As filed with the Securities and Exchange Commission on December 31, 1996
Registration No. 333-____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
Orion Network Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware 52-1271418
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
------------------
2440 Research Boulevard, Suite 400
Rockville, Maryland 20850
(Address of principal executive offices)
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Orion Network Systems, Inc. Employee Stock Purchase Plan
Orion Network Systems, Inc. 401(k) Profit Sharing Plan
(Full title of the plans)
------------------
Richard H. Shay, Esq.
2440 Research Boulevard, Suite 400
Rockville, Maryland 20850
(301) 258-8101
(Name, address and telephone number, including area code, of agent for service)
------------------
Copy to:
Steven M. Kaufman, Esq.
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
(202) 637-5600
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
Proposed Proposed
Title of securities Amount to be maximum offering maximum aggregate Amount of
to be registered registered price per share (2) offering price (2) registration fee (2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.01 600,000 (1) $12.63 $7,578,000 $2,297
=================================================================================================================
</TABLE>
(1) 500,000 shares of Orion Network Systems, Inc. Common Stock, par value $.01
per share (the "Shares") are being registered pursuant to the Orion Network
Systems, Inc. Employee Stock Purchase Plan and 100,000 Shares are being
registered pursuant to the Orion Network Systems, Inc. 401(k) Profit Sharing
Plan.
(2) Estimated pursuant to Rule 457(c) and (h) solely for purposes of calculating
the amount of the registration fee. The proposed maximum offering price per
share was determined based upon the
<PAGE>
average of the high and low prices per share of the Orion Network Systems,
Inc. Common Stock on December 26, 1996, as reported on the Nasdaq National
Market.
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I
will be sent or given to employees as specified by Rule 428(b)(1) of the
Securities Act of 1933, as amended (the "Securities Act"). In accordance with
the instructions to Part I of Form S-8, such documents will not be filed with
the Securities and Exchange Commission (the "Commission") either as part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424 of the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
Orion Network Systems, Inc. (the "Registrant") hereby
incorporates by reference into this Registration Statement the following
documents filed by it with the Commission:
(a) The Registrant's latest annual report on Form 10-K
dated March 29, 1996 filed pursuant to Sections 13(a)
and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which contains audited
financial statements for the Registrant's fiscal year
ended December 31, 1995;
(b) All other reports of the Registrant filed pursuant to
Section 13(a) or 15(d) of the Exchange Act since
December 31, 1995, including the Registrant's
quarterly reports on Form 10-Q dated May 15, 1996,
August 15, 1996 and November 13, 1996 for the periods
ended March 31, 1996, June 30, 1996 and September 30,
1996, respectively.
(c) The description of the Registrant's Common Stock, par
value $.01 per share (the "Common Stock"), contained
in the Registrant's Registration Statement on Form
8-A filed with the Commission on July 17, 1995.
In addition, all documents and reports filed by the Registrant
subsequent to the date hereof pursuant to Sections 13(a), 13(c), 14, or 15(d) of
the Exchange Act, prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters all
securities remaining unsold, shall be deemed to be incorporated by reference in
this Registration Statement and to be part hereof from the date of filing of
such documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this registration statement to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
registration statement.
2
<PAGE>
Item 4. Description of Securities.
Not applicable. (The Common Stock is registered under Section
12 of the Exchange Act.)
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The Company's Restated Certificate of Incorporation, as
amended (the "Restated Certificate of Incorporation"), provides that the
Company's directors will not be liable for monetary damages for breach of the
directors' fiduciary duty of care to the Company and its stockholders. This
provision in the Restated Certificate of Incorporation does not eliminate the
duty of care, and in appropriate circumstances equitable remedies such as an
injunction or other forms of non-monetary relief would remain available under
Delaware law. In accordance with the requirements of Delaware law, as amended,
the Restated Certificate of Incorporation provides that the Company's directors
would remain subject to liability for monetary damages (i) for any breach of
their duty of loyalty to the Company or its shareholders, (ii) for acts or
omissions not in good faith or involving intentional misconduct or knowing
violation of law, (iii) under Section 174 of the Delaware Code for approval of
an unlawful dividend or an unlawful stock purchase or redemption and (iv) for
any transaction from which the director derived an improper personal benefit.
This provision also does not affect a director's responsibilities under any
other laws, such as the federal securities laws or state or federal
environmental laws.
The Company's Restated Certificate of Incorporation also
provides that, except as expressly prohibited by law, the Company shall
indemnify any person who was or is a party (or threatened to be made a party) to
any threatened, pending or completed action, suit or proceeding by reason of the
fact that such person is or was a director or officer of the Company (or is or
was serving at the request of the Company as a director or officer of another
enterprise), against expenses, liabilities and losses (including attorneys'
fees), judgments, fines and amounts paid or to be paid in settlement actually
and reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and a manner such person
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. Such
indemnification shall not be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
(and only to the extent that) the Delaware Court of Chancery or the court in
which such action or suit was brought determines that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity.
Section 145 of the General Corporation Law of the State of
Delaware empowers a corporation incorporated under that statute to indemnify its
directors, officers, employees and agents and its former directors, officers,
employees and agents and those who serve in such capacities with another
enterprise at its request against expenses, as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred by them
in connection with the defense of any action, suit or proceeding in which they
or any of them were or are made parties or are threatened to be made parties by
reason of their serving or having served in such capacity. The power to
indemnify shall only exist where such officer, director, employee or agent has
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and, in the case of a
criminal action, where such person had no reasonable cause to believe his
conduct was unlawful. However, in an action or suit by or in the right of the
corporation, unless a court shall determine to the contrary, where such a person
has been adjudged liable to the
3
<PAGE>
corporation, the corporation shall have no power of indemnification. Indemnity
is mandatory to the extent a claim, issue or matter has been successfully
defended. Indemnification is not deemed exclusive of any other rights to which
those indemnified may be entitled, under any by-law, agreement, vote of
stockholders or otherwise. A Delaware corporation also has the power to purchase
and maintain insurance on behalf of the persons it has the power to indemnify,
whether or not indemnity against such liability would be allowed under the
statute.
The Company has an insurance policy which will insure
Directors and officers against damages from actions and claims incurred in the
course of their duties and will insure the Company against expenses incurred in
defending lawsuits arising from certain alleged acts of the Directors and
officers.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit
Number Description
------ -----------
4.1 Restated Certificate of Incorporation, as
amended, of Registrant (filed as Exhibit 3.1
to the Registrant's Registration Statement
on Form S-1 (File No. 33-80518), and
incorporated herein by reference).
4.2 Bylaws, as amended, of the Registrant (filed
as Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1 (File No.
33-80518), and incorporated herein by
reference).
4.3 Form of Common Stock Certificate (filed as
Exhibit 4.3 to the Registrant's Registration
Statement on Form S-1 (File No. 33-80518),
and incorporated herein by reference).
4.4 Orion Network Systems, Inc. Employee Stock
Purchase Plan.
4.5 Orion Network Systems, Inc. 401(k) Profit
Sharing Plan.
4
<PAGE>
5.1 Opinion of Hogan & Hartson L.L.P. regarding
the legality of the securities being
registered.
23.1 Consent of Ernst & Young, LLP
23.2 Consent of Hogan & Hartson L.L.P. (included
in their opinion filed as Exhibit 5.1
hereto).
24.1 Power of Attorney (included on signature
pages).
The Registrant hereby undertakes to submit the Orion Network
Systems, Inc. 401(k) Profit Sharing Plan and any amendments thereto to the
Internal Revenue Service ("IRS") in a timely manner and will make all changes
required by the IRS in order to qualify the foregoing under Section 401 of the
Internal Revenue Code and other applicable regulations.
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in
the Registration Statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the Registration Statement is on Form S-3 or Form S-8
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any
liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of
5
<PAGE>
an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undertaking concerning indemnification is as set forth
under the response to Item 6.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rockville, State of Maryland on the 20th day of
December, 1996.
ORION NETWORK SYSTEMS, INC.
BY:
--------------------------------------
W. Neil Bauer
President and Chief Executive Officer
POWER OF ATTORNEY
Know all Men by These Presents, that each individual whose
signature appears below constitutes and appoints John G. Puente, W. Neil Bauer
and David J. Frear, and each of them, his true and lawful attorney-in-fact and
agent, with 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
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their, his or her substitutes or substitute,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/W. Neil Bauer
---------------------------- Chief Executive December 20, 1996
W. Neil Bauer, President Officer and Director
(Principal Executive Officer)
/s/David J. Frear
------------------------------- Chief Financial December 30, 1996
David J. Frear, Vice President Officer and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
/s/Gustave M. Hauser
-------------------------------- Director December 16, 1996
Gustave M. Hauser, Chairman
/s/John V. Saeman
-------------------------------- Director December 13, 1996
John V. Saeman
7
<PAGE>
/s/John G. Puente
------------------------------ Director December 16, 1996
John G. Puente
/s/Richard J. Brekka
------------------------------ Director December 16, 1996
Richard J. Brekka
------------------------------ Director December __, 1996
Warren B. French, Jr.
/s/Sidney S. Kahn
------------------------------ Director December 16, 1996
Sidney S. Kahn
------------------------------ Director December __, 1996
W. Anthony Rice
/s/Robert M. Van Degna
------------------------------ Director December 16, 1996
Robert M. Van Degna
/s/Barry Horowitz
------------------------------ Director December 16, 1996
Barry Horowitz
</TABLE>
8
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
- ------ ----------- ----
4.1 Restated Certificate of Incorporation, as *
amended, of Registrant (filed as Exhibit 3.1
to the Registrant's Registration Statement on
Form S-1 (File No. 33-80518), and incorporated
herein by reference).
4.2 Bylaws, as amended, of the Registrant (filed as *
Exhibit 3.2 to the Registrant's Registration
Statement on Form S-1 (File No. 33-80518), and
incorporated herein by reference).
4.3 Form of Common Stock Certificate (filed as *
Exhibit 4.3 to the Registrant's Registration
Statement on Form S-1 (File No. 33-80518), and
incorporated herein by reference).
4.4 Orion Network Systems, Inc. Employee Stock
Purchase Plan.
4.5 Orion Network Systems, Inc. 401(k) Profit
Sharing Plan.
5.1 Opinion of Hogan & Hartson L.L.P. regarding the
legality of the securities being registered.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Hogan & Hartson L.L.P. (included in *
their opinion filed as Exhibit 5.1 hereto).
24.1 Power of Attorney (included on signature pages). *
*incorporated by reference
ORION NETWORK SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
1. SHARES SUBJECT TO THE PLAN................................................1
2. ADMINISTRATION............................................................1
3. INTERPRETATION............................................................1
4. ELIGIBLE EMPLOYEES........................................................1
5. PARTICIPATION IN THE PLAN.................................................2
6. PAYROLL DEDUCTIONS........................................................2
7. INTEREST ON PAYROLL DEDUCTIONS............................................2
8. PAYROLL DEDUCTION PERIODS.................................................3
9. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE..........................3
10. TIMING OF PURCHASE; PURCHASE LIMITATION...................................3
11. ISSUANCE OF STOCK CERTIFICATES............................................4
12. WITHHOLDING OF TAXES......................................................4
13. ACCOUNT STATEMENTS........................................................4
14. PARTICIPATION ADJUSTMENT..................................................5
15. CHANGES IN ELECTIONS TO PURCHASE..........................................5
16. VOLUNTARY TERMINATION OF EMPLOYMENT OR DISCHARGE..........................5
17. RETIREMENT OR SEVERANCE...................................................5
18. LAY-OFF, AUTHORIZED LEAVE OR ABSENCE OR DISABILITY........................6
19. DEATH.....................................................................7
20. TERMINATION OF PARTICIPATION..............................................7
21. ASSIGNMENT................................................................8
-i-
<PAGE>
22. APPLICATION OF FUNDS......................................................8
23. NO RIGHT TO CONTINUED EMPLOYMENT..........................................8
24. AMENDMENT OF PLAN.........................................................8
25. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN..........................8
26. EFFECT OF CHANGES IN CAPITALIZATION.......................................9
(a) Changes in Stock....................................................9
(b) Reorganization in Which the Company Is the Surviving
Corporation....................................................9
(c) Reorganization in Which the Company Is Not the Surviving
Corporation or Sale of Asset or Stock..........................10
(d) Adjustments.........................................................10
(e) No Limitations on Company...........................................10
27. GOVERNMENTAL REGULATION...................................................11
28. STOCKHOLDER RIGHTS........................................................11
29. RULE 16B-3................................................................11
30. PAYMENT OF PLAN EXPENSES..................................................11
-ii-
<PAGE>
ORION NETWORK SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of Orion Network Systems, Inc. (the "Company")
has adopted this Employee Stock Purchase Plan (the "Plan") to enable eligible
employees of the Company and its participating Affiliates (as defined below),
through payroll deductions, to purchase shares of the Company's common stock,
par value $0.01 per share (the " Common Stock"). The Plan is for the benefit of
the employees of Orion Network Systems, Inc. and any participating Affiliates.
The Plan is intended to benefit the Company by increasing the employees'
interest in the Company's growth and success and encouraging employees to remain
in the employ of the Company or its participating Affiliates. The provisions of
the Plan are set forth below:
1. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 26 below, the aggregate
number of shares of Common Stock that may be made available for purchase by
participating employees under the Plan is 400,000. The shares issuable under the
Plan may, in the discretion of the Board of Directors of the Company (the
"Board"), be authorized but unissued shares, treasury shares or issued and
outstanding shares that are purchased in the open market.
2. ADMINISTRATION.
The Plan shall be administered under the direction of the Human
Resources and Compensation Committee of the Board (the "Committee"). No member
of the Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan.
3. INTERPRETATION.
It is intended that the Plan will meet the requirements for an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986 (the "Code"), and it is to be so applied and interpreted. Subject to the
express provisions of the Plan, the Committee shall have authority to interpret
the Plan, to prescribe, amend and rescind rules relating to it, and to make all
other determinations necessary or advisable in administering the Plan, all of
which determinations will be final and binding upon all persons.
4. ELIGIBLE EMPLOYEES.
Any employee of the Company or any of its participating Affiliates may
participate in the Plan, except the following, who are ineligible to
participate: (a) an employee who has been employed by the Company or any of its
participating
<PAGE>
Affiliates for less than three months as of the beginning of a Payroll Deduction
Period (as defined in Section 7 below); (b) an employee whose customary
employment is for less than five months in any calendar year; (c) an employee
whose customary employment is 20 hours or less per week; and (d) an employee
who, after exercising his or her rights to purchase shares under the Plan, would
own shares of Common Stock (including shares that may be acquired under any
outstanding options) representing five percent or more of the total combined
voting power of all classes of stock of the Company. The term "participating
Affiliate" means any company or other trade or business that is a subsidiary of
the Company (determined in accordance with the principles of Sections 424(e) and
(f) of the Code and the regulations thereunder). The Board may at any time in
its sole discretion, if it deems it advisable to do so, terminate the
participation of the employees of a particular participating Affiliate.
5. PARTICIPATION IN THE PLAN.
An eligible employee may become a participating employee in the Plan by
completing an election to participate in the Plan on a form provided by the
Company and submitting that form to the Payroll Department of the Company. The
form will authorize payroll deductions (as provided in Section 6 below) and
authorize the purchase of shares of Common Stock for the employee's account in
accordance with the terms of the Plan. Enrollment will become effective upon the
first day of the first Payroll Deduction Period.
6. PAYROLL DEDUCTIONS.
At the time an eligible employee submits his or her election to
participate in the Plan (as provided in Section 5 above), the employee shall
elect to have deductions made from his or her pay, on each pay day following his
or her enrollment in the Plan, and for as long as he or she shall participate in
the Plan. The deductions will be credited to the participating employee's
account under the Plan. An employee may not during any Payroll Deduction Period
change his or her percentage of payroll deduction for that Payroll Deduction
Period, nor may an employee withdraw any contributed funds, other than in
accordance with Sections 15 through 20 below.
7. INTEREST ON PAYROLL DEDUCTIONS.
The Company and participating Affiliates will cause to be maintained a
record of amounts credited to each participating employee authorizing a payroll
deduction pursuant to Section 6. Interest will accrue on payroll deductions on
the balance of the employees' accounts during the Payroll Deduction Period at a
fixed or variable rate earned by the Company on the funds received for this
purpose. Such interest shall be credited to the participating employees'
accounts.
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<PAGE>
8. PAYROLL DEDUCTION PERIODS.
The Payroll Deductions Periods shall be determined by the Committee.
The initial Payroll Deduction Period shall commence on October 1, 1996 and end
on June 30, 1997, and every Payroll Deduction Period thereafter, shall be
calendar quarters until changed by the Committee.
9. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE.
Rights to purchase shares of Common Stock will be deemed granted to
participating employees as of the first trading day of each Payroll Deduction
Period. The purchase price of each share of Common Stock (the "Purchase Price")
shall be the lesser of 85 percent of the fair market value of the Common Stock
(i) on the first trading day of the Payroll Deduction Period or (ii) on the last
trading day of such Payroll Deduction Period, unless the Purchase Price is
otherwise established by the Committee; provided that in no event shall the
Purchase Price be less than the amount determined pursuant to subparagraphs (i)
and (ii) above or the par value of the Common Stock. For purposes of the Plan,
"fair market value" means the value of each share of Common Stock subject to the
Plan determined as follows: if on the determination date the shares of Common
Stock are listed on an established national or regional stock exchange, are
admitted to quotation on the National Association of Securities Dealers
Automated Quotation System, or are publicly traded on an established securities
market, the fair market value of the shares of Common Stock shall be the closing
price of the shares of Common Stock on such exchange or in such market (the
highest such closing price if there is more than one such exchange or market) on
the trading day immediately preceding the determination date (or if there is no
such reported closing price, the fair market value shall be the mean between the
highest bid and lowest asked prices or between the high and low sale prices on
such trading day) or, if no sale of the shares of Common Stock is reported for
such trading day, on the next preceding day on which any sale shall have been
reported. If the shares of Common Stock are not listed on such an exchange,
quoted on such System or traded on such a market, fair market value shall be
determined by the Board in good faith.
10. TIMING OF PURCHASE; PURCHASE LIMITATION.
Unless a participating employee has given prior written notice
terminating such employee's participation in the Plan, or the employee's
participation in the Plan has otherwise been terminated as provided in Sections
16 through 20 below, such employee will be deemed to have exercised
automatically his or her right to purchase Common Stock on the last trading day
of the Payroll Deduction Period (except as provided in Section 15 below) for the
number of shares of Common Stock which the accumulated funds in the employee's
account at that time will purchase at the Purchase Price, subject to the
participation adjustment provided for in Section 14 below and subject to
adjustment under Section 26 below.
-3-
<PAGE>
Notwithstanding any other provision of the Plan, no employee may purchase in any
one calendar year under the Plan and all other "employee stock purchase plans"
of the Company and its participating Affiliates shares of Common Stock having an
aggregate fair market value in excess of $25,000, determined as of the first
trading date of the Payroll Deduction Period as to shares purchased during such
period. Effective upon the last trading day of the Payroll Deduction Period, a
participating employee will become a stockholder with respect to the shares
purchased during such period, and will thereupon have all dividend, voting and
other ownership rights incident thereto. Notwithstanding the foregoing, no
shares shall be sold pursuant to the Plan unless the Plan is approved by the
Company's stockholders in accordance with Section 25 below.
11. ISSUANCE OF STOCK CERTIFICATES.
As of the last trading day of the Payroll Deduction Period, a
participating employee will be credited with the number of shares of Common
Stock purchased for his or her account under the Plan during such Payroll
Deduction Period. Shares purchased under the Plan will be held in the custody of
an agent (the "Agent") appointed by the Committee. The Agent may hold the shares
purchased under the Plan in stock certificates in nominee names and may
commingle shares held in its custody in a single account or stock certificate
without identification as to individual participating employees. A participating
employee may, at any time following his or her purchase of shares under the
Plan, by written notice instruct the Agent to have all or part of such shares
reissued in the participating employee's own name and have the stock certificate
delivered to the employee.
12. WITHHOLDING OF TAXES.
To the extent that a participating employee realizes ordinary income in
connection with a sale or other transfer of any shares of Common Stock purchased
under the Plan, the Company may withhold amounts needed to cover such taxes from
any payments otherwise due and owing to the participating employee or from
shares that would otherwise be issued to the participating employee hereunder.
Any participating employee who sells or otherwise transfers shares purchased
under the Plan within two years after the beginning of the Payroll Deduction
Period in which the shares were purchased must within 30 days of such transfer
notify the Payroll Department of the Company in writing of such transfer.
13. ACCOUNT STATEMENTS.
The Company will cause the Agent to deliver to each participating
employee a statement for each Payroll Deduction Period during which the employee
purchases Common Stock under the Plan, but no more frequently than quarterly,
reflecting the amount of payroll deductions during the Payroll Deduction Period,
the number of shares purchased for the employee's account, the price per share
of
-4-
<PAGE>
the shares purchased for the employee's account and the number of shares held
for the employee's account at the end of the Payroll Deduction Period.
14. PARTICIPATION ADJUSTMENT.
If in any Payroll Deduction Period the number of unsold shares that may
be made available for purchase under the Plan pursuant to Section 1 above is
insufficient to permit exercise of all rights deemed exercised by all
participating employees pursuant to Section 9 above, a participation adjustment
will be made, and the number of shares purchasable by all participating
employees will be reduced proportionately. Any funds then remaining in a
participating employee's account after such exercise will be refunded to the
employee.
15. CHANGES IN ELECTIONS TO PURCHASE.
(a) A participating employee may, at any time prior to the last day of
the Payroll Deduction Period, by written notice to the Company, direct the
Company to cease payroll deductions (or, if the payment for shares is being made
through periodic cash payments, notify the Company that such payments will be
terminated), in accordance with the following alternatives:
(i) The employee's option to purchase shall be reduced to the
number of shares which may be purchased, as of the last day of the Payroll
Deduction Period, with the amount then credited to the employee's account; or
(ii) Withdraw the amount in such employee's account and
terminate such employee's option to purchase.
(b) Any participating employee may increase or decrease his or her
payroll deduction or periodic cash payments, to take effect on the first day of
the next Payroll Deduction Period, by delivering to the Company a new form
regarding election to participate in the Plan under Section 5 above.
16. TERMINATION OF EMPLOYMENT.
In the event a participating employee voluntarily leaves the employ of
the Company or a participating Affiliate, otherwise than by retirement under a
plan of the Company or a participating Affiliate, or is terminated by the
Company prior to the last day of the Payroll Deduction Period, the amount in the
employee's account will be distributed and the employee's option to purchase
will terminate.
17. RETIREMENT.
In the event a participating employee who has an option to purchase
shares leaves the employ of the Company or a participating Affiliate because of
retirement under a plan of the Company or a participating Affiliate the
participating employee
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<PAGE>
may elect, within 10 days after the date of such retirement or termination, one
of the following alternatives:
(a) To make up any deficiency in the employee's account resulting from
the termination of payroll deductions by an immediate cash payment;
(b) The employee's option to purchase shall be reduced to the number of
shares which may be purchased, as of the last day of the Payroll Deduction
Period, with the amount then credited to the employee's account; or
(c) Withdraw the amount in such employee's account and terminate such
employee's option to purchase.
In the event the participating employee does not make an election
within the aforesaid 10-day period, he or she will be deemed to have elected
subsection 17(c) above.
18. LAY-OFF, AUTHORIZED LEAVE OR ABSENCE OR DISABILITY.
Payroll deductions for shares for which a participating employee has an
option to purchase may be suspended during any period of absence of the employee
from work due to lay-off, authorized leave of absence or disability or, if the
employee so elects, periodic payments for such shares may continue to be made in
cash.
If such employee returns to active service prior to the last day of the
Payroll Deduction Period, the employee's payroll deductions will be resumed and
if said employee did not make periodic cash payments during the employee's
period of absence, the employee shall, by written notice to the Company's
Payroll Department within 10 days after the employee's return to active service,
but not later than the last day of the Payroll Deduction Period, elect:
(a) To make up any deficiency in the employee's account resulting from
a suspension of payroll deductions by an immediate cash payment;
(b) Not to make up such deficiency, in which event the number of shares
to be purchased by the employee shall be reduced to the number of whole shares
which may be purchased with the amount, if any, then credited to the employee's
account plus the aggregate amount, if any, of all payroll deductions to be made
thereafter; or
(c) Withdraw the amount in the employee's account and terminate the
employee's option to purchase.
A participating employee on lay-off, authorized leave of absence or
disability on the last day of the Payroll Deduction Period shall deliver written
notice to his or her employer on or before the last day of the Payroll Deduction
Period, electing one
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of the alternatives provided in the foregoing clauses (a), (b) and (c) of this
Section 18. If any employee fails to deliver such written notice within 10 days
after the employee's return to active service or by the last day of the Payroll
Deduction Period, whichever is earlier, the employee shall be deemed to have
elected subsection 18(c) above.
