-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EhbduPT6OlTkHj0Q8qbzIOBve9+0QgINJAVKcnGk4lCqYaHJQmeR8DGxjjnql0lA DsLywtP0L45ipr9kHrcC0Q== 0000898430-96-000215.txt : 19960129 0000898430-96-000215.hdr.sgml : 19960129 ACCESSION NUMBER: 0000898430-96-000215 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19951031 FILED AS OF DATE: 19960126 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WHITTAKER CORP CENTRAL INDEX KEY: 0000106945 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 954033076 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20609 FILM NUMBER: 96507191 BUSINESS ADDRESS: STREET 1: 10880 WILSHIRE BLVD STE 800 CITY: LOS ANGELES STATE: CA ZIP: 90024-4163 BUSINESS PHONE: 2134759411 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- FOR FISCAL YEAR ENDED OCTOBER 31, 1995 COMMISSION FILE NUMBER 1-5407 WHITTAKER CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-4033076 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1955 N. SURVEYOR AVENUE 93063 SIMI VALLEY, CALIFORNIA (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 526-5700 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, par value $.01 per share New York Stock Exchange Pacific Stock Exchange Series A Participating Cumulative New York Stock Exchange Preferred Stock Purchase Rights Pacific Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE (TITLE OF CLASS) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((S)229.405 of the Securities Exchange Act of 1934) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] State the aggregate market value of the voting stock held by nonaffiliates of the Registrant: $178,675,097 as of December 29, 1995. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 8,588,982 shares of Common Stock as of December 29, 1995. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DOCUMENTS INCORPORATED BY REFERENCE
WHERE DOCUMENT INCORPORATED -------- ------------ Definitive Proxy Statement for the Annual Meeting of Part III Stockholders to be held March 22, 1996 to be filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 (the "Proxy Statement")
PART I ITEM 1. BUSINESS. GENERAL Whittaker Corporation ("Whittaker" or the "Company") was incorporated in California in 1947 and became a Delaware corporation in 1986. Whittaker maintains its principal executive and administrative offices at 1955 N. Surveyor Avenue, Simi Valley, California 93063 (telephone number 805-526-5700). The Company has been active during fiscal 1995 in the aerospace business, including defense electronics, and has used its electronics technologies and expertise and the acquisition in April 1995 of Hughes LAN Systems, Inc., which has been renamed Whittaker Communications, Inc., to expand into data networking and communications markets. During the past five years, the Company was also active in biotechnology businesses. Set forth below is a description of the current business of the Company. The Company develops specialized aerospace and electronic technologies to create products and customer solutions for aircraft, defense, communications and industrial markets. The Company's products and services are developed and produced by two business segments: Aerospace, which manufactures and markets proprietary fuel, hydraulic and pneumatic fluid control valves and fire detection system products fitted on aircraft, ground-based gas turbines, and other industrial installations, and designs, develops and sells a wide array of highly reliable defense electronics products and systems; and Communications, which designs, develops, and markets a comprehensive line of data networking products and services including intelligent wiring concentrators, Ethernet and Asynchronous Transfer Mode ("ATM") switches and wide area network ("WAN") access devices and provides a full range of network design, consulting, integration and support services. For the fiscal year ended October 31, 1995, total Company sales were $159.5 million, of which 81% were generated by the Aerospace segment and 19% were generated by the Communications segment. Aerospace Segment The business and operations of the Aerospace segment are conducted by the Company's Aerospace Group, which consists of the Company's aircraft, defense electronics, industrial products, and federal sector product lines. PRODUCTS Principal applications and representative products of the Company's Aerospace segment include: Fluid and Pneumatic Controls. The Company designs and manufactures a broad range of fluid control devices for both commercial and military aircraft. The products are designed to control pneumatic, hydraulic and fuel flows in aircraft systems. In commercial applications, they are used on virtually all Boeing, McDonnell Douglas, and AirBus commercial aircraft, and virtually all other aircraft and jet engines manufactured in the world, with the exception of those manufactured in the former Communist countries. In addition, commercial and industrial applications include ground refueling devices for airports and valving systems, heat exchangers, and fuel skids for land gas turbine power plants, off-shore oil platforms, and petrochemical complexes. In military applications, the products are used on military transports, bombers, helicopters, fighters and landing craft. Both commercial and military applications include aircraft turbine engines built by General Electric and Pratt & Whitney. Sales of fluid and pneumatic control products were $59.5 million in fiscal 1995, $52.9 million in fiscal 1994, and $43.0 million in fiscal 1993. Fire and Overheat Detectors. The Company designs and manufactures continuous length pneumatic fire and overheat detectors as well as optical flame and smoke detectors and systems for commercial and military aircraft and gas turbine engines. This equipment is widely used on a broad spectrum of aircraft manufactured by Boeing, AirBus, McDonnell Douglas, Northrop Grumman and many smaller manufacturers, as well as on small naval vessels, helicopters, and railcars. The aircraft range from large commercial transports to small commuter aircraft, private twin engine airplanes, helicopters, military fighters and transport aircraft. The fire 1 and overheat detectors are used on aircraft engines manufactured by General Electric, Pratt & Whitney and Rolls Royce. Industrial applications of such products include complete fire protection systems for vehicles, turbine powered pumping and electric power generation applications, as well as large scale systems to protect oil platforms and refineries. Sales of fire and overheat detectors and systems were $21.8 million in fiscal 1995, and $10.5 million in fiscal 1994, the year during which the Company acquired the business. Command, Control and Communications. The Company designs and manufactures electronic systems for command, control and communications, including display and analysis systems, digital data links, signal data converters, tactical simulation systems, and wide-band encrypted secure voice and data systems that permit secure communications. The Company also has developed modular software that is designed to be portable to any real-time operating system. A user- friendly, window-based display and a unique table-driven architecture provide easy interface between various equipment and facilitate the addition of new equipment. Sales of command, control and communications systems were $18.9 million in fiscal 1995, $24.5 million in fiscal 1994, and $29.8 million in fiscal 1993. Radio Frequency/Survivability Systems. The Company designs radar countermeasure systems and electronic combat systems that provide radar and proximity fuse jamming using an internally developed radio frequency memory unit. Experience in technique development was used to invent a proprietary monopulse radar countermeasures generator that is applicable to most modern jamming systems. Also based on this experience, the Company is under contract with the United States Army to develop enhancements to a Company-designed and produced electronic protection system (the Shortstop Electronic Protection System) that prematurely detonates incoming artillery, mortar, and other proximity-fused weapons, providing significant protection to personnel and facilities. A Company-designed radar system (TBMEWS) detects tactical ballistic missiles, such as the SCUD, and allows early warning for the civilian population and for deployment of weapons. Other ground-based radar surveillance and tracking systems of the Company, including replicas of enemy radar systems, are used in tactical training. Data Managers. The Company provides a unique combination of hardware and software that interfaces very high speed computers with lower speed computers as well as storage disks, recorders and other peripherals. The data manager allows simultaneous input and output of large amounts of data, facilitating real time analysis and storage. Data managers provide this capability in applications for jet engine data recording, transfer of video data in simulators, and command and control applications. Other Electronics Products. The Company designs and manufactures high reliability silicon dioxide insulated coaxial and multiple conductor cable systems which permit broad-band data transmission and control function operation in extreme environments. Atmospheric monitoring systems are provided for timely warning of emergency conditions. Applications for these technologies include signal transmission and control functions inside nuclear power plants and reactors, power and control monitoring and electronic valve control at oil refineries, extreme environmental condition cable applications near jet engines, and critical connections in airborne electronic countermeasure systems. The Company also designs and manufactures expendable high-energy- density batteries utilized primarily for missile and space applications. These applications require watt seconds of energy and demand the highest availability and reliability due to their critical functions. The Company supplies these batteries to meet the extreme environmental requirement of airborne applications. PRODUCT DEVELOPMENT In August 1994, the Company was awarded a $10.9 million cost-reimbursement contract from the United States Army to develop three new versions of the Company's previously developed battlefield electronic countermeasures system, capable of detonating incoming artillery and mortar rounds, designated the Shortstop Electronic Protection System ("SEPS"). During 1995, the Company met performance requirements and developed three full scale SEPS development models. The contract did not contribute a material amount of revenue to the Company in 1995, but successful development of the new SEPS versions slated for delivery starting late in fiscal 1996 could, subject to all of the risks and uncertainties that apply to military procurement generally, as discussed below, result in subsequent SEPS production contracts, which could then have a material effect on the Company's sales. There can be no assurance, however, whether or when any such contracts would be awarded. 2 The Company is discussing with various foreign governments the potential sale and installation of a Company-designed radar system that detects tactical ballistic missiles and allows early warning for the civilian population and for deployment of weapons. There are currently no firm commitments for the system at this date. If the discussions result in an agreement, annual sales of defense electronics products could increase materially. Because of the uncertainties of the military procurement processes of foreign governments, the need for the foreign government to provide budget authority for the potential procurement, and all the uncertainties that apply to military procurement generally, as discussed below, there can be no assurance that an agreement will be reached or, if reached, what the contract price would be. The Aerospace segment spent $3.4 million, $2.7 million, and $1.7 million on research and development activities in fiscal 1995, 1994, and 1993, respectively. MARKETS AND CUSTOMERS Sales to commercial customers, including foreign customers, were the major contributor to Aerospace sales and profit in 1995. In past years, the principal contributor to sales and profit for the Aerospace segment had been the United States Government and its prime contractors. Sales directly or indirectly to the United States Government, primarily under military procurement contracts, continued to decrease as a percentage of Aerospace sales, dropping to 41% of sales in 1995, compared to 49% in 1994 and 68% in 1993. Export sales to customers outside the United States continued to increase, representing 23% of Aerospace sales for 1995, compared to 20% in 1994 and 11% in 1993. The Company has been able to achieve increased sales of its aircraft fluid and pneumatic control devices over the past three years despite relatively low new aircraft build rates. Increased emphasis has been placed on expanding sales from overhaul repairs, retrofits, upgrades and spare components to end-users such as airlines, cargo carriers, maintenance stations, military bases and government agencies. New aircraft production now appears to be on the rise, which may further contribute to an improved business climate for these Company products. The Company has also positioned itself for continued growth in the Aerospace segment by expanding its product offerings through acquisitions and growth in related markets, including fire and overheat detection equipment and industrial markets. During fiscal 1995, the Company also marketed its aircraft fluid control and other aerospace products to manufacturers of industrial, land-based gas turbines, which are similar to jet engines. The Company intends to continue to do so. In certain geographic areas and certain products, sales are often made indirectly through independent representatives or distributors. Companies engaged in supplying military equipment to the United States Government are subject to competition, changes in the continuing availability of Congressional appropriations, changes in contract timing and scheduling, complexity of designs and the potential for obsolescence, and other changes which may result from world events. Contracts with the United States Government are subject to termination for the convenience of the Government if deemed in its best interests. Contracts which are terminated for convenience generally provide for payments to a contractor for its costs and for fees or profits related to work accomplished through the date of termination. BACKLOG At October 31, 1995, Aerospace backlog totaled $66.9 million (compared to $69.3 million at October 31, 1994), of which $9.8 million is not expected to be filled within fiscal 1996. Aerospace backlog includes no unfunded amounts relating to government contracts. COMPETITION The military and commercial industries in which the Aerospace segment operates are generally highly competitive, with competition centering on price, as well as product performance and product support. Competitors of the Company in such markets may have substantially greater financial resources, research and design capabilities, and manufacturing capacity. 3 Communications Segment The business and operations of the Communications segment are conducted by Whittaker Communications, Inc. ("WCI"), which was acquired by the Company in April of 1995. WCI designs, develops, and markets a comprehensive line of networking products which allow its customers a migration path from their existing legacy infrastructures to new and emerging data networking architectures. In addition, WCI provides a full range of network design, consulting, integration and support services for small businesses or large enterprise-wide solutions. The Local Area Network ("LAN") market was born in the 1980's as mainframe dominance was being seriously challenged by departmental minicomputers supporting multiple users through terminals and personal computers. Decentralized computing brought many advantages, but limitations on sharing information and communicating quickly became evident. LANs provided the foundation for cooperative computing concepts, better resource sharing, and the further dissemination of computing power throughout businesses, government agencies and schools. In the 1990's, new applications such as digital imaging, client/server, and multimedia have begun to tax the bandwidth of early LAN technologies such as Ethernet and Token Ring. Switching hubs are replacing shared Ethernet and Token Ring networks. New technologies such as 100 megabit per second ("Mbps") Fast Ethernet connectivity from the server to the desktop and ATM are critical to keep up with the demands of emerging applications. PRODUCTS WCI has created a high-speed switching product line and integrated service offering that empowers users to successfully navigate the rapid changes in the local and wide area network marketplaces. WCI provides network managers with a migration path that preserves investment in legacy LANs and software while providing practical and upgradeable products and support for emerging high- speed network standards. With products ranging from a chassis-based enterprise hub, a robust management network platform, and an ATM switch, WCI provides a global high-performance networking solution. WCI's product family provides seamless bandwidth solutions in three key high-speed networking scenarios: as a workgroup accelerator; as the backbone of a campus network; and as the core of a global network. Principal applications and representative products of the Company's Communications segment include: Enterprise Hub--WCI's Enterprise Hub, available in five- and fourteen-slot chassis designs, incorporates a distributed ATM cell-switching fabric in its architecture, which offers scalable bandwidth, high reliability, low cost of entry, and an incremental and modular upgrade to ATM technology. The Enterprise Hub integrates Ethernet, Token Ring, and Fiber Distributed Data Interface ("FDDI") wiring concentration, bridging, edge routing, and ATM cell relay technology in a hot-swappable, modular high-performance system. Among the key, single-slot modules that WCI has designed and markets are: Model 908 ATM Network Interface Module, which provides ATM backbones between Enterprise Hubs and to ATM workgroup switches, as well as User Network Interface (UNI)-based connections to workstations and servers. The Model 908 integrates any mix of legacy LANs, switched workgroups, server clusters, and workstations with ATM. Model 708 ATM Ethernet Switch Module, which provides a full 10 Mbps of bandwidth per port to boost performance for workgroup LANs, servers and high-performance workstations and switches Ethernet packets locally between its eight 10BASE-T ports. Traffic destined for other ATM modules, Enterprise Hubs and workgroup switches is converted to ATM cells and forwarded using virtual circuit mapping. Sales of the Company's Enterprise Hub and integrated modules were $23.4 million in fiscal 1995, reflecting activity for the six-month period since the business was acquired by the Company. Enterprise Network Access Switch (ENAS(TM))--WCI's ENAS, configured with a 5- or 20-slot chassis, provides data integration for high-speed ATM services. Achieving speeds of up to 155 Mbps, the ENAS integrates legacy telecommunications for high-speed conversion to ATM by converting Ethernet and T1 4 signals from their source media to ATM signals, linking existing LANs to the ATM WAN. The ENAS is a LAN/WAN edge device that can be used as a wide area ATM switch or as an interface between LANs and the ATM WAN switch. Integration and Support--WCI also provides a full range of integration and support with full turn-key networking solution to its customers, including the integration of third-party products and services with the Company's own products and services. PRODUCT DEVELOPMENT WCI's product development efforts are primarily focused on its strategic product lines: LAN connectivity (both Ethernet and Token Ring), ATM switching technology development, Ethernet switching, 100 Mbps Ethernet technology and advanced network management software. WCI's core networking technologies create opportunities to leverage its engineering investments and develop more integrated products for simpler, more innovative networking solutions for customers. WCI plans to invest in emerging technologies for use in existing and future products, as well as to improve and enhance existing products to extend their lifecycles, reduce manufacturing costs and increase functionality. In addition to the development of custom Application Specific Integrated Circuits ("ASICs") to improve performance, increase reliability and reduce costs, WCI is investing in the following areas: Fast Ethernet (100 Mbps Ethernet), ATM capabilities on both LAN and WAN, Ethernet switching, Integrated Service Digital Network ("ISDN") and Frame Relay connectivity. These efforts are directed at simplifying network management, providing remote connectivity and increased network performance. WCI spent $4.3 million on research and development activities since its acquisition by the Company in fiscal 1995. The industry in which WCI competes is subject to rapid technological developments, evolving industry standards, changes in customer requirements and frequent new product introductions and enhancements. As a result, WCI's success in part depends upon its ability, on a cost-effective and timely basis, to continue to enhance its existing products and to develop and introduce new products that take advantage of technological advances. There can be no assurance that WCI will be able to successfully develop new products to address new industry transmission standards and technological changes or to respond to new product announcements by others or that such products will achieve market acceptance. MARKETS AND CUSTOMERS With installations at over 300 major hospitals domestically, WCI has established a specialization as a network provider for the healthcare industry. WCI also has a strong presence in the public sector as well as in manufacturing, education, finance and government. WCI currently has 6,000 systems installed worldwide, 1,000 of which are ATM-based. Worldwide, WCI also serves its customers through indirect channels. Indirect channels include systems integrators, value-added resellers, distributors, resellers, and original equipment manufacturers (OEMs). WCI's multi-channel sales strategy encourages broad market coverage, by allowing WCI's sales personnel to create demand for its products while giving customers the flexibility to choose the most appropriate delivery option. WCI maintains sales offices in France, the United Kingdom, Germany and Mexico. In fiscal 1995, approximately 44% of WCI's sales arose from exports to customers outside the United States. MANUFACTURING AND SUPPLIERS WCI's primary production activities are conducted at its Santa Clara, California facilities. Purchasing, mechanical assembly, burn-in, testing, final assembly, and quality assurance functions are performed at this facility. WCI also procures certain products and subassemblies through subcontractors. Products manufactured by WCI are warranted for periods of 90 days for software and one year for hardware. Components purchased by WCI are generally available from multiple suppliers. However, certain components may be available from sole sources. The inability to obtain certain components could require WCI to redesign or delay shipments of several of its data networking products. WCI has sought to establish 5 close relationships with sole-source suppliers and/or to build up inventory of such components; however, there can be no assurance that production would not be interrupted due to the unavailability of components. WCI believes that its inventory levels of these components are adequate for its currently forecasted needs. PATENTS, LICENSES AND RELATED MATTERS WCI relies on U.S. and foreign patents, copyrights, trademarks and trade secrets to establish and maintain proprietary rights in its technology and products. There can be no assurance that any of these patents would be upheld as valid if litigated. Although WCI believes that its patents and applications have value, it also believes that its competitive position depends primarily on the innovative skills, technological expertise and management abilities of its employees. Many of WCI's products are designed to include software or other intellectual property licensed from third parties. WCI actively seeks to license software that promotes the compatibility of its products with industry standards, including standard protocols and architectures. The loss of rights in software or other intellectual property licensed from a third party and designed into a particular product might disrupt or delay WCI's distribution of that product. Although it may be necessary in the future to seek or renew licenses relating to various aspects of its products, WCI believes that, based upon past experience and standard industry practice, such licenses generally could be obtained on commercially reasonable terms. BACKLOG WCI manufactures its products based upon its forecast of the demand of its customers worldwide and maintains inventories of finished products in advance of receiving firm orders from its customers. Product orders are generally placed by the customer on an as-needed basis and products are usually shipped within one to four weeks after receipt of an order. Such orders generally may be canceled or rescheduled by the customer without significant penalty. Accordingly, WCI does not maintain a substantial backlog, and backlog as of any particular date may not be indicative of actual sales in any succeeding period. At October 31, 1995, WCI backlog totaled $15.2 million, all of which is expected to be filled in fiscal 1996. COMPETITION Data networking encompasses both on-premises (i.e., desktop connectivity devices, internetworking platforms and wiring hubs) and off-premises (i.e., WAN) technologies. WCI participates primarily in designing, manufacturing and marketing on-premises equipment, and is entering the off-premises point-of- presence market with its ENAS product. WCI's competitors typically compete in one or more segments of the data networking market. These companies are using their resources and technical expertise to improve and expand their product lines in an effort to gain market share. The industry recently has witnessed a wave of merger, acquisition and strategic partnering activity as many of these companies seek to provide broader networking solutions. Competition in the network systems business, formerly characterized by niche- based competitors focused on a single industry segment, is shifting toward more broad-based suppliers offering multiple product lines. This has been achieved through mergers and acquisitions, joint marketing agreements, and internally developed products. This industry consolidation, and the convergence of hub, switching and routing technologies on single platforms, will likely continue, intensifying competition among a small group of companies with broad product offerings. Principal competitors in the network systems products market include Bay Networks, Cabletron, 3Com, UB Networks and Cisco Systems. Several of WCI's competitors have greater name recognition, more extensive engineering, manufacturing and marketing capabilities, and greater financial, technological and personnel resources than those available to WCI. There can be no assurance that WCI will be able to compete successfully in the future with existing or new competitors. 6 DISCONTINUED OPERATIONS In October 1991, the Company spun off its biotechnology business as BioWhittaker, Inc. In addition, since the beginning of the Company's divestiture program in 1989, the Company has sold its Anjac/Doron, Duall/Wind, Chemical Coatings, Heico Chemicals, Park Chemical, Ram Chemicals, Specialty Chemicals, Technibilt, Water Management, Whittaker Metals, Winters Industries and Yardney Electric Corporation units. The divestiture program has been substantially completed. Remaining to be divested is a 996-acre parcel of land formerly used, until 1987, by the Company's former Bermite division, a discontinued technology unit. The land is located in the City of Santa Clarita, California, approximately 35 miles from downtown Los Angeles. In September 1995, the city granted the entitlements necessary to develop this property as a mixed-use, residential, commercial, and light industrial development. The Company has reached agreement in principle with City staff on a development agreement with the City, which among other things, would extend the ten-year life of the entitlements to 20 years. In January 1996, the City Council granted preliminary approval to the agreement. Final approval is not expected before February 1996, but there can be no assurance that final approval will be obtained. See Note 3 to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for information about the parcel remaining to be divested. ACQUISITIONS On April 24, 1995, the Company acquired the stock of Hughes LAN Systems, Inc., from Hughes Electronics Corporation for a purchase price consisting of $16.0 million in cash, subject to certain adjustments, a $15.0 million convertible subordinated note and deferred cash payments not to exceed $25.0 million. The deferred cash payments are payable over the years 1996 to 1999 and are based on the sales of WCI hubs, hub products, and derivatives. The subsidiary was renamed Whittaker Communications, Inc. The Company intends to continue its previously announced strategy of growth by selective acquisitions that complement the Company's existing businesses and product lines. See Note 2 to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for additional information regarding acquisitions. ENVIRONMENTAL Compliance with Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has had no material effect upon the capital expenditures, earnings or competitive position of the Company, nor is the Company estimating any material capital expenditures for environmental control facilities in fiscal 1996 or 1997. EMPLOYEE RELATIONS As of October 31, 1995, the Company employed approximately 950 persons in its businesses, about 11% of whom were represented by labor organizations. The Company believes that it has generally good relations with its employees. ITEM 2. PROPERTIES. The Company's corporate headquarters are located in its facilities in Simi Valley, California, which consist of approximately 276,000 square feet in three buildings owned by the Company. The Company owns a 30,000 square foot production facility in Colorado. The Company also leases three facilities in California which consist of approximately 305,000 square feet under leases that expire from March 1997 to January 1999. The Company has an option to renew certain of these leases for various terms. Approximately half of the square footage is used for manufacturing, engineering, and product development while the remainder is used for sales, marketing, and other general and administrative support. The Company also leases and occupies sales and technical support offices throughout the United States, as well as in Europe and Mexico. 7 The Company believes that, in general, its plants and equipment are adequately maintained, in good operating condition and adequate for the Company's present needs. The Company regularly upgrades and modernizes its facilities and equipment, and expands its facilities as necessary to meet customer requirements. ITEM 3. LEGAL PROCEEDINGS. ENVIRONMENTAL MATTERS As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted to address public health and environmental concerns arising with respect to past treatment and disposal of hazardous substances. The Company also is a potentially responsible party in a number of actions brought under state laws patterned after CERCLA. CERCLA and such other state laws provide for the imposition of clean-up liability on anyone who arranges for the disposal or treatment of hazardous substances at designated sites. Accordingly, anyone who generates hazardous substances may be a potentially responsible party if the treatment, storage, or disposal facility that handles the substances becomes the subject of an environmental clean-up under such laws. This is true even if the treatment, storage, or disposal facility has the proper licenses and permits issued by appropriate governmental authorities and treats, stores, or disposes of the hazardous substances in accordance with the terms of such licenses and permits. The various state environmental agencies and the U.S. Environmental Protection Agency take the position under these environmental laws that all responsible parties are jointly and severally liable for the costs of cleaning up sites subject to their jurisdiction and for any environmental damages caused by the treatment or disposal of hazardous substances at such sites. In nearly all of the environmental matters in which the Company is involved, the Company contributed a very small amount (generally much less than 1%) of the total wastes treated or disposed of at these various treatment or disposal facilities and participates as a so-called "de minimis" party. De minimis parties are generally allowed to settle their potential liability for clean-up activities by agreeing with the state or Federal environmental authorities and the other, larger responsible parties to bear a share of the past and estimated future clean-up costs based on the volume of the waste each de minimis party contributed, plus a "premium" or "multiplier." These premiums or multipliers are designed to allow for the uncertainty of estimates of future costs and the desirability of settling liability early to avoid so-called transaction costs, i.e., the legal, consulting, and other expenses, which tend to consume a significant amount of the funds actually spent on the resolution of environmental matters. Where the Company does not qualify for such treatment, the Company's potential liability on a particular environmental matter could be significant, or the Company believes that the premium or multiplier for a de minimis settlement is unreasonable, the Company may elect to participate in the settlement or remediation activities as, or on the same basis as, a major party, generally paying its allocated share of remediation expenses and transaction costs as they are incurred, often over several years. In addition to the CERCLA and similar actions described above, the Company also, from time to time, conducts or participates in remedial investigations and clean-up activities at facilities currently or formerly occupied by its operating units. In the most significant of these sites, the Company has "clean closed" 13 of 14 facilities regulated under the Resource Conservation and Recovery Act at its former Bermite division in Santa Clarita, California. The Company is currently working to close the 14th of such facilities and to complete an investigation of the entire property in anticipation of the development of the property for a planned mixed-use residential and commercial development. The Company's Denver, Colorado-based Power Storage Systems unit has been cited by the City of Denver for violations arising from its failure to have a waste water discharge permit for a sink used in the brazing operations of a satellite welding facility. The Company believes it has defenses to many of the 8 allegations cited in the notice of violation from the City of Denver. Discussions with the City to settle this matter were successful during fiscal 1995. The Company and the City are completing documentation and implementation of the settlement, which is not expected to have a material adverse effect on the Company. In 1995, the Company made cash expenditures of approximately $1.4 million on environmental matters. This amount was charged to reserves for environmental contingencies which were previously established as part of the Company's divestiture and restructuring program for discontinued operations. OTHER LEGAL MATTERS There are also various other claims and suits pending against the Company. Based on an evaluation, which included consultation with counsel concerning the legal and factual issues involved, the Company is of the opinion that such claims and suits pending against the Company, including the environmental matters discussed above, will not have a material adverse effect, singly or in the aggregate, on the financial position of the Company. See Note 10 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT. The following table sets forth the names, ages and positions of the current executive officers of the Registrant.
NAME AGE POSITIONS ---- --- --------- Thomas A. Brancati.................. 60 Chief Executive Officer, President, and Chief Operating Officer Jack C. Cannady..................... 63 Vice President Richard Levin....................... 45 Vice President, Chief Financial Officer and Secretary John K. Otto........................ 41 Treasurer
Mr. Brancati was President of the Company's Electronics Systems unit from 1987 until 1993, when he was elected President and Chief Operating Officer of the Company, as well as a Director. Effective January 1, 1995, Mr. Brancati became Chief Executive Officer of the Company. Mr. Cannady was Vice President of the Company's Electronics Systems unit from 1989 until his appointment as a Vice President of the Company in June 1994. Mr. Levin joined Whittaker in May 1994, at which time he was appointed Vice President, Chief Financial Officer and Secretary. From 1978 until joining Whittaker, Mr. Levin was a practicing attorney with the law firm of Stutman, Treister & Glatt. Mr. Otto joined Whittaker in 1983 as Whittaker's Manager of Banking and Cash. He was named Assistant Treasurer in 1986 and Treasurer in 1988. The term of office of each executive officer will expire at the next annual meeting of the Board of Directors, which is scheduled to be held March 22, 1996. 9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. PRINCIPAL MARKETS The Common Stock is listed on the New York Stock Exchange and the Pacific Stock Exchange (Symbol: WKR). The Series A Participating Cumulative Preferred Stock Purchase Rights are listed on the New York Stock Exchange and the Pacific Stock Exchange, and, at the present time, trade with the Common Stock and are not separately transferable. The Series D Participating Convertible Preferred Stock (the "Series D Preferred Stock") is not listed or traded on any exchange. See Note 6 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K. COMMON STOCKHOLDERS As of December 31, 1995 there were 5,498 registered holders of the Common Stock. COMMON STOCK PRICES The following table sets forth the high and low sales prices of the Common Stock during Whittaker's two most recent fiscal years.
QUARTER ENDED ---------------------------------------------------------------------------- JANUARY 31 APRIL 30 JULY 31 OCTOBER 31 ---------------- ---------------- ---------------- ---------------- HIGH LOW HIGH LOW HIGH LOW HIGH LOW ------ ------ ------ ------ ------ ------ ------ ------ 1994................ 16 5/8 12 17 7/8 13 1/2 15 5/8 13 5/8 20 15 5/8 1995................ 20 5/8 16 1/8 21 1/8 17 3/8 24 5/8 20 23 1/8 18
DIVIDENDS Dividends of $0.25 were declared on each share of Series D Preferred Stock, for each quarter of the Company's two most recent fiscal years. Dividends of $1.25 were declared on each share of the $5.00 Cumulative Convertible Preferred Stock ("$5.00 Preferred Stock") for each quarter of fiscal 1994 and for the first two quarters of fiscal 1995. On April 28, 1995, all of the outstanding shares of $5.00 Preferred Stock were redeemed or converted into Common Stock. No dividends have been declared on the Common Stock during the two most recent fiscal years. Under the Company's current credit facility with a group of banks, there are restrictions that materially limit the amount of cash dividends that may be paid on the Common Stock. The Company may pay cash dividends on the Common Stock if the Company satisfies a minimum tangible net worth requirement and meets a cash flow test measured at the end of the fiscal quarter immediately preceding the payment of the dividend, and the cumulative amount of all cash dividends paid on the Common Stock does not exceed $100,000 plus 20% of the net income of the Company determined on a cumulative basis from January 30, 1995 through the end of the fiscal quarter immediately preceding the payment of the dividend. In the foreseeable future, in light of the Company's strategy of using earnings from operations to fund growth internally and by selective acquisitions, the Company's present intention is to refrain from paying cash dividends on the Common Stock even if the Company is able to do so under its current credit facility. See Note 5 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for further description of the Company's credit facility. TRANSFER AGENT AND REGISTRAR FOR COMMON STOCK CHEMICAL MELLON SHAREHOLDER SERVICES Four Station Square Third Floor Pittsburgh, Pennsylvania 15219 RIGHTS AGENT FOR SERIES A PARTICIPATING CUMULATIVE PREFERRED STOCK PURCHASE RIGHTS MELLON BANK N.A. Post Office Box 444 Pittsburgh, Pennsylvania 15230 10 ITEM 6. SELECTED FINANCIAL DATA. WHITTAKER CORPORATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- SUMMARY OF OPERATIONS Sales............................ $159,479 $126,448 $115,386 $159,915 $158,510 Income from continuing opera- tions, before accounting change............... $ 7,865 $ 10,061 $ 7,698 $ 13,377 $ 11,374 Cumulative effect of accounting change.......................... -- -- $ 1,512 -- -- Income (loss) from discontinued operations...................... -- -- $ (1,954) $ 2,300 $ 11,201 Net income....................... $ 7,865 $ 10,061 $ 7,256 $ 15,677 $ 22,575 Earnings (loss) per share Continuing operations, before accounting change............. $ .82 $ 1.06 $ .81 $ 1.42 $ 1.27 Accounting change.............. -- -- .16 -- -- Discontinued operations........ -- -- (.21) .24 1.26 Net income..................... $ .82 $ 1.06 $ .76 $ 1.66 $ 2.53 Average common and common equiva- lent shares outstanding (in thousands)...................... 9,625 9,502 9,491 9,407 8,884 Dividends per common share....... -- -- -- -- -- OTHER DATA Working capital.................. $ 73,501 $ 79,983 $ 73,924 $ 85,926 $ 58,969 Total assets..................... $250,959 $209,307 $201,869 $218,279 $199,344 Long-term debt................... $ 70,694 $ 54,742 $ 56,782 $ 66,644 $ 54,920 Stockholders' equity............. $102,424 $ 93,950 $ 83,748 $ 75,200 $ 58,470 Current ratio.................... 2.46:1 3.18:1 2.77:1 2.74:1 2.10:1 Capital additions................ $ 6,400 $ 2,500 $ 1,300 $ 2,200 $ 2,000 Stockholders of record........... 5,500 5,700 7,100 8,500 8,800
11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. RESULTS OF OPERATIONS Comparison of 1995 to 1994 Sales for the Company for fiscal 1995 were $159.5 million, an increase of $33.0 million (26.1%) over fiscal 1994. Sales increased in 1995 largely as a result of the Company's acquisitions of a data networking and communications business in April 1995, which contributed $30.5 million to 1995 sales, and an aerospace business in March of 1994. In the aggregate, the acquired businesses and product lines accounted for $52.3 million of 1995 sales, compared to $10.5 million in 1994, reflecting the implementation of the Company's previously announced strategy of growth by selective acquisitions to complement the Company's existing businesses and product lines. Management expects that the acquired businesses and product lines will contribute to sales in fiscal 1996 at least at the annual rate at which they contributed in fiscal 1995. The acquisitions offset decreases in government sales and termination claims. In the first quarter of 1994, $4.0 million of sales were recognized related to the partial settlement of a termination claim against a defense electronics products customer. An additional, final settlement of $1.1 million was recognized in the second quarter of 1995. The Company has been able to achieve increased sales of its aircraft fluid and pneumatic control devices over the past three years despite relatively low new aircraft build rates. Increased emphasis has been placed on expanding sales from overhaul repairs, retrofits, upgrades and spare components to end- users such as airlines, cargo carriers, maintenance stations, military bases and government agencies. New aircraft production now appears to be on the rise, which may further contribute to an improved business climate for these Company products. The Company has also positioned itself for continued growth in the Aerospace segment by expanding its product offerings through acquisitions and growth in related markets, including fire and overheat detection equipment and industrial markets. During fiscal 1995, the Company also marketed its aircraft fluid control and other aerospace products to manufacturers of industrial, land-based gas turbines, which are similar to jet engines. The Company intends to continue to do so. A reduced United States defense budget has contributed to both the decline in sales to the U.S. government and delays in the receipt of new contract bookings in the Aerospace segment. The outlook for future sales is difficult to predict given the uncertainties related to the defense budget and related reductions and terminations of U.S. Government defense contracts. Any negative effect on Aerospace segment sales related to this uncertainty may be offset in the future by contracts for new, technologically advanced electronic defense systems, new commercial products, and sales of aerospace and electronic products into industrial markets. Thus, past Company performance may not be a reliable indicator of future performance. Gross margin for the Company increased in fiscal 1995 to $69.5 million, or 43.6% of sales, from $53.2 million, or 42.0% of sales in fiscal 1994. Gross margin for the Communications segment was 44.5% in fiscal 1995. Gross margin for the Aerospace segment increased to 43.4% of sales from 42.0% of sales in fiscal 1994. Affecting the comparability of the years are three items which had a net positive impact of $5.0 million on Aerospace gross margin in 1995, compared to $4.1 million in 1994. The first item is recognition in 1995 of $1.8 million of gross margin related to the Company's insurance claim for earthquake damage brought about by the January 17, 1994 Northridge, California earthquake. The second item is recognition in 1995 of $2.1 million of gross margin related to the Company's defined benefit pension plan, while related gross margin in 1994 was $0.6 million. This actuarially determined pension income is the result of an expected return on plan assets which exceeded the interest cost on the projected benefit obligation. The last item is a termination claim settlement which contributed $1.1 million of gross margin in 1995, compared to $3.5 million in 1994. When the effects of these items are removed from both years, Aerospace segment gross margin as a percentage of sales is 40.4% in 1995 compared to 40.1% in 1994. Engineering expenses for the Company as a percentage of sales increased to 4.9% in 1995 from 2.2% in 1994. This increase is due to the inclusion of six months of results of the Communications segment in 1995. Management expects engineering expenses as a percentage of sales to increase further in fiscal 1996 to reflect 12 full year operating results of the Communications segment. Engineering expenses as a percentage of sales in the Aerospace segment increased to 2.7% in 1995, from 2.2% in 1994, due to up-front costs related to its industrial business product lines. Selling, general and administrative expenses for the Company as a percentage of sales increased to 24.8% in 1995 from 24.1% in 1994. In 1995, the Aerospace segment received a $1.3 million earthquake recovery which was reflected as a reduction in selling, general and administrative expenses. Excluding the effects of the termination claim included in 1994 and 1995 revenues, as well as the earthquake recovery in 1995, the Aerospace segment's selling, general and administrative expenses as a percentage of sales increased to 19.5% in 1995 from 19.3% in 1994. The Communications segment of the business spends more on salespeople and marketing programs, as a percentage of sales, than the Aerospace segment. Consequently, the inclusion of six months of Communications segment results has increased the overall percentage for the Company. Management expects selling, general, and administrative expenses to increase further in fiscal 1996 to reflect full year operating results of the Communications segment. During the second quarter of 1995, concurrent with the acquisition of WCI, a charge to earnings was recorded related to acquired in-process research and development. The effect was to reduce net income for the second quarter and the year by $1.9 million, or $0.20 per share. During the third quarter of 1995, a charge to earnings was recorded to reflect restructuring actions at WCI, along with expenses associated with combining a substantial portion of the Company's Beaverton, Oregon operation into the WCI operation in Santa Clara, California. The effect was to reduce net income for the third quarter and year by $0.2 million, or $0.02 per share. Interest expense increased to $5.9 million for fiscal 1995 from $4.0 million in fiscal 1994 primarily as a result of higher interest rates and incremental debt from the purchase of WCI. Comparison of 1994 to 1993 Sales for fiscal 1994 increased 9.6% to $126.4 million from fiscal 1993 sales of $115.4 million. Sales increased in 1994 in part as a result of the Company's acquisition of a telecommunications business in July 1993, two aircraft fluid control product lines in the fourth quarter of fiscal 1993, and an aerospace business in March of 1994. The acquisitions offset decreases in government sales. In the aggregate, the acquired businesses and product lines accounted for $27.5 million of 1994 sales, compared to $1.7 million in 1993. The aerospace business acquired in March 1994 contributed $10.5 million to 1994 sales. The increased sales in fiscal 1994 also included the recognition of $4.0 million of sales during the first quarter of 1994 related to the partial settlement of a termination claim against a defense electronics products customer. Sales of defense electronics products were adversely affected during the first and second quarters of fiscal 1994 by the January 17 Northridge, California earthquake and by delays in the receipt of new contract bookings. Gross margin increased in fiscal 1994 to $53.2 million, or 42.0% of sales, from $44.2 million, or 38.3% of sales in fiscal 1993. The increase was due primarily to a product mix that included a higher portion of after-market aircraft fluid control products. Also contributing to the increase in gross margin in 1994 was $3.5 million of gross margin resulting from the partial termination claim settlement described above, under which the Company recorded as revenue $4.0 million, with an associated cost of sale of $0.5 million. The increase in gross margin was offset partially by lower margins in radio frequency/survivability products resulting primarily from a higher mix of cost-plus contracts in 1994 compared to 1993 and, to some degree, from the effects of the interruption of the business and damage caused by the January 17 Northridge, California earthquake. As a percentage of sales, engineering, selling and general and administrative expenses increased from 24.7% in fiscal 1993 to 26.2% in fiscal 1994. The increase primarily was the result of additional expenses of the acquired aerospace business, and executive bonus payments made for 1994 compared to limited payments made for 1993. The increase was offset partially by income associated with the Company's defined benefit pension plan. 13 General In fiscal 1995, 1994, and 1993, approximately 34%, 49%, and 68%, respectively, of the Company's sales were directly or indirectly attributable to the United States Government. All of these sales, with the exception of a minor amount in 1995, relate to the Aerospace segment. Companies engaged in supplying military equipment to the United States Government are subject to competition, changes in the continuing availability of Congressional appropriations, changes in contract timing and scheduling, complexity of designs and the potential for obsolescence, and other changes which may result from world events. A loss of Government business, although not anticipated by the Company, could have a material adverse effect on the Company's operations. In August 1994, the Company was awarded a $10.9 million cost-reimbursement contract from the United States Army to develop three new versions of the Company's previously developed battlefield electronic countermeasures system, capable of detonating incoming artillery and mortar rounds, designated the Shortstop Electronic Protection System ("SEPS"). During 1995, the Company met performance requirements and developed three full scale SEPS development models. The contract did not contribute a material amount of revenue to the Company in 1995, but successful development of the new SEPS versions slated for delivery starting late in fiscal 1996 could, subject to all of the risks and uncertainties that apply to military procurement generally, as discussed above, result in subsequent SEPS production contracts, which could then have a material effect on the Company's sales. There can be no assurance, however, whether or when any such contracts would be awarded. The Company is discussing with various foreign governments the potential sale and installation of a Company-designed radar system that detects tactical ballistic missiles and allows early warning for the civilian population and for deployment of weapons. There are currently no firm commitments for the system at this date. If the discussions result in an agreement, annual sales of defense electronics products could increase materially. Because of the uncertainties of the military procurement processes of foreign governments, the need for the foreign government to provide budget authority for the potential procurement, and all the uncertainties that apply to military procurement generally, as discussed above, there can be no assurance that an agreement will be reached or, if reached, what the contract price would be. FINANCIAL CONDITION At October 31, 1995, the Company's debt totaled $76.7 million, which consisted of $29.5 million of loans under a revolving bank credit facility, $31.3 million under a bank term loan, a $15.0 million convertible subordinated note, and $0.9 million of other debt. In addition, there were $12.9 million of letters of credit outstanding under the revolving credit facility. On January 24, 1995, the Company and a group of banks entered into a credit agreement which consists of a $65.0 million revolving credit facility with a three-year term expiring in January 1998 and a term loan that is being repaid in quarterly installments over five years. Interest on loans outstanding under the credit agreement are based, at the Company's option, on LIBOR or the agent bank's prime rate. The annual interest rate based on LIBOR may range between LIBOR plus 1.0% and LIBOR plus 1.875%, and the annual interest rate based on the prime rate may range between prime and prime plus 0.50%. The agreement includes financial covenants with respect to financial leverage, cash flow, and tangible net worth. Proceeds from the credit facility were used at closing to repay $55.5 million of loans outstanding under a prior credit facility and will be used in the future to fund working capital and acquisitions. The Company's ratio of long-term debt, including the current portion, to capitalization (stockholders' equity plus debt) was 42.8% at October 31, 1995, compared to 39.1% at the end of 1994. While stockholders' equity increased by $8.5 million for the year, reflecting a $7.9 million contribution from 1995 net income and $0.6 million from net exercises of employee stock options and related tax benefits, debt increased by $16.5 million. This increase in debt resulted from the additional debt used to finance the acquisition of WCI, which was partially offset by cash from operations. 14 Cash flow provided by operations in fiscal 1995 was $20.8 million, compared to $21.6 million in fiscal 1994. The reduction in operating cash flow in 1995 compared to 1994 resulted from the buildup of recoverable income taxes not yet received in cash, which caused a $4.8 million decrease, and a decrease in net income of $2.2 million. These reductions were substantially offset by increased cash flows from operating assets and liabilities and an increase in non-cash expenses. Cash used in investing activities was $39.5 million in fiscal 1995, which included $31.0 million for the acquisition of WCI and capital expenditures of $6.4 million. During fiscal 1994, the Company used cash of $13.0 million to make acquisitions and had capital additions of $2.5 million. Cash flow provided by financing activities was $15.4 million in fiscal 1995, primarily the result of the issuance of a convertible subordinated note to finance the acquisition of WCI, while $2.6 million of cash was used in fiscal 1994, primarily to reduce debt. The Company expects to receive a net income tax refund of $5.2 million, plus interest of approximately $5 million, under an agreement reached with the Internal Revenue Service closing the audit of the Company's 1987 and 1988 income tax returns. The refund is subject to approval by the Congressional Joint Committee on Taxation, which is not expected until the second quarter of fiscal 1996. Included in accounts receivable at the end of fiscal 1995 are no significant claims related to certain United States Government prime contracts and subcontracts compared to $5.6 million at the end of fiscal 1994. An additional claim of $1.6 million is included in other assets at the end of fiscal 1995. These claims have been recorded in accordance with generally accepted accounting principles to the extent of contract costs incurred. These costs were incurred in connection with customer caused delays and disruptions, errors in technical data, a partial termination for convenience and other unanticipated causes. These claims were filed for amounts aggregating $13.7 million at October 31, 1995, compared to $31.8 million at year-end 1994, substantially in excess of amounts recorded. While the outcome of these claims presently cannot be determined, in the opinion of the Company and its counsel the recorded amount is a reasonable estimate of the minimum amount expected to be collected. These claims are subject to negotiation and audit by the U.S. Government, the prime contractor customer, or both, and are presently at various stages of negotiation, litigation or appeal. During the third quarter of fiscal 1994, the Company submitted a claim to its insurance carriers to recover the costs of repair and replacement of assets and for the costs of business interruption brought about by the January 17 Northridge, California earthquake. A final settlement in the amount of $8.3 million was reached in the third quarter of fiscal 1995, and full payment has been received. Capital expenditures for fiscal 1995 were $6.4 million, compared to $2.5 million in fiscal 1994 and $1.3 million in fiscal 1993. The increase in fiscal 1995 reflects various costs associated with the relocation of the Company's headquarters office from leased space into an existing owned manufacturing facility, as well as upgrades to engineering equipment. At October 31, 1995, there were approximately $0.5 million of approved capital expenditures outstanding for the replacement and upgrade of existing plant and equipment at the Company's various facilities. Funds for these and other capital expenditures are expected to be provided from operations. Capital expenditures are subject to limitations by covenants contained in the Company's credit agreement. It is anticipated that the amounts under the covenants will be sufficient to allow the Company to continue to maintain and upgrade existing facilities. The Company intends to continue its previously announced strategy of growth by selective acquisitions that complement the Company's core businesses, financed by cash from operations and from borrowings under its revolving credit facility and, where appropriate, by issuance of new debt or equity securities of the Company. The Company intends to pursue its acquisition strategy with careful regard for profitability and the Company's need for liquidity. There can be no assurance, however, that any acquisitions will occur or that an acquisition that does occur will not adversely affect the Company's net income or liquidity. 15 As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 (CERCLA). See further discussion in Item 3 of this Form 10-K. See Note 10 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for information regarding commitments and contingencies. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA. 16 REPORT OF INDEPENDENT AUDITORS To the Stockholders and Board of Directors of Whittaker Corporation We have audited the accompanying consolidated balance sheets of Whittaker Corporation as of October 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended October 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Whittaker Corporation at October 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 7 to the consolidated financial statements, in 1993 the Company changed its method of accounting for income taxes. ERNST & YOUNG LLP Los Angeles, California December 14, 1995 17 WHITTAKER CORPORATION CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED OCTOBER 31, ---------------------------- 1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS) Sales............................................ $159,479 $126,448 $115,386 Costs and expenses Cost of sales.................................. 89,974 73,286 71,139 Engineering and development.................... 7,741 2,720 1,700 Selling, general and administrative............ 39,608 30,429 26,835 Acquired in-process research and development... 3,250 -- -- Restructuring costs............................ 382 -- -- -------- -------- -------- Operating income................................. 18,524 20,013 15,712 Interest expense................................. (5,897) (3,967) (3,731) Interest income.................................. 568 568 712 Other expense.................................... (169) (82) (181) -------- -------- -------- Income from continuing operations before provi- sion for taxes and cumulative effect of accounting change.......... 13,026 16,532 12,512 Provision for taxes.............................. 5,161 6,471 4,814 -------- -------- -------- Income from continuing operations before cumula- tive effect of accounting change................ 7,865 10,061 7,698 Cumulative effect as of November 1, 1992 of change in method of accounting for income taxes..................... -- -- 1,512 Loss from discontinued operations................ -- -- (1,954) -------- -------- -------- Net income....................................... $ 7,865 $ 10,061 $ 7,256 ======== ======== ======== Earnings per share Continuing operations before cumulative effect of accounting change.......................... $ 0.82 $ 1.06 $ 0.81 Cumulative effect of accounting change......... -- -- 0.16 Loss from discontinued operations.............. -- -- (0.21) -------- -------- -------- Net income..................................... $ 0.82 $ 1.06 $ 0.76 ======== ======== ========
The accompanying notes are an integral part of these statements. 18 WHITTAKER CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
AT OCTOBER 31, ------------------ 1995 1994 -------- -------- (DOLLARS IN THOUSANDS) CURRENT ASSETS Cash........................................................ $ 161 $ 3,507 Receivables................................................. 65,394 65,292 Inventories................................................. 39,518 32,013 Prepaid expenses............................................ 2,053 2,475 Income taxes recoverable.................................... 1,452 66 Deferred income taxes....................................... 15,151 13,395 -------- -------- Total Current Assets...................................... 123,729 116,748 PROPERTY, PLANT AND EQUIPMENT Land and land improvements.................................. 5,770 6,426 Buildings and improvements.................................. 27,503 27,742 Equipment................................................... 44,381 34,729 Construction in progress.................................... 405 1,376 -------- -------- 78,059 70,273 Less accumulated depreciation and amortization.............. (36,641) (33,506) -------- -------- 41,418 36,767 -------- -------- OTHER ASSETS Goodwill, net of amortization............................... 33,414 19,604 Other intangible assets, net of amortization................ 10,585 2,336 Notes and other noncurrent receivables...................... 4,218 3,682 Other noncurrent assets..................................... 10,480 4,681 Assets held for sale........................................ 27,115 25,489 -------- -------- 85,812 55,792 -------- -------- $250,959 $209,307 ======== ========
The accompanying notes are an integral part of these statements. 19 WHITTAKER CORPORATION CONSOLIDATED BALANCE SHEETS LIABILITIES & STOCKHOLDERS' EQUITY
AT OCTOBER 31, ----------------- 1995 1994 -------- -------- (DOLLARS IN THOUSANDS) CURRENT LIABILITIES Current maturities of long-term debt.......................... $ 6,048 $ 5,540 Accounts payable.............................................. 14,650 10,713 Accrued liabilities........................................... 29,530 20,512 -------- -------- Total Current Liabilities................................... 50,228 36,765 -------- -------- OTHER LIABILITIES Long-term debt................................................ 70,694 54,742 Other noncurrent liabilities.................................. 11,340 11,880 Deferred income taxes......................................... 16,273 11,970 -------- -------- Total Other Liabilities..................................... 98,307 78,592 -------- -------- Commitments and contingencies (Notes 3, 9, and 10) STOCKHOLDERS' EQUITY Capital Stock: Preferred Stock, par value $1 per share, authorized 5,000,000 shares-- $5.00 Cumulative Convertible Preferred Stock, outstanding 0 shares at October 31, 1995 and 2,185 shares at October 31, 1994..... -- 2 Series D Participating Convertible Preferred Stock, out- standing 895.18 shares at October 31, 1995 and October 31, 1994...................................................... 1 1 Common Stock, authorized 40,000,000 shares-- Par value, $.01 per share, outstanding 8,588,982 shares at October 31, 1995 and 8,486,174 shares at October 31, 1994. 86 85 Additional paid-in capital.................................... 19,261 17,787 Retained earnings............................................. 83,076 76,075 -------- -------- Total Stockholders' Equity.................................. 102,424 93,950 -------- -------- $250,959 $209,307 ======== ========
The accompanying notes are an integral part of these statements. 20 WHITTAKER CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, ---------------------------- 1995 1994 1993 -------- -------- -------- (DOLLARS IN THOUSANDS) OPERATING ACTIVITIES Continuing Operations-- Net income..................................... $ 7,865 $ 10,061 $ 7,698 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization................ 8,065 5,658 5,078 Net periodic pension cost (income)........... (2,720) (782) 1,363 Acquired in-process research and development. 3,250 -- -- Income taxes recoverable..................... (1,386) 3,416 (3,482) Deferred taxes............................... 2,899 2,913 (24) Cumulative effect of accounting change....... -- -- 1,512 Changes in operating assets and liabilities: Receivables................................ 8,860 5,555 24,521 Inventories and prepaid expenses........... (427) (2,372) 2,305 Accounts payable and other liabilities..... (5,650) (2,889) (23,541) -------- -------- -------- Total from continuing operations............... 20,756 21,560 15,430 -------- -------- -------- Discontinued Operations-- Net loss....................................... -- -- (1,954) -------- -------- -------- Net cash provided by operating activities........ 20,756 21,560 13,476 -------- -------- -------- INVESTING ACTIVITIES Businesses acquired.............................. (31,013) (12,992) (12,969) Business sold.................................... -- -- 3,519 Purchase of property, plant and equipment........ (6,376) (2,545) (1,297) Collections of notes receivable.................. 1,147 2,553 52 Increase in assets held for sale................. (1,626) (851) -- Other items, net................................. (1,631) (1,748) 1,252 -------- -------- -------- Net cash used by investing activities............ (39,499) (15,583) (9,443) -------- -------- -------- FINANCING ACTIVITIES Issuance of convertible subordinated debt........ 15,000 -- -- Issuance of other debt........................... 56,960 -- -- Reduction of debt................................ (55,500) (2,862) (6,855) Reduction (increase) in deferred debt costs...... (808) 119 492 Dividends paid................................... (4) (12) (12) Purchases of common stock........................ (1,094) -- -- Proceeds from shares issued under stock option plans........................................... 843 115 (310) -------- -------- -------- Net cash provided (used) by financing activities. 15,397 (2,640) (6,685) -------- -------- -------- Net increase (decrease) in cash.................. (3,346) 3,337 (2,652) Cash at beginning of year........................ 3,507 170 2,822 -------- -------- -------- Cash at end of year.............................. $ 161 $ 3,507 $ 170 ======== ======== ======== Supplemental disclosure of cash flow information: Cash paid during the year for: Interest....................................... $ 5,079 $ 3,780 $ 5,515 ======== ======== ======== Income taxes................................... $ 1,424 $ 3,918 $ 5,930 ======== ======== ========
The accompanying notes are an integral part of these statements. 21 WHITTAKER CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE YEARS ENDED OCTOBER 31, 1995 (IN THOUSANDS)
PREFERRED STOCK COMMON STOCK ADDITIONAL -------------- -------------- PAID-IN RETAINED $5.00 SERIES D SHARES AMOUNT CAPITAL EARNINGS TOTAL ----- -------- ------ ------ ---------- -------- -------- BALANCE AT NOVEMBER 1, 1992................... $ 2 $ 1 8,167 $82 $13,643 $61,472 $ 75,200 Net income.............. -- -- -- -- -- 7,256 7,256 Cash dividends--pre- ferred stock........... -- -- -- -- -- (12) (12) Shares issued under stock option plans..... -- -- 305 3 2,377 (2,690) (310) Income tax benefits from stock options exercised.............. -- -- -- -- 1,614 -- 1,614 --- --- ----- --- ------- ------- -------- BALANCE AT OCTOBER 31, 1993................... 2 1 8,472 85 17,634 66,026 83,748 Net income.............. -- -- -- -- -- 10,061 10,061 Cash dividends--pre- ferred stock........... -- -- -- -- -- (12) (12) Shares issued under stock option plans..... -- -- 14 -- 115 -- 115 Income tax benefits from stock options exercised.............. -- -- -- -- 38 -- 38 --- --- ----- --- ------- ------- -------- BALANCE AT OCTOBER 31, 1994................... 2 1 8,486 85 17,787 76,075 93,950 Net income.............. -- -- -- -- -- 7,865 7,865 Cash dividends--pre- ferred stock........... -- -- -- -- -- (4) (4) Conversion of preferred stock.................. (2) -- 4 -- (7) -- (9) Shares issued under stock option plans..... -- -- 154 1 842 -- 843 Purchases of common stock ................. -- -- (55) -- (225) (860) (1,085) Income tax benefits from stock options exercised.............. -- -- -- -- 864 -- 864 --- --- ----- --- ------- ------- -------- BALANCE AT OCTOBER 31, 1995................... $-- $ 1 8,589 $86 $19,261 $83,076 $102,424 === === ===== === ======= ======= ========
The accompanying notes are an integral part of these statements. 22 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. (B) Inventories: Inventories are stated at the lower of cost or market. Cost has been determined principally on the first-in, first-out (FIFO) method. Inventories consisted of the following:
OCTOBER 31, ---------------- 1995 1994 ------- ------- (IN THOUSANDS) Raw materials........................................... $23,518 $18,391 Work in process......................................... 11,500 11,643 Finished goods.......................................... 3,332 1,174 Costs relating to long-term contracts................... 2,287 805 Unliquidated progress billings.......................... (1,119) -- ------- ------- $39,518 $32,013 ======= =======
(C) Intangibles: Goodwill is amortized using the straight-line method over periods ranging from 20 to 40 years. Other intangible assets principally relate to acquired intangibles and include patents, technology, and customer lists. Amortization is recorded on a straight-line basis, generally over periods ranging from 5 to 15 years. Accumulated amortization of goodwill and of other intangible assets at October 31, 1995 amounted to $2,722,000 and $6,906,000, respectively, and at October 31, 1994 amounted to $1,852,000 and $5,858,000, respectively. (D) Property and Depreciation: Property, plant and equipment is recorded at cost. Depreciation is computed principally by use of the straight-line method based upon the estimated useful lives of such assets, ranging from four to thirty years. Depreciation of leasehold improvements is computed on a straight- line basis over the shorter of the estimated useful lives of the improvements or the terms of the leases. (E) Revenue Recognition: For the majority of its operations, the Company recognizes revenues upon shipment of its product or upon completion of the services it renders. The Company accrues estimated warranty and installation costs at the time of shipment. The Company generally uses the percentage-of- completion method for recognition of revenues and profits on significant long- term contracts. (F) Engineering and Development Costs: Company-sponsored engineering and development costs are expensed as incurred. Costs related to engineering and development contracts are included in inventory and charged to cost of goods sold upon recognition of related revenue. (G) Earnings Per Share: Earnings per share have been computed based on the weighted average number of common and common equivalent shares outstanding during the periods, after deducting from net income the dividend requirements on the $5.00 Cumulative Convertible Preferred Stock. Common stock equivalents include Series D Participating Convertible Preferred Stock and dilutive employee stock options, calculated using the treasury stock method. Fully diluted earnings per share include the additional potential dilutive effect of employee stock options. The inclusion of additional shares assuming the conversion of the convertible subordinated debt would have been antidilutive. Fully diluted earnings per share are not presented because the calculations result in dilution of less than 3%. (H) Reclassification: Certain previously reported amounts have been reclassified to conform to the current period presentation. 23 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED) (I) New Accounting Standard: In March of 1995, the Financial Accounting Standards Board issued a new standard, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of," (SFAS 121). The Company will not be required to adopt this standard until the first quarter of fiscal 1997. The Company does not expect adoption of this standard to have a material effect on its consolidated financial statements. NOTE 2. ACQUISITIONS On April 24, 1995, the Company acquired all of the stock of Hughes LAN Systems, Inc., a subsidiary of Hughes Electronics Corporation. The subsidiary was renamed Whittaker Communications, Inc. ("WCI") and is a designer and manufacturer of high speed switching and Asynchronous Transfer Mode ("ATM") compatible local area network communication hubs and network management software systems. WCI was acquired for a purchase price of $16.0 million in cash, subject to certain adjustments, and a $15.0 million convertible subordinated note. The 7% convertible subordinated note is due on May 1, 2005, and is convertible to the Company's common stock at a price of $24.25 per share. The agreement also provides for contingent deferred payments, not to exceed $25 million, over the years 1996 to 1999 based on future sales of WCI's hub products and derivatives. The acquisition was accounted for as a purchase and accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. Goodwill amounted to $14.2 million, which will be amortized on a straight-line basis over twenty years. Other intangible assets which resulted from the acquisition include developed technology with a value of $3.3 million and a customer list with a value of $5.6 million which will be amortized on a straight-line basis over periods ranging from five to fifteen years. Acquired in-process research and development valued at $3.3 million was expensed at the acquisition date. The Company also assumed liabilities of $18.1 million at the acquisition date. The accompanying consolidated statements of income reflect the operating results of WCI since the effective date of the acquisition. The following unaudited pro forma information has been prepared assuming that this acquisition had taken place at the beginning of the respective periods, after giving effect to certain pro forma adjustments, including additional amortization expense as a result of goodwill and other intangible assets, increased interest expense on acquisition debt, and related tax effects. The pro forma results are summarized below (in thousands except per share amounts):
1995 1994 -------- -------- Net sales.............................................. $181,455 $170,269 Net income............................................. 4,029 (1,728) Earnings (loss) per share.............................. 0.42 (0.20)
These pro forma results have been prepared for comparative purposes only and may not be indicative of the results of operations which actually would have occurred had the combination been in effect at the beginning of the respective periods or of future results of operations of the consolidated entities. The Company acquired other businesses for $13.0 million in cash during each of fiscal 1994 and fiscal 1993. The acquisitions were accounted for under the purchase method, and in the year of acquisition the results of operations for 1994 and 1993 include sales of $10.5 million and $1.7 million, respectively, related to these businesses. These acquisitions resulted in goodwill of $5.6 million and $6.9 million in 1994 and 1993, respectively. NOTE 3. DISCONTINUED OPERATIONS The 1993 loss from discontinued operations consists of pretax charges of $3.5 million as settlement of a patent infringement case and a $0.7 million provision for ongoing costs related to previously discontinued 24 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 3. DISCONTINUED OPERATIONS--(CONTINUED) operations, partially offset by the receipt of $1.0 million of interest related to the resolution of tax issues associated with previously discontinued operations. The tax benefit relating to the loss from discontinued operations was $1.2 million. Assets held for sale at October 31, 1995 and October 31, 1994 include $25.1 million and $23.7 million, respectively, of land formerly used by a discontinued technology unit. The Company has obtained entitlements--the right granted by political authorities to develop real property--for the land. Assets held for sale are carried at the lower of cost or net realizable value. In connection with the discontinuance of various businesses, the Company remains liable for certain retained obligations and for certain future claims, principally environmental and product liability. The noncurrent portion of such items is included in "Other Noncurrent Liabilities" in the balance sheet. NOTE 4. RECEIVABLES Receivables consisted of the following:
OCTOBER 31, ---------------- 1995 1994 ------- ------- (IN THOUSANDS) Trade accounts receivable--billed....................... $38,303 $30,107 Trade accounts receivable--unbilled..................... 25,457 33,867 Other receivables....................................... 2,810 2,619 Allowance for doubtful accounts......................... (1,176) (1,301) ------- ------- Total receivables....................................... $65,394 $65,292 ======= =======
Unbilled receivables represent recoverable costs and accrued profits, not billable to customers at the balance sheet date, which are generally billable upon product delivery and acceptance and/or completion of milestones. All amounts are reduced by appropriate progress billings. Amounts representing retainages under contracts are not material. Claims subject to further negotiations and which may not be collected within one year are not significant at October 31, 1995. A claim in the amount of $1.6 million which was included in unbilled receivables at October 31, 1994, has been reclassified to other long-term assets in 1995 because resolution is not expected within the next year. NOTE 5. LONG-TERM DEBT Long-term debt consisted of the following:
OCTOBER 31, --------------------------------- 1995 1994 ---------------- ---------------- (IN THOUSANDS) INTEREST INTEREST AMOUNT RATE AMOUNT RATE ------- -------- ------- -------- Borrowings under revolving credit facility... $29,500 7.6% $42,500 6.1% Borrowings under term loan................... 31,250 7.5% 16,500 6.4% Other note, payable semiannually to 1999, with interest at the lesser of 10% or 65% of prime....................................... 659 5.7% 859 5.0% 7% convertible subordinated note due May 1, 2005 (Note 2)............................... 15,000 7.0% -- -- Capitalized lease obligations payable in va- rying monthly or quarterly installments through 1999, with interest rates ranging to 9.67% (Note 9).............................. 333 8.8% 423 8.8% ------- ------- 76,742 60,282 Less current maturities...................... 6,048 5,540 ------- ------- $70,694 $54,742 ======= =======
25 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 5. LONG-TERM DEBT--(CONTINUED) Maturities of long-term debt are as follows for the periods stated:
YEAR ENDING OCTOBER 31 (IN THOUSANDS) ----------- -------------- 1996...................... $ 6,048 1997...................... 7,057 1998...................... 37,567 1999...................... 8,820 2000...................... 2,250
On January 24, 1995, the Company and a group of banks entered into a credit agreement which consists of a $65.0 million revolving credit facility with a three-year term expiring in January 1998 and a term loan that is being repaid in quarterly installments over five years. Interest on loans outstanding under the credit agreement are based, at the Company's option, on LIBOR or the agent bank's prime rate. The annual interest rate based on LIBOR may range between LIBOR plus 1.0% and LIBOR plus 1.875%, and the annual interest rate based on the prime rate may range between prime and prime plus .50%. The Company is obligated to pay letter of credit fees which may range between .625% per annum and 2.0% per annum on the aggregate amount of outstanding letters of credit, and commitment fees which may range between .25% per annum and .375% per annum on the unused amount of the revolving credit facility. The agreement includes financial covenants with respect to financial leverage, cash flow, and tangible net worth. Proceeds from the credit facility were used to pay off and cancel a prior credit facility and will be used going forward to fund working capital and acquisitions. The Company's obligations under the credit agreement are secured by shares of stock of subsidiaries of the Company, accounts receivable, inventory, and other assets of the Company and its subsidiaries. On April 24, 1995, the Company issued a $15 million 7.0% convertible subordinated note to Hughes Electronics Corporation, with a scheduled maturity on May 1, 2005. The note is convertible at the option of the holders into common stock of the Company at a conversion price of $24.25 per share, interest is payable semiannually, and the note is redeemable, at the option of the Company, at any time with no premium. The note prohibits the Company from paying dividends or redeeming its capital stock if its tangible net worth is less than $15 million. At October 31, 1995, there were $12.9 million of letters of credit outstanding under the revolving credit facility. NOTE 6. CAPITAL STOCK On April 28, 1995, all the outstanding shares of $5.00 Cumulative Convertible Preferred Stock were either redeemed or converted into Common Stock. Each share of the $5.00 Cumulative Convertible Preferred Stock was voting, cumulative and convertible into 1.854 shares of Common Stock plus $74.16 in cash, was redeemable, at the Company's option, at $100 per share and was entitled to preference of $100 per share upon voluntary liquidation and $50 per share upon involuntary liquidation. Each share of Series D Participating Convertible Preferred Stock is nonvoting, cumulative and, in connection with a qualifying transfer, convertible into 326.531 shares of Common Stock. Holders of the Series D Participating Convertible Preferred Stock, of which there is presently only one, are entitled to a $1.00 per share liquidation preference and to the greater of $.25 per share per quarter or any dividends paid in respect of the number of shares of Common Stock underlying each share of Series D Participating Convertible Preferred Stock. The Board of Directors is authorized to issue preferred stock in series, to fix dividend rates, conversion rights, voting rights, rights and terms of redemption and liquidation preferences, and to increase or decrease the number of shares of any series. 26 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 6. CAPITAL STOCK--(CONTINUED) Common Stock reserved for issuance at October 31, 1995 was as follows:
SHARES IN THOUSANDS --------- For conversion of Series D Participating Convertible Preferred Stock........................................................... 292 For stock options................................................ 2,457 For conversion of 7% subordinated note........................... 619 ----- 3,368 =====
On December 16, 1994, the Board of Directors adopted, and on March 24, 1995, the shareholders approved, an amendment to the Whittaker Corporation Long-Term Stock Incentive Plan (1989) (the "1989 Plan"), that increased from 1,000,000 to 2,000,000 the number of shares of Common Stock of the Company which may be made subject to stock options and other awards authorized by the 1989 Plan. The Company had reserved 2,456,903 shares of Common Stock at October 31, 1995 for future issuances under the 1989 Plan, as well as a prior stock option plan for employees, and a non-employee director stock option plan. Options to purchase Common Stock generally are conditioned upon continued employment, expire from five to ten years after the grant date, and become exercisable in whole or in part either commencing with the second year or upon the attainment of certain predetermined goals, or both. The following information for the three years ended October 31, 1995 relates to options granted from 1981 through 1995 under the plans.
