<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ....... to .......
Commission File Number: 0-17995
AMTECH CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Texas 75-2216818
(State of Incorporation) (I.R.S. Employer
Identification Number)
17304 Preston Road
Building E-100
Dallas, Texas 75252
(Address of Principal Executive Offices)
(972) 733-6600
(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO
SECTION 12(b) OF THE ACT:
None Not Applicable
(Title of Class) (Name of Exchange on Which Registered)
SECURITIES REGISTERED PURSUANT TO
SECTION 12(g) OF THE ACT:
Common Stock
$0.01 Par Value
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of February 28, 1997, there were 14,802,663 shares of Amtech Corporation
$0.01 par value Common Stock issued and 14,722,663 shares outstanding,
14,365,597 of which having an aggregate market value of $89,784,981 were held by
non-affiliates. For purposes of the above statement, all directors and executive
officers of the Registrant are presumed to be affiliates.
Portions of the Proxy Statement for the Registrant's 1997 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Form 10-K, and
portions of the Registrant's 1996 Annual Report to Shareholders are incorporated
by reference into Parts II and IV of this Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
OVERVIEW
The Company designs, manufactures, markets, installs and supports a wide
array of wireless data and security technology products and solutions for a
variety of industries. Today, the Company is a leading global supplier of
wireless data technologies and solutions for the intelligent transportation,
electronic security and logistics markets. The Company is organized into the
three market-oriented groups described below, each with a core competency in a
radio frequency technology: Electronic Security Group (ESG), encompassing the
Cotag International and Cardkey Systems product and service lines;
Transportation Systems Group (TSG), comprised of Amtech Systems Corporation and
Amtech World Corporation; and Interactive Data Group (IDG), comprised of
WaveNet, Inc. and WaveNet International, Inc. The Company designs, manufactures,
markets, installs and supports systems that make high-value assets and scarce
resources more productive and secure. These systems make extensive use of the
Company's proprietary wireless data and security technologies. The Company also
continues to explore new markets and business opportunities based on these core
competencies.
The Company was incorporated in Texas in 1988. The Company's executive
offices are located at 17304 Preston Road, Building E-100, Dallas, Texas 75252
(telephone (972) 733-6600). The Company is scheduled to relocate all Dallas
based employees in the fourth quarter of 1997 to 19111 Dallas Parkway, Dallas,
Texas 75287-3106. The Company has eight directly wholly-owned operating
subsidiaries: Amtech Systems Corporation; Amtech World Corporation; AMGT
Corporation; Amtech International, S.A.; Amtech SARL, S.A.; Cardkey Systems,
Inc.; Amtech Europe Limited; and Cardkey Systems Pacific Pty. Limited. At
December 31, 1996, the Company's affiliate WaveNet, Inc. was 90% owned by the
Company (assuming the conversion of WaveNet convertible debt securities held by
the Company).
MARKET GROUPS
Electronic Security Group ("ESG")
The Company's ESG, whose principal offices are located in Cambridge and
Reading, England, and in Simi Valley, California, designs, manufactures,
markets, installs and supports its electronic security equipment and full-
service solutions for electronic security needs to corporate and government
markets throughout the world. The ESG's products and services are marketed under
the "Cotag(R)" and "Cardkey(R)" brand names directly to end users and through
resellers. Primary target markets are electronic access control; other
facilities management applications such as video badging, attendance management
and alarm monitoring; and healthcare security. In 1996, the ESG accounted for
approximately 54 percent of the Company's sales.
Cardkey, whose name has been synonymous with access control for nearly 50
years, is a leading supplier of electronic access control and integrated
security management solutions, which it sells through a global network of direct
sales offices and resellers. Cardkey has supplied products and systems to
thousands of corporate and national and state government customers.
Representative customers include the Coca-Cola Company, CNN, a subsidiary of
Turner Broadcasting System, Inc.
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(TBS), Sony Corporation, Schering - Plough, Tennessee Valley Authority, and
Toyota Motor Corporation.
Cotag specializes in advanced hands-free proximity cards, tags and readers
and has developed systems using these products for electronic access control and
security management, which it sells through a global network of resellers and
installers. Cotag's applications of low frequency radio frequency identification
("RFID") technology have made it a leader in hands-free proximity devices.
Representative users of Cotag's products include Barclays Bank; Beijing
International Airport; Brussels National Airport; Compaq Computers; EDS; Nortel
(Northern Telecom, Inc.); and, Tennessee Valley Authority.
The ESG's radio frequency proximity electronic security technologies
compete against a variety of "traditional" modes of security access control,
such as magnetic stripe cards and Wiegand cards. There are a variety of
suppliers of these traditional types of security access control equipment in
this very competitive market. Within the proximity segment of the security
access control market, there are relatively few suppliers. No particular
supplier of proximity security equipment is dominant in the market, although
certain of the ESG's competitors are part of corporations significantly larger
than the Company. The market for the ESG's full-service solutions for electronic
security needs is served by a variety of suppliers--and hence is extremely
competitive--although the ESG is one of the larger suppliers in this specific
arena. The Company believes that the principal competitive factors in the ESG's
market are brand name identification, product performance, quality, price, and
customer service.
The ESG employs nearly 500 people. Some ESG products (including hands free
cards and readers) are manufactured at the Company's manufacturing facility
located in Cambridge, England, which is registered by the British Standards
Institute to the International Standards Organization ("ISO") 9002 standard for
quality management systems. The Company's ISO 9001 quality certified
manufacturing facility located in Albuquerque, New Mexico also supplies
subassemblies for ESG products. Other system components (including certain non-
hands free cards and readers) are manufactured and supplied by third parties in
the United States and Europe. The ESG's full-service solutions for electronic
security needs also meet Underwriters Laboratories' standards 1076 and 294.
Transportation Systems Group ("TSG")
The Company's TSG, whose principal offices are located in Dallas, Texas,
and Albuquerque, New Mexico, designs, manufactures, markets, installs and
supports wireless equipment and systems that permit the remote identification
of, and communications with, objects through the use of high frequency radio
frequency signals rather than bar codes, magnetic cards, or other means. When an
object with an attached tag passes through an area covered by a reader, data is
electronically retrieved from or written to the tag through the Company's
patented implementation of a technique referred to as "modulated backscatter."
These products, which are marketed under the "Amtech(R)" brand name, directly
and through resellers, are targeted primarily to the rail, electronic toll
collection and traffic management ("ETTM"), intermodal, airport, parking and
access control, and motor freight markets. In 1996, the TSG accounted for 44
percent of the Company's sales.
The TSG's technology is compatible with a variety of national and
international standards, as follows: (i) the standard for automatic equipment
identification ("AEI") adopted by the Association of American Railroads ("AAR"),
which requires that all railcars, locomotives, and other rail
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equipment operating in interchange service in North America (approximately
1,500,000 units of equipment) be equipped with two AEI tags; (ii) the standard
for AEI adopted by the Union Internationale des Chemins de fer ("UIC"), which
selected the TSG's high-speed read/write DYNICOM(TM) RFID technology as a
standard for the UIC's 32 member railroads in greater Europe that choose to
implement AEI for international vehicles; (iii) the international standard for
automatic identification of intermodal containers adopted by the ISO; (iv) the
national standard for automatic identification of intermodal containers adopted
by the American National Standards Institute ("ANSI"); and (v) the standard
adopted by the American Trucking Associations ("ATA") for automatic
identification of tractors, trailers and related motor carrier equipment. Except
for the mandatory AEI standard adopted by the AAR, compliance with the standards
outlined above is voluntary. Taken together, however, the TSG believes these
standards create a disincentive for participants in these markets to make
significant investments in systems that are not compatible with the standards.
The TSG has committed to the AAR, ISO, ANSI, and the UIC that, if
requested, it will license certain technology underlying the standard on
reasonable commercial terms to qualified companies. Pursuant to the commitment
to the ISO, the Company has granted a non-exclusive license to certain of the
TSG's technologies for intermodal container identification applications to Savi
Technology, Inc. Also, pursuant to its commitment to the UIC, the Company has
granted non-exclusive licenses to ABB Signal AB and Thomson CSF, S.A. to certain
of the TSG's DYNICOM technologies for European railroad applications. The
Company has also granted Alcatel Schweiz, AG and GEC Alsthom Transport, S.A.,
affiliates of Alcatel AVI, S.A., the Company's former European joint venture
partner, an option to acquire non-exclusive licenses to certain of the TSG's
technologies for intermodal container identification applications and to the
TSG's DYNICOM technologies for European railroad applications.
The ETTM, motor freight, airport, and parking and access control markets
are extremely competitive. The fragmented nature of these markets, the absence
of industry-wide standards, and the variety of competing systems have resulted
in intense competition. During 1996, the Company's single largest customer was
the MTA Bridges and Tunnels, a New York state public agency, for which the TSG
is installing an electronic toll collection system. See "CUSTOMERS" below. In
January 1997, the TSG signed a multi-year $38.6 million contract with the
Florida Department of Transportation to install a state wide electronic toll
collection system. The TSG has not encountered any material competition from
competing AEI manufacturers in offering its AEI systems to the rail and
intermodal markets, since the TSG's AEI equipment and systems are the only
products that, to the TSG's knowledge, comply with the AEI industry standards
referenced above. Significant competition in providing AEI systems to the rail
and intermodal markets may be encountered in the future to the extent that
licenses are granted to competing vendors pursuant to the license offers noted
above. The Company believes that the principal competitive factors in the TSG's
market are product performance, quality, price, brand-name identification, and
customer service.
The TSG employs approximately 320 people. The TSG's products are
manufactured at the Company's 75,000 square-foot manufacturing facility located
in Albuquerque, New Mexico. The TSG, including its manufacturing process, is
quality-certified by the AAR to its Quality Standard M-1003 and by the ISO to
its 9001 Quality Standard certification for the field of electronics.
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Interactive Data Group ("IDG")
The Company's IDG is comprised of WaveNet, Inc., headquartered in Atlanta,
Georgia and WaveNet International, Inc., headquartered in Mississauga, Ontario,
Canada ("WaveNet"), both of which are start-up enterprises. As of December 31,
1996, the Company has invested approximately $5,650,000 of convertible debt and
equity financing in WaveNet and owned 90% of the WaveNet equity (assuming the
conversion of the WaveNet convertible debt securities held by the Company). The
IDG currently employs approximately 40 people.
The IDG designs, manufactures, markets, and supports advanced wireless
radio frequency data collection ("RFDC") products and systems that allow
wireless information exchange between mobile computer users and host computer
applications via radio frequency channels. These products combine the capability
of wireless networking with products designed to collect, transmit and receive
data, including the capability to read RFID tags manufactured by the TSG. The
IDG's products can be used by businesses to create databases on a real-time
basis for more effective asset management.
In 1996, the IDG received its first significant orders for the WaveNet
product line, including orders from Kellogg, Alvey, Select Beverage, Hyundai
Motor Company, Hyundai Merchant Marine Company, Ssang Yong Motor Company, and
Korea Express. The IDG expects to market its products directly and through a
variety of distribution channels, and its products will be manufactured at the
Company's ISO 9001 quality-certified Albuquerque, New Mexico facility. The
initial targeted markets for the IDG's products include warehousing and
distribution, manufacturing, and transportation terminal management. Later
target markets are expected to include medical and retail. These markets for the
IDG's products are dominated by six well-established competitors. The Company
believes that the principal competitive factors in the IDG's markets are product
performance, quality, price, and customer service.
RESEARCH AND DEVELOPMENT; PATENTS AND TRADEMARKS
Research and development expenses for the Company amounted to $10,314,000,
$9,334,000, and $6,222,000 in 1996, 1995, and 1994, respectively.
The Company owns numerous patents and has filed patent applications in the
United States and a number of foreign countries covering features of the
Company's tags and reader systems and specific products marketed by the TSG,
ESG, and the IDG, as well as certain market applications for such products.
Although management believes that its patents provide some competitive
advantage, the Company believes that its success is primarily dependent on the
skills, technical competence and marketing abilities of the Company's personnel.
In addition, "AMTECH," "CARDKEY," "COTAG," "TOLLTAG," "DYNICOM" and other marks
are registered trademarks of the Company in the United States and various
foreign countries. The Company also licenses certain cryptographic technologies
from a third party.
CUSTOMERS
During the years ended December 31, 1996, and 1995, the MTA Bridges and
Tunnels, a New York state public agency, accounted for 11% and 21% of the
Company's sales, respectively. During the year ended December 31, 1994, Science
Applications International Corporation ("SAIC") and CCTC International, Inc.
("CCTC"), distributors of the TSG's products, accounted for 21% and 13%
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of the Company's sales, respectively. During these periods, no other customer
accounted for 10% or more of sales.
SALES BACKLOG
The Company's backlog, calculated as the aggregate of sales prices of
orders received from customers less revenue recognized, was approximately
$44,000,000 at February 28, 1997, as compared with approximately $36,000,000 at
February 29, 1996. Approximately 69% of the February 28, 1997, backlog is
anticipated to be realized as revenue in 1997.
GEOGRAPHIC INFORMATION AND EXPORT SALES
The following table presents information about the Company's operations in
different geographic areas for the indicated years (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1996
----------------------------
Canada
U. S. Europe and Other Eliminations Total
----- ------ --------- ------------ -----
<S> <C> <C> <C> <C> <C>
Sales:
Unaffiliated customers $ 85,923 $ 28,743 $ 1,842 $ ---- $ 116,508
Inter-area transfers 2,476 2,220 173 (4,869) ----
-------- -------- -------- --------- ---------
$ 88,399 $ 30,963 $ 2,015 $ (4,869) $ 116,508
======== ======== ======== ========= =========
Operating loss $ (1,008) $ (927) $ (1,213) $ ---- $ (3,148)
======== ======== ======== ========= =========
Identifiable assets $ 73,624 $ 15,233 $ 2,184 $ ---- $ 91,041
======== ======== ======== ========= =========
<CAPTION>
Year Ended December 31, 1995
----------------------------
Canada
U. S. Europe and Other Eliminations Total
----- ------ --------- ------------ -----
<S> <C> <C> <C> <C> <C>
Sales:
Unaffiliated customers $ 64,916 $ 14,763 $ 392 $ ---- $ 80,071
Inter-area transfers 586 230 208 (1,024) ----
-------- -------- -------- ------- ---------
$ 65,502 $ 14,993 $ 600 $(1,024) $ 80,071
======== ======== ======== ======= =========
Operating loss $ (2,488) $ (2,182) $ (1,372) $ ---- $ (6,042)
======== ======== ======== ======= =========
Identifiable assets $ 78,863 $ 12,803 $ 1,713 $ ---- $ 93,379
======== ======== ======== ======= =========
</TABLE>
Sales and transfers between geographic areas were generally priced to
recover cost plus an appropriate mark-up for profit. These inter-areas transfers
were eliminated from consolidated sales.
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United States export sales summarized by geographic area, are as follows:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
The Americas (excluding the U.S.) $ 7,998,000 $ 6,593,000 $ 8,805,000
Far East 5,434,000 3,938,000 1,577,000
Europe 1,340,000 2,867,000 1,557,000
----------- ----------- -----------
$14,772,000 $13,398,000 $11,939,000
=========== =========== ===========
</TABLE>
Because a substantial portion of the Company's sales of products are made
internationally, international trade has become increasingly important to the
Company's overall business. International trade is subject to numerous risks,
including labor strikes, shipping delays, political or economic instability,
military action, and export and import regulations and embargoes. Currency risk
could be an additional risk of international trade, although to-date, it has not
had a material impact on the Company's operations.
GOVERNMENT REGULATION
The Federal Communications Commission ("FCC") regulates the radio frequency
emissions of electronic devices in the United States. The FCC generally requires
that certain of the Company's products be issued a grant of equipment
authorization before the products may be marketed for use in the United States
(i.e., imported, sold, leased, or advertised for sale or lease). To date, the
----
TSG's and ESG's products have been demonstrated to operate within the FCC's
regulatory standards. The IDG has obtained FCC equipment authorization for its
core product offering. Furthermore, the FCC requires that a license be obtained
for each site at which certain of the TSG's and IDG's products are to be
installed or used. Neither the TSG, the ESG, nor to the Company's knowledge,
their customers, have experienced any material difficulty in operating their
products in compliance with relevant FCC regulations or in obtaining the
necessary site licenses.
Many foreign jurisdictions also require "type approval" by radio regulatory
agencies prior to the sale or shipment of radio frequency transmitting products,
as well as an operating license for each site. Type approvals have been obtained
for the TSG's and the ESG's products in many of the major industrial nations in
the world, and the Company believes that these products can be readily adapted
to applicable regulations in most, if not all, other countries. The IDG has
begun the process of seeking the required international radio regulatory type
approvals for its products and has obtained initial approvals in Europe.
The Company's products are required to operate within national and
international established standards for electrical safety and radio frequency
non-ionizing radiation emissions promulgated by, among others, the European
Union, the FCC, the Occupational Safety and Health Administration, and the
International Electrotechnical Commission. In addition, there are other
applicable safety standards such as those of the Underwriters Laboratories and
the Canadian Standards Association.
Sale of the Company's products in foreign jurisdictions may require the
approval of domestic and foreign regulatory agencies, which may impede or
preclude the Company's efforts to penetrate such markets. The Company cannot
predict the extent or impact of future legislation or regulation by federal,
state or local authorities in the United States or foreign countries.
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BUSINESS CONSIDERATIONS
The following management assumptions, risks and uncertainties, among
others, should be considered in evaluating the Company's business operations:
(1) the ability of the IDG to establish effective sales channels for
its WaveNet networking system; to obtain radio regulatory approval for a
key new product; and, as a start-up, to capture a meaningful market share
in light of the well-established competition, by using its strategy of
differentiated product features;
(2) the ability of the TSG to increase the sales of its manufactured
products; to win an acceptable share of public agency procurements for
large-scale toll collection systems; and to introduce successfully its
newly-developed financial clearinghouse for parking garage and other RFID
payment transactions;
(3) the ability of the ESG to sustain current gross margin levels by
maintaining its current sales ratio of ESG-manufactured products to third-
party manufactured products and services;
(4) the impact of decisions taken by applicable standards-setting
bodies;
(5) the availability of components from suppliers;
(6) the impact of developments in the regulatory and trade
environment or in general domestic and international economic conditions;
(7) the impact of competition from competitive products or
services;
(8) the Company's ability to attract and retain key employees;
and
(9) other risks detailed in this Form 10-K or from time-to-time in
the Company's SEC public filings or press releases.
ITEM 2. PROPERTIES
The TSG leases approximately 56,000 square feet of space for the Company's
and the TSG's corporate offices in Dallas, Texas, under a lease that expires in
November 1997. Beginning November 1997 the Company will occupy approximately
60,000 square feet of space at a new location in Dallas, Texas, under a ten year
lease. This facility will be used as the Company's and the TSG's corporate
offices and as branch offices for the IDG and ESG. The TSG also owns an
approximately 75,000 square foot manufacturing, product engineering, and
research and development facility located on an 8.33 acre site in Albuquerque,
New Mexico. The ESG has two facilities used for manufacturing and corporate
offices in Cambridge, England of approximately 15,800 and 11,800 square feet
under, respectively, a short-term lease expiring March 1998 (with various
options to renew) and a 125 year ground lease that commenced in September 1979,
and a 23,200 square foot facility and a 13,400 square foot facility used for
corporate offices in Reading, England under 25 year ground leases that commenced
in 1979. The ESG also leases an approximately 45,000 square foot corporate
office and product assembly facility in Simi Valley, California under a five
year lease that
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commenced in October 1995. The IDG leases an approximately 9,500 square foot
facility in Mississauga, Ontario, Canada as its engineering and research and
development offices under a five year lease that commenced in 1994. In addition,
the Company leases a variety of smaller office spaces in various locations
throughout the U.S., Europe, and Australia.
ITEM 3. LEGAL PROCEEDINGS
WaveNet International, Inc. and certain of its employees are the subject of
a Canadian $11,000,000 (approximately U.S. $8,000,000) suit brought in October
1994 by Teklogix, Inc., their former employer and a competitor in the IDG's
markets. The suit, which is pending in the Ontario (Canada) Court of Justice,
General Division, alleges improper use of Teklogix confidential information in
WaveNet International's products, theft of technology, misappropriation of
business opportunities and similar improprieties. In addition to the damages
requested, Teklogix seeks to enjoin the defendants from soliciting customers of
Teklogix, from disclosing confidential information of Teklogix, and from making
or selling any products that use intellectual property of Teklogix. Teklogix
also seeks a declaration that it owns any WaveNet International products that
use intellectual property of Teklogix. WaveNet International, Inc. has denied
any wrongdoing by it or its employees and intends to vigorously defend the
litigation.
While the final outcome of this matter cannot be predicted with certainty,
the Company believes that the final resolution of the matter will not have a
material adverse effect on the consolidated financial position or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference from the
Company's 1996 Annual Report to Shareholders, page 17 under the caption "Common
Stock Information."
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference from the
Company's 1996 Annual Report to Shareholders, page 14 under the caption "Five-
Year Financial Summary."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated by reference from the
Company's 1996 Annual Report to Shareholders, pages 15-17 under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference from the
Company's 1996 Annual Report to Shareholders, pages 18-29.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference from the
section "MANAGEMENT -- Directors and Executive Officers" in the Company's 1997
Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the
section "MANAGEMENT -- Compensation of Executive Officers and Directors" in the
Company's 1997 Proxy Statement. Information in the section and subsection titled
"REPORT OF BOARD OF DIRECTORS ON ANNUAL COMPENSATION" and "Performance Graph" is
not incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from the
Section "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" in the Company's 1997
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from the
section "MANAGEMENT -- Compensation of Executive Officers and Directors -
Business Relationships and Transactions with Management and Related Parties" in
the Company's 1997 Proxy Statement.
10
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
Index to Consolidated Financial Statements
------------------------------------------
The following consolidated financial statements of Amtech Corporation,
included in the Company's 1996 Annual Report to Shareholders for the year ended
December 31, 1996, are incorporated by reference in Item 8:
<TABLE>
<CAPTION>
Page in 1996
Annual Report to
Shareholders
-----------------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors 18
Consolidated Statements of Operations
for each of the three years in the
period ended December 31, 1996 19
Consolidated Balance Sheets at
December 31, 1996 and 1995 20
Consolidated Statements of Cash Flows
for each of the three years in the
period ended December 31, 1996 21
Consolidated Statements of Stockholders'
Equity for each of the three years in the
period ended December 31, 1996 22
Notes to Consolidated Financial Statements 23-29
</TABLE>
(a)(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
of the absence of the conditions under which they are required or because the
information required is included in the consolidated financial statements or
notes thereto.
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(a)(3) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- - ----------- -----------
<S> <C>
2.1 -- Purchase Agreement among Amtech Corporation, Assa Abloy, AB,
etal. Filed under exhibit number 2.1 to the Company's Quarterly
----
Report on Form 10-Q for the quarterly period ended June 30, 1995,
and incorporated herein by reference.
2.2 -- List of exhibits to Purchase Agreement among Amtech Corporation,
Assa Abloy, AB, etal. The Registrant agrees to furnish
----
supplementally to the Commission upon request a copy of any of
these exhibits.
2.3 -- Amendment to Purchase Agreement listed in Exhibit 2.1. Filed
under exhibit number 2.2 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995, and
incorporated herein by reference.
2.4 -- Promissory Note of Viking Acquisition Company, in the original
principal amount of $6,000,000, dated August 1, 1995, payable to
Cardkey Systems, Inc. Filed under exhibit number 2.3 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1995, and incorporated herein by reference.
2.5 -- Guaranty of Amtech Corporation, dated August 1, 1995. Filed under
exhibit number 2.4 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1995, and incorporated
herein by reference.
3.1 -- Articles of Incorporation of the Company, together with all
amendments thereto. Filed under exhibit number 3.1 in the
Company's Registration Statement on Form S-1 (Commission No. 33-
46398) and incorporated herein by reference.
3.2* -- Restated Bylaws of the Company, dated February 25, 1997.
4.1 -- Specimen Certificate for Common Stock of the Company. Filed under
exhibit number 4.1 in the Company's Registration Statement on
Form S-1 (Commission No. 33-31209) and incorporated herein by
reference.
10.1 -- 1988 Stock Option Plan of the Company. Filed under exhibit number
10.44 in the Company's Registration Statement on Form S-1
(Commission No. 33-31209) and incorporated herein by reference.
10.2 -- 1989 Stock Option Plan of the Company. Filed under exhibit number
10.45 in the Company's Registration Statement on Form S-1
(Commission No. 33-31209) and incorporated herein by reference.
10.3 -- 1990 Stock Option Plan of the Company. Filed under Appendix A in
the Company's Proxy Statement for the Annual Meeting of
Shareholders on May 24, 1990, and incorporated herein by
reference.
10.4 -- Amended and Restated 1992 Stock Option Plan of the Company. Filed
under exhibit number 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1996, and
incorporated herein by reference.
10.5* -- 401(k) Retirement Plan of the Company and related Adoption
Agreement.
10.6 -- Amended and Restated 1995 Long-Term Incentive Plan of the
Company. Filed under exhibit number 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996, and incorporated herein by reference.
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
10.7 -- 1996 Directors' Stock Option Plan of the Company. Filed under
Annex I in the Company's Proxy Statement for the Annual Meeting
of Shareholders held April 25, 1996, and incorporated herein by
reference.
10.8 -- 1996 Employee Stock Purchase Plan of the Company. Filed under
Annex II in the Company's Proxy Statement for the Annual Meeting
of Shareholders held April 25, 1996, and incorporated herein by
reference.
10.9 -- 1996 Executive Management Cash Bonus Plan of the Company. Filed
under exhibit number 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1996, and
incorporated herein by reference.
10.10 -- Director Retainer Plan. Filed under exhibit number 10.2 in the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1993, and incorporated herein by reference.
10.11 -- Amended Employment Agreement, dated January 1, 1991, by and
between the Company and G. Russell Mortenson. Filed under exhibit
number 10.10 in the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated herein by
reference.
10.12 -- Amendment to Employment Agreement, dated January 10, 1992, by and
between the Company and G. Russell Mortenson. Filed under exhibit
number 10.11 in the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated herein by
reference.
10.13 -- Second Amendment to Employment Agreement, effective November 10,
1992, by and between the Company and G. Russell Mortenson. Filed
under exhibit number 10.13 in the Company's Annual Report on Form
10-K for the year ended December 31, 1992, and incorporated
herein by reference.
10.14 -- Third Amendment to Employment Agreement, dated October 19, 1994,
by and between Amtech Corporation and G. Russell Mortenson. Filed
under exhibit number 10.27 in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1994, and
incorporated herein by reference.
10.15 -- Fourth Amendment to Employment Agreement, effective January 1,
1995, by and between Amtech Corporation and G. Russell Mortenson.
Filed under exhibit number 10.18 in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
10.16 -- Fifth Amendment to Employment Agreement, effective January 1,
1996, by and between Amtech Corporation and G. Russell Mortenson.
10.17* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and G. Russell Mortenson.
10.18 -- Employment Agreement, dated August 1, 1990, by and between Amtech
Systems Corporation and Jeremy A. Landt. Filed under exhibit
number 10.12 in the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated herein by
reference.
10.19 -- Amendment to Employment Agreement, dated November 10, 1992, by
and between Amtech Systems Corporation and Jeremy A. Landt. Filed
under exhibit number 10.22 in the Company's Annual Report on Form
10-K for the year ended December 31, 1992, and incorporated
herein by reference.
10.20 -- Second Amendment to Employment Agreement, effective October 19,
1994, by and between Amtech Systems Corporation and Jeremy A.
Landt. Filed
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
under exhibit number 10.21 in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
10.21 -- Third Amendment to Employment Agreement, effective January 1,
1995, by and between Amtech Systems Corporation and Jeremy A.
Landt. Filed under exhibit number 10.22 in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
10.22* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Jeremy A. Landt.
10.23 -- Employment Agreement, dated August 6, 1991, by and between Amtech
Corporation and Steve M. York. Filed under exhibit number 10.13
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
10.24 -- Amendment No. 1 to Employment Agreement, effective May 7, 1993,
by and between Amtech Corporation and Steve M. York. Filed under
exhibit number 10.24 in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated herein by
reference.
10.25 -- Second Amendment to Employment Agreement, dated October 19, 1994,
by and between Amtech Corporation and Steve M. York. Filed under
exhibit number 10.28 in the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1994, and
incorporated herein by reference.
10.26 -- Third Amendment to Employment Agreement, effective January 1,
1995, by and between Amtech Corporation and Steve M. York. Filed
under exhibit number 10.26 in the Company's Annual Report on Form
10-K for the year ended December 31, 1994, and incorporated
herein by reference.
10.27 -- Fourth Amendment to Employment Agreement, effective August 1,
1995, by and between Amtech Corporation and Steve M. York. Filed
under exhibit number 10.2 in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995, and
incorporated herein by reference.
10.28* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Steve M. York.
10.29 -- Employment Agreement, effective January 25, 1995, by and between
Amtech Europe Limited (formerly Cotag International Limited) and
Stuart M. Evans. Filed under exhibit number 10.3 in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995, and incorporated herein by reference.
10.30 -- First Amendment to Employment Agreement, effective August 1,
1995, by and between Amtech Europe Limited and Stuart M. Evans.
Filed under exhibit number 10.4 in the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1995,
and incorporated herein by reference.
10.31* -- Second Amendment to Employment Agreement, effective November 4,
1996, by and between Amtech Europe Limited and Stuart M. Evans.
10.32* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Stuart M. Evans.
10.33 -- Employment Agreement, effective August 1, 1995, by and between
Cardkey Systems, Inc. and Michael H. Wolpert.
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
10.34* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Michael H. Wolpert.
10.35* -- Lease Agreement, dated November 14, 1996, between Amtech
Corporation and Rosemeade Office Development, L.P.
13.1* -- Portions of the 1996 Annual Report to Shareholders that are
incorporated by reference into Parts II and IV of this Form
10-K.
21.1* -- Subsidiaries of the Company.
23.1* -- Consent of Independent Auditors.
24.1 -- Power of attorney (included on page 17 of this Annual Report on
Form 10-K).
27.1* -- Financial Data Schedule
</TABLE>
* Filed herewith
(b) Reports on Form 8-K
No reports of the registrant on Form 8-K have been filed with the
Securities and Exchange Commission during the three months ended December 31,
1996.
15
<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, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS,
STATE OF TEXAS, ON MARCH 20, 1997.
AMTECH CORPORATION
By: /s/ Steve M. York
--------------------------------------
Steve M. York
Senior Vice President, Chief Financial
Officer and Treasurer
16
<PAGE>
POWER OF ATTORNEY
We, the undersigned, directors and officers of Amtech Corporation (the
"Company"), do hereby severally constitute and appoint G. Russell Mortenson and
Steve M. York and each or either of them, our true and lawful attorneys and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, and to file the same with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys and agents, and each or either of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys and
agents, and each of them, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- - --------- ----- ----
<S> <C> <C>
/s/ G. Russell Mortenson President, Chief Executive March 20, 1997
- - -------------------------- Officer, and Director
(G.Russell Mortenson) (Principal Executive Officer)
/s/ Steve M. York Senior Vice President, Chief March 20, 1997
- - -------------------------- Financial Officer, and Treasurer
(Steve M. York) (Principal Financial and Accounting
Officer)
/s/ David P. Cook Director March 20, 1997
- - --------------------------
(David P. Cook)
/s/ Stuart M. Evans Director March 20, 1997
- - --------------------------
(Stuart M. Evans)
/s/ Gary J. Fernandes Director March 20, 1997
- - --------------------------
(Gary J. Fernandes)
/s/ Elmer W. Johnson Director March 20, 1997
- - --------------------------
(Elmer W. Johnson)
/s/ Dr. Jeremy A. Landt Director March 20, 1997
- - --------------------------
(Dr. Jeremy A. Landt)
/s/ James S. Marston Director March 20, 1997
- - --------------------------
(James S. Marston)
/s/ Antonio R. Sanchez, Jr. Director March 20, 1997
- - ---------------------------
(Antonio R. Sanchez, Jr.)
</TABLE>
17
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -----------
2.1 -- Purchase Agreement among Amtech Corporation, Assa Abloy, AB,
etal. Filed under exhibit number 2.1 to the Company's Quarterly
----
Report on Form 10-Q for the quarterly period ended June 30, 1995,
and incorporated herein by reference.
2.2 -- List of exhibits to Purchase Agreement among Amtech Corporation,
Assa Abloy, AB, etal. The Registrant agrees to furnish
----
supplementally to the Commission upon request a copy of any of
these exhibits.
2.3 -- Amendment to Purchase Agreement listed in Exhibit 2.1. Filed
under exhibit number 2.2 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995, and
incorporated herein by reference.
2.4 -- Promissory Note of Viking Acquisition Company, in the original
principal amount of $6,000,000, dated August 1, 1995, payable to
Cardkey Systems, Inc. Filed under exhibit number 2.3 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1995, and incorporated herein by reference.
2.5 -- Guaranty of Amtech Corporation, dated August 1, 1995. Filed
under exhibit number 2.4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1995, and
incorporated herein by reference.
3.1 -- Articles of Incorporation of the Company, together with all
amendments thereto. Filed under exhibit number 3.1 in the
Company's Registration Statement on Form S-1 (Commission No. 33-
46398) and incorporated herein by reference.
3.2* -- Restated Bylaws of the Company, dated February 25, 1997.
4.1 -- Specimen Certificate for Common Stock of the Company. Filed under
exhibit number 4.1 in the Company's Registration Statement on
Form S-1 (Commission No. 33-31209) and incorporated herein by
reference.
10.1 -- 1988 Stock Option Plan of the Company. Filed under exhibit number
10.44 in the Company's Registration Statement on Form S-1
(Commission No. 33-31209) and incorporated herein by reference.
10.2 -- 1989 Stock Option Plan of the Company. Filed under exhibit number
10.45 in the Company's Registration Statement on Form S-1
(Commission No. 33-31209) and incorporated herein by reference.
10.3 -- 1990 Stock Option Plan of the Company. Filed under Appendix A in
the Company's Proxy Statement for the Annual Meeting of
Shareholders on May 24, 1990, and incorporated herein by
reference.
<PAGE>
10.4 -- Amended and Restated 1992 Stock Option Plan of the Company.
Filed under exhibit number 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended March 31, 1996, and
incorporated herein by reference.
10.5* -- 401(k) Retirement Plan of the Company and related Adoption
Agreement.
10.6 -- Amended and Restated 1995 Long-Term Incentive Plan of the
Company. Filed under exhibit number 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996, and incorporated herein by reference.
10.7 -- 1996 Directors' Stock Option Plan of the Company. Filed under
Annex I in the Company's Proxy Statement for the Annual Meeting
of Shareholders held April 25, 1996, and incorporated herein by
reference.
10.8 -- 1996 Employee Stock Purchase Plan of the Company. Filed under
Annex II in the Company's Proxy Statement for the Annual Meeting
of Shareholders held April 25, 1996, and incorporated herein by
reference.
10.9 -- 1996 Executive Management Cash Bonus Plan of the Company. Filed
under exhibit number 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1996, and
incorporated herein by reference.
10.10 -- Director Retainer Plan. Filed under exhibit number 10.2 in the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1993, and incorporated herein by reference.
10.11 -- Amended Employment Agreement, dated January 1, 1991, by and
between the Company and G. Russell Mortenson. Filed under exhibit
number 10.10 in the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated herein by
reference.
10.12 -- Amendment to Employment Agreement, dated January 10, 1992, by and
between the Company and G. Russell Mortenson. Filed under exhibit
number 10.11 in the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated herein by
reference.
10.13 -- Second Amendment to Employment Agreement, effective November 10,
1992, by and between the Company and G. Russell Mortenson. Filed
under exhibit number 10.13 in the Company's Annual Report on Form
10-K for the year ended December 31, 1992, and incorporated
herein by reference.
10.14 -- Third Amendment to Employment Agreement, dated October 19, 1994,
by and between Amtech Corporation and G. Russell Mortenson. Filed
under exhibit number 10.27 in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1994, and
incorporated herein by reference.
10.15 -- Fourth Amendment to Employment Agreement, effective January 1,
1995, by and between Amtech Corporation and G. Russell Mortenson.
Filed under exhibit number 10.18 in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
<PAGE>
10.16 -- Fifth Amendment to Employment Agreement, effective January 1,
1996, by and between Amtech Corporation and G. Russell Mortenson.
10.17* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and G. Russell Mortenson.
10.18 -- Employment Agreement, dated August 1, 1990, by and between Amtech
Systems Corporation and Jeremy A. Landt. Filed under exhibit
number 10.12 in the Company's Annual Report on Form 10-K for the
year ended December 31, 1991, and incorporated herein by
reference.
10.19 -- Amendment to Employment Agreement, dated November 10, 1992, by
and between Amtech Systems Corporation and Jeremy A. Landt. Filed
under exhibit number 10.22 in the Company's Annual Report on Form
10-K for the year ended December 31, 1992, and incorporated
herein by reference.
10.20 -- Second Amendment to Employment Agreement, effective October 19,
1994, by and between Amtech Systems Corporation and Jeremy A.
Landt. Filed under exhibit number 10.21 in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
10.21 -- Third Amendment to Employment Agreement, effective January 1,
1995, by and between Amtech Systems Corporation and Jeremy A.
Landt. Filed under exhibit number 10.22 in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference.
10.22* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Jeremy A. Landt.
10.23 -- Employment Agreement, dated August 6, 1991, by and between Amtech
Corporation and Steve M. York. Filed under exhibit number 10.13
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1991, and incorporated herein by reference.
10.24 -- Amendment No. 1 to Employment Agreement, effective May 7, 1993,
by and between Amtech Corporation and Steve M. York. Filed under
exhibit number 10.24 in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, and incorporated herein by
reference.
10.25 -- Second Amendment to Employment Agreement, dated October 19, 1994,
by and between Amtech Corporation and Steve M. York. Filed
under exhibit number 10.28 in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1994, and
incorporated herein by reference.
10.26 -- Third Amendment to Employment Agreement, effective January 1,
1995, by and between Amtech Corporation and Steve M. York. Filed
under exhibit number 10.26 in the Company's Annual Report on Form
<PAGE>
10-K for the year ended December 31, 1994, and incorporated
herein by reference.
10.27 -- Fourth Amendment to Employment Agreement, effective August 1,
1995, by and between Amtech Corporation and Steve M. York. Filed
under exhibit number 10.2 in the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995, and
incorporated herein by reference.
10.28* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Steve M. York.
10.29 -- Employment Agreement, effective January 25, 1995, by and between
Ametch Europe Limited (formerly Cotag International Limited) and
Stuart M. Evans. Filed under exhibit number 10.3 in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995, and incorporated herein by reference.
10.30 -- First Amendment to Employment Agreement, effective August 1,
1995, by and between Amtech Europe Limited and Stuart M. Evans.
Filed under exhibit number 10.4 in the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1995,
and incorporated herein by reference.
10.31* -- Second Amendment to Employment Agreement effective November 4,
1996, by and between Amtech Europe Limited and Stuart M. Evans.
10.32* -- Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Stuart M. Evans.
10.33 -- Employment Agreement, effective August 1, 1995, by and between
Cardkey Systems, Inc. and Michael H. Wolpert.
10.34* -- Severance Agreement, dated November 4, 1996, between Amtech
Corportion and Michael H. Wolpert.
10.35* -- Lease Agreement, dated November 14, 1996, between Amtech
Corporation and Rosemeade Office Development, L.P.
13.1* -- Portions of the 1996 Annual Report to Shareholders that are
incorporated by reference into Parts II and IV of this Form 10-K.
21.1* -- Subsidiaries of the Company.
23.1* -- Consent of Independent Auditors.
24.1 -- Power of attorney (included on page 17 of this Annual Report on
Form 10-K).
27.1* -- Financial Data Schedule
* Filed herewith
<PAGE>
EXHIBIT 3.2
RESTATED BYLAWS
OF
AMTECH CORPORATION
FEBRUARY 25, 1997
<PAGE>
RESTATED BYLAWS
OF
AMTECH CORPORATION
ARTICLE I
OFFICES
-------
1. Principal Office. The principal office of the Corporation shall be
----------------
located in the City of Dallas, County of Dallas, State of Texas. The Corporation
also may have offices at such other places, both within and without the State of
Texas, as the Board of Directors may from time to time determine or the business
of the Corporation may require.
2. Registered Office. The registered office of the Corporation, required
-----------------
by the Texas Business Corporation Act (the "Act") to be maintained in the State
of Texas, may be, but need not be, the same as its principal place of business
in the State of Texas or the business office of a domestic or foreign
corporation authorized to transact business in the State of Texas. The address
of the registered office of the corporation may be changed from time to time by
resolution of the Board of Directors.
ARTICLE II
SHAREHOLDERS
------------
1. Time and Place of Meeting. Meetings of the shareholders shall be held
-------------------------
at such times and at such places, within or without the State of Texas, as shall
be determined by the Board of Directors.
2. Annual Meetings. Annual meetings of shareholders shall be held on
---------------
such date and at such time and place during the fourth month of each fiscal year
(beginning in 1988) as shall be determined by the Board of Directors of the
Corporation, at which they shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting. The date of the
annual meeting of the shareholders may be a date or time different than that set
forth above if the Board of Directors so determines and so states in the notice
of the meeting or in a duly executed waiver thereof.
3. Special Meetings. Special meetings of the shareholders may be called
----------------
at any time by the President or the Board of Directors, and shall be called by
the President or the Secretary at the request in writing of a majority of the
Board of Directors or at the request in writing of the holders of not less than
ten percent (10%) of all the shares issued, outstanding and entitled to vote at
the meeting. Such request shall state the purpose or purposes of the proposed
meeting. Business transacted at special meetings shall be confined to the
purposes stated in the notice of the meeting.
<PAGE>
4. Notice. Written or printed notice stating the place, day and hour of
------
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) nor more than
fifty (50) days before the date of the meeting, either personally or by mail, by
or at the discretion of the President, the Secretary, or the officer or person
calling the meeting, to each shareholder entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
share transfer records of the Corporation.
5. Closing of Share Transfer Records and Fixing Record Date. For the
--------------------------------------------------------
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose (other than determining shareholders entitled to
consent to action by shareholders proposed to be taken without a meeting of
shareholders), the Board of Directors of the Corporation may provide that the
share transfer records shall be closed for a stated period but not to exceed, in
any case, sixty (60) days. If the share transfer records shall be closed for
the purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such records shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the share transfer
records, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than sixty (60) days and, in the case of a meeting of shareholders, not less
than ten (10) days, prior to the date on which the particular action requiring
such determination of shareholders is to be taken. If the share transfer
records are not closed and no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof except where the determination has been made through the closing of the
share transfer records and the stated period of closing has expired.
Unless a record date shall have previously been fixed or determined
pursuant to this section, whenever action by shareholders is proposed to be
taken by consent in writing without a meeting of shareholders, the Board of
Directors may fix a record date for the purpose of determining shareholders
entitled to consent to that action, which record date shall not precede, and
shall not be more than ten (10) days after, the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors and the prior action of the Board of
Directors is not required by this section, the record date for determining
shareholders entitled to consent to action in writing without a meeting shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by delivery to its
registered office, its principal place of business, or an officer or agent of
the Corporation having custody of the books in which proceedings of meetings of
shareholders are recorded. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Corporation's
principal place of business shall be addressed to the President. If no record
date shall have been fixed by the Board of Directors and prior action of the
Board of Directors is required by this section, the record date for determining
shareholders entitled to consent to action in writing without a meeting shall be
at the close of business on the date on which the Board of Directors adopts a
resolution taking such prior action.
2
<PAGE>
6. Voting List. The officer or agent of the Corporation having charge of
-----------
the stock transfer books for shares of the Corporation shall make, at least ten
(10) days before each meeting of the shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of voting
shares held by each, which list, for a period of ten (10) days prior to such
meeting, shall be kept on file at the registered office or principal place of
business of the Corporation and shall be subject to inspection by any
shareholder at any time during the usual business hours. Such list shall also
be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meetings of shareholders.
7. Quorum. A quorum shall be present at all meetings of shareholders for
------
the transaction of business if the holders of a majority of the issued and
outstanding shares entitled to vote are represented at the meeting in person or
by proxy, unless otherwise provided in the Articles of Incorporation or the Act.
However, the shareholders represented in person or by proxy at a meeting of
shareholders at which a quorum is not present may adjourn the meeting until such
time and to such place as may be determined by a vote of the holders of a
majority of the shares represented in person or by proxy at that meeting. Once
a quorum is present at a meeting of shareholders, the shareholders represented
in person or by proxy at the meeting may conduct such business as may be
properly brought before the meeting until it is adjourned, and the subsequent
withdrawal from the meeting of any shareholder or the refusal of any shareholder
represented in person or by proxy to vote shall not affect the presence of a
quorum at the meeting.
8. Voting. With respect to any matter, other than the election of
------
directors or a matter for which the affirmative vote of the holders of a
specified portion of the shares entitled to vote is required by this section,
the affirmative vote of the holders of a majority of the shares entitled to vote
on that matter and represented in person or by proxy at a meeting of
shareholders at which a quorum is present shall be the act of the shareholders.
Directors shall be elected by a plurality of the votes cast by the holders
of shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present.
Each shareholder shall at every meeting of the shareholders be entitled to
one vote in person or by proxy for each share having voting power held by such
shareholder, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by the Articles of Incorporation. At each
election for directors every shareholder shall be entitled to vote, in person or
by proxy, the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to vote.
Cumulative voting is prohibited by the Articles of Incorporation. Every proxy
must be executed in writing by the shareholder. A telegram, telex, cablegram, or
similar transmission by the shareholder, or a photographic, photostatic,
facsimile, or similar reproduction of a writing executed by the shareholder,
shall be treated as an execution in writing for purposes of this section. No
proxy shall be valid after eleven (11) months from the date of its execution
unless otherwise provided therein. Each proxy shall be revocable unless
expressly provided therein to be irrevocable or unless otherwise made
irrevocable by law.
3
<PAGE>
An irrevocable proxy, if noted conspicuously on the certificate
representing the shares that are subject to the irrevocable proxy, shall be
specifically enforceable against the holder of those shares or any successor or
transferee of the holder. Unless noted conspicuously on the certificate
representing the shares that are subject to the irrevocable proxy, an
irrevocable proxy, even though otherwise enforceable, is ineffective against a
transferee for value without actual knowledge of the existence of the
irrevocable proxy at the time of the transfer or against any subsequent
transferee (whether or not for value), but such an irrevocable proxy shall be
specifically enforceable against any other person who is not a transferee for
value from and after the time that the person acquires actual knowledge of the
existence of the irrevocable proxy.
Shares registered in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such corporation may prescribe or, in
the absence of such provisions, as the board of directors of such corporation
may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name as trustee.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without being transferred into his name, if such authority is contained
in an appropriate order of the court that appointed the receiver.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
9. Action by Unanimous Consent. Any action required to be taken at any
---------------------------
annual or special meeting of shareholders, or any action which may be taken at
any annual or special meeting of shareholders, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall have been signed by the holder or
holders of all the shares entitled to vote with respect to the action that is
the subject of the consent.
Every written consent shall bear the date of signature of each shareholder
who signs the consent. No written consent shall be effective to take the action
that is the subject of the consent unless, within sixty (60) days after the date
of the earliest dated consent delivered to the corporation in the manner
required by this section, a consent or consents signed by the holder or holders
of shares having not less than the minimum number of votes that would be
necessary to take the action that is the subject of the consent are delivered to
the Corporation by delivery to its registered office, its principal place of
business, or an officer or agent of the corporation having custody of the books
in which proceedings of meetings of shareholders are recorded. Delivery shall be
by hand or certified or registered mail, return receipt requested. Delivery to
the Corporation's principal place of business shall be addressed to the
President.
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A telegram, telex, cablegram, or similar transmission by a shareholder,
or a photographic, photostatic, facsimile, or similar reproduction of a writing
signed by a shareholder, shall be regarded as signed by the shareholder for
purposes of this section.
Prompt notice of the taking of any action by shareholders without a meeting
by less than unanimous written consent shall be given to those shareholders who
did not consent in writing to the action.
If any action by shareholders is taken by written consent, any articles or
documents filed with the Secretary of State of the State of Texas as a result of
the taking of the action shall state, in lieu of any statement required by this
section or by the Act concerning any vote of shareholders, that written consent
has been given in accordance with the provisions of this section and that any
written notice required by this section has been given.
10. Presence at Meetings by Means of Communication Equipment. Shareholders
--------------------------------------------------------
may participate in and hold a meeting of such shareholders by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
ARTICLE III
DIRECTORS
---------
1. Number of Directors. The number of directors of the Corporation shall
-------------------
be fixed from time to time by resolution of the Board of Directors. Until
otherwise fixed by resolution of the Board of Directors, the number of directors
shall be six. No decrease in the number of directors shall have the effect of
reducing the term of any incumbent director. Directors shall be elected at the
annual meeting of the holders of shares entitled to vote in the election of
directors, except as provided in Section 2 of this Article III, and each
director shall hold office until (i) his successor is elected and qualified,
(ii) he dies, (iii) he resigns, or (iv) he is removed. Directors need not be
residents of the State of Texas or shareholders of the Corporation.
2. Vacancies. Subject to other provisions of this section, any vacancy
---------
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining directors, though the remaining directors may
constitute less than a quorum of the Board of Directors as fixed by Section 10
of this Article III. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office. Any directorship to be filled
by reason of an increase in the number of directors may be filled by unanimous
vote of the existing directors; provided, however, that the Board of Directors
may not fill more than two (2) such directorships during the period between any
two (2) successive annual meetings of shareholders. Any vacancy occurring in
the Board of Directors or any directorship to be filled by reason of an increase
in the number of directors may be filled by election at an annual or special
meeting of the shareholders called for that purpose. Shareholders holding a
majority of the issued and outstanding shares entitled to vote may, at any time,
terminate the term of office of all or any of the directors, with or without
cause, by a vote at any annual or special meeting, or by written consent, signed
by the holders of all of such shares, and filed with the secretary or, in his
absence, with any other officer.
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Such removal shall be effective immediately upon such shareholder action even if
successors are not elected simultaneously, and the vacancies on the Board of
Directors caused by such action shall be filled only by election by the
shareholders. Furthermore, the Board of Directors may, by the vote or by the
written consent of 66% or more of the entire Board of Directors, terminate the
term of office of any director who was within the previous 90 day period an
employee of the Corporation (or one or more of its affiliates) but who is no
longer an employee of the Corporation or of any of its affiliates. Such removal
shall be effective immediately upon such action by the Board of Directors even
if a successor is not elected simultaneously.
3. General Powers. The business of the Corporation shall be managed by
--------------
its Board of Directors, which may exercise all powers of the Corporation and do
all such lawful acts and things, as are not by the Act, the Articles of
Incorporation or these Bylaws directed or required to be exercised or done by
the shareholders.
4. Place of Meetings. The Board of Directors of the Corporation may hold
-----------------
meetings, both regular and special, either within or without the State of Texas.
5. Annual Meetings. The first meeting of each newly elected Board of
---------------
Directors shall be held, without further notice, immediately following the
annual meeting of shareholders at which such directors were elected, provided a
quorum shall be present. In the event such meeting is not held immediately
following the annual meeting, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
of notice signed by all of the directors.
6. Regular Meetings. Regular meetings of the Board of Directors shall be
----------------
held without special notice at such time and at such place as shall from time to
time be determined by the Board of Directors.
7. Special Meetings. Special meetings of the Board of Directors may be
----------------
called by or at the request of the President, and shall be called by the
Secretary on the written request of a majority of the incumbent directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
8. Notice of Special Meetings. Notice of any special meetings shall be
--------------------------
given at least forty-eight (48) hours prior thereto if given either personally
(including written notice delivered personally or telephone notice) or by
telegram, and at least one hundred twenty (120) hours prior thereto if given by
written notice mailed to each director at the address of his business or
residence. If mailed, the notice shall be deemed to be delivered when deposited
in the United States mail addressed, in the above-specified manner, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice for such meeting.
9. Waiver of Notice. Any director may waive notice of any meeting, as
----------------
provided in Article IV, Section 2, of these Bylaws. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
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10. Quorum and Voting. At all meetings of the Board of Directors, the
-----------------
presence of a majority of the number of directors fixed by Article III, Section
1, of these Bylaws shall constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by the Act, the Articles of
Incorporation or these Bylaws. If a quorum shall not be present at any meeting
of the Board of Directors, a majority of the directors present thereat may
adjourn the meeting from time to time without notice other than announcement at
the meeting, until a quorum shall be present.
11. Committees. The Board of Directors by resolution passed by a majority
----------
of the full Board of Directors may designate an Executive Committee, to consist
of two or more directors, one of whom shall be designated as Chairman and shall
preside at all meetings of such Executive Committee and at least one of whom
shall be a person other than an officer or employee of the Corporation or its
subsidiaries. The Board of Directors may also designate one or more directors
to be alternate members of such Executive Committee, who may, subject to any
limitations imposed by the Board of Directors, replace absent or disqualified
members at any meeting of the Executive Committee. At any meeting of the
Executive Committee a majority of the members of the Executive Committee shall
constitute a quorum for the transaction of business, and the act of a majority
of the members present at any meeting at which a quorum is present shall be the
act of the Executive Committee. To the extent provided in the resolution of the
Board of Directors, the Executive Committee shall have and may exercise all of
the authority of the Board of Directors, and shall have power to authorize the
seal of the corporation to be affixed to all papers which may require it,
subject to the limitations set forth in the Act, the Articles of Incorporation
or these Bylaws; provided, however, that the Executive Committee shall not have
the authority to authorize the issuance of shares of stock of the Corporation or
to declare dividends with respect to shares of stock of the Corporation. The
designation of such Executive Committee and the delegation thereto of authority
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility imposed upon it or him by law. Meetings of the Executive
Committee may be called and notices given in the same manner as calling and
giving notice of special meetings of the Board of Directors. Any member of the
Executive Committee may be removed, for or without cause, by the affirmative
vote of a majority of the full Board of Directors. If any permanent vacancy or
vacancies occur in the Executive Committee, such vacancy or vacancies shall be
filled by the affirmative vote of a majority of the full Board of Directors.
The Board of Directors by resolution passed by a majority of the full
Board of Directors may designate other committees, each committee to consist of
two or more directors, one of whom shall be designated as Chairman and shall
preside at all meetings of such committee. The Board of Directors may also
designate one or more directors to be alternate members of any committee, who
may, subject to any limitations imposed by the Board of Directors, replace
absent or disqualified members at any meeting of that committee. To the extent
provided in the resolution of the Board of Directors, the committees shall have
such power and authority and shall perform such functions as may be provided in
such resolution, subject to the limitations set forth in the Act, the Articles
of Incorporation or these Bylaws. At any meeting of the committee a majority of
the members of the committee shall constitute a quorum for the transaction of
business, and the act of a majority of the members present at any meeting at
which a quorum is present shall be the act of the committee. Such committee or
committees shall have such name or names as may be designated by the Board of
Directors.
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The Executive Committee and all other such committees shall keep regular
minutes of their proceedings and report the same to the Board of Directors at
the meeting of the Board of Directors next succeeding such action.
12. Compensation of Directors. Directors, as such, shall not receive any
-------------------------
stated salary for their services, but by resolution of the Board of Directors, a
fixed sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board of Directors. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of any committee may, by resolution of the Board of Directors, be allowed like
compensation for attending meetings of such committee.
13. Action by Unanimous Written Consent. Any action required or permitted
-----------------------------------
to be taken at any meeting of the Board of Directors or of a committee
designated by the Board of Directors may be taken without a meeting if a written
consent, setting forth the action so taken, is signed by all the members of the
Board of Directors or the committee, as the case may be, and such consent shall
have the same force and effect as a unanimous vote at a meeting.
14. Presence at Meetings by Means of Communication Equipment. Members of
--------------------------------------------------------
the Board of Directors of the Corporation or any committee designated by the
Board of Directors may participate in and hold a meeting of the Board of
Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV
NOTICES
-------
1. Form of Notice. Whenever under the provisions of the Act, the Articles
--------------
of Incorporation or these Bylaws, notice is required to be given to any director
or shareholder, and no provision is made as to how such notice shall be given,
such notice shall be given in writing, by mail, postage prepaid, addressed to
such director or shareholder at such address as appears on the books of the
Corporation, provided that such notice as is required to be given to any
director also may be given either personally (including written notice delivered
personally or telephone notice) or by prepaid facsimile. Any notice required or
permitted to be given by mail shall be deemed to be given at the time when the
same is deposited in the United States mail addressed in the above-specified
manner, with postage thereon prepaid.
2. Waiver. Whenever any notice is required to be given to any director
------
or shareholder of the Corporation under the provisions of the Act, the Articles
of Incorporation or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated in such notice, shall be equivalent to the giving of such notice.
8
<PAGE>
ARTICLE V
OFFICERS
--------
1. General. The elected officers of the Corporation shall be a
-------
President, one or more Vice Presidents, with or without such descriptive titles
as the Board of Directors shall deem appropriate, a Secretary and a Treasurer.
The Board of Directors by resolution may also appoint one or more Assistant
Secretaries, Assistant Treasurers and such other officers and assistant officers
and agents as from time to time may appear to be necessary or advisable in the
conduct of the affairs of the Corporation. Any two or more offices may be held
by the same person.
2. Election. The Board of Directors at its first meeting after each
--------
annual meeting of the shareholders shall elect and appoint the officers to fill
the positions designated in Section 1 of this Article V. The Board of Directors
may appoint such other officers and agents as it shall deem necessary and may
determine the salaries of all officers and agents from time to time. The
officers shall hold office until their successors are chosen and qualified. Any
officer elected or appointed by the Board of Directors may be removed, for or
without cause, at any time by a majority vote of the directors present at a
meeting of the Board of Directors at which a quorum is present, when in its
judgment the best interest of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
persons so removed. Election or appointment of an officer or agent shall not of
itself create contract rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise shall be filled by the
Board of Directors.
3. Chairman of the Board. The Chairman of the Board shall be chosen from
---------------------
among the non-employee directors. He shall preside at all meetings of the Board
of Directors, unless he shall be absent or unless he shall, at his election,
designate the President to preside in his stead, and shall have such incidental
powers and duties as are related to the conduct of such meetings. The Chairman
of the Board shall also be an ex-officio member of all standing committees.
4. President. The President shall be the Chief Executive Officer of the
---------
Corporation and shall be responsible for the operations and business affairs of
the Corporation. He shall preside at all meetings of the shareholders and of
the Board of Directors in the absence of the Chairman of the Board, unless he
shall be absent or unless he shall, at his election, designate another officer
to preside in his stead. He shall, in general, have supervisory power over all
of the other officers and the business activities of the Corporation, subject to
the direction of the Board of Directors. He shall have authority to execute
bonds, deeds and contracts in the name of the Corporation and to affix the
corporate seal thereto; to sign stock certificates; to cause the employment or
appointment of such employees and agents of the Corporation as the proper
conduct of operations may require, and to fix their compensation, subject to the
provisions of these Bylaws and such resolutions as may be adopted by the Board
of Directors from time-to-time; to remove or suspend any employee or agent who
shall have been employed or appointed under his authority or under authority of
an officer subordinate to him; to suspend for cause, pending final action by the
Board of Directors which shall have supervisory power over him, any officer
subordinate to him and, in general, to exercise all powers usually pertaining to
the office of the President of a corporation, except as otherwise provided in
these Bylaws. The President shall see that all orders and resolutions of the
Board of Directors and committees thereof are carried into effect.
9
<PAGE>
5. Vice Presidents. The Vice President or, if there be more than one,
---------------
the Vice Presidents, shall perform all such duties and services as shall be
assigned to or required of them from time to time by the Board of Directors, the
Executive Committee and any officer superior to him.
6. Secretary and Assistant Secretaries. The Secretary shall attend all
-----------------------------------
meetings of the Board of Directors and all meetings of the shareholders and
record all proceedings of the meetings of the shareholders of the Corporation
and of the Board of Directors in a book to be kept for that purpose, and shall
perform like duties for the Executive Committee when required. He shall give,
or cause to be given, notice of all meetings of the shareholders and meetings of
the Board of Directors. He shall have charge of the seal of the Corporation and
have authority to affix the same to any instrument requiring it, and when so
affixed, it shall be attested by his signature or by the signature of the
Treasurer, an Assistant Secretary or an Assistant Treasurer, which may be in
facsimile. He shall keep and account for all books, documents, papers and
records of the Corporation except those for which some other officer or agent is
properly accountable. He shall have authority to sign stock certificates, and
shall generally perform all the duties usually appertaining to the office of the
Secretary of a corporation.
Assistant Secretaries, in the order of their seniority unless otherwise
determined by the Board of Directors, shall assist the Secretary, and in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary. They shall perform such other duties and have such
other powers as the Board of Directors may prescribe from time to time.
7. Treasurer and Assistant Treasurers. The Treasurer shall be the chief
----------------------------------
financial officer of the Corporation and shall have active control of and shall
be responsible for all matters pertaining to the finances of the Corporation.
He shall have the care and custody of all monies, funds and securities of the
Corporation and shall deposit all monies and other valuable effects in the name
of and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall cause to be recorded a statement
of all receipts and disbursements of the Corporation in order that proper
entries may be made in the books of account. He shall have the power to sign
stock certificates, to endorse for deposit or collection, or otherwise, all
checks, drafts, notes, bills of exchange, or other commercial paper payable to
the Corporation, and to give proper receipts or discharges for all payments to
the Corporation. He shall be responsible for all terms of credit granted by the
Corporation and for the collection of all of its accounts. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Assistant Treasurers, in the order of their seniority unless otherwise
determined by the Board of Directors, shall assist the Treasurer, and in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. They shall perform such other duties and have such
other powers as the Board of Directors may prescribe from time to time.
8. Bonding. If required by the Board of Directors, all or certain of the
-------
officers shall give the Corporation a bond in such form, in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors, for
the faithful performance of the duties of their office and for the restoration
to the Corporation, in case of their death, resignation, retirement or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in their possession or under their control belonging to the
Corporation.
10
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ARTICLE VI
----------
CERTIFICATES REPRESENTING SHARES
--------------------------------
1. Form of Certificates. The Corporation shall deliver certificates
--------------------
representing all shares to which shareholders are entitled. Certificates
representing shares of the Corporation shall be in such form as shall be
determined by the Board of Directors and shall be numbered consecutively and
entered in the books of the Corporation as they are issued. Each certificate
shall state on the face thereof that the Corporation is organized under the laws
of the State of Texas; the name of the registered holder; the number, class of
shares and the designation of the series, if any, which said certificate
represents; and either the par value of the shares or a statement that the
shares are without par value. Each certificate shall also set forth on the back
thereof, a full or summary statement of matters required by the Act or the
Articles of Incorporation to be described on certificates representing shares,
and shall contain a statement on the face thereof referring to the matters set
forth on the back thereof. Certificates shall be signed by the President and
the Secretary or any Assistant Secretary, and may be sealed with the seal of the
Corporation or a facsimile thereof. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been used on such
certificate or certificates, shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the Corporation or its
agents, such certificate or certificates may be adopted, nevertheless, by the
Corporation and issued and delivered as though the person or persons who signed
the certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
Corporation.
2. Restrictions on Transferability of Shares. In the event any
-----------------------------------------
restriction on the transfer, or registration of the transfer, of shares shall be
imposed or agreed to by the Corporation, as permitted by law, each certificate
representing shares so restricted shall conspicuously set forth a full or
summary statement of the restriction on the face of the certificate, or shall
set forth such statement on the back of the certificate and conspicuously refer
to the same on the face of the certificate, or shall conspicuously state on the
face or back of the certificate that such restriction exists pursuant to a
specified document and that the Corporation will furnish to the holder of the
certificate without charge upon written request to the Corporation at its
principal place of business or registered office a copy of the specified
document.
3. Lost Certificates. The Corporation may direct that a new certificate
-----------------
or certificates be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost or destroyed. When authorizing the issuance of a new
certificate or certificates, the Board of Directors, in its discretion and as a
condition precedent to the issuance thereof, may require the owner of the lost
or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and give the Corporation a
bond in such form, in such sum, and with such surety or sureties as the
Corporation may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate alleged to have been lost or
destroyed.
4. Transfer of Shares. Shares of stock shall be transferable on the books
------------------
of the Corporation by the holder thereof in person or by his duly authorized
attorney. Subject to any restrictions on transfer set forth in the Articles of
Incorporation of the Corporation, these Bylaws or any agreement among
shareholders to which the Corporation is a party or has notice, upon surrender
to the Corporation or to
11
<PAGE>
the transfer agent of the Corporation of the certificate representing shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
5. Registered Shareholders. The Corporation shall be entitled to
-----------------------
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VII
INDEMNIFICATION
---------------
1. Indemnity. Each person who was or is made a party or is threatened to
---------
be made a party to or is otherwise involved in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and including, without
limitation, any "proceeding" referred to in art. 2.02-1 of the Texas Business
Corporation Act (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust, or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "Indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director of officer shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Texas Business Corporation Act or other applicable law of the
State of Texas, as the same exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability, and loss (including, without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties,
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such Indemnitee in connection therewith, and such indemnification shall continue
as to an Indemnitee who has ceased to be a director or officer and shall inure
to the benefit of the Indemnitee's heirs, executors, and administrators;
provided, however, that, except for a proceeding brought by an Indemnitee to
enforce his or her rights to indemnification, the Corporation shall indemnify
any such Indemnitee in connection with a proceeding (or part thereof) initiated
by such Indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation. The right to indemnification
conferred in this Article VII shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the Texas Business Corporation Act or
other applicable law of the State of Texas requires, an advancement of expenses
incurred by an Indemnitee in his or her capacity as a director of officer (and
not in any other capacity in which service was or is rendered by such
Indemnitee, including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking complying
in all respects with the requirements of the Texas Business Corporation Act or
other applicable law of the State of Texas (hereinafter an "undertaking"), by or
on behalf of such Indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
Indemnitee is not entitled to be indemnified for such expenses under this
Article VII or
12
<PAGE>
otherwise. If the Corporation makes an advancement of expenses to an Indemnitee,
the Corporation shall be subrogated to every right of recovery the Indemnitee
may have against any insurance carrier from whom the Corporation has purchased
insurance for such purpose.
2. Remedy. If a claim under this Article VII is not paid in full by the
------
Corporation within 60 days after a written claim has been received by the
Corporation, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit, including, without limitation, any appeal. In (i) any suit brought by the
Indemnitee to enforce a right to indemnification (but not in a suit brought by
the Indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the Indemnitee
has not met the applicable standard of conduct set forth in the Texas Business
Corporation Act or other applicable law of the State of Texas. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its shareholders) to have made a determination prior to the
commencement of such suit that the Indemnitee met the applicable standard of
conduct set forth in the Texas Business Corporation Act or other applicable law
of the State of Texas, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its shareholders) that the
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that the Indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the Indemnitee, be a defense to such
suit. In any suit brought by the Indemnitee to enforce a right to
indemnification or to an advancement of expenses or by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
burden of proving that the Indemnitee is not entitled to be indemnified, or to
such advancement of expenses, under this Article VII or otherwise, shall be on
the Corporation.
3. Employees and Agents. The Corporation may, to the extent authorized
--------------------
from time to time by the Board of Directors, grant rights to indemnification and
to the advancement of expenses to any employee or agent of the Corporation to
the fullest extent of the provisions of this Article VII with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
4. Partial Indemnification; Interest.
---------------------------------
(A) If it is determined pursuant to the provisions of the Texas Business
Corporation Act or other applicable law of the State of Texas, or by the court
before which such action was brought, that an Indemnitee is entitled to
indemnification as to some claims, issues, or matters, but not as to other
claims, issues, or matters, involved in any action, no matter by whom brought,
the person or persons making such determination (or the court) shall authorize
the reasonable proration of such expenses, judgments, penalties, fines, and
amounts incurred in settlement with respect to which indemnification is sought
by the Indemnitee, among such claims, issues, or matters as the person or
persons making such determination (or the court) shall deem appropriate in light
of all of the circumstances of such action.
(B) If it is determined pursuant to the provisions of the Texas Business
Corporation Act or other applicable law of the State of Texas, or by the court
before which such action was brought, that certain amounts incurred by the
Indemnitee are, for whatever reason, unreasonable in amount, the person or
persons making such determination (or the court) shall authorize indemnification
to be paid by the
13
<PAGE>
Corporation to the Indemnitee for only such amounts as the person or persons
making such determination (or the court) shall deem reasonable in light of all
of the circumstances of such action.
(C) To the extent deemed appropriate pursuant to the provisions of the
Texas Business Corporation Act or other applicable law of the State of Texas, or
by the court before which such action was brought, interest shall be paid by the
Corporation to the Indemnitee, at a reasonable interest rate, for amounts for
which the Corporation indemnifies the Indemnitee.
5. Nonexclusivity. The right to indemnification and advancement of
--------------
expenses provided to an Indemnitee pursuant to this Article VII shall not be
deemed exclusive of any other rights to which the Indemnitee may be entitled
under any charter provision, bylaw, agreement, resolution, vote of shareholders
or disinterested directors, or otherwise, including, without limitation, under
the Texas Business Corporation Act or other applicable law of the State of
Texas, as then in effect, both as to acts in his or her official capacity and as
to acts in any other capacity.
6. Insurance.
---------
(A) The Corporation may purchase and maintain insurance on behalf of an
Indemnitee against any liability asserted against him or her or incurred by or
on behalf of him or her whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of this Article
VII or under the Texas Business Corporation Act or other applicable law of the
State of Texas, as then in effect. The purchase and maintenance of such
insurance shall not in any way limit or affect the rights and obligations of the
Corporation or an Indemnitee under this Article VII and the adoption of this
Article VII by the Corporation shall not in any way limit or affect the rights
and obligations of the Corporation or of the other party or parties thereto
under any such policy or agreement of insurance.
(B) If the Indemnitee shall receive payment from any insurance carrier or
from the plaintiff in any action against the Indemnitee in respect of
indemnified amounts after payments on account of all or part of such indemnified
amounts have been made by the Corporation pursuant to this Article VII, the
Indemnitee shall promptly reimburse the Corporation for the amount, if any, by
which the sum of such payment by such insurance carrier or such plaintiff and
payments by the Corporation to the Indemnitee exceeds such indemnified amounts;
provided, however, that such portions, if any, of such insurance proceeds that
are required to be reimbursed to the insurance carrier under the terms of its
insurance policy, such as deductible or coinsurance payments, shall not be
deemed to be payments to the Indemnitee hereunder. In addition, upon payment of
indemnified amounts under this Article VII, the Corporation shall be subrogated
to the Indemnitee's rights against any insurance carrier in respect of such
indemnified amounts and the Indemnitee shall execute and deliver any and all
instruments and documents and perform any and all other acts and deeds that the
Corporation deems reasonably necessary or advisable to secure such rights.
7. Witness Expenses. Upon an Indemnitee's written request, the
----------------
Corporation shall pay (in advance or otherwise) or reimburse any and all
expenses reasonably incurred by the Indemnitee in connection with his or her
appearance as a witness in any proceeding at a time when he has not been
formally named a defendant or respondent to such a proceeding.
8. Contribution. If the indemnity provided for in this Article VII is
------------
unavailable to an Indemnitee for any reason whatsoever, the Corporation, in lieu
of indemnifying the Indemnitee, shall
14
<PAGE>
contribute to the amount reasonably incurred by or on behalf of the Indemnitee,
whether for judgments, fines, penalties, amounts incurred in settlement, or for
expenses in connection with any proceeding, no matter by whom brought, in such
proportion as deemed fair and reasonable, by the person or persons entitled to
make the determination as to whether the Indemnitee has met the requisite
standard of conduct under the Texas Business Corporation Act or other applicable
law of the State of Texas, or by the court before which such proceeding was
brought, taking into account all of the circumstances of such proceeding, in
order to reflect (i) the relative benefits received by the Corporation and the
Indemnitee as a result of the event or transaction giving cause to such
proceeding; and (ii) the relative fault of the Corporation (and its other
directors, officers, employees, and agents) and the Indemnitee in connection
with such event or transaction.
9. Severability. If any provision of this Article VII shall be deemed
------------
invalid or inoperative, or if a court of competent jurisdiction determines that
any of the provisions of this Article VII contravenes public policy, this
Article VII shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such provisions
that are invalid and inoperative or contravene public policy shall be deemed,
without further action or deed on the part of any person, to be modified,
amended, or limited, but only to the extent necessary to render the same valid
and enforceable, and the Corporation shall indemnify the Indemnitee as to
expenses, judgments, fines, and amounts incurred in settlement with respect to
any proceeding, no matter by whom brought, to the full extent permitted by any
applicable provision of this Article VII that shall not have been invalidated
and to the full extent otherwise permitted.
ARTICLE VIII
GENERAL PROVISIONS
------------------
1. Dividends. Dividends upon the outstanding shares of the Corporation,
---------
subject to the provisions of the Act, the Articles of Incorporation and any
agreements or obligations of the Corporation, if any, may be declared by the
Board of Directors at any regular or special meeting. Dividends may be declared
and paid in cash, in property, or in shares of the Corporation, provided that
all such declarations and payments of dividends shall be in strict compliance
with all applicable laws and the Articles of Incorporation. The Board may fix
in advance a record date for the purpose of determining shareholders entitled to
receive payment of any dividend, such record date to be not more than fifty (50)
days prior to the payment of such dividend. In the absence of any action by the
Board of Directors, the date upon which the Board of Directors adopts the
resolution declaring such dividend shall be the record date.
2. Reserves. There may be created by resolution of the Board of
--------
Directors out of the earned surplus of the Corporation such reserve or reserves
as the Board of Directors from time to time, in its absolute discretion, deems
proper to provide for contingencies, or to equalize dividends, or to repair or
maintain any property of the Corporation, or for such other proper purposes as
the Board of Directors shall deem beneficial to the Corporation, and the Board
of Directors may modify or abolish any reserve in the same manner in which it
was created.
3. Fiscal Year. The fiscal year of the Corporation shall be fixed by
-----------
resolution of the Board of Directors.
15
<PAGE>
4. Seal. The Corporation shall have a seal which may be used by causing
----
it or a facsimile thereof to be impressed on, affixed to, or in any manner
reproduced upon, instruments of any nature required to be executed by its proper
officers.
5. Annual Statement. The Board of Directors shall present at each annual
----------------
meeting and when requested to do so by shareholders holding at least one third
(1/3) of the outstanding shares, a full and clear statement of the business and
condition of the Corporation.
6. Checks. All checks or demands for money and notes of the Corporation
------
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may designate from time to time.
7. Voting Securities Owned by Corporation. Voting securities in any
--------------------------------------
other corporation held by this Corporation shall be voted by the President or
any Vice President, unless the Board of Directors confers authority to vote with
respect thereto, which may be general or confined to specific investments, upon
some other person or officer. Any person authorized to vote securities shall
have the power to appoint proxies with the general power of substitution.
8. Resignation. Any director, officer, employee or agent of the
-----------
Corporation may resign by giving written notice to the President or the
Secretary. The resignation shall take effect at the time specified therein, or
immediately if no time is specified therein. Unless specified in such notice,
the acceptance of such resignation shall not be necessary to make it effective.
ARTICLE IX
AMENDMENTS TO BYLAWS
--------------------
These Bylaws may be altered, amended, modified or repealed, or new Bylaws
may be adopted at any meeting of the Board of Directors at which a quorum is
present by the affirmative vote of a majority of the directors present at such
meeting.
CERTIFICATE
-----------
The foregoing Bylaws were adopted by the Board of Directors of the
Corporation effective February 25, 1997.
/s/ RONALD A. WOESSNER
--------------------------------
Ronald A. Woessner, Secretary
16
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EXHIBIT 10.5
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
DEFINED CONTRIBUTION PLAN
BASIC PLAN DOCUMENT NUMBER 03
<PAGE>
TABLE OF CONTENTS
SECTION CONTENTS PAGE
ARTICLE I - DEFINITIONS
1.1 Accrued Benefit................................................... 1
1.2 Additional Matching Contributions................................. 1
1.3 Adoption Agreement................................................ 1
1.4 Alternate Payee................................................... 1
1.5 Annuity........................................................... 1
1.6 Annuity Contract.................................................. 1
1.7 Annuity Starting Date............................................. 1
1.8 Beneficiary....................................................... 1
1.9 Board of Directors................................................ 2
1.10 CODA.............................................................. 2
1.11 Code.............................................................. 2
1.12 Compensation...................................................... 2
1.13 Considered Net Profits............................................ 5
1.14 Contribution Period............................................... 5
1.15 Davis-Bacon Act................................................... 6
1.16 Disability........................................................ 6
1.17 Disability Retirement Date........................................ 6
1.18 Early Retirement Date............................................. 6
1.19 Earned Income..................................................... 6
1.20 Effective Date.................................................... 7
1.21 Elective Deferral Contributions................................... 7
1.22 Employee.......................................................... 7
1.23 Employee Contributions............................................ 7
1.24 Employer.......................................................... 7
1.25 Entry Date........................................................ 8
1.26 ERISA............................................................. 8
1.27 Fiduciary......................................................... 8
1.28 Forfeiture........................................................ 8
1.29 Highly Compensated Employee....................................... 8
1.30 Insurance Company................................................. 11
1.31 Late Retirement Date.............................................. 11
1.32 Leased Employee................................................... 11
1.33 Life Annuity...................................................... 12
1.34 Life Insurance Policy............................................. 12
1.35 Matching Contributions............................................ 12
1.36 Money Purchase Pension Contributions.............................. 12
1.37 Named Fiduciary................................................... 12
1.38 Nonelective Contributions......................................... 12
1.39 Non-Trusteed...................................................... 13
1.40 Normal Retirement Age............................................. 13
1.41 Normal Retirement Date............................................ 13
1.42 Owner-Employee.................................................... 13
1.43 Participant....................................................... 13
1.44 Participant's Account............................................. 13
1.45 Participant's Employer Stock Account.............................. 14
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1.46 Partner........................................................... 14
1.47 Partnership....................................................... 14
1.48 Person............................................................ 15
1.49 Plan.............................................................. 15
1.50 Plan Administrator................................................ 15
1.51 Plan Year......................................................... 15
1.52 Prevailing Wage Law............................................... 15
1.53 Prior Employer Contributions...................................... 15
1.54 Prior Required Employee Contributions............................. 15
1.55 Prior Voluntary Employee Contributions............................ 15
1.56 QDRO.............................................................. 15
1.57 Qualified Matching Contributions.................................. 15
1.58 Qualified Nonelective Contributions............................... 15
1.59 QVEC Contributions................................................ 16
1.60 Required Employee Contributions................................... 16
1.61 Rollover Contribution............................................. 16
1.62 Salary Deferral Agreement......................................... 16
1.63 Self-Employed Individual.......................................... 16
1.64 Serious Financial Hardship........................................ 16
1.65 Shareholder-Employee.............................................. 16
1.66 Social Security Integration Level................................. 16
1.67 Social Security Taxable Wage Base................................. 16
1.68 Sponsoring Organization........................................... 16
1.69 Spouse............................................................ 17
1.70 Straight Life Annuity............................................. 17
1.71 Termination of Employment......................................... 17
1.72 True-Up Contributions............................................. 17
1.73 Trust............................................................. 17
1.74 Trustee........................................................... 17
1.75 Vested Interest................................................... 17
1.76 Vesting Percentage................................................ 18
1.77 Voluntary Employee Contributions.................................. 18
ARTICLE II - GENERAL PROVISIONS
2A. SERVICE
2A.I Service........................................................... 19
2A.2 Absence from Employment........................................... 19
2A.3 Hour of Service................................................... 19
2A.4 1-Year Break-in-Service........................................... 20
2A.5 Year(s) of Service................................................ 20
2A.6 Determining Vesting Percentage.................................... 21
2A.7 Excluded Years of Service for Vesting............................. 22
2A.8 Change in Plan Years.............................................. 22
2A.9 Elapsed Time...................................................... 23
2A.10 Excluded Periods of Service for Vesting........................... 24
2B. ELIGIBILITY, ENROLLMENT AND PARTICIPATION
2B.1 Eligibility....................................................... 24
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2B.2 Enrollment........................................................ 24
2B.3 Reemployed Participant............................................ 25
2B.4 Eligible Class.................................................... 25
2B.5 Waiver of Participation........................................... 25
2B.6 Trades or Businesses Controlled by Owner-Employees................ 25
2C. CONTRIBUTIONS AND ALLOCATIONS
2C.1 Profit Sharing/Thrift Plan with 401(k) Feature.................... 26
2C.2 Money Purchase Pension Plan....................................... 34
2C.3 Rollover Contributions............................................ 37
2C.4 Contributions Subject to Davis-Bacon Act.......................... 37
2C.5 QVEC Contributions................................................ 37
ARTICLE III - DISTRIBUTIONS
3A. TIMING AND FORM OF BENEFITS
3A.1 Payment of Benefits............................................... 38
3A.2 Commencement of Benefits.......................................... 40
3A.3 From Life Insurance Policies...................................... 41
3A.4 Nontransferable................................................... 41
3A.5 Alternate Payee Special Distribution.............................. 41
3B. MINIMUM DISTRIBUTION REQUIREMENTS
3B.1 Definitions....................................................... 41
3B.2 Distribution Requirements......................................... 43
3B.3 Death Distribution Provisions..................................... 44
3B.4 Transitional Rule................................................. 45
3C. JOINT AND SURVIVOR ANNUITY REQUIREMENTS
3C.1 Applicability..................................................... 47
3C.2 Definitions....................................................... 47
3C.3 Qualified joint and Survivor Annuity.............................. 48
3C.4 Qualified Preretirement Survivor Annuity.......................... 48
3C.5 Notice Requirements............................................... 48
3C.6 Safe Harbor Rules................................................. 49
3C.7 Transitional Rules................................................ 50
3D. TERMINATION OF EMPLOYMENT
3D.1 Distribution...................................................... 52
3D.2 Repayment of Prior Distribution................................... 53
3D.3 Life Insurance Policy............................................. 54
3D.4 No Further Rights or Interest..................................... 54
3D.5 Forfeiture........................................................ 54
3D.6 Lost Participant.................................................. 55
3D.7 Deferral of Distribution.......................................... 55
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3E. WITHDRAWALS
3E.1 Withdrawal - Employee Contributions............................... 55
3E.2 Withdrawal - Elective Deferral Contributions...................... 56
3E.3 Withdrawal - Employer Contributions............................... 56
3E.4 Withdrawal for Serious Financial Hardship of Contributions
Other than Elective Deferral Contributions........................ 57
3E.5 Withdrawal for Serious Financial Hardship of Elective Deferral
Contributions..................................................... 57
3E.6 Withdrawal - QVEC Contributions and Rollover Contributions........ 58
3E.7 Notification...................................................... 58
3E.8 Vesting Continuation.............................................. 59
3E.9 Withdrawal - Participant's Employer Stock Account................. 59
3E.10 Withdrawal by Terminated Participants............................. 59
3F. DIRECT ROLLOVERS
3F.1 Definitions....................................................... 59
3F.2 Direct Rollovers.................................................. 59
ARTICLE IV - LEGAL LIMITATIONS ON CONTRIBUTIONS
4A. NONDISCRIMINATION TESTS
4A.1 Definitions....................................................... 61
4A.2 Actual Deferral Percentage Test................................... 62
4A.3 Special Rules - ADP Test.......................................... 62
4A.4 Actual Contribution Percentage Test............................... 63
4A.5 Special Rules - ADP/ACP Tests..................................... 64
4B. LIMITATIONS ON ALLOCATIONS
4B.1 Definitions....................................................... 65
4B.2 Basic Limitation.................................................. 69
4B.3 Estimated Maximum Permissible Amount.............................. 70
4B.4 Actual Maximum Permissible Amount................................. 70
4B.5 Participants Covered by Another Prototype Defined
Contribution Plan................................................. 70
4B.6 Participants Covered by Non-Prototype Defined Contribution Plan... 71
4B.7 Participants Covered by Defined Benefit Plan...................... 71
4C. TREATMENT OF EXCESSES
4C.1 Definitions....................................................... 72
4C.2 Excess Elective Deferral Contributions............................ 72
4C.3 Excess Annual Additions........................................... 73
4C.4 Excess Contributions.............................................. 74
4C.5 Excess Aggregate Contributions.................................... 75
ARTICLE V - PARTICIPANT PROVISIONS
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5A. ANNUITY CONTRACT AND PARTICIPANT'S ACCOUNT
5A.1 Participant's Account............................................. 76
5A.2 Investment Transfers.............................................. 76
5A.3 Participant's Account Valuation................................... 76
5B. LIFE INSURANCE POLICIES
5B.1 Optional Purchase of Life Insurance............................... 77
5B.2 Premiums on Life Insurance Policies............................... 77
5B.3 Limitations on Premiums........................................... 77
5B.4 Disposal.......................................................... 77
5B.5 Rights under Policies............................................. 78
5B.6 Loans............................................................. 78
5B.7 Conditions of Coverage............................................ 78
5B.8 Policy Not Yet in Force........................................... 78
5B.9 Value of Policy................................................... 78
5B.10 Dividends......................................................... 78
5B.11 Distribution...................................................... 78
5B.12 Application....................................................... 78
5C. LOANS
5C.1 Loans to Participants............................................. 79
5C.2 Loan Procedures................................................... 80
5D. PARTICIPANTS'RIGHTS
5D.1 General Rights of Participants and Beneficiaries.................. 80
5D.2 Filing a Claim for Benefits....................................... 80
5D.3 Denial of Claim................................................... 80
5D.4 Remedies Available to Participants................................ 81
5D.5 Limitation of Rights.............................................. 81
5D.6 100% Vested Contributions......................................... 81
5D.7 Reinstatement of Benefit.......................................... 81
5D.8 Non-Alienation.................................................... 82
ARTICLE VI - OVERSEER PROVISIONS
6A. FIDUCIARY DUTIES AND RESPONSIBILITIES
6A.1 General Fiduciary Standard of Conduct............................. 83
6A.2 Service in Multiple Capacities.................................... 83
6A.3 Limitations on Fiduciary Liability................................ 83
6A.4 Investment Manager................................................ 83
6B. THE PLAN ADMINISTRATOR
6B.1 Designation and Acceptance........................................ 83
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6B.2 Duties and Responsibility......................................... 83
6B.3 Special Duties.................................................... 84
6B.4 Expenses and Compensation......................................... 84
6B.5 Information from Employer......................................... 84
6B.6 Administrative Committee; Multiple Signatures..................... 84
6B.7 Resignation and Removal; Appointment of Successor................. 84
6B.8 Investment Manager................................................ 85
6B.9 Delegation of Duties.............................................. 85
6C. TRUST AGREEMENT
6C.1 Creation and Acceptance of Trust.................................. 85
6C.2 Trustee Capacity; Co-Trustees..................................... 85
6C.3 Designation and Removal; Appointment of Successor Trustee......... 85
6C.4 Taxes, Expenses and Compensation of Trustee....................... 86
6C.5 Trustee Entitled to Consultation.................................. 86
6C.6 Rights, Powers and Duties of Trustee.............................. 86
6C.7 Evidence of Trustee Action........................................ 88
6C.8 Investment Policy................................................. 88
6C.9 Period of the Trust............................................... 89
6D. THE INSURANCE COMPANY
6D.1 Duties and Responsibilities....................................... 89
6D.2 Relation to Employer, Plan Administrator and Participants......... 89
6D.3 Relation to Trustee............................................... 89
6E. ADOPTING EMPLOYER
6E.1 Election to Become Adopting Employer.............................. 89
6E.2 Definition........................................................ 90
6E.3 Effective Date of Plan............................................ 90
6E.4 Forfeitures....................................................... 90
6E.5 Contributions..................................................... 90
6E.6 Expenses.......................................................... 90
6E.7 Substitution of Plans............................................. 90
6E.8 Termination of Plans.............................................. 90
6E.9 Amendment......................................................... 90
6E.10 Plan Administrator's Authority.................................... 90
ARTICLE VII - SPECIAL CIRCUMSTANCES WHICH MAY AFFECT THE PLAN
7A. TOP-HEAVY PROVISIONS
7A.1 Definitions....................................................... 91
7A.2 Minimum Allocation................................................ 93
7A.3 Minimum Vesting Schedule.......................................... 94
7B. AMENDMENT, TERMINATION OR MERGER OF THE PLAN
7B.1 Amendment of Elections under Adoption Agreement by
Employer.......................................................... 95
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7B.2 Amendment of Plan, Trust, and Form of Adoption Agreement.......... 96
7B.3 Conditions of Amendment........................................... 96
7B.4 Termination of the Plan........................................... 96
7B.5 Full Vesting...................................................... 96
7B.6 Application of Forfeitures........................................ 96
7B.7 Merger with Other Plan............................................ 97
7B.8 Transfer from Other Plans......................................... 97
7B.9 Transfer to Other Plans........................................... 97
7B.10 Approval by the Internal Revenue Service.......................... 97
7B.11 Subsequent Unfavorable Determination.............................. 98
7C. SUBSTITUTION OF PLANS
7C.1 Substitution of Plans............................................. 98
7C.2 Transfer of Assets................................................ 98
7C.3 Substitution for Pre-Existing Master or Prototype Plan............ 99
7C.4 Partial Substitution or Partial Transfer of the Plan or Assets.... 99
ARTICLE VIII - MISCELLANEOUS
8.1 Nonreversion..................................................... 100
8.2 Gender and Number................................................ 100
8.3 Reference to the Internal Revenue Code and ERISA................. 100
8.4 Governing Law.................................................... 100
8.5 Compliance with the Internal Revenue Code and ERISA.............. 100
8.6 Contribution Recapture........................................... 100
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<PAGE>
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
DEFINED CONTRIBUTION PLAN
BASIC PLAN DOCUMENT NUMBER 03
The Plan set forth herein may be adopted by an Employer and accepted by the Plan
Administrator and, if applicable, the Trustee by executing an Adoption
Agreement, which together shall constitute the Employer's Plan, for the
exclusive benefit of its eligible Employees and their Beneficiaries, as fully as
if set forth in said Adoption Agreement; provided, however, no Employer may
adopt this Plan except with the consent of Connecticut General Life Insurance
Company.
