CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 25, 1996 Commission File
Number 0-16304
Optek Technology, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-1962405
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1215 West Crosby Road, Carrollton, Texas 75006
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 323-
2200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
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 of this
Form 10-K. ( )
The aggregate market value of the registrant's voting stock
held by non-affiliates as of October 25, 1996 was: $28,198,539
(* see note on index page).
The number of shares outstanding of each class of
registrant's common stock as of October 25, 1996 was: Common
Stock, par value $0.01 per share, 3,912,915 shares.
___________________
Documents Incorporated by Reference
Portions of the registrant's definitive proxy statement to
be furnished to stockholders in connection with its Annual
Meeting of Stockholders to be held on March 19, 1997 are
incorporated by reference in Part III of this Form 10-K.
<PAGE>
OPTEK TECHNOLOGY, INC.
ANNUAL REPORT ON FORM 10-K
INDEX
Securities and Exchange Commission
Item Number and Description Page
PART I
ITEM 1. Business 1
ITEM 2. Properties 6
ITEM 3. Legal Proceedings 7
ITEM 4. Submission of Matters to a Vote of Security Holders
7
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters 7
ITEM 6. Selected Financial Data 8
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
ITEM 8. Financial Statements and Supplemental Data 10
ITEM 9. Changes in and Disagreements on Accounting and
Financial Disclosure 10
PART III
ITEM 10. Directors and Executive Officers of the Registrant
10
ITEM 11. Executive Compensation 10
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management 10
ITEM 13. Certain Relationships and Related Transactions 11
PART IV AND SIGNATURES
ITEM 14. Exhibits, Financial Statements & Financial Statement
Schedules and Reports on Form 8-K 11
INDEPENDENT AUDITORS' REPORT F-1
SIGNATURES
* The figure indicated
on the cover page as to the aggregate market value of shares of
registrant's voting stock held by nonaffiliates represents the
registrant's best good faith estimate for purposes of this annual
report on Form 10-K. The aggregate market value indicated is based
upon the average of the high and low trading prices of the
registrant's common stock as reported by the Nasdaq National Market
System, as of October 25, 1996. Shares held by non-affiliates were
calculated by reducing total outstanding shares by outstanding
shares beneficially owned by executive officers and Directors of
the registrant or by any stockholder beneficially owning more than
10% of registrant's common stock, as incorporated herein under the
heading "Security Ownership of Certain Beneficial Owners and
Management," who were considered for purposes of this disclosure to
be affiliates.
i
<PAGE>
PART I
ITEM 1. Business.
Introduction
Optek Technology, Inc. ("Optek" or "the Company") markets,
designs and manufactures sensor products which are based on
either optoelectronic or magnetic field sensing technologies.
These products react to changes in infrared light or magnetic
fields which indicate physical events such as position, speed or
rotation and convert this information into an electrical signal
which can then be communicated to control devices such as
microprocessors capable of processing and responding to that
signal.
Because optoelectronic and magnetic sensors operate without
physical contact, they are capable of more accurate, reliable,
and sensitive measurement than standard mechanical or
electromechanical devices. These characteristics, combined with
increased speed, durability and compactness, have prompted the
substitution of optoelectronic and magnetic sensors for
mechanical and electromechanical switches.
Optek's optoelectronic components and assemblies are used in
business machines, such as mailing machines, in which they
determine envelope position, and photo copy machines, in which
they sense location of paper and toner levels; in computer
peripherals, such as disk and tape drives, in which they sense
the beginning position of the data storage area; in communication
products, in which they transmit and receive data over fiber
optic cables; in industrial products, such as security systems,
in which they sense the interruption of a beam of light; and in
military applications, such as missile guidance systems, in which
they assist the projectile in tracking its target. Optek's
magnetic sensors are used in automotive applications and in
various industrial applications where harsh environments prevent
the use of optoelectronics. For example, magnetic sensors detect
rotation of shafts and gears in automobiles where the presence of
dirt and oil would make the application of optoelectronic
technology impractical.
Optoelectronic Products
The largest portion of the Company's current business is the
design, manufacture and sale of custom devices which use
optoelectronics technology to satisfy customers' sensing
application requirements. Optoelectronics technology uses light
to measure or sense position or motion. A familiar example of
the use of this technology is its application in certain burglar
alarm systems which emit a beam of light which is received by a
sensor. The interruption of this beam causes an electrical
response in the sensor which activates the alarm. These
principles may be applied using either visible or nonvisible
(eg., infrared) light as a means of sensing motion, speed or
position. The optoelectronic products made by Optek primarily
use infrared light.
Optek specializes in customized optoelectronic solutions for
its customers' applications. The Company applies its specific
engineering and manufacturing expertise to the design and
manufacture of components and assemblies which meet the physical
and technical requirements demanded for the intended use by the
customer. This application-based design requires the integration
of mechanical, electrical and optical technologies.
Based upon the Company's expertise and knowledge of the
optoelectronics industry, the Company does not believe any
patents currently govern the basic optoelectronics technology
used by the Company. As a result, development of new
applications for this technology has proceeded without the
impediment of obtaining licenses for the underlying technology.
Further, the Company believes that companies desiring to enter
the optoelectronics industry may do so without obtaining licenses
or permits relating to the use of such technology and that
competition is not impeded by such constraints. However, Optek
has sought to protect confidential information which is used in
the Company's operations by restricting its employees from using,
disseminating or disclosing confidential information not
generally known in the industry.
Optek is vertically integrated and manufactures:
(1) Infrared emitting and light sensing semiconductor
chips;
(2) Discrete components, which are plastic or metal
packages housing the light emitting or light sensing
chips described above;
(3) Assemblies, which combine the light emitting and
light sensing discrete components in a single package to
meet various electrical and/or mechanical
specifications; generally, it is assemblies which are
sold by Optek to its customers for use in their
products; and
(4) Fiber optic products, which use LED and sensor
technologies to transmit and receive light signals for
data transmission through fiber.
This integrated manufacturing structure offers Optek the
necessary flexibility to satisfy customers' specialized
requirements.
The following paragraphs describe these optoelectronic
devices and their basic principles of operation.
Semiconductor Chips
Light emitting and light sensing semiconductor chips are the
basic elements in Optek's optoelectronic product range. Both
types of chips are manufactured by Optek, which has a complete
semiconductor processing operation from engineering, through all
processing steps, to final testing.
A light emitting diode (LED) chip emits light as the result
of the application of direct current at a low voltage. Such
chips can be made to produce light in a wide range of wavelengths
extending from the near ultraviolet region of the electromagnetic
spectrum to the far infrared. Optek's light emitting chips are
manufactured from gallium arsenide and gallium aluminum arsenide
wafers using standard semiconductor manufacturing techniques.
Light sensors are semiconductor chips which are capable of
converting light into electrical signals; thus, they can be used
to sense and relay the signal produced from a light emitting
chip. Optek produces light sensitive chips from polished silicon
slices using standard silicon semiconductor manufacturing
processes. Optek's light sensing chips include photodiodes,
phototransistors and photodarlingtons, which have varying speed
and sensitivity. Phototransistors and photodarlingtons
incorporate transistors as an integral part of the chip, thus
providing in a single unit the ability to detect the light and
amplify the signal received. The Company uses a substantial
portion of the semiconductor chips it manufactures in its
discrete components. On occasion, however, the Company has
designed and manufactured custom semiconductor chips for specific
customer applications.
Most of the light sensing chips manufactured by Optek
produce an analog output which must then be interpreted by a
microprocessor. However, the Company has developed a family of
more sophisticated light sensing integrated circuits for these
applications. These Photologic chips developed by Optek
incorporate into the chip all the functions necessary to produce
a digital output. The versatility of the chip's output geometry
allows it to drive multiple outputs, resulting in savings to the
customer in system processing circuitry. A Photologic chip has
also been developed with increased sensitivity, low level input
detection and on-chip voltage regulation which enables the chip
to function under fluctuating power conditions. The former
characteristic is particularly useful in fiber optics where the
signal transmitted may be a very low level signal. The latter
characteristic finds a wide range of applications, for example,
with battery powered devices or under conditions of heavy
electrical interference.
Discrete Components
Discrete components incorporate LED or sensor chips in
either plastic or metal packages which protect the chip and allow
light to pass to or from the chip. These components form an
integral part of the assemblies manufactured by Optek. In
manufacturing discrete components, LED or sensor chips are
mounted on lead frames or headers, a wire is bonded from the chip
to the lead, and the device is housed in a plastic or metal
package. While most of Optek's discrete components are used in
its own assembly manufacturing operations, the Company also
manufactures and sells discrete components to original equipment
manufacturers ("OEMs") which integrate them into their own
products and through independent distributors, especially in
foreign markets.
Assemblies
Most of Optek's business is directed to the production of
complete assemblies which are ready to plug into the customer's
equipment. These assemblies generally fall into three product
groups:
(1) interrupter and reflective assemblies, which use
LED and sensor discrete components in combination and
detect objects interrupting or completing the light
path;
(2) detector assemblies and displays, which
incorporate specifically designed semiconductor chips
capable of sensing position in physical packaging
suitable for aerospace/defense applications; and
(3) isolators or couplers which transmit signals while
"isolating" high voltage circuits.
Discrete LED and sensor components are generally used in
combination with one another in interruptive or reflective
assemblies. Each of these assemblies includes a discrete
emitter, a light transmission path and a discrete sensor. The
sensing occurs when an object interrupts the light transmission
path from emitter to sensor or reflects the emitted light back to
the sensor.
Optek manufactures various types of detector assemblies and
displays which are used in military and aerospace applications.
These assemblies and displays often require custom sensor or LED
chips which are incorporated in physical packaging capable of
withstanding rigorous environmental conditions of temperature,
acceleration, or mechanical shock.
Optoelectronic LED's and sensors can be used to isolate
electrical noise or high voltage from an electrical circuit. In
an isolator or coupler, the light path from emitter to sensor is
totally enclosed and cannot be modified externally. Placing an
isolator between an input and output circuit can eliminate the
possibility of high voltage or electrical noise reaching the
output circuit. These devices are used to protect computers and
other sensitive circuits from potentially damaging electrical
surges or electrical noise.
Fiber Optic Products
As a complement to its other optoelectronic devices, Optek
manufactures fiber optic LED's and sensors. Optek uses its LED
and sensor technology to provide the light signal and receiver
products for data transmission through fiber. Fiber optics are
currently widely used in modems, multiplexers and local area
networks. These products allow electronic equipment, such as
energy management systems, computers and even telephones, to
communicate over thin lightweight cables of glass or plastic
fiber.
Magnetic Sensors
During fiscal 1992, Optek began production of Hall Effect
(magnetic field sensing) devices which sense physical events by
reacting to changes in magnetic fields. Since magnetic fields
are relatively unaffected by the cleanliness of the environment,
Hall Effect devices can be used in environments in which a clear
optical path is inhibited. For example, Hall Effect devices
sense rotation of gears in automobiles for various applications
where the presence of dirt and oil would make the application of
optoelectronic technology impractical. The first practical
application of this technology by Optek has been the production
of crankshaft and camshaft sensors used for the ignition system
of an automobile. This application is the subject of a patent
and the Company has been licensed to manufacture such devices
only for one automobile manufacturer.
The Company continues to explore additional opportunities in
which Hall Effect devices can efficiently address customers'
requirements. For example, the Company produces a Hall Effect
sensor which is used in an automotive security system. Because
of the presence of oil and dirt characteristic of automotive
applications, magnetic sensing devices are particularly useful
and the Company has sought to expand upon the expertise and
familiarity gained through its initial automotive programs to
identify and participate in additional sensor programs.
As with optoelectronic products, the Company is vertically
integrated and capable of producing each of the elements
incorporated into its magnetic sensing devices. The basic
building block of each device is a semiconductor chip which
reacts to fluctuations in a magnetic field. Optek produces its
own magnetic sensor chips through processes and techniques
similar to those used for manufacturing light sensing chips. As
the position of a magnet is changed, the sensor produces a signal
which is relayed to a control device. Each of these elements is
combined into an assembly integrating mechanical, electronic and
magnetic technologies.
The Company's engineering expertise in sensor technologies
has facilitated its identification of additional potential
applications for magnetic sensors. Because of the relative
newness of some of these applications, the Company has sought
and, in some cases, obtained patent protection for these
applications. However, Optek cannot currently predict whether
additional new applications will qualify for patent registration.
Product Development
In the past, the optoelectronics industry has not been as
subject to rapid technological change as other semiconductor-
based industries. Consequently, the Company's efforts have been
primarily directed toward enhancing the functions of its existing
product base to permit a wider range of applications and to
identification of new applications for optoelectronic devices
rather than research and development related to technological
advances.
In order to expand the range of applications which can be
addressed with its magnetic sensor devices, the Company
anticipates applying a portion of its research activities to
development of new magnetic sensor technology having different
sensitivities and capabilities. If successful, this effort would
permit the Company to introduce new lines of products for
applications which are difficult or impossible to address with
available sensors. No assurance can be given that the Company
will succeed in expanding these technologies.
The Company recently began developing magnetoresistive
technology as an alternative for new magnetic sensor designs.
Magnetoresistive technology has the advantage of demonstrating a
good signal to noise ratio, and is able to detect very slow
motion which is required in certain applications. Products
utilizing magnetoresistive technology are still under development
at Optek. Motion and position sensors for electronic ignition
systems in automobiles are potential applications for
magnetoresistive sensors.
In order to address certain fiber optic applications
requiring higher data transmission speeds, the Company
anticipates applying a portion of its research activities to the
development of higher speed fiber optic LEDs, sensors, and
transceivers.
During the past three fiscal years, the Company's product
development and engineering expenses have ranged between 6% and
7% of net sales, not including a portion of which has been funded
by customers. Future developments may require the Company to
allocate increased resources to advances in optoelectronic and
magnetic sensor technologies. However, no assurance can be given
that the Company will be successful in further expanding these
technologies.
Raw Materials
The principal raw materials used by the Company in the
manufacture of its semiconductor chips, components and assemblies
are silicon wafers, gallium wafers, chemicals and gases used in
processing wafers, gold wire, copper lead frames, metal and
plastic for packages that house the chip and the various custom
assemblies, and magnets used in certain Hall Effect applications.
All of these raw materials can be obtained from several
suppliers. From time to time, particularly during periods of
increased industry-wide demand, silicon wafers and other
materials have been in short supply. However, the Company has
not been materially affected by such shortages. As is typical in
the industry, the Company allows for a significant lead time
between order and delivery of raw materials.
Customers
In fiscal 1996 Optek's ten largest customers accounted for
approximately 62% of net sales. Two customers, General Motors
Corporation and Pitney Bowes, made purchases which accounted for
11% and 11%, respectively, of the Company's net sales.
Optek's customers normally purchase the Company's products
and incorporate them in products that they in turn sell into
their own markets on an ongoing basis. As a result, Optek's
sales are dependent upon the success of its customers' products,
and its future performance is dependent upon its success in
finding new customers and receiving new orders from existing
customers. In addition, sales of the Company's automotive
products are susceptible to labor strikes against the Company's
automotive customers.
Sales orders are made on the Company's standard form, which
permits the customer to cancel the order in whole or in part. In
such event, the standard form obligates the customer to pay the
Company the purchase price of finished goods, a price adjustment
based on the quantity of goods actually shipped and all costs,
direct or indirect, incurred by the Company with respect to the
order, including a reasonable allowance for prorated expenses and
anticipated profits. However, no assurance can be given that
such amounts will be received by the Company after cancellation.
Marketing
Optek markets its products through its own technical sales
staff, independent sales representatives, and independent
stocking distributors. At October 25, 1996, Optek employed seven
technical sales people who operate out of the Company's offices
in Carrollton, Texas and three technical sales people operating
out of offices in western Europe. Optek also uses approximately
130 independent sales representatives in geographic territories
throughout the United States. Independent sales representatives
are typically paid a 2% to 5% commission on sales within their
geographical territory.
The initial customer contact is usually made by either a
member of Optek's technical sales staff, a sales representative
or a distributor for the geographic area. During this contact,
the representative determines if custom optoelectronic or
magnetic components or assemblies could perform the specific
functions desired by the customer. Typically, the customer
either provides a detailed specification of its requirements or
is assisted by Optek's engineering and technical sales staff in
the development of specifications. Optek then develops a
technical proposal, incorporating preliminary design concepts,
and submits the technical proposal to the customer. The
technical proposal includes pricing terms, which usually include
a one-time tooling charge and a unit price for the product over a
specified period based on an estimated production volume.
The marketing process takes approximately four to eighteen
months from initial customer contact to purchase order, depending
on the complexity of the customer's requirements. Once a
purchase order is placed by the manufacturer with Optek, the
typical lead time to delivery of a prototype is approximately
twelve weeks, with production quantities available approximately
six to eight weeks later. Subsequent production releases
typically require lead times of six to eight weeks.
During fiscal 1996, foreign sales accounted for
approximately $18.9 million, or approximately 28% of net sales,
as compared to $16.9 million, or approximately 27% of net sales
for fiscal 1995, and $14.4 million, or approximately 26% of net
sales during 1994.
Backlog
Optek's order backlog was approximately $18.4 million at
October 25, 1996 and approximately $20.1 million at November 22,
1996 compared with a backlog of approximately $23.2 million at
October 27, 1995 and approximately $15.6 million at October 28,
1994. The Company's backlog is comprised of orders which
customers have released and scheduled for delivery within one
year. However, by industry practice, orders may be canceled or
modified at any time, with the customer being responsible for all
finished goods, all costs, direct and indirect, incurred by the
Company and a reasonable allowance for anticipated profits. No
assurance can be given that such amounts will be received by the
Company after cancellation.
Competition
The Company is a leading supplier of custom optoelectronic
and magnetic sensing devices for sale to original equipment
manufacturers and automotive parts suppliers. Optek competes
with a range of companies for the custom optoelectronic and
magnetic sensor requirements of vendors of general business
machines, automotive products, computer peripherals, a variety of
industrial products and specialized military applications. The
Company believes that its principal competitor for sales of
custom devices is Honeywell Optoelectronics, a division of
Honeywell, Inc. Because the Company specializes in custom
devices requiring a high degree of engineering expertise to meet
the requirements of specific applications, it generally does not
compete to any significant degree with other large United States,
European or Far Eastern manufacturers of standard "off-the-shelf"
optoelectronic components.
Optek believes that the production of quality products,
expertise in the design and development of custom products,
timely delivery of such products and price are the most
significant factors in the segment of the market in which it
competes. Optek believes that generally it competes favorably
with respect to these factors.
Foreign Manufacturing Operations
In order to realize significantly reduced labor costs,
virtually all of Optek's discrete components and assemblies for
commercial use, which accounted for approximately 81% of Optek's
net sales in its last fiscal year, are produced in facilities
operated by the Company in Juarez, Mexico. Mexico has enacted
legislation to promote the use of such manufacturing operations
by foreign companies and continuation of these operations depends
upon: compliance with applicable laws and regulations of the
United States of America and Mexico; the availability of less
expensive labor; and the continuation of favorable exchange
rates. These operations are authorized to operate as Maquiladoras
by the Ministry of Commerce and Industrial Development of Mexico.
Maquiladora status allows Optek to wholly own its Mexican
subsidiaries and to import items into Mexico duty free, provided
that such items, after processing, are re-exported from Mexico
within six months. Maquiladora status, which must be renewed
every two years, is subject to various restrictions and
requirements, including: compliance with the terms of the
Maquiladora program; proper utilization of imported materials;
hiring and training of Mexican personnel; compliance with tax,
labor, exchange control and notice provisions and regulations;
and compliance with locational constraints. The Company
anticipates that the North American Free Trade Agreement
("NAFTA"), when fully implemented, will further facilitate its
operations in Mexico and reduce the restrictions applicable to
those operations.
Except for a moderate devaluation of the peso at the
beginning of the year, exchange rates have remained fairly
stable. Although assembly operations in Mexico continue to be
less expensive than comparable operations in the United States of
America, additional investment in automated equipment may become
necessary to offset rising labor costs. The Company's foreign
manufacturing operations could be adversely affected by
interruptions in the trade relations between these two countries.
Employees
As of October 25, 1996, the Company employed 1,700 persons,
including 1,559 in manufacturing and assembly (1,369 in Mexico
and 190 in Carrollton), 95 in sales and engineering and 46 in
management and administration. Some of the Company's employees
are highly skilled and the Company's continued success will
depend in part on its ability to attract and retain such
employees, who are generally in demand. At times, the Company
has had difficulty hiring engineering personnel with previous
experience in its industry due to the limited number of engineers
available with such experience. To date, this difficulty has not
materially affected the Company's operations. The Company has
never had a work stoppage, no employees are represented by any
labor organization and the Company considers its employee
relations to be good.
ITEM 2. Properties.
The Company's administrative offices, engineering
facilities, silicon and gallium arsenide chip manufacturing, high
reliability and hybrid assembly manufacturing, as well as tooling
and plastic molding operations, are located in a Company-owned
building containing 205,000 square feet on a 15.5 acre site in
Carrollton, Texas. The Company also leases approximately 6,250
square feet of warehouse space in El Paso, Texas. This lease
expires in January of 1998.
Virtually all of the Company's non-military discrete
components, interrupter and reflective assemblies and
isolators/couplers are assembled at the facilities of the
Company's subsidiaries located in Juarez, Mexico. The Mexican
subsidiaries beneficially own a 24,000 square foot building and a
45,000 square foot building in Jaurez, Mexico through trust
agreements with Banca Serfin, Sociedad Nacional de Credito, as
required by Mexican law. The operations formerly conducted at the
smaller of those buildings have been consolidated into the larger
plant and adjacent leased premises, and the Company is currently
seeking to sell such plant. The Company's Mexican subsidiaries
also lease a 58,000 square foot building in Juarez, Mexico under
a lease expiring in December 1997 with aggregate annual lease
payments of $291,000. The lease provides for four one-year
renewals exercisable on at least 180 days notice. This plant is
adjacent to the 45,000 square foot building owned by the
Company's subsidiaries.
Additional buildings aggregating 56,000 square feet are
owned by Optek in Mineral Wells, Texas which formerly housed the
manufacturing and assembly operations of Optek's Aerospace
division. The Company is currently seeking to sell such plant
and other land held in Mineral Wells.
The Company believes that its existing facilities and
equipment are well-maintained and are in good operating
condition. The Company anticipates that its current facilities
will be suitable and adequate for its operations through 1997.
The Company anticipates a need for additional capital spending
during 1997 to support potential increases in demand during 1998
and 1999.
ITEM 3. Legal Proceedings.
The Company is not involved in any material current or
pending legal proceedings, other than ordinary routine litigation
incidental to its business.
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted by the Company during the fourth
quarter of the fiscal year ended October 25, 1996 to a vote of
the Company's security holders through the solicitation of
proxies or otherwise.
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The following table sets forth the quarterly high and low
closing sales prices (to the nearest 1/8) of the Common Stock, as
quoted by Nasdaq (symbol OPTT) for each quarterly period
subsequent to relisting on the Nasdaq system on April 22, 1996,
and the high and low bid prices since the first quarter of 1995
as reported by various market makers. Bid prices represent
quotations between dealers in securities, without adjustment for
retail mark-ups, mark-downs or commissions, and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION> High Low
1996 Quarter
Ended
<S> <C> <C>
October 25, 1996 $11 1/4 $ 9
July 26, 1996 15 3/4 9 5/8
April 26, 1996 14 9
January 26, 1996 8 1/4 7
1995 Quarter
Ended
October 27, 1995 $ 7 3/4 $ 5
July 28, 1995 5 2 1/2
April 28, 1995 2 5/8 1 1/2
January 27, 1995 1 5/8 1 1/4
</TABLE>
At October 25, 1996, the Company had approximately 177
stockholders of record. The Company believes that a significant
number of shares of the Company's Common Stock are held in street
name and, consequently, the Company is unable to determine the
actual number of beneficial owners thereof.
The Company has never paid a cash dividend on its Common
Stock, currently intends to retain any earnings for use in its
business and does not anticipate paying cash dividends on its
Common Stock in the foreseeable future. The Company's loan
agreements contain covenants which prohibit the Company from
declaring dividends on its Common Stock unless such covenants are
waived in writing.
ITEM 6. Selected Financial Data.
The following table summarizes certain selected consolidated
financial data for the periods indicated. This information is
derived from the Company's consolidated financial statements and
is qualified in its entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the
Consolidated Financial Statements and Notes thereto included
elsewhere in this Form 10-K.
<TABLE>
<CAPTION> (In thousands,
except per share
amounts)
Oct. 25, Oct. Oct. Oct. Oct.
Operating 1996 27, 28, 29, 30,
statement data: 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales $67,395 $62, $55, $55, $58,
542 625 878 403
Cost of sales 39,010 38,5 38,2 46,4 43,1
13 69 99 51
Gross 28,385 24,0 17,3 9,37 15,2
profit 29 56 9 52
Product 4,933 3,84 3,59 3,96 4,08
development and 1 1 8 9
engineering
expenses
Selling, general 8,266 7,09 6,53 7,49 9,05
and administrative 0 6 8 7
expenses
Provision for - - - 2,29 3,60
restructuring 2 0
costs
Reduction in value - - 893
of deferred costs - -
Operating 15,186 13,0 (5,2 (1,4
income (loss) 98 7,22 72) 94)
9
Other expense:
Interest 1,292 2,96 3,68 3,95 3,78
expense 0 5 2 8
Other (income) (145) 835 615
expense 142 365
Total 1,147
other expenses 3,10 4,05 4,78 4,40
2 0 7 3
Earnings 14,039 9,99 3,17 (10, (5,8
(loss) before 6 9 059) 97)
income taxes
Income tax expense 1,144
158 - - -
Net $12,895 $9,8 $3,1 $(10 $(5,
earnings (loss) 38 79 ,059 897)
)
Earnings (loss) $ 1.69 $ $ $ $
per common share 1.40 .47 (3.1 (1.8
2) 1)
Weighted average
number of common
and
common 7,627 7,02 7,10 3,22 3,25
equivalent shares 7 8 4 0
outstanding
Balance sheet
data:
Working capital $ 6,658 $ $ $ $(25
(deficit) 4,02 4,83 6,86 ,081
8 0 5 )
Total assets 26,359 26,0 27,8 32,1 48,6
65 27 46 51
Total current
liabilities,
including current
maturities of 8,455 9,17 8,15 7,92 50,7
long-term debt 5 9 0 89
Long-term debt, 3,428 15,9 28,6 36,4 111
less current 96 92 72
maturities
Stockholders' 14,067 810 (9,1 (12, (2,3
equity (deficit) 48) 340) 02)
</TABLE>
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Net sales for 1996 were $67.4 million versus $62.5 million
in 1995 and $55.6 million in 1994. The increase from 1995 to 1996
is attributed to higher commercial net sales volume of $1.9
million, higher automotive net sales volume of $3.4 million and a
slightly lower net sales volume of high-reliability
optoelectronic products of $.4 million. The increase from 1994 to
1995 was a result of higher commercial net sales volume of $4.5
million, higher automotive net sales volume of $1.2 million and
an increase in high-reliability optoelectronics product net sales
of $1.2 million.
Cost of sales in 1996 was 58% of net sales versus 62% in
1995 and 69% in 1994. The improvements in 1996 and 1995 are the
result of higher production volumes resulting in lower unabsorbed
fixed costs, continued efforts to reduce manufacturing cycle
times, favorable Mexico exchange rates as well as cost reduction
and yield improvement programs. In addition, 1995 showed an
improvement of $1.3 million, or 2% of net sales, resulting from
the absence of additional provisions for excess and obsolete
inventories versus 1994.
Product development and engineering expenses in 1996 were
$4.9 million or 7.3% of net sales compared to $3.8 million or
6.1% of net sales in 1995 and $3.6 million or 6.5% in 1994.
These expenses are related to the development of new products and
processes as well as sustaining engineering. The increase in
1996 relates to additional development costs for fiber optic
connectors, used in telecommunications, and magnetoresistive
technologies, used primarily in automotive applications. In
addition, certain expenses were incurred relative to a
refurbishment of the engineering and product development labs.
The improvement in the percent to net sales in 1995 was due to
net sales increasing at a greater rate than expenses. In 1997,
the Company will continue to emphasize development of new
products in support of its strategic growth plan.
Selling, general and administrative expenses in 1996 were
$8.3 million or 12.3% of net sales, versus 11.3% in 1995 and
11.8% in 1994. The increase in expenses over 1995 was primarily
attributable to sales commission rates and expenses related to
refurbishment of the sales and customers service areas.
Operating income was $15.2 million in 1996, $13.1 million in
1995 and $7.2 million in 1994. The improvements in 1996 and 1995
were the result of the aforementioned increase in sales volume
and improvements in cost of sales as discussed above.
Other expenses consist primarily of interest expense which
decreased in 1996 and 1995 due to the continued reduction of long-
term debt.
Income tax expense was $1.1 million, or 1.7% of net sales in
1996 versus $.2 million, or 0.3%, in 1995. This is the result of
the Company fully utilizing its tax loss carryforward during
1996.
As a result of the factors discussed above, net earnings for
1996 were $12.9 million versus $9.8 million in 1995 and $3.2
million in 1994.
Liquidity and Capital Resources
As reflected in the Company's consolidated statements of
cash flows, Optek generated approximately $14 million in cash
from operations in fiscal year 1996. The largest single use of
cash flow continued to be the reduction of the Company's
outstanding debt, approximately $13 million in fiscal year 1996.
The remainder of approximately $1 million was used for the
purchase of manufacturing equipment. Operating cash flows were
$14 million in 1995 and $8 million in 1994. The year-to-year
improvements were a direct result of the factors discussed above
under the caption titled Results of Operations.
The Company anticipates a need for additional capital
spending in 1997 to support potential increases in demand during
1998 and 1999. The Company also anticipates higher expenditures
for federal income taxes in 1997 due to the Company's full
utilization of tax loss carryforward during 1996.
A credit agreement with a financial institution at January
20, 1994, provided a $38.8 million line of credit consisting of a
$10.5 million working capital line and a $28.3 million revolving
term loan. Amounts drawn on the working capital line bear
interest at 1 ?? percentage points over the reference rate
announced from time to time by the First National Bank of
Chicago, Chicago, Illinois and mature on October 31, 1997, with a
one year extensions if no default exists under the loan documents
at maturity. Interest accrues on the revolving line of credit at
various rates by tranche, a summary of which is set forth in Note
5 to the Consolidated Financial Statements included herein.
Subsequent to October 25, 1996, the effective interest rate was
reduced from 1.5 percentage points over the reference rate to .5
percentage points over.
Availability on the revolving term loan was reduced to
$8,000 as of November 1, 1995. On November 1, 1996, the
revolving line was retired using the available working capital
line.
The Company was in compliance during 1996 with the financial
and other covenants contained in its loan documents. Although
Optek's ability to fund research and development and capital
expenditures is constrained by the terms of the loan documents,
management believes that its working relationship with its lender
is good and that these facilities will be adequate to finance the
Company's needs for the foreseeable future. Management believes
that cash flow from operations will be adequate to retire its
outstanding balance of long term debt during fiscal 1997.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board recently issued two
standards which will be applicable to the Company, but which the
Company has not yet adopted. No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" is not expected to have a significant impact on the
Company. No. 123, "Accounting for Stock-Based Compensation,"
which is effective for the Company beginning in 1997, gives
companies the option to adopt the fair value method for expense
recognition of employee stock options or to continue to account
for stock options and stock based awards using the intrinsic
value method as outlined under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25") and to make pro forma disclosures of net income and net
income per share as if the fair value method had been applied.
The Company expects to continue to apply APB 25 for future stock
options and stock based awards.
ITEM 8. Financial Statements and Supplemental Data.
Included on pages F-1 through F-11 hereof.
ITEM 9. Changes in and Disagreements on Accounting and Financial
Disclosure.
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
Information relating to the Company's Directors and
executive officers is set forth under the heading "Election of
Directors and Information as to Directors, Nominees and Executive
Officers" in the Company's definitive proxy statement relating to
the Company's Annual Meeting of Stockholders to be held March 19,
1997, which will be filed with the Securities and Exchange
Commission on or about January 29, 1997, and such information is
incorporated herein by reference.
ITEM 11. Executive Compensation.
Information relating to executive compensation is set forth
under the heading "Executive Compensation" in the Company's
definitive proxy statement relating to the Company's Annual
Meeting of Stockholders to be held March 19, 1997, which will be
filed with the Securities and Exchange Commission on or about
January 29, 1997, and such information is incorporated herein by
reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.
Information relating to the ownership of certain beneficial
owners and management of the Company's Common Stock is set forth
under the heading "Securities Ownership of Certain Beneficial
Owners and Management" in the Company's definitive proxy
statement relating to the Company's Annual Meeting of
Stockholders to be held March 19, 1997, which will be filed with
the Securities and Exchange Commission on or about January 29,
1997, and such information is incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
Information relating to the business relationships and
related transactions with respect to the Company and certain
Directors and nominees for election as Directors is set forth
under the heading "Certain Transactions" in the Company's
definitive proxy statement relating to the Company's Annual
Meeting of Stockholders to be held March 19, 1997, which will be
filed with the Securities and Exchange Commission on or about
January 29, 1997, and such information is incorporated herein by
reference.
PART IV
ITEM 14. Exhibits, Financial Statements & Financial Statement
Schedules and Reports on Form 8-K.
1.Financial Statements included in Part II (Item 8) of this
report:
Independent Auditors' Report;
Consolidated Balance Sheets as of October 25, 1996 and
October 27, 1995;
Consolidated Statements of Income for the three years
ended October 25, 1996;
Consolidated Statements of Stockholders' Equity (Deficit)
for the three years ended October 25,
1996;
Consolidated Statements of Cash Flows for the three years
ended October 25, 1996;
Notes to Consolidated Financial Statements.
2.Financial Statement Schedules included in Part IV (Item
14) of this report for the three fiscal years ended
October 25, 1996:
Independent Auditors' Report;
Schedule II - Valuation and Qualifying Accounts;
All other schedules are omitted, as the required
information is inapplicable or the information is
presented in the consolidated financial statements or
related notes.
No. Exhibits
3.7 Bylaws of Optek Technology, Inc. (1).
3.8 Restated Certificate of Incorporation of Optek
Technology, Inc. dated August 27, 1987 (2).
10.1 Restated and Amended 1983 Incentive Stock Option Plan
(1).
10.2 Form of Incentive Stock Option Agreement (1).
10.33First Amended and Restated Registration Rights
Agreement dated as of July 1, 1988 among Optek
Technology, Inc., Allstate Insurance Company,
Metropolitan Life Insurance Company, Burch Venture
Investors, The Confederate Venture Fund, James D.
Crownover, Jack C. Massey, Rauscher Pierce Refsnes,
Inc., Equitable Enskilda Securities Limited and
Household Commercial Financial Services, Inc. (3).
10.38 Form of Director Warrant to Purchase Common Stock (4).
10.47 Long-Term Stock Investment Plan (5).
10.48 Directors' Formula Award Plan (5).
10.49Amended and Restated Secured Credit Agreement
dated January 20, 1994 between Optek Technology, Inc.
and Household Commercial Financial Services, Inc.
(6).
10.52 Warrant to Purchase Common Stock of Optek Technology,
Inc. dated May 20, 1993 (7).
10.53 Warrant to Purchase Common Stock of Optek Technology,
Inc. dated November 22, 1993 (7).
10.54 Warrant to Purchase Common Stock of Optek Technology,
Inc. dated November 22, 1993 (7).
10.59 Form of Stock Option Agreement (7).
10.60Amended and Restated Warrant to Purchase Common
Stock of Optek Technology, Inc. Dated December 13,
1995 (8).
10.61Employment Agreement between Optek Technology,
Inc. and Thomas R. Filesi.
10.62Consulting Agreement between Optek Technology,
Inc. and Grant A. Dove.
10.63Employment Agreement between Optek Technology,
Inc. and William J. Collinsworth.
10.64Employment Agreement between Optek Technology,
Inc. and Richard Dahlberg.
10.65Employment Agreement between Optek Technology,
Inc. and Thomas Garrett.
10.66Employment Agreement between Optek Technology,
Inc. and Robert Kosobucki.
10.67Amended and restated Optek Technology, Inc.
401(k) Plan.
11.1 Statement Regarding Computation of Per Share Earnings.
22 Subsidiaries of the Registrant.
23 Independent Auditors' Consent.
(1)Previously filed as Exhibits 3.7, 10.1 and 10.2, to
registrant's Registration Statement on Form S-1, No. 33-
14885, and incorporated herein by reference.
(2)Previously filed as Exhibit 3.8 to registrant's
Registration Statement on Form 8-A filed on October 15,
1987, and incorporated herein by reference.
(3)Previously filed as Exhibit 4 to Schedule 13D dated July
21, 1988 filed on behalf of Household Commercial Financial
Services, Inc., and incorporated herein by reference.
(4)Previously filed as Exhibit 10.38 to registrant's Annual
Report on Form 10-K for the fiscal year ended October 28,
1988 and incorporated herein by reference.
(5)Previously filed as Exhibits 10.47 and 10.48 to
registrant's Annual Report on Form 10-K for the fiscal year
ended October 25, 1991 and incorporated herein by
reference.
(6)Previously filed as Exhibits 10.49 to registrant's
Annual Report on Form 10-K for the fiscal year ended
October 29, 1993 and incorporated herein by reference.
(7)Previously filed as Exhibits 10.52, 10.53 and 10.54 to
registrant's Annual Report on Form 10-K for the fiscal year
ended October 28, 1994 and incorporated by reference.
(8)Previously filed as Exhibit 10.60 to registrant's Annual
Report on Form 10-K for the fiscal year ended October 27,
1995 and incorporated by reference.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the quarter
ended October 25, 1996.
<PAGE>
KPMG Peat Marwick LLP
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Optek Technology, Inc.:
We have audited the accompanying consolidated balance
sheets of Optek Technology, Inc. and subsidiaries as of October
25, 1996 and October 27, 1995, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash
flows for each of the years in the three-year period ended
October 25, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Optek Technology, Inc. and subsidiaries as
of October 25, 1996 and October 27, 1995, and the results of
their operations and their cash flows for each of the years in
the three-year period ended October 25, 1996, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Dallas, Texas
December 6, 1996
<PAGE>
OPTEK TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION> Octob Octob
er er
25, 27,
1996 1995
ASSETS
Current assets:
<S> <C> < <C> <
C C
> >
Cash $ $
594 928
Accounts receivable, net of allowance for
doubtful accounts and
customer returns of $1,095 in 1996 and 7,288 6,931
$975 in 1995
Inventories (note 2) 6,007 5,284
Deferred income taxes (note 7) 1,142 -
Prepaid expenses
82 60
Total current assets
15,11 13,20
3 3
Property, plant and equipment, net (note 3) 11,15 12,66
0 4
Other assets
96 198
$26,3 $26,0
59 65
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ $
2,331 2,339
Accrued expenses (note 4)
5,345 5,857
Checks not presented for payment
779 979
Total current liabilities 8,455 9,175
Long-term debt (note 5) 3,428 15,99
6
Other liabilities 100 84
Deferred income taxes (note 7)
309 -
Stockholders' equity (notes 5 and 6):
Preferred stock, $.01 par value. - -
Authorized 1,000,000 shares; none issued
Common stock, $.01 par value. Authorized
12,000,000 shares;
issued and outstanding 3,912,915
shares in 1996 and 3,444,624 shares 39 34
in 1995
Additional paid-in-capital 13,37 13,01
3 6
Retained earnings (accumulated deficit) (12,2
655 40)
Total stockholders' equity 14,06
7 810
$26,3 $26,0
59 65
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
OPTEK TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Year ended
Octobe Octobe Octobe
r 25, r 27, r 28,
1996 1995 1994
<S> <C> <C> <C>
Net sales $67,39 $62,54 $55,62
5 2 5
Costs and expenses:
Cost of sales 39,010 38,513 38,269
Product development expenses 1,348 650 582
Engineering expenses 3,585 3,191 3,009
Selling expenses 5,087 4,245 3,950
General and administrative expenses
3,179 2,845 2,586
Total costs and expenses 52,209 49,444 48,396
Operating income 15,186 13,098
7,229
Other expenses:
Interest expense 1,292 2,960 3,685
Other expense (income), net
(145) 142 365
Total other expenses 4,050
1,147 3,102
Earnings before income taxes 14,039 9,996 3,179
Income tax expense (note 7)
1,144 158 -
Net earnings $12,89 $ $
5 9,838 3,179
Earnings per common and common share $ $ $
equivalents 1.69 1.40 .47
Average common and common share 7,626, 7,027, 7,108,
equivalents 914 181 016
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
OPTEK TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
<TABLE>
<CAPTION> Retain Total
Addi- ed stock-
Common Common tion earnin holders
Stock stock al gs '
paid- (accum- equity
in ulated
<S> <C> <C> <C> <C> <C>
Shares Amount capi (defici
tal defici t)
t)
Balance at October 29, 3,222, $ 32 $12, $(25,2 $(12,34
1993 305 885 57) 0)
Exercise of incentive 10,556 - 13 - 13
stock options
Net earnings - - - 3,179
3,179
Balance at October 28, 3,232, 32 12,8 (22,07 (9,148)
1994 861 98 8)
Exercise of incentive
stock options 211,76 2 118 - 120
and warrants 3
Net earnings - - - 9,838 9,838
Balance at October 27, 3,444, 34 13,0 (12,24 810
1995 624 16 0)
Exercise of incentive
stock options
and warrants 468,29 5 357 - 362
1
Net earnings - - - 12,895
12,895
Balance at October 25, 3,912, $ 39 $13, $ $14,067
1996 915 373 655
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
OPTEK TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YearsE
nded
Octo Octobe Octobe
ber r 27, r 28,
25, 1995 1994
1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $12, $ $
895 9,838 3,179
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 2,94 2,722 2,705
4
Gain on sale of property, plant - (25) (220)
and equipment
Deferred income taxes (833 - -
)
Changes in assets and
liabilities:
Accounts receivable (357 (242) 259
)
Inventories, prepaid (643 607 1,881
expenses and other assets )
Accounts payable, accrued
expenses and other liabilities (504 746 169
)
Net cash provided by 13,5
operating activities 02 13,646 7,973
Cash flows from investing activities:
Purchase of property, plant and (1,4 (1,121 (898)
equipment 32) )
Proceeds from sale of property,
plant and equipment 2 25 681
Net cash used in
investing activities (1,4 (1,096 (217)
30) )
Cash flows from financing activities:
Net repayment under long-term bank (12, (12,69 (7,780
debt 568) 6) )
Net proceeds from exercise of 362 120 13
stock options and warrants
Other financing activities 100
(200 230
)
Net cash used in (12, (12,34
financing activities 406) 6) (7,667
)
Effect of exchange rate changes on
cash - 2 (25)
Net increase (decrease) in cash (334 206 64
)
Cash at beginning of year
928 722 658
Cash at end of year $ $ $
594 928 722
Interest payments $ $ $
1,34 3,075 3,719
6
Income tax payments $ $ $
2,08 123 -
9
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended October 25, 1996, October 27, 1995 and October 28,
1994
(dollars in thousands except share data)
(1) Summary of Significant Accounting Policies
(a) General Information
Optek Technology, Inc. and subsidiaries (Company) design,
manufacture and market custom infrared optoelectronic devices,
magnetic field sensing devices and fiber optic transmitters and
receivers. A substantial portion of the Company's products are
manufactured by a wholly-owned subsidiary located in Mexico. Net
assets located at that subsidiary were $6,334 at October 25,
1996, and $6,852 at October 27, 1995.
