<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to _________________
Commission file number 0-6200
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FROZEN FOOD EXPRESS INDUSTRIES, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-1301831
- ---------------------------------------- ------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1145 Empire Central Place, Dallas, TX 75247
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, (214) 630-8090
including area code ------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $1.50 Par Value Nasdaq Stock Market
------------------------------- -----------------------------------------
Securities registered pursuant to section 12(g) of the Act:
None
---------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
[X] Yes [ ] 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.
[ X ]
As of March 10, 1995, 16,043,960 shares of the Registrant's Common Stock, $l.50
par value, were outstanding, and the aggregate market value of the voting stock
held by non-affiliates of the registrant as of March 10, 1995, was $95,042,948.
(Solely for the purposes of calculating the preceding amount, all directors and
officers of the registrant are deemed to be affiliates.)
DOCUMENTS INCORPORATED BY REFERENCE
The sections "Outstanding Capital Stock; Principal Shareholders", "Nominees for
Directors", "Executive Compensation", and "Transactions with Management" of the
Proxy Statement for the Annual Meeting of Shareholders to be held April 27,
1995, are incorporated by reference into Part III of this Form 10-K.
Portions of the Annual Report to Shareholders for the year ended December 31,
1994, are incorporated by reference into Parts I and II of this Form 10K.
<PAGE>
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Form 10-K
ANNUAL REPORT
For the Fiscal Year Ended December 31, 1994
PART I
ITEM 1. BUSINESS.
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Frozen Food Express Industries, Inc. (the company) is the largest
temperature-controlled trucking company in North America. References to the
company herein, unless the context requires otherwise, include Frozen Food
Express Industries, Inc., and its subsidiaries, all of which are wholly
owned. In its 49 years of operation, the company has not experienced an
unprofitable year. The company is also the only nationwide, full-service,
temperature-controlled trucking company in the United States offering all of
the following services:
. LESS-THAN-TRUCKLOAD: A load, typically consisting of 18 to 30
shipments, weighing as little as 50 pounds or as much as 20,000 pounds, from
multiple shippers destined for various deliveries across the United States,
Canada and Mexico. The company's temperature-controlled "LTL" operation is
the largest in the United States and the only one offering regularly
scheduled nationwide LTL service. The company is the only major LTL carrier
which uses multi-compartment refrigerated trailers to carry goods requiring
different temperatures on one trailer, enhancing customer service and
operating efficiencies.
. FULL-TRUCKLOAD: A load, typically weighing between 20,000 and 45,000
pounds and usually from a single shipper, filling the trailer. Normally, a
full-truckload has a single destination, although the company is also able to
provide multiple deliveries. Management believes the company is one of the
five largest temperature-controlled, full-truckload carriers in North
America.
. DISTRIBUTION: Distribution generally involves the delivery of cargo
within a 50-to-75-mile radius of a company terminal. Full-truckload or large
LTL loads are divided into smaller shipments at a terminal and delivered by
distribution trucks to "end users," such as grocery stores, food brokers or
drug stores, typically within a single metropolitan area.
Following is a summary of certain financial and statistical data for the
years ended December 31, 1990 through 1994 (LTL data also includes
distribution shipments):
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<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue*
Full-truckload $163,988 $129,549 $109,178 $103,582 $ 90,043
Less-than-truckload 88,328 80,965 72,864 65,068 64,589
Other 22,304 16,875 12,846 8,345 5,539
-------- -------- -------- -------- --------
Total $274,620 $227,389 $194,888 $176,995 $160,171
======== ======== ======== ======== ========
Operating ratio 93.0% 93.2% 94.0% 94.4% 95.1%
Full-truckload
Loaded miles* 121,106 97,753 83,247 80,663 69,800
Loads* 128.1 106.6 92.9 85.5 75.8
Revenue per shipment 1,280 1,215 1,175 1,211 1,188
Loaded miles per load 945 917 896 943 921
Less-than-truckload
Hundredweight* 8,670 8,116 6,848 6,211 6,314
Revenue per
hundredweight 10.19 9.98 10.64 10.48 10.23
Shipments* 305.2 292.0 253.3 231.3 241.7
Revenue per shipment 290 277 288 281 267
* In thousands
</TABLE>
Freight revenue, from motor carrier operations, has accounted for more
than 90% of total operating revenue during each of the last five years. The
percent of total freight revenue contributed by full-truckload operations and
by LTL operations during the past five years is summarized below:
<TABLE>
<CAPTION>
Percent of Total Freight Revenue
-------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Full-truckload 65% 62% 60% 61% 58%
LTL and distribution 35 38 40 39 42
---- ---- ---- ---- ----
Total 100% 100% 100% 100% 100%
---- ---- ---- ---- ----
</TABLE>
The company offers nationwide "one call does all" services to about 7,000
customers, none of which accounted for more than 10% of total revenue during
any of the past five years.
During 1994, the company commenced significant expansion of transportation
services for customers shipping products to and from Mexico and Canada.
Canadian operations are conducted with equipment operating directly under
authority of the company. The company does not presently operate its
tractors in Mexico. To provide service in Mexico, the company has
arrangements with a railroad and Mexico-based motor carriers. Pursuant to
these arrangements, the company interchanges its trailers with the Mexico
freight service provider for movement within Mexico. During 1994,
approximately 6% of freight revenue was derived from international
activities,
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for which the company collects primarily United States currency, principally
from United States-based customers.
TEMPERATURE-SENSITIVE MARKET
More than 80% of the cargo transported by the company is temperature-
sensitive. Examples are meat, poultry, seafood, processed foods, candy and
other confectioneries, dairy products, pharmaceuticals, medical supplies,
fruits and vegetables, cosmetics, film, and heat-sensitive aerospace
manufacturing materials.
The common and contract hauling of temperature-sensitive cargo is highly
fragmented, comprised primarily of carriers generating less than $50 million
in annual revenue. Industry publications report that only eight temperature-
controlled carriers generated $100 million or more of revenue in 1993. In
addition, many major food companies, food distribution firms and grocery
chains continue to transport their products with their own fleets ("private
carriage").
Increasingly, large shippers are seeking to lower their cost structures by
reducing their private carriage capabilities and turning to common and
contract carriers ("core carriers") for their transportation needs. As a
limited number of carriers continue to improve their service capabilities
through such means as satellite tracking and communications systems and
electronic data interchange, shippers are expected to reduce their private
carriage fleets in favor of common or contract carriage. Management believes
that the temperature-controlled private carriage segment is approximately the
same size as the common and contract temperature-controlled segment of the
motor carrier industry.
GROWTH STRATEGY
The company has pursued a growth strategy that combines both internal
growth and selected acquisitions. Since 1983, the company has purchased
certain operating assets of several trucking companies. Among the purchased
operations have been four LTL companies, four full-truckload companies and
the LTL and distribution assets of a regional company offering temperature-
controlled service in the Southeast.
During 1987, management determined that significant future growth could be
obtained through expansion of its full-truckload capabilities. As a result,
the company began to commit its own equipment to the temperature-controlled,
full-truckload segment. From the beginning of 1988 through 1994, the
company-operated, full-truckload tractor fleet increased from 22 units to
approximately 1,000 units. Recently, the company has placed renewed emphasis
on expanding its fleet of independent contractors ("owner-operators")
provided full-truckload tractors. As of December 31, 1994, the company had
approximately 300 owner-operator tractors to provide additional full-
truckload capacity. From 1990 through 1994, revenue from full-truckload
operations increased from 58% to 65% of total freight revenue.
By 1991, the company had achieved a significant market presence in the
full-truckload segment and has focused over the ensuing three years on
profitability improvement. Through significant reductions in costs
associated with long-term debt and a program designed to improve the
company's operating efficiency and the quality of the service provided to its
customers, the company's 1991, 1992, 1993, and 1994 net income increased by
44%, 97%, 161% and 228%, respectively, from the 1990 amount.
The management of a number of factors is critical to a trucking company's
growth and profitability, including:
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. DRIVERS: Driver shortages and high turnover can reduce revenue and
increase operating expenses through reduced operating efficiency and higher
recruiting costs. During the first half of 1992, the company experienced a
driver shortage that at various times kept as many as 40 tractors off the
road. The company's operations were not significantly affected by driver
shortages during 1993 or 1994. The company maintains an active driver
recruiting program and bases its employee-driver incentive pay package on
longevity, safety, fuel efficiency and other operational goals. In addition,
the company has continued to intensify its truck driving school recruitment
by offering graduates over-the-road training. These "student-drivers" train
with an experienced instructor-driver by riding as "second driver" and are
paid student-driver wages by the company. They are assigned a tractor only
after they have been qualified to become single drivers. At the end of 1994,
the company had drivers for all of its tractors and had about 100 student
drivers undergoing over-the-road training.
. OWNER-OPERATORS: The company actively seeks to expand its fleet with
equipment provided by owner-operators. The owner-operator provides the
tractor and driver to pull the company's loaded trailer. The owner-operator
pays the drivers' wages, fuel, equipment-related expenses and other
transportation expenses and receives a percentage of the revenue from each
load. At the end of 1994, the company had contracts for 293 owner-operator
tractors in its full-truckload divisions and 212 in its LTL operations.
The percent of full-truckload and LTL revenue generated from shipments
transported by owner-operators during each of the last five years is
summarized below:
<TABLE>
<CAPTION>
PERCENT OF REVENUE FROM SHIPMENTS
TRANSPORTED BY OWNER-OPERATORS
------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Full-truckload revenue 22% 23% 26% 25% 29%
Less-than-truckload revenue 65% 67% 68% 70% 70%
</TABLE>
. FUEL: While fuel prices during 1994 did not change significantly from
those experienced during 1993, fluctuating diesel fuel prices in recent years
have been a serious challenge for the trucking industry. During periods in
which fuel prices dramatically increased, the company successfully instituted
"fuel adjustment" charges which enabled the company to pass on most fuel
price increases to its customers. However, the company's experience is that
gradual upward trends in fuel prices are difficult to recover through
adjustment charges. Instead, gradually increasing fuel costs must generally
be recovered through freight rate increases that, for competitive reasons,
may be difficult to obtain. Average per-gallon fuel costs paid by the
company declined by 1% during 1994. Management's goal is to improve the fuel
efficiency of the company's tractors through a combination of purchasing
modern equipment with electronically controlled engines and improved
vehicular aerodynamics, fuel purchasing programs and employee-driver bonuses
based upon fuel efficiency.
. RISK MANAGEMENT: Liability for accidents is a significant concern in the
trucking industry. Exposure can be large and occurrences unpredictable. The
cost and human impact of work-related injury claims are also significant
concerns. To address these concerns, the company maintains a risk management
program designed to minimize the frequency and severity of accidents and to
manage insurance coverage and claims to achieve the least possible cost. As
part of the program, the company
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carries insurance policies under which it retains liability for up to $1
million on each property, casualty and general liability claim, substantially
all individual work-related injury claims and $100,000 on each cargo claim.
Because of this retained liability, a series of very serious traffic
accidents, work-related injury claims or unfavorable developments in or
outcomes of existing claims could materially adversely affect the company's
operating results. When claims or potential claims arise, the company
establishes reserves. As events related to claims evolve, the corresponding
reserves are increased or decreased. The company believes that it maintains
an effective risk management program and that its reserves are adequate.
A major component of the company's risk management program is the
enhancement of safety in its operations. The company has a safety department
which conducts programs which include driver education and over-the-road
observation. All drivers must meet or exceed specific guidelines relating to
safety records, driving experience and personal standards, including a
physical examination and mandatory drug testing. Drivers must also complete
the company's training program, which includes tests for motor vehicle safety
and over-the-road driving, and they must have a current Commercial Drivers
License before being assigned a tractor. Student drivers undergo a more
extensive training program as a second driver with an experienced instructor-
driver. In accordance with federal regulations, the company conducts drug
tests on all driver candidates and maintains an ongoing program of random
testing for use of such substances. Persons who test positive for drugs are
turned away and drivers who test positive for such substances are immediately
disqualified from driving.
OPERATING STRATEGY
The company's "one call does all" full-service capability, combined with
the service-oriented corporate culture it gained from its many years as a
successful LTL carrier, enables it to compete primarily on the basis of
service, rather than solely on price. Management also believes that major
shippers will require increasing levels of service and that they will rely on
their core carriers to provide transportation and logistics solutions, such
as providing the shipper real-time information about the movement and
condition of any shipment.
The company believes that it is well positioned to take advantage of the
evolving market for solutions to shippers' needs. In order to improve its
level of information services, the company is currently replacing its older
mainframe computer-based Management Information System (MIS) with a more
sophisticated, versatile and expandable "open system" with fully integrated
local area networks. Integrated with the new system are plans to complete
the installation of satellite tracking and communications equipment in
company-operated equipment. That equipment is currently operating on about
half of the company-operated, full-truckload fleet.
. LESS-THAN-TRUCKLOAD: Temperature-controlled LTL trucking is service and
capital intensive. LTL freight rates are higher than those for full-
truckload and are based on mileage, weight, type of commodity, space required
in the trailer, pick-up and delivery. Management believes that only one
other refrigerated LTL trucker competes with the company on a nationwide
basis.
Temperature-controlled LTL trucking requires a system of terminals,
capable of holding refrigerated and frozen products, located at strategic
distribution points across the United States. The company has 15 such LTL
terminals. Terminals are located in or near New York City, Philadelphia,
Atlanta, Orlando, Memphis, Nashville, Cincinnati, Chicago, Kansas City,
Dallas, Houston, Denver, Salt Lake City,
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Oakland, and Los Angeles. Several of these LTL terminals also serve as full-
truckload driver centers where company-operated, full-truckload fleets are
based.
Efficient information management is essential to a successful temperature-
controlled LTL operation. On a typical day, the company's LTL system handles
about 5,000 shipments - about 3,000 on the road, 1,000 being delivered and
1,000 being picked up. In 1994, the LTL operation handled about 305,000
individual shipments.
. FULL-TRUCKLOAD: Temperature-controlled, full-truckload service requires
a substantially lower capital investment for terminals and lower costs of
shipment handling and information management than that of LTL. Pricing is
based primarily on mileage, weight and type of commodity.
At the end of 1994, the company's full-truckload tractor fleet consisted
of about 1,000 tractors owned or leased by the company and about 300 tractors
contracted to the company by owner-operators, making it one of the five
largest temperature-controlled, full-truckload carriers in North America.
The company is continuing to expand its international and domestic
transportation and logistics services which involve railroad-based
"intermodal" long-haul transportation. In providing such service, the
company contracts with railroads to transport loaded full-truckload trailers
on railroad flat cars. The railroad is paid a fee for this service and the
company uses its tractors to transport the trailers to and from railroad
pick-up and drop-off points. During 1994 and 1993, approximately 5% of the
company's full-truckload shipments were transported in this manner. By
providing intermodal transportation services, the company is able to
transport more loaded trailers (which require relatively lower capital
investment) while engaging fewer tractors (which involve relatively higher
capital investment). As a result of the expected continued emphasis on
intermodal transportation, it is probable that the company's trailer fleet
will continue to expand more rapidly than its tractor fleet. Also
contributing to the increase in the trailer-to-tractor ratio from 1.3:1 at
January 1, 1992, to 1.5:1 at yearend 1994 were continued expansion of
dedicated fleet and short-haul, full-truckload services and, in general, the
more rapid expansion of the company's full-truckload services in relation to
its LTL service. Full-truckload services generally involve the utilization
of more trailers to enable tractors to remain in service while idle trailers
are being loaded and unloaded.
In addition to the LTL terminals, which also serve as full-truckload
employee-driver centers, full-truckload activities are conducted from
terminals in Dallas, Fort Worth and Laredo, Texas. Laredo, located on the
Texas-Mexico border, is the drop-off point for company trailers, which are
picked up by a Mexican trucking company for movement into Mexico's interior.
The company also maintains small centers for employee-drivers in Waco and
Amarillo, Texas; Phoenix, Arizona; and Shreveport, Louisiana.
EQUIPMENT
The company acquires premium company-operated tractors in order to help
attract and retain qualified employee-drivers, promote safe operations,
minimize maintenance and repair costs and assure dependable service to its
customers. Management believes that the higher initial investment for its
equipment is recovered through more efficient vehicle performance and
improved resale value. The company has a three-year replacement policy for
its full-truckload tractors. As a result, most repair costs are recovered
through efficient vehicle performance and manufacturers' warranties. The
three-year replacement policy also enables the company to maximize
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its fuel efficiency by benefiting from technological improvements in both
engine efficiency and aerodynamics. During 1995, the company plans to replace
about 250 tractors and add another 100 tractors to its company-operated,
full-truckload fleet. Management estimates that the new tractors' average
miles-per-gallon will improve over that of the tractors being replaced. In
order to minimize fuel consumption, the company includes a fuel efficiency
driving bonus in its employee-driver incentive pay package.
REGULATION
The company's interstate operations are subject to regulation by the
Interstate Commerce Commission ("ICC") and the Department of Transportation
("DOT"). The ICC regulates entry into motor carrier operation as well as
certain rates and tariffs. The DOT generally regulates driver qualifications
and safety and equipment standards. The company is also subject to state
public utilities commissions and similar state regulatory agencies with
respect to its intrastate operations. State regulations generally involve
the weight and dimensions of equipment and safety. Effective January 1, 1995,
the United States government has rescinded the authority of states to
regulate rates and tariffs with regard to intrastate operations. The company
does not anticipate that this will significantly affect its operating
results.
SEASONALITY
The company's full-truckload operations are somewhat affected by seasonal
changes. The early winter, late spring and summer growing seasons for fruits
and vegetables in California and Texas typically create increased demand for
trailers equipped to transport cargo requiring refrigeration. In addition,
winter driving conditions can be hazardous and impair the company's
operations from time to time in certain portions of the company's service
areas. The company's LTL operations are also impacted by the seasonality of
certain commodities. As a result, LTL shipment volume during the winter
months is normally lower than other months. Shipping volumes of LTL freight
are usually highest during July through October.
EMPLOYEES
A comparison of company's employees as of December 31, 1994 and 1993, is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1993
----- -----
<S> <C> <C>
Freight Operations -
Drivers and Trainees 1,394 1,264
Non-driver personnel
Full time 622 542
Part time 161 141
----- -----
Total Freight Operations 2,177 1,947
Non-freight Operations 111 109
----- -----
Total 2,288 2,056
===== =====
</TABLE>
The increase in non-driver personnel resulted primarily from the increased
use of employee-driver recruiting, safety, sales, dispatch and other
operations support personnel associated with the increased size of the
company-operated, full-truckload
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fleet. The increase in employee-drivers is the result of the addition of
company-operated equipment during 1994.
REFRIGERATION EQUIPMENT SALES AND SERVICE
The company, through a subsidiary, is a franchised distributor for
Carrier-Transi- cold brand truck and trailer refrigeration equipment. Its
primary area of sales and service responsibility is Texas. This subsidiary
is engaged in the sales, service and rental of a variety of refrigeration and
air conditioning equipment and provides refrigeration units and service for
the company's trailers. Such operations contributed 8% of the company's 1994
consolidated revenue and 4% of the consolidated operating profit (after
elimination of inter-company transactions). The company competes in its
service area with several other dealers and distributors of similar
refrigeration equipment, but is the only distributor for Carrier-Transicold
products in portions of Texas.
ITEM 2. PROPERTIES.
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The company's corporate office, which was purchased and remodeled during
1992, is located on 1.7 acres of land in northwestern Dallas, Texas. The
building contains 34,000 useable square feet.
The company's primary terminal and maintenance facility is located near
Dallas on approximately 60 acres of land owned by the company in Lancaster,
Texas. The buildings, which are also owned by the company, contain
approximately 100,000 square feet, of which 60,000 square feet are used for
warehousing and distribution, 12,000 square feet are devoted to offices
housing the terminal dispatch, safety and related activities and 26,000
square feet are used for maintenance and repair facilities.
The company owns approximately 20 acres of unimproved land abutting this
facility.
The company also owns a facility consisting of a terminal, offices and a
repair shop in Fort Worth, Texas. This property is used by Lisa Motor Lines,
Inc. ("Lisa"), a wholly-owned subsidiary of the company, and its divisions,
Middleton Transportation Company and Great Western Express. This facility
consists of two structures totaling 23,000 square feet on approximately seven
acres of land.
The company owns a cold storage LTL terminal located in Bridgeview,
Illinois, near Chicago. The terminal includes approximately 37,000 square
feet of office, dock and storage facilities.
The Florida terminal, near Orlando, is owned by the company and consists
of three buildings on approximately 15 acres of land, a dock facility of
approximately 16,000 square feet, a shop of approximately 4,000 square feet
and an office building.
The company also owns a terminal and land in Avenel, New Jersey, which is
near New York City. The building, on about five acres of land, contains
approximately 17,000 square feet.
At December 31, 1994, the company also maintained leased terminal or
office facilities in or near the following cities:
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<TABLE>
<S> <C>
Amarillo, TX Memphis, TN
Atlanta, GA Nashville, TN
Cincinnati, OH Oakland, CA
Denver, CO Philadelphia, PA
Houston, TX Phoenix, AZ
Kansas City, MO Salt Lake City, UT
Laredo, TX Shreveport, LA
Los Angeles, CA Waco, TX
</TABLE>
Lease terms range from one month to six years. These terminals range in
size from a small amount of office space to a terminal with office and dock
facilities totaling approximately 44,000 square feet.
The company expects that present facilities will be sufficient to support
its operations in the near term.
The following table sets forth certain information regarding revenue
equipment utilized by the company at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
AGE IN YEARS
------------------------------------
Tractors Less than 1 1 thru 3 4 or more Total
- ---------------- ----------- ----------- ---------- -------------
1994 1993 1994 1993 1994 1993 1994 1993
----- ---- ---- ----- ---- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Company-
operated 341 523 751 416 7 6 1,099 945
Owner-operator
provided 25 28 134 121 346 308 505 457
----- ---- ---- ----- ---- ---- ----- ------
Total 366 551 885 537 353 314 1,604 1,402
===== ==== ==== ===== ==== ==== ===== ======
AGE IN YEARS
------------------------------------
Trailers Less than 1 1 thru 5 6 or more Total
- ---------------- ----------- ----------- ---------- -------------
1994 1993 1994 1993 1994 1993 1994 1993
---- ---- ---- ----- ---- ---- ----- ------
Company-
provided 829 476 645 1,435 932 116 2,406 2,027
Owner-operator
provided 1 1 11 15 9 16 21 32
----- ---- ---- ----- ---- ---- ----- ------
Total 830 477 656 1,450 941 132 2,427 2,059
===== ==== ==== ===== ==== ==== ===== ======
</TABLE>
The increases in the number of company-operated tractors and trailers
during 1994 and 1993 resulted primarily from the addition of new equipment
during each year for use in the company's full-truckload operations.
Approximately 90% of the company's 2,427 trailers are insulated and
equipped with refrigeration units capable of providing the temperature
control necessary to handle perishable freight. Trailers that are used
primarily in LTL operations are equipped with movable partitions permitting
the transportation of goods requiring maintenance of different temperatures.
The company also operates a fleet of non-refrigerated trailers in its "dry
freight" full-truckload operation. Company-operated trailers are primarily
102 inches wide. Refrigerated trailers are 48 feet long, while non-
refrigerated trailers are primarily 53 feet long.
The company's general policy is to replace its company-operated, heavy-
duty tractors used in full-truckload operations every three years, while
tractors used in LTL operations are generally replaced after five years of
service. Company-operated,
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full-truckload trailers are usually retired after seven years of service.
Occasionally, retired equipment is kept by the company for use in local
delivery operations.
ITEM 3. LEGAL PROCEEDINGS.
------
The company is party to routine litigation incidental to its businesses,
primarily involving claims for personal injury and property damage incurred
in the transportation of freight. The aggregate amount of these claims is
significant. The company maintains insurance programs and accrues for
expected losses in amounts designed to cover liability resulting from
personal injury and property damage claims. The company does not believe
that adverse results in one or more of these pending cases would have a
material effect on the financial condition of the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------
No matters were submitted to a vote of shareholders of the company during
the fourth quarter of 1994.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
------
MATTERS.
The information regarding cash dividends, common stock price per share and
common stock trading volume set forth under the caption "Quarterly Financial,
Stock and Dividend Information" appearing on page 28 of the Annual Report to
Shareholders for the year ended December 31, 1994, is incorporated by
reference into this Report.
ITEM 6. SELECTED FINANCIAL DATA.
------
The information set forth under the caption "Eleven-Year Statistics and
Financial Data" appearing on pages 14 and 15 of the Annual Report to
Shareholders for the year ended December 31, 1994, is incorporated by
reference into this Report.
ITEM 7. MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
------
OPERATIONS.
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing on pages
16 through 18 of the Annual Report to Shareholders for the year ended Dec.
31, 1994, is incorporated by reference into this Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
------
(a) The following Consolidated Financial Statements of Frozen Food Express
Industries, Inc., and Report of Arthur Andersen, LLP, Independent Public
Accountants, with respect thereto set forth on pages 19 through 27 of the
Annual Report to Shareholders for the year ended December 31, 1994, are
incorporated by reference into this Report:
Consolidated Statements of Income - - Years ended December 31, 1994, 1993
and 1992.
Consolidated Balance Sheets - - December 31, 1994 and 1993.
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Consolidated Statements of Cash Flows - - Years ended December 31, 1994,
1993 and 1992.
Consolidated Statements of Stockholders' Equity - - Years ended December
31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
Report of Arthur Andersen, LLP, Independent Public Accountants.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
-------
In accordance with General Instruction G to Form 10-K, the information
required by Item 10 is incorporated herein by reference from the portion of
the company's Proxy Statement for the Annual Meeting of Shareholders to be
held April 27, 1995, appearing under the caption "Nominees for Directors".
ITEM 11. EXECUTIVE COMPENSATION.
-------
In accordance with General Instruction G to Form 10-K, the information
required by Item 11 is incorporated herein by reference from the portions of
the company's Proxy Statement for the Annual Meeting of Shareholders to be
held April 27, 1995, appearing under the captions "Executive Compensation"
and "Transactions with Management ".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-------
In accordance with General Instruction G to Form 10-K, the information
required by Item 12 is incorporated herein by reference from the portions of
the company's Proxy Statement for the Annual Meeting of Shareholders to be
held April 27, 1995, appearing under the captions "Outstanding Capital Stock;
Principal Shareholders" and "Nominees for Directors".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-------
In accordance with General Instruction G to Form 10-K, the information
required by Item 13 is incorporated herein by reference from the portions of
the company's Proxy Statement for the Annual Meeting of Shareholders to be
held April 27, 1995, appearing under the captions "Nominees for Directors",
"Transactions with Management " and "Executive Compensation".
11
<PAGE>
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
-------
(A) 1. & 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES:
The financial statements listed in the index to financial
statements and financial statement schedules in Item 8 on pages
10 and 11 hereof are filed as part of this Annual Report.
Financial statement schedules are omitted since the required
information is not present or is not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the financial statements and
notes thereto.
3. EXHIBITS:
3.l Articles of Incorporation of the Registrant and all amendments to
date (filed as Exhibit 3.1 to Registrant's annual report on Form
10-K for the fiscal year ended December, 31, 1993; SEC file no.
0-6200 and incorporated herein by reference).
3.2 Bylaws of the Registrant, as amended (filed as Exhibit 3.2 to
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991; SEC File Number 0-6200 and incorporated herein
by reference).
10.1 Frozen Food Express Industries, Inc., 1987 Non-Employee Director
Stock Plan (filed as Exhibit 10.2 to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991; SEC
File Number 0-6200 and incorporated herein by reference).
10.2 Amended and Restated Credit Agreement, dated December 30, 1992,
among the registrant and its subsidiaries and First Interstate
Bank of Texas, N.A.; Texas Commerce Bank, National Association;
and First City, Texas - Dallas, as agent. (filed as Exhibit 10.5
to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992; SEC file number 0-6200 and incorporated
herein by reference).
10.3 First Amendment to amended and restated credit agreement
described at Exhibit 10.5 (filed as Exhibit 10.6 to Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1993; SEC file number 0-6200 and incorporated herein by
reference).
10.4 Form of Master Lease Agreement by and between Stoney M. Stubbs,
Jr., and Charles G. Robertson and Conwell Corporation. (Filed as
Exhibit 10.12 to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991; SEC File Number 0-6200 and
incorporated herein by reference).
10.5 Frozen Food Express Industries, Inc., 1992 Incentive and
Nonstatutory Stock Option Plan (filed as Exhibit 4.3 to
Registrant's Registration #33-48494 as filed with the Commission,
and incorporated herein by reference).
12
<PAGE>
10.6 FFE Transportation Services, Inc., 1994 Incentive Bonus Plan, as
amended.
10.7 FFE Transportation Services, Inc., Executive Bonus and Phantom
Stock Plan, as amended.
10.8 FFE Transportation Services, Inc., Employee Stock Ownership Plan.
10.9 Savings Plan for Employees of Frozen Food Express Industries,
Inc.
10.10 Conwell Corporation Employee Stock Ownership Plan
10.11 Amendment to Frozen Food Express Industries, Inc., 1992 Incentive
and Nonstatutory Stock Option Plan.
11.1 Computation of net income per share of common stock, assuming
full dilution (incorporated by reference to Footnote 7 to the
financial statements appearing in the Annual Report to
Shareholders of the Registrant for the year ending December 31,
1994).
13.1 Annual Report to Shareholders of the Registrant for the year
ended December 31, 1994. Except for those portions of such
Annual Report to Shareholders expressly incorporated by reference
into this Report, such Annual Report to Shareholders is furnished
solely for the information of the Securities and Exchange
Commission and shall not be deemed a "Filed" Document.
21.1 Subsidiaries of Frozen Food Express Industries, Inc.
25.1 A Power of Attorney is found on page 15 of this Report.
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the company during the last quarter of
the period covered by this Report.
13
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
AND FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
Annual Report
to Shareholders
------------------
Report of independent public accountants 27
Consolidated Balance Sheets at December 31, 1994 and 1993 20
Consolidated Statements of Income for each of the
three years in the period ended December 31, 1994 19
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1994 22
Consolidated Statements of Stockholders' Equity for each
of the three years in the period ended December 31, 1994 23
Notes to Consolidated Financial Statements 24
Supplementary information - Quarterly financial
data (unaudited) 28
Financial statement schedules are omitted since the required information
is not present or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in the
financial statements and notes thereto.
The financial statements listed in the above index, which are included in
the Annual Report to Shareholders of Frozen Food Express Industries, Inc.,
for the year ended December 31, 1994, are hereby incorporated by reference,
and are filed herewith as Exhibit 13.1.
14
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned directors and
officers of Frozen Food Express Industries, Inc., hereby appoints Stoney M.
Stubbs, Jr., and Burl G. Cott his true and lawful attorneys-in-fact and
agents, for him and in his name, place and stead, in any and all capacities,
with full power to act alone, to sign any and all amendments to this Annual
Report on Form 10-K and to file each such amendment to the Report, with all
exhibits thereto, and any and all other documents in connection therewith,
with the Securities and Exchange Commission, hereby granting unto said
attorneys-in-fact and agents full power and authority to do and perform any
and all acts and things requisite and necessary to be done in and about the
premises as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents may lawfully do or cause to be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Date: March 27, 1995 By /s/ Burl G. Cott
---------------- -----------------------------------
Burl G. Cott
Senior Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 27, 1995 /s/ Stoney M. Stubbs, Jr.
---------------- --------------------------------------------
Stoney M. Stubbs, Jr., Chairman of
the Board of Directors and President
(Principal Executive Officer)
Date: March 27, 1995 /s/ Burl G. Cott
---------------- --------------------------------------------
Burl G. Cott, Senior Vice President and
Director
(Principal Financial and Accounting Officer)
Date: March 27, 1995 /s/ Charles G. Robertson
---------------- --------------------------------------------
Charles G. Robertson, Executive Vice
President and Director
Date: March 27, 1995 /s/ Edgar O. Weller
---------------- --------------------------------------------
Edgar O. Weller, Vice Chairman of
the Board of Directors
15
<PAGE>
Power of Attorney
Date: March 27, 1995 /s/ Brian R. Blackmarr
---------------- --------------------------------------------
Brian R. Blackmarr, Director
Date: March 27, 1995 /s/ Leroy Hallman
---------------- --------------------------------------------
Leroy Hallman, Director
Date: March 27, 1995 /s/ W. Grogan Lord
---------------- --------------------------------------------
W. Grogan Lord, Director
Date: March 27, 1995 /s/ T. Michael O'Connor
---------------- --------------------------------------------
T. Michael O'Connor, Director
16
<PAGE>
EXHIBIT 10.6
FFE TRANSPORTATION SERVICES, INC.
1994 INCENTIVE BONUS PLAN
This amended Incentive Bonus Plan (hereafter the "Incentive Plan") is
entered into as of January 1, 1995, by FFE Transportation Services, Inc., a
Delaware corporation ("FFE"), as a replacement of the 1992 Incentive Bonus Plan
(the "Prior Plan").
RECITALS
--------
FFE established the Prior Plan for the benefit of the employees of FFE in
order to provide bonuses, payable in cash and Company Stock, to certain of its
employees in the event established company performance goals were met. FFE
desires to continue this incentive bonus arrangement and to modify the plan in
certain respects.
PLAN
----
1. Definitions. For the purposes of this Incentive Plan, the following
-----------
terms shall have the meanings as set forth below:
(a) The term "Incentive Bonus" shall mean the bonus paid in cash, or
partially in cash and partially in Common Stock, to the Participants as provided
under this Incentive Plan.
(b) The term "Operating Ratio" shall mean the ratio of (i) operating
expenses of the FFE division providing motor carrier services using refrigerated
equipment to (ii) operating revenue of the FFE division providing motor carrier
services using refrigerated equipment, as established from information derived
from FFE's annual financial statements, and as further adjusted by the Committee
for such specific items, if any, that the Committee in its discretion determines
are appropriate.
(c) The term "Pay" shall mean a Participant's weekly base compensation
as of the end of the calendar year (as determined by the Committee) and shall
exclude any non-recurring compensation such as bonus payments.
(d) The term "Participant" shall mean any employee of FFE, whether
permanent, full-time, or part-time, but shall not include Temporary Employees.
1
<PAGE>
(e) The term "Common Stock" shall mean issued and outstanding shares
of common stock of Frozen Food Express Industries, Inc. ("Industries"), a Texas
corporation which is the parent of FFE, Inc. ("Inc."), a Delaware corporation
which is the parent of FFE.
(f) The term "Temporary Employee" shall mean any employee either
employed in a job classification which, under FFE's personnel policies, is
classified as temporary, or whose employment is not intended to last more than
six months as the date of commencement of employment.
(g) The term "Committee" shall mean a committee of the Board of
Directors of Industries, which shall consist of not less than two persons who
are "disinterested persons" as defined in Rule 16b-3(c)(2)(i) of the Securities
Exchange Act of 1934 and who meet such additional criteria as the Board of
Directors of Industries shall determine so that any incentive bonuses paid
pursuant to this Plan shall be exempt from the limitation set forth in Section
162(m) of the Internal Revenue Code.
(h) The term "Savings Plan" shall mean the Savings Plan for Employees
of Frozen Food Express Industries, Inc., established pursuant to Internal
Revenue Code Sections 401(a) and 401(k).
2. Incentive Bonus.
---------------
(a) Each calendar year, the Committee shall allocate to each
Participant his Applicable percentage of his Incentive Bonus, which shall be
paid in cash or partially in cash and partially in Common Stock. The Incentive
Bonus shall be determined in accordance with paragraph (b) below, and the
Applicable Percentage shall be determined in accordance with paragraph (c)
below:
(b) The Incentive Bonus for any calendar year for a Participant shall
be such number of weeks' Pay as is determined on the basis of the Operating
Ratio targets for that calendar year. The Incentive Bonus Operating Ratio
targets for 1995 and related bonus levels shall be as follows:
2
<PAGE>
<TABLE>
<CAPTION>
Payment Form
----------------------
Total Incentive Cash Stock
Operating Ratio Bonus Equal to Equal to
- ----------------- --------------- ------------ --------
<S> <C> <C> <C>
94.0% - 94.9% 1 week's Pay 1 week's Pay None
93.0% - 93.9% 2 weeks' Pay 2 week's Pay None
92.9% and below 3 weeks' Pay 3 week's Pay None
</TABLE>
The Committee may, in its sole discretion, re-determine the target Operating
Ratios and the number of weeks' Pay as the Incentive Bonus for the specified
target Operating Ratios for the subsequent calendar year. IF THE COMMITTEE
FAILS TO RE-DETERMINE THE NUMBER OF WEEKS' PAY AND THE TARGET OPERATING RATIOS,
THE PRIOR YEAR'S TARGETS AND PAY SHALL REMAIN IN EFFECT.
(c) The Applicable Percentage shall mean the percentage of a
Participant's Incentive Bonus allocated to the Participant and shall be based on
the Participant's date of hire either within the calendar year or prior to the
start of the calendar year for which the Incentive Bonus is determined, as
follows:
<TABLE>
<CAPTION>
HIRE DATE
From To Applicable
- -------------------- ------------ Percentage
-----------
<S> <C> <C>
Prior to January 1 100.0000%
January 1 January 31 91.6667%
February 1 February 28 83.3333%
March 1 March 31 75.0000%
April 1 April 30 66.6667%
May 1 May 31 58.3333%
June 1 June 30 50.0000%
July 1 July 31 41.6667%
August 1 August 31 33.3333%
September 1 September 30 25.0000%
October 1 October 31 16.6667%
November 1 November 30 8.3333%
December 1 December 31 0.0000%
</TABLE>
3. Payment of Incentive Bonus
--------------------------
(a) The Incentive Bonus allocated to a Participant for a particular
calendar year as provided in Section 2 shall be paid in the following manner:
the amount of Common Stock set forth in Section 2(b) of this Plan shall be
contributed to the Savings Plan and allocated to such Participant's account in
the Savings Plan,
3
<PAGE>
with the remainder of the Incentive Bonus paid to the Participant in cash. The
Incentive Bonus shall be paid (or contributed, as the case may be) as soon as
practical after the Operating Ratio for that year has been determined. FFE shall
make all reasonable efforts to calculate the Operating Ratio as quickly as
practicable but shall not be liable to any Participant for any losses or
diminution in value of any Incentive Bonus by reason of the timing of the
payment or contribution of the Incentive Bonus.
(b) Despite anything to the contrary, no Participant whose employment
has terminated, other than by death, prior to the payment of any Incentive Bonus
under this Incentive Plan shall be entitled to any accrued but unpaid Incentive
Bonus.
4. Non-Transferability. Except as expressly provided herein, any
-------------------
rights and benefits granted under this Incentive Plan may not be transferred,
assigned, pledged or hypothecated in any manner, by operation of law or
otherwise, other than by will or be the laws of descent and distribution, or by
a qualified domestic relations order, as defined in Section 414(p) of the
Internal Revenue Code, and shall not be subject to execution, attachment or
similar process.
5. No Fiduciary Relationship. The Boards of Directors and the officers
-------------------------
of FFE, Industries and Inc. Shall have no duty to manage or operate FFE in order
to maximize the benefits granted to Participants hereunder, but rather shall
have full discretionary power to make all management and operational decisions
based on their determination of their respective best interests. This Incentive
Plan shall not be construed to create a fiduciary relationship between such
Boards or the officers of FFE, Industries or Inc. and any Participant.
6. Governing Law. This Incentive Plan shall be governed by and
-------------
construed in accordance with the laws of the State of Texas except to the extent
Texas law is pre-empted by federal law.
7. Amendments. The Board of Directors of FFE may amend or terminate
----------
the Incentive Plan in its sole discretion; provided, however, that these plan
--------
provisions shall not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code, the Employee retirement
Income Security Act of 1974, as amended, or the rules thereunder.
8. No Employment Guarantee. Nothing in this Incentive Plan shall be
-----------------------
construed as an employment contract or a guarantee of continued employment with
FFE. The rights of any Participant shall only be those as are expressly set
forth in this Incentive Plan.
4
<PAGE>
9. Administration and Interpretation. This Incentive Plan shall be
---------------------------------
administered by the Committee which shall have sole discretion, subject to
Section 6, to interpret and construe the Incentive Plan.
10. General Creditor Status. The Participants shall, in no event, be
-----------------------
regarded as standing in any position, if at all, other than as a general
creditor of FFE with respect to any rights derived from the existence of this
Incentive Plan and shall receive only FFE's unfunded and unsecured promise to
pay benefits under this Incentive Plan.
11. Captions. The captions in this Incentive Plan are inserted for
--------
convenience of reference only and in no way define, describe or limit the scope
or intent of this Incentive Plan or any of the provisions hereof.
12. Severability. If any provision of this Incentive Plan is held to be
------------
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable and shall not invalidate the remaining provisions of
this Incentive Plan, and the remaining provisions of this Incentive Plan shall
remain in full force and effect and shall not be effected by the illegal,
invalid or unenforceable provision or by its severance from this Incentive Plan.
13. Taxes. FFE shall be entitled to deduct from amounts payable
-----
hereunder any sums required by federal, state, or local tax law to be withheld
with respect to such payments.
14. Maximum Bonus. Notwithstanding any provision of this Incentive Plan
-------------
to the contrary, no Incentive Bonus may be granted pursuant to this Incentive
Plan if, as a result of such grant, the aggregate number of shares of Common
Stock granted pursuant to this Incentive Plan exceeds five percent of the total
outstanding shares of Common Stock at the time in question.
15. Costs. All expenses and costs incurred in connection with the
-----
operation of this Incentive Plan shall be borne by FFE.
5
<PAGE>
EXHIBIT 10.7
FFE TRANSPORTATION SERVICES, INC.
EXECUTIVE BONUS AND PHANTOM STOCK PLAN
This Executive Bonus and Phantom Stock Plan (hereafter this "Plan"),
dated as of January 1, 1994 (the "Effective Date") by FFE Transportation
Services, Inc., a Delaware corporation ("FFE") which is a wholly-owned
subsidiary of FFE, Inc., a Delaware corporation ("Inc.") which is a wholly-owned
subsidiary of Frozen Food Express Industries, Inc., a Texas corporation
("Industries") for the benefit of certain officers of FFE.
PURPOSE
-------
FFE has established this Plan for the benefit of specified officers of
FFE in order to enhance the benefits to the covered officers, allow the officers
to share in the growth of FFE through the appreciation in the value of the
common stock of Industries, and to provide the officers with greater incentive
to promote the growth of Industries' shareholder value. The purpose of the Plan
is to align the financial interests of key officers of FFE with those of
Industries' shareholders through the use of awards, payable in cash and
hypothetical (phantom) shares of the common stock of Industries, upon the
attainment of predetermined performance goals.
TERMS
-----
1. Definitions. For the purposes of this Plan, the following terms
-----------
shall have the meanings set forth below:
(a) The term "Allocated Phantom Shares" shall mean all Phantom Shares
allocated by FFE to the Participants as herein provided.
(b) The term "Committee" shall mean a committee of the Board of
Directors of Industries, which shall consist of not less than two persons who
are "disinterested persons" as defined in Rule 16b-3(c)(2)(i) of the Securities
Exchange Act of 1934 and who meet such additional criteria as the Board of
Directors of Industries shall determine so that any incentive bonuses paid
pursuant to this Plan shall be exempt from the limitation set forth in Section
162(m) of the internal Revenue Code of 1986, as amended.
1
<PAGE>
(c) The term "Compensation" shall mean a Participant's base
compensation (as determined by the Committee) for the specified period and shall
exclude any non-recurring compensation such as bonus payments.
(d) The term "Disability" shall mean any condition which causes the
Participant to fail to devote his full time and reasonable best efforts to the
performance of his duties and responsibilities for a period of in excess of
ninety (90) consecutive days.
(e) The term "Election Period" shall mean the period of December 1
to December 15 inclusive for each year.
(f) The term "Fair Market Value" shall mean such amount as the Board
of Directors, in its sole discretion, shall determine; provided, however, that
-------- -------
if there is a public market for the securities, the Fair Market Value shall be
the closing sales price of the securities per share or unit, as the case may be,
as reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers Automated Quotation
System) as of the date in question or, in the event the securities are listed on
a stock exchange, the Fair Market Value shall be the closing sales price of the
securities per share or unit, as the case may be, on such exchange, as reported
in the Wall Street Journal, as of the date in question.
(g) The term "Operating Ratio" shall mean with respect to any
particular Participant, the ratio of Industries', or one or more of its
operating entities' or groups', as set forth on Exhibit A attached to this Plan,
operating expenses to operating revenues for the applicable Fiscal Year, as
adjusted by the Committee for such specific items, if any, that the Committee
deems appropriate.
(h) The term "Participant" shall mean each officer of FFE, including
without limitation any officer of Industries that is an officer of FFE, whose
name is set forth on Exhibit A.
(i) The term "Participant's Allocated Phantom Shares" shall mean the
Allocated Phantom Shares allocated by FFE to a specific Participant's account as
provided in this Plan.
(j) The term "Participant's Relative Percentage" shall mean at any
point in time the fraction, expressed as a percentage, in which the numerator is
the number of the Participant's Allocated Phantom Shares at such time and the
denominator is the sum of the total number of shares of issued and outstanding
Stock at such point in time plus the total number of Allocated Phantom Shares at
such point in time.
2
<PAGE>
(k) The term "Phantom Share" shall mean a fictitious share of Stock
which will carry with it certain rights and benefits as described more
particularly herein but which will not entitle the holder thereof either to
equity rights in FFE, Inc. or Industries or to any type of voting rights in FFE,
Inc. or Industries.
(l) The term "Reorganization" shall mean any capital reorganization of
Industries, other than pursuant to a transaction provided for in Section 4
below, or the consolidation or merger of Industries with or into another
corporation (other than a consolidation or merger in which Industries is the
continuing corporation and which does not result in any reclassification of the
outstanding shares of Stock or the conversion of such outstanding shares of
Stock into shares of other stock or other securities or property), or the sale
of the property of Industries as an entirety or substantially as an entirety.
(m) The term "Triggering Event" shall mean any one of the following:
(i) The termination of the Participant's employment.
(ii) The death of the Participant or the Participant becoming
subject to a Disability.
(iii) The Participant's written election, during an Election
Period, to cash out any number or all of the Phantom Shares allocated to
the Participant, excluding any Phantom Shares to be allocated for that
Fiscal Year.
(iv) A Change in Control (as defined in Treasury regulations
promulgated under Internal Revenue Code Section 280G) with respect to
Industries.
(n) The term "Stock" shall mean the common stock of Industries and
shall not include any Phantom Shares.
2. Determination of Bonus. With respect to each Fiscal Year commencing
----------------------
with Fiscal Year 1994, each Participant shall be entitled to an incentive bonus
("Bonus") calculated pursuant to a formula determined on the basis of such
Participant's Operating Ratio targets and specified percentages of such
Participant's Compensation, if the Committee certifies that the applicable
target has been obtained. The targets and percentages for all Participants are
shown on Exhibit A attached to this Plan. Subject to Section 13 below, on or
before the last day of any Fiscal Year, the Committee may, in its sole
discretion, redetermine who will be a Participant (provided that such person
must be an officer of FFE) for the subsequent Fiscal Year and the Operating
Ratio targets and percentages to be used
3
<PAGE>
to calculate the Participants' Bonuses for the subsequent Fiscal Year by
amending Exhibit A attached to this Plan.
3. Payment of Bonus and Phantom Shares.
-----------------------------------
(a) Each Participant's Bonus for any Fiscal Year shall be paid by FFE
to such Participant as soon as practicable after the financial statements of
Industries for such fiscal year have been prepared.
(b) In addition to the payment of any Bonus to a Participant, FFE
shall allocate, for the benefit of each Participant, Phantom Shares. The number
of Phantom Shares shall be equal to 50% of the amount of the Participant's Bonus
for that Fiscal Year divided by the applicable Phantom Share Value. The
applicable Phantom Share Value shall mean the Fair Market Value of a share of
Stock as of the last business day of the Fiscal Year immediately preceding the
Fiscal Year for which the Participant's Bonus was awarded.
(c) Each Phantom Share shall be allocated to a Participant as of the
last business day of the Fiscal Year for which the Participant's Bonus was
awarded and shall be allocated to his individual Participant account and held
and maintained by FFE as an Allocated Phantom Share for the benefit of the
Participant.
(d) If the specified bonus percentage for a Participant's Operating
Ratio for any Fiscal Year is a negative number, no award for that Fiscal Year
will be made. Rather, the Committee shall have the option to reduce each
Participant's Compensation for the next calendar year, or for such other period
as the Committee may determine, by such percentage.
4. Adjustment to Number of Phantom Shares.
--------------------------------------
(a) For the purpose of this Plan, the number of the Participant's
Allocated Phantom Shares shall be the number of Phantom Shares held and
maintained by FFE for such Participant as provided in Section 3 above, as said
number may be adjusted from time to time in accordance with the provisions of
this Section 4.
(b) In case Industries shall (i) declare a dividend to make a
distribution on the outstanding shares of Stock in additional shares of Stock,
(ii) subdivide or reclassify the outstanding shares of Stock into a greater
number of shares of Stock, or (iii) combine or reclassify the outstanding shares
of Stock into a lesser number of shares of Stock, the number of the
Participant's Allocated Phantom Shares shall be adjusted immediately after the
record date for such dividend or distribution or the effective date of such
subdivision, combination, or reclassification, so that such number in increased
or decreased by multiplying such
4
<PAGE>
number as it existed immediately before such record date or effective date by a
fraction, the numerator of which shall be the number of shares of Stock
outstanding immediately after such dividend, distribution, subdivision,
combination, or reclassification, and the denominator of which shall be the
number of shares of stock outstanding immediately before such dividend,
distribution, subdivision, combination, or reclassification.
(c) In case Industries shall issue rights or warrants to all holders
of Stock entitling them to subscribe for or purchase shares of Stock at a price
per share less than the Fair Market Value of a share of Stock as of the date of
the issuance of such rights or warrants, the number of the Participant's
Allocated Phantom Shares shall be increased by an amount equal to the
Participant's Relative Percentage of the total number of Bonus Shares
(hereinafter defined) that would be acquired upon exercise of such rights or
warrants. For the purposes hereof, Bonus Shares shall mean the total number of
shares of Stock that would be acquired upon exercise of such rights or warrants
less the number of shares of Stock that could have been purchased for the amount
expended in exercise of such rights or warrants if such shares of Stock were
purchased at a price per share equal to the Fair Market Value of a share of
Stock as of the date of the issuance of such rights or warrants.
(d) In case Industries shall sell or issue shares of Stock, other
types of equity securities, or rights, options, warrants, or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Stock or other types of equity securities in any transaction other than those
described above in this Section 4, the Participant shall not have any right by
virtue of this Plan to purchase or acquire any such shares of Stock or other
types of equity securities, or any such rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Stock or other types of equity securities, and such sale or
issuance shall not result in any adjustment in the number of the Participant's
Allocated Phantom Shares, notwithstanding that as a result of such sale or
issuance such Participant's Relative Percentage may then or thereafter be
reduced.
(e) In case Industries shall fix a record date for the payment of a
cash dividend to all holders of shares of Stock, then, if the Operating Ratio
applicable to such Participant for the Fiscal Year which includes such record
date is less than 98 percent, the number of the Participant's Allocated Phantom
Shares shall be increased as of the end of such Fiscal Year by an amount equal
to the quotient of (a) the product of the number of such Participant's Allocated
Phantom Shares on such record date and the amount of such dividend payable on
one share of Stock and (b) the Fair Market Value of a share of Stock on such
record date.
5
<PAGE>
5. Payment of Phantom Share Value.
------------------------------
(a) In the event of the occurrence of a Triggering Event described in
clause (i), (iii) or (iv) of Subsection 1(m) above (an "Optional Triggering
Event"), FFE shall, unless the Participant elects in writing within thirty (30)
days of the Optional Triggering Event, pay to the Participant, within thirty
(30) days following the close of the calendar year in which the Optional
Triggering Event occurs, the product of the Fair Market Value of a share of
Stock as of the last business day of the calendar year in which such Triggering
Event occurs and the number of such Participant's Allocated Phantom Shares (or,
in the case of a Triggering Event specified in clause (iii) of Subsection 1(m),
such lesser number of the Participant's Allocated Phantom Shares as the
Participant may specify in writing within thirty (30) days of the triggering
Event). In the event of the occurrence of a Triggering Event described in
clause (ii) of Subsection 1(m) above (a "Mandatory Triggering Event"), FFE
shall, within thirty (30) days following the close of the calendar year in which
the Mandatory Triggering Event occurs, terminate all rights of the Participant
under this Plan by paying to the Participant the product of the Fair Market
Value of a share of Stock as of the last business day of the calendar year in
which such Triggering Event occurs and the number of such Participant's
Allocated Phantom Shares. In any event, such payment shall be made in a single
lump sum, and, except as contemplated by Subsection 5(b) below, all rights of
the Participant with respect to the Phantom Shares for which he received payment
pursuant to this Subsection 5(a) shall terminate.
(b) In the event that Industries consummates a Reorganization within
six (6) months after the date that the Participant elects to be paid or FFE
becomes obligated (other than due to the death of the Participant or the
Participant becoming subject to a Disability) to pay the Participant for some or
all of such Participant's Allocated Phantom Shares in accordance with Subsection
5(a) above, and as a result of such Reorganization all holders of Stock receive
cash for each share of Stock held immediately prior to consummation of the
Reorganization in excess of the amount which FFE is obligated to pay to the
Participant for the Participant's Allocated Phantom Shares pursuant to
Subsection 5(a) above, then the amount payable to the Participant pursuant to
Subsection 5(a) above shall be increased by an amount equal to the product of
such excess and the number of such Participant's Allocated Phantom Shares (or
such lesser number as the Participant specified in accordance with Subsection
5(a)), and such increase shall be paid to the Participant.
6. Non-Transferability. Neither the Phantom Shares nor any rights and
-------------------
benefits granted in this Plan may be transferred, assigned, pledged, or
hypothecated in any manner, by operation of law or otherwise, other than by will
or by the laws of descent or distribution or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986, as amended
("Internal Revenue Code"), or Title I of the Employee Retirement Income Security
Act of 1974,
6
<PAGE>
as amended, or the rules thereunder, and shall not be subject to execution,
attachment, or similar process.
7. No Fiduciary Relationship. The Boards of Directors and the officers
-------------------------
of FFE, Industries and Inc. shall have no duty to manage or operate in order to
maximize the benefits granted to the Participants hereunder, but rather shall
have full discretionary power to make all management and operational decisions
based on their determination of their respective best interest. This Plan shall
not be construed to create a fiduciary relationship between such Boards or the
officers of FFE, Industries or Inc. and the Participant.
8. Governing Law. This Plan shall be governed by and construed in
-------------
accordance with the laws of the State of Texas.
9. No Employment Guarantee. Nothing in this Plan shall be construed as
-----------------------
an employment contract or a guarantee of continued employment. The rights of
any Participant shall only be those as are expressly set forth in this Plan.
10. Administration. The Committee shall administer this Plan and shall
--------------
have the authority, in its sole and absolute discretion, (a) to adopt, amend and
rescind administrative and interpretative rules and regulations relating to the
Plan, (b) to determine the Participants and the terms under which they may
participate in this Plan, (c) to make all other determinations, perform all
other acts, and exercise all other powers and authority necessary or advisable
for administering the Plan, including the delegation of those ministerial acts
and responsibilities as the Committee deems appropriate.
11. Taxes. FFE shall be entitled to deduct from amounts payable
-----
hereunder any sums required by federal, state, or local tax law to be withheld
with respect to such payments.
12. Maximum Number of Phantom Shares. Notwithstanding any provision of
--------------------------------
this Plan to the contrary, no Phantom Share may be allocated to any Participant
if, as a result of such allocation, the aggregate number of Allocated Phantom
Shares exceeds (and FFE shall have no obligation to allocate Phantom Shares to a
Participant if such allocation would cause such number to exceed) a number
representing five percent of the total outstanding shares of Stock at the time
in question.
13. Amendment. In addition to the amendments to this Plan contemplated
---------
by Section 3, the Board of Directors may amend or terminate this Plan in its
sole discretion; provided that this Plan may not be amended more than once every
--------
six months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder.
7
<PAGE>
14. General Creditor Status. The Participants shall, in no event, be
-----------------------
regarded as standing in any position, if at all, other than as a general
creditor of FFE with respect to any rights derived from the existence of this
Plan and shall receive only FFE's unfunded and unsecured promise to pay benefits
under this plan.
15. Captions. The captions in this Plan are inserted for convenience of
--------
reference only and in no way define, describe or limit the scope or intent of
this Plan or any of the provisions hereof.
16. Severability. If any provision of this Plan is held to be illegal,
------------
invalid or unenforceable under present or future laws, such provision shall be
fully severable and shall not invalidate the remaining provisions of this Plan,
and the remaining provisions of this Plan shall remain in full force and effect
and shall not be effected by the illegal, invalid or unenforceable provision or
by its severance from this Plan.
17. Costs. All expenses and costs incurred in connection with the
-----
operation of this Plan shall be borne by FFE.
8
<PAGE>
AMENDED (1995)
EXHIBIT A
INCENTIVE BONUS CALCULATION
PARTICIPANTS: Stoney M. (Mit) Stubbs, Jr., Charles G. Robertson, Burl G.
Cott and John T. Bailey.
OPERATING RATIO TARGETS AND BONUS PERCENTAGES APPLICABLE TO ALL PARTICIPANTS:
<TABLE>
<CAPTION>
Operating Participant's
--------- -------------
Ratio of Bonus Percentage
-------- ----------------
Industries for 1995
---------- --------
<S> <C>
100.0 or more -15
99.9 - 96.1 0
96.0 - 95.6 10
95.5 - 95.1 15
95.0 - 94.6 20
94.5 - 94.1 25
94.0 - 93.6 30
93.5 - 93.1 45
93.0 - 92.6 50
92.5 - 92.1 55
92.0 - 91.6 60
91.5 or less 65
</TABLE>
9
<PAGE>
EXHIBIT 10.8
FFE TRANSPORTATION SERVICES, INC.
---------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
(As Restated Effective January 1, 1987)
ARTICLE ONE
-----------
PURPOSE
-------
Section 1.1. Introduction. The following are provisions of the FFE
----------- ------------
TRANSPORTATION SERVICES, INC. EMPLOYEE STOCK OWNERSHIP PLAN ("Plan") (as
restated effective January 1, 1987). The Plan was established effective January
1, 1985 and was restated, effective January 1, 1989, to incorporate the original
Plan and the subsequent amendments into one document. The Plan is now restated
to incorporate the restated Plan and the additional amendments into one document
which is intended to maintain the qualification of the Plan under Section 401(a)
of the Internal Revenue Code of 1986 as amended ("Code") and applicable
regulations. The restated Plan is effective January 1, 1987, except as otherwise
provided herein. The Plan consists of the Plan document herein and the separate
Trust Agreement.
Section 1.2. Purpose. The purpose of the Plan is to reward eligible
----------- -------
Employees of the Employer who become Participants in the Plan with an
opportunity to acquire the common stock of Frozen Food Express Industries, Inc.,
the parent corporation of FFE Transportation Services, Inc., thereby promoting
Employee interest in the business endeavors of the parent and its subsidiaries
and enhancing the welfare of the Employees. The Plan is designed to invest
primarily in the common stock of Frozen Food Express Industries, Inc., is
intended to qualify under Code Section 401(a) as a leveraged employee stock
ownership plan as defined by Code Section 4975(e) and Section 407(d)(6) of the
Employee Retirement Income Security Act of 1974 as amended ("ERISA"). The
benefits provided by the Plan will be paid from the Trust and will be in
addition to the benefits eligible Employees are entitled to receive under any
other programs of the Employer and from the federal Social Security Act. The
Plan and the Trust are established and shall be maintained for the exclusive
benefit of the eligible Employees of the Employer and their Beneficiaries.
* * * * * * *
1
<PAGE>
ARTICLE TWO
-----------
DEFINITIONS
-----------
As used herein, the following words and phrases shall have the
respective meanings set forth in this Article, unless the context clearly
indicates otherwise:
Section 2.1. Account Balance means the amount standing in a Participant's
----------- ---------------
Individual Account(s) as of any date derived from both Employer Contributions
and Employee Contributions, if any.
Section 2.2. Administrator means the Committee designated by the Employer
----------- -------------
unless the Employer designates another person to hold the position of
Administrator by written Employer action.
Section 2.3. Affiliate means any company, other than an Employer, included
----------- ---------
within a "controlled group of corporations" defined by Code Section 1563(a)
determined without regard to subsections (a)(4) and (e)(3)(C) of Code Section
1563, and Code Section 409(l)(4), which contains an Employer.
Section 2.4. Allocation Date/Accounting Date means DECEMBER 31 of each
----------- -------------------------------
Plan Year.
Section 2.5. Alternate Payee means any spouse, former spouse, child, or
----------- ---------------
other dependent of a Participant who is recognized by a domestic relations order
as having a right to receive all, or a portion of, the benefits payable under
the Plan with respect to such Participant.
Section 2.6. Annual Compensation.
----------- -------------------
(a) Annual Compensation, pursuant to the safe harbor definition of Treasury
Regulation Section 1.415-2(d)(10), means wages, salaries, and fees for
professional services and other amounts received (without regard to whether or
not an amount is paid in cash) for personal services actually rendered in the
course of employment with the Employer maintaining the Plan to the extent that
the amounts are includable in gross income including, but not limited to,
commissions paid 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 described in Treasury Regulation Section 1.62-2(c), and excluding the
following:
(i) contributions by the Employer to any qualified deferred
compensation plan (to the extent not includable in the Participant's
gross income) or simplified employee pension defined in Code Section
408(k) (to the extent not includable in the Participant's gross
income);
(ii) distributions from any plan of deferred compensation;
(iii) amounts realized from the exercise of any nonqualified stock
option, or, in the case of restricted stock, when such stock becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture;
(iv) amounts realized from the sale, exchange, or other disposition of
stock acquired under a qualified stock option; and
(v) other amounts which receive special tax benefits such as premiums
paid by the Employer (to the extent not includable in the
Participant's gross income) under group term life insurance,
contributions by the Employer to an annuity under Code Section 403(b)
(to
2
<PAGE>
the extent not includable in the Participant's gross income), and
any other amounts received under any Employer sponsored fringe benefit
plan (to the extent not includable in the Participant's gross income).
(b) Annual Compensation for any Limitation Year includes compensation
received by an Employee in that Limitation Year from an Employer prior to the
Employee becoming a Participant in the Plan.
(c) Notwithstanding the foregoing, Annual Compensation taken into account
for determining all benefits provided under the Plan for any determination
period shall not exceed $200,000, or such larger amount the Secretary of the
Treasury may prescribe for the relevant year. (However, for Plan Years
beginning prior to January 1, 1989, the $200,000 limit shall apply only for Top
Heavy Plan Years and shall not be adjusted.) The $200,000 limit shall be
adjusted by the Secretary at the same time and in the same manner as under Code
Section 415(d) except that the dollar increase in effect on January 1 of any
calendar year is effective for years beginning in such calendar year. If the
period for determining compensation used in calculating an Employee's allocation
for a determination period is a short Plan Year the Annual Compensation limit is
an amount equal to the otherwise applicable Annual Compensation limit multiplied
by a fraction, the numerator of which is the number of months in the short Plan
Year and the denominator of which is twelve (12). 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 year is subject to the applicable Annual Compensation limit in
effect for that prior year. For this purpose, for years beginning before
January 1, 1990, the applicable Annual Compensation limit is $200,000. The
$200,000 (or adjusted) Annual Compensation limit applies to the combined Annual
Compensation of the Employee and of any Family Member aggregated with the
Employee under Section 2.25 who is either (i) the Employee's spouse, or (ii) the
Employee's lineal descendant under the age of 19. If, for a Plan Year, the
combined Annual Compensation of the Employee and the Family Members who are
Participants entitled to an allocation for that Plan Year exceeds the $200,000
(or adjusted) limit, Annual Compensation for each such Participant, for purposes
of the contribution and allocation provisions of Articles 3 and 5, means his or
her Adjusted Compensation. Adjusted Compensation is the amount which bears the
same ratio to the $200,000 (or adjusted) limit as the affected Participant's
Annual Compensation without regard to the $200,000 (or adjusted) limit bears to
the combined Annual Compensation of all the affected Participants in the family
unit. If the Plan uses permitted disparity, the Committee must determine the
integration level of each affected Family Member Participant prior to prorating
the $200,000 (or adjusted) limit, but the combined integration level of the
affected Participants may not exceed the $200,000 (or adjusted) limit. The
combined Excess Compensation of the affected Participants in the family unit may
not exceed the $200,000 (or adjusted) limit minus the affected Participants'
combined integration level, as determined under the preceding sentence. If the
combined Excess Compensation exceeds this limit, the Committee will prorate the
Excess Compensation limit among the affected Participants in the family unit in
proportion to each individual's Adjusted Compensation minus his or her
integration level.
(d) For purposes of determining whether the Plan discriminates in favor of
Highly Compensated Employees, Annual Compensation means Annual Compensation
defined in this Section 2.6, except any exclusions from Annual Compensation
other than the exclusions described in clauses (a)(i), (ii), (iii), (iv), and
(v) do not apply. The Employer also may elect to use an alternate
nondiscriminatory definition, under Code Section 414(s) and the applicable
Treasury regulations. In determining Annual Compensation under this paragraph,
the Employer may elect to include all Elective Contributions made by the
Employer on behalf of the Employees. The Employer's election to include
Elective Contributions must be consistent and uniform for Employees and all
plans of the Employer for any particular Plan Year. The Employer may make this
election to include Elective Contributions for nondiscrimination testing
purposes, whether or not this Section includes Elective Contributions in the
general Annual Compensation definition of the Plan.
3
<PAGE>
(e) Notwithstanding the foregoing, Annual Compensation for any Self-
Employed Individual means Earned Income.
(f) In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean 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.
Section 2.7. Beneficiary means a person or entity, either in an individual
----------- -----------
or fiduciary capacity, entitled to receive benefits upon the death of a
Participant or Former Participant pursuant to Article Eight. A Beneficiary who
becomes entitled to a benefit under the Plan shall remain a Beneficiary under
the Plan until the Trustee has fully distributed the benefits to the
Beneficiary. A Beneficiary's right to information or data concerning the Plan,
and the respective duties of the Administrator, the Committee and the Trustee to
provide to the Beneficiary information or data concerning the Plan, shall not
arise until the Beneficiary first becomes entitled to receive a benefit under
the Plan. For purposes of determining whether the Plan is a Top-Heavy Plan, a
Beneficiary of a deceased Participant shall be considered a Key Employee or a
Non-Key Employee in accordance with the applicable Treasury Regulations.
Section 2.8. Code means the Internal Revenue Code of 1986, as amended from
----------- ----
time to time.
Section 2.9. Committee means the Administrative Committee provided for in
----------- ---------
Article Nine.
Section 2.10. Determination Date means (a) the last day of the preceding
------------ ------------------
Plan Year or (b) in the case of the first Plan Year, the last day of the first
Plan Year.
Section 2.11. Disability means a physical or mental condition of a
------------ ----------
Participant which appears to permanently prevent him from satisfactorily
performing his usual duties for the Employer or such other duties which the
Employer makes available to him and for which the Participant is qualified by
reason of his training, education or experience. Determination of the fact of a
Participant's Disability, and the date it began, shall be made by the Committee
based upon medical reports and other evidence satisfactory to the Committee.
These determinations shall be made on the basis of criteria applied uniformly to
all Participants and shall be final as to all parties.
4
<PAGE>
Section 2.12. Early Retirement Age means, as applied to each Participant
------------ --------------------
or Former Participant, the first day of the month in which the Participant or
Former Participant has attained age fifty-five (55). EFFECTIVE JANUARY 1, 1989,
Early Retirement Age means, as applied to each Participant or Former
Participant, the first day of the month in which the Participant or Former
Participant has attained age fifty-five (55) and has completed at least ten (10)
Years of Vesting Service with the Employer defined in Section 2.57(b).
Section 2.13. Early Retirement Date means the first day next following the
------------ ---------------------
date the Participant attains Early Retirement Age and which immediately follows
the last day on which the Participant is an Employee, or, if later, the last day
of the Participant's Authorized Leave of Absence, if any.
Section 2.14. Effective Date. The original Effective Date of this Plan is
------------ --------------
JANUARY 1, 1985. The Effective Date of this Plan as restated during the 1994
Plan Year is JANUARY 1, 1987, except the effective date of the vesting schedule
in Section 6.2 is JANUARY 1, 1989.
Section 2.15. Employee.
------------ --------
(a) Employee means any individual currently employed to render personal
services under the control of an Employer maintaining the Plan or of any other
Employer required to be aggregated with the Employer under Code Sections 414(b),
(c), (m) or (o).
(b) The Plan treats any Leased Employee as an Employee of the Employer
unless excluded by an exclusion classification in Section 3.1. A Leased
Employee is an individual, who otherwise is not an Employee of the Employer,
who, pursuant to a leasing agreement between the Employer and any other person,
has performed services for the Employer (or for the Employer and any persons
related to the Employer within the meaning of Code Section 144(a)(3)) on a
substantially full time basis for at least one (1) year and who performs
services historically performed by Employees in the Employer's business field.
If a Leased Employee is treated as an Employee because of this Section 2.15,
Annual Compensation includes compensation from the leasing organization which is
attributable to services performed for the Employer.
(c) Notwithstanding the foregoing, the Plan does not treat any Leased
Employee as an Employee of the Employer if the leasing organization covers the
Employee in a safe harbor plan and, prior to the application of this safe harbor
plan exception, twenty percent (20%) or less of the Employer's Employees (other
than Highly Compensated Employees) are Leased Employees. A safe harbor plan is
a money purchase pension plan providing immediate participation, full and
immediate vesting, and a nonintegrated contribution formula equal to at least
ten percent (10%) of the employee's compensation without regard to employment by
the leasing organization on a specified date. The safe harbor plan must
determine the ten percent (10%) contribution on the basis of compensation
defined in Code Section 415(c)(3) plus salary deferrals.
(d) The Committee must apply this Section 2.15 in a manner consistent with
Code Sections 414(n) and 414(o) and the applicable Treasury regulations. The
Committee will reduce a Leased Employee's allocation of Employer Contributions
under this Plan by the Leased Employee's allocation under the leasing
organization's plan, but only to the extent that allocation is attributable to
the Leased Employee's service provided to the Employer. The leasing
organization's plan must be a money purchase pension plan which would satisfy
the definition under this Section 2.15 of a safe harbor plan, irrespective of
whether the Employer is able to apply the safe harbor plan exception.
Section 2.16. Employer/Plan Sponsor. Employer means FFE TRANSPORTATION
------------ ---------------------
SERVICES, INC., LISA MOTOR LINES, INC., W & B REFRIGERATION SERVICE COMPANY,
GLOBAL REFRIGERANT MANAGEMENT, INC., or any other Affiliate who with the written
consent of the Plan Sponsor adopts this Plan on the effective date of its
election to participate. Plan Sponsor means FFE TRANSPORTATION SERVICES, INC.
5
<PAGE>
Section 2.17. Employer Contributions means those contributions made to the
------------ ----------------------
Trust by the Employer pursuant to Section 4.1 of the Plan.
Section 2.18. Employer Securities.
------------ -------------------
(a) Employer Securities means those unrestricted shares of voting common
stock issued by Frozen Food Express Industries, Inc., the parent corporation of
FFE Transportation Services, Inc., and any common or preferred stock issued by
the Employer or by an Affiliate which constitute Employer Securities under Code
Section 409(l) and 4975(e)(8).
(b) Qualifying Employer Securities means:
(i) Common stock issued by the Employer (or by a corporation which is
a member of the same controlled group) which is readily tradeable on
an established securities market; or
(ii) If there is no common stock which meets the requirements of (i)
above, then common stock issued by the Employer (or by a corporation
which is a member of the same controlled group) having a combination
of voting power and dividend rights equal to or in excess of:
(A) that class of common stock of the Employer (or any other
such corporation) having the greatest voting power; and
(B) that class of common stock of the Employer (or of any other
such corporation) having the greatest dividend rights; or
(iii) Noncallable preferred stock, if such stock is convertible at any
time into stock which meets the requirements of (i) or (ii) (whichever
is applicable) and if such conversion is at a conversion price that is
reasonable. A preferred stock will be considered noncallable if after
the call there will be a reasonable opportunity for a conversion which
meets the requirements of the preceding sentence in accordance with
applicable Treasury regulations.
Section 2.19. Entry Date means the restated Effective Date and every
------------ ----------
JANUARY 1 and JULY 1 after the restated Effective Date.
Section 2.20. ERISA means the Employee Retirement Income Security Act of
------------ -----
1974, as amended from time to time.
Section 2.21. Family Member means an Employee's spouse and lineal
------------ -------------
ascendants or descendants and the spouses of lineal ascendants and descendants,
as described in Code Section 414(q)(6)(B).
Section 2.22. Forfeiture means the loss, by a Participant or Beneficiary,
------------ ----------
pursuant to Section 6.3, of that part of the benefit which the Participant or
Beneficiary otherwise would have received under the Plan at any time prior to
the termination of the Plan or the complete discontinuance of benefits under the
Plan, arising from the Participant's severance of employment before the
Participant's interest is fully vested.
Section 2.23. Former Employee means any individual who is no longer
------------ ---------------
employed by the Employer.
Section 2.24. Former Participant means any individual who has been a
------------ ------------------
Participant in the Plan, but who is either no longer employed by the Employer or
is otherwise no longer eligible to participate and has not yet received the
entire benefit to which the individual is entitled under the Plan.
6
<PAGE>
Section 2.25. Highly Compensated Employee. Highly Compensated Employee
------------ ---------------------------
means any Participant or Former Participant who is a Highly Compensated
Employee, defined in Code Section 414(q). Generally, any Participant or Former
Participant is considered a Highly Compensated Employee if, during the Plan Year
(the "Determination Year") or during the twelve month period immediately
preceding the Determination Year or, if the Employer elects, the calendar year
ending with or within the Determination Year (the "Look Back Year"), the
Participant or Former Participant:
(a) was at any time a Five Percent Owner, defined in Section 2.51(g);
(b) received Compensation from the Employer in excess of $75,000, as
adjusted by the Secretary of the Treasury for the relevant year;
(c) received Compensation from the Employer in excess of $50,000, as
adjusted by the Secretary of the Treasury for the relevant year, and was in the
top-paid group of Employees for the relevant year. An Employee is in the top-
paid group of Employees for any Plan Year if such Employee is in the group
consisting of the top twenty percent (20%) of the Employees when ranked on the
basis of Annual Compensation paid during the Plan Year. However, solely for
determining the total number of active Employees for a year, the following
Employees are disregarded:
(i) The Employees described in this subsection (i) are excluded on
the basis of age or Service:
(A) Employees who have not completed six (6) months of Service
by the end of the year. (An Employee's Service in the
immediately preceding year is added to the Employee's
Service in the current year to determine whether the
exclusion applies in the current year.);
(B) Employees who normally work less than 17 1/2 hours per week.
(This determination is made independently for each year.
Weeks during which the Employee did not work are not
considered. An Employee who works less than 17 1/2 hours a
week for fifty percent (50%) or more of the total weeks
worked by the Employee during the year is deemed to normally
work less than 17 1/2 hours per week under this rule.);
(ii) Employees who are included in a unit of employees covered by an
agreement that the Secretary of Labor finds to be a collective
bargaining agreement between Employee representatives and the Employer
which satisfies Code Section 7701(a)(46) and Temporary Treasury
Regulation Section 301.7701-17T are included in determining the number
of Employees in the top-paid group unless the following exception
applies. If ninety percent (90%) or more of the Employees of the
Employer are covered under collective bargaining agreements that the
Secretary of Labor finds to be collective bargaining agreements
between Employee representatives and the Employer, which agreements
satisfy Code Section 7701(a)(46) and Temporary Treasury Regulation
Section 301.7701-17T, and the Plan covers only Employees who are not
covered under the agreements, then the Employees who are covered under
the agreements are (A) not counted in determining the number of
noncollective bargaining employees who will be included in the top-
paid group in testing the Plan; and (B) not included in the top-paid
group in testing the Plan.
7
<PAGE>
(d) was at any time an officer of the Employer having Compensation greater
than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A)
for the relevant year. The number of officers taken into account under clause
(d) will not exceed the greater of three (3) or ten percent (10%) of the total
number (after application of the Code Section 414(q) exclusions) of Employees,
but no more than fifty (50) officers. If no Employee satisfies the Compensation
requirement in clause (d) for the relevant year, the Committee will treat the
highest paid officer as satisfying clause (d) for that year.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Determination Year, but does not satisfy clause (b), (c) or (d) during the Look
Back Year and does not satisfy clause (a) in either period, the Employee is a
Highly Compensated Employee only if the Employee is one of the one hundred (100)
most highly compensated Employees for the Plan Year.
The Committee must make the determination of who is a Highly Compensated
Employee, including the determinations of the number and identity of the top
paid twenty percent (20%) group, the top one hundred (100) paid Employees, the
number of officers includable in clause (d) and the relevant Compensation,
consistent with Code Section 414(q) and regulations issued under that Code
Section. The Employer may make a calendar year election to determine the Highly
Compensated Employees for the Look Back Year, as prescribed by Treasury
regulations. A calendar year election must apply to all plans and arrangements
of the Employer.
For purposes of applying any nondiscrimination test required under the Plan
or under the Code, in a manner consistent with applicable Treasury regulations,
the Committee will treat a Highly Compensated Employee and all Family Members as
defined in Section 2.21 as a single Highly Compensated Employee, but only if the
Highly Compensated Employee is a more than five percent (5%) owner or is one of
the ten (10) Highly Compensated Employees with the greatest Compensation for the
Plan Year. This aggregation rule applies to a Family Member even if that Family
Member is a Highly Compensated Employee without family aggregation.
A Former Participant who separated from Service, or is deemed to have
separated from Service under applicable Treasury regulations, prior to the Plan
Year, performs no Service for the Employer during the Plan Year and was a Highly
Compensated Employee either for the Separation Year or any Plan Year ending on
or after such Former Participant attained age fifty-five (55) years is
considered a Highly Compensated Employee. Generally, Separation Year means the
Plan Year during which the Employee separates from Service with the Employer. A
Former Participant who separated from Service prior to January 1, 1987 is
considered a Highly Compensated Employee only if the Former Participant was a
Five Percent Owner or received Compensation in excess of $50,000 during (a) the
Participant's Separation Year or the year preceding the Separation Year or (b)
any year ending on or after such Former Participant attained age fifty-five (55)
years or the last year ending before such Former Participant attained age fifty-
five (55) years.
For purposes of this Section, Compensation means Annual Compensation
defined in Section 2.6, excluding only the exclusions described in paragraphs
(i) through (v), and including deferrals under (a) Code Section 402(a)(8)
relating to a Code Section 401(k) arrangement; (b) Code Section 125 relating to
a cafeteria plan; (c) Code Section 403(b) relating to a tax sheltered annuity
plan; and (d) Code Section 408(h) relating to a simplified employee pension.
Compensation from each Related Employer shall be taken into account.
Section 2.26. Hour of Service.
------------ ---------------
(a) Any Employee or Participant who is compensated on an hourly-rated
basis shall be credited with an Hour of Service for:
8
<PAGE>
(i) each hour before or after the effective date of this Plan for
which the Employee or Participant is either directly or indirectly
paid or entitled to payment by the Employer for the performance of
duties or for reasons other than for the performance of duties due to
vacation, holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence, whether or not the
employment relationship was terminated; and
(ii) each hour before or after the effective date of this Plan for
which back pay has been awarded to the Employee or Participant or
agreed to by the Employer, irrespective of mitigation of damages.
(b) Any Employee or Participant who is compensated on a basis other than
an hourly-rated basis and who, if hourly-rated, would be credited with one (1)
Hour of Service pursuant to the preceding sentence, shall be credited with the
number of Hours of Service as follows:
(i) ten (10) hours of service per day, if compensated on a daily
basis;
(ii) forty-five (45) hours of service per week, if compensated on a
weekly basis;
(iii)ninety (90) hours of service per bi-weekly period, if compensated
on a bi-weekly basis;
(iv) ninety-five (95) hours of service per semi-monthly period, if
compensated on a semi-monthly basis; or
(v) one hundred ninety (190) hours of service per month, if
compensated on a monthly basis.
(c) The number of Hours of Service which shall be credited to an Employee
or Participant for being entitled to payment for reasons other than for the
performance of duties shall be determined under Sections 2530.200b-2(b) and (c)
of the Department of Labor Regulations which are incorporated herein by this
reference. The method for crediting Hours of Service under Section 2.26(b) for
each Participant shall be the same method used for crediting Hours of Service
for which the Participant received compensation. Notwithstanding the foregoing,
not more than five hundred one (501) Hours of Service shall be credited to any
Employee or Participant during any Computation Period for any single, continuous
period during which the Employee or Participant performs no duties.
(d) An Hour of Service performed for any other entity that is a Related
Employer with respect to the Employer shall be considered an Hour of Service
performed for the Employer.
Section 2.27. Individual Accounts/Accounts means accounts or records
------------ ----------------------------
maintained by the Committee or its agent indicating the composition and monetary
value of the total interest in the Trust Fund of each Participant, each Former
Participant, and each Beneficiary. The types of Accounts under this Plan are:
(a) Employer Contribution Accounts holding Employer Contributions made to
------------------------------
the Plan under Section 4.1 and attributable earnings. The types of Employer
Contribution Accounts maintained under this Plan are:
(i) Employer Investment Accounts holding a Participant's total
----------------------------
interest in the Trust Fund attributable to the Participant's portion
of the Employer Contribution made in cash and invested in assets other
than Employer Securities.
9
<PAGE>
(ii) Employer Securities Accounts holding a Participant's total
----------------------------
interest in the Trust Fund attributable to the Participant's portion
of the Employer Contribution made or invested in Employer Securities.
(b) Participant Contribution Accounts holding Participant Contributions
---------------------------------
made to the Plan and attributable earnings. The types of Participant
Contribution Accounts maintained under this Plan are:
. Rollover Accounts holding the Participant's qualified rollover to
-----------------
the Plan pursuant to Article 13.
The Accounts maintained under this Plan shall be maintained for accounting
purposes only and no segregation of Plan assets, other than Rollover
Contributions, shall be required.
Section 2.28. Leveraged Employer Securities means Employer Securities
------------ -----------------------------
acquired by the Trust with the proceeds of an Exempt Loan and which satisfy the
definition of Qualifying Employer Securities.
Section 2.29. Limitation Year means the Plan Year.
------------ ---------------
Section 2.30. Named Fiduciary means one or more fiduciaries named in this
------------ ---------------
Agreement who jointly and severally shall have authority to control or manage
the operation and administration of the Plan. FFE Transportation Services, Inc.
shall be the Named Fiduciary unless it designates another person by written
Employer action.
Section 2.31. Nonforfeitable means a vested interest attained by a
------------ --------------
Participant or Beneficiary in that part of the Participant's benefit under the
Plan arising from the Participant's Service, which claim is unconditional and
legally enforceable against the Plan.
Section 2.32. Non-Highly Compensated Employee means an Employee, Former
------------ -------------------------------
Employee or Beneficiary who is not a Highly Compensated Employee.
Section 2.33. Normal Retirement Age means, for each Participant, the date
------------ ---------------------
the Participant attains age sixty-five (65) years.
Section 2.34. Normal Retirement Date means, for each Participant, the
------------ ----------------------
first day next following the date the Participant attains Normal Retirement Age
and which immediately follows the last day on which the Participant is an
Employee, or, if later, the last day of the Participant's Authorized Leave of
Absence, if any.
Section 2.35. One Year Break in Service .
------------ --------------------------
(a) A One Year Break in Service, for purposes of eligibility, means a
Computation Period described in Section 2.57(a) relating to Year of Service,
during which an Employee has not completed more than five hundred (500) Hours of
Service with the Employer.
(b) A One Year Break in Service, for purposes of vesting, means a
Computation Period described in Section 2.57(b) relating to Year of Service,
during which an Employee has not completed more than five hundred (500) Hours of
Service with the Employer.
(c) An Employee shall not incur a One Year Break in Service for the Plan
Year in which the Employee becomes a Participant, dies, retires or suffers total
and permanent disability.
10
<PAGE>
(d) Further, solely for the purpose of determining whether a Participant
has incurred a One Year Break in Service under (a) or (b) above, Hours of
Service shall be recognized for "authorized leaves of absence" and "maternity
and paternity leaves of absence."
(i) An "authorized leave of absence" means an unpaid temporary
cessation from active employment with the Employer pursuant to an
established nondiscriminatory policy, whether occasioned by illness,
military service or any other reason.
(ii) A "maternity or paternity leave of absence" means an absence from
work for any period because of the Employee's pregnancy, birth of the
Employee's child, placement of a child with the Employee relating to
the adoption of the child, or any absence for the purpose of caring
for the child for a period immediately following the birth or
placement. For purposes of a maternity and paternity leave of
absence, Hours of Service shall be credited for the Computation Period
in which the absence from work begins, only if the credit is necessary
to prevent the Employee from incurring a One Year Break in Service,
or, in any other case, in the immediately following Computation
Period. The Hours of Service credited for a "maternity or paternity
leave of absence" shall be those which would normally have been
credited but for the absence, or, in any case in which the
Administrator is unable to determine the hours normally credited,
eight (8) Hours of Service per day. The total Hours of Service
required to be credited for a "maternity or paternity leave of
absence" shall not exceed five hundred one (501) hours.
Section 2.36. Owner-Employee means a sole proprietor or a partner who owns
------------ --------------
more than ten percent (10%) of either the capital interest or profits interest
in an unincorporated Employer and who receives income from such unincorporated
Employer for personal services.
Section 2.37. Parent means Frozen Foods Express Industries, Inc.
------------ ------
Section 2.38. Participant means an Employee of the Employer who has met
------------ -----------
the eligibility requirements of this Plan and who has been enrolled as a
Participant in this Plan.
Section 2.39. Participating Employer means any Related Employer that may
------------ ----------------------
elect to adopt this Plan pursuant to Article 10.
Section 2.40. Participation means any period commencing on the date the
------------ -------------
Employee becomes a Participant and ending on the date on which the Employee
incurs a Severance from Service.
Section 2.41. Plan means the restated leveraged employee stock ownership
------------ ----
plan embodied in this Agreement, as amended from time to time, designated as the
FFE TRANSPORTATION SERVICES, INC. EMPLOYEE STOCK OWNERSHIP PLAN. The Employer
has designed this Plan primarily to invest in Qualifying Employer Securities;
provided, however, that the Trustee shall invest the proceeds of an Exempt Loan
to acquire only Qualifying Employer Securities described in Section 2.18(b).
Section 2.42. Plan Year means the twelve (12) consecutive month period
------------ ---------
from JANUARY 1 of each year to the next following DECEMBER 31.
Section 2.43. Predecessor Employer means a business organization which has
------------ --------------------
been acquired by the Employer, whether by merger, stock purchase or acquisition
of the assets and business of the business organization.
11
<PAGE>
Section 2.44. Reemployment Commencement Date means the first date on which
------------ ------------------------------
an Employee completes an Hour of Service upon return to the employment of the
Employer after a Severance from Service.
Section 2.45. Related Employer. A related group of employers is a
------------ ----------------
controlled group of corporations (defined in Code Section 414(b)), trades or
businesses (whether or not incorporated) which are under common control (defined
in Code Section 414(c)) or an affiliated service group (defined in Code Section
414(m) or in Code Section 414(o)). If the Employer is a member of a related
group, the term "Employer" includes the related group members for purposes of
crediting Hours of Service, determining Years of Service and Breaks in Service
under Articles 2 and 9, applying the participation test of Code Section
401(a)(26) and the coverage test of Code Section 410(b), applying the
limitations on allocations in Article 5, applying the top-heavy rules and the
minimum allocation requirements of Article 5, the definitions of Employee,
Highly Compensated Employee, Compensation and Leased Employee, and for any other
purpose required by the applicable Code Section or by a Plan provision.
However, an Employer may contribute to the Plan only by being a signatory to a
Participation Agreement to the Plan. If one or more of the Employer's related
group members become Participating Employers by executing a Participation
Agreement to the Plan, the term "Employer" includes the participating related
group members for all purposes of the Plan, and Administrator means the Employer
that is the signatory to the Plan. For Plan allocation purposes, Compensation
does not include Compensation received from a Related Employer that is not
participating in this Plan.
Section 2.46. Retirement occurs when a Participant Separates from Service
------------ ----------
(i) on or after Normal Retirement Age, or (ii) on or after Early Retirement Age.
Retirement is considered to commence on the Normal Retirement Date or the Early
Retirement Date.
Section 2.47. Self-Employed Individual means, regarding an unincorporated
------------ ------------------------
business, an individual described in Code Section 401(c)(1). A Self-Employed
Individual shall be treated as an Employee if the individual has an ownership
interest in either the capital or profits interest of an unincorporated Employer
and receives income from the Employer for personal services.
Section 2.48. Separation from Service or Severance from Service occurs
------------ -------------------------------------------------
whenever a person ceases to be an Employee of the Employer and is no longer
being credited with Hours of Service.
Section 2.49. Service means any period of time the Employee is in the
------------ -------
employ of the Employer. Service in all cases includes periods during which the
Employee is on an "authorized leave of absence" or a "maternity or paternity
leave of absence" defined in Section 2.35(d) relating to One Year Break in
Service. Leaves of absence also shall include periods of absence in connection
with military service during which the Employee's re-employment rights are
legally protected. Except for absence by reason of military service, leaves of
absence shall be for a maximum period of two (2) years. Leaves of absence shall
be granted on a uniform and nondiscriminatory basis.