ARTICLE I - DEFINITIONS
1.1 ACCRUED BENEFIT. The term Accrued Benefit means the value of the
Participant's Account on any applicable date.
1.2 ADDITIONAL MATCHING CONTRIBUTIONS. The term Additional Matching
Contributions means additional discretionary Matching Contributions made
to the Plan by the Employer, as authorized by its Board of Directors by
resolution. Additional Matching Contributions shall be treated as
Matching Contributions for nondiscrimination testing and allocation
purposes.
1.3 ADOPTION AGREEMENT. The term Adoption Agreement means the prescribed
agreement by which the Employer adopts this Plan, and which sets forth
the elective provisions of this Plan as specified by the Employer.
1.4 ALTERNATE PAYEE. The term Alternate Payee means a - person, other than
the Participant, identified under a QDRO to be a recipient of part or
all of the Participant's benefit under the Plan.
1.5 ANNUITY. The term Annuity means a series of payments made over a
specified period of time.
1.6 ANNUITY CONTRACT. The term Annuity Contract means the group annuity
contract form issued by the Insurance Company to fund the benefits
provided under this Plan, as such contract may be amended from time to
time in accordance with the terms thereof. The Employer will specify
and communicate to its Employees the types of investments available
under this Plan and Annuity Contract.
1.7 ANNUITY STARTING DATE. The term Annuity Starting Date means the first
day of the first period for which an amount is paid as an Annuity or any
other form.
1.8 BENEFICIARY. The term Beneficiary means the beneficiary or
beneficiaries entitled to any benefits under a Participant's Account
hereunder upon the death of a Participant, Beneficiary or Alternate
Payee pursuant to a QDRO. If any Life Insurance Policy is purchased on
the life of a Participant hereunder, the Beneficiary under such Policy
shall be designated separately therein. However, any such Beneficiary
designation shall be subject to the terms of Section 3C.
A Participant's Beneficiary shall be his Spouse, if any, unless the
Participant designates a person or persons other than his Spouse as
Beneficiary with his Spouse's written consent. A Participant may
designate a Beneficiary on the form approved by the Plan Administrator.
Article I - Definitions -1- June 14, 1996
<PAGE>
If any distribution is made to a Beneficiary in the form of an Annuity,
and if such Annuity provides for a death benefit, then such Beneficiary
shall also have a right to designate a beneficiary and to change that
beneficiary from time to time. As an alternative to receiving the
benefit in the form of an Annuity, the Beneficiary may elect to receive
a single cash payment or any other form of payment provided by the
Employer's election in the Adoption Agreement.
If no Beneficiary has been designated pursuant to the provisions of this
Section, or if no Beneficiary survives the Participant and he has no
surviving Spouse, then the Beneficiary under the Plan shall be the
deceased Participant's surviving children in equal shares or, if there
are no surviving children, the Participant's estate. If a Beneficiary
dies after becoming entitled to receive a distribution under the Plan
but before distribution is made to him in full, and if no other
Beneficiary has been designated to receive the balance of the
distribution in that event, the estate of the deceased Beneficiary shall
be the Beneficiary for the balance of the distribution.
If the Employer so elects in the Adoption Agreement, an Alternate Payee
and/or Beneficiary shall be allowed to direct the investment of his
segregated portion of the Participant's Account, pursuant to Section 5A.
An individual who is designated as an Alternate Payee in a QDRO relating
to a Participant's benefits under this Plan shall be treated as a
Beneficiary hereunder, to the extent provided by such order.
1.9 BOARD OF DIRECTORS. The term Board of Directors means the Employer's
board of directors or other comparable governing body.
1.10 CODA. The term CODA means cash or deferred arrangement as described in
Code section 401(k) and the regulations thereunder.
1.11 CODE. The term Code means the Internal Revenue Code of 1986, as
amended from time to time.
1.12 COMPENSATION. The term Compensation means Compensation as defined below.
For any Self-Employed Individual covered under the Plan, Compensation
shall mean Earned Income. Compensation shall include only that
Compensation which is actually paid to the Participant during the
applicable Determination Period. Except as provided elsewhere in this
Plan, the "Determination Period" shall be the period elected by the
Employer in the Adoption Agreement. If the Employer makes no election,
the Determination Period shall be the Plan Year.
An Employer may elect in the Adoption Agreement to use one of the
following definitions of Compensation for purposes of allocating all
contributions:
(a) Wages, Tips, and Other Compensation Box on Form W-2. (Information
required to be reported under Code sections 6041, 6051 and 6052).
Wages within the meaning of Code section 3401(a) and all other
payments of compensation to an Employee by the Employer (in the
course of the Employer's trade or business) for which the Employer
is required to furnish the Employee a written statement under Code
sections 6041(d), 6051(a)(3), and 6052. Compensation must be
determined without regard to any rules under Code section 3401(a)
that limit the remuneration included in wages based on the nature
or location of the employment or the services performed (such as
the exception for agricultural labor in Code section 3401(a)(2)).
Article I - Definitions -2- June 14, 1996
<PAGE>
(b) Section 3401(a) wages. Wages as defined in Code section 3401(a) for
the purposes of income tax withholding at the source but determined
without regard to any rules that limit the remuneration included in
wages based on the nature or location of the employment or the
services performed (such as the exception for agricultural labor in
Code section 3401(a)(2)).
(c) 415 SAFE-HARBOR compensation. Wages, salaries, and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includable
in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under a
nonaccountable plan as described in Code section 1.62-2(c)), and
excluding the following:
(1) Employer contributions to a plan of deferred compensation
which are not includable in the Employee's gross income for
the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to the
extent such contributions are deductible by the Employee, or
any distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
contract described in Code section 403(b) (whether or not the
contributions are actually excludable from the gross income of
the Employee).
(d) Modified Wages, Tips, and Other Compensation Box on Form W-2.
Compensation as defined in subsection (a) above, but reduced by all
of the following items (even if includable in gross income):
reimbursements or other expense allowances, fringe benefits (cash
or noncash), moving expenses, deferred compensation, and welfare
benefits. This definition may not be used by standardized plans or
plans using a contribution or allocation formula that is integrated
with Social Security.
(e) Modified Section 3401(a) wages. Compensation as defined in
subsection (c) above, but reduced by all of the following items
(even if includable in gross income): reimbursements or other
expense allowances, fringe benefits (cash or noncash), moving
expenses, deferred compensation, and welfare benefits. This
definition may not be used by standardized plans or plans using a
contribution or allocation formula that is integrated with Social
Security.
(f) Modified 415 safe-harbor compensation. Compensation as defined in
subsection (d) above, but reduced by all of the following items
(even if
Article I - Definitions -3- June 14, 1996
<PAGE>
includable in gross income): reimbursements or other expense
allowances, fringe benefits (cash or noncash), moving expenses,
deferred compensation, and welfare benefits. This definition may
not be used by standardized plans or plans using a contribution or
allocation formula that is integrated with Social Security.
(g) Regular or base salary or wages. Regular or base salary or wages
(excluding overtime and bonuses) received during the applicable
period by the Employee from the Employer. This definition may not
be used by standardized plans or plans using a contribution or
allocation formula that is integrated with Social Security.
(h) Regular or base salary wages plus overtime and/or bonuses. Regular
or base salary or wages, plus either or both overtime and/or
bonuses, as elected by the Employer in the Adoption Agreement,
received during the applicable period by the Employee from the
Employer. This definition may not be used by standardized plans or
plans using a contribution or allocation formula that is integrated
with Social Security.
(i) A reasonable alternative definition of Compensation, as that term
is used in Code section 414(s)(3) and the regulations thereunder,
provided that the definition does not favor Highly Compensated
Employees and satisfies the nondiscrimination requirements under
Code section 414(s). This definition may not be used by
standardized plans or plans using a contribution or allocation
formula that is integrated with Social Security.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by
the Employer pursuant to a salary reduction agreement and which is not
includable in the gross income of the Employee under Code sections 125,
402(e)(3), 402(h)(1)(B) or 403(b).
For years beginning on or after January 1, 1989, and before January 1,
1994, the annual Compensation of each Participant taken into account for
determining all benefits provided under the Plan for any Plan Year shall
not exceed $200,000. This limitation shall be adjusted by the Secretary
at the same time and in the same manner as under Code section 415(d)
(unless a lesser amount is elected by the Employer in the Adoption
Agreement), except that the dollar increase in effect on January I of
any calendar year is effective for Plan Years beginning in such calendar
year and the first adjustment to the $200,000 limitation is effective on
January 1, 1990.
For Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Participant taken into account for determining all
benefits provided under the Plan for any Plan Year shall not exceed
$150,000, as adjusted for increases in the cost-of-living in accordance
with Code section 401 (a)(I 7)(B). The cost-of-living adjustment in
effect for a calendar year applies to any Determination Period beginning
in such calendar year.
If a Determination Period consists of fewer than 12 calendar months,
then the annual compensation limit is an amount equal to the annual
compensation limit for the calendar year in which the compensation
period begins, multiplied by the ratio obtained by dividing the number
of full months in the period by 12.
In determining the Compensation of a Participant for purposes of this
limit, the rules of Code section 414(q)(6) shall apply, except in
applying such rules, the
Article I - Definitions -4- June 14, 1996
<PAGE>
term "family" shall include only the spouse of the Participant and any
lineal descendants of the Participant who have not attained age 19
before the close of the year. If, as a result of the application of such
rules, the adjusted annual Compensation limit is exceeded, then (except
for purposes of determining the portion of Compensation up to the
integration level if this Plan uses a contribution or allocation formula
that is integrated with Social Security), the limit shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application
of this limit.
If Compensation for any prior Determination Period is taken into account
in determining an Employee's contributions or benefits for the current
year, the Compensation for such prior Determination Period is subject to
the applicable annual compensation limit in effect for that prior
period. For this purpose, in determining allocations in Plan Years
beginning on or before January 1, 1989, the annual compensation limit in
effect for Determination Periods before that date is $200,000. In
addition, in determining allocations in Plan Years beginning on or after
January 1, 1994, the annual compensation limit in effect for
Determination Periods beginning before that date is $150,000.
1.13 CONSIDERED NET PROFITS. The term Considered Net Profits means the entire
amount of the accumulated or current operating profits (excluding
capital gains from the sale or involuntary conversion of capital or
business assets) of the Employer after all expenses and charges other
than (1) the Employer contribution to this and any other qualified plan,
and (2) federal, state or local taxes based upon or measured by income,
as determined by the Employer, either on an estimated basis or a final
basis, in accordance with the generally accepted accounting principles
used by the Employer. When, for any Plan Year, the amount of Considered
Net Profits has been determined by the Employer, and the Employer
contribution made on the basis of such determination, such determination
and contribution shall be final anck conclusive and shall not be subject
to change because of any adjustments in income or expense which may be
required by the Internal Revenue Service or otherwise. Such
determination and contribution shall not be open to question by any
Participant either before or after the Employer contribution has been
made.
In the case of an Employer that is a non-profit entity, the term
Considered Net Profits means the entire amount of the accumulated or
Current operating surplus (excluding capital gains from the sale or
involuntary conversion of coital or business assets) of the Employer
after all expenses and charges other than (1) the contribution made by
the Employer to the Plan, and (2) federal, state or local taxes based
upon or measured by income, in accordance with the generally accepted
accounting principles used by the Employer.
1.14 CONTRIBUTION PERIOD. The term Contribution Period means that regular
period, specified by the Employer in its Adoption Agreement, for which
the Employer shall make Employer contributions, if any, and that regular
period specified by the Employer in its Adoption Agreement, for which
Participants may make Employee Contributions, if any, and Elective
Deferral Contributions, if any. The first Contribution Period may be an
irregular period, not longer than one month, commencing not prior to the
Effective Date. However, the first Contribution Period for Elective
Deferral Contributions may not commence before the later of the Plan's
Effective Date or adoption date.
Article I - Definitions -5- June 14, 1996
<PAGE>
1.15 DAVIS-BACON ACT. The term Davis-Bacon Act means the Davis-Bacon Act (40
U.S.C. section 276(a) et seq., as amended from time to time), which
-------
guarantees minimum wages to laborers and mechanics employed on Federal
government contracts for the construction, alteration, or repair of
public buildings or works. The minimums are the amounts found by the
Secretary of Labor to be prevailing for similar workers in the area in
which the work is to be done.
The term "wages" as used in the Davis-Bacon Act includes, in addition to
the basic hourly rate of pay, contributions irrevocably made to trustees
for pension benefits for laborers and mechanics employed on Federal
government contracts and the cost of other fringe benefits. However,
overtime pay is to be computed only on the basis of the basic hourly
rate of pay.
1.16 DISABILITY. The term Disability means a Participant's incapacity to
engage in any substantial gainful activity because of a medically
determinable physical or mental impairment which can be expected to
result in death, or which has lasted or can be expected to last for a
continuous period of not less than 12 months. The performance and degree
of such impairment shall be supported by medical evidence. All
Participants in similar circumstances shall be treated alike.
If elected by the Employer in the Adoption Agreement, nonforfeitable
contributions will be made to the Plan on behalf of each disabled
Participant who is not a Highly Compensated Employee (within the meaning
of Section 1.29 of the Plan).
1.17 DISABILITY RETIREMENT DATE. The term Disability Retirement Date means
the first day of the month after the Plan Administrator has determined
that a Participant's incapacity is a Disability. A Participant who
retires from the Service of the Employer as of his Disability Retirement
Date shall have a Vesting Percentage of 100% and shall be entitled to
receive a distribution of the entire value of his Participant's Account
and any Life Insurance Policies, or the values thereof, as of his
Disability Retirement Date, subject to the provisions of Section 3A and
Section 3C.
1.18 EARLY RETIREMENT DATE. If the Employer has specified in its Adoption
Agreement that Early Retirement is permitted, then the term Early
Retirement Date means the first day of the month coinciding with or next
following the date a Participant is separated from Service with the
Employer for any reason other than death or Disability, provided that on
such date the Participant has attained the conditions specified by the
Employer in its Adoption Agreement and has not attained his Normal
Retirement Age. A Participant who retires from the Service of the
Employer on his Early Retirement Date shall have a Vesting Percentage of
100% and shall be entitled to receive a distribution of the entire value
of his Participant's Account and any Life Insurance Policies, or the
values thereof, as of his Early Retirement Date, subject to the
provisions of Section 3A and Section 3C.
If a Participant separates from Service before satisfying the age
requirement FOR Early Retirement, but has satisfied the Service
requirement, the Participant shall be 100% vested as of his Termination
of Employment date, but he will not be eligible for a distribution of
the entire value of his Participant's Account until satisfying such age
requirement.
1.19 EARNED INCOME. The term Earned Income means the net earnings from self-
employment in the trade or business with respect to which the Plan is
established, and for which the personal services of the individual are a
material
Article I - Definitions -6- June 14, 1996
<PAGE>
income-producing factor. Net earnings will be determined without regard
to items not included in gross income and the deductions allocable to
such items. Net earnings are reduced by contributions made by the
Employer to a qualified plan to the extent deductible under Code section
404.
Net earnings shall be determined with regard to the deductions allowed
to the taxpayer by Code section 164(f) for taxable years beginning after
December 31, 1989.
1.20 EFFECTIVE DATE. The term Effective Date means the date specified by the
Employer in its Adoption Agreement as the Effective Date of the Plan.
1.21 ELECTIVE DEFERRAL CONTRIBUTIONS. The term Elective Deferral
Contributions means contributions made by the Employer to the Plan at
the election of the Participant, in lieu of cash compensation, and shall
include contributions made pursuant to a Salary Deferral Agreement or
other deferral mechanism.
With respect to any taxable year, a Participant's elective deferral is
the sum of all Employer contributions made on behalf of such Participant
pursuant to an election to defer under any CODA, any simplified employee
pension cash or deferred arrangement as described in section
402(h)(1)(B), any eligible deferred compensation plan as described in
section 457, any plan described in section 501(c)(18), and any Employer
contributions made on the behalf of a Participant for the purchase of an
annuity contract under section 403(b) pursuant to a salary reduction
agreement.
Elective Deferral Contributions shall not include those contributions
properly distributed as Excess Annual Additions, as defined in Section
4B.1(g).
1.22 EMPLOYEE. The term Employee means any employee of the Employer
maintaining the Plan or any other employer required to be aggregated
with such Employer under Code sections 414(b), (c), (m), or (o).
The term Employee also includes any Leased Employee deemed to be an
Employee of the Employer in accordance with Code sections 414(n) or (o).
1.23 EMPLOYEE CONTRIBUTIONS. The term Employee Contributions means
contributions to this Plan or any other plan, that are designated or
treated at the time of contribution as after-tax contributions made by
the Employee and are allocated to a separate account to which
attributable earnings and losses are allocated. Such term includes
Required Employee Contributions, Voluntary Employee Contributions, Prior
Required Employee Contributions, and Prior Voluntary Employee
Contributions.
1.24 EMPLOYER. The term Employer means the employer that adopts this Plan. In
the case of a group of Employers that constitutes a controlled group of
corporations (as defined in Code section 414(b)) or that constitutes
trades or businesses (whether or not incorporated) that are under common
control (as defined in section 414(c)) or that constitutes an affiliated
service group (as defined in section 414(m)), Service with all such
employers shall be considered Service with the Employer for purposes of
eligibility and vesting. The term Employer shall also mean any Adopting
Employer as defined in Section 6E.2.
Article I - Definitions -7- June 14, 1996
<PAGE>
A state or local government or political subdivision thereof, or any
agency or instrumentality thereof, or any organization exempt from tax
under Subtitle A of the code, may not elect a 401(k) option (CODA) in
the Adoption Agreement.
1.25 ENTRY DATE. The term Entry Date means either the Effective Date or each
applicable date thereafter as specified by the Employer in its Adoption
Agreement, when an Employee who has fulfilled the eligibility
requirements commences participation in the Plan.
If an Employee is not in the active Service of the Employer as of his
initial Entry Date, his subsequent Entry Date shall be the date he
returns to the active Service of the Employer, provided he still meets
the eligibility requirements. If an Employee does not enroll as a
Participant as of his initial Entry Date, his subsequent Entry Date
shall be the applicable Entry Date as specified by the Employer in the
Adoption Agreement when the Employee actually enrolls as a Participant.
1.26 ERISA. The term ERISA means the Employee Retirement Income Security Act
of 1974 (PL93-406) as it may be amended from time to time, and any
regulations issued pursuant thereto as such Act and such regulations
affect this Plan and Trust.
1.27 FIDUCIARY. The term Fiduciary means any or all of the following, as
applicable:
(a) Any Person who exercises any discretionary authority or control
respecting the management of the Plan or its assets;
(b) Any Person who renders investment advice for a fee or other
compensation, direct or indirect, respecting any monies or other
property of the Plan or has authority or responsibility to do so;
(c) Any Person who has discretionary authority or responsibility in the
administration of the Plan;
(d) Any Person who has been designated by a Named Fiduciary pursuant to
authority granted by the Plan, who acts to carry out a fiduciary
responsibility, subject to any exceptions granted directly or
indirectly by ERISA.
1.28 FORFEITURE. The term Forfeiture means the amount, if any, by which the
value of a Participant's Account exceeds his Vested Interest upon the
occurrence of an immediate Break-in-Service, a 1-Year Break-in-Service
or 5 consecutive 1-Year Breaks-in-Service, as elected by the Employer in
its Adoption Agreement pursuant to Section 3D.5, following such
Participant's Termination of Employment.
1.29 HIGHLY COMPENSATED EMPLOYEE. The term Highly Compensated Employee
includes both Highly Compensated Active Employees and Highly Compensated
Former Employees.
As elected by the Employer in the Adoption Agreement, the method to
determine Highly Compensated Employees shall be:
(a) Traditional Method: A "'Hghly Compensated Active Employee" includes
any Employee who performs service for the Employer during the
Determination Year and who, during the Look-Back Year;
(1) Received Compensation from the Employer in excess of $75,000
(as adjusted pursuant to Code section 415(d)); or
Article I - Definitions -8- June 14, 1996
<PAGE>
(2) Received Compensation from the Employer in excess of $50,000
(as adjusted pursuant to Code section 415(d)) and was a member
of the top-paid group for such year; or
(3) Was an officer of the Employer and received Compensation
during such year that is greater than 50 percent of the dollar
limitation in effect under Code section 415(b)(1)(A).
The term Highly Compensated Employee also includes: (1) Employees
who are described in the preceding sentence if the term
"Determination Year" is substituted for the term "Look-Back Year"
and who are one of the 100 employees who received the most
Compensation from the Employer during the Determination Year; and
(2) Employees who are 5-percent owners at any time during the Look-
Back Year or Determination Year.
If no officer has satisfied the Compensation requirement of (3)
above during either a Determination Year or Look-Back Year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.
For this purpose, the Determination Year shall be the Plan Year.
The Look-Back Year shall be the period elected by the Employer in
the Adoption Agreement.
A "Highly Compensated Former Employee" includes any Employee who
separated from Service (or was deemed to have separated) prior to
the Determination Year, performs no service for the Employer during
the Determination Year, 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.
If an Employee is, during a Determination Year or Look-Back Year, a
family member of either a 5-percent owner who is an active or
former Employee or a Highly Compensated Employee who i@ one of the
10 most Highly Compensated Employees ranked on the basis of
Compensation paid by the Employer during such year (a "Top 10
Highly Compensated Employee"), then the family member and the 5-
percent owner or Top 10 Highly Compensated Employee shall be
aggregated. In such case, the family member and 5-percent owner or
Top 10 Highly Compensated Employee shall be treated as a single
Employee receiving Compensation and Plan contributions or benefits
equal to the sum of such Compensation and contributions or benefits
of the family member and 5-percent owner or Top 10 Highly
Compensated Employee. For purposes of this Section, the term
"family member" includes the Spouse, lineal ascendants and
descendants of the Employee or former Employee and the spouses of
such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of the
Employees in the top-paid group, the top 100 Employees, the number
of Employees treated as officers and the Compensation that is
considered, will be made in accordance with Code section 414(q)
and the regulations thereunder.
For purposes of this definition, Compensation shall mean
compensation as defined in Code section 415(c)(3) except that
elective or salary reduction contributions to a cafeteria plan,
CODA or tax-sheltered annuity shall be included in Compensation.
Article I - Definitions -9- June 14, 1996
<PAGE>
(b) Simplified Method For Employers In More than One Geographic Area:
If elected by the Employer in the Adoption Agreement, the
Traditional Method above will be modified by substituting $50,000
for $75,000 in (1) and by disregarding (2). This simplified
definition of Highly Compensated Employee will apply to Employers
that maintain significant business activities (and employ
Employees) in at least two significant, separate geographic areas.
(c) ALTERNATIVE SIMPLIFIED Method: If elected by the Employer in the
Adoption Agreement, Highly Compensated Employees shall be
determined as follows: A Highly Compensated Active Employee
includes any Employee who performs service for the Employer during
the Determination Year and who:
(1) Is a 5-percent owner; or
(2) Received Compensation from the Employer in excess of S75,000
(as adjusted pursuant to Code section 415(d)); or
(3) Received Compensation from the Employer in excess of SSO,000
(as adjusted pursuant to Code section 415(d)) and was a member
of the top-paid group for such year; or
(4) Was an officer of the Employer and received Compensation
during such year that is greater than 50 percent of the dollar
limitation in effect under Code section 415(b)(1)(A).
Under this simplified definition, the look-back provisions of Code
section 414(q) do not apply.
(d) Alternative Simplified Method With Snapshot: If the Alternative
Simplified Method of determining Highly Compensated Employees is
selected by the Employer, the Employer may elect in the Adoption
Agreement to substantiate that the Plan complies with the
nondiscrimination requirements on the basis of the Employer's work
force on a single day during the Plan Year, provided that day is
reasonably representative of the Employer's work force and the
Plan's coverage throughout the Plan Year. The day elected by the
Employer and indicated on the Adoption Agreement shall be the
"Snapshot Day."
To apply the Alternative Simplified Method on a snapshot basis:
(1) The Employer determines who is a Highly Compensated Employee on
the basis of the data as of the Snapshot Day, except as
provided in (3) below.
(2) If the determination of who is a Highly Compensated Employee is
made earlier than the last day of the Plan Year, the Employee's
Compensation that is used to determine an Employee's status
must be projected for the Plan Year under a reasonable method
established by the Employer.
(3) If there are Employees not employed on the Snapshot Day who are
taken into account in testing, they must be determined to be
either Highly Compensated Employees or non-Highly Compensated
Employees. In addition to those Employees who are determined to
be Highly Compensated Employees on the Plan's Snapshot Day, the
Article I - Definitions -10- June 14, 1996
<PAGE>
Employer must treat as a Highly Compensated Employee any
eligible Employee for the Plan Year who:
(a) Terminated employment prior to the Snapshot Day and was a
Highly Compensated Employee in the prior Plan Year;
(b) Terminated employment prior to the Snapshot Day and (I)
was a 5-percent owner, or (ii) has Compensation for the
Plan Year greater than or equal to the projected
Compensation of any Employee who is treated as a Highly
Compensated Employee on the Snapshot Day (except for
Employees who are Highly Compensated Employees solely
because they are 5percent owners or officers), or (iii)
was an officer and has Compensation greater than or equal
to the projected Compensation of any other officer who is
a Highly Compensated Employee on the Snapshot Day solely
because that person is an officer; or
(c) Becomes employed after the Snapshot Day and (i) is a
5percent owner, or (ii) has Compensation for the Plan Year
greater than or equal to the projected Compensation of any
Employee who is treated as a Highly Compensated Employee
on the Snapshot Day (except for Employees who are Highly
Compensated Employees solely because they are 5-percent
owners or officers), or (iii) is an officer and has
Compensation greater than or equal to the projected
Compensation of any officer who is a Highly Compensated
Employee on the Snapshot Day solely because that person is
an officer.
1.30 INSURANCE COMPANY. The term Insurance Company means Connecticut
General Life Insurance Company, a legal reserve life insurance company
of Hartford, Connecticut. If any company other than Connecticut General
Life Insurance Company has issued any Life Insurance Policy held by the
Trustee under the Plan, then with respect to such Policy only and
matters pertaining directly thereto, the term Insurance Company shall be
deemed to refer to such other issuing company.
1.31 LATE RETIREMENT DATE. The term Late Retirement Date means the first
day of the month coinciding with or next following the date a
Participant is separated from Service with the Employer after his Normal
Retirement Age, for any reason other than death.
1.32 LEASED EMPLOYEE. The term Leased Employee means any person (other than
an Employee of the recipient Employer) who, pursuant to an agreement
between the recipient Employer and any other person ("leasing
organization"), has performed services for the recipient Employer (or
for the recipient Employer and related persons determined in accordance
with Code section 414(n)(6)) on a substantially full-time basis for a
period of at least one year, and such services are of a type
historically performed by employees in the business field of the
recipient Employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable to services
performed for the recipient Employer shall be treated as provided by the
recipient Employer.
Article I - Definitions -11- June 14, 1996
<PAGE>
A Leased Employee shall not be considered an Employee of the recipient
Employer if: such employee is covered by a money purchase pension plan
of the leasing organization providing: (a) a nonintegrated employer
contribution rate of at least 10 percent of compensation, as defined in
Code section 415(c)(3), but including amounts contributed by the
employer pursuant to a salary reduction agreement which are excludable
from the Leased Employee's gross income under Code section 125, section
402(e)(3), section 402(h)(1)(B) or section 403(b), (b) immediate
participation, and (c) full and immediate vesting; and (2) Leased
Employees do not constitute more than 20 percent of the recipient's non-
highly compensated work force.
1.33 LIFE ANNUITY. The term Life Annuity means an Annuity payable over the
life or life expectancy of one or more individuals.
1.34 LIFE INSURANCE POLICY. The term Life Insurance Policy (or Policy)
means a policy of individual life insurance purchased from the
Insurance Company on the life of any Participant.
1.35 MATCHING CONTRIBUTIONS. The term Matching Contributions means
contributions made by the Employer to the Plan for a Participant on
account of either Elective Deferral Contributions or Required Employee
Contributions. In addition, any Forfeiture reallocated as a Matching
Contribution shall be considered a Matching Contribution for purposes of
this Plan. If elected by the Employer in the Adoption Agreement,
Matching Contributions shall be made out of Considered Net Profits in an
amount specified by the Employer in its Adoption Agreement for each
$1.00 contributed as either an Elective Deferral Contribution or a
Required Employee Contribution, as further specified by the Employer in
its Adoption Agreement. The term Matching Contributions shall include
Additional Matching Contributions.
Should there be insufficient Considered Net Profits of the Employer for
such Employer contribution, the amount of such Matching Contributions
may be diminished to the amount that can be made from the Employer's
Considered Net Profits.
The Employer may designate at the time of contribution that all or a
portion of such Matching Contributions be treated as Qualified Matching
Contributions.
If elected by the Employer in the Adoption Agreement, Partners shall not
be entitled to receive Matching Contributions. If Partners are entitled
to receive Matching Contributions, such Contributions shall be
considered Elective Deferral Contributions for all purposes under this
Plan.
1.36 MONEY PURCHASE PENSION CONTRIBUTIONS. The term Money Purchase Pension
Contributions means contributions made to the Plan by the Employer in
accordance with a definite formula as specified in the Adoption
Agreement.
1.37 NAMED FIDUCIARY. The term Named Fiduciary means the Administrator and
any other Fiduciary designated by the Employer, and any successor
thereto.
1.38 NONELECTIVE CONTRIBUTIONS. The term Nonelective Contributions means
contributions made to the Plan by the Employer in accordance with a
definite formula as specified in the Adoption Agreement. The Employer
may designate at the time of contribution that the Nonelective
Contribution shall be treated as a Qualified Nonelective Contribution.
Article I - Definitions -12- June 14, 1996
<PAGE>
1.39 NON-TRUSTEED. The term Non-Trusteed means that the Employer has
specified in the Adoption Agreement that there will not be a Trust as a
part of the Plan. Contributions under a Non-Trusteed plan will be made
directly to the Insurance Company. If the Employer specifies in the
Adoption Agreement that the Plan is Non-Trusteed, then the terms and
provisions of this Plan relating to the Trust shall be of no force or
effect.
1.40 NORMAL RETIREMENT AGE. The term Normal Retirement Age means the age
selected in the Adoption Agreement. If the Employer enforces a mandatory
retirement age, the Normal Retirement Age is the lesser of that
mandatory age or the age specified in the Adoption Agreement.
Notwithstanding the vesting schedule elected by the Employer in the
Adoption Agreement, an Employee's right to his or her account balance
shall be nonforfeitable upon the attainment of Normal Retirement Age.
1.41 NORMAL RETIREMENT DATE. The term Normal Retirement Date means the first
day of the month coinciding with or next following the date a
Participant attains his Normal Retirement Age. If a Participant retires
from the Service of the Employer on his Normal Retirement Date, he shall
receive a distribution of the entire value of his Participant's Account,
as of his Normal Retirement Date, sub ect to the provisions of Section
3A and Section 3C.
1.42 OWNER-EMPLOYEE. The term Owner-Employee means an individual who is a
sole proprietor, or who is a Partner owning more than 10 percent of
either the capital or profits interest of the Partnership.
1.43 PARTICIPANT. The term Participant means any person who has a
Participant's Account in the Plan and/or Trust.
If elected by the Employer in the Adoption Agreement, for purposes of
the investment of contributions as described in Section 5A, the term
Participant shall include former Participants, Beneficiaries, and
Alternate Payees. Former Participants shall include those Participants
who upon Termination of Employment elected to defer distribution in
accordance with Section 3A of the Plan.
1.44 PARTICIPANT'S ACCOUNT. The term Participant's Account means the sum of
the following sub-accounts maintained on behalf of each Participant.
(a) Money Purchase Pension Contributions, if any, plus any income and
minus any loss thereon;
(b) Nonelective Contributions, if any, plus any income and minus any
loss thereon;
(c) Matching Contributions, if any, plus any income and minus any loss
thereon;
(d) Qualified Nonelective Contributions, if any, plus any income and
minus any loss thereon;
(e) Qualified Matching Contributions, if any, plus any income and minus
any loss thereon;
(f) Prior Employer Contributions, if any, plus any income and minus any
loss thereon;
Article I - Definitions -13- June 14, 1996
<PAGE>
(g) Elective Deferral Contributions, if any, plus any income and minus
any loss thereon;
(h) Employee Contributions, if any, plus any income and minus any loss
thereon;
(i) QVEC Contributions, if any, plus any income and minus any loss
thereon.
(j) Rollover Contributions, if any, plus any income and minus any loss
thereon;
A Participant's Account shall be invested in accordance with rules
established by the Plan Administrator that shall be applied in a
consistent and nondiscriminatory manner.
1.45 PARTICIPANT'S EMPLOYER STOCK ACCOUNT. The term Participant's Employer
Stock Account means that portion, if any, of the Participant's Account
which is invested in shares of the Employer's stock. Such Participant's
Employer Stock Account shall be credited with dividends paid, if any.
Such Participant's Employer Stock Account will be valued on each day
that the public exchange, over which the Employer's stock is traded, is
open for unrestricted trading.
Amounts that are invested in the Participant's Employer Stock Account
may be invested in any short term account prior to actual investment in
the Participant's Employer Stock Account.
As elected by the Employer in the Adoption Agreement:
(a) The Trustee ivill vote the shares of the Employer's stock invested
in the Participant's Employer Stock Account; or
(b) The Trustee will vote the shares of the Employer's stock in
accordance with any instructions received by the Trustee from the
Participant. The Trustee may request voting instructions from the
Participants provided this is done in a consistent and
nondiscriminatory manner.
The ability of a Participant who is subject to the reporting
requirements of section 16(a) of the Securities Exchange Act of 1934
(the "Act") to make withdrawals or investment changes involving the
Participant's Employer Stock Account may be restricted by the Plan
Administrator to comply with the rules under section 16(b) of the Act.
A money put chase pension plan making an initial investment in shares of
the Employer's stock after December 31, 1974, may not acquire shares to
the extent that the aggregate fair market value of the Employer's stock
held by the Plan will exceed 10 percent of the fair market value of the
assets of the Plan.
1.46 PARTNER. The term Partner means a member of a Partnership.
1.47 PARTNERSHIP. The term Partnership means a partnership as defined in
Code section 7701(a)(2) and the regulations thereunder and includes a
syndicate, group, pool, joint venture, or other unincorporated
organization through or by means of which any business, financial
operation, or venture is carried on, and which is not a corporation or a
trust or estate within the meaning of the Code. A joint undertaking
merely to share expenses is not a Partnership. In addition, mere co-
ownership of property which is maintained, kept in repair, and rented or
leased does not constitute a Partnership.
Article I - Definitions -14- June 14, 1996
<PAGE>
1.48 PERSON. The term Person means any natural person, partnership,
corporation, trust or estate.
1.49 PLAN. The term Plan means this Connecticut General Life Insurance
Company Defined Contribution Plan and the Adoption Agreement as adopted
by the Employer and as both may be amended from time to time.
1.50 PLAN ADMINISTRATOR. The term Plan Administrator means the Person or
Persons designated by the Employer in its Adoption Agreement and any
successor(s) thereto. If more than one Person shall be designated, the
committee thus formed shall be known as the Administrative Committee and
all references in the Plan to the Plan Administrator shall be deemed to
apply to the Administrative Committee. The Plan Administrator shall
signify in writing his acceptance of his responsibility as a Named
Fiduciary.
1.51 PLAN YEAR. The term Plan Year means the Inconsecutive month period
specified by the Employer in the Adoption Agreement.
If the Plan Year changes to a different Inconsecutive month period, the
first new Plan Year shall begin before the end of the last old Plan
Year. In this event, the period beginning on the first day of the last
old Plan Year and ending on the day before the first day of the first
new Plan Year shall be treated as a short Plan Year for purposes of
determining Highly Compensated Employees, performing the
Nondiscrimination Tests set forth in Section 4A, and applying the Top-
Heavy provisions of Section 7A. However, Service will be credited in
accordance with the provisions of Section 2A.8.
1.52 PREVAILING WAGE LAW. The term Prevailing Wage Law means any statute or
ordinance that requires the Employer to pay its Employees working on
public contracts at wage rates not less than those determined pursuant
to that statute classes of workers in the geographical area where the
contract is performed, including the Davis-Bacon Act and similar Federa@
state, or municipal prevailing wage statutes.
1.53 PRIOR EMPLOYER CONTRIBUTIONS. The term Prior Employer Contributions
means contributions made by the Employer prior to the date indicated on
the Adoption Agreement.
1.54 PRIOR REQUIRED EMPLOYEE CONTRIBUTIONS. The term Prior Required Employee
Contributions means Employee post-tax contributions that the Employer
required as either a condition of participation, or for receiving an
Employer contribution, prior to the date indicated on the Adoption
Agreement.
1.55 PRIOR VOLUNTARY EMPLOYEE CONTRIBUTIONS. The term Prior Voluntary
Employee Contributions means post-tax contributions made voluntarily by
an Employee prior to the date indicated on the Adoption Agreement.
1.56 QDRO. The term QDRO means a Qualified Domestic Relations Order as
determined in accordance with Code section 414(p) and regulations
thereunder.
1.57 QUALIFIED MATCHING CONTRIBUTIONS. The term Qualified Matching
Contributions means Matching Contributions which are subject to the
distribution and nonforfeitability requirements of Code section 401(k)
when made.
1.58 QUALIFIED NONELECTIVE CONTRIBUTIONS. The term Qualified Nonelective
Contributions means Nonelective Contributions made by the Employer and
Article I - Definitions -15- June 14, 1996
<PAGE>
allocated to Participants' accounts that the Participants may not elect
to receive in cash until distributed from the Plan; that are
nonforfeitable when made; and that are distributable only in accordance
with the distribution provisions that are applicable to Elective
Deferral Contributions and Qualified Matching Contributions.
1.59 QVEC CONTRIBUTIONS. The term QVEC Contributions means voluntary amounts
contributed by the Participant prior to January 1, 1987, which the
Participant designated in writing were eligible for A tax deduction
under Code section 219(a).
QVEC Contributions will be maintained in a separate account, which will
be nonforfeitable (i.e., 100% vested) at all times. The account will
share in the gains and losses under the Plan in the same manner as
described in Section 5A.3 of the Plan.
1.60 REQUIRED EMPLOYEE CONTRIBUTIONS. The term Required Employee
Contributions means Employee post-tax contributions that the Employer
requires either as A condition of participation or for receipt of an
Employer contribution.
1.61 ROLLOVER CONTRIBUTION. The term Rollover Contribution means an amount
representing all or part of a distribution from a pension or profit
sharing plan meeting the requirements of Code section 401 (a), which is
eligible for rollover to this Plan in accordance with the requirements
set forth in Code section 402 (including Direct Rollovers) or Code
section 408(d)(3), whichever is applicable.
1.62 SALARY DEFERRAL AGREEMENT. The term Salary Deferral Agreement means an
agreement between a Participant and the Employer to defer receipt of a
portion of the Participant's Compensation by making Elective Deferral
Contributions to the Plan.
1.63 SELF-EMPLOYED INDIVIDUAL. The term Self-Bmployed Individual means an
individual who has Earned Income for the taxab-le year from the trade or
business for which the Plan is established; also, an individual who
would have Earned Income but for the fact that the trade or business had
no net profits for the taxable year.
1.64 SERIOUS FINANCIAL HARDSHIP. The term Serious Financial Hardship means an
immediate and heavy financial need of the Participant where such
Participant lacks the available resources to meet the hardship. The Plan
Administrator shall make a determination of whether a Serious Financial
Hardship exists in accordance with the applicable provisions of Section
3E.
1.65 SHAREHOLDER-EMPLOYEE. The term Shareholder-Employee means an Employee or
officer of an electing small business S corporation who owns (or is
considered as owning within the meaning of Code section 318(a)(1)), on
any day during the taxable year of such corporation, more than 5% of the
outstanding stock of the corporation.
1.66 SOCIAL SECURITY INTEGRATION LEVEL. The term Social Security Integration
Level means the Social Security Taxable Wage Base or such lesser amount
specified by the Employer in the Adoption Agreement. If the Social
Security Taxable Wage Base is amended, the Social Security Integration
Level will be deemed to have been amended.
Article I - Definitions -16- June 14, 1996
<PAGE>
1.67 SOCIAL SECURITY TAXABLE WAGE BASE. The term Social Security Taxable Wage
Base means the contribution and benefit base in effect under section 230
of the Social Security Act at the beginning of the Plan Year.
1.68 SPONSORING ORGANIZATION. The term Sponsoring Organization means
Connecticut General Life Insurance Company, a legal reserve life
insurance company of Hartford, Connecticut.
1.69 SPOUSE. The term Spouse means the lawful wife of a male Participant, or
the lawful husband of a female Participant. However, a former Spouse
will be treated AS the Spouse or surviving Spouse and a current Spouse
will not be treated as the Spouse OR surviving Spouse to the extent
provided under a QDRO.
1.70 STRAIGHT LIFE ANNUITY. The term Straight Life Annuity means an annuity
payable in equal installments for the life of the Participant, and that
terminates upon the Participant's death.
1.71 TERMINATION OF EMPLOYMENT. The term Termination of Employment means a
severance of the Employer-Employee relationship which occurs prior to a
Participant's Normal Retirement Age for any reason other than Early
Retirement, Disability, or death.
1.72 TRUE-UP CONTRIBUTIONS. The term True-Up Contributions means Additional
Matching Contributions made to the Plan by the Employer so that total
Matching Contributions for each Participant are calculated on an annual
basis rather than on the basis selected by the Employer in the Adoption
Agreement.
1.73 TRUST. The term Trust means the Trust Agreement if the Employer
specifies in the Adoption Agreement that the Plan is Trusteed. The Trust
Agreement is entered into by the Employer, the Plan Administrator and
the Trustee by completing and signing the Adoption Agreement, which
Trust Agreement forms a part of, and implements the provisions of the
Plan as it applies to the Employer. If the Employer specifies in the
Adoption Agreement that the Plan is Non-Trusteed, then the terms and
provisions of this Plan relating to the Trust shall be of no force and
effect.
1.74 TRUSTEE. The term Trustee means the trustee(s) designated by the
Employer in its Adoption Agreement, if applicable, and any successors)
thereto.
1.75 VESTED INTEREST. The term Vested Interest means the nonforfeitable right
to an immediate or deferred benefit on any date in the amount which is
equal to the sum of (a), (b) and (c) below:
(a) The value on that date of that portion of the Participant's Account
that is attributable to and derived from Employee Contributions, if
any;
(b) The value on that date of the portion of the Participant's Account
attributable to Elective Deferral Contributions, if any; Qualified
Nonelective Contributions, if any; QVEC Contributions, if any;
Rollover Contributions, if any; and Qualified Matching
Contributions, if any;
(c) The value on that date of that portion of the Participant's Account
that is attributable to and derived from contributions made by the
Employer (and Forfeitures, if any), multiplied by his Vesting
Percentage determined on the date applicable.
Article I - Definitions -17- June 14, 1996
<PAGE>
Employer contributions described in subsection (c), plus the
earnings thereon, shall be, at any relevant time, a part of the
Participant's Vested Interest equal to an amount ('X") determined
by the following formula:
X = P(AB+D)-D
For purposes of applying this formula:
P = The Participant's Vesting Percentage at the relevant time.
AB = The account balance attributable to such contributions, plus
the earnings thereon, at the relevant time.
D = The amount of any distribution.
1.76 VESTING PERCENTAGE. The term Vesting Percentage means the Participant's
nonforfeitable interest in Money Purchase Pension Contributions,
Matching Contributions, Nonelective Contributions, or Prior Employer
Contributions credited to his Participant's Account, plus any income and
minus any loss thereon. The Vesting Percentage for each such Employer
contribution is computed in accordance with one of the schedules listed
below, based on Years of Service with the Employer, as specified by the
Employer in its Adoption Agreement:
(a) 100% full and immediate;
(b) 100% after 3 Years of Service;
(c) 20% per Year of Service, 100% at 5 Years of Service;
(d) 20% after 3 Years of Service, 20% per Year of Service thereafter,
100% at 7 Years of Service;
(e) 20% after 2 Years of Service, 20% per Year of Service thereafter,
100% at 6 Years of Service;
(f) 100% after 5 Years of Service;
(g) 25% after 1 Year of Service, 100% after 4 Years of Service;
(h) Other.
However, if a Participant dies prior to attaining his Normal Retirement
Age, his Vesting Percentage shall be 100%.
1.77 VOLUNTARY EMPLOYEE CONTRIBUTIONS. The term Voluntary Employee
Contributions means post-tax contributions made voluntarily by an
Employee.
Article I - Definitions -18- June 14, 1996
<PAGE>
ARTICLE II - GENERAL PROVISIONS
2A. SERVICE
2A.1 SERVICE. The term Service means active employment with the Employer as
an Employee.
2A.2 ABSENCE FROM EMPLOYMENT. Absence from employment on account of a leave
of absence authorized by the Employer pursuant to the Employer's
established leave policy will be counted as employment with the Employer
provided that such leave of absence is of not more than two years'
duration. Absence from employment on account of active duty with the
Armed Forces of the United States will be counted as employment with the
Employer. If the Employee does not return to active employment with the
Employer, his Service will be deemed to have ceased on the date the Plan
Administrator receives notice that the Employee will not return. The
Employer's leave policy shall be applied in a uniform and
nondiscriminatory manner to all Participants under similar
circumstances.
For purposes of determining an Employee's eligibility and vesting status
for periods while the Employee is absent from work for reasons covered
under the Family and Medical Leave Act, Service will be credited in
accordance with and to the extent required by the provisions of the
Family and Medical Leave Act.
If the Employer has elected in the Adoption Agreement to determine Service
based upon 1,000 Hours, then the following Sections 2A.3 through 2A.8 shall
apply.
2A.3 HOUR OF SERVICE. The term Hour of Service means:
(a) Each hour for which an Employee is directly or indirectly paid, or
entitled to payment, by the Employer for the performance of duties.
These hours shall be credited to the Employee for the Computation
Period or Periods, as defined in Section 2A.5, in which the duties
were performed; and
(b) Each hour for which an Employee is paid or entitled to payment, by
the Employer on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship
has 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 a single Computation Period (whether or
not the period occurs in a single Computation Period). Hours under
this paragraph will be calculated and credited pursuant to section
2530.200b-2 of the Department of Labor regulations which are
incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by @he Employer. The
same Hours of Service will not be credited under subsection (a) or
subsection (b), as the case may be, and under this subsection (c).
These hours shall be credited to the Employee for the Computation
Period or periods to which the award or agreement pertains rather
than the Computation Period in which the award, agreement or
payment is made; and Hours of Service will be credited for
employment with other members of an affiliated service group (under
Code section 414(m)), a controlled group of corporations (under
Code section 414(b)), for a group of trades or businesses under
common
Article II - General Provisions -19- June 14, 1996
<PAGE>
control (under Code section 414(c)), of which the adopting Employer
is a member, and any other entity required to be aggregated with
the Employer pursuant to Code section 414(o).
Hours of Service will also be credited for any individual considered an
Employee for purposes of this Plan under Code sections 414(n) or 414(o).
Solely for purposes of determining whether a 1-Year Break-in-Service, as
defined in Section 2A.4, for participation and vesting purposes has
occurred in a Computation Period, an individual who is absent from work
for maternity or paternity reasons shall receive credit for the Hours of
Service which would otherwise have been credited to such individual but
for such absence, or in any case in which such hours cannot be
determined, eight (8) Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of A birth of A child of the individual, (3)
by reason of the placement of A child with the individual in connection
with the adoption of such child by such individual, or (4) for purposes
of caring for such child for a period beginning immediately following
such birth or placement. The Hours of Service credited under this
paragraph shall be credited (1) in the Computation Period in which the
absence begins if the crediting is necessary to prevent a Break-in-
Service in that period, or (2) in all other cases, in the following
Computation Period.
Service shall be determined on the basis of the method selected in the
Adoption Agreement.
2A.4 1-YEAR BREAK-IN-SERVICE. The term 1-Year Break-in-Service means any
Computation Period during which an Employee fails to complete more than
500 Hours of Service.
2A.5 YEAR(S) OF SERVICE. The term Year(s) of Service means a 12-consecutive
month period ("Computation Period") during which an Employee has
completed at least 1,000 Hours of Service.
(a) Eligibility Computation Period. For purposes of determining Years
of Service and Breaks-in-Service for eligibility, the Inconsecutive
month period shall begin with the date on which the Employee first
performs an Hour of Service for the Employer and, where additional
periods are necessary, succeeding anniversaries of his employment
commencement date. The employment commencement date is the date on
which the Employee first performs an Hour of Service for the
Employer maintaining the Plan.
(b) Vesting Computation Period. As elected by the Employer in the
Adoption Agreement, for computing Years of Service and Breaks-in-
Service for vesting, the 12-consecutive month period:
(1) Shall be the Plan Year; or
(2) Shall begin with the date on which the Employee first performs
an Hour of Service for the Employer and, where additional
periods are necessary, succeeding anniversaries of that date.
However, active participation as of the last day of the Plan Year is not
required in order for a Participant to be credited with a Year of
Service for vesting purposes.
Article II - General Provisions -20- June 14, 1996
<PAGE>
(c) Contribution Computation Period. If the Employer specifies an
annual Contribution Period in its Adoption Agreement for the
purpose of determining a Participant's eligibility to receive a
contribution, the 12-consecutive month period shall be any Plan
Year during which the Participant is credited with at least 1,000
Hours of Service. However, when an Employee first becomes a
Participant or resumes active participation in the Plan following a
1-Year Break-in-Service on a date other than the first day of the
Plan Year, all Hours of Service credited to the Participant during
that Plan Year, including those Hours credited prior to the date
the Employee enrolls (or reenrolls) as an Participant in the Plan
shall be counted. Furthermore, the Employer may require in its
Adoption Agreement that a Participant be a Participant as of the
last day of the Plan Year in order to be eligible to receive a
contribution for a Plan Year.
(d) If in its Adoption Agreement the Employer permits Early Retirement,
the Inconsecutive month period for determining Early Retirement
shall be the Plan Year. However, active participation as of the
last day of the Plan Year is not required in order for a
Participant to be credited with a Year of Service.
Service with a predecessor organization of the Employer shall be treated
as Service with the Employer for the purposes of subsections (a), (b)
and (d) above in any case in which the Employer maintains the plan of
such predecessor organization. In addition, if elected by the Employer
in the Adoption Agreement, service with a predecessor organization of
the Employer shall be treated as Service with the Employer, even if the
Employer does not maintain the plan of such predecessor organization.
If elected in the Adoption Agreement, service with a subsidiary or
affiliate of the Employer that is not related to the Employer under the
provisions of Code sections 414(b), (c) or (m) shall be treated as
Service with the Employer for purposes of (a), (b) and (d) above.
2A.6 DETERMINING VESTING PERCENTAGE. Vesting credit shall be given for each
Year of Service except those periods specifically excluded in the
Adoption Agreement.
If a Participant completes less than 1,000 Hours of Service during a
Plan Year while remaining in the service of the Employer, his Vesting
Percentage shall not be increased for such Plan Year. However,at such
time as the Participant again completes at least 1,000 Hours of Service
in any subsequent Plan Year, his Vesting Percentage shall then take into
account all Years of Service with the Employer except those specifically
excluded in the Adoption Agreement.
If an individual who ceases to be an Employee and is subsequently
rehired as an Employee enrolls (or reenrolls) in the Plan, upon his
participation (or reparticipation) his Vesting Percentage shall then
take into account all Years of Service except those specifically
excluded in the Adoption Agreement.
In the case of a Participant who has 5 consecutive 1-Year Breaks-in-
Service, all Years of Service after such Breaks-in-Service will be
disregarded for the purpose of vesting the Employer-derived account
balance that accrued before such breaks. However, both pre-break and
post-break Service will count for the purpose of vesting the Employer-
derived account balance that accrues after such Breaks-in-Service. Both
accounts will share in the earnings and losses of the fund.
Article II - General Provisions -21- June 14, 1996
<PAGE>
In the case of a Participant who does not have 5-consecutive 1-Year
Breaks-in-Service, both the pre-break and post-break Service will count
in vesting both the pre-break and post-break Employer-derived account
balance.
2A.7 EXCLUDED YEARS OF SERVICE FOR VESTING. In determining the Vesting
Percentage of an Employee, all Years of Service with the Employer(s)
maintaining the Plan shall be taken into account, except that the
following periods may be excluded, as specified by the Employer in its
Adoption Agreement:
(a) Years of Service prior to the time a Participant attained age 18;
(b) Years of Service during which the Employer did not maintain the
Plan or a predecessor plan;
(c) Years of Service during a period for which the Employee made no
Required Employee Contributions;
(d) Years of Service prior to any 1-Year Break-in-Service, until the
Employee completes one Year of Service following such 1-Year Break-
in-Service.
(e) In the case of an Employee who has no Vested Interest in Employer
contributions, Years of Service before any period of consecutive 1-
Year Breaks-in-Service if the number of such consecutive 1-Year
Breaks-inService equals or exceeds the greater of (i) 5, or (ii)
the total number of Years of Service before such break.
For the purposes of this Section, a predecessor plan shall mean a plan
of the Employer that was terminated within five years preceding or
following the Effective Date of this Plan.
2A.8 CHANGE IN PLAN YEARS. If the Plan Year is changed, the following special
rules shall apply.
(a) Vesting Computation Periods. If the Vesting Computation Period is
the Plan Year, Years of Service and 1-Year Breaks-in-Service shall
be measured over two overlapping Inconsecutive month periods. The
first such period shall begin on the first day of the last old Plan
Year and the second such period shall begin on the first day of the
first new Plan Year, thereby creating an overlap. All Hours of
Service performed during the overlap period must be counted in both
Vesting Computation Periods. A Participant who completes at least
1,000 Hours of Service during each such perioc; shall be credited
with two Years of Service for Vesting.
(b) Contribution Computation Periods. To determine a Participant's
eligibility to receive a contribution for a short Plan Year, the
1,000 Hours of Service requirement shall be prorated by multiplying
by a fraction, the numerator of which is the number of full months
in the short Plan Year and the denominator of which is 12.
Article II - General Provisions -22- June 14, 1996
<PAGE>
If the Employer has elected in the Adoption Agreement to determine Service
based upon Elapsed Time, then the following Sections 2A.9 and 2A.10 shall
apply.
2A.9 ELAPSED TIME. If the Employer has selected an eligibility requirement in
the Adoption Agreement that is or includes a fractional Year(s) of
Service requirement, the provisions of this Section shall apply.
(a) For purposes of determining an Employee's initial or continued
eligibility to participate in the Plan, or the Participant's Vested
Interest in Employer contributions, an Employee will receive credit
for the aggregate of all time period(s) commencing with the
Employee's first day of employment or reemployment and ending on
the date a Break-in-Service (as defined in this Section) begins.
The first day of employment or reemployment is the first day the
Employee performs an Hour of Service. An Employee will also receive
credit for any Period of Severance of less than 12-consecutive
months. Fractional periods of a year will be expressed in terms of
days.
(b) For purposes of this Section, "Hour of Service" shall mean each
hour for which an Employee is paid or entitled to payment for the
performance of duties for the Employer.
(c) For purposes of this Section, a "Break-in-Service" is a Period of
Severance of at least 12 consecutive months.
(d) A "Period of Severance" is a continuous period of time during which
the Employee is not employed by the Employer. Such period begins on
the date the Employee retires, quits or is discharged, or if
earlier, the 12-month anniversary of the date on which the Employee
was otherwise first absent from Service.
(e) In the case of an individual who is absent from work for maternity
or paternity reasons, the 12-consecutive month period beginning on
the first anniversary of the first day of such absence shall not
constitute a Break-in-Service. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an
absence (1) by reason of the pregnancy of the individual, (2) by
reason of the birth of a child of the individual, (3) by reason of
the placement of a child with the individual in connection with the
adoption of such child by such individual, or (4) for purposes of
caring for such child for a period beginning immediately following
such birth or placement.
Each Employee will share in Employer contributions for the period
beginning on the date the Employee commences participation under
the Plan and ending on the date on which such Employee severs
employment with the Employer or is no longer a member of an
eligible class of Employees.
(f) If the Employer is a member of an affiliated service group (under
Code section 414(m)), a controlled group of corporations (under
Code section 414(b)), a group of trades or businesses under common
control (under Code section 414(c)) or any other entity required to
be aggregated with the Employer pursuant to Code section 414(o),
Service will be credited for any employment for any period of time
for any other member of such group. Service will also be credited
for any individual required under Code section 414(n) or Code
section 414(o) to be considered an Employee of any Employer
aggregated under Code sections 414(b), (c), or (m) of such group.
Article II - General Provisions -23- June 14, 1996
<PAGE>
2A.10 EXCLUDED PERIODS OF SERVICE FOR VESTING. In determining the Vesting
Percentage of an Employee, all Periods of Service with the Employer(s)
maintaining the Plan shall be taken into account, except that the
following periods may be excluded, as specified by the Employer in its
Adoption Agreement:
(a) Periods of Service prior to the time a Participant attained age
18;
(b) Periods of Service during which the Employer did not maintain the
Plan or a predecessor plan;
(c) Periods of Service during which the Employee made no Required
Employee Contributions;
(d) Periods of Service prior to any one-year Period of Severance,
until the Employee completes a one-year period of Service
following such Period of Severance;
(e) In the case of an Employee who has no Vested Interest in Employer
contributions, Periods of Service before any Period of Severance
if the number of consecutive one-year Periods of Severance equals
or exceeds the greater of (i) 5, or (ii) the total number of one-
year Periods of Service before such Period of Severance. For the
purposes of this Section, a predecessor plan shall mean a plan of
the Employer that was terminated within five years preceding or
following the Effective Date of this Plan.
2B. ELIGIBILITY, ENROLLMENT AND PARTICIPATION
2B.1 ELIGIBILITY. Each Employee shall be eligible to participate in the Plan
and receive an appropriate allocation of Employer contributions as of
the Entry Date following the day he meets the following requirerqents,
if any, specified by the Employer in its Adoption Agreement, relating
to:
(a) Required service;
(b) Minimum attained age;
(c) Job class requirements.
In addition to the eligibility conditions stated above, the Employer
may specify in the Adoption Agreement certain groups of Employees who
are not eligible to participate in the Plan.
Notwithstanding the foregoing, if the Employer's Plan as set forth
herein replaces or amends a preceding plan, then those Employees
participating under the Plan as written prior to such replacement or
amendment shall be eligible to be Participants hereunder without regard
to length of Service or minimum attained age otherwise required herein.
2B.2 ENROLLMENT. Each eligible Employee may enroll as of his Entry Date by
completing and delivering to the Plan Administrator an enrollment form
and, if applicable, a payroll deduction authorization and/or a Salary
Deferral Agreement.
Article II - General Provisions -24- June 14, 1996
<PAGE>
2B.3 REEMPLOYED PARTICIPANT. In the case of an individual who ceases to be an
Employee and is subsequently rehired as an Employee, the following
provisions shall apply in determining eligibility to again participate
in the Plan:
(a) If the Employee had met the eligibility requirements as specified
in Section 2B.1, such Employee will become a Participant in the
Plan in accordance with Section 2B.2 as of the date he is
reemployed as an Employee.
(b) If the Employee had not formerly met the eligibility requirements
specified in Section 2B.1, such Employee will become a Participant
in the Plan after meeting the requirements of Section 2B.1 in
accordance with Section 2B.2.
2B.4 ELIGIBLE CLASS. If a Participant becomes ineligible to participate
because he is no longer a member of an eligible class of Employees, such
Employee shall participate immediately upon his return to an eligible
class of Employees. If such Participant incurs a Break-in-Service,
eligibility will be determined under the Break-in-Service rules'of the
Plan.
If an Employee who is not a member of the eligible class of Employees
becomes a member of the eligible class, such Employee shall participate
immediately if such Employee has satisfied the minimum age and Service
requirements and would have previously become a Participant had he been
in the eligible class. If such Participant incurs a Break-in-Service,
eligibility will be determined under the Break-in-Service rules of the
Plan.
2B.5 WAIVER OF PARTICIPATION. Notwithstanding any provision of the Plan to
the contrary, if Required Employee Contributions are elected by the
Employer in the Adoption Agreement, any Employee in accordance with the
rules of the Plan may decline to become a Participant or cease to be a
Participant by filing a written waiver of participation with the Plan
Administrator in the manner prescribed. Such waiver must be filed prior
to the date such Employee is eligible to become a Participant, or in the
case of a current Participant, in the last month of the Plan Year
immediately preceding the Plan Year for which he wishes to cease being a
Participant.
Any Employee who files such a waiver shall not become a Participant, or
if a current Participant, shall elect to cease to be such as of the
first day of the succeeding Plan Year; and such Employee shall not
receive any additional Compensation or other sums by reason of his
waiver of participation.
Any such waiver may be rescinded by an Employee who is not a Partner
effective on the first day of the first Plan Year following one or more
Plan Years commencing after the filing of such waiver in which he was
not a Participant, in which event he shall become a Participant, or
again become a Participant, as the case may be, effective as of such
date. A Partner may make a one-time irrevocable waiver of participation
upon the later of his commencement of employment with the Employer or
the date he is first eligible to participate in the Plan.
No Employee who is eligible to participate in a standardized plan may
waive participation or voluntarily reduce his or her Compensation for
purposes of this Plan.
2B.6 TRADES OR BUSINESSES CONTROLLED BY OWNER-EMPLOYEES. If this Plan
provides contributions or benefits for one or more Owner-Employees who
control both the business for which this Plan is established and one or
more other trades or businesses, this Plan and any plans established for
other trades or businesses
Article II - General Provisions -25- June 14, 1996
<PAGE>
must, when looked at as a single plan, satisfy Code sections 401 (a) and
(d) for the Employees of this and all other trades or businesses. If the
Plan provides contributions or benefits for one or more Owner-Employees
who control one or more other trades or businesses, the employees of the
other trades or businesses must be included in a plan which satisfies
Code sections 401 (a) and (d) and which provides contributions and
benefits not less favorable than those provided for Owner-Employees
under this Plan.
If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which he does not control and the
individual controls a trade or business, then the contributions or
benefits of the Employees under. the plan of the trades or businesses
which he does control must be as favorable as those provided for him
under the most favorable plan of the trade or business which he does not
control.
For purposes of the preceding paragraphs, an Owner-Employee or two or
more Owner-Employees will be considered to control a trade or business
if the Owner-Employee or two or more Owner-Employees together:
(1) own the entire interest in an unincorporated trade or business, or
(2) in the case of a partnership, own more than 50 percent of either
the capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee or two or more
Owner-Employees shall be treated as owning any interest in a Partnership
that is owned, directly or indirectly, by a Partnership which such
Owner-Employee or such two or more Owner-Employees are considered to
control within the meaning of the preceding sentence.
2C. CONTRIBUTIONS AND ALLOCATIONS
2C.1 PROFIT SHARING/THRIFT PLAN WITH 401(k) FEATURE.
(a) Contributions - Employer.
For each Plan Year, as specified in the Adoption Agreement, the
Employer shall make one or more of the following contributions.
(1) Elective Deferral Contributions.
(2) Matching Contributions.
(3) Nonelective Contributions.
(b) Contributions - Participant.
For each Plan Year, as specified in the Adoption Agreement, each
Participant may make periodic Required Employee Contributions or
Voluntary Employee Contributions.
For Plans that contain a CODA, a Participant may elect to make a
Voluntary Employee Contribution in a lump sum. Such lump sum
Voluntary Employee Contribution may be made (1) as of the Effective
Date, or (2) as elected by the Employer in the Adoption Agreement.
Voluntary Employee Contributions shall be subject to the terms of
Section 4B.
Article II - General Provisions -26- June 14, 1996
<PAGE>
(c) Fail-Safe Contribution.
The Employer reserves the right to make a discretionary Nonelective
Contribution to the Plan for any Plan Year, if the Employer
determines that such a contribution is necessary to ensure the
Actual Deferral Percentage test or the Actual Contribution
Percentage test will be satisfied for that Plan Year. Such amount
shall be designated by the Employer at the time of contribution as
a Qualified Nonelective Contribution and shall be known as a Fail-
Safe Contribution.
The Fail-Safe Contribution shall be made on behalf of all eligible
non-Highly Compensated Employees who are Participants and Who are
considered under the Actual Deferral Percentage test or, if
applicable, the Actual Contribution Percentage test, and shall be
allocated to the Participant's Account of each such Participant in
an amount equal to a fixed percentage of such Participant's
Compensation. The fixed percentage shall be equal to the minimum
fixed percentage necessary to be contributed by the Employer on
behalf of each eligible non-Highly Compensated Employee who is a
Participant so that the Actual Deferral Percentage test or, if
applicable, the Actual Contribution Percentage test, is satisfied.
(d) Contributions - Changes.
For each Plan Year, a Participant may change the amount of his
Required Employee Contributions, Voluntary Employee Contributions,
or Elective Deferral Contributions as often as the Plan
Administrator allows (on a consistent and nondiscriminatory basis),
on certain dates prescribed by the Plan Administrator.
(e) Contributions - Timing.
(1) Elective Deferral Contributions shall be paid by the Employer
to the Trust or the Insurance Company, as elected by the
Employer in the Adoption Agreement, but never later than 90
days following the date of deferral.
(2) Matching Contributions made on other than an annual basis
shall be paid to the Trust or Insurance Company, as elected by
the Employer in the Adoption Agreement. Matching
Contributions, including Additional Matching Contributions,
made on an annual basis shall be paid to the Trust or the
Insurance Company, as applicable, at the end of the Plan Year,
or as soon as possible on or after the last day of such Plan
Year, but in no event later than the date prescribed by law
for filing the Employer's income tax return, including any
extension thereof. To the extent that Matching Contributions
are used to purchase Life Insurance Policies, then such
contributions for any Plan Year may be paid to the Trust when
premiums for such Policies are due during the Plan Year.
(3) Nonelective Contributions made on other than an annual basis
shall be paid to the Trust or Insurance Company, as
applicable, as elected by the Employer in the Adoption
Agreement. Nonelective Contributions made on an annual basis
shall be paid to the Trust or the Insurance Company, as
applicable, at the end of the Plan Year ,
Article II - General Provisions -27- June 14, 1996
<PAGE>
or as soon as possible on or after the last day of such Plan
Year, but in any event not later than the date prescribed by
law for filing the Employer's income tax return, including any
extension thereof. To the extent that Nonelective
Contributions are used to purchase Life Insurance Policies,
then such contributions for any Plan Year may be paid to the
Trust when premiums for such Policies are due during the Plan
Year.
(4) Employee Contributions shall be transferred by the Employer to
the Trust or the Insurance Company, as elected by the Employer
in the Adoption Agreement, but never later than 90 days
following the date such Contributions are made by the
Employee.
(5) The Fail-Safe Contribution for any Plan Year as determined
above shall be paid to the Insurance Company at the end of the
Plan Year, or as soon as possible on or after the last day of
such Plan Year, but in no event later than the date which is
prescribed by law for filing the Employer's income tax return,
including any extensions thereof.
(f) Contributions - Allocations.
The allocation of Nonelective Contributions shall be made in
accordance with (1), (2), (3) or (4) below, as specified by the
Employer in the Adoption Agreement.
(1) Formula A: Compensation Ratio - Not Integrated with Social
Security.
The allocation to each Participant shall be made in the
proportion that the Compensation paid to each Participant
eligible to receive an allocation bears to the Compensation
paid to all Participants eligible to receive an allocation.
(2) Formula B: Integrated with Social Security - Step Rate Method.
Base Contribution: An amount equal to a percentage (as
specified in the Adoption Agreement) of the Compensation of
each Participant up to the Social Security Integration Level;
Excess Contribution: In addition, an amount equal to a
percentage (as specified in the Adoption Agreement) of the
Participant's Compensation which is in excess of the Social
Security Integration Level, subject to the Limitations on
Allocations in accordance with Section 4B. This Excess
Contribution percentage shall not exceed the lesser of:
(A) twice the Base Contribution or
(B) the Base Contribution plus the greater of:
(i) the old age insurance portion of the Old Age
Survivor Disability (OASDI) tax rate; or
(ii) 5.7%.
If the Employer has elected in the Adoption Agreement to use a
Social Security Integration Level that in any Plan Year is the
greater of $10,000 or 20% but less than 100% of the Social
Security Taxable
Article II - General Provisions -28- June 14, 1996
<PAGE>
Wage Base, then the 5.7% limitation specified in
2C.I(f)(2)(B)(ii) shall be adjusted in accordance with the
following table:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
If the Social Security Integration Level
------------------------------------------------------------------------
is more but not more Adjust
than than 5.7% to
------------------------------------------------------------------------
<S> <C> <C>
the greater of $ 10,000 or 80% of the Social Security 4.3%
20% of the Social Security Taxable Wage Base
Taxable Wage
Base
80% of the Social Security 100% of the Social Security 5.4%
Taxable Wage Taxable Wage Base
Base
------------------------------------------------------------------------
</TABLE>
In the case of any Participant who has exceeded the
Cumulative Permitted Disparity Limit described in Section 2C.
1(g), Nonelective Contributions shall be allocated in an
amount equal to the Excess Contribution percentage of two
times such Participant's total Compensation for the Plan Year.
Any remaining Nonelective Contributions or Forfeitures will be
allocated to each Participant's Account in the ratio that each
Participant's total Compensation for the Plan Year bears to
all Participants' total Compensation for that Plan Year.
(3) Formula B: Integrated with Social Security - Maximum Disparity
Method.
Subject to the Limitations on Allocations specified in Section
4B, for each Plan Year the allocation to each Participant
shall be made in accordance with the following:
(A) An amount equal to 5.7% of the sum of each Participant's
total Compensation plus Compensation that is in excess of
the Social Security Integration Level shall be allocated
to each Participant's Account. If the Employer does not
contribute such amount for all Participants, an amount
shall be allocated to each Participant's Account equal to
the same proportion that each Participant's total
Compensation plus Compensation that is in excess of the
Social Secutity Integration Level bears to the total
Compensation plus Compensation in excess of the Social
Security Integration Level of all Participants in the
Plan. in the case of any Participant who has exceeded the
Cumulative Permitted Disparity Limit described in Section
2C. I (g), two times such Participant's total
Compensation for the Plan Year will be taken into
account.
If the Employer has elected in the Adoption Agreement to
use a Social Security Integration Level that in any Plan
Year is the greater of $ 10,000 or 20% but less than I
00% of the Social Security Taxable Wage Base, then the
5.7% limitation specified in this subsection shall be
adjusted in accordance with the following table:
Article II - General Provisions -29- June 14, 1996
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
If the Social Security Integration Level
------------------------------------------------------------------------
is more but not more Adjust
than than 5.7% to
------------------------------------------------------------------------
<S> <C> <C>
the greater of $ 10,000 or 80% of the Social Security 4.3%
20% of the Social Security Taxable Wage Base
Taxable Wage
Base
80% of the Social Security 100% of the Social Security 5.4%
Taxable Wage Taxable Wage Base
Base
------------------------------------------------------------------------
</TABLE>
(B) The balance of the Nonelective Contribution (if any), shall be
allocated TO the Participant's Account in the proportion that
each Participant's Compensation bears to the total
Compensation of all Participants.
(4) Formula C: Flat Dollar Amount.
The allocation to each Participant shall be a flat dollar amount
as elected by the Employer in the Adoption Agreement. Formula C
may not be elected under a standardized plan.
(g) Allocation Requirements.
Employer contributions shall be allocated to the accounts of
Participants in accordance with the allocation requirement as
specified by the Employer in its Adoption Agreement. If the Employer
has adopted a standardized plan, the allocation of any nonannual
contribution made by the Employer shall be made to each Participant
who is a Participant on any day of the Contribution Period regardless
of hours of Service.
Annual Overall Permitted Disparity Limit. Notwithstanding the
preceding paragraph, for any Plan Year this Plan benefits any
Participant who benefits under another qualified plan or simplified
employee pension plan, as defined in Code section 408(k), maintained
by the Employer that provides for permitted disparity (or imputes
disparity), Employer contributions and Forfeitures will be allocated
to the account of each Participant who either completes more than 500
Hours of Service during the Plan Year or who is employed as of the
last day of the Plan Year in the ratio that such Participant's total
Compensation bears to the total Compensation of all Participants.
Cumulative Permitted Disparity Limit. Effective for Plan Years
beginning on or after January 1, 1995, the Cumulative Permitted
Disparity Limit for a Participant is 35 total cumulative permitted
disparity years. Total cumulative permitted years mean the number of
years credited to the Participant for allocation or accrual purposes
under this Plan, any other qualified plan or simplified employee
pension plan (whether or not terminated) ever maintained by the
Employer. For purposes of determining the Participant's Cumulative
Permitted Disparity Limit, all years ending in the same calendar year
are treated as the same year. If the Participant has not benefitted
under a defined benefit or target benefit plan for any year beginning
on or after January 1, 1994, the Participant has no Cumulative
Permitted Disparity Limit.
Article II - General Provisions -30- June 14, 1996
<PAGE>
(h) Forfeitures.
Forfeitures will be used in the manner elected in the Adoption
Agreement as follows:
(1) To reduce Employer contributions or pay Plan expenses; or
(2) Allocated in accordance with the allocation formula elected in
the Adoption Agreement; or
(3) First, to reduce Employer contributions or pay Plan expenses,
with any remaining Forfeitures allocated in accordance with
the allocation formula elected in the Adoption Agreement.
(i) Expenses.
The Employer may contribute to the Plan the amount necessary to pay
any reasonable expenses of administering the Plan. In lieu of the
Employer contributing the amount necessary to pay such charges,
these expenses may be paid from Plan assets.
Special Rules - Elective Deferral Contributions.
(1) Each Participant- may elect to defer his Compensation in an
amount specified in the Adoption Agreement, subject to the
limitations of this Section. A Salary Deferral Agreement (or
modification of an earlier Salary Deferral Agreement) may not
be made with respect to Compensation which is currently
available on or before the date the Participant executed such
election, or if later, the later of the date the Employer
adopts this CODA, or the date such arrangement first becomes
effective. Any elections made pursuant to this Section shall
become effective as soon as administratively feasible.
(2) If elected by the Employer in the Adoption Agreement, each
Participant may elect to defer and have allocated for a Plan
Year all or a portion of any cash bonus paid during the Plan
Year. A deferral election may not be made with respect to cash
bonuses which are currently available on or before the date
the Participant executed such election.
(3) Elective Deferral Contributions will be allocated to the
Participant's Account and shall be 100 percent vested and
nonforfeitable at all times.
(4) During any taxable year, no Participant shall be permitted to
have Elective Deferral Contributions made under this Plan, or
any other qualified plan maintained by the Employer, in excess
of the dollar limitation contained in Code section 402(g) in
effect at the beginning of such taxable year. If a Participant
takes a withdrawal of Elective Deferral Contributions due to a
serious financial hardship, as provided in Section 3E.5, his
Elective Deferral Contributions for his taxable year
immediately following the taxable year of such distribution
may not exceed the Code section 402(g) limit for such taxable
year less the amount of Elective Deferral Contributions made
for the Participant in the taxable year of the distribution.
Article II - General Provisions -31- June 14, 1996
<PAGE>
(5) Elective Deferral Contributions that are not in excess of the
limits described in subsection (4) above shall be subject to
the Limitations on Allocations in accordance with Section 4B.
Elective Deferral Contributions that are in excess of the
limits described in (4) above shall also be subject to the
Section 4B limitations, as further provided in Section 4C.2.
(6) An Employee's eligibility to make Elective Deferral
Contributions under a CODA may not be conditioned upon the
completion of more than one (1) Year-of-Service or the
attainment of more than age twenty-one (21).
(7) A Participant may modify the amount of Elective Deferral
Contributions such Participant makes to the Plan as often as
the Plan Administrator allows, as specified in the Adoption
Agreement, but in no event not less frequently than once per
calendar year. Such modification may be made by filing a
written notice with the Plan Administrator within the time
period prescribed by the Plan Administrator.
(k) Suspension of Contributions.
(1) Elective Deferral Contributions. The following provisions
shall apply with respect to suspension of Elective Deferral
Contributions.
(A) Voluntary Suspension. A Participant may elect to Suspend
his Salary Deferral Agreement for Elective Deferral
Contributions by filing a written notice thereof with the
Plan Administrator. Such Contributions shall be suspended
on the date specified in such notice, which date must be
at least 15 days after such notice is filed. The notice
shall specify the period for which such suspension shall
be effective.
(B) Suspension for Leave. A Participant who is absent from
employment on account of an authorized unpaid leave of
absence or military leave shall have his Salary Deferral
Agreement suspended during such leave. Such suspension of
contributions shall be effective on the date pavment of
Compensation by the Employer to him ceases, and shall
remain in effect until payment of Compensation resumes.
(C) Withdrawal Suspension. A Participant who elects a
withdrawal in accordance with Section 3E may have his
Elective Deferral Contributions suspended on the date
such election becomes effective. Such suspension shall
remain in effect for the number of months specified
therein.
(D) Non-Elective Suspension. A Participant who ceases to meet
the eligibility requirements as specified in Section
2B.1 but who remains in the employ of the Employer shall
have his Elective Deferral Contributions suspended,
effective as of the date he ceases to meet the
eligibility requirements. Such suspension shall remain in
effect until he again meets such eligibility
requirements.
Article II - General Provisions -32- June 14, 1996
<PAGE>
The Participant may elect to reactivate his Salary
Deferral Agreement for Elective Deferral Contributions by
filing a written notice thereof with the Plan
Administrator. The Salary Deferral Agreement shall be
reactivated following the expiration of the suspension
period described above.
(2) Required Employee Contributions. The following provisions shall
apply with respect to suspension of Required Employee Contributions
by Participants. In the event that a Participant suspends his
Required Employee Contributions, he shall automatically have his
Voluntary Employee Contributions suspended for the same period of
time.
(A) Voluntary Suspension. A Participant may elect to suspend his
payroll deduction authorization for his Required Employee
Contributions by filing a written notice thereof with the Plan
Administrator. Such notice shall be effective, and his
applicable contributions shall be suspended, on the date
specified in such notice, which date must be at least 15 days
after such notice is filed. The notice shall specify the
period for which such suspension shall be effective. Such
period must be a minimum of one month and may extend
indefinitely.
(B) Suspension for Leave. A Participant who is absent from
employment on account of an authorized unpaid leave of absence
or military leave shall have his payroll deduction
authorization for Required Employee Contributions suspended
during such leave. Such suspension of contributions shall be
effective on the date payment of Compensation by the Employer
to him ceases, and shall remain in effect until payment of
Compensation resumes.
(C) Withdrawal Suspension. A Participant who elects a withdrawal
in accordance with Section 3E may have his Required Employee
Contributions suspended on the date such election becomes
effective. Such suspension shall remain in effect for the
number of months specified under the provisions of Section 3E.
(D) Involuntary Suspension. A Participant who ceases to meet the
eligibility requirements as specified in Section 2B.1 but who
remains in the employ of the Employer shall have his Required
Employee Contributions suspended, effective as of the date he
ceases to meet the eligibility requirements. Such suspension
shall remain in effect until he again meets such eligibility
requirements.
The Participant may elect to reactivate his payroll deduction
authorization by filing a written notice thereof with the Plan
Administrator. The payroll deduction authorization shall be
reactivated following the expiration of the suspension period
described above.
(3) Voluntary Employee Contributions. The following provisions apply
with respect to suspension of Voluntary Employee Contributions by
Participants.
(A) Voluntary Suspension. A Participant may elect to suspend his
payroll deduction authorization for his Voluntary Employee
Contributions by filing a written notice thereof with the Plan
Administrator. Such notice shall be effective, and his
applicable
Article II - General Provisions -33- June 14, 1996
<PAGE>
contributions shall be suspended, on the date specified in
such notice, which date must be at least 15 days after such
notice is filed. The notice shall specify the period for which
Such suspension shall be effective.
(B) Suspension for Leave. A Participant who is absent from
employment on account of an authorized unpaid leave of absence
or military leave shall have his payroll deduction order for
Voluntary Employee Contributions suspended during such leave.
Such suspension of contributions shall be effective on the
date payment of Compensation by the Employer to him ceases,
and shall remain in effect until payment of Compensation
resumes.
(C) Withdrawal Suspension. A Participant who elects a withdrawal
in accordance with Section 3E may have his Voluntary Employee
Contributions suspended on the date such election becomes
effective. Such suspension shall remain in effect for the
number of months specified therein.
(D) Involuntary Suspension. A Participant who ceases to meet the
eligibility requirements as specified in Section 2B.1 but who
remains in the employ of the Employer shall have his Voluntary
Employee Contributions suspended, effective as of the date he
ceases to meet the eligibility requirements. Such suspension
shall remain in effect until he again meets such eligibility
requirements.
The Participant may elect to reactivate his payroll deduction
authorization by filing a written notice thereof with the Plan
Administrator. The payroll deduction authorization shall be
reactivated following the expiration of the suspension period
described above.
2C.2 MONEY PURCHASE PENSION PLAN.
(a) Contributions - Employer. As specified in the Adoption Agreement,
the Employer shall contribute an amount equal to a fixed percentage
of each Participant's Compensation, a flat dollar amount, or an
amount integrated with Social Security in accordance with (1), (2)
or (3) below:
(1) Formula A: Not Integrated with Social Security. An amount
equal to a percentage from 1% to 25% of the Compensation of
each Participant, as elected by the Employer in the Adoption
Agreement, subject to the Limitations on Allocations in
accordance with Section 4B.
(2) Formula B: Flat Dollar Amount. An amount, as elected by the
Employer in the Adoption Agreement. Formula B may not be
elected under a standardized plan.
(3) Formula C: Integrated with Social Security.
Base Contribution: An amount equal to a percentage (as
specified in the Adoption Agreement) of Compensation of each
Participant up to the Social Security Integration Level;
Excess Contribution: In addition, an amount equal to a
percentage (as specified in the Adoption Agreement) of the
Participant's Compensation which is in excess of the Social
Security Integration
Article II - General Provisions -34- June 14, 1996
<PAGE>
Level, subject to the Limitations on Allocations in accordance
with Section 4B. This Excess Contribution percentage shall not
exceed the lesser of:
(A) twice the Base Contribution or
(B) the Base Contribution plus the greater of:
(i) old age insurance portion of the Old Age Survivor
Disability (OASDI) tax rate; or
(ii) 5.7%.
If the Employer has elected in the Adoption Agreement to use a
Social Security Integration Level that in any Plan Year is the
greater of $10,000 or 20% but less than 100% of the Social
Security Taxable Wage Base, then the 5.7% limitation specified
in 2C.2(a)(3)(B)(ii) shall be adjusted in accordance with the
following table:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
If the Social Security Integration Level
------------------------------------------------------------------------
is more but not more Adjust
than than 5.7% to
------------------------------------------------------------------------
<S> <C> <C>
the greater of $ 10,000 or 80% of the Social Security 4.3%
20% of the Social Security Taxable Wage Base
Taxable Wage
Base
80% of the Social Security 100% of the Social Security 5.4%
Taxable Wage Taxable Wage Base
Base
------------------------------------------------------------------------
</TABLE>
However, in the case of any Participant who has exceeded the
Cumulative Permitted Disparity Limit described below, the
Employer will contribute for each Participant who either
completes more than 500 Hours of Service during the Plan Year
or is employed on the last day of the Plan Year, an amount
equal to the Excess Contribution percentage multiplied by the
Participant's total Compensation.
Annual Overall Permitted Disparity Limit. Notwithstanding the
preceding provisions of this Section 2C.2(a), for any Plan Year
this Plan benefits any Participant who benefits under another
qualified plan or simplified employee pension plan, as defined in
Code section 408(k), maintained by the Employer that provides for
permitted disparity (or imputes disparity), Employer contributions
and Forfeitures will be allocated to the account of each
Participant who either completes more than 500 Hours of Service
during the Plan Year or who is employed as of the last day of the
Plan Year in the ratio that such Participant's total Compensation
bears to the total Compensation of all Participants.
Cumulative Permitted Disparity Limit. Effective for Plan Years
beginning on or after January 1, 1995, the Cumulative Permitted
Disparity Limit for a Participant is 35 total cumulative permitted
disparity years. Total cumulative permitted years mean the number
of years credited to the Participant for allocation or accrual
purposes under this Plan, any other qualified plan or simplified
employee pension plan (whether or not terminated) ever maintained
by the Employer. For purposes of
Article II - General Provisions -35- June 14, 1996
<PAGE>
determining the Participant's Cumulative Permitted Disparity Limit,
all years ending in the same calendar year are treated as the same
year. If the Participant has not benefitted under a defined benefit
or target benefit plan for any year beginning on or after January
1, 1994, the Participant has no Cumulative Permitted Disparity
Limit.
(b) Contributions - Participant.
The Plan Administrator will not accept Required Employee
Contributions or Voluntary Employee Contributions that are made for
Plan Years beginning after the Plan Year in which this document is
being adopted by the Employer. Required Employee Contributions and
Voluntary Employee Contributions for Plan Years beginning after
December 31, 1986, but before the Plan Year in which this document
is adopted, will be limited so as to meet the nondiscrimination
test of Code section 401 (m) as provided in Section 4A.4.
(c) Contributions - Timing.
Contributions made on other than an annual basis shall be paid to
the Trust or Insurance Company, as applicable, not less frequently
than monthly or every four weeks. Contributions made on an annual
basis shall be paid to the Trust or the Insurance Company, as
applicable, at the end of the Plan Year, or as soon as possible on
or after the last day of such Plan Year, but in any event not later
than the date prescribed by law for filing the Employer's income
tax return, including any extension thereof. To the extent that
contributions are used to purchase Life Insurance Policies, such
contributions for any Plan Year may be paid to the Trust when
premiums for such Policies are due during the Plan Year.
(d) Contributions - Allocation.