OPTIONS OUTSTANDING PRICE RANGE ------------ -------------- IN THOUSANDS Balance, October 31, 1992........................... 1,467 2.41 to 12.94 Options granted................................... 325 12.00 to 15.06 Options canceled or expired....................... (69) 5.24 to 14.50 Options exercised................................. (472) 2.41 to 12.00 ----- Balance, October 31, 1993........................... 1,251 2.41 to 15.06 Options granted................................... 191 14.19 to 16.37 Options canceled or expired....................... (61) 6.32 to 16.37 Options exercised................................. (14) 4.10 to 15.06 ----- Balance, October 31, 1994........................... 1,367 2.41 to 16.37 Options granted................................... 544 18.00 to 22.50 Options canceled or expired....................... (35) 15.06 to 22.25 Options exercised................................. (154) 3.82 to 18.63 ----- Balance, October 31, 1995........................... 1,722 2.41 to 22.50 =====
At October 31, 1995, options for 1,143,777 shares were exercisable. The Company also had reserved 618,557 shares of Common Stock at October 31, 1995 for possible conversion of the 7% convertible subordinated note at the option of the holders. The Company's Stockholder Rights Plan gives each holder of the Company's Common Stock one right for each share of Common Stock held. Each right entitles the holder to purchase from the Company 1/100 of a share of a new series of the Company's preferred stock (Series A Participating Cumulative Preferred Stock) at an exercise price of $125 per 1/100 of a share. The rights will become exercisable and will detach from the Common Stock 10 days after any person or group acquires 25% or more of the Company's Common 27 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 6. CAPITAL STOCK--(CONTINUED) Stock, or 10 business days after any person or group commences a tender or exchange offer which, if consummated, would result in that person or group owning at least 25% of the Company's Common Stock. If any person acquires 25% or more of the Company's Common Stock, each right will entitle the holder, other than the acquiring person, to purchase for the exercise price Common Stock of the Company with a value of twice the exercise price. In addition, if following an acquisition by any person or group of 25% or more of the Company's Common Stock, the Company is involved in a merger or other business combination transaction, or sells more than 50% of its assets or earning power to any person, each right will entitle the holder, other than the acquiring person, to purchase for the exercise price Common Stock of the acquiring person with a value of twice the exercise price. The Company may redeem the rights at $.01 per right at any time until the tenth day after any person or group has acquired 25% or more of its Common Stock. The rights will expire November 29, 1998, unless earlier redeemed. The Stockholder Rights Plan may be supplemented or amended at the direction of the Company without the approval of the holders of rights, except as otherwise set forth in the Stockholder Rights Plan. At October 31, 1995, 150,000 preferred shares were reserved for these rights. NOTE 7. INCOME TAXES Effective November 1, 1992 the Company changed its method of accounting for income taxes from the deferred method to the liability method required by Statement of Financial Accounting Standards No. 109, (SFAS 109) "Accounting for Income Taxes." The cumulative effect of adopting Statement 109 as of November 1, 1992 was to increase net income by $1,512,000. Income tax expense (benefit) relating to continuing operations consists of the following:
YEARS ENDED OCTOBER 31, ---------------------- 1995 1994 1993 ------- ------ ------ (IN THOUSANDS) Current provision-- U.S. Federal....................................... $(1,154) $1,247 $ (468) State.............................................. 527 1,100 717 ------- ------ ------ (627) 2,347 249 Deferred provision-- U.S. Federal....................................... 5,634 4,124 4,392 State.............................................. 154 -- 173 ------- ------ ------ 5,788 4,124 4,565 ------- ------ ------ Provision for taxes.................................. $ 5,161 $6,471 $4,814 ======= ====== ======
Foreign income taxes were not material. 28 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 7. INCOME TAXES--(CONTINUED) The tax expense is different than the amount computed by applying the U.S. federal income tax rate to income before income taxes. The reasons for these differences are as follows:
YEARS ENDED OCTOBER 31, ------------------------- 1995 1994 1993 ------- ------- ------- U.S. federal statutory rate..................... 34.2% 34.4% 34.0% State taxes, net of U.S. federal income tax ben- efit........................................... 3.4% 4.3% 4.7% Goodwill amortization........................... 1.8% -- -- Other items..................................... 0.2% 0.4% (0.3%) ------- ------- ------- Effective Tax Rate.............................. 39.6% 39.1% 38.4% ======= ======= =======
Deferred income taxes reflect the net tax effects of temporary differences between the reported amounts of assets and liabilities in the financial statements and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities at October 31 are as follows:
1995 1994 ------- ------- (IN THOUSANDS) Deferred tax assets: Receivables valuation.................................... $ 1,416 $ 1,395 Inventory valuation...................................... 4,033 4,030 Self-Insurance reserves.................................. 1,737 2,142 Pending refund from federal tax audit.................... 5,160 4,031 Reserves for discontinued operations..................... 848 1,348 Other.................................................... 7,160 7,028 ------- ------- Total before valuation allowance........................... 20,354 19,974 Valuation allowance........................................ (490) (757) ------- ------- Net deferred tax assets.................................... 19,864 19,217 ------- ------- Deferred tax liabilities: Excess of tax over book depreciation..................... 3,450 3,070 Assets held for sale..................................... 6,148 5,937 Intangible assets........................................ 1,977 -- Pension costs............................................ 1,822 780 Other.................................................... 7,589 8,005 ------- ------- $20,986 $17,792 ======= =======
The Company expects to receive a net tax refund of $5.2 million under an agreement reached with the Internal Revenue Service closing the audit of the 1987 and 1988 income tax returns. This refund is subject to approval by the Congressional Joint Committee on Taxation. The change in the valuation allowance from 1994 to 1995 is the result of changes in temporary differences which impact the deferred state income tax provision. NOTE 8. EMPLOYEE BENEFIT PLANS Prior to October 31, 1994, most of the Company's domestic employees were covered by the Whittaker Corporation Employees' Pension Plan (the "Pension Plan"), its noncontributory defined benefit pension plan. The benefits are based on years of service and the employee's highest compensation for five consecutive years during the last ten years of credited service. 29 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED) Effective October 31, 1994, the Company amended the Pension Plan to "freeze" benefits for all participants: adjustments for changes in credited years of service ceased on October 31, 1994 and adjustments for changes in remuneration ceased on December 31, 1994. The effect of the amendment was to reduce the Pension Plan's projected benefit obligation at October 31, 1994 by $3,877,000. The amount was fully absorbed by unrecognized net losses at October 31, 1994 related to the Pension Plan and accordingly, no curtailment gain was recognized. Vested service continues to accrue in accordance with applicable Pension Plan provisions, and Pension Plan funding will continue until such time that the Pension Plan is terminated and all benefit obligations are satisfied. The Company funds the Pension Plan in accordance with the Employee Retirement Income Security Act of 1974, as amended (ERISA). The following table sets forth the Pension Plan's funded status and amounts recognized in the Company's consolidated balance sheet:
OCTOBER 31, -------------------- 1995 1994 --------- --------- (IN THOUSANDS) Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested bene- fits of $123,543 in 1995 and $112,821 in 1994......... $(124,457) $(114,149) ========= ========= Projected benefit obligation for service rendered to date.................................................. $(124,457) $(114,149) Plan assets at fair value, primarily publicly traded stocks and fixed income securities....................................... 126,278 115,488 --------- --------- Plan assets in excess of projected benefit obligation.... 1,821 1,339 Items not yet recognized in earnings: Unrecognized net (gain)/loss........................... 2,999 1,688 Unrecognized net transition asset at November 1, 1985 net of amortization................................... (212) (1,139) --------- --------- Net prepaid pension cost recorded in the consolidated balance sheet........................................... $ 4,608 $ 1,888 ========= =========
The weighted average discount rates used in determining the actuarial present value of the projected benefit obligation were 7.0% and 8.0%, respectively, at October 31, 1995 and 1994. The expected long-term rate of return on plan assets was 8.75% for the years ended October 31, 1995, 1994, and 1993. As a result of the amendment described above, there are no projected increases in future compensation levels. The Company also sponsors unfunded supplemental nonqualified executive and director plans. At October 31, 1995, the projected benefit obligation for those plans totaled $5,180,000, of which $873,000 is subject to later amortization. The remaining $4,306,000 is accrued as a liability in the consolidated balance sheet. Effective November 1, 1994, the Company amended its defined contribution 401(k) plan and renamed it the Whittaker Partnership Plan ("Partnership Plan"). The amendment provides for new investment alternatives, added a profit sharing component to Company contributions to the Partnership Plan, and allows certain rollover contributions from other qualified plans. The Partnership Plan contains a matched savings provision that permits pretax employee contributions. Participants can contribute from 1% to 12% of compensation and receive a maximum matching employer contribution of 50% on up to 6% of their annual compensation. In addition to matching of employee contributions, beginning with fiscal 1995, the Company has recorded as expense amounts which may range from 0% to 7.5% of eligible employee compensation, based on the attainment of specified financial goals by participating divisions of the Company. The Partnership Plan 30 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 8. EMPLOYEE BENEFIT PLANS--(CONTINUED) covers most of the Company's employees, excluding those employed by WCI. WCI sponsors a defined contribution 401(k) plan covering a majority of its domestic employees under which participants can make pretax contributions of up to 15% of eligible compensation and receive a matching contribution of 75% on up to 6% of their eligible compensation. Total pension and retirement expense was as follows:
YEARS ENDED OCTOBER 31, ---------------------------- 1995 1994 1993 -------- -------- -------- (IN THOUSANDS) Cost components of funded defined benefit plan: Service cost--benefits earned during the pe- riod....................................... $ 490 $ 2,253 $ 2,674 Interest cost on projected benefit obliga- tion....................................... 8,658 8,723 9,108 Actual return on plan assets................ (20,204) 5,086 (24,989) Net amortization and deferral............... 8,336 (16,844) 14,570 -------- -------- -------- Net periodic pension cost (income) for funded defined benefit plan......................... (2,720) (782) 1,363 Cost for unfunded defined benefit plans....... 549 644 529 Cost for defined contribution plans........... 2,983 708 849 -------- -------- -------- Total pension and retirement plan expense..... $ 812 $ 570 $ 2,741 ======== ======== ========
NOTE 9. LEASED ASSETS AND LEASE COMMITMENTS Whittaker has various leases covering real property and equipment. Property, Plant and Equipment includes $183,000 at October 31, 1995 and $242,000 at October 31, 1994 for leases that have been capitalized. The amortization of these assets is included in depreciation expense. Future minimum payments under capital leases and under noncancellable operating leases, net of rentals to be received from existing noncancellable operating subleases, as of October 31, 1995, were as follows:
CAPITAL OPERATING YEARS ENDED OCTOBER 31, LEASES LEASES ----------------------- ------- --------- (IN THOUSANDS) 1996.................................................. $123 1,394 1997.................................................. 123 1,335 1998.................................................. 123 1,103 1999.................................................. 10 253 2000.................................................. -- 10 2001 and subsequent................................... -- -- ---- ------ Total commitments....................................... 379 $4,095 ====== Amounts representing interest........................... 46 ---- Present value of net minimum lease payments............. $333 ====
Rental expense of continuing operations for operating leases, net of rental income from subleases, was as follows:
YEARS ENDED OCTOBER 31, (IN THOUSANDS) ----------------------- ------------- 1995.................... $2,292 1994.................... 1,710 1993.................... 1,627
31 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10. COMMITMENTS AND CONTINGENCIES In certain years, after evaluating the availability and cost of insurance, the Company did not purchase insurance for certain risks, including workers' compensation and product liability. Consequently, the Company is without insurance for various risks, including product liability for certain products it manufactured. The Company currently has workers' compensation insurance and product liability insurance for products it currently manufactures. The Company's insurance carriers have taken the position that in certain cases the Company is uninsured for environmental matters, a position that the Company disputes in certain instances. As a result primarily of the activities of its discontinued operations, the Company is a potentially responsible party in a number of actions filed under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). CERCLA, also known as "Superfund," is the main Federal law enacted to address public health and environmental concerns arising with respect to the past treatment and disposal of hazardous substances. The Company is also a potentially responsible party in a number of other actions brought under state laws patterned after CERCLA. In nearly all of these matters, the Company contributed a small amount (generally less than 1%) of the total treated or disposed of waste. At October 31, 1995, the Company had provided for its aggregate liability related to various claims, including uninsured risks and potential claims in connection with the environmental matters noted above. The amounts provided on the Company's books for contingencies, including environmental matters, are recorded at gross amounts. Because of the uncertainty with respect to the amount of probable insurance recoveries, these potential insurance recoveries are not taken into account as a reduction of those amounts provided unless an insurance carrier has agreed to such coverage. The Company does not anticipate that these matters will have a material adverse effect on the Company's financial position or on its ability to meet its working capital and capital expenditure needs. Although the Company has recorded estimated liabilities for contingent losses, including uninsured risks and claims in connection with environmental matters, in accordance with generally accepted accounting principles, the absence of or denial of various insurance coverages and the filing of future environmental claims which are unknown to the Company at this time represent a potential exposure for the Company, and the net income of the Company in future periods could be adversely affected if uninsured losses in excess of amounts recorded were to be incurred. NOTE 11. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1995 and 1994 follow (in millions of dollars except for per share amounts):
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER YEAR ------- ------- ------- ------- ------ 1995 Sales.................................... $26.7 $31.7 $44.3 $56.8 $159.5 Cost of sales............................ 16.0 19.1 23.1 31.8 90.0 Net income............................... 1.7 0.2 1.8 4.2 7.9 Earnings per share....................... $0.18 $0.02 $0.18 $0.44 $ 0.82 1994 Sales.................................... $25.8 $28.8 $33.1 $38.7 $126.4 Cost of sales............................ 14.2 17.5 19.4 22.2 73.3 Net income............................... 1.7 1.9 2.9 3.6 10.1 Earnings per share....................... $0.18 $0.20 $0.31 $0.37 $ 1.06
32 WHITTAKER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Long-term debt: The carrying amounts of the Company's borrowings approximate their fair value. The Company's bank credit facility is a variable rate facility that reprices frequently. Notes receivable: The carrying amounts of the Company's notes receivable approximate their fair value. NOTE 13. BUSINESS SEGMENTS The Company develops specialized aerospace and electronic technologies to create products and customer solutions for aircraft, defense, communications and industrial markets. The Company operates in two business segments: Aerospace, which designs, manufactures, and distributes a wide variety of fluid control devices and fire detection systems, as well as defense electronics products and systems, and Communications, which designs, develops, and markets a comprehensive line of networking products and services. Prior to fiscal year 1995, the Company's communications operations were not material enough to comprise a separate business segment. Operating profit is total revenue less operating expenses. General corporate expenses have not been allocated to the business segments and are shown as a separate expense element of operating profit to reconcile to consolidated operating income. Identifiable assets are those assets used in the Company's operations in each industry. Corporate assets are principally cash, notes receivable, deferred income taxes, and assets held for sale. Information about Whittaker's operations by business segment at October 31, 1995, 1994, and 1993 and for the years then ended follows (in millions):
DEPRECIATION AND OPERATING IDENTIFIABLE AMORTIZATION CAPITAL SALES PROFIT ASSETS EXPENSE EXPENDITURES ------ --------- ------------ ---------------- ------------ 1995 Aerospace........ $129.0 $29.2 $143.8 $5.8 $4.8 Communications... 30.5 (3.4) 46.9 2.1 0.7 Corporate........ -- (7.3) 60.3 0.2 0.9 ------ ----- ------ ---- ---- Consolidated..... $159.5 $18.5 $251.0 $8.1 $6.4 ====== ===== ====== ==== ==== 1994 Aerospace........ $126.4 $26.8 $153.5 $5.4 $2.5 Corporate........ -- (6.8) 55.8 0.3 -- ------ ----- ------ ---- ---- Consolidated..... $126.4 $20.0 $209.3 $5.7 $2.5 ====== ===== ====== ==== ==== 1993 Aerospace........ $115.4 $22.9 $147.1 $4.8 $1.3 Corporate........ -- (7.2) 54.8 0.3 -- ------ ----- ------ ---- ---- Consolidated..... $115.4 $15.7 $201.9 $5.1 $1.3 ====== ===== ====== ==== ====
Communications operating profit for fiscal 1995 reflects the writeoff of $3.3 million of in-process research and development cost, which was recorded as an expense at the acquisition date. In fiscal 1995, 1994, and 1993 approximately 34%, 49%, and 68%, respectively, of Whittaker's sales from continuing operations were directly or indirectly to the United States Government. All of those sales, with the exception of a minor amount in 1995, were attributable to the Aerospace segment. In fiscal 1995, 1994 and 1993 approximately 27%, 20% and 11%, respectively, of Whittaker's sales arose from exports to customers outside the United States, primarily in Europe and the Middle East. Approximately 26% of the Company's accounts receivable are from the U.S. Government, and the balance is primarily from commercial customers, prime defense contractors with the U.S. Government, and foreign customers. 33 ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information called for by Item 10 is incorporated by reference to the information under the following captions in the Proxy Statement: CAPTION Election of Directors--Directors Compliance with Section 16(a) of the Securities Exchange Act Certain of the information called for by Item 10 with respect to executive officers of the Registrant appears as Item 4A in Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION. The information called for by Item 11 is incorporated by reference to the information under the following caption in the Proxy Statement: CAPTION Election of Directors--Executive Compensation and Other Information ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information called for by Item 12 is incorporated by reference to the information under the following caption in the Proxy Statement: CAPTION Equity Securities and Principal Holders Thereof ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information called for by Item 13 is incorporated by reference to the information under the following caption in the Proxy Statement: CAPTION Election of Directors--Directors 34 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. The following documents are filed as part of this report:
PAGE REFERENCE FORM 10-K --------- (A-1) FINANCIAL STATEMENTS: Report of Independent Auditors....................................... 17 Consolidated Statements of Income for the three years ended October 31, 1995............................................................ 18 Consolidated Balance Sheets as of October 31, 1995 and 1994.......... 19 Consolidated Statements of Cash Flows for the three years ended Octo- ber 31, 1995........................................................ 21 Consolidated Statements of Stockholders' Equity for the three years ended October 31, 1995.............................................. 22 Notes to Consolidated Financial Statements........................... 23
(A-2) FINANCIAL STATEMENT SCHEDULES: All supplemental schedules are omitted as inapplicable or because the required information is included in the Consolidated Financial Statements or the Notes to Consolidated Financial Statements. (A-3) EXHIBITS:* 3.1 Restated Certificate of Incorporation (Exhibit 3.1 to Form 10-K for fiscal year ended October 31, 1989), as amended on March 16, 1990. 3.2 Restated Bylaws (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1989), as amended on September 30, 1994 (Exhibit 3.2 to Form 10-K for fiscal year ended October 31, 1994). 4.1 Reference is made to Exhibit 3.1. 4.2 Reference is made to Exhibit 3.2. 4.3 Rights Agreement dated as of November 18, 1988 between Registrant and Manufacturers Hanover Trust Company (currently being performed by Mellon Bank N.A. as rights agent) concerning Series A Participating Cumulative Preferred Stock Purchase Rights (Exhibits 1 and 2 to Form 8-A filed on November 23, 1988), as amended as of June 28, 1989 (Exhibit 4.4 to Form 10-K for fiscal year ended October 31, 1989). 4.4 Certificate of Designation of Series D Participating Convertible Preferred Stock (Exhibit 4.2 to Form S-4, Registration No. 33-29028), as amended on March 16, 1990. 4.5 7% Convertible Subordinated Note dated April 24, 1995 (Exhibit 10.1 to Form 8-K, dated May 8, 1995). 4.6 Registration Rights Agreement dated April 24, 1995 between Registrant and Hughes Electronics Corporation (Exhibit 10.1 to Form 8-K, dated May 8, 1995). (Other instruments defining the rights of holders of long-term debt are not filed because the total amount of securities authorized under any such instrument does not exceed 10% of the consolidated total assets of Registrant. Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request.) 10.1 Amended and Restated 1977 Nonqualified Stock Option Plan (Exhibit 10.5 to Form 10-K for fiscal year ended October 31, 1982).** 10.2 Restated 1980 Nonqualified Stock Option Plan (Exhibit 10.7 to Form 10-K for fiscal year ended October 31, 1982).** 10.3 Whittaker Corporation 1992 Stock Option Plan for Non-Employee Directors (Exhibit 10.4 to Form 10-K for fiscal year ended October 31, 1991).** 10.4 1981 Incentive and Nonqualified Stock Option Plan, as amended January 22, 1982 (Exhibit 10.7 to Form 10-K for fiscal year ended October 31, 1981), and as amended June 26, 1987 (Exhibit 10.6 to Form 10-K for fiscal year ended October 31, 1987).**
35 10.5 Directors' Deferred Compensation Plan dated February 1983 (Exhibit 10.9 to Form 10-K for fiscal year ended October 31, 1984), as amended on May 18, 1990 (Exhibit 10.7 to Form 10-K for fiscal year ended October 31, 1990).** 10.6 Restated Directors' Retirement Plan effective as of August 2, 1985 (Exhibit 10.10 to Form 10-K for fiscal year ended October 31, 1990).** 10.7 Whittaker Corporation Long-Term Stock Incentive Plan (1989) (Annex 1 to Form S-8, Registration No. 33-35762), as amended and restated as of December 16, 1994. (Form S-8, Registration No. 33-58323)** 10.8 Whittaker Corporation Supplemental Retirement and Disability Trust Agreement dated November 23, 1988 (Exhibit 10.13 to Form 10-K for fiscal year ended October 31, 1988).** 10.9 Draft of Whittaker Corporation Supplemental Executive Retirement Plan, dated as of January 1, 1996.** 10.10 Amendment and Restatement of Whittaker Corporation Employees' Pension Plan dated December 22, 1994, as amended December 15, 1995.** 10.11 Whittaker Corporation Partnership Plan (formerly the Whittaker Corporation Savings and Stock Investment Plan), as amended and restated effective November 1, 1994.** 10.12 Credit Agreement dated as of January 23, 1995 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto (Exhibit 10.8 to Form 10-K for fiscal year ended October 31, 1994). 10.13 First Amendment to Credit Agreement dated as of April 21, 1995 among Registrant, NationsBank of Texas, N.A., as Agent, and certain other financial institutions as signatories thereto. 10.14 Stock Purchase Agreement dated as of March 23, 1995 between Registrant and Hughes Aircraft Company, as amended on April 24, 1995 (Exhibit 10.1 to Form 8-K dated May 8, 1995). 11. Calculation of earnings per share for the three years ended October 31, 1995. 21. Subsidiaries of the Registrant. 23. Consent of Independent Auditors. 27. Financial Data Schedule.
- -------- * Exhibits followed by a parenthetical reference are incorporated by reference to the document described therein. Upon written request to the Secretary of the Company, a copy of any exhibit referred to above will be furnished without charge. ** Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K. (B) REPORTS ON FORM 8-K: During the quarter ended October 31, 1995, the Company did not file any reports on Form 8-K. 36 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. WHITTAKER CORPORATION By Richard Levin ___________________________________ (Richard Levin, Vice President) Date January 24, 1996 __________________________________ Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- Thomas A. Brancati Director and Principal ) ____________________________________ Executive Officer ) (Thomas A. Brancati) ) ) Richard Levin Principal ) ____________________________________ Financial Officer ) (Richard Levin) ) ) Joseph F. Alibrandi Director ) ____________________________________ ) (Joseph F. Alibrandi) ) ) George H. Benter, Jr. Director ) ____________________________________ ) (George H. Benter, Jr.) ) ) January 24, 1996 ) Jack L. Hancock Director ) ____________________________________ ) (Jack L. Hancock) ) ) Edward R. Muller Director ) ____________________________________ ) (Edward R. Muller) ) ) Gregory T. Parkos Director ) ____________________________________ ) (Gregory T. Parkos) ) ) Malcolm T. Stamper Director ) ____________________________________ ) (Malcolm T. Stamper) )
37 EX-3.1 2 CERTIFICATE OF CORRECTION EXHIBIT 3.1 CERTIFICATE OF CORRECTION OF CERTIFICATE OF DESIGNATION OF WHITTAKER CORPORATION Whittaker Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows: FIRST: That the Certificate of Designation of Series D Participating Convertible Preferred Stock of Whittaker Corporation filed in the office of the Secretary of State of Delaware on June 28, 1989 (the "Series D Certificate of Designation") has been found to be an inaccurate in certain respects and, therefore, requires correction pursuant to Section 103(f) of the General Corporation Law of the State of Delaware, 8 Del. C. Section 103(f). SECOND: The Series D Certificate of Designation (i) incorrectly stated in Section 2(B) that the quarterly dividend amount was $1.00 per share and (ii) failed to specify in Section 2(C) when dividends begin to accrue in the event that there is no record date for the first Quarterly Dividend Payment Date. The aforementioned Series D Certificate of Designation is hereby corrected accordingly to replace Section 2(B) and (C) with the following: (B) The Corporation shall declare a dividend or distribution on the Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than as described in clauses (i) and (ii) of the second sentence of such paragraph (A)); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date (or, with respect to the first Quarterly Dividend Payment Date, the period between the first issuance of any share or fraction of a share of the Preferred Stock and such first Quarterly Dividend Payment Date), a dividend of $0.25 per share on the Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and the cumulative on outstanding shares of Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares unless (i) the date of issue of such shares is on or prior to the record date for the first Quarterly Dividend Payment Date or there is no record date for the first Quarterly Dividend Payment Date, in either of which events dividends on such shares shall begin to accrue from the date of issue of such shares or (ii) the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on shares of Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all shares of Preferred Stock at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall not be more than 60 days prior to the date fixed for the payment thereof. IN WITNESS WHEREOF, said Whittaker Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Edward R. Muller, a Vice President of the Corporation, and Nadine D. Leonsky, an Assistant Secretary this 7th day of March 1990. WHITTAKER CORPORATION By /s/ Edward R. Muller --------------------------------------- Edward R. Muller Vice President Attest: /s/ Nadine D. Leonsky - ---------------------------- Assistant Secretary -2- EX-4.4 3 CERT. OF INCORPORATION EXHIBIT 4.4 CERTIFICATE OF CORRECTION OF CERTIFICATE OF DESIGNATION OF WHITTAKER CORPORATION Whittaker Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), does hereby certify as follows: FIRST: That the Certificate of Designation of Series D Participating Convertible Preferred Stock of Whittaker Corporation filed in the office of the Secretary of State of Delaware on June 28, 1989 (the "Series D Certificate of Designation") has been found to be an inaccurate in certain respects and, therefore, requires correction pursuant to Section 103(f) of the General Corporation Law of the State of Delaware, 8 Del. C. Section 103(f). SECOND: The Series D Certificate of Designation (i) incorrectly stated in Section 2(B) that the quarterly dividend amount was $1.00 per share and (ii) failed to specify in Section 2(C) when dividends begin to accrue in the event that there is no record date for the first Quarterly Dividend Payment Date. The aforementioned Series D Certificate of Designation is hereby corrected accordingly to replace Section 2(B) and (C) with the following: (B) The Corporation shall declare a dividend or distribution on the Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than as described in clauses (i) and (ii) of the second sentence of such paragraph (A)); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date (or, with respect to the first Quarterly Dividend Payment Date, the period between the first issuance of any share or fraction of a share of the Preferred Stock and such first Quarterly Dividend Payment Date), a dividend of $0.25 per share on the Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and the cumulative on outstanding shares of Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares unless (i) the date of issue of such shares is on or prior to the record date for the first Quarterly Dividend Payment Date or there is no record date for the first Quarterly Dividend Payment Date, in either of which events dividends on such shares shall begin to accrue from the date of issue of such shares or (ii) the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on shares of Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all shares of Preferred Stock at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall not be more than 60 days prior to the date fixed for the payment thereof. IN WITNESS WHEREOF, said Whittaker Corporation has caused its corporate seal to be hereunto affixed and this certificate to be signed by Edward R. Muller, a Vice President of the Corporation, and Nadine D. Leonsky, an Assistant Secretary this 7th day of March 1990. WHITTAKER CORPORATION By /s/ Edward R. Muller --------------------------------------- Edward R. Muller Vice President Attest: /s/ Nadine D. Leonsky - ---------------------------- Assistant Secretary -2- EX-10.9 4 WHITTAKER RETIREMENT PLAN EXHIBIT 10.9 WHITTAKER CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN WHITTAKER CORPORATION TABLE OF CONTENTS
ARTICLE I - INTRODUCTION 1.01 Purpose I-1 1.02 Effective Date and Term I-1 1.03 Participation I-1 1.04 Participation Agreement I-1 1.05 Applicability of ERISA I-1 ARTICLE II - DEFINITIONS II-1 2.01 Affiliated Company II-1 2.02 Average Monthly Compensation II-1 2.03 Benefit Accrual Percentage II-1 2.04 Board; Board of Directors II-1 2.05 Change in Control II-1 2.06 Code II-2 2.07 Committee II-2 2.08 Compensation II-2 2.09 Covered Employer II-2 2.10 Defined Benefit Plan II-3 2.11 Early Retirement II-3 2.12 Effective Date II-3 2.13 ERISA II-3 2.14 50% Joint and Survivor Annuity II-3 2.15 401(k) Plan II-3 2.16 Full-Time Employment II-3 2.17 Normal Benefit Date II-3 2.18 Normal Benefit Form II-3 2.19 Normal Retirement II-4 2.20 Participant II-4 2.21 Payment Commencement Date II-4 2.22 Plan II-4 2.23 Retirement; Retirement Date II-4 2.24 Service Years II-4 2.25 Single Life Annuity II-5 2.26 Specified Rate II-5 2.27 Sponsor II-5 2.28 Spouse II-5 2.29 Termination II-5 2.30 Termination Date II-5 2.31 Termination for Cause II-6
i WHITTAKER CORPORATION TABLE OF CONTENTS
ARTICLE III - ADMINISTRATION OF THE PLAN III-1 3.01 Administration III-1 3.02 Board and Committee Authority; Rules and Regulations III-1 3.03 Appointment of Agents III-1 3.04 Leave of Absence III-2 3.05 Actuarial Assumptions III-2 ARTICLE IV - BENEFITS IV-1 4.01 Eligibility and Vesting IV-1 4.02 Form of Supplemental Benefit IV-1 4.03 Payment of Supplemental Benefit IV-2 4.04 Monthly Annuity Amount IV-2 4.05 Target Monthly Benefit IV-2 4.06 Monthly Offset Amount IV-2 4.07 Special Rules for Early Retirement IV-6 4.08 Termination of Plan Participation IV-7 4.09 Disability IV-7 4.10 Change of Control IV-8 4.11 Termination for Cause IV-8 ARTICLE V - DEATH OF A PARTICIPANT V-1 5.01 Termination by Reason of Death V-1 5.02 Form and Payment of Death Benefit V-1 5.03 Monthly Death Benefit Amount V-1 ARTICLE VI - MISCELLANEOUS PROVISIONS VI-1 6.01 Payments During Incapacity VI-1 6.02 Prohibition Against Assignment VI-1 6.03 Binding Effect VI-1 6.04 No Transfer of Interest VI-1 6.05 Amendment or Termination of the Plan VI-2 6.06 No Right to Employment VI-2 6.07 Notices VI-2 6.08 Governing Law VI-3 6.09 Titles and Headings; Gender of Terms VI-3 6.10 Severability VI-3 6.11 Tax Effect of Plan VI-3 6.12 Entire Agreement VI-4
ii WHITTAKER CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ARTICLE I INTRODUCTION 1.01 PURPOSE. This Whittaker Corporation Supplemental Executive ------- Retirement Plan is hereby established by the Board of Directors of the Sponsor to enable the Sponsor and such Affiliated Companies to attract, retain and motivate selected executives of the Sponsor and such Affiliated Companies by providing to such executives certain additional retirement income as more fully set forth herein. 1.02 EFFECTIVE DATE AND TERM. This plan is adopted effective as of ----------------------- January 1, 1996, and shall continue in effect until terminated by the Board of Directors. 1.03 PARTICIPATION. Participation in this Plan is open only to those ------------- executives of the Sponsor or any Affiliated Company who are selected for participation in the Plan by the President of the Sponsor and approved by the Board of Directors. The participation in this Plan by any such executive, and the payment of any benefits under this Plan to any such executive, shall be governed by the terms of this Plan and by the terms of the Participation Agreement entered into by such executive with respect to this Plan pursuant to Section 1.04 hereof. 1.04 PARTICIPATION AGREEMENT. As a condition to the commencement of ----------------------- participation in this Plan, each executive selected and approved for participation in the Plan as provided in Section 1.03 hereof shall enter into an agreement covering such executive's participation in the Plan (a "Participation Agreement"), which agreement shall be executed by the Sponsor and such executive and, if such executive is employed by an Affiliated Company, such Affiliated Company. Each Participation Agreement shall include such terms and conditions relating to the executive's participation in the Plan as the President of the Sponsor may deem appropriate, subject to Board approval. 1.05 APPLICABILITY OF ERISA. This Plan is intended to be a "top-hat" ---------------------- plan -that is, an unfunded plan maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees within the meaning of ERISA. I-1 ARTICLE II DEFINITIONS 2.01 AFFILIATED COMPANY. "Affiliated Company" means only Whittaker ------------------ Corporation, a Delaware corporation, and such other affiliates, if any, of the Sponsor as the Board may from time to time expressly designate as having the status of an Affiliated Company for purposes of this Plan. 2.02 AVERAGE MONTHLY COMPENSATION. "Average Monthly Compensation" means, ---------------------------- with respect to any Participant and as of any date of reference (the "Determination Date"), the quotient obtained by dividing (a) the highest aggregate amount of Compensation earned by such Participant during any consecutive 36-month period prior to (or ending on) such Determination Date, by (b) a factor of 36. Notwithstanding the preceding sentence, in the case of a Participant who, as of any applicable Determination Date, has not been employed by one or more Covered Employers during at least the consecutive 36-month period ending on such Determination Date, such participant's Average Monthly Compensation as of such Determination Date shall be the quotient obtained by dividing (i) the total amount of Compensation earned by such Participant prior to (and including) such Determination Date, by (ii) a factor equal to the number of months prior to (and including) such Determination Date during which such Participant was employed by a Covered Employer. 2.03 BENEFIT ACCRUAL PERCENTAGE. "Benefit Accrual Percentage" means, with -------------------------- respect to any Participant and as of any date of reference, the percentage obtained by multiplying (a) 60%, by (b) a fraction (not to exceed 1) having a numerator equal to such Participant's Service Years (determined as of such reference date), and having a denominator equal to the greater of fifteen years or the total number of Service Years such Participant would have if such Participant continued in the employ of Sponsor uninterrupted through Normal Retirement. 2.04 BOARD; BOARD OF DIRECTORS. "Board" and "Board of Directors" each ------------------------- mean the board of directors of the Sponsor. 2.05 CHANGE IN CONTROL. "Change in Control" means (1) any consolidation ----------------- or merger of the Sponsor in which the Sponsor is not the surviving corporation, other than a merger of the Sponsor in which the holders of common stock or assets of the Sponsor immediately prior to the II-1 merger have the same proportionate ownership of the surviving corporation immediately after the merger; or (2) any sale, lease exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Sponsor; or (3) during any period of two consecutive years, the individuals who at the beginning of such period constitute the Board of Directors of the Sponsor cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Sponsor's shareholders, of each new director was approved by a vote of at least two-thirds of the directors still in office who were directors at the beginning of that period; or (4) the acquisition after the date hereof by any person (as such term is used in section 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended, but excluding the Sponsor and any Affiliated Company) that results in such person holding directly or indirectly 20% or more of the combined voting power of the then outstanding securities of the Sponsor as a result of a tender or exchange offer, open market purchase(s), privately-negotiated purchase(s) or otherwise; or (5) the acquisition by any person(s), firm(s), or corporation(s) of direct or indirect ownership of 20% or more of the assets of the Sponsor which do not own at least 10% of the assets of the Sponsor as of January 1, 1996. 2.06 CODE. "Code" means the Internal Revenue Code of 1986, as amended. ---- 2.07 COMMITTEE. "Committee" means the committee (if any) that the Board --------- appoints to administer this Plan as set forth in Section 3.01 hereof, provided, however, the Committee shall contain at least one non-employee. 2.08 COMPENSATION. "Compensation" means, with respect to any Participant, ------------ the base salary paid to such Participant by any Covered Employer, including any amounts not currently includible in such Participant's gross income by reason of any amount deferred for the period pursuant to any non-qualified deferred compensation arrangement between the Participant and any Covered Employer or, Code Section 402(e)(3) and/or Code Section 125. Except as provided in the following sentence, Compensation shall also include any annual or other short term bonus paid by any Covered Employer to a Participant other than any bonus paid to a Participant who is a division manager. Notwithstanding the foregoing, the Committee shall have the sole and absolute discretion to determine, at the time of any award under a bonus plan, or the payment of any bonus, that such bonus does not constitute Compensation for purposes of this Plan. 2.09 COVERED EMPLOYER. "Covered Employer" means and includes both (a) the ---------------- Sponsor, and (b) any Affiliated Company. II-2 2.10 DEFINED BENEFIT PLAN. "Defined Benefit Plan" means the Whittaker -------------------- Corporation Employees' Pension Plan, which was frozen effective as of October 31, 1994. 2.11 EARLY RETIREMENT. "Early Retirement" means, with respect to any ---------------- Participant, any Retirement of such Participant other than Normal Retirement, which occurs on or after the date Participant has attained age 55 and completed at least 10 Service Years. 2.12 EFFECTIVE DATE. "Effective Date" means January 1, 1996. -------------- 2.13 ERISA. "ERISA" means the Employee Retirement Income Security Act of ----- 1974, as amended. 2.14 50% JOINT AND SURVIVOR ANNUITY. "50% Joint and Survivor Annuity" ------------------------------ means an annuity which (a) provides a specified level monthly benefit during the life of the primary beneficiary, and (b) following the death of the primary beneficiary, provides a level monthly benefit to, and during the remaining life of, such primary beneficiary's surviving spouse (if any) equal to 50% of the monthly benefit provided to such primary beneficiary. 2.15 401(K) PLAN. "401(k) Plan" means the Whittaker Corporation ----------- Partnership Plan, as such Plan is in effect as of the Effective Date hereof and as it may be amended from time to time hereafter. 2.16 FULL-TIME EMPLOYMENT. "Full-Time Employment" means, with respect to -------------------- any Participant, any employment or independent contractor relationship with any organization or person, whether or not the Sponsor or an Affiliated Company, pursuant to which such Participant performs services on a regular and continuous basis, provided, however, that any such relationship shall not constitute Full- Time Employment unless the Participant devotes at least an average of 35 hours per week to the performance of services pursuant to such relationship. For purposes of determining as of any given date whether the Participant meets the 35-hour requirement set forth in the preceding sentence, no more than the three- month period immediately preceding such given date shall be taken into account. 2.17 NORMAL BENEFIT DATE. "Normal Benefit Date" means, with respect to ------------------- any Participant, the ninetieth (90th) day immediately following the day upon which such Participant attains (or is expected to attain) age 65. 2.18 NORMAL BENEFIT FORM. "Normal Benefit Form" means a Single Life ------------------- Annuity, starting at age 65. II-3 2.19 NORMAL RETIREMENT. "Normal Retirement" means, with respect to any ----------------- Participant, any Retirement of such Participant having a Retirement Date which falls on or after the date such Participant attains age 65. 2.20 PARTICIPANT. "Participant" means any executive of the Sponsor or any ----------- Affiliated Company who is selected and approved for participation in this Plan as provided in Section 1.03 hereof and who has executed a Participation Agreement as required under Section 1.04 hereof. 2.21 PAYMENT COMMENCEMENT DATE. "Payment Commencement Date" means, with ------------------------- respect to any Participant, the ninetieth (90th) day after the earlier of (a) such Participant's Retirement Date, or (b) the later to occur of (i) such Participant's Termination Date and (ii) age 65. 2.22 PLAN. "Plan" means this Whittaker Corporation Supplemental Executive ---- Retirement Plan adopted as of the Effective Date hereof and as it may be amended from time to time. 2.23 RETIREMENT; RETIREMENT DATE. "Retirement" occurs with respect to any --------------------------- Participant only if and when such Participant permanently ceases, for whatever reason (whether voluntary or involuntary and including death or Disability), all Full-Time Employment. The temporary cessation of a Participant's Full-Time Employment shall not constitute Retirement. The cessation of a Participant's Full-Time Employment shall be deemed to be temporary if, following such cessation, such Participant commences (or intends to commence) actively seeking Full-Time Employment; provided, however, that if such Participant subsequently abandons his search (or intended search) for Full-Time Employment prior to obtaining such Full-Time Employment, such Participant shall be deemed to incur Retirement at the time of such abandonment. The determination as to whether (and when) a Participant incurs Retirement shall be made solely by the Board based on such evidence as the Board, in its discretion, deems appropriate. Such evidence may, but is not required to include a representation of Retirement presented to the Board by the Participant. If, following a determination by the Board that a Participant has incurred Retirement, such participant recommences Full-Time Employment, such Participant shall nevertheless be deemed for all purposes of this Plan to have incurred Retirement in accordance with the Board's original determination. A Participant's "Retirement Date" shall be the first day, as determined by the Board, on which such Participant meets the requirements of Retirement as set forth in this Section 2.23. II-4 2.24 SERVICE YEARS. "Service Years" means with respect to any ------------- Participant, the whole number of complete years (disregarding any incomplete year) elapsing during the single, period commencing on the date such Participant initially commenced employment with any Covered Employer and ending on such Participant's final Termination Date. In the case of any Participant who (a) commenced employment with a Covered Employer, (b) terminated such employment, and (c) prior to the Effective Date hereof, re-commenced employment with any Covered Employer, such Participant shall be credited with Service Years for those periods prior to the Effective Date hereof during which he was actually employed by any Covered Employer notwithstanding the fact that such pre- Effective Date employment with such covered Employer(s) was not continuous. Except as otherwise provided in Section 3.04 hereof (concerning leaves of absence), it is intended that a Participant shall cease earning Service Years upon his incurring any Termination after the Effective Date hereof, regardless of whether such Participant is thereafter employed by the Sponsor, an affiliate of the Sponsor or any Affiliated Company. Notwithstanding the foregoing, in the case of a Participant whose Termination is due to a Disability the period commencing with such Disability and ending at the earliest of (i) attainment of age 65, (ii) return to Full-Time Employment, or (iii) the death of the Participant shall continue to be credited as Service Years. 2.25 SINGLE LIFE ANNUITY. "Single Life Annuity" means an annuity which ------------------- provides a specified level monthly benefit until the death of the beneficiary. 2.26 SPECIFIED RATE. "Specified Rate" means an interest rate equal to 8% -------------- per annum, or such other annual interest rate as the Board may from time to time designate as the Specified Rate, with any such designation to be given effect only on a prospective basis. 2.27 SPONSOR. "Sponsor" means Whittaker Corporation, a Delaware ------- corporation. 2.28 SPOUSE. "Spouse" means, with respect to any Participant, only that ------ person (if any) to whom such Participant is married as of such Participant's Termination Date, provided, however, that a person who has been married to a Participant for less than one year as of such Participant's Termination Date shall not be deemed to be the "Spouse" of such Participant. 2.29 TERMINATION. "Termination" means the voluntary or involuntary ----------- termination of a Participant's employment with the Sponsor and all Affiliated Companies for any reason (including Disability or death). The determination as to whether a Participant's Termination constitutes Retirement shall be made by the Board in accordance with the provisions of Section 2.23 hereof. II-5 2.30 TERMINATION DATE. "Termination Date" means, with respect to any ---------------- Participant, the effective date of such Participant's Termination. 2.31 TERMINATION FOR CAUSE. "Termination for Cause" means, with respect --------------------- to any Participant, a Termination incurred by such Participant as a result of any one or more of the following causes : (a) The Participant's substantial neglect of his duties and responsibilities as an employee of the Sponsor or any Affiliated Company; (b) The Participant's theft or other misappropriation of, or any malfeasance with respect to, any property of the Sponsor or any Affiliated Company; (c) A conviction of the Participant for any criminal offense, whether or not involving property of the Sponsor or any Affiliated Company, but only if the Board reasonably believes such conviction may adversely affect either (i) the reputation of the Sponsor or any Affiliated Company, or (ii) the Participant's ability to effectively perform his duties and responsibilities as an employee of the Sponsor or any Affiliated Company; (d) The Participant's use of illegal drugs or alcohol to an extent that such use interferes with his ability to perform, in an acceptable manner, his duties and responsibilities as an employee of the Sponsor or any Affiliated Company; (e) The Participant's solicitation of business on behalf of, or diversion of business to, any competitor of the Sponsor or any Affiliated Company with whom the Participant expects to become employed or otherwise associated following such Participant's Termination. II-6 ARTICLE III ADMINISTRATION OF THE PLAN 3.01 ADMINISTRATION. This Plan shall be administered by the Board of -------------- Directors, provided however, that the Board may, in its discretion, delegate the administration of this Plan to a Committee composed of at least three individuals appointed from time to time by the Board. Any member of the Board or the Committee may be a Participant in this Plan, provided however, that any action to be taken by the Board or Committee solely with respect to the particular interest in this Plan of a Board or Committee member who is also a Participant in this Plan shall be taken by the remaining members of the Board or Committee. 3.02 BOARD AND COMMITTEE AUTHORITY; RULES AND REGULATIONS. The Board ---------------------------------------------------- shall have discretionary authority to (a) make, amend, interpret and enforce all appropriate rules and regulations for the administration of the Plan, and (b) decide or resolve, in its discretion, any and all questions, including interpretations of the Plan, as may arise in connection with the Plan. If a Committee is appointed by the Board pursuant to Section 3.01 hereof to administer the Plan, such Committee shall have authority to take or approve, in its discretion, all such actions relating to the Plan (including, without limitation, actions described in the preceding sentence) as may be taken or approved by the Board; provided, however, that the Committee shall have no authority (i) to approve executives for participation in the Plan, (ii) to approve the terms of any Participation Agreement, (iii) to amend or terminate the Plan, or (iv) to terminate a Participant's participation in the Plan pursuant to Section 4.08 hereof. Notwithstanding the preceding sentence, the Board may, by written notice to the Committee, withdraw all or any part of the Committee's authority at any time, in which case such withdrawn authority shall immediately revest in the Board. Any decision or action of the Board (and, subject to the limitations set forth herein above, any decision or action of the Committee, if appointed) in respect of any question arising out of or in connection with the administration, interpretation and application of this Plan and the rules and regulations promulgated hereunder shall be final, conclusive and binding upon all persons having any interest in the Plan. 3.03 APPOINTMENT OF AGENTS. In the administration of this Plan, the Board --------------------- and/or the Committee may from time to time employ agents (which may include officers and/or employees of III-1 the Sponsor) and delegate to them such administrative duties as the Board or the Committee (as applicable) deems appropriate. 3.04 LEAVE OF ABSENCE. In the event the Participant takes a leave of ---------------- absence from active employment with the Sponsor or any Affiliated Company, the Board shall determine, in its discretion, (a) whether such leave of absence shall be deemed to constitute a Termination for purposes of this Plan, and (b) if such leave of absence is not deemed to constitute a Termination under this Plan, whether such Participant shall continue to earn Service Years during such leave of absence notwithstanding the provisions of Section 2.24 hereof. The Board shall establish such standards and procedures as may be necessary so that, with respect to any determinations made by the Board pursuant to either clause (a) or clause (b) of the preceding sentence, Participants in substantially similar circumstances shall be treated substantially alike. 3.05 ACTUARIAL ASSUMPTIONS. In any case in which it is necessary to make --------------------- actuarial adjustments in order to carry out the provisions of this Plan (including, without limitation, the provisions requiring the determination of an actuarially equivalent benefit under Section 4.02 hereof), the following rules shall apply: (a) The interest/discount rate assumed in making such actuarial adjustments shall be a fixed rate equal to the Specified Rate then in effect at the time such actuarial adjustments are calculated; and, (b) The mortality table used in making such actuarial adjustments shall be the 1971 Unisex Group Annuity Table (85% of male rate and 15% of female rate). III-2 ARTICLE IV BENEFITS 4.01 ELIGIBILITY AND VESTING. Except as otherwise provided in Section ----------------------- 4.11 and Article V hereof, upon incurring Termination, a Participant shall receive a supplemental benefit under this Plan (a "Supplemental Benefit"), which Supplemental Benefit shall be paid to the extent vested, in such form and amounts, and at such times, as provided under this Plan. Notwithstanding the foregoing, and except as otherwise provided in Sections 4.09 and 4.10 hereof, a Participant who incurs a Termination shall be entitled to receive a Supplemental Benefit under this Plan only to the extent such Participant is vested in such Benefit. A Supplemental Benefit shall vest and become nonforfeitable up to a maximum of 100% as follows:
SERVICE YEARS VESTED PERCENTAGE ---------------------------------- -------------------------- Less than 6 years 0% 6 years but less than 7 years 10% 7 years but less than 8 years 20% 8 years but less than 9 years 30% 9 years but less than 10 years 40% 10 years but less than 11 years 50% 11 years but less than 12 years 60% 12 years but less than 13 years 70% 13 years but less than 14 years 80% 14 years but less than 15 years 90% 15 or more years 100%
A Supplemental Benefit shall also be 100% vested upon the death of a Participant. 4.02 FORM OF SUPPLEMENTAL BENEFIT. Any Participant who is entitled to a ---------------------------- Supplemental Benefit pursuant to Section 4.01 hereof shall receive such Supplemental Benefit in the form of an annuity, which annuity shall provide a series of level monthly payments for a period determined in accordance with the rules set forth hereinbelow. With respect to any Participant, the amount of the level monthly payment provided by such annuity (the "Monthly Annuity IV-1 Amount") shall be determined in accordance with Section 4.04 hereof, subject to such modifications as may be applicable under this Section 4.02: (a) Except as provided in subsection (b) below, a Participant shall receive his Supplemental Benefit in the Normal Benefit Form specified in Section 2.18. (b) A Participant who is entitled to receive a Supplemental Benefit may, with the consent of the Board elect in writing, on such form designated by the Plan Administrator and received by the Plan Administrator at least 15 months prior to the Payment Commencement Date, to receive his Supplemental Benefit in the form of a 50% Joint and Survivor Annuity. Notwithstanding such election, such Participant shall be entitled to receive his Supplemental Benefit in the form of a 50% Joint and Survivor Annuity only if such Participant has a spouse as of such Participant's Termination Date and also has been married continuously for at least the two years preceding such Participant's Retirement Date. The amount of the Supplemental Benefit so designated by the Participant shall be the Actuarial Equivalent of the amount otherwise payable to the Participant in the Normal Benefit Form pursuant to Section 2.18. If such election is not made or is invalid or void, the Participant's Supplemental Benefit shall be paid in the Normal Benefit Form specified in Section 2.18. 4.03 PAYMENT OF SUPPLEMENTAL BENEFIT. Notwithstanding any other ------------------------------- provisions of this Plan, payment of a Participant's Supplemental Benefit (or any portion thereof) shall commence on such Participant's Payment Commencement Date. 4.04 MONTHLY ANNUITY AMOUNT. Except to the extent modified pursuant to ---------------------- Sections 4.01 or 4.02 hereof, a Participant's "Monthly Annuity Amount" shall be the amount of such Participant's Target Monthly Benefit (as defined in Section 4.05 hereof) reduced, but not below zero, by such Participant's Monthly Offset Amount (as defined in Section 4.06 hereof). 4.05 TARGET MONTHLY BENEFIT. A Participant's "Target Monthly Benefit" ---------------------- shall be determined as of his Termination Date and shall be the amount calculated by multiplying (a) the Participant's Average Monthly Compensation determined as of his Termination Date, by (b) his Benefit Accrual Percentage determined as of his Termination Date (or later date in the case of Disability) by (c) his vesting percentage as of his Termination Date (or later date in the case of Disability) under Section 4.01. IV-2 4.06 MONTHLY OFFSET AMOUNT. A Participant's "Monthly Offset Amount" shall --------------------- be the amount equal to the sum of (1) such Participant's Social Security Offset Amount, plus (2) such Participant's Qualified Offset Amount (both as defined herein below). (a) A Participant's "Social Security Offset Amount" shall be determined in accordance with the following rules: (i) In the case of any Participant whose Termination constitutes Normal Retirement, such Participant's Social Security Offset Amount shall be 50% of the amount of the monthly Primary Social Security Benefit (as calculated by the Board under paragraph (iii) below) to which such Participant is entitled following such Termination. (ii) In the case of any Participant whose Termination does not constitute Normal Retirement (either because such Termination does not constitute Retirement or because such Termination constitutes Early Retirement), such Participant's Social Security Offset Amount shall be 50% of the amount of the monthly Primary Social Security Benefit (as calculated by the Board under paragraph (iii) below) to which such Participant would be entitled commencing on his Normal Benefit Date paid to such Participant in the Normal Benefit Form if, with respect to the period (if any) between such Participant's Termination Date and his Normal Benefit Date, (A) such Participant had continued to earn a constant monthly salary equal to the Participant's Compensation for the month immediately preceding the month of such Participant's Termination, and (B) the Social Security wage base and other provisions of the Social Security law relevant to the determination of benefits thereunder (including any applicable regulations and/or other pronouncements, such as wage base and other provisions) in effect as of such Participant's Termination Date had remained unchanged. (iii) Each Participant shall submit to the Board, for use in calculating such Participant's Primary Social Security Benefit and the corresponding Social Security Offset Amount under paragraphs (i) or (ii) above, as applicable, either (A) a written earnings history obtained from the Social Security Administration, or (B) written evidence satisfactory to the Committee showing that, such Participant has never earned wages subject to the jurisdiction of the U.S. Social Security system (e.g., a foreign Participant IV-3 with no U.S. wages). In the event a Participant fails to comply with the requirements of the preceding sentence within 90 days following such Participant's Payment Commencement Date, the Participant's Primary Social Security Offset Benefit (for purposes of calculating his Social Security Offset Amount under paragraphs (i) or (ii) above, as applicable) shall be determined by the Committee using an estimated wage history, applying a salary scale projected backwards from the Participant's Retirement Date, and based on (I) for the two years prior to the Participant's Retirement Date, an increase of six percent (6%) per annum, and (II) for the period prior to such two year period, the actual change in average wages from year to year as determined by the Social Security Administration. Such estimated wage history shall be deemed correct for all purposes of this Plan. (b) A Participant's "Qualified Plan Offset Amount" shall be the sum of the Defined Benefit Plan Offset Amount and the 401(k) Plan Offset Amount determined with respect to such Participant under the following provisions, as applicable: (i) With respect to any Participant who was a Participant in the Defined Benefit Plan, such Participant's "Defined Benefit Plan Offset Amount" shall be the employer-provided portion (i.e., the portion attributable to employer contributions) of the amount of the monthly annuity payment to which such Participant would be entitled under the Defined Benefit Plan if his benefit thereunder were paid in the Normal Benefit Form commencing on his Normal Benefit Date. The "Defined Benefit Plan Offset Amount" shall be zero with respect to any Participant who was not a participant in the Defined Benefit Plan, or to any Participant who would have become a participant in the Defined Benefit Plan following the date such Plan's benefit accruals were frozen. (ii) With respect to any Participant, such Participant's "401(k) Plan Offset Amount" shall be the amount of the monthly annuity payment to which such Participant would be entitled if the balance (determined as of such Participant's Payment Commencement Date) in such Participant's 401(k) Offset Account (as defined herein below) were paid to such Participant in the Normal Benefit Form commencing on his Normal Benefit Date. For purposes of this paragraph (ii), a Participant's "401(k) Offset Account" IV-4 shall be a hypothetical account established and maintained with respect to such Participant as follows: A Participant's 401(k) Offset Account shall be established as of December 31, 1995, and such 401(k) Offset Account shall have an initial balance equal to the actual balance (if any) as of December 31, 1995, in the account maintained under the 401(k) Plan for employer contributions made with respect to such Participant (excluding any employer contributions not currently includible in gross income by reason of Code Section 402(e)(3)). Thereafter (A) commencing with the 1996 calendar year and ending with the calendar year in which such Participant incurs a Termination (the "Termination Year"), the balance in such Participant's 401(k) Offset Account shall be increased as of the end of each such calendar year (or, in the case of the Termination Year, as of such Participant's Termination Date) by the amount of such Participant's Hypothetical Employer Contribution (as defined in paragraph (iii) below) for such calendar year and the actual employer profit sharing contribution made for such calendar year with respect to such Participant under the terms of the 401(k) Plan; and (B) commencing January 1, 1996, and ending on such Participant's Payment Commencement Date, such Participant's 401(k) Offset Account shall also be increased as if the balance in such account (as increased from time to time by the Hypothetical Employer Contributions Described in Clause (A) above) were earning interest, compounded annually, (I) from January 1, 1996, until such Participant's Termination Date, at the Specified Rate applicable from time to time, and (II) from such Participant's Termination Date until his Payment Commencement Date, at the Specified Rate in effect as of such Participant's Termination Date. (iii) As used in paragraph (ii) above, "Hypothetical Employer Contribution" means, with respect to any Participant, (A) for any calendar year prior to such Participant's Termination Year the maximum employer matching contribution that would have been made for such calendar year with respect to such Participant under the terms of the 401(k) Plan (disregarding the limits imposed by reason of Code Section 401(m)) assuming such Participant's before-tax deferral to the 401(k) Plan for such calendar year is equal to his Hypothetical Participant Deferral (as defined in paragraph (iv) below) with respect to such calendar year; and (B) for such Participant's IV-5 Termination Year, an amount equal to the product obtained by multiplying (i) the Hypothetical Employer Contribution determined with respect to such Participant for the immediately preceding calendar year, by (ii) a fraction having a numerator equal to the number of days in such Termination Year prior to and including such Participant's Termination Date, and having a denominator equal to 365. (iv) For purposes of paragraph (iii) above, the "Hypothetical Participant Deferral" applicable to any Participant for any calendar year shall be the amount determined under the following provisions, whichever is applicable: (A) If, with respect to any calendar year, the 401(k) Plan administrative committee does not take any action, either during or after the close of such year, to reduce the level of Participant deferrals permitted to be made by any 401(k) Plan Participant for such year, then the Hypothetical Participant Deferral with respect to any Participant for such calendar year shall be the lesser of (I) the maximum amount such Participant would be permitted to contribute to the 401(k) Plan for such year under Code Section 402(g), or (II) the maximum amount the Participant would be permitted to contribute under the terms of the 401(k) Plan. (B) If, with respect to any calendar year, the 401(k) Plan administrative committee takes action during and/or after such year to reduce the level of Participant deferrals permitted to be made by any 401(k) Plan Participant for such year, then the Hypothetical Participant Deferral with respect to any Participant for such year shall be the lesser of (I) the maximum amount such Participant would be permitted to contribute to the 401(k) Plan for such year under Code Section 402(g), or (II) the product determined by multiplying such Participant's compensation for such year (as determined under the 401(k) Plan for anti-discrimination testing purposes), by the maximum "actual deferral percentage" for any highly compensated employee for such year (as determined under Code Section 401(k)(3)(B) after giving effect to any corrections made following the close of such year) applicable to "highly- compensated employees" (as defined in Code Section 414(q)). IV-6 4.07 SPECIAL RULES FOR EARLY RETIREMENT. In the case of any Participant ---------------------------------- who incurs Early Retirement, such Participant's Monthly Annuity Amount shall be determined as provided in Section 4.04 hereof, and then shall be reduced to reflect the commencement of benefits on a date earlier than the Normal Benefit Date as follows: (a) If the Participant's Early Retirement commences on or after the first day of the month next following his sixty-second birthday, then the reduction shall be 0.25% for each full month by which the date of Early Retirement precedes the first day of the month next following his attainment of age 65. (b) If the Participant's Early Retirement commences prior to the first day of the month next following his sixty-second birthday, then the reduction shall be 9.00% (representing the reduction from age 65 to age 62 described in paragraph (a) above) plus 0.50% for each full month by which the date of Early Retirement precedes the first day of the month next following his sixty-second birthday. 4.08 TERMINATION OF PLAN PARTICIPATION. In the event that the Board of --------------------------------- Directors determines that a Participant's employment performance is no longer at a level which merits continued participation in the Plan, the Board may terminate such Participant's participation in the Plan (without necessarily terminating such Participant's employment) as of the date specified by the Board (the "Participation Severance Date"). Accordingly, notwithstanding any other provision of this Plan, the Supplemental Benefit payable to any Participant whose Plan participation is terminated pursuant to this Section 4.08 shall be calculated by taking into account, in determining the amount of such Participant's Target Monthly Benefit and whether such Participant has met the vesting requirement of Section 4.01 hereof, only the Service Years and Compensation earned by such Participant as of his Participation Severance Date. Such Supplemental Benefit shall be paid to the Participant pursuant to the provisions of Section 4.03 herein. 4.09 DISABILITY. In the event that a Participant incurs a Termination as ---------- a result of such Participant's becoming Disabled, the Supplemental Benefit payable to such Participant under this Plan shall be determined with regard to the vesting requirement of Section 4.01 hereof assuming Service Years continue to accrue until the earliest of (a) age 65, (b) return to Full-Time Employment, or (c) the death of the Participant. For purposes of this Plan, a Participant shall be deemed to be "Disabled" if and when, as a result of injury or sickness, such Participant is permanently impaired to such an extent that he cannot perform, and is not reasonably expected ever to be able to perform, each of the material duties of his position of employment with the IV-7 Sponsor or any Affiliated Company. For the purpose of determining whether a Participant is Disabled, the Board may require the Participant to submit to an examination by a competent physician or medical clinic selected by the Board. 