If the Employer maintains the plan of a Predecessor Employer, Service shall
include service for the Predecessor Employer. To the extent it may be required
under applicable Treasury regulations under Code Section 414, Service shall
include all service for any Predecessor Employer.
Section 2.50. Shareholder-Employee means a Participant who owns more than
------------ --------------------
five percent (5%) of the Employer's outstanding capital stock during any year in
which the Employer elected to be taxed as a Small Business Corporation under
Code Section 1362(a) and who receives income from the Employer for personal
services.
12
<PAGE>
Section 2.51. Top-Heavy Plan Status/Super Top-Heavy Plan Status. This
------------ -------------------------------------------------
Plan shall be a Top-Heavy Plan in any Plan Year in which, as of the
Determination Date, (a) the Present Value of Accrued Benefits of Key Employees,
or (b) the sum of the Aggregate Accounts of Key Employees of any plan of an
Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued
Benefits or Aggregate Accounts of all Participants under this Plan and any plan
of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but the
Participant was a Key Employee for any prior Plan Year, the Participant's
Aggregate Account balance shall not be taken into account in determining whether
this Plan is a Top-Heavy Plan (or whether any Aggregation Group which includes
this Plan is a Top-Heavy Group) as further defined in Code Section 416(g) and
the applicable Treasury regulations.
This Plan shall be a Super Top-Heavy Plan for any Plan Year in which, as of
the Determination Date, (a) the Present Value of Accrued Benefits of Key
Employees, or (b) the sum of the Aggregate Accounts of Key Employees of any plan
of an Aggregation Group, exceeds ninety percent (90%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Participants under this Plan
and any plan of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but the
Participant was a Key Employee for any prior Plan Year, the Participant's
Aggregate Account balance shall not be taken into account in determining whether
this Plan is a Super Top-Heavy Plan (or whether any Aggregation Group which
includes this Plan is a Top-Heavy Group) as further defined in Code Section
416(g) and the applicable Treasury regulations.
For purposes of determining Top-Heavy and Super Top-Heavy status, the
following definitions shall apply:
(a) Aggregate Account means, as of the Determination Date, the sum of:
-----------------
(i) the Participant Contribution Account and Employer Contribution
Account balances as of the most recent Valuation Date occurring within
a twelve (12) month period ending on the Determination Date;
(ii) the contributions that would be allocated as of a date not later
than the Determination Date, even though those amounts are not yet
made or required to be made;
(iii) any plan distributions made during the Determination Period
(However, in the case of distributions made after the Valuation Date
and prior to the Determination Date, such distributions are not
included as distributions for Top-Heavy purposes to the extent that
the distributions are already included in the Participant's Aggregate
Account balance as of the Valuation Date.); and
(iv) any Employee contributions, whether voluntary or mandatory
(However, amounts attributable to Participant Deductible Voluntary
Contributions shall not be considered to be a part of the
Participant's Aggregate Account balance.).
(v) Regarding unrelated rollovers and plan-to-plan transfers (those
which are (A) initiated by the Employee and (B) made from a plan
maintained by one employer to a plan maintained by another employer),
if this Plan provides for rollovers or plan-to-plan transfers, an
unrelated rollover or plan-to-plan transfer shall be considered as a
distribution for purposes of this Section. If this Plan is the plan
accepting an unrelated rollover or plan-to-plan transfer, an unrelated
rollover or plan-to-plan transfer accepted after December 31, 1983
shall not be considered as part of the Participant's Aggregate Account
balance. However,
13
<PAGE>
unrelated rollovers or plan-to-plan transfers accepted prior to
January 1, 1984 shall be considered as part of the Participant's
Aggregate Account balance.
(vi) Regarding related rollovers and plan-to-plan transfers (those
either (A) not initiated by the Employee or (B) made to a plan
maintained by the same Employer), if this Plan provides for rollovers
or plan-to-plan transfers, a related rollover or plan-to-plan transfer
shall be considered as a distribution for purposes of this Section.
If this Plan is the plan accepting a related rollover or plan-to-plan
transfer, a related rollover or plan-to-plan transfer shall be
considered as part of the Participant's Aggregate Account balance,
irrespective of the date on which the related rollover or plan-to-plan
transfer is accepted.
(b) Aggregation Group means either a Required Aggregation Group or a
-----------------
Permissive Aggregation Group as hereinafter determined.
(i) Required Aggregation Group means the group of plans composed of
--------------------------
(A) each plan of the Employer in which a Key Employee is a participant
or participated at any time during the Determination Period,
regardless of whether the plan has terminated; and (B) each other plan
of the Employer which enables any plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or
410, which shall be aggregated.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top-Heavy Plan if the Required Aggregation
Group is a Top-Heavy Group. No plan in the Required Aggregation Group
will be considered a Top-Heavy Plan if the Required Aggregation Group
is not a Top-Heavy Group.
(ii) Permissive Aggregation Group means the Required Aggregation Group
----------------------------
plus any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a whole,
would continue to satisfy Code Sections 401(a)(4) and 410.
In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a Top-
Heavy Plan if the Permissive Aggregation Group is a Top-Heavy Group.
No plan in the Permissive Aggregation Group will be considered a Top-
Heavy Plan if the Permissive Aggregation Group is not a Top-Heavy
Group.
(iii) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated to
determine whether the plans are Top-Heavy Plans.
(c) Determination Date means for any Plan Year (i) the last day of the
------------------
preceding Plan Year, or (ii) in the case of the first Plan Year of the Plan, the
last day of the first Plan Year.
(d) Determination Period means the five (5) year period ending on the
--------------------
Determination Date.
(e) Employer means the Employer that adopts this Plan. Related Employers
--------
shall be considered a single Employer for purposes of applying the limitations
of these top-heavy rules.
(f) Excluded Employees means any Employee who has not performed any
-------------------
Service for the Employer during the five (5) year period ending on the
Determination Date. Excluded Employees shall be excluded for purposes of a Top-
Heavy determination.
14
<PAGE>
(g) Key Employee means any Employee or Former Employee, or Beneficiary of
------------
the Employee, who, for any Plan Year in the Determination Period is:
(i) An officer of the Employer having Compensation from the Employer
and any Related Employer greater than fifty percent (50%) of the
amount in effect under Code Section 415(b)(1)(A);
(ii) One of the ten (10) Employees having Compensation from the
Employer and any Related Employer of more than the limitation in
effect under Code Section 415(c)(1)(A) and owning (or considered as
owning within the meaning of Code Section 318) the largest interests
in the Employer;
(iii) A Five Percent Owner of the Employer (Five Percent Owner means
any person owning, or considered as owning within the meaning of Code
Section 318, more than five percent (5%) of the outstanding stock of
the Employer or stock possessing more than five percent (5%) of the
total combined voting power of all stock of the Employer; or in the
case of an unincorporated business, any person who owns more than five
percent (5%) of the capital or profits interest in the Employer.); or
(iv) A One Percent Owner of the Employer having Compensation from the
Employer of more than $150,000 (One Percent Owner means any person
having Compensation from the Employer and any Related Employer in
excess of $150,000 and owning, or considered as owning within the
meaning of Code Section 318, more than one percent (1%) of the
outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer; or in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer.).
(v) Notwithstanding the foregoing, Key Employee shall have the
meaning set forth in Code Section 416(i), as amended.
(vi) For purposes of determining whether an Employee or Former
Employee is an officer under this subsection (g), an officer of the
Employer shall have the meaning set forth in the regulations under
Code Section 416(i).
(vii) For purposes of this Section, Compensation means Compensation
determined under Section 2.25 for the definition of a Highly
Compensated Employee.
(viii) For purposes of determining ownership hereunder, employers that
would otherwise be aggregated as Related Employers shall be treated as
separate employers.
(h) Non-Key Employee means any Employee or Former Employee, or Beneficiary
----------------
of the Employee, who is not a Key Employee.
(i) Present Value of Accrued Benefit. Solely for the purpose of
--------------------------------
determining if the Plan, or any other plan included in a Required Aggregation
Group of which this Plan is a part, is a Top-Heavy Plan, the Accrued Benefit of
a Non-Key Employee shall be determined under (i) the method, if any, that
uniformly applies for accrual purposes under all plans maintained by the Related
Employers, or (ii) if there is no uniform method, in accordance with the slowest
accrual rate permitted under the fractional accrual method described in Code
Section 411(b)(1)(C). To calculate the Present Value of Accrued Benefits from a
defined benefit plan, the Committee will use the actuarial assumptions for
interest and mortality only, prescribed by the defined benefit plan(s) to value
benefits for Top-Heavy purposes. If an aggregated plan does not have
15
<PAGE>
a Valuation Date coinciding with the Determination Date, the Committee must
value the Accrued Benefits in the aggregated plan as of the most recent
Valuation Date falling within the twelve (12) month period ending on the
Determination Date, except as Code Section 416 and applicable Treasury
regulations require for the first and second plan year of a defined benefit
plan. The Committee will determine whether a plan is Top-Heavy by referring to
Determination Dates that fall within the same calendar year.
(j) Top-Heavy Group means an Aggregation Group in which, as of the
---------------
Determination Date, the sum of:
(i) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group; and
(ii) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group exceeds sixty percent (60%)
of a similar sum determined for all Participants.
(k) Valuation Date means the Determination Date defined above.
--------------
Section 2.52. Total Distribution means a distribution to a Participant or
------------ ------------------
a Participant's Beneficiary, within one (1) taxable year of the recipient, of
the entire balance to the credit of the Participant.
Section 2.53. Trust means the trust created by the Trust Agreement between
------------ -----
FFE Transportation Services, Inc. and the Trustee.
Section 2.54. Trust Agreement means the agreement as provided in Article 2
------------ ---------------
of the Plan, entered into by FFE Transportation Services, Inc. and the Trustee,
or any successor Trustee, establishing the Trust and specifying the duties of
the Trustee.
Section 2.55. Trust Fund. Trust Fund means all assets of any kind and
------------ ----------
nature from time to time held by the Trustee or its agent under the Trust
Agreement without distinction between income and principal. This Plan
contemplates a single Trust for all Employers participating under the FFE
TRANSPORTATION SERVICES, INC. EMPLOYEE STOCK OWNERSHIP PLAN. However, the
Trustee will maintain separate records of account to reflect properly each
Participant's Account Balance from each Participating Employer.
Section 2.56. Trustee means the trustee or trustees under the Plan and the
------------ -------
Trust Agreement. EFFECTIVE JANUARY 1, 1985 THROUGH JUNE 30, 1989, Trustee means
Texas American Bank Dallas, N.A. EFFECTIVE JULY 1, 1989, Trustee means First
City, Texas-Dallas, and any successor Trustee.
Section 2.57. Year of Service.
------------ ---------------
(a) Year of Eligibility Service means, for each Employee, the twelve (12)
---------------------------
consecutive month Computation Period, defined below, during which the Employee
completes one thousand (1,000) Hours of Service. The initial Eligibility
Computation Period, for purposes of this subsection, shall be the twelve (12)
consecutive month period commencing with the date on which an Employee is first
entitled to credit for an Hour of Service with the Employer, the Employment
Commencement Date. The Eligibility Computation Period for each Employee shall
shift to the Plan Year which includes the Accounting Date of an Employee's
Employment Commencement Date without regard to whether the Employee is entitled
to be credited with one thousand (1,000) Hours of Service during the period,
provided that an Employee who is credited with one thousand (1,000) Hours of
Service in both the initial Eligibility Computation Period and the Plan Year
which includes the first Accounting Date of the Employee's Employment
Commencement Date shall be credited with two (2) Years of Eligibility Service.
In computing an Employee's Year(s) of Eligibility Service in the case of any
Participant who has a One Year Break in Service, Service before the Break in
Service shall not be
16
<PAGE>
required to be taken into account under the Plan until the Employee has
completed a Year of Eligibility Service measured from the date of re-employment.
(b) Year of Vesting Service means any Plan Year during which the Employee
-----------------------
performs not less than one thousand (1,000) Hours of Service for the Employer.
If (i) an Employee's Eligibility Computation Period for a Plan requiring One
Year of Service for eligibility overlaps two vesting Computation Periods; and
(ii) the Employee completes one thousand (1,000) Hours of Service in the
Eligibility Computation Period but fails to complete the one thousand (1,000)
Hours of Service in either of the overlapping Vesting Computation Periods; and
(iii) the Employee is admitted to participation in the Plan, then the Year of
Eligibility Service completed shall also be considered a Year of Vesting Service
when the Employee becomes a Participant.
(i) Years of Service, for purposes of vesting, shall include all
Years of Service of the Employee with any Predecessor Employer.
(ii) Years of Service with the Employer before a Participant enters
the Plan shall be considered for purposes of vesting.
(c) Reemployment After a Break-in-Service. In determining a Participant's
-------------------------------------
Years of Service for both participation and vesting purposes upon a
Participant's reemployment with the Employer after a Break-in-Service, the
following rules apply:
(i) For a Participant who terminates employment without any vested
right to the Employer Contribution Account and who is re-employed
after a One Year Break in Service, Service before the Break in Service
shall not be taken into account if the number of consecutive One Year
Breaks in Service equals or exceeds the greater of (A) five (5), or
(B) the aggregate number of Years of Service before the Break in
Service.
(ii) For an Employee who terminates employment and is subsequently re-
employed after incurring a One Year Break in Service, Service prior to
the Break in Service shall not be taken into account until the
Employee has completed a Year of Service after re-employment.
(iii) For a Participant who terminates employment and who subsequently
is re-employed after incurring five (5) consecutive One Year Breaks in
Service, Years of Service after the Break in Service shall not be
taken into account for purposes of determining the Nonforfeitable
percentage of an Employee's Account Balance derived from Employer
Contributions which accrued before the Break in Service.
(d) Service with Related Employers. If the Employer is a member of a
------------------------------
group of Related Employers, then Year of Service for purposes of eligibility and
vesting shall include Service with any Related Employer.
* * * * * * *
17
<PAGE>
ARTICLE THREE
-------------
ELIGIBILITY AND PARTICIPATION
-----------------------------
Section 3.1. Eligibility Conditions.
----------- ----------------------
(a) Each Employee shall be eligible to participate in this Plan on the
Entry Date coincident with or next following completion of one (1) Year of
Service with the Employer.
(b) Notwithstanding the preceding sentence, an Employee who has completed
at least one (1) Year of Service with the Employer on the Effective Date of this
Plan shall be eligible to participate in this Plan on the Effective Date.
EFFECTIVE JANUARY 1, 1987 THROUGH DECEMBER 31, 1988, notwithstanding the
foregoing, an Employee of an Employer which became an Employer pursuant to an
election under Section 9.5, shall become a Participant as of the effective date
of such Employer's election to participate in the Plan if:
(i) Such an Employee was a participant in a defined contribution plan
of such an Employer which plan was merged into this Plan
effective as of the date such Employer's participation in this
Plan commenced; or
(ii) Such an Employee would have been eligible under (a) above, prior
to such effective date if such Employer had become a
participating employer as of the first day of the first Plan Year
preceding the Plan Year in which such Employer actually commenced
participation in this Plan.
EFFECTIVE JANUARY 1, 1987 THROUGH DECEMBER 31, 1988, in all other
situations, such Employee shall become a Participant upon completing one (1)
Year of Service with the Employer, disregarding any service for the Employer
more than one Plan Year prior to the Plan Year in which the Employer's
participation in this Plan commenced.
(c) The following Employees are not eligible to participate in the Plan:
. Collective Bargaining Employees. Each Employee who is a member
of a collective bargaining unit shall not be eligible to
participate in this Plan unless the collective bargaining
agreement provides otherwise. An Employee is a member of a
collective bargaining unit if the Employee is included in a unit
of Employees covered by an agreement which the Secretary of Labor
finds to be a collective bargaining agreement between Employee
representatives and one or more employers if there is evidence
that retirement benefits were the subject of good faith
bargaining between the Employee representatives and the Employer
or Employers. The term "Employee representatives" does not
include an organization of which more than one-half ( 1/2) the
members are owners, officers, or executives of the Employer.
. Nonresident aliens who do not receive any earned income (as
defined in Code Section 911(d)(2)) from the Employer which
constitutes United States source income (as defined in Code
Section 861(a)(3)).
. Any Employee hired under a work-study arrangement whereby the
Employee's active employment with the Employer shall not exceed
four (4) consecutive calendar months, whereby the Employee
attends a recognized school for a "quarter",
18
<PAGE>
"semester" or other scholastic period immediately before or after
such employment with the Employer. EFFECTIVE JANUARY 1, 1989,
this restriction no longer applies.
. Any Employee compensated on an hourly basis who is employed by W
& B Refrigeration Service Company with the job classification of
Warehouseman, Driver, Security Guard or Mechanic.
. EFFECTIVE FEBRUARY 1, 1988, any Employee compensated on an hourly
basis who is employed by Lisa Motor Lines, Inc. with the job
classification of Warehouseman, Driver, Security Guard or
Mechanic.
. Any Employee compensated on an hourly basis who is employed by
Global Refrigerant Management, Inc. (formerly Compressor Plus,
Inc.) with the job classification of Warehouseman, Driver,
Security Guard or Mechanic.
. Effective January 1, 1995, Leased Employees.
If a Participant is no longer a member of an eligible class of Employees
and becomes ineligible to participate but has not incurred a Break in Service,
such Employee will participate immediately upon returning to an eligible class
of Employees. If a Participant incurs a Break in Service, eligibility will be
determined under the Break in Service rules of Section 2.35.
If an Employee who is not a member of an eligible class of Employees
becomes a member of an eligible class, the Employee will participate immediately
if the Employee has satisfied the minimum age and service requirements and would
have otherwise previously become a Participant.
Section 3.2. Participation.
----------- -------------
(a) Whenever a new Employee is hired by the Employer, the Employer
immediately shall give notice to the Committee of the employment and shall
identify the new Employee. The Committee shall notify in writing each new
Employee of the pending eligibility not later than thirty (30) days prior to the
date on which the Employee will become eligible and shall furnish the Employee a
copy of this Agreement or any other explanation of the Plan that the Committee
shall provide for that purpose. Each Employee so notified automatically will
become a Participant upon meeting the requirements of Section 3.1.
(b) A Former Participant who, on or after the Effective Date, incurs a
Severance from Service, and who is subsequently reemployed by an Employer, shall
immediately reenter the Plan as an active Participant on the Reemployment
Commencement Date if the Participant has not incurred a Break in Service since
the last Severance from Service, or if he was previously vested in all or a
portion of his Employer Contribution Account balance.
(c) If not covered by (b) above, a Former Participant reemployed by the
Employer will be treated as a new Employee for eligibility purposes if the
number of consecutive years of Break in Service equals or exceeds the greater of
(i) 5 years, or (ii) the number of Years of Service creditable to the Former
Participant under this Article prior to his last consecutive Breaks in Service;
otherwise, the Former Participant will become a Participant again upon his
Reemployment Commencement Date.
* * * * * * *
19
<PAGE>
ARTICLE FOUR
------------
CONTRIBUTIONS
-------------
Section 4.1. Employer Contributions.
----------- ----------------------
(a) Discretionary Contributions. For each Plan Year, the amount of the
---------------------------
Employer Contribution to the Trust Fund will equal the amount, if any, each
Employer may from time to time determine and authorize. The Employer may
contribute to this Plan whether or not it has net profits. The Employer shall
not authorize contributions by the Employer at such times or in such amounts
that the Plan in operation discriminates in favor of Highly Compensated
Employees. Notwithstanding the foregoing, the Employer Contribution for any
year shall not exceed the maximum amount allowable as a deduction to the
Employer under Code Section 404.
(b) Form of Contributions. Employer Contributions may be paid in cash or
---------------------
in Employer Securities as the Employer may determine from time to time.
Employer Contributions in cash shall be used by the Trustee to acquire Employer
Securities as soon as reasonably possible, taking into consideration current
market conditions, the availability of Employer Securities, and cash
requirements arising as a result of distributions from Participants' Accounts.
Interim investments may be made by the Trustee in certificates of deposit,
readily marketable stock, debentures, and similar investments generally regarded
as involving low risk. If any Employer Contributions are paid in shares of
Employer Securities, the value of the Employer Securities shall be determined by
the average of the closing prices of the securities for the twenty (20)
consecutive trading days immediately preceding the date on which the Employer
Securities are contributed to the Trust. EFFECTIVE JANUARY 1, 1994, the
Employer may make its contribution of Employer Securities at the fair market
value determined at the time of contribution.
(c) Make-up Contributions. After the Employer's Contribution for a Plan
---------------------
Year has been made and allocated, if it should appear that, through oversight or
mistake of fact or law, a Participant (or an Employee who should have been
considered a Participant) entitled to a share in the Employer Contribution
received no allocation or received an allocation which was less than the
individual should have received, the Employer may, at its election, and in lieu
of reallocating the Employer Contribution, make a special Make-Up Contribution
of cash or Employer Securities for the Account of the Participant in an amount
adequate to provide the Participant the amount of Employer Securities that would
have been allocated to the Employer Account but for the oversight or mistake,
including any dividend allocation.
(d) Payment on Exempt Loan. All Employer cash contributions and Trust
----------------------
income, including dividends that are not distributed in cash on instruction from
the Committee as provided in Article 5, but not including income earned on
Participants' Rollover Accounts, shall first be used to pay outstanding current
obligations of the Trust, including payments owed on Exempt Loans.
Section 4.2. Deadline for Employer Contributions. Employer Contributions
----------- -----------------------------------
may be paid to the Trustee at any time and from time to time, except that the
total Employer Contribution for any Plan Year shall be paid in full not later
than the time prescribed by Code Section 404(a)(6) to enable the Employer to
obtain a deduction on its federal income tax return for the Employer's taxable
year. The total Employer Contribution for any Plan Year shall be deemed to have
been made on the Accounting Date of that Plan Year.
Section 4.3. Deposit of Employer Contributions. All Employer
----------- ---------------------------------
Contributions shall be added immediately to and become a part of the Trust Fund
and shall remain in the Trust.
20
<PAGE>
Section 4.4. Crediting of Employer Contributions. All Employer
----------- -----------------------------------
Contributions shall be credited as of each Accounting Date as provided in
Article 5.
Section 4.5. Withdrawal of Employer Contributions. The Plan does not
----------- ------------------------------------
permit withdrawal of Employer Contributions.
Section 4.6. Employee Contributions. Except as provided in Section 13.1
----------- ----------------------
pertaining to Rollover Contributions, this Plan does not permit nor accept
Employee Contributions of any kind.
* * * * * * *
21
<PAGE>
ARTICLE FIVE
------------
ALLOCATIONS
-----------
Section 5.1. Allocation of Trust Income.
----------- --------------------------
(a) Adjustment Rules for Employer Investment Accounts. As of each
-------------------------------------------------
Accounting Date, before allocating and crediting Forfeitures and the Employer
Contributions for the Plan Year ending with such Accounting Date as provided in
Article 5, upon instruction from the Committee, the Trustee shall adjust all
Employer Investment Accounts, if any, as follows:
(i) the Trustee shall determine the fair market value of the Trust
Fund, including the cash value of any Contracts then held for the
benefit of the Trust Fund as a whole, but excluding the aggregate
amount of contributions, if any, for the Plan Year made by the
Employer and received by the Trustee during the Plan Year, and
excluding all Forfeitures to be allocated as of such Accounting
Date;
(ii) the Trustee shall determine the then total aggregate value of all
Employer Investment Accounts as shown on its records, except such
portion of an Employer Investment Account that will be forfeited
and allocated as of such Accounting Date; and
(iii) the Trustee shall adjust the value of each Employer Investment
Account, by crediting it with its proportion of the difference
between (a) and (b) if (a) is larger or by charging it with the
proportion of the difference between (a) and (b) if (b) is
larger. The proportion to be so credited or charged to each
Employer Investment Account shall be calculated by multiplying
the then amount to the credit of each Employer Investment Account
by a fraction, the numerator of which is the difference between
(a) and (b) and the denominator of which is the then total
aggregate value of all Accounts.
(iv) the Trustee shall adjust the value of each Employer Investment
Account by crediting it with cash dividends on Employer
Securities held in the corresponding Employer Securities Account
of each Participant and by debiting it for any payments on
purchases of Employer Securities or for any repayment of debt,
including principal and interest, incurred for the purchase of
Employer Securities.
(b) Adjustment Rules for Employer Securities Accounts. Upon instruction
-------------------------------------------------
from the Committee, the Trustee shall, within ninety (90) days after the close
of the Plan Year in which paid, distribute to the Participants, in cash, all or
a portion of the dividends paid to the Plan with respect to Employer Securities
held by the Plan and allocated to Accounts. The dividends, if distributed in
accordance with this Section, shall be paid out as if each Participant directly
owned the numbers of shares of Employer Securities allocated to the
Participant's Account (including fractional shares so allocated), as of the
Accounting Date corresponding with, or if none, next following the record date
for such dividend declaration. Such dividend payments shall not be considered
to be distributions under the Plan. Any dividends received on unallocated
shares, together with any other income (except income on Participants' Rollover
Accounts) shall first be used to pay outstanding current obligations of the
Trust, including payments owed on an Exempt Loan, and the balance shall be
invested as set forth in Section 4.1(b). Trust income and expenses (not
reimbursed by the Company) shall be allocated as of each Accounting Date to the
Accounts of Participants who had undistributed balances on the last preceding
Accounting Date in proportion to the balances in such Accounts on such date
adjusted for distributions since such date and prior to the particular
allocation of income and expenses in question.
22
<PAGE>
Section 5.2. Allocation to Accounts.
----------- ----------------------
(a) Employer Contributions. As of each Accounting Date, but after the
----------------------
adjustment of Accounts, the Employer Contributions, including any Forfeitures
allocated as of the Accounting Date, for the Plan Year which ends on the
Accounting Date shall be allocated and credited to the Employer Contribution
Account of each Participant in the Plan on the Accounting Date. Employer
Contributions paid in cash shall be allocated and credited to the Employer
Investment Account of each eligible Participant. Shares of Employer Securities
(including fractional shares) purchased and paid for by the Trust or contributed
in kind by the Employer shall be allocated and credited to the Employer
Securities Account of each eligible Participant.
(b) Rollover Contributions. In the event of any Rollover Contributions of
----------------------
account balances or accrued benefits from another employee benefit plan
qualified under Code Section 401(a) permitted under Article 13, a Rollover
Account will be created for the particular Employee and credited with such
Rollover Contribution. Any expenses peculiar to the assets transferred or
rolled over on behalf of a Participant shall be charged against that
Participant's Rollover Account, and any income attributable to such assets shall
be credited thereto. Rollover Accounts will not share in the income or losses
of the other Plan assets except to the extent they are invested therewith.
Section 5.3. Allocation Rules. Only those Participants (i) who had at
----------- ----------------
least one thousand (1,000) Hours of Service during such Plan Year, or (ii) whose
employment with the Employer terminated during the Plan Year as a result of
Retirement, Death or Disability, or (iii) who commenced participation on a date
other than the first day of the Plan Year if such Participants had, during the
part of the Plan Year remaining after becoming a Participant, at least that
fraction of one thousand (1,000) Hours of Service which is equal to the fraction
of the Plan Year during which the Employee was a Participant, shall be entitled
to receive allocations.
Section 5.4. Allocation Formula. Subject to the minimum allocation for
----------- ------------------
Top-Heavy Plans under Section 5.6 and any restoration allocation required under
Section 6.6, the Committee shall allocate the Employer Contributions and
Participant Forfeitures, if any, to each eligible Participant's Employer
Contribution Account in the same ratio that each Participant's Annual
Compensation for the Plan Year bears to the total Annual Compensation of all
Participants for the Plan Year.
(a) The Employer Investment Account of each eligible Participant shall be
credited as of each Accounting Date with the Participant's allocated share of
the Employer Contributions and Forfeitures in cash or assets other than Employer
Securities.
(b) The Employer Securities Account of each eligible Participant shall be
credited as of each Accounting Date with the Participant's allocated share of
Employer Securities, including fractional shares, purchased and paid for by the
Trust or contributed in kind by the Employer; and Forfeitures of Employer
Securities. In making a Forfeiture allocation under this Section, the Committee
will base Forfeitures of Employer Securities on the fair market value of the
Employer Securities as of the Allocation Date of the Forfeitures. The Committee
shall indicate separate allocations for each class of Employer Securities and
shall maintain adequate records of the aggregate cost basis of Employer
Securities allocated to each Participant's Employer Securities Account. The
number of shares of Employer Securities allocated to each Employer Securities
Account as of any Allocation Date shall consist of the total number of shares
allocated to the Employer Securities Account as of the prior Allocation Date;
the number of shares acquired for the Employer Securities Account as of the
current Allocation Date; and stock dividends with respect to the Employer
Securities, payable to shareholders of record on or after the date of purchase
and allocated to the Employer Securities Account; but reduced by the number of
shares of Employer Securities withdrawn or distributed from the Plan since the
prior Allocation Date.
23
<PAGE>
(c) Subject to the minimum allocation for Top-Heavy Plans under Section
5.6 and any restoration allocation required under Section 6.6, the Committee
will allocate a Participant Forfeiture in addition to the Employer Contribution
for the Plan Year in which the Forfeiture occurs. The Committee will allocate
the Participant Forfeitures for a Plan Year to the Account of each Participant
who satisfies the conditions of Section 5.3, in the same ratio that each
Participant's Annual Compensation for the Plan Year bears to the total Annual
Compensation of all Participants for the Plan Year. The Committee will
continue to hold the undistributed nonvested portion of a terminated
Participant's Account Balance in the Account solely for the benefit of the
Participant until a forfeiture occurs at the time specified in Section 6.3.
Except as provided under Section 6.6, a Participant will not share in the
allocation of a forfeiture of any portion of a Participant's Account Balance.
Section 5.5. Limitations on Allocations.
----------- --------------------------
(a) Defined Contribution Plan Limits. The amount of Annual Additions
--------------------------------
which the Committee may allocate under this Plan on a Participant's behalf for a
Limitation Year may not exceed the Maximum Permissible Amount. If the amount
the Employer otherwise would contribute to the Participant's Account would cause
the Annual Additions for the Limitation Year to exceed the Maximum Permissible
Amount, the Employer will reduce the amount of its contribution so the Annual
Additions for the Limitation Year will equal the Maximum Permissible Amount. If
an allocation of Employer Contributions pursuant to Section 5.4 would result in
an Excess Amount (other than an Excess Amount resulting from the circumstances
described in Section 5.5(c)) to the Participant's Account, the Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer Contributions for the Plan Year in which the
Limitation Year ends and who have not yet received their maximum annual
addition. The Committee will make this reallocation on the basis of the
allocation method under the Plan as if the Participant whose Account otherwise
would receive the Excess Amount is not eligible for an allocation of Employer
Contributions.
(b) Estimation. Prior to the determination of the Participant's actual
----------
Annual Compensation for a Limitation Year, the Committee may determine the
Maximum Permissible Amount on the basis of the Participant's estimated Annual
Compensation defined in Section 5.5(f) for the Limitation Year. The Committee
must make this determination on a reasonable and uniform basis for all
Participants similarly situated. The Committee must reduce any Employer
Contributions (including any allocation of Forfeitures) based on estimated
Annual Compensation by any Excess Amounts carried over from prior years. As
soon as administratively feasible after the end of the Limitation Year, the
Committee will determine the Maximum Permissible Amount for the Limitation Year
based on the Participant's actual Annual Compensation for the Limitation Year.
(c) Disposition of Excess Amount. If, as a result of a reasonable error
----------------------------
in estimating a Participant's Annual Compensation or as a result of an
allocation of Forfeitures, or under other limited facts and circumstances found
justifiable by the Commissioner of Internal Revenue, there is an Excess Amount
attributable to a Participant for a Limitation Year, then the Excess Amount
shall not be deemed Annual Additions in the Limitation Year if they are treated
under any one of the following methods:
(i) The Excess Amounts in the Participant's Account must be allocated
and reallocated to other Participants in the Plan. However, if
the allocation or reallocation of the Excess Amounts pursuant to
the provisions of the Plan causes the limitations of Code Section
415 to be exceeded with respect to each Plan Participant for the
Limitation Year, then these amounts must be held unallocated in a
suspense account. If a suspense account is in existence at any
time during a particular Limitation Year, other than the
Limitation Year described in the preceding sentence, all amounts
in the suspense account must be allocated and reallocated to
Participants' accounts, subject to the limitations of Code
Section 415, before any Employer Contributions
24
<PAGE>
and Employee Contributions which would constitute Annual
Additions may be made to the Plan for that Limitation Year.
(ii) If the Plan covers the Participant at the end of the Limitation
Year, then the Committee will use the Excess Amounts to reduce
future Employer Contributions (including any allocation of
Forfeitures) under the Plan for the next Limitation Year and for
each succeeding Limitation Year, as is necessary, for the
Participant. The Participant may elect to limit Compensation for
allocation purposes to the extent necessary to reduce the
allocation for the Limitation Year to the Maximum Permissible
Amount and eliminate the Excess Amount. If the Plan does not
cover the Participant at the end of the Limitation Year, then the
Committee shall hold the Excess Amount unallocated in a suspense
account and shall allocate and reallocate to the Accounts of
remaining Participants in succeeding Limitation Years to the
extent permissible under the foregoing limitations, prior to any
further Annual Additions to the Plan. Furthermore, the Excess
Amounts must be used to reduce Employer Contributions for the
next Limitation Year (and succeeding Limitation Years, as
necessary) for all of the remaining Participants in the Plan.
For purposes of this paragraph (ii), Excess Amounts may not be
distributed to Participants or Former Participants.
(iii) The Excess Amounts in the Participant's Account must be held
unallocated in a suspense account for the Limitation Year and
allocated and reallocated in the next Limitation Year to all of
the Participants in the Plan under the rules provided in
paragraph (i). The Excess Amounts must be used to reduce
Employer Contributions for the next Limitation Year (and
succeeding Limitation Years as necessary) for all of the
Participants in the Plan. For purposes of this paragraph (iii),
Excess Amounts may not be distributed to Participants or Former
Participants.
(iv) If the Plan should be terminated or contributions should be
completely discontinued, the funds in the suspense account will
be allocated to the extent not prohibited by Code Section 415.
If this Plan terminates during any Plan Year in which the
Suspense Account cannot be reallocated pursuant to the
application of paragraph (a), the amount in the suspense account
shall revert to the Employers.
(v) Any suspense account shall not be adjusted for investment gains
or losses of the Trust Fund.
(d) Multiple Defined Contribution Plan Limits. If the Employer maintains
-----------------------------------------
any other qualified defined contribution plan, the amount of the Annual Addition
which may be allocated to a Participant's Account in this Plan shall not exceed
the Maximum Permissible Amount, reduced by the amount of Annual Additions to
such Participant's accounts for the same Limitation Year in the other plan(s).
The Excess Amount attributed to this Plan equals the product of:
(i) the total Excess Amount allocated as of such date (including any
amount the Committee would have allocated but for the limitations
of Code Section 415), multiplied by
(ii) the ratio of
(A) the amount allocated to the Participant as of such date
under this Plan, divided by
25
<PAGE>
(B) the total amount allocated as of such date under all
qualified defined contribution plans (determined without
regard to the limitations of Code Section 415).
(e) Overall Limits. If the Employer maintains or establishes, or has ever
--------------
maintained or established, any defined benefit plan(s) in addition to this Plan,
then the sum of the Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction for the Participant for that Limitation Year shall not exceed 1.0.
In any Limitation Year that the sum of the Fractions does exceed 1.0, then the
Employer shall reduce the amount of Annual Additions to the Participant's
Account in the defined contribution plan(s), to the extent necessary to prevent
the sum of the Fractions from exceeding 1.0.
(f) Definitions. For purposes of the limitations of Code Section 415 set
-----------
forth in this Section, the following definitions shall apply:
(i) Annual Additions means the sum of the following amounts allocated
----------------
on behalf of a Participant for a Limitation Year:
(A) all Employer Contributions;
(B) all Forfeitures;
(C) all Employee Contributions;
(D) excess contributions described in Code Section 401(k) and
excess aggregate contributions described in Code Section
401(m), irrespective of whether the Plan distributes or
forfeits such Excess Amounts, and excess deferrals described
in Code Section 402(g), unless the excess deferrals are
distributed no later than the first April 15 following the
close of the Participant's taxable year;
(E) Excess Amounts reapplied to reduce Employer Contributions
under this Section 5.5;
(F) amounts allocated after March 31, 1984 to an individual
medical account, as defined in Code Section 415(l)(2),
included as part of a pension or annuity plan maintained by
the Employer;
(G) contributions paid or accrued after December 31, 1985, in
taxable years ending after that 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
described in Code Section 419(e), maintained by the
Employer; and
(H) allocations under a simplified employee pension plan.
(ii) Annual Compensation means the total amount of salary, wages,
-------------------
commissions, bonuses and overtime, paid or otherwise includable
in the gross income of a Participant during the Limitation Year,
but excluding:
(A) Employer contributions to any deferred compensation plan (to
the extent the contributions are not included in the
Participant's gross income for the taxable year in which
contributed) or simplified employee pension under
26
<PAGE>
Code Section 408(k) (to the extent the contributions are
excludable from the Participant's gross income;
(B) distributions from any plan of deferred compensation,
whether or not such amounts are includable in the gross
income of the Employees when distributed;
(C) amounts realized from the exercise of any nonqualified stock
option, or when restricted stock becomes freely
transferrable or is no longer subject to a substantial risk
of forfeiture;
(D) amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock option
described in Part II, Subchapter D, Chapter 1 of the Code;
(E) premiums paid by the Employer for group term life insurance
(to the extent the premiums are not includable in the
Participant's gross income); contributions by the Employer
to an annuity under Code Section 403(b) (to the extent not
includable in the Participant's gross income); and any other
amounts received under any Employer sponsored fringe benefit
plan (to the extent not includable in the Participant's
gross income);
(F) any contribution for medical benefits, within the meaning of
Code Section 419A(f)(2), after separation from Service which
is otherwise treated as an Annual Addition; and
(G) any amount otherwise treated as an Annual Addition under
Code Section 415(l)(1).
(iii)Average Annual Compensation means the average compensation during
---------------------------
a Participant's highest three (3) consecutive Years of Service,
which period is the three (3) consecutive calendar years (or the
actual number of consecutive years of employment for those
Employees who are employed for less than three (3) consecutive
years with the Employer) during which the Participant had the
greatest aggregate compensation from the Employer.
(iv) Defined Benefit Plan Fraction means the fraction derived from the
-----------------------------
numerator defined in the following paragraph (A) and the
denominator defined in the following paragraph (B).
(A) Numerator. The numerator is the Projected Annual Benefit
---------
provided for such Participant under any defined benefit
plan(s) the Employer maintains or establishes, or has ever
maintained or established.
(B) Denominator. The denominator is the lesser of (1) 1.25
-----------
times the Maximum Defined Benefit Dollar Limitation under
Code Section 415(b)(1)(A) for the Limitation Year, or (2)
1.4 times one hundred percent (100%) of the Participant's
Average Annual Compensation Limitation for his highest three
(3) consecutive years under Code Section 415(b)(1)(B).
(C) Notwithstanding the foregoing, 1.0 shall be substituted for
1.25 wherever it appears in Section 5.5(f)(iv)(B) in any
Plan Year in which the Plan is
27
<PAGE>
determined to be Top-Heavy, unless the minimum allocation
requirements of Section 5.6 are met. In determining whether
the requirements of Section 5.6 have been met, four percent
(4%) shall be substituted for three percent (3%).
Notwithstanding the foregoing, 1.0 shall be substituted for
1.25 wherever it appears in Section 5.5(f)(iv)(B) in any
Plan Year in which the Plan is determined to be Super Top-
Heavy, regardless of the minimum allocation.
(v) Defined Contribution Plan Fraction means the fraction derived
----------------------------------
from the numerator defined in the following paragraph (A) and the
denominator defined in the following paragraph (B).
(A) Numerator. The numerator is the sum of the Annual Additions
---------
to a Participant's Account under the defined contribution
plan(s) and welfare benefit funds defined in Code Section
419(e) as of the close of the Limitation Year.
(B) Denominator. The denominator is the sum of the lesser of
-----------
the following amounts determined for such Limitation Year
and for each prior Year of Service with the Employer:
(1) 1.25 times the Maximum Permissible Amount in
effect under Code Section 415(c)(1)(A) for such
Limitation Year (without regard to the special Dollar
Limitations for employee stock ownership plans), or
(2) thirty-five percent (35%) of the Participant's Annual
Compensation for each Limitation Year.
(C) Regarding any Limitation Year ending after December 31,
1982, the amount taken into account under Section
5.5(f)(v)(B) with respect to each Participant for all
Limitation Years ending before January 1, 1983, shall be at
the election of the Administrator, an amount equal to the
product of the amount determined under Section 5.5(f)(v)(B)
multiplied by a fraction, the numerator of which is the
lesser of (1) $51,875 ($41,500 for any year in which the
Plan is determined to be a Top-Heavy Plan); or (2) 1.4
multiplied by twenty-five percent (25%) of the Annual
Compensation of the Participant for the Limitation Year
ending in 1981, and the denominator of which is the lesser
of (1) $41,500; or (2) twenty-five percent (25%) of the
Annual Compensation of the Participant for the Limitation
Year ending in 1981. The Administrator may make such
election only if one or more of such plans were in existence
on or before July 1, 1982.
(D) If the Plan and all other plans maintained by the Employer
met the limitations under Code Section 415 for the last
Limitation Year beginning before January 1, 1983 the amount
under Section 5.5(f)(v) (A) shall be reduced by an amount
required to decrease the combined fractions to 1.0. The
amount subtracted shall be the product of (1) the excess of
the sum of the fractions over 1.0 and (2) the denominator
under Section 5.5(f)(v)(B) as computed through the
Limitation Year ending in 1982.
28
<PAGE>
(E) Notwithstanding the foregoing, 1.0 shall be substituted for
1.25 wherever it appears in Section 5.5(f)(v)(B) in any Plan
Year in which the Plan is determined to be Top-Heavy, unless
the minimum allocation requirements of Section 5.6 are met.
In determining whether the requirements of Section 5.4 have
been met, four percent (4%) shall be substituted for three
percent (3%). Notwithstanding the foregoing, 1.0 shall be
substituted for 1.25 wherever it appears in Section
5.5(f)(v)(B) in any year in which the Plan is determined to
be Super Top-Heavy, regardless of the minimum allocation.
(vi) Employer means the Employer that adopts this Plan. All Related
--------
Employers shall be considered a single Employer for purposes of
applying the limitations of this Section.
(vii)Excess Amount means the excess of the Participant's Annual
-------------
Additions for the Limitation Year over the Maximum Permissible
Amount, less administrative charges allocable to such Excess
Amount.
(viii) Limitation Year means the Limitation Year specified in the
---------------
Plan or, if none is specified, the calendar year.
(ix) Maximum Permissible Amount means the lesser of:
--------------------------
(A) the Defined Contribution Dollar Limitation, or
(B) twenty-five percent (25%) of the Participant's Compensation,
within the meaning of Code Section 415(c)(3)
for a Limitation Year with respect to any Participant.
Defined Contribution Dollar Limitation means $30,000 or, if
greater, twenty-five percent (25%) of the Defined Benefit Dollar
Limitation set forth in Code Section 415(b)(1)(A) as in effect
for the Limitation Year.
(x) Projected Annual Benefit means the benefit of the Participant
------------------------
payable annually in the form of a straight life annuity (with no
ancillary benefits) under the terms of a defined benefit plan to
which employees do not contribute and under which no rollover
contributions are made, assuming that the Participant continues
employment until Normal Retirement Age (or current age, if
later), compensation continues at the same rate as in effect in
the Limitation Year under consideration until the date of Normal
Retirement Age, and all other relevant factors used to determine
benefits under the defined benefit plan remain constant as of the
current Limitation Year for all future Limitation Years.
(g) Special Rules for Overall Limits. If the Employer maintains or
--------------------------------
establishes, or has ever maintained or established, any defined benefit plan(s)
in addition to this Plan, such Plans are subject to the overall limitations
under Code Section 415(e) and the following special rules apply:
(i) Recomputation Not Required. For purposes of determining the
--------------------------
Defined Contribution Plan Fraction, the Annual Addition for any
Limitation Year beginning before January 1, 1987 shall not be
recomputed to treat all Employee Contributions as Annual
Additions.
29
<PAGE>
(ii) Adjustment of Defined Contribution Plan Fraction. If the Plan
------------------------------------------------
satisfied the applicable requirements of Code Section 415 as in
effect for all Limitation Years beginning before January 1, 1987,
the Committee shall redetermine the Defined Contribution Plan
Fraction and the Defined Benefit Plan Fraction as of the end of
the 1986 Limitation Year. If the sum of the redetermined
Fractions exceeds 1.0, an amount shall be subtracted from the
numerator of the Defined Contribution Plan Fraction (not
exceeding the numerator) equal to the product of (A) the excess
of the sum of the Fractions over 1.0 times (B) the denominator of
the Defined Contribution Plan Fraction, so that the sum of the
Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction computed under Code Section 415(e)(1) does not exceed
1.0 for the Limitation Year.
(h) Separate, Combined Plan Limits. For purposes of the foregoing
------------------------------
limitations in this Section, any Employee Contributions to any defined benefit
plan shall be considered as a separate defined contribution plan. Further, all
defined contribution plans shall be considered as one defined contribution plan
and all defined benefit plans shall be considered as one defined benefit plan,
whether or not any of such plans have been terminated.
Section 5.6. Top-Heavy Minimum Allocation.
----------- ----------------------------
(a) Minimum Allocation. Notwithstanding the foregoing, for any Plan Year
------------------
in which the Plan is determined to be Top-Heavy, the amount of Employer
Contributions and Forfeitures allocated to the Account of each Non-Key Employee
shall be equal to the lesser of three percent (3%) of each Non-Key Employee's
Compensation or the highest contribution rate for the Plan Year made on behalf
of any Key Employee. However, if a defined benefit plan maintained by the
Employer which benefits a Key Employee depends on this Plan to satisfy the
nondiscrimination rules of Code Section 401(a)(4) or the coverage rules of Code
Section 410 (or another plan benefitting the Key Employee so depends on the
defined benefit plan), the top heavy minimum allocation is three percent (3%) of
the Non-Key Employee's Compensation regardless of the contribution rate for the
Key Employee.
(b) Compensation. For purposes of this Section, Compensation means Annual
------------
Compensation defined in Section 2.6 except (i) Compensation does not include
Elective Contributions, and (ii) any exclusions from Annual Compensation (other
than the exclusion of Elective Contributions and the exclusions described in
clauses (i) through (v) of Section 2.6) do not apply. Notwithstanding the
definition of Annual Compensation in Section 2.6, the period preceding a
Participant's Entry Date shall be included in determining the minimum top-heavy
allocation provided by this Section.
(c) Contribution Rate. For purposes of this Section, a Participant's
-----------------
contribution rate is the sum of Employer Contributions (not including Employer
Contributions to Social Security) and Forfeitures allocated to the Participant's
Account for the Plan Year divided by his or her Compensation for the entire Plan
Year. To determine a Participant's contribution rate, the Committee must treat
all qualified top-heavy defined contribution plans maintained by the Employer
(or by any related Employers described in Section 2.45) as a single plan. For
purposes of this Section, for Plan Years beginning after 1988, Employer
Contributions made to any plan pursuant to a salary reduction agreement or
similar arrangement may be considered as Employer Contributions. For purposes
of this Section, for Plan Years beginning after 1988, Employer Contributions
made to any plan pursuant to a salary reduction agreement or similar arrangement
("Elective Contributions") on behalf of key employees are treated as Employer
Contributions under Code Section 416(c)(2). However, elective contributions on
behalf of Employees other than key employees may not be treated as Employer
Contributions for purposes of the minimum contribution requirement of Code
Section 416.
30
<PAGE>
(d) Participant Entitled to Top-Heavy Minimum Allocation. The minimum
----------------------------------------------------
allocation under this Section shall be provided to each Non-Key Employee who is
a Participant and is employed by the Employer on the last day of the Plan Year,
whether or not the Participant has been credited with one thousand (1,000) Hours
of Service for the Plan Year. The minimum allocation under this Section shall
not be provided to any Participant who was not employed by the Employer on the
last day of the Plan Year. The provisions of this Section shall not apply to
any Participant to the extent the Participant is covered under any other plan or
plans of the Employer under which the minimum allocation or benefit requirements
under Code Section 416(c)(1) or (c)(2) are met for the Participant.
(e) Compliance. The Plan will satisfy the top-heavy minimum allocation
----------
under this Section. The Committee first will allocate the Employer
Contributions (and Participant Forfeitures, if any) for the Plan Year pursuant
to the allocation formula under Section 5.4. The Employer then will contribute
an additional amount for the Account of any Participant entitled under this
Section to a top-heavy minimum allocation and whose contribution rate for the
Plan Year, under this Plan and any other plan aggregated under this Section, is
less than the top-heavy minimum allocation. The additional amount is the amount
necessary to increase the Participant's contribution rate to the top-heavy
minimum allocation. The Committee will allocate the additional contribution to
the Account of the Participant on whose behalf the Employer makes the
contribution.
Section 5.7. Limitation on Allocations for Electing Shareholder. If a
----------- --------------------------------------------------
shareholder sells Employer Securities to the Plan and elects (with the consent
of the Employer) nonrecognition of gain under Code Section 1042, no portion of
the Employer Securities purchased in any such transaction (or any dividends or
other income attributable thereto) may be allocated during the ten (10) year
period following the purchase (or, if an Exempt Loan was incurred in connection
with such purchase, the period beginning on the date of such purchase and ending
on the tenth anniversary of the Valuation Date as of which shares are released
from the Suspense Account as a result of the final payment on the Exempt Loan)
to the Employer Securities Accounts of:
(a) the selling shareholder; or
(b) his or her spouse, brothers or sisters (whether by the whole or half
blood), ancestors or lineal descendants (except as to certain lineal
descendants, to the extent provided in Code Section 409(n)(3)(A)), or any other
person who bears a relationship to the selling shareholder that is described in
Code Section 267(b).
In addition, no portion of the Employer Securities purchased in any such
transaction (or any dividends or other income attributable thereto) may
thereafter be allocated to the Accounts of any Participant owning (as determined
under Code Section 318(a), without regard to Code Section 318(a)(2)(B)(i)),
during the entire one (1) year period preceding the purchase or on any
allocation date, more than 25% of any class of outstanding Employer Securities
or of the total value of any class of outstanding Employer Securities.
To the extent that a Participant is subject to the allocation limitation
described in this Section for a Plan Year, he or she shall not share in the
allocation of Employer Contributions and Forfeitures.
Section 5.8. Post-Allocation Adjustments to Accounts. After the amount or
----------- ---------------------------------------
amounts have been allocated and credited to each Participant's Employer
Contribution Account, as provided in this Article, the then value of each
Employer Contribution Account shall remain unchanged until the next Accounting
Date. Notwithstanding the foregoing, the Participant's Employer Contribution
Account may be adjusted prior to the next Accounting Date under:
31
<PAGE>
(a) other provisions in this Agreement authorizing the Committee to reduce
the Participant's Employer Contribution Account by disbursements properly
chargeable to it or to credit the Participant's Employer Contribution Account by
funds received by it; or
(b) a special valuation of the Participant's Employer Contribution Account
required under Articles 6 and 7.
Section 5.9. Employer Contribution Accounts Defined. For purposes of this
----------- --------------------------------------
Article, reference to the Employer Contribution Accounts of Participants shall
include the Employer Contribution Accounts of those Participants who die, become
disabled or retire during the Plan Year considered.
* * * * * * *
32
<PAGE>
ARTICLE SIX
-----------
VESTING
-------
Section 6.1. Crediting and Adjusting of Accounts Upon Termination. Upon
----------- ----------------------------------------------------
the first to occur of the Participant's Retirement, death or the determination
that the Participant has sustained total and permanent Disability, the
Participant, or his Beneficiary, shall be fully vested in and have a
nonforfeitable right to the contents of the Participant's Employer Contribution
Account and Rollover Account, if any.
If a Participant's employment by the Employer shall terminate for any
reason other than Retirement, death or total and permanent Disability, the
Participant, or the Beneficiary on the death of the Participant, shall become
entitled to (i) the contents of the Participant's Rollover Account, and (ii) the
vested percentage at the date of Separation from Service, of the contents of the
Participant's Employer Contribution Account and the Trustee shall hold the
Participant's Nonforfeitable Account Balance in the Accounts for the
Participant's benefit. The Committee shall credit and adjust the Accounts of
the terminated Participant, as provided in Article 5, as of the immediately
preceding Accounting Date. If, on the applicable Accounting Date determined
under the preceding sentence the amount credited to the Participant's Account
does not include all of the allocations, if any, to which a Participant is
entitled under Section 5.4 or 5.6, then the particular Participant's vested
portion determined under Section 6.1 or 6.2, as applicable, of the allocation or
allocations shall be distributed pursuant to Article 7 as soon as practicable
after the allocation is made. The terminated Participant shall be entitled to
benefits determined under Section 6.2 after the date of termination. At its
discretion, the Committee may conduct a special valuation to establish the value
of the terminated Participant's Accounts as of the date of termination, or any
other date that is administratively feasible.
Section 6.2. Vesting.
----------- -------
(a) EFFECTIVE JANUARY 1, 1987 THROUGH DECEMBER 31, 1988, a Participant
to whom Section 6.1 applies shall be entitled to receive the entire contents of
the Participant's Rollover Account. In addition, the Participant also shall be
entitled to receive a Nonforfeitable percentage of the balance credited to the
Employer Contribution Account, consisting of the Employer Investment Account and
the Employer Securities Account, determined under the following vesting
schedule:
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 4 years 0%
At least 4 but less than 5 years 40%
At least 5 but less than 6 years 45%
At least 6 but less than 7 years 50%
At least 7 but less than 8 years 60%
At least 8 but less than 9 years 70%
At least 9 but less than 10 years 80%
At least 10 but less than 11 years 90%
At least 11 or more years 100%
Notwithstanding the foregoing vesting schedule, for any Plan Year in
which the Plan is a Top-Heavy Plan, the following vesting schedule shall apply:
33
<PAGE>
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 2 years 0%
At least 2 but less than 3 years 20%
At least 3 but less than 4 years 40%
At least 4 but less than 5 years 60%
At least 5 but less than 6 years 80%
At least 6 years 100%
(b) Effective January 1, 1989, a Participant to whom Section 6.1
applies shall be entitled to receive the entire contents of the Participant's
Rollover Account. In addition, the Participant also shall be entitled to
receive a Nonforfeitable percentage of the balance credited to the Employer
Contribution Account, consisting of the Employer Investment Account and the
Employer Securities Account, determined under the following vesting schedule:
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 3 years 0%
At least 3 but less than 4 years 20%
At least 4 but less than 5 years 40%
At least 5 but less than 6 years 60%
At least 6 but less than 7 years 80%
At least 7 or more years 100%
Notwithstanding the foregoing vesting schedule, for any Plan Year in
which the Plan is a Top-Heavy Plan, the following vesting schedule shall apply:
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 2 years 0%
At least 2 but less than 3 years 20%
At least 3 but less than 4 years 40%
At least 4 but less than 5 years 60%
At least 5 but less than 6 years 80%
At least 6 years 100%
(c) If, in any subsequent Plan Year, the Plan ceases to be a Top-Heavy
Plan, the top-heavy vesting schedule shall continue to apply unless the Employer
elects, in writing, to revert to the vesting schedule set forth in paragraph (a)
or (b) whichever is applicable. Any reversion shall be treated as a Plan
amendment and shall be subject to the restrictions of Section 10.2.
Section 6.3. Forfeitures. A Participant to whom this Article applies
----------- -----------
shall forfeit that portion of the amount of the Account to which the Participant
is not entitled under Section 6.2 as of the Anniversary Date coincident with or
next following the earlier of the date on which the Participant incurs five (5)
consecutive One Year Breaks in Service or the date on which the Participant
receives a Cashout Distribution (the Forfeiture Event). A Cashout Distribution
means a lump sum distribution pursuant to Sections 7.3(c), that occurs no later
than the last day of the second Plan Year following the Plan Year in which the
Participant separates from Service. For purposes of this Section, a Participant
who separates from Service without a Nonforfeitable percentage in the
Participant's Employer Contribution Account shall be deemed to have
34
<PAGE>
received a distribution of the Nonforfeitable Account Balance on the date of
Separation from Service. The amount forfeited under this Section shall remain in
the Trust Fund and shall be allocated under Article 5 among the Accounts of the
remaining Participants as of the Accounting Date coincident with or next
following the Forfeiture Event.
If a portion of a Participant's account is forfeited, Qualifying
Employer Securities allocated under Section 5.4 must be forfeited only after
other assets. If interests in more than one class of Qualifying Employer
Securities have been allocated to the Participant's account, the Participant
must be treated as forfeiting the same proportion of each class.
Section 6.4. Determination of Amount of Vested Undistributed Account,
----------- --------------------------------------------------------
Forfeiture. If the Trustee pays any amount outstanding to the credit of a
- -----------
Participant in the Participant's Account while the Participant is not fully
vested in the Account, other than a Cashout Distribution defined in Section
7.3(c), and prior to the Accounting Date on which the Participant shall incur
five (5) consecutive One Year Breaks in Service, the value of the vested and
undistributed Account shall be held in a separate account and shall be
determined at any time prior to and including the Accounting Date on which the
Participant shall incur five (5) consecutive One Year Breaks in Service under
the following formula:
X = P(AB + (RxD)) - (RxD).
For this formula, the variables represent the following factors:
X is the value of the vested portion of the Participant's Account;
P is the Participant's 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 the distribution.
The nonvested portion of the Participant's Account shall be forfeited on
the Accounting Date on which the Participant incurs five (5) consecutive One
Year Breaks in Service.
Section 6.5. Crediting Years of Vesting Service.
----------- ----------------------------------
(a) If a Participant's Service with the Employer is terminated and the
Former Participant receives a distribution from the Trustee and subsequently re-
enters the Service of the Employer after incurring five (5) consecutive One Year
Breaks in Service, the reemployed Participant's Years of Service after the break
need not be taken into account to determine the Nonforfeitable percentage of the
Participant's Account Balance derived from Employer Contributions which accrued
before the Break in Service. Notwithstanding the foregoing sentence, any
reemployed Participant's Years of Service prior to the Break in Service must be
taken into account to determine the Nonforfeitable percentage of the
Participant's Account Balance derived from Employer Contributions which accrued
after the Break in Service; provided that, for vesting purposes, the pre-break
Service shall not be taken into account until the Participant completes a Year
of Service measured on a twelve (12) month Computation Period commencing with
the date of re-employment of the Participant.
35
<PAGE>
(b) If a Participant's Service with the Employer is terminated and the
Participant is reemployed by the Employer prior to incurring five (5)
consecutive One Year Breaks in Service, the reemployed Participant shall
continue to vest at the level in the vesting schedule in Section 6.2 that the
Participant had attained prior to termination in both the pre-separation and
post-separation Account Balance.
Section 6.6. Restoration of Account Balance. If a partially vested
----------- ------------------------------
Participant resumes employment covered under the Plan, but prior to incurring
five (5) consecutive One Year Breaks in Service, the Participant shall have the
right to repay the amount previously distributed pursuant to Sections 7.3(b) or
7.3(c). If the Participant repays the entire amount previously distributed
prior to the earlier of (a) incurring five (5) consecutive One Year Breaks in
Service commencing after the distribution, or (b) five years after the first
date on which the Participant is subsequently reemployed by the Employer, then
the Committee shall restore to the Participant's Account an amount equal to the
amount forfeited under Section 6.3 unadjusted by any gains or losses between the
time of distribution and the time of repayment. Sources for the restoration of
Account Balances will be used in the following order of priority: (a)
forfeitures, (b) additional Employer Contributions and (c) Trust income. The
Committee will treat a non-vested Participant who is deemed to have received a
distribution on the date of Separation from Service of the Participant's
Nonforfeitable Account Balance as having repaid the deemed distribution on the
first date of the Participant's reemployment with the Employer. Restoration of
the Participant's Account Balance includes restoration of all Code Section
411(d)(6) protected benefits pertaining to that restored Account under
applicable Treasury regulations. For purposes of Plan Section 5.6 and Code
Section 415(c) and (e), the repayment by the Participant and the restoration
will not be treated as Annual Additions.
* * * * * * *
36
<PAGE>
ARTICLE SEVEN
-------------
PAYMENT OF BENEFITS
-------------------
Section 7.1. Form of Distributions.
----------- ---------------------
(a) FORM OF PAYMENT OF BENEFITS. Whenever a Participant, Former Participant
or Beneficiary is entitled to receive a distribution of benefits, benefits shall
be paid as follows:
(i) Distribution shall be in the form of whole shares of Employer
Securities allocated to the Participant's Employer Contribution
Account. The value of any fractional shares shall be distributed
in cash. If Employer Securities are not readily tradable on an
established market, the recipient shall receive a put option as
described in Section 14.1;
(ii) Distribution of the Participant's Rollover Account shall be in
the form of the assets contained in the Rollover Account.
(iii) The Participant shall be limited in the optional forms of
payment of benefits to those which will result in the payment of
greater than fifty percent (50%) of the anticipated benefits over
the Participant's life expectancy. The purpose of this
limitation is to ensure that death benefits will be incidental to
retirement benefits under Revenue Ruling 72.241.
(iv) Notwithstanding the foregoing, a distribution made pursuant to
this Section shall be subject to the immediate cashout provisions
of Section 7.3(c) and the requirements set forth in the third
paragraph of Section 7.3(a) and the second paragraph of 7.3(b).
Notwithstanding any contrary provision, unless other Plan distribution
provisions require earlier distribution of the Participant's Account,
if the Participant and, if applicable pursuant to Code Sections
401(a)(11) and 417, with the consent of the Participant's spouse
elects, the Committee shall direct the Trustee to commence
distribution of the Participant's Account Balance attributable to
Employer Securities acquired after December 31, 1986 in the
Participant's Employer Securities Account no later than one (1) year
after the close of the Plan Year in which the Participant Separates
from Service because of attainment of Normal Retirement Age. This
distribution requirement is subject to the form of distribution
requirements of this Article 7. For purposes of this paragraph,
Employer Securities do not include any Employer Securities acquired
with the proceeds of an Exempt Loan until the close of the Plan Year
in which the borrower repays the Exempt Loan in full.
(b) DIRECT ROLLOVER OPTIONAL FORM OF BENEFIT.
(i) Direct Rollover. This Section applies to distributions made on
---------------
or after JANUARY 1, 1993. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a distributee's
election under this Section, a distributee may elect, at the time
and in the manner prescribed by the Plan Administrator, to have
any portion of an eligible rollover distribution paid directly to
an eligible retirement plan specified by the distributee in a
direct rollover.
37
<PAGE>
(ii) Definitions
-----------
(A) Eligible Rollover Distribution. An eligible rollover
------------------------------
distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to
the extent such distribution is required under Section
401(a)(9) of the Code; and the portion of any distribution
that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with
respect to Employer Securities).
(B) 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.
(C) 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 Section
414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(D) Direct Rollover. A direct rollover is a payment by the plan
---------------
to the eligible retirement plan specified by the
distributee.
(c) JOINT AND SURVIVOR ANNUITY REQUIREMENTS. The joint and survivor
annuity requirements do not apply to this Plan. The Plan does not provide any
annuity distributions to Participants nor to surviving spouses. A transfer
agreement described in Section 13.2 may not permit a plan which is subject to
Code Section 417 to transfer assets to this Plan, unless the transfer is an
elective transfer as described in Section 13.3.
Section 7.2. Election of Form of Payment of Benefits. The Participant,
----------- ---------------------------------------
Former Participant, or Beneficiary shall elect the form or forms of payment of
benefits permitted in Section 7.1 which the Committee and Trustee shall
implement. Not earlier than ninety (90) days, but not later than thirty (30)
days, before the Participant's Annuity Starting Date, the Committee must provide
a benefit notice to a Participant who is eligible to make an election under this
Section. The Participant's Annuity Starting Date means the first day of the
first period for which an amount is paid as an annuity or any other form. The
benefit notice must explain the optional forms of benefit in the Plan, including
the material features and relative values of those options, and the
Participant's right to defer distribution until he or she attains the later of
Normal Retirement Age or age 62.
38
<PAGE>
EFFECTIVE JANUARY 1, 1994, if a distribution is one to which Sections
401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution
may commence less than 30 days after the notice required under Section 1.411(a)-
11(c) of the Income Tax Regulations is given, provided that:
(i) the plan administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(ii) the participant, after receiving the notice, affirmatively elects a
distribution.
If a Participant, Former Participant, or Beneficiary makes an election
prescribed by this Section, the Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Account Balance pursuant to that election. Any
election under this Section is subject to the mandatory distribution
requirements of Sections 7.6 and the survivor annuity requirements of Section
7.1, if applicable. The Participant, Former Participant or Beneficiary must
make an election under this Section by filing an election form with the
Committee at any time before the Trustee otherwise would commence to pay a
Participant's Account Balance under the applicable requirements of Article 7.
Section 7.3. Timing of Distributions.
----------- -----------------------
(a) PAYMENT OF BENEFITS UPON DEATH, DISABILITY OR NORMAL RETIREMENT.
EFFECTIVE JANUARY 1, 1987 THROUGH DECEMBER 31, 1988, upon the Retirement or
Disability of a Participant, or the death of a Participant or Former
Participant, distribution of the contents of the Participant's Employer
Contribution and Rollover Account shall take place as soon as reasonably
possible following the end of the Plan Year in which the Participant Retired,
became Disabled or Died, and in no event later than sixty (60) days after the
end of the Plan Year.
EFFECTIVE JANUARY 1, 1989, as soon as administratively feasible after the
Committee has credited and adjusted a Participant's Accounts as provided in
Article 5, the Trustee shall make payments upon the Retirement or Disability of
a Participant or the death of a Participant or Former Participant pursuant to
the form and timing of payment of benefits provisions of this Article. Payments
shall begin as soon as administratively feasible following Separation from
Service and shall be completed as soon as reasonably possible following the end
of the Plan Year in which the Participant Retired, died or became Disabled but
in no event later than sixty (60) days after the end of the Plan Year. The
Committee shall charge each payment to the Participant's Accounts and payment
shall continue until death (when Article 8 shall control the disposition of the
deceased Participant's Nonforfeitable Account Balance) or until the
Nonforfeitable Account Balance is paid to the Participant in full, whichever
event shall occur first.
Notwithstanding any contrary provision, unless other Plan distribution
provisions require earlier distribution of the Participant's Account, if the
Participant and, if applicable pursuant to Code Sections 401(a)(11) and 417,
with the consent of the Participant's spouse elects, the Committee shall direct
the Trustee to commence distribution of the Participant's Account Balance
attributable to Employer Securities acquired after December 31, 1986 in the
Participant's Employer Securities Account no later than one (1) year after the
close of the Plan Year in which the Participant Separates from Service because
of attainment of Normal Retirement Age. This distribution requirement is
subject to the form of distribution requirements of this Article 7. For
purposes of this paragraph, Employer Securities do not include any Employer
Securities acquired with the proceeds of an Exempt Loan until the close of the
Plan Year in which the borrower repays the Exempt Loan in full.
39
<PAGE>
(b) PAYMENT OF TERMINATION BENEFITS. EFFECTIVE JANUARY 1, 1987 THROUGH
DECEMBER 31, 1988, in the event of other termination of employment, distribution
of benefits shall not occur until the end of the Plan year (no later than the
sixtieth day after the last day thereof) during which the Participant reaches
normal retirement age; in the event that such terminated employee shall die
before reaching normal retirement age, the provision of the next sentence shall
govern. In the event of death, distribution of benefits shall be as soon as is
reasonably possible following the end of the Plan Year in which death occurred,
in no event later than sixty (60) days following the end of such Plan Year.
EFFECTIVE JANUARY 1, 1989, if the Participant Separates from Service for
any reason other than Retirement, death or Disability and is not reemployed by
the Employer at the end of the fifth Plan Year following the Plan Year of the
Separation from Service, distribution of the vested percentage of the
Participant's Employer Contribution Account and the Participant's Rollover
Account will begin not later than one year after the close of the fifth Plan
Year following the Plan Year in which the Participant Separated from Service
unless the Participant elects to have distribution made, or begin, during the
sixty (60) day period following the end of the Plan Year in which the
Participant reaches Normal Retirement Age. If the Participant is reemployed by
the Employer by the end of the fifth Plan Year, distribution under the Plan will
be governed by whichever part of this section thereafter becomes applicable.
The Committee shall combine the Nonforfeitable percentage of the Accounts of a
Participant determined under Section 6.2 with the Participant Rollover Account
into one Account, and the Trustee shall make payments to the Participant
pursuant to Article 7. Distributions shall be made in substantially equal
annual payments over a period of five (5) years unless the Participant elected
to defer payments until Normal Retirement Age. The Committee shall charge each
payment to the Participant's Account and payment shall continue until death
(when Article 7 shall control the disposition of the deceased Participant's
Nonforfeitable Account Balance) or until the Participant's Nonforfeitable
Account Balance is paid to the Participant in full, whichever event shall occur
first.
Notwithstanding any contrary provision, unless other Plan distribution
provisions require earlier distribution of the Participant's Account, if the
Participant and, if applicable pursuant to Code Sections 401(a)(11) and 417,
with the consent of the Participant's spouse elects, the Committee shall direct
the Trustee to commence distribution of the Participant's Account Balance
attributable to Employer Securities acquired after December 31 1986 in the
Participant's Employer Securities Account no later than one (1) year after the
close of the Plan Year which is the fifth (5th) Plan Year following the Plan
Year in which the Participant Separates from Service for any reason other than
attainment of Normal Retirement Age, death or disability. This distribution
requirement is subject to the form of distribution requirements of this Article.
For purposes of this paragraph, Employer Securities do not include any Employer
Securities acquired with the proceeds of an Exempt Loan until the close of the
Plan Year in which the borrower repays the Exempt Loan in full. If the
Participant resumes employment with the Employer on or before the last day of
the fifth (5th) Plan Year following the Plan Year of the Participant's
Separation from Service, the distribution provisions of this paragraph will not
apply until the Participant again may separate from Service for any other reason
other than attainment of Normal Retirement Age, death or disability.
(c) Involuntary Cashout Distribution. Notwithstanding the foregoing, if a
--------------------------------
Participant separates from Service with the Employer and the Participant's
Nonforfeitable Account Balance determined under Section 6.2 is $3,500 or less in
value, the Committee may direct the Trustee to make immediate distribution to
the Participant in the form of a lump sum distribution in cash; provided,
however, the Trustee shall not make a lump sum distribution after benefit
distributions have commenced, without the written consent of the Participant and
spouse. For purposes of this paragraph, if the value of an Employee's vested
Account Balance is zero (0), the Employee shall be deemed to have received a
distribution of his or her vested Account Balance. Notwithstanding any contrary
provision, if the Nonforfeitable Account Balance of a Participant exceeds $3,500
in value, then the Trustee shall make no distribution without the Participant's
and the spouse's consent pursuant to Article 10 until the later of attainment of
age sixty-two (62) years or attainment of Normal Retirement Age. The foregoing
sentence shall not apply after the death of the Participant.
40
<PAGE>
Section 7.4. Election to Defer Receipt of Benefits. Notwithstanding the
----------- -------------------------------------
foregoing, a Participant who leaves the employment of the Employer before his or
her Normal Retirement Date or Early Retirement Date may elect to leave his or
her Nonforfeitable Account Balance under the management of the Trustee until
Normal Retirement Date or Early Retirement Date. The Trustee shall invest and
reinvest and shall credit and charge the Account with its proportionate share of
gains and losses of the Trust Fund pursuant to Article 5 until the
Nonforfeitable Account Balance is paid out to the Former Participant under this
Article. Any election made under this Section shall be irrevocable and shall be
made no later than fourteen (14) days before the electing Participant becomes
entitled to receive his or her Nonforfeitable Account Balance in the Plan.
Notwithstanding the foregoing, a Participant who has elected to leave his or her
Nonforfeitable Account Balance under the management of the Trustee may later
elect to have the Account Balance transferred to any pension or profit sharing
plan maintained by another Employer in which the Participant has, at the time of
the later election, become a participant under the transferee plan.
Section 7.5. Commencement of Payment of Benefits. Unless a Participant
----------- -----------------------------------
elects otherwise, payment of benefits shall commence not later than sixty (60)
days after the end of the Plan Year in which the latest of the following events
occur:
(a) the day the Participant attains the earlier of age sixty-five (65)
years or Normal Retirement Age;
(b) the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan; or
(c) the day the Participant terminates employment with the Employer.
Section 7.6. Mandatory Distribution of Benefits.
----------- ----------------------------------
(a) Retirement Benefits. The Committee may not direct the Trustee to
-------------------
distribute the Participant's Nonforfeitable Account Balance, nor may the
Participant elect to make the Trustee distribute the Nonforfeitable Account
Balance under a method of payment which, as of the Required Beginning Date, does
not satisfy the minimum distribution requirements under Code Section 401(a)(9)
and the applicable Treasury regulations.
(i) Limits on Distribution Periods. As of the first Distribution
------------------------------
Calendar Year, distributions, if not made in a lump sum, may only be
made over one of the following periods or a combination of such
periods:
(A) the life of the Participant;
(B) the life of the Participant and a Designated Beneficiary,
subject to the requirements of Code Section 401(a)(9) and
the applicable Treasury regulations;
(C) a period certain not extending beyond the life expectancy of
the Participant; or
(D) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated
Beneficiary.
41
<PAGE>
Under no circumstances may a Participant elect payment of benefits in
the form of an annuity. All distributions required under this Article
shall be determined and made under Code Section 401(a)(9) and
applicable Treasury regulations, including the minimum distribution
incidental benefit requirements of Treasury Regulations Section
1.401(a)(9)-2. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum unless the Participant, pursuant to
this Article, makes a valid election to receive an alternative form of
payment.
(ii) Minimum Distribution Amounts
----------------------------
(A) Non-Lump Sum Distribution. If the Participant's entire
--------------------------
interest will be distributed in other than a lump sum, then
the minimum distribution for a calendar year equals the
Participant's Nonforfeitable Account Balance as of the last
Valuation Date preceding the beginning of the calendar year
divided by the Participant's life expectancy or, if
applicable, the joint and last survivor expectancy of the
Participant and his or her Designated Beneficiary, subject
to the requirements of Code Section 401(a)(9) and the
applicable Treasury regulations. The Committee will
increase the Participant's Nonforfeitable Account Balance,
as determined on the relevant Valuation Date, for
Contributions or Forfeitures allocated after the Valuation
Date and by December 31 of the Valuation Calendar Year, and
will decrease the valuation by distributions made after the
Valuation Date and by December 31 of the Valuation Calendar
Year. For purposes of this valuation, the Committee will
treat any portion of the minimum distribution for the first
Distribution Calendar Year made after the close of that year
as a distribution occurring in the first Distribution
Calendar Year. Life expectancy and joint and last survivor
expectancy must be computed by the use of the expected
return multiples contained in Section 1.72-9 of the Income
Tax Regulations. Unless otherwise elected by the
Participant, or Spouse in the case of distributions
described in this Section 7.6(a), by the time distributions
are required to begin, life expectancies shall be
recalculated annually. The election shall be irrevocable
for the Participant, or spouse, and shall apply to all
subsequent years. The life expectancy of a non-spouse
Beneficiary may not be recalculated.
(B) Non-Spouse Beneficiary. If the Participant's spouse is not
----------------------
the Designated Beneficiary, a method of payment to the
Participant may not provide more than incidental benefits to
the Beneficiary. The Plan must satisfy the minimum
distribution incidental benefit ("MDIB") requirements in the
applicable Treasury regulations under Code Section 401(a)(9)
for distributions made on or after the Participant's
Required Beginning Date and before the Participant's death.
To satisfy the MDIB requirement, the Committee will compute
the minimum distribution required by this Section 7.6(a) by
substituting the applicable MDIB divisor for the applicable
life expectancy factor, if the MDIB divisor is a lesser
number. Following the Participant's death, the Committee
will compute the minimum distribution required by this
Section 7.6(a) solely on the basis of the applicable life
expectancy factor and will disregard the MDIB factor. For
Plan Years beginning prior to January 1, 1989, the Plan
satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB
requirement or if the present value of the retirement
benefits payable solely to the Participant is greater than
fifty percent (50%) of the present value of
42
<PAGE>
the total benefits payable to the Participant and
Beneficiaries. The Committee must determine whether benefits
to the Beneficiary are incidental on the date the Trustee is
to commence payment of the retirement benefits to the
Participant, or on the date the Trustee redetermines the
payment period to the Participant.
(iii)Commencement of Benefits
------------------------
(A) General Rule. The Trustee must distribute or begin to
------------
distribute the entire interest of a Participant no later
than the Participant's Required Beginning Date. The minimum
distribution for the first Distribution Calendar Year is due
by the Participant's Required Beginning Date. The minimum
distribution for each subsequent Distribution Calendar Year,
including the calendar year of the Participant's Required
Beginning Date, is due by December 31 of that year. Except
as provided in clause (ii), a Participant's Required
Beginning Date is the April 1 following the close of the
calendar year in which the Participant attains age seventy
and one-half (70 1/2) years.
(B) Transitional Rule. The Required Beginning Date of a
-----------------
Participant who attains age seventy and one-half (70 1/2)
years before January 1, 1988, shall be determined under the
following paragraphs (A) or (B):
(1) Other Than Five Percent Owners. The Required Beginning
------------------------------
Date of a Participant who is not a Five Percent Owner
(as defined in (iii) below) is the first day of April
of the calendar year following the calendar year in
which the later of retirement or attainment of age
seventy and one-half (70 1/2) years occurs. The
Required Beginning Date of a Participant who is not a
Five Percent Owner, who attains age seventy and one-
half (70 1/2) years during 1988 and who has not retired
on January 1, 1989, is April 1, 1990.
(2) Five Percent Owners. The Required Beginning Date of a
-------------------
Participant who is a Five Percent Owner during any year
beginning after December 31, 1979, is the first day of
April following the later of:
(I) the calendar year in which the Participant attains
age seventy and one-half (70 1/2) years; or
(II) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
becomes a Five Percent Owner, or the calendar year
in which the Participant retires.
(C) Five Percent Owner. A Participant is treated as a Five
-------------------
Percent Owner for purposes of this Section if the
Participant is a Five Percent Owner as defined in Section
2.51(g)(iii) and Code Section 416(i) (determined under Code
Section 416 but without regard to whether the Plan is Top-
Heavy) at any time during the Plan Year ending with or
within the calendar year in which the owner attains age
sixty-six and one-half (66 1/2) years or any subsequent Plan
Year. Once distributions have begun to a Five Percent
43
<PAGE>
Owner under this Section, they must continue to be
distributed, even if the Participant ceases to be a Five
Percent Owner in a subsequent year.
(iv) Definitions
-----------
(A) Applicable Life Expectancy means the life expectancy (or
--------------------------
joint and last survivor expectancy) calculated using the
attained age of the Participant (or Designated Beneficiary)
as of the Participant's (or Designated Beneficiary's)
birthday in the applicable calendar year reduced by one for
each calendar year which has elapsed since the date life
expectancy was calculated first. If life expectancy is
being recalculated, the applicable life expectancy shall be
the life expectancy as so recalculated. The applicable
calendar year shall be the first Distribution Calendar Year
and, if life expectancy is being recalculated, the
succeeding calendar year.
(B) Designated Beneficiary means the individual who is
----------------------
designated as the Beneficiary under the Plan in accordance
with Code Section 401(a)(9) and the applicable Treasury
regulations.
(C) Distribution Calendar Year means a calendar year for which a
--------------------------
minimum distribution is required. For distributions
beginning before the Participant's death, the first
Distribution Calendar Year is the calendar year immediately
preceding the calendar year which contains the Participant's
Required Beginning Date.
(D) Participant's Nonforfeitable Account Balance means the
--------------------------------------------
account balance as of the last Valuation Date in the
calendar year immediately preceding the Distribution
Calendar Year (Valuation Calendar Year), increased by the
amount of any Contributions or Forfeitures allocated to the
account balance as of the dates in the Valuation Calendar
Year after the Valuation Date and decreased by distributions
made in the Valuation Calendar Year after the Valuation
Date. If any portion of the minimum distribution for the
first Distribution Calendar Year is made in the second
Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made
in the second Distribution Calendar Year shall be treated as
if it had been made in the immediately preceding
Distribution Calendar Year.
(b) Death Benefits. The Committee may not direct the Trustee to
--------------
distribute the Participant's Nonforfeitable Account Balance, to the Beneficiary
or Designated Beneficiary, under a method of payment which, as of the Required
Beginning Date, does not satisfy the minimum distribution requirements under
Code Section 401(a)(9) and the applicable Treasury regulations.
(i) Limits on Distribution Periods
------------------------------
(A) If the Participant or Former Participant dies after
distribution has commenced, the Trustee shall continue to
distribute the remaining portion of the Participant's or
Former Participant's Nonforfeitable Account Balance at least
as rapidly as under the method of distribution used prior to
the Participant's death.
44
<PAGE>
(B) If the Participant or Former Participant dies before
distribution commences, the Trustee shall complete
distribution of the Participant's or Former Participant's
Nonforfeitable Account Balance by December 31 of the
calendar year containing the fifth (5th) anniversary of the
Participant's or Former Participant's death, except to the
extent that the Designated Beneficiary elects to receive
distributions under paragraphs (A) or (B) below:
(1) If any portion of the Participant's or Former
Participant's Nonforfeitable Account Balance is payable
to a Designated Beneficiary, the Designated Beneficiary
may elect distributions over the life or over a period
certain not greater than the life expectancy of the
Designated Beneficiary commencing on or before December
31 of the calendar year immediately following the
calendar year in which the Participant or Former
Participant died;
(2) If the Designated Beneficiary is the Participant's
Surviving Spouse, the date distributions must begin
under paragraph (A) above shall not be earlier than the
later of: (1) December 31 of the calendar year
immediately following the calendar year in which the
Participant or Former Participant died; and (2)
December 31 of the calendar year in which the
Participant or Former Participant would have attained
age seventy and one-half (70 1/2) years. If the
Participant has not made an election pursuant to this
Section by the time of death, the Designated
Beneficiary must elect the method of distribution no
later than the earlier of: (1) December 31 of the
calendar year in which distributions must begin under
this Section; or (2) December 31 of the calendar year
which contains the fifth (5th) anniversary of the date
of death of the Participant or Former Participant. If
the Participant has no Designated Beneficiary, or if
the Designated Beneficiary does not elect a method of
distribution, distribution of the Nonforfeitable
Account Balance of the Participant or Former
Participant must be completed by December 31 of the
calendar year containing the fifth (5th) anniversary of
death.
(3) If the Surviving Spouse is the Beneficiary of any
portion of a deceased Participant's or Former
Participant's benefits under the Plan, the Surviving
Spouse shall be permitted to direct that this
distribution of benefits commence at a reasonable time
following the death of the Participant or Former
Participant under applicable Treasury regulations.
(4) If the Surviving Spouse dies after the Participant or
Former Participant, but before payments to the Spouse
begin, the preceding provisions of this Section, with
the exception of paragraph (B), shall be applied as if
the Surviving Spouse had been the Participant.
(ii) Minimum Distribution Amounts. If the Trustee will distribute a
----------------------------
Participant's or Former Participant's Nonforfeitable Account
Balance in accordance with the Designated Beneficiary's life
expectancy, the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Account Balance as of the latest
45
<PAGE>
Valuation Date preceding the beginning of the calendar year
divided by the Designated Beneficiary's life expectancy.
For purposes of this Section, payments will be calculated by using the
expected return multiples specified in Tables V and VI of Treasury Regulations
Section 1.72-9. Life expectancy of a Surviving Spouse shall be recalculated
annually; however, in the case of any other Designated Beneficiary, life
expectancy will be calculated when the first payment commences without further
recalculation. For purposes of this Section, any amount paid to a child of the
Participant or Former Participant will be treated as if it had been paid to the
Surviving Spouse, if the amount becomes payable to the Surviving Spouse when the
child reaches the age of majority.
(iii)Commencement of Benefits
------------------------
(A) General Rule. For the purposes of this Section,
------------
distribution of a Participant's or Former Participant's
Nonforfeitable Account Balance is considered to begin on the
Participant's or Former Participant's Required Beginning
Date or, if Section 7.4(a)(ii)(D) applies, the date
distribution is required to begin to the Surviving Spouse
pursuant to Section 7.4(a)(ii)(A). If distribution in the
form of an annuity irrevocably commences before the Required
Beginning Date, the date distribution is considered to begin
is the date distribution actually commences. Except as
otherwise provided, the Required Beginning Date of a
Participant or Former Participant is the first day of April
of the calendar year following the calendar year in which
the Participant attains age seventy and one-half (70 1/2)
years.
(B) Transitional Rules. The Required Beginning Date of a
------------------
Participant or Former Participant who attains age seventy
and one-half (70 1/2) years before January 1, 1988, shall be
determined under paragraphs (A) or (B) below:
(1) Other Than Five Percent Owners. The Required Beginning
------------------------------
Date of a Participant or Former Participant who is not
a Five Percent Owner is the first day of April of the
calendar year following the calendar year in which the
later of retirement or the attainment of age seventy
and one-half (70 1/2) years occurs. The Required
Beginning Date of a Participant who is not a Five
Percent Owner who attains age seventy and one-half (70
1/2) years during 1988 and who has not retired as of
January 1, 1989, is April 1, 1990.
(2) Five Percent Owners. The Required Beginning Date of a
-------------------
Participant or Former Participant who is a Five Percent
Owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(I) the calendar year in which the Participant attains
age seventy and one-half (70 1/2) years, or
(II) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
becomes a Five Percent Owner, or the calendar year in
which the Participant retires.
46
<PAGE>
(C) Five Percent Owner. A Participant is treated as a Five
------------------
Percent Owner for purposes of this Section 7.4 if the
Participant is a Five Percent Owner as defined in Section
2.51(g)(iii) and Code Section 416(i) (determined under Code
Section 416 but without regard to whether the Plan is Top-
Heavy) at any time during the Plan Year ending with or
within the calendar year in which the owner attains age
sixty-six and one-half (66 1/2) years or any subsequent Plan
Year. If distributions have begun to a Five Percent Owner
under this Section, they must continue to be distributed,
even if the Participant ceases to be a Five Percent Owner in
a subsequent year.
(iv) Definitions
-----------
(A) Applicable Life Expectancy means the life expectancy
--------------------------
calculated using the attained age of the Designated
Beneficiary as of the Designated Beneficiary's birthday in
the applicable calendar year reduced by one for each
calendar year which has elapsed since the date life
expectancy was calculated first. If life expectancy is
being recalculated, the Applicable Life Expectancy shall be
the life expectancy as recalculated. The applicable
calendar year shall be the first Distribution Calendar Year
and, if life expectancy is being recalculated, the
succeeding calendar year.
(B) Designated Beneficiary means the individual who is
----------------------
designated as the Beneficiary under the Plan under Code
Section 401(a)(9) and the applicable Treasury regulations.
(C) Distribution Calendar Year means a calendar year for which a
--------------------------
minimum distribution is required. For distributions
beginning after the Participant's death, the first
Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to this
Section.
(D) Participant's Nonforfeitable Account Balance means the
--------------------------------------------
Account Balance as of the last Valuation Date in the
calendar year immediately preceding the Distribution
Calendar Year (Valuation Calendar Year), increased by the
amount of any Contributions or Forfeitures allocated to the
Account Balance as of the dates in the Valuation Calendar
Year after the Valuation Date and decreased by distributions
made in the Valuation Calendar Year after the Valuation
Date. If any portion of the minimum distribution for the
first Distribution Calendar Year is made in the second
Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made
in the second Distribution Calendar Year shall be treated as
if it had been made in the immediately preceding
Distribution Calendar Year.
Section 7.7. Minority or Disability. During the minority or disability of
----------- ----------------------
an individual entitled to receive benefits under this Plan, the Committee, if
advised of such condition, may direct distribution to or the Participant may
elect to have the Committee instruct the Trustee to make payments due the
individual directly to any one of the following:
(a) The duly appointed guardian or other legal representative of such
Participant or Beneficiary;
47
<PAGE>
(b) Any person designated as a Beneficiary by the non-competent
Participant if such Beneficiary resides in the same household as the
Participant; or
(c) To a person or institution entrusted with the care and maintenance of
the incompetent Participant or Beneficiary, provided such distributed interest
will be used in the best interests and assist in the care of such Participant or
Beneficiary, and provided further, that no prior claim for said payment has been
made by a legal representative of such Participant or Beneficiary.
Any distribution made in accordance with the foregoing provisions of this
Section shall constitute a complete discharge of any liability or obligation on
the part of FFE Transportation Services, Inc., the Committee or the Trustee
under the Plan and Trust. Neither the Committee nor the Trustee shall be
required to cause or to verify the application of any payments so made, and the
receipt of the payee, including the endorsement of a check or checks, shall be
conclusive to all interested parties.
Section 7.8. Unclaimed Account Procedure. During the time when a benefit
----------- ---------------------------
hereunder is payable to any Participant or Beneficiary, the Committee, upon
request by FFE Transportation Services, Inc. or the Trustee, or at its own
instance, shall mail by registered or certified mail to such Participant or
Beneficiary, at his last known address, a written demand for the Participant's
current address, or for satisfactory evidence of the Participant's continued
life, or both. If such information is not furnished to the Committee within
twelve (12) months from the mailing of such demand, then the Committee may, in
its sole discretion, declare such benefit, or any unpaid portion thereof,
suspended, with the result that such unclaimed benefit shall be allocated to the
Accounts of eligible Participants as a Forfeiture for the Year within which such
twelve (12) month period ends, but shall be restored through an Employer
contribution if the lost Participant or Beneficiary makes or files a claim for
such benefit.