Employer Contributions shall be allocated to the Participants'
Account in accordance with the allocation requirements as specified
by the Employer in the Adoption Agreement. If the Employer has
adopted a standardized plan, the allocation of any nonannual
contribution made by the Employer shall be made for each
Participant who is a Participant on any day of the Contribution
Period regardless of Hours of Service.
(e) Forfeitures.
Forfeitures will be used in the manner elected in the Adoption
Agreement as follows:
(1) To reduce Employer contributions or pay Plan expenses; or
(2) Allocated in the same manner elected in the Adoption Agreement
for the allocation of Employer contributions; or
(3) First, to reduce Employer contributions or pay Plan expenses,
with any remaining Forfeitures allocated in the same manner
elected in the Adoption Agreement for the allocation of
Employer contributions.
(f) Expenses.
The Employer may contribute to the Plan the amount necessary to pay
any applicable expense charges and administration charges. In lieu
of the
Article II - General Provisions -36- June 14, 1996
<PAGE>
Employer contributing the amount necessary to pay such charges,
these expenses may be paid from Plan assets.
2C.3 ROLLOVER CONTRIBUTIONS.
If elected by the Employer in the Adoption Agreement, and without regard
to the limitations Imposed under Section 4B, the Plan may receive
Rollover Contributions on behalf of an Employee, if the Employee is so
entitled under Code sections 402(c), 403(a)(4), or 408(d)(3)(A).
Contributions may be rolled over either directly or indirectly, in the
form of cash, and may be all or a portion of the funds eligible for
rollover. Receipt of Rollover Contributions shall be subject to the
approval of the Plan Administrator. Before approving the receipt of a
Rollover Contribution, the Plan Administrator may request any documents
or other information from an Employee or opinions of counsel which the
Plan Administrator deems necessary to establish that such amount is a
Rollover Contribution.
If Rollover Contributions are elected by the Employer in the Adoption
Agreement, they may be received from an Employee who is not otherwise
eligible to participate in the Plan. Rollover Contributions may be
withdrawn by such Employee pursuant to the provisions of the Adoption
Agreement and Section 3E. In addition, such Employee may direct the
investment and transfer of amounts in his Participant's Account pursuant
to the terms of Section 5A. Upon Termination of Employment, such
Employee shall be entitled to a distribution of his Participant's
Account.
2C.4 CONTRIBUTIONS SUBJECT TO DAVIS-BACON ACT.
If the Employer designates under the Adoption Agreement that Emplover
contributions are to be made in different amounts for different
contracts subject to the Davis-Bacon Act or other Prevailing Wage Law,
the Employer shall file with the Plan Administrator an irrevocable
written designation for each Prevailing Wage Law project, stating the
hourly contribution rate to be contributed to the Plan by the Employer
for each class of Employees working on the project in order to comply
with the Prevailing Wage Law applicable to the project. The contribution
rate designation shall be irrevocable with respect to work on that
project, although the hourly contribution rate may be increased
prospectively by the filing of a new written contribution rate
designation with the Plan Administrator.
2C.5 QVEC CONTRIBUTIONS.
The Plan Administrator will not accept QVEC Contributions which are made
for a taxable year beginning after December 31, 1986. Contributions made
prior to that date will be maintained in a separate account that will be
nonforfeitable at all times. The account will share in the gains and
losses under the Plan in the same manner as described in Section 5A.3 of
the Plan. No part of the QVEC Contributions portion of the Participant's
Account will be used to purchase Life Insurance Policies. No part of the
QVEC Contributions portion of the Participant's Account will be
available for loans. Subject to Section 3C, joint and Survivor Annuity
Requirements (if applicable), the Participant may withdraw any part of
his QVEC Contributions by making a written application to the Plan
Administrator.
Article II - General Provisions -37- June 14, 1996
<PAGE>
ARTICLE III - DISTRIBUTIONS
3A. TIMING AND FORM OF BENEFITS
3A.1 PAYMENT OF BENEFITS. The rules and procedures for electing the timing
and form of distribution effective for each Participant or Beneficiary
shall be formulated and administered by the Plan Administrator in a
consistent manner for all Participants in similar circumstances. For
money purchase and target benefit plans, the normal form of distribution
shall be a Life Annuity. For a profit sharing plan, the normal form of
distribution shall be cash. For any plan, the distribution shall be made
within an administratively reasonable time-following the date the
application for distribution is filed with the Plan Administrator.
If elected by the Employer in the Adoption Agreement, a Participant, or
his Beneficiary as the case may be, may elect to receive distribution of
all or a portion of his Vested Interest-in one or a combination of the
following forms of payment:
(a) Single sum cash payment;
(b) Life Annuity;
(c) Installment Payments (i.e., a series of periodic single-sum cash
payments over time, with no life contingency);
(d) Installment Refund Annuity (i.e., an Annuity that provides for
fixed monthly payments for a period certain of not less than 3 nor
more than 15 years. If a Participant dies before the period certain
expires, the Annuity will be paid to the Participant's Beneficiary
for the remainder of the period certain. The period certain shall
be chosen by the Participant at the time the Annuity is purchased
with the Participant's Vested Interest. The Installment Refund
Annuity is not a Life Annuity and in no event shall the period
certain extend to a period which equals or exceeds the life
expectancy of the Participant);
(e) Employer stock, to the extent the Participant is invested therein.
All distributions are subject to the provisions of Section 3C,
joint and Survivor Annuity Requirements.
If the value of a Participant's Vested Interest has never exceeded
$3,500 at anytime, the Employer shall indicate in the Adoption
Agreement whether a distribution shall be made in the form of a
single sum cash payment upon such Participant's Termination of
Employment and may not be deferred or the Participant may elect to
defer distribution until the April I following the calendar year in
which he reaches age 70-1/2. If the Employer permits Participants
to defer such distributions, failure to make an election will be
deemed to be an election to defer to the April I following the
calendar year in which the Participant reaches age 70-1/2.
If the Participant's Vested Interest exceeds (or at the time of any
prior distribution exceeded) $3,500, and such amount is immediately
distributable, the Participant and the Participant's Spouse, if
required, (or where either the Participant or the Spouse has died,
the survivor) must consent to any distribution of such account
balance. The consent of the Participant and the Participant's
Spouse, if required, shall be obtained in writing within the 90-day
period ending on the Annuity
Article III - Distributions -38- June 14, 1996
<PAGE>
Starting Date. The "Annuity Starting Date" is the first day of the
first period for which an amount is paid as an Annuity or any other
form.
An account balance is considered immediately distributable if any
part of the account balance could be distributed to the Participant
(or surviving Spouse) before the Participant attains (or would have
attained if not deceased) the later of Normal Retirement Age or age
62.
Instead of consenting to a distribution, the Participant may elect
to defer the distribution until the April 1 following the calendar
year in which he reaches age 70-1/2. Failure to make an election
will be deemed to be an election to defer to the April 1 following
the calendar year in which the reaches age 70-1/2.
The Plan Administrator shall notify the Participant and the
Participant's Spouse of the right to defer any distribution. Such
notification shall include a general description of the material
features and explanation of the relative values of the optional
forms of benefit available under the Plan in a manner that would
satisfy the notice requirements of Code section 417(a)(3), and
shall be provided no less than 30 days and no more than 90 days
prior to the Annuity Starting Date.
If the 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 Code regulation section 1.411(a)-
11(c) is given, provided that:
(a) 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
(b) The Participant, after receiving the notice, affirmatively
elects a distribution.
Notwithstanding the foregoing, only the Participant need consent to
the commencement of a distribution in the form of a Qualified Joint
and Survivor Annuity while the account balance is immediately
distributable. Furthermore, if payment in the form of a Qualified
Joint and Survivor Annuity is not required with respect to the
Participant pursuant to Section 3C.6 of the Plan, only the
Participant need consent to the distribution of an account balance
that is immediately distributable. Neither the consent of the
Participant nor the Participant's Spouse shall be required to the
extent that a distribution is required to satisfy Code section
401(a)(9) or section 415. In addition, upon termination of this
Plan, if the Plan does not offer an annuity option (purchased from
a commercial provider) and if the Employer or any entity within the
same controlled group as the Employer does not maintain another
defined contribution plan (other than an employee stock ownership
plan as defined in Code section 4975(e)(7)), the Participant's
account balance will, without the Participant's consent, be
distributed to the Participant. However, if any entity within the
same controlled group as the Employer maintains another defined
contribution plan (other than an employee stock ownership plan as
defined in Code section 4975(e)(7), then the Participant's account
balance will be transferred without the Participant's consent to
the other plan if the Participant does not consent to an immediate
distribution.
For purposes of determining the applicability of the foregoing
consent requirements to distributions made before the first day of
the first Plan Year
Article III - Distributions -39- June 14, 1996
<PAGE>
beginning after December 31, 1988, the Participant's vested account balance
shall not include amounts attributable to QVEC Contributions made between
December 31, 1981 and January 1, 1987, plus gains and minus losses thereon
("accumulated QVEC Contributions").
The terms of any annuity contract purchased and distributed by the Plan to
a Participant or Spouse shall comply with the requirements of this Plan.
A Participant who terminates employment and does not consent to an
immediate distribution shall have his distribution deferred. Such a
distribution shall commence no later than the April 1 following the date
the Participant attains age of 70-1/2. Loans may not be initiated for
Participants covered by this paragraph except if, after his Termination of
Employment, the Participant is still a party-in-interest (as defined in
ERISA). A Participant who continues to maintain an account balance under
the Plan may elect to withdraw an amount which is equal to any whole
percentage (not to exceed 100%) from his Participant's Account. Such an
election shall be made in accordance with Section 3E. Such Participant as
described herein shall have the authority to direct the transfer of his
Vested Interest in accordance with Section 5A.2. The election to defer
distribution may be revoked at any time by submitting a written request to
the Plan Administrator. Any Forfeiture attributable to withdrawals shall be
subject to the requirements of Sections 3D.1 and 3E.8 of the Plan. A
Participant whose Termination of Employment is on or after his Early
Retirement Date may elect to defer the distribution subject to the
requirements of Section 3B.
3A.2 COMMENCEMENT OF BENEFITS. Unless the Participant elects otherwise,
distribution of benefits will begin no later than the 60th day after the
latest of the close of the Plan Year in which:
(a) The Participant attains age 65 (or Normal Retirement Age, if earlier);
(b) The 10th anniversary of the year in which the Participant commenced
participation in the Plan occurs; or,
(c) The Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse to
consent to a distribution, if required, while a benefit is. immediately
distributable within the meaning of Section 3A.1 of the Plan, shall be
deemed to be an election to defer distribution to the date the Participant
attains age 70-1/2.
However, in no event shall distribution of that portion of a Participant's
Account attributable to Elective Deferral Contributions, Qualified Matching
Contributions, and Qualified Nonelective Contributions be made prior to the
earliest of the Participant's Retirement, death, Disability, separation
from service, attainment of age 59-1/2, or, with respect to Elective
Deferral Contributions only, due to Serious Financial Hardship, unless such
distribution is made on account of:
(a) The Employer's sale, to an unrelated entity, of its interest in a
subsidiary (within the meaning of Code section 409(d)(3)), where the
Employer continues to maintain this Plan and the Participant continues
employment with the subsidiary; or
(b) The Employer's sale, to an unrelated corporation, of substantially all
assets (within the meaning of Code section 409(d)(2)) used in its
trade or business, where the Employer continues to maintain this Plan
and the
Article III - Distributions -40- June 14, 1996
<PAGE>
Participant continues employment with the employer acquiring such
assets; or
(c) The termination of the Plan, as provided in Section 7B, without the
establishment of another defined contribution plan, other than an
employee stock ownership plan (as defined in Code sections 4975(e) or
409) or a simplified employee pension plan as defined in Code section
408(k).
All distributions that may be made in accordance with one or more of the
preceding distributable events are subject to the spousal and Participant
consent requirements (if applicable)of Code sections 40l(a)(II)and 4l7. In
addition, distributions made after March 31, 1988, which are triggered by
any of the events described in the immediately preceding paragraphs (a),
(b), or (c), must be made in a lump sum.
3A.3 FROM LIFE INSURANCE POLICIES. The Trustee shall arrange with the Insurance
Company any distribution due to any Participant during his lifetime from
any Life Insurance Policy or Policies on his life. The manner of
distribution shall be a transfer of the values of said Policy or Policies
to the Participant's Account for distribution as a portion thereof in
accordance with this Section.
Subject to Section 3C, joint and Survivor Annuity Requirements, the
Policies on a Participant's life will be converted to cash or an annuity or
distributed to the Participant upon commencement of benefits.
In the event of any conflict between the terms of this Plan and the terms
of any Life Insurance Policy purchased hereunder, the Plan provisions shall
control.
3A.4 NONTRANSFERABLE. Any annuity contract distributed herefrom must be
nontransferable.
3A.5 ALTERNATE PAYEE SPECIAL DISTRIBUTION. Distributions pursuant to Section
5D.8 may be made without regard to the age or employment status of the
Participant.
3B. MINIMUM DISTRIBUTION REQUIREMENTS
3B.1 DEFINITIONS.
(a) APPLICABLE LIFE EXPECTANCY. The term Applicable Life Expectancy means
the Life Expectancy (or joint and last survivor expectancy) calculated
using the attained age of the Participant (or Designated Beneficiary)
as of the Participant's (or Designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year which
has elapsed since the date Life Expectancy was first calculated. If
Life Expectancy is being recalculated, the Applicable Life Expectancy
shall be the Life Expectancy so recalculated. The applicable calendar
year shall be the first Distribution Calendar Year, and if Life
Expectancy is being recalculated, such succeeding calendar year.
(b) DESIGNATED BENEFICIARY. The term Designated Beneficiary means the
individual who is designated as the Beneficiary under the Plan in
accordance with Code section 401(a)(9) and the regulations thereunder.
If a Participant's Beneficiary, as determined in accordance with
Section 1.8, is
Article III - Distributions -41- June 14, 1996
<PAGE>
his estate, such Participant shall be treated as having no Designated
Beneficiary.
(c) DISTRIBUTION CALENDAR YEAR. The term Distribution Calendar Year means
a calendar year for which a minimum distribution is required. For
distributions beginning before the Participant's death, the first
Distribution Calendar Year is the calendar year immediately preceding
the calendar year which contains the Participant's Required Beginning
Date. For distributions beginning after the Participant's death, the
first Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to Section 3B.3 below.
(d) 5-PERCENT OWNER. For purposes of this Section, the term 5-Percent
Owner means a 5-percent owner as defined in Code section 416(i)
(determined in accordance with section 416 but without regard to
whether the Plan is Top-Heavy) at any time during the Plan Year ending
with or within the calendar year in which such Employee attains age
66-1/2 or any later Plan Year.
(e) LIFE EXPECTANCY. The term Life Expectancy means life expectancy and
joint and last survivor expectancy as computed by use of the expected
return multiples in Table V and VI of section 1.72-9 of the Income Tax
Regulations.
Unless otherwise elected by the Participant (or Spouse, in the case of
distributions described in Section 3B.3(b)(2)) by the time
distributions are required to begin, Life Expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Participant (or Spouse) and shall apply to all subsequent years. The
Life Expectancy of a non-Spouse Beneficiary may not be recalculated.
(f) PARTICIPANT'S BENEFIT. The term Participant's Benefit means:
(1) The Participant's Vested Interest as of the last valuation date
in the calendar year immediately preceding the Distribution
Calendar Year ("Valuation Calendar Year") increased by the amount
of any contributions or Forfeitures allocated to the
Participant's Account as of dates in the Valuation Calendar Year
after the valuation date and decreased by distributions made in
the Valuation Calendar Year after the valuation date.
(2) Exception for second Distribution Calendar Year. For purposes of
paragraph (1) above, if any portion of the minimum distribution
for the first Distribution Calendar Year is made in the second
Distribution Calendar Year on or before the Required Beginning
Date, the amount of the minimum distribution made in the second
Distribution Calendar Year shall be treated as if it had been
made in the immediately preceding Distribution Calendar Year.
(g) REQUIRED BEGINNING DATE. The term Required Beginning Date means:
(1) General Rule. The first Required Beginning Date of a Participant
is the first day of April of the calendar year following the
calendar year in which the Participant attains age 70-1/2.
Article III - Distributions -42- June 14, 1996
<PAGE>
(2) Transitional Rules. The Required Beginning Date of a Participant
who attains age 70-1/2 before January 1, 1988, shall be
determined in accordance with (A) or (B) below:
(A) Non-5-Percent Owners. The Required Beginning Date of a
Participant who is not a 5-Percent Owner is the first day of
April of the calendar year following the calendar year in
which the later of retirement or attainment of age 70-1/2
occurs.
(B) 5-Percent Owners. The Required Beginning Date of a
Participant who is a 5-Percent Owner during any year
beginning after December 31, 1979 is the first day of April
following the later of:
(i) The calendar year in which the Participant attains age
70-1/2; or
(ii) The earlier of the calendar year which ends with or
within the Plan Year in which the Participant becomes a
5-Percent Owner, or the calendar year in which the
Participant retires.
The Required Beginning Date of a Participant who is not a
5-Percent Owner who attained age 70-1/2 during 1988 and who
has not retired as of January 1, 1989 is April 1, 1990.
(3) Once distributions have begun to a 5-Percent Owner under this
Section, they must continue to be distributed, even if the
Participant ceases to be a 5-Percent Owner in a later year.
3B.2 DISTRIBUTION REQUIREMENTS.
(a) Except as otherwise provided in Section 3C, Joint and Survivor Annuity
Requirements, the requirements of this Section 3B shall apply to any
distribution of a Participant's Accrued Benefit and will take
precedence over any inconsistent provisions of this Plan. Unless
otherwise specified, the provisions of this Section apply to calendar
years beginning after December 31, 1984.
(b) All distributions required under this Section 3B shall be determined
and made in accordance with regulations under section 401(a)(9),
including the minimum distribution incidental benefit requirement of
regulations section 1.401(a)(9)-2.
A Participant's entire Vested Interest must be distributed or begin to
be distributed no later than the Participant's Required Beginning
Date.
(c) Limits on Distribution Periods. As of the first Distribution Calendar
Year, distributions, if not made in a single-sum, may only be made
over one of the following periods (or a combination thereof):
(1) The life of the Participant;
(2) The life of the Participant and a Designated Beneficiary;
(3) A period certain not extending beyond the Life Expectancy of the
Participant; or
Article III - Distributions -43- June 14, 1996
<PAGE>
(4) A period certain not extending beyond the joint and last survivor
expectancy of the Participant and a Designated Beneficiary.
(d) Determination of amount to be distributed each year. If the
Participant's Vested Interest is to be distributed in other than a
single sum, the following minimum distribution rules shall apply on or
after the Required Beginning Date:
(1) If the Participant's entire Vested Interest is to be distributed
over (1) a period not extending beyond the Life Expectancy of the
Participant or the joint life and last survivor expectancy of the
Participant and the Participant's Designated Beneficiary or (2) a
period not extending beyond the Life Expectancy of the Designated
Beneficiary, the amount required to be distributed for each
calendar year, beginning with distributions for the first
Distribution Calendar Year, must at least equal the quotient
obtained by dividing the Participant's benefit by the Applicable
Life Expectancy.
(2) For calendar years beginning before January 1, 1989, if the
Participant's Spouse is not the Designated Beneficiary, the
method of distribution selected must assure that at least 50% of
the present value of the amount available for distribution is
paid within the Life Expectancy of the Participant.
(3) For calendar years beginning after December 31, 1988, the amount
to be distributed each year, beginning with distributions for the
first Distribution Calendar Year, shall not be less than the
quotient obtained by dividing the Participant's benefit by the
lesser of (1) the Applicable Life Expectancy or (2) if the
Participant's Spouse is not the Designated Beneficiary, the
applicable divisor determined from the table set forth in
regulations section 1.401(a)(9)-2, Q&A-4. Distributions after
the death of the Participant shall be distributed using the
Applicable Life Expectancy in Section 3B.2(d)(1) above, as the
relevant divisor without regard to regulations section
1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
Distribution Calendar Year must be made on or before the
Participant's Required Beginning Date. The minimum distribution
for other calendar years, including the minimum distribution for
the Distribution Calendar Year in which the Employee's Required
Beginning Date occurs, must be made on or before December 31 of
that Distribution Calendar Year.
(e) Other Forms. If the Participant's benefit is distributed in the form
of an Annuity purchased from an Insurance Company, distributions
thereunder shall be made in accordance with the requirements of Code
section 401(a)(9) and the regulations thereunder.
3B.3 DEATH DISTRIBUTION PROVISIONS. Upon the death of the Participant, the
following distribution provisions shall take effect:
(a) Distributions Beginning Before Death. If the Participant dies after
distribution of his entire Vested Interest has begun, the remaining
portion of such entire Vested Interest will continue to be distributed
at least as
Article III - Distributions -44- June 14, 1996
<PAGE>
rapidly as under the method of distribution being used prior to the
Participant's death.
(b) Distributions Beginning After Death. If the Participant dies before
distribution of his entire Vested Interest begins, distribution of the
Participant's entire Vested Interest shall be completed by December 31
of the calendar year containing the fifth anniversary of the
Participant's death except to the extent that an election is made to
receive distributions in accordance with (1) or (2) below:
(1) If any portion of the Participant's entire Vested Interest is
payable to a Designated Beneficiary, distributions may be made
over the Life Expectancy of the Designated Beneficiary commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died;
(2) If the Designated Beneficiary is the Participant's surviving
Spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the later of
(i) December 31 of the calendar year immediately following the
calendar year in which the Participant died and (ii) December 31
of the calendar year in which the Participant would have attained
age 70-1/2.
If the Participant has not made an election pursuant to this Section
3B.3(b) by the time of his or her death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the
earlier of (1) December 31 of the calendar year in which distributions
would be required to begin under this Section, or (2) December 31 of
the calendar year which contains the fifth anniversary of the
Participant's date of death. If the Participant has no Designated
Beneficiary, or if the Designated Beneficiary does not elect a method
of distribution, distribution of the Participant's entire Vested
Interest must be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death and will
be paid in the form of a single sum cash payment.
(c) For purposes of Section 3B.3(b) above, if the surviving Spouse dies
after the Participant, but before payments to such Spouse begin, the
provisions of this Section, with the exception of paragraph (b)(2)
therein, shall be applied as if the surviving Spouse were the
Participant.
(d) For purposes of this Section, distribution of a Participant's entire
Vested Interest pursuant to Section 3B.3(b) is considered to begin on
the Participant's Required Beginning Date (or, if paragraph (c) above
is applicable, the date distribution is required to begin to the
Surviving Spouse). If distribution in the form of an Annuity
irrevocably commences to the Participant before the Required Beginning
Date, the date distribution is considered to begin is the date
distribution actually commences.
3B.4 TRANSITIONAL RULE.
(a) Notwithstanding the other requirements of this Section 3B and subject
to the requirements of Section 3C, joint and Survivor Annuity
Requirements, distribution on behalf of any Employee, including a 5-
Percent Owner, may
Article III - Distributions -45- June 14, 1996
<PAGE>
be made in accordance with all of the following requirements
(regardless of when such distribution commences):
(1) The distribution by the Plan is one which would not have
disqualified such Plan under Code section 401(a)(9) as in effect
prior to amendment by the Deficit Reduction Act of 1984.
(2) The distribution is in accordance with a method of distribution
designated by the Employee whose entire Vested Interest in the
Plan is being distributed or, if the Employee is deceased, by a
Beneficiary of such Employee.
(3) Such designation was in writing, was signed by the Employee or
the Beneficiary, and was made before January 1, 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and
in the case of any distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distribution to be
made upon the death of the Employee.
(c) For any distribution that commences before January 1, 1984, but
continues after December 31, 1983, the Employee or the Beneficiary, to
whom such distribution is being made, will be presumed to have
designated the method of distribution under which the distribution is
being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in subsections (a)(1) and
(5).
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Code section 401(a)(9) and related regulations. If
a designation is revoked subsequent to the date distributions are
required to begin, the Plan must distribute by the end of the calendar
year following the calendar year in which the revocation occurs the
total amount not yet distributed which would have been required to
have been distributed to satisfy Code section 401(a)(9) and related
regulations, except for the TEFRA section 242(b)(2) election. For
calendar years beginning after December 31, 1988, such distributions
must meet the minimum distribution incidental benefit requirements in
regulations section 1.401(a)(9)-2. Any changes in the designation will
be considered to be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be
made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount
is transferred or rolled from one plan to another plan, the rules in
Q&A J-2 and Q&A J-3 shall apply.
Article III - Distributions -46- June 14, 1996
<PAGE>
3C. JOINT AND SURVIVOR ANNUITY REQUIREMENTS
3C.1 APPLICABILITY. Except as provided in Section 3C.6, the provisions of this
Section 3C shall apply to any Participant who is credited with at least one
Hour of Service with the Employer on or after August 23, 1984, and such
other Participants as provided in Section 3C.7.
3C.2 DEFINITIONS. The following definitions shall apply to this Section 3C.
(a) EARLIEST RETIREMENT AGE. The term Earliest Retirement Age means the
earliest date on which, under the Plan, the Participant could elect to
receive retirement benefits.
(b) ELECTION PERIOD. The term Election Period means the period which
begins on the first day of the Plan Year in which the Participant
attains age 35 and ends on the date of the Participant's death. If a
Participant separates from service prior to the first day of the Plan
Year in which he attains age 35, with respect to the Vested Account
Balance as of the date of separation, the election period shall begin
on the date of separation.
Pre-age 35 waiver: A Participant who will not yet attain age 35 as of
the end of any current Plan Year may make a special Qualified Election
to waive the Qualified Preretirement Survivor Annuity for the period
beginning on the date of such election and ending on the first day of
the Plan Year in which the Participant will attain age 35. Such
election shall not be valid unless the Participant receives a written
explanation of the Qualified Preretirement Survivor Annuity in such
terms as are comparable to the explanation required under Section
3C.5(a). Except as provided in Section 3C.6, Qualified Preretirement
Survivor coverage will be automatically reinstated as of the first day
of the Plan Year in which the Participant attains age 35. Any new
waiver on or after such date shall be subject to the full requirements
of this Section 3C.
(c) QUALIFIED ELECTION. The term Qualified Election means a waiver of a
Qualified joint and Survivor Annuity or a Qualified Preretirement
Survivor Annuity. Any waiver of a Qualified Joint and Survivor Annuity
or a Qualified Preretirement Survivor Annuity shall not be effective
unless: (a) the Participant's Spouse consents in writing to the
election; (b) the election designates a specific Beneficiary,
including any class of beneficiaries or any contingent beneficiaries,
which may not be changed without Spousal consent (or the Spouse
expressly permits designations by the Participant without any further
spousal consent); (c) the Spouse's consent acknowledges the effect of
the election; and (d) the Spouse's consent is witnessed by a Plan
representative or notary public.
Additionally, a Participant's waiver of the Qualified Joint and
Survivor Annuity shall not be effective unless the election designates
a form of benefit payment which may not be changed without spousal
consent (or the Spouse expressly permits designations by the
Participant without any further spousal consent). If it is
established to the satisfaction of a Plan representative that there is
no Spouse or that the Spouse cannot be located, a waiver will be
deemed a Qualified Election.
Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained) shall
be effective only with respect to such Spouse. A consent that permits
designations by the
Article III - Distributions -47- June 14, 1996
<PAGE>
Participant without any requirement of further consent by such Spouse
must acknowledge that the Spouse has the right to limit consent to a
specific Beneficiary, and a specific form of benefit where applicable,
and that the Spouse voluntarily elects to relinquish either or both of
such rights. A revocation of a prior waiver may be made by a
Participant without the consent of the Spouse at any time before the
commencement of benefits. The number of revocations shall not be
limited. No consent obtained under this provision shall be valid
unless the Participant has received notice as provided in Section 3C.5
below.
(d) QUALIFIED JOINT AND SURVIVOR ANNUITY. The term Qualified Joint and
Survivor Annuity means an immediate Annuity for the life of the
Participant with a survivor Annuity for the life of the Spouse which
is not less than 50 percent and not more than 100 percent of the
amount of the Annuity which is payable during the joint lives of the
Participant and the Spouse and which is the amount of benefit which
can be purchased with the Participant's Vested Account Balance. The
percentage of the survivor annuity under the Plan shall be 50 percent
(unless a different percentage is elected by the Participant).
(e) VESTED ACCOUNT BALANCE. The term Vested Account Balance means the
aggregate value of the Participant's vested account balances derived
from contributions made by both the Participant and Employer, whether
vested before or upon death, including the proceeds of insurance
contracts, if any, on the Participant's life and Rollover
Contributions. The provisions of this Section 3C shall apply to a
Participant who is vested in amounts attributable to Employer
contributions, Employee Contributions (or both) made under this Plan
at the time of death or distribution.
3C.3 QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an optional form of benefit
is selected pursuant to a Qualified Election within the 90-day period
ending on the Annuity Starting Date, a married Participant's Vested
Account Balance will be paid in the form of a Qualified Joint and Survivor
Annuity and an unmarried Participant's Vested Account Balance will be paid
in the form of a Life Annuity. The Participant may elect to have such
Annuity distributed upon attainment of the Earliest Retirement Age under
the Plan.
3C.4 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Unless an optional form of
benefit has been selected within the Election Period pursuant to a
Qualified Election, if a Participant dies before the Annuity Starting Date,
then no less than 50 percent (or 100 percent if so elected in the Adoption
Agreement) of the Participant's Vested Account Balance shall be applied
toward the purchase of an Annuity for the life of the surviving Spouse. If
less than 100 percent is selected, then the remaining portion of the Vested
Account Balance shall be paid to the Participant's Beneficiary. If less
than 100 percent of the Vested Account Balance is paid to the surviving
Spouse, the amount of Employee Contributions allocated to the surviving
Spouse will be in the same proportion as the Employee Contributions bears
to the total Vested Account Balance of the Participant. The surviving
Spouse may elect to have such Annuity distributed within a reasonable
period after the Participant's death.
3C.5 NOTICE REQUIREMENTS.
(a) In the case of a Qualified joint and Survivor Annuity, the Plan
Administrator shall no less than 30 days and no more than 90 days
prior to
Article III - Distributions -48- June 14, 1996
<PAGE>
the Annuity Starting Date provide each Participant with a written
explanation of: (i) the terms and conditions of a Qualified Joint and
Survivor Annuity; (ii) the Participant's right to make and the effect
of an election to waive the Qualified Joint and Survivor Annuity form
of benefit; (iii) the rights of a Participant's Spouse; and (iv) the
right to make, and the effect of, a revocation of a previous election
to waive the Qualified Joint and Survivor Annuity.
(b) In the case of a Qualified Preretirement Survivor Annuity, the Plan
Administrator shall provide each Participant within the applicable
period (described in subsection (c) below) for such Participant a
written explanation of the Qualified Preretirement Survivor Annuity in
such terms and in such manner as would be comparable to the
explanation provided for meeting the requirements of Section 3C.5(a)
applicable to a Qualified joint and Survivor Annuity.
(c) The "applicable period" for a Participant is whichever of the
following periods ends last: (I) the period beginning with the first
day of the Plan Year in which the Participant attains age 32 and
ending with the close of the Plan Year preceding the Plan Year in
which the Participant attains age 35; (ii) a reasonable period ending
after the individual becomes a Participant; (iii) a reasonable period
ending after the Qualified Joint and Survivor Annuity is no longer
fully subsidized; (iv) a reasonable period ending after this Section
3C first applies to the Participant. Notwithstanding the foregoing,
notice must be provided within a reasonable period ending after
separation from Service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable period
ending after the enumerated events described in (ii), (iii) and (iv)
is the end of the two-year period beginning one year prior to the date
the applicable event occurs, and ending one year after that date. In
the case of a Participant who separates from Service before the Plan
Year in which he attains age 35, notice shall be provided within the
two-year period beginning one year prior to separation and ending one
year after separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for such
Participant shall be redetermined.
(d) Notwithstanding the other requirements of this Section, the respective
notices prescribed by this Section need not be given to a Participant
if (1) the Plan "fully subsidizes" the costs of a Qualified Joint and
Survivor Annuity or Qualified Preretirement Survivor Annuity, and (2)
the Plan does not allow the Participant to waive the Qualified Joint
and Survivor Annuity or Qualified Preretirement Survivor Annuity and
does not allow a married Participant to designate a nonspouse
Beneficiary. For purposes of this Section 3C.5(d), a Plan fully
subsidizes the costs of a benefit if no increase in cost or decrease
in benefits to the Participant may result form the Participant's
failure to elect another benefit.
3C.6 SAFE HARBOR RULES.
(a) This Section shall apply to a Participant in a profit sharing plan,
and to any distribution made on or after the first day of the first
Plan Year beginning after December 31, 1988, from or under a separate
account
Article III - Distributions -49- June 14, 1996
<PAGE>
attributable solely to accumulated QVEC Contributions (as described in
Section 3A.1), and maintained on behalf of a Participant in a money
purchase pension plan (including a target benefit plan), if the
following conditions are met: (1) the Participant does not or cannot
elect payments in the form of a Life Annuity; and (2) on the death of
a Participant, the Participant's Vested Account Balance will be paid
to the Participant's surviving Spouse, but if there is no surviving
Spouse, or if the surviving Spouse has consented in a manner
conforming to a Qualified Election, then to the Participant's
designated Beneficiary.
(b) The surviving Spouse may elect to have distribution of the Vested
Account Balance commence within the 90-day period following the date
of the Participant's death. The account balance shall be adjusted for
gains or losses occurring after the Participant's death in accordance
with the provisions of the Plan governing the adjustment of account
balances for other types of distributions.
(c) The Participant may waive the spousal death benefit described in this
Section 3C.6 at any time provided that no such waiver shall be
effective unless it satisfies the conditions of Section 3C.2(c) (other
than the notification requirement referred to therein) that would a
apply to the Participant's waiver of the Qualified Preretirement
Survivor Annuity.
(d) If this Section 3C.6 is operative, then the provisions of this Section
3C, other than Section 3C.7, shall be inoperative.
This Section 3C.6 shall not be operative with respect to a Participant
in a profit-sharing plan if the plan is a direct or indirect
transferee of a defined benefit plan, money purchase plan, a target
benefit plan, stock bonus, or profit-sharing plan that is subject to
the survivor annuity requirements of Code sections 401(a)(11) and
417.
(e) For purposes of this Section 3C.6, the term Vested Account Balance
shall mean, in the case of a money purchase pension plan or a target
benefit plan, the Participant's separate account balance attributable
solely to accumulated QVEC Contributions (as described in Section
3A.1). In the case of a profit sharing plan, the term Vested Account
Balance shall have the same meaning as provided in Section 3C.2(e).
3C.7 TRANSITIONAL RULES.
(a) Any living Participant not receiving benefits on August 23, 1984, who
would otherwise not receive the benefits prescribed by the previous
Sections of this Section 3C must be given the opportunity to elect to
have the prior Sections of this Section 3C apply if such Participant
is credited with at least one Hour of Service under this Plan or a
predecessor plan in a Plan Year beginning on or after January 1, 1976,
and such Participant had at least 10 years of vesting Service when he
separated from Service.
(b) Any living Participant not receiving benefits on August 23, 1984, who
was credited with at least one Hour of Service under this Plan or a
predecessor plan on or after September 2, 1974, and who is not
otherwise credited with any Service in a Plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his
benefits paid in accordance with Section 3C.7(d).
Article III - Distributions -50- June 14, 1996
<PAGE>
(c) The respective opportunities to elect (as described in Sections 3C.7(a) and
3C.7(b) above) must be afforded to the appropriate Participants during the
period commencing on August 23, 1984, and ending on the date benefits would
otherwise commence to said Participants.
(d) Any Participant who has elected pursuant to Section 3C.7(b), and any
Participant who does not elect under Section 3C.7(a), or who meets the
requirements of Section 3C.7(a), except that such Participant does not have
at least 10 years of vesting Service when he separates from Service, shall
have his benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a Life
Annuity:
(1) Automatic Joint and Survivor Annuity. If benefits in the form of a
Life Annuity become payable to a married Participant who:
(A) Begins to receive payments under the Plan on or after Normal
Retirement Age; or
(B) Dies on or after Normal Retirement Age while still working for
the Employer; or
(C) Begins to receive payments on or after the Qualified Early
Retirement Age; or
(D) Separates from Service on or after attaining Normal Retirement
Age (or the Qualified Early Retirement Age) and after satisfying
the eligibility requirements for the payment of benefits under
the Plan and thereafter dies before beginning to receive such
benefits;
then such benefits will be received under this Plan in the form of a
Qualified Joint and Survivor Annuity, unless the Participant has
elected otherwise during the Election Period. The Election Period
must begin at least 6 months before the Participant attains Qualified
Early Retirement Age and end not more than 90 days before the
commencement of benefits. Any election hereunder will be in writing
and may be changed by the Participant at any time.
(2) Election of Early Survivor Annuity. A Participant who is employed
after attaining the Qualified Early Retirement Age will be given the
opportunity to elect, during the Election Period, to have a survivor
Annuity payable on death. If the Participant elects the survivor
Annuity, payments under such Annuity must not be less than the
payments which would have been made to the Spouse under the Qualified
joint and Survivor Annuity if the Participant had retired on the day
before his or her death. Any election Linder this provision will be
in writing and may be changed by the Participant at any time. The
Election Period begins on the later of (1) the 90th day before the
Participant attains the Qualified Early Retirement Age, or (2) the
date on which participation begins, and ends on the date the
Participant terminates employment.
Article III - Distributions -51- June 14, 1996
<PAGE>
(3) For purposes of this Section 3C.7(d):
(A) Qualified Early Retirement Age is the latest of:
(i) The earliest date, under the Plan, on which the
Participant may elect to receive retirement benefits;
(ii) The first day of the 120th month beginning before the
Participant reaches Normal Retirement Age; or
(iii) The date the Participant begins participation.
(B) Qualified Joint and Survivor Annuity is an Annuity for the
life of the Participant with a survivor Annuity for the life
of the Spouse as described in Section 3C.2(d).
3D. TERMINATION OF EMPLOYMENT
3D.1 DISTRIBUTION. A Participant who terminates employment shall be entitled
to receive a distribution of his entire Vested Interest. Such distribution
shall be further subject to the terms and conditions of Section 3C. The
method used, as elected by the Employer in the Adoption Agreement, is one
of the following:
(a) Immediate (Cash-Out Method).
If at the time of his Termination of Employment the Participant is not
100% vested and does not take a distribution from the portion of his
Vested Interest that is attributable to contributions made by the
Employer, the non-vested portion of his Participant's Account will
become a Forfeiture upon the date such terminated Participant incurs 5
consecutive 1-Year Breaks-in-Service.
However, if at the time of his Termination of Employment the
Participant is not 100% vested and does take a distribution from the
portion of his Vested Interest that is attributable to contributions
made by the Employer, or if the Participant is 0% vested, the non-
vested portion of his Participant's Account will become a Forfeiture
immediately upon the Participant's Termination of Employment date.
If a Participant whose non-vested portion of his Participant's Account
became a Forfeiture in accordance with the terms of the preceding
paragraph is later rehired by the Employer and re-enrolls in the Plan
before incurring 5 consecutive 1-Year Breaks-in-Service, then the
amount of the Forfeiture shall be restored to the Participant's
Account by the Employer in accordance with the repayment provision
elected by the Employer in the Adoption Agreement and described in
Section 3D.2..
(b) 1-Year Break-in-Service (Cash-Out Method).
If at the time of his Termination of Employment the Participant is not
100% vested and does not take a distribution from the portion of his
Vested Interest that is attributable to contributions made by the
Employer, the non-vested portion of his Participant's Account will
become a Forfeiture upon the date such terminated Participant incurs 5
consecutive 1-Year Breaks-in-Service.
However, if at the time of his Termination of Employment the
Participant is not 100% vested and does take a distribution from the
portion of his
Article III - Distributions -52- June 14, 1996
<PAGE>
Vested Interest that is attributable to contributions made by the
Employer, or if the Participant is 0% vested, the non-vested portion
of his Participant's Account will become a Forfeiture upon the date
such terminated Participant incurs a 1-Year Break-in-Service.
If a terminated Participant, whose non-vested portion of his
Participant's Account became a Forfeiture in accordance with the terms
of the preceding paragraph, is later rehired by the Employer and re-
enrolls in the Plan before incurring 5 consecutive 1-Year Breaks-in-
Service, then the amount of the Forfeiture shall be restored to the
Participant's Account by the Employer in accordance with the repayment
provision elected by the Employer in the Adoption Agreement and
described in Section 3D.2.
(c) 5 Consecutive 1-Year Breaks-in-Service.
If at the time of his Termination of Employment the Participant is not
100% vested, the non-vested portion of his Participant's Account will
become a Forfeiture upon the date the terminated Participant incurs 5
consecutive 1-Year Breaks-in-Service.
3D.2 REPAYMENT OF PRIOR DISTRIBUTION.
If a terminated Participant is later rehired by the Employer and re-enrolls
in the Plan, the following Optional Payback or Required Payback provisions,
as elected by the Employer in the Adoption Agreement, will apply:
(a) Optional Payback:
(1) If the Participant was 0% vested at his Termination of Employment
and did not incur S consecutive 1-Year Breaks-in-Service after
such date, the amount which became a Forfeiture, if any, shall be
restored by the Employer at the time such Participant re-enrolls
in the Plan.
(2) If the Participant was vested but not 100% vested at his
Termination of Employment and did not incur 5 consecutive 1 -Year
Breaks-in-Service after such date, the amount which became a
Forfeiture, if any, shall be restored by the Employer at the time
Such Participant re-enrolls in the Plan. In addition, the
Participant may repay the full amount of the distribution
attributable to Employer contributions, if any, made at his
Termination of Employment. Such repayment of Employer
contributions, however, must be made before the Participant has
incurred 5 consecutive 1 -Year Breaks-in-Service following the
date he received the distribution or five years after the
Participant is rehired by the Employer, whichever is earlier.
(3) If the Participant had incurred 5 consecutive 1 -Year Breaks-
in-Service after his termination of Employment, the amount of the
Participant's Account that became a Forfeiture shall remain a
Forfeiture and such Participant shall be prohibited from repaying
a distribution made at his Termination of Employment.
(b) Required Payback:
(1) If the Participant was 0% vested at his Termination of Employment
and did not incur 5 consecutive 1-Year Breaks-in-Service after
such date, the amount which became a Forfeiture, if any, shall be
Article III - Distributions -53- June 14, 1996
<PAGE>
restored by the Employer at the time such Participant re-enrolls
in the Plan.
(2) If the Participant-was vested but not 100% vested at his
Termination of Employment and did not incur 5 consecutive I -Year
Breaks-in-Service after such date, the Participant shall be
required to repay the full amount of the distribution attributable
to Employer contributions, if any, made at his Termination of
Employment. Such repayment of Employer contributions, however,
must be made before the Participant has incurred 5 consecutive 1 -
Year Breaks-in-Service following the date he received the
distribution or five years after the Participant is rehired by the
Employer, whichever is earlier.
When the Participant makes such repayment, the amount which became
a Forfeiture, if any, shall be restored by the Employer at the
same time such repayment is made. However, if the Participant does
not repay the distribution made in accordance with this Section 3D
within the period of time specified above, that Forfeiture shall
remain a Forfeiture.
(3) If the Participant had incurred 5 consecutive 1-Year Breaks-
inService after his Termination of Employment, the amount of the
Participant's Account that became a Forfeiture shall remain a
Forfeiture and such Participant shall be prohibited from repaying
the distribution made at his Termination of Employment.
3D.3 LIFE INSURANCE POLICY. If all or any portion of the value of any Life
Insurance Policy on the Participant's life will become a Forfeiture, the
Participant shall have the right to buy such policy from the Trustee for
the then value of such policy less the value of any Vested Interest
therein, within 30 days after written notice from the Trustee is mailed to
his last known address.
3D.4 NO FURTHER RIGHTS OR INTEREST. A Participant shall have no further
interest in or any rights to any portion of his Participant's Account that
becomes a Forfeiture due to his Termination of Employment once the
Participant incurs 5 consecutive 1-Year Breaks-in-Service in accordance
with Section 2A.4.
3D.5 FORFEITURE. Any Forfeiture arising in accordance with the provisions of
Section 3D.1 shall be treated as follows:
Any amount of Forfeitures shall be used in accordance with (a), (b), or (c)
below, in the manner set forth in Section 2C.
(a) Employer Credit. Forfeitures shall be used by the Employer to reduce
and in lieu of the Employer contribution next due under Section 2C, or
to pay Plan expenses, at the earliest opportunity after such
Forfeiture becomes available.
(b) Reallocation. Forfeitures shall be allocated in accordance with the
allocation formula of the contributions from which they arose.
(c) Employer Credit and Reallocation of Remainder. Forfeitures shall
first be used to reduce and in lieu of the Employer contribution next
due under Section 2C, or to pay Plan expenses, at the earliest
opportunity after such Forfeiture becomes available. Any Forfeitures
remaining following use as an Employer credit shall be allocated in
accordance with the allocation formula of the contributions from which
they arose.
Article III - Distributions -54- June 14, 1996
<PAGE>
Notwithstanding anything above to the contrary, if Forfeitures are
generated immediately or upon the occurrence of a 1-Year Break-in-Service,
and a former Participant returns to employment with the Employer after
Forfeitures are generated but prior to the occurrence of 5 consecutive ]-
Year Breaks-in-Service, Forfeitures, if any, will first be used to make
whole the nonvested account of such Participant, equal to the value of the
nonvested account at the time the Participant terminated employment with
the Employer in accordance with the applicable provisions of Section 3D.2.
In the event that the available Forfeitures are not sufficient to make
whole the nonvested account, the Employer will make an additional
contribution sufficient to make the nonvested account whole.
3D.6 LOST PARTICIPANT. If a benefit is forfeited because the Participant or
Beneficiary cannot be found, as discussed in Section SD.7, Such benefit
will be reinstated if a claim is made by the Participant or Beneficiary.
3D.7 DEFERRAL OF DISTRIBUTION. If elected by the Employer, and as discussed in
Section 3A.1, a Participant who terminates employment and does not consent
to an immediate distribution shall have his distribution deferred (and may
be responsible for all fees and expenses associated with maintaining his
account in a deferred status).
3E. WITHDRAWALS
3E.1 WITHDRAWAL - EMPLOYEE CONTRIBUTIONS.
(a) Required Employee Contributions. If the Employer has elected in its
Adoption Agreement to allow for a withdrawal of Required Employee
Contributions and earnings thereon, then a Participant may elect to
withdraw from his Participant's Account an amount equal to any whole
percentage (not exceeding 100%) of his entire Vested Interest in his
Participant's Account attributable to Required Employee Contributions
plus any income and minus any loss thereon. On the date the election
becomes effective, the Participant shall be suspended from making any
further contributions to the Plan, and from having any Matching
Contributions made on his behalf for a period, as elected by the
Employer in its Adoption Agreement.
(b) Voluntary Employee Contributions. If the Employer has elected in its
Adoption Agreement to allow for withdrawal of Voluntary Employee
Contributions and earnings thereon, then a Participant may elect-@ to
withdraw from his Participant's Account an amount which is equal to
any whole percentage (not exceeding 100%) of the entire Vested
Interest in his Participant's Account attributable to Voluntary
Employee Contributions plus any income and minus any loss thereon.
(c) Prior Required Employee Contributions. If the Employer has elected in
its Adoption Agreement to allow for a withdrawal of Prior Required
Employee Contributions and earnings thereon, then a Participant may
elect to withdraw from his Participant's Account an amount equal to
any whole percentage (not exceeding 100%) of his entire Vested
Interest in his Participant's Account attributable to Prior Required
Employee Contributions plus any income and minus any loss thereon.
(d) Prior Voluntary Employee Contributions. If the Employer has elected
in its Adoption Agreement to allow for withdrawal of Prior Voluntary
Employee
Article III - Distributions -55- June 14, 1996
<PAGE>
Contributions and earnings thereon, then a Participant may elect to
withdraw from his Participant's Account an amount which is equal to
any whole percentage (not exceeding 100%) of the entire Vested
Interest in his Participant's Account attributable to Prior Voluntary
Employee Contributions plus any income and minus any loss thereon.
If a Participant elects a withdrawal under the provisions of this Section,
he may not elect another withdrawal under this Section for an additional
period specified by the Employer in its Adoption Agreement.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election shall
be effective as of the date specified in such notice, which date must be at
least 15 days after notice is filed.
No Forfeitures will occur solely as a result of an Employee's withdrawal of
Employee Contributions.
3E.2 WITHDRAWAL - ELECTIVE DEFERRAL CONTRIBUTIONS. If the Participant has
attained age 59-1/2, and if selected by the Employer in its Adoption
Agreement, the Participant may elect to withdraw from his Participant's
Account an amount which is equal to any whole percentage (not exceeding
100%) of his Vested Interest in his Participant's Account attributable to
his Elective Deferral Contributions and earnings thereon.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election shall
be effective as of the date specified in such notice, which date must be at
least 15 dan-s after notice is filed.
3E.3 WITHDRAWAL - EMPLOYER CONTRIBUTIONS. If the Employer has specified in its
Adoption Agreement that withdrawals of Matching Contributions, Nonelective
Contributions, or Prior Employer Contributions, if applicable, are
permitted, a Participant, who has been a Participant for at least 60
consecutive months, may elect to withdraw from his Participant's Account an
amount equal to a whole percentage (not to exceed 100%) of his Vested
Interest in his Participant's Account attributable to Matching
Contributions (and reallocated Forfeitures, if applicable), Nonelective
Contributions, (and reallocated Forfeitures, if applicable), or Prior
Employer Contributions (and reallocated Forfeitures, if applicable), along
with earnings. On the date the election becomes effective, the Participant
may be suspended from making Employee Contributions and Elective Deferral
Contributions, if any, and from having Employer contributions made on his
behalf for a period of time, as selected by the Employer in its Adoption
Agreement. In lieu of or in addition to the 60-months of participation
requirement, the Employer may specify in the Adoption Agreement that
withdrawal of Employer contributions, to the extent vested, shall be
available upon or following the attainment of age 59-1/2.
In the event a Participant's suspension period occurs during a year (or
years) when no Employer contributions are made, such suspension shall be
taken into account when the next Employer contribution(s) is made.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election shall
be effective as of the date specified in such notice, which date must be at
least 15 days after notice is filed.
Article III - Distributions -56- June 14, 1996
<PAGE>
3E.4 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF CONTRIBUTIONS OTHER THAN
ELECTIVE DEFERRAL CONTRIBUTIONS. Except as provided in Sections 7B.1 and
7B.7(e), if the Plan is a profit sharing plan or a thrift plan, and if the
Employer has elected in its Adoption Agreement to permit withdrawals due to
the occurrence of events that constitute Serious Financial Hardships to a
Participant, such Participant may withdraw all or a portion of his Vested
Interest (excluding Elective Deferral Contributions, Qualified Nonelective
Contributions, Qualified Matching Contributions, and earnings on these
contributions). Such Serious Financial Hardship must be shown by positive
evidence submitted to the Plan Administrator that the hardship is of
sufficient magnitude to impair the Participant's financial security.
Withdrawals shall be determined in a,consistent and nondiscriminatory
manner, and shall not affect the Participant's rights under the Plan to
make additional withdrawals or to continue to be a Participant.
3E.5 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF ELECTIVE DEFERRAL
CONTRIBUTIONS. If the Employer has selected in its Adoption Agreement, a
distribution may be made on account of Serious Financial Hardship if
subparagraphs (a) and (b) of this Section are satisfied. The funds
available for withdrawal shall be the portion of a Participant's Account
attributable to Elective Deferral Contributions, including any earnings
credited to such contributions as of the end of the last Plan Year ending
before July 1, 1989 ("pre-1989 earnings"), and if applicable, Qualified
Matching Contributions credited to the Participant's Account as of the end
of the last Plan Year ending before July 1, 1989, Qualified Nonelective
Contributions credited to the Participant's Account as of the end of the
last Plan Year ending before July 1, 1989, and any pre-1989 earnings
attributable to Qualified Matching Contributions, or Qualified Nonelective
Contributions. Qualified Matching Contributions credited to the
Participant's Account after the end of the last Plan Year ending before
July 1, 1989, Qualified Nonelective Contributions credited to the
Participant's Account after the end of the last Plan Year ending before
July 1, 1989, and earnings on Elective Deferral Contributions, Qualified
Matching Contribution@, and Qualified Nonelective Contributions credited
after the end of the last Plan Year ending before July 1, 1989 shall not be
eligible for withdrawal under this Section. For purposes of this Section, a
distribution may be made on account of a hardship only if the distribution
is made on account of an immediate and heavy financial need of the Employee
where such Employee lacks other available resources.
(a) The following are the only financial needs considered immediate and
heavy for purposes of this Section:
(i) Expenses for medical care described in Code section 213(d)
previously incurred by the Employee, the Employee's Spouse, or
any dependents of the Employee (as defined in Code section 152)
or necessary for these persons to obtain medical care described
in Code section 213(d);
(ii) Costs directly related to the purchase of a principal residence
for the Employee (excluding mortgage payments);
(iii) Payments necessary to prevent the eviction of the Employee from
the Employee's principal residence or foreclosure on the
mortgage on that residence; or
Article III - Distributions -57- June 14, 1996
<PAGE>
(iv) Tuition payments, related educational fees and amounts
distributed for the payment of room-and-board expenses for the
next 12 months of post-secondary education for the Employee,
his or her Spouse, or any of his or her dependents.
(b) To the extent the amount of distribution requested does not exceed the
amount required to relieve the Participant's financial need, such
distribution will be considered as necessary to satisfy an immediate
and heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all
plans maintained by the Employer;
(ii) All plans maintained by the Employer provide that the
Employee's Elective Deferral Contributions and if applicable,
Employee Contributions, will be suspended for 12 months after
the receipt of the hardship distribution;
(iii) The distribution is not in excess of the amount of the
immediate and heavy financial need (including amounts necessary
to pay any federal, state, or local income taxes or penalties
reasonably anticipated to result from the distribution); and
(iv) All plans maintained by the Employer provide that the Employee
may not make Elective Deferral Contributions for the Employee's
taxable year immediately following the taxable year of the
hardship distribution in excess of the applicable limit Linder
Code section 402(g) for such taxable year less the amount Of
Such Employee's Elective Deferral Contributions for the taxable
year of the hardship distribution.
3E.6 WITHDRAWAL - QVEC CONTRIBUTIONS and ROLLOVER CONTRIBUTIONS. If selected by
the Employer in its Adoption Agreement, a Participant may elect to withdraw
from his Participant's Account as often during each Plan Year as elected by
the Employer in the Adoption Agreement, any amount up to 100% of his entire
Vested Interest in his Participant's Account attributable to his QVEC
Contributions or Rollover Contributions along with earnings thereon.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election shall
be effective as of the date specified in such notice, which date MUST be at
least 15 days after notice is filed.
3E.7 NOTIFICATION. The Participant shall notify the Plan Administrator in
writing of his election to make a withdrawal under Section 3E. Any such
election shall be effective as of the date specified in such notice, which
date must be at least 15 days after such notice is filed. Payment of the
withdrawal shall be subject to the terms and conditions of Section 3A. All
withdrawals made Linder the provisions of Section 3E shall be subject to
top spousal consent requirements of Section 3C, as applicable.
Article III - Distributions -58- June 14, 1996
<PAGE>
3E.8 VESTING CONTINUATION. In the event a partially vested Participant takes a
withdrawal of less than 100% of his Vested Interest in accordance with
Section 3E.3 or 3E.4 or 3E.5, the remaining portion of his Participant's
Account attributable to Employer contributions shall vest according to the
formula as set forth in Section 3D.l.
3E.9 WITHDRAWAL - PARTICIPANT'S EMPLOYER STOCK ACCOUNT. The ability of a
Participant who is subject to the reporting requirements of section 16(a)
of the Securities Exchange Act of 1934 (the "Act") to make withdrawals or
investment changes involving the Participant's Employer Stock Account may
be restricted by the Plan Administrator to comply with the rules under
section 16(b) of the Act.
3E.10 WITHDRAWAL BY TERMINATED PARTICIPANTS. Terminated Participants who have
deferred distribution of their benefit may make withdrawals from the Plan
in the same manner as selected by the Employer in its Adoption Agreement
for withdrawals preceding termination.
3F. DIRECT ROLLOVERS
3F.1 DEFINITIONS.
(a) DIRECT ROLLOVER. The term Direct Rollover means a payment by the Plan
to the Eligible Retirement Plan specified by the Distributee.
(b) DISTRIBUTEE. The term Distributee means 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 who is the
Alternate Payee under a QDRO, are Distributees with regard to the
interest of the Spouse or former Spouse.
(c) ELIGIBLE RETIREMENT PLAN. The term Eligible Retirement Plan means an
individual retirement account described in Code section 408(a), an
individual retirement annuity described in Code section 408(b), an
annuity plan described in Code section 403(a), or a qualified plan
described in Code section 401(a), that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an Eligible
Rollover Distribution to the surviving Spouse, an Eligible Retirement
Plan is an individual retirement account or an individual retirement
annuity.
(d) ELIGIBLE ROLLOVER DISTRIBUTION. The term Eligible Rollover
Distribution means 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 Code section 401 (a)(9);
and the portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities); and any other
distributions) that is reasonably expected to total less than $200
during a year.
3F.2 DIRECT ROLLOVERS. This Section applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to the contrary
that
Article III - Distributions -59- June 14, 1996
<PAGE>
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
that is equal to at least $500 paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover.
Article III - Distributions -60- June 14, 1996
<PAGE>
ARTICLE IV - LEGAL LIMITATIONS ON CONTRIBUTIONS
4A. NONDISCRIMINATION TESTS 4A.1 DEFINITIONS.
(a) ACTUAL CONTRIBUTION PERCENTAGE. The term Actual Contribution
Percentage (ACP) means the average of the Actual Contribution Ratios
of the Eligible Participants in a group.
(b) ACTUAL CONTRIBUTION RATIO. The term Actual Contribution Ratio means
the ratio (expressed as a percentage) of a Participant's Contribution
Percentage Amounts to that Participant's Compensation for the Plan
Year (whether or not the Employee was a Participant for the entire
Plan Year).
(c) ACTUAL DEFERRAL PERCENTAGE. The term Actual Deferral Percentage (ADP)
means the average of the Actual Deferral Ratios for a specified group
of Participants.
(d) ACTUAL DEFERRAL RATIO. The term Actual Deferral Ratio means the ratio
(expressed as a percentage) of a Participant's Deferral Percentage
Amounts to that Participant's Compensation for such Plan Year. The
Actual Deferral Ratio for an Employee who is eligible to be a
Participant but fails to make Elective Deferral Contributions shall be
zero.
(e) AGGREGATE LIMIT. The term Aggregate Limit means the sum of: (i) 125
percent of the greater of the ADP of the non-Highly Compensated
Employees for the Plan Year or the ACP of non-Highly Compensated
Employees under the plan subject to Code section 401(m) for the Plan
Year beginning with or within the Plan Year of the CODA and (ii) the
lesser of 200% or two plus the lesser of such ADP or ACP. "Lesser" is
Substituted for "greater" in "(i)', above, and "greater" is
substituted for "lesser" after "two plus the" in "(ii)' if it would
result in a larger Aggregate Limit.
(f) CONTRIBUTION PERCENTAGE AMOUNTS. The term Contribution Percentage
Amounts means the sum of the Employee Contributions, Matching
Contributions, Qualified Matching Contributions (to the extent not
taken into account for purposes of the ADP test) and Qualified
Nonelective Contributions (to the extent not taken into account for
purposes of the ADP test) made under the Plan on behalf of the
Participant for the Plan Year. Such Contribution Percentage Amounts
shall not include Matching Contributions that are forfeited either to
correct Excess Aggregate Contributions or because the contributions to
which they relate are Excess Elective Deferral Contributions ' Excess
Contributions, or Excess Aggregate Contributions. The Employer may
elect to use Elective Deferrals in the Contribution Percentage Amounts
as long as the ADP test (as described in Section 4A.2) is met before
the Elective Deferrals are used in the ACP test (as described in
Section 4A.4) and the ADP test continues to be met following the
exclusion of those Elective Deferrals that are used to meet the ACP
test.
(g) DEFERRAL PERCENTAGE AMOUNTS. The term Deferral Percentage Amounts
means any Elective Deferral Contributions made pursuant to the
Participant's deferral election, including Excess Elective Deferral
Contributions of Highly Compensated Employees, but excluding Elective
Deferral Contributions that are taken into account in the ACP test
Article IV - Legal Limitations -61- June 14, 1996
<PAGE>
(provided the ADP test is satisfied both with and without exclusion of
these Elective Deferral Contributions). In addition, the Employer may
choose to make Qualified Nonelective Contributions and Qualified
Matching Contributions.
(h) ELIGIBLE PARTICIPANT. The term Eligible Participant means any
Employee who is eligible to make an Employee Contribution or Elective
Deferral Contribution (if the Employer takes such contributions into
account in the calculation of the Actual Contribution Ratio), or to
receive a Matching Contribution (including Forfeitures) or a Qualified
Matching Contribution. If an Employee Contribution is required as a
condition of participation in the Plan, any Employee who would be a
Participant in the Plan if such Employee made the Required Employee
Contribution shall be treated as an Eligible Participant on behalf of
whom no Employee Contributions are made.
If the Employer has elected in its Adoption Agreement to provide for Elective
Deferral Contributions, then Sections 4A.2 through 4A.5 shall apply.
4A.2 ACTUAL DEFERRAL PERCENTAGE TEST. The ADP for Participants who are Highly
Compensated Employees for each Plan Year and the ADP for Participants who
are non-Highly Compensated Employees for the same Plan Year must satisfy
one of the following tests:
(a) The ADP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ADP for Participants who are non-Highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(b) The ADP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ADP for Participants who are non-Highly
Compensated Employees for the same Plan Year multiplied by 2.0,
provided that the ADP for Participants who8 are Highly Compensated
Employees does not exceed the ADP for Participants who are non-Highly
Compensated Employees by more than two (2) percentage points.
4A.3 SPECIAL RULES - ADP TEST.
(a) The ADP for any Participant who is a Highly Compensated Employee for
the Plan Year and who is eligible to have Elective Deferral
Contributions (and Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, if treated as Elective Deferrals for
purposes of the ADP test) allocated to his accounts under two or more
CODAs maintained by the Employer, shall be determined as if such
Elective Deferral Contributions (and, if applicable, such Qualified
Nonelective Contributions or Qualified Matching Contributions, or
both) were made under a single CODA. If a Highly Compensated Employee
participates in two or more CODAs that have different Plan Years, such
CODAs are treated as a single CODA with respect to the Plan Years
ending with or within the same calendar year. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Code section 401(k).
(b) If this Plan satisfies the requirements of Code sections 401(k),
401(a)(4), or 410(b) only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such Code
sections only if
Article IV - Legal Limitations -62- June 14, 1996
<PAGE>
aggregated with this Plan, then this Section shall be applied by
determining the ADP of Employees as if all such plans were a single
plan. For Plan Years beginning after December 31, 1989, plans i-nay be
aggregated in order to satisfy Code section 401(k) only if they have
the same Plan Year.
(c) If a Highly Compensated Employee is subject to the family aggregation
rules of section 414(q)(6) because that Participant is either a 5-
percent owner or one of the top 10 Highly Compensated Employees, the
combined Actual Deferral Ratio for the family group (which is treated
as one Highly Compensated Employee) must be determined by combining
the Elective Deferral Contributions (and Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, if treated
as Elective Deferral Contributions for purposes of the ADP test), and
Compensation for the Plan Year of all the family members (as defined
in section 414(q)(6)). Such family members shall be disregarded as
separate Employees in determining the ADP for both Highly Compensated
Employees and non-Highly Compensated Employees.
(d) For purposes of determining the ADP test, Elective Deferral
Contributions, Qualified Nonelective Contributions and Qualified
Matching Contributions must be made before the last day of the 12-
month period immediately following the Plan Year to which Such
contributions relate.
(e) The Employer shall maintain records Sufficient to demonstrate
satisfaction of the ADP test and the amount Of Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(f) The determination and treatment of the Deferral Percentage Amounts of
any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(g) If the Employer determines before the end of the Plan Year that the
Plan may not satisfy the ADP test for the Plan Year, the Employer may
require that the amounts of Elective Deferral Contributions being
allocated to the accounts of Highly Compensated Employees be reduced
to the extent necessary to prevent Excess Contributions from being
made to the Plan-
Although the Employer may reduce the amounts of Elective Deferral
Contributions that may be allocated to the Participant's Accounts of
Highly Compensated Employees, the affected Employees shall continue to
participate in the Plan. When the situation that resulted in the
reduction of Elective Deferral Contributions ceases to exist, the
Employer shall reinstate the amounts of Elective Deferral
Contributions elected by the affected Participants in their Salary
Deferral Agreement to the fullest extent possible.
If the Employer has elected in its Adoption Agreement, to provide for Employee
Contributions and/or Matching Contributions required to be tested under Code
section 401(m), then Sections 4A.4 and 4A.5 shall apply.
4A.4 ACTUAL CONTRIBUTION PERCENTAGE TEST. The ACP for Participants who are
Highly Compensated Employees for each Plan Year and the ACP for
Participants who are non-Highly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
Article IV - Legal Limitations -63- June 14, 1996
<PAGE>
(a) The ACP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ACP for Participants who are non-Highly
Compensated Employees for the same Plan Year multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated Employees for the
Plan Year shall not exceed the ACP for Participants who are non-Highly
Compensated Employees for the same Plan Year multiplied by two (2),
provided that the ACP for Participants who are Highly Compensated
Employees does not exceed the ACP for Participants who are non-Highly
Compensated Employees by more than two (2) percentage points.
4A.5 SPECIAL RULES - ADP/ACP TESTS.
(a) Multiple Use: If one or more Highly Compensated Employees participates
in both a CODA and a plan Subject to the ACP test maintained by the
Employer, and the sum of the ADP and ACP of those Highly Compensated
Employees subject to either or both tests exceeds the Aggregate Limit,
then the ACP of those Highly Compensated Employees who also
participate in a CODA will be reduced (beginning with such Highly
Compensated Employee whose Actual Contribution Ratio is the highest)
so that the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amounts are reduced
shall be treated as an Excess Aggregate Contribution. The ADP and ACP
of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does
not occur if both the ADP and ACP of the Highly Compensated Employees
does not exceed 1.25 multiplied by the ADP and ACP of the non-Highly
Compensated Employees.
(b) For purposes of this Section, the Actual Contribution Ratio for any
Participant who is a Highly Compensated Employee and who is eligible
to have Contribution Percentage Amounts allocated to his account under
two or more plans described in Code section 401 (a), or CODAs that are
maintained by the Employer, shall be determined as if the total of
such Contribution Percentage Amounts was made under each plan. If a
Highly Compensated Employee participates in two or more CODAs that
have different Plan Years, all CODAs ending with or within the same
calendar year are treated as a single CODA. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Code section 401(m).
(c) If this Plan satisfies the requirements of Code sections 401 (m), 401
(a)(4) or 410(b) only if aggregated with one or more other plans, or
if one or more other plans satisfy the requirements of such sections
of the Code only if aggregated with this Plan, then this Section shall
be applied by determining the Actual Contribution Ratio of Employees
as if all such plans were a single plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated in order to satisfy
Code section 401(m) only if they have the same Plan Year.
(d) For purposes of determining the Actual Contribution Ratio of a
Participant who is a 5-percent owner or one of the Top 10 Highly
Compensated Employees, the Contribution Percentage Amounts and
Compensation for such Participant shall include the Contribution
Percentage Amounts and Compensation for the Plan Year of family
members (as defined in Code
Article IV - Legal Limitations -64- June 14, 1996
<PAGE>
section 414(q)(6)). Such family members shall be disregarded as
separate Employees in determining the ACP for Highly Compensated
Employees and non-Highly Compensated Employees.
(e) For purposes of determining the ACP test, Employee Contributions are
considered to have been made in the Plan Year in which contributed to
the Plan. Qualified Matching Contributions and Qualified Nonelective
Contributions are considered made for a Plan Year if made no later
than the end of the 12-month period beginning on the day after the
close of the Plan Year.
(f) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, used in
such test.
(g) The determination and treatment of the Contribution Percentage Amounts
of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
4B. LIMITATIONS ON ALLOCATIONS
4B.1 DEFINITIONS. The following definitions apply for purposes of Section 4B.
(a) ANNUAL ADDITIONS. The term Annual Additions means the sum of the
following amounts credited to a Participant's Account for the
Limitation Year:
(1) All contributions made by the Employer which shall include:
Elective Deferral Contributions;
Money Purchase Pension Contributions
Matching Contributions;
Nonelective Contributions;
Qualified Nonelective Contributions;
Qualified Matching Contributions;
Prior Employer Contributions;
(2) Employee Contributions;
(3) Forfeitures; and
(4) 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, are treated
as Annual Additions to a defined contribution plan. Also,
amounts derived from contributions paid or accrued after December
31, 1985 in taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated to the
separate account of a Key Employee as defined in Code section
419A(d)(3), under a welfare benefit fund as defined in Code
section 419(e), maintained by the Employer, are treated as Annual
Additions to a defined contribution plan; and
(5) Allocations under a simplified employee pension plan.
For this purpose, any Excess Annual Additions applied under Sections
4C.3 or 4B.5(f) in the Limitation Year to reduce Employer
contributions will be considered Annual Additions for such Limitation
Year.
Article IV - Legal Limitations -65- June 14, 1996
<PAGE>
(b) COMPENSATION. As elected by the Employer in the Adoption Agreement, the
term Compensation means all of a Participant's:
(1) Wages, Tips, and Other Compensation Box on Form W-2. (Information
required to be reported under Code sections 6041, 6051 and 6052).
Wages within the meaning of Code section 3401(a) and all other
payments of compensation to an Employee by the Employer (in the
course of the Employer's trade or business) for which the Employer
is required to furnish the Employee a written statement under Code
sections 6041 (d), 6051 (a)(3), and 6052. Compensation must be
determined without regard to any rules under Code section 3401 (a)
that limit the remuneration included in wages based on the nature
or location of the employment or the services performed (such as
the exception for agricultural labor in Code section 3401(a)(2)).
(2) Section 3401 (a) wages. Wages as defined in Code section 3401 (a)
for the purposes of income tax withholding at the source but
determined without regard to any rules that limit the remuneration
included in wages based on the nature or location of the employment
or the services performed (such as the exception for agricultural
labor in Code section 3401(a)(2)).
(3) 415 safe-harbor compensation. Wages, salaries, and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includable
in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under a
nonaccountable plan as described in Code section 1.62-2(c)), and
excluding the following:
(A) Employer contributions to a plan of deferred compensation
which are not includable in the Employee's gross income for
the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to the
extent such contributions are deductible by the Employee, or
any distributions from a plan of deferred compensation;
(B) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
(C) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(D) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an
Article IV - Legal Limitations -66- June 14, 1996
<PAGE>
annuity contract described in Code section 403(b) (whether or
not the contributions are actually excludable from the gross
income of the Employee).
For any Self-Employed Individual, Compensation means Earned Income.
For Limitation Years beginning after December 31, 1991, for purposes of
applying the limitations of this Section 4B, Compensation for a Limitation
Year is the Compensation actually paid or includable in gross income during
such Limitation Year.
Notwithstanding the preceding sentence, Compensation for a Participant in a
defined contribution plan who is permanently and totally disabled (as
defined in Code section 22(e)(3)) is the Compensation such Participant
would have received for the Limitation Year if the Participant had been
paid at the rate of Compensation paid immediately before becoming
permanently and totally disabled; such imputed Compensation for the
disabled Participant may be taken into account only if the Participant is
not a Highly Compensated Employee and contributions made on behalf of such
Participant are nonforfeitable when made.
(c) DEFINED BENEFIT FRACTION. The term Defined Benefit Fraction means a
fraction, the numerator of which is the sum of the Participant's Projected
Annual Benefits under all the defined benefit plans (whether or not
terminated) maintained by the Employer, and the denominator of which is the
lesser of 125 percent of the dollar limitation determined for the
Limitation Year under Code sections 415(b) and (d), or 140 percent of the
Highest Average Compensation including any adjustments Linder Code section
415(b).
Notwithstanding the above, if the Participant was a Participant as of the
first day of the Limitation Year beginning after December 31, 1986 in one
or more defined benefit plans maintained 6y the Employer which were in
existence on May 6, 1986, the denominator of this fraction will not be less
than 125 percent of the sum of the annual benefits under such plans which
the Participant had accrued as of the later of the close of the last
Limitation Year beginning before January 1, 1987, disregarding any changes
in the terms and conditions of the Plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of Code section 415 for all Limitation
Years beginning before January 1, 1987.
Notwithstanding the foregoing, for any Top-Heavy Plan Year, 100 shall be
substituted for 125 unless the extra minimum allocation is being made
pursuant to the Employer's election in the Adoption Agreement. However, for
any Plan Year in which this Plan is a Super Top-Heavy Plan, 100 shall be
substituted for 125 in any event.
(d) DEFINED CONTRIBUTION DOLLAR LIMITATION. The term Defined Contribution
Dollar Limitation means $30,000 or if greater, one-fourth of the defined
benefit dollar limitation set forth in Code section 41 5(b)(1) as in effect
for the Limitation Year.
Article IV - Legal Limitations -67- June 14, 1996
<PAGE>
(e) DEFINED CONTRIBUTION FRACTION. The term Defined Contribution Fraction
means a fraction, the numerator of which is the sum of the Annual Additions
to the Participant's accounts under all the defined contribution plans
(whether or not terminated) maintained by the Employer for the current and
all prior Limitation Years (including the Annual Additions attributable to
the Participant's nondeductible employee contributions to all defined
benefit plans, whether or not terminated, maintained by the Employer, and
the Annual Additions attributable to all welfare benefit funds, as defined
in Code section 419(e), individual medical accounts, as defined in Code
section 415(l)(2), and simplified employee pension plans, as defined in
Code section 408(k), maintained by the Employer), and the denominator of
which is the sum of the maximum aggregate amounts for the current and all
prior Limitation Years of service with the Employer (regardless of whether
a defined contribution plan was maintained by the Employer). The maximum
aggregate amount in any Limitation Year is the lesser of 125 percent of the
dollar limitation determined under Code sections 415(b) and (d) in effect
under Code section 415(c)(1)(A) or 35 percent of the Participant's
Compensation for such year.
If the Employee was a Participant as of the end of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the Defined Benefit Fraction would
otherwise exceed 1.0 under the terms of this Plan. Under the adjustment,
an amount equal to the product of (1) the excess of the sum of the
fractions over 1.0 times (2) the denominator of this fraction, will be
permanently subtracted from the numerator of this fraction. The adjustment
is calculated using the fractions as they would be computed as of the end
of the last Limitation Year beginning before January @, 1987, and
disregarding any changes in the terms and conditions of the Plan made after
May 5, 1986, but using the section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987.
Notwithstanding the foregoing, for any Top-Heavy Plan Year, 100 shall be
substituted for 125 unless the extra minimum allocation is being made
pursuant to the Employer's election in the Adoption Agreement. However,
for any Plan Year in which this Plan is a Super Top-Heavy Plan, 100 shall
be substituted for 125 in any event.
The Annual Additions for any Limitation Year beginning before January 1,
1987 shall not be recomputed to treat all Employee Contributions as Annual
Additions.
(f) EMPLOYER. For purposes of this Section 4B, the term Employer means the
Employer that adopts this Plan, and all members of a controlled group of
corporations (as defined in Code section 414(b) as modified by section
415(h)), a group of commonly controlled trades or businesses (as defined in
Code section 414(c) as modified by section 415(h)) or affiliated service
groups (as defined in Code section 414(m)) of which the adopting Employer
is a part and any other entity required to be aggregated with the Employer
pursuant to regulations under Code section 414(o).
Article IV - Legal Limitations -68- June 14, 1996
<PAGE>
(g) HIGHEST AVERAGE COMPENSATION. The term Highest Average
Compensation means the average Compensation for the three
consecutive Years of Service with the Employer that produces the
highest average. A Year of Service with the Employer is the 12-
consecutive month period defined in Section 2A.5.
(h) LIMITATION YEAR. The term Limitation Year means a calendar year,
or the Inconsecutive month period elected by the Employer in the
Limitation Year section of the Adoption Agreement. All qualified
plans maintained by the Employer must use the same Limitation
Year. If the Limitation Year is amended to a different 12-
consecutive month period, the new Limitation Year must begin on a
date within the Limitation Year in which the amendment is made.
(i) MASTER OR PROTOTYPE PLAN. The term Master or Prototype Plan means a
plan the form of which is the subject of a favorable opinion letter
from the national office of the Internal Revenue Service.
(j) MAXIMUM PERMISSIBLE AMOUNT. The term Maximum Permissible Amount
means the maximum Annual Additions that may be contributed or
allocated to a Participant's Account tinder the Plan for any
Limitation Year, which shall not exceed the lesser of:
(1) The Defined Contribution Dollar Limitation, or
(2) 25 percent of the Participant's Compensation for the Limitation
Year.
The Compensation limitation referred to in (2) above, shall not
apply to any contribution for medical benefits (within the meaning
of Code section 401(h) or 419A(f)(2)) which is otherwise treated
as Annual Additions under Code sections 415(l)(1) or 419A(d)(2).
If a short Limitation Year is created because of an amendment changing
the Limitation Year to a different Inconsecutive month period, the
Maximum Permissible Amount will not exceed the Defined Contribution
Dollar Limitation multiplied by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
(k) PROJECTED ANNUAL BENEFIT. The term Projected Annual Benefit means the
annual retirement benefit (adjusted to an actuarially equivalent
Straight Life Annuity if such benefit is expressed in a form other
than a Straight Life Annuity or Qualified joint and Survivor Annuity)
to which the Participant would be entitled under the terms of the Plan
assuming:
(1) The Participant will continue employment until Normal Retirement
Age under the Plan (or current age, if later); and
(2) The Participant's Compensation for the current Limitation Year
and all other relevant factors used to determine benefits under
the Plan will remain constant for all future Limitation Years.
4B.2 BASIC LIMITATION. If the Participant does not participate in, and has
never participated in another qualified plan or welfare benefit fund
maintained by the Employer, as defined in Code section 419(e), or an
individual medical account, as defined in Code section 415(l)(2),
maintained by the Employer, or a simplified
Article IV - Legal Limitations -69- June 14, 1996
<PAGE>
employee pension, as defined in Code section 408(k), maintained by the
Employer, which provides Annual Additions as defined in Section 4B.1(a),
the amount of Annual Additions which may be credited to the Participant's
Account for any Limitation Year will not exceed the lesser of the Maximum
Permissible Amount or any other limitation contained in this Plan. If the
Employer contributions that would otherwise be contributed or allocated to
the Participant's Account would cause the Annual Additions for the
Limitation Year to exceed the Maximum Permissible Amount, the amount
contributed or allocated will be reduced so that the Annual Additions for
the Limitation Year will equal the Maximum Permissible Amount.
4B.3 ESTIMATED MAXIMUM PERMISSIBLE AMOUNT. Prior to determining the
Participant's actual Compensation for the Limitation Year, the Employer may
determine the Maximum Permissible Amount for a Participant on the basis of
a reasonable estimation of the Participant's Compensation for the
Limitation Year, uniformly determined for all Participants similarly
situated.
4B.4 ACTUAL MAXIMUM PERMISSIBLE AMOUNT. As soon as administratively feasible
after the end of the Limitation Year, the Maximum Permissible Amount for
the Limitation Year will be determined on the basis of the Participant's
actual Compensation for the Limitation Year.
4B.5 PARTICIPANTS COVERED BY ANOTHER PROTOTYPE DEFINED CONTRIBUTION PLAN.
(a) This Section applies if, in addition to this Plan, the Participant is
covered under another qualified Master or Prototype defined
contribution Plan maintained by the Employer, or a welfare benefit
fund, as defined in Code section 419(e), maintained by the Employer,
or an individual medical account as defined in Code section 415(1)(2),
maintained by the Employer, or a simplified employee pension plan, as
defined in Code section 408(k), that provides Annual Additions as
defined in Section 4B.1(a), during any Limitation Year. The Annual
Additions which may be credited to a Participant's Account under this
Plan for any such Limitation Year will not exceed the Maximum
Permissible Amount reduced by the Annual Additions credited to a
Participant's account under the other qualified Master and Prototype
defined contribution Plans, welfare benefit funds, individual medical
accounts, and simplified employee pension plans for the same
Limitation Year. If the Annual Additions with respect to the
Participant under other qualified Master and Prototype defined
contribution Plans, welfare benefit funds, individual medical
accounts, and simplified employee pension plans maintained by the
Employer are less than the Maximum Permissible Amount and the Employer
contributions that would otherwise be contributed or allocated to the
Participant's Account under this Plan would cause the Annual Additions
for the Limitation Year to exceed this limitation, the amount
contributed or allocated will be reduced so that the Annual Additions
under all such plans and funds for the Limitation Year will equal the
Maximum Permissible Amount. If the Annual Additions with respect to
the Participant under such other qualified master and prototype
defined contribution plans, welfare benefit funds, individual medical
accounts, and simplified employee pension plans, in the aggregate are
equal to or greater than the Maximum Permissible Amount, no amount
will be contributed or allocated to the Participant's Account under
this Plan for the Limitation Year.
Article IV - Legal Limitations -70- June 14, 1996
<PAGE>
(b) Prior to determining the Participant's actual Compensation for the
Limitation Year, the Employer may determine the estimated Maximum
Permissible Amount for a Participant in the manner described in
Section 4B.3.
(c) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
(d) If, pursuant to Section 4B.5(c), or as a result of the allocation of
Forfeitures, a Participant's Annual Additions under this Plan and such
other plans would result in Excess Annual Additions as defined in
Section 4C.1(b) for a Limitation Year, the Excess Annual Additions
will be deemed to consist of the Annual Additions last allocated,
except that Annual Additions attributable to a simplified employee
pension plan will be deemed to have been allocated first, followed by
Annual Additions to a welfare benefit fund or individual medical
account, regardless of the actual allocation date.
(e) If Excess Annual Additions were allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date
of another plan, the Excess Annual Additions attributed to this Plan
will be the product of:
(1) The total Excess Annual Additions allocated as of such date,
multiplied by
(2) The ratio of (i) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under this
Plan to (ii) the total Annual Additions allocated to the
Participant for the Limitation Year as of such date under this
and all the other qualified Master or Prototype defined
contribution Plans.
(f) Any Excess Annual Additions attributed to this Plan will be disposed
of in the manner described in Section 4C.3.
4B.6 PARTICIPANTS COVERED BY NON-PROTOTYPE DEFINED CONTRIBUTION PLAN. If the
Participant is covered under another qualified defined contribution plan
maintained by the Employer which is not a Master or Prototype Plan, Annual
Additions which may be credited to the Participant's Account under this
Plan for any Limitation Year will be limited in accordance with Section
4B.5 as though the other plan were a Master or Prototype Plan, unless the
Employer provides other limitations in the Limitations on Allocations
section of the Adoption Agreement.
4B.7 PARTICIPANTS COVERED BY DEFINED BENEFIT PLAN. If the Employer maintains,
or at any time maintained, a qualified defined benefit plan covering any
Participant in this Plan, the sum of the Participant's Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. The Annual Additions which may be credited to the
Participant's Account under this Plan for any Limitation Year will be
limited in accordance with the Limitations on Allocations section of the
Adoption Agreement.
Article IV - Legal Limitations -71- June 14, 1996
<PAGE>
4C. TREATMENT OF EXCESSES
4C.1 DEFINITIONS.
(a) EXCESS AGGREGATE CONTRIBUTIONS. The term Excess Aggregate
Contributions means, with respect to any Plan Year, the excess of:
(1) The aggregate Contribution Percentage Amounts taken into account
in computing the ACP of Highly Compensated Employees for such
Plan Year, over
(2) The maximum Contribution Percentage Amounts permitted by the ACP
test (determined by reducing the Contribution Percentage Amounts
made on behalf of Highly Compensated Employees in order of their
Actual Contribution Ratios beginning with the highest of such
ratios). Such determination shall be made after first
determining Excess Elective Deferral Contributions, pursuant to
Section 4C.2(a) and then determining Excess Contributions
pursuant to Section 4C.4.
(b) EXCESS ANNUAL ADDITIONS. The term Excess Annual Additions means the
excess of the Participant's Annual Additions for the Limitation Year
over the Maximum Permissible Amount.
(c) EXCESS CONTRIBUTIONS. The term Excess Contributions means, with
respect to any Plan Year, the excess of:
(1) The aggregate Deferral Percentage Amounts taken into account in
computing the ADP of Highly Compensated Employees for such Plan
Year, over
(2) The maximum Deferral Percentage Amounts permitted by the ADP test
(determined by reducing the Deferral Percentage Amounts made on
behalf of Highly Compensated Employees in order of their Actual
Deferral Ratios, beginning with the highest of such ratios).
(d) EXCESS ELECTIVE DEFERRAL CONTRIBUTIONS. The term Excess Elective
Deferral Contributions means those Elective Deferral Contributions
that are includable in a Participant's gross income under Code section
402(g) to the extent such Participant's Elective Deferral
Contributions for a taxable year exceed the dollar limitation under
such Code section. Excess Elective Deferral Contributions shall be
treated as Annual Additions under the Plan pursuant to Section 4B,
unless such amounts are distributed in accordance with the provisions
of Section 4C.2(a), below.
4C.2 EXCESS ELECTIVE DEFERRAL CONTRIBUTIONS.
(a) In the event that Elective Deferral Contributions made during a
calendar year exceed the limit specified in Section 2C.1(j)(4), then
the Excess Elective Deferral Contributions, plus any income and minus
any loss allocable thereto, shall be distributed to the Participant by
the April 15 following the calendar year in which such amount was
contributed, provided that the Participant notifies the Plan
Administrator no later than 30 days in advance of his intent to
withdraw such Excess Elective Deferral Contributions, or is deemed to
notify the Plan Administrator. A Participant is deemed to notify the
Plan Administrator of any Excess Elective Deferral Contributions that
arise by taking into account only
Article IV - Legal Limitations -72- June 14, 1996
<PAGE>
those Elective Deferrals made to this Plan and any other plans of this
Employer. The spousal consent provisions of Section 3C shall not apply
to any distribution of Excess Elective Deferral Contributions.
(b) Excess Elective Deferral Contributions shall be adjusted for any
income or loss for the Employee's tax year. The income or loss
allocable to excess Elective Deferral Contributions is an amount
determined by multiplying the sum of the income or loss allocable to
the Participant's Elective Deferral Contribution account for the
taxable year by a fraction, the numerator of which is such
Participant's Excess Elective Deferral Contributions for the taxable
year, and the denominator of which is equal to the sum of the
Participant's Account balance attributable to Elective Deferral
Contributions as of the beginning of the taxable year plus the
Participant's Elective Deferral Contributions for the taxable year.
Income for the gap period (the period from the end of the taxable year
to the date of distribution) shall not be allocated to Excess Elective
Deferral Contributions.
(c) Matching Contributions, as defined in Section 1.35, that are
attributable to Excess Elective Deferral Contributions shall be
forfeited, and as such, shall be applied to reduce Employer
contributions or pay Plan expenses.
4C.3 EXCESS ANNUAL ADDITIONS. If, pursuant to Section 4B.4 or as a result of
the allocation of Forfeitures, there are Excess Annual Additions, the
excess will be disposed of using any of the following methods:
(a) Employee Contributions or Elective Deferral Contributions or both, to
the extent they would reduce the Excess Annual Additions, will be
returned to the Participant. The Contributions returned in accordance
with the preceding shall include any gains or losses attributable to
such Contributions.
Employee Contributions so returned will be disregarded with respect to
the ACP test. Elective Deferral Contributions so returned will be
disregarded with respect to the elective deferral limitation described
in Section 2C.1(j)(4) of the Plan and the ADP test.