4.10 CHANGE OF CONTROL. Notwithstanding any other provision of this Plan, ----------------- upon a Change in Control, all Participants in the Plan shall be fully vested in their Supplemental Benefits. All Participants shall be entitled to the Supplemental Benefit they would otherwise receive pursuant to this Article IV hereof. Upon and following a Change of Control, no Participant shall be removed from the Plan, nor shall his benefit be terminated, modified, reduced or eliminated without his express written consent. 4.11 TERMINATION FOR CAUSE. Notwithstanding any other provision of this --------------------- Plan except Section 4.10, a Participant who incurs a Termination for Cause prior to a Change of Control shall not be entitled to a Supplemental Benefit, regardless of Service Years, under this Plan. IV-8 ARTICLE V DEATH OF A PARTICIPANT 5.01 TERMINATION BY REASON OF DEATH. In the event that a Participant ------------------------------ incurs a Termination by reason of his death, (a) such Participant shall not be entitled to receive a Supplemental Benefit under this Plan, and (b) if such Participant has a Spouse at the time of his death, such Participant's Spouse (the "Surviving Spouse") shall be entitled to receive a special benefit (a "Death Benefit") at the times and in the amounts set forth in this Article V. No Death Benefit shall be paid in respect of any Participant who does not have a Spouse at the time of his death. 5.02 FORM AND PAYMENT OF DEATH BENEFIT. A Surviving Spouse who is --------------------------------- entitled to receive a Death Benefit pursuant to Section 5.01 hereof shall receive such Death Benefit in the form of a Single Life Annuity which provides a level monthly payment equal to the Monthly Death Benefit Amount specified in Section 5.03 hereof. Except as otherwise provided hereinbelow, payment of a Surviving Spouse's Death Benefit shall commence on the ninetieth (90th) day (the "Death Benefit Commencement Date") after the Participant's death. 5.03 MONTHLY DEATH BENEFIT AMOUNT. The "Monthly Death Benefit Amount" ---------------------------- applicable to any Surviving Spouse shall be an amount equal to the Monthly Annuity Amount of the Supplemental Benefit that would have been payable to the deceased Participant under Article IV hereof if such Participant had incurred a Retirement on the day prior to his death, provided, however, that the determination of such Monthly Annuity Amount shall take into account the following assumptions and special rules: (a) Such Monthly Annuity Amount shall be determined assuming the Participant would have received his Supplemental Benefit in the Normal Benefit Form, modified, if applicable, by the provisions of Section 4.07 hereof. (b) Such Monthly Annuity Amount shall be determined as if the Participant was 100% vested in the Supplemental Benefit. (c) The Payment Commencement Date used in determining such Monthly Annuity Amount shall be deemed to be the Surviving Spouse's Death Benefit V-1 Commencement Date (disregarding any provision in Article IV to the contrary), and if the deceased Participant's death caused Early Retirement, the provisions of Section 4.07 hereof shall be applied in determining the deceased Participant's Monthly Annuity Amount after first determining the amount of the Defined Benefit Plan Offset Amount pursuant to subsection (c) above. V-2 ARTICLE VI MISCELLANEOUS PROVISIONS 6.01 PAYMENTS DURING INCAPACITY. In the event a Participant (or -------------------------- Beneficiary) is under mental or physical incapacity at the time of any payment to be made to such Participant (or Beneficiary) pursuant to this Plan, any such payment may be made to the conservator or other legally appointed personal representative having authority over and responsibility for the person or estate of such Participant (or Beneficiary), as the case may be, and for purposes of such payment references in this Plan to the Participant (or Beneficiary) shall mean and refer to such conservator or other personal representative, whichever is applicable. In the absence of any lawfully appointed conservator or other personal representative of the person or estate of the Participant (or Beneficiary), any such payment may be made to any person or institution that has apparent responsibility for the person and/or estate of the Participant (or Beneficiary) as determined by the Committee. Any payment made in accordance with the provisions of Section 6.01 to a person or institution other than the Participant (or Beneficiary) shall be deemed for all purposes of this Plan as the equivalent of a payment to such Participant (or Beneficiary), and the Sponsor shall have no further obligation or responsibility with respect to such payment. 6.02 PROHIBITION AGAINST ASSIGNMENT. Except as otherwise expressly ------------------------------ provided in Section 6.01 hereof, the rights, interests and benefits of a Participant under this Plan (a) may not be sold, assigned, transferred, pledged, hypothecated, gifted, bequeathed or otherwise disposed of to any other party by such Participant or any Beneficiary, executor, administrator, heir, distributee or other person claiming under such Participant, and (b) shall not be subject to execution, attachment or similar process. Any attempted sale, assignment, transfer, pledge, hypothecation, gift, bequest or other disposition of such rights, interests or benefits contrary to the foregoing provisions of this Section 6.02 shall be null and void and without effect. 6.03 BINDING EFFECT. The Provisions of this Plan shall be binding upon -------------- the Sponsor, the Participants, all Affiliated Companies employing any Participants, and any successor-in-interest to the Sponsor. 6.04 NO TRANSFER OF INTEREST. Benefits under this Plan shall be payable ----------------------- solely from the general assets of the Sponsor (and, with respect to any Participant who is an employee of an Affiliated Company, also from the general assets of such Affiliated Company), and no person shall VI-1 be entitled to look to any other source for payment of such benefits. The Sponsor (and, if applicable, any Affiliated Company) shall have and possess all title to, and beneficial interest in, any and all funds or reserves maintained or held by the Sponsor (or such Affiliated Company) on account of any obligation to pay benefits as required under this Plan, whether or not earmarked as a fund or reserve for such purpose; any such funds, other property or reserves shall be subject to the claims of the creditors of the Sponsor (or such Affiliated Company), and the provisions of this Plan are not intended to create, and shall not be interpreted as vesting, in any Participant, Beneficiary or other person, any right to or beneficial interest in any such funds, other property or reserves. Nothing in this Section 6.04 shall be construed or interpreted as prohibiting or restricting the establishment of a grantor trust within the meaning of Code Section 671 which is unfunded for purposes of Sections 201(2), 301(a)(3), and 401(a)(l) of ERISA, from which benefits under this Plan may be payable. 6.05 AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors may ------------------------------------ amend this Plan from time to time in any respect that it deems appropriate or desirable, and the Board may terminate this Plan at any time; provided, however, that any such amendment or termination may not, without the written consent of a Participant, eliminate or reduce the Supplemental Benefit that has accrued with respect to such Participant as of the effective date of such amendment or termination. For purposes of this Section 6.05, the Supplemental Benefit that has accrued with respect to any Participant as of the date of any amendment of termination of the Plan shall be deemed to be the Supplemental Benefit to which such Participant would be entitled pursuant to Article IV hereof if such Participant incurred Retirement immediately prior to such Plan amendment or Plan termination. 6.06 NO RIGHT TO EMPLOYMENT. This Plan is voluntary on the part of the ---------------------- Sponsor and its Affiliated Companies, and the Plan shall not be deemed to constitute an employment contract between any Participant and the Sponsor or any Affiliated Company, nor shall the adoption or existence of the Plan or any provision contained in the Plan be deemed to be a required condition of the employment of any Participant. Nothing contained in this Plan shall be deemed to give any Participant the right to continued employment with the Sponsor or any Affiliated Company, and the Sponsor and its Affiliated Companies may terminate any Participant at any time, in which case the Participant's rights arising under this Plan shall be only those expressly provided under the terms of this Plan. 6.07 NOTICES. All notices, requests, or other communications (hereinafter ------- collectively referred to as "Notices") required or permitted to be given hereunder or which are given with VI-2 respect to this Plan shall be in writing and may be personally delivered, or may be deposited in the United States mail, postage prepaid and addressed as follows: To the Sponsor any Affiliated Whittaker Corporation Company or the Committee at: Attention: Board of Directors 1955 Surveyor Avenue Simi Valley, California 93063-3386 To Participant at: The Participant's residential mailing address as reflected in the Sponsor's or Affiliated Company's employment records A Notice which is delivered personally shall be deemed given as of the date of personal delivery, and a Notice mailed as provided herein shall be deemed given on the second business day following the date so mailed. Any Participant may change his address for purposes of Notices hereunder pursuant to a Notice to the Committee, given as provided herein, advising the Committee of such change. The Sponsor, any Affiliated Company and/or the Committee may at any time change its address for purposes of Notices hereunder. 6.08 GOVERNING LAW. This Plan shall be governed by, interpreted under, ------------- and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of California applicable to agreements made and to be performed wholly within the State of California. 6.09 TITLES AND HEADINGS; GENDER OF TERMS. Article and Section headings ------------------------------------ herein are for reference purposes only and shall not be deemed to be part of the substance of this Plan or in any way to enlarge or limit the meaning or interpretation of any provision in this Plan. Use in this Plan of the masculine, feminine or neuter gender shall be deemed to include each of the omitted genders wherever the context so requires. 6.10 SEVERABILITY. In the event that any provision of this Plan is found ------------ to be invalid or otherwise unenforceable by a court or other tribunal of competent jurisdiction, such invalidity or unenforceability shall not be construed as rendering any other provision contained herein invalid or unenforceable, and all such other provisions shall be given full force and effect to the same extent as though the invalid and unenforceable provision was not contained herein. 6.11 TAX EFFECT OF PLAN. Neither the Sponsor nor any Affiliated Company ------------------ warrants any tax benefit nor any financial benefit under the Plan. Without limiting the foregoing, the Sponsor and each Affiliated Company and their directors, officers, employees and agents shall be VI-3 held harmless by the Participant from, and shall not be subject to any liability on account of, any Federal or State tax consequences or any consequences under ERISA of any determination as to the amount of Plan benefits to be paid, the method by which Plan benefits are paid, the persons to whom Plan benefits are paid, or the commencement or termination of the payment of Plan benefits. 6.12 ENTIRE AGREEMENT. The Plan represents the entire agreement regarding ---------------- nonqualified retirement benefits provided by Sponsor to each Participant. Further, the Plan supersedes all Participant benefits or accruals under the Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan. IN WITNESS WHEREOF, the Sponsor has caused this Plan to be executed by its duly authorized officer effective as of the Effective Date hereof. WHITTAKER CORPORATION By_____________________________________ Title__________________________________ VI-4 WHITTAKER CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT is made and entered into this ____________ day of _______________________, 1995, by and between Whittaker Corporation, a Delaware corporation (hereinafter referred to as the "Sponsor"), and __________________________, an executive of the Sponsor (hereinafter referred to as the "Executive"). WITNESSETH WHEREAS, the Executive is employed by the Sponsor or an Affiliated Company; and WHEREAS, the Sponsor recognizes the value of the services performed by the Executive and wishes to offer a supplemental retirement benefit to the Executive as an inducement to remain as an employee; and WHEREAS, the Executive wishes to be assured that he will be entitled to a supplemental retirement benefit if he continues to render substantial services to the Sponsor; and WHEREAS, the Sponsor had previously established the Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan to provide certain supplemental benefits; and WHEREAS, the Sponsor and Executive wish to revise the supplemental benefits to be provided to the Executive; and WHEREAS, the Sponsor hereto has established the Whittaker Corporation Supplemental Executive Retirement Plan (hereinafter referred to as the "Plan") to supersede all benefits provided to the Executive under the Whittaker Corporation Supplemental Benefit Plan and Whittaker Corporation Excess Benefit Plan; and WHEREAS, the Whittaker Corporation Supplemental Executive Retirement Plan provides the terms and conditions upon which the Sponsor shall pay such supplemental retirement benefits to those executives of the Sponsor who are selected for participation in the Plan by the President of the Sponsor and approved by the Board of Directors; and WHEREAS, the parties hereto intend that the Plan be considered an unfunded arrangement, maintained primarily to provide deferred compensation benefits for the Executive, a member of a select group of management and a highly compensated employee of the Sponsor, within the meaning of the Employee Retirement Security Act of 1974 (ERISA) as amended; and NOW, THEREFORE, in consideration of the premises and of the mutual promises herein contained, the parties hereto agree to be bound by the terms and conditions set forth in the Plan and as set forth herein below: 1. All capitalized terms used, but not defined herein, shall have the meaning ascribed to them in the Plan. 2. The terms and conditions of the Executive's participation in the Plan shall be governed by the provisions of the Plan. Any additional terms and conditions of the Executive's participation shall be designated in an Addendum to this agreement. 3. The Executive hereby designates the Form of Supplemental Benefit from the choices below as the desired form of distribution of the Supplemental Benefit: [_] Single Life Annuity [_] 50% Joint and Survivor Annuity If no election is made or the election is invalid or void, the Supplemental Benefit shall be paid in the form of a Single Life Annuity. 4. If the Executive is married at the time of his death, his surviving spouse shall receive the applicable Death Benefit pursuant to the terms and conditions of the Plan. The following individual is married to the Executive and is hereby designated as the Executive's Surviving Spouse for purposes of receiving the Executive's Death Benefit: _________________________________ If the Executive is not married, no person shall be designated as the Surviving Spouse and no Death Benefit shall be paid pursuant to Article V of the Plan. 5. The Executive shall promptly notify the Sponsor of any changes in his marital status. 6. By executing this Agreement, Executive waives all rights to benefits under the Whittaker Corporation Supplemental Benefit Plan and the Whittaker Corporation Excess Benefit Plan. IN WITNESS WHEREOF, the Sponsor and the Executive have executed this agreement to be effective as of the day and year first above written. _______________________ _______________________ Sponsor Executive EX-10.10 5 WHITTAKER EMPLOYEES PENSION PLAN EXHIBIT 10.10 AMENDMENT AND RESTATEMENT OF WHITTAKER CORPORATION EMPLOYEES' PENSION PLAN WHITTAKER CORPORATION EMPLOYEES' PENSION PLAN Whittaker Corporation, a Delaware corporation, hereinafter referred to as the "Company," hereby adopts the defined benefit pension plan set forth below (the "Plan") as an amendment and complete restatement of its current defined benefit pension plan. The Plan is a defined benefit pension plan intended to qualify under Section 401 of the Code, and the trust established pursuant to the Plan is an employees' trust intended to constitute a tax-exempt organization under Section 501 of the Code. The provisions of the Plan as amended and restated herein shall only apply to Participants who terminate employment after the Effective Date, except as otherwise required by law for those provisions pursuant to the Tax Reform Act of 1986 (TRA '86) and subsequent legislation including but not limited to the Consolidated Omnibus Budget Reconciliation Act which are effective respectively as of January 1, 1989, January 1, 1990, January 1, 1991, January 1, 1992 and January 1, 1993. This 1994 amendment and restatement incorporates all amendments made to the 1988 amendment and restatement and also serves to further document the Company's intention to freeze the accrual of benefits under the Plan as of October 31, 1994 by ceasing to count as Plan Compensation and Final Average Earnings any remuneration paid after December 31, 1994 and as Benefit Service any period of employment after October 31, 1994. Vested Service, however, will continue to accrue in accordance with the applicable Plan provisions. WHITTAKER CORPORATION EMPLOYEES' PENSION PLAN TABLE OF CONTENTS
PAGE ARTICLE I - DEFINITIONS.................................................. I-1 1.01 Accrued Benefit.............................................. I-1 1.02 Actuarial Equivalent......................................... I-1 1.03 Adjustment Factor............................................ I-2 1.04 Affiliated Company........................................... I-2 1.05 Applicable Interest Rate..................................... I-2 1.06 Beneficiary.................................................. I-2 1.07 Benefit Commencement Date.................................... I-2 1.08 Benefit Service.............................................. I-3 1.09 Board........................................................ I-4 1.10 Code......................................................... I-4 1.11 Committee.................................................... I-4 1.12 Company...................................................... I-4 1.13 Compensation................................................. I-4 1.14 Day of Service............................................... I-7 1.15 Defined Benefit Dollar Limitation............................ I-8 1.16 Defined Benefit Plan......................................... I-8 1.17 Defined Contribution Dollar Limitation....................... I-9 1.18 Defined Contribution Plan.................................... I-9 1.19 Disability................................................... I-9 1.20 Early Retirement Age......................................... I-9 1.21 Effective Date............................................... I-9 1.22 Eligible Spouse.............................................. I-9 1.23 Employee..................................................... I-9 1.24 Enrolled Actuary............................................. I-9 1.25 ERISA........................................................ I-9 1.26 Final Average Earnings....................................... I-10 1.27 Includable Compensation...................................... I-11 1.28 Investment Advisory Committee................................ I-11 1.29 Investment Manager........................................... I-12 1.30 Leased Employee.............................................. I-12 1.31 Limitation Year.............................................. I-12 1.32 Minimum Accrual.............................................. I-12 1.33 Minimum Benefit.............................................. I-12
(i) 1.34 Normal Benefit.............................................. I-12 1.35 Normal Retirement Age....................................... I-12 1.36 Normal Retirement Benefit................................... I-13 1.37 One Year Break in Service................................... I-13 1.38 Participant................................................. I-13 1.39 Participating Company....................................... I-13 1.40 Plan........................................................ I-13 1.41 Plan Year................................................... I-14 1.42 Qualified Joint and Survivor Annuity........................ I-14 1.43 Qualified Plan.............................................. I-14 1.44 Qualified Pre-retirement Survivor Annuity................... I-14 1.45 Severance................................................... I-14 1.46 Social Security Benefit..................................... I-14 1.47 Social Security Retirement Age.............................. I-15 1.48 Top-Heavy Plan.............................................. I-15 1.49 Trust Agreement............................................. I-15 1.50 Trust Fund.................................................. I-16 1.51 Trustee..................................................... I-16 1.52 Vested Service.............................................. I-16 1.53 Welfare Benefit Fund........................................ I-17 ARTICLE II - ELIGIBILITY TO PARTICIPATE................................. II-1 2.01 Initial Eligibility to Participate.......................... II-1 2.02 Subsequent Eligibility to Participate....................... II-1 2.03 Exclusions from Participation............................... II-1 2.04 Participation Following a Severance......................... II-3 2.05 Leased Employees............................................ II-4 2.06 Participation Freeze........................................ II-5 ARTICLE III - PARTICIPANT CONTRIBUTIONS................................. III-1 3.01 Participant Contributions Prohibited........................ III-1 ARTICLE IV - PARTICIPATING COMPANY CONTRIBUTIONS........................ IV-1 4.01 Amount of Contribution...................................... IV-1 4.02 Time of Payment............................................. IV-1 ARTICLE V - RETIREMENT BENEFITS......................................... V-1 5.01 Severance on or After Normal Retirement Age................. V-1 5.02 Severance Before Normal Retirement Age...................... V-1 5.03 Determination of Benefit.................................... V-2 5.04 Code Section 415 Limitations................................ V-14 5.05 Forms of Retirement Benefits................................ V-22 5.06 Special Annuity Provisions.................................. V-24
(ii) 5.07 Rules Governing Distributions............................... V-25 5.08 Relevant Information........................................ V-28 5.09 Benefits Upon Reemployment.................................. V-28 5.10 Suspension of Benefits...................................... V-28 5.11 Prohibition Against Reduction of Accrued Benefit............ V-30 5.12 Withholding on Payment of Benefits.......................... V-30 ARTICLE VI - DEATH BENEFITS............................................. VI-1 6.01 Spousal Death Benefit....................................... VI-1 6.02 Commencement of Benefit..................................... VI-1 6.03 Certain Spouses............................................. VI-1 6.04 Cost of Coverage............................................ VI-2 ARTICLE VII - VESTING................................................... VII-1 7.01 Vested Benefit.............................................. VII-1 7.02 Aggregation of Year's of Vested Service..................... VII-2 7.03 Unclaimed Benefits.......................................... VII-3 7.04 Application of Forfeited Amounts............................ VII-4 ARTICLE VIII - DESIGNATION OF BENEFICIARY............................... VIII-1 8.01 Designation of Beneficiary.................................. VIII-1 8.02 Failure to Designate Beneficiary............................ VIII-1 ARTICLE IX - TOP-HEAVY PLAN PROVISIONS.................................. IX-1 9.01 Priority over Other Plan Provisions......................... IX-1 9.02 Definitions................................................. IX-1 9.03 Compensation Taken Into Account............................. IX-4 9.04 Minimum Benefit............................................. IX-5 9.05 Minimum Vesting............................................. IX-7 9.06 Modification of Aggregate Benefit Limit..................... IX-8 ARTICLE X - ADMINISTRATIVE PROCEDURES................................... X-1 10.01 Appointment of Committee Members............................ X-1 10.02 Officers and Employees of the Committee..................... X-1 10.03 Action of the Committee..................................... X-1 10.04 Disqualification of Committee Member........................ X-1 10.05 Expenses of the Committee................................... X-1 10.06 Bonding and Compensation.................................... X-2 10.07 General Powers and Duties of the Committee.................. X-2 10.08 Specific Powers and Duties of the Committee................. X-2 10.09 Allocation of Fiduciary Responsibility...................... X-4 10.10 Information to be Submitted to the Committee................ X-4 10.11 Notices, Statements and Reports............................. X-5 10.12 Claims Procedure............................................ X-5
(iii) 10.13 Service of Process.......................................... X-7 10.14 Payment to Minors or Persons Under Legal Disability......... X-8 10.15 Uniform Application of Rules and Policies................... X-8 10.16 Funding Policy.............................................. X-8 ARTICLE XI INVESTMENT OF PLAN ASSETS................................... XI-1 11.01 Trust Fund Investments...................................... XI-1 11.02 General Responsibility and Authority for Investment of Trust Assets................................................ XI-1 11.03 The Trust Agreement......................................... XI-5 11.04 Loans Prohibited............................................ XI-5 11.05 Appointment of Investment Advisory Committee Members........ XI-5 11.06 Officers and Employees of the Investment Advisory Committee. XI-5 11.07 Action of the Investment Advisory Committee................. XI-5 11.08 Disqualification of Investment Advisory Committee Member.... XI-6 11.09 Expenses of the Investment Advisory Committee............... XI-6 11.10 Bonding and Compensation.................................... XI-6 ARTICLE XII TERMINATION AND PARTIAL TERMINATION......................... XII-1 12.01 Continuance of Plan......................................... XII-1 12.02 Complete Vesting............................................ XII-1 12.03 Allocation of Assets........................................ XII-1 12.04 Withdrawal by Participating Company......................... XII-2 12.05 Prevention of Discrimination on Early Termination........... XII-2 12.06 Residual Assets............................................. XII-10 ARTICLE XIII - AMENDMENT OF THE PLAN.................................... XIII-1 13.01 Right of Company to Amend Plan.............................. XIII-1 13.02 Amendment Procedure......................................... XIII-2 13.03 Effect on Other Participating Companies..................... XIII-2 ARTICLE XIV - ADOPTION OF PLAN BY AFFILIATED COMPANIES.................. XIV-1 14.01 Adoption Procedure.......................................... XIV-1 14.02 Effect of Adoption by Affiliated Company.................... XIV-1 ARTICLE XV - MISCELLANEOUS.............................................. XV-1 15.01 Reversion Prohibited........................................ XV-1 15.02 Bonding, Insurance and Indemnity............................ XV-2 15.03 Merger, Consolidation or Transfer of Assets................. XV-2 15.04 Spendthrift Clause.......................................... XV-3
(iv) 15.05 Rights of Participants...................................... XV-4 15.06 Gender, Tense and Headings.................................. XV-4 15.07 Counterparts................................................ XV-4 15.08 Governing Law............................................... XV-5 APPENDIX A - Special Rules for Certain Employees........................ A-1
(v) ARTICLE I DEFINITIONS 1.01 ACCRUED BENEFIT. "Accrued Benefit" means the portion of a Participant's retirement benefit which he has earned as of any date. 1.02 ACTUARIAL EQUIVALENT. "Actuarial Equivalent" means a form of benefit under which the aggregate payments expected to be received are equal in value to the aggregate payments expected to be received under a different form of benefit using the following assumptions: Mortality Tables: 1971 Unisex Group annuity Table (85% of male rate and 15% of female rate) Interest rate: 8% per annum
Notwithstanding the foregoing, in calculating the present value of a Participant's benefit for purposes of the Lump Sum Option under Section 5.05(c)(4) or for purposes of the immediate distribution of a small benefit under Section 5.07(f), actuarial equivalence shall be determined (1) by using an interest rate no greater than the Applicable Interest Rate if the vested Accrued Benefit (as determined using such rate) is not in excess of $25,000, and (2) by using an interest rate no greater than 120% of the Applicable Interest Rate if the vested Accrued Benefit (as determined under clause (1)) exceeds $25,000, provided that in no event shall the present value of the vested Accrued Benefit as determined under clause (2) be less than $25,000. Subject to the foregoing assumptions and limitations, in calculating the present value of a Participant's benefit, actuarial equivalence shall be determined by using the interest rate which produces the greatest benefit. The foregoing actuarial assumptions may be changed from time to time by amendment to the Plan. No Participant or Beneficiary shall be deemed to have any right, vested or nonvested, to have his benefit computed under previously adopted actuarial assumptions, except as may be required by Section 411(d)(5) of the Code to prevent the reduction of a Participant's Accrued Benefit. I-1 Notwithstanding the above, if a benefit is distributed in a form other than a nondecreasing annuity payable for a period not less than the life of a Participant (or in the case of a Qualified Joint and Survivor Annuity, the life of the surviving spouse), the interest rate used in determining the Actuarial Equivalent of that portion of the benefit based on Excess Final Average Earnings, where applicable, shall be an interest rate determined pursuant to Code Section 417. 1.03 ADJUSTMENT FACTOR. "Adjustment Factor" means the cost of living adjustment factor prescribed by the Secretary of the Treasury under Section 415(d) of the Code for years beginning after December 31, l987. 1.04 AFFILIATED COMPANY. "Affiliated Company" means: (a) Any member of a controlled group of corporations (within the meaning of Section 414(b) of the Code, modified, for purposes of Section 5.04, by Section 415(h) of the Code) of which the Company is a member; (b) Any trade or business (whether or not incorporated) under common control with the Company (within the meaning of Section 414(c) of the Code, modified, for purposes of Section 5.04, by Section 415(h) of the Code); (c) Any member of an affiliated service group (within the meaning of Section 414(m) of the Code) of which the Company is a member; and (d) Any other entity required to be aggregated with the Company under Section 414(o) of the Code. 1.05 APPLICABLE INTEREST RATE. "Applicable Interest Rate" means the interest rate or rates that would be used by the Pension Benefit Guaranty Corporation, as of the first day of the Plan Year in which a distribution is made, for purposes of determining the present value of the Participant's benefit under the Plan if the Plan had terminated on the first day of such Plan Year with insufficient assets to provide benefits guaranteed by the Pension Benefit Guaranty Corporation on that date. 1.06 BENEFICIARY. "Beneficiary" means the one or more persons or entities entitled to receive distribution of a Participant's interest in the Plan in the event of his death. I-2 1.07 BENEFIT COMMENCEMENT DATE. "Benefit Commencement Date" means the date upon which payment of a Participant's benefit commences. 1.08 BENEFIT SERVICE. "Benefit Service" means the number of years of Benefit Service of a Participant determined according to this Section 1.08. A Participant shall be deemed to accrue a full year of Benefit Service for each Plan Year during which he completes at least 365 Days of Service as an Employee of a Participating Company. In addition, a Participant shall be deemed to accrue a fractional year of Benefit Service in any Plan Year in which he completes one or more but less than 365 Days of Service as an Employee of a Participating Company Such fractional year of Benefit Service shall be computed by dividing the number of Days of Service completed by the Participant as an Employee of a Participating Company during such Plan Year by 365. Notwithstanding any other provision of the Plan to the contrary, for purposes of determining a Participant's Benefit Service, the following additional rules shall apply: (a) No Benefit Service shall be credited to any Employee prior to his commencement of participation in this Plan pursuant to the provisions of Article II, provided, however, that upon commencement of such participation, such Employee's service for a Participating Company prior to commencement of participation shall be taken into account for purposes of this Section (subject, however, to exceptions set forth in subsections (b) through (g), below); (b) No Benefit Service shall be credited to any Participant with respect to any period prior to attainment of age 21; (c) Effective for Participants who do not complete at least one Day of Service on or after January 1, 1988, no Benefit Service shall be credited to any such Participant with respect to any period after such Participant's attainment of Normal Retirement Age; (d) Subject to the provisions of Section 1.14, no Benefit Service shall be credited to any Participant with respect to any period prior to the date on which such Participant's employer became a Participating Company; I-3 (e) No Benefit Service shall be credited to an Employee with respect to any period of service disregarded under the provisions of Section 2.04; (f) Effective for Participants who are hired by a Participating Company after attaining age 60 and prior to January 1, 1988, no Benefit Service shall be credited to any such Participant with respect to any period prior to January 1, 1988. (g) Effective October 31, 1994, no further Benefit Service shall accrue on behalf of any current or former Participant. 1.09 BOARD. "Board" means the Board of Directors of the Company. 1.10 CODE. "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.11 COMMITTEE. "Committee" means the Pension Committee appointed and acting pursuant to the provisions of Article X. 1.12 COMPANY. "Company" means Whittaker Corporation, a Delaware corporation. The term "Company" shall also include any successor employer, if the successor employer expressly agrees in writing as of the effective date of succession to continue the Plan and become a party to the Trust Agreement. 1.13 COMPENSATION. "Compensation" means the full salary and wages (including bonuses, incentive payments, overtime, commissions, shift differentials, and holiday, vacation and sick pay) and other compensation paid by the Company and any Affiliated Company during a Plan Year by reason of services performed by an Employee, subject, however, to the following special rules: (a) Fringe benefits (including but not limited to relocation allowance, expense allowance, overseas allowance and other similar items), contributions by the Company or any Affiliated Company to or benefits under any employee benefit plan, except as provided in subsection (b) below, and benefits received from the Whittaker Corporation Long Term Incentive Plan shall not be taken into account in determining Compensation; (b) Amounts deducted pursuant to authorization by an Employee or pursuant to requirements of law (including amounts of salary or wages deferred in accordance I-4 with Code Section 401(k)) shall be included in Compensation except as specifically provided to the contrary elsewhere in this Plan; (c) Amounts paid or payable by reason of services performed during any period in which an Employee is not a Participant under this Plan shall not be taken into account in determining Compensation; (d) Amounts not included in the Employee's gross income for his current taxable year pursuant to any nonqualified deferred compensation plan shall not be taken into account in determining Compensation, however, such amounts (other than amounts under stock options) shall be included in Compensation in the year when those amounts are taxable to the Participant; (e) Amounts included in any Employee's gross income with respect to life insurance as provided by Code Section 79 shall not be taken into account in determining Compensation; (f) Any special cash payment in the nature of a commission, bonus or incentive payment to an Employee whose basic annual salary is at least $50,000 shall not be taken into account in determining the Employee's Compensation if the payment is pursuant to an individual written agreement with the Employee; and (g) For any Plan Year commencing on or after January 1, 1989, the maximum amount of a Participant's annual Compensation taken into account for determining all benefits provided under the Plan for any determination period, shall be $200,000 except as such limitation is adjusted for cost of living in accordance with the provisions of Sections 401(a)(17) of the Code, except that the dollar increase in effect on January 1 of any calendar year is effective for any years beginning in such calendar year. If the period for determining Compensation used in calculating an Employee allocation for a determination period is a short Plan Year (i.e., shorter than 12 months), the annual Compensation limit is an amount equal to the otherwise applicable annual Compensation limit multiplied by the fraction, the numerator of which is the number of months in the short Plan Year, and the denominator of which is 12. In determining the Compensation of a Participant for I-5 purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the spouse of the Participant and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of such rules the adjusted $200,000 limitation is exceeded, then (except, where applicable) for purposes of determining the portion of Compensation up to the integration level the limitation shall be prorated among the affected individuals in proportion to each such individual's Compensation as determined under this Section 1.13 prior to the application of this limitation. If Compensation for any prior determination period is taken into account in determining an Employee's benefit for the current determination period, the Compensation for such prior year is subject to the application annual Compensation limit in effect for that prior year. For this purpose, for years beginning before January 1, 1990, the applicable annual Compensation limit is $200,000. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each Employee taken into account under the Plan shall not exceed the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93") annual Compensation limit. The OBRA '93 annual Compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual Compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. I-6 For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93 annual Compensation limit set forth in this provision. If Compensation for any prior determination period is taken into account in determining an Employee's benefit accruing in the current Plan Year, the Compensation for that prior determination period is subject to the OBRA '93 annual Compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual Compensation limit is $150,000. (h) Compensation earned after December 31, 1994 shall not be used in determining any benefit provided by this Plan. 1.14 DAY OF SERVICE. "Day of Service" means, in the case of any Employee, each day during any period commencing with the day on which the Employee first enters into active service as an Employee on or following his most recent date of rehire by the Company or any Affiliated Company and ending on the date of his next following Severance. If an Employee's Severance date is the date of his retirement, discharge or voluntary termination of employment, then "Day of Service" shall also include each day between such Severance date and the date upon which the Employee recommences active service as an Employee if the Employee recommences such active service prior to: (a) The first anniversary of such Severance date if such Severance date did not occur during an absence from service by the Employee for a reason other than retirement, discharge or voluntary termination of employment; or (b) The first anniversary of the date on which the Employee was first absent from service for a reason other than retirement, discharge or voluntary termination of employment if such Severance date occurred during such absence. Credit for Days of Service shall be given with respect to periods of military service and family leave to such extent and for such purposes as are required by applicable federal law. Credit for Days of Service shall be given with respect to service performed for an I-7 operating unit, division or subsidiary of any corporation, trade or business that is acquired by the Company or any Affiliated Company commencing on the effective date of such acquisition. Notwithstanding the provisions of subsection (a), the Board or the Committee by resolution may provide that, for purposes of determining eligibility to participate in the Plan, Benefit Service or Vested Service, credit for Days of Service also shall be given with respect to service performed for such an entity prior to the effective date of the acquisition. In addition, the Board or the Committee by resolution may provide that, for purposes of determining Vested Service of a former Employee who has less than a 100% vested and nonforfeitable interest in his Accrued Benefit, credit for Days of Service shall be given with respect to service performed for any other corporation, trade or business that has acquired all or part of an operating unit, division or subsidiary of the Company or any Affiliated Company. Days of Service shall also include any period of service that constitutes service with a predecessor employer within the meaning of Section 414(a)(1) of the Code. Finally, effective for Plan Years beginning after 1984, and solely for purposes of preventing a One Year Break in Service, Days of Service shall include each period of service credited in accordance with Sections 410(a)(5)(E) and 411(a)(6)(E) of the Code for unpaid periods during which an Employee is absent from work by reason of the pregnancy of the Employee, the birth of a child of the Employee, the placement of a child with the Employee in connection with the adoption of such child by the Employee, or for purposes of caring for such child for a period beginning immediately following such birth or placement, provided that the Employee furnishes timely information to the Company to establish that the absence from work is for one of the aforementioned reasons, and the number of days for which there was such an absence. The Days of Service created under this paragraph shall be credited in the computation period in which the absence begins only if necessary to prevent a One Year Break in Service in that period, and in all other cases, in the immediately succeeding computation period. 1.15 DEFINED BENEFIT DOLLAR LIMITATION. "Defined Benefit Dollar Limitation" means the Defined Benefit Dollar Limitation computed under Section 5.04(b). I-8 1.16 DEFINED BENEFIT PLAN. "Defined Benefit Plan" means a Qualified Plan other than a Defined Contribution Plan. 1.17 DEFINED CONTRIBUTION DOLLAR LIMITATION. "Defined Contribution Dollar Limitation" means, for any Limitation Year, $30,000 or, if greater, 25% of the Defined Benefit Dollar Limitation in effect for the Limitation Year. If a short Limitation Year is created because of a Plan amendment changing the Limitation Year to a different 12-consecutive month period, the Defined Contribution Dollar Limitation for the short Limitation Year shall not exceed the amount determined in the preceding sentence multiplied by a fraction, the numerator of which is the number of months in the short Limitation Year, and the denominator of which is 12. 1.18 DEFINED CONTRIBUTION PLAN. "Defined Contribution Plan" means, a Qualified Plan which provides individual participant accounts for employer contributions, forfeitures and gains or losses thereon, in accordance with Section 414(i) of the Code. 1.19 DISABILITY. "Disability" means, the permanent inability of a Participant to perform the duties assigned to him by the Company or any Affiliated Company by reason of mental or physical illness or injury The determination of a Participant's Disability shall be made by the Committee after receiving competent medical advice and on a basis uniformly applicable to all Participants. 1.20 EARLY RETIREMENT AGE. "Early Retirement Age" means the date on which a Participant attains age 55 and completes at least 10 years of Vested Service. 1.21 EFFECTIVE DATE. "Effective Date" means January 1, 1994. 1.22 ELIGIBLE SPOUSE. "Eligible Spouse" means the spouse of a Participant. 1.23 EMPLOYEE. "Employee" means any person who is: (a) Employed by the Company or any Affiliated Company if the relationship between the Company or Affiliated Company and such person would, for federal income tax purposes, constitute the legal relationship of employer and employee, or (b) A Leased Employee as provided in Section 2.05. 1.24 ENROLLED ACTUARY. "Enrolled Actuary" means the enrolled actuary as defined by Section 103(a)(4)(A) of ERISA, engaged by the Committee or the Company as the Plan's enrolled actuary. I-9 1.25 ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 1.26 FINAL AVERAGE EARNINGS. "Final Average Earnings" means: (a) For each Participant who has a Severance with at least five consecutive full years of Benefit Service within the 10-year period ending on the date of such Severance, the average monthly Compensation received by such Participant during the highest paid consecutive five full years of Benefit Service within such 10-year period; (b) For each Participant who has a Severance with at least five full years of Benefit Service (but not with five consecutive full years of Benefit Service) within the 10-year period ending on the date of such Severance, the average monthly compensation received by such Participant during the highest paid five consecutive full years of Benefit Service excluding intervening years in which no Benefit Service was earned within such 10-year period; (c) For each Participant who has a Severance with less than five full years of Benefit Service within the 10-year period ending on the date of such Severance, the average monthly Compensation received during all years (and fractions thereof) of Benefit Service within such 10-year period; and (d) With respect to a Participant described in subsection (a) or (b), if the Compensation received by the Participant during the Plan Year in which his most recent Severance occurs is not utilized in determining Final Average Earnings under the provisions of such subsection (a) or (b), and if such Compensation exceeds the Compensation received by the Participant during any other year of Benefit Service which is utilized in determining Final Average Earnings under the provisions of subsection (a) or (b), then the Compensation received by the Participant during such other year of Benefit Service shall be increased by such excess for purposes of determining Final Average Earnings. (e) Notwithstanding the foregoing, effective for benefits accruing with respect to Plan Years beginning after December 31, 1988, "Final Average Earnings" shall mean Final Average Compensation, as defined in Section 40l(l)(5)(D) of the Code. I-10 (f) Notwithstanding anything herein to the contrary, Compensation earned after December 31, 1994 shall be excluded from any computation of Final Average Earnings. 1.27 INCLUDABLE COMPENSATION. "Includable Compensation" means an Employee's total wages from Participating Companies or other Affiliated Companies as determined for purposes of Internal Revenue Service Form W-2, excluding, however: (a) Moving expense reimbursements that are deductible by the Employee under Section 217 of the Code, (b) Company and Affiliated Company contributions to a simplified employee pension plan to the extent such contributions are deductible by the Employee and Company and Affiliated Company contributions to any other plan of deferred compensation that, before the application of Section 5.04, are not includable in the Employee's gross income, (c) Distributions to the Employee from any plan of deferred compensation other than an unfunded, nonqualified plan of deferred compensation, (d) Amounts realized from the exercise of a nonqualified stock option, (e) Amounts realized under Section 83 of the Code with respect to restricted property that becomes freely transferable or is no longer subject to a substantial risk of forfeiture, (f) Amounts realized from the disposition of stock acquired under a qualified stock option within the meaning of Section 422 of the Code, and (g) Any other amounts which receive special tax benefits within the meaning of Section l.4l5-2(d)(2) of the Treasury Regulations. 1.28 INVESTMENT ADVISORY COMMITTEE. "Investment Advisory Committee" means the Investment Advisory Committee appointed and acting pursuant to the provisions of Article XI. I-11 1.29 INVESTMENT MANAGER. "Investment Manager" means a person or organization (other than the Committee or the Trustee): (1) Which the Committee has appointed to manage, invest and reinvest all or a portion of the assets of the Trust Fund; (2) Which is (A) Registered as an investment advisor under the Investment Advisors Act of 1940, (B) A bank as defined in said Act, or (C) An insurance company qualified to manage, acquire or dispose of the assets of a pension plan under the laws of more than one state; and (3) Which has acknowledged in writing to the Committee and the Trustee that such person or organization is a fiduciary within the meaning of Section 3(21) of ERISA with respect to the assets of the Trust Fund under its management and control. 1.30 LEASED EMPLOYEE. "Leased Employee" means a person described in Section 2.05(a). 1.31 LIMITATION YEAR. "Limitation Year" means the 12-consecutive month period used by a Qualified Plan for purposes of computing the limitations on benefits and annual additions under Section 415 of the Code. The Limitation Year for this Plan is the Plan Year. If the Limitation Year is amended to a different 12-consecutive-month period, the new Limitation Year shall begin on a date within the Limitation Year in which the amendment is made. 1.32 MINIMUM ACCRUAL. "Minimum Accrual" means the Minimum Accrual in a Top-Heavy Plan computed under Section 9.04. 1.33 MINIMUM BENEFIT. "Minimum Benefit" means the Minimum Benefit in a Top-Heavy Plan computed under Section 9.04. 1.34 NORMAL BENEFIT COMMENCEMET DATE. "Normal Benefit Commencement Date" means the first day of the first month following a Participant's attainment of Normal Retirement Age. I-12 1.35 NORMAL RETIREMENT AGE. "Normal Retirement Age" means the date on which a Participant attains age 65. Notwithstanding the foregoing, effective with respect to Participants who are hired by a Participating Company after attaining age 60 and after December 31, 1988, "Normal Retirement Age" means the fifth anniversary of the date on which such a Participant became a Participant in the Plan. 1.36 NORMAL RETIREMENT BENEFIT. "Normal Retirement Benefit" means the retirement benefit derived from Participating Company contributions payable as of Normal Retirement Age to a Participant who has a Severance on his Normal Retirement Age, determined in accordance with Section 5.03(a). 1.37 ONE YEAR BREAK IN SERVICE. "One Year Break in Service" means a 12- consecutive-month period commencing on the date of an Employee's Severance, or any anniversary thereof, in which the Employee completes less than one Day of Service 1.38 PARTICIPANT. "Participant" means an Employee or former Employee who has met the applicable eligibility requirements of Article II and who has not yet received a distribution of the entire amount of his vested interest in the Plan. A Participant shall be treated as benefiting under the Plan for any Plan Year during which such Participant accrues a benefit or is deemed to have accrued a benefit in accordance with Income Tax Regulation Section 1.410(b)- 3(a). 1.39 PARTICIPATING COMPANY. "Participating Company" means the Company, each Affiliated Company that has adopted the Plan in the manner provided in Article XIV and each organizational unit of the Company or an Affiliated Company that is designated as a Participating Company by the Board of Directors of the Company or the Affiliated Company; excluding, however, each organizational unit of the Company or any Affiliated Company that has adopted the Plan that is designated as a nonparticipating unit by the Board of Directors of the Company or such Affiliated Company. For purposes of the Plan the term "organizational unit" shall include, without limitation, any division, department plant or office of the Company or any Affiliated Company. I-13 1.40 PLAN. "Plan" means the Whittaker Corporation Employees' Pension Plan (formerly the Whittaker Corporation Basic Pension Plan) first executed by the Company on February 16. 1968, as amended from time to time. 1.41 PLAN YEAR. "Plan Year" means the period with respect to which the records of the Plan are maintained, which shall be the 12-month period beginning on January 1 and ending on December 31, and includes such periods prior to the Effective Date. 1.42 QUALIFIED JOINT AND SURVIVOR ANNUITY. "Qualified Joint and Survivor Annuity" means a monthly annuity paid directly from the Trust Fund or through the purchase of a nontransferable annuity contract for the life of a Participant and, after his death, a monthly survivor annuity for the life of such Participant's spouse which shall be equal to 50% of the amount of the monthly annuity payable during the joint lives of the Participant and his spouse, which shall be the Actuarial Equivalent of the benefit provided to an unmarried Participant. 1.43 QUALIFIED PLAN. "Qualified Plan" means an employee benefit plan that is qualified under Section 401(a) of the Code. 1.44 QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY. "Qualified Pre-retirement Survivor Annuity" means a monthly annuity paid directly from the Trust Fund or through the purchase of a nontransferable annuity contract for the life of the surviving Eligible Spouse of a deceased Participant equal to 50% of the monthly annuity that the Participant would have received under a Straight-Life Annuity determined under Section 5.05(c)(3). 1.45 SEVERANCE. "Severance" means an Employee's voluntary or involuntary termination of employment with the Company and all Affiliated Companies for any reason at any time. Notwithstanding the foregoing, if an Employees employment with the Company and all Affiliated Companies is suspended due to the commencement of a leave of absence or a layoff which lasts for a continuous period of at least one year, such Employee shall be deemed to have a Severance on the one-year anniversary of the date on which such leave of absence or layoff commenced. 1.46 SOCIAL SECURITY BENEFIT. "Social Security Benefit" means the estimated monthly primary benefit payable to a Participant under the Social Security Act determined as of the time of his Severance. However: I-14 (a) In the event that a Participant has a Severance prior to his attainment of Social Security Retirement Age, the Participant's Social Security Benefit shall be the benefit which he would have received at Social Security Retirement Age had he continued to receive Compensation treated as wages for purposes of the Social Security Act until such age at the same rate that he received such Compensation during the last full year of employment prior to the date of his Severance (and based upon the level of Social Security Benefits in effect at the time of such Severance). (b) Each Participant shall be informed in writing of his right to supply his actual compensation history and of the financial consequences of failing to supply such history. This notice shall be given each time a copy of the Summary Plan Description is provided to the Participant, and shall also be given to the Participant upon his Severance. The notice shall state that the Participant may obtain his actual compensation history from the Social Security Administration. (c) If the Participant supplies his actual compensation history, the calculation of his Social Security Benefit shall be based on such data rather than using an estimated compensation history. This data must be provided to the Committee no later than the expiration of a reasonable period of time (determined in accordance with Committee rules) following the later of: (1) The Participant's Severance, or (2) The date on which the Participant is notified of the benefit to which he is entitled. (d) Estimated compensation may be used only for years prior to the Participant's employment commencement date. 1.47 SOCIAL SECURITY RETIREMENT AGE. "Social Security Retirement Age" means the age used as the retirement age under Section 216(1) of the Social Security Act, except that such Section shall be applied: (a) Without regard to the age increase factor, and (b) As if the early retirement age under Section 216(1) of such Act were 62. I-15 1.48 TOP-HEAVY PLAN. "Top-Heavy Plan" means a Top-Heavy Plan as defined in Article IX. 1.49 TRUST AGREEMENT. "Trust Agreement" means the Trust Agreement executed by the Company and the Trustee, which established a Trust Fund to provide for the investment, reinvestment, administration and distribution of contributions made under the Plan and the earnings thereon, as amended from time to time. 1.50 TRUST FUND. "Trust Fund" means the assets of the Plan held by the Trustee pursuant to the Trust Agreement. 1.51 TRUSTEE. "Trustee" means the one or more individuals or organizations who have entered into the Trust Agreement as Trustee(s), and any duly appointed successor. 1.52 VESTED SERVICE. "Vested Service" means the number of years of Vested Service determined according to this Section 1.52. (a) An Employee shall be deemed to accrue a full year of Vested Service for each Plan Year during which he completes at least 365 Days of Service as an Employee. In addition, an Employee shall be deemed to accrue a fractional year of Vested Service in any Plan Year in which he completes one or more but less than 365 Days of Service as an Employee. Such fractional year of Vested Service shall be computed by dividing the number of Days of Service completed by the Employee during such calendar year by 365. Notwithstanding any other provision of the Plan to the contrary, for purposes of determining Vested Service pursuant to this subsection (a), the following additional rules shall apply: (1) Vested Service shall not include any period of service disregarded under the provisions of Section 7.02. (2) Vested Service shall not include any period of service prior to January 1, 1985 which would not be taken into account under the provisions of this Plan as in effect prior to such date with respect to breaks in service. (b) Notwithstanding the provisions of subsection (a), the Vested Service of an individual who commenced participation in the Plan prior to January 1, 1985 shall I-16 be determined in accordance with the provisions of the Plan as it existed on December 31, 1984 if the Vested Service of such individual as so determined exceeds the Vested Service of such individual determined under the provisions of subsection (a). (c) Vested Service shall continue to accrue notwithstanding the fact that Benefit Service ceased to accrue on December 31, 1994. 1.53 WELFARE BENEFIT FUND. "Welfare Benefit Fund" means an organization described in paragraph (7), (9), (17) or (20) of Section 501(c) of the Code, a trust, corporation or other organization not exempt from federal income tax, or to the extent provided in Treasury Regulations, any account held for an employer by any person, which is part of a plan of an employer through which the employer provides benefits to employees or their beneficiaries, other than a benefit to which Code Sections 83(h), 404 (determined without regard to Section 404(b)(2)) or 404A applies, or to which an election under Code Section 463 applies. I-17 ARTICLE II ELIGIBILITY TO PARTICIPATE 2.01 INITIAL ELIGIBILITY TO PARTICIPATE. Subject to the provisions of this Article II, each Employee who was a Participant in the Plan on December 31, 1993 shall be a Participant as of the Effective Date, if he is then employed by a Participating Company. 2.02 SUBSEQUENT ELIGIBILITY TO PARTICIPATE. Each Employee of a Participating Company who is not otherwise a Participant in the Plan on the Effective Date shall become a Participant on the first year anniversary of his date of hire by the Company or any Affiliated Company, if: (a) Such Employee has attained age 21 on or before such date; (b) Such Employee completed at least 365 Days of Service during the 12- consecutive-month period beginning on such date of hire; and (c) Such Employee is employed by a Participating Company on the first year anniversary of such date of hire. If an Employee fails to qualify under the preceding sentence, the Employee shall become a Participant on the first day on which he is employed by a Participating Company, is at least age 21 and has completed at least 365 Days of Service. 2.03 EXCLUSIONS FROM PARTICIPATION. (a) COLLECTIVE BARGAINING EMPLOYEES. An Employee who would otherwise be eligible to participate in the Plan shall not become a Participant if he is covered by a collective bargaining agreement that does not expressly provide for participation in the Plan, provided that the representative of the Employees with whom the collective bargaining agreement is executed has had an opportunity to bargain concerning retirement benefits for such Employees. An Employee who is ineligible to participate in the Plan solely by reason of this paragraph shall become a Participant on the first day after he is no longer covered by such a collective II-1 bargaining agreement on which he completes at least one Day of Service with a Participating Company. (b) NONPARTICIPATING AFFILIATED COMPANIES AND UNITS. An Employee who is otherwise eligible to participate in the Plan but who is employed by a nonparticipating unit of a Participating Company or by an Affiliated Company that is not a Participating Company shall not become a Participant until the date on which he completes at least one Day of Service with a Participating Company. (c) LEAVES OF ABSENCE OR LAYOFFS. An Employee who is otherwise eligible to participate in the Plan but who is then on an approved leave of absence without pay, on layoff or in the service of the armed forces of the United States shall not become a Participant until the date on which he completes at least one Day of Service with a Participating Company, provided that the Employee returns to employment with the Company or an Affiliated Company immediately following such leave of absence or layoff or, in the case of an Employee who is on military leave, during the period in which his reemployment rights are guaranteed by law. (d) NONRESIDENT ALIENS. An Employee who would otherwise be eligible to participate in the Plan shall not become a Participant if he is a nonresident alien who receives no earned income (within the meaning of Section 9ll(d)(2) of the Code) from the Company or any Affiliated Company which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code), until the date on which he receives such earned income from a Participating Company. (e) LEASED EMPLOYEES. An Employee who is a Leased Employee within the meaning of Section 2.05(a) shall be ineligible to participate in the Plan. (f) EXCLUSION AFTER PARTICIPATION. A Participant who becomes ineligible under this Section shall continue to receive credit for Days of Service and Vested Service for purposes of determining vesting under Section 7.01, but during the period of such ineligibility, such Participant's Compensation, Days of Service and Benefit Service shall not be taken into account for purposes of determining his retirement benefits under the Plan. II-2 2.04 PARTICIPATION FOLLOWING A SEVERANCE. (a) SEVERANCE PRIOR TO PARTICIPATION. If an Employee who is eligible to participate under Section 2.02 has a Severance before becoming a Participant and is reemployed by the Company or any Affiliated Company before incurring the number of consecutive One Year Breaks in Service specified in the following sentence he shall become a Participant on the later of the date initially determined under the provisions of Section 2.02, or the date he is entitled to be credited with one or more Days of Service by a Participating Company after reemployment. An Employee who has a Severance before becoming a Participant, and who is reemployed by the Company or any Affiliated Company after incurring a number of consecutive One Year Breaks in Service equal to the greater of five or the aggregate number of years of Benefit Service which he completed before such One Year Breaks in Service, shall be treated as a new Employee for purposes of the Plan and his Days of Service completed prior to such One Year Breaks in Service shall be disregarded for purposes of determining the amount of the Employee's Benefit Service and when the Employee will become a Participant after his reemployment. The aggregate number of years of Benefit Service shall not include any years of Benefit Service with respect to which Days of Service of the Employee are disregarded under this Section by reason of his prior One Year Breaks in Service. (b) SEVERANCE FOLLOWING PARTICIPATION. (1) A Participant who has a Severance and who has a nonforfeitable right to his Normal Retirement Benefit at the time of his Severance shall be eligible for participation immediately upon his reemployment by a Participating Company. (2) A Participant who does not have a nonforfeitable right to his Normal Retirement Benefit upon his Severance and who is reemployed by the Company or any Affiliated Company before incurring the number of consecutive One Year Breaks in Service specified in paragraph (3) shall be II-3 eligible for participation on the date he completes one or more Days of Service with a Participating Company. (3) A Participant who does not have any nonforfeitable right to his Normal Retirement Benefit upon his Severance and who is reemployed by the Company or any Affiliated Company after incurring a number of consecutive One Year Breaks in Service equal to the greater of five or the aggregate number of years of Benefit Service which he completed before such One Year Breaks in Service shall be treated as a new Employee for purposes of the Plan and his Days of Service completed prior to such One Year Breaks in Service shall be disregarded for purposes of determining the amount of the Employee's Benefit Service and when the Employee will become a Participant after his reemployment. The aggregate number of years of Benefit Service shall not include any years of Benefit Service with respect to which Days of Service of the Employee are disregarded under this Section by reason of his prior One Year Breaks in Service. 2.05 LEASED EMPLOYEES. (a) DEFINITIONS. A "Leased Employee" means any person (other than an Employee defined under Section 1.23(a)) who, pursuant to an agreement between the Company or any Affiliated Company ("Recipient") and any other person ("Leasing Organization") has performed services for the Recipient or for the Recipient and "related persons" (determined in accordance with Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least one year and such services are of a type historically performed by employees in the business field of the Recipient. (b) INCLUSION AS EMPLOYEE. A Leased Employee shall be treated as an Employee of the Recipient. However, contributions to or benefits under a Qualified Plan provided by the Leasing Organization which are attributable to the services performed for the Recipient shall be treated as if they had been provided by the Recipient. II-4 (c) EXCEPTION. Subsection (b) shall not apply to any Leased Employee if such employee is covered by a money purchase pension plan sponsored by the Leasing Organization providing (1) A nonintegrated employer contribution rate of at least 10% of compensation, (2) Immediate participation for all employees of the Leasing Organization other than employees who perform substantially all of their services for the Leasing Organization and employees whose compensation from the Leasing Organization in each plan year during the four-year period ending with the plan year is less than $1,000, and (3) Full and immediate vesting, and if all Leased Employees constitute less than 20% of the Recipient's non-highly compensated work force within the meaning of Section 4l4(n)(5)(C)(ii) of the Code. 2.06 PARTICIPATION FREEZE. Notwithstanding any other provision of the Plan to the contrary, any Employee who is not a Participant on October 31, 1994 shall not become a Participant thereafter. II-5 ARTICLE III PARTICIPANT CONTRIBUTIONS 3.01 PARTICIPANT CONTRIBUTIONS PROHIBITED. The Plan shall not accept any Participant contributions that are accounted for separately or any other Participant contributions. III-1 ARTICLE IV PARTICIPATING COMPANY CONTRIBUTIONS 4.01 AMOUNT OF CONTRIBUTION. The Company shall pay to the Trustee for each Plan Year the amount, if any, necessary to provide the benefits under Article V and, if applicable, Article IX with respect to Top-Heavy Plans, as determined by the Enrolled Actuary, subject to the Company's right to amend or terminate the Plan under Articles XII and XIII. Any actuarial gains arising from actual experience under the Plan will be used to reduce future Company contributions and will not be used to increase any benefits payable under the Plan. (All contributions will be made on the condition that they are deductible under Section 404 of the Code.) 4.02 TIME OF PAYMENT. The contributions for a Plan Year to be made by the Company pursuant to this Article IV shall be paid to the Trustee not later than the date permitted under Section 412 of the Code and regulations thereunder for purposes of determining credits to the funding standard account for such Plan Year, unless a waiver of the minimum funding standard for such Plan Year has been obtained by the Company from the Internal Revenue Service. The timing of all contributions shall be entirely discretionary with the Company except that the Company shall make contributions no less frequently than quarterly and/or in lesser amounts than required pursuant to Code Section 412(m). Notwithstanding anything herein to the contrary any required quarterly contribution shall always be conditional upon its deductibility under Section 404 of the Code. IV-1 ARTICLE V RETIREMENT BENEFITS 5.01 SEVERANCE ON OR AFTER NORMAL RETIREMENT AGE. (a) NORMAL RETIREMENT. A Participant who has a Severance upon his attainment of Normal Retirement Age shall be entitled to receive a retirement benefit commencing on his Normal Benefit Commencement Date equal to his Normal Retirement Benefit. The amount of the Participant's Normal Retirement Benefit shall be determined under Section 5.03(a). (b) LATE RETIREMENT. A Participant who remains or again becomes an Employee after his attainment of Normal Retirement Age shall be entitled to receive a retirement benefit commencing on the first day of the month immediately following the date of his Severance. The amount of the Participant's late retirement benefit shall be determined under Section 5.03(e). 