The Company uses a fiscal year ending on the last Friday in
October.
(b) Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of Optek Technology, Inc. and its wholly owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(c) Revenue Recognition
Revenues from product sales are recognized at the time of
shipment to the customer. Certain shipments to distributors are
subject to limited right-of-return provisions. The Company
provides for estimated returns when material.
(d) Use of Estimates
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Because of the use of
estimates inherent in the financial reporting process, actual
results could differ from those estimates.
(e) Inventories
Inventories are stated at the lower of cost or market on a
first-in first-out basis. The Company continually assesses the
appropriateness of the inventory valuations giving consideration
to obsolete and excess inventory.
(f) Depreciation
Depreciation of property, plant and equipment is provided
using the straight-line method over the estimated useful life of
the asset. Useful lives range from 3 to 20 years.
(g) Earnings per Common Share
Earnings per common share is based on the weighted average
number of shares and, when dilutive, equivalent shares
outstanding during each of the periods presented. Primary
earnings per share and fully diluted earnings per share were
substantially the same in fiscal 1996, 1995, and 1994. Weighted
average common shares and common share equivalents when dilutive
were 7,626,914, 7,027,181, and 7,108,016 during fiscal 1996, 1995
and 1994, respectively. The calculation of net earnings per
share in 1996, 1995 and 1994 uses the modified treasury stock
method.
<PAGE>
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(dollars in thousands)
(h) Foreign Currency Translation
The United States dollar has been determined to be the
functional currency for all foreign operations. Exchange gains
and losses related to such operations are immaterial for all
years presented.
(i) Income Taxes
The Company uses the asset and liability method of
accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases.
(j) Reclassifications
Certain amounts in the 1995 and 1994 consolidated financial
statements have been reclassified to conform with the current
year's presentation.
(2) Inventories
A summary of inventories at October 25, 1996 and October
27, 1995 follows:
<TABLE>
<CAPTION> 1996 1995
<S> < <C> < <C>
C C
> >
Finished goods $1,109 $1,186
Work in process 3,323 3,393
Raw materials 3,381 3,158
Reserve for excess and obsolete (1,806) (2,453)
inventory
$6,007 $5,284
</TABLE>
The Company made provisions for excess and obsolete
inventories during fiscal 1995 and 1994 in the amounts of $63 and
$1,298 respectively. During fiscal 1996, additional provisions
were not required due to the Company's utilization of a portion
of the inventories previously identified as excess.
(3) Property, Plant and Equipment
A summary of property, plant and equipment at October 25,
1996 and October 27, 1995 follows:
<TABLE>
<CAPTION> 1996 1995
<S> <C> <C>
Land $ 3,137 $ 3,137
Buildings and 5,288 8,886
improvements
Equipment 18,238 21,259
26,663 33,282
Accumulated (15,513) (20,618)
depreciation
$11,150 $12,664
</TABLE>
(4) Accrued Expenses
A summary of accrued expenses at October 25, 1996 and
October 27, 1995 follows:
<TABLE>
<CAPTION> 1996 1995
<S> <C> <C>
Employee related $2,778 $2,729
accruals
Property taxes 322 283
Customer tooling 290 278
Other 1,955 2,567
$5,345 $5,857
</TABLE>
<PAGE>
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(dollars in thousands)
(5) Long-term Debt
The following is a summary of long-term debt at October
25, 1996 and October 27, 1995:
<TABLE>
<CAPTION> 1996 1995
<S> <C> <C>
$10,500 working capital line of credit
from a financial
institution; interest at the
corporate base rate at the First $ $
National Bank of Chicago (8.25% at 1 1
October 25, 1996)
plus 1.5%; interest payable monthly
(a)
$21,900 revolving term loan from a
financial institution with
annual scheduled principal reductions
through October 31,
1998; interest rates and associated
outstanding amounts are
as follows:
Corporate base rate at the First
National Bank of Chicago - 1,080
plus 2.0%, interest payable
monthly (b)
Corporate base rate at the First
National Bank of Chicago 3,427 6,000
plus 4.0%; interest payable
monthly (b)
12.20%; interest payable monthly (b) - 6,915
12.34%; interest payable monthly (b) - 2,000
$3,428 $15,99
6
</TABLE>
(a) The working capital
commitment is scheduled to expire October 31, 1997 and is
renewable at the option of the Company for a one-year
term, provided no event of default has occurred, and will
be renewable after October 31, 1998 at the option of the
lender.
Subsequent to October 25, 1996, the effective interest
rate on the working capital line was reduced from 1.5
points over the corporate base lending rate to .5 points
over.
(b) The financial
institution is entitled to additional contingent interest
in the event of a future sale of the Company or third
party refinancing of the Company's loans. The additional
interest would be equal to the difference between 18% and
the applicable interest rate on the outstanding balance
on certain portions of the debt for the period January
20, 1994 through the date of the event.
The Company must comply with specific affirmative and
negative covenants which require the Company, among other things,
to maintain minimum net worth, as defined, and to satisfy certain
financial ratios. The covenants also restrict investments,
capital expenditures and additional debt and prohibit payment of
dividends. The Company was in compliance with all debt covenants
during fiscal 1996.
All loans from the financial institution are secured by all
real and personal property of the Company. For loans from the
financial institution, a commitment fee accrues at .5 percent per
annum on the daily average balance of the unused commitment.
The Company has granted the financial institution a warrant,
as amended on December 13, 1995, to purchase 3,150,000 shares of
the Company's common stock at an exercise price of $.50 per share
which expires on October 31, 1998. The exercise price may
decrease to $.01 if the Company's cumulative adjusted operating
profit is less than stipulated minimums through the earlier of
the date the warrants are exercised, the date the Company is sold
or October 31, 1998. The Company was in compliance with minimum
adjusted operating profit requirement during fiscal 1996. The
warrant also contains certain antidilutive provisions, certain
registration rights upon the occurrence of a public offering and
certain demand rights for such a registration.
<PAGE>
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(dollars in thousands)
The Company has entered into bank agency agreements with the
financial institution which specify that throughout the term of
the credit agreement, the agent bank shall be pledgee-in-
possession (for the benefit of the lender) of lock boxes, master
accounts and all cash instruments of the Company. Available cash
balances in excess of $300 are applied against long-term debt and
are available for re-borrowing according to the terms of the
agreement.
Availability on the revolving term loan was reduced to
$8,000 as of November 1, 1995. On November 1, 1996, the
revolving line was retired using the available working capital
line.
(6) Stockholders' Equity
During fiscal 1992, the Company implemented a long-term
stock investment plan (Investment Plan) which allows the granting
of options to key employees and non-employee advisors to the
Company to purchase up to 1,000,000 shares of the Company's
authorized but unissued common stock at an exercise price equal
to the fair market value on the date of grant. During fiscal
1995, the Company increased the authorized but unissued common
stock available for this plan to 1,500,000 shares. The
Investment Plan allows the granting of rights to receive cash or
to acquire shares of common stock equal to the difference between
the exercise price and the current market price of stock issuable
pursuant to exercisable options. No rights to receive cash in
lieu of common stock have been granted as of October 25, 1996.
During fiscal 1996, 156,000 options were granted, 370,202 were
exercised and 17,665 were terminated. A summary of option
activity under the Investment Plan since inception follows:
<TABLE>
<CAPTION> 1996 1995 1994
<S> <C> <C> <C>
Options outstanding at 818,82 867,82 89,070
beginning of year 5 0
Granted 156,00 200,65 799,60
0 0 0
Exercised (370,2 (177,2 -
02) 80)
Canceled (17,66 (72,36 (20,85
5) 5) 0)
Options outstanding at year 586,95 818,82 867,82
end 8 5 0
Option price range for
options granted
during the year $7.66 $1.80 $0.19
to to to
$11.97 $6.05 $1.38
Options exercisable at year 152,58 253,73 52,430
end 0 2
Options available for grant 365,56 503,89 132,18
at year end 0 5 0
</TABLE>
During fiscal 1983, the Company implemented an incentive
stock option plan (Incentive Plan) which allowed the granting of
options, exercisable for up to ten years after the date of grant,
to key employees to purchase the Company's authorized but
unissued common stock at an exercise price equal to the fair
market value on the date of grant. The Incentive Plan expired
during fiscal 1993. During fiscal 1996, options to purchase
84,089 shares of common stock were exercised. Under the
Incentive Plan, options outstanding and exercisable totaled
63,866 at exercise prices of $1.13 to $5.18 per share at October
25, 1996.
During fiscal 1993 and 1994, the Company granted warrants to
purchase up to 8,759 and 170,042 shares of common stock,
respectively, to a director in partial consideration for
consulting services. Previous grants, in the amount of 82,500
shares, were made to certain non-employee directors and advisors.
During fiscal 1995, warrants to purchase 16,000 shares of common
stock were exercised. During fiscal 1996, 11,500 warrants
expired. Excluding warrants granted to financial institutions,
the Company, at October 25, 1996, had 233,801 warrants
outstanding and exercisable at $.19 to $6.00 per share expiring
December 1996 through November 1998.
During fiscal 1992, the Company adopted a directors' formula
award plan (Directors' Plan) which provides for the granting of
options to directors of the Company to purchase up to
200,000 shares of the Company's
<PAGE>
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(dollars in thousands)
authorized but unissued common stock at an exercise price equal
to the fair market value on the date of grant. Each individual
elected or reelected to serve as a director of the Company who is
not a full-time employee of the Company will automatically be
awarded options to purchase up to 3,500 shares of common stock.
Options granted under the Directors' Plan vest if such
individual continues to serve as a Director of the Company
until the next annual meeting of the Company's stockholders and
are exercisable for a period of ten years from the date of grant.
During fiscal 1996, 14,000 options to purchase common stock were
exercised. At October 25, 1996 there are 59,500 director options
outstanding of which 45,500 are currently exercisable from $.44
to $11.97 per share.
(7) Income Taxes
Income tax expense differs from the "expected" tax expense
computed by applying the U.S. corporate income tax rate of 35%
for fiscal 1996 and 34% for fiscal 1995 and 1994 to earnings
before income taxes as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Expected tax expense $ $ $
4,914 3,399 1,081
Realization of benefits of tax loss (3,238 (3,853 (305)
carryforwards ) )
Change in valuation allowance net
of loss carryforward (209) 410 (804)
realized
Other, net
(323) 202 28
Income tax expense $ $ $
1,144 158 -
</TABLE>
The provision for income taxes is comprised of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
Current:
<S> <C> <C> <C>
U.S. $1,88 $ $
Federal 7 158 -
Foreign 90 - -
Deferred (833) - -
$1,14 $ $
4 158 -
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
at October 25, 1996 and October 27, 1995 are presented below:
<TABLE>
<CAPTION> 1995
1996
Deferred tax assets:
<S> <C> <C>
Net operating loss carryforwards $ $ 3,238
-
Accounts receivable allowances 372 332
Inventory allowances 525 724
Accrued expenses and other 603 838
Less valuation allowance (358) (3,805)
Deferred tax assets 1,142 1,327
Deferred tax liabilities:
Differences between book and tax (309) (1,327)
basis of assets
Net deferred tax assets $ 833 $
-
</TABLE>
<PAGE>
OPTEK TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(dollars in thousands)
The valuation allowance for deferred tax assets at October
25, 1996 was $358. The net change in the valuation allowance for
the year ended October 25, 1996 and October 27, 1995 was a
decrease of $3,447 and $3,443, respectively. Based on the
Company's historical and current earnings, management believes it
is more likely than not that the Company will realize the
benefits of its net deferred tax assets existing at October 25,
1996.
(8) Operating Leases
The Company and its subsidiaries lease certain manufacturing
facilities and equipment under noncancellable operating leases.
Future minimum lease payments as of October 25, 1996 under all
such operating leases are as follows: 1997, $381; 1998, $110;
1999, $43; 2000, $20; and 2001, $3. Rental expense was $399 in
1996, $412 in 1995, and $382 in 1994.
(9) Credit Risk and Major Customer Information
Substantially all of the Company's sales are made on credit
on an unsecured basis. The Company evaluates credit risks on an
individual basis before extending credit to its customers and
believes the allowance for doubtful accounts adequately provides
for losses on uncollectible accounts.
During fiscal 1996, the Company's ten largest customers
accounted for approximately 62% of net sales. Such customers are
involved primarily in the automotive and office equipment
industries. During fiscal 1996, sales to one customer in the
automotive industry were 11% of sales, versus 13% in 1995 and 14%
in 1994, and sales to one customer in the office equipment
industry was 11% of sales versus 13% in 1995 and 15% in 1994.
Aggregate export sales to unaffiliated customers were
$18,865 in 1996, $16,856 in 1995 and $14,406 in 1994. Export
sales were primarily to customers in Western Europe.
(10) Employee Benefit Plan
All U.S. paid employees of the Company are entitled to
participate in the Optek Technology, Inc. Profit-Sharing Plan and
Trust (Profit-Sharing Plan). Pursuant to the Profit-Sharing
Plan, employees may request the Company to deduct and contribute
up to 15% of their salary. The Company has the option to
contribute up to 2% of the employee's salary. Employer
contributions vest ratably over a period of five years. Vesting
occurs after each year in which employees accumulate at least
1,000 hours of service. An employee's vested account balance is
distributable either upon termination of employment or after
attaining a certain age. During fiscal 1996, the Company
provided for contributions to the Profit-Sharing Plan totaling
$140 to be paid the first quarter of fiscal 1997. During fiscal
1995 and 1994 the Company contributed $139 and $118,
respectively.
(11) Contingencies
The Company is involved in various claims and legal actions
arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not
have a material affect on the Company's financial position or
results of operations
<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 by the undersigned,
thereunder duly authorized.
OPTEK TECHNOLOGY, INC.
By /s/ Thomas R. Filesi
.
Thomas R. Filesi, President and
Chief Executive Officer
Dated: January 22, 1997
Pursuant to the requirements of The Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/ Thomas R. Filesi . President,
Chief Executive
Thomas R. Filesi Officer and Director
(Principal Executive Officer)
/s/ William J. Collinsworth . Vice
President - Finance
William J. Collinsworth
Treasurer and Assistant
Secretary (Principal Financial
and Accounting Officer)
/s/ Grant A. Dove . Chairman
of the Board
Grant A. Dove and Director January
22, 1997
/s/ Rodes Ennis . Director
Rodes Ennis
/s/ Michael E. Cahr . Director
Michael E. Cahr
/s/ William H. Daughtrey . Director
William H. Daughtrey
/s/ Wayne Stevenson . Director
Wayne Stevenson
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") effective the 28th
day of October, 1996, by and between OPTEK TECHNOLOGY, INC., a
Delaware corporation, with principal executive offices at 1215 West
Crosby Road, Carrollton, Texas 75006 (hereinafter referred to as
the "Company") and THOMAS R. FILESI, an individual residing at 632
Hawthorn Circle, Highland Village, Texas 75067 (hereinafter
referred to as "Executive");
W I T N E S S E T H:
WHEREAS, Executive wishes to continue to be employed by the
Company, and Executive and the Company desire to enter into an
agreement relating to such employment;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, it is agreed as follows:
1. Employment. The Company employs Executive, and Executive
accepts employment by the Company, subject to the terms and
conditions set forth herein.
2. Term. Subject to the provisions hereof, the term of
Executive's employment by the Company under this Agreement shall be
for a period of three (3) years commencing on the date hereof;
provided, however, that at the end of each year of employment, the
term of employment shall be extended for an additional one-year
period unless, on or prior to the date six (6) months prior to the
end of such year of employment, the Company shall give written
notice to Executive or Executive shall give written notice to the
Company of an intention to terminate this Agreement, in which event
the term of employment shall comprise only the remaining two years
and six months of the then existing term of employment. The term
of Executive's employment hereunder, including any continuation or
extension of the original term, is hereinafter referred to as the
"Employment Period."
3. Position and Duties. During the Employment Period,
Executive shall serve as President and Chief Executive Officer of
the Company, with such assignments, powers and duties as are
assigned or delegated to him by the Board of Directors of the
Company. Such assignments, powers and duties may, from time to
time, be modified by the Company, as needs may require. Executive
shall also, at the request of the Company, perform similar services
for any Affiliate (as hereinafter defined) of the Company without
additional compensation. Executive agrees to devote his full time,
skill, attention and energy to the business affairs of the Company
and its Affiliates to advance the best interests of the Company and
its Affiliates and shall not hold any other salaried position
during the Employment Period.
Nothing contained herein shall be construed to prevent
Executive from investing his assets in any form or manner or from
serving on the Boards of other corporations or charitable organiza-
tions or holding uncompensated positions with professional,
academic or industry organizations, provided such investments and
activities do not unreasonably interfere with Executive's perfor-
mance of services on behalf of Company hereunder. As used in this
Agreement, the term "Affiliate" of the Company means any person or
corporation that, directly or indirectly through one or more
intermediaries, is controlled by the Company.
4. Compensation.
(a) For all services rendered by Executive to the Company
during the Employment Period, the Company shall pay Executive a
salary at the rate of One Hundred Eighty-Five Thousand Dollars
($185,000.00) per year, payable, subject to such withholding as may
be required by law, in installments in accordance with the
Company's customary payroll practices.
(b) In addition, Executive shall be entitled to receive such
bonuses, based upon the performance of the Company as compared to
its annual budget, as shall be determined by duly adopted resolu-
tion of the Board of Directors of the Company or its duly autho-
rized Committees (the "Board"), which resolution may be adopted
either before or after actual performance against the budget has
been determined.
(c) Executive shall be entitled to such salary increases,
further compensation and reasonable expenses incurred in connection
with business of the Company, if any, as shall be authorized by the
Board.
5. Office Facilities. During the Employment Period, the
Company will furnish Executive, without charge, suitable office
facilities for the purpose of performing his duties hereunder,
which facilities shall include secretarial, telephone, clerical and
support personnel and services and shall be similar to those
furnished to employees of the Company having comparable positions.
6. Fringe Benefits; Vacations.
(a) During the Employment Period, Executive shall be entitled
to participate in or receive benefits under such pension, medical
and life insurance and other employee benefit plans of the Company
which may be in effect from time to time, to the extent he is
eligible under the terms of those plans, on the same basis as other
employees of the Company having comparable positions.
(b) Executive shall be entitled to twenty days of vacation
with pay during each year of employment, which vacation time shall
accrue pro rata during each year of employment according to the
portion of such year of employment during which Executive has
served.
(c) During the Employment Period, the Company shall provide
for the Executive's exclusive use a General Motors automobile in
the STS or similar class at the Company's expense, including
insurance and maintenance.
7. Expenses. Subject to such policies regarding expenses
and expense reimbursement as may be adopted from time to time by
the Company and compliance therewith by Executive, Executive is
authorized to incur reasonable and necessary expenses in the
performance of his duties hereunder, and the Company will reimburse
Executive for such reasonable out-of-pocket expenses upon the
presentation by Executive of a reasonably itemized account and
receipts satisfactory to the Company.
8. Termination by Company.
(a) If Executive dies during the Employment Period, Company
shall pay to:
(i) the surviving spouse of Executive in the event of his
death, for so long as she survives; or,
(ii) the estate of Executive if Executive's spouse does
not survive him, or dies before expiration of the Employment
Period,
all amounts payable to Executive hereunder through the date of
death and the amounts which would otherwise be payable to Executive
pursuant to Section 4(a) hereof during the thirty (30) day period
immediately following the date of death, less any amounts payable
to Executive (or such spouse or estate) pursuant to any insurance
programs provided for Executive's benefit with premiums paid by
Company. All other rights of Executive under this Agreement shall
terminate concurrently with his death.
(b) The Company may terminate the employment of Executive at
any time upon written notice to Executive if Executive has (i)
breached an express term or provision of this Agreement and has
failed to remedy such breach within thirty (30) days of receipt by
Executive of notice of such breach; (ii) habitually neglected the
duties that Executive is required to perform under the terms of
this Agreement at any time within ninety (90) days after having
received a written notice from the Company that Executive has so
neglected such duties; or (iii) willfully violated reasonable and
substantial rules governing employee performance at any time within
ninety (90) days after having received a written notice from the
Company that Executive has so violated such rules. In the event of
termination of Executive's employment pursuant to this Section
8(b), Executive shall continue to receive salary at the rate
specified in Section 4(a) and, to the extent permitted by the
applicable plans, to participate in the benefits described in
Section 6 on a month-to-month basis thereafter until (i) Executive
shall have obtained subsequent employment or (ii) the expiration of
an additional period of three months from the date of such
termination, whichever time period is shorter.
(c) If Executive commits any act of criminal misconduct,
whether or not related to Executive's duties hereunder, or any
clearly dishonest, disloyal or criminal act toward the Company or
its Affiliates, the Employment Period and Executive's salary and
other rights under this Agreement or as an employee of the Company
shall terminate without severance pay or other obligation on the
part of Company upon written notice from the Company to Executive,
but such termination shall not affect the liability of Executive by
reason of his misconduct or dishonest, disloyal or criminal
conduct.
(d) Notwithstanding anything to the contrary contained
herein, the Employment Period and the Executive's salary and other
rights under this Agreement or as an employee of the Company shall
not be deemed to have been terminated pursuant to either Section
8(b) or (c) unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative
vote of not less than two-thirds of the Pre-change Directors of the
Board at a meeting of the Board called and held for the purpose
(after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in Section 8(b) or
(c).
(e) Nothing herein shall be construed to reduce or abrogate
any rights Executive may have pursuant to the Consolidated Omnibus
Budget Reduction Act of 1985.
9. Termination by Executive.
(a) The Employment Period may be terminated by Executive, if
the Company fails to perform its duties hereunder or fails to
comply with any of the provisions hereof, thirty (30) days after
giving written notice to Company stating the nature of such non-
performance or non-compliance, unless Company shall have remedied
such non-performance or non-compliance with such thirty (30) days
notice period.
(b) The Executive shall be entitled to terminate his
employment hereunder at any time that (A) a change in control of
the Company (as defined below) has occurred and (B) there has
occurred, without the express written consent of the Executive:
(i) a substantial alteration in the nature or status of
the title, position, duties or responsibilities of Executive
from those in effect immediately prior to the change in
control of the Company;
(ii) a reduction by the Company in the Executive's salary
as in effect on the date hereof or as the same may be in-
creased from time to time;
(iii) the relocation of the Company's principal executive
offices to a location outside the Dallas Metropolitan Area or
the Company's requiring the Executive to be based anywhere
other than the Company's principal executive offices except
for required travel on the Company's business to an extent
substantially consistent with the Executive's business travel
obligations prior to the change in control of the Company;
(iv) the failure by the Company to continue in effect
any compensation plan in which the Executive was participating
immediately prior to the change in control, or the failure by
the Company to continue the Executive's participation therein;
(v) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's employee
stock ownership, life insurance, medical, health-and-accident,
or disability plans, as well as vacation, travel and club
privileges in which the Executive was participating at the
time of a change in control of the Company or the taking of
any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Execu-
tive of any material fringe benefits enjoyed by the Executive
immediately before the time of the change in control of the
Company; or
(vi) any purported termination of the Executive's
employment which is not effected in accordance with the
requirements of Section 8 and, for purposes of this Agreement,
no such purported termination shall be effective.
(c) Upon termination of the Employment Period pursuant to
Section 9(a) or 9(b), the Company shall pay to Executive in one
lump sum on the fifth (5th) day following such termination, cash in
an amount equal to the lesser of (i) the total compensation
provided for under this Agreement for the balance of the then
effective Employment Period and (ii) the amount that is one dollar
($1.00) less than the amount which would be deemed a "parachute
payment" to Executive under the Internal Revenue Code of 1986, as
amended, to be paid in consideration of Executive's election to
terminate his employment with the Company and to release in full
all rights as an employee of the Company.
(d) Upon the occurrence of any change in control of the
Company, all options awarded to Executive under the Company's Long-
Term Stock Investment Plan which are not then vested shall become
fully vested.
(e) For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Company
is then subject to such reporting requirement, or any other actual
change in the control of the Company (whether by merger, consolida-
tion, acquisition of assets or stock or otherwise); provided that,
without limitation, such a change in control shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) other than a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), of the
Company's common stock as of the date of this Agreement, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing more than forty-five percent (45%) of the combined
voting power of the Company's then outstanding securities entitled
to vote in the election of directors, (ii) a change occurs in
ownership of more than forty-five percent (45%) in book value of
the Company's assets, or (iii) during any period of two (2)
consecutive years, individuals who at the beginning of such two
year period constituted the Board of Directors of the Company,
including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who were directors at the beginning of the period
(collectively, "Pre-Change Directors"), cease for any reason to
constitute a majority of the Company's Board of Directors.
10. Intellectual Property Rights.
(a) Executive hereby assigns, transfers, and conveys his
entire right, title, and interest in any and all Intellectual
Property which he makes or conceives, whether as a sole inventor or
originator or as a joint inventor or originator with others,
whether made within or out of usual working hours or upon the
premises or elsewhere, during the Employment Period. Executive
understands that "Intellectual Property" as used herein includes
information of a technical or a business nature such as ideas,
discoveries, designs, inventions, improvements, trade secrets,
know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer
programs, financial figures, marketing plans, customer lists and
data, business plans or methods and the like, which relate in any
manner to the actual or anticipated business or the actual or
anticipated areas of research and development of the Company, or
its divisions, subsidiaries, Affiliates, or related entities.
(b) Either during or subsequent to Executive's employment,
upon the request and at the expense of the Company, and for no
remuneration in addition to that due Executive pursuant to this
Agreement, but at no expense to him, Executive agrees to execute,
acknowledge, and deliver to the Company, its nominee, or its
attorneys any and all instruments which in the judgment of the
Company, its nominee, or its attorneys may be necessary or
desirable to secure or maintain for the benefit of the Company or
its nominee adequate patent, copyright, and other property rights
in the United States and foreign countries with respect to any
Intellectual Property embraced within this Agreement, including but
not limited to: (1) domestic and foreign patents and copyright
applications, (2) any other applications for securing, protecting,
or registering any property rights embraced within this Agreement,
and (3) powers of attorney, assignments, oaths, affirmations,
supplemental oaths and sworn statements; and further agrees to
assist the Company, its nominee, or its attorneys as required to
draft said instruments, to obtain said rights, and to enforce said
rights.
(c) Executive further agrees to disclose to the Company
promptly in writing any and all ideas, designs, inventions,
improvements, and developments, when conceived or made in whole or
in part, by him and to maintain adequate and current records
thereof.
(d) Any ideas, designs, inventions, improvements, dis-
coveries, and developments disclosed by Executive within one year
following termination of his employment shall be deemed to have
been assigned, transferred, and conveyed under the terms of
paragraphs (a) and (b), unless proved to have been conceived after
termination.
11. Covenant Not to Disclose. Executive covenants and agrees
that he will not, at any time during or after the termination of
his employment by the Company, communicate or disclose to any
person, or use for his own account, or advise, discuss with, or in
any way assist any other person or firm in obtaining or learning
about, without the prior written consent of the Company, informa-
tion concerning any inventions, processes, programs, systems, flow
charts or equipment used in, or any secret or confidential or
proprietary information, trade secrets or know-how (including,
without limitation, any customer lists, trade secrets or informa-
tion concerning any work done by the Company for its customers or
done in an effort to solicit or obtain customers) concerning, the
products, services, business or affairs of the Company or any of
its Affiliates which is not generally available to the public and
which has become known to Executive at any time he has been
employed by the Company. Executive further covenants and agrees
that he shall retain all such knowledge and information concerning
the foregoing in trust for the sole benefit of the Company and its
Affiliates and their respective successors and assigns. Upon
termination of his employment with Company, all documents, records,
notebooks, and similar repositories of or containing secret or
confidential or proprietary information, including copies thereof,
then in Executive's possession, whether prepared by him or others,
will be left with Company.
12. Protection of Company Goodwill and Proprietary Informa-
tion
(a) The following provisions of this Agreement contain
substantial restrictions on Executive's post-employment activities.
As evidenced by his initials affixed to this and subsequent pages,
Executive acknowledges that he has read and understands such
provisions.
(b) Executive recognizes and acknowledges that the lists of
the Company's customers, as well as information pertaining to
customer personnel, product preferences and buying habits as such
lists or information may exist, whether same are ever actually
committed to writing or otherwise compiled in one or more docu-
ments, or are merely memorized by Executive, are also valuable,
special and unique assets of the Company's business. Executive
will not, during or after the term of this Agreement, disclose,
directly or indirectly any of said customer lists or information of
or pertaining to customers or any part thereof, to any person,
firm, corporation, association or other entity for any reason or
purpose whatsoever.
(c) Further, Executive agrees:
(i) that Executive shall not, during the one (1) year
period immediately following the date upon which his employ-
ment by Company is terminated, directly or indirectly, for
himself or for any other person, firm, corporation, associa-
tion or other entity, as an owner, independent contractor,
principal, agent, officer, director, partner, stockholder,
employee, consultant or otherwise, within any state of the
United States of America or any foreign country in which the
Company has sold goods or services within one (1) year prior
to such termination, sell, solicit or accept orders, or assist
or aid in the selling or solicitation or acceptance of orders
for products similar to or which can be used in substitution
for or replacement of the Company's to any party with whom
Executive had contact while in the employ of Company and (A)
who is or has been a customer or client of the Company at the
date of such termination or within a period of one (1) year
prior thereto, or (B) who has been identified as a potential
customer or client of the Company as of the date of such
termination;
(ii) that Executive shall not during the one (1) year
period immediately following the date upon which his employ-
ment or engagement by Company is terminated, directly or
indirectly, for himself or for any other person, firm,
corporation, association or other entity as owner, independent
contractor, principal, agent, officer, director, partner,
stockholder, employee, consultant or otherwise, within any
state of the United States of America or any foreign country
in which the Company has purchased or obtained goods or
services within one (1) year prior to such termination, employ
or attempt to employ, or engage or attempt to engage, or
solicit or encourage to leave the employment of Company or
otherwise cease, curtail or modify his relationship with
Company, any employee, salesman, independent contractor or
agent employed or engaged by Company as of the date of
Executive's termination, unless such person's employment or
engagement with Company shall have been terminated by Company
prior thereto or Company shall have consented to such employ-
ment, engagement, solicitation or encouragement in writing.
(d) While the restrictions set forth in this Section 12 are
considered by the parties to be reasonable in all circumstances, it
is agreed that if any of such restrictions shall be adjudged to be
void or ineffective for whatever reason, but would be adjudged to
be valid and effective if part of the wording thereof were deleted
or the periods thereof reduced, the said restrictions shall apply
with such modifications as may be necessary to make the same valid
and effective.
13. Essential Nature of Covenants. The existence of any
claim or cause of action of Executive against the Company or any of
its Affiliates, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of
the covenants contained in Sections 10, 11 and 12 hereof.
Executive understands that the covenants contained in Sections 10,
11 and 12 are essential elements of the transactions contemplated
by this Agreement and, but for the agreement of Executive to
Sections 10, 11 and 12, the Company would not have agreed to enter
into such transactions. Executive has had the opportunity to
consult with counsel and to be advised in all respects concerning
the reasonableness and propriety of Sections 10, 11 and 12 with
specific regard to the nature of the business conducted by the
Company, and Executive acknowledges that Sections 10, 11 and 12 are
reasonable in all respects.
14. Remedies. Notwithstanding Section 15 of this Agreement,
in the event of a breach or threatened breach by Executive of
Sections 10, 11 or 12, the Company shall be entitled to obtain from
any court having jurisdiction of the parties a temporary restrain-
ing order and an injunction restraining Executive from the
commission of such breach. Nothing contained in this Section 14
shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened
breach, including the recovery money damages.
15. Arbitration. Except as provided in Section 14 of this
Agreement, the Company and Executive agree to submit to binding
arbitration any controversy or claim arising out of or relating to
this Agreement or the breach thereof or any other matter relating
in any manner to the relationship between the Company and
Executive or the termination of such relationship or otherwise
arising from or relating to any practices or procedures of the
Company or conduct of the Company or its agents toward Executive,
including but not limited to tortious claims and statutory claims.
Such arbitration shall be conducted in the City of Dallas, Texas,
in accordance with the Model Employment Arbitration Procedures then
in effect or, if such have been repealed, the rules then obtaining
of the American Arbitration Association, and judgment upon the
award rendered may be entered in any court having jurisdiction
thereof.
16. Certain Arbitration Procedures.
(a) The parties shall cooperate to the fullest extent
practicable in the voluntary exchange of documents and information
to expedite any such arbitration. Any request for documents or
other information should be specific, relate to the matter in
controversy, and afford the party to whom the request is made a
reasonable period of time to respond without interfering with the
time set for the hearing.
(b) Document Production and Information Exchange.
(i) Any party may serve a written request for infor-
mation or documents ("information request") upon another party
twenty (20) business days or more after the non-complaining
party has received notice of the institution of arbitration
proceedings. The requesting party shall serve the information
request on all parties and file a copy with the arbitrator(s).
The parties shall endeavor to resolve disputes regarding an
information request prior to serving any objection to the
request. Such efforts shall be set forth in the objection.
(ii) Unless a greater time is allowed by the requesting
party, information requests shall be satisfied or objected to
within thirty (30) calendar days from the date of service.
Any objection to an information request shall be served by the
objecting party on all parties and filed with the
arbitrator(s).
(iii) Any response to objections to an information re-
quest shall be served on all parties and filed with the
arbitrator(s) within ten (10) calendar days of receipt of the
objection.
(iv) Upon the written request of a party whose infor-
mation request is unsatisfied, the matter will be referred by
the arbitrator(s) to either a pre-hearing conference under
subsection (d) of this section or to a selected arbitrator
under subsection (f) of this section.
(c) At least ten (10) calendar days prior to the first
scheduled hearing date, all parties shall serve on each other
copies of documents in their possession they intend to present at
the hearing and shall identify witnesses they intend to present at
the hearing. The arbitrators may exclude from the arbitration any
documents not exchanged or witnesses not identified. This
paragraph does not require service of copies of documents or
identification of witnesses which parties may use for cross-
examination or rebuttal.
(d)(i) Upon the written request of a party or an arbitrator,
a pre-hearing conference shall be scheduled. The arbitrator(s)
shall set the time and place of a pre-hearing conference and
appoint a person to preside. The pre-hearing conference may be
held by telephone conference call. The presiding person shall seek
to achieve agreement among the parties on any issue which relates
to the pre-hearing process or to the hearing, including but not
limited to exchange of information, exchange or production of
documents, identification of witnesses, identification and exchange
of hearing documents, stipulation of facts, identification and
briefing of contested issues, and any other matters which will
expedite the arbitration proceedings.
(ii) Any issues raised at the pre-hearing conference that are
not resolved may be referred to a single member of the arbitration
panel for decision.
(e) The arbitrator(s) shall apply such rules of procedure in
addition to the preceding rules as the arbitrator(s) think
appropriate under the circumstances, provided that both parties
shall be entitled to representation by counsel, to appear and
present written and oral evidence and argument, and to cross-
examine witnesses presented by the other party, and the
arbitrator(s) shall provide written reasons for the determination
rendered.
(f) The arbitrators (if more than one) may appoint a single
member of the arbitration panel to decide all unresolved issues
under this Section 16. Such arbitrator shall be authorized to act
on behalf of the panel to issue subpoenas, direct appearances of
witnesses and production of documents, set deadlines for compli-
ance, and issue any other ruling which will expedite the arbitra-
tion proceedings. Decisions under this section shall be made upon
the papers submitted by the parties, unless the arbitrator calls a
hearing. The arbitrator may elect to refer any issue under this
section to the full panel.
17. Waiver of Breach. The waiver by the either party of a
breach of any provision of this Agreement by the other party shall
not operate nor be construed as a waiver of any subsequent breach
by the other party.
18. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors, assigns, heirs and legal representatives.
19. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
20. Severability. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibi-
tion or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
21. Governing Law. This Agreement shall be construed (both
as to validity and performance) and enforced in accordance with and
governed by the laws of the State of Texas.
22. Notice. All notices which are required or may be given
under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person or three (3) days
after being mailed by registered or certified first class mail,
postage prepaid, return receipt requested, at the address listed
above for such party, or to such other address as such party shall
have specified by notice to the other party hereto as provided in
this Section.
23. Entire Agreement. Except as specifically set forth
below, this Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with
respect to the subject matter hereof.
24. Amendment. This Agreement may not be changed orally, but
only in writing signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
25. Limitations. No suit, action, arbitration or other
proceeding based upon or arising out of this Agreement shall be
maintainable in any court of law or equity or before any arbitra-
tor(s) or other adjudicator(s) unless the same be commenced within
two (2) years after the calendar date upon which the claim giving
rise to such suit, action, arbitration or other proceeding arose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and date first above written.
OPTEK TECHNOLOGY, INC.
By:
Print Name:
Title:
THOMAS R. FILESI
CONSULTING AGREEMENT
CONSULTING AGREEMENT (this "Agreement") effective the 28th day
of October, 1996, between OPTEK TECHNOLOGY, INC., a Delaware
corporation (hereinafter called the "Company"), and GRANT DOVE, an
individual residing in Dallas, Texas (hereinafter called
"Consultant");
W I T N E S S E T H:
WHEREAS the Company desires to retain Consultant as an
independent contractor to perform certain duties described herein;
NOW THEREFORE, in consideration of the mutual agreements
herein made, the Company and Consultant do hereby agree as follows:
1. Retainer as Consultant. The Company hereby designates
and appoints Consultant as an independent contractor to provide
services described herein for the Company, and Consultant hereby
accepts such appointment upon the terms and conditions hereinafter
set forth.
2. Status of Consultant as an Independent Contractor.
(a) In exercising the duties and obligations arising
under the terms of this Agreement, Consultant shall at all
times be and remain an independent contractor and nothing in
this Agreement will constitute Consultant a general partner or
joint venturer of the Company. Consultant shall have full
discretion and authority as to the manner in which Consultant
carries out his duties and obligations hereunder and the time
at which Consultant carries out his duties and obligations.
(b) The parties agree that by the execution of this
Agreement and the performance of his responsibilities as an
independent contractor hereunder, Consultant is not assuming
and shall not assume any of the Company's corporate
obligations.
(c) Consultant shall be solely responsible for paying
all taxes, including social security, which may be or become
due as a result of remuneration payable to him under this
Agreement.
3. Remuneration.
(a) For all services rendered by Consultant under the
terms of this Agreement, Consultant shall receive compensation
at the rate of $25,000 per fiscal quarter of the Company,
payable in cash within ten (10) days after the end of each
fiscal quarter of the Company during which Consultant shall
have provided services hereunder. In the event that
Consultant shall serve for a portion but not the entirety of
any fiscal quarter of the Company, the amount paid to
Consultant shall be adjusted proportionately.
(b) Consultant shall also be entitled to reimbursement
by the Company of all reasonable, ordinary and necessary
business expenses incurred by Consultant in carrying out the
duties of his appointment hereunder, provided that Consultant
accounts promptly for such expenses to the Company in the
manner prescribed from time to time by the Company's Board of
Directors.
4. Term of Appointment. The term of Consultant's appointment
(hereinafter referred to as the "term of appointment") shall
commence on the date hereof and terminate on May 30, 1998.
5. Termination by Company.
(a) If Consultant dies during the term of appointment,
Company shall pay to:
(i) the surviving spouse of Consultant in the event
of his death, for so long as she survives; or,
(ii) the estate of Consultant if Consultant's spouse
does not survive him, or dies before expiration of the
term of appointment,
all amounts payable to Consultant hereunder through the date
of death and the amounts which would otherwise be payable to
Consultant pursuant to Section 4 hereof during the ninety (90)
day period immediately following the date of death, less any
amounts payable to Consultant (or such spouse or estate)
pursuant to any insurance programs provided for Consultant's
benefit with premiums paid by Company. All other rights of
Consultant under this Agreement shall terminate concurrently
with his death.
(b) The Company may terminate the employment of
Consultant at any time upon written notice to Consultant if
Consultant has (i) breached an express term or provision of
this Agreement and has failed to remedy such breach within
thirty (30) days of receipt by Consultant of notice of such
breach or (ii) habitually neglected the duties that Consultant
is required to perform under the terms of this Agreement at
any time within ninety (90) days after having received a
written notice from the Company that Consultant has so
neglected such duties. In the event of termination of
Consultant's employment pursuant to this Section 5(b),
Consultant shall be entitled to receive all amounts payable to
Consultant through the date of termination and the amounts
which would otherwise be payable to Consultant pursuant to
Section 4 hereof during the ninety (90) day period immediately
following the date of termination.
(c) If Consultant commits any act of criminal
misconduct, whether or not related to Consultant's duties
hereunder, or any clearly dishonest, disloyal or criminal act
toward the Company or its Affiliates, the term of appointment
and Consultant's remuneration and other rights under this
Agreement or as an employee of the Company shall terminate
without severance pay or other obligation on the part of
Company upon written notice from the Company to Consultant,
but such termination shall not affect the liability of
Consultant by reason of his misconduct or dishonest, disloyal
or criminal conduct.
(d) Notwithstanding anything to the contrary contained
herein, the term of appointment and the Consultant's
remuneration and other rights under this Agreement or as an
employee of the Company shall not be deemed to have been
terminated pursuant to either Section 5(b) or (c) unless and
until there shall have been delivered to the Consultant a copy
of a resolution duly adopted by the affirmative vote of not
less than two-thirds of the Pre-change Directors of the Board
at a meeting of the Board called and held for the purpose
(after reasonable notice to the Consultant and an opportunity
for the Consultant, together with his counsel, to be heard
before the Board), finding that in the good faith opinion of
the Board the Consultant was guilty of conduct set forth above
in Section 5(b) or (c).
6. Termination by Consultant.
(a) The term of appointment may be terminated by
Consultant, if the Company fails to perform its duties
hereunder or fails to comply with any of the provisions
hereof, thirty (30) days after giving written notice to
Company stating the nature of such non-performance or non-
compliance, unless Company shall have remedied such non-
performance or non-compliance with such thirty (30) days
notice period.
(b) The Consultant shall be entitled to terminate the
term of appointment hereunder at any time that (A) a change in
control of the Company (as defined below) has occurred and (B)
there has occurred, without the express written consent of the
Consultant:
(i) a substantial alteration in the nature or
status of the title, position, duties or responsibilities
of Consultant from those in effect immediately prior to
the change in control of the Company;
(ii) a reduction by the Company in the Consultant's
remuneration as in effect on the date hereof or as the
same may be increased from time to time;
(iii) the failure by the Company to continue in
effect any compensation plan in which the Consultant was
participating immediately prior to the change in control,
or the failure by the Company to continue the
Consultant's participation therein; or
(iv) any purported termination of the Consultant's
term of appointment which is not effected in accordance
with the requirements of Section 5 and, for purposes of
this Agreement, no such purported termination shall be
effective.