If a Participant or Beneficiary who has incurred a Forfeiture of Account
Balance under the provisions of the first paragraph of this Section makes a
claim, at any time, for the forfeited Account Balance, the Committee must
restore the Participant's or Beneficiary's forfeited Account Balance to the same
dollar amount as the dollar amount of the Account Balance forfeited, unadjusted
for any gains or losses occurring subsequent to the date of the forfeiture. The
Committee will make the restoration during the Plan Year in which the
Participant or Beneficiary makes the claim, through the amount, or additional
amount, the Employer contributes to enable the Committee to make the required
restoration. The Committee must direct the Trustee to distribute the
Participant's or Beneficiary's restored vested benefit not later than sixty (60)
days after the close of the Plan Year in which the Committee restores the
forfeited vested benefit. The forfeiture provisions of this Section apply
solely to the Participant's or the Beneficiary's vested benefit derived from
Employer Contributions.
Upon termination of the Plan, in lieu of the unclaimed account procedure
set forth in this Section, Section 12.18 shall apply.
* * * * * * *
48
<PAGE>
ARTICLE EIGHT
-------------
BENEFICIARIES
-------------
Section 8.1. Beneficiary Designation.
----------- -----------------------
(a) Each Participant or Former Participant may from time to time select
one or more persons (who may be designated contingently or successively and who
may be an entity other than a natural person) either individually or in a
fiduciary capacity, as the Beneficiary or Beneficiaries to receive benefits
under this Article on the death of the Participant or Former Participant before
receipt of all benefits. The selection shall be made in writing on a form
provided by the Committee and shall be filed with the Committee. Subject to
Section 8.1(b), the last selection filed with the Committee shall control.
A married Participant's Beneficiary designation is not valid unless the
Participant's spouse consents, in writing, to the Beneficiary designation. The
spouse's consent must acknowledge the effect of that consent and a notary public
or the Administrator (or Plan representative) must witness that consent. The
spousal consent requirements of this paragraph do not apply if:
(i) the Participant and spouse are not married throughout the one
year period ending on the date of the Participant's death;
(ii) the Participant's spouse is the Participant's sole primary
beneficiary;
(iii)the Administrator is not able to locate the Participants' spouse;
(iv) the Participant is legally separated or has been abandoned
(within the meaning of State law) and the Participant has a court
order to that effect; or
(v) other circumstances exist under which the Secretary of the
Treasury will excuse the consent requirement.
If the Participant's spouse is legally incompetent to give
consent, the spouse's legal guardian (even if the guardian is the
Participant) may give consent. If a Participant fails to name a
Beneficiary under this Section, Section 8.1(b) shall control.
(b) Unless elected in accordance with Section 8.1(c), the Beneficiary of
the death benefit shall be the Participant's spouse, who shall receive the
benefit in the manner prescribed in this Article. Notwithstanding the foregoing
sentence, the Participant may designate a Beneficiary other than the spouse if:
(i) the Participant has no spouse; or
(ii) the spouse cannot be located.
(c) In the case of a married Participant or Former Participant, the
designation of a non-spouse as Beneficiary shall be valid only if:
(i) the spouse consents in writing to the designation;
49
<PAGE>
(ii) the designation specifies the beneficiary and may not be changed
without spousal consent (or the spouse's consent expressly
permits designations by the Participant without any requirement
of further spousal consent); and
(iii)the spouse's consent acknowledges the effect of the election and
the written consent is witnessed by a Plan representative or by a
Notary Public.
(d) If a Participant dies without a spouse or alternative Beneficiary
surviving; if the alternative Beneficiary (other than the spouse) does not
survive until final distribution of the Participant's balance; if a Participant
who is not married dies without having designated a Beneficiary and/or
alternative Beneficiary; or if a Participant who is not married dies after
having made and revoked a designation but prior to having made a subsequent
designation, then the amount remaining in the deceased Participant's Account
shall be payable in equal shares in the following descending order to:
(i) the Participant's surviving issue, including adopted persons and
their descendants, per stirpes;
--- -------
(ii) the Participant's surviving parents;
(iii)the Participant's surviving brothers and sisters; and
(iv) the Executor or Administrator of the Participant's estate.
The Committee shall determine the applicable person, class of persons,
or legal entity to whom the benefit shall be paid beginning with (i), in the
descending order of (i) to (iv). Each class shall be determined to be not in
existence and, therefore, inapplicable by the Committee before proceeding to the
next class. In determining if a classification is inapplicable, the Committee
shall be required only to make reasonable inquiry into the existence of the
person or persons.
Remaining death benefits shall be payable under Section 7.6 regarding
mandatory distributions. Payment made pursuant to the power conferred on the
Committee in this Section shall operate as a complete discharge of all
obligations under the Plan concerning the share of a deceased Participant and
shall not be subject to review by anyone but shall be final, binding and
conclusive on all persons for all purposes.
50
<PAGE>
ARTICLE NINE
------------
COMMITTEE ADMINISTRATIVE PROVISIONS
-----------------------------------
Section 9.1. Committee Appointment. FFE Transportation Services,
----------- ---------------------
Inc. shall appoint a Committee consisting of not less than three (3) nor more
than seven (7) members. FFE Transportation Services, Inc. may remove any member
of the Committee at any time and a member may resign by written notice to FFE
Transportation Services, Inc. Any vacancy in the membership of the Committee
shall be filled by appointment made by FFE Transportation Services, Inc., but
pending the filling of any vacancy, the then members of the Committee may act
under this Agreement as though they alone constitute the full Committee. FFE
Transportation Services, Inc. shall notify the Trustee promptly of the
appointment of the original Committee and of any change in the membership of the
Committee. The Committee may be contacted through the officer in charge of the
Personnel Department of FFE Transportation Services, Inc.
Section 9.2. Committee Action and Procedure
----------- ------------------------------
(a) Any and all acts and decisions of the Committee shall be by at least a
majority of the then members. The Committee, by majority action, may delegate
to any one or more of its members the authority to sign notices or other
documents on its behalf or to perform ministerial acts for it, in which event
the Trustee and any other person may accept the notice, document or act without
question as having been authorized by the Committee.
(b) The Committee may, but need not, call or hold formal meetings, and any
decisions made or actions taken either by a vote at a meeting or in writing
without a meeting.
(c) The Committee shall maintain adequate records of its decisions, which
records shall be subject to inspection by the Employer and by any Participant,
Former Participant, or Beneficiary, but only to the extent that they apply to
the individuals.
(d) The Committee may designate one (1) of its members as Chairman and one
(1) of its members as Secretary and such other officers as it shall deem
advisable and may establish policies and procedures governing it if they are
consistent with this Agreement.
Section 9.3. Committee Powers and Duties. The Committee shall perform the
----------- ---------------------------
duties and may exercise the powers and discretion given to it in this Agreement,
and its decisions and actions shall be final and conclusive regarding all
persons affected thereby. The Committee shall exercise its discretion at all
times in a nondiscriminatory manner. Subject to any limitations stated in this
Agreement, the Committee is authorized and empowered with the following powers,
rights, and duties:
(a) To select a Secretary, who need not be a member of the Committee;
(b) To determine the rights of eligibility of an Employee to participate
in the Plan, the value of a Participant's Account Balance and the Nonforfeitable
percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations necessary for the proper
and efficient administration of the Plan provided the rules are consistent with
the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the rules and
regulations it adopts, including interpretation of the Plan documents and
documents related to the Plan's operation;
(e) To direct the Trustee concerning the crediting and distribution of the
Trust;
51
<PAGE>
(f) To direct the Trustee to vote all whole and fractional shares of
Employer Securities held by the Plan in accordance with Section 14.6.
(g) To review and render decisions respecting a claim for, or denial of a
claim for, a benefit under the Plan;
(h) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(i) To engage the service of agents whom it may deem advisable to assist
it with the performance of its duties;
(j) To engage the services of an Investment Manager or Managers (as
defined in ERISA Section 3(38)), each of whom will have full power and authority
to manage, acquire or dispose, or direct the Trustee with respect to acquisition
or disposition, of any Plan asset under its control;
(k) To establish, in its sole discretion, a nondiscriminatory policy,
pursuant to this Section, which the Trustee must observe in making loans, if
any, to Participants and Beneficiaries; and
(l) To establish and maintain a funding standard account and to make
credits and charges to the account to the extent required by and in accordance
with applicable Code provisions;
The Committee must exercise all of its powers, duties, and discretion under
the Plan in a uniform and nondiscriminatory manner.
Section 9.4. Committee Reliance. The Trustee may rely without question on
----------- ------------------
any notices or other documents received from the Committee. The Employer shall
furnish the Committee with all data and information available to the Employer,
which the Committee may reasonably require to perform its functions under this
Agreement. The Committee may rely without question on any data or information
furnished by the Employer.
Section 9.5. Committee Authority. Any and all disputes which may arise
----------- -------------------
involving Participants, Former Participants, Beneficiaries and/or the Trustee
shall be referred to the Committee, and its decisions shall be final and
conclusive regarding all affected persons. Furthermore, if any issue arises
concerning the meaning, interpretation or application of any provisions of this
Agreement, the decision of the Committee on any issue shall be final.
Section 9.6. Conflicts in Interest. Notwithstanding any other provisions
----------- ---------------------
of this Agreement, no member of the Committee shall vote or act on any matter
involving the Committee member's rights, benefits or other participation under
this Agreement.
Section 9.7. Appointment of Agent and Legal Counsel. The Committee may
----------- --------------------------------------
engage agents to assist it and may engage legal counsel who may be counsel for
the Employer. The Committee shall not be responsible for any action taken or
omitted to be taken on the advice of counsel.
Section 9.8. Committee Compensation and Reimbursement. Unless otherwise
----------- ----------------------------------------
determined by FFE Transportation Services, Inc., the members of the Committee
shall serve without compensation for their services. However, all expenses
incident to the functioning of the Committee shall be paid by FFE Transportation
Services, Inc., including, but not limited to, salaries of the Committee's
employees, fees of investment counsel, attorneys' fees, accounting charges and
any other costs of administering the Plan. All reasonable expenses incurred by
the Committee shall be paid by FFE Transportation Services, Inc.
52
<PAGE>
Section 9.9. Appointment of Investment Manager. The Committee may
----------- ---------------------------------
delegate investment management authority pertaining to all or a portion of the
Plan assets by appointing an Investment Manager(s) and may authorize payment of
the fees and expenses of the Investment Manager(s) from the Plan assets. For
purposes of this Agreement, any Investment Manager so appointed shall, during
the period of appointment, possess fully and absolutely those powers, rights and
duties of the Trustee (to the extent delegated by the Committee) regarding the
investment or reinvestment of that portion of the Plan assets over which the
Investment Manager has investment management authority. An Investment Manager
must be one (1) of the following:
(a) an Investment Advisor registered under the Investment Advisors Act of
1949;
(b) a bank, as defined in the Investment Advisors Act of 1940; or
(c) an insurance company qualified to manage, acquire, or dispose of Plan
assets under the laws of more than one (1) state.
Any Investment Manager shall acknowledge in writing to the party making the
appointment and to the Trustee that it is a fiduciary respecting the Plan.
During any period when the Investment Manager is appointed and serving, and
regarding those assets in the Plan over which the Investment Manager exercises
investment management authority, the Trustee's responsibility shall be limited
to holding assets as a custodian, providing accounting services, disbursing
benefits as authorized, and executing investment instructions only as directed
by the Investment Manager. Any certificates or other instrument duly signed by
the Investment Manager (or the authorized representative of the Investment
Manager), purporting to evidence any instruction, direction or order of the
Investment Manager regarding the investment of those assets of the Plan over
which the Investment Manager has investment management authority, shall be
accepted by the Trustee as conclusive proof thereof. The Trustee also shall be
fully protected in acting in good faith on any notice, instruction, direction,
order, certificate, opinion, letter, telegram or other document believed by the
Trustee to be genuine and to be from the Investment Manager (or the authorized
representative of the Investment Manager). The Trustee shall not be liable for
any action taken or omitted by the Investment Manager or for any mistakes of
judgment or other action made, taken or omitted by the Trustee in good faith on
direction of the Investment Manager.
Section 9.10. Annual Accounting. As soon as administratively feasible
------------ -----------------
after the Accounting Date of each Plan Year, but within the time prescribed by
ERISA and the applicable Labor regulations and at least annually, the Committee
shall advise each Participant, Former Participant and Beneficiary for whom
Accounts are held under this Plan of the then balance in the Participant's
Accounts and the other information ERISA requires to be furnished. No
Participant except a member of the Committee shall have the right to inspect the
records reflecting the Accounts of any other Participant.
Section 9.11. Funding Policy. The Committee will review, not less often
------------ --------------
than annually, all pertinent Employee information and Plan data to establish the
funding policy of the Plan and to determine the appropriate methods of carrying
out the Plan's objectives. The Committee must communicate periodically, as it
deems appropriate, to the Trustee and to any Plan Investment Manager the Plan's
short-term and long-term financial needs so investment policy can be coordinated
with Plan financial requirements.
53
<PAGE>
Section 9.12. Indemnification. FFE Transportation Services, Inc. shall
------------ ---------------
indemnify and hold harmless each member of the Committee from any and all
claims, losses, damages, expenses (including counsel fees approved by the
Committee), and liabilities (including any amounts paid in settlement with the
Committee's approval) arising from any act or omission of the member, except
when such claims, losses, damages, expenses or liabilities are judicially
determined to be due to the gross negligence or willful misconduct of such
member. No plan assets may be used for such indemnification.
* * * * * *
54
<PAGE>
ARTICLE TEN
-----------
EMPLOYER ADMINISTRATIVE PROVISIONS
----------------------------------
Section 10.1. Employer Action. Whenever the Employer is permitted or
------------ ---------------
required to do or perform any act under this Agreement, it shall be done and
performed by a person duly authorized to do or perform the act by its legally
constituted authority. The legally constituted authority of a corporation shall
be the Board of Directors.
Section 10.2. Plan Amendment.
------------ --------------
(a) At any time FFE Transportation Services, Inc., by formal written
action, may amend or modify this Agreement in any manner it deems necessary or
desirable, retroactively or prospectively, with or without the knowledge or
consent of any Participant, subject to the following provisions of this Article.
Notwithstanding anything to the contrary contained in the Plan, the provisions
of the Plan which specify the amount, price, timing and criteria for allocation
of Employer Securities under the Plan shall not be amended more than once every
six months, other than to comport with changes in the Code, ERISA, or the rules
thereunder.
(b) FFE Transportation Services, Inc. must make all amendments in writing,
signed by duly authorized persons with the legally constituted authority of FFE
Transportation Services, Inc. and with the consent or approval, if any, as
provided in this Section. An amendment shall become effective upon its delivery
to the Trustee. Each amendment must state the date on which it is either
retroactively or prospectively effective. Notwithstanding the foregoing, FFE
Transportation Services, Inc., without action of its Board of Directors, may
amend the Plan to meet any requirements of the Internal Revenue Service to
retain the status of the Plan as a qualified plan under Sections 401(a) and
4975(e)(7) and related sections of the Code.
(c) Unless it is made to secure the approval of the Commissioner of the
Internal Revenue Service or other governmental bureau or agency, no amendment or
modification of this Agreement by the Employer shall:
(i) operate retroactively to reduce or divest the then vested
interest in any Account or to reduce or divest any benefit then
payable hereunder unless all Participants, Former Participants
and Beneficiaries then having Accounts or benefit payments
affected thereby shall consent to the amendments or
modifications;
(ii) directly or indirectly affect any Participant's Nonforfeitable
percentage outside the protection of Treasury Regulations Section
1.411(a)(8);
(iii)decrease a Participant's accrued benefit, except to the extent
permitted under Code Section 412(c)(8), and reduce or eliminate
Code Section 411(d)(6) protected benefits determined immediately
prior to the adoption date (or, if later, the effective date) of
the amendment, except as permitted by applicable Treasury
regulations (An amendment reduces or eliminates Code Section
411(d)(6) protected benefits if the amendment has the effect of
either: (A) eliminating or reducing an early retirement benefit
or a retirement-type subsidy (as defined in applicable Treasury
regulations); or (B) except as provided by applicable Treasury
regulations, eliminating an optional form of benefit. The
Committee must disregard an amendment to the extent application
of the amendment would fail to satisfy this paragraph. If the
Committee must disregard an amendment because the amendment would
violate clause (A) or
55
<PAGE>
clause (B), the Committee must maintain a schedule of the early
retirement option or other optional forms of benefit the Plan
must continue for the affected Participant.); or
(iv) affect the rights, duties or responsibilities of the Trustees,
the Plan Administrator or the Committee without the written
consent or approval of the Trustee, Administrator, or affected
Committee member.
(d) If the vesting schedule described in Section 6.2 is amended, a
Participant's vested interest in any contribution to which the vesting schedule
in Section 6.2 applied, shall not be less than the Nonforfeitable percentage
determined as of the later of the effective date of the amendment or the date of
its adoption. A Participant with at least three (3) Years of Service on the
last day of the election period described in this paragraph, may elect to have
the Nonforfeitable percentage of the Employer Contribution Accounts determined
without regard to the amendment. For Participants who do not have at least one
(1) Hour of Service in any Plan Year beginning after December 31, 1988, the
preceding sentence shall be applied by substituting "five (5) Years of Service"
for "three (3) Years of Service" where the language appears. If a Participant
fails to make an election, then the Participant shall be subject to the new
vesting schedule. The election period shall commence on the date the amendment
is adopted or deemed to be made and shall end sixty (60) days after the latest
of:
(i) the date of the adoption of the amendment;
(ii) the effective date of the amendment; or
(iii)the date the Participant receives written notice of the amendment
from the Employer or Administrator.
Section 10.3. Discontinuance, Termination of Plan
------------ -----------------------------------
(a) FFE Transportation Services, Inc., by action of its Board of
Directors, has the right, at any time, to suspend or discontinue its
contributions under the Plan to the Trust Fund, and to terminate the Plan and
the Trust created under this Agreement. The Plan will terminate on the first to
occur of the following events:
(i) the date the Plan is terminated by action of the Employer;
(ii) the date the Employer is judicially declared bankrupt or
insolvent, unless the proceeding authorized continued maintenance
of the Plan; or
(iii)the dissolution, merger, consolidation or reorganization of the
Employer or the sale by the Employer of all or substantially all
of its assets, unless the successor or purchaser elects and makes
provision to continue the Plan, in which event the successor or
purchaser will substitute itself as the Employer under this Plan.
(b) Upon either full or partial termination of the Plan, or, if
applicable, upon complete discontinuance of contributions to the Plan,
participation of all Participants affected by the termination will end. If
Employer Contributions on behalf of the terminated Participants are not replaced
by contributions to a comparable plan qualified under Code Section 401(a), the
Accounts of all Participants, Former Participants and Beneficiaries shall be and
become fully vested and Nonforfeitable, notwithstanding the Nonforfeitable
percentage which otherwise would apply under Article 6. A complete
discontinuance of Employer contributions shall be deemed to be a termination of
the Plan for this purpose. The Trustee, in its discretion, may convert some or
all of the Trust Fund to cash and shall deduct therefrom all unpaid charges and
56
<PAGE>
expenses, except as the same may be paid by the Employer. The Committee then
shall adjust the balance of all Accounts on the basis of the net cash balance
and fair market value of all property in the Trust Fund. Thereafter, the
Trustee shall distribute the amount to the credit of each Participant, Former
Participant and Beneficiary as the Committee shall direct. Notwithstanding the
foregoing, a distribution made because of a termination of the Plan shall be
subject to the mandatory distribution requirements of Section 7.6, and the
immediate cashout distribution provisions of Section 7.3(c), and a Participant's
right to demand Employer Securities set forth in Section 7.1(a).
Section 10.4. Prohibition Against Reversion to Employer. No power of
------------ -----------------------------------------
amendment or of full or partial termination may be exercised to discriminate in
favor of officers, shareholders or highly compensated employees. Under no
circumstances or conditions, other than those specifically provided herein,
shall the Trust Fund or any portion thereof revert to the Employer or be used
for or diverted to purposes other than the exclusive benefit of the
Participants, Former Participants and Beneficiaries prior to the satisfaction of
all liabilities with respect to such Participants and their Beneficiaries. No
amendment or revocation by the Employer of this Section may cause or permit any
portion of the Trust Fund to revert to or become a property of the Employer.
Section 10.5. Adoption by Related Employer. Notwithstanding any contrary
------------ ----------------------------
provision contained in this Agreement, with the written consent of the Plan
Sponsor, any Affiliate which otherwise falls within the definition of Employer
may adopt this Plan and Trust in its entirety, participate herein and be known
as a Participating Employer by executing a properly authorized document
evidencing the intent and will of the Participating Employer. Such election to
participate shall be by the adoption of t his Plan by such Affiliate's board of
directors, and this election shall be contingent upon a resolution by FFE
Transportation Services, Inc.'s Board of Directors approving such action by the
Affiliate. The employees of such Affiliate shall, upon the effective date of
FFE Transportation Services, Inc.'s approval of the election, become Employees
hereunder and shall become Participants as provided in Article 3. The adoption
of this Plan and any related merger with this Plan of a preexisting plan of such
Affiliate may be contingent upon such Affiliate, or FFE Transportation Services,
Inc. as Plan Administrator, receiving a determination from the Internal Revenue
Service that the Plan and the related Trust Agreement continue thereafter to
qualify as an employee stock ownership plan under Code Section 4975(e)(7), and
as a qualified plan and exempt trust under Code Sections 401 and 501. Unless
the context of this Agreement clearly indicates the contrary, the term
"Employer" shall be deemed to include each Participating Employer relating to
its adoption of the Plan.
Section 10.6. Requirements for Adoption by Related Employer. The
------------ ---------------------------------------------
following requirements shall apply to any Participating Employer who elects to
adopt this Plan pursuant to this Article:
(a) Each Participating Employer shall be required to use the same Trustee
as provided in this Agreement.
(b) The Trustee may, but shall not be required to, commingle, hold and
invest as one (1) Trust Fund all contributions made by Participating Employers
and all increments thereof.
(c) The transfer of any Participant from or to any corporation
participating in this Plan, whether the Participant is an Employee of the Plan
Sponsor or a Participating Employer, shall not affect the Participant's rights
under the Plan; all amounts credited to the Participant's Account, all
accumulated service with the transferor or Predecessor Employer, and the length
of participation in the Plan shall continue to the Participant's credit.
(d) All rights and values forfeited by termination of employment shall
inure only to the benefit of the Employees and Participants of the Participating
Employer which employed the forfeiting Participant, except, if the Forfeiture is
for an Employee whose Employer is a Related Employer, then the Forfeiture shall
be allocated based on Annual Compensation to all Accounts of Participating
Employers who are Related
57
<PAGE>
Employers. Should an Employee of one ("First") Employer be transferred to a
Related ("Second") Employer the transfer shall not cause the Employee's Account
Balance, generated while an Employee of the First Employer, in any manner or by
any amount, to be forfeited. The Employee's Account Balance for all purposes of
the Plan, including length of service, shall be considered as though the
Employee had always been employed by the Second Employer and as such had
received contributions, forfeitures, earnings or losses, and appreciation or
depreciation in value of assets totaling the amount so transferred.
(e) Upon an Employee's transfer between Participating Employers, the
Employee involved shall carry accumulated Years of Service for eligibility and
vesting. No transfer shall effect a termination of employment under this
Agreement and the Participating Employer to which the Employee transfers shall
thereupon become obligated under this Agreement to the Employee in the same
manner as the Participating Employer from whom the Employee transfers.
(f) Any contributions made by a Participating Employer under this Plan,
shall be paid to and held by the Trustee for the exclusive benefit of the
Employees of the Participating Employer and the Beneficiaries of the Employees,
subject to all the terms and conditions of this Agreement.
(g) Based on information furnished by the Administrator, the Committee and
the Trustee shall keep separate books and records concerning the affairs of each
Participating Employer and of the Account Balances of the Participants of each
Participating Employer. The Trustee may, but need not, register Contracts to
evidence that a particular Participating Employer is the interested Employer
under this Agreement, but upon an Employee's transfer from one Participating
Employer to another, the employing Employer shall immediately notify the Trustee
of the transfer.
Section 10.7. Plan Sponsor as Agent of Participating Employer. Each
------------ -----------------------------------------------
Participating Employer shall be deemed to be a part of this Plan; however, each
Participating Employer shall be deemed to have designated irrevocably the Plan
Sponsor as its agent in all of its relations with the Trustee, the Committee and
the Administrator under this Agreement.
Section 10.8. Participating Employer Contributions. All contributions
------------ ------------------------------------
made by a Participating Employer provided for in this Plan shall be determined
separately on the basis of its total Annual Compensation paid. The
Participating Employer shall pay the contributions to the Trustee who shall hold
the contribution for the exclusive benefit of the Employees of the Participating
Employer and the Beneficiaries of the Employees, subject to all of the terms and
conditions of this Plan.
Section 10.9. Amendment by Plan Sponsor, Participating Employers.
------------ --------------------------------------------------
Amendment of this Plan by the Plan Sponsor at any time when there shall be a
Participating Employer under this Agreement shall be effective only upon the
written action of each and every Participating Employer and with the consent of
the Trustee where the consent is necessary under this Agreement.
Notwithstanding the foregoing sentence, each Participating Employer shall be
deemed to have authorized irrevocably the Plan Sponsor or any person(s) duly
authorized by resolution of the Board of Directors of the Plan Sponsor, to amend
or modify this Agreement in any manner it deems necessary or desirable,
retroactively or prospectively, subject to the provisions of this Article.
Section 10.10. Revocation of Participation by Participating Employer. Any
------------- -----------------------------------------------------
Participating Employer shall be permitted to discontinue or revoke its
participation in this Plan. Upon any discontinuance or revocation, satisfactory
evidence thereof and of any applicable conditions imposed shall be delivered to
the Trustee. The Trustee shall thereafter transfer, deliver and assign
Contracts and other Trust Fund assets allocable to the Participants of the
Participating Employer to the new plan as shall have been designated by the
Participating Employer, if it has established a separate employee benefit
pension plan for its employees. If no successor plan is designated, the Trustee
shall retain the assets for the Employees of the Participating Employer under
Article 10. No part of the corpus or income of the Trust Fund relating to the
Participating
58
<PAGE>
Employer shall be used for or diverted to purposes other than the exclusive
benefit of the Employees of the Participating Employer and the Beneficiaries of
the Employees.
Section 10.11. Authority of Administrator over Participating Employers.
------------- -------------------------------------------------------
The Administrator shall have the authority to make any and all necessary rules
or regulations binding on all Participating Employers and all Participants and
Beneficiaries to effectuate the purposes of this Article.
Section 10.12. Deficiency of Earnings or Profits. If any Participating
------------- ---------------------------------
Employer is prevented in whole or in part from making a contribution to the
Trust Fund which it otherwise would have made under the Plan because of having
no current or accumulated earnings or profits, or because the earnings or
profits are less than the contribution which it otherwise would have made, then
so much of the contribution which the Participating Employer was prevented from
making may be made for the benefit of the participating Employees of the
Participating Employer by the other Participating Employers who are Related
Employers. The contribution by each other Participating Employer shall be
limited to the proportion of its total current and accumulated earnings or
profits remaining after adjustment for its contribution to the Plan made without
regard to this Section, which the total prevented contribution bears to the
total current and accumulated earnings or profits of all the Participating
Employers remaining after adjustment for all contributions made to the Plan
without regard to this Section. A Participating Employer on behalf of whose
Employees a contribution is made under this Section shall not reimburse the
contributing Participating Employer unless it has otherwise agreed to do so in
writing.
Section 10.13. Indemnity by Employer. All Employees of FFE Transportation
------------- ---------------------
Services, Inc. designated by the Employer to perform acts under the Plan shall
be indemnified by FFE Transportation Services, Inc., or by insurance policies
purchased by FFE Transportation Services, Inc. against any and all liabilities
arising by reason of any act or failure to act, made in good faith pursuant to
the provisions of the Plan, including expenses reasonably related thereto.
Section 10.14. Losses and Depreciation. Neither FFE Transportation
------------- -----------------------
Services, Inc. nor the Trustee guarantees the Trust Fund in any manner against
loss or depreciation.
Section 10.15. Fiduciary Breach. FFE Transportation Services, Inc., the
------------- ----------------
Board of Directors, the Committee or any other committee authorized by FFE
Transportation Services, Inc. to perform all or some of the administration of
the Plan, the Trustee and any other person who is deemed to be a fiduciary under
the Plan will not be liable for a breach of fiduciary responsibility of another
fiduciary under the Plan except to the extent they shall have (1) participated
knowingly in, or knowingly undertaken to conceal, an act or omission of the
fiduciary, knowing such act or omission to be a breach of the fiduciary's
responsibilities; (2) enabled the fiduciary to commit a breach of its fiduciary
responsibilities through a breach of their own fiduciary responsibilities; or
(3) had knowledge of a breach of fiduciary responsibilities by the fiduciary,
unless they made a reasonable effort to remedy the breach.
Section 10.16. Reimbursement of Expenses. Except as otherwise specifically
------------- -------------------------
provided herein, all expenses incident to the administration, termination or
protection of the Plan and Trust, including but not limited to, actuarial,
legal, accounting and Trustee fees, shall be paid by FFE Transportation
Services, Inc., which may require reimbursement from other Participating
Employers for their pro rata shares, or if not paid by FFE Transportation
Services, Inc., shall be paid by the Trustee from the Trust Assets, but no
amount paid pursuant to Section 9.12 or 11.5 shall be paid, directly or
indirectly, from the Trust Assets.
Any expenses of the Plan and Trust which are to be paid by FFE
Transportation Services, Inc. or borne by the Trust Fund shall be paid by each
Participating Employer in the same proportion that the total amount standing to
the credit of all Participants employed by the Participating Employer bears to
the total amount standing to the credit of all Participants.
* * * * * * *
59
<PAGE>
ARTICLE ELEVEN
--------------
THE TRUSTEE
-----------
Section 11.1. Trust and Trust Agreement. FFE Transportation Services,
------------ -------------------------
Inc. shall enter into a Trust Agreement with a Trustee to be selected by FFE
Transportation Services, Inc. who shall serve at the pleasure of FFE
Transportation Services, Inc.. The Trust Agreement shall provide, among other
things, for a Trust Fund to which all Employer and Rollover Contributions shall
be paid, and the Trustee shall have such rights, powers and duties as set forth
in the Trust Agreement. All assets of the Trust Fund shall be held, invested and
reinvested in accordance with the provisions of that Trust Agreement and this
Plan.
Section 11.2. Trustee's Responsibility. The Trustee shall be responsible
------------ ------------------------
solely for the investment and safekeeping of the assets of the Trust Fund and
shall have no responsibility for the operation or administration of the Plan,
except as expressly provided herein. If the Trustee is a bank or trust company
supervised by the United States or a state, assets of the Trust Fund may be
invested in deposits which bear a reasonable rate of interest with such bank or
trust company to the extent they are not required by the Plan to be invested in
Employer Securities. The Trustee shall have the authority to pay moneys to or
upon the order of FFE Transportation Services, Inc. for the use of the Plan upon
requisition drawn by the Trustee.
Section 11.3. Exclusive Benefit. The Employer Contributions shall be
------------ -----------------
held by the Trustee for the benefit of the Participants and their Beneficiaries,
and no part of such Contributions and no part of the respective Participant's
Accounts shall be recoverable by the Employer, or used for or diverted to
purposes other than for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the provisions of the Plan.
Section 11.4. Incorporation of Trust Agreement by Reference. The
------------ ---------------------------------------------
provisions of the Trust Agreement are incorporated herein by reference and such
provisions shall govern the operation of the Trust; however, in the event of any
conflict between the provisions of the Trust Agreement and this Plan, the
provisions of this Plan shall control.
Section 11.5. Reimbursement of Expenses. Costs of brokerage fees,
------------ -------------------------
commissions, taxes and other costs incident to purchase, sale and servicing of
investments and other taxes, if any, payable on the assets or income of the
Trust and any expenses to be paid by the Trustee pursuant to Section 10.16 shall
be paid by the Trustee from the Trust Assets and shall be allocably charged to
the Employer Contribution Accounts which had undistributed balances on the last
preceding Accounting Date in proportion to the balances in such Accounts on such
date adjusted for distributions since such date.
* * * * * *
60
<PAGE>
ARTICLE TWELVE
--------------
ERISA ADMINISTRATIVE PROVISIONS
-------------------------------
Section 12.1. Administrator Appointment. FFE Transportation Services,
------------ -------------------------
Inc. shall be the Administrator of this Plan and shall be responsible for filing
all reporting and disclosure documents required by the Department of Labor and
the Internal Revenue Service in accordance with ERISA, the Code and the
respective regulations. FFE Transportation Services, Inc. may delegate any of
its duties and responsibilities as Administrator to the Committee. Service of
process on the Plan or Trust may be obtained by personal service on FFE
Transportation Services, Inc. or any Committee member.
Section 12.2. Record Information.
------------ ------------------
(a) Record Address. Each individual or entity with an actual or potential
--------------
interest in an existing Account shall file and maintain a current record address
with the Payroll Department of the appropriate Employer. Such record address
will be furnished by the Employers to the Committee. Mailings to such record
address will fulfill any obligation to provide required information to present
or former Participants and Beneficiaries with regard to the Plan. If no record
address is filed, it will be presumed that the address used by the Committee in
forwarding statements of a Participant's Employer Contribution or any other
account balance is the record address.
(b) Required Information to be Furnished. Participants and Beneficiaries
------------------------------------
who are or may become entitled to any payment hereunder shall furnish to the
Committee such information as the Committee considers necessary or desirable for
purposes of administering the Plan, and the provisions of the Plan with respect
to any payment hereunder are conditioned upon the prompt receipt by the
Committee of such true, full and complete information as the Committee may
reasonably request.
Section 12.3. Summary Plan Description. The Administrator shall furnish a
------------ ------------------------
summary plan description to each Participant within ninety (90) days after
becoming a Participant and to each Beneficiary receiving benefits under the Plan
within ninety (90) days after beginning to receive benefits. Every fifth (5th)
year after the Effective Date of the Plan, the Administrator shall furnish an
updated summary plan description, which integrates all amendments made within
the five (5) year period, to each Participant and Beneficiary receiving
benefits. If no amendments have been made within the five (5) year period, the
Administrator shall furnish the updated summary plan description only every
tenth (10th) year. If there is a modification or change in the Plan, the
Administrator shall furnish to each Participant and each Beneficiary who is
receiving benefits, a summary description of the change or modification not
later than two hundred ten (210) days after the end of the Plan Year in which
the change is adopted.
Section 12.4. Summary Annual Report. The Administrator shall furnish to
------------ ---------------------
each Participant and each Beneficiary receiving benefits a summary of the Annual
Return/Report of the Plan containing a statement of the Plan assets and
liabilities, receipts and disbursements and other information fairly summarizing
the Plan's financial statement within two hundred ten (210) days after the close
of each Plan Year, or an extended period as may be permitted by the Secretary of
Labor.
Section 12.5. Individual Benefit Statements. The Administrator shall
------------ -----------------------------
furnish to any Participant or Beneficiary receiving benefits, who requests in
writing, a statement reporting the total benefits accrued and the Nonforfeitable
benefits, if any, which have accrued or the earliest date on which benefits will
become Nonforfeitable. In no event shall a Participant or Beneficiary be
entitled to receive the report described in this Section more than once in every
twelve (12) month period.
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<PAGE>
Section 12.6. Copies of Additional Documents. Upon written request from a
------------ ------------------------------
Participant or Beneficiary receiving benefits, the Administrator shall furnish a
copy of any one (1) or all of the following documents: the latest updated
summary plan description, the latest annual report, any terminal report, Trust
agreement, contract or other instruments under which the Plan was established or
is operated. The Administrator may make a reasonable charge to cover the cost
of furnishing complete copies.
Section 12.7. Documents Available for Examination. Copies of the Plan
------------ -----------------------------------
description and the latest annual report, Trust agreement, contract or other
instruments under which the Plan was established or is operated shall be
available for examination at the principal office of the Employer by any
Participant or Beneficiary receiving benefits. Examination may be made during
reasonable hours in person or by agent, accountant or attorney.
Section 12.8. Notice of Participant Rights under ERISA. The Committee
------------ ----------------------------------------
shall furnish to each Participant and to each Beneficiary receiving benefits
information on their rights under the Plan and how the rights may be protected
by law.
Section 12.9. Notice to Participant on Participant Termination. The
------------ ------------------------------------------------
Administrator shall furnish a statement to a Participant who terminated Service
with the Employer for any of the reasons set forth in Articles 6 through 9,
describing the nature, amount and form of the Nonforfeitable Account Balance, if
any, to which the Participant is entitled as soon as administratively feasible
after the close of the Plan Year in which the Participant terminated Service.
Section 12.10. Notice to Trustee on Participant Termination
------------- --------------------------------------------
(a) As soon as practicable after a Participant terminates Service with the
Employer for any of the reasons set forth in Articles 6 through 9, the Committee
shall give written notice to the Trustee, including the following information
and directions which may be necessary or advisable under the circumstances:
(i) name and address of the Participant;
(ii) reason the Participant terminated Service with the Employer;
(iii)name and address of the Beneficiary or Beneficiaries of a
deceased Participant;
(iv) Nonforfeitable percentage or amount to which the Participant is
entitled on termination of employment pursuant to Article 9; and
(v) time, manner and amount of payment to be made pursuant to the
Participant's election under Article 10.
If a Former Participant or Beneficiary dies, the Committee shall give like
notice to the Trustee, but only if the Committee learns of the death.
(b) At any time and from time to time after giving the notice provided
under this Section, the Committee may modify the original notice or any
subsequent notice by a further written notice or notices to the Trustee, but any
action taken or payments made by the Trustee pursuant to a prior notice shall
not be affected by a subsequent notice.
(c) A copy of each notice provided under this Section shall be mailed by
the Committee to the Participant, Former Participant or Beneficiary involved,
but the failure to send or receive the copy shall not affect the validity of any
action taken or payment made pursuant thereto.
62
<PAGE>
(d) Upon receipt of any notice provided under this Section, the Trustee
shall promptly take any action and make any payments directed in the notice.
The Trustee may rely on the information and directions in the notice absolutely
and without question. However, the Trustee may inform the Committee of any
error or oversight which the Trustee believes to exist in any notice.
Section 12.11. Claim for Benefits. Participants and Beneficiaries who are
------------- ------------------
or may become entitled to any payment hereunder shall furnish to the Committee
such information as the Committee considers necessary or desirable for purposes
of administering the Plan, and the provisions of the Plan with respect to any
payment hereunder are conditioned upon the prompt receipt by the Committee of
such true, full and complete information as the Committee may reasonably
request.
Normally, whenever a Participant or Beneficiary becomes entitled to
benefits under this Agreement, the Committee and the Trustee will automatically
initiate procedures to provide for the payment of the benefits. If a
Participant or Beneficiary believes that he or she is entitled to the payment of
benefits under this Agreement and no action is forthcoming from the Committee or
the Trustee, then the Participant or Beneficiary may file a written claim for
benefits with the Committee or the Trustee.
Once a claim request is submitted, the Committee shall act upon such
request and inform the Claimant within ninety (90) days from the date the
request was filed whether such request is granted or denied. If special
circumstances so warrant, the Committee may take up to an additional ninety (90)
days; provided, written notice shall be sent to Claimant stating in full the
reasons for the delay and the date by which the final decision is expected.
Failure of the Claimant to receive any notification within ninety (90) days (one
hundred eighty (180) days for special cases) shall cause the claim to be deemed
denied, and the Claimant may institute the review proceedings set out in Section
12.12.
Section 12.12. Appeal for Decision of Committee
------------- --------------------------------
(a) If any Participant or Beneficiary files a claim for benefits under
this Plan ("Claimant") and the claim is denied in whole or in part, the
Administrator shall give notice of the decision to the Claimant in writing
setting forth:
(i) the specific reasons for the denial;
(ii) a specific reference to pertinent provisions of the Plan, if any,
upon which the denial is based;
(iii)a description of any additional material or information necessary
for the Claimant to perfect the claim with an explanation of the
necessity therefor; and
(iv) that any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Committee within sixty
(60) days after receipt of the Administrator's notice of denial
of benefits, or from the date the claim is deemed denied because
of a failure of notification to the Claimant. The
Administrator's notice must further advise the Claimant that
failure to appeal the action to the Committee in writing within
the sixty (60) day period will render the Committee's
determination final, binding and conclusive.
(b) The written notice shall be given to the Claimant as soon as
administratively feasible after the decision is made, but not later than sixty
(60) days after the claim is filed. The Claimant shall have the right to be
represented, to review pertinent documents and to present written and oral
evidence. In order to perfect the right to review, the Claimant must file
written notice within sixty (60) days from the date the Claimant receives
written notification of the denial from the Committee, or from the date the
claim is deemed
63
<PAGE>
denied because of a failure of notification to the Claimant. The Claimant is
entitled to have a representative present at the review hearing to argue the
claim on the Claimant's behalf.
(c) If the Claimant should appeal to the Committee, the Claimant or the
duly authorized representative, shall be entitled to a reasonable opportunity to
examine all documentation relevant to the claim and may submit, in writing,
issues and comments the Claimant or the duly authorized representative considers
pertinent. After completion of written and oral argument by the Claimant, the
Committee shall render a final decision on the review and shall set forth the
specific reasons for the decision with specific references to pertinent
provisions. The Committee shall render the decision in writing within sixty
(60) days after receipt of the request for review unless under special
circumstances, such as the need for a hearing, require an extension which shall
not exceed an additional sixty (60) days upon showing a necessity therefor and
informing the Claimant of the delay and the reasons therefor.
(d) The Claimant shall be informed of the final decision of the Committee
in writing which shall:
(i) Be written in a manner calculated to be understood by the
Claimant;
(ii) State specific reasons for the decision; and
(iii) State specific references to pertinent Plan provisions on which
the decision is based.
Section 12.13. Exclusive Benefit. Except as provided under this Article
------------- -----------------
and Article 3, the Employer has no beneficial interest in any asset of the Trust
and no part of any asset in the Trust may ever revert to or be repaid to an
Employer, either directly or indirectly. Further, prior to the satisfaction of
all liabilities with respect to the Participants and their Beneficiaries under
the Plan, no part of the corpus or income of the Trust Fund, or any asset of the
Trust, may be used for, or diverted to, purposes other than the exclusive
benefit of the Participants or their Beneficiaries. No amendment or revocation
by the Employer of this Section may cause or permit any portion of the Trust
Fund to revert to or become a property of the Employer.
Section 12.14. Denial of Request for Initial Approval. Any contribution to
------------- --------------------------------------
the Trust Fund associated with this Plan is conditioned on initial qualification
of the Plan under applicable Code Sections 401(a), 403(a) or 405(a) and of the
exemption of the Trust created under the Plan under Code Section 501(a). If the
Commissioner of the Internal Revenue Service, upon the Employer's request for
initial approval of this Plan and Trust, determines that the Plan is not
qualified or the Trust is not exempt, then the Trustee may return to the
Employer, within one (1) year after the date of final disposition of the
Employer's request for initial approval, any contribution made by the Employer,
and any increment attributable to the contribution.
Section 12.15. Mistake of Fact. Notwithstanding any contrary provision in
------------- ---------------
this Agreement, if a contribution is made by an Employer by a mistake of fact,
the contribution may be returned to the Employer within one (1) year after the
payment of the contribution. The amount of the mistaken contribution is equal
to the excess of (a) the amount contributed over (b) the amount that would have
been contributed had there not occurred a mistake of fact. Earnings
attributable to mistaken contributions may not be returned to the Employer, but
losses attributable thereto shall reduce the amount to be returned.
Section 12.16. Disallowance of Deduction. Notwithstanding any contrary
------------- -------------------------
provision in this Agreement, any contributions by the Employer to the Plan and
Trust are conditioned on the deductibility of the contribution by the Employer
under the Code. To the extent any deduction is disallowed, the Employer, within
one (1) year following a final determination of the disallowance, whether by
agreement with the Internal Revenue Service or by final decision in a court of
competent jurisdiction, may demand repayment of the disallowed contribution,
and the Trustee shall return the contribution within one (1) year following the
disallowance. Earnings attributable to excess contributions may not be returned
to the Employer, but losses attributable thereto shall reduce the amount to be
returned.
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<PAGE>
Section 12.17. Spendthrift Clause. Except as provided below, no
------------- ------------------
Participant, Former Participant or Beneficiary shall have the right to
anticipate, assign or alienate any benefit provided under the Plan and the
Trustee will not recognize any anticipation, assignment or alienation.
Furthermore, a benefit under the Plan is not subject to attachment, garnishment,
levy, execution or other legal or equitable process. All provisions of this
Agreement shall be for the exclusive benefit of those designated herein. These
restrictions shall not apply in the following case(s):
. Distributions Pursuant to Qualified Domestic Relations Orders. The
-------------------------------------------------------------
Committee may direct the Trustee under the nondiscriminatory policy
adopted by the Committee to pay an Alternate Payee designated under a
Qualified Domestic Relations Order as defined in Code Section 414(p)
or any domestic relations order entered before January 1, 1985 if
payment of benefits pursuant to the order has commenced as of that
date. To the extent provided under a Qualified Domestic Relations
Order, a former spouse of a Participant shall be treated as the spouse
or surviving spouse for all purposes of the Plan.
Section 12.18. Termination. Upon termination of the Plan, in lieu of the
------------- -----------
distribution provisions of Article 10, the Committee will direct the Trustee to
distribute each Participant's Nonforfeitable Account Balance, in a single sum,
as soon as administratively feasible after the later of the termination of the
Plan or the receipt of a favorable determination letter from the Office of the
Key District Director, if an application is filed, irrespective of the present
value of the Participant's Nonforfeitable Account Balance and whether the
Participant consents to that distribution. This paragraph applies only if:
(i) the Plan does not provide an annuity option;
(ii) the Plan is a profit sharing plan on its termination date; and
(iii) as of the period between the Plan termination date and the final
distribution of assets, the Employer does not maintain any other
defined contribution plan (other than an employee stock ownership
plan).
For Participants or Beneficiaries who cannot be located upon Plan
termination, and whose Nonforfeitable Account Balance exceeds $3,500, to
liquidate the Trust, the Committee will purchase a deferred annuity contract,
distribute the benefits to an individual retirement account, or transfer the
account to an ongoing qualified plan of a Related Employer. If the Committee
distributes the lost Participant's or Beneficiary's benefits to an individual
retirement account or purchases an annuity, and the Participant's or
Beneficiary's whereabouts remain unknown for the duration of the escheat period,
the benefits will ultimately escheat to the state under applicable state law.
* * * * * *
65
<PAGE>
ARTICLE THIRTEEN
----------------
ROLLOVERS, MERGERS, DIRECT TRANSFERS
------------------------------------
Section 13.1. Participant Rollover Contributions. Any Participant who has
------------ ----------------------------------
the Employer's written consent and who has filed with the Trustee the form
prescribed by the Committee may contribute cash or other property to the Trust
other than as a voluntary contribution if the contribution is a Rollover
Contribution which the Code permits an Employee to transfer either directly or
indirectly from one qualified plan to another qualified plan. Before accepting a
Rollover Contribution, the Trustee may require an Employee to furnish
satisfactory evidence that the proposed transfer is in fact a Rollover
Contribution which the Code permits an Employee to make to a qualified plan. A
Rollover Contribution is not an Annual Addition.
An eligible Employee, prior to satisfying the Plan's conditions, may make a
Rollover Contribution to the Trust to the same extent and in the same manner as
a Participant. If an Employee makes a Rollover Contribution to the Trust prior
to satisfying the Plan's eligibility conditions, the Committee and Trustee must
treat the Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer Contributions
or Participant Forfeitures under the Plan until the Employee actually becomes a
Participant in the Plan. If the Employee has a separation from Service prior to
becoming a Participant, the Trustee will distribute the Rollover Account to the
Participant as if it were an Employer Contribution Account.
For any Rollover Contribution, the following requirements shall be met:
(a) The Committee shall maintain a Participant's Rollover Contribution in
a separate Rollover Account;
(b) The Trustee will invest the Rollover Contribution pursuant to the
terms of the Trust Agreement.
(c) A Participant's Rollover Contribution shall not be forfeitable nor
reduce in any way the obligations of the Employer under this Agreement.
EFFECTIVE JANUARY 1, 1990, notwithstanding the foregoing provisions, the
Plan will not accept Rollover Contributions of account balances or accrued
benefits from other employee benefit plans. Currently existing Rollover
Accounts, which were created as separate accounts pursuant to this Section 13.1
will continue to be maintained by the Plan.
Section 13.2. Merger and Direct Transfer. The Trustee possesses the
------------ --------------------------
specific authority to enter into merger agreements or direct transfer of assets
agreements with the trustees of other retirement plans described in Code Section
401(a), including an Elective Transfer defined in Section 13.3, and to accept
the direct transfer of plan assets or to transfer plan assets, as a party to any
agreement. Further, the Trustee may permit the transfer of plan assets to an
individual retirement account or an individual retirement annuity. However, the
Trustee, before any merger or direct transfer is consummated, shall be satisfied
that the holding of any transferred assets is permitted by the transferee
trusts. When the Trustee is so satisfied, the Trustee shall accept the direct
transfer of plan assets or shall cause to be transferred the assets directed to
be transferred and as appropriate shall direct the insurance company to transfer
any Contracts held by it to the new Trustee. The Trustee may accept a direct
transfer of plan assets on behalf of an Employee prior to the date
66
<PAGE>
the Employee satisfies the Plan's eligibility conditions. If the Trustee accepts
a direct transfer of plan assets, the Committee and Trustee must treat the
Employee as a Participant for all purposes of the Plan except that the Employee
is not a Participant for purposes of sharing in Employer Contributions or
Participant Forfeitures under the Plan until the Employee actually becomes a
Participant in the Plan.
The Trustee may not consent to, or be a party to, any merger or
consolidation with another plan or to a transfer of assets and liabilities to
another plan, unless, immediately after the merger, consolidation or transfer
the surviving plan provides each Participant a benefit equal to or greater than
the benefit each Participant would have received had the plan terminated
immediately before the merger, consolidation or transfer.
Section 13.3. Certain Rollovers, Mergers and Direct Transfers Prohibited.
------------ ----------------------------------------------------------
Notwithstanding any contrary provision in this Agreement, the Trustee, after
August 9, 1988, may not consent to or be a party to a rollover, merger,
consolidation or transfer of assets from a qualified plan which is required to
provide benefits in the form of a joint and survivor annuity under Code Section
417, except with respect to an Elective Transfer, or unless the transferred
benefits are in the form of paid-up individual annuity contracts guaranteeing
the payment of the transferred benefits under the transferor plan and in a
manner consistent with the Code and ERISA. The Trustee will hold, administer
and distribute the transferred assets as a part of the Trust Fund and the
Trustee must maintain a separate Employer Contribution Account for the benefit
of the Employee on whose behalf the Trustee accepted the transfer to reflect the
value of the transferred assets.
Unless a transfer of assets to this Plan is an Elective Transfer, the Plan
will preserve all Code Section 411(d)(6) protected benefits with respect to
those transferred assets, in the manner described in Section 10.2(c)(iii). A
transfer is an Elective Transfer if: (a) the transfer satisfies Section 13.2;
(b) the transfer is voluntary, under a fully informed election by the
Participant; (c) the Participant has an alternative that retains his or her Code
Section 411(d)(6) protected benefits, including an option to leave the benefit
in the transferor plan, if that plan is not terminating; (d) the transfer
satisfies the applicable spousal consent requirements of the Code; (e) the
transferor plan satisfies the joint and survivor notice requirements of the
Code, if the Participant's transferred benefit is subject to those requirements;
(f) the Participant has a right to immediate distribution from the transferor
plan, in lieu of the Elective Transfer; (g) the transferred benefit is at least
the greater of the single sum distribution provided by the transferor plan for
which the Participant is eligible or the present value of the Participant's
Accrued Benefit under the transferor plan payable at that plan's normal
retirement age; (h) the Participant has a one hundred percent (100%)
Nonforfeitable interest in the transferred benefit; and (i) the transfer
otherwise satisfies applicable Treasury regulations. An Elective Transfer may
occur between qualified plans of any type.
If the Plan receives a direct transfer, by merger or otherwise, of Elective
Contributions, or amounts treated as Elective Contributions, under a Plan with a
Code Section 401(k) arrangement, the distribution restrictions of Code Sections
401(k)(2) and 401(k)(10) continue to apply to those transferred Elective
Contributions.
* * * * * * *
67
<PAGE>
ARTICLE FOURTEEN
----------------
REPURCHASE OF EMPLOYER SECURITIES;
----------------------------------
NONTERMINABLE PROTECTIONS AND RIGHTS
------------------------------------
Section 14.1. Put Option. A share of Employer Securities shall be subject
------------ ----------
to a put option if it is not publicly traded, or if it is subject to a trading
limitation, when distributed. FFE Transportation Services, Inc. shall issue a
put option to each Former Participant receiving a distribution of Employer
Securities from the Plan required under the conditions described in the
foregoing sentence, in accordance with the terms set forth in this Section:
(a) Exercise of Option. The put option shall be exercisable only by a
------------------
Participant or Beneficiary; by a donee of the Participant or Beneficiary; or by
a person, including an estate or its distributees, to whom such Employer
Securities have passed because of the death of the Participant.
(b) Rights Under Put Option. The put option shall give to the eligible
-----------------------
holder the right to put such shares to FFE Transportation Services, Inc. Under
no circumstances may it bind the Plan or Trust, but it may grant the Plan or
Trust an option to assume the rights and obligations of FFE Transportation
Services, Inc. at the time it is exercised; if it is known, at the time such
stock is acquired, that Federal or state law will be violated by FFE
Transportation Services, Inc.'s honoring such put option, it must permit the
stock subject thereto to be put, in a manner consistent with such law, to a
third party (e.g., an affiliate or a shareholder of FFE Transportation Services,
Inc. other than the Plan or the Trust) that has substantial net worth at the
time such debt is incurred and whose net worth is reasonably expected to remain
substantial.
(c) Period of Option.
----------------
(i) The put option must be exercisable at least during a sixty (60)
day period following the date of distribution from the Trust to the
Participant or Beneficiary and for an additional sixty (60) day period
during the Plan Year immediately following the Plan Year in which the
first option period ends;
(ii) In the case of Employer Securities that are publicly traded
without limitation when distributed by the Trust but ceases to be so
traded within the same Plan Year as the distribution, FFE
Transportation Services, Inc. shall notify each holder of such stock
in writing on or before the tenth day after such stock ceased to be so
traded that for at least a sixty (60) day period during such Plan
Year, and for an additional sixty (60) day period during the following
Plan Year, such stock is subject to a put option. Such notice must
inform such holders of the terms of such put option, which shall
satisfy the requirements of this Section;
(iii)The period during which it is exercisable shall not include any
time when a distributee is unable to exercise it because the party
bound by it is prohibited by from honoring it by applicable Federal or
state law;
(iv) The put option shall be exercisable by the holder notifying FFE
Transportation Services, Inc. in writing that it is being exercised;
and
(v) The price at which it is exercisable shall be the Current Market
Value of the stock subject thereto, determined as of the most recent
Accounting Date; provided, however, that such value shall be
determined as of the date the put is honored if the holder of such put
is a "disqualified person" (as defined under Section 4975 of the
Code).
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<PAGE>
(d) Option Rights Not Affected by Amendment. The rights provided to
---------------------------------------
Participants under this Article shall be non-terminable and no amendment to this
Plan shall affect these rights except such amendments to this Article as may be
required to assure the continuing qualification of the Plan under the Code.
Section 14.2. Lifetime Transfer/Right of First Refusal.
------------ ----------------------------------------
(a) Notice of Offer. If a Former Participant or Beneficiary, who has
----------------
received a distribution of Employer Securities, receives a bona fide offer for
the purchase of all or a portion of the shares, the person shall give written
notice of the offer to the Trustees and to the Employer. The notice shall set
forth the name of the proposed transferee, the number of shares to be
transferred, the price per share, and all other terms and conditions of the
proposed transfer.
(b) Right of First Refusal. On receipt of the notice regarding the
-----------------------
transfer, the Trustees shall have the exclusive right and option, exercisable at
any time during a period of fourteen (14) days from the date of the notice to
purchase the shares of the Employer covered by the offer in question at the same
price and on the same terms and conditions of the offer as set out in the
notice. If the Trustees decide to exercise the option, the Trustees shall give
written notice of this effect to the Former Participant or Beneficiary desiring
to sell, and the sale and purchase shall be closed within thirty (30) days
thereafter. If the Trustees do not elect to exercise the option to purchase any
or all of the offered shares, the Trustees shall, prior to the expiration of the
fourteen (14) day period stated above, notify the Employer of the Trustees'
election, and the Employer shall be entitled during the remainder of the
fourteen (14) day period to purchase that portion of the offered shares, not so
purchased by the Trustees, on the same terms and conditions as set out in the
offer.
(c) Requirements. Notwithstanding the foregoing, the right of first
-------------
refusal shall be subject to the following requirements:
(i) The Employer Securities subject to such right must be equity or
debt convertible into equity;
(ii) The right of first refusal may not be exercised at a time when
the Employer Securities are publicly traded;
(iii)The right of first refusal may be granted only to the Trustees
and the Employer;
(iv) The selling price and terms of purchase by either the Trustees or
Employer, pursuant to this right of first refusal, shall be no
less favorable to the seller than the greater of the selling
price and terms offered by a good faith purchaser or fair market
value;
(v) The right of first refusal shall lapse no later than fourteen
(14) days after notice of the third party offer is given.
Section 14.3. Payment of Purchase Price. If a Former Participant
------------ -------------------------
exercises a put option pursuant to Section 14.1 or if the Employer or the
Trustee, at the Committee's direction exercises an option to purchase a Former
Participant's Employer Securities pursuant to Section 14.2, the purchaser may
make payment by delivery of a note with payments commencing not more than thirty
(30) days after the exercise of the put option. The payment obligation will be
satisfied by the delivery of said note, which must meet the following
requirements:
(a) the note must bear a reasonable rate of interest determined at
Closing;
(b) the purchaser must provide adequate security for the note;
69
<PAGE>
(c) the note must provide for equal annual installments not to exceed five
(5) years, with interest payable with each installment, the first installment
due and payable thirty (30) days after the exercise of the Put Option;
(d) the note must provide for acceleration upon thirty (30) days' default
of the payment on interest or principal; and
(e) the note must grant to the maker the right to prepay the note in whole
or in part at any time or times without penalty; provided, however, the
purchaser must not have the right to make any prepayment during the calendar
year or fiscal year of the Participant (Beneficiary) in which Closing occurs.
Payment under a put option may not be restricted by the provisions of a
loan or any other arrangement, including the terms of the Company's articles of
incorporation, unless so required by applicable state law.
Section 14.4. Notice. A person has given notice under this Section when
------------ ------
the person deposits the notice in the United States mail, first class, postage
prepaid, addressed to the person entitled to the Notice at the address currently
listed for the person in the Committee records. Any person affected by this
Section has the obligation to inform the Committee of any change of address.
Section 14.5. Nonterminable Protections and Rights. Except as provided in
------------ ------------------------------------
this Article, no Employer Securities may be subject to a put, call, or other
option, or buy-sell or similar arrangement when held by and when distributed
from the Trust Fund, whether or not the Plan is then an employee stock ownership
plan. The protections and rights granted in this Article, in Sections 6.1, 7.1,
and 7.3 pursuant to Code Section 409(o) attributable to stock acquired after
December 31, 1986, and in Section 14.7 pursuant to Code Section 401(a)(28)(B),
are nonterminable and shall continue to exist under the terms of this Plan so
long as any Employer Security is held by the Trust Fund or by any Participant or
other person for whose benefit such protections and rights have been created.
Neither the repayment of an Exempt Loan described in Section 14.6 nor the
failure of the Plan to be an employee stock ownership plan, nor an amendment of
the Plan shall cause a termination of the protections and rights.
Section 14.6. Investment in Employer Securities.
------------ ---------------------------------
(a) Type of Employer Securities. The Trustee shall invest the Trust Fund
---------------------------
primarily in Qualifying Employer Securities to the extent practicable and may
invest one hundred percent (100%) of the Trust Fund in Employer Securities. The
Employer Securities may be Treasury Stock which has been purchased by the
Employer; stock which has been authorized, but never issued by the Employer;
Employer Securities traded on a public market; or Employer Securities owned by
shareholders of the Employer. Provided, however, that the Trustee shall invest
the proceeds of an Exempt Loan to acquire only Qualifying Employer Securities
described in Section 2.18.
(b) Purchase Price. For the purchase of Employer Securities, from the
--------------
Parent or any Employer or from a shareholder of the Parent or any Employer, the
Trustee shall not pay more than fair market value as determined by the current
market price of the Employer Securities, if there is a market, and if there is
not a market for the stock, then as determined by an independent appraisal after
taking into account the book value of the stock, the earnings of the Employer
and other factors normally taken into account in determining fair market value
of stock of a corporation. All valuations of Employer Securities which are not
readily tradable on an established securities market, with respect to activities
carried on by the Plan, must be made by an independent appraiser meeting
requirements similar to requirements of the Regulations prescribed under Code
Section 170(a)(1). For the purchase of Employer Securities from a Disqualified
Person, the value of the Employer Securities must be determined as of the date
of the transaction. For any other purchase, the value shall be based on a
current valuation. Notwithstanding the preceding provisions of this Section,
the
70
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Trustee may purchase Employer Securities at a price lower than that determined
in accordance with the preceding provisions of this Section 14.6(b) from any
source whatsoever. If a public market is made for the Employer Securities, the
purchase price shall be the average of the closing prices on the OTC for the
last three days for which such prices are quoted in the Wall Street Journal
preceding the purchase.
(c) Exempt Loan. From time to time, the Trustee may purchase Employer
-----------
Securities (i) which are paid for in whole or in part with the Trust's
promissory note or (ii) which are paid for in whole or in part with funds
borrowed from others, any such indebtedness being herein referred to as an
"Exempt Loan." The term Exempt Loan means a loan that satisfies the provisions
of Treasury Regulations Section 54.4975-7(b) and is described in this Section
14.6(c). The Trustee is expressly authorized to enter into an Exempt Loan
transaction. The following terms and conditions apply to any Exempt Loan.
(i) The Trustee shall use the proceeds of any Exempt Loan:
(A) to acquire Employer Securities described in Section
14.6(a)(i), (ii) or (iii);
(B) to repay the Exempt Loan; or
(C) to repay a prior Exempt Loan.
(ii) Any Exempt Loan shall provide that the creditor is without
recourse against the Plan and Trust. The Exempt Loan shall
further provide that no person entitled to payment under the
Exempt Loan shall have any rights to the assets of the Plan and
Trust other than:
(A) the collateral given under the Exempt Loan;
(B) contributions (other than contributions of Employer
Securities) made by the Employer to meet the repayment
requirements of the Exempt Loan; or
(C) earnings attributable to:
(1) the Employer Securities pledged as collateral for such
loan; or
(2) the Employer contributions described in the preceding
paragraph (B).
(iii)Any Exempt Loan shall provide that payments made on the loan by
the Plan shall not exceed for any Plan Year an amount equal to
the sum of Employer Contributions and Plan earnings for the
current Plan Year, plus the amounts in prior years, less the sum
of the note payment for prior years. Such Employer Contributions
and Plan earnings shall be accounted for separately in the Plan
accounting records until the Exempt Loan is repaid.
(iv) Collateral for the Exempt Loan shall be restricted to Employer
Securities acquired with the proceeds of the Exempt Loan or
Employer Securities acquired with a prior Exempt Loan which prior
Exempt Loan is repaid with the proceeds of the Exempt Loan.
(v) Any Exempt Loan shall provide that in the event of default, the
value of the Plan assets transferred in satisfaction of the
Exempt Loan must not exceed the amount of the default. If the
lender is a Disqualified Person, the Exempt Loan shall provide
71
<PAGE>
for the transfer of Plan assets upon default only upon and to the
extent of the failure of the Plan to meet the repayment schedule
of the loan.
(vi) Any Exempt Loan shall provide for a reasonable rate of interest,
taking into account all relevant factors.
(vii)Any Exempt Loan shall provide for a release from encumbrance of
shares of Employer Securities held as collateral as of each
Accounting Date equal to the number of encumbered shares of
Employer Securities held immediately before the release,
multiplied by a fraction. The numerator of the fraction is the
amount of principal and interest paid during the Plan Year. The
denominator of the fraction is the sum of the principal and
interest to be paid in all future years without taking into
account any possible extensions of the loan. If a variable rate
of interest is used, the calculation of the denominator shall be
based upon the rate applicable as of the end of the Plan Year in
question. Release of shares of more than one class shall be made
on a pro rata basis applying such fraction.
(viii)Any Exempt Loan shall call for a definitely determinable period
of repayment and may not be payable at the demand of any person
except in the case of default.
(ix) The Trustee shall comply with all requirements under Code Section
4975 and the applicable Treasury regulations to assure that the
loan qualifies as an Exempt Loan.
(x) Notwithstanding that this Plan ceases to be an employee stock
ownership plan, Employer Securities acquired with the proceeds of
an Exempt Loan will continue, after the Trustee repays the loan,
to be subject to the provisions of Treasury Regulations Sections
54.4975-7(b)(4), (10), (11) and (12) relating to put, call or
other options and to buy-sell or similar arrangements, except to
the extent those regulations are inconsistent with Code Section
409(h).
(d) Allocation. The Committee shall allocate all Employer Securities
----------
contributed or purchased for each Plan Year in accordance with the provisions of
Section 5.2. Additional shares or fractional shares of Employer Securities
shall be added to each Participant's Employer Securities Account as of the
Accounting Date.
(i) Provided, however, that the Committee shall direct the Trustee to
hold any shares of Employer Securities which are acquired with
the proceeds of an Exempt Loan in a suspense account. As of each
Accounting Date, a pro rata amount of such Employer Securities
shall be released from the suspense account in accordance with
Section 14.6(c)(vii), and non-monetary units representing
Participants' interests in assets withdrawn from the suspense
account shall be allocated in accordance with the immediately
preceding paragraph. The amount to be released shall equal the
total number of shares acquired from the proceeds of the Exempt
Loan, multiplied by a fraction. The numerator of the fraction is
the amount of principal and interest paid on the loan during the
Plan Year. The denominator of the fraction is the sum of the
numerator plus the principal and interest to be paid for all
future years, without taking into account any possible extensions
of the loan.
(ii) Any dividend income received during the year for the shares held
in suspense shall be applied by the Trustee in the subsequent
year towards the repayment of the Exempt Loan.
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<PAGE>
(e) Voting Rights. EFFECTIVE JANUARY 1, 1987, a Participant is entitled
-------------
to direct the exercise of voting rights or other rights with respect to the
whole or fractional shares of stock allocated to said Participant's Account.
FFE Transportation Services, Inc. shall provide to each Participant materials
pertaining to the exercise of such rights containing all the information
distributed to shareholders as part of its distribution of such information to
shareholders. A Participant shall have the opportunity to exercise any such
rights within the same time period as shareholders of FFE Transportation
Services, Inc. In the exercise of voting rights, votes representing fractional
shares of stock and shares of stock held in unallocated inventory shall be voted
in the same ratio for the election of directors and for and against each issue
as the applicable vote directed by Participants with respect to whole and
fractional shares of stock. Likewise where a participant(s) fails or refuses to
exercise the right to direct the exercise of voting rights, the same ratio shall
be applicable to such whole and fractional shares.
EFFECTIVE MARCH 27, 1987, the following provisions apply:
(i) Each Participant shall be entitled to direct the Trustee as to
the manner in which voting rights with respect to shares of
Employer Securities allocated to such Participant's Account shall
be exercised.
(ii) Each Participant shall have the right to direct the Trustee as to
the manner in which voting rights are to be exercised with
respect to a pro rata portion of the unallocated shares of
Employer Securities held by the Trust. Such pro rata portion
shall be determined by multiplying the total number of
unallocated shares of Employer Securities by a fraction, the
numerator of which is the number of shares over which the
Participant has voting rights in accordance with subsection (a)
and the denominator of which is the total number of such shares
allocated to the Accounts of all Participants.
(iii)In order to implement the voting rights granted in this Section,
the Parent or Plan Administrator shall furnish the Trustee and
the Participants with a notice or information statement which
complies with both the law and the Parent's charter and bylaws
applicable to security holders in general. Allocated shares of
Employer Securities with respect to which timely voting
instructions have not been received shall be voted by the Trustee
on each matter in the same proportion as shares with respect to
which such instructions have been received on such matter,
provided, however, EFFECTIVE JANUARY 1, 1989, they shall be voted
by the Trustee as though they were unallocated shares.
(f) Tender Offer
------------
(i) Notwithstanding any other provisions of the Plan or Trust, the
provisions of this Section shall govern the tendering of shares
of Employer Securities held in this Plan. Upon commencement of a
tender offer for any securities held by the Trust that are
Employer Securities, the Plan Administrator shall notify each
Participant of such tender offer, utilize its best efforts to
timely distribute or cause to be distributed to the Participants
such information as is distributed to shareholders of the
Employer in connection with such tender offer, and shall provide
a means by which the Participant can instruct the Trustee whether
or not to tender the Employer Securities allocated to such
Participant's Accounts. The Plan Administrator shall provide the
Trustee with a copy of any materials provided to Participants.
Each Participant shall have the right to instruct the Trustee as
to the manner in which the Trustee is to respond to the tender
offer for any or all of the Employer Securities allocated to such
Participant's account. The Trustee shall respond to the tender
offer with
73
<PAGE>
respect to the Employer Securities as instructed by the
Participant. The Trustee shall not tender Employer Securities
allocated to a Participant's account for which the Trustee has
received no instructions from the Participant.
(ii) The Trustee shall tender that number of unallocated shares of
Employer Securities which is determined by multiplying the total
number of unallocated shares by a fraction of which the numerator
is the number of shares of Employer Securities allocated to
Participants' accounts for which the Trustee has received
instructions from Participants to tender (and such instructions
have not been withdrawn as of the date of determination) and the
denominator is the total number of shares of Employer Securities
allocated to Participants' accounts.
(iii)A Participant who has directed the Trustee to tender shares of
Employer Securities allocated to such Participant's Account may,
at any time, prior to the tender offer withdrawal date, instruct
the Trustee to withdraw, and the Trustee shall withdraw such
shares of Employer Securities from the tender offer prior to the
withdrawal deadline. Prior to such withdrawal deadline, if
unallocated shares of Employer Securities have already been
tendered, the Trustee shall redetermine the number of shares of
Employer Securities which would be tendered under subsection (ii)
if the date of such withdrawal were the date of determination,
and withdraw the number of unallocated shares necessary to reduce
the number of allocated shares tendered to the amount so
redetermined. A Participant shall not be limited as to the
number of instructions to tender or withdraw which he may give to
the Trustee.
(iv) The Trustee shall credit the proceeds, received in exchange for
the tendered Employer Securities allocated to the Account of each
Participant who instructed the Trustee to so tender, to that
Participant's account. The Trustee shall exercise its best
efforts to invest the proceeds from such tender, whether cash or
securities, in conformity with the requirements of Code Section
4975.
(g) Shareholder Agreements. The Trustee may enter into agreements with
----------------------
shareholders to purchase shares of Employer Securities under which the Trustee
is granted an option to purchase all or a portion of the shares of Employer
Securities owned by the shareholders on the death of the shareholder or
shareholders. To provide for the funding of the purchase of shares of Employer
Securities, the Trustee may apply for and pay premiums on contracts of life
insurance on the life of such shareholder for the benefit of the Trust Fund as a
whole, provided, however, that if this Plan invests in Leveraged Employer
Securities the Trustee may not enter into any agreement which would obligate the
Plan and Trust to purchase Employer Securities from a particular shareholder at
an indefinite time determined upon the happening of an event such as death of
the shareholder.
Section 14.7. Partial Diversification of Investment. A Qualified
------------ -------------------------------------
Participant may elect within the Diversification Election Interval during his
Qualified Election Period to direct the Trustee on the investment of: (a) not
more than twenty-five percent (25%) of the Qualified Participant's Account
Balance (excluding accumulated employee contributions) at the end of the Plan
Year, reduced by amounts previously diversified, during the first five (5) years
of his Qualified Election Period; and (b) not more than fifty percent (50%) of
the Qualified Participant's Account Balance (excluding accumulated employee
contributions) at the end of the Plan Year, reduced by amounts previously
diversified, during the sixth (6th) year of his Qualified Election Period.
74
<PAGE>
The Trustee shall complete diversification of a Qualified Participant's
investment in accordance with a Qualified Participant's Election no later than
ninety (90) days after the close of the Diversification Election Interval. The
Trustee shall satisfy this requirement: (a) by distributing to the Participant
an amount equal to the amount for which the Participant elected diversification;
or (b) by substituting for the amount of the Employer Securities for which the
Participant elected diversification an equivalent amount of other assets,
according to the Participant's investment direction based on at least three (3)
investment options consistent with applicable Treasury regulations. All
valuations of Employer Securities contemplated herein must be made by an
independent appraiser.
For purposes of this Section, the following definitions apply:
(a) "Qualified Participant" means any Employee who has completed at least
ten (10) years of participation under the Plan and has attained age fifty-five
(55) years.
(b) "Qualified Election Period" means the six (6) Plan Year Period
beginning with the Plan Year in which the Participant becomes a Qualified
Participant.
(c) "Diversification Election Interval" means the span of ninety (90) days
after the close of each Plan Year within a Qualified Participant's Qualified
Election Period.
* * * * * * *
75
<PAGE>
ARTICLE FIFTEEN
---------------
INTERPRETATIVE PROVISIONS
-------------------------
Section 15.1. Headings. The headings in this Agreement are for
------------ --------
convenience only and shall not be considered in construing this Agreement.
Section 15.2. Context. In this Agreement, wherever the context of the
------------ -------
Plan dictates, words used in the masculine may be construed in the feminine, the
plural includes the singular and the singular includes the plural.
Section 15.3. Employment Not Guaranteed. Nothing contained in this
------------ -------------------------
Agreement, or regarding the establishment of the Plan or Trust, or any
modification or amendment to the Agreement, Plan or Trust, or in the creation of
any Account, or the payment of any benefit, shall be construed as giving any
Employee, Participant or Beneficiary whomsoever any right to continue in the
Service of the Employer, any legal or equitable right against the Committee,
against the Employer, its stockholders, officers or directors or against the
Trustee, except as expressly provided by the Agreement, the Plan, the Trust,
ERISA or by separate agreement. Employment of all persons by the Employer shall
remain subject to termination by the Employer to the same extent as if this
Agreement had never been executed.
Section 15.4. Governing Law. This Agreement and each of its provisions
------------ -------------
shall be construed and their validity determined by the laws of the State of
Texas and applicable Federal law to the extent Federal statute supersedes Texas
law.
Section 15.5. Securities Laws. FFE Transportation Services, Inc.
------------ ---------------
reserves the right to withhold authorization of any distribution of an Account
or to restrict the distribution or transfer of any shares of Employer Securities
from an Account to the extent necessary to satisfy the requirements of any
federal or state law or regulations applicable to Employer securities.
Section 15.6. Parties Bound. This Agreement shall be binding on all
------------ -------------
persons entitled to benefits under the Plan, their respective heirs and legal
representatives, on the Employer, its successors and assigns, and on the
Trustee, the Committee and their successors.
* * * * * * *
76
<PAGE>
IN WITNESS WHEREOF, FFE TRANSPORTATION SERVICES, INC. has caused this
Plan to be executed by its duly appointed officers on this _____________________
day of December, 1994.
FFE TRANSPORTATION SERVICES, INC.
By:
-----------------------------------------
President
ATTEST:
- --------------------
Secretary
77
<PAGE>
EXHIBIT 10.9
SAVINGS PLAN
FOR EMPLOYEES OF
FROZEN FOOD EXPRESS INDUSTRIES, INC.
(As Restated Effective October 1, 1987)
ARTICLE ONE
-----------
PURPOSE
-------
Section 1.1. Introduction. The following are provisions of the SAVINGS
----------- ------------
PLAN FOR EMPLOYEES OF FROZEN FOOD EXPRESS INDUSTRIES, INC. ("Plan") (as restated
effective October 1, 1987). The Plan was originally established effective
October 1, 1987. The Plan is now restated to incorporate the Plan and the
subsequent amendments into one document which is intended to maintain the
qualification of the Plan under Section 401(a) of the Internal Revenue Code of
1986 as amended ("Code") and applicable regulations. The restated Plan is
effective October 1, 1987, except as otherwise provided herein. The Plan
consists of the Plan document herein and the separate Trust Agreement.
Section 1.2. Purpose. The purpose of the Plan is to reward eligible
----------- -------
Employees for their loyal and faithful service, to share with such Employees a
portion of the Employers' profits, to help such Employees accumulate funds for
their retirement, and to provide funds for such Employees or their Beneficiaries
in the event of death or disability. The benefits provided by the Plan will be
paid from the Trust and will be in addition to the benefits eligible Employees
are entitled to receive under any other programs of the Employers and/or from
the federal Social Security Act. The Plan and the Trust are established and
shall be maintained for the exclusive benefit of the eligible Employees and
their beneficiaries.
* * * * * * *
1
<PAGE>
ARTICLE TWO
-----------
DEFINITIONS
-----------
When used herein, the following words and phrases shall have the respective
meanings set forth below, unless the context clearly indicates otherwise:
Section 2.1. Accounts means the value of all of the accounts maintained
----------- --------
by the Committee for a particular Participant, including his Employer
Contribution Account, Rollover Account, Savings Account and, EFFECTIVE JANUARY
1, 1988, Incentive Account.
Section 2.2. Administrator means the Committee designated by the Employer
----------- -------------
unless the Employer designates another person to hold the position of
Administrator by written Employer action.
Section 2.3. Affiliate means any company, other than an Employer, included
----------- ---------
within a "controlled group of corporations" defined by Code Section 1563(a)
determined without regard to subsections (a)(4) and (e)(3)(C) of Code Section
1563, and Code Section 409(l)(4), which contains an Employer.
Section 2.4. Allocation Date means the last day of each calendar quarter
----------- ---------------
of any Plan Year.
Section 2.5. Alternate Payee means any spouse, former spouse, child, or
----------- ---------------
other dependent of a Participant who is recognized by a domestic relations order
as having a right to receive all, or a portion of, the benefits payable under
the Plan with respect to such Participant.
Section 2.6. Beneficiary means a person or entity, either in an individual
----------- -----------
or fiduciary capacity, designated by a Participant or Former Participant
pursuant to Article 8 to receive any benefit payable under this Plan upon the
death of such Participant or Former Participant.
Section 2.7. Break in Service
----------- ----------------
(a) A Break in Service, for purposes of eligibility, means a Computation
Period described in Section 2.65(a) relating to Year of Service, during which an
Employee has not completed more than five hundred (500) Hours of Service with
the Employer.
(b) A Break in Service, for purposes of vesting, means a Computation Period
described in Section 2.65(b) relating to Year of Service, during which an
Employee has not completed more than five hundred (500) Hours of Service with
the Employer.
(c) An Employee shall not incur a Break in Service for the Plan Year in
which the Employee becomes a Participant, dies, retires or suffers total and
permanent disability.
(d) Further, solely for the purpose of determining whether a Participant
has incurred a Break in Service under (a) or (b) above, Hours of Service shall
be recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence."
(i) An "authorized leave of absence" means an unpaid temporary
cessation from active employment with the Employer pursuant to an
established nondiscriminatory policy, whether occasioned by
illness, military service or any other reason.
A. a person is absent on a leave of absence with the prior
consent of his Employer, which consent shall be granted
under uniform rules applied to all
2
<PAGE>
Employees on a nondiscriminatory basis, but only if such
person is an Employee immediately prior to the commencement
of such period of authorized absence and resumes employment
with an Employer not later than the first working day
following the expiration of such period of authorized
absence;
B. a person is a member of the Armed Forces of the United
States and his reemployment rights are guaranteed by law,
but only if such person is an Employee immediately prior to
becoming a member of such Armed Forces and resumes
employment with an Employer within the period during which
his reemployment rights are guaranteed by law; or
C. a person who is at any time an Employee who is employed by
an entity which is not an Employer but whose employees are
deemed, under Section 414 of the Code, to be employed,
together with all Employees, by a common entity, including a
period or periods of such employment prior to or after any
particular time such person is an Employee.
(ii) A "maternity or paternity leave of absence" means an absence from
work for any period because of the Employee's pregnancy, birth of
the Employee's child, placement of a child with the Employee
relating to the adoption of the child, or any absence for the
purpose of caring for the child for a period immediately
following the birth or placement. For purposes of a maternity
and paternity leave of absence, Hours of Service shall be
credited for the Computation Period in which the absence from
work begins, only if the credit is necessary to prevent the
Employee from incurring a One Year Break in Service, or, in any
other case, in the immediately following Computation Period. The
Hours of Service credited for a "maternity or paternity leave of
absence" shall be those which would normally have been credited
but for the absence, or, in any case in which the Administrator
is unable to determine the hours normally credited, eight (8)
Hours of Service per day. The total Hours of Service required to
be credited for a "maternity or paternity leave of absence" shall
not exceed five hundred one (501) hours.
(e) Notwithstanding the foregoing, no credit will be given for such
absences from work unless the Employee furnishes to the Committee such timely
information as it may reasonably require to establish that the absence from work
is for the reason(s) referred to above and the number of days for which there
was such an absence.
Section 2.8. Committee means the Savings Plan Committee appointed pursuant
----------- ---------
to Article 16 to administer the Plan.
Section 2.9. Compensation
----------- ------------
(a) Annual Compensation, pursuant to the safe harbor definition of Treasury
Regulation Section 1.415-2(d)(10), means wages, salaries, and fees for
professional services and other amounts received (without regard to whether or
not an amount is paid in cash) for personal services actually rendered in the
course of employment with the Employer maintaining the Plan to the extent that
the amounts are includable in gross income including, but not limited to,
commissions paid 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 described in Treasury Regulation Section 1.62-2(c), and excluding the
following:
3
<PAGE>
(i) contributions by the Employer to any qualified deferred
compensation plan (to the extent not includable in the Participant's
gross income) or simplified employee pension defined in Code Section
408(k) (to the extent not includable in the Participant's gross
income);
(ii) distributions from any plan of deferred compensation;
(iii) amounts realized from the exercise of any nonqualified stock
option, or, in the case of restricted stock, when such stock becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture;
(iv) amounts realized from the sale, exchange, or other disposition of
stock acquired under a qualified stock option; and
(v) other amounts which receive special tax benefits such as premiums
paid by the Employer (to the extent not includable in the
Participant's gross income) under group term life insurance,
contributions by the Employer to an annuity under Code Section 403(b)
(to the extent not includable in the Participant's gross income), and
any other amounts received under any Employer sponsored fringe benefit
plan (to the extent not includable in the Participant's gross income).
(b) Annual Compensation for any Limitation Year includes compensation
received by an Employee in that Limitation Year from an Employer prior to the
Employee becoming a Participant in the Plan.
(c) Notwithstanding the foregoing, Annual Compensation taken into account
for determining all benefits provided under the Plan for any determination
period shall not exceed $200,000, or such larger amount the Secretary of the
Treasury may prescribe for the relevant year. (However, for Plan Years
beginning prior to January 1, 1989, the $200,000 limit shall apply only for Top
Heavy Plan Years and shall not be adjusted.) The $200,000 limit shall be
adjusted by the Secretary at the same time and in the same manner as under Code
Section 415(d) except that the dollar increase in effect on January 1 of any
calendar year is effective for years beginning in such calendar year. If the
period for determining compensation used in calculating an Employee's allocation
for a determination period is a short Plan Year the Annual Compensation limit is
an amount equal to the otherwise applicable Annual Compensation limit multiplied
by a fraction, the numerator of which is the number of months in the short Plan
Year and the denominator of which is twelve (12). 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 year is subject to the applicable Annual Compensation limit in
effect for that prior year. For this purpose, for years beginning before
January 1, 1990, the applicable Annual Compensation limit is $200,000. The
$200,000 (or adjusted) Annual Compensation limit applies to the combined Annual
Compensation of the Employee and of any Family Member aggregated with the
Employee under Section 2.24 who is either (i) the Employee's spouse, or (ii) the
Employee's lineal descendant under the age of 19. If, for a Plan Year, the
combined Annual Compensation of the Employee and the Family Members who are
Participants entitled to an allocation for that Plan Year exceeds the $200,000
(or adjusted) limit, Annual Compensation for each such Participant, for purposes
of the contribution and allocation provisions of Articles 3 and 5, means his or
her Adjusted Compensation. Adjusted Compensation is the amount which bears the
same ratio to the $200,000 (or adjusted) limit as the affected Participant's
Annual Compensation without regard to the $200,000 (or adjusted) limit bears to
the combined Annual Compensation of all the affected Participants in the family
unit. If the Plan uses permitted disparity, the Committee must determine the
integration level of each affected Family Member Participant prior to prorating
the $200,000 (or adjusted) limit, but the combined integration level of the
affected Participants may not exceed the $200,000 (or adjusted) limit. The
combined Excess Compensation of the affected Participants in the family unit may
not exceed the $200,000 (or adjusted) limit minus the
4
<PAGE>
affected Participants' combined integration level, as determined under the
preceding sentence. If the combined Excess Compensation exceeds this limit, the
Committee will prorate the Excess Compensation limit among the affected
Participants in the family unit in proportion to each individual's Adjusted
Compensation minus his or her integration level.
(d) For purposes of determining whether the Plan discriminates in favor of
Highly Compensated Employees, Annual Compensation means Annual Compensation
defined in this Section 2.6, except any exclusions from Annual Compensation
other than the exclusions described in clauses (a)(i), (ii), (iii), (iv), and
(v) do not apply. The Employer also may elect to use an alternate
nondiscriminatory definition, under Code Section 414(s) and the applicable
Treasury regulations. In determining Annual Compensation under this paragraph,
the Employer may elect to include all Elective Contributions made by the
Employer on behalf of the Employees. The Employer's election to include
Elective Contributions must be consistent and uniform for Employees and all
plans of the Employer for any particular Plan Year. The Employer may make this
election to include Elective Contributions for nondiscrimination testing
purposes, whether or not this Section includes Elective Contributions in the
general Annual Compensation definition of the Plan.
(e) Notwithstanding the foregoing, Annual Compensation for any Self-
Employed Individual means Earned Income.
(f) In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean 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.
Section 2.10. Company means FROZEN FOOD EXPRESS INDUSTRIES, INC., a
------------ -------
corporation organized under the laws of the State of Texas.
Section 2.11. Company Stock means the presently authorized common stock,
------------ -------------
$1.50 par value, of the Company, and any other stock into which such presently
authorized common stock may hereafter be converted, whether directly as a result
of a single change or indirectly as a result of more than one change.
Section 2.12. Company Stock Fund means the investment fund for the
------------ ------------------
investment of Plan assets hereunder consisting solely of Company Stock, together
with such amounts of cash as, in the Trustee's sole discretion, is too small to
be reasonably invested in such Company Stock.
5
<PAGE>
Section 2.13. Current Market Value means the Current Market Value of each
------------ --------------------
asset included in the Trust Assets on any particular date shall be that amount
determined by the Trustee on a basis uniformly applied which, in the Trustees
opinion, fairly reflects the fair market value of such asset on such date.
Section 2.14. Disability means a physical or mental condition which, in
------------ ----------
the opinion of the Committee, totally and presumably permanently prevents a
Participant or Former Participant from performing substantially the same duties
assigned to him by his Employer (which includes for purposes of this Section
2.14 an employing entity described in Section 2.3) at the time such condition
develops, or if such Participant or Former Participant is on an Authorized Leave
of Absence (other than an Authorized Leave of Absence referred to in Section
2.3) or any other leave of absence approved by his Employer when such condition
develops, substantially the same duties assigned to him by his Employer
immediately prior to the commencement of such period of authorized or approved
absence. A determination that Disability exists shall be based upon competent
medical evidence satisfactory to the Committee. The date any person's
Disability occurs shall be deemed to be the date such condition is determined to
exist by the Committee.
Section 2.15. Early Retirement means the date the Participant attains age
------------ ----------------
55 and completes ten (10) Years of Service.
Section 2.16. Early Retirement Date means the first day next following
------------ ---------------------
the date the Participant attains Early Retirement Age and which immediately
follows the last day on which the Participant is an Employee, or, if later, the
last day of the Participant's Authorized Leave of Absence, if any.
Section 2.17. Effective Date. The original Effective Date of this Plan
------------ --------------
is OCTOBER 1, 1987. The Effective Date of this as restated during the 1994 Plan
Year is OCTOBER 1, 1987.
Section 2.18. Employee.
------------ --------
(a) Employee means any individual currently employed by the Employer
maintaining the Plan or of any other Employer required to be aggregated with the
Employer under Code Sections 414(b), (c), (m) or (o).
(b) The Plan treats any Leased Employee as an Employee of the Employer
unless excluded by an exclusion classification in Section 3.1. A Leased
Employee is an individual, who otherwise is not an Employee of the Employer,
who, pursuant to a leasing agreement between the Employer and any other person,
has performed services for the Employer (or for the Employer and any persons
related to the Employer within the meaning of Code Section 144(a)(3)) on a
substantially full time basis for at least one (1) year and who performs
services historically performed by Employees in the Employer's business field.
