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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the Fiscal Year Ended March 30, 1996
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to .
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Commission file number 0-14643
KENT ELECTRONICS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Texas 74-1763541
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
7433 Harwin Drive 77036-2015
Houston, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (713) 780-7770
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, without par value New York Stock Exchange, Inc.
(Title of each class) (Name of each exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of May 7, 1996 was approximately $884,248,622.
As of May 7, 1996 there were outstanding 23,937,176 shares of Common
Stock, without par value.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for the 1996 Annual Meeting of Shareholders of the
Registrant (Sections entitled "Common Stock Outstanding and Principal Holders
Thereof" and "Proposal No. 1 - Election of Directors") is incorporated by
reference in Part III of this Report.
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<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Kent Electronics Corporation (the "Company") is a leading national
specialty distributor of electronic products and a manufacturer of
custom-made electronic assemblies. The Company, through its Kent Components
Distribution division, distributes electronic connectors, electronic wire and
cable, and other passive and electromechanical products and interconnect
assemblies used in assembling and manufacturing electronic products. The
Company, through its wholly owned subsidiary K * TEC Electronics Corporation
("K * TEC"), also manufactures custom-made electronic interconnect assemblies,
specially fabricated battery power packs, and other sub-assemblies that are
built to customers' specifications, and provides a wide variety of other fully
integrated electronic manufacturing services. Through Kent Datacomm
("Datacomm"), the Company distributes a broad range of premise wiring
products, such as fiber optic cables, patch panels and enclosures, and local
area network ("LAN") and wide area network ("WAN") equipment, such as modems,
hubs, bridges and routers, directly to commercial end-users and professionals
who install and service voice and data communications networks.
The Company has concentrated its efforts on certain market niches and has
not attempted to be a broad-line distributor. Moreover, it has followed a
strategy of distributing the products of a selected group of leading
suppliers. The Company believes that these factors provide its marketing
personnel with the advantage of greater familiarity with the products they
sell. The Company is increasingly focused on providing materials management
services, such as bar code auto replenishment, in-plant stores, and
electronic data interchange capabilities, that reduce its customers' total
acquisition costs. In response to customer needs and market opportunities,
the Company regularly reviews the possibility of adding other products and
services to its distribution network to provide customers with an entire
materials management solution. K * TEC concentrates on developing long-term
relationships with a select group of original equipment manufacturers
("OEMs") desiring to lower their total production cost through outsourcing.
The Company's customers are primarily industrial users and OEMs involved
in a wide range of industries, including the data communication/collection,
computer, industrial/capital goods and medical industries.
The Company maintains its primary distribution facility in Houston,
Texas, with sales offices in 18 states, some of which maintain a limited
amount of local inventory and provide selected services to support specific
customer needs. The Company operates manufacturing facilities in Houston and
Dallas, Texas and the San Jose, California area.
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DISTRIBUTION
GENERAL. The principal focus of the Company's distribution business,
conducted through its Components division, is to provide its industrial and
OEM customers with rapid and reliable deliveries of specialty wiring and
connector products and other passive and electromechanical products and
assembled parts as well as a wide variety of materials management services.
The Company utilizes a computerized inventory control system to assist in the
marketing of its products and coordinate purchases from suppliers with sales
to customers. The Company's computer system provides detailed on-line
information regarding the availability of the Company's entire stock of
inventory located at its stocking facilities as well as on-line access to the
inventories of most of the Company's major suppliers. Through the Company's
integrated real-time information system, customers' orders can readily be
tracked through the entire process of entering the order, reserving products
to fill the order, ordering components from suppliers, if necessary, and
shipping products to customers on scheduled dates. The Company is thus able
to provide the type of distributor service required by its OEM customers that
have adopted the "just-in-time" method of inventory procurement. The
"just-in-time" method is utilized in an effort to operate more efficiently
and profitably by relying on scheduled deliveries of such components at the
time they are needed in the production process and thereby reducing
inventories of components.
The principal products the Company distributes consist of connectors,
receptacles and sockets, which collectively accounted for approximately 15%,
19% and 20% of the Company's total sales in its fiscal years ended in 1996,
1995 and 1994, respectively, and other electronic connecting components, such
as cable and wiring products, which accounted for approximately 6%, 8% and 8%
of the Company's total sales in such years. In addition, the Company
distributes capacitors, resistors and electromechanical parts. Sales to
Compaq Computer Corporation represented 12.2% and 11.2% of net sales in 1996
and 1995, respectively. Sales to Applied Materials represented 13.0% and
10.3% of net sales for the same years, respectively. No customer constituted
10% or more of net sales in 1994.
As is customary in the electronic distribution industry, the Company
primarily operates under short-term contracts with its suppliers. In the
Company's past experience, such contracts have typically been renewed from
year to year. In the year ended March 30, 1996, the Company's purchases from
AMP Incorporated represented approximately 22% of its total purchases.
Although the Company believes that it may be able to obtain competitive
products of comparable quality from other suppliers, the loss of such
supplier could have an adverse impact on the Company's operations.
AFTERMARKET OPERATIONS. Datacomm serves the voice and data
communications after-market. Through a focused sales effort, Datacomm offers
a broad range of premise wiring products and LAN and WAN equipment to
commercial end-users and professionals who install or service voice and data
communications networks. Through such a marketing approach, the Company
believes it is able to participate directly in the large and rapidly growing
market for connection devices, reflecting the increasing use of
microcomputers in LANs and WANs and
3
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the continued growth in networking and cabling needs of minicomputer and
mainframe users. Datacomm can provide customers with immediate off-the-shelf
delivery of voice and data communications wiring products. The Company,
through Datacomm, is an authorized distributor of AMP, AT&T, Belden,
Cabletron and other LAN and WAN products. Datacomm serves numerous
industries, including financial, government, airline, medical, media, food,
manufacturing and aerospace.
MANUFACTURING
K * TEC provides fully integrated electronic manufacturing services,
including printed circuit board assembly and test, electronic interconnect
assemblies, specially fabricated battery power packs, subassemblies, sheet
metal, plastic injection molding and system integration (box build). The
Company has developed innovative material requirements planning (MRP)
relationships with a select group of OEMs in the data processing,
telecommunications, medical instrumentation and energy industries. These
relationships are supported by sophisticated in-house product design and
technical support capabilities. K * TEC support teams work closely with
K * TEC's customers through all stages of product planning and production to
apply the latest design and production technology. K * TEC's computer
systems have a computer aided design capability that allows its engineers to
be on-line with an OEM's engineer when developing and changing product
designs.
K * TEC's quality control standards provide another means of serving the
needs of the Company's just-in-time customers, since an important aspect of
the just-in-time method is that OEMs rely on suppliers to assure quality
control for subassemblies rather than providing such quality control
themselves. The Company believes that K * TEC's adherence to strict quality
control standards and investment in state-of-the-art production facilities
and equipment have attracted and retained important customers who have
established extremely rigid product quality standards.
Substantially all of the Company's manufacturing business is contract
manufacturing. The contract manufacturing business is generally
characterized by close working relationships with a select group of
customers. Sales of K * TEC's products represented approximately 44%, 38%
and 34% of the Company's total sales for the fiscal years ended in 1996, 1995
and 1994, respectively. The Company believes that its profit margins from
sales of manufactured products is generally greater than its profit margin on
sales of distributed products.
MARKETING
The Company's sales representatives undergo continuous training and
attend classes in order to enhance both their technical expertise and sales
techniques. Sales associates are compensated primarily on a commission
basis. The Company uses direct mailings of brochures and catalogs as well as
advertising in trade journals in the marketing of its products.
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The Company has concentrated its efforts in certain market niches in
which it only distributes the products of a select group of leading
suppliers. In addition, because sales personnel specialize within related
product groupings, they are able to develop a high degree of technical
expertise.
COMPETITION
The Company faces substantial competition from a large number of
distributors, suppliers and manufacturers, some of which are larger, have
greater financial resources, broader name recognition, and may, in some
instances, have lower costs than the Company.
The Company's manufacturing operations encounter competition from both
domestically manufactured products and products manufactured outside the
United States. Such foreign-manufactured products are often sold at prices
below the Company's prices for comparable products. The Company's products
are not protected from competition by virtue of any proprietary rights such
as trade secrets or patents. The Company competes by providing its customers
with reliable, rapid delivery of products that are priced at competitive
levels and meet strict quality control standards.
BACKLOG
Based upon the Company's internal backlog tracking system, and including
verbal orders from customers as well as written purchase orders, the Company
believes its backlog was approximately $51 million and $39 million at March 30,
1996 and April 1, 1995, respectively. Backlog has traditionally consisted
of orders the Company believed to be firm, a substantial portion of which were
scheduled for shipment within three months. Customers have generally been
permitted to modify, reschedule or cancel their orders without penalty. With
an increasing amount of the Company's business being conducted through
"just-in-time" and other materials management program methods, traditional
backlog is becoming a less meaningful indicator of future sales. Many of these
programs require that the Company provide materials in accordance with a
continually changing forecast. Although historically the Company's backlog
figures have provided an indication of sales in the short term, due to the
changing nature of the Company's business, backlog may no longer be a reliable
indicator of future sales.
EMPLOYEES
At March 30, 1996, the Company employed 1,191 persons, all on a full time
basis. The Company's employees are not subject to any collective bargaining
agreement. In addition to its employees, the Company uses other workers on a
contract basis, as its needs require.
TRADEMARKS
The Company has registered a number of trademarks and service marks
relating to the operation of its business. These have been of value to the
Company in the past and are expected to be of value in the future. The loss
of a single trademark or service mark other than "KE Kent Electronics" or
"K * TEC Electronics," in the opinion of management, would not have a material
adverse effect on the conduct of its business.
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ITEM 2. PROPERTIES
The Company's headquarters are located in a 66,000 square foot office
facility in Houston, Texas, of which approximately 56,000 square feet are
presently used by the Company. The Company also owns a 2.7 acre tract of
vacant land adjacent to the office facility. In nearby facilities, the
Company uses approximately 10,000 square feet of space for office purposes
and approximately 118,000 square feet for distribution and manufacturing
operations. The Company owns a 10.8 acre tract of vacant land adjoining
these Houston facilities. The distribution and manufacturing facilities in
Dallas, Texas are located in approximately 34,000 square feet of space and
are subject to a lease expiring in May 1999. The Company has a lease
expiring in April 1998 in the San Jose, California area covering
approximately 40,000 square feet for manufacturing facilities. The Company's
San Jose, California distribution facility contains approximately 13,000
square feet with a lease expiring in February 2000. The Company's St. Paul,
Minnesota distribution facilities comprise approximately 22,000 square feet
subject to a lease expiring in October 1997. At the end of fiscal 1996, the
Company's other facilities, located in Austin, Texas; Fountain Valley,
California; Seattle, Washington; Philadelphia, Pennsylvania; Wallingford,
Connecticut; Baltimore, Maryland; Syracuse, New York; Orlando, Florida; San
Diego, California; Phoenix, Arizona; Denver, Colorado; Kansas City, Kansas;
Cedar Rapids, Iowa; Huntsville, Alabama; Pine Brook, New Jersey; Boston,
Massachusetts; Portland, Oregon; Chicago, Illinois; and Raleigh, North Carolina
occupied an aggregate of approximately 103,000 square feet subject to leases
expiring at various times through the year 2000. Most of the leases are
subject to renewal at the option of the Company for a term at least equal to
the initial term, but at a newly determined rental rate.
In March 1995, the Company purchased a 66 acre parcel of land and
acquired a four-year option to purchase an adjacent 30 acres in Sugar Land,
Texas. In January 1996, the Company completed phase one of a K * TEC
facility at its Sugar Land location, consisting of approximately 210,000
square feet for manufacturing and warehouse operations and approximately
40,000 square feet for office purposes. Construction of the second phase of
this project, consisting of approximately 210,000 square feet, is planned to
begin during the first quarter of fiscal 1997 and is anticipated to take
approximately 7 months to complete. In addition to the K * TEC manufacturing
facility, the Company's new distribution facility of approximately 215,000
square feet to be located at its Sugar Land location is currently in the
design phase. The Company estimates construction on the distribution
facility will begin during the first quarter of fiscal 1997, with completion
within 18 to 24 months.
ITEM 3. LEGAL PROCEEDINGS
The Company is engaged in litigation occurring in the normal course of
business. In the opinion of management, based upon advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's consolidated financial statements.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
COMMON STOCK PRICE RANGE
The Company's Common Stock is listed on the New York Stock Exchange and
trades under the symbol "KNT." The following table presents the high and low
closing prices for the Common Stock for each fiscal quarter of the Company's
fiscal years ended 1995 and 1996 and for a portion of the Company's current
quarter, as reported by the New York Stock Exchange and as adjusted to
reflect (i) a three-for-two stock split to shareholders of record on February
15, 1995 effected on March 1, 1995 as a 50% stock dividend, and (ii) a
two-for-one stock split to shareholders of record on February 15, 1996,
effected on March 1, 1996 as a 100% stock dividend.
<TABLE>
<CAPTION>
HIGH LOW
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<S> <C> <C>
FISCAL YEAR ENDED 1995
First Quarter. . . . . . . . . . . $10.67 $ 8.92
Second Quarter . . . . . . . . . . 12.17 10.17
Third Quarter. . . . . . . . . . . 13.33 11.42
Fourth Quarter . . . . . . . . . . 15.38 12.92
FISCAL YEAR ENDED 1996
First Quarter. . . . . . . . . . . $18.94 $14.06
Second Quarter . . . . . . . . . . 22.38 18.75
Third Quarter. . . . . . . . . . . 29.25 19.31
Fourth Quarter . . . . . . . . . . 35.38 26.00
FISCAL YEAR ENDING 1997
First Quarter (through May 7). . . $43.25 $34.25
</TABLE>
On May 7, 1996, there were 1,137 holders of record of the Company's
Common Stock.
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DIVIDEND POLICY
Historically, the Company has reinvested earnings available to Common
Stock in its business and, accordingly, has not paid any cash dividends on
its Common Stock. Although the Company intends to continue to invest future
earnings in its business, it may determine at some future date that payment
of cash dividends on Common Stock would be desirable. The payment of any
such dividends would depend, among other things, upon the earnings and
financial condition of the Company.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected consolidated financial data of
the Company for each fiscal year of the five-year period ended March 30,
1996, and should be read in conjunction with the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------
MARCH 30, APRIL 1, APRIL 2, APRIL 3, MARCH 28,
1996 1995 1994 1993 1992
--------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating Statement Data:
Net sales. . . . . . . $372,019 $253,484 $192,887 $154,677 $ 94,695
Gross profit . . . . . 98,728 64,877 50,648 42,270 26,489
Earnings before
income taxes . . . . 46,885 22,075 15,379 12,162 9,166
Income taxes . . . . . 18,910 8,689 5,844 4,439 3,397
Net earnings . . . . . $ 27,975 $ 13,386 $ 9,535 $ 7,723 $ 5,769
Net earnings as a
percentage of sales . 7.5% 5.3% 5.0% 5.0% 6.1%
Earnings per share . . $ 1.22 $ 0.66 $ 0.48 $ 0.40 $ 0.34
Weighted average
shares. . . . . . . . 22,987 20,275 19,762 19,351 16,838
</TABLE>
<TABLE>
<CAPTION>
MARCH 30, APRIL 1, APRIL 2, APRIL 3, MARCH 28,
1996 1995 1994 1993 1992
--------- -------- -------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets . . . . . $277,461 $133,890 $114,507 $98,390 $84,581
Long-term debt, less
current maturities. . -- -- -- -- --
Stockholders' equity . 225,308 108,800 92,519 81,695 71,592
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents, as a percentage of sales, certain selected
consolidated financial data for each of the three years, as indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
MARCH 30, APRIL 1, APRIL 2,
1996 1995 1994
--------- ---------- ---------
<S> <C> <C> <C>
Manufacturing. . . . . . . . . . . . 44.2% 38.0% 34.4%
Distribution . . . . . . . . . . . . 55.8 62.0 65.6
----- ----- -----
Net sales. . . . . . . . . . . . . . 100.0 100.0 100.0
Cost of sales. . . . . . . . . . . . 73.5 74.4 73.7
----- ----- -----
Gross profit . . . . . . . . . . . . 26.5 25.6 26.3
Selling, general and administrative
expenses. . . . . . . . . . . . . . 15.0 17.3 18.7
----- ----- -----
Operating profit . . . . . . . . . . 11.5 8.3 7.6
Other income (expense)
Interest expense . . . . . . . . . -- -- --
Other - net (principally interest
and dividend income). . . . . . . 1.1 0.4 0.4
----- ----- -----
Earnings before income taxes . . . . 12.6 8.7 8.0
Income taxes . . . . . . . . . . . . 5.1 3.4 3.0
----- ----- -----
Net earnings . . . . . . . . . . . . 7.5% 5.3% 5.0%
----- ----- -----
----- ----- -----
</TABLE>
COMPARISON OF FISCAL YEAR 1996 WITH FISCAL YEAR 1995
Net sales for the fiscal year ended March 30, 1996 increased
$118,535,189, or 46.8%, when compared to the fiscal year ended April 1, 1995.
The sales increase reflected internal growth primarily from increased demand
from existing customers and an expanded customer base.
Gross profit increased $33,850,786, or 52.2%, compared to the preceding
year. Gross profit as a percentage of sales increased to 26.5% from 25.6% in
the prior year. The increase in gross profit was primarily due to increased
sales and an increase in the gross profit percentage that benefited from the
substantial gains in contract manufacturing as a percentage of total sales.
The Company believes that its profit margins from sales of manufactured
products are generally higher than its profit margins on sales of distributed
products.
Selling, general and administrative (SG&A) expenses increased
$11,833,358, or 26.9%, compared to the prior fiscal year. However, as a
percentage of sales, SG&A expenses declined to 15.0% from 17.3% in the
preceding year. The decline in SG&A expenses as a percentage of sales
reflects the Company's continued focus on cost containment to reduce such
expenses as
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a percentage of sales. The increase in SG&A expenses was
primarily due to the expenses necessary to support the growth in the
Company's existing operations.
Other-net consists principally of interest and dividend income generated
by cash, cash equivalents and trading securities. The increase in interest
and dividend income was primarily due to the invested net proceeds from the
September 1995 public offering.
Net earnings increased $14,589,133, or 109.0% when compared to the prior
year. The improved profitability was primarily due to the incremental profit
associated with the increase in sales volume, the increase in the gross
profit percentage and the Company's continued focus on cost containment.
COMPARISON OF FISCAL YEAR 1995 WITH FISCAL YEAR 1994
Net sales for the fiscal year ended April 1, 1995, increased $60,596,687,
or 31.4%, compared to the prior year. The sales increase reflected internal
growth, primarily from increased demand from existing customers and an
expanded customer base.
Gross profit increased $14,229,197, or 28.1%, when compared to the prior
year. Gross profit as a percentage of sales decreased to 25.6% from 26.3% in
the previous year. The decline in the gross profit percentage was primarily
due to the highly competitive conditions in the electronics and personal
computer industries, creating downward pressure on margins. The increase in
gross profit was primarily due to increased sales, partially offset by a
slight decline in the gross profit percentage.
SG&A expenses increased $7,904,923, or 22.0%, when compared to the
preceding year. As a percentage of sales, expenses decreased to 17.3% from
18.7% when compared to the previous year. The decline reflected the
Company's continued focus on cost containment to reduce expenses as a
percentage of sales. The increase in expense was primarily due to the
expenses necessary to support the growth of the Company's existing operations.
Other-net consisted principally of interest and dividend income generated
by cash, cash equivalents and trading securities. The increase in interest
income was due to the Company shifting a portion of available funds into a
higher yielding taxable investment vehicle from a tax exempt municipal money
market fund, and higher interest rates.
Net earnings increased $3,851,048, or 40.4%, when compared to the prior
year. The improved profitability was primarily due to the incremental profit
associated with the increase in sales volume.
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LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 30, 1996 was $165,682,111, an increase of
$99,363,687 from April 1, 1995. The increase was primarily the result of net
proceeds from the September 1995 public offering, as well as accounts
receivable growing in response to current sales levels and inventories
growing in anticipation of future sales.
Included in the Company's working capital at March 30, 1996 are
investments of $114,298,457. The Company's investment strategy is low-risk
and short-term, keeping the funds readily available to meet capital
requirements as they arise in the normal course of business. At March 30,
1996, funds were invested primarily in a reverse repurchase agreement, a
managed fund consisting primarily of taxable, high quality corporate debt
instruments, an institutional money market fund consisting primarily of
taxable, high quality money market type instruments and a portfolio managed
by a professional investment management firm. All are compatible with the
Company's stated investment strategy.
The Company intends to apply its capital resources to expand its business
by establishing or acquiring similar distribution and manufacturing
operations in geographic areas that are attractive to the Company, by
acquiring new facilities and by enlarging or improving existing facilities.
In addition to the capital required to purchase existing businesses or to
fund start-up operations, the expansion of the Company's operations at both
new and existing locations will require greater levels of capital to finance
the purchase of additional equipment, increased levels of inventory and
greater accounts receivable.
The Company is currently constructing the second phase of the K * TEC
manufacturing, warehouse and administrative facility and a new distribution
facility at its Sugar Land location which will require aggregate capital
expenditures of approximately $22 million in fiscal 1997 and approximately
$12 million in fiscal 1998. Management believes that current resources,
along with funds generated from operations, should be sufficient to meet its
current capital requirements and those anticipated in the near future.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Kent Electronics Corporation
We have audited the consolidated balance sheets of Kent Electronics
Corporation and Subsidiaries as of March 30, 1996 and April 1, 1995, and the
related consolidated statements of earnings, cash flows and stockholders'
equity for each of the three years in the period ended March 30, 1996. 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 audits 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 consolidated financial position of Kent
Electronics Corporation and Subsidiaries as of March 30, 1996 and April 1,
1995, and the consolidated results of their operations and cash flows for
each of the three years in the period ended March 30, 1996, in conformity
with generally accepted accounting principles.
GRANT THORNTON LLP
Houston, Texas
May 6, 1996
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KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 30, 1996 AND APRIL 1, 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (including
temporary investments of $75,551,602 in
1996 and $6,395,425 in 1995). . . . . . . $ 73,191,479 $ 4,434,457
Trading securities, net. . . . . . . . . . 38,746,855 16,832,467
Accounts receivable, net . . . . . . . . . 52,469,442 33,963,810
Inventories
Materials and purchased products . . . . 44,741,013 30,080,372
Work in process . . . . . . . . . . . . 3,413,779 3,039,140
------------ ------------
48,154,792 33,119,512
Other. . . . . . . . . . . . . . . . . . . 4,296,511 2,778,348
------------ ------------
Total current assets . . . . . . . . . 216,859,079 91,128,594
PROPERTY AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . 7,422,183 7,089,838
Buildings. . . . . . . . . . . . . . . . . 18,589,883 6,697,207
Equipment, furniture and fixtures. . . . . 34,444,175 26,205,888
Leasehold improvements . . . . . . . . . . 1,722,276 1,362,806
------------ ------------
62,178,517 41,355,739
Less accumulated depreciation and
amortization. . . . . . . . . . . . . (17,328,591) (13,620,455)
------------ ------------
44,849,926 27,735,284
DEFERRED INCOME TAXES. . . . . . . . . . . . 1,369,000 838,000
OTHER ASSETS . . . . . . . . . . . . . . . . 1,582,162 1,022,244
COST IN EXCESS OF NET ASSETS ACQUIRED, less
accumulated amortization of $1,994,127 in
1996 and $1,629,122 in 1995. . . . . . . . 12,801,855 13,166,859
------------ ------------
$277,462,022 $133,890,981
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable. . . . . . . . . . . . . $ 30,924,194 $ 15,479,278
Accrued compensation. . . . . . . . . . . 9,904,241 4,579,595
Other accrued liabilities . . . . . . . . 5,177,053 3,057,149
Income taxes. . . . . . . . . . . . . . . 5,171,480 1,694,148
------------ ------------
Total current liabilities . . . . . . 51,176,968 24,810,170
LONG-TERM LIABILITIES . . . . . . . . . . . 976,418 281,205
COMMITMENTS AND CONTINGENCIES . . . . . . . -- --
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value; authorized
2,000,000 shares; none issued. . . . . . -- --
Common stock, no par value; authorized
30,000,000 shares; issued and outstanding
23,937,176 shares in 1996 and 19,609,486
shares in 1995 . . . . . . . . . . . . . 38,335,899 34,742,597
Additional paid-in capital. . . . . . . . 110,154,419 25,213,946
Retained earnings . . . . . . . . . . . . 76,818,318 48,843,063
------------ ------------
225,308,636 108,799,606
------------ ------------
$277,462,022 $133,890,981
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED MARCH 30, 1996, APRIL 1, 1995 AND APRIL 2, 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . $372,018,931 $253,483,742 $192,887,055
Cost of sales. . . . . . . . . . . . 273,290,618 188,606,215 142,238,725
------------ ------------ ------------
Gross profit . . . . . . . . . . 98,728,313 64,877,527 50,648,330
Selling, general and administrative
expenses. . . . . . . . . . . . . . 55,750,449 43,917,091 36,012,168
------------ ------------ ------------
Operating profit . . . . . . . . 42,977,864 20,960,436 14,636,162
Other income (expense)
Interest expense . . . . . . . . . (20,004) (18,000) (15,000)
Other-net (principally interest
and dividend income). . . . . . . 3,927,495 1,132,686 757,912
------------ ------------ ------------
Earnings before income taxes . 46,885,355 22,075,122 15,379,074
Income taxes . . . . . . . . . . . . 18,910,100 8,689,000 5,844,000
------------ ------------ ------------
NET EARNINGS . . . . . . . . . $ 27,975,255 $ 13,386,122 $ 9,535,074
------------ ------------ ------------
------------ ------------ ------------
Earnings per share . . . . . . . . . $ 1.22 $ 0.66 $ 0.48
------------ ------------ ------------
------------ ------------ ------------
Weighted average shares. . . . . . . 22,986,500 20,275,000 19,762,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED APRIL 2, 1994, APRIL 1, 1995 AND MARCH 30, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
---------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Balance at April 3, 1993 . . . . . . 19,248,368 $32,035,669 $23,737,053 $25,921,867
Common stock issued upon exercise
of employee stock options,
including tax effect. . . . . . . . 126,750 666,891 -- --
Amortization of unearned
compensation related to stock
option plans. . . . . . . . . . . . -- -- 622,454 --
Net earnings for the year. . . . . . -- -- --
9,535,074
---------- ----------- ------------ -----------
Balance at April 2, 1994 . . . . . . 19,375,118 32,702,560 24,359,507 35,456,941
Common stock issued upon exercise of
employee stock options, including
tax effect. . . . . . . . . . . . . 235,202 2,040,037 -- --
Common stock split fractional
shares. . . . . . . . . . . . . . . (834) -- (16,325) --
Amortization of unearned
compensation related to stock
option plans. . . . . . . . . . . . -- -- 870,764 --
Net earnings for the year. . . . . . -- -- -- 13,386,122
---------- ----------- ------------ -----------
Balance at April 1, 1995 . . . . . . 19,609,486 34,742,597 25,213,946 48,843,063
Net proceeds from public stock
offering. . . . . . . . . . . . . . 4,000,000 20,000 83,825,670 --
Common stock issued upon exercise of
employee stock options, including
tax effect. . . . . . . . . . . . . 327,690 3,572,302 -- --
Common stock split . . . . . . . . . -- 1,000 (1,000)
Amortization of unearned compensation
related to stock option plans . . . -- -- 1,115,803 --
Net earnings for the year. . . . . . -- -- -- 27,975,255
---------- ----------- ------------ -----------
Balance at March 30, 1996. . . . . . 23,937,176 $38,335,899 $110,154,419 $76,818,318
---------- ----------- ------------ -----------
---------- ----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of this statement.
15
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 30, 1996, APRIL 1, 1995 AND APRIL 2, 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings . . . . . . . . . . . . $ 27,975,255 $13,386,122 $ 9,535,074
Adjustments to reconcile net
earnings to net cash provided by
operating activities
Depreciation and amortization . . 4,251,771 3,806,652 3,202,761
Provision for losses on accounts
receivable . . . . . . . . . . . 192,522 163,171 334,691
Loss (gain) on sale of property
and equipment. . . . . . . . . . 35,285 (268) 6,688
Stock option expense. . . . . . . 1,115,803 870,764 622,454
Unrealized (gains) losses on
trading securities . . . . . . . (44,547) 224,684 --
Unrealized losses on short-term
investments. . . . . . . . . . . -- -- 77,300
Net purchases of trading
securities . . . . . . . . . . . (21,869,841) (1,872,972) --
Change in assets and liabilities
Increase in accounts receivable (18,698,154) (8,088,900) (4,212,860)
Increase in inventories. . . . . (15,035,280) (9,919,652) (5,819,343)
Increase in other. . . . . . . . (1,518,163) (708,151) (375,091)
(Increase) decrease in other
assets. . . . . . . . . . . . . (601,625) (421,951) 3,942
(Increase) decrease in deferred
income taxes. . . . . . . . . . (531,000) 432,000 812,000
Increase (decrease) in accounts
payable. . . . . . . . . . . . 15,444,916 (910,333) 4,514,425
Increase in accrued
compensation . . . . . . . . . 5,324,646 2,057,693 288,398
Increase in other accrued
liabilities. . . . . . . . . . 2,119,904 1,036,733 399,723
Increase in income taxes. . . . 3,477,332 638,390 89,495
Increase in long-term
liabilities. . . . . . . . . . 695,213 281,205 --
------------ ----------- ------------
Net cash provided by
operating activities . . . 2,334,037 975,187 9,479,657
Cash flows from investing activities
Capital expenditures . . . . . . . . (21,042,565) (9,960,471) (5,751,781)
Net purchases of short-term
investments . . . . . . . . . . . . -- -- (15,261,479)
Proceeds from sale of property and
equipment . . . . . . . . . . . . . 47,578 13,850 16,223
------------ ----------- ------------
Net cash used by
investing activities . . . (20,994,987) (9,946,621) (20,997,037)
Cash flows from financing activities
Issuance of common stock . . . . . . 86,280,972 1,526,037 365,167
Payment for fractional shares. . . . -- (16,325) --
Tax effect of common stock issued
upon exercise of employee stock
options. . . . . . . . . . . . . . . 1,137,000 514,000 301,724
------------ ----------- ------------
Net cash provided by
financing activities . . . 87,417,972 2,023,712 666,891
------------ ----------- ------------
Net increase (decrease) in cash . . . 68,757,022 (6,947,722) (10,850,489)
Cash and cash equivalents at
beginning of year. . . . . . . . . . 4,434,457 11,382,179 22,232,668
------------ ----------- ------------
Cash and cash equivalents at end of
year . . . . . . . . . . . . . . . . $ 73,191,479 $ 4,434,457 $ 11,382,179
------------ ----------- ------------
------------ ----------- ------------
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . $ 20,004 $ 18,000 $ 15,000
Income taxes . . . . . . . . . . . . $ 16,235,768 $ 7,713,610 $ 4,813,667
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 30, 1996, APRIL 1, 1995 AND APRIL 2, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
PRINCIPLES OF CONSOLIDATION
Kent Electronics Corporation consolidates its accounts with those of its
wholly-owned subsidiaries. All material intercompany transactions have been
eliminated.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to the end of
March. The fiscal years ended March 30, 1996, April 1, 1995 and April 2,
1994 all consisted of 52 weeks.
USE OF ESTIMATES
In preparing the financial statements in conformity with generally
accepted accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company's presentation of cash includes cash equivalents. Cash
equivalents are defined as short-term investments with maturity dates at
purchase of ninety days or less.
Securities purchased under agreements to resell, reverse repurchase
agreements, result from transactions that are collateralized by negotiable
securities and are carried at the amounts at which the securities will
subsequently be resold. It is the policy of the Company not to take
possession of securities purchased under agreements to resell. At March 30,
1996, agreements to resell securities in the amount of $25,538,000 with a
two-day maturity were outstanding.
Temporary investments may be greater than the cash and cash equivalents
balance because they may be offset by individual bank accounts with a book
overdraft position within the same bank where multiple accounts are
maintained.
17
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TRADING SECURITIES AND SHORT-TERM INVESTMENTS
In 1995, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". This statement established standards of financial accounting
and reporting for investments in equity securities that have a readily
determinable fair value and for all investments in debt securities. The
Company has classified all investment securities as trading securities which
are measured at fair value in the financial statements with unrealized gains
and losses included in earnings. Net unrealized holding gains on trading
securities of $44,600 are included in net earnings for 1996 as indicated in
the following table:
<TABLE>
<S> <C>
Net Unrealized loss on trading securities at
beginning of year. . . . . . . . . . . . . . . . . . . . . . $302,000
Decrease in unrealized loss included in
earnings during the year . . . . . . . . . . . . . . . . . . (44,600)
--------
Net unrealized loss on trading securities at end of year. . . $257,400
--------
--------
</TABLE>
ACCOUNTS RECEIVABLE
The Company's allowance for doubtful accounts was $999,000 at March 30,
1996 and $979,000 at April 1, 1995.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are provided using the straight-line method over the estimated useful lives
of the related assets. Leasehold improvements are amortized over the life of
the lease or the service life of the improvements, whichever is shorter.
18
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired represents the excess of the
purchase price over the value of net assets acquired for previous
acquisitions, and is being amortized on a straight-line basis over 40 years.
on an ongoing basis, management reviews the valuation and amortization of the
cost in excess of net assets. as part of this review, the company considers
the current and future levels of net income generated by the related
acquisition to determine that no impairment has occurred.
NEW PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived assets to Be Disposed Of" (SFAS No. 121). SFAS No. 121
established guidance for the recognition and measurement of impairment losses
for long-lived assets and certain intangibles and valuation of long-lived
assets to be disposed. This Statement is effective for years beginning after
December 15, 1995. The Company does not expect the effect of SFAS No. 121 to
be material to the financial statements taken as a whole.
In 1995, the FASB also issued SFAS No. 123 "Accounting for Stock-Based
Compensation" (SFAS No. 123). the SFAS allows entities to compute
compensation cost related to employee stock options by either using a
fair-value-based method or by continuing to use the method prescribed in APB
No. 25 "Accounting for Stock Issued to Employees" (APB No. 25). Even if
entities plan to continue to apply apb no. 25, they will be required to adopt
the new disclosure requirements of SFAS No. 123. The effective date of this
Statement is for years beginning after December 15, 1995. The Company plans
to continue to apply APB No. 25.
2. INCOME TAXES
The company accounts for income taxes using the liability method. Under
the liability method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of
assets and liabilities as measured by the enacted tax rates which will be in
effect when these differences reverse. deferred tax expense is the result of
changes in deferred tax assets and liabilities.
19
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Currently payable. . . . . . . . . . . . $ 19,562,000 $8,308,000 $4,978,000
Tax reduction for exercise
of stock options credited to
stockholders' equity. . . . . . . . . . 1,137,000 514,000 302,000
Deferred (benefit) expense . . . . . . . (1,788,900) (133,000) 564,000
----------- ---------- ----------
$18,910,100 $8,689,000 $5,844,000
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
A reconciliation of income taxes computed at the statutory federal income tax
rate and income taxes reported in the consolidated statements of earnings
follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Tax at statutory rate. . . . . . . . . . $16,410,000 $7,726,000 $5,229,000
Increases (reductions)
State income taxes, net of federal tax
effect. . . . . . . . . . . . . . . . . 1,652,000 742,000 482,000
Other - net . . . . . . . . . . . . . . 848,100 221,000 133,000
---------- --------- ---------
Income taxes as reported. . . . . . . . $18,910,100 $8,689,000 $5,844,000
---------- --------- ---------
---------- --------- ---------
</TABLE>
20
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred tax assets and liabilities at March 30, 1996 and April 1, 1995
consist of the following:
<TABLE>
1996 1995
-------------- --------------
<S> <C> <C>
CURRENT DEFERRED ASSET
Allowance for doubtful accounts. . . . . . . . $ 395,000 $ 392,000
Capitalization of additional inventory
costs . . . . . . . . . . . . . . . . . . . . 870,000 672,000
Accrued expenses not currently
deductible, net of reversals. . . . . . . . . 517,000 320,000
Net operating losses . . . . . . . . . . . . . 320,000 330,000
Deferred compensation. . . . . . . . . . . . . 616,000 --
Other. . . . . . . . . . . . . . . . . . . . . 562,000 157,000
---------- ----------
$ 3,280,000 $1,871,000
---------- ----------
---------- ----------
LONG-TERM DEFERRED ASSET
Depreciation . . . . . . . . . . . . . . . . . (2,007,000) (1,763,000)
Fixed asset bases differences. . . . . . . . . 630,000 649,000
Stock compensation . . . . . . . . . . . . . . 1,291,000 861,000
Net operating losses . . . . . . . . . . . . . 770,000 1,091,000
Deferred compensation. . . . . . . . . . . . . 685,000 --
---------- ----------
$ 1,369,000 $ 838,000
---------- ----------
---------- ----------
</TABLE>
Acquired net operating losses are approximately $3,116,000 at March 30,
1996, expire in various amounts through 2003, and are subject to annual usage
limitations.
The current deferred asset is included in other current assets and the
long-term deferred asset is included in other assets in the accompanying
Balance Sheets.
21
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. COMMITMENTS AND CONTINGENCIES
The Company conducts a portion of its operations in leased office,
warehouse, and manufacturing facilities and leases transportation equipment.
Rent expense for 1996, 1995, and 1994 was approximately $2,036,000, $1,695,000
and $1,472,000, respectively.
The following is a schedule by years of minimum future rentals as of
March 30, 1996:
<TABLE>
<CAPTION>
Fiscal years
ending in Amount
------------ ------
<S> <C>
1997 $1,794,000
1998 1,513,000
1999 1,010,000
2000 550,000
2001 100,000
Thereafter 6,000
----------
Total minimum future rentals $4,973,000
----------
----------
</TABLE>
The Company has instituted a self-insurance program for employees' major
medical coverages. Claims under the self-insurance program are insured for
amounts greater than $50,000 per employee. The aggregate annual amount
self-insured varies based on participant levels and was limited to
approximately $2,100,000 as of March 30, 1996. Claims are accrued as
incurred and the total expense under the program was approximately
$2,103,000, $2,121,000 and $1,258,000 in 1996, 1995 and 1994, respectively.
The Company is engaged in litigation occurring in the normal course of
business. In the opinion of management, based upon advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's consolidated financial statements.
4. SALES TO MAJOR CUSTOMERS
Sales to Compaq Computer Corporation represented 12.2% and 11.2% of net
sales in 1996 and 1995, respectively. Sales to Applied Materials represented
13.0% and 10.3% of net sales for the same years, respectively. No customer
constituted 10% or more of net sales in 1994.
22
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. STOCKHOLDERS' EQUITY
FAIR PRICE PROVISION
The Company has adopted a fair price provision relating to certain
business combinations. The fair price provision provides that, except in
certain circumstances, a business combination between the Company and an
interested shareholder must be approved by the affirmative vote of the
holders of 80% of the outstanding voting stock, unless certain pricing and
procedural requirements regarding the business combination are satisfied.
STOCKHOLDER RIGHTS PLAN
The Company has adopted a stockholder rights plan, declaring a
distribution of one equity purchase right on each outstanding share of the
Company's common stock. Upon the occurrence of certain events, each right
would entitle the holder to purchase, at a price of $40, one one-hundredth of
a share of the Company's Series A Preferred Stock. Additionally, under
certain circumstances, the holder of rights may be entitled to purchase
either the Company's common stock or securities of an acquiring entity at
half of market value.
STOCK SPLIT
The Company's common stock was split three-for-two to stockholders of
record on February 15, 1995, and was effected as a 50% stock dividend. The
Company's common stock was split two-for-one to stockholders of record on
February 15, 1996, and was effected as a 100% stock dividend. All issued and
outstanding shares, stock option data and earnings per share amounts in the
consolidated financial statements have been restated to give effect to the
stock splits.
6. BENEFIT PLANS
STOCK OPTIONS
At March 30, 1996, the Company had nonqualified stock option plans which
allow for the grant of 5,982,500 common shares for options, of which
1,650,709 are available for future grants. Options granted under the plans
have a maximum term of 15 years and are exercisable under the terms of the
respective option agreements. Under some plans, options may be granted with
exercise prices of less than the stock's market value at the date of grant.
23
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Number of Option price
shares range
under option per share
------------ ------------
<S> <C> <C>
Outstanding at April 3, 1993 . . . 1,260,948 $2.00 - $8.80
Granted . . . . . . . . . . . 1,228,500 3.59 - 9.63
Exercised . . . . . . . . . . (126,750) 2.00 - 7.25
Lapsed/forfeited. . . . . . . (46,600) 2.05 - 8.59
--------- -------------
Outstanding at April 2, 1994 . . . 2,316,098 2.34 - 9.63
Granted . . . . . . . . . . . 143,250 9.13 - 13.88
Exercised . . . . . . . . . . (235,202) 2.34 - 8.80
Lapsed/forfeited. . . . . . . (43,502) 6.96 - 6.96
--------- -------------
Outstanding at April 1, 1995 . . . 2,180,644 3.43 - 13.88
Granted . . . . . . . . . . . 802,400 7.25 - 32.69
Exercised . . . . . . . . . . (327,691) 3.43 - 18.88
Lapsed/forfeited. . . . . . . (85,852) 6.96 - 19.19
--------- -------------
Outstanding at March 30, 1996. . . 2,569,501 $3.46 -$32.69
--------- -------------
--------- -------------
</TABLE>
At March 30, 1996, options representing 449,701 shares were exercisable.
24
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TAX-DEFERRED SAVINGS AND RETIREMENT PLAN AND TRUST
The Company sponsors a Tax-Deferred Savings and Retirement Plan (the Plan)
covering substantially all employees. Under the Plan, a participating employee
may allocate up to 12% of salary, and the Company makes matching contributions
of up to 3% thereof. Additionally, the Company may elect to make additional
contributions at its option. Such contributions accrue to employee accounts
regardless of whether they have elected to participate in the salary deferral
option of the Plan. The Company contributed approximately $618,000, $639,000
and $514,000 to the Plan in fiscal years ended March 30, 1996, April 1, 1995
and April 2, 1994, respectively.
The Company has deferred compensation plans for management and highly
compensated associates of the Company. Under one plan, a participant may elect
to defer a minimum of 3% of their compensation. The Company has agreed to
match the participant's compensation amount, limited to 50% of the first 6% of
compensation deferred. Participants become vested in the Company matching
contributions at the rate of 10% per plan year, or vest fully at age 60. Under
another deferred benefit plan, the participant will receive minimum annual
payments subsequent to retirement of the participant for the greater of 15
years or life.
Under the first plan, the Company has accrued at March 30, 1996 and April
1, 1995, approximately $976,000 and $281,000, respectively, for participant and
Company contributions which are recorded as long-term liabilities on the
Balance Sheet. Under the second plan, annual expense will range from $1.2
million to $1.6 million through March 31, 2001, based on accruing the present
value of the minimum benefits through the date the participant vests in the
payments.
7. EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of common
shares outstanding during each year. Options are included in periods where
they have a dilutive effect.
25
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial data for fiscal
years 1996, 1995 and 1994:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Year ended March 30, 1996
- -------------------------
Net sales . . . . . . . . . . . $77,585 $90,190 $100,059 $104,185
Gross profit. . . . . . . . . . 19,973 23,803 26,880 28,072
Net earnings. . . . . . . . . . 4,679 6,018 8,253 9,025
Earnings per share. . . . . . . 0.23 0.29 0.33 0.36
Year ended April 1, 1995
- ------------------------
Net sales . . . . . . . . . . . $56,527 $60,335 $64,462 $72,160
Gross profit. . . . . . . . . . 14,524 15,440 16,480 18,433
Net earnings. . . . . . . . . . 2,831 3,215 3,466 3,874
Earnings per share. . . . . . . 0.14 0.16 0.17 0.19
Year ended April 2, 1994
- ------------------------
Net sales . . . . . . . . . . . $43,245 $46,914 $49,238 $53,490
Gross profit. . . . . . . . . . 11,532 12,434 12,935 13,747
Net earnings. . . . . . . . . . 2,073 2,293 2,509 2,660
Earnings per share. . . . . . . 0.11 0.12 0.13 0.13
</TABLE>
26
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
In accordance with paragraph (3) of General Instruction G to Form 10-K,
Part III of this Report is omitted because the Registrant has filed with the
Securities and Exchange Commission, not later than 120 days after March 30,
1996, a definitive proxy statement pursuant to Regulation 14A involving the
election of directors. Reference is made to the sections of such proxy
statement entitled "Common Stock Outstanding and Principal Holders Thereof" and
"Proposal No. 1 -- Election of Directors" which sections of such proxy
statement are incorporated herein.
27
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)
1. FINANCIAL STATEMENTS:
PAGE
----
Report of Independent Certified Public Accountants . . . . . . . . . . . . 12
Consolidated balance sheets at March 30, 1996 and April 1, 1995. . . . . . 13
Consolidated statements of earnings for the years ended March 30, 1996,
April 1, 1995 and April 2, 1994 . . . . . . . . . . . . . . . . . . . 14
Consolidated statement of stockholders' equity for the years ended
April 2, 1994, April 1, 1995 and March 30, 1996 . . . . . . . . . . . 15
Consolidated statements of cash flows for the years ended March 30, 1996,
April 1, 1995 and April 2, 1994. . . . . . . . . . . . . . . . . . . 16
Notes to consolidated financial statements . . . . . . . . . . . . . . . . 17
2. FINANCIAL STATEMENT SCHEDULE:
Schedule II--Allowance for Doubtful Receivables for the years ended
April 2, 1994 , April 1, 1995 and March 30, 1996
3. EXHIBITS:
3.1* -- Articles of Incorporation of Kent Electronics Corporation,
including amendments thereto filed through July 2, 1987.
Incorporated by reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended April 2,
1988.
3.2* -- Articles of Amendment to Articles of Incorporation of Kent
Electronics Corporation. Incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-1
(Registration No. 33-24018) filed with the Securities and
Exchange Commission ("SEC") on August 26, 1988.
3.3* -- Certificate of Designation, Preferences and Rights of Series A
Preferred Stock. Incorporated by reference to Exhibit 3.3 to
the Company's Annual Report on Form 10-K for the Fiscal Year
Ended March 30, 1991 (the "1991 Form 10-K").
28
<PAGE>
3.4* -- Articles of Amendment to Articles of Incorporation of Kent
Electronics Corporation. Incorporated by reference to Exhibit
3.4 to 1991 Form 10-K.
3.5 -- Amended and Restated Bylaws of Kent Electronics Corporation.
4.1* -- Specimen stock certificate for the Common Stock of Kent
Electronics Corporation. Incorporated by reference to Exhibit
4.1 to the Company's Registration Statement on Form S-2
(Registration No. 33-40066) filed with the SEC on April 19,
1991 (the "1991 Registration Statement").
4.2* -- Rights Agreement dated as of May 14, 1990 between Kent
Electronics Corporation and Ameritrust Company National
Association. Incorporated by reference to Exhibit 4 to the
Company's Current Report on Form 8-K dated May 14, 1990.
4.3* -- First Amendment to Rights Agreement dated as of May 14, 1990
between Kent Electronics Corporation and Ameritrust Company
National Association. Incorporated by reference to Exhibit 4.3
to 1992 Form 10-K.
10.1* -- Chief Executive Stock Option Plan and Agreement between Kent
Electronics Corporation and Morrie K. Abramson dated July 24,
1991. Incorporated by reference to Exhibit 10.1 to 1992 Form
10-K.(1)
10.2* -- Amendment to Chief Executive Stock Option Plan between Kent
Electronics Corporation and Morrie K. Abramson dated June 26,
1992. Incorporated by reference to Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the Fiscal Year Ended
April 3, 1993 (the "1993 Form 10-K").(1)
10.3* -- Amendment to Chief Executive Officer Stock Option Plan and
Agreement between Kent Electronics Corporation and Morrie K.
Abramson dated June 30, 1994. Incorporated by reference to
Exhibit 10.4 to the Company's Annual Report on Form 10-K for
the Fiscal Year Ended April 1, 1995 (the "1995 Form 10-K").(1)
10.4* -- K * TEC President Stock Option Plan and Agreement between Kent
Electronics Corporation and Randy J. Corporron dated May 1,
1993. Incorporated by reference to Exhibit 10.4 to 1993 Form
10-K.(1)
10.5* -- K * TEC General Manager Stock Option Plan and Agreement between
Kent Electronics Corporation and Rodney J. Corporron dated May
1, 1993. Incorporated by referenced to Exhibit 10.5 to 1993
Form 10-K.(1)
29
<PAGE>
10.6* -- 1991 Non-Employee Director Stock Option Plan, as amended.
Incorporated by reference to Exhibit 10.2 to 1992 Form 10-K.(1)
10.7 -- 1996 Non-Employee Director Stock Option Plan.(1)
10.8* -- Amended and Restated 1987 Stock Option Plan. Incorporated by
reference to Exhibit 10.3 to 1992 Form 10-K.(1)
10.9* -- Amendments of Amended and Restated 1987 Stock Option Plan.
Incorporated by reference to Exhibit 10.8 to 1993 Form 10-K.(1)
10.10* -- Kent Electronics Corporation Stock Option Plan and Agreement for
the Company's Executive Vice President Sales-Distribution
between Kent Electronics Corporation and Larry D. Olson dated
May 8, 1995. Incorporated by reference to Exhibit 10.11 to
1995 Form 10-K.(1)
10.11* -- Kent Electronics Corporation Stock Option Plan and Agreement for
the Company's Executive Vice President Operations-Distribution
between Kent Electronics Corporation and Mark A. Zerbe dated
May 8, 1995. Incorporated by reference to Exhibit 10.12 to 1995
Form 10-K.(1)
10.12* -- Kent Electronics Corporation Stock Option Plan and Agreement for
the Company's Vice President, Secretary and Treasurer between
Kent Electronics Corporation and Stephen J. Chapko dated May 8,
1995. Incorporated by reference to Exhibit 10.13 to 1995 Form
10-K.(1)
10.13 -- Kent Electronics Corporation Stock Option Plan and Agreement for
the Company's Vice President, Corporate Controller between Kent
Electronics Corporation and David D. Johnson dated May 9,
1996.(1)
10.14 -- Kent Electronics Corporation 1996 Employee Incentive Plan.(1)
10.15 -- Kent Electronics Corporation Tax-Deferred Savings and Retirement
Plan and Trust (As Amended and Restated Effective March 26,
1989).(1)
10.16* -- Kent Electronics Corporation Deferred Compensation Plan dated
July 28, 1994. Incorporated by reference to Exhibit 10.15 to
1995 Form 10-K.(1)
10.17 -- First Amendment to the Kent Electronics Corporation Deferred
Compensation Plan.(1)
10.18* -- Trust Agreement for Kent Electronics Corporation Deferred
Compensation Plan dated July 28, 1994. Incorporated by
reference to Exhibit 10.16 to 1995 Form 10-K.(1)
30
<PAGE>
10.19* -- Contracts between Kent Electronics Corporation and AMP
Products Corporation effective as of July 22, 1988 and
July 31, 1986, respectively, and addenda thereto.
Incorporated by reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the Fiscal Year Ended April
1, 1989.
10.20* -- Form of Agreement by and between Kent Electronics
Corporation and Morrie K. Abramson dated March 16, 1993.
Incorporated by reference to Exhibit 10.21 to 1993 Form
10-K.(1)
10.21* -- Form of Executive Health Care Benefits and Consulting
Agreement by and between Kent Electronics Corporation and
Morrie K. Abramson dated January 27, 1993. Incorporated
by reference to Exhibit 10.22 to 1993 Form 10-K.(1)
10.22 -- Employment Agreement dated January 3, 1996 by and between
Morrie K. Abramson and Kent Electronics Corporation.(1)
10.23 -- Kent Electronics Corporation Chief Executive Officer
Deferred Compensation Plan and Agreement dated January 3,
1996 by and between Kent Electronics Corporation and
Morrie K. Abramson.(1)
10.24 -- Trust Agreement for Kent Electronics Corporation Chief
Executive Officer Deferred Compensation Plan and Agreement
and Employment Agreement dated January 3, 1996 by and
between Kent Electronics Corporation and Texas Commerce
Bank National Association, as trustee.(1)
10.25* -- Special Warranty Deed from Sugarland Properties Incorporated
to Kent Electronics Corporation dated March 7, 1995 for 51
acres of land. Incorporated by reference to Exhibit 10.23
to 1995 Form 10-K.
10.26* -- Special Warranty Deed from Sugarland Properties Incorporated
to Kent Electronics Corporation dated March 7, 1995 for 15
acres of land. Incorporated by reference to Exhibit 10.24
to 1995 Form 10-K.
10.27* -- Development and Construction Management Agreement by and
between Sugarland Properties Incorporated and Kent
Electronics Corporation dated April 21, 1995.
Incorporated by reference to Exhibit 10.25 to 1995 Form
10-K.
10.28* -- Irrevocable Standby Letter of Credit with Texas Commerce
Bank National Association dated May 2, 1995. Incorporated
by reference to Exhibit 10.26 to 1995 Form 10-K.
31
<PAGE>
11 -- Computation of earnings per share.
21 -- Subsidiaries of Kent Electronics Corporation.
23.1 -- Consent of Independent Certified Public Accountants.
27 -- Financial Data Schedule.
- ----------------
* Incorporated by reference.
(1) Management contract or compensatory plan or agreement
(B) REPORTS ON FORM 8-K:
None.
32
<PAGE>
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 of the undersigned, thereunto duly authorized.
KENT ELECTRONICS CORPORATION
(Registrant)
By: /s/ MORRIE K. ABRAMSON
-------------------------------------
Morrie K. Abramson
Chairman of the Board, Chief
Executive Officer and President
(Principal Executive Officer)
Date: June 10, 1996
33
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- -----
/s/ MORRIE K. ABRAMSON Chairman of the Board, Chief Executive June 10, 1996
- ------------------------ Officer, President and Director
Morrie K. Abramson (Principal Executive Officer)
/s/ STEPHEN J. Chapko Vice President, Treasurer and June 10, 1996
- ------------------------ Secretary (Principal Financial
Stephen J. Chapko Officer)
/s/ DAVID D. JOHNSON Vice President, Corporate Controller June 10, 1996
- ------------------------ (Principal Accounting Officer)
David D. Johnson
/s/ MAX S. LEVIT Director June 10, 1996
- ------------------------
Max S. Levit
/s/ DAVID SIEGEL Director June 10, 1996
- ------------------------
David Siegel
/s/ RICHARD C. WEBB Director June 10, 1996
- ------------------------
Richard C. Webb
/s/ ALVIN L. ZIMMERMAN Director June 10, 1996
- ------------------------
Alvin L. Zimmerman
34
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS ON SCHEDULE
Board of Directors and Stockholders
Kent Electronics Corporation
In connection with our audit of the consolidated financial statements of
Kent Electronics Corporation and Subsidiaries for the year ended March 30,
1996, we have also audited Schedule II for each of the three years in the
period ended March 30, 1996. In our opinion, this consolidated schedule
presents fairly, in all material respects, the information required to be set
forth therein.
GRANT THORNTON LLP
Houston, Texas
May 6, 1996
S-1
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED APRIL 2, 1994, APRIL 1, 1995 AND MARCH 30, 1996
ALLOWANCE FOR DOUBTFUL RECEIVABLES
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -----------------------------------------------------------------------------------------
Additions Deductions
-------------------- -----------
(1) (2)
Charged Charged
Balance at to costs to other Balance at
beginning and accounts Amounts end of
Description of period expenses recoveries written-off period
- ------------------------------ ---------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended April 2, 1994 . . . $798,684 $334,691 $16,199 $194,836 $954,738
Year ended April 1, 1995 . . . 954,738 163,171 0 139,024 978,885
Year ended March 30, 1996. . . 978,885 192,522 12,307 184,340 999,374
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. ITEM NUMBERED PAGES
- ----------- ---- --------------
3.5 Amended and Restated Bylaws of Kent Electronics
Corporation.
10.7 1996 Non-Employee Director Stock Option Plan.
10.13 Kent Electronics Corporation Stock Option Plan and
Agreement for the Company's Vice President,
Corporate Controller between Kent Electronics
Corporation and David D. Johnson dated May 9, 1996.
10.14 Kent Electronics Corporation 1996 Employee Incentive
Plan.
10.15 Kent Electronics Corporation Tax-Deferred Savings
and Retirement Plan and Trust (As Amended and
Restated Effective March 26, 1989).
10.17 First Amendment to the Kent Electronics Corporation
Deferred Compensation Plan.
10.22 Employment Agreement dated January 3, 1996 between
Morrie K. Abramson and Kent Electronics Corporation.
10.23 Kent Electronics Corporation Chief Executive Officer
Deferred Compensation Plan and Agreement dated
January 3, 1996 between Kent Electronics Corporation
and Morrie K. Abramson.
10.24 Trust Agreement for Kent Electronics Corporation
Chief Executive Officer Deferred Compensation Plan
and Agreement and Employment Agreement dated
January 3, 1996 between Kent Electronics Corporation
and Texas Commerce Bank National Association, as
trustee.
11 Computation of earnings per share.
21 Subsidiaries of Kent Electronics Corporation.
23.1 Consent of Independent Certified Public Accountants.
27 Financial Data Schedule.
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
KENT ELECTRONICS CORPORATION
(the "Company")
OFFICES
SECTION 1.1 OFFICES. The principal business office of the Company
shall be in the City of Houston, Harris County, Texas. The Company may have
such other business offices within or without the State of Texas as the board
of directors may from time to time establish.
ARTICLE II
CAPITAL STOCK
SECTION 2.1 CERTIFICATE REPRESENTING SHARES. Shares of the capital
stock of the Company shall be represented by certificates in such form or
forms as the board of directors may approve, provided that such form or forms
shall comply with all applicable requirements of law or of the articles of
incorporation. Such certificates shall be signed by the chairman of the
board, the president or a vice president, and by the secretary or an
assistant secretary, of the Company and may be sealed with the seal of the
Company or imprinted or otherwise marked with a facsimile of such seal. In
the case of any certificate countersigned by any transfer agent or registrar,
provided such countersigner is not the Company itself or an employee thereof,
the signature of any or all of the foregoing officers of the Company may be
represented by a printed facsimile thereof. If any officer whose signature,
or a facsimile thereof, shall have been set upon any certificate shall cease,
prior to the issuance of such certificate, to occupy the position in right of
which his signature, or facsimile thereof, was so set upon such certificate,
the Company may nevertheless adopt and issue such certificate with the same
effect as if such officer occupied such position as of such date of issuance;
and issuance and delivery of such certificate by the Company shall constitute
adoption thereof by the Company. The certificates shall be consecutively
numbered, and as they are issued, a record of such issuance shall be entered
in the books of the Company.
SECTION 2.2 STOCK CERTIFICATE BOOK AND SHAREHOLDERS OF RECORD. Except
as to any class of the Company's stock as to which it has appointed a
transfer agent and registrar pursuant to Section 2.5, the secretary of the
Company shall maintain, among other records, a stock certificate book, the
stubs in which shall set forth the names and addresses of the holders of all
issued shares of the Company, the number of shares held by each, the number
of certificates representing such shares, the date of issue of such
certificates, and whether or not such shares originate from original issue or
from transfer. The names and addresses of shareholders as they appear on the
<PAGE>
stock certificate book or the records of such transfer agent shall be the
official list of shareholders of record of the Company for all purposes. The
Company shall be entitled to treat the holder of record of any shares as the
owner thereof for all purposes, and shall not be bound to recognize any
equitable or other claim to, or interest in, such shares or any rights
deriving from such shares on the part of any other person, including, but
without limitation, a purchaser, assignee, or transferee, unless and until
such other person becomes the holder of record of such shares, whether or not
the Company shall have either actual or constructive notice of the interest
of such other person.
SECTION 2.3 SHAREHOLDER'S CHANGE OF NAME OR ADDRESS. Each shareholder
shall promptly notify the secretary of the Company, at its principal business
office, by written notice sent by certified mail, return receipt requested,
of any change in name or address of the shareholder from that as it appears
upon the official list of shareholders of record of the Company. The
secretary of the Company shall then enter such changes into all affected
Company records, including, but not limited to, the official list of
shareholders of record.
SECTION 2.4 TRANSFER OF STOCK. The shares represented by any
certificate of the Company are transferable only on the books of the Company
by the holder of record thereof or by his duly authorized attorney or legal
representative upon surrender of the certificate for such shares, properly
endorsed or assigned. The board of directors may make such rules and
regulations concerning the issue, transfer, registration and replacement of
certificates as they deem desirable or necessary.
SECTION 2.5 TRANSFER AGENT AND REGISTRAR. The board of directors may
appoint one or more transfer agents or registrars of the shares, or both, and
may require all share certificates to bear the signature of a transfer agent
or registrar, or both.
SECTION 2.6 LOST, STOLEN OR DESTROYED CERTIFICATES. The Company may
issue a new certificate for shares of stock in the place of any certificate
theretofore issued and alleged to have been lost, stolen or destroyed, but
the board of directors may require the owner of such lost, stolen or
destroyed certificate, or his legal representative, to furnish an affidavit
as to such loss, theft, or destruction and to give a bond in such form and
substance, and with such surety or sureties, with fixed or open penalty, as
the board may direct, in order to indemnify the Company and its transfer
agents and registrars, if any, against any claim that may be made on account
of the alleged loss, theft or destruction of such certificate.
SECTION 2.7 FRACTIONAL SHARES. Only whole shares of the common stock
of the Company shall be issued. In case of any transaction by reason of
which a fractional share of common stock might otherwise be issued, the
directors, or the officers in the exercise of powers delegated by the
directors, shall take such measures consistent with the law, the articles of
incorporation and these bylaws, including (for example, and not by way of
limitation) the payment in cash of an amount equal to the fair value of any
fractional share of common stock as they may deem proper to avoid the
issuance of any fractional share of common stock. The Company may issue
fractional shares of preferred stock.
