<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1997
Commission file number: 1-8306
AIR EXPRESS INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2074327
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
120 Tokeneke Road, Darien, Connecticut 06820
(203) 655-7900
(Address of, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
NONE
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 3 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 the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date (applicable only to corporate
registrants).
The number of shares of common stock outstanding as of May 9, 1997 was
22,864,214 (Net of 33,652 Treasury Shares).
<PAGE>
AIR EXPRESS INTERNATIONAL CORPORATION
March 1997 Form 10-Q Quarterly Report
Table of Contents
Part I - Financial Information
Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as at
March 31, 1997 and December 31, 1996................. 2
Condensed Consolidated Statements of Operations -
three months ended March 31, 1997 and 1996........... 3
Consolidated Statements of Cash Flows -
three months ended March 31, 1997 and 1996........... 4
Notes to Condensed Consolidated Financial
Statements........................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 7
Part II - Other Information
Item 1. Legal Proceedings............................................... 10
Item 6. Exhibits and Reports on Form 8-K................................ 10
<PAGE>
Page 2
<TABLE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, 1997 Dec 31, 1996
(Unaudited)
Assets
<S> <C> <C>
Current Assets:
Cash and cash equivalents ...................... $ 62,345 $ 46,516
Accounts receivable, (less allowance for
doubtful accounts of $4,831 and $4,721) ....... 332,610 346,323
Other current assets ........................... 6,631 6,295
Total current assets ..................... 401,586 399,134
Investment in unconsolidated affiliates ........... 15,660 13,991
Property, plant and equipment (less accumulated
depreciation and amortization of $54,626
and $53,455) ................................... 59,859 61,112
Deposits and other assets ......................... 16,896 15,226
Goodwill (less accumulated amortization
of $10,967 and $10,673) ....................... 88,846 91,866
Total assets ............................. $ 582,847 $ 581,329
Liabilities and stockholders' investment
Current Liabilities:
Current portion of long-term debt .............. $ 3,853 $ 3,915
Bank overdrafts payable ........................ 162 2,058
Transportation payables ........................ 170,387 166,686
Accounts payable ............................... 50,274 50,201
Accrued liabilities ............................ 57,522 61,347
Income taxes payable ........................... 13,217 14,691
Total current liabilities ................ 295,415 298,898
Long-term debt ................................. 14,969 16,616
Other liabilities .............................. 6,712 6,729
Total liabilities ........................ 317,096 322,243
Stockholders' Investment:
Capital stock-
Preferred (authorized 1,000,000 shares,
none outstanding)
Common, $.01 par value (authorized 40,000,000
shares, issued 22,844,527 and 22,786,341 shares) . 228 228
Capital surplus ................................... 138,011 137,174
Cumulative translation adjustments ................ (16,976) (15,633)
Retained earnings ................................. 145,160 137,989
266,423 259,758
Less: 27,305 shares of treasury stock, at cost ....... (672) (672)
Total stockholders' investment .................... 265,751 259,086
Total liabilities and stockholders' investment ....$ 582,847 $ 581,329
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
Page 3
<TABLE>
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except
per share data)
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Revenues .................................... $ 351,155 $ 294,787
Operating expenses:
Transportation ............................ 238,724 201,645
Terminal .................................. 64,126 52,662
Selling, general and administrative ....... 36,018 30,377
Operating profit ............................ 12,287 10,103
Other income (expense):
Interest, net ............................. 208 (987)
Other, net ................................ 1,278 961
1,486 (26)
Income before provision for income taxes ..... 13,773 10,077
Provision for income taxes ................... 5,234 3,930
Net income ................................... $ 8,539 $ 6,147
Income per common share:
Primary .................................. $ .37 $ .33
Fully diluted ............................ $ .37 $ .31
Weighted average number of common shares (000's):
Primary .................................. 23,255 18,863
Fully diluted ............................ 23,260 22,239
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
<TABLE>
Page 4
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED March 31, 1997 AND 1996
(Dollars in thousands)
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income ..................................... $ 8,539 $ 6,147
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ............... 3,041 2,229
Amortization of goodwill .................... 652 547
Amortization of bond discount ............... -- 57
Deferred income taxes ....................... (1,005) 647
Equity in earnings of unconsolidated
affiliates ............................... (712) (565)
Gains on sales of assets .................... (27) (23)
Changes in assets and liabilities, net of
business acquisitions:
Decrease in accounts receivable, net ........ 8,580 11,265
(Increase) in other current assets ........... (576) (729)
(Increase) in other assets ................... (750) (288)
Increase (decrease) in transportation
payables ................................. 6,237 (16,408)
Increase (decrease) in accounts payable ..... 2,083 (4,863)
(Decrease) increase in accrued liabilities ... (2,555) 598
(Decrease) increase in income taxes payable .. (223) 613
Increase in other liabilities ............... 47 6
Total adjustments ....................... 14,792 (6,914)
Net cash provided (used) by operating
activities ............................... 23,331 (767)
Cash flows from investing activities:
Business acquisitions, net of cash acquired .... -- (1,259)
Other investing activities ..................... 41 170
Proceeds from sales of assets .................. 295 89
Capital expenditures ........................... (3,110) (2,009)
Investment in unconsolidated affiliates ........ (1,179) --
Net cash used in investing activities ...... (3,953) (3,009)
Cash flows from financing activities:
Net (repayments) borrowings in bank
overdrafts payable .......................... (1,760) 81
Payment of long-term debt ...................... (662) (214)
Issuance of common stock ....................... 837 432
Payment of cash dividends ...................... (1,364) (929)
Purchase of treasury stock ..................... -- (14)
Net cash (used) by financing activities .... (2,949) (644)
Effect of foreign currency exchange rates on cash .. (600) (174)
Net increase (decrease) in cash and cash
equivalents .................................... 15,829 (4,594)
Cash and cash equivalents at beginning of period ... 46,516 54,463
Cash and cash equivalents at end of period ......... $ 62,345 $ 49,869
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
Page 5
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. The consolidated balance sheet at March 31, 1997, the consolidated
statements of operations for the three-month periods ended March 31, 1997
and 1996, and the consolidated statements of cash flows for the three-month
periods ended March 31, 1997 and 1996 were prepared by the Company without
audit. In the opinion of management, all adjustments necessary to present
fairly the financial position, results of operations, and cash flows for
the interim periods were made. Certain items in the March 31, 1996
financial statements were reclassified to conform to classifications in the
March 31, 1997 financial statements.
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, were condensed or omitted. Accordingly, these
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in
the Company's annual report to stockholders for the year ended December 31,
1996. The results of operations for the period ended March 31, 1997 are not
necessarily indicative of the results of operations expected for the full
year ending December 31, 1997.