If a Leased Employee is treated as an Employee because of this Section 2.18,
Annual Compensation includes compensation from the leasing organization which is
attributable to services performed for the Employer.
(c) Notwithstanding the foregoing, the Plan does not treat any Leased
Employee as an Employee of the Employer if the leasing organization covers the
Employee in a safe harbor plan and, prior to the application of this safe harbor
plan exception, twenty percent (20%) or less of the Employer's Employees (other
than Highly Compensated Employees) are Leased Employees. A safe harbor plan is
a money purchase pension plan providing immediate participation, full and
immediate vesting, and a nonintegrated contribution formula equal to at least
ten percent (10%) of the employee's compensation without regard to employment by
the leasing organization on a specified date. The safe harbor plan must
determine the ten percent (10%) contribution on the basis of compensation
defined in Code Section 415(c)(3) plus salary deferrals.
(d) The Committee must apply this Section 2.18 in a manner consistent with
Code Sections 414(n) and 414(o) and the applicable Treasury regulations. The
Committee will reduce a Leased Employee's allocation of Employer Contributions
under this Plan by the Leased Employee's allocation under the leasing
6
<PAGE>
organization's plan, but only to the extent that allocation is attributable to
the Leased Employee's service provided to the Employer. The leasing
organization's plan must be a money purchase pension plan which would satisfy
the definition under this Section 1.16 of a safe harbor plan, irrespective of
whether the Employer is able to apply the safe harbor plan exception.
Section 2.19. Employer Contribution Account means the account or record
------------ -----------------------------
maintained or caused to be maintained by the Trustee showing the composition and
value of the individual interest of a particular Participant, Former Participant
or Beneficiary in the Trust Assets attributable to Employer Contributions;
effective January 1, 1988, Matching Employer Contributions made pursuant to
Section 4.2(a).
Section 2.20. Employer Contributions means the contributions made by the
------------ ----------------------
Employers pursuant to Section 4.2(a); EFFECTIVE JANUARY 1, 1988, the Employer
Matching Contributions and the Incentive Contributions made by the Employers
pursuant to Section 4.2(a).
Section 2.21. Employer/Plan Sponsor. Employer means FROZEN FOOD EXPRESS
------------ ---------------------
INDUSTRIES, INC., FFE TRANSPORTATION SERVICES, INC., CONWELL CORPORATION, W & B
REFRIGERATION SERVICE COMPANY, INC., EFFECTIVE FEBRUARY 1, 1988, LISA MOTOR
LINES, INC., EFFECTIVE MAY 24, 1990, GLOBAL REFRIGERANT MANAGEMENT, INC., or any
other Affiliate who with the written consent of the Plan Sponsor adopts this
Plan on the effective date of its election to participate. Plan Sponsor means
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Section 2.22. Employment Commencement Date means the first day for which
------------ ----------------------------
an Employee is to be credited with an Hour of Service.
Section 2.23. Entrance Date means OCTOBER 1, 1987. Thereafter, the
------------ -------------
Entrance Dates are JANUARY 1 and JULY 1 of each Plan Year.
Section 2.24. Family Member means an Employee's spouse and lineal
------------ -------------
ascendants or descendants and the spouses of lineal ascendants and descendants,
as described in Code Section 414(q)(6)(B).
Section 2.25. Former Participant means a Participant who is no longer
------------ ------------------
participating in the Plan but who has a vested account balance which has not
been paid in full.
Section 2.26. Highly Compensated Employee means any Participant or Former
------------ ---------------------------
Participant who is a Highly Compensated Employee, defined in Code Section
414(q). Generally, any Participant or Former Participant is considered a Highly
Compensated Employee if, during the Plan Year (the "Determination Year") or
during the twelve month period immediately preceding the Determination Year or,
if the Employer elects, the calendar year ending with or within the
Determination Year (the "Look Back Year"), the Participant or Former
Participant:
(a) was at any time a Five Percent Owner, defined in Section 15.2(g);
(b) received Compensation from the Employer in excess of $75,000, as
adjusted by the Secretary of the Treasury for the relevant year;
(c) received Compensation from the Employer in excess of $50,000, as
adjusted by the Secretary of the Treasury for the relevant year, and was in the
top-paid group of Employees for the relevant year. An Employee is in the top-
paid group of Employees for any Plan Year if such Employee is in the group
consisting of the top twenty percent (20%) of the Employees when ranked on the
basis of Annual Compensation paid during the Plan Year. However, solely for
determining the total number of active Employees for a year, the following
Employees are disregarded:
7
<PAGE>
(i) The Employees described in this subsection (i) are excluded on
the basis of age or Service:
(A) Employees who have not completed six (6) months of Service by
the end of the year. (An Employee's Service in the immediately
preceding year is added to the Employee's Service in the current
year to determine whether the exclusion applies in the current
year.);
(B) Employees who normally work less than 17 1/2 hours per week.
(This determination is made independently for each year. Weeks
during which the Employee did not work are not considered. An
Employee who works less than 17 1/2 hours a week for fifty
percent (50%) or more of the total weeks worked by the Employee
during the year is deemed to normally work less than 17 1/2 hours
per week under this rule.);
(ii) Employees who are included in a unit of employees covered by an
agreement that the Secretary of Labor finds to be a collective
bargaining agreement between Employee representatives and the Employer
which satisfies Code Section 7701(a)(46) and Temporary Treasury
Regulation Section 301.7701-17T are included in determining the number
of Employees in the top-paid group unless the following exception
applies. If ninety percent (90%) or more of the Employees of the
Employer are covered under collective bargaining agreements that the
Secretary of Labor finds to be collective bargaining agreements
between Employee representatives and the Employer, which agreements
satisfy Code Section 7701(a)(46) and Temporary Treasury Regulation
Section 301.7701-17T, and the Plan covers only Employees who are not
covered under the agreements, then the Employees who are covered under
the agreements are (A) not counted in determining the number of
noncollective bargaining employees who will be included in the top-
paid group in testing the Plan; and (B) not included in the top-paid
group in testing the Plan.
(d) was at any time an officer of the Employer having Compensation greater
than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A)
for the relevant year. The number of officers taken into account under clause
(d) will not exceed the greater of three (3) or ten percent (10%) of the total
number (after application of the Code Section 414(q) exclusions) of Employees,
but no more than fifty (50) officers. If no Employee satisfies the Compensation
requirement in clause (d) for the relevant year, the Committee will treat the
highest paid officer as satisfying clause (d) for that year.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Determination Year, but does not satisfy clause (b), (c) or (d) during the Look
Back Year and does not satisfy clause (a) in either period, the Employee is a
Highly Compensated Employee only if the Employee is one of the one hundred (100)
most highly compensated Employees for the Plan Year.
The Committee must make the determination of who is a Highly Compensated
Employee, including the determinations of the number and identity of the top
paid twenty percent (20%) group, the top one hundred (100) paid Employees, the
number of officers includable in clause (d) and the relevant Compensation,
consistent with Code Section 414(q) and regulations issued under that Code
Section. The Employer may make a calendar year election to determine the Highly
Compensated Employees for the Look Back Year, as prescribed by Treasury
regulations. A calendar year election must apply to all plans and arrangements
of the Employer.
For purposes of applying any nondiscrimination test required under the Plan
or under the Code, in a manner consistent with applicable Treasury regulations,
the Committee will treat a Highly Compensated Employee and all Family Members as
defined in Section 2.24 as a single Highly Compensated Employee, but
8
<PAGE>
only if the Highly Compensated Employee is a more than five percent (5%) owner
or is one of the ten (10) Highly Compensated Employees with the greatest
Compensation for the Plan Year. This aggregation rule applies to a Family
Member even if that Family Member is a Highly Compensated Employee without
family aggregation.
A Former Participant who separated from Service, or is deemed to have
separated from Service under applicable Treasury regulations, prior to the Plan
Year, performs no Service for the Employer during the Plan Year and was a Highly
Compensated Employee either for the Separation Year or any Plan Year ending on
or after such Former Participant attained age fifty-five (55) years is
considered a Highly Compensated Employee. Generally, Separation Year means the
Plan Year during which the Employee separates from Service with the Employer. A
Former Participant who separated from Service prior to January 1, 1987 is
considered a Highly Compensated Employee only if the Former Participant was a
Five Percent Owner or received Compensation in excess of $50,000 during (a) the
Participant's Separation Year or the year preceding the Separation Year or (b)
any year ending on or after such Former Participant attained age fifty-five (55)
years or the last year ending before such Former Participant attained age fifty-
five (55) years.
For purposes of this Section, Compensation means Annual Compensation
defined in Section 2.9, excluding only the exclusions described in paragraphs
(i) through (v), and including deferrals under (a) Code Section 402(a)(8)
relating to a Code Section 401(k) arrangement; (b) Code Section 125 relating to
a cafeteria plan; (c) Code Section 403(b) relating to a tax sheltered annuity
plan; and (d) Code Section 408(h) relating to a simplified employee pension.
Compensation from each Related Employer shall be taken into account.
Section 2.27. Hours of Service.
------------ ----------------
(a) Hours of Service shall be credited for periods during which an Employee
is either:
(1) directly or indirectly paid, or entitled to payment, by an
Employer or an entity described in Section 2.3 for the performance of
duties in his capacity as an Employee of such Employer or entity;
(2) directly or indirectly paid or entitled to payment, by an Employer
or an entity described in Section 2.3 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 any other leave of absence approved by such Employer
or entity;
(3) entitled to back pay, irrespective of mitigation of damages, which
is either awarded or agreed to by an Employer or an entity described
in Section 2.3; or
(4) on an Authorized Leave of Absence.
(b) An Employee shall not receive credit for the same Hours of Service
under more than one paragraph of this Section 2.27(a);
(c) An Employee shall also receive credit for any additional Hours of
Service required by applicable federal law (other than the Employee Retirement
Income Security Act of 1974, as amended from time to time) to be credited to
him, the nature and extent of such credit to be determined under such law.
(d) (1) (A) Except as provided in Subparagraph (B) of this Subsection
2.27(d)(1), Hours of Service under Subsection 2.27(a)(1) shall be
computed by crediting an Employee with 190 Hours of Service for
each month such Employee is entitled to be credited with one,
Hour of Service under Subsection 2.27(a)(1).
9
<PAGE>
(B) If an Employee is a Part-time Employee, such Employee shall
receive credit for Hours of -Service equal to the actual number
of hours worked by such Employee, as determined from the
appropriate payroll records.
(2) Hours of Service under Subsection 2.27(a)(2) shall be determined
pursuant to the rules set forth in paragraphs (b) and (c) of Section
2530.200b-2 of the United States Department of Labor Regulations,
which rules are hereby incorporated and made a part of this Plan by
reference.
(3) Except for Part-time Employees, Hours of Service under Subsection
2.27(a)(4) shall be credited on the basis of 190 hours for each
complete calendar month of a person's Authorized Leave of Absence, but
no such Hours of Service shall be credited for any month for which an
Employee receives credit for Hours of Service under Subsection
2.27(a)(1) or (2).
(d) The term defined in this Section 2.27 shall include Hours of Service
rendered by an Employee prior to the Effective Date for an Employer or a member
of a controlled group of corporations including an Employer.
Section 2.28. Incentive Account means, EFFECTIVE JANUARY 1, 1988, the
------------ -----------------
account or record maintained or caused to be maintained by the Trustee showing
the composition and value of the individual interest of a particular
Participant, Former Participant or Beneficiary in the Trust Assets attributable
to Incentive Contributions made by FFE Transportation Services, Inc.
Section 2.29. Incentive Contribution means, EFFECTIVE JANUARY 1, 1988, a
------------ ----------------------
qualified non-elective employer contribution made pursuant to Section 4.2(a)(3).
Section 2.30. Incentive Participant means, EFFECTIVE JANUARY 1, 1988, any
------------ ---------------------
Participant participating in the Plan pursuant to Section 3.1(c).
Section 2.31. Matching Employer Contribution means, EFFECTIVE JANUARY 1,
------------ ------------------------------
1988, any contribution to the Plan made by an Employer for the Plan Year and
allocated to a Participant's Employer Contribution Account by reason of the
Participant's Savings Contributions. All Employer Contributions under Section
4.2(a)(1) and (2) (other than contributions used to restore forfeitures) are
Matching Employer Contributions.
Section 2.32. Named Fiduciary means one or more fiduciaries named in this
------------ ---------------
Agreement who jointly and severally shall have authority to control or manage
the operation and administration of the Plan. Frozen Food Express Industries,
Inc. shall be the Named Fiduciary unless it designates another person by written
Employer action.
Section 2.33. Nonforfeitable means a vested interest attained by a
------------ --------------
Participant or Beneficiary in that part of the Participant's benefit under the
Plan arising from the Participant's Service, which claim is unconditional and
legally enforceable against the Plan.
Section 2.34. Non-Highly Compensated Employee. An Employee who is neither
------------ -------------------------------
a Highly Compensated Employee nor a Family Member.
Section 2.35. Normal Retirement Age. The 65th birthday of a Participant
------------ ---------------------
or Former Participant.
Section 2.36. Normal Retirement Date means, for each Participant, the
------------ ----------------------
first day next following the date the Participant attains Normal Retirement Age
and which immediately follows the last day on which the Participant is an
Employee, or, if later, the last day of the Participant's Authorized Leave of
Absence, if any.
10
<PAGE>
Section 2.37. Owner-Employee means a sole proprietor or a partner who owns
------------ --------------
more than ten percent (10%) of either the capital interest or profits interest
in an unincorporated Employer and who receives income from such unincorporated
Employer for personal services.
Section 2.38. Parent means Frozen Foods Express Industries, Inc.
------------ ------
Section 2.39. Participant means an Employee of the Employer who has met
------------ -----------
the eligibility requirements of this Plan and who has been enrolled as a
Participant in this Plan.
Section 2.40. Participating Employer means any Related Employer that may
------------ ----------------------
elect to adopt this Plan pursuant to Article 10.
Section 2.41. Participation means any period commencing on the date the
------------ -------------
Employee becomes a Participant and ending on the date on which the Employee
incurs a Severance from Service.
Section 2.42. Part-time Employee. An Employee who is normally employed
------------ ------------------
for less than twenty (20) hours per week or less than six (6) months per Plan
Year.
Section 2.43. Participant. Any Employee participating in the Plan
------------ -----------
pursuant to Article 3.
Section 2.44. Plan. The SAVINGS PLAN FOR EMPLOYEES OF FROZEN FOOD EXPRESS
------------ ----
INDUSTRIES, INC., the Plan set forth herein, as amended from time to time.
Section 2.45. Plan Year. The annual period beginning on JANUARY 1 and
------------ ---------
ending on DECEMBER 31, both dates inclusive; provided, however, the Plan Year
ending on December 31, 1987 shall begin on October 1, 1987.
Section 2.46. Re-Employment Commencement Date. The first date on which an
------------ -------------------------------
Employee is credited with an Hour of Service upon his return to employment with
an Employer after he has Separated from Service.
Section 2.47. Related Employer. A related group of employers is a
------------ ----------------
controlled group of corporations (defined in Code Section 414(b)), trades or
businesses (whether or not incorporated) which are under common control (defined
in Code Section 414(c)) or an affiliated service group (defined in Code Section
414(m) or in Code Section 414(o)). If the Employer is a member of a related
group, the term "Employer" includes the related group members for purposes of
crediting Hours of Service, determining Years of Service and Breaks in Service
under Articles 2 and 12, applying the participation test of Code Section
401(a)(26) and the coverage test of Code Section 410(b), applying the
limitations on allocations in Article 15, applying the top-heavy rules and the
minimum allocation requirements of Article 15, the definitions of Employee,
Highly Compensated Employee, Compensation and Leased Employee, and for any other
purpose required by the applicable Code Section or by a Plan provision.
However, an Employer may contribute to the Plan only by being a signatory to a
Participation Agreement to the Plan. If one or more of the Employer's related
group members become Participating Employers by executing a Participation
Agreement to the Plan, the term "Employer" includes the participating related
group members for all purposes of the Plan, and Administrator means the Employer
that is the signatory to the Plan. For Plan allocation purposes, Compensation
does not include Compensation received from a Related Employer that is not
participating in this Plan.
Section 2.48. Retirement. A Participant's or Former Participant's being
------------ ----------
Separated from Service on or after his Normal Retirement Date. Retirement shall
be considered as commencing on that day which occurs on or after a Participant
or Former Participant had reached Normal Retirement Date and which immediately
follows (i) the last day of which such Participant or Former Participant is an
Employee or, if later, (ii) the last day of Authorized Leave of Absence or any
other leave of absence approved by such Participant's
11
<PAGE>
or Former Participant's Employer.
Section 2.49. Rollover Account. The account(s) or record(s) maintained or
------------ ----------------
caused to be maintained by the Trustee showing the composition and value of the
individual interest of a particular Participant, Former Participant or
Beneficiary in the Trust Assets attributable to each contribution of a Rollover
Amount (as defined in Section 4.9) or a direct trustee-to-trustee transfer of
assets to the Trust from a qualified plan or Code Section 403(b) annuity on
behalf of a Participant. Rollover Accounts representing direct trustee-to-
trustee transfers of assets to the Trust from the W & B REFRIGERATION SERVICE
CO., INC. EMPLOYEES' PROFIT-SHARING PLAN AND TRUST are to be held in an account
referred to as the "W & B PLAN ROLLOVER ACCOUNT."
Section 2.50. Savings Account. The account or record maintained or caused
------------ ---------------
to be maintained by the Trustee showing the composition and value of the
individual interest of a particular Participant, Former Participant or
Beneficiary in the Trust Assets attributable to Savings Contributions elected by
Participants.
Section 2.51. Savings Contributions means Employer contributions to the
------------ ---------------------
Plan made pursuant to Participants' elections under Section 4.1.
Section 2.52. Self-Employed Individual means, regarding an unincorporated
------------ ------------------------
business, an individual described in Code Section 401(c)(1). A Self-Employed
Individual shall be treated as an Employee if the individual has an ownership
interest in either the capital or profits interest of an unincorporated Employer
and receives income from the Employer for personal services.
Section 2.53. Separation from Service or Severance from Service occurs
------------ -------------------------------------------------
whenever a person ceases to be an Employee of the Employer and is no longer
being credited with Hours of Service.
Section 2.54. Service means any period of time the Employee is in the
------------ -------
employ of the Employer. Service in all cases includes periods during which the
Employee is on an "authorized leave of absence" or a "maternity or paternity
leave of absence" defined in Section 2.7(d) relating to One Year Break in
Service. Leaves of absence also shall include periods of absence in connection
with military service during which the Employee's re-employment rights are
legally protected. Except for absence by reason of military service, leaves of
absence shall be for a maximum period of two (2) years. Leaves of absence shall
be granted on a uniform and nondiscriminatory basis.
If the Employer maintains the plan of a Predecessor Employer, Service shall
include service for the Predecessor Employer. To the extent it may be required
under applicable Treasury regulations under Code Section 414, Service shall
include all service for any Predecessor Employer.
Section 2.55. Shareholder-Employee means a Participant who owns more than
------------ --------------------
five percent (5%) of the Employer's outstanding capital stock during any year in
which the Employer elected to be taxed as a Small Business Corporation under
Code Section 1362(a) and who receives income from the Employer for personal
services.
Section 2.56. Separated from Service. A person is Separated from Service
------------ ----------------------
when he is no longer an Employee.
Section 2.57. Spouse means the spouse to whom a Participant or Former
------------ ------
Participant was married on the date the Participant or Former Participant
becomes entitled to benefit payments under the Plan, or if such entitlement has
not occurred, the spouse to whom the Participant or Former Participant was
married on the date of his death; provided, however, that the Participant or
Former Participant had been married to such spouse for at least one year ending
on the date the Participant becomes entitled to benefit payments or the date of
the Participant's or Former Participant's death.
12
<PAGE>
Section 2.58. Total Distribution means a distribution to a Participant or
------------ ------------------
a Participant's Beneficiary, within one (1) taxable year of the recipient, of
the entire balance to the credit of the Participant.
Section 2.59. Trust means the trust created by the Trust Agreement between
------------ -----
Frozen Food Express Industries, Inc. and the Trustee.
Section 2.60. Trust Agreement means the agreement as provided in Article 2
------------ ---------------
of the Plan, entered into by Frozen Food Express Industries, Inc. and the
Trustee, or any successor Trustee, establishing the Trust and specifying the
duties of the Trustee.
Section 2.61. Trust Fund means all assets of any kind and nature from time
------------ ----------
to time held by the Trustee or its agent under the Trust Agreement without
distinction between income and principal. This Plan contemplates a single Trust
for all Employers participating under the SAVINGS PLAN FOR EMPLOYEES OF FROZEN
FOOD EXPRESS INDUSTRIES, INC. However, the Trustee will maintain separate
records of account to reflect properly each Participant's Account Balance from
each Participating Employer.
Section 2.62. Trustee means at any particular time, the then acting
------------ -------
Trustee or, collectively, if there is more than one, the then acting Trustees of
the Trust.
Section 2.63. Valuation Date means March 31, June 30, September 30, and
------------ --------------
December 31 of each Plan Year.
Section 2.64. Vested Percentage means that percentage of a
------------ ------------------
Participant's Employer Contribution Account in which the Participant's rights
are nonforfeitable and fully vested, which percentage is determined by reference
to the vesting schedule set forth in Section 6.2.
Section 2.65. Year of Service.
------------ ---------------
(a) For purposes of eligibility and participation, an Employee shall be
credited with One-Half Year of Service for a six-month period during which he
has completed at least 500 Hours of Service. The initial six-month period shall
begin on and include the Employee's Employment Commencement Date and subsequent
six-month periods shall begin on each six-month anniversary thereof.
(b) For purposes of vesting, and subject to Section 6.3, an Employee shall
be credited with a Year of Service for each Plan Year during which he is
credited with at least 1,000 Hours of Service.
(c) For purposes of participation and vesting, an Employee's years of
service with W & B REFRIGERATION SERVICE CO., INC. prior to the Effective Date
shall be counted as Years of Service and One-Half Years of Service under this
Plan to the extent that such service was counted as years of service under the
W & B Refrigeration Service Co., Inc. Employees' Profit-Sharing Plan and Trust.
(d) The term defined in this Section 2.65 shall include Years of Service
and One-Half Years of Service performed by an Employee prior to the Effective
Date.
* * * * * * *
13
<PAGE>
ARTICLE THREE
-------------
ELIGIBILITY AND PARTICIPATION
-----------------------------
Section 3.1. Eligibility.
----------- -----------
(a) Any Employee who has completed a One-Half Year of Service as of the
Effective Date, will become a Participant on the Effective Date.
(b) Any other Employee will become a Participant as of the Entrance Date
concurrent with or next following the date on which he completes a One-Half Year
of Service.
(c) EFFECTIVE JANUARY 1, 1988, any Employee of FFE Transportation Services,
Inc. who has completed One-Half Year of Service on or before the last day of a
Plan Year, and who is an employee on the last day of that Plan Year, shall be an
Incentive Participant in that Plan Year. An Incentive Participant who does not
also qualify as a Participant under Section 3.1(a) or (b) shall only be eligible
for an Incentive Contribution pursuant to Section 4.2(a)(3) and shall not be
eligible for any other contribution.
Section 3.2. Eligibility Following Separation From Service. If an
----------- ---------------------------------------------
Employee who has satisfied the eligibility requirements of Section 3.1 has
Separated from Service and later returns to Service with an Employer, he shall
become a Participant on his Re-Employment Commencement Date; provided, however,
that any Employee who Separated from Service at a time when he had no Vested
Percentage and who has incurred five consecutive years of Break-in-Service
before his Re-Employment Commencement Date, must meet the eligibility
requirements of Section 3.1 anew before he will become or again become a
Participant.
Section 3.3. Participation During Leave of Absence. During an Authorized
----------- -------------------------------------
Leave of Absence or any other leave of absence approved by a Participant's or
Former Participant's Employer:
(a) The Participant's Accounts shall share in the allocation of net
earnings, net losses, taxes (if any) and expenses of the Trust during such
period;
(b) In the case of an Authorized Leave of Absence under Subsection 2.3, the
Participant's interest in his Employer Contribution Account shall continue to
vest, as provided in Article 6, until he is Separated from Service. In the case
of any other Authorized Leave of Absence or any other leave of absence approved
by his Employer, his interest in his Employer Contribution Account shall
continue to vest, as provided in Article 6, but only if he resumes employment
with an Employer not later than the first working day following the expiration
of the period of such leave. If such employment is not so resumed, the date he
is Separated from Service for purposes of such vesting shall be deemed to be the
last day of employment prior to the commencement of such authorized or approved
absence and such Participant or Former Participant shall not receive credit for
any Hours of Service under Section 2.27(a)(2) after such last day; and
(c) In case of the distribution of his Accounts as a result of his being
Separated from Service, the value of such Accounts shall be determined as of the
Valuation Date concurrent with or next preceding the day on which he is
Separated from Service in the case of an Authorized Leave of Absence under
Subsection 2.3, or in the case of any other Authorized Leave of Absence or any
other leave of absence approved by his Employer, the day on which such
Participant or Former Participant notifies his Employer that he has determined
not to resume employment or the last day of such authorized or approved absence,
whichever is earlier.
14
<PAGE>
Section 3.4. Notification of Eligibility and Commencement of
----------- -----------------------------------------------
Participation. As soon as administratively feasible prior to each Entrance
- -------------
Date, the Employers shall furnish the Committee with a list of all Employees who
will become eligible or reeligible to participate in the Plan as if that
Entrance Date. The Committee shall promptly notify each such Employee of his
prospective participation and provide each such Employee with such explanation
of the Plan as the Committee may provide for that purpose, together with such
forms as the Committee may prescribe for elections to participate in the Plan.
Such forms shall include elections for (1) Savings Contributions (via payroll
deduction); (2) investment direction of a Participant's Accounts and (3)
Beneficiary designation. Each Employee shall be eligible to have Savings
Contributions made on his behalf only if and when he (1) signs and returns such
election forms, and (2) becomes a Participant. Each such eligible Employee
shall automatically become a Participant as of the first Entrance Date he
becomes eligible.
* * * * * * *
15
<PAGE>
ARTICLE FOUR
-------------
CONTRIBUTIONS
-------------
Section 4.1. Savings Contributions.
----------- ---------------------
(a) Subject to the provisions of Sections 4.1(d) and (e), each Participant
may elect, by written direction to the Committee, that an amount, in any whole
percentage of his Compensation, not to exceed the maximum percentage of his
Compensation as determined by the Committee, be withheld from his Compensation
and contributed by his Employer to the Trustee. Such contributions shall be
known as Savings Contributions.
As additional or alternative Savings Contributions, each Participant may
elect, by written direction to the Committee, that a specific dollar amount (in
$10.00 increments) be withheld from his Compensation on a one-time basis and
contributed by his Employer to the Trustee. These one-time lump sum Savings
Contributions are sometimes referred to herein as "Lump Sum Savings
Contributions," and the regular percentage Savings Contributions are sometimes
referred to herein as "Percentage Savings Contributions."
(b) A Participant who does not have an election to have Savings
Contributions made on his behalf in effect or any Participant who would like to
amend his election may make such election or amend such election, effective the
next following January 1, April 1, July 1 or October 1, by filing a written
election with the Committee within a reasonable time prior to such effective
date. Any such election or amendment of an election shall be effective only
with respect to Compensation payable after such notice is received by the
Committee. A Participant may revoke an election to have Savings Contributions
made on his behalf, effective the next following payroll period, by filing a
written notice with the Committee within a reasonable time prior to such payroll
period.
(c) Savings Contributions shall be effected by payroll deductions for each
pay period of the electing Participant commencing after the effective date of
his election, or for any series of such pay periods as the Employer may deem
most convenient, and shall be paid over to the Trustee no later than the last
day of the month following the month of such payroll deduction.
(d) No Employee shall be permitted to have Savings Contributions made under
this Plan during any Plan Year which exceed the following limitations. For
purposes of the following clauses (iv) through (viii), Elective Deferrals means
for any taxable year the sum of:
(i) any Employer contribution under a qualified cash or deferred
arrangement defined in Code Section 401(k), to the extent not
includable in gross income for the taxable year under Code
Section 402(a)(8), determined without regard to the dollar
limitation under Code Section 402(g);
(ii) any Employer contribution under a simplified employee pension as
defined in Code Section 408(k)(6), pursuant to a salary reduction
agreement; and
(iii) any Employer contribution toward the purchase of a tax
sheltered annuity contract as defined in Code Section 403(b),
pursuant to a salary reduction agreement.
Savings Contributions shall not include any deferrals properly
distributed as excess annual additions.
16
<PAGE>
(iv) A Participant's Savings Contributions shall not exceed the
statutory dollar limitation under Code Section 402(g) for the
taxable year of the Participant. The dollar limitation under
Code Section 402(g) is $7,000 indexed for cost-of-living
adjustments under Code Section 415(d) ($7,627 for 1989, $7,979
for 1990, $8,475 for 1991) or the amount of the dollar limitation
under Code Section 402(g) in effect on January 1 of each calendar
year, as adjusted annually by the Secretary of the Treasury.
(v) Excess Elective Deferrals means those Elective Deferrals that are
-------------------------
includable in a Participant's gross income under Code Section
402(g) to the extent the Participant's Elective Deferrals for a
taxable year exceed the dollar limitation under Code Section
402(g). Excess Elective Deferrals shall be treated as Annual
Additions under the Plan, unless such amounts are distributed no
later than the first April 15 following the close of the
Participant's taxable year.
(vi) If the statutory dollar limitation in clause (iv) is exceeded,
the Committee shall direct the Trustee to distribute the Excess
Elective Deferrals, and any income or loss allocable to the
Excess Elective Deferrals, to the Participant not later than the
first April 15 following the close of the Participant's taxable
year. If there is a loss allocable to the Excess Elective
Deferral, the distribution shall in no event be less than the
lesser of the Participant's Salary Deferral Account or the
Participant's Elective Deferrals for the Plan Year. The amount
of Excess Elective Deferrals to be distributed to an Employee for
a taxable year will be reduced by Excess Contributions previously
distributed or recharacterized for the Plan Year beginning in the
taxable year of the Employee.
(vii) If a Participant is also a participant in (A) another qualified
cash or deferred arrangement defined in Code Section 401(k); (B)
a simplified employee pension defined in Code Section 408(k); or
(C) a salary reduction arrangement pursuant to which an employer
purchases a tax sheltered annuity contract defined in Code
Section 403(b), and the Elective Deferrals made under the other
arrangement(s) and this Plan cumulatively exceed $7,000 indexed
for cost-of-living adjustments under Code Section 415(d) ($7,627
for 1989, $7,979 for 1990, $8,475 for 1991) or the amount of the
dollar limitation under Code Section 402(g) in effect on January
1 of each calendar year, as adjusted annually by the Secretary of
the Treasury, then the Participant may, not later than March 1
following the close of the Participant's taxable year, notify the
Administrator in writing of the excess and request that the
Participant's Elective Deferrals under this Plan be reduced by an
amount specified by the Participant. The specified amount then
shall be distributed in the same manner as provided in clause
(vi). A Participant is deemed to notify the Administrator of any
Excess Elective Deferrals that arise by taking into account only
those Elective Deferrals made to this Plan and any other plans of
this Employer.
(viii) If any of the foregoing provisions of this Section are not in
conformity with applicable Treasury regulations, the
nonconforming provisions may be amended retroactively to assure
conformity.
(e) Savings Contributions elected by Participants who are Highly
Compensated Employees may be prospectively limited by the Committee without the
Participant's consent if necessary to meet the limits of Section 4.1(d).
17
<PAGE>
(f) Restrictions on Distributions. Amounts held in the Participant's
-----------------------------
Savings Account, Employer Qualified Non-Elective Contribution Account, and
Employer Qualified Matching Contribution Account may not be distributable prior
to the earliest of:
(i) separation from Service, total and permanent disability or death;
(ii) attainment of age fifty-nine and one-half (59 1/2) years;
(iii) Plan termination without establishment of another defined
contribution plan, other than an employee stock ownership plan
(as defined in Code Sections 4975(e) or 409) or a simplified
employee pension plan as defined in Code Section 408(k);
(iv) disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Code
Section 409(d)(2)) used in a trade or business of the
corporation, if the corporation continues to maintain this Plan
after the disposition, but only with respect to Employees who
continue employment with the corporation acquiring the assets;
(v) disposition by a corporation to an unrelated entity of the
corporation's interest in a subsidiary (within the meaning of
Code Section 409(d)(3)) if the corporation continues to maintain
this Plan, but only with respect to Employees who continue
employment with the subsidiary; or
(vi) proven financial hardship, subject to the following limitations.
All distributions that may be made pursuant to one or more of the
foregoing distributable events are subject to the spousal and
participant consent requirements, if applicable, of Code Sections
401(a)(11) and 417. In addition, distributions after March 31, 1988,
that are triggered by one of the preceding events enumerated as (iii),
(iv) or (v) must be made in a lump sum distribution.
Section 4.2. Employer Contributions.
----------- ----------------------
(a) In addition to the total amount of Savings Contributions elected for
each month pursuant to Section 4.1, but subject to the limits of Section 4.2(b),
each Employer shall, as a contribution to the Plan, pay to the Trustee, for each
calendar quarter an amount equal to the sum of:
(1) fifty percent (50%) of the lesser of:
(i) the total amount of (a) all Percentage Savings Contributions
for such calendar quarter and (b) one-fourth of all Lump Sum
Savings Contributions for such calendar quarter and for each of
the preceding three calendar quarters, elected under Section 4.1
(and not subsequently distributed under Section 4.4) that are
made on behalf of each Participant who is entitled to share in
the Employer Contribution pursuant to Section 5.4; or
(ii) an amount equal to 4% of each such Participant's
Compensation for such calendar quarter; plus
(2) fifty percent (50%) of the product obtained by multiplying (i)
times (ii), where:
18
<PAGE>
(i) EFFECTIVE JANUARY 1, 1987 THROUGH DECEMBER 31, 1992, (i) is
equal to the total amount of (a) all Percentage Savings
Contributions for such calendar quarter and (b) one-fourth of all
Lump Sum Savings Contributions for such calendar quarter and for
each of the preceding three calendar quarters, elected under
Section 4.1 (and not subsequently distributed under Section 4.4)
that are made on behalf of each Participant who is not an
officer, shareholder or highly compensated employee within the
meaning of Code Section 401(a)(4) and who is entitled to share in
the Employer Contribution pursuant to Section 5.4, if the total
of all Percentage Savings Contributions for such calendar quarter
and all Lump Sum Savings Contributions for such calendar quarter
and for each of the preceding three calendar quarters are
invested, pursuant to such Participant's direction, in the
Company Stock Fund at the end of such calendar quarter; and
EFFECTIVE JANUARY 1, 1993, (i) is equal to the total amount of
(a) all Percentage Savings Contributions for such calendar
quarter and (b) one-fourth of all Lump Sum Savings Contributions
for such calendar quarter and for each of the preceding three
calendar quarters, elected under Section 4.1 (and not
subsequently distributed under Section 4.4) that are made on
behalf of each Participant who is entitled to share in the
Employer Contribution pursuant to Section 5.4, if the total of
all Percentage Savings Contributions for such calendar quarter
and all Lump Sum Savings Contributions for such calendar quarter
and for each of the preceding three calendar quarters are
invested, pursuant to such Participant's direction, in the
Company Stock Fund at the end of such calendar quarter; and
(ii) EFFECTIVE OCTOBER 1, 1987 THROUGH DECEMBER 31, 1992, (ii) is
equal to a fraction (not to exceed 1), the numerator of which is
an amount equal to 4% of each such Participant's Compensation for
such calendar quarter, and the denominator of which is the total
of all Percentage Savings Contributions for such calendar quarter
and one-fourth of all Lump Sum Savings Contributions for such
calendar quarter and for each of the preceding three calendar
quarters elected by such Participant;
EFFECTIVE JANUARY 1, 1993, (ii) is equal to a fraction (not to
exceed 1), the numerator of which is an amount equal to 4% of
each such Participant's Compensation for such calendar quarter,
and the denominator of which is the total of all Percentage
Savings Contributions for such calendar quarter and one-fourth of
all Lump Sum Savings Contributions for such calendar quarter and
for each of the preceding three calendar quarters elected by such
Participant.
(3) Plus, EFFECTIVE JANUARY 1, 1988, for Incentive Participants only,
an Incentive Contribution in an amount determined under the Incentive
Bonus Plan of FFE Transportation Services, Inc., as effective for the
Plan Year in question. Incentive Contributions shall be made by FFE
Transportation Services, Inc. Notwithstanding anything to the
contrary in this Section 4.2(a), Incentive Contributions shall only be
made annually.
(b) Notwithstanding the provisions of Section 4.2(a), the Employer
Contribution specified therein shall be limited by and in no event shall exceed
the following limits:
(1) The total amount deductible by such Employer under Code Section
404; or
(2) The maximum amount that may be allocated to a particular
Participant's Accounts under the annual additions limit of Section 5.6
(and, if applicable, Article 15).
19
<PAGE>
(c) Employer Contributions may be made in cash, in Company Stock, or in a
combination of cash and Company Stock, as determined by the Employer in its sole
discretion. If contributions are made in shares of Company Stock, the value of
such Company Stock shall be determined by the average of closing prices of such
stock for the twenty (20) consecutive trading days immediately preceding the
date on which the shares are contributed.
Section 4.3. Payment of Employer Contributions. Employer Contributions
----------- ---------------------------------
shall be paid to the Trustee no later than the date prescribed by law for filing
such Employer's federal income tax return for its taxable year ending with or
within the Plan Year for which such contribution is made, including extensions
which have been granted for the filing of such tax return. The Trustee shall
old all such Employer Contributions subject to the provisions of the Plan and
Trust Agreement, and no part of such contributions shall be used for, or
diverted to, any purpose other than those specified in the Plan and Trust
Agreement. However, notwithstanding anything to the contrary contained herein,
an Employer Contribution for a Plan Year may be returned to the Employer to the
extent that the amount of such contribution exceeds the amount that such
Employer would have contributed for such Plan Year but for (i) a good faith
mistake of fact made in determining the amount of such contribution or (ii) a
good faith mistake in determining that the contribution made would be deductible
under Section 404 of the Code.
The return of a portion of an Employer Contribution shall be subject to the
following conditions: (i) earnings attributable to the amount to be returned
may not be distributed to the Employer but losses attributable thereto must
reduce the amount to be returned; (ii) the amount to be returned shall be
limited so as to avoid reducing the balance in any Employer Contribution Account
to less than the balance which would have been in such account if the amount
attributable to such mistake had not been contributed; (iii) the return of an
amount attributable to a mistake of fact may only be made within one year after
such amount was paid to the Trustee; and (iv) the return of an amount
attributable to a mistake in determining such deductibility may only be made
within one year after the disallowance of such deduction. Except as provided in
the preceding sentence, an appropriate adjustment shall be made in the Employer
Contribution Accounts to reflect the return of a portion of an Employer
Contribution.
Section 4.4. Distribution of Excess Savings Contributions.
----------- --------------------------------------------
(a) Notwithstanding any other provision of the Plan, any Excess Savings
Contribution for a Plan Year and all income allocable thereto shall be
distributed (in cash) to the Participant on whose behalf such contributions were
made no later than March 15 of the immediately following Plan Year.
(b) For purposes of this Section 4.4 the term "Excess Savings Contribution"
shall mean any Savings Contribution in excess of the limits of Section 4.1(d) or
(e).
(c) The income allocable to Excess Savings Contribution shall be determined
by multiplying the Trust income allocable to a Participant's Savings Account for
the Plan Year by a fraction, the numerator of which is the Excess Savings
Contribution made on behalf of the Participant for the Plan Year and the
denominator of which is the total Savings Account balance of the Participant on
the last day of such Plan Year.
(d) In determining a Participant's Excess Savings Contribution for a Plan
Year, the Savings Contributions made on behalf of the Participant that exceed
the limits of Section 4.1(d) are to be calculated and distributed first, and
then the Savings Contributions made on behalf of the Participant that exceed the
limits of Section 4.1(e) are to be calculated, allocated among the Highly
Compensated Employees as provided in subsection (e) below, and distributed.
20
<PAGE>
(e) To determine the amount of Excess Savings Contributions under Section
4.1(e) and the Highly Compensated Employees to whom such contributions are to be
allocated and distributed, the Savings Contributions of the Highly Compensated
Employees are to be reduced in the order of their actual deferral percentages
(as defined in Section 4.1(e)) beginning with those Highly Compensated Employees
with the highest actual deferral percentages. The Excess Savings Contributions
are to be distributed to those Highly Compensated Employees for whom a reduction
is made under the preceding sentence to the extent necessary to satisfy the
Section 4.1(d) special nondiscrimination test.
Section 4.5. Limitations on Matching Employer Contributions.
----------- ----------------------------------------------
(a) The Average Contribution Percentage for Eligible Participants who are
Highly Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Eligible Participants who are Non-Highly Compensated
Employees for the Plan Year multiplied by 1.25; or
(b) The Average Contribution Percentage for Eligible Participants who are
Highly Compensated Employees for the Plan Year shall not exceed the Average
Contribution Percentage for Eligible Participants who are Non-Highly Compensated
Employees for the Plan Year multiplied by 2, provided that the Average
Contribution Percentage for Eligible Participants who are Highly Compensated
Employees does not exceed the Average Contribution Percentage for Eligible
Participants who are Non-Highly Compensated Employees by more than two (2)
percentage points.
(c) For purposes of this Section 4.5, and for purposes of Section 4.6, the
following definitions shall apply.
(1) "Average Contribution Percentage" shall mean the average
(expressed as a percentage) of the Contribution Percentages of the
Eligible Participants in a group.
(2) "Contribution Percentage" shall mean the ratio (expressed as a
percentage), of the sum of the Matching Employer Contributions under
the Plan on behalf of the eligible Participant for the Plan Year to
such Eligible Participant's Compensation for the Plan Year.
(3) "Eligible Participant" shall mean any Employee who is authorized
under the terms of the Plan to have Matching Employer Contributions
allocated to his Employer Contribution Account for the Plan Year.
(4) EFFECTIVE JANUARY 1, 1988, in computing the Contribution
Percentage under Section 4.5(c)(2), the Committee may elect each Plan
Year whether and to what extent to take into account the Incentive
Contribution.
(d) For purposes of determining the Contribution Percentage of an Eligible
Participant who is both a Highly Compensated Employee and either a five percent
owner or one of the ten highest paid Employees of an Employer during the Plan
Year in question, the Matching Employer Contributions and Compensation of such
Participant shall include the Matching Employer Contributions and Compensation
of Family Members, but such Family Members shall be disregarded in determining
the Contribution Percentage for other Highly Compensated Employees and for
Eligible Participants who are Non-Highly Compensated Employees.
(e) Under regulations promulgated by the Secretary of the Treasury, the
Committee may elect, in its sole discretion, to take Savings Contributions into
account in computing the Average Contribution Percentage. However, in such a
case, the actual deferral percentage tests under Section 4.7 must still be
computed and met separately, and in connection therewith, no aggregation with
Matching Employer Contributions shall be permitted.
21
<PAGE>
Section 4.6. Forfeiture of Excess Matching Employer Contributions.
----------- ----------------------------------------------------
(a) Excess Matching Employer Contributions and all income allocable thereto
shall be forfeited no later than March 15 of the Plan Year immediately following
the Plan Year for which such Excess Matching Employer Contributions were made.
(b) For purposes of this Section 4.6, "Excess Matching Employer
Contributions" shall mean (i) Matching Employer Contributions that exceed the
limits of Section 4.5, and (ii) Matching Employer Contributions that were made
on account of Excess Savings Contributions, as defined in Section 4.4(b).
(c) The income allocable to Excess Matching Employer Contributions shall be
determined by multiplying the total Trust income allocable to the Participant's
Employer Contribution Account for the Plan Year by a fraction, the numerator of
which is the Excess Matching Employer Contributions made on behalf of the
Participant for the Plan Year and the denominator of which is the Participant's
total account balance in his Employer Contribution Account on the last day of
such Plan Year.
(d) The Excess Matching Employer Contributions shall be determined by
reducing contributions on behalf of Highly Compensated Employees in order of
their Contribution Percentages beginning with the highest of such percentages.
(e) Amounts forfeited by Highly Compensated Employees under this Section
4.6 shall be (i) treated as annual additions under Section 5.6 and (ii)
allocated as provided in Section 5.5.
Section 4.7. Limitations on Employer Elective Contributions
----------- ----------------------------------------------
(a) Actual Deferral Percentage Test. The annual allocation derived from
-------------------------------
Employer Elective Contributions to a Participant's Savings Account
shall satisfy one of the following tests:
(i) The Average Actual Deferral Percentage for Participants who are
Eligible Highly Compensated Employees for the Plan Year shall not
exceed the Average Actual Deferral Percentage for Participants
who are Eligible Nonhighly Compensated Employees for the Plan
Year multiplied by 1.25; or
(ii) The Average Actual Deferral Percentage for Participants who are
Eligible Highly Compensated Employees for the Plan Year shall not
exceed the Average Actual Deferral Percentage for Participants
who are Eligible Nonhighly Compensated Employees for the Plan
Year multiplied by two (2); provided that the Average Actual
Deferral Percentage for Participants who are Eligible Highly
Compensated Employees for the Plan Year does not exceed the
Average Actual Deferral Percentage for Participants who are
Eligible Nonhighly Compensated Employees for the Plan Year by
more than two (2) percentage points or the amount as may be
prescribed in applicable Treasury regulations to prevent the
multiple use of this alternative limitation for any Highly
Compensated Employee.
(b) Definitions. For the purposes of this Section, the following
-----------
definitions shall apply:
(i) Actual Deferral Percentage means the ratio, expressed as a
--------------------------
percentage, of (A) the amount of Savings Contributions actually
paid to the Trust Fund on behalf of the Eligible Participant for
the Plan Year to (B) the Eligible Participant's Compensation for
the Plan Year, whether or not the Employee was a Participant for
the entire Plan Year. Employer Contributions on behalf of any
Participant shall include: (A) any Savings Contributions made
pursuant to the Eligible Participant's Elective Deferrals,
22
<PAGE>
(including Excess Elective Deferrals of Highly Compensated
Employees), but excluding (1) Excess Elective Deferrals of
Nonhighly Compensated Employees that arise solely from Elective
Deferrals made under the plan or plans of this Employer, and (2)
Savings Contributions that are taken into account in the
Contribution Percentage Test (provided the Actual Deferral
Percentage Test is satisfied both with and without exclusion of
these Employer Elective Contributions); and (B) at the election
of the Employer, Qualified Non-Elective Contributions and
Qualified Matching Contributions. A Savings Contribution will be
taken into account under the Actual Deferral Percentage Test for
a Plan Year only if it relates to compensation that either would
have been received by the Employee in the Plan Year, but for the
deferral election, or is attributable to services performed by
the Employee in the Plan Year and would have been received by the
Employee within two and one-half (2 1/2) months after the close
of the Plan Year, but for the deferral election. To compute
Actual Deferral Percentages, an Employee who would be a
Participant but for the failure to make Elective Deferrals shall
be treated as a Participant on whose behalf no Employer Elective
Contributions are made.
(ii) Average Actual Deferral Percentage means the average, expressed
----------------------------------
as a percentage, of the Actual Deferral Percentages of the
Eligible Participants in a group.
(iii) Eligible Participant means any Employee of the Employer who is
--------------------
otherwise authorized under the Plan to have Savings Contributions
(or Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if treated as Employer Elective
Contributions for the Actual Deferral Percentage Test) allocated
to his or her Salary Deferral Account for the Plan Year.
(iv) Qualified Non-Elective Contributions means Employer
------------------------------------
Contributions, other than Savings Contributions and Matching
Contributions, allocated to Participants' accounts which are 100%
Nonforfeitable at all times and which are subject to the
distribution restrictions described in Section 4.1(f). Non-
Elective Contributions are not 100% Nonforfeitable at all times
if the Employee has a 100% Nonforfeitable interest because of
Years of Service taken into account under a vesting schedule.
Any Non-Elective Contributions allocated to a Participant's
Salary Deferral Account under the Plan automatically satisfy the
definition of Qualified Non-Elective Contributions.
(v) Qualified Matching Contributions means Employer Matching
--------------------------------
Contributions allocated to Participants' accounts which are 100%
Nonforfeitable at all times and which are subject to the
distribution restrictions described in Section 4.1(f). Matching
Contributions are not 100% Nonforfeitable at all times if the
Employee has a 100% Nonforfeitable interest because of Years of
Service taken into account under a vesting schedule. Any
Matching Contributions allocated to a Participant's Employer
Salary Deferral Account under the Plan automatically satisfy the
definition of Qualified Matching Contributions.
(c) Special Rules
-------------
(i) For purposes of this Section, the Actual Deferral Percentage for
any Participant who is a Highly Compensated Employee for the Plan
Year who is eligible to have Savings Contributions (or Qualified
Non-Elective Contributions or Qualified Matching Contributions,
or both, if treated as Employer Elective Contributions for the
Actual Deferral Percentage Test) allocated to his or her account
under two (2) or more
23
<PAGE>
plans or arrangements described in Code Section 401(k) that are
maintained by the Employer or a Related Employer shall be
determined as if all Employer Elective Contributions (and, if
applicable, Qualified Non-Elective Contributions or Qualified
Matching Contribution, or both) were made under a single
arrangement. If a Highly Compensated Employee participates in
two (2) or more cash or deferred arrangements that have different
plan years, all cash or deferred arrangements ending with or
within the same calendar year shall be treated as a single
arrangement. Notwithstanding the foregoing, certain plans shall
be treated as separate if mandatorily disaggregated under
applicable Treasury regulations pursuant to Code Section 401(k).
(ii) If this Plan satisfies the requirements of Code Sections 401(k),
401(a)(4) or 410(b) only if aggregated with one or more other
plans, or if one or more other plans satisfy the requirements of
the Code Sections only if aggregated with this Plan, then this
Section shall be applied by determining the Actual Deferral
Percentage of Employees as if all such plans were a single plan.
For Plan Years beginning after December 31, 1989, plans may be
aggregated to satisfy Code Section 401(k) only if they have the
same Plan Year.
(iii) To determine the Actual Deferral Percentage of a Participant
who is a Five Percent Owner or one of the ten (10) most highly
paid Highly Compensated Employees, the Savings Contributions (and
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if treated as Employer Elective
Contributions for the Actual Deferral Percentage Test) and
Compensation of the Participant shall include the Savings
Contributions (and, if applicable, the Qualified Non-Elective
Contributions or Qualified Matching Contributions or both) and
Compensation of Family Members defined in Code Section 414(q)(6)
received by the Family Member for the portion of the Plan Year
during which the Employee was eligible to participate in the cash
or deferred arrangement. Family Members, with respect to Highly
Compensated Employees, shall be disregarded in determining the
Actual Deferral Percentage for Participants who are Nonhighly
Compensated Employees and for Participants who are Highly
Compensated Employees except as required in the preceding
sentence.
(iv) To determine the Actual Deferral Percentage Test, Employer
Elective Contributions, Qualified Non-Elective Contributions, and
Qualified Matching Contributions must be made before the last day
of the twelve (12) month period immediately following the Plan
Year to which contributions relate.
(v) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Actual Deferral Percentage Test and the
amount of Qualified Non-Elective Contributions or Qualified
Matching Contributions, or both, used in the test.
(vi) The determination and treatment of the Actual Deferral Percentage
amounts of any Participant shall satisfy other requirements
prescribed by applicable Treasury regulations.
(vii) EFFECTIVE JANUARY 1, 1988, in computing the Actual Deferral
Percentage under Section 4.7(a), the Committee may elect each
Plan Year whether and to what extent to take into account the
Incentive Contribution.
24
<PAGE>
(d) Fail-Safe Provisions
--------------------
If the initial allocations of the Savings Contributions do not satisfy
one of the tests set forth in paragraph (a) of this Section, the
Administrator shall adjust the accounts of the Participants pursuant
to one (1) or more of the following options:
(i) Distribution of Excess Contributions. If the Committee
-------------------------------------
determines that the initial allocations of the Employer Elective
Contributions do not satisfy one of the Actual Deferral
Percentage Tests set forth in paragraph (a) of this Section, the
Administrator must distribute the Excess Contributions, as
adjusted for allocable income, during the next Plan Year.
However, the Employer will incur an excise tax equal to 10% of
the amount of Excess Contributions for a Plan Year not
distributed to the appropriate Highly Compensated Employees
during the first 2 1/2 months of that next Plan Year. The Excess
Contributions are the amount of Employer Elective Contributions
made at the election of the Highly Compensated Employees which
causes the Plan to fail to satisfy the Actual Deferral Percentage
Test. The Administrator will distribute to each Highly
Compensated Employee his or her respective share of the Excess
Contributions by starting with the Highly Compensated Employee(s)
who has the greatest Actual Deferral Percentage, reducing his or
her Actual Deferral Percentage to the next highest Actual
Deferral Percentage, then, if necessary, reducing the Actual
Deferral Percentage of the Highly Compensated Employee(s) at the
next highest Actual Deferral Percentage level (including the
Actual Deferral Percentage of the Highly Compensated Employee(s)
whose Actual Deferral Percentage the Administrator already has
reduced), and continuing in this manner until the average Actual
Deferral Percentage for the Highly Compensated Group satisfies
the Actual Deferral Percentage Test. Excess Contributions of
Participants who are subject to the Family Member aggregation
rules shall be allocated among the Family Members in proportion
to the Elective Deferrals (and amounts treated as Elective
Deferrals) of each Family Member that is combined to determine
the combined Actual Deferral Percentage. The amount of Excess
Contributions to be distributed to an Employee for a Plan Year
shall be reduced by any Excess Deferrals previously distributed
to the Employee for the Employee's taxable year ending with or
within the Plan Year.
Allocable Income. To determine the amount of the corrective
-----------------
distribution required under this Section, the Administrator must
calculate the allocable income for the Plan Year in which the
Excess Contributions arose. The income allocable to Excess
Contributions is equal to the sum of the allocable gain or loss
for the Plan Year.
(A) Method of Allocating Income. The Administrator may use any
---------------------------
reasonable method for computing the income allocable to
Excess Contributions, provided that the method does not
violate Code Section 401(a)(4), is used consistently for all
Participants and for all corrective distributions under the
Plan for the Plan Year, and is used by the Plan for
allocating income to Participants' Accounts.
(B) Alternative Method of Allocating Income. A Plan may
---------------------------------------
allocate income to Excess Contributions by multiplying the
income for the Plan Year allocable to Savings Contributions
and amounts treated as Savings Contributions by a fraction.
The numerator of the fraction is the Excess Contributions
for the Employee for the Plan Year. The denominator of the
fraction is equal to the sum of:
25
<PAGE>
(I) The total account balance of the Employee attributable
to Savings Contributions and amounts treated as
Elective Contributions as of the beginning of the Plan
Year; plus
(II) The Employee's Savings Contributions, and amounts
treated as Savings Contributions for the Plan Year.
(ii) Recharacterization of Excess Contributions. If the Plan permits
------------------------------------------
Participant Voluntary After Tax Contributions, a Participant may
treat his or her Excess Contributions as an amount distributed to
the Participant and then contributed by the Participant to the
Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Elective
Deferrals. Amounts may not be recharacterized by a Highly
Compensated Employee to the extent that such amount in
combination with other Employee Contributions made by that
Employee would exceed any stated limit under the Plan on Employee
Contributions. Recharacterization must occur no later than two
and one-half (2 1/2) months after the last day of the Plan Year
in which such Excess Contributions arose, and is deemed to occur
no earlier than the date the last Highly Compensated Employee is
informed in writing of the amount recharacterized and the
consequences thereof. Recharacterized amounts will be taxable to
the Participant for the Participant's tax year in which the
Participant would have received them in cash. The amount of
Excess Contributions to be recharacterized with respect to an
Employee for a Plan Year shall be reduced by any Excess Deferrals
previously distributed to the Employee for the Employee's taxable
year ending with or within the Plan Year.
(iii) Recharacterization of Matching Contributions. A portion of the
--------------------------------------------
Employer's Matching Contribution shall be deemed a Savings
Contribution for purposes of paragraph (a) of this Section and
for vesting and withdrawal purposes. The portion shall be equal
to an amount necessary to satisfy one of the tests set forth in
paragraph (a) of this Section, taking into account the
Administrator's action under any option herein and shall be
reallocated to the Salary Deferral Account. Reallocation of the
Employer's Matching Contribution shall be made on behalf of
Participants who are Nonhighly Compensated Employees.
(iv) Qualified Non-Elective and Qualified Matching Contributions. The
-----------------------------------------------------------
Employer shall make Qualified Non-Elective Contributions or
Qualified Matching Contributions on behalf of Participants who
are Nonhighly Compensated Employees in an amount sufficient to
satisfy one of the tests set forth in paragraph (a) of this
Section, taking into account the Administrator's action under any
option herein. The contribution shall be treated as a Savings
Contribution and shall be allocated to the Savings Account of
each Participant who is a Nonhighly Compensated Employee in the
same proportion that each Nonhighly Compensated Employee's
Savings Contributions for the year bears to the total Savings
Contributions of all Participants who are Nonhighly Compensated
Employees. The Qualified Non-Elective and Qualified Matching
Contributions may be treated as Savings Contributions provided
that each of the following requirements, to the extent
applicable, is satisfied:
(A) The amount of Non-Elective Contributions, including those
Qualified Non-Elective Contributions treated as Savings
Contributions for purposes of the Actual Deferral Percentage
Test, satisfies the requirements of Code Section 401(a)(4).
26
<PAGE>
(B) The amount of Non-Elective Contributions, excluding those
Qualified Non-Elective Contributions treated as Savings
Contributions for purposes of the Actual Deferral Percentage
Test and those Qualified Non-Elective Contributions treated
as Matching Contributions under Treasury Regulations Section
1.401(m)-1(b)(5) for purposes of the Average Contribution
Percentage Test, satisfies the requirements of Code Section
401(a)(4).
(C) The Matching Contributions, including those Qualified
Matching Contributions treated as Savings Contributions for
purposes of the Actual Deferral Percentage Test, satisfy the
requirements of Code Section 401(a)(4).
(D) The Matching Contributions, excluding those Qualified
Matching Contributions treated as Savings Contributions for
purposes of the Actual Deferral Percentage Test, satisfy the
requirements of Code Section 401(a)(4).
(E) The Qualified Non-Elective Contributions and Qualified
Matching Contributions satisfy the requirements of Treasury
Regulations Section 1.401(k)-1(b)(4)(i) for the Plan Year as
if the contributions were Elective Contributions.
(F) The plan that includes the cash or deferred arrangement and
the plan or plans to which the Qualified Non-Elective
Contributions and Qualified Matching Contributions are made
could be aggregated for purposes of Code Section 410(b).
Section 4.8. Limitations on Employee Contributions and Matching Employer
----------- -----------------------------------------------------------
Contributions.
- -------------
(a) Average Contribution Percentage Test. The annual allocation derived
------------------------------------
from Employee Contributions, Matching Contributions, and Qualified
Matching Contributions to a Participant's Individual Account shall
satisfy one of the following tests:
(i) The Average Contribution Percentage for Participants who are
Eligible Highly Compensated Employees for the Plan Year shall not
exceed the Average Contribution Percentage for Participants who
are Eligible Nonhighly Compensated Employees for the Plan Year
multiplied by 1.25; or
(ii) The Average Contribution Percentage for Participants who are
Eligible Highly Compensated Employees for the Plan Year shall not
exceed the Average Contribution Percentage for Participants who
are Eligible Nonhighly Compensated Employees for the Plan Year
multiplied by two (2); provided that the Average Contribution
Percentage for Participants who are Eligible Highly Compensated
Employees for the Plan Year does not exceed the Average
Contribution Percentage for Participants who are Eligible
Nonhighly Compensated Employees for the Plan Year by more than
two (2) percentage points or the amount prescribed in applicable
Treasury regulations to prevent the multiple use of this
alternative limitation for any Highly Compensated Employee.
27
<PAGE>
(b) Definitions
-----------
(i) Aggregate Limit means the greater of (A) or (B), described as
---------------
follows:
(A) The sum of:
(I) 1.25 multiplied by the greater of the Actual Deferral
Percentage or the Average Contribution Percentage for
Participants who are Eligible Nonhighly Compensated
Employees, and
(II) Two (2) percentage points plus the lesser of Actual
Deferral Percentage or the Average Contribution
Percentage of Participants who are Eligible Nonhighly
Compensated Employees. (In no event shall this amount
exceed twice the lesser of the Actual Deferral
Percentage or Average Contribution Percentage of
Participants who are Eligible Nonhighly Compensated
Employees).
(B) The sum of:
(I) 1.25 multiplied by the lesser of the Actual Deferral
Percentage or the Average Contribution Percentage of
Participants who are Eligible Nonhighly Compensated
Employees, and
(II) Two (2) percentage points plus the greater of Actual
Deferral Percentage or the Average Contribution
Percentage of Participants who are Eligible Nonhighly
Compensated Employees. (In no event shall this amount
exceed twice the greater of the Actual Deferral
Percentage or Average Contribution Percentage of
Participants who are Eligible Nonhighly Compensated
Employees).
(ii) Average Contribution Percentage means the average, expressed as a
-------------------------------
percentage, of the Contribution Percentages of the Eligible
Participants in a group.
(iii) Contribution Percentage means the ratio, expressed as a
-----------------------
percentage, of the sum of the Employee Contributions and Matching
Contributions under the Plan on behalf of the Eligible
Participant for the Plan Year to the Eligible Participant's
Compensation for the Plan Year.
(iv) Contribution Percentage Amounts means the sum of the Employee
-------------------------------
Contributions, Matching Contributions and Qualified Matching
Contributions, to the extent not taken into account for purposes
of the Actual Deferral Percentage Test, made under the Plan on
behalf of the Participant for the Plan Year. Contribution
Percentage Amounts shall include Forfeitures of Excess Aggregate
Contributions or Matching Contributions allocated to the
Participant's Account which shall be taken into account in the
year in which the Forfeiture is allocated. Notwithstanding the
foregoing, Contribution Percentage Amounts shall not include
Matching Contributions that are forfeited either to correct
Excess Aggregate Contributions or because the contributions to
which they relate are Excess Deferrals, Excess Contributions, or
Excess Aggregate Contributions. The Employer may include
Qualified Non-Elective Contributions in the Contribution
Percentage Amounts. The Employer also may elect to use Employer
Elective Contributions in the Contribution Percentage Amount if
the Actual Deferral Percentage Test is met before the
28
<PAGE>
Employer Elective Contributions are used in the Average
Contribution Percentage Test and continues to be met following
the exclusion of those Employer Elective Contributions that are
used to meet the Average Contribution Percentage Test.
(v) Eligible Participant means any Employee who is eligible to make
--------------------
an Employee Contribution, or an Elective Deferral, if the
Employer takes the contributions into account in calculating the
Contribution Percentage, or to receive a Matching Contribution,
including Forfeitures, or a Qualified Matching Contribution. If
an Employee Contribution is required as a condition of
participation in the Plan, any Employee who would be a
Participant in the Plan if the Employee made a required
contribution shall be treated as an Eligible Participant on
behalf of whom no Employee Contributions are made.
(vi) Employee Contribution means any contribution made to the Plan by
---------------------
or on behalf of a Participant that is included in the
Participant's gross income in the year in which made and that is
maintained under a separate account to which earnings and losses
are allocated. Employer Elective Contributions are not Employee
Contributions.
(vii) Matching Contribution means an Employer Contribution made to
---------------------
this or any other defined contribution plan on behalf of a
Participant on account of an Employee Contribution made by the
Participant, or on account of a Participant's election to defer a
portion of his or her Annual Compensation under a plan maintained
by the Employer.
(viii) Qualified Non-Elective Contributions means Employer
------------------------------------
Contributions, other than Employer Elective Contributions and
Matching Contributions, allocated to Participants' accounts which
are 100% Nonforfeitable at all times and which are subject to the
distribution restrictions described in Section 4.1(f). Non-
Elective Contributions are not 100% Nonforfeitable at all times
if the Employee has a 100% Nonforfeitable interest because of
Years of Service taken into account under a vesting schedule.
Any Non-Elective Contributions allocated to a Participant's
Salary Deferral Account under the Plan automatically satisfy the
definition of Qualified Non-Elective Contributions.
(ix) Qualified Matching Contributions means Employer Matching
--------------------------------
Contributions allocated to Participants' accounts which are 100%
Nonforfeitable at all times and which are subject to the
distribution restrictions described in Section 4.1(f). Matching
Contributions are not 100% Nonforfeitable at all times if the
Employee has a 100% Nonforfeitable interest because of Years of
Service taken into account under a vesting schedule. Any
Matching Contributions allocated to a Participant's Employer
Salary Deferral Account under the Plan automatically satisfy the
definition of Qualified Matching Contributions.
(c) Special Rules
-------------
(i) Multiple Use. If one or more Highly Compensated Employees
------------
participate in both a cash or deferred arrangement subject to
Code Section 401(k) and a plan maintained by the Employer subject
to Code Section 401(m) and the sum of the Actual Deferral
Percentage and Average Contribution Percentage of those Highly
Compensated Employees subject to either or both tests exceeds the
Aggregate Limit, then the Average Contribution Percentage of
those Highly Compensated Employees who also participate in a cash
or deferred arrangement will be reduced, beginning
29
<PAGE>
with the Highly Compensated Employee whose Average Contribution
Percentage is the highest, so that the limit is not exceeded.
The amount by which each Highly Compensated Employee's
Contribution Percentage Amount is reduced shall be treated as an
Excess Aggregate Contribution. The Actual Deferral Percentage
and Average Contribution Percentage of the Highly Compensated
Employees are determined after
(A) use of Qualified Non-Elective Contributions and Qualified
Matching Contributions to meet the Actual Deferral
Percentage Test;
(B) use of Qualified Non-Elective Contributions and Elective
Contributions to meet the Actual Deferral Percentage Test;
(C) any corrective distribution or forfeiture of Excess
Deferrals, Excess Contributions or Excess Aggregate
Contributions; and
(D) after any recharacterization of Excess Contributions
required without regard to multiple use of the alternative
limitation.
Multiple use occurs if the Actual Deferral Percentage and Average
Contribution Percentage of the Highly Compensated Employees
exceeds 1.25 multiplied by the Actual Deferral Percentage and
Average Contribution Percentage of the Nonhighly Compensated
Employees.
(ii) For purposes of this Section, the Contribution Percentage for any
Participant who is an Eligible Highly Compensated Employee for
the Plan Year who is eligible to have Contribution Percentage
Amounts allocated under two (2) or more plans described in Code
Section 401(a) or arrangements described in Code Section 401(k)
that are maintained by the Employer or a Related Employer shall
be determined as if the total of the Contribution Percentage
Amounts were made under each plan. If a Highly Compensated
Employee participates in two (2) or more cash or deferred
arrangements that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year shall
be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under regulations pursuant to Code
Section 401(m).
(iii) If this Plan satisfies the requirements of Code Sections
401(m), 401(a)(4) or 410(b) only if aggregated with one (1) or
more other plans, or if one (1) or more other plans satisfy the
requirements of the Code Sections only if aggregated with this
Plan, then this Section shall be applied by determining the
Contribution Percentages of Eligible Participants as if all such
plans were a single plan.
(iv) For purposes of determining the Contribution Percentage of a
Participant who is a Five Percent Owner or one of the ten (10)
most highly paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of the Participant shall
include the Contribution Percentage Amounts and Compensation of
Family Members as defined in Code Section 414(g)(6). Family
Members shall be disregarded in determining the Contribution
Percentage for Participants who are Eligible Nonhighly
Compensated Employees and for Participants who are Eligible
Highly Compensated Employees except as required in the preceding
sentence.
30
<PAGE>
(v) The Employer shall maintain records sufficient to demonstrate
satisfaction of the Average Contribution Percentage Test.
(vi) The determination and treatment of the Contribution Percentage of
any Participant shall satisfy other requirements prescribed by
applicable Treasury regulations.
(d) Fail Safe Provisions. If the initial allocations of the Employer
--------------------
Matching Contributions and Employee Contributions do not satisfy one
of the tests set forth in paragraph (a) of this Section, the
Administrator shall adjust the accounts of the Participants pursuant
to one (1) or more of the following options:
(i) Distribution of Excess Aggregate Contributions. The
-----------------------------------------------
Administrator will determine Excess Aggregate Contributions after
determining Excess Deferrals under Section 4.1(d)(v) and Excess
Employer Elective Contributions under Section 4.7. If the
Administrator determines that the Plan fails to satisfy the
Average Contribution Percentage Test for a Plan Year, it must
distribute the Excess Aggregate Contributions, as adjusted for
allocable income, during the next Plan Year. However, the
Employer will incur an excise tax equal to 10% of the amount of
Excess Aggregate Contributions for a Plan Year not distributed to
the appropriate Highly Compensated Employees during the first
2 1/2 months of that next Plan Year. The Excess Aggregate
Contributions are the amount of aggregate contributions allocated
on behalf of the Highly Compensated Employees which causes the
Plan to fail to satisfy the Average Contribution Percentage Test.
The Administrator will distribute to each Highly Compensated
Employee his or her respective share of Excess Aggregate
Contributions. The Administrator will determine the respective
shares of the Excess Aggregate Contributions by starting with the
Highly Compensated Employee(s) who has the greatest Contribution
Percentage, reducing his or her Contribution Percentage to the
next highest Contribution Percentage, then, if necessary,
reducing the Contribution Percentage of the Highly Compensated
Employee(s) at the next highest Contribution Percentage level
(including the Contribution Percentage of the Highly Compensated
Employee(s) whose Contribution Percentage the Administrator
already has reduced), and continuing in this manner until the
Average Contribution Percentage for the Highly Compensated Group
satisfies the Average Contribution Percentage Test. Excess
Aggregate Contributions of Participants who are subject to the
Family Member aggregation rules shall be allocated among the
Family Members in proportion to the Employee and Matching
Contributions (or amounts treated as Matching Contributions) of
each Family Member that is combined to determine the combined
Average Contribution Percentage.
Allocable Income. To determine the amount of the corrective
----------------
distribution required under this Section, the Administrator must
calculate the allocable income for the Plan Year in which the
Excess Aggregate Contributions arose and for the "gap period"
measured from the beginning of the next Plan Year to the date of
the distribution. The income allocable to Excess Aggregate
Contributions is equal to the sum of the allocable gain or loss
for the Plan Year and the allocable gain or loss for the gap
period.
(A) Method of Allocating Income. The Administrator may use any
---------------------------
reasonable method for computing the income allocable to
Excess Aggregate Contributions, provided that the method
does not violate Code Section 401(a)(4), is used
consistently for all Participants and for all corrective
31
<PAGE>
distributions under the Plan for the Plan Year, and is used
by the Plan for allocating income to Participants' Accounts.
(B) Alternative Method of Allocating Income. A Plan may
---------------------------------------
allocate income to Excess Aggregate Contributions by
multiplying the income for the Plan Year and the gap period
allocable to Employee Contributions, Matching Contributions,
and amounts treated as Matching Contributions by a fraction.
The numerator of the fraction is the Excess Aggregate
Contributions for the Employee for the Plan Year. The
denominator of the fraction is equal to the sum of:
(I) The total account balance of the Employee attributable
to Employee and Matching Contributions, and amounts
treated as Matching Contributions as of the beginning
of the Plan Year; plus
(II) The Employee and Matching Contributions, and amounts
treated as Matching Contributions for the Plan Year and
for the gap period.
(C) Safe Harbor Method of Allocating Gap Period Income. Under
--------------------------------------------------
the safe harbor method, income or Excess Aggregate
Contributions for the gap period will equal ten percent
(10%) of the income allocable to Excess Aggregate
Contributions for the Plan Year (calculated under the method
described in paragraph (B) of this Section), multiplied by
the number of calendar months that have elapsed since the
end of the Plan Year. For purposes of calculating the
number of calendar months that have elapsed under the safe
harbor method, a corrective distribution that is made on or
before the fifteenth day of the month is treated as made on
the last day of the preceding month. A distribution made
after the fifteenth day of the month is treated as made on
the first day of the next month.
(ii) Characterization of Excess Aggregate Contributions. The
---------------------------------------------------
Administrator will treat a Highly Compensated Employee's
allocable share of Excess Aggregate Contributions in the
following priority: (A) first as attributable to his or her
Employee Contributions which are voluntary contributions, if any;
(B) then as Matching Contributions allocable with respect to
Excess Contributions determined under the Actual Deferral
Percentage Test described in Section 4.7; (C) then on a pro rata
basis to Matching Contributions and to the Employer Elective
Contributions relating to those Matching Contributions which the
Administrator has included in the Average Contribution Percentage
Test; (D) then on a pro rata basis to Employee Contributions
which are mandatory contributions, if any, and to the Matching
Contributions allocated on the basis of those mandatory
contributions; and (E) last to Qualified Non-Elective
Contributions used in the Average Contribution Percentage Test.
To the extent the Highly Compensated Employee's Excess Aggregate
Contributions are attributable to Matching Contributions, and he
or she is not 100% vested in the Account Balance attributable to
Matching Contributions, the Administrator will distribute only
the vested portion and forfeit the nonvested portion. The vested
portion of the Highly Compensated Employee's Excess Aggregate
Contributions attributable to Employer Matching Contributions is
the total amount of the Excess Aggregate Contributions (as
adjusted for allocable income) multiplied by his or her vested
percentage (determined as of the last day of the Plan Year for
which the Employer made the Matching Contribution).
32
<PAGE>
(iii) Qualified Non-Elective and Elective Contributions. The Employer shall
-------------------------------------------------
make Qualified Non-Elective Contributions or Elective Contributions
that, in combination with Employee and Matching Contributions, satisfy
one of the tests set forth in paragraph (a) of this Section, taking
into account the Administrator's action under any option herein. The
contribution shall be treated as an Employer Elective Contribution and
shall be allocated to the Salary Deferral Account of each Participant
who is a Nonhighly Compensated Employee. The Qualified Non-Elective
and Elective Contributions may be treated as Matching Contributions
provided that each of the following requirements, to the extent
applicable, is satisfied:
(A) The amount of Non-Elective Contributions, including those
Qualified Non-Elective Contributions treated as Matching
Contributions for purposes of the Average Contribution
Percentage Test, satisfies the requirements of Code Section
401(a)(4).
(B) The amount of Non-Elective Contributions, excluding those
Qualified Non-Elective Contributions treated as Matching
Contributions for purposes of the Average Contribution
Percentage Test and those Qualified Non-Elective
Contributions treated as Elective Contributions under
Treasury Regulations Section 1.401(k)-1(b)(5) for purposes
of the Actual Deferral Percentage Test, satisfies the
requirements of Code Section 401(a)(4).
(C) The Elective Contributions, including those treated as
Qualified Matching Contributions for purposes of the Average
Contribution Percentage Test, satisfy the requirements of
Code Section 401(k)(3) for the Plan Year.
(D) The Qualified Non-Elective Contributions are allocated to
the Employee under the Plan as of a date within the Plan
Year, and the Elective Contributions satisfy the
requirements of Treasury Regulations Section 1.401(k)-
1(b)(4)(i) for the Plan Year.
(E) The plan that takes Qualified Non-Elective Contributions and
Elective Contributions into account in determining whether
Employee and Matching Contributions satisfy the requirements
of Code Section 401(m)(2)(A), and the plans to which the
Qualified Non-Elective Contributions and Elective
Contributions are made, are or could be aggregated for
purposes of Code Section 410(b).
(iv) Forfeiture of Non-Vested Matching Contributions. Matching
-----------------------------------------------
Contributions that are not vested may be forfeited to correct
Excess Aggregate Contributions. Notwithstanding the foregoing
sentence, Excess Aggregate Contributions for a Plan Year may not
remain unallocated or be allocated to a suspense account for
allocation to one or more Employees in any future year.
Forfeitures of Matching Contributions to correct Excess Aggregate
Contributions shall be:
(A) Applied to reduce Employer Contributions for the Plan Year
in which the excess arose, but allocated according to the
following paragraph (B), to the extent the excess exceeds
Employer Contributions or the Employer has already
contributed for the Plan Year.
(B) Allocated, after all other Forfeitures under the Plan, to
the Employer Matching Contribution Account of each Nonhighly
Compensated Participant
33
<PAGE>
who made Elective Deferrals or Employee Contributions in the
ratio which each such Participant's Compensation for the
Plan Year bears to the total Compensation of all such
Participants for the Plan Year.
Section 4.9. Rollover Contributions.
----------- ----------------------
(a) Upon approval by the Committee, an Employee who has received a
qualified total distribution, as defined in Section 402(a)(5)(E)(i) of
the Code (other than five percent owners pursuant to Code Section
402(a)(5)(F)(ii)), may contribute such qualified total distribution to
a Rollover Account under the Plan. An Employee may also transfer to a
Rollover Account under the Plan (upon Committee approval) a
distribution from an individual retirement account or from an
individual retirement annuity, but only if such distribution or
proceeds qualify for tax-free rollovers under Code Section
408(d)(3)(A)(ii), provided that any such Rollover Account shall be
accounted for separately, pursuant to Section 5.1, from any Rollover
Account resulting from the transfer of a qualified total distribution.
In addition, the Plan will accept (upon Committee approval) direct
trustee-to-trustee transfers from another qualified plan or Code
Section 403(b) annuity, and will account for such transfers separately
from any other Rollover Account. Any contribution under this Section
4.7 shall be treated as the contribution of a "Rollover Amount" and,
except in the case of trustee-to-trustee transfers, shall be subject to
the following requirements and conditions:
(1) The Employee must transfer the Rollover Amount or cause to be
transferred such amount to the Committee for delivery to the Trustee
or, if the Committee directs, to the Trustee, in time for the
Trustee to receive such amount on or before the 60th day after the
day on which such amount was received by the Employee; provided,
however, that if the Employee is an officer of an Employer and
received a Roll Over Amount from a previous plan (other than a plan
sponsored by an Employer), such Employee may not transfer or cause
to be transferred his Rollover Amount to the Committee or the
Trustee prior to the 20th business day after his receipt of the
distribution from such previous plan.
(2) The Employee must furnish such evidence as the Committee may
require that such Rollover Amount includes all (and does not include
anything other than) the amount, in such Employee's particular case,
and, if applicable, the particular property, required to be
transferred by Code Section 402(a)(5)(E)(i) or 408(d)(3)(A)(ii), as
appropriate.
(b) The Committee shall not deliver or cause the delivery of any Rollover
Amount to the Trustee prior to its receipt of such evidence as may be required
by it pursuant to Section 4.9(a) and, except in the case of trustee-to-trustee
transfers, shall not deliver or cause the delivery of any Rollover Amount to the
Trustee if such Rollover Amount would not be received by the Trustee on or
before the 60th day after the day on which such amount was received by the
Employee who wishes to transfer such amount to the Plan.
(c) An Employee shall be eligible to transfer amounts to a Rollover Account
pursuant to this Section 4.9 notwithstanding the provisions of Article 3 hereof.
(d) An Employee who establishes and maintains a Rollover Account or
Accounts shall be deemed to be a Participant under the Plan notwithstanding the
provisions of Article 3 and Section 2.43, but no such Employee shall be entitled
to share in any Employer Contributions or elect Savings Contributions unless he
is otherwise participating under Article 3.
(e) Fees and expenses of the Trustee attributable to the maintenance of
Rollover Accounts shall be paid as provided in Section 14.7.
34
<PAGE>
(f) The time and method of payment from an Employee's Rollover Accounts
shall be governed by Articles 6, 8, and 11.
* * * * * * *
35
<PAGE>
ARTICLE FIVE
------------
ALLOCATIONS
-----------
Section 5.1. Accounts. The Committee shall maintain or cause to be
----------- --------
maintained adequate records to disclose the interest in the Trust of each
Participant, Former Participant, and Beneficiary. Such records shall be in the
form of individual accounts, and credits and charges shall be made to such
accounts in the manner herein described. When appropriate, a Participant shall
have, as separate accounts, an Employer Contribution Account, a Rollover Account
or Accounts, and a Savings Account. The maintenance of separate accounts is
only for accounting purposes, and a segregation of the Trust Assets to each
account shall not be required. Each Account shall reflect its allocable share
of income, loss, appreciation, and depreciation of the Trust Assets.
Distributions made from an account shall be charged to such account as of the
end of the month during which the distribution is made.
Section 5.2. Allocation of Income and Expense.
----------- --------------------------------
(a) Except as otherwise provided in Section 7.3(a), income of the Trust
Assets shall be allocated no later than as of each Valuation Date to the
accounts that generated such income.
(b) Except as otherwise provided by Section 7.3(b), expenses paid from the
Trust Assets and not reimbursed by an Employer shall be allocated no later than
as of each Valuation Date to the Accounts of Participants, Former Participants
and Beneficiaries who had undistributed balances in their Accounts on such last
preceding Valuation Date in proportion to the balances in such Accounts on such
date, but after first reducing each such account balance by any distributions
from the account since such last preceding Valuation Date.
Section 5.3. Allocation of Savings Contributions. Savings Contributions
----------- -----------------------------------
elected by a Participant during any calendar month shall be credited and
allocated to his Savings Account no later than as of the last day of the month
following such calendar month.
Section 5.4. Allocation of Employer's Contribution. EFFECTIVE OCTOBER 1,
----------- -------------------------------------
1987 THROUGH DECEMBER 31, 1988, each Participant who is a Participant on the
last business day of each calendar quarter and each Former Participant who would
have been a Participant on the last business day of such calendar quarter but
for his death, Disability, Early Retirement, or Retirement during such calendar
quarter is entitled to share in the Employer Contribution for such calendar
quarter. Subject to Section 4.5, the Committee shall instruct the Trustee to
allocate the portion of the Employer Contribution for each calendar quarter to
the Employer Contribution Account of each Participant or Former Participant for
whom such contribution was made pursuant to Section 4.2(a).
EFFECTIVE JANUARY 1, 1988, the following provisions shall apply:
(a) Each Participant who is a Participant on the last business day of each
calendar quarter and each Former Participant who would have been a Participant
on the last business day of such calendar quarter but for his death, Disability,
Early Retirement, or Retirement during such calendar quarter is entitled to
share in the Matching Employer Contribution for such calendar quarter. Subject
to Section 4.5, the Committee shall instruct the Trustee to allocate the portion
of the Matching Employer Contribution for each calendar quarter to the Employer
Contribution Account of each Participant or Former Participant for whom such
contribution was made pursuant to Sections 4.2(a)(1) and (2).
(b) Incentive Contributions for a Plan Year will be allocated, in proportion
to each Incentive Participant's Compensation and as soon after the end of the
Plan Year as the amount of the Incentive Contribution is calculated under the
Incentive Bonus Plan, to the Incentive Account of each Incentive
36
<PAGE>
Participant for whom such a contribution was made pursuant to Section 4.2(a)(3).
Section 5.5. Forfeitures. Amounts forfeited pursuant to Sections 5.6 or 6.3
----------- -----------
shall be allocated as of the end of each Plan Year to the Employer Contribution
Accounts of each Participant who is a Participant on the last business day of
the Plan Year and each Former Participant who would have been a Participant on
the last business day of such Plan Year but for his death, Disability, Early
Retirement, or Retirement during such Plan Year, according to the ratio that
each such Participant's Compensation for the Plan Year bears to the total
Compensation of all such Participants for the Plan Year. Amounts forfeited
pursuant to Section 4.6 shall be allocated as of the end of each Plan Year to
the Employer Contribution Accounts of each Participant who is a Non-Highly
Compensated Employee and who is a Participant on the last business day of the
Plan Year and each Former Participant who was a Nonhighly Compensated Employee
and who would have been a Participant on the last business day of such Plan Year
but for his death, Disability, Early Retirement, or Retirement during such Plan
Year, according to the ratio that each such Participant's Compensation for the
PIan Year bears to the total Compensation of all such Participants for the Plan
Year.
Section 5.6. Maximum Additions.
- ----------- -----------------
(a) Defined Contribution Plan Limits. The amount of Annual Additions which
--------------------------------
the Committee may allocate under this Plan on a Participant's behalf for a
Limitation Year may not exceed the Maximum Permissible Amount. If the amount
the Employer otherwise would contribute to the Participant's Account would cause
the Annual Additions for the Limitation Year to exceed the Maximum Permissible
Amount, the Employer will reduce the amount of its contribution so the Annual
Additions for the Limitation Year will equal the Maximum Permissible Amount. If
an allocation of Employer Contributions pursuant to Section 5.4 would result in
an Excess Amount (other than an Excess Amount resulting from the circumstances
described in Section 5.6(c)) to the Participant's Account, the Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer Contributions for the Plan Year in which the
Limitation Year ends. The Committee will make this reallocation on the basis of
the allocation method under the Plan as if the Participant whose Individual
Account otherwise would receive the Excess Amount is not eligible for an
allocation of Employer Contributions.
(b) Estimation. Prior to the determination of the Participant's actual Annual
----------
Compensation for a Limitation Year, the Committee may determine the Maximum
Permissible Amount on the basis of the Participant's estimated Annual
Compensation defined in Section 5.6(f) for the Limitation Year. The Committee
must make this determination on a reasonable and uniform basis for all
Participants similarly situated. The Committee must reduce any Employer
Contributions (including any allocation of Forfeitures) based on estimated
Annual Compensation by any Excess Amounts carried over from prior years. As
soon as administratively feasible after the end of the Limitation Year, the
Committee will determine the Maximum Permissible Amount for the Limitation Year
based on the Participant's actual Annual Compensation for the Limitation Year.
(c) Disposition of Excess Amount. If, pursuant to Section 5.6(b) or because
----------------------------
of an allocation of Forfeitures, there is an Excess Amount attributable to a
Participant for a Limitation Year, then the Committee will dispose of the Excess
Amount as follows:
(i) The Committee shall return any nondeductible Participant
Voluntary After Tax Contributions to the Participant to the
extent that the return would reduce the Excess Amount.
(ii) If, after the application of clause (i) an Excess Amount still
exists, and the Plan covers the Participant at the end of the
Limitation Year, then the Committee will use the Excess Amounts
to reduce future Employer Contributions (including any allocation
of Forfeitures) under the Plan for the next Limitation Year and
for each
37
<PAGE>
succeeding Limitation Year, as is necessary, for the Participant.
The Participant may elect to limit Compensation for allocation
purposes to the extent necessary to reduce the allocation for the
Limitation Year to the Maximum Permissible Amount and eliminate
the Excess Amount.
(iii) If, after the application of clause (i) an Excess Amount still
exits and the Plan does not cover the Participant at the end of
the Limitation Year, then the Committee shall hold the Excess
Amount in a suspense account and use the Excess Amount to reduce
Employer Contributions on behalf of remaining Participants and
shall allocate and reallocate to the Individual Accounts of
remaining Participants in succeeding Limitation Years to the
extent permissible under the foregoing limitations, prior to any
further Annual Additions to the Plan. If the Plan should be
terminated or contributions should be completely discontinued,
the funds in the suspense account will be allocated to the extent
not prohibited by Code Section 415. Any suspense account shall
not be adjusted for investment gains or losses of the Trust Fund.
(iv) The Committee will not distribute any Excess Amount(s) to
Participants or to Former Participants.
(v) Notwithstanding the foregoing sentence and the foregoing
paragraphs (i), (ii), (iii), and (iv), the Committee may
distribute Elective Deferrals (within the meaning of Code Section
402(g)(3)) or return voluntary or mandatory Employee
Contributions, to the extent the distribution or return would
reduce the excess amounts in the Participant's account.
(d) Multiple Defined Contribution Plan Limits. If the Employer maintains
-----------------------------------------
any other qualified defined contribution plan, the amount of the Annual Addition
which may be allocated to a Participant's Individual Account in this Plan shall
not exceed the Maximum Permissible Amount, reduced by the amount of Annual
Additions to such Participant's accounts for the same Limitation Year in the
other plan(s). The Excess Amount attributed to this Plan equals the product of:
(i) the total Excess Amount allocated as of such date (including any
amount the Committee would have allocated but for the limitations
of Code Section 415), multiplied by
(ii) the ratio of
(A) the amount allocated to the Participant as of such date under
this Plan, divided by
(B) the total amount allocated as of such date under all
qualified defined contribution plans (determined without regard
to the limitations of Code Section 415).
(e) Overall Limits. If the Employer maintains or establishes, or has ever
--------------
maintained or established, any defined benefit plan(s) in addition to this Plan,
then the sum of the Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction for the Participant for that Limitation Year shall not exceed 1.0.
In any Limitation Year that the sum of the Fractions does exceed 1.0, then the
Employer shall reduce the amount of Annual Additions to the Participant's
Individual Account in the defined contribution plan(s), to the extent necessary
to prevent the sum of the Fractions from exceeding 1.0.
38
<PAGE>
(f) Definitions. For purposes of the limitations of Code Section 415 set
-----------
forth in this Section, the following definitions shall apply:
(i) Annual Additions means the sum of the following amounts allocated
----------------
on behalf of a Participant for a Limitation Year:
(A) all Employer Contributions;
(B) all Forfeitures;
(C) all Employee Contributions;
(D) excess contributions described in Code Section 401(k) and
excess aggregate contributions described in Code Section
401(m), irrespective of whether the Plan distributes or
forfeits such Excess Amounts, and excess deferrals described
in Code Section 402(g), unless the excess deferrals are
distributed no later than the first April 15 following the
close of the Participant's taxable year;
(E) Excess Amounts reapplied to reduce Employer Contributions
under this Section 5.6;
(F) amounts allocated after March 31, 1984 to an individual
medical account, as defined in Code Section 415(l)(2),
included as part of a pension or annuity plan maintained by
the Employer;
(G) contributions paid or accrued after December 31, 1985, in
taxable years ending after that 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
described in Code Section 419(e), maintained by the
Employer; and
(H) allocations under a simplified employee pension plan.