2
<PAGE>
ARTICLE III
THE SHAREHOLDERS
SECTION 3.1 ANNUAL MEETING. The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as
may properly come before the meeting, shall be held at the principal office
of the Company, at 2:00 p.m. local time, on the second Tuesday in August of
each year commencing in the calendar year 1987, unless such day is a legal
holiday, in which case such meeting shall be held at such hour on the first
day thereafter which is not a legal holiday; or at such other place and time
as may be designated by the board of directors. Failure to hold any annual
meeting or meetings shall not work a forfeiture or dissolution of the Company.
SECTION 3.2 SPECIAL MEETINGS. Except as otherwise provided by law or
by the articles of incorporation, special meetings of the shareholders may be
called by the chairman of the board of directors, the president, any one of
the directors, or the holders of not less than one-tenth of all the shares
having voting power at such meeting, and shall be held at the principal
office of the Company or at such other place, and at such time, as may be
stated in the notice calling such meeting. Business transacted at any special
meeting of shareholders shall be limited to the purpose stated in the notice
of such meeting given in accordance with the terms of section 3.3.
SECTION 3.3 NOTICE OF MEETINGS - WAIVER. Written or printed notice of
each meeting of shareholders, stating the place, day and hour of any meeting,
and in the case of a special shareholder's meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10)
nor more than sixty (60) days before the date of the meeting, either
personally or by mail, by or at the direction of the president, the secretary
or the officer or person calling the meeting, to each shareholder entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the shareholder at his
address as it appears on the stock transfer books of the Company, with
postage thereon prepaid. Such further or earlier notice shall be given as
may be required by law. The signing by a shareholder of a written waiver of
notice of any shareholders' meeting, whether before or after the time stated
in such waiver, shall be equivalent to the receiving by him of all notice
required to be given with respect to such meeting. Attendance by a
shareholder, whether in person or by proxy, at a shareholders' meeting shall
constitute a waiver of notice of such meeting. No notice of any adjournment
of any meeting shall be required.
SECTION 3.4 CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For the
purpose of determining shareholders entitled to notice of, or to vote at, any
meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any dividend or in order to make a determination of
shareholders for any other proper purpose, the board of directors of the
Company may provide that the stock transfer books shall be closed for a
stated period in no case to exceed sixty (60) days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least the ten days immediately preceding such meeting. In lieu of
closing
3
<PAGE>
the stock transfer books, the board of directors may fix in advance a date as
the record date for any such determination of shareholders, such date in no
case to be more than sixty (60) days nor, in the case of a meeting of
shareholders, less than ten (10) days prior to the date on which the
particular action requiring such determination of shareholders is to be
taken. If the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice of or to vote
at a meeting of shareholders, or shareholders entitled to receive payment of
a dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date of such determination
of shareholders. When a determination of shareholders entitled to vote at
any meeting of shareholders has been made, as provided in this section, such
determination shall apply to any adjournment thereof except where the
determination has been made through the closing of stock transfer books and
the stated period of closing has expired.
SECTION 3.5 VOTING LIST. The officer or agent having charge of the
stock transfer books for shares of the Company shall make, at least ten days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by
each, which list, for a period of ten days prior to such meeting, shall be
kept on file at the registered office of the Company and shall be subject to
lawful inspection by any shareholder at any time during the usual business
hours. Such list shall also be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. Failure to comply with this section
shall not affect the validity of any action taken at such meeting.
SECTION 3.6 QUORUM AND OFFICERS. Except as otherwise provided by law,
by the articles of incorporation or by these bylaws, the holders of a
majority of the shares entitled to vote and represented in person or by proxy
shall constitute a quorum at a meeting of shareholders, but the shareholders
present at any meeting, although representing less than a quorum, may from
time to time adjourn the meeting to some other day and hour, without notice
other than announcement at the meeting. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. The vote of the holders of a majority of the shares entitled to vote
and thus represented at a meeting at which a quorum is present shall be the
act of the shareholders' meeting, unless the vote of a greater number is
required by law. The chairman of the board, or in his absence the president,
of the Company shall preside at, and the secretary shall keep the records of,
each meeting of shareholders, and in the absence of any such officer, his
duties shall be performed by any other officer authorized by these bylaws or
any person appointed by resolution duly adopted at the meeting.
SECTION 3.7 VOTING AT MEETINGS. Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders except to the extent that the articles of incorporation, or
bylaws of the Company or the laws of the State of Texas provide otherwise.
4
<PAGE>
SECTION 3.8 PROXIES. A shareholder may vote either in person or by
proxy executed in writing by the shareholder, or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven (11) months from the
date of its execution unless otherwise provided in the proxy. A proxy shall
be revocable unless expressly provided therein to be irrevocable and unless
otherwise made irrevocable by law.
SECTION 3.9 BALLOTING. Upon the demand of any shareholder, the vote
upon any question before the meeting shall be by ballot. At each meeting
inspectors of election may be appointed by the presiding officer of the
meeting, and at any meeting for the election of directors, inspectors shall
be so appointed on the demand of any shareholder present or represented by
proxy and entitled to vote in such election of directors. No director or
candidate for the office of director shall be appointed as such inspector.
The number of votes cast by shares in the election of directors shall be
recorded in the minutes.
SECTION 3.10 PROHIBITION OF CUMULATIVE VOTING FOR DIRECTORS. No
shareholder shall have the right to cumulative voting in the election of
directors, but each share shall be entitled to one vote in the election of
each director. In the case of any contested election for any directorship,
the candidate for such position receiving a plurality of the votes cast in
such election shall be elected to such position.
SECTION 3.11 RECORD OF SHAREHOLDERS. The Company shall keep at its
principal business office, or the office of its transfer agents or
registrars, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of the shares held by each.
SECTION 3.12 ACTION WITHOUT MEETING. Any action required by statute
to be taken at a meeting of the shareholders of the Company, or any action
which may be taken at a meeting of the shareholders, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the
subject matter thereof and such consent shall have the same force and effect
as a unanimous vote of the shareholders. Any such signed consent, or a
signed copy thereof, shall be placed in the minute book of the Company.
ARTICLE IV
THE BOARD OF DIRECTORS
SECTION 4.1 QUALIFICATION AND NUMBER.
(a) The property, business and affairs of the Company shall be managed
and controlled by the board of directors and, subject to any restrictions
imposed by law, by the articles of incorporation or by these bylaws, the
board of directors may exercise all the powers of the Company. Directors
need not be residents of Texas or shareholders of the Company absent
provision to the contrary in the articles of incorporation or laws of the
State of Texas.
5
<PAGE>
(b) The number of directors of the Company (exclusive of directors to
be elected by the holders of any one or more classes or series of preferred
stock of the Company or any other class or series of stock of the Company,
other than the common stock, which may at some time be outstanding, voting
separately as a class or classes) shall be fixed at six and may be increased,
subject to Section 7.2 of these bylaws, or decreased (provided that any
decrease does not shorten the term of any incumbent director) from time to
time by amendment of these bylaws. Such number shall, without the necessity
of any amendment of this Section 4.1(b), automatically be increased from time
to time as may be necessary to permit the inclusion on the board of directors
of any director elected by a separate vote of holders of any one or more
classes or series of preferred stock of the Company, or any other class or
series of stock of the Company, other than common stock, that are outstanding
at the time of such increase.
SECTION 4.2 TERM, REMOVAL AND VACANCIES.
(a) The board of directors (exclusive of directors to be elected by the
holders of any one or more classes or series of preferred stock of the
Company or any other class or series of stock of the Company other than the
common stock, which may at some time be outstanding, voting separately as a
class or classes) shall be divided into three classes, as nearly equal in
number as possible as determined by the board of directors, with the term of
office of one class expiring each year. At the annual meeting of
stockholders in 1990, one director of the first class shall be elected to
hold office for a term expiring at the next succeeding annual meeting, two
directors of the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and two directors of the
third class shall be elected to hold office for a term expiring at the third
succeeding annual meeting. At each annual meeting of stockholders, the
respective successors to the class of directors whose term shall then expire
shall be elected to hold office for a term expiring at the third succeeding
annual meeting. Any increase in the number of directors elected by holders
of common stock shall be apportioned among the classes of directors so as to
make each class as nearly equal in number as is practicable.
(b) Notwithstanding any other provision of the articles of
incorporation or these bylaws (and notwithstanding the fact that some lesser
percentage may be specified by law, the articles of incorporation or these
bylaws), any director or the entire board of directors may be removed only
for cause and only by the affirmative vote of the holders of sixty-six and
two-thirds percent (66 2/3%) of all shares of stock of the Company entitled
to vote at a meeting of stockholders, voting together as a single class.
Notwithstanding the foregoing, and except as otherwise required by law,
whenever the holders of any one or more classes or series of preferred stock
of the Company or any other class or series of stock of the Company other
than the common stock, which may at some time be outstanding, shall have the
right, voting separately as a class or classes, to elect one or more
directors of the Company, the provisions of this Section 4.2(b) shall not
apply with respect to the director or directors elected by such holders of
preferred stock or other stock.
(c) Any vacancies in the board of directors, for any reason, and any
newly created directorships resulting from any increase in the number of
directors (to the extent permitted by
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law) shall be filled by the board of directors, acting by not less than a
majority of the directors then in office, even if less than a quorum (which
majority may consist of a sole remaining director). Any directors so chosen
to fill any such vacancies or newly created directorships shall, unless
otherwise required by law, hold office until the next election of the class
for which such directors shall have been chosen and until their respective
successors shall be duly elected and qualified. Notwithstanding the
foregoing, and except as otherwise required by law, whenever the holders of
any one or more classes or series of preferred stock of the Company or any
other class or series of stock of the Company other than the common stock,
which may at some time be outstanding, shall have the right, voting
separately as a class or classes, to elect one or more directors of the
Company, the provisions of this Section 4.2(c) shall not apply with respect
to the director or directors elected by such holders of preferred stock or
other stock.
SECTION 4.3 VACANCIES. Any vacancy occurring in the board of directors
may be filled by the vote of a majority of the remaining directors, even if
such remaining directors comprise less than a quorum of the board of
directors. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office. Any position on the board of
directors to be filled by reason of an increase in the number of directors
shall be filled by election at an annual meeting of the shareholders, or at a
special meeting of shareholders duly called for such purpose.
4.3A NOMINATIONS. No person (other than a person nominated or
recommended for nomination by the board of directors or any nominating
committee thereof or any person to be elected by the holders of any one or
more classes or series of preferred stock of the Company or any other class
or series of stock of the Company other than the common stock which may be
outstanding at some time, voting separately as a class or classes) shall be
eligible for election as a director at any annual or special meeting of
stockholders unless a written notice regarding such person's nomination,
together with written consent of such person to serve as a director, is
received from a stockholder of record by the Secretary of the Company not
later than the close of business on the tenth day following the date on which
notice of such meeting is first given to stockholder. Each such notice shall
set forth (i) the name, age, business address and residence address of each
nominee proposed in such notice, (ii) the principal occupation or employment
of each such nominee, (iii) the number of shares of stock of the Company
which are beneficially owned by each such nominee, and (iv) such other
information in respect of such nominee as would be required by the federal
securities laws and the rules and regulations promulgated thereunder in
respect of an individual nominated as a director of the Company and for whom
proxies are solicited by the board of directors. The Chairman of any meeting
of stockholders may, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
SECTION 4.4 REGULAR MEETINGS. Regular meetings of the board of
directors shall be held immediately following each annual meeting of
shareholders, at the place of such meeting, and at such other times and
places as the board of directors shall determine. No notice of any kind of
such regular meetings needs to be given to either old or new members of the
board of directors.
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SECTION 4.5 SPECIAL MEETINGS. Special meetings of the board of
directors shall be held at any time by call of the chairman of the board, the
president, or a majority of the directors. The secretary shall give notice
of each special meeting to each director at his usual business or residence
address by mail at least three days before the meeting or in person, by
telegraph or telephone at least one day before such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States
mail with postage thereon prepaid. Except as otherwise provided by law, by
the articles of incorporation, or by these bylaws, such notice need not
specify the business to be transacted at, or the purpose of, such meeting. No
notice shall be necessary for any adjournment of any meeting. The signing of
a written waiver of notice of any special meeting by the person or persons
entitled to such notice, whether before or after the time stated therein,
shall be equivalent to the receiving of such notice. Attendance of a
director at a meeting shall also constitute a waiver of notice of such
meeting, except where a director attends a meeting for the express and
announced purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
SECTION 4.6 QUORUM. A majority of the number of directors fixed by
these bylaws shall constitute a quorum for the transaction of business and
the act of not less than a majority of the directors present at a meeting at
which a quorum is present shall be required in order to constitute the act of
the board of directors, unless the act of a greater number shall be required
by law, by the articles of incorporation or by these bylaws.
SECTION 4.7 PROCEDURE AT MEETINGS. The board of directors, at each
regular meeting held immediately following the annual meeting of
shareholders, may appoint one of their number as chairman of the board of
directors, to preside at all meetings of the board of directors. In the
event of failure to designate a chairman of the board, or in his absence, the
president of the Company, if a director, shall perform the functions of the
chairman of the board and shall preside at meetings of the board. In the
absence of the designated chairman or the president of the Company, at any
meeting, any officer authorized by these bylaws to act in the absence of the
president, who is a director, or any member of the board selected by the
members present shall preside. The secretary of the Company shall act as
secretary at all meetings of the board. In his absence, the presiding officer
of the meeting may designate any person to act as secretary. At meetings of
the board of directors, the business shall be transacted in such order as the
board may from time to time determine.
SECTION 4.8 PRESUMPTION OF ASSENT. Any director of the Company who is
present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person
acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the Company
immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a director who voted in favor of such action.
SECTION 4.9 ACTION WITHOUT A MEETING. Any action required by stature
to be taken at a meeting of the directors of the Company, or which may be
taken at such meeting, may be taken
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without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by each director entitled to vote at such meeting, and such
consent shall have the same force and effect as a unanimous vote of the
directors. Such signed consent, or a signed copy thereof, shall be placed in
the minute book of the Company.
SECTION 4.10 COMPENSATION. Directors as such shall not receive any
stated salary for their service, but by resolution of the board of directors,
may receive a fixed sum and reimbursement for attendance at each regular or
special meeting of the board of directors or at any meeting of the executive
committee of directors, if any, to which such director may be elected in
accordance with the following section 4.11; but nothing herein shall preclude
any director from serving the Company in any other capacity or receiving
compensation therefor.
SECTION 4.11 EXECUTIVE COMMITTEE. The board of directors, by
resolution adopted by a majority of the full board of directors, may
designate an executive committee, which committee shall consist of one or
more of the directors of the Company. Such executive committee may exercise
such authority of the board of directors in the business and affairs of the
Company as the board of directors may, by resolution duly adopted, delegate
to it except as prohibited by law. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed upon it or
him by law. Any member of the executive committee may be removed by the
board of directors. The executive committee shall keep regular minutes of
its proceedings and report the same to the board of directors when required.
The minutes of the proceeds of the executive committee shall be placed in the
minute book of the Company. Members of the executive committee shall receive
such compensation as may be approved by the board of directors and will be
reimbursed for reasonable expenses actually incurred by reason of membership
on the executive committee.
SECTION 4.12 OTHER COMMITTEES. The board of directors, by resolution
adopted by a majority of the full board of directors, may appoint one or more
committees of two or more directors each. Such committees may exercise such
authority of the board of directors in the business and affairs of the
Company as the board of directors may, by resolution duly adopted, delegate,
except as prohibited by law. The designation of any committee and the
delegation thereto of authority shall not operate to relieve the board of
directors, or any member thereof, of any responsibility imposed on it or him
by law. Any member of a committee may be removed at any time by the board of
directors. Members of any such committees shall receive such compensation as
may be approved by the board of directors and will be reimbursed for
reasonable expenses actually incurred by reason of membership on a committee.
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ARTICLE V
OFFICERS
SECTION 5.1 NUMBER. The officers of the Company shall consist of a
chairman of the board, a president, one or more vice presidents, a secretary
and a treasurer; and, in addition, such other officers and assistant officers
and agents as may be deemed necessary or desirable. Officers shall be
elected or appointed by the board of directors. In its discretion, the board
of directors may leave unfilled any office except those of president,
treasurer and secretary.
SECTION 5.2 ELECTION; TERM; QUALIFICATION. Officers shall be chosen by
the board of directors annually at the meeting of the board of directors
following the annual shareholders' meeting. Each officer shall hold office
until his successor has been chosen and qualified, or until his death,
resignation, or removal.
SECTION 5.3 REMOVAL. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interests of the Company will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not
of itself create any contract rights.
SECTION 5.4 VACANCIES. Any vacancy in any office for any cause may be
filled by the board of directors at any meeting.
SECTION 5.5 DUTIES. The officers of the Company shall have such powers
and duties, except as modified by the board of directors, as generally
pertain to their offices, respectively, as well as such powers and duties as
from time to time shall be conferred by the board of directors and by these
bylaws.
SECTION 5.6 THE CHAIRMAN OF THE BOARD. The chairman of the board shall
be the chief executive officer and shall have general direction of the
affairs of the Company and general supervision over its several officers,
subject however, to the control of the board of directors. He shall at each
annual meeting, and from time to time, report to the shareholders and to the
board of directors all matters within his knowledge which, in his opinion,
the interest of the Company may require to be brought to the notice of such
persons. He may sign, with the secretary or an assistant secretary, any or
all certificates of stock of the Company. He shall preside at all meetings
of the shareholders, and, in the absence of a chairman, at meetings of the
board of directors, shall sign and execute in the name of the Company (i) all
contracts or other instruments authorized by the board of directors, and (ii)
all contracts or instruments in the usual and regular course of business,
pursuant to section 6.2 hereof, except in cases when the signing and
execution thereof shall be expressly delegated or permitted by the board or
by these bylaws to some other officer or agent of the Company; and, in
general, shall perform all duties incident to the office of president, and
such other duties as from time to time may be assigned to him by the board of
directors or as are prescribed by these bylaws.
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SECTION 5.7 THE PRESIDENT. The president shall be the chief operating
officer of the corporation. The president shall, in the absence or
disability of the chairman of the board, perform the duties and exercise the
powers of the chairman of the board and shall perform such other duties and
have such other powers as the board of directors may form time to time
prescribe. The President may sign certificates of stock of the Company.
SECTION 5.8 THE VICE PRESIDENTS. At the request of the president, or
in his absence or disability, the vice presidents, in the order of their
election, shall perform the duties of the president, and, when so acting
shall have all the powers of, and be subject to all restrictions upon, the
president. Any action taken by a vice president in the performance of the
duties of the president shall be conclusive evidence of the absence or
inability to act of the president at the time such action was taken. The
vice presidents shall perform such other duties as may, from time to time, be
assigned to them by the board of directors or the president. A vice
president may sign, with the secretary or an assistant secretary,
certificates of stock of the Company.
SECTION 5.9 SECRETARY. The secretary shall keep the minutes of all
meetings of the shareholders, of the board of directors, and of the executive
committee, if any, of the board of directors, in one or more books provided
for such purpose and shall see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law. He shall be
custodian of the corporate records and of the seal (if any) of the Company
and see, if the Company has a seal, that the seal of the Company is affixed
to all documents the execution of which on behalf of the Company under its
seal is duly authorized; shall have general charge of the stock certificate
books, transfer books and stock ledgers, and such other books and papers of
the Company as the board of directors may direct, all of which shall, at all
reasonable times, be open to the examination of any director, upon
application at the office of the Company during business hours; and in
general shall perform all duties and exercise all powers incident to the
office of the secretary and such other duties and powers as the board of
directors or the president from time to time may assign to or confer on him.
SECTION 5.10 TREASURER. The treasurer shall keep complete and accurate
records of account, showing at all times the financial condition of the
Company. He shall be the legal custodian of all money, notes, securities and
other valuables which may from time to time come into the possession of the
Company. He shall furnish at meetings of the board of directors, or whenever
requested, a statement of the financial condition of the Company, and shall
perform such other duties as these bylaws may require or the board of
directors may prescribe.
SECTION 5.11 ASSISTANT OFFICERS. Any assistant secretary or assistant
treasurer appointed by the board of directors shall have power to perform,
and shall perform, all duties incumbent upon the secretary or treasurer of
the Company, respectively, subject to the general direction of such
respective officers, and shall perform such other duties as these bylaws may
require or the board of directors may prescribe.
SECTION 5.12 SALARIES. The salaries or other compensation of the
officers shall be fixed from time to time by the board of directors. No
officer shall be prevented from receiving such
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salary or other compensation by reason of the fact that he is also a director
of the Company.
SECTION 5.13 BONDS OF OFFICERS. The board of directors may secure the
fidelity of any officer of the Company by bond or otherwise, on such terms
and with such surety or sureties, conditions, penalties or securities as
shall be deemed proper by the board of directors.
SECTION 5.14 DELEGATION. The board of directors may delegate
temporarily the powers and duties of any officer of the Company, in case of
his absence or for any other reason, to any other officer, and may authorize
the delegation by any officer of the Company of any of his powers and duties
to any agent or employee, subject to the general supervision of such officer.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 DIVIDENDS. Dividends on the outstanding shares of the
Company, subject to the provisions of the articles of incorporation, if any,
may be declared by the board of directors at any regular or special meeting,
pursuant to law. Dividends may be paid by the Company in cash, in property,
or in the Company's own shares, but only out of the unreserved and
unrestricted earned surplus of the Company, except as otherwise allowed by
law.
Subject to limitations upon the authority of the board of directors
imposed by law or by the articles of incorporation, the declaration of and
provision for payment of dividends shall be at the discretion of the board of
directors.
SECTION 6.2 CONTRACTS. The chairman of the board and the president
shall have the power and authority to execute, on behalf of the Company,
contracts or instruments in the usual and regular course of business, and in
addition the board of directors may authorize any officer or officers, agent
or agents, of the Company to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Company, and such
authority may be general or confined to specific instances. Unless so
authorized by the board of directors or by these bylaws, no officer, agent or
employee shall have any power or authority to bind the Company by any
contract or engagement, or to pledge its credit or to render it pecuniarily
liable for any purpose or in any amount.
SECTION 6.3 CHECKS, DRAFTS, ETC. All checks, drafts, or other orders
for the payment of money, notes, or other evidences of indebtedness issued in
the name of the Company shall be signed by such officers or employees of the
Company as shall from time to time be authorized pursuant to these bylaws or
by resolution of the board of directors.
SECTION 6.4 DEPOSITORIES. All funds of the Company shall be deposited
from time to time to the credit of the Company in such banks or other
depositories as the board of directors may from time to time designate, and
upon such terms and conditions as shall be fixed by the
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board of directors. The board of directors may from time to time authorize
the opening and maintaining within any such depository as it may designate,
of general and special accounts, and may make such special rules and
regulations with respect thereto as it may deem expedient.
SECTION 6.5 ENDORSEMENT OF STOCK CERTIFICATES. Subject to the specific
directions of the board of directors, any share or shares of stock issued by
a corporation and owned by the Company, including reacquired shares of the
Company's own stock, may, for sale or transfer, be endorsed in the name of
the Company by the president or any vice president; and such endorsement may
be attested or witnessed by the secretary or any assistant secretary either
with or without the affixing thereto of the corporate seal.
SECTION 6.6 CORPORATE SEAL. The corporate seal, if any, shall be in
such form as the board of directors shall approve, and such seal, or a
facsimile thereof, may be impressed on, affixed to, or in any manner
reproduced upon, instruments of any nature required to be executed by
officers of the Company.
SECTION 6.7 FISCAL YEAR. The fiscal year of the Company shall begin
and end on such dates as the board of directors at any time shall determine.
SECTION 6.8 BOOKS AND RECORDS. The Company shall keep correct and
complete books and records of account and shall keep minutes of the
proceedings of its shareholders and board of directors, and shall keep at its
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving the names
and addresses of all shareholders and the number and class of the shares held
by each.
SECTION 6.9 RESIGNATIONS. Any director or officer may resign at any
time. Such resignations shall be made in writing and shall take effect at
the time specified therein, or, if no time is specified, at the time of its
receipt by the chairman of the board, the president or secretary. The
acceptance of a resignation shall not be necessary to make it effective,
unless expressly so provided in the resignation.
SECTION 6.10 INDEMNIFICATION OF DIRECTORS AND OFFICERS AND INSURANCE.
(a) The Company shall, to the maximum extent permissible under
applicable provisions of the Texas Business Corporation Act, pay, reimburse
or otherwise indemnify any present or former director or officer of the
Company in respect of any costs or expenses incurred by that person in any
action, suit or proceeding to which the officer is made a party by reason of
holding such position or any other position held by such person at the
request of the Company.
(b) The Company may purchase and maintain insurance on behalf of any
person who is or was a director, officer or employee of the Company, or who
is or was serving at the request of the Company as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, other enterprise, or employee benefit
plan, against any liability asserted against and incurred by that person in
such a capacity or arising out of his status as such a person,
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whether or not the Company would have the power to indemnify such person
against such liability under this Article.
(c) Any indemnification of a director or an officer of the Company in
accordance with this Article shall be reported in writing to the shareholders
when and as required by applicable provisions of the Texas Business
Corporation Act.
SECTION 6.11 MEETINGS BY TELEPHONE. Subject to the provisions required
or permitted by these bylaws or the laws of the State of Texas for notice of
meetings, shareholders, members of the board of directors, or members of any
committee designated by the board of directors may participate in and hold
any meeting required or permitted under these bylaws by telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such a meeting, except where a
person participates in the meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting is not
lawfully called or convened.
ARTICLE VII
AMENDMENTS
SECTION 7.1 AMENDMENTS. These bylaws may be altered, amended, or
repealed, or new bylaws may be adopted, by a majority of the board of
directors at any duly held meeting of directors or by the holders of a
majority of the shares represented at any duly held meeting of shareholders
provided that notice of such proposed action shall have been contained in the
notice of any such meeting.
SECTION 7.2 RESTRICTIONS ON AMENDMENTS. Notwithstanding any other
provisions of these bylaws and in addition to any requirements of the
provisions of any class or series of stock of the Company that may be
outstanding, no amendment to these bylaws shall amend, alter, change or repeal
any of the provisions of this Section 7.2 or Section 4.2 of these bylaws, nor
shall any amendment increase the number of directors provided in accordance
with Section 4.1(b) of these bylaws, unless such amendment, alteration, change
or repeal shall receive either (a) the affirmative vote of the holders of not
less than eighty percent (80%) of all shares of stock of the Company entitled
to vote at a meeting of stockholders, voting together as a single class; or
(b) the affirmative vote of a majority of directors in office.
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KENT ELECTRONICS CORPORATION
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE I
PURPOSE
Kent Electronics Corporation, a Texas corporation (the "Company"), is
dependent for the successful conduct of its business on the initiative,
effort and judgment of its directors. This 1996 Non-Employee Director Stock
Option Plan (the "Plan") is intended to provide the independent directors of
the Company additional compensation for their service as directors and an
incentive, through options to acquire stock in the Company, to increase the
value of the Company's common stock, without par value ("Common Stock").
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board"). Subject to the express provisions of the Plan and the
policies of each stock exchange on which any of the Company's stock at any
time may be traded, the Board shall have plenary authority (i) to construe
and interpret the Plan, (ii) to define the terms used therein, (iii) to
prescribe, amend and rescind rules and regulations relating to the Plan, and
(iv) to make all other determinations necessary or advisable for the
administration of the Plan. All determinations and interpretations made by
the Board shall be binding and conclusive on all participants in the Plan and
their legal representatives and beneficiaries. No member of the Board shall
be liable for any action, failure to act, determination or interpretation
made in good faith with respect to the Plan or any transaction under the Plan.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
Under the Plan each director who is not a full-time employee of the
Company or any of its subsidiaries (each, a "Non-Employee Director") shall,
effective as of the date of his initial election to the Board, be granted a
stock option to purchase from the Company 5,000 shares of Common Stock, and
effective as of the date of each annual meeting of shareholders, be granted a
stock option to purchase from the Company 5,000 shares of Common Stock, at a
price determined as set forth in ARTICLE IV below.
ARTICLE IV
TERMS AND CONDITIONS OF STOCK OPTIONS;
STOCK OPTION PRICE; TRANSFERABILITY
(a) Each stock option granted under the Plan shall be evidenced by a
Stock Option Agreement (the "Agreement") in such form as may be hereafter
approved by the Board on the advice of counsel to the Company. The Agreement
shall be executed by the Company and the
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optionee. The sale of the shares issued on the exercise of a stock
option by any person subject to Section 16 of the 1934 Act shall not be
allowed until at least six months after the later of (i) the approval of this
Plan by the stockholders of the Company in accordance with ARTICLE IX hereof
or (ii) the grant of the stock option. Such determination for each stock
option is to be made prior to or at the time that stock option is granted.
Each stock option granted hereunder shall expire if not exercised within five
years of the date of grant.
(b) The per share stock option price shall be an amount equal to the
Fair Market Value (as defined below) of the Common Stock on the date of grant
of the stock option. In no event shall the stock option price be less than
the par value of the Company's Common Stock.
(c) Except as set forth below, the stock options granted hereunder shall
not be transferable otherwise than by will or operation of the laws of
descent and distribution or pursuant to a qualified domestic relations order
as defined in the Internal Revenue Code of 1986, as amended (the "Code"), or
Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules thereunder. During the lifetime of the optionee,
stock options granted hereunder shall be exercisable only by the optionee,
the optionee's guardian or legal representative. In addition to
non-transferable stock options, the Board may allow stock options to be
granted that are transferable, without payment of consideration, to immediate
family members of the optionee or to trusts or partnerships for such family
members; the Board may also amend outstanding stock options to provide for
such transferability.
(d) No stock option granted hereunder shall be exercisable unless the
Plan and all shares issuable on the exercise thereof have been registered
under the Securities Act of 1933, as amended (the "1933 Act") and all other
applicable securities laws, and there is available for delivery a prospectus
meeting the requirements of Section 10 of the 1933 Act, or the Company shall
have first received the opinion of its counsel that registration under the
1933 Act and all other applicable securities laws is not required in
connection with such issuance. At the time of exercise, if the shares with
respect to which the stock option is being exercised have not been registered
under the 1933 Act and all other applicable securities laws, the Company may
require the optionee to provide the Company whatever written assurance
counsel for the Company may require that the shares are being acquired for
investment and not with a view to the distribution thereof, and that the
shares will not be disposed of without the written opinion of such counsel
that registration under the 1933 Act and all other applicable securities laws
is not required. Share certificates issued to the optionee upon exercise of
the stock option shall bear a legend to the foregoing effect to the extent
counsel for the Company deems it advisable.
(e) For all purposes under the Plan, the Fair Market Value of a share of
Common Stock on a particular date, or on the most recent prior date on which
Common Stock was traded, shall be equal to the reported closing price per
share as reported by the New York Stock Exchange, Inc. or other principal
exchange or market on which the Common Stock is traded. In the event Common
Stock is not publicly traded at the time a determination of its value is
required to be made hereunder, the determination of its Fair Market Value
shall be made by the Board of Directors in such manner as it deems
appropriate.
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(f) A stock option shall lapse in the following situations:
(1) If the directorship of a Non-Employee Director terminates for
any reason other than death, all unexercised stock options theretofore
granted shall expire ten days after the date of such termination of
directorship, unless such stock options shall have terminated earlier under
the terms or under other provisions of the Plan.
(2) If the directorship of a Non-Employee Director terminates by
reason of death, all unexercised stock options, if any, shall become
immediately exercisable and may be exercised until the expiration of one year
from the date of death of the Non-Employee Director or until the expiration
of the term of the stock option, whichever is earlier. Such stock option may
be exercised by any designated beneficiary of the Non-Employee Director,
subject to all other provisions of the Plan.
ARTICLE V
SHARES SUBJECT TO PLAN AND DURATION OF PLAN
The Plan shall expire and terminate on the earlier of (i) the date ten
years from the effective date of this Plan, or (ii) the date on which there
have been granted to Non-Employee Directors pursuant to the Plan stock
options to purchase an aggregate of 100,000 shares of the Common Stock.
Shares subject to stock options under the Plan may be either authorized and
unissued shares or issued shares that have been acquired by the Company and
held in its treasury, in the sole discretion of the Board. When stock
options have been granted under the Plan and have lapsed unexercised or
partially unexercised or have been surrendered for cancellation by the
optionee thereof, the unexercised shares which were subject thereto may be
reoptioned under the Plan.
ARTICLE VI
ADJUSTMENTS
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the Company's directors and stockholders, the number of shares
provided for in each outstanding stock option and the price per share
thereof, and the number of shares provided for in the Plan, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of the Company's Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only on the
Common Stock), a stock split, a reverse stock split, or any other increase or
decrease in the number of such shares effected without receipt of
consideration by the Company, and shall also be proportionately adjusted in
the event of a spin-off, spin-out, or other distribution of assets to
stockholders of the Company, to the extent necessary to prevent dilution of
the interests of grantees pursuant to the Plan or of the other stockholders
of the Company, as applicable. If the Company shall engage in a merger,
consolidation, reorganization or recapitalization, each outstanding stock
option (or if such transaction involves less than all of the shares of the
Company's Common Stock, then a number of stock options proportionate to the
number of such involved shares), shall become exercisable for the securities
and other consideration to which a holder of the number of shares of the
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Company's Common Stock subject to each such stock option would have been
entitled to receive in any such merger, consolidation, reorganization or
recapitalization.
(b) If, while unexercised stock options remain outstanding under the
Plan, (i) the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation or
where the Common Stock is converted into other securities, cash or other
property in connection with such merger or consolidation, (ii) the Company is
recapitalized in such a manner that shares of the Common Stock are converted
into or exchanged for other securities of the Company, (iii) the Company
sells or otherwise disposes of substantially all of its assets to another
person, corporation or entity, (iv) over 30% of the Common Stock of the
Company is acquired by another person, corporation or entity in exchange for
stock (or stock and securities) of such corporation or (v) over 30% of the
then outstanding Common Stock is acquired in a single transaction or a series
of related transactions, then, unless the terms of the transaction described
in clauses (i), (ii), (iii), (iv) or (v) above provide that after the
effective date of such merger, consolidation, recapitalization, exchange,
sale or acquisition, as the case may be, each holder of an outstanding stock
option shall be entitled, upon exercise of such stock option to receive, in
lieu of shares of the Company's Common Stock, shares of such stock or other
securities of the Company or the surviving or acquiring corporation or such
other property at the same rate per share as the holders of shares of the
Company's Common Stock received pursuant to the terms of the merger,
consolidation, exchange, recapitalization, sale or acquisition, all
outstanding stock options shall be cancelled as of the effective date of any
such merger, consolidation, recapitalization, exchange, sale or acquisition.
At least 30 days notice of such cancellation shall be given to each holder of
a stock option and each holder of a stock option shall have the right to
exercise such stock options in full during a 30-day period preceding the
effective date of such merger, consolidation, recapitalization, exchange,
sale or acquisition.
(c) CHANGE OF PAR VALUE. In the event of a change in the Company's
Common Stock which is limited to a change of all of its authorized shares
without par value into the same number of shares with a par value, the shares
resulting from any such change shall be deemed to be Common Stock within the
meaning of the Plan.
(d) MISCELLANEOUS. The adjustments provided for in this Article shall
be made by the Board whose determination in that respect shall be final,
binding and conclusive. Except as hereinbefore expressly provided in this
Article, the holder of a stock option shall not be entitled to the privilege
of stock ownership as to any shares of Common Stock or other stock not
actually issued and delivered to the holder, and any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock
of any class, shall not affect and no adjustment by reason thereof shall be
made with respect to the number or price of shares of the Company's Common
Stock subject to any stock option. The grant of a stock option pursuant to
the Plan shall not affect in any way the right or power of the Company to,
among other things, make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge or to consolidate or
to dissolve or liquidate or sell or transfer all or any part of its business
or assets.
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ARTICLE VII
POWER TO AMEND
The Board of Directors may amend, terminate or suspend this Plan at any
time and from time to time; provided, however, that the Plan shall not be
amended more than once every six months, other than to comport with changes
in the Code, ERISA, or the regulations thereunder, or the regulations
thereunder; and provided, further, that to the extent the Board desires for
any amendment to the Plan to maintain qualification of the Plan under Rule
16b-3 of the Exchange Act, no amendment shall (i) materially increase the
benefits accruing to participants under the Plan; (ii) change the aggregate
number of Shares which may be issued under Options pursuant to the provisions
of the Plan; (iii) reduce the Option price at which Options have been
granted; or (iv) change the class of persons eligible to receive Options.
However, no termination or amendment of the Plan may, without the consent of
the holder of any Option then outstanding, adversely affect the rights of
such holder under the Options.
ARTICLE VIII
EFFECTIVE DATE; STOCKHOLDER APPROVAL
The Plan shall be effective as of May 7, 1996, the date on which it
received the approval of a majority of the disinterested members of the
Board. However, the Plan and all stock options granted under the Plan shall
be void if the Plan is not approved by the stockholders within 12 months from
the date the Plan is approved by the Board. The Plan shall be deemed
approved by the holders of the outstanding voting stock of the Company by the
affirmative votes of the holders of a majority of the outstanding voting
stock of the Company present, or represented, and entitled to vote at a
meeting of such stockholders duly held in accordance with the applicable laws
of the state or other jurisdiction in which the Company is incorporated. No
stock option granted under the Plan shall be exercisable in whole or in part
unless and until such stockholder approval is obtained.
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KENT ELECTRONICS CORPORATION
STOCK OPTION PLAN AND AGREEMENT
FOR VICE PRESIDENT, CORPORATE CONTROLLER
1. GRANT. Under the terms, provisions, and conditions of this Stock
Option Plan and Agreement by and between Kent Electronics Corporation (the
"Company"), and David D. Johnson (the "Optionee"), the Company hereby grants to
Optionee the option to purchase 25,000 shares of the Company's Common Stock,
without par value (the "Stock"), at the option price specified herein, subject
to adjustment as provided herein (the "Option"). The Option is not an
"incentive stock option" as described in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. DURATION OF OPTION AND OPTION PRICE. The Option shall be for a term
commencing on the date hereof and ending fifteen (15) years from the date
hereof. The option price payable by the Optionee upon exercise of the Option as
to each share subject to the Option will be $19.31, which equals one-half of the
closing price of one share of the Stock, as reported by the New York Stock
Exchange, on the date hereof.
3. AMOUNT EXERCISABLE AND SCHEDULE OF EXERCISABILITY. Except as
otherwise provided herein, this Option may be exercised as to 2,500 shares, on
and after May 1, 2000; as to an additional 5,000 shares, on and after May 1,
2001; as to an additional 7,500 shares, on and after May 1, 2002; and as to all
remaining shares, on and after May 1, 2003. This Option shall immediately
become fully vested and exercisable as to all shares subject hereto upon the
death or Disability (as hereinafter defined) of Optionee, or upon the occurrence
of a "Change in Control" (as hereinafter defined), or upon the Company's
termination of its employment of Optionee at the election of the Company, or
upon Optionee's termination of his employment by the Company for "Good Reason"
(as defined herein at Section 11), or such earlier date as set forth in Section
9 hereof. The Option may be exercised, so long as it is valid and outstanding,
from time to time in whole (as to shares then exercisable) or in part; provided,
however, no fractional shares of Stock shall be issued. The Option is
cumulative, and may be exercised as to any or all shares of Stock covered hereby
from and after the time it becomes exercisable as to such shares through the
date of termination of the Option.
4. EXERCISE OF OPTIONS. The Option shall be exercisable, in whole or in
part, by the delivery of written notice to the Company setting forth the number
of shares of Stock with respect to which the Option is to be exercised. In
order to be effective, such written notice shall be accompanied at the time of
its delivery to the Company by payment of the option price for such shares of
Stock, which payment shall be made (a) in cash or by personal check, cashier's
check, certified check, or postal or express money order payable to the order of
the Company in an amount (in United States dollars) equal to the option price
multiplied by the number of shares of Stock with respect to which the Option is
exercised or (b) in shares of Stock as set forth in this Section 4. Such notice
may be delivered in person or by messenger or courier service to the Secretary
of the Company, or shall be sent by registered mail, return receipt
<PAGE>
requested, to the Secretary of the Company, and in all such cases delivery shall
be deemed to have been made on the date such notice is received.
At the time when the Optionee (or other holder of the Option pursuant to
Section 5) makes payment to the Company for the shares of Stock issuable upon
the exercise of the Option, the Company may require the Optionee to pay to the
Company an additional amount equal to any federal, state or local taxes (which
the Company deems necessary or appropriate to be withheld in connection with the
exercise of such Option) in such forms of payment as are described in the first
paragraph of this Section 4. In the event that Optionee does not pay to the
Company any such amount required for withholding taxes, to the extent
applicable, the employer (for payroll tax purposes) of Optionee shall have the
right to withhold such required amount from any sum payable, or to become
payable, to Optionee, upon such terms and conditions as the Company in its
discretion shall prescribe.
Payment of the option price may be made, in whole or in part, in shares of
Stock previously held by the Optionee (or other holder of the Option pursuant to
Section 5). If payment is made in whole or in part in shares of Stock, then the
Optionee (or other holder of the Option pursuant to Section 5) shall deliver to
the Company, in payment of the option price of the shares of Stock with respect
to which such Option is exercised, (i) certificates registered in the name of
such Optionee (or other holder of the Option pursuant to Section 5) representing
a number of shares of Stock legally and beneficially owned by such Optionee (or
other holder of the Option pursuant to Section 5), free of all liens, claims and
encumbrances of every kind, such certificates to be accompanied by stock powers
duly endorsed in blank by the record holder of the shares represented by such
certificates; and (ii), if the option price of the shares of Stock with respect
to which such Option is to be exercised exceeds the fair market value of such
shares of Stock, cash or a personal check, cashier's check, certified check, or
postal or express money order payable to the order of the Company in an amount
(in United States dollars) equal to the amount of such excess. If the fair
market value of such Shares of Stock delivered to the Company exceeds the option
price of the shares of Stock with respect to which such Option is to be
exercised, the Company shall promptly deliver, or cause to be delivered, to
Optionee a replacement share certificate representing the number of shares of
Stock in excess of those surrendered in payment of the option price.
As promptly as practicable after the receipt by the Company of (i) such
written notice from the Optionee (or other holder of the Option pursuant to
Section 5) setting forth the number of shares of Stock with respect to which
such Option is to be exercised, (ii) payment of the option price of such shares
in the form required by the foregoing provisions of this Section 4, and (iii) an
amount equal to any federal, state or local taxes which the Company deems
necessary or appropriate to be withheld incident to the exercise of the Option,
the Company shall cause to be delivered to such Optionee (or other holder of the
Option pursuant to Section 5) certificates representing the number of shares of
Stock with respect to which such Option has been so exercised.
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All proceeds received pursuant to the exercise of the Option shall be added
to the general funds of the Company to be used for any corporate purpose.
For purposes of determining the value of shares of Stock delivered in
payment of all or any portion of the option price pursuant to this Section 4,
the "fair market value" of such shares shall equal the average of the daily
averages of the high and low sales price per share of the Stock as reported by
the New York Stock Exchange (or such other principal exchange or market on which
the Stock is traded as of the applicable dates) on each day on which such trades
are reported of the five trading days prior to Optionee's exercise of the
Option.
5. TRANSFERABILITY OF OPTION. The Option shall not be subject to sale,
assignment or transfer, other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code. The designation of a beneficiary by Optionee shall not constitute a
transfer. The Option shall be exercisable (i) during Optionee's lifetime, only
by Optionee (or in the event of his incapacity, by his legal representative) or
(ii) following Optionee's death, by such persons as set forth in Section 6.
6. TERMINATION OF OPTIONS IN CERTAIN CASES. In the event of the death of
the Optionee while in the employ of the Company (or while affiliated with the
Company in the discretion of the Board), the Option shall become fully vested
and shall terminate on the earlier of (i) the date of expiration of the Option,
or (ii) twelve (12) months following the date of Optionee's death. After the
death of the Optionee, his executors, administrators or any person(s) to whom
the Option was transferred by will or by the laws of descent and distribution,
shall have the right, at any time prior to the expiration of the period
described in the first sentence of this paragraph, to exercise the Option.
If, before the date of expiration of the Option, the Optionee shall be
retired in good standing from the employ of the Company (or from another
affiliation with the Company in the discretion of the Board) including
retirement for reasons of Disability, the Option shall terminate on the earlier
of (i) the date of expiration of the Option, or (ii) three (3) years following
the date of such retirement. As used herein, the term "Disability" shall mean a
total and permanent disability resulting from a mental or physical incapacity
which prevents Optionee from performing the full scope of his duties for the
Company (as such duties exist on the date immediately prior to the occurrence of
such incapacity) and lasting or expected to last for a period of at least 180
days. Disability shall be determined in good faith by the Board of Directors of
the Company based on the opinion of a licensed physician. In the event of such
retirement, the Optionee (or, in the event of his incapacity, his legal
representative) shall have the right, at any time prior to the expiration of the
period described in the first sentence of this paragraph, to exercise the Option
to the same extent to which he was entitled to exercise it immediately prior to
such retirement (and, in the case of retirement for Disability or under
circumstances constituting a termination of Optionee's employment by the Company
at the Company's election, the Option shall fully vest and become exercisable,
as set forth herein).
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If, before the date of expiration of the Option, the Optionee's employment
by the Company shall be terminated by the Company at its election, or shall be
terminated by Optionee for Good Reason, this Option shall immediately vest fully
and become exercisable as to all shares covered hereby. In such event, Optionee
shall have the right to exercise the Option at any time prior to the earlier of
(i) the date of expiration of the Option or (ii) twelve (12) months following
the date of such termination of employment.
If, before the date of expiration of the Option, the Optionee's employment
or other affiliation with the Company terminates at the election of Optionee for
any reason other than Good Reason (other than in connection with Optionee's
retirement in accordance with the second paragraph of this Section 6), the
Option shall terminate on the earlier of (i) the date of expiration of such
Option, or (ii) ninety (90) days after the date of termination of the Optionee's
employment or other affiliation with the Company. In such event, the Option
shall be exercisable and shall vest as to all shares that, pursuant to the
schedule set forth in Section 3 hereof, become exercisable on or prior to the
date of termination of the Option.
For purposes of this Stock Option Plan and Agreement, employment by the
Company shall include employment by any subsidiary of the Company.
7. NO RIGHTS AS SHAREHOLDER. No holder of the Option shall have any
rights as a shareholder with respect to shares covered by the Option until the
date of exercise of the Option as to such shares; and, except as otherwise
provided in Section 9 hereof, no adjustment for dividends, or otherwise, shall
be made if the record date therefor is prior to the date of such exercise.
8. EMPLOYMENT OR AFFILIATION OBLIGATION. The grant of this Option shall
not impose upon the Company any obligation to employ or to continue any
employment or other affiliation with the Optionee. The right of the Company to
terminate its employment or affiliate relationship with any person, including
the Optionee, shall not be diminished or affected by reason of the fact that
this Option has been granted.
9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of the
Option shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of, or affecting,the Stock
or the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
The number of shares covered by this Option and the price per share thereof
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Stock resulting from the subdivision or consolidation of shares
or any other capital adjustment, the payment of a stock dividend or any other
increase in such shares effected without receipt of
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consideration by the Company or any other decrease therein effected without a
distribution of cash, property, or other securities in connection therewith.
If (i) the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation or where
the Stock is converted into other securities, cash or other property in
connection with such merger or consolidation, (ii) the Company is recapitalized
in such a manner that shares of Stock are converted into or exchanged for other
securities of the Company, (iii) the Company sells or otherwise disposes of
substantially all its assets to another person, corporation or entity, or (iv) a
tender offer is announced that, if successfully completed, would result in a
Change in Control, then in any such case, on a date at least 30 days prior to
the effective date of any such merger, consolidation, recapitalization,
exchange, sale or acquisition or tender offer (or, in the case of such tender
offer, on such later date as is practicable, but in any such case at least ten
days prior to the termination of such tender offer), as the case may be, any
limitations as to amount exercisable each year shall be modified so that Option
from and after such date shall be exercisable in full. In addition, with
respect to any event described in the preceding sentence, after the effective
date of such merger, consolidation, recapitalization, exchange, sale or
acquisition, as the case may be, Optionee shall be entitled, upon exercise of
such Option to receive in lieu of shares of Stock, shares of such stock or other
securities of the Company or the surviving or acquiring corporation or such
other property at the rate per share as the holders of shares of Stock received
pursuant to the terms of the merger, consolidation, exchange, recapitalization,
sale or acquisition.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class or securities convertible into shares of stock of
any class for cash or property or for labor or services, either upon direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number, class or price of shares of Stock then
subject to the Option.
10. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred on the earliest of the following dates:
(i) The date any entity or person (including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934)
shall have become the beneficial owner of, or shall have obtained
voting control over, thirty percent (30%) or more of the outstanding
common shares of the Company;
(ii) The date the shareholders of the Company approve a
definitive agreement (A) to merge or consolidate the Company with or
into another corporation, in which the Company is not the continuing
or surviving corporation or pursuant to which any common shares of the
Company would be converted into cash, securities or other property of
another corporation, other than a merger of the Company in which
holders of common shares immediately prior to the
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merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger as immediately
before, or (B) to sell or otherwise dispose of substantially all the
assets of the Company; or
(iii) The first date as of which Continuing Directors (as
defined in Article IX of the Company's Articles of Incorporation) fail
to constitute a majority of the members of the Company's Board of
Directors.
11. TERMINATION OF EMPLOYMENT BY OPTIONEE FOR GOOD REASON. For purposes
of this Stock Option Plan and Agreement a termination of Optionee's employment
for "Good Reason" shall be deemed to occur if Optionee tenders his resignation
to the Board of Directors after there has been a significant and material
diminishment in the nature and scope of the authority, power, function and duty
attached to Optionee's management position with the Company as of the effective
date of this Agreement (which shall include, but not be limited to, the
appointment of any officer to whom Optionee shall report other than the Chairman
of the Board and Chief Executive Officer, the President and Chief Operating
Officer or the Chief Financial Officer), and such diminishment lasts for at
least thirty (30) consecutive days and is not cured or corrected by the Company
within ten (10) days after Optionee provides notice of same to the Company
pursuant to the notice provisions hereof. Executive's termination of his
employment with the Company for Good Reason may take place at any time after the
events set forth in the preceding sentence have occurred, and such termination
need not be effected within any specified time period after the occurrence of
such events. Such termination for Good Reason shall result in the Option
immediately becoming fully vested and exercisable as to all shares covered
hereby.
12. LIMITED STOCK APPRECIATION RIGHTS. Notwithstanding any other
provisions in this Stock Option Plan and Agreement, upon the occurrence of any
Change in Control, and thereafter so long as this Option is in effect, Optionee
shall have the right to require the Company (or if the Company is not the
survivor of a merger, consolidation or reorganization, such survivor) to
purchase from him any or all unexercised options granted under this Stock Option
Plan and Agreement at a purchase price equal to (i) the excess of the Change in
Control Price (as hereinafter defined) per share over the option price per share
multiplied by (ii) the number of shares subject to the Option specified by the
Optionee for purchase in a written notice to the Company or such survivor,
addressed to the attention of the Corporate Secretary.
For purposes of this Stock Option Plan and Agreement, the term "Change in
Control Price" of shares of Stock shall mean (a) except in the case of a Change
in Control that results from a merger, consolidation or reorganization in which
the Company is not the survivor or shares of Stock are converted into cash or
other securities or other assets (a "Termination Merger"), the higher of (I) the
highest sales price per share of the Stock on the New York Stock Exchange (or if
the Company's Stock is not then traded on the New
York Stock Exchange, on the principal exchange or market where such Stock is
actively traded) on the trading days during the thirty (30) days immediately
preceding the date the Optionee so notified the Company of his election pursuant
to the preceding paragraph or (II) the highest sales price per share of the
Stock on the New York Stock Exchange (or if the Company's Stock is not then
traded on the New
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York Stock Exchange, on the principal exchange or market where
such stock is actively traded) on the trading days during the thirty (30) days
immediately preceding the date of the Change in Control; and (b) in the case of
a Change in Control that results from a Termination Merger, the higher of (I)
the fair market value of the consideration receivable per share by holders of
Stock of the Company in such Termination Merger (which fair market value as to
any securities included in such consideration shall be the highest sales price
per unit of such security on the principal exchange or market where such
security is actively traded on the trading days during the thirty (30) days
immediately preceding the date of the Termination Merger, and as to any such
security not actively traded in any market, and as to all other property
included in such consideration, shall be the fair market value determined by the
Committee (hereinafter defined) in good faith exercised in a reasonable manner)
or (II) the amount determined pursuant to clause (a)(II) of this Section 12. The
amount payable to Optionee by the Company or the survivor in a Termination
Merger, as the case may be, shall be paid in cash or by certified check, and
shall be reduced by the amount of any taxes required to be withheld.
13. ADMINISTRATION. This Stock Option Plan and Agreement shall be
administered by a committee of at least two persons to be appointed by the Board
of Directors of the Company (the "Committee"). All members of the Committee
shall be persons who are "disinterested persons," as set forth in Rule 16b-3
under the Securities Exchange Act of 1934, as amended, or any successor rule
thereto ("Rule 16b-3"). Meetings shall be held at such times and places as
shall be determined by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of those members present at any meeting shall decide any
question brought before the meeting. No member of the Committee shall be liable
for any act or omission of any other member of the Committee or for any act or
omission on his own part, including but not limited to the exercise of any power
or discretion given to him under this Stock Option Plan and Agreement, except
those resulting from his own gross negligence or willful misconduct.
14. NOTICES. Any notice, consent, request or other communication
("Notice") required or permitted to be given hereunder shall be in writing.
Such Notice shall be (a) personally delivered or delivered by messenger, or (b)
mailed by certified mail, return receipt requested, postage prepaid, or (c) sent
by telecopy or the equivalent (provided, however, that the original Notice of
which a facsimile has been transmitted shall in all cases be delivered to the
addressee within two (2) business days following such transmission). Notices
given hereunder shall be addressed as follows:
If to Company: If to Optionee:
Kent Electronics Corporation David D. Johnson
7433 Harwin Drive c/o Kent Electronics Corporation
Houston, Texas 77036 7433 Harwin Drive
Attention: Secretary Houston, Texas 77036
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Any Notice given in accordance herewith shall be deemed effective and to
have been received by the party to whom such Notice is directed (a) upon
delivery, if delivered personally or by messenger or sent by telecopy or the
equivalent, or (b) three (3) days after the date of deposit in the U.S. Mail, if
sent by mail and the return receipt is received by the sender, or upon actual
receipt by the party receiving Notice in the event that such return receipt is
not received by the sender.
15. AMENDMENT. This Stock Option Plan and Agreement may be modified or
amended only by a written instrument executed by Company and Optionee, and any
such modification or amendment may be authorized on behalf of the Company by the
Committee; provided, however, that so long as Optionee and the Company desire
that this Stock Option Plan and Agreement comply with Rule 16b-3, or any
successor or similar provisions thereto, any such amendment that would require
the vote or approval of a specified percentage of the Company's shareholders in
order to assure that this Stock Option Plan and Agreement complies with Rule
16b-3, or any successor or similar provisions thereto, shall only be made upon
obtaining such required shareholder vote, or taking such other action in
connection with such amendment as the Board of Directors or such authorized
Committee deems advisable to operate this Stock Option Plan and Agreement in
accordance with Rule 16b-3 or such successor or similar rule. However, no
termination or amendment of this Stock Option Plan and Agreement may, without
the consent of the Optionee, adversely affect the rights of Optionee as to any
portion of the Option then outstanding.
16. SEVERABILITY. In the event that any provision of this Stock Option
Plan and Agreement shall be held illegal, invalid, or unenforceable for any
reason, such provision shall be fully severable, but shall not affect the
remaining provisions hereof, and this Stock Option Plan and Agreement shall be
construed and enforced as if the illegal, invalid, or unenforceable provision
had not been included herein.
17. GENDER, TENSE AND HEADINGS. Whenever the context so requires, words
of the masculine gender used herein shall include the feminine and neuter, and
words used in the singular shall include the plural. Section headings as used
herein are inserted solely for convenience and reference and are not to be
interpreted as part of the construction of this Stock Option Plan and Agreement.
18. GOVERNING LAW. The provisions of this Stock Option Plan and Agreement
shall be construed according to the laws of the State of Texas, except as
superseded by federal law. This Agreement is performable in Harris County,
Texas. In the event that any dispute arises under this Agreement, the Optionee
shall have the right, in addition to all other rights and remedies provided by
law, at his election to seek arbitration in Houston, Texas under the rules of
the American Arbitration Association by serving a notice to arbitrate upon the
Company, or to institute a judicial proceeding in a court of competent
jurisdiction located in Harris County, Texas. In the event that the Company
institutes any legal proceeding against the Optionee to resolve a dispute under
this Agreement, the Optionee shall have the right either to seek arbitration in
Houston, Texas or to institute a judicial proceeding in a court located in
Harris
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County, Texas, as provided in the preceding sentence, and the Company
shall dismiss its proceeding or take such other action as may be reasonably
requested by the Optionee in order for such proceeding to be brought in the
forum selected by the Optionee in accordance with the preceding sentence.
19. SHAREHOLDER APPROVAL. This Stock Option Plan and Agreement is subject
to approval and ratification by the vote of the holders of a majority of shares
of Stock present in person or by proxy and entitled to vote at a meeting of
shareholders of the Company. If such shareholder approval is not received on or
before December 31, 1996, the Option shall be null and void.
20. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES. (a) In the
event that the Optionee is deemed to have received an excess parachute payment
(as such term is defined in Section 280G(b) of the Internal Revenue Code of
1986, as amended (the "Code")) which is subject to the excise taxes (the "Excise
Taxes") imposed by Section 4999 of the Code in respect of any payment of
compensation to the Optionee from the Company pursuant to this Stock Option Plan
and Agreement, whether in the form of cash, property, stock, stock options,
securities or otherwise, the Company shall make the Bonus Payment to the
Optionee promptly after the date on which the Optionee received or is deemed to
have received any excess parachute payments.
(b) (i) The term "Bonus Payment" means a cash payment in an amount equal
to the sum of (A) all Excise Taxes payable by the Optionee, plus (B) all
additional Excise Taxes and federal or state income taxes to the extent
such taxes are imposed in respect of the Bonus Payment, such that the
Optionee shall be in the same after-tax position and shall have received
the same benefits that he would have received if the Excise Taxes had not
been imposed. For purposes of calculating any income taxes attributable to
the Bonus Payment, the Optionee shall be deemed for all purposes to be
paying income taxes at the highest marginal federal income tax rate, taking
into account any applicable surtaxes and other generally applicable taxes
which have the effect of increasing the marginal federal income tax rate
and, if applicable, at the highest marginal state income tax rate to which
the Bonus Payment and the Optionee are subject.
(ii) An example of the calculation of the Bonus Payment is set forth
below: Assume that the Excise Tax rate is 20%, that the highest federal
marginal income tax rate is 36% and that the Optionee is not subject to
state income taxes. Assume that the Optionee has received an excess
parachute payment in the amount of $1,000,000, on which $200,000 in Excise
Taxes are payable. The amount of the required Bonus Payment is
$454,545.45. The Bonus Payment, less Excise Taxes of $90,909.09 and income
taxes of $163,636.36, yields $200,000.00, the amount of the Excise Taxes
payable in respect of the excess parachute payment.
(c) The Optionee agrees to cooperate reasonably with the Company to
minimize the amount of the excess parachute payments, including without
limitation assisting the Company
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in establishing that some or all of the payments received by the Optionee
contingent on a change described in Section 280G(b)(2)(A)(i) of the Code are
reasonable compensation for personal services actually rendered by the Optionee
before the date of such change or to be rendered by the Optionee on or after the
date of such change. In the event that the Company is able to establish that the
amount of the excess parachute payments is less than originally anticipated by
the Optionee, the Optionee shall refund to the Company any excess Bonus Payment
to the extent not required to pay Excise Taxes or income taxes (including those
incurred in respect of the payment of the Bonus Payment). Notwithstanding the
foregoing, the Optionee shall not be required to take any actions which his tax
advisor advises him in writing (i) is improper or (ii) exposes the Optionee to
material personal liability, and the Optionee may require the Company to deliver
to the Optionee an indemnification agreement in form and substance satisfactory
to the Optionee as a condition to taking any action required by this Section 20.
(d) The Company shall make any payment required to be made under this
Agreement in cash and on demand. Any payment required to be paid by the Company
under this Agreement which is not paid within five days of receipt by the
Company of the Optionee's demand therefor shall thereafter be deemed delinquent,
and the Company shall pay to the Optionee immediately upon demand interest at
the highest nonusurious rate per annum allowed by applicable law from the date
such payment becomes delinquent to the date of payment of such delinquent sum.
(e) In the event that there is any change to the Code which results in the
recodification of Section 280G or Section 4999 of the Code, or in the event that
either such section of the Code is amended, replaced or supplemented by other
provisions of the Code of similar import ("Successor Provisions"), then this
Agreement shall be applied and enforced with respect to such new Code provisions
in a manner consistent with the intent of the parties as expressed herein, which
is to assure that the Optionee is in the same after-tax position and has
received the same benefits that he would have been in and received if any taxes
imposed by Section 4999 or any Successor Provisions had not been imposed.
(f) There shall be no right of set-off or counterclaim, in respect of any
claim, debt or obligation, against any payments required under this Section 20
to the Optionee provided for in this Agreement. No right or interest to or in
any payments required under this Section 20 shall be assignable by the Optionee;
provided, however, that this provision shall not preclude him from designating
one or more beneficiaries to receive any amount that may be payable after his
death and shall not preclude the legal representative of his estate from
assigning any right hereunder to the person or persons entitled thereto under
his will or, in the case of intestacy, to the person or persons entitled thereto
under the laws of intestacy applicable to his estate. The term "beneficiary" as
used in this Agreement shall mean a beneficiary or beneficiaries so designated
to receive any such amount or, if no beneficiary has been so designated, the
legal representative of the Optionee's estate. No right, benefit or interest
under this Section 20 shall be subject to anticipation, alienation, sale,
assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of
any claim, debt or obligation, or to execution, attachment, levy or similar
process, or assignment by operation of law. Any attempt, voluntary or
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involuntary, to effect any action specified in the immediately preceding
sentence shall, to the full extent permitted by law, be null, void and of no
effect.