B. Interest, net was as follows:
<TABLE>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Interest expense ................... $ (383) $(1,509)
Interest income .................... 591 522
Interest, net ...................... $ 208 $ (987)
</TABLE>
<PAGE>
Page 6
C. Other, net was as follows:
<TABLE>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Equity in earnings of
unconsolidated affiliates ............ $ 712 $ 565
Foreign exchange gains ................ 539 373
Other ................................. 27 23
$1,278 $ 961
</TABLE>
D. Supplemental disclosures of cash flow information:
<TABLE>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Interest and income taxes paid:
Interest ................................ $ 264 $ 2,384
Income Taxes ............................ 4,818 2,523
$ 5,082 $ 4,907
</TABLE>
<PAGE>
Page 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The Company considers its total business to represent a single segment
comprised of three major services: airfreight forwarding, ocean freight
forwarding, and customs brokerage and other services, all of which are fully
integrated. The following table sets forth the gross revenues and net revenues
(gross revenues minus transportation expenses) for each of these three service
categories, as well as the Company's internal operating expenses (terminal and
selling, general and administrative expenses) and operating profit:
<TABLE>
Three Months Ended
March 31,
1997 1996
($ in millions)
<S> <C> <C>
Gross Revenues:
Airfreight ..................................... $272.7 $231.7
Ocean Freight .................................. 44.3 40.2
Customs Brokerage and Other .................... 34.2 22.9
Total Gross Revenues ......................... $351.2 $294.8
Net Revenues:
Airfreight ..................................... $ 69.4 $62.2
Ocean Freight .................................. 13.3 10.3
Customs Brokerage and Other .................... 29.7 20.6
Total Net Revenues ........................... $112.4 $93.1
Internal Operating Expenses:
Terminal ....................................... $ 64.1 $52.7
Selling, general
and administrative ............................ 36.0 30.3
Total Internal Operating Expenses ............ $100.1 $83.0
Operating Profit ................................. $ 12.3 $10.1
</TABLE>
Consolidated gross revenues for the first quarter of 1997 increased $56.4
million (19.1%) over the first quarter of 1996. The increase in gross revenues
for the quarter included the negative effect of approximately $4.6 million
resulting from a stronger U.S. dollar when converting foreign currency revenues
into U.S. dollars for financial reporting purposes. Consolidated net revenues
increased $19.3 million (20.7%) over the comparable 1996 period. The increases
in gross revenues were comprised of a $41.0 million (17.7%) increase in
airfreight revenues, a $4.1 million (10.2%) increase in ocean freight revenues,
and a $11.3 million (49.3%) increase in customs brokerage and other revenues.
The increases in net revenues were comprised of a $7.2 million (11.6%) increase
in airfreight net revenues, a $3.0 million (29.1%) increase in ocean freight net
revenues, and a $9.1 million (44.2%) increase in customs brokerage and other net
revenues. The increases in gross and net revenues from airfreight services were
attributable to an increase of 9.2% in the number of shipments and to an
increase of 16.7% in the total weight of cargo shipped. The gross margin (net
<PAGE>
Page 8
revenues as a percentage of gross revenues) for airfreight services decreased
1.4% from 26.8% for the first quarter of 1996 to 25.4% for the first quarter of
1997. The decrease was mainly due to the reduced yields associated with the
increase in the weight of cargo shipped. The increases in gross and net revenues
from ocean freight services were attributable to greater shipping volumes from
existing customers and the Company's continuing penetration into the ocean
freight market. The gross margin for ocean freight services increased 4.4% to
30.0% for the first quarter of 1997 from 25.6% for the first quarter of 1996.
The increase was primarily due to the growth in business handled by the Company
as an agent for the steamship lines, along with reduced steamship rates in
certain markets. The increases in gross and net revenues from customs brokerage
and other services were primarily due to the Company's continuing efforts to
expand its United States customs brokerage activities to existing and new
customers.
The Company's internal operating expenses increased $17.1 million (20.6%)
over the first quarter of 1996. The increase was primarily attributable to the
additional expenses incurred in connection with the greater shipping volumes.
Consolidated operating profit for the first quarter of 1997 increased $2.2
million (21.8%) over the first quarter of 1996. The increase reflects increases
in operating profit in the Company's foreign operations.
Interest expense decreased $1.1 million to $.4 million for the first
quarter of 1997 compared to the first quarter of 1996 due primarily to the
elimination of interest expense associated with the Convertible Subordinated
Debentures which were converted on or before July 8, 1996.
The effective income tax rate for the first quarter of 1997 decreased to
38.0% from 39.0% for the first quarter of 1996. The decrease was largely the
result of a shift in the mix of worldwide earnings to countries with lower
effective income tax rates, along with a reduction in the total of nondeductible
expenses as a percentage of pre-tax income.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 "Earnings Per Share" (FASB 128), which
establishes standards for computing and presenting earnings per share. FASB 128
will be effective for periods ending after December 15, 1997. Adoption of this
accounting standard is not expected to have a material impact upon the Company's
earnings per share computations assuming the current capital structure.
<PAGE>
Page 9
Liquidity and Capital Resources
At March 31, 1997, cash and cash equivalents increased approximately $15.8
million to $62.3 million from $46.5 million at December 31, 1996. For the first
quarter of 1997, the Company's primary source of cash was approximately $23.3
million from operating activities, while its primary uses were for: capital
expenditures of $3. 1 million, debt repayments of $2.4 million and dividend
payments of $1.4 million. Cash flow provided by operating activities increased
approximately $24.1 million over the first quarter of 1996. This increase was
primarily the result of the on-going integration of prior years' acquisitions
which has enhanced the management of working capital. Working capital increased
approximately $5.9 million in the quarter to $106.2 million. The increase was
mainly due to the increase in profits.
Capital expenditures increased approximately $1.1 million from $2.0 million
for the first quarter of 1996 to $3.1 million for the first quarter of 1997. The
$3.1 million of capital expenditures was primarily for improvement and expansion
of facilities and management information services.
At March 31, 1997, the Company had available for future borrowings
approximately $71.8 million of its $75.0 million revolving credit facility. The
Company utilized approximately $3.2 million under this facility mainly for
letters of credit issued in connection with its insurance programs.
Additionally, various of the Company's foreign subsidiaries maintained overdraft
facilities with foreign banks, aggregating approximately $18.6 million, of which
approximately $.2 million was outstanding.
Management believes that the Company's available cash and sources of
credit, together with expected future sources of credit and cash generated from
operations, will be sufficient to satisfy its anticipated needs for working
capital, capital expenditures and dividends.
<PAGE>
Page 10
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
The Company believes that there are no legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, to which the
Company or any of its subsidiaries is a party. Management is of the opinion that
the ultimate outcome of existing legal proceedings, if adverse, would not have a
material effect on the Company's consolidated financial position.
Item 6. - Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 10 - Deferred Compensation Plan.
Exhibit 11 - Computation of Earnings Per Common Share.
Exhibit 27 - Financial Data Schedule.
b) Reports on Form 8-K:
None.
<PAGE>
Page 11
SIGNATURES
Pursuant to the requirements 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.