(ii) Annual Compensation means the total amount of salary, wages,
-------------------
commissions, bonuses and overtime, paid or otherwise includable
in the gross income of a Participant during the Limitation Year,
but excluding:
(A) Employer contributions to any deferred compensation plan (to
the extent the contributions are not included in the
Participant's gross income for the taxable year in which
contributed) or simplified employee pension under Code
Section 408(k) (to the extent the contributions are
excludable from the Participant's gross income;
(B) distributions from any plan of deferred compensation,
whether or not such amounts are includable in the gross
income of the Employees when distributed;
(C) amounts realized from the exercise of any nonqualified stock
option, or when restricted stock becomes freely
transferrable or is no longer subject to a substantial risk
of forfeiture;
39
<PAGE>
(D) amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock option
described in Part II, Subchapter D, Chapter 1 of the Code;
(E) premiums paid by the Employer for group term life insurance
(to the extent the premiums are not includable in the
Participant's gross income); contributions by the Employer
to an annuity under Code Section 403(b) (to the extent not
includable in the Participant's gross income); and any other
amounts received under any Employer sponsored fringe benefit
plan (to the extent not includable in the Participant's
gross income);
(F) any contribution for medical benefits, within the meaning of
Code Section 419A(f)(2), after separation from Service which
is otherwise treated as an Annual Addition; and
(G) any amount otherwise treated as an Annual Addition under
Code Section 415(l)(1).
(iii) Average Annual Compensation means the average compensation
---------------------------
during a Participant's highest three (3) consecutive Years of
Service, which period is the three (3) consecutive calendar years
(or the actual number of consecutive years of employment for
those Employees who are employed for less than three (3)
consecutive years with the Employer) during which the Participant
had the greatest aggregate compensation from the Employer.
(iv) Defined Benefit Plan Fraction means the fraction derived from the
-----------------------------
numerator defined in the following paragraph (A) and the
denominator defined in the following paragraph (B).
(A) Numerator. The numerator is the sum of the Projected Annual
---------
Benefit provided for such Participant under all defined
benefit plan(s) the Employer maintains or establishes, or
has ever maintained or established (whether or not
terminated).
(B) Denominator. The denominator is the lesser of (1) 1.25
-----------
times the Maximum Defined Benefit Dollar Limitation under
Code Section 415(b) and (d) for the Limitation Year, or (2)
1.4 times one hundred percent (100%) of the Participant's
Average Annual Compensation Limitation for his highest three
(3) consecutive years under Code Section 415(b).
(C) Notwithstanding the foregoing, 1.0 shall be substituted for
1.25 wherever it appears in Section 5.6(f)(iv)(B) in any
Plan Year in which the Plan is determined to be Top-Heavy,
unless the minimum allocation requirements of Section 15.2
are met. In determining whether the requirements of Section
15.2 have been met, four percent (4%) shall be substituted
for three percent (3%). Notwithstanding the foregoing, 1.0
shall be substituted for 1.25 wherever it appears in Section
5.6(f)(iv)(B) in any Plan Year in which the Plan is
determined to be Super Top-Heavy, regardless of the minimum
allocation.
40
<PAGE>
(v) Defined Contribution Plan Fraction means the fraction derived
----------------------------------
from the numerator defined in the following paragraph (A) and the
denominator defined in the following paragraph (B).
(A) Numerator. The numerator is the sum of the Annual Additions
---------
to a Participant's Individual Account under all the defined
contribution plans (whether or not terminated) maintained by
the Employer for the current and all prior Limitation Years
(including the annual additions attributable to the
Participant's nondeductible employee contributions to all
defined benefit plans, whether or not terminated, maintained
by the Employer, and the annual additions attributable to
all welfare benefit funds, as defined in Code Section 419(e)
and individual medical accounts, as defined in Code Section
415(l)(2), maintained by the Employer.
(B) Denominator. The denominator is the sum of the lesser of
-----------
the following amounts determined for such Limitation Year
and for each prior Year of Service with the Employer:
(1) 1.25 times the Maximum Permissible Amount determined
under Code Sections 415(b) and (d) in effect under Code
Section 415(c)(1)(A) for such Limitation Year (without
regard to the special Dollar Limitations for employee
stock ownership plans), or
(2) thirty-five percent (35%) of the Participant's Annual
Compensation for each Limitation Year.
(C) Regarding any Limitation Year ending after December 31,
1982, the amount taken into account under Section
5.6(f)(v)(B) with respect to each Participant for all
Limitation Years ending before January 1, 1983, shall be at
the election of the Administrator, an amount equal to the
product of the amount determined under Section 5.6(f)(v)(B)
multiplied by a fraction, the numerator of which is the
lesser of (1) $51,875 ($41,500 for any year in which the
Plan is determined to be a Top-Heavy Plan); or (2) 1.4
multiplied by twenty-five percent (25%) of the Annual
Compensation of the Participant for the Limitation Year
ending in 1981, and the denominator of which is the lesser
of (1) $41,500; or (2) twenty-five percent (25%) of the
Annual Compensation of the Participant for the Limitation
Year ending in 1981. The Administrator may make such
election only if one or more of such plans were in existence
on or before July 1, 1982.
(D) If the Plan and all other plans maintained by the Employer
met the limitations under Code Section 415 for the last
Limitation Year beginning before January 1, 1983 the amount
under Section 5.6(f)(v) (A) shall be reduced by an amount
required to decrease the combined fractions to 1.0. The
amount subtracted shall be the product of (1) the excess of
the sum of the fractions over 1.0 and (2) the denominator
under Section 5.6(f)(v)(B) as computed through the
Limitation Year ending in 1982.
(E) Notwithstanding the foregoing, 1.0 shall be substituted for
1.25 wherever it appears in Section 5.6(f)(v)(B) in any Plan
Year in which the Plan is determined to be Top-Heavy, unless
the minimum allocation requirements of Section 15.2 are met.
In determining whether the requirements of
41
<PAGE>
Section 15.2 have been met, four percent (4%) shall be
substituted for three percent (3%). Notwithstanding the
foregoing, 1.0 shall be substituted for 1.25 wherever it
appears in Section 5.6(f)(v)(B) in any year in which the
Plan is determined to be Super Top-Heavy, regardless of the
minimum allocation.
(vi) Employer means the Employer that adopts this Plan. All Related
--------
Employers shall be considered a single Employer for purposes of
applying the limitations of this Section.
(vii) Excess Amount means the excess of the Participant's Annual
-------------
Additions for the Limitation Year over the Maximum Permissible
Amount, less administrative charges allocable to such Excess
Amount.
(viii) Limitation Year means the Limitation Year specified in the
---------------
Plan or, if none is specified, the calendar year.
(ix) Maximum Permissible Amount means the lesser of:
--------------------------
(A) the Defined Contribution Dollar Limitation, or
(B) twenty-five percent (25%) of the Participant's Compensation,
within the meaning of Code Section 415(c)(3)
for a Limitation Year with respect to any Participant.
Defined Contribution Dollar Limitation means $30,000 or, if
greater, twenty-five percent (25%) of the Defined Benefit Dollar
Limitation set forth in Code Section 415(b)(1)(A) as in effect
for the Limitation Year.
(x) Projected Annual Benefit means the benefit of the Participant
------------------------
payable annually in the form of a straight life annuity (with no
ancillary benefits) under the terms of a defined benefit plan to
which employees do not contribute and under which no rollover
contributions are made, assuming that the Participant continues
employment until Normal Retirement Age (or current age, if
later), compensation continues at the same rate as in effect in
the Limitation Year under consideration until the date of Normal
Retirement Age, and all other relevant factors used to determine
benefits under the defined benefit plan remain constant as of the
current Limitation Year for all future Limitation Years.
(g) Special Rules for Overall Limits. If the Employer maintains or
--------------------------------
establishes, or has ever maintained or established, any defined benefit plan(s)
in addition to this Plan, such Plans are subject to the overall limitations
under Code Section 415(e) and the following special rules apply:
(i) Recomputation Not Required. For purposes of determining the
--------------------------
Defined Contribution Plan Fraction, the Annual Addition for any
Limitation Year beginning before January 1, 1987 shall not be
recomputed to treat all Employee Contributions as Annual
Additions.
(ii) Adjustment of Defined Contribution Plan Fraction. If the Plan
------------------------------------------------
satisfied the applicable requirements of Code Section 415 as in
effect for all Limitation Years beginning before January 1, 1987,
the Committee shall redetermine the Defined
42
<PAGE>
Contribution Plan Fraction and the Defined Benefit Plan Fraction
as of the end of the 1986 Limitation Year. If the sum of the
redetermined Fractions exceeds 1.0, an amount shall be subtracted
from the numerator of the Defined Contribution Plan Fraction (not
exceeding the numerator) equal to the product of (A) the excess
of the sum of the Fractions over 1.0 times (B) the denominator of
the Defined Contribution Plan Fraction, so that the sum of the
Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction computed under Code Section 415(e)(1) does not exceed
1.0 for the Limitation Year.
(iii) Adjustment of Defined Benefit Plan Fraction. Notwithstanding
-------------------------------------------
the foregoing, 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 1.25 times the sum of the
annual benefits under such plans which the Participant had
accrued as of the close of the last Limitation Year beginning
before January 1, 1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of Code Section 415 for all
Limitation Years beginning before January 1, 1987.
(h) Separate, Combined Plan Limits. For purposes of the foregoing
------------------------------
limitations in this Section, any Employee Contributions to any defined benefit
plan shall be considered as a separate defined contribution plan. Further, all
defined contribution plans shall be considered as one defined contribution plan
and all defined benefit plans shall be considered as one defined benefit plan,
whether or not any of such plans have been terminated.
Section 5.7. Notification to Participants. At least once annually the
----------- ----------------------------
Committee shall advise each Participant or Former Participant of the then
composition and value of his Accounts and of the Vested Percentage of his
Employer Contribution Account.
* * * * * * *
43
<PAGE>
ARTICLE SIX
-----------
VESTING
-------
Section 6.1. Retirement, Death, or Disability. If a Participant ceases to
----------- --------------------------------
be an Employee due to the Participant's Retirement, Early Retirement, death, or
Disability, such Participant, Former Participant, or the Beneficiary, as the
case may be, shall be fully vested in and entitled to the total amount credited
to each of his Accounts.
Section 6.2. Separated From Service. If a Participant or Former Participant
----------- ----------------------
is Separated from Service for any reason other than Retirement, Early
Retirement, death, or Disability, such Participant or Former Participant, or the
Beneficiary, as the case may be, shall be entitled to the sum of the following:
(a) The total amount credited to the Participant's Savings Account, effective
January 1, 1988, Incentive Account, and Rollover Account or Accounts, if any,
other than his W & B Plan Rollover Account, if any; and
(b) The "Vested Percentage", at the date he is Separated from Service, of the
total amount credited to the Participant's Employer Contribution Account and W &
B Plan Rollover Account, if any. The Vested Percentage shall be determined in
accordance with the following schedule:
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 3 years 0%
At least 3 but less than 4 years 20%
At least 4 but less than 5 years 40%
At least 5 but less than 6 years 60%
At least 6 but less than 7 years 80%
At least 7 or more years 100%
(c) Notwithstanding the foregoing vesting schedule, for any Plan Year in which
the Plan is a Top-Heavy Plan, the following vesting schedule shall apply:
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 2 years 0%
At least 2 but less than 3 years 20%
At least 3 but less than 4 years 40%
At least 4 but less than 5 years 60%
At least 5 but less than 6 years 80%
At least 6 or more years 100%
(d) If, in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan,
the vesting schedule in paragraph (c) shall continue to apply unless the
Employer elects, in writing, to revert to the vesting schedule set forth in
paragraph (b). Any reversion shall be treated as a Plan amendment and shall be
subject to the restrictions of Section 13.1 and this paragraph. No such
amendment shall be effective unless, in the event it changes the Plan's
applicable vesting schedule (determined in accordance with regulations under
Section 411 of the Code), each Participant's nonforfeitable percentage of his
accounts (determined as of the later of the date such amendment is adopted or
becomes effective) is not less than such percentage computed under
44
<PAGE>
Section 6.2 without regard to such amendment and unless, in such event, each
Participant having not less than 5 Years of Service is permitted to elect
(pursuant to regulations under Section 411 of the Code) to have his
nonforfeitable percentage computed under the Plan without regard to such
amendment.
(e) Notwithstanding the foregoing, a Participant's Vested Percentage in his W
& B Plan Rollover Account, if any, shall never be less than his vested
percentage in the assets transferred to such Account at the time such assets
were transferred to the Plan from the W & B Refrigeration Service Co., Inc.
Employees' Profit-Sharing Plan and Trust.
Section 6.3. Computation of Years of Service for Vesting.
----------- -------------------------------------------
(a) General. For purposes of computing a Participant's or Former
-------
Participant's Vested Percentage of his Employer Contribution Account, each
Participant or Former Participant shall be credited with all Years of Service to
which he is entitled pursuant to Section 2.65(b), other than Years of Service
not counted under Sections 6.3(b) and (c) below.
(b) Re-employment After a Break in Service. In determining a Participant's
--------------------------------------
Years of Service for vesting purposes upon a Participant's re-employment with an
Employer after a Break in Service, the following rules shall apply:
(1) If the Participant was not entitled to any Vested Percentage prior
to his Break-in-Service, he shall be credited with pre-break Years of
Service only if the number of consecutive years of Break-in-Service
are less than five.
If any Years of Service are not required to be taken into account
by reason of the above sentence, such Years of Service shall not be
taken into account in applying this paragraph (1) to a subsequent
period of Break-in-Service.
(2) If the Participant was entitled to a Vested Percentage prior to
his Break-in-Service, or if he meets the requirements of paragraph (1)
above, then his prebreak Years of Service shall be taken into account
in determining his Vested Percentage of his Employer Contribution
Account upon his completion of one Year of Service after his re-
employment commencement date.
(c) Forfeitures. If, at the time a Participant becomes Separated from
-----------
Service, he is not entitled to a distribution of the entire balance in his
Employer Contribution Account, he shall receive no distribution from such
Account until the end of the Plan Year in which he incurs a Break-in-Service.
As of the end of the Year in which the Participant has Separated from Service,
his Employer Contribution Account shall be divided into two portions, one
representing the vested portion, and the other representing the forfeiture
portion, of such Account. Such Employer Contribution Account shall continue to
receive income allocations pursuant to Section 5.2 until distributed in full.
If the Participant returns to the employ of an Employer before incurring a
Break-in-Service, the vested and forfeiture portions of his Employer
Contribution Account, plus income allocations, shall, upon his return, become
the beginning balance in his new Employer Contribution Account. If the
Participant does not return to the employ of an Employer before incurring a
Break-in-Service, his previous Employer Contribution Account shall be closed,
with the result that the vested portion of his Employer Contribution Account,
plus income allocations, shall be distributed pursuant to Article 11 hereof and
the forfeiture portion of his Employer Contribution Account, shall become
available for allocation to the Employer Contribution Accounts of other eligible
Participants as of the end of the Year in which he incurs a Break-in-Service.
45
<PAGE>
(d) Benefit Accruals and Repayments:
--------------------------------
(i) Notwithstanding subsection (b) above, for purposes of determining a
Participant's Vested Percentage under the Plan, the Plan will disregard
service performed by the Participant with respect to which he has received
a distribution if the present value of his entire Vested Percentage of such
distribution was not more than $3,500. This paragraph (1) shall apply,
however, only if such distribution was made on termination of the
Participant's participation in the Plan.
(ii) For purposes of determining a Participant's Vested Percentage under
the Plan, the Plan will not disregard service as provided in paragraph (d)
(1) above if the Participant repays the full amount of the distribution
described in such paragraph (d) (1). Upon such repayment, the
Participant's account balance prior to the distribution will be restored
(unadjusted by any gains or losses between the time of distribution and the
time of repayment) and his Vested Percentage will be recomputed by taking
into account service so disregarded. This paragraph (2) shall apply,
however, only in the case of a Participant who --
(A) resumes employment before the date on which he would have incurred
five (5) consecutive years of Break-in-Service; and
(B) repays the full amount of such distribution before the date on
which he would have incurred five (5) consecutive years of Break-in-
Service.
The Employer will make a special contribution to the Plan in order to
restore any account balances hereunder.
For purposes of Plan Section 5.6 and Code section 415(c) and (e), the
repayment by the Participant and the restoration will not be treated as "annual
additions."
Section 6.4. Determination of Amount.
----------- -----------------------
(a) For purposes of Sections 6.1, 6.2 and 6.3, the amount credited to the
Accounts of a Participant or Former Participant shall be determined as of the
Valuation Date concurrent with or, if none, next preceding the date of the event
which caused entitlement to a distribution, and the distribution of such amount
shall be made or shall commence as soon thereafter as practicable in the manner
determined under Article 11.
(b) If, on the Valuation Date referred to in Section 6.4(a), the amount
credited to the Account in question does not include the allocation, if any, to
which such Account is entitled under Article 5 for the months which include
and/or follow such Valuation Date, then the particular Participant's or Former
Participant's vested portion, determined under Section 6.1, 6.3 and 6.3, as
appropriate, of such allocation shall be distributed in the manner provided
under Subsection 11.1(b) as soon as practicable after such allocation is made.
* * * * * * *
46
<PAGE>
ARTICLE SEVEN
-------------
INVESTMENT OF TRUST ASSETS
--------------------------
Section 7.1. Appointment of Trustee. The Board of Directors of the
----------- ----------------------
Company shall determine the number of Trustees, shall appoint such Trustees, and
may at any time and from time to time increase or decrease the number of
Trustees. The Board of Directors of the Company may remove any Trustee at any
time and appoint a successor Trustee or Trustees or reduce the number of
Trustees (but not to less than one). The Trustee or Trustees shall have such
rights, powers and duties as shall from time to time be specified in or
determined pursuant to the Trust Agreement. The Trust Agreement shall form a
part of the Plan, and the Trust Assets shall be administered in accordance with
the terms of the Plan and the Trust Agreement.
Section 7.2. Investment of Accounts.
----------- ----------------------
(a) All Employer Contributions to the Trust and forfeitures shall be
invested and reinvested by the Trustee in the Company Stock Fund. Participants
shall have no right to direct investment of their Employer Contribution Accounts
or, effective January 1, 1988, Incentive Accounts, except as set forth in
Section 7.2(h). All Savings Accounts and Rollover Accounts, including W & B
Plan Rollover Accounts, shall be invested and reinvested by the Trustee in
accordance with Participant direction, as provided herein. There shall be at
least two investment funds for the Participants to choose between. One such
investment fund shall be the Company Stock Fund. However, the Company Stock
Fund shall be unavailable for investment until the Registration Statement for
the Plan, as filed with the Securities and Exchange Commission, becomes
effective. The Committee may, from time to time and in its sole discretion,
determine the number and type of any other investment fund(s) available for the
Participants to choose among.
(b) The Company Stock Fund shall be invested solely in Company Stock,
pursuant to Section 2.11. The Trustee is explicitly authorized to acquire and
hold Company Stock. Any and all investments, reinvestments, or purchases shall
be made at prices not in excess of the Current Market Value of the Company Stock
at the time of such purchase or investment.
(c) Each Participant, in his written application for participation, shall
direct the Committee and the Trustee as to which investment fund(s) he wishes to
utilize and the percentage of his Accounts he wishes to have invested in each
fund. The Participant shall make a separate investment election for his Savings
Account, Rollover Accounts, if any, and his W & B Plan Rollover Account, if any.
If a Participant fails to designate the investment fund(s) for one or more
of his Accounts, the Committee shall direct the Trustee to invest such Accounts
in one of the investment funds available for the Participants to choose among
consisting of money market short-term investments with a high level of
liquidity.
(d) The stock in the Company Stock Fund purchased each month shall be
allocated to each Participant's Accounts based on (1) the contributions and
forfeitures allocated to each such Account, (2) the elections made under this
Section 7.2, and (3) the current market price of the Company Stock.
(e) A Participant may change his investment direction with respect to
future contributions effective the next following January 1, April 1, July 1, or
October 1, by filing a written application therefor with the Committee at least
30 days prior to the effective date of such change, on such forms and within
such time limits as the Committee may prescribe.
(f) A Participant may transfer any part or all of the funds or stock
credited to his Savings Account, Rollover Accounts and W & B Plan Rollover
Account between the Company Stock Fund and any other investment fund chosen by
the Committee pursuant to Section 7.2(a), effective the next following January 1
or July 1, by filing a written application therefor with the Committee at least
30 days prior to the
47
<PAGE>
effective date of such transfer, on such forms and within such time limits as
the Committee may prescribe; provided, however, that a Participant may not
-----------------
direct that any shares of Company Stock credited to his Savings Account be sold
and the sales proceeds transferred to another investment fund until such shares
that are to be sold have been held as an earmarked investment in his Savings
Account for a period of at least five (5) years, or, if earlier, until he has
attained age sixty-two (62) as set forth in Section 7.2(h). Any transfer of
funds within an Account from the Company Stock Fund to any other investment fund
chosen by the Committee pursuant to Section 7.2(a), will require that the
Company Stock allocated to such Account be sold for its then market value and
the sales proceeds transferred to the other investment fund (which will remain
allocated to that same Account). Any transfer of funds within an Account from
another investment fund to the Company Stock Fund will require that the
transferred funds be used to purchase Company Stock (such stock to be allocated
to the same Account from which the fund transfer was made).
(g) Elections by officers or directors of the Company and beneficial owners
of 10% or more of the outstanding Company Stock to invest funds credited to
their Accounts in the Company Stock Fund shall be contingent upon approval of
the Plan by the shareholders of the Company in accordance with Securities and
Exchange Commission Rule 16b-3, and shall be null and void if the Plan is not so
approved.
(h) Each Participant who is employed by an Employer at age sixty-two (62)
may elect, on a one-time basis, at any time between age sixty-two (62) and age
sixty-four (64), to change the investment of his Accounts, including his
Employer Contribution Account, from the Company Stock Fund to any other
investment fund chosen by the Committee pursuant to Section 7.2(a), effective
the next following January 1 or July 1, by filing a written application therefor
with the Committee at least 30 days prior to the effective date of such
transfer. If such an election is made, future Employer Contributions and
forfeitures allocable to such Participant's Accounts shall be invested in the
fund he has chosen, rather than in the Company Stock Fund.
Section 7.3. Income and Expenses.
----------- -------------------
(a) The dividends, capital gains distributions, and other earnings received
on any share of Company Stock that is specifically credited to a Participant's
or Former Participant's separate Account under the Plan shall be allocated to
such separate Account and immediately reinvested, to the extent practicable, in
additional shares of Company Stock.
(b) Fees charged by the Trustee and other expenses of operating the Trust
shall be paid by the Employers or, in the absence of such payments (which are
not obligatory), out of the general Trust assets and charged to the separate
Accounts of all Participants and Former Participants under the Plan in the ratio
that the fair market value of each such Account bears to the total fair market
value of all separate Accounts. However, notwithstanding the above, any
brokerage fees, commissions, taxes and other costs incurred by the Trust (and
not reimbursed by the Employers) with respect to the purchase, sale, or
distribution of Company Stock pursuant to an inter-fund transfer in connection
with an in-service withdrawal or a distribution made at the direction of a
Participant, Former Participant, or Beneficiary pursuant to Section 10.1 or
11.1(a), shall be charged to and paid by such Participant's, Former
Participant's, or Beneficiary's separate Accounts.
Section 7.4. Company Stock.
----------- -------------
(a) Acquisition of Stock by Trustee. The Trustee shall acquire shares of
-------------------------------
Company Stock pursuant to Participants' elections under Section 7.2 from private
sources (including an Employer), or if the Committee advises that no such shares
are available from private sources, in the open market, at not more than the
market price then prevailing. All shares of Company Stock shall be carried by
the Trustee at the actual cost thereof, including taxes, brokerage fees and
commissions, if any, incident to the purchase, if the shares of Company Stock
were purchased, or shall be carried by the Trustee at their value at the time of
contribution to the Plan, if contributed in kind to the Plan by the Employer, as
determined under Section 4.2(c) of the Plan.
48
<PAGE>
(b) Stock Rights, Stock Splits, and Stock Dividends. No Participant,
-----------------------------------------------
Former Participant or Beneficiary shall have any right of request, direction, or
demand upon the Committee or the Trustee to exercise in his behalf rights or
privileges to acquire, convert into, or exchange for Company Stock or other
securities. The Trustee, in its sole discretion, may exercise or sell any such
rights or privileges. The separate Accounts shall be appropriately credited if
such rights are exercised or sold. Company Stock received by the Trustee by
reason of a stock split, stock dividend or recapitalization shall be
appropriately allocated to the separate accounts of the affected Participant,
Former Participant, or Beneficiary.
(c) Voting of Company Stock. At each annual meeting and special meeting of
-----------------------
the stockholders of the Company, the Committee shall direct the Trustee how to
vote the shares of Company Stock held by the Plan.
Section 7.5. Exclusive Benefit. The Plan and the Trust are established
----------- -----------------
and shall be maintained for the exclusive benefit of the Participants, Former
Participants and their Beneficiaries. Subject to the exceptions expressly set
forth in the Plan or the Trust Agreement, no part of the Trust Assets may ever
revert to an Employer or be used for or diverted to purposes other than the
exclusive benefit of the Participants, Former Participants and Beneficiaries.
Section 7.6. Valuation. The value of each Account shall be determined as
----------- ---------
of each Valuation Date, on the basis of the fair market value of the assets
allocated to each such Account, as appraised by the Trustee.
* * * * * * *
49
<PAGE>
ARTICLE EIGHT
-------------
BENEFICIARY
-----------
Section 8.1. Designation of Beneficiary. Each Participant or Former
----------- --------------------------
Participant may, from time to time, designate any person or persons (who may be
designated contingently or successively and who may be an entity or a natural
person), either individually or in a fiduciary capacity, the Beneficiary or
Beneficiaries to whom his Plan benefits are to be paid if he dies before receipt
of all such benefits. However, a married Participant or a married Former
Participant may not select a Beneficiary other than his Spouse unless the Spouse
consents to such selection in writing, and the Spouse's consent acknowledges the
effect of such selection and is witnessed by a Plan representative or a notary
public. Each Beneficiary designation shall be in the form prescribed by the
Committee and will be effective only when filed with the Committee during the
Participant's or Former Participant's lifetime. Each Beneficiary designation
filed with the Committee will cancel all Beneficiary designations previously
filed with the Committee.
Section 8.2. No Beneficiary. If any Participant or Former Participant
----------- --------------
fails to designate a Beneficiary in the manner provided above, or if the
Beneficiary designated by a Participant ,or Former Participant dies before him
and the Participant or Former Participant fails to designate a new Beneficiary,
or if the Beneficiary designated by a deceased Participant or Former Participant
dies before complete distribution of the deceased Participant's or Former
Participant's benefit, the Committee shall direct the Trustee to distribute such
Participant's or Former Participant's benefits (or the balance thereof) to one
or more of the following, as determined by the Committee in its sole discretion:
(a) To the surviving Spouse of such Participant or Former Participant;
(b) To any one or more or all of the next of kin of such Participant or
Former Participant, and in such proportions, as the Committee shall determine;
or
(c) To the estate of the last to die of such Participant or Former
Participant and his Beneficiary or Beneficiaries; or
(d) To such recipient as may be required by applicable law.
Section 8.3. Mandatory Distribution of Death Benefits. The Committee may
----------- ----------------------------------------
not direct the Trustee to distribute the Participant's Nonforfeitable Account
Balance, to the Beneficiary or Designated Beneficiary, under a method of payment
which, as of the Required Beginning Date, does not satisfy the minimum
distribution requirements under Code Section 401(a)(9) and the applicable
Treasury regulations.
(a) Limits on Distribution Periods
------------------------------
(i) If the Participant or Former Participant dies after distribution
has commenced, the Trustee shall continue to distribute the
remaining portion of the Participant's or Former Participant's
Nonforfeitable Account Balance at least as rapidly as under the
method of distribution used prior to the Participant's death.
(ii) If the Participant or Former Participant dies before distribution
commences, the Trustee shall complete distribution of the
Participant's or Former Participant's Nonforfeitable Account
Balance by December 31 of the calendar year containing the fifth
(5th) anniversary of the Participant's or Former Participant's
death, except to the extent that the Designated Beneficiary
elects to receive distributions under
50
<PAGE>
paragraphs (A) or (B) below:
(A) If any portion of the Participant's or Former Participant's
Nonforfeitable Account Balance is payable to a Designated
Beneficiary, the Designated Beneficiary may elect
distributions over the life or over a period certain not
greater than the life expectancy of the Designated
Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in
which the Participant or Former Participant died;
(B) If the Designated Beneficiary is the Participant's Surviving
Spouse, the date distributions must begin under paragraph
(A) above shall not be earlier than the later of: (1)
December 31 of the calendar year immediately following the
calendar year in which the Participant or Former Participant
died; and (2) December 31 of the calendar year in which the
Participant or Former Participant would have attained age
seventy and one-half (70 1/2) years. If the Participant has
not made an election pursuant to this Section by the time of
death, the Designated Beneficiary must elect the method of
distribution no later than the earlier of: (1) December 31
of the calendar year in which distributions must begin under
this Section; or (2) December 31 of the calendar year which
contains the fifth (5th) anniversary of the date of death of
the Participant or Former Participant. If the Participant
has no Designated Beneficiary, or if the Designated
Beneficiary does not elect a method of distribution,
distribution of the Nonforfeitable Account Balance of the
Participant or Former Participant must be completed by
December 31 of the calendar year containing the fifth (5th)
anniversary of death.
(C) If the Surviving Spouse is the Beneficiary of any portion of
a deceased Participant's or Former Participant's benefits
under the Plan, the Surviving Spouse shall be permitted to
direct that this distribution of benefits commence at a
reasonable time following the death of the Participant or
Former Participant under applicable Treasury regulations.
(D) If the Surviving Spouse dies after the Participant or Former
Participant, but before payments to the Spouse begin, the
preceding provisions of this Section, with the exception of
paragraph (B), shall be applied as if the Surviving Spouse
had been the Participant.
(b) Minimum Distribution Amounts. If the Trustee will distribute a
----------------------------
Participant's or Former Participant's Nonforfeitable Account Balance in
accordance with the Designated Beneficiary's life expectancy, the minimum
distribution for a calendar year equals the Participant's Nonforfeitable Account
Balance as of the latest Valuation Date preceding the beginning of the calendar
year divided by the Designated Beneficiary's life expectancy.
For purposes of this Section, payments will be calculated by using the
expected return multiples specified in Tables V and VI of Treasury Regulations
Section 1.72-9. Life expectancy of a Surviving Spouse shall be recalculated
annually; however, in the case of any other Designated Beneficiary, life
expectancy will be calculated when the first payment commences without further
recalculation. For purposes of this Section, any amount paid to a child of the
Participant or Former Participant will be treated as if it had been paid to the
Surviving Spouse, if the amount becomes payable to the Surviving Spouse when the
child reaches the age of majority.
51
<PAGE>
(c) Commencement of Benefits
------------------------
(i) General Rule. For the purposes of this Section, distribution of
------------
a Participant's or Former Participant's Nonforfeitable Account
Balance is considered to begin on the Participant's or Former
Participant's Required Beginning Date or, if Section
8.3(a)(ii)(D) applies, the date distribution is required to begin
to the Surviving Spouse pursuant to Section 8.3(a)(ii)(A). If
distribution in the form of an annuity irrevocably commences
before the Required Beginning Date, the date distribution is
considered to begin is the date distribution actually commences.
Except as otherwise provided, the Required Beginning Date of a
Participant or Former Participant is the first day of April of
the calendar year following the calendar year in which the
Participant attains age seventy and one-half (70 1/2) years.
(ii) Transitional Rules. The Required Beginning Date of a Participant
------------------
or Former Participant who attains age seventy and one-half (70
1/2) years before January 1, 1988, shall be determined under
paragraphs (A) or (B) below:
(A) Other Than Five Percent Owners. The Required Beginning Date
------------------------------
of a Participant or Former Participant who is not a Five
Percent Owner is the first day of April of the calendar year
following the calendar year in which the later of retirement
or the attainment of age seventy and one-half (70 1/2) years
occurs. The Required Beginning Date of a Participant who is
not a Five Percent Owner who attains age seventy and one-
half (70 1/2) years during 1988 and who has not retired as
of January 1, 1989, is April 1, 1990.
(B) Five Percent Owners. The Required Beginning Date of a
-------------------
Participant or Former Participant who is a Five Percent
Owner during any year beginning after December 31, 1979, is
the first day of April following the later of:
(1) the calendar year in which the Participant attains age
seventy and one-half (70 1/2) years, or
(2) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
Five Percent Owner, or the calendar year in which the
Participant retires.
(iii) Five Percent Owner. A Participant is treated as a Five Percent
------------------
Owner for purposes of this Section 8.3 if the Participant is a
Five Percent Owner as defined in Section 2.26(g)(iii) and Code
Section 416(i) (determined under Code Section 416 but without
regard to whether the Plan is Top-Heavy) at any time during the
Plan Year ending with or within the calendar year in which the
owner attains age sixty-six and one-half (66 1/2) years or any
subsequent Plan Year. If distributions have begun to a Five
Percent Owner under this Section, they must continue to be
distributed, even if the Participant ceases to be a Five Percent
Owner in a subsequent year.
(d) Definitions
-----------
(i) Applicable Life Expectancy means the life expectancy calculated
--------------------------
using the attained age of the Designated Beneficiary as of the
Designated Beneficiary's birthday in the applicable calendar year
reduced by one for each calendar year which has elapsed since the
date life expectancy was calculated first. If life expectancy is
being recalculated, the Applicable Life Expectancy shall be the
life expectancy as recalcu-
52
<PAGE>
lated. The applicable calendar year shall be the first
Distribution Calendar Year and, if life expectancy is being
recalculated, the succeeding calendar year.
(ii) Designated Beneficiary means the individual who is designated as
----------------------
the Beneficiary under the Plan under Code Section 401(a)(9) and
the applicable Treasury regulations.
(iii) Distribution Calendar Year means a calendar year for which a
--------------------------
minimum distribution is required. For distributions beginning
after the Participant's death, the first Distribution Calendar
Year is the calendar year in which distributions are required to
begin pursuant to this Section.
(iv) Participant's Nonforfeitable Account Balance means the Account
--------------------------------------------
Balance as of the last Valuation Date in the calendar year
immediately preceding the Distribution Calendar Year (Valuation
Calendar Year), increased by the amount of any Contributions or
Forfeitures allocated to the Account Balance as of the dates in
the Valuation Calendar Year after the Valuation Date and
decreased by distributions made in the Valuation Calendar Year
after the Valuation Date. If any portion of the minimum
distribution for the first Distribution Calendar Year is made in
the second Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made in
the second Distribution Calendar Year shall be treated as if it
had been made in the immediately preceding Distribution Calendar
Year.
* * * * * * *
53
<PAGE>
ARTICLE NINE
------------
NOTICES
-------
Section 9.1. Notice to Trustee. As soon as practicable after a
----------- -----------------
Participant, Former Participant or Beneficiary becomes entitled to benefits in
accordance with Article 6, the Committee shall give written notice to the
Trustee, which notice shall include the following information and directions:
(a) The name and address of the Participant, Former Participant, or
Beneficiary.
(b) The percentage or amount to which the Participant, Former Participant,
or Beneficiary is entitled under Article 6.
(c) The time, manner and amount of payments to be made pursuant to Article
11.
Section 9.2. Subsequent Notices. At any time and from time to time after
----------- ------------------
giving the notice provided for in Section 9.1, the Committee may modify such
original notice or any subsequent notice by means of a further written notice or
notices to the Trustee, but any action taken or payments made by the Trustee
pursuant to the original notice and prior to the receipt of a subsequent notice
shall not be affected by such subsequent notice.
Section 9.3. Copy to Participant. A copy of each notice provided for in
----------- -------------------
Sections 9.1 and 9.2 shall be mailed by the Committee to the Participant or
Former Participant or to each Beneficiary involved, as the case may be, but if,
for any reason, such copy is not sent or received, that fact shall not affect
the validity of any notice' to the Trustee nor the validity of any action taken
or payment made pursuant thereto.
Section 9.4. Reliance Upon Notice. Upon receipt of any notice as provided
----------- --------------------
in this Article 9, the Trustee shall promptly take whatever action and make
whatever payments are called for therein.
* * * * * * *
54
<PAGE>
ARTICLE TEN
-----------
IN-SERVICE WITHDRAWALS AND LOANS TO PARTICIPANTS
------------------------------------------------
Section 10.1. Withdrawals from Accounts.
------------ -------------------------
(a) Savings Accounts. Upon the approval of the Plan by the shareholders of
----------------
the Company in accordance with Securities and Exchange Commission Rule 16b-3, a
Participant who is an Employee of such Employer may elect to withdraw any amount
up to the full amount of the funds or stock allocated to his Savings Account if
needed for a hardship; provided, however that (1) whether a Participant has
incurred a hardship shall be determined by the Committee, in its sole
discretion, based on a uniform and nondiscriminatory policy, and in accordance
with any Treasury regulations which may be promulgated in this area; (2) the
amount permitted to be withdrawn may not exceed the amount needed to meet the
costs of the hardship; and (3) EFFECTIVE JANUARY 1, 1989, only the actual
Savings Contributions may be withdrawn and not any earnings thereon. The
withdrawal shall be requested by filing a written application with the
Committee; provided, however, no withdrawal of less than $500 in cash or stock
value will be allowed, unless such lesser amount represents the entire balance
of such Participant's Savings Account. Any such withdrawal shall be effective
as of the close of business on the last day of the month following that month
during which such written application is filed with and approved by the
Committee on a form to be provided by the Committee; provided, however, that no
more than one withdrawal shall be allowed during each 12-month period, unless
the Committee, in its sole discretion, approves otherwise. Any such withdrawal
made pursuant to this Section 10.1 from an investment fund other than the
Company Stock Fund, shall be paid in a single cash sum and any such withdrawal
from the Company Stock Fund shall be paid by a distribution in kind of Company
Stock, plus an amount in cash equal to the value of any fractional share of
stock. The Committee shall give such directions to the Trustee as shall be
appropriate to effectuate the distribution in accordance with the terms hereof
of the amount being withdrawn. Such withdrawals described in Section 10.1(b)
below shall be debited to the Participant's Savings Account, and the Committee
shall charge the sum of such debits to the Company Stock Fund and/or other
investment fund(s) within such Savings Account in such manner as the Participant
designates in writing; provided however, if the Participant fails to make such a
written designation, the Committee shall charge the sum of such debits to the
investment fund to be determined by the Committee.
(b) Hardship Distributions. Distribution of Savings Contributions (and any
----------------------
earnings credited to a Participant's Account as of the end of the last Plan Year
ending before July 1, 1989), Employer Qualified Non-Elective Contributions, and
Employer Qualified Matching Contributions made pursuant to a Participant's
Savings Contributions, may be made to a Participant in the event of hardship.
For the purposes of this Section, a hardship distribution is defined as a
distribution necessary to satisfy an immediate and heavy financial need of an
Employee who lacks other available resources. Hardship distributions are
subject to the spousal consent requirements contained in Code Sections
401(a)(11) and 417.
(i) A distribution will be considered to satisfy an immediate and
heavy need of an Employee if the distribution is for:
(A) expenses incurred for or necessary to obtain medical care,
described in Code Section 213(d), of the Employee, the
Employee's spouse, children, or dependents;
(B) costs directly related to the purchase, excluding mortgage
payments, of a principal residence for the Employee;
(C) payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the
Employee, the Employee's
55
<PAGE>
spouse, children or dependents; or
(D) payment necessary to prevent the eviction of the Employee
from, or a foreclosure on the mortgage of, the Employee's
principal residence.
(ii) A distribution will be considered necessary to satisfy an
immediate and heavy financial need of an Employee who lacks other
available resources only if:
(A) the Employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all
plans maintained by the Employer; and
(B) the distribution is not in excess of the amount of an
immediate and heavy financial need, including amounts
necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from the
distribution.
(iii) In addition to the conditions above:
(A) each plan maintained by the Employer or a legally
enforceable arrangement provide that the Savings
Contributions and any Employee Contributions will be
suspended for twelve (12) months after the receipt of the
hardship distribution; and
(B) each plan maintained by the Employer or a legally
enforceable arrangement prohibit the Employee from making
Elective Deferrals for the Employee's taxable year
immediately following the taxable year of the hardship
distribution in excess of the applicable limit under Code
Section 402(g) for such taxable year less the amount of such
Employee's Elective Deferrals for the taxable year of the
hardship distribution.
(C) any hardship withdrawal to a Participant made pursuant to
this Section shall be increased by an amount equal to the
lesser of:
(1) all federal, state, and local income taxes and
associated penalties (including, if applicable, the
additional income tax described in Section 72(t) of the
Internal Revenue Code) imposed with respect to such
hardship withdrawal; or
(2) the amount, if any, in such Participant's Elective
Deferrals Account in excess of such hardship
withdrawal.
(c) Employer Contribution Accounts, Incentive Accounts and Rollover
---------------------------------------------------------------
Accounts. No in-service withdrawals shall be permitted from a Participant's
- --------
Employer Contribution Account or Rollover Account and, EFFECTIVE JANUARY 1,
1988, Incentive Accounts.
(d) One-Year Suspension from Participation. In the event that, in the
--------------------------------------
aggregate, twenty percent (20%) or more of the Company Stock held by the Trust
is, or, after the withdrawal in question, will be, beneficially owned, for
purposes of section 16 of the Securities Exchange Act of 1934, by officers and
directors of the Company and persons who are beneficial owners of 10% or more of
the outstanding Company Stock, any Participant who shall elect to make an in-
service withdrawal pursuant to Section 10.1(a) shall be ineligible to
participate in the Plan until the next Entrance Date following the twelve (12)
month period commencing
56
<PAGE>
upon the date of such withdrawal.
Section 10.2. Loans to Participants.
------------ ---------------------
EFFECTIVE SEPTEMBER 1, 1994, the Committee may authorize a loan to the
Participants and to any Former Participant who is a "party-in-interest" (as
defined in ERISA Section 3(14)) who makes application therefor, of amounts
credited to the Participant's Accounts. Provided, however, that no portion of
-------- -------
the Annuity-Restricted Account (as defined in Section 11.2) shall be available
for a loan. Each such loan shall be subject to the following provisions:
(a) The amount of any loan, when added to the outstanding balance of all
other loans to the Participant or Former Participant under this Plan shall not
exceed the lesser of:
(1) $50,000, reduced by the excess (if any) of (i) the highest
outstanding balance of loans to the Participant or Former Participant
from the Plan and all related plans during the one year period ending
on the day before the date the loan is made, over (ii) the outstanding
balance of loans to the Participant or Former Participant from the
Plan and all related plans on the date the loan is made; and
(2) 50% of the amount in which the Participant would have a vested
interest in the event his Separation from Service was to occur on the
date the loan is made.
For purposes of this Section, a related plan is any "qualified employer
plan", as defined in Code Section 72(p)(3), sponsored by the Employers or any
related employer, determined according to Code Section 72(p)(2)(C).
(b) Each loan shall be evidenced by a promissory note payable to the order
of the Plan. Each loan shall be adequately secured as determined by the
Committee. A loan shall be considered adequately secured if the amount of the
loan at the date the loan is granted does not exceed one-half of the amount in
which the Participant would have a vested interest in the event of his
Separation from Service.
(c) The Committee shall determine the rate of interest to be paid with
respect to each loan, which shall be a reasonable rate of interest within the
meaning of Code Section 4975 and which is determined in accordance with the
requirements of Section 408 of ERISA and the regulations promulgated thereunder.
(d) Each such loan shall provide for the repayment of principal and accrued
interest in substantially level amortized payments payable not less frequently
than quarterly through payroll deduction payments.
(e) Each loan shall extend for a stated period determined by agreement of
the Participant and the Committee, not exceeding five years. The limitation in
the preceding sentence shall not apply to any loan designated by the Committee
as a home loan. For purposes of this Section 10.2, a "home loan" is a loan used
to acquire any dwelling unit which within a reasonable time is to be used as the
principal residence of the Participant. A home loan shall not exceed ten (10)
years.
(f) If a loan to a Participant is outstanding on the date a distribution is
to be made from the Plan with respect to a portion of the Participant's Accounts
represented by the loan, the balance of the loan, or a portion thereof equal to
the amount to be distributed, if less, shall on such date become due and
payable; provided that if the Participant is a party-in-interest (as defined in
ERISA Section 3(14), such loan shall not become due and payable if renegotiated
on terms acceptable to the Committee. The portion of the loan due and payable
shall be satisfied by offsetting such amount against the amount to be
distributed to the Participant. Alternatively, the Committee may in its
discretion direct that the portion of the Participant's Accounts equal
57
<PAGE>
to the outstanding loan balance be distributed in kind by distribution of the
Participant's note.
(g) If a loan to a Participant is outstanding at the time of the
Participant's death, and if the loan is not repaid by the Participant's executor
or administrator, the note shall be distributed in kind to the Participant's
Beneficiary.
(h) If a Participant fails to pay interest or principal on an outstanding
loan when due, his Account from which the loan was made shall, at the direction
of the Committee, be reduced by the unpaid amount if a withdrawal would be
permitted from said Account pursuant to Article 6. The Participant shall be
treated as having received such a distribution and shall receive credit under
the promissory note for the delinquent payment accordingly. If the Committee
does not take such action, the Committee shall take whatever steps (including
legal action) it deems necessary to collect the unpaid amount.
(i) In accordance with the foregoing standards and requirements, loans
shall be available to all Participants on a reasonably equivalent basis. A
Participant shall only be entitled to have one (1) loan in effect at the same
time. Each loan must be in a minimum amount of $1,000.
(j) All loans shall be governed by such rules and regulations as the
Committee may adopt which rules and regulations are hereby incorporated by
reference, and applications for loans shall be made on such forms as the
Committee may provide for such purpose. The Committee shall cause to be
furnished to any Participant receiving a loan any information required to be
furnished pursuant to the Federal Truth in Lending Act, if applicable, or
pursuant to any other applicable law.
(k) The portion of a Participant's Accounts represented by the outstanding
loan principal shall be segregated and shall not share in the income or losses
of the Plan. In lieu of sharing in such income or losses, the Participant's
Accounts shall be credited with all interest paid by the Participant on the
loan. The Trustee may charge to the Participant's Accounts any expenses
attributable to the loan.
(l) The investment funds held for a Participant's Accounts that are to be
liquidated to provide cash equal to the loan principal shall be selected by the
Committee in the order of priority established by such rules as the Committee
may adopt.
* * * * * * *
58
<PAGE>
ARTICLE ELEVEN
--------------
METHODS OF PAYMENT
------------------
Section 11.1. Participant Election.
------------ --------------------
(a) EFFECTIVE OCTOBER 1, 1987 THROUGH DECEMBER 31, 1988, subject to the
provisions of Section 6.3(c) and this Article 11, 60 days after the close of the
Plan Year in which a Participant, Former Participant or Beneficiary becomes
entitled to a distribution pursuant to Sections 6.1 or 6.2, the Committee shall
direct by written notice as provided in Article 9 that such distribution shall
be made to the Participant, Former Participant or his Beneficiary through a
single lump-sum distribution in Company Stock and cash in lieu of fractional
shares from any account invested in the Company Stock Fund and in cash from any
account invested in the other investment fund(s).
EFFECTIVE JANUARY 1, 1989, THE FOLLOWING PROVISIONS SHALL APPLY:
(a) (i) Subject to the provisions of this Article 11, upon the Retirement
or Disability of a Participant, or the death of a Participant or
former Participant, distribution of amounts to which a Participant,
former Participant or Beneficiary became entitled pursuant to Section
6.1 of the Plan shall commence as soon as practicable following the
event which caused entitlement to a distribution, and shall be
completed as soon as reasonably possible following the end of the Plan
Year in which the Participant or Former Participant Retired, became
Disabled or died, and in no event later than sixty (60) days after the
end of such Plan Year.
(ii) Subject to the provisions of this Article 11, distribution of
amounts to which a Participant becomes entitled pursuant to Section
6.2 and 6.3(c) of the Plan shall be completed as soon as practicable
following the end of the Plan Year in which the event occurred which
caused entitlement to a distribution, and in no event later than sixty
(60) days after the end of such Plan Year.
(iii) The Committee shall direct by written notice as provided in
Article 9 that distributions shall be made in a lump sum distribution
in Company Stock (and cash in lieu of fractional shares) from any
account balances invested in the Company Stock Fund and in cash from
any account balances invested in the other investment fund(s).
(b) An amount to which a Participant, Former Participant or Beneficiary is
entitled pursuant to Section 6.4(b) shall be paid in cash to such Participant,
Former Participant or Beneficiary within 30 days after the determination of such
amount or, if later, the date a payment is made to such Participant, Former
Participant or Beneficiary under Section 11.1(a).
(c) Notwithstanding anything to the contrary herein contained, unless a
Participant or Former Participant has attained age sixty-five (65), if the value
of the vested interest in his Accounts exceeds $3,500, no distribution may be
made to such Participant or Former Participant without his express written
consent.
(d) Notwithstanding anything to the contrary herein contained, a
Participant's benefits will in all events be paid in a lump sum as of the end of
the Plan Year in which such Participant terminates employment if the total value
of his vested interest in his Accounts is less than or equals $3,500.
(e) No officer or director of the Company or beneficial owner of 10% or
more of the outstanding Company Stock shall receive a distribution from an
account invested in the Company Stock Fund unless and until the Plan is approved
by the shareholders of the Company in accordance with Securities and Exchange
59
<PAGE>
Commission Rule 16b-3.
Section 11.2. Joint and Survivor Annuity.
------------ --------------------------
(a) Notwithstanding any provision of the Plan to the contrary, if any
portion of a Participant's Rollover Account or W & B Plan Rollover Account
represents a transfer of assets, directly or indirectly, from a defined benefit
plan, or from a defined contribution plan that is either subject to the funding
standards of Code Section 412 or otherwise subject to the requirements of Code
Section 401(a)(11)(A), such portion (referred to in this Article 11 as the
"Annuity-Restricted Account") shall, if the Participant does not die before the
Annuity Starting Date, be distributed in the form of a qualified joint and
survivor annuity in the absence of a qualified waiver under Section 11.3, or
except as otherwise provided in Section 6.3(c). For purposes of this paragraph,
Annuity Starting Date means the first day of the first period for which an
amount is payable as an annuity, or, in the case of the benefit not payable in
the form of an annuity, the first day on which all events have occurred which
entitled the participant to such benefit.
The qualified joint and survivor annuity shall be purchased with the total
amount (as determined under Article 11) credited to the Participant's Annuity-
Restricted Account subject to this Section 11.2.
(b) Notwithstanding any provision of the Plan to the contrary, in the case
of any Participant who dies before distribution of his benefits under the Plan
has commenced, a qualified preretirement survivor annuity shall be payable from
the Annuity-Restricted Account (as determined under Article 11) to the Spouse of
the Participant in the absence of a qualified waiver under Section 11.3, or
except as otherwise provided in Section 6.3(c).
Section 11.3. Joint and Survivor Annuity Requirements.
------------ ---------------------------------------
The provisions of this Section shall apply to any Participant who is
credited with at least one (1) Hour of Service with the Employer on or after
August 23, 1984. The provisions of this Section shall apply to all vested
benefits of the Participant, whether the Participant became vested in the
benefit before or after death, which are payable under the Plan, including any
proceeds from Contracts owned by the Plan.
(a) Qualified Joint and Survivor Annuity. Unless an optional form of
------------------------------------
benefit is selected pursuant to a Qualified Election within the ninety (90) day
period ending on the Annuity Starting Date, a married Participant's
Nonforfeitable Account Balance will be paid in the normal form of a Qualified
Joint and Survivor Annuity, defined in Section 11.3(c)(vi), and an unmarried
Participant's Nonforfeitable Account Balance will be paid in the normal form of
an immediate life annuity. The Participant may elect to have the annuity
distributed upon attainment of the Earliest Retirement Age under the Plan. A
Participant shall be considered vested even if the Participant is only vested in
Employee Contributions. For purposes of satisfying the Qualified Joint and
Survivor Annuity requirements, Account Balances shall mean benefits derived from
both Employee and Employer Contributions.
(b) Qualified Preretirement Survivor Annuity. Unless an optional form of
----------------------------------------
benefit has been selected within the Election Period pursuant to a Qualified
Election, if a Participant dies before the Annuity Starting Date, then the
Participant's Nonforfeitable Account Balance shall be applied toward the
purchase of a Qualified Preretirement Survivor Annuity, defined in Section
11.3(c)(vii). The Surviving Spouse may elect to commence payment of the
Qualified Preretirement Survivor Annuity within a reasonable period after the
Participant's death. For purposes of this Section 11.3(b), the amount of the
Qualified Preretirement Survivor Annuity attributable to Employee Contributions
shall not be an amount in excess of the ratio of Employee and Employer
Contributions. In determining the value of the Qualified Preretirement Survivor
Annuity, any portion of a Participant's Individual Account which is pledged as
collateral to secure payment of a Plan Participant loan shall be included in the
Nonforfeitable Account Balance.
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<PAGE>
(c) Definitions
-----------
(i) Annuity Starting Date means the first day of the first period for
---------------------
which an amount is paid as an annuity or any other form.
(ii) Election Period means the period which begins on the first day of
---------------
the Plan Year in which the Participant attains age thirty-five
(35) years and ends on the date of the Participant's death. If a
Participant separates from Service prior to the first day of the
Plan Year in which the Participant attains age thirty-five (35)
years, for the Account Balance as of the date of separation, the
Election Period shall begin on the date of separation. A
Participant who will not yet attain age thirty-five (35) years as
of the end of any current Plan Year may make a Special Qualified
Election to waive the Qualified Preretirement Survivor Annuity
for the period beginning on the date of the election and ending
on the first day of the Plan Year in which the Participant will
attain age thirty-five (35) years. The election shall not be
valid unless the Participant receives a written explanation of
the Qualified Preretirement Survivor Annuity in such terms as are
comparable to the explanation required under Section 11.3(d).
Qualified Preretirement Survivor Annuity coverage will be
automatically reinstated as of the first day of the Plan Year in
which the Participant attains age thirty-five (35) years. Any
new waiver on or after the date shall be subject to the full
requirements of this Article.
(iii) Earliest Retirement Age means the earliest date on which, under
-----------------------
the Plan, the Participant could elect to receive retirement
benefits.
(iv) Nonforfeitable Account Balance means the aggregate value of the
------------------------------
Participant's Nonforfeitable Account Balance derived from
Employer and Employee Contributions, including rollovers, whether
vested before or upon death, including the proceeds of Contracts,
if any, on the Participant's life. The provisions of this
Article shall apply to a Participant who is vested in amounts
attributable to Employer Contributions, Employee Contributions,
or both, at the time of death or distribution.
(v) Qualified Election means a waiver of a Qualified Joint and
------------------
Survivor Annuity or a Qualified Preretirement Survivor Annuity.
Any waiver of a Qualified Joint and Survivor Annuity or a
Qualified Preretirement Survivor Annuity shall not be effective
unless:
(A) the Participant's Spouse to whom the Survivor Annuity or
Preretirement Survivor Annuity is payable consents in
writing to the waiver election;
(B) the election designates a specific Beneficiary, including
any class of Beneficiaries or any contingent Beneficiaries;
(C) the Spouse is the Participant's sole primary Beneficiary,
the Spouse consents to the Participant's Beneficiary
designation or consents to any change in the Participant's
Beneficiary designation without any further spousal consent;
(D) the Spouse's consent acknowledges the effect of the
election; and
(E) the Spouse's consent is witnessed by a Plan representative
or notary public.
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<PAGE>
(F) Additionally, a Participant's waiver of the Qualified Joint
and Survivor Annuity shall not be effective unless the
election designates a form of benefit payment and the Spouse
consents to the form of payment designated by the
Participant or consents to any change in that designated
form of payment without any further spousal consent.
Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of a Plan representative that
written consent may not be obtained because there is no Spouse,
or the Spouse cannot be located, a waiver will be deemed a
Qualified Election. If the Spouse is legally incompetent to give
consent, the Spouse's legal guardian, even if the guardian is the
Participant, may give consent. Also, if the Participant is
legally separated or the Participant has been abandoned (within
the meaning of local law) and the Participant has a court order
to such effect, spousal consent is not required unless a
Qualified Domestic Relations Order described in Code Section
414(p) provides otherwise. Any consent obtained under this
provision, or establishment that the consent of a Spouse may not
be obtained, shall be effective only with respect to the Spouse
who signs the consent, or in the event of a deemed Qualified
Election, the designated spouse. A consent that permits
designations by the Participant without any requirement of
further consent by the Spouse must acknowledge that the Spouse
has the right to limit consent to a specific Beneficiary, and a
specific form of benefit where applicable, and that the Spouse
voluntarily elects to relinquish either or both of the rights. A
revocation of a prior waiver may be made by a Participant without
the consent of the Spouse at any time before the commencement of
benefits. The number of revocations shall not be limited. No
consent obtained under this provision shall be valid unless the
Participant has received notice as provided in Section 11.3(d).
After the Participant's death, a Beneficiary may change the
optional form of survivor benefit as permitted by the Plan.
(vi) Qualified Joint and Survivor Annuity means, in the case of a
------------------------------------
married Participant who does not die before the Annuity Starting
Date, an immediate annuity for the life of the Participant with a
Survivor Annuity for the life of the Spouse which is equal to
fifty percent (50%) of the amount of the annuity which is payable
during the joint lives of the Participant and the Spouse and
which is the amount of benefit which can be purchased with the
Participant's Nonforfeitable Account Balance. In the case of an
unmarried Participant who does not die before the Annuity
Starting Date, the Qualified Joint and Survivor Annuity
requirement means an annuity for the life of the Participant
which is the amount of benefit which can be purchased with the
Participant's Nonforfeitable Account Balance.
(vii) Qualified Preretirement Survivor Annuity means an annuity for
----------------------------------------
the life of the Participant's Spouse, the payments under which
shall be equal to the amount of benefit which can be purchased
with the Nonforfeitable Account Balance of the Participant. The
Participant's Surviving Spouse will receive the same benefit that
would be payable if the Participant had retired with an immediate
Qualified Joint and Survivor Annuity on the day before the
Participant's date of death.
(viii) Spouse, Surviving Spouse means the Spouse or Surviving Spouse
------------------------
of the Participant, provided that a former spouse will be treated
as the Spouse or Surviving Spouse and a current spouse will not
be treated as the Spouse or Surviving Spouse to the extent
provided under a Qualified Domestic Relations Order described in
Code Section 414(p).
62
<PAGE>
(d) Notice Requirements
-------------------
(i) For a Qualified Joint and Survivor Annuity described in Section
11.3(c)(vi), the Administrator shall provide, no less than thirty
(30) days and no more than ninety (90) days prior to the Annuity
Starting Date, to each Participant a written explanation of:
(A) the terms and conditions of a Qualified Joint and Survivor
Annuity;
(B) the Participant's right to make and the effect of an
election to waive the Qualified Joint and Survivor Annuity
form of benefit;
(C) the rights of a Participant's Spouse; and
(D) the right to make, and the effect of, a revocation of a
previous election to waive the Qualified Joint and Survivor
Annuity.
(ii) For a Qualified Preretirement Survivor Annuity described in
Section 11.3(c)(vii), the Administrator shall provide, within the
applicable notice period for the Participant, to each Participant
a written explanation of the Qualified Preretirement Survivor
Annuity in such terms and in such manner comparable to the
explanation provided for meeting the requirements of Section
11.3(d)(i) applicable to a Qualified Joint and Survivor Annuity.
The applicable notice period for the waiver of the Qualified
Preretirement Survivor Annuity is whichever of the following
periods ends last:
(A) the period beginning with the first day of the Plan Year in
which the Participant attains age thirty-two (32) years and
ending with the close of the Plan Year preceding the Plan
Year in which the Participant attains age thirty-five (35)
years;
(B) a reasonable period ending after the individual becomes a
Participant;
(C) a reasonable period ending after Section 11.3(d)(iii) ceases
to apply to the Participant; or
(D) a reasonable period ending after this Article first applies
to the Participant.
Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from Service in the
case of a Participant who separates from Service before attaining
age thirty-five (35) years.
For purposes of applying the preceding paragraph, a reasonable
period ending after the events described in (B), (C) and (D) is
the end of the two (2) year period beginning one (1) year prior
to the date the applicable event occurs and ending one (1) year
after that date. In the case of a Participant who separates from
Service before the Plan Year in which the Participant attains age
thirty-five (35) years, notice shall be provided within the two
(2) year period beginning one (1) year prior to separation and
ending one (1) year after separation. If the Participant
thereafter returns to employment with the Employer, the
applicable period for the Participant shall be redetermined.
63
<PAGE>
If a Participant enters the Plan after the first day of the Plan
Year in which the Participant attained age thirty-two (32) years,
the Administrator shall provide notice no later than the close of
the second Plan Year succeeding the entry of the Participant in
the Plan.
(iii) Notwithstanding the other requirements of this Section 11.3(d),
the respective notices prescribed by this Section shall be given
to a Participant even if the Plan fully subsidizes the costs of a
Qualified Joint and Survivor Annuity or Qualified Preretirement
Survivor Annuity. For purposes of this Section 11.3(d), a plan
fully subsidizes the costs of a benefit if under the plan the
failure to waive the benefit by a Participant would not result in
a decrease in any plan benefit with respect to the Participant
and would not result in increased contributions from the
Participant.
(e) Profit Sharing Plan Exception. This Plan is a profit sharing plan and
-----------------------------
the provisions of this Section 11.3 apply only to a Participant described in
Section 11.2 and this Section. The preceding provisions of this Section 11.3 do
not apply to any Participant in the Plan except:
(i) a Participant described in Section 11.2;
(ii) a Participant as respects whom the Plan is a direct or indirect
transferee from a plan subject to the survivor annuity
requirements of Code Sections 401(a)(11) and 417 and the Plan
received the transfer after December 31, 1984, unless the
transfer is an Elective Transfer;
(iii) a Participant who elects a life annuity distribution (if the
Plan is required to provide a life annuity distribution option);
and
(iv) a Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided under
this Plan.
Section 11.4. Notice and Explanation to Participants. The Committee shall
------------ --------------------------------------
provide each Participant who has an Annuity-Restricted Account within a
reasonable period of time prior to the commencement of benefits under the Plan a
written explanation setting forth the provisions of Section 11.3.
Section 11.5. Direct Rollover Optional Form of Benefit.
------------ ----------------------------------------
(a) Direct Rollover. This Section applies to distributions made on or
---------------
after JANUARY 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Section,
a distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee in a direct
rollover.
(b) Definitions
-----------
(i) Eligible Rollover Distribution. An eligible rollover
------------------------------
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
64
<PAGE>
distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation
with respect to Employer Securities).
(ii) 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.
(iii) 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 Section 414(p) of the
Code, are distributees with regard to the interest of the spouse
or former spouse.
(iv) Direct Rollover. A direct rollover is a payment by the plan to
---------------
the eligible retirement plan specified by the distributee.
Section 11.6. Election to Defer Receipt of Benefits. Notwithstanding the
------------ -------------------------------------
foregoing, a Participant who leaves the employment of the Employer before his or
her Normal Retirement Date or Early Retirement Date may elect to leave his or
her Nonforfeitable Account Balance under the management of the Trustee until
Normal Retirement Date or Early Retirement Date. The Trustee shall invest and
reinvest and shall credit and charge the Individual Account with its
proportionate share of gains and losses of the Trust Fund pursuant to Article 5
until the Nonforfeitable Account Balance is paid out to the Former Participant
under this Article. Any election made under this Section shall be irrevocable
and shall be made no later than fourteen (14) days before the electing
Participant becomes entitled to receive his or her Nonforfeitable Account
Balance in the Plan. Notwithstanding the foregoing, a Participant who has
elected to leave his or her Nonforfeitable Account Balance under the management
of the Trustee may later elect to have the Account Balance transferred to any
pension or profit sharing plan maintained by another Employer in which the
Participant has, at the time of the later election, become a participant under
the transferee plan.
Section 11.7. Election of Form of Payment of Benefits
------------ ---------------------------------------
(a) The Participant, Former Participant, or Beneficiary shall elect the
form or forms of payment of benefits permitted in Section 11.1 which the
Committee and Trustee shall implement. Not earlier than ninety (90) days, but
not later than thirty (30) days, before the Participant's Annuity Starting Date,
the Committee must provide a benefit notice to a Participant who is eligible to
make an election under this Section. The Participant's Annuity Starting Date
means the first day of the first period for which an amount is paid as an
annuity or any other form. The benefit notice must explain the optional forms of
benefit in the Plan, including the material features and relative values of
those options, and the Participant's right to defer distribution until he or she
attains the later of Normal Retirement Age or age 62.
(b) This subparagraph (b) applies to all distributions made on or after
JANUARY 1, 1993. If a distribution is one to which Code Sections 401(a)(11) and
417 do not apply, such distribution may commence less than thirty (30) days
after the notice required under Section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(i) the Plan Administrator clearly informs the Participant that he or
she has a right to a period of at least thirty (30) days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
65
<PAGE>
(ii) the Participant, after receiving the notice, affirmatively elects
a distribution.
(c) If a Participant, Former Participant, or Beneficiary makes an election
prescribed by this Section, the Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Account Balance pursuant to that election. Any
election under this Section is subject to the mandatory distribution
requirements of Sections 11.9 and 8.3 and the survivor annuity requirements of
Section 11.3, if applicable. The Participant, Former Participant or Beneficiary
must make an election under this Section by filing an election form with the
Committee at any time before the Trustee otherwise would commence to pay a
Participant's Account Balance under the applicable requirements of Articles 6, 8
and 11.
Section 11.8. Limit on Commencement of Distribution.
------------ -------------------------------------
(a) (1) Unless both the Employer and the Participant or Former
Participant agree otherwise, the payment of benefits to which a
Participant, Former Participant or Beneficiary is entitled shall in no
event commence later than the latest of the following dates:
(A) the 60th day after the close of the Plan Year in which such
Participant or Former Participant attains his Normal Retirement
Date;
(B) the 60th day after the close of the Plan Year in which occurs
the date 10 years after the date such Participant or Former
Participant first commenced participation in the Plan; or
(C) the 60th day after the close of the Plan Year in which such
Participant or Former Participant terminates his employment with
all Employers.
(2) If payment does not commence earlier under Section 11.6(a)(1), the
payment of benefits to which a Participant, Former Participant or
Beneficiary is entitled will be distributed or commence to be
distributed to him not later than the first day of April following the
calendar year in which he attains age 70-1/2.
(b) Death Distribution Provisions. Upon the death of the Participant (or
-----------------------------
Former Participant), the following distribution provisions shall take effect:
(1) If the Participant dies after distribution of his Accounts have
commenced, the remaining portion of such Accounts will continue to be
distributed at least as rapidly as under the method of distribution
being used prior to the Participant's death.
(2) If the Participant dies before distribution of his Accounts have
commenced, and the value of the Participant's vested account balance
in his Accounts is not greater than $3,500, the Beneficiary shall
receive a distribution of the value of his entire vested account
balance, and the nonvested portion will be treated as a forfeiture.
(3) If the Participant dies before distribution of his Accounts have
commenced, and the value of his vested account balance in his Accounts
is greater than $3,500, the Participant's entire Accounts (to the
extent vested) will be distributed no later than five years after the
Participant's death.
Section 11.9. Mandatory Distribution of Retirement Benefits. The
------------ ---------------------------------------------
Committee may not direct the Trustee to distribute the Participant's
Nonforfeitable Account Balance, nor may the Participant elect to make the
Trustee distribute the Nonforfeitable Account Balance under a method of payment
which, as of the Required Beginning Date, does not satisfy the minimum
distribution requirements under Code Section
66
<PAGE>
401(a)(9) and the applicable Treasury regulations.
(a) Limits on Distribution Periods. As of the first Distribution Calendar
------------------------------
Year, distributions, if not made in a lump sum, may only be made over
one of the following periods or a combination of such periods:
(i) the life of the Participant;
(ii) the life of the Participant and a Designated Beneficiary, subject
to the requirements of Code Section 401(a)(9) and the applicable
Treasury regulations;
(iii) a period certain not extending beyond the life expectancy of
the Participant; or
(iv) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a Designated Beneficiary.
Under no circumstances may a Participant elect payment of benefits in
the form of an annuity. All distributions required under this Article
shall be determined and made under Code Section 401(a)(9) and
applicable Treasury regulations, including the minimum distribution
incidental benefit requirements of Treasury Regulations Section
1.401(a)(9)-2. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum unless the Participant, pursuant to
this Article, makes a valid election to receive an alternative form of
payment.
(b) Minimum Distribution Amounts
----------------------------
(i) Non-Lump Sum Distribution. If the Participant's entire interest
--------------------------
will be distributed in other than a lump sum, then the minimum
distribution for a calendar year equals the Participant's
Nonforfeitable Account Balance as of the last Valuation Date
preceding the beginning of the calendar year divided by the
Participant's life expectancy or, if applicable, the joint and
last survivor expectancy of the Participant and his or her
Designated Beneficiary, subject to the requirements of Code
Section 401(a)(9) and the applicable Treasury regulations. The
Committee will increase the Participant's Nonforfeitable Account
Balance, as determined on the relevant Valuation Date, for
Contributions or Forfeitures allocated after the Valuation Date
and by December 31 of the Valuation Calendar Year, and will
decrease the valuation by distributions made after the Valuation
Date and by December 31 of the Valuation Calendar Year. For
purposes of this valuation, the Committee will treat any portion
of the minimum distribution for the first Distribution Calendar
Year made after the close of that year as a distribution
occurring in the first Distribution Calendar Year. Life
expectancy and joint and last survivor expectancy must be
computed by the use of the expected return multiples contained in
Section 1.72-9 of the Income Tax Regulations. Unless otherwise
elected by the Participant, or Spouse in the case of
distributions described in this Section 6.4(b), by the time
distributions are required to begin, life expectancies shall be
recalculated annually. The election shall be irrevocable for the
Participant, or spouse, and shall apply to all subsequent years.
The life expectancy of a non-spouse Beneficiary may not be
recalculated.
(ii) Non-Spouse Beneficiary. If the Participant's spouse is not the
----------------------
Designated Beneficiary, a method of payment to the Participant
may not provide more than incidental benefits to the Beneficiary.
The Plan must satisfy the minimum distribution incidental benefit
("MDIB") requirements in the applicable Treasury regulations
67
<PAGE>
under Code Section 401(a)(9) for distributions made on or after
the Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the
Committee will compute the minimum distribution required by this
Section 6.4(b) by substituting the applicable MDIB divisor for
the applicable life expectancy factor, if the MDIB divisor is a
lesser number. Following the Participant's death, the Committee
will compute the minimum distribution required by this Section
6.4(b) solely on the basis of the applicable life expectancy
factor and will disregard the MDIB factor. For Plan Years
beginning prior to January 1, 1989, the Plan satisfies the
incidental benefits requirement if the distributions to the
Participant satisfied the MDIB requirement or if the present
value of the retirement benefits payable solely to the
Participant is greater than fifty percent (50%) of the present
value of the total benefits payable to the Participant and
Beneficiaries. The Committee must determine whether benefits to
the Beneficiary are incidental on the date the Trustee is to
commence payment of the retirement benefits to the Participant,
or on the date the Trustee redetermines the payment period to the
Participant.
(c) Commencement of Benefits
------------------------
(i) General Rule. The Trustee must distribute or begin to distribute
------------
the entire interest of a Participant no later than the
Participant's Required Beginning Date. The minimum distribution
for the first Distribution Calendar Year is due by the
Participant's Required Beginning Date. The minimum distribution
for each subsequent Distribution Calendar Year, including the
calendar year of the Participant's Required Beginning Date, is
due by December 31 of that year. Except as provided in clause
(ii), a Participant's Required Beginning Date is the April 1
following the close of the calendar year in which the Participant
attains age seventy and one-half (70 1/2) years.
(ii) Transitional Rule. The Required Beginning Date of a Participant
-----------------
who attains age seventy and one-half (70 1/2) years before
January 1, 1988, shall be determined under the following
paragraphs (A) or (B):
(A) Other Than Five Percent Owners. The Required Beginning Date
------------------------------
of a Participant who is not a Five Percent Owner (as defined
in (iii) below) is the first day of April of the calendar
year following the calendar year in which the later of
retirement or attainment of age seventy and one-half (70
1/2) years occurs. The Required Beginning Date of a
Participant who is not a Five Percent Owner, who attains age
seventy and one-half (70 1/2) years during 1988 and who has
not retired on January 1, 1989, is April 1, 1990.
(B) Five Percent Owners. The Required Beginning Date of a
-------------------
Participant who is a Five Percent Owner during any year
beginning after December 31, 1979, is the first day of April
following the later of:
(I) the calendar year in which the Participant attains age
seventy and one-half (70 1/2) years; or
(II) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
Five Percent Owner, or the calendar year in which the
Participant retires.
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<PAGE>
(iii) Five Percent Owner. A Participant is treated as a Five Percent
-------------------
Owner for purposes of this Section if the Participant is a Five
Percent Owner as defined in Section 2.26(g)(iii) and Code Section
416(i) (determined under Code Section 416 but without regard to
whether the Plan is Top-Heavy) at any time during the Plan Year
ending with or within the calendar year in which the owner
attains age sixty-six and one-half (66 1/2) years or any
subsequent Plan Year. Once distributions have begun to a Five
Percent Owner under this Section, they must continue to be
distributed, even if the Participant ceases to be a Five Percent
Owner in a subsequent year.
(d) Definitions
-----------
(i) Applicable Life Expectancy means the life expectancy (or joint
--------------------------
and last survivor expectancy) calculated using the attained age
of the Participant (or Designated Beneficiary) as of the
Participant's (or Designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was calculated
first. If life expectancy is being recalculated, the applicable
life expectancy shall be the life expectancy as so recalculated.
The applicable calendar year shall be the first Distribution
Calendar Year and, if life expectancy is being recalculated, the
succeeding calendar year.
(ii) Designated Beneficiary means the individual who is designated as
----------------------
the Beneficiary under the Plan in accordance with Code Section
401(a)(9) and the applicable Treasury regulations.
(iii) Distribution Calendar Year means a calendar year for which a
--------------------------
minimum distribution is required. For distributions beginning
before the Participant's death, the first Distribution Calendar
Year is the calendar year immediately preceding the calendar year
which contains the Participant's Required Beginning Date.
(iv) Participant's Nonforfeitable Account Balance means the account
--------------------------------------------
balance as of the last Valuation Date in the calendar year
immediately preceding the Distribution Calendar Year (Valuation
Calendar Year), increased by the amount of any Contributions or
Forfeitures allocated to the account balance as of the dates in
the Valuation Calendar Year after the Valuation Date and
decreased by distributions made in the Valuation Calendar Year
after the Valuation Date. If any portion of the minimum
distribution for the first Distribution Calendar Year is made in
the second Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made in
the second Distribution Calendar Year shall be treated as if it
had been made in the immediately preceding Distribution Calendar
Year.
Section 11.10. Minority or Disability Payments. During the minority or
------------- -------------------------------
disability of any person entitled to receive benefits hereunder, the Committee
may direct the Trustee to make payments thereof to the guardian or other legal
representative authorized under applicable law to receive property on behalf of
such person. If permitted under applicable law, the Committee may direct such
payments to be made directly to such person, to such person's spouse, to a
relative of such person or to any individual or institution having custody of
such person. If such applicable law does not permit payment of benefits to be
made as provided above in this Section 11.9, then such payments shall be made in
such manner, at such time, and to such person or entity as may be required or
permitted under such applicable law. Except as may otherwise be provided by
applicable law: (i) neither the Committee nor the Trustee shall be required to
see to the application of any payments made under this Section 11.9; and (ii)
the receipt of the payee shall be conclusive as to all interested parties.
69
<PAGE>
Section 11.11. Unclaimed Benefits. If at, after, or during the time when
------------- ------------------
a benefit hereunder is payable to any Participant, Former Participant or
Beneficiary, the Committee, upon request of the Trustee, or at its own instance,
mails by registered or certified mail to such Participant, Former Participant or
Beneficiary at his last known address, a written demand for his then address, or
for satisfactory evidence of his continued life, or both, and if such
Participant, Former Participant, or Beneficiary shall fail to furnish the same
to the Committee within two years from the mailing of such demand, then, unless
otherwise required by applicable law, the Committee may, in its sole discretion,
determine that such Participant, Former Participant or Beneficiary has forfeited
his right to such benefit and may declare such benefit, or any unpaid portion
thereof, terminated as if the death of the Participant, Former Participant or
Beneficiary (with no surviving Beneficiary) had occurred on the date of the last
payment made thereon or on the date such Participant, Former Participant or
Beneficiary first became entitled to receive benefit payments, whichever is
later. All such forfeitures shall be used to reduce future Employer
Contributions, shall at all times remain Trust Assets, and in no event shall
they escheat to any governmental unit under any escheat law. If such applicable
law does not permit this disposition of unclaimed benefits then such unclaimed
benefits shall be administered in such manner as may be required or permitted
under such applicable law.
* * * * * * *
70
<PAGE>
ARTICLE TWELVE
--------------
ADOPTION BY OTHER ORGANIZATIONS
-------------------------------
Section 12.1. Procedure for Adoption. Any corporation or other
------------ ----------------------
organization with employees, now in existence or hereafter formed or acquired,
which is not already an Employer under the Plan and which is otherwise legally
eligible, may, in the future, with the consent and approval of the Company and
the Trustee by resolution or decision of its own board or governing authority,
adopt the Plan and the Trust, for all or any classification of persons in its
employment, and thereby, from and after the effective date specified in such
resolution or decision, become an Employer. The adoption resolution or decision
may contain such specified changes and variations in the terms and provisions of
the Plan or the Trust Agreement as may be acceptable to the Company and the
Trustee. The adoption resolution or decision shall become, as to such adopting
organization and its Employees, a part of the Plan and the Trust Agreement. It
shall not be necessary for the adopting organization to sign or execute the Plan
or the Trust Agreement. The effective date of the Plan for any such adopting
organization shall be that stated in the resolution or decision of adoption, and
from and after such effective date such adopting organization shall assume all
the rights, obligations, and liabilities of an Employer under the Plan and the
Trust Agreement, and shall be included within the meaning of the term Employer.
The administrative powers and control of the Company, as provided in the Plan
and the Trust Agreement, including the right of amendment and of appointment and
removal of the Committee, the Trustee, and their successors, shall be the sole
right of the Company and shall not be diminished by reason of the participation
of any such adopting organization. Any participating Employer may withdraw from
the Plan and the Trust at any time without affecting other Employers not
withdrawing, by complying with the provisions of the Plan and the Trust
Agreement. Separate records shall be kept as to each Employer and its
Employees.
* * * * * * *
71
<PAGE>
ARTICLE THIRTEEN
----------------
AMENDMENT AND TERMINATION OF PLAN
---------------------------------
Section 13.1. Amendment of the Plan. The Company may, without the assent
------------ ---------------------
of any other party, make from time to time any amendment or amendments to the
Plan which do not operate retroactively to reduce or divest the then vested
interest in any Employer Contribution Account or to reduce or divest any benefit
then payable hereunder unless all Participants, Former Participants, and
Beneficiaries then having Employer Contribution Accounts or benefit payments
affected thereby shall consent to such amendment or amendments. Notwithstanding
anything to the contrary contained in the Plan, the provisions of the Plan which
specify the amount, price, timing and criteria for allocation of Common Stock
under the Plan shall not be amended more than once every six months, other than
to comport with changes in the Code, ERISA, or the rules thereunder. Each such
amendment shall be in writing, signed by a duly authorized officer of the
Company and shall become effective as of the date specified therein. In
addition, no such amendment shall (i) reduce the vested percentage of any
Participant with respect to Employer contributions made either before or after
the effective date of the amendment; (ii) eliminate or reduce an early
retirement benefit or a retirement-type subsidy or eliminate an optional form of
benefit with respect to benefits attributable to service before the amendment;
or (iii) restrict the availability of an "alternate form of benefit" to a
certain select group or classification of Participants or Beneficiaries which
favor the "prohibited group," or restrict or deny a Participant through the
withholding of consent or the exercise of discretion by some person or persons
other than the Participant (and, where relevant, his Spouse) of an alternate
form of benefit. For purposes of this Section 13.1, Plan provisions will be
considered to favor the prohibited group if the group of Employees to whom the
benefit is available does not satisfy either the 70% test of Code Section
410(b)(1)(A) or the nondiscriminatory classification test of Code Section
410(b)(1)(B). For purposes of this Section 13.1, an alternate form of benefit
encompasses the different forms of benefit payment available under the Plan
which provide that (a) a Participant's benefits under the Plan may be paid in
more than one form, or (b) payment of a particular form of benefit may commence
at some time earlier or later than the normal date for the commencement of such
benefit.
Section 13.2. Right to Terminate. An Employer may at any time terminate
------------ ------------------
the Plan with respect to its Employees, pursuant to resolution or decision of
the Board of Directors or other governing authority of such terminating
Employer. Upon termination with respect to an Employer, the Committee shall
direct the Trustee to distribute the share of the Trust Assets allocable to the
Employees of such Employer, as provided in Section 13.4. If the Plan is
terminated with respect to fewer than all Employers, the Plan shall continue in
effect for Employees of the remaining Employers.
Section 13.3. Consolidation or Merger. Upon an Employer's liquidation,
------------ -----------------------
dissolution, bankruptcy, or insolvency, or upon its sale, consolidation or
merger to or with another organization that is not an employer hereunder, in
which such Employer is not the surviving company, the Plan will terminate
insofar as that Employer is concerned unless the successor to that Employer
assumes the duties and responsibilities of such Employer by adopting the Plan
and Trust, by combining the Plan and Trust with an existing plan and trust of
such successor with the consent and agreement of that Employer, or by the
establishment of a separate plan and trust to which the Trust Assets held on
behalf of the Employees of such Employer shall be transferred with the consent
and agreement of that Employer. If the successor to an Employer is itself an
Employer, such successor shall succeed to all the rights and duties under the
Plan and Trust of the Employers involved.
Section 13.4. Liquidation of Trust Fund Upon Termination.
------------ ------------------------------------------
(a) Upon a complete or partial termination of the Plan with respect to any
Employer, the Employer Contribution Accounts of the Participants, Former
Participants and Beneficiaries affected thereby shall become fully vested and
nonforfeitable, and, subject to the restrictions of Section 13.4(b) below, the
72
<PAGE>
proportionate interests of such Participants, Former Participants and
Beneficiaries in the Trust Assets, as determined by the Committee, shall be
distributed as soon as practicable after provision is made for the expenses of
administration, termination and liquidation. Distributions due to termination
of the Plan will be made in accordance with the methods of distribution provided
for in the Plan.
(b) However, notwithstanding anything to the contrary above, a
Participant's Accounts shall not be distributed before the first to occur of the
following events:
(1) Retirement;
(2) death;
(3) Disability;
(4) termination of employment;
(5) attainment of age 59-1/2;
(6) with respect to a Participant's Savings Account only, incurring
of a hardship (as defined in Section 10.2);
(7) the termination of the Plan, provided that neither the Employer
nor an Affiliated Employer maintains a successor plan;
(8) the sale, to an entity that is not an Affiliated Employer, of
substantially all of the assets used by the Employer in the trade
or business in which the Participant is employed; or
(9) the sale, to an entity that is not an Affiliated Employer, of an
incorporated Affiliated Employer's interest in a subsidiary in
which the Participant is employed.
For purposes of this Section 13.4(b), the term "Affiliated Employer" shall mean
the Employers and any corporation which is a member of a controlled group of
corporations (as defined in Section 414(b) of the Code) which includes an
Employer; any trade or business (whether or not incorporated) which is under
common control (as defined in Section 414(c) of the Code) with an Employer; any
organization (whether or not incorporated) which is a member of an affiliated
service group (as defined in Section 414(m) of the Code) which includes an
Employer; and any other entity required to be aggregated with an Employer
pursuant to regulations under Section 414(o) of the Code.
Section 13.5. Permanent Discontinuance of Contributions. Upon a permanent
------------ -----------------------------------------
discontinuance of contributions with respect to any Employer, the Employer
Contribution Accounts shall become fully vested and nonforfeitable and, unless
such Employer provides by appropriate resolution that the Plan and Trust will
continue for the purpose of holding, investing, and distributing Trust Assets
pursuant to other provisions of the Plan and Trust Agreement, the proportionate
interest of the Participants, Former Participants and Beneficiaries of such
Employer in the Trust Assets, as determined by the Committee, shall be
distributed (subject to the restrictions of Section 13.4(b)) as soon as
practicable after provision is made for the expenses of administration,
termination and liquidation.
73
<PAGE>
Section 13.6. Consolidation or Merger of Plan. In the event that the Plan
------------ -------------------------------
is merged or consolidated with any other plan, or in the event that any assets
or liabilities of the Plan are transferred to any other plan, the benefit any
Participant, Former Participant or Beneficiary under the Plan would be entitled
to receive if such other plan were terminated immediately after such merger,
consolidation, or transfer shall be equal to or greater than the benefit such
Participant, Former Participant or Beneficiary would be entitled to receive if
the Plan terminated immediately before such merger, consolidation, or transfer.
* * * * * * *
74
<PAGE>
ARTICLE FOURTEEN
----------------
GENERAL PROVISIONS
------------------
Section 14.1. Non-Guarantee of Employment. Nothing contained in the Plan
------------ ---------------------------
or Trust Agreement shall be construed as a contract of employment between any
person and an Employer (or an entity referred to in section 2.3), as a right of
any person to be continued in the employment of an Employer (or such entity), or
as a limitation of the right of an Employer (or such entity) to discharge any
person, with or without cause.
Section 14.2. Manner of Payment. Subject to the provisions of Sections
------------ -----------------
11.7 and 11.8, wherever and whenever it is herein provided for payments or
distributions to be made, said payments or distributions shall be made directly
into the hands of the Participant, Former Participant, Beneficiary, or their
respective administrators, executors, or guardians, as the case may be. Deposit
to the credit of any such person in any bank or trust company selected by such
person shall be deemed to be payment into his hands.
Section 14.3. Nonalienation of Benefits. Except as otherwise provided
------------ -------------------------
below in this Section 14.3, interests of Participants, Former Participants and
Beneficiaries under the Plan and benefits payable under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, disposition, garnishment, execution, or levy of any
kind, either voluntary or involuntary, including any liability for alimony or
other payments for property settlement or support of a Spouse or former Spouse,
or for any other relative of the Participant, Former Participant or Beneficiary,
but excluding devolution by death or mental incompetency, prior to actually
being received by the person entitled to the benefits under the terms of the
Plan; any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge or otherwise dispose of any right to benefits payable hereunder
shall be void; the Trust Assets shall not in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements or torts of any
person entitled to benefits hereunder.
Notwithstanding anything to the contrary above, however, if the Committee
determines that a domestic relations order is a "qualified domestic relations
order" as defined in Section 206(d)(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), benefits shall be payable in
accordance with the applicable requirements of any such order and in accordance
with the requirements of Section 206(d)(3) of ERISA. To the extent of any
conflict between the terms of any such order and the term.s of ERISA Section
206(d)(i, the latter shall control in all respects.
Section 14.4. Titles for Convenience Only. Titles of the Articles,
------------ ---------------------------
Sections and Subsections hereof are for convenience only and shall not be
considered in construing the Plan.
Section 14.5. Governing Law. Except as may otherwise be required by
------------ -------------
applicable federal law, the Plan and each of its provisions shall be construed
and their validity determined by the laws of the State of Texas.
Section 14.6. Contributions Contingent Upon Approval. The Plan and Trust
------------ --------------------------------------
are designed to qualify under Sections 401(a) and 501(a) of the Code. Anything
contained herein to the contrary notwithstanding, if a determination letter is
issued by the District Director of Internal Revenue to the effect that the Plan
and Trust do not meet the requirements of Sections 401(a) and 501(a) of the
Code, each Employer shall be entitled at its option to withdraw all
contributions made by such Employer for any period during which the Plan and
Trust are determined not to have met such requirements, in which event the Plan
and Trust shall then terminate and all rights of Participants, Former
Participants and Beneficiaries with respect to such Employer's contributions
shall cease. If a deduction for any Employer contribution is not allowable
under Section 404 of the Code, the applicable Employer at its option will be
entitled to withdraw such contribution to the extent that a deduction was not
allowable.
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<PAGE>
Section 14.7. Payment of Expense. Except as otherwise specifically
------------ ------------------
provided herein, all expenses incident to the administration, termination, or
protection of the Plan and Trust, including but not limited to, actuarial,
legal, accounting, and Trustee fees, may be paid by the Company, which may
require reimbursement from the other Employers for their pro rata shares, of it
not paid by the Company (which payment is not obligatory), shall be paid by the
Trustee from the Trust Assets, but no amount paid pursuant to Section 16.9 or
Subsection 14.9(d) shall be paid, directly or indirectly, from the Trust Assets.
Section 14.8. Rights to Trust Assets. No Participant, Former Participant
------------ ----------------------
or Beneficiary shall have any right to, or interest in, any Trust Assets upon
termination of his employment or otherwise, except as provided from time to time
under the Plan, and then only to the extent of the benefits payable to such
Participant, Former Participant or Beneficiary out of the Trust Asset. All
payments of benefits as provided for in the Plan shall be made solely out of the
Trust Assets and, except as may otherwise be provided by applicable law, neither
the boards of Directors of the Employers, the Employers, the Trustee, nor the
Committee shall be liable therefor in any manner.