5.02 SEVERANCE BEFORE NORMAL RETIREMENT AGE. (a) EARLY RETIREMENT. Subject to the requirements of Section 5.05, if a Participant who has completed at least 10 years of Vested Service has a Severance prior to his attainment of Normal Retirement Age for any reason other than death or Disability, he shall be entitled, upon the later of his Severance or his attainment of Early Retirement Age, to receive a retirement benefit equal to his Accrued Benefit determined as of the date of his Severance and payable on his Normal Benefit Commencement Date. If the Participant elects to begin receiving his retirement benefit as of the first day of any month before he attains Normal Retirement Age, the amount of the benefit shall be equal to the amount determined under Section 5.03(a), reduced as follows: (1) If the Participant elects to receive his retirement benefit commencing on or after the first day of the month next following his sixty-second birthday, then the reduction shall be 0.25% for each full month by which the date of V-1 commencement of such benefit precedes the first day of the month next following his attainment of Normal Retirement Age. (2) If the Participant elects to receive his retirement benefit commencing prior to the first day of the month next following his sixty-second birthday, then the reduction shall be 9.00% plus 0.50% for each full month by which the date of commencement of such benefit precedes the first day of the month next following his sixty-second birthday. Notwithstanding the foregoing, effective with respect to Employees who became Participants after attaining age 60 and before January 1, 1989, if such a Participant elects to begin receiving his retirement benefit at any time prior to the first day of the month next following the fifth anniversary of the date on which he became a Participant the amount of any benefit payable to such Participant that accrued after December 31, 1988 shall be reduced 0.25% for each full month by which the date of commencement of such benefit precedes the first day of the month next following the fifth anniversary of the date on which he became a Participant in the Plan. (b) DEFERRED VESTED BENEFIT. Subject to the requirements of Section 5.05, if a Participant who has a vested interest in his retirement benefit has a Severance prior to his attainment of Normal Retirement Age for any reason other than death or Disability, he shall be entitled upon his Severance to receive a retirement benefit equal to his vested Accrued Benefit determined as of the date of his Severance and payable on his Normal Benefit Commencement Date. 5.03 DETERMINATION OF BENEFIT. (a) NORMAL RETIREMENT BENEFIT. A Participant's Normal Retirement Benefit shall be a monthly retirement benefit, commencing on his Normal Benefit Commencement Date and ending with the last monthly payment specified in Section 5.05, equal to the sum of (1) and (2) as adjusted by (3), below. (1) The amount of the Participant's monthly benefit, if any, accrued under any predecessor plan which has been amended and merged into this Plan V-2 (which shall, in the case of any lump sum benefit provided under a predecessor plan which has been amended and merged into this Plan, be the Actuarial Equivalent of such lump sum benefit). (2) The greatest of: (A) The sum of (i) and (ii) below: (i) The product obtained by multiplying the difference between 2.00% of the Participant's Final Average Earnings and 1.50% of the Participant's Social Security Benefit by the number of the Participant's years (and fractions thereof) of Benefit Service (excluding any Benefit Service after December 31, 1988), and (ii) The sum of (x) and (y) below: (x) The product obtained by multiplying 1.30% of the Participant's Final Average Earnings by the number of the Participant's years (and fractions thereof) of Benefit Service (excluding any Benefit Service before January 1, 1989), and (y) The product obtained by multiplying .55% of the Participant's Excess Final Average Earnings by the number of the Participant's years (and fractions thereof) of Benefit Service (excluding any Benefit Service before January 1, 1989, and excluding any Benefit Service in excess of 35 years minus the number of years and fractions thereof before January 1, 1989); (B) The product of $10.50 multiplied by the number of years (and fractions thereof) of Benefit Service of the Participant; or (C) The amount of the Participant's monthly benefit, if any, accrued under the provisions of this Plan prior to January 1, 1980. V-3 (3) For Plan Years beginning on or after January 1, 1994, the amount of each affected Participant's Accrued Benefit impacted by the $150,000 Compensation limitation shall be governed by the rule that each Section 401(a)(17) Employee's Accrued Benefit under this Plan will be the greater of the Accrued Benefit determined for the Employee under A or B below: (A) The Employee's Accrued Benefit determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the Employee's total years of Benefit Service taken into account under the Plan; or (B) The sum of: (i) The Employee's Accrued Benefit as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Section 1.401(a)(4)-13 of the regulations; and (ii) The Employee's Accrued Benefit determined under the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the Employee's years of Benefit Service credited to the Employee for Plan Years beginning on or after January 1, 1994. A Section 401(a)(17) Employee means an Employee whose current Accrued Benefit as of a date on or after the first day of the first Plan Year beginning on or after January 1, 1994 is based on Compensation for a Plan Year beginning prior to the first day of the first Plan Year beginning on or after January 1, 1994, that exceeded $150,000. Notwithstanding any other provision of the Plan to the contrary, if a collective bargaining agreement which provides for participation in this Plan by covered Employees expressly provides for a different determination of a Participant's monthly retirement benefit under the Plan than that provided in subparagraph (B), such different determination shall be made in lieu of that provided in subparagraph (B). V-4 In the event that, while a Participant is receiving a retirement benefit under the Plan, such Participant also receives a payment or payments pursuant to a workers' compensation, occupational disease or similar law of the United States or of any State thereof, then, to the extent that such workers' compensation, occupational disease or similar benefits have been provided by premiums, taxes or other payments paid by or at the expense of the Company or any Affiliated Company, the monthly retirement benefit payable hereunder to such Participant shall be reduced by the amount of such payment or payments. If a workers' compensation, occupational disease or similar benefit is paid on a lump sum basis, the amount of such lump sum payment shall be deducted from the monthly retirement benefit payable hereunder until the entire amount of such lump sum payment shall have been liquidated. A payment or payments shall be considered to be made under a workers' compensation, occupational disease or similar law without regard to whether such payment or payments are made pursuant to an award or a settlement. Notwithstanding the foregoing, no reduction in a Participant's retirement benefit shall be made pursuant to this paragraph on account of payments specifically allocated for hospitalization, medical or legal expenses In addition notwithstanding the foregoing, this paragraph shall not be applied so as to cause a reduction in any Participant's retirement benefit below the level of benefits to which he would have been entitled had he not been credited with a Day of Service on or after January 1, 1981. For purposes of this paragraph, Social Security Disability Benefits shall not be considered payments pursuant to a workers' compensation occupational disease or similar law. In no event shall a Participant's Normal Retirement Benefit be less than the Minimum Benefit to which the Participant may be entitled under Article IX. For purposes of this Section, "Excess Final Average Earnings" means the excess, if any, of a Participant's Final Average Earnings over the Breakpoint. The "Breakpoint" means, for a Plan Year, the amount obtained by (1) dividing the contribution and benefit base in effect under Section 230 of the Social Security Act V-5 on the first day of such Plan Year by $48,000, (2) multiplying such quotient by $15,700, and (3) rounding such product to the closest $100. The Breakpoint for a Plan Year shall apply to all Participants who retire or otherwise terminate employment during such Plan Year. (b) SPECIAL RETIREMENT INCENTIVE BONUS. (1) SECTION 5.03(B) PERSONS. The provisions of this Section 5.03(b) shall apply with respect to all Participants who are Employees on or after July 1, 1984 and who, taking into account the provisions of this Section 5.03(b), are eligible to have a Severance after attaining Early Retirement Age or Normal Retirement Age provided, however, that the terms of this Section 5.03(b) shall expire as set forth in Section 5.03(b)(4) on October 31, 1989. The persons described by the proceeding sentence are hereinafter referred to as "Section 5.03(b) persons." Notwithstanding any other provision of the Plan to the contrary, effective January 1, 1986, the terms of this Section 5.03(b) shall not apply to Employees who had a Severance prior to January 1, 1986 after attaining Early Retirement Age or Normal Retirement Age and who are rehired by the Company or any Affiliated Company on or after such date. In addition, the terms of this Section 5.03(b) shall be subject to the requirements of Section 5.05. (2) SPECIAL BENEFIT BONUS. The monthly amount of the retirement benefit payable with respect to a Section 5.03(b) person who has a Severance after attaining Early Retirement Age or Normal Retirement Age on or after August 1, 1984 shall be increased over the monthly amount which apart from the provisions of this Section 5.03(b) would be payable with respect to such person under the provisions of Sections 5.03(a), 5.03(c), 5.03(d), 5.03(e) or 9.04, whichever is applicable, by adding to the Section 5.03(b) person's credited Benefit Service and Vested Service (determined as of the date of such person's Severance) a fraction, the numerator of V-6 which is the Section 5.03(b) person's credited Benefit Service accrued as of such date, and the denominator of which is four. In no event, however, shall any Section 5.03(b) person who was granted Vested Service for service with a prior employer receive additional Benefit Service or Vested Service as provided in this Section 5.03(b) for any service performed for such prior employer. For purposes of the preceding sentence, the term "prior employer" means. with respect to any period of service, an employer which was not an Affiliated Company at the time such service was rendered. Notwithstanding any of the foregoing, the increased retirement benefit provided under this Section 5.03(b)(2) shall not apply to any Employee who was on layoff on August 1, 1984 and who thereafter did not return to active employment with the Company or any Affiliated Company. (3) SPECIAL ADJUSTMENT OF EARLY RETIREMENT REDUCTION FACTOR. For each year of Benefit Service or portion thereof granted under this Section 5.03(b), each Section 5.03(b) person shall, for the purposes of calculating the early retirement reduction factor as set forth in Section 5.02(a), be deemed to have attained an age equal to his actual age plus the number of years or fraction thereof of Benefit Service granted under the provisions of Section 5.03(b)(2) above in determining additional Benefit Service and Vesting Service for early or normal retirement as provided by this Section. (4) TERM OF SPECIAL RETIREMENT INCENTIVE BONUS. The special retirement incentive bonus set forth in this Section 5.03(b) shall apply without reduction for Section 5.03(b) persons who have a Severance after attaining Early Retirement Age or Normal Retirement Age between August 1, 1984 and November 1, 1984. For Section 5.03(b) persons with respect to whom such Severance occurs after November 1, 1984, the additional Benefit Service, Vesting Service and years of age otherwise granted by this Section 5.03(b) shall be reduced by 1/60th for each full or V-7 partial calendar month after November 1, 1984 through October 31, 1989, so that a Section 5.03(b) person who retires on or after October 31, 1989 shall be entitled to no additional years of Benefit Service Vested Service or years of age pursuant to the provisions of this Section 5.03(b). (5) SPECIAL RULES. Notwithstanding any other provision of this Section 5.03(b) to the contrary, the special Vested Service, Benefit Service and years of age provided herein shall not be credited to any Participant until his Severance. In addition, such Vested Service, Benefit Service and years of age shall not be taken into account for purposes of any other benefit plan whatsoever of the Company or any Affiliated Company. Furthermore, the provisions of this Section 5.03(b) shall not apply in determining: (A) the amount of a Participant's Final Average Earnings as provided under Section 1.26 of the Plan; and (B) whether an Employee is entitled to accelerated vesting as provided under Section 7.01(d) of the Plan. (c) SPECIAL TERMINATION PROGRAM BONUS. (1) APPLICATION. The provisions of this Section 5.03(c) shall apply to a Participant who elects to receive the increased retirement benefit under one of the special termination bonus programs established from time to time by the Company for a group or classification of Employees that includes the Participant (hereinafter referred to as a "Termination Program"). Such a Participant is described in Section 5.03(c)(2) below and the increased retirement benefit is described in Section 5.03(c)(3). Notwithstanding any other provision of the Plan to the contrary, the terms of this Section 5.03(c) shall be subject to the requirements of Section 5.05. (2) SECTION 5.03(C) PERSONS. To be eligible for the increased retirement benefit established by a Termination Program and described in Section 5.03(c)(3) below a Participant must meet each of the following V-8 requirements (such a Participant is hereinafter referred to as a "Section 5.03(c) person"): (A) The person must be an Employee who, on or after the cut- off date specified with respect to the applicable Termination Program, was on the payroll and was among the group or classification of Employees designated by the Committee as eligible to participate in such Termination Program. Employees who would be on that payroll on or after that date but for an unpaid leave of absence of less than six months as of that date shall also be eligible. (B) The person must voluntarily incur a Severance by executing the specific form provided to the person for that purpose and filing it with the appropriate representative of the Company by the filing date specified with respect to the applicable Termination Program. Persons who transfer to other positions with the Company or an Affiliated Company or successor thereto will not be considered as having incurred a Severance for purposes of this Section 5.03(c). (C) The persons resignation and Severance must not be revoked prior to the applicable filing date. (D) The person's resignation and Severance must be accepted by the Company or the Affiliated Company then employing the person. (E) The person must agree, by executing the Severance form provided, to accept benefits under the applicable Termination Program in lieu of pursuing any claims he may have against the Company or any Affiliated Company arising from his Severance. (F) The person must actually terminate employment with the Company and all Affiliated Companies on the date established pursuant to the applicable Termination Program (which date is hereinafter referred to as the "Scheduled Termination Date"). V-9 (3) INCREASED RETIREMENT BENEFITS. The Accrued Benefit of a Section 5.03(c) person shall be increased by crediting the person with five additional years of Benefit Service and Vested Service and by deeming the person's actual chronological age to be increased by five years. The minimum increase in a covered Participant's Accrued Benefit (before application of the increase in Vested Service) shall be equal to $200 per month payable at Normal Retirement Age in the Participant's normal form of benefit under Section 5.05. The foregoing increases shall be calculated as of the Section 5.03(c) person's Scheduled Termination Date. The increase in age described in this Section 5.03(c) shall be applied without regard to any increase in age to which a Section 5.03(c) person may also be entitled under Section 5.03(b). (4) FINAL AVERAGE EARNINGS. In calculating the Final Average Earnings of a Section 5.03(c) person, the person's Compensation for the Plan Year in which his Scheduled Termination Date occurs shall include the Compensation he would have earned had such Date occurred on the last day of that Plan Year. In addition, a Section 5.03(c) person's annualized Compensation for the period beginning on his Scheduled Termination Date and ending on the last day of the Plan Year including such date shall be taken into account in calculating his Final Average Earnings. (5) BENEFIT SERVICE. A Section 5.03(c) person's Benefit Service shall be calculated in accordance with Section 1.08 but taking into account the period beginning on his attainment of Normal Retirement Age and ending on his Scheduled Termination Date. (6) RETURN TO EMPLOYMENT. If a Section 5.03(c) person again becomes an Employee after his Scheduled Termination Date, his Accrued Benefit under the Plan at any time thereafter shall be the greater of the following: (A) The person's Accrued Benefit calculated without regard to this Section 5.03(c); V-10 (B) The person's Accrued Benefit calculated at his Scheduled Termination Date, taking into account this Section 5.03(c). Notwithstanding the foregoing, if the Section 5.03(c) person again terminates employment before his attainment of Normal Retirement Age, the reductions under Section 5.02 for the early commencement of retirement benefits shall only apply to the portion, if any, of the Section 5.03(c) person's Accrued Benefit which exceeds his Accrued Benefit calculated at his Scheduled Termination Date, taking into account this Section 5.03(c). (7) NONDISCRIMINATORY BENEFITS. Notwithstanding the foregoing provisions of this Section 5.03(c), no Termination Program shall be implemented unless such Termination Program benefits a group or classification of Employees that does not discriminate in favor of highly compensated employees within the meaning of Section 414(q) of the Code. (d) CHANGE OF CONTROL. (1) APPLICATION. The provisions of this Section 5.03(d) shall provide a Participant described in Section 5.03(d)(2) below with the increased retirement benefits described in Section 5.03(d)(4) below. Notwithstanding any other provision of the Plan to the contrary, the terms of this Section 5.03(d) shall be subject to the requirements of Section 5.05. (2) SECTION 5.03(D) PERSONS. To be eligible for the increased retirement benefits described in Section 5.03(d)(4) below, a Participant must meet each of the following requirements (such a Participant is hereinafter referred to as a "Section 5.03(d) person"). (A) The person must be an Employee who, on or after September 9, 1986, is on the payroll and is among the group or classification of Employees designated by the Committee as eligible to receive increased retirement benefits under this Section 5.03(d). Employees V-11 who would be on that payroll on or after that date but for an unpaid leave of absence shall also be eligible. (B) A Change of Control of the Company must occur on or after September 9, 1986. (C) The person must not be receiving or entitled to receive an increased retirement benefit under Section 5.03(c). (3) CHANGE OF CONTROL. A "Change of Control" of the Company shall occur upon the earliest of the following events. (A) Any "person" or "group" is or becomes (other than pursuant to a transaction or agreement approved by the Board prior to the acquisition of such status) the "beneficial" owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities representing 50.00% or more of the combined voting power of the Company's then outstanding securities having ordinary voting power to vote in the election of directors; or (B) During any 12-consecutive-month period commencing before the date this Section 5.03(d) expires (see Section 5.03(d)(8)), individuals who at the beginning of such period constituted the Board, plus any additional individuals who during such period became members of the Board whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least a majority of the members of the Board then still in office who either were members of the Board at the beginning of the period or whose election or nomination for election had been so approved, cease for any reason (other than death, disability or retirement in accordance with existing Company policy) to constitute at least a majority of the members of the Board. V-12 (4) INCREASED RETIREMENT BENEFITS. The Accrued Benefit of a Section 5.03(d) person shall be increased by crediting the person with five additional years of Benefit Service and Vested Service and by deeming the person's actual chronological age to be increased by five years. The foregoing increases shall be calculated as of the date the Change of Control occurs. The increase in age described in this Section shall be applied without regard to any increase in age to which a Section 5.03(d) person may also be entitled under Section 5.03(b). (5) FINAL AVERAGE EARNINGS. In calculating the Final Average Earnings of a Section 5.03(d) person, the person's Compensation for the Plan Year in which the Change of Control occurs shall include the Compensation he would have earned had the Change of Control occurred on the last day of that Plan Year. (6) LIMITATION ON BENEFIT. If, as a result of Section 5.03(d)(4), a Section 5.03(d) person is or would become a "Disqualified Individual" as defined in Section 280G of the Code, or any successor provision thereto, and would be subject to the imposition of an excise tax pursuant to Section 4999 of the Code, or any successor provision thereto, then Section 5.03(d)(4) shall be operative only if and to the extent that the Section 5.03(d) person will not be subject to the imposition of such excise tax. (7) AMENDMENT OF SECTION 5.03(D). This Section 5.03(d) may not be amended in any fashion which has the effect of revoking or eliminating such Section, unless all Section 5.03(d) persons consent in writing to such an amendment. The provisions of this Section 5.03(d) may only be amended by the Board to clarify any ambiguities hereunder or to increase the additional retirement benefits provided hereunder. (8) EXPIRATION OF SECTION. This Section 5.03(d) shall automatically expire at the close of business on September 9, 1991 if, and only if, no Change of Control occurs prior thereto. V-13 (9) NONDISCRIMINATORY BENEFITS. Notwithstanding the foregoing provisions of this Section 5.03(d), the provisions hereof shall not be implemented unless the group or classification of Employees designated by the Committee as eligible to receive increased retirement benefits does not discriminate in favor of highly compensated employees within the meaning of Section 414(q) of the Code. (e) RETIREMENT BENEFIT PAYABLE BY REASON OF RETIREMENT ON A POSTPONED RETIREMENT DATE. Subject to Section 203 of ERISA, if a Participant continues in active employment after his attainment of Normal Retirement Age, the Participant's retirement benefit hereunder shall commence on the first day of the month next following his postponed retirement date and shall be payable as provided in Section 5.05. The amount of the retirement benefit to which a Participant may be entitled upon retirement after his attainment of Normal Retirement Age shall be computed in accordance with the provisions of Section 5.03(a), based however, upon the Participant's Benefit Service and Final Average Earnings as of his postponed retirement date. (f) COORDINATION WITH LIMITATIONS ON CONTRIBUTIONS AND BENEFITS. Notwithstanding any of the foregoing, in no event shall the amount of any benefit determined under this Section exceed the maximum benefit permitted under Section 415 of the Code. 5.04 CODE SECTION 415 LIMITATIONS. (a) GENERAL LIMITATION. Subject to the provisions of subsections (f), (g) and (h), a Participant's Accrued Benefit, when expressed as an Annual Benefit (as hereinafter defined), shall not at any time during a Plan Year exceed the lesser of: (1) the Defined Benefit Dollar Limitation applicable to that Plan Year, or (2) 100% of the Participant's average annual Includable Compensation for his High Three Years (as hereinafter defined). If a Participant's Accrued Benefit in any Plan Year would produce an Annual Benefit in excess of this limitation, the rate of accrual will be reduced so that the Annual Benefit will equal the maximum permitted amount. If V-14 the Participant is, or has ever been, covered under more than one Defined Benefit Plan maintained by the Company or an Affiliated Company, the sum of the Participant's Annual Benefits from all such Defined Benefit Plans may not exceed the limitation provided in this subsection, and the rate of accrual under this Plan will be reduced, if necessary, to meet this limitation. (b) DETERMINATION OF DEFINED BENEFIT DOLLAR LIMITATION. (1) LIMIT BEFORE ADJUSTMENT. The Defined Benefit Dollar Limitation applicable to a Plan Year shall be $90,000, adjusted for years beginning after December 31, 1987 to the amount determined by the Commissioner of Internal Revenue, pursuant to the authority of Section 415(d)(l)(A) of the Code and regulations thereunder, which is made effective as of the first day of the Plan Year. (2) ADJUSTMENT FOR BENEFIT COMMENCEMENT DATE BEFORE SOCIAL SECURITY RETIREMENT AGE. If a Participant's Benefit Commencement Date is prior to the date on which he attains Social Security Retirement Age, the Defined Benefit Dollar Limitation described in paragraph (1) shall, with respect to that Participant, be decreased so that it is the Actuarial Equivalent of an annual benefit of $90,000 (adjusted in the manner described in paragraph (1)) commencing at Social Security Retirement Age. The adjustment provided for in the preceding sentence shall be made in a manner prescribed by the Secretary of the Treasury that is consistent with the reduction under the Social Security Act of old-age insurance benefits commencing before normal retirement age. (3) ADJUSTMENT FOR BENEFIT COMMENCEMENT DATE AFTER SOCIAL SECURITY RETIREMENT AGE. If a Participant's Benefit Commencement Date is after the date on which he attains Social Security Retirement Age, the Defined Benefit Dollar Limitation described in paragraph (1) shall, with respect to that Participant, be increased so that it is the Actuarial Equivalent of an V-15 annual benefit of $90,000 (adjusted in the manner described in paragraph (1)) commencing at Social Security Retirement Age. (4) ADJUSTMENT FOR LESS THAN TEN YEARS OF PARTICIPATION. If a Participant has less than ten years of participation in the Plan, the Defined Benefit Dollar Limitation applicable to the Participant's Accrued Benefit shall be adjusted by multiplying such limitation by a fraction the numerator of which is the number of the Participant's years of participation (or portion thereof), and the denominator of which is ten. For purposes of this paragraph (4), the term "year of participation" shall have such meaning as is set forth in regulations published by the Secretary of the Treasury under Section 415(b) of the Code. (c) DETERMINATION OF A PARTICIPANTS HIGH THREE YEARS. A Participant's High Three Years shall be the three consecutive Plan Years of his employment with the Company or Affiliated Company (or, if he does not have three consecutive Plan Years of such employment, his greatest actual number of consecutive Plan Years of such employment) during which he had the greatest aggregate Includable Compensation. (d) EXPRESSION OF ACCRUED BENEFIT AS AN ANNUAL BENEFIT. (1) The term "Annual Benefit" means a benefit which is payable annually in the form of a straight life annuity with no ancillary benefits, without regard to benefits attributable to either Employee contributions or rollover contributions (as defined in Code Sections 402(a)(5), 403(a)(4) and 408(d)(3)). (2) If a Participant's Accrued Benefit is payable in any form other than an Annual Benefit, the limitation set forth in subsection (a) shall be applied by adjusting the actual form of that Participant's benefit distribution to an Annual Benefit, commencing at the same Benefit Commencement Date as the actual form of his benefit distribution, which is the Actuarial Equivalent of such actual form. V-16 (3) In making the adjustment described in paragraph (2), the following values shall not be taken into account. (A) The value of a Qualified Joint and Survivor Annuity; (B) The value of ancillary benefits that are not directly related to retirement benefits (including, but not limited to, pre-retirement disability and death benefits and post-retirement medical benefits); and (C) The value of benefits provided by the Plan which reflect post-retirement cost of living increases to the extent that such increases are in accordance with Section 415(d) of the Code and Treasury Regulation Section 1.415-5. (e) LIMITATION ON CERTAIN ASSUMPTIONS. (1) For purposes of the adjustments described in subsections (b)(2), (d)(2) and (d)(3), the interest rate assumption shall not be less than the greater of 5% or the rate specified in Section 1.02. (2) For purposes of the adjustment described in subsection (b)(3), the interest rate assumption shall not be greater than the lesser of 5% or the rate specified in Section 1.02. (3) For purposes of the adjustments described in subsections (b)(2), (b)(3), (d)(2) and (d)(3) no adjustments under Section 415(d)(l) of the Code shall be taken into account prior to the year for which such adjustment first takes effect. (f) PERMISSIBLE MINIMUM BENEFIT. Notwithstanding the provisions of subsection (a), but subject to the provisions of subsection (g), a Participant's Accrued Benefit shall be deemed not to exceed the limitations of this Section if (1) the benefits actually paid to him under this Plan and all other Defined Benefit Plans maintained by the Company or any Affiliated Company do not exceed $10,000 in any Plan Year, regardless of the Benefit Commencement Date or the form in which such benefits are paid and (2) he has not at any time participated in a Defined V-17 Contribution Plan maintained by the Company or any Affiliated Company. For purposes of subclause (2), a Participant shall not be deemed to be participating in a separate Defined Contribution Plan maintained by the Company or an Affiliated Company solely by reason of his making Participant contributions to the Plan. (g) REDUCTION FOR LESS THAN TEN YEARS OF BENEFIT SERVICE. If a Participant has less than ten years of Benefit Service at his Benefit Commencement Date, the limitation set forth in subsection (a) with respect to a Participant's average Includable Compensation for his High Three Years and the limitation set forth in subsection (f) shall be reduced by multiplying such limitations by a fraction, the numerator of which is his years of Benefit Service (or portion thereof), and the denominator of which is ten. (h) TRANSITION RULES FOR PRIOR PARTICIPATION. (1) In the case of an individual who was a participant in one or more Defined Benefit Plans maintained by the Company or any Affiliated Company before July 1, 1982, the application of the limitations of this Section shall not cause the maximum permissible benefit for such individual under all such Defined Benefit Plans to be less than the individual's accrued benefit under all such Defined Benefit Plans as of the end of the Limitation Year beginning in 1982 determined without regard to any amendments to such Plans adopted after July 1, 1982, including optional benefit forms. The preceding sentence applies only if all such Defined Benefit Plans met the requirements of Section 415 of the Code, as in effect on July 1, 1982, for all Limitation Years beginning before January 1, 1983. (2) In the case of an individual who was a participant in one or more Defined Benefit Plans maintained by the Company or any Affiliated Company before May 6, 1986, the application of the limitations of this Section shall not cause the maximum permissible benefit for such individual under all such Defined Benefit Plans to be less than the individual's accrued benefit under all such Defined Benefit Plans as of the end of the Limitation Year V-18 beginning in 1986 determined without regard to any amendments to such Plans adopted after May 5 1986, including optional benefit forms. The preceding sentence applies only if all such Defined Benefit Plans met the requirements of Section 415 of the Code, as in effect on May 6 1986, for all Limitation Years beginning before January 1, 1987. (i) AGGREGATE BENEFIT LIMITATION. If the Company or an Affiliated Company maintains, or at any time maintained, one or more Defined Contribution Plans (or, after December 31, 1985, a Welfare Benefit Fund) covering any Participant in this Plan, the sum of the Defined Benefit Fraction (defined in paragraph (1)) and the Defined Contribution Fraction (defined in paragraph (2)) for any Limitation Year shall equal no more than one (1.0). The current Annual Addition under the Defined Contribution Plan(s) will be reduced first, and then the rate of accrual under this Plan will be reduced, if necessary to meet this limitation. (1) "Defined Benefit Fraction" shall mean a fraction, the numerator of which is the Projected Annual Benefit (as defined in paragraph (5)) of the Participant under all Defined Benefit Plans maintained by the Company or any Affiliated Company determined as of the close of the Limitation Year pursuant to Treasury Regulations under Section 415 of the Code, and the denominator of which is the lesser of (A) 140% of the Participant's average Includable Compensation for his High Three Years adjusted in the manner set forth in subsection (g), or (B) 125% of the Defined Benefit Dollar Limitation determined as of the close of the Limitation Year. (2) "Defined Contribution Fraction" shall mean a fraction, the numerator of which is the sum of the Annual Additions (hereinafter defined) to the Employee's Defined Contribution Plan accounts for the applicable Limitation Year and each prior Limitation Year, and the denominator of which is the sum of the lesser of the following products for each Limitation Year in which the Employee was an Employee (regardless of whether a Defined Contribution Plan was in existence for such Plan Year): V-19 (A) the Defined Contribution Dollar Limitation effective for the Limitation Year, multiplied by 125%, or (B) 35% of the Participant's Includable Compensation for such Limitation Year. (3) If the Participant was a participant in one or more Defined Contribution Plans maintained by the Company or an Affiliated Company which were in existence on July 1, 1982, the numerator of the Defined Contribution Fraction will be adjusted if the sum of this fraction and the Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of: (A) the excess of the sum of the fractions over 1.0, times (B) the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of the end of the last Limitation Year beginning before January 1, 1983. This adjustment will also be made if at the end of the last Limitation Year beginning before January 1, 1984, the sum of the fractions exceeds 1.0 because of benefit accruals or annual additions that were made before the limitations of this Section became effective to any Qualified Plans of the Company or an Affiliated Company in existence on July 1, 1982. (4) If the Participant was a participant in one or more Defined Contribution Plans that satisfied the requirements of Section 415 of the Code as of the last Limitation Year beginning before January 1, 1987, an amount shall be subtracted from the numerator of the Defined Contribution Fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the Defined Benefit Fraction and the Defined Contribution Fraction does not exceed 1.0 for such Limitation Year. (5) "Projected Annual Benefit" shall mean the Annual Benefit as defined in subsection (d), to which the Participant would be entitled under the terms of the Plan assuming: V-20 (A) The Participant will continue employment until Normal Retirement Age (or current age, if later); and (B) The Participant's Compensation for the current Limitation Year and all other relevant factors used to determine benefits under the Plan will remain constant for all future Limitation Years. (6) For purposes of this subsection, a master or prototype plan is a Qualified Plan the form of which is the subject of a favorable opinion letter from the Internal Revenue Service. (7) "Annual Addition" shall mean, with respect to a Participant in a Limitation Year, the sum of the following amounts with respect to all Qualified Plans and Welfare Benefit Funds maintained by the Company or any Affiliated Company: (A) The amount of any employer-provided contribution with respect to the Limitation Year which is allocated to the Participant's account; (B) The amount of any forfeitures for the Limitation Year allocated to the Participant's account; (C) The amount of a Participant's voluntary nondeductible contributions for the Limitation Year provided that the Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all voluntary nondeductible contributions as an Annual Addition; (D) The amount allocated, after March 31, 1984, to an individual medical account as defined in Section 415(l)(l) of the Code, which is part of a Defined Benefit Plan maintained by the Company or an Affiliated Company; and (E) The amount 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 Section V-21 419A(d)(3) of the Code), under a Welfare Benefit Fund maintained by the Company or an Affiliated Company. (j) AGGREGATION OF PLANS. For purposes of this Section, all Defined Benefit Plans ever maintained by the Company or an Affiliated Company shall be treated as one Defined Benefit Plan, and all Defined Contribution Plans ever maintained by the Company or an Affiliated Company shall be treated as one Defined Contribution Plan (whether or not any such Qualified Plan was terminated). (k) LIMITATION ON CERTAIN ADJUSTMENTS. In no event shall the adjustments of subsections (b)(4) and (g) above reduce the limitations provided under Sections 415(b)(l) and 415(b)(4) of the Code to an amount less than one-tenth of the applicable limitations as determined without such adjustments. (l) INCORPORATION OF CERTAIN REQUIREMENTS. Notwithstanding any other provision of the Plan to the contrary, the foregoing limitations shall be applied in accordance with requirements of Section 415 of the Code and the Treasury Regulations thereunder, and such Section and regulations are hereby incorporated by reference. 5.05 FORMS OF RETIREMENT BENEFIT. (a) UNMARRIED PARTICIPANT. The normal form of payment of retirement benefits under the Plan for a Participant who is not married on his Benefit Commencement Date shall be a Straight-Life Annuity consisting of equal monthly installments payable on the first day of each month commencing on or immediately following his Benefit Commencement Date and ending with the monthly payment due immediately prior to his death. In the event that an unmarried Participant has a former spouse who pursuant to Section 5.06(b) is treated as a spouse or surviving spouse such Participant shall be deemed to be a married Participant hereunder to the extent required by Section 5.06(b). (b) MARRIED PARTICIPANT. The normal form of payment of benefits under the Plan for a Participant who is married on his Benefit Commencement Date shall be a Qualified Joint and Survivor Annuity, unless an optional form of benefit is selected V-22 pursuant to a Qualified Election as defined in Section 5.06(a) within the 90-day period prior to the date benefits commence. (c) OPTIONAL FORMS OF RETIREMENT BENEFIT. The optional forms of retirement benefit under the Plan, each of which shall be the Actuarial Equivalent of the normal form of benefit under subsection (a) or (b) above, whichever is applicable, shall be the following: (1) A 10-Year Certain and Continuous Annuity, under which monthly benefit payments are made to the Participant during his lifetime, and if the Participant's death occurs before the Participant has received 120 monthly payments, monthly payments shall be continued to his Beneficiary until the Participant and his Beneficiary have received a total of 120 payments. (2) A Contingent Annuitant Annuity, under which monthly benefit payments are made to the Participant during his lifetime and following his death are continued to his Beneficiary, if the Beneficiary survives the Participant. in an amount equal to 50% or 100% (as the Participant shall elect) of the monthly payments to the Participant. If the Participant's Beneficiary dies after the Benefit Commencement Date, the amount of monthly payments to the Participant shall not be increased and shall cease upon his death. For purposes of this optional form of benefit, a Participant may designate only one individual as a Beneficiary. (3) For married Participants, a Straight-Life Annuity, as described in subsection (a). (4) With respect to an Employee who was an active participant in any predecessor plan that was amended and merged into this Plan and who was entitled to receive a lump sum benefit under such predecessor plan, a Lump Sum Option, under which the portion of the Participant's retirement benefit attributable to his participation in such predecessor plan is paid in a single sum payment. V-23 Each optional form of benefit (other than the Lump Sum Option) shall be the Actuarial Equivalent of the Participant's normal form of benefit. The Lump Sum Option shall be the Actuarial Equivalent of the normal form of benefit of the portion of the Participant's retirement benefit attributable to his participation in the applicable predecessor plan. Subject to Section 5.06, a Participant may elect in writing, on a form provided by the Committee, to have his monthly retirement benefit paid in one of the optional forms; provided, however, that the election will be effective only if the Participant is alive on the date benefits are scheduled to commence or a single sum payment is scheduled to be made. The period for making this election shall be for at least 90 days following the furnishing of all applicable information to the Participant by the Committee and ending not earlier than 90 days before his Benefit Commencement Date. Any election made by a Participant under this Section may be revoked in writing during the election period and another election may be made during such period. Notwithstanding the foregoing, the election and revocation of any election must be made in accordance with rules adopted by the Committee which are not inconsistent with regulations issued in accordance with ERISA and the Code. 5.06 SPECIAL ANNUITY PROVISIONS. (a) QUALIFIED ELECTION. For purposes of Section 5.05(b), "Qualified Election" means a waiver of a Qualified Joint and Survivor Annuity which meets the requirements of this subsection. The waiver must be in writing, must be consented to by the Participant's spouse, must designate a Beneficiary (if other than the consenting spouse) and must select an optional form of benefit in accordance with Section 5.05. The spouse's consent to a waiver must be witnessed by a Plan representative or notary public. Notwithstanding this consent requirement, if the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no spouse or the spouse cannot be located, a waiver will be deemed a Qualified Election. Any consent necessary under this provision will be valid only with respect to the spouse who signs the V-24 consent, or in the event of a deemed Qualified Election, the designated spouse. A revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the commencement of benefits. However, a Participant whose spouse has consented to a Qualified Election may not change the optional form of benefits or elect an optional form following his revocation of the Qualified Election without spousal consent unless the Qualified Election expressly acknowledges the spouse's right to limit consent to a single election but expressly permits the Participant to elect optional forms of benefit without any further consent of the spouse. Notwithstanding the foregoing or any other provision of the Plan to the contrary, a Participant may elect to receive his retirement benefit in the form of a Contingent Annuitant Annuity described in Section 5.05(c)(2) without the consent of his spouse, provided his spouse is designated as the Beneficiary under such optional form of benefit. (b) CERTAIN SPOUSES. A former spouse will be treated as the spouse or surviving spouse of a Participant to the extent provided under a qualified domestic relations order as described in Section 414(p) of the Code. (c) NOTICE REQUIREMENTS. In the case of a Qualified Joint and Survivor Annuity, the Committee shall provide each Participant within a reasonable period prior to the commencement of benefits a written explanation of: (1) the terms and conditions of a Qualified Joint and Survivor Annuity, (2) the Participant's right to make and the effect of an election to waive the Qualified Joint and Survivor Annuity form of benefit, (3) the rights of a Participant's spouse, and (4) the right to make, and the effect of, a revocation of a previous election to waive the Qualified Joint and Survivor Annuity. 5.07 RULES GOVERNING DISTRIBUTIONS. (a) COMMENCEMENT OF BENEFITS. Unless the Participant elects otherwise in writing, distribution of benefits will begin no later than the 60th day after the close of the Plan Year in which occurs the later of: V-25 (1) The Participant's attainment of age 65; or (2) The Participant's Severance. Subject to subsection (b), a Participant may elect to have benefits commence at a later date by submitting to the Committee a written request therefor. (b) RESTRICTIONS ON PERIOD OF DISTRIBUTION. Distribution of a Participant's entire benefit will commence not later than April 1 following the calendar year in which the Participant attains age 70- 1/2. Unless the form of distribution is a single sum payment, distributions will be made in non-increasing dollar payments each year over one of the following periods: (1) the life of the Participant, (2) the joint lives of the Participant and his Beneficiary, (3) a period certain not exceeding the life expectancy of the Participant, (4) a period certain not exceeding the joint life expectancy of the Participant and his Beneficiary, or (5) a combination of the foregoing. (c) MINIMUM AMOUNTS TO BE DISTRIBUTED. If the Participant's entire interest in the Plan is to be distributed in a form other than a single sum payment, then the amount to be distributed each year must be at least an amount equal to the quotient obtained by dividing the Participant's entire interest by the life expectancy of the Participant or joint and last survivor expectancy of the Participant and designated Beneficiary. Life expectancy and joint and last survivor expectancy shall be computed by the use of the return multiples contained in Section 1.72-9 of the Treasury Regulations. For purposes of this computation, the life expectancy of the Participant (and the Participant's spouse, if the spouse is the designated Beneficiary) may be recalculated no more frequently than annually. The life expectancy of a Beneficiary other than a spouse may not be recalculated. If the Participant's spouse is not the designated Beneficiary, then the method of distribution selected must assure that at least 50% of the present value of the amount available for distribution is paid within the life expectancy of the Participant. V-26 (d) RESTRICTIONS IN THE EVENT OF DEATH. Upon the death of the Participant, the following distribution provisions shall apply: (1) If the Participant dies after distribution of his interest has commenced, the remaining portion of such interest will continue to be distributed at least as rapidly as under the method of distribution being used prior to the Participant's death. (2) If the Participant dies before distribution of his interest commences, the Participant's entire interest will be distributed no later than 5 years after the Participant's death except to the extent that an election is made to receive distributions in accordance with subparagraph (A) or (B): (A) If any portion of the Participant's interest is payable to a designated Beneficiary distributions may be made in substantially equal installments over the life or life expectancy of the designated Beneficiary commencing no later than one year after the Participant's death. (B) If the designated Beneficiary is the Participant's surviving spouse, the date distributions are required to begin in accordance with subparagraph (A) shall not be earlier than the date in which the Participant would have attained age 70-1/2, and if the spouse dies before payments begin, subsequent distributions shall be made as if the spouse had been the Participant. For purposes of this paragraph, payments will be calculated by use of the return multiples specified in Section 1.72-9 of the Treasury Regulations. Life expectancy of a surviving spouse may be recalculated annually. In the case of any other designated Beneficiary, life expectancy will be calculated at the time payment first commences without further recalculation. (3) For purposes of this subsection, any amount paid to a child of the Participant will be treated as if it had been paid to the surviving spouse if V-27 the amount becomes payable to the surviving spouse when the child reaches the age of majority. (e) DELAYED PAYMENTS. If the amount of a benefit payment required to commence on a date determined under this Section cannot be ascertained by such date, or if it is not possible to make such payment on such date because the Committee has been unable to locate the Participant after making reasonable efforts to do so, a payment retroactive to such date may be made no later than 60 days after the earliest date on which the amount of such payment can be ascertained or the date on which the Participant is located (whichever is applicable). (f) CONSENT TO DISTRIBUTION. If the present value of a Participant's vested Accrued Benefit ever exceeded $3,500, the Committee shall not distribute the Participant's benefit to him unless the Participant and his spouse (in accordance with Section 5.06(a)) consent to such distribution or unless the Participant consents and the distribution is in the form of a Qualified Joint and Survivor Annuity. If the present value of the Participant's vested Accrued Benefit does not exceed $3,500 and payment of benefits has not commenced, the Committee may distribute the benefit as an immediate single sum payment notwithstanding the provisions of Sections 5.05(b). 5.08 RELEVANT INFORMATION. A Participant entitled to receive benefits under a Qualified Joint and Survivor Annuity or any other option providing benefits or contingent benefits to his spouse or other Beneficiary shall certify to the Committee such information as it may reasonably request respecting his spouse or Beneficiary, including (but not limited to) information as to name, address, age, sex, and date of marriage. The Committee shall be entitled to rely upon any certification of a Participant's marital status and shall not be obligated to make inquiry into the legal effect of any actual or purported marriage, marital dissolution, or common-law relationship. 5.09 BENEFITS UPON REEMPLOYMENT. If a Participant receives a benefit and again becomes a Participant, his Accrued Benefit or Normal Retirement Benefit on his subsequent Severance shall be reduced by the Actuarial Equivalent of the payments previously made to him. V-28 5.10 SUSPENSION OF BENEFITS. (a) GENERAL RULE. If a Participant who is receiving periodic retirement benefits from the Plan again becomes an Employee of a Participating Company, his retirement benefit will be suspended for each calendar month during which the Employee completes at least 40 Hours of Service with a Participating Company in Section 203(a)(3)(B) Service. Similarly, a retirement benefit which commences later than Normal Benefit Commencement Date will be computed as if the Employee had been receiving benefits since Normal Benefit Commencement Date and had been reemployed, without actuarial increase for amounts which would have been subject to suspension under the preceding sentence. (b) RESUMPTION OF PAYMENT. If benefit payments have been suspended, payments shall resume no later than the first day of the third calendar month after the calendar month in which the Employee ceases to be employed in Section 203(a)(3)(B) Service. The initial payment upon resumption shall include the payment scheduled to occur in the calendar month when payments resume and any amounts withheld during the period between the cessation of Section 203(a)(3)(B) Service and the resumption of payments. (c) NOTIFICATION. No payment shall be withheld by the Plan pursuant to this Section unless the plan notifies the Employee by personal delivery or first class mail during the first calendar month or payroll period in which the Plan withholds payments that his benefits are suspended. Such notification shall contain a description of the specific reasons why benefit payments are being suspended, a description of the Plan provision relating to the suspension of payments, a copy of such provisions. and a statement to the effect that applicable Department of Labor Regulations may be found in Section 2530.203-3 of the Code of Federal Regulations. In addition, the notice shall inform the Employee of the Plan's procedures for affording a review of the suspension benefits. Requests for such reviews may be considered in accordance with the claims procedure set forth in Section 10.12. (d) AMOUNT SUSPENDED. V-29 (1) LIFE ANNUITY. In the case of benefits payable periodically on a monthly basis for as long as a life (or lives) continues, such as a straight life annuity or a Qualified Joint and Survivor Annuity, the amount suspended under subsection (a) shall be equal to the monthly benefit payment. (2) OTHER BENEFIT FORMS. In the case of a benefit payable in a form other than the form described in paragraph (1) above, the amount suspended under subsection (a) in a calendar month in which the Employee is employed in Section 203(a)(3)(B) Service shall be equal to the lesser of: (A) The amount of benefits which would have been payable to the Employee if he had been receiving monthly benefits under the Plan since actual retirement based on a single life annuity commencing at actual retirement age; or (B) The actual amount paid or scheduled to be paid to the Employee for such month. Payments which are scheduled to be paid less frequently than monthly may be converted to monthly payment for purposes of the foregoing sentence. (e) TOP-HEAVY PLAN MINIMUM BENEFIT. This Section does not apply to the Minimum Benefit to which the Participant is entitled under the Top- Heavy Plan provisions of Article IX. (f) SECTION 203(A)(3)(B) SERVICE. The definition of "Section 203(a)(3)(B) Service" is set forth in Department of Labor Regulation Section 2530.203-3(c) (1). 5.11 PROHIBITION AGAINST REDUCTION OF ACCRUED BENEFIT. Notwithstanding the provisions of Sections 1.35 and 5.02, with respect to individuals who become Participants after attaining age 60 and before January 1, 1989, no change in the Normal Retirement Age under the Plan shall be effective to the extent that it has the effect of decreasing the present value as of December 31. 1988 of such a Participant's Accrued Benefit. 5.12 WITHHOLDING ON PAYMENT OF BENEFITS. All nonperiodic distributions and periodic payments shall be subject to the provisions of Section 10.08, items (i) through (k) hereto, unless pursuant to Code Section 401(a)(31) and Treasury Regulation Section 1.401(a)(31)-1T the V-30 distributee of any eligible rollover distribution elects to have the distribution paid directly to an eligible retirement plan in a direct rollover. Accordingly, in addition to any other required payment restrictions, the Committee shall, not less than 30 days or more than 90 days prior to a distribution, provide the distributee with a notice of his right to have his distribution paid in a direct rollover to an eligible retirement plan and provide the distributee the means to make such election in accordance with the following: (a) If a distribution is one to which Section 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)- 11(c) of the Income Tax Regulations is given, provided that: (i) The Plan administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), (ii) The Participant after receiving the notice, affirmatively elects a distribution, and (iii) The Participant does not have an Eligible Spouse. (b) This provision applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this provision, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution that is at least equal to $500 paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (c) DEFINITIONS. (i) 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 V-31 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 10 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 includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities). (ii) 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. (iii) DISTRIBUTEE: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (iv) DIRECT ROLLOVER: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. V-32 ARTICLE VI DEATH BENEFITS 6.01 SPOUSAL DEATH BENEFIT. The Eligible Spouse of a Participant who has a vested interest in his Normal Retirement Benefit and who dies prior to his Benefit Commencement Date shall receive a Qualified Pre-retirement Survivor Annuity, in an amount determined as follows: (a) DEATH AFTER EARLIEST RETIREMENT AGE. If the Participant dies after attaining Early Retirement Age, the payments to his Eligible Spouse under the Qualified Pre-retirement Survivor Annuity shall be equal to 50% of the payments the Participant would have received under a Straight-Life Annuity determined under Section 5.05(c)(3) had the Participant retired with such an annuity on the day prior to his death. (b) DEATH ON OR BEFORE EARLIEST RETIREMENT AGE. If the Participant dies on or before attaining Early Retirement Age, the payments to his Eligible Spouse under the Qualified Pre-retirement Survivor Annuity shall be equal to 50% of the payments the Participant would have received under a Straight-Life Annuity determined under Section 5.05(c)(3) had the Participant: (1) Experienced a Severance on the date of his death (if he was an Employee on the date of his death); (2) Survived to his Early Retirement Age; (3) Received such an annuity at his Early Retirement Age; and (4) Died on the day after his Early Retirement Age. 6.02 COMMENCEMENT OF BENEFIT. The Eligible Spouse shall begin to receive payments as of the last day of the month in which the Participant would have attained Early Retirement Age unless she elects a later date (in conformity with Sections 5.07(b), (c) and (d), as applicable). VI-1 6.03 CERTAIN SPOUSES. A former spouse will be treated as the spouse or surviving spouse of a Participant to the extent provided under a qualified domestic relations order as described in Section 414(p) of the Code. 6.04 COST OF COVERAGE. The Participant's benefit under the Plan shall not be reduced by the cost of providing the Qualified Pre-retirement Survivor Annuity coverage described in Section 6.01. VI-2 ARTICLE VII VESTING 7.01 VESTED BENEFIT. (a) YEARS OF VESTED SERVICE. Subject to subsections (b), (c) and (d), the interest of each Participant in his Accrued Benefit shall become vested and nonforfeitable in accordance with whichever of the following vesting schedules will provide the Participant with the greatest nonforfeitable percentage of such Accrued Benefit:
NONFORFEITABLE PERCENTAGE OF PARTICIPANT'S YEARS SUM OF PARTICIPANT'S AGE PARTICIPANT'S OF VESTED SERVICE AND VESTED SERVICE ACCRUED BENEFIT --------------------------- ---------------------------- ------------------- Less than 5 0% At least 5 At least 45 50% At least 6 At least 47 60% At least 7 At least 49 70% At least 8 At least 51 80% At least 9 At least 53 90% At least 10 At least 55 100%
NONFORFEITABLE PERCENTAGE OF PARTICIPANT'S YEARS PARTICIPANT'S OF VESTED SERVICE ACCRUED BENEFIT --------------------------- ------------------- Less than 10 0% At least 10 50% At least 11 60% At least 12 70% At least 13 80% At least 14 90% At least 15 100%
VII-1 (b) SPECIAL RULE FOR CERTAIN PARTICIPANTS. Notwithstanding the provisions of subsection (a), but subject to the provisions of subsections (c) and (d), the interest of each Participant who completes at least one Day of Service after December 31, 1988 in his Accrued Benefit shall become vested and nonforfeitable in accordance with the following vesting schedule:
NONFORFEITABLE PERCENTAGE OF PARTICIPANT'S YEARS PARTICIPANT'S OF VESTED SERVICE ACCRUED BENEFIT --------------------------- ------------------- Less than 5 0% At least 5 100%
(c) SPECIAL RULE FOR PREDECESSOR PLANS. Notwithstanding the provisions of subsections (a) and (b), if any portion of a Participant's Accrued Benefit was earned under a predecessor plan which was amended and merged into this Plan, the vested and nonforfeitable interest of such Participant in that portion of his Accrued Benefit on the date of his Severance shall equal the greatest of: (1) the vested and nonforfeitable percentage determined pursuant to subsection (a); (2) the vested and nonforfeitable percentage determined pursuant to subsection (b); or (3) the vested and nonforfeitable percentage determined as if the vesting schedule of such predecessor plan were in effect on the date of such Participant's Severance. (d) ACCELERATED VESTING. An Employees interest in his Accrued Benefit shall become 100% vested and nonforfeitable without regard to his years of Vested Service on his attainment of Normal Retirement Age. 7.02 AGGREGATION OF YEARS OF VESTED SERVICE. (a) VESTED PARTICIPANTS. If a Participant who has a nonforfeitable right to all or a portion of his Accrued Benefit has a Severance and again becomes an Employee, the Participant's years of Vested Service prior to his Severance shall be included in VII-2 determining his vested and nonforfeitable Accrued Benefit after he again becomes an Employee. (b) NONVESTED EMPLOYEES AND PARTICIPANTS. (1) If an Employee or a Participant who does not have any nonforfeitable right to his Accrued Benefit has a Severance and again becomes an Employee before incurring the number of consecutive One Year Breaks in Service specified in paragraph (2), his years of Vested Service prior to his Severance shall be included in determining his vested and nonforfeitable Accrued Benefit after he again becomes an Employee. (2) If an Employee or a Participant who does not have any nonforfeitable right to his Accrued Benefit has a Severance and again becomes an Employee after incurring a number of consecutive One Year Breaks in Service equal to the greater of five or the aggregate number of years of Vested Service which he completed before such One Year Breaks in Service, his years of Vested Service completed prior to his One Year Breaks in Service shall be disregarded for purposes of determining his vested and nonforfeitable Accrued Benefit after he again becomes an Employee. The aggregate number of years of Vested Service shall not include any years of Vested Service disregarded under this Section by reason of a prior period of One Year Breaks in Service. 7.03 UNCLAIMED BENEFITS. If the Committee, acting upon information available to it, cannot locate a person entitled to receive a benefit under the Plan within a reasonable period of time (as determined by the Committee in its discretion) after the benefit becomes payable, and such person has not contacted the Committee or the Trustee concerning the distribution by the end of such period, the amount of the benefit shall be treated as a forfeiture and shall be applied in the manner described in Section 7.04. If, prior to the date final distributions are made from the Trust Fund following termination of the Plan, a person who was entitled to a benefit which has been forfeited pursuant to this Section makes a claim to the Committee or the Trustee for VII-3 such benefit, such person shall be entitled to receive the amount of such benefit as soon as administratively feasible after such claim is received. 7.04 APPLICATION OF FORFEITED AMOUNTS. The amount of a Participant's benefit that is forfeited pursuant to Section 7.03 shall not be applied to increase the benefits of Participants at any time but shall be applied to reduce Participating Company contributions to the Plan. VII-4 ARTICLE VIII DESIGNATION OF BENEFICIARY 8.01 DESIGNATION OF BENEFICIARY. Subject to Section 5.06(a), each Participant shall have the right to designate a Beneficiary or Beneficiaries to receive remaining benefits, if any, payable under the Plan (such as amounts payable under a Certain and Continuous Annuity) upon his death. The designation shall be made on forms prescribed by the Committee and shall be effective upon delivery to the Committee. A Participant shall have the right to change or revoke from time to time any such designation by filing a new designation or notice of revocation with the Committee, but such revised designation or revocation shall be effective only upon receipt by the Committee. 8.02 FAILURE TO DESIGNATE BENEFICIARY. In the event a Participant has not designated a Beneficiary, or in the event no Beneficiary survives a Participant, the distribution of the Participant's remaining benefits, if any, upon his death shall be made: (a) to the Participant's spouse, if living; (b) if his spouse is not then living, to his then issue by right of representation; (c) if neither his spouse nor his issue are then living, to his then living parents; and (d) if none of the above are then living, to his estate. VIII-1 ARTICLE IX TOP-HEAVY PLAN PROVISIONS 9.01 PRIORITY OVER OTHER PLAN PROVISIONS. If the Plan is or becomes a Top-Heavy Plan in any Plan Year beginning after December 31, 1983, the provisions of this Article IX will supersede any conflicting provisions of the Plan. However, the provisions of this Article shall not operate to increase the rights or benefits of Participants under the Plan except to the extent required by Section 416 of the Code and other provisions of law and the Treasury Regulations applicable to "top-heavy plans," as that term is defined in Section 416(g) of the Code, taking into account amendments to Section 416 of the Code and such other provisions of law which are enacted after the Tax Equity and Fiscal Responsibility Act of 1982, as amended. 9.02 DEFINITIONS. (a) KEY EMPLOYEE. A Key Employee is any Employee or former Employee (and the Beneficiaries of such deceased Employee) who at any time during the Determination Period was: (1) an officer of the Company or any Affiliated Company if such individual's Includable Compensation exceeds 1.5 times the Defined Contribution Dollar Limitation; (2) an owner (or considered an owner under Section 318 of the Code) of one of the ten largest interests in the Company or any Affiliated Company, if such individual's Includable Compensation exceeds the Defined Contribution Dollar Limitation; (3) a 5% owner of the Company or any Affiliated Company; or (4) a 1% owner of the Company or any Affiliated Company who has an annual Includable Compensation of more than $150,000. The determination of who is a Key Employee will be made in accordance with Section 416(i) of the Code and the Treasury Regulations thereunder. (b) DETERMINATION PERIOD. The Determination Period is the Plan Year containing the Determination Date and the four preceding Plan Years. (c) TOP-HEAVY PLANS. For any Plan Year beginning after December 31, 1983, the Plan is a Top-Heavy Plan if any of the following conditions exists: IX-1 (1) If the Top-Heavy Ratio for the Plan exceeds 60% and the Plan is not a part of any Required Aggregation Group or Permissive Aggregation Group of Qualified Plans. (2) If the Plan is a part of a Required Aggregation Group but not part of a Permissive Aggregation Group of Qualified Plans and the Top-Heavy Ratio for the Required Aggregation Group exceeds 60%. (3) If the Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of Qualified Plans and the Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%. Solely for the purpose of determining if the Plan or any other Qualified Plan included in a Required Aggregation Group of which this Plan is a part is a Top-Heavy Plan, the Accrued Benefit of a Participant other than a Key Employee shall be determined under (1) the method, if any, that uniformly applies for accrual purposes under all Qualified Plans maintained by the Company or any Affiliated Company, or (2) if there is no such method, as if such benefit accrued not more than rapidly than the slowest accrual rate permitted under the fractional accrual rate provisions of Section 4ll(b)(l)(C) of the Code. (d) TOP-HEAVY RATIO. (1) The Top-Heavy Ratio with respect to the Qualified Plans taken into account under subsection (c)(l), (c)(2), or (c)(3), as applicable, is a fraction, the numerator of which is the sum of the Present Value (as defined in subsection (i)) of accrued benefits and the account balances (as required by Code Section 416) of all Key Employees with respect to such Qualified Plans as of the Determination Date (including any part of any accrued benefit or account balance distributed in the five-year period ending on the Determination Date), and the denominator of which is the sum of the Present Value of the accrued benefits and the required account balances (including any part of any accrued benefit or account balance distributed in the five-year period ending on the Determination Date) of all IX-2 Employees with respect to such Qualified Plans as of the Determination Date. (2) For purposes of paragraph (1), the value of account balances and the Present Value of accrued benefits will be determined as of the most recent Top-Heavy Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided Section 416 and the Treasury Regulations thereunder for the first and second Plan Years of a Defined Benefit Plan. The account balances and accrued benefits of a Participant who is not a Key Employee but who was a Key Employee in a prior year will be disregarded. The calculation of the Top-Heavy Ratio, and the extent to which distributions (including distributions from terminated plans), rollovers, transfer and contributions unpaid as of the Determination Date are taken into account will be made in accordance with the provisions of Section 416(g)(3) and (g)(4) of the Code and the Treasury Regulations thereunder, which are incorporated herein by reference. Deductible employee contributions will not be taken into account for purposes of computing the Top-Heavy Ratio. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. (3) Notwithstanding the foregoing, the account balances and accrued benefits of any Employee who has not performed any services for an employer maintaining any of the aggregated plans during the five-year period ending on the Determination Date shall not be taken into account for purposes of this subsection. (e) REQUIRED AGGREGATION GROUP. A Required Aggregation Group consists of: (1) each Qualified Plan (including simplified employee pension plans) of the Company or any Affiliated Company in which at least one Key Employee participates, and (2) any other Qualified Plan (including simplified employee pension plans) of the IX-3 Company or any Affiliated Company which enables a Qualified Plan described in subclause (1) to meet the requirement of Sections 40l(a)(4) or 410 of the Code. (f) PERMISSIVE AGGREGATION GROUP. A Permissive Aggregation Group consists of the Required Aggregation Group of Qualified Plans plus any other Qualified Plan or Qualified Plans of the Company or any Affiliated Company which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code (including simplified employee pension plans). (g) DETERMINATION DATE. The Determination Date for any Plan Year subsequent to the first Plan Year is the last day of the preceding Plan Year. For the first Plan Year of the Plan, the Determination Date is the last day of the Plan Year. (h) TOP-HEAVY VALUATION DATE. The Top-Heavy Valuation Date is the last day of the Plan Year. Such date shall also be the valuation date used with respect to the Plan when applying the minimum funding standards under Section 412 of the Code. (i) PRESENT VALUE. Present Value means present value based only on the interest and mortality rates specified in the Plan for the calculation of Actuarial Equivalent benefits. 9.03 COMPENSATION TAKEN INTO ACCOUNT. For any Plan Year in which the Plan is a Top-Heavy Plan, the amount of each Participant's Compensation taken into account for purposes of determining benefits under the Plan shall not exceed for Plan Years beginning on or before January 1, 1993 the first $200,000 or for Plan Years beginning on or after January 1, 1994 the first $150,000 (or such larger amount as may be prescribed by the Secretary of the Treasury or his delegate) of such Participant's Includable Compensation for such Plan Year. Notwithstanding the foregoing, no Participant's Accrued Benefit shall be reduced as a result of the application of this Section. 