If the period of a participating employee's lay-off, authorized leave
of absence or disability shall terminate on or before the last day of the
Payroll Deduction Period, and the employee shall not resume active employment
with the Company or a participating Affiliate, the employee shall receive a
distribution in accordance with the provisions of Section 17 of this Plan.
19. DEATH.
In the event of the death of a participating employee while the
employee's option to purchase shares is in effect, the legal representatives of
such employee may, within three months after the employee's death (but no later
than the last day of the Payroll Deduction Period) by written notice to the
Company or participating Affiliate, elect one of the following alternatives:
(a) To make up any deficiency in the employee's account resulting from
a suspension of payroll deductions by an immediate cash payment;
(b) The employee's option to purchase shall be reduced to the number of
shares which may be purchased, as of the last day of the Payroll Deduction
Period, with the amount then credited to the employee's account; or
(c) Withdraw the amount in such employee's account and terminate such
employee's option to purchase.
In the event the legal representatives of such employee fail to deliver
such written notice to the Company or participating Affiliate within the
prescribed period, the election to purchase shares shall terminate and the
amount, then credited to the employee's account shall be paid to such legal
representatives.
20. TERMINATION OF PARTICIPATION.
A participating employee will be refunded all moneys in his or her
account, and his or her participation in the Plan will be terminated if either
(a) the Board elects to terminate the Plan as provided in Section 25 below, or
(b) the employee ceases to be eligible to participate in the Plan under Section
4 above. As soon as practicable following termination of an employee's
participation in the Plan, the Company will deliver to the employee a check
representing the amount in the employee's account and a stock certificate
representing the number of whole shares
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held in the employee's account. Once terminated, participation may not be
reinstated for the then current Payroll Deduction Period, but, if otherwise
eligible, the employee may elect to participate in any subsequent Payroll
Deduction Period.
21. ASSIGNMENT.
No participating employee may assign his or her rights to purchase
shares of Common Stock under the Plan, whether voluntarily, by operation of law
or otherwise. Any payment of cash or issuance of shares of Common Stock under
the Plan may be made only to the participating employee (or, in the event of the
employee's death, to the employee's estate). Once a stock certificate has been
issued to the employee or for his or her account, such certificate may be
assigned the same as any other stock certificate.
22. APPLICATION OF FUNDS.
All funds received or held by the Company under the Plan shall be
deposited with the Agent for the account of the participating employees.
Participating employees' accounts will not be segregated.
23. NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the Plan nor any right to purchase Common Stock under the Plan
confers upon any employee any right to continued employment with the Company or
any of its participating Affiliates, nor will an employee's participation in the
Plan restrict or interfere in any way with the right of the Company or any of
its participating Affiliates to terminate the employee's employment at any time.
24. AMENDMENT OF PLAN.
The Board may, at any time, amend the Plan in any respect (including an
increase in the percentage specified in Section 9 above used in calculating the
Purchase Price); provided, however, that without approval of the stockholders of
the Company no amendment shall be made (a) increasing the number of shares
specified in Section 1 above that may be made available for purchase under the
Plan (except as provided in Section 26 below), (b) changing the eligibility
requirements for participating in the Plan, or (c) impairing the vested rights
of participating employees.
25. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN.
The Plan shall be effective as of the date of adoption by the Board,
which date is set forth below, subject to approval of the Plan by a majority of
the votes present and entitled to vote at a duly held meeting of the
shareholders of the Company at which a quorum representing a majority of all
outstanding voting stock is present, either in person or by proxy; provided,
however, that upon approval of the Plan by
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<PAGE>
the shareholders of the Company as set forth above, all rights to purchase
shares granted under the Plan on or after the effective date shall be fully
effective as if the shareholders of the Company had approved the Plan on the
effective date. If the shareholders fail to approve the Plan on or before one
year after the effective date, the Plan shall terminate, any rights to purchase
shares granted hereunder shall be null and void and of no effect and all
contributed funds shall be refunded to participating employees. The Board may
terminate the Plan at any time and for any reason or for no reason, provided
that such termination shall not impair any rights of participating employees
that have vested at the time of termination. In any event, the Plan shall,
without further action of the Board, terminate ten (10) years after the date of
adoption of the Plan by the Board or, if earlier, at such time as all shares of
Common Stock that may be made available for purchase under the Plan pursuant to
Section 1 above have been issued.
26. EFFECT OF CHANGES IN CAPITALIZATION.
(a) Changes in Stock.
If the number of outstanding shares of Common Stock is increased or
decreased or the shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend, or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the effective
date of the Plan, the number and kinds of shares that may be purchased under the
Plan shall be adjusted proportionately and accordingly by the Company. In
addition, the number and kind of shares for which rights are outstanding shall
be similarly adjusted so that the proportionate interest of a participating
employee immediately following such event shall, to the extent practicable, be
the same as immediately prior to such event. Any such adjustment in outstanding
rights shall not change the aggregate Purchase Price payable by a participating
employee with respect to shares subject to such rights, but shall include a
corresponding proportionate adjustment in the Purchase Price per share.
(b) Reorganization in Which the Company Is the Surviving
Corporation.
Subject to Subsection (c) of this Section 26, if the Company shall be
the surviving corporation in any reorganization, merger or consolidation of the
Company with one or more other corporations, all outstanding rights under the
Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Common Stock subject to such rights would have been entitled
immediately following such reorganization, merger or consolidation, with a
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<PAGE>
corresponding proportionate adjustment of the Purchase Price per share so that
the aggregate Purchase Price thereafter shall be the same as the aggregate
Purchase Price of the shares subject to such rights immediately prior to such
reorganization, merger or consolidation.
(c) Reorganization in Which the Company Is Not the Surviving
Corporation or Sale of Assets or Stock.
Upon any dissolution or liquidation of the Company, or upon a merger,
consolidation or reorganization of the Company with one or more other
corporations in which the Company is not the surviving corporation, or upon a
sale of all or substantially all of the assets of the Company to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving corporation) approved by
the Board that results in any person or entity owning more than 80 percent of
the combined voting power of all classes of stock of the Company, the Plan and
all rights outstanding hereunder shall terminate, except to the extent provision
is made in writing in connection with such transaction for the continuation of
the Plan and/or the assumption of the rights theretofore granted, or for the
substitution for such rights of new rights covering the stock of a successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kinds of shares and exercise prices, in which event the Plan
and rights theretofore granted shall continue in the manner and under the terms
so provided. In the event of any such termination of the Plan, the Payroll
Deduction Period shall be deemed to have ended on the last trading day prior to
such termination, and in accordance with Section 10 above the rights of each
participating employee then outstanding shall be deemed to be automatically
exercised on such last trading day. The Board shall send written notice of an
event that will result in such a termination to all participating employees not
later than the time at which the Company gives notice thereof to its
stockholders.
(d) Adjustments.
Adjustments under this Section 26 related to stock or securities of the
Company shall be made by the Committee, whose determination in that respect
shall be final, binding, and conclusive.
(e) No Limitations on Company.
The grant of a right pursuant to the Plan shall not affect or limit in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
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<PAGE>
27. GOVERNMENTAL REGULATION.
The Company's obligation to issue, sell and deliver shares of Common
Stock pursuant to the Plan is subject to such approval of any governmental
authority and any national securities exchange or other market quotation system
as may be required in connection with the authorization, issuance or sale of
such shares.
28. STOCKHOLDER RIGHTS.
Any dividends paid on shares held by the Company for a participating
employee's account will be transmitted to the employee. The Company will deliver
to each participating employee who purchases shares of Common Stock under the
Plan, as promptly as practicable by mail or otherwise, all notices of meetings,
proxy statements, proxies and other materials distributed by the Company to its
stockholders. Any shares of Common Stock held by the Agent for an employee's
account will be voted in accordance with the employee's duly delivered and
signed proxy instructions. There will be no charge to participating employees in
connection with such notices, proxies and other materials.
29. RULE 16B-3.
Transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or any successor provision under the Securities
Exchange Act of 1934, as amended. If any provision of the Plan or action by the
Board fails to so comply, it shall be deemed null and void to the extent
permitted by law and deemed advisable by the Board. Moreover, in the event the
Plan does not include a provision required by Rule 16b-3 to be stated herein,
such provision (other than one relating to eligibility requirements, or the
price and amount of awards) shall be deemed automatically to be incorporated by
reference into the Plan.
30. PAYMENT OF PLAN EXPENSES.
The Company will bear all costs of administering and carrying out the
Plan; provided however, participating employees shall bear all costs incurred
subsequent to the issuance of stock certificates pursuant to Section 11.
* * *
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ORION NETWORK SYSTEMS, INC.
401(K) PROFIT SHARING PLAN
SUMMARY PLAN DESCRIPTION
<PAGE>
SECTION 1
INTRODUCTION
Type Of Plan: Effective January 1, 1996, ORION NETWORK SYSTEMS, INC.
(the Company) has amended its 40 1 (k) profit sharing plan (the Plan). The
continuing purpose of the Plan is to provide those Employees who are eligible to
participate with retirement benefits. The Plan may also provide benefits upon
death, disability, or termination of employment with the Company.
Summary Plan Description: This summary plan description describes in
general the essential features of the Plan. Every effort has been made to insure
that the information in this summary is correct, but if there are any
discrepancies, the provisions of the actual Plan will govern. A copy of the Plan
is on file at the Company office and may be read at any reasonable time.
SECTION 2
PLAN ADMINISTRATION
Trustees And Administrator: The Plan is administered by a written trust
agreement between the Company and the Trustees: Stanley Cooper and LeMoyne
Zacherl, whose address is 2440 Research Blvd., Suite 400, Rockville, MD 20850.
The Trustees are responsible for investing all amounts credited to your Account
except for those amounts which you choose to invest yourself (as explained in
Section 6 in the paragraph titled Directed Investment Accounts). The Plan
Administrator is responsible for all other matters connected with day to day
operation of the Plan. This Plan's Administrator is ORION NETWORK SYSTEMS, INC.,
whose address is 2440 Research Blvd., Suite 400, Rockville, NM 20850; whose
telephone number is 301/258-8101; and whose employer identification number is
52-1271418.
Other Information: Tile Plan number is 001; the Plan Year (the
accounting year) is a twelve month period beginning on January 1 and ending on
December 31; and the Anniversary Date is December 31. Also, if it becomes
necessary for you to bring legal action against the Plan, all legal papers must
be served on either the Company, the Trustee, or the Administrator.
SECTION 3
PLAN PARTICIPATION
Eligibility Requirements: If you were a Participant in the Plan on
January 1, 1996, you will continue to participate. If you were not a Participant
on that date, you will be eligible to enter the Plan as a Participant when you
reach age 21.
Entry Date: You will actually enter the Plan as a Participant on the
January 1st, the April 1st, the July 1st or the October 1st which coincides with
or next follows the day on which you satisfy the eligibility requirements.
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SECTION 4
CONTRIBUTIONS AND ALLOCATIONS
Deferral And Matching Contributions: You will be permitted to defer
part of your Compensation during any Plan Year by up to a current maximum annual
limit of $9,500. The amount you defer is called an elective deferral, which the
Company will contribute to the Plan on your behalf. The Company may also, at its
discretion, make a contribution matching all or part of the elective deferral
you make for the Plan Year. Elective deferrals and matching contributions will
be allocated to your Account on a dollar for dollar basis. Matching
contributions may either be made in "cash" or in equivalent Company stock
shares.
Profit Sharing Contributions: In addition to your elective deferrals
and matching contributions, the Company may also make additional discretionary
"profit sharing" contributions to the Plan, which will be allocated to your
Account in the ratio that your Compensation bears to the total Compensation of
all Participants. This means that the amount of the discretionary contributions
that are allocated to your Account will, as a percentage of your Compensation,
be the same as the percentage allocated to all other eligible Participants. For
example, if the Company makes a contribution equal to 10% of the total
Compensation of all Participants, and your Compensation for the year is $25,000,
the amount allocated to your Account would be $2,500 ($25,000 times 10%). For
purposes of the Plan, your Compensation is limited to the first $150,000 you
receive from the Company during the Plan Year.
Earnings, Losses And Forfeitures: Your Account will also receive a pro
rata allocation of the Plan's investment earnings and losses. Any earnings and
losses will be allocated to your Account at least once a year, subject to
certain exceptions set forth in the next paragraph pertaining to Participants
who terminate during the Plan Year. The Plan may also experience forfeitures,
which are those portions of Participants' Accounts in which they did not have a
vested interest when they terminated participation in the Plan (see Termination
Of Employment in Section 5). Forfeitures will used by the Company to fund its
matching contribution, if any, for that year.
Allocations To Terminated Participants: If your participation in the
Plan ceases during the Plan Year for any reason, your Account will still receive
an allocation of the elective deferrals you made for that Plan Year. If your
participation ceases because you reach Normal Retirement Age, or because you die
or become disabled (as defined in Section 5), your Account will also receive all
of the other allocations described above; but if your participation ceases for
reasons other than retirement, death or disability, your Account will only
receive the other allocations if you complete at least 1000 hours of service and
you are still employed by the Company on the last day of that Plan Year.
However, notwithstanding the foregoing allocation rules, if you have an
undistributed Account balance on the last day of any Plan Year after you
terminate, your Account will also receive a pro rata allocation of the Plan's
earnings and losses for that Plan Year.
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<PAGE>
SECTION 5
PLAN BENEFITS
Retirement And Disability Benefits: Upon reaching Normal Retirement
Age, or upon becoming disabled while still employed by the Company, you will be
entitled to receive 100% of your Account. Payment will generally be made shortly
after the last day of the Plan Year in which you actually retire or become
disabled.
Definition Of Disability: You will be considered disabled for purposes
of qualifying for disability benefits if you suffer a physical or mental
condition after you become a Participant that totally and permanently prevents
you from engaging in any occupation for compensation. Whether you are disabled
will be decided by a doctor appointed by the Administrator, but you will not be
considered disabled under the Plan if the disability is caused by (1) chronic or
excessive use of intoxicants or other substances; (2) an intentionally
self-inflicted injury or sickness; (3) an unlawful act on your part; or (4)
military service if you qualify for a military disability pension.
Death Benefit: If you die while still employed by the Company but
before reaching Normal Retirement Age, 100% of your Account will be paid to
your beneficiary. Payment will generally begin shortly after the last day of the
Plan Year in which your death occurs. If you are married, 100% of your Account
will automatically be paid to your surviving spouse unless he or she has waived
that right, in which event you can name some other beneficiary to receive your
Account. A beneficiary designation form is attached to this summary and should
be completed and returned to the Administrator.
Normal Retirement Age: Your Normal Retirement Age is the date you reach
age 65. You may actually retire on the same date that you reach your Normal
Retirement Age. You can also elect to postpone retirement and continue to work
for the Company, in which event you will continue to participate in the Plan and
your Account will continue to receive the allocations described in Section 4
until you actually retire.
Termination Of Employment: If you leave the Company before you retire,
die, or become disabled, you will only be entitled to your vested interest,
which is the percentage of your Account to which you are entitled at any point
in time. If your vested interest is $3,500 or less, it will be paid by the end
of the Plan Year in which you incur a 1-Year Break in Service. If your vested
interest is more than $3,500, it will be paid upon request, but only if you
consent to the distribution. Your vested interest in all elective deferrals
allocated to your Account will be 100% at all times. However, your vested
interest in any matching and discretionary contributions allocated to your
Account will be determined by the following schedule, based on the number of
Years of Service you complete:
2 Years of Service 100% Vested Interest
Top Heavy Requirements: If more than 60% of Plan's assets are allocated
to the Accounts of Participants who are key Employees (that is, owners,
officers, or shareholders of the Company), the Plan will be considered top
heavy; and during each top heavy Plan Year the Company may be required to make a
minimum allocation for each non-Key Employee of up to 3% of Compensation.
Taxation Of Benefits: Most distributions are subject to income taxes,
but it is possible to postpone or reduce them. The manner in which a
distribution will be taxed is described in more detail in the form titled
Special Tax Notice Regarding Plan Payments which is attached to this summary.
3
<PAGE>
Benefit Claims: You can file a claim with the Administrator either
orally or in writing, and you will be notified of its disposition within 90
days. If your claim is denied, you can have the denial reviewed by making a
written request to the Administrator, which, along with a written statement
explaining your position, must be filed within 60 days of the date you were
notified in writing that the claim was denied. The Administrator may provide you
with a hearing, but in any event must decide on the appeal within 60 days and
give you written notice of the decision.
SECTION 6
OTHER INFORMATION
Amendment And Termination: The Company can amend the Plan at any time,
but no amendment can reduce your Account balance. Likewise, the Company can
terminate the Plan at any time. If so, you will have a 100% vested interest in
your Account, which will either be distributed to you or be held in a frozen
trust until you would otherwise be entitled to receive a distribution under the
terms of the Plan as it existed on the date of termination. Upon termination of
the Plan, your Account balance is not insured by the Pension Benefit Guaranty
Corporation (PBGC) because the insurance provisions of ERISA do not apply to
this type of Plan. For more information on PBGC protection and limitations, ask
the Administrator. You can also write the PBGC Office of Communications at 1200
K Street NW, Washington, D.C. 20005, or you can call the PBGC at (202) 326-
4000.
Definition Of Year of Service A Year of Service is a 12-consecutive
month period in which you complete at least 1000 hours of service for the
Company, and is used to determine your continued eligibility to participate in
the Plan and to determine your vested interest in your Account. An hour of
service is any hour for which you have a right to be paid, including hours you
are paid for vacation, holidays, illness, back pay and for maternity leave
occasioned by pregnancy or the birth or adoption of your child or by leave to
care for your child immediately following birth or adoption.
Break In Service Rules: In any Plan Year in which you receive credit
for less than 501 hours of service, you will incur a 1-Year Break in Service and
your participation in the Plan will cease. However, regardless of the number of
hours of service you complete, you will not incur a break in service in the Plan
Year that you become a Participant, retire at Normal Retirement Age, die, become
disabled, or are absent from work because of an authorized leave. Furthermore,
if you are absent from work because of illness or maternity leave, you will
receive credit for up to 501 hours of service if necessary in order to prevent
you from incurring a break in service.
Non-Alienation: Your creditors may not garnish or levy upon your
Account and you may not sell, transfer, assign, or pledge your Account; but any
distribution you receive will be offset by the unpaid balance of any loans you
may have from the Plan. All or some portion of your Account may also be
distributed to someone else pursuant to a qualified domestic relations order,
which is a judicial decree that provides for child support, alimony or marital
property rights and that recognizes the right of your spouse, former spouse,
child or dependent to all or part of your Plan benefits.
4
<PAGE>
Rollovers: With the Administrator's consent, you may under certain
circumstances rollover into this Plan amounts you receive from another qualified
plan. Rollovers will be maintained in a Rollover Account which will be 100%
vested at all times; but your rollovers may not be withdrawn or distributed to
you until you are otherwise entitled to receive a distribution of the vested
interest in your Account.
Participant Loans: At the discretion of the Trustee, you will be
permitted to borrow from the Plan. The minimum loan is $1,000, and the maximum
loan is the lesser of $50,000 or 50% of your vested interest. If a loan is
approved, it must bear a reasonable rate of interest, be adequately secured, and
be repaid within 5 years by equal payments made at least quarterly, except that
a loan used to acquire your principal residence can be repaid over more than 5
years. Unpaid loans will be subtracted from any distribution you receive upon
retirement, death, disability or termination of employment.
Directed Investment Accounts: You may direct the investment of your
elective deferrals. Investment directives may be given to the Trustee at any
time. Directed investments will be credited to your Directed Investment Account,
to which will also be credited the earnings or losses on your directed
investments, and from which will be deducted any expenses connected with making
a directed investment, such as broker's fees and commissions. The Trustee (1) is
not required to give advice on directed investments; (2) is not liable for
losses that may occur; and (3) can refuse to comply if he thinks the investment
is improper or illegal.
Salary Reduction Agreements: The Administrator will provide you with a
Salary Reduction Agreement in which you indicate the amount of the elective
deferral you wish to make. You may change the agreement on of each Plan Year (or
on the first business day of each such month if the first day of the month falls
on the weekend). You may also cancel the agreement at any time by filing written
notice at least 30 days prior to the effective date of the cancellation. The
Company may at any time change or suspend the amount of your elective deferral
to insure that the Plan continues to meet certain limitations imposed on
elective deferrals by the Internal Revenue Code. If this happens, you will still
continue to participate in the Plan, and when the situation which resulted in
the change or suspension no longer exists, your elective deferral will be
reinstated to tile fullest extent possible.
Hardship Withdrawals: If you suffer an immediate and heavy financial
hardship, you may, with the Administrator's consent, withdraw all or a portion
of your elective deferrals. A hardship distribution is permitted (1) for
deductible medical expenses incurred by you or your family; (2) for the purchase
(excluding mortgage payments) of your principal residence; (3) for tuition for
the next 12 months of college for you or your family; or (4) for payments needed
to prevent your eviction from, or foreclosure on the mortgage of, your principal
residence. A hardship distribution cannot exceed the amount required to relieve
the financial need, and cannot be made to the extent the hardship can be
satisfied from other resources that are available to you by insurance
reimbursement; by reasonable liquidation of your assets, to the extent
liquidation would not itself cause a hardship; by cessation of your elective
deferrals to the Plan; or by other distributions or nontaxable loans from this
plan or by borrowing from commercial sources on reasonable commercial terms.
However, if you do receive a hardship distribution, you cannot make any elective
deferrals for at least 12 months; and for the taxable year following the taxable
year in which you receive the distribution, your elective deferrals will be
limited to the difference between the maximum amount allowed by law and the
elective deferrals you made for the taxable year in which the hardship
distribution was made.
5
<PAGE>
SECTION 7
STATEMENT OF ERISA RIGHTS
Rights Of Participants: As a Participant, you are entitled to certain
rights and protections under the Employee Retirement Income Security Act of 1974
(ERISA). ERISA provides that all Participants are (1) entitled to examine
without charge at the Administrator's office and at other specified locations
(such as worksites and union halls) all Plan documents, including insurance
contracts, collective bargaining agreements and copies of all Plan documents
filed with the U.S. Department of Labor, such as detailed annual reports and
Plan objectives; (2) obtain copies of all Plan documents and other information
upon written request to the Administrator (who may make a reasonable charge for
the copies); (3) receive a summary of the Plan's annual financial report and a
copy of the Administrator's summary annual report; and (4) obtain a statement
telling if you have a right to receive a pension at normal retirement age and if
so, what your benefits would be if you stopped working now. If you do not have a
right to a pension, the statement will tell you how many more years you have to
work to get a pension. This statement must be requested in writing, is not
required to be given more than once a year, and must be provided free of charge.
Duties Of Fiduciaries: ERISA also imposes duties upon the people
responsible for the operation of the plan. These people, called fiduciaries,
have a duty to do so prudently and in the interest of all Participants. No one,
including the Company, a union, or any other person, may fire you or
discriminate against you in any way to prevent you from obtaining a pension
benefit or exercising your ERISA rights. If your claim is denied in whole or
part, you must receive a written explanation, and you have the right to have the
Plan review and reconsider your claim.
Enforcement Of Rights: There are steps you can take to enforce your
rights. For instance, if you request materials from the Plan and do not receive
them within 30 days, you may file suit in a federal court. If fiduciaries misuse
the Plan's money, or if you are discriminated against for asserting your rights,
you may seek help from the U.S. Department of Labor, or you may file suit in a
federal court. The court will decide who should pay court costs and legal fees.
If you are successful, the court may order the person you sued to pay the costs
and fees. If you lose, the court may order you to pay court costs and legal
fees, if, for example, the court finds that your claim was frivolous. If you
have questions about the Plan, contact the Administrator. If you have questions
about this statement or about your ERISA rights, contact the nearest Area Office
of the United States Labor-Management Services Administration, Department of
Labor.
6
<PAGE>
SPECIAL TAX NOTICE
REGARDING PLAN PAYMENTS
This notice contains important o If you want to roll over 100% of
information you will need before the payment to an IRA or an
you decide how to receive your employer plan, you must find other
benefit from the Plan. money to replace the 20% that was
withheld. If you only roll over the
Summary 80% you received, you will be taxed
on the 20% withheld and not rolled
A payment from the Plan that is over.
eligible for "rollover" can be
taken in two ways. You may have all More detailed information is
or any portion of your payment contained in this notice under the
either Paid As A Direct Rollover or following headings:
Paid To You. A direct rollover is a
payment of your Plan benefits to =====================
your individual retirement PAYMENTS THAT CAN AND
arrangement (IRA) or to another CANNOT BE ROLLED OVER
employer plan. This choice will
affect the tax you owe. DIRECT ROLLOVER
If you choose to have your Plan PAYMENT PAID TO YOU
benefits paid as a Direct Rollover:
SURVIVING SPOUSES, ALTERNATIVE
o Your payment will not be taxed in PAYEES AND OTHER BENEFICIARIES
the current year and no income tax =====================
will be withheld.
o Your payment will be made PAYMENTS THAT CAN AND
directly to your IRA or, if you CANNOT BE ROLLED OVER
choose, to another employer plan
that accepts your rollover.