(b) If, after the application of paragraph (a), Excess Annual Additions
still exist and the Participant is covered by the Plan at the end of
the Limitation Year, the Excess Annual Additions in the Participant's
Account, other than Employee Contributions and Elective Deferral
Contributions, will be used to reduce Employer contributions
(including any allocation of Forfeitures) for such Participant in the
next Limitation Year, and each succeeding Limitation Year, if
necessary.
(c) If, after the application of paragraph (a), Excess Annual Additions
still exist and the Participant is not covered by the Plan at the end
of a Limitation Year, the Excess Annual Additions will be held
unallocated in a suspense account. The suspense account will be
applied to reduce future Employer contributions (including allocation
of any Forfeiture) for all remaining Participants in the next
Limitation Year, and each succeeding Limitation Year if necessary.
(d) If a suspense account is in existence at any time during the
Limitation Year pursuant to this Section, it will not participate in
the allocation of the Trust or Insurance Company's gains and losses.
If a suspense account is in
Article IV - Legal Limitations -73- June 14, 1996
<PAGE>
existence at any time during a particular Limitation Year, all amounts
in the suspense account must be allocated and reallocated to the
Participants' Account before any Employer or Employee Contributions
may be made to the Plan for that Limitation Year. Except as provided
in Section 4C.3(a), Excess Annual Additions may not be distributed to
Participants or former Participants.
4C.4 EXCESS CONTRIBUTIONS.
(a) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose Participants' accounts such Excess Contributions
were allocated for the preceding Plan Year. If such excess amounts
are distributed more than 2-1/2 months after the last day of the Plan
Year in which such excess amounts arose ' - a ten percent excise tax
will be imposed on the Employer maintaining the Plan with respect to
such amounts.
Such distributions shall be made to Highly Compensated Employees on
the basis of the respective portions of the Excess Contributions
attributable to each of such Employees.
The distribution of Excess Contributions made to the family members of
a family group that was combined for purposes of determining a Highly
Compensated Employee's Actual Deferral Ratio shall be allocated among
the family members in proportion to the Deferral Percentage Amounts
(including any amounts required to be taken into account under
Sections 4A.3(a) and (b) of the Plan) of each family member that is
combined to determine the Actual Deferral Ratio.
(b) Excess Contributions shall be treated as Annual Additions, as defined
in Section 4B.1, under the Plan in the Limitation Year in which they
arose.
(c) Excess Contributions shall be adjusted for any income or loss for the
Plan Year. The income or loss allocable to Excess Contributions is an
amount determined by multiplying the sum of the income or loss
allocable to the Participant's Account for Deferral Percentage Amounts
for the Plan Year, by a fraction, the numerator of which is such
Participant's Excess Contributions for the Plan Year and the
denominator of which is equal to the sum of the Participant's Account
balance attributable to Deferral Percentage Amounts as of the
beginning of the Plan Year plus the Participant's Deferral Percentage
Amounts for the Plan Year. Income for the gap period (the period from
the end of the Plan Year to the date of distribution) shall not be
allocated to Excess Contributions.
(d) Excess Contributions shall be distributed from the Participant's
Account for Elective Contributions and Qualified Matching
Contributions (if applicable) in proportion to the Participant's
Elective Deferral Contributions and Qualified Matching Contributions
(to the extent used in the ADP test) for the Plan Year. Excess
Contributions shall be distributed from the Part!,-'pant's Qualified
Nonelective Contribution Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Account for
Elective Contributions and Qualified Matching Contributions.
Article IV - Legal Limitations -74- June 14, 1996
<PAGE>
(e) Matching Contributions, as defined in Section 1.35, that are
attributable to Excess Contributions, shall be forfeited, and as such,
shall be applied to reduce Employer contributions or pay Plan
expenses.
4C.5 EXCESS AGGREGATE CONTRIBUTIONS.
(a) Notwithstanding any other provision of this Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed
no later than the last day of each Plan Year to Participants to whose
Participants' Accounts such Excess Aggregate Contributions were
allocated for the preceding Plan Year. If such Excess Aggregate
Contributions are distributed more than 2-1/2 months after the last
day of the Plan Year in which such excess amounts arose, a ten percent
excise tax will be imposed on the Employer maintaining the Plan with
respect to those amounts.
The distribution of Excess Aggregate Contributions made to the family
members of a family group that was combined for purposes of
determining a Highly Compensated Employee's Actual Contribution Ratio
shall be allocated among the family members in proportion to the
Contribution Percentage Amounts (including any amounts required to be
taken into account under Sections 4A.5 (a) and (b) of the Plan) of
each family member that is combined to determine the Actual
Contribution Ratio.
(b) Excess Aggregate Contributions shall be treated as Annual Additions,
as defined in Section 4B.1, in the Limitation Year in which they
arose.
(c) Excess Aggregate Contributions shall be adjusted for any income or
loss for the Plan Year. The income or loss allocable to Excess
Aggregate Contributions is an amount determined by multiplying the sum
of the income or loss allocable to the Participant's Account for
Contribution Percentage Amounts for the Plan Year by a,fraction, the
numerator of which is such Participant's Excess Aggregate
Contributions for the Plan Year, and the denominator of which is equal
to the sum of the Participant's Account balance attributable to
Contribution Percentage Amounts as of the beginning of the Plan Year
plus the Participant's Contribution Percentage Amounts for the Plan
Year. Income for the gap period (the period from the end of the Plan
Year to the date of distribution) shall not be allocated to Excess
Aggregate Contributions.
(d) Excess Aggregate Contributions shall be forfeited, if forfeitable, or
distributed on a pro-rata basis from the Participant's Account for
Employee Contributions, Matching Contributions, and Qualified Matching
Contributions (and, if applicable, the Participant's Qualified
Nonelective Contributions or Elective Deferral Contributions, or
both).
(e) Forfeitures of Excess Aggregate Contributions shall be applied to
reduce Employer contributions or pay Plan expenses.
(f) Matching Contributions as defined in Section 1.35 that are
attributable to Excess Aggregate Contributions shall be forfeited, and
as such, shall be applied to reduce Employer contributions or pay Plan
expenses.
Article IV - Legal Limitations -75- June 14, 1996
<PAGE>
ARTICLE V - PARTICIPANT PROVISIONS
5A. ANNUITY CONTRACT AND PARTICIPANT'S ACCOUNT
5A.1 PARTICIPANT'S ACCOUNT. A Participant's Account shall be maintained on
behalf of each Participant until such Account is distributed in accordance
with the terms of this Plan.
Each Participant shall have the exclusive authority to direct the
investment of Employee Contributions, Elective Deferral Contributions, QVEC
Contributions and Rollover Contributions, if applicable, from among the
investment options selected by the Employer.
If selected by the Employer in its Adoption Agreement, the Participant,
Beneficiary and/or Alternate Payee additionally shall have the exclusive
authority to direct the investment of contributions made by the Employer
from among the investment choices selected by the Employer.
5A.2 INVESTMENT TRANSFERS. Each Participant, Beneficiary, and/or Alternate
Payee shall have the exclusive authority to direct the transfer of amounts
between the investment funds designated by the Employer, attributable to
his Employee Contributions, Elective Deferral Contributions, QVEC
Contributions and Rollover Contributions, if applicable.
If the Employer selects in its Adoption Agreement to grant the Participant
exclusive authority to direct the investment of contributions made by the
Employer, the Participant, Beneficiary, and/or Alternate Payee shall also
have the exclusive authority to transfer contributions made by the Employer
from among the investment choices selected by the Employer.
The transfer of amounts between investment funds shall be subject to the
rules of the investment funds in which the Participant's Account is
invested or is to be invested.
The Plan Administrator or the Participant, Beneficiary, and/or Alternate
Payee as the case may be, may change such amounts as often as the Plan
Administrator may allow in accordance with the terms of the investment
funds in which the Participant's Account is being invested.
The ability of a Participant who is subject to the reporting requirements
of section 16(a) of the Securities and Exchange Act of 1934 (the "Act") to
make withdrawals or investment changes involving the Participant's Employer
Stock Account may be restricted by the Plan Administrator to comply with
rules under section 16(b) of the Act.
5A.3 PARTICIPANT'S ACCOUNT VALUATION. A Participant's Account shall be
maintained on behalf of each Participant until such Account is distributed
in accordance with the terms of this Plan. At least once per year, as of
the last day of the Plan Year, each Participant's Account shall be
adjusted, in the ratio that the Participant's Account balance bears to all
account balances invested into the same investment vehicle, for any
earnings, gains, losses, contributions, withdrawals, expenses, and loans
attributable to such Plan Year, in order to obtain a new valuation of the
Participant's Account. The assets of the Plan will be valued annually at
fair market value as of the last day of each Plan Year.
Article V - Participant Provisions -76- June 14, 1996
<PAGE>
5B. LIFE INSURANCE POLICIES
5B.1 OPTIONAL PURCHASE OF LIFE INSURANCE. If the Employer in its Adoption
Agreement shall permit the purchase of life insurance on the lives of some
or all Participants hereunder, each eligible Participant may elect that a
portion of the Contribution made on his behalf shall be applied to the
purchase of a Life Insurance Policy or Policies on his life. The
application for each Policy shall be signed by the Participant and by the
Trustee and shall conform to the requirements of the Insurance Company,
including any requested evidence of insurability, and the requirements of
this Section. All Life Insurance Policies shall be issued so as to permit
a common billing date. Any Policy on the life of a Participant who can
qualify for waiver of premium thereunder and participant account
contribution disability benefits thereunder may include such benefits if
applied for by the Participant. The Plan Administrator may adopt
reasonable rules regarding the purchase of Life Insurance Policies
provided such rules are administered in a consistent and nondiscriminatory
manner. No application shall be made hereunder for any Life Insurance
Policy on the life of a Participant acceptable to the Insurance Company at
standard premium rates for a face amount of less that $1,000 for the
first, or any additional Policy issued on the Participant's life.
5B.2 PREMIUMS ON LIFE INSURANCE POLICIES. The premiums on all Life Insurance
Policies on the life of a Participant shall be paid from the portion of
his Participant's Account attributable to contributions made by the
Employer, to the extent sufficient therefor, otherwise in one of the
following manners:
(a) By a loan against the Participant's Policy or Policies, under the
automatic premium loan provision thereof, or
(b) By payment out of his Participant's Account.
If the Participant is not acceptable to the Insurance Company as a
standard risk at standard rates, a Policy with the same premium but a
lesser death benefit may be purchased.
5B.3 LIMITATIONS ON PREMIUMS. In no case shall the cumulative total premiums
paid on all Policies held on the life of a Participant hereunder exceed an
amount equal to the applicable percentage set forth below of all
Contributions (other than Employee Contributions) and Forfeitures
theretofore allocated or currently due on his behalf:
(a) 49% in the case of ordinary life insurance or similar policies.
(b) 25% in the case of term insurance policies or a combination of
policies, with premiums on ordinary life insurance or similar
policies being given half weight.
If such cumulative total premiums would otherwise exceed this amount, the
necessary steps to avoid this result shall be taken by reduction of the
Participant's life insurance coverage by changing all or a portion of his
coverage to paid-up life insurance or by selling the excess portion to the
Participant.
5B.4 DISPOSAL. A Participant who no longer wishes to have any part of his
allocable share of Contributions used to pay the premiums for any Life
Insurance Policy or .Policies may withdraw a prior election by written
notice to the Trustee to that
Article V - Participant Provisions -77- June 14, 1996
<PAGE>
effect. Any Policy shall be disposed of in accordance with its provisions
as the Trustee shall direct.
5B.5 RIGHTS UNDER POLICIES. Each Policy shall provide that the Trustee shall
have the right to receive any or all payments that may be due during the
Participant's lifetime. Any death benefit shall be payable directly to
the Beneficiary named in the Policy and the Participant shall have the
right, subject to the terms of Section 3C, either directly or through the
Trustee, to change the Beneficiary from time to time and to elect
settlement options under the policy for the benefit of the Beneficiary.
The Trustee shall have the right to exercise all other options and
privileges contained in the policy and shall exercise such rights and
privileges in a manner consistent with the terms of the Plan.
5B.6 LOANS. No loans shall be made against any of the Policies hereunder
either from the Insurance Company or any other source unless such loans
are made in order to pay amounts then due as premiums thereon.
5B.7 CONDITIONS OF COVERAGE. Except as may be otherwise provided in any
conditional or binding receipt issued by the Insurance Company, there
shall be no coverage and no death benefit payable under any Policy to be
purchased from the Insurance Company until such Policy shall have been
delivered and the premium therefor shall have been paid to the Insurance
Company as a premium for that Policy. Neither the Employer nor the Trustee
shall have any responsibility as to the effectiveness of any Life
Insurance Policy purchased from the Insurance Company hereunder nor be
under any liability or obligation to pay any amount to any Participant or
his Beneficiary by reason of any failure or refusal by the Insurance
Company to make such payment.
5B.8 POLICY NOT YET IN FORCE. If at the death of any Participant, the Trustee
shall be holding any amount intended for the purchase of any Life
Insurance Policy on the Participant's life, but coverage under such Policy
shall not yet be in force, the Trustee shall credit such amount to the
Participant's Account to be disposed of as a portion thereof.
5B.9 VALUE OF POLICY. The value of any Policy on the life of a living
Participant for any purpose under this Plan shall be that amount which the
Insurance Company would pay upon surrender of such Policy in accordance
with its usual rules and practices.
5B.10 DIVIDENDS. If dividends are allowed on any Life Insurance Policy, they
shall be used to provide additional benefits under the Policy.
5B.11 DISTRIBUTION. No life insurance protection shall continue in force under
the Plan subsequent to a Participant's retirement or Termination of
Employment, whichever occurs first. As of such date, any Life Insurance
Policy shall be distributed to the Participant in accordance with its
terms and the terms of Section 3C.3.
5B.12 APPLICATION. The Trustee, if the Plan is trusteed, or custodian, if the
Plan has a custodial account, shall apply for and will be the owner of any
Life Insurance Policy purchased under the terms of this Plan. The Life
Insurance Policy(ies) must provide that proceeds will be payable to the
Trustee (or custodian, if applicable). However, the Trustee (or
custodian) shall be required to pay over all proceeds of the Life
Insurance Policy(ies) to the Participant's designated Beneficiary in
accordance with the distribution provisions of this Plan. A Participant's
Spouse will be the designated Beneficiary of the proceeds in all
circumstances unless a
Article V - Participant Provisions -78- June 14, 1996
<PAGE>
Qualified Election has been made in accordance with Section 3C.2(c), joint
and Survivor Annuity Requirements, if applicable. Under no circumstances
shall the Trust (or custodial account) retain any part of the proceeds.
In the event of any conflict between the provisions of this Plan and any
Life Insurance Policies or annuity contracts issued pursuant to the Plan,
the Plan provisions shall control.
5C.LOANS
5C.1 LOANS TO PARTICIPANTS. If the Employer has specified in its Adoption
Agreement that loans are permitted, then the Plan Administrator may make a
bona fide loan to a Participant, in an amount which, when added to the
outstanding balance of all other loans to the Participant from all
qualified plans of the Employer, does not exceed the lesser of $50,000
reduced by the excess of the Participant's highest outstanding loan balance
during the 12 months preceding the date on which the loan is made over the
outstanding loan balance on the date the new loan is made, or 50% of the
Participant's Vested Interest in his Participant's Account excluding
amounts attributable to QVEC Contributions. Notwithstanding any provision
in this paragraph to the contrary, loans may not exceed a Participant's
Vested Interest attributable to such contributions.
In the event of default, foreclosure on the note and attachment of security
will not occur until a distributable event occurs in the Plan.
No loans will be made to any Shareholder-Employee or Owner-Employee or to
family members of Shareholder-Employees or Owner-Employees, as defined in
Code section 267(c)(4).
The loan shall be made under such terms, security interest, and conditions
as the Plan Administrator deems appropriate, provided, however, that:
(a) Loans shall be made available to all Participants and parties-in-
interest (as defined in ERISA and including Employees and
Beneficiaries), on a reasonably equivalent basis.
(b) Loans shall not be made available to Highly Compensated Employees on a
basis greater than the basis made available to other Employees.
(c) Loans must bear a reasonable rate of interest.
(d) Loans are adequately secured.
(e) Unless the provisions of Section 3C.6 apply to a Participant, loans
may be made only after a Participant obtains the consent of his
Spouse, if any, to use his Participant's Account as security for the
loan. Spousal consent shall be obtained no earlier than the beginning
of the 90-day period that ends on the date on which the loan is to be
so secured. The consent must be in writing, must acknowledge the
effect of the loan, and must be witnessed by a Plan representative or
notary public. Such consent shall thereafter be binding with respect
to the consenting Spouse or any subsequent Spouse with respect to that
loan. A new consent shall be required if the Participant's Account is
used for renegotiation, extension, renewal or other revision of the
loan.
(f) Loans must be made in accordance with and subject to all of the
provisions of this Section SC.
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If a valid spousal consent has been obtained in accordance with (e), then,
notwithstanding any other provision of this Plan, the portion of the
Participant's Vested Interest used as a security interest held by the Plan
by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the account balance
payable at the time of death or distribution, but only if the reduction is
used as repayment of the loan. If less than 100% of the Participant's
Vested Interest in his Participant's Account (determined without regard to
the preceding sentence) is payable to the surviving Spouse, then the
Participant's Account shall be adjusted by first reducing the Vested
Interest by the amount of the security used as repayment of the loan, and
then determining the benefit payable to the surviving Spouse.
5C.2 LOAN PROCEDURES. The Plan Administrator shall establish a written set of
procedures, set forth in the summary plan description or any other
established set of procedures, which.becomes a part of such Plan by which
all loans will be administered. Such rules, which are incorporated herein
by reference, will include, but not be limited to the following:
(a) The person or persons authorized to administer the loan program,
identified by name or position;
(b) The loan application procedure;
(c) The basis for approving or denying loans;
(d) Any limits on the types of loans permitted;
(e) The procedure for determining a 'reasonable' interest rate;
(f) Acceptable collateral;
(g) Default conditions; and
(h) Steps which will be taken to preserve Plan assets in the event of
default.
5D. PARTICIPANTS' RIGHTS
5D.1 GENERAL RIGHTS OF PARTICIPANTS AND BENEFICIARIES. The Plan is established
and the Plan or Trust assets are held for the exclusive purpose of
providing benefits for such Employees and their Beneficiaries as have
qualified to participate under the terms of the Plan.
5D.2 FILING A CLAIM FOR BENEFITS. A Participant or Beneficiary, or the Employer
acting in his behalf, shall notify the Plan Administrator of a claim of
benefits under the Plan. Such request shall be in writing to the Plan
Administrator and shall set forth the basis of such claim and shall
authorize the Plan Administrator to conduct such examinations as may be
necessary to determine the validity of the claim and to take such steps as
may be necessary to facilitate the payment of any benefits to which the
Participant or Beneficiary may be entitled under the terms of the Plan.
SD.3 DENIAL OF CLAIM. Whenever a claim for benefits by any Participant or
Beneficiary has been denied by a Plan Administrator, a written notice,
prepared in a manner calculated to be understood by the Participant, must
be provided, setting forth (1) the specific reasons for the denial; (2) the
specific reference to pertinent Plan provisions on which the denial is
based; (3) a description of any additional material or information
necessary for the claimant to perfect the claim
Article V - Participant Provisions -80- June 14, 1996
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and an explanation of why such material or information is necessary; and
(4) an explanation of the Plan's claim review procedure.
5D.4 REMEDIES AVAILABLE TO PARTICIPANTS. A Participant or Beneficiary (1) may
request a review by a Named Fiduciary, other than the Plan Administrator,
upon written application to the Plan; (2) may review pertinent Plan
documents; and (3) may submit issues and comments in writing to a Named
Fiduciary. A Participant or Beneficiary shall have 60 days after receipt by
the claimant of written notification of a denial of a claim to request a
review of a denied claim.
A decision by a Named Fiduciary shall be made promptly and not later than
60 days after the Named Fiduciary's receipt of a request for review, unless
special circumstances require an extension of the time for processing in
which case a decision shall be rendered as soon as possible, but not later
than 120 days after receipt of a request for review. The decision on
review by a Named Fiduciary shall be in writing and shall include specific
reasons for the decision, written in a manner calculated to be understood
by the claimant, and specific references to the pertinent Plan provisions
on which the decision is based.
A Participant or Beneficiary shall be entitled, either in his own name or
in conjunction with any other interested parties, to bring such actions in
law or equity or to undertake such administrative actions or to seek such
relief as may be necessary or appropriate to compel the disclosure of any
required information, to enforce or protect his rights, to recover present
benefits due to him or to clarify his rights to future benefits under the
Plan.
5D.5 LIMITATION OF RIGHTS. Participation hereunder shall not grant any
Participant the right to be retained in the Service of the Employer or any
other rights or interest in the Plan or Trust fund other than those
specifically herein set forth.
5D.6 100% VESTED CONTRIBUTIONS. Each Participant, regardless of his length of
Service with the Employer, shall be fully vested (100%) at all times in any
portion of his Participant's Account attributable to the following
contributions, as applicable:
(a) Employee Contributions and earnings thereon;
(b) Elective Deferral Contributions and earnings thereon;
(c) Qualified Matching Contributions and earnings thereon;
(d) Qualified Nonelective Contributions and earnings thereon;
(e) Rollover Contributions and earnings thereon;
(f) QVEC Contributions and earnings thereon.
5D.7 REINSTATEMENT OF BENEFIT. In the event any portion of a benefit which is
payable to a Participant or a Beneficiary shall remain unpaid on account of
the inability of the Plan Administrator, after diligent effort, to locate
such Participant or Beneficiary, the amount so distributable shall be
treated as a Forfeiture under Section 3D. If a claim is made by the
Participant or Beneficiary for any benefit forfeited under this Section,
such benefit must be reinstated by the Employer.
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<PAGE>
5D.8 NON-ALIENATION. It is a condition of the Plan, and all rights of each
Participant shall be subject thereto, that no right or interest of any
Participant in the Plan shall be assignable or transferable in whole or in
part, either directly or by operation of law or otherwise, including, but
without limitation, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner, and no right or interest of any
Participant in the Plan shall be liable for or subject to any obligation or
liability of such Participant. The preceding sentence shall not preclude
the enforcement of a federal tax levy made pursuant to Code section 6331 or
the collection by the United States on A judgement resulting from an unpaid
tax assessment.
The preceding paragraph shall also apply to the creation, assignment, or
recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to
be a QDRO. A domestic relations order entered before January 1, 1985 will
be treated AS A QDRO if payment of benefits pursuant to the order has
commenced as of such date, and may be treated as a QDRO if payment of
benefits has not commenced as of such date, even though the order does not
satisfy the requirements of Code section 414(p).
Article V - Participant Provisions -82- June 14, 1996
<PAGE>
ARTICLE VI - OVERSEER PROVISIONS
6A. FIDUCIARY DUTIES AND RESPONSIBILITIES
6A.1 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary of the Plan shall
discharge his duties hereunder solely in the interest of the Participants
and their Beneficiaries and for the exclusive purpose of providing benefits
to Participants and their Beneficiaries and defraying reasonable expenses
of administering the Plan. Each Fiduciary shall act with the care, skill,
prudence and diligence under the circumstances that a prudent man acting in
a like capacity and familiar with such matters would use in conducting an
enterprise of like character and with like aims, in accordance with the
documents and instruments governing this Plan, insofar as such documents
and instruments are consistent with this standard.
6A.2 SERVICE IN MULTIPLE CAPACITIES. Any Person or group of Persons may serve in
more than one Fiduciary capacity with respect to this Plan, specifically
including service both as Trustee and Plan Administrator.
6A.3 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this Plan shall be construed
to prevent any Fiduciary from receiving any benefit to which he may be
entitled as a Participant or Beneficiary in this Plan, so long as the
benefit is computed and paid on a basis which is consistent with the terms
of this Plan as applied to all other Participants and Beneficiaries. Nor
shall this Plan be interpreted to prevent any Fiduciary from receiving any
reasonable compensation for services rendered, or for the reimbursement of
expenses properly and actually incurred in the performance of his duties
with the Plan; except that no Person so serving who already receives full-
time pay from an Employer shall receive compensation from this Plan, except
for reimbursement of expenses properly and actually incurred.
6A.4 INVESTMENT MANAGER. If an Investment Manager has been appointed pursuant to
Section 6B.7 of this Plan, he is required to acknowledge in writing that he
has undertaken a Fiduciary responsibility with respect to the Plan. The
Insurance Company's liability as a Fiduciary is limited to that arising
from its management of any assets of the Plan held by the Insurance Company
in its separate accounts.
6B. THE PLAN ADMINISTRATOR
6B.1 DESIGNATION AND ACCEPTANCE. The Employer shall designate a Person or
Persons to serve as Plan Administrator under the Plan and such Persons, by
joining in the execution of the Adoption Agreement, accepts such
appointment an4i agrees to act in accordance with the terms of the Plan.
6B.2 DUTIES AND RESPONSIBILITY. The Plan Administrator shall administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries
in a nondiscriminatory manner subject to the specific terms of the Plan.
The Plan Administrator shall perform all such duties as are necessary to
operate, administer, and manage the Plan in accordance with the terms
thereof. This shall include notification to the Insurance Company of any
adjustment made to a Participant's Account as a result of Excess Annual
Additions as defined in Section 4C.1(b).
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<PAGE>
The Plan Administrator shall comply with the regulatory provisions of ERISA
and shall furnish to each Participant (a) a summary plan description, (b)
upon written request, a statement of his total benefits accrued and his
vested benefits if any and (c) the information necessary to elect the
benefits available under the Plan. The Plan Administrator shall also file
the appropriate annual reports and any other data which may be required by
appropriate regulatory agencies.
Furthermore, the Plan Administrator shall take the necessary steps to
notify the appropriate interested parties whenever an application is made
to the Secretary of the Treasury for a determination letter in accordance
with Code section 7476 as amended.
6B.3 SPECIAL DUTIES. If the Employer that adopts this Plan is not the Plan
Administrator, and the Plan provides for either Employee Contributions or
Matching Contributions to be made, the Plan Administrator shall:
(a) Maintain records that enable it to monitor the adopting Employer's
compliance with the requirements of Code section 401(m);
(b) Perform the ACP test, as described in Section 4A.4, for the Employer
on an annual basis; and
(c) Notify the Employer if it is required to correct Excess Aggregate
Contributions.
6B.4 EXPENSES AND COMPENSATION. The expenses necessary to administer the Plan
shall be taken from Participants' Accounts unless paid by the Employer,
including but not limited to those involved in retaining necessary
professional assistance from an attorney, an accountant, an actuary, or an
investment advisor. Nothing shall prevent the Plan Administrator from
receiving reasonable compensation for services rendered in administering
this Plan, provided the Plan Administrator is not a full-time Employee of
any Employer adopting this Plan.
6B.5 INFORMATION FROM EMPLOYER. To enable the Plan Administrator to perform his
functions, the Employer shall supply full and timely information to the
Plan Administrator on all matters relating to this Plan as the Plan
Administrator may require.
6B.6 ADMINISTRATIVE COMMITTEE; MULTIPLE SIGNATURES. In the event that more than
one Person has been duly nominated to serve on the Administrative Committee
and has signified in writing the acceptance of such designation, the
signature(s) of one or more Persons may be accepted by an interested party
as conclusive evidence that the Administrative Committee has duly
authorized the action therein set forth and as representing the will of and
binding upon the whole Administrative Committee. No Person receiving such
documents or written instructions and acting in good faith and in reliance
thereon shall be obliged to ascertain the validity of such action under the
terms of this Plan. The Administrative Committee shall act by a majority of
its members at the time in office, and such action may be taken either by a
vote at a meeting or in writing without a meeting.
6B.7 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. The Plan Administrator,
or any member of the Administrative Committee, may resign at any time by
delivering to the Employer a written notice of resignation, to take effect
at a date specified therein, which shall not be less than 30 days after the
delivery thereof, unless such notice shall be waived.
Article VI - Overseer Provisions -84- June 14, 1996
<PAGE>
The Plan Administrator may be removed with or without cause by the Employer
by delivery of written notice of removal, to take effect at a date
specified therein, which shall be not less than thirty (30) days after
delivery thereof, unless such notice shall be waived.
The Employer, upon receipt of or giving notice of the resignation or
removal of the Plan Administrator, shall promptly designate a successor
Plan Administrator who must signify acceptance of this position in writing.
In the event no successor is appointed, the Board of Directors of the
Employer will function as the Administrative Committee until a new Plan
Administrator has been appointed and has accepted such appointment.
6B.8 INVESTMENT MANAGER. The Plan Administrator may appoint, in writing, an
Investment Manager or Managers to whom is delegated the authority to
manage, acquire, Invest or dispose of all or any part of the Plan or Trust
assets. With regard to the assets entrusted to his care, the Investment
Manager shall provide written instructions and directions to the Employer
or Trustee, as applicable, who shall in turn be entitled to rely upon such
written direction. This appointment and delegation shall be evidenced by a
signed written agreement.
6B.9 DELEGATION OF DUTIES. The Plan Administrator shall have the power, to the
extent permitted by law, to delegate the performance of such Fiduciary and
non-Fiduciary duties, responsibilities and functions as the Plan
Administrator shall deem advisable for the proper management and
administration of the Plan in the best interests of the Participants and
their Beneficiaries.
6C. TRUST AGREEMENT
This agreement entered into by and among the Employer, the Plan Administrator
and the Trustee pursuant to the Adoption Agreement completed and signed by the
Employer, the Plan Administrator and Trustee, hereby establishes the Trust with
the following provisions to form a part of and implement the provisions of the
Plan:
6C.1 CREATION AND ACCEPTANCE OF TRUST. The Trustee, by joining in the execution
of the Adoption Agreement, accepts the Trust hereby created and agrees to
act in accordance with the express terms and conditions herein stated.
6C.2 TRUSTEE CAPACITY; CO-TRUSTEES. The Trustee may be a Bank, Trust Company or
other corporation possessing trust powers under applicable State or Federal
law or one or more individuals or any combination thereof.
When two or more persons serve as Trustee, they are specifically
authorized, by a written agreement between themselves, to allocate specific
responsibilities, obligations or duties among themselves. An original copy
of such written agreement is to be delivered to the Plan Administrator.
6C.3 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE. Any Trustee may
resign at any time by delivering to the Plan Administrator a written notice
of resignation, to take effect at a date specified therein, which shall not
be less than 30 days after the delivery thereof, unless such notice shall
be waived.
The Trustee may be removed with or without cause by the Board of Directors
by delivery of a written notice of removal, to take effect at a date
specified therein, which shall not be less than 30 days after delivery
thereof, unless such notice shall be waived.
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<PAGE>
In the case of the resignation or removal of a Trustee, the Trustee shall
have the right to a settlement of its account, which may be made, at the
option of the Trustee, either (1) by judicial settlement in an action
instituted by the Trustee in a court of competent jurisdiction, or (2) by
written agreement of settlement between the Trustee and the Plan
Administrator.
Upon such settlement, all right, title and interest of such Trustee in the
assets of the Trust and all rights and privileges under this Agreement
theretofore vested in such Trustee shall vest in the successor Trustee, and
thereupon all future liability of such Trustee shall terminate; provided,
however, that the Trustee shall execute, acknowledge and deliver all
documents and written instruments which are necessary to transfer and
convey the right, title and interest in the Trust assets, and all rights
and privileges to the successor Trustee.
The Board of Directors, upon receipt of notice of the resignation or
removal of the Trustee, shall promptly designate a successor Trustee, whose
appointment is subject to acceptance of this Trust in writing and shall
notify the Insurance Company in writing of such successor Trustee.
6C.4 TAXES, EXPENSES AND COMPENSATION OF TRUSTEE. The Trustee shall deduct from
and charge against the Trust fund any taxes paid by it which may be
imposed upon the Trust fund or the income thereof or which the Trustee is
required to pay with respect to the interest of any person therein.
The Employer shall pay the Trustee annually its expenses in administering
the Trust and a reasonable compensation for its service as Trustee
hereunder if the Trustee is not an Employee of the Plan, at a rate to be
agreed upon from time to time. The reasonable compensation shall include
that for any extraordinary services.
6C.5 TRUSTEE ENTITLED TO CONSULTATION. The Trustee shall be entitled to advice
of counsel, which may be counsel for the Plan or the Employer, in any case
in which the Trustee shall deem such advice necessary. With the exception
of those powers and duties specifically allocated to the Trustee by the
express terms of this Plan, it shall not be the responsibility of the
Trustee to interpret the terms of the Plan or Trust and the Trustee may
request, and is entitled to receive guidance and written direction from the
Plan Administrator on any point requiring construction or interpretation of
the Plan documents.
6C.6 RIGHTS, POWERS AND DUTIES OF TRUSTEE. The Trustee shall have the
following rights, powers, and duties:
(a) The Trustee shall be responsible for the safekeeping and administering
of the assets of this Plan and Trust in accordance with the provisions
of this Agreement and any amendments thereto. The duties of the
Trustee under this Agreement shall be determined solely by the express
provisions of this Agreement and no other further duties or
responsibilities shall be implied. Subject to the terms of this Plan
and Trust, the Trustee shall be fully protected and shall incur no
liability in acting in reliance upon the written instructions or
directions of the Plan Administrator or a duly designated Investment
Manager or any other Named Fiduciary.
(b) The Trustee shall have all powers necessary or convenient for the
orderly and efficient performance of its duties hereunder, including
but not limited to those specified in this Section. The Trustee may
appoint one or more administrative agents or contract for the
performance of such
Article VI - Overseer Provisions -86- June 14, 1996
<PAGE>
administrative and service functions as it may deem necessary for the
effective installation and operation of the Plan and Trust.
(c) The Trustee shall have the power to collect and receive any and all
monies and other property due hereunder and to give full discharge and
acquittance therefor; to settle, compromise or submit to arbitration
any claims, debts or damages due or owing to or from the Trust; to
commence or defend suits or legal proceedings wherever, in its
judgment, any interest of the Trust requires it; and to represent the
Trust in all suits or legal proceedings in any court of law or equity
or before any other body or tribunal. It shall have the power
generally to do all acts, whether or not expressly authorized, which
the Trustee in the exercise of its Fiduciary responsibility may deem
necessary or desirable for the protection of the Trust and the assets
thereof.
(d) The Trustee shall make application to the Insurance Company for the
Annuity Contract required hereunder and shall take all necessary steps
to obtain any Life Insurance Policies elected on the lives of
Participants hereunder. In applying for the Annuity Contract, the
Trustee may indicate that, unless it directs the Insurance Company
otherwise, it shall be entitled to receive all cash payments for
further distribution to Participants and Beneficiaries.
(e) The Trustee may temporarily hold cash balances and shall be entitled
to deposit any such funds received in a bank account or bank accounts
in the name of the Trust in any bank or banks selected by the Trustee,
including the banking department of the Trustee, pending disposition
of such funds in accordance with the Trust. Any such deposit may be
made with or without interest.
(f) The Trustee shall obtain and deal with any Life Insurance Policies or
other assets of this Trust held or received under this Plan only in
accordance with the written directions from the Plan Administrator.
The Trustee shall be under no duty to determine any facts or the
propriety of any action taken or omitted by it in good faith pursuant
to instructions from the Plan Administrator.
(g) All contributions made to the Trust fund under this Plan shall be paid
by the Trustee to the Insurance Company under the Annuity Contract
within 30 days after the date such contributions were due under the
Plan. However, in lieu of holding any contributions made to the Trust
fund, the Trustee may direct that all such contributions be made
directly to the Insurance Company under the Annuity Contract or any
Life Insurance Policy. The Employer shall keep the Trustee informed
of all contributions made directly to the Insurance Company in
accordance with the Trustee's instructions.
(h) If the whole or any part of the Trust shall become liable for the
payment of any estate, inheritance, income or other tax which the
Trustee shall be required to pay, the Trustee shall have full power
and authority to pay such tax out of any monies or other property in
its hands for the account of the person whose interest hereunder is so
liable. Prior to making any payment, the Trustee may require such
releases or other documents from any lawful taxing authority as it
shall deem necessary. The Trustee shall not be liable
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<PAGE>
for any nonpayment of tax when it distributes an interest hereunder on
instructions from the Plan Administrator.
(i) The Trustee shall keep a full, accurate and detailed record of all
transactions of the Trust which the Plan Administrator shall have the
right to examine at any time during the Trustee's regular business
hours. Following the close of the fiscal year of the Trust, or as soon
as practical thereafter, the Trustee shall furnish the Plan
Administrator with a statement of account. This account shall set
forth all receipts, disbursements and other transactions effected by
the Trustee during said year.
The Plan Administrator shall promptly notify the Trustee in writing of
its approval or disapproval of the account. The Plan Administrator's
failure to disapprove the account within 60 days after receipt shall
be considered an approval. The approval by the Plan Administrator
shall be binding as to all matters embraced in any statement to the
same extent as if the account of the Trustee had been settled by
judgment or decree of a COURT of competent jurisdiction under which
the Trustee, Plan Administrator, Employer and all persons having or
claiming any interest in the Trust were parties; provided, however,
that the Trustee may have its account judicially settled if it so
desires.
(j) If, at any time, there shall be a dispute as to the person to whom
payment or delivery of monies or property should be made by the
Trustee, or regarding any action to be taken by the Trustee, the
Trustee may postpone such payment, delivery or action, retaining the
funds or property involved, until such dispute shall have been
resolved in a court of competent jurisdiction or the Trustee shall
have been indemnified to its satisfaction or until it has received
written direction from the Plan Administrator.
(k) Anything in this instrument to the contrary notwithstanding, it shall
be understood that the Trustee shall have no duty or responsibility
with respect to the determination of matters pertaining to the
eligibility of any Employee to become or remain a Participant
hereunder, the amount of benefit to which any Participant or
Beneficiary shall be entitled hereunder, all such responsibilities
being vested in the Plan Administrator. The Trustee shall have no
duty to collect any contribution from the Employer and shall not be
concerned with the amount of any contribution nor the application of
any contribution formula.
6C.7 EVIDENCE OF TRUSTEE ACTION. In the event that the Trustee comprises two or
more Trustees, then those Trustees may designate one such Trustee to
transmit all decisions of the Trustee and to sign all necessary notices and
other reports on behalf of the Trustee. All notices and other reports
bearing the signature of the individual Trustee so designated shall be
deemed to bear the signatures of all the individual Trustees and all
parties dealing with the Trustee are entitled to rely on any such notices
and other reports as authentic and as representing the action of the
Trustee.
6C.8 INVESTMENT POLICY. This Plan has been established for the sole purpose of
providing benefits to the Participants and their Beneficiaries. In
determining its investments hereunder, the Trustee shall take account of
the advice provided by the Plan Administrator as to funding policy and the
short and long-range needs
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<PAGE>
of the Plan based on the evident and probable requirements of the Plan as
to the time benefits shall be payable and the requirements therefor.
6C.9 PERIOD OF THE TRUST. If it shall be determined that the applicable State
law requires a limitation on the period during which the Employer's Trust
shall continue, then such Trust shall not continue for a period longer than
21 years following the death of the last of those Participants including
future Participants who are living at the Effective Date hereof. At least
180 days prior to the end of the twenty-first year as described in the
first sentence of this Section the Employer, the Plan Administrator and the
Trustee shall provide for the establishment of a successor trust and
transfer of Plan assets to the Trustee. If applicable State law requires
no such limitation, then this Section shall not be operative.
6D. THE INSURANCE COMPANY
6D.1 DUTIES AND RESPONSIBILITIES. The Insurance Company shall issue the Annuity
Contract and any Policies hereunder and thereby assumes all the duties and
responsibilities set forth therein. The terms of the Annuity Contract may
be changed as provided therein without amending this Plan, provided such
changes shall conform (1) to the requirements for qualification under Code
section 401(a), as amended from time to time and (2) to ERISA, as amended
from time to time.
6D.2 RELATION TO EMPLOYER, PLAN ADMINISTRATOR AND PARTICIPANTS. The Insurance
Company may receive the statement of the Plan Administrator or, if the Plan
Administrator so designates, the Employer or the Trustee, as conclusive
evidence of any of the matters decided in the Plan, and the Insurance
Company shall be fully protected in taking or permitting any action on the
basis thereof and shall incur no liability or responsibility for so doing.
The Insurance Company shall not be required to look into the terms of the
Plan, to question any action by the Employer or the Plan Administrator
any Participant nor to determine that such action is properly taken under
the Plan. The Insurance Company shall be fully discharged from any and all
liability with respect to any payment to any Participant hereunder in
accordance with the terms of the Annuity Contract or of any Policies under
the Plan. The Insurance Company shall not be required to take any action
contrary to its normal rules and practices.
6D.3 RELATION TO TRUSTEE. The Insurance Company shall not be required to look
into the terms of the Plan or question any action of the Trustee, and the
Insurance Company shall not be responsible for seeing that any action of
the Trustee is authorized by the terms hereof. The Insurance Company shall
be under no obligation to take notice of any change in Trustee until
evidence of such change satisfactory to the Insurance Company shall have
been given to the Insurance Company in writing at its home office.
6E. ADOPTING EMPLOYER
6E.1 ELECTION TO BECOME ADOPTING EMPLOYER. With the consent of the Employer and
Trustee, if any, any employer, which along with the Employer is included in
a group of employers which constitute a controlled group of corporations
(as defined in Code section 414(b)) or which constitutes trade or
businesses (whether or not incorporated) which are under common control (as
defined in section 414(c)) or which constitutes an affiliated service group
as
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defined in section 414(m) and is identified as an Adopting Employer in
the Adoption Agreement, may adopt this Plan and all of its provisions.
6E.2 DEFINITION. Any employer eligible to adopt this Plan under the provisions
of Section 6E.1 and which adopts this Plan and all of its provisions,
shall be known as an Adopting Employer and shall be included within the
term Employer, as defined in Section 1.24.
6E.3 EFFECTIVE DATE OF PLAN. The effective date of the Plan for an Adopting
Employer on other than the date specified in the Adoption Agreement shall
be the first day of the Plan Year in which such Adopting Employer adopts
this Plan.
6E.4 FORFEITURES. Forfeitures of any nonvested portion of a Participant's
Account, as selected by the Employer in the Adoption Agreement, shall be
allocated only to other Participants who are employed by the Adopting
Employer who made the contributions to such Participant's Account, or
shall be used as a credit only for such Adopting Employer.
6E.5 CONTRIBUTIONS. All contributions made by an Adopting Employer shall be
determined separately by each Adopting Employer and shall be paid to and
held by the Plan for the exclusive benefit of the Employees of such
Adopting Employer and the Beneficiaries of such Employees, subject to all
the terms and conditions of this Plan. The Plan Administrator shall keep
separate books and records concerning the affairs of each Adopting
Employer and as to the accounts and credits of the Employees of each
Adopting Employer.
6E.6 EXPENSES. Subject to Section 6B.3, the expenses necessary to administer
the Plan of any Adopting Employer shall be taken from accounts of
Participants who are Employees of such Adopting Employer unless paid for
by such Adopting Employer. The expenses necessary to administer the Plan
for each Adopting Employer shall be determined by the ratio of the value
of all Participants' Accounts of such Adopting Employers to the total
value of all Participants' Accounts of each Adopting Employer.
6E.7 SUBSTITUTION OF PLANS. Subject to the provisions of Section 7C, any
Adopting Employer shall be permitted to withdraw from its participation in
this Plan. The consent of the Employer or any other Adopting Employer
shall not be required.
6E.8 TERMINATION OF PLANS. If any Adopting Employer elects to terminate its
Plan pursuant to Sections 7B.4, 7B.5 and 7B.6, such termination shall in
no way affect the Plan of any other Adopting Employer.
6E.9 AMENDMENT. Amendment of this Plan by the Employer or any Adopting Employer
shall only be by the written consent of the Employer and each and every
Adopting Employer and with the consent of the Trustee, if any, where such
consent is necessary in accordance with the terms of this Plan.
6E.10 PLAN ADMINISTRATOR'S AUTHORITY. The Plan Administrator shall have
authority to make any and all necessary rules or regulations, binding upon
all Adopting Employers and all Participants, to effectuate the purpose of
this Section 6E.
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<PAGE>
ARTICLE VII - SPECIAL CIRCUMSTANCES WHICH MAY AFFECT THE PLAN
7A. TOP-HEAVY PROVISIONS
7A.1 DEFINITIONS.
(a) ANNUAL COMPENSATION. The term Annual Compensation means Compensation
as defined in the Compensation section of the Adoption Agreement, but
including amounts contributed by the Employer pursuant to a salary
reduction agreement which are excludable from the Employee's gross
income under Code section 125, section 402(e)(3), section 402(h)(1)(B)
or section 403(b).
(b) DETERMINATION DATE. The term Determination Date means for any Plan
Year subsequent to the first Plan Year, the last day of the preceding
Plan Year. For the first Plan Year of the Plan, it means the last day
of that year.
(c) DETERMINATION PERIOD. The term Determination Period means the Plan
Year containing the Determination Date and the four preceding Plan
Years.
(d) KEY EMPLOYEE. The term Key Employee means any Employee or former
Employee (and the Beneficiaries of such Employee) who at any time
during the Determination Period was:
(1) An officer of the Employer if such individual's Annual
Compensation exceeds 50 percent of the dollar limitation under
Code section 415(b)(1)(A); or
(2) An owner (or considered an owner under Code section 318) of one
of the ten largest interests in the Employer if such individual's
Annual Compensation exceeds 100'%percent of the dollar limitation
under Code section 415(c)(1)(A); or
(3) A 5-percent owner of the Employer; or
(4) A I-percent owner of the Employer who has Annual Compensation of
more than $150,000.
The determination of who is a Key Employee will be made in accordance
with Code section 416(l)(1) and related regulations.
(e) PERMISSIVE AGGREGATION GROUP. The term Permissive Aggregation Group
means the Required Aggregation Group of plans plus any other plan or
plans of the Employer which, when considered as a group with the
Required Aggregation Group, Would continue to satisfy the requirements
of Code sections 401(a)(4) and 410.
(f) PRESENT VALUE. Present Value shall be based only on the interest and
mortality rates specified in the Adoption Agreement.
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(g) REQUIRED AGGREGATION GROUP. The term Required Aggregation Group means
(1) each qualified plan of the Employer in which at least one Key
Employee participates or participated at any time during the
Determination Period (regardless of whether the plan has terminated),
and (2) any other qualified plan of the Employer which enables a plan
described in (1) to meet the requirements of Code sections 401(a)(4)
or 410.
(H) TOP-HEAVY PLAN. For any Plan Year beginning after December 31, 1983,
this Plan is Top-Heavy if any of the following conditions exists:
(1) If the Top-Heavy Ratio for this Plan exceeds 60 percent a nd this
Plan is not part of any Required Aggregation GROUP or Permissive
Aggregation Group of plans.
(2) If this Plan is a part of a Required Aggregation Group of plans
but not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the group of plans exceeds 60 percent.
(3) If this Plan is a part of a Required Aggregation Group and part of
a Permissive Aggregation Group of plans and the Top-Heavy Ratio
for the Permissive Aggregation Group exceeds 60 percent.
(I) TOP-HEAVY RATIO. The term Top-Heavy Ratio means:
(1) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the Employer
has not maintained any defined benefit plan which during the 5-
year period ending on the Determination Date(s) has or has had
accrued benefits, the Top-Heavy Ratio for this Plan alone or for
the Required or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of the account
balances of all Key Employees as of the Determination Date(s)
(including any part of any account balance distributed in the 5-
year period ending on the Determination Date(s)), and the
denominator of which is the sum of all account balances (including
any part of any account balance distributed in the 5-year period
ending on the Determination Date(s)), both computed in accordance
with Code section 416 and related regulations. Both the numerator
and denominator of the Top-Heavy Ratio are increased to reflect
any contribution not actually made as of the Determination Date,
but which is required to be taken into account on that date under
Code section 416 and related regulations.
(2) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plans as defined in
Code section 408(k)) and the Employer maintains or has maintained
one or more defined benefit plans, which during the 5-year period
ending on the Determination Date(s) has or has had any accrued
benefits, the Top-Heavy Ratio for any Required or Permissive
Aggregation Group as appropriate is a fraction, the numerator of
which is the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees, determined in
accordance with (1) above, and the Present Value of accrued
benefits under the aggregated defined benefit plan or plans
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<PAGE>
for all Key Employees as of the Determination Date(s), and the
denominator of which is the sum of the account balances under the
aggregated defined contribution plan or plans for all
Participants, determined in accordance with (1) above, and the
Present Value of accrued benefits under the defined benefit plan
or plans for all Participants as of the Determination Date(s), all
determined in accordance with Code section 416 and related
regulations. The accrued benefits under a defined benefit plan in
both the numerator and denominator of the Top-Heavy Ratio are
increased for any distribution of an accrued benefit made in the
5-year period ending on the Determination Date.
(3) For purposes of (1) and (2) above, the value of account balances
and the Present Value of accrued benefits will be determined as of
the most recent Valuation Date that falls within or ends with the
12-month period ending on the Determination Date, except as
provided in Code section 416 and the regulations thereunder for
the first and second plan years of a defined benefit plan. The
account balances and accrued benefits of a Participant (1) who is
not a Key Employee but who was a Key Employee in a prior year, or
(ii) who has not been credited with at least one Hour of Service
with any Employer maintaining the Plan at any time during the 5-
year period ending on the Determination Date shall be disregarded.
The calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account,
will be made in accordance with Code section 416 and the
regulations thereunder. QVEC Contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and accrued
benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year. The accrued benefit
of a Participant other than a Key Employee shall be determined
under (a) the method, if any, that uniformly applies for accrual
purposes under all defined benefit plans maintained by the
Employer, or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted
under the fractional rule of Code section 411(b)(1)(C).
(j) VALUATION DATE. The term Valuation Date means the date specified in
the Top-Heavy Provisions section of the Adoption Agreement as of which
account balances or accrued benefit are valued for purposes of
calculating the Top-Heavy Ratio.
7A.2 MINIMUM ALLOCATION. For any Plan Year in which the Plan is Top-Heavy, the
following will apply:
(a) Except as otherwise provided in (c) and (d) below, the Employer
contributions and Forfeitures allocated on behalf of any Participant
who is not a Key Employee shall not be less than the lesser of three
percent of such Participant's Compensation or in the case where the
Employer has no defined benefit plan which designates this Plan to
satisfy Code section 401, the largest percentage of Employer
contributions and Forfeitures, as limited by Code section 401(a)(17),
allocated on behalf of any Key Employee for that year. The Minimum
Allocation is determined without
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<PAGE>
regard to any Social Security contribution. This Minimum Allocation
shall be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation,
or would have received a lesser allocation for the year because of (1)
the Participant's failure to complete 1,000 Hours of Service (or any
equivalent provided in the Plan), or (2) the Participant's failure to
make Required Employee Contributions to the Plan, or (3) Compensation
less than a stated amount.
(b) For purposes of computing the Minimum Allocation, Compensation shall
mean Compensation as defined in the Compensation section of the
Adoption Agreement as limited by Code section 401(a)(17).
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed
by the Employer pursuant to a salary reduction agreement and which is
not includable in the Employee's gross income under Code sections 125,
401(a)(8), 402(h) or 403(b).
(c) The provision in (a) above shall not apply to any Participant who was
not employed by the Employer on the last day of the Plan Year.
(d) The provision in (a) above shall not apply to any Participant to the
extent the Participant is covered under any other plan or plans of the
Employer and the Employer has provided in the Top-Heavy Provisions
section of the Adoption Agreement that the Minimum Allocation or
benefit requirement applicable to Top-Heavy plans will be met in the
other plan or plans,
(e) The Minimum Allocation required (to the extent required to be
nonforfeitable under Code section 416(b)) may not be forfeited under
Code sections 41l(a)(3)(B) or 41l(a)(3)(D).
(f) Neither Elective Deferral Contributions nor Matching Contributions may
be taken into account for the purpose of satisfying this Minimum
Allocation Requirement.
7A.3 MINIMUM VESTING SCHEDULE. For any Plan Year in which this Plan is Top-
Heavy, one of the minimum vesting schedules as elected by the Employer in
the Adoption Agreement will automatically apply to the Plan. The minimum
vesting schedule applies to all benefits within the meaning of Code section
411(a)(7) except those attributable to Employee Contributions, Elective
Deferral Contributions, QVEC Contributions and Rollover Contributions
including benefits accrued before the effective date of Code section 416
and benefits accrued before the Plan became Top-Heavy. Further, no decrease
in a Participant's nonforfeitable percentage may occur in the event the
Plan's status as Top-Heavy changes for any Plan Year. However, this Section
does not apply to the account balances of any Employee who does not have an
Hour of Service after the Plan has initially become Top-Heavy. Such
Employee's account balance attributable to Employer contributions and
Forfeitures will be determined without regard to this Section.
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<PAGE>
7B. AMENDMENT, TERMINATION OR MERGER OF THE PLAN
7B.1 AMENDMENT OF ELECTIONS UNDER ADOPTION AGREEMENT BY EMPLOYER. The party
elected by the Employer in the Adoption Agreement shall have the right from
time to time to change the elections under its Adoption Agreement in a
manner consistent with the Plan, provided that such amendment or
modification shall be in accordance with the Board of Director's
resolution, if applicable, that describes the amendment procedure and
provided further that the written amendment or modification is signed by
the party elected by the Employer in the Adoption Agreement. The amendment
must be accepted by the Sponsoring Organization. Upon any such change in
the Elections under the Adoption Agreement, the Plan Administrator, the
Trustee and the Sponsoring Organization shall be furnished a copy thereof.
If the Plan's vesting schedule is amended, or the Plan is amended in any
way that directly or indirectly affects the computation of the
Participant's nonforfeitable percentage or if the Plan is deemed amended by
an automatic change to a top-heavy vesting schedule, each Participant with
at least 3 years of Service with the Employer may elect, in writing, within
a reasonable period after the adoption of the amendment or change, to have
the nonforfeitable percentage computed under the Plan without regard to
such amendment or change. For Participants who do not have at least 1 Hour
of Service in any Plan Year beginning after December 31, 1988, the
preceding sentence shall be applied by substituting "5 years of Service"
for "3 years of Service" where such language appears.
The period during which the election must be made by the Participant shall
begin no later than the date the Plan amendment is adopted and end no later
than after the latest of the following dates:
(a) The date which is 60 days after the day the amendment is adopted;
(b) The date which is 60 days after the day the amendment becomes
effective; or
(c) The date which is 60 days after the day the Participant is issued
written notice of the amendment by the Employer or Plan Administrator.
Such written election by a Participant shall be made to the Plan
Administrator, who shall then give written notice to the Insurance Company.
No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's Accrued Benefit. Notwithstanding the
preceding sentence, a Participant's account balance may be reduced to the
extent permitted under Code section 412(c)(8). For purposes of this
paragraph, a Plan amendment which has the effect of decreasing a
Participant's account balance or eliminating an optional form of benefit,
with respect to benefits attributable to service before the amendment,
shall be treated as reducing an Accrued Benefit. Furthermore, if the
vesting schedule of a Plan is amended, in the case of an Employee who is a
Participant as of the later of the date such amendment is adopted or the
date it becomes effective, the nonforfeitable percentage (determined as of
such date) of such Employee's Employer-derived Accrued Benefit will not be
less than the percentage computed under the Plan without regard to such
amendment.
In the event of an amendment to a money purchase pension plan (including a
target benefit plan) to convert it to a profit sharing plan (including a
thrift plan or plan with a 401(k) feature), the resulting plan shall
separately account in each affected Participant's Account for amounts
attributable to coverage under the
Article VII - Special Circumstances -95- June 14, 1996
<PAGE>
money purchase plan, including future earnings on such amounts. On and
after the date of such amendment, these money purchase plan amounts shall
remain subject to the money purchase plan restrictions on distribution.
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when such
language is necessary to satisfy Code sections 415 or 416 because of the
required aggregation of multiple plans, and (3) add certain model
amendments published by the Internal Revenue Service which specifically
provide that their adoption will not cause the Plan to be treated as
individually designed. An Employer that amends the Plan for any other
reason, including a waiver of the minimum funding requirements under Code
section 412(d), will no longer participate in this prototype plan and will
be considered to have an individually designed plan.
7B.2 AMENDMENT OF PLAN, TRUST, AND FORM OF ADOPTION AGREEMENT. The Sponsoring
Organization may amend this Plan and Trust, and the form of the Adoption
Agreement, and the Employer in adopting this Plan and the Plan
Administrator and the Trustee in accepting appointment as Plan
Administrator and as Trustee, shall be deemed to have consented to any such
amendment by executing the Adoption Agreement, provided that the written
consent of the Trustee and the Plan Administrator to any change affecting
their duties or responsibilities shall first be obtained. Upon any Such
amendment by the Sponsoring Organization, the Plan Administrator, the
Employer and the Trustee shall be furnished with a copy thereof.
7B.3 CONDITIONS OF AMENDMENT. Neither the Sponsoring Organization nor the
Employer shall make any amendment which would cause the Plan to lose its
status as a qualified plan within the meaning of Code section 401 (a).
7B.4 TERMINATION OF THE PLAN. The Employer intends to continue the Plan
indefinitely for the benefit of its Employees, but reserves the right to
terminate the Plan at any time by resolution of its Board of 6irectors.
Upon such termination, the liability of the Employer to make Employer
contributions hereunder shall terminate. The Plan shall terminate
automatically upon complete discontinuance of Employer contributions
hereunder, if the Plan is a profit sharing plan or a thrift plan.
7B.5 FULL VESTING. Upon the termination or partial termination of the Plan, or
upon complete discontinuance of Employer contributions, the rights of all
affected Participants in and to the amounts credited to each such
Participant's Account and to any Policies on each Participant's life shall
be 100% vested and nonforfeitable. Thereupon, each Participant shall
receive a total distribution of his Participant's Account (including any
amounts in the Forfeiture Account allocated in accordance with Section
7B.6) in accordance with the terms and conditions of Section 2A. If the
Plan terminates, the assets will be distributed from the Trust as soon as
administratively feasible.
7B.6 APPLICATION OF FORFEITURES. Upon the termination of the Plan, any amount in
the Forfeiture account which has not been applied as of such termination to
reduce the Employer contribution, or has not been allocated as of such
termination, shall be credited on a pro-rata basis to each Participant's
Account in the same manner as the last Employer contribution made under the
Plan.
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<PAGE>
7B.7 MERGER WITH OTHER PLAN. In the case of any merger with or transfer of
assets or liabilities to any other qualified plan after September 2, 1974:
(a) The sum of the account balances in each plan shall equal the fair
market value (determined as of the date of the merger or transfer as
if the plan had then terminated) of the entire plan assets.
(b) The assets or liabilities of each plan shall be combined to form the
assets of the plan as merged (or transferred), and each Participant
in the plan merged (or transferred) shall have an account balance
equal to the sum of the account balances the Participant.had in the
plans immediately prior to the merger (or transfer).
(c) Immediately after the merger (or transfer), each Participant in the
plan merged (or transferred) shall have an account balance equal to
the sum of the account balances the Participant had in the plans
immediately prior to the merger (or transfer).
(d) Immediately after the merger (or transfer), each Participant in the
plan merged (or transferred) shall be entitled to the same optional
benefit forms as they were entitled to immediately prior to the
merger (or transfer).
(e) In the event of a merger (or transfer) of a money purchase pension
plan (including a target benefit plan) and a profit sharing plan
(including a thrift plan or plan with a 401(k) feature), the
resulting plan shall separately account in each affected
Participant's Account for amounts attributable to coverage under the
money purchase plan, including future earnings on such amounts. On
and after the date of such merger (or transfer), these money purchase
plan amounts shall remain subject to the money purchase plan
restrictions on distribution.
7B.8 TRANSFER FROM OTHER PLANS. If elected in the Adoption Agreement, the
Employer may cause all or any of the assets held in another qualified
pension or profit sharing plan meeting the requirements of Code section
401 (a) to be transferred to the Plan pursuant to a merger or
consolidation of this Plan with such other plan or for any other allowable
purpose. Upon receipt of such assets, the Plan shall separately account
for such amounts in each affected Participant's Account. Such transfer
shall be made without regard to the Limitations on Allocations imposed in
Section 4B.
7B.9 TRANSFER TO OTHER PLANS. Upon written direction from the Employer, the
Plan shall transfer some or all of the assets held under this Plan to
another qualified pension or profit sharing plan meeting the requirements
of Code section 401 (a) and sponsored by the Employer.
7B.10 APPROVAL BY THE INTERNAL REVENUE SERVICE. Notwithstanding any other
provisions of this Plan, the Employer's adoption of this Plan is subject
to the condition precedent that the Employer's Plan shall be approved and
qualified by the Internal Revenue Service as meeting the requirements of
Code section 401 (a) and, if applicable, that the Trust established
hereunder shall be entitled to exemption under the provisions of Code
section 501 (a). In the event the Plan initially fails to qualify and the
Internal Revenue Service issues a final ruling that the Employer's Plan or
Trust falls to so qualify as of the Effective Date, all liability of the
Employer to make further Employer contributions hereunder shall cease. The
Insurance Company, Plan Administrator, Trustee and any other Named
Fiduciary shall be notified immediately by the Employer, in writing, of
such
Article VII - Special Circumstances -97- June 14, 1996
<PAGE>
failure to qualify. Upon such notification, the value of the Participants,
Accounts, including the then value of any Life Insurance Policies, shall
be distributed in cash subject to the terms and conditions of Section 5B.
That portion of such distribution which is attributable to Participant's
Employee Contributions, if any, shall be paid to the Participant, and the
balance of such distribution shall be paid to the Employer. Upon the death
of any Participant prior to the actual surrender of a Life Insurance
Policy or Policies on his life, the death benefit shall be payable to the
Participant's Beneficiary.
If the Employer's Plan falls to attain or retain qualification, such Plan
will no longer participate in this prototype plan and will be considered
an individually designed plan.
7B.11 SUBSEQUENT UNFAVORABLE DETERMINATION. If the Employer is notified
subsequent to initial favorable qualification that the Plan is no longer
qualified within the meaning of Code section 401 (a) or, if applicable,
that the Trust is no longer entitled to exemption under the provisions of
Code section 501 (a), and if the Employer shall fail within a reasonable
time to make any necessary changes in order that the Plan shall so
qualify, the Participants' Accounts, including any Life Insurance Policies
or the values thereof, shall be fully vested and nonforfeitable and shall
be disposed of in the manner set forth in Sections 7B.5 and 7B.6 above.
7C. SUBSTITUTION OF PLANS
7C.1 SUBSTITUTION OF PLANS. Subject to the provisions of Section 8.6, the
Employer may substitute an individually designed plan or a master or
another prototype plan for this Plan without terminating this Plan as
embodied herein, and this shall be deemed to constitute an amendment and
restatement in its entirety of this Plan as heretofore adopted by the
Employer; provided, however that the Employer shall have certified to the
Insurance Company and the Trustee, if applicable, that this Plan is being
continued one restated basis which meets the requirements of Code section
401(a) and ERISA.
Any such changes shall be subject to the provisions of Sections 7B.1 and
7B.2 of the Plan.
7C.2 TRANSFER OF ASSETS. Upon 90 days' written notification from the Employer
and the Trustee (unless the Insurance Company shall accept a shorter
period of notification) that a different plan meeting the requirements set
forth in Section 7C.1 above has been executed and entered into by the Plan
Administrator and the Employer, and after the Insurance Company and the
Trustee have been furnished the Employer's certification in writing that
the Employer intends to continue the Plan as a qualified plan under Code
section 401(a) and ERISA, the Insurance Company shall transfer the value
of all Participants' Accounts under the Annuity Contract to the Trustee or
such person or persons as may be entitled to receive the same, in
accordance with the terms of the Annuity Contract. The Trustee shall
likewise make a similar transfer, including all Life Insurance Policies,
or the values thereof, to such person or persons as may be entitled to
receive same. The Insurance Company and the Trustee may rely fully on the
representations or directions of the Employer with respect to any such
transfer and shall be fully protected and discharged with respect to any
such transfer made in accordance with such representations, instructions,
or directions.
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<PAGE>
7C.3 SUBSTITUTION FOR PRE-EXISTING MASTER OR PROTOTYPE PLAN. This Plan is
designed:
(a) For adoption by an Employer not previously covered under a master or
prototype plan sponsored by Connecticut General Life Insurance
Company; or
(b) For adoption by an Employer in substitution for a pre-existing master
or prototype plan sponsored by Connecticut General Life Insurance
Company.
If this Plan is adopted in substitution for such a pre-existing master or
prototype plan, it shall be deemed to amend the Employer's prior Plan in
its entirety effective as of the date specified in the Employer's Adoption
Agreement. The Employer's Plan as so amended shall continue in full force
and effect and no termination thereof shall be deemed to have occurred.
7C.4 PARTIAL SUBSTITUTION OR PARTIAL TRANSFER OF THE PLAN OR ASSETS. In the
event this Plan is adopted as the result of a partial substitution or
partial transfer of the Plan or the assets under the prior Plan as a result
of a merger, spinoff, consolidation or any other allowable purpose, the
Plan and all transactions allowable under it are subject to the rules
established by the Employer to address the orderly transition of the Plan
or assets.
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<PAGE>
ARTICLE VIII - MISCELLANEOUS
8.1 NONREVERSION. This Plan has been adopted by the Employer for the exclusive
benefit of the Participants and their Beneficiaries. Except as otherwise
provided in Section 6C.4 and Section 8.6, under no circumstances shall any
funds contributed hereunder at any time revert to or be used by the
Employer, nor shall any such funds or assets of any kind be used other than
for the benefit of the Participants or their Beneficiaries.
8.2 GENDER AND NUMBER. When necessary to the meaning hereof, and except when
otherwise indicated by the context, either the masculine or the.neuter
pronoun shall be deemed to include the masculine, the feminine, and the
neuter, and the singular shall be deemed to include the plural.
8.3 REFERENCE TO THE INTERNAL REVENUE CODE AND ERISA. Any reference herein to
any section of the Internal Revenue Code, ERISA, or to any other statute or
law shall be deemed to include any successor law of similar import.
8.4 GOVERNING LAW. The Plan and Trust, if applicable, shall be governed and
construed in accordance with the laws of the state where the Employer or
Trustee has its principal office in the United States.
8.5 COMPLIANCE WITH THE INTERNAL REVENUE CODE AND ERISA. This Plan is intended
to comply with all requirements for qualification tinder the Internal
Revenue Code and ERISA, and if any provision hereof is subject to more than
one interpretation or any term used herein is subject to more than one
construction, such ambiguity shall be resolved in favor of that
interpretation or construction which is consistent with the Plan being so
qualified. If any provision of the Plan is held invalid or unenforceable,
such invalidity or unenforceability shall not affect any other provisions,
and this Plan shall be construed and enforced as if such provision had not
been included.
8.6 CONTRIBUTION RECAPTURE. Notwithstanding any other provisions of this Plan,
(1) in the case of a contribution which is made by an Employer by a mistake
of fact, Section 8.1 shall not prohibit the return of such contribution to
the Employer within one year after the payment of the contribution, and (2)
if a contribution is conditioned upon the deductibility of the contribution
under Code section 404, then, to the extent the deduction is disallowed,
Section 8.1 shall not prohibit the return to the Employer of such
contribution (to the extent disallowed) within one year after the
disallowance of the deduction. The amount which may be returned to the
Employer is the excess of (1) the amount contributed over (2) the amount
that would have been contributed had there not occurred a mistake of fact
or a mistake in determining the deduction. Earnings attributable to the
excess contribution may not be returned to the Employer, but losses
attributable thereto must reduce the amount to be so returned. Furthermore,
if the withdrawal of the amount attributable to the mistaken contribution
would cause the balance of any Participant's Account to be reduced to less
than the balance which would have been in the Participant's Account had the
mistaken amount not been contributed, then the amount to be returned to the
Employer would have to be limited so as to avoid such reduction.
Article VIII - Miscellaneous -100- June 14, 1996
<PAGE>
In the event that the Commissioner of the Internal Revenue determines that
the Plan is not initially qualified under the Internal Revenue Code, any
contribution made incident to that initial qualification by the Employer
must be returned to the Employer within one year after the date the initial
qualification is denied, but only if the application for the qualification
is made by the time prescribed by law for filing the Employer's return for
the taxable year in which the Plan is adopted, or such later date as the
Secretary of the Treasury may prescribe.
Notwithstanding the above, any excess or returned contribution shall not be
returned to the Employer if the Employer has taken Davis-Bacon Act credit
for such contribution. These excess or mistaken contributions shall be pa-
id to the Employee for whom such credit is taken.
Article VIII - Miscellaneous -101- June 14, 1996
<PAGE>
Non-Standardized Profit Sharing/Thrift Plan With 401(k) Feature
Adoption Agreement Number 001-03
This Adoption Agreement, when executed by the Employer and accepted by the Plan
Administrator, and the Trustee, if applicable, and accepted by Connecticut
General Life Insurance Company, establishes the Employer's Plan and Trust, if
applicable, for the benefit of its eligible Employees and their Beneficiaries.
The terms of the Connecticut General Life Insurance Company Defined Contribution
Plan are expressly incorporated therein and shall form a part hereof as fully as
if set forth herein except that if more than one election is provided, only that
election made by the Employer shall be so incorporated. The terms of the Plan
so incorporated together with the terms of this Adoption Agreement shall
constitute the sole terms of the Employer's Plan and Trust, if applicable, and
no further trust instrument or other instrument of any nature whatsoever shall
be required. The Employer's participation under the Plan shall be subject to
all the terms set forth therein and in this Adoption Agreement.
*Note: Section 414(d) governmental plans and section 414(e) nonelecting church
plans that do not wish to provide ERISA-required benefits should not adopt this
document.
- - --------------------------------------------------------------------------------
Plan
Document GENERAL INFORMATION
Section
- - --------------------------------------------------------------------------------
Legal Name of Employer: Amtech Corporation
- - --------------------------------------------------------------------------------
Address: Dominion Place
17304 Preston Road
Building E-100
City: Dallas State: TX Zip: 75252
- - --------------------------------------------------------------------------------
Plan Name: Amtech Corporation Retirement Plan
- - --------------------------------------------------------------------------------
Plan Number: 001
*To be assigned by the Employer. For example: 001, 002, and so on.
- - --------------------------------------------------------------------------------
Employer's EIN: 75-2216818
- - --------------------------------------------------------------------------------
Classification of Business:
[X] C Corporation [_] S Corporation [_] Partnership
[_] Sole Proprietorship [_] Tax-Exempt/Nonprofit Organization
[X] Other: Controlled Group
- - --------------------------------------------------------------------------------
RPSTNS -1- October 25, 1995
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document GENERAL INFORMATION
Section
- - --------------------------------------------------------------------------------
Employer Tax Status:
Tax Year Ends (MM/DD): 12/31
Tax Basis: [_] Cash [X] Accrual
- - --------------------------------------------------------------------------------
1.20 Effective Date
The adoption of the CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Non-Standardized Profit Sharing/Thrift Plan with 401(k) Feature
shall:
[_] A. Establish a new Plan effective as of (MM/DD/YY): __/__/__.
[X] B. Constitute an amendment and restatement in its entirety of a
previously established Qualified Plan of the Employer which
was effective 01/01/89 (hereinafter called the "Effective
Date"). The effective date of this amendment and restatement
is 01/01/97.
- - --------------------------------------------------------------------------------
Merger Data
This Plan Includes funds from a prior or coincidental merger of a:
[_]A. Money Purchase Plan
[_]B. Target Benefit Plan
[X]C. Not Applicable
- - --------------------------------------------------------------------------------
Sponsoring Organization:
Connecticut General Life Insurance Company
P.O. Box 2975
Hartford, CT 06104
(860) 725-2274
- - --------------------------------------------------------------------------------
RPSTNS -2- March 27, 1996
<PAGE>
TABLE OF CONTENTS
Article Page
I. Nontrusteed, Trust, and Trustee............................. 4
II. Plan Administrator.......................................... 4
III. Plan Year................................................... 5
IV. Compensation................................................ 6
V. Highly Compensated Employee................................. 7
VI. Service..................................................... 8
VII. Eligibility Requirements.................................... 10
VIII. Entry Date.................................................. 13
IX. Vesting..................................................... 15
X. Contributions............................................... 18
XI. Contribution Period......................................... 28
XII. Allocation of Contributions................................. 29
XIII. Limitations on Allocations.................................. 31
XIV. Investment of Participant's Account......................... 32
XV. Life Insurance.............................................. 32
XVI. Employer Stock.............................................. 33
XVII. Withdrawals Preceding Termination........................... 34
XVIII. Loans to Participants, Beneficiaries and Parties-in-Interest 38
XIX. Retirement and Disability................................... 39
XX. Distribution of Benefits.................................... 40
XXI. Qualified Preretirement Survivor Annuity.................... 41
XXII. Amendment of the Plan....................................... 41
XXIII. Top-Heavy Provisions........................................ 42
XXIV. Other Adopting Employer..................................... 44
RPSTNS -3- MAY 23, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document I.NONTRUSTEED, TRUST, AND TRUSTEE
Section
- - --------------------------------------------------------------------------------
*The Plan must have a Trustee if the Employer has elected Employer Stock, Loans,
investment in Life Insurance, and/or any investment other than through a
contract with Connecticut General Life Insurance Company.
*If the plan is trusteed, the Employer must apply for a Trust Tax Identification
Number, unless the Trust already has obtained one, even if CG Trust Company has
been appointed as the Plan's Trustee.
- - --------------------------------------------------------------------------------
The Plan is:
1.39 [_]A. Nontrusteed.
- - --------------------------------------------------------------------------------
1.73,1.74 [_]B. Trusteed and Trustees are:
Trustee(s)
Name(s):____________________________________
Address:____________________________________
____________________________________________
City:_____________________ St:_____ Zip:____
Trust EIN:__________________________________
- - --------------------------------------------------------------------------------
1.73,1.74 [X]C. Trusteed and CG Trust Company has been appointed as the Plan's
Trustee.
Trust
Name: CG Trust Company
Address: 525 West Monroe St., Suite 1800
Chicago, IL 60661-3629
Employer's Trust EIN:
----------------------
- - --------------------------------------------------------------------------------
Plan
Document II. PLAN ADMINISTRATOR
Section
- - --------------------------------------------------------------------------------
1.50 The Plan Administrator is:
Name: Amtech Corporation
Address: 17304 Preston Road
Building E-100
City: Dallas State: TX Zip: 75252
- - --------------------------------------------------------------------------------
RPSTNS -4- July 17, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document III. PLAN YEAR
Section
- - --------------------------------------------------------------------------------
1.51 A. The Plan Year will mean:
[_]1. The 12-consecutive-month period commencing on (MM/DD/YY)
__/__/__ and each anniversary thereof except that the first
plan year will commence on (MM/DD/YY) __/__/__.
*This election may be made only for new plans.
[X]2. The 12-consecutive-month period commencing on (MM/DD/YY)
01/01/97 and each anniversary thereof.
- - --------------------------------------------------------------------------------
RPSTNS -5- MARCH 27, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document IV. COMPENSATION
Section
- - --------------------------------------------------------------------------------
*(i) Election of options 1-6 below does not require a separate
nondiscrimination test.
*(ii) If option 1, 2, or 3 is elected, you must elect the same definition of
Compensation in Section XIII, Limitations on Allocations.
*(iii) Options 1-6 include lump sum amounts and/or cash bonuses. These amounts
are included in compensation in the year in which paid.
*(iv) Options 4-9 may not be elected by a plan that uses an integrated
allocation formula.
*(v) This compensation definition is for purposes of allocating contributions
under the Plan. For nondiscrimination testing, the Employer may use any
definition of compensation that is based upon Code section 414(s) or
415(c)(3). Use of options 7, 8, or 9 for nondiscrimination testing
requires that the employer satisfy a separate compensation
nondiscrimination test.
- - --------------------------------------------------------------------------------
A. Indicate the number of the Compensation definition that will be
used for allocating each type of contribution.
Elective Deferral Contributions: 9
Matching Contributions: 9
Nonelective Contributions: 9
Employee Contributions:
1.12 For purposes of allocating contributions, Compensation means:
1.12(a) 1. Wages, Tips and Other Compensation Box on Form W-2.
1.12(b) 2. Section 3401 (a) wages.
1.12(c) 3. 415 safe-harbor compensation.
1.12(d) 4. Modified Wages, Tips, and Other Compensation Box on Form W-2.
1.12(e) 5. Modified section 3401 (a) wages.
1.12(f) 6. Modified 415 safe-harbor compensation.
1.12(g) 7. Regular or base salary or wages.
1.12(h) 8. Regular or base salary or wages plus 0 overtime and/or 0 bonuses.
1.12(i) 9. A "reasonable alternative definition of Compensation," as that
term is used under Code section 414(s)(3) and the regulations
thereunder.
The definition of Compensation is: 415 safeharbor compensation as
defined in Section 1.12(c) of the Plan, excluding relocation
expenses and amounts realized from a disqualifying disposition
of stock acquired under a stock purchase plan described in section
423 of the Internal Revenue Code.
*Lump sum amounts and/or cash bonuses may be excluded only if
specified in this definition. Also see note (v) above.
- - --------------------------------------------------------------------------------
RPSTNS -6- March 27, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document IV. COMPENSATION
Section
- - --------------------------------------------------------------------------------
1.12 B. Compensation shall be determined over the following determination
period:
[X]1. The Plan Year.
[_]2. A 12-consecutive-month period beginning on (MM/DD) __/__
and ending with or within the Plan Year. For Employees
whose date of HIRE is less than 12 months before the end
of the designated 12-month period, Compensation will be
determined over the Plan Year.
[_]3. The Plan Year. However, for the Plan Year in which an
Employee's participation begins, the applicable period is
the portion of the Plan Year during which the Employee is
eligible to participate in the Plan.
- - --------------------------------------------------------------------------------
1.12 C. Compensation shall/shall not include Employer contributions made
pursuant to a salary reduction agreement, which are not
includable in the gross income of the Employee under Code section
125, 402(e)(3), 402(h)(1)(B) or 403(b).
[X] Shall [_] Shall Not
- - --------------------------------------------------------------------------------
1.12 D. The highest annual Compensation to be used in determining
allocations to a Participant's Account shall be:
$ ______________
*Enter an amount if less than $150,000 (as indexed) limitation on
compensation.
- - --------------------------------------------------------------------------------
Plan
Document V. HIGHLY COMPENSATED EMPLOYEE
Section
- - --------------------------------------------------------------------------------
1.29 A. Highly Compensated Employees shall be determined using:
1.29(a) [X]1. The Traditional Method.
1.29(b) [_]2. The Simplified Method for Employers in more than
one geographical area.
1.29(c) [_]3. The alternative Simplified Method.
1.29(d) [_]4. The alternative Simplified Method with Snapshot
Day basis.
The Snapshot Day is _______________ (fill in).
- - --------------------------------------------------------------------------------
RPSTNS -7- October 25, 1995
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document V. HIGHLY COMPENSATED EMPLOYEE
Section
- - --------------------------------------------------------------------------------
1.29(a) B. If A. 1. or A.2. is chosen above, the Look-Back Year shall be:
[X]1. The 12-month period immediately preceding the
Determination Year.
[_]2. The calendar year ending with or within the Determination
Year.
*If B.2. is selected and the Determination Year (Plan Year) is
the calendar year, then the Look-Back Year is the same 12-month
period as the Determination Year. This avoids having to look back
at data from a prior year.
However, if the Determination Year is not the calendar year, the
Determination Year calculation must be made on the basis of a
lag period (the period running from the end of the Look-Back Year
to the end of the Determination Year), with the applicable dollar
amounts adjusted on a pro rata basis for the number of months in
the lag period.
- - --------------------------------------------------------------------------------
Plan
Document VI. SERVICE
Section
*Check off appropriate basis for determining service.
- - --------------------------------------------------------------------------------
2A.3,2A.9 A. Hours of Service or Elapsed Time
1. Years of Service shall be determined on the following basis:
a. Eligibility: [X] Hours of Service [_] Elapsed Time
b. Vesting: [X] Hours of Service [_] Elapsed Time
c. Allocation of
Contributions: [X] Hours of Service [_] Elapsed Time
2. If service is based on Hours of Service, Hours shall be
determined on the basis of:
[_]a. Actual hours for which paid or entitled to payment.
[_]b. Days Worked (10 Hours of Service).
[_]c. Weeks Worked (45 Hours of Service).
[_]d. Semimonthly payroll periods (95 Hours of Service).
[X]e. Months Worked (190 Hours of Service).
*For options b, c, d, and e: If the Employee would be credited
with 1 Hour of Service during the period, the Employee shall be
credited with the number of Hours of Service indicated in
parentheses.
- - --------------------------------------------------------------------------------
RPSTNS -8- October 25, 1995
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document VI. SERVICE
Section
- - --------------------------------------------------------------------------------
1.24 B. Service with other employers.
1. Service with members of the Employer's controlled group of
corporations, affiliated service group, or group of business
under common control ("controlled group").
*Service for an employer while the employer is part of the
controlled group must be taken into account.
a. Service with a member of the controlled group prior to it
becoming part of the controlled group will be included for
all purposes.
[_] Yes [X] No
2A.5 2. Service with a predecessor organization.
*Service with a predecessor organization of the Employer must
be taken into account if the Employer maintains the Plan of the
predecessor organization.
a. Service with a predecessor organization will be included for
all purposes even if the Employer does not maintain the plan
of the predecessor organization.
[_] Yes [X] No
2A.5 3. Service with the following subsidiary(ies) or affiliated
organization, not related to the Employer under the rules of
Code sections 414(b), (c) or (m), shall be considered Service
for all purposes of this plan:
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
*Service credited under l.a, 2.a and 3 must apply to all similarly
situated Employees, must be credited for a legitimate business reason,
and must not by design or operation discriminate significantly in
favor of Highly Compensated Employees.
- - --------------------------------------------------------------------------------
RPSTNS -9- October 25, 1995
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document VII. ELIGIBILITY REQUIREMENTS
Section
*Check or fill out appropriate requirements for each type of contribution in
the Plan.
- - --------------------------------------------------------------------------------
2A.5(a), 2B.1 A. Eligibility Requirements
1. If Employer Is a Partnership or Sole Proprietorship: Self-
Employed Individuals are eligible to participate in the
Plan.
[_] Yes [_] No
2. Immediate Participation.
*No age or service requirement.
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
3. Service Requirement.
*Not to exceed 1 year if graded vesting; not to exceed 2
years if 100% immediate vesting. Not to exceed 1/2 year if
graded vesting or 1-1/2 years if lOO% immediate vesting if
annual Entry Date is chosen in Section VIII "Entry Date."
Not to exceed 1 year for Elective Deferral Contributions.
[_] Elective Deferral Contributions: 0 (indicate
number of years)
[_] Matching Contributions: 0 (indicate number of
years)
[_] Nonelective Contributions: 0 (indicate number
of years)
[_] Employee Contributions: _____ (indicate number
of years)
*Fill in the blank(s) above with the amount of service
required. Any service requirement not in units of whole
years requires service for eligibility to be determined
based on elapsed time (see Section VI.A.l.a).
4. Age Requirement.
*Not greater than 21 years. If annual entry date is chosen
in Section VIII "Entry Date," not greater than 20-1/2
years.
[X] Elective Deferral Contributions: 21 (indicate
minimum age)
[X] Matching Contributions: 21 (indicate minimum
age)
[X] Nonelective Contributions: 21 (indicate minimum
age)
[_] Employee Contributions: ___ (indicate minimum
age)
5. Employees who were employed on or before the initial
Effective Date of the Plan or the Effective Date of the
amendment and restatement of the Plan, as indicated on page
2, shall/shall not be immediately eligible without regard
to any Age and/or Service requirements specified in 2 or 3
above.
[_] Shall [X] Shall Not
- - --------------------------------------------------------------------------------
RPSTNS -10- March 27, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document VII. ELIGIBILITY REQUIREMENTS
Section
- - --------------------------------------------------------------------------------
2B.1 B. Job Class Requirements
An Employee must be a member of one or more of the following
selected classifications:
1. No Job Class Requirements:
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
2. Salaried:
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
3. Hourly:
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
4. Clerical:
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
5. Employees whose employment is governed by a collective
bargaining agreement represented by the following union:
_______________________________________________________
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
6. Other(fill in): Employed in a capacity other than a leased
employee as defined under Section 414(n) of the Internal
Revenue Code
[X] Elective Deferral Contributions
[X] Matching Contributions
[X] Nonelective Contributions
[_] Employee Contributions
*"Part-time" Employees may not be excluded.
- - --------------------------------------------------------------------------------
RPSTNS -11- November 17, 1995
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document VII. ELIGIBILITY REQUIREMENTS
Section
- - --------------------------------------------------------------------------------
2B.1 C. Additional Requirements
An Employee must be in the following designated division(s) of the
Employer:
------------------------------------------------------------------
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
- - --------------------------------------------------------------------------------
2B.1 D. An Employee must not be a member of any one of the following
groups:
1. Union.
*Employees who are members of a union are defined as: Employees
included in a unit of Employees covered by a collective
bargaining agreement between the Employer and employee
representatives, if retirement benefits were the subject of
good faith bargaining and if two percent or less of the
employees of the Employer who are covered pursuant to that
agreement are professional employees as defined in section
1.410(b)-9 of the regulations. For this purpose, the term
"employee representatives" does not include any organization
more than half of whose members are Employees who are owners,
officers, or executives of the Employer, unless the Collective
bargaining agreement provides for coverage under the Plan.
[X] Elective Deferral Contributions
[X] Matching Contributions
[X] Nonelective Contributions
[_] Employee Contributions
2. Nonresident aliens (within the meaning of Code section
7701(b)(1)(B)) who receive no earned income (within the meaning
of Code section 911(d)(2)) from the Employer that constitutes
income from sources within the United States (within the
meaning of Code section 861(a)(3)).
[_] Elective-Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
- - --------------------------------------------------------------------------------
RPSTNS -12- November 17, 1995
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document VII. ELIGIBILITY REQUIREMENTS
Section
- - --------------------------------------------------------------------------------
3. Employees covered by the following designated qualified
employee benefit plans:
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
- - --------------------------------------------------------------------------------
1.15 E. The Plan covers Employees whose conditions of employment are
mandated under the Davis-Bacon Act.
[_] Yes [X] No
- - --------------------------------------------------------------------------------
Plan
Document VII. ELIGIBILITY REQUIREMENTS
Section
*Check the appropriate requirement for Entry Date.
- - --------------------------------------------------------------------------------
1.25 A. Immediately.
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
- - --------------------------------------------------------------------------------
1.25 B. The first day of any month.
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
- - --------------------------------------------------------------------------------
1.25 C. Quarterly (that is, three months apart) on each:
(MM/DD) 0l/01 or (MM/DD) 04/01 or
(MM/DD) 07/01 or (MM/DD) 1O/01
*Fill in dates.
[X] Elective-Deferral Contributions
[X] Matching Contributions
[X] Nonelective Contributions
[_] Employee Contributions
- - --------------------------------------------------------------------------------
RPSTNS -13- November 17, 1995
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document VIII. ENTRY DATE
Section
- - --------------------------------------------------------------------------------
1.25 D. Semiannually (that is, six months apart) on each:
(MM/DD) __/__ or (MM/DD) __/__.
*Fill in dates.
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
- - --------------------------------------------------------------------------------
1.25 E. Annually, on each (MM/DD) __/__.
*Fill in date.
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
- - --------------------------------------------------------------------------------
1.25 F. The first day nearest to the date(s) selected in B, C, D or E
above, whether before or after that date, that the Participant
meets the Eligibility Requirements.
[_] Elective Deferral Contributions
[_] Matching Contributions
[_] Nonelective Contributions
[_] Employee Contributions
*Allows retroactive entry into the Plan. This may have an effect on
various nondiscrimination tests for the Plan.
- - --------------------------------------------------------------------------------
RPSTNS -14- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document IX. VESTING
Section
- - --------------------------------------------------------------------------------
1.76 A. Vesting Percentage.
The Vesting Schedule, based on number of Years or Periods of
Service, shall be as indicated below. Indicate the number of the
vesting schedule that applies to any Nonelective Contributions,
Matching Contributions, and Prior Employer Contributions. The
vesting schedules are depicted in 1 through 8, below.