Air Express International Corporation
(Registrant)
Date: May 13, 1997 /s/ Dennis M. Dolan
Dennis M. Dolan
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 13, 1997 /s/ Walter L. McMaster
Walter L. McMaster
Vice President - Controller
(Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
AIR EXPRESS INTERNATIONAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(Unaudited)
(In thousands, except
per share amounts)
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Primary:
Net income applicable to
common shares ........................ $ 8,539 $ 6,147
Weighted average of common
shares outstanding ................... 22,789 18,564
Common share equivalents ............... 466 299
Average common shares outstanding ...... 23,255 18,863
Earnings per common share .............. $ .37 $ .33
Fully diluted:
Weighted average of common
shares outstanding .................... 22,789 18,564
Common share equivalents ............... 471 384
Common shares issuable upon assumed
conversion of subordinated debentures . -- 3,291
Average common shares outstanding ...... 23,260 22,239
Earnings per common share .............. $ .37 $ .31
<FN>
Primary earnings per share was computed by dividing net income by the
weighted average common and common share equivalents outstanding during the
period. For the quarter ended March 31, 1996, fully diluted earnings per
share was calculated assuming the conversion of the subordinated debentures
and the elimination of the associated interest expense, net of tax, of
approximately $.73 million. Effective July 8, 1996, the Company completed
the redemption for all of its Convertible Subordinated Debentures.
Therefore, the debentures and related interest expense were not a component
of the Company's fully diluted earnings per share calculation for the first
quarter of 1997.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 62,345
<SECURITIES> 0
<RECEIVABLES> 337,441
<ALLOWANCES> 4,831
<INVENTORY> 0
<CURRENT-ASSETS> 401,586
<PP&E> 114,485
<DEPRECIATION> 54,626
<TOTAL-ASSETS> 582,847
<CURRENT-LIABILITIES> 295,415
<BONDS> 14,969
<COMMON> 228
0
0
<OTHER-SE> 283,171
<TOTAL-LIABILITY-AND-EQUITY> 582,847
<SALES> 0
<TOTAL-REVENUES> 351,155
<CGS> 0
<TOTAL-COSTS> 238,724
<OTHER-EXPENSES> 64,126
<LOSS-PROVISION> 360
<INTEREST-EXPENSE> 383
<INCOME-PRETAX> 13,773
<INCOME-TAX> 5,234
<INCOME-CONTINUING> 8,539
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,539
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
Air Express International Corporation
Deferred Compensation Plan
Amendment No. 1
Air Express International Corporation ("Company") established the Air Express
International Corporation Deferred Compensation Plan ("Plan") for a select group
of management or highly-compensated employees ("Eligible Employees") effective
as of January 1, 1995.
Section 8.1 of the Plan provides that the Company has the power to amend the
Plan. Therefore, the Company hereby amends the Plan as hereinafter set forth
effective as of the 1st day of January, 1997.
1. Section 2.1 is amended to add a paragraph to the end thereof to read as
follows:
"In addition, at the sole discretion of the Administrator, an individual
may be reassigned from one group of Eligible Employees to another to recognize a
change in a participant's employment status whereby he/she meets the
requirements designated for the new group. Such reassignment shall become
effective upon written notice of such by the Administrator to the Participant.
If such reassignment occurs during a current Plan Year, it shall specify that
the Participant's exiting Deferral Agreement is revoked and instruct the
Participant to complete a new Deferral Agreement to be effective from the
effective date of the reassignment to the end of the current Plan Year."
2. Section 3.2 A. is amended to read as follows:
"Except for a reassignment of a Participant from one group of Eligible
Employees to another as provided in Section 2.1, each annual election to defer
is irrevocable."
3. The first sentence of Section 4.3 is amended to read as follows:
"Except for a reassignment of a Participant from one group of Eligible
Employees to another as provided in Section 2.1, a Participant may not modify,
alter, amend or revoke his/her allocation for a Plan Year after such Plan Year
begins."
Executed this day of ,1996.
Attest: Air Express International Corporation:
By:______________________ By: ____________________________
<PAGE>
Air Express International Corporation
Deferred Compensation Plan
Amendment No. 2
Air Express International Corporation ("Company") established the Air Express
International Corporation Deferred Compensation Plan ("Plan") for a select group
of management or highly-compensated employees ("Eligible Employees") effective
as of January 1, 1995.
Section 8.1 of the Plan provides that the Company has the power to amend the
Plan. Therefore, the Company hereby amends the Plan as hereinafter set forth
effective as of the 1st day of January, 1997.
1. The second sentence of Section 4.5 is deleted.
2. The fifth sentence of Section 4.5 is amended to read as follows:
"A Participant who allocates a portion of his/her anticipated contributions
to his/her Education and/or Fixed Period Accounts may further allocate such
contributions among subaccounts. The collective maximum number of such
subaccounts shall be no more than seven (7). "
3. The second sentence of Section 5.3B is amended to read as follows:
"Subject to the provisions of Section 4.5, as amended, a Participant may
have a maximum of seven (7) subaccounts at any time."
Executed this _____ day of ___________, 1997.
Attest: Air Express International Corporation:
By:______________________ By:_________________________
<PAGE>
AIR EXPRESS INTERNATIONAL CORP.
DEFERRED COMPENSATION PLAN
Table of Contents
Section Contents Page
1 DEFINITIONS................................. 3
2 PARTICIPATION IN THE PLAN .................. 8
2.1 Designation as Eligible Employee....... 8
2.2 Commencement of Participation ......... 8
2.3 Procedure For and Effect of Admission . 8
2.4 Cessation of Participation ............ 9
3 PLAN CONTRIBUTIONS.......................... 9
3.1 Plan Contributions .................... 9
3.2 Rules Governing Contributions.......... 11
3.3 Distributable Benefit ................. 11
3.4 Forfeitures............................ 12
4 PARTICIPANT ACCOUNTS ....................... 13
4.1 Establishment of Accounts ............. 13
4.2 Benefit Allocation .................... 13
4.3 Irrevocable Allocation ................ 13
4.4 Directed Adjustment of Certain Accounts 13
4.5 Suballocation Within the Education
and Fixed Period Accounts........... 14
4.6 Funding Obligations of the Company..... 15
5 BENEFITS.................................... 16
5.1 Retirement Account .................... 16
5.2 Education Account...................... 17
5.3 Fixed Period Account................... 18
5.4 Additional Accounts ................... 19
5.5 Beneficiary Designation ............... 19
5.6 Tax Withholding ....................... 19
5.7 Judicial Intervention ................. 19
<PAGE>
6 ADMINISTRATION.............................. 20
6.1 Appointment of Administrator .......... 20
6.2 Administrator's Responsibilities ...... 20
6.3 Records and Accounts .................. 20
6.4 Administrator's Specific Powers
and Duties......................... 20
6.5 Company's Responsibility to
Administrator.......................... 21
6.6 Liability ............................. 21
6.7 Payment of Expenses ................... 21
6.8 Indemnity of Plan Administrator ....... 21
6.9 Substitute Payee ...................... 21
6.10 Trust Fund ............................ 21
7 CLAIMS PROCEDURE............................ 22
7.1 Claim ................................. 22
7.2 Review Procedure ...................... 22
7.3 Final Decision ........................ 22
7.4 Satisfaction of Liability ............ 22
8 AMENDMENT AND TERMINATION................... 23
8.1 Plan Amendment ........................ 23
8.2 No Premature Distribution ............. 23
8.3 Termination of the Plan ............... 23
9 MISCELLANEOUS............................... 24
9.1 Supplemental Benefits ................. 24
9.2 Governing Law ......................... 24
9.3 Jurisdiction .......................... 24
9.4 No Assignment Permitted ............... 24
9.5 Binding Terms ......................... 24
9.6 Spendthrift Provision ................. 24
9.7 Headings .............................. 24
9.8 Rule of Interpretation ................ 24
9.9 Limitation of Rights .................. 24
9.10 Severability .......................... 24
<PAGE>
AIR EXPRESS INTERNATIONAL CORP.