Payments from the Plan may be
o Your payment will be taxed later "eligible rollover distributions."
when you take it out of the IRA or This means that they can be rolled
the employer plan. over to an IRA or to another
employer plan that accepts
If you choose to have your Plan rollovers. Your Plan administrator
benefits Paid To You: should be able to tell you what
portion of your payment is an
o You will receive only 80% of the eligible rollover distribution. The
payment, because the Plan following types of payments cannot
administrator is required to be rolled over:
withhold 20% of the payment and
send it to the IRS as income tax Non-taxable Payments: In general,
withholding to be credited against only the taxable portion of your
your taxes. payment is an eligible rollover
distribution. If you made after-tax
o Your payment will be taxed in the employee contributions to the Plan,
current year unless you roll it these contributions will be
over. You may be able to use non-taxable when they are paid to
special tax rules that could reduce you, and they cannot be rolled
the tax you owe. However, if you over. (After-tax employee
receive the payment before age 59 contributions generally are
1/2., you also may have to pay an contributions you made from your
additional 1O% tax. own pay that were already taxed.)
o You can roll over the payment to Payments Spread Over A Long Period:
your IRA or to another employer You cannot roll over a payment if
plan that accepts your rollover it is part of a series of equal (or
within 60 days of receiving the almost equal) payments made at
payment. The amount rolled over least once a year and that will
will not be taxed until you take it last for:
out of the IRA or employer plan.
1
<PAGE>
o Your lifetime (or your life Direct Rollover of a Series of
expectancy), or Payments: If you receive eligible
rollover distributions that are
o Yours and your beneficiary's paid in a series for less than ten
lifetime (or life expectancies), or years, your choice to make or not
make a direct rollover for a
o A period of ten years or more. payment will apply to an later
payments in the series until you
Required Minimum Payments: change your election. You are free
Beginning in the year you reach age to change your election for any
70 1/2, a portion of your payment later payment in the series.
cannot be rolled over because it is
a "required minimum payment" that
must be paid to you. PAYMENT PAID TO YOU
If the payment is made to you, it's
DIRECT ROLLOVER subject to 20% income tax
withholding. The payment is taxed
You can choose a direct rollover of in the year you receive it unless,
all or any portion of your payment within 60 days, you roll it over to
that is an "eligible rollover an IRA or another plan that accepts
distribution," as described above. rollovers. If you do not roll it
In a direct rollover, the eligible over, special tax rules may apply.
rollover distribution is paid
directly from the Plan to an IRA or Income Tax Withholding:
another employer plan that accepts
rollovers. If you choose a direct Mandatory Withholding: If any
rollover, you are not taxed on a portion of the payment made to you
payment until you later take it out is an eligible rollover
of the IRA or the employer plan. distribution, the Plan is required
by law to withhold 20% of that
Direct Rollover to an IRA: You can amount. This amount is sent to the
open an IRA to receive the direct IRS as income tax withholding. For
rollover. (The term IRA, as used in example, if your eligible rollover
this notice, includes individual distribution is $10,000, only
retirement accounts and individual $8,000 will be paid to you because
retirement annuities.) To have your the Plan must withhold $2,000 as
payment made directly to an IRA, income tax. However, when you
contact an IRA sponsor (usually a prepare your income tax return for
bank, savings and loan association, the year, you will report the full
insurance company, mutual fund, $10,000 as a payment from the Plan.
brokerage firm, etc.) to find out You will report the $2,000 as tax
how to have your payment made in a withheld, and it will be credited
direct rollover to an IRA at that against any income tax you owe for
institution. If you are unsure of the year.
how to invest your money, you can
temporarily establish an IRA to Voluntary Withholding: If any
receive the payment. However, in portion of your payment is not an
choosing an IRA, you may wish to eligible rollover distribution but
consider whether the IRA will allow is taxable, the mandatory
vou to move all or a part of your withholding rules described above
payment to another IRA at a later do not apply. In this case, you may
date, without penalties or other elect not to have withholding apply
limitations. See IRS Publication to that portion. To elect out of
590, Individual Retirement withholding, ask the Plan
Arrangements, for more information administrator for the election form
on IRAs (including limits on how and related information.
often you can roll over between
IRAs). Sixty-Day Rollover Option: If you
receive an eligible rollover
Direct Rollover to a Plan: If you distribution, you can still roll
are employed by a new employer that over all or part of it to an IRA or
has a plan, and you want a direct another employer plan that accpts
rollover to that plan, ask the rollovers. If you roll over, you
administrator of that plan whether must do so within 60 days after you
it will accept your rollover. If receive the payment. The portion of
your new employer's plan does not the payment you roll over will not
accept a rollover, you can choose a be taxed until you take it out of
direct rollover to an IRA. the IRA or the employer plan.
2
<PAGE>
You can roll over up to 100% of the because you reach age 59 1/2 or
eligible rollover distribution, have become disabled). For a
including an amount equal to the payment to qualify as a lump sum
20% that was withheld. If you distribution you must have been a
choose to roll over 100%, you must participant in the Plan for at
find other money within the 60-day least 5 years. The special tax
period to contribute to the IRA or treatment for lump sum
the employer plan to replace the distributions is described below.
20% withholding. On the other hand,
if you roll over only the 80% that Five-Year Averaging: If you receive
you received, you will be taxed on a lump sum distribution after you
the 20% that was withheld. are age 591/2, you may be able to
make a one-time election to figure
Example: Your eligible rollover the tax on the payment by using 5
distribution is $10,000, and you year averaging. Five-year averaging
choose to have it paid to you. You often reduces the tax you owe
will receive $8,000 and $2,000 will because it treats the payment as if
be sent to the IRS as income tax it were paid over 5 years.
withholding. Within 60 days after
receiving the $8,000, you may roll Ten-Year Averaging If You Were Born
over the entire $10,000 to an IRA Before January 1, 1936: If you
or employer plan. To do this, you receive a lump sum distribution and
roll over the $8,000 you received you were bom before January 1,
plus $2,000 you will have to find 1936, you can make a one-time
from other sources (your savings, a election to figure the tax on the
loan, etc.) In this case, the payment by using 10-year averaging
entire $10,000 is not taxed until (using 1986 tax rates) instead of
I you take it out of the IRA or 5-year averaging (using current tax
employer plan. If you roll over the rates). Like the 5-year averaging
entire $10,000 when you file your rules, 10-year averaging often
tax return you may get a refund of reduces the tax you owe.
the $2,000 withheld. If, on the
other hand, you roll over only Capital Gain Treatment If You Were
$8,000, the $2,000 you did not roll Born Before January 1, 1936: In
over is taxed in the year it was addition, if you receive a lump sum
withheld. When you file your tax distribution and you were bom
return you may get a refund of part before January 1, 1936, you may
of the $2,000 withheld. (However, elect to have the part of your
any refund is likely to be larger payment that is attributable to
if you roll over the entire your pre-1974 participation in the
$10,000.) Plan (if any) taxed as long-term
capital gain at a rate of 20%.
Additional 10% Tax If You Are Under There are other limits on the
59 1/2: If you receive a payment special tax treatment for lump sum
before you reach age 59 1/2 and you distributions. For example, you can
do not roll it over, then, in generally elect this special tax
addition to the regular income tax, treatment only once in your
you may have to pay an extra tax of lifetime and the election applies
10% of the taxable portion of the to all lump sum distributions that
payment. The additional 10% tax you receive in that same year. If
does not apply to your payment if you have previously rolled over a
it is (1) paid because you separate payment from the Plan (or certain
from service with your employer other similar plans of the
during or after the year you reach employer), you cannot use this
age 55, (2) paid because you retire special tax treatment for later
due to disability, (3) paid as payments from the Plan. If you roll
equal (or almost equal) payments over your payment to an IRA, you
over your life or life expectancy cannot use this special tax
(or your and your beneficiary's treatment for later payments from
lives or life expectancies), or (4) the IRA. Also, if you roll over
used to pay certain medical only a portion of your payments to
expenses. See IRS Form 5329 for an IRA, this special tax treatment
more information on the additional is not available for the rest of
10% tax. the payment. Additional
restrictions are described in IRS
Special Tax Treatment: If your Form 4972, which has more
eligible rollover distribution is information on lump sum
not rolled over, it will be taxed distributions and how you elect the
in the year you receive it. special tax treatment.
However, if it qualifies as a "lump
sum distribution", it may be
eligible for special tax treatment.
A lump sum distribution is a
payment, within one year, of your
entire balance under the Plan (and
certain other plans of the
employer) that is payable because
you reach age 59 1/2 or separate
from service with your employer
(or, in the case of a self-employed
individual,
3
<PAGE>
SURVIVING SPOUSES, If you are a surviving spouse, an
ALTERNATIVE PAYEES, alternate payee, or another
AND OTHER BENEFICIARIES beneficiary, you may be able to use
the special tax treatment for lump
In general, the rules summarized sum distributions and the special
above that apply to payments to rule for payments that include
employees also apply to payments to employer stock, as described in the
surviving spouses of employees and preceding section. If you receive a
to spouses or former spouses who payment because of the employee's
are "alternate payees". You are an death, you may be able to treat the
alternate payee if your interest in payment as a lump sum distribution
the Plan results from a "qualified if the employee met the appropriate
domestic relations order", which is age requirements, whether or not
an order issued by a court, usually the employee has 5 years of
in connection with a divorce or participation in the Plan.
legal separation. Some of the rules
summarized above also apply to a
deceased employee's beneficiary who HOW TO OBTAIN ADDITIONAL
is not a spouse. However, there are INFORMATION
exceptions for payments to
surviving spouses, alternate This notice summarizes only the
payees, and other beneficiaries federal (not state or local) tax
that should be mentioned. rules that might apply to your
payment. The rules described above
If you are a surviving spouse, you are complex and contain many
may choose to have an eligible conditions and exceptions that are
rollover distribution paid in a not included in this notice.
direct rollover to an IRA or paid Therefore, you may want to consult
to you. If you have the payment with a professional tax advisor
paid to you, you can keep it or before you take a payment of your
roll it over yourself to an IRA but benefits from the Plan. Also, you
you cannot roll it over to an can find more specific information
employer plan. If you are an on the tax treatment of payments
alternate payee, you have the same from qualified retirement plans in
choices as the employee. Thus, you IRS Publication 575, Pension and
can have the payment paid as a Annuity Income, and IRS Publication
direct rollover or paid to you. If 590, Individual Retirement
you have it paid to you, you can Arrangements. These publications
keep it or roll it over yourself to are available from your local IRS
an IRA or to another employer plan office or by calling 1-800-
that accepts rollovers. If you are TAX-FORMS.
a beneficiary other than the
surviving spouse, you cannot choose
a direct rollover, and you cannot
roll over tile payment yourself.
If vou are a surviving spouse, an
alternate payee, or another
beneficiary, your payment is not
subject to the additional 10% tax
described in the section titled
PAYMENT PAID TO YOU, even if vou
are younger than age 591/2.
4
<PAGE>
ORION NETWORK SYSTEMS, INC.
401(K) PROFIT SHARING PLAN
<PAGE>
ORION NETWORK SYSTEMS, INC.
401(K) PROFIT SHARING PLAN
THIS AGREEMENT is made and entered into this_______day
of_________________ 199___, between ORION NETWORK SYSTEMS, INC. (hereafter
called the Employer) and STANLEY COOPER and LEMOYNE ZACHERL (hereafter called
the Trustee). W I T N E S S E T H:
WHEREAS, the Employer previously established a Profit Sharing Plan and
Trust (hereafter called the Plan), effective January 1, 1991, in order to
provide retirement benefits and other incidental benefits to those of its
employees who qualify to participate in the Plan, thereby supplementing their
social security benefits; and
WHEREAS, the Employer believes that continued contributions to the Plan
will help to strengthen the bonds of loyalty and mutual understanding that have
existed between the Employer and its employees, thereby making possible the
continued growth of its business; and
WHEREAS, in accordance with the terms of the Plan, the Employer has the
ability at any time, and from time to time, to amend the Plan;
NOW, THEREFORE. effective January 1, 1996 (hereafter called the
Effective Date), the Employer and the Trustee hereby amend the Plan to comply
with all applicable statutes, including the Employee Retirement Income Security
Act of 1974 (ERISA), the Tax Equity and Fiscal Responsibility Act of 1982, the
Tax Reform Act of 1984, the Retirement Equity Act of 1984, the Tax Reform Act of
1986, the Omnibus Budget Reconciliation Act of 1987, and the Technical and
Miscellaneous Revenue Act of 1988, and restate the Plan in its entirety to
provide as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS
1.01 ADMINISTRATOR: Administrator means the Employer unless another
Administrator is appointed by the Employer.
1.02 AFFILIATED EMPLOYER: Affiliated Employer means any of the following of
which the Employer is a part: (1) a controlled group of corporations,
as defined in Code Section 414(b); (2) a trade or business (whether or
not incorporated) under common control, as defined in Code Section
414(c); (3) any organization (whether or not incorporated) which is a
member of an affiliated service group, as defined in Code Section
414(m); and (4) any other entity required to be aggregated with the
Employer pursuant to Code Section 414(o).
1.03 AGE: Age means actual attained age.
1.04 ANNIVERSARY DATE: Anniversary Date means December 31.
1.05 ANNUITY STARTING DATE: Annuity Starting Date means the first day of the
first period for which an amount is paid as an annuity, or, in the case
of a benefit not payable as an annuity, the first day all events have
occurred which entitle the Participant to such benefit. The first
day-of the first period for which a benefit is to be received by reason
of Disability will be treated as the Annuity Starting Date only if such
benefit is not an auxiliary benefit.
1.06 BENEFICIARY: Beneficiary means the recipient designated by the
Participant to receive the Plan benefits (if any) payable upon his
death, subject to Section 5.02.
1.07 1-YEAR BREAK IN SERVICE: 1-Year Break in Service means a Plan
Year during which an Employee does not complete more than 500 Hours of
Service for reasons other than an Authorized Leave of Absence, except
for the Plan Year in which the Employee becomes a Participant, retires,
dies, or suffers Disability. For purposes hereof, an Authorized Leave
of Absence is any period in which an Employee ceases active employment
with the Employer because of illness, military service, or any other
reason approved by the Employer.
1.08 CODE: Code means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder by the Internal Revenue Service.
1.09 COMPENSATION: Compensation means the total taxable compensation up to
$150,000 paid by the Employer to a Participant during the Limitation
Year ending on or within the Plan Year, including compensation not
currently includible in gross income by reason of Code Sections 125,
402(a)(8), 402(h), or 403(b). Compensation of a Self-Employed
Individual who owns an interest in the Employer will equal his Earned
Income up to $150,000 derived from the Employer. The $150,000
limitation will be adjusted for increases in the cost of living in
accordance with Code Section 401 (a)(17), and such adjustment in
effect for a calendar year will apply to any period not exceeding 12
months over which Compensation is determined (determination period)
beginning in such calendar year. If a determination period consists of
fewer than 12 months, the adjusted $150,000 limitation will be
multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is
twelve. In determining a Participanfs Compensation for purposes of the
adjusted $150,000 limitation, the rules of Code Section 414(q)(6) will
apply, but the term "family" will only include the Participant's spouse
and any lineal descendants who have not reached Age 19 before the close
of the Plan Year. If by applying such rules the adjusted $150,000
limitation is exceeded, then the limitation 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 limitation, or such other method as determined by the Plan
Administrator that is not prohibited by IRS regulations.
2
<PAGE>
1.10 DISABILITY: Disability means a physical or mental condition arising
after an Employee has become a Participant, which totally and
permanently prevents the Participant from engaging in any occupation or
employment for remuneration or profit, except for the purpose of
rehabilitation not incompatible with a finding of total and permanent
disability. The determination as to whether a Participant is totally
and permanently disabled will be made (1) on medical evidence by a
licensed physician designated by the Administrator; or (2) on evidence
that the Participant is eligible for benefits under any long-term
disability plan sponsored by the Employer, but administered by an
independent third party; or (3) on evidence that the Participant is
eligible for total and permanent disability benefits under the Social
Security Act in effect at the date of disability. However, the term
Disability as used herein will not include any disability arising from
(1) chronic or excessive use of intoxicants or other substances; (2)
intentionally self-infiicted injury or sickness; (3) an unlawful act
or enterprise by the Participant; or (4) military service where the
Participant is eligible to receive a government sponsored military
disability pension.
1.11 EARLIEST RETIREMENT AGE: Earliest Retirement Age means the earliest
date on which a Participant could elect to receive retirement benefits.
1.12 EARLY RETIREMENT DATE: This Plan does not provide a Participant with
retirement benefits prior to the date he reaches Normal Retirement Age.
1.13 EARNED INCOME: Earned Income means the net earnings from
self-employment in the trade or business with respect to which the Plan
is established, for which personal services of the individual are a
material income-producing factor. Net earnings will be determined
without regard to items not included in gross income and the deductions
allocable thereto. Net earnings will be reduced by deductible
contributions by the Employer to a qualified retirement plan. Net
earnings will be determined with regard to the deduction a] lowed to
the Employer by Code Section 164(f) for taxable years beginning after
December 31, 1989.
1.14 EFFECTIVE DATE: Effective Date means January 1, 1996, the date of this
restatement.
1.15 ELECTIVE DEFERRAL Elective Deferrals means Employer contributions made
to the Plan at the election of the Participant, in lieu of cash
Compensation pursuant to a written agreement or other deferral
mechanism. For any taxable year, a Participant's Elective Deferral is
the sum of all Employer contributions made on his behalf pursuant to an
election to defer under any qualified cash or deferred arrangement as
described in Code Section 401(k), any simplified employee pension cash
or deferred arrangement as described in Code Section 402(h)(1)(B), any
eligible deferred compensation plan under Code Section 457, any plan as
described under Code Section 501 (c)(18), and any Employer
contributions made on behalf of a Participant for the purchase of an
annuity contract under Code Section 403(b) pursuant to a Salary Savings
Agreement.
1.16 EMPLOYEE: Employee means any person employed by the Employer as an
employee, including employees of an Affiliated Employer. Employee also
means any Leased Employee deemed to be an Employee as provided in Code
Sections 414(n) or 414(o). For purposes of this Plan, a Self- Employed
Individual who derives Earned Income from the Employer will also be
considered an Employee. The term leased employees means any person
(other than an employee of the recipient) who pursuant to an agreement
between the Employer and any other person (the "leasing organization")
has performed services for the Employer (or for the 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 Employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to
services performed for the Employer will be treated as provided by
Employer. Leased employees will not be considered Employees of the
Employer if (1) they are covered by a money purchase pension plan
providing immediate participation, full and immediate vesting, and a
non-integrated employer contribution rate of at
3
<PAGE>
least 10% of a Leased Employee's Section 415 Compensation, but
including amounts contributed pursuant to a salary reduction agreement
which are excludable from the Leased Employee's gross income under Code
Sections 125, 402(a)(8), 402(h), or 403(b); and (2) they do not
constitute more than 20% of the Employer's nonhighly compensated
workforce.
1.17 EMPLOYER: Employer means ORION NETWORK SYSTEMS, INC., any Adopting
Employer, and any successor which maintains this Plan.
1.18 FISCAL YEAR: Fiscal Year means the Employer's twelve month accounting
year beginning January 1st and ending the following December 31st.
1.19 FORFEITURE: Forfeiture means the amount by which a Participant's
Account exceeds his Vested Interest upon the earlier to occur of the
date that (1) he receives a distribution of his Vested Interest
pursuant to Sections 5.04, 5.05, or 5.06; or (2) he incurs 5
consecutive 1-Year Breaks in Service. However, no Forfeitures will
occur solely as a result of a Participant's withdrawal of his own
contributions to the Plan.
1.20 HIGHLY COMPENSATED EMPLOYEE: The term Highly Compensated Employee
includes highly compensated active Employees and former Employees. An
active Highly Compensated Employee includes any Employee who performs
service for the Employer during the Plan Year and who, during the
look-back year (that is, the 12-month period immediately preceding the
Plan Year): (1)received Compensation in excess of $75,000; (2) received
Compensation in excess of $50,000 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% of the dollar
limitation in effect under Code Section 415(b)(1)(A). However, if no
officer has satisfied the Compensation requirement during either the
Plan Year or look-back year, the highest paid officer for such Plan
Year or look-back year will be treated as a Highly Compensated Employee
for the Plan Year or look-back year. Highly Compensated Employees also
include Employees who are (1) both described in the preceding paragraph
if the Plan Year is substituted for the term look-back year and are one
of the 100 Employees who received the most Compensation during the
Plan Year; and (2) 5-percent owners at any time during the Plan Year or
look- back year. A former Highly Compensated Employee includes any
Employee who separated from service (or was deemed to have separated)
prior to the Plan Year, performs no service for the Employer during the
Plan Year, and was an active Highly Compensated Employee for either the
separation year or any Plan Year ending on or after his 55th birthday.
Also, if an Employee is, during the 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 is one of the 10
most highly compensated Employees ranked on the basis of Compensation
paid by the Employer during such year, then the family member and the
5-percent owner or top-ten highly compensated Employee will be treated
as a single Employee receiving Compensation and Plan contributions or
benefits equal to the sum of such Compensation and contributions or
benefit of the family members and 5-percent owner or top-ten highly
compensated Employee. 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 (1) who is a Highly Compensated Employee, including
the determination of the number and identity of employees in the
top-ten paid group, (2) the top 100 Employees, (3) the number of
Employees treated as officers and (4) the Compensation that is
considered, will be made under Code Section 414(q)
1.21 HOUR OF SERVICE: Hour of Service means each hour an Employee is paid,
or entitled to payment, by the Employer for the performance of duties
during the applicable computation period; each hour an Employee is
paid, or entitled to payment, by the Employer for a period of time in
which no duties are performed (regardless of whether the employment
relationship has terminated) for reasons other than performance of
duties, such as vacation, holidays, illness, incapacity (including
disability), lay-off, jury duty, military duty, or Authorized Leave of
Absence (as defined in Section 1.07) during the applicable computation
period; and each hour for back pay awarded or agreed to by the Employer
without regard to mitigation of damages. An Employee on Maternity or
4
<PAGE>
Paternity Leave will be credited with each Hour of Service which would
normally have been credited to such Employee but for such absence, or
if the Administrator is unable to determine such hours, 8 Hours of
Service per day of such absence, but only in the year in which
Maternity or Paternity Leave begins if necessary to prevent a 1-Year
Break in Service, or, in any other case in the immediately following
year.
However, (1) no more than 501 Hours of Service during a Plan Year will
be credited to an Employee for any single continuous period in which he
does not perform any duties (whether or not such period occurs in a
single computation period) or is on Maternity or Paternity Leave; (2)
an hour for which an Employee is paid, or entitled to payment, because
of a period in which no duties are performed is not required to be
credited if payment is made or due under a plan maintained solely to
comply with applicable worker's compensation, unemployment compensation
or disability insurance laws; and (3) Hours of Service are not required
to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses.
A pavment will be deemed to be made by, or due from, the Employer,
regardless of whether such payment is made by, or due from, the
Employer directly, or indirectly through, among others, a trust fund or
insurer to which the Employer contributes or pays premiums and
regardless of whether contributions made or due to the trust fund,
insurer, or other entity are for the benefit of particular Employees or
are on behalf of a group of Employees in the aggregate. Also, Hours of
Service will be calculated and credited pursuant to Labor Regulations
2530.200b-2(b) and 2530.200b-2(c), which are incorporated herein by
reference. Hours of Service will also be credited for employment with
any Affiliated Employer.
1.22 KEY EMPLOYEE: Key Employee means any Employee, Former Employee,
deceased Employee, or Beneficiary who at any time during the Plan Year
containing the Determination Date (as defined in Section 9.02) for the
Plan Year in question or any of the prior 4 Plan Years was (1) an
officer of the Employer whose Section 415 Compensation exceeds 50% of
the amount in effect under Code Section 415(b)(1)(A); (2) an owner (or
was considered an owner under Code Section 318) of one of the ten
largest interests in the Employer whose Section 415 Compensation
exceeds 100% of the dollar limitation in effect under Code Section
415(c)(1)(A); (3) a 5-percent owner of the Employer; or (4) a
1-percent owner of the Employer whose annual Section 415 Compensation
is more than $150,000. For purposes of this Section, Section 415
Compensation will include amounts contributed by the Employer pursuant
to a salary reduction agreement which are excludible from the
Employee's gross income under Code Section 125, Code Section 402(a)(8),
Code Section 402(h), or Code Section 403(b).
1.23 LIMITATION YEAR: Limitation Year means the Plan Year.
1.24 MATCHING CONTRIBUTION: Matching Contribution means an Employer
contribution made to this or any other defined contribution plan on
behalf of a Participant on account of Voluntary Employee Contributions
made by such Participant, or on account of a Participant's Elective
Deferral, under a Plan maintained by tile Employer.