21. SUCCESSORS TO THE COMPANY. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the Company and any
successor of the Company, including, without limitation, any corporation or
other entity acquiring directly or indirectly all or substantially all of the
assets of the Company whether by merger, consolidation, sale or otherwise (and
such successor shall thereafter be deemed "the Company" for the purposes of this
Agreement), but shall not otherwise be assignable by the Company.
IN WITNESS WHEREOF, this Stock Option Plan and Agreement is executed,
subject to shareholder approval as set forth herein, effective as of the 9th day
of May, 1996.
KENT ELECTRONICS CORPORATION
By: /s/ Morrie K. Abramson
-----------------------------------
Morrie K. Abramson, Chairman and
Chief Executive Officer
OPTIONEE
/s/ David D. Johnson
---------------------------------------
David D. Johnson
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KENT ELECTRONICS CORPORATION
1996 EMPLOYEE INCENTIVE PLAN
<PAGE>
KENT ELECTRONICS CORPORATION
1996 EMPLOYEE INCENTIVE PLAN
ARTICLE I
PLAN
1.1 PURPOSE. The Kent Electronics Corporation 1996 Employee Incentive
Plan is intended to provide a means whereby certain Employees of Kent
Electronics Corporation, a Texas corporation, and its Affiliates may develop a
sense of proprietorship and personal involvement in the development and
financial success of the Company, and to encourage them to remain with and
devote their best efforts to the business of the Company, thereby advancing the
interests of the Company and its shareholders. Accordingly, the Company may
grant Awards to certain Employees in the form of Incentive Stock Options,
Nonqualified Stock Options and Performance Grants, subject to the terms of the
Plan.
1.2 EFFECTIVE DATE OF PLAN. The Plan is effective May 7, 1996, if within
12 months of such date, it shall have been approved by the vote of the holders
of a majority of the shares of Stock of the Company present in person or by
proxy and represented at a duly held shareholders' meeting. No Award shall be
granted pursuant to the Plan after May 6, 2006.
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout the Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company if, at
the time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain. The term
"subsidiary corporation" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of the
action or transaction, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
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2.2 "AWARD" means an award or grant made to an Employee under Articles V
through IX herein.
2.3 "AWARD AGREEMENT" means the written agreement provided in connection
with an Award setting forth the terms and conditions of the Award. Such
Agreement may contain any other provisions that the Committee, in its sole
discretion, shall deem advisable which are not inconsistent with the terms of
the Plan.
2.4 "BOARD OF DIRECTORS" or "Board" means the board of directors of the
Company.
2.5 "CHANGE OF CONTROL" means the happening of any of the following
events:
(i) the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the surviving
corporation or the Stock is converted into other securities, cash or other
property in connection with such merger or consolidation;
(ii) the Company is recapitalized in such a manner that shares of
Stock are converted into or exchanged for other securities of the Company;
(iii) the Company sells or otherwise disposes of substantially all
its assets to another person, corporation or entity;
(iv) over 30% of the then outstanding Stock is acquired by another
corporation in exchange for stock (or stock and securities) of such
corporation; or
(v) over 30% of the then outstanding Stock is acquired in a single
transaction or a series of related transactions.
2.6 "CODE" means the Internal Revenue Code of 1986, as amended.
2.7 "COMMITTEE" means the Compensation Committee of the Board of Directors
or such other committee designated by the Board of Directors. The Committee
shall at all times consist solely of two or more members of the Board of
Directors, and all members of the Committee shall be both Disinterested Persons
and Outside Directors. Any member who no longer qualifies as a Disinterested
Person or an Outside Director shall automatically be removed from the Committee.
2.8 "COMPANY" means Kent Electronics Corporation, a Texas corporation.
2.9 "DISINTERESTED PERSON" means a "disinterested person" as that term is
defined in Rule 16b-3 under the Exchange Act.
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2.10 "EMPLOYEE" means a key employee employed by the Company or any
Affiliate to whom an Award is granted.
2.11 "FAIR MARKET VALUE" means, on a particular date or on the most recent
prior date on which Stock was traded, the reported closing price per share of
the Stock of the Company as reported by the New York Stock Exchange, Inc. or
other principal exchange or market on which the Stock is traded; in the event
the Stock of the Company is not publicly traded at the time a determination of
its value is required to be made hereunder, the determination of its Fair Market
Value shall be made by the Committee in such manner as it deems appropriate.
2.12 "INCENTIVE OPTION" means an option granted under the Plan which is
designated as an "Incentive Option" and satisfies the requirements of Section
422 of the Code.
2.13 "NONQUALIFIED OPTION" means an option granted under the Plan other
than an Incentive Option.
2.14 "OPTION" means an Incentive Option or a Nonqualified Option granted
under the Plan to purchase shares of Stock.
2.15 "OUTSIDE DIRECTOR" means a member of the Board of Directors serving on
the Committee who satisfies the requirements of Section 162(m) of the Code.
2.16 "PERFORMANCE GRANT" means an Award, denominated in cash or in Stock,
made to an Employee under Article VI which is intended to qualify as performance
based compensation as defined in Section 162(m) of the Code and regulations
issued thereunder.
2.17 "PLAN" means the Kent Electronics Corporation 1996 Employee Incentive
Plan, as set out in this document and as it may be amended from time to time.
2.18 "STOCK" means the voting common stock of the Company, without par
value, or in the event that the outstanding shares of voting common stock are
later changed into or exchanged for a different class of stock or securities of
the Company or another corporation, that other stock or security.
2.19 "10% SHAREHOLDER" means an individual who, at the time the Option is
granted, owns stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or of any Affiliate. An individual shall
be considered as owning the stock owned, directly or indirectly, by or for his
brothers and sisters (whether by whole or half blood), spouse, ancestors, and
lineal descendants; and stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust, shall be considered as being owned
proportionately by or for its shareholders, partners or beneficiaries.
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<PAGE>
ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Awards shall be those
Employees as the Committee shall determine from time to time. However, no
non-Employee director shall be eligible to receive any Award or to receive
stock, stock options, or stock appreciation rights under any other plan of the
Company or any of its Affiliates, if receipt of it would cause the individual
not to be a Disinterested Person or Outside Director.
ARTICLE IV
GENERAL PROVISIONS RELATING TO AWARDS
4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant Awards to those
Employees as it shall determine from time to time under the terms and conditions
of the Plan. Subject only to any applicable limitations set out in the Plan,
the amount of any Award and the number of shares of Stock to be covered by any
Award to be granted to an Employee shall be as determined by the Committee.
Each Award shall be evidenced by an Award Agreement which shall set forth the
terms and conditions of the Award. Except as otherwise provided herein, no
Award granted pursuant to the Plan shall vest in whole or in part in less than
six months after the date the Award is granted. An Employee who has received an
Award in any year may receive an additional Award or Awards in the same year or
in subsequent years. The Committee may, in its discretion, waive or accelerate
any restrictions to which the Awards may be subject; provided, however, that the
Committee may not alter, amend or modify pre-established performance based
criteria to which any Award may be subject.
4.2 DEDICATED SHARES. The total number of shares of Stock with respect to
which Awards may be granted under the Plan shall be 1,600,000 shares. The
shares of Stock may be treasury shares or authorized but unissued shares. The
numbers of shares of Stock stated in this Section 4.2 shall be subject to
adjustment in accordance with the provisions of Section 4.5.
In the event that any Award shall expire or terminate for any reason or any
Award is surrendered, the shares of Stock allocable to that Award may again be
subject to an Award under the Plan. Upon approval by the shareholders of the
Plan, the Committee will not issue any additional stock options under the
Company's Amended and Restated 1987 Stock Option Plan.
4.3 NON-TRANSFERABILITY. Except as set forth below, the Awards granted
hereunder shall not be transferable by the Employee otherwise than by will or
operation of the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
During the Employee's lifetime, Awards granted hereunder shall be
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exercisable only by the Employee. The Committee may grant Awards that are
transferable, without payment of consideration, to immediate family members of
the Employee or to trusts or partnerships for such family members; the
Committee may also amend outstanding Awards to provide for such transferability.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any Award if issuing that Stock would constitute or result
in a violation by the Employee or the Company of any provision of any law,
statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, the Company shall not be required to issue any Stock
unless the Committee has received evidence satisfactory to it to the effect that
the holder of that Award will not transfer the Stock except in accordance with
applicable law, including receipt of an opinion of counsel satisfactory to the
Company to the effect that any proposed transfer complies with applicable law.
The determination by the Committee on this matter shall be final, binding and
conclusive. The Company may, but shall in no event be obligated to, register
any Stock covered by the Plan pursuant to applicable securities laws of any
country or any political subdivision. In the event the Stock issuable pursuant
to an Award is not registered, the Company may imprint on the certificate
evidencing the Stock any legend that counsel for the Company considers necessary
or advisable to comply with applicable law. The Company shall not be obligated
to take any other affirmative action in order to cause the exercise of, or the
issuance of shares under, an Award to comply with any law or regulation of any
governmental authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of the Plan
and the Awards granted hereunder shall not affect or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of bonds, debentures, preferred or prior preference stocks ahead of or affecting
the Stock or the rights thereof, the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of similar character or otherwise.
In the event of any change in the outstanding shares of Stock of the
Company by reason of any stock split, stock dividend, split-up, split-off,
spin-off, recapitalization, merger, consolidation, liquidation, rights offering,
share offering, reorganization, combination or exchange of shares, a sale by the
Company of all or part of its assets, any distribution to shareholders other
than a normal cash dividend, or other extraordinary or unusual event, if the
Committee shall determine, in its discretion, that such change equitably
requires an adjustment in the terms of any Award or the number of shares of
Stock available for Awards, such adjustment may be made by the Committee subject
to Section 162(m) of the Code, and shall be final, conclusive and binding for
all purposes of the Plan.
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4.6 TERMINATION OF EMPLOYMENT. Except as specifically provided herein,
the Committee shall set forth in the Award Agreement the status of any Award or
shares of Stock underlying any Award upon the termination of the Employee's
employment for any reason.
4.7 ELECTION UNDER SECTION 83(b) OF THE CODE. No Employee shall exercise
the election permitted under Section 83(b) of the Code without written approval
of the Committee. Any Employee doing so shall forfeit all Awards issued to the
Employee under the Plan.
ARTICLE V
OPTIONS
5.1 TYPE OF OPTION. The Committee shall specify whether a given option
shall constitute an Incentive Option or a Nonqualified Option.
5.2 OPTION PRICE. The price per share at which shares of Stock may be
purchased under an Incentive Option shall not be less than the greater of: (a)
100% of the Fair Market Value per share of Stock on the date the Option is
granted or (b) the per share par value of the Stock on the date the Option is
granted. The Committee in its discretion may provide that the price per share
at which shares of Stock may be purchased shall be more than 100% of Fair Market
Value per share. In the case of any 10% Shareholder, the price per share at
which shares of Stock may be purchased under an Incentive Option shall not be
less than the greater of: (a) 110% of the Fair Market Value per share of Stock
on the date the Incentive Option is granted or (b) the per share par value of
the Stock on the date the Incentive Option is granted.
The price per share at which shares of Stock may be purchased under a
Nonqualified Option shall not be less than the greater of: (a) 100% of the Fair
Market Value per share of Stock on the date the Option is granted or (b) the per
share par value of the Stock on the date the Option is granted. The Committee
in its discretion may provide that the price per share at which shares of Stock
may be purchased shall be more than 100% of Fair Market Value per share.
5.3 DURATION OF OPTIONS. No Option shall be exercisable after the
expiration of ten years from the date the Option is granted. In the case of a
10% Shareholder, no Incentive Option shall be exercisable after the expiration
of five years from the date the Incentive Option is granted.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to time,
in whole or in part, in the manner and subject to the conditions the Committee,
in its discretion, may provide in the Award Agreement, as long as the Option is
valid and outstanding. To the extent that the aggregate Fair Market Value
(determined as of the time an Incentive Option is granted) of the Stock with
respect to which Incentive Options first become exercisable by the optionee
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during any calendar year (under the Plan and any other incentive stock option
plan(s) of the Company or any Affiliate) exceeds $100,000, the Incentive Options
shall be treated as Nonqualified Options. In making this determination,
Incentive Options shall be taken into account in the order in which they were
granted.
5.5 EXERCISE OF OPTIONS. Subject to the tax withholding requirements set
forth in Section 9.3 herein, options shall be exercised by the delivery of
written notice to the Company setting forth the number of shares with respect to
which the Option is to be exercised and the address to which the certificates
representing shares of Stock issuable upon the exercise of such Option shall be
mailed, together with: (a) cash, check, certified check, bank draft, or postal
or express money order payable to the order of the Company for an amount equal
to the Option Price of the shares, (b) Stock at its Fair Market Value equal to
the Option Price of the shares on the date of exercise, and/or (c) any other
form of payment which is acceptable to the Committee. In order to enable an
Employee to have sufficient funds to pay the Option Price, the Committee may, to
the extent permitted by law, cause the Company to loan funds to the Employee, to
guarantee a loan by a third party to the Employee or to take such other action
as the Committee deems appropriate. The proceeds of the sale of shares subject
to the Options are to be added to the general funds of the Company and used for
its corporate purposes. No fractional shares shall be issued under the Plan.
Subject to the tax withholding requirements set forth in Section 9.3
herein, as promptly as practicable after receipt of written notification and
payment, the Company or a stock transfer agent of the Company shall deliver to
the Employee certificates for the number of shares with respect to which the
Option has been exercised, issued in the Employee's name. If shares of Stock
are used in payment, the Fair Market Value of the shares of Stock tendered must
be less than the Option Price of the shares being purchased, and the difference
must be paid by check. Delivery shall be deemed effected for all purposes when
the Company or a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to the optionee, at the
address specified by the Employee.
Whenever an Option is exercised by exchanging shares of Stock owned by the
Employee, the Employee shall deliver to the Company certificates registered in
the name of the Employee representing a number of shares of Stock legally and
beneficially owned by the Employee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates (with signature guaranteed
by the Company or a commercial bank or trust company or by a brokerage firm
having a membership on a registered national stock exchange). The delivery of
certificates upon the exercise of Options is subject to the condition that the
person exercising the Option provide the Company with the information the
Company might reasonably request pertaining to exercise, sale or other
disposition.
5.6 SUBSTITUTION OPTIONS. Options may be granted under the Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to
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become employees of or affiliated with the Company or any Affiliate as the
result of a merger or consolidation of the employing corporation with the
Company or any Affiliate, or the acquisition by the Company or any Affiliate of
the assets of the employing corporation, or the acquisition by the Company or
any Affiliate of stock of the employing corporation as the result of which it
becomes an Affiliate of the Company. The terms and conditions of the
substitute Options granted may vary from the terms and conditions set out in
the Plan to the extent the Committee, at the time of grant, may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted.
5.7 NO RIGHTS AS STOCKHOLDER. No Employee shall have any rights as a
stockholder with respect to Stock covered by an Option until the date a stock
certificate is issued for the Stock.
5.8 LIMITATIONS. The maximum number of Options which may be awarded under
this Article V during the term of the Plan shall be 1,600,000 shares, and the
maximum number of Options which may be awarded to any Employee under this
Article V during the term of the Plan shall be 1,600,000 shares.
5.9 CHANGE IN CONTROL. On a date at least 30 days prior to the effective
date of a Change in Control, any limitations as to the amount exercisable each
year may be modified at the discretion of the Committee so that all Options from
and after such date shall, if the Committee in its discretion so determines, be
exercisable in full. In addition, with respect to any event described in
clauses (i) through (v) of the definition of Change in Control, either (a) after
the effective date of such Change in Control, each holder of an outstanding
Option shall be entitled, upon exercise of such Option, to receive, in lieu of
shares of Stock, shares of such stock or other securities of the Company or the
surviving or acquiring corporation or such other property at the same rate per
share as the holders of shares of Stock received pursuant to the Change in
Control, or (b) all outstanding Options may be canceled by the Board as of the
effective date of the Change in Control, provided that notice of such
cancellation shall be given to each holder of an Option and each holder of an
Option shall have the right to exercise such Options in full (without regard to
any limitations that might be set forth in the Award Agreement) during a 30-day
period preceding the effective date of the Change in Control.
ARTICLE VI
PERFORMANCE GRANTS
6.1 PERFORMANCE GRANTS AND ELIGIBILITY. The Committee, in its sole
discretion, may designate certain key Employees of the Company who are eligible
to receive a Performance Grant if certain pre-established performance goals are
met. In determining which Employees shall be eligible for a Performance Grant,
the Committee may, in its discretion, consider the nature of the Employee's
duties, past and potential contributions to the success of the Company
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and its Affiliates, and such other factors as the Committee deems relevant in
connection with accomplishing the purposes of the Plan.
6.2 ESTABLISHMENT OF PERFORMANCE GRANT. The Committee shall determine the
terms of the Performance Grant, if any, to be made to an Employee for such
period designated by the Committee (the "Performance Cycle").
6.3 CRITERIA FOR PERFORMANCE GOALS. The performance goals shall be
pre-established by the Committee in accordance with Section 162(m) of the Code
and regulations issued thereunder. Performance goals determined by the
Committee may be based upon, but are not limited to, net profits, operating
income, Stock price, earnings per share, sales and/or return on equity.
6.4 COMMITTEE CERTIFICATION. The Committee must certify in writing that a
performance goal has been met prior to payment to any Employee of the
Performance Grant by issuance of a certificate for Stock or payment in cash. If
the Committee certifies the entitlement of an Employee to the performance based
Performance Grant, the payment shall be made to the Employee subject to other
applicable provisions of the Plan, including but not limited to, all legal
requirements and tax withholding.
6.5 PAYMENT AND LIMITATIONS. Performance Grants shall be paid on or
before the 30th day following both (a) the end of the Performance Cycle and (b)
certification by the Committee that the performance goals and any other material
terms of the Performance Grant and the Plan have been satisfied, or as soon
thereafter as is reasonably practicable. The Performance Grant may be paid in
Stock, cash, or a combination of Stock and cash, in the sole discretion of the
Committee. If paid in whole or in part in Stock, the Stock shall be valued at
Fair Market Value as of the date the Committee directs payments to be made in
whole or in part in Stock. However, no fractional shares of Stock shall be
issued, and the balance due, if any, shall be paid in cash.
The maximum amount which may be paid to any Employee pursuant to one or
more Performance Grants under this Article VI shall not exceed $8 million per
year.
6.6 TERMINATION OF EMPLOYMENT DURING PERFORMANCE CYCLE. Unless the terms
of an employment agreement, severance agreement or the Award Agreement provide
otherwise, if an Employee's employment with the Company and all Affiliates
terminates during a Performance Cycle (other than in connection with or within
one year after a Change of Control), he shall not be entitled to any payment
under this Article VI for that Performance Cycle.
6.7 CHANGE IN CONTROL. Upon a Change in Control, all Performance Grants
shall become immediately payable to the fullest extent of the Award regardless
of whether the Performance Cycle (hereinafter defined) upon which it is based
has been completed.
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ARTICLE VII
ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Awards granted thereunder shall
be subject to the determination of the Committee. A majority of the members of
the Committee shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination
reduced to writing and signed by a majority of the members shall be as effective
as if it had been made by a majority vote at a meeting properly called and held.
The Plan shall be administered in such a manner as to permit the Options granted
under it which are designated to be Incentive Options to qualify as Incentive
Options. In carrying out its authority under the Plan, the Committee shall have
full and final authority and discretion, including but not limited to the
following rights, powers and authorities, to:
(a) determine the Employees to whom and the time or times at which
Awards will be made,
(b) determine the number of shares and the purchase price of Stock or
dollar amount of cash covered in each Award, subject to the terms of the
Plan,
(c) determine the terms, provisions and conditions of each Award,
which need not be identical,
(d) define the effect, if any, on an Award of the death, disability,
retirement, or termination of employment of the Employee,
(e) proscribe, amend and rescind rules and regulations relating to
administration of the Plan, and
(f) make all other determinations and take all other actions deemed
necessary, appropriate, or advisable for the proper administration of the
Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of the Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.
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<PAGE>
ARTICLE VIII
AMENDMENT OR TERMINATION OF PLAN
The Board may amend, terminate or suspend the Plan at any time, in its sole
and absolute discretion; provided, however, that to the extent the Board desires
for any amendment to the Plan to maintain qualification of the Plan under Rule
16b-3 promulgated under the Exchange Act, no amendment that would (a) materially
increase the number of shares of Stock that may be issued under the Plan, (b)
materially modify the requirements as to eligibility for participation in the
Plan, or (c) otherwise materially increase the benefits accruing to participants
under the Plan, shall be made without the approval of the Company's
shareholders; provided further, however, that to the extent required to maintain
the status of any Incentive Option under the Code, no amendment that would (a)
change the aggregate number of shares of Stock which may be issued under
Incentive Options, (b) change the class of employees eligible to receive
Incentive Options, or (c) decrease the Option price for Incentive Options below
the Fair Market Value of the Stock at the time it is granted, shall be made
without the approval of the Company's shareholders. Subject to the preceding
sentence, the Board shall have the power to make any changes in the Plan and in
the regulations and administrative provisions under it or in any outstanding
Incentive Option as in the opinion of counsel for the Company may be necessary
or appropriate from time to time to enable any Incentive Option granted under
the Plan to continue to qualify as an incentive stock option or such other stock
option as may be defined under the Code so as to receive preferential federal
income tax treatment.
ARTICLE IX
MISCELLANEOUS
9.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside nor
shall a trust fund of any kind be established to secure the rights of any
Employee under the Plan. All Employees shall at all times rely solely upon the
general credit of the Company for the payment of any benefit which becomes
payable under the Plan.
9.2 NO EMPLOYMENT OBLIGATION. The granting of any Award shall not
constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ any
Employee. The right of the Company or any Affiliate to terminate the employment
of any person shall not be diminished or affected by reason of the fact that an
Award has been granted to him.
9.3 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Employee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option, the cash payment of a Performance Grant, or issuance of
Stock in payment of a Performance Grant. In the alternative,
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<PAGE>
the Company may require the Employee (or other person exercising the Option or
receiving Stock) to pay the sum directly to the employer corporation. If the
Employee (or other person exercising the Option or receiving the Stock) is
required to pay the sum directly, payment in cash or by check of such sums for
taxes shall be delivered (a) on the date of exercise, or (b) on the date of
payment of all or part of a Performance Grant in Stock, whichever is
applicable. The Company shall have no obligation upon exercise of any Option,
or notice of the Committee's decision to pay all or part of the Performance
Grant in Stock, until payment has been received, unless withholding (or offset
against a cash payment) as of or prior to the date of exercise or issuance of
Stock is sufficient to cover all sums due with respect to that exercise or
issuance of Stock. The Company and its Affiliates shall not be obligated to
advise an Employee of the existence of the tax or the amount which the employer
corporation will be required to withhold.
9.4 FORFEITURE FOR DISHONESTY. Notwithstanding anything to the contrary
in the Plan, if the Committee finds, after full consideration of the facts
presented on behalf of both the Company and the Employee, that the Employee has
been engaged in fraud, embezzlement, theft, commission of a felony or dishonesty
in the course of his employment by the Company which damaged the Company or an
Affiliate, or for disclosing trade secrets of the Company or an Affiliate, the
Employee shall forfeit all unexercised Options and all exercised Options under
which the Company has not yet delivered the certificates. The decision of the
Committee shall be final. No decision of the Committee, however, shall affect
the finality of the discharge of such Employee by the Company in any manner.
9.5 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With
respect to administration of the Plan, the Company shall indemnify each present
and future member of the Committee and the Board of Directors, and each member
of the Committee and the Board of Directors shall be entitled without further
act on his part to indemnity from the Company to the fullest extent allowed
under the Texas Business Corporation Act.
9.6 GENDER. If the context requires, words of one gender when used in the
Plan shall include the others and words used in the singular or plural shall
include the other.
9.7 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
9.8 OTHER COMPENSATION PLANS. The adoption of the Plan shall not preclude
the Company from establishing any other forms of incentive or other compensation
for employees of the Company or any Affiliate.
9.9 OTHER AWARDS. The grant of an Award shall not confer upon the
Employee the right to receive any future or other Awards under the Plan, whether
or not Awards may be
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<PAGE>
granted to similarly situated Employees, or the right to receive future Awards
upon the same terms or conditions as previously granted.
9.10 GOVERNING LAW. The provisions of the Plan shall be construed,
administered, and governed under the laws of the State of Texas.
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<PAGE>
THIS DOCUMENT HAS BEEN CONFORMED TO INCLUDE THE FIRST AMENDMENT TO THE KENT
ELECTRONICS CORPORATION TAX-DEFERRED SAVINGS AND RETIREMENT PLAN EXECUTED ON
NOVEMBER 15, 1995.
KENT ELECTRONICS CORPORATION
TAX-DEFERRED SAVINGS AND RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE MARCH 26, 1989)
<PAGE>
TABLE OF CONTENTS
Section
ARTICLE I - DEFINITIONS
Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.1
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2
Active Service . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.3
Administrative Committee . . . . . . . . . . . . . . . . . . . . . . .1.4
Affiliated Employer . . . . . . . . . . . . . . . . . . . . . . . . .1.5
Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.6
Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.7
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.8
Compensation Deferral Agreement . . . . . . . . . . . . . . . . . . .1.9
Considered Compensation . . . . . . . . . . . . . . . . . . . . . . 1.10
Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.12
Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.13
Entry Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14
Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . 1.15
Leased Employee . . . . . . . . . . . . . . . . . . . . . . . . . . 1.16
Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.18
Non-Highly Compensated Employee . . . . . . . . . . . . . . . . . . 1.19
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.20
Plan Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.21
Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.22
Prior Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.23
Rollover Contribution . . . . . . . . . . . . . . . . . . . . . . . 1.24
Total and Permanent Disability . . . . . . . . . . . . . . . . . . . 1.25
Transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.26
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.27
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.28
Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.29
Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.30
ARTICLE II - EMPLOYEES ELIGIBLE TO PARTICIPATE
Eligibility Requirements . . . . . . . . . . . . . . . . . . . . . . .2.1
Certification and Notice of Eligibility . . . . . . . . . . . . . . .2.2
Frozen Participation . . . . . . . . . . . . . . . . . . . . . . . . .2.3
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ARTICLE III - CONTRIBUTIONS
Compensation Deferral Agreements for Elective Contributions . . . . .3.1
Rollover Contributions . . . . . . . . . . . . . . . . . . . . . . . .3.2
Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . .3.3
Composition of and Deadline for Payment
of Employer Contributions . . . . . . . . . . . . . . . . . . . .3.4
Return of Contributions for Mistake, Disqualification
or Disallowance of Deduction. . . . . . . . . . . . . . . . . . .3.5
ARTICLE IV - PARTICIPATION
Periodic Certification by Employer . . . . . . . . . . . . . . . . . .4.1
Allocation of Employer Contributions . . . . . . . . . . . . . . . . .4.2
Limitation on Additions to Account . . . . . . . . . . . . . . . . . .4.3
Periodic Valuation of Trust Fund . . . . . . . . . . . . . . . . . . .4.4
Extraordinary Valuation of Trust Fund . . . . . . . . . . . . . . . .4.5
Forfeitures and Allocation Thereof . . . . . . . . . . . . . . . . . .4.6
Effective Date of Allocations and Adjustments . . . . . . . . . . . .4.7
Accounting for Transferred Member . . . . . . . . . . . . . . . . . .4.8
No Vesting Unless Otherwise Prescribed . . . . . . . . . . . . . . . .4.9
Investment Elections with Respect to Commingled Funds . . . . . . . 4.10
Diversification Election . . . . . . . . . . . . . . . . . . . . . . 4.11
Purchase of Life Insurance for Individual Accounts . . . . . . . . . 4.12
Special Transition Rule . . . . . . . . . . . . . . . . . . . . . . 4.13
Section 16(b) Restrictions on Insiders . . . . . . . . . . . . . . . 4.14
ARTICLE V - RETIREMENT
Early Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . .5.1
Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . . . .5.2
Late Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3
Rights of Members and Prohibition of
Unauthorized Distribution . . . . . . . . . . . . . . . . . . . .5.4
ARTICLE VI - DISTRIBUTION OF BENEFITS
Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.1
Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . .6.2
Total and Permanent Disability Benefit . . . . . . . . . . . . . . . .6.3
Severance Benefit . . . . . . . . . . . . . . . . . . . . . . . . . .6.4
Accounting for Distributions; Offsets in
Special Circumstances . . . . . . . . . . . . . . . . . . . . . .6.5
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Distributions - Settlement Options . . . . . . . . . . . . . . . . . .6.6
Lost Members or Beneficiaries; Escheat . . . . . . . . . . . . . . . .6.7
Withdrawals by Members . . . . . . . . . . . . . . . . . . . . . . . .6.8
Claims Procedure for Benefits . . . . . . . . . . . . . . . . . . . .6.9
Distributions to Divorced Spouse . . . . . . . . . . . . . . . . . . 6.10
Special Transition Rule . . . . . . . . . . . . . . . . . . . . . . 6.11
ARTICLE VII - TOP-HEAVY PLAN PROVISIONS
General Rules for Determining Top-Heavy Status . . . . . . . . . . . .7.1
Computation of Present Value of Accrued Benefits . . . . . . . . . . .7.2
Special Rules for Plan Years that Plan is Top-Heavy . . . . . . . . .7.3
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.4
ARTICLE VIII - ADMINISTRATIVE COMMITTEE
Appointment, Term of Service and Removal . . . . . . . . . . . . . . .8.1
Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.2
Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.3
Quorum and Majority Action . . . . . . . . . . . . . . . . . . . . . .8.4
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.5
Self-Interest of Committee Member . . . . . . . . . . . . . . . . . .8.6
Disclosure to Members . . . . . . . . . . . . . . . . . . . . . . . .8.7
Standard of Performance . . . . . . . . . . . . . . . . . . . . . . .8.8
Liability of Committee and Liability Insurance . . . . . . . . . . . .8.9
Exemption from Bond . . . . . . . . . . . . . . . . . . . . . . . . 8.10
No Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 8.11
Persons Serving in Dual Fiduciary Roles . . . . . . . . . . . . . . 8.12
Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.13
Indemnification of Members of Administrative Committee . . . . . . . 8.14
ARTICLE IX - TRUST AGREEMENT AND TRUST FUND
Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .9.1
Benefits Paid Solely from Trust Fund . . . . . . . . . . . . . . . . .9.2
ARTICLE X - ADOPTION OF PLAN BY OTHER EMPLOYERS
Adoption Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 10.1
No Joint Venture Implied . . . . . . . . . . . . . . . . . . . . . . 10.2
Transfer of Members . . . . . . . . . . . . . . . . . . . . . . . . 10.3
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<PAGE>
ARTICLE XI - AMENDMENT AND TERMINATION
Right to Amend and Limitations Thereon . . . . . . . . . . . . . . . 11.1
Mandatory Amendments . . . . . . . . . . . . . . . . . . . . . . . . 11.2
Withdrawal of an Employer . . . . . . . . . . . . . . . . . . . . . 11.3
Voluntary and Involuntary Termination . . . . . . . . . . . . . . . 11.4
Vesting Upon Discontinuance of Employer Contributions,
Total or Partial Termination . . . . . . . . . . . . . . . . . 11.5
Continuance Permitted Upon Sale or Transfer of Assets . . . . . . . 11.6
Requirement on Merger, Transfer, etc. . . . . . . . . . . . . . . . 11.7
ARTICLE XII - MISCELLANEOUS
Plan Not An Employment Contract . . . . . . . . . . . . . . . . . . 12.1
Benefits Provided Solely From Trust Fund . . . . . . . . . . . . . . 12.2
Spendthrift Provision . . . . . . . . . . . . . . . . . . . . . . . 12.3
Gender, Tense and Headings . . . . . . . . . . . . . . . . . . . . . 12.4
General Transition Rules Relating to Amendment,
Restatement and Continuation of Plan . . . . . . . . . . . . . 12.5
Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.6
Governing Law; Parties to Legal Actions . . . . . . . . . . . . . . 12.7
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.8
Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9
iv
<PAGE>
KENT ELECTRONICS CORPORATION
TAX-DEFERRED SAVINGS AND
RETIREMENT PLAN
For the exclusive benefit of its eligible employees and their
beneficiaries, Kent Electronics Corporation, a Texas Corporation (the "Plan
Sponsor"), heretofore adopted the stock bonus plan and trust which are
embodied in the instrument entitled "Kent Electronics Corporation
Tax-Deferred Savings and Retirement Plan and Trust" (the "Prior Plan") which
instrument is intended to meet the requirements for qualification and
exemption under applicable provisions of the Internal Revenue Code of 1986,
as amended (the "Code") and to comply with applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended (the "Act").
The Plan Sponsor has determined that said Prior Plan and Trust should be
completely amended, restated and continued without a gap or lapse in
coverage, time or effect of a qualified plan and exempt trust under
applicable provisions of the Code in order (i) to effect numerous technical
changes for the benefit of eligible employees and their beneficiaries and
(ii) to ensure that the terms and provisions of the Prior Plan continue to
meet the requirements for qualification and exemption under applicable
provisions of the Code and to comply with applicable provisions of the Act
following amendment of the Code and the Act by the Tax Reform Act of 1986,
the Omnibus Budget Reconciliation Act of 1986, the Omnibus Budget
Reconciliation Act of 1987, the Technical and Miscellaneous Revenue Act of
1988 and the Omnibus Budget Reconciliation Act of 1989 and the issuance of
regulations thereunder.
It is intended that certain other business organizations may adopt the
form of the Plan for the exclusive benefit of their eligible employees and
their eligible employees' beneficiaries.
It is intended that the benefits offered under the Plan will help retain
and attract the highest quality employees by providing additional financial
incentives and financial security for eligible employees and their
beneficiaries.
NOW, THEREFORE, the Plan Sponsor completely amends, restates and
continues the Prior Plan under the form of the Plan hereinafter set forth,
without a gap or lapse in coverage, time or effect of a qualified plan and
exempt trust under applicable provisions of the Code, as follows:
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<PAGE>
ARTICLE I
DEFINITIONS
As used herein, the words and phrases set forth below shall have the
meaning next below attributed to them unless the context in which any such
word or phrase appears reasonably requires a broader, narrower or different
meaning:
1.1 ACCOUNT: "Account" shall mean, with respect to a Member, all of the
ledger accounts maintained by the Administrative Committee to set out such
Member's proportionate interest in the Trust Fund.
An "EMPLOYER ACCOUNT" shall be maintained, as necessary, for each Member
which reflects the portion of the Employer's Contributions allocated to the
Member, and the appreciation or depreciation and income or loss incurred by
the Trust Fund allocated to such Employer Account. The Employer Account
maintained for each Member shall consist of (i) an "EMPLOYER NONFORFEITABLE
CONTRIBUTIONS ACCOUNT" which shall separately reflect (a) any Elective
Contributions which are authorized by the Member and made by the Employer on
behalf of such Member, and (b) any Qualified Non-Elective Contributions which
are made by the Employer on behalf of the Member and (c) the portion of the
Profit Sharing Contributions, if any, which are made by the Employer on
behalf of the Member and are designated (in resolutions adopted by the Board
and communicated to Members) as allocable to the Employer Nonforfeitable
Contributions Account; and/or (ii) an "EMPLOYER CONTRIBUTIONS ACCOUNT" which
shall reflect (a) the Matching Contributions, if any, which are made by the
Employer on behalf of the Member in order to match Elective Contributions and
(b) the portion of the Profit Sharing Contributions, if any, which are made
by the Employer on behalf of such Member and not specifically designated (in
resolutions adopted by the Board and communicated to Members) as allocable to
the Employer Nonforfeitable Contributions Account.
A "PREDECESSOR PLAN ACCOUNT" shall be maintained, as necessary, which
reflects (i) the portion of the Member's accrued benefit derived from
employee contributions and/or the Member's accrued benefit derived from
employer contributions (under any defined contribution plan, other than the
Plan or any Prior Plan, that is described in Section 414(i) of the Code
(excluding any plan that is subject to the minimum funding standards of
Section 412 of the Code or that is required to provide a qualified joint and
survivor annuity or a qualified preretirement survivor annuity described in
Sections 401(a)(11) and 417 of the Code) or any defined benefit plan which is
described in Section 414(j) of the Code, which plan at all times relevant
meets the requirements for qualification under Section 401(a) or 403(a) of
the Code) and which accrued benefit, with the consent or ratification of the
Board, is transferred directly from such defined contribution plan or defined
benefit plan to the Trust Fund, at such time and in such manner as the
Administrative Committee, with the consent or ratification of the Board, may
determine pursuant to uniformly applied nondiscriminatory rules established
by the Administrative
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<PAGE>
Committee, and (ii) the appreciation or depreciation and income or loss
incurred by the Trust Fund allocated to the Predecessor Plan Account.
A "ROLLOVER ACCOUNT" shall be maintained for each Member who has made a
Rollover Contribution to the Plan, which reflects the amount of the Rollover
Contribution and the appreciation or depreciation and income or loss incurred
by the Trust Fund allocated to the Rollover Account.
Should the Administrative Committee in its absolute discretion so direct,
any of the above-described Accounts may be divided into subaccounts in order
to facilitate administration of the Plan. A Member's Employer Accounts shall
be reduced as of the end of the preceding Plan Year (or such shorter
accounting period as may be prescribed by the Administrative Committee) for
any amount of funds used during the Plan Year (or such shorter accounting
period as may be prescribed by the Administrative Committee) to purchase a
life insurance contract under Section 4.11 for the Member's benefit.
However, such life insurance contract shall constitute an investment of the
Trust Fund allocable to such Member, and the Trustee shall maintain all
information relevant to any life insurance purchased for the Member's benefit
separate from the Member's Employer Accounts.
1.2 ACT: "Act" shall mean the Employee Retirement Income Security Act of
1974, as amended, and regulations and other authority issued thereunder by
the appropriate governmental authority. Reference to any section of the Act
shall include reference to any successor section or provision of the Act.
1.3 ACTIVE SERVICE: "Active Service" shall mean, as to any Employee, the
number of whole years and complete months of the Employee's period(s) of
service with any Employer or Affiliated Employer, whether or not such
period(s) of service were completed consecutively. Except as otherwise
provided below, in determining the number of whole years and complete months
of an Employee's period of service, non-successive periods of service shall
be aggregated, and less than whole year periods of service (whether or not
consecutive) shall be aggregated on the basis that twelve complete months of
service (thirty days shall be deemed to be a complete month in the case of
aggregation of fractional months) equal a whole year of Active Service.
If an Employee severs from service by reason of a quit, discharge, or
retirement, and the Employee then performs an hour of service within twelve
months of the severance from service date, such Employee's period of
severance shall be deemed to have been a period of service.
If an Employee severs from service by reason of a quit, discharge, or
retirement during an absence from service for any reason other than a quit,
discharge, or retirement, and then performs an hour of service within twelve
months of the date on which the Employee was first absent from service, such
Employee's period of severance shall be deemed to have been a period of
service.
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Periods of severance taken into account as periods of service shall not
be taken into account for purposes of determining whether an Employee is in
the employ of the Employer for purposes of allocating Employer Contributions
in accordance with Section 4.2.
All service with any Affiliated Employer shall be deemed to be service
with the Employer. Furthermore, all covered service and contiguous
noncovered service with an Employer which has adopted the Plan but which is
not an Affiliated Employer shall be deemed to be service with the Employer.
In the event that an Employer assumes and maintains the plan of a
predecessor employer described in Section 414(a)(2) of the Code, Active
Service for such predecessor employer shall be treated as Active Service for
the Employer in accordance with the provisions of Section 414(a)(1) of the
Code. However, if the Employer does not maintain the plan of a predecessor
employer, the Plan shall treat any Employee's service with the predecessor
employer as service with the Employer only to the extent prescribed in
Section 414(a)(2) of the Code.
In addition, pursuant to uniform and nondiscriminatory rules established
by the Administrative Committee with the consent or approval of the Board,
the Administrative Committee may vote to allow Employees to be credited with
Active Service for eligibility or vesting with respect to periods of service
which would otherwise be disregarded under the Plan. Any such decision shall
be evidenced by formal minutes reflecting such action of the Administrative
Committee, or by unanimous written consent of the members of the
Administrative Committee, and must be approved or ratified by the Board,
unless pursuant to the rules described in the preceding sentence, approval or
ratification by the Board is not required. Any such decision shall be
appropriately communicated to the affected Members.
Notwithstanding any other provision hereof, any period of service
occurring prior to the effective date of the adoption of the Plan by an
Employer shall be taken into account for purposes of determining vesting
credit hereunder. In the case of an Employee who completes at least one hour
of service under the Plan (i) if he has incurred five (or more) consecutive
periods of severance, the period of service completed after such period of
severance shall not be taken into account for purposes of determining the
Member's vested percentage in amounts credited to his Employer Contributions
Account prior to such five (or more) consecutive periods of severance, and
(ii) if he does not have any vested right under the Plan to Employer
Contributions credited to his Account at the time he incurs a period of five
(or more) consecutive one year periods of severance, the period of service
completed by such Employee before such period of severance shall not be taken
into account for any reason when the period of five (or more) consecutive
periods of severance equals or exceeds his period of service, whether or not
consecutive, completed before such period of severance; provided, however, in
the case of an Employee who completes at least one hour of service under the
Plan, any period of service which would have been disregarded under the Plan
or any Prior Plan as of the date immediately prior to the first day of any
Plan Year after December 31, 1984, shall not be recognized under the Plan.
In computing the aggregate period of service prior to any such period of
severance,
I-4
<PAGE>
any periods of service which may be disregarded by reason of any prior period
of severance shall be disregarded.
A "period of service" shall mean a period of service with any Employer or
Affiliated Employer commencing on the Employee's employment commencement date
or reemployment commencement date, whichever is applicable, and ending on the
severance from service date. "Employment commencement date" and "reemployment
commencement date" shall mean, respectively, the dates on which the Employee
first performs an hour of service initially, and following a period of
severance not deemed to have been a period of service.
A "period of severance" shall mean the period of time commencing on the
severance from service date and ending on the date on which the Employee
again performs an hour of service. A "one year period of severance" shall
mean a 12-consecutive-month period beginning on the severance from service
date and ending on the first anniversary of such date if the Employee does
not perform an hour of service during such 12-consecutive-month period;
provided, however, solely for purposes of determining whether an Employee has
incurred a one year period of severance, any Employee who is absent from
employment with the Employer or Affiliated Employer for a period of absence
which either (1) begins after the first day of the Plan Year beginning after
December 31, 1984, and which is incurred by reason of (i) the pregnancy of
the Employee, (ii) the birth of a child of the Employee, (iii) the placement
of a child with the Employee in connection with adoption of such child by the
Employee or (iv) for purposes of caring for such child for a period beginning
immediately following such birth or placement, or (2) begins on or after
August 5, 1993, and to which the Employee is entitled under the Family and
Medical Leave Act of 1993 ("FMLA"), shall not be charged with a period of
severance with respect to (a) the 12-consecutive-month period beginning on
the first day of such absence or (b) the 12-consecutive-month period
commencing on the first anniversary date of the first day of the period
described in clause (a) if the period in clause (a) is included in the
Employee's period of service. The applicable 12-consecutive-month period
described in clause (a) or (b) shall be subtracted from any period of
severance which would otherwise include the period described in clause (a) or
(b), as applicable.
An Employee's "severance from service date" shall occur on the earlier of
(i) the date on which the Employee quits, retires, is discharged, or dies; or
(ii) the first anniversary of the first day of a period in which the Employee
remains absent from service (with or without pay) for any reason other than a
quit, retirement, discharge, or death, such as vacation, holiday, sickness,
disability, leave of absence, or layoff. In addition, any period of absence
which is not described in the preceding sentence, which begins on or after
the first day of the Plan Year beginning after December 31, 1984, and which
is incurred by reason of (i) the pregnancy of the Employee, (ii) the birth of
a child of the Employee, (iii) the placement of a child with the Employee in
connection with the adoption of such child by the Employee or (iv) for
purposes of caring for such child for a period beginning immediately
following such birth or placement, shall be deemed to be a period of absence
described in, and subject to, clause (ii) of the preceding sentence.
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<PAGE>
An "hour of service" shall mean an hour for which an Employee is paid, or
entitled to payment, for the performance of duties for any Employer or
Affiliated Employer. "Covered service" shall mean service within a job
classification or class of employees covered under the Plan. "Contiguous
noncovered service" shall mean service other than covered service, which
precedes or follows covered service, if no quit, discharge, or retirement
occurs between such covered service and such other service.
Notwithstanding any other provisions of the Plan to the contrary, the
provisions of this paragraph shall govern the method for determining and
crediting Active Service with respect to any Employee covered under any Prior
Plan. For purposes of determining the Active Service of a Member who was a
participant in and had an interest under a Prior Plan as of the date
immediately prior to the date that the Prior Plan was amended and continued
under the form of the Plan, such Member shall be credited with Active Service
(for his period(s) of service prior to the date that the Prior Plan was
amended and continued under the form of the Plan) equal to the service
determined and credited to such Member under applicable provisions of the
Prior Plan as of the date immediately prior to the date that the Prior Plan
was amended and continued under the form of the Plan. For purposes of
determining such Member's Active Service for the period(s) of service
continuing or commencing on or after the date that the Prior Plan was amended
and continued under the form of the Plan, such Member's Active Service shall
be determined using the methods set out under applicable provisions of the
Plan, unless the Plan is retroactively effective as of a date which occurs
within a computation period of a Prior Plan (under which service credit was
determined with reference to computation periods and hours of service
credited thereto). In such event, Active Service shall be determined and
credited with respect to such computation period under applicable provisions
of the Prior Plan if necessary to ensure that a Member does not lose service
credit otherwise recognizable under the Prior Plan with respect to such
computation period, and then Active Service of any such Member for period(s)
of service continuing or commencing on or after the end of such computation
period shall be determined using the methods set out under applicable
provisions of the Plan.
1.4 ADMINISTRATIVE COMMITTEE: "Administrative Committee" shall mean the
committee appointed by the Board.
1.5 AFFILIATED EMPLOYER: "Affiliated Employer" shall mean an employer
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code), or which is a trade or business
(whether or not incorporated) which is under common control (within the
meaning of Section 414(c) of the Code), or which is a member of an affiliated
service group of employers (within the meaning of Section 414(m) of the
Code), which related group of corporations, businesses or employers includes
the Employer; and any other entity required to be aggregated with the
Employer pursuant to regulations under Section 414(o) of the Code.
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<PAGE>
1.6 BENEFICIARY: "Beneficiary" shall mean the person, the trust created
for the benefit of a person who is the natural object of the Member's bounty
or estate, whichever is designated by the Member to receive the benefits
payable hereunder upon his death.
1.7 BOARD: "Board" shall mean the Board of Directors (or equivalent
governing authority) of the Plan Sponsor.
1.8 CODE: "Code" shall mean the Internal Revenue Code of 1986, as
amended, and regulations and other authority issued thereunder by the
appropriate governmental authority. References to any section of the Code or
the Income Tax Regulations shall include reference to any successor section
or provision of the Code or Income Tax Regulations, as applicable.
1.9 COMPENSATION DEFERRAL AGREEMENT: "Compensation Deferral Agreement"
shall mean a written agreement between an eligible Employee and the Employer
in a form satisfactory to the Administrative Committee to permit the
Employer, in lieu of paying such amounts to the Employee in cash, to reduce
such Employee's current Base Compensation (as defined in Section 3.1(a)) and
contribute the amount of the reduction to the Trust as an Elective
Contribution for the benefit of the Member.
1.10 CONSIDERED COMPENSATION: "Considered Compensation" shall mean, as to
each Employee, compensation received during the Plan Year by the Employee
from the Employer which is required to be reported as wages on the Employee's
form W-2 (or its successor) for federal income tax withholding purposes, but
determined without regard to any rules under the Code that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the Code). Notwithstanding the previous
sentence, Considered Compensation shall be determined without regard to (a)
cash payments for (i) auto allowances, (ii) third party promotion funds,
(iii) company/division-wide special contests, (iv) stock option exercises,
(v) Employee suggestion winners, and (vi) reimbursements under the officers'
medical reimbursement plan, as well as (b) non-monetary compensation such as
(i) awards, e.g., sales trips, (ii) Employer-provided automobile and (iii)
imputed income on term life insurance benefits. Considered Compensation shall
also be determined before reduction under a compensation deferral agreement
under (i) the Plan or another plan described in Section 401(k) or 408(k) of
the Code, (ii) an annuity described in Section 403(b) of the Code or (iii) an
election under a cafeteria plan described in Section 125 of the Code. The
definition of Considered Compensation as used herein is intended to be
reasonable, nondiscriminatory and not by design to favor Highly Compensated
Employees.
With respect to Plan Years commencing after December 31, 1988, Considered
Compensation in excess of the limit imposed under Section 401(a)(17) of the
Code, which, for Plan Years commencing after December 31, 1988 but on or
before December 31, 1993, shall be $200,000 (as adjusted, as may be
determined by the Commissioner of Internal Revenue, at the same time and in
the same manner as prescribed in Section 401(a)(17) of the Code) for the
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<PAGE>
Plan Year shall be disregarded, and the rules pertaining to treatment of
family members set out in the third paragraph of the definition of Highly
Compensated Employee shall apply, except that in applying such rules, the
term "family" shall include only the spouse and any lineal descendants of the
Employee who have not attained age 19 before the close of the applicable Plan
Year.
For Plan Years commencing on or after January 1, 1994, Considered
Compensation shall not exceed $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with Section 401(a)(17) of the
Code. For purposes of this definition of "Considered Compensation", and for
purposes of the corresponding limitations on Considered Compensation in
Sections 3.3(h); 3.3(j); 7.3(b); and 7.4(l) of the Plan, the following
provisions shall apply:
(i) 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 applicable 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; and
(ii) If Considered Compensation for any prior determination
period is taken into account in determining an eligible Employee's
benefits accruing in the current Plan Year, the Considered
Compensation for that prior determination period is subject to the
applicable compensation limit in effect for that prior
determination period.
1.11 CONTRIBUTION: "Contribution" shall mean as to the Employer all
amounts which the Employer contributes to the Trust Fund under the terms of
the Plan. "ELECTIVE CONTRIBUTION" means the amounts which the Employer
contributes to the Trust Fund on behalf of Members pursuant to Compensation
Deferral Agreements. "MATCHING CONTRIBUTION" means the amount, if any, which
the Employer contributes to the Trust Fund pursuant to applicable provisions
of the Plan in order to match Elective Contributions. "PROFIT SHARING
CONTRIBUTION" means the amount, if any, which the Employer contributes to the
Trust pursuant to applicable provisions of the Plan. "QUALIFIED NON-ELECTIVE
CONTRIBUTION" means the amount, if any, which the Employer contributes to the
Trust on behalf of the Non-Highly Compensated Employees who are Members in
order to satisfy the actual deferral percentage test and/or the actual
contribution percentage test under Section 3.3.
1.12 EMPLOYEE: "Employee" shall mean every person employed as a common
law employee by an Employer, including, in the case of a corporation,
officers (but excluding any director unless the director is also a salaried
officer or other common law employee). In accordance with the requirements
of Section 414(n) of the Code, any Leased Employee shall be treated as an
Employee of the recipient Employer, however, contributions or benefits
provided by the Leasing Organization (described in the definition of Leased
Employee) which are attributable to services performed for the recipient
Employer shall be treated as provided by the
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<PAGE>
recipient Employer. Provided that Leased Employees do not comprise more than
20 percent of the recipient's nonhighly compensated work force (described in
Section 414(n)(5)(C) of the Code), the preceding sentence shall not apply if
such Leased Employee is covered by a money purchase pension plan providing:
(i) an nonintegrated employer contribution rate of at least 10 percent of
compensation, (ii) immediate participation by each employee of the Leasing
Organization other than (a) employees who perform substantially all of their
services for the Leasing Organization and (b) any individual whose
compensation (as defined in Section 415(c)(3) of the Code, including also
amounts contributed pursuant to a salary reduction agreement which are
excludable from the individual's gross income under Section 125, Section
402(a)(8), Section 402(h) or Section 403(b) of the Code) from the Leasing
Organization in each Plan Year during the 4-year period ending with the Plan
Year is less than $1,000, and (iii) full and immediate vesting.
1.13 EMPLOYER: "Employer" shall mean the Plan Sponsor and any other
person (described in Section 7701(a) of the Code) which adopts the Plan in
accordance with applicable provisions thereof.
1.14 ENTRY DATE: "Entry Date" shall mean the date on which an Employee
becomes a Member by commencing participation in the Plan after having met the
eligibility requirements under applicable provisions of the Plan, which date
shall be the first day of the periodic pay period commencing coincident with
or next following the first day of the Plan Year and the first day of the
seventh month of the Plan Year and anniversaries thereof.
1.15 HIGHLY COMPENSATED EMPLOYEE: "Highly Compensated Employee" shall
mean (subject to the subsequent provisions hereof) any Employee, who during
the Plan Year for which the determination is being made (the "determination
year") or during the 12-month period immediately preceding the Plan Year (the
"look-back year"):
(i) was at any time a 5-percent owner (as defined in Section
416(i)(1) of the Code and Section 7.4),
(ii) received compensation (described below) from the Employer
in excess of $75,000 (as adjusted at such time and in such manner
as may be prescribed under Section 414(q) and Section 415(d) of the
Code),
(iii) received compensation from the Employer in excess of
$50,000 (as adjusted at such time and in such manner as may be
prescribed under Section 414(q) and Section 415(d) of the Code),
and was in the top-paid group of Employees consisting of the top
20-percent of the Employees when ranked on the basis of
compensation paid during such year, excluding, however, for
purposes of determining the number (but, except for Employees
covered by collective bargaining agreements described below, not
identity) of Employees which comprise such top-paid group of
Employees, (a) any Employee who has not completed six months of
service as of the end of the current year
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<PAGE>
after aggregating the Employee's service for the Employer during
the current year and the immediately preceding year, (b) any
Employee who normally works less than 17-1/2 hours per week for 50%
or more of the total weeks worked during such year (excluding weeks
during which an Employee did not work for the Employer), (c) any
Employee who normally works during not more than six months during
any year (an Employee who works on one day during a month is deemed
to have worked during that month), (d) any Employee who has not
attained age 21 as of the end of the applicable year, and (e)
except to the extent provided in regulations issued under Section
414(q) of the Code by the appropriate governmental authority, any
Employee who 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 the
Employer, if at least 90 percent of the Employees of the Employer
are covered under one or more such collective bargaining agreements
and the Plan does not cover any Employee who is covered by any such
collective bargaining agreement.
(iv) was at any time an officer (within the meaning of Section
416(i) of the Code) and received compensation greater than
50-percent of the dollar amount in effect under Section
415(b)(1)(A) of the Code for the calendar year in which the
determination year or look-back year begins.
With respect to the exclusions for Employees who normally work less than
17 1/2 hours per week or during not more than six months during any year (as
described in clauses (iii)(b) and (iii)(c), respectively, above), such
exclusion determinations may be made separately with respect to each
Employee, or on the basis of groups of Employees who fall within particular
job categories as established by the Employer on a reasonable and consistent
basis. For purposes of clause (iii)(b) above, the Employer may exclude
Employees who are members of a particular job category if (i) 80% of the
positions within that job category are filled by Employees who normally work
less than 17 1/2 hours per week, or (ii) the median number of hours of service
credited to Employees in that job category during a determination year or
look-back year, as the case may be, is less than or equal to 500. Any
Employee who is a non-resident alien who receives no earned income (within
the meaning of Section 911(d)(2) of the Code) from the Employer which
constitutes income from sources within the United States (within the meaning
of Section 861(a)(3) of the Code) shall not be treated as an Employee for the
purpose of determining whether an Employee is a Highly Compensated Employee
or a Non-Highly Compensated Employee.
An Employee shall not be treated as described in clause (ii), (iii) or
(iv) of the first paragraph for the determination year unless such Employee
is also a member of the group consisting of the 100 Employees paid the
greatest compensation (described below) during the determination year. For
purposes of clause (iv) of the first paragraph, without regard to any
exclusions applicable for purposes of determining the number of Employees in
the top-paid group of Employees, no more than 50 Employees (or, if lesser,
the greater of (a) three Employees who perform services during the
determination or look-back year or (b) 10% of such
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<PAGE>
Employees) shall be treated as officers with respect to the determination
year or the look-back year, whichever may be applicable. Provided, however,
that if for either such year the number of officers of the Employer who
satisfy the requirements of clause (iv) of the first paragraph (as limited by
the first sentence of this paragraph) exceeds the 50-Employee limitation of
the immediately preceding sentence, then the officers who receive the
greatest compensation during the determination year or look-back year will be
considered includible officers; and, further provided, that if for any such
year, no officer of the Employer is described in clause (iv) of the first
paragraph, the highest paid officer of the Employer for such year (without
regard to the amount of compensation paid to such officer in relation to the
dollar limit of Section 415(c)(1)(A) of the Code for the year) shall be
treated as described in such clause (iv) whether or not such Employee is also
a Highly Compensated Employee on any other basis. An individual who is a
Highly Compensated Employee for the determination year or the look-back year
by reason of being described in two or more of clauses (i) through (iv) of
the first sentence of the immediately preceding paragraph shall not be
disregarded in determining whether another individual is a Highly Compensated
Employee. The Administrative Committee shall prescribe reasonable and
nondiscriminatory rules which shall be uniformly and consistently applied for
the purposes of (i) rounding calculations incident to determining the number
of Employees in the top-paid group of Employees and (ii) breaking ties among
two or more Employees incident to identifying particular Employees who are in
the top-paid group of Employees, who are among the top-10 Highly Compensated
Employees, or who are among the 100 Employees paid the greatest compensation
during the determination year.
If, on any single day during any determination year or look-back year, an
Employee is a member of the family (described below) of another individual
who is (i) a 5-percent owner who is a current or former Employee or (ii) a
Highly Compensated Employee (including former Employees) in the group
consisting of the 10 Highly Compensated Employees paid the greatest
compensation during the determination year or the look-back year, then such
family member and 5-percent owner or top-10 Highly Compensated Employee shall
be considered to be a single Employee receiving an amount of compensation and
a Plan contribution that is based on the compensation and Plan contribution
attributable to such family member and the 5-percent owner or top-10 Highly
Compensated Employee. For purposes of the immediately preceding sentence,
family members of any Employee or former Employee include the Employee's or
former Employee's spouse and lineal ascendants or descendants and the spouses
of lineal ascendants and descendants. Family members are subject to the
aggregation rule described in the second preceding sentence whether or not
(i) they fall within the categories of Employees that may be excluded for
purposes of determining the number of Employees in the top-paid group
consisting of the top 20-percent of the Employees when ranked on the basis of
compensation (as such toppaid group is described in clause (iii) of the first
paragraph hereof), or (ii) they are Highly Compensated Employees when
considered separately.
A former Employee who, with respect to the Employer, had a "separation
year" (described below) or a "deemed separation year" (described below) prior
to the determination year will be treated as a Highly Compensated Employee
for the determination year if such
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<PAGE>
former Employee was (i) a Highly Compensated Employee for such former
Employee's separation year or deemed separation year, or (ii) a Highly
Compensated Employee for any determination year ending on or after such
former Employee attained age 55. For purposes of the immediately preceding
sentence, an Employee who performs no services for the Employer during a
determination year (including a leave of absence throughout the determination
year) is treated as a former Employee. A "separation year" is the
determination year during which the Employee separates from service with the
Employer; provided, however, an Employee who performs no services for the
Employer during a determination year will be treated as having separated from
service with the Employer in the year in which such Employee last performed
services for the Employer. An Employee who performs services for the
Employer during a determination year will incur a "deemed separation year"
if, in any determination year which ends prior to such Employee's attainment
of age 55, the Employee receives compensation in an amount less than 50% of
the Employee's average annual compensation for the three consecutive calendar
years preceding such determination year during which the Employee received
the greatest amount of compensation from the Employer; provided, however, an
Employee will not be treated as a Highly Compensated Employee (solely by
reason of a 8-deemed separation in a deemed separation year), if after such
deemed separation and before the year of the Employee's actual separation,
such Employee's compensation increased sufficiently to permit the Employee to
be treated as having a deemed resumption of employment with respect to a
determination year, as prescribed in regulations issued under Section 414(q)
of the Code by the appropriate governmental authority.
Former Employees are not counted for purposes of determining the top-paid
group consisting of the top 20-percent of the Employees when ranked on the
basis of compensation (as such top-paid group is described in clause (iii) of
the first paragraph hereof). Furthermore, with respect to the determination
year, former Employees are not included in (i) the group consisting of the
100 Employees paid the greatest compensation, or (ii) the group of includible
officers of the Employer, as such groups are described in the second
paragraph of this Section.
For purposes of this Section, "compensation" shall mean the wages (as
defined in Section 3401(a) of the Code for purposes of income tax withholding
at the source) that are paid (within the meaning of Section 1.415-2(d)(3) and
(4) of the Income Tax Regulations) to the Employee by the Employer during the
Plan Year for services performed and reportable on the Employee's form W-2
(or its successor), determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the Code), but including elective or salary
reduction contributions to cafeteria plans under Section 125 of the Code, or
to cash or deferred arrangements under Sections 402(a)(8) and 402(h)(1)(B) of
the Code, or to tax-sheltered annuities under Section 403(b) of the Code.
Only compensation received by the Employee from an Employer, or deemed to be
received pursuant to the preceding sentence, shall be considered for purposes
of this Section; therefore, compensation shall not be annualized in order to
compute an Employee's compensation in the determination year or the look-back
year.
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<PAGE>
The rules of Section 414(b), (c), (m), (n) and (o) of the Code shall be
applied before the above provisions of this Section are applied. The rules
described in the immediately preceding sentence do not apply for purposes of
determining who is a 5-percent owner. Notwithstanding any provision hereof
to the contrary, the determination of who is a Highly Compensated Employee
shall be made in accordance with Section 414(q) of the Code.