9.04 MINIMUM BENEFIT. (a) CALCULATION OF MINIMUM ACCRUAL AND MINIMUM BENEFIT. Notwithstanding any other provision of the Plan except subsections (b), (c) and (d) below, for any Plan IX-4 Year in which this Plan is a Top-Heavy Plan, each Participant who is not a Key Employee and has completed 1,000 Hours of Service will accrue a benefit (to be provided solely by Participating Company contributions and expressed as a life annuity commencing at Normal Retirement Age) of not less than 2% of his or her average Includable Compensation for the five consecutive Plan Years for which the Participant had the highest Includable Compensation (the "Minimum Accrual"). The Minimum Accrual is determined without regard to any Social Security contribution. The Minimum Accrual applies even though under other Plan provisions the Participant would not otherwise be entitled to receive an accrual, or would have received a lesser accrual for the Plan Year because: (1) the non-Key Employee fails to make mandatory contributions to the Plan; (2) the non-Key Employee's Compensation is less than a stated amount; (3) the non- Key Employee is not employed on the last day of the Plan Year; or (4) the Plan is integrated with Social Security The total benefit provided as a result of a Participant's Minimum Accruals as of any date shall be his "Minimum Benefit." All accruals of employer- derived benefits, whether or not attributable to Plan Years in which the Plan is a Top-Heavy Plan, may be used in computing whether the Minimum Accrual requirement is satisfied. Any Participant who is not a Key Employee shall be a non-Key Employee. (b) LIMITATION ON MINIMUM ACCRUALS. No additional Minimum Accruals shall be provided pursuant to subsection (a) to the extent that the total accruals on behalf of the Participant attributable to Participating Company contributions will provide a benefit expressed as a life annuity commencing at Normal Retirement Age that equals or exceeds 20% of the Participant's highest average Includable Compensation for the five consecutive Plan Years for which the Participant had the highest Includable Compensation. (c) MINIMUM BENEFIT OR ALLOCATION IN OTHER PLAN(S). (1) If the Company or any Affiliated Company maintains one or more Defined Contribution Plans covering Employees who are Participants in this Plan, IX-5 the minimum benefit or allocation requirement applicable to Top-Heavy Plans will be met in such Defined Contribution Plan or Plans unless such Plan or Plans expressly provide that such requirement shall be met in this Plan. (2) If the Company or any Affiliated Company maintains one or more Defined Contribution Plans or Defined Benefit Plans covering Employees who are Participants in this Plan, and paragraph (1) is not applicable, the minimum benefit or allocation requirement applicable to Top-Heavy Plans will be met in this Plan in accordance with subsection (a). (d) MINIMUM BENEFIT IN THIS PLAN. When the Qualified Plans aggregated under Section 9.02(e) or (f) include at least one Defined Contribution Plan and are Top-Heavy Plans but the Top-Heavy Ratio is not greater than 90%, the Top-Heavy Plan requirements set forth in Article IX of this Plan shall apply, except that the Minimum Accrual under subsection (a) shall be 3%, and the limitation under subsection (b) for the Minimum Accruals shall be 30%. When such Top- Heavy Ratio exceeds 90%, the Minimum Accrual shall be as provided in subsection (a) and the overall Minimum Benefit shall be as provided in subsection (b). This subsection shall apply to all Employees who are not Key Employees regardless of whether they are participating in one or more of the Qualified Plans which are aggregated with this Plan, but shall not apply to the extent that subsection (c)(1) is applicable. (e) FORM OF BENEFIT. If the form of benefit provided under the Plan is other than a single life annuity, the Participant must receive a benefit that is the Actuarial Equivalent of the Minimum Benefit If the benefit commences at a date other than at Normal Retirement Age, the Participant must receive at least an amount that is the Actuarial Equivalent of the Minimum Benefit commencing at Normal Retirement Age. (f) NONFORFEITABILITY. The Participant's Minimum Benefit required under this Section, to the extent required to be nonforfeitable under Section 416(b) and the IX-6 special vesting schedule provided in Section 9.05, may not be forfeited under Sections 4l1(a)(3)(B) (relating to suspension of benefits on reemployment) or 4ll(a)(3)(D) (relating to withdrawal of mandatory contributions) of the Code. 9.05 MINIMUM VESTING. (a) APPLICATION. For any Plan Year in which this Plan is a Top-Heavy Plan, the minimum vesting schedule set forth in subsection (b) will automatically apply to the Plan with respect to those Years of Service categories at which it provides a higher vested percentage than the regular vesting schedule set forth in Section 7.01(a). The minimum vesting schedule applies to all Accrued Benefits within the meaning of Section 411(a)(7) of the Code (except those attributable to Participant contributions), including benefits accrued before the effective date of Section 416 of the Code and benefits accrued before the Plan became a Top-Heavy Plan. Further, no reduction in vested benefits may occur in the event the Plan's status as a Top- Heavy Plan changes for any Plan Year and any change in the effective vesting schedule set forth in subsection (b) to the schedule set forth in Section 7.01(a) shall be treated as an amendment subject to Section 13.01(d) However, this Section does not apply to the Accrued Benefits of any Employee who does not have an Hour of Service after the Plan has initially become a Top-Heavy Plan and such Employee's Accrued Benefit attributable to Participating Company contributions will be determined without regard to this Section. (b) VESTING SCHEDULE. The minimum vesting schedule referred to in subsection (a) is 20% vesting after two completed years of Vested Service, and then 20% for each additional year of Vested Service. 9.06 MODIFICATION OF AGGREGATE BENEFIT LIMIT. (a) MODIFICATION. Subject to the provisions of subsection (b), in any Plan Year in which the Top-Heavy Ratio exceeds 60%, the aggregate benefit limitation described in Section 5.04(i) shall be modified by substituting "100%" for "125%" in paragraphs (1) and (2) of Section 5.04(i). IX-7 (b) EXCEPTION. The modification of the aggregate benefit limit described in subsection (a) shall not be required if the Top-Heavy Ratio does not exceed 90% and one of the following conditions is met: (1) Employees who are not Key Employees do not participate in both a Defined Benefit Plan and a Defined Contribution Plan which are in the Required Aggregation Group, and the minimum allocation requirements of Section 416(c)(2) of the Code, as modified by Section 416(h)(2)(A) of the Code, are met in the Defined Contribution Plan; or (2) The minimum allocation requirements of Section 416(c)(2) of the Code are met in the Defined Contribution Plan when such requirements are applied with the substitution of "7-1/2%" in each place that "3%" occurs therein; or (3) The Minimum Accrual requirements of Section 9.04(d) are met in this Plan or any other Defined Benefit Plan maintained by the Company or any Affiliated Company. IX-8 ARTICLE X ADMINISTRATIVE PROCEDURES 10.01 APPOINTMENT OF COMMITTEE MEMBERS. The Board shall appoint a Pension Committee consisting of not less than three members, who shall hold office at the pleasure of the Board. Any member may resign by giving notice, in writing, filed with the Trustee and the Board. 10.02 OFFICERS AND EMPLOYEES OF THE COMMITTEE. The Committee shall choose from its members a Chairman and a Secretary The Chairman may appoint one or more Assistant Secretaries for the Committee who may, but need not be members of the Committee. The Secretary (or an Assistant Secretary) shall keep a record of the Committee's proceedings and all dates, records and documents pertaining to the Committee's administration of the Plan The Committee may employ and suitably compensate such persons or organizations to render advice with respect to the duties of the Committee under the Plan as the Committee determines to be necessary or appropriate. 10.03 ACTION OF THE COMMITTEE. Action of the Committee may be taken with or without a meeting of Committee members, provided, however, that any action shall be taken only upon the vote or other affirmative expression of a majority of the Committee's members qualified to vote with respect to such action. Any member of the Committee may execute a certificate or other written direction on behalf of the Committee In the event the Committee members qualified to vote on any question are unable to determine such question by a majority vote or other affirmative expression of a majority of the Committee members qualified to vote on such question, such question shall be determined by the Board. 10.04 DISQUALIFICATION OF COMMITTEE MEMBER. A member of the Committee who is a Participant shall not vote on any question relating specifically to himself unless he is the sole member of the Committee. X-1 10.05 EXPENSES OF THE COMMITTEE. The expense of the Committee properly and actually incurred in the performance of its duties under the Plan shall be paid from the Trust Fund, unless the Participating Companies in their discretion pay such expenses. 10.06 BONDING AND COMPENSATION. The members of the Committee shall serve without bond, except as may be required by ERISA, and without compensation for their services as Committee members. 10.07 GENERAL POWERS AND DUTIES OF THE COMMITTEE. The Committee shall have full power to administer the Plan and the Trust Agreement and to construe and apply their provisions. For purposes of ERISA, the Committee acting as the agent of the Employer shall be the named fiduciary with respect to the operation and administration of the Plan and the Trust Agreement. In addition, the Committee shall have the powers and authority granted by the terms of the Trust Agreement. The Committee, and all other persons with discretionary control respecting the operation, administration control, and/or management of the Plan, the Trust Agreement, and/or the Trust Fund, shall perform their duties under the Plan and the Trust Agreement solely in the interests of Participants and their Beneficiaries. 10.08 SPECIFIC POWERS AND DUTIES OF THE COMMITTEE. The Committee shall administer the Plan and have all powers necessary to accomplish that purpose, including the following: (a) Resolving all questions relating to the eligibility of Employees to become Participants; (b) Determining the amount of benefits payable to Participants or their Beneficiaries, and determining the time and manner in which such benefits are to be paid; (c) Authorizing and directing all disbursements by the Trustee from the Trust Fund; (d) Engaging any administrative, legal, medical accounting, clerical, or other services it may deem appropriate to effectuate the Plan or the Trust Agreement: (e) Construing and interpreting the Plan and the Trust Agreement and adopting rules for administration of the Plan and the Trust Agreement which are not inconsistent with the terms of such documents; X-2 (f) Compiling and maintaining all records it determines to be necessary, appropriate or convenient in connection with the administration of the Plan and the Trust Agreement; (g) Determining the disposition and distribution of assets in the Trust Fund in the event the Plan is terminated; (h) Reviewing the performance of the Trustee with respect to the Trustee's administrative duties, responsibilities and obligations under the Plan and the Trust Agreement as such administrative duties, responsibilities and obligations are set forth in the Trust Agreement; reporting to the Board regarding such administrative performance of the Trustee; and recommending to the Board, if necessary, the removal of the Trustee and the appointment of a successor Trustee; (i) Acting to withhold, and be liable for, payment of the tax required to be withheld from any benefits paid in accordance with the provisions of this Plan, unless the Participant, Eligible Spouse or other Beneficiary who is payee for such benefits shall elect to have withholding not apply to such payments. Such election shall remain in effect until revoked by the elector. The maximum amount to be withheld shall not exceed the sum of the amount of money and the fair market value of other property (within the meaning of applicable law) received in payment of benefits unless otherwise required by law; (j) (i) Notifying the Participant, Eligible Spouse or other Beneficiary who is payee of any periodic payments, otherwise subject to withholding, of the right to elect not to apply withholding to such payments. Notice shall be given no earlier than six months before, and no later than the date of the first periodic payment subject to withholding. Notice of the right to make and revoke such election shall be given to payees not less frequently than once each calendar year; (ii) Notifying the Participant, Eligible Spouse or other Beneficiary who is payee of any nonperiodic distribution otherwise subject to withholding of the right to elect that withholding shall not apply to such distribution. X-3 Notice shall be given no later than the date of distribution or at such earlier date as may be prescribed by the Secretary of the Treasury; (iii) Notifying the payee of mandatory withholding requirements in effect for years beginning after December 31, 1992 where appropriate statutory rollover requirements have not been met; (k) Directing the payor of authorized disbursements from the Fund to withhold payment of the tax required to be withheld by law. In such case, and if the payor is supplied with such information as required by regulations, then the payor shall be liable for payment of the tax withheld; and (l) Performing such other functions that are delegated to the Committee under the Trust Agreement. 10.09 ALLOCATION OF FIDUCIARY RESPONSIBILITY. The Committee from time to time may allocate to one or more of its members and/or may delegate to any other persons or organizations any of the rights, powers, duties and responsibilities of the Committee with respect to the operation and administration of the Plan and the Trust Agreement that are permitted to be so delegated under ERISA. Any such allocation or delegation shall be made in writing, shall be reviewed periodically by the Committee, and shall be terminable upon such notice as the Committee in its discretion deems reasonable and proper under the circumstances Whenever a person or organization (the "Delegating Party") has the power and authority under the Plan or the Trust Agreement to delegate discretionary power and authority respecting the control, management, operation or administration of the Plan or any portion of the Trust Fund to another person or organization (the "Appointee"), the Delegating Party's responsibility with respect to such delegation is limited to the selection of the Appointee and the periodic review of the Appointee's performance and compliance with applicable law and regulations. Any breach of fiduciary responsibility by the Appointee which is not proximately caused by the Delegating Party's failure to properly select or supervise the Appointee, and in which breach the Delegating Party does not otherwise participate, will not be considered a breach by the Delegating Party. X-4 10.10 INFORMATION TO BE SUBMITTED TO THE COMMITTEE. To enable the Committee to perform its functions the Participating Companies shall supply full and timely information to the Committee on all matters relating to Employees and Participants as the Committee may require, and shall maintain such other records as the Committee may determine are necessary in order to determine the benefits due or which may become due to Participants or their Beneficiaries under the Plan. In addition, the Committee shall make arrangements to obtain from other Affiliated Companies such records and other information with respect to each Employee as are necessary for the Committee to determine benefits hereunder. 10.11 NOTICES, STATEMENTS AND REPORTS. The Company shall be the "administrator" of the Plan as defined in Section 3(16)(A) of ERISA for purposes of the reporting and disclosure requirements imposed by ERISA and the Code. The Committee shall assist the Company, as requested, in complying with such reporting and disclosure requirements. 10.12 CLAIMS PROCEDURE. (a) FILING CLAIM FOR BENEFITS. If an individual (hereinafter referred to as the "Applicant," which reference shall include where appropriate the authorized representative, if any, of the individual) does not receive the timely payment of the benefits which he believes he is entitled to receive under the Plan, he may make a claim for benefits in the manner hereinafter provided. All claims for benefits under the Plan shall be made in writing and shall be signed by the Applicant. Claims shall be submitted to a representative designated by the Committee and hereinafter referred to as the "Claims Coordinator." The Claims Coordinator may, but need not, be an Employee or a member of the Committee. If the Applicant does not furnish sufficient information with the claim for the Claims Coordinator to determine the validity of the claim, the Claims Coordinator shall indicate to the Applicant any additional information which is necessary for the Claims Coordinator to determine the validity of the claim. Each claim hereunder shall be acted on or disapproved by the Claims Coordinator within 90 days following the receipt by the Claims Coordinator of the information necessary to process the claim. X-5 In the event the Claims Coordinator denies a claim for benefits in whole or in part, the Claims Coordinator shall notify the Applicant in writing of the denial of the claim and notify such Applicant of his right to a review of the Claims Coordinator's decision by the Committee. Such notice by the Claims Coordinator shall also set forth, in a manner calculated to be understood by the Applicant, the specific reason for such denial, the specific Plan provisions on which the denial is based, a description of any additional material or information necessary to perfect the claim with an explanation of why such material or information is necessary. and an explanation of the Plan's claim review procedure as set forth in this Section. If no action is taken by the Claims Coordinator on an Applicant's claim within 90 days after receipt by the Claims Coordinator, such application will be deemed to be denied for purposes of the following appeals procedure. (b) APPEALS PROCEDURE. Any Applicant whose claim for benefits is denied in whole or in part (such Applicant hereinafter referred to as the "Claimant") may appeal from such denial to the Committee for a review of the decision by the entire Committee. Such appeal must be made within three months after the denial provided above. An appeal must be submitted in writing within such period and must: (1) Request a review by the entire Committee of the claim for benefits under the Plan; (2) Set forth all of the grounds upon which the Claimant's request for review is based and any facts in support thereof; and (3) Set forth any issues or comments which the Claimant deems pertinent to the appeal. The Committee shall regularly review appeals by Claimants The Committee shall act upon each appeal within 60 days after receipt thereof unless special circumstances require an extension of the time for processing, in which case a decision shall be rendered by the Committee as soon as possible but not later than 120 days after the appeal is received by the Committee. X-6 The Committee shall make a full and fair review of each appeal and any written materials submitted by therewith. The Committee may require the Claimant and/or the Participating Company to submit such additional facts, documents or other evidence as the Committee in its discretion deems necessary or advisable in making its review. The Claimant shall be given the opportunity to review pertinent documents or materials upon submission of a written request to the Committee, provided the Committee finds the requested documents or materials are pertinent to the appeal. On the basis of its review, the Committee shall make an independent determination of the Claimant's eligibility for benefits under the Plan. The decision of the Committee on any claim for benefits shall be final and conclusive upon all parties thereto. In the event the Committee denies an appeal in whole or in part, the Committee shall give written notice of the decision to the Claimant, which notice shall set forth in a manner calculated to be understood by the Claimant the specific reasons for such denial and which shall make specific reference to the pertinent Plan provisions on which the Committee decision was based. (c) REVIEW OF ANNUAL STATEMENT. If a Participant or Beneficiary believes a statement he receives regarding his interest in the Plan s incorrect, such Participant or Beneficiary may submit a written request for correction or verification of such Annual Statement to the Claims Coordinator, and the Claims Coordinator shall respond in writing to such request in the same manner as a claim for benefits by an applicant. If the Participant or Beneficiary believes the Claims Coordinator's response is incorrect, the Participant or Beneficiary may request in writing within 30 days of the response that the entire Committee review such statement, and the Committee shall follow the same procedure with respect to such request as provided above for a Claimant. 10.13 SERVICE OF PROCESS. The Committee may from time to time designate an agent of the Plan for the service of legal process. The Committee shall cause such agent to be identified X-7 in materials it distributes or causes to be distributed when such identification is required under applicable law. In the absence of such a designation, the Company shall be the agent of the Plan for the service of legal process. 10.14 PAYMENT TO MINORS OR PERSONS UNDER LEGAL DISABILITY. If any benefit becomes payable to a minor or to a person under a legal disability, payment of such benefit shall be made only to the conservator or the guardian of the estate of such person appointed by a court of competent jurisdiction or such other person or in such other manner as the Committee determines is necessary to ensure that the payment will legally discharge the Plan's obligation to such person. 10.15 UNIFORM APPLICATION OF RULES AND POLICIES. The Committee in exercising its discretion granted under any of the provisions of the Plan or the Trust Agreement shall do so only in accordance with rules and policies established by it which shall be uniformly applicable to all Participants. 10.16 FUNDING POLICY. The Plan is to be funded through Participating Company contributions and earnings on such contributions, and benefits shall be paid to Participants and Beneficiaries as provided in the Plan. The Board shall determine investment policies from time to time that are consistent with the objectives of the Plan. X-8 ARTICLE XI INVESTMENT OF PLAN ASSETS 11.01 TRUST FUND INVESTMENTS. The investment and reinvestment of Plan assets held in the Trust Fund shall be governed by the terms of the Trust Agreement and the provisions of this Article. 11.02 GENERAL RESPONSIBILITY AND AUTHORITY FOR INVESTMENT OF TRUST ASSETS. (a) THE BOARD. (1) The assets of the Trust Fund shall be invested and reinvested by the Trustee as directed by the Board, unless the Board delegates investment responsibility and authority for all or a portion of the Trust Fund to the Trustee pursuant to the provisions of subsection (b) or to an Investment Manager pursuant to the provisions of subsection (c). (2) All directions by the Board to the Trustee concerning the investment, reinvestment or management of assets of the Trust Fund shall be made, in writing or in such other manner as is acceptable to the Trustee, by the member or members of the Board that have been designated by the Board in writing to the Trustee from time to time. (b) THE TRUSTEE. (1) The Board may by written resolution delegate to the Trustee the responsibility and authority to invest and reinvest the assets of all or any portion of the Trust Fund, provided however that the Trustee accepts such investment responsibility and authority in writing. (2) In the event that the Board delegates investment responsibility and authority to the Trustee, the Investment Advisory Committee shall have the duty and power to review the investment performance of the Trustee at periodic intervals and report to the Board regarding such performance. XI-1 (3) The Board may revoke the delegation of any investment responsibility and authority to the Trustee by written notice to the Trustee of such revocation, and the Trustee may relinquish its investment responsibility and authority to the Board by written notice to the Board. In either event, the investment responsibility and authority that had been delegated to the Trustee shall be restored to the Board, effective upon receipt of such written notice by the Trustee or the Board. (c) INVESTMENT MANAGERS. (1) The Board has the power and authority to appoint one or more Investment Managers. Each Investment Manager so appointed shall have the power and authority to invest, acquire, manage or dispose of the assets of the Trust Fund under its management and control, and to direct the Trustee with respect to the investment and reinvestment of such assets. (2) If the Board elects to delegate investment authority for the assets of all or any portion of the Trust Fund to an Investment Manager pursuant to paragraph (1), the Board shall deliver a written resolution to such effect to the Trustee, which resolution shall specify the portion of the Trust Fund affected. Upon receipt of such resolution, the Trustee will be obligated to follow the investment directions of the Investment Manager with respect to the assets of the specified portion of the Trust Fund until such Investment Manager resigns or is removed or replaced by the Board. The Trustee shall not be a party to any agreement between the Company and an Investment Manager, and shall have no responsibility respecting the terms and conditions of such agreement. (3) In exercising its authority to delegate investment authority to an Investment Manager, the Board has the duty, responsibility and power to: (A) Examine and analyze the performance of prospective Investment Managers; (B) Select an Investment Manager or Managers; XI-2 (C) Determine the portion of the Trust Fund that shall be under the management and control of each Investment Manager; (D) Issue appropriate instructions to the Trustee and to each Investment Manager regarding the allocation of investment authority; (E) Review the performance of each Investment Manager at periodic intervals; and (F) Remove any Investment Manager when the Board deems such removal to be necessary or appropriate. In order to assist the Board in the performance of the aforementioned duties, responsibilities and powers, the Investment Advisory Committee shall have the duty and power to: (i) examine and analyze the performance of prospective Investment Managers and report to the Board regarding such performance; (ii) make recommendations to the Board regarding the selection of an Investment Manager or Managers; (iii) make recommendations to the Board regarding the portion of the Trust Fund that should be under the management and control of each Investment Manager; (iv) make recommendations to the Board regarding the allocation of investment authority between the Trustee and any Investment Manager; (v) review the investment performance of each Investment Manager at periodic intervals and report to the Board regarding such performance; and (vi) make recommendations to the Board regarding the removal of any Investment Manager. (4) All directions by an Investment Manager to the Trustee concerning the investment, reinvestment or management of assets of the Trust Fund shall be made, in writing or in such other manner as is acceptable to the Trustee, by such person or persons as the Investment Manager designates in writing to the Trustee from time to time. (5) An Investment Manager may engage any investment adviser or investment counselor that it deems necessary or appropriate, and may provide for XI-3 directions concerning the investment and reinvestment of the assets of the Trust Fund under its management and control to be made directly to the Trustee by such adviser or counselor as its agent, provided however that the Investment Manager acknowledges in writing to the Trustee that the directions of such agent shall be considered the directions of the Investment Manager and that the Investment Manager shall be responsible for the directions of such agent. (6) If an Investment Manager resigns or is removed by the Board, the Company shall notify the Trustee in writing of such resignation or removal. Upon receipt of such notice, the power and authority to invest and reinvest the assets of the Trust Fund formerly under the control and management of the Investment Manager shall return to the Company unless the Company indicates that a successor Investment Manager has been appointed. (7) Each Investment Manager shall receive for its services reasonable compensation as agreed upon in writing between the Company and the Investment Manager from time to time. (d) FIDUCIARY RESPONSIBILITY. Whenever a person or organization (the "Delegating Party") has the power and authority under the Plan or this Trust Agreement to delegate discretionary power and authority respecting the control, management, operation or administration of the Plan or any portion of the Trust Fund another person or organization (the "Appointee"), the Delegating Party's responsibility with respect to such delegation is limited to the selection of the Appointee and a periodic review of the Appointee's performance and compliance with applicable law or regulations. Any breach of fiduciary responsibility by the Appointee which is not proximately caused by the Delegating Party's failure to properly select or supervise the Appointee, and in which breach the Delegating Party does not otherwise participate, shall not be considered to be a breach of fiduciary responsibility by the Delegating Party. XI-4 11.03 THE TRUST AGREEMENT. Pursuant to written action by the Board, the Company has the exclusive authority to amend, terminate or rescind the Trust Agreement and to enter into a successor Trust Agreement to provide a fund for the Plan. In addition, the Board has the exclusive authority to remove the Trustee and to appoint a successor Trustee upon such terms and conditions as it deems appropriate. 11.04 LOANS PROHIBITED. A Participant may not borrow any amount from the Plan. 11.05 APPOINTMENT OF INVESTMENT ADVISORY COMMITTEE MEMBERS. The Board shall appoint an Investment Advisory Committee consisting of not less than three members, who shall hold office at the pleasure of the Board. Any member may resign by giving notice, in writing, filed with the Trustee and the Board. 11.06 OFFICERS AND EMPLOYEES OF THE INVESTMENT ADVISORY COMMITTEE. The Investment Advisory Committee shall choose from its members a Chairman and shall appoint a Secretary. The Chairman may appoint one or more Assistant Secretaries for the Investment Advisory Committee who may, but need not, be members of such Committee. The Secretary (or an Assistant Secretary) shall keep a record of the Investment Advisory Committee's proceedings and all dates, records and documents pertaining to such Committee's duties and responsibilities under the Plan. The Investment Advisory Committee may employ and suitably compensate such persons or organizations to render advice with respect to the duties of the Investment Advisory Committee under the Plan as such Committee determines to be necessary or appropriate. 11.07 ACTION OF THE INVESTMENT ADVISORY COMMITTEE. Action of the Investment Advisory Committee may be taken with or without a meeting of Investment Advisory Committee members, provided, however, that any action shall be taken only upon the vote or other affirmative expression of a majority of the Investment Advisory Committee's members qualified to vote with respect to such action. Any member of the Investment Advisory Committee may execute a certificate or other written direction on behalf of such Committee. In the event the Investment Advisory Committee members qualified to vote on any question are unable to determine such question by a majority vote or other affirmative expression of a XI-5 majority of the Investment Advisory Committee members qualified to vote on such question, such question shall be determined by the Board. 11.08 DISQUALIFICATION OF INVESTMENT ADVISORY COMMITTEE MEMBER. A member of the Investment Advisory Committee who is a Participant shall not vote on any question relating specifically to himself unless he is the sole member of such Committee. 11.09 EXPENSES OF THE INVESTMENT ADVISORY COMMITTEE. The expense of the Investment Advisory Committee properly and actually incurred in the performance of its duties under the Plan shall be paid from the Trust Fund, unless the Participating Companies in their discretion pay such expenses. 11.10 BONDING AND COMPENSATION. The members of the Investment Advisory Committee shall serve without bond, except as may be required by ERISA, and without compensation for their services as Investment Advisory Committee members. XI-6 ARTICLE XII TERMINATION AND PARTIAL TERMINATION 12.01 CONTINUANCE OF PLAN. The Participating Companies expect to continue this Plan indefinitely, but they do not assume an individual or collective contractual obligation to do so, and the right is reserved to the Company, by action of the Board, to terminate the Plan. In addition, subject to Section 12.04, any Participating Company at any time may discontinue its participation in the Plan with respect to its Employees. 12.02 COMPLETE VESTING. If the Plan is terminated, the Accrued Benefits of all affected Participants at the time of such termination shall become 100% vested and nonforfeitable to the extent funded as of such date without regard to their Years of Service, except as otherwise provided in Treasury Regulation 1.411(a)-4. For purposes of this Section, a Participant who has a Severance and is not again an Employee at the time the Plan is terminated shall not be an affected Participant entitled to full vesting if, after such Severance and before such termination, the Participant incurred five consecutive One Year Breaks in Service or received a distribution of his entire vested interest in the Plan attributable to Participating Company contributions. Notwithstanding any provision of the Plan to the contrary, if the value of a Participant's entire vested interest in the Plan attributable to employer and employee contributions at the time of such Participant's Severance equals $0, the Participant shall be deemed to receive a distribution of that amount upon his Severance. In the event of a partial termination of the Plan, the Accrued Benefits of those Participants who cease to participate on account of the facts and circumstances which result in the partial termination shall become 100% vested and nonforfeitable to the extent funded as of such date without regard to their Years of Service. 12.03 ALLOCATION OF ASSETS. In the event of the termination or partial termination of the Plan, the Trust Fund shall be allocated among the Participants and Beneficiaries in the following order (except that in the event of a partial termination, such allocation shall be with respect to the portion of the Trust Fund as to which such partial termination has occurred): XII-1 (a) First, (1) In the case of the benefit of a Participant or Beneficiary who was receiving payments as of the beginning of the three year period ending on the termination or partial termination date of the Plan, to each such benefit, based on the provisions of the Plan (as in effect during the five year period ending on such date) under which such benefit would be the least. (2) In the case of a Participant's or Beneficiary's benefit (other than a benefit described above) which would have been paid as of the beginning of such three year period if the Participant had retired prior to the beginning of such three year period and if his benefits had commenced (in the normal form of distribution) as of the beginning of such period, to each such benefit based on the provisions of the Plan (as in effect during the five year period ending on such date) under which such benefit would be the least. (b) Second, to all other benefits under the Plan subject to guarantee by the Pension Benefit Guaranty Corporation. (c) Third, to all other nonforfeitable benefits under the Plan not subject to guarantee by the Pension Benefit Guaranty Corporation. (d) Fourth, to all other benefits under the Plan. 12.04 WITHDRAWAL BY PARTICIPATING COMPANY. A Participating Company may withdraw from participation in the Plan only with the approval of the Board. If any Participating Company withdraws from the Plan, a copy of resolutions of the Board of Directors of such Participating Company adopting such action, certified by the secretary of such Board of Directors and reflecting approval by the Board, shall be delivered to the Committee as soon as it is administratively feasible to do so, and the Committee shall communicate such action to the Trustee and to the Employees of the Participating Company. 12.05 PREVENTION OF DISCRIMINATION ON EARLY TERMINATION. (a) RESTRICTED EMPLOYEES. Notwithstanding any provisions of the Plan other than Article IX to the contrary, the benefits provided by Participating Company contributions for Participants who are among the 25 highest paid Employees at the XII-2 time the Plan is established and whose anticipated annual benefit exceeds $1,500 will be restricted as provided in subsection (c) upon the occurrence of any of the conditions described in subsection (b). (b) CONDITIONS FOR RESTRICTION. The restrictions set forth in this Section will apply under any of the following conditions: (1) The Plan is terminated within 10 years after its establishment; (2) The benefits of such highest paid Employee become payable within 10 years after the establishment of the Plan; or (3) If the Plan is not subject to the minimum funding standards of Section 412 of the Code (without regard to Section 412(h)(2)), the benefits of such Employee become payable after the Plan has been in effect for 10 years, and the full current costs of the Plan for the first 10 years have not been funded. (c) EFFECT OF RESTRICTION. Participating Company contributions which may be used for the benefit of an Employee described in subsection (a) shall not exceed the greater of $10,000, or 20% of the first $50,000 of the Employee's Compensation multiplied by the number of years between the date of the establishment of the Plan and: (1) If (b)(l) applies, the date of the termination of the Plan; --------------- (2) If (b)(2) applies, the date the benefits become payable; or --------------- (3) If (b)(3) applies, the date of the failure to meet the full --------------- current costs. (d) AMENDMENT OF PLAN. If the Plan is amended so as to increase the benefit actually payable in event of the subsequent termination of the Plan, or the subsequent discontinuance of contributions thereunder, then the provisions of this Section shall be applied to the Plan as so changed as if it were a new plan established on the date of the change. The original group of 25 Employees (as described in subsection (a)) will continue to have the limitations in subsection (c) apply as if the Plan had not been changed. The restrictions relating to the change of Plan shall apply to benefits or funds for each of the 25 highest paid Employees on the XII-3 effective date of the change except that such restrictions need not apply with respect to any Employee in this group for whom the normal annual pension or annuity provided by Participating Company contributions prior to that date and during the ensuing ten years, based on his rate of Compensation on that date, could not exceed $1,500. The Participating Company contributions which may be used for the benefit of the new group of 25 Employees will be limited to the greatest of: (1) The Participating Company contributions (or funds attributable thereto) which would have been applied to provide the benefits for the Employee if the previous plan had been continued without change; (2) $20,000; or (3) The sum of (A) the Participating Company contributions (or funds attributable thereto) which would have been applied to provide benefits for the Employee under the previous plan if it had been terminated the day before the effective date of change, and (B) an amount computed by multiplying the number of years for which the current costs of the Plan after that date are met by (i) 20% of his annual Compensation, or (ii) $10,000, whichever is smaller. (e) MODIFICATION OF RESTRICTION. Notwithstanding the above limitations, the following limitations will apply if they would result in a greater amount of Participating Company contributions being used for the benefit of the restricted Employee: (1) In the case of a "substantial owner" (as defined in Section 4022(b)(5) of ERISA), a dollar amount which equals the present value of the benefit guaranteed for such Employee under Section 4022 of ERISA, or if the Plan has not terminated, the present value of the benefit that would be guaranteed if the Plan terminated on the date the benefit commences, determined in accordance with regulations of the Pension Benefit Guaranty Corporation; and XII-4 (2) In the case of the other restricted Employees, a dollar amount which equals the present value of the maximum benefit described in Section 4022(b)(3)(B) of ERISA (determined on the earlier of the date the Plan terminates or the date benefits commence, and determined in accordance with regulations of the Pension Benefit Guaranty Corporation) without regard to any other limitations in Section 4022 of ERISA. (f) SPECIAL RULE FOR PLAN TERMINATION. If, as of the date this Plan terminates, the value of Plan assets is not less than The present value of all Accrued Benefits (whether or not nonforfeitable), distributions to each Participant equal to the present value of that Participant's Accrued Benefit will not be discriminatory if the formula for computing benefits as of the date of termination is not discriminatory. For the purpose of this subsection, all present values and the value of Plan assets will be computed using assumptions satisfying Section 4044 of ERISA. (g) SPECIAL RULE FOR SINGLE SUM PAYMENT. Notwithstanding the otherwise applicable restrictions under this Section, a Participant's otherwise restricted benefit may be distributed in full upon depositing with an acceptable depository property having a fair market value equal to 125% of the amount which would be repayable as a distribution in excess of the permitted amount had the plan terminated on the date of the single sum payment. If the market value of the property held by the depository falls below 110% of the amount which would be repayable if the plan were then to terminate, additional property necessary to bring the value of the property held by the depository up to 125% of such amount will be deposited. (h) SPECIAL RULE FOR DISABILITY OR NORMAL RETIREMENT BENEFITS. These conditions shall not restrict the current payment of full disability or retirement benefits called for by the Plan for any retired or disabled restricted Participant if: (1) The Participating Company contributions which may be used for any such Participant in accordance with the restriction contained in subsection(a) are applied either: (A) to provide level amounts of annuity in the normal XII-5 form of benefit provided for under the Plan for such Participant at retirement (or, if he has already retired, beginning immediately), or (B) to provide level amounts of annuity in an optional form of benefit provided under the Plan if the level amount of annuity under such optional form of benefit is not greater than the level amount of annuity under the normal form of benefit provided under the Plan; (2) The annuity thus provided is supplemented to the extent necessary to provide the full retirement benefit in the normal form called for under the Plan by current payments to such Participant as such benefits become due; and (3) Such supplemental payments are made at any time only if the full current costs of the Plan have been met, or the aggregate of such supplemental payments for all such Participants does not exceed the aggregate Participating Company contributions already made under the Plan in the current Plan Year. (i) USE OF EXCESS FUNDING. Excess funding arising from the application of the limitations of this Section upon the benefits of the restricted Participants shall first be applied in a non- discriminatory manner to provide for the Accrued Benefits of nonrestricted Participants. After the satisfaction of the liabilities for Accrued Benefits of such nonrestricted Participants, any remaining excess funding shall be applied to provide for the restricted portion of the Accrued Benefits of restricted Participants in a nondiscriminatory manner. (j) This Section 12.05 is included herein to conform to the requirements of Treasury Regulation Section 1.401-4(c) and shall cease to be effective either at such time as the provisions of Treasury Regulation Section 1.401-4(c) or any substitute therefor are no longer effective or applicable, or at such time as the Internal Revenue Service rules that these provisions are unnecessary to prevent discrimination in favor of Highly Compensated Employees. Accordingly, effective as of the first day XII-6 of the first Plan Year beginning on or after January 1, 1994, the provisions of paragraph (k) shall be applicable. (k) In the event of Plan termination, the benefit of any Highly Compensated Employee (and any highly compensated former Employee) shall be limited to a benefit that is nondiscriminatory under Section 401(a)(4) of the Code. Annual payments to a Participant described in the preceding sentence shall be restricted to an amount equal to the payments that would be made on behalf of the Participant under a single life annuity that is the Actuarial Equivalent of the sum of the Participant's Accrued Benefit and the Participant's other benefits under the Plan. (i) The restrictions set forth in the preceding paragraph shall not apply if: (A) After payment to a Participant described in subsection (ii) of all benefits described in subsection (iii), the value of Plan assets equals or exceeds one hundred ten percent (110%) of the value of current liabilities, as defined in Code Section 412(1)(7); or (B) The value of all benefits described in subsection (iii) for a Participant described in subsection (ii) is less than one percent (1%) of the value of current liabilities. (ii) Participants whose benefits are restricted on distributions shall include all Participants who are Highly Compensated Employees and Highly Compensated former Employees. In any one (1) year the total number of Participants whose benefits are subject to restriction under this Section 12.05(k) shall be a group consisting of the twenty-five (25) Participants who are Highly Compensated Employees or Highly Compensated former Employees whose compensation was the highest. (iii) For the purpose of this Section 12.05(k), the term "benefit" shall include amounts under this Plan attributable to loans in excess of the amount set forth in Code Section 72(p)(2)(A), any periodic income, any withdrawal values payable to a living Participant, and any death benefits not provided for by insurance on the Participant's life. XII-7 (iv) This Section 12.05(k) is included herein to conform to the requirements of Income Tax Regulation Section 1.401(a)(4)- 5(b) and will remain in effect unless the Internal Revenue Service determines that such rules are not necessary to prevent prohibited discrimination that may occur in the event of any early termination of the Plan. (l) Highly Compensated Employee shall mean any Employee who performs services with respect to the Employer during the Plan Year (the "determination year") and who is described in one or more of the following groups applicable with respect to the determination year or the look back year determined pursuant to Treasury Regulation Section 1.414(q)-1T. Accordingly, the Employer hereby elects to make the look back calculation on the basis of the calendar year ending with or within the applicable determination year. Such Employees shall include any Employee who: (i) Was at any time a five percent owner as defined under Code Section 416(i)(1); or (ii) Received Compensation from the Employer in excess of $75,000 (as adjusted pursuant to Code Section 415(d)); or (iii) Received Compensation from the Employer in excess of $50,000 (as adjusted pursuant to Code Section 415(d)) and who was in the Top Paid Group of Employees for such Plan Year or such preceding Plan Year; or (iv) Was at any time an officer and received Compensation greater than 50% of the amount in effect under Code Section 415(b)(1)(A) for such Plan Year or such preceding Plan Year. (v) An Employee not described in paragraphs (i), (ii) or (iii) above for the preceding Plan Year ("look back year") shall not be treated as an Employee described in such paragraphs for the current Plan Year unless such Employee is one of the 100 Employees who receive the most Compensation from the Employer during the current Plan Year. XII-8 (vi) For the purposes of paragraph (iii) above, the term "Top Paid Group" shall mean the top 20% of active Employees ranked on the basis of Compensation received from the Employer during the Plan Year. (vii) For the purposes of paragraph (iv) above, no more than 50 Employees or, if less, the greater of three Employees or 10% of the Employees shall be treated as officers. If for any Plan Year no officer of the Employer is described under paragraph (iv), the highest paid officer of the Employer for such Plan Year shall be treated as described in such paragraph. (viii) If any Employee is a Family Member of a five percent owner or a Highly Compensated Employee in the group consisting of the 10 Highly Compensated Employees paid the greatest Compensation during a Plan Year, then such Employee shall not be considered a separate Employee and any Compensation paid to such Employee (and any contribution made on behalf of such Employee) shall be treated as if it were paid to or on behalf of the five percent owner or Highly Compensated Employee. (ix) A former Employee shall be treated as a Highly Compensated former Employee if such Employee was a Highly Compensated Employee when such Employee separated from Service, or such Employee was a Highly Compensated Employee at any time after attaining age 55. (x) For the purpose of this Section 12.05: (i) The term "Compensation" shall have the meaning given such term by Code Section 415(c)(3) as adjusted and modified by Treasury Regulation Section 1.414(q)-1T. (ii) Employers aggregated under Code Sections 414(b), (c), (m), (n), or (o) shall be treated as a single Employer. (xi) The determination of who is a Highly Compensated Employee, including the determination of the number and identity of the Employees in the Top Paid Group, the top 100 Employees, the number of Employees treated as officers and the Compensation that is considered, will be made in XII-9 accordance with Code Section 414(q) and the regulations thereunder except as specifically provided to the contrary in Code Section 401(a)(17). (m) Non-Highly Compensated Employee shall mean an Employee of the Employer who is neither a Highly Compensated Employee nor a Family Member of a Highly Compensated Employee. (n) Family Member shall mean, with respect to any Employee, such Employee's spouse and lineal ascendants or descendants and spouses of such lineal ascendants or descendants. 12.06 RESIDUAL ASSETS. Except as otherwise provided herein, no part of the Trust Fund shall be recoverable by the Participating Companies from the Trust Fund or from any Participant, Beneficiary, spouse or other person, or be used for or diverted to purposes other than for the exclusive benefit of Participants and their Beneficiaries and spouses, except that any portion of the Trust Fund which remains after the satisfaction of all liabilities to such Participants, Beneficiaries, and spouses determined under the provisions of Sections 12.03 and 12.05 hereof shall, upon termination of the Plan, be distributed to the Participating Companies as directed by the Board. XII-10 ARTICLE XIII AMENDMENT OF THE PLAN 13.01 RIGHT OF COMPANY TO AMEND PLAN. The Company reserves the right to amend the Plan in the manner set forth in Section 13.02 at any time and from time to time to the extent it may deem advisable or appropriate, provided, however, that: (a) No amendment shall increase the duties or liabilities of the Trustee or the Committee without their respective written consent; (b) No amendment shall contravene the provisions of Section 15.01; (c) No amendment (including a change in the actuarial assumptions used for determining Actuarial Equivalents) shall be effective to the extent that it has the effect of decreasing a Participant's Accrued Benefit. Notwithstanding the preceding sentence, a Participant's Accrued Benefit may be reduced to the extent permitted under Section 412(c)(8) of the Code. For purposes of this subsection, an amendment which has the effect of: (1) eliminating or reducing an early retirement benefit or a retirement-type subsidy, or (2) eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment shall be treated as reducing Accrued Benefits. In the case of a retirement-type subsidy, the preceding sentence shall apply only with respect to a Participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy. In general, a retirement- type subsidy is a subsidy that continues after Benefit Commencement Date, but does not include a qualified disability benefit, a medical benefit, a Social Security supplement, a death benefit (including life insurance), or a plant shutdown benefit (that does not continue after Benefit Commencement Date); and (d) No amendment shall have the effect of reducing the percentage of the vested and nonforfeitable interest of any Participant in his Accrued Benefit nor shall the vesting provisions of the Plan be amended unless each Participant with at least five XIII-1 Years of Service (including Years of Service, if any, disregarded pursuant to Article VII) is permitted to elect to continue to have the prior vesting provisions apply to him, within 60 days after the latest of: the date on which the amendment is adopted, the date on which the amendment is effective, or the date on which the Participant is issued written notice of the amendment. 13.02 AMENDMENT PROCEDURE. Any amendment to the Plan shall be made only pursuant to action of the Board. A certified copy of the resolutions adopting any amendment and a copy of the adopted amendment as executed by the Company shall be delivered to the Committee and to the Trustee. Upon such action by the Board, the Plan shall be deemed amended as of the date specified as the effective date by such Board action or in the instrument of amendment. The effective date of any amendment may be before, on or after the date of such Board action. 13.03. EFFECT ON OTHER PARTICIPATING COMPANIES. Unless an amendment expressly provides otherwise, all Participating Companies shall be bound by any amendment adopted pursuant to this Article XIII. XIII-2 ARTICLE XIV ADOPTION OF PLAN BY AFFILIATED COMPANIES 14.01 ADOPTION PROCEDURE. Any Affiliated Company may become a Participating Company under the Plan provided that: (a) The Board approves the adoption of the Plan by the Affiliated Company and designates such Affiliated Company as a Participating Company; (b) The Affiliated Company adopts the Plan together with all amendments then in effect by appropriate resolutions of the Board of Directors of the Affiliated Company; (c) The Affiliated Company adopts the Trust Agreement together with all amendments then in effect by appropriate resolutions of the Board of Directors of the Affiliated Company; and (d) The Affiliated Company by appropriate resolution of its Board of Directors agrees to be bound by any other terms and conditions which may be required by the Board, provided that such terms and conditions are not inconsistent with the purposes of the Plan. 14.02 EFFECT OF ADOPTION BY AFFILIATED COMPANY. An Affiliated Company which adopts the Plan pursuant to Section 14.01 shall be deemed to be a Participating Company for all purposes hereunder, unless otherwise specified in the resolutions of the Board designating the Affiliated Company as a Participating Company. In addition, the Board may provide, in its discretion and by appropriate resolutions, that the Employees of the Affiliated Company shall receive credit for their employment with the Affiliated Company prior to the date it became an Affiliated Company for purposes of determining the eligibility of such Employees to participate in the Plan, the determination of their Accrued Benefits, and the vested and nonforfeitable interest of such Employees as Participants under Article VII, provided, however, that such credit shall be applied in a uniform and nondiscriminatory manner with respect to all such Employees. XIV-1 ARTICLE XV MISCELLANEOUS 15.01 REVERSION PROHIBITED. (a) GENERAL RULE. Except as provided in subsections (b), (c) and (d) below, it shall be impossible for any part of the Trust Fund either (1) to be used for or diverted to purposes other than those which are for the exclusive benefit of Participants and their Beneficiaries (except for the payment of taxes and administrative expenses), or (2) to revert to the Company or any Affiliated Company. (b) DISALLOWED CONTRIBUTIONS. Each contribution of the Participating Companies under the Plan is expressly conditioned upon the deductibility of the contribution under Section 404 of the Code. If all or part of a Participating Company's contribution is disallowed as a deduction under the Code, and the contribution of the disallowed amount was due to a good faith mistake in determining the deductibility of the contribution, then such disallowed amount (reduced by any Trust Fund losses attributable thereto) may be returned to the Participating Company with respect to which the deduction was disallowed within one year after the disallowance upon the adoption of appropriate resolutions by the Board of Directors of the Participating Company. (c) MISTAKEN CONTRIBUTIONS. If a contribution is made by a Participating Company by reason of a mistake of fact which was made in good faith, then so much of the contribution as was made as a result of the mistake (reduced by any Trust Fund losses attributable thereto) may be returned to such Participating Company within one year after the mistaken contribution was made upon the adoption of appropriate resolutions by the Board of Directors of the Participating Company. (d) FAILURE TO QUALIFY. In the event the Internal Revenue Service shall determine that the Plan and the Trust Agreement as amended by amendments acceptable to the Company, initially fail to constitute a qualified plan and trust under the Code, then XV-1 notwithstanding any other provisions of the Plan or the Trust Agreement, the contributions made by the Participating Companies prior to the date of such determination may be returned to the Participating Companies upon adoption of appropriate resolutions by the Board of Directors of each Participating Company. 15.02 BONDING, INSURANCE AND INDEMNITY. (a) BONDING. To the extent required under the ERISA or any other applicable federal or state law of similar import, the Participating Companies shall obtain, pay for and keep current a bond or bonds with respect to each Committee member and each Employee who receives, handles, disburses, or otherwise exercises custody or control of, any of the assets of the Plan. (b) INSURANCE. The Participating Companies, in their discretion, may obtain, pay for and keep current a policy or policies of insurance, insuring the Committee members, the members of the Board of Directors of each Participating Company and other Employees to whom any fiduciary responsibility with respect to the administration of the Plan has been delegated against any and all costs, expenses and liabilities (including attorneys' fees) incurred by such connection with the performance of their duties, responsibilities and obligations under the Plan and any applicable law. (c) INDEMNITY. If the Participating Companies do not obtain, pay for and keep current the type of insurance policy or policies referred to in subsection (b), or if such insurance is provided but any of the parties referred to in subsection (b) incur any costs or expenses which are not covered under such policies, then the Participating Companies shall indemnify and hold harmless, to the extent permitted by law, such parties against any and all costs, expenses and liabilities (including attorneys' fees) incurred by such parties in performing their duties and responsibilities under this Plan, provided that such party or parties were acting in good faith within what was reasonably believed to have been the best interests of the Plan and its Participants. XV-2 15.03 MERGER, CONSOLIDATION OR TRANSFER OF ASSETS. There shall be no merger or consolidation of all or any part of the Plan with, or transfer of the assets or liabilities of all or any part of the Plan to, any other Qualified Plan unless each Participant who remains a Participant hereunder and each Participant who becomes a participant in the other Qualified Plan would receive a benefit immediately after the merger, consolidation or transfer (determined as if the other Qualified Plan and the Plan were then terminated) which is equal to or greater than the benefit they would have been entitled to receive under the Plan immediately before the merger, consolidation or transfer if the Plan had then terminated. 15.04 SPENDTHRIFT CLAUSE. (a) GENERAL RULE. Except as provided in subsection (b), the rights of any Participant or Beneficiary to and in any benefits under the Plan shall not be subject to assignment or alienation, and no Participant or Beneficiary shall have the power to assign, transfer or dispose of such rights, nor shall any such rights to benefits be subject to attachment, execution, garnishment, sequestration, the laws of bankruptcy or any other legal or equitable process. (b) QUALIFIED DOMESTIC RELATIONS ORDER. Subsection (a) shall not apply to a "qualified domestic relations order." A "qualified domestic relations order" means a judgment, decree or order made pursuant to a state domestic relations law which relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child or other dependent of a Participant; creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a Participant under the Plan; and meets the following additional requirements: (1) Such order clearly specifies: (A) The name and the last known mailing address (if any) of the Participant and the name and mailing address of each alternate payee covered by the order. XV-3 (B) The amount or percentage of the Participant's benefits to be paid by the Plan to each such alternate payee, or the manner in which such amount or percentage is to be determined. (C) The number of payments or period to which such order applies. (D) Each plan to which such order applies. (2) Such order does not require: (A) The provision of any type or form of benefit, or any option, not otherwise provided under the Plan. (B) The provision of increased benefits (determined on the basis of actuarial value). (C) The payment of benefits to an alternate payee which are required to be paid to another alternate payee under another order previously determined to be a qualified domestic relations order. 15.05 RIGHTS OF PARTICIPANTS. Participation in the Plan shall not give any Participant the right to be retained in the employ of the Company or Affiliated Company or any right or interest in the Plan or the Trust Fund except as expressly provided herein. 15.06 GENDER, TENSE AND HEADINGS. Whenever any words are used herein in the masculine gender, they shall be construed as though they were also used in the feminine gender in all cases where they would so apply. Whenever any words used herein are in the singular form, they shall be construed as though they were also used in the plural form in all cases where they would so apply. Headings of Articles, Sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan. 15.07 COUNTERPARTS. This Plan and any amendments thereto may be executed in an original and any number of counterparts, each of which shall be deemed to be an original of one and the same instrument. XV-4 15.08 GOVERNING LAW. The Plan shall be construed and governed in all respects in accordance with applicable federal law and, to the extent not preempted by such federal law, in accordance with the laws of the State of California. Executed this 22nd day of December 1994. "Company" WHITTAKER CORPORATION By /s/ Thomas A. Brancati, President ------------------------------------------ By /s/ Richard B. Levin, Chief Financial Officer --------------------------------------------- XV-5 APPENDIX A SPECIAL RULES FOR CERTAIN EMPLOYEES 1. SPECIAL RULE FOR FORMER EMPLOYEES OF CROWN ALUMINUM INDUSTRIES DIVISION. (a) The provisions of this Section shall apply to any Participant who was employed by the Crown Aluminum Industries Division of the Company as of February 17, 1977, if (1) such Participant was a Participant in this Plan as of such date, and (2) as of February 18, 1977 such Participant became an employee of Hunter Douglas, Inc. (or of a related corporation which is a member of a controlled group of corporations including Hunter Douglas, Inc., within the meaning of Section 414 of the Code). (b) In the case of a Participant to whom this Section applies, Days of Service shall accrue with respect to periods of employment by Hunter Douglas, Inc. (or by a related corporation described in subsection (a) above) for the limited purpose of determining such Participant's Vested Service under this Plan. Such Vested Service shall be taken into account for the limited purpose of determining (1) the nonforfeitable percentage of such Participant's Accrued Benefit, (2) such Participant's eligibility to begin receiving early retirement benefits, (3) the entitlement of such Participant's Spouse to a death benefit pursuant to Section 6.01 and (4) whether a break in service and forfeiture of benefits has occurred, all with respect to the Accrued Benefit of such Participant as of February 17, 1977. (c) Days of Service and Vested Service to be recognized pursuant to this Section shall be computed as provided in Sections 1.14 and 1.50, respectively, as though Hunter Douglas, Inc. and the related corporations described in subsection (a) above were Affiliated Companies but not Participating Companies. In computing the Days of Service and Vested Service of any Participant to whom this Section applies (for periods of employment by Hunter Douglas, Inc. and its related corporations described in subsection (a) above), the Committee may, in its discretion A-1 conclusively rely upon information supplied by Hunter Douglas, Inc. and its related corporations, and all Participants and Beneficiaries shall be bound thereby. (d) Notwithstanding any other provision to the contrary in this Plan or in this Section, no individual employed by Hunter Douglas, Inc. or by a corporation related to it shall, by reason of such employment, (1) earn any additional Benefit Service after February 17, 1977, (2) increase his minimum monthly retirement benefit beyond the amount accrued as of February 17, 1977, (3) be eligible for any increased benefits resulting from any amendment to the Plan increasing the level, amount, type or commencement date of benefits (except an amendment expressly so providing) or (4) be otherwise eligible for an increase in his Accrued Benefit determined as of February 17, 1977. (e) If a Participant to whom this Section applies is reemployed by the Company or any Affiliated Company and again becomes eligible to accrue benefits under the Plan, Days of Service and Vested Service recognized under this Section shall not be taken into account for any purpose with respect to benefits accrued during such new period of active participation in this Plan, unless otherwise determined by the Committee. In the case of a Participant to whom this Section applies, for the limited purpose of determining when such Participant's benefits shall be payable, termination of employment with Hunter Douglas, Inc. and its related corporations (as described in subsection (a) above) shall be treated as a Severance. 2. PAST SERVICE RECOGNITION FOR EMPLOYEES COVERED UNDER COLLECTIVE BARGAINING AGREEMENT. Notwithstanding any other provision of the Plan to the contrary, for those Employees who were actively employed by the Company or any Affiliated Company as of January 1, 1981, service with the Company or any Affiliated Company which was performed prior to January 1, 1976 shall not fail to be recognized under the Plan for purposes of determining eligibility to participate or vesting merely because such service was performed by Employees who were covered by a collective bargaining agreement and did not participate in the Plan. A-2 3. SPECIAL PROVISION FOR BERWICK FORGE AND FABRICATING DIVISION EMPLOYEES. This Section shall apply to any Participant who (a) is employed on or after July 1, 1978 by the Berwick Forge and Fabricating Division of the Company, (b) is represented by United Steelworkers of America, Local 8567, and (c) is entitled to receive a retirement benefit under the Plan by reason of the amendment and merger into this Plan of the Pension Plan For Employees Who Are Members Of The Berwick Industrial Workers Union ("Berwick Plan"). In the case of a Participant to whom this Section applies, the amount of the retirement benefit, if any, which the Participant is entitled to receive pursuant to Section 5.03(a) of the Plan with respect to "credited service" which was earned and recognized on or before June 30, 1972 under the Berwick Plan shall be $5.50 per month for each year of such "credited service." For purposes of this Section only, the term "credited service" shall have the meaning ascribed to it under provisions of the Berwick Plan as in effect immediately prior to amendment and merger of the Berwick Plan into this Plan. 4. SPECIAL PROVISION FOR CERTAIN PARTICIPANTS IN THE PLAN AND THE WHITTAR INDUSTRIES, LTD. EMPLOYEES' PENSION PLAN. (a) The following special rules shall apply to certain participants in the Whittar Industries, Ltd. Employees' Pension Plan (the "Whittar Plan"), which was merged into the Plan: (1) Participants in the Whittar Plan who were employees of the Partnership on the Closing Date and immediately thereafter became employees of Metals, the Grant Partnership or the Grant General Partner shall not accrue any additional benefits under the Whittar Plan or this Plan after the Closing Date, unless they become Participants in this Plan. However, the interest of such participants in their accrued benefits under the Whittar Plan as of the Closing Date shall continue to become vested and nonforfeitable in accordance with the terms of this Plan based on such Participants' service with Metals, the Grant Partnership or the Grant General Partner (or any other trade or business that is treated as a single employer with Metals, the A-3 Grant Partnership or the Grant General Partner under Section 414(b), (c) or (m) of the Code) after the Closing Date. (2) Participants in the Whittar Plan who were employees of the Partnership on the Closing Date and immediately thereafter became employees of Whittar (including employees of the Technibilt Business) shall become Participants in their Plan in accordance with Article II and shall accrue benefits under the Plan in accordance with Article V. In no event shall such Participants' Accrued Benefits under the Plan at any time after the Closing Date be less than such Participants' accrued benefits under the Whittar Plan as of the Closing Date. (3) All other participants in the Whittar Plan on the Closing Date shall be entitled to receive payment of their vested accrued benefits under the Whittar Plan in accordance with the terms of this Plan, but shall only become Participants in this Plan if they satisfy the eligibility requirements of Article II. (b) Accrued Benefits which were transferred from the Whittar Plan to this Plan shall be distributable in accordance with the terms of this Plan, except that a participant in the Whittar Plan who became employed by Metals, the Grant Partnership or the Grant General Partner after the Closing Date shall not be considered to have a Severance until the participant separates from service with Metals, the Grant Partnership, the Grant General Partner (or any other trade or business that is treated as a single employer with Metals, the Grant Partnership or the Grant General Partner under Section 414(b), (c) or (m) of the Code), the Company and all Affiliated Companies. (c) Participants in the Plan who were Employees on the Option Closing Date and immediately thereafter became employees of Metals, the Technibilt Partnership or the Technibilt General Partner shall not accrue any additional benefits under this Plan after the Option Closing Date, unless they again become eligible to participate in this Plan in accordance with Article II. However, the interest of such A-4 Participants in their Accrued Benefits shall continue to become vested and nonforfeitable in accordance with the terms of this Plan based on such Participants' service with Metals, the Technibilt Partnership or the Technibilt General Partner (or any other trade or business that is treated as a single employer with Metals, the Technibilt Partnership or the Technibilt General Partner under Section 414(b), (c) or (m) of the Code) after the option Closing Date. (d) For purposes of this Section 4, the following terms shall have the meaning given them in the Master Agreement dated December 12, 1986 by and among Whittar Industries, Ltd., The Arlen Corporation, Arlen Metals Corporation, Whittaker Metals Corporation and Whittaker Corporation: Closing Date; Grant General Partner; Grant Partnership; Metals; Option Closing Date; Technibilt Business; Technibilt General Partner; and Technibilt Partnership. 5. SPECIAL RULES FOR FORMER EMPLOYEES OF CERTAIN DIVISIONS AND SUBSIDIARIES. The provisions of this Section 5 shall apply to Participants who were employed by the following divisions or subsidiaries and who ceased to be Employees in connection with the sale of such divisions or subsidiaries. Such a Participant's service with the specified division or subsidiary began being taken into account under the Plan as of the date indicated in the following schedule. The Participant's subsequent service with the purchaser of the division or subsidiary shall continue to be taken into account under the Plan for purposes of determining the Participant's Days of Service and Vested Service.