(c) Upon termination of the term of appointment pursuant
to Section 6(a) or 6(b), the Company shall pay to Consultant
in one lump sum on the fifth (5th) day following such termina-
tion, cash in an amount equal to the lesser of (i) the total
compensation provided for under this Agreement for the balance
of the term of appointment and (ii) the amount that is one
dollar ($1.00) less than the amount which would be deemed a
"parachute payment" to Consultant under the Internal Revenue
Code of 1986, as amended, to be paid in consideration of
Consultant's election to release in full all rights under this
Agreement.
(d) For purposes of this Agreement, a "change in control
of the Company" shall mean a change in control of a nature
that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), whether or not the Company is then subject to such
reporting requirement, or any other actual change in the
control of the Company (whether by merger, consolidation,
acquisition of assets or stock or otherwise); provided that,
without limitation, such a change in control shall be deemed
to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) other than a
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), of the Company's common stock as of the date of
this Agreement, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than forty-five
percent (45%) of the combined voting power of the Company's
then outstanding securities entitled to vote in the election
of directors, (ii) a change occurs in ownership of more than
forty-five percent (45%) in book value of the Company's
assets, or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such two year
period constituted the Board of Directors of the Company,
including for this purpose any new director whose election or
nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who were directors at the
beginning of the period (collectively, "Pre-Change
Directors"), cease for any reason to constitute a majority of
the Company's Board of Directors.
7. Duties; Extent of Service. Consultant, as an independent
contractor, agrees to serve as Chairman of the Board of the Company
during his term of appointment and to perform the normal functions
and duties of that position as contemplated by the Company's
Certificate of Incorporation and Bylaws and applicable law.
Consultant may during the term of this Agreement be engaged in any
other business activity.
8. Confidential Information; Covenant Not to Disclose.
Consultant recognizes and acknowledges that he will have access to
certain Confidential Information of the Company, and that such
information constitutes valuable, special and unique property of
the Company. Consultant agrees that he will not during the term of
appointment or at any time thereafter use, disseminate or disclose
any such Confidential Information to any party not associated with
the Company for any reason or purpose whatsoever. Nothing herein
shall be construed as prohibiting the Company from pursuing any
other remedies available to the Company for such breach or
threatened breach. Upon termination of his appointment by the
Company, all documents, records, notebooks and similar repositories
of or containing confidential information, including copies
thereof, then in Consultant's possession, whether prepared by him
or other, will be left with the Company. As used herein,
"Confidential Information" means information disclosed to
Consultant or known by Consultant as a consequence of or through
his association with the Company, not generally known in the
industry in which the Company is or may become engaged, about the
Company's products, processes or services, including information
relating to research, development, inventions, manufacturing,
purchasing, accounting, engineering, marketing, merchandising and
selling.
9. Indemnification; Insurance. The Company agrees to
indemnify Consultant against any liability asserted against
Consultant by reason of the fact that he is or has been a Director,
officer or agent of the Company, or is or has served as a Director,
officer or agent of another corporation at the request of the
Company to the fullest extent permitted by Delaware law, and the
Company shall use its best efforts to obtain officers' and
Directors' liability insurance concerning the same.
10. Contents of Agreement, Parties in Interest, Assignment,
Etc. This Agreement sets forth the entire understanding of the
parties with respect to the matters contemplated hereby and any
previous agreements or understandings between the parties regarding
the subject matter hereof are merged into and superseded by this
Agreement. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs,
executors, administrators, legal representatives, successors and
assigns. Consultant may not assign, transfer, convey, mortgage,
hypothecate, pledge or otherwise encumber the remuneration or other
benefits payable to him or any right which he may have under the
provisions of this Agreement. This Agreement may and shall be
assigned or transferred to, and shall be binding upon and inure to
the benefit of, any successor of the Company and any successor
shall be deemed substituted for all purposes of the Company under
the terms of this Agreement.
11. Waiver. Any waiver by any party of any of the terms or
conditions of this Agreement in any instance shall not be deemed or
construed to be a waiver of such term or condition for the future,
or any subsequent breach thereof.
12. Amendment of Agreement. Notwithstanding anything to the
contrary in this Agreement, to the extent permitted by law, this
Agreement may be amended, supplemented or interpreted at any time
by written instrument duly executed by each of the parties hereto.
13. Receipt of Agreement. Each of the parties hereto
acknowledges that he has read this Agreement in its entirety and
does hereby acknowledge receipt of a fully executed copy thereof.
A fully executed copy shall be an original for all purposes and is
a duplicate original.
14. Captions and Section Headings. Captions and Section
headings used herein are for convenience only and are not a part of
this Agreement and shall not be used in construing it.
15. Invalid Provisions. Should any part of this Agreement
for any reason be declared invalid, the validity and binding effect
of any remaining portion shall not be affected, and the remaining
portion of this Agreement shall remain in force and effect as if
this Agreement had been executed with the invalid provision
eliminated.
16. Jurisdiction and Venue. Each of the parties hereto
hereby irrevocably submits to the jurisdiction and venue of the
state and federal courts sitting in the County of Dallas, State of
Texas, with respect to any legal proceedings arising out of this
Agreement.
17. Notices. Any notice required or permitted to be given
under the terms of this Agreement shall be in writing and shall be
deemed to have been delivered when sent postage prepaid by
registered or certified mail, return receipt requested, in the case
of Consultant, to his last place of residence as shown on the
records of the Company, or in the case of the Company, to its
principal office in the City of Carrollton, Texas.
18. Miscellaneous. This Agreement shall be subject to and
governed by the laws of the State of Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first appearing above.
THE COMPANY:
OPTEK TECHNOLOGY, INC.
By:
Thomas R. Filesi
President
INDEPENDENT CONTRACTOR:
GRANT DOVE
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") effective the 28th
day of October, 1996, by and between OPTEK TECHNOLOGY, INC., a
Delaware corporation, with principal executive offices at 1215 West
Crosby Road, Carrollton, Texas 75006 (hereinafter referred to as
the "Company") and B.J. COLLINSWORTH, an individual residing at
(hereinafter
referred to as "Executive");
W I T N E S S E T H:
WHEREAS, Executive wishes to continue to be employed by the
Company, and Executive and the Company desire to enter into an
agreement relating to such employment;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, it is agreed as follows:
1. Employment. The Company employs Executive, and Executive
accepts employment by the Company, subject to the terms and
conditions set forth herein.
2. Term. Subject to the provisions hereof, the term of
Executive's employment by the Company under this Agreement shall be
for a period of two (2) years commencing on the date hereof;
provided, however, that at the end of each year of employment, the
term of employment shall be extended for an additional one-year
period unless, on or prior to the date three (3) months prior to
the end of such year of employment, the Company shall give written
notice to Executive or Executive shall give written notice to the
Company of an intention to terminate this Agreement, in which event
the term of employment shall comprise only the remaining one year
and three months of the then existing term of employment. The term
of Executive's employment hereunder, including any continuation or
extension of the original term, is hereinafter referred to as the
"Employment Period."
3. Position and Duties. During the Employment Period,
Executive shall serve as Vice President - Finance and Chief
Financial Officer of the Company, with such assignments, powers and
duties as are assigned or delegated to him by the Board of
Directors of the Company. Such assignments, powers and duties may,
from time to time, be modified by the Company, as needs may
require. Executive shall also, at the request of the Company,
perform similar services for any Affiliate (as hereinafter defined)
of the Company without additional compensation. Executive agrees to
devote his full time, skill, attention and energy to the business
affairs of the Company and its Affiliates to advance the best
interests of the Company and its Affiliates and shall not hold any
other salaried position during the Employment Period.
Nothing contained herein shall be construed to prevent
Executive from investing his assets in any form or manner or from
serving on the Boards of other corporations or charitable organiza-
tions or holding uncompensated positions with professional,
academic or industry organizations, provided such investments and
activities do not unreasonably interfere with Executive's perfor-
mance of services on behalf of Company hereunder. As used in this
Agreement, the term "Affiliate" of the Company means any person or
corporation that, directly or indirectly through one or more
intermediaries, is controlled by the Company.
4. Compensation.
(a) For all services rendered by Executive to the Company
during the Employment Period, the Company shall pay Executive a
salary at the rate of One Hundred Thirty-Five Thousand Dollars
($135,000.00) per year, payable, subject to such withholding as may
be required by law, in installments in accordance with the
Company's customary payroll practices.
(b) In addition, Executive shall be entitled to receive such
bonuses, based upon the performance of the Company as compared to
its annual budget, as shall be determined by duly adopted resolu-
tion of the Board of Directors of the Company or its duly autho-
rized Committees (the "Board"), which resolution may be adopted
either before or after actual performance against the budget has
been determined.
(c) Executive shall be entitled to such salary increases,
further compensation and reasonable expenses incurred in connection
with business of the Company, if any, as shall be authorized by the
Board.
5. Office Facilities. During the Employment Period, the
Company will furnish Executive, without charge, suitable office
facilities for the purpose of performing his duties hereunder,
which facilities shall include secretarial, telephone, clerical and
support personnel and services and shall be similar to those
furnished to employees of the Company having comparable positions.
6. Fringe Benefits; Vacations.
(a) During the Employment Period, Executive shall be entitled
to participate in or receive benefits under such pension, medical
and life insurance and other employee benefit plans of the Company
which may be in effect from time to time, to the extent he is
eligible under the terms of those plans, on the same basis as other
employees of the Company having comparable positions.
(b) Executive shall be entitled to twenty days of vacation
with pay during each year of employment, which vacation time shall
accrue pro rata during each year of employment according to the
portion of such year of employment during which Executive has
served.
7. Expenses. Subject to such policies regarding expenses
and expense reimbursement as may be adopted from time to time by
the Company and compliance therewith by Executive, Executive is
authorized to incur reasonable and necessary expenses in the
performance of his duties hereunder, and the Company will reimburse
Executive for such reasonable out-of-pocket expenses upon the
presentation by Executive of a reasonably itemized account and
receipts satisfactory to the Company.
8. Termination by Company.
(a) If Executive dies during the Employment Period, Company
shall pay to:
(i) the surviving spouse of Executive in the event of his
death, for so long as she survives; or,
(ii) the estate of Executive if Executive's spouse does
not survive him, or dies before expiration of the Employment
Period,
all amounts payable to Executive hereunder through the date of
death and the amounts which would otherwise be payable to Executive
pursuant to Section 4(a) hereof during the thirty (30) day period
immediately following the date of death, less any amounts payable
to Executive (or such spouse or estate) pursuant to any insurance
programs provided for Executive's benefit with premiums paid by
Company. All other rights of Executive under this Agreement shall
terminate concurrently with his death.
(b) The Company may terminate the employment of Executive at
any time upon written notice to Executive if Executive has (i)
breached an express term or provision of this Agreement and has
failed to remedy such breach within thirty (30) days of receipt by
Executive of notice of such breach; (ii) habitually neglected the
duties that Executive is required to perform under the terms of
this Agreement at any time within ninety (90) days after having
received a written notice from the Company that Executive has so
neglected such duties; or (iii) willfully violated reasonable and
substantial rules governing employee performance at any time within
ninety (90) days after having received a written notice from the
Company that Executive has so violated such rules. In the event of
termination of Executive's employment pursuant to this Section
8(b), Executive shall continue to receive salary at the rate
specified in Section 4(a) and, to the extent permitted by the
applicable plans, to participate in the benefits described in
Section 6 on a month-to-month basis thereafter until (i) Executive
shall have obtained subsequent employment or (ii) the expiration of
an additional period of three months from the date of such
termination, whichever time period is shorter.
(c) If Executive commits any act of criminal misconduct,
whether or not related to Executive's duties hereunder, or any
clearly dishonest, disloyal or criminal act toward the Company or
its Affiliates, the Employment Period and Executive's salary and
other rights under this Agreement or as an employee of the Company
shall terminate without severance pay or other obligation on the
part of Company upon written notice from the Company to Executive,
but such termination shall not affect the liability of Executive by
reason of his misconduct or dishonest, disloyal or criminal
conduct.
(d) Notwithstanding anything to the contrary contained
herein, the Employment Period and the Executive's salary and other
rights under this Agreement or as an employee of the Company shall
not be deemed to have been terminated pursuant to either Section
8(b) or (c) unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative
vote of not less than two-thirds of the Pre-change Directors of the
Board at a meeting of the Board called and held for the purpose
(after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in Section 8(b) or
(c).
(e) Nothing herein shall be construed to reduce or abrogate
any rights Executive may have pursuant to the Consolidated Omnibus
Budget Reduction Act of 1985.
9. Termination by Executive.
(a) The Employment Period may be terminated by Executive, if
the Company fails to perform its duties hereunder or fails to
comply with any of the provisions hereof, thirty (30) days after
giving written notice to Company stating the nature of such non-
performance or non-compliance, unless Company shall have remedied
such non-performance or non-compliance with such thirty (30) days
notice period.
(b) The Executive shall be entitled to terminate his
employment hereunder at any time that (A) a change in control of
the Company (as defined below) has occurred and (B) there has
occurred, without the express written consent of the Executive:
(i) a substantial alteration in the nature or status of
the title, position, duties or responsibilities of Executive
from those in effect immediately prior to the change in
control of the Company;
(ii) a reduction by the Company in the Executive's salary
as in effect on the date hereof or as the same may be in-
creased from time to time;
(iii) the relocation of the Company's principal executive
offices to a location outside the Dallas Metropolitan Area or
the Company's requiring the Executive to be based anywhere
other than the Company's principal executive offices except
for required travel on the Company's business to an extent
substantially consistent with the Executive's business travel
obligations prior to the change in control of the Company;
(iv) the failure by the Company to continue in effect
any compensation plan in which the Executive was participating
immediately prior to the change in control, or the failure by
the Company to continue the Executive's participation therein;
(v) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's employee
stock ownership, life insurance, medical, health-and-accident,
or disability plans, as well as vacation, travel and club
privileges in which the Executive was participating at the
time of a change in control of the Company or the taking of
any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Execu-
tive of any material fringe benefits enjoyed by the Executive
immediately before the time of the change in control of the
Company; or
(vi) any purported termination of the Executive's
employment which is not effected in accordance with the
requirements of Section 8 and, for purposes of this Agreement,
no such purported termination shall be effective.
(c) Upon termination of the Employment Period pursuant to
Section 9(a) or 9(b), the Company shall pay to Executive in one
lump sum on the fifth (5th) day following such termination, cash in
an amount equal to the lesser of (i) the total compensation
provided for under this Agreement for the balance of the then
effective Employment Period and (ii) the amount that is one dollar
($1.00) less than the amount which would be deemed a "parachute
payment" to Executive under the Internal Revenue Code of 1986, as
amended, to be paid in consideration of Executive's election to
terminate his employment with the Company and to release in full
all rights as an employee of the Company.
(d) Upon the occurrence of any change in control of the
Company, all options awarded to Executive under the Company's Long-
Term Stock Investment Plan which are not then vested shall become
fully vested.
(e) For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Company
is then subject to such reporting requirement, or any other actual
change in the control of the Company (whether by merger, consolida-
tion, acquisition of assets or stock or otherwise); provided that,
without limitation, such a change in control shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) other than a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), of the
Company's common stock as of the date of this Agreement, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing more than forty-five percent (45%) of the combined
voting power of the Company's then outstanding securities entitled
to vote in the election of directors, (ii) a change occurs in
ownership of more than forty-five percent (45%) in book value of
the Company's assets, or (iii) during any period of two (2)
consecutive years, individuals who at the beginning of such two
year period constituted the Board of Directors of the Company,
including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who were directors at the beginning of the period
(collectively, "Pre-Change Directors"), cease for any reason to
constitute a majority of the Company's Board of Directors.
10. Intellectual Property Rights.
(a) Executive hereby assigns, transfers, and conveys his
entire right, title, and interest in any and all Intellectual
Property which he makes or conceives, whether as a sole inventor or
originator or as a joint inventor or originator with others,
whether made within or out of usual working hours or upon the
premises or elsewhere, during the Employment Period. Executive
understands that "Intellectual Property" as used herein includes
information of a technical or a business nature such as ideas,
discoveries, designs, inventions, improvements, trade secrets,
know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer
programs, financial figures, marketing plans, customer lists and
data, business plans or methods and the like, which relate in any
manner to the actual or anticipated business or the actual or
anticipated areas of research and development of the Company, or
its divisions, subsidiaries, Affiliates, or related entities.
(b) Either during or subsequent to Executive's employment,
upon the request and at the expense of the Company, and for no
remuneration in addition to that due Executive pursuant to this
Agreement, but at no expense to him, Executive agrees to execute,
acknowledge, and deliver to the Company, its nominee, or its
attorneys any and all instruments which in the judgment of the
Company, its nominee, or its attorneys may be necessary or
desirable to secure or maintain for the benefit of the Company or
its nominee adequate patent, copyright, and other property rights
in the United States and foreign countries with respect to any
Intellectual Property embraced within this Agreement, including but
not limited to: (1) domestic and foreign patents and copyright
applications, (2) any other applications for securing, protecting,
or registering any property rights embraced within this Agreement,
and (3) powers of attorney, assignments, oaths, affirmations,
supplemental oaths and sworn statements; and further agrees to
assist the Company, its nominee, or its attorneys as required to
draft said instruments, to obtain said rights, and to enforce said
rights.
(c) Executive further agrees to disclose to the Company
promptly in writing any and all ideas, designs, inventions,
improvements, and developments, when conceived or made in whole or
in part, by him and to maintain adequate and current records
thereof.
(d) Any ideas, designs, inventions, improvements, dis-
coveries, and developments disclosed by Executive within one year
following termination of his employment shall be deemed to have
been assigned, transferred, and conveyed under the terms of
paragraphs (a) and (b), unless proved to have been conceived after
termination.
11. Covenant Not to Disclose. Executive covenants and agrees
that he will not, at any time during or after the termination of
his employment by the Company, communicate or disclose to any
person, or use for his own account, or advise, discuss with, or in
any way assist any other person or firm in obtaining or learning
about, without the prior written consent of the Company, informa-
tion concerning any inventions, processes, programs, systems, flow
charts or equipment used in, or any secret or confidential or
proprietary information, trade secrets or know-how (including,
without limitation, any customer lists, trade secrets or informa-
tion concerning any work done by the Company for its customers or
done in an effort to solicit or obtain customers) concerning, the
products, services, business or affairs of the Company or any of
its Affiliates which is not generally available to the public and
which has become known to Executive at any time he has been
employed by the Company. Executive further covenants and agrees
that he shall retain all such knowledge and information concerning
the foregoing in trust for the sole benefit of the Company and its
Affiliates and their respective successors and assigns. Upon
termination of his employment with Company, all documents, records,
notebooks, and similar repositories of or containing secret or
confidential or proprietary information, including copies thereof,
then in Executive's possession, whether prepared by him or others,
will be left with Company.
12. Protection of Company Goodwill and Proprietary Informa-
tion
(a) The following provisions of this Agreement contain
substantial restrictions on Executive's post-employment activities.
As evidenced by his initials affixed to this and subsequent pages,
Executive acknowledges that he has read and understands such
provisions.
(b) Executive recognizes and acknowledges that the lists of
the Company's customers, as well as information pertaining to
customer personnel, product preferences and buying habits as such
lists or information may exist, whether same are ever actually
committed to writing or otherwise compiled in one or more docu-
ments, or are merely memorized by Executive, are also valuable,
special and unique assets of the Company's business. Executive
will not, during or after the term of this Agreement, disclose,
directly or indirectly any of said customer lists or information of
or pertaining to customers or any part thereof, to any person,
firm, corporation, association or other entity for any reason or
purpose whatsoever.
(c) Further, Executive agrees:
(i) that Executive shall not, during the one (1) year
period immediately following the date upon which his employ-
ment by Company is terminated, directly or indirectly, for
himself or for any other person, firm, corporation, associa-
tion or other entity, as an owner, independent contractor,
principal, agent, officer, director, partner, stockholder,
employee, consultant or otherwise, within any state of the
United States of America or any foreign country in which the
Company has sold goods or services within one (1) year prior
to such termination, sell, solicit or accept orders, or assist
or aid in the selling or solicitation or acceptance of orders
for products similar to or which can be used in substitution
for or replacement of the Company's to any party with whom
Executive had contact while in the employ of Company and (A)
who is or has been a customer or client of the Company at the
date of such termination or within a period of one (1) year
prior thereto, or (B) who has been identified as a potential
customer or client of the Company as of the date of such
termination;
(ii) that Executive shall not during the one (1) year
period immediately following the date upon which his employ-
ment or engagement by Company is terminated, directly or
indirectly, for himself or for any other person, firm,
corporation, association or other entity as owner, independent
contractor, principal, agent, officer, director, partner,
stockholder, employee, consultant or otherwise, within any
state of the United States of America or any foreign country
in which the Company has purchased or obtained goods or
services within one (1) year prior to such termination, employ
or attempt to employ, or engage or attempt to engage, or
solicit or encourage to leave the employment of Company or
otherwise cease, curtail or modify his relationship with
Company, any employee, salesman, independent contractor or
agent employed or engaged by Company as of the date of
Executive's termination, unless such person's employment or
engagement with Company shall have been terminated by Company
prior thereto or Company shall have consented to such employ-
ment, engagement, solicitation or encouragement in writing.
(d) While the restrictions set forth in this Section 12 are
considered by the parties to be reasonable in all circumstances, it
is agreed that if any of such restrictions shall be adjudged to be
void or ineffective for whatever reason, but would be adjudged to
be valid and effective if part of the wording thereof were deleted
or the periods thereof reduced, the said restrictions shall apply
with such modifications as may be necessary to make the same valid
and effective.
13. Essential Nature of Covenants. The existence of any
claim or cause of action of Executive against the Company or any of
its Affiliates, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of
the covenants contained in Sections 10, 11 and 12 hereof.
Executive understands that the covenants contained in Sections 10,
11 and 12 are essential elements of the transactions contemplated
by this Agreement and, but for the agreement of Executive to
Sections 10, 11 and 12, the Company would not have agreed to enter
into such transactions. Executive has had the opportunity to
consult with counsel and to be advised in all respects concerning
the reasonableness and propriety of Sections 10, 11 and 12 with
specific regard to the nature of the business conducted by the
Company, and Executive acknowledges that Sections 10, 11 and 12 are
reasonable in all respects.
14. Remedies. Notwithstanding Section 15 of this Agreement,
in the event of a breach or threatened breach by Executive of
Sections 10, 11 or 12, the Company shall be entitled to obtain from
any court having jurisdiction of the parties a temporary restrain-
ing order and an injunction restraining Executive from the
commission of such breach. Nothing contained in this Section 14
shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened
breach, including the recovery money damages.
15. Arbitration. Except as provided in Section 14 of this
Agreement, the Company and Executive agree to submit to binding
arbitration any controversy or claim arising out of or relating to
this Agreement or the breach thereof or any other matter relating
in any manner to the relationship between the Company and
Executive or the termination of such relationship or otherwise
arising from or relating to any practices or procedures of the
Company or conduct of the Company or its agents toward Executive,
including but not limited to tortious claims and statutory claims.
Such arbitration shall be conducted in the City of Dallas, Texas,
in accordance with the Model Employment Arbitration Procedures then
in effect or, if such have been repealed, the rules then obtaining
of the American Arbitration Association, and judgment upon the
award rendered may be entered in any court having jurisdiction
thereof.
16. Certain Arbitration Procedures.
(a) The parties shall cooperate to the fullest extent
practicable in the voluntary exchange of documents and information
to expedite any such arbitration. Any request for documents or
other information should be specific, relate to the matter in
controversy, and afford the party to whom the request is made a
reasonable period of time to respond without interfering with the
time set for the hearing.
(b) Document Production and Information Exchange.
(i) Any party may serve a written request for infor-
mation or documents ("information request") upon another party
twenty (20) business days or more after the non-complaining
party has received notice of the institution of arbitration
proceedings. The requesting party shall serve the information
request on all parties and file a copy with the arbitrator(s).
The parties shall endeavor to resolve disputes regarding an
information request prior to serving any objection to the
request. Such efforts shall be set forth in the objection.
(ii) Unless a greater time is allowed by the requesting
party, information requests shall be satisfied or objected to
within thirty (30) calendar days from the date of service.
Any objection to an information request shall be served by the
objecting party on all parties and filed with the
arbitrator(s).
(iii) Any response to objections to an information re-
quest shall be served on all parties and filed with the
arbitrator(s) within ten (10) calendar days of receipt of the
objection.
(iv) Upon the written request of a party whose infor-
mation request is unsatisfied, the matter will be referred by
the arbitrator(s) to either a pre-hearing conference under
subsection (d) of this section or to a selected arbitrator
under subsection (f) of this section.
(c) At least ten (10) calendar days prior to the first
scheduled hearing date, all parties shall serve on each other
copies of documents in their possession they intend to present at
the hearing and shall identify witnesses they intend to present at
the hearing. The arbitrators may exclude from the arbitration any
documents not exchanged or witnesses not identified. This
paragraph does not require service of copies of documents or
identification of witnesses which parties may use for cross-
examination or rebuttal.
(d)(i) Upon the written request of a party or an arbitrator,
a pre-hearing conference shall be scheduled. The arbitrator(s)
shall set the time and place of a pre-hearing conference and
appoint a person to preside. The pre-hearing conference may be
held by telephone conference call. The presiding person shall seek
to achieve agreement among the parties on any issue which relates
to the pre-hearing process or to the hearing, including but not
limited to exchange of information, exchange or production of
documents, identification of witnesses, identification and exchange
of hearing documents, stipulation of facts, identification and
briefing of contested issues, and any other matters which will
expedite the arbitration proceedings.
(ii) Any issues raised at the pre-hearing conference that are
not resolved may be referred to a single member of the arbitration
panel for decision.
(e) The arbitrator(s) shall apply such rules of procedure in
addition to the preceding rules as the arbitrator(s) think
appropriate under the circumstances, provided that both parties
shall be entitled to representation by counsel, to appear and
present written and oral evidence and argument, and to cross-
examine witnesses presented by the other party, and the
arbitrator(s) shall provide written reasons for the determination
rendered.
(f) The arbitrators (if more than one) may appoint a single
member of the arbitration panel to decide all unresolved issues
under this Section 16. Such arbitrator shall be authorized to act
on behalf of the panel to issue subpoenas, direct appearances of
witnesses and production of documents, set deadlines for compli-
ance, and issue any other ruling which will expedite the arbitra-
tion proceedings. Decisions under this section shall be made upon
the papers submitted by the parties, unless the arbitrator calls a
hearing. The arbitrator may elect to refer any issue under this
section to the full panel.
17. Waiver of Breach. The waiver by the either party of a
breach of any provision of this Agreement by the other party shall
not operate nor be construed as a waiver of any subsequent breach
by the other party.
18. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors, assigns, heirs and legal representatives.
19. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
20. Severability. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibi-
tion or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
21. Governing Law. This Agreement shall be construed (both
as to validity and performance) and enforced in accordance with and
governed by the laws of the State of Texas.
22. Notice. All notices which are required or may be given
under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person or three (3) days
after being mailed by registered or certified first class mail,
postage prepaid, return receipt requested, at the address listed
above for such party, or to such other address as such party shall
have specified by notice to the other party hereto as provided in
this Section.
23. Entire Agreement. Except as specifically set forth
below, this Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with
respect to the subject matter hereof.
24. Amendment. This Agreement may not be changed orally, but
only in writing signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
25. Limitations. No suit, action, arbitration or other
proceeding based upon or arising out of this Agreement shall be
maintainable in any court of law or equity or before any arbitra-
tor(s) or other adjudicator(s) unless the same be commenced within
two (2) years after the calendar date upon which the claim giving
rise to such suit, action, arbitration or other proceeding arose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and date first above written.
OPTEK TECHNOLOGY, INC.
By:
Print Name:
Title:
B.J. COLLINGSWORTH
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") effective the 28th
day of October, 1996, by and between OPTEK TECHNOLOGY, INC., a
Delaware corporation, with principal executive offices at 1215 West
Crosby Road, Carrollton, Texas 75006 (hereinafter referred to as
the "Company") and RICHARD DAHLBERG, an individual residing at 2732
Greywood Lane, Plano, Texas 75057 (hereinafter referred to as
"Executive");
W I T N E S S E T H:
WHEREAS, Executive wishes to continue to be employed by the
Company, and Executive and the Company desire to enter into an
agreement relating to such employment;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, it is agreed as follows:
1. Employment. The Company employs Executive, and Executive
accepts employment by the Company, subject to the terms and
conditions set forth herein.
2. Term. Subject to the provisions hereof, the term of
Executive's employment by the Company under this Agreement shall be
for a period of two (2) years commencing on the date hereof;
provided, however, that at the end of each year of employment, the
term of employment shall be extended for an additional one-year
period unless, on or prior to the date three (3) months prior to
the end of such year of employment, the Company shall give written
notice to Executive or Executive shall give written notice to the
Company of an intention to terminate this Agreement, in which event
the term of employment shall comprise only the remaining one year
and three months of the then existing term of employment. The term
of Executive's employment hereunder, including any continuation or
extension of the original term, is hereinafter referred to as the
"Employment Period."
3. Position and Duties. During the Employment Period,
Executive shall serve as Vice President, Engineering of the
Company, with such assignments, powers and duties as are assigned
or delegated to him by the Board of Directors of the Company. Such
assignments, powers and duties may, from time to time, be modified
by the Company, as needs may require. Executive shall also, at the
request of the Company, perform similar services for any Affiliate
(as hereinafter defined) of the Company without additional
compensation. Executive agrees to devote his full time, skill,
attention and energy to the business affairs of the Company and its
Affiliates to advance the best interests of the Company and its
Affiliates and shall not hold any other salaried position during
the Employment Period.
Nothing contained herein shall be construed to prevent
Executive from investing his assets in any form or manner or from
serving on the Boards of other corporations or charitable organiza-
tions or holding uncompensated positions with professional,
academic or industry organizations, provided such investments and
activities do not unreasonably interfere with Executive's perfor-
mance of services on behalf of Company hereunder. As used in this
Agreement, the term "Affiliate" of the Company means any person or
corporation that, directly or indirectly through one or more
intermediaries, is controlled by the Company.
4. Compensation.
(a) For all services rendered by Executive to the Company
during the Employment Period, the Company shall pay Executive a
salary at the rate of One Hundred Thousand Dollars ($100,000.00)
per year, payable, subject to such withholding as may be required
by law, in installments in accordance with the Company's customary
payroll practices.
(b) In addition, Executive shall be entitled to receive such
bonuses, based upon the performance of the Company as compared to
its annual budget, as shall be determined by duly adopted resolu-
tion of the Board of Directors of the Company or its duly autho-
rized Committees (the "Board"), which resolution may be adopted
either before or after actual performance against the budget has
been determined.
(c) Executive shall be entitled to such salary increases,
further compensation and reasonable expenses incurred in connection
with business of the Company, if any, as shall be authorized by the
Board.
5. Office Facilities. During the Employment Period, the
Company will furnish Executive, without charge, suitable office
facilities for the purpose of performing his duties hereunder,
which facilities shall include secretarial, telephone, clerical and
support personnel and services and shall be similar to those
furnished to employees of the Company having comparable positions.
6. Fringe Benefits; Vacations.
(a) During the Employment Period, Executive shall be entitled
to participate in or receive benefits under such pension, medical
and life insurance and other employee benefit plans of the Company
which may be in effect from time to time, to the extent he is
eligible under the terms of those plans, on the same basis as other
employees of the Company having comparable positions.
(b) Executive shall be entitled to twenty days of vacation
with pay during each year of employment, which vacation time shall
accrue pro rata during each year of employment according to the
portion of such year of employment during which Executive has
served.
7. Expenses. Subject to such policies regarding expenses
and expense reimbursement as may be adopted from time to time by
the Company and compliance therewith by Executive, Executive is
authorized to incur reasonable and necessary expenses in the
performance of his duties hereunder, and the Company will reimburse
Executive for such reasonable out-of-pocket expenses upon the
presentation by Executive of a reasonably itemized account and
receipts satisfactory to the Company.
8. Termination by Company.
(a) If Executive dies during the Employment Period, Company
shall pay to:
(i) the surviving spouse of Executive in the event of his
death, for so long as she survives; or,
(ii) the estate of Executive if Executive's spouse does
not survive him, or dies before expiration of the Employment
Period,
all amounts payable to Executive hereunder through the date of
death and the amounts which would otherwise be payable to Executive
pursuant to Section 4(a) hereof during the thirty (30) day period
immediately following the date of death, less any amounts payable
to Executive (or such spouse or estate) pursuant to any insurance
programs provided for Executive's benefit with premiums paid by
Company. All other rights of Executive under this Agreement shall
terminate concurrently with his death.
(b) The Company may terminate the employment of Executive at
any time upon written notice to Executive if Executive has (i)
breached an express term or provision of this Agreement and has
failed to remedy such breach within thirty (30) days of receipt by
Executive of notice of such breach; (ii) habitually neglected the
duties that Executive is required to perform under the terms of
this Agreement at any time within ninety (90) days after having
received a written notice from the Company that Executive has so
neglected such duties; or (iii) willfully violated reasonable and
substantial rules governing employee performance at any time within
ninety (90) days after having received a written notice from the
Company that Executive has so violated such rules. In the event of
termination of Executive's employment pursuant to this Section
8(b), Executive shall continue to receive salary at the rate
specified in Section 4(a) and, to the extent permitted by the
applicable plans, to participate in the benefits described in
Section 6 on a month-to-month basis thereafter until (i) Executive
shall have obtained subsequent employment or (ii) the expiration of
an additional period of three months from the date of such
termination, whichever time period is shorter.
(c) If Executive commits any act of criminal misconduct,
whether or not related to Executive's duties hereunder, or any
clearly dishonest, disloyal or criminal act toward the Company or
its Affiliates, the Employment Period and Executive's salary and
other rights under this Agreement or as an employee of the Company
shall terminate without severance pay or other obligation on the
part of Company upon written notice from the Company to Executive,
but such termination shall not affect the liability of Executive by
reason of his misconduct or dishonest, disloyal or criminal
conduct.
(d) Notwithstanding anything to the contrary contained
herein, the Employment Period and the Executive's salary and other
rights under this Agreement or as an employee of the Company shall
not be deemed to have been terminated pursuant to either Section
8(b) or (c) unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative
vote of not less than two-thirds of the Pre-change Directors of the
Board at a meeting of the Board called and held for the purpose
(after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in Section 8(b) or
(c).
(e) Nothing herein shall be construed to reduce or abrogate
any rights Executive may have pursuant to the Consolidated Omnibus
Budget Reduction Act of 1985.
9. Termination by Executive.
(a) The Employment Period may be terminated by Executive, if
the Company fails to perform its duties hereunder or fails to
comply with any of the provisions hereof, thirty (30) days after
giving written notice to Company stating the nature of such non-
performance or non-compliance, unless Company shall have remedied
such non-performance or non-compliance with such thirty (30) days
notice period.
(b) The Executive shall be entitled to terminate his
employment hereunder at any time that (A) a change in control of
the Company (as defined below) has occurred and (B) there has
occurred, without the express written consent of the Executive:
(i) a substantial alteration in the nature or status of
the title, position, duties or responsibilities of Executive
from those in effect immediately prior to the change in
control of the Company;
(ii) a reduction by the Company in the Executive's salary
as in effect on the date hereof or as the same may be in-
creased from time to time;
(iii) the relocation of the Company's principal executive
offices to a location outside the Dallas Metropolitan Area or
the Company's requiring the Executive to be based anywhere
other than the Company's principal executive offices except
for required travel on the Company's business to an extent
substantially consistent with the Executive's business travel
obligations prior to the change in control of the Company;
(iv) the failure by the Company to continue in effect
any compensation plan in which the Executive was participating
immediately prior to the change in control, or the failure by
the Company to continue the Executive's participation therein;
(v) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's employee
stock ownership, life insurance, medical, health-and-accident,
or disability plans, as well as vacation, travel and club
privileges in which the Executive was participating at the
time of a change in control of the Company or the taking of
any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Execu-
tive of any material fringe benefits enjoyed by the Executive
immediately before the time of the change in control of the
Company; or
(vi) any purported termination of the Executive's
employment which is not effected in accordance with the
requirements of Section 8 and, for purposes of this Agreement,
no such purported termination shall be effective.
(c) Upon termination of the Employment Period pursuant to
Section 9(a) or 9(b), the Company shall pay to Executive in one
lump sum on the fifth (5th) day following such termination, cash in
an amount equal to the lesser of (i) the total compensation
provided for under this Agreement for the balance of the then
effective Employment Period and (ii) the amount that is one dollar
($1.00) less than the amount which would be deemed a "parachute
payment" to Executive under the Internal Revenue Code of 1986, as
amended, to be paid in consideration of Executive's election to
terminate his employment with the Company and to release in full
all rights as an employee of the Company.
(d) Upon the occurrence of any change in control of the
Company, all options awarded to Executive under the Company's Long-
Term Stock Investment Plan which are not then vested shall become
fully vested.
(e) For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Company
is then subject to such reporting requirement, or any other actual
change in the control of the Company (whether by merger, consolida-
tion, acquisition of assets or stock or otherwise); provided that,
without limitation, such a change in control shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) other than a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), of the
Company's common stock as of the date of this Agreement, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing more than forty-five percent (45%) of the combined
voting power of the Company's then outstanding securities entitled
to vote in the election of directors, (ii) a change occurs in
ownership of more than forty-five percent (45%) in book value of
the Company's assets, or (iii) during any period of two (2)
consecutive years, individuals who at the beginning of such two
year period constituted the Board of Directors of the Company,
including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who were directors at the beginning of the period
(collectively, "Pre-Change Directors"), cease for any reason to
constitute a majority of the Company's Board of Directors.
10. Intellectual Property Rights.
(a) Executive hereby assigns, transfers, and conveys his
entire right, title, and interest in any and all Intellectual
Property which he makes or conceives, whether as a sole inventor or
originator or as a joint inventor or originator with others,
whether made within or out of usual working hours or upon the
premises or elsewhere, during the Employment Period. Executive
understands that "Intellectual Property" as used herein includes
information of a technical or a business nature such as ideas,
discoveries, designs, inventions, improvements, trade secrets,
know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer
programs, financial figures, marketing plans, customer lists and
data, business plans or methods and the like, which relate in any
manner to the actual or anticipated business or the actual or
anticipated areas of research and development of the Company, or
its divisions, subsidiaries, Affiliates, or related entities.
(b) Either during or subsequent to Executive's employment,
upon the request and at the expense of the Company, and for no
remuneration in addition to that due Executive pursuant to this
Agreement, but at no expense to him, Executive agrees to execute,
acknowledge, and deliver to the Company, its nominee, or its
attorneys any and all instruments which in the judgment of the
Company, its nominee, or its attorneys may be necessary or
desirable to secure or maintain for the benefit of the Company or
its nominee adequate patent, copyright, and other property rights
in the United States and foreign countries with respect to any
Intellectual Property embraced within this Agreement, including but
not limited to: (1) domestic and foreign patents and copyright
applications, (2) any other applications for securing, protecting,
or registering any property rights embraced within this Agreement,
and (3) powers of attorney, assignments, oaths, affirmations,
supplemental oaths and sworn statements; and further agrees to
assist the Company, its nominee, or its attorneys as required to
draft said instruments, to obtain said rights, and to enforce said
rights.
(c) Executive further agrees to disclose to the Company
promptly in writing any and all ideas, designs, inventions,
improvements, and developments, when conceived or made in whole or
in part, by him and to maintain adequate and current records
thereof.
11. Arbitration. The Company and Executive agree to submit
to binding arbitration any controversy or claim arising out of or
relating to this Agreement or the breach thereof or any other
matter relating in any manner to the relationship between the
Company and Executive or the termination of such relationship or
otherwise arising from or relating to any practices or procedures
of the Company or conduct of the Company or its agents toward
Executive, including but not limited to tortious claims and
statutory claims. Such arbitration shall be conducted in the City
of Dallas, Texas, in accordance with the Model Employment Arbitra-
tion Procedures then in effect or, if such have been repealed, the
rules then obtaining of the American Arbitration Association, and
judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
12. Certain Arbitration Procedures.
(a) The parties shall cooperate to the fullest extent
practicable in the voluntary exchange of documents and information
to expedite any such arbitration. Any request for documents or
other information should be specific, relate to the matter in
controversy, and afford the party to whom the request is made a
reasonable period of time to respond without interfering with the
time set for the hearing.
(b) Document Production and Information Exchange.
(i) Any party may serve a written request for infor-
mation or documents ("information request") upon another party
twenty (20) business days or more after the non-complaining
party has received notice of the institution of arbitration
proceedings. The requesting party shall serve the information
request on all parties and file a copy with the arbitrator(s).
The parties shall endeavor to resolve disputes regarding an
information request prior to serving any objection to the
request. Such efforts shall be set forth in the objection.
(ii) Unless a greater time is allowed by the requesting
party, information requests shall be satisfied or objected to
within thirty (30) calendar days from the date of service.
Any objection to an information request shall be served by the
objecting party on all parties and filed with the
arbitrator(s).
(iii) Any response to objections to an information re-
quest shall be served on all parties and filed with the
arbitrator(s) within ten (10) calendar days of receipt of the
objection.
(iv) Upon the written request of a party whose infor-
mation request is unsatisfied, the matter will be referred by
the arbitrator(s) to either a pre-hearing conference under
subsection (d) of this section or to a selected arbitrator
under subsection (f) of this section.
(c) At least ten (10) calendar days prior to the first
scheduled hearing date, all parties shall serve on each other
copies of documents in their possession they intend to present at
the hearing and shall identify witnesses they intend to present at
the hearing. The arbitrators may exclude from the arbitration any
documents not exchanged or witnesses not identified. This
paragraph does not require service of copies of documents or
identification of witnesses which parties may use for cross-
examination or rebuttal.
(d)(i) Upon the written request of a party or an arbitrator,
a pre-hearing conference shall be scheduled. The arbitrator(s)
shall set the time and place of a pre-hearing conference and
appoint a person to preside. The pre-hearing conference may be
held by telephone conference call. The presiding person shall seek
to achieve agreement among the parties on any issue which relates
to the pre-hearing process or to the hearing, including but not
limited to exchange of information, exchange or production of
documents, identification of witnesses, identification and exchange
of hearing documents, stipulation of facts, identification and
briefing of contested issues, and any other matters which will
expedite the arbitration proceedings.
(ii) Any issues raised at the pre-hearing conference that are
not resolved may be referred to a single member of the arbitration
panel for decision.
(e) The arbitrator(s) shall apply such rules of procedure in
addition to the preceding rules as the arbitrator(s) think
appropriate under the circumstances, provided that both parties
shall be entitled to representation by counsel, to appear and
present written and oral evidence and argument, and to cross-
examine witnesses presented by the other party, and the
arbitrator(s) shall provide written reasons for the determination
rendered.
(f) The arbitrators (if more than one) may appoint a single
member of the arbitration panel to decide all unresolved issues
under this Section 11. Such arbitrator shall be authorized to act
on behalf of the panel to issue subpoenas, direct appearances of
witnesses and production of documents, set deadlines for compli-
ance, and issue any other ruling which will expedite the arbitra-
tion proceedings. Decisions under this section shall be made upon
the papers submitted by the parties, unless the arbitrator calls a
hearing. The arbitrator may elect to refer any issue under this
section to the full panel.
13. Waiver of Breach. The waiver by the either party of a
breach of any provision of this Agreement by the other party shall
not operate nor be construed as a waiver of any subsequent breach
by the other party.
14. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors, assigns, heirs and legal representatives.
15. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
16. Severability. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibi-
tion or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
17. Governing Law. This Agreement shall be construed (both
as to validity and performance) and enforced in accordance with and
governed by the laws of the State of Texas.
18. Notice. All notices which are required or may be given
under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person or three (3) days
after being mailed by registered or certified first class mail,
postage prepaid, return receipt requested, at the address listed
above for such party, or to such other address as such party shall
have specified by notice to the other party hereto as provided in
this Section.
19. Entire Agreement. Except as specifically set forth
below, this Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with
respect to the subject matter hereof.
20. Amendment. This Agreement may not be changed orally, but
only in writing signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
21. Limitations. No suit, action, arbitration or other
proceeding based upon or arising out of this Agreement shall be
maintainable in any court of law or equity or before any arbitra-
tor(s) or other adjudicator(s) unless the same be commenced within
two (2) years after the calendar date upon which the claim giving
rise to such suit, action, arbitration or other proceeding arose.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and date first above written.
OPTEK TECHNOLOGY, INC.
By:
Print Name:
Title:
RICHARD DAHLBERG
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") effective the 28th
day of October, 1996, by and between OPTEK TECHNOLOGY, INC., a
Delaware corporation, with principal executive offices at 1215 West
Crosby Road, Carrollton, Texas 75006 (hereinafter referred to as
the "Company") and THOMAS GARRETT, an individual residing at Rt. 1,
Box 415-1, Buchanan Dam, Texas 78609 (hereinafter referred to as
"Executive");
W I T N E S S E T H:
WHEREAS, Executive wishes to continue to be employed by the
Company, and Executive and the Company desire to enter into an
agreement relating to such employment;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, it is agreed as follows:
1. Employment. The Company employs Executive, and Executive
accepts employment by the Company, subject to the terms and
conditions set forth herein.
2. Term. Subject to the provisions hereof, the term of
Executive's employment by the Company under this Agreement shall be
for a period of two (2) years commencing on the date hereof;
provided, however, that at the end of each year of employment, the
term of employment shall be extended for an additional one-year
period unless, on or prior to the date three (3) months prior to
the end of such year of employment, the Company shall give written
notice to Executive or Executive shall give written notice to the
Company of an intention to terminate this Agreement, in which event
the term of employment shall comprise only the remaining one year
and three months of the then existing term of employment. The term
of Executive's employment hereunder, including any continuation or
extension of the original term, is hereinafter referred to as the
"Employment Period."
3. Position and Duties. During the Employment Period,
Executive shall serve as Vice President, Operations of the Company,
with such assignments, powers and duties as are assigned or
delegated to him by the Board of Directors of the Company. Such
assignments, powers and duties may, from time to time, be modified
by the Company, as needs may require. Executive shall also, at the
request of the Company, perform similar services for any Affiliate
(as hereinafter defined) of the Company without additional
compensation. Executive agrees to devote his full time, skill,
attention and energy to the business affairs of the Company and its
Affiliates to advance the best interests of the Company and its
Affiliates and shall not hold any other salaried position during
the Employment Period.
Nothing contained herein shall be construed to prevent
Executive from investing his assets in any form or manner or from
serving on the Boards of other corporations or charitable organiza-
tions or holding uncompensated positions with professional,
academic or industry organizations, provided such investments and
activities do not unreasonably interfere with Executive's perfor-
mance of services on behalf of Company hereunder. As used in this
Agreement, the term "Affiliate" of the Company means any person or
corporation that, directly or indirectly through one or more
intermediaries, is controlled by the Company.
4. Compensation.
(a) For all services rendered by Executive to the Company
during the Employment Period, the Company shall pay Executive a
salary at the rate of One Hundred Twenty-One Thousand Dollars
($121,000.00) per year, payable, subject to such withholding as may
be required by law, in installments in accordance with the
Company's customary payroll practices.
(b) In addition, Executive shall be entitled to receive such
bonuses, based upon the performance of the Company as compared to
its annual budget, as shall be determined by duly adopted resolu-
tion of the Board of Directors of the Company or its duly autho-
rized Committees (the "Board"), which resolution may be adopted
either before or after actual performance against the budget has
been determined.
(c) Executive shall be entitled to such salary increases,
further compensation and reasonable expenses incurred in connection
with business of the Company, if any, as shall be authorized by the
Board.
5. Office Facilities. During the Employment Period, the
Company will furnish Executive, without charge, suitable office
facilities for the purpose of performing his duties hereunder,
which facilities shall include secretarial, telephone, clerical and
support personnel and services and shall be similar to those
furnished to employees of the Company having comparable positions.
6. Fringe Benefits; Vacations.
(a) During the Employment Period, Executive shall be entitled
to participate in or receive benefits under such pension, medical
and life insurance and other employee benefit plans of the Company
which may be in effect from time to time, to the extent he is
eligible under the terms of those plans, on the same basis as other
employees of the Company having comparable positions.
(b) Executive shall be entitled to twenty days of vacation
with pay during each year of employment, which vacation time shall
accrue pro rata during each year of employment according to the
portion of such year of employment during which Executive has
served.
7. Expenses. Subject to such policies regarding expenses
and expense reimbursement as may be adopted from time to time by
the Company and compliance therewith by Executive, Executive is
authorized to incur reasonable and necessary expenses in the
performance of his duties hereunder, and the Company will reimburse
Executive for such reasonable out-of-pocket expenses upon the
presentation by Executive of a reasonably itemized account and
receipts satisfactory to the Company.
8. Termination by Company.
(a) If Executive dies during the Employment Period, Company
shall pay to:
(i) the surviving spouse of Executive in the event of his
death, for so long as she survives; or,
(ii) the estate of Executive if Executive's spouse does
not survive him, or dies before expiration of the Employment
Period,
all amounts payable to Executive hereunder through the date of
death and the amounts which would otherwise be payable to Executive
pursuant to Section 4(a) hereof during the thirty (30) day period
immediately following the date of death, less any amounts payable
to Executive (or such spouse or estate) pursuant to any insurance
programs provided for Executive's benefit with premiums paid by
Company. All other rights of Executive under this Agreement shall
terminate concurrently with his death.
(b) The Company may terminate the employment of Executive at
any time upon written notice to Executive if Executive has (i)
breached an express term or provision of this Agreement and has
failed to remedy such breach within thirty (30) days of receipt by
Executive of notice of such breach; (ii) habitually neglected the
duties that Executive is required to perform under the terms of
this Agreement at any time within ninety (90) days after having
received a written notice from the Company that Executive has so
neglected such duties; or (iii) willfully violated reasonable and
substantial rules governing employee performance at any time within
ninety (90) days after having received a written notice from the
Company that Executive has so violated such rules. In the event of
termination of Executive's employment pursuant to this Section
8(b), Executive shall continue to receive salary at the rate
specified in Section 4(a) and, to the extent permitted by the
applicable plans, to participate in the benefits described in
Section 6 on a month-to-month basis thereafter until (i) Executive
shall have obtained subsequent employment or (ii) the expiration of
an additional period of three months from the date of such
termination, whichever time period is shorter.
(c) If Executive commits any act of criminal misconduct,
whether or not related to Executive's duties hereunder, or any
clearly dishonest, disloyal or criminal act toward the Company or
its Affiliates, the Employment Period and Executive's salary and
other rights under this Agreement or as an employee of the Company
shall terminate without severance pay or other obligation on the
part of Company upon written notice from the Company to Executive,
but such termination shall not affect the liability of Executive by
reason of his misconduct or dishonest, disloyal or criminal
conduct.
(d) Notwithstanding anything to the contrary contained
herein, the Employment Period and the Executive's salary and other
rights under this Agreement or as an employee of the Company shall
not be deemed to have been terminated pursuant to either Section
8(b) or (c) unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative
vote of not less than two-thirds of the Pre-change Directors of the
Board at a meeting of the Board called and held for the purpose
(after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in Section 8(b) or
(c).
(e) Nothing herein shall be construed to reduce or abrogate
any rights Executive may have pursuant to the Consolidated Omnibus
Budget Reduction Act of 1985.
9. Termination by Executive.
(a) The Employment Period may be terminated by Executive, if
the Company fails to perform its duties hereunder or fails to
comply with any of the provisions hereof, thirty (30) days after
giving written notice to Company stating the nature of such non-
performance or non-compliance, unless Company shall have remedied
such non-performance or non-compliance with such thirty (30) days
notice period.
(b) The Executive shall be entitled to terminate his
employment hereunder at any time that (A) a change in control of
the Company (as defined below) has occurred and (B) there has
occurred, without the express written consent of the Executive:
(i) a substantial alteration in the nature or status of
the title, position, duties or responsibilities of Executive
from those in effect immediately prior to the change in
control of the Company;
(ii) a reduction by the Company in the Executive's salary
as in effect on the date hereof or as the same may be in-
creased from time to time;
(iii) the relocation of the Company's principal executive
offices to a location outside the Dallas Metropolitan Area or
the Company's requiring the Executive to be based anywhere
other than the Company's principal executive offices except
for required travel on the Company's business to an extent
substantially consistent with the Executive's business travel
obligations prior to the change in control of the Company;
(iv) the failure by the Company to continue in effect
any compensation plan in which the Executive was participating
immediately prior to the change in control, or the failure by
the Company to continue the Executive's participation therein;
(v) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's employee
stock ownership, life insurance, medical, health-and-accident,
or disability plans, as well as vacation, travel and club
privileges in which the Executive was participating at the
time of a change in control of the Company or the taking of
any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Execu-
tive of any material fringe benefits enjoyed by the Executive
immediately before the time of the change in control of the
Company; or
(vi) any purported termination of the Executive's
employment which is not effected in accordance with the
requirements of Section 8 and, for purposes of this Agreement,
no such purported termination shall be effective.
(c) Upon termination of the Employment Period pursuant to
Section 9(a) or 9(b), the Company shall pay to Executive in one
lump sum on the fifth (5th) day following such termination, cash in
an amount equal to the lesser of (i) the total compensation
provided for under this Agreement for the balance of the then
effective Employment Period and (ii) the amount that is one dollar
($1.00) less than the amount which would be deemed a "parachute
payment" to Executive under the Internal Revenue Code of 1986, as
amended, to be paid in consideration of Executive's election to
terminate his employment with the Company and to release in full
all rights as an employee of the Company.
(d) Upon the occurrence of any change in control of the
Company, all options awarded to Executive under the Company's Long-
Term Stock Investment Plan which are not then vested shall become
fully vested.
(e) For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Company
is then subject to such reporting requirement, or any other actual
change in the control of the Company (whether by merger, consolida-
tion, acquisition of assets or stock or otherwise); provided that,
without limitation, such a change in control shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) other than a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), of the
Company's common stock as of the date of this Agreement, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing more than forty-five percent (45%) of the combined
voting power of the Company's then outstanding securities entitled
to vote in the election of directors, (ii) a change occurs in
ownership of more than forty-five percent (45%) in book value of
the Company's assets, or (iii) during any period of two (2)
consecutive years, individuals who at the beginning of such two
year period constituted the Board of Directors of the Company,
including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who were directors at the beginning of the period
(collectively, "Pre-Change Directors"), cease for any reason to
constitute a majority of the Company's Board of Directors.
10. Intellectual Property Rights.
(a) Executive hereby assigns, transfers, and conveys his
entire right, title, and interest in any and all Intellectual
Property which he makes or conceives, whether as a sole inventor or
originator or as a joint inventor or originator with others,
whether made within or out of usual working hours or upon the
premises or elsewhere, during the Employment Period. Executive
understands that "Intellectual Property" as used herein includes
information of a technical or a business nature such as ideas,
discoveries, designs, inventions, improvements, trade secrets,
know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer
programs, financial figures, marketing plans, customer lists and
data, business plans or methods and the like, which relate in any
manner to the actual or anticipated business or the actual or
anticipated areas of research and development of the Company, or
its divisions, subsidiaries, Affiliates, or related entities.
(b) Either during or subsequent to Executive's employment,
upon the request and at the expense of the Company, and for no
remuneration in addition to that due Executive pursuant to this
Agreement, but at no expense to him, Executive agrees to execute,
acknowledge, and deliver to the Company, its nominee, or its
attorneys any and all instruments which in the judgment of the
Company, its nominee, or its attorneys may be necessary or
desirable to secure or maintain for the benefit of the Company or
its nominee adequate patent, copyright, and other property rights
in the United States and foreign countries with respect to any
Intellectual Property embraced within this Agreement, including but
not limited to: (1) domestic and foreign patents and copyright
applications, (2) any other applications for securing, protecting,
or registering any property rights embraced within this Agreement,
and (3) powers of attorney, assignments, oaths, affirmations,
supplemental oaths and sworn statements; and further agrees to
assist the Company, its nominee, or its attorneys as required to
draft said instruments, to obtain said rights, and to enforce said
rights.
(c) Executive further agrees to disclose to the Company
promptly in writing any and all ideas, designs, inventions,
improvements, and developments, when conceived or made in whole or
in part, by him and to maintain adequate and current records
thereof.
(d) Any ideas, designs, inventions, improvements, dis-
coveries, and developments disclosed by Executive within one year
following termination of his employment shall be deemed to have
been assigned, transferred, and conveyed under the terms of
paragraphs (a) and (b), unless proved to have been conceived after
termination.
11. Covenant Not to Disclose. Executive covenants and agrees
that he will not, at any time during or after the termination of
his employment by the Company, communicate or disclose to any
person, or use for his own account, or advise, discuss with, or in
any way assist any other person or firm in obtaining or learning
about, without the prior written consent of the Company, informa-
tion concerning any inventions, processes, programs, systems, flow
charts or equipment used in, or any secret or confidential or
proprietary information, trade secrets or know-how (including,
without limitation, any customer lists, trade secrets or informa-
tion concerning any work done by the Company for its customers or
done in an effort to solicit or obtain customers) concerning, the
products, services, business or affairs of the Company or any of
its Affiliates which is not generally available to the public and
which has become known to Executive at any time he has been
employed by the Company. Executive further covenants and agrees
that he shall retain all such knowledge and information concerning
the foregoing in trust for the sole benefit of the Company and its
Affiliates and their respective successors and assigns. Upon
termination of his employment with Company, all documents, records,
notebooks, and similar repositories of or containing secret or
confidential or proprietary information, including copies thereof,
then in Executive's possession, whether prepared by him or others,
will be left with Company.
12. Protection of Company Goodwill and Proprietary Informa-
tion
(a) The following provisions of this Agreement contain
substantial restrictions on Executive's post-employment activities.
As evidenced by his initials affixed to this and subsequent pages,
Executive acknowledges that he has read and understands such
provisions.
(b) Executive recognizes and acknowledges that the lists of
the Company's customers, as well as information pertaining to
customer personnel, product preferences and buying habits as such
lists or information may exist, whether same are ever actually
committed to writing or otherwise compiled in one or more docu-
ments, or are merely memorized by Executive, are also valuable,
special and unique assets of the Company's business. Executive
will not, during or after the term of this Agreement, disclose,
directly or indirectly any of said customer lists or information of
or pertaining to customers or any part thereof, to any person,
firm, corporation, association or other entity for any reason or
purpose whatsoever.
(c) Further, Executive agrees:
(i) that Executive shall not, during the one (1) year
period immediately following the date upon which his employ-
ment by Company is terminated, directly or indirectly, for
himself or for any other person, firm, corporation, associa-
tion or other entity, as an owner, independent contractor,
principal, agent, officer, director, partner, stockholder,
employee, consultant or otherwise, within any state of the
United States of America or any foreign country in which the
Company has sold goods or services within one (1) year prior
to such termination, sell, solicit or accept orders, or assist
or aid in the selling or solicitation or acceptance of orders
for products similar to or which can be used in substitution
for or replacement of the Company's to any party with whom
Executive had contact while in the employ of Company and (A)
who is or has been a customer or client of the Company at the
date of such termination or within a period of one (1) year
prior thereto, or (B) who has been identified as a potential
customer or client of the Company as of the date of such
termination;
(ii) that Executive shall not during the one (1) year
period immediately following the date upon which his employ-
ment or engagement by Company is terminated, directly or
indirectly, for himself or for any other person, firm,
corporation, association or other entity as owner, independent
contractor, principal, agent, officer, director, partner,
stockholder, employee, consultant or otherwise, within any
state of the United States of America or any foreign country
in which the Company has purchased or obtained goods or
services within one (1) year prior to such termination, employ
or attempt to employ, or engage or attempt to engage, or
solicit or encourage to leave the employment of Company or
otherwise cease, curtail or modify his relationship with
Company, any employee, salesman, independent contractor or
agent employed or engaged by Company as of the date of
Executive's termination, unless such person's employment or
engagement with Company shall have been terminated by Company
prior thereto or Company shall have consented to such employ-
ment, engagement, solicitation or encouragement in writing.
(d) While the restrictions set forth in this Section 12 are
considered by the parties to be reasonable in all circumstances, it
is agreed that if any of such restrictions shall be adjudged to be
void or ineffective for whatever reason, but would be adjudged to
be valid and effective if part of the wording thereof were deleted
or the periods thereof reduced, the said restrictions shall apply
with such modifications as may be necessary to make the same valid
and effective.
13. Essential Nature of Covenants. The existence of any
claim or cause of action of Executive against the Company or any of
its Affiliates, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of
the covenants contained in Sections 10, 11 and 12 hereof.
Executive understands that the covenants contained in Sections 10,
11 and 12 are essential elements of the transactions contemplated
by this Agreement and, but for the agreement of Executive to
Sections 10, 11 and 12, the Company would not have agreed to enter
into such transactions. Executive has had the opportunity to
consult with counsel and to be advised in all respects concerning
the reasonableness and propriety of Sections 10, 11 and 12 with
specific regard to the nature of the business conducted by the
Company, and Executive acknowledges that Sections 10, 11 and 12 are
reasonable in all respects.
14. Remedies. Notwithstanding Section 15 of this Agreement,
in the event of a breach or threatened breach by Executive of
Sections 10, 11 or 12, the Company shall be entitled to obtain from
any court having jurisdiction of the parties a temporary restrain-
ing order and an injunction restraining Executive from the
commission of such breach. Nothing contained in this Section 14
shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened
breach, including the recovery money damages.
15. Arbitration. Except as provided in Section 14 of this
Agreement, the Company and Executive agree to submit to binding
arbitration any controversy or claim arising out of or relating to
this Agreement or the breach thereof or any other matter relating
in any manner to the relationship between the Company and
Executive or the termination of such relationship or otherwise
arising from or relating to any practices or procedures of the
Company or conduct of the Company or its agents toward Executive,
including but not limited to tortious claims and statutory claims.
Such arbitration shall be conducted in the City of Dallas, Texas,
in accordance with the Model Employment Arbitration Procedures then
in effect or, if such have been repealed, the rules then obtaining
of the American Arbitration Association, and judgment upon the
award rendered may be entered in any court having jurisdiction
thereof.
16. Certain Arbitration Procedures.
(a) The parties shall cooperate to the fullest extent
practicable in the voluntary exchange of documents and information
to expedite any such arbitration. Any request for documents or
other information should be specific, relate to the matter in
controversy, and afford the party to whom the request is made a
reasonable period of time to respond without interfering with the
time set for the hearing.
(b) Document Production and Information Exchange.
(i) Any party may serve a written request for infor-
mation or documents ("information request") upon another party
twenty (20) business days or more after the non-complaining
party has received notice of the institution of arbitration
proceedings. The requesting party shall serve the information
request on all parties and file a copy with the arbitrator(s).
The parties shall endeavor to resolve disputes regarding an
information request prior to serving any objection to the
request. Such efforts shall be set forth in the objection.
(ii) Unless a greater time is allowed by the requesting
party, information requests shall be satisfied or objected to
within thirty (30) calendar days from the date of service.
Any objection to an information request shall be served by the
objecting party on all parties and filed with the
arbitrator(s).
(iii) Any response to objections to an information re-
quest shall be served on all parties and filed with the
arbitrator(s) within ten (10) calendar days of receipt of the
objection.
(iv) Upon the written request of a party whose infor-
mation request is unsatisfied, the matter will be referred by
the arbitrator(s) to either a pre-hearing conference under
subsection (d) of this section or to a selected arbitrator
under subsection (f) of this section.
(c) At least ten (10) calendar days prior to the first
scheduled hearing date, all parties shall serve on each other
copies of documents in their possession they intend to present at
the hearing and shall identify witnesses they intend to present at
the hearing. The arbitrators may exclude from the arbitration any
documents not exchanged or witnesses not identified. This
paragraph does not require service of copies of documents or
identification of witnesses which parties may use for cross-
examination or rebuttal.
(d)(i) Upon the written request of a party or an arbitrator,
a pre-hearing conference shall be scheduled. The arbitrator(s)
shall set the time and place of a pre-hearing conference and
appoint a person to preside. The pre-hearing conference may be
held by telephone conference call. The presiding person shall seek
to achieve agreement among the parties on any issue which relates
to the pre-hearing process or to the hearing, including but not
limited to exchange of information, exchange or production of
documents, identification of witnesses, identification and exchange
of hearing documents, stipulation of facts, identification and
briefing of contested issues, and any other matters which will
expedite the arbitration proceedings.
(ii) Any issues raised at the pre-hearing conference that are
not resolved may be referred to a single member of the arbitration
panel for decision.
(e) The arbitrator(s) shall apply such rules of procedure in
addition to the preceding rules as the arbitrator(s) think
appropriate under the circumstances, provided that both parties
shall be entitled to representation by counsel, to appear and
present written and oral evidence and argument, and to cross-
examine witnesses presented by the other party, and the
arbitrator(s) shall provide written reasons for the determination
rendered.
(f) The arbitrators (if more than one) may appoint a single
member of the arbitration panel to decide all unresolved issues
under this Section 16. Such arbitrator shall be authorized to act
on behalf of the panel to issue subpoenas, direct appearances of
witnesses and production of documents, set deadlines for compli-
ance, and issue any other ruling which will expedite the arbitra-
tion proceedings. Decisions under this section shall be made upon
the papers submitted by the parties, unless the arbitrator calls a
hearing. The arbitrator may elect to refer any issue under this
section to the full panel.
17. Waiver of Breach. The waiver by the either party of a
breach of any provision of this Agreement by the other party shall
not operate nor be construed as a waiver of any subsequent breach
by the other party.
18. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors, assigns, heirs and legal representatives.
19. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
20. Severability. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibi-
tion or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
21. Governing Law. This Agreement shall be construed (both
as to validity and performance) and enforced in accordance with and
governed by the laws of the State of Texas.
22. Notice. All notices which are required or may be given
under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person or three (3) days
after being mailed by registered or certified first class mail,
postage prepaid, return receipt requested, at the address listed
above for such party, or to such other address as such party shall
have specified by notice to the other party hereto as provided in
this Section.
23. Entire Agreement. Except as specifically set forth
below, this Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with
respect to the subject matter hereof.
24. Amendment. This Agreement may not be changed orally, but
only in writing signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
25. Limitations. No suit, action, arbitration or other
proceeding based upon or arising out of this Agreement shall be
maintainable in any court of law or equity or before any arbitra-
tor(s) or other adjudicator(s) unless the same be commenced within
two (2) years after the calendar date upon which the claim giving
rise to such suit, action, arbitration or other proceeding arose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and date first above written.
OPTEK TECHNOLOGY, INC.
By:
Print Name:
Title:
THOMAS GARRETT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") effective the 28th
day of October, 1996, by and between OPTEK TECHNOLOGY, INC., a
Delaware corporation, with principal executive offices at 1215 West
Crosby Road, Carrollton, Texas 75006 (hereinafter referred to as
the "Company") and ROBERT J. KOSOBUCKI, an individual residing at
9607 E. Valley Ranch Parkway #2088, Irving, Texas 75063 (hereinaf-
ter referred to as "Executive");
W I T N E S S E T H:
WHEREAS, Executive wishes to continue to be employed by the
Company, and Executive and the Company desire to enter into an
agreement relating to such employment;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein set forth, it is agreed as follows:
1. Employment. The Company employs Executive, and Executive
accepts employment by the Company, subject to the terms and
conditions set forth herein.
2. Term. Subject to the provisions hereof, the term of
Executive's employment by the Company under this Agreement shall be
for a period of two (2) years commencing on the date hereof;
provided, however, that at the end of each year of employment, the
term of employment shall be extended for an additional one-year
period unless, on or prior to the date three (3) months prior to
the end of such year of employment, the Company shall give written
notice to Executive or Executive shall give written notice to the
Company of an intention to terminate this Agreement, in which event
the term of employment shall comprise only the remaining one year
and three months of the then existing term of employment. The term
of Executive's employment hereunder, including any continuation or
extension of the original term, is hereinafter referred to as the
"Employment Period."
3. Position and Duties. During the Employment Period,
Executive shall serve as Vice President, Marketing and Sales of the
Company, with such assignments, powers and duties as are assigned
or delegated to him by the Board of Directors of the Company. Such
assignments, powers and duties may, from time to time, be modified
by the Company, as needs may require. Executive shall also, at the
request of the Company, perform similar services for any Affiliate
(as hereinafter defined) of the Company without additional
compensation. Executive agrees to devote his full time, skill,
attention and energy to the business affairs of the Company and its
Affiliates to advance the best interests of the Company and its
Affiliates and shall not hold any other salaried position during
the Employment Period.
Nothing contained herein shall be construed to prevent
Executive from investing his assets in any form or manner or from
serving on the Boards of other corporations or charitable organiza-
tions or holding uncompensated positions with professional,
academic or industry organizations, provided such investments and
activities do not unreasonably interfere with Executive's perfor-
mance of services on behalf of Company hereunder. As used in this
Agreement, the term "Affiliate" of the Company means any person or
corporation that, directly or indirectly through one or more
intermediaries, is controlled by the Company.
4. Compensation.
(a) For all services rendered by Executive to the Company
during the Employment Period, the Company shall pay Executive a
salary at the rate of One Hundred Thousand Dollars ($100,000.00)
per year, payable, subject to such withholding as may be required
by law, in installments in accordance with the Company's customary
payroll practices.
(b) In addition, Executive shall be entitled to receive such
bonuses, based upon the performance of the Company as compared to
its annual budget, as shall be determined by duly adopted resolu-
tion of the Board of Directors of the Company or its duly autho-
rized Committees (the "Board"), which resolution may be adopted
either before or after actual performance against the budget has
been determined.
(c) Executive shall be entitled to such salary increases,
further compensation and reasonable expenses incurred in connection
with business of the Company, if any, as shall be authorized by the
Board.
5. Office Facilities. During the Employment Period, the
Company will furnish Executive, without charge, suitable office
facilities for the purpose of performing his duties hereunder,
which facilities shall include secretarial, telephone, clerical and
support personnel and services and shall be similar to those
furnished to employees of the Company having comparable positions.
6. Fringe Benefits; Vacations.
(a) During the Employment Period, Executive shall be entitled
to participate in or receive benefits under such pension, medical
and life insurance and other employee benefit plans of the Company
which may be in effect from time to time, to the extent he is
eligible under the terms of those plans, on the same basis as other
employees of the Company having comparable positions.
(b) Executive shall be entitled to twenty days of vacation
with pay during each year of employment, which vacation time shall
accrue pro rata during each year of employment according to the
portion of such year of employment during which Executive has
served.
7. Expenses. Subject to such policies regarding expenses
and expense reimbursement as may be adopted from time to time by
the Company and compliance therewith by Executive, Executive is
authorized to incur reasonable and necessary expenses in the
performance of his duties hereunder, and the Company will reimburse
Executive for such reasonable out-of-pocket expenses upon the
presentation by Executive of a reasonably itemized account and
receipts satisfactory to the Company.
8. Termination by Company.
(a) If Executive dies during the Employment Period, Company
shall pay to:
(i) the surviving spouse of Executive in the event of his
death, for so long as she survives; or,
(ii) the estate of Executive if Executive's spouse does
not survive him, or dies before expiration of the Employment
Period,
all amounts payable to Executive hereunder through the date of
death and the amounts which would otherwise be payable to Executive
pursuant to Section 4(a) hereof during the thirty (30) day period
immediately following the date of death, less any amounts payable
to Executive (or such spouse or estate) pursuant to any insurance
programs provided for Executive's benefit with premiums paid by
Company. All other rights of Executive under this Agreement shall
terminate concurrently with his death.
(b) The Company may terminate the employment of Executive at
any time upon written notice to Executive if Executive has (i)
breached an express term or provision of this Agreement and has
failed to remedy such breach within thirty (30) days of receipt by
Executive of notice of such breach; (ii) habitually neglected the
duties that Executive is required to perform under the terms of
this Agreement at any time within ninety (90) days after having
received a written notice from the Company that Executive has so
neglected such duties; or (iii) willfully violated reasonable and
substantial rules governing employee performance at any time within
ninety (90) days after having received a written notice from the
Company that Executive has so violated such rules. In the event of
termination of Executive's employment pursuant to this Section
8(b), Executive shall continue to receive salary at the rate
specified in Section 4(a) and, to the extent permitted by the
applicable plans, to participate in the benefits described in
Section 6 on a month-to-month basis thereafter until (i) Executive
shall have obtained subsequent employment or (ii) the expiration of
an additional period of three months from the date of such
termination, whichever time period is shorter.
(c) If Executive commits any act of criminal misconduct,
whether or not related to Executive's duties hereunder, or any
clearly dishonest, disloyal or criminal act toward the Company or
its Affiliates, the Employment Period and Executive's salary and
other rights under this Agreement or as an employee of the Company
shall terminate without severance pay or other obligation on the
part of Company upon written notice from the Company to Executive,
but such termination shall not affect the liability of Executive by
reason of his misconduct or dishonest, disloyal or criminal
conduct.
(d) Notwithstanding anything to the contrary contained
herein, the Employment Period and the Executive's salary and other
rights under this Agreement or as an employee of the Company shall
not be deemed to have been terminated pursuant to either Section
8(b) or (c) unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative
vote of not less than two-thirds of the Pre-change Directors of the
Board at a meeting of the Board called and held for the purpose
(after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above in Section 8(b) or
(c).
(e) Nothing herein shall be construed to reduce or abrogate
any rights Executive may have pursuant to the Consolidated Omnibus
Budget Reduction Act of 1985.
9. Termination by Executive.
(a) The Employment Period may be terminated by Executive, if
the Company fails to perform its duties hereunder or fails to
comply with any of the provisions hereof, thirty (30) days after
giving written notice to Company stating the nature of such non-
performance or non-compliance, unless Company shall have remedied
such non-performance or non-compliance with such thirty (30) days
notice period.
(b) The Executive shall be entitled to terminate his
employment hereunder at any time that (A) a change in control of
the Company (as defined below) has occurred and (B) there has
occurred, without the express written consent of the Executive:
(i) a substantial alteration in the nature or status of
the title, position, duties or responsibilities of Executive
from those in effect immediately prior to the change in
control of the Company;
(ii) a reduction by the Company in the Executive's salary
as in effect on the date hereof or as the same may be in-
creased from time to time;
(iii) the relocation of the Company's principal executive
offices to a location outside the Dallas Metropolitan Area or
the Company's requiring the Executive to be based anywhere
other than the Company's principal executive offices except
for required travel on the Company's business to an extent
substantially consistent with the Executive's business travel
obligations prior to the change in control of the Company;
(iv) the failure by the Company to continue in effect
any compensation plan in which the Executive was participating
immediately prior to the change in control, or the failure by
the Company to continue the Executive's participation therein;
(v) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's employee
stock ownership, life insurance, medical, health-and-accident,
or disability plans, as well as vacation, travel and club
privileges in which the Executive was participating at the
time of a change in control of the Company or the taking of
any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Execu-
tive of any material fringe benefits enjoyed by the Executive
immediately before the time of the change in control of the
Company; or
(vi) any purported termination of the Executive's
employment which is not effected in accordance with the
requirements of Section 8 and, for purposes of this Agreement,
no such purported termination shall be effective.
(c) Upon termination of the Employment Period pursuant to
Section 9(a) or 9(b), the Company shall pay to Executive in one
lump sum on the fifth (5th) day following such termination, cash in
an amount equal to the lesser of (i) the total compensation
provided for under this Agreement for the balance of the then
effective Employment Period and (ii) the amount that is one dollar
($1.00) less than the amount which would be deemed a "parachute
payment" to Executive under the Internal Revenue Code of 1986, as
amended, to be paid in consideration of Executive's election to
terminate his employment with the Company and to release in full
all rights as an employee of the Company.
(d) Upon the occurrence of any change in control of the
Company, all options awarded to Executive under the Company's Long-
Term Stock Investment Plan which are not then vested shall become
fully vested.
(e) For purposes of this Agreement, a "change in control of
the Company" shall mean a change in control of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Company
is then subject to such reporting requirement, or any other actual
change in the control of the Company (whether by merger, consolida-
tion, acquisition of assets or stock or otherwise); provided that,
without limitation, such a change in control shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) other than a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), of the
Company's common stock as of the date of this Agreement, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company
representing more than forty-five percent (45%) of the combined
voting power of the Company's then outstanding securities entitled
to vote in the election of directors, (ii) a change occurs in
ownership of more than forty-five percent (45%) in book value of
the Company's assets, or (iii) during any period of two (2)
consecutive years, individuals who at the beginning of such two
year period constituted the Board of Directors of the Company,
including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still
in office who were directors at the beginning of the period
(collectively, "Pre-Change Directors"), cease for any reason to
constitute a majority of the Company's Board of Directors.
10. Intellectual Property Rights.
(a) Executive hereby assigns, transfers, and conveys his
entire right, title, and interest in any and all Intellectual
Property which he makes or conceives, whether as a sole inventor or
originator or as a joint inventor or originator with others,
whether made within or out of usual working hours or upon the
premises or elsewhere, during the Employment Period. Executive
understands that "Intellectual Property" as used herein includes
information of a technical or a business nature such as ideas,
discoveries, designs, inventions, improvements, trade secrets,
know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer
programs, financial figures, marketing plans, customer lists and
data, business plans or methods and the like, which relate in any
manner to the actual or anticipated business or the actual or
anticipated areas of research and development of the Company, or
its divisions, subsidiaries, Affiliates, or related entities.
(b) Either during or subsequent to Executive's employment,
upon the request and at the expense of the Company, and for no
remuneration in addition to that due Executive pursuant to this
Agreement, but at no expense to him, Executive agrees to execute,
acknowledge, and deliver to the Company, its nominee, or its
attorneys any and all instruments which in the judgment of the
Company, its nominee, or its attorneys may be necessary or
desirable to secure or maintain for the benefit of the Company or
its nominee adequate patent, copyright, and other property rights
in the United States and foreign countries with respect to any
Intellectual Property embraced within this Agreement, including but
not limited to: (1) domestic and foreign patents and copyright
applications, (2) any other applications for securing, protecting,
or registering any property rights embraced within this Agreement,
and (3) powers of attorney, assignments, oaths, affirmations,
supplemental oaths and sworn statements; and further agrees to
assist the Company, its nominee, or its attorneys as required to
draft said instruments, to obtain said rights, and to enforce said
rights.
(c) Executive further agrees to disclose to the Company
promptly in writing any and all ideas, designs, inventions,
improvements, and developments, when conceived or made in whole or
in part, by him and to maintain adequate and current records
thereof.
(d) Any ideas, designs, inventions, improvements, dis-
coveries, and developments disclosed by Executive within one year
following termination of his employment shall be deemed to have
been assigned, transferred, and conveyed under the terms of
paragraphs (a) and (b), unless proved to have been conceived after
termination.
11. Covenant Not to Disclose. Executive covenants and agrees
that he will not, at any time during or after the termination of
his employment by the Company, communicate or disclose to any
person, or use for his own account, or advise, discuss with, or in
any way assist any other person or firm in obtaining or learning
about, without the prior written consent of the Company, informa-
tion concerning any inventions, processes, programs, systems, flow
charts or equipment used in, or any secret or confidential or
proprietary information, trade secrets or know-how (including,
without limitation, any customer lists, trade secrets or informa-
tion concerning any work done by the Company for its customers or
done in an effort to solicit or obtain customers) concerning, the
products, services, business or affairs of the Company or any of
its Affiliates which is not generally available to the public and
which has become known to Executive at any time he has been
employed by the Company. Executive further covenants and agrees
that he shall retain all such knowledge and information concerning
the foregoing in trust for the sole benefit of the Company and its
Affiliates and their respective successors and assigns. Upon
termination of his employment with Company, all documents, records,
notebooks, and similar repositories of or containing secret or
confidential or proprietary information, including copies thereof,
then in Executive's possession, whether prepared by him or others,
will be left with Company.
12. Protection of Company Goodwill and Proprietary Informa-
tion
(a) The following provisions of this Agreement contain
substantial restrictions on Executive's post-employment activities.
As evidenced by his initials affixed to this and subsequent pages,
Executive acknowledges that he has read and understands such
provisions.
(b) Executive recognizes and acknowledges that the lists of
the Company's customers, as well as information pertaining to
customer personnel, product preferences and buying habits as such
lists or information may exist, whether same are ever actually
committed to writing or otherwise compiled in one or more docu-
ments, or are merely memorized by Executive, are also valuable,
special and unique assets of the Company's business. Executive
will not, during or after the term of this Agreement, disclose,
directly or indirectly any of said customer lists or information of
or pertaining to customers or any part thereof, to any person,
firm, corporation, association or other entity for any reason or
purpose whatsoever.
(c) Further, Executive agrees:
(i) that Executive shall not, during the one (1) year
period immediately following the date upon which his employ-
ment by Company is terminated, directly or indirectly, for
himself or for any other person, firm, corporation, associa-
tion or other entity, as an owner, independent contractor,
principal, agent, officer, director, partner, stockholder,
employee, consultant or otherwise, within any state of the
United States of America or any foreign country in which the
Company has sold goods or services within one (1) year prior
to such termination, sell, solicit or accept orders, or assist
or aid in the selling or solicitation or acceptance of orders
for products similar to or which can be used in substitution
for or replacement of the Company's to any party with whom
Executive had contact while in the employ of Company and (A)
who is or has been a customer or client of the Company at the
date of such termination or within a period of one (1) year
prior thereto, or (B) who has been identified as a potential
customer or client of the Company as of the date of such
termination;
(ii) that Executive shall not during the one (1) year
period immediately following the date upon which his employ-
ment or engagement by Company is terminated, directly or
indirectly, for himself or for any other person, firm,
corporation, association or other entity as owner, independent
contractor, principal, agent, officer, director, partner,
stockholder, employee, consultant or otherwise, within any
state of the United States of America or any foreign country
in which the Company has purchased or obtained goods or
services within one (1) year prior to such termination, employ
or attempt to employ, or engage or attempt to engage, or
solicit or encourage to leave the employment of Company or
otherwise cease, curtail or modify his relationship with
Company, any employee, salesman, independent contractor or
agent employed or engaged by Company as of the date of
Executive's termination, unless such person's employment or
engagement with Company shall have been terminated by Company
prior thereto or Company shall have consented to such employ-
ment, engagement, solicitation or encouragement in writing.
(d) While the restrictions set forth in this Section 12 are
considered by the parties to be reasonable in all circumstances, it
is agreed that if any of such restrictions shall be adjudged to be
void or ineffective for whatever reason, but would be adjudged to
be valid and effective if part of the wording thereof were deleted
or the periods thereof reduced, the said restrictions shall apply
with such modifications as may be necessary to make the same valid
and effective.
13. Essential Nature of Covenants. The existence of any
claim or cause of action of Executive against the Company or any of
its Affiliates, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of
the covenants contained in Sections 10, 11 and 12 hereof.
Executive understands that the covenants contained in Sections 10,
11 and 12 are essential elements of the transactions contemplated
by this Agreement and, but for the agreement of Executive to
Sections 10, 11 and 12, the Company would not have agreed to enter
into such transactions. Executive has had the opportunity to
consult with counsel and to be advised in all respects concerning
the reasonableness and propriety of Sections 10, 11 and 12 with
specific regard to the nature of the business conducted by the
Company, and Executive acknowledges that Sections 10, 11 and 12 are
reasonable in all respects.
14. Remedies. Notwithstanding Section 15 of this Agreement,
in the event of a breach or threatened breach by Executive of
Sections 10, 11 or 12, the Company shall be entitled to obtain from
any court having jurisdiction of the parties a temporary restrain-
ing order and an injunction restraining Executive from the
commission of such breach. Nothing contained in this Section 14
shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened
breach, including the recovery money damages.
15. Arbitration. Except as provided in Section 14 of this
Agreement, the Company and Executive agree to submit to binding
arbitration any controversy or claim arising out of or relating to
this Agreement or the breach thereof or any other matter relating
in any manner to the relationship between the Company and
Executive or the termination of such relationship or otherwise
arising from or relating to any practices or procedures of the
Company or conduct of the Company or its agents toward Executive,
including but not limited to tortious claims and statutory claims.
Such arbitration shall be conducted in the City of Dallas, Texas,
in accordance with the Model Employment Arbitration Procedures then
in effect or, if such have been repealed, the rules then obtaining
of the American Arbitration Association, and judgment upon the
award rendered may be entered in any court having jurisdiction
thereof.
16. Certain Arbitration Procedures.
(a) The parties shall cooperate to the fullest extent
practicable in the voluntary exchange of documents and information
to expedite any such arbitration. Any request for documents or
other information should be specific, relate to the matter in
controversy, and afford the party to whom the request is made a
reasonable period of time to respond without interfering with the
time set for the hearing.
(b) Document Production and Information Exchange.
(i) Any party may serve a written request for infor-
mation or documents ("information request") upon another party
twenty (20) business days or more after the non-complaining
party has received notice of the institution of arbitration
proceedings. The requesting party shall serve the information
request on all parties and file a copy with the arbitrator(s).
The parties shall endeavor to resolve disputes regarding an
information request prior to serving any objection to the
request. Such efforts shall be set forth in the objection.
(ii) Unless a greater time is allowed by the requesting
party, information requests shall be satisfied or objected to
within thirty (30) calendar days from the date of service.
Any objection to an information request shall be served by the
objecting party on all parties and filed with the
arbitrator(s).
(iii) Any response to objections to an information re-
quest shall be served on all parties and filed with the
arbitrator(s) within ten (10) calendar days of receipt of the
objection.
(iv) Upon the written request of a party whose infor-
mation request is unsatisfied, the matter will be referred by
the arbitrator(s) to either a pre-hearing conference under
subsection (d) of this section or to a selected arbitrator
under subsection (f) of this section.
(c) At least ten (10) calendar days prior to the first
scheduled hearing date, all parties shall serve on each other
copies of documents in their possession they intend to present at
the hearing and shall identify witnesses they intend to present at
the hearing. The arbitrators may exclude from the arbitration any
documents not exchanged or witnesses not identified. This
paragraph does not require service of copies of documents or
identification of witnesses which parties may use for cross-
examination or rebuttal.
(d)(i) Upon the written request of a party or an arbitrator,
a pre-hearing conference shall be scheduled. The arbitrator(s)
shall set the time and place of a pre-hearing conference and
appoint a person to preside. The pre-hearing conference may be
held by telephone conference call. The presiding person shall seek
to achieve agreement among the parties on any issue which relates
to the pre-hearing process or to the hearing, including but not
limited to exchange of information, exchange or production of
documents, identification of witnesses, identification and exchange
of hearing documents, stipulation of facts, identification and
briefing of contested issues, and any other matters which will
expedite the arbitration proceedings.