DEFERRED COMPENSATION PLAN
WHEREAS, AIR EXPRESS INTERNATIONAL CORP. ("Company") desires to establish a
flexible benefit plan ("Plan") for a select group of management or
highly-compensated employees ("Eligible Employees") which allows them to choose
among alternative benefits.
NOW THEREFORE, to effectuate its intentions, the Company hereby adopts this
Plan as of the 1st day of January, 1995.
This Plan shall be known as the
AIR EXPRESS INTERNATIONAL CORP.
DEFERRED COMPENSATION PLAN
SECTION 1
DEFINITIONS
1.1 Account means a recordkeeping source from which Plan benefits are
provided. The specific Accounts under this Plan are listed in Section
4.1.
1.2 Administrator or Plan Administrator means the individual or committee
appointed to administer the Plan pursuant to Section 6.1.
1.3 Base Salary means an Eligible Employee's base salary rate or rates in
effect at any time during a Plan Year, including any pretax elective
deferrals to any Company-sponsored plan that includes amounts deferred
under a Deferral Agreement or a qualified cash or deferred arrangement
under Code Section 401(k) or a cafeteria plan under Code Section 125,
but excluding car and travel allowances.
1.4 Beneficiary means the person, persons, trust or other entity a
Participant designates by written revocable designation filed with the
Administrator to receive payments in the event of his/her death.
1.5 Bonus means Compensation which is designated as such by the Company, and
which relates to services performed during a performance period by an
Eligible Employee in addition to his/her Base Pay.
1.6 Code means the Internal Revenue Code of 1986, as amended, and as may be
further amended from time to time, and the Regulations thereunder.
-3-
<PAGE>
1.7 Company means Air Express International Corp. and any successor thereto,
and for purposes of determining eligibility to participate in the Plan,
(i) any affiliated company which is a member of a controlled group of
corporations, within the meaning of Code Section 1563(a), with Air
Express International Corp. and which adopts this Plan with consent of
the Board of Directors of Air Express International Corp.
1.8 Compensation means the total remuneration paid to an Eligible Employee,
including Base Salary and any Bonus, for any Plan Year.
1.9 Deferral Agreement means a written agreement between a Participant and
the Company whereby a Participant agrees to defer a portion of his/her
Compensation and the Company agrees to provide benefits under the Plan.
-4-
<PAGE>
1.10 Deferral Contribution means the amount that a Participant elects to
defer from his/her Compensation pursuant to the Deferral Agreement and
as described in Section 3.1A.
1.11 Determination Date means for the Accumulation Accounts other than the
Education and Fixed Period Accounts of each Participant, his/her date of
death, Retirement, Disability or other termination of employment. The
Determination Date means, for the Education Account of any Participant,
January 1 of the year in which an Eligible Dependent of such Participant
for whom the Education Account has been established attains age 18. The
Determination Date means, for the Fixed Period Account of any
Participant, January 1 of the Plan Year selected by the Participant in
which payment of benefits from such Fixed Period Account will commence.
1.12 Disability means an illness or injury which meets the definition and
provisions described in the Company's group long-term disability
contract covering Participants.
1.13 Discretionary Contribution means the Company's contribution described in
Section 3.1C.
1.14 Distributable Benefit means that portion of each Account to which the
Participant, or his/her Beneficiary, is entitled upon the Determination
Date, as defined in Section 3.3.
1.15 Effective Date means January 1, 1995.
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1.16 Eligible Dependent means an individual who (i) is a child, grandchild,
niece or nephew, or otherwise qualifies as a dependent of a Participant
under the Code; (ii) is living at any time during an Enrollment Period
in which Deferral Amounts are to be credited to an Education Account
established on behalf of that individual; and (iii) is either younger
than (A) age 14 or (B) age 18 but for whom a subaccount was initially
established pursuant to Section 5.2 prior to his/her attaining age 14.
1.17 Eligible Employee means each employee of the Company designated by the
Administrator pursuant to Section 2.1 as eligible to participate in the
Plan.
1.18 Enrollment Period means the period set by the Administrator which ends
prior to the first day of a Plan Year and, with respect to an Eligible
Employee designated as such effective as of any date other than the
first day of a Plan Year, the period beginning with the date of his/her
designation as an Eligible Employee, and ending no later than the date
participation in the Plan commences.
1.19 Investment Fund or Fund means each of the investments described in
Section 4.4 which serve as a means to measure value, increases or
decreases with respect to a Participant's Accounts.
1.20 Matching Contribution means the Company's contribution described in
Section 3.1B.
1.21 Participant means
A. An Eligible Employee who participates under the
Plan in accordance with Sections 2 and 3.1.
B. Each former Eligible Employee for whom an Account is
maintained.
1.22 Plan means the Air Express International Corp. Deferred Compensation
Plan as described in this instrument, and as may be amended from time to
time.
1.23 Plan Year means the twelve (12) consecutive month period beginning on
each January 1 and ending on the following December 31.
1.24 Retirement means the termination of the Participant's employment or
contract with the Company for any reason other than death or Disability
(i) at age 65, or (ii) if the Participant has at least ten (10) years of
service with the Company, at any time after attaining age 55.
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1.25 Trustee means the Trustee or any successor Trustee, appointed by the
Company, acting pursuant to the terms of a trust created in accordance
with the provisions of Section 6.10.
1.26 Valuation Date means the last day of each calendar quarter or, if the
Investment Indexes designated by the Plan Administrator are valued each
business day, each business day.
1.27 Years of Service means the total number of full twelve (12) month
periods that an individual has been an employee of or an independent
contractor with the Company.
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SECTION 2
PARTICIPATION IN THE PLAN
2.1 Designation as Eligible Employee. The Administrator shall from time to
time specify one or more persons from a select group of management or
highly-compensated employees as Eligible Employees. Such specification
shall be in writing, with a copy delivered to the Company and the person
designated as eligible, and shall set the date as of which the person
becomes eligible. At the same time, the Administrator in its sole and
absolute discretion, shall assign the Eligible Employee to a class of
Eligible Employees. Initially, the Eligible Employees will be assigned
to either "Class I" or "Class II". Such assignment of an Eligible
Employee to a group of Eligible Employees shall be made for the purpose
of and in a manner consistent with the administration of the Plan. An
individual's designation as an Eligible Employee and his/her assignment
to a group of Eligible Employees, may be revoked at any time upon
written notice of the Administrator to such individual.
2.2 Commencement of Participation. Each Eligible Employee may elect to
become a Participant on the day immediately following the expiration of
the Enrollment Period coincident with or following his/her initial
designation as an Eligible Employee.