Date from which Division or subsidiary Date of sale service is counted ------------------------------ ---------------- ---------------------- Crown Aluminum 06/01/77 01/01/69 Medicus Affiliates 04/15/83 Date of hire Microbiological Assoc. 07/27/84 Date of hire Acrodyne 12/06/84 10/31/78 Toxigenics 02/10/85 Date of hire Trojan Yacht 03/01/85 08/16/54 Bertram Yacht 03/01/85 01/01/70 Balboa Marine 06/30/86 03/01/70
A-5
Date from which Division or subsidiary Date of sale service is counted ------------------------------ ---------------- ---------------------- Kettenburg Marine 06/30/86 12/01/57 Grant Products Non-union 12/12/86 Date of hire Juster Steel 04/26/87 10/01/75 (BU) 07/01/68 (NB) Duall/Wind Plastics 10/29/89 02/01/69 Ram Chemicals 09/29/89 Date of hire Thompson Paint Co. 09/29/89 08/01/88 Ram Chemicals (East) 09/29/89 Date of hire Whittaker Plastics: Doran 10/01/89 Date of hire Anjac 10/01/89 Date of hire
6. SPECIAL RULES FOR RECOGNITION OF SERVICE WITH CERTAIN FORMER EMPLOYERS. This Section 6 shall apply to Participants who formerly were employed by the following entities and who became Employees in connection with the acquisition of such entities by the Company. Such a Participant's prior service with such an entity shall be taken into account under the Plan from the date indicated for purposes of determining the Participant's Days of Service and Vested Service.
Effective date Date from which Entity of coverage service is counted ------------------------------ ---------------- ---------------------- Atech 05/17/85 Date of hire Batavia 07/01/68 07/01/68 Bauer 07/01/68 07/01/68 Colton 07/01/68 Date of hire Corporate 11/01/67 Date of hire Dallas Metals 01/01/69 Date of hire Dayton Chemicals 12/01/68 Date of hire Decatur 07/01/68 07/01/68 Duall/Wind Plastics 02/01/69 02/01/69 Electronic Resources 10/01/69 08/31/52 Haynes 01/01/79 Date of hire Heico 08/10/79 Date of hire Houston Metals 01/01/69 06/01/67
A-6 Lafayette Metals 01/01/69 01/01/69 Norris 01/31/85 Date of hire
A-7
Effective date Date from which Entity of coverage service is counted ---------------------------------- ---------------- ---------------------- North Brunswick: Non-union 02/01/79 Date of hire Bargaining unit 11/03/81 Date of hire Continental Technical Finishes Corporation: Non-union 12/03/86 Date of hire Bargaining unit 12/03/86 12/03/86 Orrville: Non-union 07/01/68 07/01/68 Bargaining unit 10/01/72 10/01/72 Park Chemical Non-union 01/01/89 Date of hire Piedmont 11/08/88 11/08/88 Providence Chemicals Non-union 01/01/79 Date of hire Ram Chemicals 07/01/68 Date of hire Thomson Paint Co. 08/01/88 08/01/88 Ram Chemicals (East) 07/01/68 Date of hire Technibilt Non-union 01/01/82 Date of hire Tulsa Metals 01/01/69 01/01/69 Water Management Systems 03/01/74 Date of hire Whittaker Bioproducts 01/01/70 Date of hire Whittaker Coating Development Lab 07/01/68 Date of hire Whittaker Coatings Research Center 07/01/68 Date of hire Whittaker Controls 11/01/67 Date of hire Whittaker Electronic: Systems 10/01/69 09/30/59 Command, Control (4C's) 01/01/86 Date of hire Lee Telecommunications 06/13/86 Date of hire REL, Inc. 06/09/86 Date of hire Whittaker Ordnance 10/24/80 Date of hire Whittaker Plastics: Doran 08/30/85 Date of hire Anjac 02/01/87 Date of hire Whittaker Power Storage Systems 11/01/67 Date of hire
A-8 Whittaker Yardney Power: Systems Non-union 03/01/70 Date of hire GTE Corp. 06/13/88 Date of hire Winters Industries Non-union 01/01/72 Date of hire Yardney Electric 11/12/69 Date of hire
A-9 CERTIFICATE OF SECRETARY OF WHITTAKER CORPORATION I, RICHARD B. LEVIN, do hereby certify that I am the duly elected and acting Secretary of Whittaker Corporation, a Delaware corporation, that at a special meeting of the Board of Directors of Whittaker Corporation held on December 15, 1995, the following resolutions were adopted, that they have not been modified or rescinded, and that they remain in full force and effect as of the date of this certificate: WHEREAS, Whittaker Corporation (hereafter the "Employer") maintains the Whittaker Corporation Employees' Pension Plan (hereafter, the "Plan") Plan Number 001; and WHEREAS, the Employer may amend the Plan at any time pursuant to Article XIII; and WHEREAS, the Internal Revenue Service as a condition precedent to issuing a favorable determination letter as to the qualified status of the Plan under Section 401(a) of the Internal Revenue Code has requested that certain provisions of the Plan be amended; and WHEREAS, the Board of Directors of the Employer previously authorized the officers of the Employer to perform all appropriate ministerial actions to effect the Plan as a tax-qualified retirement plan; NOW, THEREFORE, the Plan shall be amended effective as of January 1, 1994 or such earlier date required by law as follows: Article XIII, Section 13.01(d) shall be amended in its entirety to read as follows: "No amendment shall have the effect of reducing the percentage of the vested and nonforfeitable interest of any Participant in his Accrued Benefit nor shall the vesting provisions of the Plan be amended unless each participant with at least three Years of Service (including Years of Service, if any, disregarded pursuant to Article VII) is permitted to elect to continue to have the prior vesting provisions apply to him, within 60 days after the latest of: the date on which the amendment is adopted, the date on which the amendment is effective, or the date on which the Participant is issued written notice of the amendment." Article V, Section 5.07 shall be amended to add the following Section 5.07(g) thereto: "(g) Applicable Law. Distributions will be made in accordance with Code Section 401(a)(9) and the Treasury Regulations thereunder including, but not limited to, Treasury Regulations (S)1.401(a)(9)-2." Executed this 15th day of December, at Simi Valley, California. /s/ Richard B. Levin __________________________________________ Richard B. Levin Secretary EX-10.11 6 WHITTAKER PARTNERSHIP PLAN EXHIBIT 10.11 WHITTAKER CORPORATION PARTNERSHIP PLAN AMENDED AND RESTATED EFFECTIVE NOVEMBER 1, 1994 WHITTAKER CORPORATION PARTNERSHIP PLAN TABLE OF CONTENTS
PAGE ARTICLE I -- DESIGNATION OF PLAN AND DEFINITIONS..................................... I--1 1.01 Title..................................................................... I--1 1.02 Definitions............................................................... I--1 ARTICLE II -- SERVICE................................................................ II--1 2.01 Period of Service......................................................... II--1 2.02 Year of Eligibility Service............................................... II--1 2.03 Hours of Service.......................................................... II--2 2.04 Former Employee or Participant............................................ II--3 ARTICLE III -- PARTICIPATION......................................................... III--1 3.01 Eligibility Requirements.................................................. III--1 3.02 Participation Application................................................. III--1 3.03 Participant May Name Beneficiary.......................................... III--2 3.04 Termination of Participation.............................................. III--2 3.05 Termination Date.......................................................... III--3 3.06 Restricted Participation.................................................. III--4 3.07 Eligibility upon Reemployment............................................. III--5 ARTICLE IV -- CONTRIBUTIONS.......................................................... IV--1 4.01 Employer Contributions.................................................... IV--1 4.02 Payment................................................................... IV--3 4.03 Salary Deferral Contributions............................................. IV--3 4.04 Limitations on Contributions for Highly Compensated Employees............. IV--5 4.05 Distribution of Excess Deferrals, Excess Contributions and Excess Aggregate Contributions................................................. IV--13 4.06 Qualified Voluntary Employee Contributions Not Permitted.................. IV--20 4.07 Duties of Funding Agent Regarding Contributions........................... IV--20 4.08 Special Investment Directions............................................. IV--20 4.09 Transfers from Other Qualified Plans...................................... IV--22 4.10 Rollover Contributions.................................................... IV--22 4.11 Segregation of Rollovers.................................................. IV--23
(i) TABLE OF CONTENTS, CONTINUED
PAGE ARTICLE V -- ALLOCATIONS TO PARTICIPANTS' ACCOUNTS................................... V--1 5.01 Individual Accounts....................................................... V--1 5.02 Order of Adjustment to Accounts........................................... V--1 5.03 Evaluation of Accounts.................................................... V--1 5.04 Crediting of Salary Deferral Contributions................................ V--2 5.05 Crediting of Employer Profit Sharing Contributions........................ V--2 5.06 Limitation on Allocations to Participants................................. V--3 5.07 Accounts in General....................................................... V--8 5.08 Interim Evaluation of Accounts............................................ V--8 5.09 Insurance................................................................. V--9 ARTICLE VI -- RIGHT TO BENEFITS...................................................... VI--1 6.01 Vesting of Interest in Salary Deferral, Employer Matching, Rollover and Permanent Accounts..................................................... VI--1 6.02 Vesting of Interest in Employer Profit Sharing Account.................... VI--1 6.03 Fully Vested Benefits..................................................... VI--2 6.04 Partially Vested Benefits................................................. VI--2 6.05 Forfeitures............................................................... VI--3 6.06 Top Heavy Provisions...................................................... VI--4 6.07 Persons under Legal or Other Disability................................... VI--6 6.08 Missing Participants or Beneficiaries..................................... VI--6 6.09 Lien for Debts to Fund.................................................... VI--7 6.10 Loans to Participants..................................................... VI--7 6.11 Withdrawals prior to Termination of Employment............................ VI--11 6.12 Nature of Participants' Interest.......................................... VI--13 6.13 Suspension of Benefits and Immediate Participation upon Reemployment...... VI--14 6.14 Application for Benefits.................................................. VI--14 6.15 Appeals Procedure......................................................... VI--14 6.16 Application for Correction of Annual Statement............................ VI--15 ARTICLE VII -- DISTRIBUTION OF BENEFITS.............................................. VII--1 7.01 Methods of Making Distributions........................................... VII--1 7.02 Involuntary Cash-Out of Vested Participant Accounts....................... VII--3 7.03 Voluntary Cash-Out of Vested Participant Accounts......................... VII--3 7.04 Withholding on Distributions.............................................. VII--3
(ii) TABLE OF CONTENTS, CONTINUED
PAGE ARTICLE VIII -- THE COMMITTEE........................................................ VIII--1 8.01 Committee................................................................. VIII--1 8.02 Committee Action.......................................................... VIII--1 8.03 Rights and Duties......................................................... VIII--2 8.04 Funding Policy and Method................................................. VIII--5 8.05 Transmittal of Information................................................ VIII--5 8.06 Compensation.............................................................. VIII--5 8.07 Retention of Advisors..................................................... VIII--6 8.08 Allocation and Delegation of Fiduciary Responsibilities................... VIII--6 8.09 Indemnification........................................................... VIII--7 8.10 Determinations and Corrections............................................ VIII--7 8.11 Designation of Agents..................................................... VIII--7 8.12 Relationship of Fiduciaries............................................... VIII--7 8.13 Discharge of Duties by Fiduciaries........................................ VIII--8 8.14 Multiple Fiduciary Capacities............................................. VIII--9 ARTICLE IX -- AMENDMENT AND TERMINATION.............................................. IX--1 9.01 Amendment by Employer..................................................... IX--1 9.02 Retroactive Amendments.................................................... IX--2 9.03 Discontinuance or Termination of Plan..................................... IX--2 9.04 Partial Termination of Plan............................................... IX--3 9.05 Failure to Contribute..................................................... IX--4 9.06 Merger and Consolidation of Plan.......................................... IX--4 9.07 Substitution of Successor Employer........................................ IX--4 9.08 Distribution upon Sale.................................................... IX--4 ARTICLE X -- SPECIAL PROVISIONS FOR CERTAIN FORMER PARTICIPANTS IN WHITTAR INDUSTRIES, LTD. SAVINGS PLAN AS AMENDED (401(K)).................................. X--1 10.01 Applicability............................................................ X--1 10.02 Participant Transfer Contributions....................................... X--1 ARTICLE XI -- MISCELLANEOUS.......................................................... XI--1 11.01 Contributions Not Recoverable............................................ XI--1 11.02 Employment Rights........................................................ XI--2 11.03 Receipt or Release....................................................... XI--3 11.04 Alienation............................................................... XI--3 11.05 Controlling Law.......................................................... XI--3 11.06 Text Prevails over Captions.............................................. XI--4 11.07 Counterparts............................................................. XI--4 11.08 Successors and Assigns................................................... XI--4
(iii) TABLE OF CONTENTS, CONTINUED
PAGE ARTICLE XII -- PARTICIPATING EMPLOYERS............................................... XII--1 12.01 Adoption by Affiliated Employers......................................... XII--1 12.02 Requirements of Participating Employers.................................. XII--1 12.03 Designation of the Employer as Agent..................................... XII--1 12.04 Employee Transfers....................................................... XII--2 12.05 Participating Employer Contributions..................................... XII--2 12.06 Amendment................................................................ XII--2 12.07 Participating Employer Discontinuance.................................... XII--2 12.08 Committee Authority...................................................... XII--3
(v) WHITTAKER CORPORATION PARTNERSHIP PLAN This Plan is made and entered into by Whittaker Corporation, a corporation organized and existing under the laws of the State of Delaware, with its - principal place of business located at Los Angeles, California. RECITALS 1. Whittaker Corporation feels the need to continue to encourage Employees to contribute to the growth and profitability of the Company. 2. Whittaker Corporation has decided to continue to afford its Employees the opportunity to share in the rewards of continued long and faithful service. 3. By execution of this instrument, the Employer desires to amend and restate as of November 1, 1994, the administrative provisions of the Whittaker Corporation Partnership Plan, and as of January 1, 1989 or such earlier date as required by law, those regulatory provisions necessary to comply with the applicable provisions of the Employee Retirement Income Security Act of 1974 (Public Law 93-406), as amended, and to continue to qualify the Plan as a profit sharing plan under Sections 401(a) and (k) of the Internal Revenue Code of 1986, as amended. OPERATIVE PROVISIONS NOW, THEREFORE, effective November 1, 1994, or such earlier date as required by law the Whittaker Corporation Partnership Plan, first promulgated and established, effective February 16, 1968, is restated and as so promulgated and restated, continues to constitute a profit sharing plan for 1 the Employer. Under no circumstances may a salary reduction agreement or other deferral mechanism pursuant to this Plan be adopted retroactively. 1 ARTICLE I DESIGNATION OF PLAN AND DEFINITIONS 1.01 TITLE. This profit sharing plan shall be known as the "Whittaker Corporation Partnership Plan." 1.02 DEFINITIONS. Whenever used herein, the following terms shall have the meanings set forth below, unless a different meaning is clearly required by the context: (a) "Adjustment Factor" shall mean the cost of living adjustment factor prescribed by the Secretary of the Treasury under Section 415(d) of the Code for years beginning after December 31, 1987, as applied to such items and in such manner as the Secretary shall provide. (b) "Affiliated Employer" shall mean the Employer and any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Section 414(m) of the Code) which includes the Employer; any "leasing organization" (as defined in Section 414(n) of the Code) to the extent its employees constitute "leased employees" (within the meaning of Code Section 414(n)) with respect to a Participating Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. (c) "Anniversary Date" shall mean the last day of each Plan Year which ends on or after the Effective Date. Such date shall be the valuation date for determining Top Heavy status for the I-1 succeeding Plan Year, except that the last day of the first Plan Year shall function as the determination date for the first Plan Year. (d) "Annual Addition" shall mean, in the case of any Employee, when used with respect to the Plan or a Related Plan, the sum for any Plan Year of (i) the amount of contributions made by the Employer (or by an Affiliated Employer maintaining a Related Plan), including any Salary Deferral Contributions, for the Employee's benefit under the Plan (or a Related Plan); (ii) the Employee Contributions for such Year under such Plan (or the Related Plan); (iii) forfeitures, if any, allocated to the Employee's Account for such Year under the Plan (or the Related Plan); (iv) excess contributions and excess aggregate contributions, as defined under Section 4.05(a), for such year which are distributed in accordance with Section 4.05(c); and (v) contributions allocated on the Employee's behalf to any individual medical account as defined in Section 415(l)(2) of the Code which is part of a pension or annuity plan or which are attributable to post- retirement medical benefits under a welfare benefit fund as defined in Section 419(e) of the Code. A restored forfeiture pursuant to Section 6.04, a transfer from another qualified pension plan pursuant to Section 4.09, and a rollover contribution pursuant to Section 4.10 shall not be counted as part of any Participant's "annual addition". Notwithstanding the foregoing, the Annual Addition for any Limitation Year starting prior to January 1, 1987 shall not be recomputed to count all Employee voluntary contributions as Annual Additions. I-2 (e) "Beneficiary" or "Beneficiaries" shall mean the person or persons last designated by a Participant in accordance with Section 3.03 to receive the benefits specified hereunder in the event of the Participant's death. A designation of Beneficiary other than the spouse shall be automatically revoked on the marriage or remarriage (other than a common-law marriage) of a Participant. The designation of the spouse as Beneficiary shall be automatically revoked upon any finalized divorce of a Participant subsequent to the date of filing of the designation of the Beneficiary. If a Participant fails to designate a Beneficiary before his death, or if no designated Beneficiary survives the Participant, the Committee shall direct the Funding Agent to pay any benefits payable to a Beneficiary of such Participant pursuant to the provisions of this Plan to the Participant's spouse if such spouse survives the Participant or, if no spouse survives or exists, then the duly appointed and currently acting personal representative of the Participant's estate. If there is no personal representative of the Participant's estate duly appointed and acting in that capacity within sixty (60) days after the Participant's death, then Beneficiary or Beneficiaries shall mean the person or persons who can verify by affidavit or Court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder pursuant to the laws of intestate succession or other statutory provision in effect at the Participant's death in the state in which the Participant resided. In the event any amount is payable under the Plan to a minor, payment shall not be made to the minor, but instead shall be paid to that person's then living parent(s) to act as custodian or, if no parent of that person is then living, to a custodian I-3 selected by the Committee to hold the funds for the minor under the Uniform Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within sixty (60) days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor. In the event any amount is payable under the Plan to a person for whom a conservator has been legally appointed, the payment shall be distributed to the duly appointed and currently acting conservator, without any duty on the part of the Committee to supervise or inquire into the application of any amounts so paid. (f) "Board of Directors" or "Board" shall mean the Board of Directors of the Employer or its successor in interest resulting from merger, consolidation or transfer of substantially all assets, which expressly agrees in writing to continue the Plan as its own. (g) "Break in Employment" shall mean the separation from Service where an Employee completes less than 1 day of Service during a twelve (12) month period with the Employer, all Affiliated Employers or any Predecessor Employer as a result of resignation, discharge, death, disability or retirement. In determining whether and when a Break in Employment has occurred, the following rules shall apply: (i) A Break in Employment shall not occur solely by reason of a Leave of Absence authorized by the Employer or an Affiliated I-4 Employer in accordance with established nondiscriminatory policies or a vacation, military or maternity/paternity leave. Effective August 5, 1993, leaves of absence shall also be granted in accordance with the requirements of The Family and Medical Leave Act of 1993. Accordingly, an eligible Employee with more than one year of continuous service, during which the Employee worked at least one thousand two hundred and fifty (1,250) hours, may take up to a total of twelve (12) weeks in a twelve (12)-month period for unpaid family care leave. In determining a Break in Service for eligibility purposes, the twelve (12)-month computation period shall be the twelve (12) consecutive month period specified in Section 2.02. (ii) Failure to return to work after the expiration of any Leave of Absence shall be considered a resignation effective as of the earlier of (1) expiration of such Leave of Absence, or (2) twelve (12) months following the commencement of such Leave of Absence, except in the case of maternity or paternity leave where the initial one (1)-year period of severance shall not be counted. (iii) A Break in Employment shall not occur solely by reason of a Layoff from the Employer or an Affiliated Employer, but a Break in Employment shall occur on the earlier of (1) a refusal by the Employee to return to the employ of the Employer or Affiliated Employer, or (2) twelve (12) months following the commencement of such Layoff. (iv) Failure of any Employee on military leave to make application for reemployment within the period of time during which he is entitled to retention of reemployment I-5 rights under applicable laws of the United States shall be considered a resignation effective as of the expiration date of such reemployment rights. (h) "Code" shall mean the Internal Revenue Code of 1986, as amended. Reference to a Section of the Code shall include that Section and any comparable Section or Sections of any future legislation that amends, supplements, or supersedes such section. (i) "Committee" shall mean the Administrative Committee appointed pursuant to Article VIII of the Plan. (j) "Compensation" shall mean an Employee's wages, salaries, fees for professional services, and other amounts received (without regard to whether or not an amount is paid in cash) for services actually rendered in the course of employment with the Employer to the extent that amounts are includable in gross income (including, but not limited to commissions paid salesman, compensation for service on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, reimbursements and expense allowances). Compensation shall also include any remuneration which is currently excluded from the Participant's gross income by reason of the application of Sections 125, 402(a)(8), 402(h)(1)(B), or 403(b) of the Code. Compensation with respect to any Employee shall exclude: (i) Any compensation directly paid or payable as fringe benefits including benefits received from the Whittaker Corporation Long Term Incentive Plan and the HMO Bonus Incentive Plan. (ii) Any contributions made by the Employer for or on account of the Employees under this Plan, except for Salary Deferral I-6 Contributions, or under any other employee benefit plan other than any specifically excepted herein; (iii) Any compensation paid or payable by reason of services performed prior to the date the Employee becomes a Participant; and (iv) Any compensation paid or payable by reason of services performed after the date the Employee ceased to be a Participant. (v) Any compensation not included in the Participant's gross income for the current taxable year pursuant to non-qualified deferred compensation plans, however, such amounts shall be included in Compensation in the year such amounts are taxable to the Participant under an unfunded non-qualified plan; and (vi) Amounts included in an Employee's gross income under Section 79 of the Code. (vii) For Plan Years beginning after December 31, 1988, Compensation shall exclude amounts in excess of two hundred thousand dollars ($200,000) except as such limit is adjusted for cost of living in accordance with the provisions of Section 401(a)(17) of the Code. In determining the Compensation of a Participant for purposes of this limitation, the rules of Section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the spouse of the Participant and any lineal descendants of the Participant who have not attained age nineteen (19) before the close of the year. If, as a result of the application of such rules the adjusted two hundred thousand dollars ($200,000) limitation is exceeded, then the I-7 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. (viii) In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each Employee taken into account under the Plan shall not exceed the Omnibus Budget Reconciliation Act of 1993 (OBRA '93) annual Compensation limit. The OBRA '93 annual Compensation limit is one hundred fifty thousand dollars ($150,000), as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding twelve (12) months, over which Compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than twelve (12) months, the OBRA '93 annual Compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is twelve (12). For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA '93 annual Compensation limit set forth in this provision. If Compensation for any prior determination period is taken into account in determining an Employee's benefits I-8 accruing in the current Plan Year, the Compensation for that prior determination period is subject to the OBRA '93 annual Compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual Compensation limit is $150,000. Notwithstanding the above provision to the contrary, Compensation earned but not paid in a Plan Year may include amounts earned but not paid in a Plan Year because of the timing of pay periods and pay days if such amounts are paid during the first few weeks of the next following Plan Year, the amounts are included on a uniform and consistent basis with respect to all similarly situated Employees, and no Compensation is included in more than one Limitation Year. (k) "Defined Benefit Plan" shall mean any defined benefit plan (as defined in Section 415(k) of the Code) maintained by the Employer or by any other Affiliated Employer. (l) "Effective Date" shall be February 16, 1968 for the original Whittaker Corporation Partnership Plan and November 1, 1994 for the amended and restated administrative provisions Plan and, as of January 1, 1989 or such earlier date as required by law, for those regulatory provisions necessary to comply with the applicable provisions of ERISA and the Code. (m) "Elective Deferrals" or "Salary Deferral Contributions" shall mean contributions made to the Plan during the Plan Year by the Employer, at the election of the Participant, in lieu of Compensation and shall include contributions made pursuant to I-9 a salary reduction agreement under the Plan made on behalf of a Participant in accordance with Section 4.03. (n) "Eligible Employee" shall mean all Employees who have completed one (1) Year of Eligibility Service. Eligible Employees do not include (i) any Employee who is a member of a collective bargaining unit and who is covered by a collective bargaining agreement, which agreement does not specifically provide for coverage of such Employee under this Plan, provided that retirement benefits were the subject of good faith bargaining between Employee representatives and the Employer, or (ii) any non-resident alien who has no earned income from sources within the United States unless such nonresident alien is designated by the Committee, either individually or by reference to a class of which he is part, as an Employee eligible to become a Participant. (o) "Employee" shall mean a person employed by the Employer, or an Affiliated Employer, any portion of whose income is subject to withholding of income tax and/or for whom Social Security contributions are made by the Employer or an Affiliated Employer, as well as any other person qualifying as a common-law Employee of the Employer or an Affiliated Employer. Employee shall include Leased Employees within the meaning of Section 414(n)(2) of the Code. For purposes of this Section 1.02(o), the term "Leased Employee" shall mean any person (other than an Employee of the Employer) who pursuant to an agreement between the Employer and any other person ("leasing organization") has performed services for the Employer (or for the Employer and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full time basis for a period of at least one year, and I-10 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 shall be treated as provided by the Employer. A Leased Employee shall not be considered an Employee of the Employer if: (i) Such Employee is covered by a money purchase pension plan providing: (1) A nonintegrated employer contribution rate of at least 10 percent (10%) of compensation, as defined in Section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code, (2) Immediate participation, and (3) Full and immediate vesting; and (ii) Leased Employees do not constitute more than twenty percent (20%) of the Employer's nonhighly compensated workforce. (p) "Employee Contributions" shall mean contributions to the Plan made by a Participant that are designated or treated at the time of deferral or contribution as after-tax employee contributions. Employee Contributions shall include amounts, if any, attributable to excess contributions within the meaning of Section 401(k)(8)(B) of the Code which are recharacterized as Employee Contributions under the provisions of this Plan. I-11 (q) "Employer" or "Company" shall mean the Employer named above that has adopted this Plan and whose Plan meets the requirements of Section 401(a) of the Internal Revenue Code of 1986 and, if the context so requires, shall also mean a Participating Employer and/or an Affiliated Employer; and any successor of such Employer. (r) "Employer Matching Account" shall mean the account maintained by the Committee for each Participant as required by Section 5.01 for the deposit of Employer Matching Contributions (s) "Employer Profit Sharing Account" shall mean the account maintained by the Committee for each Participant as required by Section 5.01 for the deposit of Employer Profit Sharing Contributions. (t) "Employment Date" shall mean the latest of: (i) The Employee's most recent date of employment (the day on which he is first credited with an Hour of Service) with the Employer or an Affiliated Employer or a Predecessor Employer prior to January 1, 1989; or (ii) The date on which the Employee is first credited with an Hour of Service for the Employer or an Affiliated Employer or a Predecessor Employer; or (iii) His Reemployment Date if he incurs a Break in Employment and is treated as a new Employee pursuant to Section 2.04. (u) "ERISA" shall mean the Employee Retirement Income Security Act of 1974 (Public Law 93-406), as amended. Reference to a Section of ERISA shall include that section and any comparable Section or Sections of any future legislation that amends, supplements or supersedes such section. I-12 (v) "Family Member" shall mean, with respect to any Employee, such Employee's spouse and lineal ascendants or descendants and spouses of such lineal ascendants or descendants. (w) "Fiscal Year" shall mean the taxable year of the Employer beginning on the first day of November and ending on the last day of October. (x) "Fund" shall mean the aggregate of all assets held by the Funding Agent for the accounts of Participants and their Beneficiaries. (y) "Funding Agent" shall mean the insurance company or companies and/ or trustee(s) selected by the Board of Directors as a depository for assets accumulated under this Plan, severally or jointly, as the case may be. (z) "Funding Instrument" shall mean the trust and/or insurance contract entered into by the Employer to fund this Plan. (aa) "Highly Compensated Employee" shall mean any Employee who performs services with respect to the Employer during the Plan Year (the "determination year") and is described in one or more of the following groups applicable with respect to the determination year or the "lookback year" determined pursuant to I. T. Reg. 1.414(q)1-T. Accordingly, the Employer hereby elects to make the lookback calculation on the basis of the calendar year ending with or within the applicable determination year. Such Employees shall include any Employee who: (i) Was at any time a five percent (5%) owner as defined under Code Section 416(i)(1); or (ii) Received Compensation from the Employer in excess of seventy- five thousand dollars ($75,000) (as adjusted pursuant to Code Section 415(d)); or I-13 (iii) Received Compensation from the Employer in excess of fifty thousand dollars ($50,000) (as adjusted pursuant to Code Section 415(d)) and who was in the Top Paid Group of Employees for such Plan Year or such preceding Plan Year; or (iv) Was at any time an officer and received Compensation greater than fifty percent (50%) of the amount in excess of Code Section 415(b)(1)(A) for such Plan Year or such preceding Plan Year. (v) An Employee described in paragraphs (ii), (iii) or (iv) above for the current Plan Year who was not described in such paragraphs for the preceding Plan Year shall be treated as a Highly Compensated Employee for the current Plan Year only if such Employee is one (1) of the one hundred (100) Employees who receive the most Compensation from the Employer during the current Plan Year or he is an Employee described under (i) above. (vi) For the purposes of paragraph (iii) above, the term "Top Paid Group" shall mean the top twenty percent (20%) of active Employees ranked on the basis of Compensation received from the Employer during the Plan Year. (vii) For the purposes of paragraph (iv) above, no more than fifty (50) Employees or, if less, the greater of three (3) Employees or ten percent (10%) of the Employees shall be treated as officers. If for any Plan Year no officer of the Employer is described under paragraph (iv), the highest paid officer of the Employer for such Plan Year shall be treated as described in such paragraph. I-14 (viii) If any Employee is a Family Member of a five percent (5%) owner or a Highly Compensated Employee in the group consisting of the ten (10) Highly Compensated Employees paid the greatest Compensation during a Plan Year, then such Employee shall not be considered a separate Employee and any Compensation paid to such Employee (and any contribution made on behalf of such Employee) shall be treated as if it were paid to or on behalf of the five percent (5%) owner or Highly Compensated Employee. (ix) A former Employee shall be treated as a highly compensated former Employee if such Employee was a Highly Compensated Employee when such Employee separated from service, or such Employee was a Highly Compensated Employee at any time after attaining age fifty-five (55). (x) For the purpose of this Section 1.02(y): (A) The term "Compensation" shall have the meaning given such term by Code Section 415(c)(3). (B) Employers aggregated under Code Sections 414(b), (c), (m), (n), or (o) shall be treated as a single Employer. (xi) The determination of who is a Highly Compensated Employee, including the determination of the number and identity of the Employees in the Top Paid Group, the top one hundred (100) Employees, the number of Employees treated as officers and the Compensation that is considered, will be made in accordance with Code Section 414(q) and the regulations thereunder except as specifically provided to the contrary in Code Section 401(a)(17). I-15 (bb) "Inactive Participant" shall mean any Employee or former Employee who has ceased to be a Participant on whose behalf an account is maintained under the Plan. (cc) "Key Employee" shall mean each Employee or former Employee (including a Beneficiary of a Key Employee or former Key Employee) who, at any time during the current Plan Year or any of the four (4) immediately preceding Plan Years: (i) is or was an officer of the Employer having an annual compensation greater than fifty percent (50%) of the amount specified under Code Section 415(b)(1)(A) for such year; (ii) is among the ten (10) Employees having an annual compensation from the Employer of more than the limitation in effect for such Year under Code Section 415(c)(1)(A) and owning or considered to own (within the meaning of Code Section 318) both more than a one-half percent (.5%) interest and the largest interests in the Employer; (iii) is an Employee owning (within the meaning of Code Section 318) more than five percent (5%) of the Employer; or (iv) is an Employee receiving more than one hundred fifty thousand dollars ($150,000) of annual compensation from the Employer and owning (within the meaning of Code Section 318) more than one percent (1%) of the Employer. Notwithstanding the foregoing, no more than fifty (50) Employees or, if less, the greater of three (3) or ten percent (10%) (rounded to the next highest integer) of the Employer's Employees shall be treated as officers of the Employer. Compensation for the purpose of this Section 1.02(aa) shall have the meaning given such term by Code Section 414(q)(7). I-16 For the purposes of determining the number of officers under (i) above, Employees described in Code Section 418(q)(8) shall be excluded. For the purposes of (ii) above, if two Employees have the same interest in the Employer, the Employee having the greater annual compensation shall be treated as having the larger interest. (dd) "Layoff" shall mean an involuntary suspension of an Employee's employment with the Employer or Affiliated Employer resulting from a reduction of the work force at the Employee's place of employment and during which the Employee has seniority or other employment rights with the Employer or Affiliated Employer during a specified recall period, pursuant to an applicable collective bargaining agreement or Company policy. No Employee shall be considered to be on Layoff for a period in excess of the recall period applicable to such Employee under an applicable collective bargaining agreement. (ee) "Leave of Absence" shall mean any period of temporary absence approved in writing by the Employer or an Affiliated Employer. (ff) "Matching Contribution" shall mean any contribution to the Plan made by the Employer for the Plan Year and allocated to a Participant's Account by reason of the Participant's Employee Contributions, if any, or Elective Deferrals. (gg) "Named Fiduciary" shall mean the Committee. (hh) "Non-Highly Compensated Employee" shall mean an Employee of the Employer who is neither a Highly Compensated Employee nor a Family Member. (ii) "Non-Key Employee" shall mean each Employee who is not a Key Employee. I-17 (jj) "Participant" shall mean any Eligible Employee who participates in The Plan in accordance with Article III, including any former Employee who is receiving or will receive benefits under the Plan. A Participant ceases to be a Participant when all funds to which he is entitled under the Plan have been distributed in accordance with the terms hereof. A Participant shall be treated as benefiting under the Plan for any Plan Year during which such Participant receives or is deemed to receive an allocation in accordance with I.T. Regulation Section 1.410(b)-3(a). (kk) "Participating Employer" shall mean the Employer and each Affiliated Employer and any such other business entity which, by resolution of its board of directors and with the written approval of the Employer, elects to participate in this Plan. (ll) "Period of Separation" shall mean the period of time commencing with the date an Employee incurs a Break in Employment and ending with the date such Employee is first credited with an Day of Service by the Employer or an Affiliated Employer. (mm) "Permanent Account" shall mean the account maintained by the Committee for each Participant as required by Section 4.09 for the deposit of assets transferred pursuant to such Section. (nn) "Plan" shall mean the Whittaker Corporation Partnership Plan originally effective February 16, 1968 as amended and restated herein, together with any and all amendments and supplements hereto. (oo) "Plan Year" shall mean the reporting year used by the Plan beginning on the first day of January and ending on the last day of December. The Plan Year shall be the Limitation Year for purposes of ERISA and for all purposes under this Plan. I-18 (pp) "Predecessor Employer" shall mean any corporation, partnership, or sole proprietorship, or a division thereof, a substantial part of the assets of which are acquired by the Employer either by purchase from, or liquidation, merger or consolidation of or with, such other corporation, partnership, or sole proprietorship, which has been designated by the Employer as a Predecessor Employer for purposes of this Plan. (qq) "Qualified Matching Contributions" and "Qualified Nonelective Contributions" shall have the meanings set forth in this Section 1.02(11). Qualified Matching Contributions shall mean that portion of the Employer Matching Contributions pursuant to Section 4.01(a) which are to be treated as Elective Deferrals for purposes of the Actual Deferral Percentage ("ADP") test described in Section 4.04(a)(ii). "Qualified Nonelective Contributions" shall mean contributions (other than Matching Contributions) made by the Employer pursuant to Section 4.01(a) which are to be treated as Elective Deferrals for purposes of the ADP test. Both Qualified Matching Contributions and Qualified Nonelective Contributions shall be contributions that the Participant may not elect to receive in cash earlier than the occurrence of one of those events applicable to Salary Deferral Contributions as set forth in Section 4.03. (rr) "Reemployment Date" shall mean the date on which the Employee is first credited with an Hour of Service by the Employer, an Affiliated Employer, or a Predecessor Employer following a Break in Employment. (ss) "Related Plan" shall mean any defined contribution plan (as defined in Section 415(k) of the Code), other than this Plan, maintained by the Employer or by any other Affiliated Employer, I-19 including, if applicable, after December 31, 1985 any welfare benefit fund that is defined in Section 419(e) of the Code. (tt) "Salary Deferral Contributions Account" shall mean a Participant's Account hereunder to which his Salary Deferral Contributions, as defined in Section 1.02(m), made pursuant to a salary reduction agreement are allocated pursuant to Section 4.03. (uu) "Suspense Account" shall mean an account maintained by the Committee pursuant to Section 5.06(a)(iii). (vv) "Top Heavy" shall mean that the aggregate of the Employer Matching, Employer Profit Sharing and Salary Deferral Accounts of all Key Employees hereunder and the accrued benefits under any plan which is part of a required or permissive aggregation group, including any amounts distributed to any Participants during the five (5) years ending on the immediately preceding Anniversary Date but excluding any death benefit that exceeds the actuarially equivalent present value of accrued benefits existing immediately prior to death and any rollover contribution (or similar transfer) initiated by a Participant and made after January 1, 1993 to the extent permitted by regulations and the value of the Employer Matching Account, Employer Profit Sharing Account, Salary Deferral Account and the accrued benefits under any plan which is part of a required or permissive aggregation group, of each then Non-Key Employee who was previously a Key Employee, exceeds sixty percent (60%) of the aggregate of the Employer Matching Account, Employer Priofit Sharing Accounts, Salary Deferral Accounts and the accrued benefits under any plan which is part of a required or permissive aggregation group, of all Participants (with the same inclusions and exclusions) as of such immediately preceding Anniversary Date. Any account balance or I-20 accrued benefit attributable to any individual who has not been an Employee (or received any remuneration for services rendered from the Employer) with respect to this Plan or any other Related Plan at any time during the five (5) years ending on the Anniversary Date shall be disregarded. If an Employee returns to employment with the Employer after such five (5) year period, such Employee's total accrued benefit shall be included in determining the Top Heavy ratio. The determination date with respect to determining whether the Plan is Top Heavy for a particular Plan Year shall be the last day of the preceding Plan Year, or in the case of the first Plan Year, the last day of such year. The required aggregation group shall consist of any plans (including terminated plans where required by Section 416(g)(3) of the Code) qualified under Section 401(a) of the Code in which a Key Employee participates or which enables this Plan to meet the requirements of Code Sections 401(a)(4) or 410. The permissive aggregation group shall consist of the required aggregation group plus any other plan to the extent that such plan, when so aggregated, continues to meet the requirements of Sections 401(a)(4) and 410 of the Code. (ww) "Top Heavy Compensation" shall mean the maximum amount of a Participant's Compensation which may be taken into account during any Plan Year that the Plan is Top Heavy for purposes of determining the amount of deductible contributions hereto (currently one hundred fifty thousand dollars ($150,000)), as adjusted for increases in the cost of living in accordance with the provisions of Section 401(a)(17) of the Code. I-21 (xx) "Valuation Date" shall mean the last day of each calendar month or, in the Committee's discretion, such other dates on which the Funding Agent may undertake to provide valuations to the Committee. (yy) A pronoun or adjective in the masculine gender includes the feminine gender unless the context clearly indicates otherwise. Where the context admits, words in the plural shall include the singular and the singular shall include the plural. The words "hereof," "herein," "hereunder," and other similar compounds of the word "here" shall mean and refer to the entire Plan and not to any particular provision or section. The Plan and Funding Instrument shall each form a part of the other and the terms shall be used interchangeably. I-22 ARTICLE II SERVICE 2.01 PERIOD OF SERVICE. "Period of Service" shall mean the time period commencing with the Employee's Employment Date and ending on the date a Break in Employment occurs; provided, however, a Period of Service for these purposes includes a Period of Separation of less than twelve (12) consecutive months. An Employee who separates from Service and later resumes employment with the Employer or an Affiliated Employer following a Period of Separation of twelve (12) consecutive months or longer shall be treated as a new Employee and shall not be entitled to have the Period of Service he completed prior to the Break in Employment aggregated with his Service subsequent to resumption of employment unless: (a) at the time of his Break in Employment he had a vested interest in a benefit hereunder provided by Employer contributions; (b) the Employee resumes employment before his Period of Separation equals or exceeds sixty (60) consecutive months; or (c) he resumes employment before his Period of Separation equals or exceeds his Period of Service completed prior to his Break in Employment. If the Employee satisfies either condition (a), condition (b) or condition (c) of the preceding sentence, his Period of Service completed prior to his Break in Employment will be aggregated with Service subsequent to resumption of employment and he shall be eligible to become a Participant commencing with the first month after reemployment by a Participating Employer. To the extent required under Section 414(a) of the Code and Regulations issued thereunder, Period of Service shall include Service for a Predecessor Employer. "Service" means an Employee's period of employment with the Employer or an Affiliated Employer. II-1 2.02 YEAR OF ELIGIBILITY SERVICE. A Year of Eligibility Service shall mean a period of twelve (12) consecutive months commencing on an Employee's date of employment. 2.03 DAYS OF SERVICE.(a) "Day of Service" shall mean, in the case of any Employee, each day during the period commencing with the date on which the Employee first performs one (1) hour of service within the meaning of 29 C.F.R. 2530.200b-2(a) for the Employer or an Affiliated Employer, and ending on the date on which such employment by the Employer and all Affiliated Employers terminates for any reason, provided, however, that for the purposes of this paragraph such termination shall be deemed to occur on the earlier of (i) the date of retirement, resignation, release, discharge or death, or (ii) the first anniversary of the day on which the employee last performed one (1) hour of service within the meaning of 29 C.F. R. 2530.200b-2(a) for the Employer and all Affiliated Employers. (b) Notwithstanding the above, the Board of Directors or the chief executive offic er may include in the period taken into account for purposes of computing Days of Service those days in which an Employee or former Employee performs service for an operating unit, division or subsidiary or any corporation, trade or business that is acquired by the Employer or an Affiliated Employer or a part thereof, or for such period as a former Employee subsequently performs service for any other corporation, trade or business which may have acquired all or part of an operating unit, division or subsidiary of the Employer or Affiliated Employer. (c) Notwithstanding any provision to the contrary in this Plan, for any period during which the Plan is a multiple employer plan within the meaning of Section 413(c) of the Internal Revenue Code an Employee shall accrue Days of Service only with respect to periods of "covered service" and "contiguous non- covered service" with the Company. For purposes of determining an Employee's Days of Service, "covered service" shall mean an Employee's non- II-2 covered service which immediately precedes or follows such Employee's covered service and no termination or retirement occurs between such covered service and uncovered service; provided, however, that any transfer of an Employee between the Employer and an Affiliated Employer shall result in such Employee's period of uncovered service which immediately precedes or follows such transfer being deemed "non-contiguous" for purposes of this subsection 2.03(c) (d) Solely for purposes of determining whether a Break in Service, as defined in Section 1.021(g), has occurred in a computation period, an individual who is absent from work for maternity or paternity reasons shall receive credit for the Days of service which would otherwise have been credited to such individual but for such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (1) by reason of the pregnancy of the individual, (2) by reason of a birth of a child of the individual, (3) by reason of the placement of a child with the individual in connection with the adoption of such child by such individual, or (4) for purposes of caring for such child for a period beginning immediately following such birth or placement. The Days of Service credited under this paragraph shall be credited (1) in the computation period in which the absence begins if the crediting is necessary to prevent a Break in Service in that period. 2.04 FORMER EMPLOYEE OR PARTICIPANT. Except as otherwise specifically provided in the Plan, if a former Employee or Participant is reemployed by the Employer, he will be considered as a new Employee for all purposes. II-3 ARTICLE III PARTICIPATION 3.01 ELIGIBILITY REQUIREMENTS. All active Eligible Employees who are in the Service of the Employer on November 1, 1994 and who qualify for participation in the Plan under the provisions of the second paragraph of this Section shall become Participants in the Plan as of November 1, 1994. Any other Eligible Employee who thereafter meets the requirements of said paragraph shall become a Participant in the Plan as of the first day of the month coinciding with or following the day upon which he first meets such requirements, provided he is an Eligible Employee on such day. Any Eligible Employee who has completed a Year of Eligibility Service shall be eligible to participate in the Plan. If an Employee completes a Year of Eligibility Service as described above, but either is then not employed by a Participating Employer or is then on an approved Leave of Absence without pay, Layoff, jury duty or active military duty, he shall be eligible to become a Participant commencing with the first month thereafter that: (i) he or she becomes actively employed by a Participating Employer (or if later, as of the Effective Date of the Plan with respect to such Participating Employer); or (ii) he or she returns from such Leave of Absence, Layoff, jury duty or active duty. Nothing herein shall be construed to permit an Eligible Employee to commence participation herein prior to the date the entity that employs him becomes a Participating Employer. 3.02 PARTICIPATION APPLICATION FOR SALARY DEFERRAL CONTRIBUTIONS (a) To begin salary deferral contributions, an Employee who otherwise meets the eligibility requirements of this Article III must file a written application for participation with the Committee (in such form as the Committee may prescribe) within the time prescribed III-1 by the Committee prior to the first day of the fiscal month during which the Employee desires salary deferrals under the Plan to be effective (or on such later date prior to such fiscal month as may be authorized with respect to the Employee by the Committee). (b) The participation application shall evidence the Employee's acceptance of the benefits and terms of this Plan shall indicate the Employee's election to defer a portion of his compensation as set forth in Section 4.03. 3.03 PARTICIPANT MAY NAME BENEFICIARY. (a) A Participant may designate, in writing to the Committee upon his/her application, the Beneficiary or Beneficiaries whom he desires to receive the benefits of the Plan in the event of his death. A married Participant may not designate a Beneficiary other than his spouse unless: (i) The spouse of the Participant consents in writing to such designation; (ii) The Beneficiary designation may not be changed without spousal consent (or the consent of the spouse expressly permits designations by the Participant without any requirement of further consent by the spouse); and (iii) The spouse's consent acknowledges the effect of such election and is witnessed by a Plan representative or notary public. The Employer, the Committee and the Funding Agent may rely upon the designation of Beneficiary or Beneficiaries last filed in accordance with the terms of this Agreement. (b) If, upon the death of a Participant, there is no designated Beneficiary or surviving Beneficiary, the Committee shall III-2 designate as the Beneficiary such person specified in Section 1.02(e). 3.04 TERMINATION OF PARTICIPATION. Active participation in the Plan shall continue until the Anniversary Date coinciding with or next following the Participant's Termination Date or, if earlier, as of the date the Plan terminates. Participation in the Plan shall continue until a Participants' Accounts have been withdrawn. A Participant may not voluntarily withdraw from participation or receive any distribution of his benefit under the Plan prior to his Termination Date, except to the extent provided in Sections 6.09 and 6.10. 3.05 TERMINATION DATE. A Participant's Termination Date shall be the date on which his employment with the Employer is terminated because of the first to occur of the following events: (a) NORMAL RETIREMENT. The Participant retires or is retired from the employ of the Employer on or after attaining age sixty-five (65). The Plan contemplates that a Participant retire as of the Anniversary Date coinciding with or next following his attainment of age sixty- five (65), except that a Participant may continue his employment after that date. During the continuation of his employment with the Employer after attaining such date, such Participant shall continue to participate in the Plan and shall be entitled to receive his benefits only upon his actual termination of employment unless otherwise required pursuant to the provisions of Section 7.01(e). (b) EARLY RETIREMENT. A Participant's termination of employment with the Employer on or after the date as of which the Participant reaches age fifty-five (55). (c) DISABILITY RETIREMENT. The Participant is retired from the employ of the Employer because of disability, irrespective of age. A III-3 Participant will be considered disabled for purposes of the Plan if, upon suffering any medically determinable physical or mental impairment as a result of sickness, accident or other injury which, in the opinion of a physician approved by the Committee, may be expected to result in death or be of long, continued duration and which renders the Participant incapable of performing the duties of his employment with the Employer. A Participant who claims to be totally and permanently disabled must, within ninety (90) days of the date he became totally and permanently disabled, give written notice thereof to the Committee and submit, at the expense of the Participant, to the Committee such medical evidence of such disability (including without limitation, certification thereof by a physician approved by the Administrative Committee) as said Committee may from time to time reasonably require. Failure by a Participant to comply with the foregoing requirements shall be deemed conclusive evidence that such Participant is not totally and permanently disabled, or has ceased to be so disabled as of the date of such failure. A Participant who qualifies for Social Security disability benefits will automatically satisfy the requirements under this Plan with respect to submission of evidence of disability, throughout the period that he remains qualified for Social Security disability benefits. All rules with respect to the subject of this Section 3.04(c) shall be uniformly and consistently applied to all Participants in similar circumstances. III-4 (d) DEATH. The Participant's death. (e) RESIGNATION OR DISMISSAL. The Participant resigns or is dismissed from the employ of the Employer before retirement in accordance with paragraphs (a), (b) or (c) above and incurs a Break in Employment. If a Participant continues in the employ of the Employer but no longer is a member of a group of employees to which the Plan has been and continues to be extended by the Employer, any subsequent Termination Date nevertheless will be as stated above, and his Salary Deferral Account and Employer Matching and Profit Sharing Accounts will be held in accordance with the provisions of Section 3.06. 