(ii) Any issues raised at the pre-hearing conference that are
not resolved may be referred to a single member of the arbitration
panel for decision.
(e) The arbitrator(s) shall apply such rules of procedure in
addition to the preceding rules as the arbitrator(s) think
appropriate under the circumstances, provided that both parties
shall be entitled to representation by counsel, to appear and
present written and oral evidence and argument, and to cross-
examine witnesses presented by the other party, and the
arbitrator(s) shall provide written reasons for the determination
rendered.
(f) The arbitrators (if more than one) may appoint a single
member of the arbitration panel to decide all unresolved issues
under this Section 16. Such arbitrator shall be authorized to act
on behalf of the panel to issue subpoenas, direct appearances of
witnesses and production of documents, set deadlines for compli-
ance, and issue any other ruling which will expedite the arbitra-
tion proceedings. Decisions under this section shall be made upon
the papers submitted by the parties, unless the arbitrator calls a
hearing. The arbitrator may elect to refer any issue under this
section to the full panel.
17. Waiver of Breach. The waiver by the either party of a
breach of any provision of this Agreement by the other party shall
not operate nor be construed as a waiver of any subsequent breach
by the other party.
18. Binding Effect. This Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors, assigns, heirs and legal representatives.
19. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the construction
or interpretation of this Agreement.
20. Severability. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibi-
tion or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
21. Governing Law. This Agreement shall be construed (both
as to validity and performance) and enforced in accordance with and
governed by the laws of the State of Texas.
22. Notice. All notices which are required or may be given
under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered in person or three (3) days
after being mailed by registered or certified first class mail,
postage prepaid, return receipt requested, at the address listed
above for such party, or to such other address as such party shall
have specified by notice to the other party hereto as provided in
this Section.
23. Entire Agreement. Except as specifically set forth
below, this Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with
respect to the subject matter hereof.
24. Amendment. This Agreement may not be changed orally, but
only in writing signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
25. Limitations. No suit, action, arbitration or other
proceeding based upon or arising out of this Agreement shall be
maintainable in any court of law or equity or before any arbitra-
tor(s) or other adjudicator(s) unless the same be commenced within
two (2) years after the calendar date upon which the claim giving
rise to such suit, action, arbitration or other proceeding arose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and date first above written.
OPTEK TECHNOLOGY, INC.
By:
Print Name:
Title:
ROBERT J. KOSOBUCKI
OPTEK TECHNOLOGY 401(K) PLAN
as amended and restated
effective October 1, 1996
PREAMBLE
The purpose of this Plan and Trust is to provide, in
accordance with its provisions, a defined
contribution plan providing retirement and other
related benefits for those Employees of the
Employer who are eligible to participate
hereunder. This document is a complete amendment and
restatement of the Optek Technology 401(k) Plan,
which was originally effective as of May 1, 1985.
It is intended that the Plan qualify for approval
under Sections 401 and 410 through 417 of the
Internal Revenue Code. It is intended that the
Trust qualify for approval under Section 501 of the
Code. It is further intended that the Plan comply
with the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA). In case of
any ambiguity in the Plan's language, it will be
interpreted to accomplish the Plan's intent of
qualifying under the Code and complying with ERISA.
This Plan and Trust is exclusively for the
benefit of the eligible Employees and their
Beneficiaries. Neither the Employer, the Plan
Administrator nor the Trustee will apply or interpret
the terms of the Plan in any manner that
permits discrimination in favor of Highly Compensated
Employees. All Employees under similar
circumstances will be treated alike.
The undersigned Employer and Trustee hereby adopt
this restatement of the Optek Technology 401(k)
Plan to be effective as of October 1, 1996.
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS
1-1
ARTICLE 2 - PARTICIPATION
2-1
ARTICLE 3 - PARTICIPANT ACCOUNTS
3-1
ARTICLE 4 - ACCOUNTING AND VALUATION
4-1
ARTICLE 5 - RETIREMENT BENEFITS
5-1
ARTICLE 6 - DEATH BENEFIT
6-1
ARTICLE 7 - LIMITATIONS ON BENEFITS
7-1
ARTICLE 8 - MISCELLANEOUS
8-1
ARTICLE 9 - ADMINISTRATION
9-1
ARTICLE 10 - AMENDMENT OR TERMINATION OF PLAN
10-1
ARTICLE 11 - TRUSTEE AND TRUST FUND
11-1
ARTICLE 1
DEFINITIONS
As used in this document, unless otherwise defined
or required by the context, the following terms
have the meanings set forth in this Article 1. Some
of the terms used in this document are not
defined in Article 1, but for convenience are
defined as they are introduced in the text.
1.01 uAccount
Account means a separate account maintained
for each Participant reflecting applicable
contributions, applicable forfeitures,
investment income (loss) allocated to the account and
distributions.
1.02 Accounting Date, Valuation Date
The term Accounting Date means the last day of
each Accounting Period and any other days
within the Accounting Period upon which,
consistent with established methods and guidelines,
the Plan Administrator applies the accounting
procedures specified in Section 4.02. The term
Valuation Date, unless otherwise specified,
means any business day on which the New York Stock
Exchange is open.
1.03 Accounting Period
Accounting Period means each of the 3-month
periods which end on March 31st, June 30th,
September 30th and December 31st.
1.04 Accrued Benefit
A Participant's Accrued Benefit means the
total value, as of a given date, of his Accounts
determined as of the Valuation Date
immediately preceding the date of determination. A
Participant's Accrued Benefit will not be
reduced solely on account of any increase in the
Participant's age or service or on account of
an amendment to the Plan.
A Participant's Vested Accrued Benefit is
equal to his Vested Percentage of that portion of
his Accrued Benefit which is subject to the
Vesting Schedule plus 100% of the remaining
portion of his Accrued Benefit.
1.05 Beneficiary
Beneficiary means the person, persons, trust
or other entity who is designated to receive any
amount payable upon the death of a
Participant.
1.06 ~uCash-Out Distribution~w
Cash-Out Distribution means, as described in
Article 5, a distribution to a Participant upon
termination of employment of his Vested
Accrued Benefit.
1.07 Code and ERISA
Code means the Internal Revenue Code of 1986,
as it may be amended from time to time, and all
regulations issued thereunder. Reference to
a section of the Code includes that section and
any comparable section or sections of any
future legislation that amends, supplements or
supersedes such section and any regulations
issued thereunder.
ERISA means Public Law No. 93-406, the
Employee Retirement Income Security Act of 1974, as it
may be amended from time to time, and all
regulations issued thereunder. Reference to a
section of ERISA includes that section and any
comparable section or sections of any future
legislation that amends, supplements or
supersedes such section and any regulations issued
thereunder.
1-1
1.08 Compensation
Except where otherwise specifically provided
in this Plan, Compensation means Aggregate
Compensation as defined in Section 7.03(a).
Compensation also includes any amounts
contributed by the Employer or any Related Employer on
behalf of any Employee pursuant to a salary
reduction agreement which are not includable in
the gross income of the Employee due to Code
Section 125, 402(e)(3), 402(h) or 403(b).
Notwithstanding the foregoing, for all
purposes under this Plan, Compensation in excess of the
Statutory Compensation Limit will be
disregarded. For purposes of applying this compensation
limit, a Family Member of a Highly Compensated
Employee is subject to the single aggregate
compensation limit imposed on the Highly
Compensated Employee if the Family Member is either
the Employee's spouse or is a lineal
descendant who has not attained the age of 19 by the end
of the Plan Year.
Statutory Compensation Limit means $150,000
($200,000 for Plan Years beginning before 1994),
as adjusted in accordance with Code Section
401(a)(17)(B).
1.09 ~uEffective Date~w
The Effective Date of the Plan is May 1, 1985.
Except as specified elsewhere in this
document, the effective date of this restatement of the
Plan is October 1, 1996.
Sections 1.08, 1.12, 1.18, 1.32, 1.33, 1.36,
and Article 7 are effective January 1, 1987.
Section 4.05 is effective January 1, 1987.
1.10 Eligible Employee Classification
An Eligible Employee Classification is a
classification of Employees, the members of which are
eligible to participate in the Plan. The Plan
covers all employee classifications except
Leased Employees.
1.11 Eligible Participant
An Eligible Participant is a Participant who
is eligible to share in the allocation of a given
Employer contribution; Eligible Participant
means any Participant who:
* is actively employed on the last
day of the Plan Year; or
* retires, dies or becomes disabled
during the Plan Year.
1.12 Employee
(a) In General
An Employee is any person who is employed
by the Employer or a Participating Employer.
(b) Leased Employee
A Leased Employee means any person who,
pursuant to an agreement between the Employer or
any Related Employer ("Recipient
Employer") and any other person ("leasing organization"),
has performed services for the Recipient
Employer on a substantially full-time basis for a
period of at least one year and such
services are of a type historically performed by
employees in the business field of the
Recipient Employer.
Any Leased Employee will be treated as an
Employee of the Recipient Employer; however,
1-2
contributions or benefits provided by the
leasing organization which are attributable to
the services performed for the Recipient
Employer will be treated as provided by the
Recipient Employer. If all Leased
Employees constitute less than 20% of the Employer's
non-highly-compensated work force within
the meaning of Code Section 414(n)(1)(C)(ii),
then the preceding sentence will not apply
to any Leased Employee if such Employee is
covered by a money purchase pension plan
("Safe Harbor Plan") which provides: (1) a
nonintegrated employer contribution rate
of at least 10% of compensation, (2) immediate
participation, and (3) full and immediate
vesting.
Years of Service for purposes of
eligibility to participate in the Plan and Years of
Service for purposes of determining a
Participant's Vested Percentage include service by
an Employee as a Leased Employee.
1.13 Employer
The Employer and Plan Sponsor is Optek
Technology, Inc. A Participating Employer is any
organization which has adopted this Plan and
Trust in accordance with Section 8.07.
The term Predecessor Employer means any prior
employer to which the Employer is the successor,
including any Predecessor Employer for which
the Employer maintains the obligations of a
Predecessor Plan established by the
Predecessor Employer. Service with a Predecessor Employer
will be included as Service with the Employer
for all purposes under this Plan.
1.14 ~uEmployment Commencement Date~w
The date an Employee first performs an Hour of
Service for the Employer is his Employment
Commencement Date.
1.15 Entry Date
Entry Date means the first day of the month
which coincides with or next follows the date upon
which the eligibility requirements are met.
1.16 Fiscal Year
Fiscal Year means the taxable year of the Plan
Sponsor. The Fiscal Year of the Plan Sponsor
is the 12 month period beginning October 1 and
ending September 30.
1.17 Forfeiture
The term Forfeiture refers to that portion, if
any, of a Participant's Accrued Benefit which
is in excess of his Vested Accrued Benefit
following the termination of the Participant's
employment.
A Forfeiture is considered to occur as of the
earlier of (a) the date of the occurrence of the
fifth of 5 consecutive One Year
Breaks-in-Service or (b) the date a Cash-Out Distribution
occurs in accordance with the provisions of
Article 5.
1.18 Highly Compensated Definitions
(a) Compensation
For purposes of this Section, Compensation
means Aggregate Compensation as defined in
Section 7.03(a) plus amounts contributed
by the Employer pursuant to a salary reduction
agreement which are excludable from the
gross income of the Employee under Code Section
125, 402(e)(3), 402(h) or 403(b).
Compensation in excess of the Statutory Compensation
Limit will be disregarded.
1-3
(b) Determination Year
Determination Year means the Plan Year for
which the determination of who is Highly
Compensated is being made.
(c) Family Member
Family Member means an Employee who is the
spouse, a lineal ascendant or descendant, or
the spouse of a lineal ascendant or
descendant of:
* a 5-percent owner (within the meaning
of Code Section 416(i)) of the Employer or any
Related Employer who is an active or
former Employee; or
* a Highly Compensated Employee who is
one of the 10 most highly compensated employees
ranked on the basis of Compensation
paid by the Employer during the Determination
Year or the Lookback Year.
For purposes of this Section, the Family
Member and the Highly Compensated Employee will
be considered one Employee. A Family
Member's Compensation and benefits will be
aggregated with those of the Highly
Compensated Employee irrespective of whether the
Family Member would otherwise be treated
as a Highly-Compensated Employee or is in a
category of Employees which may be
excluded in determining the number of Employees in the
Top-Paid Group.
If an 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 which include that employee will
be aggregated as one family group.
For purposes of applying the compensation
limit under Code Section 401(a)(17), a Family
Member is subject to the single aggregate
compensation limit imposed on the Highly
Compensated Employee if the Family Member
is either the Employee's spouse or is a lineal
descendant who has not attained the age of
19 by the end of the Plan Year.
(d) Highly Compensated Employee
Highly Compensated Employee means any
individual who is a Highly Compensated Active
Employee or a Highly Compensated Former
Employee within the meaning of Code Section 414(q)
and the regulations thereunder.
(e) Highly Compensated Active Employee
Highly Compensated Active Employee means
any individual who during the Determination Year
or the Lookback Year:
(1) Was at any time a 5-percent Owner
(within the meaning of Code Section 416(i)) of the
Employer or any Related Employer;
(2) Received Compensation from the
Employer and all Related Employers in excess of $75,000
(or any greater amount determined by
regulations issued by the Secretary of the
Treasury under Code Section 415(d));
(3) Received Compensation from the
Employer and all Related Employers in excess of $50,000
(or any greater amount determined by
regulations issued by the Secretary of the
Treasury under Code Section 415(d))
and was in the Top-Paid Group of Employees; or
(4) Was an Officer of the Employer or any
Related Employer (as that term is defined in the
regulations under Code Section 416(i))
and received Compensation greater than 50% of
the Defined Benefit Dollar Limit
described in Section 7.03(f) for the applicable
1-4
year. For this purpose, if no Officer
received enough Compensation to be a Highly
Compensated Employee under the
preceding sentence, the highest-paid Officer will be
treated as a Highly Compensated
Employee. The maximum number of Officers who will be
treated as Highly Compensated Active
Employees under this paragraph is equal to 10% of
all Employees determined without
regard to statutory or other exclusions, subject to a
minimum of 3 Employees and a maximum
of 50 Employees.
No individual described in subparagraphs
(2), (3) or (4) above will be treated as a Highly
Compensated Active Employee for the
Determination Year unless he (i) was a Highly
Compensated Active Employee for the
Lookback Year (or would have been except that he was
not among the 100 most highly compensated
Employees of the Employer and all Related
Employers for the Lookback Year) or (ii)
was among the 100 most highly compensated
Employees of the Employer and all Related
Employers for the Determination Year.
(f) Highly Compensated Former Employee
Highly Compensated Former Employee means
any Former Employee who had a Separation Year
(within the meaning of Treasury Regulation
Section 1.414(q)-1T Q&A-5) and was a Highly
Compensated Active Employee for either the
Separation Year or any Determination Year
ending on or after the Employee's 55th
birthday.
(g) Highly Compensated Group
Highly Compensated Group means all Highly
Compensated Employees.
(h) Lookback Year
Lookback Year means the 12-month period
immediately preceding the Determination Year.
(i) Non-Highly Compensated Employee
Non-Highly Compensated Employee means an
Employee who is neither a Highly Compensated
Employee nor a Family Member.
(j) Non-Highly Compensated Group
Non-Highly Compensated Group means all
Non-Highly Compensated Employees.
(k) Top-Paid Group
Top-Paid Group means those individuals who
are among the top 20 percent of Employees of
the Employer and all Related Employers
when ranked on the basis of Compensation received
during the year. In determining the
number of individuals in the Top-Paid Group (but not
the identity of those individuals), the
following individuals may be excluded:
(1) Employees who have not completed 6
months of Service by the end of the year. For this
purpose, an Employee who has completed
One Hour of Service in any calendar month will
be credited with one month of Service;
(2) Employees who normally work fewer than
17 1/2 hours per week;
(3) Employees who normally work fewer than
6 months during any year. For this purpose, an
Employee who has worked on one day of
a month is treated as having worked for the
whole month;
(4) Employees who have not reached age 21
by the end of the year;
(5) Nonresident aliens who received no
earned income (which constitutes income from
sources within the United States)
within the year from the Employer or any Related
Employer; and
1-5
(6) Employees covered by a collective
bargaining agreement negotiated in good faith
between the employee representatives
and the Employer or a group of employers of which
the Employer is a member if (i) 90% or
more of all employees of the Employer and all
Related Employers are covered by
collective bargaining agreements, and (ii) this Plan
covers only Employees who are not
covered under a collective bargaining agreement.
1.19 Hour of Service
An Hour of Service means:
(a) Each hour for which an Employee is paid,
or entitled to payment, for the performance of
duties for the Employer. These hours will
be credited to the Employee for the computation
period in which the duties are performed;
(b) Each hour for which an Employee is paid,
or entitled to payment, by the Employer on
account of a period of time during which
no duties are performed (irrespective of whether
the employment relationship has
terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty,
military duty or leave of absence. No more
than 501 Hours of Service will be credited
under this paragraph for any 12-month period.
Hours under this paragraph will be
calculated and credited pursuant to Section 2530.200b-2
of the Department of Labor Regulations
which are incorporated herein by this reference;
and
(c) Each hour for which back pay, irrespective
of mitigation of damages, is either awarded or
agreed to by the Employer. The same Hours
of Service will not be credited both under
paragraphs (a) or (b), as the case may be,
and under this paragraph (c). These hours will
be credited to the Employee for the
computation period or periods to which the award or
agreement pertains rather than the
computation period in which the award, agreement or
payment is made.
Hours of Service for all Employees will be
determined on the basis of actual hours for which
an Employee is paid or is entitled to payment.
Hours of Service will be credited for
employment with any Related Employer or any
Predecessor Employer. Hours of Service will be
credited for any individual considered an
employee under Code Section 414(n) or 414(o) and the
regulations thereunder.
Solely for purposes of determining whether a
One Year Break-in-Service has occurred, a
Participant who is absent from work on an
authorized Leave of Absence or by reason of the
Participant's pregnancy, birth of the
Participant's child, placement of a child with the
Participant in connection with the adoption of
such child, or for the purpose of caring for
such child for a period immediately following
such birth or placement, will receive credit for
the Hours of Service which otherwise would
have been credited to the Participant but for such
absence. The Hours of Service credited under
this paragraph will be credited in the Plan Year
in which the absence begins if such crediting
is necessary to prevent a One Year
Break-in-Service in such Plan Year; otherwise,
such Hours of Service will be credited in the
following Plan Year. The Hours of Service
credited under this paragraph are those which would
normally have been credited but for such
absence; in any case in which the Plan Administrator
is unable to determine such hours normally
credited, 8 Hours of Service per day will be
credited. No more than 501 Hours of Service
will be credited under this paragraph for any
12-month period. The Date of Severance is the
second anniversary of the date on which the
absence begins. The period between the
initial date of absence and the first anniversary of
the initial date of absence is deemed to be a
period of Service. The period between the first
and second anniversaries of the initial date
of absence is neither a period of service nor a
period of severance.
1-6
1.20 Investment Fund
An Investment Fund means any portion of the
assets of the Trust Fund which the Plan
Administrator designates as an Investment Fund
and for which the Plan Administrator maintains
a set of accounts separate from the remaining
assets of the Trust Fund.
(a) Specific Investment Fund means an
Investment Fund which is designated as a Specific
Investment Fund by the Plan Administrator
in a manner and form acceptable to the Trustee.
(b) ~uGeneral Investment Fund~w means all
assets of the Trust Fund excluding the assets of any
Specific Investment Funds.
1.21 Leave of Absence
An authorized Leave of Absence means a period
of time of one year or less granted to an
Employee by the Employer due to illness,
injury, temporary reduction in work force, or other
appropriate cause or due to military service
during which the Employee's reemployment rights
are protected by law, provided the Employee
returns to the service of the Employer on or
before the expiration of such leave, or in the
case of military service, within the time his
reemployment rights are so protected or within
60 days of his discharge from military service
if no federal law is applicable. All
authorized Leaves of Absence are granted or denied by
the Employer in a uniform and
nondiscriminatory manner, treating Employees in similar
circumstances in a like manner.
If the Participant does not return to active
service with the Employer on or prior to the
expiration of his authorized Leave of Absence
he will be considered to have had a Date of
Severance as of the earlier of the date on
which his authorized Leave of Absence expired, the
first anniversary of the last date he worked
at least one hour as an Active Participant, or
the date on which he resigned or was
discharged.
1.22 Reserved
1.23 Normal Retirement Age
A Participant's Normal Retirement Age is age
65.
1.24 ~uNormal Retirement Date~w
A Participant's Normal Retirement Date is the
date on which the Participant attains Normal
Retirement Age.
1.25 ~uOne Year Break-in-Service~w
One Year Break-in-Service is defined in
Section 1.42(a).
1.26 ~uParticipant~w
The term Participant means an Employee or
former Employee who is eligible to participate in
this Plan and who is or who may become
eligible to receive a benefit of any type from this
Plan or whose Beneficiary may be eligible to
receive any such benefit.
(a) ~uActive Participant~w means a Participant
who is currently an Employee in an Eligible
Employee Classification.
(b) ~uDisabled Participant~w means a
Participant who has terminated his employment with the
Employer due to his Disability and who is
receiving or is entitled to receive benefits
from the Plan.
(c) ~uRetired Participant~w means a
Participant who has terminated his employment with the
1-7
Employer after meeting the requirements
for his Normal Retirement Date and who is
receiving or is entitled to receive
benefits from the Plan.
(d) ~uVested Terminated Participant~w means a
Participant who has terminated his employment with
the Employer and who has a nonforfeitable
right to all or a portion of his or her Accrued
Benefit and who has not received a
distribution of the value of his or her Vested Accrued
Benefit.
(e) ~uInactive Participant~w means a
Participant who has (i) interrupted his status as an Active
Participant without becoming a Disabled,
Retired or Vested Terminated Participant and (ii)
has a non-forfeitable right to all or a
portion of his Accrued Benefit and has not
received a complete distribution of his
benefit.
(f) ~uFormer Participant~w means a Participant
who has terminated his employment with the Employer
and who currently has no nonforfeitable
right to any portion of his or her Accrued
Benefit.
1.27 ~uPayroll Withholding Agreement~w
If a written Payroll Withholding Agreement is
required pursuant to the provisions of Article
3, then each Participant who elects to
participate in the Plan will file such agreement on or
before the first day of the payroll period for
which the agreement is applicable (or at some
other time as specified by the Plan
Administrator). Such agreement will be effective for each
payroll period thereafter until modified or
amended.
The terms of such agreement will provide that
the Participant agrees to have the Employer
withhold, each payroll period, any whole
percentage of his Compensation (or such other amount
as allowed by the Plan Administrator under
rules applied on a uniform and nondiscriminatory
basis), not to exceed the limitations of
Article 7. In consideration of such agreement, the
Employer periodically will make a contribution
to the Participant's proper Account(s) in an
amount equal to the total amount by which the
Participant's Compensation from the Employer was
reduced during applicable payroll periods
pursuant to the Payroll Withholding Agreement.
Notwithstanding the above, Payroll Withholding
Agreements will be governed by the following
general guidelines:
(a) A Payroll Withholding Agreement will apply
to each payroll period during which an
effective agreement is on file with the
Employer. Upon termination of employment, such
agreement will become void.
(b) The Plan Administrator will establish and
apply guidelines concerning the frequency and
timing of amendments or changes to Payroll
Withholding Agreements. Notwithstanding the
foregoing, a Participant may revoke his
Payroll Withholding Agreement at any time and
discontinue all future withholding.
(c) The Plan Administrator may amend or revoke
its Payroll Withholding Agreement with any
Participant at any time, if the Employer
determines that such revocation or amendment is
necessary to insure that a Participant's
Annual Additions for any Plan Year will not
exceed the limitations of Article 7 or to
insure that the requirements of Sections 401(k)
and 401(m) of the Code have been satisfied
with respect to the amount which may be
withheld and contributed on behalf of the
Highly Compensated Group.
(d) Except as provided above, a Payroll
Withholding Agreement may not be revoked or amended by
the Participant or the Employer.
1-8
1.28 ~uPlan, Plan and Trust, Trust~w
The terms Plan, Plan and Trust and Trust mean
Optek Technology 401(k) Plan. The Plan
Identification Number is 001. The Plan is a
profit sharing plan.
The term Predecessor Plan means any qualified
plan previously established and maintained by
the Employer and to which this Plan is the
successor.
1.29 ~uPlan Administrator~w
The Plan Administrator is Optek Technology,
Inc.
1.30 ~uPlan Year~w
The Plan Year is the 12 month period beginning
January 1 and ending December 31.
Prior to December 31, 1996, Plan Year means
the 12 month period beginning October 1 and ending
September 30. The period beginning October 1,
1996 and ending December 31, 1996 is a short
Plan Year.
The Limitation Year coincides with the Plan
Year.
1.31 ~uReserved~w
1.32 ~uQualified Election~w
Qualified Election means the designation of a
specific Beneficiary other than the
Participant's Surviving Spouse. Such
Qualified Election must be in writing and must be
consented to by the Participant's spouse. The
spouse's written consent to a Qualified
Election must be witnessed by a representative
of the Plan Administrator or a notary public.
Such consent will not be required if the
Participant establishes to the satisfaction of the
Plan Administrator that such written consent
may not be obtained because there is no spouse,
the spouse cannot be located or other
circumstances that may be prescribed by Treasury
Regulations. Any consent necessary under this
provision will be valid only with respect to
the spouse who signs the consent (or in the
event of a deemed Qualified Election, the
designated spouse). Additionally, a
revocation of a prior Qualified Election may be made by a
Participant without the consent of the spouse
at any time before the commencement of benefits;
however, any Qualified Election which follows
such revocation must be in writing and must be
consented to by the Participant's spouse. The
number of Qualified Elections or revocations of
such Qualified Elections will not be limited.
1.33 ~uRelated Employer~w
The terms Related Employer and Affiliated
Employer are used interchangeably and mean any other
corporation, association, company or entity on
or after the Effective Date which is, along
with the Employer, a member of a controlled
group of corporations (as defined in Code Section
414(b)), a group of trades or businesses which
are under common control (as defined in Code
Section 414(c)), an affiliated service group
(as defined in Code Section 414(m)), or any
organization or arrangement required to be
aggregated with the Employer by Treasury
Regulations issued under Code Section 414(o).
1.34 ~uRequired Beginning Date~w
A Participant's Required Beginning Date for
the commencement of benefit payments from the Plan
is the April 1 immediately following:
o the later of 1989 or the calendar year in
which he attained age 70-1/2 if he attained
age 70-1/2 after December 31, 1987;
1-9
o the calendar year in which he attains age
70-1/2 if he is or was a Five Percent Owner
at any time during the Plan Year ending
with or within the calendar year in which he
attains age 66-1/2 or any later Plan Year;
or
o the later of the calendar year in which he
attains age 70-1/2 or the calendar year in
which he retires for any other
Participant.
1.35 ~uSurviving Spouse~w
Surviving Spouse means a deceased
Participant's spouse who was married to the Participant on
the Participant's date of death. The Plan
Administrator and the Trustee may rely conclusively
on a Participant's written statement of his
marital status. Neither the Plan Administrator
nor the Trustee is required at any time to
inquire into the validity of any marriage, the
effectiveness of a common-law relationship or
the claim of any alleged spouse which is
inconsistent with the Participant's report of
his marital status and the identity of his
spouse.
1.36 ~uTop-Heavy Definitions~w
(a) ~uAggregate Account~w
Aggregate Account means, with respect to
each Participant, the value of all accounts
maintained on behalf of the Participant,
whether attributable to Employer or Employee
contributions, used to determine Top-Heavy
Plan status under the provisions of a defined
contribution plan. A Participant's
Aggregate Account as of the Determination Date will be
the sum of:
o the balance of his Account(s) as of
the most recent valuation date occurring within
a 12-month period ending on the
Determination Date (excluding any amounts
attributable to deductible voluntary
employee contributions); plus
o contributions that would be allocated
as of a date not later than the Determination
Date, even though those amounts are
not yet made or required to be made; plus
o any Plan Distributions made within the
Plan Year that includes the Determination
Date or within the four preceding Plan
Years.
(b) ~uAggregation Group~w
Aggregation Group means either a Required
Aggregation Group or a Permissive Aggregation
Group as hereinafter determined.
(1) ~uRequired Aggregation Group~w
Each plan of the Employer in which a
Key Employee is a Participant, and each other
plan of the Employer which enables any
plan in which a Key Employee participates to
meet the requirements of Code Section
401(a)(4) or 410, will be aggregated and the
resulting group will be known as a
Required Aggregation Group.
Each plan in the Required Aggregation
Group will be considered a Top-Heavy Plan if the
Required Aggregation Group is a
Top-Heavy Group. No plan in the Required Aggregation
Group will be considered a Top-Heavy
Plan if the Required Aggregation Group is not a
Top-Heavy Group.
(2) ~uPermissive Aggregation Group~w
The Employer may also include any
other plan not required to be included in the
Required Aggregation Group, provided
the resulting group (to be known as a Permissive
Aggregation Group), taken as a whole,
would continue to satisfy the provisions of Code
1-10
Sections 401(a)(4) and 410.
Only a plan that is part of the
Required Aggregation Group will be considered a
Top-Heavy Plan if the Permissive
Aggregation Group is a Top-Heavy Group. No plan in
the Permissive Aggregation Group will
be considered a Top-Heavy Plan if the Permissive
Aggregation Group is not a Top-Heavy
Group.
Only those plans of the Employer in
which the Determination Dates fall within the same
calendar year will be aggregated in
order to determine whether the plans are Top-Heavy
Plans.
(c) ~uDetermination Date~w
Determination Date means the last day of
the preceding Plan Year, or, in the case of the
first Plan Year, the last day of the first
Plan Year.
(d) ~uKey Employee~w
Key Employee means any Employee or former
Employee (and his Beneficiary) who, at any time
during the Plan Year or any of the
preceding four Plan Years, was:
(1) A "Five Percent Owner" of the
Employer. "Five Percent Owner" means any person who
owns (or is considered as owning
within the meaning of Code Section 318) more than 5%
of the value of the outstanding stock
of the Employer or stock possessing more than 5%
of the total combined voting power of
all stock of the Employer. If the Employer is
not a corporation, Five Percent Owner
means any person who owns more than 5% of the
capital or profits interest in the
Employer. In determining percentage ownership
hereunder, Related Employers will be
treated as separate Employers; or
(2) A "One Percent Owner" of the Employer
having Compensation from the Employer of more
than $150,000. "One Percent Owner"
means any person who owns (or is considered as
owning within the meaning of Code
Section 318) more than 1% of the value of the
outstanding stock of the Employer or
stock possessing more than 1% of the total
combined voting power of all stock of
the Employer. If the Employer is not a
corporation, One Percent Owner means
any person who owns more than 1% of the capital
or profits interest in the Employer.
In determining percentage ownership hereunder,
Related Employers will be treated as
separate Employers. However, in determining
whether an individual has Compensation
of more than $150,000, Compensation from each
Related Employer will be taken into
account.
(3) One of the 10 Employees having
Compensation not less than the Defined Contribution
Dollar Limit (as defined in Section
7.03(j) for the Plan Year) who owns (or is
considered as owning within the
meaning of Code Section 318) both greater than 1/2%
interest and the largest interests in
all Employers required to be aggregated under
Code Sections 414(b), (c), (m) and
(o);
(4) An officer (within the meaning of the
regulations under Code Section 416) of the
Employer having Compensation greater
than 50% of the Defined Benefit Dollar Limit as
defined in Section 7.03(f) for the
Plan Year;
For purposes of this Section, Compensation
means Aggregate Compensation as defined in
Section 7.03(a) plus any amounts
contributed by the Employer pursuant to a salary
reduction agreement which are excludable
from the gross income of the Employee under Code
Section 125, 402(e)(3), 402(h) or 403(b).
Compensation in excess of the Statutory
Compensation Limit is disregarded.
1-11
(e) ~uNon-Key Employee~w
Non-Key Employee means any Employee (and
his Beneficiaries) who is not a Key Employee.
(f) ~uPlan Distributions~w
Plan distributions include distributions
made before January 1, 1984, and distributions
under a terminated plan which, if it had
not been terminated, would have been required to
be included in an aggregation group.
However, distributions made after the valuation date
and before the Determination Date are not
included to the extent that they are already
included in the Participant's Single Sum
Benefit as of the valuation date.
With respect to "unrelated" rollovers and
plan-to-plan transfers (those which are both
initiated by an employee and made from a
plan maintained by one employer to a plan
maintained by another employer), if such
a rollover or plan-to-plan transfer is made from
this Plan, it will be considered as a
distribution for purposes of this Section. If such
a rollover or plan-to-plan transfer is
made to this Plan, it will not be considered as
part of the Participant's Single Sum
Benefit. However, an unrelated rollover or
plan-to-plan transfer accepted before
January 1, 1984, will be considered as part of the
Participant's Single Sum Benefit.
With respect to "related" rollovers and
plan-to-plan transfers (those which are either not
initiated by an employee or are made from
one plan to another plan maintained by the same
employer), if such a rollover or
plan-to-plan transfer is made from this Plan, it will not
be considered as a distribution for
purposes of this Section. If such a rollover or
plan-to-plan transfer is made to this
Plan, it will be considered as part of the
Participant's Single Sum Benefit.
(g) ~uPresent Value of Accrued Benefit~w
In the case of the defined benefit plan,
a Participant's Present Value of Accrued Benefit,
for Top-Heavy determination purposes, will
be determined using the following rules:
(1) The Present Value of Accrued Benefit
will be determined as of the most recent
"valuation date" within a 12-month
period ending on the Determination Date.
(2) For the first Plan Year, the Present
Value of Accrued Benefit will be determined as if
(A) the Participant terminated service
as of the Determination Date; or (B) the
Participant terminated service as of
the valuation date, but taking into account the
estimated Present Value of Accrued
Benefits as of the Determination Date.
(3) For any other Plan Year, the Present
Value of Accrued Benefit will be determined as if
the Participant terminated service as
of the valuation date.
(4) The valuation date must be the same
date used for computing the defined benefit plan
minimum funding costs, regardless of
whether a calculation is performed that plan
year.
(5) A Participant's Present Value of
Accrued Benefit as of a Determination Date will be
the sum of:
o the present value of his Accrued
Benefit determined using the actuarial
assumptions which are specified
below; plus
o any Plan Distributions made within
the Plan Year that includes the Determination
Date or within the four preceding
Plan Years; plus
1-12
o any employee contributions,
whether voluntary or mandatory. However, amounts
attributable to qualified
voluntary employee contributions, as defined in Code
Section 219(e)(2) will not be
considered to be a part of the Participant's
Present Value of Accrued Benefit.
For purposes of this Section, the
present value of a Participant's Accrued Benefit
will be equal to the greater of the
present value determined using the actuarial
assumptions which are specified for
Actuarial Equivalent purposes or the present
value determined using the "Applicable
Interest Rate." The Applicable Interest Rate
is the rate or rates that would be
used by the Pension Benefit Guaranty Corporation
for a trusteed single-employer plan to
value a Participant's or Beneficiary's
benefit on the date of distribution
(the "PBGC Rate"). If the present value using
the PBGC Rate exceeds $25,000, the
Applicable Interest Rate is 120% of the PBGC
Rate. However, the use of 120% of the
PBGC Rate will never result in a present
value less than $25,000.
(6) Solely for the purpose of determining
if this Plan (or any other plan included in a
Required Aggregation Group of which
this Plan is a part) is Top- Heavy, the Accrued
Benefit of any Employee other than a
Key Employee will be determined under
(A) the method, if any, that uniformly
applies for accrual purposes under all plans
maintained by the Employer or any
Related Employer, or
(B) if there is no such method, as if
the benefit accrued no more rapidly than the
slowest accrual rate permitted
under the fractional accrual rate of Code Section
411(b)(1)(C).
(h) ~uSingle Sum Benefit~w
The Single Sum Benefit for any Participant
in a defined benefit pension plan will be equal
to his Present Value of Accrued Benefit.
The Single Sum Benefit for any Participant in a
defined contribution plan will be equal to
his Aggregate Account.
(i) ~uTop-Heavy Group~w
Top-Heavy Group means an Aggregation Group
in which, as of the Determination Date, the
Single Sum Benefits of all Key Employees
under all plans included in the group exceeds 60%
of a similar sum determined for all
Participants.
Super Top-Heavy Group means an Aggregation
Group in which, as of the Determination Date,
the sum of (1) the Single Sum Benefits of
all Key Employees under all defined benefit
plans included in the group, plus (2) the
Single Sum Benefit of all Key Employees under
all defined contribution plans included in
the group exceeds 90% of a similar sum
determined for all Participants.
(j) ~uTop-Heavy Plan~w
This Plan will be a Top-Heavy Plan for any
Plan Year beginning after December 31, 1983, in
which, as of the Determination Date, the
Single Sum Benefits of all Key Employees exceed
60% of the Single Sum Benefits of all
Participants under this Plan.
This Plan will be a Super Top-Heavy Plan
for any Plan Year beginning after December 31,
1983, in which, as of the Determination
Date, the Single Sum Benefits of all Key Employees
exceed 90% of the Single Sum Benefits of
all Participants under this Plan.
If any Participant is a Non-Key Employee
for a given Plan Year, but was a Key Employee for
any prior Plan Year, the Participant's
Single Sum Benefit will not be taken into account
1-13
for purposes of determining whether this
Plan is a Top-Heavy or Super Top-Heavy Plan (or
whether any Aggregation Group which
includes this Plan is a Top-Heavy or Super Top-Heavy
Group).
If an individual has performed no services
for the Employer at any time during the 5-year
period ending on the Determination Date,
any Single Sum Benefit of such individual will
not be taken into account for purposes of
determining whether this Plan is a Top-Heavy or
Super Top-Heavy Plan (or whether any
Aggregation Group which includes this Plan is a
Top-Heavy Group or Super Top-Heavy Group).
1.37 ~uTrust Fund, Trust~w
These terms mean the total cash, securities,
real property, insurance contracts and any other
property held by the Trustee.
1.38 ~uTrustee~w
The Trustee is Charles Schwab Trust Company or
any successor Trustee.
1.39 ~uVested Percentage~w
A Participant's Vested Percentage as of a
given date will be that percentage determined in
accordance with the Vesting Schedule.
Notwithstanding the preceding, a Participant will be
100% vested upon reaching the earlier of (a)
his Normal Retirement Age or (b) the later of the
date upon which the Participant attains age 65
or reaches the 5th anniversary of the date he
commenced participation in the Plan.
1.40 ~uVesting Schedule~w
A Participant's Vested Percentage will be
determined in accordance with the following table:
~u Years of Vesting Service ~w
~uVested Percentage~w
Less than 1 Year
0%
1 Year
20%
2 Years
40%
3 Years
60%
4 Years
80%
5 Years or more
100%
1.41 ~uWritten Resolution~w
The terms Written Resolution and Written
Consent are used interchangeably and reflect
decisions, authorizations, etc. by the
Employer.
1.42 ~uYear of Service~w
(a) ~uCrediting Years of Service~w
Years of Service are determined using the
Elapsed Time Method and/or the Hours of Service
Method as specified in this Section.
(1) ~uElapsed Time Method~w
Under the Elapsed Time Method, Years
of Service are based upon an Employee's Elapsed
Time of employment irrespective of the
number of hours actually worked during such
period; a Year of Service (including
a fraction thereof) will be credited for each
completed 365 days of Elapsed Time
which need not be consecutive. The following terms
are used in determining Years of
Service under the Elapsed Time Method:
(A) Date of Severance (Termination) -
means the earlier of (i) the actual date an
1-14
Employee resigns, is discharged,
dies or retires, or (ii) the first anniversary of
the date an Employee is absent
from work (with or without pay) for any other
reason, e.g., disability,
vacation, leave of absence, layoff, etc.
(B) Elapsed Time - means the total
period of service which has elapsed between a
Participant's Employment
Commencement Date and Date of Termination including
Periods of Severance where a One
Year Break-in-Service does not occur.
(C) Employment Commencement Date -
means the date an Employee first performs one Hour
of Service for the Employer.
(D) One Year Break-in-Service - means
any 365-day period following an Employee's Date
of Termination as defined above in
which the Employee does not complete at least
one Hour of Service.
(E) Period of Severance - is the time
between the actual Date of Severance as defined
above and the subsequent date, if
any, on which the Employee performs an Hour of
Service.
All periods of employment will be
aggregated including Periods of Severance unless
there is a One Year Break-in-Service.
(2) ~uHours of Service Method~w
Under the Hours of Service Method, a
Year of Service is credited for each 12
consecutive month Computation Period
during which an Employee is credited with a
specified number of Hours of Service.
Under the Hours of Service Method, a
One Year Break-in-Service means any Computation
Period during which an Employee
completes 500 or fewer Hours of Service.
Years of Eligibility Service for purposes
of determining eligibility to participate in the
Plan and Years of Vesting Service for
purposes of determining a Participant's Vested
Percentage include service with any
organization which is a Related Employer with respect
to the Employer.
(b) ~uFor Eligibility Purposes~w
Years of Service for purposes of
eligibility to participate in the Plan are referred to as
Years of Eligibility Service and are
determined using the Hours of Service Method.
A Year of Eligibility Service is credited
for each Computation Period during which an
Employee is credited with at least 1,000
Hours of Service. The initial Computation Period
is the 12 consecutive month period
beginning with the Employee's Employment Commencement
Date. Thereafter, the Computation Period
is the Plan Year beginning with the Plan Year in
which the initial Computation Period ends.
All of an Employee's Years of Eligibility
Service are taken into account in determining
his eligibility to participate.
(c) ~uFor Vesting Purposes~w
Years of Service for purposes of computing
a Participant's Vested Percentage are referred
to as Years of Vesting Service and are
determined using the Elapsed Time Method.
All of a Participant's Years of Vesting
Service are taken into account in determining his
Vested Percentage.
1-16
ARTICLE 2
PARTICIPATION~p
2.01 ~uParticipation~w
An Employee will become eligible to
participate in the Plan on the Entry Date which coincides
with or next follows the completion of one
Year of Eligibility Service.
An Employee who is eligible to participate as
of the Effective Date or as of a given Entry
Date will automatically become a Participant
as of such date. An Employee who is otherwise
eligible to participate may irrevocably elect
not to participate in the Plan. Any election
under this paragraph must be in writing and
according to guidelines established by the Plan
Administrator.
2.02 ~uParticipation After Reemployment~w
An Employee who has satisfied all of the
eligibility requirements but terminates employment
prior to his Entry Date will participate in
the Plan immediately upon returning to the employ
of the Employer.
A Participant or Former Participant who has
terminated employment will participate as an
Active Participant in the Plan immediately
upon returning to the employ of the Employer.
2.03 ~uChange in Employment Classification~w
In the event a Participant becomes ineligible
to participate because he is no longer a member
of an Eligible Employee Classification, the
Participant will participate immediately upon his
return to an Eligible Employee Classification.
In the event an Employee who is not a member
of an Eligible Employee Classification becomes a
member of such a classification, such Employee
will begin to participate immediately if he has
satisfied the eligibility requirements which
are specified in Section 2.01.