2.3 Procedure For and Effect of Admission. Each Eligible Employee who
desires to participate in this Plan shall complete such forms and
provide such data as are reasonably required by the Company during the
applicable Enrollment Period. By becoming a Participant, an Eligible
Employee shall be deemed conclusively to have assented to the provisions
of this Plan and all amendments hereto.
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2.4 Cessation of Participation. A Participant shall cease to be an active
Participant on the earlier of:
A. the date on which the Plan terminates;
B. the date on which he/she ceases to be an Eligible
Employee; or
C. termination of his/her employment or contract with
the Company.
A Participant who ceases to be an active Participant because of
Retirement, termination of status as an Eligible Employee or
reassignment to a division or affiliate of the Company not covered by
the Plan will be deemed a Participant as long as he/she retains an
Account for all purposes except for the right to make further
contributions to such Account.
SECTION 3
PLAN CONTRIBUTIONS
3.1 Plan Contributions.
A. Deferral Contributions. Each Participant as described under
Subsection 1.23A may authorize the Company to reduce his/her future
Compensation by a percentage not to exceed the greater of (A) 25% of
his/her Base Salary and (B) 100% of his/her Bonus less all sums
required to be withheld from such Bonus under any applicable
federal, state or local law or regulation, and to have a
corresponding amount credited to his/her Accounts, in accordance
with Section 4.2, by filing a Deferral Agreement with the
Administrator during his/her initial Enrollment Period or any
subsequent Enrollment Period preceding the Plan Year during which
such Compensation will be earned.
Notwithstanding the foregoing, a Participant may not make
contributions to this Plan during any period for which contributions
must be suspended in accordance with Section
1.401(k)-l(d)(2)(iv)(B)(4) of the Income Tax Regulations as a
condition of the Participant's receipt of a hardship withdrawal from
any plan of the Company which includes a qualified cash or deferred
arrangement under Code Section 401(k), if such a plan is maintained
by the Company.
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B. Company Matching Contribution. The Company, on behalf of each
Participant who (i) is a member of a group designated by the
Administrator in accordance with Section 2.1 above as eligible for
Company Matching Contributions and (ii) elects to reduce his/her
Compensation by means of a Deferral Contributions, may make a
Matching Contribution in an amount which it, in its sole and
absolute discretion, determines as appropriate. The Company shall
make such determination on an annual basis prior to the beginning of
the Plan Year for which Participants are eligible for Company
Matching Contributions. Such Matching Contributions shall be
allocated to the Participants' Accumulation Accounts at such
Participants' elections made in accordance with Section 4.2.
C. Company Discretionary Contribution. At its sole and absolute
discretion, the Company may elect to make a Discretionary
Contribution to the Accounts of some or all of the Participants. The
amount of such Discretionary Contribution, if any, shall be
determined by the Company annually. Nothing in this Plan, however,
shall obligate the Company to make Discretionary Contributions for
the benefit of Participants in any Plan Year, nor to make identical
Contributions for the benefit of Participants in any Plan Year, and
the Company expressly reserves the right to make Discretionary
Contributions to such Participants in such amount or such
proportions as it deems warranted or appropriate; provided, however,
the Company shall not discriminate against any Plan Participant in
making Contributions under this provision on the basis of such
Participant's race, nationality, religion, gender, marital status or
disability. Discretionary Contributions shall be allocated to the
Participants' Accumulation Accounts at such Participants' elections
made in accordance with Section 4.2. Nothing in this Plan or any
other agreement or document shall represent or be construed to
represent an obligation or promise of the Company to make
Discretionary Contributions on behalf of a Participant at any time.
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3.2 Rules Governing Contributions.
A. Each annual election to defer is irrevocable.
B. The amount that a Participant elects to defer will be credited to
such Participant's Accounts concurrently with the date on which the
Participant would have otherwise received the amount deferred under
the Company's normal payroll distribution but for such deferral.
C. The minimum Deferral Contribution a Participant may make for any
Plan Year is two percent (2%) of his/her Compensation or, in the
case of an Employee designated as a Participant after the first day
of a Plan Year, two percent (2%) of his/her Compensation for the
remainder of such Plan Year. If the percentage elected in accordance
with Section 3.1 when applied to the sum of the Participant's Base
Salary plus Bonus for the Plan Year of reference does not produce an
amount at least equal two percent (2%) of his/her Compensation, any
Deferral Contributions made during such Plan Year shall be paid to
the Participant in the subsequent Plan Year and shall be included in
his/her taxable compensation for such Plan Year.
3.3 Distributable Benefit.
A. Deferral Contributions. The entire amount of the Deferral
Contributions and the earnings thereon shall always be a
Distributable Benefit.
B. Company Matching Contributions. A Participant's Accounts
attributable to the Company Matching Contributions and the earnings
thereon shall be considered a Distributable Benefit at a rate of
twenty percent (20%) per year for each Year of Service completed,
but in any event for no more than five (5) Years of Service.
C. Company Discretionary Contributions. A Participant's Accounts
attributable to Company Discretionary Contributions and the earnings
thereon shall become a Distributable Benefit in accordance with a
schedule established by the Administrator, in its sole and absolute
discretion, at the time such Discretionary Contributions are made to
the Plan.
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D. Non-Service Vesting. Notwithstanding any provision contained herein
to the contrary, if, prior to the time that the entire amount of the
Company Matching or Discretionary Contribution becomes a
Distributable Benefit
i. a Participant shall die or become disabled within the meaning
of Section 1.12 at any time while in the employ of the
Company, or
ii. a Participant retires in accordance with Section 1.26 above,
or
iii. more than fifty percent (50%) of the outstanding and issued
shares of stock of the Company is sold or exchanged within a
twelve (12) month period,
then that portion of the Company Matching or Discretionary
Contribution which has not yet become a Distributable Benefit shall
immediately become a Distributable Benefit to such Participant or
such Participant's beneficiary or estate, as the case may be, as of
the date of such Employee's death, Disability or Retirement, or the
sale or exchange of more than fifty percent (50%) of the outstanding
and issued shares of stock of the Company within a twelve (12) month
period.
3.4 Forfeitures. In the event that upon the Determination Date a
Participant's Distributable Benefit is less than the entire amount in
his/her Accounts, as provided in Section 3.3, the portion of such
Accounts in excess of the Distributable Benefit shall be applied against
the Company's future obligations under the Plan.
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SECTION 4
PARTICIPANT ACCOUNTS
4.1 Establishment of Accounts.
A. Any one or more of the following Accounts may be established on
behalf of each Participant in Class I:
i. Retirement Account.
ii. Education Account.
iii. Fixed Period Account.
B. A Retirement Account only may be established on behalf of each
Participant in Class II.
C. The above Accounts shall be collectively known as "Accumulation
Accounts".
4.2 Benefit Allocation. Each Participant shall submit to the Plan
Administrator before the close of the Enrollment Period, a written
statement specifying the Participant's allocation of anticipated
contributions to any one or more of the Accumulation Accounts
established for his/her benefit and the resultant benefits the
Participant has elected.
4.3 Irrevocable Allocation. A Participant may not modify, alter, amend or
revoke his/her allocation for a Plan Year after such Plan Year begins.