In the event that the Administrative Committee elects to have one or more
of the provisions of this paragraph apply for purposes of determining the
status of an Employee as a Highly Compensated Employee or a Non-Highly
Compensated Employee, the Administrative Committee shall adopt a resolution
which shall specifically identify the provision or provisions of this
paragraph which shall apply and the effective date of such application, and a
certified copy of such resolution shall be attached to the Plan as an exhibit
which shall be referenced to this Section and shall be deemed to be an
amendment of the Plan which is incorporated in and made a part of this
Section for all purposes of the Plan. Any provision of this paragraph which
becomes operative by virtue of application of the preceding sentence shall
override or supersede and control over any provision of this Section which
may be inconsistent with the operative provisions of this paragraph.
Accordingly, to the extent elected by the Administrative Committee in
compliance with the requirements of the first sentence of this paragraph, the
following provision or provisions shall apply:
(i) To the extent permitted in regulations issued under
Section 414(q) of the Code, the look-back year calculation for a
determination year shall be made on the basis of the calendar year
ending with or within the applicable determination year (or, in the
case of a determination year that is shorter than twelve months,
the calendar year ending with or within the twelve month period
ending with the end of the applicable determination year);
provided, however, the computation contemplated hereunder shall
apply only if the Administrative Committee elects, as described
above, to apply the same computation provisions to all plans,
entities and arrangements of the Employer which are required to
apply the definition of Highly Compensated Employee set forth in
Section 414(q) of the Code.
(ii) To the extent permitted in regulations issued under
Section 414(q) of the Code, Leased Employees covered under a
qualified money purchase pension plan maintained by a leasing
organization and not covered under a qualified retirement plan of
the Employer (including the Plan), shall be included for purposes
of determining the group of Highly Compensated Employees hereunder.
(iii) To the extent permitted in regulations issued under
Section 414(q) of the Code, the special definition (described in
such regulations) for purposes of determining whether former
Employees who separated from service with the Employer prior to
January 1, 1987 are Highly Compensated Employees shall apply;
provided, however, the special definition contemplated hereunder
shall apply only if the Administrative Committee elects, as
described above, to apply the special definition to all plans,
entities and arrangements of the Employer which are required to
apply the definition of Highly Compensated Employee set forth in
Section 414(q) of the Code, and further, provided that such
election to use such special definition may not be changed by the
Employer without the consent of the Internal Revenue Service.
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<PAGE>
Subject to any governmental approval as may be required under applicable
regulations or other authority issued by the appropriate governmental
authority, any operative provision of this paragraph may be changed by
attaching a certified resolution of the Administrative Committee (which
resolution shall be attached to the Plan as an exhibit) which (i) shall
identify the provision or provisions of the paragraph that are to be changed
and the effective date of such change, (ii) shall be referenced to this
Section, and (iii) shall be deemed to be an amendment of the Plan which is
incorporated in and made part of this Section for all purposes of the Plan.
If elected by a resolution duly adopted by the Administrative Committee,
Section 1.15 shall be modified by:
(i) Substituting $50,000 for $75,000 in clause (ii) of the
first paragraph of Section 1.15 and by disregarding clause (iii) of
the first paragraph of Section 1.15. This simplified definition of
Highly Compensated Employee may apply if the Employer maintains
significant business activities (and employs employees) in at least
two significantly separate geographic areas; or
(ii) Substituting the simplified method pursuant to Section 4
of Revenue Procedure 93-42, in which case the Highly Compensated
Employees shall be determined under Section 1.15 on the basis of
(a) the look-back year and determination year or (b) the
determination year only, as determined by the Administrative
Committee, taking into account all Employees employed during such year.
1.16 LEASED EMPLOYEE: "Leased Employee" shall mean any person (i) who is
not a common law employee of the recipient Employer and (ii) who (pursuant to
an agreement between an Employer (or Affiliated Employer) and any other
person ("Leasing Organization")) has performed services for the Employer (or
for the Employer and related persons determined in accordance with Section
414(n)(6) of the Code) (a) on a substantially full time basis for a period of
at least one year (including periods of service for the recipient Employer
for which such person would have been a Leased Employee but for the
requirements of this subclause (a)) and (b) such services are of a type
historically performed by employees in the business field of the recipient
Employer.
1.17 MEMBER: "Member" shall mean an Employee who is participating in the
Plan during the Plan Year and, if consistent with the context in which such
term is used, a former Member of the Plan.
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1.18 NET INCOME: "Net Income" shall mean, as to an Employer, its net
profit for any given year as determined by its accountant or accounting firm
and reflected on its profit and loss statement for such year, without
reduction for contributions under the Plan or payments of, or reserves for,
federal and state taxes based on income, and after elimination of all gains
from the sale or disposition of property not held for sale to customers in
the ordinary course of business.
1.19 NON-HIGHLY COMPENSATED EMPLOYEE: "Non-Highly Compensated Employee"
shall mean a Employee who is neither a Highly Compensated Employee nor a
family member thereof described in Section 414(q)(6) of the Code.
1.20 PLAN: "Plan" shall mean the Kent Electronics Corporation
Tax-Deferred Savings and Retirement Plan herein set forth and all subsequent
amendments hereto. The Plan is hereby designated as a profit sharing plan
for purposes of Sections 401, 402, 412, 417 and other applicable provisions
of the Code.
1.21 PLAN SPONSOR: "Plan Sponsor" shall mean Kent Electronics Corporation
and any successor thereto which adopts and continues the Plan.
1.22 PLAN YEAR: "Plan Year" shall mean the fiscal year of the Plan which
shall end on the Saturday closest to March 31 of each year; provided,
however, that the Plan Year commencing April 2, 1995 shall end on December
31, 1995 and that from and after January 1, 1996, "Plan Year" shall mean the
period commencing on January 1 of a calendar year and ending on December 31
of the same year.
1.23 PRIOR PLAN: "Prior Plan" shall mean the Plan, as in effect prior to
its amendment, restatement and continuation under the form of this Plan. The
term "Prior Plan" shall also include any other defined contribution plan
described in Section 414(i) of the Code (excluding any plan that is subject
to the minimum funding standards of Section 412 of the Code or that is
required to provide a qualified joint and survivor annuity or a qualified
preretirement survivor annuity described in Sections 401(a)(11) and 417 of
the Code) or any defined benefit plan described in Section 414(j) of the
Code, which plan at all times relevant met the requirements for qualification
under Section 401(a) or 403(a) of the Code as in effect on the date
immediately prior to the date that such plan was completely amended, restated
and continued under the form of the Plan, without a gap or lapse in coverage,
time or effect of a qualified plan and exempt trust under applicable
provisions of the Code.
1.24 ROLLOVER CONTRIBUTION: "Rollover Contribution" shall mean an amount
(i) which the Administrative Committee determines may be deposited in the
Trust Fund in accordance with Section(s) 402(c), 402(e) or 408(d)(3) of the
Code without endangering the qualification and exemption of the Plan and the
Trust under Sections 401(a) and 501(a) of the Code, respectively, and (ii)
which is contributed by a Member to his Rollover Account.
I-15
<PAGE>
1.25 TOTAL AND PERMANENT DISABILITY: "Total and Permanent Disability"
shall mean a mental or physical disability which, in the opinion of a
physician selected or pre-approved by the Administrative Committee, will
prevent a Member from earning a reasonable livelihood with the Employer or
any Affiliated Employer, which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less
than twelve months and which:
(a) Was not contracted, suffered or incurred while such
Member was engaged in, or did not result from his having engaged
in, a felonious criminal enterprise;
(b) Did not result from alcoholism or addiction to narcotics
or any self-inflicted injury; and
(c) Did not result from an injury incurred while a member of
the armed forces of the United States after the effective date of
the Plan and for which such Member receives a military pension.
1.26 TRANSFERRED: "Transferred" as used with respect to an Employee and
"Transfer of an Employee" shall mean the termination of employment with one
Employer and the contemporaneous commencement of employment with another
Employer.
1.27 TRUST: "Trust" shall mean the trust estate created under the Trust
Agreement.
1.28 TRUSTEE: "Trustee" shall mean the trustee or trustees qualified and
acting hereunder or any successor or successors appointed by the Board.
1.29 TRUST AGREEMENT: "Trust Agreement" shall mean the trust agreement
provided for in Article IX hereof, as amended from time to time.
1.30 TRUST FUND: "Trust Fund" shall mean the cash, bonds, stock and other
assets or liabilities held by the Trustee under the terms of the Trust
Agreement.
I-16
<PAGE>
ARTICLE II
EMPLOYEES ELIGIBLE TO PARTICIPATE
2.1 ELIGIBILITY REQUIREMENTS: An Employee who was a Member or
participant in a Prior Plan on the date immediately prior to the date such
Prior Plan was amended, restated and continued under the form of the Plan,
shall be deemed to be a Member hereunder as of the date such Prior Plan was
amended, restated and continued under the form of the Plan. Every other
Employee shall be eligible to participate in the Plan commencing on the Entry
Date coincident with or next following the latest of (i) the effective date
of the adoption of the Plan by the Employee's Employer or (ii) the Employee's
attainment of the age of twenty-one (21) years or (iii) the date on which the
Employee first completes six (6) of more months of Active Service.
Notwithstanding the preceding provisions of this paragraph, student interns
are not eligible to participate in the Plan.
In addition, pursuant to uniform and nondiscriminatory rules established
by the Administrative Committee with the consent or ratification of the
Board, the Administrative Committee may vote to allow Employees to enter the
Plan as Members on any date which would not otherwise be permitted under the
Plan. Any such decision shall be evidenced by formal minutes reflecting such
action of the Administrative Committee or by unanimous written consent of
the members of the Administrative Committee and shall be appropriately
communicated to the affected Members, and must be approved or ratified by the
Board, unless pursuant to the rules described in the preceding sentence,
approval or ratification by the Board is not required.
Should an Employee be separated from the service of the Employer for any
reason during a period which includes an Entry Date, such Employee shall be
eligible to commence participation in the Plan on the date he completes an
hour of service following his return to employment with the Employer. An
Employee who has become a Member shall continue as such until his severance
from service date. A former Member shall be eligible to recommence
participation in the Plan on the first day on which he completes an hour of
service following his return to employment with the Employer.
Employees who are included in a unit of Employees covered by a collective
bargaining agreement between the Employees' representative and an Employer
shall be excluded from participation in the Plan if retirement benefits were
the subject of good faith bargaining between the Employees' representative
and the Employer and the agreement does not require the Employer to include
such Employees in the Plan. For purposes of the preceding sentence, the term
"Employees' representative" shall not include any organization more than
one-half of the members of which are Employees who are owners, officers or
executives of the Employer. Employees who are nonresident aliens and who
receive no earned income (within the meaning of Section 911(d)(2) of the
Code) from the Employer which constitutes income from sources within the
United States (within the meaning of Section 861(a)(3) of the Code) shall be
excluded from participation in the Plan.
II-1
<PAGE>
Notwithstanding any other provision of the Plan to the contrary, (i) any
individual who was considered by the Employer to be an independent
contractor, but who is later reclassified as a common-law Employee (excluding
any Leased Employee described in clause (ii) below) of the Employer with
respect to any portion of the period in which such individual was paid by the
Employer as an independent contractor, or (ii) any Leased Employee, shall be
excluded from participation in the Plan with respect to the period in which
any individual described in clause (i) was considered to be an independent
contractor, or the period in which any individual described in clause (ii) is
a Leased Employee. The immediately preceding sentence shall fully apply only
with respect to Plan Years (or portions thereof) in which none of the
individuals described in such sentence is required to be covered in order to
ensure that the Plan is operated in compliance with the requirements of
Sections 401(a) and 410(b) of the Code. In the event that any individual who
is included in the class of reclassified independent contractors or Leased
Employees described in clause (i) or (ii) of the first sentence of this
paragraph, must be covered with respect to a Plan Year (or portion thereof)
in order to ensure that the requirements of the immediately preceding
sentence are met, starting with the class of reclassified independent
contractors, only such number of individuals within the class which includes
the individual (beginning with the individuals with the lowest Considered
Compensation determined on an annualized basis) as is necessary to ensure
compliance with the requirements of the immediately preceding sentence shall
be covered in the Plan only for the Plan Year (or portion thereof) that is
necessary to ensure that the requirements of the immediately preceding
sentence are met.
2.2 CERTIFICATION AND NOTICE OF ELIGIBILITY: Eligibility shall be
determined and each Employee shall be notified of his admission as a Member
by the Administrative Committee.
2.3 FROZEN PARTICIPATION: While service with an Affiliated Employer
which is not an Employer is counted for purposes of determining Active
Service, no person shall authorize Elective Contributions to the Plan except
for the period(s) of service that he is actually employed in covered
employment with and paid by an Employer. If an Employee is (i) transferred
from an Employer to an Affiliated Employer which is not an Employer or (ii)
otherwise ceases to be employed in covered employment with and paid by an
Employer (but does not have a severance from service), his Account shall
thereupon be frozen: he shall not be permitted to authorize contributions to
the Plan, and his Account shall not share in the allocation of any Employer
Contribution or, if applicable, any forfeitures (except for the period(s) of
service that he is actually employed in covered employment with and paid by
an Employer), but his Account will continue to share in any appreciation or
depreciation and income or loss incurred by the Trust Fund during the period
of time that he is employed by an Affiliated Employer which is not an
Employer or that he is otherwise excluded from covered employment; provided,
however, he shall continue to accrue Active Service.
II-2
<PAGE>
ARTICLE III
CONTRIBUTIONS
INDEX OF PLAN PROVISIONS COVERED IN ARTICLE III
Section or Subsection Section Number
- --------------------- --------------
Compensation Deferral Agreements for Elective Contributions 3.1
Compensation Deferral Agreements 3.1(a)
Special Compensation Deferral Agreements 3.1(b)
Dollar Limit on Elective Deferrals 3.1(c)
Remedying Excess Deferrals 3.1(d)
Rollover Contributions 3.2
Employer Contributions 3.3
Elective Contributions 3.3(a)
Matching Contributions 3.3(b)
Profit Sharing Contributions 3.3(c)
Qualified Non-Elective Contributions 3.3(d)
Restoration of Forfeited Benefits 3.3(e)
Top-Heavy Minimum Contribution 3.3(f)
Contribution Limits 3.3(g)
Actual Deferral Percentage Test 3.3(h)
Excess Contributions over ADP Limits 3.3(i)
Actual Contribution Percentage Test 3.3(j)
Prohibited Multiple Use of 2.0/2%
Alternative Limit for the ADP and ACP tests 3.3(k)
Excess Aggregate Contributions over ACP Limits 3.3(l)
Composition of and Deadline for Payment of Employer Contributions 3.4
Return of Contributions for Mistake, Disqualification
and Disallowance of Deduction 3.5
III-1
<PAGE>
3.1 COMPENSATION DEFERRAL AGREEMENTS FOR ELECTIVE CONTRIBUTIONS:
(a) COMPENSATION DEFERRAL AGREEMENTS: Subject to applicable conditions
and limitations of the Plan, at such time or times as may be permitted by the
Administrative Committee and in such manner and amounts as shall be
consistent with the provisions of this Section, in lieu of receipt of such
amounts in cash, Members may authorize the Employer to make Elective
Contributions to the Plan on their behalf. Elective Contributions shall be
held, invested and distributed as provided under applicable provisions of the
Plan. Provided, however, no Compensation Deferral Agreement (or any other
deferral mechanism that may be permitted under the Plan) may be adopted
retroactively. In the event Elective Contributions are permitted, the
opportunity to authorize Elective Contributions hereunder shall be announced
and made available to all Members on an equal basis. Once Elective
Contributions have been permitted, if the Administrative Committee determines
to stop Elective Contributions, an announcement shall be made to all
Employees and the Elective Contributions to the effective date of the
announcement shall be retained in the Plan subject to its terms and
provisions.
From and after the date, if any, established by the Board pursuant to
the preceding paragraph of this Section, or the Entry Date or other date with
respect to which a Member is eligible to participate, if later, each Member
may execute a Compensation Deferral Agreement in a form satisfactory to the
Administrative Committee whereunder the Member shall agree subject to any
necessary adjustments pursuant to this Section and Sections 3.3 and 4.3 (i)
to a reduction (expressed in whole percentages only) of not less than one
percent (1%) nor more than twelve percent (12%) of his Base Compensation
(before such authorized reduction) attributable to the applicable pay
periods, and (ii) to have the Employer contribute (as an Elective
Contribution) to the Plan an amount equal to the amount of the authorized
reduction, which Elective Contribution shall be allocated and credited to the
Member's Employer Nonforfeitable Contributions Account.
For purposes of this Section 3.1 and any other provisions of the Plan
that utilize the term, "Base Compensation" shall mean, as to each Employee,
compensation received during the Plan Year by the Employee from the Employer
which is required to be reported as wages on the Employee's form W-2 (or its
successor) for federal income tax withholding purposes, but determined
without regard to any rules under the Code that limit the remuneration
included in wages based on the nature or location of the employment or the
services performed (such as the exception for agricultural labor in Section
3401(a)(2) of the Code). Notwithstanding the previous sentence, Base
Compensation shall be determined without regard to (a) cash payments for (i)
auto allowances, (ii) third party promotion funds, (iii)
company/division-wide special contests, (iv) stock option
III-2
<PAGE>
exercises, (v) Employee suggestion winners, and (vi) reimbursements under the
officers' medical reimbursement plan, as well as (b) non-monetary
compensation such as (i) awards, e.g., sales trips, (ii) Employer-provided
automobile and (iii) imputed income on term life insurance benefits. Base
Compensation shall also be determined before reduction under a compensation
deferral agreement under (i) the Plan or another plan described in Section
401(k) or 408(k) of the Code, (ii) an annuity described in Section 403(b) of
the Code or (iii) an election under a cafeteria plan described in Section 125
of the Code. The definition of Base Compensation as used herein is intended
to be reasonable, nondiscriminatory and not by design to favor Highly
Compensated Employees.
Reductions authorized under Compensation Deferral Agreements shall be
irrevocable, except that Elective Contributions may be increased or decreased
on the first day of any periodic pay period coincident with or next following
any subsequent first day of the first quarter or third quarter of the Plan
Year (or such other date(s) as may be prescribed by the Administrative
Committee) with reasonable notice as may be required by the Administrative
Committee. Elective Contributions may be discontinued at any time with
reasonable notice as may be required by the Administrative Committee;
provided, however, if Elective Contributions are discontinued at the request
of a Member, such Contributions may not be resumed until the first day of any
periodic pay period coincident with or next following the first day of the
first quarter or third quarter of the Plan Year (or such other date(s) as may
be prescribed by the Administrative Committee) following receipt by the
Administrative Committee of reasonable notice as may be required by the
Administrative Committee. Under special circumstances, the Administrative
Committee may permit different or additional effective dates for increases or
decreases of Elective Contributions authorized under Compensation Deferral
Agreements, or may waive the otherwise applicable notice requirement, in
order to prevent hardship to any Member, provided that the waiver is not
contrary to the best interests of the other Members.
(b) SPECIAL COMPENSATION DEFERRAL AGREEMENTS: Notwithstanding the
preceding subsection, if the Administrative Committee so determines in its
sole discretion, prior to the first day of the last month of the calendar
year (or such other month during a Plan Year as determined by the
Administrative Committee), each Member may execute a Compensation Deferral
Agreement (in such form as is satisfactory to the Administrative Committee
and hereinafter referred to as a "Special Compensation Deferral Agreement")
providing for an increase or a reduction of Elective Contributions with
respect to any part or all of the Member's Base Compensation for any part or
all of the selected month during the Plan Year; provided, however, (i) such
Special Compensation Deferral Agreement shall be deemed to modify and
override any prior Compensation Deferral Agreement during the period covered
by the Special Compensation
III-3
<PAGE>
Deferral Agreement, (ii) the deferrals authorized under the Special
Compensation Deferral Agreement may be increased, reduced or revoked only if
permitted by the Administrative Committee and (iii) the Special Compensation
Deferral Agreement shall automatically terminate as of the earlier of such
time (a) it is revoked by the Member in accordance with nondiscriminatory
rules established by the Administrative Committee or (b) the last day of the
period with respect to which authorized reductions thereunder are contributed
to the Plan. All deferrals required under the Plan as a result of the
execution of a Special Compensation Deferral Agreement shall be subject to
all applicable terms, conditions, and limitations of the Plan. As of the
date that the Special Compensation Deferral Agreement ceases to be operative,
the Member's then otherwise operative Compensation Deferral Agreement shall
govern deferrals to be made on behalf of the Member.
(c) DOLLAR LIMIT ON ELECTIVE DEFERRALS: Notwithstanding any other
provision of the Plan to the contrary, deferrals under the Plan in lieu of
cash Considered Compensation, pursuant to any Compensation Deferral Agreement
and Special Compensation Deferral Agreement, when added to (i) any employer
contribution under the Plan or any other cash or deferred arrangement
(described in Section 401(k) of the Code) to the extent not includible in
gross income for the taxable year under Section 402(a)(8) of the Code, (ii)
any employer contribution (to a simplified pension plan under a salary
reduction agreement) to the extent not includible in gross income for the
taxable year under Section 402(h)(1)(B) of the Code, (iii) any employer
contribution to purchase an annuity contract (described in Section 403(b) of
the Code) under a salary reduction agreement (within the meaning of Section
3121(a)(5)(D) of the Code) to the extent not includible in gross income for
the taxable year under Section 403(b) of the Code, and (iv) any employer
contribution (pursuant to any election to defer under any eligible deferred
compensation plan) to the extent not includible in gross income under Section
457 of the Code, are limited to $7,000 (as adjusted, as may be determined by
the Commissioner of Internal Revenue, at the same time and in the same manner
as prescribed in Section 415(d) of the Code). In addition, without limiting
the scope of the immediately preceding sentence, Elective Contributions
and/or any similar elective deferrals (described in Section 402(g)(3) of the
Code) to the Plan and/or any other qualified plan, contract or arrangement,
which is described in the immediately preceding sentence and maintained by
the Employer and/or any Affiliated Employer, shall not in the aggregate
exceed the dollar limitation (as adjusted) of the immediately preceding
sentence and Section 402(g) of the Code as in effect at the beginning of such
taxable year.
(d) REMEDYING EXCESS DEFERRALS: To the extent that a Member's elective
deferrals authorized pursuant to the Sections of the Code referenced in the
immediately preceding subsection exceed the applicable limit for the
III-4
<PAGE>
applicable year so that any amount otherwise excludable from such Member's
gross income for federal income tax purposes is includible in his gross
income, then, not later than the first March 1 following the close of the
taxable year of such excess deferral, the Member shall notify the
Administrative Committee in writing of any portion of any such excess
deferrals which the Member has elected to allocate to the Plan. Such notice
shall include the Member's certified written claim for a specified amount of
excess deferrals for the preceding calendar year and shall be accompanied by
the Member's certified written statement that if such amounts are not
distributed, such excess deferrals, when added to amounts deferred under
other plans or arrangements described in Sections 401(k), 408(k), 403(b) or
457 of the Code, exceeds the limit imposed under Section 402(g) of the Code
for the year in which the deferral occurred. In accordance with Section
1.402(g)-1(e)(2) of the Income Tax Regulations, to the extent that the Member
only has elective deferrals for the taxable year under the Plan and any other
plan or arrangement described in the previous sentence which is maintained by
the same Employer, such Employer may notify the Administrative Committee of
any excess deferrals made on behalf of the Member.
Following actual receipt by the Administrative Committee of the notice
described in the immediately preceding paragraph, (notwithstanding any other
provision of law or the Plan relating to spousal consent), not later than the
first April 15 immediately following such March 1 deadline for written
notification of the Administrative Committee, the Plan shall distribute to
such Member in a lump sum (in cash or in kind) the amount of excess elective
deferrals allocated to the Plan (and any income allocable to such amount).
Such distribution shall be made first by distribution of nonmatched Elective
Contributions, if any, allocated to the Member's Employer Nonforfeitable
Contributions Account, and, if necessary, next by distribution of Elective
Contributions which were matched by Matching Contributions. To the extent
that such excess deferrals are attributable to matched Elective Contributions
(and any income allocable thereto) which amounts are distributed to the
Member pursuant to the preceding provisions of this Section, Matching
Contributions (and any income allocable thereto) will be appropriately
reduced and such reduced Matching Contributions (and any income allocable
thereto) shall be applied as forfeitures pursuant to Section 4.6. Such
reduction shall be made first by reduction of any Matching Contributions
allocated to the Member's Employer Nonforfeitable Contributions Account, and,
if necessary, next by reduction of Matching Contributions allocated to the
Member's Employer Contributions Account. The provisions of this paragraph
(which provide for reduction of Matching Contributions made with respect to
Elective Contributions which are distributed hereunder) are intended to
comply with the requirements of Sections 401(a), 401(k), 401(m) and 411 of
the Code. To the extent that any provision of this paragraph is inconsistent
with the preceding sentence, such provision shall be deemed to be inoperative
and the Plan shall be operated in a manner that complies with the
requirements of the immediately preceding sentence.
III-5
<PAGE>
Income or loss allocable to the portion of the Member's Employer
Nonforfeitable Contributions Account that is attributable to excess elective
deferrals (described below) shall be income or loss for the taxable year
allocable to the portion of Member's Employer Nonforfeitable Contributions
Account that is attributable to elective deferrals multiplied by a fraction,
the numerator of which is the Member's excess elective deferrals for the year
and the denominator of which is the balance as of the end of such year of the
portion of the Member's Employer Nonforfeitable Contributions Account that is
attributable to elective deferrals reduced by any gain and increased by any
loss allocable to such balance for the taxable year. In the event that a
separate subaccount is not maintained with respect to elective deferrals
attributable to Elective Contributions (and any income allocable thereto),
the portion of the Employer Nonforfeitable Contributions Account which is
attributable to elective deferrals is determined by multiplying the balance
of the Member's Employer Nonforfeitable Contributions Account by a fraction,
the numerator of which is the Elective Contributions made on behalf of the
Member and credited to the Member's Employer Nonforfeitable Contributions
Account less any withdrawals, and the denominator of which is the sum of all
Employer Contributions made on behalf of the Member and credited to the
Member's Employer Nonforfeitable Contributions Account less any withdrawals.
Similar rules apply with respect to determination of Matching Contributions
allocated to the Employer Contributions Account and any income allocable
thereto. No income or loss will be allocated for the gap period between the
end of the taxable year to the date of distribution for Plan Years beginning
on or after March 28, 1992 and, with respect to Plan Years beginning before
such date, income or loss shall be allocated in accordance with the
applicable Income Tax Regulations and Plan document as then in effect.
Notwithstanding the preceding provisions of this subsection, any Member
who has excess elective deferrals for a taxable year may receive a corrective
distribution of such deferrals (and income attributable thereto) during the
same year if the Member notifies the Administrative Committee of an excess
deferral, the correcting distribution is made after the date on which the
Plan received the excess deferral and the Plan designates and treats the
distribution as a distribution of an excess deferral. Any distribution
described in the immediately preceding sentence shall be made as soon as
practicable, but absent circumstances beyond the control of the
Administrative Committee, not later than 60 days after the first day of the
month that occurs on or after the later of (i) the actual receipt by
Administrative Committee of the Member's notification of an excess deferral
or (ii) the date that the Plan actually receives the excess elective
deferral. The income allocable to elective deferrals from the first day of
the taxable year to the date of the distribution shall be determined by using
the method described in the immediately preceding paragraph.
III-6
<PAGE>
Notwithstanding any other provision of this subsection to the contrary,
the amount of excess elective deferrals that may be distributed under this
subsection shall be reduced by any excess contributions over the ADP limit
(described in Section 3.3) previously distributed with respect to a Member
for the Plan Year beginning with or within such Member's taxable year. In no
event shall any Member receive from the Plan a corrective distribution for
the taxable year of an amount in excess of the Member's total elective
deferrals under the Plan for the taxable year. Except as may be otherwise
required under Section 3.3, any excess deferral not timely distributed shall
remain in the Plan and be subject to otherwise applicable conditions and
limitations thereof. In addition, any excess elective deferrals which are
timely distributed under the preceding provisions of this subsection shall
not be treated as an annual addition under Section 4.3. Also, excess
deferrals by Non-Highly Compensated Employees shall not be taken into account
under the ADP test of Section 3.3 to the extent such excess deferrals are
made under the Plan or any other qualified plan of the Employer or any
Affiliated Employer. A distribution of elective deferrals (and allocable
income thereon) under this subsection shall not be considered as a
distribution for purposes of compliance with the minimum distribution
provisions of Section 6.6.
3.2 ROLLOVER CONTRIBUTIONS:
(a) Qualified cash Rollover Contributions may be made to the Plan by
any Employee other than a Leased Employee of amounts received by such
Employee from an individual retirement account or annuity or from another
qualified retirement plan, but only if such Rollover Contributions are made
pursuant to and in accordance with applicable provisions of the Code as
determined by the Administrative Committee. Any Employee who desires to make
a Rollover Contribution to the Plan must complete, execute and file with the
Administrative Committee a form prescribed by the Administrative Committee
for such purpose. If the Administrative Committee on a nondiscriminatory
basis approves the Rollover Contribution, it shall be credited to the
Rollover Account of the Employee making such Rollover Contribution as of the
last day of the month in which the Rollover Contribution is made.
(b) Qualified direct Rollover Contributions may be made to the Plan by
any Employee other than a Leased Employee of amounts which are eligible
rollover distributions within the meaning of Section 402(f)(2)(A) of the Code
from an employees' trust described in Section 401(a) of the Code which is
exempt from tax under Section 501(a) of the Code, but only if such Rollover
Contributions are made pursuant to and in accordance with applicable
provisions of the Code as determined by the Administrative Committee. Any
Employee desiring to effect such Rollover Contributions to the Plan must
complete, execute and file with the Administrative Committee a form
prescribed by the Administrative Committee for such purpose. Direct Rollover
Contributions to the Plan must be in cash and may be effectuated only by wire
transfer directed to the Trustee or by issuance of a check made payable to
the Trustee which is negotiable only by the Trustee and which identifies the
Employee for whose benefit the Rollover Contribution is being made. If the
Administrative Committee on a nondiscriminatory basis approves the direct
Rollover Contribution, it shall be credited to the Rollover Account of the
Employee for whose benefit such Rollover Contribution is being made as of the
last day of the month in which the Rollover Contribution is made.
III-7
<PAGE>
(c) The Rollover Account shall share in any income or loss and
appreciation or depreciation of the Trust Fund. Rollover Contributions shall
not have an effect on limitations under the Plan that are based on
Contributions.
(d) An Employee who has made a Rollover Contribution in accordance with
Paragraph (a) or Paragraph (b) of this Section who has not otherwise become a
Member of the Plan shall become a Member coincident with such Rollover
Contribution; provided, however, that such Member shall not have a right to
defer Compensation or have Employer Contributions made on his behalf until he
has otherwise satisfied the eligibility requirements imposed by Article II.
3.3 EMPLOYER CONTRIBUTIONS:
(a) ELECTIVE CONTRIBUTIONS: Subject to the applicable limitations of
the Plan set forth below, each periodic pay period the Employer shall
contribute to the Trust (without regard to its Net Income or accumulated
earnings and profits) Elective Contributions for each Member in an amount
equal to the amount by which the Member's Base Compensation was reduced
pursuant to a Compensation Deferral Agreement (and, if applicable, Special
Compensation Deferral Agreement) executed by the Member in accordance with
Section 3.1.
(b) MATCHING CONTRIBUTIONS: Subject to the applicable limitations of
the Plan set forth below, in addition to the Elective Contributions described
in the preceding subparagraph, with respect to each Plan Year (or such
shorter period as may be prescribed by the Administrative Committee), the
Employer may, in the discretion of the Board, contribute to the Trust
(without regard to its Net Income or accumulated earnings and profits)
Matching Contributions on behalf of each eligible Member in an amount equal
to the lesser of (i) one hundred percent (100%) of the amount by which the
Member's Base Compensation was reduced for the Plan Year (or such shorter
period as may be prescribed by the Administrative Committee) pursuant to a
Compensation Deferral Agreement (and, if applicable, Special Compensation
Deferral Agreement) under Section 3.1, or (ii) three percent (3%) of the
Member's Base Compensation for the Plan Year (or such shorter period as may
be prescribed by the Administrative Committee), or such other percentage or
dollar amount as may be established by the Board pursuant to uniformly
applied nondiscriminatory rules. Any decision to provide a Matching
Contribution or any increase or decrease in the percentage described in
clause (i) or (ii) in effect from time to time, shall be communicated to all
eligible Employees at least seven (7) days prior to the date on which
eligible Employees are required to inform the Administrative Committee of an
increase or decrease in their Elective Contributions pursuant to Section 3.1.
III-8
<PAGE>
Matching Contributions shall be made on behalf of each Member
notwithstanding the fact that a Member does not remain in the employ of the
Employer as of the last day of the Plan Year (or such shorter period as may
be prescribed by the Administrative Committee).
(c) PROFIT SHARING CONTRIBUTIONS: Subject to applicable limitations of
the Plan set forth below, with respect to each Plan Year, the Employer may
contribute to the Trust (from its Net Income or accumulated earnings and
profits) Profit Sharing Contributions in such amount as may be determined by
the Board in its discretion. Profit-Sharing Contributions, if any, shall be
made on behalf of each Member who remains in the employ of the Employer on
the last day of the Plan Year, notwithstanding the fact that the Member did
not elect to authorize Elective Contributions under Section 3.1 at any time
during such Plan Year. For purposes of the preceding sentence, (i) any
Employee whose employment terminates on account of normal retirement, Total
and Permanent Disability, or death, shall be deemed to be in the employ of
the Employer on the last day of the Plan Year in which the termination of
employment occurs, and (ii) any Employee who is, on the last day of the Plan
Year (or applicable shorter period), on a leave of absence to which such
Employee is entitled under the FMLA shall be deemed to be in the employ of
the Employer on such last day unless final regulations issued under the FMLA
do not require such treatment for this purpose.
Notwithstanding any other provision of the Plan to the contrary, any
Member (i) whose employment terminates prior to the last day of the Plan
Year, or (ii) who would otherwise not be treated as employed in covered
employment on the last day of the Plan Year, shall nevertheless be treated as
employed on the last day of the Plan Year, to the extent necessary to ensure
compliance with Section 401(a)(4), Section 401(a)(26) and/or Section 410(b)
of the Code.
(d) QUALIFIED NON-ELECTIVE CONTRIBUTIONS: At the election of the
Board, in lieu of distributing excess Employer Contributions to Highly
Compensated Employees in order to satisfy the ADP test or the ACP test, as
described below in this Section, the Employer may make Qualified Non-Elective
Contributions on behalf of Non-Highly Compensated Employees who are Members
in such amounts as are sufficient to satisfy the ADP test or the ACP test, as
applicable. Qualified Non-Elective Contributions, if any, shall be made on
behalf of each Member who (i) is a Non-Highly Compensated Employee and (ii)
remains in the employ of the Employer as of the last day of the Plan Year.
For purposes of the preceding sentence, (i) any Employee whose employment
terminates on account of normal retirement, Total and Permanent Disability,
or death, shall be deemed to be in the employ of the Employer on the last day
of the Plan Year in which the termination of employment occurs, and (ii) any
Employee who is, on the last day of the Plan Year (or applicable shorter
period), on a leave of absence to which such Employee is entitled under the
FMLA shall be deemed to be in the employ of the Employer on such last day
unless final regulations issued under the FMLA do not require such treatment
for this purpose.
III-9
<PAGE>
In addition, notwithstanding any other provision of the Plan to the
contrary, any Member whose employment terminates prior to the last day of the
Plan Year, and who would otherwise not be treated as employed in covered
employment on the last day of the Plan Year, shall, nevertheless, be treated
as employed on the last day of the Plan Year, to the extent necessary to
ensure compliance with Section 401(a)(4), Section 401(a)(26) and/or Section
410(b) of the Code.
(e) RESTORATION OF FORFEITED BENEFITS: Not later than the last day of
the Plan Year in which occurs any repayment described in Section 4.6, the
Employer shall contribute (without regard to its Net Income or accumulated
earnings and profits) an amount which, when added to unallocated forfeitures,
shall be equal to the amount previously forfeited under applicable provisions
of the Plan by any Member entitled to have his Account restored in accordance
with Section 4.6. In addition, as soon as administratively practicable
following receipt of a claim under circumstances described in Section 6.7,
the Employer shall contribute (without regard to its Net Income or
accumulated earnings and profits) an amount equal to the value of the
forfeited benefits described in and payable under Section 6.7.
(f) TOP-HEAVY MINIMUM CONTRIBUTION: In the event that the Plan is a
Top-Heavy Plan described in Article VII with respect to any Plan Year, the
Employer shall contribute (without regard to its Net Income or accumulated
earnings and profits) any amount necessary to ensure that Members who are
entitled to a minimum allocation pursuant to Section 7.3(c) in fact receive
such allocation.
III-10
<PAGE>
(g) CONTRIBUTION LIMITS: No Contribution by the Employer shall exceed
a sum equal to fifteen percent (15%) of the total compensation paid or
accrued during its taxable year ending with or within the Plan Year to all
Members.
No Contribution shall be made to the Plan under circumstances which
would result in any violation of the limitations of Section 3.1, this Section
or Section 4.3 of the Plan. The Employer shall maintain such records as may
be necessary to demonstrate compliance with the nondiscrimination tests set
forth below in this Section.
(h) ACTUAL DEFERRAL PERCENTAGE TEST: The actual deferral percentage
("ADP") for all eligible Highly Compensated Employees shall not exceed the
greater of:
(i) the actual deferral percentage for the group of all
eligible Non-Highly Compensated Employees multiplied by 1.25, or
(ii) the actual deferral percentage of the group of all
eligible Non-highly Compensated Employees multiplied by 2.0;
provided, however, that the actual deferral percentage for the
group of eligible Highly Compensated Employees may not exceed the
actual deferral percentage of the group of all eligible Non-Highly
Compensated Employees by more than two percentage points.
For purposes of the immediately preceding sentence, the provisions of Section
401(k)(3) of the Code and Section 1.401(k)-1(b) of the Income Tax Regulations
are hereby incorporated into the Plan for all purposes. In addition, for
Plan Years beginning after December 31, 1988, if (i) any Highly Compensated
Employee is eligible to authorize Elective Contributions under the Plan and
to have Matching Contributions allocated with respect thereto or (ii) such
Highly Compensated Employee is eligible to make elective deferrals (described
in Section 402(g)(3) of the Code) under any other cash or deferred
arrangement (described in Section 401(k) of the Code) and/or to make employee
contributions (described in Section 401(m) of the Code) or to receive
matching contributions (described in Section 401(m)(4)(A) of the Code) under
any other qualified plan of the Employer and/or any Affiliated Employer
regardless of whether such plan contains a cash or deferred arrangement, the
disparities between the actual deferral percentages of the respective groups
of eligible Highly Compensated Employees and Non-Highly Compensated Employees
shall be reduced as described in Section 1.401(m)-2 of the Income Tax
Regulations, and the provisions of subsection (k) below.
III-11
<PAGE>
Subject to the provisions of the Plan set forth below, the actual
deferral percentage for a specified group of eligible Employees for a Plan
Year shall be the average of the actual deferral ratios (calculated
separately for each Employee in such group) of the sum of Elective
Contributions, Qualified Non-Elective Contributions, if any, and Profit
Sharing Contributions, if any, actually paid over to the Trust on behalf of
each such Employee for such Plan Year, and allocated to the Employee's
Employer Nonforfeitable Contributions Account for such Plan Year, to the
Employee's Considered Compensation for the Plan Year.
For the purposes of the immediately preceding paragraph, provided that
the ADP test is satisfied both with and without exclusion of these Elective
Contributions, Elective Contributions shall include excess elective deferrals
over the annual dollar limit described in Section 3.1 (even if distributed
under Section 3.1) made by Highly Compensated Employees, as well as all
Elective Contributions made by all Members that are not taken into account in
the ACP test described in a subsection below. In accordance with Section
1.402(g)-1(e)(1)(ii) of the Income Tax Regulations, excess elective deferrals
described in Section 3.1 made by Non-Highly Compensated Employees, to the
extent made under the Plan or a plan maintained by an Affiliated Employer,
shall not be taken into account under the ADP test described in this
subsection.
For the purpose of calculating the actual deferral percentages
hereunder, subject to and in accordance with regulations or other authority
issued under Sections 401(k) and/or 401(m) of the Code by the appropriate
governmental authority, only such portion of the applicable Contributions (as
described in the second preceding paragraph) as may be necessary to ensure
compliance with the ADP test shall be taken into account for purposes of that
test. With respect to Plan Years commencing after December 31, 1988, such
actual deferral ratios of each eligible Employee and the ADP of each group
shall be calculated to the nearest one-hundredth of one percent of the
eligible Employee's Considered Compensation. The actual deferral ratio of an
eligible Employee is zero if no applicable Contributions were allocated to
such Employee's Employer Nonforfeitable Contributions Account for the Plan
Year.
In accordance with the requirements of Section 1.401(k)-1(b)(3) of the
Income Tax Regulations, two or more cash or deferred arrangements (as defined
in Section 401(k) of the Code) may be considered one such arrangement for
purposes of determining whether such arrangements satisfy the requirements of
Sections 401(a)(4), Section 401(k) and 410(b) of the Code. In such case, the
cash or deferred arrangements included in such plans and the plans including
such arrangements shall be treated as one arrangement and as one plan for
purposes of applying this Section 3.3 and Sections 401(a)(4), 401(k) and
410(b) of the Code. If the Employer and any Affiliated Employer individually
or collectively
III-12
<PAGE>
maintain two or more plans that are treated as a single plan for purposes of
Section 401(a)(4) or 410(b) of the Code (other than Section 410(b)(2)(A)(ii)
of the Code as in effect for Plan Years which begin after December 31, 1988),
all cash or deferred arrangements that are included in such plans are to be
treated as a single arrangement for purposes of this Section and Sections
401(a)(4), 401(k) and 410(b) of the Code. For Plan Years beginning after
December 31, 1989, plans may be aggregated under the preceding provisions of
this paragraph only if they have the same Plan Year. If any Highly
Compensated Employee is a participant under two or more cash or deferred
arrangements (as defined in Section 401(k) of the Code) of the Employer, for
purposes of determining the actual deferral ratio with respect to such Highly
Compensated Employee, all such cash or deferred arrangements shall be treated
as one cash or deferred arrangement. For Plan Years beginning after December
31, 1988, if a Highly Compensated Employee participates in two or more cash
or deferred arrangements that have different plan years, the immediately
preceding sentence shall be applied by treating all cash or deferred
arrangements with years ending with or within the same calendar year as a
single arrangement. For Plan Years beginning after 1988, contributions and
allocations under an employee stock ownership plan described in Section
4975(e)(7) of the Code may not be combined with contributions or allocations
under any plan not described in Section 4975(e)(7) of the Code.
With respect to Plan Years beginning prior to January 1, 1992, the Plan
or, if the Plan is aggregated with another cash or deferred arrangement
pursuant to the previous paragraph, such aggregated Plan may, in the
discretion of the Administrative Committee, be restructured (in accordance
with Sections 1.401(k)-1(h)(3)(iii), 1.401(a)(4)-1(c)(8)(iii) and
1.401(a)(4)-9(c) of the Income Tax Regulations) into two or more component
plans for purposes of determining whether the Plan or aggregated Plan
satisfies Section 401(a)(4) of the Code and the actual deferral percentage
test set forth above. If each of the component plans of the Plan or
aggregated Plan satisfies all of the requirements of Sections 401(a)(4) and
410(b) of the Code as if it were a separate Plan or aggregated Plan, then the
Plan or aggregated Plan is treated as satisfying Section 401(a)(4) of the
Code. If the Plan or aggregated Plan is restructured into component plans
for purposes of testing for compliance with Section 401(a)(4) of the Code and
the actual deferral percentage test, each component plan resulting from such
restructuring shall consist of all of the allocations, accruals and other
benefits, rights and features provided to a group of Employees under the Plan
or aggregated Plan. Each Employee is permitted to be included in only one
such component plan.
If an eligible Highly Compensated Employee is subject to the family
aggregation rules of Section 414(q)(6) of the Code (as described in the third
III-13
<PAGE>
paragraph of the Highly Compensated Employee definition in Article I) because
such person is either a 5-percent owner (described in the Highly Compensated
Employee definition) or a Highly Compensated Employee in the group consisting
of the ten Highly Compensated Employees paid the greatest compensation (as
described in the Highly Compensated Employee definition), the combined actual
deferral ratio of the family group (which is treated as one Highly
Compensated Employee) shall be determined by combining the Considered
Compensation and the applicable Contributions (described above) which are
allocated to the Employer Nonforfeitable Contributions Account of all such
eligible family members described in this sentence. The Considered
Compensation and the applicable Contributions (described above) allocated to
the Employer Nonforfeitable Contributions Accounts of all eligible family
members are disregarded for purposes of determining the ADP of the group of
Non-Highly Compensated Employees. If any eligible Employee is required to be
aggregated as a member of more than one family group, all eligible Employees
who are members of those family groups that include such Employee are
aggregated as one family group in accordance with the preceding provisions of
this paragraph.
(i) DISTRIBUTION OF EXCESS EMPLOYER CONTRIBUTIONS OVER ADP LIMITS: In
the event that with respect to any Plan Year, the aggregate amount of
Employer Contributions (taken into account in computing the ADP of Highly
Compensated Employees for the Plan Year) exceeds the maximum amount of such
Employer Contributions permitted under the ADP test set out above, then (to
the extent that another means of satisfying the ADP test is not implemented
by the Administrative Committee), within two and one-half months from the end
of the Plan Year or as soon as practicable, but not later than the end of the
Plan Year immediately following the Plan Year to which any such excess
Employer Contributions pertain, such excess (plus allocable income or loss)
shall be distributed to Highly Compensated Employees as provided below. In
lieu of distribution of excess Contributions, within twelve (12) months after
the end of the Plan Year, the Employer may make Qualified Non-Elective
Contributions on behalf of Non-Highly Compensated Employees pursuant to
Section 3.3(d) in an amount sufficient to satisfy the ADP test for the Plan
Year.
The amount of such excess Employer Contributions for a Highly
Compensated Employee for a Plan Year shall be determined by the following
leveling method, under which the actual deferral ratio of the Highly
Compensated Employee with the highest actual deferral ratio is reduced to the
extent required to (i) enable the Plan to satisfy the ADP test set out above,
or (ii) cause such Highly Compensated Employee's actual deferral ratio to
equal the ratio of the Highly Compensated Employee with the next highest
actual deferral ratio. This process shall be repeated until the Plan
satisfies the ADP test. For each Highly Compensated Employee, the amount of
such excess Employer Contributions is
III-14
<PAGE>
equal to the applicable Contributions (described above) that were allocated
to such Employee's Employer Nonforfeitable Contributions Account and taken
into account in computing his actual deferral ratio (determined prior to the
application of this and the immediately preceding sentence), minus the amount
determined by multiplying such Employee's actual deferral ratio (determined
after application of this and the immediately preceding sentence) by his
Compensation used in determining such ratio. Any such excess Employer
Contributions shall be allocated to Members who are subject to the family
member aggregation rules of Section 414(q)(6) of the Code (described in the
third paragraph of the Highly Compensated Employee definition) in the manner
prescribed under Section 1.401(k)-1(f)(5) of the Income Tax Regulations. Any
such excess Employer Contributions shall be treated as annual additions
subject to Section 4.3 of the Plan.
For purposes of this subsection, in accordance with Section
1.401(k)-1(f)(4)(ii)(C) of the Income Tax Regulations, income or loss that is
allocable to excess Employer Contributions (described above) for the Plan
Year shall be the income or loss allocable to the Member's Employer
Nonforfeitable Contributions Account (to the extent attributable to
applicable Contributions (described above) used in the ADP test), multiplied
by a fraction. The numerator of this fraction is the Member's excess
Employer Contributions for the Plan Year. The denominator is the balance of
the Member's Employer Nonforfeitable Contributions Account (to the extent
attributable to applicable Contributions (described above) used in the ADP
test), as of the beginning of that Plan Year, plus the applicable
Contributions (described above) allocated to his Employer Nonforfeitable
Contributions Account for the Plan Year. No income or loss will be allocated
for the gap period between the end of the Plan Year to the date of
distribution for Plan Years beginning on or after March 28, 1992 and, with
respect to Plan Years beginning before such date, income or loss shall be
allocated in accordance with the applicable Income Tax Regulations and Plan
document as then in effect.
Excess Employer Contributions (and any income allocable thereto) shall
be distributed from the portion of the Employer Nonforfeitable Contributions
Account attributable to the Contributions used in the ADP test. In addition,
to the extent that such excess Employer Contributions are attributable to
Elective Contributions (and any income allocable thereto) which amounts are
distributed to the Member pursuant to the preceding provisions of this
subsection, Matching Contributions (and any income allocable thereto
determined in the same manner as for other contributions) will be
appropriately reduced and such reduced Matching Contributions (and any income
allocable thereto) shall be applied as forfeitures pursuant to Section 4.6.
Such reduction shall be made first by reduction of any Matching Contributions
allocated to the Member's Employer
III-15
<PAGE>
Nonforfeitable Contributions Account, and, if necessary, next by reduction of
Matching Contributions allocated to the Member's Employer Contributions
Account. The provisions of this paragraph (which provide for reduction of
Matching Contributions made with respect to excess Elective Contributions
which are distributed hereunder) are intended to comply with the requirements
of Sections 401(a), 401(k), 401(m) and 411 of the Code. To the extent that
any provision of this paragraph is inconsistent with the preceding sentence,
such provision shall be deemed to be inoperative and the plan shall be
operated in a manner that complies with the requirements of the immediately
preceding sentence.
(j) ACTUAL CONTRIBUTION PERCENTAGE TEST: The actual contribution
percentage ("ACP"), as determined for a Plan Year pursuant to this
subsection, for all eligible Highly Compensated Employees shall not exceed
the greater of:
(i) the ACP for the group of all eligible Non-Highly
Compensated Employees multiplied by 1.25, or
(ii) the ACP of the group of all eligible Non-Highly
Compensated Employees multiplied by 2.0; provided, however, that
the ACP for the group of eligible Highly Compensated Employees may
not exceed the ACP for the group of all eligible Non-Highly
Compensated Employees by more than two percentage points (2%).
For purposes of the immediately preceding paragraph, the provisions of
Section 401(m) of the Code and Section 1.401(m)-1 of the Income Tax
Regulations are hereby incorporated into the Plan for all purposes. In
addition, for Plan Years beginning after December 31, 1988, if any Highly
Compensated Employee is eligible to authorize Elective Contributions under
the Plan and to have Matching Contributions allocated with respect thereto,
or if such Highly Compensated Employee is eligible to make elective
contributions (described in Section 402(g)(3) of the Code) under any other
cash or deferred arrangement (described in Section 401(k) of the Code) and/or
to make employee contributions (described in Section 401(m) of the Code) or
to receive matching contributions (described in Section 401(m)(4)(A) of the
Code) under any other qualified plan of the Employer and/or any Affiliated
Employer regardless of whether such plan contains a cash or deferred
arrangement, the disparities between the ACPs of the respective groups of
eligible Highly Compensated Employees and Non-Highly Compensated Employees
shall be reduced as described in Section 1.401(m)-2 of the Income Tax
Regulations and subsequent provisions of this subsection.
Subject to the limitations set forth below, the ACP for a specified
group of eligible Employees for a Plan Year shall be the average of the
actual
III-16
<PAGE>
contribution ratios (calculated separately for each Employee in such group)
of the sum of any (i) Matching Contributions and allocated to his Employer
Contributions Account for the Plan Year, and (ii) to the extent taken into
account under Section 1.401(m)-1(b)(5) of the Income Tax Regulations and this
subsection, any Elective Contributions, Qualified Non-Elective Contributions,
and Profit Sharing Contributions allocated to the Employee's Employer
Nonforfeitable Contributions Account for such Plan Year, to the Employee's
Considered Compensation for the Plan Year. Notwithstanding anything in the
preceding sentence to the contrary, the ACP described in the preceding
sentence 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. To the extent that any Contribution is required to
satisfy the ADP test set forth above in this Section, it may not be used to
satisfy the ACP test.
For purposes of computing the ACP ratios, Elective Contributions shall
include excess elective deferrals described in Section 3.1 and any Elective
Contributions that are not taken into account in the ADP test, provided that
the ADP test is satisfied both with and without exclusion of these Elective
Contributions. Any Qualified Non-Elective Contributions and any Profit
Sharing Contributions allocated to the Member's Employer Nonforfeitable
Contributions Account, as provided above, shall be taken into account for
purposes of the ACP test to the extent that such amounts are not needed to
pass the ADP test. With respect to Plan Years commencing after December 31,
1988, actual contribution ratios of each eligible Employee and the ACP of
each group shall be calculated to the nearest one-hundredth of one percent of
the eligible Employee's Considered Compensation. The actual contributions
ratio of an eligible Employee is zero if no Contributions which are used in
computing actual contribution ratios are allocated on behalf of such Employee.
If the Employer and any Affiliated Employer, individually or
collectively, maintain two or more plans that are treated as a single plan
for purposes of Section 401(a)(4) or 410(b) of the Code (other than Section
410(b)(2)(A)(ii) of the Code as in effect for Plan Years which began after
December 31, 1988), all employee contributions and matching contributions, as
such contributions are defined in Section 1.401(m)-1(f) of the Income Tax
Regulations, are to be treated as made under a single plan for purposes of
this Section and Sections 401(a)(4), 401(k) and 410(b) of the Code. For Plan
Years beginning after December 31, 1989, plans may be aggregated under the
preceding provisions of this paragraph only if they have the same Plan Year.
If any Highly Compensated Employee is a participant under two or more plans
of the Employer or any Affiliated Employer which are subject to Section
401(m) of the Code, for purposes of determining the actual contribution ratio
with respect to such Highly Compensated
III-17
<PAGE>
Employee, all employee and/or matching contributions described in Section
1.401(m)-1(f) of the Income Tax Regulations made under such plans must be
aggregated. For Plan Years beginning after 1988, contributions and
allocations under an employee stock ownership plan described in Section
4975(e)(7) of the Code may not be combined with contributions or allocations
under any plan not described in Section 4975(e)(7) of the Code.
With respect to Plan Years beginning prior to January 1, 1992, the Plan
or, if the Plan is aggregated with another plan pursuant to the previous
paragraph, such aggregated Plan may, in the discretion of the Administrative
Committee, be restructured (in accordance with Sections 1.401(m)-1(g)(5),
1.401(a)(4)-1 (c)(8)(iii) and 1.401(a)(4)-9(c) of the Income Tax Regulations)
into two or more component plans for purposes of determining whether the Plan
or aggregated Plan satisfies Section 401(a)(4) of the Code and the ACP test
set forth above. If each of the component plans of the Plan or aggregated
Plan satisfies all of the requirements of Sections 401(a)(4) and 410(b) of
the Code as if it were a separate Plan or aggregated Plan, then the Plan or
aggregated Plan is treated as satisfying Section 401(a)(4) of the Code. If
the Plan or aggregated Plan is restructured into component plans for purposes
of testing for compliance with Section 401(a)(4) of the Code and the ACP
test, each component plan resulting from such restructuring shall consist of
all the allocations, accruals, and other benefits, rights and features
provided to a group of Employees under the Plan or aggregated Plan. Each
Employee is permitted to be included in only one such component plan.
If an eligible Highly Compensated Employee is subject to the family
aggregation rules of Section 414(q)(6) of the Code (described in the third
paragraph of the Highly Compensated Employee definition in Article I) because
such person is either a 5-percent owner (as described in the Highly
Compensated Employee definition) or a Highly Compensated Employee in the
group consisting of the ten Highly Compensated Employees paid the greatest
compensation (as described in the Highly Compensated Employee definition),
the combined actual contribution ratio of the family group (which is treated
as one Highly Compensated Employee) shall be determined by combining the
Considered Compensation and the applicable Contributions (described above)
which are allocated to the appropriate Accounts of all eligible family
members described in this sentence. The Considered Compensation and the
applicable Contributions (described above) which are allocated to the
appropriate Accounts of all eligible family members are disregarded for
purposes of determining the ACP of the group of Non-Highly Compensated
Employees. If any eligible Employee is required to be aggregated as a member
of more than one family group, all eligible Employees who are members of
those family groups that include that Employee shall be aggregated as one
family group in accordance with the preceding provisions of this paragraph.
III-18
<PAGE>
(k) PROHIBITED MULTIPLE USE OF 2.0/2% ALTERNATIVE LIMITS FOR THE ADP
AND ACP TESTS: Any disparity between the ADP or ACP of the respective groups
of Highly Compensated Employees and Non-Highly Compensated Employees shall be
reduced as described in Section 1.401(m)-2 of the Income Tax Regulations.
Without limiting the scope of the immediately preceding sentence, any
multiple use of the alternative method of compliance with the ADP and ACP
tests (i.e., the 2.0/2% alternative limit which is described in clauses (ii)
and (iv) below and in Sections 401(k)(3)(A)(ii)(II) and 401(m)(2)(A)(ii) of
the Code) shall be determined and corrected, as appropriate, in accordance
with the provisions of this subsection.
Multiple use of the alternative limitation shall occur if the sum of (a)
the ADP of the entire group of eligible Highly Compensated Employees under
the Plan or any other cash or deferred arrangement (described in Section
401(k) of the Code) of the Employer or an Affiliated Employer and (b) the ACP
of the entire group of eligible Highly Compensated Employees under the Plan
or any other qualified plan of the Employer or an Affiliated Employer that is
subject to Section 401(m) of the Code, exceeds the greater of:
(i) 125 percent of the GREATER of (1) the ADP of the group of
Non-Highly Compensated Employees eligible under the Plan (or other
arrangement of the Employer or Affiliated Employer that is subject
to Section 401(k) of the Code) for the Plan Year, or (2) the ACP of
the group of Non-Highly Compensated Employees under the Plan (or
other plan of the Employer or Affiliated Employer that is subject
to Section 401(m) of the Code) for the Plan Year beginning with the
Plan Year of the Plan (or other arrangement that is subject to
Section 401(k) of the Code), plus
(ii) the number two (2) plus the LESSER of clause (1) or (2)
of (i) above; provided, however, in no event shall the amount
computed under this (ii) exceed 200 percent of the lesser of clause
(1) or (2) of (i) above; OR
(iii) 125 percent of the LESSER of (1) the ADP of the
group of Non-Highly Compensated Employees eligible under the Plan
(or other arrangement of the Employer or Affiliated Employer that
is subject to Section 401(k) of the Code) for the Plan Year, or (2)
the ACP of the group of Non-Highly Compensated Employees under the
Plan (or other plan of the Employer or Affiliated Employer that is
subject to Section 401(m) of the Code) for the Plan Year beginning
with the Plan Year of the Plan (or other arrangement that is
subject to Section 401(k) of the Code), plus
III-19
<PAGE>
(iv) the number two (2) plus the GREATER of clause (1) or (2)
of (iii) above; provided, however, in no event shall the amount
computed under this (iv) exceed 200 percent of the lesser of clause
(1) or (2) of (iii) above.
Notwithstanding the previous paragraph, multiple use of the alternative
limitation does not occur if (i) the ADP of the group of Highly Compensated
Employees does not exceed the product of 1.25 multiplied by the ADP of the
group of Non-Highly Compensated Employees, or (ii) the ACP of the group of
Highly Compensated Employees does not exceed the product of 1.25 multiplied
by the ACP of the group of Non-Highly Compensated Employees.
The ADP and ACP of the group of eligible Highly Compensated Employees
shall be determined after the use of all applicable Contributions to meet the
ADP test and after use of all applicable Contributions to meet the
requirements of the ACP test. In addition, the ADP and the ACP of the group
of eligible Highly Compensated Employees shall be determined after any
required corrective distribution of excess deferrals, excess Employer
Contributions or excess aggregate contributions (described below) without
regard to the rules hereunder relating to multiple use of the alternative
methods of compliance contained in this subsection and Sections
401(k)(3)(A)(ii)(II) and 401(m)(2)(A)(ii) of the Code.
If a multiple use of the alternative method of compliance with Sections
401(k) and 401(m) occurs, in order to eliminate the multiple use of such
alternative method of compliance, the amount of the reduction to the ADP of
the entire group of eligible Highly Compensated Employees under the Plan (and
each other arrangement subject to Section 401(k) of the Code) shall be
calculated in the manner described in Section 3.3(i) of the Plan and Section
1.401(k)-1(f)(2) of the Income Tax Regulations. Such required reduction
shall be treated as an excess contribution under the arrangement subject to
Section 401(k) of the Code. Instead of reducing the actual deferral ratios
of Highly Compensated Employees, the Employer may eliminate the multiple use
of the alternative limitation by making Qualified Non-Elective Contributions
on behalf of Non-Highly Compensated Employees (pursuant to Section 3.3(d))
within twelve (12) months after the end of the Plan Year.
(l) EXCESS AGGREGATE CONTRIBUTIONS OVER ACP LIMITS: In the event that
with respect to any Plan Year, the aggregate amount of applicable
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<PAGE>
Contributions taken into account under the ACP test (set forth above) on
behalf of Highly Compensated Employees exceeds the maximum amount of such
Contributions permitted under the ACP test set out above (determined by
reducing such Contributions made on behalf of Highly Compensated Employees in
order of ACPs beginning with the highest of such percentages), then, within
two and one-half months from the end of the Plan Year or as soon as
practicable, but not later than the end of the Plan Year immediately
following the Plan Year to which any such excess aggregate contributions
pertain, as described below, such excess (plus allocable income or loss)
shall be forfeited, if forfeitable, or distributed to Highly Compensated
Employees on the basis of the respective portions of such excess aggregate
contributions attributable to each of the Highly Compensated Employees as
provided below. In lieu of forfeiture or distribution of such excess
aggregate contributions, within twelve (12) months after the end of the Plan
Year, the Employer may make Qualified Non-Elective Contributions on behalf of
Non-Highly Compensated Employees pursuant to Section 3.3(d) in an amount
sufficient to satisfy the ACP test for the Plan Year.