2-1
~bARTICLE 3
PARTICIPANT
ACCOUNTS~p
3.01 ~uSalary Deferral Account~w
Salary Deferral Account means the Account of
a Participant reflecting applicable
contributions, investment income or loss
allocated thereto and distributions. A Participant's
Salary Deferral Account is 100% vested at all
times.
(a) ~uSalary Deferral Contributions~w
(1) ~uAmount of Contribution~w
Each Participant may elect to make a
Salary Deferral Contribution each Contribution
Period not to exceed 15% of the
Participant's Compensation. Such contribution will be
designated as a percentage of
Compensation and will be equal to an even multiple of 1%
or such other amount as allowed by the
Plan Administrator.
(2) ~uPayroll Withholding~w
All Salary Deferral Contributions will
be made pursuant to a Payroll Withholding
Agreement in accordance with Section
1.27.
(3) ~uNondiscrimination Requirements~w
All Salary Deferral Contributions are
Elective Contributions within the meaning of
Section 4.05(a) and must satisfy the
Nondiscrimination Requirements of Section 4.05.
(4) ~uExcess Deferrals~w
The maximum amount of Salary Deferral
Contribution which can be made under the Plan on
behalf of any Participant during any
calendar year will be limited to that amount
which would not constitute an Excess
Deferral as defined in Section 4.05. The Plan
Administrator will distribute any
Excess Deferral, together with the income allocable
to it, to the Participant no later
than April 15 of the calendar year immediately
following the year of the Excess
Deferral. If a Participant notifies the Plan
Administrator before March 1 of any
calendar year that Excess Deferrals have been made
on his account for the previous
calendar year by reason of participation in a Cash or
Deferred Arrangement maintained by
another employer or employers, and if the
Participant requests that the Plan
Administrator distribute a specific amount to him
on account of Excess Deferrals and
certifies that the requested amount is an Excess
Deferral, the Plan Administrator will
designate the amount requested together with the
income allocable to it as a
distribution of Excess deferrals and distribute such
amount no later than April 15 of that
calendar year. The amount of Excess Deferrals
to be distributed will be reduced by
any Excess Contributions previously distributed
or recharacterized with respect to the
Plan Year beginning with or within the calendar
year. The amount of income allocable
to the Excess Deferral will be determined as
described in Section 4.05.
(5) ~uTiming of Deposits~w
The Employer will deposit all Salary
Deferral Contributions on the earliest date on
which such contributions can
reasonably be segregated from the Employer's general
assets, but in no event later than 90
days after the date on which the amounts
withheld would otherwise have been
paid to the Participant in cash. Effective
February 3, 1997, the Employer will
deposit all Salary Deferral Contributions on the
earliest date on which such
contributions can reasonably be segregated from the
3-1
Employer's general assets, but in no
event later than 15 business days following the
end of the month in which the amounts
withheld would otherwise have been paid to the
Participant in cash.
The Contribution Period for Salary
Deferral Contributions is each of the semi-monthly
periods which end on the 15th and the
last day of each month.
(b) ~uFinancial Hardship Withdrawals~w
A Participant may file with the Plan
Administrator a written request to withdraw, in order
to avoid or alleviate a Financial
Hardship, any amount not to exceed that portion of his
Salary Deferral Account which represents
the sum of
o his total Salary Deferral
Contributions made after 1988, and
o his total Salary Deferral
Contributions made before 1989 together with the income
earned before 1989 which is allocable
to those Contributions.
The Plan Administrator will allow
Financial Hardship withdrawals only if they are
necessary to satisfy a Participant's
immediate and heavy financial need.
(1) ~uImmediate and Heavy Financial Need~w
A withdrawal will be deemed to be made
due to an immediate and heavy financial need of
the Participant if it is made because
of:
o Expenses for medical care
described in Code Section 213(d) previously incurred
by the Participant, his spouse or
any of his dependents (as defined in Code
Section 152) or necessary for
these persons to obtain medical care described in
Code Section 213(d);
o Costs directly related to the
purchase (excluding mortgage payments) of a
principal residence for the
Participant;
o Payment of tuition, room and board
or educational fees for the next 12 months of
post-secondary education for the
Participant, his spouse, children or dependents
(as defined in Code Section 152);
o Prevention of the eviction of the
Participant from his principal residence or
foreclosure on the mortgage of the
Participant's principal residence.
(2) ~uNecessary To Satisfy Financial
Need~w
No withdrawal may exceed the amount
necessary to satisfy the Participant's immediate
and heavy financial need. However,
the amount of an immediate and heavy financial
need may include any amounts necessary
to pay any federal, state or local income taxes
or penalties reasonably anticipated to
result from the distribution. The Plan
Administrator will allow the
withdrawal if it determines, after a full review of the
Participant's written request and
evidence presented by the Participant showing
immediate and heavy financial need as
well as the Participant's lack of other
reasonably available resources, that
the withdrawal is necessary to satisfy the need.
No withdrawal will be treated as
necessary to the extent it can be satisfied from
other resources which are reasonably
available to the Participant, including those of
the Participant's spouse and minor
children. A withdrawal will be treated as
necessary to the extent the
Participant demonstrates to the satisfaction of the Plan
Administrator that the need cannot be
relieved by any of the following:
3-2
o Reimbursement or compensation by
insurance or otherwise;
o Reasonable liquidation of assets
to the extent the liquidation would not itself
cause an immediate and heavy
financial need;
o Cessation of Salary Deferral
Contributions or Employee After-tax Contributions
(as defined in Section 4.05(a)) or
both under any plan maintained by any
employer;
o Other distributions or nontaxable
(at the time of the loan) loans from plans
maintained by any employer;
o Borrowing from commercial sources
on reasonable commercial terms.
Unless the Plan Administrator has
evidence to the contrary, it may rely upon the
Participant's written representation
that the need cannot be relieved by any of the
foregoing.
(3) ~uSafe Harbor~w
The Plan Administrator will not allow
any withdrawal until the Participant has
obtained all distributions, other than
hardship distributions, and all nontaxable
loans currently available to the
Participant under all plans maintained by the
Employer. Upon the withdrawal of any
portion of a Participant's Salary Deferral
Account, the Participant will become
ineligible for any Elective Contribution to this
Plan or any other plan maintained by
the Employer, or to make any contribution to this
Plan or any other plan maintained by
the Employer until the first day of the first
payroll period which begins not less
than 12 months following the date of withdrawal.
For this purpose the phrase "any other
plan maintained by the Employer" means all
qualified and nonqualified plans of
deferred compensation maintained by the Employer.
The phrase includes stock option,
stock purchase, or similar plans, or a cash or
deferred arrangement that is part of
a cafeteria plan within the meaning of Code
Section 125. It does not include the
mandatory employee contribution portion of a
defined benefit plan, nor does it
include a health or welfare benefit plan (including
one that is part of a cafeteria plan
within the meaning of Code Section 125).
Furthermore, the maximum amount of
Salary Deferral Contributions which can be made
under the Plan on behalf of any
Participant during the calendar year which follows the
calendar year in which the withdrawal
was made will be limited to the amount which
would not be treated as an Excess
Deferral for that year reduced by the amount of
Salary Deferral Contributions made on
behalf of the Participant in the calendar year
of withdrawal.
(c) ~uDistributions~w
No distribution may be made from the
Participant's Salary Deferral Account or any account
comprised of Matching Contributions or
Nonelective Contributions which are treated as
Elective Contributions in accordance with
the provisions of Section 4.05(h) except under
one of the following circumstances:
o the Participant's retirement, death,
disability or termination of employment;
o the Participant's attaining of age 59
1/2;
o the avoidance or alleviation of a
Financial Hardship;
o the termination of this Plan without
the establishment of a successor plan within
3-3
the meaning of Treasury Regulation
Section 1.401(k)-1(d)(3);
o the sale or other disposition by the
Employer of at least 85 percent of the assets
used by the Employer in a trade or
business to an unrelated corporation which does
not maintain the plan, but only if the
Participant continues employment with the
corporation acquiring the assets and
only if the Employer continues to maintain this
Plan; or
o the sale or other disposition by the
Employer of its interest in a subsidiary to an
unrelated entity which does not
maintain the plan, but only if the Participant
continues employment with the
subsidiary and only if the Employer continues to
maintain this Plan.
This paragraph does not apply to
distributions of Excess Deferrals, Excess Contributions,
or excess Annual Additions.
3.02 ~uMatching Account~w
Matching Account means the Account of a
Participant reflecting applicable contributions,
forfeitures, investment income or loss
allocated thereto and distributions. A Participant's
Matching Account is subject to the Vesting
Schedule.
(a) ~uMatching Contributions~w
Each Plan Year, the Employer may, within
the time prescribed by law for making a
deductible contribution, make a Matching
Contribution to the Trust.
For a given Plan Year, the total Matching
Contribution, if any, made by the Employer will
be an amount determined and authorized by
the Employer for such Plan Year; however, the
Employer will not authorize Matching
Contributions at such times or in such amounts that
the Plan, in operation, discriminates in
favor of Highly Compensated Employees.
The target Matching Contribution to be
made to a Participant's Matching Account is equal
to 50% of that portion of the
Participant's Salary Deferral Contribution which is not in
excess of 4% of the Participant's
Compensation.
If the sum of the target Matching
Contributions to be made for all Participants is less
than or greater than the total Matching
Contribution made by the Employer in accordance
with the provisions of this Section, then
the actual Matching Contribution allocated to
each Eligible Participant's Matching
Account will be adjusted proratably so that the sum
of the actual Matching Contributions made
for all Participants is equal to the total
Matching Contribution made by the
Employer.
All Matching Contributions are Matching
Contributions within the meaning of Section
4.05(a) and must satisfy the
Nondiscrimination Requirements of Section 4.05.
(b) ~uContribution Period~w
The Contribution Period for Matching
Contributions is each Plan Year.
(c) ~uApplication of Forfeitures~w
Forfeitures from a Participant's Matching
Account will be used to reduce Matching
Contributions in the Plan Year in which
the Forfeitures are determined to occur.
3-4
(d) ~uWithdrawals~w
A Participant who has been a Participant
in the Plan for five or more years and has
attained age 59 1/2 may withdraw all or
any portion of his Matching Account subject to the
limitations of this Section. A
Participant who has not been a Participant in the Plan for
five or more years or has not attained age
59 1/2 may not withdraw any portion of his
Matching Account prior to the time when
benefits otherwise become payable in accordance
with the provisions of Article 5.
(e) ~uMinimum Allocation for Top-Heavy Plan~w
Notwithstanding anything contained herein
to the contrary, for any Plan Year in which this
Plan is determined to be Top-Heavy, a
Participant who is a Non-Key Employee (including any
Employee who is excluded from the Plan
because his Compensation is less than a stated
amount) will be entitled to a minimum
allocation of employer contributions in addition to
any Matching Contributions equal to 3% of
the Non-Key Employee's Aggregate Compensation
received during the Plan Year. This
minimum allocation will allocated to the
Participant's Matching Account and will be
provided to each Non-Key Employee who is a
Participant and is employed by the
Employer on the last day of the Plan Year whether or
not he or she is an otherwise Eligible
Participant or fails to make any mandatory Employee
contribution to the Plan.
The percentage referred to in the
preceding paragraph will not exceed the percentage of
Aggregate Compensation at which Matching
Contributions are made or allocated to the Key
Employee for whom such percentage is the
largest; provided, however, this sentence will
not apply if the Plan is required to be
included in an Aggregation Group to meet the
requirements of Code Sections 401(a)(4) or
410.
3.03 ~uRollover Account~w
Rollover Account means the Account of a
Participant reflecting applicable contributions,
investment income or loss allocated thereto
and distributions. A Participant's Rollover
Account is 100% vested at all times.
(a) ~uRollover Contributions~w
Rollover Contribution means a contribution
to the Plan by a Participant where such
contribution is the result of a prior
distribution from an Individual Retirement Account,
an Individual Retirement Annuity or
another qualified plan. Such prior contribution must
be a rollover amount described in Section
402(c)(4) of the Code or a contribution
described in Section 408(d)(3) of the
Code.
Each Employee who is a member of an
Eligible Employee Classification, regardless of
whether he is a Participant in the Plan,
will have the right to make a Rollover
Contribution of cash (or other property of
a form acceptable to the Plan Administrator and
the Trustee) into the Plan from another
qualified plan. If the Employee is not a
Participant hereunder, his Rollover
Account will constitute his entire interest in the
Plan. In no event will the existence of
a Rollover Account entitle the Employee to
participate in any other benefit provided
by the Plan.
If specifically provided for in a Written
Resolution, Rollover Contribution will also mean
the amount of assets transferred, pursuant
to Section 10.05, to this Plan from another
plan which is qualified under Code
Sections 401(a) and 501(a).
3-5
(b) ~uWithdrawals~w
A Participant may withdraw all or any
portion of his Rollover Account at any time.
3-6
~bARTICLE 4
ACCOUNTING AND
VALUATION~p
4.01 ~uGeneral Powers of the Plan Administrator~w
The Plan Administrator will have the power to
establish rules and guidelines, which will be
applied on a uniform and non-discriminatory
basis, as it deems necessary, desirable or
appropriate with regard to accounting
procedures and to the timing and method of contributions
to and/or withdrawals from the Plan.
4.02 ~uValuation Procedure~w
As of each Valuation Date, the Plan
Administrator will determine from the Trustee the fair
market value of Trust assets and will, subject
to the provisions of this Article, determine
the allocation of such value among the
Accounts of the Participants; in doing so, the Plan
Administrator will in the following order:
(a) Credit or charge, as appropriate, to the
proper Accounts all contributions, payments,
transfers, forfeitures, withdrawals or
other distributions made to or from such Accounts
since the last preceding Valuation Date
and that have not been previously credited or
charged.
(b) Credit or charge, as applicable, each
Account with its pro rata portion of the
appreciation or depreciation in the fair
market value of the Trust Fund since the prior
Valuation Date. Such appreciation or
depreciation will reflect investment income,
realized and unrealized gains and losses,
other investment transactions and expenses paid
from the Trust Fund.
4.03 ~uReserved~w
4.04 ~uParticipant Direction of Investment~w
(a) ~uApplication of this Section~w
Subject to the provisions of this Section,
each Participant will have the right to direct
the investment of all of his Accounts
among the Specific Investment Funds which are made
available by the Plan Administrator.
(b) ~uGeneral Powers of the Trustee~w
The Trustee will have the power to
establish rules and guidelines as it deems necessary,
desirable or appropriate with regard to
the directed investment of contributions in
accordance with this Section. Such rules
and guidelines are intended to comply with
Section 404(c) of ERISA and the
regulations thereunder. Included in such powers, but not
by way of limitation, are the following
powers and rights.
(1) To temporarily invest those
contributions which are pending directed investment in a
Specific Investment Fund, in the
General Investment Fund or in some other manner as
determined by the Trustee.
(2) To establish rules with regard to the
transfer of all or any part of the balance of an
Account or Accounts of a given
Participant from one Investment Fund to another.
(3) To maintain any part of the assets of
any Investment Fund in cash, or in demand or
short-term time deposits bearing a
reasonable rate of interest, or in a short-term
investment fund that provides for the
collective investment of cash balances or in
4-1
other cash equivalents having ready
marketability, including, but not limited to,
U.S. Treasury Bills, commercial
paper, certificates of deposit, and similar types of
short-term securities, as may be
deemed necessary by the Trustee in its sole
discretion.
The Trustee will not be liable for any
loss that results from a Participant's exercise of
control over the investment of the
Participant's Accounts. If the Participant fails to
provide adequate directions, the Plan
Administrator will direct the investment of the
Participant's Account. The Trustee will
have no duty to review or make recommendations
regarding a Participant's investment
directions.
(c) ~uAccounting~w
The Plan Administrator will maintain a set
of accounts for each Investment Fund. The
accounts of the Plan Administrator for
each Investment Fund will indicate separately the
dollar amounts of all contributions made
to such Investment Fund by or on behalf of each
Participant from time to time. The Plan
Administrator will compute the net income from
investments; net profits or losses arising
from the sale, exchange, redemption, or other
disposition of assets, and the prorata
share attributable to each Investment Fund of the
expenses of the administration of the Plan
and Trust and will debit or credit, as the case
may be, such income, profits or losses,
and expenses to the unsegregated balance in each
Investment Fund from time to time. To the
extent that the expenses of the administration
of the Plan and Trust are not directly
attributable to a given Investment Fund, such
expenses, as of a given Valuation Date,
will be prorated among each Investment Fund; such
allocation of expenses will, in general,
be performed in accordance with the guidelines
which are specified in this Article.
(d) ~uFuture Contributions~w
Each Participant who chooses to
participate in the Plan will elect the percentage of those
contributions (which are subject to
Participant direction of investment) which is to be
deposited to each available Investment
Fund. Such election will be in effect until
modified. If any Participant fails to
make an election by the appropriate date, he will
be deemed to have elected an Investment
Fund(s) as determined by the Plan Administrator.
Elections will be limited to multiples of
one percent (or such other reasonable increments
as determined by the Plan Administrator).
(e) ~uChange in Investment of Past
Contributions~w
A Participant may file an election with
the Plan Administrator to shift the aggregate
amount or reasonable increments (as
determined by the Plan Administrator) of the balance
of his existing Account or Accounts which
are subject to Participant direction of
investment among the various Investment
Funds as of the first day of each Accounting
Period (or such other time or times as
determined by the Plan Administrator). Elections
will be limited to multiples of one
percent (or such other reasonable increments as
determined by the Plan Administrator).
(f) ~uChanges in Investment Elections~w
Elections with respect to future
contributions and/or with respect to changes in the
investment of past contributions will be
in writing on a form provided by the Plan
Administrator, except that each
Participant may authorize the Plan Administrator in
writing on an authorization form provided
by the Plan Administrator to accept such
directions as may be made by the
Participant by use of a telephone voice response system
maintained for such purpose.
The Plan Administrator may establish
additional rules and procedures with respect to
investment election changes including, for
example, the number of allowed changes per
4-2
specified period, the amount of reasonable
fee, if any, which will be charged to the
Participant for making a change, specified
dates or cutoff dates for making a change,
etc.
(g) ~uAddition and Deletion of Specific
Investment Funds~w
Specific Investment Funds may be made
available from time to time by the Trustee.
Specific Investment Funds, as are from
time to time made available by the Trustee, may be
deleted or added from time to time by the
Plan Administrator. The Plan Administrator will
establish guidelines for the proper
administration of affected Accounts when a Specific
Investment Fund is added or deleted.
4.05 ~uNondiscrimination Requirements~w
(a) ~uDefinitions Applicable to the
Nondiscrimination Requirements~w
The following definitions apply to this
Section:
(1) ~uAggregate Limit~w
With respect to a given Plan Year,
Aggregate Limit means the greater of the sum of
[(A) + (B)] or the sum of [(C) + (D)]
where:
(A) is equal to 125% of the
~ugreater~w of DP or CP;
(B) is equal to 2 percentage points
plus the ~ulesser~w of DP or CP,
not to exceed 2 times the
~ulesser~w of DP or CP;
(C) is equal to 125% of the
~ulesser~w of DP or CP;
(D) is equal to 2 percentage points
plus the ~ugreater~w of DP or CP,
not to exceed 2 times the
~ugreater~w of DP or CP;
DP represents the Deferral
Percentage for the Non-highly Compensated Group
eligible under the Cash or
Deferred Arrangement for the Plan Year; and
CP represents the Contribution
Percentage for the Non-highly Compensated Group
eligible under the plan
providing for the Employee After-tax Contributions or
Employer Matching Contributions
for the Plan Year beginning with or within the
Plan Year of the Cash or
Deferred Arrangement.
(2) ~uCash or Deferred Arrangement
(CODA)~w
A Cash or Deferred Election is any
election (or modification of an earlier election)
by an Employee to have the Employer
either:
o provide an amount to the
Employee in the form of cash or some
other taxable benefit that is
not currently available, or
o contribute an amount to the
Plan (or provide an accrual or other
benefit) thereby deferring
receipt of Compensation.
A Cash or Deferred Election will only
be made with respect to an amount that is not
currently available to the Employee on
the date of election. Further, a Cash or
Deferred Election will only be made
with respect to amounts that would have (but for
the Cash or Deferred Election) become
currently available after the later of the date
on which the Employer adopts the Cash
or Deferred Arrangement or the date on which the
arrangement first becomes effective.
4-3
A Cash or Deferred Election does not
include a one-time irrevocable election upon the
Employee's commencement of employment
or first becoming an Eligible Employee.
(3) ~uCompensation~w
For purposes of this Section,
Compensation means Aggregate Compensation as defined in
Section 7.03(a) plus amounts
contributed by the Employer pursuant to a salary
reduction agreement which are
excludable from the gross income of the Employee under
Code Section 125, 402(e)(3), 402(h) or
403(b). Compensation in excess of the
Statutory Compensation Limit is
disregarded.
The period used to determine an
Employee's Compensation for a Plan Year may be limited
to that portion of the Plan Year in
which the Employee was an Eligible Employee,
provided that this method is applied
uniformly to all Eligible Employees under the
Plan for the Plan Year.
(4) ~uContribution Percentage~w
Contribution Percentage means, for any
specified group, the average of the ratios
calculated (to the nearest
one-hundredth of one percent) separately for each
Participant in the group, of the
amount of Employee After-tax Contributions and
Matching Contributions which are made
by or on behalf of each Participant for a Plan
Year to each Participant's
Compensation for the Plan Year.
For purposes of determining the
Contribution Percentage, each Employee who is eligible
under the terms of the Plan to make or
to have contributions made on his behalf is
treated as a Participant. The
Contribution Percentage of an eligible Employee who
makes no Employee After-tax
Contribution and receives no Matching Contribution is
zero.
For purposes of determining the
Contribution Percentage of a Participant who is a
Highly Compensated Employee, the
Compensation of and all Employee Contributions and
Matching Contributions for the
Participant include, in accordance with the provisions
of Section 4.05(d), the Compensation
of and all Employee After-tax Contributions and
Matching Contributions for any Family
Member of the Participant.
The Contribution Percentage of a
Participant who is a Highly Compensated Employee for
the Plan Year and who is eligible to
make Employee After-tax Contributions or receive
an allocation of Matching
Contributions (including Elective Contributions and
Nonelective Contributions which are
treated as Employee or Matching Contributions for
purposes of the Contribution
Percentage Test) allocated to his accounts under two or
more plans which are sponsored by the
Employer will be determined as if the Employee
After-tax and Matching Contributions
were made under a single plan. For purposes of
this paragraph, if a Highly
Compensated Employee participates in two or more such
plans which have different Plan Years,
all plans ending with or within the same
calendar year will be treated as a
single plan.
(5) ~uContribution Percentage Test~w
The Contribution Percentage Test is a
test applied on a Plan Year basis to determine
whether a plan meets the requirements
of Code Section 401(m). The Contribution
Percentage Test may be met by either
satisfying the General Contribution Percentage
Test or the Alternative Contribution
Percentage Test.
The General Contribution Percentage
Test is satisfied if the Contribution Percentage
for the Highly Compensated Group does
not exceed 125% of the Contribution Percentage
4-4
for the Non-highly Compensated Group.
The Alternative Contribution
Percentage Test is satisfied if the Contribution
Percentage for the Highly Compensated
Group does not exceed the lesser of:
o the Contribution Percentage
for the Non-highly Compensated Group
plus 2 percentage points, or
o the Contribution Percentage
for the Non-highly Compensated Group
multiplied by 2.0.
If (i) one or more Highly Compensated
Employees of the Employer or any Related
Employer are eligible to participate
in both a Cash or Deferred Arrangement and a plan
which provides for Employee After-tax
Contributions or Matching Contributions, (ii)
the Deferral Percentage for the Highly
Compensated Group does not satisfy the General
Deferral Percentage Test, and (iii)
the Contribution Percentage for the Highly
Compensated Group does not satisfy the
General Contribution Percentage Test, then the
Contribution Percentage Test will be
deemed to be satisfied only if the sum of the
Deferral Percentage and the
Contribution Percentage for the Highly Compensated Group
does not exceed the Aggregate Limit.
The Plan will not fail to satisfy the
Contribution Percentage test merely because all
of the Eligible Employees under the
Plan for a Plan Year are Highly Compensated
Employees.
(6) ~uDeferral Percentage~w
Deferral Percentage means, for any
specified group, the average of the ratios
calculated (to the nearest
one-hundredth of one percent) separately for each
Participant in the group, of the
amount of Elective Contributions which are made on
behalf of each Participant for a Plan
Year to each Participant's Compensation for the
Plan Year.
For purposes of determining the
Deferral Percentage, each Employee who is eligible
under the terms of the Plan to have
contributions made on his behalf is treated as a
Participant. The Deferral Percentage
of an eligible Employee who makes no Elective
Contribution is zero.
For purposes of determining the
Deferral Percentage of a Participant who is a Highly
Compensated Employee, the Compensation
of and Elective Contributions for the
Participant include, in accordance
with the provisions of Section 4.05(d), the
Compensation and all Elective
Contributions for any Family Member of the Participant.
The Deferral Percentage of a
Participant who is a Highly Compensated Employee for the
Plan Year and who is eligible to have
Elective Contributions (including Nonelective
Contributions or Matching
Contributions which are treated as Elective Contributions
for purposes of the Deferral
Percentage Test) allocated to his accounts under two or
more Cash or Deferred Arrangements
which are maintained by the Employer will be
determined as if the Elective
Contributions were made under a single Arrangement. For
purposes of this paragraph, if a
Highly Compensated Employee participates in two or
more Cash or Deferred Arrangements
which have different Plan Years, all Cash or
Deferred Arrangements ending with or
within the same calendar year will be treated as
a single Arrangement.
4-5
(7) ~uDeferral Percentage Test~w
The Deferral Percentage Test is a test
applied on a Plan Year basis to determine
whether a plan meets the requirements
of Code Section 401(k). The Deferral Percentage
Test may be met by either satisfying
the General Deferral Percentage Test or the
Alternative Deferral Percentage Test.
The General Deferral Percentage Test
is satisfied if the Deferral Percentage for the
Highly Compensated Group does not
exceed 125% of the Deferral Percentage for the
Non-highly Compensated Group.
The Alternative Deferral Percentage
Test is satisfied if the Deferral Percentage for
the Highly Compensated Group does not
exceed the lesser of:
o the Deferral Percentage for
the Non-highly Compensated Group
plus 2 percentage points, or
o the Deferral Percentage for
the Non-highly Compensated Group
multiplied by 2.0.
If (i) one or more Highly Compensated
Employees of the Employer or any Related
Employer are eligible to participate
in both a Cash or Deferred Arrangement and a plan
which provides for Employee After-tax
Contributions or Matching Contributions, (ii)
the Deferral Percentage for the Highly
Compensated Group does not satisfy the General
Deferral Percentage Test, and (iii)
the Contribution Percentage for the Highly
Compensated Group does not satisfy the
General Contribution Percentage Test, then the
Deferral Percentage Test will be
deemed to be satisfied only if the sum of the
Deferral Percentage and the
Contribution Percentage for the Highly Compensated Group
does not exceed the Aggregate Limit.
The Plan will not fail to satisfy the
Deferral Percentage test merely because all of
the Eligible Employees under the Plan
for a Plan Year are Highly Compensated
Employees.
(8) ~uElective Contribution~w
Elective Contribution means any
contribution made by the Employer to a Cash or
Deferred Arrangement on behalf of and
at the election of an Employee. An Elective
Contribution will be taken into
account for a given Plan Year only if:
o The Elective Contribution is
allocated to the Participant's
Account as of a date within
the Plan Year to which it relates;
o The allocation is not
contingent upon the Employee's
participation in the Plan or
performance of services on any date
after the allocation date;
o The Elective Contribution is
actually paid to the trust no later
than 12 months after the end
of the Plan Year to which the
Elective Contribution relates;
and
o The Elective Contribution
relates to Compensation which either
(i) but for the Participant's
election to defer, would have been
received by the Participant in
the Plan Year or (ii) is
attributable to services
performed by the Participant in the
Plan Year and, but for the
Participant's election to defer,
4-6
would have been received by
the Participant within two and
one-half months after the
close of the Plan Year.
Elective Contributions will be treated
as Employer Contributions for purposes of Code
Sections 401(a), 401(k), 402(a), 404,
409, 411, 412, 415, 416, and 417.
(9) ~uElective Deferral~w
Elective Deferral means the sum of the
following:
o Any Elective Contribution to
any Cash or Deferred Arrangement to
the extent it is not
includable in the Participant's gross
income for the taxable year of
contribution;
o Any employer contribution to
a simplified employee pension as
defined in Code Section 408(k)
to the extent not includable in
the Participant's gross income
for the taxable year of
contribution;
o Any employer contribution to
an annuity contract under Code
Section 403(b) under a salary
reduction agreement to the extent
not includable in the
Participant's gross income for the taxable
year of contribution; plus
o Any employee contribution
designated as deductible under a trust
described in Code Section
501(c)(18) for the taxable year of
contribution.
(10) ~uEligible Employee~w
Eligible Employee means an Employee
who is directly or indirectly eligible to make a
Cash or Deferred Election under the
Plan for all or a portion of the Plan Year. An
Employee who is unable to make a Cash
or Deferred Election because the Employee has
not contributed to another plan is
also an Eligible Employee. An Employee who would
be eligible to make Elective
Contributions but for a suspension due to a distribution,
a loan, or an election not to
participate in the Plan, is treated as an Eligible
Employee for purposes of Code Section
401(k)(3) and 401(m) for a Plan Year even though
the Employee may not make a Cash or
Deferred Election due to the suspension. Also, an
Employee will not fail to be treated
as an Eligible Employee merely because the
employee may receive no additional
Annual Additions because of Code Section 415(c)(1)
or 415(e).
(11) ~uEmployee After-tax Contribution~w
Employee After-tax Contribution means
any contribution made by an Employee to any plan
maintained by the Employer or any
Related Employer which is other than an Elective
Contribution and which is designated
or treated at the time of contribution as an
after-tax contribution. Employee
After-tax Contributions include amounts attributable
to Excess Contributions which are
recharacterized as Employee After-tax
Contributions.
(12) ~uExcess Contribution~w
Excess Contribution means, for each
member of the Highly Compensated Group, the amount
of Elective Contribution (including
any Qualified Nonelective Contributions and
Qualified Matching Contributions which
are treated as Elective Contributions) which
exceeds the maximum contribution which
could be made if the Deferral Percentage Test
were to be satisfied.
4-7
(13) ~uExcess Aggregate Contribution~w
Excess Aggregate Contribution means,
for each member of the Highly Compensated Group,
the amount of Employee After-tax and
Matching Contributions (including any Qualified
Nonelective Contributions and Elective
Contributions which are treated as Matching
Contributions) which exceeds the
maximum contribution which could be made if the
Contribution Percentage Test were to
be satisfied.
(14) ~uExcess Deferral~w
Excess Deferral means, for a given
calendar year, that amount by which each
Participant's total Elective Deferrals
under all plans of all employers exceed the
dollar limit in effect under Code
Section 402(g) for the calendar year.
(15) ~uMatching Contribution~w
Matching Contribution means any
contribution made by the Employer to any plan
maintained by the Employer or any
Related Employer which is based on an Elective
Contribution or an Employee After-tax
Contribution together with any forfeiture
allocated to the Participant's Account
on the basis of Elective Contributions,
Employee After-tax Contributions or
Matching Contributions. A Matching Contribution
will be taken into account for a given
Plan Year only if:
o The Matching Contribution is
allocated to a Participant's
Account as of a date within
the Plan Year to which it relates;
o The allocation is not
contingent upon the Employee's
participation in the Plan or
performance of services on any date
after the allocation date;
o The Matching Contribution is
actually paid to the Trust no later
than 12 months after the end
of the Plan Year to which the
Matching Contribution relates;
and
o The Matching Contribution is
based on an Elective or Employee
After-tax Contribution for the
Plan Year.
Any contribution or allocation, other
than a Qualified Nonelective Contribution, which
is used to meet the minimum
contribution or benefit requirement of Code Section 416 is
not treated as being based on Elective
Contributions or Employee After-tax
Contributions and therefore is not
treated as a Matching Contribution.
Qualified Matching Contribution means
a Matching Contribution which is 100% vested and
may be withdrawn or distributed only
under the conditions described in Treasury
Regulation 1.401(k)-1(d).
(16) ~uNonelective Contribution~w
Nonelective Contribution means any
Employer Contribution, other than a Matching
Contribution, which meets all of the
following requirements:
o The Nonelective Contribution
is allocated to a Participant's
Account as of a date within
the Plan Year to which it relates;
o The allocation is not
contingent upon the Employee's
participation in the Plan or
performance of services on any date
after the allocation date;
4-8
o The Nonelective Contribution
is actually paid to the Trust no
later than 12 months after the
end of the Plan Year to which the
Nonelective Contribution
relates; and
o The Employee may not elect to
have the Nonelective Contribution
paid in cash in lieu of being
contributed to the Plan.
Qualified Nonelective Contribution
means a Nonelective Contribution which is 100%
vested and may be withdrawn or
distributed only under the conditions described in
Treasury Regulation 1.401(k)-1(d).
(b) ~uApplication of Deferral Percentage
Test~w
All Elective Contributions, including any
Elective Contributions which are treated as
Employee After-tax or Matching
Contributions with respect to the Contribution Percentage
Test, must satisfy the Deferral Percentage
Test. Furthermore, any Elective Contributions
which are not treated as Employee
After-tax or Matching Contributions with respect to the
Contribution Percentage Test must satisfy
the Deferral Percentage Test. The Plan
Administrator will determine as soon as
administratively feasible after the end of the
Plan Year whether the Deferral Percentage
Test has been satisfied. If the Deferral
Percentage Test is not satisfied, the
Employer may elect to make an additional
contribution to the Plan on account of the
Non-highly Compensated Group. The additional
contribution will be treated as a
Nonelective Contribution.
If the Deferral Percentage Test is not
satisfied after any Nonelective Contributions, the
Plan Administrator may, in its sole
discretion, recharacterize all or any portion of the
Excess Contribution of each Highly
Compensated Employee as an Employee After-tax
Contribution if Employee After-tax
Contributions are otherwise allowed by the Plan. If
so, the Plan Administrator will notify all
affected Participants and the Internal Revenue
Service of the amount recharacterized no
later than the 15th day of the third month
following the end of the Plan Year in
which the Excess Contribution was made. Excess
Contributions will be includable in the
Participant's gross income on the earliest date
any Elective Contribution made on behalf
of the Participant during the Plan Year would
have been received by the Participant had
the Participant elected to receive the amount in
cash. Recharacterized Excess
Contributions will continue to be treated as Employer
Contributions that are Elective
Contributions for all other purposes under the Code,
including Code Sections 401(a) (other than
401(a)(4) and 401(m)), 404, 409, 411, 412, 415,
416, 417 and 401(k)(2). With respect to
the Plan Year for which the Excess Contribution
was made, the Plan Administrator will
treat the recharacterized amount as an Employee
After-tax Contribution for purposes of the
Deferral Percentage Test and the Contribution
Percentage Test and for purposes of
determining whether the Plan meets the requirements of
Code Section 401(a)(4), but not for any
other purposes under this Plan. Therefore,
recharacterized amounts will remain
subject to the nonforfeiture requirements and
distribution limitations which apply to
Elective Contributions.
If the Deferral Percentage Test is still
not satisfied, then after the close of the Plan
Year in which the Excess Contribution
arose but within 12 months after the close of that
Plan Year, the Plan Administrator will
distribute the Excess Contributions, together with
allocable income, to the affected
Participants of the Highly Compensated Group to the
extent necessary to satisfy the Deferral
Percentage Test. Failure to do so will cause the
Plan to not satisfy the requirements of
Code Section 401(a)(4) for the Plan Year for which
the Excess Contribution was made and for
all subsequent Plan Years for which the Excess
Contribution remains uncorrected.
4-9
The amount of Excess Contribution to be
distributed to a Highly Compensated Employee for a
Plan Year will be reduced by any Excess
Deferrals previously distributed to the
Participant for the calendar year ending
with or within the Plan Year in accordance with
Code Section 402(g)(2).
Excess Contributions will be treated as
Employer Contributions for purposes of Code
Sections 404 and 415 even if distributed
from the Plan.
(c) ~uApplication of Contribution Percentage
Test~w
Employee After-tax Contributions and
Matching Contributions, disregarding any Matching
Contributions which are treated as
Elective Contributions with respect to the Deferral
Percentage Test, must satisfy the
Contribution Percentage Test. The Plan Administrator
will determine as soon as administratively
feasible after the end of the Plan Year whether
the Contribution Test has been satisfied.
If the Contribution Percentage Test is not
satisfied, the Employer may elect to make
an additional contribution to the Plan for the
benefit of the Non-Highly Compensated
Group. The additional contribution will be treated
as a Nonelective Contribution.
If the Contribution Percentage Test is
still not satisfied, then after the close of the
Plan Year in which the Excess Aggregate
Contribution arose but within 12 months after the
close of that Plan Year, the Plan
Administrator will distribute (or forfeit, to the extent
not vested) the Excess Aggregate
Contributions, together with allocable income, to the
affected Participants of the Highly
Compensated Group to the extent necessary to satisfy
the Contribution Percentage Test. Failure
to do so will cause the Plan to not satisfy the
requirements of Code Section 401(a)(4) for
the Plan Year for which the Excess Aggregate
Contribution was made and for all
subsequent Plan Years for which the Excess Aggregate
Contribution remains uncorrected.
The determination of any Excess Aggregate
Contributions will be made after the
recharacterization of any Excess
Contributions as Employee After-tax Contributions.
Excess Aggregate Contributions, including
forfeited Matching Contributions, will be
treated as Employer Contributions for
purposes of Code Sections 404 and 415 even if they
are distributed from the Plan.
Forfeited Matching Contributions that are
reallocated to the Accounts of other
Participants are treated as Annual
Additions under Code Section 415 for the Participant
whose Accounts they are reallocated to and
for the Participants from whose Accounts they
are forfeited.
(d) ~uFamily Aggregation~w
The Deferral Percentage or the
Contribution Percentage (the "Relevant Percentage") for any
Highly Compensated Employee who is subject
to the family aggregation rules of Section
1.18(c) will be determined by combining
the Elective Contributions, Employee After-tax
Contributions, Matching Contribution,
amounts treated as Elective or Matching
Contributions and Compensation of all the
eligible Family Members.
The determination and correction of Excess
Contributions and Excess Aggregate
Contributions of a Highly Compensated
Employee whose Relevant Percentage is determined
under the family aggregation rules is
accomplished by reducing the Relevant Percentage as
provided for in Sections 4.05(b) and
4.05(c) and Excess Contributions or Excess Aggregate
Contributions for the family group are
allocated among the Family Members whose
contributions were combined to determine
the Relevant Percentage in proportion to the
Elective Contributions or Nonelective and
Matching Contributions of each Family Member.
4-10
For all purposes under this Section, the
contributions and compensation of eligible Family
Members who are not Highly Compensated
Employees without regard to family aggregation are
disregarded when determining the Relevant
Percentage for the Non-highly Compensated
Group.
(e) ~uReduction of Excess Amounts~w
The total Excess Contribution or total
Excess Aggregate Contribution will be reduced in a
manner so that the Deferral Percentage or
the Contribution Percentage (Relevant
Percentage) of the affected Participant(s)
with the highest Relevant Percentage will first
be lowered to a point not less than the
level of the affected Participant(s) with the next
highest Relevant Percentage. If further
overall reductions are required to satisfy the
relevant test, each of the above
Participants' (or groups of Participants') Relevant
Percentage will be lowered to a point not
less than the level of the affected
Participant(s) with the next highest
Relevant Percentage, and so on continuing until
sufficient total reductions have occurred
to achieve satisfaction of the relevant test.
(f) ~uPriority of Reductions~w
The Plan Administrator will determine the
method and order of correcting Excess
Contributions and Excess Aggregate
Contributions. The method of correcting Excess
Contributions and Excess Aggregate
Contributions must meet the requirements of Code
Section 401(a)(4). The determination of
whether a rate of Matching Contribution
discriminates under Code Section 401(a)(4)
will be made after making any corrective
distributions of Excess Deferrals, Excess
Contributions and Excess Aggregate
Contributions.
Excess Aggregate Contributions (and any
attributable income) will be corrected first, by
distributing any excess Employee After-tax
Contributions (and any attributable income);
then by distributing vested excess
Matching Contributions (and any attributable income);
and finally, by forfeiting or distributing
non-vested Matching Contributions (and any
attributable income). The Plan will not
distribute Employee After-tax Contributions while
the Matching Contributions based upon
those Employee After-tax Contributions remain
allocated.
(g) ~uIncome~w
The income allocable to any Excess
Contribution made to a given Account for a given Plan
Year will be equal to the total income
allocated to the Account for the Plan Year,
multiplied by a fraction, the numerator of
which is the amount of the Excess Contribution
and the denominator of which is equal to
the sum of the balance of the Account at the
beginning of the Plan Year plus the
Participant's Elective Contributions and amounts
treated as Elective Contributions for the
Plan Year.
The income allocable to any Excess
Aggregate Contribution made to a given Account for a
given Plan Year will be equal to the total
income allocated to the Account for the Plan
Year, multiplied by a fraction, the
numerator of which is the amount of the Excess
Aggregate Contribution and the denominator
of which is equal to the sum of the balance of
the Account at the beginning of the Plan
Year plus the Participant's Employee After-tax
and Matching Contributions and amounts
treated as Employee After-tax and Matching
Contributions for the Plan Year.
Notwithstanding the foregoing, the Plan
may use any reasonable method for computing the
income allocable to any Excess
Contribution or Excess Aggregate Contribution provided the
method does not violate Code Section
401(a)(4), is used consistently for all corrective
distributions under the Plan for the Plan
Year, and is used by the Plan for allocating
4-11
income to the Participants' Accounts.
Income includes all earnings and
appreciation, including interest, dividends, rents,
royalties, gains from the sale of
property, and appreciation in the value of stocks,
bonds, annuity and life insurance
contracts and other property, regardless of whether the
appreciation has been realized.
(h) ~uTreatment as Elective Contributions~w
The Plan Administrator may, in its
discretion, treat all or any portion of Qualified
Nonelective Contributions or Qualified
Matching Contributions or both, whether to this
Plan or to any other qualified plan which
has the same Plan Year and is maintained by the
Employer or a Related Employer, as
Elective Contributions for purposes of satisfying the
Deferral Percentage Test if they meet all
of the following requirements:
o All Nonelective Contributions,
including the Qualified Nonelective Contributions
treated as Elective Contributions for
purposes of the Deferral Percentage Test,
satisfy the requirements of Code
Section 401(a)(4);
o Any Nonelective Contributions which
are not treated as Elective Contributions for
purposes of the Deferral Percentage
Test or as Matching Contributions for purposes
of the Contribution Percentage Test
satisfy the requirements of Code Section
401(a)(4);
o The Qualified Matching Contributions
which are treated as Elective Contributions for
purposes of the Deferral Percentage
Test are not taken into account in determining
whether any Employee After-tax
Contributions or other Matching Contributions satisfy
the Contribution Percentage Test;
o Any Matching Contributions which are
not treated as Elective Contributions for
purposes of the Deferral Percentage
Test satisfy the requirements of Code Section
401(m); and
o The plan which includes the Cash or
Deferred Arrangement and the plan or plans to
which the Qualified Nonelective
Contributions and Qualified Matching Contributions
are made could be aggregated for
purposes of Code Section 410(b).