3.06 RESTRICTED PARTICIPATION. When distribution of part or all of the benefits to which a Participant is entitled under the Plan is deferred beyond or cannot be made until after his Termination Date, or during any period that a Participant continues in the employ of the Employer but no longer is a member of a group of Employees to which the Plan has been and continues to be extended by the Employer, the Participant will be considered and treated as a Participant for all purposes of the Plan, except that no share of Employer contributions or forfeitures will be credited to his Accounts for any period during which he continues in the employ of the Employer, but is no longer a member of the group of Employees to which the Plan has been and continues to be extended by the Employer. Notwithstanding the preceding paragraph, a Participant who meets the requirements of Section 5.05 for receiving an allocation of the Employer Profit Sharing Contributions for a Plan Year, except for the fact that at some time during the Plan year such Participant became a member of a group of Employees not covered by the Plan, shall be entitled to share in the allocation of Employer Profit Sharing III-5 Contributions and forfeitures attributable to such Plan Year. Such Participant's allocable share of Employer Profit Sharing Contributions and forfeitures shall be determined on the basis of his Compensation for the period during which he was in a group of Employees eligible to be covered under the Plan. 3.07 ELIGIBILITY UPON REEMPLOYMENT. If a former Employee incurs a Break in Employment and is subsequently reemployed as an Eligible Employee, he shall be treated as a new Employee and shall commence participation in this Plan only after satisfying the eligibility requirements set forth in Section 3.01 above following such reemployment, unless he is entitled to have his prior Period of Service aggregated under Section 2.01 with Service subsequent to reemployment, in which event he shall be entitled to commence participation in the Plan on his Employment Date or the date of his reemployment as an Eligible Employee, if later. III-6 ARTICLE IV CONTRIBUTIONS 4.01 EMPLOYER CONTRIBUTIONS (a) For the Plan Year ending December 31, 1994, and for each Plan Year thereafter, at the discretion of the Board of Directors, the Employer may contribute out of its income for the current Fiscal Year and/or accumulated earned surplus for such Fiscal Year before all Federal income and excess profits taxes to the Plan: (i) a "Matching Contribution" in an amount equal to the below listed percentage of the Salary Deferral Contributions percentage elected pursuant to Section 4.03 by each Participant for each payroll period up to a maximum election of six percent (6%) per payroll period, plus (ii) a profit sharing contribution that may be authorized at the discretion of the Board of Directors, but not to exceed the dollar balance remaining after subtracting the sum of the total Salary Deferral Contributions and the Employer contributions made pursuant to subparagraph (i) above from fifteen percent (15%) of the aggregated annual Compensation (after any salary reductions for Salary Deferral Contributions) of all Participants for such Fiscal Year. Matching Contributions shall be made as follows: (a) For the period during a Plan Year in which a Participant elected Salary Deferral Contributions equal to one percent (1%) of his Compensation, the Participating Employers shall contribute three-quarters of one percent (.75%) of the Participant's Compensation during such period (i.e., seventy-five cents ($.75) for each one dollar ($1.00) of Salary Deferral Contributions); IV-1 (b) For the period during a Plan Year in which a Participant elected Salary Deferral Contributions equal to two percent (2%) of his Compensation, the Participating Employers shall contribute one and one-half percent (1-1/2%) of the Participant's Compensation during such period (i.e., seventy-five cents ($.75) for each one dollar ($1.00) of Salary Deferral Contributions); (c) For the period during a Plan Year in which a Participant elected Salary Deferral Contributions equal to three percent (3%) of his Compensation, the Participating Employers shall contribute one and eight hundred seventy-five thousandths percent (1.875%) of the Participant's Compensation during such period (i.e., sixty- two and one-half cents ($.62-1/2) for each one dollar ($1.00) of Salary Deferral Contributions); (d) For the period during a Plan Year in which a Participant elected Salary Deferral Contributions equal to four percent (4%) of his Compensation, the Participating Employers shall contribute two and one-half percent (2-1/2%) of the Participant's Compensation during such period (i.e., sixty-two and one-half cents ($.62- 1/2) for each one dollar ($1.00) of Salary Deferral Contributions); (e) For the period during a Plan Year in which a Participant elected Salary Deferral Contributions equal to five percent (5%) of his Compensation, the Participating Employers shall contribute two and one-half percent (2-1/2%) of the Participant's Compensation during such period (i.e., fifty cents ($.50) for each one dollar ($1.00) of Salary Deferral Contributions); IV-2 (f) For the period during a Plan Year in which a Participant elected Salary Deferral Contributions equal to six percent (6%) or more of his Compensation, the Participating Employers shall contribute three percent (3%) of the Participant's Compensation during such period (i.e., fifty cents ($.50) for each one dollar ($1.00) of Salary Deferral Contributions disregarding any such Salary Deferral Contributions in excess of six percent (6%) of the Participant's Compensation). (b) Notwithstanding the foregoing, the sum of the contribution of the Employer and the Salary Deferral Contribution for any Fiscal Year shall not exceed an amount equal to fifteen percent (15%) of the total Compensation (after any salary reductions) otherwise paid or accrued to all Participants employed by the Employer for such Year. (c) In no event shall the Employer contribution attributable to any Plan Year be so large as to cause the Annual Addition for any Participant to exceed the amount permitted under Section 5.06 below. (d) In no event shall the Employer contribution for any Fiscal Year exceed an amount which the Employer estimates will be deductible under Section 404(a)(3) and, if applicable, Section 404(a)(7) of the Code. (e) The Employer may, notwithstanding any other provision of this Plan, make all contributions to the Plan without regard to current or accumulated earnings and profits for the taxable year or years ending with or within such Plan Year. Notwithstanding the foregoing, the Plan shall continue to be designed to qualify as a IV-3 profit sharing plan for purposes of Sections 401(a), 402, 412 and 417 of the Code. 4.02 PAYMENT. All contributions shall be made directly to the Funding Agent and may be made on any date or dates selected by the Employer; provided, however, that the total annual contribution for each Fiscal Year shall be paid, without interest, on or before the date on which the Federal income tax return of the Employer for such Year is due, including any extensions of time obtained for the filing of the return and shall be conditioned on their deductibility under the Code. 4.03 SALARY DEFERRAL CONTRIBUTIONS. (a) A Participant may reduce his Compensation and have the Employer contribute on his behalf as a Salary Deferral Contribution in each Plan Year, subject to the limitation on Annual Additions provided in Section 5.06 and any limitation pursuant to the provisions of Section 6.11, a minimum of zero percent (0%) of his Compensation up to a maximum of an amount which does not, exceed twelve percent (12%) of such Participant's Compensation for the Plan Year. The rate of his Salary Deferral Contribution shall be determined by the Participant on a form approved by the Committee and filed with the Committee and shall continue unless changed in the manner hereinafter provided. All such contributions shall be calculated in integral percentages of a Participant's Compensation. All Salary Deferral Contributions shall be made by regular payroll deductions. The Employer shall segregate such contributions from Employer assets as soon as reasonably possible; provided, however, that the Employer must pay over any contributions to the Funding Agent within ninety (90) days after the date received or withheld from payroll. IV-4 A Participant may change his contribution rate under this Section 4.03(b) (but not retroactively) to any level permitted above and at any time but, no more than once per month by filing written notice with the Committee in such form as the Committee may prescribe. The change in the Participant's contribution rate shall be effective as of the first day of the month or next following the receipt of such notice if, and only if, the Participant's notice is delivered to the Committee within such period as may be authorized by the Committee). (b) Notwithstanding any other provision in this Plan to the contrary, no Employee shall be permitted to make Salary Deferral Contributions during any calendar year (or other taxable year of the Employee) which are in excess of the limits set forth under Code Section 402(g)(1) (nine thousand two hundred forty dollars ($9,240) for 1994) multiplied by the Adjustment Factor as provided by the Secretary of the Treasury and in effect, at the beginning of such taxable year. For the purpose of the preceding sentence only, with respect to any taxable year, a Participant's Salary Deferral Contributions shall be the sum of all Employer contributions made on behalf of such Participant, pursuant to a deferral election under any qualified cash or deferred arrangement (CODA) 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 the behalf of a Participant for the purchase of an annuity contract under Code Section 403(b) to a salary reduction agreement. IV-5 (c) The interest of each Participant in his or her Salary Deferral Contributions Account shall be, at all times, one hundred percent (100%) vested and nonforfeitable. (d) When a Participant terminates employment, his Salary Deferral Contributions Account shall be distributed to him in the same manner as his Employer Matching Account. Except as provided pursuant to Sections 6.09 and 6.10, amounts attributable to Elective Deferrals shall not be distributable to Plan Participants earlier than upon one of the following events: (i) The Participant's retirement, death, disability, or separation from Service with the Employer (ii) The Participant's attainment of age fifty-nine and one-half (59-1/2) (iii) The termination of the Plan without the establishment of a successor plan (iv) The sale or other disposition by the Employer to an unrelated employer that does not maintain the Plan, of substantially all (eighty-five percent (85%) or more) of the assets of the Employer, provided this paragraph (d) shall not apply with respect to Participants who continue employment with the acquiring employer and (v) The sale or other disposition by the Employer of its interest in a subsidiary to an unrelated employer that does not maintain the Plan, provided this paragraph (e) shall apply only with respect to Participants who continue employment with the subsidiary. 4.04 LIMITATIONS ON CONTRIBUTIONS FOR HIGHLY COMPENSATED EMPLOYEES. Employer Contributions and Salary Deferral Contributions IV-6 made on behalf of Highly Compensated Employees in accordance with Sections 4.01 and 4.03 respectively shall be subject to limitations described in this Section 4.04. (a) For the purpose of this Section 4.04: (i) "Contribution Percentage" shall mean the ratio (expressed as a percentage) of: (A) The sum of the Employee Contributions, if any, and Matching and Profit Sharing Contributions made on behalf of a Participant for the Plan Year to (B) The Compensation paid to such Participant for the Plan Year. The Contribution Percentage shall be determined subject to the following provisions: (C) If one or more Highly Compensated Employees participate in both a cash or deferred arrangement and a plan subject to the Actual Contribution Percentage (ACP) test maintained by the Employer, and as the result of multiple use of the alternative limits, the Aggregate Limit determined in accordance with I.T. Reg. 1.401(m)-2 is exceeded, then the ACP of those Highly Compensated Employees who also participate in a cash or deferred arrangement shall be reduced (beginning with such Highly Compensated Employee whose ACP is the highest) so that the limit is not exceeded. The amount by which each Highly Compensated Employee's Contribution Percentage amount is reduced shall be treated as an Excess Aggregate Contribution. The ADP and ACP of the Highly IV-7 Compensated Employees shall be determined after any corrections required to meet the ADP and ACP tests. (D) For purposes of this Section 4.04(a)(i), the Contribution Percentage for any Participant who is a Highly Compensated Employee, and who is eligible to have Contribution Percentage amounts allocated to his or her account under two or more plans subject to Code Section 401(m) that are maintained by the Employer, shall be determined as if the total of such Contribution Percentage amounts were made under each plan. Further, if a Highly Compensated Employee participates in two or more cash or deferred arrangements that have different Plan Years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. (E) In the event that this Plan satisfies the requirements of Code Sections 401(m), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Sections of the Code only if aggregated with this Plan, then this Section 4.04(a) shall be applied by determining the Contribution Percentage of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, other plans may be aggregated with this Plan in order to satisfy Code Section 401(m) only if they have the same Plan Year. (F) For purposes of determining the Contribution Percentage of a Participant who is a five-percent (5%) IV-8 owner or one of the ten most highly paid Highly Compensated Employees, the Contribution Percentage amounts and Compensation of such Participant shall include the Contribution Percentage amounts and Compensation for the Plan Year of Family Members. Family Members, with respect to Highly Compensated Employees, shall be disregarded as separate employees in determining the Contribution Percentage both for Participants who are Non-Highly Compensated Employees and Participants who are Highly Compensated Employees. (G) For purposes of determining the Contribution Percentage test, Employee Contributions are considered to have been made in the Plan Year in which contributed to the Plan. Matching Contributions and Qualified Nonelective Contributions will be considered made for a Plan Year if made no later than the end of the twelve(12)-month period beginning on the day after the close of the Plan Year. (H) Elective Deferrals may be used in determining the Contribution Percentage amounts so long as the ADP test is met before the Elective Deferrals are used in the ACP test and so long as the ADP test continues to be met following the exclusion of those Elective Deferrals that are used to meet the ACP test. (I) The actual compensation ratios of all eligible Employees shall be taken into account for the purposes of the ACP test under this Plan. For this purpose, eligible Employees shall include each IV-9 Employee who would be a Participant under the Plan and eligible to receive an allocation of Employer Contributions hereunder, except that such Employee is not a Plan Participant because: (1) He has failed to make required contributions, if any; (2) He has elected not to participate; or (3) His compensation is less than a stated dollar amount, if such amount is a condition of his participation. In the case of an eligible Employee who makes no Employee contributions, his Contribution Percentage shall be deemed to be zero(0). (ii) "Actual Deferral Percentage" (ADP) shall mean the ratio (expressed as a percentage) of: (A) The Salary Deferral Contributions, Qualified Matching Contributions, and Qualified Nonelective Contributions, if any, made on behalf of a Participant for the Plan Year to (B) The Compensation paid to such Participant for the Plan Year. The ADP shall be determined subject to the following provisions: (C) The ADP for any Participant who is a Highly Compensated Employee for the Plan Year, and who is eligible to have Elective Deferrals (and Qualified Nonelective Contributions or Qualified Matching Contributions, or both, if treated as Elective Deferrals for purposes of the ADP test) allocated to his or her IV-10 Accounts under two or more arrangements described in Code Section 401(k) that are maintained by the Employer, shall be determined as if such Elective Deferrals (and, if applicable, such Qualified Nonelective Contributions or Qualified Matching Contributions, or both) were made under a single arrangement. If a Highly Compensated Employee participates in two (2) or more cash or deferred arrangements that have different Plan Years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement. (D) In the event that this Plan satisfies the requirements of Code Section 401(k), 401(a), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Sections of the Code only if aggregated with this Plan, then this Section 4.04(a)(ii) shall be applied by determining the ADP of Employees as if all such plans were a single plan. For Plan Years beginning after December 31, 1989, other plans may be aggregated with the Plan to satisfy Code Section 401(k) only if they have the same Plan Year. (E) For purposes of determining the ADP test, Elective Deferrals, Qualified Nonelective Contributions and Qualified Matching Contributions shall be taken into account under the ADP test for a Plan Year only if allocated to an Employee as of a date within that Plan Year. For this purpose, such allocation shall not be IV-11 contingent on participation or performance of services after such date and actual payment to the Fund shall be made before the last day of the twelve (12)-month period immediately following the Plan Year to which such deferrals or contributions relate. (F) The actual deferral percentages of all eligible Employees shall be taken into account for the purposes of the ADP test under this Plan. For this purpose, eligible Employees shall include each Employee who would have been eligible to make an Elective Deferral under the Plan, except that no Elective Deferral was made because such Employee: (1) Was suspended from making an Elective Deferral due to a distribution, loan or a suspension caused by the limitations an annual additions of Code Section 415(c)(l) or 415(e); (2) Elected not to participate in the Plan; or (3) Received Compensation less than a stated dollar amount, if such amount is a condition of his participation in the Plan. In the case of an Eligible Employee who makes no Elective Deferral, his deferral percentage shall be deemed to be zero (0). (b) Neither the average ACP nor the average ADP for all Participants who are Highly Compensated Employees for the Plan Year shall exceed the greater of: (i) The average ACP or the average ADP, as applicable, for all Participants who are Non-Highly Compensated Employees for the Plan Year multiplied by 1.25; or IV-12 (ii) The average ACP or the average ADP for all Participants who are Non-Highly Compensated Employees, as applicable, multiplied by 2.00, provided such averages for the Highly Compensated Employees do not exceed such averages for Non- Highly Compensated Employees by more than two (2) percentage points, or such lesser amount as the Secretary of the Treasury shall prescribe. Notwithstanding the above, the tests provided for under this Section 4.04(b) shall be imposed separately on contributions and deferrals. Except as provided under paragraph (e) below, the Plan shall not test under this Section 4.04(b)(ii) to meet applicable Code requirements for both contributions and deferrals in the same year. (c) In the case of a Highly Compensated Employee who is either a five percent (5%) owner or one of the ten (10) most Highly Compensated Employees and is thereby subject to the family aggregation rules of Code Section 414(q)(6): (1) The Contribution Percentage for the family group (which is treated as one (1) Highly Compensated Employee) is the greater of (A) the Contribution Percentage determined by combining the contributions and Compensation of all eligible Family Members who are Highly Compensated without regard to family aggregation, or (B) the Contribution Percentage determined by combining the Contributions and compensation of all eligible Family Members. (2) The ADP for the family group (which is treated as one (1) Highly Compensated Employee) is the ADP determined by combining the Elective Deferrals, and Compensation and IV-13 amounts treated as elective contributions of all eligible Family Members. Except to the extent taken into account in this paragraph (c), the contributions, Compensation, Elective Deferrals, and amounts treated as elective contributions of all Family Members shall be disregarded for determining either the ACPs or ADPs for the groups of Highly Compensated Employees and Non-Highly Compensated Employees. (d) The term "Compensation" shall have the meaning given such term by Code Section 415(c)(3). (e) If the test described in paragraph (b)(ii) above is used for both contributions and deferrals in the same Plan Year, the Aggregate Limit as defined below shall not be exceeded. (i) The "Aggregate Limit" for the purposes of this Section 4.04(e) shall mean the greater of: (A) The sum of: (1) One hundred twenty-five percent (125%) of the greater of the Relevant Actual Deferral Percentage or the Relevant Actual Contribution Percentage, and (2) Two (2) percentage points plus the lesser of the Relevant Actual Deferral Percentage or the Relevant Actual Contribution Percentage. In no event, however, shall this amount exceed twice the lesser of the Relevant Actual Deferral Percentage or the Relevant Actual Contribution Percentage; or IV-14 (B) The sum of: (1) One hundred twenty-five percent (125%) of the lesser of the Relevant Actual Deferral Percentage or the Relevant Actual Contribution Percentage, and (2) Two (2) percentage points plus the greater of the Relevant Actual Deferral Percentage or the Relevant Actual Contribution Percentage. In no event, however, shall this amount exceed twice the lesser of the Relevant Actual Deferral Percentage or the Relevant Actual Contribution Percentage. (ii) For the purposes of this Section 4.04(e): (A) Relevant Actual Deferral Percentage shall mean the ADP of the group of eligible Non-Highly Compensated Employees for the Plan Year; and (B) Relevant Actual Contribution Percentage shall mean the ACP of the eligible group of Non-Highly Compensated Employees for the Plan Year. (f) The determination and treatment of the Contribution Percentage, the Salary Deferral Contributions and the ADP of a Participant shall at all times satisfy I.T. Reg. 1.401(k)-1, 1.401(m)-1, 1.401(m)-2 and such other requirements as may be required by the Secretary of Treasury. 4.05 DISTRIBUTION OF EXCESS DEFERRALS, EXCESS CONTRIBUTIONS AND EXCESS AGGREGATE CONTRIBUTIONS. The Committee shall determine, as soon as is reasonably possible after the close of each Plan Year, Employer Contributions pursuant to Section 4.01 and Salary Deferral Contributions pursuant to Section 4.03, if applicable, which will result in Excess Deferrals, Excess Contributions, or Excess Aggregate Contributions for any Participant. In addition, prior to the close of each IV-15 Plan Year the Committee, upon a determination that the ADP test will not be met for such Plan Year, may direct at any time that an individual Highly Compensated Employee's future Salary Deferral Contributions be reduced or stopped in order to avoid accumulating Excess Deferrals or Excess Contributions under the Plan. Notwithstanding any other provisions of this Plan, Excess Deferrals, Excess Contributions, Excess Aggregate Contributions and income allocable thereto shall be distributed to Participants as described in this Section 4.05. (a) For the purpose of this Section 4.05: (i) "Excess Deferrals" shall mean amounts of Elective Deferrals, Qualified Matching Contributions, and Qualified Nonelective Contributions for a calendar year that: (A) The Participant requests be distributed pursuant to the claims procedure set forth in Section 4.05(b) below; or (B) The Committee determines to be, pursuant to I. T. Reg. 1.401(k)-1, Excess Deferrals. (ii) "Qualified Matching Contributions" and "Qualified Nonelective Contributions" shall mean contributions reclassified pursuant to Section 1.02(qq) and Section 5.06(d) for the purpose of meeting the ADP test. Such reclassification shall be permitted only if the following requirements are met: (A) Employer Contributions, including those Qualified Nonelective Contributions treated as Elective Deferrals for purposes of the ADP test must satisfy the requirements of Code Section 401(a)(4). IV-16 (B) Employer Contributions, excluding those Qualified Matching Contributions and Qualified Nonelective Contributions treated as Elective Deferrals for purposes of the ADP test, must satisfy the requirements of Code Section 401(a)(4). (C) Those Qualified Matching Contributions and Qualified Nonelective Contributions treated as Elective Deferrals for purposes of the ADP test shall not be taken into account for purposes of satisfying the requirements of Code Section 401(m). (D) Except as provided in paragraphs (A) and (C), Qualified Matching Contributions and Qualified Nonelective Contributions treated as Elective Deferrals for the purposes of the ADP test shall not be taken into account in determining whether any other contributions or benefits satisfy Code Section 401(a)(4) or in determining whether Employee Contributions or other matching Employer Contributions meet the requirements of Code Section 401(m). (E) Qualified Nonelective Contributions may not be treated as Elective Deferrals if the effect of such treatment is to increase the difference between the ADP for the group of eligible Highly Compensated Employees and the ADP of all other Eligible Employees. (F) The Qualified Nonelective Contributions must satisfy the requirements of I.T. Reg. 1.401(k)-1(b)(6)(1) for the Plan Year as if such contributions were Elective Deferrals; IV-17 (G) For Plan Years which begin after December 31, 1988, Qualified Matching Contributions and Qualified Nonelective Contributions must be taken into account during the Plan Year in which they are deemed made; and (H) Any other applicable conditions described in I.T. Reg. 1.401(m)-1(b)(2) are satisfied. (iii) "Excess Contributions" shall mean amounts described in Section 401(k)(8)(B) of the Code. The amount of Excess Contributions for a Highly Compensated Employee shall be determined in the following manner: (A) First, the ADP of the Highly Compensated Employee with the highest ADP shall be reduced to the extent necessary to satisfy the ADP test or cause such ratio to equal the ADP of the Highly Compensated Employee with the next highest ratio. This process shall be repeated until the ADP test is satisfied. (B) The amount of Excess Contributions for a Highly Compensated Employee shall then equal the total of Elective Deferrals or other contributions taken into account for the ADP test minus the product of the Employee's contribution ratio as determined above and the Employee's Compensation. (C) In the case of a Highly Compensated Employee whose ADP is determined under the family aggregation rules prescribed by regulations, the determination of the amount of Excess Contributions for the family unit shall be made by combining the Contributions and Compensation of all Family Members and then reducing the ADP in accordance with the leveling IV-18 methods described in paragraphs (A) and (B) of this Section 4.05(a)(iii). Excess Contributions shall be determined by taking into account the Contributions of all eligible Family Members and shall be allocated among such Family Members in proportion to their Elective Deferrals. (iv) "Excess Aggregate Contributions" shall mean amounts described in Section 401(m)(6)(B) of the Code. The amount of Excess Aggregate Contributions for a Highly Compensated Employee shall be determined in the following manner: (A) First, the ACP of the Highly Compensated Employee with the highest ACP shall be reduced to the extent necessary to satisfy the ACP test or cause such ratio to equal the ACP of the Highly Compensated Employee with the next highest ratio. This process shall be repeated until the ACP test is satisfied. (B) The amount of the Excess Aggregate Contribution for a Highly Compensated Employee shall then equal the total amount of Employee Contributions, Employer Matching Contributions, and other contributions taken into account for the ACP test minus the product of the Employee's contribution ratio as determined above and the Employee's Compensation. (C) In the case of a Highly Compensated Employee whose ACP is determined under the family aggregation rules prescribed by regulations, the determination of Excess Aggregate Contributions shall be made by combining the Contributions and Compensation of all Family IV-19 Members and then reducing the ACP in accordance with the leveling method described in paragraphs (A) and (B) of this Section 4.05(a)(iii). Excess Aggregate Contributions shall be determined by taking into account the Contributions of all eligible Family Members and shall be allocated among such Family Members in proportion to their Contributions. (b) A Participant may determine that deferrals in excess of the limits imposed by Code Section 402(g) have been made. Such Participant may request a distribution of such Excess Deferral amounts by submitting a claim in writing to the Committee no later than March 1, specifying the Participant's Excess Deferral amount for the preceding calendar year. Such claim shall include the Participant's written statement that if such amounts are not distributed, such Excess Deferral amounts, when added to amounts deferred under other plans or arrangements as described in Sections 401(k), 408(k), or 403(b) of the Code, exceed the limit imposed on the Participant by Section 402(g) of the Code for the year in which the deferral occurred. Notwithstanding the above, a Participant shall be deemed to have made the designation for the distribution of Excess Deferrals at any time the Committee determines that the limits of Code Section 402(g) would be exceeded by the Plan or the plan of any Affiliated Employer. (c) Notwithstanding any other provision of the Plan to the contrary: (i) Excess Deferrals and income allocable thereto shall be distributed after the date on which the Plan received the Excess Deferral, but no later than the April 15 following the calendar year during which such Excess Deferral was made. IV-20 Any such distribution shall be designated by the Plan as a distribution of Excess Deferrals. Excess Deferrals to be distributed with respect to an Employee for an Employee's taxable year shall be reduced by any Excess Contributions previously distributed or recharacterized with respect to such Employee for the Plan Year ending within such taxable year. (ii) A Participant's Excess Contributions and income allocable thereto, shall be distributed to the Participant, if administratively feasible, not later than two and one-half (2- 1/2) months following the close of the Plan Year in which such Excess Contributions were made, but in any event, no later than the last day of the Plan Year following the close of the Plan Year in which the Excess Contributions were made. If such excess amounts are distributed more than two and one-half (2- 1/2) months following the close of the Plan Year in which such excess amounts arose, a ten percent (10%) excise tax will be imposed on the Employer with respect to such amounts. The amount of Excess contributions to be recharacterized or distributed with respect to an Employee for a Plan Year shall be reduced by any Excess Deferrals previously distributed to such Employee for the Employee's Taxable Year ending with or within such Plan Year. (iii) A Participant's Excess Aggregate Contributions and income allocable thereto shall be distributed to each Participant, if administratively feasible, not later than two and one-half (2- 1/2) months following the close of the Plan Year in which such Excess Aggregate Contributions were made, but in any event, no later than the last day of the Plan Year following IV-21 the close of the Plan Year in which the Excess Aggregate Contributions were made. If such excess amounts are distributed more than two and one-half (2-1/2) months following the close of the Plan Year in which such amounts arose, a ten percent (10%) excise tax will be imposed on the Employer with respect to such amounts. (d) The allocable income required to be distributed in accordance with Section 4.05(c) shall be equal to the sum of the income allocable to the applicable year in accordance with the procedures detailed in Section 5.03. (i) Income shall include all earnings and appreciation, including such items as interest, dividends, rent, royalties, gains or losses from the sale of property, appreciation or depreciation in the value of stocks, bonds, annuity and life insurance contracts, and other property, without regard to whether such appreciation or depreciation has been realized. (ii) No income shall be allocable to periods between the end of the applicable year and the date of distribution. (iii) The Committee shall not be liable to any Participant (or his Beneficiary, if applicable) for any losses caused by inaccurately estimating the amount of any Excess Deferrals, Excess Contributions, or Excess Aggregate Contributions and income allocable to such excess. (e) Excess Contributions distributed under this Section 4.05 shall first be treated as distributions from the Participant's Salary Deferral Account and shall be treated as distributed from the Participant's Account only to the extent such Excess Contributions exceed the balance in the Participant's Salary IV-22 Deferral Account. Excess Aggregate Contributions shall be distributed from the Participant's Salary Deferral Account and the Participant's Account in proportion to the Participant's Employee Contributions, if any, and Employer Matching Contributions for the Plan Year. (f) In any year where the Plan allows after-tax Employee Contributions, a Participant's Excess Contributions may be recharacterized as an amount distributed to the Participant and then contributed by the Participant 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 that such amount, in combination with other Employee Contributions made by that Employee, would exceed any stated limit under the Plan on Employee Contributions. Recharacterization must occur no later than two and one-half (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 Participant's tax year in which the Participant would have received them in cash. 4.06 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS NOT PERMITTED. The Plan shall accept no Employee Contributions designated by a Participant as deductible employee contributions (within the meaning of Section 72(o)(5)(A) of the Code) for a taxable year of the Participant beginning after December 31, 1986. IV-23 4.07 DUTIES OF FUNDING AGENT REGARDING CONTRIBUTIONS. The Funding Agent shall receive all contributions paid by the Employer in cash or other property acceptable to the Funding Agent and shall be accountable for all such contributions, but shall have no duty to collect or enforce payment to it of any contributions to the Fund, nor to determine or verify the accuracy thereof. 4.08 SPECIAL INVESTMENT DIRECTIONS. All contributions other than Employer Matching Contributions Pursuant Section 4.01(a) (which shall be invested solely in "Stock Fund" under the terms of the Funding Instrument) shall be invested in such vehicles as directed by the Participant pursuant to the following provisions of this Plan. Each Participant shall have the right to elect from among one or more separate and distinct investment vehicles designated, from time to time, by the Committee, the percentage of his allocated contribution which he wishes to have invested in each vehicle. The Committee, at its discretion, may make available to the Participants one (1) or more of the following investment options: (a) A "Money Market Fund" wherein monies contributed by the Participant will be invested in a Money Market Certificate with a bank and/or savings and loan association; (b) A "Fixed Income Fund" wherein monies contributed by the Participant may be invested in guaranteed interest-type contracts issued by an insurance company licensed to do business in the State of California or such other type of investments geared to provide maximum protection of capital with a reasonable rate of return thereon; (c) An "Equity Fund" wherein monies contributed by the Participant will be invested primarily in common stocks and such other IV-24 securities or investment opportunities which provide for capital appreciation; and (d) A "Stock Fund" which shall consist of an unsegregated fund invested in common stock of the Employer, or warrants or other rights to purchase common stock of the Employer received as a result of holdings of such common stock; (e) Such other investment vehicle, which, in the opinion of the Committee, may be appropriate to meet the investment goals of a substantial portion of active Participants. Notwithstanding any other provision of the Plan, if at any time, the Registration Statement relating to the Plan filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, shall become out of date and until a post-effective amendment thereto is filed and declared effective and a current prospectus thereunder is delivered to the Employees, any Employee contribution directed to be invested in the Stock Fund during such period shall be null and void. Deposits, contributions and other amounts received by the Funding Agent for investment in the "Stock Fund" shall be used promptly and solely to purchase Company securities (as described in subsection (d) above) at the market price for such securities, subject only to any limitations imposed by administrative practicalities and applicable laws and regulations. Until so invested, cash received by the Funding Agent may be kept temporarily in savings accounts or other cash equivalent investments. Company securities held in the "Stock Fund" may be sold, and cash and equivalent investments may thereafter be held by the Funding Agent, but only when and to the extent reasonably necessary to pay benefit distributions under the Plan, or to provide for transfers of all or a portion of Participants' interests between investment funds pursuant to the directions of Participants. However, notwithstanding the foregoing, neither the Funding Agent, the Employer, a IV-25 Participating Employer, nor any other person or committee shall have any authority or responsibility to attempt to time the purchase of Employer securities, to attempt to time sales of Employer securities made for the purpose of distributing benefits or providing for transfers between investment funds, or otherwise to sell or trade such securities in an effort to anticipate movements in the market price for Employer securities. Participants shall be permitted to change their election of an investment vehicle and/or the percentage to be allocated to each option out of future contributions at each Valuation Date of the Plan. Participants may change the options in which their prior contributions are invested not more often than determined by the Committee. Such change shall be effective only as of a Valuation Date unless the Committee, in its sole discretion, agrees to another date. Participants must notify the Committee of any such change in writing, not later than thirty (30) days prior to the date the change is to be effective. Notwithstanding the above, all Employer Matching Contributions shall be invested in the Stock Fund and shall not be subject to the direction of the Participant provided however that each participant who has attained the age of fifty-five (55) or more may direct the transfer of fifty percent (50%) of the balance of the Participant's Employer Matching Account from the Stock Fund to another investment vehicle or vehicles of his choice as permitted pursuant to Section 4.08. Further, a Participant who has attained age sixty (60) or more may direct the transfer of the remaining balance of the Participant's Employer Matching Account from the Stock Fund to another investment vehicle or vehicles of his choice. 4.09 TRANSFERS FROM OTHER QUALIFIED PLANS. Notwithstanding any other provision hereof, there may be transferred to the Funding Agent of this Plan all or any of the assets held (whether by a trustee, custodian or otherwise) on behalf of any other plan (excluding any such plan that requires payment of a IV-26 qualified joint and survivor annuity) which satisfies the applicable requirements of Sections 401(a) or 403(a) of the Internal Revenue Code, and which is maintained for the benefit of any persons who are or are about to become Participants in this Plan. Transferred amounts shall, at all times, meet the requirements of Code Section 414(l) and, notwithstanding any other provisions hereof, benefits under the transferor plan which are protected under the provisions of Code Section 411(d)(6) shall be provided with respect to the assets so transferred to this Plan. 4.10 ROLLOVER CONTRIBUTIONS. Notwithstanding any other provision hereof, the Funding Agent shall be authorized to accept assets from a person who is or is about to become a Participant in this Plan, provided the transfer of such assets to this Plan qualifies as a rollover contribution within the meaning of Section 402(c) or Section 403(c) of the Internal Revenue Code. (a) An amount will qualify as a rollover contribution if it: (i) Meets the criteria of Section 7.04; or (ii) Represents the balance to his credit of a conduit individual retirement plan; and (in either case) (iii) Is contributed to the Plan within sixty (60) days following distribution of such amount to him. (b) An amount will not qualify if: (i) It includes any amount which constituted or was treated as a contribution made by the Employee to such plan; or (ii) It includes any amount which constituted or was treated as attributable to contributions made on behalf of the Employee while he was a Key Employee in a Top Heavy plan; or (iii) It is attributable to a Plan that requires payment of a qualified joint and survivor annuity pursuant to Sections 401(a)(11) and 417 of the Code and such IV-27 requirement has not been eliminated prior to the attempted rollover. The Committee shall require the Participant to provide reasonable evidence that any such amount meets the above requirements. Failure of the Participant to provide such evidence will preclude the Plan's acceptance of any such amount. 4.11 SEGREGATION OF ROLLOVERS. Notwithstanding any other provision hereof, amounts transferred to the Funding Agent of this Plan pursuant to Sections 4.09 and 4.10 shall be maintained in separate accounts known as Permanent Accounts and Rollover Accounts, respectively, and shall be applied solely for the benefit of the Participant on whose behalf such amounts were transferred. Such amounts shall not be applied to provide any accrued benefit provided by this Plan. Such amounts shall, however, be credited with their proportionate share of the Fund's realized and unrealized earnings and losses except where the Funding Agent or the Participant, with the consent of the Committee, designates a separate and distinct investment vehicle for those amounts. IV-28 ARTICLE V ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 5.01 INDIVIDUAL ACCOUNTS. The Committee shall establish and maintain an Employer Matching Account, an Employer Profit Sharing Account, a Salary Deferral Contribution Account, a Permanent Account, a Rollover Account and an After-Tax Account (for purposes of those after-tax contributions permissible pursuant to prior plan provisions) in the name of each Participant. If any Eligible Employee ceases participation because of a one (1)-year Period of Separation and receives a distribution and again becomes a Participant, the Committee shall establish a new, Employer Matching Account, Employer Profit Sharing Account, Salary Deferral Contributions Account, Permanent Account, Rollover Account and After-Tax Account for that Participant. To facilitate allocations hereunder, the Committee may authorize such sub-accounts as may be required or useful. 5.02 ORDER OF ADJUSTMENT TO ACCOUNTS. The Committee shall have the authority to establish and thereafter adjust the order of adjustments to Employee Accounts as may be necessary to accomodate any valuation procedure or frequencies adopted by the Committee. 5.03 EVALUATION OF ACCOUNTS. As of each Valuation Date, the Committee shall determine the fair market value of the Fund and shall deduct from such fair market value the following amounts in order to determine the net fair market value of the Fund as of such date: (a) The Employer's annual contribution for the Plan Year ending on such Valuation Date, if any, to the extent such contribution has been paid prior to such Date; and (b) Salary Deferral Contributions for the period ending on such Valuation Date to the extent such contributions have been paid prior to such Date, but since the last preceding Valuation Date. V-1 To determine any increase or decrease in the fair market value of the Fund, the net fair market value of such Fund determined in accordance with the preceding paragraph shall be compared to the net fair market value of the Fund as of the last preceding Valuation Date. Any increase or decrease in the net fair market value of such assets so determined shall be allocated to the Employer Matching Accounts, Employer Profit-Sharing Accounts and Salary Deferral Contributions Accounts of the Participants in the proportion that the cumulative amounts previously allocated and remaining credited to the Account of each such Participant bear to the total of the cumulative amounts previously allocated and remaining credited to the Accounts of all such Participants. Notwithstanding the foregoing, segregated accounts held in accordance with the provisions of Sections 4.08, 4.09 and 4.10 of Article IV shall be valued separately on each regular Valuation Date, and the increment or profit shall be allocated to or, as the case may be, the loss shall be charged against each such account on a segregated basis. 5.04 CREDITING OF SALARY DEFERRAL CONTRIBUTIONS. Salary Deferral Contributions and Qualified Nonelective Contributions made by the Employer on behalf of Participants shall be allocated to their Salary Deferral Contributions Accounts as of the Valuation Date by which such contributions were withheld by the Employer. V-2 5.05 CREDITING OF EMPLOYER PROFIT SHARING CONTRIBUTIONS. A person shall be entitled to share in the Employer Profit Sharing Contributions for a Plan Year, which occurred during such Year, if he is both a Participant and an Employee on the last day of such Year or if his employment terminated pursuant to subsections 3.05(a), (b) or (c). Annual Employee forfeitures pursuant to Section 6.05, if any, shall be used to off-set the annual Employer Profit Sharing Contribution. As of each payroll period, the Employer Matching Contribution, shall be allocated among and credited to the Employer Matching Accounts of the persons entitled to share in such amounts in accordance with the matching provision of Section 4.01(a). The Employer Profit Sharing Contribution pursuant to Section 4.01(a) for the Plan Year ending on such Date shall be allocated among and credited to the Employer Profit Sharing Accounts of the persons entitled to share in such amounts (as provided in the preceding paragraph) in proportion to each Participant's respective amounts of Compensation for such Plan Year. 5.06 LIMITATION ON ALLOCATIONS TO PARTICIPANTS. Notwithstanding any other provisions of the Plan: (a) LIMITATIONS APPLICABLE TO PARTICIPANTS IN DEFINED CONTRIBUTION PLANS ONLY. (i) The Annual Addition credited to a Participant's Accounts (exclusive of any amounts credited in accordance with Section 5.03) for any Plan Year commencing on or after January 1, 1989 shall not exceed the lesser of (A) thirty thousand dollars ($30,000) or such larger amount equal to twenty-five percent (25%) of the defined benefit dollar limitation as adjusted for cost-of-living increases pursuant to Code Section 415(d)(3), or (B) twenty-five percent (25%) of the Participant's Compensation (as defined in V-3 Section 5.06(e) for purposes of this Section, and Sections 5.06(b) and 5.06(c) of this Plan) for such Year. (ii) In the case of any Participant who also participates in a Related Plan, the sum of his Annual Addition under the Plan and his Annual Addition under all Related Plans for any Plan Year commencing on or after January 1, 1989, shall not exceed the lesser of (A) the amount set forth in (i)(A) above or (B) twenty-five percent (25%) of the sum of (l) the Participant's Compensation for such Year and (2) his remuneration for such Year from all Employers maintaining such Related Plans. The Compensation limitation referred to in (B) shall not apply to any contribution for medical benefits (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) which is otherwise treated as an Annual Addition under Section 415(l)(1) or Section 419A(d)(2) of the Code. (iii) To the extent necessary to satisfy the limitations of (i) and (ii) above, the Committee shall reduce the amount which the Participant is permitted to contribute under the provisions of the Plan and, if the elimination of such Salary Deferral Contributions will not satisfy such limitations, shall first distribute any prior Salary Deferral Contribution made during the year to the extent such excess results from a reasonable error in determining the amount of the Salary Deferral Contribution and secondly shall direct the Employer to reduce the net contribution it would otherwise make for the Participant's benefit for the applicable Plan Year. If after reduction of the net contribution as aforesaid, there is any amount of contribution for the Plan Year which V-4 cannot be allocated to the Accounts of Participants because of the aforesaid limitations, such amount shall be credited to a Suspense Account and shall be applied to reduce the next Year's contribution requirement. If a Suspense Account is in existence at any time during a particular limitation year, all amounts in the Suspense Account must be allocated and reallocated to Participants' Accounts before any Employer or Employee Contributions may be made to the Plan for that limitation year. Excess amounts may not be distributed to Participants or former Participants. (b) LIMITATIONS APPLICABLE TO PARTICIPANTS WHO ALSO PARTICIPATE IN A DEFINED BENEFIT PLAN. (i) In the case of any Participant who participates in both the Plan and in a Defined Benefit Plan, his Annual Addition under the Plan for any Plan Year ending on or after December 31, 1988 shall be limited so that the sum of his Defined Benefit Plan fraction and his Defined Contribution Plan fraction for such Year does not exceed 1.0. (ii) For purposes of the limitation of (i) above: (A) A Participant's Defined Benefit Plan fraction for any Plan Year is a fraction (1) whose numerator is the Participant's projected annual benefit under all Defined Benefit Plans as a group (determined as of the close of the Plan Year and reflecting any limitation thereof required under the terms of any Defined Benefit Plan or Plans), and (2) whose denominator is the lesser of (i) the product of 1.25, multiplied by the dollar limitation in effect under Internal Revenue Code Section 415(b)(1)(A) for such Year, or (ii) the product of V-5 1.4, multiplied by the amount which may be taken into account under Code Section 415(b)(1)(B) with respect to such Participant under the Plan for such Year; and (B) A Participant's Defined Contribution Plan fraction for any Plan Year is a fraction (1) whose numerator is the sum of the Participant's Annual Additions for all Plan Years under the Plan and all Related Plans determined as of the close of the Plan Year, and (2) whose denominator is the sum of the lesser of the following amounts determined for the current Plan Year and for each prior Year: (i) the product of 1.25, multiplied by the dollar limitation in effect under subsection 5.06(a)(i)(A) for such Year, or (ii) the product of 1.4, multiplied by the amount which may be taken into account under subsection 5.06(a)(i)(B) with respect to such Participant under the Plan and all Related Plans for such Year. (c) ADJUSTMENTS ON ACCOUNT OF EXCESSIVE CREDITS. If, as a result of the allocation of forfeitures, a reasonable error in estimating a Participant's annual compensation or other limited facts and circumstances that the Commissioner of the Internal Revenue Service finds justifiable, it is determined at any time that the amount credited to a Participant's Accounts for any prior Plan Year was in excess of the amount permitted under the limitations of (a) above, the Committee shall charge against the Participant's Accounts an amount or amounts (adjusted to reflect income, expenses, gain or loss of the Fund properly attributable to the excess credit or credits) sufficient to permit the remaining credits V-6 for such prior Year to satisfy the foregoing limitations and make adjustments in the order provided below. To the extent the excessive credit was an excessive Employee Contribution, as determined by the Committee, the Funding Agent shall refund such portion, adjusted as aforesaid, to the Participant. To the extent the excessive credit was an excessive Employer contribution as determined by the Committee, such excessive portion, adjusted as aforesaid, shall be applied to reduce the first contribution or contributions thereafter to be made by the Employer. A reduction of benefits and/or contributions to all Plans, where required under (b) above, shall be accomplished by first reducing the Participant's benefit under any Defined Benefit Plans in which he participated, such reduction to be made first with respect to the Whittaker Corporation Employees' Pension Plan and then to the extent necessary, from the Whittaker Corporation Retirement Security Plan and, thereafter, in such priority as shall be determined by the Committee and the administrators of such other Plans. Then, by reducing contributions or allocating excess forfeitures for Defined Contribution Plans in which the Participant participated, such reduction to be made first with respect to the Plan in which he most recently accrued benefits and, thereafter, in such priority as shall be established by the Committee and the administrators of such other Plans; provided, however, that, whenever it is in the best interest of a Participant, necessary reductions may be made in a different manner and priority pursuant to the agreement of the Committee and the administrators of all other plans covering such Participant. V-7 The charges and credits required by this Section 5.06(c) in any Plan Year shall be made prior to any adjustments under Section 5.02 as of the same Anniversary Date. (d) CODE SECTION 401(K) LIMITS. Under Code Section 401(k), the contributions allocated to a Participant's Salary Deferral Account in a particular Plan Year shall be limited as described in Section 4.04(a) and (b). The Committee shall have the responsibility for monitoring compliance with the requirements of Section 4.04 and shall have the power to take any steps it deems appropriate to ensure compliance, including limiting the amount of salary reduction permitted for Highly Compensated Employees or designating a portion of the Employer contributions pursuant to Section 4.01(a)(ii) on behalf of such Plan Year to be allocated to the Salary Deferral Account of Non-Highly Compensated Employees, with such amount to be treated as part of their deferral percentage until such time as the Committee determines that contributions can be made on behalf of the Highly Compensated Employees without violating the requirements of Code Section 401(k). (e) CODE SECTION 415 COMPENSATION DEFINITION. Participant's Compensation for the purposes of this Section 5.06 shall mean a Participant's earned income, wages, salaries and fees for professional services, and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Employer maintaining the Plan to the extent that the amounts are includable in gross income (including, but not limited to, commissions paid salesmen, compensation for services on the V-8 basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements and expense allowances), and excluding the following: (i) Employer contributions to a plan of deferred compensation which are not included in the Employee's gross income for the taxable year in which contributed, or Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the Employee, or any distributions from a plan of deferred compensation; (ii) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by the Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (iii) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; (iv) Other amounts which received special tax benefits, or contributions made by the Employer (whether or not under a salary reduction agreement) toward the purchase of an annuity described in Section 403(b) of the Code (whether or not the amounts are actually excludable from the gross income of the Employee). Compensation earned but not paid in a Plan Year may include amounts earned but not paid in a Plan Year because of the timing of pay periods and pay days if such amounts are paid during the first few weeks of the next following Plan Year, the amounts are included on a uniform and consistent basis with respect to all similarly situated Employees, and no Compensation is included in more than one Limitation Year. V-9 5.07 ACCOUNTS IN GENERAL. As soon as the Committee has made the adjustments to the Participants' Accounts required by this Article, it shall notify each Participant as to the status of his Account or Accounts. Such notification shall in any event be made not later than one hundred twenty (120) days after the Valuation Date. The total amounts so credited to each Participant's Accounts shall represent each Participant's share of the Fund as of such date. Such allocation and notification shall not vest in any Participant any right, title or interest in the Fund, except to the extent, at the time or times, and upon the terms and conditions set forth herein. The Employer, the Funding Agent and the Committee do not in any manner or to any extent whatever warrant, guarantee or represent that the value of any Participant's Accounts will at any time equal or exceed the amount previously allocated thereto and, except as provided in ERISA, shall not be liable or responsible for any inadequacy of the Fund to meet and discharge any or all payments and liabilities under the Plan. 5.08 INTERIM EVALUATION OF ACCOUNTS. Each Account of a Participant whose Termination Date occurs on a date other than a Valuation Date shall be valued currently, using the same procedure described in Section 5.03, if such interim evaluation, determined in a uniform and nondiscriminatory manner, is necessary to account for a material change in the fair market value of the Fund. The Committee shall determine the fair market value, based on information furnished by the Funding Agent, as of the end of the calendar month next preceding the Participant's Termination Date, of the net Fund in order to determine the percentage of increase or decrease in the fair market value of such Fund when compared with the fair market value of such Fund as of the next preceding Valuation Date. In determining the percentage of increase or decrease of the fair market value of the Fund, all dividends, declared but not yet paid, interest and other V-10 income received by the Funding Agent in the interim between the next preceding Valuation Date and the interim evaluation date shall be included. Once the percentage of increase or decrease has been determined, the Account or Accounts of such Participant as of the next preceding Valuation Date shall, for purposes of distribution only, be multiplied by the percentage so determined in order to reflect such increase or decrease. This interim evaluation shall not affect the amount to be forfeited, if any, under Section 6.05 and any increase or decrease in the fair market value of the Fund so distributed to, or retained with respect to the Account or Accounts of, a former Participant shall increase or decrease unallocated assets for the purpose of any evaluation required by Section 5.03. 5.09 INSURANCE. No portion of the interest of a Participant shall be applied to the purchase of any policy of insurance relating to other Participants; and no policy premium shall be less than the premium rate of an ordinary life insurance policy. The interest of each Participant shall be invested proportionately with the interests of all Participants in any such policy of insurance or other earmarked investment. All policies of insurance shall be issued by a legal reserve life insurance company authorized to do business in the State of California. All proceeds from any "key-man" insurance policies upon the life of any officer or employee of the Employer shall inure solely to the benefit of the then Participants of the Employer. In valuing the Fund, and notwithstanding anything to the contrary herein, all policies of insurance actually purchased are to be excluded. Nothing herein shall be constructed to confer upon a Participant or his Beneficiary any right to any such policy except to the extent of his vested interest in this Plan. Ordinary policies of life insurance may be purchased. However, not more than 49.9% of the contributions allocated to the interest of a Participant shall V-11 be applied to the payment of premiums upon such ordinary policies of life insurance. All policies of ordinary life insurance so purchased for the account of a Participant shall be distributed at or before retirement to such Participant. V-12 ARTICLE VI RIGHT TO BENEFITS 6.01 VESTING OF INTEREST IN SALARY DEFERRAL, EMPLOYER MATCHING, ROLLOVER AND PERMANENT ACCOUNTS. The interest of each Participant in his Salary Deferral Contribution Account, Employer Matching Account, Rollover and Permanent Accounts shall be 100% vested and nonforfeitable. 6.02 VESTING OF INTEREST IN EMPLOYER PROFIT SHARING ACCOUNT. The interest of each Participant in his Employer Profit Sharing Account shall vest and become nonforfeitable up to a maximum of one hundred percent (100%) as follows: (a) Pursuant to the following schedule:
Vested Period of Service percentage ----------------- ---------- Less than 3 years 0% 3 years but less than 4 years 20 4 years but less than 5 years 40 5 years but less than 6 years 60 6 years but less than 7 years 80 7 or more years 100 ===
(b) One hundred percent (100%) on the Participant's attaining age sixty- five (65). (c) One hundred percent (100%) on the Participant's death, or upon a determination, in accordance with Section 3.05(c), that he is totally and permanently disabled. (d) For the purpose of determining a Participant's vested percentage under subsection (a), the following Periods of Service shall be disregarded: (i) All Periods of Service prior to the original Effective Date. (ii) Those Periods of Service of a former nonvested Participant which relate to a Period of Service prior to his incurring a Break in Employment, if his Period of Separation exceeds VI-1 both his prior Period of Service and sixty (60) consecutive months. (iii) Any Period of Separation which exceeds twelve (12) consecutive months. The vesting of a Participant's interest in whole, or in part, in his Employer Profit Sharing Account shall not preclude the allocations and evaluations required under the preceding Article. If the Plan should ever be amended to change the vesting schedule thereunder, then each then Participant's vested percentage in his Employer Profit Sharing Account as of the later of the date such amendment is adopted or the date it becomes effective, shall be, at any time, not less than his vested percentage computed under the Plan without regard to such amendment; provided, however, that in the event the vesting schedule in a particular Plan Year goes from the Top Heavy vesting schedule back to the vesting schedule in Section 6.02(a), only those Participants with three (3) or more Years of Service shall have the right to retain the Top Heavy schedule. 6.03 FULLY VESTED BENEFITS. If a Participant retires or is retired from the employ of the Employer under (a), (b) or (c) of Section 3.05, dies while in the employ of the Employer, or resigns or is dismissed when his Employer Profit Sharing Account is fully vested in accordance with Section 6.02, the entire balances in his Employer Profit Sharing Account and all other Accounts as of the Valuation Date coinciding with or next preceding his Termination Date (after all adjustments then required or permitted under the Plan have been made) will become distributable to or for his benefit, or for the benefit of his Beneficiary, as the case may be, in accordance with Article VII. Any additional allocations made pursuant to Section 5.05 shall be paid as soon as possible in accordance with Article VII. 6.04 PARTIALLY VESTED BENEFITS. Except as specifically provided in Section 6.03, if a Participant resigns or is dismissed from the employ of the VI-2 Employer before retirement under (a), (b) or (c) of Section 3.04, the balance in his Employer Profit Sharing Account as of the Valuation Date coinciding with or next preceding his Termination Date (after all adjustments then required under the Plan have been made) will be reduced to an amount from his Employer Profit Sharing Account (hereinafter referred to as the "Vested Amount") determined in accordance with Section 6.02. The Vested Amount in the Participant's Employer Profit Sharing Account and the entire balance in all other Accounts (after all adjustments then required or permitted under the Plan have been made) will become distributable to or for his benefit, or to or for the benefit of his Beneficiary, as the case may be, in accordance with Article VII. 6.05 FORFEITURES. The non-vested portion of a Participant's Employer Profit Sharing Account shall be forfeited as of the Valuation Date on or following the earlier of: (a) The date as of which the Participant receives a distribution of his Employer Profit Sharing Account on account of his termination of employment or (b) The date which is the close of a sixty (60)-month period of Separation following a Break in Employment. Provided, however, that if the Participant is reemployed prior to the date that he incurs a sixty (60)-month Period of Separation following a Break in Employment, any amounts so forfeited shall be reinstated (unadjusted by any gains or losses occurring after such forfeitures) to the Participant's Employer Profit Sharing Account within a reasonable time after repayment by the Participant of the amount of any distribution he may have received pursuant to Sections 7.02 or 7.03. Such repayment must be made before the earlier of the date which is five (5) years after the date on which the Participant is subsequently reemployed by the Employer or the date which is the close of a VI-3 sixty (60)-month Period of Separation commencing after a distribution or withdrawal. If a Participant does not receive a total distribution of his Accounts, the amount forfeited shall be reinstated if the Participant returns to employment covered by the Plan whether or not the Participant repays the amount of distribution he may have received. For the purposes of this Section 6.05, if the value of an Employee's vested Account is zero, the Employee shall be deemed to have received a distribution of such vested Account. If such Participant resumes employment covered by this Plan before the date the Participant incurs a sixty month Period of Separation, the amount forfeited shall be restored to the Participant's Account. Amounts forfeited pursuant to this Section 6.05 shall be allocated as provided pursuant to Section 5.05. A Participant's vested Account shall not include any accumulated deductible Employee contributions within the meaning of Code Section 72(o)(5)(B) made for Plan Years beginning prior to January 1, 1987. 6.06 TOP HEAVY PROVISIONS. The following provisions shall apply for each Plan Year for which the Plan is Top Heavy: (a) The Compensation of each Key Employee taken into account for purposes of computing the maximum amount of the Employer contribution hereto or Annual Additions of any Participant's Account for each such Year shall not exceed his Top Heavy Compensation. (b) If the Employer does not maintain a qualified defined benefit retirement plan, or does maintain such a plan but each Non-Key Employee does not accrue the minimum benefit thereunder required by Section 416 of the Code, the Employer Contribution, if any, for any such Plan Year shall be allocated on the basis of each VI-4 Participant's Top Heavy Compensation in such manner as may be prescribed by the Code or any pertinent regulations promulgated thereunder as will result in each Non-Key Employee receiving an allocation hereunder of the amount which, when added to the amount allocated to his Account or any amount allocated pursuant to Section 401(k) under this or any other qualified defined contribution retirement plan maintained by the Employer for such Year, will at least equal the lesser of: (i) three percent (3%) of his Top Heavy Compensation, (ii) the highest percentage computed by dividing the amount of the Employer contributions so allocated to each Key Employee's Accounts (including amounts contributed as the result of a salary reduction agreement) by his Top Heavy Compensation, or (iii) the amount otherwise required after any credit against or reduction of the minimum amounts described in clauses (i) or (ii) allowable for benefits accrued under any such defined benefit plan. Non-Key Employees entitled to the minimum percentage contribution set forth in clause (i) or (ii) shall also include (iv) Participants who have not incurred a Break in Employment at the end of the Plan Year and (v) Eligible Employees who declined to make Salary Deferral Contributions to the Plan but must be considered as Participants to satisfy the coverage requirements of Code Section 410(b) in accordance with Section 401(a)(5) of the Code even if such Participants or Eligible Employees have earned less than 1,000 Hours of Service and regardless of their level of Compensation. However, if the Employer maintains any other qualified defined benefit retirement plan and this Plan is aggregated therewith for purposes of meeting the requirements of Section 401(a)(4) or 410 of the Code, the minimum amount described in clause (ii) of the preceding VI-5 sentence shall not be applicable. Further, if the Employer maintains any other qualified defined benefit plan for purposes of providing the additional benefits permissible by Section 415 of the Code, and each Non-Key Employee does not accrue the minimum benefit thereunder required by Section 416 of the Code, the percentage set forth in clause (i) hereinabove shall be deemed to be seven and one-half percent (7-1/2%). (c) A Participant's vested percentage in his Employer Profit Sharing Account attributable to Employer contributions made for Years in which this Plan is Top Heavy shall be no less than the percentage determined in accordance with the schedule below if his participation hereunder terminates.