Further, amounts in one Account cannot be transferred to another
Account.
4.4 Directed Adjustment of Certain Accounts. A Participant may direct, by
written instruction delivered to the Plan Administrator, that his/her
Accumulation Accounts be valued as if they were invested in one or more
of the Investment Funds designated by the Plan Administrator for such
purpose. A Participant may select one or more Investment Funds in
multiples of one percent (1%) of the balance in an Account, and may make
a separate selection with respect to each Account. A Participant may
change his or her selection of Investment Funds no more than four (4)
times in one calendar year. An election shall be effective as soon as
administratively possible following the date of the change and shall
apply to new contributions and/or previous accumulations as the
Participant specifies.
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Each Participant's Accumulation Accounts shall be initially valued as of
the date on which the Company, in the event it elects to use a grantor
trust to accumulate funds in accordance with the provisions of Section
6.10, transfers contributions for investment in the Funds designated by
the Company for such purpose. Nothing in this Plan shall obligate the
Company to transfer funds to a grantor trust nor shall anything
contained herein be construed as obligating the Company to invest in the
Funds. The valuation of each Participant's Accumulation Accounts shall
be based upon the performance of the Investment Funds selected by the
Participant on each Valuation Date. The fair market value of an
Investment Fund shall be determined by the Plan Administrator and shall
represent the fair market value of all securities or other property held
in the respective Fund. A valuation summary of a Participant's Accounts
shall be prepared quarterly by the Plan Administrator.
If any Participant fails to file a designation, he/she shall be deemed
to have designated the Fund which the Administrator shall select and the
Participant, by such inaction, shall be deemed to have directed the
Administrator to make such selection.
4.5 Suballocation Within the Education and Fixed Period Accounts. A
Participant who allocates a portion of his/her anticipated contributions
to his/her Education Account may further allocate such contributions
among subaccounts established on behalf of any Eligible Dependent. A
Participant can have no more than five (5) subaccounts at any one time.
Further, the minimum deferral which a Participant can elect to make to
any such subaccount is $500. In the absence of such suballocation, all
contributions to the Participant's Education Account shall be equally
allocated to the Participant's Eligible Dependents. Further, a
Participant who allocates a portion of his/her anticipated contributions
to his/her Fixed Period Account may further allocate such contributions
between no more than two (2) subaccounts as provided in Section 5.3B
below. In the absence of such suballocation, all contributions to the
Participant's Fixed Period Account shall be allocated to a single Fixed
Period Account, to be distributed in accordance with Section 5.3C below.
A Participant may direct the adjustment of each subaccount separately
pursuant to Section 4.4.
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4.6 Funding Obligations of the Company.
A. Benefits are payable as they become due irrespective of any actual
investments the Company may make to meet its obligations. Neither
the Company nor any Trustee (in the event the Company elects to use
a grantor trust to accumulate funds in accordance with the
provisions of Section 6.10) shall be obligated to purchase or
maintain any asset, and any reference to investment or Investment
Funds is intended solely for the purpose of computing the value of
benefits. To the extent a Participant or any other person acquires a
right to receive payments from the Company under this Plan, such
right shall be no greater than the right of any unsecured creditor
of the Company. Neither this Plan nor any action taken pursuant to
the terms of this Plan shall be considered to create a fiduciary
relationship between the Company and the Participants or any other
persons, or to establish a trust in which the assets are beyond the
claims of any unsecured creditor of the Company.
B. Notwithstanding any provision contained herein to the contrary, the
Company expressly reserves the right to acquire life insurance
policies on the lives of Participants to satisfy its obligations to
pay benefits to such Participants in accordance with the terms of
this Plan. As a condition of participation in the Plan, each
Participant agrees to cooperate with the Company and the reputable
insurance company of its choosing in applying for, obtaining and
renewing such policies. In the event that the Company does acquire
such policies, the Company alone shall have the right to exercise
the incidents of ownership over such policies, including the right
to designate a beneficiary and to receive the proceeds of such
policies, and no Participant nor his/her Beneficiary shall have any
right in or claim against the policy on his/her life nor any of the
proceeds of such policy.
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SECTION 5
BENEFITS
5.1 Retirement Account.
A. If a Participant terminates his/her employment because of
Retirement, the Company shall pay him/her a benefit in the form
determined under Subsection B. based on the value of the
Distributable Benefit of his/her Retirement Account. If the
Participant is deceased, the benefit shall be paid to his/her
Beneficiary.
B. The Participant may elect any one of the following forms of payment
so long as the election is made in writing delivered to the Plan
Administrator before January 1st of the calendar year preceding the
calendar year in which the benefit of the Participant's or such
Participant's Beneficiary becomes payable.
i. The normal form of payment of benefits hereunder, and the form
of payments to be used if no other election is made, shall be
a single lump sum distribution of the value of the
Distributable Benefit of the Participant's Retirement Account.
ii. A Participant or such Participant's Beneficiary entitled to a
benefit hereunder may elect to receive his/her Distributable
Benefit in substantially equal annual installments over a
period not to exceed twenty (20) years. If any Beneficiary
receiving such installment payments hereunder dies, leaving no
further Beneficiary designated by the Beneficiary or the
Participant, any remaining balance of the Distributable
Benefit shall be paid to such deceased Beneficiary's estate in
a single sum.
The amount of the substantially equal payments described above
shall be determined by multiplying the Participant's
Retirement Account by a fraction, the numerator of which is
one (1) and the denominator of which in the first year of
payment equals the number of years over which benefits are to
be paid.
The amounts of the payments for each succeeding year shall be
determined by multiplying the Participant's Retirement Account
as of the applicable anniversary of the Determination Date by
a fraction, the numerator of which is one (1) and the
denominator of which equals the number of remaining years over
which benefits are to be paid.
iii. A Participant may receive a monthly annuity purchased with the
value of the Distributable Benefit of the Participant's
Retirement Account for the life of the Participant or a joint
life annuity purchased on the lives of the Participant and
his/her spouse.
iv. Notwithstanding any provision to the contrary, if the
Distributable Benefit of the Participant's Retirement Account
has a value of less than $10,000 at the time benefit payments
are to commence, then the Participant's benefit shall be paid
as a single lump sum as soon as administratively feasible
following termination.
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C. Commencement of Payment
i. If termination of the Participant's employment shall occur as
a result of the Participant's Retirement, the payment of
benefits described in Subsections A. and B. shall be made or
shall begin as soon as administratively practicable following
the Participant's Retirement. Notwithstanding the foregoing,
the Participant may elect, before January 1st of the calendar
year preceding the calendar year of Retirement, to have
payment of benefits hereunder begin at a later date, provided
that such date is not later than the first day of the second
full month following the Participant's attainment of age 70.
ii. If termination of the Participant's employment shall occur as
a result of any reason other than such Participant's
Retirement, the benefit described in Subsections A. and B.
shall be paid in a single lump sum within ninety (90) days of
the Participant's termination.
D. The amount in a Participant's Retirement Account in excess of
the Distributable Benefit at the time of termination of the
Participant's employment shall be applied against any future
obligation of the Company to other Plan Participants as soon as
possible following such termination.