(i) ~uTreatment as Matching Contributions~w
The Plan Administrator may, in its
discretion, treat all or any portion of Qualified
Nonelective Contributions or Elective
Contributions or both, whether to this Plan or to
any other qualified plan which has the
same Plan Year and is maintained by the Employer or
a Related Employer, as Matching
Contributions for purposes of satisfying the Contribution
Percentage Test if they meet all of the
following requirements:
o All Nonelective Contributions,
including the Qualified Nonelective Contributions
treated as Matching Contributions for
purposes of the Contribution Percentage Test,
satisfy the requirements of Code
Section 401(a)(4);
o Any Nonelective Contributions which
are not treated as Elective Contributions for
purposes of the Deferral Percentage
Test or as Matching Contributions for purposes
of the Contribution Percentage Test
satisfy the requirements of Code Section
401(a)(4);
o The Elective Contributions which are
treated as Matching Contributions for purposes
of the Contribution Percentage Test
are not taken into account in determining
4-12
whether any other Elective
Contributions satisfy the Deferral Percentage Test;
o The Qualified Nonelective
Contributions and Elective Contributions which are treated
as Matching Contributions for purposes
of the Contribution Percentage Test are not
taken into account in determining
whether any other contributions or benefits
satisfy Code Section 401(a); and
o All Elective Contributions, including
those treated as Matching Contributions for
purposes of the Contribution
Percentage Test, satisfy the requirements of Code
Section 401(k)(3); and
o The plan that takes Qualified
Nonelective Contributions and Elective Contributions
into account in determining whether
Employee After-tax and Matching Contributions
satisfy the requirements of Code
Section 401(m)(2)(A) and the plan or plans to which
the Qualified Nonelective
Contributions and Elective Contributions are made could be
aggregated for purposes of Code
Section 410(b).
(j) ~uAggregation of Plans~w
If the Employer or a Related Employer
sponsors one or more other plans which include a
Cash or Deferred Arrangement, the Employer
may elect to treat any two or more of such
plans as an aggregated single plan for
purposes of satisfying Code Sections 401(a)(4),
401(k) and 410(b). The Cash of Deferred
Arrangements included in such aggregated plans
will be treated as a single Arrangement
for purposes of this Section. However, only those
plans that have the same plan year may be
so aggregated.
If the Employer or a Related Employer
sponsors one or more other plans to which Employee
After-tax Contributions or Matching
Contributions are made, the Employer may elect to
treat any two or more of such plans as an
aggregated single plan for purposes of
satisfying Code Sections 401(a)(4), 401(m)
and 410(b). However, only those plans that
have the same plan year may be so
aggregated.
Any such aggregation must be made in
accordance with Treasury Regulation
1.401(k)-1(b)(3). For example,
contributions and allocations under the portion of a plan
described in Code Section 4975(e)(7) (an
ESOP) may not be aggregated with the portion of a
plan not described in Code Section
4975(e)(7) (a non-ESOP) for purposes of determining
whether the ESOP or non-ESOP satisfies the
requirements of Code Sections 401(a)(4),
401(k), 401(m) and 410(b).
Plans that could be aggregated under Code
Section 410(b) but that are not actually
aggregated for a Plan Year for purposes of
Code Section 410(b) may not be aggregated for
purposes of Code Sections 401(k) and
401(m).
4-13
~bARTICLE 5
RETIREMENT
BENEFITS~p
5.01 ~uValuation of Accounts~w
For purposes of this Article, the value of a
Participant's Accrued Benefit will be determined
as of the Valuation Date immediately preceding
the date that benefits are to be distributed.
5.02 ~uNormal Retirement~w
After an Active Participant reaches his Normal
Retirement Date, he may elect to retire. Upon
such retirement he will become a Retired
Participant and his Accrued Benefit will become
distributable to him. A Participant's Accrued
Benefit will become nonforfeitable no later
than the date upon which he attains his Normal
Retirement Age. The form and timing of benefit
payment will be governed by the provisions of
Section 5.05.
5.03 ~uDisability Retirement~w
In the event of a Participant's termination
due to Disability, he will be entitled to begin to
receive a distribution of his Accrued Benefit
which will become nonforfeitable as of his date
of termination. The form and timing of
benefit payment will be governed by the provisions of
Section 5.05.
Disability means the determination by the Plan
Administrator that a Participant is unable by
reason of any medically determinable physical
or mental impairment to perform the usual duties
of his employment or of any other employment
for which he is reasonably qualified based upon
his education, training and experience.
5.04 ~uTermination of Employment~w
(a) ~uIn General~w
If a Participant's employment terminates
for any reason other than retirement, death, or
disability, his Accrued Benefit will
become distributable to him as of the last day of the
month which coincides with or next follows
the last date upon which any contributions on
the Participant's behalf are made to the
Trust following the Participant's date of
termination of employment (or as of such
earlier date as determined by the Plan
Administrator in a uniform and
nondiscriminatory manner). The form and timing of benefit
payment will be governed by the provisions
of Section 5.05.
(b) ~uCash-Out Distribution~w
If a Participant terminates employment and
receives a distribution equal to the Vested
Percentage of his Matching Account, a
Cash-Out Distribution will be deemed to have
occurred if the following conditions are
met:
(1) The Participant was less than 100%
vested in his Matching Account; and
(2) The entire distribution is made before
the last day of the second Plan Year following
the Plan Year in which the Participant
terminated employment.
(c) ~uRestoration of Matching Account~w
If, following the date of a Cash-Out
Distribution, a Participant returns to an Eligible
Employee Classification prior to incurring
5 consecutive One Year Breaks-in-Service, then
the Participant will have the right to
repay to the Trustee, within 5 years after his
return date, the portion of the Cash-Out
Distribution which was attributable to his
Matching Account in order to restore such
Account to its value as of the date of the
5-1
Cash-Out Distribution.
The Plan Administrator will restore an
eligible Participant's Matching Account as of the
Accounting Date coincident with or
immediately following the complete repayment of the
Cash-Out Distribution. To restore the
Participant's Matching Account, the Plan
Administrator, to the extent necessary,
will, under rules and guidelines applied in a
uniform and nondiscriminatory manner,
first allocate to the Participant's Matching Account
the amount, if any, of Forfeitures which
would otherwise be allocated under Article 3. To
the extent such forfeitures for a
particular Accounting Period are insufficient to enable
the Plan Administrator to make the
required restoration, the Employer will contribute such
additional amount as is necessary to
enable the Plan Administrator to make the required
restoration. The Plan Administrator will
not take into account the allocation under this
Section in applying the limitation on
allocations under Article 7.
(d) ~uNon-Vested Participant~w
If a Participant who is zero percent
vested in his Matching Account terminates employment,
a Cash-Out Distribution will be deemed to
have occurred as of the Participant's date of
termination of employment.
If the Participant subsequently returns to
an Eligible Employee Classification prior to
incurring five consecutive One Year
Breaks-in-Service, then the Participant will
immediately become entitled to a complete
restoration of his Matching Account as of the
Accounting Date coincident with or next
following his date of re-employment. Such
restoration will be made in accordance
with the provisions of Section 5.04(c).
5.05 ~uForm of Benefit Payment~w
Subject to the provisions of Section 5.06, the
Plan Administrator will direct the Trustee to
make the payment of any benefit provided under
this Plan upon the event giving rise to such
benefit within 60 days following the receipt
of a Participant's written request for the
payment of benefits on a form provided by the
Plan Administrator. The Plan Administrator may
temporarily suspend such processing in the
event of unusual or extraordinary circumstances
such as the conversion of Plan records from
one recordkeeper to another.
The form of benefit will be a lump sum
payment, unless the Participant elects a direct
transfer pursuant to Section 5.07.
If a Participant's Vested Accrued Benefit is
in excess of $3,500, any payment of benefits
prior to the Participant's Normal Retirement
Date will be subject to the Participant's written
consent. If the value of his Vested Accrued
Benefit at the time of any distribution exceeds
$3,500, the value of his Vested Accrued
Benefit at any later time will be deemed to also
exceed $3,500.
5.06 ~uCommencement of Benefit~w
Subject to the provisions of this Article,
commencement of a benefit will, unless the
Participant elects otherwise in writing, begin
not later than the 60th day after the later of
the close of the Plan Year in which the
Participant attains Normal Retirement Age or the close
of the Plan Year which contains the date the
Participant terminates his service with the
Employer.
Payment of a Participant's benefits must begin
no later than his Required Beginning Date.
All distributions required under this Section
will be determined and made in accordance with
the regulations issued under Code Section
401(a)(9), including those dealing with minimum
distribution requirements. Notwithstanding
the provisions of Section 5.05, an Active
5-2
Participant who has reached his Required
Beginning Date will receive an annual distribution of
his Accrued Benefit equal to the minimun
required distribution determined under Code Section
401(a)(9).
For purposes of this Section, life expectancy
and joint and last survivor expectancy are to be
computed by the use of the return multiples
contained in Section 1.72-9 of the Income Tax
Regulations.
If the Participant dies after distribution of
his interest has begun, the remaining portion of
the interest will continue to be distributed
at least as rapidly as under the method of
distribution being used before the
Participant's death.
5.07 ~uDirected Transfer of Eligible Rollover
Distributions~w
(a) ~uGeneral~w
This Section applies to distributions made
on or after January 1, 1993. Notwithstanding
any provision of the Plan to the contrary
that would otherwise limit a Distributee's
election under this Section, a Distributee
may elect, at the time and in the manner
prescribed by the Plan Administrator, to
have any portion of an Eligible Rollover
Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in
a Direct Rollover.
(b) ~uEligible Rollover Distribution~w
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).
(c) ~uEligible Retirement Plan~w
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, or a qualified trust described in
section 401(a) of the Code, that accepts the
Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible
Rollover Distribution to the surviving
spouse, an Eligible Retirement Plan is an
individual retirement account or
individual retirement annuity.
(d) ~uDistributee~w
A Distributee includes an Employee or
Former Employee. In addition, the Employee's or
Former Employee's surviving spouse and the
Employee's or Former Employee's spouse or
former spouse who is the alternate payee
under a qualified domestic relations order, as
defined in section 414(p) of the Code, are
Distributees with regard to the interest of the
spouse or former spouse.
(e) ~uDirect Rollover~w
A Direct Rollover is a payment by the Plan
to the Eligible Retirement Plan specified by
the Distributee.
5-3
(f) ~uWaiver of 30-Day Notice~w
If a distribution is one to which Code
Sections 401(a)(11) and 417 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:
o the Plan Administrator clearly informs
the Participant that the Participant has
a right to a period of at least 30
days after receiving the notice to consider
the decision of whether or not to
elect a distribution (and, if applicable, a
particular distribution option); and
o the Participant, after receiving the
notice, affirmatively elects to receive a
distribution.
5-4
~bARTICLE 6
DEATH
BENEFIT~p
6.01 ~uValuation of Accounts~w
For purposes of this Article, the value of a
Participant's Accrued Benefit will be determined
as of the Valuation Date immediately preceding
the date that benefits are to be distributed.
6.02 ~uDeath Benefit~w
In the event of the death of a Participant
prior to the date on which he receives a complete
distribution of his benefit under the Plan,
the Participant's Beneficiary will be entitled to
receive the value of the Participant's Accrued
Benefit.
6.03 ~uDesignation of Beneficiary~w
Each Participant will be given the opportunity
to designate a Beneficiary or Beneficiaries,
and from time to time the Participant may file
with the Plan Administrator a new or revised
designation on the form provided by the Plan
Administrator. If a Participant is married, any
designation of a Beneficiary other than the
Participant's spouse must be consented to by the
Participant's spouse pursuant to a Qualified
Election.
If a Participant dies without designating a
Beneficiary, or if the Participant is predeceased
by all designated Beneficiaries and contingent
Beneficiaries, the Plan Administrator will
distribute all benefits which are payable in
the event of the Participant's death in the
following manner and to the first of the
following (who are listed in order of priority) who
survive the Participant by at least 30 days:
o All to the Participant's Surviving
Spouse;
o Equally among the then living children of
the Participant (by birth or adoption);
o Among the Participant's then living
lineal descendants, by right of representation; or
o The Participant's estate.
6-1
~bARTICLE 7
LIMITATIONS ON
BENEFITS~p
7.01 ~uLimitation on Annual Additions~w
The amount of the Annual Addition which may be
allocated under this Plan to any Participant's
Account as of any Allocation Date will not
exceed the Defined Contribution Limit (based upon
his Aggregate Compensation up to such
Valuation Date) reduced by the sum of any allocations of
annual additions made to Participant's
Accounts under this Plan as of any preceding Allocation
Date within the Limitation Year.
If the Annual Addition under this Plan on
behalf of a Participant is to be reduced as of any
Allocation Date as a result of the next
preceding paragraph, the reduction will be, to the
extent required, effected by first reducing
Participant contributions (which increase the
annual addition), then Forfeitures (if any),
and then Employer contributions to be allocated
under this Plan on behalf of the Participant
as of the Allocation Date.
Any necessary reduction will be made as
follows:
(a) The amount of the reduction consisting of
nondeductible Participant contributions will be
paid to the Participant as soon as
administratively feasible.
(b) The amount of the reduction consisting of
any other Participant contributions will be paid
to the Participant as soon as
administratively feasible.
(c) The amount of the reduction consisting of
Forfeitures will be allocated and reallocated to
other Accounts in accordance with the Plan
formula for allocating Forfeitures to the
extent that such allocations do not cause
the additions to any other Participant's
Accounts to exceed the lesser of the
Defined Contribution Limit or any other limitation
provided in the Plan.
(d) The amount of the reduction consisting of
Employer contributions will be allocated and
reallocated to other Accounts in
accordance with the Plan formula for Employer
Contributions to the extent that such
allocations do not cause the additions to any other
Participant's Accounts to exceed the
lesser of the Defined Contribution Limit or any other
limitation provided in the Plan.
(e) To the extent that the reductions
described in paragraph (d) cannot be allocated to other
Participant's Accounts, the reductions
will be allocated to a suspense account as
Forfeitures and held therein until the
next succeeding Allocation Date on which
Forfeitures could be applied under the
provisions of the Plan. All amounts held in a
suspense account must be applied as
Forfeitures before any additional contributions, which
would constitute annual additions, may be
made to the Plan. If the Plan terminates, the
suspense account will revert to the
Employer to the extent it may not be allocated to any
Participant's Accounts.
(f) If a suspense account is in existence at
any time during a Limitation Year pursuant to
this Section, it will not participate in
the allocation of the Trust Fund's investment
gains and losses.
7-1
7.02 ~uWhere Employer Maintains Another Qualified
Plan~w
(a) ~uWhere Employer Maintains Another
Qualified Defined Contribution Plan~w
If the Employer maintains this Plan and
one or more other qualified defined contribution
plans, one or more welfare benefit funds
(as defined in Code Section 419(e)), or one or
more individual medical accounts (as
defined in Code Section 415(l)(2)), all of which are
referred to in this Article 7 as
"qualified defined contribution plans", the annual
additions allocated under this Plan to any
Participant's Accounts will be limited in
accordance with the allocation provisions
of this Section 7.02(a).
The amount of the Annual Additions which
may be allocated under this Plan to any
Participant's Accounts as of any
Allocation Date will not exceed the Defined Contribution
Limit (based upon Aggregate Compensation
up to the allocation date) reduced by the sum of
any allocations of Annual Additions made
to the Participant's Accounts under this Plan and
any other qualified defined contribution
plans maintained by the Employer as of any
earlier Allocation Date within the
Limitation Year.
If a Allocation Date of this Plan
coincides with a Allocation Date of any other plan
described in the above paragraph, the
amount of Annual Additions to be allocated on behalf
of a Participant under this Plan as of
such date will be an amount equal to the product of
the amount described in the next preceding
paragraph multiplied by a fraction (not to
exceed 1.0), the numerator of which is the
amount to be allocated under this Plan without
regard to this Article during the
Limitation Year and the denominator of which is the
amount that would otherwise be allocated
on this Allocation Date under all plans without
regard to this Article 7.
If the Annual Addition under this Plan on
behalf of a Participant is to be reduced as of
any Allocation Date as a result of the
next preceding two paragraphs, the reduction will
be, to the extent required, effected by
first reducing Participant contributions (which
increase the annual addition), then
Forfeitures (if any), and then any Employer
contributions, to be allocated under this
Plan on behalf of the Participant as of the
Allocation Date.
If as a result of the first four
paragraphs of this Section 7.02 the allocation of
additions is reduced, the reduction will
be treated in the manner described in the third
paragraph of Section 7.01.
(b) ~uWhere Employer Maintains a Qualified
Defined Benefit Plan~w
(1) ~uIn General~w
If the Employer maintains (or has ever
maintained), in addition to this Plan, one or
more qualified defined benefit plans,
then for any Limitation Year, the sum of the
Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction will not
exceed 1.0. If, in any Limitation
Year, the sum of the Defined Benefit Plan Fraction
and the Defined Contribution Plan
Fraction for a Participant would exceed 1.0 without
adjustment to the amount of the annual
benefit that can be paid to the Participant
under the defined benefit plan, then
the amount of annual benefit that would otherwise
be paid to the Participant under the
defined benefit plan will be reduced to the
extent necessary to reduce the sum of
the Defined Benefit Plan Fraction and the
Defined Contribution Plan Fraction for
the Participant to 1.0.
(2) ~uTransition Rule under TRA '86~w
If a plan was in existence on May 6,
1986, the numerator of the Defined Contribution
Plan Fraction will be reduced (to not
less than zero) as prescribed by the Secretary
7-2
of the Treasury by subtracting the
amount required to decrease the sum of the Defined
Contribution Plan Fraction plus the
Defined Benefit Plan Fraction to 1.0. Such amount
is determined (as of the first day of
the first Limitation Year beginning on or after
January 1, 1987) as the product of:
(A) The amount by which, without this
adjustment, the sum of the Defined Contribution
Plan Fraction plus the Defined
Benefit Plan Fraction exceeds 1.0, multiplied by
(B) The denominator of the Defined
Contribution Plan Fraction, as computed through the
last Limitation Year beginning
before January 1, 1987, disregarding any changes in
the terms and conditions of the
plan after May 5, 1986.
This subparagraph applies only if the
defined benefit plans individually and in the
aggregate satisfied the requirements
of Code Section 415 for all Limitation Years
beginning before January 1, 1987.
(3) ~uTransition Rule under TEFRA~w
In the case of a plan which met the
limitation of Section 415 of the Code for the last
Limitation Year beginning before
January 1, 1983, the numerator of the Defined
Contribution Plan Fraction will be
reduced (to not less than zero) as prescribed by
the Secretary of the Treasury by
subtracting the amount required to decrease the sum
of the Defined Contribution Plan
Fraction plus the Defined Benefit Plan Fraction to
1.0. Such amount is determined (as of
the first day of the first Limitation Year
beginning on or after January 1, 1983)
as the product of:
(A) The amount by which, without this
adjustment, the sum of the Defined Contribution
Plan Fraction plus the Defined
Benefit Plan Fraction exceeds 1.0, multiplied by
(B) The denominator of the Defined
Contribution Plan Fraction, as computed through the
last Limitation Year beginning
before January 1, 1983.
7.03 ~uDefinitions Applicable to Article 7~w
(a) ~uAggregate Compensation~w
Aggregate Compensation means a
Participant's earned income, wages, salaries, and fees for
professional services, and other amounts
received for personal services actually rendered
in the course of employment with the
employer maintaining the plan (including, but not
limited to, commissions paid to salesmen,
compensation for services on the basis of a
percentage of profits, commissions on
insurance premiums, tips and bonuses), and excluding
the following:
o Employer contributions to a plan of
deferred compensation which are not included in
the employee's gross income for the
taxable year in which contributed or employer
contributions under a simplified
employee pension plan to the extent the
contributions are deductible by the
employee, or any distributions from a plan of
deferred compensation;
o Amounts realized from the exercise of
a nonqualified stock option, or when
restricted stock (or property) held by
the employee either becomes freely
transferable or is no longer subject
to a substantial risk of forfeiture;
o Amounts realized from the sale,
exchange or other disposition of stock acquired
under a qualified stock option; and
7-3
o Other amounts which received special
tax benefits, or contributions made by the
employer (whether or not under a
salary reduction agreement) toward the purchase of
an annuity described in Code Section
403(b) (whether or not the amounts are actually
excludable from the gross income of
the employee).
Aggregate Compensation excludes any
amounts contributed by the Employer or any Related
Employer on behalf of any Employee
pursuant to a salary reduction agreement which are not
includable in the gross income of the
Employee due to Code Section 125, 402(e)(3), 402(h)
or 403(b).
Aggregate Compensation in excess of the
Statutory Compensation Limit is disregarded.
Aggregate Compensation for any Limitation
Year is the Aggregate Compensation actually paid
or includable in gross income in such
year.
(b) ~uAllocation Date~w
Allocation Date means the date with
respect to which all or a portion of employer
contributions, employee contributions or
forfeitures or both are allocated to participant
accounts under a defined contribution
plan.
(c) ~uAnnual Additions~w
For Plan Years beginning after December
31, 1986, Annual Additions are the sum of the
following amounts allocated to any defined
contribution plan maintained by the Employer
(including voluntary contributions to any
defined benefit plan maintained by the Employer)
on behalf of a Participant for a
Limitation Year:
o All Employee and Employer
contributions;
o All reallocated forfeitures;
o Amounts allocated after March 31,
1984, to an individual medical account, as defined
in Code Section 415(l)(2) which is
part of a pension or annuity plan maintained by
the Employer, and amounts derived from
contributions paid or accrued after December
31, 1985, in taxable years ending
after that date, which are attributable to
post-retirement medical benefits
required by Code Section 401(h)(6) to be allocated
to the separate account of a Key
Employee under a welfare benefit plan (as defined
in Code Section 419(e)) maintained by
the Employer.
Contributions or forfeitures will be
treated as Annual Additions regardless of whether
they constitute Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions
within the meaning of the regulations
under Code Section 401(k) or 401(m) and regardless
of whether they are corrected through
distribution or recharacterization. Excess
deferrals distributed in accordance with
Treasury Regulation 1.402(g)-1(e)(2) or (3) are
not Annual Additions. The Annual Addition
for any Limitation Year beginning before
January 1, 1987, will not be recomputed to
treat all Employee After-tax Contributions as
Annual Additions.
(d) ~uAnnual Benefit~w
Annual Benefit means a benefit payable
annually in the form of a straight life annuity
(with no ancillary benefits) under a plan
to which employees do not contribute and under
which no rollover contributions are made.
7-4
(e) ~uDefined Benefit Compensation Limit~w
The Defined Benefit Compensation Limit is
equal to 100% of the Participant's average
Aggregate Compensation for the three
consecutive calendar years (or other twelve
consecutive month periods adopted by the
Employer pursuant to a Written Resolution and
applied on a uniform and consistent basis)
of service during which the Participant had the
greatest Aggregate Compensation.
Where the annual benefit is payable to a
Participant in a form other than a straight life
annuity or a Qualified Joint and Survivor
Annuity, the Defined Benefit Compensation Limit
will be the Actuarial Equivalent of a
straight life annuity beginning at the same age. No
adjustment is required for the following:
pre-retirement disability benefits,
pre-retirement death benefits and
post-retirement medical benefits. For purposes of this
paragraph, the interest rate used in
adjusting the Defined Benefit Compensation Limit will
be the greater of (1) 5%, or (2) the
post-retirement interest rate specified in the plan
for Actuarial Equivalent purposes.
Where the annual benefit is payable to a
Participant who has fewer than 10 years of
service with the Employer or any Related
or Predecessor Employer, the Defined Benefit
Compensation Limit will be multiplied by
a fraction, the numerator of which is the
Participant's number of years of service
with the Employer or Related or Predecessor
Employer, and the denominator of which is
10.
With regard to a Participant who has
separated from service with a nonforfeitable right to
an Accrued Benefit, the Defined Benefit
Compensation Limit will be adjusted effective
January 1 of each Calendar year. For any
Limitation Year beginning after the separation
occurs, the Defined Benefit Compensation
Limit will be equal to the Defined Benefit
Compensation Limit which was applicable to
the Participant in the Limitation Year in which
he separated from service multiplied by a
fraction, the numerator of which is the Defined
Benefit Dollar Limit for the Limitation
Year in which the Defined Benefit Compensation
Limit is being adjusted and the
denominator of which is the Defined Benefit Dollar Limit
for the Limitation Year in which the
Participant separated from service.
(f) ~uDefined Benefit Dollar Limit~w
The Defined Benefit Dollar Limit is equal
to $90,000 for calendar years 1984 through
1987. As of January 1, 1988 and as of
January 1 of each subsequent calendar year, the
dollar limitation (described in Code
Section 415(b)(1)(A)) as determined by the Secretary
of the Treasury for that calendar year
will become effective as the Defined Benefit Dollar
Limit for the calendar year. For calendar
years between 1976 and 1983, the Defined
Benefit Dollar Limit is $75,000 as
adjusted by the Secretary of the Treasury under Code
Section 415(d) for that calendar year.
The Defined Benefit Dollar Limit for a calendar
year applies to Limitation Years ending
with or within that calendar year.
Where the annual benefit is payable to a
Participant in a form other than a straight life
annuity or a Qualified Joint and Survivor
Annuity, the Defined Benefit Dollar Limit will
be the Actuarial Equivalent of a straight
life annuity beginning at the same age. No
adjustment is required for the following:
pre-retirement disability benefits,
pre-retirement death benefits, and
post-retirement medical benefits. For purposes of this
paragraph, the interest rate used for
adjusting the Defined Benefit Dollar Limit will be
the greater of (1) 5%, or (2) the
post-retirement interest rate specified for Actuarial
Equivalent purposes.
Where the annual benefit is payable to a
Participant who has fewer than 10 years of
participation in the Plan, the Defined
Benefit Dollar Limit will be multiplied by a
fraction, the numerator of which is the
Participant's number of years (or part thereof) of
7-5
participation in the Plan, and the
denominator of which is 10. To the extent provided by
the Secretary of the Treasury, this
paragraph will be applied to each change in the
benefit structure of the Plan.
For a benefit commencing before a
Participant's Social Security Retirement Age but at or
after age 62, the Defined Benefit Dollar
Limit will be adjusted in a manner which is
consistent with the reduction for old-age
insurance benefits commencing before Social
Security Retirement Age under the Social
Security Act. The reduction will be 5/9 of 1%
for each of the first 36 months and 5/12
of 1% for each additional month (up to 24 months)
by which benefits commence before the
month of the Participant's Social Security
Retirement Age. The Defined Benefit
Dollar Limit for a benefit commencing before age 62
will be adjusted to the Actuarial
Equivalent of the Defined Benefit Dollar Limit for a
benefit commencing at age 62 based on an
interest rate equal to the greater of (1) 5%, or
(2) the interest rate specified in the
plan for determining actuarial equivalence for
early retirement.
For a benefit commencing after a
Participant's Social Security Retirement Age, the Defined
Benefit Dollar Limit will be adjusted to
the actuarial equivalent of the Defined Benefit
Dollar Limit for a benefit commencing at
the Participant's Social Security Retirement
Age. For purposes of this paragraph, the
interest rate used for adjusting the Defined
Benefit Dollar Limit will be the lesser of
(1) 5%, or (2) the interest rate specified in
the plan for determining actuarial
equivalence for early retirement.
(g) ~uDefined Benefit Limit~w
The Defined Benefit Limit is the lesser of
the Defined Benefit Dollar Limit or the Defined
Benefit Compensation Limit.
(h) ~uDefined Benefit Plan Fraction
Denominator~w
The Defined Benefit Plan Fraction
Denominator with respect to any Participant is the
lesser of (1) the product of the Defined
Benefit Dollar Limit multiplied by 1.25, or (2)
the product of the Defined Benefit
Compensation Limit multiplied by 1.4. However, for
purposes of determining the Defined
Benefit Plan Fraction Denominator, "years of service
with the Employer or any Related or
Predecessor Employer" will be substituted for "years
of participation in the Plan" wherever it
appears in Section 7.03(f).
(i) ~uDefined Benefit Plan Fraction~w
The Defined Benefit Plan Fraction is a
fraction determined as of the close of a Limitation
Year, the numerator of which is the
Projected Annual Benefit payable to a Participant
under this Plan and the denominator of
which is the Defined Benefit Fraction Denominator.
If a Participant has participated in more
than one defined benefit plan maintained by the
Employer, the numerator of the Defined
Benefit Plan Fraction is the sum of the projected
annual benefits payable to the Participant
under all of the defined benefit plans, whether
or not terminated.
(j) ~uDefined Contribution Limit~w
The Defined Contribution Limit for a given
Limitation Year is equal to the lesser of (1)
the Defined Contribution Compensation
Limit, which is 25% of Aggregate Compensation
applicable to the Limitation Year, or (2)
the Defined Contribution Dollar Limit, which,
for calendar years after 1983 is the
greater of $30,000 or one-fourth of the Defined
Benefit Dollar Limit for the Limitation
Year, and for calendar years between 1976 and 1983
is one-third of the Defined Benefit Dollar
Limit. If a short Limitation Year is created
because of an amendment changing the
Limitation Year to a different 12 consecutive month
period, the Defined Contribution Dollar
Limit is multiplied by a fraction, the numerator
of which is equal to the number of months
in the short Limitation Year and the denominator
7-6
of which is 12.
(k) ~uDefined Contribution Plan Fraction~w
The Defined Contribution Plan Fraction is
a fraction determined as of the close of a
Limitation Year, the numerator of which is
the sum of the Annual Additions to the
Participant's Accounts under all defined
contribution plans of the Employer for the
current and all prior Limitation Years and
the denominator of which is the sum of the
Annual Additions which would have been
made for the Participant for the current and all
prior Limitation Years (for all prior
years of service with the Employer or any
predecessor Employer) if in each
Limitation year the Annual Additions equaled the lesser
of (1) the product of the Defined
Contribution Compensation Limit for the Limitation Year
multiplied by 1.4, or (2) the product of
the Defined Contribution Dollar Limit for the
Limitation Year multiplied by 1.25. The
aggregate amount in the numerator of this
fraction due to years beginning before
January 1, 1976 may not exceed the aggregate amount
in the denominator of this fraction for
all such years.
For purposes of this Section 7.03(k), the
Annual Addition for any Limitation Year
beginning before January 1, 1987 will not
be recomputed to treat all Employee After-tax
Contributions as Annual Additions.
(l) ~uEmployer~w
The Employer is the Employer that adopts
this Plan together with all Related Employers.
For this purpose, the definition of
Related Employer in Section 1.33 of this Plan is
modified by Code Section 415(h).
(m) ~uLimitation Year~w
The Limitation Year will be the 12
consecutive month period which is specified in Article
1 of this Plan and which is adopted for
all qualified plans maintained by the Employer
pursuant to a Written Resolution adopted
by the Employer. In the event of a change in the
Limitation Year, the additional
limitations of Treasury Regulation Section
1.415-2(b)(4)(iii) will also apply.
(n) ~uProjected Annual Benefit~w
For purposes of this Section, a
Participant's Projected Annual Benefit is equal to the
annual benefit to which a Participant in
a defined benefit Plan would be entitled under
the terms of the plan based on the
following assumptions:
o The Participant will continue
employment until reaching normal retirement age as
determined under the terms of the plan
(or current age, if that is later);
o The Participant's compensation for the
Limitation Year under consideration will
remain the same for all future years;
o All other relevant factors used to
determine benefits under the plan for the
Limitation Year under consideration
will remain constant for all future Limitation
Years; and
o The benefits resulting from any
Participant Contributions or Rollover Contributions
are disregarded.
(o) ~uSocial Security Retirement Age~w
Social Security Retirement Age means age
65 for a Participant born before January 1, 1938;
age 66 for a Participant born after
December 31, 1937, but before January 1, 1955; and age
67 for a Participant born after December
31, 1954.
7-7
(p) ~uTransition Rule Under TRA '86~w
If at the beginning of the first
Limitation Year beginning after December 31, 1986, an
Employee was a Participant in a defined
benefit plan of the Employer or any Related
Employer that was in existence on May 6,
1986, the Defined Benefit Dollar Limit for that
Participant is the greater of the Defined
Benefit Dollar Limit described above or the
Participant's Current Accrued Benefit on
that date determined without regard to changes in
the terms and conditions of the Plan or
cost-of-living increases occurring after May 5,
1986. This Section 7.03(p) applies only
if all defined benefit plans maintained by the
Employer and all Related Employers,
individually and in the aggregate, satisfied the
requirements of Code Section 415 for all
Limitation Years beginning before January 1,
1987.
7.04 ~uEffect of Top-Heavy Status~w
(a) ~uGeneral~w
Notwithstanding the provisions of Section
7.03, "1.0" will be substituted for "1.25"
wherever it appears in Sections 7.03(h)
and 7.03(k) for any Limitation Year in which the
Plan is found to be Top-Heavy for the Plan
Year which coincides with or ends within such
Limitation Year.
(b) ~uNon-application~w
Section 7.04(a) will not apply for any
Limitation Year in which, for the Plan Year which
coincides with or ends within such
Limitation Year, (1) the Plan is not determined to be
Super Top-Heavy and (2) for any Non-Key
Employee who is a Participant in both this Plan
and a defined benefit plan maintained by
the Employer or a Related Employer, the annual
allocation of Employer contributions plus
Forfeitures under this Plan is not less than
7.5% of the Non-Key Employee's Aggregate
Compensation.
7-8
~bARTICLE 8
MISCELLANEOUS~p
8.01 ~uEmployment Rights of Parties Not
Restricted~w
The adoption and maintenance of this Plan will
not be deemed a contract between the Employer
and any Employee. Nothing in this Plan will
give any Employee or Participant the right to be
retained in the employ of the Employer or to
interfere with the right of the Employer to
discharge any Employee or Participant at any
time, nor will it give the Employer the right to
require any Employee or Participant to remain
in its employ, or to interfere with any
Employee's or Participant's right to terminate
his employment at any time.
8.02 ~uAlienation~w
(a) ~uGeneral~w
No person entitled to any benefit under
this Plan will have any right to sell, assign,
transfer, hypothecate, encumber, commute,
pledge, anticipate or otherwise dispose of his
interest in the benefit, and any attempt
to do so will be void. No benefit under this
Plan will be subject to any legal process,
levy, execution, attachment or garnishment for
the payment of any claim against such
person.
(b) ~uExceptions~w
Section 8.02(a) will not apply to the
extent a Participant or Beneficiary is indebted to
the Plan under the provisions of the Plan.
At the time a distribution is to be made to or
for a Participant's or Beneficiary's
benefit, the portion of the amount distributed which
equals the indebtedness will be withheld
by the Trustee to apply against or discharge the
indebtedness. Before making a payment,
however, the Participant or Beneficiary must be
given written notice by the Plan
Administrator that the indebtedness is to be so paid in
whole or part from his Participant's
Accrued Benefit. If the Participant or Beneficiary
does not agree that the indebtedness is a
valid claim against his Vested Accrued Benefit,
he will be entitled to a review of the
validity of the claim in accordance with procedures
established by the Plan Administrator.
Section 8.02(a) will not apply to a
qualified domestic relations order (QDRO) as defined
in Code Section 414(p), and those other
domestic relations orders permitted to be so
treated by the Plan Administrator under
the provisions of the Retirement Equity Act of
1984. The Plan Administrator will
establish a written procedure to determine the
qualified status of domestic relations
orders and to administer distributions under such
qualified orders. Further, to the extent
provided under a QDRO, a former spouse of a
Participant will be treated as the spouse
or Surviving Spouse for all purposes under the
Plan. Where, however, because of a QDRO,
more than one individual is to be treated as a
Surviving Spouse, the total amount to be
paid in the form of a Qualified Survivor Annuity
or the survivor portion of a Qualified
Joint and Survivor Annuity may not exceed the
amount that would be paid if there were
only one Surviving Spouse. All rights and
benefits, including elections, provided to
a Participant under this Plan will be subject
to the rights afforded to any alternate
payee as such term is defined in Code Section
414(p).
This Plan specifically permits
distribution to an alternate payee under a QDRO (without
regard to whether the Participant has
attained his or her earliest retirement age as that
term is defined under Code Section 414(p))
in the same manner that is provided for a
Vested Terminated Participant.
8-1
8.03 ~uQualification of Plan~w
The Employer will have the sole responsibility
for obtaining and retaining qualification of
the Plan under the Code with respect to the
Employer's individual circumstances.
8.04 ~uConstruction~w
To the extent not preempted by ERISA, this
Plan will be construed according to the laws of the
state in which the Employer's principal place
of business is located. Words used in the
singular will include the plural, the
masculine gender will include the feminine, and vice
versa, whenever appropriate.
8.05 ~uNamed Fiduciaries~w
(a) ~uAllocation of Functions~w
The authority to control and manage the
operation and administration of the Plan and Trust
created by this instrument will be
allocated between the Plan Sponsor, the Trustee, and
the Plan Administrator, all of whom are
designated as Named Fiduciaries with respect to
the Plan and Trust as provided for by
Section 402(a)(2) of ERISA. The Plan Sponsor
reserves the right to allocate the various
responsibilities for the present execution of
the functions of the Plan, other than the
Trustee's responsibilities, among its Named
Fiduciaries. Any person or group of
persons may serve in more than one fiduciary capacity
with regard to the Plan.
(b) ~uResponsibilities of the Plan Sponsor~w
The Plan Sponsor, in its capacity as a
Named Fiduciary, will have only the following
authority and responsibility:
o To appoint or remove the Plan
Administrator and furnish the Trustee with certified
copies of any resolutions of the Plan
Sponsor with regard thereto;
o To appoint and remove the Trustee;
o To appoint a successor Trustee or
additional Trustees;
o To communicate information to the Plan
Administrator and the Trustee as needed for the
proper performance of the duties of
each;
o To appoint an investment manager (or
to refrain from such appointment), to monitor the
performance of the investment manager
so appointed, and to terminate such appointment
(more than one investment manger may
be appointed and in office at any time); and
o To establish and communicate to the
Trustee a funding policy for the Plan.
(c) ~uLimitation on Obligations of Named
Fiduciaries~w
No Named Fiduciary will have authority or
responsibility to deal with matters other than
as delegated to it under this Plan or by
operation of law. A Named Fiduciary will not in
any event be liable for breach of
fiduciary responsibility or obligation by another
fiduciary (including Named Fiduciaries) if
the responsibility or authority of the act or
omission deemed to be a breach was not
within the scope of the Named Fiduciary's authority
or delegated responsibility.
(d) ~uStandard of Care and Skill~w
The duties of each fiduciary will be
performed with the care, skill, prudence and
diligence under the circumstances then
prevailing that a prudent person acting in a like
capacity and familiar with such matters
would use in the conduct of an enterprise of like
8-2
character and with like objectives.
8.06 ~uStatus of Insurer~w
The term Insurer refers to any legal reserve
life insurance company licensed to do business in
the state within which the Employer maintains
its principal office. The Insurer will file
such returns, keep such records, make such
reports and supply such information as required by
applicable law or regulation.
8.07 ~uAdoption and Withdrawal by Other
Organizations~w
(a) ~uProcedure for Adoption~w
Subject to the provisions of this Section
8.07, any organization now in existence or
hereafter formed or acquired, which is not
already a Participating Employer under this
Plan and which is otherwise legally
eligible may, in the future, with the consent and
approval of the Plan Sponsor, by formal
Written Resolution (referred to in this Section as
an Adoption Resolution), adopt the Plan
and Trust hereby created for all or any
classification of persons in its
employment and thereby, from and after the specified
effective date, become a Participating
Employer under this Plan. Such consent will be
effected by and evidenced by a formal
Written Resolution of the Plan Sponsor. The
Adoption Resolution may contain such
specific changes and variations in Plan terms and
provisions applicable to the adopting
Participating Employer and its Employees as may be
acceptable to the Plan Sponsor and the
Trustee. However, the sole, exclusive right of any
other amendment of whatever kind or extent
to the Plan is reserved to the Plan Sponsor.
The Adoption Resolution will become, as to
the adopting organization and its Employees, a
part of this Plan as then amended or
thereafter amended. It will not be necessary for the
adopting organization to sign or execute
the original or then amended Plan and Trust
Agreement or any future amendment to the
Plan and Trust Agreement. The effective date of
the Plan for the adopting organization
will be that stated in the Adoption Resolution and
from and after such effective date the
adopting organization will assume all the rights,
obligations and liabilities as a
Participating Employer under this Plan. The
administrative powers of and control by
the Plan Sponsor as provided in the Plan,
including the sole right of amendment or
termination of the Plan, of appointment and
removal of the Plan Administrator and the
Trustee, and of appointment and removal of an
investment manager will not be diminished
by reason of the participation of the adopting
organization in the Plan.
(b) ~uWithdrawal~w
Any Participating Employer may withdraw
from the Plan at any time, without affecting the
Plan Sponsor or other Participating
Employers not withdrawing, by complying with the
provisions of the Plan. A withdrawing
Participating Employer may arrange for the
continuation by itself or its successor of
this Plan in separate forms for its own
employees, with such amendments, if any,
as it may deem proper, and may arrange for
continuation of the Plan by merger with an
existing plan and transfer of plan assets. The
Plan Sponsor may, it its absolute
discretion, terminate a Participating Employer's
participation at any time when in its
judgment the Participating Employer fails or refuses
to discharge its obligations under the
Plan.
(c) ~uAdoption Contingent Upon Initial and
Continued Qualifications~w
The adoption of this Plan by an
organization as provided is hereby made contingent and
subject to the condition precedent that
said adopting organization meets all the statutory
requirements for qualified plans,
including, but not limited to, Sections 401(a) and
501(a) of the Internal Revenue Code for
its Employees. If the Plan or the Trust, in its
operation, becomes disqualified, for any
reason, as to the adopting organization and its
Employees, the portion of the Plan assets
allocable to them will be segregated as soon as
8-3
is administratively feasible, pending
either the prompt (1) requalification of the Plan as
to the organization and its employees to
the satisfaction of the Internal Revenue Service
so as not to affect the continued
qualified status thereof as to other Employers, (2)
withdrawal of the organization from this
Plan and a continuation by itself or its
successor of its plan separately from this
Plan, or by merger with another existing plan,
with a transfer of its said segregated
portion of Plan assets, or (3) termination of the
Plan as to itself and its Employees.
8.08 ~uEmployer Contributions~w
Employer contributions made to the Plan and
Trust are made and will be held for the sole
purpose of providing benefits to Participants
and their Beneficiaries.
In no event will any contribution made by the
Employer to the Plan and Trust or income
therefrom revert to the Employer except as
provided in Section 7.01(e) or as provided below.
(a) Any contribution made to the Plan and
Trust by the Employer because of a mistake of fact
may be returned to the Employer within one
year of such contribution.
(b) Notwithstanding any other provision of the
Plan and Trust, if the Internal Revenue Service
determines initially that the Plan, as
adopted by the Employer, does not qualify under
applicable sections of the Code and
applicable Treasury Department Regulations, and the
Employer does not wish to amend this Plan
and Trust so that it does qualify, the value of
all assets will be distributed by the
Trustee to the Employer within one year after the
date such initial qualification is denied.
Thereafter, the Employer's participation in
this Plan and Trust will be considered
rescinded and of no force or effect.