The amount of such excess aggregate contributions for a Highly
Compensated Employee for a Plan Year shall be determined by the following
leveling method, under which the actual contribution ratio of the Highly
Compensated Employee with the highest actual contribution ratio is reduced to
the extent required to (i) enable the Plan to satisfy the ACP test, or (ii)
cause such Highly Compensated Employee's actual contribution ratio to equal
the ratio of the Highly Compensated Employee with the next highest actual
contribution ratio. This leveling process shall be repeated until the Plan
satisfies the ACP test. For each Highly Compensated Employee, the amount of
such excess aggregate contributions is equal to the applicable Contributions
(described above) that were taken into account in computing his actual
contribution ratio (determined prior to the application of this and the
immediately preceding sentence), minus the amount determined by multiplying
such Employee's actual contribution ratio (determined after application of
this and the immediately preceding sentence) by his Compensation used in
determining such ratio. Any such excess aggregate contributions shall be
allocated to Members who are subject to the family member aggregation rules
of Section 414(q)(6) of the Code (described in the third paragraph of the
Highly Compensated Employee definition) in the manner prescribed under
Section 1.401(k)-l(f)(5) of the Income Tax Regulations.
For purposes of this subsection, in accordance with Section
1.401(m)-1(e)(3)(ii)(C) of the Income Tax Regulations, income or loss that is
allocable to excess aggregate contributions (described above) for the Plan
Year shall be the income or loss allocable to the applicable Contributions
(described above) used in the ACP test multiplied by a fraction. The
numerator of this fraction is the Member's excess aggregate contributions for
the Plan Year.
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<PAGE>
The denominator is the balance in the Member's Account to the extent used in
the ACP test as of the beginning of the Plan Year, plus the applicable
Contributions (described above) used in the ACP test for the Plan Year. No
income or loss will be allocated for the gap period between the end of the
Plan Year and the date of distribution for Plan Years beginning on or after
March 28, 1992 and, with respect to Plan Years beginning before such date,
income or loss shall be allocated in accordance with the Income Tax
Regulations and Plan document as then in effect.
The Administrative Committee (on or before the fifteenth day of the
third month following the end of the Plan Year but, in any event, before the
end of the next Plan Year) shall direct the Trustee to distribute to the
Highly Compensated Employee having the highest actual contribution ratio, his
portion of the excess aggregate contributions (and income allocable thereto)
or, if forfeitable, forfeit such non-vested excess aggregate contributions
attributable to Matching Contributions (and income allocable thereto)
pursuant to Section 4.6. This process shall be repeated until the ACP test
is satisfied, or until the actual contribution ratio of such Highly
Compensated Employee equals the actual contribution ratio of the Highly
Compensated Employee having the next highest actual contribution ratio.
Vested Matching Contributions may not be forfeited to correct excess
aggregate contributions; provided, however, an otherwise vested Matching
Contribution may be forfeited if the Elective Contribution to which such
Matching Contribution relates is an excess contribution (above the ADP limits
of Section 401(k)(3) of the Code) or an excess deferral (above the annual
dollar limit of Section 402(g) of the Code). The forfeiture or distribution
of excess aggregate contributions (and allocable income) shall be made in the
following order:
(1) Forfeiture of non-vested Matching Contributions, if any; and
(2) Distribution of vested Matching Contributions, if any.
Forfeitures of excess aggregate contributions (and income allocable
thereto) shall be administered in accordance with Section 4.6; provided,
however, if forfeitures are allocated to Members under Section 4.6, no
forfeitures may be allocated to a Highly Compensated Employee whose excess
aggregate contributions were reduced pursuant to the previous paragraph.
Excess aggregate contributions are still counted as Employer
Contributions, for purposes of Sections 404 and 415 of the Code, for the Plan
Year when made, even if distributed from the Plan. In addition, forfeitures
of excess Matching Contributions to satisfy the ACP test are still counted as
annual additions under Section 415 of the Code for the Plan Year when made on
behalf of the applicable Highly Compensated Employees from whose Accounts
such
III-22
<PAGE>
amounts were forfeited. If forfeitures are re-allocated to Members' Accounts
pursuant to Section 4.6, such forfeitures are also treated as annual
additions under Section 415 of the Code on behalf of such Members for the
Plan Year in which such amounts are re-allocated.
(m) MANDATORY DISAGGREGATION OF CERTAIN PLANS: Notwithstanding any
provision of this Section 3.3 to the contrary, the Plan shall be operated in
accordance with Section 1.401(k)-1(g)(11) of the Income Tax Regulations
concerning mandatory disaggregation of certain types of plans. Subject to
all the requirements of Section 1.401(k)-1(g)(11)(iii) of the Income Tax
Regulations, the following plans shall be treated as comprising separate
plans:
(i) PLANS BENEFITING COLLECTIVE BARGAINING UNIT
EMPLOYEES. A plan that benefits employees who are included in a
unit of employees covered by a collective bargaining agreement and
employees who are not included in such a collective bargaining unit
is treated as comprising separate plans.
(ii) ESOPS AND NON-ESOPS. For Plan Years beginning on or
after January 1, 1991, the portion of a plan that is an employee
stock ownership plan described in Section 4975(e) or 409 of the
Code (an ESOP) and the portion of the plan that is not an ESOP are
treated as separate plans, except as otherwise permitted under
Section 54.4975-11(e) of the Income Tax Regulations.
(iii) PLANS BENEFITING EMPLOYEES OF QUALIFIED
SEPARATE LINES OF BUSINESS. If an Employer is treated as operating
qualified separate lines of business for purposes of Section 410(b)
of the Code, the portion of a plan that benefits employees of one
qualified separate line of business is treated as a separate plan
from the portions of the same plan that benefit employees of the
other qualified separate lines of business of the Employer.
(iv) PLANS MAINTAINED BY MORE THAN ONE EMPLOYER.
(A) MULTIPLE EMPLOYER PLANS. If a plan benefits
employees of more than one Employer and the employees are
not included in a unit of employees covered by a
collective bargaining agreement (a multiple employer
plan), the plan is treated as comprising separate plans
each of which is maintained by a separate Employer.
(B) MULTIEMPLOYER PLANS. The portion of a plan
that benefits employees who are included in a collective
bargaining unit, the portion of a plan that benefits
employees who are included in another collective
bargaining unit and the portion of a plan that benefits
III-23
<PAGE>
non-collective bargaining unit employees are all treated
as separate plans. Consistent with Section 413(b) of the
Code, the portion of a plan that is maintained pursuant
to a collective bargaining agreement is treated as a
single plan maintained by a single employer that employs
all the employees benefiting under the same benefit
computation formula and covered pursuant to that
collective bargaining agreement. The non-collectively
bargained portion of the plan is treated as maintained by
one or more employers, depending on whether the
non-collective bargaining unit employees who benefit
under the plan are employed by one or more employers.
3.4 COMPOSITION OF AND DEADLINE FOR PAYMENT OF EMPLOYER CONTRIBUTIONS:
Employer Contributions shall be paid to the Trustee in cash or in kind
(including shares of common stock of the Plan Sponsor). Should contributions
be made in the form of common stock of the Plan Sponsor, which is not issued
and purchased on the open market or otherwise, for purposes of determining
the number of shares to be contributed to the Plan, common stock of the Plan
Sponsor shall be valued at its closing price on the date last traded on or
prior to the most recent valuation date (or its closing price or average
closing prices on such other date(s) as may be prescribed by the
Administrative Committee under nondiscriminatory rules uniformly applied and
announced to all Members) immediately preceding the date on which such shares
are contributed to the Plan.
Any Employer Elective Contributions made pursuant to Compensation
Deferral Agreements for the Plan Year shall be paid to the Trustee (in
installments based on the Employer's pay period and in an amount equal to the
amount by which all Members' Base Compensation was reduced pursuant to
Compensation Deferral Agreements applicable to the pay period) not later than
thirty (30) days after the end of the Employer's pay period to which such
Contributions are attributable, while all other Contributions of an Employer
for each Plan Year shall be paid to the Trustee in one or more installments
as the Administrative Committee may from time to time determine; provided,
however, the Contribution may be paid not later than the time prescribed by
law for filing the Employer's federal income tax return (including extensions
thereof) for such Employer's taxable year ending with or within the Plan Year
if (i) the Contribution is treated by the Plan in the same manner that the
Plan would treat a Contribution actually received on the last day of such
taxable year and (ii) either of the following conditions are satisfied: (1)
the Employer designates the Contribution in writing to the Trustee as a
payment on account of such taxable year, or (2) the Employer claims such
Contribution as a deduction on its federal income tax return for such taxable
year; and, further provided, that to the extent required under regulations or
other authority prescribed by the appropriate governmental authority, any
Contributions (other than Elective Contributions) which are to be taken into
account for purposes of determining the ADP or ACP (defined in Section 3.3)
shall be paid to the Trustee not later than the last day of the 12-month
period that immediately follows the end of the Plan Year to which such
Contributions pertain.
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<PAGE>
3.5 RETURN OF CONTRIBUTIONS FOR MISTAKE, DISQUALIFICATION OR
DISALLOWANCE OF DEDUCTION: The assets of the Trust Fund shall in no event be
paid to or revert to any Employer or be used for any purpose other than the
exclusive benefit of the Members and their Beneficiaries and the reasonable
expenses of administering the Plan except that:
(a) If an Employer makes a Contribution by mistake of fact,
such mistaken Contribution may revert and be repaid to the Employer
within one year after the payment of the Contribution;
(b) The Employer's Contribution for each Plan Year is
conditioned on the Plan's initial qualification under Section 401
of the Code and the Employer's Contribution may revert and be
repaid to the Employer within one year after the date of denial of
the initial qualification of the Plan; and
(c) The Employer's Contribution is conditioned upon the
deductibility thereof under Section 404 of the Code and, to the
extent the deduction is disallowed, the Contribution may revert and
be repaid to the Employer within one year after the disallowance of
the deduction.
In any case hereinabove described in clauses (a), (b), or (c) of this
Section, the Employer shall, subject to the limitations set forth below, have
exclusive authority and absolute discretion to determine whether a
Contribution, or any part thereof, shall revert and be repaid to it or shall
instead remain a part of the Trust Fund. The amount which may be repaid to
the Employer under clauses (a) or (c) of this Section may not exceed the
excess of (i) the amount contributed over (ii) the amount that would have
been contributed had there not occurred a mistake of fact or a mistake in
determining the deduction. Earnings attributable to such excess contribution
shall not be repaid, and losses attributable thereto shall reduce the amount
which may be returned. If the repayment of the amount attributable to the
mistaken Contribution would cause the balance of any Member's Account to be
reduced to less than the balance which would have been in the Account had the
mistaken amount not been contributed, then the amount which may be repaid to
the Employer shall be limited so as to avoid such reduction.
III-25
<PAGE>
ARTICLE IV
PARTICIPATION
4.1 PERIODIC CERTIFICATION BY EMPLOYER: As soon as practicable after
each Plan Year (or such shorter period as may be prescribed by the
Administrative Committee), each Employer shall certify to the Administrative
Committee the amount of any Elective, Matching, Qualified Non-Elective,
and/or Profit Sharing Contributions that it made for the period then ended,
the names of its Members entitled to share in each type of Contribution, the
number of years of Active Service of its Members, the amount of Base
Compensation paid to each Member for such period, the amount of Considered
Compensation paid to each such Member for such period, and the amount of
Considered Compensation paid to all its Members for such period. Such
certification shall be conclusive evidence of such facts.
4.2 ALLOCATION OF EMPLOYER CONTRIBUTIONS:
(a) ELECTIVE CONTRIBUTIONS: As of the end of each pay period
to which Elective Contributions described in Section 3.1 apply,
Elective Contributions authorized by the Member for such pay period
pursuant to a Compensation Deferral Agreement (and permitted under
applicable limitations of the Plan to be made by the Employer on
behalf of the Member) shall be allocated to the Member's Employer
Nonforfeitable Contributions Account.
(b) MATCHING CONTRIBUTIONS: As of the last day of each Plan
Year (or such shorter period as may be prescribed by the Board) to
which any Matching Contributions apply, Matching Contributions
described in Section 3.3(b) on behalf of each appropriate Member
shall be allocated to the Member's Employer Contributions Account.
(c) PROFIT SHARING CONTRIBUTIONS: As of the end of the Plan
Year to which any Profit Sharing Contribution applies, the
Administrative Committee shall allocate any Profit Sharing
Contribution (made in accordance with applicable provisions of
Section 3.3(c)) among each Member who satisfies the requirements of
Section 3.3(c) in the proportion that the total Considered
Compensation of each such Member for such Plan Year bears to the
total Considered Compensation for all such Members for such Plan
Year, and shall credit each such Member's proportionate share to
the Member's Employer Nonforfeitable Contributions Account and/or
Employer Contributions Account, as specified in resolutions adopted
by the Board and communicated to Members; provided, however, absent
such specification, the Administrative Committee shall credit each
Member's proportionate share to the Member's Employer Contributions
Account.
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<PAGE>
(d) QUALIFIED NON-ELECTIVE CONTRIBUTIONS: As of the end of
the Plan Year to which any Qualified Non-Elective Contribution
applies, the Administrative Committee shall allocate the Qualified
Non-Elective Contribution for the Plan Year (made in accordance
with applicable provisions of Section 3.3(d)) among each eligible
Member who satisfies the requirements of Section 3.3(d) in the
proportion that total Considered Compensation of each such Member
for the Plan Year bears to total Considered Compensation for all
such Members for such Plan Year, and shall credit each such
Member's proportionate share to the Member's Employer
Nonforfeitable Contributions Account.
(e) TOP-HEAVY MINIMUM CONTRIBUTION: Notwithstanding any other
provision of the Plan to the contrary, if the Plan is a Top-Heavy
Plan described in Article VII for the Plan Year, such portion of
the Employer's Contribution (made pursuant to applicable provisions
of Section 3.3(f)) shall be allocated among the Employer's Members
who are in its employ at the end of the Plan Year (including
Members who, except for Section 7.4(f) of the Plan, may not
otherwise be entitled to share in the allocation) as may be
required to ensure that each such Member is credited with an amount
which when added to any other portion of the Employer Contribution
allocated to his Account will equal the minimum allocation required
under Section 7.3(c) of the Plan. Any such amount allocated
hereunder shall be specially allocated pursuant hereto and credited
to the Member's Employer Contributions Account.
(f) RESTORATION OF FORFEITED AMOUNTS: The Administrative
Committee shall allocate any Employer Contribution (made in
accordance with applicable provisions of Section 3.3(e) to restore
an Account in accordance with the requirements of Section 4.6) to
the Account required to be restored under applicable provisions of
Section 4.6. The Administrative Committee shall temporarily hold
any Employer Contribution (made in accordance with Section 3.3 to
restore an Account in accordance with the requirements of Section
6.7) in an unallocated distribution account until it can be paid
out in accordance with Section 6.7. Distribution from the
unallocated distribution account to the appropriate person shall be
made as soon as practicable.
If a Member has been Transferred during a pay period or the
Plan Year, such Member shall be entitled to have allocated to his
Account a portion of the Employer Contribution made by each
Employer by whom such Member was employed during such pay period or
Plan Year, and such Member's share of each Employer's Contribution
shall be computed with respect to each such Employer in the manner
hereinabove provided.
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<PAGE>
4.3 LIMITATION ON ADDITIONS TO ACCOUNT:
Capitalized terms used in this Section which are not otherwise defined
in Article I of the Plan are defined in Section 4.3(d).
(a) MEMBER COVERED SOLELY IN THIS PLAN: This Section 4.3(a)
applies only if the Member does not participate in, and has never
participated in, another qualified plan, a welfare benefit fund, as
defined in Section 419(e) of the Code, or an individual medical
account, as defined in Section 415(l)(2) of the Code, maintained by
the Employer, which provides an Annual Addition.
(i) If the Member does not participate in, and has
never participated in another qualified plan, a welfare
benefit fund, as defined in Section 419(e) of the Code,
or an individual medical account, as defined in Section
415(l)(2) of the Code, maintained by the Employer, the
amount of Annual Additions which may be credited to the
Member's Account as of any allocation date for any
Limitation Year will not exceed the lesser of (1) the
Maximum Permissible Amount or (2) any other limitation
contained in the Plan. If the Employer Contribution that
would otherwise be contributed or allocated to the
Member's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount,
the amount contributed or allocated will be reduced so
that the Annual Additions for the Limitation Year will
equal the Maximum Permissible Amount.
(ii) Prior to the determination of the Member's
actual compensation for a Limitation Year, the Employer
may determine the Maximum Permissible Amount on the basis
of a reasonable estimation of the Member's annual
Compensation for such Limitation Year, uniformly
determined for all Members similarly situated.
(iii) As soon as is administratively feasible
after the end of the Limitation Year, the Maximum
Permissible Amount for such Limitation Year shall be
determined on the basis of the Member's actual
Compensation for such Limitation Year.
(iv) Pursuant to Section 1.415-6(b)(6) of the Income
Tax Regulations, if, as a result of the allocation of
forfeitures, a reasonable error in estimating a Member's
annual compensation, a reasonable error in determining
the amount of elective deferrals (within the meaning of
Section 3.1 of the Plan and Section 402(g)(3) of the
Code) that may be made with respect to a Member under the
limits of Section 415 of the Code, or any other facts and
circumstances as the Internal Revenue
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<PAGE>
Service determines justify the availability of this
Section 4.3(a)(iv), there is an Excess Amount with respect
to a Member for a Limitation Year, such Excess Amount shall
be disposed of as follows:
(1) First, if the Member is in the
service of the Employer at the end of the
Limitation Year, then such Excess Amounts
in the Member's Account must not be
distributed to the Member, but shall be
reallocated to a temporary suspense
account and shall be reapplied to reduce
future Employer Contributions under the
Plan for such Member in the next
Limitation Year, and for each succeeding
Limitation Year, if necessary.
(2) If after application of Section
4.3(a)(iv)(1) an Excess Amount still
exists, and the Member is not in the
service of the Employer at the end of the
Limitation Year, then such Excess Amounts
in the Member's Account must not be
distributed to the Member, but shall be
reallocated to a temporary suspense
account and shall be reapplied to reduce
future Employer Contributions for all
remaining Members in the next Limitation
Year and each succeeding Limitation Year
if necessary.
(3) If a temporary suspense account
is in existence at any time during the
Limitation Year pursuant to this Section,
it will not participate in the allocation
of the Trust Fund's investment gains and
losses. If a temporary suspense account
is in existence at any time during a
Limitation Year, all amounts in the
suspense account must be applied as set
forth above before any Employer
Contributions may be made to the Plan for
that Limitation Year. Excess Amounts may
not be distributed to Members or former
Members.
If due to a reasonable error in determining the amount of
Elective Contributions that may be made within the limits of
Section 415 of the Code, in accordance with Section 1.415-6(b)(6)
of the Income Tax Regulations, the Plan shall distribute Elective
Contributions to the extent that such distribution reduces the
Excess Amount. Any such amounts distributed shall not be taken
into account for purposes of computing (i) the dollar limit on
Elective Contributions under Section 3.1 of the Plan and Section
402(g) of the Code, (ii) the ADP test under Section 3.3 of the Plan
and Section 401(k)(3) of the Code, and (iii) the ACP test under
Section 3.3 of the Plan and Section 401(m)(2) of the Code.
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<PAGE>
(b) MEMBER COVERED UNDER ANOTHER DEFINED CONTRIBUTION PLAN:
This Section 4.3(b) applies if, in addition to the Plan, the Member
is covered under another qualified plan which is a defined
contribution plan, a welfare benefit fund, as defined in Section
419(e) of the Code, or an individual medical account, as defined in
Section 415(l)(2) of the Code, maintained by the Employer during
any Limitation Year, which provides an Annual Addition during the
Limitation Year.
(i) The Annual Additions which may be credited to a
Member's Account under the Plan for any such Limitation
Year will not exceed the lesser of (1) the Maximum
Permissible Amount reduced by the Annual Additions
credited to a Member's account under the other plans,
welfare benefit funds and individual medical accounts for
the same Limitation Year or (2) any other limitation
contained in the Plan. If the Annual Additions with
respect to the Member under other defined contribution
plans, welfare benefit funds, and individual medical
accounts, maintained by the Employer are less than the
Maximum Permissible Amount and the Employer Contribution
that would otherwise be contributed or allocated to the
Member's Account under the Plan would cause the Annual
Additions for the Limitation Year to exceed this
limitation, the amount contributed or allocated will be
reduced so that the Annual Additions under all such plans
and funds for the Limitation Year will equal the Maximum
Permissible Amount. If the Annual Additions with respect
to the Member under such other defined contribution
plans, welfare benefit funds, and individual medical
accounts, in the aggregate, are equal to or greater than
the Maximum Permissible Amount, no amount will be
contributed or allocated to the Member's Account under
the Plan for the Limitation Year.
(ii) Prior to determining the Member's actual
Compensation for the Limitation Year, the Employer may
determine the Maximum Permissible Amount in the manner
described in Section 4.3(a)(ii).
(iii) As soon as is administratively feasible
after the end of the Limitation Year, the Maximum
Permissible Amount for the Limitation Year shall be
determined on the basis of the Member's actual
Compensation for such Limitation Year.
(iv) Pursuant to Section 1.415-6(b)(6) of the Income
Tax Regulations, if, as a result of the allocation of
forfeitures, a reasonable error in estimating a Member's
annual compensation, a reasonable error in determining
the amount of elective deferrals (within the meaning of
Section 3.1 of the Plan and Section 402(g)(3) of the
Code) that may be made with respect to a Member under the
IV-5
<PAGE>
limits of Section 415 of the Code, or any other facts and
circumstances as the Internal Revenue Service determines
justify the availability of this Section 4.3(b)(iv), a
Member's Annual Additions under the Plan and all such
other plans result in an Excess Amount, such Excess
Amount shall be deemed to consist of the Annual Additions
last allocated, except that Annual Additions attributable
to a welfare benefit fund will be deemed to have been
allocated first regardless of the actual allocation date.
(v) If an Excess Amount was allocated to a Member's
Account on an allocation date of the Plan which coincides
with an allocation date of another plan, the Excess
Amount attributed to the Plan will be the product of:
(1) the total Excess Amount
allocated as of such date, multiplied by
(2) the ratio of (A) the Annual
Additions allocated to the Member's
Account for the Limitation Year as of such
date under the Plan, divided by (B) the
total Annual Additions allocated to the
Member's Account for the Limitation Year
as of such date under the Plan and all
qualified defined contribution plans.
(vi) Any Excess Amounts attributed to the Plan shall be
disposed of as provided in Section 4.3(a)(iv).
If due to a reasonable error in determining the amount of
Elective Contributions that may be made within the limits of
Section 415 of the Code, in accordance with Section 1.415-6(b)(6)
of the Income Tax Regulations, the Plan shall distribute Elective
Contributions to the extent that such distribution reduces the
Excess Amount. Any such amounts distributed shall not be taken
into account for purposes of computing (i) the dollar limit on
Elective Contributions under Section 3.1 of the Plan and Section
402(g) of the Code, (ii) the ADP test under Section 3.3 of the Plan
and Section 401(k)(3) of the Code, and (iii) the ACP test under
Section 3.3 of the Plan and Section 401(m)(2) of the Code.
(c) MEMBER COVERED UNDER DEFINED BENEFIT PLAN: If the Employer
maintains, or at any time maintained, a qualified defined benefit plan
covering any Member of the Plan, the sum of the Member's Defined Benefit
Fraction and Defined Contribution Fraction will not exceed 1.0. For purposes
of this Section 4.3, all defined contribution plans of an Employer are to be
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<PAGE>
treated as one defined contribution plan and all defined benefit plans of an
Employer are to be treated as one defined benefit plan, whether or not such
plans have been terminated. If the sum of the Defined Contribution Fraction
and Defined Benefit Plan Fraction exceeds 1.0, the rate of accrual of the
annual benefit of the defined benefit plan(s) will be reduced so that the sum
of the fractions will not exceed 1.0. In no event will the annual benefit be
decreased below the amount of the accrued benefit to date. If additional
reductions are required for the sum of the fractions to equal 1.0, the
reductions will then be made to the Annual Additions of the defined
contribution plans. If the defined benefit plan does not contain provisions
which correspond to this provision, the Annual Addition to the defined
contribution plans for the Limitation Year will be reduced so that the sum of
the fractions will not exceed 1.0.
(d) DEFINITIONS: For purposes of this Section 4.3, the following terms
shall be defined as follows:
(i) ANNUAL ADDITION -- With respect to any Member, an Annual
Addition for the Limitation Year shall be the sum of (1) all
Employer Contributions allocated to his Account; (2) any
forfeitures allocated to his Account; and (3) the amount of any
nondeductible after-tax Member Voluntary Contributions allocated to
his Account. Moreover, any Excess Amounts applied under Section
4.3(a)(iv) or 4.3(b)(vi) during the Limitation Year to reduce
Employer Contributions shall be considered to be Annual Additions
for such Limitation Year. Subject to the correction rules of
Section 4.3(a)(iv), Contributions do not fail to be Annual
Additions merely because they are excess deferrals (described in
Section 3.1(c) of the Plan), excess contributions above the ADP
limits (described in Section 3.3(h) of the Plan), or excess
aggregate contributions above the ACP limits (described in Section
3.3(j) of the Plan); provided, however, excess deferrals which are
timely distributed by April 15 following the year of deferral to
the applicable Member pursuant to Section 3.1(d) of the Plan are
not Annual Additions.
Amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Section 415(l) of the Code, which is
part of a defined benefit plan maintained by the Employer, are
treated as Annual Additions to a defined contribution plan. Also,
amounts derived from contributions paid or accrued after December
31, 1985, in taxable years ending after such date, which are
attributable to postretirement medical benefits allocated to the
separate account of a key employee, as defined in Section
419A(d)(3) of the Code, under a welfare benefit fund, as defined in
Section 419(e) of the Code, maintained by the Employer, are treated
as Annual Additions to a defined contribution plan. The Annual
Addition for any Limitation Year beginning before January 1, 1987
shall not be recomputed to treat all Employee Contributions as
Annual Additions.
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<PAGE>
(ii) COMPENSATION -- For each Limitation Year commencing after
December 31, 1989, a Member's wages (as defined in Section 3401(a)
of the Code for purposes of income tax withholding at the source)
that are paid (within the meaning of Section 1.415-2(d)(3) and (4)
of the Income Tax Regulations) to the Member by the Employer during
the Limitation Year for services performed and reportable on the
Member's form W-2 (or its successor), but determined without regard
to any rules that limit the remuneration included in wages based on
the nature or location of the employment or the services performed
(such as the exception for agricultural labor in Section 3401(a)(2)
of the Code). For each Limitation Year commencing prior to January
1, 1990, Compensation for purposes of this Section shall be defined
by reference to Section 1.415-2(d)(1) and (2) of the Income Tax
Regulations.
(iii) DEFINED BENEFIT FRACTION -- A fraction, the
numerator of which is the sum of the Member's Projected Annual
Benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer and, subject to application
of Section 416(h) of the Code and Article VII of the Plan relating
to Top-Heavy Plans, the denominator of which is the lesser of 125
percent of the dollar limitation in effect for the Limitation Year
under Section 415(b)(1)(A) and Section 415(d) of the Code or 140
percent of the Highest Average Compensation, including any
adjustments under Section 415(b) of the Code.
(iv) DEFINED CONTRIBUTION FRACTION -- A fraction, the
numerator of which is the sum of the Annual Additions to the
Member's account under all the defined contribution plans (whether
or not terminated) maintained by the Employer for the current and
all prior Limitation Years (including the Annual Additions
attributable to the Member's nondeductible employee contributions
to all defined benefit plans, whether or not terminated, maintained
by the Employer, and the Annual Additions to all welfare benefit
funds as defined in Section 419(e) of the Code, and individual
medical accounts as defined in Section 415(l)(2) of the Code,
maintained by the Employer), and the denominator of which is the
sum of the Maximum Aggregate Amounts for the current and all prior
Limitation Years of service with the Employer (regardless of
whether a defined contribution plan was maintained by the
Employer). Subject to application of Section 416(h) of the Code
and Article VII of the Plan relating to Top-Heavy Plans, the
Maximum Aggregate Amount in any Limitation Year is the lesser of
125 percent of the dollar limitation in effect under Section
415(c)(1)(A) of the Code or 35 percent of the Member's Compensation
for such year.
IV-8
<PAGE>
The Annual Addition for any Limitation Year beginning before
January 1, 1987, shall not be recomputed to treat any Employee
Contributions as Annual Additions.
(v) EMPLOYER -- The Employer that adopts the Plan. In the
case of a group of Employers which constitutes a controlled group
of corporations (as defined in Section 414(b) of the Code as
modified by Section 415(h) of the Code) or which constitutes trades
or businesses (whether or not incorporated) which are under common
control (as defined in Section 414(c) as modified by Section 415(h)
of the Code) or all members of an affiliated service group (as
defined in Section 414(m) of the Code) or any other entity required
to be aggregated with the Employer pursuant to regulations under
Section 414(o) of the Code, all such Employers shall be considered
a single Employer for purposes of applying the limitations of this
Section 4.3.
(vi) EXCESS AMOUNT -- The excess of the Annual Additions
credited to the Member's Account for the Limitation Year over the
Maximum Permissible Amount.
(vii) HIGHEST AVERAGE COMPENSATION -- The average
compensation for the three consecutive years of service with the
Employer that produces the highest average. A year of service with
the Employer is the 12-consecutive-month period which corresponds
with the Limitation Year.
(viii) LIMITATION YEAR -- The 12-consecutive-month period
which begins on the first day of the Plan Year and anniversaries
thereof. All qualified plans maintained by the Employer must use
the same Limitation Year. If the Limitation Year is amended to a
different 12-consecutive- month period, the new Limitation Year
must begin on a date within the Limitation Year in which the
amendment is made.
(ix) MAXIMUM PERMISSIBLE AMOUNT -- The Maximum Permissible
Amount with respect to any Member shall be the lesser of (1)
$30,000 (or, if greater, one-fourth of the defined benefit dollar
limitation set forth in Section 415(b)(1) of the Code as in effect
for the Limitation Year) or (2) except as otherwise provided below,
25 percent of his actual Compensation for the Limitation Year.
Effective on January 1 of the calendar year prescribed in Section
415(d) of the Code and each January 1
IV-9
<PAGE>
thereafter, the $30,000 limitation above will be automatically
adjusted to the new dollar limitation determined by the
Commissioner of Internal Revenue for that calendar year in
accordance with applicable provisions of Sections 415(b), 415(c)
and 415(d) of the Code. The new limitation will apply to
Limitation Years ending within the calendar year of the date of the
adjustment. The 25 percent of actual Compensation limitation
referred to above shall not apply to any contribution for medical
benefits (within the meaning of Section 401(h) or Section
419A(f)(2) of the Code) after separation from service which is
otherwise treated as an Annual Addition, or to any other amount
otherwise treated as an Annual Addition under Section 415(l)(1) or
Section 419A(d)(2) of the Code.
If a short Limitation Year is created because of an amendment
changing the limitation to a different 12-consecutive-month period,
the Maximum Permissible Amount shall not exceed the defined
contribution dollar limitation for the short Limitation Year
determined as follows: the dollar limitation in effect for the
calendar year in which the short Limitation Year ends will be
multiplied by a fraction, the numerator of which is the number of
months in the short Limitation Year, and the denominator of which is 12.
(x) PROJECTED ANNUAL BENEFIT -- A Member's annual retirement
benefit (adjusted to the actuarial equivalent of a straight life
annuity if expressed in a form other than a straight life or
qualified joint and survivor annuity) to which the Member would be
entitled under the respective plan, assuming that the Member will
continue employment until the later of current age or normal
retirement age under the respective plan, and that the
participant's compensation for the current Limitation Year and all
other relevant factors used to determine benefits under the
respective plan will remain constant for all future Limitation Years.
4.4 PERIODIC VALUATION OF TRUST FUND: Subject to Section 4.10
concerning investment elections in individual investment funds, at the end of
each Plan Year (or such shorter accounting period as may be prescribed by the
Administrative Committee) the Trustee shall revalue the Trust Fund (excluding
any Contributions made to the Trust during such Plan Year and any life
insurance policies purchased under Section 4.11) at its then fair market
value, determine the amount of income or loss and appreciation or
depreciation incurred by the Trust Fund for the applicable accounting period
then ended, and certify such information to the Administrative Committee.
Subject to Section 4.10, with respect to Members' Accounts, the balances of
which have not been withdrawn, distributed or otherwise paid pursuant to
applicable provisions of the Plan as of the last day of the applicable
accounting period, the Administrative Committee shall allocate such income or
loss and any appreciation or depreciation of the Trust Fund to each Member's
Account (without regard to whether the Member is employed by the
IV-10
<PAGE>
Employer at the end of the applicable accounting period) in the ratio that
the balance credited to each Member's Account as of the first day of the
applicable accounting period bears to the total of the balances credited to
all such Members' Accounts as of the first day of the applicable accounting
period. The Administrative Committee shall then allocate the income or loss
and any appreciation or depreciation among each Member's individual accounts
maintained under his Account in the ratio that the balance credited to each
individual account as of the first day of the applicable accounting period
bears to the total balance credited to his Account as of the first day of the
applicable accounting period. Provided, however, the income or loss and any
appreciation or depreciation for the first Plan Year (or such shorter
accounting period as may be prescribed by the Administrative Committee) only
will be allocated to Members' Accounts on the basis of Account balances as of
the end of the first Plan Year or other applicable accounting period.
Prior to the allocations described in this Section and subject to Section
4.10, Account balances shall be reduced as appropriate by amounts used to
purchase insurance, forfeitures, withdrawals, payments or distributions, or
other amounts properly chargeable to Members' Accounts under the Plan during
the applicable accounting period. Notwithstanding the above, solely for
purposes of the allocations made under this Section pursuant to
nondiscriminatory rules which may be established by the Administrative
Committee, on or after the first day of the applicable accounting period, any
Rollover Contributions credited to the Member's Rollover Account, any direct
transfers credited to the Member's Predecessor Plan Account, and/or any other
Contributions credited to the Member's Account, shall be taken into account
to ensure that such amounts transferred or contributed to the Plan share in
the allocations hereunder with respect to such accounting period; provided,
however, the Administrative Committee shall not be required to establish any
such rules.
4.5 EXTRAORDINARY VALUATION OF TRUST FUND: Subject to Section 4.10
concerning investment elections in individual investment funds, at any time
or times during a Plan Year that one or more of the Members become eligible
for a distribution hereunder or request a withdrawal in accordance with
applicable provisions of Article VI, and the Administrative Committee
determines that because of such distribution or withdrawal a revaluation of
the Trust Fund, a determination of the Trust Fund's income or loss, and an
interim allocation are necessary to prevent discrimination against those
Members who have not requested a distribution or withdrawal, the Trustee
shall revalue the Trust Fund (excluding any Contributions made to the Trust
during such Plan Year and any life insurance policies purchased under Section
4.11), as of a date selected by the Administrative Committee (which is
administratively practical and is near the date of distribution or
withdrawal), at its then fair market value, determine the amount of income
earned or loss suffered by the Trust Fund for the period then ended, and
certify such information to the Administrative Committee.
Subject to Section 4.10, with respect to Members' Accounts, the balances
of which have not been withdrawn, distributed or otherwise paid pursuant to
applicable provisions of the Plan as of the date that an extraordinary
valuation is required, the Administrative Committee shall allocate such
income or loss and appreciation or depreciation of the Trust Fund to each
IV-11
<PAGE>
Member's Account (without regard to whether the Member is employed by the
Employer on the date that an extraordinary valuation is required) in the
ratio that the balance credited to each Member's Account as of the first day
of the applicable accounting period bears to the total of the balances
credited to all such Members' Accounts as of the first day of the applicable
accounting period. The Administrative Committee shall then allocate the
income or loss and appreciation or depreciation which was allocated to each
Member's Account among each Member's individual accounts maintained under his
Account in the ratio that the balance credited to each individual account as
of the first day of the applicable accounting period bears to the total
balance credited to his Account as of the first day of the applicable
accounting period.
Prior to the allocations described in this Section and subject to Section
4.10, Account balances shall be reduced as appropriate by amounts used to
purchase insurance, forfeitures, withdrawals, payments or distributions, or
other amounts properly chargeable to Members' Accounts during the applicable
accounting period. Notwithstanding the above, solely for purposes of the
allocations made under this Section pursuant to nondiscriminatory rules which
may be established by the Administrative Committee, on or after the first day
of the applicable accounting period, any Rollover Contributions credited to
the Member's Rollover Account, any direct transfer allocated to the Member's
Predecessor Plan Account, and/or any other Contributions credited to the
Member's Account, shall be taken into account to ensure that such amounts
transferred or contributed to the Plan share in the allocations hereunder
with respect to such accounting period; provided, however, the Administrative
Committee shall not be required to establish any such rules.
4.6 FORFEITURES AND ALLOCATION THEREOF:
(a) GENERAL RULE: In the event that a Member terminates
employment with any Employer and all Affiliated Employers, his
vested interest in his Account will be paid (or deemed to be paid
in the case of a nonvested Member, as described below) in
accordance with this Section and Section 6.6, and any nonvested
amount shall be forfeited at such time as is provided under
subsequent provisions of this Section. Not later than the last day
of the Plan Year in which such distribution (or deemed
distribution) occurred, such forfeiture shall be applied first to
reinstate any Account required to be reinstated during the Plan
Year under the subsequent provisions of this Section, and any
remaining forfeitures shall then be applied to reduce any
subsequent Contributions of the Employer that contributed with
respect to the amounts forfeited.
(b) ACTUAL AND DEEMED CASH-OUTS OF NONVESTED OR PARTIALLY
VESTED ACCOUNTS WITHIN TWO PLAN YEARS AFTER THE MEMBER'S
TERMINATION OF EMPLOYMENT; REINSTATEMENT OF SUCH ACCOUNTS: With
respect to any Member (i) who terminates employment with any
Employer and all Affiliated Employers, (ii) who has a zero percent
(0%) vested interest in his Employer Contributions Account or who
has a vested interest in his Employer Contributions Account that is
IV-12
<PAGE>
greater than zero percent (0%), but is less than one hundred
percent (100%) and (iii) who, pursuant to Section 6.6, receives a
distribution of the full amount of his entire vested interest in
his Employer Account in the form of a lump sum distribution by the
close of the second Plan Year following the Plan Year in which his
employment terminated (or is deemed under this Section and Section
6.6 to have received such distribution of zero dollars on the date
his employment terminated in the case of a nonvested terminated
Member described in clause (ii) above), which distribution (i)
includes the full amount of his entire vested interest in his
Employer Account as a result of his termination of participation in
the Plan, and (ii) is $3,500 or less, or is more than $3,500 but is
consented to, then, the nonvested, forfeitable amount credited to
his Employer Contributions Account (as of the valuation date with
respect to which the amount of the distribution is determined)
shall become a forfeiture as of the distribution date (or as of the
date his employment terminated if no amount is payable from
Employer Contributions on his behalf, but such Member is deemed
under this Section and Section 6.6 to have received a distribution
of zero dollars on the date his employment terminated). Provided,
however, in the event that a partially vested terminated Member
(described in clause (ii) of the first sentence of this Section
4.6(b)) who received a distribution described in the immediately
preceding sentence resumes employment covered under the Plan, his
Employer Account shall be restored pursuant to Section 4.6(c) if he
repays to the Trustee the full amount of such distribution
attributable to Employer Contributions prior to the earlier of (i)
the date on which the Member incurs a period of five (5)
consecutive one year periods of severance, or (ii) five (5) years
after the first date that he is subsequently re-employed by the
Employer. If a terminated Member had a zero percent (0%) vested
interest in his Employer Contributions Account at the time of his
termination of employment and thus is deemed under this Section and
Section 6.6 to have received a distribution of a vested interest in
his Employer Contributions Account equal to zero dollars (thus
actually receiving no distribution from his Employer Contributions
Account as a result of his termination of employment), his Employer
Contributions Account will be restored if he resumes employment
covered under the Plan prior to incurring a period of five (5)
consecutive one year periods of severance. Such reemployed Member
shall be deemed to have repaid a distribution of zero dollars on
the date of his reemployment with the Employer.
(c) AMOUNT AND TIMING OF RESTORATION OF ACCOUNTS: With
respect to Employer Accounts which are entitled to be restored as a
result of compliance with all of the requirements of Section
4.6(b), the amount to be restored under the provisions of this
Section 4.6(c) shall be the amount credited to the Member's
Employer Account, both the vested and the nonvested portions,
immediately prior to the rehired Member's distribution (or deemed
distribution), unadjusted by any subsequent gains or losses. Such
restoration shall be made as soon as administratively practicable
after the later of the date the Member resumes employment covered
under the Plan or the date on which any required repayment is
completed and shall be effective as of the end of the Plan Year (or
other period designated by the Administrative Committee) coincident
with or next following the occurrence of the event which gives rise
to the restoration of the Member's Employer Account.
IV-13
<PAGE>
Except as otherwise provided above, a Member's Employer
Account shall not be restored upon resumption of employment covered
under the Plan. Any portion of the Trust Fund attributable to
Active Service prior to resumption of employment by a Member whose
Employer Account has not been restored shall be held and
distributed in accordance with applicable provisions of the Plan
and elections made thereunder. Separate accounts may be
established and maintained for Contributions allocable to such a
Member after his resumption of employment covered under the Plan.
(d) CASH-OUTS OF FULLY VESTED ACCOUNTS WITHIN TWO PLAN YEARS
AFTER THE MEMBER'S TERMINATION OF EMPLOYMENT; NON-REINSTATEMENT OF
SUCH ACCOUNTS: With respect to any Member (i) who terminates
employment with any Employer and all Affiliated Employers, (ii) who
has a vested interest in his Employer Contributions Account equal
to 100% and (iii) who received a distribution from his Employer
Account in the form of a lump sum distribution by the close of the
second Plan Year following the Plan Year in which his employment
terminated, which distribution (i) includes the full amount of his
entire vested interest in his Employer Account as a result of his
termination of participation in the Plan, and (ii) is $3,500 or
less, or is more than $3,500 but is consented to, shall not be
permitted to repay to the Trustee the full amount of such
distribution attributable to Employer Contributions in order to
restore his Employer Account.
(e) DISTRIBUTIONS MADE MORE THAN TWO PLAN YEARS AFTER THE
MEMBER'S TERMINATION OF EMPLOYMENT: With respect to a Member (i)
who terminates employment with any Employer and all Affiliated
Employers with greater than a zero percent (0%), but less than a
one hundred percent (100%), vested interest in his Employer
Contributions Account and (ii) who received a termination
distribution from his Employer Account after the close of the
second Plan Year following the Plan Year in which his employment
terminated, any amount remaining in his Employer Contributions
Account shall continue to be maintained as a separate account. At
any relevant time, such Member's nonforfeitable portion of his
separate account shall be determined in accordance with the
following formula:
X = P (AB + D) - D
IV-14
<PAGE>
For purposes of applying the formula: X is the nonforfeitable
portion of such separate account at the relevant time; P is the
Member's vested interest in his Employer Contributions Account at
the relevant time; AB is the balance of such separate account at
the relevant time; and D is the amount of the distribution. For
all other purposes of the Plan, a Member's separate account shall
be treated as an Employer Contributions Account. The forfeitable
portion of a terminated Member's separate Employer Contributions
Account that is subject to such formula shall be forfeited on the
date on which such Member incurs a period of five (5) consecutive
one year periods of severance.
(f) DEFERRED DISTRIBUTIONS OF PARTIALLY VESTED ACCOUNTS:
With respect to a Member (i) who terminates employment with any
Employer and all Affiliated Employers with greater than a zero
percent (0%), but less than a one hundred percent (100%), vested
interest in his Employer Contributions Account and (ii) who is not
otherwise subject to the forfeiture provisions of Sections 4.6(b)
or (e) above, the forfeitable portion of such terminated Member's
Employer Contributions Account shall be forfeited on the date on
which such Member incurs a period of five (5) consecutive one year
periods of severance.
(g) INVESTMENT OF NONFORFEITABLE PORTION OF EMPLOYER ACCOUNT:
If Members are permitted to direct the investment of their
Accounts in accordance with Section 4.10, a terminated Member shall
be entitled to direct the investment of his Account up until such
time as investments are liquidated, if applicable, and distribution
of his entire vested interest is made in accordance with Article
VI. Thereafter, the forfeitable portion of such Account shall be
invested by the Trustee subject to the provisions of Article IX and
the Trust Agreement.
4.7 EFFECTIVE DATE OF ALLOCATIONS AND ADJUSTMENTS: The Administrative
Committee will credit to each eligible Member's Account the Member's portion
of the Employer Contributions referred to in Section 4.2 so that all Employer
Contributions will become effective and will be credited to each Member's
Account as of the end of the Plan Year (or such shorter accounting period as
may be prescribed by the Administrative Committee) for which they are
attributable.
In addition, any amounts contributed to any Member's Rollover Account or
Predecessor Plan Account shall be credited to the appropriate Account as of
the end of the Plan Year (or such shorter accounting period as may be
prescribed by the Administrative Committee) to which they are attributable.
The Administrative Committee shall credit to each Member's Account the
Member's portion of the periodic adjustments and allocations required by
Section 4.4 so that all periodic adjustments and allocations will become
effective and will be credited to each Member's Account as of the end of the
Plan Year (or such shorter accounting period as may be prescribed by the
Administrative Committee) for which they are attributable.
IV-15
<PAGE>
In the event that interim adjustments and allocations are required by
Section 4.5, they will become effective and will be entered in each Member's
Account as of the end of the applicable accounting period next preceding the
event requiring the interim adjustment and, additionally, allocation and
distribution of benefits during the accounting period in which the interim
adjustment or allocation is made shall take into account the interim
adjustment and allocation.
4.8 ACCOUNTING FOR TRANSFERRED MEMBER: In the case of a Member who is
Transferred during a Plan Year, the Administrative Committee, as of the date
that the Member is Transferred, shall transfer on their books such Member's
Account (including that portion of the Trust Fund allocated thereto) so that
such Member's Account will always be reflected on the Administrative
Committee's books as being attributable to the Employer with whom such Member
is currently employed.
4.9 NO VESTING UNLESS OTHERWISE PRESCRIBED: No allocations, adjustments,
credits or transfers shall ever vest in any Member any right, title or
interest in the Trust Fund except at the times and upon the terms and
conditions herein set forth. Except as otherwise may be provided in Section
4.10, the Trust Fund shall be, as to all Member's Accounts, a commingled fund.
4.10 INVESTMENT ELECTIONS WITH RESPECT TO COMMINGLED FUNDS:
(a) INVESTMENT FUNDS ESTABLISHED: The assets of the Plan
shall be invested in one or more categories of assets (which
conform to any portfolio standards and guidelines established by
the Trustee), including common stock issued by the Plan Sponsor, as
may be determined from time to time in the discretion of the
Administrative Committee and announced and made available on an
equal basis to all Members subject to the provisions of this
Section 4.10. When the Trustee or any agent thereof (i) receives
funds to be invested or determines that assets from those funds, if
applicable, should be sold and the proceeds held for a period of
time pending reinvestment or other purpose, or (ii) has notice that
required or appropriate filings with the Securities and Exchange
Commission have not been timely accepted as filed and funds
received have been designated to be invested in shares of common
stock issued by the Plan Sponsor, then, prior to completion of
required or appropriate filings with the Securities and Exchange
Commission, such funds may be held in cash, or invested in
short-term investments such as U.S. Treasury bills, commercial
paper, demand notes, money market funds, any savings accounts,
money market accounts, certificates of deposit or like investments
with the commercial department of any bank, including any bank
serving as Trustee, as long as they bear a reasonable rate of
IV-16
<PAGE>
interest and the bank is supervised by the United States or a
state, any common, pooled or collective trust funds which any bank,
including any bank serving as Trustee, or any other corporation may
now have or in the future may adopt for such short-term investments
(the governing document of such common, pooled or collective trust
fund(s) being hereby incorporated herein by reference), and other
similar assets which may be offered by the federal government, or
any national or state bank (whether or not serving as Trustee
hereunder), and as may be determined by the Trustee, in its
discretion, which assets will remain a part of the fund to which
they would otherwise relate.
(b) ELECTION PROCEDURES ESTABLISHED: If Members are given the
right to designate the funds in which their Accounts are invested
pursuant to Section 4.10(a), on such form as shall be prescribed by
the Administrative Committee, each Member shall designate the
percentage of his Account (as such Account presently exists and the
percentage of future contributions, if any, to be allocated to such
Account) to be invested in any one or more funds, as such funds may
be established from time to time as set forth in Section 4.10(a).
Except as provided in Section 4.11, Matching, Profit Sharing and
Qualified Non-Elective Contributions shall be exclusively invested
in Common Stock issued by the Plan Sponsor.
At such times as shall be prescribed by the Administrative
Committee in its discretion, the percentage elected to be placed in
any one fund may be changed by the Member, which change will be
effective after such period of time as shall be established by the
Administrative Committee. The Administrative Committee shall
determine whether any such change as to investments will change the
Member's Account as it presently exists or whether it will only be
effective as to succeeding investments of Contributions; however,
any such change, when made, shall continue to be effective until
revoked or changed in a like manner. The rules established and the
discretion exercised by the Administrative Committee hereunder
shall apply to all Members on a nondiscriminatory basis.
(c) ALLOCATIONS ATTRIBUTABLE TO DIRECTED INVESTMENTS IN
COMMINGLED FUNDS: If Members are given the right to designate the
fund in which their Accounts are invested pursuant to Section
4.10(a), each valuation and determination of income or loss and
appreciation or depreciation provided for hereunder shall reflect
the value of the different categories of assets separately. The
Administrative Committee shall allocate appreciation, depreciation,
income, and loss attributable to each such category of assets among
the Members' various Accounts (each type of account being
considered separately) in the ratio that the amount in each account
which was invested in a particular category as of the first day of
the applicable accounting period bears to the amount in all
accounts which was invested in such category as of the first day of
such applicable accounting period.
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<PAGE>
Notwithstanding the foregoing, if a fund is invested in shares of
an open-end mutual fund or in an investment account maintained by
an insurance company, the procedures set forth in this Paragraph
shall be adjusted to the extent necessary to correspond to such
mutual fund's or insurance company's net income (or net loss)
allocation procedure.
4.11 DIVERSIFICATION ELECTION: Effective June 30, 1993, each Member who
(i) is age 55 or older and (ii) has been credited with a period of at least
five (5) years of Active Service for vesting purposes (hereinafter a
"Qualified Member") shall be permitted to direct the investment of up to
fifty percent (50%) of the balance credited to his Accounts that is invested
in Common Stock issued by the Plan Sponsor (the "Company Stock Fund") into
one or more of the other investment funds then available under the Plan
pursuant to Section 4.10. The procedural requirements pertaining to this
diversification election shall be established by the Administrative Committee
in the exercise of its discretion and shall apply to all Qualified Members on
a uniform and nondiscriminatory basis. In accordance with Section 401(a)(4)
of the Code, the right to make a diversification election pursuant to the
foregoing provisions of this Section shall be currently and effectively
available to all Qualified Members and shall not substantially favor Highly
Compensated Employees who are Qualified Members.
4.12 PURCHASE OF LIFE INSURANCE FOR INDIVIDUAL ACCOUNTS: The
Administrative Committee may direct the Trustee to purchase insurance for the
Account of individual Members on each Member's life, whether ordinary life,
term life, universal life and/or any other life insurance contracts which are
not ordinary life insurance contracts, in such amount as shall be determined
by the Administrative Committee in its discretion with or without
consultation with the Members. In the alternative, the Administrative
Committee may permit each Member to select the amount of insurance, if any,
to be purchased by the Trustee for the Account of the Member. If the
Administrative Committee permits its Members to elect insurance coverage,
each Member must notify the Administrative Committee in writing regarding the
amount and type of insurance he desires and the Administrative Committee will
direct the Trustee to effect the purchases as appropriate. If the
Administrative Committee elects (or permits the Members to elect) to purchase
incidental life insurance coverage, the Administrative Committee must select
the insurance company which will act as insurer for its Members and notify
the Trustee of its election in writing.
The premium on the amount of life insurance purchased for each Member
shall be limited as follows: (i) if only ordinary life insurance contracts
(i.e. contracts with both nondecreasing death benefits and nonincreasing
premiums) are purchased, the premium may not exceed an amount which, when
added to the total amount of the Employer's Contributions previously
allocated to the purchase of ordinary life insurance for the Member, will be
less than one-half of the Employer's total Contributions allocated to such
Member at such time; (ii) if only term insurance contracts, universal life
insurance contracts and/or any other life insurance contracts which are not
ordinary life insurance contracts are purchased, the premium may not exceed
an amount which, when added to the total amount of the Employer's
Contributions previously
IV-18
<PAGE>
allocated to the purchase of term insurance for the Member will be less than
one-quarter of the Employer's total Contributions allocated to such Member at
such time; and (iii) if a combination of ordinary life insurance contracts
and term insurance contracts, universal life insurance contracts and/or any
other life insurance contracts which are not ordinary life insurance
contracts are purchased, the premium may not exceed an amount which, when
added to the total amount of the Employer's Contributions previously
allocated to the purchase of life insurance for the Member, will be less than
one-quarter of the Employer's total Contributions allocated to such Member at
such time (for the purpose of computing the present premium and amount
previously allocated to the purchase of insurance for purpose of this clause
(iii), only one-half of the funds expended for premiums on ordinary life
insurance contracts shall be counted but all funds expended for premiums on
term life insurance shall be counted).
The Trustee shall be the sole owner of all policies so purchased, and the
Trustee shall be so designated in all policies and applications therefor.
The Trustee will pay from the funds in the Member's Employer Account the
initial and renewal premiums under policies on the Member's life. For any
year that a Member's share of the Employer's Contribution is insufficient to
meet the required premium payment, any amounts available in the Member's
Employer Account will be applied to pay the premium, provided, however, in no
event shall the aggregate of premiums paid from a Member's Employer Account
under any life insurance contract exceed the above limits on the aggregate
Employer Contributions made on behalf of such Member. In the event
sufficient funds are not available within the limits of this Section for the
payment of premiums, the policy shall be allowed to lapse or shall be
endorsed as a paid up policy in a lesser amount, and a new policy of a lesser
amount shall be acquired within the permissible premium limits.
If the Member is uninsurable or is insurable only at substandard rates
then all of the Contributions of the Employer shall instead be invested in
assets other than life insurance to be held for the Member's benefit in his
Account.
Any insurer from which life insurance is purchased under this Section
shall not be deemed a party to the Plan, and its rights and obligations shall
be measured and determined solely by the terms of its policy contracts. Any
policy issued or based on the life of a Member shall constitute an investment
of funds to the credit of the Account of such Member and the premiums paid
for such policy shall be charged to the Member's Account. Upon the death of
a Member, the proceeds of any such policy shall be added to the amount
distributable pursuant to applicable provisions of the Plan. In the event of
a Member's retirement for reasons of age or disability, or his termination of
employment, his Account shall include the vested cash value of any policy
issued or based on his life. Any dividend or refunds payable upon policies
purchased by the Trustee shall be used and applied in reduction of the next
premium payable upon such policy. However, dividends or refunds payable upon
the event of the death of a Member on whose life the policy is issued or
based shall form a part of the death proceeds of such policy and shall be
payable pursuant to applicable provisions of the Plan. The Administrative
Committee shall direct the Trustee to convert the entire value of the life
insurance policy at or before normal retirement age into cash or to provide
periodic income, so that no portion of such value may be used to continue
life insurance protection beyond retirement, or to distribute the contract to
the Member.
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<PAGE>
Any insurance policy purchased hereunder shall provide that the proceeds
of such policy or policies shall be payable to the Trustee; provided,
however, the Trustee shall be required to pay over all proceeds of the policy
to the Member's designated Beneficiary in accordance with the distribution
provisions of Section 6.6.
All insurance policies shall be non-transferable when owned by any person
other than the Trustee. In the event of any conflict between applicable
provisions of the Plan and the provisions of any insurance policies purchased
hereunder, the provisions of the Plan shall control.
Except as provided by the Act and any other applicable state or federal
law which cannot be waived, the failure of the Administrative Committee to
direct the purchase of any policy or the failure of the Trustee to obtain any
policy under the Plan upon such direction, or the failure of the Trustee to
pay any premium when due (whether or not funds are available therefor) under
the Plan, will not give rise to any right, claim or benefit to any Member,
Beneficiary, or other person against the Trustee, the Employer or the
Administrative Committee. The Trustee shall have no right or obligation to
determine whether any policy meets the requirements of this Section. The
Trustee shall purchase such policies as of such dates, containing such terms,
and requiring such premiums as the Administrative Committee shall, in its
discretion, direct. Except as provided by the Act and any other applicable
state or federal law which cannot be waived, neither the Trustee, the
Administrative Committee, nor any Employer is responsible for the validity of
any policies issued by an insurer, or for the failure on the part of an
insurer to make payments provided by any such policies or for the action of
any person which may render a policy null and void or unenforceable in whole
or in part.
4.13 SPECIAL TRANSITION RULE: Notwithstanding any other provision of the
Plan to the contrary, if the Plan is retroactively effective with respect to
any Plan Year (or other applicable accounting period) of a Prior Plan, the
Account of any individual who was a participant or Member during such Plan
Year (or other applicable accounting period) shall be credited with any
Employer Contributions under the Plan attributable to such accounting period,
if such Member's Account would have been entitled to such an allocation under
the Prior Plan immediately prior to the later of (i) the adoption of or (ii)
the effective date of the amendment, restatement and continuation of the
Prior Plan under the form of the Plan. In addition, notwithstanding any
other provision of the Plan to the contrary, if the participant or Member
described in the preceding sentence would have been so entitled under the
Prior Plan immediately prior to the later of (i) the adoption of or (ii) the
effective date of, its amendment, restatement and continuation under the form
of the Plan, the Account of such Member shall be charged or credited, in
accordance with the terms of the Prior Plan, with its proportionate share of
the Trust Fund's income, loss, appreciation or depreciation attributable to
such accounting period.
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4.14 SECTION 16(b) RESTRICTIONS ON INSIDERS.
(a) WITHDRAWALS FROM KENT STOCK FUND. In accordance with Rule
16b-3(d)(2)(i)(B) promulgated under Section 16 of the Securities Exchange Act
of 1934, as amended ("Section 16"), if an officer, director or 10%
shareholder of the Employer (as defined in Section 16 and referred to as an
"insider") while in service withdraws cash or securities from an investment
fund maintained under the Trust which invests in Employer securities
("Company Stock Fund"), the Administrative Committee will cease further
Elective Contributions from being directed on the insider's behalf into the
Company Stock Fund for a period of six (6) months from the date of the
withdrawal. The requirements of the immediately preceding sentence shall not
apply in the event of (i) an extraordinary distribution of all of the
Employer's securities held by the Plan or (ii) a distribution in connection
with death, retirement, disability, termination of employment, or a qualified
domestic relations order as defined in Section 6.10. The only in-service
withdrawals permitted under the Plan are hardship withdrawals pursuant to
Section 6.8. In accordance with the Code and Section 6.8, the receipt of a
hardship withdrawal by any Member results in a suspension of Elective
Contributions by such Member for 12 consecutive months following receipt of
the amount withdrawn. Consequently, the requirement set forth in the first
sentence of this paragraph should be satisfied if an insider receives a
hardship withdrawal since he will be prohibited from authorizing any future
Elective Contributions for 12 months, which period exceeds the 6-month
restrictions period required under Section 16.
(b) CESSATION OF ELECTIVE CONTRIBUTIONS TO KENT STOCK FUND. If an
insider's Elective Contributions are (i) no longer directed into the Company
Stock Fund or (ii) only directed into the Company Stock Fund at a nominal
level, the insider cannot resume or increase the investment of his Elective
Contributions into the Company Stock Fund for at least six (6) months from
the effective date of such direction. The requirement set forth in the
immediately preceding sentence should be satisfied to the extent that Members
are not permitted to change their investment elections under Section 4.10
more often than once every six months. The requirement of the first sentence
of this paragraph does not apply to automatic purchases of Employer
securities as a result of (i) the reinvestment of dividends, earnings and
forfeitures and (ii) the allocation of Matching Contributions to the Company
Stock Fund, to the extent that such purchases and allocations are
non-elective and required by the terms of the Plan. Furthermore, in
accordance with Section 4.10, the insider can authorize that his Elective
Contributions be directed into investment funds that do not invest in
Employer securities.
(c) TRANSFER ACCOUNT BALANCE FROM KENT STOCK FUND TO ANOTHER INVESTMENT
FUND. When a Member elects to switch all or a portion of his Account balance
out of the Company Stock Fund into another investment fund, the Member
effectively has made a decision to sell his interest in Employer securities.
Similarly, a transfer of funds into the Company Stock Fund is treated as a
purchase of Employer securities. With respect to insiders, such intra-plan
transfers
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<PAGE>
will be exempt transactions, in accordance with Rule 16b-3(d)(2)(ii) under
Section 16, provided that the transfer into or out of the Company Stock Fund
is pursuant to an election made by the insider during a quarterly window
period at least six months after the date of any previous intra-plan transfer
election relating to the Company Stock Fund that was made by the insider.
Consequently, intra-plan transfers by insiders may be effected only twice a
year in six-month intervals. For purposes of this rule, a window period
begins on the third business day following release for publication of the
Plan Sponsor's quarterly statement of sales and earnings and ends on the
twelfth business day following such date. In order to qualify for the
exemption for intra-plan transfers, only the transfer election must take
place during the window period; the actual transfer can occur outside the
window period.
(d) CESSATION OF FURTHER PURCHASES AFTER WITHDRAWAL FROM KENT STOCK
FUND. In accordance with Rule 16b-3(d)(2)(i)(B) under Section 16, an
intra-fund transfer by an insider out of the Company Stock Fund constitutes a
withdrawal. Consequently, the Administrative Committee will cease future
Elective Contributions from being invested on the insider's behalf into the
Company Stock Fund for a period of six (6) months from the date of the
intra-fund transfer out of the Company Stock Fund; therefore, if an insider
authorizes an intra-fund transfer out of the Company Stock Fund, no portion
of his future Elective Contributions may be directed into the Company Stock
Fund for at least six months, however, such Elective Contributions can be
directed into other investment funds maintained pursuant to Section 4.10.
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<PAGE>
ARTICLE V
RETIREMENT
5.1 EARLY RETIREMENT: A Member may retire on the last day of any month
in which he has attained age fifty-five (55) years or older and completed at
least five (5) years of Active Service for vesting purposes.