Nonelective Contributions are subject to vesting schedule: 3
Matching Contributions are subject to vesting schedule: 3
Prior Employer Contributions are subject to vesting schedule:
___
1. Immediately = 100%
2. 0-3 Years = 0%
3 Years = 100%
3. 1 Year = 20%
2 Years = 40%
3 Years = 60%
4 Years = 80%
5 Years = 100%
4. 0-3 Years = 0%
3 Years = 20%
4 Years = 40%
5 Years = 60%
6 Years = 80%
7 Years = 100%
5. 0-2 Years = 0%
2 Years = 20%
3 Years = 40%
4 Years = 60%
5 Years = 80%
6 Years = 100%
6. 0-5 Years = 0%
5 Years = 100%
7. 1 Year = 25%
2 Years = 50%
3 Years = 75%
4 Years = 100%
- - --------------------------------------------------------------------------------
RPSTNS -15- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document IX. VESTING
Section
- - --------------------------------------------------------------------------------
8. Other. Must be at least as liberal as #4 or #6 above.
______________ = _____________
______________ = _____________
______________ = _____________
______________ = _____________
- - --------------------------------------------------------------------------------
2A.5(b) B. The vesting computation period shall be based on the Employee's
service in the:
[X] Plan Year [_] Employment year
- - --------------------------------------------------------------------------------
2A.7,2A.10 C. Excluded Years or Periods of Service.
The vesting percentage shall be based on all Years of Service
(i.e., completing 1000 Hours of Service) or Periods of Service
(i.e., Elapsed Time), EXCEPT that the following shall be
excluded:
Years or Periods of Service:
[_] 1. Prior to the time the Participant attained age 18.
[_] 2. During which the Employer did not maintain the plan or
predecessor plan.
[_] 3. During which the Participant elected not to contribute to
a plan which required Employee Contributions.
[_] 4. Rule of Parity (Elapsed Time).
*Rule of Parity (Elapsed Time): In the event a reemployed
Employee has no vested interest in Employer Contributions
at the time the break occurred, and has since incurred 5
consecutive 1-year Breaks-in-Service, and has a Period of
Severance which equals or exceeds his prior Period of
Service, such prior Service may be disregarded.
[_] 5. Rule of Parity (Hours of Service).
*Rule of Parity (Hours of Service): Years of Service
prior to a Break-in-Service may be disregarded if the
participant had no vested interest in Employer
Contributions at the time the break occurred, and the
Participant has since incurred 5 consecutive 1-year
Breaks-in-Service, and the number of consecutive 1-year
Breaks-in-Service is at least as great as the Years of
Service before the break occurred.
[X] 6. Prior to any 1-Year Break-in-Service until the Employee
completes a Year of Service following reemployment.
[_] 7. None of the above.
- - --------------------------------------------------------------------------------
RSPTNS -16- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document IX. VESTING
Section
- - --------------------------------------------------------------------------------
3D.1,3D.2, D. Forfeitures.
2A.7,2A.10
1. Forfeitures will occur:
[X]a. Immediately.
[_](1) Optional Payback Method.
[X](2) Required Payback Method.
[_]b. Upon a 1-Year Break-in-Service.
[_](1) Optional Payback Method.
[_](2) Required Payback Method.
[_]c. Upon 5 consecutive 1-Year Breaks-in-Service.
2. Forfeitures will be:
[_]a. Used as an Employer Credit.
[_]b. Reallocated to Participants' Accounts.
[X]c. Used as an Employer Credit and then, to the extent
any Forfeitures remain, reallocated to
Participants' Accounts.
If choice IX.D.2.b or c is selected and the Plan provides
Matching Contributions, the Actual Contribution
Percentage (ACP) Test will be affected.
- - --------------------------------------------------------------------------------
RPSTNS -17- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
2C.l(k)(1) A. Elective Deferral Contributions
1. Availability/Amount
[_] Not Available under the Plan.
[X] Available under the Plan (complete the following).
Each Participant MAY elect to have his Compensation
actually paid during the Plan Year reduced by:
[_]a. _______%
[_]b. up to _______%
[_]c. from 2% to 15%
[_]d. up to the maximum percentage allowable, not to
exceed the limits of Code sections 402(g) and 415.
*Lump sum amounts and/or cash bonuses must be subject to
the salary deferral election unless the definintion of
compensation in Section IV.A.9 has been elected and
these amounts have been specifically excluded from that
conpensation definition. Lump sum amounts and cash
bonuses are deferred upon and tested in the Plan Year in
which paid.
2. Modification
A Participant may change the amount of Elective Deferral
Contributions the Participant makes to the Plan (complete a
and b):
[_]a. 2 per calendar year (may not be less frequent than
once).
[_]b. As of the following date(s) (MM/DD):
Any date.
- - --------------------------------------------------------------------------------
RPSTNS -18- July 17, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
B. Required Employee Contributions
2C.l(b) 1. Availability/Amount
[X] Not Available under the Plan.
[_] Available under the Plan and must be made as a condition of
receiving an Employer Contribution.
*Required Employee Contributions are NOT AVAILABLE unless
Elective Deferral Contributions are available.
Required Contributions shall be in the amount of:
[_]a. ____% of Compensation actually paid during the
Contribution Period.
2C.1(k)(1) [-]b. Not less than ______% nor more than _____% of
Compensation actually paid during the Contribution
Period.
2. Modification
A Participant may suspend Required Employee Contributions for
a minimum period of.
[_]a. 1 month
[_]b. 2 months
[_]c. 3 months
*The suspension period may be of indefinite duration. A
Participant's reentry into the Plan shall be as of the first
Entry Date Following the end of the suspension period.
- - --------------------------------------------------------------------------------
RPSTNS -19- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
2C.1 C. Matching Contributions
Availability/Amount
[_]Not Available under the Plan.
[X]Available under the Plan (elect one from option 1 and,
if applicable, elect one from option 2).
1. [_]a. Matching Contributions SHALL be based upon a
percentage of Considered Net Profits.
[X]b. Matching Contributions SHALL NOT be based upon a
percentage of Considered Net Profits.
2. Partnership Plans.
[_]a. The Employer SHALL make Matching Contributions to
Partners.
*Matching Contributions to Partners are treated in all
respects as Elective Deferral Contributions.
[_]b. The Employer SHALL NOT make Matching Contributions to
Partners.
For each $1.00 of either Elective Deferral Contributions or
Required Employee Contributions, as selected above, the Employer
will contribute and allocate to each Participant's Matching
Contribution Account an amount equal to:
[_]1. $ _________(e.g., $.5O).
[X]2. A discretionary percentage, to be determined by the
Employer.
*If option 2 is elected, the amount of the discretionary
percentage should be determined by an annual Board of
Directors resolution setting the percentage.
[_]3. Graded Match.
*If a or b is elected, the minimum and maximum percentages
must be within the parameters of the Elective Deferral
election in Section X.A or the Required Employee
Contribution election in Section X.B of this Adoption
Agreement.
*Percentages for higher amounts must be lower than the
percentages for lower amounts. For example. 100% of the
first $500, plus 75% of the next $500, plus 50% of the next
$500.
[_]a. Graded based upon the dollar amount of each Participant's
Elective Deferral Contributions or Required Employee
Contributions as follows:
_________% of the first $ ________ plus
_________% of the next $ ________ plus
_________% of the next $ ________ plus
_________% of the next $ ________
- - --------------------------------------------------------------------------------
RPSTNS -20- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
[_]b. Graded based upon the percentage of Compensation of each
Participant's Elective Deferral Contribution or Required
Employee Contribution as follows:
_________% of the first ________% plus
_________% of the next ________% plus
_________% of the next ________% plus
_________% of the next ________%
*If 3.a or b is elected, additional testing will be required to
prove that the different contributions are available on a
nondiscriminatory basis.
[_]4. Separate specific dollar amounts for different employees (e.g.,
employees in different job classifications):
*This option is available only for Plans covering Employees whose
conditions of employment are mandated under the Davis-Bacon Act.
$______(e.g., $.50) to employees in _____________ (fill in)
$______(e.g., $.50) to employees in _____________ (fill in)
$______(e.g., $.50) to employees in _____________ (fill in)
$______(e.g., $.50) to employees in _____________ (fill in)
$______(e.g., $.50) to employees in _____________ (fill in)
Additional Formulas (fill in below):
*Formulas must be the same type as above.
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
*If 4 is selected, additional testing will be required to prove
that the different contributions are available on a
nondiscriminatory basis.
- - --------------------------------------------------------------------------------
RPSTNS -21- August 26, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
[_]5. Different graded matches for different employees (e.g.,
employees in different job classifications, divisions,
organizations, members of a controlled group of corporations,
etc.):
*This option is available only for Plans covering Employees
whose conditions of employment are mandated under the Davis-
Bacon Act.
*Percentages for higher amounts must be lower than the
percentages for lower amounts. For example: 100% of the first
$500, plus 75% of the next $5OO, plus 50% or the next $500.
[_]a. Graded based upon the dollar amount of Elective Deferral
Contributions or Required Contributions of each
Participant as follows:
Employees in ______________ (fill in)
________% of the first $_______ plus
________% of the first $_______ plus
________% of the first $_______ plus
________% of the first $_______
Employees in ______________ (fill in)
________% of the first $_______ plus
________% of the first $_______ plus
________% of the first $_______ plus
________% of the first $_______
Employees in ______________ (fill in)
________% of the first $_______ plus
________% of the first $_______ plus
________% of the first $_______ plus
________% of the first $_______
Additional Formulas (fill in below):
*Formulas must be the same type as above.
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
- - --------------------------------------------------------------------------------
RPSTNS -22- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
[_] b. Graded based upon the percentage of compensation of the
Elective Deferral Contributions or Required Contributions of
each Participant as follows:
* This option is available only for Plans covering Employees
whose conditions of employment are mandated under the Davis-
Bacon Act.
* Matching percentages for higher compensation percentages must
be lower than matching percentages for lower compensation
percentages. For example: 100% of the first 3%, plus 75% of
the next 2%, plus 50% of the next 2%.
Employees in _______________________________ (fill in)
________% of the first ________% plus
________% of the next _________% plus
________% of the next _________% plus
________% of the next _________%
Employees in _______________________________ (fill in)
________% of the first ________% plus
________% of the next _________% plus
________% of the next _________% plus
________% of the next _________%
Employees in _______________________________ (fill in)
________% of the first ________% plus
________% of the next _________% plus
________% of the next _________% plus
________% of the next _________%
Additional Formulas (fill in below):
* Formulas must be the same type as above.
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
* If 5.a or b is selected, additional testing will be required to
prove that the different contributions are available on a
nondiscriminatory basis.
RPSTNS -23- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
The Elective Deferral or Required Employee Contributions, upon which
Matching Contributions are made by the Employer, shall not exceed:
[_] 1. $________ for the Plan Year.
[_] 2. ________% of Participant's Compensation for the Contribution
Period.
[X] 3. N/A.
True-Up Contributions:
The Employer may/may not contribute a True-Up Contribution for each
Participant at the end of the Plan Year so that the total Matching
Contribution for each Participant is calculated on an annual basis.
[X] May [_] May not
Additional Matching Contributions:
In addition, at the end of the Plan Year, the Employer may contribute
Additional Matching Contributions to be allocated in the same
proportion that the Matching Contribution made on behalf of each
Participant during the Plan Year bears to the Matching Contribution
made on behalf of all Participants during the Plan Year.
[_] Yes [X] No
RPSTNS -24- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
2C.1 D. Nonelective Contributions
* If you choose to make a Nonelective Contribution, each Employee
eligible to participate in the Plan and who satisfies the Annual
Allocation Requirement of Section XII.A or XII.B MUST be given an
allocation, regardless of whether they make Elective Deferral
Contributions.
Availability/Amount
[_] Not Available under the Plan.
[X] Available under the Plan (complete the following).
The Contribution for each Contribution Period shall be:
[_] 1. ________% of Considered Net Profits.
[_] 2. ________% of Compensation of each Participant.
[_] 3. The Employer will contribute an amount equal to $_______
for each Participant.
[X] 4. Discretionary.
* If option 4 is elected, the amount of the discretionary
contribution should be determined by an annual Board of Directors
resolution setting a fixed amount of contribution or a formula by
which a Fixed amount can be determined.
[X] 5. The Employer will contribute an amount equal to $____/hour
or unit of each Participant (indicate dollar or cents
amount).
* Option 5 may be chosen ONLY for Employees who are subject to a
Collective Bargaining Agreement.
[_] 6. ______% of Considered Net Profits to __________ (fill in)
______% of Considered Net Profits to __________ (fill in)
______% of Considered Net Profits to __________ (fill in)
______% of Considered Net Profits to __________ (fill in)
______% of Considered Net Profits to __________ (fill in)
______% of Considered Net Profits to __________ (fill in)
* Fill in job classification.
RPSTNS -25- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
Additional Formulas (FILL in below):
* Formulas must be the same type as above.
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
[_] 7. ______% of Compensation to each Participant in ______ (fill in)
______% of Compensation to each Participant in ______ (fill in)
______% of Compensation to each Participant in ______ (fill in)
______% of Compensation to each Participant in ______ (fill in)
______% of Compensation to each Participant in ______ (fill in)
* Fill in job classification.
Additional Formulas (fill in below):
* Formulas must be the same type as above.
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
* Options 6 and 7 may be selected ONLY when a Plan covers
Employees whose conditions of employment are mandated under
the Davis-Bacon Act.
* If option 6 or 7 is selected, subsection A.1 (Compensation to
Compensation allocation) MUST be chosen in Section XIII,
"Allocation of Contributions."
* If options 6 or 7 is selected, additional testing will be
required to prove that the different contributions are
available on a nondiscriminatory basis.
Nonelective Contributions shall/shall not be based on Considered Net
Profits.
* "Shall" must be chosen if option 1 is selected.
[_] Shall [X] Shall not
RPSTNS -26- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
2C.1(b) E. Voluntary Employee Contributions
Availability/Amount
[X] Not Available under the Plan.
[_] Available under the Plan (complete the following).
[_] Voluntary Employee Contributions SHALL be permitted
up to ______% of Compensation actually paid during
the Plan Year.
[_] Voluntary Employee Contributions made in a Lump Sum
SHALL be permitted.
* Voluntary Employee Contributions are NOT AVAILABLE unless
Elective Deferral Contributions are available.
2C.3 F. Rollover Contributions
Availability
[X] 1. Rollover Contributions out of the Plan are always
available.
[X] Cash only.
[_] Cash and Loan Notes from this and/or a prior plan.
[_] 2. Rollover Contributions into the Plan:
[_] Not Available under the Plan.
[X] Available under the Plan (complete the following).
Cash Only or Cash and Loan Notes:
[X] Cash only.
[_] Cash and Loan Notes from prior plan.
Rollover contributions into the Plan may be made
by:
[X] Both eligible Employees and Employees
who would be eligible except they do
not yet meet the Plan's age and/or
service requirement.
[_] Eligible Employees only.
RPSTNS -27- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document X. CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
7B.8, 7B.9 G. Transfers of Account Balances
Availability
[X] 1. Transfers of account balances out of the Plan are always
available.
[_] 2. Transfers of Account Balances into the Plan:
[X] Not Available under the Plan.
[_] Available under the Plan.
- - --------------------------------------------------------------------------------
Plan
Document XI. CONTRIBUTION PERIOD
Section
- - --------------------------------------------------------------------------------
1.14 A. The regular Contribution Period (by contribution type) shall be:
* For 1 and 2 below, "Other" Contribution Period may not be longer
than annual, but may be shorter than 4-weekly.
* For 3 below, "Other" Contribution Period may not be longer than
monthly, but may be shorter than 4-weekly.
1. Matching Contributions:
[X] Annual [_] 4-Weekly
[_] Monthly [_] Other (specify)_________
2. Nonelective Contributions:
[X] Annual [_] 4-Weekly
[_] Monthly [_] Other (specify)_________
3. Elective Deferral Contributions, Required Employee
Contributions, and/or Voluntary Employee Contributions:
* Annual contribution period is not available for contributions
in #3.
[_] Monthly [_] 4-Weekly
[X] Other (specify) semi-monthly
----------------------
RPSTNS -28- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XII. ALLOCATION OF CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
2C.1(f) A. Allocation Formula for Nonelective Contribution
Complete the following ONLY if Section X.D is 1, 4, 6 or 7.
* If Section X.D is 6 or 7, the Compensation to Compensation
allocation formula (1 below) must be chosen.
The Nonelective Contribution will be allocated to Participants
who meet the requirements of Section XII.B or C as follows:
[X] 1. Compensation to Compensation:
In the same ratio as each Participant's Compensation bears
to the total Compensation of all Participants.
[_] 2. Integrated with Social Security:
a. Choose one of the following methods:
[_] Step-Rate Method
For each Plan Year, the Employer will contribute
an amount equal to ____% of each Participant's
Compensation up to the Social Security
Integration Level, plus ___% of each
Participant's Compensation in excess of the
Social Security Integration Level. However, in
no event will the Excess Contribution percentage
exceed the amount specified in Section
2C.1(f)(2)(B) of the Plan.
[_] Maximum Disparity Method
For each Plan Year, the Employer's Nonelective
Contribution shall be allocated in the manner
stated in Section 2C.1(f)(3) of the Plan in
order to maximize permitted disparity.
b. Social Security Integration Level:
[_] i. $______ (not to exceed the Social Security
Taxable Wage Base).
[_] ii. The Social Security Taxable Wage Base in effect
on the first day of the Plan Year.
[_] iii. _____% of the Social Security Taxable Wage Base
(not to exceed 100%).
RPSTNS -29- July 17, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XII. ALLOCATION OF CONTRIBUTIONS
Section
- - --------------------------------------------------------------------------------
2C.1(g) B. Annual Allocation Requirements
An allocation of the annual Nonelective Contribution, annual
Matching Contribution, and/or Additional Matching Contribution
made by the Employer will be made to each Participant who:
[_] 1. Is a Participant on ANY day during the Plan Year regardless
of Service credited during the Plan Year.
[_] 2. Is credited with a Year of Service in the Plan Year for
which the contribution is made.
[X] 3. Is a Participant on the last day of the Plan Year.
[_] 4. Is credited with a Year of Service in the Plan Year for
which the contribution is made and is a Participant on the
last day of the Plan Year.
In addition, an allocation will be made by the Employer on behalf
of any Participant who retires, dies or becomes disabled during
the Plan Year, regardless of the number of Hours of Service
credited to such Participant and regardless of whether such
Participant is a participant on the last day of the Plan Year.
Annual Nonelective Contribution [X] Yes [_] No
Annual Matching Contribution [X] Yes [_] No
Additional Matching Contribution [_] Yes [_] No
- - --------------------------------------------------------------------------------
2C.1(g) C. Nonannual Allocation Requirement
An allocation of the nonannual Matching Contribution or nonannual
Nonelective Contribution made by the Employer will be made to
each Participant who:
[_] 1. Is a Participant on any day of the Contribution Period.
[_] 2. Is a Participant as of the last day of the Contribution
Period.
In addition, an allocation will be made by the Employer on behalf
of any Participant who retires, dies, or becomes disabled during
the Contribution Period, regardless of whether such Participant
is a Participant as of the last day of the Contribution Period.
Nonannual Nonelective Contribution [_] Yes [_] No
Nonannual Matching Contribution [_] Yes [_] No
RPSTNS -30- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XIII. LIMITATIONS ON ALLOCATIONS
Section
- - --------------------------------------------------------------------------------
4B A. If any Participant is covered by another qualified defined
contribution plan maintained by the Employer, other than a Master
or Prototype plan:
* Complete part A if you: (1) maintain, or at any time maintained,
another qualified retirement plan in which any Participant in this
Plan is, was, or could be, a participant; or (2) maintain a Code
section 415(1)(2) individual medical account, for which amounts are
treated as Annual Additions for any Participant in this Plan.
[X] 1. N/A. The Employer has no other defined contribution
plan(s).
[_] 2. The provisions of Section 4B.5 of the Plan will apply, as
if the other plan were a Master or Prototype plan.
________________________________________________
________________________________________________
- - --------------------------------------------------------------------------------
4B B. If any Participant is or ever has been a Participant in a qualified
defined benefit plan maintained by the Employer:
* Complete part B if you maintain, or at any time maintained, another
qualified retirement plan in which any Participant in this Plan is,
was, or could be a participant.
[X] 1. N/A. The Employer has no defined benefit plan(s).
[_] 2. In any Limitation Year, the Annual Additions credited to
the Participant under this Plan may not cause the sum of
the Defined Benefit Plan Fraction and the Defined
Contribution Fraction to exceed 1.0. If the Employer
contributions that would otherwise be allocated to the
Participant's account during such year would cause the 1.0
limitation to be exceeded, the allocation will be reduced
so that the sum of the fraction equals 1.0. Any
contributions not allocated because of the preceding
sentence will be allocated to the remaining Participants
according to the Plan's allocation formula. If the 1.0
limitation is exceeded because of an Excess Amount, such
Excess Amount will be reduced in accordance with Section
4B.4 of the Plan.
[_] 3. Provide the method under which the Plan involved will
satisfy the 1.0 limitation in a manner that precludes
Employer discretion.
________________________________________________
________________________________________________
RPSTNS -31- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XIII. LIMITATIONS ON ALLOCATIONS
Section
- - --------------------------------------------------------------------------------
C. Compensation will mean all of each Participant's:
* Everyone must complete Section C. If option 1, 2, or 3 was selected
in Section IV.A., you must make the same selection here.
4B.1(b)(1)
[_] 1. Wages, Tips, and Other Compensation Box on Form W-2.
4B-1(b)(2)
[_] 2. Section 3401 (a) wages.
4B-1(b)(3)
[X] 3. 415 safe-harbor compensation.
- - --------------------------------------------------------------------------------
4B.1(h) D. The Limitation Year shall be:
* Everyone must complete Section D.
[X] 1. The Calendar Year.
[_] 2. The 12-month period coinciding with the Plan Year.
[_] 3. The 12-month period beginning on (MM/DD):____/____.
- - --------------------------------------------------------------------------------
Plan
Document XIV. INVESTMENT OF PARTICIPANT'S ACCOUNTS
Section
- - --------------------------------------------------------------------------------
SA.1 A. The Participant shall/shall not have the authority to
direct the Investment of Contributions made by the Employer.
[X] Shall [_] Shall Not
- - --------------------------------------------------------------------------------
SA.1 B. If SHALL is elected above, complete the following.
Those having authority to direct the investment of the
Participant's Account are (choose all that apply):
[X] 1. Participants who are active Employees.
[X] 2. Participants who are former employees and continue to
maintain an account in the Plan or Trust.
[X] 3. Beneficiaries.
[X] 4. Alternate Payees.
- - --------------------------------------------------------------------------------
Plan
Document XV. LIFE INSURANCE
Section
- - --------------------------------------------------------------------------------
5B.1 A. Available as a Participant investment:
[_] Yes [X] No
RPSTNS -32- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XV. LIFE INSURANCE
Section
- - --------------------------------------------------------------------------------
B. If yes is elected above, Life Insurance shall be available to:
[_] 1. All Participants.
[_] 2. Only to the specified group of Participants (fill in below):
__________________________________________________________
__________________________________________________________
__________________________________________________________
* If subsection 2 is checked, separate nondiscrimination testing
will be required.
- - --------------------------------------------------------------------------------
Plan
Document XVI. EMPLOYER STOCK
Section
- - --------------------------------------------------------------------------------
* Before electing Employer Stock as an investment option, you should consult
your legal counsel on any federal or state securities law requirements arising
from offering Employer Stock as an investment option under your Plan and whether
use of this document is appropriate for you under those laws. Neither
Connecticut General Life Insurance Company nor any of its employees can advise
you on these matters.
- - --------------------------------------------------------------------------------
1.45 A. Investment in Employer Stock is:
[_] Permitted.
[X] Not Permitted.
* You must complete the following subsections B and C if
investment in Employer Stock is permitted and Participants have
the authority to direct the investment of Employer Contributions.
- - --------------------------------------------------------------------------------
1.45 B. Investment in Employer Stock within the Plan by officers or
directors of the Employer or by an individual who owns more than
10% of the Employer's Stock is:
[_] Permitted.
[_] Not Permitted.
- - --------------------------------------------------------------------------------
1.45 C. The Trustee:
[_] 1. Will vote the shares of the Employer Stock.
[_] 2. Will vote the shares of the Employer Stock in accordance
with any instructions received by the Trustee from the
Participant.
* Option 2 must be selected if CG Trust Company is the Trustee.
[_] 3. May request voting instructions from the Participants.
- - --------------------------------------------------------------------------------
RPSTNS -33- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XVII. WITHDRAWALS PRECEDING TERMINATION
Section
- - --------------------------------------------------------------------------------
* Complete only the sections for the type of contributions in your plan.
- - --------------------------------------------------------------------------------
3E.1(a) A. Withdrawal of Required Employee Contributions.
* Withdrawal may be for any reason.
[X] Not Available under the Plan.
[_] Available under the Plan.
If available, Required Employee Contributions may be
withdrawn:
[_] Once each 6 months.
[_] Once each 12 months.
[_] Other (specify) _____________________.
The Contribution suspension period following a withdrawal
of Required Employee Contributions shall be.
* You must choose one of the suspension periods shown.
Related Employer Contributions will be suspended for the
same period.
[_] 6 Months.
[_] 12 Months.
[_] 24 Months.
- - --------------------------------------------------------------------------------
3E.1(b) B. Withdrawal of Voluntary Employee Contributions.
* Withdrawal may be for any reason.
[X] Not Available under the Plan.
[_] Available under the Plan.
If available, Voluntary Employee Contributions may be
withdrawn:
[_] Once each 6 months.
[_] Once each 12 months.
[_] Other (specify) _____________________.
- - --------------------------------------------------------------------------------
RPSTNS -34- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XVII. WITHDRAWALS PRECEDING TERMINATION
Section
- - --------------------------------------------------------------------------------
C. Withdrawal of Elective Deferral Contributions.
[_] Not Available under the Plan.
[X] Available under the Plan.
If available, select the conditions for withdrawal:
3E.2 [X] Withdrawal upon Participant's attainment of age 59-1/2.
3E.5 [_] Withdrawal for Serious Financial Hardship,
* If a Participant makes a withdrawal of Elective Deferral
Contributions due to a Serious Financial Hardship, the
Participant must be suspended from making any additional
Elective Deferral Contributions for a period of 12 months.
D. Withdrawal of Employer Contributions (Matching, Nonelective
and/or Prior Employer Contributions).
[X] Not Available under the Plan.
[_] Available under the Plan.
* If Prior Employer Contributions are money purchase plan
contributions, they may not be withdrawn.
If available, select the conditions for withdrawal:
3E.3 [_] 1. Withdrawal upon Participant's attainment of age 591/2.
Available from:
[_] a. Matching Contributions.
[_] b. Nonelective Contributions.
[_] c. Prior Employer Contributions.
- - --------------------------------------------------------------------------------
RPSTNS -35- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XVII. WITHDRAWALS PRECEDING TERMINATION
Section
- - --------------------------------------------------------------------------------
3E.3 [_] 2. Withdrawals to active Participants who have been
Participants for a minimum of 60 consecutive months.
Available from:
[_] a. Matching Contributions.
[_] b. Nonelective Contributions
[_] C. Prior Employer Contributions.
Frequency of withdrawal:
[_] Once each 6 months.
[_] Once each 12 months.
[_] Other (specify)____________________.
Suspension Period following withdrawal:
[_] N/A.
[_] 6 months.
[_] 12 months.
[_] 24 months.
3E.4 [_] 3. Withdrawal for Serious Financial Hardship.
Available from:
[_] a. Matching Contributions.
[_] b. Nonelective Contributions
[_] c. Prior Employer Contributions.
Prior Employer Contributions:
Prior Employer Contributions are contributions made to the Plan by the
Employer prior to the Plan's original conversion and/or restatement on
___________________________________(fill in date)
RPSTNS -36- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XVII. WITHDRAWALS PRECEDING TERMINATION
Section
- - --------------------------------------------------------------------------------
3E.6 E. Withdrawal of Rollover Contributions:
[_] Not Available under the Plan.
[X] Available under the Plan.
If available, Rollover Contributions may be withdrawn:
[_] Once per Plan Year.
[_] Every 6 Months.
[_] Every 3 Months.
[_] Every Month.
[X] Anytime.
- - --------------------------------------------------------------------------------
3E.6 F. Withdrawal of Qualified Voluntary Employee Contributions (QVEC
Contributions)
* Applicable only if this is a readoption of an existing plan. If
selected, Contributions may be withdrawn for any reason.
[X] Not Available under the Plan.
[_] Available under the Plan.
If available, Qualified Voluntary Employee
Contributions may be withdrawn:
[_] Once per Plan Year.
[_] Every 6 Months.
[_] Every 3 Months.
[_] Every Month.
[_] Anytime.
- - --------------------------------------------------------------------------------
RPSTNS -37- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XVII. WITHDRAWALS PRECEDING TERMINATION
Section
- - --------------------------------------------------------------------------------
3E.1(c) G. Withdrawal of Prior Required Employee Contributions.
* Withdrawal may be for any reason.
[X] Not Available under the Plan.
[_] Available under the Plan.
If available, Prior Required Employee Contributions may
be withdrawn:
[_] Once each 6 months.
[_] Once each 12 months.
[_] Other (specify)________________________.
Prior Required Employee Contributions are post-tax contributions
made by Employees in order to receive an Employer contribution and
which were made before the Plan's original conversion and/or
restatement on ________________ (fill in date).
- - --------------------------------------------------------------------------------
3E.1(d) H. Withdrawal of Prior Voluntary Employee Contributions.
* Withdrawal may be for any reason and may be taken at any time.
[X] Not Available under the Plan.
[_] Available under the Plan.
Prior Voluntary Employee Contributions are voluntary contributions
made by Employees prior to these types of contribution being
eliminated as a plan option on ____________________(fill in date).
- - --------------------------------------------------------------------------------
Plan
Document XVIII. LOANS TO PARTICIPANTS, BENEFICIARIES AND
Section PARTIES-IN-INTEREST
- - --------------------------------------------------------------------------------
5C A. Loans are permitted.
[X] Yes
* If yes, Plan must be trusteed
[_] No
- - --------------------------------------------------------------------------------
RPSTNS -38- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XVIII. LOANS TO PARTICIPANTS, BENEFICIARIES AND
Section PARTIES-IN-INTEREST
- - --------------------------------------------------------------------------------
5C B. Loans are available only from the following sources:
* Qualified Voluntary Employee Contributions (QVEC
Contributions) may not be taken in a loan.
[X] All Sources.
[_] List Sources:
________________________________________
________________________________________
________________________________________
- - --------------------------------------------------------------------------------
Plan
Document XIX. RETIREMENT AND DISABILITY
Section
- - --------------------------------------------------------------------------------
1.40 A. Normal Retirement Age is:
[_] 1. The date the Participant attains age ___ (not to exceed 65).
[X] 2. The later of:
a. The date the Participant attains age 65 (not to exceed
65), or
b. The 5th (not to exceed 5th) anniversary of the
Participation Commencement Date.
* Note regarding 2.b above: If, for Plan Years beginning
before January 1, 1988, Normal Retirement Age was determined
with reference to the anniversary of the Participation
Commencement Date (more than 5 but not to exceed 10
years), the anniversary date for Participants who first
commenced participation under the Plan before the first Plan
Year beginning on or after January 1, 1988 shall be the
earlier of (A) the tenth anniversary of the date the
Participant commenced participation in the Plan (or such
anniversary as had been elected by the Employer, if less
than 10) or (B) the fifth anniversary of the first day of
the first Plan Year beginning on or after January 1, 1988.
The Participation Commencement Date is the first day of the
first Plan Year in which the Participant commenced
participation in the Plan.
- - --------------------------------------------------------------------------------
RPSTNS -39- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XIX. RETIREMENT AND DISABILITY
Section
- - --------------------------------------------------------------------------------
1.18 B. Early Retirement by Participants
1. Early Retirement by Participants is:
[_] a. Not Permitted.
[X] b. Permitted. Subject to the following conditions:
[_] i. Age ______ (not to exceed 65).
[_] ii. Years of Service ___________.
[_] iii. Age 55 (not to exceed 65) and 5 Years of
Service.
[_] iv. Age _____ (not to exceed 65) and _____ Years of
Participation.
- - --------------------------------------------------------------------------------
1.16 C. Disability
1. The Employer shall/shall not make contributions on behalf of
disabled Participants who are Nonhighly Compensated Employees on
the basis of the Compensation each such Participant would have
received for the Limitation Year if the Participant had been
paid at the rate of Compensation paid immediately before
becoming permanently and totally disabled.
[_] Shall [X] Shall Not
* All such contributions are 100% vested and nonforfeitable when
made.
- - --------------------------------------------------------------------------------
Plan
Document XX. DISTRIBUTION OF BENEFITS
Section
- - --------------------------------------------------------------------------------
3A.1 A. Distribution of benefits should be in the form of (check all that
apply):
[X] 1. Single Sum.
[_] 2. Life Annuity.
[_] 3. Installment Payments.
[_] 4. Installment Refund Annuity.
[_] 5. Employer Stock, to the extent the Participant is invested
therein.
- - --------------------------------------------------------------------------------
B. Distribution Timing
[_] 1. All Participants may elect to defer their distributions.
[X} 2. Participants who terminate employment and whose account
balances never exceeded $3,500 shall receive an immediate,
lump sum cash distribution.
- - --------------------------------------------------------------------------------
RPSTNS -40- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XX. DISTRIBUTION OF BENEFITS
Section
- - --------------------------------------------------------------------------------
C. Expenses - Deferred Participants.
1. Participants who elect to defer distribution of their
benefits shall/shall not pay for all fees associated with
administration of their deferral payment.
[X] Shall [_] Shall Not
- - --------------------------------------------------------------------------------
Plan
Document XXI. QUALIFIED PRERETIREMENT SURVIVOR ANNUITY
Section
- - --------------------------------------------------------------------------------
3C.4 The Qualified Preretirement Survivor Annuity shall be:
* 100% is required for Plans allowing only single sum distributions.
[X] 100% to the surviving spouse.
[_] 50% to the surviving spouse.
- - --------------------------------------------------------------------------------
Plan
Document XXII. AMENDMENT TO THE PLAN
Section
- - --------------------------------------------------------------------------------
7B A. The party having the authority to amend the Adoption Agreement is
the:
[_] 1. Trustee(s).
* Trustee(s) cannot be chosen if the Trustee is CG Trust.
[_] 2. Plan Administrator.
[_] 3. Plan Committee.
[X] 4. Designated Representative of the Employer.
- - --------------------------------------------------------------------------------
RPSTNS -41- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XXIII. TOP-HEAVY PROVISIONS
Section
- - --------------------------------------------------------------------------------
7A.1(i) A. Method to be used to avoid duplication of Top-Heavy Minimum
benefits when a non-Key Employee is a Participant in both this Plan
and a defined benefit plan maintained by the Employer (select one
response):
[X] 1. N/A. The Employer has no other plan(s).
[_] 2. Single Plan Minimum Top-Heavy Allocation. A minimum Top-
Heavy contribution will be allocated to each non-Key
Employee's Participant Account in an amount equal to:
[_] a. The lesser of 3% of Compensation or the highest
percentage allocated to any Key Employee.
[_] b. ______% of Compensation (must be at least 3%).
[_] 3. Multiple Plans Top-Heavy Allocation. In order to satisfy
Code sections 415 and 416, and because of the required
aggregation of multiple plans, a minimum Top-Heavy
contribution will be allocated to each non-Key Employee in
an amount equal to:
[_] a. Not Applicable. No other plan was in existence prior
to the Effective Date of this Adoption Agreement.
[_] b. 5% of Compensation, to be provided in a defined
contribution plan of the Employer.
[_] c. 7-1/2% of Compensation, to be nonintegrated, and
provided in this Plan.
* If c is chosen, for all Plan Years in which this Plan is
Top-Heavy (but not Super Top-Heavy), the Defined Benefit and
Defined Contribution fractions shall be computed using 125%.
[_] 4. Enter the name of the plan(s) and specify the method under
which the plan(s) will provide Top-Heavy Minimum Benefits to
non-Key Employees [include any adjustments required under
Code section 415(e)]:
______________________________________________________
______________________________________________________
* If 4 is selected, the method specified must preclude Employer
discretion and inadvertent omissions.
- - --------------------------------------------------------------------------------
RPSTNS -42- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XXIII. TOP-HEAVY PROVISIONS
Section
- - --------------------------------------------------------------------------------
7A.1 B. Present Value: In order to establish the present value to compute
the Top-Heavy Ratio, any benefit shall be discounted only for
mortality and interest, based on:
* Complete B only if response to A is 2, 3, or 4. Fill in all blanks.
[_] 1. Interest Rate ___________%
[_] 2. Mortality Table___________.
[_] 3. Valuation Date____________.
- - --------------------------------------------------------------------------------
7A.2 C. Where a non-Key Employee is a Participant in this and another
defined contribution plan(s) of the Employer, choose which plan
will provide the minimum Top-Heavy contribution:
[X] 1. N/A. The Employer has no other plan.
[_] 2. The minimum allocation will be met in this Plan.
[_] 3. The minimum allocation will be met in the other defined
contribution plan. Enter the name of the plan:
_______________________________________________________
- - --------------------------------------------------------------------------------
7A.3 D. Top-Heavy Vesting Schedule. In the event the plan becomes Top-
Heavy, the vesting schedule shall be:
* Must meet one of the schedules below and must be at least as liberal
as the vesting schedule elected in Section IX.A.
[_] 1. 100% vesting after _________ (not to exceed 3) years of
Service.
[_] 2. ________% vesting after 1 Year of Service
________% (not less than 20) vesting after 2 Years
of Service
________% (not less than 40) vesting after 3 Years
of Service
________% (not less than 60) vesting after 4 Years
of Service
________% (not less than 80) vesting after 5 Years
of Service
100% vesting after 6 Years of Service
[X] 3. Same vesting schedules) as elected in Adoption Agreement
Section IX (already meets Top-Heavy minimum vesting
requirements).
* If the vesting schedule under the Plan shifts into the above
schedule for any Plan Year because of the Plan's Top-Heavy status,
such shift is an amendment to the vesting schedule and the election
provisions in Section 7B. 1 of the Plan shall apply.
* The Top-Heavy vesting schedule will remain in effect even if the
Plan ceases to be Top Heavy.
- - --------------------------------------------------------------------------------
RPSTNS -43- May 22, 1996
<PAGE>
- - --------------------------------------------------------------------------------
Plan
Document XXIV. OTHER ADOPTING EMPLOYER
Section
- - --------------------------------------------------------------------------------
6E.1, 6E.2 A. The following Adopting Employer(s) also adopt this plan and have
executed this Adoption Agreement:
* Fill in below the names and the Employer Identification Numbers
(EINS) or adopting Employers.
* Must meet requirements or Plan definition or Employer, Plan
Section 1.24.
Cardkey Systems, Inc. 77-0405047
AMGT Corporation 75-2205460
Amtech World Corporation 75-2199362
WaveNet, Inc. 75-2628579
- - --------------------------------------------------------------------------------
RPSTNS -44- May 22, 1996
<PAGE>
The Employer hereby adopts the Connecticut General Life Insurance Company
Defined Contribution Prototype Profit Sharing/Thrift Plan with 401(k) Feature,
including all elections made in this Non-Standardized Adoption Agreement, and
the Employer agrees to be bound by all the terms of the Plan and by all the
terms of this Adoption Agreement and of the Annuity Contract. The Employer
further agrees that it will furnish promptly all information required by the
Trustee, if applicable, the Plan Administrator and the Insurance Company in
order to carry out their functions. The Employer shall notify the Trustee, if
applicable, the Plan Administrator and the Insurance Company promptly of any
changes in the status of the Employer which might affect the Employer duties
and responsibilities hereunder.
The elections under this Adoption Agreement may be changed by the Employer
from time to time by a written instrument signed by the Employer, the Plan
Administrator and the Trustee, if applicable, and accepted by the Plan
Sponsor. The Employer consents to the exercise by the Plan Sponsor of the
right to amend the Plan and the Annuity Contract from time to time as it may
deem necessary or advisable.
By signing this Adoption Agreement, the Employer specifically acknowledges
that the Insurance Company has no authority. (1) to answer legal questions and
that all such questions shall be answered by legal counsel for the Employer;
and (2) to make determinations involved in the administration of the Plan and
that all such determinations shall be answered by the Employer's Plan
Administrator or other designated representative.
Upon execution of this Adoption Agreement by the Employer, the Plan shall be
effective with respect to that Employer as of the Effective Date specified
herein, provided the Plan Administrator and the Trustee, if applicable, shall
then or thereafter execute this Adoption Agreement to signify their acceptance
of their duties and responsibilities hereunder and provided further, the Plan
Sponsor will indicate its acceptance of the Employer in accordance with its
usual rules and practices.
The Adopting Employer may not rely on an opinion letter issued by the National
Office of the Internal Revenue Service as evidence that the Plan is qualified
under Internal Revenue Code section 401. In order to obtain reliance with
respect to plan qualification, the Employer must apply to the appropriate key
district office for a determination letter.
Connecticut General Life Insurance Company will inform the Employer of any
amendments made to the Plan or of the discontinuance or abandonment of such
Plan.
CAUTION: You should very carefully examine the elections you have made in this
Adoption Agreement and discuss them with your legal counsel. Failure to
properly fill out the Adoption Agreement may result in disqualification of
your plan. This Adoption Agreement may only be used in conjunction with Basic
Plan Document Number 03.
(Note: The Employer, Plan Administrator and Trustee, if applicable, must all
sign below.)
Executed at DALLAS, TEXAS, this 31 day of DECEMBER, 1996.
Employer's Exact Name: AMTECH CORPORATION
Witness: /s/ BARBARA MILLER By: /s/ JOHN D. PELLEGRINI
---------------------- ---------------------------------
Title: VPHR
Additional Adopting Employer's Exact Name: CARDKEY SYSTEMS, INC.
Witness: /s/ BARBARA MILLER By: /s/ JOHN D. PELLEGRINI
---------------------- ---------------------------------
Title: VPHR
RPSTNS -45- May 22, 1996
<PAGE>
Additional Adopting Employer's Exact Name: AMGT CORPORATION
Witness: /s/ BARBARA MILLER By: /s/ JOHN D. PELLEGRINI
---------------------- ---------------------------------
Title: VPHR
Additional Adopting Employer's Exact Name: AMTECH WORLD CORPORATION
Witness: /s/ BARBARA MILLER By: /s/ JOHN D. PELLEGRINI
---------------------- ---------------------------------
Title: VPHR
Additional Adopting Employer's Exact Name: WAVENET INC.
Witness: /s/ BARBARA MILLER By: /s/ JOHN D. PELLEGRINI
---------------------- ---------------------------------
Title: VPHR
ACCEPTED this 31st day of December 1996.
Witness: /s/ BARBARA MILLER By (Plan Administrator): /s/ JOHN D. PELLEGRINI
-------------------- -----------------------
Witness: By (Plan Administrator):
-------------------- -----------------------
Witness: By (Plan Administrator):
-------------------- -----------------------
Witness: By (Trustee):
-------------------- ----------------------------------
Witness: By (Trustee):
-------------------- ----------------------------------
Witness: By (Trustee):
-------------------- ----------------------------------
ACCEPTED this 3rd day of February 1997.
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By (Authorized Representative): /s/ Byron Oliver
--------------------------
RPSTNS -46- May 22, 1996
<PAGE>
EXHIBIT 10.17
Execution Version
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated November 4, 1996, is
entered into between Amtech Corporation, a Texas corporation, with its principal
executive offices in Dallas, Texas (the "Company"), and G. Russell Mortenson, an
individual currently residing in Plano, Texas, who is currently employed as
President & Chief Executive Officer of the Company ("Employee").
Recitals
--------
A. The Company and Employee have entered into an Employment Agreement,
dated January 1, 1990, as amended (the "Employment Agreement"), which expires on
the date specified in Section 2 thereof (the "Expiration Date").
B. In lieu of extending the term of the Employment Agreement or entering
into a new employment agreement, the Company and Employee desire to enter into
this Severance Agreement, which will supplement the Employment Agreement until
the Expiration Date and thereafter survive it .
C. In consideration of the Company's agreements herein, Employee is
willing to continue working for the Company or an Affiliate, as applicable, on
an "at-will" basis after the Expiration Date.
Terms and Conditions
--------------------
In consideration of the recitals and the agreements herein and other good
and valuable consideration, the parties agree as follows:
1. Definitions.
-----------
1.1 An "Acquiring Person" shall mean any person (including any "person" as
such term is used in Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) that, together with all Affiliates
and Associates of such person, is the beneficial owner of 10% or more of the
outstanding Common Stock. The term "Acquiring Person" shall not include the
Company, any subsidiary of the Company, any employee benefit plan of the Company
or subsidiary of the Company, or any person to the extent such person is holding
Common Stock for or pursuant to the terms of any such plan. For the purposes of
this Agreement, a person who becomes an Acquiring Person by acquiring beneficial
ownership of 10% or more of the Common Stock at any time after the date of this
Agreement shall continue to be an Acquiring Person whether or not such person
-1-
<PAGE>
continues to be the beneficial owner of 10% or more of the outstanding Common
Stock.
1.2 "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act in effect on the date of this Agreement.
1.3 The Company and its Affiliates shall have "Cause" to terminate
Employee's employment upon (1) the willful and continued failure by Employee to
substantially perform Employee's employment duties (other than any such failure
resulting from Employee's incapacity due to physical or mental illness), after
written demand for substantial performance is delivered by the Company or an
Affiliate, as applicable, that specifically identifies the manner in which the
Company or the Affiliate, as applicable, believes Employee has not substantially
performed Employee's duties; or (2) the willful engaging by Employee in
misconduct that is materially injurious to the Company or employing Affiliate,
as applicable; or (3) the conviction of Employee of any felony or crime of moral
turpitude; or (4) Employee attains the mandatory retirement age specified in any
applicable retirement plan of the Company or any succcessor-in-interest (but for
purposes of this clause (4), any such mandatory retirement age shall not be less
than age 65). For purposes of this definition no act, or failure to act, on
Employee's part shall be considered "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company or the
applicable Affiliate(s), or both, as applicable. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without the
following procedures having been adhered to: (a) reasonable written notice to
Employee, setting forth the reasons for the Company's or the Affiliate's
intention to terminate for Cause; (b) an opportunity for Employee, together with
Employee's counsel, to be heard before the Amtech Corporation Board of
Directors; and (c) delivery to Employee of a written Notice of Termination
finding that, in the good faith opinion of the Amtech Corporation Board of
Directors, Employee was guilty of conduct set forth above in clause (1), (2) or
(3) above, and specifying the particulars thereof in detail.
1.4 "Change in Control" shall mean the occurrence of any of the following
events:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, other than an Affiliate, and as
a result of such merger, consolidation or reorganization less than 51% of
the combined voting power to elect each class of directors of the then
outstanding securities of the remaining corporation
-2-
<PAGE>
or legal person or its ultimate parent immediately after such transaction
is owned, directly or indirectly, in the aggregate by persons who were
shareholders, directly or indirectly, of the Company immediately prior to
such merger, consolidation, or reorganization;
(ii) The Company sells all or substantially all of its assets to any
other corporation or other legal person, other than an Affiliate, and as a
result of such sale less than 51% of the combined voting power to elect
each class of directors of the then outstanding securities of such
corporation or legal person or its ultimate parent immediately after such
transaction is owned, directly or indirectly, in the aggregate by persons
who were shareholders, directly or indirectly, of the Company immediately
prior to such sale;
(iii) Any Acquiring Person has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule
or regulation promulgated under the Exchange Act) of securities which when
added to any securities already owned by such person would represent in the
aggregate 50% or more of the then outstanding securities of the Company
which are entitled to vote to elect any class of directors;
(iv) If at any time, the Continuing Directors then serving on the
Board of Directors of the Company cease for any reason to constitute at
least a majority thereof; or
(v) Any occurrence that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A or any successor rule or
regulation promulgated under the Exchange Act.
1.5 "Change in Control Payments" shall mean three times the higher of (i)
Employee's annual base salary in effect on the date of the Change in Control or
(ii) Employee's annual base salary in effect on the date of the Employee's
separation from employment following the Change in Control.
1.6 A "Continuing Director" shall mean a director of the Company who (i)
is not an Acquiring Person or an Affiliate or Associate thereof, or a
representative of an Acquiring Person or nominated for election by an Acquiring
Person, and (ii) was either a member of the Board of Directors of the Company on
the date of this Agreement or subsequently became a director of the Company and
whose initial election or initial nomination for election by the Company's
shareholders was approved by a majority of the Continuing Directors then on the
Board of Directors of the Company.
-3-
<PAGE>
1.7 "Disability" shall mean any medically determinable physical or mental
impairment that can reasonably be expected to prevent Employee from performing
substantially all of Employee's customary employment duties for at least six
months.
1.8 "Good Reason" shall mean the occurrence of any of the following
events:
(a) any material diminution in Employee's title and duties that has
not been cured within thirty days after notice of such noncompliance has
been given (within 30 days of the alleged material diminution) by Employee
to the Company or the employing Affiliate, as applicable. A change in title
or duties will not be considered to be a "material diminution" in title or
duties if, after such change, Employee is an officer of the Company;
Employee continues to report to the Company's Board of Directors; and a
substantial portion of Employee's duties are in Employee's field of
professional training or experience.
(b) a reduction of more than 10% in Employee's base salary (with the
10% being cumulative over the term of Employee's employment, but any
percentage reduction that is actually made is made against the Employee's
then current base salary).
EXAMPLE: assume Employee's base salary is $100,000. The Company or
Affiliate, as applicable, is permitted to reduce Employee's base salary by
up to 10% ($10,000) without giving Employee "Good Reason" to terminate
employment. Any further salary reductions would constitute "Good Reason"
to terminate employment.
EXAMPLE: assume Employee's base salary is $100,000. Assume the Company or
Affiliate, as applicable, reduces Employee's base salary by 8% ($8,000).
Then, assume Employee's base salary is subsequently increased to $120,000.
The Company or Affilate is entitled to reduce the $120,000 salary by up to
2% ($2,400) without giving Employee "Good Reason to terminate employment.
Any further salary reductions would constitute "Good Reason" to terminate
employment.
(c) any purported termination for Cause of Employee's employment
that is not effected pursuant to the procedural requirements of Subsection
1.3.
(d) the location of Employee's place of employment is moved more
than 50 miles from its current location.
(e) Employee becomes the subject of a Disability.
-4-
<PAGE>
1.9 "Notice of Termination" shall mean a notice that shall indicate the
specific reasons for termination and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Employee's
employment.
1.10 "Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an incorporated organization or a
government or political subdivision thereof.
1.11 "Severance Payment" shall mean an amount equal to three months of
Employee's then-current monthly base salary for those Employees whose aggregate
period of employment with the Company or an Affiliate is a year or less. For
other Employees, the "Severance Payment" shall be an amount determined
according to the following formula:
M = 3 + [(Y-1) x 2]
M = the number of months of Employee's then-current monthly base salary
that the Company is required to pay to Employee as severance pay; provided
--------
that, in no event shall the value of M exceed 24; provided further that,
---- ---------------------
from and after the Expiration Date if the event giving rise to the
Severance Payment occurs on or before the 180th day following a Change in
Control (with the day immediately following the day of the occurrence of
the Change in Control being day "1"), then the amount of the Severance
Payment shall be the greater of (i) the amount provided for under the
formula above or (ii) the amount provided for in Section 3 (as if Employee
had resigned from employment pursuant to Section 3); and provided further
--------------------
that, if either of the events specified in Section 2(a) or 2(b) occurs
----
prior to the Expiration Date, then M shall be reduced by the number of
whole months of Employee's then-current monthly base salary, if any, that
the Company is required to pay to Employee under the Employment Agreement.
Y = number of years or partial years that Employee has been employed by the
Company or an Affiliate. For purpose of calculating "Y" with respect to
employment with an Affiliate of the Company only the years or partial years
during which the Affiliate was an "Affiliate" will be counted.
EXAMPLE: Assume Employee has been employed by the Company or an Affiliate
for an aggregate of 3-1/2 years. Then,
M = 3 + [(4-1) x 2];
M = 3 + [3 x 2];
M = 3 + 6
M = 9
-5-
<PAGE>
Thus, Employee would be entitled to receive 9 months of the Employee's
then-current monthly base salary as a Severance Payment.
2. Severance Payment. From and after the date hereof, upon the occurrence of
-----------------
either of the following events, and subject to receiving a release reasonably
satisfactory to the Company relating to employment matters, the Company will pay
to Employee the Severance Payment:
(a) Employee's employment with the Company and its Affiliates is
terminated by the Company or the employing Affiliate, as applicable, other
than for Cause; or
(b) Employee has Good Reason to terminate employment and actually
does so.
To terminate Employee's employment other than for Cause pursuant to 2(a),
the Company or the employing Affiliate, as applicable, shall give Employee
written notice of such termination. Such notice shall be effective 90 days
following the Employee's receipt thereof.
3. Change in Control Payment. From and after the Expiration Date, if Employee
-------------------------
resigns from employment with the Company and its Affiliates on or before the
180th day following a Change in Control (with the day immediately following the
day of the occurrence of the Change in Control being day "1"), the Company shall
pay to Employee the Change in Control Payment.
4. Mode of Payment. The Severance Payment and the Change in Control Payment
---------------
shall be paid in a lump sum (less applicable withholdings for taxes and other
withholdings required by applicable law) contemporaneously with the occurrence
of the applicable event. The Company's obligation to pay the Severance Payment
and the Change in Control Payment is absolute, and such payments shall not be
mitigated or offset by virtue of Employee obtaining new employment or failing to
seek new employment.
5. Confidential Information. Employee recognizes and acknowledges that
------------------------
Employee will have access to confidential information of the Company and its
Affiliates, including, without limitation, customer information, lists of
suppliers and costs, information concerning the business and operations of the
Company and its Affiliates and proprietary data, information, concepts and ideas
(whether or not patentable or copyrightable) relating to the business of the
Company and its Affiliates. Employee agrees not to disclose such confidential
information (except as may be necessary in the performance of Employee's duties)
to any Person and not to use such confidential information (other than for the
conduct of the business of the Company and its Affiliates), either during the
duration of Employee's employment
-6-
<PAGE>
or within the three years immediately following Employee's termination of
employment, unless Employee has received the written consent of the Company and
its Affiliates, as applicable, or unless such confidential information becomes
public knowledge through no wrongful act of Employee. Upon termination of
Employee's employment for any reason, Employee shall promptly deliver to the
Company all drawings, manuals, letters, notebooks, customer lists, documents,
records, equipment, files, computer disks or tapes, reports or any other
materials relating to the business of the Company or any of its Affiliates (and
all copies) which are in Employee's possession or under Employee's control.
Additionally, the parties acknowledge that Employee has previously executed an
Assignment of Inventions and Confidential Information Agreement, signed June 22,
1988, which shall survive Employee's separation from employment in accordance
with its terms.
6. Noncompetition. Employee agrees and covenants:
--------------
(a) For a period (the "Non-Competition Term") of 12 months after
Employee ceases to be employed by the Company or an Affiliate, as the case
may be, Employee will not compete directly or indirectly with the Company
or its Affiliates in the Designated Geographical Area in any business or
businesses conducted by the Company and its Affiliates and in connection
therewith will not furnish advice to, solicit or do business with any past
or current customer of the Company or an Affiliate involving such business
or businesses. For purposes of this Section 6, "Competition" shall
include, without limitation, any engagement in any business whether as
proprietor, partner, joint venturer, employee, agent, officer or holder of
more than five percent (5%) of any class of equity ownership of a business
enterprise, which is competitive with any business or businesses conducted
by the Company or an Affiliate.
(b) For purposes of this Section 6, "Designated Geographical Area"
shall mean and include the United States and any foreign jurisdiction in
which the Company or an Affiliate is actively conducting business, directly
or indirectly, at the time Employee ceases to be employed by the Company or
an Affiliate.
(c) The non-competition covenant of Employee contained in this
Section 6 (the "non-competition covenant") shall be construed as an
agreement independent of any other provision of this Agreement and the
existence of any claim or cause of action of Employee against the Company
or any Affiliate, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company or an Affiliate
of the non-competition covenant. The Company and its Affiliates shall be
entitled
-7-
<PAGE>
to seek equitable relief to enforce the non-competition covenant.
(d) Although the Company and Employee have in good faith used their
best efforts to make the non-competition covenant reasonable in both
geographic area and in duration, and it is not anticipated, nor is it
intended, by either party to this Agreement that any court of competent
jurisdiction will find it necessary to reform the non-competition covenant
to make it reasonable in both geographic area and in duration, or
otherwise, the Company and Employee understand and agree that if a court of
competent jurisdiction determines it necessary to reform the non-
competition covenant in order to make it reasonable in either geographic
area or duration, or otherwise, damages, if any, for a breach of the non-
competition covenant, as so reformed, will be deemed to accrue to the
Company or an Affiliate as and from the date of such a breach only insofar
as the damages for such breach related to an action which accrued within
the scope of the geographic area and duration as so reformed.
7. Dispute Resolution. Employee and the Company agree to the alternate
------------------
dispute resolution provisions contained in Exhibit A attached hereto.
---------
Specifically, if a dispute arises between the parties as to whether or not
Employee has "Good Reason" to terminate employment, Employee is not required to
resign from employment with the Company or an Affiliate, as applicable, to
"perfect" Employee's right to make a claim for the Severance Payment, although
Employee may resign from employment if Employee chooses. Such disputes shall be
resolved in accordance with the provisions of Exhibit A. If the dispute is
---------
resolved in Employee's favor and it is determined that Employee has "Good
Reason" to terminate employment, then Employee will be required to terminate
employment and provide the required release in order to collect the Severance
Payment.
8. General.
-------
8.1 The Employment Agreement shall continue to be effective in accordance
with its terms until the Expiration Date; until such Expiration Date the
provisions of this Agreement supplement the Employment Agreement, and until the
Expiration Date in the event of a conflict between this Agreement and the
Employment Agreement, the Employment Agreement shall govern. From and after the
Expiration Date, the provisions of Sections 5, 6, and 7 of this Agreement shall
supersede the analogous provisions in the Employment Agreement.
8.2 Except for the Employment Agreement, this Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to the subject
-8-
<PAGE>
matter hereof. This Agreement may be amended only by an instrument in writing
executed by both parties.
8.3 This Agreement will be binding upon and inure to the benefit of the
parties hereto and any successors in interest to the Company following a Change
in Control.
8.4 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas (excluding its conflict of laws
rules).
8.5 This Agreement may be executed in a number of identical counterparts,
each of which constitute collectively, one agreement; but, in making proof of
this Agreement, it shall not be necessary to produce or account for more than
one counterpart.
AMTECH CORPORATION
By: /s/ Steve M. York
---------------------------------
Steve M. York
Senior Vice President &
Chief Financial Officer
EMPLOYEE:
/s/ G. Russell Mortenson
-------------------------------------
-9-
<PAGE>
EXHIBIT A
---------
ALTERNATIVE DISPUTE RESOLUTION
------------------------------
A. Except as otherwise provided in this Exhibit A, Amtech Corporation, or
---------
its employing subsidiary, as applicable (individually and collectively, the
"Company"), and the Employee consent and agree to the resolution, in the manner
provided for in this Exhibit A, of all claims or controversies brought by the
---------
Employee ("Claims") for which a court otherwise would be authorized by law to
grant relief, in any way arising out of, relating to, or associated with (1) the
Employee's employment or termination from employment with the Company or any
adverse employment action by the Company, or (2) any other claims the Employee
may have against the Company, any benefit plans of the Company or any
fiduciaries, administrators, and affiliates of any benefit plan, or any of the
Company's officers, directors, employees, or agents in their capacity as such,
or (3) any issue concerning the formation, applicability, interpretation, or
enforceability of this Exhibit A.
---------
The Employee acknowledges that the Claims intended to be covered by
this Exhibit A include (but are not limited to) claims or controversies under or
---------
relating to the Employee's severance agreement (of which this Exhibit A is a
---------
part); any federal, state, or local constitution, law, or regulation prohibiting
discrimination, harassment, or discharge; an alleged or actual contract; any
Company policy or benefit; entitlement to wages or other compensation; and, any
claim for personal, emotional, physical, economic, or other injury.
B. The only Claims otherwise within the definition of Claims that are not
covered by this Exhibit A are: (1) any administrative actions that the Employee
---------
is permitted to pursue under applicable law that are not precluded by virtue of
the Employee having entered into this Exhibit A; (2) any Claim by the Employee
---------
for workers' compensation benefits or unemployment compensation benefits; or (3)
any Claim by the Employee for benefits under a Company pension or benefit plan
that provides its own non-judicial dispute resolution procedure.
C. The Employee waives any right to assert a Claim, unless he or she
gives written notice of any Claim to Amtech Corporation by the earlier of (1)
the date that is one year after the day the Employee first has knowledge of the
event giving rise to the Claim or (2) the date upon which the applicable statute
of limitations expires.
D. Within 20 days of receipt of the notice of a Claim, THE COMPANY, IN
ITS SOLE DISCRETION, MAY ELECT TO SUBMIT ANY CLAIMS TO BINDING ARBITRATION IN
ACCORDANCE WITH THE PROVISIONS OF THIS
A-1 /s/
----------
Initial
<PAGE>
EXHIBIT A. If the Company elects not to submit a Claim to binding arbitration,
- - ---------
then the Employee may initiate or otherwise pursue the Claim by legal
proceedings other than binding arbitration (e.g., a lawsuit), except that IF THE
EMPLOYEE INITIATES A LAWSUIT, HE OR SHE HEREBY WAIVES THE RIGHT TO REQUEST OR
OBTAIN A JURY TRIAL WITH RESPECT TO ANY SUCH CLAIMS. The Employee agrees that if
he or she initiates litigation in violation of this Exhibit A, he or she will
---------
incur liability to the person(s) sued, including the obligation to pay their
legal fees and expenses. The sole and exclusive venue of any lawsuit initiated
by the Employee relating to any Claims shall be Dallas County, Texas.
E. The arbitration will be conducted in accordance with the provisions of
this Exhibit A and the Employment Dispute Resolution Rules of the American
---------
Arbitration Association ("AAA") in effect at the time the written notice of the
Claim is received. An arbitrator shall be selected in the manner provided for in
the Employment Dispute Resolution Rules of the AAA, except that the parties
agree that the arbitrator shall (1) be an attorney licensed in the state where
the arbitration is being conducted and (2) have expertise in the area of
employment law. The arbitration will be held in Dallas County, Texas.
F. Each party shall have the right to take one deposition of the other
party and any expert witness or other witness designated by the other party.
Additional deposition discovery may be taken only if the arbitrator so orders,
upon a showing of substantial need. The Employee understands that by agreeing to
submit Claims to arbitration he or she gives up the right to seek a trial by
court or jury and the right to an appeal from any errors of the court and
forgoes any and all related rights he or she may otherwise have under federal
and state laws.
G. In the event any provision of this Exhibit A is found by an arbitrator
---------
or court to be unenforceable, in whole or in part, the remaining provisions of
this Exhibit A shall nevertheless remain enforceable and the unenforceable
---------
provisions shall, to the extent permitted under applicable law, be modified so
as to be enforceable to the maximum extent possible under applicable law.
H. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS CAREFULLY READ THIS EXHIBIT
-------
A; THAT HE OR SHE UNDERSTANDS ITS TERMS; THAT ALL UNDERSTANDINGS BETWEEN THE
- - -
EMPLOYEE AND THE COMPANY RELATING TO THE SUBJECTS COVERED IN THIS EXHIBIT A ARE
---------
CONTAINED IN THIS EXHIBIT A; AND, THAT HE OR SHE HAS ENTERED INTO THIS EXHIBIT A
--------- ---------
VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE
COMPANY OTHER THAN THOSE CONTAINED IN THIS EXHIBIT A ITSELF OR THE EMPLOYMENT
---------
AGREEMENT (TO WHICH THIS EXHIBIT A IS A PART).
---------
A-2 /s/
----------
Initial
<PAGE>
EXHIBIT 10.22
Execution Version
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated November 4, 1996, is
entered into between Amtech Corporation, a Texas corporation, with its principal
executive offices in Dallas, Texas (the "Company"), and Dr. Jeremy A. Landt, an
individual currently residing in Santa Fe, New Mexico, who is currently employed
as Chief Technical Officer of the Company ("Employee").
Recitals
--------
A. The Company and Employee have entered into an Employment Agreement,
dated August 1, 1990, as amended (the "Employment Agreement"), which expires on
the date specified in Section 2 thereof (the "Expiration Date").
B. In lieu of extending the term of the Employment Agreement or
entering into a new employment agreement, the Company and Employee desire to
enter into this Severance Agreement, which will supplement the Employment
Agreement until the Expiration Date and thereafter survive it.
C. In consideration of the Company's agreements herein, Employee is
willing to continue working for the Company or an Affiliate, as applicable, on
an "at-will" basis after the Expiration Date.
Terms and Conditions
--------------------
In consideration of the recitals and the agreements herein and other good
and valuable consideration, the parties agree as follows:
1. Definitions.
-----------
1.1 An "Acquiring Person" shall mean any person (including any "person" as
such term is used in Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) that, together with all Affiliates
and Associates of such person, is the beneficial owner of 10% or more of the
outstanding Common Stock. The term "Acquiring Person" shall not include the
Company, any subsidiary of the Company, any employee benefit plan of the Company
or subsidiary of the Company, or any person to the extent such person is holding
Common Stock for or pursuant to the terms of any such plan. For the purposes of
this Agreement, a person who becomes an Acquiring Person by acquiring beneficial
ownership of 10% or more of the Common Stock at any time after the date of this
Agreement shall continue to be an Acquiring Person whether or not such person
-1-
<PAGE>
continues to be the beneficial owner of 10% or more of the outstanding Common
Stock.
1.2 "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act in effect on the date of this Agreement.
1.3 The Company and its Affiliates shall have "Cause" to terminate
Employee's employment upon (1) the willful and continued failure by Employee to
substantially perform Employee's employment duties (other than any such failure
resulting from Employee's incapacity due to physical or mental illness), after
written demand for substantial performance is delivered by the Company or an
Affiliate, as applicable, that specifically identifies the manner in which the
Company or the Affiliate, as applicable, believes Employee has not substantially
performed Employee's duties; or (2) the willful engaging by Employee in
misconduct that is materially injurious to the Company or employing Affiliate,
as applicable; or (3) the conviction of Employee of any felony or crime of moral
turpitude; or (4) Employee attains the mandatory retirement age specified in any
applicable retirement plan of the Company or any succcessor-in-interest (but for
purposes of this clause (4), any such mandatory retirement age shall not be less
than age 65). For purposes of this definition no act, or failure to act, on
Employee's part shall be considered "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company or the
applicable Affiliate(s), or both, as applicable. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without the
following procedures having been adhered to: (a) reasonable written notice to
Employee, setting forth the reasons for the Company's or the Affiliate's
intention to terminate for Cause; (b) an opportunity for Employee, together with
Employee's counsel, to be heard before the Amtech Corporation Board of
Directors; and (c) delivery to Employee of a written Notice of Termination
finding that, in the good faith opinion of the Amtech Corporation Board of
Directors, Employee was guilty of conduct set forth above in clause (1), (2) or
(3) above, and specifying the particulars thereof in detail.
1.4 "Change in Control" shall mean the occurrence of any of the following
events:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, other than an Affiliate, and as
a result of such merger, consolidation or reorganization less than 51% of
the combined voting power to elect each class of directors of the then
outstanding securities of the remaining corporation
-2-
<PAGE>
or legal person or its ultimate parent immediately after such transaction
is owned, directly or indirectly, in the aggregate by persons who were
shareholders, directly or indirectly, of the Company immediately prior to
such merger, consolidation, or reorganization;
(ii) The Company sells all or substantially all of its assets to any
other corporation or other legal person, other than an Affiliate, and as a
result of such sale less than 51% of the combined voting power to elect
each class of directors of the then outstanding securities of such
corporation or legal person or its ultimate parent immediately after such
transaction is owned, directly or indirectly, in the aggregate by persons
who were shareholders, directly or indirectly, of the Company immediately
prior to such sale;
(iii) Any Acquiring Person has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule
or regulation promulgated under the Exchange Act) of securities which when
added to any securities already owned by such person would represent in the
aggregate 50% or more of the then outstanding securities of the Company
which are entitled to vote to elect any class of directors;
(iv) If at any time, the Continuing Directors then serving on the
Board of Directors of the Company cease for any reason to constitute at
least a majority thereof; or
(v) Any occurrence that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A or any successor rule or
regulation promulgated under the Exchange Act.
1.5 "Change in Control Payments" shall mean three times the higher of (i)
Employee's annual base salary in effect on the date of the Change in Control or
(ii) Employee's annual base salary in effect on the date of the Employee's
separation from employment following the Change in Control.
1.6 A "Continuing Director" shall mean a director of the Company who (i)
is not an Acquiring Person or an Affiliate or Associate thereof, or a
representative of an Acquiring Person or nominated for election by an Acquiring
Person, and (ii) was either a member of the Board of Directors of the Company on
the date of this Agreement or subsequently became a director of the Company and
whose initial election or initial nomination for election by the Company's
shareholders was approved by a majority of the Continuing Directors then on the
Board of Directors of the Company.
-3-
<PAGE>
1.7 "Disability" shall mean any medically determinable physical or mental
impairment that can reasonably be expected to prevent Employee from performing
substantially all of Employee's customary employment duties for at least six
months.
1.8 "Good Reason" shall mean the occurrence of any of the following
events:
(a) any material diminution in Employee's title and duties that has
not been cured within thirty days after notice of such noncompliance has
been given (within 30 days of the alleged material diminution) by Employee
to the Company or the employing Affiliate, as applicable. A change in title
or duties will not be considered to be a "material diminution" in title or
duties if, after such change, Employee is an officer of the Company;
Employee's reporting relationship does not change or Employee reports to
the Company's Chief Executive Officer or Chief Operating Officer; and a
substantial portion of Employee's duties are in Employee's field of
professional training or experience.
(b) a reduction of more than 10% in Employee's base salary (with the
10% being cumulative over the term of Employee's employment, but any
percentage reduction that is actually made is made against the Employee's
then current base salary).
EXAMPLE: assume Employee's base salary is $100,000. The Company or
Affiliate, as applicable, is permitted to reduce Employee's base salary by
up to 10% ($10,000) without giving Employee "Good Reason" to terminate
employment. Any further salary reductions would constitute "Good Reason"
to terminate employment.
EXAMPLE: assume Employee's base salary is $100,000. Assume the Company or
Affiliate, as applicable, reduces Employee's base salary by 8% ($8,000).
Then, assume Employee's base salary is subsequently increased to $120,000.
The Company or Affilate is entitled to reduce the $120,000 salary by up to
2% ($2,400) without giving Employee "Good Reason to terminate employment.
Any further salary reductions would constitute "Good Reason" to terminate
employment.
(c) any purported termination for Cause of Employee's employment that
is not effected pursuant to the procedural requirements of Subsection 1.3.
(d) the location of Employee's place of employment is moved more than
50 miles from its current location.
(e) Employee becomes the subject of a Disability.
-4-
<PAGE>
1.9 "Notice of Termination" shall mean a notice that shall indicate the
specific reasons for termination and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Employee's
employment.
1.10 "Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an incorporated organization or a
government or political subdivision thereof.
1.11 "Severance Payment" shall mean an amount equal to three months of
Employee's then-current monthly base salary for those Employees whose aggregate
period of employment with the Company or an Affiliate is a year or less. For
other Employees, the "Severance Payment" shall be an amount determined
according to the following formula:
M = 3 + [(Y-1) x 2]
M = the number of months of Employee's then-current monthly base salary
that the Company is required to pay to Employee as severance pay; provided
--------
that, in no event shall the value of M exceed 18; provided further that,
---- ---------------------
from and after the Expiration Date if the event giving rise to the
Severance Payment occurs on or before the 180th day following a Change in
Control (with the day immediately following the day of the occurrence of
the Change in Control being day "1"), then the amount of the Severance
Payment shall be the greater of (i) the amount provided for under the
formula above or (ii) the amount provided for in Section 3 (as if Employee
had resigned from employment pursuant to Section 3); and provided further
--------------------
that, if either of the events specified in Section 2(a) or 2(b) occurs
----
prior to the Expiration Date, then M shall be reduced by the number of
whole months of Employee's then-current monthly base salary, if any, that
the Company is required to pay to Employee under the Employment Agreement.
Y = number of years or partial years that Employee has been employed by the
Company or an Affiliate. For purpose of calculating "Y" with respect to
employment with an Affiliate of the Company only the years or partial years
during which the Affiliate was an "Affiliate" will be counted.
EXAMPLE: Assume Employee has been employed by the Company or an Affiliate
for an aggregate of 3-1/2 years. Then,
M = 3 + [(4-1) x 2];
M = 3 + [3 x 2];
M = 3 + 6
M = 9
-5-
<PAGE>
Thus, Employee would be entitled to receive 9 months of the Employee's
then-current monthly base salary as a Severance Payment.
2. Severance Payment. From and after the date hereof, upon the occurrence of
-----------------
either of the following events, and subject to receiving a release reasonably
satisfactory to the Company relating to employment matters, the Company will pay
to Employee the Severance Payment:
(a) Employee's employment with the Company and its Affiliates is
terminated by the Company or the employing Affiliate, as applicable, other
than for Cause; or
(b) Employee has Good Reason to terminate employment and actually does
so.
To terminate Employee's employment other than for Cause pursuant to 2(a),
the Company or the employing Affiliate, as applicable, shall give Employee
written notice of such termination. Such notice shall be effective 90 days
following the Employee's receipt thereof.
3. Change in Control Payment. From and after the Expiration Date, if Employee
-------------------------
resigns from employment with the Company and its Affiliates on or before the
180th day following a Change in Control (with the day immediately following the
day of the occurrence of the Change in Control being day "1"), the Company shall
pay to Employee the Change in Control Payment.
4. Mode of Payment. The Severance Payment and the Change in Control Payment
---------------
shall be paid in a lump sum (less applicable withholdings for taxes and other
withholdings required by applicable law) contemporaneously with the occurrence
of the applicable event. The Company's obligation to pay the Severance Payment
and the Change in Control Payment is absolute, and such payments shall not be
mitigated or offset by virtue of Employee obtaining new employment or failing to
seek new employment.
5. Confidential Information. Employee recognizes and acknowledges that
------------------------
Employee will have access to confidential information of the Company and its
Affiliates, including, without limitation, customer information, lists of
suppliers and costs, information concerning the business and operations of the
Company and its Affiliates and proprietary data, information, concepts and ideas
(whether or not patentable or copyrightable) relating to the business of the
Company and its Affiliates. Employee agrees not to disclose such confidential
information (except as may be necessary in the performance of Employee's duties)
to any Person and not to use such confidential information (other than for the
conduct of the business of the Company and its Affiliates), either during the
duration of Employee's employment
-6-
<PAGE>
or within the three years immediately following Employee's termination of
employment, unless Employee has received the written consent of the Company and
its Affiliates, as applicable, or unless such confidential information becomes
public knowledge through no wrongful act of Employee. Upon termination of
Employee's employment for any reason, Employee shall promptly deliver to the
Company all drawings, manuals, letters, notebooks, customer lists, documents,
records, equipment, files, computer disks or tapes, reports or any other
materials relating to the business of the Company or any of its Affiliates (and
all copies) which are in Employee's possession or under Employee's control.
Additionally, the parties acknowledge that Employee has previously executed an
Assignment of Inventions and Confidential Information Agreement, signed November
8, 1994, which shall survive Employee's separation from employment in accordance
with its terms.
6. Noncompetition. Employee agrees and covenants:
--------------
(a) For a period (the "Non-Competition Term") of 12 months after
Employee ceases to be employed by the Company or an Affiliate, as the case
may be, Employee will not compete directly or indirectly with the Company
or its Affiliates in the Designated Geographical Area in any business or
businesses conducted by the Company and its Affiliates and in connection
therewith will not furnish advice to, solicit or do business with any past
or current customer of the Company or an Affiliate involving such business
or businesses. For purposes of this Section 6, "Competition" shall
include, without limitation, any engagement in any business whether as
proprietor, partner, joint venturer, employee, agent, officer or holder of
more than five percent (5%) of any class of equity ownership of a business
enterprise, which is competitive with any business or businesses conducted
by the Company or an Affiliate.
(b) For purposes of this Section 6, "Designated Geographical Area"
shall mean and include the United States and any foreign jurisdiction in
which the Company or an Affiliate is actively conducting business, directly
or indirectly, at the time Employee ceases to be employed by the Company or
an Affiliate.
(c) The non-competition covenant of Employee contained in this Section
6 (the "non-competition covenant") shall be construed as an agreement
independent of any other provision of this Agreement and the existence of
any claim or cause of action of Employee against the Company or any
Affiliate, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company or an Affiliate of
the non-competition covenant. The Company and its Affiliates shall be
entitled
-7-
<PAGE>
to seek equitable relief to enforce the non-competition covenant.
(d) Although the Company and Employee have in good faith used their
best efforts to make the non-competition covenant reasonable in both
geographic area and in duration, and it is not anticipated, nor is it
intended, by either party to this Agreement that any court of competent
jurisdiction will find it necessary to reform the non-competition covenant
to make it reasonable in both geographic area and in duration, or
otherwise, the Company and Employee understand and agree that if a court of
competent jurisdiction determines it necessary to reform the non-
competition covenant in order to make it reasonable in either geographic
area or duration, or otherwise, damages, if any, for a breach of the non-
competition covenant, as so reformed, will be deemed to accrue to the
Company or an Affiliate as and from the date of such a breach only insofar
as the damages for such breach related to an action which accrued within
the scope of the geographic area and duration as so reformed.
7. Dispute Resolution. Employee and the Company agree to the alternate
------------------
dispute resolution provisions contained in Exhibit A attached hereto.
---------
Specifically, if a dispute arises between the parties as to whether or not
Employee has "Good Reason" to terminate employment, Employee is not required to
resign from employment with the Company or an Affiliate, as applicable, to
"perfect" Employee's right to make a claim for the Severance Payment, although
Employee may resign from employment if Employee chooses. Such disputes shall be
resolved in accordance with the provisions of Exhibit A. If the dispute is
---------
resolved in Employee's favor and it is determined that Employee has "Good
Reason" to terminate employment, then Employee will be required to terminate
employment and provide the required release in order to collect the Severance
Payment.
8. General.
-------
8.1 The Employment Agreement shall continue to be effective in accordance
with its terms until the Expiration Date; until such Expiration Date the
provisions of this Agreement supplement the Employment Agreement, and until the
Expiration Date in the event of a conflict between this Agreement and the
Employment Agreement, the Employment Agreement shall govern. From and after the
Expiration Date, the provisions of Sections 5, 6, and 7 of this Agreement shall
supersede the analogous provisions in the Employment Agreement.
8.2 Except for the Employment Agreement, this Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to the subject
-8-
<PAGE>
matter hereof. This Agreement may be amended only by an instrument in writing
executed by both parties.
8.3 This Agreement will be binding upon and inure to the benefit of the
parties hereto and any successors in interest to the Company following a Change
in Control.
8.4 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas (excluding its conflict of laws
rules).
8.5 This Agreement may be executed in a number of identical counterparts,
each of which constitute collectively, one agreement; but, in making proof of
this Agreement, it shall not be necessary to produce or account for more than
one counterpart.
AMTECH CORPORATION
By: /s/ G. Russell Mortenson
-------------------------------------
G. Russell Mortenson,
President & Chief
Executive Officer
EMPLOYEE:
/s/ Jeremy A. Landt
----------------------------------------
-9-
<PAGE>
EXHIBIT A
---------
ALTERNATIVE DISPUTE RESOLUTION
------------------------------
A. Except as otherwise provided in this Exhibit A, Amtech Corporation, or
---------
its employing subsidiary, as applicable (individually and collectively, the
"Company"), and the Employee consent and agree to the resolution, in the manner
provided for in this Exhibit A, of all claims or controversies brought by the
---------
Employee ("Claims") for which a court otherwise would be authorized by law to
grant relief, in any way arising out of, relating to, or associated with (1) the
Employee's employment or termination from employment with the Company or any
adverse employment action by the Company, or (2) any other claims the Employee
may have against the Company, any benefit plans of the Company or any
fiduciaries, administrators, and affiliates of any benefit plan, or any of the
Company's officers, directors, employees, or agents in their capacity as such,
or (3) any issue concerning the formation, applicability, interpretation, or
enforceability of this Exhibit A.
---------
The Employee acknowledges that the Claims intended to be covered by this
Exhibit A include (but are not limited to) claims or controversies under or
- - ---------
relating to the Employee's severance agreement (of which this Exhibit A is a
---------
part); any federal, state, or local constitution, law, or regulation prohibiting
discrimination, harassment, or discharge; an alleged or actual contract; any
Company policy or benefit; entitlement to wages or other compensation; and, any
claim for personal, emotional, physical, economic, or other injury.
B. The only Claims otherwise within the definition of Claims that are not
covered by this Exhibit A are: () any administrative actions that the Employee
---------
is permitted to pursue under applicable law that are not precluded by virtue of
the Employee having entered into this Exhibit A; () any Claim by the Employee
---------
for workers' compensation benefits or unemployment compensation benefits; or ()
any Claim by the Employee for benefits under a Company pension or benefit plan
that provides its own non-judicial dispute resolution procedure.
C. The Employee waives any right to assert a Claim, unless he or she
gives written notice of any Claim to Amtech Corporation by the earlier of (1)
the date that is one year after the day the Employee first has knowledge of the
event giving rise to the Claim or (2) the date upon which the applicable statute
of limitations expires.
D. Within 20 days of receipt of the notice of a Claim, THE COMPANY, IN
ITS SOLE DISCRETION, MAY ELECT TO SUBMIT ANY CLAIMS TO BINDING ARBITRATION IN
ACCORDANCE WITH THE PROVISIONS OF THIS
A-1 /s/
-------
Initial
<PAGE>
EXHIBIT A. If the Company elects not to submit a Claim to binding arbitration,
- - ---------
then the Employee may initiate or otherwise pursue the Claim by legal
proceedings other than binding arbitration (e.g., a lawsuit), except that IF THE
EMPLOYEE INITIATES A LAWSUIT, HE OR SHE HEREBY WAIVES THE RIGHT TO REQUEST OR
OBTAIN A JURY TRIAL WITH RESPECT TO ANY SUCH CLAIMS. The Employee agrees that if
he or she initiates litigation in violation of this Exhibit A, he or she will
---------
incur liability to the person(s) sued, including the obligation to pay their
legal fees and expenses. The sole and exclusive venue of any lawsuit initiated
by the Employee relating to any Claims shall be Dallas County, Texas.
E. The arbitration will be conducted in accordance with the provisions
of this Exhibit A and the Employment Dispute Resolution Rules of the American
---------
Arbitration Association ("AAA") in effect at the time the written notice of the
Claim is received. An arbitrator shall be selected in the manner provided for
in the Employment Dispute Resolution Rules of the AAA, except that the parties
agree that the arbitrator shall (1) be an attorney licensed in the state where
the arbitration is being conducted and (2) have expertise in the area of
employment law. The arbitration will be held in Bernalillo County, New Mexico.
F. Each party shall have the right to take one deposition of the other
party and any expert witness or other witness designated by the other party.
Additional deposition discovery may be taken only if the arbitrator so orders,
upon a showing of substantial need. The Employee understands that by agreeing to
submit Claims to arbitration he or she gives up the right to seek a trial by
court or jury and the right to an appeal from any errors of the court and
forgoes any and all related rights he or she may otherwise have under federal
and state laws.
G. In the event any provision of this Exhibit A is found by an arbitrator
---------
or court to be unenforceable, in whole or in part, the remaining provisions of
this Exhibit A shall nevertheless remain enforceable and the unenforceable
---------
provisions shall, to the extent permitted under applicable law, be modified so
as to be enforceable to the maximum extent possible under applicable law.
H. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS CAREFULLY READ THIS EXHIBIT
-------
A; THAT HE OR SHE UNDERSTANDS ITS TERMS; THAT ALL UNDERSTANDINGS BETWEEN THE
- - -
EMPLOYEE AND THE COMPANY RELATING TO THE SUBJECTS COVERED IN THIS EXHIBIT A ARE
---------
CONTAINED IN THIS EXHIBIT A; AND, THAT HE OR SHE HAS ENTERED INTO THIS EXHIBIT A
--------- ---------
VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE
COMPANY OTHER THAN THOSE CONTAINED IN THIS EXHIBIT A ITSELF OR THE EMPLOYMENT
---------
AGREEMENT (TO WHICH THIS EXHIBIT A IS A PART).
---------
A-2 /s/
-------
Initial
<PAGE>
EXHIBIT 10.28
Execution Version
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated November 4, 1996, is
entered into between Amtech Corporation, a Texas corporation, with its principal
executive offices in Dallas, Texas (the "Company"), and Steve M. York, an
individual currently residing in Arlington, Texas, who is currently employed as
Senior Vice President, Chief Financial Officer and Treasurer of the Company
("Employee").
Recitals
--------
A. The Company and Employee have entered into an Employment Agreement,
dated August 6, 1991, as amended (the "Employment Agreement"), which expires on
the date specified in Section 2 thereof (the "Expiration Date").
B. In lieu of extending the term of the Employment Agreement or
entering into a new employment agreement, the Company and Employee desire to
enter into this Severance Agreement, which will supplement the Employment
Agreement until the Expiration Date and thereafter survive it.
C. In consideration of the Company's agreements herein, Employee is
willing to continue working for the Company or an Affiliate, as applicable, on
an "at-will" basis after the Expiration Date.
Terms and Conditions
--------------------
In consideration of the recitals and the agreements herein and other good
and valuable consideration, the parties agree as follows:
1. Definitions.
-----------
1.1 An "Acquiring Person" shall mean any person (including any "person" as
such term is used in Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) that, together with all Affiliates
and Associates of such person, is the beneficial owner of 10% or more of the
outstanding Common Stock. The term "Acquiring Person" shall not include the
Company, any subsidiary of the Company, any employee benefit plan of the Company
or subsidiary of the Company, or any person to the extent such person is holding
Common Stock for or pursuant to the terms of any such plan. For the purposes of
this Agreement, a person who becomes an Acquiring Person by acquiring beneficial
ownership of 10% or more of the Common Stock at any time after the date of this
Agreement shall continue to be an Acquiring Person whether or not such person
-1-
<PAGE>
continues to be the beneficial owner of 10% or more of the outstanding Common
Stock.
1.2 "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act in effect on the date of this Agreement.
1.3 The Company and its Affiliates shall have "Cause" to terminate
Employee's employment upon (1) the willful and continued failure by Employee to
substantially perform Employee's employment duties (other than any such failure
resulting from Employee's incapacity due to physical or mental illness), after
written demand for substantial performance is delivered by the Company or an
Affiliate, as applicable, that specifically identifies the manner in which the
Company or the Affiliate, as applicable, believes Employee has not substantially
performed Employee's duties; or (2) the willful engaging by Employee in
misconduct that is materially injurious to the Company or employing Affiliate,
as applicable; or (3) the conviction of Employee of any felony or crime of moral
turpitude; or (4) Employee attains the mandatory retirement age specified in any
applicable retirement plan of the Company or any succcessor-in-interest (but for
purposes of this clause (4), any such mandatory retirement age shall not be less
than age 65). For purposes of this definition no act, or failure to act, on
Employee's part shall be considered "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company or the
applicable Affiliate(s), or both, as applicable. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without the
following procedures having been adhered to: (a) reasonable written notice to
Employee, setting forth the reasons for the Company's or the Affiliate's
intention to terminate for Cause; (b) an opportunity for Employee, together with
Employee's counsel, to be heard before the Amtech Corporation Board of
Directors; and (c) delivery to Employee of a written Notice of Termination
finding that, in the good faith opinion of the Amtech Corporation Board of
Directors, Employee was guilty of conduct set forth above in clause (1), (2) or
(3) above, and specifying the particulars thereof in detail.