(c) Any contribution made by the Employer will
be conditioned on the deductibility of such
contribution and may be refunded to the
Employer, to the extent the contribution is
determined not to be deductible, within
one year after such determination is made.
8-4
~bARTICLE 9
ADMINISTRATION~p
9.01 ~uPlan Administrator~w
The Plan Administrator will have the
responsibility for the general supervision and
administration of the Plan and will be a
fiduciary of the Plan. The Employer may, by Written
Resolution, appoint one or more individuals to
serve as Plan Administrator. If the Employer
does not appoint an individual or individuals
as Plan Administrator, the Employer will
function as Plan Administrator. The Employer
may at any time, with or without cause, remove
an individual as Plan Administrator or
substitute another individual therefor.
9.02 ~uPowers and Duties of the Plan
Administrator~w
The Plan Administrator will be charged with
and will have delegated to it the power, duty,
authority and discretion to interpret and
construe the provisions of this Plan, to determine
its meaning and intent and to make application
thereof to the facts of any individual case; to
determine in its discretion the rights and
benefits of Participants or the eligibility of
Employees; to give necessary instructions and
directions to the Trustee and the Insurer as
herein provided or as may be requested by the
Trustee and the Insurer from time to time; to
resolve all questions of fact relating to any
of the foregoing; and to generally direct the
administration of the Plan according to its
terms. All decisions of the Plan Administrator in
matters properly coming before it according to
the terms of this Plan, and all actions taken
by the Plan Administrator in the proper
exercise of its administrative powers, duties and
responsibilities, will be final and binding
upon all Employees, Participants and Beneficiaries
and upon any person having or claiming any
rights or interest in this Plan. The Employer and
the Plan Administrator will make and receive
any reports and information, and retain any
records necessary or appropriate to the
administration of this Plan or to the performance of
duties hereunder or to satisfy any
requirements imposed by law. In the performance of its
duties, the Plan Administrator will be
entitled to rely on information duly furnished by any
Employee, Participant or Beneficiary or by the
Employer or Trustee.
9.03 ~uActions of the Plan Administrator~w
The Plan Administrator may adopt such rules as
it deems necessary, desirable or appropriate
with respect to the conduct of its affairs and
the administration of the Plan. Whenever any
action to be taken in accordance with the
terms of the Plan requires the consent or approval
of the Plan Administrator, or whenever an
interpretation is to be made of the terms of the
Plan, the Plan Administrator will act in a
uniform and non-discriminatory manner, treating all
Employees and Participants in similar
circumstances in a like manner. If the Plan
Administrator is a group of individuals, all
of its decisions will be made by a majority
vote. The Plan Administrator will have the
authority to employ one or more persons to render
advice or services with regard to the
responsibilities of the Plan Administrator, including
but not limited to attorneys, actuaries, and
accountants. Any persons employed to render
advice or services will have no fiduciary
responsibility for any ministerial functions
performed with respect to this Plan.
9.04 ~uReliance on Plan Administrator and
Employer~w
Until the Employer gives notice to the
contrary, the Trustee and any persons employed to
render advice or services will be entitled to
rely on the designation of Plan Administrator
that has been furnished to them. In addition,
the Trustee and any persons employed to render
advice or services will be fully protected in
acting upon the written directions and
instructions of the Plan Administrator made in
accordance with the terms of this Plan. If the
Plan Administrator is a group of individuals,
unless otherwise specified, any one of such
individuals will be authorized to sign
documents on behalf of the Plan Administrator and such
authorized signatures will be recognized by
all person dealing with the Plan Administrator.
9-1
The Trustee and any persons employed to render
advice or services may take cognizance of any
rules established by the Plan Administrator
and rely upon them until notified to the
contrary. The Trustee and any persons
employed to render advice or services will be fully
protected in taking any action upon any paper
or document believed to be genuine and to have
been properly signed and presented by the Plan
Administrator, Employer or any agent of the
Plan Administrator acting on behalf of the
Plan Administrator.
9.05 ~uReports to Participants~w
The Plan Administrator will report in writing
to a Participant his Accrued Benefit under the
Plan and the Vested Percentage of such benefit
when the Participant terminates his employment
or requests such a report in writing from the
Plan Administrator. To the extent required by
law or regulation, the Plan Administrator will
annually furnish to each Participant, and to
each Beneficiary receiving benefits, a report
which fairly summarizes the Plan's most recent
report.
9.06 ~uBond~w
The Plan Administrator and other fiduciaries
of the Plan will be bonded to the extent required
by ERISA or other applicable law. No
additional bond or other security for the faithful
performance of any duties under this Plan will
be required.
9.07 ~uCompensation of Plan Administrator~w
The Compensation of the Plan Administrator
will be left to the discretion of the Plan Sponsor;
no person who is receiving full pay from the
Employer will receive compensation for services
as Plan Administrator. All reasonable and
necessary expenses incurred by the Plan
Administrator in supervising and administering
the Plan will be paid from the Plan assets by
the Trustee at the direction of the Plan
Administrator to the extent not paid by the Plan
Sponsor.
9.08 ~uClaims Procedure~w
The Plan Administrator will make all
determinations as to the rights of any Employee,
Participant, Beneficiary or other person under
the terms of this Plan. Any Employee,
Participant or Beneficiary, or person claiming
under them, may make claim for benefit under
this Plan by filing written notice with the
Plan Administrator setting forth the substance of
the claim. If a claim is wholly or partially
denied, the claimant will have the opportunity
to appeal the denial upon filing with the Plan
Administrator a written request for review
within 60 days after receipt of notice of
denial. In making an appeal the claimant may
examine pertinent Plan documents and may
submit issues and comments in writing. Denial of a
claim or a decision on review will be made in
writing by the Plan Administrator delivered to
the claimant within 60 days after receipt of
the claim or request for review, unless special
circumstances require an extension of time for
processing the claim or review, in which event
the Plan Administrator's decision must be made
as soon as possible thereafter but not beyond
an additional 60 days. If no action on an
initial claim is taken within 120 days, the claims
will be deemed denied for purposes of
permitting the claimant to proceed to the review stage.
The denial of a claim or the decision on
review will specify the reasons for the denial or
decision and will make reference to the
pertinent Plan provisions upon which the denial or
decision is based. The denial of a claim will
also include a description of any additional
material or information necessary for the
claimant to perfect the claim and an explanation of
the claim review procedure herein described.
The Plan Administrator will serve as an agent
for service of legal process with respect to
the Plan unless the Employer, through written
resolution, appoints another agent.
If a Participant or Beneficiary is entitled to
a distribution from the Plan, the Participant
or Beneficiary will be responsible for
providing the Plan Administrator with his current
address. If the Plan Administrator notifies
the Participant or Beneficiary by registered mail
9-2
(return receipt requested) at his last known
address that he is entitled to a distribution and
also notifies him of the provisions of this
paragraph, and the Participant or Beneficiary
fails to claim his benefits under the Plan or
provide his current address to the Plan
Administrator within one year after such
notification, the distributable amount will be
forfeited and used to reduce the cost of the
Plan. If the Participant or Beneficiary is
subsequently located, such benefit will be
restored.
9.09 ~uLiability of Fiduciaries~w
Except for a breach of fiduciary
responsibility due to gross negligence or willful misconduct,
the Plan Administrator will not incur any
individual liability for any decision, act, or
failure to act hereunder. The Plan
Administrator may engage agents to assist it and may
engage legal counsel who may be counsel for
the Employer. The Plan Administrator will not be
responsible for any action taken or omitted to
be taken on the advice of counsel.
If there is more than one person serving as a
fiduciary in any capacity (for example,
co-Trustees), each will use reasonable care to
prevent the other or others from committing a
breach of this Plan. Nothing contained in
this Section will preclude any agreement allocating
specific responsibilities or obligations among
the co-fiduciaries provided that the agreement
does not violate any of the terms and
provisions of this Plan. In those instances where any
duties have been allocated between
co-fiduciaries, a fiduciary will not be liable for any loss
resulting to the Plan arising from any act or
omission on the part of another co-fiduciary to
whom responsibilities or obligations have been
allocated except under the following
circumstances:
o If he participates knowingly in, or
knowingly undertakes to conceal, an act or omission
of a co-fiduciary knowing the act or
omission is a breach; or
o If by his failure to comply with his
specific responsibilities which give rise to his
status as a fiduciary, he has enabled the
other fiduciary to commit a breach; or
o If he has knowledge of a breach by a
co-fiduciary, unless he makes reasonable efforts
under the circumstances to remedy the
breach.
9.10 ~uExpenses of Administration~w
The Employer does not and will not guarantee
the Plan assets against loss. The Employer may
in its sole discretion, but will not be
obligated to, pay the ordinary expenses of
establishing the Plan, including the fees of
consultants, accountants and attorneys in
connection therewith. The Employer may, in
its sole discretion (but will not be obligated
to), pay other costs and expenses of
administering the Plan, the taxes imposed upon the Plan,
if any, and the fees, charges or commissions
with respect to the purchase and sale of Plan
assets. Unless paid by the Employer, such
costs and expenses, taxes (if any), and fees,
charges and commissions will be a charge upon
Plan assets and deducted by the Trustee.
9.11 ~uDistribution Authority~w
If any person entitled to receive payment
under this Plan is a minor, declared incompetent or
is under other legal disability, the Plan
Administrator may, in its sole discretion, direct
the Trustee to:
o Distribute directly to the person entitled
to the payment;
o Distribute to the legal guardian or, if
none, to a parent of the person entitled to
payment or to a responsible adult with
whom the person entitled to payment maintains his
residence;
9-3
o Distribute to a custodian for the person
entitled to payment under the Uniform Gifts to
Minors Act if permitted by the laws of the
state in which the person entitled to payment
resides; or
o Withhold distribution of the amount
payable until a court of competent jurisdiction
determines the rights of the parties
thereto or appoints a guardian of the estate of the
person entitled to payment.
If there is any dispute, controversy or
disagreement between any Beneficiary or person and any
other person as to who is entitled to receive
the benefits payable under this Plan, or if the
Plan Administrator is uncertain as to who is
entitled to receive benefits, or if the Plan
Administrator is unable to locate the person
who is entitled to benefits, the Plan
Administrator may with acquittance interplead
the funds into a court of competent jurisdiction
in the judicial district in which the Employer
maintains its principal place of business and,
upon depositing the funds with the clerk of
the court, be released from any further
responsibility for the payment of the
benefits. If it is necessary for the Plan Administrator
to retain legal counsel or incur any expense
in determining who is entitled to receive the
benefits, whether or not it is necessary to
institute court action, the Plan Administrator
will be entitled to reimbursement from the
benefits for the amount of its reasonable costs,
expenses and attorneys' fees incurred.
9-4
~bARTICLE 10
AMENDMENT OR
TERMINATION OF PLAN~p
10.01 ~uRight of Plan Sponsor to Amend or
Terminate~w
The Plan Sponsor reserves the right to alter,
amend, revoke or terminate this Plan. No
amendment will deprive any Participant or
Beneficiary of any vested right nor will it reduce
the present value (determined upon an
actuarial equivalent basis) of any Accrued Benefit to
which he is then entitled with respect to
Employer contributions previously made, except as
may be required to maintain the Plan as a
qualified plan under the Code. No amendment will
change the duties or responsibilities of the
Trustee without its express written consent
thereto.
A plan amendment which has the effect of (a)
eliminating or reducing an early retirement
benefit or a retirement-type subsidy, or (b)
eliminating an optional benefit form, will, with
respect to benefits attributable to service
before the amendment be treated as reducing
Accrued Benefits. In the case of a
retirement-type subsidy, the preceding sentence will
apply only with respect to a Participant who
satisfies (either before or after the amendment)
the preamendment conditions for the subsidy.
In general, a retirement-type subsidy is a
subsidy that continues after retirement but
does not include a disability retirement benefit,
a medical benefit, a social security
supplement, a pre-retirement death benefit, or a plant
shutdown benefit (that does not continue
after retirement).
A minimum Accrued Benefit value will apply if
this Plan is or becomes a successor to a profit
sharing plan, a defined contribution pension
plan, a target benefit plan, or a defined
benefit pension plan which was fully insured,
or any plan under which the accrued benefit of
a Participant was determined as a lump sum or
account balance. The actuarial equivalent
value of a Participant's Accrued Benefit will
not be less than the actuarial equivalent value
of his Accrued Benefit on the Effective Date
of the Plan.
10.02 ~uAllocation of Assets Upon Termination of
Plan~w
If this Plan is revoked or terminated (in
whole or in part) or if contributions are
completely discontinued the Accounts of all
affected Participants will become
non-forfeitable. The Employer will then
arrange for allocation of all assets among
Participants so affected by the total or
partial termination in accordance with the
requirements of all applicable law and the
regulations and requirements of the Internal
Revenue Service. All allocated amounts will
be retained in the Plan to the credit of the
individual Participants until distribution as
directed by the Employer. Distribution to
Participants may be in the form of cash or
other Plan assets or partly in each.
10.03 ~uExclusive Benefit~w
At no time will any part of the principal or
income of the Plan assets be used or diverted
for purposes other than the exclusive benefit
of Participants in the Plan and their
Beneficiaries, nor may any portion of the
Plan assets revert to the Employer except as
provided in Sections 7.01(e) and 8.08.
10.04 ~uFailure to Qualify~w
Notwithstanding any of the foregoing
provisions, if this Plan, upon adoption by the Employer,
is submitted to the Internal Revenue Service
which then determines that the Plan as initially
adopted by the Employer is not a qualified
plan under the Code, the Employer may elect to
terminate this Plan by giving written notice
thereof. Such termination will have the same
effect as if the Plan were never adopted, all
policies and contracts will be cancelled, and
all contributions, to the extent recoverable
from the Trustee, will be returned to their
10-1
source. If any amendment to this Plan is
submitted to the Internal Revenue Service within
the period allowed under Code Section 401(b)
which then determines that the Plan as amended
is not a qualified plan under the Code, the
Employer may cancel or modify any or all
provisions of the amendment retroactive to
the effective date of the amendment in order to
maintain the qualified status of the Plan,
whereupon written notice thereof will be furnished
to all affected Employees, Participants and
Beneficiaries.
10.05 ~uMergers, Consolidations or Transfers of
Plan Assets~w
In the event this Plan is merged or
consolidated with another plan which is qualified under
Code Sections 401(a) (and 501(a) if
applicable), or in the event of a transfer of the assets
or liabilities of this Plan to another plan
which is qualified under Code Sections 401(a)
(and 501(a) if applicable), the benefit which
each Participant would be entitled to receive
under the successor plan or other plan if it
were terminated immediately after the merger,
consolidation or transfer will be equal to or
greater than the benefit which the Participant
would have received immediately before the
merger, consolidation or transfer if this Plan had
then terminated.
Any transfer of assets and/or liabilities to
(or from) this Plan from (or to) another plan
qualified under Code Sections 401(a) (and
501(a) if applicable) will be evidenced by a
Written Resolution by the Plan Sponsor of
each affected plan which specifically authorizes
such transfer of assets and/or liabilities.
Any transfer of assets to this Plan will be
allowed under the provisions of this Section if
such transferred assets are not required to
be paid in the form of a qualified joint &
survivor annuity or a qualified survivor
annuity in accordance with Code Section 401(a)(11).
10.06 ~uEffect of Plan Amendment on Vesting
Schedule~w
No amendment to the Vesting Schedule will
deprive a Participant of his nonforfeitable right
to his Vested Accrued Benefit as of the date
of the amendment. Further, if the Vesting
Schedule of the Plan is amended, or if the
Plan is amended in any way that directly or
indirectly affects the computation of a
Participant's non-forfeitable percentage, each
Participant with at least 3 Years of Vesting
Service as of the last day of the election
period described below may elect, within a
reasonable period after the adoption of the
amendment, to have his Vested Percentage
computed under the Plan without regard to such
amendment. The period during which such
election may be made will commence with the date the
amendment is adopted and will end 60 days
after the latest of:
(a) the date the amendment is adopted;
(b) the date the amendment becomes effective;
or
(c) the date the Participant is issued
written notice of the amendment by the Employer.
10-2
~bARTICLE 11
TRUSTEE AND
TRUST FUND~p
11.01 ~uAcceptance of Trust~w
The Trustee, by signing this Agreement,
accepts this Trust and agrees to perform the duties
of the Trustee in accordance with the terms
and conditions set forth herein.
11.02 ~uTrust Fund~w
(a) ~uPurpose and Nature~w
The Trustee will establish and maintain
a Trust Fund for purposes of providing a means of
accumulating the assets necessary to
provide the benefits which become payable under the
Plan. The Trustee will receive, hold and
invest all contributions made by the Employer,
any Participating Employers, and the
Participants, including the investment earnings
thereon. The Trust Fund arising from
such contributions and earnings will consist of all
assets held by the Trustee under the Plan
and Trust. All benefits payable under the Plan
will be paid by the Trustee from the
Trust Fund.
Any person having any claim under the
Plan will look solely to the assets of the Trust
Fund for satisfaction. In no event will
the Plan Administrator, the Employer, any
Employees, any officer of the Employer or
any agents of the Employer or the Plan
Administrator be liable in their
individual capacities to any person whomsoever, under
the provisions of this Plan and Trust,
except as provided by law.
The Trust Fund will be used and applied
only in accordance with the provisions of the
Plan and Trust, to provide the benefits
thereof, and no part of the corpus or income of
the Trust Fund will be used for, or
diverted to, purposes other than for the exclusive
benefit of the Participants or their
Beneficiaries entitled to benefits under the Plan,
except to the extent specifically
provided elsewhere herein.
(b) ~uInvestments~w
The Trustee will invest the Trust Fund in
accordance with the investment policy for the
Trust Fund considering the fiduciary
requirements of law, the objectives of the Plan, and
the liquidity needs of the Plan.
(c) ~uReserved~w
(d) ~uOperation of Trust Fund~w
The Trust Fund will be maintained in
accordance with the accounting requirements of the
Plan. No Participant will have any right
to any specific asset or any specific portion
of the Trust Fund prior to distribution
of benefits. Withdrawals from the Trust Fund
will be made to provide benefits to
Participants and Beneficiaries in the amounts
specified by the Plan, and to pay
expenses authorized by the Plan Administrator.
(e) ~uPlan Sponsor Direction of Investment~w
The Plan Sponsor will have the right to
direct the Trustee with respect to the investment
and reinvestment of assets comprising the
Trust Fund. The Trustee and the Plan Sponsor
(or the Plan Administrator or an
Investment Committee appointed by the Plan Sponsor) will
execute a letter of agreement as a part
of this Plan containing such conditions,
limitations and other provisions they
deem appropriate before the Trustee will follow any
Plan Sponsor direction with respect to
the investment or reinvestment of any part of the
Trust Fund. Such letter of agreement may
provide for Participant direction with respect
11-1
to the investment and reinvestment of a
Participant's Accounts among the Specific
Investment Funds designated by the Plan
Administrator.
11.03 ~uReceipt of Contributions~w
The Trustee will be accountable to the
Employer for the funds contributed to it, but will
have no duty to see that the contributions
received comply with the provisions of the Plan.
The Trustee will not be obligated to collect
any contributions from the Employer or the
Participants.
11.04 ~uPowers of the Trustee~w
Subject to the provisions and limitations
contained elsewhere in this Plan, the Trustee will
have full discretion and authority with
regard to the investment of the Trust Fund. The
Trustee is authorized and empowered, but not
by way of limitation, with the following powers,
rights and duties:
(a) To invest any part or all of the Trust
Fund in any common or preferred stocks, open-end
or closed-end mutual funds, United States
retirement plan bonds, corporate bonds,
debentures, convertible debentures,
commercial paper, U.S. Treasury bills, book entry
deposits with the United States Federal
Reserve Bank or System, Master Notes or similar
arrangements sponsored by the Trustee or
any other financial institution as permitted by
law, improved or unimproved real estate
situated in the United States, mortgages, notes
or other property of any kind, real or
personal, as a prudent man would so invest under
like circumstances with due regard for
the purposes of this Plan;
(b) To maintain any part of the assets of the
Trust Fund in cash, or in demand or short-term
time deposits bearing a reasonable rate
of interest (including demand or short-term time
deposits of or with the Trustee), or in
a short-term investment fund or in other cash
equivalents having ready marketability,
including, but not limited to, U.S. Treasury
Bills, commercial paper, certificates of
deposit (including such certificates of deposit
of or with the Trustee), and similar
types of short-term securities, as may be deemed
necessary by the Trustee in its sole
discretion;
(c) To manage, sell, contract to sell, grant
options to purchase, convey, exchange, transfer,
abandon, improve, repair, insure, lease
for any term even though commencing in the future
or extending beyond the term of the
Trust, and otherwise deal with all property, real or
personal, in such manner, for such
considerations and on such terms and conditions as the
Trustee will decide;
(d) To credit and distribute the Trust as
directed by the Plan Administrator or any agent of
the Plan Administrator. The Trustee will
not be obliged to inquire as to whether any
payee or distributee is entitled to any
payment or whether the distribution is proper or
within the terms of the Plan, or as to
the manner of making any payment or distribution.
The Trustee will be accountable only to
the Plan Administrator for any payment or
distribution made by it in good faith on
the order or direction of the Plan Administrator
or any agent of the Plan Administrator;
(e) To borrow money, assume indebtedness,
extend mortgages and encumber by mortgage or
pledge;
(f) To compromise, contest, arbitrate, or
abandon claims and demands, in its discretion;
(g) To have with respect to the Trust all of
the rights of an individual owner, including the
power to give proxies, to participate in
any voting trusts, mergers, consolidations or
liquidations, and to exercise or sell
stock subscriptions or conversion rights;
11-2
(h) To hold any securities or other property
in the name of the Trustee or its nominee, or in
another form as it may deem best, with or
without disclosing the trust relationship;
(i) To perform any and all other acts in its
judgment necessary or appropriate for the proper
and advantageous management, investment
and distribution of the Trust;
(j) To retain any funds or property subject
to any dispute without liability for the payment
of interest, and to decline to make
payment or delivery of the funds or property until
final adjudication is made by a court of
competent jurisdiction;
(k) To file all tax forms or returns required
of the Trustee;
(l) To begin, maintain or defend any
litigation necessary in connection with the
administration of the Plan, except that
the Trustee will not be obligated to or required
to do so unless indemnified to its
satisfaction; and
(m) To keep any or all of the Trust property
at any place or places within the United States
or abroad, or with a depository or
custodian at such place or places; provided, however,
that the Trustee may not maintain the
indicia of ownership of any assets of the Plan
outside the jurisdiction of the District
Courts of the United States, except as may be
expressly authorized in U.S. Treasury or
U.S. Department of Labor regulations.
11.05 ~uInvestment in Common or Collective Trust
Funds~w
Notwithstanding the provisions of Section
11.04, the Plan Sponsor specifically authorizes the
Trustee to invest all or any portion of the
assets comprising the Trust Fund in any common or
collective trust fund which at the time of
the investment provides for the pooling of the
assets of plans qualified under Code Section
401(a). The authorization applies only if such
common or collective trust fund: (a) is
exempt from taxation under Code Section 584 or
501(a); (b) if exempt under Code Section
501(a), expressly limits participation to pension
and profit sharing trusts which are exempt
under Code Section 501(a) by reason of qualifying
under Code Section 401(a); (c) prohibits that
part of its corpus or income which equitably
belongs to any participating trust from being
used for or diverted to any purposes other than
for the exclusive benefit of the Employees or
their Beneficiaries who are entitled to
benefits under such participating trust; (d)
prohibits assignment by participating trust of
any part of its equity or interest in the
group trust; and (e) the sponsor of the group trust
created or organized the group trust in the
United States and maintains the group trust at
all times as a domestic trust in the United
States. The provisions of the common or
collective trust fund agreement, as amended
by the Trustee from time to time, are by this
reference incorporated within this Plan and
Trust. The provisions of the common or
collective trust fund will govern any
investment of Plan assets in that fund. This provision
constitutes the express permission required
by Section 408(b)(8) of ERISA.
11.06 ~uInvestment in Insurance Company Contracts~w
The Trustee may invest any portion of the
Trust Fund in a deposit administration, guaranteed
investment or similar type of investment
contract (hereinafter referred to as Contract);
provided, however, that no such Contract may
provide for an optional form of benefit which
would not be provided for under the
provisions hereof. The Trustee will be the complete and
absolute owner of Contracts held in the Trust
Fund.
The Trustee may convert from one form to
another any Contract held in the Trust Fund;
designate any mode of settlement; sell or
assign any Contract held in the Trust Fund;
surrender for cash any Contract held in the
Trust Fund; agree with the insurance company
issuing any Contract to any release,
reduction, modification or amendment thereof; and,
11-3
without limitation of any of the foregoing,
exercise any and all of the rights, options and
privileges that belong to the absolute owner
of any Contract held in the Trust Fund that are
granted by the terms of any such Contract or
by the terms of this Agreement.
The Trustee will hold in the Trust Fund the
proceeds of any sale, assignment or surrender of
any Contract held in the Trust Fund and any
and all dividends and other payments of any kind
received in respect to any Contract held in
the Trust Fund.
No insurance company which may issue any
Contract based upon the application of the Trustee
will be responsible for the validity of this
Plan, be required to look into the terms of this
Plan, be required to question any act of the
Plan Administrator or the Trustee hereunder or
be required to verify that any action of the
Trustee is authorized by this Plan. If a
conflict should arise between the terms of
the Plan and any such Contract, the terms of the
Plan will govern.
11.07 ~uFees and Expenses from Fund~w
The Trustee will be entitled to receive
reasonable annual compensation as may be mutually
agreed upon from time to time between the
Plan Sponsor and the Trustee. The Trustee will pay
all expenses reasonably incurred by it in its
administration and investment of the Trust Fund
from the Trust Fund unless the Plan Sponsor
pays the expenses. No person who is receiving
full pay from the Plan Sponsor will receive
compensation for services as Trustee.
11.08 ~uRecords and Accounting~w
The Trustee will keep full and complete
records of the administration of the Trust Fund which
the Employer and the Plan Administrator may
examine at any reasonable time. As soon as
practical after the end of each Plan Year and
at such other reasonable times as the Employer
may direct, the Trustee will prepare and
deliver to the Employer and the Plan Administrator
an accounting of the administration of the
Trust, including a report on the fair market value
of all assets of the Trust Fund.
11.09 ~uDistribution Directions~w
If no one claims a payment or distribution
made from the Trust, the Trustee will notify the
Plan Administrator and will dispose of the
payment in accordance with the subsequent
direction of the Plan Administrator.
11.10 ~uThird Party~w
No person dealing with the Trustee will be
obliged to see to the proper application of any
money paid or property delivered to the
Trustee, or to inquire whether the Trustee has acted
pursuant to any of the terms of the Plan.
Each person dealing with the Trustee may act upon
any notice, request or representation in
writing by the Trustee, or by the Trustee's duly
authorized agent, and will not be liable to
any person whomsoever in so doing. The
certification of the Trustee that it is
acting in accordance with the Plan will be conclusive
in favor of any person relying on the
certification.
11.11 ~uProfessional Agents, Affiliates and
Arbitration~w
(a) ~uProfessional Agents~w
The Trustee may employ and pay from the
Trust Fund reasonable compensation to agents,
attorneys, accountants and other persons
to advise the Trustee as in its opinion may be
necessary. The Trustee may delegate to
any agent, attorney, accountant or other person
selected by it any non-Trustee power or
duty vested in it by the Plan; the Trustee may
act or refrain from acting on the advice
or opinion of any agent, attorney, accountant or
other person so selected.
11-4
(b) ~uUse of Affiliates~w
(1) Charles Schwab Trust Company (CSTC)
is authorized to contract or make other
arrangements with The Charles Schwab
Corporation, Charles Schwab & Co., Inc., their
affiliates and subsidiaries,
successors and assigns (collectively referred to as
Schwab), and any other organizations
affiliated with or subsidiaries of CSTC or
related entities, for the provision
of services to the Trust Fund or Plan, except
where such arrangements are
prohibited by law or regulation. As used below,
authorized person means any person
whose authorization is required pursuant to the
provision of any prohibited
transaction exemption otherwise applicable.
(2) CSTC is authorized to place
securities orders, settle securities trades, hold
securities in custody and other
related activities on behalf of the Trust Fund
through or by Schwab whenever
possible unless the authorized person specifically
instructs the use of another Broker.
Trades and related activities conducted through
the Broker will be subject to fees
and commissions established by the Broker, which
may be paid from the Trust Fund or
netted from the proceeds of trades.
(3) Trades will not be executed through
Schwab unless the Plan Administrator and the
authorized person have received
disclosure concerning the relationship of Schwab to
CSTC, and the fees and commissions
which may be paid to Schwab, CSTC and any
affiliate or subsidiary of any of
them as a result of using Schwab to execute trades
or for other services.
(4) CSTC is authorized to disclose such
information as is necessary to the operation and
administration of the Trust Fund to
Schwab and to such other persons or organizations
that CSTC determines have a
legitimate business purpose for obtaining such
information.
(5) At the direction of the authorized
person, CSTC may purchase shares of regulated
investment companies (or other
investment vehicles) advised by Schwab or CSTC
("Schwab Funds"), except to the
extent that such investment is prohibited by law or
regulation. Schwab Fund shares may
not be purchased for or held by the Trust Fund
unless the Plan Administrator has
received disclosure concerning the relationship of
Schwab or CSTC to the Schwab Funds,
and any fees which may be paid to such entities.
(6) To the extent permitted under
applicable laws, CSTC may invest in deposits, long and
short term debt instruments, stocks
and other securities, including those of CSTC or
Schwab.
(7) CSTC and Schwab are authorized to
tape record conversations between CSTC or Schwab
and persons acting on behalf of the
Plan or a Participant in order to verify data on
transactions.
(c) ~uArbitration~w
Except as preempted by ERISA, any dispute
under this agreement will be resolved by
submission of the issue to a member of
the American Arbitration Association who is chosen
by the Employer and the Trustee. If the
Employer and the Trustee cannot agree on such a
choice, each will nominate a member of
the American Arbitration Association, and the two
nominees will then select an arbitrator.
Expenses of the arbitration will be paid as
decided by the arbitrator.
11-5
11.12 ~uValuation of Trust~w
The Trustee will value the Trust Fund as of
the last day of each Plan Year to determine the
fair market value of the Trust, and the
Trustee will value the Trust Fund on such other
date(s) as may be necessary to carry out the
provisions of the Plan.
11.13 ~uLiability of Trustee~w
The Trustee will be liable only for the
safeguarding and administration of the assets of this
Trust Fund in accordance with the provisions
hereof and any amendments hereto and no other
duties or responsibilities will be implied.
The Trustee will not be required to pay any
interest on funds paid to or deposited with
it or to its credit under the provisions of this
Trust, unless pursuant to a written agreement
between the Employer and the Trustee. The
Trustee will not be responsible for the
adequacy of the Trust Fund to meet and discharge any
liabilities under the Plan and will not be
required to make any payment of any nature except
from funds actually received as Trustee. The
Trustee may consult with legal counsel of its
choice, including counsel for the Employer,
upon any question or matter arising hereunder and
the opinion of such counsel when relied upon
by the Trustee shall be evidence the Trustee was
acting in good faith. It will not be the
duty of the Trustee to determine the identity or
mailing address of any Participant or any
other person entitled to benefits hereunder, such
identity and mailing addresses to be
furnished by the Employer, the Plan Administrator or an
agent of the Plan Administrator. The Trustee
will be under no liability in making payments
in accordance with the terms of this Plan and
the certification of the Plan Administrator or
an agent of the Plan Administrator who has
been granted such powers by the Plan
Administrator.
Except to the extent required by any
applicable law, no bond or other security for the
faithful performance of duty hereunder will
be required of the Trustee.
11.14 ~uRemoval or Resignation and Successor
Trustee~w
A Trustee may resign at any time upon giving
30 days prior written notice to the Plan Sponsor
or, with the consent of the Plan Sponsor, a
Trustee may resign with less than 30 days prior
written notice.
The Plan Sponsor may remove a Trustee by
giving at least 30 days prior written notice to the
Trustee.
Upon the removal or resignation of a Trustee,
the Plan Sponsor will appoint and designate a
successor Trustee which will be one or more
individual successor Trustees or a corporate
Trustee organized under the laws of the
United Sates or of any state thereof with authority
to accept and execute trusts. Any successor
Trustee must accept and acknowledge in writing
its appointment as a successor Trustee before
it can act in such capacity.
Title to all property and records or true
copies of such records necessary to the current
operation of the Trust Fund held by the
Trustee hereunder will vest in any successor Trustee
acting pursuant to the provisions hereof,
without the execution or filing of any further
instrument. Any resigning or removed Trustee
will execute all instruments and do all acts
necessary to vest such title in any successor
Trustee of record. Each successor Trustee will
have, exercise and enjoy all the powers, both
discretionary and ministerial, herein conferred
upon his predecessor. No successor Trustee
will be obligated to examine the accounts,
records and acts of any previous Trustee or
Trustees, and each successor Trustee in no way or
manner will be responsible for any action or
omission to act on the part of any previous
Trustee.
Any corporation which results from any
merger, consolidation or purchase to which the Trustee
may be a party, or which succeeds to the
trust business of the Trustee, or to which
11-6
substantially all the trust assets of the
Trustee may be transferred, will be the successor
to the Trustee hereunder without any further
act or formality with like effect as if the
successor Trustee had originally been named
Trustee herein; and in any such event it will not
be necessary for the Trustee or any successor
Trustee to give notice thereof to any person,
and any requirement, statutory or otherwise,
that notice will be given is hereby waived.
11.15 ~uAppointment of Investment Manager~w
One or more Investment Managers may be
appointed by the Plan Sponsor (or the Plan
Administrator) to exercise full investment
management authority with respect to all or a
portion of the Trust assets. Authorized
payment of the fees and expenses of the Investment
Manager(s) may be made from the Trust assets.
For purposes of this agreement, any Investment
Manager so appointed will, during the period
of his appointment, possess fully and absolutely
those powers, rights and duties of the
Trustee (to the extent delegated by the Plan Sponsor
or the Plan Administrator) with respect to
the investment or reinvestment of that portion of
the Trust assets over which the Investment
Manager has investment management authority. The
Investment Manager must be one of the
following:
(a) Registered as an investment advisor under
the Investment Advisors Act of 1940;
(b) A bank, as defined in the Investment
Advisors Act of 1940; or
(c) An insurance company qualified to manage,
acquire, or dispose of such Plan assets under
the laws of more than one state.
Any Investment Manager will acknowledge in
writing to the Plan Sponsor or the Plan
Administrator and to the Trustee that he or
it is a fiduciary with respect to the Plan.
During any period of time when the Investment
Manager is so appointed and serving, and with
respect to those assets in the Plan over
which the Investment Manager exercises investment
management authority, the Trustee's
responsibility will be limited to holding such assets as
a custodian, providing accounting services,
disbursing benefits as authorized, and executing
such investment instructions only as directed
by the Investment Manager. The Trustee will
not be responsible for any acts or omissions
of the Investment Manager. Any certificates or
other instruments duly signed by the
Investment Manager (or the authorized representative of
the Investment Manager), purporting to
evidence any instruction, direction or order of the
Investment Manager with respect to the
investment of those assets of the Plan over which the
Investment Manager has investment management
authority, will be accepted by the Trustee as
conclusive proof thereof. The Trustee will
also be fully protected in acting in good faith
upon any notice, instruction, direction,
order, certificate, opinion, letter, telegram or
other document believed by the Trustee to be
genuine and from the Investment Manager (or the
authorized representative of the Investment
Manager). The Trustee will not be liable for any
action taken or omitted by the Investment
Manager or for any mistakes of judgment or other
action made, taken or omitted by the Trustee
in good faith upon direction of the Investment
Manager.
11.16 ~uLoans to Participants~w
The Plan Administrator may authorize the
Trustee to lend on a nondiscriminatory basis to a
Participant an amount from the Plan as
specified herein; provided, a reasonable rate of
interest will be charged on the loan, the
loan will be secured by 50% of the Participant's
Vested Accrued Benefit in the Plan, and
provision for repayment will be made. All loans will
be subject to the approval of the Plan
Administrator which will investigate each application
for a loan. The Plan Administrator will
prescribe such rules as may be necessary to provide
guidelines as to under which circumstances
and for what purpose loans will be permitted.
The Plan Administrator will prescribe
guidelines as to which Account or Accounts loans may be
11-7
made from. Each loan made to a Participant
will be made from the Participant's allowable
Account or Accounts. All interest and
principal repayments will be credited to the
Participant's Account from which the loan was
made.
In addition to any additional rules and
regulations as the Plan Administrator may adopt all
loans will comply with the following terms
and conditions:
(a) Only Active and Inactive Participants
will be eligible to apply for a loan. Each
application for a loan will be made in
writing to the Plan Administrator, whose action
thereon will be final.
(b) Each loan will be made against collateral
being the assignment of 50% of the borrower's
entire right, title and interest in and
to the Trust Fund, supported by the borrower's
promissory note for the amount of the
loan, including interest payable to the order to
the Trustee, and any additional security
deemed necessary to adequately secure the Loan.
If a person fails to make a required
payment within 90 days of the due date set forth in
the loan agreement, the loan will be in
default. There will be no foreclosure against a
Participant's Accrued Benefit prior to
his becoming entitled to a distribution of
benefits in accordance with the terms of
this Plan. All loans will become due and
payable in full upon the termination of
a Participant's employment. If a Participant
with an outstanding loan terminates
employment and becomes entitled to a distribution of
benefits from the Plan, then the
outstanding balance of the unpaid loan plus any accrued
interest thereon will be deducted from
the amount of otherwise distributable benefits and
the Participant's promissory note will be
distributed to the Participant.
(c) The principal repayment will be amortized
over the fixed life of a loan with installments
of principal and interest to be paid not
less often than quarterly. The period of
repayment for each loan will be arrived
at by mutual agreement between the Plan
Administrator and the borrower, but in no
event will such period exceed a reasonable
period of time. The period of repayment
will in no event exceed 5 years unless the loan
is to be used to acquire, construct,
reconstruct or substantially rehabilitate any
dwelling unit which, within a reasonable
period of time, is to be used as a principal
residence of the Participant or a member
of the family (spouse, brother, sister,
ancestor, or lineal descendants) of the
Participant.
(d) The minimum amount of any loan is equal
to $1,000.
(e) The maximum amount of any loan is such
that when the amount of the loan is added to the
outstanding balance of all other loans
made to the Participant from the Plan (and any
other plans maintained by the Employer or
any Related Employer) the total does not exceed
the lesser of:
(1) 50% of the Participant's Vested
Accrued Benefit; or
(2) $50,000, reduced by the amount, if
any, of the highest balance of all outstanding
loans to the Participant during the
one-year period ending on the day prior to the
day on which the loan in question is
made.
(f) Each loan will bear interest at a rate
equal to the prime rate which is published in the
Wall Street Journal as being
representative of the base rate on corporate loans at large
U.S. money center commercial banks on
the first day of the month in which the loan is
made, plus 1 percentage point.
(g) A Participant may have no more than two
loans outstanding at any time.
11-8
(h) Each loan will require the Participant
(and, if the Participant is married, the
Participant's spouse) to consent to the
loan and the possible reduction in the
Participant's Accrued Benefit. Such
consent must be made in writing within the 90-day
period before the making of the loan.
(i) No loan will be permitted to a
Participant in a year in which he is either an
Owner-Employee or Shareholder-Employee as
defined in Code Section 4975(d).
11-9
IN WITNESS WHEREOF, this instrument has been
executed by the duly authorized and empowered officers
of the Employer, this ~u________~w day of
~u_____________________~w, 19~u_____~w.
Optek Technology, Inc.
By:~u_____________________________________~w
The Trustee agrees to continue to serve as Trustee
under the terms of this instrument.
Charles Schwab Trust Company
By:~u_____________________________________~w
Computation of Per Share Earnings
Exhibit 11.1
<TABLE>
<CAPTION>
For the Fiscal Years Ended
October 25, October 27, October 28,
1996 1995 1994
<S> <C> <C> <C>
Adjusted shares outstanding
Weighted average common
shares outstanding 3,767,083 3,318,649 3,223,741
Warrants 3,383,800 3,404,801 3,408,801
Stock options 795,759 967,461 1,120,222
--------- --------- ---------
Total common shares and
common share equivalents 7,946,642 7,690,911 7,752,764
20% common stock limitation (319,728) (663,730) (644,748)
--------- --------- ---------
Adjusted weighted average
shares outstanding 7,626,914 7,027,181 7,108,016
Adjusted net earnings
Net earnings $12,895,000 $ 9,838,000 $ 3,179,000
Adjustment for 20% common
stock limitation - 27,000 184,000
--------- --------- ---------
Adjusted earnings for
computation of earn-
ings per share $12,895,000 $ 9,865,000 $ 3,363,000
Earnings per share
Adjusted earnings for comp-
utation of earnings
per share $12,895,000 $ 9,865,000 $ 3,363,000
Adjusted weighted average
shares outstanding 7,626,914 7,027,181 7,108,016
Earnings per common share $1.69 $1.40 $0.47
Note:
Primary earnings per share and fully diluted earnings per share were
substantially the same in all periods presented.
The modified treasury stock method is used to calculate net earnings per
common share. The calculation uses the weighted average number of common
shares outstanding and, when fully dilutive, common equivalent shares
outstanding (warrants and stock options). Under this method, all warrants
and options are assumed to be exercised and up to 20% of common shares
outstanding are assumed to be repurchased. The remaining proceeds, if any,
are then assumed to be used to reduce debt and the resulting reduction in
interest expense is added back to net earnings for calculation of earnings
per share.
</TABLE>
Exhibit 22
Subsidiaries of the Registrant
Optek International, Inc. (Texas)
OTX corporation (Texas)
Semiconductores Opticos, S.a. de C.V. (Mexico)
Optron de mexico, S.A. de C.V. (Mexico)
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Optek Technology, Inc.:
We consent to incorporation by reference in the registration
statements (No. 33-60656, 33-18555 and 333-419) on Form S-8 of
Optek Technology, Inc. of our reports dated December 6, 1996,
relating to the consolidated balance sheets of Optek Technology,
Inc. and subsidiaries as of October 25, 1996 and October 27, 1995,
and the related consolidated statements of income, stockholders'
equity (deficit), and cash flows for each of the years in the
three-year period ended October 25, 1996, and the related schedule,
which reports appear in the October 25, 1996 annual report on Form
10-K of Optek Technology, Inc.
KPMG Peat Marwick LLP
Dallas, Texas
January 22, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-25-1996
<PERIOD-END> OCT-25-1996
<CASH> 594
<SECURITIES> 0
<RECEIVABLES> 8383
<ALLOWANCES> 1095
<INVENTORY> 6007
<CURRENT-ASSETS> 15113
<PP&E> 26663
<DEPRECIATION> 15513
<TOTAL-ASSETS> 26359
<CURRENT-LIABILITIES> 8455
<BONDS> 0
0
0
<COMMON> 39
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 26359
<SALES> 67395
<TOTAL-REVENUES> 67395
<CGS> 39010
<TOTAL-COSTS> 52209
<OTHER-EXPENSES> (145)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1295
<INCOME-PRETAX> 14039
<INCOME-TAX> 1144
<INCOME-CONTINUING> 12895
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12895
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.69
</TABLE>