5.2 NORMAL RETIREMENT: A Member may retire on the last day of the month
ending coincident with or immediately following his normal retirement age. A
Member's normal retirement age shall be his sixty-fifth (65th) birthday, from
which time he shall henceforth be one hundred percent (100%) vested in his
Account.
5.3 LATE RETIREMENT: A Member may continue his employment after he
attains normal retirement age; provided, however, that he shall have the
right to retire on any subsequent date.
5.4 RIGHTS OF MEMBERS AND PROHIBITION OF UNAUTHORIZED DISTRIBUTION:
Until a Member retires or otherwise terminates service he shall be accorded
all rights as a Member under the Plan, but, subject to Section 6.6, he shall
receive no distribution until he actually retires or otherwise becomes
entitled to a distribution under the provisions of Article VI.
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ARTICLE VI
DISTRIBUTION OF BENEFITS
Distributions under the Trust shall be made to Members, spouses,
Beneficiaries, executors or administrators, as the case may be, only upon the
following conditions and in the manner specified.
6.1 DEATH BENEFIT: On the death of a Member prior to complete
distribution of such Member's Account, his death benefit shall be (i) 100% of
the amount credited to his Account as of the end of the applicable accounting
period (for which the last valuation was made) coincident with or next
preceding the date of the Member's death, exclusive of any life insurance
purchased under Section 4.11, (ii) an amount equal to any Rollover
Contributions, and any direct transfers allocable to the Member's Predecessor
Plan Account, made after the end of such accounting period which were not
used to purchase life insurance under Section 4.11, (iii) an amount equal to
any Employer Contributions made on behalf of such Member after the end of
such accounting period which were not used to purchase life insurance under
Section 4.11, (iv) the death benefit under any such life insurance contract,
and (v) to the extent that the Member's Account has any undistributed balance
which has not been paid as of the end of the applicable accounting period
(for which the last valuation was made), that portion of the periodic
adjustments and allocations required by Article IV to be credited to the
Member's Account as of the end of the applicable accounting period next
preceding or coincident with payment of the benefits described above.
The death benefit shall be paid to the Member's surviving spouse, or if
there is no surviving spouse or the surviving spouse consents in the manner
described below, to such Member's designated Beneficiary (other than such
surviving spouse). At any time, subject to the following provisions of this
Section, each Member shall have the right to designate any Beneficiary or
Beneficiaries to receive his death benefit and shall have the unrestricted
right to revoke any such designation; provided, however, subject to the
subsequent provisions hereof which permit the spouse to consent to the
Member's waiver of the requirements of this sentence, any new designation of
a Beneficiary (other than the Member's spouse) by a Member who is lawfully
married (or deemed to be married under applicable local law) shall require a
new spousal consent. Each such designation or revocation by a Member shall
be evidenced by a written instrument which shall be (i) limited to a benefit
for at least one specific Beneficiary (including a nonspouse Beneficiary, or
a class of Beneficiaries or contingent Beneficiaries), (ii) filed with the
Administrative Committee, (iii) signed by the Member, and (iv) bear the
signature of at least one person who shall be a representative designated by
the Administrative Committee or a Notary Public as witness to his signature.
With respect to any Member who is lawfully married (or deemed to be
married under applicable state law), any such Member's designation of a
Beneficiary (other than the Member's spouse) to receive any portion of such
death benefit shall be deemed to be ineffective, unless the
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<PAGE>
Member's spouse consents to such designation and acknowledges the effect of
such election, which consent and acknowledgement shall be evidenced by a
written instrument which shall be (i) limited to a benefit for at least one
specific Beneficiary which may not be changed without spousal consent (or the
spouse's consent expressly permits at least one additional designation of
another Beneficiary without any requirement of further consent by such spouse
if such spouse's consent expressly acknowledges that a more limited consent
could be provided), (ii) filed with the Administrative Committee, (iii)
signed by the spouse and (iv) bear the signature of at least one person who
shall be a representative designated by the Administrative Committee or a
Notary Public as witness to the signature. Notwithstanding the immediately
preceding sentence, a Member's designation of a Beneficiary (other than the
Member's spouse) shall be effective if it is established to the satisfaction
of the Administrative Committee that the consent required in the preceding
sentence may not be obtained because (i) there is no spouse, (ii) the spouse
cannot be located, (iii) the Member has provided a duly certified copy of a
court order issued by a court of competent jurisdiction which recognizes that
the Member is legally separated or has been abandoned (under applicable local
law) and the Administrative Committee has not received a duly certified copy
of a qualified domestic relations order (described in Section 414(p) of the
Code) which requires spousal consent, or (iv) there exists such other
circumstance (as are prescribed under Sections 401(a)(11) and 417(a)(2) of
the Code) which obviate the necessity of obtaining the consent described in
the preceding sentence. In addition, if the surviving spouse is not legally
competent to give consent, such spouse's legal guardian, who may be the
Member, may give the required consent. Any consent by a Member's spouse (or
establishment that the consent of a Member's spouse may not be obtained)
shall be effective only with respect to such spouse.
Notwithstanding any other provision hereof to the contrary, commencing
with Plan Years beginning after October 22, 1986, any spousal consent which
expressly acknowledges that a more limited consent could be provided may
expressly provide that the spouse consents to the designation by the Member
of any Beneficiary (or any number of specified Beneficiaries) without any
requirement of further consent by the spouse and, in such event, no further
spousal consent shall be required, provided that any change of Beneficiary by
the Member does not exceed any limit contained in the spouse's consent on
such Member's right to change his Beneficiary. Any spousal consent shall be
deemed to be revocable unless it is expressly made irrevocable at the
election of the Member's spouse.
Any designation of a Beneficiary (other than the Member's spouse) which
otherwise meets the above requirements of this Section shall become
inoperative in the event that (i) the Member subsequently marries (or
subsequently is deemed to be married under applicable state law), (ii) any
missing spouse is located or (iii) any other circumstance which earlier
precluded the necessity of obtaining consent of the Member's spouse no longer
exists. If no designation of Beneficiary is on file with the Administrative
Committee at the time of the Member's death, or if the Administrative
Committee for any reason determines that such designation is ineffective,
then such Member's spouse, if then living, or if not, then the executor,
administrator, or other personal representative of the estate of such Member
shall be conclusively deemed to be the Beneficiary designated to receive such
Member's death benefit.
VI-2
<PAGE>
The provisions of this Section are intended to comply with the
requirements of Sections 401(a)(11) and 417(a)(2) of the Code. To the extent
any provision hereof is inconsistent with the preceding sentence, such
provision shall be deemed to be inoperative and the Plan shall be operated in
a manner which complies with the requirements of the immediately preceding
sentence.
Whenever the Trustee is authorized by this Plan or by a designation of
Beneficiary to pay funds to a minor or an incompetent, the Trustee shall be
authorized to pay such funds to a parent of such minor, to a guardian of such
minor or incompetent, or directly to such minor, or to apply such funds for
the benefit of such minor or incompetent in such manner as the Administrative
Committee may in writing direct. The Trustee, Administrative Committee, and
Employer shall be fully discharged with respect to any payment made in
accordance with the preceding sentence.
6.2 RETIREMENT BENEFIT: Upon the normal retirement of a Member, his
retirement benefit shall be (i) 100% of the amount credited to his Account as
of the end of the applicable accounting period (for which the last valuation
was made) coincident with or next preceding his retirement, exclusive of any
life insurance purchased under Section 4.11, (ii) an amount equal to any
Rollover Contributions, and any direct transfers allocable to the Member's
Predecessor Plan Account, made after the end of such period, which were not
used to purchase life insurance under Section 4.11, (iii) an amount equal to
any Employer Contributions made on behalf of such Member after the end of
such accounting period which were not used to purchase life insurance under
Section 4.11, (iv) the value of any life insurance purchased under Section
4.11, and (v) to the extent that the Member's Account has any undistributed
balance which has not been paid as of the end of the applicable accounting
period (for which the last valuation was made), that portion of the periodic
adjustments and allocations required by Article IV to be credited to the
Member's Account as of the end of the applicable accounting period next
preceding or coincident with payment of benefits described above.
6.3 TOTAL AND PERMANENT DISABILITY BENEFIT: In the event that the
Administrative Committee determines that a Member is suffering from a Total
and Permanent Disability, his disability benefit shall be (i) 100% of the
amount credited to his Account as of the end of the applicable accounting
period (for which the last valuation was made) coincident with or next
preceding such determination, exclusive of any life insurance purchased under
Section 4.11, (ii) an amount equal to any Rollover Contributions, and any
direct transfers allocable to the Member's Predecessor Plan Account, made
after the end of such period, which were not used to purchase life insurance
under Section 4.11, (iii) an amount equal to any Employer Contributions made
on behalf of such Member after the end of such accounting period which were
not used to purchase life insurance under Section 4.11, (iv) the value of any
life insurance purchased under Section 4.11, and, if applicable, (v) to the
extent that the Member's Account has any undistributed balance which has not
been paid as of the end of the applicable accounting
VI-3
<PAGE>
period (for which the last valuation was made), that portion of the periodic
adjustments and allocations required by Article IV to be credited to the
Member's Account as of the end of the applicable accounting period next
preceding or coincident with payment of benefits described above. The
Administrative Committee's determination as to whether there is a Total and
Permanent Disability and the date on which such disability occurred shall be
based upon the opinion of a physician selected or preapproved by the
Administrative Committee, and shall be final and conclusive with respect to
all persons and entities.
6.4 SEVERANCE BENEFIT: Upon a Member's severance from employment with
the Employer and all Affiliated Employers, for any reason other than death,
normal retirement, or Total and Permanent Disability, his severance benefit
shall be an amount equal to the sum of: (i) 100% of the total amount credited
to his Employer Nonforfeitable Contributions Account, Rollover Account, and
Predecessor Plan Account, as of the end of the applicable accounting period
(for which the last valuation was made) coincident with or next preceding the
date of such Member's severance, any Contributions, Rollover Contributions or
direct transfers made by or on behalf of the Member after the end of such
accounting period which were allocated to any of the above-listed accounts,
(ii) the percentage of the total amount credited to his Employer
Contributions Account, as of the end of such accounting period coincident
with or next preceding the date of such Member's severance, together with the
percentage of the amount of any Contributions made on behalf of such Member
after the end of such accounting period which were allocated to his Employer
Contributions Account, as such percentage is shown in the table set out below
for the number of whole years of Active Service credited to the Member prior
to his date of severance of employment, (iii) the sum of (x) the portion of
the cash surrender value of any life insurance policy purchased for the
benefit of the Member and (y), the percentage of the balance of the cash
surrender value of any life insurance policy purchased for the benefit of the
Member as shown in the table set out below in this Section for the number of
whole years of Active Service prior to his date of severance of employment,
and, if applicable, (iv) to the extent that the Member's Account has any
undistributed balance which has not been paid as of the end of the applicable
accounting period (for which the last valuation was made), that portion of
the periodic adjustments and allocations required by Article IV to be
credited to the Member's Account as of the end of the applicable accounting
period next preceding or coincident with payment of benefits described above.
Less than two years. . . . . . . . . . . . . . .0%
Two years, but less than three years . . . . . 40%
Three years, but less than four years. . . . . 60%
Four years, but less than five years . . . . . 80%
Five years, or more. . . . . . . . . . . . . .100%
All Contributions credited to the Member's Account after the end of the
applicable accounting period (for which the last valuation was made) shall be
net of any amount used to purchase life insurance pursuant to Section 4.11.
The above vesting schedule is subject to automatic 100% vesting in the event
of a full or partial termination of the Plan pursuant to Section 11.5.
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<PAGE>
The amount credited to such Member's Account which is not vested upon
distribution shall be forfeited and applied as provided in Section 4.6.
6.5 ACCOUNTING FOR DISTRIBUTIONS; OFFSETS IN SPECIAL CIRCUMSTANCES:
Subject to Section 4.6 concerning restoration of Members' Accounts and to
Section 4.10 concerning individual investment direction, if applicable, any
distribution of benefits under the Plan (and any forfeitures arising incident
thereto) shall be subtracted from the affected Member's Account balance as of
the end of the Plan Year (or such shorter accounting period as may be
prescribed by the Administrative Committee) coincident with or next preceding
the applicable accounting period in which such distribution was paid.
Moreover, notwithstanding any other provision of the Plan to the contrary, if
after a former Member's employment with the Employer and all other Affiliated
Employers terminates, such person is (i) reemployed by the Employer after
receiving a distribution pursuant to Section 6.6 and again becomes eligible
for membership, and (ii) has his Employer Account restored pursuant to
Section 4.6, then any benefits that such Member may become entitled to
receive after reentry in the Plan shall be reduced by any amounts distributed
from his Employer Account which were not repaid by such Member incident to
restoration of his Employer Account pursuant to Section 4.6.
6.6 DISTRIBUTIONS-SETTLEMENT OPTIONS:
(i) FORM AND METHOD OF PAYMENT OF BENEFITS: Except in the
event of a special circumstance described in Sections 3.1, 3.3,
6.8, 11.4, 11.7 or 12.3, distributions shall be made under the Plan
only upon the occurrence of one of the events described in Sections
6.1 through 6.4. To the extent required by Section 401(k) of the
Code, the limits of this sentence shall continue to apply even if
Trust Fund assets attributable to any Member's Account are
transferred to another plan pursuant to applicable provisions of
the Trust Agreement or Section 11.7. Subject to the next paragraph
and Section 6.6(v), distributions provided for under the Plan shall
be made only in the form of a lump sum payment in cash.
With respect to any amounts invested in common stock of the
Plan Sponsor, distribution shall be paid in cash in an amount equal
to the value (as of the date or dates shares of common stock of the
Plan Sponsor credited to the Member's Account are converted into
cash) of the Member's vested interest in shares of common stock of
the Plan Sponsor credited to such Member's Account, or in whole
shares of common stock of the Plan Sponsor, or in any combination
thereof as elected by the Member. In the event that the Member
fails to make an election between cash or stock with respect to the
portion of his vested Account balance that is invested in common
stock of the Plan Sponsor, such Member shall receive cash. Any
fractional shares of the Plan Sponsor to which the Member may be
entitled shall always be valued and paid in cash.
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<PAGE>
A Member must consent, in writing, to any required
distribution if the present value of the Member's vested Account
balance (derived from Employer and any Employee Contributions)
distributable under the Plan exceeds $3,500 and the Member has not
attained the normal retirement age described in Article V.
Notwithstanding any other provision of the Plan to the contrary,
any Member who does not have a greater than zero percent (0%)
vested interest in his Employer Contributions Account as of the
date his employment by the Employer and all Affiliated Employers
terminates, but who otherwise would have been eligible to receive a
distribution as of such date had any portion of his Employer
Contributions Account been more than zero percent (0%) vested,
shall be deemed as of such date to have received a distribution of
the vested balance of his Employer Contributions Account equal to
zero dollars. After the Member's death, benefits may be paid in
accordance with applicable provisions of the Plan without regard to
the requirements of the first sentence of this paragraph.
(ii) DISTRIBUTABLE ACCOUNT BALANCE DOES NOT EXCEED $3,500. If
the present value of a Member's vested Account balance (derived
from Employer Contributions and any Employee Contributions) which
is distributable under the Plan does not exceed $3,500, the
Member's vested Account balance shall be distributed in a lump sum
payment. Such distribution may be made without the necessity of
obtaining the consent of the Member and/or his spouse or any other
Beneficiary. Such payment may be made as soon as practicable, but
(absent circumstances beyond the control of the Administrative
Committee) in no event later than sixty (60) days after the last
day of the Plan Year in which the Member's employment with the
Employer and all Affiliated Employers is terminated.
(iii) DISTRIBUTABLE ACCOUNT BALANCE EXCEEDS $3,500: If
the present value of a Member's vested Account balance (derived
from Employer Contributions and any Employee Contributions) which
is distributable under the Plan is in excess of $3,500 and if the
Member provides the Administrative Committee with written consent
to the distribution, the Administrative Committee shall direct the
Trustee to make settlement of the Member's Account within the
60-day period (or as soon as practicable) after the Administrative
Committee receives such consent, but (absent circumstances beyond
the control of the Administrative Committee) in no event later than
sixty (60) days after the last day of the Plan Year in which the
Member's employment with the Employer and all Affiliated Employers
was terminated. No such written consent shall be considered valid
unless (within the period which shall begin no more than ninety
(90) days before the annuity starting date (described below) and
end no less than thirty (30) days before the annuity starting date)
such Member has received a general written explanation of the
general features and values of each optional form of payment
available under the Plan, and has been informed in writing of his
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right to defer receipt of the distribution. Such written
explanation may be provided by mail, personal delivery, or other
means which would normally ensure or facilitate the continued
attention of the Member during the period prescribed below in which
the Member is to consent to the distribution or otherwise be deemed
to have elected to defer receipt (as set out below). Written
consent of the Member shall be invalid unless it is given after
receipt of the written explanation described above and not more
than ninety (90) days before the annuity starting date. The term
"annuity starting date" means the first day of the first period for
which an amount is paid pursuant to the settlement option elected
under the Plan.
In addition, subject to a designated Beneficiary's right to
elect the date of settlement in the case of a Member who dies prior
to receipt of any benefits under the Plan, a valid written consent
to distribution may be made by a Member without the necessity of
obtaining the consent of the Member's spouse or any other
Beneficiary.
If the Administrative Committee fails to receive the Member's
written consent to the distribution within 60 days after his
receipt of the written explanation described above, absent
circumstances beyond the control of the Administrative Committee,
the settlement shall be made within 60 days after the last day of
the Plan Year in which occurs the earlier of the date the Member
dies or attains the normal retirement age. Subject to application
of the forfeiture provisions of Section 4.6, the Account balance of
any Member described in the immediately preceding sentence shall
continue to be part of the Trust Fund and thus shall continue to be
allocated its proportionate share of any income, loss, appreciation
or depreciation pending distribution of such Account balance;
provided, however, no further Contributions shall be credited to
his Account.
If a distribution is one to which Section 401(a)(11) and
Section 417 of the 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:
(1) the Administrative Committee clearly informs
the Member that the Member 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
(2) the Member, after receiving the notice,
affirmatively elects a distribution.
If Members are permitted to direct the investment of their
Accounts in accordance with Section 4.10, a terminated Member shall
be entitled to direct the
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investment of his Account up until such time as investments are
liquidated, if applicable, and distribution of his entire vested
interest is made in accordance with Article VI. Thereafter, the
forfeitable portion of such Account shall be invested by the
Trustee subject to the provisions of Article IX and the Trust
Agreement.
(iv) DISTRIBUTION REQUIREMENTS: Capitalized terms used in this
Section 6.6(a)(iv) which are not otherwise defined in Article I are
defined in Section 6.6(a)(iv)(3). The requirements of this Section
6.6(a)(iv) shall apply to any distribution of a Member's or
Beneficiary's vested Benefit and will take precedence over any
inconsistent provisions of the Plan. All distributions required
under Article VI shall be determined and made in accordance with
Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of the
proposed Income Tax Regulations or any successor or final
regulation issued with respect thereto.
(1) REQUIRED BEGINNING DATE. Notwithstanding any other
provision of the Plan to the contrary, but subject to the next
paragraph, the Trustee must make full settlement or begin Benefit
payments to the Member not later than the 60th day after the latest
of the close of the Plan Year in which: (a) the Member attains the
normal retirement age set out in Article V, (b) occurs the tenth
(10th) anniversary of the year in which the Member commenced
participation in the Plan, or (c) the Member terminates employment
with the Employer. The entire vested Benefit payable to a Member
must be distributed or commence to be distributed no later than the
Required Beginning Date.
(2) MEMBER'S DEATH PRIOR TO RECEIPT OF ALL VESTED BENEFITS.
5-YEAR RULE. In the event that the Member dies
prior to payment or commencement of payment of Benefits
hereunder, such Member's entire vested Benefit shall be
distributed following the Member's date of death on, or as
soon as is administratively practicable following, the date
elected by the Member's Designated Beneficiary (but in any
event not later than December 31 of the calendar year in which
occurs the fifth (5th) anniversary of the date of the Member's
death) in the form of a lump sum payment. Any such election
must be made (and shall be deemed irrevocable) as of the
earlier of (i) December 31 of the calendar year in which
occurs the fifth (5th) anniversary of the Member's date of
death or (ii) the date on which payment must commence under
applicable provisions of this Section set out below.
Provided, however, if the present value of the Member's vested
VI-8
<PAGE>
Account balance (derived from Employer Contributions and any
Employee Contributions) which is distributable on account of
the death of the Member does not exceed $3,500, such Member's
entire vested Account balance shall be distributed in a lump
sum payment, which payment shall be made as soon as
practicable, but (absent circumstances beyond the control of
the Administrative Committee) in no event later than sixty
(60) days after the last day of the Plan Year in which the
Member's date of death occurs.
(3) DEFINITIONS.
(A) DESIGNATED BENEFICIARY. The individual who is designated
as the Beneficiary under the Plan in accordance with Section
401(a)(9) of the Code.
(B) BENEFIT.
(i) 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 allocated to the
Account as of dates in the valuation calendar
year after the valuation date, and decreased by
distributions made in the valuation calendar
year after the valuation date.
(ii) For purposes of paragraph (i)
immediately above, 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.
(C) DISTRIBUTION CALENDAR YEAR. A calendar year
for which a minimum distribution is required. For
distributions beginning before the Member's death, the
first Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains
the Member's Required Beginning Date. For distributions
beginning after the Member's death, the first
Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to the
5-year rule in subsection (iv)(2) above.
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<PAGE>
(D) REQUIRED BEGINNING DATE.
(i) GENERAL RULE. The Required Beginning
Date of a Member is the first day of April of
the calendar year following the calendar year
in which the Member attains age 70-1/2.
(ii) TRANSITIONAL RULES. The Required
Beginning Date of a Member who attains age
70-1/2 before January 1, 1988, shall be
determined in accordance with (1) or (2) below:
(1) NON-5-PERCENT OWNERS. The
Required Beginning Date of a Member who is
not a 5-percent Owner (defined 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 70-1/2 occurs.
The Required Beginning Date of a
Member who is not a 5-percent Owner who
attains age 70-1/2 during 1988 and who has
not retired as of January 1, 1989, is
April 1, 1990.
(2) 5-PERCENT OWNERS. The Required
Beginning Date of a Member who is a
5-percent Owner during any year beginning
after December 31, 1979, is the first day
of April following the later of:
(A) the calendar year in which the
Member attains age 70-1/2, or
(B) the earlier of the calendar year
with or within which ends the Plan Year in
which the Member becomes a 5-percent Owner, or
the calendar year in which the Member retires.
(iii) 5-PERCENT OWNER. A Member is treated as a
5-percent Owner for purposes of this Section if such
Member is a 5-percent Owner as defined in Section 416(i)
of the Code (determined in accordance with Section 416
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<PAGE>
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 such owner attains age 66-1/2 or
any subsequent Plan Year.
(iv) DISTRIBUTIONS BEGUN TO 5-PERCENT OWNER. Once
distributions have begun to a 5-percent Owner under this
Section, they must continue to be distributed, even if
the Member ceases to be a 5-percent Owner in a subsequent year.
(v) SPECIAL RULES REGARDING ELIGIBLE ROLLOVER DISTRIBUTIONS.
Effective for distributions made after December 31, 1992, the
Employer shall impose income tax withholding at a flat rate of
twenty percent (20%) on any "eligible rollover distribution"
(defined below) from the Plan that is not transferred directly to
an "eligible retirement plan" (defined below). The Employer shall
provide a notice to the recipient of a Plan distribution prior to
making the distribution, which notice shall generally explain the
tax withholding and rollover rules that apply to such distribution.
The requirements of this Section 6.6(v) shall be construed in
accordance with Section 401(a)(31) of the Code.
(1) Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a distributee's
election under this Section 6.6(v), a distributee may
elect, at the time and in the manner prescribed by the
Administrative Committee, to have any portion of an
eligible rollover distribution (other than, if
applicable, any portion attributable to the offset of the
Member's outstanding loan balance pursuant to the Plan's
loan procedures, if any) paid directly to an eligible
retirement plan specified by the distributee in a direct
rollover. The provisions of this Paragraph shall apply
only if the Member's eligible rollover distributions
during the Plan Year are reasonably expected to total
$200 or more or, if less than 100% of the Member's
eligible rollover distribution is to be a direct
rollover, the direct rollover is $500 or more. Prior to
any direct rollover pursuant to this Paragraph, the
distributee shall furnish the Administrative Committee
with a statement from the plan administrator or trustee
of the qualified plan, or the trustee or custodian of the
individual retirement account or annuity, to which the
direct rollover is to be transferred that such plan,
account or annuity is, or is intended to be, an eligible
retirement plan.
(2) DEFINITIONS.
VI-11
<PAGE>
(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
includible 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 Member's surviving spouse,
an eligible retirement plan is an individual
retirement account or individual retirement
annuity.
(3) DISTRIBUTEE: A distributee includes an Employee
or former Employee. In addition, the Employee's or
former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations
order, as defined in Section 414(p) of the Code and
Section 6.10 hereof, are distributees with regard to the
interest of the spouse or former spouse.
(4) DIRECT ROLLOVER: A direct rollover is a payment
by the Plan to the eligible retirement plan specified by
the distributee.
6.7 LOST MEMBERS OR BENEFICIARIES; ESCHEAT: If a former Member or
Beneficiary cannot be located within sixty (60) days of the date any benefits
payable under the Plan should be paid or commence to be paid pursuant to
Section 6.6, the former Member's entire Account may be forfeited and
allocated as any other forfeiture pursuant to applicable provisions of
Section 4.6. Notwithstanding the preceding sentence, if the former Member or
Beneficiary files a valid claim pursuant to Section 6.10 for the forfeited
benefits payable under the Plan, then (i) as soon as administratively
practicable, the forfeited benefits payable to such former Member or
Beneficiary shall be reinstated effective as of the date of receipt of the
claim and (ii) as soon as administratively practicable following the
Employer's Contribution (pursuant to applicable
VI-12
<PAGE>
provisions of Section 3.3) of an amount equal to the value of such forfeited
benefits, the value of the reinstated benefits shall be paid pursuant to
Section 6.6.
Should the Plan be joined as a part to any escheat proceedings concerning
rights to any benefits payable to a former Member or Beneficiary, the Plan
shall comply with any final judgment (of the appropriate court declaring that
title to any benefits payable under the Plan to a former Member or
Beneficiary vests in the State) by (i) treating the judgment as if it were a
claim filed by the former Member or Beneficiary on the effective date of the
final judgment and (ii) paying the State as if it were the former Member or
Beneficiary who filed the claim for benefits which the court determined to
have escheated to the State.
6.8 WITHDRAWALS BY MEMBERS: Subject to the conditions of this Section,
upon giving thirty (30) days' written notice to the Administrative Committee,
any Member who is suffering an immediate and heavy financial hardship (i)
because of expenses previously incurred, or necessary to be incurred, for
medical care described in Section 213(d) of the Code (not covered by
insurance or otherwise reimbursable from any other source) of the Member, the
Member's spouse or any other person who qualifies as a dependent of the
Member under Section 152 of the Code, (ii) due to lack of funds required to
pay expenses and/or other amounts required (excluding mortgage payments) to
effect the purchase of a principal residence for the Member, (iii) due to a
lack of funds required to make any payment required to avoid eviction from
the Member's principal residence, or (iv) due to lack of funds required to
make any payment required to avoid foreclosure on the Member's principal
residence, or (v) due to a lack of funds to pay tuition or related
educational fees for the next twelve (12) months of post-secondary education
for the Member, the Member's spouse or dependents (described above), shall be
entitled to withdraw from his Account, in the order of priority set out
below, an amount equal to THE LESSER OF (A) the amount needed to alleviate
the hardship or (B) the Distributable Amount (defined below) then credited to
the Member's Account. The requested withdrawal under clause (A) of the
immediately preceding sentence may also include an additional amount
necessary to pay any federal, state or local income taxes or penalties
(including additional taxes under Section 72(t) of the Code) that are
reasonably expected to result from the withdrawal. For purposes of clause
(B) of the second preceding sentence, in accordance with Section
1.401(k)-1(d)(2)(ii) of the Income Tax Regulations, the Distributable Amount
shall be equal to the Member's total Elective Contributions credited to his
Employer Nonforfeitable Contributions Account as of the date of withdrawal;
provided, however, the Distributable Amount may be increased by any Qualified
Non-Elective Contributions and net earnings and appreciation on Elective
Contributions and Qualified Non-Elective Contributions that were credited to
the Member's Nonforfeitable Contributions Account as of December 31, 1988.
The Distributable Amount shall not include any (i) Qualified Non-Elective
Contributions and (ii) earnings and appreciation, that were credited to the
Member's Nonforfeitable Contributions Account after December 31, 1988.
Notwithstanding the immediately preceding paragraph, effective as of
October 1, 1992, in the event that the amount available to the Member for
withdrawal from his Non-Forfeitable Contributions Account is not sufficient
to relieve his financial hardship that is attributable to a
VI-13
<PAGE>
lack of funds to pay tuition or related educational fees for the next twelve
(12) months of post-secondary education for the Member, the Member's spouse
or dependents then, in that event only, the Member may withdraw the
additional amount needed to satisfy the hardship from the vested portion of
his Employer Contributions Account and Rollover Account, if any. The
requested withdrawal may also include an additional amount necessary to pay
any federal, state or local income taxes or penalties (including additional
taxes under Section 72(t) of the Code) that are reasonably expected to result
from the withdrawal.
If a withdrawal is made at a time when the Member is not fully vested in
his Employer Contributions Account and such Member can increase his vested
percentage in his Employer Contributions Account, the Member's vested
interest in his Employer Contributions Account at any relevant time will be
determined under the following formula: X = P(AB + D)-D. For purposes of
applying the formula: P is the vested percentage at the relevant time; AB is
the Employer Contributions Account balance at the relevant time; and D is the
amount of the withdrawal.
A Member shall not be considered as suffering an immediate and heavy
financial hardship unless such Member submits to the Administrative Committee
(i) written evidence (satisfactory to the Administrative Committee) of such
hardship and the amount needed to alleviate the hardship (ii) and any other
written agreement or other documentation which the Administrative Committee
deems to be necessary or appropriate in order to ensure that the Member
understands and will comply with the requirements of this Section. Absent
actual knowledge to the contrary, any Member shall be deemed to have met the
requirements of the immediately preceding sentence if the Member complies
with the requirements of the next sentence and if he submits a written
request in which he specifically identifies the hardship and attaches a
photocopy of (i) bills for medical care (described in the first paragraph of
this Section) previously incurred or physician's reports and other evidence
of medical care to be incurred, (ii) a contract to purchase property which he
represents to be his principal residence, (iii) a notice or other evidence of
imminent eviction from property which the Member represents to be his
principal residence, (iv) a notice or other evidence of imminent foreclosure
action with respect to property which the Member represents to be his
principal residence, (v) enrollment or registration forms or other evidence
of tuition and related educational fees due for the next twelve (12) months
of post-secondary education, (vi) other evidence of the claimed hardship and
the amount of funds required to alleviate such hardship.
In addition, the Member must represent in writing that (i) his financial
need cannot be relieved through reimbursement or compensation by insurance or
otherwise, (ii) his financial need cannot be relieved through liquidation of
any of his remaining assets (or any remaining assets of his spouse or minor
children that are readily available to him) without such liquidation itself
causing an immediate and heavy financial hardship, (iii) his financial need
cannot be relieved through his cessation of any contributions authorized by
such Member to the Plan, (iv) the Member has received or applied for all
other distributions available to him from plans maintained by the Employer
and any other employer, and such distributions have not or will not
VI-14
<PAGE>
relieve the claimed financial hardship, and (v) such Member has received or
applied for all nontaxable loans available to him from plans maintained by
the Employer (or any other employer) and from commercial sources, and such
loans have not or will not relieve the claimed financial hardship. For
purposes of this paragraph, a need cannot reasonably be relieved by one of
the actions listed in items (i) through (v) above if the effect would be to
increase the amount of the need. For example, the need for funds to purchase
a principal residence cannot reasonably be relieved by a Plan loan if the
loan would disqualify the employee from obtaining other necessary financing.
The Administrative Committee shall have no duty or obligation to
independently investigate or verify the truth or accuracy of any
representation of the Member or the authenticity or accuracy of any
documentary evidence provided by the Member and, absent actual knowledge to
the contrary, the Administrative Committee shall assume that any such
representation is true and correct and any such documentary evidence is
authentic and correct.
Any withdrawal hereunder shall result in suspension (for a period of 12
months after the Member's receipt of amounts withdrawn hereunder) of Elective
Contributions and any other elective deferrals (described in Section
402(g)(3) of the Code) and any employee contributions described in Section
401(m) of the Code under any other plan of deferred compensation maintained
by the Employer and/or any Affiliated Employer. The term "any other plan of
deferred compensation" as used in the immediately preceding sentence shall
mean any plan of deferred compensation maintained by the Employer or any
Affiliated Employer, including stock option, stock purchase and similar
plans, as well as a cash or deferred arrangement under a cafeteria plan
described in Section 125 of the Code, but excluding health or welfare benefit
plans and excluding the mandatory contributions portion of any defined
benefit plan maintained by the Employer or any Affiliated Employer.
Accordingly, as a prior condition of any hardship withdrawal, the Member
shall execute any written agreement or other document that the Administrative
Committee deems necessary to ensure that during the one-year suspension
period, the Member is on notice and will comply with requirements of Section
401(k) of the Code.
In addition, under the Plan and any other plan maintained by the Employer
and/or any Affiliated Employer, the Member may not authorize Elective
Contributions or any other elective deferrals (described in Section 402(g)(3)
of the Code) for the Member's taxable year next following the taxable year of
receipt of the amount withdrawn hereunder which are in excess of the
applicable dollar limit under Section 402(g) of the Code for such next
taxable year, less the amount of such Member's Elective Contributions and any
other elective deferrals (described above) for the Member's taxable year of
receipt of the amount withdrawn hereunder.
No withdrawal hereunder shall result in any forfeiture of a Member's
vested Account balance and no repayment of amounts withdrawn in order to
wholly or partially restore a withdrawing Member's Account shall be permitted.
VI-15
<PAGE>
Subject to Section 4.10, if applicable, for the purposes of allocating
appreciation or depreciation of the Trust Fund and income or loss of the
Trust Fund, such withdrawal shall be subtracted from the Member's Account
balance at the beginning of the applicable accounting period in which the
withdrawal is made.
A Member shall not be allowed to make more than one withdrawal from his
Account under this Section during any given Plan Year.
Effective for distributions made after December 31, 1992, the Employer
shall impose income tax withholding at a flat rate of twenty percent (20%) on
any eligible rollover distribution (including a hardship withdrawal) from the
Plan that is not transferred directly to an eligible retirement plan in
accordance with Section 6.6(v). Recipients of distributions that are not
transferred may not elect out of the withholding requirement for such
distributions. The Employer shall provide a notice to the recipient of a
Plan distribution, prior to making the distribution, which notice shall
generally explain the tax withholding and rollover rules that apply to such
distributions. The requirements of this paragraph shall be construed in
accordance with Section 401(a)(31) of the Code.
6.9 CLAIMS PROCEDURE FOR BENEFITS: When a benefit is due under the Plan,
a claim should be submitted to the personnel office of the Employer by which
the Member is or was employed. Under normal circumstances a final decision
on a claimant's request for benefits shall be made within ninety (90) days
after receipt of the claim. However, if special circumstances require an
extension of time to process a claim, a final decision may be deferred up to
one hundred eighty (180) days after receipt of the claim if, prior to the end
of the initial ninety (90) day period, the claimant is furnished with written
notice of the special circumstances requiring the extension and the
anticipated date of a final decision. If the claim is denied, within the
applicable period of time set out above, the claimant shall receive written
notification of the denial, which notice shall set forth the specific reasons
for the denial, the relevant Plan provisions on which the denial is based,
and the claims review procedure under the Plan. In the event that a claim is
denied, or in the event that no action is taken on the claim within the
above-described period(s) of time, the following procedure shall be used:
(a) First, in the event that the claimant does not timely
receive the above-described written notification, the claimant's
request for benefits shall be deemed to be denied as of the last
day of the relevant period and the claimant shall be entitled to a
full review of his claim in accordance with the following
provisions of this Section.
(b) Second, a claimant is entitled to a full review of his
claim after actual or constructive notification of a denial. A
claimant desiring a review must make a written request to the
Administrative Committee requesting such a review, which may
include whatever comments or arguments the claimant wishes to
submit. Incident to the review, the claimant may represent himself
or appoint a representative to do so, and will have the right to
VI-16
<PAGE>
inspect all documents pertaining to the issue. The Administrative
Committee, in its sole discretion, may schedule any meeting(s) with
the claimant and/or the claimant's representative that it deems
necessary or appropriate to facilitate or expedite its review of a
denied claim.
A request for a review must be filed with the Administrative Committee within
ninety (90) days after the denial of the claim for benefits was actually or
constructively received by the claimant. If no request is received within the
90-day time limit, the denial of benefits will be final. However, if a
request for review of a denied claim is timely filed, the Administrative
Committee must render its decision under normal circumstances within sixty
(60) days of its receipt of the request for review. In special circumstances
the decision may be delayed if, prior to expiration of the initial 60-day
period, the claimant is notified of the extension, but must in any event be
rendered no later than one hundred twenty (120) days after receipt of the
request. If the decision on review is not furnished to the claimant within
the applicable time period(s) set above, the claim shall be deemed denied on
the last day of the relevant period. All decisions of the Administrative
Committee shall be in writing and shall include specific reasons for whatever
action has been taken, including the specific Plan provisions on which the
decision is based.
6.10 DISTRIBUTIONS TO DIVORCED SPOUSE: Subject to the provisions of
Section 12.3 which pertain to qualified domestic relations orders ("QDRO")
and pursuant to the QDRO procedures of the Plan, in the event that the
Administrative Committee receives a domestic relations order that it
determines to be a valid QDRO, and if such QDRO provides that distribution of
vested benefits to an alternate payee described therein is not to commence or
be made immediately, but the QDRO provides for the apportionment of such
benefits to be made immediately, the Administrative Committee shall establish
a separate account under the Plan for the alternate payee. Subject to
Section 12.3 and the QDRO procedures of the Plan, if the Administrative
Committee receives a domestic relations order that it determines to be a
valid QDRO, and if the QDRO provides that distribution of vested benefits to
an alternative payee described therein is to commence or be made immediately,
then the Administrative Committee shall direct the Trustee to effect
distribution to the alternate payee who, for the purpose of effecting such
distribution, shall be considered and treated as any other Member who is
entitled to receive a benefit payable under the Plan.
The Administrative Committee shall comply with the terms and provisions
of any QDRO, including orders which require distributions to an alternate
payee prior to a Member's "earliest retirement age" as such term is defined
in Section 206(d)(3)(E)(ii) of the Act and Section 414(p)(4)(B) of the Code,
and shall establish appropriate procedures to effect the same.
If any such distribution pursuant to a QDRO is made at a time when the
Member is not fully vested in his Employer Contributions Account and the
Member can increase his vested percentage in his Employer Contributions
Account, the Member's vested interest in his Employer Contributions Account
shall be determined by the following formula: X = P(AB + D)-D. For purposes
of applying the formula: P is the vested percentage at the relevant time;
VI-17
<PAGE>
AB is the Employer Contributions Account balance at the relevant time; and D
is the amount of the distribution. For purposes of allocating income or loss
and appreciation or depreciation of the Trust Fund, such distribution shall
be subtracted from the Member's Account balance at the beginning of the Plan
Year (or such other accounting period prescribed by the Administrative
Committee) in which the distribution is made.
6.11 SPECIAL TRANSITION RULE: Notwithstanding any other provisions of the
Plan to the contrary, if the Plan is retroactively effective with respect to
any Plan Year (or other applicable accounting period) of a Prior Plan, the
benefits payable under the Plan to any Member who terminated employment
during such Plan Year (or other applicable accounting period) shall be
determined with reference to the special transition rules of Sections 1.3,
4.12 and 12.5.
VI-18
<PAGE>
ARTICLE VII
TOP-HEAVY PLAN PROVISIONS
Capitalized terms used in this Article VII which are not otherwise
defined in Article I of the Plan are defined in Section 7.4.
7.1 GENERAL RULES FOR DETERMINING TOP-HEAVY STATUS: In order to
determine whether the Plan is Top-Heavy for a Plan Year, it is necessary to
determine (i) whether the Employer must be aggregated with other employers
which will be treated as a single employer, (ii) what the Determination Date
is for the Plan Year, (iii) which Employees or former Employees or other
individuals who perform or performed services as owners or employees of any
Affiliated Employer which is not an Employer (whether or not Qualified Plan
participants) are, or formerly were, Key Employees, (iv) which former
Employees or other individuals who performed services as owners or employees
of any Affiliated Employer which is not an Employer (whether or not Qualified
Plan participants) have not performed any service for the Employer (or any
Affiliated Employer which is not an Employer) at any time during the
five-year period ending on the Determination Date, (v) if, at any time during
the five-year period ending on the Determination Date, the Employer and the
Affiliated Employers maintain or maintained Qualified Plans (whether or not
terminated) in addition to the Plan, which Qualified Plans (including the
Plan) are required or permitted to be aggregated to determine Top-Heavy
status and (vi) the present value of accrued benefits (including
distributions made during the plan year of the Qualified Plan(s) and the four
preceding plan years of the Qualified Plan(s)) of Key Employees, former Key
Employees and non-Key Employees. For this purpose, the Employer and all
Affiliated Employers must be treated as one employer and the Employees or
former Employees or other individuals who perform or performed services as
owners or employees of any Affiliated Employer which is not an Employer
(whether or not participants in all Qualified Plans maintained by the
Employer and the Affiliated Employers) must be categorized as Key Employees,
former Key Employees or non-Key Employees. Former Key Employees are non-Key
Employees and are excluded entirely from the calculation used to determine if
a plan or aggregation group of plans is Top-Heavy.
With respect to plan years beginning after December 31, 1984, the accrued
benefit of any individual who has not performed any services for the Employer
or any Affiliated Employer at any time during the five-year period ending on
the Determination Date shall be excluded from the calculation used to
determine if the plan or aggregation group of plans is Top-Heavy. In
addition, incident to testing whether any such Plan or group of plans is
Top-Heavy, an individual's present value of accrued benefits is used only
once. All Qualified Plans (of the Employer and the Affiliated Employers) in
which a Key Employee participates, and certain other Qualified Plans, must be
aggregated to form the Required Aggregation Group. Other Qualified Plans may
be aggregated with the Required Aggregation Group to form a Permissive
Aggregation Group. Once aggregated, all Qualified Plans that are required to
be aggregated will be Top-Heavy Plans only if the aggregation group is
Top-Heavy. No Qualified Plan in the
VII-1
<PAGE>
Required Aggregation Group will be Top-Heavy if the Required Aggregation
Group is not Top- Heavy. If a Permissive Aggregation Group is Top-Heavy,
only those Qualified Plans which are part of the Required Aggregation Group
shall be treated as Top-Heavy Plans subject to the provisions of this Article
VII.
7.2 COMPUTATION OF PRESENT VALUE OF ACCRUED BENEFITS:
(a) DEFINED CONTRIBUTION PLAN(S): The present value of
accrued benefits as of the Determination Date for any individual
who is a participant in a Qualified Plan which is (or is treated
as) a defined contribution plan is the sum of (i) the account
balance as of the most recent valuation date occurring within a
12-month period ending on the Determination Date, and (ii) an
adjustment for contributions due as of the Determination Date. In
the case of such a Qualified Plan not subject to the minimum
funding requirements of Section 412 of the Code, the adjustment in
(ii) is generally the amount of any contributions actually made
after the valuation date but on or before the Determination Date.
However, in the first plan year of the Qualified Plan, the
adjustment in (ii) should also reflect the amount of any
contributions made after the Determination Date that are allocated
as of a date in that first plan year of the plan. In the case of a
Qualified Plan that is a defined contribution plan and is subject
to the minimum funding requirements, the account balance in (i)
should include contributions that would be allocated as of a date
not later than the Determination Date, even though those amounts
are not yet required to be contributed. Thus, the account balance
will include contributions waived in prior years as reflected in
the adjusted account balance and contributions not paid that
resulted in a funding deficiency. The adjusted account balance is
described in Rev. Rul. 78-223, 1978-1 C.B. 125. Also, the
adjustment in (ii) should reflect the amount of any contribution
actually made (or due to be made) after the valuation date but
before the expiration of the extended payment period in Section
412(c)(10) of the Code. The account balance of any individual who
has not performed services for the Employer at any time during the
5-year period ending on the Determination Date shall be disregarded.
(b) DEFINED BENEFIT PLANS: The present value of an accrued
benefit under a Qualified Plan that is a defined benefit plan as of
the Determination Date must be determined as of the most recent
valuation date which is within a 12month period ending on the
Determination Date. In the first plan year of a plan, the accrued
benefit for a current participant must be determined either (i) as
if the individual terminated service as of the Determination Date
(i.e., the last day of plan year of the plan) or, (ii) as if the
individual terminated service as of the valuation date, but taking
into account the estimated accrued benefit as of the Determination
Date. However, for any other year, the accrued benefit for a
current participant must be determined as if the individual
terminated service as of such valuation date. For this purpose,
the valuation date must be the same
VII-2
<PAGE>
valuation date used for computing plan costs for minimum funding,
regardless of whether a valuation is performed that year. For
purposes of this paragraph, present value shall be determined with
reference to the interest rate and mortality table used to
determine Actuarial Equivalent optional benefits under the defined
benefit plan. The accrued benefit of a Member (other than a Key
Employee) shall be determined (i) under the method which is used
for accrual purposes for all plans of the Employer or (ii) if there
is no method described in clause (i), as if such benefit occurred
not more rapidly than the slowest accrual rate permitted under
Section 411(b)(1)(c) of the Code. The accrued benefit of any
individual who has not performed services for the Employer at any
time during the 5-year period ending on the Determination Date
shall be disregarded.
(c) EMPLOYEE CONTRIBUTIONS: For purposes of determining the
present value of accrued benefits in either a defined benefit or
defined contribution plan, the accrued benefits attributable to
employee contributions are considered to be part of the accrued
benefits whether such contributions are mandatory or voluntary.
However, the amounts attributable to deductible employee
contributions are not considered to be part of the accrued benefits.
(d) DISTRIBUTIONS: For purposes of determining the present
value of accrued benefits, distributions made within the plan year
of the Qualified Plan that includes the Determination Date or
within the four preceding plan years of such plan are added to the
present value of accrued benefits in testing for topheaviness.
However, in the case of distributions made after the valuation date
and prior to the Determination Date, such distributions are not
included as distributions in Section 416(g)(3)(A) of the Code to
the extent that such distributions are included in the present
value of the accrued benefits as of the valuation date. In the
case of the distribution of an annuity contract, the amount of such
distribution is deemed to be the current actuarial value of the
contract, determined on the date of the distribution. Benefits
paid on account of death are treated as distributions hereunder to
the extent such benefits do not exceed the present value of accrued
benefits immediately prior to death.
(e) ROLLOVER CONTRIBUTIONS AND PLAN-TO-PLAN TRANSFERS: With
respect to proper treatment of rollover contributions and
plan-to-plan transfers incident to determining the present value of
accrued benefits, it must first be determined whether the rollovers
and plan-to-plan transfers are unrelated (both initiated by the
employee and made from a plan maintained by one employer to a plan
maintained by another employer) or whether they are related (a
rollover either not initiated by the employee or made to a plan
maintained by the same employer). For purposes of determining
whether the employer is the same employer, all employers aggregated
under Section 414(b), (c), (m) or (o) of the Code are treated as
the same employer. Thus, the Employer and all Affiliated Employers
are to be treated as a single employer. In the case of unrelated
VII-3
<PAGE>
rollovers, (i) the plan providing the distributions shall count the
distribution as a distribution under Section 416(g)(3)(B) of the
Code and (ii) the plan accepting the rollover shall not consider
the rollover part of the accrued benefit if such rollover was
accepted after December 31, 1983, but must consider it part of the
accrued benefit if such rollover was accepted prior to January 1,
1984. In the case of related rollovers, the plan providing the
rollover shall not count the rollover as a distribution under
Section 416(g)(3)(B) of the Code and the plan accepting the
rollover counts the rollover in the present value of the accrued
benefits. Rules for related rollovers do not depend on whether the
rollover was accepted prior to January 1, 1984.
7.3 SPECIAL RULES FOR PLAN YEARS THAT PLAN IS TOP-HEAVY: Notwithstanding
any other provision of the Plan to the contrary, if the Plan is Top-Heavy for
any Plan Year beginning after December 31, 1983, then the following
provisions shall be applicable and shall supersede and override any
conflicting provision of the Plan for such Plan Year:
(a) VESTING: Vesting of accrued benefits (described in
Section 411(a)(7) of the Code) shall be determined in accordance
with the vesting table set out in Section 6.4.
(b) TOP-HEAVY COMPENSATION: Considered Compensation and Top
Heavy Compensation for any one Member for such Plan Year in excess
of $200,000 or, for Plan Years beginning after December 31, 1993,
$150,000 (as adjusted at such time and in such manner as may be
prescribed in Section 401(a)(17) of the Code), shall be disregarded
for any Plan Year in which the Plan is Top-Heavy.
(c) MINIMUM ALLOCATIONS: Subject to the following provisions
hereof, for any Plan Year in which the Plan is Top-Heavy, each
Member shall receive an allocation of the Employer Contribution and
forfeitures, if any, for the Plan Year in an amount equal to the
lesser of (i) three percent (3%) of the Members' Top-Heavy
Compensation and (ii) the largest percentage of Top-Heavy
Compensation provided on behalf of any Key Employee. The minimum
allocation shall be made without regard to any contribution to
Social Security. To the extent permitted under applicable law or
other authority issued thereunder by the appropriate governmental
authority, in determining whether an allocation of Employer
Contributions equal to the required percentage of Top-Heavy
Compensation meets the requirements of this Section, all benefits
allocated under defined contribution plans required to be
aggregated under Section 7.1 shall be considered benefits allocated
under the Plan and, with respect to Plan Years beginning after
December 31, 1984, any Employer Contribution attributable to a
salary reduction or similar arrangement shall be taken into
account. Accordingly, for the purpose of clarity and without
limiting the scope of the immediately preceding sentence,
VII-4
<PAGE>
(i) with respect to Plan Years beginning after December 31, 1988,
any elective deferral (described in Section 402(g)(3) of the Code)
under the Plan or any plan described in the immediately preceding
sentence on behalf of any Member who is not a Key Employee shall
not be treated as an Employer Contribution for purposes of this
Section, but will be treated as an Employer Contribution for
purposes of determining the percentage at which Contributions are
made for the Key Employee with the highest percentage; (ii)
qualified nonelective contributions (described in Section
401(m)(4)(C) of the Code) under the Plan or any plan described in
the immediately preceding sentence on behalf of any Member shall be
treated as an Employer Contribution for purposes of this Section;
and (iii) with respect to Plan Years beginning after December 31,
1988, any matching contribution (described in Section 401(m)(4)(A)
of the Code) under the Plan or any plan described in the
immediately preceding sentence on behalf of any Member who is not a
Key Employee shall not be treated as an Employer Contribution for
purposes of this Section to the extent such matching contribution
is treated as an elective deferral for purposes of satisfying the
ADP test of Section 401(k)(3) of the Code or a matching
contribution for purposes of satisfying the ACP of Section
401(m)(2) of the Code.
Notwithstanding the preceding paragraph, in the event that an
Employee is a Member of the Plan and another Qualified Plan which
is a defined benefit plan maintained by the Employer and/or any
Affiliated Employer, such Employee shall not receive both the
minimum benefit provided hereunder and the minimum benefit provided
under the defined benefit plan on account of such plans being
Top-Heavy. Instead, the aggregate minimum benefit requirement for
any Employee who is a Member under the Plan, and any defined
benefit plan described in the preceding sentence, shall be provided
under the defined benefit plan, which defined benefit minimum shall
be offset by the value of the Member's vested and nonforfeitable
interest in his accrued benefit derived from Employer Contributions
under the Plan. If the defined benefit minimum will be paid in the
form of an annuity, the offset shall be effected by converting the
Member's vested accrued benefit derived from Employer Contributions
under the Plan into an annuity (payable in the same form and
commencing at the same time as the defined benefit minimum) which
can be provided by the Member's vested accrued benefit derived from
Employer Contributions using the interest rate and mortality table
for immediate annuities published by the Pension Benefit Guaranty
Corporation as in effect on the date the defined benefit minimum is
to commence. If the defined benefit minimum is paid in the form of
a lump sum, the lump sum value of the Member's accrued benefit
derived from Employer Contributions under the Plan shall be offset
against the single sum value of the defined benefit minimum
calculated in accordance with the applicable provisions of the
defined benefit plan. For purposes of this Section, a Member's
accrued benefit derived from Employer Contributions shall include
any prior withdrawals or distributions attributable thereto.
VII-5
<PAGE>
(d) SPECIAL RULES: For any Plan Year that the Plan is (i)
Top-Heavy and the additional minimum benefit described in Section
416(h) of the Code is not provided or (ii) Super Top-Heavy, the
limitations of Section 4.3(d)(iv) and (v) shall be applied by
substituting "100 percent" for "125 percent" wherever it appears
therein. Such substitution shall not cause a reduction in any
account balances attributable to Contributions for a Plan Year
prior to the Plan Year in which the Plan is Top-Heavy or Super
Top-Heavy.
7.4 DEFINITIONS: For purposes of this Article VII, the following terms
shall be defined as follows:
(a) AFFILIATED EMPLOYER: "Affiliated Employer" shall mean the
Affiliated Employer described in Article I of the Plan.
(b) DETERMINATION DATE: "Determination Date" shall mean with
respect to a single Qualified Plan, (i) the last day of the
preceding plan year of the Qualified Plan, or (ii) in the case of
the first plan year of the Qualified Plan, the last day of such
plan year. When aggregating Qualified Plans, the value of accrued
benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year.
(c) EMPLOYEE: "Employee" shall mean the Employee described in
Article I of the Plan.
(d) EMPLOYER: "Employer" shall mean the Employer described in
Article I of the Plan.
(e) KEY EMPLOYEE: "Key Employee" shall mean with respect to
any Qualified Plan, any Employee or former Employee (or any other
person (i) who is or was employed by any Affiliated Employer or
(ii) who owns or owned any interest in any Affiliated Employer and
who derives or derived earned income from such Affiliated Employer
or would have derived earned income had such Affiliated Employer
had net profits), including any beneficiary described below, who,
at any time during the Qualified Plan's plan year containing the
Determination Date or any of the four (4) preceding plan years of
such Qualified Plan, is:
(i) An officer of any Employer or any Affiliated
Employer treated separately, if such individual earns
annual compensation for a plan year (for services
rendered to the
VII-6
<PAGE>
Employer and any Affiliated Employer during the relevant
plan year of the Qualified Plan) greater than fifty
percent (50%) of the amount in effect under Section
415(b)(1)(A) of the Code as in effect for the calendar
year in which such plan year ends for plan years
beginning after December 31, 1986 (one hundred fifty
percent (150%) of the maximum dollar limitation set forth
under Section 415(c)(1)(A) of the Code as in effect for
the calendar year in which such plan year ends for plan
years beginning prior to January 1, 1987); provided,
however, subject to the last paragraph of this Section
7.4(e), no more than fifty (50) individuals who are or
were Employees of the Employer and/or employees of an
Affiliated Employer or, if less, the greater of three (3)
individuals who are Employees of the Employer and/or
employees of an Affiliated Employer or ten percent (10%)
of all such individuals, shall be considered Key
Employees by reason of being officers;
(ii) One of the ten (10) individuals owning (or
considered as owning within the meaning of Section 318 of
the Code) both more than a 1/2 percent interest and the
largest interests in the Employer or any Affiliated
Employer, treated separately, if such individual earns
annual compensation for a plan year (for services
rendered to the Employer and any Affiliated Employer
during the relevant plan year of the Qualified Plan) more
than the maximum dollar limitation set forth under
Section 415(c)(1)(A) of the Code as in effect for the
calendar year in which such plan year ends; provided,
however, if two such individuals have the same interest
in the Employer or Affiliated Employer, treated
separately, the individual earning the greater
compensation (for purposes of this Section 7.4(e)(ii))
shall be treated as having a larger interest;
(iii) Any individual owning (or considered as
owning within the meaning of Section 318 of the Code)
more than five percent (5%) of the outstanding stock of
any corporate Employer or any corporate Affiliated
Employer treated separately, or stock possessing more
than five percent (5%) of the total combined voting power
of all stock of any corporate Employer or any corporate
Affiliated Employer, treated separately, or, if the
Employer or Affiliated Employer is not a corporation, any
individual owning more than five percent (5%) of the
capital or profits interest of such Employer, or
Affiliated Employer treated separately; or
VII-7
<PAGE>
(iv) Any individual whose aggregate annual
compensation for a plan year (for services rendered to
the Employer and any Affiliated Employer during the
relevant plan year of the Qualified Plan) is more than
$150,000 and who would be described in Section
7.4(e)(iii) if one percent (1%) were substituted for five
percent (5%) therein.
Any Beneficiary of an Employee who is a Key Employee or a former Key
Employee and any Beneficiary of any other individual described above who is a
Key Employee or former Key Employee shall be treated as a Key Employee or
former Key Employee, whichever is applicable. Similarly, any Beneficiary of
an Employee who is a former non-Key Employee and any Beneficiary of any other
individual described above who is a former non-Key Employee shall be treated
as a former non-Key Employee.
For purposes of applying Section 318 of the Code to the provisions of
this Section, subparagraph (C) of Section 318(a)(2) of the Code shall be
applied by substituting five percent (5%) for fifty percent (50%). For
purposes of this Section, annual compensation for the plan year of the
Qualified Plan shall include all remuneration described in Treasury
Regulation Section 1.415-2(d) and any successor thereto, but including
amounts contributed by the Employer or Affiliated Employer pursuant to a
salary reduction agreement which are excludable from the individual's gross
income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b)
of the Code.
In the event that the number of Key Employees determined under
Subsection (e)(i) of this Section would, but for the numerical limitations of
that Subsection, exceed the number determined under that Subsection, then
those officers having the largest annual compensation during the plan year of
the Qualified Plan and the four (4) preceding plan years of such Qualified
Plan shall be the Key Employees. Such term shall not include any officer or
employee of an entity referred to in Section 414(d) of the Code.
Notwithstanding any provision hereof to the contrary, determination of who is
a Key Employee shall be made in accordance with Section 416(i)(1) of the Code.
(f) MEMBER: "Member" shall mean any Member described in Article I of
the Plan except that if the Plan is Top-Heavy, in addition to Employees who
would otherwise be considered to be Members under the Plan, the following
Employees shall be considered to be Members solely for purposes of
determining the individuals entitled to share in the minimum benefit
described in Section 7.3(c): (i) Members who have not separated from service
at the end of the Plan Year, (ii) individuals who are otherwise eligible to
participate in the Plan but who have failed to complete 1000 hours of service
(or the equivalent) during the Plan
VII-8
<PAGE>
Year, (iii) individuals who are otherwise eligible to participate in the Plan
but who declined to make any required Contributions to the Plan or, in the
case of a cash or deferred arrangement, any elective contributions permitted
or required under the Plan, or (iv) individuals who are eligible to
participate in the Plan but who have been excluded from the Plan because each
such individual's Considered Compensation is less than a stated amount.
(g) PERMISSIVE AGGREGATION GROUP: "Permissive Aggregation Group" shall
mean a Required Aggregation Group plus one or more Qualified Plans which are
not part of the Required Aggregation Group but which satisfy the requirements
of Section 401(a)(4) and 410 when considered together with the Required
Aggregation Group.
(h) QUALIFIED PLAN: "Qualified Plan" shall mean the Plan and any other
defined contribution plan (whether or not terminated) described in Section
414(i) of the Code and/or any defined benefit plan (whether or not
terminated) described in Section 414(j) of the Code which is/are (or with
respect to any such plan which has been terminated, was/were) maintained at
any time during the five-year period ending on the Determination Date by the
Employer and/or the Affiliated Employers and intended to meet the
requirements of Section 401(a) of the Code; provided, however, a simplified
employee pension plan described in Section 408(k) of the Code shall be
treated as a defined contribution plan.
(i) REQUIRED AGGREGATION GROUP: "Required Aggregation Group" shall mean
a group of Qualified Plans, which group shall include each Qualified Plan
maintained by the Employer and/or the Affiliated Employers in which a Key
Employee participates in the relevant plan year including the Determination
Date, or any of the four preceding plan years, and which group shall exclude
any Qualified Plan in which a Key Employee does not participate at any time
during the plan year, or any of the four preceding plan years, unless during
such period such Qualified Plan enables any Qualified Plan in which a Key
Employee participates to meet the requirements of Sections 401(a)(4) or 410
of the Code.
(j) SUPER TOP-HEAVY: "Super Top-Heavy" shall mean Top-Heavy except for
purposes of this Section 7.4(j), "ninety percent (90%)" shall be substituted
for "sixty percent (60%)" wherever the latter percent appears in Section
7.4(k).
(k) TOP-HEAVY: "Top-Heavy" shall mean with respect to any Qualified
Plan, which is not included in any aggregation group, any such Qualified Plan
whereunder, as of the Determination Date, the sum of the present value of the
accrued benefits for Key Employees is more than sixty percent (60%) of the
sum of the present value of the accrued benefits of all Employees of the
Employer
VII-9
<PAGE>
plus, if applicable, all employees (and self-employed individuals) of all
Affiliated Employers, excluding former Key Employees, and shall mean with
respect to any aggregation group, Required Aggregation Group or Permissive
Aggregation Group, whereunder as of the Determination Date, the sum of the
present value of the accrued benefits for Key Employees is more than sixty
percent (60%) of the sum of the present value of accrued benefits of all
Employees of the Employer plus all employees (and self-employed individuals)
of all Affiliated Employers, excluding former Key Employees. For purposes of
this Section 7.4(k), the accrued benefit of any individual who is not a Key
Employee, but who is a former Key Employee will be disregarded, and, with
respect to Plan Years beginning after December 31, 1984, the accrued benefit
of any individual described in this Section 7.4(k) who has not performed any
service for the Employer and any Affiliated Employer(s) maintaining any
Qualified Plan at any time during the five-year period ending on the
Determination Date shall be disregarded. In addition, when aggregating
Qualified Plans, the value of accrued benefits will be calculated with
reference to the Determination Dates that fall within the same calendar year.