1.25 MATERNITY OR PATERNITY LEAVE: Maternity or Paternity Leave means that
an Employee is absent from work because of the Employee's pregnancy;
the birth of the Employee's child; the placement of a child with the
Employee in connection with the adoption of such child by the Employee;
or the need to care for such child for a period beginning immediately
following the child's birth or placement as set forth above.
1.26 NON-ELECTIVE CONTRIBUTIONS: Non-Elective Contributions means
contributions other than Matching Contributions or Qualified Matching
Contributions made by the Employer and allocated to Participants
Accounts that the Participant may not elect to receive in cash until
distributed from the Plan.
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1.27 NONHIGHLY COMPENSATED EMPLOYEE: Nonhighly Compensated Employee means
any Employee who is not a Highly Compensated Employee.
1.28 NON-KEY EMPLOYEE: Non-Key Employee means any Employee who is not a Key
Employee, including former Key Employees. For purposes of making the
allocations in Section 3.06, Non-Key Employee means a Non-Key Employee
who either (1) is a Participant, or (2) would be a Participant but for
the reasons set forth in Section 3.06(d).
1.29 NORMAL RETIREMENT AGE: Normal Retirement Age means the date a
Participant reaches Age 65, at which time he will have a 100% Vested
Interest in his Participant's Account.
1.30 NORMAL RETIREMENT DATE: Non-nal Retirement Date means the same date
that a Participant reaches Normal Retirement Age.
1.31 PARTICIPANT: Participant means any Employee who has met the eligibility
and participation requirements of the Plan. However, any individual who
is no longer employed by the Employer will not be deemed a Participant
if his entire benefit rights under the Plan are (1) fully guaranteed by
an insurance company, insurance service or insurance organization and
are legally enforceable at the sole choice of such individual against
such insurance company, insurance service, or insurance organization,
provided that a contract, Policy, or certificate describing the
benefits to which such individual is entitled under the Plan has been
issued to such individual; or (2) such benefits are paid in a lump sum
distribution which represents the entire balance of such individual's
interest in his benefits under this Plan.
1.32 PARTICIPANT'S ACCOUNT: Participant's Account means the account to which
each Participant's share of any Employer contributions is credited.
1.33 PLAN: Plan means this document and all amendments to this document.
1.34 PLAN YEAR: Plan Year means the Plan's accounting year beginning January
1 and ending the following December 31.
1.35 POLICY: Policy means a life insurance policy or annuity contract
purchased under the terms of the Plan as set forth in Section 7.03.
1.36 QUALIFIED JOINT AND SURVIVOR ANNUITY: Qualified Joint and Survivor
Annuity means an immediate annuity for the life of the Participant with
a survivor benefit for the life of the Participant's spouse which is
not less than 50% nor more than 100% of the annuity payable during the
joint lives of the Participant and his spouse and which is the amount
of benefit which can be purchased with the Participant's Vested
Aggregate Account. The survivor benefit will be 50% unless otherwise
elected by tile Participant pursuant to Section 5.08.
1.37 QUALIFIED MATCHING CONTRIBUTION: Qualified Matching Contribution means
contributions which are subject to the distribution and
nonforfeitability requirements under Code Section 401(k).
1.38 QUALIFIED NON-ELECTIVE CONTRIBUTIONS: Qualified Non-Elective
Contributions means NonElective Contributions (other than Elective
Deferrals or Matching Contributions) made by the Employer and allocated
to Participants' Accounts which are deemed Qualified Non-Elective
Contributions for purposes of satisfying the ADP or ACP tests, and
which the Participants may not elect to receive in cash until
distributed from the Plan; that are nonforfeitable when made; and that
are distributable oniv in accordance with the distribution provisions
that are applicable to Qualified Matching Contributions.
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1.39 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY: Qualified Preretirement
Survivor Annuity means a survivor annuity for the life of a
Participant's surviving spouse which is equal to the amount of benefit
which can be purchased by 100% of the Participant's Vested Aggregate
Account balance determined as of the date of his death. However, for
purposes of this section, a Participant's Vested Aggregate Account will
(a) exclude his own deductible Plan contributions (for Plan Years prior
to January 1, 1989), and (b) take into consideration any security
interest held by the Plan by reason of a loan outstanding to the
Participant.
1.40 RETIRED PARTICIPANT: Retired Participant means a Participant who is
entitled to retirement benefits under the Plan.
1.41 SECTION 415 COMPENSATION: Section 415 Compensation means a
Participant's Earned Income, wages, salaries, fees for professional
services and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the
Plan (including, but not limited to, commissions paid salesmen,
compensation for services based on a percentage of profits, commissions
on insurance premiums, tips and bonuses). However, Section 415
Compensation does not include (a) Employer contributions to a deferred
compensation plan which are not includible 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 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 receive special tax
benefits, or contributions made by an Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
described in Code Section 403(b) (whether or not the amounts are
excludable from the gross income of the Employee).
1.42 SELF-EMPLOYED INDIVIDUAL: Self-Employed Individual means an Employee
who has Earned Income for the Plan Year or who would have had Earned
Income but for the fact the Employer had no net profits for the Plan
Year.
1.43 SUPER TOP HEAVY PLAN: Super Top Heavy Plan means that this Plan is a
Super Top Heavy Plan as defined in Section 9.01 of the Plan.
1.44 SUSPENSE ACCOUNT: Suspense Account means the account to which
Forfeitures are credited pending allocation to Participants' Accounts
pursuant to Section 3.05.
1.45 TERMINATION OF EMPLOYMENT: Termination of Employment means that a
Participant has ceased to be an Employee for reasons other than
retirement, death, or Disability.
1.46 TERMINATED PARTICIPANT: Terminated Participant means a person who was a
Participant in the Plan, but whose participation in the Plan has ceased
for reasons other than death, Disability, or retirement.
1.47 TOP HEAVY PLAN: Top Heavy Plan means that this Plan is a Top Heavy Plan
as defined in Section 9.01 of the Plan.
1.48 TOP HEAVY PLAN YEAR: Top Heavy Plan Year means the Plan is a Top Heavy
Plan for a particular Plan Year.
1.49 TRUSTEE: Trustee means the persons or entity named as trustee or
trustees in this Plan and any successor to such Trustee or Trustees.
1.50 TRUST FUND: Trust Fund means the assets of the Plan.
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1.51 VESTED AGGREGATE ACCOUNT: Vested Aggregate Account means the aggregate
value of a Participant's Account and/or any accounts attributable to
the Participant's own Plan contributions (including rollovers) in which
the Participant had a Vested Interest at the time of distribution or
upon death, including the proceeds of any Policies on his life.
1.52 VESTED INTEREST: Vested Interest means a Participant's nonforfeitable
percentage in any account maintained on his behalf by the Plan.
1.53 YEAR OF PLAN PARTICIPATION: Year of Plan Participation means a Plan
Year in which a Participant completes a Year of Service. A
Participant's Years of Plan Participation will be computed from the
date he enters the Plan as a Participant.
1.54 YEAR OF SERVICE: Year of Service means a 12 consecutive month
computation period during which an Employee completes at least 1000
Hours of Service with the Employer or an Affiliated Employer. Such
computation period will be determined in accordance with Section 2.01
for purposes of an Emplovee's eligibility to participate in the Plan
and with Section 4.04 for purposes of a Participant's Vested Interest
in his Participant's Account.
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ARTICLE 2
PLAN PARTICIPATION
2.01 ELIGIBILITY REQUIREMENTS: Anyone who is a Participant on January 1,
1996 will continue to participate in the Plan. Any other Employee will
be eligible to enter the Plan as a Participant when he reaches Age 21.
2.02 ENTRY DATE: An Employee will enter the Plan as a Participant on the
January 1st, the April 1st, the July 1st or the October 1st which
coincides with or next follows the date on which he satisfies the
eligibility requirements of Section 2.01.
2.03 WAIVER OF PARTICIPATION: If an Employee has met all of the requirements
of Section 2.01, he may, in writing, waive his right to enter the Plan
as a Participant unless the Administrator determines that such action
may jeopardize the Plan's qualified status. If an Employee who has
waived his right to become a Participant subsequently elects to become
a Participant, the period of waiver will be considered as Years of
Service under the Plan for purposes of eligibility to participate and
for purposes of determining his Vested Interest in his Participant's
Account. Once an Employee has become a Participant, he will not
thereafter be permitted to withdraw from participation without the
Administrator's written consent.
2.04 SUSPENSION OF PARTICIPATION: A Participanf s continued participation in
the Plan will be suspended in accordance with the following provisions:
(a) Participants Who Join An Ineligible Class: If a Participant no
longer satisfies the eligibility requirements by becoming a
member of an ineligible class as set forth in Section 2.01, then
his participation in this Plan will be suspended. However, such
suspended Participant will participate in the Plan immediately
upon returning to a class of Employees eligible to participate in
the Plan.
(b) Employees Who Are Members Of An Ineligible Class: If an Employee
is ineligible to become a Participant because he is a member of
an ineligible class as set forth in Section 2.01, he will
immediately become a Participant if he (1) ceases to be a member
of the ineligible class, and (2) has satisfied the eligibility
requirements in Section 2.01 and would have otherwise previously
become a Plan Participant.
(c) Treatment Of Allocations And Vested Interest: The Participant's
Account of any Participant whose participation in the Plan has
been suspended in accordance with the terms of this Section will
not receive any allocations under the terms of Article 3.
However, the Vested Interest of a suspended Participant will
continue to increase in accordance with the vesting schedule set
forth in Section 4.04.
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ARTICLE 3
CONTRIBUTIONS AND ALLOCATIONS
3.01 EMPLOYER'S CONTRIBUTION: Each Plan Year, the Employer will contribute
to the Plan such amounts as it may, in its sole discretion, determine,
subject to the following provisions:
(a) Elective Deferrals: The Employer will contribute each
Participant's Elective Deferrals to the Plan. With respect
thereto, each Participant may, pursuant to a Salary Reduction
Agreement as set forth in Section 8.07, elect to reduce his
Compensation up to the maximum amount which will not cause the
Plan to violate the limitations of Section 3.01(c), but in no
event may such amount be more than $7,000, as adjusted under Code
Section 402(g)(5). The amount of the reduction will be deemed an
Elective Deferral. However, notwithstanding the foregoing, a
Participant who has received a hardship distribution from the
Plan may not make an Elective Deferral for at least 12 months
after receipt of such distribution. Further, the Elective
Deferral of any such Participant will, for the taxable year of
the Participant which immediately follows the taxable year in
which the hardship distribution was made, be limited to the
lesser of (A) the maximum amount which will not cause the Plan to
violate the limitations of Section 3.01(c), or (B) an amount
equal to $7,000, as adjusted under Code Section 402(g)(5), minus
the amount of the Participant's Elective Deferral for the taxable
year such distribution was made.
(b) Limitation On Elective Deferrals: Each Plan Year, Elective
Deferrals made to the Plan must satisfy one of the Average
Deferral Percentage tests set forth in Code Section 401(k)(3),
and the provisions of such Code Section and the provisions of
regulation 1.401(k)-1(b) are incorporated herein by reference.
Any Elective Deferrals which are in excess of the limitations
imposed by this paragraph will be deemed to be Excess
Contributions and will be returned in accordance with Section
5.14.
(c) Matching And Non-Elective Contributions: Subject to the
limitations of Section 3.01(d), the Employer may make a Matching
Contribution (in cash or in the form of Employer equivalent
stock) each Plan Year in such amount as the Employer may, in its
sole discretion, determine. In addition, the Employer may make
such other Non-Elective Contributions as the Employer may, in its
sole discretion, determine. However, no such Non-Elective
Contributions will be made for any Participant who completes
less than 1000 Hours of Service during the Plan Year unless
otherwise provided in Sections 3.06 or 3.07.
(d) Limitation On Matching Contributions: Notwithstanding paragraph
(c) to the contrary, all Matching Contributions made hereunder
must meet the nondiscrimination tests set forth in Code Section
401(m). Accordingly, the provisions of Code Section 401(m) and
the regulations thereunder are hereby incorporated in this Plan
by reference. Any Matching Contributions in excess of the
limitations imposed by Code Section 401(m) and the regulation
thereunder will be deemed to be Excess Aggregate Contributions
and will be returned in accordance with the provisions of Section
5.15.
(e) Qualified Non-Elective Contributions And Qualified Matching
Contributions: The Employer may elect to treat all or any portion
of the Matching Contributions as Qualified Matching Contributions
and apply them to satisfy the Average Deferral Percentage (ADP)
test. In addition, the Employer may elect to treat all or any
portion of the Non-Elective Contributions as Qualified
Non-Elective Contributions and apply them to meet the Average
Deferral Percentage (ADP) test or the Average Contribution
Percentage (ACP) test, or may contribute Qualified Non-Elective
Contributions to the Plan in such amounts as determined by the
Employer.
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(f) Restrictions On Withdrawal: A Participant's Elective Deferrals
(exclusive of the earnings thereon) can only be withdrawn upon
the earlier to occur of the date the Participant (1) reaches Age
59 1/2; (2) retires; (3) suffers a Disability or Termination of
Employment; or (4) suffers hardship (as defined in Section 5.17).
Any distribution of a Participant's Elective Deferrals will be
made in accordance with the applicable provisions of Article 5 of
the Plan.
(g) Eligible Employee Excluded: If an Employee should have been
included as a Participant but is mistakenly excluded, the
Employer will nevertheless make a Plan contribution equal to the
amount which would have been contributed on such Employee's
behalf regardless of whether it is ever deductible by the
Employer.
(h) Exclusive Benefit: All Employer contributions will be made for
the exclusive benefit of the Participants and Beneficiaries, and
for the payment of the costs of maintainingthe Plan, and will not
be used for nor diverted to any other purposes. Notwithstanding
the foregoing, amounts contributed to the Plan by the Employer
may be refunded to the Employer in accordance with the provisions
of Section 3.02.
3.02 REFUND OF CONTRIBUTIONS: Contributions made to the Plan by the Employer
may be refunded to the Employer, but only in accordance with the
following provisions:
(a) Initial Nonqualification: If the Plan fails to initially satisfy
the qualification requirements of Code Section 401 (a) and the
Employer declines to amend the Plan to satisfy such requirements,
contributions made prior to the date such qualification is denied
must be returned to the Employer within 1 year of the date of
such denial, but only if the application for the qualification is
made by the time prescribed by law for filing the Employer's tax
return for the taxable year in which the Plan is adopted, or by
such later date as the Secretary of tile Treasury may prescribe.
(b) Mistake Of Fact: If a contribution to the Plan in whole or
in part is attributable to a good faith mistake of fact,
including a good faith mistake in determining the
deductibility of the contribution under Code Section 404,
then an amount may be returned to the Employer equal to the
excess of the amount contributed over the amount which would
have been contributed had there not occurred a mistake of
fact or a mistake in determining the amount of the
deduction. Earnings attributable to such excess contribution
will not be returned, but losses attributable thereto will
reduce the amount so returned. Such amount will be returned
within 1 year of the date the contribution was made or the
deduction disallowed, as the case may be.
3.03 ALLOCATION OF EMPLOYER'S CONTRIBUTION: The Administrator will establish
sub-accounts to separately account for the various types of
contributions made to the Plan on behalf of each Participant. Each
Participant's share of those contributions will thereafter be allocated
to such Participant's Account (and respective sub-accounts), as
follows:
(a) Elective Deferrals, Matching Contributions And Qualified
Non-Elective Contributions:A Participant's Elective Deferrals and
Matching Contributions will be allocated to his Participant's
Account in an amount equal to the Elective Deferrals and Matching
Contributions contributed on his behalf for that Plan Year.
Non-Elective Contributions that are treated as Qualified
Non-Elective Contributions will be allocated to the Accounts of
each Participant eligible to receive an allocation pursuant to
paragraph 3.07 (or each such Participant who is not a Highly
Compensated Employee) in the ratio that each such Participant's
Compensation bears to all such Participants' Compensation.
Qualified Non-Elective Contributions may be considered for
purposes of determining the minimum Top-Heavy contribution, if
any, required to be made pursuant to Section 3.06.
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(b) Non-Elective Contributions: All Non-Elective Contributions that
are not treated as Qualified Non- Elective Contributions will be
allocated to each eligible Participant's Account in the ratio
that the Compensation of each Participant bears to the total
Compensation of all Participants, subject to the provisions of
Section 3.06 and Section 3.07.
3.04 ALLOCATION OF EARNINGS AND LOSSES: Earnings and losses of the Trust
Fund will be determined on each Anniversary Date and such other dates
as the Administrator deems necessary. All accounts which have not been
segregated from the general Trust Fund for investment will have
earnings or losses allocated thereto in the ratio that the value of
such account (determined before the allocation of the Emplover's
contribution for the Plan Year) bears to the total value of all such
accounts as of each valuation date, subject to Section 3.07. Accounts
segregated and invested separately from the general Trust Fund will
only have the actual earnings and losses thereon allocated thereto. Any
Policy dividends or credits will be allocated to the Participant's
Account for whose benefit the Policy is held.
3.05 ALLOCATION OF FORFEITURES: On each Anniversary Date, any amounts
credited to the Suspense Account which have become Forfeitures since
the preceding Anniversary Date will be used by the Company to fund its
matching contribution, if any, for that year.
3.06 TOP HEAVY PLAN ALLOCATIONS: Notwithstanding anything herein to the
contrary, including Section 3.07, in any Top Heavy Plan Year, each
Non-Key Employee will receive the Minimum Allocation (as defined below)
to his Participant's Account, such Minimum Allocation to be made in
accordance with, and subject to, the following provisions:
(a) Definitions: For purposes of this Section, the term Minimum
Allocation means an amount equal to 3% of a Non-Key Employee's
Section 415 Compensation for the applicable Plan Year, unless a
lesser percentage would be permissible as determined in
paragraph (b) below. The term Extra Minimum Allocation means the
3% Minimum Allocation, plus an additional 1% allocation.
(b) Multiple Defined Contribution Plans: The Minimum Allocation will
not be required in this Plan for any Non-Key Employee who
participates in another defined contribution plan subject to the
minimum funding standards of Code Section 412 and which is
included with this Plan in a Required Aggregation Group.
(c) Lesser Allocation Allowed: If the allocation made to the
Participant's Account of each Key Employee is less than 3% of his
Section 415 Compensation, and if this Plan is not required to be
included in an Aggregation Group to enable a defined benefit plan
to meet the requirements of Code Sections 401 (a)(4) or 410, the
Minimum Allocation made to the Participant's Account of a Non-Key
Employee will equal the largest percentage allocated to the
Participant's Account of a Key Employee. Such percentage will be
equal to the ratio of the sum of the Employee's contribution and
Forfeitures allocated on such Key Employee's behalf divided by
his Compensation.
(d) Who Must Receive Minimum Allocation: The Minimum Allocation will
be made for each Non-Key Employee employed by the Employer on the
last day of the Plan Year, including those who have failed to
complete a Year of Service and who have been excluded from Plan
participation because (1) their Compensation is less than a
stated amount; (2) they declined to make mandatory contributions
(if required) to the Plan during the time they were considered to
be Participants; or (3) they failed to make an elective
contribution to a Code Section 401(k) plan maintained by the
Employer.
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<PAGE>
(e) Participation in Multiple Plans: If a Non-Key Employee
participates in this Plan and in a defined benefit plan that is
part of a top heavy Required Aggregation Group, the minimum
benefits required to be provided to such Non-Key Employee under
Code Section 416 will be provided by this Plan in the form of a
5% allocation in lieu of any other allocations provided for in
this Section. However, if a Non-Key Employee participates only in
this Plan, he will not receive the Extra Minimum Allocation.
3.07 ADDITIONAL ALLOCATION RULES Except as provided in Section 3.06 or by
other terms of this Plan, if during the Plan Year a Participant retires
at Normal (or Early or Late) Retirement Age, dies, suffers a
Disability, or incurs a Termination of Employment, then the allocations
made pursuant to the provisions of Sections 3.03, 3.04, and 3.05 for
such Plan Year will only be made in accordance with the following
provisions:
(a) Retiring Participants: If during the Plan Year a Participant
retires because of reaching Non-nal (or Early or Late) Retirement
Age, his Participanfs Account will receive such Plan allocations
re 'gardless of the number of Hours of Service such Participant
completes during the Plan Year in which his retirement occurs.
(b) Disabled Participants: If during the Plan Year a Participant
suffers a Disability, his Participanfs Account will receive such
allocations regardless of the number of Hours of Service he
completes during the Plan
(c) Deceased Participants: If during the Plan Year a Participant
dies, his Participant's Account will receive such Plan
allocations regardless of the number of Hours of Service he
completes during the Plan Year in which his death occurs.
(d) Terminated Participants: If during the Plan Year a Participant
has a Termination of Employment, his Participant's Account will
only receive such Plan allocations if such Participant (1)
completes at least 1000 Hours of Service during such Plan Year,
and (2) is still an Emplovee on the last day of such Plan Year.
(e) Failsafe Allocation: Notwithstanding any provision herein to the
contrary, if, after the allocations required bv this Article 3
(including this Section 3.07) have been made, this Plan fails to
satisfy Code Sections 410(b)(1) and 401(a)(26) for the Plan Year,
then, with respect to anyone who was a Participant on the first
day of such Plan Year but who has failed to receive any
allocations for such Plan Year either because he completed fewer
than 1000 Hours of Service but more than 500 Hours of Service, or
because he was not an Employee on the last day of the Plan Year,
an allocation will be made on his behalf on the same basis as any
other Participant. If more than one Employee is ineligible for
the allocations described in this Article, and the Plan will
satisfy Code Sections 410(b)(1) and 401(a)(26) if some but not
all of such ineligible Employees are eligible for an allocation,
only that number necessary to permit the Plan to satisfy the
requirements of such Code Sections will be eligible for an
allocation. The ineligible Employees will be ranked by their
Hours of Service for the Plan Year, and the Employees to receive
an allocation will be those with the highest number of Hours of
Service. If more than one Employee has completed a specific
number of Hours of Service, all such Employees will be eligible
for an allocation if any one of them would be so eligible.
(f) Earnings And Losses On Undistributed Accounts: Notwithstanding
anything in this Section to the contrary, if a retired, deceased,
disabled, or Terminated Participant has an undistributed Vested
Aggregate Account on any Anniversary Date, such Account will
receive an allocation of earnings and losses pursuant to the
provisions of Section 3.04.
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3.08 ROLLOVERS: With the consent of the Administrator, amounts (hereafter
called Rollovers) may be transferred to this Plan from another
qualified plan provided such other plan permits the transfer to be
made, subject to the following provisions:
(a) Rollover Account: Rollovers will be credited to the Participant's
Rollover Account. A Participant will at all times have a fully
Vested Interest in such account, which will be distributed in
accordance with the applicable provisions of Article 5 of the
Plan. A Participant's Rollover Account balance will either be
segregated into a separate account in such investments as the
Trustee deems acceptable, or will be invested as part of the
general Trust Fund, at the discretion of the Administrator.
(b) Definition Of Rollover: The term Rollover means amounts
transferred to this Plan from (1)another qualified plan; (2)
another qualified plan as a lump sum distribution eligible for
tax free rollover treatment and which is transferred by the
Participant to this Plan within 60 days following his receipt
thereof, (3) a conduit individual retirement account if the only
assets therein were previously distributed to the Participant by
another qualified plan as a lump sum distribution which was
eligible for a tax free rollover within 60 days of receipt
thereof and earnings on said assets; or (4) a conduit individual
retirement account meeting the requirements of subparagraph (3)
and transferred by the Participant to this Plan within 60 days of
receipt thereof.
(c) Other Conditions For Accepting Rollovers: Prior to accepting any
Rollovers, the Administrator may require the Employee to
establish that amounts to be transferred hereto meet the
requirements of this Section and may also require that the
Employee provide an opinion of counsel satisfactory to the
Employer that the amounts to be transferred meet the requirements
of this Section and will not create any adverse tax consequences
for the Employer orjeopardize the Plan's tax exempt status.
(d) Additional Limitation On Rollovers: Notwithstanding paragraph
(b)(1) above, if this Plan does not provide for a Qualified Joint
and Survivor Annuity in Section 5.01, or for a Qualified
Pre-Retirement Survivor Annuity in Section 5.02, then this Plan
will not accept any Rollovers transferred directly or indirectly
to this Plan from any defined benefit plan, money purchase plan,
target benefit plan, stock bonus plan, or profit sharing plan
which provided for a life annuity form of payment to the
Participant.
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ARTICLE 4
PLAN BENEFITS
4.01 RETIREMENT BENEFITS: Every Participant may retire on his Normal (or
Early) Retirement Date, at which time he will be eligible to receive
his Vested Aggregate Account balance, subject to the following
provisions:
(a) Determination Of Benefit: If allocations are received under
Section 3.07 in the Plan Year of his retirement, the Participant
will be entitled to his Vested Aggregate Account balance as of
the Anniversary Date coinciding with or next following his Normal
or Early Retirement Date, whichever is applicable. However, if no
allocations are received, he will only be entitled to his Vested
Aggregate Account balance as of the Anniversary Date preceding
his Normal or Early Retirement Date.