1.4 "Change in Control" shall mean the occurrence of any of the following
events:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, other than an Affiliate, and as
a result of such merger, consolidation or reorganization less than 51% of
the combined voting power to elect each class of directors of the then
outstanding securities of the remaining corporation
-2-
<PAGE>
or legal person or its ultimate parent immediately after such transaction
is owned, directly or indirectly, in the aggregate by persons who were
shareholders, directly or indirectly, of the Company immediately prior to
such merger, consolidation, or reorganization;
(ii) The Company sells all or substantially all of its assets to any
other corporation or other legal person, other than an Affiliate, and as a
result of such sale less than 51% of the combined voting power to elect
each class of directors of the then outstanding securities of such
corporation or legal person or its ultimate parent immediately after such
transaction is owned, directly or indirectly, in the aggregate by persons
who were shareholders, directly or indirectly, of the Company immediately
prior to such sale;
(iii) Any Acquiring Person has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule
or regulation promulgated under the Exchange Act) of securities which when
added to any securities already owned by such person would represent in the
aggregate 50% or more of the then outstanding securities of the Company
which are entitled to vote to elect any class of directors;
(iv) If at any time, the Continuing Directors then serving on the
Board of Directors of the Company cease for any reason to constitute at
least a majority thereof; or
(v) Any occurrence that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A or any successor rule or
regulation promulgated under the Exchange Act.
1.5 "Change in Control Payments" shall mean three times the higher of (i)
Employee's annual base salary in effect on the date of the Change in Control or
(ii) Employee's annual base salary in effect on the date of the Employee's
separation from employment following the Change in Control.
1.6 A "Continuing Director" shall mean a director of the Company who (i)
is not an Acquiring Person or an Affiliate or Associate thereof, or a
representative of an Acquiring Person or nominated for election by an Acquiring
Person, and (ii) was either a member of the Board of Directors of the Company on
the date of this Agreement or subsequently became a director of the Company and
whose initial election or initial nomination for election by the Company's
shareholders was approved by a majority of the Continuing Directors then on the
Board of Directors of the Company.
-3-
<PAGE>
1.7 "Disability" shall mean any medically determinable physical or mental
impairment that can reasonably be expected to prevent Employee from performing
substantially all of Employee's customary employment duties for at least six
months.
1.8 "Good Reason" shall mean the occurrence of any of the following
events:
(a) any material diminution in Employee's title and duties that has
not been cured within thirty days after notice of such noncompliance has
been given (within 30 days of the alleged material diminution) by Employee
to the Company or the employing Affiliate, as applicable. A change in title
or duties will not be considered to be a "material diminution" in title or
duties if, after such change, Employee is an officer of the Company;
Employee's reporting relationship does not change or Employee reports to
the Company's Chief Executive Officer or Chief Operating Officer; and a
substantial portion of Employee's duties are in Employee's field of
professional training or experience.
(b) a reduction of more than 10% in Employee's base salary (with the
10% being cumulative over the term of Employee's employment, but any
percentage reduction that is actually made is made against the Employee's
then current base salary).
EXAMPLE: assume Employee's base salary is $100,000. The Company or
Affiliate, as applicable, is permitted to reduce Employee's base salary by
up to 10% ($10,000) without giving Employee "Good Reason" to terminate
employment. Any further salary reductions would constitute "Good Reason"
to terminate employment.
EXAMPLE: assume Employee's base salary is $100,000. Assume the Company or
Affiliate, as applicable, reduces Employee's base salary by 8% ($8,000).
Then, assume Employee's base salary is subsequently increased to $120,000.
The Company or Affilate is entitled to reduce the $120,000 salary by up to
2% ($2,400) without giving Employee "Good Reason to terminate employment.
Any further salary reductions would constitute "Good Reason" to terminate
employment.
(c) any purported termination for Cause of Employee's employment that
is not effected pursuant to the procedural requirements of Subsection 1.3.
(d) the location of Employee's place of employment is moved more than
50 miles from its current location.
(e) Employee becomes the subject of a Disability.
-4-
<PAGE>
1.9 "Notice of Termination" shall mean a notice that shall indicate the
specific reasons for termination and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Employee's
employment.
1.10 "Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an incorporated organization or a
government or political subdivision thereof.
1.11 "Severance Payment" shall mean an amount equal to three months of
Employee's then-current monthly base salary for those Employees whose aggregate
period of employment with the Company or an Affiliate is a year or less. For
other Employees, the "Severance Payment" shall be an amount determined
according to the following formula:
M = 3 + [(Y-1) x 2]
M = the number of months of Employee's then-current monthly base salary
that the Company is required to pay to Employee as severance pay; provided
--------
that, in no event shall the value of M exceed 18; provided further that,
---- ---------------------
from and after the Expiration Date if the event giving rise to the
Severance Payment occurs on or before the 180th day following a Change in
Control (with the day immediately following the day of the occurrence of
the Change in Control being day "1"), then the amount of the Severance
Payment shall be the greater of (i) the amount provided for under the
formula above or (ii) the amount provided for in Section 3 (as if Employee
had resigned from employment pursuant to Section 3); and provided further
--------------------
that, if either of the events specified in Section 2(a) or 2(b) occurs
----
prior to the Expiration Date, then M shall be reduced by the number of
whole months of Employee's then-current monthly base salary, if any, that
the Company is required to pay to Employee under the Employment Agreement.
Y = number of years or partial years that Employee has been employed by the
Company or an Affiliate. For purpose of calculating "Y" with respect to
employment with an Affiliate of the Company only the years or partial years
during which the Affiliate was an "Affiliate" will be counted.
EXAMPLE: Assume Employee has been employed by the Company or an Affiliate
for an aggregate of 3-1/2 years. Then,
M = 3 + [(4-1) x 2];
M = 3 + [3 x 2];
M = 3 + 6
M = 9
-5-
<PAGE>
Thus, Employee would be entitled to receive 9 months of the Employee's
then-current monthly base salary as a Severance Payment.
2. Severance Payment. From and after the date hereof, upon the occurrence of
-----------------
either of the following events, and subject to receiving a release reasonably
satisfactory to the Company relating to employment matters, the Company will pay
to Employee the Severance Payment:
(a) Employee's employment with the Company and its Affiliates is
terminated by the Company or the employing Affiliate, as applicable, other
than for Cause; or
(b) Employee has Good Reason to terminate employment and actually does
so.
To terminate Employee's employment other than for Cause pursuant to 2(a),
the Company or the employing Affiliate, as applicable, shall give Employee
written notice of such termination. Such notice shall be effective 90 days
following the Employee's receipt thereof.
3. Change in Control Payment. From and after the Expiration Date, if Employee
-------------------------
resigns from employment with the Company and its Affiliates on or before the
180th day following a Change in Control (with the day immediately following the
day of the occurrence of the Change in Control being day "1"), the Company shall
pay to Employee the Change in Control Payment.
4. Mode of Payment. The Severance Payment and the Change in Control Payment
---------------
shall be paid in a lump sum (less applicable withholdings for taxes and other
withholdings required by applicable law) contemporaneously with the occurrence
of the applicable event. The Company's obligation to pay the Severance Payment
and the Change in Control Payment is absolute, and such payments shall not be
mitigated or offset by virtue of Employee obtaining new employment or failing to
seek new employment.
5. Confidential Information. Employee recognizes and acknowledges that
------------------------
Employee will have access to confidential information of the Company and its
Affiliates, including, without limitation, customer information, lists of
suppliers and costs, information concerning the business and operations of the
Company and its Affiliates and proprietary data, information, concepts and ideas
(whether or not patentable or copyrightable) relating to the business of the
Company and its Affiliates. Employee agrees not to disclose such confidential
information (except as may be necessary in the performance of Employee's duties)
to any Person and not to use such confidential information (other than for the
conduct of the business of the Company and its Affiliates), either during the
duration of Employee's employment
-6-
<PAGE>
or within the three years immediately following Employee's termination of
employment, unless Employee has received the written consent of the Company and
its Affiliates, as applicable, or unless such confidential information becomes
public knowledge through no wrongful act of Employee. Upon termination of
Employee's employment for any reason, Employee shall promptly deliver to the
Company all drawings, manuals, letters, notebooks, customer lists, documents,
records, equipment, files, computer disks or tapes, reports or any other
materials relating to the business of the Company or any of its Affiliates (and
all copies) which are in Employee's possession or under Employee's control.
Additionally, the parties acknowledge that Employee has previously executed an
Assignment of Inventions and Confidential Information Agreement, signed April 4,
1990, which shall survive Employee's separation from employment in accordance
with its terms.
6. Noncompetition. Employee agrees and covenants:
--------------
(a) For a period (the "Non-Competition Term") of 12 months after
Employee ceases to be employed by the Company or an Affiliate, as the case
may be, Employee will not compete directly or indirectly with the Company
or its Affiliates in the Designated Geographical Area in any business or
businesses conducted by the Company and its Affiliates and in connection
therewith will not furnish advice to, solicit or do business with any past
or current customer of the Company or an Affiliate involving such business
or businesses. For purposes of this Section 6, "Competition" shall
include, without limitation, any engagement in any business whether as
proprietor, partner, joint venturer, employee, agent, officer or holder of
more than five percent (5%) of any class of equity ownership of a business
enterprise, which is competitive with any business or businesses conducted
by the Company or an Affiliate.
(b) For purposes of this Section 6, "Designated Geographical Area"
shall mean and include the United States and any foreign jurisdiction in
which the Company or an Affiliate is actively conducting business, directly
or indirectly, at the time Employee ceases to be employed by the Company or
an Affiliate.
(c) The non-competition covenant of Employee contained in this Section
6 (the "non-competition covenant") shall be construed as an agreement
independent of any other provision of this Agreement and the existence of
any claim or cause of action of Employee against the Company or any
Affiliate, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company or an Affiliate of
the non-competition covenant. The Company and its Affiliates shall be
entitled
-7-
<PAGE>
to seek equitable relief to enforce the non-competition covenant.
(d) Although the Company and Employee have in good faith used their
best efforts to make the non-competition covenant reasonable in both
geographic area and in duration, and it is not anticipated, nor is it
intended, by either party to this Agreement that any court of competent
jurisdiction will find it necessary to reform the non-competition covenant
to make it reasonable in both geographic area and in duration, or
otherwise, the Company and Employee understand and agree that if a court of
competent jurisdiction determines it necessary to reform the non-
competition covenant in order to make it reasonable in either geographic
area or duration, or otherwise, damages, if any, for a breach of the non-
competition covenant, as so reformed, will be deemed to accrue to the
Company or an Affiliate as and from the date of such a breach only insofar
as the damages for such breach related to an action which accrued within
the scope of the geographic area and duration as so reformed.
7. Dispute Resolution. Employee and the Company agree to the alternate
------------------
dispute resolution provisions contained in Exhibit A attached hereto.
---------
Specifically, if a dispute arises between the parties as to whether or not
Employee has "Good Reason" to terminate employment, Employee is not required to
resign from employment with the Company or an Affiliate, as applicable, to
"perfect" Employee's right to make a claim for the Severance Payment, although
Employee may resign from employment if Employee chooses. Such disputes shall be
resolved in accordance with the provisions of Exhibit A. If the dispute is
---------
resolved in Employee's favor and it is determined that Employee has "Good
Reason" to terminate employment, then Employee will be required to terminate
employment and provide the required release in order to collect the Severance
Payment.
8. General.
-------
8.1 The Employment Agreement shall continue to be effective in accordance
with its terms until the Expiration Date; until such Expiration Date the
provisions of this Agreement supplement the Employment Agreement, and until the
Expiration Date in the event of a conflict between this Agreement and the
Employment Agreement, the Employment Agreement shall govern. From and after the
Expiration Date, the provisions of Sections 5, 6, and 7 of this Agreement shall
supersede the analogous provisions in the Employment Agreement.
8.2 Except for the Employment Agreement, this Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to the subject
-8-
<PAGE>
matter hereof. This Agreement may be amended only by an instrument in writing
executed by both parties.
8.3 This Agreement will be binding upon and inure to the benefit of the
parties hereto and any successors in interest to the Company following a Change
in Control.
8.4 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas (excluding its conflict of laws
rules).
8.5 This Agreement may be executed in a number of identical counterparts,
each of which constitute collectively, one agreement; but, in making proof of
this Agreement, it shall not be necessary to produce or account for more than
one counterpart.
AMTECH CORPORATION
By: /s/ G. Russell Mortenson
------------------------------------
G. Russell Mortenson,
President & Chief
Executive Officer
EMPLOYEE:
/s/ Steve M. York
----------------------------------------
-9-
<PAGE>
EXHIBIT A
---------
ALTERNATIVE DISPUTE RESOLUTION
------------------------------
A. Except as otherwise provided in this Exhibit A, Amtech Corporation, or
---------
its employing subsidiary, as applicable (individually and collectively, the
"Company"), and the Employee consent and agree to the resolution, in the manner
provided for in this Exhibit A, of all claims or controversies brought by the
---------
Employee ("Claims") for which a court otherwise would be authorized by law to
grant relief, in any way arising out of, relating to, or associated with (1) the
Employee's employment or termination from employment with the Company or any
adverse employment action by the Company, or (2) any other claims the Employee
may have against the Company, any benefit plans of the Company or any
fiduciaries, administrators, and affiliates of any benefit plan, or any of the
Company's officers, directors, employees, or agents in their capacity as such,
or (3) any issue concerning the formation, applicability, interpretation, or
enforceability of this Exhibit A.
---------
The Employee acknowledges that the Claims intended to be covered by this
Exhibit A include (but are not limited to) claims or controversies under or
- - ---------
relating to the Employee's severance agreement (of which this Exhibit A is a
---------
part); any federal, state, or local constitution, law, or regulation prohibiting
discrimination, harassment, or discharge; an alleged or actual contract; any
Company policy or benefit; entitlement to wages or other compensation; and, any
claim for personal, emotional, physical, economic, or other injury.
B. The only Claims otherwise within the definition of Claims that are not
covered by this Exhibit A are: () any administrative actions that the Employee
---------
is permitted to pursue under applicable law that are not precluded by virtue of
the Employee having entered into this Exhibit A; () any Claim by the Employee
---------
for workers' compensation benefits or unemployment compensation benefits; or ()
any Claim by the Employee for benefits under a Company pension or benefit plan
that provides its own non-judicial dispute resolution procedure.
C. The Employee waives any right to assert a Claim, unless he or she
gives written notice of any Claim to Amtech Corporation by the earlier of (1)
the date that is one year after the day the Employee first has knowledge of the
event giving rise to the Claim or (2) the date upon which the applicable statute
of limitations expires.
D. Within 20 days of receipt of the notice of a Claim, THE COMPANY, IN
ITS SOLE DISCRETION, MAY ELECT TO SUBMIT ANY CLAIMS TO BINDING ARBITRATION IN
ACCORDANCE WITH THE PROVISIONS OF THIS
/s/
-------
Initial
A-1
<PAGE>
EXHIBIT A. If the Company elects not to submit a Claim to binding arbitration,
- - ---------
then the Employee may initiate or otherwise pursue the Claim by legal
proceedings other than binding arbitration (e.g., a lawsuit), except that IF THE
EMPLOYEE INITIATES A LAWSUIT, HE OR SHE HEREBY WAIVES THE RIGHT TO REQUEST OR
OBTAIN A JURY TRIAL WITH RESPECT TO ANY SUCH CLAIMS. The Employee agrees that if
he or she initiates litigation in violation of this Exhibit A, he or she will
---------
incur liability to the person(s) sued, including the obligation to pay their
legal fees and expenses. The sole and exclusive venue of any lawsuit initiated
by the Employee relating to any Claims shall be Dallas County, Texas.
E. The arbitration will be conducted in accordance with the provisions
of this Exhibit A and the Employment Dispute Resolution Rules of the American
---------
Arbitration Association ("AAA") in effect at the time the written notice of the
Claim is received. An arbitrator shall be selected in the manner provided for
in the Employment Dispute Resolution Rules of the AAA, except that the parties
agree that the arbitrator shall (1) be an attorney licensed in the state where
the arbitration is being conducted and (2) have expertise in the area of
employment law. The arbitration will be held in Dallas County, Texas.
F. Each party shall have the right to take one deposition of the other
party and any expert witness or other witness designated by the other party.
Additional deposition discovery may be taken only if the arbitrator so orders,
upon a showing of substantial need. The Employee understands that by agreeing to
submit Claims to arbitration he or she gives up the right to seek a trial by
court or jury and the right to an appeal from any errors of the court and
forgoes any and all related rights he or she may otherwise have under federal
and state laws.
G. In the event any provision of this Exhibit A is found by an arbitrator
---------
or court to be unenforceable, in whole or in part, the remaining provisions of
this Exhibit A shall nevertheless remain enforceable and the unenforceable
---------
provisions shall, to the extent permitted under applicable law, be modified so
as to be enforceable to the maximum extent possible under applicable law.
H. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS CAREFULLY READ THIS EXHIBIT
-------
A; THAT HE OR SHE UNDERSTANDS ITS TERMS; THAT ALL UNDERSTANDINGS BETWEEN THE
- - -
EMPLOYEE AND THE COMPANY RELATING TO THE SUBJECTS COVERED IN THIS EXHIBIT A ARE
---------
CONTAINED IN THIS EXHIBIT A; AND, THAT HE OR SHE HAS ENTERED INTO THIS EXHIBIT A
--------- ---------
VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE
COMPANY OTHER THAN THOSE CONTAINED IN THIS EXHIBIT A ITSELF OR THE EMPLOYMENT
---------
AGREEMENT (TO WHICH THIS EXHIBIT A IS A PART).
---------
/s/
-------
Initial
A-2
<PAGE>
EXHIBIT 10.31
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
Reference is made to that certain Employment Agreement, entered into on
January 25, 1995, as amended (the "Employment Agreement"), between Cotag
International Limited (now named Amtech Europe Limited), a company organized
under the laws of England (the "Company"), and Stuart M. Evans ("Employee").
Employee and Company desire to amend the Employment Agreement, as
follows:
1. Paragraph 2 of the Employment Agreement is hereby amended in its
entirety to read as follows:
"2. Term. Subject to the terms and conditions herein, the employment of
----
Employee by the Company as provided in Section 1 will be for a term
commencing on the date hereof and expiring on the close of business on
December 31, 1997 (the "Primary Term").
2. Other than as set forth herein the Employment Agreement remains in
full force and effect as written.
EFFECTIVE, as of November 4, 1996.
AMTECH EUROPE LIMITED
By: /s/ G. Russell Mortenson
-----------------------------
G. Russell Mortenson
Date: November 7, 1997
-----------------------------
EMPLOYEE
/s/ Stuart M. Evans
----------------------------------
Stuart M. Evans
Date: November 21, 1996
-----------------------------
-1-
<PAGE>
EXHIBIT 10.32
Execution Version
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated November 4, 1996, is
entered into between Amtech Corporation, a Texas corporation, with its principal
executive offices in Dallas, Texas (the "Company"), and Stuart M. Evans, an
individual currently residing in Cambridge, England and who is currently
employed as President and Chief Operating Officer, Electronic Security Group
("Employee").
Recitals
--------
A. Amtech Europe Limited (formerly Cotag International Limited) and
Employee have entered into an Employment Agreement, dated January 25, 1995, as
amended (the "Employment Agreement"), which expires on December 31, 1997 (the
"Expiration Date").
B. In lieu of extending the term of the Employment Agreement or entering
into a new employment agreement, the Company and Employee desire to enter into
this Severance Agreement, which will supplement the Employment Agreement until
the Expiration Date and thereafter survive it.
C. In consideration of the Company's agreements herein, Employee is
willing to continue working for the Company or an Affiliate, as applicable, on
an "at-will" basis after the Expiration Date.
Terms and Conditions
--------------------
In consideration of the recitals and the agreements herein and other good
and valuable consideration, the parties agree as follows:
1. Definitions.
-----------
1.1 An "Affiliate" with respect to the Company shall mean any corporation
or other entity controlled by, controlling, or under common control with, the
Company.
1.2 The Company and its Affiliates shall have "Cause" to terminate
Employee's employment upon (1) the willful and continued failure by Employee to
substantially perform Employee's employment duties (other than any such failure
resulting from Employee's incapacity due to physical or mental illness), after
written demand for substantial performance is delivered by the Company or an
Affiliate, as applicable, that specifically identifies the manner in which the
Company or the Affiliate, as applicable, believes Employee has not substantially
performed Employee's duties; or (2) the willful engaging by Employee in
-1-
<PAGE>
misconduct that is materially injurious to the Company or employing Affiliate,
as applicable; or (3) the conviction of Employee of any felony or crime of moral
turpitude; or (4) Employee attains the mandatory retirement age specified in any
applicable retirement plan of the Company or any succcessor-in-interest (but for
purposes of this clause (4), any such mandatory retirement age shall not be less
than age 65). For purposes of this definition no act, or failure to act, on
Employee's part shall be considered "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company or the
applicable Affiliate(s), or both, as applicable. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without the
following procedures having been adhered to: (a) reasonable written notice to
Employee, setting forth the reasons for the Company's or the Affiliate's
intention to terminate for Cause; (b) an opportunity for Employee, together with
Employee's counsel, to be heard before the Amtech Corporation Board of
Directors; and (c) delivery to Employee of a written Notice of Termination
finding that, in the good faith opinion of the Amtech Corporation Board of
Directors, Employee was guilty of conduct set forth above in clause (1), (2) or
(3) above, and specifying the particulars thereof in detail.
1.3 "Disability" shall mean any medically determinable physical or mental
impairment that can reasonably be expected to prevent Employee from performing
substantially all of Employee's customary employment duties for at least six
months.
1.4 "Good Reason" shall mean the occurrence of any of the following
events:
(a) any material diminution in Employee's title and duties that has
not been cured within thirty days after notice of such noncompliance has
been given (within 30 days of the alleged material diminution) by Employee
to the Company or the employing Affiliate, as applicable.
(b) a reduction of more than 10% in Employee's base salary (with the
10% being cumulative over the term of Employee's employment, but any
percentage reduction that is actually made is made against the Employee's
then current base salary).
EXAMPLE: assume Employee's base salary is $100,000. The Company or
Affiliate, as applicable, is permitted to reduce Employee's base salary by
up to 10% ($10,000) without giving Employee "Good Reason" to terminate
employment. Any further salary reductions would constitute "Good Reason"
to terminate employment.
-2-
<PAGE>
EXAMPLE: assume Employee's base salary is $100,000. Assume the Company or
Affiliate, as applicable, reduces Employee's base salary by 8% ($8,000).
Then, assume Employee's base salary is subsequently increased to $120,000.
The Company or Affilate is entitled to reduce the $120,000 salary by up to
2% ($2,400) without giving Employee "Good Reason to terminate employment.
Any further salary reductions would constitute "Good Reason" to terminate
employment.
(c) any purported termination for Cause of Employee's employment that
is not effected pursuant to the procedural requirements of Subsection 1.2.
(d) the location of Employee's place of employment is moved more than
50 miles from its current location.
(e) Employee becomes the subject of a Disability.
1.5 "Notice of Termination" shall mean a notice that shall indicate the
specific reasons for termination and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Employee's
employment.
1.6 "Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an incorporated organization or a
government or political subdivision thereof.
1.7 "Severance Payment" shall mean an amount equal to three months of
Employee's then-current monthly base salary for those Employees whose aggregate
period of employment with the Company or an Affiliate is a year or less. For
other Employees, the "Severance Payment" shall be an amount determined
according to the following formula:
M = 3 + [(Y-1) x 2]
M = the number of months of Employee's then-current monthly base salary
that the Company is required to pay to Employee as severance pay; provided
--------
that, in no event shall the value of M exceed 18; provided further that, if
---- ---------------------
either of the events specified in Section 2(a) or 2(b) occurs prior to the
Expiration Date, then M shall be reduced by the number of whole months of
Employee's then-current monthly base salary, if any, that the Company is
required to pay to Employee under the Employment Agreement.
Y = number of years or partial years that Employee has been employed by the
Company or an Affiliate. For purpose of calculating "Y" with respect to
employment with an Affiliate of the Company only the years or partial years
during which the Affiliate was an "Affiliate" will be counted.
-3-
<PAGE>
EXAMPLE: Assume Employee has been employed by the Company or an Affiliate
for an aggregate of 3-1/2 years. Then,
M = 3 + [(4-1) x 2];
M = 3 + [3 x 2];
M = 3 + 6
M = 9
Thus, Employee would be entitled to receive 9 months of the Employee's
then-current monthly base salary as a Severance Payment.
2. Severance Payment. From and after the date hereof, upon the occurrence of
-----------------
either of the following events, and subject to receiving a release reasonably
satisfactory to the Company relating to employment matters, the Company will pay
to Employee the Severance Payment:
(a) Employee's employment with the Company and its Affiliates is
terminated by the Company or the employing Affiliate, as applicable, other
than for Cause; or
(b) Employee has Good Reason to terminate employment and actually does
so.
To terminate Employee's employment other than for Cause pursuant to 2(a),
the Company or the employing Affiliate, as applicable, shall give Employee
written notice of such termination. Such notice shall be effective 90 days
following the Employee's receipt thereof.
3. Mode of Payment. The Severance Payment shall be paid in a lump sum (less
---------------
applicable withholdings for taxes and other withholdings required by applicable
law) contemporaneously with the occurrence of the applicable event. The
Company's obligation to pay the Severance Payment is absolute, and such payment
shall not be mitigated or offset by virtue of Employee obtaining new employment
or failing to seek new employment.
4. Confidential Information. Employee recognizes and acknowledges that
------------------------
Employee will have access to confidential information of the Company and its
Affiliates, including, without limitation, customer information, lists of
suppliers and costs, information concerning the business and operations of the
Company and its Affiliates and proprietary data, information, concepts and ideas
(whether or not patentable or copyrightable) relating to the business of the
Company and its Affiliates. Employee agrees not to disclose such confidential
information (except as may be necessary in the performance of Employee's duties)
to any Person and not to use such confidential information (other than for the
conduct of the business of the Company and its Affiliates), either during the
duration of Employee's employment
-4-
<PAGE>
or within the three years immediately following Employee's termination of
employment, unless Employee has received the written consent of the Company and
its Affiliates, as applicable, or unless such confidential information becomes
public knowledge through no wrongful act of Employee. Upon termination of
Employee's employment for any reason, Employee shall promptly deliver to the
Company all drawings, manuals, letters, notebooks, customer lists, documents,
records, equipment, files, computer disks or tapes, reports or any other
materials relating to the business of the Company or any of its Affiliates (and
all copies) which are in Employee's possession or under Employee's control.
Additionally, the parties acknowledge that Employee has previously executed an
Assignment of Inventions and Confidential Information Agreement, signed January
25, 1995, which shall survive Employee's separation from employment in
accordance with its terms.
5. Noncompetition. Employee agrees and covenants:
--------------
(a) For a period (the "Non-Competition Term") of 12 months after
Employee ceases to be employed by the Company or an Affiliate, as the case
may be, Employee will not compete directly or indirectly with the Company
or its Affiliates in the Designated Geographical Area in any business or
businesses conducted by the Company and its Affiliates and in connection
therewith will not furnish advice to, solicit or do business with any past
or current customer of the Company or an Affiliate involving such business
or businesses. For purposes of this Section 6, "Competition" shall
include, without limitation, any engagement in any business whether as
proprietor, partner, joint venturer, employee, agent, officer or holder of
more than five percent (5%) of any class of equity ownership of a business
enterprise, which is competitive with any business or businesses conducted
by the Company or an Affiliate.
(b) For purposes of this Section 5, "Designated Geographical Area"
shall mean and include the United States and any foreign jurisdiction in
which the Company or an Affiliate is actively conducting business, directly
or indirectly, at the time Employee ceases to be employed by the Company or
an Affiliate.
(c) The non-competition covenant of Employee contained in this Section
5 (the "non-competition covenant") shall be construed as an agreement
independent of any other provision of this Agreement and the existence of
any claim or cause of action of Employee against the Company or any
Affiliate, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company or an Affiliate of
the non-competition covenant. The Company and
-5-
<PAGE>
its Affiliates shall be entitled to seek equitable relief to enforce the
non-competition covenant.
(d) Although the Company and Employee have in good faith used their
best efforts to make the non-competition covenant reasonable in both
geographic area and in duration, and it is not anticipated, nor is it
intended, by either party to this Agreement that any court of competent
jurisdiction will find it necessary to reform the non-competition covenant
to make it reasonable in both geographic area and in duration, or
otherwise, the Company and Employee understand and agree that if a court of
competent jurisdiction determines it necessary to reform the non-
competition covenant in order to make it reasonable in either geographic
area or duration, or otherwise, damages, if any, for a breach of the non-
competition covenant, as so reformed, will be deemed to accrue to the
Company or an Affiliate as and from the date of such a breach only insofar
as the damages for such breach related to an action which accrued within
the scope of the geographic area and duration as so reformed.
6. Dispute Resolution. Employee and the Company agree to the alternate
------------------
dispute resolution provisions contained in Exhibit A attached hereto.
---------
Specifically, if a dispute arises between the parties as to whether or not
Employee has "Good Reason" to terminate employment, Employee is not required to
resign from employment with the Company or an Affiliate, as applicable, to
"perfect" Employee's right to make a claim for the Severance Payment, although
Employee may resign from employment if Employee chooses. Such disputes shall be
resolved in accordance with the provisions of Exhibit A. If the dispute is
---------
resolved in Employee's favor and it is determined that Employee has "Good
Reason" to terminate employment, then Employee will be required to terminate
employment and provide the required release in order to collect the Severance
Payment.
7. General.
-------
7.1 The Employment Agreement shall continue to be effective in accordance
with its terms until the Expiration Date; until the Expiration Date, the
provisions of this Agreement supplement the Employment Agreement, and until the
Expiration Date in the event of a conflict between this Agreement and the
Employment Agreement, the Employment Agreement shall govern. From and after the
Expiration Date, the provisions of Sections 4 and 5 of this Agreement shall
supersede the analogous provisions in the Employment Agreement.
7.2 Except for the Employment Agreement, this Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to the subject
-6-
<PAGE>
matter hereof. This Agreement may be amended only by an instrument in writing
executed by both parties.
7.3 This Agreement will be binding upon and inure to the benefit of the
parties hereto and any successors in interest to the Company.
7.4 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas (excluding its conflict of laws
rules).
7.5 This Agreement may be executed in a number of identical counterparts,
each of which constitute collectively, one agreement; but, in making proof of
this Agreement, it shall not be necessary to produce or account for more than
one counterpart.
AMTECH CORPORATION
By: /s/ G. Russell Mortenson
---------------------------------------
G. Russell Mortenson,
President & Chief
Executive Officer
EMPLOYEE:
/s/ Stuart M. Evans
--------------------------------------------
-7-
<PAGE>
EXHIBIT A
---------
ALTERNATIVE DISPUTE RESOLUTION
------------------------------
A. Except as otherwise provided in this Exhibit A, Amtech Corporation, or
---------
its employing subsidiary, as applicable (individually-and collectively, the
"Company"), and the Employee consent and agree to the resolution, in the manner
provided for in this Exhibit A, of all claims or controversies brought by the
---------
Employee ("Claims") for which a court otherwise would be authorized by law to
grant relief, in any way arising out of, relating to, or associated with (1) the
Employee's employment or termination from employment with the Company or any
adverse employment action by the Company, or (2) any other claims the Employee
may have against the Company, any benefit plans of the Company or any
fiduciaries, administrators, and affiliates of any benefit plan, or any of the
Company's officers, directors, employees, or agents in their capacity as such,
or (3) any issue concerning the formation, applicability, interpretation, or
enforceability of this Exhibit A.
---------
The Employee acknowledges that the Claims intended to be covered by this
Exhibit A include (but are not limited to) claims or controversies under or
- - ---------
relating to the Employee's severance agreement (of which this Exhibit A is a
---------
part); any federal, state, or local constitution, law, or regulation prohibiting
discrimination, harassment, or discharge; an alleged or actual contract; any
Company policy or benefit; entitlement to wages or other compensation; and, any
claim for personal, emotional, physical, economic, or other injury.
B. The only Claims otherwise within the definition of Claims that are not
covered by this Exhibit A are: () any administrative actions that the Employee
---------
is permitted to pursue under applicable law that are not precluded by virtue of
the Employee having entered into this Exhibit A; () any Claim by the Employee
---------
for workers' compensation benefits or unemployment compensation benefits; or ()
any Claim by the Employee for benefits under a Company pension or benefit plan
that provides its own non-judicial dispute resolution procedure.
C. The Employee waives any right to assert a Claim, unless he or she
gives written notice of any Claim to Amtech Corporation by the earlier of (1)
the date that is one year after the day the Employee first has knowledge of the
event giving rise to the Claim or (2) the date upon which the applicable statute
of limitations expires.
D. Within 20 days of receipt of the notice of a Claim, THE COMPANY, IN
ITS SOLE DISCRETION, MAY ELECT TO SUBMIT ANY CLAIMS TO BINDING ARBITRATION IN
ACCORDANCE WITH THE PROVISIONS OF THIS
A-1 /s/
-------
Initial
<PAGE>
EXHIBIT A. If the Company elects not to submit a Claim to binding arbitration,
- - ---------
then the Employee may initiate or otherwise pursue the Claim by legal
proceedings other than binding arbitration (e.g., a lawsuit), except that IF THE
EMPLOYEE INITIATES A LAWSUIT, HE OR SHE HEREBY WAIVES THE RIGHT TO REQUEST OR
OBTAIN A JURY TRIAL WITH RESPECT TO ANY SUCH CLAIMS. The Employee agrees that if
he or she initiates litigation in violation of this Exhibit A, he or she will
---------
incur liability to the person(s) sued, including the obligation to pay their
legal fees and expenses. The sole and exclusive venue of any lawsuit initiated
by the Employee relating to any Claims shall be Dallas County, Texas.
E. The arbitration will be conducted in accordance with the provisions
of this Exhibit A and the Employment Dispute Resolution Rules of the American
---------
Arbitration Association ("AAA") in effect at the time the written notice of the
Claim is received. An arbitrator shall be selected in the manner provided for
in the Employment Dispute Resolution Rules of the AAA, except that the parties
agree that the arbitrator shall (1) be an attorney licensed in the state where
the arbitration is being conducted and (2) have expertise in the area of
employment law. The arbitration will be held in Dallas County, Texas.
F. Each party shall have the right to take one deposition of the other
party and any expert witness or other witness designated by the other party.
Additional deposition discovery may be taken only if the arbitrator so orders,
upon a showing of substantial need. The Employee understands that by agreeing to
submit Claims to arbitration he or she gives up the right to seek a trial by
court or jury and the right to an appeal from any errors of the court and
forgoes any and all related rights he or she may otherwise have under federal
and state laws.
G. In the event any provision of this Exhibit A is found by an arbitrator
---------
or court to be unenforceable, in whole or in part, the remaining provisions of
this Exhibit A shall nevertheless remain enforceable and the unenforceable
---------
provisions shall, to the extent permitted under applicable law, be modified so
as to be enforceable to the maximum extent possible under applicable law.
H. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS CAREFULLY READ THIS
EXHIBIT A; THAT HE OR SHE UNDERSTANDS ITS TERMS; THAT ALL UNDERSTANDINGS BETWEEN
- - ---------
THE EMPLOYEE AND THE COMPANY RELATING TO THE SUBJECTS COVERED IN THIS EXHIBIT A
---------
ARE CONTAINED IN THIS EXHIBIT A; AND, THAT HE OR SHE HAS ENTERED INTO THIS
---------
EXHIBIT A VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY
- - ---------
THE COMPANY OTHER THAN THOSE CONTAINED IN THIS EXHIBIT A ITSELF OR THE
---------
EMPLOYMENT AGREEMENT (TO WHICH THIS EXHIBIT A IS A PART).
---------
A-2 /s/
-------
Initial
<PAGE>
EXHIBIT 10.34
Execution Version
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated November 4, 1996,
is entered into between Amtech Corporation, a Texas corporation, with its
principal executive offices in Dallas, Texas (the "Company"), and Michael H.
Wolpert, an individual currently residing in Los Angeles, California and who is
currently employed as President and Chief Operating Officer, Cardkey Systems,
Inc. ("Employee").
Recitals
--------
A. Cardkey Systems, Inc., a Delaware corporation, and Employee have
entered into an Employment Agreement, dated August 1, 1995, as amended (the
"Employment Agreement"), which expires on the date specified in Section 2
thereof (the "Expiration Date").
B. In lieu of extending the term of the Employment Agreement or entering
into a new employment agreement, the Company and Employee desire to enter into
this Severance Agreement, which will supplement the Employment Agreement until
the Expiration Date and thereafter survive it.
C. In consideration of the Company's agreements herein, Employee is
willing to continue working for the Company or an Affiliate, as applicable, on
an "at-will" basis after the Expiration Date.
Terms and Conditions
--------------------
In consideration of the recitals and the agreements herein and other good
and valuable consideration, the parties agree as follows:
1. Definitions.
-----------
1.1 An "Affiliate" with respect to the Company shall mean any corporation
or other entity controlled by, controlling, or under common control with, the
Company.
1.2 The Company and its Affiliates shall have "Cause" to terminate
Employee's employment upon (1) the willful and continued failure by Employee to
substantially perform Employee's employment duties (other than any such failure
resulting from Employee's incapacity due to physical or mental illness), after
written demand for substantial performance is delivered by the Company or an
Affiliate, as applicable, that specifically identifies the manner in which the
Company or the Affiliate, as applicable, believes Employee has not substantially
performed Employee's duties; or (2) the willful engaging by Employee in
-1-
<PAGE>
misconduct that is materially injurious to the Company or employing Affiliate,
as applicable; or (3) the conviction of Employee of any felony or crime of moral
turpitude; or (4) Employee attains the mandatory retirement age specified in any
applicable retirement plan of the Company or any succcessor-in-interest (but for
purposes of this clause (4), any such mandatory retirement age shall not be less
than age 65). For purposes of this definition no act, or failure to act, on
Employee's part shall be considered "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company or the
applicable Affiliate(s), or both, as applicable. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without the
following procedures having been adhered to: (a) reasonable written notice to
Employee, setting forth the reasons for the Company's or the Affiliate's
intention to terminate for Cause; (b) an opportunity for Employee, together with
Employee's counsel, to be heard before the Amtech Corporation Board of
Directors; and (c) delivery to Employee of a written Notice of Termination
finding that, in the good faith opinion of the Amtech Corporation Board of
Directors, Employee was guilty of conduct set forth above in clause (1), (2) or
(3) above, and specifying the particulars thereof in detail.
1.3 "Disability" shall mean any medically determinable physical or mental
impairment that can reasonably be expected to prevent Employee from performing
substantially all of Employee's customary employment duties for at least six
months.
1.4 "Good Reason" shall mean the occurrence of any of the following
events:
(a) any material diminution in Employee's title and duties that has
not been cured within thirty days after notice of such noncompliance has
been given (within 30 days of the alleged material diminution) by Employee
to the Company or the employing Affiliate, as applicable.
(b) a reduction of more than 10% in Employee's base salary (with the
10% being cumulative over the term of Employee's employment, but any
percentage reduction that is actually made is made against the Employee's
then current base salary).
EXAMPLE: assume Employee's base salary is $100,000. The Company or
Affiliate, as applicable, is permitted to reduce Employee's base salary by
up to 10% ($10,000) without giving Employee "Good Reason" to terminate
employment. Any further salary reductions would constitute "Good Reason"
to terminate employment.
-2-
<PAGE>
EXAMPLE: assume Employee's base salary is $100,000. Assume the Company or
Affiliate, as applicable, reduces Employee's base salary by 8% ($8,000).
Then, assume Employee's base salary is subsequently increased to $120,000.
The Company or Affilate is entitled to reduce the $120,000 salary by up to
2% ($2,400) without giving Employee "Good Reason to terminate employment.
Any further salary reductions would constitute "Good Reason" to terminate
employment.
(c) any purported termination for Cause of Employee's employment that
is not effected pursuant to the procedural requirements of Subsection 1.2.
(d) the location of Employee's place of employment is moved more than
50 miles from its current location.
(e) Employee becomes the subject of a Disability.
1.5 "Notice of Termination" shall mean a notice that shall indicate the
specific reasons for termination and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Employee's
employment.
1.6 "Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an incorporated organization or a
government or political subdivision thereof.
1.7 "Severance Payment" shall mean an amount equal to three months of
Employee's then-current monthly base salary for those Employees whose aggregate
period of employment with the Company or an Affiliate is a year or less. For
other Employees, the "Severance Payment" shall be an amount determined
according to the following formula:
M = 3 + [(Y-1) x 2]
M = the number of months of Employee's then-current monthly base salary
that the Company is required to pay to Employee as severance pay; provided
--------
that, in no event shall the value of M exceed 18; provided further that, if
---- ---------------------
either of the events specified in Section 2(a) or 2(b) occurs prior to the
Expiration Date, then M shall be reduced by the number of whole months of
Employee's then-current monthly base salary, if any, that the Company is
required to pay to Employee under the Employment Agreement.
Y = number of years or partial years that Employee has been employed by the
Company or an Affiliate. For purpose of calculating "Y" with respect to
employment with an Affiliate of the Company only the years or partial years
during which the Affiliate was an "Affiliate" will be counted.
-3-
<PAGE>
EXAMPLE: Assume Employee has been employed by the Company or an Affiliate
for an aggregate of 3-1/2 years. Then,
M = 3 + [(4-1) x 2];
M = 3 + [3 x 2];
M = 3 + 6
M = 9
Thus, Employee would be entitled to receive 9 months of the Employee's
then-current monthly base salary as a Severance Payment.
2. Severance Payment. From and after the date hereof, upon the occurrence of
-----------------
either of the following events, and subject to receiving a release reasonably
satisfactory to the Company relating to employment matters, the Company will pay
to Employee the Severance Payment:
(a) Employee's employment with the Company and its Affiliates is
terminated by the Company or the employing Affiliate, as applicable, other
than for Cause; or
(b) Employee has Good Reason to terminate employment and actually does
so.
To terminate Employee's employment other than for Cause pursuant to 2(a),
the Company or the employing Affiliate, as applicable, shall give Employee
written notice of such termination. Such notice shall be effective 90 days
following the Employee's receipt thereof.
3. Mode of Payment. The Severance Payment shall be paid in a lump sum (less
---------------
applicable withholdings for taxes and other withholdings required by applicable
law) contemporaneously with the occurrence of the applicable event. The
Company's obligation to pay the Severance Payment is absolute, and such payment
shall not be mitigated or offset by virtue of Employee obtaining new employment
or failing to seek new employment.
4. Confidential Information. Employee recognizes and acknowledges that
------------------------
Employee will have access to confidential information of the Company and its
Affiliates, including, without limitation, customer information, lists of
suppliers and costs, information concerning the business and operations of the
Company and its Affiliates and proprietary data, information, concepts and ideas
(whether or not patentable or copyrightable) relating to the business of the
Company and its Affiliates. Employee agrees not to disclose such confidential
information (except as may be necessary in the performance of Employee's duties)
to any Person and not to use such confidential information (other than for the
conduct of the business of the Company and its Affiliates), either during the
duration of Employee's employment
-4-
<PAGE>
or within the three years immediately following Employee's termination of
employment, unless Employee has received the written consent of the Company and
its Affiliates, as applicable, or unless such confidential information becomes
public knowledge through no wrongful act of Employee. Upon termination of
Employee's employment for any reason, Employee shall promptly deliver to the
Company all drawings, manuals, letters, notebooks, customer lists, documents,
records, equipment, files, computer disks or tapes, reports or any other
materials relating to the business of the Company or any of its Affiliates (and
all copies) which are in Employee's possession or under Employee's control.
Additionally, the parties acknowledge that Employee has previously executed an
Assignment of Inventions and Confidential Information Agreement, signed July 11,
1995, which shall survive Employee's separation from employment in accordance
with its terms.
5. Noncompetition. Employee agrees and covenants:
--------------
(a) For a period (the "Non-Competition Term") of 12 months after
Employee ceases to be employed by the Company or an Affiliate, as the case
may be, Employee will not compete directly or indirectly with the Company
or its Affiliates in the Designated Geographical Area in any business or
businesses conducted by the Company and its Affiliates and in connection
therewith will not furnish advice to, solicit or do business with any past
or current customer of the Company or an Affiliate involving such business
or businesses. For purposes of this Section 6, "Competition" shall
include, without limitation, any engagement in any business whether as
proprietor, partner, joint venturer, employee, agent, officer or holder of
more than five percent (5%) of any class of equity ownership of a business
enterprise, which is competitive with any business or businesses conducted
by the Company or an Affiliate.
(b) For purposes of this Section 5, "Designated Geographical Area"
shall mean and include the United States and any foreign jurisdiction in
which the Company or an Affiliate is actively conducting business, directly
or indirectly, at the time Employee ceases to be employed by the Company or
an Affiliate.
(c) The non-competition covenant of Employee contained in this Section
5 (the "non-competition covenant") shall be construed as an agreement
independent of any other provision of this Agreement and the existence of
any claim or cause of action of Employee against the Company or any
Affiliate, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company or an Affiliate of
the non-competition covenant. The Company and
-5-
<PAGE>
its Affiliates shall be entitled to seek equitable relief to enforce the
non-competition covenant.
(d) Although the Company and Employee have in good faith used their
best efforts to make the non-competition covenant reasonable in both
geographic area and in duration, and it is not anticipated, nor is it
intended, by either party to this Agreement that any court of competent
jurisdiction will find it necessary to reform the non-competition covenant
to make it reasonable in both geographic area and in duration, or
otherwise, the Company and Employee understand and agree that if a court of
competent jurisdiction determines it necessary to reform the non-
competition covenant in order to make it reasonable in either geographic
area or duration, or otherwise, damages, if any, for a breach of the non-
competition covenant, as so reformed, will be deemed to accrue to the
Company or an Affiliate as and from the date of such a breach only insofar
as the damages for such breach related to an action which accrued within
the scope of the geographic area and duration as so reformed.
6. Dispute Resolution. Employee and the Company agree to the alternate
------------------
dispute resolution provisions contained in Exhibit A attached hereto.
---------
Specifically, if a dispute arises between the parties as to whether or not
Employee has "Good Reason" to terminate employment, Employee is not required to
resign from employment with the Company or an Affiliate, as applicable, to
"perfect" Employee's right to make a claim for the Severance Payment, although
Employee may resign from employment if Employee chooses. Such disputes shall be
resolved in accordance with the provisions of Exhibit A. If the dispute is
---------
resolved in Employee's favor and it is determined that Employee has "Good
Reason" to terminate employment, then Employee will be required to terminate
employment and provide the required release in order to collect the Severance
Payment.
7. General.
-------
7.1 The Employment Agreement shall continue to be effective in accordance
with its terms until the Expiration Date; until the Expiration Date, the
provisions of this Agreement supplement the Employment Agreement, and until the
Expiration Date in the event of a conflict between this Agreement and the
Employment Agreement, the Employment Agreement shall govern. From and after the
Expiration Date, the provisions of Sections 4, 5, and 6 of this Agreement shall
supersede the analogous provisions in the Employment Agreement.
7.2 Except for the Employment Agreement, this Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to the subject
-6-
<PAGE>
matter hereof. This Agreement may be amended only by an instrument in writing
executed by both parties.
7.3 This Agreement will be binding upon and inure to the benefit of the
parties hereto and any successors in interest to the Company.
7.4 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas (excluding its conflict of laws
rules).
7.5 This Agreement may be executed in a number of identical counterparts,
each of which constitute collectively, one agreement; but, in making proof of
this Agreement, it shall not be necessary to produce or account for more than
one counterpart.
AMTECH CORPORATION
By: /s/ G. Russell Mortenson
--------------------------------------
G. Russell Mortenson,
President & Chief
Executive Officer
EMPLOYEE:
/s/ Michael H. Wolpert
------------------------------------------
-7-
<PAGE>
EXHIBIT A
---------
ALTERNATIVE DISPUTE RESOLUTION
------------------------------
A. Except as otherwise provided in this Exhibit A, Amtech Corporation, or
---------
its employing subsidiary, as applicable (individually and collectively, the
"Company"), and the Employee consent and agree to the resolution, in the manner
provided for in this Exhibit A, of all claims or controversies brought by the
---------
Employee ("Claims") for which a court otherwise would be authorized by law to
grant relief, in any way arising out of, relating to, or associated with (1) the
Employee's employment or termination from employment with the Company or any
adverse employment action by the Company, or (2) any other claims the Employee
may have against the Company, any benefit plans of the Company or any
fiduciaries, administrators, and affiliates of any benefit plan, or any of the
Company's officers, directors, employees, or agents in their capacity as such,
or (3) any issue concerning the formation, applicability, interpretation, or
enforceability of this Exhibit A.
---------
The Employee acknowledges that the Claims intended to be covered by this
Exhibit A include (but are not limited to) claims or controversies under or
- - ---------
relating to the Employee's severance agreement (of which this Exhibit A is a
---------
part); any federal, state, or local constitution, law, or regulation prohibiting
discrimination, harassment, or discharge; an alleged or actual contract; any
Company policy or benefit; entitlement to wages or other compensation; and, any
claim for personal, emotional, physical, economic, or other injury.
B. The only Claims otherwise within the definition of Claims that are not
covered by this Exhibit A are: (1) any administrative actions that the Employee
---------
is permitted to pursue under applicable law that are not precluded by virtue of
the Employee having entered into this Exhibit A; (2) any Claim by the Employee
-------
for workers' compensation benefits or unemployment compensation benefits; or (3)
any Claim by the Employee for benefits under a Company pension or benefit plan
that provides its own non-judicial dispute resolution procedure.
C. The Employee waives any right to assert a Claim, unless he or she
gives written notice of any Claim to Amtech Corporation by the earlier of (1)
the date that is one year after the day the Employee first has knowledge of the
event giving rise to the Claim or (2) the date upon which the applicable statute
of limitations expires.
D. Within 20 days of receipt of the notice of a Claim, THE COMPANY, IN
ITS SOLE DISCRETION, MAY ELECT TO SUBMIT ANY CLAIMS TO BINDING ARBITRATION IN
ACCORDANCE WITH THE PROVISIONS OF THIS
/s/
-------
Initial
A-1
<PAGE>
EXHIBIT A. If the Company elects not to submit a Claim to binding arbitration,
- - ---------
then the Employee may initiate or otherwise pursue the Claim by legal
proceedings other than binding arbitration (e.g., a lawsuit), except that IF THE
EMPLOYEE INITIATES A LAWSUIT, HE OR SHE HEREBY WAIVES THE RIGHT TO REQUEST OR
OBTAIN A JURY TRIAL WITH RESPECT TO ANY SUCH CLAIMS. The Employee agrees that if
he or she initiates litigation in violation of this Exhibit A, he or she will
---------
incur liability to the person(s) sued, including the obligation to pay their
legal fees and expenses. The sole and exclusive venue of any lawsuit initiated
by the Employee relating to any Claims shall be Dallas County, Texas.
E. The arbitration will be conducted in accordance with the provisions
of this Exhibit A and the Employment Dispute Resolution Rules of the American
---------
Arbitration Association ("AAA") in effect at the time the written notice of the
Claim is received. An arbitrator shall be selected in the manner provided for
in the Employment Dispute Resolution Rules of the AAA, except that the parties
agree that the arbitrator shall (1) be an attorney licensed in the state where
the arbitration is being conducted and (2) have expertise in the area of
employment law. The arbitration will be held in Los Angeles County, California.
F. Each party shall have the right to take one deposition of the other
party and any expert witness or other witness designated by the other party.
Additional deposition discovery may be taken only if the arbitrator so orders,
upon a showing of substantial need. The Employee understands that by agreeing to
submit Claims to arbitration he or she gives up the right to seek a trial by
court or jury and the right to an appeal from any errors of the court and
forgoes any and all related rights he or she may otherwise have under federal
and state laws.
G. In the event any provision of this Exhibit A is found by an arbitrator
---------
or court to be unenforceable, in whole or in part, the remaining provisions of
this Exhibit A shall nevertheless remain enforceable and the unenforceable
---------
provisions shall, to the extent permitted under applicable law, be modified so
as to be enforceable to the maximum extent possible under applicable law.
H. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS CAREFULLY READ THIS
EXHIBIT A; THAT HE OR SHE UNDERSTANDS ITS TERMS; THAT ALL UNDERSTANDINGS BETWEEN
- - ---------
THE EMPLOYEE AND THE COMPANY RELATING TO THE SUBJECTS COVERED IN THIS EXHIBIT A
---------
ARE CONTAINED IN THIS EXHIBIT A; AND, THAT HE OR SHE HAS ENTERED INTO THIS
---------
EXHIBIT A VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY
- - ---------
THE COMPANY OTHER THAN THOSE CONTAINED IN THIS EXHIBIT A ITSELF OR THE
---------
EMPLOYMENT AGREEMENT (TO WHICH THIS EXHIBIT A IS A PART).
---------
A-2 /s/
-------
Initial
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 10.35
BASIC LEASE INFORMATION
-----------------------
<S> <C> <C>
Lease Date: November 14, 1996
Tenant: AMTECH CORPORATION
Tenant's Address: 17304 Preston Road, EIOO
Dallas, Texas 75252-5613
Contact: Steve York Telephone: (972) 733-6600
Landlord: Rosemeade Office Development, L.P.
Landiord's Address: 2200 Ross Avenue, Suite 3700
Dallas, Texas
Contact: Jim Wells Telephone: (214) 979-6100
Premises: Suite No. 300 in the office building (the "BUILDING") to
--------
be located on the land described on Exhibit A-I and whose
-----------
street address is 19111 Dallas North Tollway, Dallas,
Texas (the "LAND"). The Premises are outlined on the plan
----
attached to the Lease as Exhibit A-2.
-----------
Term: 120 months, commencing on the earlier to occur of (i) the
date on which Tenant occupies and begins conducting
business in the Premises or (ii) November 12, 1997 (the
"COMMENCEMENT DATE"), and ending at 5:00 p.m. on November
-------------------
30, 2007. The Term is subject to adjustment and earlier
termination as provided in the Lease.
Basic Rental: Basic Rental shall be the following amounts for the
following periods of time:
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------
ANNUAL BASIC RENTAL RATE
TIME PERIOD PER RENTABLE SQUARE FOOT MONTHLY BASIC RENTAL
--------------------------------------------------------------------
<S> <C> <C>
Months 1-60 $17.57 $76,193.77
--------------------------------------------------------------------
Months 61-120 $19.33 $83,826.16
--------------------------------------------------------------------
</TABLE>
If the Commencement Date is not the first day of a
calendar month, the first 60 months of the Term shall
include the partial month at the beginning of the Term
plus the first 60 full calendar months of the Term.
<TABLE>
<CAPTION>
<S> <C>
Security Deposit: None.
Rent: Basic Rental, Tenant's Proportionate Share of Electrical
Costs, Tenant's share of Excess, and all other sums that
Tenant may owe to Landlord under the Lease.
Permitted Use: General office use and uses incidental thereto, as well as
other uses expressly permitted under this Lease.
Tenant's Proportionate Share:
34.5976%, which is the percentage obtained by dividing (a)
the 52,039 rentable square feet in the Premises
(determined as hereinafter provided), by (b) the 150,412
of rentable square feet in the Building (determined as
hereinafter provided). The size of the Premises is subject
to adjustment as provided in the Lease. If the size of the
Premises or the Building changes, then Tenant's
Proportionate Share shall adjust accordingly.
Expense Stop: $4.16 per rentable square foot.
Initial Liability Insurance Amount:
$5,000,000.
Allowance: $28.50 per rentable square foot
</TABLE>
i
<PAGE>
The foregoing Basic Lease Information is incorporated into and made a part of
the Lease identified above. If any conflict exists between any Basic Lease
Information and the Lease, then the Lease shall control.
LANDLORD: ROSEMEADE OFFICE DEVELOPMENT, L.P., a Texas
limited partnership
By: Crow Family, Inc., a Texas corporation,
its general partner
By: /s/ ANTHONY W. DONA
-----------------------------------
Name: Anthony W. Dona
---------------------------------
Title: Vice President
--------------------------------
TENANT: AMTECH CORPORATION, a Texas corporation
By: /s/ STEVE M. YORK
-----------------------------------------
Name: Steve M. York
---------------------------------------
Title: Chief Financial Officer
--------------------------------------
ii
<PAGE>
TABLE OF CONTENTS
-----------------
Page No.
-------
1. DEFINITIONS AND BASIC PROVISIONS.......................... 1
2. LEASE GRANT............................................... 1
3. TERM...................................................... 1
(a) Commencement Date.............................. 1
(b) Basic Rental Abatement; Termination Right...... 1
(c) Acceptance..................................... 1
4. RENT...................................................... 2
(a) Payment........................................ 2
(b) Consumer Price Index Increases to Basic Rental. 2
(c) Electrical Costs............................... 2
(d) Annual Cost Statement.......................... 2
(e) Adjustments to Electrical Costs................ 2
(f) Tenant's Audit Rights.......................... 2
5. DELINQUENT PAYMENT; HANDLING CHARGES...................... 3
6. SECURITY DEPOSIT.......................................... 3
7. LANDLORD'S OBLIGATIONS.................................... 3
(a) Services....................................... 3
(b) Excess Utility Use............................. 3
(c) Discontinuance................................. 4
(d) Restoration of Services; Abatement............. 4
8. IMPROVEMENTS; ALTERATIONS; REPAIRS; MAINTENANCE........... 4
(a) Improvements; Alterations...................... 4
(b) Repairs; Maintenance........................... 5
(c) Performance of Work............................ 5
(d) Mechanic's Liens............................... 5
9. USE....................................................... 5
10. ASSIGNMENT AND SUBLETTING................................. 5
(a) Transfers; Consent............................. 5
(b) Cancellation................................... 6
(c) Additional Compensation........................ 6
11. INSURANCE; WAIVERS; SUBROGATION; INDEMNITY................ 7
(a) Insurance...................................... 7
(b) Waiver of Negligence Claims; No Subrogation.... 7
(c) Indemnity...................................... 7
(d) Landlord's Insurance........................... 7
12. SUBORDINATION ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE.. 7
(a) Subordination.................................. 7
(b) Attorriment.................................... 8
(c) Notice to Landlord's Mortgagee................. 8
13. RULES AND REGULATIONS..................................... 8
14. CONDEMNATION.............................................. 8
(a) Taking - Landlord's and Tenant's Rights........ 8
(b) Taking - Landiord's Rights..................... 8
(c) Award.......................................... 8
(d) Restoration.................................... 8
15. FIRE OR OTHER CASUALTY.................................... 8
(a) Repair Estimate................................ 8
(b) Landlord's and Tenant's Rights................. 8
(c) Landlord's Rights.............................. 8
(d) Repair Obligation.............................. 9
16. TAXES..................................................... 9
17. EVENTS OF DEFAULT......................................... 9
18. REMEDIES.................................................. 9
19. PAYMENT BY TENANT; NON-WAIVER............................. 10
(a) Payment by Tenant.............................. 10
(b) No Waiver...................................... 10
20. LANDLORD'S LIEN........................................... 10
21. SURRENDER OF PREMISES..................................... 10
22. HOLDING OVER.............................................. 10
23. CERTAIN RIGHTS RESERVED BY LANDLORD....................... 10
24. SUBSTITUTION SPACE........................................ 11
25 MISCELLANEOUS............................................. 11
(a) Landlord Transfer.............................. 11
(b) Landlord's Liability........................... 11
(c) Force Majeure.................................. 11
(d) Brokerage...................................... 11
(e) Estoppel Certificates; Financial Information... 11
(f) Notiices....................................... 11
(g) Separability................................... 11
(h) Amendments; and Binding Effect................. 11
iii
<PAGE>
(i) Quiet Enjoyment................................ 11
(j) Joint and Several Liability.................... 12
(k) Captions; Interpretation....................... 12
(1) No Merger...................................... 12
(m) No Offer....................................... 12
(n) Exhibits....................................... 12
(o) Entire Agreement............................... 12
(p) Attorney's Fees................................. 12
26. SPECIAL PROVISIONS........................................ 12
(a) Signage........................................ 12
(b) Rooftop Equipment.............................. 13
(c) City of Dallas Negotiations.................... 13
(d) Reader Testing................................. 13
(e) Janitorial Services............................ 13
(f) Security System................................ 14
(g) Hazardous Materials............................ 14
(h) Confidentiality................................ 14
(i) Generator...................................... 14
iv
<PAGE>
LIST OF DEFINED TERMS
---------------------
Page No.
--------
Abatement Date...................................................... 1
Abatement Period.................................................... 1
Acceptable Contractor............................................... D-1
Acceptance Notice................................................... H-1
Active Lease Negotiations........................................... F-1
affiliate........................................................... 1
Allowance........................................................... D-5
Annual Cost Statement............................................... 2
Approved Equipment.................................................. 3
Approved Space Plans................................................ D-2
Arbitrator.......................................................... 1-1
Available Space..................................................... F-1
Available Space Exercise Notice..................................... F-1
Basic Cost.......................................................... C-1
Basic Lease Information............................................. 1
Basic Rental........................................................ i
Bid Cost............................................................ D-3
BOMA Method......................................................... 1
Building............................................................ i
Building Signs...................................................... 12
Building Specifications............................................. D-3
Building Standard Condition......................................... D-1
business day........................................................ 1
Casualty............................................................ 8
Commencement Date................................................... i
Comparable Buildings................................................ 3
Construction Loan................................................... J-1
Contractor.......................................................... D-1
Controllable Basic Costs............................................ C-4
Damage Notice....................................................... 8
Defect.............................................................. D-4
Designation Notice.................................................. F-1
Desired Space....................................................... F-1
Disabilities Acts................................................... 5
Electrical Costs.................................................... 2
Eligible Available Space............................................ F-1
Encumbered Space.................................................... F-1
Event of Default.................................................... 9
Excess.............................................................. C-1
Exercise Notice..................................................... I-1
Expense Stop........................................................ C-1
Extension Notice.................................................... G-1
Force Majeure Delay Days............................................ 1
GAAP................................................................ 7
Generator........................................................... 14
holiday............................................................. 3
HVAC................................................................ 3
including........................................................... 1
Initial Liability Insurance Amount.................................. 7
Land................................................................ i
Land Acquisition.................................................... J-1
Landlord............................................................ 1
Landlord's Assessment............................................... I-1
Landlord's Construction Manager..................................... D-1
Landlord's Mortgagee................................................ 7
Law................................................................. 1
Laws................................................................ 1
Lease............................................................... 1
Lease Date.......................................................... 1
Legal Requirements.................................................. 13
Letter of Intent.................................................... F-1
Lobby Signs......................................................... 12
Loss................................................................ 7
Major Fixtures...................................................... D-5
Marketable Condition................................................ F-1
Minimum Tangible Net Worth.......................................... 6
Minimum Working Capital............................................. 6
Monument Sign....................................................... 12
Mortgage............................................................ 7
Moving Costs........................................................ D-5
v
<PAGE>
normal business hours............................................... 3
Objection Notice.................................................... 1-1
Offer Notice........................................................ H-1
Parking Lot......................................................... E-1
Partial Floor....................................................... 1
Permitted Expenses.................................................. D-5
Permitted Transfer.................................................. 6
Permitted Transferee................................................ 6
Permitted Use....................................................... i
Pre-Occupancy Period................................................ D-5
Preliminary Plans................................................... D-2
Premises............................................................ i
Prevailing Market Conditions........................................ 1-1
Primary Lease....................................................... 7
Refusal Space....................................................... H-1
Relocatable Portion................................................. 11
Rent................................................................ i
Request Notice...................................................... F-1
Rooftop Equipment................................................... 13
Security Deposit.................................................... i
Selected Available Space............................................ F-1
Sign Conditions..................................................... 12
Sign Requirements................................................... 12
SNDA................................................................ 7
Substantially Completed Condition................................... D-4
Taking.............................................................. 8
Tangible Net Worth.................................................. 7
Taxes............................................................... C-1
Tenant.............................................................. 1
Tenant Delay Days................................................... D-5
Tenant Monument Sign................................................ 12
Tenant Party........................................................ 1
Tenant's Architect.................................................. D-1
Tenant's Assessment................................................. I-1
Tenant's Business................................................... 10
Tenant's Consultant................................................. D-1
Tenant's Property................................................... 4
Tenant's Proportionate Share........................................ i
Term................................................................ i
Termination Date.................................................... 1
Termination Notice.................................................. 1
Third Party Offer................................................... H-1
Total Construction Costs............................................ D-1
Transfer............................................................ 5
without profit or mark-up........................................... 1
Work................................................................ D-1
Work Termination Date............................................... J-1
Working Capital..................................................... 7
Working Drawings.................................................... D-2
vi
<PAGE>
LEASE
THIS LEASE AGREEMENT (this "LEASE ") is entered into as of November 14,
-----
1996, between ROSEMEADE OFFICE DEVELOPMENT, L.P., a Texas limited partnership
("LANDLORD"), and AMTECH CORPORATION, a Texas corporation ("TENANT").
-------- ------
1. DEFINITIONS AND BASIC PROVISIONS. The definitions and basic
--------------------------------
provisions set forth in the Basic Lease Information (the "BASIC LEASE
-----------
INFORMATION") executed by Landlord and Tenant contemporaneously herewith are
- - -----------
incorporated herein by reference for all purposes. The following terms shall
have the following meanings: "LAWS" means all federal, state, and local laws,
----
rules and regulations, all court orders, all governmental directives and
governmental orders, and all restrictive covenants affecting the Property, and
"LAW" means any of the foregoing; "AFFILIATE" means any person or entity which,
--- ---------
directly or indirectly, controls, is controlled by, or is under common control
with the party in question; "TENANT PARTY" shall include Tenant, any assignees
------------
claiming by, through, or under Tenant, any subtenants claiming by, through, or
under Tenant, and any agents, contractors, employees, and invitees of the
foregoing parties; "BUSINESS DAY" means Monday through Friday, other than
------------
holidays (defined below); and "INCLUDING" means including, without limitation.
---------
The use of the phrase "WITHOUT PROFIT OR MARK-UP" shall not preclude Landlord
-------------------------
from charging a reasonable administrative charge in connection with the matter
in question and such an administrative charge shall constitute part of the
actual costs for such matter.
2. LEASE GRANT. Subject to the terms of this Lease, Landlord leases to
-----------
Tenant, and Tenant leases from Landlord, the Premises. Tenant may in its
discretion increase the size of the Premises by up to 7,805 rentable square feet
by delivering to Landlord written notice thereof by January 2, 1997, provided
that if Tenant leases more than one full floor, there shall exist only one floor
on which Tenant is not leasing the entire rentable area thereof, and the
Premises shall consist of one contiguous block of space (which contiguous block
of space may be located on more than one floor). Any such additional space shall
be leased to Tenant on the terms and conditions of this Lease. Additionally, if
Tenant leases some, but not all, of the rentable area of a floor (a "PARTIAL
-------
FLOOR"), then the portion of such floor which is not leased by Tenant must be
- - -----
contiguous space whose size, configuration, elevator access and window exposure
is commercially reasonable and marketable in Landiord's reasonable discretion,
and must not fail to comply with Law because of its separation from the
Premises; otherwise, Tenant shall not have the right to lease space on such
Partial Floor. Upon fmat determination of the Premises, Landlord and Tenant
shall initial a revised Exhibit A-2 and attach it hereto. The number of rentable
-----------
square feet in the Building and in the Premises and the conversion factors for
converting the usable square footage to rentable square footage on single-tenant
and multi-tenant floors shall be calculated in accordance with the standard
method of measurement currently published by the Building Owner's and Manager's
Association for office buildings (the "BOMA METHOD"). At any time before
-----------
December 31, 1997, either party may request that the Building be remeasured, in
which case, the Building shall be remeasured by an architect or engineer
reasonably acceptable to each of the parties hereto, at the requesting party's
expense. If after such measurement it is finally determined that the rentable
area of the Premises or the Building is incorrect, then Landlord and Tenant
shall execute an amendment to this Lease revising the number of rentable square
feet set forth herein for the Premises or the Building, as applicable, and
Landlord's and Tenant's obligations hereunder shall be adjusted accordingly. If
neither party requests that the Premises or the Building be remeasured by
December 31, 1997, then the measurement of the Building and the Premises as of
the date hereof shall be binding on Landlord and Tenant.
3. TERM.
----
(a) COMMENCEMENT DATE. If the Commencement Date does not occur in
-----------------
November and is not the FIRST day of a calendar month, then the Tenn shall be
extended by the time between the Commencement Date and the first day of the next
month. If this Lease is executed before the Premises become available and ready
for occupancy by Tenant and Landlord is unable to tender possession of the
Premises to Tenant in a Substantially Completed Condition (defined in Exhibit D)
---------
before the Commencement Date, then, subject to Section 3.(b), (1) Tenant's
obligation to pay Basic Rental, Excess, and Electrical Costs hereunder shall be
waived until the date the Premises would have been in a Substantially Completed
Condition but for Tenant Delay Days (which date will be the Commencement Date,
unless Tenant has previously begun conducting business in the Premises), (2) the
Term shall be extended as herein provided, (3) Landlord shall not be in default
hereunder or be liable for damages therefor, and (4) Tenant shall accept
possession of the Premises when Landlord tenders possession thereof to Tenant in
a Substantially Completed Condition.
(b) BASIC RENTAL ABATEMENT: TERMINATION RIGHT. If Landlord fails to
-----------------------------------------
tender possession of the Premises to Tenant in a Substantially Completed
Condition by November 12, 1997, plus the sum of the number of Force Majeure
Delay Days (defined below) and the number of Tenant Delay Days (defined below)
(the "ABATEMENT DATE"), the Landlord shall abate Basic Rental, from the date
--------------
Tenant would otherwise be obligated to commence paying Basic Rental hereunder,
for a period (the "ABATEMENT PERIOD") equal to two days fro each day after the
----------------
Abatement Date that the Premises are not tendered to Tenant in a Substantially
Completed Condition, and the Term shall be extended by the number of days in the
Abatement Period. "FORCE MAJEURE DELAY DAYS" means the number of days of delay
------------------------
in obtaining a Substantially Completed Condition caused by events described in
Section 25.(c). If the Substantially Completed Condition has not occurred by
April 30, 1998, plus the number of Tenant Delay Days and Force Majeure Delay
Days (the "TERMINATION DATE"), Tenant may terminate this Lease by delivering
----------------
written notice thereof to Landlord (a "TERMINATION NOTICE") before the earlier
------------------
of (1) ten days after the Termination Date or (2) the date the Substantially
Completed Condition occurs. The abatement of Basic Rental and termination right
herein provided shall be Tenant's sole remedies for Landlord's failure to timely
tender the Premises to Tenant in a Substantially Completed Condition.
(c) ACCEPTANCE. By occupying the Premises, Tenant shall be deemed
----------
to have accepted the Premises in their condition as of the date of such
occupancy, subject to the performance of punch-list items that remain to be
performed by Landlord, if any, and to latent defects. Nothing contained in this
Section 3(c) shall be construed to
1
<PAGE>
relieve Landlord from its obligations expressly set forth in this Lease. It is
agreed that Tenant's presence in the Premises for the purpose of inspecting the
progress of construction, Tenant's activities relating to its move into the
Premises, and other activities prior to the conduct of Tenant's business in the
Premises shall not be deemed to be "occupancy" of the Premises for the purposes
of this Section 3(c). After Landlord has tendered possession of the Premises to
Tenant in a Substantially Completed Condition, Tenant shall execute and deliver
to Landlord, within ten days after Landlord has requested same, a letter
confirming (1) the Commencement Date, (2) that Tenant has so accepted the
Premises, and (3) that Landlord performed all of its obligations under Exhibit D
---------
with respect to the Premises (except for punch list items specified in such
letter and Landlord's one-year construction warranty), in each case to the
extent the same is factually accurate.
4. RENT.
----
(a) Payment. Tenant shall timely pay to Landlord Rent, without
-------
deduction or set off (except as specifically provided herein), at Landlord's
Address (or such other address as Landlord may from time to time designate in
writing to Tenant). Basic Rental shall be payable monthly in advance. The
first monthly installment of Basic Rental shall be payable on the Commencement
Date and on the first day of each succeeding calendar month during the Term.
Basic Rental for any fractional month at the beginning of the Term shall be
prorated based on 1/365 of the current annual Basic Rental for each day of the
partial month this Lease is in effect, and shall be due on the Commencement
Date.
(b) Consumer Price Index Increases to Basic Rental. [Intentionally
----------------------------------------------
Deleted].
(c) Electrical Costs. Tenant shall pay to Landlord an amount equal
----------------
to the product of (1) the Electrical Costs multiplied by (2) Tenant's
Proportionate Share. "ELECTRICAL COSTS" means Landlord's actual costs (without
----------------
profit or mark-up) incurred in connection with the provision of electricity used
in the Building (based on the average cost incurred per kilowatt hour for the
Building determined on the basis of Landiord's utility bills for the period in
question) less the costs incurred in connection with the provision of above-
----
building-standard electricity used in the Building less the cost incurred in
----
providing electricity for HVAC (defined below) during periods when
Buildingstandard HVAC service is not available to Tenant at no extra charge
(other than pursuant to pass-through provisions similar to this Section 4.(c)
and Exhibit C), and less the costs incurred in connection with the provision of
--------- ----
electricity that is separately metered to a particular tenant of the Building.
Tenant may at any time elect to have all electricity consumed in the Premises
separately metered by delivering written notice thereof to Landlord, in which
case (A) Landlord shall install and maintain the meters necessary to measure the
electricity consumed in the Premises at Tenant's expense and (B) after the
installation of such meters, Tenant's obligation in respect of rent for
Electrical Costs shall be to pay to Landlord the cost incurred in providing
electricity in the Premises as determined by such meters and Tenant's
Proportionate Share of Electrical Costs for the common areas of the Building
(including the Parking Lot [defined below]). Electrical Cost payments shall be
payable in monthly installments based on Landiord's good faith estimate of the
amount due for each month, and shall be due on the Commencement Date and on the
first day of each calendar month thereafter. Landlord may, from time to time,
re-estimate (but not more frequently than once during any calendar year after
the initial estimate for such year) the Electrical Costs to be due from Tenant
during any calendar year and deliver a copy of the re-estimate to Tenant, in
which case, Tenant shall pay its share of Electrical Costs based on such
reestimate.
(d) Annual Cost Statement. By April of each calendar year, or as
---------------------
soon thereafter as practicable, Landlord shall furnish to Tenant a statement of
Landiord's actual Electrical Costs (the "ANNUAL COST STATEMENT") for the
---------------------
previous year adjusted as provided in Section 4.(e). If the Annual Cost
Statement reveals that Tenant paid more for Electrical Costs than Tenant's
Proportionate Share of Electrical Costs in the year for which such statement was
prepared, then Landlord shall reimburse Tenant for such excess within 30 days
after delivery of the Annual Cost Statement in question or credit such excess to
Tenant's obligation to pay future installments of Rent for Electrical Costs (if
the Term has ended, then Landlord shall reimburse Tenant such excess); likewise,
if Tenant paid less than Tenant's Proportionate Share of Electrical Costs, then
Tenant shall pay Landlord such deficiency within 30 days after delivery of the
Annual Cost Statement in question.
(e) Adjustments to Electrical Costs. With respect to any calendar
-------------------------------
year or partial calendar year in which the Building is not occupied to the
extent of 95% of the rentable area thereof, the Electrical Costs for such period
shall, for the purposes hereof, be increased to the amount which would have been
incurred had the Building been occupied to the extent of 95% of the rentable
area thereof. However, in no event shall Landlord be entitled to be reimbursed
from all tenants of the Building more than the Electrical Costs of all
electricity consumed in the Building during the period in question.
(f) Tenant's Audit Rights. The Annual Cost Statement shall
---------------------
separately set forth the basic components (in reasonable detail) of Basic Cost
for the prior calendar year, and, if reasonably requested by Tenant, Landlord
shall provide Tenant with a supplemental statement setting forth the
applicability of such costs and the rationale behind the allocation thereof.
Tenant shall have the right, once in each calendar year of the Term, during
business hours of Landlord and in a manner so as to not unreasonably interfere
with Landlord's business, to audit Landlord's books related to the computation
of Basic Cost and Electrical Costs relating to a period within two years of such
audit (provided, however, that if any such audit discloses a discrepancy in the
costs for any year, then Tenant shall be entitled to conduct an audit of all
prior years); however, after Tenant has conducted any such audit of such costs
for a year Tenant may not conduct another audit of that year. If it is finally
determined that Tenant's actual share of Excess and Electrical Costs is
different than Landlord's computation of Tenant's share of Excess and Electrial
Costs, then Landlord shall refund to Tenant any overpayment of any such costs
for the year in question and for each year during the Term the same error was
made or Tenant shall pay to Landlord any underpayment of any such costs for the
year in question and for each year during the Term the same error was made, as
the case may be, within 30 days after such final determination. All such audits
shall be performed at Tenant's expense unless it is finally determined that the
Annual Cost Statement for the time period in question was in error and, as a
result thereof, Tenant paid to Landlord $5,000 more than the actual amount
2
<PAGE>
due for such time period, in which case Landlord shall pay the out-of-pocket
audit costs of Tenant. Tenant shall maintain the results of each such audit
confidential and shall not be permitted to use any third party to perform such
audit unless such third party is a certified public accountant who agrees with
Landlord in writing to maintain the results of such audit confidential and is
not paid on a contingency fee basis. Notwithstanding the foregoing, Tenant
shall be permitted to reveal the results of the audit to its attorneys,
accountants, permitted assignees or sublessees, government agencies and other
persons to whom Tenant is required to disclose such results pursuant to
provisions of any applicable Law or the order of a court.
5. DELINQUENT PAYMENT: HANDLING CHARGES. All payments required of Tenant
------------------------------------
hereunder shall bear interest from the date due until paid at the maximum lawful
rate. Alternatively, Landlord may charge Tenant a fee equal to 10% of any
delinquent payment of Rent which is not paid within ten days after Landlord
delivers to Tenant written notice of such delinquency; however, if Tenant failed
to timely pay Rent twice during the 12-month period preceding such delinquency,
then Landlord may charge Tenant such 10% fee without first delivering to Tenant
written notice of the delinquency in question, unless such delinquent payment is
for a nonrecurring charge (thus, excluding Basic Rental and Tenant's estimated
payments of Excess or Electrical Costs), in which case such written notice shall
be delivered to Tenant before the imposition of such fee. Such 10% fee shall be
made to reimburse Landlord for its cost and inconvenience incurred as a
consequence of Tenant's delinquency. In no event, however, shall the charges
permitted under this Section 5 or elsewhere in this Lease, to the extent the
same are considered to be interest under applicable Law, exceed the maximum
lawful rate of interest.
6. SECURITY DEPOSIT. [Intentionally deleted.]
----------------
7. LANDLORD'S OBLIGATIONS.
----------------------
(a) Services. Landlord shall furnish to Tenant (1) at all times
--------
water (hot and cold) at those points of supply provided for general use of
tenants of the Building; (2) heated, ventilated, and refrigerated air
conditioning ("HVAC") as appropriate, during normal business hours, at such
----
temperatures and in such amounts as are typical in Comparable Buildings (defmed
below); (3) unless Tenant has elected to provide such services under Section
26.(e), janitorial service to the Premises on weekdays other than holidays for
Building-standard installations (Landlord reserves the right to bill Tenant
separately for extra janitorial service required for non-standard installations)
and such window washing, all as set forth on the janitorial schedule attached
hereto as Exhibit K and made a part hereof; (4) elevators for ingress and egress
---------
at all times to the floors on which the Premises are located, in common with
other tenants, provided that Landlord may reasonably limit the number of
elevators to be in operation at times other than during normal business hours
and on holidays (provided that Tenant shall always have at least one elevator in
operation to provide Tenant access to all floors of the Premises); (5)
replacement of Building-standard light bulbs and fluorescent tubes, provided
that Landlord's standard charge for such bulbs and tubes shall be paid by
Tenant; and (6) electrical current at all times other than for computers,
electronic data processing equipment (other than personal computers), special
lighting, equipment that requires more than 110 volts, or other equipment whose
electrical energy consumption exceeds normal office usage unless Landlord has
specifically agreed in writing to provide electricity for any such equipment or
machines (the "APPROVED EQUIPMENT") or such equipment is Special Equipment
------------------
(hereafter defined). Landlord will provide the services referred to in this
Section 7.(a) and shall maintain the common areas, roof, foundation, structural
components, landscaping, windows, curtain walls and mechanical, electrical,
plumbing, HVAC and life-safety systems of the Building and the Parking Lot at a
level that is substantially similar to the level of service and maintenance that
is typical in comparable buildings in the Dallas North Tollway corridor
("COMPARABLE BUILDINGS"). The phrase "NORMAL BUSINESS HOURS" means 7:00 a.m. to
-------------------- ---------------------
7:00 p.m. Monday through Friday (except for holidays) and 8:00 a.m. to 1:00 p.m.
on Saturday (except for holidays); and the term "HOLIDAY" means New Year's Day,
-------
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
If Tenant desires any of the services specified in this Section 7.(a) at any
time other than times herein designated, such services shall be supplied to
Tenant upon the written request of Tenant delivered to Landlord before 3:00 p.m.
on the business day on which such usage is required (unless such day is a
holiday or a weekend in which case such request shall be made before 3:00 p.m.
on the immediately preceding business day), and Tenant shall pay to Landlord the
actual cost (without profit or mark-up) of such services within ten days after
Landlord has delivered to Tenant an invoice therefor. The costs incurred by
Landlord in providing after-hour HVAC service to Tenant shall include costs for
electricity, water, sewage, water treatment, labor, metering, filtering, and
maintenance and administrative fees reasonably allocated by Landlord to
providing such service, but shall not include any profit or mark-up for such
services to Landlord.
(b) Excess Utility Use. Landlord shall use reasonable efforts to
------------------
furnish electrical current for computers, electronic data processing equipment,
special lighting, equipment that requires more than 110 volts, and other
equipment whose electrical energy consumption exceeds normal office usage
through the then-existing feeders and risers serving the Building and the
Premises, and (unless such equipment is Approved Equipment) Tenant shall pay to
Landlord the actual cost (without profit or mark-up) of such service within ten
days after Landlord has delivered to Tenant and invoice therefor. Landlord may
determine the amount of such additional consumption and potential consumption by
either or both: (1) a survey of standard or average tenant usage of electricity
in the Building performed by a reputable consultant selected by Landlord and
paid for by Tenant; or (2) a separate meter in the Premises installed,
maintained, and read by Landlord, at Tenant's expense. Tenant shall not install
any electrical equipment requiring special wiring or requiring voltage in excess
of 110 volts or otherwise exceeding Building capacity unless approved in advance
by Landlord (which approval shall not be unreasonably withheld or delayed) other
than (i) up to two office copy machines, (ii) a test lab, and (iii) a network
computer, which such computer will be installed in the computer room
(collectively, the equipment referenced in items (i), (ii) and (iii) being
referred to as the "SPECIAL EQUIPMENT") or (iv) Approved Equipment (all such
-----------------
electrical equipment to be installed in those areas of the Premises as indicated
in the Working Drawings as requiring in excess of 110 volts). The use of
electricity in the Premises shall not exceed the capacity of feeders and risers
to or wiring in the Premises. Any risers or wiring required to meet Tenant's
excess electrical requirements shall, upon Tenant's written request, be
installed by Landlord, at Tenant's cost, if, in Landlord's sole and
3
<PAGE>
absolute judgment, they are necessary and shall not cause permanent damage or
injury to the Building or the Premises, cause or create a dangerous or hazardous
condition, entail excessive or unreasonable alterations, repairs, or expenses,
or interfere with or disturb other tenants of the Building. If Tenant uses
machines or equipment (other than general office machines, excluding computers
and electronic data processing equipment) in the Premises which affect the
temperature otherwise maintained by the air conditioning system or otherwise
overload any utility, Landlord may install supplemental air conditioning units
or other supplemental equipment in the Premises, and the reasonable cost
thereof, including the cost of installation, operation, use, and maintenance,
shall be paid by Tenant to Landlord within ten days after Landlord has delivered
to Tenant an invoice therefor.
(c) DISCONTINUANCE. Landlord's obligation to furnish services
--------------
under Section 7.(a) shall be subject to the rules and regulations of the
supplier of such services and governmental rules and regulations.
(d) RESTORATION OF SERVICES; ABATEMENT. Landlord shall use
----------------------------------
reasonable efforts to restore any service that becomes unavailable; however,
such unavailability shall not entitle Tenant to any abatement or termination of
Tenant's obligations hereunder except as provided in the next sentence. However,
if Tenant is prevented from making reasonable use of a material portion of the
Premises for more than five consecutive business days (or for more than ten
business days, whether or not consecutive, during any 12-month period) because
of the unavailability of any such service and such unavailability was not caused
by a Tenant Party, Tenant shall, in addition to Tenant's other remedies at law
or in equity (other than termination or abatement of its obligations under this
Lease) be entitled to a reasonable abatement of Rent for each consecutive day
immediately following such five-business-day period (or each day during such 12
month period after such 10 business days, as applicable) that Tenant is so
prevented from making reasonable use of the Premises. If any such unavailability
or interruption of services is caused by Landlord's negligence or willful
misconduct, then the five-consecutive-business-day period shall be reduced for
that event to two consecutive business days and each day such interruption
occurs because of Landlord's negligence or willful misconduct shall count 1.5
business days for purposes of determining the ten business days during any 12-
month period provided in the prior sentence. If any such unavailability or
interruption of services occurs (other than because of a Taking [defined below]
or Casualty [defined below] as to which Sections 14 and 15 shall control), and
Landlord fails to restore such services to the Premises within 30 days (except
in an emergency, in which case such period shall be a reasonable amount of time
under the circumstances, but in any event no less than one business day)
following delivery of written notice from Tenant to Landlord, Tenant may
commence to restore such services unless Landlord is diligently taking action to
restore such services and diligently prosecutes same to completion. All actual
third-party costs incurred by Tenant in connection with restoring such services
shall be paid by Landlord to Tenant within 30 days following written demand
therefor to Landlord, accompanied by invoices substantiating such claim.
Tenant's right to perform work under this Section 7.(d) is subject to the
following conditions:
(1) all such work shall be performed in a good and
workmanlike manner and in accordance with law;
(2) except in an emergency, all such work shall be
performed in accordance with plans and specifications approved by
Landlord (which approval shall not be unreasonably withheld), whose
approval shall be deemed given if Landlord fails to disapprove any
submitted plans and specifications within three business days after
Tenant delivers such plans to Landlord;
(3) all such work shall be performed by contractors
reasonably acceptable to Landlord which maintain commercial liability
insurance in an amount not less than $ 1,000,000 per occurrence naming
Landlord as an additional insured, provided that any contractor which
has previously performed material amounts of work in the Building with
the approval of Landlord and who performed such work and its
obligations in connection therewith promptly and in an acceptable
manner shall be deemed to be acceptable to Landlord for purposes of
this Section; Landlord's approval shall be deemed given if Landlord
fails to disapprove any contractor within three business days after
Tenant delivers to Landlord a request for its consent thereto; and
(4) Tenant delivers to Landlord "as-built" plans of the work
performed by Tenant.
(e) ACCESS. Tenant shall have unlimited access to the Premises 24
------
hours per day, 7 days per week and, in connection therewith, Landlord will
provided a minimum of one elevator, 24 hours per day, subject to controlled
access, and Tenant shall be provided access to and use of the service elevator
and loading dock 24 hours per day, 7 days per week during the Term, in each
case, subject to such reasonable rules and regulations as Landlord may impose
thereon (including scheduling and notification requirements).