(l) TOP-HEAVY COMPENSATION: "Top-Heavy Compensation" shall mean with
respect to Plan Years beginning on or after January 1, 1989, (i) the wages
(as defined in Section 3401(a) of the Code for purposes of income tax
withholding at the source) that are paid (within the meaning of Section
1.415-2(d)(3) and (4) of the Income Tax Regulations) to the Employee by the
Employer during the Plan Year for services performed and reportable on the
Employee's form W-2 (or its successor), determined without regard to any
rules that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the exception
for agricultural labor in Section 3401(a)(2) of the Code), plus any reduction
under a compensation deferral agreement under (a) a plan described in Section
401(k) or 408(k) of the Code, (b) an annuity described in Section 403(b) of
the Code or (c) an election under a cafeteria plan described in Section 125
of the Code, (ii) that is actually paid to or is includible in the gross
income of the Member within the relevant Plan Year, or would have been so
paid or includible but for a reduction described in clause (i) immediately
above, and (iii) that does not exceed $200,000 or, for Plan Years beginning
after December 31, 1993, $150,000 (as adjusted at such time and in such
manner as may be prescribed in Section 401(a)(17) of the Code). With respect
to Plan Years beginning prior to January 1, 1994, "Top Heavy Compensation"
shall mean compensation as defined in Section 1.415-2(d)(1) and (2) of the
Income Tax Regulations.
VII-10
<PAGE>
ARTICLE VIII
ADMINISTRATIVE COMMITTEE
8.1 APPOINTMENT, TERM OF SERVICE AND REMOVAL: The Board shall appoint an
Administrative Committee of not less than two (2) persons, the members of
which shall serve until their resignation, death or removal. Any member of
the Administrative Committee may resign at any time by mailing or delivering
written notice of such resignation to the Board. Any member of the
Administrative Committee may be removed by the Board, with or without cause,
at any time by mailing or delivering written notice to such person at the
address set forth in the records of the Employer. Vacancies in the
Administrative Committee arising by resignation, death, removal or otherwise
shall be filled by such persons as may be appointed by the Board.
8.2 POWERS: The Administrative Committee shall be a fiduciary and shall,
in that capacity, have the exclusive responsibility for the general
administration of the Plan, according to its terms and provisions, and shall
have all discretion and powers necessary to accomplish such purposes,
including, but not by way of limitation, the right, power, and authority:
(a) To make nondiscriminatory rules and
regulations for the administration of the Plan which are
not inconsistent with the terms and provisions hereof;
(b) To construe all terms, provisions,
conditions, and limitations of the Plan; and its
construction thereof, shall be final and conclusive on
all persons or entities;
(c) To correct any defect, supply any omission,
or reconcile any inconsistency which may appear in the
Plan in such manner and to such extent as it shall deem
necessary or appropriate, and its judgment in such
matters shall be final and conclusive as to all persons
and entities;
(d) To select, employ, and compensate from time
to time such consultants, actuaries, accountants,
attorneys, and other agents and employees as the
Administrative Committee may deem necessary or advisable
for the proper and efficient administration of the Plan;
any agent, firm or employee so selected by the
Administrative Committee may be a "disqualified person"
or a "party in interest" but only if the requirements of
Section 4975(d) of the Code and Section 408(b) of the Act
have been satisfied;
(e) To determine all questions relating to the
eligibility of Employees to become Members, and to
determine the period of Active Service and the amount of
Considered Compensation upon which the benefits of each
Member shall be calculated;
VIII-1
<PAGE>
(f) To determine all controversies relating to the
administration of the Plan, including but not limited to:
(i) differences of opinion arising between an Employer
and the Trustee or a Member, or any combination thereof
and (ii) any questions it deems advisable to determine in
order to promote nondiscriminatory administration of the
Plan for the benefit of the Members and Beneficiaries;
(g) Subject to portfolio standards and guidelines
which may be established by the Trustee from time to
time, to direct and instruct (or to appoint an investment
manager which would have the power to direct and
instruct) the Trustee in all matters relating to the
preservation, investment, reinvestment, management and
disposition of the Trust Fund;
(h) To direct and instruct the Trustee in all
matters relating to the payment of Plan benefits and to
determine the entitlement of a Member or a Beneficiary to
a benefit should he appeal a denial of his claim, or any
portion thereof;
(i) With the consent or ratification of the
Board, to take any action necessary or appropriate to
cause to be directly transferred to the Trustee any or
all of the assets held with respect to a Member under any
other plan which expressly permits such transfer and
which otherwise satisfies the requirements for
establishing a Predecessor Plan Account described in
Section 1.1. For the limited purpose of being eligible
to have a transfer described in the preceding sentence
made on behalf of an Employee who is not a Member, such
Employee shall be deemed to be a Member; provided,
however, such Employee shall not be entitled to authorize
Contributions to the Plan or share in the allocation of
any Employer Contributions or forfeitures unless and
until such Employee satisfies the applicable eligibility
requirements of the Plan. Any amounts transferred to
such Predecessor Plan Account shall not have any effect
on limitations under the Plan on Member or Employer
Contributions under the Plan;
(j) With the consent or ratification of the Board,
to direct the Trustee to enter into any agreement that
the Administrative Committee deems to be necessary or
appropriate to effect any transaction described in
Section 8.2(i) or 11.7; and
(k) To delegate by written notice such clerical and
recordation duties of the Administrative Committee under
the Plan as the Administrative Committee may deem
necessary or advisable for the proper and efficient
administration of the Plan or the Trust.
8.3 ORGANIZATION: The Administrative Committee shall select from among
its members a chairman, who shall preside at all of its meetings, and shall
select a secretary, who need not
VIII-2
<PAGE>
be a member of the Administrative Committee and who shall keep all records,
documents and data pertaining to its supervision of the administration of the
Plan.
8.4 QUORUM AND MAJORITY ACTION: A majority of the members of the
Administrative Committee constitutes a quorum for the transaction of
business. The majority vote of the members present at any meeting at which
there is a quorum will decide any question brought before that meeting. In
addition, the Administrative Committee may decide any question, taken without
a meeting, by a majority vote of all of its members, or by a consent executed
by all of its members.
8.5 SIGNATURES: The chairman, the secretary and any one or more of the
members of the Administrative Committee to which the Administrative Committee
has delegated the power, shall each, severally, have the power to execute any
document on behalf of the Administrative Committee, and to execute any
certificate or other written evidence of the action of the Administrative
Committee. The Trustee, after being notified of any such delegation of power
in writing, shall thereafter accept and may rely upon any document executed
by such member or members as representing the action of the Administrative
Committee until the Administrative Committee files with the Trustee a written
revocation of that delegation of power.
8.6 SELF-INTEREST OF COMMITTEE MEMBER: No member of the Administrative
Committee shall have the right to vote or decide upon any matter relating
solely to himself under the Plan or to vote in any case in which his
individual right to claim any benefit under the Plan is particularly
involved. In any case in which an Administrative Committee member is so
disqualified to act and the remaining members cannot agree, the Board shall
appoint a temporary substitute member to exercise all the powers of the
disqualified member concerning the matter in which he is disqualified.
8.7 DISCLOSURE TO MEMBERS: The Administrative Committee shall make
available to each Member and Beneficiary for his examination such records,
documents and other data as are required under the Act, but only at
reasonable times during business hours. No Member or Beneficiary shall have
the right to examine any data or records reflecting the compensation paid to
any other Member or Beneficiary, and the Administrative Committee shall not
be required to make any other data or records available other than those
required by the Act.
8.8 STANDARD OF PERFORMANCE: The Administrative Committee, and each of
its members, shall (i) use the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in conducting his business as the
administrator of the Plan; (ii) when exercising its power to direct
investments, diversify the investments of the Plan so as to minimize the risk
of large losses unless under the circumstances it is clearly prudent not to
do so; and (iii) otherwise act in accordance with the provisions of the Plan
and the Act.
VIII-3
<PAGE>
The Administrative Committee shall exercise its responsibility and
authority hereunder in a uniform and non-discriminatory manner with respect
to all Members.
8.9 LIABILITY OF COMMITTEE AND LIABILITY INSURANCE: No member of the
Administrative Committee shall be liable for any act or omission of any other
member of the Administrative Committee, the Trustee, any investment manager
appointed by the Administrative Committee, or any other agent or
representative appointed by the Administrative Committee, except to the
extent required by the Act and any other applicable state or federal law,
which liability cannot be waived. No member of the Administrative Committee
shall be liable for any act or omission on his own part except to the extent
required by the Act, and any other applicable state or federal law, and then
only if and to the extent such liability cannot be waived. It is the express
intent of the Plan to waive any such liability to the full extent permitted
by law.
Further, it is specifically provided that, if so directed by the
Administrative Committee, the Trustee may purchase out of the Trust Fund
insurance for the members of the Administrative Committee any other
fiduciaries appointed by the Administrative Committee and for the Trust Fund
itself, to cover liability or losses occurring by reason of the act or
omission of any one or more of the members of the Administrative Committee or
any other appointed fiduciary under the Plan or any other agents; provided,
however, such insurance permits recourse by the insurer against the members
of the Administrative Committee or the other concerned fiduciaries in the
case of a breach of a fiduciary obligation by one or more members of the
Administrative Committee or other fiduciary covered thereby.
8.10 EXEMPTION FROM BOND: No member of the Administrative Committee shall
be required to give bond for the performance of his duties hereunder, unless
required by the Act or by other law which cannot be waived.
8.11 NO COMPENSATION: The Administrative Committee shall serve without
compensation for its services, but shall be reimbursed by the Employer(s) for
all expenses properly and actually incurred in the performance of its duties
under the Plan, unless the Employer(s) elects to have such expenses paid out
of the Trust Fund. Each Employer shall bear such portion of such expense as
shall be determined by the Administrative Committee based upon the
approximate total amount in the Accounts of Members employed by it as
compared to the approximate total amount in the Accounts of all Members.
8.12 PERSONS SERVING IN DUAL FIDUCIARY ROLES: Any person, group of
persons, corporation, firm or other entity, may serve in more than one
fiduciary capacity with respect to the Plan, including the ability to serve
both as Trustee and as a member of the Administrative Committee.
8.13 ADMINISTRATOR: For all purposes of the Act, the Administrator
of the Plan shall be the Plan Sponsor. The Administrator of the Plan shall
have final responsibility for compliance with all reporting and disclosure
requirements imposed with respect to the Plan under any applicable federal or
state law, or under any
VIII-4
<PAGE>
regulations or other authority promulgated thereunder by the appropriate
governmental authority.
8.14 INDEMNIFICATION OF MEMBERS OF ADMINISTRATIVE COMMITTEE: To the full
extent permitted by law, the Plan Sponsor and each other Employer, jointly
and severally, shall indemnify each past, present and future member of the
Administrative Committee against, and each member of the Administrative
Committee shall be entitled without further act on his part to indemnity from
each Employer for, any and all losses, liabilities, costs and expenses
(including the amount of judgments, court costs, reasonable attorneys' fees,
and the amount of approved settlements made with a view to the curtailment of
costs of litigation, other than amounts paid to the Employer itself) incurred
by such member in connection with or arising out of any pending, threatened
or anticipated possible action, suit, or other proceeding, including any
investigation that might lead to such a proceeding, in which he is or may be
involved by reason of or in connection with his being or having been a member
of the Administrative Committee, whether or not he continues to be a member
of the Administrative Committee at the time of incurring any such losses,
liabilities, costs and expenses; provided, however, that such indemnity shall
not include any losses, liabilities, costs and expenses incurred by such
member of the Administrative Committee (i) with respect to any matters as to
which he is finally adjudged in any such action, suit or proceeding to have
been guilty of gross negligence or willful and culpable misconduct in the
performance of his duties as a member of the Administrative Committee, or
(ii) with respect to any matter to the extent that a settlement thereof is
effected in an amount in excess of the amount approved by the Plan Sponsor
(or by the affected Employer if not an Affiliated Employer), which approval
shall not be unreasonably withheld. No right of indemnification hereunder
shall be available to, or enforceable by, any such member of the
Administrative Committee unless, within sixty (60) days after his actual
receipt of service of process in any such action, suit or other proceeding
(or such longer period as may be approved by the Board), he shall have
offered the Plan Sponsor (or affected Employer if not an Affiliated
Employer), in writing, the opportunity to handle and defend same at its sole
expense. The decision by the Plan Sponsor or other affected Employer to
handle the proceeding shall conclusively determine that such person is
entitled to the indemnity provided herein unless then otherwise expressly
agreed by the person. Until and unless a final judicial determination has
been made that indemnity is not applicable, all such person's expenses shall
be promptly and fully paid or reimbursed by the Plan Sponsor and each other
Employer upon demand by such person. The foregoing right of indemnification
shall inure to the benefit of the heirs, executors, administrators and
personal representatives of each such member of the Administrative Committee
and shall be in addition to all other rights to which such member may be
entitled as a matter of law, contract, or otherwise.
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<PAGE>
ARTICLE IX
TRUST AGREEMENT AND TRUST FUND
9.1 TRUST AGREEMENT: The provisions of the Trust Agreement referred to
in Article I hereof as the Trust Agreement are herein incorporated by
reference as fully as if set out herein. If, for any reason, a separate and
duly authorized Trust Agreement is not in force at any time from and after
the effective date of this amendment and restatement of the Plan, the
provisions of the Prior Plan that relate to the establishment and maintenance
of the Trust Agreement shall govern the Trust and the responsibilities of the
Trustee appointed by the Plan Sponsor.
9.2 BENEFITS PAID SOLELY FROM TRUST FUND: All of the benefits provided
to be paid under Article VI hereof shall be paid by the Trustee out of the
Trust Fund to be administered under the Trust Agreement. No fiduciary shall
be responsible or liable in any manner for payment of any such benefits, and
all Members hereunder shall look solely to such Trust Fund and to the
adequacy thereof for the payment of any such benefits of any nature or kind
which may at any time be payable hereunder.
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<PAGE>
ARTICLE X
ADOPTION OF PLAN BY OTHER EMPLOYERS
10.1 ADOPTION PROCEDURE: Any business organization may, with the approval
of the Board, adopt the Plan for all or any classification of its Employees,
as permitted by Section 401(a) of the Code, by delivering to the
Administrative Committee:
(a) A certified resolution or consent of the sole
proprietor, managing partner(s) or board of directors (or
equivalent governing authority) of the adopting Employer,
or a duly executed adoption instrument (adopted and
approved by the sole proprietor, managing partner(s) or
board of directors (or equivalent governing authority) of
the adopting Employer)) setting forth its agreement to be
bound as an Employer by all the terms, provisions,
conditions and limitations of the Plan, except those, if
any, specifically set forth in the adoption instrument;
(b) All information required by the
Administrative Committee and the Trustee with reference
to Employees or Members; and
(c) The written consent of the Board to the
adoption of this Plan. Any adoption may be made
retroactive to the beginning of a Plan Year by complying
with the foregoing conditions on or before the last day
of that Plan Year.
The provisions of the Plan shall apply separately and equally to each
Employer and its Employees in the same manner as is expressly provided herein
with respect to the Plan Sponsor and its Employees, except that the power to
appoint or otherwise affect the Administrative Committee or the Trustee and
the power to amend or terminate the Plan shall be exercised by the Plan
Sponsor alone. Nevertheless, any Employer may, with the consent of the Plan
Sponsor, incorporate in its adoption agreement or in an amendment document
specific provisions relating to the operation of the Plan, and such
provisions shall become a part of the Plan as to such Employer only.
10.2 NO JOINT VENTURE IMPLIED: The adoption instrument executed by an
Employer shall become, as to it and its Employees, a part of the Plan.
However, except as otherwise provided under the Plan, neither the adoption of
the Plan by an Employer, nor any act performed by it in relation to the Plan
shall ever create a joint venture or partnership relation between it and any
other Employer. Although the Accounts of Members employed by the Employers
which adopt the Plan shall be commingled for purposes of investment thereof,
unless the Administrative Committee and the Trustee are otherwise directed by
the Board, amounts held in the Trust Fund allocable to a particular Employer
shall, on an ongoing basis, be available to pay benefits to Members employed
by that Employer, and to pay benefits to Members employed by any other
Employer which is an Affiliated Employer required to be aggregated with the
first such Employer, but not otherwise. In addition, unless the
Administrative Committee and Trustee are
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<PAGE>
otherwise directed by the Board, the Administrative Committee shall maintain
completely separate accounts and records for the Plan Sponsor and each other
Employer which is an Affiliated Employer required to be aggregated with the
Plan Sponsor (and Employees thereof who are Members), but otherwise the Plan
shall be maintained on a consolidated basis for the Plan Sponsor and all such
other Affiliated Employers. The Administrative Committee shall maintain
completely separate accounts and records for any Employer that is not an
Affiliated Employer, as distinguished from maintaining the Plan on a
consolidated basis with such other Employer.
10.3 TRANSFER OF MEMBERS: If an Employee of one Employer is Transferred
to the service of another Employer, the Employee shall maintain all of his
rights under the Plan. Contributions to the Transferred Employee's Employer
Account shall be handled in accordance with the provisions of Sections 4.2
and 4.8, and his Active Service shall be considered uninterrupted, as if no
Transfer had occurred. Unless otherwise provided hereunder, Active Service
with any Employer shall count as Active Service with all Employers, whether
before or after the date that the Employer adopts the Plan.
X-2
<PAGE>
ARTICLE XI
AMENDMENT AND TERMINATION
11.1 RIGHT TO AMEND AND LIMITATIONS THEREON: The Board shall have the
sole right to amend the Plan. Any amendment shall (i) be made by a written
instrument and executed by an appropriate officer of the Plan Sponsor, (ii)
set forth the nature of the amendment and its effective date (which may be
retroactive), and (iii) be supported by a certified copy of the resolution or
direction which authorized or ratified it. Although the Trustee shall be
expected to execute each amendment of the Plan, failure of the Trustee to
execute any such amendment shall not adversely affect the Plan Sponsor's
exclusive right to effectively amend the Plan without regard to any act or
forbearance on the part of the Trustee. No amendment shall:
(a) Except as otherwise specifically provided
in the Plan, cause or permit any Trust Fund assets to be
diverted to any purpose other than the exclusive benefit
of the Members and their Beneficiaries;
(b) Decrease the accrued benefit of any Member
or eliminate a protected form of benefit in violation of
Section 411(d)(6) of the Code;
(c) Increase the duties or liabilities of the
Trustee without its prior written consent;
(d) Change the vesting schedule to one
which would result in the nonforfeitable percentage of
the accrued benefit derived from Employer Contributions
(determined as of the later of the amendment's adoption
date or effective date) of any Member being less than
such nonforfeitable percentage computed under the Plan
without regard to such amendment. If the Plan's vesting
schedule is amended, or if the Plan is amended in any way
that directly or indirectly affects the computation of
the Member's nonforfeitable percentage, or if the Plan is
deemed amended by an automatic change to or from a
Top-Heavy vesting schedule, each Member with at least
three years of service with an Employer may elect, within
a reasonable period after the adoption of the amendment
or change, to have the nonforfeitable percentage computed
under the Plan without regard to such amendment or
change. With respect to Members who are not entitled to
be credited with at least one hour of service in any Plan
Year beginning after December 31, 1988, the immediately
preceding sentence shall be applied by substituting "five
years of service" for "three years of service". The
period during which the election may be made shall begin
no later than the date upon which the amendment is
adopted or deemed to be made and shall end no later than
the latest of the following dates: (1) the date which is
sixty (60) days after the day the amendment is adopted or
deemed to be made; (2) the date which is sixty (60) days
after the day that the amendment becomes
XI-1
<PAGE>
effective; or (3) the date which is sixty (60) days
after the day that the Member is issued written notice
of the amendment by the Employer; or
(e) In accordance with Rule 16b-3(c)(ii)
promulgated under Section 16 of the Securities Exchange
Act of 1934, as amended ("Section 16"), change any term
or provision in the Plan relating to (i) the eligibility
of officers, directors or 10% shareholders of the
Employer, as defined in Section 16, to participate in the
Plan, or (ii) the timing, pricing, and amount of
contributions allocated to such officers, directors and
10% shareholders, more often than once every six (6)
months other than as necessary to comport with the Code
or the Act.
In the event of an amendment, each Employer will be deemed to have
consented to and adopted the amendment unless an Employer notifies the Plan
Sponsor and the Administrative Committee to the contrary in writing within
thirty (30) days after receipt of a copy of the amendment, in which case the
rejection will constitute a withdrawal from the Plan by that Employer.
11.2 MANDATORY AMENDMENTS: Except as otherwise provided in the Plan, or
except as otherwise prescribed by applicable law or other authority
prescribed thereunder by the appropriate governmental authority, the
Contributions of each Employer to the Plan are intended to be:
(a) Deductible under applicable provisions of the Code;
(b) Exempt from the federal Social Security Act, as amended;
(c) Exempt from withholding under the Code; and
(d) Excludable from any Employee's regular rate of pay, as
that term is defined under the Fair Labor Standards Act of 1938, as
amended.
The Plan Sponsor shall make such amendments to the Plan as may be necessary
to carry out this intention, and all such amendments may be made
retroactively.
11.3 WITHDRAWAL OF AN EMPLOYER: An Employer may withdraw from the Plan
either by rejecting an amendment or by giving written notice of its intent to
withdraw to the Plan Sponsor, the Administrative Committee and the Trustee.
The Administrative Committee shall then determine, within ninety (90) days
following the receipt of the rejection or notice, the portion of the Trust
Fund that is attributable to the Members employed by the withdrawing Employer
and shall forward a copy of such determination to the Trustee. Upon receipt
of the determination, the Trustee shall immediately segregate those assets
attributable to the Members employed by the withdrawing Employer and shall
transfer those assets to the successor trustee when it receives a designation
of such successor from the withdrawing Employer.
XI-2
<PAGE>
The withdrawal from the Plan will not terminate the Plan with respect to
the withdrawing Employer. Instead, the withdrawing Employer shall, as soon
as practical, either appoint a successor trustee or trustees and reaffirm the
Plan as a new and separate plan and trust intended to qualify under Sections
401(a) and 501(a) of the Code, or establish another plan and trust intended
to qualify under Sections 401(a) and 501(a) of the Code.
The determination of the Administrative Committee, in its sole
discretion, of the portion of the Trust Fund that is attributable to the
Members employed by the withdrawing Employer shall be final and binding upon
all persons or entities; and, the Trustee's transfer of those assets to the
designated successor trustee shall relieve the Trustee of any further
obligation or duty to the withdrawing Employer, the Members employed by that
Employer and their Beneficiaries, and to the successor trustee.
11.4 VOLUNTARY AND INVOLUNTARY TERMINATION: Any Employer may terminate
its participation in the Plan by executing and delivering to the
Administrative Committee and the Trustee a notice which specifies the date on
which its participation in the Plan shall terminate. Likewise, participation
of an Employer in the Plan will automatically terminate upon the general
assignment by that Employer to or for the benefit of its creditors or the
liquidation or dissolution of that Employer without a successor (whether or
not as the result of a bankruptcy proceeding).
Upon termination of participation in the Plan by any Employer without
provision for continuation of the portion thereof attributable to such
Employer, subject to the provisions of this Section, the Trustee shall
distribute to each Member employed by the terminating Employer the vested
amounts certified by the Administrative Committee as then credited to the
Accounts of the Members employed by the terminating Employer.
If a Member's vested Account balance (derived from Employer and any
Employee Contributions) which is distributable hereunder does not exceed
$3,500, such Account balance shall be distributed in the form of a lump sum
payment which may be paid in cash or in shares of Company Stock, or both, as
elected by the Member in accordance with applicable provisions of Section
6.6. Such distribution may be made without the necessity of obtaining the
consent of the Member. If a Member's vested Account balance (derived from
Employer and any Employee Contributions) which is distributable hereunder is
in excess of $3,500, and if the Member consents to the distribution hereunder
in the form of a lump sum payment, the Administrative Committee shall direct
the Trustee to make settlement of a Member's Account as provided in the
second preceding sentence. If a Member's vested Account balance (derived
from Employer and any Employee Contributions) which is distributable
hereunder is in excess of $3,500, and if the Member fails to consent to the
distribution hereunder, the Administrative Committee shall direct the Trustee
to make settlement of the Member's Account by distribution of a deferred
commercial annuity which can be purchased (with the net proceeds of the
Member's vested Account balance) from any life insurance company licensed to
conduct business in the State of the situs of the Trust, provided that such
annuity (i) shall provide the same settlement provisions as are set out in
Article VI and (ii) shall be issued or endorsed as
XI-3
<PAGE>
nontransferable so that the owner thereof cannot sell, assign, discount, or
pledge as collateral for a loan or as security for the performance of an
obligation or for any other purpose his interest in such contract to any
person, other than the issuer of such annuity upon the surrender thereof,
and, further provided, that in the event of any conflict between applicable
terms and provisions of the Plan (regarding the timing or manner of payment
of benefit) and the terms and provisions of any such commercial annuity
purchased hereunder, the terms and provisions of the Plan shall control.
Subject to subsequent provisions hereof, distributions hereunder shall be
made as soon as administratively practicable, but in no event later than the
time required under applicable provisions of the Code.
In the event that (i) the Plan is maintained by the Plan Sponsor and at
least one other Employer which is an Affiliated Employer required to be
aggregated with the Plan Sponsor, (ii) on an ongoing basis, assets of the
Plan are available to pay benefits to any Employee who is a Member (and
Beneficiaries thereof) and thus the Plan should be viewed as a single plan
for purposes of Section 414(l) of the Code, and (iii) the Plan is operated on
a consolidated basis, then, in that event, should any Employer which is an
Affiliated Employer terminate participation in the Plan without provision for
continuation of the portion thereof attributable to such Employer, subject to
application of Section 11.5 (relating to partial terminations), any
forfeitures arising incident to the distributions described above shall be
allocated in accordance with Section 4.6 among the Plan Sponsor, and any
other remaining Employer which is an Affiliated Employer, to reduce future
Employer Contributions. Any unapplied portion (comprised of excess amounts
arising from or attributable to Contributions of such terminating Affiliated
Employer) of any suspense account described in Section 4.3 shall be applied
pro-rata to reduce future Contributions of the Plan Sponsor and any other
remaining Employer which is an Affiliated Employer.
Regardless of whether the Plan is operated on an ongoing basis which
should result in the Plan being viewed as a single plan for purposes of
Section 414(l) of the Code, in the event that the Plan is not operated on a
consolidated basis and separate accounts and records are maintained for each
separate Employer under the Plan, then should any Employer which is an
Affiliated Employer terminate participation in the Plan without provision for
continuation of the portion thereof attributable to such Employer, Members
employed by such terminating Employer as of the date of such termination of
participation in the Plan shall have a 100% vested and nonforfeitable
interest in their Accounts. Similar rules shall apply with respect to any
other Employer with respect to which the Plan is not operated on a
consolidated basis.
If the Plan should terminate, or should an Employer terminate its
participation in the Plan without causing the Plan to terminate, the Trustee,
as directed by the Administrative Committee, shall notify the Internal
Revenue Service of such termination of the Plan or termination of
participation in the Plan by an Employer, and the Plan Sponsor shall apply to
the Internal Revenue Service for a determination letter with respect to said
termination of the Plan or termination of participation in the Plan by an
Employer. The Trustee shall not distribute the assets in the Trust Fund in
violation of applicable provisions of Article VI of the Plan or prior
XI-4
<PAGE>
to receipt of a copy of a determination letter from the Internal Revenue
Service to the effect that an immediate distribution of Plan assets will not
adversely affect the prior qualification of the Plan under Sections 401(a) of
the Code and the exemption of the Trust under Section 501(a) of the Code.
Provided further, notwithstanding any other provision of the Plan to the
contrary, amounts allocated and credited to the affected Members' Accounts
may be distributed in any form authorized hereunder which constitutes a lump
sum distribution described in Section 401(k)(10) of the Code prior to the
time that such amounts would otherwise be distributed if (i) the Plan is
terminated without establishment of a successor plan in contravention of
Section 401(k)(10)(A)(i) of the Code, (ii) the Plan Sponsor or other Employer
effects a disposition (to an employer which is not an Affiliated Employer) of
substantially all of the assets (within the meaning of Section 409(d)(2) of
the Code) used by such Plan Sponsor or other Employer in a trade or business
of such Plan Sponsor or other Employer with respect to any former Member who
continues employment with the employer which acquires such assets, and the
Plan Sponsor or other Employer continues to maintain the Plan after such
disposition, or (iii) the Plan Sponsor or other Employer effects a
disposition (to an employer which is not an Affiliated Employer) of its
interest in a subsidiary (within the meaning of Section 409(d)(3) of the
Code) with respect to any former Member who continues employment with the
subsidiary, and the Plan Sponsor or other Employer continues to maintain the
Plan after such disposition. A distribution may be made under Section
401(k)(10) of the Code and clauses (ii) and (iii) of this paragraph only if
the Plan Sponsor or Employer continues to maintain the Plan after the
disposition. This requirement is satisfied only if the purchaser does not
maintain the Plan after the disposition. A purchaser maintains the Plan if
it adopts the Plan or otherwise becomes an employer whose employees accrue
benefits under the Plan. A purchaser also maintains the Plan if the Plan is
merged or consolidated with, or any assets or liabilities are transferred
from the Plan to, a plan maintained by the purchaser in a transaction subject
to Section 414(l)(1) of the Code. A purchaser is not treated as maintaining
the Plan merely because a plan that it maintains accepts rollover
contributions of amounts distributed by the Plan.
For purposes of the previous paragraph, in accordance with Section
1.401(k)-1(d)(3) of the Income Tax Regulations, a successor plan is any other
defined contribution plan maintained by the same employer. However, if fewer
than two percent (2%) of the employees who are eligible under the Plan at the
time of its termination are or were eligible under another defined
contribution plan at any time during the 24-month period beginning 12 months
before the time of the termination, the other plan is not a successor plan.
The term "defined contribution plan" means a plan that is a defined
contribution plan as defined in Section 414(i) of the Code, but does not
include an employee stock ownership plan as defined in Section 4975(e) or 409
of the Code or a simplified employee pension as defined in Section 408(k) of
the Code. A plan is a successor plan only if it exists at the time the Plan
is terminated or within the period ending 12 months after distribution of all
assets from the Plan.
Pursuant to Section 11.5, the termination of participation in the Plan by
any one or more of the Employers will not constitute a termination of the
Plan with respect to any other
XI-5
<PAGE>
remaining Employers. Upon satisfaction of all liabilities to all Members and
Beneficiaries hereunder, the Trust shall terminate.
11.5 VESTING UPON DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS, TOTAL OR
PARTIAL TERMINATION: Notwithstanding any other provision of the Plan, in the
event that there is a total or partial termination, or complete
discontinuance of the Employer Contributions hereunder, the vesting schedule
contained in Sections 6.4 shall be inapplicable to the affected Members and
each affected Member thereupon shall have a full 100% vested interest in the
amount credited to his Account as of the end of the last Plan Year for which
a substantial Employer Contribution was made and in any amounts thereafter
credited or allocated to his Account; provided, however, that if the Employer
shall thereafter resume making substantial Contributions hereunder, all
amounts credited or allocated to an affected Member's Account with respect to
the Plan Year for which such Contributions are resumed, and the Plan Years
for which they are continued, shall vest only in accordance with the vesting
schedules contained in Sections 6.4. During any such period of termination
or complete discontinuance of Employer Contributions, all other provisions of
the Plan shall nevertheless continue in full force and effect, other than
provisions for Employer Contributions and the allocation thereof to the
affected Members' Accounts. Except as otherwise provided in Section 11.4,
the Plan shall not terminate earlier than the effective date as of which the
Plan is voluntarily terminated by the Plan Sponsor or by the Plan Sponsor and
the other Employers maintaining the Plan.
11.6 CONTINUANCE PERMITTED UPON SALE OR TRANSFER OF ASSETS: An Employer's
participation in the Plan will not automatically terminate in the event that
it consolidates, merges, and is not the surviving corporation; sells
substantially all of its assets; is a party to a reorganization and its
Employees and substantially all of its assets are transferred to another
entity; or liquidates or dissolves, if there is a successor entity. Instead,
the resulting successor person, firm, corporation, or other entity may assume
and continue the Plan and the Trust by executing a direction, entering into a
contractual commitment or adopting a resolution, as the case may be,
providing for the continuance of the Plan and the Trust simultaneous with or
within one hundred twenty (120) days after such consolidation, merger, sale,
reorganization, liquidation or dissolution. If after such one hundred twenty
(120) day period, the successor entity has not assumed and continued the Plan
and otherwise complied with the provisions of Section 11.3, the successor
entity shall be deemed to have given notice under Section 11.4 and its
participation in the Plan will then automatically terminate on the one
hundred twenty-first (121st) day and, in that event, the appropriate portion
of the Trust Fund will be distributed exclusively to the affected Members or
their Beneficiaries as soon as practicable pursuant to Section 11.4.
11.7 REQUIREMENT ON MERGER, TRANSFER, ETC.: Notwithstanding any other
provision hereof, in accordance with Section 414(l) of the Code, the Plan
will not be merged or consolidated with, nor shall any assets or liabilities
of the Plan be transferred to, any other plan unless each Member would
receive (if the
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<PAGE>
Plan then terminated) a benefit immediately after the merger, consolidation,
or transfer which is equal to or greater than the benefit that he would have
been entitled to receive immediately before the merger, consolidation, or
transfer (if the Plan had then terminated). In addition, any accrued
benefits under the Plan which are subject to and protected under Section
411(d)(6) of the Code shall not be reduced or eliminated in violation of
Section 411(d)(6) of the Code incident to (i) any merger, consolidation,
spin-off or transfer of such accrued benefits or (ii) any transaction
involving an amendment or having the effect of an amendment of the Plan to
transfer such accrued benefits.
Subject to Sections 8.2(i), 8.2(j) and applicable provisions of the Trust
Agreement, the Trustee, as directed by the Administrative Committee, shall
have the authority to enter into (i) an agreement to merge or consolidate the
Plan with another plan which meets the requirements of Sections 401(a) and
501(a) of the Code or (ii) an agreement to accept the direct transfer of
assets from any such plan or to transfer Plan assets to any such plan. To
the extent that any such assets that are directly transferred to the Plan are
comprised of amounts attributable to elective deferrals (described in Section
402(g)(3) of the Code), or qualified nonelective contributions (described in
Section 401(m)(4)(C) of the Code), or matching contributions (described in
Section 401(m)(4)(A) of the Code) that are treated as elective deferrals
under Section 401(k) of the Code, such amounts shall remain subject to any
limitations on distribution thereof and, thus, shall not be distributed under
the Plan prior to such time as is permitted under the transferor plan and
Section 401(k) of the Code. Subject to the Code Sections described in the
immediately preceding sentence, if assets are accepted on behalf of any
Employee prior to the date that such Employee is eligible to enter the Plan
as an active Member, such Employee shall be deemed to be a Member; provided
however, such Employee shall not be entitled to authorize Contributions to
the Plan or share in the allocation of any Employer Contributions unless and
until such Employee meets the applicable eligibility requirements of the Plan.
The Trustee shall not consent or be a party to a merger, consolidation or
transfer of assets with a defined benefit plan, except with respect to a
transfer which the Administrative Committee has determined to be an "elective
transfer" (described below). The Trustee shall hold, administer and
distribute the transferred assets as a part of the Trust Fund and the
Administrative Committee shall maintain a separate Predecessor Plan Account
for the benefit of each Employee on whose behalf the Trustee accepted the
transfer in order to reflect the value of the transferred assets. Unless a
transfer of assets to the Plan is a Rollover Contribution (including a direct
rollover contribution described in Section 401(a)(31) of the Code) or an
"elective transfer" (defined below), the Plan shall apply the optional forms
of benefit protections described in this Section and in Section 11.1 to all
of the transferred assets. A transfer is an elective transfer if: (i) the
transfer satisfies the preceding provisions of this Section; (ii) the
transfer is voluntary, under a fully informed election by the Member; (iii)
the Member has an alternative that retains his Code Section 411(d)(6)
protected benefits (including an option to leave his benefit in the
transferor plan if that plan is not terminating and the Member's transferor
plan account exceeds $3,500); (iv) the transfer satisfies the applicable
spousal consent requirements of the Code; (v) the transferor plan satisfies
the QJSA notice requirements of the Code, if the Member's transferred benefit
is subject to those requirements; (vi) the Member has the right to immediate
distribution from the transferor plan in lieu of the elective transfer; (vii)
the transferred benefit is the entire nonforfeitable accrued benefit under
the transferor plan (1)
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calculated to be at least the greater of the single sum distribution provided
by the transferor plan for which the Member is eligible or the present value
of the Member's accrued benefit under the transferor plan payable at that
plan's normal retirement age and (2) calculated by using an interest rate
that complies with the requirements of Section 417(e) of the Code and subject
to the overall limitations of Section 415 of the Code; (viii) the Member has
100% vested interest in the transferred benefit; and (ix) the transfer
otherwise satisfies applicable regulations or other guidance issued under
applicable provisions of the Code by the appropriate governmental authority.
XI-8
<PAGE>
ARTICLE XII
MISCELLANEOUS
12.1 PLAN NOT AN EMPLOYMENT CONTRACT: The adoption and maintenance of the
Plan shall not be deemed to be a contract between any Employer and its
Employees which gives any Employee the right to be retained in the employment
of any Employer; to interfere with the rights of any Employer to discharge
any Employee at any time; or to interfere with any Employee's right to
terminate his employment at any time.
12.2 BENEFITS PROVIDED SOLELY FROM TRUST FUND: All benefits payable under
the Plan shall be paid or provided for solely from the Trust Fund; neither
the Administrative Committee nor any Employer assumes any liability or
responsibility therefor. Each Member assumes all risks in connection with
any decrease in the market value of any common stocks or other investments
held on his behalf in accordance with the provisions of the Plan.
12.3 SPENDTHRIFT PROVISION: No principal or income payable, or to become
payable, from the Trust Fund will be subject to: (i) anticipation or
assignment by any Member or by any Beneficiary; (ii) attachment by,
interference with, or control of any creditor of a Member or Beneficiary; or
(iii) being taken or reached by any legal or equitable process in
satisfaction of any debt or liability of a Member or Beneficiary prior to its
actual receipt by such Member or Beneficiary. Any attempted conveyance,
transfer, assignment, mortgage, pledge, or encumbrance of the Trust Fund, any
part or interest in it, by a Member or Beneficiary prior to distribution will
be void, whether that conveyance, transfer, assignment, mortgage, pledge,
hypothecation or encumbrance is intended to take place or become effective
before or after any distribution of Trust Fund assets or the termination of
the Trust. Furthermore, the Trustee shall not be required to recognize any
conveyance, transfer, assignment, mortgage, pledge or encumbrance by a Member
or Beneficiary of the Trust, any part or interest in it, or to pay any money
or thing of value to any creditor or assignee of a Member or Beneficiary for
any cause whatsoever.
This Section shall also apply to the creation, assignment, or recognition
of a right to any benefit payable with respect to a Member pursuant to a
domestic relations order, unless such order is determined to be a qualified
domestic relations order (as defined in Section 414(p) of the Code). In
addition, in the event that, pursuant to a qualified domestic relations order
described above, an Account or subaccount is established for the benefit of
the former spouse or dependent of a Member ("alternate payee"), and in the
further event that Members are entitled to direct the investment of their
Accounts in accordance with Section 4.10, unless the Administrative Committee
otherwise prescribes pursuant to uniformly applied nondiscriminatory rules
formulated by the Administrative Committee, any alternate payee shall be
considered to be a Member for purposes of Section 4.10 and, thus, shall be
entitled to direct the investment of such Account or subaccount.
XII-1
<PAGE>
In the event that the Administrative Committee receives notice that a
domestic relations order that is intended to be a qualified domestic
relations order is being prepared and will be provided to the Administrative
Committee within a reasonably short time, the Administrative Committee may
place a temporary hold on the distribution of benefits under the Plan to the
affected Member, pending (a) the determination of whether such order is a
qualified domestic relations order within the meaning of Section 414(p) of
the Code, and (b) the rights of the alternate payee under such order.
12.4 GENDER, TENSE AND HEADINGS: Whenever the context so requires, words
of the masculine gender used herein shall include the feminine and neuter,
and words used in the singular shall include the plural. The words "herein,"
"hereof," "hereunder," and other similar compounds of the word "here" shall
refer to the entire Plan, not to any particular Section or provision of the
Plan. Headings of Articles, Sections and subsections as used herein are
inserted solely for convenience and reference and constitute no part of the
Plan.
12.5 GENERAL TRANSITION RULES RELATING TO AMENDMENT, RESTATEMENT AND
CONTINUATION OF PLAN: This Section shall generally apply to any Prior Plan.
(a) APPLICATION OF PLAN: Except as otherwise
provided under the Plan, in the event that the Employer
adopts the Plan as an amendment, restatement and
continuation of a Prior Plan, the provisions of the Plan
shall apply only to Employees whose employment with the
Employer terminates after the effective date of the Plan.
If an Employee's employment with the Employer terminates
prior to the effective date of the Employer's adoption of
the Plan, the former Employee shall be entitled to
benefits under the terms and provisions of Employer's
Prior Plan as that plan existed on the date of the
termination of employment.
(b) MAINTENANCE OF ACCOUNTS: Amounts credited to a
Member's accounts under the Prior Plan as in effect
immediately prior to the effective date of its amendment,
restatement and continuation hereunder shall constitute
the opening balances of corresponding Accounts
established under the Plan.
(c) EMPLOYEE ELECTIONS: Employee elections (under
the Prior Plan as in effect immediately prior to the
effective date of its amendment, restatement and
continuation hereunder) with respect to Employee
contribution rates, investment thereof, etc., shall
continue in effect under the Plan unless the
Administrative Committee otherwise directs. Similarly,
any beneficiary designation in effect under the Prior
Plan immediately prior to its amendment, restatement and
continuation hereunder shall be deemed to be a valid
designation filed with the Administrative Committee under
applicable provisions of the Plan, to the extent
consistent with the Plan and applicable law and
regulations or other authority issued thereunder by the
appropriate governmental authority, unless and until the
XII-2
<PAGE>
Member revokes such Beneficiary designation under
applicable provisions of the Plan.
(d) WITHDRAWALS AND LOANS: Except to the
extent inconsistent with applicable law and regulations
or other authority issued thereunder by the appropriate
governmental authority, and unless the Administrative
Committee otherwise directs, any withdrawals authorized
and loans made under the Prior Plan, as in effect
immediately prior to the effective date of its amendment,
restatement and continuation hereunder, shall continue to
be governed by the terms and provisions of the Prior Plan
as it existed on the date of the withdrawal and/or loan.
Provided, however, any withdrawals or loans permitted
under the Plan after its effective date shall be governed
solely by applicable terms and provisions of the Plan.
(e) ACCOUNTING: Unless the Administrative Committee
otherwise directs, Trust accounting for income, gain,
loss, appreciation and depreciation and forfeitures under
the Prior Plan, as in effect immediately prior to the
effective date of its amendment, restatement and
continuation hereunder, shall not be affected by the
adoption of the Plan.
(f) DISTRIBUTION OF BENEFITS: Amounts being
paid to a former Member or Beneficiary under the Prior
Plan, as in effect immediately prior to the effective
date of its amendment, restatement and continuation
hereunder, shall continue to be paid in accordance with
the terms and provisions of the Prior Plan.
12.6 SEVERABILITY: Each term and provision of the Plan is severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of any other term or provision.
12.7 GOVERNING LAW: PARTIES TO LEGAL ACTIONS: The terms and provisions of
the Plan shall be construed, administered, and governed under the laws of the
State of Texas and, to the extent applicable, by the laws of the United
States. The Trustee or any Employer may at any time initiate a legal action
or proceeding for the settlement of the account of the Trustee, for the
determination of any question, or for instructions. The only necessary
parties to any such action or proceeding are the Trustee, the Plan Sponsor or
other affected Employer; however, any other person may be included as a party
at the election of the Trustee, the Plan Sponsor or other affected Employer.
12.8 NOTICES: Except as otherwise specifically provided under the Plan,
any notice, description, explanation, direction, consent, election, waiver or
other information required or permitted to be given under the Plan shall be
sufficient if it is in writing and otherwise complies with the requirements
of applicable provisions of the Plan and rules established by the
Administrative Committee and if hand-delivered to the Member, Beneficiary,
member of the
XII-3
<PAGE>
Administrative Committee, Trustee or other person to whom such communication
is to be given, or if sent by registered mail (return receipt requested) or
by first class mail or any other reasonable method to such person at the
address last furnished by such person. Any such communication described in
the immediately preceding sentence shall be effective as of the date of the
postmark if mailed via registered mail and the return receipt is received by
the sender, or upon actual receipt by the party receiving such communication
in the event that (i) such return receipt is not received by the sender or
(ii) such communication was given by in-hand delivery or by first class mail
or any other reasonable method.
12.9 COUNTERPARTS: This Plan may be executed in two or more counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument. It shall not be necessary that any
single counterpart hereof be executed by all parties so long as each party
executes at least one counterpart.
IN WITNESS WHEREOF, the Plan Sponsor has caused this Plan to be executed this
23rd day of March, 1995, to be effective as of March 26, 1989, except as
otherwise provided under certain terms or provisions of the Plan.
PLAN SPONSOR:
KENT ELECTRONICS CORPORATION
ATTEST:
By:/S/ STEPHEN J. CHAPKO
--------------------------------------
Name: STEPHEN J. CHAPKO
------------------------------------
Title: VICE PRESIDENT & TREASURER
-----------------------------------
By: /S/ VICKIE KING
---------------------------
Name: VICKIE KING
-------------------------
Title: ADMINISTRATIVE ASST.
------------------------
XII-4
<PAGE>
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on March 23, 1995 by Stephen
J. Chapko, Vice President & Treasurer of Kent Electronics Corporation, on
behalf of said corporation.
/S/ JANICE G. CHAMBERS
------------------------------------
Notary Public in and for
the State of Texas
Printed Name: JANICE G. CHAMBERS
-----------------------
My commission expires: JUNE 15, 1997
--------------
XII-5
<PAGE>
ADOPTION AGREEMENT
K*Tec Electronics Corporation hereby adopts, approves, ratifies and
consents to the complete amendment, restatement and continuation (without a
gap or lapse in coverage, time, or effect of a qualified plan and exempt
trust under applicable provisions of the Code) of the Kent Electronics
Corporation Tax-Deferred Savings and Retirement Plan and Trust.
K*TEC ELECTRONICS CORPORATION
ATTEST:
By:/S/ JAMES F. CORPORRON
-------------------------------------
By:/S/ KIM K. JOHNSON Printed Name: JAMES F. CORPORRON
-------------------------- ---------------------------
Title: SECRETARY & TREASURER
----------------------------------
Printed Name: KIM K. JOHNSON
---------------
Title: CORPORATE ACCOUNTING
MANAGER
---------------------
THE STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on March 23, 1995 by James F.
Corporron, Secretary & Treasurer of K*Tec Electronics Corporation on behalf
of said corporation.
/S/ JANICE G. CHAMBERS
----------------------------------------
Notary Public in and for the
State of Texas
Printed Name: JANICE G. CHAMBERS
---------------------------
My Commission expires: JUNE 15, 1997
------------------
XII-6
<PAGE>
FIRST AMENDMENT TO
KENT ELECTRONICS CORPORATION
TAX-DEFERRED SAVINGS AND RETIREMENT PLAN
W I T N E S S E T H
WHEREAS, KENT ELECTRONICS CORPORATION (the "Plan Sponsor") maintains the
Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan (the
"Plan") for the benefit of its eligible employees and their beneficiaries; and
WHEREAS, in Section 11.1 of the Plan, the Plan Sponsor reserved the right
to amend the Plan at any time; and
WHEREAS, it has been determined that the Plan should be amended in order
to set forth certain changes requested by the Internal Revenue Service in
connection with the issuance of a favorable determination letter for the Plan,
NOW, THEREFORE, the Plan is hereby amended, effective as of March 26,
1989, by this First Amendment thereto as follows:
1. The reference to the date "December 31, 1994" in the second
paragraph of Section 1.10 of the Plan shall be changed to
"December 31, 1993".
2. Except as modified herein, the Plan is specifically ratified
and affirmed.
3. In order to effectuate the amendments described in Paragraph 1
above, the substitute page I-7 attached hereto shall be inserted
into the Plan in place of the above described original section.
IN WITNESS WHEREOF, the First Amendment to the Plan is executed this 15th
day of November, 1995.
PLAN SPONSOR:
KENT ELECTRONICS CORPORATION
ATTEST:
By:/S/ KIM K. JOHNSON By:/S/ STEPHEN J. CHAPKO
----------------------------- ----------------------------------
Printed Name: Kim K. Johnson Printed Name: Stephen J. Chapko
Title: Corporate Accounting Title: Vice President - Treasurer
XII-7
<PAGE>
TRUSTEE:
SMITH BARNEY PRIVATE TRUST
COMPANY
By:/S/ DONALD E. ROSE
---------------------------
Printed Name: Donald E. Rose
Title: Vice President
XII-8
<PAGE>
EXHIBIT 10.17
FIRST AMENDMENT TO THE
KENT ELECTRONICS CORPORATION DEFERRED COMPENSATION PLAN
Having reserved the right in Article X of the Kent Electronics
Corporation Deferred Compensation Plan (the "Plan") to amend the Plan and the
Board of Directors of Kent Electronics Corporation having authorized the
amendment of the Plan by Board resolution, the Plan is hereby amended as
follows:
The third paragraph of Article II commencing on page 3 of the Plan and
continuing on page 4 of the Plan shall be deleted in its entirety
effective as of March 1, 1996.
KENT ELECTRONICS CORPORATION
By:/s/ Stephen J. Chapko
-----------------------------------
Stephen J. Chapko
Vice President and Treasurer
Date: March 4, 1996
-------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into as of
January 3, 1996 by and among Morrie K. Abramson ("Employee") and Kent
Electronics Corporation, a Texas corporation (the "Company").
The parties agree as follows:
1. EMPLOYMENT.
1.1 TITLE AND DUTIES. The Company hereby agrees to continue to
employ Employee, and Employee hereby accepts continuing employment, as Chairman,
Chief Executive Officer and President of the Company. Employee shall be given
authorities, powers, functions and duties consistent with such offices and
positions.
1.2 PLACE. Employee shall not be required to perform any duties
described hereunder at any place other than in the Houston, Texas metropolitan
area without his consent, except insofar as his duties shall require reasonable
business trips and/or visits to investors, suppliers, customers or facilities of
the Company.
2. EXTENT OF SERVICES.
2.1 GENERAL. It is recognized that the services to be rendered by
Employee are of such a nature as to be peculiarly rendered by Employee,
encompass the individual ability of Employee and cannot be measured exclusively
in terms of hours or services rendered in any particular period. During the
term of his employment pursuant to this Agreement, Employee shall devote
substantially his full time and undivided attention during normal business hours
to the business and affairs of the Company, except for reasonable vacations and
except for Disability, but nothing in this Agreement shall preclude Employee
from serving as a director or member of a committee of any organization
involving no conflict of interest with the interests of the Company, from
engaging in charitable and community activities, or from managing his personal
investments, provided that such activities do not materially interfere with the
regular performance of his duties and responsibilities under this Agreement.
2.2 VACATION. Employee shall be entitled to such vacations and other
absences from work as shall be reasonably consistent with the performance of his
duties as provided in this Agreement.
3. TERM. Subject to the provisions for earlier termination provided
herein, the term of this Agreement and the term of Employee's employment by the
Company shall continue uninterrupted until March 31, 2001 ("Term of
Employment").
4. COMPENSATION. In consideration of the services to be rendered
pursuant to this Agreement by Employee to the Company, Employee shall be
compensated as set forth in this Agreement, including this Section 4.
<PAGE>
4.1 CASH COMPENSATION.
(a) During the Term of Employment, the Company shall compensate
Employee for services rendered under this Agreement in a cash amount of not less
than $950,000 per fiscal year of the Company payable in respect of such year as
determined from time to time by the Board of Directors of the Company. Employee
shall be considered in the Company's annual review of executive compensation and
Employee shall be a participant in the Company's executive cash bonus plans that
may be in effect from time to time. All cash compensation paid to Employee
under this Agreement shall be aggregated for purposes of meeting the $950,000
per fiscal year requirement, whether in the form of base salary or in the form
of bonuses.
(b) Upon a Change in Control (as defined below), the Company
shall establish a "rabbi trust" for the benefit of Employee into which there
shall be contributed by the Company cash in an amount sufficient to satisfy the
Company's obligations to pay the Employee the amounts to which he is entitled
under Section 6.1(d)(ii). Any instruments establishing such rabbi trust shall
in all respects be satisfactory in form and substance to Employee and his
counsel.
4.2 ADDITIONAL BENEFITS.
(a) During the Term of Employment, Employee shall be entitled to
receive all benefits consistent with Employee's duties and positions, which
benefits shall (except as specified below) be no less than those to which he is
entitled as of the date hereof, including but not limited to all plans of life,
accident and health, salary continuation and other insurance which is or becomes
generally available to other employees, officers or executives of the Company
and participation in the Company's pension, profit-sharing, or any other
deferred compensation plan of the Company generally available to other
executives in the Company. Employee shall be provided with the full-time use of
an automobile consistent with the Company's corporate policy on automobiles as
in effect from time to time. Subject to Section 4.5 hereof, the Company
reserves the right to modify, suspend or discontinue any and all benefits
referred to in this Section 4.2 at any time without recourse by Employee so long
as such action is taken generally with respect to other similarly situated peer
executives and does not single out Employee. The Company will, for so long as
Employee may have liability to any person for actions taken or omissions by
Employee in his capacity as a director or officer of the Company and so long as
available on a commercially reasonable basis, maintain in effect directors' and
officers' liability insurance covering Employee on terms no less favorable than
the directors' and officers' liability insurance maintained by the Company in
effect on the date hereof in terms of coverage and amounts. In addition, for so
long as Employee may have liability to any person for actions taken or omissions
by Employee in his capacity as a director or officer of the Company, the Company
shall not terminate or amend any provisions of any such entity's charter, bylaws
or other organizational documents so as to reduce or otherwise adversely affect
Employee's rights to indemnification from any such entity or the limitation or
elimination of Employee's liability
-2-
<PAGE>
to the entity or it shareholders or other beneficial owners for monetary damages
to terms less favorable than those in effect on the date hereof.
(b) During the Term of Employment, Employee shall be entitled to
continue to participate in any stock incentive plan, stock option plan or other
equity ownership plan in which he is a participant on the date hereof, and
Employee may, in the discretion of the Board of Directors of the Company,
participate in any other stock incentive plan, stock option plan or other equity
ownership plans adopted by the Company.
4.3 EXPENSES. Employee shall be reimbursed for all expenses
reasonably incurred in the furtherance of the business of the Company during the
Term of Employment. Employee shall keep complete and accurate records of all
expenditures such that Employee may fully account to the Board of Directors, if
requested, or as may then be required by the Internal Revenue Service.
4.4 BENEFITS FOLLOWING TERMINATION OF EMPLOYMENT.
(a) Upon the termination of Employee's employment by the
Company, whether due to death, Disability, resignation, whether or not for Good
Reason, or discharge, whether or not for Just Cause, the Company shall,
commencing on the first day of the month following the date of the termination
of Employee's employment, pay, or cause to be paid, to Employee in equal monthly
installments the sum of $750,000 per year (the "Annual Amount"), for a period
equal to the greater of 15 years or the life of Employee; provided, however,
that in the event of the termination of Employee's employment due to death or
Disability prior to March 31, 2001, the Annual Amount described above shall
equal $950,000 until March 31, 2001, after which time the Annual Amount shall
equal $750,000; and provided further that Employee shall not be entitled to any
amounts under this Section 4.4 if Employee's employment is terminated prior to a
Change in Control for Just Cause or without Good Reason. In addition, the
Annual Amount shall be adjusted annually to reflect increases in the cost of
living after the date hereof, as measured by the Consumer Price Index ("CPI")
for all urban consumers calculated by the Bureau of Labor Statistics (or any
successor or replacement index). If Employee shall die before or after the
payments described above shall have commenced and before all amounts required to
be paid pursuant to Section 4.4 shall have been paid to Employee, then the
unpaid portion of such amounts shall continue to be paid in monthly installments
to Employee's surviving spouse. If Employee's surviving spouse dies before all
amounts required to be paid have been paid, then any remaining installments
shall be paid to the personal representative of the estate of the surviving
spouse, and pass as a part thereof. If Employee shall not be married at the
time of his death, then any such payments shall be made to Employee's
beneficiary designated in writing to the Company by Employee, or in the absence
thereof, to the personal representative of the estate of Employee, to pass as a
part thereof.
(b) Upon the termination of Employee's employment by the
Company, whether due to death, Disability, resignation (whether or not for Good
Reason) or discharge (whether or not for Just Cause), the Company shall secure
its obligations under this Section 4.4
-3-
<PAGE>
as described below. In the case of a termination of Employee's employment
(whether or not after any Change in Control), the Company shall pay to Employee
cash in an amount sufficient to permit Employee to purchase a fully paid annuity
contract issued by an insurance company acceptable to Employee, in his sole
discretion, providing for the payment to Employee of the amounts required to be
paid pursuant to this Section 4.4 ("Section 4.4 Payments"), and shall also pay
to Employee cash in an amount sufficient to pay Employee's income taxes
(calculated at the highest marginal federal income tax rate and after taking
into account any applicable surtaxes and other generally applicable taxes which
would have the effect of increasing the marginal federal income tax rate, and,
if applicable, at the highest marginal state income tax rate in effect in the
State of Texas) payable upon receipt of any such annuity contract (which payment
of income taxes and its effect on the taxability of the payments under the
annuity contract shall be taken into account in establishing the annuity
contract, which will be designed to provide Employee with the same after-tax
benefit that he would have received if the Company directly made the Section 4.4
Payments assuming the highest federal and Texas marginal income tax rates in
effect at the time of the establishment of the annuity); provided however, that
such cash payment to Employee to purchase this annuity shall not release the
Company from its obligations hereunder in the event that as a result of changes
in the CPI such cash is not sufficient to make the payments required by this
Section 4.4.
(c) Upon the effective date of this Agreement, the Company shall
establish a "rabbi trust" for the benefit of Employee into which there shall be
contributed by the Company cash in an amount sufficient to purchase the annuity
contract and pay the anticipated income taxes contemplated by the preceding
subparagraph (b) upon the termination of Employee's employment at any time
during the term of this Agreement without any regard as to whether such
termination is for Just Cause or without Good Reason prior to a Change in
Control. Any instruments establishing such rabbi trust shall in all respects be
satisfactory in form and substance to Employee and his counsel.
4.5 MEDICAL BENEFITS.
(a) Employee is presently a party to that certain Executive
Health Care Benefits and Consulting Agreement between the Company and Employee
dated January 27, 1993 (the "Medical Benefits Agreement"), which is incorporated
herein by reference. The Medical Benefits Agreement shall remain in full force
and effect, except that it is hereby clarified that the Medical Benefits
Agreement shall apply upon Employee's termination from employment by the
Company, whether due to death, Disability, resignation (whether or not for Good
Reason) or discharge (whether or not for Just Cause) and except that the Company
further agrees that at no time after the date of the EARLIER of Employee's
termination of employment, a Change in Control, or the occurrence of an event
constituting Good Reason (whether or not
-4-
<PAGE>
the Employee actually terminates his employment on account of the event) shall
the Health Care Plan (as defined in the Medical Benefits Agreement) provide
benefits which are not the same, in all material respects, as the coverage being
provided under the Company's Health Care Plan to Employee and his spouse as of
the date of the EARLIER of Employee's termination of employment, a Change in
Control, or the occurrence of an event constituting Good Reason (whether or not
the Employee actually terminates his employment on account of the event) and in
the event that at any time the Health Care Plan does not provide such coverage
the Company shall be required to take the actions provided for in the Medical
Benefits Agreement so as to provide to Executive and his Spouse (as defined in
the Medical Benefits Agreement) coverage which, in all material respects, is the
same as the coverage that is being provided under the Company's Health Care Plan
to Executive and his spouse as of the date of the EARLIER of the Employee's
termination of employment, a Change in Control, or the occurrence of an event
constituting Good Reason (whether or not the Employee actually terminates his
employment on account of the event).
(b) So long as Employee is employed by the Company (or any
successor or assignee of the Company), Employee and his spouse shall be provided
coverage under a Health Care Plan at least consistent with the plans providing
such coverage to the Chief Executive Officer and other senior officers of the
Company (or any successor of the Company) with respect to the terms and
conditions of coverage and other substantive provisions of such plans, but in no
event shall the Company (or any successor or assignee of the Company) fail to
provide to Employee and his spouse coverage under a Health Care Plan which, in
all material respects, is the same as the coverage that is being provided under
the Company's Health Care Plan to Employee and his spouse as of the date of a
Change in Control.
(c) To the extent that there are any adverse tax consequences to
the Employee in connection with the provision of the benefits under this Section
4.5, the Company shall pay the Employee a cash amount sufficient to pay all
federal and state income taxes, calculated at the highest marginal income tax
rates then in effect and after taking into account any applicable surtaxes and
other generally applicable taxes which would have the effect of increasing the
marginal income tax rates, imposed with respect to the benefits provided
pursuant to this Section 4.5 or the payment contemplated by this sentence, the
effect being that Employee will have no out-of-pocket cost due to income taxes
associated with the benefits provided pursuant to this Section 4.5.
4.6 INCAPACITY. If Employee or any other person entitled to the
payment of benefits hereunder shall at the time any payment is due be
incapacitated, the Company shall make such payment to the legally appointed
conservator or guardian of such person, or if no conservatorship or guardianship
shall have been established, the Company may, in the case of temporary
incapacity, apply such payment, or any portion thereof, for the benefit of such
person.