(b) Election Of Late Retirement: A Participant may elect to remain
employed after his Normal Retirement Date and retire on a later
date, but employment beyond Age 70 will require the Employer's
written consent. Such Participant's Vested Aggregate Account
balance will be determined in the same manner as described in
paragraph (a) above, based, however, on the Participant's actual
retirement date.
4.02 DEATH BENEFITS: Upon the death of a Participant before his Normal (or
Early) Retirement Date or other Termination of Employment, his
Beneficiary will be entitled to receive the balance in his
Participant's Account plus the proceeds of the Policies, if any,
purchased on his life pursuant to Section 7.03. The Administrator's
determination that a Participant has died and that a particular person
has a right to receive his death benefit will be final. In determining
a deceased Participant's death benefit, the following provisions will
apply:
(a) Fully Vested Interest: A deceased Participant will have a 100%
Vested Interest in his Participant's Account and all other Plan
accounts maintained on his behalf.
(b) Determination Of Amount: If allocations are received under
Section 3.07 in the Plan Year of his death, the deceased
Participant's death benefit will be limited to his Vested
Aggregate Account as of the Anniversary Date coinciding with or
next following his death. However, if no allocations are
received, his death benefit will be limited to his Vested
Aggregate Account as of the Anniversary Date preceding his death.
Further, the amount of the death benefit that is determined under
this Section and which is distributed to the deceased
Participant's Beneficiary under Section 5.02 will be deemed to be
a complete distribution of such Participant's interest in the
Plan.
(c) Designation Of Beneficiary: Subject to the provisions of Section
5.08 regarding the rights of a Participant's spouse, each
Participant may designate his own Beneficiary on a form supplied
by the Administrator, and may change or revoke same by filing
written notice with the Administrator. In the absence of a
designation, the Participant will be deemed to have designated
the following Beneficiaries (i f then living) in the following
order: (1) his spouse, (2) his children; and (3) his estate. If
any Beneficiary is living at the death of the Participant, but
such person dies prior to receiving the entire death benefit, the
remaining portion of such death benefit will be paid in a single
sum to the estate of such deceased Beneficiary or contingent
Beneficiary.
4.03 DISABILITY BENEFITS: If a Participant suffers a Disability before his
Normal (or Early) Retirement Date or other Termination of Employment,
he will be entitled to receive his Vested Aggregate Account balance,
subject to the following provisions:
(a) Fully Vested Interest: Such disabled Participant will have a 100%
Vested Interest in his Participant's Account and ail other Plan
accounts maintained on his behalf
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(b) Determination Of Amount: If any allocations are received under
Section 3.07 in the year he suffers a Disability, such
Participant will be entitled to his Vested Aggregate Account
balance as of the Anniversary Date coinciding with or next
following his Disability. However, if no allocations are
received, he will be entitled to his Vested Aggregate Account
balance as of the Anniversary Date preceding his Disability.
Further, the amount of the disability benefit that is determined
under this Section and which is distributed to the Participant
under Section 5.03 will be deemed to be a complete distribution
of such Participant's interest in the Plan.
4.04 BENEFITS ON TERMINATION OF EMPLOYMENT: Upon a Participant's Termination
of Employment, his Plan benefit will be limited to his Vested Aggregate
Account balance, determined in accordance with the following
provisions:
(a) Determination Of Vested Interest In Participant's Account: A
Participant will at all times have a 100% Vested Interest in all
Elective Deferrals, Qualified Matching Contributions and
Qualified Non-Elective Contributions allocated to his
Participant's Account. In determining a Participant's Vested
Interest in the Matching Contributions and Non-Elective
Contributions allocated to his Participant's Account, (1) his
Years of Service and Breaks in Service will be measured by the
Plan Year; (2) his Vested Interest will not be less than it was
as of tile later of January 1, 1996 or the adoption date of this
amended Plan; and (3) subject to the limitation set forth in (2)
above, his Vested Interest will be determined by the following
schedule:
2 Years of Service 100% Vested Interest
(b) Breaks In Service: If any Former Participant is reemployed after
a 1-Year Break in Service, his Vested Interest in his
Participant's Account will be computed as follows: (1) Years of
Service prior to the break in service will not be counted for
purposes of computing his post-break Vested Interest until such
Participant has completed 1 Year of Service from the date of his
reemployment; (2) Years of Service after a Participant has
incurred 5 consecutive 1-Year Breaks in Service will not be taken
into account in determining his Vested Interest in his
Participant's Account which accrued before such 5 year period;
and (3)if a Participant does not have a Vested Interest in his
Participant's Account, Years of Service with the Employer before
any period of consecutive 1 -Year Breaks in Service will not be
taken into account if the number of consecutive 1-Year Breaks in
Service within such period equals or exceeds the greater of 5 or
the aggregate number of Years of Service before such period.
(c) Effect Of Amendment To Vesting Schedule: No Plan amendment may
directly or indirectly reduce a Participant's Vested Interest. If
the schedule used to determine a Participant's Vested Interest is
amended, any Participant with at least 3 Years of Service (or 5
Years of Service for those Participants who do not have at least
1 Hour of Service in any Plan Year beginning after December 31,
1988) may, by filing a written request with the Administrator 60
days after to the latest of (1) the amendment's adoption date, or
(2) the amendment's effective date, or (3) the date the
Participant receives written notice of the amendment, elect to
have his Vested Interest computed by the schedule in effect prior
to the amendment. A Participant who fails to make the election
will have his Vested Interest computed by the new schedule.
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ARTICLE 5
DISTRIBUTION OF BENEFITS
5.01 RETIREMENT BENEFITS: A Participant's retirement benefits as determined
under Section 4.01, will be distributed in accordance with the
following provisions:
(a) Forms Of Distribution: A Participant may elect to have his Vested
Aggregate Account distributed in either (1) one lump-sum payment;
or (2) equal monthly, quarterly, semi-annual, or annual
installments. If a Participant's Vested Aggregate Account is paid
in installments, such Account will either be segregated and
separately invested by the Trustee or will be invested in a
nontransferable annuity Policy. If the Vested Aggregate Account
is invested in a separate account, interest will be credited
thereto and will be currently distributed in addition to the
regular installment payment.
(b) Mandatory Commencement of Benefits: Distribution of a
Participant's retirement benefits must begin no later than April
1 of the calendar year following the calendar year in which he
attains Age 70 1/2. However, the Vested Aggregate Account of any
Participant who attains Age 70 1/2 before January 1, 1988 will be
distributed in accordance with the following:(1) distribution to
a Participant who is not a 5-percent owner must begin by the
April 1st of the calendar year following the calendar year in
which occurs the later of the date he retires or the date he
reaches Age 70 1/2; (2) distribution to a Participant who is a
5-percent owner during any Plan Year beginning after December 31,
1979, must begin no later than the later of the April 1st
following the later of (A) the calendar year in which he reaches
Age 70 1/2, or the earlier of (B) the calendar year with or
within which ends the Plan Year in which he becomes a 5-percent
owner, or the calendar year in which he actually retires; and (3)
distribution to a Participant who is not a 5-percent owner and
who reaches Age 70 1/2 during 1988 and who has not retired as of
January 1, 1989 must begin no later than April 1, 1990.
(c) Definition Of 5-Percent Owner: A Participant will be treated as a
5-percent owner for purposes of this Section if he is a 5-percent
owner as defined in Code Section 416(i) (without regard to
whether the Plan is a Top Heavy Plan) at any time during the Plan
Year ending on or within the calendar year in which he reaches
Age 66 1/2 or any subsequent Plan Year. Once distributions have
begun to a 5-percent owner, they must continue even if he ceases
to be a 5-percent owner in any future Plan Year.
(d) Limitation On Distribution Periods: As of the first distribution
calendar year (as defined in Section 5.01(f) below), if a
Participant's Vested Aggregate Accrued Benefit is distributed in
other than a lump sum, distribution cannot be made over a period
exceeding the life of the Participant (or the lives of the
Participant and his designated Beneficiary) or the life
expectancy of the Participant (or the life expectancies of the
Participant and his designated Beneficiary). For purposes of this
Section 5.01, life expectancies will be determined in accordance
with the provisions of Section 5.12.
(e) Determination Of Amount To Be Distributed Each Year: If a
Participant's Vested Aggregate Accrued Benefit is to be paid in
other than a single sum, the following minimum distribution rules
will apply on or after the Participant's mandatory benefit
commencement date as set forth in Section 5.0 1 (b) above:
(1) If a Participant's Vested Aggregate Account is to be
distributed over (A) a period not extending beyond the life
expectancy of the Participant or the joint life and last
survivor expectancy of the Participant and his designated
Beneficiary, or (B) a period not extending beyond the life
expectancy of the designated Beneficiary,
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<PAGE>
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 Vested Aggregate
Account 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 by which a Participant's Vested Aggregate Account is
distributed must assure that at least 50% of such Account 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, will
not be less than the quotient obtained by dividing the
Participant's Vested Aggregate Account by the lesser of (A)
the applicable life expectancy, or (B) if the Participant's
spouse is not the designated Beneficiary, the applicable
divisor determined from the table in Q&A of tax regulation
1.401(a)(9)-2. Distributions after the death of the
Participant will be distributed using the applicable life
expectancy in subparagraph (1) above as the relevant divisor
without regard to tax regulation 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 mandatory benefit commencement date
pursuant to Section 5.01(b). The minimum distribution for
other calendar years, including the distribution calendar
year in which the employee's mandatory benefit commencement
date occurs, must be made on or before December 31 of that
distribution calendar year.
(f) Distribution Calendar Year: For purposes of this Section, the
term distribution calendar year means the 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 mandatory benefit commencement
date per Section 5.01(c).
5.02 DEATH BENEFITS: A deceased Participant's death benefits as determined
under Section 4.02 will be paid in accordance with tile following
provisions:
(a) Form Of Distribution: A Participant will designate that his
Vested Aggregate Account be distributed to his Beneficiary in
either (1) one lump-sum payment; or (2) equal monthly, quarterly,
semi-annual, or annual installments, the number of which may be
elected by the Participant. In the absence of such an election by
the Participant, the Trustee will, subject to the requirements of
paragraph (d) below, either (1) determine the number of such
installment payments to be made, or (2) invest the deceased
Participanfs Vested Aggregate Account balance in a
nontransferable annuity Policy.
(b) Mandatory Distribution To Surviving Spouse: Notwithstanding
Sections 4.02(c) and 5.02(a) to the contrary, the Trustee will
distribute a deceased Participant's Vested Aggregate Account to
the deceased Participant's surviving spouse, unless the surviving
spouse elects not to receive the death benefit. If the surviving
spouse elects, pursuant to Section 5.08, not to receive the death
benefit, or if there is no surviving spouse, the Participant's
death benefit will be paid to his designated Beneficiary, or if
no designation has been made, in accordance with Section 4.02(c).
(c) Distribution To Retired Participants: If a Retired Participant
who has started to receive his Vested Aggregate Account dies
before his entire interest therein has been distributed, the
balance thereof will be distributed at least as rapidly as under
the distribution method being used under Section 5.01 on the date
of his death.
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(d) Five Year Rule: If a Participant dies before distribution of his
Vested Aggregate Account begins, the entire balance thereof must
be distributed to the Participant's Beneficiary by December 31st
of the calendar year containing the fifth anniversary of the
Participant's death, provided, however, that if any portion of
the Participant's Vested Aggregate Account is payable to a
designated Beneficiiry, distribution may be made over the life of
such Beneficiary (or over a period not extending beyond the life
expectancy of such Beneficiary) if distribution begins not later
than December 31st of the calendar year immediately following the
calendar year in which the Participant died, and provided further
that if a Participant's spouse is his designated Beneficiary,
distribution must begin not later than the earlier of (1) the
December 31st of the calendar year immediately following the
calendar year in which the Participant died or (2) the December
31st of the calendar year in which the Participant would have
reached Age 7O 1/2. If the surviving spouse dies before
distribution begins, the 5-year requirement will apply as if the
spouse were the Participant. For purposes of this Section, life
expectancies will be determined in accordance with the provisions
of Section 5.12.
(e) Date Distribution Deemed To Begin: For purposes of this Section,
distribution of a Participant's Vested Aggregate Account balance
is considered to begin on the Participant's mandatory benefit
commencement date pursuant to Section 5.01(b) above (or, if
applicable, the date distribution is required to the
Participant's surviving spouse pursuant to Section 5.02(d)
above). If distribution in the form of an annuity irrevocably
commences to the Participant before his mandatory benefit
commencement date, the date distribution is considered to begin
is the actual date distribution begins.
5.03 DISABILITY BENEFITS: Distribution of a disabled Participant's
Disability Benefit as determined under Section 4.03 will be made in
accordance with the provisions of Sections 5.01, 5.05, and 5.06 of the
Plan.
5.04 TERMINATION OF EMPLOYMENT: A Participant who has a Termination of
Employment will be entitled to a distribution of his Vested Aggregate
Account, subject to the following:
(a) Segregation Of Account: As of the Anniversary Date coinciding
with or next following a Participant's Termination of Employment,
the Administrator will, until a distribution is made in
accordance with Section 5.04(c) below, direct the Trustee to
either invest the Terminated Participant's Vested Aggregate
Account balance in a separate account in such investments as the
Trustee deems acceptable; or leave such Vested Aggregate Account
balance as part of the general Trust Fund.
(b) Determination Of Benefit: If the Terminated Participant receives
any Plan allocations pursuant to Section 3.07 in the Plan Year of
his Termination of Employment, he will be entitled to his Vested
Aggregate Account balance as of the Anniversary Date coinciding
with or next following his Termination of Employment. However, if
the Terminated Participant does not receive any such allocations
in the Plan Year of his Termination of Employment, he will be
entitled to his Vested Aggregate Account balance as of the
Anniversary Date preceding his Termination of Employment.
(c) Distribution: A Terminated Participant's Vested Aggregate Account
will be distributed upon the earlier to occur of his death,
Disability, or his attainment of the Plan's Normal (or Early)
Retirement Age. Such distribution will be made in accordance with
the provisions of Section 5.01, Section 5.02 or Section 5.03, as
the case may be, unless an earlier cash-out has occurred in
accordance with the provisions of Section 5.05 or Section 5.06.
That portion of a Terminated Participanfs Account in which he
does not have a Vested Interest at the time of distribution will
be treated as a Forfeiture.
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<PAGE>
5.05 CASHOUTS NOT GREATER THAN $3,500: If a Participant's Vested Aggregate
Account does not exceed $3,500 (excluding any deductible Employee
contributions for Plan Years beginning prior to January 1, 1989), the
Administrator will distribute such amount as soon as administratively
feasible following the last of the Plan Year in which the Participant
completed an Hour of Service, but not later than the last day of the
Plan Year in which the Participant incurs a 1 -Year Break in Service.
If a Participant's Vested Aggregate Account balance is zero, he will be
deemed to have received a distribution of such balance. Upon
distribution, that portion of a Participant's Account in which he does
not have a Vested Interest will be treated as a Forfeiture.
5.06 CASHOUTS GREATER THAN $3,500: If a Participant's Vested Aggregate
Account balance exceeds, or at the time of any prior distribution
exceeded $3,500 (excluding any deductible Employee contributions for
Plan Years beginning prior to January 1, 1989), the Administrator will
distribute such amount as soon as administratively feasible following
the date the Participant requested payment. Upon distribution, that
portion of a Participant's Account in which he does not have a Vested
Interest will be treated as a Forfeiture. If such Vested Aggregate
Account is immediately distributable, the Participant and his spouse
(or where either the Participant or spouse has died, the survivor)
must consent'to the distribution in accordance with the following:
(a) Definition Of Immediately Distributable: An account balance is
immediately distributable if any part of such account could be
distributed to the Participant (or surviving spouse) before the
Participant reaches (or would have reached if not deceased) the
later of his Normal Retirement Age or Age 62.
(b) Participant Must Consent: Because this Plan does not provide that
a Participant's Vested Aggregate Account must be distributed as a
Qualified Joint and Survivor Annuity under Section 5.01, only the
Participant need consent to the distribution of his Vested
Aggregate Account balance that is immediately distributable. Such
consent must be obtained in writing within the 90-day period
ending on the Annuity Starting Date. The Participant will not be
required to consent to a distribution that is required by Code
Sections 401(a)(9) or 415. In addition, if this Plan, upon
termination, does not offer an annuity option (purchased by a
commercial provider), the Participant's Vested Aggregate Account
may, without his consent, be distributed to the Participant or
transferred to another defined contribution plan within the same
controlled group (other than an employee stock ownership plan as
defined in Section 4975(e)(7) of the Code).
(c) Notification: The Administrator must notify the Participant of
the right to defer any distribution until the Participant's
Vested Aggregate Account balance is no longer immediately
distributable. Such notification will include a general
explanation of the material features and 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). Notification will be provided no less than 30 days and
no more than 90 days prior to the Annuity Starting Date. However,
distribution may commence less than 30 days after notice is given
if (1) the distribution is one to which Code Sections 401(a)(11)
and 417 do not apply, (2) the Administrator clearly informs the
Participant that he has a right to a period of at least 30 days
after receiving notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular
distribution option), and (3) the Participant, after receiving
notice, affirmatively elects a distribution.
5.07 REPAYMENT OF PRIOR DISTRIBUTIONS: If a Former Participant receives a
distribution (or is deemed to have received a distribution) of his
entire Vested Interest and is subsequently reemployed by the Employer,
he may repay the full amount of the distribution (other than his own
Employee contributions, if any) before the earlier of 5 years after the
first date on which he is subsequently reemployed by the Employer or
the close of the first period of 5 consecutive 1 -Year Breaks in
Service beginning after the distribution. The balance in his
Participant's Account after such repayment will be equal to the balance
in his Participant's Account on the day the distribution described in
this paragraph was originally made.
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5.08 ELECTION AND CONSENT REQUIREMENTS: A surviving spouse's election not to
receive a deceased Participant's death benefit will not be effective
unless the spouse consents in writing to the election; the election
designates a specific Beneficiary (or form of benefit) which may not be
changed without spousal consent (or the consent of the spouse expressly
permits designations by the Participant without any requirement of
further spousal consent); and the spouse's consent acknowledges the
effect of the election and is witnessed by the Administrator or a
notary public.
5.09 APPLICATION OF CODE SECTION 401(a)(9): All distributions required
hereunder will be determined and made in accordance with the
regulations issued under Code Section 401(a)(9), including the minimum
distribution incidental benefit requirement of regulation
1.401(a)(9)-2, and any provisions in this Plan which reflect Code
Section 401(a)(9) will override any distribution options in the Plan
which are inconsistent with such Code Section and regulations.
5.10 EFFECT OF QUALIFIED DOMESTIC RELATIONS ORDER: Notwithstanding Sections
5.01 and 5.02, a Participant's benefits, if any, which are payable
hereunder as a Qualified Joint and Survivor Annuity or a Qualified
Preretirement Survivor Annuity need not be paid in such form if such
payment is inconsistent with, or has been modified by, the terms of a
qualified domestic relations order that meets the requirements of Code
Section 414(p).
5.11 COMMENCEMENT OF BENEFITS: Unless the Participant otherwise elects, the
distribution of his benefits under this Plan will commence in
accordance with the following provisions: (a) Payment of a
Participant's Plan benefits under this Section must begin no later than
the 60th day after the latest of the close of the Plan Year in which
the Participant (1) reaches the earlier of Age 65 or Normal Retirement
Age; (2) reaches his 10th anniversary of the year he commenced Plan
participation; or (3) terminates his service with the Employer.
However, the failure of a Participant and his spouse to consent to a
distribution while a benefit is immediately distributable within the
meaning of Section 5.06 will be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy this
Section; (b) If this Plan provides for early retirement, a Participant
who satisfied the service requirement for early retirement prior to his
Termination of Employment will be entitled to receive his Vested
Aggregate Account balance, if any, upon satisfaction of the age
requirement for early retirement.
5.12 DETERMINATION OF LIFE EXPECTANCIES: In determining life expectancies
for purposes of Section 5.01 and Section 5.02, the following provisions
will apply:
(a) Applicable Life Expectancy And Calendar Year: The applicable life
expectancy (or joint and last survivor expectancy) will be
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 will be the life
expectancy as so recalculated. The applicable calendar year will
be the first distribution calendar year as defined in Section
5.01(f), and if life expectancy is being recalculated, the
succeeding distribution calendar year. If annuity payments begin
before the required beginning date, the applicable calendar year
is the year such payments commence. If distribution is in the
form of an immediate annuity purchased after the Participant's
death, the applicable calendar year will be the year such annuity
is purchased.
(b) Life Expectancy: Life expectancy or joint and last survivor
expectancy under Sections 5.01 or 5.02 will be computed by use of
Tables V and VI of regulation 1.72-9. Unless otherwise elected by
the Participant (or by the spouse in the case of distributions
made under Section 5.02(d) above) by the time distributions are
required to begin, life expectancies will be recalculated
annually. Such election will be irrevocable as to the Participant
(or spouse) and will apply to all subsequent years. The life
expectancy of a nonspouse Beneficiary may not be recalculated.
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5.13 DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS: Excess Elective Deferrals
plus income and minus loss allocable thereto will be distributed no
later than each April 15th to Participants to whose Accounts Excess
Elective Deferrals were allocated for the preceding calendar year, and
who claim or are deemed to have claimed Excess Elective Defeffals for
such calendar year. Participants may receive a corrective distribution
of Excess Elective Deferrals, plus any income and minus any loss
allocable thereto during the same calendar year in which such Excess
Elective Deferrals were made if the correcting distribution is made
after the date on which the Plan received the Excess Elective Deferrals
and all of the other requirements of this Section are met. Such
distributions will be made in accordance with the following provisions:
(a) Elective Deferral: The term Elective Deferral means any Employer
contribution made to the Plan at the election of a Participant in
lieu of cash compensation, including contributions made pursuant
to a salary reduction 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 qualified
cash or deferred arrangement described in Code Sections 401(k),
402(h)(1)(B), 457, 501(c)(18) or 403(b).
(b) Excess Elective Deferrals: The term Excess Elective Deferrals
means those Elective Deferrals includible in a Participant's
gross income under Code Section 402(g) to the extent his Elective
Deferrals for a taxable year exceed the dollar limitation under
such Code Section. Excess Elective Deferrals will be treated as
Annual Additions under Section 6.01 unless such amounts are
distributed no later than the first April 15th following the
close of the Participant's taxable year.
(c) Claims: Claims must be in writing; must be submitted to the
Administrator no later than March 1st of each year with respect
to the preceding taxable year; must specify the Participant's
Excess Elective Deferrals for the preceding calendar year; and
must be accompanied by the Participant's written statement that
if such amounts are not distributed, such Excess Elective
Deferrals, when added to amounts deferred under other plans
described in Code Sections 401(k), 408(k), or 403(b), exceeds
the limit imposed by Code Section 402(g) for the year in which
the Excess Elective Deferrals occurred. A Participant will be
deemed to have made a written claim for a such a distribution if
he has Excess Elective Deferrals arising solely from amounts
deferred under this Plan and any other plans maintained by the
Employer.
(d) Income Or Loss: Excess Elective Deferrals will be adjusted for
any income or loss up to the end of the Participant's taxable
year and, at the discretion of the Administrator, may be adjusted
for income or loss up to the date of distribution. The period, if
any, between the end of the Participant's taxable year and the
date of distribution will be referred to as the gap period, and
any income earned therein will be allocated at the discretion of
the Administrator applied consistently to all Participants and to
all corrective distributions for the taxable year. The income or
loss allocable to a Participant's Excess Elective Deferrals will
be the amount determined by either the method in subparagraph (1)
or subparagraph (2) plus, if applicable the amount determined in
subparagraph (3), as follows:
(1) The amount determined by multiplying the income or loss
allocable to his Elective Deferrals for the taxable year
(and the gap period) by a fraction, the numerator of which
is the Participant's Excess Elective Deferrals for the year
and the denominator of which is (A) the Participant's
Account balance attributable to Elective Deferrals as of the
beginning of the Participant's taxable year plus any
Elective Deferrals allocated to the Participant's Account
during such taxable year and the gap period, if applicable,
or (B) solely with respect to taxable years beginning before
January 1, 1992, the Participant's Account balance
attributable to Elective Deferrals as of the end of the
Participant's taxable year, reduced by any gain and
increased by any loss allocable thereto during the taxable
year; or
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(2) The amount determined by any reasonable method of allocating
income or loss to Excess Elective Deferrals for the taxable year
and for the gap period, if applicable, provided the method used
is the same method used by this Plan for allocating income or
losses to Participant's Accounts; and
(3) Ten percent (1O%) of the amount determined under subparagraph (1)
multiplied by the number of whole calendar months between the end
of the Participant's taxable year and the date of distribution,
counting the month of distribution if distribution occurs after
the 15th of such month.