8. IMPROVEMENTS; ALTERATIONS; REPAIRS; MAINTENANCE.
-----------------------------------------------
(a) IMPROVEMENTS; ALTERATIONS. After the initial Tenant
-------------------------
improvements are made pursuant to Exhibit D, no alterations or physical
---------
additions in or to the Premises may be made without Landlord's prior written
consent, which shall not be unreasonably withheld or delayed; however, if such
alterations, additions, or improvements could reasonably be expected to have
more than a de minimis effect on the Building's structure, the Building's HVAC,
plumbing, electrical, or other mechanical systems, or the exterior appearance of
the Building or the appearance of its common areas or elevator lobby areas, then
Landlord's consent may be granted or denied in its sole and absolute
discretion. In addition, it is agreed that the installation of Tenant's
furniture and equipment (including but not limited to built-in furniture and
modular furniture) (collectively the "TENANT'S PROPERTY") shall not require
-----------------
Landlord's consent, if such installation would not affect the Building's
structure or any of its systems (other than a de minimis effect). Subject to
Section 26.(a), Tenant shall not paint or install lighting or decorations,
signs, window or door lettering, or advertising media of any type that can be
viewed from the common areas of the Building or the exterior of the Building
without the prior written consent of Landlord. Except for Tenant's Property all
alterations, additions, or improvements
4
<PAGE>
(whether temporary or permanent in character, and including without limitation
all air-conditioning equipment and all other equipment that is in any manner
connected to the Building's plumbing system) made in or upon the Premises,
either by Landlord or Tenant, shall be Landlord's property when Tenant's right
to possess the Premises ends and shall remain on the Premises without
compensation to Tenant. Approval by Landlord of any of Tenant's drawings and
plans and specifications prepared in connection with any improvements in the
Premises shall not constitute a representation or warranty of Landlord as to the
adequacy or sufficiency of such drawings, plans and specifications, or the
improvements to which they relate, for any use, purpose, or condition (other
than their adequacy and sufficiency with respect to the structural components of
the Building, and the mechanical, electrical, plumbing, HVAC, life-safety and
other building systems), but such approval shall merely be the consent of
Landlord as required hereunder. As between Landlord and Tenant, (1) Tenant
shall bear the risk of complying with Title III of the Americans With
Disabilities Act of 1990, the Texas Elimination of Architectural Barriers Act,
and all rules, regulations, and guidelines promulgated under either of such
acts, as amended from time to time (the "DISABILITIES ACTS") in the Premises,
-----------------
and (2) Landlord shall bear the risk of complying with the Disabilities Acts in
the common areas of the Building, other than compliance that is necessitated by
the use of the Premises for other than the Permitted Use (which risk and
responsibility shall be borne by Tenant). For purposes of the previous sentence
only, the following portions of the Premises shall be considered "common areas":
elevator lobbies; fire stairwells; drinking fountains; Building central and core
entrances to mechanical rooms and closets; and restrooms; and the cost of such
compliance shall not be part of the Total Construction Costs (defined in Exhibit
-------
D).
- - --
(b) REPAIRS; MAINTENANCE. Tenant shall maintain the Premises in a
--------------------
clean, safe, operable, attractive condition, and shall not permit or allow to
remain any waste or damage to any portion of the Premises. Tenant shall repair
or replace, subject to Landiord's reasonable direction and supervision, any
damage to the Building caused by a Tenant Party. If Tenant fails to make such
repairs or replacements within a reasonable time after the occurrence of such
damage and written notice thereof to Tenant, then Landlord may make the same at
Tenant's cost. If any such damage caused by a Tenant Party affects any area
outside the Premises or the HVAC, plumbing, mechanical, or electrical systems of
the Building or is visible in the lobby areas of the Building or from outside
the Premises, then Landlord may repair such damage at Tenant's reasonable cost
without delivering to Tenant any prior notice thereof. The cost of any repair
or replacement work performed by Landlord under this Section 8 shall be paid by
Tenant to Landlord within ten days after Landlord has delivered to Tenant an
invoice therefor.
(c) PERFORMANCE OF WORK. All work described in this Section 8 shall
-------------------
be performed only by Landlord or by contractors and subcontractors approved in
writing by Landlord (which approval shall not be unreasonably withheld or
delayed). Tenant shall cause all contractors and subcontractors to procure and
maintain insurance coverage against such risks, in such amounts, and with such
companies as Landlord may reasonably require, and, if reasonably required by
Landlord in connection with any such alteration for which Landlord's consent is
required pursuant to this Section 8, to procure payment and performance bonds
reasonably satisfactory to Landlord covering the cost of the work. All such work
shall be performed in accordance with all Laws and in a good and workmanlike
manner so as not to damage the Premises, the primary structure or structural
qualities of the Building, or plumbing, electrical lines, or other utility
transmission facility. All such work which may affect the HVAC, electrical,
plumbing, other mechanical systems, or the Building's structural elements must
be approved by the Building's engineer of record (which approval shall not be
unreasonably withheld), at Tenant's expense.
(d) MECHANIC'S LIENS. Tenant shall not permit any mechanic's
----------------
liens to be filed against the Premises or the Building for any work performed,
materials furnished, or obligation incurred by or at the request of Tenant. If
such a lien is filed, then Tenant shall, within ten days after Landlord has
delivered notice of the filing to Tenant, either pay the amount of the lien or
diligently contest such lien and deliver to Landlord a bond or other security
reasonably satisfactory to Landlord. If Tenant fails to timely take either such
action, then Landlord may pay the lien claim without inquiry as to the validity
thereof, and any amounts so paid, including expenses and interest, shall be paid
by Tenant to Landlord within ten days after Landlord has delivered to Tenant an
invoice therefor.
9. USE. Tenant shall use the Premises only for the Permitted Use and
---
shall comply with all Laws relating to Tenant's particular use of the Premises
(as opposed to Laws which are applicable to property owners generally), and
Landlord shall comply with Laws in other portions of the Building which are not
leased to third parties and shall use reasonable efforts to cause other tenants
to comply with Laws in their premises. The Premises shall not be used for any
use which is disreputable or creates extraordinary fire hazards or results in an
increased rate of insurance on the Building or its contents or the storage of
any hazardous materials or substances. If, because of a Tenant Party's acts, the
rate of insurance on the Building or its contents increases, then Tenant shall
pay to Landlord the amount of such increase on demand and acceptance of such
payment shall not constitute a waiver of any of Landlord's other rights. Tenant
shall conduct its business and control each other Tenant Party so as not to
create any nuisance or unreasonably interfere with other tenants or Landlord in
its management of the Building. It is acknowledged and agreed that Tenant's use
of the Premises for general office purposes and other uses specifically
contemplated herein shall not be deemed to be a violation of this Section 9 so
as to cause the rate of insurance on the Building to increase.
10. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) TRANSFERS; CONSENT. Tenant shall not, without the prior
------------------
written consent of Landlord (which Landlord may grant or deny in its sole
discretion), (1) advertise that any portion of the Premises is available for
lease, (2) assign, transfer, or encumber this Lease or any estate or interest
herein, whether directly or by operation of law, (3) permit any other entity to
become Tenant hereunder by merger, consolidation, or other reorganization,
except as provided in Section 10.(d), (4) if Tenant is an entity other than a
corporation whose stock is publicly traded, permit the transfer of ownership
interest in Tenant so as to result in a change in the current control of Tenant,
(5) sublet any portion of the Premises, (6) grant any license, concession, or
right of occupancy of any portion of the Premises, or (7) permit the use of the
Premises by any parties other than Tenant (any of the event listed in Sections
10.(a)(2) through 10.(a)(7) being a "TRANSFER"). Notwithstanding the foregoing,
--------
Landlord shall not unreasonably withhold its consent to any assignment or
subletting of the Premises to a party which (A) has a good credit standing any
may
5
<PAGE>
reasonably be expected to fulfill the obligations of Tenant hereunder, and (B)
will use the Premises for the purposes herein stated. Without limiting the
foregoing, Landlord may withhold its consent to any such assignment or
subletting of the Premises to (i) any party engaged in a business which directly
competes with any business of another tenant in the Building which leases more
than 10,000 rentable square feet, (ii) any party which is a tenant or an
affiliate of any tenant in the Building, (iii) any governmental agency, or (iv)
any party with whom Landlord is actively negotiating the terms of a lease for
the Building. However, in the case of clause (ii) and (iv), if such party needs
space in the Building in excess of the unleased portions thereof, then Landlord
shall not unreasonably withhold its consent to any subletting of the Premises to
accommodate such party's excess space needs, but only to the extent such needs
exceed the space which is then available for lease in the Building. If Tenant
requests Landlord's consent to a Transfer, then Tenant shall provide Landlord
with a written description of all terms and conditions of the proposed Transfer,
copies of the proposed documentation, and the following information about the
proposed transferee: name and address; reasonably satisfactory information about
its business and business history; its proposed use of the Premises; banking,
fmancial, and other credit information; and general references sufficient to
enable Landlord to determine the proposed transferee's credit worthiness and
character. Tenant shall reimburse Landlord for its reasonable attorneys' fees
and other expenses incurred in connection with considering any request for its
consent to a Transfer. If Landlord consents to a proposed Transfer, then the
proposed transferee shall deliver to Landlord a written agreement whereby it
expressly assumes the Tenant's obligations hereunder accruing from and after the
time of such transfer; however, any transferee shall be liable only for
obligations under this Lease that are properly allocable to the space subject to
the Transfer, and only to the extent of the rent it has agreed to pay Tenant
therefor. No Transfer shall release Tenant from performing the obligations of
the "Tenant" under this Lease, but rather Tenant and its transferee shall be
jointly and severally liable therefor. Landlord's consent to any Transfer shall
not waive Landlord's rights as to any subsequent Transfers. If an Event of
Default occurs while the Premises or any part thereof are subject to a Transfer,
then Landlord, in addition to its other remedies, may collect directly from such
transferee all rents becoming due to Tenant and apply such rents against Rent.
Tenant authorizes its transferees to make payments of rent directly to Landlord
upon the occurrence of an Event of Default and receipt of notice from Landlord
to do so.
(b) CANCELLATION. Landlord may, within 30 days after submission of
------------
Tenant's written request for Landlord's consent to a Transfer, cancel this Lease
(or, as to a subletting or assignment, cancel as to the portion of the Premises
proposed to be sublet or assigned) as of the date the proposed Transfer was to
be effective. If Landlord cancels this Lease as to any portion of the Premises,
then this Lease shall cease for such portion of the Premises and Tenant shall
pay to Landlord all Rent accrued through the cancellation date relating to the
portion of the Premises covered by the proposed Transfer. Thereafter, Landlord
may lease such portion of the Premises to the prospective transferee (or to any
other person) without liability to Tenant.
(c) ADDITIONAL COMPENSATION. If no Event of Default exists, all
-----------------------
compensation received by Tenant for a Transfer (other than a Permitted Transfer)
in respect of the interval in question that exceeds the Basic Rental and
Tenant's share of Electrical Costs and Excess allocable to the portion of the
Premises covered thereby for the same interval shall be payable as follows:
(1) first, to Tenant until Tenant has received an amount equal
to all actual third-party out-of-pocket costs incurred by Tenant in
connection with such Transfer (including brokerage commissions,
attorneys' fees and expenses, tenant-finish-work and other tenant
inducements), and, provided Tenant is not occupying or using any
portion of the Premises in question for any purpose whatsoever
(including storage purposes) during such period, Tenant's costs
related to the Premises in question during the time such Premises are
being marketed by Tenant; and
(2) thereafter, 100% to Landlord.
If an Event of Default exists, all such excess compensation shall be payable to
Landlord.
(d) PERMITTED TRANSFERS. Notwithstanding the foregoing, Tenant may
-------------------
Transfer all or part of its interest in this Lease or all or part of the
Premises to the following types of entities (a "PERMITTED TRANSFEREE") without
--------------------
the consent of Landlord (a "PERMITTED TRANSFER"), provided that the Premises
------------------
will continue to be used only for the Permitted Use, the proposed use of the
Premises by the Permitted Transferee does not violate an exclusive use granted
to other tenants of the Building, and the conditions set forth below are
satisfied:
(1) any affiliate of Tenant; however, if at the time of or at
any time after any such Transfer (A) ownership interests in such
Permitted Transferee are transferred resulting in a change of control
of such Permitted Transferee other than to an affiliate of Tenant or
(B) such Permitted Transferee is subject to a merger, consolidation,
or other reorganization with a party which is not an affiliate of
Tenant, then such event shall constitute a Transfer requiring
Landlord's consent under Section 10.(a), unless in either case such
permitted Transferee is a corporation whose common stock is traded on
a public exchange (including the NASDAQ exchange), in which case
Landlord's consent shall not be required;
(2) any corporation in which or with which Tenant, or its
corporate successors or assigns, is merged or consolidated, in
accordance with applicable statutory provisions governing merger and
consolidation of corporations, so long as (A) Tenant's obligations
hereunder are assumed by the corporation surviving such merger or
created by such consolidation; (B) the Tangible Net Worth (hereafter
defined) of the surviving or created corporation is not less than
$30,000,000 (the "MINIMUM TANGIBLE NET WORTH"); and (C) the surviving
--------------------------
or created corporation has unencumbered Working Capital (hereafter
defined) of not less than $10,000,000 (the "MINIMUM WORKING CAPITAL");
-----------------------
or
6
<PAGE>
(3) any corporation acquiring all or substantially all of
Tenant's assets if such corporation's Tangible Net Worth after such
acquisition is not less than the Minimum Tangible Net Worth and such
corporation's Working Capital after such acquisition is not less than
the Minimum Working Capital.
Tenant shall promptly notify Landlord of any such Permitted Transfer. "TANGIBLE
--------
NET Worth" means the excess of total assets over total liabilities (in each
- - ---
case, determined in accordance with generally accepted accounting principles
["GAAP"]) excluding from the determination of total assets all assets which
-----
would be classified as intangible assets under GAAP, including, without
limitation, goodwill, licenses, patents, trademarks, trade names, copyrights,
and franchises. "WORKING CAPITAL" means the amount by which current assets
---------------
exceed current liabilities of the party in question, with the current assets
being calculated in accordance with GAAP excluding, however, from the
determination of current assets prepaid expenses, loans to directors, officers,
and shareholders, and monies due from affiliates; and current liability shall be
calculated in accordance with GAAP and shall include, without limitation, all
obligations payable on demand or within one year after the date on which the
determination is made.
11. INSURANCE: WAIVERS: SUBROGATION, INDEMNITY.
-------------------------------------------
(a) INSURANCE. Tenant shall at its expense procure and maintain
-----------
throughout the Term the following insurance policies: (1) commercial general
liability insurance, umbrella insurance, or property insurance in amounts of not
less than a combined single limit of $5,000,000 (the "INITIAL LIABILITY
-----------------
INSURANCE AMOUNT") or such higher amounts as Landlord may from time to time
- - ----------------
reasonably require based on industry standards for entities engaging in business
operations similar to those conducted by Tenant in the Premises and on the
Parking Lot, insuring Tenant, Landlord, Landlord's agents and their respective
affiliates against all liability of the type which may be covered by such
insurance policies for injury to or death of a person or persons or damage to
property arising from the use and occupancy of the Premises, (2) contractual
liability insurance coverage sufficient to cover Tenant's indemnity obligations
hereunder, to the extent such coverage may be obtained by Tenant, (3) insurance
covering the full value of all Tenant's personal property and improvements in
the Premises, (4) workman's compensation insurance, containing a waiver of
subrogation endorsement reasonably acceptable to Landlord, and (5) business
interruption insurance. Tenant's insurance shall provide primary coverage to
Landlord when any policy issued to Landlord provides duplicate or similar
coverage, and in such circumstance Landlord's policy will be excess over
Tenant's policy. Tenant shall furnish certificates of such insurance and such
other evidence reasonably satisfactory to Landlord of the maintenance of all
insurance coverages required hereunder, and Tenant shall obtain a written
obligation on the part of each insurance company to notify Landlord at least 30
days before cancellation or a material change of any such insurance. All such
insurance policies shall be in form, and issued by companies, reasonably
satisfactory to Landlord.
(b) WAIVER OF NEGLITENCE CLAIMS, NO SUBROGATION. Landlord shall not
-------------------------------------------
be liable to any Tenant Party for any injury to or death of any person or
persons or the damage to or theft, destruction, loss, or loss of use of any
property or inconvenience (a "LOSS") caused by casualty, theft, fire, third
----
parties, or any other matter (including Losses arising through repair or
alteration of any part of the Building, or failure to make repairs, or from any
other cause, provided that Landlord is not otherwise in breach of its
obligations hereunder), except to the extent resulting from the negligence or
intentional acts or omissions of Landlord or its agents, affiliates, contractors
or invitees. Landlord and Tenant each waives any claim it might have against the
other for any dwnage to or theft, destruction, loss, or loss of use of any
property, to the extent the same is insured against under any insurance policy
maintained by it that covers the Building, the Premises, Landlord's or Tenant's
fixtures, personal property, leasehold improvements, or business, or is required
to be insured by it against under the temis hereof, REGARDLESS OF WHETHER THE
NEGLIGENCE OR FAULT OF THE OTHER PARTY CAUSED SUCH LOSS; HOWEVER, LANDIORD'S
WAIVER SHALL NOT INCLUDE THE FIRST $50,000 OF ANY DEDUCTIBLE AMOUNTS ON
INSURANCE POLICIES CARRIED BY LANDLORD. Each party shall cause its insurance
carrier to endorse all applicable policies waiving the carrier's rights of
recovery under subrogation or otherwise against the other party.
(c) INDEMNITY. Subject to the waiver of subrogation in Section
---------
11.(b), Tenant shall defend, indemnify, and hold harmless Landlord and its
agents from and against all claims, demands, liabilities, causes of action,
suits, judgments, and expenses (including attorneys' fees) for any Loss arising
from any occurrence on the Premises (other than a Loss arising from the
negligence or willful misconduct of Landlord or its agents, employees, or
contractors). Subject to the waiver of subrogation in Section 11.(b), Landlord
shall defend, indemnify, and hold harmless Tenant and its agent from and against
all claims, demands, liabilities, causes of action, suits, judgments, and
expenses (including attomey's fees) for any Loss arising from any occurrence in
the common areas of the Building (other than a Loss arising from the negligence
or wilful misconduct of a Tenant Party). These indemnity provisions shall
survive termination or expiration of this Lease.
(d) LANDLORD'S INSURANCE. Landlord shall carry throughout the Term
--------------------
(1) fire and extended coverage insurance on the Building for 100% of the
replacement cost thereof, including a rent loss endorsement for at least 12
months and (2) commercial general liability insurance with respect to all common
areas of the Building in an amount not less than a combined single limit of
$5,000,000; all such coverages shall be subject to commercially reasonable
deductible amounts.
12. SUBORDINATION ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE.
--------------------------------------------------------
(a) SUBORDINATION. This Lease shall be subordinate to any deed of
-------------
trust, mortgage, or other security instrument (a "MORTGAGE"), or any ground
--------
lease, master lease, or primary lease (a "PRIMARY LEASE"), that now or hereafter
-------------
covers all or any part of the Premises (the mortgagee under any Mortgage or the
lessor under any Primary Lease is referred to herein as "LANDLORD'S MORTGAGEE");
--------------------
provided, however, that the subordination of this Lease to any Mortgage or
Primary Lease now or hereafter affecting the Building is expressly conditioned
upon Tenant and the Landlord's Mortgagee in question entering into a
subordination, non-disturbance and attornment agreement in form and substance
reasonably acceptable to Tenant ("SNDA"). If the Mortgage or Primary Lease
----
encumbering the Land as of the date hereof, if any, is not discharged and
released of record concurrently with the Land Acquisition (defined in
7
<PAGE>
Exhibit J), Landlord shall cause the Landlord's Mortgagee under such Mortgage or
- - ---------
Primary Lease to execute and deliver to Tenant an SNDA within ten days after the
Land Acquisition. If such SNDA is not so delivered to Tenant, then Tenant shall
have the right to terminate this Lease by delivering to Landlord written notice
thereof before the earlier of the date such SNDA is delivered to Tenant or 20
days after the Land Acquisition.
(b) ATTORNMENT. Tenant shall attorn to any party succeeding to
----------
Landlord's interest in the Premises, whether by purchase, foreclosure, deed in
lieu of foreclosure, power of sale, termination of lease, or otherwise, upon
such party's request and in accordance with the terms of the applicable SNDA,
and shall execute such agreements confmning such attornment as such party may
reasonably request.
(c) NOTICE to LANDLORD'S MORTGAGEE. Tenant shall not seek to
------------------------------
enforce any remedy it may have for any default on the part of the Landlord
without first giving written notice by certified mail, return receipt requested,
specifying the default in reasonable detail, to any Landlord's Mortgagee whose
address has been given to Tenant, and affording such Landlord's Mortgagee a
reasonable opportunity to perform Landlord's obligations hereunder as set forth
in the applicable SNDA.
13. RULES AND REGULATIONS. Tenant shall comply with the rules and
----------
regulations of the Building which are attached hereto as Exhibit B. Landlord
---------
may, from time to time, reasonably change such rules and regulations for the
safety, care, or cleanliness of the Building and related facilities, provided
that such changes are applicable to all tenants of the Building, are delivered
to Tenant in writing, and will not unreasonably interfere with Tenant's use of
the Premises. Tenant shall be responsible for the compliance with such rules
and regulations by each Tenant Party. All such rules and regulations will be
applied in a non-discriminatory manner to all tenants of the Building. In the
event of a conflict or an inconsistency between any such rules and regulations
and the terms of this Lease, the terms of this Lease shall control.
14. CONDEMNATION.
-------------
(a) TAKING - LANDLORD'S AND TENANT'S RIGHTS. If any part of the
----------------------------------------
Building is taken by right of eminent domain or conveyed in lieu thereof (a
"TAKING"), and such Taking prevents Tenant from conducting its business in the
-------
Premises in a manner reasonably comparable to that conducted immediately before
such Taking, or such portion of the parking for the Building or access to the
Premises (either on the Land or within the Building such as through lobby areas)
is subject to a Taking and such Taking prevents Tenant from conducting its
business in the Premises in a manner reasonable comparable to that conducted
immediately before such Taking, then Tenant may terminate this Lease as of the
date of such Taking by giving written notice to Landlord within 60 days after
the Taking, and Rent shall be apportioned as of the date of such Taking. If
Tenant does not terminate this Lease, then Rent shall be abated on a reasonable
basis as to that portion of the Premises rendered untenantable by the Taking.
(b) TAKING - LANDLORD'S RIGHTS. If any material portion, but less
--------------------------
than all, of the Building becomes subject to a Taking, or if Landlord is
required to pay any of the proceeds received for a Taking to Landlord's
Mortgagee, then this Lease, at the option of Landlord, exercised by written
notice to Tenant within 30 days after such Taking, shall terminate and Rent
shall be apportioned as of the date of such Taking. If Landlord does not so
terminate this Lease, then this Lease will continue, but if any portion of the
Premises has been taken or rendered untenantable, Rent shall abate as provided
in the last sentence of Section 14.(a).
(c) AWARD. If any Taking occurs, then Landlord shall receive the
-----
entire award or other compensation for the Land, the Building, and other
improvements taken, and Tenant may separately pursue a claim against the
condemnor for the value of Tenant's personal property which Tenant is entitled
to remove under this Lease, moving costs, loss of business, and other claims it
may have.
(d) RESTORATION . In the case of any Taking where this Lease is
-----------
not terminated, Landlord shall rebuild and restore the remaining Building and
other improvements on the Land to an architecturally and functionally complete
unit (as comparable to those which existed prior to the Taking as may be
feasible under the circumstances) at Landlord's sole expense. Notwithstanding
the foregoing, Landlord's obligation to restore the Building shall be limited to
the actual award received by Landlord for such Taking less all costs incurred by
Landlord in connection therewith .
15. FIRE OR OTHER CASUALTY.
----------------------
(a) REPAIR ESTIMATE. If the Premises or the Building are damaged by
---------------
fire or other casualty (a "CASUALTY"), Landlord shall, within 60 days after such
--------
Casualty, deliver to Tenant a good faith estimate (the "DAMAGE NOTICE") of the
-------------
time needed to repair the damage caused by such Casualty.
(b) LANDLORD'S AND TENANT'S RIGHTS. If a material portion of the
------------------------------
Premises or the Building is damaged by Casualty such that Tenant is prevented
from conducting its business in the Premises in a manner reasonably comparable
to that conducted immediately before such Casualty and Landlord estimates that
the damage caused thereby cannot be repaired within 180 days after the
commencement of repair, and such Casualty was not caused by a Tenant Party, then
Tenant may terminate this Lease by delivering written notice to Landlord of its
election to terminate within 30 days after the Damage Notice has been delivered
to Tenant. If tenant does not terminate this Lease, then (subject to Landlord's
rights under Section 15.(c)) Landlord shall repair the Building and Premises, as
the case may be, as provided below, the Rent for the portion of the Premises
rendered untenantable by the damage shall be abated on a reasonable basis from
the date of damage until the completion of the repair.
(c) LANDLORD'S RIGHTS. If (1) a Casualty damages a material portion
-----------------
of the building, (2) if Landlord is required to pay any insurance proceeds
arising out of the Casualty to Landlord's Mortgagee, and (3) Landlord terminates
all other leases in the Building whose premises are materially damaged by such
Casualty, then
8
<PAGE>
Landlord may terminate this Lease by giving written notice of its election to
terminate within 30 days after the Damage Notice has been delivered to Tenant,
and Rent hereunder shall be abated as of the date of the Casualty.
(d) REPAIR OBLIGATION. If neither party elects to terminate this
-----------------
Lease following a Casualty, then Landlord shall, within a reasonable time after
such Casualty, commence to repair the Building and the Premises and shall
proceed with reasonable diligence to restore the Building and Premises to
substantially the same condition as they existed immediately before such
Casualty; however, Landlord shall not be required to repair or replace any part
of the furniture, equipment, fixtures, and other leasehold improvements in the
Premises or in the premises of other occupants in the Building.
16. TAXES. Tenant shall be liable for all taxes levied or assessed against
-----
personal property, furniture, or fixtures placed by Tenant in the Premises. If
any taxes for which Tenant is liable are levied or assessed against Landlord or
Landlord's property and Landlord elects to pay the same, or if the assessed
value of Landlord's property is increased by inclusion of such personal
property, furniture or fixtures and Landlord elects to pay the taxes based on
such increase, then Tenant shall pay to Landlord, upon demand, that part of such
taxes for which Tenant is primarily liable hereunder; however, Landlord shall
not pay such amounts if Tenant notifies Landlord that it will contest the
validity or amount of such taxes and thereafter diligently proceeds with such
contest in accordance with applicable Law and the non-payment thereof does not
pose a threat of loss or seizure of the Building or interest of Landlord
therein.
17. EVENTS OF DEFAULT. Each of the following occurrences shall constitute
-----------------
an "EVENT OF DEFAULT":
----------------
(a) Tenant's failure to pay Rent when due and such failure
continues for a period of ten days after Landlord has delivered to Tenant
written notice thereof;
(b) Tenant's failure to perform, comply with, or observe any other
agreement or obligation of Tenant under this Lease (or any other lease executed
by Tenant for space in the Building) and such failure continues for a period of
30 days after Landlord has delivered to Tenant written notice thereof; however,
if such failure cannot be cured within such 30-day period, but Tenant begins to
cure such failure within such 30-day period and thereafter diligently pursues
such cure to completion, then such failure shall not constitute an Event of
Default unless it is not fully cured within 90 days after the expiration of the
initial 30-day period;
(c) the filing of a petition by or against Tenant (1) in any
bankruptcy or other insolvency proceeding; (2) seeking any relief under any
state or federal debtor relief law; (3) for the appointment of a liquidator or
receiver for all or substantially all of Tenant's property or for Tenant's
interest in this Lease; or (4) for the reorganization or modification of
Tenant's capital structure; however, if any such petition is filed against
Tenant, the filing thereof shall not constitute an Event of Default if such
petition is dismissed within 120 days after the filing thereof; and
(d) the making by Tenant of an assignment for the benefit of its
creditors.
18. REMEDIES. Upon any Event of Default, Landlord may, in addition to all
--------
other rights and remedies afforded Landlord hereunder or by law or equity, take
any of the following actions:
(a) Terminate this Lease by giving Tenant written notice thereof,
in which event, Tenant shall pay to Landlord the sum of (1) all Rent accrued
hereunder through the date of termination, (2) all amounts due under Section
19.(a), and (3) an amount equal to (A) the total Rent that Tenant would have
been required to pay for the remainder of the Term discounted to present value
at a per annum rate equal to the "Discount Rate" as published on the date this
Lease is terminated by The Wall Street Journal, Southwest Edition, in its
listing of "Money Rates", minus (B) the then present fair rental value of the
Premises for such period, similarly discounted; or
(b) Terminate Tenant's right to possession of the Premises without
terminating this Lease by giving written notice thereof to Tenant, in which
event Tenant shall pay to Landlord (1) all Rent and other amounts accrued
hereunder to the date of termination of possession, (2) all amounts due from
time to time under Section 19.(a), and (3) all Rent and other sums required
hereunder to be paid by Tenant during the remainder of the Term, diminished by
any net sums thereafter received by Landlord through reletting the Premises
during such period. Landlord shall use reasonable efforts to relet the Premises
on such terms and conditions as Landlord in its sole discretion may determine
(including a term different from the Term, rental concessions, and alterations
to, and improvement of, the Premises); however, Landlord shall not be obligated
to relet the Premises before leasing other portions of the Building. Landlord
shall not be liable for, nor shall Tenant's obligations hereunder be diminished
because of, Landlord's failure to relet the Premises or to collect rent due for
such reletting. Tenant shall not be entitled to the excess of any consideration
obtained by reletting over the Rent due hereunder. Reentry by Landlord in the
Premises shall not affect Tenant's obligations hereunder for the unexpired Term;
rather, Landlord may, from time to time, bring action against Tenant to collect
amounts due by Tenant, without the necessity of Landlord's waiting until the
expiration of the Term. Unless Landlord delivers written notice to Tenant
expressly stating that is has elected to terminate this Lease, all actions taken
by Landlord to exclude or dispossess Tenant of the Premises shall be deemed to
be taken under this Section 18.(b). If Landlord elects to proceed under this
Section 18.(b), it may at any time elect to terminate this Lease under Section
18.(a).
Additionally, upon the occurrence of an Event of Default, Landlord may without
notice enter upon the Premises to perform any of Tenant's unperformed
obligations hereunder and alter locks or other security devices at the Premises
to deprive Tenant of access thereto, and Landlord shall not be required to
provide a new key or right of access to Tenant.
9
<PAGE>
19. PAYMENT BY TENANT: NON-WAIVER.
-----------------------------
(a) PAYMENT BY TENANT. Upon any Event of Default, Tenant shall pay
-----------------
to Landlord all costs incurred by Landlord (including court costs and reasonable
attorneys' fees and expenses), in (1) obtaining possession of the Premises, (2)
removing and storing Tenant's or any other occupant's property, (3) repairing,
restoring, altering, remodeling, or otherwise putting the Premises into
condition acceptable to a new tenant, (4) if Tenant is dispossessed of the
Premises and this Lease is not terminated, reletting all or any part of the
Premises (including brokerage commissions, cost of tenant finish work, and other
costs incidental to such reletting), and (5) performing Tenant's obligations
which Tenant failed to perform.
(b) NO WAIVER. Landlord's acceptance of Rent following an Event of
---------
Default shall not waive Landlord's rights regarding such Event of Default. No
waiver by either party of any violation or breach of any of the terms contained
herein shall waive such party's rights regarding any future violation of such
term or violation of any other term.
20. LANDLORD'S LIEN. Landlord hereby waives its statutory landlord's lien
---------------
and agrees to execute such instruments as Tenant may reasonably request to
further evidence such waiver.
21. SURRENDER OF PREMISES. No act by Landlord shall be deemed an
---------------------
acceptance of a surrender of the Premises, and no agreement to accept a
surrender of the Premises shall be valid unless the same is made in writing and
signed by Landlord. At the expiration or termination of Tenant's right to
possess the Premises, Tenant shall deliver to Landlord the Premises with all
improvements located thereon in the same state of repair and condition as on the
Commencement Date, reasonable wear and tear (and condemnation and fire or other
casualty damage, as to which Sections 14 and 15 shall control) excepted taking
into account Tenant's duty to maintain the Premises, and shall deliver to
Landlord all keys to the Premises. Provided that Tenant has performed all of
its obligations hereunder, Tenant may remove all of Tenant's Property and such
other items which Landlord has specifically agreed in writing may be removed by
Tenant at the end of the Term (but Tenant shall not remove any such item which
was paid for, in whole or in part, by Landlord). Additionally, Tenant shall, at
Landlord's option, remove such alterations, additions, improvements, trade
fixtures, equipment, wiring, and furniture as Landlord may request (other than
(i) the improvements constructed pursuant to Exhibit D, and (ii) such
---------
alterations, additions, and improvements subsequently made by Tenant which
Landlord has specifically agreed in writing need not be removed at the end of
the Term). Tenant shall repair all damage caused by such removal. All items
not so removed shall be deemed to have been abandoned by Tenant and may be
appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord
without notice to Tenant and without any obligation to account for such items.
The provisions of this Section 21 shall survive the end of the Term.
22. HOLDING OVER. If Tenant fails to vacate the Premises at the end of
------------
the Term, then Tenant shall be a tenant at will and, in addition to all other
damages and remedies to which Landlord may be entitled for such holding over,
Tenant shall pay, in addition to the other Rent, a daily Basic Rental equal to
150% of the daily Basic Rental payable during the last month of the Term.
23. CERTAIN RIGHTS RESERVED BY LANDLORD. Provided that the exercise of
-----------------------------------
such rights does not unreasonably interfere with Tenant's occupancy of the
Premises, Landlord shall have the following rights:
(a) to decorate and to make inspections, repairs, alterations,
additions, changes, or improvements, whether structural or otherwise, in and
about the Building, or any part thereof; for such purposes, to enter upon the
Premises and, during the continuance of any such work, to temporarily close
doors, entryways, public space, and corridors in the Building; to interrupt or
temporarily suspend Building services and facilities (subject to Section 7.(d)
above); and to change the arrangement and location of entrances or passageways,
doors, and doorways, corridors, elevators, stairs, restrooms, or other public
parts of the Building;
(b) to take such reasonable measures as Landlord deems advisable
for the security of the Building and its occupants, including without limitation
searching all persons entering or leaving the Building; evacuating the Building
for cause, suspected cause, or for drill purposes; temporarily denying access to
the Building; and closing the Building after normal business hours and on
Saturdays, Sundays, and holidays, subject, however, to Tenant's right to enter
when the Building is closed after normal business hours under such reasonable
regulations as Landlord may prescribe from time to time which may include by way
of example, but not of limitation, that persons entering or leaving the
Building, whether or not during normal business hours, identify themselves to a
security officer by registration or otherwise and that such persons establish
their right to enter or leave the Building;
(c) to change the name by which the Building is designated,
provided that Landlord shall not change the name to one associated with an
entity whose primary business directly competes with Tenant's Business
(hereafter defined) at the time of such name change; and
(d) to enter the Premises at all reasonable hours to show the
Premises to prospective purchasers, lenders, and, during the last nine months of
the Term of the Lease, to prospective tenants; provided, however, any such entry
shall (except in case of an emergency) be upon advance, reasonable notice (which
may be oral) to Tenant and shall be conducted during Tenant's business hours.
In addition, at Tenant's request, Landlord shall (except in case of an
emergency) be accompanied by a representative of Tenant during any such entry
onto the Premises. Notwithstanding anything to the contrary contained herein,
Landlord shall not have the right to enter such areas of the Premises as are
designated by Tenant from time to time and approved by Landlord as "Secure
Areas" (herein so called) except in the case of an emergency. As used herein,
"TENANT BUSINESS" shall mean wireless data communication for the purpose of (1)
---------------
monitoring, locating or identifying people or objects or (2) security access
control.
10
<PAGE>
24. SUBSTITUTION SPACE. With respect to any portion of the Premises that
------------------
is not located on the third floor of the Building and is not a part of at least
25,000 contiguous rentable square feet on the floor on which it is located (the
"RELOCATABLE PORTION"), Landlord may, at Landlord's expense, relocate Tenant
-------------------
from the Relocatable Portion in question to other space in the Building which is
comparable in size and tenant finish-out to the Relocatable Portion in question
and is reasonably suited for Tenant's use. If Landlord so relocates Tenant,
Landlord shall reimburse Tenant for Tenant's reasonable out-of-pocket expenses
for moving Tenant's furniture, equipment and supplies from the Relocatable
Portion in question to the relocation space. Upon such relocation, the
relocation space shall be deemed to be part of the Premises and the terms of
this Lease shall remain in full force and shall apply to the relocation space,
except that, for purposes of determining Tenant's Proportionate Share and
Tenant's Basic Rental obligations, the number of rentable square feet of the
Premises with respect to such Relocatable Portion shall be deemed to be the
lesser of (a) the number of rentable square feet of such relocation space or (b)
the number of rentable square feet of the Relocatable Portion in question.
25. MISCELLANEOUS.
-------------
(a) LANDLORD TRANSFER. Landlord may transfer, in whole or in part,
-----------------
the Building and any of its rights under this Lease. If Landlord assigns its
rights under this Lease, then, upon assumption by the transferee of the
obligations of Landlord hereunder, Landlord shall thereby be released from any
further obligations hereunder.
(b) LANDLORD'S LIABILITY. The liability of Landlord to Tenant for
--------------------
any default by Landlord under the terms of this Lease shall be limited to
Tenant's actual direct, but not consequential, damages therefor and shall be
recoverable from the interest of Landlord in the Building and the Land, and
Landlord shall not be personally liable for any deficiency. This section shall
not be deemed to limit or deny any remedies which Tenant may have in the event
of default by Landlord hereunder which do not involve the recourse liability of
Landlord. Without limiting the foregoing sentence, this Section 25(b) shall in
no event be construed as a limitation on Tenant's right to pursue its equitable
remedies. Tenant hereby waives its statutory lien under Section 91.004 of the
Texas Property Code.
(c) FORCE MAJEURE. Other than for Landlord's and Tenant's monetary
-------------
obligations under this Lease and the obligation to maintain insurance, whenever
a period of time is herein prescribed for action to be taken by either party
hereto, such party shall not be liable or responsible for, and there shall be
excluded from the computation for any such period of time, any delays due to
strikes, riots, acts of God, shortages of labor or materials, war, Laws, or any
other causes of any kind whatsoever which are beyond the control of such party.
(d) BROKERAGE. Landlord and Tenant each warrant to the other that
---------
it has not dealt with any broker or agent in connection with the negotiation or
execution of this Lease, other than The Staubach Company, whose commissions
shall be paid by Landlord pursuant to a separate written commission agreement.
Tenant and Landlord shall each indemnify the other against all costs, expenses,
attorneys' fees, and other liability for commissions or other compensation
claimed by any broker or agent claiming the same by, through, or under the
indemnifying party.
(e) ESTOPPEL CERTIFICATES; FINANCIAL INFORMATION. From time to
--------------------------------------------
time, Tenant shall furnish to any party designated by Landlord, within ten days
after Landlord has made a request therefor, (1) a certificate signed by Tenant
confirming and containing such factual certifications and representations as to
this Lease as Landlord may reasonably request, and (2) such public financial
statements and other credit information and reports, if any, regarding Tenant as
Landlord may reasonably request. Tenant shall have the right to make such
qualifications to the estoppel certificate as are necessary to make the
statements therein factually accurate.
(f) NOTICES. All notices and other communications given pursuant to
-------
this Lease shall be in writing and shall be (1) mailed by first class, United
States Mail, postage prepaid, certified, with return receipt requested, and
addressed to the parties hereto at the address specified in the Basic Lease
information, (2) hand delivered to the intended address, or (3) sent by prepaid
telegram, cable, facsimile transmission, or telex followed by a confirmatory
letter. Notice sent by certified mail, postage prepaid, shall be effective
three business days after being deposited in the United States Mail; all other
notices shall be effective upon delivery to the address of the addressee. The
parties hereto may change their addresses by giving notice thereof to the other
in conformity with this provision.
(g) SEPARABILITY. If any clause or provision of this Lease is
------------
illegal, invalid, or unenforceable under present or future laws, then the
remainder of this Lease shall not be affected thereby and in lieu of such clause
or provision, there shall be added as a part of this Lease a clause or provision
as similar in terms to such illegal, invalid, or unenforceable clause or
provision as may be possible and be legal, valid, and enforceable.
(h) AMENDMENTS: AND BINDING EFFECT. This Lease may not be amended
------------------------------
except by instrument in writing signed by Landlord and Tenant. No provision of
this Lease shall be deemed to have been waived by either party, unless such
waiver is in writing signed by such party, and no custom or practice which may
evolve between the parties in the administration of the terms hereof shall waive
or diminish the right of either party to insist upon the performance by the
other party in strict accordance with the terms hereof. The terms and
conditions contained in this Lease shall inure to the benefit of and be binding
upon the parties hereto, and upon their respective successors in interest and
legal representatives, except as otherwise herein expressly provided. This
Lease is for the sole benefit of Landlord and Tenant, and, other than
Landlord's Mortgagee, no third party shall be deemed a third party beneficiary
hereof.
(i) QUIET ENJOYMENT. Provided Tenant has performed all of the
---------------
terms and conditions of this Lease to be performed by Tenant, Tenant shall
peaceably and quietly hold and enjoy the Premises for the Term, without
hindrance from Landlord or any party claiming by, through, or under Landlord,
subject to the terms and conditions of this Lease. Landlord shall not enter into
any restrictive covenants that will materially and adversely affect Tenant's use
and occupancy of the Premises, increase Tenant's obligations or decrease
Tenant's rights under this Lease (other than a de minimis effect), without
Tenant's prior written consent.
11
<PAGE>
(j) JOINT AND SEVERAL LIABILITY. If there is more than one Tenant,
---------------------------
then the obligations hereunder imposed upon Tenant shall be joint and several.
(k) CAPTIONS: INTERPRETATION. The captions contained in this Lease
------------------------
are for convenience of reference only, and do not limit or enlarge the terms and
conditions of this Lease. When used herein, the singular includes the plural and
the plural the singular and words importing any gender include the other gender.
The normal rule of construction that any ambiguity be resolved against the
drafting party shall not apply to the interpretation of this Lease or any
Exhibits or amendments hereto.
(l) NO MERGER. There shall be no merger of the leasehold estate
---------
hereby created with the fee estate in the Premises or any part thereof if the
same person acquires or holds, directly or indirectly, this Lease or any
interest in this Lease and the fee estate in the leasehold Premises or any
interest in such fee estate.
(m) NO OFFER. The submission of this Lease to Tenant shall not be
--------
construed as an offer, nor shall Tenant have any rights under this Lease unless
Landlord executes a copy of this Lease and delivers it to Tenant.
(n) EXHIBITS. All exhibits and attachments attached hereto are
--------
incorporated herein by this reference.
Exhibit A - Outline of Premises
Exhibit B - Building Rules and Regulations
Exhibit C - Operating Expense Escalator
Exhibit D - Work Letter
Exhibit E - Parking
Exhibit F - Right of First Opportunity
Exhibit G - Extension Option
Exhibit H - Right of First Refusal
Exhibit I - Prevailing Market Conditions
Exhibit J - Land Acquisition and Construction Loan
Exhibit K - Janitorial Schedule
Exhibit L - Sign Description
Exhibit M - Preliminary Architectural Renderings
(o) ENTIRE AGREEMENT. This Lease constitutes the entire agreement
----------------
between Landlord and Tenant regarding the subject matter hereof and supersedes
all oral statements and prior writings relating thereto. Except for those set
forth in this Lease, no representations, warranties, or agreements have been
made by Landlord or Tenant to the other with respect to this Lease or the
obligations of Landlord or Tenant in connection therewith.
(p) ATTORNEY'S FEES. In the event of any litigation in connection
---------------
with this Lease, the prevailing party shall be entitled to recover from the non-
prevailing party all reasonable attorneys' fees and costs of court incurred by
the prevailing party in connection with such litigation.
26. SPECIAL PROVISIONS.
------------------
(a) SIGNAGE. If (1) Tenant is occupying at least one full floor in
-------
the Building, and (2) Tenant's right to possess the Premises or this Lease has
not been terminated (collectively, the "SIGN CONDITIONS"), then Tenant may, at
---------------
its risk and expense, construct one sign (collectively, the "BUILDING SIGNS") on
--------------
up to two sides of the Building's exterior whose design, size, color, material
composition, and plans and specifications therefor are reasonably acceptable to
Landlord; such signs' locations on the Building are designated on Exhibit L,
---------
and such signs' design shall be mutually agreed upon by Landlord and Tenant
within 30 days from the date hereof. If the Sign Conditions are satisfied,
Tenant's rights to signage on the exterior walls of the Building as agreed upon
above shall be exclusive and no other party shall be permitted to have exterior
signage on such walls. Tenant may also install, at its expense, appropriate
signage, including Tenant's logo, on the walls of the elevator lobbies of and on
entrance doors to all floors of the Building on which Tenant is leasing the
entire rentable area thereof (the "LOBBY SIGNS"). The location, design, size,
-----------
color, material composition, and plans and specifications for the Lobby Signs
must be consistent with the sign criteria established by Landlord therefor and
be approved by Landlord, such approval not to be unreasonably withheld or
delayed. If Landlord, at its option, constructs a monument or pylon sign on the
Land relating to the Building (the "MONUMENT SIGN"), and if the Sign Conditions
-------------
are satisfied, Tenant shall have the right, at Tenant's expense, to place
Tenant's sign panel (the "TENANT MONUMENT SIGN") on the Monument Sign at a
--------------------
location designated by Landlord. The design, size, color, material composition,
and plans and specifications of the Tenant Monument Sign must be reasonably
acceptable to Landlord. If Landlord grants its approval, Tenant shall erect the
Building Signs, Lobby Signs, and Tenant Monument Sign in accordance with the
approved plans and specifications, in a good and workmanlike manner, in
accordance with all Laws and after Tenant has received all requisite approvals
thereunder (the "SIGN REQUIREMENTS"), and in a manner so as not to unreasonably
-----------------
interfere with the use of the Building grounds while such construction is taking
place; thereafter, Tenant shall maintain the building Sign, Lobby Sign, and
Tenant Monument Sign in a good, clean, and safe condition in accordance with the
Sign Requirements. During the Term and so long as the Sign Conditions are
satisfied, no more than one additional tenant of the building shall have the
right to maintain a sign on the building's exterior. If either of the Sign
Conditions are not satisfied, Tenant shall remove the Building Signs, Lobby
Signs, and Tenant Monument Sign upon Landlord's written demand therefor and
Tenant's rights under this Section 26.(a) shall terminate. If Tenant fails to
so remove the Building Signs, Lobby Sign, and Tenant Monument Sign within 20
days after Landlord's written request, Landlord may, at Tenant's expense, remove
and dispose of the Building Signs, Lobby Signs, and Tenant Monument Sign in any
manner it deems appropriate, all without compensation to Tenant. After the end
of the Term or after Tenant's right to posses the Premises has been terminated,
Landlord may require that Tenant remove the Building Signs, Lobby Signs, and
Tenant Monument Sign by delivering to Tenant written notice thereof within 30
12
<PAGE>
days after the end of the Term. If Landlord so requests, Tenant shall remove
the Building Signs, Lobby Signs, and Tenant Monument Sign, repair all damage
caused thereby, and restore the Building area on which the signs were located to
its condition before the installation of the signs within ten days after
Landlord's request therefor (reasonable wear and tear and damage by fire or
other casualty excepted). If Tenant fails to timely do so, Landlord may,
without compensation to Tenant, (A) use the Building Signs, Lobby Signs, and
Tenant Monument Sign or (B) at Tenant's expense, remove the Building Signs,
Lobby Signs, and Tenant Monument Sign, perform the related restoration and
repair work and dispose of the signs in any manner Landlord deems appropriate.
Tenant shall defend, indemnify, and hold harmless Landlord from all losses,
claims, costs and liabilities arising in connection with or relating to the
construction, installation, maintenance, use, or removal of the Building Signs,
Lobby Signs, and Tenant Monument Sign, INCLUDING THOSE ARISING FROM LANDLORD'S
---------------------------------------
NEGLIGENCE. The rights granted to Tenant under this Section 26.(a) may not be
- - ----------
assigned to any party, other than in connection with a Permitted Transfer of the
entire Premises. Provided no Event of Default exists when such allowance is
due, Landlord shall provide to Tenant an allowance equal to the lesser of (i)
$20,000 or (ii) the cost incurred by Tenant in designing, installing,
maintaining, repairing and removing the Building Signs. Such allowance shall be
due within ten days after Tenant delivers to Landlord a written request therefor
together with evidence reasonably acceptable to Landlord of the cost of
designing, installing, maintaining, repairing and removing the Building Signs.
(b) ROOFTOP EQUIPMENT. Provided that Tenant complies with the terms
-----------------
of this Section, Tenant may, at its risk and expense, install one satellite dish
and related communications equipment and wiring and supplemental HVAC equipment
(collectively, the "ROOFTOP EQUIPMENT") on the roof of the Building at a
-----------------
location approved by Landlord, which equipment may be used solely by Tenant and
its Permitted Transferees. Before installing the Rooftop Equipment, Tenant shall
submit to Landlord for its approval (which approval shall be in Landlord's sole
discretion) plans and specifications which (1) specify in detail the design,
location, size, and, in the case of a satellite dish, frequency of the Rooftop
Equipment and (2) are sufficiently detailed to allow for the installation of the
Rooftop Equipment in a good and workmanlike manner and in accordance with all
Laws (the "LEGAL REQUIREMENTS"). If Landlord approves of such plans, Tenant
------------------
shall install (in a good and workmanlike manner), maintain and use the Rooftop
Equipment in accordance with all Legal Requirements and shall obtain all
consents and permits required for the installation and operation thereof; copies
of all such permits and evidence of such consents must be submitted to Landlord
before Tenant begins to install the Rooftop Equipment. Tenant shall thereafter
maintain all permits necessary for the maintenance and operation of the Rooftop
Equipment while it is on the Building and operate and maintain the Rooftop
Equipment in such a manner so as not to unreasonably interfere with any other
satellite, antennae, or other transmission facility on the Building's roof or in
the Building. Landlord may require that Tenant screen the Rooftop Equipment with
a parapet or other screening device reasonably acceptable to Landlord. Tenant
shall maintain the Rooftop Equipment and screening device in good repair and
condition. Tenant shall, at its risk and expense, remove the Rooftop Equipment
(including all wiring related thereto), within ten days after Landlord's written
request therefor following the occurrence of any of the following events: (A)
the termination of Tenant's right to possess the Premises; (B) the termination
of the Lease; (C) the expiration of the Term; or (D) Tenant's vacating the
Premises. If Tenant fails to do so within such ten-day period, Landlord may
remove the Rooftop Equipment and store or dispose of it in any manner Landlord
deems appropriate without liability to Tenant; Tenant shall reimburse Landlord
for all costs incurred by Landlord in connection therewith within ten days after
Landlord's written request therefor. Tenant shall, at its expense, repair any
damage to the Building caused by or relating to the Rooftop Equipment, including
that which is caused by its installation, maintenance, use, or removal and shall
indemnify Landlord against all Losses arising from the installation,
maintenance, use, or removal of the Rooftop Equipment, INCLUDING THAT CAUSED BY
------------------------
LANDLORD'S NEGLIGENCE. All work relating to the Rooftop Equipment shall, at
- - ---------------------
Tenant's expense, be coordinated with Landlord's roofmg contractor so as not to
affect any warranty for the Building's roof.
(c) CITY OF DALLAS NEGOTIATIONS. Landlord will initiate and
---------------------------
lead negotiations with the City of Dallas to rename the public street directly
adjacent to the west side of the Building "Amtech Boulevard." Landlord shall
have no liability hereunder should the City of Dallas refuse to change such
name, and Tenant shall pay any costs required to be paid by the City of Dallas
in connection with such name change.
(d) READER TESTING. Tenant may use a portion of the Parking Lot to
conduct Tenant's windshield access card reader testing or, with the written
approval of Landlord, other products of Tenant, such area to be designated by
Landlord from time to time in its sole discretion, but which shall, in all
events, be of a size and configuration reasonably adequate to enable Tenant to
conduct such approved testing procedures, and any parking spaces used in
connection therewith shall be part of the parking spaces allocated to Tenant
under Exhibit E. In conducting such testing, (1) Tenant shall not in any way
---------
unreasonably interfere with the rights of other tenants of the Building, and (2)
Tenant shall conduct such testing in a safe and orderly manner in accordance
with all Laws and Landlord's rules and regulations therefor reasonably
promulgated for the care and safety of the Parking Lot or any users thereof.
Landlord may terminate Tenant's right to conduct such testing in the Parking Lot
if Landlord, in its reasonable discretion, determines that such use unreasonably
interferes with the use of the Parking Lot by other tenants or creates an unsafe
condition in the Parking Lot and if Tenant fails to remedy the interference or
unsafe condition within a reasonable time after written notice from Landlord.
The area being used by Tenant for such testing shall be deemed to be under
Tenant's control during such use by Tenant, and Tenant shall defend, indemnify
and hold harmless Landlord for all Losses arising therein or occurring in
connection therewith, INCLUDING THOSE ARISING FROM LANDLORD'S NEGLIGENCE.
--------------------------------------------------
(e) JANITORIAL SERVICES. Tenant may, at its election, hire a
-------------------
janitorial contractor to provide janitorial services to the Premises by
delivering at least 45-day's prior written notice thereof to Landlord. such
contract must be reasonably acceptable to Landlord and shall provide for
services at least equal to Building-standard services. The janitorial
contractor must be reasonably acceptable to Landlord and must deliver to
Landlord such insurance as Landlord may reasonably request naming Landlord and
its agents as additional insured parties. If Tenant engages a janitorial
contractor to provide janitorial services to the Premises, then (until such
time as Landlord again, at Tenant's request, provides janitorial services to the
Premises) the portion of the Basic Cost allocable to the janitorial services
previously performed in the Premises shall not be included as a Basic Cost.
13
<PAGE>
(f) security SYSTEM. Landlord will, at Tenant's request, exclusively
---------------
contract with Tenant or its contractors or subcontractors to install Cardkey
Systems, Inc.'s security system in the Building (including the Premises and for
other tenants of the Building), provided that such equipment and contract are
available at comparable costs for similar card access security systems. Tenant
shall provide to Landlord all access devices to enable Landlord to enter into
the Premises, other than the Secure Areas, including, without limitation, all
codes, access cards, and keys.
(g) HAZARDOUS MATERIALS. Landlord represents and warrants that to the
-------------------
best of its knowledge there is no hazardous material or other environmental
contamination in, on or under the Land or the Building
(h) CONFIDENTIALITY. Tenant shall keep the terms and provisions of
-----------------
this Lease confidential, provided that Tenant may reveal the terms and
provisions of this Lease to its employees, representatives, agents, consultants,
attorneys, accountants, prospective or permitted assignees or sublessees,
governmental agencies and other persons to whom Tenant is required to disclose
such information pursuant to provisions of any applicable Law. or the order of a
court.
(i) GENERATOR. Tenant may install, operate, and maintain one
---------
emergency backup generator and uninterrupted power system (the "GENERATOR") at a
---------
location (subject to the conditions set forth below) mutually agreed to by
Tenant and Landlord, provided that the installation, maintenance, use, and
operation thereof complies with all Laws, and Tenant receives all approvals,
consents, and permits required by Law before the installation, maintenance, use,
and operation thereof. Before beginning the installation of the Generator,
Tenant shall deliver to Landlord final plans and specifications therefor
prepared by an engineer reasonably approved by Landlord and setting forth in
detail the design, location, size, and method of installation (including,
without limitation, separation walls and ventilation system) for Landlord's
review and approval, together with evidence reasonably satisfactory to Landlord
that all Laws have been satisfied. Landlord's approval of any such plans and
specifications shall not constitute a representation or warranty by Landlord
that such plans and specifications comply with the Law; such compliance shall be
the sole responsibility of Tenant. The Generator shall be installed on a
concrete pad no less than six inches thick and separated from the floor by a
suitable buffer (as reasonably determined by Landlord's engineer) and enclosed
in chain-link fencing from floor to ceiling in a manner which is readily
removable in case of emergency. Additionally, the generator model, size and
weight shall be subject in all respects to Landlord's prior written approval,
not to be unreasonably withheld. Upon approval of the plans and specifications
therefor and the size and location thereof, Tenant may install the Generator
provided that such work is coordinated with Landlord and is performed in a good
and workmanlike manner, in accordance with all Laws and the plans and
specifications therefor and in a manner so as not to damage the Building or
materially interfere with the use of any portion thereof while such installation
is taking place (which may require that Tenant perform such work after normal
business hours); thereafter, Tenant shall use, maintain, and operate the
Generator in a good, clean, and safe condition and in accordance with all Laws.
Tenant shall repair all damage caused by the installation, use, maintenance,
operation, or removal of the Generator and, upon its removal, restore the
portion of the Building or the Land where it was located to its condition
immediately before the installation thereof (ordinary wear and tear excepted).
If Tenant fails to do so within five days after Landlord's request (subject to
extension if such repair and restoration cannot reasonably be completed within
such five-day period so long as Tenant commences such work within FIVE days and
diligently prosecutes the same to completion), Landlord may perform such work
and Tenant shall pay to Landlord all reasonable costs incurred in connection
therewith within 30 days after Landlord's written request therefor. Tenant shall
properly fuel and immediately remove from the area surrounding the Generator any
spills or other leaks of fluid from the Generator. Additionally, Tenant shall
ensure that (1) the Generator is properly exhausted at all times so no odors
emanate therefrom and (2) all of Tenant's exhaust pipes extend to the full
height of Landlord's exhaust pylons. The Generator shall be installed, used,
maintained, operated, and removed at Tenant's risk and expense and Tenant shall
maintain insurance in respect thereof reasonably satisfactory to Landlord,
listing Landlord, its agents and their respective affiliates, as additional
insureds. IT IS THE INTENTION OF THE PARTIES THAT TENANT BEAR ALL RISKS RELATING
TO THE INSTALLATION, USE, MAINTENANCE, OPERATION, AND REMOVAL OF THE GENERATOR;
THEREFORE, TENANT SHALL DEFEND, INDEMNIFY, AND HOLD HARMLESS LANDLORD, ITS
AGENTS, AND THEIR RESPECTIVE AFFILIATES FROM ALL LOSSES ARISING IN CONNECTION
WITH OR RELATING TO THE INSTALLATION, MAINTENANCE, USE, OPERATION, AND REMOVAL
OF THE GENERATOR, INCLUDING, WITHOUT LIMITATION, THAT ARISING FROM LANDLORD'S
NEGLIGENCE. All testing of the Generator shall be performed after normal
business hours and must be coordinated with Landlord.
LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES
ARE SUITABLE FOR TENANT'S INTENDED COMMERCIAL PURPOSE, AND, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT
ABATEMENT, SETOFF, DEDUCTION. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, IT IS AGREED THAT THIS PARAGRAPH SHALL NOT IN ANY WAY LIMIT OR
IMPAIR LANDLORD'S OBLIGATIONS OR TENANT'S RIGHTS EXPRESSLY SET FORTH IN THIS
LEASE.
14
<PAGE>
DATED as of the date first written above.
LANDLORD: ROSEMEADE OFFICE DEVELOPMENT, L.P., a Texas
limited partnership
By: Crow Family, Inc., a Texas corporation, its
general partner
By: /s/ Anthony W. Dona
------------------------------
Name: Anthony W. Dona
----------------------------
Title: Vice President
---------------------------
TENANT: AMTECH CORPORATION, a Texas corporation
By: /s/ Steve M. [illegible]
------------------------------
Name: Steve M. [illegible]
----------------------------
Title: Chief Financial Officer
----------------------------
15
<PAGE>
EXHIBIT A
[Outline of Premises]
A-1
<PAGE>
EXHIBIT A-1
[Land]
A-1-1
<PAGE>
EXHIBIT A -I
------------
BOUNDARY DESCRIPTION
--------------------
BEING a 7.921 acre tract of land out of the Moses A. Jackson Survey, Abstract
- - -----
No. 486 and being a portion of a tract of land deeded to Guaranty Federal
Savings and Loan Association recorded in Volume 2739, Page 785, Deed Records,
Collin County, Texas. Said tract also being described by metes and bounds as
follows:
BEGINNING at a found 1/2 inch iron rod, located,at the intersection of the
- - ---------
southerly right-of way line of Rosemeade Road (a 80' right-of-way) and the
easterly line of a 100 foot wide Texas Power and Light Company easement-recorded
in Volume 677, Page 344, D.R.C.C.T. and also being located in a nontangent curve
to the left, having a delta of 27[degree] 52'14", a radius of 630.00 feet and a
chord bearing and distance of South 76[degree] 44'01" East, 303.44 feet;
THENCE along said curve and following along said south line of Rosemeade Road,
- - ------
an arc distance of 306.45 feet to a found 1/2 inch iron rod and the point of
tangency of said curve;
THENCE North 89[degree] 19'52" East, continuing along said south line, for a
- - ------
distance of 314.06 feet to a set inch iron rod;
THENCE South 50'03'45" East, continuing along said south line, for a distance of
- - ------
60.14 feet to a found concrete monument, located in the west right-of-way line
of Dallas Tollway ( a variable width right-of-way);
THENCE South 08[degree] 22'58" East, following along the west line of said
- - ------
Dallas Tollway, for a distance of 43.94 feet to a set 1/2 inch iron rod;
THENCE South 05[degrees] 52'11 " East, continuing along said west line, for a
- - ------
distance of'250.17 feet to a set 1/2 inch iron rod;
THENCE South 03[degrees] 20'37" East, continuing along said west line, for a
- - ------
distance of 163.28 feet to a set 1/2 inch iron rod;
THENCE South 89[degrees] 10'42" West, leaving said west line, for a distance of
- - ------
707.30 feet to a found 1/2 inch iron rod, located in the east line of said T.P.
and L. Easement;
THENCE North 01[degrees] 01'38" East, following along said east line, for a
- - ------
distance of 570.14 feet to the POINT OF BEGINNING and CONTAINING 345,048 square
------------------ ----------
feet or 7.921 acres of land more or less.
18
<PAGE>
EXHIBIT A-2
[Premises]
19
<PAGE>
EXHIBIT A-2
REFUSAL SPACE
[MAP APPEARS HERE]
20
<PAGE>
EXHIBIT A-2
PREMISES
[MAP APPEARS HERE]
21
<PAGE>
EXHIBIT B
BUILDING RULES AND REGULATIONS
------------------------------
The following rules and regulations shall apply to the Premises, the
Building, the parking garage associated therewith, the Land and the
appurtenances thereto:
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by tenants or used by any tenant for purposes
other than ingress and egress to and from their respective leased premises and
for going from one to another part of the Building.
2. Plumbing, fixtures and appliances shall be used only for the purposes
for which designed, and no sweepings, rubbish, rags or other unsuitable material
shall be thrown or deposited therein. Damage resulting to any such fixtures or
appliances from misuse by a tenant or its agents, employees or invitees, shall
be paid by such tenant.
3. No signs, advertisements or notices shall be painted or affixed on or
to any windows or doors or other part of the Building without the prior written
consent of Landlord. No nails, hooks or screws (other than for the installation
of Tenant's artwork or other decorations) shall be driven or inserted in any
part of the Building except by Building maintenance personnel. No curtains or
other window treatments shall be placed between the glass and the Building
standard window treatments.
4. Landlord shall provide and maintain an alphabetical directory for all
tenants in the main lobby of the Building.
5. Landlord shall provide all door locks in each tenant's leased
premises, at the cost of such tenant, and no tenant shall place any additional
door locks in its leased premises without Landiord's prior written consent.
Landlord shall fumish to each tenant a reasonable number of keys to such
tenant's leased premises, at such tenant's cost, and no tenant shall make a
duplicate thereof.
6. Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material, merchandise or
materials which require use of elevators or stairways, or movement through the
Building entrances or lobby shall be conducted under Landlord's supervision at
such times and in such a manner as Landlord may reasonably require. Each tenant
assumes all risks of and shall be liable for all damage to articles moved and
injury to persons or public engaged or not engaged in such movement, including
equipment, property and personnel of Landlord if damaged or injured as a result
of acts in connection with carrying out this service for such tenant (except to
the extent attributable to the negligence or willful misconduct of Landlord or
its agents, employees or contractors).
7. Landlord may prescribe weight limitations and determine the locations
for safes and other heavy equipment or items, which shall in all cases be placed
in the Building so as to distribute weight in a manner acceptable to Landlord
which may include the use of such supporting devices as Landlord may require.
All damages to the Building caused by the installation or removal of any
property of a tenant, or done by a tenant's property while in the Building,
shall be repaired at the expense of such tenant.
8. Corridor doors, when not in use, shall be kept closed. Nothing shall
be swept or thrown into the corridors, halls, elevator shafts or stairways. No
birds or animals shall be brought into or kept in, on or about any tenant's
leased premises. No portion of any tenant's leased premises shall at any time
be used or occupied as sleeping or lodging quarters.
9. Tenant shall cooperate with Landlord's employees in keeping its leased
premises neat and clean. Tenants shall not employ any person for the purpose of
such cleaning other than the Building's cleaning and maintenance personnel.
10. To ensure orderly operation of the Building, no ice, mineral or other
water, towels, newspapers, etc. shall be delivered to any leased area except by
persons approved by Landlord (which approval shall not be unreasonably withheld
or delayed).
11. Tenant shall not make or permit any vibration or reasonably
objectionable or unpleasant noises or odors in the Building or otherwise
unreasonably interfere in any way with other tenants or persons having business
with them.
12. No machinery of any kind (other than normal office equipment) shall be
operated by any tenant on its leased area without Landlord's prior written
consent, nor shall any tenant use or keep in the Building any flammable or
explosive fluid or substance (other than customary office supplies, solvents and
other kitchen cleansers customarily found in office space).
13. Landlord will not be responsible for lost or stolen personal property,
money or jewelry from tenant's leased premises or public or common areas
regardless of whether such loss occurs when the area is locked against entry or
not.
14. No vending or dispensing machines of any kind may be maintained in any
leased premises (other than in the kitchen and breakrooms within the Premises)
without the prior written permission of Landlord (which approval shall not be
unreasonably withheld or delayed).
22
<PAGE>
15. All mail chutes located in the Building shall be available for use
by Landlord and all tenants of the Building according to the rules of the United
States Postal Service.
16. To the extent permitted by Law, smoking shall be prohibited in the
Building.
23
<PAGE>
EXHIBIT C
OPERATING EXPENSE ESCALATOR
---------------------------
I Tenant shall pay an amount (per each rentable square foot in the
Premises) equal to the excess ("EXCESS") from time to time of the Basic Cost per
------
rentable square foot in the Building over $4.16 (the "EXPENSE STOP"). Tenant's
------------
obligation to pay the Excess shall be prorated during any partial year during
the Term. Landlord may collect such amount in a lump sum, to be due within 30
days after Landlord furnishes to Tenant the Annual Cost Statement.
Alternatively, Landlord may make a good faith estimate of the Excess to be due
by Tenant for any calendar year or part thereof during the Term, and, unless
Landlord delivers to Tenant a revision of the estimated Excess, Tenant shall pay
to Landlord, on the Commencement Date and on the first day of each calendar
month thereafter, an amount equal to the estimated Excess for such calendar year
or part thereof divided by the number of months in such calendar year during the
Term. From time to time during any calendar year, Landlord may estimate and re-
estimate (but not more frequently than once during any calendar year after the
initial estimate for such year) the Excess to be due by Tenant for that calendar
year and deliver a copy of the estimate or re-estimate to Tenant. Thereafter,
the monthly installments of Excess payable by Tenant shall be appropriately
adjusted in accordance with the estimations so that, by the end of the calendar
year in question, Tenant shall have paid all of the Excess as estimated by
Landlord. Any amounts paid based on such an estimate shall be subject to
adjustment pursuant to paragraph 3 of this Exhibit when actual Basic Cost is
available for each calendar year.
2. For the purposes of this Exhibit, the term "BASIC COST" shall mean all
----------
expenses and disbursements of every kind (subject to the limitations set forth
below) which Landlord incurs, pays or becomes obligated to pay in connection
with the ownership, operation, and maintenance of the Building (including the
associated parking facilities), determined in accordance with generally accepted
federal income tax basis accounting principles consistently applied, including
but not limited to the following:
(a) Management fees and wages and salaries of all employees engaged
in the operation, repair, replacement, maintenance, and security of the
Building, including taxes, insurance and benefits relating thereto;
(b) All supplies and materials used in the operation, maintenance,
repair, replacement, and security of the Building;
(c) Annual cost of all capital improvements made to the Building
which although capital in nature can reasonably be expected to reduce the normal
operating costs of the Building, as well as all non-structural capital
improvements made in order to comply with any law hereafter promulgated by any
governmental authority, as amortized over the useful economic life of such
improvements as determined by Landlord in its reasonable discretion (without
regard to the period over which such improvements may be depreciated or
amortized for federal income tax purposes) on a straight-line basis, and which
cost to be amortized shall exclude the reasonable salvage value of the item in
question; however, with respect to capital improvements made to the Building to
reduce operating costs, the costs thereof included in Basic Cost for a calendar
year shall not exceed Landlord's estimate of the annual cost savings for such
year (using good faith estimations and assumptions made when such improvement
was installed, unless the actual annual cost savings exceed such estimates, in
which case, such costs included in Basic Cost shall not exceed such actual
savings);
(d) Cost of all utilities, other than the cost of utilities
actually reimbursable to Landlord by the Building's tenants (including Tenant
under Section 7.(b) of this Lease), provided that the cost of utilities
reimbursable to Landlord pursuant to operating expense pass-through provisions
similar to this Exhibit C may be included in Basic Costs;
---------
(e) Cost of any insurance or insurance related expense applicable
to the Building and Landlord's personal property used in connection therewith;
(f) All taxes and assessments and governmental charges whether
federal, state, county or municipal, and whether they be by taxing or management
districts or authorities presently taxing or by others, subsequently created or
otherwise, and any other taxes and assessments attributable to the Building (or
its operation), and the grounds, parking areas, driveways, and alleys around the
Building, excluding, however, federal and state taxes on income (collectively,
"TAXES"); if the present method of taxation changes so that in lieu of the whole
-----
or any part of any Taxes levied on the Land or Building, there is levied on
Landlord a capital tax directly on the rents received therefrom or a fiwchise
tax, assessment, or charge based, in whole or in part, upon such rents for the
Building, then all such taxes, assessments, or charges, or the part thereof so
based, shall be deemed to be included within the term "Taxes" for the purposes
hereof;
(g) Cost of repairs, replacements, and general maintenance of the
building, other than repair, replacement, and general maintenance of the roof,
foundation and exterior walls and other structural components of the Building;
and
(h) Cost of service or maintenance contracts with independent
contractors for the operation, maintenance, repair, replacement, or security of
the Building (including, without limitation, alarm service, window cleaning, and
elevator maintenance).
There are specifically excluded from the definition of the term "Basic Cost" the
following costs:
(1) capital improvements made to the Building, other than
capital improvements described in Section 2.(c) of this Exhibit and
except for items which, though capital for accounting purposes, are
properly considered maintenance and repair items, such as painting of
common areas, replacement and
24
<PAGE>
restretching of carpet in elevator lobbies, replacement of wall coverings in
elevator lobbies, and restriping the Parking Lot;
(2) alterations attributable solely to tenants of the Building
(including Tenant) and costs incurred in renovating, decorating, painting or
redecorating vacant space for tenants or other occupants of the Building;
(3) interest payable by Landlord with respect to any debt of Landlord
or secured by the Building and/or the Land;
(4) amortization or other payments or charges on loans to Landlord,
whether loans unsecured or secured by a deed of trust, mortgage, or otherwise on
the Building and/or the Land;
(5) depreciation of the Building or any improvements on the Land under
or pertaining to the Building except as otherwise provided in this Section or
Landlord's personal property;
(6) leasing fees, commissions or brokerage commissions of any kind,
including signing bonuses;
(7) legal, auditing, consulting and professional fees (other than
those legal, auditing, consulting and professional fees incurred in connection
with the normal and routine maintenance and operation of the Building and/or
the Land, including, without limitation, Tax contests) paid or incurred in
connection with negotiations for leases, financings, refinancings, sales,
acquisitions, obtaining of permits or approvals, zoning proceedings or actions,
environmental permits or actions, lawsuits, further development of the Land or
any extraordinary transactions, occurrences or events;
(8) transfer, gains, inheritance, estate, gift, income, excess profits
or franchise taxes or other such taxes imposed on or measured by the income of
Landlord from the operation of the Building and/or the Land or the value of the
Building or the Land, except as provided in Section 2.(f) of this Exhibit;
(9) the cost incurred in performing work or furnishing services for
individual tenants which work or services are in excess of work and services
available to Tenant at no extra charge;
(10) expenses (including reserves) for repair, the maintenance or
replacement paid by proceeds of condemnation awards or covered by warranties,
guarantees and service contracts and any costs due to Casualty (whether insured
or not);
(11) expenses incurred in leasing or procuring new tenants including
advertising and marketing expenses and expenses for preparation of leases or
renovating space for new tenants or costs incurred for installation of multi-
tenant floor corridor configurations, rent allowances, lease, takeover costs,
payment of moving costs and similar costs and expenses;
(12) the amount of rent or other charges payable under and pursuant to
any ground lease or superior lease pertaining to the Land on which the Building
is located, and/or the Building or payments for air rights, licenses and
easements benefitting the Building;
(13) costs incurred which are subject to reimbursement by tenants of
the Building (including Tenant) or third parties (including insurers), other
than pursuant to an operating expense pass-through provision similar to this
Exhibit C or Section 4 of this Lease;
- - ---------
(14) wages, costs and salaries associated with home office, off-site
employees of Landlord other than professional services provided by such
employees which would otherwise be provided by outside professionals, but only
to the extent such services are included at reasonable market rates (and then
only to the extent that such person's wages, costs and salaries are reasonably
allocated among the Building and other buildings or properties with respect to
which such person performs services);
(15) the costs of installing, operating and maintaining an
observatory, broadcasting facility, luncheon club, cafeteria, retail store,
sundry shop, newsstand, concession, athletic or recreational club, fitness room,
or day care center that are in excess of the normal costs attributable to
providing Building standard services;
(16) the cost of correcting latent defects and defects in base
building construction for the Building or its systems or the parking areas and
other common areas outside the Building, including noncompliance with Laws
currently in effect;
(17) any advertising, promotional or marketing expenses for the
Building;
(18) any cost representing an amount paid to any entity related to
Landlord or the Building's manager which is in excess of the amount which would
have been paid in the absence of such relationship;
(19) payments for rented equipment, the cost of which would not be
included as a Basic Cost if the equipment were purchased;
C-2
<PAGE>
(20) cost incurred due to violation by Landlord or any tenant of the
Building of the terms of any lease or condition, covenant or Law applicable
to the Land, and/or the Building, except as provided in Section 2.(c) above
of this Exhibit D;
---------
(21) costs of repairs, replacements or other work occasioned by the
exercise by governmental authorities of the right of eminent domain;
(22) services, items and benefits for which Tenant or any other tenant
or occupant of the Building specifically reimburses Landlord (other than
pursuant to a pass-through provision similar to this Exhibit or Section 4
of this Lease) or for which Tenant or any other tenant or occupant of the
Building pays third persons.
(23) penalties and interest for late payment of, including, without
limitation, Taxes, insurance, equipment leases and other past due amounts,
(24) costs incurred in removing the property of former tenants or
other occupants of the Building;
(25) salaries or other compensation or benefits paid to employees
above the grade of building manager (including, without limitation, profit
sharing, bonuses and 401(k) savings plans);
(26) costs of selling, syndicating, financing, mortgaging or
hypothecating any of Landlord's interest in the Building;
(27) the cost of any disputes (other than Tax disputes and those which
generally benefit the tenants of the Building) including, without
limitation, legal fees, between Landlord, any employee or agency of
Landlord, or any mortgagees or ground lessors of Landlord.
(28) costs and disbursements relating to or arising in any way,
directly or indirectly, from the handling, removal, treatment, disposal or
replacement of asbestos, asbestos containing materials or other hazardous
materials in the Building or otherwise complying with environmental Laws,
(29) any cost of acquiring, maintaining (other than routine cleaning),
and restoring objects of art;
(30) costs of constructing leasehold improvements to rentable areas of
the Building, whether for Tenant or any other tenant;
(31) costs of initially constructing the Building and other
improvements on the Land and the costs of constructing additions to the
Building or new buildings on the Land or the Project, or otherwise further
developing the Land or the Project;
(32) discounts received by Landlord;
(33) Landlord's general overhead and general administrative expenses;
(34) cost of electricity paid by Tenant pursuant to Section 4 of the
Lease;
(35) any compensation paid to clerks, tenants or other persons in
commercial concessions operated by Landlord in any parking garage
associated with the Building, if any, and any other costs specifically
incurred in connection with the operation of any such parking garage, but
only to the extent revenues are received by Landlord from such parking
garage to cover such costs; it being agreed that any such excess costs not
covered by such revenues shall be included as Basic Costs; and
(36) costs incurred because of an intentional tort by Landlord or its
agents.
In no event shall Landlord be entitled to be reimbursed from all tenants of
the Building to cover more than its actual Basic Cost in any year. If a
particular expense falls in more than one category it shall be counted only
once.
3. The Annual Cost Statement shall include a statement of Landlord's
actual Basic Cost for the previous year adjusted as provided in paragraph 4 of
this Exhibit. If the Annual Cost Statement reveals that Tenant paid more for
Basic Cost than the actual Excess in the year for which such statement was
prepared, then, at Tenant's option, Landlord shall reimburse Tenant for such
excess within 30 days after delivery of the Annual Cost Statement or credit such
excess to Tenant's obligation to pay future Rent for Excess(if the Term has
ended, then Landlord shall reimburse Tenant such excess); likewise, if Tenant
paid less than the actual Excess, then Tenant shall pay Landlord such deficiency
within 30 days after delivery of the Annual Cost Statement.
4. With respect to any calendar year or partial calendar year in which
the Building is not occupied to the extent of 95% of the rentable area thereof,
the Basic Cost for such period shall, for the purposes hereof, be increased to
the amount which would have been incurred had the Building been occupied to the
extent of 95% of the rentable area thereof.
C-3
<PAGE>
5. For property tax purposes, Tenant waives all rights to protest the
appraised value of the Premises or to appeal the same and all rights to receive
notices of reappraisal as set forth in Sections 41.413 and 42.015 of the Texas
Tax Code.
6. For purposes of calculating Excess, the Controllable Basic Cost
(defined below) for each calendar year after the year in which the Commencement
Date occurs shall not increase by more than 7% over the Controllable Basic Cost
for the previous calendar year on a non-cumulative basis. "CONTROLLABLE BASIC
--------------------
COSTS" shall mean all items of Basic Cost (after the gross-up adjustment
- - -----
provided in this Exhibit), other than costs incurred for Taxes, insurance, and
utilities.
C-4
<PAGE>
EXHIBIT D
WORK LETTER
-----------
ARTICLE I
DEFINITIONS
-----------
Section 1.1 DEFINITIONS. When used in this Exhibit (unless specified
-------------
otherwise), the following terms shall have the following meanings:
(a) "LANDLORD'S CONSTRUCTION MANAGER" means Trammell Crow
-------------------------------
Dallas/Fort Worth, Ltd.
(b) "CONTRACTOR" means the firm selected (in accordance with the
----------
provisions hereinafter set forth) for the Work from the following six
contractors: C. D. Henderson; Constructors and Associates; James R. Thompson;
Precept Builders; Phoenix Commercial, Inc.; and Pacific Builders, Inc. (each, an
ACCEPTABLE CONTRACTOR").
- - -------------------------
(C) "TENANTS ARCHITECT" means Steve Waddill and Company.
-----------------
(d) "TENANT'S CONSULTANT" means The Staubach Company.
-------------------
(e) "TOTAL CONSTRUCTION COSTS" shall mean (1) all costs incurred in
------------------------
designing and performing the Work, including, without limitation, cost of
construction, labor and materials, general tenant signage, related taxes and
insurance, demolition, construction and installation of leasehold improvements
(subject to certain exclusions provided for herein), and (2) a construction
management fee payable to Landlord's Construction Manager equal to 5% of the
difference between the costs described in clause (1) less any such costs for (A)
unattached furniture and components (excluding cabling, which costs shall be
included in calculating the construction management fee) of Tenant's data and
communication system that are unattached and free-standing and plug into
outlets, (B) designing the Work, and (C) general tenant signage (other than
life/safety signage).
(f) "WORK" means all improvements to be constructed or installed in
----
the Premises in accordance with the Working Drawings.
ARTICLE 2
CONDITION OF PREMISES
Section 2.1 BUILDING STANDARD CONDITION. After the Construction Loan is
---------------------------
obtained for the Building as provided in Exhibit J, Landlord shall construct the
---------
Building so as to cause the Premises to be delivered to Tenant in the following
condition (the "BUILDING STANDARD CONDITION") all at Landlord's sole expense
----------------------------
(and which costs shall not be a part of the Total Construction Costs):
FLOOR: . Floor levelness shall be plus/minus 1/4INCH per ten lineal
------ feet.
FINISHES: . Furr out 5/8" gypsum wall board over studs installed 16" on
--------- centers; all columns and shafts as required taped and
bedded, sanded and ready for finish, shaftwalls will have
necessary 2-hr. rating.
. Provide ceramic tile on floors and wet walls only in the
bathrooms in areas immediately adjacent water closets and
urinals. Floors in lavatory areas shall be shell building
concrete to receive tenant furnished carpet.
. Acoustical Ceiling - Provide 2' x 4' suspension grid system
throughout Tenant area. Tile to be stockpiled on floor.
CONVEYING
SYSTEMS: . Minimum of two 3,500-pound passenger elevators, rated as a
-------- minimum of 150 feet per minute, as manufactured by
Montgomery, Dover, etc. Elevator cab finish shall be
minimum of $10,000/per cab finish. All elevators must have
the ability to restrict access to Tenant floors.
MECHANICAL
SYSTEMS: . Plumbing - Two sets of men's and women's restrooms per
------- floor. All fixtures should be Kohler, American Standard, or
equal and meet TAS provisions. One water cooler per floor. 2
Water heaters installed on the second floor shall serve
first, second and third floors.
. Mechanical - Total building air conditioning capacity shall
be 440 tons provided by packaged, water cooled units. First
and second floors shall have two 70-ton units each. Third
floor shall have two 80-ton units. The shell building
cooling tower shall include 150 nominal tons of spare
condenser water capacity proportionally distributed in
condenser water pipe risers located in air handling unit
rooms. Tenant may use up to it's proportionate share of
spare cooling tower capacity if Tenant, at its cost: (1)
pays a flat fee of $0.15 per rsf per year as usage fee
(subject to
D-1
<PAGE>
escalation by Landlord) (2) furnishes air conditioning
equipment, condenser piping taps, valves, piping, fittings,
necessary pumps, insulation, sound and vibration control
materials/devices, electrical, controls, supports, etc. and
installing labor, and (3) pays for system rebalance by
Landlord approved contractor. The Building will comply with
the American Society of Heating & Refrigeration Engineers
(ASHRE) ventilation standards.
Medium pressure air distribution ductwork shall be
installed. Perimeter VAV and fan powered heating boxes
shall be installed with connecting medium pressure ducts.
Perimeter slot diffusers shall be installed with connecting
low pressure ductwork. Interior VAV boxes shall be
installed with connecting medium pressure ductwork. A
minimum of 15 feet of low pressure distribution ductwork
shall be installed on each interior VAV box. No interior
zone diffusers nor duct taps will be installed over typical
tenant space.
. Fire Protection - Wet pipe system based on code requirement.
Heads will be fully recessed and centered on the short axis
of ceiling tiles.
ELECTRICAL: . Light fixtures - 2x4, 2 lamp parabolic fixtures at 1/80SF.
----------- Provide with 10' pigtail. Provide special lighting allowance
in lobby area.
Shell building power will include: (1) 3 watts per square
foot of 120 volt, single phase power, (2) 2 watts per square
foot of 480 volt, 3 phase power, and (3) reserve capacity of
5 watts per square foot available in electrical riser and
main switchgear.
Connections to such reserve capacity will require, if Tenant
elects and at its expense, riser taps, switches, electrical
rough-in, panels. Each riser tap will require a meter for
separate electrical metering.
. Building Fire Alarm, smoke detectors, exit lights and any
other life safety equipment required by code.
Section 2.2 PLANS AND DRAWINGS.
------------------
(a) DESIGN PROFESSIONALS. All plans and specifications relating to
--------------------
the Work shall be prepared by Tenant's Architect. Tenant's Consultant and
Tenant's Architect shall be afforded access to all work in progress in the
Premises. Landlord shall be solely responsible for all payments and other
liabilities or obligations to, and any liens or claims asserted by, Landlord's
engineers (except as provided in Section 2.2(d) of this Exhibit) and, subject to
Tenant's obligation to pay Total Construction Costs in excess of the Allowance
(defined below), other persons employed by, or contracted with by, Landlord in
connection with the Work.
(b) BUILDING PLANS. Concurrently with the execution hereof,
--------------
Landlord shall furnish to Tenant or Tenant's Architect such architectural,
structural, plumbing, electrical, and mechanical drawings, specifications,
schedules and other information with respect to the Building in its possession
(including CADD drawings for each floor in the Building where the Premises will
be located), as Tenant may reasonably require for the preparation of the Space
Plans (defined below) and as may be necessary for the permits necessary to
perform the Work, all of which shall be reasonably complete and accurate and
shall be reissued to Tenant promptly after their completion. Preliminary
architectural renderings of the Building are attached as Exhibit M to this
---------
Lease.
(c) PREPARATION AND APPROVAL OF SPACE PLANS. By May 1, 1997, Tenant
---------------------------------------
shall submit to Landlord preliminary plans consisting of final plans and
specifications reflecting the partition layout in the Premises and the Work (the
"PRELIMINARY PLANS"). Within ten days after receipt of the Preliminary Plans
-----------------
from Tenant, Landlord shall either (1) approve the Preliminary Plans by written
notice to Tenant, or (2) deliver to Tenant a written list of any changes
reasonably required. Failure to respond in accordance with the preceding
sentence within the required ten-day period shall be deemed to constitute
approval of the Preliminary Plans as submitted. Any required changes must be
reasonably specific. Landlord may require changes only to the extent necessary
to comply with the standards, specifications, and other requirements described
in Section 2.2(e) of this Exhibit. If changes are so reasonably required, Tenant
shall cause Tenant's Architect to make the required changes within ten days
after receipt of the notice described in Section 2.2(c)(2) of this Exhibit and
deliver to Landlord the revised Preliminary Plans for its review and approval.
Landlord shall have three business days to approve or disapprove any resubmitted
Preliminary Plans, and Tenant shall have two business days to correct any such
resubmitted Preliminary Plans disapproved by Landlord. This process shall be
repeated until the Preliminary Plans have been finally approved. Upon approval
of the Preliminary Plans in accordance with this Section, the Preliminary Plans
shall constitute the "APPROVED SPACE PLANS".
--------------------
(d) WORKING DRAWINGS. By June 15, 1997, Tenant shall deliver to
----------------
Landlord complete, finished, and detailed architectural and engineering working
drawings for the improvements ("WORKING DRAWINGS"), including, without
----------------
limitation, partition layouts, reflective ceiling plans, telephone and electric
outlet plans, decorating and finishing plans and schedules including dimensions
and specifications for the Work, and engineering drawings for all work that will
affect the Building's structural integrity or the Building's HVAC, electrical,
mechanical, or plumbing systems (which engineering drawings must be prepared by
an engineer reasonably acceptable to Landlord's review and approval. Landlord
shall notify Tenant whether it approves of the submitted Working Drawings within
ten days after Tenant's submission thereof. If Landlord disapproves of such
Working Drawings, then Landlord shall notify Tenant thereof specifying in
reasonable detail the reasons for such disapproval, in which case, Tenant shall
correct the submitted Working Drawings and deliver them to Landlord for its
approval within ten days after Tenant receives Landlord's notice
D-2
<PAGE>
disapproving the submitted drawings. Landlord shall have five business days to
approve or disapprove any resubmitted Working Drawings, and Tenant shall have
five business days to correct any such resubmitted Working Drawings disapproved
by Landlord. This process shall be repeated until the Working Drawings have
been finally approved. If Landlord fails to notify Tenant that it disapproves
of the initial Working Drawings within ten days or any resubmitted Working
Drawings within five business days after the submission thereof, then Landlord
shall be deemed to have approved the Working Drawings. The installation of any
of the Work shall not commence until Landlord approves or is deemed to have
approved the Working Drawings as required by this Section 2.2.