5.2 Education Account.
A. On January 1 of the calendar year in which an Eligible Dependent
attains age 18, the Company shall pay to the Participant a
benefit, as soon after such January 1st and on each of the next
three anniversaries thereof as administratively practicable, in
an amount determined as follows:
Percentage of Distributable
January 1st Benefit in Eligible
of Year Dependent's Subaccount
1 25 %
2 33-1/3 %
3 50 %
4 100 %
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B. If a Participant's employment is terminated for any reason other
than Retirement and such Participant has a balance in his/her
Education Account, such balance shall be transferred to his/her
Retirement Account and distributed to the Participant in
accordance with Section 5.1.
C. Notwithstanding any provision to the contrary, if the
Distributable Benefit of an Eligible Dependent's subaccount has
a balance of less than $10,000 on the January 1 of the calendar
year in which such Eligible Dependent attains age 18, then the
balance shall be paid to the Participant in a single lump sum.
D. The amount in a Participant's Education Account in excess of the
Distributable Benefit at the time of termination of the
Participant's employment shall be applied against any future
obligation of the Company to other Plan Participants as soon as
possible following such termination.
5.3 Fixed Period Account.
A. A benefit equal to the lump sum value of the Distributable
Benefit in a Participant's Fixed Period Account shall be paid to
him/her within ninety (90) days of January 1 of the Plan Year
selected by such Participant.
B. A Participant may establish subaccounts under his/her Fixed
Period Account, with separate payment years for each such
subaccount. A Participant may have a maximum of two (2)
subaccounts at any time. The minimum initial deferral period for
each subaccount shall be five (5) years.
C. If a Participant's employment is terminated for any reason other
than Retirement and such Participant has a balance in his/her
Fixed Period Account, such balance shall be transferred to
his/her Retirement Account and distributed to the Participant in
accordance with Section 5.1.
D. The amount in a Participant's Fixed Period Account in excess of
the Distributable Benefit at the time of termination of the
Participant's employment shall be applied against any future
obligation of the Company to other Plan Participants as soon as
possible following such termination.
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5.4 Additional Accounts. The Company may, at its sole and absolute
discretion, establish for the benefit of the Plan Participants, such
additional accounts as it deems warranted and appropriate. In the
event that the Company does establish such additional accounts for
the benefit of Plan Participants, funds may be allocated to the
accounts for each Participant without regard to and independently of
any allocation election made by such Participant. Further, the
Company may make contributions to such accounts for the benefit of
all Plan Participants; provided, however, the Company shall not
discriminate against any Plan Participant in making Contributions
under this provision on the basis of such Participant's race,
nationality, religion, gender, marital status or disability.
Benefits from such additional accounts shall be payable, unless
otherwise provided by subsequent amendment of this Plan in
accordance with Section 5.1 above.
5.5 Beneficiary Designation
A. Each Participant, upon becoming eligible for participation in
the Plan, may designate a Beneficiary to receive the benefits
payable in the event of his/her death, and designate a successor
Beneficiary to receive any benefits payable in the event of the
death of any Beneficiary.
B. A Participant may change his/her Beneficiary at any time. All
Beneficiary designations and changes shall be made on an
appropriate form as designated by the Plan Administrator and
filed with the Plan Administrator.
C. If no person shall be designated by the Participant, or if the
designated Beneficiary shall not survive the Participant,
payment of his/her interest shall be made to the Participant's
estate.
5.6 Tax Withholding. To the extent required by the law in effect at the
time benefits are distributed pursuant to this Section 5, the Plan
Administrator shall cause to be withheld any taxes required by the
federal or any state or local government from payments made
hereunder.
5.7 Judicial Intervention. Notwithstanding any provision contained
herein to the contrary, neither the Company, the Administrator nor
the Trustee shall be obligated to make or remit any payment to any
Participant or Beneficiary otherwise entitled to such payment to the
extent that the Company, Plan Administrator or Trustee is prohibited
from so doing by any court of law or any other judicial or
administrative body or agency. In the event that such prohibition
exists, such payment shall be made upon the earlier of the
expiration of the order prohibiting the payment or the entry of a
final order directing the Company, Plan Administrator or Trustee to
make such payment.
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SECTION 6
ADMINISTRATION
6.1 Appointment of Administrator. The Company shall appoint an
individual or a committee to serve as Administrator of the Plan. The
Administrator may be removed by the Company at any time, and any
individual may resign as Administrator at any time by submitting
his/her resignation in writing to the Company. A new Administrator
shall be appointed by the Company as soon as practicable in the
event of a removal or resignation. Any person so appointed shall
signify his/her acceptance by filing a written acceptance with the
Company.
6.2 Administrator's Responsibilities. The Administrator is responsible
for the day-to-day administration of the Plan. The Administrator may
appoint other persons or entities to perform any of its fiduciary
functions. Such appointment shall be made and accepted by the
appointee in writing and shall be effective upon the written
approval of the Company. The Administrator and any such appointee
may employ advisors and other persons necessary or convenient to
help it carry out its duties, including its fiduciary duties. The
Administrator shall have the right to remove any such appointee from
its position. Any person, group of persons or entity may serve in
more than one fiduciary capacity.
6.3 Records and Accounts. The Administrator shall maintain or shall
cause to be maintained accurate and detailed records and accounts of
Participants and of their rights under the Plan, and of all deemed
investments, receipts, disbursements and other transactions. Such
accounts, books and records relating thereto shall be open at all
reasonable times to inspection and audit by the Company and by
persons designated thereby.
6.4 Administrator's Specific Powers and Duties. In addition to any
powers, rights and duties set forth elsewhere in the Plan, the
Administrator shall have the following powers and duties:
A. to adopt such rules and regulations consistent with the
provisions of the Plan;
B. to enforce the Plan in accordance with its terms and any rules
and regulations it establishes;
C. to maintain records concerning the Plan sufficient to prepare
reports, returns and other information required by the Plan or
by law;
D. to construe and interpret the Plan and to resolve all questions
arising under the Plan;
E. to direct the Company or Trustee to pay benefits under the Plan,
and to give such other directions and instructions as may be
necessary for the proper administration of the Plan;
F. to be responsible for the preparation, filing and disclosure on
behalf of the Plan of such documents and reports as are required
by any applicable federal or state law; and
G. to determine the Distributable Benefit of a Participant's
Accounts.
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6.5 Company's Responsibility to Administrator. The Company shall furnish
the Administrator with such data and information as it may require.
The records of the Company shall be determinative of each
Participant's period of employment, termination of employment and
the reason therefor, leave of absence, re-engagement, Years of
Service, personal data, and Compensation. Participants and their
Beneficiaries shall furnish to the Administrator such evidence, data
or information, and execute such documents as the Administrator
requests.
6.6 Liability. Neither the Administrator nor the Company shall be liable
to any person for any action taken or omitted in connection with the
administration of this Plan unless attributable to its own fraud or
willful misconduct; nor shall the Company be liable to any person
for such action unless attributable to gross negligence or willful
misconduct on the part of a director, officer or agent of the
Company.
6.7 Payment of Expenses. All expenses of the Administrator incurred in
the operation or administration of this Plan shall be paid by
Company.