5.14 DISTRIBUTION OF EXCESS CONTRIBUTIONS Excess Contributions, plus any
income and minus any loss allocable thereto, will be distributed no
later than the last day of each Plan Year to Participants to whose
accounts such Excess Contributions were allocated for the preceding
Plan Year. Such distribution will be made in accordance with the
following provisions:
(a) Definitions: The term Excess Contributions means, with respect to
any Plan Year, the excess of the aggregate amount of Employer
contributions actually used in computing the Actual Deferral
Percentage (ADP) of Highly Compensated Employees for such Plan
Year, over the maximum amount of such contributions permitted by
the ADP (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of the ADP, beginning with
the highest of such percentages). Also, the terms Actual Deferral
Percentage, Qualified Nonelective Contributions and Qualified
Matching Contributions have the meaning ascribed to them in Code
Section 401(m) and the regulations thereunder, which are
incorporated herein by reference. Excess Contributions, including
amounts that are recharacterized under paragraph (e) below, will
be treated for purposes of this Plan as Annual Additions pursuant
to Section 6.01.
(b) Excise Taxes: If Excess Contributions are distributed more than
2 1/2 months after the last day of the Plan Year in which such
Excess Contributions arose, a 10% excise tax will be imposed on
the Employer with respect to such amounts. Distribution will be
made to Highly Compensated Employees on the basis of the
respective portions of the Excess Contributions attributable to
each such Employee. Excess Contributions of Participants who are
subject to the family member aggregation rules of Code Section
414(q)(6) will be allocated among family members in proportion to
the Elective Deferrals (and amounts treated as Elective
Deferrals) of each family member that is combined to determine
the combined Average Deferral Percentage.
(c) Determination Of Income Or Loss: Excess Contributions will be
adjusted for any income or loss up to the end of the Plan Year
and, at the discretion of the Administrator, may be adjusted for
income or loss up to the date of distribution. The period, if
any, between the end of the Plan Year and the date of
distribution will be referred to as gap period, and any income
earned therein will be allocated at the Administrator's
discretion applied consistently to all Participants and to all
corrective distributions made for the Plan Year. The income or
loss allocable to a Participant's Excess Contributions will be
the amount determined by either the method in subparagraph (1) or
subparagraph (2) plus, if applicable, the amount determined under
subparagraph (3), as follows:
(1) The amount determined by multiplying the income or loss
allocable to his Elective Deferrals (and, if applicable his
Qualified Non-Elective Contributions or his Qualified
Matching Contributions, or both) for the Plan Year (and the
gap period, if applicable) by a fraction, the numerator of
which is the Participant's Excess Contributions for the year
and the denominator of which is (A) the Participant's
Account balance attributable to Elective Deferrals (and
Qualified Non-Elective Contributions or Qualified Matching
Contributions, or both, if any of such contributions are
included in the ADP test) as of the beginning of the Plan
Year plus any Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified
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Matching Contributions, or both, if any of such
contributions are included in the ADP test) allocated to the
Participant during such Plan Year and the gap period, if
applicable, or (B) solely with respect to Plan Years
beginning before January 1, 1992, the Participant's Account
balance attributable to Elective Deferrals (and Qualified
NonElective Contributions or Qualified Matching
Contributions or both, if any such contributions are
included in the Actual Deferral Percentage test) as of the
end of the Plan Year reduced by any gain and increased by
any loss allocable thereto during the Plan Year; or
(2) The amount determined by any reasonable method of allocating
income or loss to the Participant's Elective Deferrals (and
if applicable, his Qualified Non-Elective Contributions or
his Qualified Matching Contributions, or both) for the Plan
Year and for the gap period, if applicable, provided the
method used is the same method used by this Plan for
allocating income or losses to Participants' Accounts; and
(3) Ten percent (1O%) of the amount determined under
subparagraph (1) multiplied by the number of whole calendar
months between the end of the Plan Year and the date of
distribution, counting the month of distribution if
distribution occurs after the 15th of such month.
(d) Accounting For Excess Contributions: Excess Contributions, which
cannot be refunded to the Employer, will be distributed from the
Participant's Account balance attributable to Elective Deferrals
and Qualified Matching Contributions, if any, in proportion to
the Participant's Elective Deferrals and Qualified Matching
Contributions (to the extent used in the ADP test) for the Plan
Year. Excess Contributions will be distributed from the
Participant's Account balance attributable to Qualified
Nonelective Contributions only to the extent that such Excess
Contributions exceed the Participant's Account balance
attributable to Elective Deferrals and Qualified Matching
Contributions.
(e) Recharacterization: A Participant may elect to treat his Excess
Contributions as an amount distributed to the Participant and
then contributed to the Plan. Recharacterized amounts will remain
nonforfeitable and subject to the same distribution requirements
as Elective Deferrals. Amounts may not be recharacterized by a
Highly Compensated Employee to the extent such amount in
combination with other contributions made by that Employee would
exceed 1O% of the Participant's Compensation. Recharacterization
must occur no later than 2 1/2 months after the last day of the
Plan Year in which such Excess Contributions arose and is deemed
to occur no earlier than the date the last Highly Compensated
Employee is informed in writing of the amount recharacterized and
the consequences thereof. Recharacterized amounts will be taxable
to the Participant for the tax year in which the Participant
would have received them in cash.
5.15 DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS: Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
will be forfeited, if forfeitable, or if not forfeitable, will be
distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Aggregate Contributions were
allocated for the preceding Plan Year. Such distribution will be made
in accordance with the following:
(a) Definitions: The term Excess Aggregate Contributions means, with
respect to any Plan Year, the excess of the aggregate
Contribution Percentage Amounts taken into account in computing
the numerator of the Contribution Percentage actually made on
behalf of Highly Compensated Employees for such Plan Year, over
the maximum Contribution Percentage Amounts permitted by the
Actual Contribution Percentage test (as determined by reducing
contributions made on behalf of Highly Compensated Employees in
order of their Contribution Percentages beginning with the
highest of such percentages). Also, the terms Contribution
Percentage Amount, Actual Contribution Percentage, and
Contribution Percentage have the meaning ascribed to them in Code
Section 401 (m) and the regulations
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thereunder, which pursuant to regulation 1.401(m)-1(b)(3) are
incorporated herein by reference.
(b) Excise Taxes: Excess Aggregate Contributions of Participants
subject to the family member aggregation rules of Code Section
414(q)(6) will be allocated among family members in proportion to
the Voluntary Employee Contributions and Matching Contributions
(or amounts treated as Matching Contributions) of each family
member that is combined to determine the combined Actual Deferral
Percentage. If such Excess Aggregate Contributions are
distributed more than 2 1/2 months after the last day of the Plan
Year in which they arose, a 10% excise tax will be imposed on the
Employer with respect to such amounts. Excess Aggregate
Contributions will be treated for purposes of this Plan as Annual
Additions pursuant to Section 6.0 1.
(c) Determination Of Income: Excess Aggregate Contributions will be
adjusted for any income or loss up to the end of the Plan Year
and, at the discretion of the Administrator, may be adjusted for
income or loss up to the date of distribution. The period between
the end of the Plan Year and the date of distribution, if any,
shall be referred to as the gap period, and any income earned
during the gap period will be allocated at the discretion of the
Administrator applied consistently to all Participants and to all
corrective distributions for the Plan Year. The income or loss
allocable to a Participant's Excess Aggregate Contributions will
be the amount determined by either the method in subparagraph (1)
or the method in subparagraph (2) plus, if applicable, the amount
determined under subparagraph (3):
(1) The amount determined by multiplying the income or loss
allocable to his Voluntary Employee Contributions, Matching
Contributions (if not used in the Actual Deferral Percentage
test), Qualified Non-Elective Contributions and, to the
extent applicable, Elective Deferrals for the Plan Year (and
the gap period, if applicable) by a fraction, the numerator
of which is such Participant's Excess Aggregate
Contributions for the year and the denominator of which is
(i) the Participant's Account balance(s) attributable to
Contribution Percentage Amounts as of tile beginning of the
Plan Year, plus any additional amounts attributable to
Contribution Percentage Amounts allocated to the Participant
during such Plan Year and the gap period, if applicalbe, or
(ii) solely with respect to Plan Years beginning before
January 1, 1992, the Participant's Account balance
attributable to Contribution Percentage Amounts as of the
end of the Plan Year, reduced by any gain and increased by
any loss allocable thereto during the Plan Year; or
(2) The amount determined by any reasonable method of allocating
income or loss to the Participant's Voluntary Contributions,
Matching Contributions and Qualified Non-Elective
Contributions for the Plan Year and for the gap period, if
applicable, provided the method used is the same one used by
this Plan for allocating income or losses to Participants'
Accounts; and
(3) Ten percent (1O%) of the amount determined under
subparagraph (1) multiplied by the number of whole calendar
months between the end of the Plan Year and the date of
distribution, counting the month of distribution if
distribution occurs after the 15th of such month.
(d) Accounting For Excess Aggregate Contributions: Excess Aggregate
Contribution will be forfeited, if forfeitable, or distributed on
a prorata basis from (1) the Participant's Voluntary Employee
Contribution Account and his Participant's Account balance
attributable to Matching Contributions and Qualified Matching
Contributions (and, if applicable, his Participant's Account
balance attributable to Qualified Nonelective Contributions or
Elective Deferrals, or both).
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(e) Allocation Of Forfeitures: Amounts forfeited by Highly
Compensated Employees under this Section will be applied to
reduce the Employer's contributions.
5.16 DIRECT ROLLOVERS: This Section applies to distributions made on or
after January 1, 1993. Notwithstanding any other provision of the Plan
to the contrary that would otherwise limit a distributee's election
under this Article, a distributes may elect, at the time and in the
manner prescribed by the Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributes in a direct rollover.
(a) Definition Of Eligible Rollover Distribution: An eligible
rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more;
any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
(b) Definition Of Eligible Retirement Plan: An eligible retirement
plan is an individual retirement account described in Section
408(a) of the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in Section
403(a) of the Code, or a qualified trust described in Section
401(a) of the Code, that accepts the distributee's eligible
rollover distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(c) Definition Of Distributee: A distributes includes an Employee or
former Employee. In addition, the Employee's or former Employee's
Surviving Spouse and the Employee's or former Employee's spouse
or former Spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of the Spouse
or former Spouse.
(d) Definition Of Direct Rollover: A direct rollover is a payment by
the Plan to the eligible retirement plan specified by the
distributes.
5.17 HARDSHIP DISTRIBUTIONS: The Trustee may, at the direction of the
Administrator and subject to the spousal consent requirements, if any,
set forth in Section 5.08, distribute all or part of a Participant's
Elective Deferrals (plus any earnings credited thereto as of the end of
the last Plan Year ending before July 1, 1989) due to the financial
hardship of the Participant, in accordance with and subject to the
following provisions:
(a) Definition Of Hardship: Hardship means an immediate and heavy
financial need of the Participant where such Participant lacks
available resources, and the following are the only financial
needs considered immediate and heavy: (1) medical expenses within
the meaning of Code Section 213(d) that are incurred by the
Participant, his spouse or his children; (2) the purchase
(excluding mortgage payments) of a principal residence for the
Participant; (3) payment of tuition and related educational fees
for the next 12 months of post-secondary education for the
Participant, his spouse or his children; or (4) the need to
prevent the eviction of the Participant from his principal
residence or foreclosure on the mortgage of his principal
residence.
26
<PAGE>
(b) Maximum Distribution: A hardship distribution cannot exceed the
amount required to relieve the hardship, and cannot be made to
the extent the hardship can be satisfied from other resources
reasonably available to the Participant, as determined by the
Administrator on the basis of all relevant facts and
circumstances. However, a distribution will be treated as
necessary to satisfy a hardship if the Administrator, in the
absence of actual knowledge to the contrary, relies upon the
Participant's written representation that the hardship cannot be
relieved (1) through reimbursement or compensation by insurance
or otherwise; (2) by liquidation of the Participant's assets, to
the extent such liquidation would not itself cause a hardship;
(3) by cessation of Elective Deferrals or Employee contributions
to the Plan; or (4)by other distributions or nontaxable (at the
time of the loan) loans from other Employer-maintained plans or
by any other employer, or by borrowing from commercial sources on
reasonable terms.
(c) Distributions Deemed Necessary To Meet A Hardship:
Notwithstanding anything herein to the contrary, a distribution
made hereunder will be deemed to be necessary to satisfy a
financial hardship of the Participant if all of the following
requirements are satisfied:(1) the distribution is not in excess
of the amount of the hardship, including amounts necessary to pay
any federal, state or local income taxes or penalties reasonably
anticipated to result from the distribution; (2) the Participant
has obtained all distributions (other than hardship
distributions) and all nontaxable loans currently available under
all plans maintained by the Employer; (3) the Plan, and all other
plans maintained by the Employer, provide that the Participant's
Elective Deferrals and Employee contributions will be suspended
for at least 12 months after receipt of the hardship
distribution; and (4) the Plan, and all other plans maintained by
the Employer, provide that the Participant may not make Elective
Deferrals for the Participant's taxable year immediately
following the taxable year of the hardship distribution in excess
of the applicable limit under Code Section 402(g)(5) for such
taxable year, minus the amount of such Participant's Elective
Deferral for the taxable year in which the hardship distribution
was made.
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<PAGE>
ARTICLE 6
CODE SECTION 415 LIMITATIONS
6.01 MAXIMUM ANNUAL ADDITION: The maximum Annual Addition (as defined below)
made to a Participant's various accounts maintained under the Plan for
any Limitation Year beginning after December 31, 1986 will not exceed
the lesser of the Dollar Limitation set forth in Section 6.01(a) or the
Compensation Limitation set forth in Section 6.0 1 (b), as follows:
(a) Dollar Limitation: The Dollar Limitation is the greater of
$30,000 or 25% of the defined benefit dollar limitation set forth
in Code Section 415(b)(1) as adjusted in accordance with Code
Section 415(d).
(b) Compensation Limitation: The Compensation Limitation is equal to
25% of the Participant's Section 415 Compensation for the
Limitation Year. However, this limitation will not apply to any
contribution made for medical benefits within the meaning of Code
Section 419A(f)(2) after separation from service which is
otherwise treated as an Annual Addition, or to any amount
otherwise treated as an Annual Addition under Code Section
415(i)(1).
(c) Annual Additions: The term Annual Additions means the sum of the
following amounts credited to a Participant's Account for the
Limitation Year: (1) Employer contributions; (2) Employee
contributions; (3) Forfeitures; (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; and (5) 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 fund, as defined in Code Section 419(e),
maintained by the Employer.
(d) Exclusions From Annual Additions: Notwithstanding the foregoing,
Annual Additions do not include a Participant's rollovers, loan
repayments, repayments of prior Plan distributions or prior
distributions of his mandatory contributions, direct transfers of
contributions from another plan to this Plan, deductible
contributions to a simplified employee pension plan, or his
voluntary deductible contributions.
6.02 ADJUSTMENTS TO MAXIMUM ANNUAL ADDITION: In applying the limitation on
Annual Additions in Section 6.01, the following adjustments must be
made:
(a) Short Limitation Year: In a Limitation Year of less than 12
months, the Defined Contribution Dollar Limitation in Section
6.01(a) will be adjusted by multiplying it by the ratio that the
number of months in the short Limitation Year bears to 12.
(b) Plans With Different Anniversary Dates: If a Participant
participates in multiple defined contribution plans sponsored by
the Employer which have different Anniversary Dates, the maximum
Annual Addition in this Plan for the Limitation Year will be
reduced by the Annual Additions credited to the Participant's
accounts in the other defined contribution plans for such
Limitation Year.
(c) Plans With The Same Anniversary Date: If a Participant
participates in multiple defined contribution plans sponsored by
the Employer which have the same Anniversary Date, the following
provisions will apply:
(1) If only one of the plans is subject to Code Section 412,
Annual Additions will first be credited to the Participant's
accounts in the plan subject thereto.
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<PAGE>
(2) If none of the plans are subject to Code Section 412, the
maximum Annual Addition in this Plan for a given Limitation
Year will equal the product of (A) the maximum Annual
Addition for such Limitation Year minus any other Annual
Additions previously credited to the Participant's account,
multiplied by the ratio that the Annual Additions which
would be credited to a Participant's accounts hereunder
without regard to the limitations in Section 6.01 bears to
the Annual Additions for all plans described in this
paragraph.
6.03 MULTIPLE PLANS AND MULTIPLE EMPLOYERS: All defined benefit plans
(whether terminated or not) of the Employer will be treated as one
defined benefit plan, and all such defined contribution plans (whether
terminated or not) will be treated as one defined contribution plan. In
addition, all Affiliated Employers will be considered a single
employer.
6.04 MULTIPLE PLAN REDUCTION: If an Employee is, or has been, a Participant
in one or more Employer- sponsored defined benefit plans and one or
more Employer-sponsored defined contribution plans, the sum of the
defined benefit plan fraction and the defined contribution plan
fraction for any Limitation Year may not exceed 1.0, subject to the
following rules:
(a) Adjustment Of Fraction: If the sum of the defined benefit
fraction and the defined contribution fraction for any Limitation
Year exceeds 1.0 for reasons other than those in Section 6.04(b),
the numerator of the defined benefit fraction will be adjusted so
the sum of such fractions will not exceed 1.0 for such
Participant.
(b) Adjustment of Defined Contribution Fraction: If an 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 the defined
contribution fraction will be adjusted if the sum of such defined
contribution 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 the excess of the
sum of the defined benefit fraction and the defined contribution
fraction over 1.0 multiplied by the denominator of the defined
contribution fraction will be permanently subtracted from the
numerator of the defined contribution fraction. The adjustment
will be calculated using the fractions as they would be computed
as of the end of the last Limitation Year beginning before
January 1, 1987, disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but using the Code
Section 415 limitation applicable to the first Limitation Year
beginning on or after January 1, 1987.
6.05 DEFINED BENEFIT FRACTION: The defined benefit plan fraction referred to
in Section 6.04 will be determined in accordance with the following
provisions:
(a) Definition Of Defined Benefit Fraction: The Defined Benefit
Fraction is a fraction which has as its numerator the
Participant's Projected Annual Benefits determined as of the
close of the Limitation Year and which has as its denominator the
lesser of 125% of the dollar limitation for the Limitation Year
determined under Code Section 415(b) and Code Section (d), or
140% of the amount which may be taken into account under Code
Section 415(b)(1)(B) for such Limitation Year.
(b) Exception For Pre-1987 Participants: Notwithstanding the
foregoing, with respect to anyone who was a Participant as of the
first day of the first Limitation Year beginning after December
31, 1987, in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the denominator
of the defined benefit fraction will not be less than 125% of the
Current Accrued Benefit.
29
<PAGE>
(c) Definitions: As used in this Section, (1) the term Projected
Annual Benefits means the annual benefits payable to a
Participant under all defined benefit plans (whether terminated
or not) maintained by the Employer as determined under income tax
regulation 1.415-7(b)(3); and (2) the term Current Accrued
Benefit means a Participant's accrued benefit under a defined
benefit plan, determined as if the Participant had separated from
service as of the close of the last Limitation Year beginning
before January 1, 1987, when expressed as an annual benefit
within the meaning of Code Section 415(b)(2). In determining a
Participant's Current Accrued Benefit, the Administrator will
disregard any changes in the terms and conditions of the Plan
after May 5, 1986, and any cost of living adjustment occurring
after May 5, 1986. The Current Accrued Benefit will only be used
as set forth above if the defined benefit plans individually and
in the aggregate satisfied the requirements of Code Section 415
f6r all Limitation Years beginning before January 1, 1987.
6.06 DEFINED CONTRIBUTION FRACTION: The defined contribution plan fraction
referred to in Section 6.04 will be determined in accordance with the
following provisions:
(a) Definition Of Defined Contribution Fraction: The Defined
Contribution Fraction is a fraction the numerator of which is the
sum of the Annual Additions to the Participant's Account under
all the defined contribution plans (whether terminated or not)
maintained by the Employer for the current Limitation Year and
all prior Limitation Years (including the Annual Additions
attributable to the Participant's nondeductible Employee
contributions to all defined benefit plans, whether terminated or
not, maintained by the Employer, and the Annual Additions
attributable to all welfare benefit funds, as defined in Code
Section 419(e), and individual medical accounts, as defined in
Code Section 415(l)(2), maintained by the Employer), and the
denominator of which is the sum of the maximum aggregate amounts
for the current Limitation Year and all prior Limitation Years
the Employee was employed by the Employer (regardless of whether
a defined contribution plan was maintained by the Employer). The
maximum permissible aggregate amount in any Limitation Year is
the lesser of (1) 125% of the dollar limitation in effect in Code
Section 415(c)(1)(A) for such Limitation Year determined without
regard to Code Section 415(c)(6) and adjusted per regulation
1.415-7(d)(1) and Notice 83-10, or (2) 140% of the amount which
may be taken into account under Code Section 415(c)(1)(B) for
such Limitation Year.
(b) Transition Rule For Denominator: For defined contribution plans
in effect on or before July 1, 1982, the Administrator may elect
for any Limitation Year ending after December 31, 1982 that the
denominator will be the product of the denominator for the
Limitation Year ending in 1982 determined under the law in effect
for such Limitation Year, multiplied by the Transition Fraction.
(c) Definition Of Transition Fraction: For purposes of this Section,
the Transition Fraction is a fraction which has as its numerator
the lesser of $51,875 or 1.4 multiplied by 25% of the
Participant's Section 415 Compensation for the Plan Year ending
in 198 1, and which has as its denominator the lesser of $41,500
or 25% of the Participant's Section 415 Compensation for the Plan
Year ending in 1981.
6.07 TOP HEAVY PLAN ADJUSTMENTS: Notwithstanding anything herein to the
contrary, in any Top Heavy Plan Limitation Year, the following rules
will apply in determining the defined benefit fraction and the defined
contribution fraction:
(a) Determination Of Transition Fraction: In Section 6.05(c), $41,500
will be substituted for $51,875 in determining the Transition
Fraction unless the Extra Minimum Allocation is being provided in
Section 3.06. In a Super Top Heavy Plan Limitation Year, $41,500
will be substituted for $51,875 in any event.
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<PAGE>
(b) Determination Of Multiple Plan Fraction: 100% will be substituted
for 125% in Sections 6.05 and 6.06 unless a 7.5% allocation is
being provided to Non-Key Employees in Section 3.06 or a Non-Key
Employee is being provided with a retirement benefit under a
defined benefit plan that is equal to 3% of his average monthly
Section 415 Compensation. However, in any Super Top Heavy Plan
Limitation Year, 100% will be substituted for 125% in any event.
(c) Adjustments If Limitation Is Exceeded: If the 100% limitation is
exceeded for any Participant in any Limitation Year, then the
Participant's accrued benefit in the defined benefit plan will
not be increased; no Annual Additions may be credited to his
accounts; and the Participant may not make any contributions
(voluntary or mandatory) to this Plan or any other Employer
sponsored-qualified plan.
6.08 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS: If an allocation of
Forfeitures or an error in calculating a Participant's Compensation
causes the Annual Additions allocated to such Participant's Account to
exceed the maximum set forth in Section 6.01, such Participant's
Account will be adjusted as follows in order to reduce such excess:
(a) Return Of Voluntary Employee Contributions: The Administrator
will return any Voluntary Employee Contributions to the extent
that such return would reduce the excess amount in the
Participant's Account.
(b) Remaining Excess: If after applying paragraph (a), an excess
amount remains in such Participant's Account, such excess will be
disposed of in the following manner:
(1) If the Participant is employed by the Employer at the end of
the Limitation Year, the Administrator will hold the excess
amount in the Section 415 Suspense Account and use such
excess to reduce Employer contributions (including any
allocation of Forfeitures) for the next Limitation Year (and
for each succeeding Limitation Year if necessary) for such
Participant.
(2) If the Participant is not employed by the Employer at the
end of a Limitation Year, the excess amount may not be
distributed to the Participant but will be held unallocated
in the Section 415 Suspense Account and will be used to
reduce future Employer contributions (including the
allocation of Forfeitures) for all remaining Participants in
the next Limitation Year, and in each succeeding Limitation
Year if necessary.
(c) Earnings, Losses And Reallocation: If the Section 415 Suspense
Account is in existence at any time during a Limitation Year
pursuant to this Section, it will not share in the allocation of
the earnings or losses of the Trust Fund. If the Section 415
Suspense Account is in existence at any time during a particular
Limitation Year, all amounts in such account must be allocated
and reallocated to Participants' Accounts before any Employer
contributions or any Employee contributions may be made to the
Plan for that Limitation Year. Excess amounts in the Section 415
Suspense Account may not be distributed to Participants or former
Participants.