4.7 OFFSETS. The compensation and benefits provided hereunder are in
addition to all other compensation and benefits provided by the Company or by
any other employer of Employee, or by any governmental agency, and shall not be
reduced by any amount payable under any pension or retirement arrangement,
social security, or any other government benefit or payment. In addition, the
Company hereby agrees that in the event of any dispute with respect to the
payment of compensation or benefits to Employee hereunder that they shall not
have the right to withhold any such payments or to offset against any such
payments any other
-5-
<PAGE>
amounts that may otherwise be payable or owed by Employee to the Company, except
in accordance with an order obtained pursuant to the procedures described in
Section 7 hereof.
5. CONFIDENTIAL INFORMATION; NON-COMPETITION.
5.1 GENERAL. Employee acknowledges that during his employment by,
and as a result of his relationship with, the Company he will obtain knowledge
of and gain access to information regarding the Company's (including for
purposes of this Section 5 all former, current, and future subsidiaries of the
Company) business, operations, products, proposed products, production methods,
processes, customer lists, advertising, marketing and promotional plans and
materials, price lists, pricing policies, financial information and other trade
secrets, confidential information and material proprietary to the Company or
designated as being confidential by the Company which is not generally known by
non-Company personnel, including information and material originated, discovered
or developed in whole or in part by Employee (collectively referred to herein as
"Confidential Information"). Employee agrees that during the term of this
Agreement and, to the fullest extent permitted by law, thereafter, he will, in a
fiduciary capacity for the benefit of the Company, hold all Confidential
Information strictly in confidence and will not directly or indirectly reveal,
report, disclose, publish or transfer any of such Confidential Information to
any person, firm or other entity or utilize any of the Confidential Information
for any purpose, except in furtherance of the Company's business or his
employment under this Agreement.
5.2 RETURN OF MATERIALS. Employee agrees that upon the expiration or
earlier termination of this Agreement he will at the Company's request surrender
and return to the Company all lists, books, records and other Confidential
Information of the Company, or obtained in connection with the Company's
business, it being expressly acknowledged by Employee that all such items are
the exclusive property of the Company, and Employee shall not make or retain any
copies thereof.
5.3 NON-COMPETITION. Employee agrees that during the term of this
Agreement he will neither directly nor indirectly engage in a business competing
with any of the businesses conducted by the Company or any of its subsidiaries,
nor without the prior written consent of the Board of Directors of the Company,
directly or indirectly have any equity interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, director, officer,
employee, partner or consultant, or otherwise engage, invest or participate in
any business which is competitive with any of the businesses conducted by the
Company or by any subsidiary of the Company; provided, however, that nothing
contained in this Section 5.3 shall prevent Employee from investing or trading
in stocks, bonds, commodities, securities, real estate or other forms of
investment for his own account and benefit (directly or indirectly), so long as
such investment activities do not interfere with Employee's services to be
rendered hereunder and are consistent with the conflict of interest provisions
contained in the Company's Business Ethics Policy as it exists from time to
time.
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6. TERMINATION PRIOR TO EXPIRATION OF TERM. Employee's employment, and
his rights under this Agreement, may be terminated prior to the expiration of
the term of this Agreement (as provided in Section 3 hereof) only as provided in
this Section 6.
6.1 DISCHARGE OR RESIGNATION.
(a) Employee may be discharged prior to the expiration of the
term of this Agreement only for Just Cause. For the purpose of any provision of
this Agreement, the termination of Employee's employment shall be deemed to have
been for "Just Cause" only: (i) if termination of his employment shall have
been the result of an act or acts of dishonesty on the part of Employee
constituting a felony and resulting or intended to result directly or indirectly
in gain or personal enrichment at the expense of the Company, or (ii) if during
the Term of Employment there has been a breach by Employee of the provisions of
Section 2.1 above, relating to the time to be devoted to the business and
affairs of the Company, or of Section 5, relating to Confidential Information
and non-competition, and such breach results in demonstratable material injury
to the Company, and with respect to any alleged breach of Section 2.1 or Section
5, Employee shall have either failed to remedy such alleged breach within 30
days after his receipt of written notice from the Company pursuant to a
resolution duly adopted by the Board of Directors of the Company after notice to
the Employee and an opportunity to be heard demanding that he remedy such
alleged breach, or shall have failed to take all reasonable steps to that end
during such 30-day period and thereafter; PROVIDED, that there shall have been
delivered to Employee a certified copy of the resolution of the Board of
Directors of the Company adopted by the affirmative vote of not less than two-
thirds of the entire membership of the Board of Directors (other than Employee,
if he is then a member of the Board of Directors) at a meeting called and held
for that purpose and at which Employee was given an opportunity to be heard,
finding that Employee was guilty of conduct set forth in subparagraphs (i) or
(ii) above, specifying the particulars thereof in detail. "Just Cause" shall
not include the death or Disability of Employee.
(b) Anything in this Section 6.1 or elsewhere in this Agreement
to the contrary notwithstanding, the employment of Employee shall in no event be
considered to have been terminated for Just Cause if termination of his
employment took place as the result of (i) bad judgment or negligence on the
part of Employee; (ii) an act or omission without intent of gaining therefrom
directly or indirectly a profit to which Employee was not legally entitled;
(iii) an act or omission believed by Employee in good faith to have been in or
not opposed to the interests of the Company; (iv) an act or omission in respect
of which a determination could properly be made that Employee met the
applicable standard of conduct prescribed for indemnification or reimbursement
or payment of expenses under the laws of the state of incorporation of the
Company or pursuant to the terms of any policy of directors' and officers'
liability insurance that may be applicable to directors and officers of the
Company, in each case as in effect at the time of such act or omission; (v) an
act or omission which occurred more than 12 calendar months prior to the
Employee's having been given notice of the termination of his employment for
such act or omission unless the commission of such act or such omission could
not at the time of such commission or omission have been known to a member of
the Board of
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<PAGE>
Directors of the Company (other than Employee, if he is then a member of the
Board of Directors), in which case more than 12 calendar months from the date
that the commission of such act or such omission was or could reasonably have
been so known; or (vi) a continuing course of action which commenced and was or
could reasonably have been known to a member of the Board of Directors of the
Company (other than Employee) more than 12 calendar months prior to notice
having been given to Employee of the termination of his employment.
(c) Employee may resign prior to the expiration of the term of
this Agreement for Good Reason at any time upon providing written notice to the
Company and the Employee's continued employment with the Company after an event
constituting Good Reason has occurred shall not be deemed a waiver of the
Employee's right to terminate his employment for such Good Reason at any time
after the event and receive the benefits under Section 6.1(d)(ii). "Good
Reason" shall mean the material failure by the Company to fulfill its
obligations under this Agreement, to the extent not remedied in a reasonable
period of time, but in no event more than 30 days, after receipt of written
notice from Employee specifying the material failure by the Company. Without
limiting other circumstances which may constitute Good Reason, (i) any reduction
or attempted reduction of compensation or benefits below that required by
Section 4, (ii) any failure to elect or reelect Employee to, or removal of
Employee from, the offices described in Section 1, (iii) any significant change
in the nature or scope of the authorities, powers, functions or duties attached
to the offices described in Section 1, (iv) any change in the Employee's
position as Chairman, Chief Executive Officer, and President of the Company, or
(v) any determination by Employee made in good faith that as a result of a
change in circumstances since the date of this Agreement significantly affecting
his offices and positions he is unable to carry out the authorities, powers,
functions or duties attached to his offices and positions, shall be deemed
material failure by the Company to fulfill its obligations under this Agreement.
For a resignation which occurs coincident with or following a Change in Control,
"Good Reason" shall also mean the failure by the Company or its successors or
assigns to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if a succession or assignment had not occurred.
(d) (i) If prior to a Change in Control Employee is discharged
for Just Cause or resigns without Good Reason, the Company shall not be
obligated to pay Employee any sums of money pursuant to Section 4.1 other than a
cash lump sum payment equal to all compensation and benefits due Employee as of
the date of discharge or resignation, including the bonus for the period of his
employment prior to the discharge or resignation (all cash compensation to be
based on annual cash compensation of not less than $950,000 per year,
irrespective of the time at which such cash compensation is otherwise payable)
annualized on a reasonable basis acceptable to the Employee; however, if at the
end of such year it is determined that the Employee's annual compensation would
have been higher than the annualized amount used to calculate this payment, the
Company shall pay the Employee an amount in a cash lump sum equal to a
proportionate share in the increase based on his period of employment during the
year in which Employee was discharged or resigned. Employee's other
compensation and benefits under this Agreement, including without limitation
those provided pursuant to
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<PAGE>
Section 4.5, shall not be impaired or otherwise adversely affected by
termination of Employee's employment; provided, however, that Employee shall not
be entitled to any amounts under Section 4.4 if Employee's employment is
terminated prior to a Change in Control for Just Cause or without Good Reason.
(ii) If prior to a Change in Control Employee is discharged
without Just Cause or resigns for Good Reason, or if Employee's employment is
terminated after a Change in Control (even if for Just Cause or without Good
Reason), Employee, or his spouse, estate or otherwise designated beneficiary, as
the case may be, shall be entitled to the following:
(1) a cash lump sum payment equal to all compensation
and benefits due Employee pursuant to Section 4.1 as of the date of discharge or
resignation, including the bonus for the period of his employment prior to the
discharge or resignation (all cash compensation to be based on annual cash
compensation of not less than $950,000 per year, irrespective of the time at
which such cash compensation is otherwise payable) annualized on a reasonable
basis acceptable to the Employee; however, if at the end of such year it is
determined that the Employee's annual compensation would have been higher than
the annualized amount used to calculate this payment, the Company shall pay the
Employee an amount in a cash lump sum equal to a proportionate share in the
increase based on his period of employment during the year in which Employee was
discharged or resigned; plus
(2) a cash lump sum payment equal to the compensation
pursuant to Section 4.1 which would be received by Employee for the remainder of
the Term of Employment (using annual compensation of $950,000 per year or, if
higher, the highest annual amount of Employee's compensation or annualized
compensation calculated as described in Section 6(d)(ii)(1) in any year
(including the year in which Employee terminates) during which this Agreement
was in force). The entire lump sum amount shall be paid concurrent with any
discharge or within 3 business days of the date of any resignation. Employee
shall have no duty to mitigate or attempt to mitigate his damages. Employee's
other compensation and benefits under this Agreement, including without
limitation those provided pursuant to Sections 4.4 and 4.5, shall not be
impaired or otherwise adversely affected by termination of Employee's
employment.
(e) For purposes of this Agreement, a "Change in Control" shall
be deemed to have occurred on the earliest of the following dates:
(i) The date any entity or person (including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, or any
comparable successor provisions) shall have become the beneficial owner of, or
shall have obtained voting control over, twenty percent (20%) or more of the
then outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company approve a
definitive agreement to sell or otherwise dispose of substantially all the
assets of the Company, or to merge or consolidate the Company with or into
another corporation, in which the Company
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<PAGE>
is not the continuing or surviving corporation or pursuant to which any common
shares of the Company would be converted into cash, securities or other property
of another corporation, other than a merger of the Company in which holders of
common shares immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger as immediately before, or (2) the date the Company enters into a binding
agreement to sell or otherwise transfer (including without limitation by merger
or consolidation) to one or more unaffiliated entities or persons not less than
a majority of the outstanding capital stock of the Company; or
(iii) The date upon which, during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company (the "Company Board") cease for any reason
to constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's stockholders, of each new Company Board
member was approved by a vote of at least three-fourths of the Company Board
members then still in office who were Company Board members at the beginning of
such period.
6.2 DISABILITY. (a) The term "Disability" shall mean an illness or
accident which prevents Employee from performing with reasonable accommodation
by the Company his duties under this Agreement for a period of 12 consecutive
months. Unless Employee shall have returned to full-time performance of his
duties within such 12-month period, this Term of Employment under this Agreement
shall be deemed to have ended as of the close of business on the last day of
such twelve 12-month period. In the event of the Disability of Employee
resulting in the termination of the Term of Employment, Employee shall be
entitled to the full cash compensation and benefits provided for in Section 4
above for the period of such Disability, but shall not receive any cash
compensation pursuant to Section 4.1 for a period in excess of 12 months after
the onset of such Disability. Employee's other compensation and benefits under
this Agreement, including without limitation those provided pursuant to Sections
4.4 and 4.5, shall not be impaired or otherwise adversely affected by
termination of Employee's employment on account of Disability.
6.3 DEATH. The death of Employee shall result in the termination of
the Term of Employment, and his spouse, estate or otherwise designated
beneficiary shall be entitled to the benefits described in Section 4, including
without limitation Sections 4.4 and 4.5. The Company shall not be obligated to
pay the estate or personal representative of Employee any sums of money pursuant
to Section 4.1 other than a cash lump sum payment equal to all compensation and
benefits due Employee at the date of his death (all cash compensation to be
based on annual cash compensation of not less than $950,000 per year,
irrespective of the time at which such cash compensation is otherwise payable)
annualized on a reasonable basis acceptable to the estate or personal
representative of the Employee; however, if at the end of such year it is
determined that the Employee's annual compensation would have been higher than
the annualized amount used to calculate this payment, the Company shall pay the
estate or personal representative of the Employee an amount in a cash lump sum
equal to a proportionate share in the increase based on his period of employment
during the year in which the Employee died. Employee's other compensation and
benefits under this Agreement, including without
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<PAGE>
limitation those provided pursuant to Sections 4.4 and 4.5, shall not be
impaired or otherwise adversely affected by termination of Employee's employment
on account of death.
6.4 REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES.
(a) In the event that Employee is deemed to have received an
excess parachute payment (as such term is defined in Section 280G(b) of the
Code) which is subject to the excise taxes (the "Excise Taxes") imposed by
Section 4999 of the Code in respect of any payment of compensation to Employee
from the Company pursuant to this Agreement, in whatever form, the Company shall
make the Bonus Payment (as defined below) to Employee promptly after the date on
which Employee received or is deemed to have received any excess parachute
payments.
(b) The term "Bonus Payment" means a cash payment in an amount
equal to the sum of (A) all Excise Taxes payable by Employee, plus (B) all
additional Excise Taxes and federal or state income taxes to the extent such
taxes are imposed in respect of the Bonus Payment, such that Employee shall be
in the same after-tax position and shall have received the same benefits that he
would have received if the Excise Taxes had not been imposed. For purposes of
calculating any income taxes attributable to the Bonus Payment, Employee shall
be deemed for all purposes to be paying income taxes at the highest marginal
federal income tax rate, taking into account any applicable surtaxes and other
generally applicable taxes which have the effect of increasing the marginal
federal income tax rate and, if applicable, at the highest marginal state income
tax rate to which the Bonus Payment and Employee are subject. An example of the
calculation of the Bonus Payment is set forth below: Assume that the Excise Tax
rate is 20%, that the highest federal marginal income tax rate is 40% and that
Employee is not subject to state income taxes. Assume that Employee has
received an excess parachute payment in the amount of $500,000, on which
$100,000 in Excise Taxes are payable. The amount of the required Bonus Payment
is $250,000. The Bonus Payment, less Excise Taxes of $50,000 and income taxes
of $100,000, yields $100,000, the amount of the Excise Taxes payable in respect
of the excess parachute payment.
(c) Employee agrees to cooperate reasonably with the Company to
minimize the amount of the excess parachute payments, including without
limitation assisting the Company in establishing that some or all of the
payments received by Employee contingent on a change described in Section
280G(b)(2)(A)(i) of the Code are reasonable compensation for personal services
actually rendered by Employee before the date of such change or to be rendered
by Employee on or after the date of such change. In the event that the Company
is able to establish that the amount of the excess parachute payments is less
than originally anticipated by Employee, Employee shall refund to the Company
any excess Bonus Payment to the extent not required to pay Excise Taxes or
income taxes (including those incurred in respect of the payment of the Bonus
Payment). Notwithstanding the foregoing, Employee shall not be required to take
any actions which his tax advisor advises him in writing (i) is improper or (ii)
exposes Employee to material personal liability, and Employee may require the
Company to
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<PAGE>
deliver to Employee an indemnification agreement in form and substance
satisfactory to Employee as a condition to taking any action required by this
Section 6.4.
(d) The Company shall make any payment required to be made under
this Agreement in cash and on demand. Any payment required to be paid by the
Company under this Agreement which is not paid within five days of receipt by
the Company of Employee's demand therefor shall thereafter be deemed delinquent,
and the Company shall pay to Employee immediately upon demand interest at the
highest nonusurious rate per annum allowed by applicable law from the date such
payment becomes delinquent to the date of payment of such delinquent sum.
(e) In the event that there is any change to the Code which
results in the recodification of Section 280G or Section 4999 of the Code, or in
the event that either such section of the Code is amended, replaced or
supplemented by other provisions of the Code of similar import ("Successor
Provisions"), then this Agreement shall be applied and enforced with respect to
such new Code provisions in a manner consistent with the intent of the parties
as expressed herein, which is to assure that Employee is in the same after-tax
position and has received the same benefits that he would have been in and
received if any taxes imposed by Section 4999 or any Successor Provisions had
not been imposed.
7. ARBITRATION.
7.1 GENERAL. In the event that Employee's employment shall be
terminated by the Company during the term of this Agreement and such termination
is alleged to be for Just Cause, or Employee's right to terminate his employment
for Good Reason under Section 6.1(c) shall be questioned by the Company, or for
any other reason, or in the event of any other dispute arising under or in
connection with this Agreement, Employee shall have the right, in addition to
all other rights and remedies provided by law, at his sole election either to
seek arbitration in Houston, Texas under the rules of the American Arbitration
Association (the "AAA") by serving a notice to arbitrate upon the Company or to
institute a judicial proceeding in a court of competent jurisdiction located in
Harris County, Texas. The arbitrator shall be selected by mutual agreement of
the parties, if possible. If the parties fail to reach an agreement upon the
appointment of an arbitrator within 30 days following the receipt by the Company
of Employee's desire to arbitrate, the arbitrator shall be selected from a panel
or panels of persons submitted by the AAA. The selection process shall be that
which is set forth in the AAA Commercial Arbitration Rules then prevailing. In
the event that the Company institutes any legal proceeding against Employee to
resolve a dispute under this Agreement, Employee shall have the right either to
seek arbitration in Houston, Texas or to institute a judicial proceeding in a
court located in Harris County, Texas, as provided in the preceding sentence,
and the Company shall dismiss its proceeding or take such other action as may be
reasonably requested by Employee in order for such proceeding to be brought in
the forum selected by Employee in accordance with the preceding sentence. Any
award rendered pursuant to this Section 7.1 shall be final and binding on the
parties to this Agreement.
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<PAGE>
7.2 PROCEDURE. The Company shall have the burden of proving Just
Cause for any discharge of Employee under Section 6.1, and the Company shall
have the burden of proving that Good Reason did not exist in respect of any
resignation by Employee. Judgment upon any award of any arbitrator may be
entered in any court having jurisdiction, or application may be made to any such
court for the judicial acceptance of the award and for an order of enforcement.
7.3 COSTS AND EXPENSES. The Company shall pay the fees of any
arbitrator, witnesses and such other expenses as may be generated by an
arbitration, except Employee's attorneys' fees, unless the arbitrator concludes
that such arbitration procedure was not instituted in good faith by Employee.
In such event the arbitrator shall be empowered to allocate fees and assess
costs and other expenses of the arbitration, except attorneys' fees, as the
arbitrator may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
8. NON-ASSIGNMENT. This Agreement shall not be assignable nor the duties
hereunder delegable by Employee. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall the Company directly or indirectly transfer (including
without limitation by merger or consolidation) all or any substantial part of
the stock or assets of the Company without first obtaining in conjunction with
such transfer the express assumption of all of its obligations in this Agreement
by the successor, assignee or transferee.
9. REMEDIES. Employee acknowledges that the services he is to render
under this Agreement are of a unique and special nature, the loss of which
cannot reasonably or adequately be compensated for in monetary damages, and that
irreparable injury and damage will result to the Company in the event of any
default or breach of this Agreement by Employee. Because of the unique nature
of the Confidential Information, Employee further acknowledges and agrees that
the Company will suffer irreparable harm if Employee fails to comply with his
obligations in Section 5 hereof and that monetary damages would be inadequate to
compensate the Company for such breach. Accordingly, Employee agrees that the
Company will, in addition to any other remedies available to either of them at
law, in equity or, without limitation, otherwise, be entitled to injunctive
relief or specific performance to enforce the terms, or prevent or remedy the
violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
10. SURVIVAL. The provisions of Sections 5.1, 5.2, 7 and 9 shall survive
the expiration or earlier termination of this Agreement.
11. NOTICES. Any notices or other communications relating to this
Agreement shall be in writing and delivered personally or mailed by certified
mail, return receipt requested, to the party concerned at the address set forth
below:
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If to the Company: Kent Electronics Corporation
7433 Harwin Drive
Houston, Texas 77036
Attn: Chairman
If to Employee: At his residence address as maintained by the
Company in the regular course of its business
for payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this Section 11.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior written and oral and all contemporaneous oral agreements, understandings
and negotiations with respect to the subject matter hereof. This Agreement may
not be changed orally, but only by an agreement in writing signed by both
parties.
13. CONSTRUCTION. This Agreement shall be governed under and construed in
accordance with the laws of the State of Texas, without regard to the conflicts
of laws principles thereof. The paragraph headings and captions contained
herein are for reference purposes and convenience only and shall not in any way
affect the meaning or interpretation of this Agreement. It is intended by the
parties that this Agreement be interpreted in accordance with its fair and
simple meaning, not for or against either party, and neither party shall be
deemed to be the drafter of this Agreement.
14. SEVERABILITY. If any portion or provisions of this Agreement is
determined to be invalid, illegal or unenforceable, the remaining portions or
provisions hereof shall not be affected.
15. BINDING EFFECT. The rights and obligations of the parties under this
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
16. TERMINATION OF CERTAIN OTHER AGREEMENTS. Upon the execution of this
Agreement, that certain Executive Agreement between Company and Morrie K.
Abramson dated May 29, 1987, as amended by an Amendment to Executive Agreement
dated March 16, 1993, and that certain 1994 Kent Electronics Corporation Spousal
Salary Continuation Plan adopted on October 10, 1994 for the benefit of Employee
shall terminate. All other agreements or arrangements of the Company with or
for the benefit of the Employee in effect on the date hereof shall remain
effective, including but not limited to the obligations of the Company under the
Medical Benefits Agreement and that certain Agreement dated March 16, 1993
between the Company and Employee requiring a Bonus Payment in the event Employee
is deemed to have
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received an excess parachute payment under Section 280G of the Code, and the
parties hereto agree that such agreements shall be unaffected except as
expressly modified by this Agreement.
17. TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes that shall be
required to be withheld pursuant to applicable law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
/s/ Morrie K. Abramson
--------------------------------------------
Morrie K. Abramson
KENT ELECTRONICS CORPORATION
By:/s/ Stephen J. Chapko
-----------------------------------------
Stephen J. Chapko
Vice President, Treasurer and Secretary
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KENT ELECTRONICS CORPORATION
CHIEF EXECUTIVE OFFICER
DEFERRED COMPENSATION PLAN AND AGREEMENT
- ------------------------------------------------------------------------------
Kent Electronics Corporation (the "COMPANY") hereby establishes and enters
into the following Plan and Agreement with Morrie K. Abramson (the
"PARTICIPANT"), Chairman, President and Chief Executive Officer of the Company,
on and as of January 3, 1996:
W I T N E S S E T H:
WHEREAS, the Company desires to establish an executive deferred
compensation plan primarily for the purpose of providing deferred compensation
to the Participant; and
WHEREAS, it is the intention of the Company that the plan and the related
grantor trust will be considered to be unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and that all benefits paid under the plan shall be payable
either from the related grantor trust or the general assets of the Company.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good and
valuable consideration paid by each of the parties hereto to the other, and the
mutual agreements set forth herein of such parties, the receipt and sufficiency
of which are hereby acknowledged, the Company does hereby establish the Kent
Electronics Corporation Chief Executive Officer Deferred Compensation Plan and
Agreement (this "AGREEMENT" or "PLAN") and the Company and the Participant do
hereby agree as follows:
ARTICLE 1.
DEFINITIONS
- ------------------------------------------------------------------------------
The following additional definitions shall govern this Plan:
(a) BENEFICIARY means the person or persons designated in writing to
receive benefits, if any, upon the death of the Participant. If no such
designation is made or if the designated person is not living at the death of
the Participant, the designated Beneficiary shall be the deceased Participant's
spouse, if living, otherwise the trustee named under the Participant's last will
and testament, otherwise the personal representative, executors, or
administrators of the Participant's estate. Notwithstanding the preceding
sentence, the designated Beneficiary of a Participant married at date of death
shall be the Participant's spouse unless the Participant's spouse has consented
in writing to the Participant's naming a non-spouse Beneficiary. The consent of
the spouse to a non-spouse Beneficiary shall be irrevocable by the spouse. In
the event an unmarried Participant marries, such Participant's designated
Beneficiary shall be the Participant's spouse regardless of an existing
Beneficiary designation which shall be deemed
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revoked as of the date of marriage unless consented to in writing by the
Participant's spouse.
(b) BOARD OF DIRECTORS shall mean the Board of
Directors of the Company.
(c) CHANGE IN CONTROL shall mean a Change in Control, as defined in the
Trust Agreement.
(d) CODE shall mean the Internal Revenue Code of 1986, as amended.
(e) COMMITTEE shall mean the Compensation Committee of the Board of
Directors.
(f) COMPENSATION shall mean the Participant's total wages, salaries,
fees for professional service and other amounts received for personal
services actually rendered in the course of employment with the Company,
including commissions, compensation based on a percentage of profits, bonuses
and elective contributions. Elective contributions are amounts excludable
from the Participant's gross income under Sections 125, 402(e)(3) or 402(h)
of the Code and contributed by the Company, at the Participant's election, to
a Section 401(k) arrangement, a Simplified Employee Pension, a cafeteria plan
or a tax-sheltered annuity.
(g) DEFERRED COMPENSATION means the Compensation deferred pursuant to
Article 2 hereof.
(h) DISABILITY means a total and permanent disability resulting from a
mental or physical incapacity which prevents the Participant from performing the
full scope of his duties for the Company (as such duties exist on the date
immediately prior to the occurrence of such incapacity) and lasting or expected
to last for a period of at least 180 days. Disability shall be determined in
good faith by the Board of Directors of the Company based on the opinion of a
licensed physician.
(i) PERMITTED INVESTMENTS shall have the meaning set forth in the Trust
Agreement.
(j) PLAN YEAR means each fiscal year of the Company (i.e., the 52- or
53-week period which begins on the Sunday following the Saturday which is
closest to March 31, and ends on the Saturday which is closest to the
following March 31). However, the first Plan Year shall be from the date of
this Plan to March 30, 1996.
(k) TRUST shall mean the grantor trust established pursuant to the Trust
Agreement.
(l) TRUST AGREEMENT shall mean the Trust Agreement for the Kent
Electronics Corporation Chief Executive Officer Deferred Compensation Plan and
Agreement entered into on January 3, 1996, by and between the Company and
Texas Commerce Bank National Association, as trustee.
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(m) TRUSTEE shall mean Texas Commerce Bank National Association, as
trustee, or any successor Trustee named under and in accordance with the Trust
Agreement.
(n) TRUST FUNDS shall have the meaning set forth in the Trust Agreement.
ARTICLE 2.
PLAN BENEFIT AND DEFERRED COMPENSATION
- ------------------------------------------------------------------------------
(a) PERMITTED CASH COMPENSATION DEFERRALS: The Participant, to the extent
authorized by the Company, may from time to time defer payment of additional
cash Compensation to be earned by the Participant. Any deferral by the
Participant shall be made by written notice to the Company prior to the Plan
Year in which such cash Compensation is to be earned by or accrued on behalf of
the Participant. Any and all deferred cash Compensation shall be contributed by
the Company to the Trust and thereafter held in the Trust, subject to the terms
of this Plan and the Trust Agreement, for the benefit of the Participant and his
Beneficiary.
(b) BENEFIT ACCOUNTING. The Company shall maintain the following
bookkeeping accounts which shall reflect the interest of the Participant under
this Agreement:
A "CASH ACCOUNT" which shall reflect any cash bonus or other cash
Compensation from time to time deferred by the Participant and placed
in the Trust on his behalf pursuant hereto, increased by an amount
equivalent to earnings at a specified rate of return on the balance
existing in the Cash Account. The rate of return for any period of
time shall, unless otherwise agreed to by the Participant, be a rate
equal to the average rate of interest or other return earned on the
Trust Funds held in the Trust and invested in Permitted Investments
for such period, or in the event that for any reason (including
without limitation because such Trust Funds have been paid to the
Company's creditors upon its insolvency) no Trust Funds held in the
Trust are invested in Permitted Investments, at a rate of return of
12% per annum. The Cash Account shall be reduced by the amount of any
payments to the Participant.
The total balance of the Cash Account shall hereinafter be referred to as the
"DEFERRED COMPENSATION ACCOUNT BALANCE."
(c) ANNUAL STATEMENT OF TRUSTEE: Within a reasonable period of time after
the last day of each Plan Year, the Company will cause the Trustee to furnish
the Participant with an annual statement of all Trust assets as of the last day
of such Plan Year. The Company will cause the Trustee to credit (debit) the
Trust with all investment and reinvestment earnings (and losses) allocable to
the Trust.
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(d) SOURCE OF FUNDS: Amounts payable under this Agreement shall be paid
first from any assets held in the Trust, which is intended to provide for the
payment of benefits hereunder and then, to the extent that the assets of the
Trust are insufficient, out of the general assets of the Company to the extent
available. Upon the Participant becoming entitled to any payment under this
Plan, the Company shall promptly direct the Trustee to make such payment to the
extent there are sufficient assets in the Trust. Any rights of the Participant
to payments under this Agreement, regardless of whether payable from the Trust
or by the Company, however, shall not be greater than the right of any unsecured
creditor of the Company. It is expressly provided hereunder that, except
insofar as amounts are contributed by the Company to the Trust, no assets of the
Company shall be segregated or set aside to fund the obligations of the Company
under this Plan.
ARTICLE 3.
GENERAL CREDITOR STATUS OF PARTICIPANT
ASSET OWNERSHIP
- ------------------------------------------------------------------------------
The Participant shall be regarded as an unsecured general creditor of the
Company with respect to any rights derived by the Participant from the existence
of this Plan or the existence of the Trust.
Beneficial ownership of any assets which the Company may use to pay
deferred compensation benefits hereunder, including assets held by the Trustee
in the Trust, shall at all times remain with the Company. The Participant and
his designated Beneficiary shall not have any property interest whatsoever in
any specific assets of the Company or the Trust by virtue of this Plan or the
Trust. All such assets shall remain subject to the claims of the Company's
general creditors until such time as payments are actually made from the Trust
to the Participant or his Beneficiary.
The Company covenants and agrees that, prior to using assets held by the
Trustee in Trust hereunder to satisfy any creditors of the Company (other than
the Participant or his Beneficiary), it will use assets of the Company other
than assets held by the Trustee in Trust hereunder to satisfy such creditors at
all times, including in the event of insolvency or bankruptcy, to the extent
such other assets are available.
ARTICLE 4.
VESTING
- ------------------------------------------------------------------------------
The Participant shall at all times be fully vested in the benefits provided
by this Plan.
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ARTICLE 5.
PAYMENT OF DEFERRED COMPENSATION
- ------------------------------------------------------------------------------
The entire value of the Deferred Compensation Account Balance shall be
paid to the Participant on the first to occur of the following:
(i) April 2, 2001;
(ii) the Participant's death or Disability;
(iii) the termination of Participant's employment with the
Company; or
(iv) a Change in Control.
At such time as the Participant is entitled to the receipt of benefits from
the Plan, such Participant shall be entitled to receive his benefit hereunder in
cash.
ARTICLE 6.
NON-ASSIGNMENT
- ------------------------------------------------------------------------------
The right of the Participant, or designated Beneficiary of the Participant,
to any benefit or distribution hereunder shall not be subject in any manner to
attachment or other legal process for the debts of such Participant or
designated Beneficiary. Any rights, benefits, or payment hereunder shall not be
subject to anticipation, alienation, sale, transfer, assignment or encumbrance
except by will, intestacy laws, or other laws of descent and distribution or
pursuant to a qualified domestic relationship order as defined by the Code or
Title I of ERISA, or the rules thereunder.
ARTICLE 7.
PLAN BINDING
- ------------------------------------------------------------------------------
This Plan shall be binding upon and inure to the benefit of the parties
hereto and their successors, assigns, heirs, executors, administrators and legal
representatives.
ARTICLE 8.
ADMINISTRATION
- ------------------------------------------------------------------------------
Unless otherwise determined by the Board of Directors of the Company, the
Committee shall administer this Plan and shall have the authority to determine
the nature and amounts of the rights and interests of the Participant under the
terms of the Plan.
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<PAGE>
ARTICLE 9.
NO GUARANTEE OF EMPLOYMENT
- ------------------------------------------------------------------------------
Any distributions under this Plan shall be independent of, and in addition
to, those under any other plan, program or agreement which may be in effect
between the parties hereto, or any other Compensation payable to the Participant
or the Participant's designee by the Company or any other employer. This Plan
shall not be construed as a contract of employment nor does it restrict the
right of the Company to discharge the Participant at will or the right of the
Participant to terminate employment.
ARTICLE 11.
CONSTRUCTION
- ------------------------------------------------------------------------------
This Plan shall be construed in accordance with and governed by the laws of
the State of Texas applicable to contracts made and to be wholly performed
within the State of Texas, except to the extent subject to federal law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written in several original counterparts each of which
shall be deemed the original, and each of which shall constitute but one and the
same document.
KENT ELECTRONICS CORPORATION
By:/s/ STEPHEN J. CHAPKO
-------------------------------------------
Name: Stephen J. Chapko
-----------------------------------------
Title: Vice President, Treasurer & Secretary
---------------------------------------
/s/ MORRIE K. ABRAMSON
--------------------------------------------
Morrie K. Abramson
<PAGE>
TRUST AGREEMENT FOR KENT ELECTRONICS CORPORATION
CHIEF EXECUTIVE OFFICER
DEFERRED COMPENSATION PLAN AND AGREEMENT
AND EMPLOYMENT AGREEMENT
This Trust Agreement is made this 3rd day of January, 1996 by and between
Kent Electronics Corporation (the "COMPANY") and Texas Commerce Bank National
Association, as trustee (the "TRUSTEE").
WHEREAS, the Company has adopted a nonqualified deferred compensation plan
known as the Kent Electronics Corporation Chief Executive Officer Deferred
Compensation Plan and Agreement (the "PLAN");
WHEREAS, the Company has entered into an Employment Agreement with Morrie
K. Abramson dated January 3, 1996 (the "Employment Agreement");
WHEREAS, the Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individual participating in such Plan and
under the terms of the Employment Agreement;
WHEREAS, the Company wishes to establish a trust (the "TRUST") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's creditors in the event the Company is insolvent (as herein
defined) until paid to the participant in the Plan and to the employee under the
Employment Agreement (collectively the "PARTICIPANT") or his beneficiary under
the Plan and Employment Agreement (collectively the "BENEFICIARY") in such
manner and at such times as specified in the Plan and Employment Agreement;
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation to the chief executive officer of the Company for purposes of Title
I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
and;
WHEREAS, it is the intention of the Company to make contributions to the
Trust for the purpose of accumulating assets to assist it in fulfilling its
obligations under the Plan and under the Employment Agreement;
NOW, THEREFORE, in consideration of the premises and of the sum of One
Dollar ($1.00) paid by the Trustee to the Company, the receipt and sufficiency
of which is hereby acknowledged, the Company hereby grants, conveys, assigns,
transfers, pledges, sets over and confirms to the Trustee, forever, the
securities or other funds or properties now or hereafter contributed in Trust to
the Trustee hereunder for the benefit of the Participant or his Beneficiary, and
grant a security interest therein for the purposes herein expressed, to be
comprised of, held and disposed of as follows:
<PAGE>
SECTION 1. ESTABLISHMENT OF TRUST.
(a) The Trustee hereby accepts this Trust, as evidenced by the Trustee's
execution of this Trust Agreement. The Trustee shall hold, administer and
invest the Trust Fund and all sums paid to the Trustee in accordance with the
provisions of this Trust Agreement. The Trustee shall receive any contributions
made to the Trustee in cash, or in the form of such other property as the
Trustee may from time to time deem acceptable and which shall have been
delivered to the Trustee. All contributions so received, together with all
income thereon, and any and all other increments and accruals thereon, shall
hereinafter be collectively referred to as the "TRUST FUNDS" and shall be held,
administered and paid by the Trustee pursuant to the terms of this Trust
Agreement.
(b) The Trust hereby established shall be irrevocable; provided, however,
that the Trust Funds will be subject to the claims of the Company's general
creditors under federal and state law in the event the Company is insolvent.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The Trust Funds shall be held separate and apart from other funds of
the Company and shall be used exclusively for the uses and purposes of the
Participant and general creditors as herein set forth. The Participant and his
Beneficiary shall have no preferred claim on, or any beneficial ownership
interest in, any Trust Funds. Any rights created under the Plan, the Employment
Agreement and this Trust Agreement shall be unsecured contractual rights of the
Participant and his Beneficiary against the Company.
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or property in trust with the Trustee to
be held, administered and disposed of by the Trustee as provided in this Trust
Agreement.
(f) The Company will provide the Trustee any reconciliation, allocation,
investment or other information concerning, or representation with respect to,
the cash or property contributed to the Trust as the Trustee may require. The
Trustee shall have no duty or authority to (1) require any deposits to be made
under the Plan or the Employment Agreement, (2) compute any amount to be
deposited under the Plan or the Employment Agreement with the Trustee, or (3)
determine whether assets received by the Trustee comply with the Plan or the
Employment Agreement. The Trust Funds may, in the Trustee's discretion, be held
in trust by an affiliate of the Trustee.
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<PAGE>
SECTION 2. PAYMENTS TO PARTICIPANT AND HIS BENEFICIARY.
(a) The Company shall deliver to the Trustee written notice (the "PAYMENT
NOTICE") that (i) indicates the amounts payable to the Participant or his
Beneficiary and the appropriate recipient, (ii) indicates the reason for the
payment and (iii) provides instructions acceptable to the Trustee for
determining the amount so payable, the form of payment and the time for payment
of Trust Funds. Except as otherwise provided herein, the Trustee shall make
payments to the Participant or his Beneficiary in accordance with such Payment
Notice. The Trustee shall make payments in accordance with directions set out
in the Payment Notice without further inquiry of any person, and the Trustee
shall have no duty or responsibility to question or determine whether such
payments are in accordance with the terms of the Plan or Employment Agreement.
The Payment Notice shall be delivered to the Trustee not less than 10 business
days prior to the date on which a payment is to be made, unless the Trustee
agrees to a shorter notice period. The Trustee shall make provision for the
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of the
Plan or the Employment Agreement, it being understood among the parties hereto
that (1) the Company shall on a timely basis provide the Trustee specific
information as to the amount of taxes to be withheld, and (2) the Company shall
be obligated to receive such withheld taxes from the Trustee and properly pay
and report such amounts to the appropriate taxing authorities.
(b) Except as otherwise provided in this Section 2(b), the Trustee shall
not make any payment from the Trust except pursuant to the written direction of
the Company as provided in Section 2(a) hereof. The Trustee shall make payment
in accordance with the Company's direction without any requirement to engage in
its own independent investigation regarding the payment, but shall provide the
Company with written confirmation of the fact and amount of such payment after
it is made in the form designated in the Payment Notice. Notwithstanding
anything contained herein to the contrary, upon the Trustee's receipt from the
Company or the Participant of written confirmation satisfactory to the Trustee
that a Change in Control (as hereinafter defined) with respect to the Company
has occurred, which confirmation the Company shall promptly provide in the event
of such a Change in Control, the Trustee shall pay all Trust Funds attributable
to contributions under the terms of the Plan to the Participant, but such
payment shall not change any rights of the Company or the Participant under the
Plan. Following a Change in Control, the Trustee shall be directed by the
Company or the Participant, in writing, regarding the same information as
contained in a Payment Notice and the Trustee shall follow such direction
without further inquiry as provided herein.
(c) The entitlement of the Participant or his Beneficiary to benefits
under the Plan or the Employment Agreement shall be determined by the Company or
such party as it shall designate under the Plan or the Employment Agreement.
(d) The Company may make payments of benefits directly to the Participant
or his Beneficiary, if applicable, as they become due under the terms of the
Plan or the Employment Agreement. The Company shall notify the Trustee of its
decision to make payments of benefits directly prior to the time amounts are
payable to the Participant or his Beneficiary. In addition,
3
<PAGE>
if Trust Funds are not sufficient to make payment of benefits in accordance
with the terms of the Plan or the Employment Agreement, the Company shall
make the balance of each such payment as such benefits are due. The Trustee
shall notify the Company in the event that the Trust Funds are not sufficient
to make a directed payment in full.
(e) The Trustee shall have no responsibility to determine whether the
Trust is sufficient to meet the obligations under the Plan or the Employment
Agreement, and shall not be liable for payments of any amounts or obligations in
excess of the value of the Trust's assets.
(f) It is the intention of the Company that the Trust Fund assist in
funding, in whole or in part, the Company's legal liabilities under the Plan and
the Employment Agreement and to have the balance of funds, if any, revert to the
Company after the legal liabilities of the Company under the Plan and the
Employment Agreement have been met. All income, deductions and credits of the
Trust Fund shall be included on the Company's income tax returns.
(g) The Trustee shall not make any payments hereunder to any Beneficiary
of the Participant prior to receiving appropriate evidence of the death of the
Participant.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN THE COMPANY IS INSOLVENT.
(a) The Trustee shall cease payment of benefits to the Participant and his
Beneficiary if the Company is insolvent. The Company shall be considered
"INSOLVENT" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due in the usual course of its business, (ii) the
Company files any proceeding under federal bankruptcy laws or state insolvency
statutes, or (iii) any creditor of the Company files any proceeding against the
Company under federal bankruptcy laws or state insolvency statutes, which
proceeding is not dismissed within 90 days of filing.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the Trust Funds shall be subject to claims of general
creditors of the Company under federal and state law as set forth below.
(1) The Company shall have the duty promptly to inform the Trustee in
writing of the Company's insolvency. If a person claiming to be a creditor of
the Company alleges in writing to the Trustee that the Company has become
insolvent, the Trustee shall determine whether the Company is insolvent and,
pending such determination, the Trustee shall discontinue payment of benefits to
the Participant or his Beneficiary. The Trustee shall not be liable or
responsible to the Company, Participant, Beneficiary or any other person for any
determination regarding the Company's solvency or insolvency that the Trustee
makes in good faith and in accordance with this Trust Agreement.
(2) Unless the Trustee has actual knowledge of the Company's
insolvency, or has received written notice pursuant to subsection 3(b)(1) above
from the Company of the
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<PAGE>
Company's insolvency or a person claiming to be a creditor alleging that the
Company is insolvent, the Trustee shall have no duty to inquire whether the
Company is insolvent. In making any such inquiry, the Trustee may rely on
such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency. The Company shall reimburse
the Trustee for all reasonable costs of making such determination.
(3) If at any time the Trustee has determined that the Company is
insolvent, the Trustee shall discontinue payments to the Participant or his
Beneficiary and shall hold the assets of the Trust for the benefit of the
Company's general creditors. Nothing in this Trust Agreement shall in any way
diminish any rights of the Participant or his Beneficiary to pursue their
respective rights as general creditors of the Company with respect to benefits
due under the Plan, the Employment Agreement or otherwise.
(4) The Trustee shall resume the payment of benefits to the
Participant or his Beneficiary in accordance with Section 2 of this Trust
Agreement only after the Trustee has determined that the Company is not
insolvent (or is no longer insolvent).
(c) Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to the
Participant or his Beneficiary under the terms of the Plan and/or the Employment
Agreement for the period of such discontinuance, less the aggregate amount of
any payments made to the Participant or his Beneficiary by the Company in lieu
of the payments provided for hereunder during any such period of discontinuance;
provided that the Company has given the Trustee the information with respect to
such payments made during the period of discontinuance prior to resumption of
payments by the Trustee and the Trustee receives a Payment Notice pursuant to
Section 2 hereof.
SECTION 4. PAYMENTS TO THE COMPANY.
Except as otherwise provided herein, the Company shall have no right or
power to direct the Trustee to return to the Company or to divert to others any
of the Trust Funds before all payment of benefits have been made to the
Participant or his Beneficiary pursuant to the terms of the Plan and the
Employment Agreement.
SECTION 5. INVESTMENT AUTHORITY.
(a) The Trustee shall have the authority and discretion to invest and
reinvest all or any portion of the Trust Funds and shall invest and reinvest all
or any portion of the Trust Funds pursuant to and to the extent directed to do
so in writing by the Company. In the event of a Change in Control, the Trustee
shall have the sole responsibility and authority to invest and reinvest the
assets of the Trust following such Change in Control until such assets are paid
to the Participant. Unless otherwise consented to by the Participant, any and
all such investment
5
<PAGE>
or reinvestment proceeds of Trust Funds shall be invested and reinvested in
Permitted Investments only and the Company shall direct investments and
reinvestments in Permitted Investments only.
(b) The Trustee, or the Trustee's designee, is authorized and empowered:
(1) To hold any investment or security contributed to the Trust and
to exercise all voting or tendering rights with respect to any investment and to
grant proxies, discretionary or otherwise;
(2) To invest and reinvest Trust Funds in the following, each of
which constitutes a "PERMITTED INVESTMENT":
(i) Direct obligations of the United States of America or
obligations of any instrumentality or agency thereof the payment of the
principal of and interest on which an unconditionally guaranteed by the United
States of America; provided, however, that any such obligation shall have a
final maturity date no more than one year after the acquisition thereof;
(ii) repurchase obligations issued by any bank or trust company
including any bank serving as Trustee, fully collateralized by obligations of or
guaranteed by the United States of America and maturing within 30 days of the
acquisition thereof; and
(iii) money market funds or accounts which invest solely in
any of the above described Permitted Investments;
(3) To hold, manage, improve, repair and control all property, real
or personal, forming part of the Trust; to sell, convey, transfer, exchange,
partition, lease for any term, even extending beyond the duration of this Trust,
and otherwise dispose of the same from time to time;
(4) To hold in cash, without liability for interest, such portion of
the Trust as is pending investment, or payment of expenses, or payment of
benefits, and to invest in time deposits of any bank including any bank serving
as Trustee or its affiliates;
(5) To settle, compromise or abandon all claims and demands in favor
of or against the Trust, and
(6) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under the laws
of the State of Texas, so that the powers conferred upon the Trustee herein
shall not be in limitation of any authority conferred by law, but shall be in
addition thereto.
6
<PAGE>
(c) To the extent necessary or which it deems appropriate to implement its
powers under Section 6 or otherwise to fulfill any of its duties and
responsibilities as trustee of the Trust, the Trustee shall have the following
additional powers and authority:
(1) To register securities, or any other property, in its name or in
the name of any nominee, including the name of any affiliate or the nominee name
designated by any affiliate, with or without indication of the capacity in which
property shall be held, or to hold securities in bearer form and to deposit any
securities or other funds or properties in a depository or clearing corporation;
(2) To designate and engage the services of, and to delegate powers
and responsibilities to, such agents, representatives, advisers, attorneys and
accountants as the Trustee considers necessary or appropriate, any of whom may
be an affiliate of the Trustee or a person who renders services to the Trustee
or an affiliate, and, as a part of its administrative expenses under this Trust
Agreement, to pay their reasonable expenses and compensation from the Trust;
(3) To make, execute and deliver, as the Trustee, any and all deeds,
leases, mortgages, conveyances, waivers, releases or other instruments in
writing necessary or appropriate for the accomplishment of any of the powers
listed in this Trust Agreement; and
(4) Generally to do all other acts which the Trustee deems necessary
or appropriate for the protection of the Trust.
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust shall be
accumulated and reinvested in the Trust.
SECTION 7. ACCOUNTING BY THE TRUSTEE.
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following the close of each calendar
year and within 60 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchases or sales (accrued interest paid
or receivable being shown separately), and showing all cash, securities and
other property held in the Trust at the end of such year or as of the date of
such removal or resignation, as the case may be. Within a reasonable period of
time after the last day of each Plan Year, the Trustee shall furnish the
Participant with an annual statement of all Trust assets as of the last
7
<PAGE>
day of such Plan Year. The Company and Participant may approve such
accounting by a written notice of approval delivered to the Trustee or by
failure to express written objection to such accounting within 60 days from
the date upon which the accounting was delivered to the Company or
Participant, as applicable. Upon the receipt of such written approval of the
accounting or upon passage of such 60-day period without written objection
being delivered to the Trustee, such accounting shall be deemed approved in
all respects and the Trustee shall be released and discharged as to all items
set forth in such accounting as if such accounting had been settled by a
final decree of a court of competent jurisdiction.
The Trustee shall have the right to apply at any time to a court of
competent jurisdiction for judicial settlement of any Trust Funds or for a
declaratory judgment as to a question affecting the Trust.
SECTION 8. RESPONSIBILITY OF THE TRUSTEE; INDEMNIFICATION.
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity with, the terms of this Trust Agreement and is given in
writing by the Company, Participant or Beneficiary. The Trustee shall incur no
liability to any person for any failure to act in the absence of a direction,
request or approval from the Company, Participant or Beneficiary which is
contemplated by, and in conformity with, the terms of this Trust Agreement. In
the event of a dispute between the Company and a party, the Trustee may apply to
a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto. If the Company does not pay
such costs, expenses and liabilities in a reasonably timely manner, the Trustee
may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel (who may also be counsel
for the Company generally) with respect to any of its duties or obligations
hereunder and pay their reasonable fees and expenses from the Trust.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants, attorneys or other professionals to assist it
in performing any of its duties or obligations hereunder and pay their
reasonable fees and expenses from the Trust.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein;
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a
8
<PAGE>
beneficiary of the policy other than the Trust, to assign the policy (as
distinct from conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any borrowing
against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or pursuant to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to the Internal
Revenue Code.
(g) The Company hereby indemnifies the Trustee and each of its affiliates
(individually and collectively, the "INDEMNIFIED PARTY") against, and shall hold
them harmless from, any and all losses, claims, liabilities, damages, costs and
expenses, including reasonable attorneys' fees, imposed upon or incurred by any
Indemnified Party as a result of any acts taken, or any failure to act, in
accordance with directions from the Company or any employee or other designee of
the Company, or by reason of the Indemnified Party's execution of its duties
with respect to the Trust, including, but not limited to, its holding of assets
of the Trust. The Company's obligations described in the preceding sentence are
to be satisfied promptly by the Company; provided, however, in the event the
loss, claim, liability, damage, cost or expense involved is determined by a no
longer appealable final judgment entered in a lawsuit or other proceeding to
have resulted from the negligence or willful misconduct of the Trustee, the
Trustee shall promptly upon request thereafter return to the Company any amount
previously received by the Trustee under this subsection with respect to such
loss, claim, liability, damage, cost or expense. If the Company does not pay
such amounts due hereunder in a reasonably timely manner, the Trustee may obtain
payment from the Trust without direction from the Company.
(h) The Trustee shall have no duties with respect to the Plan or the
Employment Agreement except as specifically provided herein. The Trustee shall
follow the directions of the Company, Participant or Beneficiary, as applicable
hereunder, without further inquiry, and, subject to applicable law, the Trustee
shall not be liable for the acts or omissions of the Company, Participant or
Beneficiary.
SECTION 9. COMPENSATION AND EXPENSES OF THE TRUSTEE.
The Company shall promptly pay all administrative and Trustee's fees and
expenses. If not so paid, such fees and expenses shall constitute a charge or
lien on the Trust Funds and shall be paid from the Trust by the Trustee without
direction from the Company.
SECTION 10. RESIGNATION AND REMOVAL OF THE TRUSTEE.
(a) The Trustee may resign at any time by written notice to the Company,
which shall be effective 30 days after receipt of such notice, unless the
Company and the Trustee agree otherwise.
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<PAGE>
(b) The Trustee may be removed by the Company on 30 days notice or upon
shorter notice accepted by the Trustee.
(c) Upon a Change in Control the Trustee may not be removed by the Company
for five (5) years; provided, however, the Trustee may still resign.
(d) If the Trustee resigns within five (5) years after a Change in
Control, the Company shall select a successor Trustee.
(e) Notwithstanding anything contained herein to the contrary, in the
event of a Change in Control, neither the resignation nor removal of the Trustee
shall be effective prior to the appointment (and approval, if applicable) of and
written acceptance by a successor Trustee; provided, however, notwithstanding
any other provision hereof, in no event shall the effective date of the
Trustee's resignation be delayed beyond 90 days from the date that the Trustee
gives written notice to the Company of its resignation, unless the Trustee
agrees in writing to serve for a longer period until an interim or successor
Trustee has been appointed. The Company shall make a good faith effort to
appoint a successor Trustee as expeditiously as possible.
(f) Upon resignation or removal of the Trustee and appointment (and
approval, if applicable) and acceptance of a successor Trustee, the appointed
successor Trustee, without further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the succeeded Trustee and all
assets shall automatically be transferred to the successor Trustee; provided,
however, that on request of the Company or the successor Trustee, such succeeded
Trustee shall, upon payment of its charges by the Company or the successor
Trustee, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the succeeded Trustee, and shall
duly assign, transfer and deliver to the successor Trustee all property and
money held by such succeeded Trustee hereunder. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
(g) If the Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date of resignation or
removal under Section 10(a) or 10(b). If a successor Trustee shall not have
accepted its appointment as successor Trustee within 30 days after the giving of
notice of resignation or removal, the Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee. All expenses
of the Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust to be paid by the Company pursuant to
Section 9.
(h) Upon settlement of the account and transfer of the Trust assets to the
successor Trustee, all rights and privileges under this Trust Agreement shall
vest in the successor Trustee and all responsibility and liability of the
Trustee with respect to the Trust and assets thereof shall fully terminate
subject only to the requirement that the Trustee execute all necessary documents
to transfer the Trust assets to the successor Trustee pursuant to Section 10(f)
above.
10
<PAGE>
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If the Trustee resigns or is removed in accordance with Section 10(a)
or 10(b) hereof, the Company may appoint any third party not affiliated with the
Company, such as a bank trust department or other party that may be granted
corporate trustee powers under state law, as a successor to replace the Trustee
upon resignation or removal. The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee, who shall have all of the
rights and powers of the former Trustee, including ownership rights in the Trust
assets. The former Trustee shall execute any instrument necessary or reasonably
requested by the Company or the successor Trustee to evidence the transfer.
(b) If the Trustee resigns pursuant to the provisions of Section 10(d)
hereof, the Company may appoint any third party not affiliated with the Company,
such as a bank trust department or other party that may be granted corporate
trustee powers under state law, as a successor to replace the Trustee upon
resignation or removal. The appointment of a successor Trustee shall be
effective when approved in writing by the Participant and accepted in writing by
the new Trustee, who shall have all the rights and powers of the former Trustee,
including ownership rights in Trust assets. The former Trustee shall execute
any instrument necessary or reasonably requested by the successor Trustee to
evidence the transfer.
(c) The successor Trustee need not examine the records and acts of any
prior Trustee. The successor Trustee shall not be responsible for and the
Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument executed
by the Trustee and the Company. Notwithstanding the foregoing, the Company
shall ensure that no such amendment shall conflict with the terms of the Plan or
the Employment Agreement, shall make the Trust revocable or shall divest the
Participant or his Beneficiary of any amounts or rights to which the Participant
or his Beneficiary is entitled under the Plan, the Employment Agreement or this
Trust Agreement.
(b) The Trust shall not terminate until the date on which the Participant
and his Beneficiary are no longer entitled to benefits pursuant to the terms of
the Plan or the Employment Agreement. Upon termination of the Trust, any assets
remaining in the Trust after payment of all amounts owed to the Participant or
his Beneficiary under the Plan, the Employment Agreement or this Trust Agreement
shall be returned to the Company.
(c) This Trust Agreement may not be amended by the Company without the
consent of the Participant for five (5) years following a Change in Control.
11
<PAGE>
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to the Participant or his Beneficiary under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Texas.
(d) For purposes of this Trust Agreement, "CHANGE IN CONTROL" shall be
deemed to have occurred on the earliest of the following dates:
(i) The date any entity or person (including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, or any comparable
successor provisions) shall have become the beneficial owner of, or shall
have obtained voting control over, twenty percent (20%) or more of the then
outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company approve a
definitive agreement to sell or otherwise dispose of substantially all the
assets of the Company, or to merge or consolidate the Company with or into
another corporation, in which the Company is not the continuing or
surviving corporation or pursuant to which any common shares of the Company
would be converted into cash, securities or other property of another
corporation, other than a merger of the Company in which holders of common
shares immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after
the merger as immediately before, or (2) the date the Company enters into a
binding agreement to sell or otherwise transfer (including without
limitation by merger or consolidation) to one or more unaffiliated entities
or persons not less than a majority of the outstanding capital stock of the
Company; or
(iii) The date upon which, during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board
of Directors of the Company (the "Company Board") cease for any reason to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's stockholders, of each new Company
Board member was approved by a vote of at least three-fourths of the
Company Board members then still in office who were Company Board members
at the beginning of such period.
(e) The provisions of Section 8(g) of this Trust Agreement shall survive
termination of this Trust Agreement.
12
<PAGE>
(f) The rights, duties, responsibilities, obligations and liabilities of
the Trustee are set forth in this Trust Agreement, and no provision of the Plan,
the Employment Agreement or any other documents shall affect such rights,
responsibilities, obligations and liabilities. If there is a conflict between
provisions of the Plan, the Employment Agreement and this Trust Agreement with
respect to any subject involving the Trustee, including but not limited to the
responsibility, authority or powers of the Trustee, the provisions of this Trust
Agreement shall be controlling.
(g) Unless otherwise determined by the Board of Directors of the Company,
all actions to be taken by the Company under this Trust Agreement, with respect
to the Employment Agreement or the Plan shall be taken at the direction of the
Compensation Committee of the Company's Board of Directors, which shall have
full authority to administer the Plan and this Trust Agreement on behalf of the
Company and to provide directions to the Trustee pursuant to procedures
established by the Trustee. The Company shall provide specimen signatures to
the Trustee as deemed necessary or appropriate and as requested in writing by
the Trustee.
IN WITNESS WHEREOF, this Trust Agreement has been executed by the parties
hereto as of the day and year first above written in several original
counterparts each of which shall be deemed an original, and all of which shall
constitute but one and the same document.
KENT ELECTRONICS CORPORATION
By:/S/ STEPHEN J. CHAPKO
-----------------------------------------
Name: STEPHEN J. CHAPKO
---------------------------------------
Title: VICE PRESIDENT, TREASURER & SECRETARY
--------------------------------------
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, AS TRUSTEE
By: /S/ MARY GRACE GREENWOOD
-----------------------------------------
Name: MARY GRACE GREENWOOD
---------------------------------------
Title: VICE PRESIDENT
---------------------------------------
13
<PAGE>
EXHIBIT 11
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------------------------------------------
MARCH 30, 1996 APRIL 1, 1995 APRIL 2, 1994
-------------------------------- ------------------------------------- --------------------------------
FULLY FULLY FULLY DILUTED
PRIMARY DILUTED PRIMARY DILUTED PRIMARY
----------------- ------------- ----------------- ------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net Earnings. . . . . . . $ 27,975,255 $ 27,975,255 $ 13,386,122 $ 13,386,122 $ 9,535,074 $ 9,535,074
----------------- ------------- ----------------- ------------------- ---------------- ---------------
----------------- ------------- ----------------- ------------------- ---------------- ---------------
Weighted average number
of common shares
outstanding . . . . . . . 21,759,600 21,759,600 19,492,000 19,492,000 19,302,000 19,302,000
Excess of shares issuable
upon exercise of stock
options over shares
deemed retired utilizing
the treasury stock
method. . . . . . . . . . 1,226,900 1,404,100 783,000 893,400 460,000 572,400
----------------- ------------- ----------------- ------------------ ---------------- ---------------
22,986,500 23,163,700 20,275,000 20,385,400 19,762,000 19,874,400
----------------- ------------- ----------------- ------------------ ---------------- ---------------
Earnings per share . . . $ 1.22 $ 1.21 $ 0.66 $ 0.66 $ 0.48 $ 0.48
----------------- ------------- ----------------- ------------------ ---------------- ---------------
----------------- ------------- ----------------- ------------------ ---------------- ---------------
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF KENT ELECTRONICS CORPORATION
<TABLE>
<CAPTION>
State of
Subsidiary Incorporation
---------- -------------
<S> <C>
K * TEC Electronics Corporation Delaware
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated May 6, 1996, accompanying the
consolidated financial statements and schedule included in the Annual Report
of Kent Electronics Corporation and Subsidiaries on Form 10-K for the year
ended March 30, 1996. We hereby consent to the incorporation by reference of
said reports in the Registration Statements of Kent Electronics Corporation
on Form S-3, File Nos. 33-59108 and 33-48434 and Forms S-8, File Nos.
33-12028, 33-17821, 33-18527 and 33-66030
GRANT THORNTON LLP
Houston, Texas
May 6, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> MAR-30-1996
<CASH> 73,191,479
<SECURITIES> 38,746,855
<RECEIVABLES> 53,468,816
<ALLOWANCES> 999,374
<INVENTORY> 48,154,792
<CURRENT-ASSETS> 216,859,079
<PP&E> 62,178,517
<DEPRECIATION> 17,328,591
<TOTAL-ASSETS> 277,462,022
<CURRENT-LIABILITIES> 51,176,968
<BONDS> 0
0
0
<COMMON> 38,335,899
<OTHER-SE> 186,972,737
<TOTAL-LIABILITY-AND-EQUITY> 277,462,022
<SALES> 372,018,931
<TOTAL-REVENUES> 372,018,931
<CGS> 273,290,618
<TOTAL-COSTS> 273,290,618
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 192,522
<INTEREST-EXPENSE> 20,004
<INCOME-PRETAX> 46,885,355
<INCOME-TAX> 18,910,100
<INCOME-CONTINUING> 27,975,255
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,975,255
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.21
</TABLE>