Section 14.9. Disclaimer of Liability. Except as otherwise provided
------------ -----------------------
herein or under Sections 404 through 409 of ERISA (to the extent applicable):
(a) Neither the Board of Directors of the Employers, the Employers, the
Trustee, nor the Committee guarantees the Trust Assets or other Assets of the
Plan in any manner against loss or depreciation, and they shall not be liable
for any act or failure to act which is made in good faith pursuant to the
provisions of the Plan and Trust Agreement.
(b) The Board of Directors of the Employers and the Employers shall not be
responsible for any act or failure to act of the Committee of the Trustee.
(c) The Committee shall not be responsible for any act or failure to act of
the Board of Directors of the Employers, the Employers, or the Trustee.
(d) Each Employer shall indemnify each member of its Board of Directors
against any liability or losses sustained by such member by reason of any act or
failure to act relating to the Plan or Trust in his capacity as such member if
such act or failure to act is in good faith and does not constitute willful
misconduct. Such indemnification shall include attorney's fees and other costs
and expenses reasonably incurred by such member in defense of any action brought
against him by reason of any such act or failure to act.
Section 14.10. Persons May Serve in More than One Capacity. A person may
------------- -------------------------------------------
serve both as a member of secretary of the Committee and as a Trustee hereunder.
A person serving as a member of the Board of Directors or as an officer of an
Employer may serve as a member or secretary of the Committee or as a Trustee, or
both, hereunder.
Section 14.11. Construction. The masculine gender, where appearing in the
------------- ------------
Plan, shall be deemed to include the feminine gender, unless the context clearly
indicates to the contrary. The words "herein," "hereof," "hereunder" and other
similar compounds of the word "here" shall mean and refer to the entire Plan,
not to any particular provision, section, or subsection, and words used in the
singular or the plural may be construed as though in the plural or singular
where they would so apply.
Section 14.12. Counterparts. The Plan may be executed in any number of
------------- ------------
counterparts, each of which shall be considered an original, and only one such
counterpart need be produced.
76
<PAGE>
Section 14.13. No Involuntary Retirement Because of Age. Notwithstanding
------------- ----------------------------------------
the provisions hereof defining Normal Retirement Date and Retirement, nor any
other provision hereof, nothing contained in the Plan or Trust Agreement shall
be construed to require or permit the involuntary retirement of any Employee
solely because of age.
* * * * * * *
77
<PAGE>
ARTICLE FIFTEEN
---------------
TOP HEAVY PROVISIONS
--------------------
Section 15.1. Application. This Article shall apply for any Plan Year
------------ -----------
beginning with the first Plan Year in which the Plan is determined to be top-
heavy.
Section 15.2. Top-Heavy Plan Status/Super Top-Heavy Plan Status. This
------------ -------------------------------------------------
Plan shall be a Top-Heavy Plan in any Plan Year in which, as of the
Determination Date, (a) the Present Value of Accrued Benefits of Key Employees,
or (b) the sum of the Aggregate Accounts of Key Employees of any plan of an
Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued
Benefits or Aggregate Accounts of all Participants under this Plan and any plan
of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but the
Participant was a Key Employee for any prior Plan Year, the Participant's
Aggregate Account balance shall not be taken into account in determining whether
this Plan is a Top-Heavy Plan (or whether any Aggregation Group which includes
this Plan is a Top-Heavy Group) as further defined in Code Section 416(g) and
the applicable Treasury regulations.
This Plan shall be a Super Top-Heavy Plan for any Plan Year in which, as of
the Determination Date, (a) the Present Value of Accrued Benefits of Key
Employees, or (b) the sum of the Aggregate Accounts of Key Employees of any plan
of an Aggregation Group, exceeds ninety percent (90%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Participants under this Plan
and any plan of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but the
Participant was a Key Employee for any prior Plan Year, the Participant's
Aggregate Account balance shall not be taken into account in determining whether
this Plan is a Super Top-Heavy Plan (or whether any Aggregation Group which
includes this Plan is a Top-Heavy Group) as further defined in Code Section
416(g) and the applicable Treasury regulations.
For purposes of determining Top-Heavy and Super Top-Heavy status, the
following definitions shall apply:
(a) Aggregate Account means, as of the Determination Date, the sum of:
-----------------
(i) the Participant Contribution Account and Employer Contribution
Account balances as of the most recent Valuation Date occurring
within a twelve (12) month period ending on the Determination
Date;
(ii) the contributions that would be allocated as of a date not later
than the Determination Date, even though those amounts are not
yet made or required to be made;
(iii) any plan distributions made during the Determination Period
(However, in the case of distributions made after the Valuation
Date and prior to the Determination Date, such distributions are
not included as distributions for Top-Heavy purposes to the
extent that the distributions are already included in the
Participant's Aggregate Account balance as of the Valuation
Date.); and
(iv) any Employee contributions, whether voluntary or mandatory
(However, amounts attributable to Participant Deductible
Voluntary Contributions shall not be con-
78
<PAGE>
sidered to be a part of the Participant's Aggregate Account
balance.).
(v) Regarding unrelated rollovers and plan-to-plan transfers (those
which are (A) initiated by the Employee and (B) made from a plan
maintained by one employer to a plan maintained by another
employer), if this Plan provides for rollovers or plan-to-plan
transfers, an unrelated rollover or plan-to-plan transfer shall
be considered as a distribution for purposes of this Section. If
this Plan is the plan accepting an unrelated rollover or plan-to-
plan transfer, an unrelated rollover or plan-to-plan transfer
accepted after December 31, 1983 shall not be considered as part
of the Participant's Aggregate Account balance. However,
unrelated rollovers or plan-to-plan transfers accepted prior to
January 1, 1984 shall be considered as part of the Participant's
Aggregate Account balance.
(vi) Regarding related rollovers and plan-to-plan transfers (those
either (A) not initiated by the Employee or (B) made to a plan
maintained by the same Employer), if this Plan provides for
rollovers or plan-to-plan transfers, a related rollover or plan-
to-plan transfer shall be considered as a distribution for
purposes of this Section. If this Plan is the plan accepting a
related rollover or plan-to-plan transfer, a related rollover or
plan-to-plan transfer shall be considered as part of the
Participant's Aggregate Account balance, irrespective of the date
on which the related rollover or plan-to-plan transfer is
accepted.
(b) Aggregation Group means either a Required Aggregation Group or a
-----------------
Permissive Aggregation Group as hereinafter determined.
(i) Required Aggregation Group means the group of plans composed of
--------------------------
(A) each plan of the Employer in which a Key Employee is a
participant or participated at any time during the Determination
Period, regardless of whether the plan has terminated; and (B)
each other plan of the Employer which enables any plan in which a
Key Employee participates to meet the requirements of Code
Sections 401(a)(4) or 410, which shall be aggregated.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top-Heavy Plan if the Required
Aggregation Group is a Top-Heavy Group. No plan in the Required
Aggregation Group will be considered a Top-Heavy Plan if the
Required Aggregation Group is not a Top-Heavy Group.
(ii) Permissive Aggregation Group means the Required Aggregation Group
----------------------------
plus any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a
whole, would continue to satisfy Code Sections 401(a)(4) and 410.
In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a
Top-Heavy Plan if the Permissive Aggregation Group is a Top-Heavy
Group. No plan in the Permissive Aggregation Group will be
considered a Top-Heavy Plan if the Permissive Aggregation Group
is not a Top-Heavy Group.
(iii) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated to
determine whether the plans are Top-Heavy Plans.
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<PAGE>
(c) Determination Date means for any Plan Year (i) the last day of the
------------------
preceding Plan Year, or (ii) in the case of the first Plan Year of the Plan, the
last day of the first Plan Year.
(d) Determination Period means the five (5) year period ending on the
--------------------
Determination Date.
(e) Employer means the Employer that adopts this Plan. Related Employers
--------
shall be considered a single Employer for purposes of applying the limitations
of these top-heavy rules.
(f) Excluded Employees means any Employee who has not performed any Service
-------------------
for the Employer during the five (5) year period ending on the Determination
Date. Excluded Employees shall be excluded for purposes of a Top-Heavy
determination.
(g) Key Employee means any Employee or Former Employee, or Beneficiary of
------------
the Employee, who, for any Plan Year in the Determination Period is:
(i) An officer of the Employer having Compensation from the Employer
and any Related Employer greater than fifty percent (50%) of the
amount in effect under Code Section 415(b)(1)(A);
(ii) One of the ten (10) Employees having Compensation from the
Employer and any Related Employer of more than the limitation in
effect under Code Section 415(c)(1)(A) and owning (or considered
as owning within the meaning of Code Section 318) the largest
interests in the Employer;
(iii) A Five Percent Owner of the Employer (Five Percent Owner means
any person owning, or considered as owning within the meaning of
Code Section 318, more than five percent (5%) of the outstanding
stock of the Employer or stock possessing more than five percent
(5%) of the total combined voting power of all stock of the
Employer; or in the case of an unincorporated business, any
person who owns more than five percent (5%) of the capital or
profits interest in the Employer.); or
(iv) A One Percent Owner of the Employer having Compensation from the
Employer of more than $150,000 (One Percent Owner means any
person having Compensation from the Employer and any Related
Employer in excess of $150,000 and owning, or considered as
owning within the meaning of Code Section 318, more than one
percent (1%) of the outstanding stock of the Employer or stock
possessing more than one percent (1%) of the total combined
voting power of all stock of the Employer; or in the case of an
unincorporated business, any person who owns more than one
percent (1%) of the capital or profits interest in the
Employer.).
(v) Notwithstanding the foregoing, Key Employee shall have the
meaning set forth in Code Section 416(i), as amended.
(vi) For purposes of determining whether an Employee or Former
Employee is an officer under this subsection (g), an officer of
the Employer shall have the meaning set forth in the regulations
under Code Section 416(i).
(vii) For purposes of this Section, Compensation means Compensation
determined under Section 2.26 for the definition of a Highly
Compensated Employee.
(viii) For purposes of determining ownership hereunder, employers
that would otherwise be aggregated as Related Employers shall be
treated as separate employers.
80
<PAGE>
(h) Non-Key Employee means any Employee or Former Employee, or Beneficiary
----------------
of the Employee, who is not a Key Employee.
(i) Present Value of Accrued Benefit. Solely for the purpose of
--------------------------------
determining if the Plan, or any other plan included in a Required Aggregation
Group of which this Plan is a part, is a Top-Heavy Plan, the Accrued Benefit of
a Non-Key Employee shall be determined under (i) the method, if any, that
uniformly applies for accrual purposes under all plans maintained by the Related
Employers, or (ii) if there is no uniform method, in accordance with the slowest
accrual rate permitted under the fractional accrual method described in Code
Section 411(b)(1)(C). To calculate the Present Value of Accrued Benefits from a
defined benefit plan, the Committee will use the actuarial assumptions for
interest and mortality only, prescribed by the defined benefit plan(s) to value
benefits for Top-Heavy purposes. If an aggregated plan does not have a
Valuation Date coinciding with the Determination Date, the Committee must value
the Accrued Benefits in the aggregated plan as of the most recent Valuation Date
falling within the twelve (12) month period ending on the Determination Date,
except as Code Section 416 and applicable Treasury regulations require for the
first and second plan year of a defined benefit plan. The Committee will
determine whether a plan is Top-Heavy by referring to Determination Dates that
fall within the same calendar year.
(j) Top-Heavy Group means an Aggregation Group in which, as of the
---------------
Determination Date, the sum of:
(i) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group; and
(ii) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group
exceeds sixty percent (60%) of a similar sum determined for all
Participants.
(k) Valuation Date means the Determination Date defined above.
--------------
Section 15.3. Top-Heavy Minimum Allocation.
------------ ----------------------------
(a) Minimum Allocation. Notwithstanding the foregoing, for any Plan Year
------------------
in which the Plan is determined to be Top-Heavy, the amount of Employer Non-
Elective Contributions and Forfeitures allocated to the Individual Account of
each Non-Key Employee shall be equal to the lesser of three percent (3%) of each
Non-Key Employee's Compensation or the highest contribution rate for the Plan
Year made on behalf of any Key Employee. However, if a defined benefit plan
maintained by the Employer which benefits a Key Employee depends on this Plan to
satisfy the nondiscrimination rules of Code Section 401(a)(4) or the coverage
rules of Code Section 410 (or another plan benefitting the Key Employee so
depends on the defined benefit plan), the top heavy minimum allocation is three
percent (3%) of the Non-Key Employee's Compensation regardless of the
contribution rate for the Key Employee.
(b) Compensation. For purposes of this Section, Compensation means Annual
------------
Compensation defined in Section 2.9 except (i) Compensation does not include
Elective Contributions, and (ii) any exclusions from Annual Compensation (other
than the exclusion of Elective Contributions and the exclusions described in
clauses (i) through (v) of Section 2.9) do not apply. Notwithstanding the
definition of Annual Compensation in Section 2.9, the period preceding a
Participant's Entry Date shall be included in determining the minimum top-heavy
allocation provided by this Section.
(c) Contribution Rate. For purposes of this Section, a Participant's
-----------------
contribution rate is the sum of Employer Contributions (not including Employer
Contributions to Social Security) and Forfeitures allocated to the Participant's
Account for the Plan Year divided by his or her Compensation for the entire Plan
Year.
81
<PAGE>
To determine a Participant's contribution rate, the Committee must treat all
qualified top-heavy defined contribution plans maintained by the Employer (or by
any related Employers described in Section 1.41) as a single plan. For purposes
of this Section, for Plan Years beginning after 1988, the following rules apply:
(i) Employer Elective Contributions on behalf of Key Employees are
taken into account in determining the minimum required
contribution under Code Section 416(c)(2). However, Employer
Elective Contributions on behalf of Employees other than Key
Employees may not be treated as Employer Contributions for the
minimum contribution or benefit requirement of Code Section 416.
(ii) Employer Matching Contributions allocated to Key Employees are
treated as Employer Contributions for determining the minimum
contribution or benefit under Code Section 416. However, if a
plan utilizes Matching Contributions allocated to Employees other
than Key Employees as Employee Contributions or Elective
Contributions to satisfy the minimum contribution requirement,
the Matching Contributions are not treated as Matching
Contributions for applying the requirements of Code Section
401(k) and 401(m).
(iii) Qualified Non-Elective Contributions described in Code Section
401(m)(4)(C) may be treated as Employer Contributions for the
minimum contribution or benefit requirement of Code Section 416.
(d) Participant Entitled to Top-Heavy Minimum Allocation. The minimum
----------------------------------------------------
allocation under this Section shall be provided to each Non-Key Employee who is
a Participant and is employed by the Employer on the last day of the Plan Year,
whether or not the Participant has been credited with one thousand (1,000) Hours
of Service for the Plan Year. The minimum allocation under this Section shall
not be provided to any Participant who was not employed by the Employer on the
last day of the Plan Year. The provisions of this Section shall not apply to
any Participant to the extent the Participant is covered under any other plan or
plans of the Employer under which the minimum allocation or benefit requirements
under Code Section 416(c)(1) or (c)(2) are met for the Participant.
(e) Compliance. The Plan will satisfy the top-heavy minimum allocation
----------
under this Section. The Committee first will allocate the Employer
Contributions (and Participant Forfeitures, if any) for the Plan Year pursuant
to the allocation formula under Section 5.2. The Employer then will contribute
an additional amount for the Individual Account of any Participant entitled
under this Section to a top-heavy minimum allocation and whose contribution rate
for the Plan Year, under this Plan and any other plan aggregated under this
Section, is less than the top-heavy minimum allocation. The additional amount
is the amount necessary to increase the Participant's contribution rate to the
top-heavy minimum allocation. The Committee will allocate the additional
contribution to the Account of the Participant on whose behalf the Employer
makes the contribution.
82
<PAGE>
Section 15.4. Amendments. If the Plan is determined to be top-heavy, the
------------ ----------
vesting schedule in Section 6.2(c) shall continue to apply notwithstanding a
determination in a later Plan Year that the Plan is no longer top-heavy unless
the Company shall amend the Plan to provide otherwise. No such amendment shall
be effective unless, in the event it changes the Plan's applicable vesting
schedule (determined in accordance with regulations under Section 411 of the
Code), each Participant's nonforfeitable percentage of his accounts (determined
as of the later of the date such amendment is adopted or becomes effective) is
not less than such percentage computed under Section 6.2(c) without regard to
such amendment and unless, in such event, each Participant having not less than
5 years of Service is permitted to elect (pursuant to regulations under Section
411 of the Code) to have his nonforfeitable percentage computed under the Plan
without regard to such amendment.
* * * * * * *
83
<PAGE>
ARTICLE SIXTEEN
---------------
PLAN ADMINISTRATION
-------------------
Section 16.1. Committee. The Plan shall be administered by the Savings
------------ ---------
Plan Committee. The Committee shall consist of not less than three nor more
then seven members. Each member shall be appointed, and may at any time be
removed, by the Board of Directors of the Company, and the Board of Directors of
the Company shall designate the chairman of Committee. Any vacancy on the
Committee resulting from resignation, death, removal by the Board of directors
of the Company, or otherwise, shall be filled by the Board of Directors of the
Company. The chief executive officer of the Company may appoint a person to fill
any vacancy during the period prior to action by the Board of Directors filling
such vacancy. All usual and reasonable expenses of the Committee shall be paid
as provided in Section 14.7. The members of the Committee shall not receive
compensation from the Plan or the Trust with respect to their services in
administering the Plan.
Section 16.2. Claims Procedure.
------------ ----------------
(a) The Committee shall make all determinations as to the right of any
person to a benefit. Any denial by the Committee of a claim for benefits under
the Plan by a Participant, Former Participant or Beneficiary shall be stated in
writing and delivered or mailed to the Participant, Former Participant or
Beneficiary. Such notice of denial shall to the best of the Committee's
ability, be written to be understood without legal or actuarial counsel or other
specialized knowledge or advice, and shall:
(1) set forth the reasons for such denial;
(2) specify the pertinent provisions of the Plan on which such denial
is based;
(3) describe any additional material or information necessary for
perfection of such claim and explain why such material or information
is necessary; and
(4) explain the claims review procedure established by the Committee
under the Plan.
(b) In the case of any Participant, Former Participant or Beneficiary whose
claim for benefits under the Plan has been denied, such Participant, Former
Participant or Beneficiary, or his duly authorized representative, may:
(1) request a review of such denial by written application mailed or
delivered to the Committee by the 60th day after receipt of such
denial; and
(2) within such reasonable times as may be prescribed in the claims
review procedure established by the Committee,
(A) review pertinent documents; and
(B) submit issues and comments in writing.
(c) The Committee shall provide a full and fair review of any request
submitted under Section 16.2(b). In connection with such review, the Committee
may request an opinion from an Employer's counsel and shall be fully protected
by the Company and such Employer from any liability resulting from good faith
reliance on such opinion.
84
<PAGE>
Section 16.3. Powers and Duties of the Committee. The Committee shall
------------ ----------------------------------
have such powers and duties as may be necessary to discharge its duties
hereunder, including, but not by way of limitation, the following powers and
duties:
(a) To administer the Plan;
(b) To construe and interpret the Plan, decide all questions of eligibility
and determine the amount, manner and time of payment of any benefits hereunder;
(c) To review the performance of the Trustee and to report thereon to the
Board of Directors of the Company;
(d) To prescribe and establish (i) procedures to be followed and forms to
be used by Employees, Participants, Former Participants or Beneficiaries for
commencing or resuming participation in the Plan and for applying for benefits
from the Plan and (ii) such additional procedures and forms for reviewing
denials of claims for benefits as the Committee deems advisable which are not
inconsistent with the provisions of the. Plan or applicable law, but if any
procedure or form is prescribed by the Plan.or by applicable law, such procedure
or form shall be used for the purpose prescribed;
(e) To receive from the Employers and from Employees, Participants, Former
Participants and Beneficiaries such information as shall be necessary for the
proper administration of the Plan;
(f) To prepare and distribute, in such manner as required by applicable
law, information explaining the Plan;
(g) To prepare such reports with respect to the Plan as are required by
applicable law and such other reports as are reasonable and appropriate and
requested by the Employers;
(h) To appoint or employ such agents or employees as it deems advisable,
including legal counsel, accountants, and actuaries, as needed for the discharge
of its duties;
(i) To allocate in writing any of its rights, powers, or duties hereunder
to a particular member or members of the Committee; in the event of any such
allocation, the exercise of right or power, or the discharge of a duty has been
allocated shall be deemed to be an act of the Committee; and
(j) To designate persons who are not members of the Committee to exercise
any of the foregoing powers, to carry out any of the foregoing duties, or to
authorize benefit payments under Section 16.8.
Section 16.4. Limitation on Powers. The Committee shall have no power to
------------ --------------------
add to, subtract from, or modify any of the terms of the Plan, or to waive or
fail to apply any requirements of eligibility for benefits under the Plan.
Section 16.5. Limitation on Duties. Except as elsewhere provided herein,
------------ --------------------
the Committee shall have no power to manage or responsibility for managing the
investing (including selection, acquiring, retaining, or disposing) of the Trust
Assets.
Section 16.6. Rules and Decisions. The Committee may adopt such rules as
------------ -------------------
it deems necessary, desirable, or appropriate. All rules and decisions of the
Committee shall be uniformly and consistently applied to all Employees,
Participants, Former Participants, and Beneficiaries in similar circumstances.
Any rule or decision which is not inconsistent with the provisions of the Plan
shall be conclusive and binding upon all persons affected by it, and, except as
otherwise provided by applicable law or herein, there shall be no appeal from
any decision by the Committee which is within its authority. When making a
determination or
85
<PAGE>
calculation, the Committee shall be entitled to rely upon information furnished
by an Employer, the legal counsel of an Employer, or an accountant or actuary of
the Plan. When making any decision hereunder, the Committee may consult with
any Participant, Former Participant, or Beneficiary affected thereby and may, if
appropriate, take such Participant's, Former Participant's, or Beneficiary's
preference into account, but the Committee shall not be required to consult with
or follow the preference of any Participant, Former Participant, or Beneficiary
in the making of any decision hereunder unless it is expressly required to do so
by other provisions hereof or by applicable law.
Section 16.7. Committee Procedures. The Committee may act at a meeting or
------------ --------------------
in writing without a meeting. The Committee shall appoint a secretary, whom may
or may not be a Committee member, and advise the Trustee of such action in
writing. The secretary shall keep a record of all meetings and forward all
necessary communications to the Employers or the Trustee. The Committee may
adopt such bylaws and regulations as it deems desirable for the conduct of its
affairs. All decisions of the Committee shall be made by the vote of a majority
of the total number of members at the time serving on the Committee including
actions in writing taken without a meeting.
Section 16.8. Liability of Committee. Except as may otherwise be required
------------ ----------------------
by applicable law, no member of the Committee shall be liable for any act or
omission of his own or of any agent or employee appointed or employed by the
Committee, unless, such act or omission is the result of his own willful
misconduct or bad faith. The Company shall indemnify each such member against
any liability or loss sustained by him by reason of any act or failure to act in
his capacity as such member if such act or failure to act is in good faith and
does not constitute willful misconduct. Such indemnification shall include
attorney's fees and other costs and expenses reasonably incurred by such member
in defense of any action brought against him by reason of any such act or
failure to act.
Section 16.9. Bonding. The secretary and members of the Committee and any
------------ -------
persons designated under Subsection 16.3(j) shall serve without bond except as
otherwise required by applicable law or by, the Company. The premium on any
bond required of the secretary or members of the Committee shall be paid as
provided in Section 14.7.
86
<PAGE>
IN WITNESS WHEREOF, FROZEN FOOD EXPRESS INDUSTRIES, INC. has caused this
Plan to be executed by its duly appointed officers on this __________ day of
December, 1994.
FROZEN FOOD EXPRESS INDUSTRIES, INC.
By:________________________________________
President
ATTEST:
- ------------------------------------
Secretary
87
<PAGE>
EXHIBIT 10.10
CONWELL CORPORATION
-------------------
EMPLOYEE STOCK OWNERSHIP PLAN
-----------------------------
(As Restated Effective January 1, 1987)
ARTICLE ONE
-----------
PURPOSE
-------
Section 1.1. Introduction. The following are provisions of the CONWELL
----------- ------------
CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN ("Plan") (as restated effective
January 1, 1987). The Plan was established effective January 1, 1985 and was
restated, effective January 1, 1989, to incorporate the original Plan and the
subsequent amendments into one document. The Plan is now restated to
incorporate the restated Plan and the additional amendments into one document
which is intended to maintain the qualification of the Plan under Section 401(a)
of the Internal Revenue Code of 1986 as amended ("Code") and applicable
regulations. The restated Plan is effective January 1, 1987, except as
otherwise provided herein. The Plan consists of the Plan document herein and
the separate Trust Agreement.
Section 1.2. Purpose. The purpose of the Plan is to reward eligible
----------- -------
Employees of the Employer who become Participants in the Plan with an
opportunity to acquire the common stock of Frozen Food Express Industries, Inc.,
the parent corporation of Conwell Corporation, thereby promoting Employee
interest in the business endeavors of the parent and its subsidiaries and
enhancing the welfare of the Employees. The Plan is designed to invest
primarily in the common stock of Frozen Food Express Industries, Inc., is
intended to qualify under Code Section 401(a) as a leveraged employee stock
ownership plan as defined by Code Section 4975(e) and Section 407(d)(6) of the
Employee Retirement Income Security Act of 1974 as amended ("ERISA"). The
benefits provided by the Plan will be paid from the Trust and will be in
addition to the benefits eligible Employees are entitled to receive under any
other programs of the Employer and from the federal Social Security Act. The
Plan and the Trust are established and shall be maintained for the exclusive
benefit of the eligible Employees of the Employer and their Beneficiaries.
* * * * * * *
1
<PAGE>
ARTICLE TWO
-----------
DEFINITIONS
-----------
As used herein, the following words and phrases shall have the respective
meanings set forth in this Article, unless the context clearly indicates
otherwise:
Section 2.1. Account Balance means the amount standing in a Participant's
----------- ---------------
Individual Account(s) as of any date derived from both Employer Contributions
and Employee Contributions, if any.
Section 2.2. Administrator means the Committee designated by the Employer
----------- -------------
unless the Employer designates another person to hold the position of
Administrator by written Employer action.
Section 2.3. Affiliate means any company, other than an Employer, included
----------- ---------
within a "controlled group of corporations" defined by Code Section 1563(a)
determined without regard to subsections (a)(4) and (e)(3)(C) of Code Section
1563, and Code Section 409(l)(4), which contains an Employer.
Section 2.4. Allocation Date/Accounting Date means DECEMBER 31 of each
----------- -------------------------------
Plan Year.
Section 2.5. Alternate Payee means any spouse, former spouse, child, or
----------- ---------------
other dependent of a Participant who is recognized by a domestic relations order
as having a right to receive all, or a portion of, the benefits payable under
the Plan with respect to such Participant.
Section 2.6. Annual Compensation.
----------- -------------------
(a) Annual Compensation, pursuant to the safe harbor definition of Treasury
Regulation Section 1.415-2(d)(10), means wages, salaries, and fees for
professional services and other amounts received (without regard to whether or
not an amount is paid in cash) for personal services actually rendered in the
course of employment with the Employer maintaining the Plan to the extent that
the amounts are includable in gross income including, but not limited to,
commissions paid 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 described in Treasury Regulation Section 1.62-2(c), and excluding the
following:
(i) contributions by the Employer to any qualified deferred
compensation plan (to the extent not includable in the Participant's
gross income) or simplified employee pension defined in Code Section
408(k) (to the extent not includable in the Participant's gross
income);
(ii) distributions from any plan of deferred compensation;
(iii) amounts realized from the exercise of any nonqualified stock
option, or, in the case of restricted stock, when such stock becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture;
(iv) amounts realized from the sale, exchange, or other disposition of
stock acquired under a qualified stock option; and
(v) other amounts which receive special tax benefits such as premiums
paid by the Employer (to the extent not includable in the
Participant's gross income) under group term life insurance,
contributions by the Employer to an annuity under Code Section 403(b)
(to
2
<PAGE>
the extent not includable in the Participant's gross income), and any
other amounts received under any Employer sponsored fringe benefit
plan (to the extent not includable in the Participant's gross income).
(b) Annual Compensation for any Limitation Year includes compensation
received by an Employee in that Limitation Year from an Employer prior to the
Employee becoming a Participant in the Plan.
(c) Notwithstanding the foregoing, Annual Compensation taken into account
for determining all benefits provided under the Plan for any determination
period shall not exceed $200,000, or such larger amount the Secretary of the
Treasury may prescribe for the relevant year. (However, for Plan Years
beginning prior to January 1, 1989, the $200,000 limit shall apply only for Top
Heavy Plan Years and shall not be adjusted.) The $200,000 limit shall be
adjusted by the Secretary at the same time and in the same manner as under Code
Section 415(d) except that the dollar increase in effect on January 1 of any
calendar year is effective for years beginning in such calendar year. If the
period for determining compensation used in calculating an Employee's allocation
for a determination period is a short Plan Year the Annual Compensation limit is
an amount equal to the otherwise applicable Annual Compensation limit multiplied
by a fraction, the numerator of which is the number of months in the short Plan
Year and the denominator of which is twelve (12). 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 year is subject to the applicable Annual Compensation limit in
effect for that prior year. For this purpose, for years beginning before
January 1, 1990, the applicable Annual Compensation limit is $200,000. The
$200,000 (or adjusted) Annual Compensation limit applies to the combined Annual
Compensation of the Employee and of any Family Member aggregated with the
Employee under Section 2.25 who is either (i) the Employee's spouse, or (ii) the
Employee's lineal descendant under the age of 19. If, for a Plan Year, the
combined Annual Compensation of the Employee and the Family Members who are
Participants entitled to an allocation for that Plan Year exceeds the $200,000
(or adjusted) limit, Annual Compensation for each such Participant, for purposes
of the contribution and allocation provisions of Articles 3 and 5, means his or
her Adjusted Compensation. Adjusted Compensation is the amount which bears the
same ratio to the $200,000 (or adjusted) limit as the affected Participant's
Annual Compensation without regard to the $200,000 (or adjusted) limit bears to
the combined Annual Compensation of all the affected Participants in the family
unit. If the Plan uses permitted disparity, the Committee must determine the
integration level of each affected Family Member Participant prior to prorating
the $200,000 (or adjusted) limit, but the combined integration level of the
affected Participants may not exceed the $200,000 (or adjusted) limit. The
combined Excess Compensation of the affected Participants in the family unit may
not exceed the $200,000 (or adjusted) limit minus the affected Participants'
combined integration level, as determined under the preceding sentence. If the
combined Excess Compensation exceeds this limit, the Committee will prorate the
Excess Compensation limit among the affected Participants in the family unit in
proportion to each individual's Adjusted Compensation minus his or her
integration level.
(d) For purposes of determining whether the Plan discriminates in favor of
Highly Compensated Employees, Annual Compensation means Annual Compensation
defined in this Section 2.6, except any exclusions from Annual Compensation
other than the exclusions described in clauses (a)(i), (ii), (iii), (iv), and
(v) do not apply. The Employer also may elect to use an alternate
nondiscriminatory definition, under Code Section 414(s) and the applicable
Treasury regulations. In determining Annual Compensation under this paragraph,
the Employer may elect to include all Elective Contributions made by the
Employer on behalf of the Employees. The Employer's election to include
Elective Contributions must be consistent and uniform for Employees and all
plans of the Employer for any particular Plan Year. The Employer may make this
election to include Elective Contributions for nondiscrimination testing
purposes, whether or not this Section includes Elective Contributions in the
general Annual Compensation definition of the Plan.
3
<PAGE>
(e) Notwithstanding the foregoing, Annual Compensation for any Self-
Employed Individual means Earned Income.
(f) In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual compensation of each employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the determination period, and
the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean 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.
Section 2.7. Beneficiary means a person or entity, either in an individual
----------- -----------
or fiduciary capacity, entitled to receive benefits upon the death of a
Participant or Former Participant pursuant to Article Eight. A Beneficiary who
becomes entitled to a benefit under the Plan shall remain a Beneficiary under
the Plan until the Trustee has fully distributed the benefits to the
Beneficiary. A Beneficiary's right to information or data concerning the Plan,
and the respective duties of the Administrator, the Committee and the Trustee to
provide to the Beneficiary information or data concerning the Plan, shall not
arise until the Beneficiary first becomes entitled to receive a benefit under
the Plan. For purposes of determining whether the Plan is a Top-Heavy Plan, a
Beneficiary of a deceased Participant shall be considered a Key Employee or a
Non-Key Employee in accordance with the applicable Treasury Regulations.
Section 2.8. Code means the Internal Revenue Code of 1986, as amended from
----------- ----
time to time.
Section 2.9. Committee means the Administrative Committee provided for in
----------- ---------
Article Nine.
Section 2.10. Determination Date means (a) the last day of the preceding
------------ ------------------
Plan Year or (b) in the case of the first Plan Year, the last day of the first
Plan Year.
Section 2.11. Disability means a physical or mental condition of a
------------ ----------
Participant which appears to permanently prevent him from satisfactorily
performing his usual duties for the Employer or such other duties which the
Employer makes available to him and for which the Participant is qualified by
reason of his training, education or experience. Determination of the fact of a
Participant's Disability, and the date it began, shall be made by the Committee
based upon medical reports and other evidence satisfactory to the Committee.
These determinations shall be made on the basis of criteria applied uniformly to
all Participants and shall be final as to all parties.
4
<PAGE>
Section 2.12. Early Retirement Age means, as applied to each Participant
------------ --------------------
or Former Participant, the first day of the month in which the Participant or
Former Participant has attained age fifty-five (55). EFFECTIVE JANUARY 1, 1989,
Early Retirement Age means, as applied to each Participant or Former
Participant, the first day of the month in which the Participant or Former
Participant has attained age fifty-five (55) and has completed at least ten (10)
Years of Vesting Service with the Employer defined in Section 2.57(b).
Section 2.13. Early Retirement Date means the first day next following the
------------ ---------------------
date the Participant attains Early Retirement Age and which immediately follows
the last day on which the Participant is an Employee, or, if later, the last day
of the Participant's Authorized Leave of Absence, if any.
Section 2.14. Effective Date. The original Effective Date of this Plan is
------------ --------------
JANUARY 1, 1985. The Effective Date of this Plan as restated during the 1994
Plan Year is JANUARY 1, 1987, except the effective date of the vesting schedule
in Section 6.2 is JANUARY 1, 1989.
Section 2.15. Employee.
------------ --------
(a) Employee means any individual currently employed to render personal
services under the control of an Employer maintaining the Plan or of any other
Employer required to be aggregated with the Employer under Code Sections 414(b),
(c), (m) or (o).
(b) The Plan treats any Leased Employee as an Employee of the Employer
unless excluded by an exclusion classification in Section 3.1. A Leased
Employee is an individual, who otherwise is not an Employee of the Employer,
who, pursuant to a leasing agreement between the Employer and any other person,
has performed services for the Employer (or for the Employer and any persons
related to the Employer within the meaning of Code Section 144(a)(3)) on a
substantially full time basis for at least one (1) year and who performs
services historically performed by Employees in the Employer's business field.
If a Leased Employee is treated as an Employee because of this Section 2.15,
Annual Compensation includes compensation from the leasing organization which is
attributable to services performed for the Employer.
(c) Notwithstanding the foregoing, the Plan does not treat any Leased
Employee as an Employee of the Employer if the leasing organization covers the
Employee in a safe harbor plan and, prior to the application of this safe harbor
plan exception, twenty percent (20%) or less of the Employer's Employees (other
than Highly Compensated Employees) are Leased Employees. A safe harbor plan is
a money purchase pension plan providing immediate participation, full and
immediate vesting, and a nonintegrated contribution formula equal to at least
ten percent (10%) of the employee's compensation without regard to employment by
the leasing organization on a specified date. The safe harbor plan must
determine the ten percent (10%) contribution on the basis of compensation
defined in Code Section 415(c)(3) plus salary deferrals.
(d) The Committee must apply this Section 2.15 in a manner consistent with
Code Sections 414(n) and 414(o) and the applicable Treasury regulations. The
Committee will reduce a Leased Employee's allocation of Employer Contributions
under this Plan by the Leased Employee's allocation under the leasing
organization's plan, but only to the extent that allocation is attributable to
the Leased Employee's service provided to the Employer. The leasing
organization's plan must be a money purchase pension plan which would satisfy
the definition under this Section 2.15 of a safe harbor plan, irrespective of
whether the Employer is able to apply the safe harbor plan exception.
Section 2.16. Employer/Plan Sponsor. Employer means CONWELL CORPORATION,
------------ ---------------------
LISA MOTOR LINES, INC., W & B REFRIGERATION SERVICE COMPANY, GLOBAL REFRIGERANT
MANAGEMENT, INC., or any other Affiliate who with the written consent of the
Plan Sponsor adopts this Plan on the effective date of its election to
participate. Plan Sponsor means CONWELL CORPORATION.
5
<PAGE>
Section 2.17. Employer Contributions means those contributions made to the
------------ ----------------------
Trust by the Employer pursuant to Section 4.1 of the Plan.
Section 2.18. Employer Securities.
------------ -------------------
(a) Employer Securities means those unrestricted shares of voting common
stock issued by Frozen Food Express Industries, Inc., the parent corporation of
Conwell Corporation, and any common or preferred stock issued by the Employer or
by an Affiliate which constitute Employer Securities under Code Section 409(l)
and 4975(e)(8).
(b) Qualifying Employer Securities means:
(i) Common stock issued by the Employer (or by a corporation which is
a member of the same controlled group) which is readily tradeable on
an established securities market; or
(ii) If there is no common stock which meets the requirements of (i)
above, then common stock issued by the Employer (or by a corporation
which is a member of the same controlled group) having a combination
of voting power and dividend rights equal to or in excess of:
(A) that class of common stock of the Employer (or any other
such corporation) having the greatest voting power; and
(B) that class of common stock of the Employer (or of any other
such corporation) having the greatest dividend rights; or
(iii) Noncallable preferred stock, if such stock is convertible at
any time into stock which meets the requirements of (i) or (ii)
(whichever is applicable) and if such conversion is at a conversion
price that is reasonable. A preferred stock will be considered
noncallable if after the call there will be a reasonable opportunity
for a conversion which meets the requirements of the preceding
sentence in accordance with applicable Treasury regulations.
Section 2.19. Entry Date means the restated Effective Date and every
------------ ----------
JANUARY 1 and JULY 1 after the restated Effective Date.
Section 2.20. ERISA means the Employee Retirement Income Security Act of
------------ -----
1974, as amended from time to time.
Section 2.21. Family Member means an Employee's spouse and lineal
------------ -------------
ascendants or descendants and the spouses of lineal ascendants and descendants,
as described in Code Section 414(q)(6)(B).
Section 2.22. Forfeiture means the loss, by a Participant or Beneficiary,
------------ ----------
pursuant to Section 6.3, of that part of the benefit which the Participant or
Beneficiary otherwise would have received under the Plan at any time prior to
the termination of the Plan or the complete discontinuance of benefits under the
Plan, arising from the Participant's severance of employment before the
Participant's interest is fully vested.
Section 2.23. Former Employee means any individual who is no longer
------------ ---------------
employed by the Employer.
Section 2.24. Former Participant means any individual who has been a
------------ ------------------
Participant in the Plan, but who is either no longer employed by the Employer or
is otherwise no longer eligible to participate and has not yet received the
entire benefit to which the individual is entitled under the Plan.
6
<PAGE>
Section 2.25. Highly Compensated Employee. Highly Compensated Employee
------------ ---------------------------
means any Participant or Former Participant who is a Highly Compensated
Employee, defined in Code Section 414(q). Generally, any Participant or Former
Participant is considered a Highly Compensated Employee if, during the Plan Year
(the "Determination Year") or during the twelve month period immediately
preceding the Determination Year or, if the Employer elects, the calendar year
ending with or within the Determination Year (the "Look Back Year"), the
Participant or Former Participant:
(a) was at any time a Five Percent Owner, defined in Section 2.51(g);
(b) received Compensation from the Employer in excess of $75,000, as
adjusted by the Secretary of the Treasury for the relevant year;
(c) received Compensation from the Employer in excess of $50,000, as
adjusted by the Secretary of the Treasury for the relevant year, and was in the
top-paid group of Employees for the relevant year. An Employee is in the top-
paid group of Employees for any Plan Year if such Employee is in the group
consisting of the top twenty percent (20%) of the Employees when ranked on the
basis of Annual Compensation paid during the Plan Year. However, solely for
determining the total number of active Employees for a year, the following
Employees are disregarded:
(i) The Employees described in this subsection (i) are excluded on
the basis of age or Service:
(A) Employees who have not completed six (6) months of Service
by the end of the year. (An Employee's Service in the
immediately preceding year is added to the Employee's
Service in the current year to determine whether the
exclusion applies in the current year.);
(B) Employees who normally work less than 17 1/2 hours per week.
(This determination is made independently for each year.
Weeks during which the Employee did not work are not
considered. An Employee who works less than 17 1/2 hours a
week for fifty percent (50%) or more of the total weeks
worked by the Employee during the year is deemed to normally
work less than 17 1/2 hours per week under this rule.);
(ii) Employees who are included in a unit of employees covered by an
agreement that the Secretary of Labor finds to be a collective
bargaining agreement between Employee representatives and the Employer
which satisfies Code Section 7701(a)(46) and Temporary Treasury
Regulation Section 301.7701-17T are included in determining the number
of Employees in the top-paid group unless the following exception
applies. If ninety percent (90%) or more of the Employees of the
Employer are covered under collective bargaining agreements that the
Secretary of Labor finds to be collective bargaining agreements
between Employee representatives and the Employer, which agreements
satisfy Code Section 7701(a)(46) and Temporary Treasury Regulation
Section 301.7701-17T, and the Plan covers only Employees who are not
covered under the agreements, then the Employees who are covered under
the agreements are (A) not counted in determining the number of
noncollective bargaining employees who will be included in the top-
paid group in testing the Plan; and (B) not included in the top-paid
group in testing the Plan.
7
<PAGE>
(d) was at any time an officer of the Employer having Compensation greater
than fifty percent (50%) of the amount in effect under Code Section 415(b)(1)(A)
for the relevant year. The number of officers taken into account under clause
(d) will not exceed the greater of three (3) or ten percent (10%) of the total
number (after application of the Code Section 414(q) exclusions) of Employees,
but no more than fifty (50) officers. If no Employee satisfies the Compensation
requirement in clause (d) for the relevant year, the Committee will treat the
highest paid officer as satisfying clause (d) for that year.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Determination Year, but does not satisfy clause (b), (c) or (d) during the Look
Back Year and does not satisfy clause (a) in either period, the Employee is a
Highly Compensated Employee only if the Employee is one of the one hundred (100)
most highly compensated Employees for the Plan Year.
The Committee must make the determination of who is a Highly Compensated
Employee, including the determinations of the number and identity of the top
paid twenty percent (20%) group, the top one hundred (100) paid Employees, the
number of officers includable in clause (d) and the relevant Compensation,
consistent with Code Section 414(q) and regulations issued under that Code
Section. The Employer may make a calendar year election to determine the Highly
Compensated Employees for the Look Back Year, as prescribed by Treasury
regulations. A calendar year election must apply to all plans and arrangements
of the Employer.
For purposes of applying any nondiscrimination test required under the Plan
or under the Code, in a manner consistent with applicable Treasury regulations,
the Committee will treat a Highly Compensated Employee and all Family Members as
defined in Section 2.21 as a single Highly Compensated Employee, but only if the
Highly Compensated Employee is a more than five percent (5%) owner or is one of
the ten (10) Highly Compensated Employees with the greatest Compensation for the
Plan Year. This aggregation rule applies to a Family Member even if that Family
Member is a Highly Compensated Employee without family aggregation.
A Former Participant who separated from Service, or is deemed to have
separated from Service under applicable Treasury regulations, prior to the Plan
Year, performs no Service for the Employer during the Plan Year and was a Highly
Compensated Employee either for the Separation Year or any Plan Year ending on
or after such Former Participant attained age fifty-five (55) years is
considered a Highly Compensated Employee. Generally, Separation Year means the
Plan Year during which the Employee separates from Service with the Employer. A
Former Participant who separated from Service prior to January 1, 1987 is
considered a Highly Compensated Employee only if the Former Participant was a
Five Percent Owner or received Compensation in excess of $50,000 during (a) the
Participant's Separation Year or the year preceding the Separation Year or (b)
any year ending on or after such Former Participant attained age fifty-five (55)
years or the last year ending before such Former Participant attained age fifty-
five (55) years.
For purposes of this Section, Compensation means Annual Compensation
defined in Section 2.6, excluding only the exclusions described in paragraphs
(i) through (v), and including deferrals under (a) Code Section 402(a)(8)
relating to a Code Section 401(k) arrangement; (b) Code Section 125 relating to
a cafeteria plan; (c) Code Section 403(b) relating to a tax sheltered annuity
plan; and (d) Code Section 408(h) relating to a simplified employee pension.
Compensation from each Related Employer shall be taken into account.
Section 2.26. Hour of Service.
------------ ---------------
(a) Any Employee or Participant who is compensated on an hourly-rated basis
shall be credited with an Hour of Service for:
8
<PAGE>
(i) each hour before or after the effective date of this Plan for
which the Employee or Participant is either directly or indirectly
paid or entitled to payment by the Employer for the performance of
duties or for reasons other than for the performance of duties due to
vacation, holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence, whether or not the
employment relationship was terminated; and
(ii) each hour before or after the effective date of this Plan for
which back pay has been awarded to the Employee or Participant or
agreed to by the Employer, irrespective of mitigation of damages.
(b) Any Employee or Participant who is compensated on a basis other than an
hourly-rated basis and who, if hourly-rated, would be credited with one (1) Hour
of Service pursuant to the preceding sentence, shall be credited with the number
of Hours of Service as follows:
(i) ten (10) hours of service per day, if compensated on a daily
basis;
(ii) forty-five (45) hours of service per week, if compensated on a
weekly basis;
(iii) ninety (90) hours of service per bi-weekly period, if
compensated on a bi-weekly basis;
(iv) ninety-five (95) hours of service per semi-monthly period, if
compensated on a semi-monthly basis; or
(v) one hundred ninety (190) hours of service per month, if
compensated on a monthly basis.
(c) The number of Hours of Service which shall be credited to an Employee
or Participant for being entitled to payment for reasons other than for the
performance of duties shall be determined under Sections 2530.200b-2(b) and (c)
of the Department of Labor Regulations which are incorporated herein by this
reference. The method for crediting Hours of Service under Section 2.26(b) for
each Participant shall be the same method used for crediting Hours of Service
for which the Participant received compensation. Notwithstanding the foregoing,
not more than five hundred one (501) Hours of Service shall be credited to any
Employee or Participant during any Computation Period for any single, continuous
period during which the Employee or Participant performs no duties.
(d) An Hour of Service performed for any other entity that is a Related
Employer with respect to the Employer shall be considered an Hour of Service
performed for the Employer.
Section 2.27. Individual Accounts/Accounts means accounts or records
------------ ----------------------------
maintained by the Committee or its agent indicating the composition and monetary
value of the total interest in the Trust Fund of each Participant, each Former
Participant, and each Beneficiary. The types of Accounts under this Plan are:
(a) Employer Contribution Accounts holding Employer Contributions made to
------------------------------
the Plan under Section 4.1 and attributable earnings. The types of Employer
Contribution Accounts maintained under this Plan are:
(i) Employer Investment Accounts holding a Participant's total
----------------------------
interest in the Trust Fund attributable to the Participant's portion
of the Employer Contribution made in cash and invested in assets other
than Employer Securities.
9
<PAGE>
(ii) Employer Securities Accounts holding a Participant's total
----------------------------
interest in the Trust Fund attributable to the Participant's portion
of the Employer Contribution made or invested in Employer Securities.
(b) Participant Contribution Accounts holding Participant Contributions
---------------------------------
made to the Plan and attributable earnings. The types of Participant
Contribution Accounts maintained under this Plan are:
. Rollover Accounts holding the Participant's qualified rollover to
-----------------
the Plan pursuant to Article 13.
The Accounts maintained under this Plan shall be maintained for accounting
purposes only and no segregation of Plan assets, other than Rollover
Contributions, shall be required.
Section 2.28. Leveraged Employer Securities means Employer Securities
------------ -----------------------------
acquired by the Trust with the proceeds of an Exempt Loan and which satisfy the
definition of Qualifying Employer Securities.
Section 2.29. Limitation Year means the Plan Year.
------------ ---------------
Section 2.30. Named Fiduciary means one or more fiduciaries named in this
------------ ---------------
Agreement who jointly and severally shall have authority to control or manage
the operation and administration of the Plan. Conwell Corporation shall be the
Named Fiduciary unless it designates another person by written Employer action.
Section 2.31. Nonforfeitable means a vested interest attained by a
------------ --------------
Participant or Beneficiary in that part of the Participant's benefit under the
Plan arising from the Participant's Service, which claim is unconditional and
legally enforceable against the Plan.
Section 2.32. Non-Highly Compensated Employee means an Employee, Former
------------ -------------------------------
Employee or Beneficiary who is not a Highly Compensated Employee.
Section 2.33. Normal Retirement Age means, for each Participant, the date
------------ ---------------------
the Participant attains age sixty-five (65) years.
Section 2.34. Normal Retirement Date means, for each Participant, the
------------ ----------------------
first day next following the date the Participant attains Normal Retirement Age
and which immediately follows the last day on which the Participant is an
Employee, or, if later, the last day of the Participant's Authorized Leave of
Absence, if any.
Section 2.35. One Year Break in Service .
------------ --------------------------
(a) A One Year Break in Service, for purposes of eligibility, means a
Computation Period described in Section 2.57(a) relating to Year of Service,
during which an Employee has not completed more than five hundred (500) Hours of
Service with the Employer.
(b) A One Year Break in Service, for purposes of vesting, means a
Computation Period described in Section 2.57(b) relating to Year of Service,
during which an Employee has not completed more than five hundred (500) Hours of
Service with the Employer.
(c) An Employee shall not incur a One Year Break in Service for the Plan
Year in which the Employee becomes a Participant, dies, retires or suffers total
and permanent disability.
(d) Further, solely for the purpose of determining whether a Participant
has incurred a One Year Break in Service under (a) or (b) above, Hours of
Service shall be recognized for "authorized leaves of absence" and "maternity
and paternity leaves of absence."
10
<PAGE>
(i) An "authorized leave of absence" means an unpaid temporary
cessation from active employment with the Employer pursuant to an
established nondiscriminatory policy, whether occasioned by illness,
military service or any other reason.
(ii) A "maternity or paternity leave of absence" means an absence from
work for any period because of the Employee's pregnancy, birth of the
Employee's child, placement of a child with the Employee relating to
the adoption of the child, or any absence for the purpose of caring
for the child for a period immediately following the birth or
placement. For purposes of a maternity and paternity leave of absence,
Hours of Service shall be credited for the Computation Period in which
the absence from work begins, only if the credit is necessary to
prevent the Employee from incurring a One Year Break in Service, or,
in any other case, in the immediately following Computation Period.
The Hours of Service credited for a "maternity or paternity leave of
absence" shall be those which would normally have been credited but
for the absence, or, in any case in which the Administrator is unable
to determine the hours normally credited, eight (8) Hours of Service
per day. The total Hours of Service required to be credited for a
"maternity or paternity leave of absence" shall not exceed five
hundred one (501) hours.
Section 2.36. Owner-Employee means a sole proprietor or a partner who owns
------------ --------------
more than ten percent (10%) of either the capital interest or profits interest
in an unincorporated Employer and who receives income from such unincorporated
Employer for personal services.
Section 2.37. Parent means Frozen Foods Express Industries, Inc.
------------ ------
Section 2.38. Participant means an Employee of the Employer who has met
------------ -----------
the eligibility requirements of this Plan and who has been enrolled as a
Participant in this Plan.
Section 2.39. Participating Employer means any Related Employer that may
------------ ----------------------
elect to adopt this Plan pursuant to Article 10.
Section 2.40. Participation means any period commencing on the date the
------------ -------------
Employee becomes a Participant and ending on the date on which the Employee
incurs a Severance from Service.
Section 2.41. Plan means the restated leveraged employee stock ownership
------------ ----
plan embodied in this Agreement, as amended from time to time, designated as the
CONWELL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN. The Employer has designed
this Plan primarily to invest in Qualifying Employer Securities; provided,
however, that the Trustee shall invest the proceeds of an Exempt Loan to acquire
only Qualifying Employer Securities described in Section 2.18(b).
Section 2.42. Plan Year means the twelve (12) consecutive month period
------------ ---------
from JANUARY 1 of each year to the next following DECEMBER 31.
Section 2.43. Predecessor Employer means a business organization which has
------------ --------------------
been acquired by the Employer, whether by merger, stock purchase or acquisition
of the assets and business of the business organization.
Section 2.44. Reemployment Commencement Date means the first date on which
------------ ------------------------------
an Employee completes an Hour of Service upon return to the employment of the
Employer after a Severance from Service.
Section 2.45. Related Employer. A related group of employers is a
------------ ----------------
controlled group of corporations (defined in Code Section 414(b)), trades or
businesses (whether or not incorporated) which are under common control (defined
in Code Section 414(c)) or an affiliated service group (defined in Code
11
<PAGE>
Section 414(m) or in Code Section 414(o)). If the Employer is a member of a
related group, the term "Employer" includes the related group members for
purposes of crediting Hours of Service, determining Years of Service and Breaks
in Service under Articles 2 and 9, applying the participation test of Code
Section 401(a)(26) and the coverage test of Code Section 410(b), applying the
limitations on allocations in Article 5, applying the top-heavy rules and the
minimum allocation requirements of Article 5, the definitions of Employee,
Highly Compensated Employee, Compensation and Leased Employee, and for any other
purpose required by the applicable Code Section or by a Plan provision. However,
an Employer may contribute to the Plan only by being a signatory to a
Participation Agreement to the Plan. If one or more of the Employer's related
group members become Participating Employers by executing a Participation
Agreement to the Plan, the term "Employer" includes the participating related
group members for all purposes of the Plan, and Administrator means the Employer
that is the signatory to the Plan. For Plan allocation purposes, Compensation
does not include Compensation received from a Related Employer that is not
participating in this Plan.
Section 2.46. Retirement occurs when a Participant Separates from Service
------------ ----------
(i) on or after Normal Retirement Age, or (ii) on or after Early Retirement Age.
Retirement is considered to commence on the Normal Retirement Date or the Early
Retirement Date.
Section 2.47. Self-Employed Individual means, regarding an unincorporated
------------ ------------------------
business, an individual described in Code Section 401(c)(1). A Self-Employed
Individual shall be treated as an Employee if the individual has an ownership
interest in either the capital or profits interest of an unincorporated Employer
and receives income from the Employer for personal services.
Section 2.48. Separation from Service or Severance from Service occurs
------------ -------------------------------------------------
whenever a person ceases to be an Employee of the Employer and is no longer
being credited with Hours of Service.
Section 2.49. Service means any period of time the Employee is in the
------------ -------
employ of the Employer. Service in all cases includes periods during which the
Employee is on an "authorized leave of absence" or a "maternity or paternity
leave of absence" defined in Section 2.35(d) relating to One Year Break in
Service. Leaves of absence also shall include periods of absence in connection
with military service during which the Employee's re-employment rights are
legally protected. Except for absence by reason of military service, leaves of
absence shall be for a maximum period of two (2) years. Leaves of absence shall
be granted on a uniform and nondiscriminatory basis.
If the Employer maintains the plan of a Predecessor Employer, Service shall
include service for the Predecessor Employer. To the extent it may be required
under applicable Treasury regulations under Code Section 414, Service shall
include all service for any Predecessor Employer.
Section 2.50. Shareholder-Employee means a Participant who owns more than
------------ --------------------
five percent (5%) of the Employer's outstanding capital stock during any year in
which the Employer elected to be taxed as a Small Business Corporation under
Code Section 1362(a) and who receives income from the Employer for personal
services.
Section 2.51. Top-Heavy Plan Status/Super Top-Heavy Plan Status. This
------------ -------------------------------------------------
Plan shall be a Top-Heavy Plan in any Plan Year in which, as of the
Determination Date, (a) the Present Value of Accrued Benefits of Key Employees,
or (b) the sum of the Aggregate Accounts of Key Employees of any plan of an
Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued
Benefits or Aggregate Accounts of all Participants under this Plan and any plan
of an Aggregation Group.
12
<PAGE>
If any Participant is a Non-Key Employee for any Plan Year, but the
Participant was a Key Employee for any prior Plan Year, the Participant's
Aggregate Account balance shall not be taken into account in determining whether
this Plan is a Top-Heavy Plan (or whether any Aggregation Group which includes
this Plan is a Top-Heavy Group) as further defined in Code Section 416(g) and
the applicable Treasury regulations.
This Plan shall be a Super Top-Heavy Plan for any Plan Year in which, as of
the Determination Date, (a) the Present Value of Accrued Benefits of Key
Employees, or (b) the sum of the Aggregate Accounts of Key Employees of any plan
of an Aggregation Group, exceeds ninety percent (90%) of the Present Value of
Accrued Benefits and the Aggregate Accounts of all Participants under this Plan
and any plan of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but the
Participant was a Key Employee for any prior Plan Year, the Participant's
Aggregate Account balance shall not be taken into account in determining whether
this Plan is a Super Top-Heavy Plan (or whether any Aggregation Group which
includes this Plan is a Top-Heavy Group) as further defined in Code Section
416(g) and the applicable Treasury regulations.
For purposes of determining Top-Heavy and Super Top-Heavy status, the
following definitions shall apply:
(a) Aggregate Account means, as of the Determination Date, the sum of:
-----------------
(i) the Participant Contribution Account and Employer Contribution
Account balances as of the most recent Valuation Date occurring within
a twelve (12) month period ending on the Determination Date;
(ii) the contributions that would be allocated as of a date not later
than the Determination Date, even though those amounts are not yet
made or required to be made;
(iii) any plan distributions made during the Determination Period
(However, in the case of distributions made after the Valuation Date
and prior to the Determination Date, such distributions are not
included as distributions for Top-Heavy purposes to the extent that
the distributions are already included in the Participant's Aggregate
Account balance as of the Valuation Date.); and
(iv) any Employee contributions, whether voluntary or mandatory
(However, amounts attributable to Participant Deductible Voluntary
Contributions shall not be considered to be a part of the
Participant's Aggregate Account balance.).
(v) Regarding unrelated rollovers and plan-to-plan transfers (those
which are (A) initiated by the Employee and (B) made from a plan
maintained by one employer to a plan maintained by another employer),
if this Plan provides for rollovers or plan-to-plan transfers, an
unrelated rollover or plan-to-plan transfer shall be considered as a
distribution for purposes of this Section. If this Plan is the plan
accepting an unrelated rollover or plan-to-plan transfer, an unrelated
rollover or plan-to-plan transfer accepted after December 31, 1983
shall not be considered as part of the Participant's Aggregate Account
balance. However, unrelated rollovers or plan-to-plan transfers
accepted prior to January 1, 1984 shall be considered as part of the
Participant's Aggregate Account balance.
(vi) Regarding related rollovers and plan-to-plan transfers (those
either (A) not initiated by the Employee or (B) made to a plan
maintained by the same Employer), if this Plan provides for rollovers
or plan-to-plan transfers, a related rollover or plan-to-plan transfer
shall be considered as a distribution for purposes of this Section.
If this Plan is the plan accepting a related rollover or plan-to-plan
transfer, a related rollover or plan-to-plan transfer shall
13
<PAGE>
be considered as part of the Participant's Aggregate Account balance,
irrespective of the date on which the related rollover or plan-to-plan
transfer is accepted.
(b) Aggregation Group means either a Required Aggregation Group or a
-----------------
Permissive Aggregation Group as hereinafter determined.
(i) Required Aggregation Group means the group of plans composed of
--------------------------
(A) each plan of the Employer in which a Key Employee is a participant
or participated at any time during the Determination Period,
regardless of whether the plan has terminated; and (B) each other plan
of the Employer which enables any plan in which a Key Employee
participates to meet the requirements of Code Sections 401(a)(4) or
410, which shall be aggregated.
In the case of a Required Aggregation Group, each plan in the
group will be considered a Top-Heavy Plan if the Required Aggregation
Group is a Top-Heavy Group. No plan in the Required Aggregation Group
will be considered a Top-Heavy Plan if the Required Aggregation Group
is not a Top-Heavy Group.
(ii) Permissive Aggregation Group means the Required Aggregation Group
----------------------------
plus any other plan not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a whole,
would continue to satisfy Code Sections 401(a)(4) and 410.
In the case of a Permissive Aggregation Group, only a plan that
is part of the Required Aggregation Group will be considered a Top-
Heavy Plan if the Permissive Aggregation Group is a Top-Heavy Group.
No plan in the Permissive Aggregation Group will be considered a Top-
Heavy Plan if the Permissive Aggregation Group is not a Top-Heavy
Group.
(iii) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated to
determine whether the plans are Top-Heavy Plans.
(c) Determination Date means for any Plan Year (i) the last day of the
------------------
preceding Plan Year, or (ii) in the case of the first Plan Year of the Plan, the
last day of the first Plan Year.
(d) Determination Period means the five (5) year period ending on the
--------------------
Determination Date.
(e) Employer means the Employer that adopts this Plan. Related Employers
--------
shall be considered a single Employer for purposes of applying the limitations
of these top-heavy rules.
(f) Excluded Employees means any Employee who has not performed any Service
-------------------
for the Employer during the five (5) year period ending on the Determination
Date. Excluded Employees shall be excluded for purposes of a Top-Heavy
determination.
(g) Key Employee means any Employee or Former Employee, or Beneficiary of
------------
the Employee, who, for any Plan Year in the Determination Period is:
(i) An officer of the Employer having Compensation from the Employer
and any Related Employer greater than fifty percent (50%) of the
amount in effect under Code Section 415(b)(1)(A);
14
<PAGE>
(ii) One of the ten (10) Employees having Compensation from the
Employer and any Related Employer of more than the limitation in
effect under Code Section 415(c)(1)(A) and owning (or considered as
owning within the meaning of Code Section 318) the largest interests
in the Employer;
(iii) A Five Percent Owner of the Employer (Five Percent Owner means
any person owning, or considered as owning within the meaning of Code
Section 318, more than five percent (5%) of the outstanding stock of
the Employer or stock possessing more than five percent (5%) of the
total combined voting power of all stock of the Employer; or in the
case of an unincorporated business, any person who owns more than five
percent (5%) of the capital or profits interest in the Employer.); or
(iv) A One Percent Owner of the Employer having Compensation from the
Employer of more than $150,000 (One Percent Owner means any person
having Compensation from the Employer and any Related Employer in
excess of $150,000 and owning, or considered as owning within the
meaning of Code Section 318, more than one percent (1%) of the
outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer; or in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer.).
(v) Notwithstanding the foregoing, Key Employee shall have the meaning
set forth in Code Section 416(i), as amended.
(vi) For purposes of determining whether an Employee or Former
Employee is an officer under this subsection (g), an officer of the
Employer shall have the meaning set forth in the regulations under
Code Section 416(i).
(vii) For purposes of this Section, Compensation means Compensation
determined under Section 2.25 for the definition of a Highly
Compensated Employee.
(viii) For purposes of determining ownership hereunder, employers
that would otherwise be aggregated as Related Employers shall be
treated as separate employers.
(h) Non-Key Employee means any Employee or Former Employee, or Beneficiary
----------------
of the Employee, who is not a Key Employee.
(i) Present Value of Accrued Benefit. Solely for the purpose of
--------------------------------
determining if the Plan, or any other plan included in a Required Aggregation
Group of which this Plan is a part, is a Top-Heavy Plan, the Accrued Benefit of
a Non-Key Employee shall be determined under (i) the method, if any, that
uniformly applies for accrual purposes under all plans maintained by the Related
Employers, or (ii) if there is no uniform method, in accordance with the slowest
accrual rate permitted under the fractional accrual method described in Code
Section 411(b)(1)(C). To calculate the Present Value of Accrued Benefits from a
defined benefit plan, the Committee will use the actuarial assumptions for
interest and mortality only, prescribed by the defined benefit plan(s) to value
benefits for Top-Heavy purposes. If an aggregated plan does not have a
Valuation Date coinciding with the Determination Date, the Committee must value
the Accrued Benefits in the aggregated plan as of the most recent Valuation Date
falling within the twelve (12) month period ending on the Determination Date,
except as Code Section 416 and applicable Treasury regulations require for the
first and second plan year of a defined benefit plan. The Committee will
determine whether a plan is Top-Heavy by referring to Determination Dates that
fall within the same calendar year.
15
<PAGE>
(j) Top-Heavy Group means an Aggregation Group in which, as of the
---------------
Determination Date, the sum of:
(i) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group; and
(ii) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group exceeds sixty percent (60%)
of a similar sum determined for all Participants.
(k) Valuation Date means the Determination Date defined above.
--------------
Section 2.52. Total Distribution means a distribution to a Participant or
------------ ------------------
a Participant's Beneficiary, within one (1) taxable year of the recipient, of
the entire balance to the credit of the Participant.
Section 2.53. Trust means the trust created by the Trust Agreement between
------------ -----
Conwell Corporation and the Trustee.
Section 2.54. Trust Agreement means the agreement as provided in Article 2
------------ ---------------
of the Plan, entered into by Conwell Corporation and the Trustee, or any
successor Trustee, establishing the Trust and specifying the duties of the
Trustee.
Section 2.55. Trust Fund. Trust Fund means all assets of any kind and
------------ ----------
nature from time to time held by the Trustee or its agent under the Trust
Agreement without distinction between income and principal. This Plan
contemplates a single Trust for all Employers participating under the CONWELL
CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN. However, the Trustee will maintain
separate records of account to reflect properly each Participant's Account
Balance from each Participating Employer.
Section 2.56. Trustee means the trustee or trustees under the Plan and the
------------ -------
Trust Agreement. EFFECTIVE JANUARY 1, 1985 THROUGH JUNE 30, 1989, Trustee means
Texas American Bank Dallas, N.A. EFFECTIVE JULY 1, 1989, Trustee means First
City, Texas-Dallas, and any successor Trustee.
Section 2.57. Year of Service.
------------ ---------------
(a) Year of Eligibility Service means, for each Employee, the twelve (12)
---------------------------
consecutive month Computation Period, defined below, during which the Employee
completes one thousand (1,000) Hours of Service. The initial Eligibility
Computation Period, for purposes of this subsection, shall be the twelve (12)
consecutive month period commencing with the date on which an Employee is first
entitled to credit for an Hour of Service with the Employer, the Employment
Commencement Date. The Eligibility Computation Period for each Employee shall
shift to the Plan Year which includes the Accounting Date of an Employee's
Employment Commencement Date without regard to whether the Employee is entitled
to be credited with one thousand (1,000) Hours of Service during the period,
provided that an Employee who is credited with one thousand (1,000) Hours of
Service in both the initial Eligibility Computation Period and the Plan Year
which includes the first Accounting Date of the Employee's Employment
Commencement Date shall be credited with two (2) Years of Eligibility Service.
In computing an Employee's Year(s) of Eligibility Service in the case of any
Participant who has a One Year Break in Service, Service before the Break in
Service shall not be required to be taken into account under the Plan until the
Employee has completed a Year of Eligibility Service measured from the date of
re-employment.
(b) Year of Vesting Service means any Plan Year during which the Employee
-----------------------
performs not less than one thousand (1,000) Hours of Service for the Employer.
If (i) an Employee's Eligibility Computation Period for a Plan requiring One
Year of Service for eligibility overlaps two vesting Computation Periods; and
16
<PAGE>
(ii) the Employee completes one thousand (1,000) Hours of Service in the
Eligibility Computation Period but fails to complete the one thousand (1,000)
Hours of Service in either of the overlapping Vesting Computation Periods; and
(iii) the Employee is admitted to participation in the Plan, then the Year of
Eligibility Service completed shall also be considered a Year of Vesting Service
when the Employee becomes a Participant.
(i) Years of Service, for purposes of vesting, shall include all Years
of Service of the Employee with any Predecessor Employer.
(ii) Years of Service with the Employer before a Participant enters
the Plan shall be considered for purposes of vesting.
(c) Reemployment After a Break-in-Service. In determining a Participant's
-------------------------------------
Years of Service for both participation and vesting purposes upon a
Participant's reemployment with the Employer after a Break-in-Service, the
following rules apply:
(i) For a Participant who terminates employment without any vested
right to the Employer Contribution Account and who is re-employed
after a One Year Break in Service, Service before the Break in Service
shall not be taken into account if the number of consecutive One Year
Breaks in Service equals or exceeds the greater of (A) five (5), or
(B) the aggregate number of Years of Service before the Break in
Service.
(ii) For an Employee who terminates employment and is subsequently re-
employed after incurring a One Year Break in Service, Service prior to
the Break in Service shall not be taken into account until the
Employee has completed a Year of Service after re-employment.
(iii) For a Participant who terminates employment and who
subsequently is re-employed after incurring five (5) consecutive One
Year Breaks in Service, Years of Service after the Break in Service
shall not be taken into account for purposes of determining the
Nonforfeitable percentage of an Employee's Account Balance derived
from Employer Contributions which accrued before the Break in Service.
(d) Service with Related Employers. If the Employer is a member of a group
------------------------------
of Related Employers, then Year of Service for purposes of eligibility and
vesting shall include Service with any Related Employer.
* * * * * * *
17
<PAGE>
ARTICLE THREE
-------------
ELIGIBILITY AND PARTICIPATION
-----------------------------
Section 3.1. Eligibility Conditions.
----------- ----------------------
(a) Each Employee shall be eligible to participate in this Plan on the
Entry Date coincident with or next following completion of one (1) Year of
Service with the Employer.
(b) Notwithstanding the preceding sentence, an Employee who has completed
at least one (1) Year of Service with the Employer on the Effective Date of this
Plan shall be eligible to participate in this Plan on the Effective Date.
EFFECTIVE JANUARY 1, 1987 THROUGH DECEMBER 31, 1988, notwithstanding (a)
above, an Employee of an Employer which became an Employer pursuant to an
election under Section 9.5, shall become a Participant as of the effective date
of such Employer's election to participate in the Plan if:
(i) Such an Employee was a participant in a defined contribution plan
of such an Employer which plan was merged into this Plan
effective as of the date such Employer's participation in this
Plan commenced; or
(ii) Such an Employee would have been eligible under (a) above, prior
to such effective date if such Employer had become a
participating employer as of the first day of the first Plan Year
preceding the Plan Year in which such Employer actually commenced
participation in this Plan.
In all other situations, such Employee shall become a Participant upon
meeting the requirements of (a) above, disregarding any service for the Employer
more than one Plan Year prior to the Plan Year in which the Employer's
participation in this Plan commenced.
(c) The following Employees are not eligible to participate in the Plan:
. Collective Bargaining Employees. Each Employee who is a member
of a collective bargaining unit shall not be eligible to
participate in this Plan unless the collective bargaining
agreement provides otherwise. An Employee is a member of a
collective bargaining unit if the Employee is included in a unit
of Employees covered by an agreement which the Secretary of Labor
finds to be a collective bargaining agreement between Employee
representatives and one or more employers if there is evidence
that retirement benefits were the subject of good faith
bargaining between the Employee representatives and the Employer
or Employers. The term "Employee representatives" does not
include an organization of which more than one-half (1/2) the
members are owners, officers, or executives of the Employer.
. Nonresident aliens who do not receive any earned income (as
defined in Code Section 911(d)(2)) from the Employer which
constitutes United States source income (as defined in Code
Section 861(a)(3)).
. Any Employee hired under a work-study arrangement whereby the
Employee's active employment with the Employer shall not exceed
four (4) consecutive calendar months, whereby the Employee
attends a recognized school for a "quarter",
18
<PAGE>
"semester" or other scholastic period immediately before or after
such employment with the Employer. EFFECTIVE JANUARY 1, 1989,
this restriction no longer applies.
. Any Employee compensated on a salaried or hourly basis who is
employed by W & B Refrigeration Service Company but does not have
the job classification of Warehouseman, Driver, Security Guard or
Mechanic.
. EFFECTIVE FEBRUARY 1, 1988, any Employee compensated on a
salaried or hourly who is employed by Lisa Motor Lines, Inc. but
does not have the job classification of Warehouseman, Driver,
Security Guard or Mechanic.
. Any Employee compensated on a salaried or hourly basis who is
employed by Global Refrigerant Management, Inc. (formerly
Compressor Plus, Inc.) but does not have the job classification
of Warehouseman, Driver, Security Guard or Mechanic.
. Effective January 1, 1995, Leased Employees.
If a Participant is no longer a member of an eligible class of Employees
and becomes ineligible to participate but has not incurred a Break in Service,
such Employee will participate immediately upon returning to an eligible class
of Employees. If a Participant incurs a Break in Service, eligibility will be
determined under the Break in Service rules of Section 2.35.
If an Employee who is not a member of an eligible class of Employees
becomes a member of an eligible class, the Employee will participate immediately
if the Employee has satisfied the minimum age and service requirements and would
have otherwise previously become a Participant.
Section 3.2. Participation.
----------- -------------
(a) Whenever a new Employee is hired by the Employer, the Employer
immediately shall give notice to the Committee of the employment and shall
identify the new Employee. The Committee shall notify in writing each new
Employee of the pending eligibility not later than thirty (30) days prior to the
date on which the Employee will become eligible and shall furnish the Employee a
copy of this Agreement or any other explanation of the Plan that the Committee
shall provide for that purpose. Each Employee so notified automatically will
become a Participant upon meeting the requirements of Section 3.1.
(b) A Former Participant who, on or after the Effective Date, incurs a
Severance from Service, and who is subsequently reemployed by an Employer, shall
immediately reenter the Plan as an active Participant on the Reemployment
Commencement Date if the Participant has not incurred a Break in Service since
the last Severance from Service, or if he was previously vested in all or a
portion of his Employer Contribution Account balance.
(c) If not covered by (b) above, a Former Participant reemployed by the
Employer will be treated as a new Employee for eligibility purposes if the
number of consecutive years of Break in Service equals or exceeds the greater of
(i) 5 years, or (ii) the number of Years of Service creditable to the Former
Participant under this Article prior to his last consecutive Breaks in Service;
otherwise, the Former Participant will become a Participant again upon his
Reemployment Commencement Date.
* * * * * * *
19
<PAGE>
ARTICLE FOUR
------------
CONTRIBUTIONS
-------------
Section 4.1. Employer Contributions.
----------- ----------------------
(a) Discretionary Contributions. For each Plan Year, the amount of the
---------------------------
Employer Contribution to the Trust Fund will equal the amount, if any, each
Employer may from time to time determine and authorize. The Employer may
contribute to this Plan whether or not it has net profits. The Employer shall
not authorize contributions by the Employer at such times or in such amounts
that the Plan in operation discriminates in favor of Highly Compensated
Employees. Notwithstanding the foregoing, the Employer Contribution for any
year shall not exceed the maximum amount allowable as a deduction to the
Employer under Code Section 404.
(b) Form of Contributions. Employer Contributions may be paid in cash or
---------------------
in Employer Securities as the Employer may determine from time to time.
Employer Contributions in cash shall be used by the Trustee to acquire Employer
Securities as soon as reasonably possible, taking into consideration current
market conditions, the availability of Employer Securities, and cash
requirements arising as a result of distributions from Participants' Accounts.
Interim investments may be made by the Trustee in certificates of deposit,
readily marketable stock, debentures, and similar investments generally regarded
as involving low risk. If any Employer Contributions are paid in shares of
Employer Securities, the value of the Employer Securities shall be determined by
the average of the closing prices of the securities for the twenty (20)
consecutive trading days immediately preceding the date on which the Employer
Securities are contributed to the Trust. EFFECTIVE JANUARY 1, 1994, the
Employer may make its contribution of Employer Securities at the fair market
value determined at the time of contribution.
(c) Make-up Contributions. After the Employer's Contribution for a Plan
---------------------
Year has been made and allocated, if it should appear that, through oversight or
mistake of fact or law, a Participant (or an Employee who should have been
considered a Participant) entitled to a share in the Employer Contribution
received no allocation or received an allocation which was less than the
individual should have received, the Employer may, at its election, and in lieu
of reallocating the Employer Contribution, make a special Make-Up Contribution
of cash or Employer Securities for the Account of the Participant in an amount
adequate to provide the Participant the amount of Employer Securities that would
have been allocated to the Employer Account but for the oversight or mistake,
including any dividend allocation.
(d) Payment on Exempt Loan. All Employer cash contributions and Trust
----------------------
income, including dividends that are not distributed in cash on instruction from
the Committee as provided in Article 5, but not including income earned on
Participants' Rollover Accounts, shall first be used to pay outstanding current
obligations of the Trust, including payments owed on Exempt Loans.
Section 4.2. Deadline for Employer Contributions. Employer Contributions
----------- -----------------------------------
may be paid to the Trustee at any time and from time to time, except that the
total Employer Contribution for any Plan Year shall be paid in full not later
than the time prescribed by Code Section 404(a)(6) to enable the Employer to
obtain a deduction on its federal income tax return for the Employer's taxable
year. The total Employer Contribution for any Plan Year shall be deemed to have
been made on the Accounting Date of that Plan Year.
Section 4.3. Deposit of Employer Contributions. All Employer
----------- ---------------------------------
Contributions shall be added immediately to and become a part of the Trust Fund
and shall remain in the Trust.
20
<PAGE>
Section 4.4. Crediting of Employer Contributions. All Employer
----------- -----------------------------------
Contributions shall be credited as of each Accounting Date as provided in
Article 5.
Section 4.5. Withdrawal of Employer Contributions. The Plan does not
----------- ------------------------------------
permit withdrawal of Employer Contributions.
Section 4.6. Employee Contributions. Except as provided in Section 13.1
----------- ----------------------
pertaining to Rollover Contributions, this Plan does not permit nor accept
Employee Contributions of any kind.
* * * * * * *
21
<PAGE>
ARTICLE FIVE
------------
ALLOCATIONS
-----------
Section 5.1. Allocation of Trust Income.
----------- --------------------------
(a) Adjustment Rules for Employer Investment Accounts. As of each
-------------------------------------------------
Accounting Date, before allocating and crediting Forfeitures and the Employer
Contributions for the Plan Year ending with such Accounting Date as provided in
Article 5, upon instruction from the Committee, the Trustee shall adjust all
Employer Investment Accounts, if any, as follows:
(i) the Trustee shall determine the fair market value of the Trust
Fund, including the cash value of any Contracts then held for the
benefit of the Trust Fund as a whole, but excluding the aggregate
amount of contributions, if any, for the Plan Year made by the
Employer and received by the Trustee during the Plan Year, and
excluding all Forfeitures to be allocated as of such Accounting
Date;
(ii) the Trustee shall determine the then total aggregate value of all
Employer Investment Accounts as shown on its records, except such
portion of an Employer Investment Account that will be forfeited
and allocated as of such Accounting Date; and
(iii) the Trustee shall adjust the value of each Employer Investment
Account, by crediting it with its proportion of the difference
between (a) and (b) if (a) is larger or by charging it with the
proportion of the difference between (a) and (b) if (b) is
larger. The proportion to be so credited or charged to each
Employer Investment Account shall be calculated by multiplying
the then amount to the credit of each Employer Investment Account
by a fraction, the numerator of which is the difference between
(a) and (b) and the denominator of which is the then total
aggregate value of all Accounts.
(iv) the Trustee shall adjust the value of each Employer Investment
Account by crediting it with cash dividends on Employer
Securities held in the corresponding Employer Securities Account
of each Participant and by debiting it for any payments on
purchases of Employer Securities or for any repayment of debt,
including principal and interest, incurred for the purchase of
Employer Securities.
(b) Adjustment Rules for Employer Securities Accounts. Upon instruction
-------------------------------------------------
from the Committee, the Trustee shall, within ninety (90) days after the close
of the Plan Year in which paid, distribute to the Participants, in cash, all or
a portion of the dividends paid to the Plan with respect to Employer Securities
held by the Plan and allocated to Accounts. The dividends, if distributed in
accordance with this Section, shall be paid out as if each Participant directly
owned the numbers of shares of Employer Securities allocated to the
Participant's Account (including fractional shares so allocated), as of the
Accounting Date corresponding with, or if none, next following the record date
for such dividend declaration. Such dividend payments shall not be considered
to be distributions under the Plan. Any dividends received on unallocated
shares, together with any other income (except income on Participants' Rollover
Accounts) shall first be used to pay outstanding current obligations of the
Trust, including payments owed on an Exempt Loan, and the balance shall be
invested as set forth in Section 4.1(b). Trust income and expenses (not
reimbursed by the Company) shall be allocated as of each Accounting Date to the
Accounts of Participants who had undistributed balances on the last preceding
Accounting Date in proportion to the balances in such Accounts on such date
adjusted for distributions since such date and prior to the particular
allocation of income and expenses in question.
22
<PAGE>
Section 5.2. Allocation to Accounts.
----------- ----------------------
(a) Employer Contributions. As of each Accounting Date, but after the
----------------------
adjustment of Accounts, the Employer Contributions, including any Forfeitures
allocated as of the Accounting Date, for the Plan Year which ends on the
Accounting Date shall be allocated and credited to the Employer Contribution
Account of each Participant in the Plan on the Accounting Date. Employer
Contributions paid in cash shall be allocated and credited to the Employer
Investment Account of each eligible Participant. Shares of Employer Securities
(including fractional shares) purchased and paid for by the Trust or contributed
in kind by the Employer shall be allocated and credited to the Employer
Securities Account of each eligible Participant.
(b) Rollover Contributions. In the event of any Rollover Contributions of
----------------------
account balances or accrued benefits from another employee benefit plan
qualified under Code Section 401(a) permitted under Article 13, a Rollover
Account will be created for the particular Employee and credited with such
Rollover Contribution. Any expenses peculiar to the assets transferred or
rolled over on behalf of a Participant shall be charged against that
Participant's Rollover Account, and any income attributable to such assets shall
be credited thereto. Rollover Accounts will not share in the income or losses
of the other Plan assets except to the extent they are invested therewith.
Section 5.3. Allocation Rules. Only those Participants (i) who had at
----------- ----------------
least one thousand (1,000) Hours of Service during such Plan Year, or (ii) whose
employment with the Employer terminated during the Plan Year as a result of
Retirement, Death or Disability, or (iii) who commenced participation on a date
other than the first day of the Plan Year if such Participants had, during the
part of the Plan Year remaining after becoming a Participant, at least that
fraction of one thousand (1,000) Hours of Service which is equal to the fraction
of the Plan Year during which the Employee was a Participant, shall be entitled
to receive allocations.
Section 5.4. Allocation Formula. Subject to the minimum allocation for
----------- ------------------
Top-Heavy Plans under Section 5.6 and any restoration allocation required under
Section 6.6, the Committee shall allocate the Employer Contributions and
Participant Forfeitures, if any, to each eligible Participant's Employer
Contribution Account in the same ratio that each Participant's Annual
Compensation for the Plan Year bears to the total Annual Compensation of all
Participants for the Plan Year.
(a) The Employer Investment Account of each eligible Participant shall be
credited as of each Accounting Date with the Participant's allocated share of
the Employer Contributions and Forfeitures in cash or assets other than Employer
Securities.
(b) The Employer Securities Account of each eligible Participant shall be
credited as of each Accounting Date with the Participant's allocated share of
Employer Securities, including fractional shares, purchased and paid for by the
Trust or contributed in kind by the Employer; and Forfeitures of Employer
Securities. In making a Forfeiture allocation under this Section, the Committee
will base Forfeitures of Employer Securities on the fair market value of the
Employer Securities as of the Allocation Date of the Forfeitures. The Committee
shall indicate separate allocations for each class of Employer Securities and
shall maintain adequate records of the aggregate cost basis of Employer
Securities allocated to each Participant's Employer Securities Account. The
number of shares of Employer Securities allocated to each Employer Securities
Account as of any Allocation Date shall consist of the total number of shares
allocated to the Employer Securities Account as of the prior Allocation Date;
the number of shares acquired for the Employer Securities Account as of the
current Allocation Date; and stock dividends with respect to the Employer
Securities, payable to shareholders of record on or after the date of purchase
and allocated to the Employer Securities Account; but reduced by the number of
shares of Employer Securities withdrawn or distributed from the Plan since the
prior Allocation Date.
23
<PAGE>
(c) Subject to the minimum allocation for Top-Heavy Plans under Section 5.6
and any restoration allocation required under Section 6.6, the Committee will
allocate a Participant Forfeiture in addition to the Employer Contribution for
the Plan Year in which the Forfeiture occurs. The Committee will allocate the
Participant Forfeitures for a Plan Year to the Account of each Participant who
satisfies the conditions of Section 5.3, in the same ratio that each
Participant's Annual Compensation for the Plan Year bears to the total Annual
Compensation of all Participants for the Plan Year. The Committee will continue
to hold the undistributed nonvested portion of a terminated Participant's
Account Balance in the Account solely for the benefit of the Participant until a
forfeiture occurs at the time specified in Section 6.3. Except as provided under
Section 6.6, a Participant will not share in the allocation of a forfeiture of
any portion of a Participant's Account Balance.
Section 5.5. Limitations on Allocations.
----------- --------------------------
(a) Defined Contribution Plan Limits. The amount of Annual Additions which
--------------------------------
the Committee may allocate under this Plan on a Participant's behalf for a
Limitation Year may not exceed the Maximum Permissible Amount. If the amount
the Employer otherwise would contribute to the Participant's Account would cause
the Annual Additions for the Limitation Year to exceed the Maximum Permissible
Amount, the Employer will reduce the amount of its contribution so the Annual
Additions for the Limitation Year will equal the Maximum Permissible Amount. If
an allocation of Employer Contributions pursuant to Section 5.4 would result in
an Excess Amount (other than an Excess Amount resulting from the circumstances
described in Section 5.5(c)) to the Participant's Account, the Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer Contributions for the Plan Year in which the
Limitation Year ends and who have not yet received their maximum annual
addition. The Committee will make this reallocation on the basis of the
allocation method under the Plan as if the Participant whose Account otherwise
would receive the Excess Amount is not eligible for an allocation of Employer
Contributions.
(b) Estimation. Prior to the determination of the Participant's actual
----------
Annual Compensation for a Limitation Year, the Committee may determine the
Maximum Permissible Amount on the basis of the Participant's estimated Annual
Compensation defined in Section 5.5(f) for the Limitation Year. The Committee
must make this determination on a reasonable and uniform basis for all
Participants similarly situated. The Committee must reduce any Employer
Contributions (including any allocation of Forfeitures) based on estimated
Annual Compensation by any Excess Amounts carried over from prior years. As
soon as administratively feasible after the end of the Limitation Year, the
Committee will determine the Maximum Permissible Amount for the Limitation Year
based on the Participant's actual Annual Compensation for the Limitation Year.
(c) Disposition of Excess Amount. If, as a result of a reasonable error in
----------------------------
estimating a Participant's Annual Compensation or as a result of an allocation
of Forfeitures, or under other limited facts and circumstances found justifiable
by the Commissioner of Internal Revenue, there is an Excess Amount attributable
to a Participant for a Limitation Year, then the Excess Amount shall not be
deemed Annual Additions in the Limitation Year if they are treated under any one
of the following methods:
(i) The Excess Amounts in the Participant's Account must be allocated
and reallocated to other Participants in the Plan. However, if
the allocation or reallocation of the Excess Amounts pursuant to
the provisions of the Plan causes the limitations of Code Section
415 to be exceeded with respect to each Plan Participant for the
Limitation Year, then these amounts must be held unallocated in a
suspense account. If a suspense account is in existence at any
time during a particular Limitation Year, other than the
Limitation Year described in the preceding sentence, all amounts
in the suspense account must be allocated and reallocated to
Participants' accounts, subject to the limitations of Code
Section 415, before any Employer Contributions
24
<PAGE>
and Employee Contributions which would constitute Annual
Additions may be made to the Plan for that Limitation Year.
(ii) If the Plan covers the Participant at the end of the Limitation
Year, then the Committee will use the Excess Amounts to reduce
future Employer Contributions (including any allocation of
Forfeitures) under the Plan for the next Limitation Year and for
each succeeding Limitation Year, as is necessary, for the
Participant. The Participant may elect to limit Compensation for
allocation purposes to the extent necessary to reduce the
allocation for the Limitation Year to the Maximum Permissible
Amount and eliminate the Excess Amount. If the Plan does not
cover the Participant at the end of the Limitation Year, then the
Committee shall hold the Excess Amount unallocated in a suspense
account and shall allocate and reallocate to the Accounts of
remaining Participants in succeeding Limitation Years to the
extent permissible under the foregoing limitations, prior to any
further Annual Additions to the Plan. Furthermore, the Excess
Amounts must be used to reduce Employer Contributions for the
next Limitation Year (and succeeding Limitation Years, as
necessary) for all of the remaining Participants in the Plan.
For purposes of this paragraph (ii), Excess Amounts may not be
distributed to Participants or Former Participants.
(iii) The Excess Amounts in the Participant's Account must be held
unallocated in a suspense account for the Limitation Year and
allocated and reallocated in the next Limitation Year to all of
the Participants in the Plan under the rules provided in
paragraph (i). The Excess Amounts must be used to reduce
Employer Contributions for the next Limitation Year (and
succeeding Limitation Years as necessary) for all of the
Participants in the Plan. For purposes of this paragraph (iii),
Excess Amounts may not be distributed to Participants or Former
Participants.