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<PAGE>
ARTICLE 7
TRUSTEE
7.01 APPOINTMENT, RESIGNATION, REMOVAL, AND SUCCESSION: This Plan will have
one or more individual Trustees, or one corporate Trustee, or any
combination thereof, said Trustee or Trustees to serve in accordance
with the following provisions:
(a) Appointment Of Trustee: Each Trustee will be appointed by the
Employer and will serve until its successor has been named or
until such Trustee's resignation, death, incapacity, or removal,
in which event the Employer will name a successor Trustee. The
term Trustee will include the original and any successor
Trustees.
(b) Resignation Of Trustee: A Trustee may resign at any time by
giving 30 days written notice in advance to the Employer, unless
such notice is waived by the Employer. The Employer may remove a
Trustee by giving such Trustee 30 days written notice in advance.
Such removal may be with or without cause.
(c) Successor Trustee: Each successor Trustee will succeed to the
title to the Trust by accepting his appointment in writing and by
filing such written acceptance with the former Trustee and the
Employer. The former Trustee, upon receipt of such acceptance,
will execute all documents and perform all acts necessary to vest
the Trust Fund's title of record in any successor Trustee. No
successor Trustee will be personally liable for any act or
failure to act of any predecessor Trustee.
(d) Merger Of Corporate Trustee: If any corporate Trustee, before or
after qualification, changes its name, consolidates or merges
with another corporation, or otherwise reorganizes, any resulting
corporation which succeeds to the fiduciary business of such
Trustee will become a Trustee hereunder in lieu of such corporate
Trustee.
7.02 GENERAL INVESTMENT POWERS: The Employer will establish, by a statement
delivered in writing to the Trustee, a funding policy for the Plan and
the Trustee's actions performed pursuant to this Plan will be
consistent with said funding policy. However, the Trustee will have no
responsibility for reviewing the funding policy or advising the
Employer on the merits of said policy. Consistent with such funding
policy, the Trustee will invest and reinvest the Trust Fund without
distinction between principal and income in such securities or property
(real, personal or mixed), wherever situated, as the Trustee deems
advisable, including, but not limited to, bonds, notes, debentures,
mortgages, preferred or common stock, and real estate or any interest
therein. Also, in addition to all powers under common law, statutory
law, and other provisions of this Plan, the Trustee will have the
following investment powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) Purchase And Sale Of Securities: The Trustee may purchase, or
subscribe for, any bonds, debentures, mortgages, notes, common or
preferred stocks (with or without par value), and other property
and retain the same as the Trustee deems advisable. In
conjunction with tile purchase of any securities, margin accounts
may be maintained. The Trustee may sell, exchange, convey,
transfer, grant options to purchase, or otherwise dispose of any
securities held by the Trustee, by private contract or at public
auction. No person dealing with tile Trustee will be bound to see
to the application of the purchase money or to inquire into the
validity or propriety of any such sale or other disposition, with
or without advertisement.
(b) Exercise of Securities' Rights: The Trustee may vote (in person,
by general or limited proxy, or by power of attorney) upon any
stocks, bonds, debentures, or other securities; may exercise any
conversion privileges, subscription rights or other options; and
may make any payments incidental thereto. The Trustee may join
in, dissent from, or oppose, corporate
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reorganizations, recapitalizations, consolidations,sales or
mergers of any corporation or its properties, upon such terms and
conditions as it deems advisable, and may accept any securities
which may be issued upon any such reorganization,
recapitalization, consolidation, sale or merger and thereaher
hold the same as a part of the Trust Fund. The Trustee may
exercise any powers of an owner with respect to stocks, bonds,
securities, or other property.
(c) Registration of Securities: The Trustee may cause any securities
or other property to be registered in the Trustee's own name or
in the name of the Trustee's nominee(s), and may hold any
investments in bearer form, but the records of the Trustee will
at all times show all such investments as part of the Trust Fund.
(d) Call Options: The Trustee may write and sell call options if the
holder has the right to purchase stock held by the Trustee as
part of the Trust Fund, if (1) such options are traded or sold
through a securities exchange registered under the Securities
Exchange Act of 1934 which is authorized to provide a market for
option contracts under Rule 9B- 1 of such Act, and (2) the
Trustee at all times (including the time of exercise or
expiration of the option) holds sufficient stock in the Trust
Fund to meet the obligations under the option if exercised. The
Trustee may purchase and acquire call options for the purchase of
stock covered by such options if the options are traded on and
purchased through a national securities exchange as described
above and the option is purchased solely in a closing purchase
transaction.
(e) Property Transactions: The Trustee may sell, exchange, transfer,
or dispose of, and may also grant options with respect to, any
property, whether real or personal, at any time held by it. Any
sale may be made by private contract or by public auction, and no
person will be bound to see to the application of the purchase
money or to inquire into the validity or propriety of any such
sale or other disposition. Further, the Trustee may retain,
manage, operate, repair, improve and mortgage or lease for any
period on such terms as it deems proper any real estate or
personal property held by it, including the power to demolish any
building or other improvements in whole or part. The Trustee may
erect buildings or other improvements, may make leases that
extend beyond the term of this Trust, and may foreclose, extend,
reiiew, assign, release or partially release and discharge
mortgages or other liens.
(f) Mineral Investments: The Trustee may purchase, convey, lease, and
otherwise deal with oil, gas and other minerals, mineral rights,
and royalties. The Trustee may operate and develop oil, gas, and
other mineral properties and interests, including, but not
limited to, the power to make and release oil, gas, and mineral
leases and subleases. The Trustee may make mineral deeds and
royalty transfers, create, reserve and dispose of overriding
royalties, oil payments, gas payments, and any other interests,
may execute division orders and transfer orders, may enter into
development and drilling contracts, operating agreements and
unitization agreements, and may make agreements for present or
future pooling of any and all interests in oil, gas and other
minerals.
(g) Cash Reserves: The Trustee may retain in cash so much of the
Trust Fund as it may deem advisable to satisfy the liquidity
needs of the Plan and to deposit any cash held in the Trust Fund
in a bank account without liability for the highest rate of
interest available. If a bank is acting as Trustee, such Trustee
is specifically given authority to invest in deposits of such
Trustee.
(h) Cash Held Uninvested: The Trustee may hold cash uninvested at any
time and from time to time and in such amount or to such extent
as the Trustee deems prudent, and the Trustee will not be liable
for any losses which may be incurred as the result of the failure
to invest same, except to the extent provided herein or in ERISA.
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(i) Loans to the Trust: The Trustee may borrow or raise money for
Plan purposes in such amount, and upon such terms and conditions,
as the Trustee deems advisable; and for any sum so borrowed, the
Trustee may issue a promissory note as Trustee, and secure its
repayment by pledging all, or any part of the Trust Fund. No
person lending money to the Trustee will be bound to see to the
application of the money lent or to inquire into the validity or
propriety of any borrowing.
(j) Other Investments: The Trustee may accept and retain for such
time as the Trustee deems advisable any securities or other
property received or acquired as Trustee, whether or not such
securities or other property would normally be purchased as
investments hereunder.
(k) Documents of Transfer: The Trustee may make, execute,
acknowledge, and deliver any and all contracts, deeds, leases,
waivers, releases, guarantees, pledges, conveyances, powers of
attorney, or other instruments necessary or proper to accomplish
any of the powers granted herein.
(1) Claims, Debts or Damages: The Trustee may settle, compromise, or
submit to arbitration any claims, debts, or damages due or owing
to or from the Plan.
(m) Litigation: The Trustee may begin, maintain, or defend any
litigation necessary in connection with the administration of the
Plan, except that the Trustee will not be obliged or required to
do so unless indemnified to its satisfaction.
(n) Treasury Bills and Certificates of Deposit: The Trustee may
invest in Treasury Bills and other forms of United States
government obligations and may deposit monies in federally
insured savings accounts or certificates of deposit in banks or
savings and loan associations.
(o) Mutual Funds, Money Funds, and Pooled Funds: The Trustee may
invest in mutual funds, money funds, and other pooled fund
arrangements.
(p) Miscellaneous: The Trustee may do all such acts and exercise all
such rights and privileges, although not specifically mentioned
herein, as the Trustee deems necessary to carry out the purposes
of the Plan. Further, the Trustee will not be restricted to
securities or other property of the character expressly
authorized by applicable law for trust investments, subject,
however, to the requirement that the Trustee discharge his duties
with the care, skill, prudence, and diligence, under the
circumstances then prevailing, that a prudent man acting in a
like capacity and familiar with such matters would use in the
conduct of an enterprise of similar character and with similar
aims by diversifying the investments to minimize the risks of
large losses unless under the circumstances it is clearly prudent
not to do so. Further, the Trustee will give due regard to any
limitations imposed by the Code or ER] SA so that at all times
this Plan may continue to be a qualified retirement plan.
7.03 PURCHASE OF INSURANCE POLICIES: The Trustee may purchase insurance
Policies on the lives of the Participants as otherwise provided by the
terms of the Plan, as follows (provided, however, that except in a
fiduciary capacity, no Trustee who is also a Participant may exercise
any ownership rights with respect to any Policy insuring his life):
(a) Key Man Insurance: The Trustee, with the Administrator's consent,
may purchase Policies on any Participant whose employment is
deemed to be key to the Employer's financial success. Such
Policies will be deemed an investment of the Trust and will be
payable to the Trust as the beneficiary thereof. The Trustee may
exercise any and all rights granted under such Policies.
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(b) Fiduciaries And Insurers Protected: Neither the Trustee, the
Employer, the Administrator, nor any Fiduciary (as defined in
Section 12.05) will be responsible for the validity of any Policy
or the failure of any insurer to make payments thereunder, or for
the action of any person which may delay payment or render a
Policy void in whole or in part. Further, no insurance company
which issues a Policy will be deemed to be a party to this Plan
for any purpose nor to be responsible for its validity; nor will
it be required to look into the terms of the Plan nor to question
any action of the Trustee. The obligations of the insurance
company will be determined solely by the Policies terms and any
other written agreements between it and the Trustee. The
insurance company will act only at the written direction of the
Trustee, and will be discharged from all liability with respect
to any amount paid to the Trustee. Further, the insurance company
will not be obligated to see that any money paid by it to the
Trustee or to any other person is properly distributed or
applied.
7.04 POOLED TRUST FUNDS: A corporate Trustee may invest Trust assets in any
collective investment trust maintained by such Trustee for the pooling
of the assets of plans described in Code Section 401 (a) if such trust
is exempt from federal income tax, and the provisions of such trust are
incorporated herein by reference and will govem the investment of Plan
assets therein. Also, any Trustee may pool Trust assets with assets
belonging to any other qualified retirement trust created by the
Employer, and may commingle such assets and make joint or common
investments and carry joint accounts for this Plan and such other
trust, allocating undivided shares therein to the two or more trusts in
accordance with their respective interests. The Trustee may also buy or
sell any assets or undivided interests in this Trust or in any other
trust with which the assets of this Trust are pooled.
7.05 VALUATION OF THE TRUST FUND: On each valuation date (that is, the
Anniversary Date and such other dates deemed necessary by the
Administrator in a manner that does not discriminate in favor of Highly
Compensated Employees), the Trustee will determine the net worth of the
Trust Fund. Trust assets will be evaluated at fair market value, and
all expenses for which the Trustee has not yet obtained reimbursement
from the Employer or the Trust Fund will be deducted. A security listed
or traded on any recognized exchange will be valued at its last sale
price on the valuation date, and if traded on more than one recognized
exchange, the Trustee may select the last price on any such exchange.
If a sale has not been reported on any such exchange for that day, the
mean between the closing bid and asked prices quoted by any such
exchange selected by the Trustee will be used. If the closing bid and
asked prices do not fairly indicate the actual market value in the
opinion of the Trustee or if there is not both a bid and an asked
price, the Trustee will obtain a quotation from a reputable broker or
investment banker and any other pertinent information and will proceed
to determine value. If security is not listed or traded on a recognized
exchange, such security will be valued by a consideration of tile bid
and asked prices, quotations obtained from a reputable broker or
investment banker as of the close of business on the valuation date, or
any other pertinent information.
7.06 PAYMENTS FROM THE TRUST FUND: The Trustee will pay Plan benefits and
other payments as the Administrator directs, and except as provided by
ERISA, the Trustee will not be responsible for the propriety of such
payments. Any payment made to a Participant, his legal representative
or Beneficiary in accordance with the terms of the Plan will, to the
extent thereof, be in full satisfaction of all claims arising against
the Trust, the Trustee, the Employer, and the Administrator. Any
payment or distribution is contingent on the recipient executing a
receipt and release acceptable to the Trustee or Employer.
7.07 COMPENSATION AND EXPENSES: The Trustee, either from the Trust Fund or
directly by the Employer, will be reimbursed for all of its expenses
and will be paid reasonable compensation as agreed upon from time to
time with the Employer. However, no person who already receives
full-time pay from the Employer may receive any fees for his services
to the Plan either as Trustee or in any other capacity.
7.08 PAYMENT OF TAXES: The Trustee will pay all taxes of the Trust Fund,
including property taxes,
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income taxes, transfer taxes and other taxes which may be levied or
assessed upon or in respect of the Trust Fund or any money, property or
securities forming a part of the Trust Fund. In addition, the Trustee
may withhold from distributions to any payee such sum as the Trustee
may reasonably estimate as necessary to cover federal and state taxes
for which the Trustee may be liable, which are, or may be, assessed
with regard to the amount distributable to such payee. Prior to making
any payment, the Trustee may require such releases or other documents
from any lawful taxing authority and may require such indemnity from
any payee or distributes as the Trustee deems necessary.
7.09 ACCOUNTS, RECORDS, AND REPORTS: The Trustee will (a) maintain records
and accounts of all Plan transactions; (b) make them available at all
reasonable times for inspection by any person designated by the
Administrator; and (c) submit such interim valuations, reports, or
other information as the Administrator may require. Within 90 days
after the close of a Plan Year or the effective date of the removal or
resignation of the Trustee, the Trustee will file a written report with
the Administrator of all transactions effected since the end of the
period for the last previous report, and approval of such report will
be a full acquittance and discharge of the Trustee with respect to all
matters set forth therein. Upon the expiration of 90 days from the
filing date of the report (or upon earlier specific approval @s
provided above) the Trustee will be forever discharged from all
liability and accountability with respect to all matters set forth
therein, except for actual fraud or any specific transactions to which
the Administrator files written objections within such 90-day period.
However, the Trustee will not be precluded from seeking a judicial
settlement of its account and records.
7.10 TRANSFER OF INTEREST: The Trustee may transfer a Participant's Vested
Aggregate Account to another qualified plan maintained by the
Participant's new employer if such plan permits the transfer to be
made, subject to the following provisions (such provisions to be
interpreted and applied in accordance with regulation 1.41l(d)-4,
Q-3):
(a) Participant Election: The transfer will only be made if the
Participant voluntarily elects to transfer his benefit to another
plan. However, the Participant will be given the option of
leaving his benefit in this Plan, subject to Sections 5.05 and
5.06.
(b) Spousal Consent And Notice: If this Plan provides for a Qualified
Joint and Survivor Annuity under Section 5.01, the Participant's
spouse must consent to such election, such consent to be obtained
in accordance with Section 5.08. Also, before making the election
to have his benefit transferred, the Participant must be provided
with the written explanation with respect to an election not to
receive a Qualified Joint and Survivor Annuity as provided in
Section 5.08.
(c) Benefit Must Be Immediately Distributable: Before any transfer
can be made under this Section, the Participant whose benefits
are being transferred must be eligible under the terms of the
Plan to receive an immediate distribution from this Plan.
Further, the amount of the benefit being transferred must equal
the Participant's entire Vested Aggregate Account balance.
(d) Benefit Under The Transferee Plan: The transferee plan must
provide that the Participant will have a fully Vested Interest in
the amount being transferred. In a transfer from this plan to a
defined benefit plan, the defined benefit plan must provide a
minimum benefit for each Participant whose benefits are being
transferred equal to the benefit, expressed as an annuity payable
at normal retirement age, that is derived solely on the basis of
the amount being transferred by the Participant.
7.11 MULTIPLE TRUSTEES: Unless the Plan Trustees have agreed that a
particular act or transaction must be approved by a majority of their
number, any single Trustee may act independently on behalf of the Trust
and may execute papers on behalf of the Trust.
7.12 EMPLOYMENT OF AGENTS AND COUNSEL: The Trustee may employ such agents
and
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counsel as it deems necessary and may pay their reasonable expenses and
compensation. The Trustee will not be liable for any action taken or
omitted by it in good faith pursuant to the advice of such agents and
counsel.
7.13 LOANS TO PARTICIPANTS: The Trustee may, in his sole discretion, make
loans to Participants and Beneficiaries under the following
circumstances:
(a) Loans Must Be Nondiscriminatory: Any loan made under this Section
must be made available to all Participants on a reasonably
equivalent basis. Further, any such loan cannot be made available
to Highly Compensated Employees in an amount greater than the
amount made available to other Employees.
(b) Loans Must Bear Reasonable Interest: Any such loan must bear a
reasonable rate of interest commensurate with the interest rates
charged by persons in the business of lending money for loans
which would be made under similar circumstances. The Trustee will
treat any loan made hereunder as a directed investment of the
Participant, and will allocate the interest on such loan directly
to the individual Participant's Account.
(c) Loans Must Be Adequately Secured: Each such loan will be
adequately secured, and in addition to any other security the
Trustee may deem necessary, each Participant who receives a loan
from the Plan will be required to execute a loan agreement and a
promissory note in which the Participant assigns his entire
interest in the Plan as security for such loan; provided,
however, that the Participant must obtain the written consent of
his spouse, if any, no earlier than the beginning of the 90 day
period ending on the date the loan is so secured. The consent
must be in writing, must acknowledge the effect of the loan, and
must be witnessed by the Administrator or a notary public. Such
consent will thereafter be binding with respect to the consenting
spouse or any subsequent spouse with respect to that loan. A new
consent will be required if the Account balance is used for
renegotiation, extension, renewal, or other revision of the loan.
Also, the use of a Participant's Account balance as security for
any loan given under the terms of this Section must be approved
in writing by all Trustees and the Plan Administrator.
(d) Terms Of Repayment: Each loan must be repaid (principal and
interest) within 5 years by substantially level payments, not
less frequently than quarterly, unless such loan is used to
acquire any dwelling unit which within a reasonable time
(determined at the time the loan is made) will be used as the
Participant's principal residence. However, loans made before
January 1, 1987 may provide for periodic repayments which are
made less frequently than quarterly and are not necessarily
equal.
(e) Minimum Loan And Maximum Loan: The minimum loan that can be made
to a Participant is $1,000. However, no loan (when added to the
outstanding balance of all other loans from the Plan) can exceed
the lesser of: (1) $50,000 reduced by the excess (if any) of the
highest outstanding loan balance from the Plan during the 1-year
period ending on the dav before the date on which such loan was
made, over the outstanding loan balance from the Plan on the date
such loan was made; or (2) one-half of the Participant's Vested
Aggregate Account.
(f) Repayment Of Loan Before Distribution Of Benefit: If a
Participant has received a loan from the Plan and he (or his
Beneficiary) is entitled to a payment from the Trust Fund before
such loan is repaid in full, the Trustees will offset, at the
time of distribution, any outstanding indebtedness, including
accrued interest, from the total amount otherwise due to the
Participant (or his Beneficiary). If a valid spousal consent has
been obtained pursuant to paragraph (c) above, then
notwithstanding any other provision of this Plan, the portion of
the Participant's Vested Aggregate Account balance used as a
security interest for a loan will be taken into account for
purposes of determining the amount of the Vested Aggregate
Account balance payable at the time of death or distribution, but
only if the reduction is
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used as a repayment of the loan. If less than 100% of the
Participant's Vested Aggregate Account (determined without regard
to the preceding sentence) is payable to the Participant's
surviving spouse, then such Vested Aggregate Account will be
adjusted by first reducing the Vested Aggregate Account by the
amount of the security used as repayment of the loan, and then
determining the benefit payable to the surviving spouse.
(g) Reasons For Immediate Repayment: A Participant's loan will
immediately become due and payable if the Participant ceases to
be an Employee or if the Participant fails to make a principal
and/or interest payment on the loan. If the Participant ceases to
be an Employee, the Administrator will immediately request
payment of principal and interest on the loan. If the Participant
refuses to make such payment, the Administrator will reduce his
Vested Aggregate Account balance by the remaining principal and
interest of the loan. If the Participant's Vested Aggregate
Account balance is less than the amount due, the Administrator
will take whatever steps are necessary to collect the balance due
directly from the Participant. However, no foreclosure on the
promissory note or attachment of the Participant's Vested
Aggregate Account balance will occur until a distributable event
occurs in the Plan.
(h) Restrictions On Owners And Shareholders: Loans may not be made to
an owner-employee as defined in Code Section 401(c)(3) or to a
shareholder-employee unless an exemption from the prohibited
transaction rules of the Code and ERISA has been obtained. A
shareholder-employee is an employee or officer of an electing
small business (Subchapter S) corporation who owns (or is
considered as owning within the meaning of Section 318(a)(1) of
the Code), on any day during the taxable year of such
corporation, more than 5% of the outstanding stock of the
corporation.
7.14 DIRECTED INVESTMENT ACCOUNTS: Notwithstanding anything herein to the
contrary, a Participant may direct the Trustee in writing with regard
to the investment of any Elective Deferrals allocated to his
Participant's Account, subject to the following provisions:
(a) Directed Investment Account: Any investments the Trustee makes at
the direction of a Participant will be credited to the
Participant's Directed Investment Account. Such account will not
receive an allocation of the earnings or losses of the Trust
Fund, but rather will only receive an allocation of the actual
earnings or losses thereon. Further, any costs or expenses
connected with such investment directives will be considered an
expense of such Directed Investment Account. Investment
directives may be given to the Trustee at any time.
(b) Trustee's Responsibility And Liability: The Trustee will be
required to follow a Participant's investment directive (or the
revocation thereof), subject to the restrictions concerning the
payment of Policy premiums as set forth in Section 7.03. Neither
the Trustee nor the Administrator will be under any duty to
question or review any such investment directive, or to make
suggestions to the Participant in connection therewith. However,
the Trustee may refuse to comply with any investment directive,
if, in his sole judgment, such investment would be improper
because of any applicable law. However, if the Trustee exercises
such authority, he must give the Participant a written statement
setting forth his reasons why the investment directive was not
followed. Further, the Trustee will bear no responsibility or
liability for any loss or expense arising from any directed
investment. In addition, the Trustee is absolved of any fiduciary
responsibility with respect to such directed investment.
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ARTICLE 8
ADMINISTRATOR
8.01 APPOINTMENT, RESIGNATION, REMOVAL, AND SUCCESSION: The Employer will be
the Plan Administrator unless it appoints another person or entity.
Each Administrator (other than the Employer) will continue until his
death, resignation, or removal by the Employer, and any Administrator
may resign by giving 30 days written notice to the Employer. If an
Administrator dies, resigns, or is removed by the Employer, his
successor will be appointed as promptly as possible, and such
appointment will become effective upon its acceptance in writing by
such successor. Pending the appointment and acceptance of any successor
Administrator, any then acting or remaining Administrator will have
full power to act.
8.02 POWERS AND DUTIES OF THE ADMINISTRATOR: The Administrator will
administer the Plan in accordance with its terms and will have all the
powers necessary to carry out its terms. In addition, the Administrator
will have the following specific powers and duties:
(a) Plan Interpretation: All interpretations of the Plan, except as
they relate to the Trust, and questions concerning its
administration and application, will be determined by the
Administrator, and such determination will be final except as
otherwise provided.
(b) Books And Records: The Administrator will maintain all such books
of account, records, and other data as are necessary for the
proper administration of the Plan and for meeting the reporting
and disclosure requirements of the Code and ERISA.
(c) Annual Statements And Other Information: The Administrator will
upon written request of a Participant or Beneficiary provide
copies of such material as it deems appropriate or required by
law, in which case the Participant or Beneficiary may be required
to pay the reasonable cost of preparing and furnishing such
material as the Administrator determines or as prescribed and
limited by law. In addition, the Administrator will, once during
each Plan Year, furnish each Participant or Beneficiary with a
statement indicating the balance in his Participant's Account
(and his various other Plan accounts) and his Vested Interest
therein.
(d) Summary Plan Description: The Administrator will furnish each
Participant and Beneficiary receiving benefits hereunder a copy
of the summary plan description and any changes thereto as may be
made from time to time.
(e) Domestic Relations Orders: The Administrator will establish
written procedures to determine if a domestic relations order is
a qualified domestic relations order (as such terms are defined
in Code Section 414(p)), and will also establish procedures to
administer any Plan benefits required to be distributed pursuant
to such orders.
(f) Maternity Or Paternity Leave: The Administrator will establish
procedures a Participant must follow in verifying Maternity or
Paternity Leave. In connection therewith, the Administrator may
require the Employee to provide timely information needed to
establish that the absence from work is due to Maternity or
Paternity Leave and the number of days applicable thereto.