6.8 Indemnity of Administrator. Company shall indemnify the
Administrator or any individual who is a delegate of the
Administrator against any and all claims, loss, damage, expense or
liability arising from any action or failure to act, except when due
to gross negligence or willful misconduct.
6.9 Substitute Payee. If a Participant or Beneficiary entitled to
receive any benefits hereunder is in his/her minority, or is, in the
judgment of the Administrator, legally, physically, or mentally
incapable of personally receiving and receipting any distribution,
the Administrator may make distributions to a legally appointed
guardian or to such other person or institution as, in the judgment
of the Administrator, is then maintaining or has custody of the
payee.
6.10 Trust Fund. The Company reserves the right to establish, subject to
the provisions of Subsection 4.6, a trust for the purpose of
accumulating funds to assist the Company in satisfying its
obligations under the Plan, and to appoint an individual or
corporate trustee to administer and distribute said trust.
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SECTION 7
CLAIMS PROCEDURE
7.1 Claim. If a Participant, Beneficiary or his/her representative is
denied all or a portion of an expected Plan benefit for any reason
and the Participant, Beneficiary or his/her representative desires
to dispute the decision of the Administrator, he/she must file a
written notification of his/her claim with the Administrator. The
Administrator shall provide the Participant or Beneficiary, within
sixty (60) days of the filing of the claim in writing, sent by mail
to the Participant's or Beneficiary's or representative's last known
address, the following information:
A. the specific reasons for the denial;
B. the specific reference to the pertinent Plan provision on which
the denial is based;
C. if applicable, a description of any additional information or
material necessary to perfect the claim, and an explanation of
why such information or material is necessary; and
D. an explanation of the claims review procedure and the time
limitations of the review procedure applicable thereto.
7.2 Review Procedure. A Participant or Beneficiary or his/her
representative is entitled to request a review of any denial of
his/her claim by the Administrator. The request for review must be
submitted to the Administrator in writing within sixty (60) days of
mailing of the information provided under Section 7.1 above. Absent
a request for review within the 60 day period, the claim will be
deemed to be conclusively denied. The Participant, Beneficiary or
his/her representative shall be entitled to review all pertinent
documents and to submit issues and comments in writing. The
Administrator shall provide a full and fair review, of the claim and
render the final decision.
7.3. Final Decision. Within sixty (60) days of mailing of a request for
review, the Administrator shall allow or deny the claim, unless
special circumstances require an extension (such as for a hearing);
provided, however, that in no event shall the decision be delayed
beyond one hundred twenty (120) days after receipt of the request
for review. The decision shall be communicated in writing to the
Participant, Beneficiary or his/her representative. The decision
shall recite the facts and reasons for denial, with specific
reference to the pertinent Plan provisions.
7.4 Satisfaction of Liability. After all benefits have been distributed
in full to a Participant or to his/her Beneficiary, all liability to
such Participant or to his/her Beneficiary shall cease.
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<PAGE>
SECTION 8
AMENDMENT AND TERMINATION
8.1 Plan Amendment. The Plan may be amended or otherwise modified, other
than as provided in Section 8.3 below, by the Company, in whole or
in part, either retroactively or prospectively, provided that no
amendment or modification shall, with respect to contributions
already credited, change the amount of contributions under Section
3.1, or lengthen the time periods for determining the Distributable
Benefit under Section 3.3.
8.2 No Premature Distribution. Subject to Section 8.3, no amendment
hereto shall permit amounts accumulated prior to the amendment to be
paid to a Participant or Beneficiary prior to the time he/she would
otherwise be entitled thereto.
8.3 Termination of the Plan. The Company reserves the right to terminate
the Plan and/or the Deferral Agreement pertaining to any Participant
at any time prior to the commencement of benefits. In the event the
Plan is terminated, the Company shall pay a benefit to each
Participant, or the Beneficiary of any deceased Participant, in lieu
of other benefits hereunder, an amount equal to the entire value of
such Participant's Accumulation Accounts, including the amount of
the Distributable Benefit of each such Account, as well as any
amount to which the Participant, or the Beneficiary, would otherwise
not be entitled under Section 3.3. In the event the Deferral
Agreement of any Participant is terminated, such Participant shall
be deemed a Participant as long as he/she retains an Account for all
purposes except for the right to make further contributions to such
Account.
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<PAGE>
SECTION 9
MISCELLANEOUS
9.1 Supplemental Benefits. The benefits provided for the Participants
under this Plan are in addition to benefits provided by any other
plan or program of the Company and, except as otherwise expressly
provided herein, the benefits of this Plan shall supplement and
shall not supersede any plan or agreement between the Company and
any Participant or any provisions contained herein.
9.2 Governing Law. The Plan shall be governed and construed under the
laws of the State of Connecticut.
9.3 Jurisdiction. The courts of Connecticut shall have exclusive
jurisdiction in any or all actions arising under this Plan.
9.4 No Assignment Permitted. No benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer,
assignment, pledge encumbrance or charge, and any such action shall
be void for all purposes of the Plan. No benefit shall in any manner
be subject to the debts, contracts, liabilities, engagements or
torts of any person, nor shall it be subject to attachments or other
legal process for or against any person, except to such extent as
may be required by law.
9.5 Binding Terms. The terms of this Plan shall be binding upon and
inure to the benefit of the parties hereto, their respective heirs,
executors, administrators, successors and assigns.
9.6 Spendthrift Provision. The interest of any Participant or
Beneficiary receiving payments hereunder shall not be subject to
anticipation, nor to voluntary or involuntary alienation, until
distribution is actually made.
9.7 Headings. All headings preceding the text of the several Sections
hereof are inserted solely for reference and shall not constitute a
part of this Plan, nor affect its meaning, construction or effect.
9.8 Rule of Interpretation. Where appropriate, words in the masculine
gender shall include the feminine and neuter genders.
9.9 Limitation of Rights. Neither the establishment of the Plan or a
trust agreement (in accordance with Section 6.10), nor any
modification thereof, nor the creation of an Account, nor the
payment of any benefits shall be construed as giving any
Participant, Beneficiary or any other person whomsoever, any legal
or equitable right against the Company or the Plan Administrator
unless such right shall be specifically provided for in the Plan or
trust agreement or conferred by affirmative action of the Plan
Administrator in accordance with the terms and provisions of the
Plan, or as giving any Participant the right to be retained in the
service of the Company, and all Participants and other agents shall
remain subject to termination to the same extent as if the Plan had
never been adopted.
9.10 Severability. Should any provision of the Plan or any regulations
adopted thereunder be deemed or held to be unlawful or invalid for
any reason, such fact shall not adversely affect the other
provisions or regulations unless such invalidity shall render
impossible or impractical the functioning of the Plan and, in such
case, the appropriate parties shall immediately adopt a new
provision or regulation to take the place of the one held illegal or
invalid.
IN WITNESS WHEREOF, the Company hereby adopts the above Deferred
Compensation Plan as of the date first above written.
ATTEST AIR EXPRESS INTERNATIONAL
CORP.
________________________ By:_______________________
, Secretary ,
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