(iv) If the Plan should be terminated or contributions should be
completely discontinued, the funds in the suspense account will
be allocated to the extent not prohibited by Code Section 415.
If this Plan terminates during any Plan Year in which the
Suspense Account cannot be reallocated pursuant to the
application of paragraph (a), the amount in the suspense account
shall revert to the Employers.
(v) Any suspense account shall not be adjusted for investment gains
or losses of the Trust Fund.
(d) Multiple Defined Contribution Plan Limits. If the Employer maintains
-----------------------------------------
any other qualified defined contribution plan, the amount of the Annual Addition
which may be allocated to a Participant's Account in this Plan shall not exceed
the Maximum Permissible Amount, reduced by the amount of Annual Additions to
such Participant's accounts for the same Limitation Year in the other plan(s).
The Excess Amount attributed to this Plan equals the product of:
(i) the total Excess Amount allocated as of such date (including any
amount the Committee would have allocated but for the limitations
of Code Section 415), multiplied by
(ii) the ratio of
(A) the amount allocated to the Participant as of such date
under this Plan, divided by
25
<PAGE>
(B) the total amount allocated as of such date under all
qualified defined contribution plans (determined without
regard to the limitations of Code Section 415).
(e) Overall Limits. If the Employer maintains or establishes, or has ever
--------------
maintained or established, any defined benefit plan(s) in addition to this Plan,
then the sum of the Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction for the Participant for that Limitation Year shall not exceed 1.0.
In any Limitation Year that the sum of the Fractions does exceed 1.0, then the
Employer shall reduce the amount of Annual Additions to the Participant's
Account in the defined contribution plan(s), to the extent necessary to prevent
the sum of the Fractions from exceeding 1.0.
(f) Definitions. For purposes of the limitations of Code Section 415 set
-----------
forth in this Section, the following definitions shall apply:
(i) Annual Additions means the sum of the following amounts allocated
----------------
on behalf of a Participant for a Limitation Year:
(A) all Employer Contributions;
(B) all Forfeitures;
(C) all Employee Contributions;
(D) excess contributions described in Code Section 401(k) and
excess aggregate contributions described in Code Section
401(m), irrespective of whether the Plan distributes or
forfeits such Excess Amounts, and excess deferrals described
in Code Section 402(g), unless the excess deferrals are
distributed no later than the first April 15 following the
close of the Participant's taxable year;
(E) Excess Amounts reapplied to reduce Employer Contributions
under this Section 5.5;
(F) amounts allocated after March 31, 1984 to an individual
medical account, as defined in Code Section 415(l)(2),
included as part of a pension or annuity plan maintained by
the Employer;
(G) contributions paid or accrued after December 31, 1985, in
taxable years ending after that 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
described in Code Section 419(e), maintained by the
Employer; and
(H) allocations under a simplified employee pension plan.
(ii) Annual Compensation means the total amount of salary, wages,
-------------------
commissions, bonuses and overtime, paid or otherwise includable
in the gross income of a Participant during the Limitation Year,
but excluding:
(A) Employer contributions to any deferred compensation plan (to
the extent the contributions are not included in the
Participant's gross income for the taxable year in which
contributed) or simplified employee pension under
26
<PAGE>
Code Section 408(k) (to the extent the contributions are
excludable from the Participant's gross income;
(B) distributions from any plan of deferred compensation,
whether or not such amounts are includable in the gross
income of the Employees when distributed;
(C) amounts realized from the exercise of any nonqualified stock
option, or when restricted stock becomes freely
transferrable or is no longer subject to a substantial risk
of forfeiture;
(D) amounts realized from the sale, exchange, or other
disposition of stock acquired under a qualified stock option
described in Part II, Subchapter D, Chapter 1 of the Code;
(E) premiums paid by the Employer for group term life insurance
(to the extent the premiums are not includable in the
Participant's gross income); contributions by the Employer
to an annuity under Code Section 403(b) (to the extent not
includable in the Participant's gross income); and any other
amounts received under any Employer sponsored fringe benefit
plan (to the extent not includable in the Participant's
gross income);
(F) any contribution for medical benefits, within the meaning of
Code Section 419A(f)(2), after separation from Service which
is otherwise treated as an Annual Addition; and
(G) any amount otherwise treated as an Annual Addition under
Code Section 415(l)(1).
(iii) Average Annual Compensation means the average compensation
---------------------------
during a Participant's highest three (3) consecutive Years of
Service, which period is the three (3) consecutive calendar years
(or the actual number of consecutive years of employment for
those Employees who are employed for less than three (3)
consecutive years with the Employer) during which the Participant
had the greatest aggregate compensation from the Employer.
(iv) Defined Benefit Plan Fraction means the fraction derived from the
-----------------------------
numerator defined in the following paragraph (A) and the
denominator defined in the following paragraph (B).
(A) Numerator. The numerator is the Projected Annual Benefit
---------
provided for such Participant under any defined benefit
plan(s) the Employer maintains or establishes, or has ever
maintained or established.
(B) Denominator. The denominator is the lesser of (1) 1.25
-----------
times the Maximum Defined Benefit Dollar Limitation under
Code Section 415(b)(1)(A) for the Limitation Year, or (2)
1.4 times one hundred percent (100%) of the Participant's
Average Annual Compensation Limitation for his highest three
(3) consecutive years under Code Section 415(b)(1)(B).
(C) Notwithstanding the foregoing, 1.0 shall be substituted for
1.25 wherever it appears in Section 5.5(f)(iv)(B) in any
Plan Year in which the Plan is
27
<PAGE>
determined to be Top-Heavy, unless the minimum allocation
requirements of Section 5.6 are met. In determining whether
the requirements of Section 5.6 have been met, four percent
(4%) shall be substituted for three percent (3%).
Notwithstanding the foregoing, 1.0 shall be substituted for
1.25 wherever it appears in Section 5.5(f)(iv)(B) in any
Plan Year in which the Plan is determined to be Super Top-
Heavy, regardless of the minimum allocation.
(v) Defined Contribution Plan Fraction means the fraction derived
----------------------------------
from the numerator defined in the following paragraph (A) and the
denominator defined in the following paragraph (B).
(A) Numerator. The numerator is the sum of the Annual Additions
---------
to a Participant's Account under the defined contribution
plan(s) and welfare benefit funds defined in Code Section
419(e) as of the close of the Limitation Year.
(B) Denominator. The denominator is the sum of the lesser of
-----------
the following amounts determined for such Limitation Year
and for each prior Year of Service with the Employer:
(1) 1.25 times the Maximum Permissible Amount in effect
under Code Section 415(c)(1)(A) for such Limitation
Year (without regard to the special Dollar Limitations
for employee stock ownership plans), or
(2) thirty-five percent (35%) of the Participant's Annual
Compensation for each Limitation Year.
(C) Regarding any Limitation Year ending after December 31,
1982, the amount taken into account under Section
5.5(f)(v)(B) with respect to each Participant for all
Limitation Years ending before January 1, 1983, shall be at
the election of the Administrator, an amount equal to the
product of the amount determined under Section 5.5(f)(v)(B)
multiplied by a fraction, the numerator of which is the
lesser of (1) $51,875 ($41,500 for any year in which the
Plan is determined to be a Top-Heavy Plan); or (2) 1.4
multiplied by twenty-five percent (25%) of the Annual
Compensation of the Participant for the Limitation Year
ending in 1981, and the denominator of which is the lesser
of (1) $41,500; or (2) twenty-five percent (25%) of the
Annual Compensation of the Participant for the Limitation
Year ending in 1981. The Administrator may make such
election only if one or more of such plans were in existence
on or before July 1, 1982.
(D) If the Plan and all other plans maintained by the Employer
met the limitations under Code Section 415 for the last
Limitation Year beginning before January 1, 1983 the amount
under Section 5.5(f)(v) (A) shall be reduced by an amount
required to decrease the combined fractions to 1.0. The
amount subtracted shall be the product of (1) the excess of
the sum of the fractions over 1.0 and (2) the denominator
under Section 5.5(f)(v)(B) as computed through the
Limitation Year ending in 1982.
28
<PAGE>
(E) Notwithstanding the foregoing, 1.0 shall be substituted for
1.25 wherever it appears in Section 5.5(f)(v)(B) in any Plan
Year in which the Plan is determined to be Top-Heavy, unless
the minimum allocation requirements of Section 5.6 are met.
In determining whether the requirements of Section 5.4 have
been met, four percent (4%) shall be substituted for three
percent (3%). Notwithstanding the foregoing, 1.0 shall be
substituted for 1.25 wherever it appears in Section
5.5(f)(v)(B) in any year in which the Plan is determined to
be Super Top-Heavy, regardless of the minimum allocation.
(vi) Employer means the Employer that adopts this Plan. All Related
--------
Employers shall be considered a single Employer for purposes of
applying the limitations of this Section.
(vii) Excess Amount means the excess of the Participant's Annual
-------------
Additions for the Limitation Year over the Maximum Permissible
Amount, less administrative charges allocable to such Excess
Amount.
(viii) Limitation Year means the Limitation Year specified in the
---------------
Plan or, if none is specified, the calendar year.
(ix) Maximum Permissible Amount means the lesser of:
--------------------------
(A) the Defined Contribution Dollar Limitation, or
(B) twenty-five percent (25%) of the Participant's Compensation,
within the meaning of Code Section 415(c)(3)
for a Limitation Year with respect to any Participant.
Defined Contribution Dollar Limitation means $30,000 or, if
greater, twenty-five percent (25%) of the Defined Benefit Dollar
Limitation set forth in Code Section 415(b)(1)(A) as in effect
for the Limitation Year.
(x) Projected Annual Benefit means the benefit of the Participant
------------------------
payable annually in the form of a straight life annuity (with no
ancillary benefits) under the terms of a defined benefit plan to
which employees do not contribute and under which no rollover
contributions are made, assuming that the Participant continues
employment until Normal Retirement Age (or current age, if
later), compensation continues at the same rate as in effect in
the Limitation Year under consideration until the date of Normal
Retirement Age, and all other relevant factors used to determine
benefits under the defined benefit plan remain constant as of the
current Limitation Year for all future Limitation Years.
(g) Special Rules for Overall Limits. If the Employer maintains or
--------------------------------
establishes, or has ever maintained or established, any defined benefit plan(s)
in addition to this Plan, such Plans are subject to the overall limitations
under Code Section 415(e) and the following special rules apply:
(i) Recomputation Not Required. For purposes of determining the
--------------------------
Defined Contribution Plan Fraction, the Annual Addition for any
Limitation Year beginning before January 1, 1987 shall not be
recomputed to treat all Employee Contributions as Annual
Additions.
29
<PAGE>
(ii) Adjustment of Defined Contribution Plan Fraction. If the Plan
------------------------------------------------
satisfied the applicable requirements of Code Section 415 as in
effect for all Limitation Years beginning before January 1, 1987,
the Committee shall redetermine the Defined Contribution Plan
Fraction and the Defined Benefit Plan Fraction as of the end of
the 1986 Limitation Year. If the sum of the redetermined
Fractions exceeds 1.0, an amount shall be subtracted from the
numerator of the Defined Contribution Plan Fraction (not
exceeding the numerator) equal to the product of (A) the excess
of the sum of the Fractions over 1.0 times (B) the denominator of
the Defined Contribution Plan Fraction, so that the sum of the
Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction computed under Code Section 415(e)(1) does not exceed
1.0 for the Limitation Year.
(h) Separate, Combined Plan Limits. For purposes of the foregoing
------------------------------
limitations in this Section, any Employee Contributions to any defined benefit
plan shall be considered as a separate defined contribution plan. Further, all
defined contribution plans shall be considered as one defined contribution plan
and all defined benefit plans shall be considered as one defined benefit plan,
whether or not any of such plans have been terminated.
Section 5.6. Top-Heavy Minimum Allocation.
----------- ----------------------------
(a) Minimum Allocation. Notwithstanding the foregoing, for any Plan Year
------------------
in which the Plan is determined to be Top-Heavy, the amount of Employer
Contributions and Forfeitures allocated to the Account of each Non-Key Employee
shall be equal to the lesser of three percent (3%) of each Non-Key Employee's
Compensation or the highest contribution rate for the Plan Year made on behalf
of any Key Employee. However, if a defined benefit plan maintained by the
Employer which benefits a Key Employee depends on this Plan to satisfy the
nondiscrimination rules of Code Section 401(a)(4) or the coverage rules of Code
Section 410 (or another plan benefitting the Key Employee so depends on the
defined benefit plan), the top heavy minimum allocation is three percent (3%) of
the Non-Key Employee's Compensation regardless of the contribution rate for the
Key Employee.
(b) Compensation. For purposes of this Section, Compensation means Annual
------------
Compensation defined in Section 2.6 except (i) Compensation does not include
Elective Contributions, and (ii) any exclusions from Annual Compensation (other
than the exclusion of Elective Contributions and the exclusions described in
clauses (i) through (v) of Section 2.6) do not apply. Notwithstanding the
definition of Annual Compensation in Section 2.6, the period preceding a
Participant's Entry Date shall be included in determining the minimum top-heavy
allocation provided by this Section.
(c) Contribution Rate. For purposes of this Section, a Participant's
-----------------
contribution rate is the sum of Employer Contributions (not including Employer
Contributions to Social Security) and Forfeitures allocated to the Participant's
Account for the Plan Year divided by his or her Compensation for the entire Plan
Year. To determine a Participant's contribution rate, the Committee must treat
all qualified top-heavy defined contribution plans maintained by the Employer
(or by any related Employers described in Section 2.45) as a single plan. For
purposes of this Section, for Plan Years beginning after 1988, Employer
Contributions made to any plan pursuant to a salary reduction agreement or
similar arrangement may be considered as Employer Contributions. For purposes
of this Section, for Plan Years beginning after 1988, Employer Contributions
made to any plan pursuant to a salary reduction agreement or similar arrangement
("Elective Contributions") on behalf of key employees are treated as Employer
Contributions under Code Section 416(c)(2). However, elective contributions on
behalf of Employees other than key employees may not be treated as Employer
Contributions for purposes of the minimum contribution requirement of Code
Section 416.
30
<PAGE>
(d) Participant Entitled to Top-Heavy Minimum Allocation. The minimum
----------------------------------------------------
allocation under this Section shall be provided to each Non-Key Employee who is
a Participant and is employed by the Employer on the last day of the Plan Year,
whether or not the Participant has been credited with one thousand (1,000) Hours
of Service for the Plan Year. The minimum allocation under this Section shall
not be provided to any Participant who was not employed by the Employer on the
last day of the Plan Year. The provisions of this Section shall not apply to
any Participant to the extent the Participant is covered under any other plan or
plans of the Employer under which the minimum allocation or benefit requirements
under Code Section 416(c)(1) or (c)(2) are met for the Participant.
(e) Compliance. The Plan will satisfy the top-heavy minimum allocation
----------
under this Section. The Committee first will allocate the Employer
Contributions (and Participant Forfeitures, if any) for the Plan Year pursuant
to the allocation formula under Section 5.4. The Employer then will contribute
an additional amount for the Account of any Participant entitled under this
Section to a top-heavy minimum allocation and whose contribution rate for the
Plan Year, under this Plan and any other plan aggregated under this Section, is
less than the top-heavy minimum allocation. The additional amount is the amount
necessary to increase the Participant's contribution rate to the top-heavy
minimum allocation. The Committee will allocate the additional contribution to
the Account of the Participant on whose behalf the Employer makes the
contribution.
Section 5.7. Limitation on Allocations for Electing Shareholder. If a
----------- --------------------------------------------------
shareholder sells Employer Securities to the Plan and elects (with the consent
of the Employer) nonrecognition of gain under Code Section 1042, no portion of
the Employer Securities purchased in any such transaction (or any dividends or
other income attributable thereto) may be allocated during the ten (10) year
period following the purchase (or, if an Exempt Loan was incurred in connection
with such purchase, the period beginning on the date of such purchase and ending
on the tenth anniversary of the Valuation Date as of which shares are released
from the Suspense Account as a result of the final payment on the Exempt Loan)
to the Employer Securities Accounts of:
(a) the selling shareholder; or
(b) his or her spouse, brothers or sisters (whether by the whole or half
blood), ancestors or lineal descendants (except as to certain lineal
descendants, to the extent provided in Code Section 409(n)(3)(A)), or any other
person who bears a relationship to the selling shareholder that is described in
Code Section 267(b).
In addition, no portion of the Employer Securities purchased in any such
transaction (or any dividends or other income attributable thereto) may
thereafter be allocated to the Accounts of any Participant owning (as determined
under Code Section 318(a), without regard to Code Section 318(a)(2)(B)(i)),
during the entire one (1) year period preceding the purchase or on any
allocation date, more than 25% of any class of outstanding Employer Securities
or of the total value of any class of outstanding Employer Securities.
To the extent that a Participant is subject to the allocation limitation
described in this Section for a Plan Year, he or she shall not share in the
allocation of Employer Contributions and Forfeitures.
Section 5.8. Post-Allocation Adjustments to Accounts. After the amount or
----------- ---------------------------------------
amounts have been allocated and credited to each Participant's Employer
Contribution Account, as provided in this Article, the then value of each
Employer Contribution Account shall remain unchanged until the next Accounting
Date. Notwithstanding the foregoing, the Participant's Employer Contribution
Account may be adjusted prior to the next Accounting Date under:
31
<PAGE>
(a) other provisions in this Agreement authorizing the Committee to reduce
the Participant's Employer Contribution Account by disbursements properly
chargeable to it or to credit the Participant's Employer Contribution Account by
funds received by it; or
(b) a special valuation of the Participant's Employer Contribution Account
required under Articles 6 and 7.
Section 5.9. Employer Contribution Accounts Defined. For purposes of this
----------- --------------------------------------
Article, reference to the Employer Contribution Accounts of Participants shall
include the Employer Contribution Accounts of those Participants who die, become
disabled or retire during the Plan Year considered.
* * * * * * *
32
<PAGE>
ARTICLE SIX
-----------
VESTING
-------
Section 6.1. Crediting and Adjusting of Accounts Upon Termination. Upon
----------- ----------------------------------------------------
the first to occur of the Participant's Retirement, death or the determination
that the Participant has sustained total and permanent Disability, the
Participant, or his Beneficiary, shall be fully vested in and have a
nonforfeitable right to the contents of the Participant's Employer Contribution
Account and Rollover Account, if any.
If a Participant's employment by the Employer shall terminate for any
reason other than Retirement, death or total and permanent Disability, the
Participant, or the Beneficiary on the death of the Participant, shall become
entitled to (i) the contents of the Participant's Rollover Account, and (ii) the
vested percentage at the date of Separation from Service, of the contents of the
Participant's Employer Contribution Account and the Trustee shall hold the
Participant's Nonforfeitable Account Balance in the Accounts for the
Participant's benefit. The Committee shall credit and adjust the Accounts of
the terminated Participant, as provided in Article 5, as of the immediately
preceding Accounting Date. If, on the applicable Accounting Date determined
under the preceding sentence the amount credited to the Participant's Account
does not include all of the allocations, if any, to which a Participant is
entitled under Section 5.4 or 5.6, then the particular Participant's vested
portion determined under Section 6.1 or 6.2, as applicable, of the allocation or
allocations shall be distributed pursuant to Article 7 as soon as practicable
after the allocation is made. The terminated Participant shall be entitled to
benefits determined under Section 6.2 after the date of termination. At its
discretion, the Committee may conduct a special valuation to establish the value
of the terminated Participant's Accounts as of the date of termination, or any
other date that is administratively feasible.
Section 6.2. Vesting.
----------- -------
(a) EFFECTIVE JANUARY 1, 1987 THROUGH DECEMBER 31, 1988, a Participant to
whom Section 6.1 applies shall be entitled to receive the entire contents of the
Participant's Rollover Account. In addition, the Participant also shall be
entitled to receive a Nonforfeitable percentage of the balance credited to the
Employer Contribution Account, consisting of the Employer Investment Account and
the Employer Securities Account, determined under the following vesting
schedule:
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 4 years 0%
At least 4 but less than 5 years 40%
At least 5 but less than 6 years 45%
At least 6 but less than 7 years 50%
At least 7 but less than 8 years 60%
At least 8 but less than 9 years 70%
At least 9 but less than 10 years 80%
At least 10 but less than 11 years 90%
At least 11 or more years 100%
Notwithstanding the foregoing vesting schedule, for any Plan Year in which
the Plan is a Top-Heavy Plan, the following vesting schedule shall apply:
33
<PAGE>
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 2 years 0%
At least 2 but less than 3 years 20%
At least 3 but less than 4 years 40%
At least 4 but less than 5 years 60%
At least 5 but less than 6 years 80%
At least 6 years 100%
(b) EFFECTIVE JANUARY 1, 1989, a Participant to whom Section 6.1 applies
shall be entitled to receive the entire contents of the Participant's Rollover
Account. In addition, the Participant also shall be entitled to receive a
Nonforfeitable percentage of the balance credited to the Employer Contribution
Account, consisting of the Employer Investment Account and the Employer
Securities Account, determined under the following vesting schedule:
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 3 years 0%
At least 3 but less than 4 years 20%
At least 4 but less than 5 years 40%
At least 5 but less than 6 years 60%
At least 6 but less than 7 years 80%
At least 7 or more years 100%
Notwithstanding the foregoing vesting schedule, for any Plan Year in which
the Plan is a Top-Heavy Plan, the following vesting schedule shall apply:
Nonforfeitable
--------------
Years of Service Percentage
---------------- ----------
Less than 2 years 0%
At least 2 but less than 3 years 20%
At least 3 but less than 4 years 40%
At least 4 but less than 5 years 60%
At least 5 but less than 6 years 80%
At least 6 years 100%
(c) If, in any subsequent Plan Year, the Plan ceases to be a Top-Heavy
Plan, the top-heavy vesting schedule shall continue to apply unless the Employer
elects, in writing, to revert to the vesting schedule set forth in paragraph (a)
or (b) whichever is applicable. Any reversion shall be treated as a Plan
amendment and shall be subject to the restrictions of Section 10.2.
Section 6.3. Forfeitures. A Participant to whom this Article applies
----------- -----------
shall forfeit that portion of the amount of the Account to which the Participant
is not entitled under Section 6.2 as of the Anniversary Date coincident with or
next following the earlier of the date on which the Participant incurs five (5)
consecutive One Year Breaks in Service or the date on which the Participant
receives a Cashout Distribution (the Forfeiture Event). A Cashout Distribution
means a lump sum distribution pursuant to Sections 7.3(c), that occurs no later
than the last day of the second Plan Year following the Plan Year in which the
Participant separates from Service. For purposes of this Section, a Participant
who separates from Service without a Nonforfeitable percentage in the
Participant's Employer Contribution Account shall be deemed to have
34
<PAGE>
received a distribution of the Nonforfeitable Account Balance on the date of
Separation from Service. The amount forfeited under this Section shall remain in
the Trust Fund and shall be allocated under Article 5 among the Accounts of the
remaining Participants as of the Accounting Date coincident with or next
following the Forfeiture Event.
If a portion of a Participant's account is forfeited, Qualifying Employer
Securities allocated under Section 5.4 must be forfeited only after other
assets. If interests in more than one class of Qualifying Employer Securities
have been allocated to the Participant's account, the Participant must be
treated as forfeiting the same proportion of each class.
Section 6.4. Determination of Amount of Vested Undistributed Account,
----------- --------------------------------------------------------
Forfeiture. If the Trustee pays any amount outstanding to the credit of a
- ----------
Participant in the Participant's Account while the Participant is not fully
vested in the Account, other than a Cashout Distribution defined in Section
7.3(c), and prior to the Accounting Date on which the Participant shall incur
five (5) consecutive One Year Breaks in Service, the value of the vested and
undistributed Account shall be held in a separate account and shall be
determined at any time prior to and including the Accounting Date on which the
Participant shall incur five (5) consecutive One Year Breaks in Service under
the following formula:
X = P(AB + (RxD)) - (RxD).
For this formula, the variables represent the following factors:
X is the value of the vested portion of the Participant's Account;
P is the Participant's 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 the distribution.
The nonvested portion of the Participant's Account shall be forfeited on
the Accounting Date on which the Participant incurs five (5) consecutive One
Year Breaks in Service.
Section 6.5. Crediting Years of Vesting Service.
----------- ----------------------------------
(a) If a Participant's Service with the Employer is terminated and the
Former Participant receives a distribution from the Trustee and subsequently re-
enters the Service of the Employer after incurring five (5) consecutive One Year
Breaks in Service, the reemployed Participant's Years of Service after the break
need not be taken into account to determine the Nonforfeitable percentage of the
Participant's Account Balance derived from Employer Contributions which accrued
before the Break in Service. Notwithstanding the foregoing sentence, any
reemployed Participant's Years of Service prior to the Break in Service must be
taken into account to determine the Nonforfeitable percentage of the
Participant's Account Balance derived from Employer Contributions which accrued
after the Break in Service; provided that, for vesting purposes, the pre-break
Service shall not be taken into account until the Participant completes a Year
of Service measured on a twelve (12) month Computation Period commencing with
the date of re-employment of the Participant.
35
<PAGE>
(b) If a Participant's Service with the Employer is terminated and the
Participant is reemployed by the Employer prior to incurring five (5)
consecutive One Year Breaks in Service, the reemployed Participant shall
continue to vest at the level in the vesting schedule in Section 6.2 that the
Participant had attained prior to termination in both the pre-separation and
post-separation Account Balance.
Section 6.6. Restoration of Account Balance. If a partially vested
----------- ------------------------------
Participant resumes employment covered under the Plan, but prior to incurring
five (5) consecutive One Year Breaks in Service, the Participant shall have the
right to repay the amount previously distributed pursuant to Sections 7.3(b) or
7.3(c). If the Participant repays the entire amount previously distributed
prior to the earlier of (a) incurring five (5) consecutive One Year Breaks in
Service commencing after the distribution, or (b) five years after the first
date on which the Participant is subsequently reemployed by the Employer, then
the Committee shall restore to the Participant's Account an amount equal to the
amount forfeited under Section 6.3 unadjusted by any gains or losses between the
time of distribution and the time of repayment. Sources for the restoration of
Account Balances will be used in the following order of priority: (a)
forfeitures, (b) additional Employer Contributions and (c) Trust income. The
Committee will treat a non-vested Participant who is deemed to have received a
distribution on the date of Separation from Service of the Participant's
Nonforfeitable Account Balance as having repaid the deemed distribution on the
first date of the Participant's reemployment with the Employer. Restoration of
the Participant's Account Balance includes restoration of all Code Section
411(d)(6) protected benefits pertaining to that restored Account under
applicable Treasury regulations. For purposes of Plan Section 5.6 and Code
Section 415(c) and (e), the repayment by the Participant and the restoration
will not be treated as Annual Additions.
* * * * * * *
36
<PAGE>
ARTICLE SEVEN
-------------
PAYMENT OF BENEFITS
-------------------
Section 7.1. Form of Distributions.
----------- ---------------------
(a) FORM OF PAYMENT OF BENEFITS. Whenever a Participant, Former
Participant or Beneficiary is entitled to receive a distribution of benefits,
benefits shall be paid as follows:
(i) Distribution shall be in the form of whole shares of Employer
Securities allocated to the Participant's Employer Contribution
Account. The value of any fractional shares shall be distributed
in cash. If Employer Securities are not readily tradable on an
established market, the recipient shall receive a put option as
described in Section 14.1;
(ii) Distribution of the Participant's Rollover Account shall be in
the form of the assets contained in the Rollover Account.
(iii) The Participant shall be limited in the optional forms of
payment of benefits to those which will result in the payment of
greater than fifty percent (50%) of the anticipated benefits over
the Participant's life expectancy. The purpose of this
limitation is to ensure that death benefits will be incidental to
retirement benefits under Revenue Ruling 72.241.
(iv) Notwithstanding the foregoing, a distribution made pursuant to
this Section shall be subject to the immediate cashout provisions
of Section 7.3(c) and the requirements set forth in the third
paragraph of Section 7.3(a) and the second paragraph of 7.3(b).
Notwithstanding any contrary provision, unless other Plan distribution
provisions require earlier distribution of the Participant's Account,
if the Participant and, if applicable pursuant to Code Sections
401(a)(11) and 417, with the consent of the Participant's spouse
elects, the Committee shall direct the Trustee to commence
distribution of the Participant's Account Balance attributable to
Employer Securities acquired after December 31, 1986 in the
Participant's Employer Securities Account no later than one (1) year
after the close of the Plan Year in which the Participant Separates
from Service because of attainment of Normal Retirement Age. This
distribution requirement is subject to the form of distribution
requirements of this Article 7. For purposes of this paragraph,
Employer Securities do not include any Employer Securities acquired
with the proceeds of an Exempt Loan until the close of the Plan Year
in which the borrower repays the Exempt Loan in full.
(b) DIRECT ROLLOVER OPTIONAL FORM OF BENEFIT.
(i) Direct Rollover. This Section applies to distributions made on
---------------
or after JANUARY 1, 1993. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a distributee's
election under this Section, a distributee may elect, at the time
and in the manner prescribed by the Plan Administrator, to have
any portion of an eligible rollover distribution paid directly to
an eligible retirement plan specified by the distributee in a
direct rollover.
37
<PAGE>
(ii) Definitions
-----------
(A) Eligible Rollover Distribution. An eligible rollover
------------------------------
distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the distributee or the
joint lives (or joint life expectancies) of the distributee
and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to
the extent such distribution is required under Section
401(a)(9) of the Code; and the portion of any distribution
that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation with
respect to Employer Securities).
(B) 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.
(C) 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 Section
414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(D) Direct Rollover. A direct rollover is a payment by the plan
---------------
to the eligible retirement plan specified by the
distributee.
(c) JOINT AND SURVIVOR ANNUITY REQUIREMENTS. The joint and survivor
annuity requirements do not apply to this Plan. The Plan does not provide any
annuity distributions to Participants nor to surviving spouses. A transfer
agreement described in Section 13.2 may not permit a plan which is subject to
Code Section 417 to transfer assets to this Plan, unless the transfer is an
elective transfer as described in Section 13.3.
Section 7.2. Election of Form of Payment of Benefits. The Participant,
----------- ---------------------------------------
Former Participant, or Beneficiary shall elect the form or forms of payment of
benefits permitted in Section 7.1 which the Committee and Trustee shall
implement. Not earlier than ninety (90) days, but not later than thirty (30)
days, before the Participant's Annuity Starting Date, the Committee must provide
a benefit notice to a Participant who is eligible to make an election under this
Section. The Participant's Annuity Starting Date means the first day of the
first period for which an amount is paid as an annuity or any other form. The
benefit notice must explain the optional forms of benefit in the Plan, including
the material features and relative values of those options, and the
Participant's right to defer distribution until he or she attains the later of
Normal Retirement Age or age 62.
38
<PAGE>
EFFECTIVE JANUARY 1, 1994, if a distribution is one to which Sections
401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution
may commence less than 30 days after the notice required under Section 1.411(a)-
11(c) of the Income Tax Regulations is given, provided that:
(i) the plan administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(ii) the participant, after receiving the notice, affirmatively elects a
distribution.
If a Participant, Former Participant, or Beneficiary makes an election
prescribed by this Section, the Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Account Balance pursuant to that election. Any
election under this Section is subject to the mandatory distribution
requirements of Sections 7.6 and the survivor annuity requirements of Section
7.1, if applicable. The Participant, Former Participant or Beneficiary must
make an election under this Section by filing an election form with the
Committee at any time before the Trustee otherwise would commence to pay a
Participant's Account Balance under the applicable requirements of Article 7.
Section 7.3. Timing of Distributions.
----------- -----------------------
(a) PAYMENT OF BENEFITS UPON DEATH, DISABILITY OR NORMAL RETIREMENT.
EFFECTIVE JANUARY 1, 1987 THROUGH DECEMBER 31, 1988, upon the Retirement or
Disability of a Participant, or the death of a Participant or Former
Participant, distribution of the contents of the Participant's Employer
Contribution and Rollover Account shall take place as soon as reasonably
possible following the end of the Plan Year in which the Participant Retired,
became Disabled or Died, and in no event later than sixty (60) days after the
end of the Plan Year.
EFFECTIVE JANUARY 1, 1989, as soon as administratively feasible after the
Committee has credited and adjusted a Participant's Accounts as provided in
Article 5, the Trustee shall make payments upon the Retirement or Disability of
a Participant or the death of a Participant or Former Participant pursuant to
the form and timing of payment of benefits provisions of this Article. Payments
shall begin as soon as administratively feasible following Separation from
Service and shall be completed as soon as reasonably possible following the end
of the Plan Year in which the Participant Retired, died or became Disabled but
in no event later than sixty (60) days after the end of the Plan Year. The
Committee shall charge each payment to the Participant's Accounts and payment
shall continue until death (when Article 8 shall control the disposition of the
deceased Participant's Nonforfeitable Account Balance) or until the
Nonforfeitable Account Balance is paid to the Participant in full, whichever
event shall occur first.
Notwithstanding any contrary provision, unless other Plan distribution
provisions require earlier distribution of the Participant's Account, if the
Participant and, if applicable pursuant to Code Sections 401(a)(11) and 417,
with the consent of the Participant's spouse elects, the Committee shall direct
the Trustee to commence distribution of the Participant's Account Balance
attributable to Employer Securities acquired after December 31, 1986 in the
Participant's Employer Securities Account no later than one (1) year after the
close of the Plan Year in which the Participant Separates from Service because
of attainment of Normal Retirement Age. This distribution requirement is
subject to the form of distribution requirements of this Article 7. For
purposes of this paragraph, Employer Securities do not include any Employer
Securities acquired with the proceeds of an Exempt Loan until the close of the
Plan Year in which the borrower repays the Exempt Loan in full.
39
<PAGE>
(b) PAYMENT OF TERMINATION BENEFITS. EFFECTIVE JANUARY 1, 1987 THROUGH
DECEMBER 31, 1988, in the event of other termination of employment, distribution
of benefits shall not occur until the end of the Plan year (no later than the
sixtieth day after the last day thereof) during which the Participant reaches
normal retirement age; in the event that such terminated employee shall die
before reaching normal retirement age, the provision of the next sentence shall
govern. In the event of death, distribution of benefits shall be as soon as is
reasonably possible following the end of the Plan Year in which death occurred,
in no event later than sixty (60) days following the end of such Plan Year.
EFFECTIVE JANUARY 1, 1989, if the Participant Separates from Service for
any reason other than Retirement, death or Disability and is not reemployed by
the Employer at the end of the fifth Plan Year following the Plan Year of the
Separation from Service, distribution of the vested percentage of the
Participant's Employer Contribution Account and the Participant's Rollover
Account will begin not later than one year after the close of the fifth Plan
Year following the Plan Year in which the Participant Separated from Service
unless the Participant elects to have distribution made, or begin, during the
sixty (60) day period following the end of the Plan Year in which the
Participant reaches Normal Retirement Age. If the Participant is reemployed by
the Employer by the end of the fifth Plan Year, distribution under the Plan will
be governed by whichever part of this section thereafter becomes applicable.
The Committee shall combine the Nonforfeitable percentage of the Accounts of a
Participant determined under Section 6.2 with the Participant Rollover Account
into one Account, and the Trustee shall make payments to the Participant
pursuant to Article 7. Distributions shall be made in substantially equal
annual payments over a period of five (5) years unless the Participant elected
to defer payments until Normal Retirement Age. The Committee shall charge each
payment to the Participant's Account and payment shall continue until death
(when Article 7 shall control the disposition of the deceased Participant's
Nonforfeitable Account Balance) or until the Participant's Nonforfeitable
Account Balance is paid to the Participant in full, whichever event shall occur
first.
Notwithstanding any contrary provision, unless other Plan distribution
provisions require earlier distribution of the Participant's Account, if the
Participant and, if applicable pursuant to Code Sections 401(a)(11) and 417,
with the consent of the Participant's spouse elects, the Committee shall direct
the Trustee to commence distribution of the Participant's Account Balance
attributable to Employer Securities acquired after December 31 1986 in the
Participant's Employer Securities Account no later than one (1) year after the
close of the Plan Year which is the fifth (5th) Plan Year following the Plan
Year in which the Participant Separates from Service for any reason other than
attainment of Normal Retirement Age, death or disability. This distribution
requirement is subject to the form of distribution requirements of this Article.
For purposes of this paragraph, Employer Securities do not include any Employer
Securities acquired with the proceeds of an Exempt Loan until the close of the
Plan Year in which the borrower repays the Exempt Loan in full. If the
Participant resumes employment with the Employer on or before the last day of
the fifth (5th) Plan Year following the Plan Year of the Participant's
Separation from Service, the distribution provisions of this paragraph will not
apply until the Participant again may separate from Service for any other reason
other than attainment of Normal Retirement Age, death or disability.
(c) Involuntary Cashout Distribution. Notwithstanding the foregoing, if a
--------------------------------
Participant separates from Service with the Employer and the Participant's
Nonforfeitable Account Balance determined under Section 6.2 is $3,500 or less in
value, the Committee may direct the Trustee to make immediate distribution to
the Participant in the form of a lump sum distribution in cash; provided,
however, the Trustee shall not make a lump sum distribution after benefit
distributions have commenced, without the written consent of the Participant and
spouse. For purposes of this paragraph, if the value of an Employee's vested
Account Balance is zero (0), the Employee shall be deemed to have received a
distribution of his or her vested Account Balance. Notwithstanding any contrary
provision, if the Nonforfeitable Account Balance of a Participant exceeds $3,500
in value, then the Trustee shall make no distribution without the Participant's
and the spouse's consent pursuant to Article 10 until the later of attainment of
age sixty-two (62) years or attainment of Normal Retirement Age. The foregoing
sentence shall not apply after the death of the Participant.
40
<PAGE>
Section 7.4. Election to Defer Receipt of Benefits. Notwithstanding the
----------- -------------------------------------
foregoing, a Participant who leaves the employment of the Employer before his or
her Normal Retirement Date or Early Retirement Date may elect to leave his or
her Nonforfeitable Account Balance under the management of the Trustee until
Normal Retirement Date or Early Retirement Date. The Trustee shall invest and
reinvest and shall credit and charge the Account with its proportionate share of
gains and losses of the Trust Fund pursuant to Article 5 until the
Nonforfeitable Account Balance is paid out to the Former Participant under this
Article. Any election made under this Section shall be irrevocable and shall be
made no later than fourteen (14) days before the electing Participant becomes
entitled to receive his or her Nonforfeitable Account Balance in the Plan.
Notwithstanding the foregoing, a Participant who has elected to leave his or her
Nonforfeitable Account Balance under the management of the Trustee may later
elect to have the Account Balance transferred to any pension or profit sharing
plan maintained by another Employer in which the Participant has, at the time of
the later election, become a participant under the transferee plan.
Section 7.5. Commencement of Payment of Benefits. Unless a Participant
----------- -----------------------------------
elects otherwise, payment of benefits shall commence not later than sixty (60)
days after the end of the Plan Year in which the latest of the following events
occur:
(a) the day the Participant attains the earlier of age sixty-five (65)
years or Normal Retirement Age;
(b) the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan; or
(c) the day the Participant terminates employment with the Employer.
Section 7.6. Mandatory Distribution of Benefits.
----------- ----------------------------------
(a) Retirement Benefits. The Committee may not direct the Trustee to
-------------------
distribute the Participant's Nonforfeitable Account Balance, nor may the
Participant elect to make the Trustee distribute the Nonforfeitable Account
Balance under a method of payment which, as of the Required Beginning Date, does
not satisfy the minimum distribution requirements under Code Section 401(a)(9)
and the applicable Treasury regulations.
(i) Limits on Distribution Periods. As of the first Distribution
------------------------------
Calendar Year, distributions, if not made in a lump sum, may only be
made over one of the following periods or a combination of such
periods:
(A) the life of the Participant;
(B) the life of the Participant and a Designated Beneficiary,
subject to the requirements of Code Section 401(a)(9) and
the applicable Treasury regulations;
(C) a period certain not extending beyond the life expectancy of
the Participant; or
(D) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated
Beneficiary.
41
<PAGE>
Under no circumstances may a Participant elect payment of benefits in
the form of an annuity. All distributions required under this Article
shall be determined and made under Code Section 401(a)(9) and
applicable Treasury regulations, including the minimum distribution
incidental benefit requirements of Treasury Regulations Section
1.401(a)(9)-2. A mandatory distribution at the Participant's Required
Beginning Date will be in lump sum unless the Participant, pursuant to
this Article, makes a valid election to receive an alternative form of
payment.
(ii) Minimum Distribution Amounts
----------------------------
(A) Non-Lump Sum Distribution. If the Participant's entire
--------------------------
interest will be distributed in other than a lump sum, then
the minimum distribution for a calendar year equals the
Participant's Nonforfeitable Account Balance as of the last
Valuation Date preceding the beginning of the calendar year
divided by the Participant's life expectancy or, if
applicable, the joint and last survivor expectancy of the
Participant and his or her Designated Beneficiary, subject
to the requirements of Code Section 401(a)(9) and the
applicable Treasury regulations. The Committee will increase
the Participant's Nonforfeitable Account Balance, as
determined on the relevant Valuation Date, for Contributions
or Forfeitures allocated after the Valuation Date and by
December 31 of the Valuation Calendar Year, and will
decrease the valuation by distributions made after the
Valuation Date and by December 31 of the Valuation Calendar
Year. For purposes of this valuation, the Committee will
treat any portion of the minimum distribution for the first
Distribution Calendar Year made after the close of that year
as a distribution occurring in the first Distribution
Calendar Year. Life expectancy and joint and last survivor
expectancy must be computed by the use of the expected
return multiples contained in Section 1.72-9 of the Income
Tax Regulations. Unless otherwise elected by the
Participant, or Spouse in the case of distributions
described in this Section 7.6(a), by the time distributions
are required to begin, life expectancies shall be
recalculated annually. The election shall be irrevocable for
the Participant, or spouse, and shall apply to all
subsequent years. The life expectancy of a non-spouse
Beneficiary may not be recalculated.
(B) Non-Spouse Beneficiary. If the Participant's spouse is not
----------------------
the Designated Beneficiary, a method of payment to the
Participant may not provide more than incidental benefits to
the Beneficiary. The Plan must satisfy the minimum
distribution incidental benefit ("MDIB") requirements in the
applicable Treasury regulations under Code Section 401(a)(9)
for distributions made on or after the Participant's
Required Beginning Date and before the Participant's death.
To satisfy the MDIB requirement, the Committee will compute
the minimum distribution required by this Section 7.6(a) by
substituting the applicable MDIB divisor for the applicable
life expectancy factor, if the MDIB divisor is a lesser
number. Following the Participant's death, the Committee
will compute the minimum distribution required by this
Section 7.6(a) solely on the basis of the applicable life
expectancy factor and will disregard the MDIB factor. For
Plan Years beginning prior to January 1, 1989, the Plan
satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB
requirement or if the present value of the retirement
benefits payable solely to the Participant is greater than
fifty percent (50%) of the present value of the
42
<PAGE>
total benefits payable to the Participant and Beneficiaries.
The Committee must determine whether benefits to the
Beneficiary are incidental on the date the Trustee is to
commence payment of the retirement benefits to the
Participant, or on the date the Trustee redetermines the
payment period to the Participant.
(iii) Commencement of Benefits
------------------------
(A) General Rule. The Trustee must distribute or begin to
------------
distribute the entire interest of a Participant no later
than the Participant's Required Beginning Date. The minimum
distribution for the first Distribution Calendar Year is due
by the Participant's Required Beginning Date. The minimum
distribution for each subsequent Distribution Calendar Year,
including the calendar year of the Participant's Required
Beginning Date, is due by December 31 of that year. Except
as provided in clause (ii), a Participant's Required
Beginning Date is the April 1 following the close of the
calendar year in which the Participant attains age seventy
and one-half (70 1/2) years.
(B) Transitional Rule. The Required Beginning Date of a
-----------------
Participant who attains age seventy and one-half (70 1/2)
years before January 1, 1988, shall be determined under the
following paragraphs (A) or (B):
(1) Other Than Five Percent Owners. The Required Beginning
------------------------------
Date of a Participant who is not a Five Percent Owner
(as defined in (iii) below) is the first day of April
of the calendar year following the calendar year in
which the later of retirement or attainment of age
seventy and one-half (70 1/2) years occurs. The
Required Beginning Date of a Participant who is not a
Five Percent Owner, who attains age seventy and one-
half (70 1/2) years during 1988 and who has not retired
on January 1, 1989, is April 1, 1990.
(2) Five Percent Owners. The Required Beginning Date of a
-------------------
Participant who is a Five Percent Owner during any year
beginning after December 31, 1979, is the first day of
April following the later of:
(I) the calendar year in which the Participant attains
age seventy and one-half (70 1/2) years; or
(II) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
becomes a Five Percent Owner, or the calendar year
in which the Participant retires.
(C) Five Percent Owner. A Participant is treated as a Five
-------------------
Percent Owner for purposes of this Section if the
Participant is a Five Percent Owner as defined in Section
2.51(g)(iii) and Code Section 416(i) (determined under Code
Section 416 but without regard to whether the Plan is Top-
Heavy) at any time during the Plan Year ending with or
within the calendar year in which the owner attains age
sixty-six and one-half (66 1/2) years or any subsequent Plan
Year. Once distributions have begun to a Five Percent
43
<PAGE>
Owner under this Section, they must continue to be
distributed, even if the Participant ceases to be a Five
Percent Owner in a subsequent year.
(iv) Definitions
-----------
(A) Applicable Life Expectancy means the life expectancy (or
--------------------------
joint and last survivor expectancy) calculated using the
attained age of the Participant (or Designated Beneficiary)
as of the Participant's (or Designated Beneficiary's)
birthday in the applicable calendar year reduced by one for
each calendar year which has elapsed since the date life
expectancy was calculated first. If life expectancy is
being recalculated, the applicable life expectancy shall be
the life expectancy as so recalculated. The applicable
calendar year shall be the first Distribution Calendar Year
and, if life expectancy is being recalculated, the
succeeding calendar year.
(B) Designated Beneficiary means the individual who is
----------------------
designated as the Beneficiary under the Plan in accordance
with Code Section 401(a)(9) and the applicable Treasury
regulations.
(C) Distribution Calendar Year means a calendar year for which a
--------------------------
minimum distribution is required. For distributions
beginning before the Participant's death, the first
Distribution Calendar Year is the calendar year immediately
preceding the calendar year which contains the Participant's
Required Beginning Date.
(D) Participant's Nonforfeitable Account Balance means the
--------------------------------------------
account balance as of the last Valuation Date in the
calendar year immediately preceding the Distribution
Calendar Year (Valuation Calendar Year), increased by the
amount of any Contributions or Forfeitures allocated to the
account balance as of the dates in the Valuation Calendar
Year after the Valuation Date and decreased by distributions
made in the Valuation Calendar Year after the Valuation
Date. If any portion of the minimum distribution for the
first Distribution Calendar Year is made in the second
Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made
in the second Distribution Calendar Year shall be treated as
if it had been made in the immediately preceding
Distribution Calendar Year.
(b) Death Benefits. The Committee may not direct the Trustee to distribute
--------------
the Participant's Nonforfeitable Account Balance, to the Beneficiary or
Designated Beneficiary, under a method of payment which, as of the Required
Beginning Date, does not satisfy the minimum distribution requirements under
Code Section 401(a)(9) and the applicable Treasury regulations.
(i) Limits on Distribution Periods
------------------------------
(A) If the Participant or Former Participant dies after
distribution has commenced, the Trustee shall continue to
distribute the remaining portion of the Participant's or
Former Participant's Nonforfeitable Account Balance at least
as rapidly as under the method of distribution used prior to
the Participant's death.
44
<PAGE>
(B) If the Participant or Former Participant dies before
distribution commences, the Trustee shall complete
distribution of the Participant's or Former Participant's
Nonforfeitable Account Balance by December 31 of the
calendar year containing the fifth (5th) anniversary of the
Participant's or Former Participant's death, except to the
extent that the Designated Beneficiary elects to receive
distributions under paragraphs (A) or (B) below:
(1) If any portion of the Participant's or Former
Participant's Nonforfeitable Account Balance is payable
to a Designated Beneficiary, the Designated Beneficiary
may elect distributions over the life or over a period
certain not greater than the life expectancy of the
Designated Beneficiary commencing on or before December
31 of the calendar year immediately following the
calendar year in which the Participant or Former
Participant died;
(2) If the Designated Beneficiary is the Participant's
Surviving Spouse, the date distributions must begin
under paragraph (A) above shall not be earlier than the
later of: (1) December 31 of the calendar year
immediately following the calendar year in which the
Participant or Former Participant died; and (2)
December 31 of the calendar year in which the
Participant or Former Participant would have attained
age seventy and one-half (70 1/2) years. If the
Participant has not made an election pursuant to this
Section by the time of death, the Designated
Beneficiary must elect the method of distribution no
later than the earlier of: (1) December 31 of the
calendar year in which distributions must begin under
this Section; or (2) December 31 of the calendar year
which contains the fifth (5th) anniversary of the date
of death of the Participant or Former Participant. If
the Participant has no Designated Beneficiary, or if
the Designated Beneficiary does not elect a method of
distribution, distribution of the Nonforfeitable
Account Balance of the Participant or Former
Participant must be completed by December 31 of the
calendar year containing the fifth (5th) anniversary of
death.
(3) If the Surviving Spouse is the Beneficiary of any
portion of a deceased Participant's or Former
Participant's benefits under the Plan, the Surviving
Spouse shall be permitted to direct that this
distribution of benefits commence at a reasonable time
following the death of the Participant or Former
Participant under applicable Treasury regulations.
(4) If the Surviving Spouse dies after the Participant or
Former Participant, but before payments to the Spouse
begin, the preceding provisions of this Section, with
the exception of paragraph (B), shall be applied as if
the Surviving Spouse had been the Participant.
(ii) Minimum Distribution Amounts. If the Trustee will distribute a
----------------------------
Participant's or Former Participant's Nonforfeitable Account
Balance in accordance with the Designated Beneficiary's life
expectancy, the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Account Balance as of the latest
45
<PAGE>
Valuation Date preceding the beginning of the calendar year
divided by the Designated Beneficiary's life expectancy.
For purposes of this Section, payments will be calculated by using the
expected return multiples specified in Tables V and VI of Treasury Regulations
Section 1.72-9. Life expectancy of a Surviving Spouse shall be recalculated
annually; however, in the case of any other Designated Beneficiary, life
expectancy will be calculated when the first payment commences without further
recalculation. For purposes of this Section, any amount paid to a child of the
Participant or Former Participant will be treated as if it had been paid to the
Surviving Spouse, if the amount becomes payable to the Surviving Spouse when the
child reaches the age of majority.
(iii) Commencement of Benefits
------------------------
(A) General Rule. For the purposes of this Section,
------------
distribution of a Participant's or Former Participant's
Nonforfeitable Account Balance is considered to begin on the
Participant's or Former Participant's Required Beginning
Date or, if Section 7.4(a)(ii)(D) applies, the date
distribution is required to begin to the Surviving Spouse
pursuant to Section 7.4(a)(ii)(A). If distribution in the
form of an annuity irrevocably commences before the Required
Beginning Date, the date distribution is considered to begin
is the date distribution actually commences. Except as
otherwise provided, the Required Beginning Date of a
Participant or Former Participant is the first day of April
of the calendar year following the calendar year in which
the Participant attains age seventy and one-half (70 1/2)
years.
(B) Transitional Rules. The Required Beginning Date of a
------------------
Participant or Former Participant who attains age seventy
and one-half (70 1/2) years before January 1, 1988, shall be
determined under paragraphs (A) or (B) below:
(1) Other Than Five Percent Owners. The Required Beginning
------------------------------
Date of a Participant or Former Participant who is not
a Five Percent Owner is the first day of April of the
calendar year following the calendar year in which the
later of retirement or the attainment of age seventy
and one-half (70 1/2) years occurs. The Required
Beginning Date of a Participant who is not a Five
Percent Owner who attains age seventy and one-half (70
1/2) years during 1988 and who has not retired as of
January 1, 1989, is April 1, 1990.
(2) Five Percent Owners. The Required Beginning Date of a
-------------------
Participant or Former Participant who is a Five Percent
Owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(I) the calendar year in which the Participant attains
age seventy and one-half (70 1/2) years, or
(II) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
becomes a Five Percent Owner, or the calendar year in
which the Participant retires.
46
<PAGE>
(C) Five Percent Owner. A Participant is treated as a Five
------------------
Percent Owner for purposes of this Section 7.4 if the
Participant is a Five Percent Owner as defined in Section
2.51(g)(iii) and Code Section 416(i) (determined under Code
Section 416 but without regard to whether the Plan is Top-
Heavy) at any time during the Plan Year ending with or
within the calendar year in which the owner attains age
sixty-six and one-half (66 1/2) years or any subsequent Plan
Year. If distributions have begun to a Five Percent Owner
under this Section, they must continue to be distributed,
even if the Participant ceases to be a Five Percent Owner in
a subsequent year.
(iv) Definitions
-----------
(A) Applicable Life Expectancy means the life expectancy
--------------------------
calculated using the attained age of the Designated
Beneficiary as of the Designated Beneficiary's birthday in
the applicable calendar year reduced by one for each
calendar year which has elapsed since the date life
expectancy was calculated first. If life expectancy is
being recalculated, the Applicable Life Expectancy shall be
the life expectancy as recalculated. The applicable
calendar year shall be the first Distribution Calendar Year
and, if life expectancy is being recalculated, the
succeeding calendar year.
(B) Designated Beneficiary means the individual who is
----------------------
designated as the Beneficiary under the Plan under Code
Section 401(a)(9) and the applicable Treasury regulations.
(C) Distribution Calendar Year means a calendar year for which a
--------------------------
minimum distribution is required. For distributions
beginning after the Participant's death, the first
Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to this
Section.
(D) Participant's Nonforfeitable Account Balance means the
--------------------------------------------
Account Balance as of the last Valuation Date in the
calendar year immediately preceding the Distribution
Calendar Year (Valuation Calendar Year), increased by the
amount of any Contributions or Forfeitures allocated to the
Account Balance as of the dates in the Valuation Calendar
Year after the Valuation Date and decreased by distributions
made in the Valuation Calendar Year after the Valuation
Date. If any portion of the minimum distribution for the
first Distribution Calendar Year is made in the second
Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made
in the second Distribution Calendar Year shall be treated as
if it had been made in the immediately preceding
Distribution Calendar Year.
Section 7.7. Minority or Disability. During the minority or disability of
----------- ----------------------
an individual entitled to receive benefits under this Plan, the Committee, if
advised of such condition, may direct distribution to or the Participant may
elect to have the Committee instruct the Trustee to make payments due the
individual directly to any one of the following:
(a) The duly appointed guardian or other legal representative of such
Participant or Beneficiary;
47
<PAGE>
(b) Any person designated as a Beneficiary by the non-competent Participant
if such Beneficiary resides in the same household as the Participant; or
(c) To a person or institution entrusted with the care and maintenance of
the incompetent Participant or Beneficiary, provided such distributed interest
will be used in the best interests and assist in the care of such Participant or
Beneficiary, and provided further, that no prior claim for said payment has been
made by a legal representative of such Participant or Beneficiary.
Any distribution made in accordance with the foregoing provisions of this
Section shall constitute a complete discharge of any liability or obligation on
the part of Conwell Corporation, the Committee or the Trustee under the Plan and
Trust. Neither the Committee nor the Trustee shall be required to cause or to
verify the application of any payments so made, and the receipt of the payee,
including the endorsement of a check or checks, shall be conclusive to all
interested parties.
Section 7.8. Unclaimed Account Procedure. During the time when a benefit
----------- ---------------------------
hereunder is payable to any Participant or Beneficiary, the Committee, upon
request by Conwell Corporation or the Trustee, or at its own instance, shall
mail by registered or certified mail to such Participant or Beneficiary, at his
last known address, a written demand for the Participant's current address, or
for satisfactory evidence of the Participant's continued life, or both. If such
information is not furnished to the Committee within twelve (12) months from the
mailing of such demand, then the Committee may, in its sole discretion, declare
such benefit, or any unpaid portion thereof, suspended, with the result that
such unclaimed benefit shall be allocated to the Accounts of eligible
Participants as a Forfeiture for the Year within which such twelve (12) month
period ends, but shall be restored through an Employer contribution if the lost
Participant or Beneficiary makes or files a claim for such benefit.
If a Participant or Beneficiary who has incurred a Forfeiture of Account
Balance under the provisions of the first paragraph of this Section makes a
claim, at any time, for the forfeited Account Balance, the Committee must
restore the Participant's or Beneficiary's forfeited Account Balance to the same
dollar amount as the dollar amount of the Account Balance forfeited, unadjusted
for any gains or losses occurring subsequent to the date of the forfeiture. The
Committee will make the restoration during the Plan Year in which the
Participant or Beneficiary makes the claim, through the amount, or additional
amount, the Employer contributes to enable the Committee to make the required
restoration. The Committee must direct the Trustee to distribute the
Participant's or Beneficiary's restored vested benefit not later than sixty (60)
days after the close of the Plan Year in which the Committee restores the
forfeited vested benefit. The forfeiture provisions of this Section apply
solely to the Participant's or the Beneficiary's vested benefit derived from
Employer Contributions.
Upon termination of the Plan, in lieu of the unclaimed account procedure
set forth in this Section, Section 12.18 shall apply.
* * * * * * *
48
<PAGE>
ARTICLE EIGHT
-------------
BENEFICIARIES
-------------
Section 8.1. Beneficiary Designation.
----------- -----------------------
(a) Each Participant or Former Participant may from time to time select one
or more persons (who may be designated contingently or successively and who may
be an entity other than a natural person) either individually or in a fiduciary
capacity, as the Beneficiary or Beneficiaries to receive benefits under this
Article on the death of the Participant or Former Participant before receipt of
all benefits. The selection shall be made in writing on a form provided by the
Committee and shall be filed with the Committee. Subject to Section 8.1(b), the
last selection filed with the Committee shall control.
A married Participant's Beneficiary designation is not valid unless the
Participant's spouse consents, in writing, to the Beneficiary designation. The
spouse's consent must acknowledge the effect of that consent and a notary public
or the Administrator (or Plan representative) must witness that consent. The
spousal consent requirements of this paragraph do not apply if:
(i) the Participant and spouse are not married throughout the one
year period ending on the date of the Participant's death;
(ii) the Participant's spouse is the Participant's sole primary
beneficiary;
(iii) the Administrator is not able to locate the Participants'
spouse;
(iv) the Participant is legally separated or has been abandoned
(within the meaning of State law) and the Participant has a court
order to that effect; or
(v) other circumstances exist under which the Secretary of the
Treasury will excuse the consent requirement.
If the Participant's spouse is legally incompetent to give
consent, the spouse's legal guardian (even if the guardian is the
Participant) may give consent. If a Participant fails to name a
Beneficiary under this Section, Section 8.1(b) shall control.
(b) Unless elected in accordance with Section 8.1(c), the Beneficiary of
the death benefit shall be the Participant's spouse, who shall receive the
benefit in the manner prescribed in this Article. Notwithstanding the foregoing
sentence, the Participant may designate a Beneficiary other than the spouse if:
(i) the Participant has no spouse; or
(ii) the spouse cannot be located.
(c) In the case of a married Participant or Former Participant, the
designation of a non-spouse as Beneficiary shall be valid only if:
(i) the spouse consents in writing to the designation;
49
<PAGE>
(ii) the designation specifies the beneficiary and may not be changed
without spousal consent (or the spouse's consent expressly
permits designations by the Participant without any requirement
of further spousal consent); and
(iii) the spouse's consent acknowledges the effect of the election and
the written consent is witnessed by a Plan representative or by
a Notary Public.
(d) If a Participant dies without a spouse or alternative Beneficiary
surviving; if the alternative Beneficiary (other than the spouse) does not
survive until final distribution of the Participant's balance; if a Participant
who is not married dies without having designated a Beneficiary and/or
alternative Beneficiary; or if a Participant who is not married dies after
having made and revoked a designation but prior to having made a subsequent
designation, then the amount remaining in the deceased Participant's Account
shall be payable in equal shares in the following descending order to:
(i) the Participant's surviving issue, including adopted persons and
their descendants, per stirpes;
(ii) the Participant's surviving parents;
(iii) the Participant's surviving brothers and sisters; and
(iv) the Executor or Administrator of the Participant's estate.
The Committee shall determine the applicable person, class of persons,
or legal entity to whom the benefit shall be paid beginning with (i), in the
descending order of (i) to (iv). Each class shall be determined to be not in
existence and, therefore, inapplicable by the Committee before proceeding to the
next class. In determining if a classification is inapplicable, the Committee
shall be required only to make reasonable inquiry into the existence of the
person or persons.
Remaining death benefits shall be payable under Section 7.6 regarding
mandatory distributions. Payment made pursuant to the power conferred on the
Committee in this Section shall operate as a complete discharge of all
obligations under the Plan concerning the share of a deceased Participant and
shall not be subject to review by anyone but shall be final, binding and
conclusive on all persons for all purposes.
* * * * * * *
50
<PAGE>
ARTICLE NINE
------------
COMMITTEE ADMINISTRATIVE PROVISIONS
-----------------------------------
Section 9.1. Committee Appointment. Conwell Corporation shall appoint a
----------- ---------------------
Committee consisting of not less than three (3) nor more than seven (7) members.
Conwell Corporation may remove any member of the Committee at any time and a
member may resign by written notice to Conwell Corporation. Any vacancy in the
membership of the Committee shall be filled by appointment made by Conwell
Corporation, but pending the filling of any vacancy, the then members of the
Committee may act under this Agreement as though they alone constitute the full
Committee. Conwell Corporation shall notify the Trustee promptly of the
appointment of the original Committee and of any change in the membership of the
Committee. The Committee may be contacted through the officer in charge of the
Personnel Department of Conwell Corporation.
Section 9.2. Committee Action and Procedure
----------- ------------------------------
(a) Any and all acts and decisions of the Committee shall be by at least a
majority of the then members. The Committee, by majority action, may delegate
to any one or more of its members the authority to sign notices or other
documents on its behalf or to perform ministerial acts for it, in which event
the Trustee and any other person may accept the notice, document or act without
question as having been authorized by the Committee.
(b) The Committee may, but need not, call or hold formal meetings, and any
decisions made or actions taken either by a vote at a meeting or in writing
without a meeting.
(c) The Committee shall maintain adequate records of its decisions, which
records shall be subject to inspection by the Employer and by any Participant,
Former Participant, or Beneficiary, but only to the extent that they apply to
the individuals.
(d) The Committee may designate one (1) of its members as Chairman and one
(1) of its members as Secretary and such other officers as it shall deem
advisable and may establish policies and procedures governing it if they are
consistent with this Agreement.
Section 9.3. Committee Powers and Duties. The Committee shall perform the
----------- ---------------------------
duties and may exercise the powers and discretion given to it in this Agreement,
and its decisions and actions shall be final and conclusive regarding all
persons affected thereby. The Committee shall exercise its discretion at all
times in a nondiscriminatory manner. Subject to any limitations stated in this
Agreement, the Committee is authorized and empowered with the following powers,
rights, and duties:
(a) To select a Secretary, who need not be a member of the Committee;
(b) To determine the rights of eligibility of an Employee to participate in
the Plan, the value of a Participant's Account Balance and the Nonforfeitable
percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations necessary for the proper
and efficient administration of the Plan provided the rules are consistent with
the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the rules and
regulations it adopts, including interpretation of the Plan documents and
documents related to the Plan's operation;
(e) To direct the Trustee concerning the crediting and distribution of the
Trust;
51
<PAGE>
(f) To direct the Trustee to vote all whole and fractional shares of
Employer Securities held by the Plan in accordance with Section 14.6.
(g) To review and render decisions respecting a claim for, or denial of a
claim for, a benefit under the Plan;
(h) To furnish the Employer with information which the Employer may require
for tax or other purposes;
(i) To engage the service of agents whom it may deem advisable to assist it
with the performance of its duties;
(j) To engage the services of an Investment Manager or Managers (as defined
in ERISA Section 3(38)), each of whom will have full power and authority to
manage, acquire or dispose, or direct the Trustee with respect to acquisition or
disposition, of any Plan asset under its control;
(k) To establish, in its sole discretion, a nondiscriminatory policy,
pursuant to this Section, which the Trustee must observe in making loans, if
any, to Participants and Beneficiaries; and
(l) To establish and maintain a funding standard account and to make
credits and charges to the account to the extent required by and in accordance
with applicable Code provisions;
The Committee must exercise all of its powers, duties, and discretion under
the Plan in a uniform and nondiscriminatory manner.
Section 9.4. Committee Reliance. The Trustee may rely without question on
----------- ------------------
any notices or other documents received from the Committee. The Employer shall
furnish the Committee with all data and information available to the Employer,
which the Committee may reasonably require to perform its functions under this
Agreement. The Committee may rely without question on any data or information
furnished by the Employer.
Section 9.5. Committee Authority. Any and all disputes which may arise
----------- -------------------
involving Participants, Former Participants, Beneficiaries and/or the Trustee
shall be referred to the Committee, and its decisions shall be final and
conclusive regarding all affected persons. Furthermore, if any issue arises
concerning the meaning, interpretation or application of any provisions of this
Agreement, the decision of the Committee on any issue shall be final.
Section 9.6. Conflicts in Interest. Notwithstanding any other provisions
----------- ---------------------
of this Agreement, no member of the Committee shall vote or act on any matter
involving the Committee member's rights, benefits or other participation under
this Agreement.
Section 9.7. Appointment of Agent and Legal Counsel. The Committee may
----------- --------------------------------------
engage agents to assist it and may engage legal counsel who may be counsel for
the Employer. The Committee shall not be responsible for any action taken or
omitted to be taken on the advice of counsel.
Section 9.8. Committee Compensation and Reimbursement. Unless otherwise
----------- ----------------------------------------
determined by Conwell Corporation, the members of the Committee shall serve
without compensation for their services. However, all expenses incident to the
functioning of the Committee shall be paid by Conwell Corporation, including,
but not limited to, salaries of the Committee's employees, fees of investment
counsel, attorneys' fees, accounting charges and any other costs of
administering the Plan. All reasonable expenses incurred by the Committee shall
be paid by Conwell Corporation.
52
<PAGE>
Section 9.9. Appointment of Investment Manager. The Committee may
----------- ---------------------------------
delegate investment management authority pertaining to all or a portion of the
Plan assets by appointing an Investment Manager(s) and may authorize payment of
the fees and expenses of the Investment Manager(s) from the Plan assets. For
purposes of this Agreement, any Investment Manager so appointed shall, during
the period of appointment, possess fully and absolutely those powers, rights and
duties of the Trustee (to the extent delegated by the Committee) regarding the
investment or reinvestment of that portion of the Plan assets over which the
Investment Manager has investment management authority. An Investment Manager
must be one (1) of the following:
(a) an Investment Advisor registered under the Investment Advisors Act of
1949;
(b) a bank, as defined in the Investment Advisors Act of 1940; or
(c) an insurance company qualified to manage, acquire, or dispose of Plan
assets under the laws of more than one (1) state.
Any Investment Manager shall acknowledge in writing to the party making the
appointment and to the Trustee that it is a fiduciary respecting the Plan.
During any period when the Investment Manager is appointed and serving, and
regarding those assets in the Plan over which the Investment Manager exercises
investment management authority, the Trustee's responsibility shall be limited
to holding assets as a custodian, providing accounting services, disbursing
benefits as authorized, and executing investment instructions only as directed
by the Investment Manager. Any certificates or other instrument duly signed by
the Investment Manager (or the authorized representative of the Investment
Manager), purporting to evidence any instruction, direction or order of the
Investment Manager regarding the investment of those assets of the Plan over
which the Investment Manager has investment management authority, shall be
accepted by the Trustee as conclusive proof thereof. The Trustee also shall be
fully protected in acting in good faith on any notice, instruction, direction,
order, certificate, opinion, letter, telegram or other document believed by the
Trustee to be genuine and to be from the Investment Manager (or the authorized
representative of the Investment Manager). The Trustee shall not be liable for
any action taken or omitted by the Investment Manager or for any mistakes of
judgment or other action made, taken or omitted by the Trustee in good faith on
direction of the Investment Manager.
Section 9.10. Annual Accounting. As soon as administratively feasible
------------ -----------------
after the Accounting Date of each Plan Year, but within the time prescribed by
ERISA and the applicable Labor regulations and at least annually, the Committee
shall advise each Participant, Former Participant and Beneficiary for whom
Accounts are held under this Plan of the then balance in the Participant's
Accounts and the other information ERISA requires to be furnished. No
Participant except a member of the Committee shall have the right to inspect the
records reflecting the Accounts of any other Participant.
Section 9.11. Funding Policy. The Committee will review, not less often
------------ --------------
than annually, all pertinent Employee information and Plan data to establish the
funding policy of the Plan and to determine the appropriate methods of carrying
out the Plan's objectives. The Committee must communicate periodically, as it
deems appropriate, to the Trustee and to any Plan Investment Manager the Plan's
short-term and long-term financial needs so investment policy can be coordinated
with Plan financial requirements.
53
<PAGE>
Section 9.12. Indemnification. Conwell Corporation shall indemnify and
------------ ---------------
hold harmless each member of the Committee from any and all claims, losses,
damages, expenses (including counsel fees approved by the Committee), and
liabilities (including any amounts paid in settlement with the Committee's
approval) arising from any act or omission of the member, except when such
claims, losses, damages, expenses or liabilities are judicially determined to be
due to the gross negligence or willful misconduct of such member. No plan
assets may be used for such indemnification.
* * * * * *
54
<PAGE>
ARTICLE TEN
-----------
EMPLOYER ADMINISTRATIVE PROVISIONS
----------------------------------
Section 10.1. Employer Action. Whenever the Employer is permitted or
------------ ---------------
required to do or perform any act under this Agreement, it shall be done and
performed by a person duly authorized to do or perform the act by its legally
constituted authority. The legally constituted authority of a corporation shall
be the Board of Directors.
Section 10.2. Plan Amendment.
------------ --------------
(a) At any time Conwell Corporation, by formal written action, may amend or
modify this Agreement in any manner it deems necessary or desirable,
retroactively or prospectively, with or without the knowledge or consent of any
Participant, subject to the following provisions of this Article.
Notwithstanding anything to the contrary contained in the Plan, the provisions
of the Plan which specify the amount, price, timing and criteria for allocation
of Employer Securities under the Plan shall not be amended more than once every
six months, other than to comport with changes in the Code, ERISA, or the rules
thereunder.
(b) Conwell Corporation must make all amendments in writing, signed by duly
authorized persons with the legally constituted authority of Conwell Corporation
and with the consent or approval, if any, as provided in this Section. An
amendment shall become effective upon its delivery to the Trustee. Each
amendment must state the date on which it is either retroactively or
prospectively effective. Notwithstanding the foregoing, Conwell Corporation,
without action of its Board of Directors, may amend the Plan to meet any
requirements of the Internal Revenue Service to retain the status of the Plan as
a qualified plan under Sections 401(a) and 4975(e)(7) and related sections of
the Code.
(c) Unless it is made to secure the approval of the Commissioner of the
Internal Revenue Service or other governmental bureau or agency, no amendment or
modification of this Agreement by the Employer shall:
(i) operate retroactively to reduce or divest the then vested
interest in any Account or to reduce or divest any benefit then
payable hereunder unless all Participants, Former Participants
and Beneficiaries then having Accounts or benefit payments
affected thereby shall consent to the amendments or
modifications;
(ii) directly or indirectly affect any Participant's Nonforfeitable
percentage outside the protection of Treasury Regulations Section
1.411(a)(8);
(iii) decrease a Participant's accrued benefit, except to the extent
permitted under Code Section 412(c)(8), and reduce or eliminate
Code Section 411(d)(6) protected benefits determined immediately
prior to the adoption date (or, if later, the effective date) of
the amendment, except as permitted by applicable Treasury
regulations (An amendment reduces or eliminates Code Section
411(d)(6) protected benefits if the amendment has the effect of
either: (A) eliminating or reducing an early retirement benefit
or a retirement-type subsidy (as defined in applicable Treasury
regulations); or (B) except as provided by applicable Treasury
regulations, eliminating an optional form of benefit. The
Committee must disregard an amendment to the extent application
of the amendment would fail to satisfy this paragraph. If the
Committee must disregard an amendment because the amendment would
violate clause (A) or clause (B), the Committee must maintain a
schedule of the early retirement option
55
<PAGE>
or other optional forms of benefit the Plan must continue for the
affected Participant.); or
(iv) affect the rights, duties or responsibilities of the Trustees,
the Plan Administrator or the Committee without the written
consent or approval of the Trustee, Administrator, or affected
Committee member.
(d) If the vesting schedule described in Section 6.2 is amended, a
Participant's vested interest in any contribution to which the vesting schedule
in Section 6.2 applied, shall not be less than the Nonforfeitable percentage
determined as of the later of the effective date of the amendment or the date of
its adoption. A Participant with at least three (3) Years of Service on the
last day of the election period described in this paragraph, may elect to have
the Nonforfeitable percentage of the Employer Contribution Accounts determined
without regard to the amendment. For Participants who do not have at least one
(1) Hour of Service in any Plan Year beginning after December 31, 1988, the
preceding sentence shall be applied by substituting "five (5) Years of Service"
for "three (3) Years of Service" where the language appears. If a Participant
fails to make an election, then the Participant shall be subject to the new
vesting schedule. The election period shall commence on the date the amendment
is adopted or deemed to be made and shall end sixty (60) days after the latest
of:
(i) the date of the adoption of the amendment;
(ii) the effective date of the amendment; or
(iii) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
Section 10.3. Discontinuance, Termination of Plan
------------ -----------------------------------
(a) Conwell Corporation, by action of its Board of Directors, has the
right, at any time, to suspend or discontinue its contributions under the Plan
to the Trust Fund, and to terminate the Plan and the Trust created under this
Agreement. The Plan will terminate on the first to occur of the following
events:
(i) the date the Plan is terminated by action of the Employer;
(ii) the date the Employer is judicially declared bankrupt or
insolvent, unless the proceeding authorized continued maintenance
of the Plan; or
(iii) the dissolution, merger, consolidation or reorganization of the
Employer or the sale by the Employer of all or substantially all
of its assets, unless the successor or purchaser elects and makes
provision to continue the Plan, in which event the successor or
purchaser will substitute itself as the Employer under this Plan.
(b) Upon either full or partial termination of the Plan, or, if applicable,
upon complete discontinuance of contributions to the Plan, participation of all
Participants affected by the termination will end. If Employer Contributions on
behalf of the terminated Participants are not replaced by contributions to a
comparable plan qualified under Code Section 401(a), the Accounts of all
Participants, Former Participants and Beneficiaries shall be and become fully
vested and Nonforfeitable, notwithstanding the Nonforfeitable percentage which
otherwise would apply under Article 6. A complete discontinuance of Employer
contributions shall be deemed to be a termination of the Plan for this purpose.
The Trustee, in its discretion, may convert some or all of the Trust Fund to
cash and shall deduct therefrom all unpaid charges and expenses, except as the
same may be paid by the Employer. The Committee then shall adjust the balance
of all Accounts on the basis of the net cash balance and fair market value of
all property in the Trust Fund.
56
<PAGE>
Thereafter, the Trustee shall distribute the amount to the credit of each
Participant, Former Participant and Beneficiary as the Committee shall direct.
Notwithstanding the foregoing, a distribution made because of a termination of
the Plan shall be subject to the mandatory distribution requirements of Section
7.6, and the immediate cashout distribution provisions of Section 7.3(c), and a
Participant's right to demand Employer Securities set forth in Section 7.1(a).
Section 10.4. Prohibition Against Reversion to Employer. No power of
------------ -----------------------------------------
amendment or of full or partial termination may be exercised to discriminate in
favor of officers, shareholders or highly compensated employees. Under no
circumstances or conditions, other than those specifically provided herein,
shall the Trust Fund or any portion thereof revert to the Employer or be used
for or diverted to purposes other than the exclusive benefit of the
Participants, Former Participants and Beneficiaries prior to the satisfaction of
all liabilities with respect to such Participants and their Beneficiaries. No
amendment or revocation by the Employer of this Section may cause or permit any
portion of the Trust Fund to revert to or become a property of the Employer.
Section 10.5. Adoption by Related Employer. Notwithstanding any contrary
------------ ----------------------------
provision contained in this Agreement, with the written consent of the Plan
Sponsor, any Affiliate which otherwise falls within the definition of Employer
may adopt this Plan and Trust in its entirety, participate herein and be known
as a Participating Employer by executing a properly authorized document
evidencing the intent and will of the Participating Employer. Such election to
participate shall be by the adoption of t his Plan by such Affiliate's board of
directors, and this election shall be contingent upon a resolution by Conwell
Corporation's Board of Directors approving such action by the Affiliate. The
employees of such Affiliate shall, upon the effective date of Conwell
Corporation's approval of the election, become Employees hereunder and shall
become Participants as provided in Article 3. The adoption of this Plan and any
related merger with this Plan of a preexisting plan of such Affiliate may be
contingent upon such Affiliate, or Conwell Corporation as Plan Administrator,
receiving a determination from the Internal Revenue Service that the Plan and
the related Trust Agreement continue thereafter to qualify as an employee stock
ownership plan under Code Section 4975(e)(7), and as a qualified plan and exempt
trust under Code Sections 401 and 501. Unless the context of this Agreement
clearly indicates the contrary, the term "Employer" shall be deemed to include
each Participating Employer relating to its adoption of the Plan.
Section 10.6. Requirements for Adoption by Related Employer. The
------------ ---------------------------------------------
following requirements shall apply to any Participating Employer who elects to
adopt this Plan pursuant to this Article:
(a) Each Participating Employer shall be required to use the same Trustee
as provided in this Agreement.
(b) The Trustee may, but shall not be required to, commingle, hold and
invest as one (1) Trust Fund all contributions made by Participating Employers
and all increments thereof.
(c) The transfer of any Participant from or to any corporation
participating in this Plan, whether the Participant is an Employee of the Plan
Sponsor or a Participating Employer, shall not affect the Participant's rights
under the Plan; all amounts credited to the Participant's Account, all
accumulated service with the transferor or Predecessor Employer, and the length
of participation in the Plan shall continue to the Participant's credit.
(d) All rights and values forfeited by termination of employment shall
inure only to the benefit of the Employees and Participants of the Participating
Employer which employed the forfeiting Participant, except, if the Forfeiture is
for an Employee whose Employer is a Related Employer, then the Forfeiture shall
be allocated based on Annual Compensation to all Accounts of Participating
Employers who are Related Employers. Should an Employee of one ("First")
Employer be transferred to a Related ("Second") Employer the transfer shall not
cause the Employee's Account Balance, generated while an Employee of the First
57
<PAGE>
Employer, in any manner or by any amount, to be forfeited. The Employee's
Account Balance for all purposes of the Plan, including length of service, shall
be considered as though the Employee had always been employed by the Second
Employer and as such had received contributions, forfeitures, earnings or
losses, and appreciation or depreciation in value of assets totaling the amount
so transferred.
(e) Upon an Employee's transfer between Participating Employers, the
Employee involved shall carry accumulated Years of Service for eligibility and
vesting. No transfer shall effect a termination of employment under this
Agreement and the Participating Employer to which the Employee transfers shall
thereupon become obligated under this Agreement to the Employee in the same
manner as the Participating Employer from whom the Employee transfers.
(f) Any contributions made by a Participating Employer under this Plan,
shall be paid to and held by the Trustee for the exclusive benefit of the
Employees of the Participating Employer and the Beneficiaries of the Employees,
subject to all the terms and conditions of this Agreement.
(g) Based on information furnished by the Administrator, the Committee and
the Trustee shall keep separate books and records concerning the affairs of each
Participating Employer and of the Account Balances of the Participants of each
Participating Employer. The Trustee may, but need not, register Contracts to
evidence that a particular Participating Employer is the interested Employer
under this Agreement, but upon an Employee's transfer from one Participating
Employer to another, the employing Employer shall immediately notify the Trustee
of the transfer.
Section 10.7. Plan Sponsor as Agent of Participating Employer. Each
------------ -----------------------------------------------
Participating Employer shall be deemed to be a part of this Plan; however, each
Participating Employer shall be deemed to have designated irrevocably the Plan
Sponsor as its agent in all of its relations with the Trustee, the Committee and
the Administrator under this Agreement.
Section 10.8. Participating Employer Contributions. All contributions
------------ ------------------------------------
made by a Participating Employer provided for in this Plan shall be determined
separately on the basis of its total Annual Compensation paid. The
Participating Employer shall pay the contributions to the Trustee who shall hold
the contribution for the exclusive benefit of the Employees of the Participating
Employer and the Beneficiaries of the Employees, subject to all of the terms and
conditions of this Plan.
Section 10.9. Amendment by Plan Sponsor, Participating Employers.
------------ --------------------------------------------------
Amendment of this Plan by the Plan Sponsor at any time when there shall be a
Participating Employer under this Agreement shall be effective only upon the
written action of each and every Participating Employer and with the consent of
the Trustee where the consent is necessary under this Agreement.
Notwithstanding the foregoing sentence, each Participating Employer shall be
deemed to have authorized irrevocably the Plan Sponsor or any person(s) duly
authorized by resolution of the Board of Directors of the Plan Sponsor, to amend
or modify this Agreement in any manner it deems necessary or desirable,
retroactively or prospectively, subject to the provisions of this Article.
Section 10.10. Revocation of Participation by Participating Employer. Any
------------- -----------------------------------------------------
Participating Employer shall be permitted to discontinue or revoke its
participation in this Plan. Upon any discontinuance or revocation, satisfactory
evidence thereof and of any applicable conditions imposed shall be delivered to
the Trustee. The Trustee shall thereafter transfer, deliver and assign
Contracts and other Trust Fund assets allocable to the Participants of the
Participating Employer to the new plan as shall have been designated by the
Participating Employer, if it has established a separate employee benefit
pension plan for its employees. If no successor plan is designated, the Trustee
shall retain the assets for the Employees of the Participating Employer under
Article 10. No part of the corpus or income of the Trust Fund relating to the
Participating Employer shall be used for or diverted to purposes other than the
exclusive benefit of the Employees of the Participating Employer and the
Beneficiaries of the Employees.
58
<PAGE>
Section 10.11. Authority of Administrator over Participating Employers.
------------- -------------------------------------------------------
The Administrator shall have the authority to make any and all necessary rules
or regulations binding on all Participating Employers and all Participants and
Beneficiaries to effectuate the purposes of this Article.
Section 10.12. Deficiency of Earnings or Profits. If any Participating
------------- ---------------------------------
Employer is prevented in whole or in part from making a contribution to the
Trust Fund which it otherwise would have made under the Plan because of having
no current or accumulated earnings or profits, or because the earnings or
profits are less than the contribution which it otherwise would have made, then
so much of the contribution which the Participating Employer was prevented from
making may be made for the benefit of the participating Employees of the
Participating Employer by the other Participating Employers who are Related
Employers. The contribution by each other Participating Employer shall be
limited to the proportion of its total current and accumulated earnings or
profits remaining after adjustment for its contribution to the Plan made without
regard to this Section, which the total prevented contribution bears to the
total current and accumulated earnings or profits of all the Participating
Employers remaining after adjustment for all contributions made to the Plan
without regard to this Section. A Participating Employer on behalf of whose
Employees a contribution is made under this Section shall not reimburse the
contributing Participating Employer unless it has otherwise agreed to do so in
writing.
Section 10.13. Indemnity by Employer. All Employees of Conwell
------------- ---------------------
Corporation designated by the Employer to perform acts under the Plan shall be
indemnified by Conwell Corporation, or by insurance policies purchased by
Conwell Corporation against any and all liabilities arising by reason of any act
or failure to act, made in good faith pursuant to the provisions of the Plan,
including expenses reasonably related thereto.
Section 10.14. Losses and Depreciation. Neither Conwell Corporation nor
------------- -----------------------
the Trustee guarantees the Trust Fund in any manner against loss or
depreciation.
Section 10.15. Fiduciary Breach. Conwell Corporation, the Board of
------------- ----------------
Directors, the Committee or any other committee authorized by Conwell
Corporation to perform all or some of the administration of the Plan, the
Trustee and any other person who is deemed to be a fiduciary under the Plan will
not be liable for a breach of fiduciary responsibility of another fiduciary
under the Plan except to the extent they shall have (1) participated knowingly
in, or knowingly undertaken to conceal, an act or omission of the fiduciary,
knowing such act or omission to be a breach of the fiduciary's responsibilities;
(2) enabled the fiduciary to commit a breach of its fiduciary responsibilities
through a breach of their own fiduciary responsibilities; or (3) had knowledge
of a breach of fiduciary responsibilities by the fiduciary, unless they made a
reasonable effort to remedy the breach.
Section 10.16. Reimbursement of Expenses. Except as otherwise
------------- -------------------------
specifically provided herein, all expenses incident to the administration,
termination or protection of the Plan and Trust, including but not limited to,
actuarial, legal, accounting and Trustee fees, shall be paid by Conwell
Corporation, which may require reimbursement from other Participating Employers
for their pro rata shares, or if not paid by Conwell Corporation, shall be paid
by the Trustee from the Trust Assets, but no amount paid pursuant to Section
9.12 or 11.5 shall be paid, directly or indirectly, from the Trust Assets.
Any expenses of the Plan and Trust which are to be paid by Conwell
Corporation or borne by the Trust Fund shall be paid by each Participating
Employer in the same proportion that the total amount standing to the credit of
all Participants employed by the Participating Employer bears to the total
amount standing to the credit of all Participants.
* * * * * * *
59
<PAGE>
ARTICLE ELEVEN
--------------
THE TRUSTEE
-----------
Section 11.1. Trust and Trust Agreement. Conwell Corporation shall enter
------------ -------------------------
into a Trust Agreement with a Trustee to be selected by Conwell Corporation who
shall serve at the pleasure of Conwell Corporation. The Trust Agreement shall
provide, among other things, for a Trust Fund to which all Employer and Rollover
Contributions shall be paid, and the Trustee shall have such rights, powers and
duties as set forth in the Trust Agreement. All assets of the Trust Fund shall
be held, invested and reinvested in accordance with the provisions of that Trust
Agreement and this Plan.
Section 11.2. Trustee's Responsibility. The Trustee shall be responsible
------------ ------------------------
solely for the investment and safekeeping of the assets of the Trust Fund and
shall have no responsibility for the operation or administration of the Plan,
except as expressly provided herein. If the Trustee is a bank or trust company
supervised by the United States or a state, assets of the Trust Fund may be
invested in deposits which bear a reasonable rate of interest with such bank or
trust company to the extent they are not required by the Plan to be invested in
Employer Securities. The Trustee shall have the authority to pay moneys to or
upon the order of Conwell Corporation for the use of the Plan upon requisition
drawn by the Trustee.
Section 11.3. Exclusive Benefit. The Employer Contributions shall be held
------------ -----------------
by the Trustee for the benefit of the Participants and their Beneficiaries, and
no part of such Contributions and no part of the respective Participant's
Accounts shall be recoverable by the Employer, or used for or diverted to
purposes other than for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the provisions of the Plan.
Section 11.4. Incorporation of Trust Agreement by Reference. The
------------ ---------------------------------------------
provisions of the Trust Agreement are incorporated herein by reference and such
provisions shall govern the operation of the Trust; however, in the event of any
conflict between the provisions of the Trust Agreement and this Plan, the
provisions of this Plan shall control.
Section 11.5. Reimbursement of Expenses. Costs of brokerage fees,
------------ -------------------------
commissions, taxes and other costs incident to purchase, sale and servicing of
investments and other taxes, if any, payable on the assets or income of the
Trust and any expenses to be paid by the Trustee pursuant to Section 10.16 shall
be paid by the Trustee from the Trust Assets and shall be allocably charged to
the Employer Contribution Accounts which had undistributed balances on the last
preceding Accounting Date in proportion to the balances in such Accounts on such
date adjusted for distributions since such date.
* * * * * *
60
<PAGE>
ARTICLE TWELVE
--------------
ERISA ADMINISTRATIVE PROVISIONS
-------------------------------
Section 12.1. Administrator Appointment. Conwell Corporation shall be the
------------ -------------------------
Administrator of this Plan and shall be responsible for filing all reporting and
disclosure documents required by the Department of Labor and the Internal
Revenue Service in accordance with ERISA, the Code and the respective
regulations. Conwell Corporation may delegate any of its duties and
responsibilities as Administrator to the Committee. Service of process on the
Plan or Trust may be obtained by personal service on Conwell Corporation or any
Committee member.
Section 12.2. Record Information.
------------ ------------------
(a) Record Address. Each individual or entity with an actual or potential
--------------
interest in an existing Account shall file and maintain a current record address
with the Payroll Department of the appropriate Employer. Such record address
will be furnished by the Employers to the Committee. Mailings to such record
address will fulfill any obligation to provide required information to present
or former Participants and Beneficiaries with regard to the Plan. If no record
address is filed, it will be presumed that the address used by the Committee in
forwarding statements of a Participant's Employer Contribution or any other
account balance is the record address.
(b) Required Information to be Furnished. Participants and Beneficiaries
------------------------------------
who are or may become entitled to any payment hereunder shall furnish to the
Committee such information as the Committee considers necessary or desirable for
purposes of administering the Plan, and the provisions of the Plan with respect
to any payment hereunder are conditioned upon the prompt receipt by the
Committee of such true, full and complete information as the Committee may
reasonably request.