(g) Information From Employer: The Employer will supply the
Administrator (and the Trustee) with such information as they
require to enable them to perform their duties. The Administrator
(and the Trustee) will be entitled to rely upon such information
and will have no duty or responsibility to verify its accuracy.
(h) Miscellaneous: The Administrator will, in addition to the
foregoing, have all other powers necessary to carry out the terms
and conditions of the Plan.
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8.03 MULTIPLE ADMINISTRATORS: If there is more than one Administrator, the
Employer may delegate specific responsibilities to each one. In
addition, the Administrators may delegate specific responsibilities
among themselves (unless revoked by the Employer), including, but not
limited to, the authority to sign documents. The Employer and the
Trustee will be promptly notified in writing of any such delegation.
The Trustee thereafter may rely upon any documents executed by the
appropriate Administrator.
8.04 EMPLOYMENT OF AGENTS AND COUNSEL: The Administrator may appoint such
actuaries, accountants, custodians, counsel, agents, consultants, and
other persons deemed necessary or desirable in connection with the
administration and operation of the Plan. However, no such persons will
be given any authority or discretion concerning the management and
operation of the Plan that would cause them to become Plan Fiduciaries.
8.05 COMPENSATION AND EXPENSES: The Administrator may receive such
compensation as agreed upon from time to time between the Employer and
the Administrator, provided that any person who already receives
full-time pay from the Employer may not receive any fees for his
services to the Plan as Administrator or in any other capacity. In
addition, the Employer will pay all reasonable expenses incurred by the
Administrator in the performance of its duties under this Plan. If the
Employer fails to pay such expenses, the Trustee will reimburse the
Administrator for such expenses out of the Trust Fund.
8.06 CLAIMS FOR BENEFITS: Claims for benefits under this Plan must be filed
with the Plan Administrator. All such claims will be handled and
disposed of as follows:
(a) Denial Of Claim: Written notice of the denial of a claim will be
furnished to the claimant within 90 days after the application is
filed. Such notice will set forth, in a manner calculated to be
understood by the claimant, specific reasons for such denial,
specific references to the Plan provisions on which the denial is
based, a description of any additional material necessary for the
claimant to perfect his claim, an explanation of why such
material is necessary, and an explanation of the Plan's review
procedures.
(b) Review Procedure: Within 60 days after a claimant receives a
denial of his claim, such claimant may make a written request to
the Administrator for a review by the Administrator of such
denial. The request must set forth all of the grounds upon which
it is based, supporting facts, and any other matters the claimant
deems pertinent. The Administrator will, upon written
application, give the claimant the opportunity to review
documents pertinent to his claim and may require the claimant to
submit such additional facts, documents or other materials as it
deems necessary or advisable in making its review. In conducting
such a review, the Administrator may hold a hearing, if it
determines that such a hearing is necessary. The Administrator
must act upon a request for a review within 60 days after receipt
thereof unless special circumstances (such as the need to hold a
hearing) require further time, but in no event later than 120
days after receipt. If an extension of time is required, written
notice will be furnished to the claimant. If the Administrator
confirms the denial in whole or in part, written notice will be
furnished to the claimant setting forth, in a manner calculated
to be understood by the claimant, the reasons for the denial and
references to the Plan provisions on which the denial is based. A
claimant must exhaust all remedies set forth in the Plan prior to
seeking remedy through actions of the courts and/or governmental
bodies.
8.07 SALARY REDUCTION AGREEMENTS: No Elective Deferrals will be made on
behalf of any Participant until the Participant has executed a Salary
Reduction Agreement. In furtherance thereof, each Participant in this
Plan will be given a Salary Reduction Agreement in which he evidences
both his intent to reduce his Compensation and the amount of any such
reduction, subject, however, to the following conditions and
restrictions:
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(a) Modification By Participant: The Salary Reduction Agreement may
be changed on of each Plan Year (or on the first business day of
each such month if the first day of the month falls on the
weekend). The change must be made by filing written notice of the
change with the Administrator at least 30 days in advance of the
effective date of such change.
(b) Cancellation By Participant: The Salary Reduction Agreement may
be canceled by a Participant at any time during the Plan Year by
filing written notice thereof with the Administrator at least
thirty days prior to the effective date of the cancellation. A
Participant may thereafter make a new Salary Reduction Agreement
and once again have the Employer make Elective Deferrals to the
Plan on his behalf, but any new such agreement will only be
effective at such times as may be designated by the
Administrator; and any such new Salary Reduction Agreement must
be filed with the Administrator at least 30 days in advance of
its effective date.
(c) Modification By Employer: The Employer may at any time change or
suspend the amount by which a Participant's Compensation is
reduced pursuant to his Salary Reduction Agreement if the
Employer determines that such decrease or suspension is necessary
to insure that one of the deferral percentage tests of Code
Section 401(k) are met. If the Employer changes or suspends the
Salary Reduction Agreement, the affected Participant will
continue to participate in the Plan. When the situation which
resulted in the change or suspension no longer exists, the
Employer will reinstate the Salary Reduction Agreement to the
fullest extent possible for the affected Participant in a uniform
and nondiscriminatory manner.
41
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ARTICLE 9
TOP HEAVY DETERMINATION
9.01 DEFINITION OF TOP HEAVY PLAN: For Plan Years beginning after December
31, 1983, this Plan will be (a) a Top Heavy Plan if, as of the
Determination Date, Key Employees' Present Value of Accrued Benefits
and the sum of their Aggregate Accounts in this Plan and all plans of
an Aggregation Group exceed 60% of the Present Value of Accrued
Benefits and the Aggregate Accounts of all Participants in this Plan
and all plans of an Aggregation Group; or (b) a Super Top Heavy Plan
if, as of the Determination Date, Key Employees'Present Value of
Accrued Benefits and the sum of their Aggregate Accounts in this Plan
and all plans of an Aggregation Group exceed 90% of the Present Value
of Accrued Benefits and the Aggregate Accounts of all Participants
herein and all plans of an Aggregation Group.
9.02 SPECIAL RULES AND OTHER DEFINITIONS: In determining if this Plan is a
Top Heavy Plan or a Super Top Heavy Plan, the following rules and
definitions will apply:
(a) Former Key Employees: If any Participant is a Non-Key Employee
for any Plan Year but he was a Key Employee for any prior Plan
Year, his Present Value of Accrued Benefit and/or Aggregate
Account balance will not be taken into account in determining if
this is a Top Heavy Plan or a Super Top Heavy Plan or if any
Aggregation Group which includes this Plan is a Top Heavy Group.
(b) No Services Performed: If a Participant has not performed
services for the Employer at any time during the five year period
ending on the Determination Date, his accrued benefit and/or
Aggregate Account will not be considered in determining if this
Plan is a Top Heavy Plan or a Super Top Heavy Plan or if any
Aggregation Group which includes this Plan is a Top Heavy Group.
(c) Determination Of Accrued Benefit: A Non-Key Employee's accrued
benefit in a defined benefit plan will be determined by the
method used for accrual purposes for all plans of the Employer,
or if there is no such method, as if such benefit accrued not
more rapidly than the slowest rate permitted by Code Section
41l(b)(1)(C).
(d) Definition Of Aggregate Account: The term Aggregate Account
means, as of each Determination Date, the balance in a
Participant's Account, plus:
(1) If the Plan is not subject to Code Section 412,
contributions made after the valuation date but on or before
the Determination Date, including, in the first Plan Year,
those made after the Determination Date allocated as of a
date in that first Plan Year; if the Plan is subject to Code
Section 412, contributions (1) that would be allocated as of
a date not later than the Determination Date, even though
they are not yet required to be contributed, such as waived
contributions and contributions not paid that resulted in a
funding deficiency; and (2) actually made (or due to be
made) after the valuation date but before the expiration of
the Code Section 412(c)(10) period.
(2) Distributions made within the Plan Year that includes the
Determination Date and the 4 preceding Plan Years, excluding
distributions (1) made after the valuation date and before
the Determination Date to the extent they are already
included in the Participant's Aggregate Account; (2) made
because of death, including the cash value of any Policies;
and (3) from a terminated plan in the 5 year period ending
on the Determination Date if such plan would have been
required to be included in an Aggregation Group but for the
termination. Distributions with respect to an annuity will
be deemed to be the current actuarial value of the annuity
on the date of distribution.
42
<PAGE>
(3) A Participant's own voluntary or mandatory non-deductible
contributions; any unrelated rollovers and plan to plan
transfers if (A) this Plan is the Plan from which the
rollover or transfer is made, or (B) this Plan accepted such
rollover or transfer prior to January 1, 1984; and any
related rollovers and plan to plan transfers if this Plan is
the plan accepting such rollover or transfer, regardless of
when it was accepted.
(e) Definition Of Aggregation Group: The term Aggregation Group means
either a Required Aggregation Group or a Permissive Aggregation
Group, defined as follows:
(1) Required Aggregation Group: Required Aggregation Group means
each plan sponsored by the Employer (whether or not
terminated and including Keogh plans) in which a Key
Employee participates in the Plan Year containing the
Determination Date or any of the 4 preceding Plan Years, and
each other plan sponsored by the Employer which during this
period enables any plan in which a Key Employee participates
to satisfy Code Section 401(a)(4) or Code Section 410. Each
plan in the Required Aggregation Group will only be
considered top heavy if the Required Aggregation Group is a
Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may include any
other plan not required to be included in the Required
Aggregation Group if the resulting group taken as a whole
would continue to satisfy the provisions of Code Section
401(a)(4) and Code Section 410. Only a plan that is part of
the Required Aggregation Group will be considered top heavy
if the Permissive Aggregation Group is a Top Heavy Group.
(3) Plans Required To Be Aggregated: Only those plans of the
Employer in which the Determination Dates fall within the
same calendar year must be aggregated in determining whether
such plans are top heavy.
(f) Definition Of Determination Date: The term Determination Date
means the last day of the preceding Plan Year, or in the case of
the first Plan Year, the last day of such first Plan Year.
(g) Definition Of Present Value of Accrued Benefit: The term Present
Value of Accrued Benefit means a Participant's present value of
accrued benefit as determined under the provisions of the
applicable defined benefit plan.
(h) Definition Of Top Heavy Group: The term Top Heavy Group means an
Aggregation Group in which, as of the Determination Date, the sum
of Key Employees' Present Value of Accrued Benefits under all
defined benefit plans included in the group and Key Employees'
Aggregate Accounts under all defined contribution plans included
in the group, exceeds 60% of a similar sum determined for all
Participants.
(i) Definition Of Valuation Date: The term valuation date means
the most recent valuation date of the Plan (1) which is
performed on the Anniversary Date, and (2) which occurs
within the twelve month period preceding the Determination
Date.
43
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ARTICLE 10
AMENDMENT, TERMINATION AND MERGER
10.01 AMENDMENT: The Employer, by action of its board of directors, will have
the right to amend or modify the Plan at any time provided such
amendment or modification is in writing. However, any such amendment or
modification must comply with the following provisions:
(a) No Increase In Responsibilities: No such amendment or
modification can increase the responsibilities of the Trustee or
Administrator without their written consent.
(b) No Deprivation Of Benefits: No such amendment or modification can
deprive any Participant or Beneficiary of the benefits to which
he is entitled from the Plan.
(c) No Decrease In Accrued Benefit: No such amendment or modification
can result in a decrease in the amount of any Participant's
accrued benefit except as may be permitted under the terms of
Code Section 412(c)(8).
(d) No Diversion Of Funds: No such amendment or modification, except
as otherwise provided, can permit any part of the Trust Fund
(other than as required to pay taxes and administration expenses)
to be used for or diverted to purposes other than the exclusive
benefit of the Participants or their Beneficiaries, or cause or
permit any portion of the Trust Fund to revert to or become the
property of the Employer.
(e) No Elimination Of Subsidies Of Benefits: No such amendment or
modification to the Plan can eliminate or reduce a
retirement-type subsidy, or an early retirement benefit, or an
optional form of benefit with respect to benefits attributable to
service before the amendment or modification. In the case of a
retirement-type subsidy, this provision will apply only with
respect to a Participant who satisfies the pre-amendment
conditions for the subsidy either before or after the amendment.
10.02 TERMINATION: The Employer has the right to terminate, in whole or in
part, the Plan and the Trust at any time by delivering written notice
thereof to the Administrator and the Trustee, subject to the following
provisions:
(a) Termination Procedure: The Employer may terminate the Plan either
(1) by filing written notice thereof with the Administrator, or
(2) by completely discontinuing contributions to the Plan if the
Plan is not covered by the minimum funding provisions of Code
Section 412. Upon any such termination, the Trustee will continue
to administer the Trust until distribution has been made to the
Participants, which distribution must (1) occur within a
reasonable time after the termination of the Plan, and (2) be
made in accordance with the provisions of Article 5 of the Plan.
(b) Full And Immediate Vesting: Upon any termination of the Plan
(whether partial or complete), or upon a complete discontinuance
of contributions thereto if the Plan is not covered by Code
Section 412, any Participant who is affected by such termination
will have a 100% Vested Interest in his Participant's Account.
10.03 MERGER OR CONSOLIDATION: This Plan and Trust may not be merged or
consolidated with, nor may any of its assets or liabilities be
transferred to, any other plan, unless the benefits payable to each
Participant if tile Plan was terminated immediately after such action
would be equal to or greater than the benefits to which such
Participant would have been entitled if this Plan had been terminated
immediately before such action.
44
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ARTICLE 11
ADOPTING EMPLOYERS
11.01 CONDITIONS OF ADOPTION: Any business organization, such organization
hereafter referred to as the Adopting Employer, may adopt this Plan.
However, pursuant to any such adoption, each Adopting Employer must
agree to the following:
(a) Plan Trustee And Plan Administrator: Each Adopting Employer must
agree to use the Plan Trustee and Plan Administrator that are
appointed by the Employer.
(b) Employer As Agent: Each Adopting Employer must agree to use the
Employer as its agent in dealing with all other Fiduciaries of
the Plan.
(c) Plan Amendments: Each Adopting Employer must agree to execute
those amendments to the Plan that the Employer deems necessary.
(d) Rules And Procedures: Each Adopting Employer must agree to abide
by such rules and accounting procedures as the Administrator
deems necessary for the proper administration of the Plan.
11.02 CONTRIBUTIONS, FORFEITURES AND EXPENSES: All contributions made to the
Plan by an Adopting Employer will be contributed subject to the
following provisions:
(a) Exclusive Benefit: All contributions made to the Plan by an
Adopting Employer will be held by the Trustee for the exclusive
benefit of the Employees of the Adopting Employer making the
contribution.
(b) Forfeitures: All Forfeitures will be used exclusively for
the benefit of the Participants of the Adopting Employer for
whom the Participant who incurred the Forfeiture worked,
unless such Participant is employed by an Affiliated
Employer, in which case the Forfeiture will be allocated to
a Participant's Account based on the ratio that the
Compensation of a Participant employed by an Adopting
Employer who is also an Affiliated Employer bears to the
Compensation of all such Participants. If an Employee is
transferred to an Affiliated Employer, no amount in his
Participant's Account will be deemed a Forfeiture under the
terms of this Plan.
(c) Expenses: Any expenses of maintaining the Plan will be paid by
each Adopting Employer in the ratio that each Adopting Employer's
Participants' Accounts bears to the total of all the
Participants' Accounts maintained by this Plan.
11.03 EMPLOYEE TRANSFERS: An Employee's transfer to or from any Adopting
Employer (including the Employer) will not affect his Participant's
Account balance, his total Years of Service, Plan Years of Service, and
Years of Plan Participation.
11.04 TERMINATION OF PARTICIPATION: An Adopting Employer may terminate its
participation in this Plan by delivering written notice thereof to the
Trustee. If the assets of the Plan which have been allocated to the
Employees of such terminating Adopting Employer are not thereafter
transferred within a reasonable time to a successor Trustee designated
by the terminating Adopting Employer, then such assets will be
distributed to the Employees of such terminating Adopting Employer as
if the Plan had terminated under Section 10.02(a).
45
<PAGE>
ARTICLE 12
MISCELLANEOUS
12.01 NO CONTRACT OF EMPLOYMENT: Except as otherwise provided by law, neither
the establishment of this Plan, any modification hereto, the creation
of any fund or account, nor the payment of any benefits, will be
construed as giving any Participant or other person any legal or
equitable rights against the Employer, any officer or Employee thereof,
or the Trustee, except as herein provided. Further, under no
circumstances will the terms of employment of any Participant be
modified or otherwise affected by this Plan.
12.02 ALIENATION OF BENEFITS: Except as may otherwise be provided in a
qualified domestic relations order (as such term is defined in Section
414(p) of the Code), or except as may otherwise be provided in Article
7 if this Plan provides for loans to Participants, the benefits of any
Participant or Beneficiary payable from the Trust will not be subject
in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, and any attempt to accomplish
the foregoing will be void. In addition, such benefits will not be
subject in any manner to the debts, contracts, liabilities,
engagements, or torts of any such person. Further, no such benefits,
proceeds, payments, or claims will be considered an asset of the
Participant or Beneficiary in the event of his insolvency or
bankruptcy.
12.03 DISTRIBUTION IN EVENT OF LEGAL INCAPACITY: If any person entitled to
Plan benefits (the Payee) is under anv legal incapacity, or, in the
sole judgment of the Administrator, is unable to apply such benefits in
furtherance of his own interest, payments may be made in any one or
more of the following ways as directed by the Administrator: (a) to the
Payee directly; (b) to the guardian or legal representative of the
Payee's person or estate; (c) to a relative of the Payee, to be
expended for his benefit; or (d) to the custodian of the Payee under
any Uniform Gifts to Minors Act. The Administrator's determination of
minority or incapacity will be final. Any payment made hereunder will
be in complete discharge of all obligations of the Trustee, the
Employer, and Plan to the extent of the payments so made.
12.04 MISSING PARTICIPANT OR BENEFICIARY: Each Participant and Beneficiary
must file his mailing address and each change thereof with the
Administrator. Any Plan correspondence addressed to a Participant or
Beneficiary at the last such address, or if no address has been filed,
then to his last address filed with the Employer, will be binding on
such Participant or Beneficiary for all Plan purposes. If the
Participant or Beneficiary cannot be found, his Plan benefits will,
after 5 consecutive 1 -Year Breaks In Service have occurred, be treated
as a Forfeiture. If such Participant or Beneficiary is later found, the
benefit will be restored.
12.05 FIDUCIARIES AND BONDING: The Fiduciaries will have only those powers
and duties that are specifically given to them in this Plan. In
addition, every Fiduciary other than a bank, an insurance company, or a
Fiduciary of a Plan sponsor which has no common-law employees, will be
bonded in an amount not less than 1O% of the amount of funds under such
Fiduciary's supervision, but such bond will not be less than $ 1,000 or
more than $500,000. The bond will provide protection to the Plan
against any loss for acts of fraud or dishonesty by the Fiduciary alone
or in concert with others. The cost of such bond will be an expense of
either the Employer or the Trust. For purposes hereof, a Fiduciary is
anyone who (a) exercises any discretionary authority or control over
Plan management or the disposition of Plan assets; (b) renders
investment advice for a fee or other compensation (direct or indirect);
or (c) has any discretionary authority or responsibility over Plan
administration.
12.06 SEVERABILITY OF PROVISIONS: If any Plan provision is held invalid or
unenforceable, such invalidity or unenforceability will not affect any
other provision of this Plan, and this Plan will be construed and
enforced as if such provision had not been included.
46
<PAGE>
12.07 GENDER AND NUMBER: Words in this Plan that are used in the masculine
gender will be construed as though they were also used in the feminine
or neuter gender where applicable, and words used in the singular form
will be construed as though they were also used in the plural form
where applicable.
12.08 TITLE TO ASSETS: No Participant or Beneficiary will have any right to,
or any interest in, any assets of the Trust upon separation from
service with the Employer, Affiliated Employer, or Adopting Employer,
except as otherwise provided by the terms of the Plan.
12.09 HEADINGS AND SUBHEADINGS: Headings and subheadings are inserted in this
Plan for convenience of reference. They constitute no part of this Plan
and are not to be considered in its construction.
12.10 LEGAL ACTION: Unless otherwise prohibited by law, the Employer or the
Trust will reimburse the Trustee and the Administrator for all costs,
attorneys fees and other expenses associated with any claim, suit, or
proceeding concerning the Plan and/or Trust which is brought against
the Trustee or the Administrator.
12.11 CONTROLLING LAW: This Plan and Trust will be construed and enforced
according to the laws of the state where the Employer maintains his
principal place of business, to the extent not preempted by the
provisions of ERISA.
IN WITNESS WHEREOF, this Plan and Trust have been executed by the
Employer and the Trustees on the day, month and year first above written.
ORION NETWORK SYSTEMS, INC.
By
----------------------------
TRUSTEES
------------------------------
Stanley Cooper
------------------------------
LeMoyne Zacherl
47
Opinion of Hogan & Hartson, LLP
December 31, 1996
Board of Directors
Orion Network Systems, Inc.
2440 Research Boulevard, Suite 400
Rockville, Maryland 20850
Gentlemen:
This firm has acted as counsel to Orion Network Systems, Inc.
(the "Company"), a Delaware corporation, in connection with its registration,
pursuant to a registration statement on Form S-8 filed on or about the date
hereof (the "Registration Statement"), of 600,000 shares (the "Shares") of
common stock, par value $.01 per share, of the Company, issuable under the Orion
Network Systems, Inc. Employee Stock Purchase Plan (the "Purchase Plan") and the
Orion Network Systems, Inc. 401(k) Profit Sharing Plan (the "401(k) Plan")
(collectively, the "Plans"). This letter is furnished to you pursuant to the
requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. ss. 229.601(b)(5),
in connection with such registration.
For purposes of this opinion letter, we have examined copies
of the following documents:
1. An executed copy of the Registration Statement.
2. A copy of the Plans, as certified by the Secretary of
the Company on the date hereof as then being
complete, accurate and in effect.
3. The Restated Certificate of Incorporation of the
Company, as amended (the "Charter"), as certified by
the Secretary of State of the State of Delaware on
September 26, 1996 and by the Secretary of the
Company on the date hereof as then being complete,
accurate and in effect.
<PAGE>
4. The By-laws of the Company, as amended, as certified
by the Secretary of the Company on the date hereof as
then being complete, accurate and in effect.
5. Resolutions and consents of the Board of Directors of
the Company adopted on December 10, 1996 as certified
by the Secretary of the Company on the date hereof as
then being complete, accurate and in effect relating
to, among other things, approval of the Plans.
We have not, except as specifically identified above, made any
independent review or investigation of factual or other matters, including the
organization, existence, good standing, assets, business or affairs of the
Company or its subsidiaries. In our examination of the aforesaid certificates,
records, and documents, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity, accuracy and completeness
of all documents submitted to us as originals, and the authenticity, accuracy
and completeness and conformity with the original documents of all documents
submitted to us as certified, telecopied, photostatic, or reproduced copies. We
have assumed the authenticity and accuracy of the foregoing certifications of
corporate officers, on which we are relying, and have made no independent
investigations thereof. This opinion is given in the context of the foregoing.
This opinion letter is based as to matters of law solely on
the General Corporation Law of the State of Delaware. We express no opinion
herein as to any other laws, statutes, regulations, or ordinances.
Based upon, subject to, and limited by the foregoing, we are
of the opinion that the Shares, when issued and delivered in the manner and on
the terms contemplated in the Registration Statement and the Plans (with the
Company having received the consideration therefor, the form of which is in
accordance with applicable law) and, in the case of the Purchase Plan, subject
to the approval of the Company's shareholders in accordance with the Charter and
applicable law, will be validly issued, fully paid and non-assessable by the
Company.
We assume no obligation to advise you of any changes in the
foregoing subsequent to the delivery of this opinion letter. This opinion letter
has been
<PAGE>
prepared solely for your use in connection with the filing of the Registration
Statement on the date of this letter, and should not be quoted in whole or in
part or otherwise be referred to, nor be filed with or furnished to any
governmental agency or other person or entity, without the prior written consent
of this firm.
We hereby consent to the filing of this opinion letter as
Exhibit 5.1 to the Registration Statement. In giving this consent, we do not
thereby admit that we are an "expert" within the meaning of the Securities Act
of 1933, as amended.
Very truly yours,
/s/HOGAN & HARTSON L.L.P.
-------------------------
HOGAN & HARTSON L.L.P.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8, No,. 333-xxxx) pertaining to the Orion Network Systems, Inc. Employee Stock
Purchase Plan and the Orion Network Systems, Inc. 401(k) Profit Sharing Plan of
our report dated February 9, 1996, with respect to the consolidated financial
statements of Orion Network Systems, Inc. included in its Annual Report (Form
10- K) for the year ended December 31, 1995, filed with the Securities and
Exchange Commission.
/S/ERNST & YOUNG L.L.P.
-----------------------
ERNST & YOUNG L.L.P.
Washington, D.C.
December 24, 1996