(e) STANDARDS FOR APPROVAL. Landlord shall not unreasonably withhold
----------------------
its approval of the Preliminary Plans or Working Drawings (either as initially
submitted by Tenant or as re-submitted in accordance with the terms hereof).
Landlord's right to approve the Preliminary Plans and Working Drawings shall be
limited to those matters relating to compliance with Law and the specifications
and standards of the Building relating to the following matters (the "BUILDING
---------
SPECIFICATIONS"):
- - ------------------
(1) HVAC, electrical, plumbing, and other mechanical systems of
the Building;
(2) floor loading or the structural integrity of the Building;
(3) window treatment, signs, graphics, and other quality,
appearance, or other aesthetic consideration visible outside
the Premises or in the elevator lobby areas;
(4) door height, which must be from the floor to the ceiling in
the Premises; and
(5) lighting and related fixtures that are visible from
outside the Premises.
Approval by Landlord of the Preliminary Plans and Working Drawings shall not be
a representation or warranty of Landlord that such drawings or the improvements
described therein comply with Law, but shall merely be the consent of Landlord
to the performance of the Work described therein. However, if (A) Landlord has
approved the Preliminary Plans or Working Drawings and (B) (i) any item (to the
extent and level of detail described in the Preliminary Plans or the Working
Drawings) does not comply with the Building Specifications or (ii) any change or
additional or different equipment or parts are required to comply with the
Building Specifications, then any days of delay caused thereby shall not be a
Tenant Delay Day and Landlord shall bear the additional cost incurred in
completing the Work caused thereby (which additional costs shall not be part of
the Total Construction Costs).
Section 2.3 CONTRACTOR SELECTION.
--------------------
(a) If the Working Drawings are approved by July 15, 1997, then
Tenant may elect to:
(1) have Tenant's Consultant and Landlord's Construction Manager
submit to the Acceptable Contractors the Working Drawings and the
Acceptable Contractors shall submit to Tenant's Consultant and Landlord's
Construction Manager a detailed cost breakdown of all construction costs
("BID COST"). Upon receipt by Tenant's Consultant and Landlord's
--------
Construction Manager of the Bid Cost, Tenant's Consultant and Landlord's
Construction Manager shall, within five business days of such receipt,
mutually approve of such Bid Cost and select the Contractor. If Tenant's
Consultant and Landlord's Construction Manager are unable to agree on the
Contractor, then Tenant shall select the Contractor, provided that the Bid
Cost for such selected Contractor was responsive and without unreasonable
qualifications, exclusions or omissions for the entire amount of the Work.
The form of contract entered into by the Contractor selected under this
Section 2.3(a)(1) shall, at Tenant's option, provide a stipulated sum for
the entire cost of the Work to be performed thereunder or provide for
payment to the Contractor based on the cost of such Work plus a fee (with a
guaranteed maximum price); or
(2) have Tenant's Consultant and Landlord's Construction Manager
select the Acceptable Contractor, in which case the form of contract
entered into with such Contractor shall be a cost plus fee contract (with
or without a guaranteed maximum price).
If the Working Drawings are finally approved after July 15, 1997, then Tenant's
Consultant and Landlord's Construction Manager shall select the Contractor and
the form of contract to be entered into with such Contractor shall be a cost
plus fee contract (with or without a guaranteed maximum price).
(b) It is the intention of Landlord's Construction Manager and
Tenant's Consultant to cooperate with each other in keeping each other
reasonably informed regarding the status of each other's (as well as
Contractor's) planning, scheduling, construction and all other pertinent
matters, including delivery of progress sheets or progress drawings, if
available. Any information reasonably required by either party shall be
provided by the other party upon request to the extent available. Without
limiting the generality of the foregoing, the construction of the Work shall be
done on a open-book basis and Tenant shall have access to all books and records
relating thereto as well as to all Working Drawings, shop drawings and plans and
specifications in connection with the Work.
(c) Landlord shall enter into a contract with Contractor in a form
mutually acceptable to Landlord, Landlord's Construction Manager, Tenant's
Consultant, and Contractor for the Work, which shall comply with the provisions
of Sections 2.3 (a) and 2.7 of this Exhibit and provide for, among other things,
a one-year warranty for all defective Work; shall require the Contractor to
maintain general commercial liability insurance of not less than a combined
single limit of $5,000,000, naming Landlord, Landlord's Construction Manager,
Tenant, Tenant's Consultant, and each of their respective affiliates as
additional insureds; and shall provide that Contractor is responsible for daily
cleanup work. Any payment or performance bonds required by Landlord in
connection with the Work shall be obtained at Landlord's sole expense and shall
not be a part of the "Total Construction Costs."
Section 2.4 PERFORMANCE OF WORK. Landlord shall cause to be constructed
-------------------
and performed the Work in accordance with the Working Drawings. In implementing
the Work reflected in the Working Drawings, Landlord shall
D-3
<PAGE>
not knowingly violate any Laws. Unless otherwise agreed to in writing by
Landlord and Tenant's Consultant, the performance of the Work shall be carried
out by Contractor under the direction of Landlord's Construction Manager and
Tenant's Consultant. The Landlord's Construction Manager and Tenant's
Consultant will co-manage the performance of the Work. Tenant shall reasonably
cooperate with Landlord's Construction Manager to promote the efficient and
expeditious completion of the Work. Landlord shall apply the Allowance to the
Total Construction Costs. If the Total Construction Costs exceed the Allowance,
then Tenant shall pay Landlord's Construction Manager all Total Construction
Costs (including labor and materials) incurred for the Work in excess of the
Allowance; provided, however, that all Total Construction Costs shall be paid by
Landlord from the Allowance first, and after the amount of the Allowance has
been exhausted, Landlord shall have the right to submit requests for payment for
the Total Construction Costs in excess of the Allowance as such costs are
incurred by Landlord in connection with the construction of the Work. Tenant
agrees that in the event of default of payment thereof, after written notice and
ten days opportunity to cure, Landlord (in addition to all other remedies) shall
have the same rights as for an Event of Default.
Section 2.5 CHANGE ORDERS. If there are any changes in the Work from the
-------------
Work as reflected in the Working Drawings, each such change must receive the
prior written approval of Landlord's Construction Manager and Tenant, such
approval not to be unreasonably withheld or delayed, and, in the event of any
such approved change, Tenant shall, upon completion of the Work, furnish
Landlord and Landlord's Construction Manager with an accurate architectural "as-
built" plan of the Work as constructed, which plan shall be incorporated into
this Exhibit D by this reference for all intents and purposes.
---------
Section 2.6 TENANT'S REPRESENTATIVE. Tenant designates Tenant's
------------------------
Consultant as Tenant's representative in connection with the Work and Landlord's
Construction Manager may rely on instructions and approvals given by Tenant's
Consultant in connection with the Work; however, all change orders must be
signed by Tenant. Tenant's Consultant shall have complete access to all parts of
the Work at all times to observe and inspect it to be sure that the construction
complies with the approved Working Drawings. Tenant's Consultant will be
available to interpret the approved Working Drawings, prepare change orders and
otherwise assist in expediting construction so long as same are communicated
through Landlord's Construction Manager. If Tenant's Consultant observes any
defects in the materials or workmanship or if the construction otherwise is not
in accordance with the approved Working Drawings (a "DEFECT"), Tenant's
------
Consultant will promptly notify Contractor and Landlord's Construction Manager
in writing as to such Defects and Landlord's Construction Manager shall cause
the Defects to be promptly corrected; however, Tenant's Consultant's failure to
disclose a Defect shall not relieve Landlord of its obligation to correct the
Defect.
Section 2.7 CONSTRUCTION CONTRACT. Unless otherwise agreed by Landlord and
---------------------
Tenant, the construction contract shall: (a) separately state and account for
the costs and any associated fee for installation or construction of trade
categories, (b) provide that both Landlord and Tenant shall have the right to
approve any subcontractor, (c) no disbursements shall be made without the prior
approval of Landlord's Construction Manager and Tenant's Consultant, (d) require
competitive bids for all subcontract work, (d) provide a schedule and sequence
of construction activities and completion reasonably acceptable to Tenant and
Landlord's Construction Manager, (e) provide for liquidated damages reasonably
acceptable to Landlord and Tenant for Contractor's failure to timely complete
the Work in accordance with the approved Working Drawings, and (f) be
collaterally assignable to Landlord's Mortgagees.
Section 2.8 SUBSTANTIALLY COMPLETED CONDITION. "SUBSTANTIALLY COMPLETED
---------------------------------- ------------------------
CONDITION" means the date on which all of the following conditions have been
- - ---------
met:
(a) A certificate of occupancy has been issued by the appropriate
governmental entity permitting Tenant's use of the Premises. If a temporary
certificate of occupancy is issued, Landlord shall be responsible for obtaining
a permanent certificate of occupancy as soon as reasonably possible; provided,
however, that the condition in this subparagraph (a) shall not be deemed
satisfied unless the temporary certificate of occupancy permits lawful use and
occupancy of the Premises by Tenant for its contemplated use;
(b) The Work has been substantially completed in accordance with the
Working Drawings, notwithstanding the fact that minor or insubstantial details
of construction, mechanical adjustment, or decoration remain to be performed,
the non-completion of which does not materially interfere with Tenant's use of
the Premises or the conduct of its normal business and so as to permit Tenant to
move into the Premises and install its furniture, fixtures, machinery and
equipment therein,
(c) All Building fire alarms, fire sprinklers, smoke detectors, exit
lights, life safety equipment, and other building code requirements are
installed and operational;
(d) The Building's elevators, HVAC, utilities, plumbing services and
doors and hardware to the Premises are installed and in good working order: and
(e) The Parking Lot is reasonably accessible to and usable by Tenant.
Section 2.9 WARRANTY. Landlord shall warrant the Work will be free of
--------
defects for a period of one year after Substantial Completion, provided that
Tenant delivers to Landlord written notice of any defective Work within one year
after Substantial Completion; however this warranty shall not apply to defects
relating to the defects in design of items which were designed by Tenant or
Tenant's Architect. Landlord hereby assigns to Tenant all assignable warranties
relating to the Work; such assignment shall be effective one year and one day
after Substantial Completion and provided that no Event of Default occurs. If
an Event of Default occurs, such assignment shall be ineffective and Landlord
shall have the sole right to enforce the obligations of the party providing the
warranty in question.
Section 2.10 PUNCH-LIST ITEMS. After the work has been substantially
----------------
completed, Landlord's Construction Manager and Tenant's Architect shall conduct
a walk-through of the Premises and Tenant's Architect shall specify any
31
<PAGE>
punch-list items that need to be corrected. Landlord shall complete the punch-
list items within 30 days after such inspection (provided, however, that if such
completion reasonably requires longer than 30 days, Landlord shall have such
longer period of time as is reasonably necessary to complete such punchlist item
so long as Landlord commences the corrective work within such 30-day period and
diligently prosecutes same to completion).
Section 2.11 USE OF BUILDING FACILITIES. Neither Tenant, Contractor nor
--------------------------
any subcontractor shall be charged for use of the utilities or the use of
freight elevators (except any costs for extraordinary usage, e.g., moving
materials on top of elevator cabs) in connection with the Work and such charges
shall not constitute a part of the "Total Construction Costs."
Section 2.12 TENANT DELAY DAYS. "TENANT DELAY DAYS" shall mean the number
----------------- ------------------
of days of delay in obtaining Substantially Completed Condition caused by (a)
Tenant's failure to timely provide acceptable Preliminary Plans by May 1, 1997,
or acceptable Working Drawings by June 15, 1997, unless such failure occurred
because Landlord unreasonably withheld its approval thereof, because Landlord
failed timely to provide requested information under Section 2.2(b) of this
Exhibit, or because Landlord failed to provide reasonably complete and accurate
requested information under Section 2.2(b) of this Exhibit, (b) changes in the
Preliminary Plans or the Working Drawings after final approval by Tenant and the
Landlord's Construction Manager, other than those caused by Landlord's failure
to provide reasonably accurate and complete requested information under Section
2.2(b) of this Exhibit, (c) Tenant's disapproval or failure to approve the
selection of the Contractor for the Work by July 15, 1997, (d) any specification
by Tenant of materials or installations which are not readily available,
provided that Landlord notifies Tenant thereof within two business days after
Landlord's discovery thereof and Tenant nevertheless insists upon using the
materials or installations in question rather than reasonably acceptable
substitutes therefor proposed by Landlord, and (e) the action or inaction of
Tenant or its agents or contractors, provided that Landlord's Construction
Manager shall notify Tenant in writing of delays caused by Tenant's or its
agent's or contractor's action or inaction within one business day after the
discovery thereof. Landlord shall deliver written notice to Tenant within three
(or, in the case of clause (e), one) business days after Landlord becomes aware
of the occurrence of any event which would cause any Force Majeure Delay Days or
Tenant Delay Days.
ARTICLE 3
ALLOWANCES: OFFSET
------------------
Section 3.1 ALLOWANCES. Landlord shall provide to Tenant an allowance (the
----------
"ALLOWANCE") of $28.50 per rentable square foot in the initial Premises. The
- - ------------
Allowance may be applied toward the following expenses (collectively, the
"PERMITTED EXPENSES"), without duplication of costs: Total Construction Costs
- - ---------------------
and Moving Costs (defined below). "MOVING COSTS" shall equal the actual, out-
--------------
of-pocket costs incurred by Tenant in connection with moving to the Premises
including, without limitation, new stationery and business cards; disassembly,
installation, and acquisition of new and used furniture, fixtures, and equipment
(including telephone and data cabling and equipment); disposal of materials
(whether currently existing or accumulated during Tenant's move); labor,
supervision, and other services employed to move Tenant to the Premises
(including, without limitation, security services and elevator services); and
items purchased or leased to move Tenant's and its employees' property to the
Premises. However, a minimum of $24.00 per rentable square foot must be applied
towards improvements to the Premises. The Allowance shall be disbursed in
accordance with the Construction Contract and Section 2.4 of this Exhibit D,
---------
however, Tenant shall be entitled to receive (a) up to the product of $ 1.00 and
the number of rentable square feet in the initial Premises upon the closing and
funding of the construction loan for the Building; and (b) up to the product of
$1.00 and the number of rentable square feet in the initial Premises on or
before 60 days after such date. The balance shall be paid as costs are incurred
by Tenant upon submission of payment requests from Tenant. Additionally, Tenant
may require Landlord to make payments to Tenant's vendors and contractors (i.e.
architect consultants, and engineers) or directly to Tenant upon Tenant's
presentation of appropriate invoices.
Section 3.2 OFFSET. If the entire Allowance is more than the Permitted
------
Expenses, then Tenant may offset from its obligation to pay Basic Rental an
amount equal to the product of (a) the positive difference obtained by
subtracting the Permitted Expenses from the Allowance and (b) 50%. If Landlord
wrongfully fails to provide to Tenant the Allowance as provided in this Lease,
after ten business days prior written notice thereof to Landlord, Tenant may
offset from its obligation to pay Basic Rental an amount equal to that portion
of the Allowance which was wrongfully withheld. Such offsets shall be applied
to Basic Rental as it becomes due.
ARTICLE 4
TENANT'S OCCUPANCY
------------------
Section 4.1
(a) PRE-OCCUPANCY PERIOD. In connection with the installation of
--------------------
the Work, Tenant shall be entitled to enter upon the Premises during a mutually
agreed upon period during the period of construction of the Work ("PRE-OCCUPANCY
-------------
PERIOD") for purposes of Tenant's installation of its telephone equipment,
- - ------
computer equipment and associated cabling, modular furniture systems, and any
and all other equipment and fixtures to be installed by Tenant in the Premises.
In addition, Landlord shall give Tenant notice at least two weeks prior to the
full enclosure of the Exterior of the Building, and Tenant may, at its sole cost
and liability, move and install certain of Tenant's fixtures into the Premises
which are reasonably approved by Landlord (the "MAJOR FIXTURES").
--------------
Notwithstanding anything to the contrary, (1) Tenant shall be solely liable for
the Major Fixtures and any damage, destruction, or theft relating thereto, (2)
Tenant shall maintain sufficient insurance covering any damage, destruction or
theft to the Major Fixtures, (3) Tenant shall pay all costs relating to moving
and installing the Major Fixtures into the Premises and storing, packaging or
otherwise protecting the Major Fixtures prior to the Commencement Date, and (4)
Tenant shall defend, indemnify, and
D-5
<PAGE>
hold harmless Landlord from all Losses relating to the Major Fixtures,
INCLUDING THOSE ARISING FROM LANDLORD'S NEGLIGENCE. Tenant shall be entitled to
- - -----------------------------------------------------
enter upon the Premises during the Pre-Occupancy Period provided that such entry
does not interfere with the Work and further provided that such entry is
complementary to the work of the Contractor constructing the Work. If Landlord
reasonably determines such entry by Tenant or the installation or storage of the
Major Fixtures interfere with the performance of the Work, then Landlord may
terminate Tenant's early entry right under this Section 4.1 by delivering to
Tenant written notice thereof.
(b) MOVE-IN. Tenant shall be permitted, subject to the reasonable
-------
approval of Landlord with respect to Tenant's move in schedule, to move into
each floor of the Premises after normal business hours, over a two week period
prior to the Commencement Date.
(c) TERMS AND CONDITIONS. All such entries under this Section 4.1
--------------------
shall be on the terms and conditions of the Lease; however, Tenant shall not be
required to pay Landlord Basic Rental or any amounts in respect of Excess or
Electrical Costs before the Commencement Date. Tenant shall be required to
deliver certificates of insurance required under Section 11.(b) of this Lease
to Landlord prior to any such entry.
D-6
<PAGE>
EXHIBIT E
PARKING
-------
Tenant shall be permitted to use undesignated (except as provided below)
vehicular parking spaces in the surface parking lot associated with the Building
(the "PARKING LOT") during the Term at no charge and subject to such reasonable
-----------
terms, conditions and regulations as are from time to time charged or applicable
to patrons of the Parking Lot. Landlord shall provide Tenant such parking
spaces in the Parking Lot at a ratio of 1 such space per 250 rentable square
feet in the Premises, which shall include 12 designated vehicular parking spaces
in the Parking Lot marked "Amtech Visitor", in a location to be mutually agreed
upon by Landlord and Tenant within 30 days from the execution hereof.
If, during the Term, Landlord elects, at its sole discretion, to construct
a covered parking facility (the "PARKING FACILITY") to be used in connection
----------------
with the Building, Tenant shall have the option to utilize parking in such
facility with other tenants of the Building at the same ratio as the parking
space per rentable square foot ratio as is generally afforded other tenants of
the Building, and subject to such terms, conditions and regulations as are from
time to time charged or applicable to patrons of such facility. If the Parking
Facility reduces the number of spaces that Tenant is permitted to use on the
Parking Lot pursuant to the previous paragraph, then Tenant shall have the right
to use the same number and type of vehicular parking spaces in such covered
parking facility as such number of spaces in the Parking Lot which were
previously used by Tenant but which were eliminated in connection with the
construction of the Parking Facility, at no charge to Tenant.
E-1
<PAGE>
EXHIBIT F
RIGHT OF FIRST OPPORTUNITY
--------------------------
1. The following terms shall have the following meanings:
(a) "ACTIVE LEASE NEGOTIATIONS" shall mean a prospective or existing
--------------------------
tenant is engaged in active dialogue regarding the terms for the leasing of the
space in question.
(b) "AVAILABLE SPACE" shall mean all rentable space in the Building
---------------
(thus, excluding common areas), which is not Encumbered Space.
(c) "ENCUMBERED SPACE" shall mean space being used by Landlord or the
----------------
Building's manager, or is subject to a lease, option to lease, preferential
right to lease (i.e., right of refusal, right of opportunity, or right of first
offer), Letter of Intent, or otherwise encumbered and is not subject to Active
Lease Negotiations (provided, however, that upon the cessation of such use by
Landlord or the Building's manager, or the lapse, expiration, or termination of
any such lease, option to lease, preferential rights to lease or other
encumbrance, or the expiration or termination of a Letter of Intent unless a
lease is entered into between the parties thereto or their affiliates, such
space shall no longer be a part of the Encumbered Space, but shall instead be a
part of the Available Space).
(d) "LETTER OF INTENT" shall mean a writing signed by Landlord and
----------------
another person setting forth some of the terms and conditions upon which
Landlord and such other person would be willing to enter a lease for space in
the Building, which writing may be non-binding and subject to the execution of a
Lease.
2. From time to time during the Term (but not more frequently than once
every six months), Tenant may deliver written notice to Landlord requesting that
Landlord specify the then Available Space (a "REQUEST NOTICE"). Within ten days
--------------
after delivery of the Request Notice, Landlord shall deliver to Tenant written
notice specifying (a) the dien-existing Available Space, (b) the location
thereof (each such notice is herein called a "DESIGNATION NOTICE") and (c) which
------------------
space in the Building is not Available Space solely because it is subject to
Active Lease Negotiations. Tenant may elect to lease the Available Space
specified in the Designation Notice in question or portion thereof ("ELIGIBLE
--------
AVAILABLE SPACE"), provided that the Eligible Available Space on each floor
- - ---------------
elected to be leased by Tenant consists of all of the Eligible Available Space
on such floor or a contiguous block of space containing at least 5,000 rentable
square feet on such floor, and, if all of the Available Space on such floor is
not leased by Tenant, the remaining Available Space on such floor must be in
Marketable Condition. "MARKETABLE CONDITION" means such space is reasonably
--------------------
configured such that it may be reasonably leased for office use and has
reasonable window exposure, access to elevators and corridor exposure. Such
election shall be made, if at all, by delivering to Landlord written notice
thereof (an "AVAILABLE SPACE EXERCISE NOTICE) specifying the Eligible Available
-------------------------------
Space that Tenant desires to lease (the "SELECTED AVAILABLE SPACE") within 30
------------------------
days after the Designation Notice is delivered to Tenant (time is of the essence
with respect to the delivery thereof); however, such election must be made first
as to the Eligible Available Space that is contiguous to the Premises and,
unless Landlord otherwise agrees, then as to space that is closest in proximity
to the Premises. If, however, any Eligible Available Space becomes subject to
Active Lease Negotiations before Tenant timely elects to lease such space, then
such space shall cease to be Eligible Available Space. If there is any space
that is not Eligible Available Space solely because it is subject to Active
Lease Negotiations, then Tenant may designate all of such space subject to such
Active Lease Negotiations as "DESIRED SPACE" by delivering to Landlord written
--------------
notice thereof. If Tenant designates Desired Space, then such space shall
become Selected Available Space unless Landlord enters into a Letter of Intent
or lease with the person with whom the Active Lease Negotiations are being
conducted within 45 days after Landlord's receipt of Tenant's notice designating
such space as Desired Space.
Tenant shall lease such Selected Available Space on the terms and
conditions of this Lease, except the economic terms shall be the Prevailing
Market Conditions, and Landlord shall not be required to perform any work
therein or provide any allowances or other tenant inducements therefor, except
as provided in the Prevailing Market Conditions. Landlord shall tender
possession of the Selected Available Space in an "AS-IS" condition, unless such
space was not previously occupied, in which case it shall be delivered in an
"AS-IS" but Building Standard Condition, within 30 days after Tenant delivers to
Landlord the Available Space Exercise Notice or, in the case of Desired Space,
within 30 days after such space becomes Selected Available Space. Tenant shall
begin paying Basic Rental and Tenant's share of Excess and Electrical Costs for
such space by the earlier of (a) the date Tenant begins conducting business in
the Selected Available Space or (b) the date on which such space would have been
delivered by Landlord to Tenant in Substantially Completed Condition but for
Tenant Delay Days.
3. Tenant's rights under this Exhibit shall terminate if this Lease or
Tenant's right to possession of the Premises is terminated. Tenant may not
assign its right to exercise this option, other than to a Permitted Transferee
which is occupying the entire Premises.
4. Tenant may not exercise its rights hereunder to lease Available Space
(a) if an Event of Default exists, (b) with a view to effecting or facilitating
a Transfer of Available Space or of the Premises (other than to a Permitted
Transferee), or (c) if Tenant and/or its affiliates are not then occupying at
least one full floor in the Premises.
F-1
<PAGE>
EXHIBIT G
EXTENSION OPTION
----------------
Provided no Event of Default exists, Tenant may renew this Lease as to all
or a portion of the then-leased Premises (provided that if the renewal of this
Lease is exercised as to only a portion of the Premises, then such portion must
contain at least 25,000 rentable square feet; and such portion of the Premises
must be located on a single floor of the Building, unless the number of rentable
square feet in such portion exceeds the size of a single floor of the Building,
in which case such portion of the Premises must be a contiguous block of space
consisting of full floor(s) and space on one floor in the Building on which
Tenant is not leasing the entire rentable area thereof) for two additional
periods of one, two, three, four, or five years (or such other term as may be
permitted under Exhibit H) on the same terms provided in this Lease (except as
---------
set forth below), by delivering written notice of the exercise thereof to
Landlord (an "EXTENSION NOTICE") not later than 9 months before the expiration
----------------
of the Term, which notice must specify (i) the portion of the Premises as to
which this option is exercised and (ii) the duration of the extended Term;
however, if this option is not exercised as to all of the Premises on a floor,
then the portion of the Premises as to which this option is not exercised must
be in Marketable Condition and Tenant shall pay all costs necessary to separate
the Premises as to which this option is exercised from the other portions of the
Premises and, if Tenant previously leased all of the rentable area on a floor in
which such Premises is located, the cost of converting such floor to a multi-
tenant floor. On or before the commencement date of the extended Term in
question, Landlord and Tenant shall execute an amendment to this Lease extending
the Term as to the portion of the Premises in question on the same terms
provided in this Lease, except as follows:
(a) the Basic Rental payable for each month during each such extended
Term shall be the Prevailing Market Conditions (as determined in accordance
with Exhibit I) for such extended Term;
---------
(b) the amendment shall specify the portion of the Premises as to
which this option is exercised;
(c) Tenant shall have no further renewal options unless expressly
granted by Landlord in writing or provided for in this Exhibit G; and
---------
(d) Landlord shall lease to Tenant the Premises in their then-current
condition, and Landlord shall not provide to Tenant any allowances (e.g.,
moving allowance, construction allowance, and the like) or other tenant
inducements, except as may be required in connection with the Prevailing
Market Conditions.
Tenant's rights under this Exhibit shall terminate if (1) this Lease or
Tenant's right to possession of the Premises is terminated, or (2) Tenant fails
to timely exercise its option under this Exhibit, time being of the essence with
respect to Tenant's exercise thereof. Tenant may not assign its rights under
this Exhibit to any assignee or subtenant other than to a Permitted Transferee
of the entire Premises.
G-1
<PAGE>
EXHIBIT H
RIGHT OF FIRST REFUSAL
----------------------
1. If Landlord receives a bona fide offer from a third party, as evidenced
by a term sheet or non-binding letter of intent (a "THIRD PARTY OFFER" to lease
-----------------
the space designated on Exhibit A-2 as the "REFUSAL SPACE" (herein so called)
----------- ---------------
and Landlord is willing to accept the terms of such Third Party Offer, or if
Landlord makes a Third Party Offer to the third party for the Refusal Space,
which offer the third party is willing to accept, Landlord shall offer to lease
to Tenant the Refusal Space on the same terms and conditions as the Third Party
Offer; such offer shall be in writing, specify the rent to be paid for the
Refusal Space, contain all material terms and conditions of the Third Party
Offer and the date on which the Refusal Space shall be included in the Premises
(the "OFFER NOTICE"). Tenant shall notify Landlord in writing whether Tenant
------------
elects to lease the entire portion of the Refusal Space subject to the Third
Party Offer on the same terms and conditions as the Third Party Offer in the
Offer Notice, within five business days after Landlord delivers to Tenant the
Offer Notice. If Tenant elects to lease the Refusal Space by delivering to
Landlord written notice thereof within such five-business-day period (an
"ACCEPTANCE NOTICE"), then Landlord and Tenant shall execute an amendment to
------------
this Lease, effective as of the date the Refusal Space is to be included in the
Premises, on the same terms as this Lease except (a) the Basic Rental shall be
the amount specified in the Offer Notice, (b) the term for the Refusal Space
shall be the longer of (1) the term specified in the Offer Notice or (2) five
years, (c) Tenant shall lease the Refusal Space in an "AS-IS" condition,
Landlord shall not be required to perform any work therein, and Landlord shall
not provide to Tenant any allowances other than those contained in the Third
Party Offer (e.g., moving allowance, construction allowance, and the like), if
any, and (d) other terms set forth in the Lease which are inconsistent with the
terms of the Offer Notice shall be modified accordingly for the Refusal Space.
Notwithstanding the foregoing, if the Offer Notice includes space in excess of
the Refusal Space, Tenant must exercise its right hereunder, if at all, as to
all of the space contained in the Offer Notice. If Tenant fails or is unable to
timely exercise its right hereunder, then such right shall lapse, time being of
the essence with respect to the exercise thereof, and Landlord may lease the
Refusal Space to third parties on substantially the same terms as set forth in
the Offer Notice (provided, however, that if Landlord has not entered into a
lease for the Refusal Space, upon substantially the same terms as set forth in
the Offer Notice, within 180 days after the date on which Tenant has elected not
to exercise its right of first refusal hereunder, Landlord shall again comply
with the provisions of this Exhibit with respect to the Refusal Space before
leasing same to any third party). Tenant may not exercise its rights under this
Exhibit if an Event of Default exists or Tenant is not then occupying the entire
Premises. For purposes hereof, if an Offer Notice is delivered for less than
all of the Refusal Space but such notice provides for an expansion, right of
first refusal, or other preferential right to lease some of the remaining
portion of the Refusal Space, then if Landlord enters into a lease with the
third party in question upon terms that are substantially the same as the terms
set forth in the Offer Notice (in accordance with the terms hereof) such
remaining portion of the Refusal Space shall thereafter be excluded from the
provisions of this Exhibit. It is the intention of the parties that the right
of first refusal granted to Tenant under this Exhibit H is an ongoing right of
---------
first refusal. Consequently, if Landlord enters into a lease with a third party
with regard to the Refusal Space, in accordance with the terms hereof, and such
lease with the third party subsequently terminates or expires, or the third
party's right of possession is terminated the space covered by such lease shall
again become subject to Tenant's right of first refusal in accordance with the
terms hereof. In addition, it is agreed that if the Offer Notice relates to less
than all of the Refusal Space shown on Exhibit A-2 attached and made a part
-----------
hereof, then Tenant's right of first refusal with respect to the remaining
Refusal Space designated on Exhibit A-2 shall not be affected.
-----------
2. If the lease term of the Refusal Space would extend beyond the then-
effective Term for the Premises (that is, the initial Term or the first extended
Term, as applicable, but not the second extended Term), then the expiration date
of the then-effective Term may, at Tenant's option, by written notice to
Landlord, be extended such that it is the same as the lease term expiration date
for the Refusal Space and the Basic Rental rate for the Premises (excluding the
Refusal Space) during such extended Term shall equal the annual Basic Rental
rate for the Premises determined by Prevailing Market Conditions taking into
account that no allowances will be paid, and no leasehold improvements will be
made in the Premises (excluding the Refusal Space), by Landlord for such
extended Term. Each extension exercised by Tenant under this Section 2 shall
reduce the number of extension options that may be exercised by Tenant under
Exhibit G.
- - ---------
3. Tenant's rights under this Exhibit shall terminate if (a) this Lease
or Tenant's right to possession of the Premises is terminated, (b) Tenant
assigns any of its interest in this Lease or sublets any portion of the Premises
other than to a Permitted Transferee, or (c) Tenant fails timely to exercise its
option as to any portion of the Refusal Space.
H-1
<PAGE>
EXHIBIT I
PREVAILING MARKET CONDITIONS
----------------------------
The "PREVAILING MARKET CONDITIONS" shall mean the base rental rate,
----------------------------
expense stop, operating expense pass-through, and tenant inducements in
Comparable Buildings for the time period such determination is being made for
office space of equivalent quality, size, utility, and location as the space in
question (taking into account all relevant factors, including, without
limitation, the creditworthiness of Tenant, the length of the extended Term in
question, the term for such additional space, the age of the Building, and the
fair market value of the improvements in such space that Tenant elects to use),
as determined using leases entered into for comparable space in Comparable
Buildings under similar circumstances during the period six months before the
determination date in question, recent letters of intent for comparable space in
Comparable Buildings under similar circumstances and other relevant information.
"EXERCISE NOTICE" shall mean an Extension Notice, an Available Space Exercise
---------------
Notice, or, if the then-effective Term is extended in connection with the
leasing of Refusal Space pursuant thereto, an Acceptance Notice. Within 30 days
after Landlord has received an Exercise Notice, Landlord shall deliver to Tenant
Landlord's assessment of the Prevailing Market Conditions for the extended Tenn
or space in question (the "LANDLORD'S ASSESSMENT"); however, in the case of an
---------------------
extension, the delivery of Landlord's Assessment may be deferred until nine
months before the then-effective Term expires. Tenant shall notify Landlord
whether it agrees with the Landlord's Assessment within 30 days after it is
delivered to Tenant. If Tenant fails timely to notify Landlord that it
disagrees with the Landlord's Assessment, then the Landlord's Assessment shall
be the Prevailing Market Conditions for the extended Term or space in question.
If Tenant timely delivers to Landlord written notice that it disagrees with the
Landlord's Assessment for the extended Term or space in question (an "OBJECTION
---------
NOTICE), then the Objection Notice shall specify Tenant's assessment of the
- - ------
Prevailing Market Conditions for the space or extended Term in question
("TENANT'S ASSESSMENT"), and Landlord and Tenant shall meet to attempt to
-------------------
determine the Prevailing Market Conditions for such extended Term or space; if
they are unable to agree on such Prevailing Market Conditions within 15 days
after Tenant delivers to Landlord an Objection Notice, then Landlord and Tenant
shall, within ten days after such 15-day period expires, jointly appoint an
independent real estate broker or consultant (an "ARBITRATOR") with at least
----------
ten-years' commercial real estate experience in the vicinity of the Building and
submit to the Arbitrator their respective assessments of the Prevailing Market
Conditions for such extended Term or space, together with the supporting data
that was used to calculate such assessments. If Landlord and Tenant are unable
to agree upon an Arbitrator, then either may request that the Dallas office of
the American Arbitration Association select the Arbitrator, which selection
shall be binding. Within 20 days after the selection of an Arbitrator, the
Arbitrator shall select the assessment which is closest to his determination of
the Prevailing Market Conditions for the extended Term or space, which
assessment shall be the Prevailing Market Conditions for such extended Term or
space. The Arbitrator's determination shall be binding on Landlord and Tenant.
The cost of such Arbitrator shall be paid by the party whose assessment was not
selected.
If Tenant has exercised the right to lease additional space or extend the
Term and the Prevailing Market Conditions therefor have not been determined by
the time Basic Rental for such space or extended Term is scheduled to begin,
then Tenant shall pay Rent for such space or the extended Term on the terms in
effect under this Lease immediately before such space is leased or the extended
Term (as the case may be) until such time as the Prevailing Market Conditions
have been determined, at which time appropriate cash payments shall be made by
Landlord or Tenant such that Tenant is charged and pays rent based on the
Prevailing Market Condition for the space or extended Term during the interval
in question.
I-1
<PAGE>
EXHIBIT J
ACQUISITION OF LAND AND CONSTRUCTION LOAN
The obligations of Landlord hereunder are conditioned upon Landlord's
acquiring the Land on satisfactory terms and conditions (the "Land Acquisition")
----------------
and obtaining financing acceptable to Landlord in all respects for the
construction of the Building (a "Construction Loan). Landlord shall use
-----------------
reasonable and diligent efforts to close the Land Acquisition and obtain a
Construction Loan. If Landlord has not acquired the Land by December 31, 1996,
either Landlord or Tenant may terminate this Lease by delivering written notice
thereof to the other party, whereupon neither party shall have any further
duties or liabilities hereunder. If Landlord has not received a Construction
Loan (i.e. the construction loan is not closed) within 90 days after the date
hereof, either Landlord or Tenant may terminate this Lease by delivering written
notice thereof to the other party, whereupon neither party shall have any
further duties or liabilities hereunder. If Landlord obtains a Construction
Loan, Landlord shall diligently construct the Building and perform the Work
under Exhibit D of this Lease. If Landlord does not begin construction work for
---------
the Building by clearing and grading the Land by February 1, 1997, plus the
number of Force Majeure Days (the "Work Termination Date"), Tenant may, as its
---------------------
sole remedy therefor, terminate this Lease by delivering a termination notice to
Landlord before the earlier of (1) ten days after the Work Termination Date or
(2) the date such construction work commences.
J-1
<PAGE>
EXHIBIT K
JANITORIAL SCHEDULE
[INTENTIONALLY LEFT BLANK]
40
<PAGE>
SCHEDULE OF JANITORIAL SERVICES
-------------------------------
A. OFFICE AREAS
1. Empty, clean and damp dust all waste receptacles and remove waste paper
and rubbish from the premises nightly; wash receptacles as necessary.
2. Empty and clean all ash trays, screen all sand urns nightly and supply
and replace sand as necessary.
3. Vacuum all rugs and carpeted areas in offices, lobbies and corridors
nightly. Spot clean carpets as needed.
4. Hand dust and wipe clean with damp or treated cloth all office
furniture, files, fixtures, paneling, window sills and all other
horizontal surfaces nightly; wash window sills when necessary.
5. Damp wipe and polish all glass furniture tops nightly.
6. Remove all finger marks and smudges from vertical surfaces, Including
doors, door frames, around light switches, private entrance glass and
partitions nightly.
7. Wash clean all water coolers nightly.
8. Sweep all stairways nightly, vacuum if carpeted.
9. Police all stairwells throughout the entire building daily and keep in
clean condition.
10. Damp mop spillage in office and public areas as required.
11. Damp dust all telephones as necessary.
B. WASH ROOMS
1. Mop, rinse and dry floors nightly.
2. Scrub floors weekly.
3. Clean all mirrors, bright work and enameled surfaces nightly.
<PAGE>
4. Wash and disinfect all basins, urinals and bowls nightly, using non-
abrasive cleaners to remove stains and clean underside of rim on
urinals and bowls nightly.
5. Wash both sides of all toilet seats with soap and water and disinfect
nightly.
6. Damp wipe nightly, wash all partitions, tile walls and outside surface
of all dispensers and receptacles.
7. Empty and sanitize all receptacles and sanitary disposals nightly:
thoroughly clean and wash at least once Der week.
8. Fill toilet tissue, soap, towel and sanitary napkin dispensers
nightly.
9. Clean flushometers, piping, toilet seat hinges and other metal work
nightly.
10. Wash and polish all wall, partitions, tile walls and enamel surfaces
from trim to floor monthly or as needed.
11. Vacuum all louvres, ventilating grills, and dust light fixtures
monthly.
NOTE: It is the intention to keep the wash rooms thoroughly cleaned and not
to use a disinfectant or deodorant to kill odor. If a disinfectant is
necessary, an odorless product will be used with the Manager's
permission.
C. FLOORS
1. Ceramic tile, marble and terrazzo floors to be swept and buffed nightly
and washed or scrubbed as necessary.
2. Vinyl asbestos, asphalt, vinyl, rubber or other composition floors and
bases to be swept nightly; such floors in public areas on multiple
tenancy floors to be waxed and buffed as needed.
3. Tile floors in office areas will be waxed and buffed monthly.
4. All vinyl floors stripped and rewaxed as necessary.
5. All carpeted areas and rugs to be vacuumed clean nightly.
6. Detail vacuuming shall be performed as necessary.
7. Carpet shampooing will be performed at Manager's request and billed by
Manager.
<PAGE>
D. RAISED COMPUTER FLOORS
1. Dry mop and Spot clean all computer flooring nightly.
2. Wet mop all computer flooring at least once weekly. Mopping may be
performed on separate sections of the computer flooring on successive
nights, as long as entire raised flooring is mopped once during each
one-week period.
3. Buff all computer flooring monthly.
4. Computer sub-flooring shall be cleaned annually by contractor, or as
necessary.
E. GLASS
1. Clean glass entrance doors, adjacent glass panels, and any common area
glass nightly.
F. HIGH DUSTING (Quarterly)
1. Dust and wipe clean all closet shelving when empty and carpet sweep or
dry mop all floors in closets if such are empty.
2. Dust all picture frames, charts, graphs and similar wall hangings.
3. Dust clean all vertical surfaces such as walls, partitions, doors,
door bucks and other surfaces above shoulder height.
4. Damp dust all ceiling air conditioning diffusers, wall grilles,
registers and other ventilating louvers.
5. Dust the exterior surfaces of lighting fixtures, including glass and
plastic enclosures.
6. Dust all miniblinds.
G. ELEVATORS
1. Carpets will be vacuumed daily and spot cleaned as necessary.
2. Exterior and interior doors and trim will be dusted nightly.
3. Cabinets will be dusted nightly.
<PAGE>
4. Control and dispatch panels will be dusted and polished as necessary.
5. Elevator thresholds will be cleaned nightly.
6. Hardwood surfaces will be kept clean.
7. Telephones will be kept dust free.
8. Garage elevators - floors will be stripped, waxed, and damp mopped as
necessary. Elevator tracks are to be kept clean.
H. GENERAL
1. Wipe all interior metal window frames, mullions, and other unpainted
interior metal surfaces of the perimeter walls of the building each
time the interior of the windows is washed (as requested by the
Manager).
2. Keep slopsink rooms in a clean, neat and orderly condition at all
times.
3. Wipe clean and polish all metal hardware fixtures and other bright
work nightly.
4. Dust and/or wash all directory boards as required, remove fingerprints
and smudges nightly.
5. Maintain building lobby, corridors and other public areas in a clean
condition.
6. Dust fire extinguishers and cabinets nightly (interior and exterior);
wash as necessary.
7. All baseboards (resilient flooring and carpeted areas) will be washed
and wiped clean as necessary.
8. Vacuum entrance mats nightly.
9. Perform special cleaning needs of individual tenants only as
authorized and directed by the Manager.
10. Properly maintain exterior of building at ground level by ensuring
that curtain wall, glass, marble, etc., is kept in a clean condition.
Exterior stainless steel is to be cleaned or polished weekly.
11. Polish standpipes and sprinkler Siamese connections as necessary.
<PAGE>
NOTE: Upon completion of nightly duties, floor supervisors will ensure that
all offices have been cleaned and left in a neat and orderly condition;
all lights have been turned off and all doors locked. Nightly condition
report should be completed, noting any employees working on the
floors or other incidents.
<PAGE>
EXHIBIT L
[SIGN DESCRIPTION)
[DIAGRAM OMITTED]
<PAGE>
EXHIBIT M
[BUILDING PLANS]
[DIAGRAM OMITTED]
<PAGE>
Amtech Corporation
1996 Annual Report
EXHIBIT 13.1
FINANCIAL INFORMATION
Five-Year Financial Summary
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
(In thousands, except per
share data) 1996 1995(1) 1994 1993 1992
- - ----------------------------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Sales $116,508 $80,071 $61,457 $59,424 $39,856
Operating costs and expenses:
Cost of sales 68,055 53,656 31,288 28,678 20,190
Research and development 10,314 9,334 6,222 4,407 2,562
Marketing, general and
administrative 41,287 23,123 13,991 13,978 10,960
-------- ------- ------- ------- -------
119,656 86,113 51,501 47,063 33,712
-------- ------- ------- ------- -------
Operating income (loss) (3,148) (6,042) 9,956 12,361 6,144
Investment income 3,065 2,308 2,104 1,735 1,261
Interest expense (272) (181) -- -- --
-------- ------- ------- ------- -------
Income (loss) before income
taxes and
cumulative effect of
change in accounting
for income taxes (355) (3,915) 12,060 14,096 7,405
Provision for income taxes 289 172 4,398 3,729 132
-------- ------- ------- ------- -------
Income (loss) before
cumulative effect of
change in accounting for
income taxes (644) (4,087) 7,662 10,367 7,273
Cumulative effect of change
in accounting
for income taxes -- -- -- 6,000 --
-------- ------- ------- ------- -------
Net income (loss) $ (644) $(4,087) $ 7,662 $16,367 $ 7,273
======== ======= ======= ======= =======
Earnings (loss) per share (2) $(0.04) $ (0.28) $ 0.52 $ 1.10 $0.51
Shares used in computing
earnings
(loss) per share 14,637 14,655 14,800 14,855 14,199
Cash dividends declared per
common share $ -- $ 0.02 $ 0.08 $ 0.06 $ --
Working capital $ 43,047 $49,349 $63,558 $47,625 $38,030
Total assets 91,041 93,379 80,622 76,720 57,445
Total stockholders' equity (3) 71,756 72,561 75,336 66,805 48,821
Stockholders' equity per share 4.87 4.97 5.16 4.59 3.40
</TABLE>
(1) In 1995, the Company acquired Cotag International Limited, Cardkey Systems,
Inc., Cardkey Systems Limited, and WaveNet International, Inc.
(formerly WaveLink Technologies, Inc.). See Note 2 to Consolidated Financial
Statements included herein.
(2) Amount for 1993 includes the cumulative effect of a change in accounting for
income taxes which increased earnings per share by $0.40.
(3) The Company completed a follow-on public offering in May 1992 of 1,562,500
common shares for net proceeds of $24,884,000.
This five-year financial summary should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes included
herein.
14
<PAGE>
Amtech Corporation
1996 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The Company is organized into three market-oriented groups. The Transportation
Systems Group ("TSG"), which includes Amtech Systems Corporation, Amtech World
Corporation, and Amtech International S.A., develops and provides high-frequency
radio frequency identification (RFID) solutions to the transportation markets.
These markets include electronic toll and traffic management (ETTM), rail,
airport, parking and access control, intermodal, and motor freight. In October
1996, the Company acquired the remaining 51% interest in its European joint
venture, Amtech International S.A. (formerly Alcatel Amtech S.A.). Prior to
October 1996, the Company accounted for its investment in Amtech International
using the equity method of accounting. Since October 1996, the Company has
included 100% of Amtech International's accounts in its consolidated financial
statements. The 1997 results of operations of Amtech International are not
expected to have a material effect on the TSG's net operating results.
The Electronic Security Group ("ESG"), which focuses on products and services
for electronic access control applications, includes Amtech Europe Limited and
Cardkey Systems, Inc. Amtech Europe Limited combines Cotag International Limited
(acquired in January 1995) and Cardkey Systems Limited (acquired in August 1995
along with Cardkey Systems, Inc.). The 1995 acquisitions impact the
comparability of the Company's 1996 results with those of 1995.
The Interactive Data Group ("IDG"), consisting of WaveNet, Inc. and WaveNet
International, Inc. (collectively, "WaveNet"), is a start-up enterprise that is
developing a line of products targeted to the interactive data marketplace
consisting of mobile radio frequency data communications terminals using
wireless local area networks for use in portable computing in logistics,
warehousing, transportation, and medical applications. The IDG faces the risks
and uncertainties inherent in any start-up enterprise. In 1996, the IDG formally
introduced its product line. While the IDG received initial orders from several
customers in 1996, the operating loss experienced by the IDG more than offset
the 1996 combined operating income of the ESG and the TSG. There is no assurance
that the IDG will be profitable in 1997, and any losses sustained in 1997 could
materially affect the Company's overall results of operations.
Results of operations
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
Sales - Sales increased by 45% from $80,071,000 in 1995 to $116,508,000 in
1996, primarily as a result of the acquisition of Cardkey in August 1995. In
1995, the ESG included post-acquisition sales of $31,687,000 as compared to
$63,393,000 for the entire twelve month period in 1996. The TSG sales increased
9% from $47,348,000 in 1995 to $51,490,000 in 1996, which includes $16,942,000
and $12,682,000, respectively, from a single systems integration services
contract. IDG's initial start-up sales in 1996 were $762,000.
Gross profit - Gross profit as a percentage of sales increased from 33% in
1995 to 42% in 1996, primarily due to an increase in ESG's gross profit margin
from 33% in 1995 to 42% in 1996. The ESG improvement results primarily from a
combination of targeting higher-margin business and enhancing operational
efficiencies, and the 1995 disposition of certain operations unrelated to
Cardkey's core business that yielded lower margins. Also contributing to the
overall increase is an improvement in the TSG gross profit margin from 31% in
1995 to 37% in 1996, primarily as a result of a greater percentage of sales
being attributable to the Company's manufactured products.
Research and development - Research and development expenses increased by 10%
from $9,334,000 in 1995 to $10,314,000 in 1996, primarily due to a full year of
ESG expenses in 1996 from the acquisition of Cardkey and an increase in product
development activities in the IDG. Expenses in 1995 include one-time charges of
$1,382,000 for purchased in-process research and development as a result of the
Cardkey and WaveNet acquisitions.
Marketing, general and administrative - Marketing, general and administrative
expenses increased 79% from $23,123,000 in 1995 to $41,287,000 in 1996. The
increase was primarily attributable to increased ESG expenditures from
$10,642,000 in 1995 to $23,628,000 in 1996 as a result
15
<PAGE>
Amtech Corporation
1996 Annual Report
Management's Discussion and Analysis of Financial Condition and Results of
Operations
of the Cardkey acquisition. In addition, the Company's pro-rata share of the
losses attributable to its European joint venture, Amtech International S.A.,
prior to its acquisition by the TSG increased from $535,000 in 1995 to
$1,301,000 in 1996 primarily due to a decline in sales in that market.
Additionally, the IDG began building a sales and administrative infrastructure
in 1996 resulting in $1,942,000 of expenditures. Also contributing to the
increase was an expense of $446,000 recognized by the Company relating to stock
options granted in December 1995 to certain of the Company's outside directors
under a plan that was approved by the shareholders on April 25, 1996.
Operating loss - As a result of the foregoing, the Company reduced its
operating loss of $6,042,000 in 1995 to $3,148,000 in 1996. Excluding corporate
holding company expenses, the ESG and TSG were profitable for the year after
sustaining losses in 1995. These improvements were offset by the increased
losses experienced by the IDG due to low initial sales volumes, continuing
product development efforts and the building of a sales and administrative
infrastructure to support new product introductions.
Investment income - Investment income increased from $2,308,000 in 1995 to
$3,065,000 in 1996. The increase is primarily attributable to an increase in the
gains realized from the sale of corporate equity securities from $1,040,000 in
1995 to $2,150,000 in 1996. These gains are not expected to recur in 1997. The
effect of a reduction in invested cash and marketable securities resulting from
the Company's 1995 business acquisitions partially offset the overall increase.
Income taxes - The provision for income taxes in 1996 of $289,000 is different
from the U.S. statutory rate of 34%, primarily due to the effect of certain
goodwill not being deductible for tax purposes, state taxes, and unbenefitted
foreign losses. The provision for income taxes in 1995 of $172,000 is different
from the U.S. statutory rate of 34%, primarily due to the effect of unbenefitted
foreign losses.
Net loss - As a result of the foregoing, the Company experienced a net loss of
$644,000 in 1996 compared to a net loss of $4,087,000 in 1995.
Comparison of the Year Ended December 31, 1995 to the Year Ended December 31,
1994
Sales - Sales increased by 30% from $61,457,000 in 1994 to $80,071,000 in
1995. Sales volumes for the ETTM sector of the TSG markets increased
$10,211,000, primarily as a result of revenues of approximately $16,942,000 from
a single systems integration services contract. Shipments in the TSG markets for
the rail industry decreased from $30,506,000 to $9,281,000 primarily as a result
of the substantial completion in mid-1994 of tag deliveries for the
implementation of the Association of American Railroads' mandatory standard for
automatic equipment identification. Sales in the ESG markets amounted to
approximately $31,687,000 in 1995 as sales of Cotag were included in the
Company's consolidated financial statements beginning February 1, 1995 and sales
of Cardkey were included beginning August 1, 1995.
Gross profit - Gross profit as a percentage of sales decreased from 49% in
1994 to 33% in 1995. This decrease was primarily due to a reduction in the
percentage of sales attributable to the Company's manufactured products for the
TSG markets, and a larger percentage of sales being attributable to lower margin
systems integration project work in the ETTM market. The gross profit margin on
sales to the ESG markets was 33%.
Research and development - Research and development expenses increased by 50%
from $6,222,000 in 1994 to $9,334,000 in 1995, due in part to one-time charges
of $1,382,000 for purchased in-process research and development as a result of
the Cardkey and WaveNet acquisitions, expenditures of approximately $900,000 by
WaveNet for product development and the inclusion of expenses for the ESG of
$2,427,000 in 1995. These increases were partially offset by reduced joint
venture expense levels relating to product development for certain
transportation applications.
Marketing, general and administrative - Marketing, general and administrative
expenses increased 65% from $13,991,000 in 1994 to $23,123,000 in 1995. The
increases are primarily attributable to the inclusion of ESG expenses of
$10,642,000 in 1995. These increases were partially offset
16
<PAGE>
Amtech Corporation
1996 Annual Report
by decreases in outside consultant, advertising, and travel costs incurred to
pursue and support new business opportunities for the TSG markets.
Investment income - Investment income increased from $2,104,000 in 1994 to
$2,308,000 in 1995. The increase is primarily attributable to gains realized
from the sale of corporate equity securities of approximately $1,040,000
partially offset by the effect of a reduction in invested cash and marketable
securities resulting from the Company's 1995 business acquisitions.
Income taxes - The provision for income taxes in 1995 of $172,000 is different
from the U.S. statutory rate of 34%, primarily due to the effect of unbenefitted
foreign losses. The effective tax rate for 1994 was 36.5%.
Net income (loss) - As a result of the foregoing, the Company experienced a
net loss of $4,087,000 in 1995 as compared to net income of $7,662,000 in 1994.
Liquidity and capital resources
At December 31, 1996 the Company's principal source of liquidity is its net
working capital position of $43,047,000. For the year ended December 31, 1996
the Company used cash of $3,450,000 for operating activities largely due to
increased accounts receivable as a result of increased sales in the fourth
quarter of 1996, increased inventory levels partially attributable to the
purchase of raw materials for the manufacture of WaveNet's new product line, and
the consolidation of Amtech International's accounts beginning October 1996. The
Company's near-term liquidity will be impacted by the final note payment of
$1,839,000 in March 1997 associated with the acquisition of Cardkey.
Additionally, in 1997 the Company collateralized a contract performance bond
with $3,800,000 of the Company's short-term marketable securities. The Company
expects to invest up to $4,500,000 in 1997 for property and equipment.
The Company believes that its existing net working capital position will be
sufficient to meet the capital requirements for the current businesses for at
least the next two years. Additional acquisitions, if any, would be financed by
the most attractive alternative available which could be the utilization of cash
reserves or the issuance of debt or equity securities.
Common stock information
The Company's common stock trades on The Nasdaq Stock Market under the symbol
AMTC. The following table shows the high and low sales prices by quarter for
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
------------ -------------
Quarter Ended High Low High Low
- - ------------- ----- ----- ------ -----
<S> <C> <C> <C> <C>
March 31 $6.75 $5.13 $10.63 $7.25
June 30 $9.88 $5.38 $ 8.50 $5.25
September 30 $8.38 $5.50 $ 7.63 $5.88
December 31 $8.25 $5.75 $ 6.88 $4.63
</TABLE>
At February 28, 1997 there were 14,722,663 shares of common stock outstanding
held by 755 stockholders of record. On that date, the last reported sales price
of the common stock was $6.25.
The Company declared a cash dividend of $0.02 per share during the quarter
ended March 31, 1995 and suspended its quarterly payment of dividends
thereafter. Future dividends, if any, are dependent on the Company's future
earnings, capital requirements, and overall financial condition. In August 1994,
the Company's Board of Directors approved a program to repurchase up to
$5,000,000 of the Company's common stock from time-to-time in the open market or
in privately negotiated transactions. The Company repurchased 80,000 of its
shares for $393,000 in 1995 and rescinded the repurchase program in 1996.
17
<PAGE>
Amtech Corporation
1996 Annual Report
Report of Independent Auditors
The Board of Directors and Stockholders
Amtech Corporation
We have audited the accompanying consolidated balance sheets of Amtech
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Amtech Corporation
at December 31, 1996 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Dallas, Texas
February 20, 1997
<PAGE>
Amtech Corporation
1996 Annual Report
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Sales $116,508,000 $80,071,000 $61,457,000
Operating costs and
expenses:
Cost of sales 68,055,000 53,656,000 31,288,000
Research and development 10,314,000 9,334,000 6,222,000
Marketing, general and
administrative 41,287,000 23,123,000 13,991,000
------------ ----------- -----------
119,656,000 86,113,000 51,501,000
------------ ----------- -----------
Operating income (loss) (3,148,000) (6,042,000) 9,956,000
Investment income 3,065,000 2,308,000 2,104,000
Interest expense (272,000) (181,000) --
------------ ----------- -----------
Income (loss) before
provision for income taxes (355,000) (3,915,000) 12,060,000
Provision for income taxes 289,000 172,000 4,398,000
------------ ----------- -----------
Net income (loss) $ (644,000) $(4,087,000) $ 7,662,000
============ =========== ===========
</TABLE>
Earnings (loss) per share $ (0.04) $ (0.28) $ 0.52
============ =========== ===========
Shares used in computing earnings
(loss) per share 14,636,605 14,654,681 14,799,782
============ =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
Amtech Corporation
1996 Annual Report
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,296,000 $17,669,000
Short-term marketable securities 11,852,000 10,168,000
Accounts receivable, net of allowance for doubtful accounts
of $1,006,000 in 1996 and $831,000 in 1995 28,030,000 26,591,000
Inventories 13,497,000 11,383,000
Deferred income taxes 2,401,000 1,037,000
Prepaid expenses 1,256,000 725,000
------------ -----------
Total current assets 62,332,000 67,573,000
Property and equipment, at cost 27,638,000 23,221,000
Accumulated depreciation (12,994,000) (9,138,000)
------------ -----------
14,644,000 14,083,000
Intangible assets, net of amortization of
$1,407,000 in 1996 and $529,000 in 1995 8,214,000 8,827,000
Deferred income taxes 1,003,000 1,544,000
Other assets 4,848,000 1,352,000
------------ -----------
$ 91,041,000 $93,379,000
============ ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 6,815,000 $ 6,628,000
Note payable 1,839,000 1,887,000
Accrued expenses 8,391,000 7,201,000
Deferred income and license revenues 2,240,000 2,508,000
------------ -----------
Total current liabilities 19,285,000 18,224,000
Note payable -- 2,594,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value, 10,000,000 shares
authorized; none outstanding -- --
Common stock, $0.01 par value, 30,000,000 shares
authorized; 14,802,663 issued, 14,722,663
outstanding in 1996 and 14,685,036 issued, 14,605,036
outstanding in 1995 148,000 147,000
Additional paid-in capital 76,510,000 75,349,000
Unrealized gain on marketable securities, net of
tax effect -- 1,323,000
Treasury stock, at cost (393,000) (393,000)
Accumulated deficit (4,509,000) (3,865,000)
------------ -----------
Total stockholders' equity 71,756,000 72,561,000
------------ -----------
$ 91,041,000 $93,379,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
Amtech Corporation
1996 Annual Report
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (644,000) $ (4,087,000) $ 7,662,000
Adjustments to reconcile net income (loss)
to net cash from operating activities:
Depreciation and amortization 4,605,000 3,614,000 2,980,000
Realized gain on sale of marketable securities (2,150,000) (1,040,000) --
Stock option compensation 446,000 -- --
Deferred income taxes (91,000) (603,000) 3,164,000
Tax benefit from exercise of stock options 35,000 101,000 329,000
Purchased in-process research and development -- 1,382,000 --
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,284,000) (4,062,000) 1,113,000
(Increase) decrease in inventories (2,114,000) 2,788,000 (1,326,000)
(Increase) decrease in prepaid expenses (531,000) 280,000 (307,000)
(Increase) decrease in other assets (1,871,000) 603,000 1,910,000
Increase (decrease) in accounts payable and accrued expenses 1,417,000 1,629,000 (3,660,000)
Decrease in deferred income and license revenues (268,000) (1,233,000) (969,000)
------------ ----------- -----------
Net cash provided (used) by operating activities (3,450,000) (628,000) 10,896,000
Cash flows from investing activities:
Purchases of property and equipment (4,184,000) (3,315,000) (2,333,000)
Purchase of Cotag International Limited -- (5,784,000) --
Purchase of Cardkey Systems, net of cash acquired (952,000) (15,096,000) --
Purchase of WaveNet International Inc., net of cash acquired -- (428,000) --
Recapitalization of Alcatel Amtech S.A. -- -- (2,231,000)
Purchases of marketable securities (14,729,000) (3,000,000) (35,350,000)
Sales and maturities of marketable securities 13,191,000 32,193,000 22,756,000
Increase in other assets (1,884,000) (79,000) (983,000)
Other (599,000) -- --
------------ ----------- -----------
Net cash provided (used) by investing activities (9,157,000) 4,491,000 (18,141,000)
Cash flows from financing activities:
Payment of cash dividends -- (293,000) (1,168,000)
Proceeds from exercise of stock options 113,000 301,000 264,000
Purchase of treasury stock -- (393,000) --
------------ ----------- -----------
Net cash provided (used) by financing activities 113,000 (385,000) (904,000)
Effect of exchange rate changes on cash and cash equivalents 121,000 (26,000) --
------------ ----------- -----------
Increase (decrease) in cash and cash equivalents (12,373,000) 3,452,000 (8,149,000)
Cash and cash equivalents, beginning of year 17,669,000 14,217,000 22,366,000
------------ ----------- -----------
Cash and cash equivalents, end of year $ 5,296,000 $ 17,669,000 $ 14,217,000
============ =========== ===========
Supplemental cash flow information
Income taxes paid, net $ 765,000 $ 148,000 $ 1,265,000
Interest paid $ 113,000 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE>
Amtech Corporation
1996 Annual Report
Consolidated Statements
of Stockholders' Equity
<TABLE>
<CAPTION>
Unrealized gain Retained
Common Stock Additional (loss) on earnings Total
-------------------- paid-in marketable Treasury (accumulated stockholders'
Shares Amount capital securities stock deficit) equity
---------- -------- ----------- ----------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 14,558,389 $146,000 $72,638,000 $ -- $ -- $(5,979,000) $66,805,000
Exercise of stock options
for cash 49,019 -- 264,000 -- -- -- 264,000
Payment of cash dividends
($0.08 per share) -- -- -- -- -- (1,168,000) (1,168,000)
Tax benefit from exercise of
stock options -- -- 2,184,000 -- -- -- 2,184,000
Unrealized loss on marketable
securities (net of tax effect
of $211,000) -- -- -- (411,000) -- -- (411,000)
Net income -- -- -- -- -- 7,662,000 7,662,000
---------- -------- ----------- ----------- --------- ------------ -------------
Balance, December 31, 1994 14,607,408 146,000 75,086,000 (411,000) -- 515,000 75,336,000
Exercise of stock options
for cash 77,628 1,000 300,000 -- -- -- 301,000
Payment of cash dividends
($0.02 per share) -- -- -- -- -- (293,000) (293,000)
Tax benefit from exercise of
stock options -- -- 101,000 -- -- -- 101,000
Unrealized gain on marketable
securities (net of tax effect
of $892,000) -- -- -- 1,734,000 -- -- 1,734,000
Purchase of treasury stock
(80,000 shares) -- -- -- -- (393,000) -- (393,000)
Other -- -- (138,000) -- -- -- (138,000)
Net loss -- -- -- -- -- (4,087,000) (4,087,000)
---------- -------- ----------- ----------- --------- ------------ -------------
Balance, December 31, 1995 14,685,036 147,000 75,349,000 1,323,000 (393,000) (3,865,000) 72,561,000
Exercise of stock options
for cash 117,627 1,000 112,000 -- -- -- 113,000
Tax benefit from exercise of
stock options -- -- 35,000 -- -- -- 35,000
Stock option compensation -- -- 446,000 -- -- -- 446,000
Realized gain on marketable
securities (net of tax effect
of $681,000) -- -- -- (1,323,000) -- -- (1,323,000)
Other -- -- 568,000 -- -- -- 568,000
Net loss -- -- -- -- -- (644,000) (644,000)
---------- -------- ----------- ----------- --------- ------------ -------------
Balance, December 31, 1996 14,802,663 $148,000 $76,510,000 $ -- $(393,000) $(4,509,000) $71,756,000
========== ======== =========== =========== ========= =========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
Amtech Corporation
1996 Annual Report
Notes to Consolidated
Financial Statements
1. Summary of significant accounting policies
Consolidation - The accompanying consolidated financial statements include the
accounts of the Company and its majority owned subsidiaries. Intercompany
balances and transactions have been eliminated. Investees in which the Company
owns 50% or less of the outstanding securities are accounted for using the
equity method of accounting.
Cash investments and marketable securities - Cash investments with
maturities of three months or less when purchased are considered cash
equivalents. Marketable securities, which are available-for-sale and have stated
maturities within two years, are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
U.S. Treasury securities $ 9,882,000 $ 7,124,000
U.S. corporate debt securities 1,970,000 --
U.S. corporate equity securities -- 3,044,000
----------- -----------
$11,852,000 $10,168,000
=========== ===========
</TABLE>
Marketable securities are carried at amortized cost, which approximates
fair market value except for U.S. corporate equity securities which had an
unrealized gain of $2,004,000 and, net of its potential tax effect, was included
in stockholders' equity at December 31, 1995. In 1997, the Company
collateralized a contract performance bond with $3,800,000 of the Company's
short-term marketable securities.
Inventories - Inventories are stated at the lower of cost (first-in, first-
out) or market.
Depreciation and amortization - Depreciation of property and equipment is
provided using the straight-line method over estimated useful lives ranging from
three to twenty-five years. Amortization of intangible assets, including
goodwill, is provided using the straight-line method over periods ranging from
seven to fifteen years.
Revenue recognition - Generally, sales are recorded when products are
shipped or services are rendered. Sales under long-term contracts are recorded
as costs are incurred and include estimated profits calculated on the basis of
the relationship between costs incurred and total estimated costs (cost-to-cost
type of percentage-of-completion method of accounting). Revenues recognized in
excess of amounts billed to customers are included in accounts receivable and
amounted to approximately $4,700,000 and $1,855,000 at December 31, 1996 and
1995, respectively. In the period in which it is determined it is probable that
a loss will result from the performance of a contract, the entire amount of the
estimated ultimate loss is charged against income. Deferred license revenues
associated with the sale of manufacturing and marketing rights are amortized
over five years on a straight-line basis.
Earnings per share - The computation of earnings per share is based on the
weighted average number of shares of common stock and dilutive common equivalent
shares outstanding. Common equivalent shares assume the exercise of all dilutive
outstanding stock options using the treasury stock method. Fully diluted
earnings per share is not materially different from primary earnings per share
as presented.
Concentration of credit risk - The Company purchases cash investments and
marketable securities that are of high credit quality and limits the amount
invested in any one institution. The Company sells products and services to
various governmental and commercial customers covering a wide range of
industries throughout the world. The Company continuously evaluates the
creditworthiness of its customers' financial condition and generally does not
require collateral. The Company's allowance for doubtful accounts is based on
current market conditions and losses on uncollectible accounts have consistently
been within management's expectations.
Use of estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Long-lived assets - In accordance with Financial Accounting Standards Board
Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", the Company reviews the original
assumptions and rationale utilized in
23
<PAGE>
Amtech Corporation
1996 Annual Report
Notes to Consolidated
Financial Statements
the establishment of the carrying value and estimated life of certain long-lived
assets. The carrying value would be adjusted to fair value if facts and
circumstances indicating an impairment were present.
Reclassifications - Certain prior year balances have been reclassified to
conform with the 1996 presentation.
2. Business acquisitions
Amtech International
In October 1996, the Company acquired the remaining 51% interest in its European
joint venture, Amtech International S.A. (formerly Alcatel Amtech S.A.) for a
nominal amount. Prior to October 1996, the Company accounted for its investment
in Amtech International using the equity method of accounting and recognized
$1,301,000 in 1996 as marketing, general, and administrative expense. Since
October 1996, the Company has been including 100% of Amtech International's
accounts in its consolidated financial statements.
Cotag
In late January 1995, the Company purchased all of the stock of Cotag
International Limited ("Cotag") for approximately $5,800,000, including
acquisition expenses. Cotag is located in Cambridge, England, and manufactures
radio frequency identification security systems for hands-free electronic access
control and other related applications. The results of operations for Cotag are
included in the consolidated financial statements of the Company beginning
February 1, 1995. The acquisition of Cotag resulted in goodwill of approximately
$4,100,000, which is being amortized over ten years.
Cardkey
On August 1, 1995, the Company purchased substantially all of the assets and
assumed certain liabilities of Cardkey Systems, Inc., and Cardkey Systems
Limited (collectively, "Cardkey") and subsequently sold certain operations
unrelated to Cardkey's core business. The net purchase price for Cardkey
including acquisition expenses and post-acquisition adjustments recorded in 1996
was $17,887,000, consisting of cash and a non-interest bearing promissory note
which was originally recorded at a present value of $4,481,000 using an 8.75%
imputed interest rate. The note's final installment of $1,839,000 is due in
March 1997, and is secured by short-term marketable securities. The primary
operating companies of Cardkey are headquartered in Simi Valley, California, and
Reading, England. Cardkey sells, installs, and services electronic access
control systems through an international network of direct sales offices and
resellers.
The results of operations for Cardkey are included in the consolidated
financial statements of the Company beginning August 1, 1995. Allocation of the
purchase price resulted in a one-time charge in the third quarter of 1995 in the
amount of $882,000 for purchased in-process research and development. The
acquisition of Cardkey resulted in goodwill and other intangible assets of
approximately $4,600,000, after the effect of post-acquisition adjustments,
which are being amortized over periods ranging from seven to fifteen years.
The following unaudited pro forma summary combines the consolidated results
of operations of the Company and Cardkey as if the acquisition had occurred on
January 1, 1995, after giving effect to certain adjustments, including
amortization of goodwill and intangible assets, decreased interest income on the
cash consideration paid for the purchase, decreased interest expense on
intercompany debt not assumed by the Company and related income tax effects. The
pro forma summary does not include the effect of the one-time charge for
purchased in-process research and development. This pro forma summary is not
necessarily indicative of the results of operations as they would have been if
the Company and Cardkey had constituted a single entity during such period, nor
is it necessarily indicative of the future results of operations.
<TABLE>
<CAPTION>
(Unaudited) 1995
- - -----------------------------------------------
<S> <C>
Sales $118,852,000
Net loss (5,953,000)
Loss per share (0.41)
</TABLE>
24
<PAGE>
Amtech Corporation
1996 Annual Report
WaveNet
Since December 1994, the Company has provided debt and equity financing to
WaveNet International, Inc. (formerly WaveLink Technologies, Inc.) and WaveNet,
Inc. (collectively, "WaveNet"). WaveNet is developing a product line for the
radio frequency data communications market. During 1995, the Company accounted
for its investment in WaveNet using the equity method of accounting and
recognized approximately $900,000 as research and development expense. During
the fourth quarter of 1995, the financing provided by the Company resulted in
the Company owning a majority of the outstanding equity securities of WaveNet.
Accordingly WaveNet's accounts are consolidated with those of the Company
beginning December 31, 1995. Upon consolidation, allocation of the Company's net
investment to the acquired net assets of WaveNet resulted in goodwill of
approximately $364,000 and a one-time charge of approximately $500,000 in the
fourth quarter of 1995 for purchased in-process research and development.
3. Inventories
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Raw materials $ 7,355,000 $ 4,900,000
Work in process 2,307,000 1,944,000
Finished goods 3,835,000 4,539,000
----------- -----------
$13,497,000 $11,383,000
=========== ===========
4. Property and equipment
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Land $ 690,000 $ 690,000
Buildings 4,810,000 4,462,000
Manufacturing, test, and
other equipment 10,636,000 8,801,000
Computer equipment and
software 7,743,000 6,337,000
Office equipment, furniture,
and fixtures 2,294,000 2,106,000
Leasehold improvements
and other 1,465,000 825,000
----------- -----------
$27,638,000 $23,221,000
=========== ===========
5. Accrued expenses
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Payroll and related benefits $2,473,000 $2,186,000
Warranty reserves 2,599,000 2,323,000
Other 3,319,000 2,692,000
---------- ----------
$8,391,000 $7,201,000
========== ==========
</TABLE>
6. Stock Options
The Company has non-qualified stock options outstanding to employees and
directors under various shareholder approved Stock Option Plans. Options granted
under these plans are generally not less than the fair market value at the date
of grant, and subject to termination of employment, generally expire ten years
from date of grant. Employee options are generally exercisable in annual
installments over five years or are exercisable at rates of 45% in three years
and 55% in five and one-half years, unless accelerated due to the Company's
common stock trading at appreciated price targets. Annual grants to certain
directors are exercisable within six months from the date of the grant. At
December 31, 1996, 529,053 shares were available for future grants under the
Company's Stock Option Plans excluding 80,500 shares reserved for possible
issuance as restricted stock in tandem with the exercise of certain stock
options outstanding. In 1996, 47,700 shares of restricted stock were issued
pursuant to the Plans.
The following is a summary of transactions in these plans for 1996, 1995,
and 1994:
<TABLE>
<CAPTION>
Weighted Average
Shares Exercise Price
---------------------------
<S> <C> <C>
Outstanding at December 31, 1993 811,983 $15.25
Granted 642,475 $11.30
Cancelled (538,251) $21.17
Exercised (49,019) $ 5.39
---------
Outstanding at December 31, 1994 867,188 $ 9.20
Granted 765,500 $ 6.13
Cancelled (277,712) $ 9.16
Exercised (77,628) $ 3.88
---------
Outstanding at December 31, 1995 1,277,348 $ 7.69
Granted 330,750 $ 6.29
Cancelled (128,650) $ 7.36
Exercised (69,927) $ 4.98
---------
Outstanding at December 31, 1996 1,409,521 $ 7.53
=========
</TABLE>
25
<PAGE>
Amtech Corporation
1996 Annual Report
Summarized information about stock options outstanding under the plans at
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- - -------------------------------------------------------------------- ----------------------------
Weighted Average
Range of Number Remaining Weighted Average Number Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- - --------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$3.18 - $7.07 853,638 8.6 years $ 5.67 179,588 $ 5.14
$7.80 - $10.75 522,133 7.1 years $ 9.80 178,243 $ 9.66
$16.50 - $25.40 33,750 6.6 years $19.09 33,750 $19.09
--------- -------
1,409,521 391,581
========= =======
</TABLE>
In December 1995, stock options were granted to certain of the Company's
outside directors under a plan that was approved by the shareholders on April
25, 1996. The Company recognized compensation expense of $446,000 based on the
excess of the fair market value of the Company's common stock on the date of
plan approval, which was $9.00, over the exercise price of the options of $5.13,
which was fair market value of the Company's common stock on the date of the
grant.
During 1994, certain stock options were cancelled and regranted pursuant to
a program whereby employees could voluntarily elect to exchange any outstanding
stock options for replacement options at the current market price of the
Company's common stock, provided that replacement options would only be for one-
half as many shares. As a result, 520,438 options were cancelled and 260,225
options regranted for which the exercise price per share was reduced from a
range of $13.34 - $29.25 to $10.00 - $10.75.
In accordance with the terms of Accounting Principles Board Opinion No. 25,
the Company does not record compensation expense for its stock option plans
unless the market price exceeds the exercise price on the date of grant. As
required by Financial Accounting Standards Board Statement No. 123, "Accounting
and Disclosure of Stock-Based Compensation", the Company provides the following
disclosure of hypothetical values for these plans. Options granted in 1996 with
a market price equal to the exercise price have a weighted average exercise
price of $6.29 and an estimated weighted average grant date value of $2.74. The
directors' options approved by the shareholders on April 25, 1996, with a market
price exceeding the exercise price, have a weighted average exercise price of
$5.13 and an estimated weighted average grant date value of $4.48. These values
were estimated using the Black-Scholes option pricing model with the following
weighted average assumptions: expected future stock-price volatility of 51%;
risk-free interest rate of 6.05%; no expected dividend yield and expected life
of 3.7 years. Had compensation expense been recorded based on these hypothetical
values, the Company's 1996 net loss would have been $1,112,000 or $0.08 per
share rather than the reported net loss of $0.04 per share. A similar
computation for 1995 would have resulted in a net loss of $4,275,000 or $0.29
per share rather than the reported net loss of $0.28 per share. Because options
vest over several years and additional option grants are expected, the effects
of these hypothetical calculations are not likely to be representative of
similar future calculations.
7. Income Taxes
Components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- --------- ----------
<S> <C> <C> <C>
Current:
U.S. $183,000 $ 775,000 $1,234,000
Foreign 197,000 -- --
Deferred:
U.S. (91,000) (603,000) 3,164,000
-------- --------- ----------
$289,000 $ 172,000 $4,398,000
======== ========= ==========
</TABLE>
Approximately $35,000, $101,000 and $2,184,000 in 1996, 1995, and 1994,
respectively, represent the tax benefit from the Company's stock option
exercises which directly increased paid-in capital and did not reduce the
provision for income taxes.
26
<PAGE>
Amtech Corporation
1996 Annual Report
A reconciliation of the expected U.S. tax provision (benefit) to the actual
consolidated tax provision is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- ----------- ----------
<S> <C> <C> <C>
Expected tax provision
(benefit) at U.S.
statutory rate $(121,000) $(1,331,000) $4,121,000
State taxes 50,000 15,000 277,000
Foreign taxes 51,000 75,000 --
Interest on tax-
exempt securities -- (15,000) (218,000
Unbenefitted foreign losses, net 40,000 1,171,000 --
Non-deductible goodwill 165,000 130,000 --
Effect of foreign tax rates (83,000) -- --
Other, net 187,000 127,000 218,000
--------- ----------- ----------
$ 289,000 $ 172,000 $4,398,000
========= =========== ==========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Components of the
Company's deferred tax assets and liabilities as of December 31, 1996 and 1995
are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Deferred tax assets:
Non-deductible reserves $ 1,742,000 $ 1,301,000
Losses of foreign subsidiaries and
joint ventures 10,473,000 3,398,000
Tax credit carryforwards 490,000 478,000
Amortization of deferred
license revenues -- 294,000
Amortization of intangibles 256,000 247,000
Other, net 536,000 410,000
------------ -----------
Total deferred tax assets 13,497,000 6,128,000
Valuation allowance for deferred
tax assets (10,093,000) (2,866,000)
------------ -----------
3,404,000 3,262,000
Deferred tax liabilities:
Unrealized gain on
marketable securities -- 681,000
------------ -----------
Net deferred tax assets $ 3,404,000 $ 2,581,000
============ ===========
</TABLE>
The valuation allowance in 1996 and 1995 primarily represents losses of
foreign subsidiaries for which realization is uncertain. In 1996, $6,894,000 of
the valuation allowance is related to the acquisition of Amtech International.
The foreign subsidiaries have net operating loss carryforwards which begin to
expire in the year 1997. Tax credit carryforwards in the U.S. include research
tax credits which are available through 2011 and alternative minimum tax credits
that do not expire. Although realization is not assured, management believes it
is more likely than not that the net deferred tax assets will be realized. The
amount of the deferred tax assets considered realizable, however, could be
reduced in the near term if estimates of future taxable income are reduced.
8. Commitments and Contingencies
Leases - The Company leases certain of its office facilities and various
automobiles. Rental expense for 1996, 1995, and 1994 was $3,325,000, $1,521,000,
and $703,000 respectively. Certain facility leases have renewal options from one
to five years. Future minimum lease payments under noncancelable operating
leases are as follows:
<TABLE>
<S> <C>
1997 $ 2,926,000
1998 2,710,000
1999 2,430,000
2000 2,219,000
2001 1,399,000
Thereafter 10,345,000
</TABLE>
Contingencies - WaveNet International, Inc. and certain of its employees are the
subject of a Canadian $11,000,000 (approximately U.S. $8,000,000) suit brought
by Teklogix, Inc., their former employer. The suit alleges improper use of
confidential information in WaveNet International, Inc.'s products, theft of
technology, misappropriation of business opportunities and similar
improprieties. In addition to the damages requested, Teklogix seeks to enjoin
the defendants from soliciting customers of Teklogix, from disclosing
confidential information of Teklogix, and from making or selling any products
that use intellectual property of Teklogix. Teklogix also seeks a declaration
that it owns any WaveNet International, Inc. products that use intellectual
property of Teklogix. WaveNet International, Inc. has denied any wrongdoing by
it or its employees and intends to
27
<PAGE>
Amtech Corporation
1996 Annual Report
vigorously defend the litigation. While the final outcome of this matter cannot
be predicted with certainty, the Company believes that the final resolution of
this matter will not have a material adverse effect on the consolidated
financial position or results of operations of the Company.
9. Related Party Transactions
Sales to affiliates accounted for 1%, 5%, and 11% of sales for 1996, 1995, and
1994, respectively.
In December 1995, Mr. David P. Cook was appointed a director of the
Company. In April 1994 the Company invested $5,000,000 of cash and cash
equivalents in a Limited Partnership investment fund managed by Mr. Cook. The
fund invested in U.S. Treasury securities, financial futures contracts and index
options. The Company's investment was valued at $5,299,000 at December 31, 1995.
Mr. Cook personally guaranteed the Company's $5,000,000 investment. The Company
liquidated its investment in the fund on March 31, 1996 for $5,000,000 to avoid
any potential conflict of interest or the appearance of a conflict of interest.
10. Geographic Operations and Significant Customers
The Company operates in one industry segment, the provision of systems and
solutions for the intelligent transportation, electronic security, logistics,
and other markets through the design, manufacturing, installation, and support
of hardware and software products utilizing the Company's wireless data and
security technologies.
The following presents information about the Company's operations in
different geographic areas:
<TABLE>
<CAPTION>
Year Ended December 31, 1996
(In thousands) Canada
U. S. Europe and Other Eliminations Total
------- ------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Sales:
Unaffiliated
customers $85,923 $28,743 $ 1,842 $ -- $116,508
Inter-area
transfers 2,476 2,220 173 (4,869) --
------- ------- ------- --------- --------
$88,399 $30,963 $ 2,015 $ (4,869) $116,508
======= ======= ======= ========= ========
Operating loss $(1,008) $ (927) $(1,213) $ -- $ (3,148)
======= ======= ======= ========= ========
Identifiable
assets $73,624 $15,233 $ 2,184 $ -- $ 91,041
======= ======= ======= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1995
(In thousands) Canada
U. S. Europe and Other Eliminations Total
------- ------- --------- ------------ -------
<S> <C> <C> <C> <C> <C>
Sales:
Unaffiliated
customers $64,916 $14,763 $ 392 $ -- $80,071
Inter-area
transfers 586 230 208 (1,024) --
------- ------- ------- --------- -------
$65,502 $14,993 $ 600 $ (1,024) $80,071
======= ======= ======= ========= =======
Operating loss $(2,488) $(2,182) $(1,372) $ -- $(6,042)
======= ======= ======= ========= =======
Identifiable
assets $78,863 $12,803 $ 1,713 $ -- $93,379
======= ======= ======= ========= =======
</TABLE>
Sales and transfers between geographic areas were generally priced to
recover cost plus an appropriate mark-up for profit. These inter-area transfers
were eliminated from consolidated sales.
U. S. export sales, summarized by geographic area, are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
The Americas (excluding
the United States) $ 7,998,000 $ 6,593,000 $ 8,805,000
Far East 5,434,000 3,938,000 1,577,000
Europe 1,340,000 2,867,000 1,557,000
----------- ----------- -----------
$14,772,000 $13,398,000 $11,939,000
=========== =========== ===========
</TABLE>
In 1996, the Company had one customer, a state government transportation
agency, which accounted for 11% of sales and 16% of year-end accounts
receivable. In 1995, the Company had one customer, a state government
transportation agency, which accounted for 21% of sales and 22% of year-end
accounts receivable. In 1994, the Company had two customers which accounted for
21% and 13% of sales.
11. Employee Benefit Plans
The Company has a retirement savings plan structured under Section 401(k) of the
Internal Revenue Code. The plan covers substantially all U.S. employees meeting
minimum service requirements. Under the plan, contributions are voluntarily made
by employees and the Company may provide matching contributions based on the
employees' contributions. The Company incurred $125,000, $79,000, and $96,000 in
28
<PAGE>
Amtech Corporation
1996 Annual Report
1996, 1995, and 1994, respectively, for matching contributions to this plan.
The Company has an employee stock purchase plan for substantially all
employees that meet minimum service requirements. The plan provides for the
purchase of up to 300,000 previously issued shares of the Company's common
stock. The employee contributes 85% of the purchase price through payroll
deduction with the difference paid by the Company. Since inception of the plan
in October 1996, 15,893 shares had been purchased pursuant to the plan.
12. Quarterly Results of Operations (Unaudited)
The following is a summary of the quarterly results of operations for the years
ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Quarter Ended
1996 March 31 June 30 September 30 December 31
- - ------------------ ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Sales $28,276,000 $29,867,000 $27,971,000 $30,394,000
Cost of sales 17,279,000 16,937,000 15,961,000 17,878,000
Net income
(loss) 353,000 (20,000) (63,000) (914,000)
Net income
(loss) per share 0.02 0.00 0.00 (0.06)
<CAPTION>
1995
- - ------------------
<S> <C> <C> <C> <C>
Sales $13,935,000 $13,001,000 $24,526,000 $28,609,000
Cost of sales 9,373,000 8,434,000 15,775,000 20,074,000
Net loss (280,000) (1,257,000) (422,000) (2,128,000)
Net loss
per share (0.02) (0.09) (0.03) (0.15)
</TABLE>
29
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
---------------------------
AMGT Corporation
(Delaware corporation)
Amtech Europe Limited
(United Kingdom corporation)
Amtech International, S.A.
(French corporation)
Amtech SARL, S.A.
(French corporation)
Amtech Systems Corporation
(Delaware corporation)
Amtech Systems (Hong Kong) Limited
(Hong Kong corporation)
Amtech World Corporation
(Delaware corporation)
Cardkey Systems Pacific Pty. Limited
(Australian corporation)
Cardkey Sicherheitssysteme GmbH
(German corporation)
Cardkey Systems, Inc.
(Delaware corporation)
Cardkey Systems Limited
(United Kingdom corporation)
Cotag International, Inc.
(Delaware corporation)
Cotag International Limited
(United Kingdom corporation)
WaveNet International, Inc.
(Canadian corporation)
WaveNet, Inc.
(Delaware corporation)
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Amtech Corporation of our report dated February 20, 1997 included in the 1996
Annual Report to Shareholders of Amtech Corporation.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-34451) pertaining to the 1988 Stock Option Plan, 1989 Stock
Option Plan, 1990 Stock Option Plan, and the Original Stock Plan of Amtech
Corporation; the Registration Statement (Form S-8 No. 33-53010) pertaining to
the Amtech Corporation 1992 Stock Option Plan; the Registration Statements (Form
S-8 No. 33-65061 and Form S-8 No. 333-06507) pertaining to the Amtech
Corporation 1995 Long-Term Incentive Plan; the Registration Statement (Form S-8
No. 333-06503) pertaining to the Amtech Corporation 1996 Directors' Stock Option
Plan; the Registration Statement (Form S-8 No. 333-06505) pertaining to the
Amtech Corporation 401(k) Plan; and the Registration Statement (Form S-8 No.
333-06511) pertaining to the Amtech Corporation 1996 Employee Stock Purchase
Plan of our report dated February 20, 1997, with respect to the consolidated
financial statements of Amtech Corporation incorporated by reference in this
Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ Ernst & Young LLP
----------------------------
Ernst & Young LLP
Dallas, Texas
March 20, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,296
<SECURITIES> 11,852
<RECEIVABLES> 29,036
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0
0
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</TABLE>