Section 12.3. Summary Plan Description. The Administrator shall furnish a
------------ ------------------------
summary plan description to each Participant within ninety (90) days after
becoming a Participant and to each Beneficiary receiving benefits under the Plan
within ninety (90) days after beginning to receive benefits. Every fifth (5th)
year after the Effective Date of the Plan, the Administrator shall furnish an
updated summary plan description, which integrates all amendments made within
the five (5) year period, to each Participant and Beneficiary receiving
benefits. If no amendments have been made within the five (5) year period, the
Administrator shall furnish the updated summary plan description only every
tenth (10th) year. If there is a modification or change in the Plan, the
Administrator shall furnish to each Participant and each Beneficiary who is
receiving benefits, a summary description of the change or modification not
later than two hundred ten (210) days after the end of the Plan Year in which
the change is adopted.
Section 12.4. Summary Annual Report. The Administrator shall furnish to
------------ ---------------------
each Participant and each Beneficiary receiving benefits a summary of the Annual
Return/Report of the Plan containing a statement of the Plan assets and
liabilities, receipts and disbursements and other information fairly summarizing
the Plan's financial statement within two hundred ten (210) days after the close
of each Plan Year, or an extended period as may be permitted by the Secretary of
Labor.
Section 12.5. Individual Benefit Statements. The Administrator shall
------------ -----------------------------
furnish to any Participant or Beneficiary receiving benefits, who requests in
writing, a statement reporting the total benefits accrued and the Nonforfeitable
benefits, if any, which have accrued or the earliest date on which benefits will
become Nonforfeitable. In no event shall a Participant or Beneficiary be
entitled to receive the report described in this Section more than once in every
twelve (12) month period.
61
<PAGE>
Section 12.6. Copies of Additional Documents. Upon written request from a
------------ ------------------------------
Participant or Beneficiary receiving benefits, the Administrator shall furnish a
copy of any one (1) or all of the following documents: the latest updated
summary plan description, the latest annual report, any terminal report, Trust
agreement, contract or other instruments under which the Plan was established or
is operated. The Administrator may make a reasonable charge to cover the cost of
furnishing complete copies.
Section 12.7. Documents Available for Examination. Copies of the Plan
------------ -----------------------------------
description and the latest annual report, Trust agreement, contract or other
instruments under which the Plan was established or is operated shall be
available for examination at the principal office of the Employer by any
Participant or Beneficiary receiving benefits. Examination may be made during
reasonable hours in person or by agent, accountant or attorney.
Section 12.8. Notice of Participant Rights under ERISA. The Committee
------------ ----------------------------------------
shall furnish to each Participant and to each Beneficiary receiving benefits
information on their rights under the Plan and how the rights may be protected
by law.
Section 12.9. Notice to Participant on Participant Termination. The
------------ ------------------------------------------------
Administrator shall furnish a statement to a Participant who terminated Service
with the Employer for any of the reasons set forth in Articles 6 through 9,
describing the nature, amount and form of the Nonforfeitable Account Balance, if
any, to which the Participant is entitled as soon as administratively feasible
after the close of the Plan Year in which the Participant terminated Service.
Section 12.10. Notice to Trustee on Participant Termination
------------- --------------------------------------------
(a) As soon as practicable after a Participant terminates Service with the
Employer for any of the reasons set forth in Articles 6 through 9, the Committee
shall give written notice to the Trustee, including the following information
and directions which may be necessary or advisable under the circumstances:
(i) name and address of the Participant;
(ii) reason the Participant terminated Service with the Employer;
(iii) name and address of the Beneficiary or Beneficiaries of a
deceased Participant;
(iv) Nonforfeitable percentage or amount to which the Participant is
entitled on termination of employment pursuant to Article 9; and
(v) time, manner and amount of payment to be made pursuant to the
Participant's election under Article 10.
If a Former Participant or Beneficiary dies, the Committee shall give like
notice to the Trustee, but only if the Committee learns of the death.
(b) At any time and from time to time after giving the notice provided
under this Section, the Committee may modify the original notice or any
subsequent notice by a further written notice or notices to the Trustee, but any
action taken or payments made by the Trustee pursuant to a prior notice shall
not be affected by a subsequent notice.
(c) A copy of each notice provided under this Section shall be mailed by
the Committee to the Participant, Former Participant or Beneficiary involved,
but the failure to send or receive the copy shall not affect the validity of any
action taken or payment made pursuant thereto.
62
<PAGE>
(d) Upon receipt of any notice provided under this Section, the Trustee
shall promptly take any action and make any payments directed in the notice. The
Trustee may rely on the information and directions in the notice absolutely and
without question. However, the Trustee may inform the Committee of any error or
oversight which the Trustee believes to exist in any notice.
Section 12.11. Claim for Benefits. Participants and Beneficiaries who are
------------- ------------------
or may become entitled to any payment hereunder shall furnish to the Committee
such information as the Committee considers necessary or desirable for purposes
of administering the Plan, and the provisions of the Plan with respect to any
payment hereunder are conditioned upon the prompt receipt by the Committee of
such true, full and complete information as the Committee may reasonably
request.
Normally, whenever a Participant or Beneficiary becomes entitled to
benefits under this Agreement, the Committee and the Trustee will automatically
initiate procedures to provide for the payment of the benefits. If a
Participant or Beneficiary believes that he or she is entitled to the payment of
benefits under this Agreement and no action is forthcoming from the Committee or
the Trustee, then the Participant or Beneficiary may file a written claim for
benefits with the Committee or the Trustee.
Once a claim request is submitted, the Committee shall act upon such
request and inform the Claimant within ninety (90) days from the date the
request was filed whether such request is granted or denied. If special
circumstances so warrant, the Committee may take up to an additional ninety (90)
days; provided, written notice shall be sent to Claimant stating in full the
reasons for the delay and the date by which the final decision is expected.
Failure of the Claimant to receive any notification within ninety (90) days (one
hundred eighty (180) days for special cases) shall cause the claim to be deemed
denied, and the Claimant may institute the review proceedings set out in Section
12.12.
Section 12.12. Appeal for Decision of Committee
------------- --------------------------------
(a) If any Participant or Beneficiary files a claim for benefits under this
Plan ("Claimant") and the claim is denied in whole or in part, the Administrator
shall give notice of the decision to the Claimant in writing setting forth:
(i) the specific reasons for the denial;
(ii) a specific reference to pertinent provisions of the Plan, if any,
upon which the denial is based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim with an
explanation of the necessity therefor; and
(iv) that any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Committee within sixty
(60) days after receipt of the Administrator's notice of denial
of benefits, or from the date the claim is deemed denied because
of a failure of notification to the Claimant. The
Administrator's notice must further advise the Claimant that
failure to appeal the action to the Committee in writing within
the sixty (60) day period will render the Committee's
determination final, binding and conclusive.
(b) The written notice shall be given to the Claimant as soon as
administratively feasible after the decision is made, but not later than sixty
(60) days after the claim is filed. The Claimant shall have the right to be
represented, to review pertinent documents and to present written and oral
evidence. In order to perfect the right to review, the Claimant must file
written notice within sixty (60) days from the date the Claimant receives
written notification of the denial from the Committee, or from the date the
claim is deemed
63
<PAGE>
denied because of a failure of notification to the Claimant. The Claimant is
entitled to have a representative present at the review hearing to argue the
claim on the Claimant's behalf.
(c) If the Claimant should appeal to the Committee, the Claimant or the
duly authorized representative, shall be entitled to a reasonable opportunity to
examine all documentation relevant to the claim and may submit, in writing,
issues and comments the Claimant or the duly authorized representative considers
pertinent. After completion of written and oral argument by the Claimant, the
Committee shall render a final decision on the review and shall set forth the
specific reasons for the decision with specific references to pertinent
provisions. The Committee shall render the decision in writing within sixty
(60) days after receipt of the request for review unless under special
circumstances, such as the need for a hearing, require an extension which shall
not exceed an additional sixty (60) days upon showing a necessity therefor and
informing the Claimant of the delay and the reasons therefor.
(d) The Claimant shall be informed of the final decision of the Committee
in writing which shall:
(i) Be written in a manner calculated to be understood by the
Claimant;
(ii) State specific reasons for the decision; and
(iii) State specific references to pertinent Plan provisions on which
the decision is based.
Section 12.13. Exclusive Benefit. Except as provided under this Article
------------- -----------------
and Article 3, the Employer has no beneficial interest in any asset of the Trust
and no part of any asset in the Trust may ever revert to or be repaid to an
Employer, either directly or indirectly. Further, prior to the satisfaction of
all liabilities with respect to the Participants and their Beneficiaries under
the Plan, no part of the corpus or income of the Trust Fund, or any asset of the
Trust, may be used for, or diverted to, purposes other than the exclusive
benefit of the Participants or their Beneficiaries. No amendment or revocation
by the Employer of this Section may cause or permit any portion of the Trust
Fund to revert to or become a property of the Employer.
Section 12.14. Denial of Request for Initial Approval. Any contribution
------------- --------------------------------------
to the Trust Fund associated with this Plan is conditioned on initial
qualification of the Plan under applicable Code Sections 401(a), 403(a) or
405(a) and of the exemption of the Trust created under the Plan under Code
Section 501(a). If the Commissioner of the Internal Revenue Service, upon the
Employer's request for initial approval of this Plan and Trust, determines that
the Plan is not qualified or the Trust is not exempt, then the Trustee may
return to the Employer, within one (1) year after the date of final disposition
of the Employer's request for initial approval, any contribution made by the
Employer, and any increment attributable to the contribution.
Section 12.15. Mistake of Fact. Notwithstanding any contrary provision in
------------- ---------------
this Agreement, if a contribution is made by an Employer by a mistake of fact,
the contribution may be returned to the Employer within one (1) year after the
payment of the contribution. The amount of the mistaken contribution is equal
to the excess of (a) the amount contributed over (b) the amount that would have
been contributed had there not occurred a mistake of fact. Earnings
attributable to mistaken contributions may not be returned to the Employer, but
losses attributable thereto shall reduce the amount to be returned.
Section 12.16. Disallowance of Deduction. Notwithstanding any contrary
------------- -------------------------
provision in this Agreement, any contributions by the Employer to the Plan and
Trust are conditioned on the deductibility of the contribution by the Employer
under the Code. To the extent any deduction is disallowed, the Employer, within
one (1) year following a final determination of the disallowance, whether by
agreement with the Internal Revenue Service or by final decision in a court of
competent jurisdiction, may demand repayment of the disallowed contribution,
and the Trustee shall return the contribution within one (1) year following the
disallowance. Earnings attributable to excess contributions may not be returned
to the Employer, but losses attributable thereto shall reduce the amount to be
returned.
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<PAGE>
Section 12.17. Spendthrift Clause. Except as provided below, no
------------- ------------------
Participant, Former Participant or Beneficiary shall have the right to
anticipate, assign or alienate any benefit provided under the Plan and the
Trustee will not recognize any anticipation, assignment or alienation.
Furthermore, a benefit under the Plan is not subject to attachment, garnishment,
levy, execution or other legal or equitable process. All provisions of this
Agreement shall be for the exclusive benefit of those designated herein. These
restrictions shall not apply in the following case(s):
. Distributions Pursuant to Qualified Domestic Relations Orders. The
-------------------------------------------------------------
Committee may direct the Trustee under the nondiscriminatory policy
adopted by the Committee to pay an Alternate Payee designated under a
Qualified Domestic Relations Order as defined in Code Section 414(p)
or any domestic relations order entered before January 1, 1985 if
payment of benefits pursuant to the order has commenced as of that
date. To the extent provided under a Qualified Domestic Relations
Order, a former spouse of a Participant shall be treated as the spouse
or surviving spouse for all purposes of the Plan.
Section 12.18. Termination. Upon termination of the Plan, in lieu of the
------------- -----------
distribution provisions of Article 10, the Committee will direct the Trustee to
distribute each Participant's Nonforfeitable Account Balance, in a single sum,
as soon as administratively feasible after the later of the termination of the
Plan or the receipt of a favorable determination letter from the Office of the
Key District Director, if an application is filed, irrespective of the present
value of the Participant's Nonforfeitable Account Balance and whether the
Participant consents to that distribution. This paragraph applies only if:
(i) the Plan does not provide an annuity option;
(ii) the Plan is a profit sharing plan on its termination date; and
(iii) as of the period between the Plan termination date and the final
distribution of assets, the Employer does not maintain any other
defined contribution plan (other than an employee stock ownership
plan).
For Participants or Beneficiaries who cannot be located upon Plan
termination, and whose Nonforfeitable Account Balance exceeds $3,500, to
liquidate the Trust, the Committee will purchase a deferred annuity contract,
distribute the benefits to an individual retirement account, or transfer the
account to an ongoing qualified plan of a Related Employer. If the Committee
distributes the lost Participant's or Beneficiary's benefits to an individual
retirement account or purchases an annuity, and the Participant's or
Beneficiary's whereabouts remain unknown for the duration of the escheat period,
the benefits will ultimately escheat to the state under applicable state law.
* * * * * *
65
<PAGE>
ARTICLE THIRTEEN
----------------
ROLLOVERS, MERGERS, DIRECT TRANSFERS
------------------------------------
Section 13.1. Participant Rollover Contributions. Any Participant who has
------------ ----------------------------------
the Employer's written consent and who has filed with the Trustee the form
prescribed by the Committee may contribute cash or other property to the Trust
other than as a voluntary contribution if the contribution is a Rollover
Contribution which the Code permits an Employee to transfer either directly or
indirectly from one qualified plan to another qualified plan. Before accepting
a Rollover Contribution, the Trustee may require an Employee to furnish
satisfactory evidence that the proposed transfer is in fact a Rollover
Contribution which the Code permits an Employee to make to a qualified plan. A
Rollover Contribution is not an Annual Addition.
An eligible Employee, prior to satisfying the Plan's conditions, may make a
Rollover Contribution to the Trust to the same extent and in the same manner as
a Participant. If an Employee makes a Rollover Contribution to the Trust prior
to satisfying the Plan's eligibility conditions, the Committee and Trustee must
treat the Employee as a Participant for all purposes of the Plan except the
Employee is not a Participant for purposes of sharing in Employer Contributions
or Participant Forfeitures under the Plan until the Employee actually becomes a
Participant in the Plan. If the Employee has a separation from Service prior to
becoming a Participant, the Trustee will distribute the Rollover Account to the
Participant as if it were an Employer Contribution Account.
For any Rollover Contribution, the following requirements shall be met:
(a) The Committee shall maintain a Participant's Rollover Contribution in a
separate Rollover Account;
(b) The Trustee will invest the Rollover Contribution pursuant to the terms
of the Trust Agreement.
(c) A Participant's Rollover Contribution shall not be forfeitable nor
reduce in any way the obligations of the Employer under this Agreement.
EFFECTIVE JANUARY 1, 1990, notwithstanding the foregoing provisions, the
Plan will not accept Rollover Contributions of account balances or accrued
benefits from other employee benefit plans. Currently existing Rollover
Accounts, which were created as separate accounts pursuant to this Section 13.1
will continue to be maintained by the Plan.
Section 13.2. Merger and Direct Transfer. The Trustee possesses the
------------ --------------------------
specific authority to enter into merger agreements or direct transfer of assets
agreements with the trustees of other retirement plans described in Code Section
401(a), including an Elective Transfer defined in Section 13.3, and to accept
the direct transfer of plan assets or to transfer plan assets, as a party to any
agreement. Further, the Trustee may permit the transfer of plan assets to an
individual retirement account or an individual retirement annuity. However, the
Trustee, before any merger or direct transfer is consummated, shall be satisfied
that the holding of any transferred assets is permitted by the transferee
trusts. When the Trustee is so satisfied, the Trustee shall accept the direct
transfer of plan assets or shall cause to be transferred the assets directed to
be transferred and as appropriate shall direct the insurance company to transfer
any Contracts held by it to the new Trustee. The Trustee may accept a direct
transfer of plan assets on behalf of an Employee prior to the date
66
<PAGE>
the Employee satisfies the Plan's eligibility conditions. If the Trustee accepts
a direct transfer of plan assets, the Committee and Trustee must treat the
Employee as a Participant for all purposes of the Plan except that the Employee
is not a Participant for purposes of sharing in Employer Contributions or
Participant Forfeitures under the Plan until the Employee actually becomes a
Participant in the Plan.
The Trustee may not consent to, or be a party to, any merger or
consolidation with another plan or to a transfer of assets and liabilities to
another plan, unless, immediately after the merger, consolidation or transfer
the surviving plan provides each Participant a benefit equal to or greater than
the benefit each Participant would have received had the plan terminated
immediately before the merger, consolidation or transfer.
Section 13.3. Certain Rollovers, Mergers and Direct Transfers Prohibited.
------------ ----------------------------------------------------------
Notwithstanding any contrary provision in this Agreement, the Trustee, after
August 9, 1988, may not consent to or be a party to a rollover, merger,
consolidation or transfer of assets from a qualified plan which is required to
provide benefits in the form of a joint and survivor annuity under Code Section
417, except with respect to an Elective Transfer, or unless the transferred
benefits are in the form of paid-up individual annuity contracts guaranteeing
the payment of the transferred benefits under the transferor plan and in a
manner consistent with the Code and ERISA. The Trustee will hold, administer
and distribute the transferred assets as a part of the Trust Fund and the
Trustee must maintain a separate Employer Contribution Account for the benefit
of the Employee on whose behalf the Trustee accepted the transfer to reflect the
value of the transferred assets.
Unless a transfer of assets to this Plan is an Elective Transfer, the Plan
will preserve all Code Section 411(d)(6) protected benefits with respect to
those transferred assets, in the manner described in Section 10.2(c)(iii). A
transfer is an Elective Transfer if: (a) the transfer satisfies Section 13.2;
(b) the transfer is voluntary, under a fully informed election by the
Participant; (c) the Participant has an alternative that retains his or her Code
Section 411(d)(6) protected benefits, including an option to leave the benefit
in the transferor plan, if that plan is not terminating; (d) the transfer
satisfies the applicable spousal consent requirements of the Code; (e) the
transferor plan satisfies the joint and survivor notice requirements of the
Code, if the Participant's transferred benefit is subject to those requirements;
(f) the Participant has a right to immediate distribution from the transferor
plan, in lieu of the Elective Transfer; (g) the transferred benefit is at least
the greater of the single sum distribution provided by the transferor plan for
which the Participant is eligible or the present value of the Participant's
Accrued Benefit under the transferor plan payable at that plan's normal
retirement age; (h) the Participant has a one hundred percent (100%)
Nonforfeitable interest in the transferred benefit; and (i) the transfer
otherwise satisfies applicable Treasury regulations. An Elective Transfer may
occur between qualified plans of any type.
If the Plan receives a direct transfer, by merger or otherwise, of Elective
Contributions, or amounts treated as Elective Contributions, under a Plan with a
Code Section 401(k) arrangement, the distribution restrictions of Code Sections
401(k)(2) and 401(k)(10) continue to apply to those transferred Elective
Contributions.
* * * * * * *
67
<PAGE>
ARTICLE FOURTEEN
----------------
REPURCHASE OF EMPLOYER SECURITIES;
----------------------------------
NONTERMINABLE PROTECTIONS AND RIGHTS
------------------------------------
Section 14.1. Put Option. A share of Employer Securities shall be subject
------------ ----------
to a put option if it is not publicly traded, or if it is subject to a trading
limitation, when distributed. Conwell Corporation shall issue a put option to
each Former Participant receiving a distribution of Employer Securities from the
Plan required under the conditions described in the foregoing sentence, in
accordance with the terms set forth in this Section:
(a) Exercise of Option. The put option shall be exercisable only by a
------------------
Participant or Beneficiary; by a donee of the Participant or Beneficiary; or by
a person, including an estate or its distributees, to whom such Employer
Securities have passed because of the death of the Participant.
(b) Rights Under Put Option. The put option shall give to the eligible
-----------------------
holder the right to put such shares to Conwell Corporation. Under no
circumstances may it bind the Plan or Trust, but it may grant the Plan or Trust
an option to assume the rights and obligations of Conwell Corporation at the
time it is exercised; if it is known, at the time such stock is acquired, that
Federal or state law will be violated by Conwell Corporation's honoring such put
option, it must permit the stock subject thereto to be put, in a manner
consistent with such law, to a third party (e.g., an affiliate or a shareholder
of Conwell Corporation other than the Plan or the Trust) that has substantial
net worth at the time such debt is incurred and whose net worth is reasonably
expected to remain substantial.
(c) Period of Option.
----------------
(i) The put option must be exercisable at least during a sixty (60)
day period following the date of distribution from the Trust to the
Participant or Beneficiary and for an additional sixty (60) day period
during the Plan Year immediately following the Plan Year in which the
first option period ends;
(ii) In the case of Employer Securities that are publicly traded
without limitation when distributed by the Trust but ceases to be so
traded within the same Plan Year as the distribution, Conwell
Corporation shall notify each holder of such stock in writing on or
before the tenth day after such stock ceased to be so traded that for
at least a sixty (60) day period during such Plan Year , and for an
additional sixty (60) day period during the following Plan Year, such
stock is subject to a put option. Such notice must inform such
holders of the terms of such put option, which shall satisfy the
requirements of this Section;
(iii) The period during which it is exercisable shall not include any
time when a distributee is unable to exercise it because the party
bound by it is prohibited by from honoring it by applicable Federal or
state law;
(iv) The put option shall be exercisable by the holder notifying
Conwell Corporation in writing that it is being exercised; and
(v) The price at which it is exercisable shall be the Current Market
Value of the stock subject thereto, determined as of the most recent
Accounting Date; provided, however, that such value shall be
determined as of the date the put is honored if the holder of such put
is a "disqualified person" (as defined under Section 4975 of the
Code).
68
<PAGE>
(d) Option Rights Not Affected by Amendment. The rights provided to
---------------------------------------
Participants under this Article shall be non-terminable and no amendment to this
Plan shall affect these rights except such amendments to this Article as may be
required to assure the continuing qualification of the Plan under the Code.
Section 14.2. Lifetime Transfer/Right of First Refusal.
------------ ----------------------------------------
(a) Notice of Offer. If a Former Participant or Beneficiary, who has
----------------
received a distribution of Employer Securities, receives a bona fide offer for
the purchase of all or a portion of the shares, the person shall give written
notice of the offer to the Trustees and to the Employer. The notice shall set
forth the name of the proposed transferee, the number of shares to be
transferred, the price per share, and all other terms and conditions of the
proposed transfer.
(b) Right of First Refusal. On receipt of the notice regarding the
-----------------------
transfer, the Trustees shall have the exclusive right and option, exercisable at
any time during a period of fourteen (14) days from the date of the notice to
purchase the shares of the Employer covered by the offer in question at the same
price and on the same terms and conditions of the offer as set out in the
notice. If the Trustees decide to exercise the option, the Trustees shall give
written notice of this effect to the Former Participant or Beneficiary desiring
to sell, and the sale and purchase shall be closed within thirty (30) days
thereafter. If the Trustees do not elect to exercise the option to purchase any
or all of the offered shares, the Trustees shall, prior to the expiration of the
fourteen (14) day period stated above, notify the Employer of the Trustees'
election, and the Employer shall be entitled during the remainder of the
fourteen (14) day period to purchase that portion of the offered shares, not so
purchased by the Trustees, on the same terms and conditions as set out in the
offer.
(c) Requirements. Notwithstanding the foregoing, the right of first
-------------
refusal shall be subject to the following requirements:
(i) The Employer Securities subject to such right must be equity or
debt convertible into equity;
(ii) The right of first refusal may not be exercised at a time when
the Employer Securities are publicly traded;
(iii) The right of first refusal may be granted only to the Trustees
and the Employer;
(iv) The selling price and terms of purchase by either the Trustees or
Employer, pursuant to this right of first refusal, shall be no
less favorable to the seller than the greater of the selling
price and terms offered by a good faith purchaser or fair market
value;
(v) The right of first refusal shall lapse no later than fourteen
(14) days after notice of the third party offer is given.
Section 14.3. Payment of Purchase Price. If a Former Participant
------------ -------------------------
exercises a put option pursuant to Section 14.1 or if the Employer or the
Trustee, at the Committee's direction exercises an option to purchase a Former
Participant's Employer Securities pursuant to Section 14.2, the purchaser may
make payment by delivery of a note with payments commencing not more than thirty
(30) days after the exercise of the put option. The payment obligation will be
satisfied by the delivery of said note, which must meet the following
requirements:
(a) the note must bear a reasonable rate of interest determined at
Closing;
(b) the purchaser must provide adequate security for the note;
69
<PAGE>
(c) the note must provide for equal annual installments not to exceed five
(5) years, with interest payable with each installment, the first installment
due and payable thirty (30) days after the exercise of the Put Option;
(d) the note must provide for acceleration upon thirty (30) days' default
of the payment on interest or principal; and
(e) the note must grant to the maker the right to prepay the note in whole
or in part at any time or times without penalty; provided, however, the
purchaser must not have the right to make any prepayment during the calendar
year or fiscal year of the Participant (Beneficiary) in which Closing occurs.
Payment under a put option may not be restricted by the provisions of a
loan or any other arrangement, including the terms of the Company's articles of
incorporation, unless so required by applicable state law.
Section 14.4. Notice. A person has given notice under this Section when
------------ ------
the person deposits the notice in the United States mail, first class, postage
prepaid, addressed to the person entitled to the Notice at the address currently
listed for the person in the Committee records. Any person affected by this
Section has the obligation to inform the Committee of any change of address.
Section 14.5. Nonterminable Protections and Rights. Except as provided in
------------ ------------------------------------
this Article, no Employer Securities may be subject to a put, call, or other
option, or buy-sell or similar arrangement when held by and when distributed
from the Trust Fund, whether or not the Plan is then an employee stock ownership
plan. The protections and rights granted in this Article, in Sections 6.1, 7.1,
and 7.3 pursuant to Code Section 409(o) attributable to stock acquired after
December 31, 1986, and in Section 14.7 pursuant to Code Section 401(a)(28)(B),
are nonterminable and shall continue to exist under the terms of this Plan so
long as any Employer Security is held by the Trust Fund or by any Participant or
other person for whose benefit such protections and rights have been created.
Neither the repayment of an Exempt Loan described in Section 14.6 nor the
failure of the Plan to be an employee stock ownership plan, nor an amendment of
the Plan shall cause a termination of the protections and rights.
Section 14.6. Investment in Employer Securities.
------------ ---------------------------------
(a) Type of Employer Securities. The Trustee shall invest the Trust Fund
---------------------------
primarily in Qualifying Employer Securities to the extent practicable and may
invest one hundred percent (100%) of the Trust Fund in Employer Securities. The
Employer Securities may be Treasury Stock which has been purchased by the
Employer; stock which has been authorized, but never issued by the Employer;
Employer Securities traded on a public market; or Employer Securities owned by
shareholders of the Employer. Provided, however, that the Trustee shall invest
the proceeds of an Exempt Loan to acquire only Qualifying Employer Securities
described in Section 2.18.
(b) Purchase Price. For the purchase of Employer Securities, from the
--------------
Parent or any Employer or from a shareholder of the Parent or any Employer, the
Trustee shall not pay more than fair market value as determined by the current
market price of the Employer Securities, if there is a market, and if there is
not a market for the stock, then as determined by an independent appraisal after
taking into account the book value of the stock, the earnings of the Employer
and other factors normally taken into account in determining fair market value
of stock of a corporation. All valuations of Employer Securities which are not
readily tradable on an established securities market, with respect to activities
carried on by the Plan, must be made by an independent appraiser meeting
requirements similar to requirements of the Regulations prescribed under Code
Section 170(a)(1). For the purchase of Employer Securities from a Disqualified
Person, the value of the Employer Securities must be determined as of the date
of the transaction. For any other purchase, the value shall be based on a
current valuation. Notwithstanding the preceding provisions of this Section,
the
70
<PAGE>
Trustee may purchase Employer Securities at a price lower than that determined
in accordance with the preceding provisions of this Section 14.6(b) from any
source whatsoever. If a public market is made for the Employer Securities, the
purchase price shall be the average of the closing prices on the OTC for the
last three days for which such prices are quoted in the Wall Street Journal
preceding the purchase.
(c) Exempt Loan. From time to time, the Trustee may purchase Employer
-----------
Securities (i) which are paid for in whole or in part with the Trust's
promissory note or (ii) which are paid for in whole or in part with funds
borrowed from others, any such indebtedness being herein referred to as an
"Exempt Loan." The term Exempt Loan means a loan that satisfies the provisions
of Treasury Regulations Section 54.4975-7(b) and is described in this Section
14.6(c). The Trustee is expressly authorized to enter into an Exempt Loan
transaction. The following terms and conditions apply to any Exempt Loan.
(i) The Trustee shall use the proceeds of any Exempt Loan:
(A) to acquire Employer Securities described in Section
14.6(a)(i), (ii) or (iii);
(B) to repay the Exempt Loan; or
(C) to repay a prior Exempt Loan.
(ii) Any Exempt Loan shall provide that the creditor is without
recourse against the Plan and Trust. The Exempt Loan shall
further provide that no person entitled to payment under the
Exempt Loan shall have any rights to the assets of the Plan and
Trust other than:
(A) the collateral given under the Exempt Loan;
(B) contributions (other than contributions of Employer
Securities) made by the Employer to meet the repayment
requirements of the Exempt Loan; or
(C) earnings attributable to:
(1) the Employer Securities pledged as collateral for such
loan; or
(2) the Employer contributions described in the preceding
paragraph (B).
(iii) Any Exempt Loan shall provide that payments made on the loan by
the Plan shall not exceed for any Plan Year an amount equal to
the sum of Employer Contributions and Plan earnings for the
current Plan Year, plus the amounts in prior years, less the sum
of the note payment for prior years. Such Employer Contributions
and Plan earnings shall be accounted for separately in the Plan
accounting records until the Exempt Loan is repaid.
(iv) Collateral for the Exempt Loan shall be restricted to Employer
Securities acquired with the proceeds of the Exempt Loan or
Employer Securities acquired with a prior Exempt Loan which prior
Exempt Loan is repaid with the proceeds of the Exempt Loan.
(v) Any Exempt Loan shall provide that in the event of default, the
value of the Plan assets transferred in satisfaction of the
Exempt Loan must not exceed the amount of the default. If the
lender is a Disqualified Person, the Exempt Loan shall provide
71
<PAGE>
for the transfer of Plan assets upon default only upon and to the
extent of the failure of the Plan to meet the repayment schedule
of the loan.
(vi) Any Exempt Loan shall provide for a reasonable rate of interest,
taking into account all relevant factors.
(vii) Any Exempt Loan shall provide for a release from encumbrance of
shares of Employer Securities held as collateral as of each
Accounting Date equal to the number of encumbered shares of
Employer Securities held immediately before the release,
multiplied by a fraction. The numerator of the fraction is the
amount of principal and interest paid during the Plan Year. The
denominator of the fraction is the sum of the principal and
interest to be paid in all future years without taking into
account any possible extensions of the loan. If a variable rate
of interest is used, the calculation of the denominator shall be
based upon the rate applicable as of the end of the Plan Year in
question. Release of shares of more than one class shall be made
on a pro rata basis applying such fraction.
(viii) Any Exempt Loan shall call for a definitely determinable
period of repayment and may not be payable at the demand of any
person except in the case of default.
(ix) The Trustee shall comply with all requirements under Code Section
4975 and the applicable Treasury regulations to assure that the
loan qualifies as an Exempt Loan.
(x) Notwithstanding that this Plan ceases to be an employee stock
ownership plan, Employer Securities acquired with the proceeds of
an Exempt Loan will continue, after the Trustee repays the loan,
to be subject to the provisions of Treasury Regulations Sections
54.4975-7(b)(4), (10), (11) and (12) relating to put, call or
other options and to buy-sell or similar arrangements, except to
the extent those regulations are inconsistent with Code Section
409(h).
(d) Allocation. The Committee shall allocate all Employer Securities
----------
contributed or purchased for each Plan Year in accordance with the provisions of
Section 5.2. Additional shares or fractional shares of Employer Securities
shall be added to each Participant's Employer Securities Account as of the
Accounting Date.
(i) Provided, however, that the Committee shall direct the Trustee to
hold any shares of Employer Securities which are acquired with
the proceeds of an Exempt Loan in a suspense account. As of each
Accounting Date, a pro rata amount of such Employer Securities
shall be released from the suspense account in accordance with
Section 14.6(c)(vii), and non-monetary units representing
Participants' interests in assets withdrawn from the suspense
account shall be allocated in accordance with the immediately
preceding paragraph. The amount to be released shall equal the
total number of shares acquired from the proceeds of the Exempt
Loan, multiplied by a fraction. The numerator of the fraction is
the amount of principal and interest paid on the loan during the
Plan Year. The denominator of the fraction is the sum of the
numerator plus the principal and interest to be paid for all
future years, without taking into account any possible extensions
of the loan.
(ii) Any dividend income received during the year for the shares held
in suspense shall be applied by the Trustee in the subsequent
year towards the repayment of the Exempt Loan.
72
<PAGE>
(e) Voting Rights. EFFECTIVE JANUARY 1, 1987, a Participant is entitled to
-------------
direct the exercise of voting rights or other rights with respect to the whole
or fractional shares of stock allocated to said Participant's Account. Conwell
Corporation shall provide to each Participant materials pertaining to the
exercise of such rights containing all the information distributed to
shareholders as part of its distribution of such information to shareholders. A
Participant shall have the opportunity to exercise any such rights within the
same time period as shareholders of Conwell Corporation. In the exercise of
voting rights, votes representing fractional shares of stock and shares of stock
held in unallocated inventory shall be voted in the same ratio for the election
of directors and for and against each issue as the applicable vote directed by
Participants with respect to whole and fractional shares of stock. Likewise
where a participant(s) fails or refuses to exercise the right to direct the
exercise of voting rights, the same ratio shall be applicable to such whole and
fractional shares.
EFFECTIVE MARCH 27, 1987, the following provisions apply:
(i) Each Participant shall be entitled to direct the Trustee as to
the manner in which voting rights with respect to shares of
Employer Securities allocated to such Participant's Account shall
be exercised.
(ii) Each Participant shall have the right to direct the Trustee as to
the manner in which voting rights are to be exercised with
respect to a pro rata portion of the unallocated shares of
Employer Securities held by the Trust. Such pro rata portion
shall be determined by multiplying the total number of
unallocated shares of Employer Securities by a fraction, the
numerator of which is the number of shares over which the
Participant has voting rights in accordance with subsection (a)
and the denominator of which is the total number of such shares
allocated to the Accounts of all Participants.
(iii) In order to implement the voting rights granted in this
Section, the Parent or Plan Administrator shall furnish the
Trustee and the Participants with a notice or information
statement which complies with both the law and the Parent's
charter and bylaws applicable to security holders in general.
Allocated shares of Employer Securities with respect to which
timely voting instructions have not been received shall be voted
by the Trustee on each matter in the same proportion as shares
with respect to which such instructions have been received on
such matter, provided, however, EFFECTIVE JANUARY 1, 1989, they
shall be voted by the Trustee as though they were unallocated
shares.
(f) Tender Offer
------------
(i) Notwithstanding any other provisions of the Plan or Trust, the
provisions of this Section shall govern the tendering of shares
of Employer Securities held in this Plan. Upon commencement of a
tender offer for any securities held by the Trust that are
Employer Securities, the Plan Administrator shall notify each
Participant of such tender offer, utilize its best efforts to
timely distribute or cause to be distributed to the Participants
such information as is distributed to shareholders of the
Employer in connection with such tender offer, and shall provide
a means by which the Participant can instruct the Trustee whether
or not to tender the Employer Securities allocated to such
Participant's Accounts. The Plan Administrator shall provide the
Trustee with a copy of any materials provided to Participants.
Each Participant shall have the right to instruct the Trustee as
to the manner in which the Trustee is to respond to the tender
offer for any or all of the Employer Securities allocated to such
Participant's account. The Trustee shall respond to the tender
offer with
73
<PAGE>
respect to the Employer Securities as instructed by the
Participant. The Trustee shall not tender Employer Securities
allocated to a Participant's account for which the Trustee has
received no instructions from the Participant.
(ii) The Trustee shall tender that number of unallocated shares of
Employer Securities which is determined by multiplying the total
number of unallocated shares by a fraction of which the numerator
is the number of shares of Employer Securities allocated to
Participants' accounts for which the Trustee has received
instructions from Participants to tender (and such instructions
have not been withdrawn as of the date of determination) and the
denominator is the total number of shares of Employer Securities
allocated to Participants' accounts.
(iii) A Participant who has directed the Trustee to tender shares of
Employer Securities allocated to such Participant's Account may,
at any time, prior to the tender offer withdrawal date, instruct
the Trustee to withdraw, and the Trustee shall withdraw such
shares of Employer Securities from the tender offer prior to the
withdrawal deadline. Prior to such withdrawal deadline, if
unallocated shares of Employer Securities have already been
tendered, the Trustee shall redetermine the number of shares of
Employer Securities which would be tendered under subsection (ii)
if the date of such withdrawal were the date of determination,
and withdraw the number of unallocated shares necessary to reduce
the number of allocated shares tendered to the amount so
redetermined. A Participant shall not be limited as to the
number of instructions to tender or withdraw which he may give to
the Trustee.
(iv) The Trustee shall credit the proceeds, received in exchange for
the tendered Employer Securities allocated to the Account of each
Participant who instructed the Trustee to so tender, to that
Participant's account. The Trustee shall exercise its best
efforts to invest the proceeds from such tender, whether cash or
securities, in conformity with the requirements of Code Section
4975.
(g) Shareholder Agreements. The Trustee may enter into agreements with
----------------------
shareholders to purchase shares of Employer Securities under which the Trustee
is granted an option to purchase all or a portion of the shares of Employer
Securities owned by the shareholders on the death of the shareholder or
shareholders. To provide for the funding of the purchase of shares of Employer
Securities, the Trustee may apply for and pay premiums on contracts of life
insurance on the life of such shareholder for the benefit of the Trust Fund as a
whole, provided, however, that if this Plan invests in Leveraged Employer
Securities the Trustee may not enter into any agreement which would obligate the
Plan and Trust to purchase Employer Securities from a particular shareholder at
an indefinite time determined upon the happening of an event such as death of
the shareholder.
Section 14.7. Partial Diversification of Investment. A Qualified
------------ -------------------------------------
Participant may elect within the Diversification Election Interval during his
Qualified Election Period to direct the Trustee on the investment of: (a) not
more than twenty-five percent (25%) of the Qualified Participant's Account
Balance (excluding accumulated employee contributions) at the end of the Plan
Year, reduced by amounts previously diversified, during the first five (5) years
of his Qualified Election Period; and (b) not more than fifty percent (50%) of
the Qualified Participant's Account Balance (excluding accumulated employee
contributions) at the end of the Plan Year, reduced by amounts previously
diversified, during the sixth (6th) year of his Qualified Election Period.
74
<PAGE>
The Trustee shall complete diversification of a Qualified Participant's
investment in accordance with a Qualified Participant's Election no later than
ninety (90) days after the close of the Diversification Election Interval. The
Trustee shall satisfy this requirement: (a) by distributing to the Participant
an amount equal to the amount for which the Participant elected diversification;
or (b) by substituting for the amount of the Employer Securities for which the
Participant elected diversification an equivalent amount of other assets,
according to the Participant's investment direction based on at least three (3)
investment options consistent with applicable Treasury regulations. All
valuations of Employer Securities contemplated herein must be made by an
independent appraiser.
For purposes of this Section, the following definitions apply:
(a) "Qualified Participant" means any Employee who has completed at least
ten (10) years of participation under the Plan and has attained age fifty-five
(55) years.
(b) "Qualified Election Period" means the six (6) Plan Year Period
beginning with the Plan Year in which the Participant becomes a Qualified
Participant.
(c) "Diversification Election Interval" means the span of ninety (90) days
after the close of each Plan Year within a Qualified Participant's Qualified
Election Period.
* * * * * * *
75
<PAGE>
ARTICLE FIFTEEN
---------------
INTERPRETATIVE PROVISIONS
-------------------------
Section 15.1. Headings. The headings in this Agreement are for
------------ --------
convenience only and shall not be considered in construing this Agreement.
Section 15.2. Context. In this Agreement, wherever the context of the
------------ -------
Plan dictates, words used in the masculine may be construed in the feminine, the
plural includes the singular and the singular includes the plural.
Section 15.3. Employment Not Guaranteed. Nothing contained in this
------------ -------------------------
Agreement, or regarding the establishment of the Plan or Trust, or any
modification or amendment to the Agreement, Plan or Trust, or in the creation of
any Account, or the payment of any benefit, shall be construed as giving any
Employee, Participant or Beneficiary whomsoever any right to continue in the
Service of the Employer, any legal or equitable right against the Committee,
against the Employer, its stockholders, officers or directors or against the
Trustee, except as expressly provided by the Agreement, the Plan, the Trust,
ERISA or by separate agreement. Employment of all persons by the Employer shall
remain subject to termination by the Employer to the same extent as if this
Agreement had never been executed.
Section 15.4. Governing Law. This Agreement and each of its provisions
------------ -------------
shall be construed and their validity determined by the laws of the State of
Texas and applicable Federal law to the extent Federal statute supersedes Texas
law.
Section 15.5. Securities Laws. Conwell Corporation reserves the right to
------------ ---------------
withhold authorization of any distribution of an Account or to restrict the
distribution or transfer of any shares of Employer Securities from an Account to
the extent necessary to satisfy the requirements of any federal or state law or
regulations applicable to Employer securities.
Section 15.6. Parties Bound. This Agreement shall be binding on all
------------ -------------
persons entitled to benefits under the Plan, their respective heirs and legal
representatives, on the Employer, its successors and assigns, and on the
Trustee, the Committee and their successors.
* * * * * * *
76
<PAGE>
IN WITNESS WHEREOF, CONWELL CORPORATION has caused this Plan to be executed
by its duly appointed officers on this _____________________ day of December,
1994.
CONWELL CORPORATION
By:
-------------------------------------
President
ATTEST:
- --------------------------
Secretary
77
<PAGE>
EXHIBIT 10.11
AMENDMENT NO.1
TO
FROZEN FOOD EXPRESS INDUSTRIES, INC.
1992 INCENTIVE AND NONSTATUTORY OPTION PLAN
1. Paragraph 2.1 of the Frozen Food Express Industries, Inc., 1992
Incentive and Nonstatutory Option Plan (the "Plan") is hereby amended by
replacing the phrase "200,000 shares" in Paragraph 2.1 of the Plan with the
phrase "1,055,555 shares ".
2. The Plan is hereby amended by adding the following language
immediately after Paragraph 9.20 thereof:
9.21 Limitation on Grants. Notwithstanding any other provision contained
---------------------
in the Plan, no employee of the Corporation or its subsidiaries may
receive in any one year options under the Plan to acquire in excess of
100,000 (the "Annual Limit") shares of Stock; provided, however, that
the Annual Limit shall be increased or decreased form time to time in
such manner and at such time as the maximum number of shares of Stock
available for the Plan (as provided in Paragraph 2.1 of the Plan) are
increased or decreased.
This amendment No. 1 shall become effective as of February 4, 1994, if
the Plan, as amended hereby, is approved by the affirmative vote of the holders
of the majority of the shares of Common Stock of Frozen Food Express Industries,
Inc., at its April 28, 1994, meeting of shareholders.
<PAGE>
EXHIBIT 13.1
THIS FORM 10-K INCORPORATES CERTAIN SECTIONS OF THE REGISTRANT'S 1994
ANNUAL REPORT TO SHAREHOLDERS. ACCORDINGLY, ONLY THE PORTIONS OF REGISTRANT'S
1994 ANNUAL REPORT TO SHAREHOLDERS WHICH ARE INCORPORATED BY REFERENCE INTO THIS
FORM 10-K ARE FILED AS THIS EXHIBIT 13.1.
<PAGE>
<TABLE>
<CAPTION>
Eleven-Year Statistics and Financial Data 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------
(in thousands, except ratio, rates, equipment and per-share amounts)
<S> <C> <C> <C> <C>
Summary of Operations
Revenue 274,620 227,389 194,888 176,995
Operating expenses 255,484 211,999 183,179 167,033
Net income 11,874 9,441 7,144 5,202
Net margin 4.3% 4.2% 3.7% 2.9%
After-tax return on equity 20.4% 20.1% 18.6% 16.0%
Net income per common share, fully diluted .72 .58 .45 .34
Financial Data
Working capital 25,623 20,823 16,949 15,612
Current ratio 1.8 1.8 1.8 2.1
Cash provided by operations 20,025 17,482 16,395 14,968
Capital expenditures, net 8,160 18,453 18,375 (2,423)
Long-term debt 9,000 17,000 12,000 5,000
Stockholders' equity 64,288 51,983 41,799 35,059
Long-term debt-to-equity ratio .1 .3 .3 .1
Common Stock
Average shares outstanding (fully diluted) 16,451 16,276 15,910 15,249
Book value per share 4.03 3.31 2.72 2.42
Market value per share
High 15 15 11 1/2 4 1/8
Low 11 7 1/4 3 7/8 1 7/8
Cash dividends per share .096 .096 .079 .06
Revenue Table
Full truckload 163,988 129,549 109,178 103,582
Less-than-truckload 88,328 80,965 72,864 65,068
TL/LTL % revenue contribution 60/32 57/36 56/37 59/37
Equipment in Service at Year End
Tractors
Company operated 1,099 945 800 737
Provided by owner-operators 505 457 432 421
-------- ------ ------ ------
Total 1,604 1,402 1,232 1,158
Trailers
Company provided 2,406 2,027 1,609 1,475
Provided by owner-operators 21 32 24 28
-------- ------ ------ ------
Total 2,427 2,059 1,633 1,503
Full-Truckload
Revenue 163,988 129,549 109,178 103,582
Loaded miles 121,106 97,753 83,247 80,663
Shipments 128.1 106.6 92.9 85.5
Revenue per shipment 1,280 1,215 1,175 1,211
Loaded miles per load 945 917 896 943
Revenue per loaded mile 1.35 1.33 1.31 1.28
Number of loads per business day 508 423 367 339
Revenue per business day 651 514 431 411
Less-than-Truckload
Revenue 88,328 80,965 72,864 65,068
Hundredweight 8,670 8,116 6,848 6,211
Shipments 305.2 292.0 253.3 231.3
Revenue per hundredweight 10.19 9.98 10.64 10.48
Revenue per shipment 289 277 288 281
Revenue per business day 351 321 288 258
Pounds per shipment 2,841 2,779 2,704 2,685
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Eleven Year Statistics and Financial Data 1990 1989 1988 1987
- --------------------------------------------------------------------------------------------
(in thousands, except ratio, rates, equipment and per-share amounts)
<S> <C> <C> <C> <C>
Summary of Operations
Revenue 160,171 122,248 102,136 84,585
Operating expenses 152,370 115,769 96,558 81,278
Net income 3,618 3,779 3,660 2,373
Net margin 2.3% 3.1% 3.6% 2.8%
After-tax return on equity 12.6% 14.6% 16.5% 8.5%
Net income per common share, fully diluted .25 .26 .26 .18
Financial Data
Working capital 13,085 9,567 5,096 4,862
Current ratio 1.9 2.0 1.6 1.9
Cash provided by operations 9,022 9,174 9,191 7,320
Capital expenditures, net 16,285 11,619 15,060 3,454
Long-term debt 19,200 12,500 7,500 2,300
Stockholders' equity 30,005 27,255 24,348 20,121
Long-term debt-to-equity ratio .6 .5 .3 .1
Common Stock
Average shares outstanding (fully diluted) 14,519 14,534 14,095 13,200
Book value per share 2.11 1.96 1.78 1.52
Market value per share
High 2 3/4 2 7/8 2 3/8 1 5/8
Low 1 7/8 2 1/8 1 1
Cash dividends per share .06 .50 .038 .03
Revenue Table
Full truckload 90,043 60,313 42,947 26,226
Less-than-truckload 64,589 60,114 57,863 57,004
TL/LTL % revenue contribution 56/40 49/49 42/57 31/67
Equipment in Service at Year End
Tractors
Company operated 739 508 256 98
Provided by owner-operators 386 376 496 421
------ ------- ------ ------
Total 1,125 884 752 519
Trailers
Company provided 1,419 1,204 876 698
Provided by owner-operators 38 41 49 49
------ ------- ------ ------
Total 1,457 1,245 925 747
Full-Truckload
Revenue 90,043 60,313 42,947 26,226
Loaded miles 69,800 46,975 33,762 18,872
Shipments 75.8 51.9 38.1 26.7
Revenue per shipment 1,188 1,162 1,127 982
Loaded miles per load 921 905 886 706
Revenue per loaded mile 1.29 1.28 1.27 1.39
Number of loads per business day 301 206 151 106
Revenue per business day 357 239 170 104
Less-than-Truckload
Revenue 64,589 60,114 57,863 57,004
Hundredweight 6,314 6,051 5,816 5,983
Shipments 241.7 253.4 256.7 268.6
Revenue per hundredweight 10.23 9.93 9.95 9.53
Revenue per shipment 267 237 225 212
Revenue per business day 256 239 230 226
Pounds per shipment 2,612 2,388 2,266 2,227
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Eleven-Year Statistics and Financial Data 1986 1985 1984
- ------------------------------------------------------------------------------
(in thousands, except ratio, rates, equipment and per-share amounts)
<S> <C> <C> <C>
Summary of Operations
Revenue 91,195 86,916 64,013
Operating expenses 89,618 87,304 63,049
Net income 1,055 1,157 767
Net margin 1.2% 1.3% 1.2%
After-tax return on equity 2.6% 3.1% 3.3%
Net income per common share, fully diluted .08 .09 .06
Financial Data
Working capital 5,133 6,046 2,376
Current ratio 1.8 1.7 1.4
Cash provided by operations 7,398 228 6,743
Capital expenditures, net 2,332 7,268 5,954
Long-term debt 3,900 10,630 1,000
Stockholders' equity 19,105 18,796 17,845
Long-term debt-to-equity ratio .2 .6 .1
Common Stock
Average shares outstanding (fully diluted) 13,220 13,140 12,951
Book value per share 1.44 1.42 1.38
Market value per share
High 1 3/8 1 3/8 1 1/8
Low 1 7/8 3/4
Cash dividends per share .006 .026 .021
Revenue Table
Full truckload 30,157 29,801 18,687
Less-than-truckload 59,888 56,286 44,379
TL/LTL % revenue contribution 33/66 34/65 29/69
Equipment in Service at Year End
Tractors
Company operated 75 110 63
Provided by owner-operators 541 590 284
------ ----- -----
Total 616 700 347
Trailers
Company provided 720 855 467
Provided by owner-operators 74 92 33
------ ----- -----
794 947 500
Full-Truckload
Revenue 30,157 29,801 18,687
Loaded miles 21,741 20,837 12,707
Shipments 29.8 29.0 20.2
Revenue per shipment 1,010 1,028 925
Loaded miles per load 728 719 629
Revenue per loaded mile 1.39 1.43 1.47
Number of loads per business day 118 115 80
Revenue per business day 220 118 74
Less-than-Truckload
Revenue 59,888 56,286 44,379
Hundredweight 6,417 5,858 4,451
Shipments 294.8 299.0 245.0
Revenue per hundredweight 9.33 9.61 9.97
Revenue per shipment 203 188 181
Revenue per business day 238 223 176
Pounds per shipment 2,177 1,959 1,817
</TABLE>
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
RESULTS OF OPERATIONS
During 1994, revenue increased by 20.8% to $274,620,000. For 1993,
revenue totaled $227,389,000 and was 16.7% above 1992 revenue of $194,888,000.
Full-truckload revenue rose during 1994 and 1993 by 26.6% and 18.7%,
respectively, while less-than-truckload (LTL) revenue increased by 9.1% during
1994 and 11% during 1993.
Factors contributing to the 1994 increase in LTL revenue include an
increase of 4.5% in the number of shipments transported and a 2.2% increase in
the average weight per shipment. The increased level of LTL activity for 1993
resulted in part from the purchase of the LTL assets of a small regional
trucking company during the fourth quarter of 1992. The purchased operation
specializes in shorter haul LTL and distribution services. Rate increases
during 1993 and 1994 also contributed to the increased level of LTL revenue
during both years.
Expansion of the company-operated, full-truckload fleet and the results
of efforts to improve the efficiency of this fleet were the primary factors
contributing to increased full-truckload revenue during 1994 and 1993. During
1994, the size of the company-operated, full-truckload fleet rose by nearly 160
tractors, average miles per full-truckload shipment increased by 3% and revenue
per loaded mile increased by 1.5%. During 1993, the size of the full-truckload
fleet rose by 150 tractors from yearend 1992 levels while revenue per loaded
mile increased by 1.5% and average miles per full-truckload shipment increased
by 2.3%. The number of full-truckload shipments transported during 1994 and
1993 increased by approximately 20% and 15%, respectively, over previous year
levels as a result of improved operating efficiencies, improved equipment
utilization and the larger fleet. During 1994, 1993 and 1992, company-operated,
full-truckload equipment accounted for 78%, 77%, and 74%, respectively, of total
full-truckload revenue.
The company expects to make net additions of about 100 tractors to its
company-operated, full-truckload fleet during 1995. Any further expansion of the
fleet will depend upon developments in the nation's economy and demand for the
company's services. Continued emphasis will be placed on improving the
operating efficiency and increasing the utilization of this fleet through
enhanced driver training and retention, seeking longer haul and more specialized
business, greater use of railroad based "intermodal" transportation service for
long-haul business and reducing the percentage of empty, non-revenue producing
miles.
5
<PAGE>
MANAGEMENT'S DISCUSSION
The company is continuing to expand its transportation and logistics
services which involve railroad based intermodal long-haul transportation. In
providing such service, the company contracts with railroads to transport loaded
full-truckload trailers on railroad flat cars. Railroads are paid fees for this
service and the company uses its tractors to transport the trailers to and from
railroad pick-up and drop-off points. During 1993 and 1994, less than 5% of the
company's domestic full-truckload shipments were transported in this manner.
During 1993 and 1994, the company expanded transportation services for
customers shipping products to and from Mexico and Canada. Canadian operations
are conducted with equipment operating directly under authority of the company.
The company does not presently operate its tractors in Mexico. To provide
service in Mexico, the company has arrangements with a railroad and Mexico-based
motor carriers. Pursuant to these arrangements, the company interchanges its
trailers with the Mexico freight service provider for movement within Mexico.
During 1994, approximately 6% of freight revenue was derived from international
activities, for which the company collects primarily United States currency,
principally from United States-based customers.
In providing certain international and intermodal transportation
services, the company is able to transport more loaded trailers (which require
relatively lower capital investment) while engaging fewer tractors (which
involve relatively higher capital investment). It is probable that the
company's trailer fleet will continue to expand more rapidly than its tractor
fleet as these activities continue to grow. Also contributing to the increase
in the trailer-to-tractor ratio from 1.3:1 at January 1, 1992, to 1.5:1 at
yearend 1994 were continued expansion of dedicated fleet and short-haul full-
truckload services and, in general, the more rapid expansion of the company's
full-truckload services in relation to its LTL service. Full-truckload services
generally involve the utilization of more trailers to enable tractors to remain
in service while idle trailers are being loaded and unloaded.
The company is continuing to aggressively seek to increase the number of
tractors provided by owner-operators in its full-truckload operations. During
1994 and 1993, the number of full-truckload tractors provided by owner-operators
increased by about 25% and 7%, respectively.
The company continues to experience cyclical shortages and surpluses of
qualified employee-drivers for company-operated tractors and employee-driver
turnover has been high. This situation, which has been typical in the industry,
tends to increase costs associated with employee-driver training and recruiting.
The company continues to experience cycles in which customer demands for
services exceed the company's ability to provide the services. Significant
efforts are devoted to recruiting and retaining qualified employee-drivers and
to improving their job satisfaction. The company offers monetary incentives to
employee-drivers meeting certain targeted fuel economy, safety, and tenure
goals. In the future, certain
6
<PAGE>
MANAGEMENT'S DISCUSSION
aspects of employee-drivers' compensation will continue to be tied to
improvements in productivity and quality of service.
Income from operations increased by 24.3% during 1994 to $19,136,000 as
compared to $15,390,000 in 1993 and $11,709,000 in 1992. The net margin (net
income as a percent of total revenue) for 1994, 1993 and 1992 was 4.3%, 4.2% and
3.7%, respectively. Changes in the percentage of total revenue generated from
full-truckload versus LTL shipments, as well as changes in the mix of company-
operated versus owner-operated equipment and in the mix of leased versus owned
equipment, contributed to variations in related operating and interest expenses
during the three-year period.
The percents of freight revenue absorbed by employee road driver payroll
costs have continued to increase as the company-operated, full-truckload fleet
has expanded more rapidly than has the independent contractor fleet. Partially
offsetting this increase has been a gradual decline in the percent of freight
revenue absorbed by payroll costs of non-driver employees. In addition, costs
associated with fringe benefits, such as work-related injuries and non-driver
incentive compensation declined during 1994 as a percent of freight revenue. As
a result of these changes, salaries, wages and related expenses, as a percentage
of freight revenue, for 1994, 1993 and 1992 were 24.9%, 25.2% and 24.4%,
respectively.
As the percentage of total freight handled by company-operated equipment
increased, the percent of freight revenue absorbed by purchased transportation
(primarily payments to owner-operators) declined from 24.8% in 1992, to 22.5% in
1993 and to 21.1% in 1994.
The increased activity of company-operated, full-truckload equipment
contributed to increased expenditures for supplies and expenses, particularly
for fuel and driver road expenses. The effect of fuel price changes on the
company's operating expenses has been magnified as a result of the higher
percentage of total freight transported by company-operated equipment. Average
per-gallon fuel costs (including fuel taxes) paid by the company decreased by
about 1% during 1994 despite an increase of 4.3 cents per gallon in federal
taxes on diesel fuel and the federally-mandated use of more costly low-sulfur
fuel effective during the 1993 fourth quarter. Each year, several states have
also increased their per-gallon fuel taxes. The company has been able to
mitigate the effect of increases in fuel taxes and the higher cost of low-sulfur
fuel primarily through the utilization of more fuel efficient tractors, by
aggressively managing its fuel purchasing and by obtaining freight rate
increases from its customers. Fuel price fluctuations result from many external
market factors, most of which cannot be influenced or forecasted by the company.
Recovery of future fuel tax or price increases, if any, will continue to depend
upon competitive market conditions.
The total of revenue equipment rent and depreciation expense decreased
from 10.3% of freight revenue in 1992 to 9.8% for 1993. During 1994, these
costs totaled
7
<PAGE>
MANAGEMENT'S DISCUSSION
10.2% of freight revenue. Rising longer-term interest rates, the cost of which
is imbedded in equipment rental, contributed to the 1994 increase in revenue
equipment rental expense.
Insurance and claims expense, as a percentage of freight revenue, was
5.2% in 1994, 4.8% in 1993, and 4.3% in 1992. Premiums paid to insurance
companies do not significantly contribute to overall insurance costs, partially
because the company carries significant deductibles under its policies of
liability insurance. Claims against the company for over-the-road accidents are
the primary component of insurance and claims expense and these expenses tend to
vary in relation to miles traveled. In recent years, full-truckload operations,
from which per-mile revenue is relatively low, have been expanding more rapidly
than LTL operations, from which per-mile revenue is relatively high.
Accordingly, while insurance expense on a per-mile basis did not change
significantly between 1993 and 1994, the increased percentage of full-truckload
miles and revenue during 1994 resulted in the increase in insurance and claims
expense as a percentage of combined full-truckload and LTL freight revenue.
Insurance and claims expense can vary significantly from year to year.
Estimated reserves are established for potential claims based on the information
available at the time of an incident. As additional information regarding the
incident becomes available, adjustments are made to previously recorded amounts.
The aggregate amount of open claims, some of which involve litigation, is
significant. In the opinion of management, however, these claims can be resolved
without a material adverse effect on the company's financial position or its
results of operations.
During 1993, the company's motor carrier subsidiaries were granted
authority by the Interstate Commerce Commission to become self-insured for the
risks of public liability and cargo loss and damage. Deductibles under
insurance policies were not changed in connection with this authorization. The
company expects that outlays associated with claims settlement and expenses
related to claims management will be reduced under the self-insurance program.
In order to improve its safety performance, reduce accidents and lower
insurance and claims expense, the company has strengthened restrictions on the
manner in which equipment may be operated on its behalf. Driver selection,
safety training, performance evaluations and rewards for accident-free driving
will continue to be major areas of concentration.
Gains from the sale of equipment totaled $136,000 in 1992, rose to
$629,000 in 1993 and fell to $405,000 in 1994. The company generally replaces
tractors and trailers after three and seven years of service, respectively. The
amount of gains from the sale of equipment depend primarily upon market
conditions for used equipment.
8
<PAGE>
MANAGEMENT'S DISCUSSION
The company also has operations engaged in the sale and service of
refrigeration equipment. Non-freight revenue associated with these operations
totaled $22,304,000 during 1994, $16,875,000 in 1993 and $12,846,000 in 1992.
These operations posted a minor operating loss during 1992 and generated a small
operating profit in 1993. An operating profit of $765,000 was posted for 1994.
Significant costs were incurred throughout 1992 in connection with the expansion
of these operations and the development of new markets. Programs designed to
improve gross margins and to reduce overhead expenses were then implemented and
certain assets associated with unprofitable divisions were sold. The results of
these programs, together with increased non-freight activity, combined to
improve operating results in 1994.
For 1994, 1993, and 1992, interest and other expense was $1,372,000,
$963,000, and $484,000, respectively. Relatively high interest expense during
1993 resulted primarily from borrowings to finance increased levels of working
capital and the company's expansion of its full-truckload operations. Rising
interest rates, which were only partially offset by lower average borrowing
under the company's line of credit, and net expenses associated with the
implementation of a company-owned life insurance program during 1994 were the
primary reasons for the increased 1994 expense.
Pre-tax income rose by 23.1% and 28.5% in 1994 and 1993, respectively.
Net income increased by 25.8% in 1994 and 32.1% in 1993. The provision for
income tax, as a percent of income before income tax for 1994, 1993, and 1992
was 33.2%, 34.6%, and 36.4%, respectively. The variances from the company's
statutory rate of 34.9% for 1994, 34.3% for 1993 and 34.0% for 1992 were
principally due to decreased expenses which are only partially deductible for
federal income tax purposes (such as road driver meals) and increased non-
taxable income associated with the newly-adopted company-owned life insurance
program.
LIQUIDITY
The company continues to maintain a strong financial position. Following
is a summary of certain liquidity measures (dollars in thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Cash provided by operations $20,025 $17,482 $16,395
Working capital $25,623 $20,823 $16,949
Current ratio 1.8 1.8 1.8
</TABLE>
The increase in cash provided by operations is attributable primarily to
increased revenue and net income, as well as refinements in the company's cash
management systems.
9
<PAGE>
MANAGEMENT'S DISCUSSION
CAPITAL RESOURCES
Expenditures for property and equipment totaled $13.6 million during 1994,
$23.6 million in 1993, and $19.1 million in 1992. In addition, the company
financed, through operating leases, the acquisition of revenue equipment valued
at $30 million, $32 million, and $3 million, respectively, during these years.
During recent years, the company has created and significantly expanded its
fleet of company-operated tractors and trailers, and acquired the businesses and
certain assets of other motor carriers in connection with the expansion of its
activities.
In connection with the need for funds to finance the purchase of assets
from acquired business and the continuing expansion of the company-operated,
full-truckload fleet, the company has in place a $50 million line of credit.
Interest rates under the credit agreement are at prime or below. No commitment
fee is charged on the unused portion of the credit line. This line of credit is
also used to support letters of credit issued in connection with the company's
insurance programs. The amount available for borrowing is reduced by such
letters of credit which totaled approximately $9 million at December 31, 1994.
At the end of 1994, approximately $32 million was available under the credit
line.
The company plans to replace about 250 of its tractors during 1995.
Further, the company expects to add approximately 100 new tractors and
approximately 150 new trailers to its fleet during the year. These expenditures
will be financed by internally generated funds, borrowings under the credit
agreement, and leasing. Management believes these sources of capital will be
sufficient to finance the company's operations and capital expenditures during
1995.
At December 31, 1994, 1993 and 1992, the ratios of long-term debt to
total capitalization were 12.3%, 24.6%, and 22.3%, respectively.
10
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
- ------------------------------------------------------
Frozen Food Express Industries, Inc., and Subsidiaries
Years ended December 31, 1994, 1993 and 1992
(in thousands, except per-share amounts)
1994 1993 1992
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Freight revenue $252,316 $210,514 $182,042
Non-freight revenue 22,304 16,875 12,846
-------- -------- --------
274,620 227,389 194,888
-------- -------- --------
Costs and expenses
Freight operating expenses
Salaries, wages and related expenses 62,900 53,042 44,385
Purchased transportation 53,340 47,400 45,193
Supplies and expenses 68,430 55,471 45,678
Revenue equipment rent 16,027 10,757 11,280
Communications and utilities 3,285 2,753 2,835
Insurance and claims 13,066 10,020 7,910
Depreciation 9,752 9,941 7,554
Operating taxes and licenses 4,988 4,069 3,581
Gain on sale of equipment (405) (629) (136)
Miscellaneous expense 2,562 2,394 2,037
-------- -------- --------
233,945 195,218 170,317
Non-freight costs and operating expenses 21,539 16,781 12,862
-------- -------- --------
255,484 211,999 183,179
-------- -------- --------
Income from operations 19,136 15,390 11,709
Interest and other expense 1,372 963 484
-------- -------- --------
Income before income tax 17,764 14,427 11,225
Provision for income tax 5,890 4,986 4,081
-------- -------- --------
Net income $11,874 $9,441 $7,144
-------- -------- --------
Net income per share of common stock
Primary and fully diluted $ .72 $ .58 $ .45
- ---------------------------------------------------------------------------
See accompanying notes.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Frozen Food Express Industries, Inc., and Subsidiaries
December 31, 1994 and 1993
(in thousands)
1994 1993
- ----------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents $ 4,381 $ 3,834
Accounts receivable, net 36,643 31,611
Inventories 8,006 6,313
Tires on equipment in use 4,334 4,002
Other current assets 3,692 2,302
--------- --------
Total current assets 57,056 48,062
--------- --------
Property and equipment, at cost
Land 2,389 2,272
Buildings and improvements 12,132 10,856
Revenue equipment 64,401 64,738
Service Equipment 8,926 7,630
Computer, software and related equipment 8,992 6,964
--------- --------
96,840 92,460
Less accumulated depreciation 42,679 35,414
--------- --------
Net property and equipment 54,161 57,046
--------- --------
Other assets 5,619 3,554
--------- --------
$116,836 $108,662
========= ========
- ----------------------------------------------------------------------------
See accompanying notes.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Frozen Food Express Industries, Inc., and Subsidiaries
December 31, 1994 and 1993
(in thousands)
1994 1993
- --------------------------------------------------------------------------
Liabilities and Stockholders' Equity
<S><C> <C> <C>
Current liabilities
Trade accounts payable $ 12,580 $ 11,549
Payable to owner-operators 1,448 1,640
Accrued claims liabilities 7,712 4,081
Accrued payroll 5,006 4,263
Deferred federal income tax 163 888
Federal income tax payable -- 1,809
Other accrued liabilities 4,524 3,009
-------- --------
Total current liabilities 31,433 27,239
Long-term debt 9,000 17,000
Deferred federal income tax 4,512 3,554
Accrued claims and other liabilities 7,603 8,886
-------- --------
Total liabilities and deferred credits 52,548 56,679
-------- --------
Commitments and contingencies -- --
Stockholders' equity
Common stock, 17,281 shares issued in 1994
and 13,825 in 1993 25,921 20,737
Additional paid-in capital -- 259
Retained earnings 43,513 36,164
-------- --------
69,434 57,160
Less - Treasury stock, at cost 4,538 3,962
Receivable from ESOP 608 1,215
-------- --------
Total stockholders' equity 64,288 51,983
-------- --------
$116,836 $108,662
======== ========
- --------------------------------------------------------------------------
See accompanying notes.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Frozen Food Express Industries, Inc., and Subsidiaries
Years ended December 31, 1994, 1993 and 1992
(in thousands)
1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 11,874 $ 9,441 $ 7,144
Non-cash items involved in net income
Depreciation and amortization 10,224 10,484 8,189
Provisions for losses on accounts receivable 1,136 1,303 661
Deferred federal income tax 233 (814) (339)
Gain on sale of property and equipment (405) (629) (136)
Non-cash contribution to employee benefit plans 1,609 2,202 1,572
Change in assets and liabilities,
net of effects from acquired businesses
Accounts receivable (6,420) (9,413) (5,282)
Inventories (1,693) (2,191) (1,138)
Tires on equipment in use (332) (892) (1,083)
Other current assets (1,390) 365 (59)
Trade accounts payable 2,584 1,632 1,526
Payable to owner-operators (192) 540 196
Accrued claims and other liabilities 2,348 2,170 3,355
Accrued payroll 743 1,312 439
Federal income tax payable (1,809) 1,655 697
Other accrued liabilities 1,515 317 704
Other -- -- (51)
------ ------ ------
Net cash provided by operating activities 20,025 17,482 16,395
------ ------ ------
Cash flows from investing activities
Payment for businesses acquired (937) (2,636) (562)
Expenditures for property and equipment (13,615) (23,562) (19,115)
Proceeds from sale of property and equipment 5,455 6,776 740
Advances to ESOP -- -- (3,168)
Other (1,223) (1,523) 217
------ ------ ------
Net cash used in investing activities (10,320) (20,945) (21,888)
------ ------ ------
Cash flows from financing activities
Borrowings under revolving credit agreement 25,000 22,600 12,800
Payments against revolving credit agreement (33,000) (17,600) (5,800)
Dividends paid (1,520) (1,494) (1,170)
Proceeds from sale of treasury stock 1,012 927 941
Purchases of treasury stock (650) (813) (831)
------ ------ ------
Net cash provided by (used in) financing activities (9,158) 3,620 5,940
------ ------ ------
Net increase in cash and cash equivalents 547 157 447
Cash and cash equivalents at beginning of year 3,834 3,677 3,230
------ ------ ------
Cash and cash equivalents at end of year $ 4,381 $ 3,834 $ 3,677
======= ======= =======
- -----------------------------------------------------------------------------------------
See accompanying notes.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
Frozen Food Express Industries, Inc., and Subsidiaries
Years ended December 31, 1994, 1993 and 1992
(in thousands)
Shares of Par Value Additional Shares of Cost of Total
Common of Common Paid-in Treasury Treasury Retained ESOP Stockholders'
Stock Issued Stock Capital Stock Stock Earnings Receivable Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
At December 31, 1991 7,777 $11,665 -- 1,255 $2,714 $28,202 $2,094 $35,059
Net income -- -- -- -- -- 7,144 -- 7,144
Cash dividends paid
($.079 per share) -- -- -- -- -- (1,170) -- (1,170)
Treasury stock purchased -- -- -- 165 1,918 -- -- (1,918)
Treasury stock reissued -- -- 1,053 (114) (260) -- -- 1,313
Exercise of stock options -- -- 500 (455) (1,064) -- -- 1,564
4-for-3 stock split in the form
of a 33% stock dividend 2,592 3,888 (1,174) 313 -- (2,714) -- --
Purchase shares on open market -- -- -- -- -- -- 1,075 (1,075)
Contributions/payments -- -- -- -- -- -- (882) 882
------- ------- ------- ------- ------- ------- ------- -------
At December 31, 1992 10,369 15,553 379 1,164 3,308 31,462 2,287 41,799
Net income -- -- -- -- -- 9,441 -- 9,441
Cash dividends paid
($.096 per share) -- -- -- -- -- (1,494) -- (1,494)
Treasury stock purchased -- -- (3) 101 1,708 -- -- (1,711)
Treasury stock reissued -- -- 1,522 (119) (396) -- -- 1,918
Exercise of stock options -- -- 300 (207) (658) -- -- 958
4-for-3 stock split in the form
of a 33% stock dividend 3,456 5,184 (1,939) 323 -- (3,245) -- --
Contributions/payments -- -- -- -- -- -- (1,072) 1,072
------- ------- ------- ------- ------- ------- ------- -------
At December 31, 1993 13,825 20,737 259 1,262 3,962 36,164 1,215 51,983
Net income -- -- -- -- -- 11,874 -- 11,874
Cash dividends paid
($.096 per share) -- -- -- -- -- (1,520) -- (1,520)
Treasury stock purchased -- -- -- 94 1,487 -- -- (1,487)
Treasury stock reissued -- -- 1,427 (110) (358) -- -- 1,785
Exercise of stock options -- -- 493 (172) (553) -- -- 1,046
Retroactive effect of a 5-for-4
stock split in the form of
a 25% stock dividend 3,456 5,184 (2,179) 268 -- (3,005) -- --
Contributions/payments -- -- -- -- -- -- (607) 607
------- ------- ------- ------- ------- ------- ------- -------
At December 31, 1994 17,281 $25,921 $ -- 1,342 $4,538 $43,513 $608 $64,288
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
15
<PAGE>
Frozen Food Express Industries, Inc. and Subsidiaries
December 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- Frozen Food Express Industries, Inc. (FFEX), a
Texas corporation, and its subsidiaries, all of which are wholly-owned, are
primarily engaged in motor carrier transportation of perishable commodities,
providing direct service for both full-truckload and less-than-truckload
shipments in all 48 contiguous states as well as Canada and Mexico. The
consolidated financial statements include FFEX and all subsidiary companies (the
Company). All significant intercompany balances and transactions have been
eliminated in consolidation.
CASH EQUIVALENTS -- The Company considers all highly liquid investments with a
maturity of three months or less at the time of purchase to be cash equivalents.
ACCOUNTS RECEIVABLE -- In the normal course of business, the Company extends
unsecured credit to its customers which are located throughout the United
States. Because of the credit risk involved, management has provided an
allowance for doubtful accounts which reflects its estimate of amounts which
will eventually become uncollectible. Accounts receivable from customers are
stated net of allowances for doubtful accounts of $1,286,000 and $1,004,000 as
of December 31, 1994, and 1993, respectively.
INVENTORIES -- Inventories are valued at the lower of cost (principally
weighted average cost or specific identification method) or market.
PROPERTY AND EQUIPMENT -- Property and equipment are carried at cost.
Maintenance and repairs are charged to operations currently. Capitalized
interest on funds borrowed to finance the construction and development of major
assets, replacements and improvements was $100,000 during 1994 and $50,000
during 1992. No interest was capitalized during 1993.
DEPRECIATION -- Depreciation of property and equipment is calculated using the
straight-line method generally over estimated useful lives of 20 to 30 years for
buildings, 3 to 10 years for improvements to owned or leased facilities, 3 to 7
years for revenue equipment, 2 to 20 years for service equipment, and 2 to 5
years for computer, software and related equipment.
FREIGHT REVENUE AND EXPENSE RECOGNITION -- Freight revenue and associated
direct operating expenses are recognized on the date the freight is picked up
from the shipper.
INCOME TAXES -- Deferred income taxes are provided for temporary differences
between the tax basis of assets and liabilities and their financial reporting
amounts. Deferred taxes are recorded based upon enacted tax rates anticipated to
be in effect when these temporary differences are expected to reverse.
PRIOR PERIOD AMOUNTS -- Certain prior period amounts have been reclassified to
conform with the current year presentation.
SUBSEQUENT EVENT -- On February 8, 1995, the Board of Directors declared a 5-
for-4 stock split in the form of a 25% stock dividend. Retroactive effect has
been given
16
<PAGE>
to the stock dividend in the stockholders' equity accounts as of December 31,
1994, and all applicable share and per-share data in the financial statements.
2. LONG-TERM DEBT
The Company has a $50 million line of credit pursuant to a revolving credit
agreement with three commercial banks. As long as the Company maintains a
required "borrowing base", payments on principal are not due until termination
of the agreement. The agreement, which has no stated expiration date, can be
terminated by either party upon sixty days' notice, with repayment due in 48
equal monthly payments commencing 13 months following the termination. The
agreement provides for interest payable quarterly at the prime rate of one of
the banks. The Company may elect to borrow for specified periods of time at
fixed interest rates. The fixed interest rates are based on the London
Interbank Offered Rate or specified 90-day or 180-day certificate of deposit
rates. At December 31, 1994, $9,000,000 was borrowed at fixed rates averaging
7%. At December 31, 1993, $15,000,000 was borrowed at fixed rates averaging
4.1%, and $2,000,000 was borrowed at the prime rate of 6%.
The agreement sets certain minimum limits on consolidated net worth. Cash
dividends paid during any four consecutive quarters may not exceed 40% of the
total net income of the four quarters preceding the declaration of any cash
dividend. In addition, the Company is required to maintain certain minimum
financial and coverage ratios. Future investments, mergers and leases of
property are also restricted. Additionally, the agreement provides that the
amount the Company is permitted to borrow is reduced by outstanding letters of
credit (see Note 6). Under the terms of the revolving credit agreement, the
banks have the option to obtain liens on revenue equipment, accounts receivable
and service equipment. The banks have made no request for such liens. At
December 31, 1994, approximately $32 million was available under the agreement.
No commitment fees are charged on the unused portion of the credit line and no
compensating balances are required.
Total interest payments made during 1994, 1993 and 1992 were $809,000,
$755,000, and $389,000, respectively.
3. FINANCING AND INVESTING ACTIVITIES NOT AFFECTING CASH
During 1994, 1993 and 1992, the Company funded contributions to its Employee
Savings Plan and one of its Employee Stock Ownership Plans and Trusts (ESOPs) by
transferring 78,035, 109,680 and 102,514 shares, respectively, of treasury stock
to the trustees of the plans. The fair market value of the shares, at the time
of the contributions, was approximately $1,002,000, $1,130,000 and $690,000,
respectively.
During 1994, 1993 and 1992, $607,000, $1,072,000 and $882,000, respectively,
of the Company's contribution to another ESOP was applied against amounts owed
by the ESOP to the Company (see Note 5).
In 1992 the Company transferred $516,000 from other non-current assets to
buildings and improvements representing previously incurred costs associated
with the exercise of a purchase option for a formerly leased terminal property.
As of December 31, 1993 and 1992, accounts payable included $1,553,000 and
$865,000, respectively, for the purchase of equipment delivered during 1993 and
1992. As of December 31, 1994 and 1993, accounts receivable included $24,000 and
17
<PAGE>
$245,000, respectively, from the sale of equipment retired and sold during 1994
and 1993.
4. INCOME TAXES
The provision for income tax consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Taxes currently payable
Federal $5,337 $5,169 $4,202
State 320 222 218
Deferred federal taxes 233 (405) (339)
------ ------ ------
$5,890 $4,986 $4,081
====== ====== ======
</TABLE>
The differences between the statutory federal income tax rate and the
Company's effective income tax rate are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Statutory federal income 34.9% 34.3% 34.0%
tax rate
Non-taxable income (2.9) -- --
Non-deductible expenses 0.3 1.6 1.5
Other, net 0.9 (1.3) 0.9
----- ----- -----
33.2% 34.6% 36.4%
===== ===== =====
</TABLE>
Total income taxes paid by the Company were $7,259,000, $3,477,000 and
$3,169,000 for 1994, 1993 and 1992, respectively.
The following presents the changes in the primary components of the total
deferred tax liability (in thousands):
<TABLE>
<CAPTION>
Deferred
December (Provision) December
31, 1993 Benefit 31, 1994
-------- --------- -------
<S> <C> <C> <C>
Accrued claims $ 3,658 $ 1,011 $ 4,669
Allowance for bad debts 276 353 629
Prepaid expense (1,872) (155) (2,027)
Fixed assets (6,332) (1,670) (8,002)
Other (172) 228 56
------- ------- -------
$(4,442) $ (233) $(4,675)
======= ======= =======
</TABLE>
5. RETIREMENT PLANS
The Company sponsors ESOPs for its employees. Contributions to the ESOPs are
made at the discretion of the Board of Directors. One of the ESOPs financed its
purchases of FFEX stock with borrowed funds. Initially, these funds were
borrowed from a bank. During 1992, a subsidiary of FFEX paid the bank debt in
full and now carries the ESOP loan. During 1992, this leveraged ESOP made
purchases of FFEX common stock totaling $1,075,000 financed by increasing the
amount borrowed under the ESOP loan agreement. No such purchases were made
during 1994 or 1993. These loans mature in annual installments through 1999 and
bear interest at the prime
18
<PAGE>
rate. The interest rate for these loans at December 31, 1994 and 1993, was 8.5%
and 6%, respectively. The remaining loan balance of $608,000 at December 31,
l994, is expected to be repaid by the ESOP from future Company contributions to
the ESOP. The following table sets forth a summary of ESOP related expense (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Level payments required $ - $ - $ -
Contribution in excess of
required payments 1,296 1,172 942
Interest paid by Company
on behalf of ESOP 85 78 58
------ ------ ------
$1,381 $1,250 $1,000
====== ====== ======
Dividends on ESOP shares
used for debt
service $ 29 $ 64 $ 84
====== ====== ======
</TABLE>
The leveraged ESOP utilizes dividends received on the shares pledged as
collateral under the loan agreement to service the ESOP debt. To the extent
these dividends are not sufficient to satisfy the full amount of the interest on
the debt, the contribution required of the Company is increased.
In 1993 the American Institute of Certified Public Accountants issued
Statement of Position 93-6, "Employers' Accounting in Employee Stock Ownership
Plans" (SOP 93-6). SOP 93-6 significantly changes the way employers will account
for contributions to leveraged ESOPs. SOP 93-6 allows employers to account for
shares acquired by leveraged ESOPs prior to January 1, 1993, under rules which
were previously in effect. Generally, SOP 93-6 impacts employers' recognition of
expense and determination of weighted average shares outstanding for purposes of
computing earnings per share. During 1994 and 1993, the leveraged ESOP did not
acquire any FFEX shares. As such, the provisions of SOP 93-6 have not impacted
the Company. The Company has not determined whether the leveraged ESOP will use
borrowed funds to acquire FFEX shares in the future.
The Company sponsors a Savings Plan (the Plan) for its employees.
Contributions by the Company to the Plan for the benefit of employees are
determined by reference to voluntary contributions made by each employee.
Company contributions are made on a quarterly basis by transferring, at fair
market value, shares of FFEX stock to the Plan. For 1994, 1993 and 1992, Company
contributions to the Plan were approximately $1,002,000, $1,030,000 and
$630,000, respectively.
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain office space, terminals, maintenance facilities,
and equipment. The aggregate future minimum rentals under non-cancelable
operating leases at December 31, l994, are (in thousands):
19
<PAGE>
<TABLE>
<CAPTION>
Related Third
Parties Parties Total
------- ------- -------
<S> <C> <C> <C>
1995 $ 569 $14,147 $14,716
1996 372 11,594 11,966
1997 109 5,304 5,413
1998 -- 3,570 3,570
1999 -- 2,662 2,662
After 1999 -- 3,354 3,354
------ ------- -------
Total $1,050 $40,631 $41,681
====== ======= =======
</TABLE>
Leases with related parties involve tractors leased from certain officers of
the Company under three-year non-cancelable operating leases. For 1994, 1993
and 1992, respectively, payments under these leases were $489,000, $191,000 and
$232,000, respectively.
At December 31, 1994, the Company had purchase commitments of approximately
$36 million for the purchase of tractors, trailers and information systems in
l995 and 1996.
The Company has accrued for costs related to public liability and work-related
injury claims, some of which involve litigation. The aggregate amount of these
claims is significant. In the opinion of management, these actions can be
successfully defended or resolved, and any additional costs incurred over
amounts accrued will not have a material adverse effect on the Company's
financial position or results of operations. At December 31, 1994, in
connection with its accrued claims liabilities administered by independent
insurance companies, the Company had established approximately $8,900,000 of
irrevocable letters of credit in favor of the insurance companies. Under the
terms of the insurance agreements, the letters of credit may be drawn upon in
the event of default for failure to pay claims (within retention levels
specified in the policies).
7. NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock was computed using the weighted average
number of common and common equivalent shares, (calculated using the treasury
stock method) outstanding during the year. Computation of primary common stock
equivalents assumes exercise of options at the average market price of FFEX's
shares during each year. The computation of fully diluted common stock
equivalents assumes exercise of options at the year-end market price. The
shares presented in the following table are in thousands.
20
<PAGE>
<TABLE>
<CAPTION>
Weighted
Average Common Weighted
Shares Stock Average
Outstanding Equivalents Shares
----------- ----------- --------
<S> <C> <C> <C>
Primary
1994 15,852 599 16,451
1993 15,546 666 16,212
1992 14,930 961 15,891
Fully Diluted
1994 15,852 599 16,451
1993 15,546 730 16,276
1992 14,930 980 15,910
</TABLE>
8. STOCKHOLDERS' EQUITY
As of December 31, 1994 and 1993, there were authorized 40 million of FFEX's
$1.50 par value common stock. At December 31, 1992, 20 million shares were
authorized.
ESOP debt represents the amount of the Company's receivable from one of its
ESOPs. Current financial reporting practice requires this amount to be
reflected as a reduction of stockholders' equity.
FFEX has stock option plans adopted in 1993, 1987 and 1982 which provide that
options for shares of FFEX common stock may be granted to officers and key
employees of the Company at the fair market value on the date of grant and to
non-employee directors of FFEX at the greater of 50% of the fair market value at
date of grant or $1.00. The options expire 10 years from the date of grant.
Under the 1993 and 1982 stock option plans, options may be granted for 10 years
following shareholder ratification. Accordingly, no future options may be
granted under the 1982 plan. The following table sets forth summarized
information regarding the plans:
21
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Options outstanding at beginning of year 1,009,520 1,034,275 1,624,081
Surrendered, forfeited or expired (938) (6,060) -
Granted 207,500 321,666 380,959
Exercised (214,764) (340,361) (970,765)
---------- ---------- ----------
Options outstanding at end of year 1,001,318 1,009,520 1,034,275
========== ========== ==========
Average price of options exercised
during the year $4.87 $2.87 $1.51
Average price of outstanding options at
end of year ($1.00 to $12.40) $6.10 $4.65 $2.94
Exercisable options 794,756 689,553 673,341
Options available for future grants 708,075 102,138 439,124
</TABLE>
______________________________________________________________________________
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
To Frozen Food Express Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Frozen Food
Express Industries, Inc., and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Frozen Food Express Industries,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Dallas, Texas
February 8, 1995
22
<PAGE>
Quarterly Financial, Stock and Dividend Information
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Revenue $60,301 $70,303 $72,535 $71,481 $274,620
Income from operations 2,934 5,986 5,477 4,739 19,136
Net income 1,745 3,787 3,434 2,908 11,874
Net income per share of
common stock
Primary and fully diluted .10 .23 .21 .18 .72
Cash dividends per share .024 .024 .024 .024 .096
Common stock price per share
High 15 13 3/8 13 5/8 13 3/8 15
Low 11 12 12 7/8 11 7/8 11
Common stock trading volume 2,244 1,461 1,034 718 5,457
- --------------------------------------------------------------------------------
1993
Revenue $48,957 $57,025 $60,557 $60,850 $227,389
Income from operations 2,272 4,782 4,598 3,738 15,390
Net income 1,345 2,956 2,774 2,366 9,441
Net income per share of common stock
Primary and fully diluted .08 .18 .17 .14 .58
Cash dividends per share .024 .024 .024 .024 .096
Common stock price per share
High 10 1/2 11 1/4 12 1/2 15 15
Low 8 1/4 7 1/4 9 3/4 10 7 1/4
Common stock trading volume 1,249 1,931 2,243 1,591 7,014
- --------------------------------------------------------------------------------
</TABLE>
Amounts per share of common stock and common stock trading volume for all
periods have been adjusted retroactively to reflect a 5-for-4 stock split in the
form of a 25% stock dividend declared and paid during the first quarter of 1995.
As of March 10, 1995, the company had approximately 6,000 beneficial
shareholders, including participants in the company's Employee Stock Ownership
Plans.
On May 25, 1993, the company's common stock began trading on the Nasdaq Stock
Market under the symbol FFEX. Prior to that date, the company's stock was listed
on the American Stock Exchange. Trading volume and price per share are as
reported to the company by the appropriate stock exchange.
23
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF
FROZEN FOOD EXPRESS INDUSTRIES, INC.
Jurisdiction of
Name of Subsidiary Incorporation
FFE Transportation Services, Inc. Delaware
W & B Refrigeration Service Company Delaware
Conwell Corporation Delaware
Lisa Motor Lines, Inc. Delaware
Global Refrigerant Management, Inc.+ Texas
FFE, Inc. Delaware
Conwell Cartage, Inc.* Texas
Frozen Food Express, Inc.* Texas
Middleton Transportation Company* Texas
Each subsidiary does business under its corporate name.
+ Formerly Compressors Plus, Inc.
* Inactive
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF FROZEN FOOD EXPRESS INDUSTRIES, INC., AND
SUBSIDIAIRIES AS OF DECEMBER 31, 1994, AND THE CONSOLIDATED STATEMENTS OF
INCOME, CASH FLOW AND STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 1994,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,581
<SECURITIES> 0
<RECEIVABLES> 37,929
<ALLOWANCES> 1,286
<INVENTORY> 8,006
<CURRENT-ASSETS> 57,056
<PP&E> 96,840
<DEPRECIATION> 42,679
<TOTAL-ASSETS> 116,836
<CURRENT-LIABILITIES> 31,433
<BONDS> 9,000
<COMMON> 25,952
0
0
<OTHER-SE> 38,336
<TOTAL-LIABILITY-AND-EQUITY> 116,836
<SALES> 22,304
<TOTAL-REVENUES> 274,620
<CGS> 0
<TOTAL-COSTS> 255,484
<OTHER-EXPENSES> 1,372
<LOSS-PROVISION> 1,136
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,764
<INCOME-TAX> 5,890
<INCOME-CONTINUING> 11,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,874
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