Vested Period of Service percentage ----------------- ---------- Less than 2 years 0% 2 years but less than 3 years 20 3 years but less than 4 years 40 4 years but less than 5 years 60 5 years but less than 6 years 80 6 or more years 100 ===
(d) Unless the Plan qualifies under an exception as described in Section 416(h)(2) of the Code, "1.0" shall be substituted for "1.25" in the definitions of Defined Benefit Plan fraction and Defined Contribution Plan fraction contained in this Plan. (e) Solely for the purpose of determining if the Plan, or any other plan included in a required aggregation group of which this Plan is a part, is Top Heavy (within the meaning of Section 416(g) of the Code) the accrued benefit of an Employee other than a Key Employee (within the meaning of Section 416(i)(1) of the Code) shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Affiliated Employers, or (ii) if there is no such method, as if such VI-6 benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rule of Section 411(b)(1)(C) of the Code. (f) Neither Elective Deferrals nor Matching Contributions shall be used to satisfy the minimum contribution or benefit accrual which must be made on behalf of Non-Key Employees pursuant to this Section 6.06. 6.07 PERSONS UNDER LEGAL OR OTHER DISABILITY. In the event a Participant or his Beneficiary is judicially determined to be incompetent, and a conservator or other person legally charged with the care of his person or of his estate is appointed, any benefits to which such Participant or Beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of his person or of his estate. Except as provided in this Section, when, in the opinion of the Committee, a Participant or his Beneficiary is in any way incapacitated so as to be unable to manage his financial affairs, the Committee may direct the Funding Agent to make payments or distributions to his legal representative or to a relative or friend of such person for his benefit, or the Committee may direct the Funding Agent to make payments and distributions for the benefit of the Participant or his Beneficiary in any way the Committee determines as further detailed in Section 1.02(e). 6.08 MISSING PARTICIPANTS OR BENEFICIARIES. Each Participant and each Beneficiary shall file, or cause to be filed, with the Committee through the Employer from time to time in writing, his mailing address and each change of mailing address. Any communication, statement or notice addressed to a Participant or his Beneficiary at his last mailing address filed with the Committee, or if no address is filed with the Committee, then at his last mailing address as shown on the Employer's records, will be binding on the Participant and his Beneficiary for all purposes of the Plan. VI-7 Neither the Committee nor the Funding Agent shall be required to search for or locate a Participant or his Beneficiary other than by mailing the notices set forth in this Section 6.08. If the Committee sends the notice required by this Section 6.08 to a Participant or his Beneficiary stating that he is entitled to a distribution and also includes in such notice the provisions of this Section, and the Participant or his Beneficiary fails to claim his benefits under the Plan or make his whereabouts known to the Committee within three (3) calendar years after notification, the benefits under the Plan of the Participant or his Beneficiary will be disposed of as follows: (a) If the whereabouts of the Participant is unknown but the whereabouts of the Participant's Beneficiary then is known to the Committee, distribution will be made to the Beneficiary; (b) If the whereabouts of the Participant and his Beneficiary then is unknown to the Committee, but the whereabouts of one or more relatives by adoption, blood or marriage of the Participant is known to the Committee, the Committee shall direct the Funding Agent to distribute the Participant's benefits to any one or more of such relatives and in such proportions as the Committee in its sole discretion determines; (c) If the whereabouts of the Participant, his Beneficiary and relatives by adoption, blood or marriage of the Participant then is unknown to the Committee, the amount of such benefits shall be forfeited, provided that the amount of such benefits shall be reinstated if a claim is subsequently made by the Participant or his Beneficiary. 6.09 LIEN FOR DEBTS TO FUND. If, at the time of occurrence of any event which causes a distribution to be made hereunder, notwithstanding any other provisions of the Plan to the contrary, should a Participant have any outstanding indebtedness to the Fund, the Committee shall determine the total amount of such indebtedness and notify the Funding Agent. The VI-8 Funding Agent, upon receipt of such notice, shall retain and pay over to the Fund such amount from the Participant's vested interest in his Account or Accounts. In the event the Participant is to receive payment of his interest herein by lump sum, the Funding Agent shall pay the Fund the debt outstanding and then distribute the remaining balance, if any, to the Participant. 6.10 LOANS TO PARTICIPANTS. If a financial emergency arises from such causes as sickness of a Participant or his family, layoff, divorce or dissolution of marriage, need to provide adequate housing, need to provide for education of children or dependents or such other financial need deemed acceptable by the Committee, the Committee, in its sole discretion and upon written application of such Participant, may make a loan or loans to such Participant in an amount aggregating under this Plan or any other Plan (Related Plan) maintained by the Employer not less than one thousand dollars ($1,000) nor in excess of the lesser of (1) fifty thousand dollars ($50,000) (reduced by the highest outstanding loan balance during the one (1)-year period ending on the day before the loan is made over the outstanding balance of loans from the Plan to the Participant on the date which such loan is made), or (2) fifty percent (50%) of the sum of the Participant's vested Employer Matching Account, Employer Profit Sharing Account, Permanent Account, Rollover Account and the Participant's Salary Deferral Account, provided that such loans: (a) Are available to all Participants on a reasonably equivalent basis, and in the same percentage of their vested balances; (b) Are not made available to Highly Compensated Employees, officers or shareholders in an amount greater than the amount made available to other Employees; (c) Are adequately secured; VI-9 (d) Will in all events be due and payable in substantially level payments made through payroll deductions unless otherwise authorized by the Committee in five (5) years or less (unless the loan is used to acquire a dwelling which is used or to be used within a reasonable time as the principal residence of the Participant or the Participant's brothers, sisters, spouse, ancestors or lineal descendants which may, by its terms be repaid within fifteen (15) years); (e) Are evidenced by the borrowing Participant's promissory note (including in the case of a married Participant spousal consent to such loan) for a fixed term bearing interest at a rate commensurate with the prevailing interest rate charged on similar commercial loans by persons in the business of lending money as determined by the Committee. Such note shall be payable to the Trustee not later than the earliest of : (i) a fixed maturity date as described in (d) above provided, however, that in the event of a Participant's termination of employment with the Employer, such note shall become immediately due and payable; or (ii) the Participant's death. (f) If valid consent has been obtained in accordance with paragraph (g) below, then, notwithstanding any other provision of this Plan, upon distribution of a Participant's Account, all notes are due and payable and total amounts unpaid, including principal and interest, will be deducted from the amount distributed, but only if such reduction is used as a repayment of the loan. If less than one hundred percent (100%) of the Participant's vested Account is payable to the surviving spouse, then the Account shall be adjusted by first reducing the vested VI-10 Account by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse; (g) Notwithstanding the above, no portion of a Participant's Account may be used as security for a loan unless, at the time, the security interest is entered into, the Participant's spouse (if any) consents to the use of the Participant's Account as security. Such consent must: (i) Acknowledge the effect of the consent; and (ii) Be signed within the 90-day period ending on the date on which the loan is to be so secured; and (iii) Be witnessed by a Plan representative or notary public. Such consent shall thereafter be binding with respect to the consenting spouse or any subsequent spouse with respect to that loan. A new consent shall be required if the Account is used for renegotiation, extension or renewal, or other revision for the loan; (h) Shall be made under specific procedures established by the Administrative Committee. Such procedures shall include the basis on which loans will be approved or denied; the limitations, if any, on the types and amounts of loans offered; and the events constituting a default and the steps that will be taken to preserve Plan assets in the event of such default. For the purposes of this Section 6.10, if three (3) monthly payments are not made, or if one quarterly payment is not made the loan shall be in default. (i) A Participant may upon thirty (30) days written notice delivered to the Committee (on such form as the Committee may prescribe), request that a loan be made to the Participant in conformity with the dollar limits set forth above provided no loan request has been VI-11 made within the preceding twelve (12) calendar months. A Participant shall first borrow the available balance in his Salary Deferral Account, shall next borrow the available balance in his Employer Matching Account, and finally shall borrow any available balance in his Employer Profit Sharing Account. A Participant may not request a second loan until any prior outstanding loan has been repaid in full. Each loan shall be made only from an Account or Accounts of the Participant requesting the loan and shall be treated as an investment of such Account or Accounts funding the loan. So long as a loan to a Participant under this Plan is outstanding, the Participant may not elect to withdraw any portion of his Account or Accounts prior to termination under the provisions of Article VI. (j) The Committee shall have the power to establish additional rules with respect to loans extended pursuant to this Article VI as may be appropriate to ensure the orderly administration of this Plan including, but not limited to, rules relating to non-discriminatory minimum installments. Notwithstanding (e) above, in no event, except as may otherwise be required by ERISA, may the interest rate charged for a loan exceed any limit established under the applicable state usury law. Such loan shall be treated as an earmarked investment of the borrowing Participant who shall be entitled to all earnings or losses thereon. In the event a Participant is deemed to be in default pursuant to written procedures maintained by the Plan, the Plan shall treat such loan as a deemed distribution of Plan benefits as of the date of such default with the Participant's vested interest reduced accordingly. VI-12 6.11 WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT. (a) Amounts may be withdrawn from a Participant's Employer Matching Account, Permanent Account or Rollover Account while the Participant remains in the employ of the Employer provided that withdrawals are limited to contributions made to the stated Accounts at least twenty- four (24) full calendar months prior to the beginning of the Plan Year in which the withdrawal request is made, together with any earnings thereon. (b) If a Participant has attained age fifty-nine and one-half (59-1/2) years, all amounts that have been allocated to the Participant's Salary Deferral Contributions Account may be withdrawn by the Participant upon request to the Committee on approved forms provided the Participant has received distribution of all of the value of his other Employee Accounts or has requested such withdrawals. Such withdrawals shall be allowed only if all loans made to the Participant pursuant to Section 6.10 have been repaid in full. The minimum amount that may be withdrawn at any one time is the lesser of three hundred dollars ($300.00) or the entire value of the Participant's Salary Deferral Contribution Account. All other rules will be uniformly applicable to all Participants and shall require spousal consent if the Participant is married. Such spousal consent must acknowledge the effect of the withdrawal, be signed within the 90-day period preceding the date the withdrawal is to be made, and be witnessed by a Plan representative or notary public. No more than two (2) requests for withdrawal pursuant to this Section 6.11(b) shall be permitted in any Plan Year. (c) In addition, a distribution of the Salary Deferral Contributions (but not Qualified Matching Contributions or Qualified VI-13 Non-Elective Contributions) made by a Participant may be made from such Participant's Salary Deferral Contributions Account on account of hardship if the distribution is necessary in light of immediate and heavy financial need of the Employee determined in accordance with Code Section 401(k)(2)(b)(IV) and regulations issued thereunder. Such distribution shall be made subject to spousal consent as described above. In no event shall such distribution include any of the investment gains earned after December 31, 1988 on such Salary Deferral Contributions or any Employer Contribution which was recharacterized or eligible to be recharacterized to enable the Plan to meet the requirements of the ADP test in Section 4.04. A distribution will not be treated as necessary to satisfy an immediate and heavy financial need of an Employee to the extent the amount of the distribution is in excess of the amount required to relieve the financial need or to the extent such need may be satisfied from other resources that are reasonably available to the Participant. (i) In order to receive a distribution under this Section 6.11(c) a Participant shall be required to submit an appropriate application to the Committee. Such application shall include the Participant's written statement that the financial need cannot be relieved: (A) Through reimbursement or compensation by insurance or otherwise, (B) By reasonable liquidation of the Participant's assets, to the extent such liquidation would not itself cause an immediate and heavy financial need, VI-14 (C) By cessation of Elective Deferrals or Employee Contributions under the Plan, or (D) By other distributions or nontaxable (at the time of the loan) loans from plans maintained by the Employer or by any other employer, or by borrowing from commercial sources on reasonable commercial terms. (ii) The Committee shall deem a distribution to be necessary if all of the following requirements are satisfied: (A) The distribution is not in excess of the amount of the immediate and heavy financial need of the Participant including the amount necessary to pay income taxes or penalties resulting from the distribution, (B) The Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans currently available under all plans maintained by the Employer, (C) 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 twelve months (12) after receipt of the hardship distribution, and (D) The Plan, and all other plans maintained by the Employer, provide that the Participant may not make Elective Deferrals for the Employee's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Code Section 402(g) for such next taxable year less the amount of such Participant's Elective Deferrals for the taxable year of the hardship distribution. VI-15 (E) Unless otherwise allowed by the appropriate income tax regulations, the following are the only financial needs which will be considered immediate and heavy: deductible medical expenses (within the meaning of Section 213(d) of the Code) of the Employee, and the Employee's spouse, children, or dependents, either incurred or required; the purchase (excluding mortgage payments) of a principal residence of the Employee; payment of tuition and related education expenses for twelve (12) months of post- secondary education for the Employee, and the Employee's spouse, children, or dependents; or the need to prevent the eviction of the Employee from, or a foreclosure on the mortgage of, the Employee's principal residence. 6.12 NATURE OF PARTICIPANTS' INTEREST. The interest of a Participant in the Fund shall not be deemed to be in the assets of the Fund, but rather in a right to receive, in cash or in kind, from the Funding Agent the nonforfeitable or vested interest of the Participant in his Employer Profit Sharing Account and Salary Deferral Account, as determined by the Committee at such time and subject to the provisions of Articles VII and VIII. 6.13 SUSPENSION OF BENEFITS AND IMMEDIATE PARTICIPATION UPON REEMPLOYMENT. Notwithstanding any other provision of this Agreement, the payment of benefits hereunder to a former Participant who returns to the employ of the Employer after VI-16 incurring a Break in Employment shall be suspended for the period of such reemployment. Such former Participant will become a Participant as of the date on which he first earns a Day of Service after his reemployment. 6.14 APPLICATION FOR BENEFITS. (a) A Participant must complete and file an application for benefits under the Plan. Application for benefits shall include all pertinent information requested by the Committee, including reasonable proof thereof. Applications for benefits must be in writing on the forms prescribed by the Committee and must be signed by the Participant and his spouse, if any, and submitted to the Committee. (b) Each application for benefits shall be acted upon and approved or disapproved within ninety (90) days following its receipt by the Committee. (c) If any application for benefits is denied, in whole or in part, the Committee shall notify the applicant in writing of such denial and of such Participant's right to a review by the Committee and shall set forth specific reasons for such denial, specific references to pertinent Plan provisions on which the denial is based, a description of any additional material or information necessary for the applicant to perfect the application, an explanation of why such material or information is necessary and an explanation of the Plan's review procedure. If the Committee fails to act within the ninety (90)-day period specified above, the Participant may assume that his application for benefits has been denied either in whole or in part. 6.15 APPEALS PROCEDURE. (a) Any Participant, or such Participant's duly authorized representative, whose application for benefits is denied, in whole or in part, may appeal from such denial to the Committee for a VI-17 review of the decision by submitting to the Committee within sixty (60) days after receiving written notice from the Committee of the denial of the claim a written statement: (i) Requesting a review of the application for benefits by the Committee; (ii) Setting forth all of the grounds upon which the request for review is based and any facts in support thereof; and (iii) Setting forth any issues or comments which the applicant deems relevant to the application. The Committee shall act upon each such application within sixty (60) days after either receipt of the applicant's request for review by the Committee or receipt of any additional materials reasonably requested by the Committee from such applicant, whichever occurs later. (b) The Committee shall make a full and fair review of each such application and any written materials submitted by the applicant or the Employer in connection therewith and may require the Employer or the Participant to submit within thirty (30) days after a written notice by the Committee therefore, such additional facts, documents or other evidence as is deemed necessary or advisable in the sole discretion of the Committee in making such a review. On the basis of the review, the Committee shall make an independent determination of the applicant's eligibility for benefits under the Plan. The decision of the Committee on any application for benefits shall be final and conclusive upon all persons if supported by substantial evidence in the record. If the Committee denies an application in whole or in part, the Committee shall give written notice of the decision to the applicant setting forth the specific reasons for such denial and specific references to the VI-18 pertinent Plan provisions on which the Committee's decision is based. Such written notice shall be given within one hundred-twenty (120) days of the date the appeal was filed. 6.16 APPLICATION FOR CORRECTION OF ANNUAL STATEMENT. If a Participant believes that the annual statement respecting his accounts is incorrect, he may submit a written request to the Committee for correction or verification of the statement. The Committee shall respond in writing in the same manner set forth in Section 6.14 and the same appeal and review procedures shall be available to the Participant. VI-19 ARTICLE VII DISTRIBUTION OF BENEFITS 7.01 METHODS OF MAKING DISTRIBUTIONS. (a) The Committee shall direct the Funding Agent to distribute the net credit balances in the Participant's Employer Matching Account, Employer Profit Sharing Account, Permanent Account and Rollover Account, if any, and Salary Deferral Contributions Account to or for the benefit of the Participant, or in the event of his death, to or for the benefit of his Beneficiary, in cash (and whole shares in the case of investments in the "Stock Fund") as a single payment. (b) Distributions of a Participant's Accounts payable in accordance with Section 6.02 will be made or commenced (unless administratively unfeasible) no later than the sixtieth (60th) day next following the close of the Plan Year during which the Participant's Termination Date occurs. Provided, however, that if the Participant fails to consent to an immediate distribution, failure to so consent shall be construed as an election to defer distribution until the later of the Normal Retirement Age or age sixty-two (62). Notwithstanding the preceding sentence, a Participant who meets the service requirement, if any, for early retirement pursuant to Section 3.05, but who terminates prior to his early retirement age, shall be eligible to elect to receive his early retirement benefit at any time after attaining his early retirement age. When directed by the Committee, the Funding Agent shall make interim payments from such accounts to the Participant, or in the event of his death to his Beneficiary, at such time and in such amounts as the Committee may direct during the period from the Participant's Termination Date to the VII-1 Anniversary Date coinciding with or next following the Participant's Termination Date. (c) Distribution of a Participant's Accounts payable in accordance with Section 6.03 will be made or commenced as soon as possible after the Valuation Date as of which the net credit balances in the accounts are determined subject to the provisions of Sections 7.03 and 7.04. (d) The Funding Agent shall have no discretion with respect to making distributions under the Plan and, therefore, except as otherwise specifically provided hereinabove, shall make distributions only at such time and in such manner as the Committee directs. The Funding Agent shall have no responsibility to see to the application of distributions so made or to ascertain whether the directions of the Committee comply with the Plan. (e) Notwithstanding anything to the contrary contained herein, the distribution options under the Plan shall comply with Section 401(a)(9) of the Code and regulations promulgated thereunder. Accordingly, unless otherwise permitted by law, the entire interest of each Participant shall commence to be distributed by April 1 of the calendar year following the calendar year in which the Participant reaches age seventy and one-half (70-1/2) over the life of such Participant (or over the lives of the Participant and his Beneficiary) or over a period not extending beyond the life expectancy of the Participant (or over a period not extending beyond the life expectancy of the Participant and his Beneficiary). If a distribution has begun in accordance with the preceding sentence and the Participant dies before his entire interest has been distributed to him, the remaining portion of his VII-2 interest shall be distributed at least as rapidly as under the method of distribution being used under the preceding sentence as of the date of his death. If a Participant dies before the distribution of his interest has begun, his entire interest shall be distributed within five (5) years after the date of his death, unless the requirements of one (1) of the two (2) following exceptions are satisfied: (i) the Participant's interest will be distributed to a Beneficiary over the life of such Beneficiary or over a period not extending beyond the life expectancy of such Beneficiary, and the distributions begin not later than one (1) year following the date of the Participant's death (or such later date as permitted by law), or (ii) the Participant's interest will be distributed to or for the benefit of his surviving spouse over the life expectancy of such surviving spouse or over a period not extending beyond the life expectancy of such surviving spouse, and the distributions begin no later than the date on which the Participant would have attained age seventy and one-half (70-1/2) (if the surviving spouse dies before such distributions begin, this second exception shall be applied as if the surviving spouse were the Participant). For purposes of this paragraph and to the extent permitted by law, any amount paid to a Participant's child shall be treated as if it had been paid to the Participant's surviving spouse if such amount will become payable to the surviving spouse upon such child reaching majority (or other designated event permitted by law). (f) Notwithstanding anything in the above to the contrary, payment of benefits shall commence no later than sixty (60) days after the latest of the close of the Plan Year in which: (i) The Participant reaches Normal Retirement Age; VII-3 (ii) The tenth (10th) anniversary of the date on which the Participant commenced participation occurs; or (iii) The Participant terminates employment. (g) All payment options shall require that the present value of expected payments to be made to the Participant shall be more than fifty percent (50%) of the present value of all payments. 7.02 INVOLUNTARY CASH-OUT OF VESTED PARTICIPANT ACCOUNTS. The Plan will make a lump sum distribution of the entire vested interest in his Accounts to a Participant entitled to a distribution in accordance with Sections 6.03 and 6.04, provided that the amount of his Accounts has never exceeded three thousand five hundred dollars ($3,500). 7.03 VOLUNTARY CASH-OUT OF VESTED PARTICIPANT ACCOUNTS. A Participant entitled to a distribution in accordance with Sections 6.03 and 6.04 may elect to receive a lump sum distribution of his entire vested interest in his Accounts. 7.04 WITHHOLDING ON DISTRIBUTIONS. All nonperiodic distributions and periodic payments shall be subject to the provisions of Section 8.03, items (l) through (n), hereto, unless pursuant to Code Section 401(a)(31) and I.T. Regulation Section 1.401(a)(31)-IT the distributee of any eligible rollover distribution elects to have the distribution paid directly to an eligible retirement plan in a direct rollover. Accordingly, in addition to any other required payment restrictions, the Committee shall, not less than 30 days or more than 90 days prior to a distribution, provide the distributee with a notice of his right to have his distribution paid in a direct rollover to an eligible retirement plan and provide the distributee the means to make such election in accordance with the following: (a) If a distribution is one to which Sections 401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution may commence less than 30 days after the notice required under VII-4 Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (i) The Plan administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) The Participant, after receiving the notice, affirmatively elects a distribution. (b) This Provision applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under the Provision, a distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an eligible rollover distribution that is at least equal to five hundred dollars ($500) paid directly to an eligible retirement plan specified by the distributee in a direct rollover. (c) Definitions (i) 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 VII-5 portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (ii) 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. (iii) Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (iv) Direct rollover: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. VII-6 ARTICLE VIII THE COMMITTEE 8.01 COMMITTEE. The Employer shall appoint an Administrative Committee of not less than three (3) persons. The Employer shall certify to the Funding Agent the names and specimen signatures of the members of the Committee. The members of the Committee shall serve at the pleasure of the Employer, and any member may resign by written instrument addressed to the Employer and may be removed by the Employer with or without cause. While a vacancy exists, the remaining member(s) of the Committee may perform any act which the Committee is authorized to perform. The decisions of the majority of the number of members of the Committee then in office shall constitute the final and binding act of the Committee. The Committee may act with or without a meeting being called or held and shall keep minutes of all meetings held and a record of all actions taken by written consent. The Funding Agent shall be promptly notified in writing by the Employer of the original membership, and of any change in the membership, of the Committee and shall be supplied with specimen signatures of each Committee member. Vacancies in the membership of the Committee shall be filled promptly by the Employer. 8.02 COMMITTEE ACTION. The Committee shall choose a secretary (hereinafter referred to as the "Secretary") who may, but need not, be one of the members of the Committee. The Secretary shall keep minutes of the Committee's proceedings and all records and documents pertaining to the Committee's administration of the Plan. Any action of the Committee shall be taken pursuant to a majority vote or the written consent of a majority of its members, and such action shall constitute the action of the Committee and be binding the same as if all members had joined therein. A quorum of the Committee shall consist of a majority of its members. The Secretary may execute any certificate or other written direction on behalf of the Committee. VIII-1 The Funding Agent or third persons dealing with the Committee may conclusively rely upon any certificate or other written direction signed by the Secretary which purports to have been duly authorized by the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself as a Participant, unless all Participants are members of the Committee or there are no other Participants. If a matter arises affecting one of the members of the Committee as a Participant and the other members of the Committee are unable to agree as to the disposition of such matter, the Employer may appoint a substitute member of the Committee in the place and stead of the affected member, for the sole and only purpose of passing upon and deciding the particular matter. 8.03 RIGHTS AND DUTIES. The Employer, on behalf of the Participants and their Beneficiaries, shall be the administrator as defined in Section 3(16)(A) of ERISA. The Committee acting as an agent of the Employer shall enforce the Plan on a nondiscriminatory basis in accordance with its terms; shall be charged with the general administration of the Plan; and shall have all powers and duties necessary to accomplish those purposes, including, without limiting the generality of the foregoing, the following: (a) To make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan; (b) To interpret and construe the terms and provisions of the Plan, its interpretation and construction thereof in good faith to be final and conclusive on all Employees, former Employees, Participants, former Participants and Beneficiaries, except as otherwise provided by law; (c) To determine all questions concerning the Plan and the eligibility of any person to participate in the Plan; (d) To determine the service of Participants to be recognized under the Plan; VIII-2 (e) To determine, compute and certify to the Funding Agent the amount and form of benefits which will be payable to any Participant, former Participant, or Beneficiary in accordance with the provisions of the Plan, and to determine the person or persons to whom such benefits will be paid; (f) To authorize the payment of benefits and all other disbursements by the Funding Agent from the Fund; (g) To maintain all the necessary records for the administration of the Plan other than those maintained by the Funding Agent; (h) To provide for disclosure of all information and filing or provision of all reports and statements to Participants, Beneficiaries or governmental bodies as shall be required by ERISA or the Code, and to submit to the Employer, at least annually, such information as is necessary to fully inform the Employer of the discharge by the Committee or its delegates of responsibilities under the Plan; (i) To enter into a written agreement or agreements with one or more Investment Managers (as defined by Department of Labor Regulations) to advise the Committee or the Funding Agent with respect to investment of the Fund, or to manage (including the power to acquire or dispose of) any assets of the Plan; (j) To delegate to such Investment Manager or Managers who have acknowledged his/their fiduciary status authority to exercise any and all powers of the Committee to direct the Funding Agent as to investment and reinvestment of the Fund; (k) To instruct the Funding Agent in writing from time to time with respect to investments of principal or income of trust funds, including, but not limited to: instructing the Funding Agent to acquire, retain, sell, exchange or lease any property, real or VIII-3 personal, which the Committee may designate; instructing the Funding Agent to invest in stated classes of investments (e.g., to invest all or a certain percentage of the funds in diversified mutual funds); instructing the Funding Agent to implement stated investment goals (e.g., to invest all or a certain percentage of the funds in high- grade equity securities with potentialities for capital appreciation); and instructing the Funding Agent to enter into a group contract and to invest assets held by an insurer under a group contract in accordance with the investment directions of the individual Participants; (l) To withhold, and be liable for, payment of the tax required to be withheld from any benefits paid in accordance with the provisions of this Plan, unless the Participant or Beneficiary who is payee for such benefits shall elect to have withholding not apply to such payments. Such election, where otherwise allowable, shall remain in effect until revoked by the elector. The maximum amount to be withheld shall not exceed the sum of the amount of money and the fair market value of other property (within the meaning of applicable law) received in payment of benefits, unless otherwise required by law; (m) (i) To notify the Participant or Beneficiary who is payee of any periodic payments, otherwise subject to withholding, of the right to elect not to apply withholding to such payments. Notice shall be given no earlier than six months before, and no later than, the date of the first periodic payment subject to withholding. Notice of the right to make and revoke such election shall be given to payees not less frequently than once each calendar year. VIII-4 (ii) To notify the Participant or Beneficiary who is payee of any nonperiodic distribution otherwise subject to withholding of the right to elect that withholding shall not apply to such distribution. Notice shall be given no later than the date of distribution or at such earlier date as may be prescribed by the Secretary of the Treasury. (iii) To notify the payee of mandatory withholding requirements in effect for years beginning after December 31, 1992 where appropriate statutory rollover requirements have not been met; (n) To direct the payor of authorized disbursements from the Fund to withhold payment of the tax required to be withheld by law. In such case, and if the payor is supplied with such information as required by regulations, then the payor shall be liable for payment of the tax withheld; (o) To establish a procedure for the Plan to deal with qualified domestic relations orders. Such procedure shall comply with the applicable requirements of Code Sections 401(a)(13) and 414(p), as well as ERISA Sections 206(d)(3)(A) and 516(b)(7), provided that the Plan shall be permitted to make an immediate distribution to an alternate payee pursuant to a qualified domestic relations order that provides for such distribution even though the Participant may not have attained his earliest possible retirement age; and (p) To determine the allocation, disposition and distribution of Trust fund assets in the event the Plan is terminated with respect to any one or more Participating Employers. VIII-5 8.04 FUNDING POLICY AND METHOD. (a) The Committee shall establish and carry out a funding policy and method for the Plan which is consistent with the objectives of the Plan and the requirements of Title I of ERISA. In so doing, the Committee shall, from time to time, determine whether the Plan has a short-run need for liquidity (e.g., to pay benefits) or whether liquidity is a long-run goal and investment growth (and the stability of the same) is a more current need or the Committee shall appoint a qualified person to do so. (b) The funding policy and method, as established and amended from time to time, shall be communicated by the Committee or its delegate to the Funding Agent in order that the investment policies of the Fund may be coordinated with the funding policy and method. 8.05 TRANSMITTAL OF INFORMATION. In order to enable the Committee to establish a funding policy and to perform its other functions under the Plan, the Employer shall supply full and timely information to the Committee on all matters relating to the compensation of all Employees and Participants, their employment, their retirement, death, or termination of employment, and such other pertinent facts as may be required. The Committee shall advise the Funding Agent of such of the foregoing facts as may be pertinent to the Funding Agent's administration of the Fund. 8.06 COMPENSATION. The members of the Committee shall serve without compensation for their services hereunder. Members of the Committee and its appointed delegates shall be bonded to the extent required by ERISA and the regulations issued by the Secretary of Labor. The expense of such bond and all expenses of the Committee or such delegate shall be paid by the Employer, unless charged to the Plan, and the Employer shall furnish the VIII-6 Committee without charge with such clerical and other assistance as is necessary in the performance of its duties. 8.07 RETENTION OF ADVISORS. The Committee may employ such persons or organizations to render advice or perform services with respect to the responsibilities of the Committee under the Plan as the Committee, in its sole discretion, determines to be necessary and appropriate. Such persons may include, without limitation, actuaries, attorneys, accountants, investment advisors and consultants. All costs, charges and expenses incurred by the Committee under the provisions of this Section shall be paid by the Employer unless charged to the Plan. 8.08 ALLOCATION AND DELEGATION OF FIDUCIARY RESPONSIBILITIES. (a) As provided in this Article, the Employer shall appoint the Committee. The Employer shall not, however, be responsible in any way or to any extent whatever for the operation and administration of the Plan. (b) The Committee, from time to time, may allocate to one (1) or more of its members and delegate to others any of its rights, powers, responsibilities and duties (hereinafter collectively referred to as "Duties") with respect to the operation and administration of the Plan. Each such allocation and/or delegation shall be in writing; shall specify the Duties so allocated or delegated; and shall be subject to termination by the Committee upon notice to the person or persons to whom such Duties have been allocated and/or delegated. Each person to whom Duties have been allocated and/or delegated shall, by a written acknowledgment, accept such allocation or delegation and acknowledge that he is a fiduciary with respect to the Plan. VIII-7 (c) The Committee shall periodically review the performance of any of its members or others to whom Duties have been allocated or delegated under the provisions of this Section: (i) by a formal annual review; (ii) by day-to-day contact and evaluation; or (iii) in other appropriate ways. 8.09 INDEMNIFICATION. To the extent permitted by the laws of the State of California and ERISA, the Employer shall indemnify and hold harmless the Board of Directors, the Committee and each member thereof, and any other Employee to whom any fiduciary responsibility with respect to the Plan is allocated or delegated, from and against any and all liabilities and claims, including legal fees to defend against such liabilities and claims, and costs and expenses, arising out of their discharge in good faith of responsibilities under or incident to the Plan, excepting only expenses and liabilities arising out of willful misconduct or gross negligence. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Employer or provided by the Employer under any agreement, operating policies or otherwise, as such indemnities are permitted under the laws of the State of California. Payments with respect to any indemnity and payment of insurance premiums, expenses or fees under this Section shall be made only from the Employer's assets and shall not be made directly or indirectly from the Fund assets. 8.10 DETERMINATIONS AND CORRECTIONS. It is recognized in the administration of the Plan that certain mathematical and accounting errors may be made, or mistakes arise, by reason of factual errors in information supplied to the Committee. The Committee shall have the power to make such corrections and equitable adjustments, arising from mathematical, accounting or factual errors made in good faith, as the Committee shall in its discretion deem appropriate, which adjustments shall be final and binding on VIII-8 all Employees, former Employees, Participants, former Participants and Beneficiaries. 8.11 DESIGNATION OF AGENTS. The Committee shall, in its sole discretion, have the right to appoint such agents as it may deem necessary to carry out its duties pursuant to the provisions of the Plan. 8.12 RELATIONSHIP OF FIDUCIARIES. It is the intent of all fiduciaries under the Plan that each fiduciary shall be solely responsible for its own acts or omissions. Except to the extent imposed by ERISA or the Code, no fiduciary shall have the duty to question whether any other fiduciary is fulfilling all of the responsibilities imposed upon such other fiduciary by ERISA or by any regulations or rulings issued thereunder. No fiduciary shall have any liability for breach of fiduciary responsibility of another fiduciary with respect to the Plan unless he participates knowingly in such breach, knowingly undertakes to conceal such breach, has actual knowledge of such breach and fails to take reasonable remedial action to remedy said breach or, through his negligence in performing his own specific fiduciary responsibilities which give rise to his status as a fiduciary, has enabled such other fiduciary to commit a breach of the latter's fiduciary responsibilities. 8.13 DISCHARGE OF DUTIES BY FIDUCIARIES. The Committee and the Funding Agent and any other fiduciary (as that term is defined below) shall discharge their respective duties set forth in this Plan solely in the interest of the Participants and their Beneficiaries: (a) for the exclusive purpose of: (i) providing benefits to Participants and their Beneficiaries, and (ii) defraying reasonable expenses of administering the Plan; (b) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like VIII-9 capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; (c) by diversifying the investments of the Plan so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and (d) in accordance with this Plan insofar as the Plan is consistent with the provisions of Title I of ERISA. Such fiduciaries shall not permit the indicia of ownership of any Fund assets to be maintained outside the jurisdiction of the District Courts of the United States, except as may otherwise be allowed under applicable Department of Labor rules and regulations. For purposes of this Plan, a "fiduciary" is any person who: (e) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets; (f) renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of the Plan, or has any authority or responsibility to do so; or (g) has any discretionary authority or discretionary responsibility in the administration of the Plan. 8.14 MULTIPLE FIDUCIARY CAPACITIES. Any person or organization may serve in more than one fiduciary capacity with respect to the Plan (including service both as Funding Agent and administrator), provided, however, that the provisions of ERISA Section 406 and Code Section 4975 are not violated. VIII-10 ARTICLE IX AMENDMENT AND TERMINATION 9.01 AMENDMENT BY EMPLOYER. The Employer shall have the right to amend this Plan from time to time and to amend further or cancel any such amendment. Such amendments shall be stated in an instrument in writing executed by the Employer, and this Plan shall be deemed to have been amended in the manner and at the time therein set forth, and all Employees, former Employees, Participants, former Participants, Beneficiaries, and the Employer shall be bound thereby; provided, however: (a) No such amendment shall be effective which shall attempt to cause any of the assets of the Fund to be used for or diverted to purposes other than for the exclusive benefit of the Participants, former Participants, or their Beneficiaries, except such changes, if any, as may be required to permit this Plan to meet the applicable requirements of ERISA or the Code; (b) No such amendment shall have any retroactive effect so as to deprive any Participant of any benefit already vested, except such changes, if any, as may be required to permit this Plan to meet the applicable requirements of ERISA or the Code; (c) No such amendment shall create or effect any discrimination in favor of Participants or former Participants who are officers, shareholders or Highly Compensated Employees; (d) No such amendment shall increase the duties or liabilities of the Funding Agent without its written consent; (e) No such amendment shall cause any reduction in the retirement benefits or other optional form of benefits with respect to benefits accrued to the date of the amendment for any Employee who, at any time on or after the amendment date, satisfied the pre-amendment condition; and IX-1 (f) No such amendment shall eliminate any other benefit, including any optional form of benefit, protected pursuant to Code Section 411(d)(6) with respect to benefits accrued as of the date of the amendment. 9.02 RETROACTIVE AMENDMENTS. An amendment under Section 9.01 may be made effective on a date prior to the first day of a Plan Year in which it is adopted only if (a) or (b) below is satisfied: (a) Any amendment may be made effective retroactively as of such date as the Employer considers necessary or appropriate to enable the Plan to meet any applicable requirements of the Code. (b) Any amendment which is adopted in order to conform the Plan to any change in Federal law, or to any regulation or ruling thereunder, may be made effective as of the date such amendment is required to be effective under such law, regulation or ruling. 9.03 DISCONTINUANCE OR TERMINATION OF PLAN. It is the Employer's expectation that the Plan contained herein and the payment of contributions hereunder will be continued indefinitely, and the Funding Instrument is irrevocable, but continuance of the Plan by the Employer is not assumed as a contractual obligation. The Employer, pursuant to Section 10.01(a), shall be entitled to recover any contributions made to the Fund prior to the time that the Commissioner of Internal Revenue, or his delegate, makes an initial determination with respect to the exempt status of the Fund for Federal income tax purposes and the deductibility of contributions by Employer for its income tax purposes, if the Commissioner of Internal Revenue, or his delegate, initially determines that the Plan does not meet the requirements of the Internal Revenue Code with the result that the Fund is not exempt from Federal income tax and the contributions of the Employer to the Fund are not deductible in determining its Federal income tax, and furthermore, if such approval is not obtained the Plan shall be treated as never having been IX-2 adopted. The Employer reserves the right at any time to reduce or temporarily suspend contributions hereunder. The Employer may discontinue contributions under the Plan at any time by written notice delivered to the Funding Agent without any liability hereunder for any such discontinuance. In the event of a complete discontinuance of contributions by the Employer, the entire interest of each Participant shall be vested to the extent of one hundred percent (100%). The Employer may terminate the Plan at any time by written notice delivered to the Funding Agent without any liability hereunder for any such termination. The Plan will be deemed terminated: (a) If and when the Employer is judicially declared bankrupt; or (b) If and when the Employer is a party to a merger in which it is not the surviving business entity or sells all or substantially all of its assets unless the surviving business entity or purchaser continues the Plan. Upon termination or partial termination of the Plan, the entire interest of each affected Participant shall be vested to the extent of one hundred percent (100%). The Funding Agent shall, upon direction of the appropriate Committee, with reasonable promptness, liquidate all assets remaining in the Fund. Upon the liquidation of all assets, the Committee shall make, after deducting estimated expense for liquidation and distribution, the allocations required under Article V, where applicable, with the same effect as though the date of completion of liquidation were a Valuation Date, which was an Anniversary Date of the Plan. Following these allocations, Elective Deferrals, Qualified Employer Deferral Contributions and income attributable thereto, shall be distributed to Participants, or their Beneficiaries as soon as administratively feasible after the termination of the Plan, provided that neither the Employer nor an IX-3 Affiliated Employer maintains a successor Plan. The Funding Agent shall promptly, after receipt of appropriate instructions from the Committee, distribute in accordance with Article VII to each former Participant a benefit equal to the amount credited to such former Participant's Employer Matching Account, Employer Profit Sharing Account, Rollover Account, if any, and Salary Deferral Contributions Account as of the date of completion of the liquidation. 9.04 PARTIAL TERMINATION OF PLAN. In the event of partial termination of the Plan, the appropriate portion of the Fund shall be allocated and treated in accordance with Section 9.03 above. 9.05 FAILURE TO CONTRIBUTE. The failure of the Employer to contribute to the Fund for any Plan Year when no contribution is required shall not of itself be a discontinuance of contributions to the Fund by the Employer. 9.06 MERGER AND CONSOLIDATION OF PLAN; TRANSFER OF PLAN ASSETS. In the case of any merger or consolidation with, or transfer of assets and liabilities to, any other plan, provisions shall be made so that each Participant in the Plan on the date thereof (if the Plan then terminated) would receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately prior to the merger, consolidation or transfer (if the Plan then terminated). Further, a merger, consolidation or transfer of assets shall be made only if resolutions of the Board of Directors and the board of directors of the other plan shall authorize such merger, consolidation or transfer and such other plan and fund are qualified under Sections 401(a) and 501(a) of the Code. 9.07 SUBSTITUTION OF SUCCESSOR EMPLOYER. In the event of the dissolution, merger, consolidation or reorganization of the Employer, provision may be made by which the Plan will be continued by any successor and, in that event, such successor shall be substituted for the Employer IX-4 under the Plan. Resolutions of the Board of Directors and board of directors of any new or successor employer shall include an assumption of Plan liabilities by the successor, and the successor shall have all of the powers, duties and responsibilities of the Employer under the Plan. 9.08 DISTRIBUTION UPON SALE. Unless the provisions of Section 9.07 are applicable, all Elective Deferrals, Qualified Employer Deferral Contributions, and income attributable thereto, may be distributed as soon as administratively feasible: (a) To Participants after the sale to an entity that is not an Affiliated Employer, of substantially all the assets used by the Employer in the trade or business in which a Participant is employed; and (b) To Participants employed by a subsidiary of the Employer after the sale, to an entity that is not an Affiliated Employer, of an Affiliated Employer's interest in such subsidiary. For the purpose of this Section 9.08, a sale of eighty-five percent (85%) of the relevant assets shall be deemed a sale of substantially all assets. IX-5 ARTICLE X SPECIAL PROVISIONS FOR CERTAIN FORMER PARTICIPANTS IN WHITTAR INDUSTRIES, LTD. SAVINGS PLAN AS AMENDED (401(K)) 10.01 APPLICABILITY. This Article shall apply to those Participants who ceased to be employees of employers participating in the Whittar Industries, Ltd. Savings Plan as Amended (401(k)) and became Employees within the meaning of this Plan. Individuals to whom this Article applies shall be referred to herein as Article X persons. For purposes of this Article X, the Whittar Industries, Ltd. Savings Plan as Amended (401(k)) shall be referred to herein as the Whittar Plan. 10.02 PARTICIPANT TRANSFER CONTRIBUTIONS. Effective as of the date the Employee became a Participant of this Plan, or such later date as may be determined by the Committee, the account (as defined in Section 5.01 of the Whittar Plan), if any, of an Article X person then held in trust under the Whittar Plan may be transferred to this Plan and credited to the Participant's corresponding Account in accordance with rules which the Committee shall prescribe from time to time; provided, however, that the transfer of such account from the Whittar Plan be transferred directly by the Trustee of the Whittar Plan to the Trustee of this Plan. Any amounts so transferred shall not be subject to distribution to an Article X person except as expressly provided under this Plan. In addition, any amounts so transferred shall be invested in accordance with the provisions of Section 4.08 of this Plan and at such time and, in such manner. X-1 ARTICLE XI MISCELLANEOUS 11.01 CONTRIBUTIONS NOT RECOVERABLE. Except where contributions are required to be returned to the Employer or a Participant as permitted by the provisions of the Plan or required by ERISA or the Code, it shall be impossible for any part of the principal or income of the Fund to be used for, or diverted to, purposes other than the exclusive benefit of such Participants or their Beneficiaries; provided, however, that notwithstanding this or any other provision of this Plan, the Employer shall be entitled, subject to the conditions established under Internal Revenue Service Ruling 91-4, to recover any contributions made to the Fund: (a) If such contributions were conditioned on the initial qualification of the Plan and; (i) The Commissioner of Internal Revenue, or his delegate, makes an initial determination, with respect to the exempt status of the Fund for Federal income tax purposes and the deductibility of contributions by Employer for its income tax purposes, that the Plan does not meet the requirements of the Internal Revenue Code with the result that the Fund is not exempt from Federal income tax and the contributions of the Employer to the Fund are not deductible in determining its Federal income tax; and (ii) The application for determination relating to the initial qualification is filed by the due date of the Employer's return for the taxable year in which the Plan is adopted; and (iii) The contribution is returned within one year of the denial of the contribution; or (b) In error as a result of a mistake in fact; or XI-1 (c) Conditioned upon the contribution being allowed as a deduction for Federal income tax purposes and such deduction is disallowed; or (d) Remaining in the Suspense Account after termination of the Plan which cannot be allocated to Participants because of the provisions of Section 5.06. (e) The permissible recovery under (b) must be made within one (1) year from the date the contribution was made to the Plan, and under (c) must be made within one (1) year from the date of disallowance of tax qualification or tax deduction. (f) Reversions due to a mistake of fact or the disallowance of a deduction with respect to a contribution that was conditioned on its deductibility shall be permitted only if the surrounding facts and circumstances indicate that the contribution of the amount that subsequently reverts to the Employer is attributable to a good faith mistake of fact or, in the case of the disallowance of the deduction, a good faith mistake in determining the deductibility of the contribution. (g) The maximum amount that may be returned to the Employer in the case of a mistake of fact or the disallowance of a deduction is the excess of (i) the amount contributed, over, as relevant, (ii) (A) the amount that would have been contributed had no mistake of fact occurred, or (B) the amount that would have been contributed had the contribution been limited to the amount that is deductible after any disallowance by the Internal Revenue Service. (h) Earnings attributable to the excess contribution may not be returned to the Employer, but losses attributable to such contribution shall reduce the amount returned. XI-2 (i) If, the return of the amount attributable to the mistaken or nondeductible contribution would cause the Account of any Participant to be reduced to an amount which is less than the amount which would have been in the Account of such Participant had the mistaken or nondeductible amount not been contributed, the amount returned to the Employer shall be limited so as to avoid such reduction. Notwithstanding the preceding sentence, in the case of a reversion due to initial disqualification of the Plan, the entire assets of the Plan attributable to Employer contributions may be returned to the Employer. 11.02 EMPLOYMENT RIGHTS. The Plan is not a contract of employment. Participation in the Plan shall not give any Employee or any other person (a) the right to be retained in the employ of the Employer; (b) any right or claim to any interest in the Plan, unless the right or claim has specifically accrued under the Plan; or (c) any legal or equitable right against the Employer, the Committee or the Funding Agent, except as provided herein. The Employer reserves the right to dismiss (with or without cause) any Employee without any liability for any claim either against the Fund, except to the extent provided herein, or against the Committee or the Employer. It is a condition of the Plan, and each Participant expressly agrees by his participation herein, that each Participant shall look solely to the assets held in the Fund for the payment of any benefit to which he is entitled under the Plan. 11.03 RECEIPT OR RELEASE. Any payment to a Participant, former Participant, or his Beneficiary in accordance with the provisions of this Plan shall, to the extent thereof, be in full satisfaction of all claims against the Funding Agent, the Committee and the Employer, and the Committee or Funding Agent may require such Participant, former Participant, or XI-3 Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. 11.04 ALIENATION. None of the benefits, payments, proceeds or claims of any Participant, former Participant, or Beneficiary shall be subject to any claim of any creditor and, in particular, the same shall 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. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, garnish, levy or otherwise dispose of or execute upon any right or benefit payable hereunder shall be void. The Fund shall not in any manner be liable or subject to the debts, contracts, liabilities, engagements or costs of any Participant entitled to benefits hereunder, and such benefits shall not be considered an asset of the Participant in the event of his insolvency or bankruptcy. This provision shall not prevent the Plan from complying with the terms of a "qualified domestic relations order" as defined in Code Sections 401(a)(13) and 414(p) so long as such compliance will not adversely affect the qualified status of the Plan. 11.05 CONTROLLING LAW. This Plan shall be construed, administered, and governed in all respects under applicable Federal law, and to the extent that Federal law is inapplicable, under the laws of the State of California; provided, however, that if any provision is susceptible to more than one interpretation, such interpretation shall be given thereto as is consistent with the Plan being a qualified plan within the meaning of Section 401 of the Code. If any provisions of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 11.06 TEXT PREVAILS OVER CAPTIONS. The headings and subheadings of the Articles and Sections of this Plan are included herein solely for XI-4 convenience or reference, and if there be any conflict between such headings and subdivisions and the text of this Plan, the text shall control. 11.07 COUNTERPARTS. This Plan has been executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument, which may be sufficiently evidenced by any one counterpart. 11.08 SUCCESSORS AND ASSIGNS. This Plan shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns. XI-5 ARTICLE XII PARTICIPATING EMPLOYERS 12.01 ADOPTION BY AFFILIATED EMPLOYERS. With the consent of the Employer, any Affiliated Employer may adopt this Plan and all of the provisions hereof, and participate herein and be known as a Participating Employer, by properly executing a document evidencing said intent and will of such Participating Employer. 12.02 REQUIREMENTS OF PARTICIPATING EMPLOYERS. (a) Each Participating Employer shall be required to use the same Funding Agent as selected pursuant to Section 1.02(w). (b) The Funding Agent, subject to the provisions of Section 4.08, shall commingle, hold and invest as one, all contributions received pursuant to Sections 4.01 and 4.03. (c) The transfer of any Participant from or to an Employer participating in this Plan, whether he or she be an Employee of the Employer or an Affiliated Employer, shall not affect such Participant's rights under the Plan, and all amounts credited to such Participant's Accounts, as well as his accumulated Years of Service with the transferor or predecessor, and his length of participation in the Plan, shall continue to his credit. (d) All rights and values forfeited by termination of employment shall inure to Participants subject to Plan Section 5.05. (e) Any expenses of the Plan which are to be paid by the Employer or borne by the Plan shall be paid by each Participating Employer in the same proportion that the total amount standing to the credit of all Participants employed by such Employer bears to the total standing to the credit of all Participants. 12.03 DESIGNATION OF THE EMPLOYER AS AGENT. With respect to all of its relations with the Funding Agent and Administrator for the purpose of this XII-1 Plan, each Participating Employer shall be deemed to have designated irrevocably the Employer as its agent. Unless the context of the Plan clearly indicates the contrary, the word "Employer" shall be deemed to include each Participating Employer as related to its adoption of the Plan. 12.04 EMPLOYEE TRANSFERS. In the event an Employee transfers between Participating Employers, the Employee involved shall carry with him his accumulated Service and eligibility. No such transfer shall effect a termination of employment hereunder, and the Participating Employer to which the Employee is transferred shall thereupon become obligated hereunder with respect to such Employee in the same manner as was the Participating Employer from whom the Employee was transferred. 12.05 PARTICIPATING EMPLOYER CONTRIBUTIONS. All contributions made by a Participating Employer, as provided for in this Plan, shall be determined separately by each Participating Employer, and shall be paid to and held by the Funding Agent for the exclusive benefit of the Employees of such Participating Employer and the Beneficiaries of such Employees, subject to all the terms and conditions of this Plan. On the basis of the information furnished by the Employer, the Committee shall keep separate books and records concerning the affairs of each Participating Employer hereunder and as to the Accounts and credits of the Employees of each Participating Employer. 12.06 AMENDMENT. Amendment of this Plan by the Employer, at any time, pursuant to Section 9.01, shall be deemed to be an amendment by each Participating Employer, provided, however, that if such amendment affects the individual duties or liabilities of any Participating Employer, such amendment shall not be effective as to such Participating Employer until such Participating Employer has submitted a properly executed document evidencing its consent to such amendment. XII-2 12.07 PARTICIPATING EMPLOYER DISCONTINUANCE. Any Participating Employer shall be permitted to discontinue or revoke its participation in the Plan. At the time of any such discontinuance or revocation, satisfactory evidence thereof and of any applicable conditions imposed shall be delivered to the Committee. The Committee shall thereafter cause to be transferred, delivered and assigned Plan assets allocable to the participants of such Participating Employer to such new Funding Agent as shall have been designated by such Participating Employer. If no successor is designated, the Committee shall retain such assets for the Employees of said Participating Employer, pursuant to the provisions of the Funding Instrument. In no such event shall any part of the corpus or income of the Plan as it relates to such Participating Employer be used for or diverted for purposes other than for the exclusive benefit of the Employees of such Participating Employer, except as otherwise provided pursuant to Section 5.05. 12.08 COMMITTEE AUTHORITY. The Committee shall have authority to make any and all necessary rules or regulations binding upon all Participating Employers and all Participants to effect the purposes of this Article XI. XII-3 IN WITNESS WHEREOF, the Employer has caused this Plan to be executed by its duly authorized officers this 22nd day of December, 1994. ___________________________ (Whittaker Corporation) By: /s/ Thomas A. Brancati --------------------------------- Title: President --------------------------------- By: /s/ Richard B. Levin --------------------------------- Title: Chief Financial Officer --------------------------------- Approved as to form: /s/ Robert Hardy - --------------------------------- Jones, Day, Reavis & Pogue - -------------------------- Counsel for Employer XII-4 The undersigned business entities hereby join in the establishment of the Whittaker Corporation Partnership Plan for Employees of Whittaker Controls, Inc. ------------------------ (Affiliated Employer) By: /s/ Richard B. Levin --------------------------------- President Attest: /s/ Gordon J. Louttit --------------------------------- Secretary (Corporate Seal) Whittaker Services Corporation ------------------------------ (Affiliated Employer) By: /s/ Thomas A. Brancati --------------------------------- President Attest: /s/ Gordon J. Louttit --------------------------------- Secretary (Corporate Seal) Whittaker Technical Products Inc. --------------------------------- (Affiliated Employer) By: /s/ Thomas A. Brancati --------------------------------- President Attest: /s/ Gordon J. Louttit --------------------------------- Secretary (Corporate Seal) XII-5 EX-10.13 7 AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.13 FIRST AMENDMENT To WHITTAKER CORPORATION CREDIT AGREEMENT Dated as of April 21, 1995 This FIRST AMENDMENT (this "Amendment") is among WHITTAKER CORPORATION, a Delaware corporation (the "Borrower"), the Financial Institutions party to the Credit Agreement referred to below (the "Lenders"), and NATIONSBANK OF TEXAS, N.A., as agent (the "Agent") for the Lenders thereunder. PRELIMINARY STATEMENTS: (1) The Borrower, the Lenders and the Agent have entered into a Credit Agreement dated as of January 23, 1995 (the "Credit Agreement"; capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement). (2) In connection with the proposed acquisition (the "HLS Acquisition") by the Borrower of 100% of the capital stock of Hughes LAN Systems, Inc., a California corporation ("HLS"), from Hughes Aircraft Company, a Delaware corporation (the "Seller"), the Borrower has requested that the Agent and the Lenders agree to certain amendments to the terms of the Credit Agreement. (3) The Agent and the Lenders are, on the terms and conditions stated below, willing to grant the requests of the Borrower. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Amendments to Credit Agreement. The Credit Agreement is, effective concurrently with and only upon the consummation of the HLS Acquisition and subject to the satisfaction of the conditions precedent set forth in Section 3 hereof, hereby amended as follows: (a) Section 1.01 of the Credit Agreement is hereby amended by adding thereto, in appropriate alphabetical order, the following defined terms: "'First Amendment' means the First Amendment dated as of April 21, 1995 among the Borrower, the Lenders and the Agent. "'HLS' means Hughes LAN Systems, Inc., a California corporation. "'HLS Acquisition' means the acquisition by the Borrower of 100% of the capital stock of HLS. "'HLS Acquisition Agreement' means the Stock Purchase Agreement dated as of March 23, 1995 by and between the Seller and the Borrower. "'HLS Acquisition Documents' means the HLS Acquisition Agreement, the HLS Subordinated Debt Documents and each other document, instrument and agreement executed and/or delivered in connection with the HLS Acquisition. "'HLS Contingent Payments' means (i) "Contingent Payments" as defined in Exhibit 1.3(c) to the HLS Acquisition Agreement, (ii) HLS Mandatory Payments, and (iii) any other amounts payable by the Borrower or any of its Subsidiaries to the Seller or any of its Affiliates based on the revenues or income of HLS; provided, however, that any amounts required to be paid as a result of adjustments, pursuant to Section 1.6 of the HLS Acquisition Agreement, to the purchase price payable in connection with the HLS Acquisition shall not constitute HLS Contingent Payments. "'HLS Mandatory Payments' means mandatory payments under Section 2.2 of Exhibit 1.3(c) to the HLS Acquisiiton Agreement. "'HLS Subordinated Debt' means the 7% convertible Subordinated Debt in the original principal amount of $15,000,000 incurred by the Borrower in connection with the HLS Acquisition. "'HLS Subordinated Debt Documents' means (i) the HLS Subordinated Note, and (ii) any other instruments and agreements evidencing and governing the HLS Subordinated Debt. "'HLS Subordinated Note' means the 7% Convertible Subordinated Note due May 1, 2005 in the original principal amount of $15,000,000 and any note or notes issued in exchange therefor or replacement thereof so long as each such note is in substantially the form of Exhibit 1.3(b) to the HLS Acquisition Agreement. "'HLS Transaction Documents' means the HLS Acquisition Documents and the First Amendment. "'Seller' means Hughes Aircraft Company, a Delaware corporation. "'Specified Bermite Land proceeds' means the cash proceeds from the sale, transfer, lease (other than the existing lease with the City of Santa Clarita and any other lease with a term, including all extension options, of two years or less) or other disposition of all or any portion of the Bermite Land (including any sale or other disposition of any Securities of or any other equity interest in any Affiliate of the Borrower with any ownership interest in the Bermite Land) to any Person other than the Borrower or a wholly owned Subsidiary of the Borrower, net of (a) all reasonable costs incurred and payable within twelve months of, and as a result of, the applicable transaction by the Borrower or any of its Subsidiaries to a Person that is not its Affiliate, (b) the amount (as estimated by the Borrower in good faith) of income, franchise, transfer or other taxes payable by the Borrower in cash within 12 months as a result of such transaction (after giving effect to all deductions, credits and other items which reduce tax liability and, at the time of determination, are available or reasonably anticipated to be available), and (c) amounts payable to Northholme Partners or its successors in connection with the applicable transaction pursuant to the terms of the Bermite 2 Development Agreement, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of the applicable cash proceeds, paid or payable to a Person that is not its Affiliate and are properly attributable to the transaction." (b) The definition of "Fixed Charge Coverage Ratio" contained in Section 1.01 of the Credit Agreement is herby amended and restated in its entirety to read as follows: "'Fixed Charge Coverage Ratio' means, subject to Section 6.01(o), for any period, the quotient obtained by dividing (a) Consolidated EBITDA of the Borrower and its Subsidiaries for such period minus the sum of (i) Consolidated Capital Expenditures of the Borrower and its Subsidiaries in such period and (ii) the amount of any HLS Contingent Payments accrued in such period by (b) the sum of Consolidated Interest Expense for such period plus scheduled payments of the principal amount of (i) the Term Advances required to be made during such period in accordance with the provisions of Section 2.03(a) (as such scheduled payments may be reduced by any prepayments of the Term Advances) and (ii) any other funded debt or other indebtedness for borrowed money (including Capitalized Leases) of the Borrower and its Subsidiaries (determined in accordance with GAAP but excluding any Revolving Advances and L/C Advances) required to be made during such period." (c) Section 1.01 of the Credit Agreement is hereby amended by adding, immediately prior to the period at the end of the definition of the term "Debt", a proviso to read as follows: "; provided, however, that HLS Contingent Payments shall not constitute 'Debt' hereunder". (d) Section 2.05(b) of the Credit Agreement is hereby amended by adding thereto a new subsection (iii) to read as follows: "(iii) Mandatory Prepayment: Specified Bermite Land Proceeds. On the first Business Day after any Specified Bermite Land Proceeds are received by the Borrower or any of its Subsidiaries, the Borrower shall pay to each Lender (in accordance with the provisions of Section 2.09(a)) such Lender's Pro Rata Share of an amount equal to such Specified Bermite Land Proceeds, to be applied to the prepayment of each scheduled principal installment of the Term Advances (ratably in accordance with the respective principal amounts of each such installment), until the Term Advances are repaid in full." (e) Section 6.01 of the Credit Agreement is hereby amended by adding thereto a new subsection (h) to read as follows: "(h) Delivery of HLS Transaction Documents. The Borrower shall deliver to the Agent as soon as reasonably practicable after the closing of the HLS Acquisition, and in any event within 30 days of such closing, copies of the HLS Acquisition Agreement, the HLS Subordinated Debt Documents and each other HLS Acquisition Document reasonably requested by the Agent or the Required Lenders, each certified as of the date delivered as being true, correct and complete." 3 (f) Section 6.02(f)(v) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(v) from and after the date which is twelve months after the closing date of the HLS Acquisition, Operating Investments (in addition to Investments otherwise expressly permitted hereunder) so long as no Default has occurred and is continuing or would occur as a result of the consummation thereof and so long as: (A) the amount of each such Investment (or series of related Investments) does not exceed 10% of the total assets of the Borrower and its Subsidiaries (determined on a Consolidated basis in accordance with GAAP at the time of such Investment); and (B) the cumulative amount of all Operating Investments made during any period of twelve consecutive months, whether or not outstanding or recovered, does not exceed $10,000,000;". (g) Section 6.02(f) of the Credit Agreement is hereby further amended by (i) deleting the word "and" which immediately follows the semi-colon at the end of subsection (viii) of such Section, (ii) replacing the period at the end of subsection (ix) of such Section with "; and", and (iii) adding to such Section a new subsection (x) to read as follows: "(x) the HLS Acquisition, but only if (i) such acquisition is consummated (A) on substantially the terms disclosed in writing to the Lenders by the Borrower prior to execution of the First Amendment, and (B) in accordance with the terms and conditions of the HLS Acquisition Agreement (without any material modification from the form delivered to the Lenders prior to their execution of the First Amendment) without any material modification or amendment thereof or waiver thereunder which has not been approved by the Required Lenders, and (ii) the purchase price payable in connection with such acquisition does not exceed $17,500,000 plus the amount of any positive adjustment of such amount pursuant to Section 1.6 of the HLS Acquisition Agreement, plus amounts payable in respect of the HLS Subordinated Note (as if effect on the closing date of the HLS Acquisition) and HLS Contingent Payments." (h) Section 6.02 of the Credit Agreement is hereby further amended by adding thereto a new subsection (o) to read as follows: "(o) HLS Contingent Payments, Etc. Make or permit to be made any payment in respect of any HLS Contingent Payment if, at the time of such payment, the Fixed Charge Coverage Ratio (determined as set forth below in the case of any HLS Mandatory Payment) for the period of the four most recently ended fiscal quarters of the Borrower is less than 1.50 to 1.0, or prepay prior to the scheduled maturity thereof in any manner any HLS Contingent Payments, or amend, modify or change in any manner Section 2.6 of Exhibit 1.3(c) to the HLS Acquisition Agreement or any other term or provision of the HLS Acquisition Documents if such amendment, modification or change would increase the amount of, or accelerate the date for payment of, any HLS Contingent Payment. For purposes of determining the amount of any HLS Mandatory Payment which may be made at any time (and only for such purposes), the term "Fixed Charge 4 Coverage Ratio" means, the quotient obtained by dividing (a) Consolidated EBITDA of the Borrower and its Subsidiaries for such period minus the sum of (i) Consolidated Capital Expenditures of the Borrower and its Subsidiaries in such period, and (ii) the amount of any HLS Contingent Payments accrued in such period, and (iii) without duplication of any amount included under the foregoing clause (ii), the amount of any HLS Mandatory Payments made in such period and any HLS Mandatory Payments proposed to be made in the next subsequent fiscal quarter, plus the amount of any cash proceeds received by the Borrower or any of its Subsidiaries in such period (and, without duplication, in the next subsequent fiscal quarter) in connection with any sale of any capital stock or assets of HLS which constitutes a "Trigger Event" as defined in Exhibit 1.3(c) to the HLS Acquisition Agreement (net of all taxes and expenses incurred by the Borrower in connection with such sale, in each case as determined by the Borrower in good faith) by (b) the sum of Consolidated Interest Expense for such period plus scheduled payments of the principal amount of (i) the Term Advances required to be made during such period in accordance with the provisions of Section 2.03(a) (as such scheduled payments may be reduced by any prepayments of the Term Advances) and (ii) any other funded debt or other indebtedness for borrowed money (including Capitalized Leases) of the Borrower and its Subsidiaries (determined in accordance with GAAP but excluding any Revolving Advances and L/C Advances) required to be made during such period. Prior to make any HLS Mandatory Payment, the Borrower shall deliver to the Agent an Officers' Certificate of the Borrower setting forth the amount of such HLS Mandatory Payment and the calculation of the Fixed Charge Coverage Ratio (as set forth in this Section 6.02(o)) for the period of the four most recently ended fiscal quarters of the Borrower after giving effect to such HLS Mandatory Payment." (i) Section 6.04(b) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(b) Leverage Ratio. Maintain at all times during the period of twelve consecutive months immediately following the closing date of the HLS Acquisition a ratio of Consolidated Total Debt to Consolidated Total Capitalization of not greater than 0.55 to 1.0 and maintain at all other times a ratio of Consolidated Total Debt to Consolidated Total Capitalization of not greater than 0.50 to 1.0." (j) Section 6.04(d) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(d) Consolidated Tangible Net Worth. Maintain a Consolidated Tangible Net Worth, as determined as of the last day of each fiscal quarter, of not less than the sum of (i) 50% of cumulative Consolidated Net Income for all fiscal quarters commencing with and including the fiscal quarter ending July 31, 1995 (but excluding Consolidated Net Income for any fiscal quarter for which Consolidated Net Income is a negative number), (ii) 75% of the amount of HLS Subordinated Debt, if any, converted to any equity interest in the Borrower or any of its Subsidiaries, and (iii) $50,000,000." 5 (k) Article IX of the Credit Agreement is hereby amended by adding thereto a new Section 9.19 to read as follows: "SECTION 9.19. Notices Under HLS Acquisition Agreement. If, at any time, the Borrower shall fail to maintain for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter a Fixed Charge Coverage Ratio equal to or greater than 1.50 to 1.0, then, at the request of the Agent, the Borrower shall, and the Agent is hereby authorized to, give written notice to the Seller pursuant to the terms of the HLS Acquisition Agreement that a 'Fixed Charge Deficiency' has occurred and is continuing; provided that, if the Agent gives any such notice, the Agent shall deliver a copy thereof to the Borrower concurrently with the delivery of such notice to the Seller (it being understood and agreed that the failure by the Agent to so deliver such a copy to the Borrower shall not affect the effectiveness of any such notice and shall not result in any liability on the part of the Agent). The Borrower agrees that, unless the Agent has made a request therefor pursuant to this Section 9.19, the Borrower will not deliver any notice under the HLS Acquisition Agreement of the occurrence of a 'Fixed Charge Deficiency' without the prior written consent of the Agent." SECTION 2. Consent to HLS Subordinated Debt. Upon the effectiveness of this Amendment, the Agent and the Lenders hereby approve the HLS Subordinated Note (without any material modification from the form delivered to the Lenders prior to their execution hereof) for the purposes of the definition of "Subordinated Debt" contained in Section 1.01 of the Credit Agreement. SECTION 3. Conditions to Effectiveness. This Amendment shall become effective when: (a) the Agent has executed this Amendment and has received counterparts of this Amendment executed by the Borrower and the Required Lenders or, as to any of the Lenders, advice satisfactory to the Agent that such Lender has executed this Amendment; (b) the Agent has received counterparts of the Consent appended hereto executed by each of the Guarantors and Grantors listed therein (such Guarantors and Grantors, together with the Borrower, collectively the "Loan Parties"); (c) the Borrower shall have paid to the Agent on or prior to the date of execution by the Borrower of this Amendment, in accordance with Section 2.09(a) of the Credit Agreement, for the account of the Lenders, an amendment fee in an amount equal to 0.25% of the sum of the outstanding Term Advances, the outstanding Revolving Advances, the outstanding Letter of Credit Obligations and the Unused Revolving Commitments of the Lenders; (d) the Borrower shall have taken such steps, and shall have executed and/or delivered such certificates, instruments and other documents, if any, as the Agent may reasonably require to ensure that the certificates representing 100% of the capital stock of HLS shall be pledged to the Agent pursuant to the Security Agreement simultaneously with the closing of the HLS Acquisition and shall be delivered to the Agent substantially concurrently therewith; and (e) the Agent has received a certificate, dated as of the date of closing of the HLS Acquisition (the "HLS Acquisition Closing Date") and in form and substance satisfactory to the 6 Agent, of the Borrower and each other Loan Party, signed on behalf of the Borrower and such other Loan Party by its President or its Vice President and its Secretary or any Assistant Secretary, certifying as to (A) the due incorporation and good standing of the Borrower and each other Loan Party, as a corporation organized under the laws of the state of its incorporation, and the absence of any proceeding for the dissolution or liquidation of the Borrower or such other Loan Party, (B) the truth, both immediately prior to consummation of the HLS Acquisition and after giving effect thereto, of the representations and warranties contained in this Amendment and in each of the Loan Documents as though made on and as of the date thereof (other than any such representations or warranties that, by their terms, specifically refer to a date other than the HLS Acquisition Closing Date), (C) the absence, both immediately prior to consummation of the HLS Acquisition and after giving effect thereto, of any event occurring and continuing that constitutes a Default, and (D) the names and true signatures of the officers of the Borrower or such other Loan Party authorized to sign this Amendment or the consent hereto, as applicable. SECTION 4. Representations and Warranties. The Borrower represents and ------------------------------ warrants as follows: (a) Authority; Enforceability. The Borrower and each of its ------------------------- Subsidiaries has the requisite corporate power and authority (i) to execute, deliver and perform each HLS Transaction Document executed or to be executed by it, and (ii) to file the HLS Transaction Documents filed by it, or to be filed by it, with each appropriate Governmental Authority. The execution, delivery and performance (or filing, as the case may be) by the Borrower and each of its Subsidiaries of each HLS Transaction Document to which it is or is to be a party and the consummation of the transactions contemplated thereby, have been duly approved by the Board of Directors of such Person and no other corporate proceedings on the part of such Person are necessary to consummate such transactions. Each HLS Transaction Document to which the Borrower or any of its Subsidiaries is a party has been duly executed and delivered by the Borrower and/or such Subsidiary, as the case may be, and constitutes each such Person's legal, valid and binding obligation, enforceable against such Person in accordance with its terms, and is in full force and effect. (b) No Conflict. The execution, delivery and performance by the ----------- Borrower and each of its Subsidiaries of each HLS Transaction Document to which it is party and the consummation of the transactions contemplated thereby do not and will not (i) constitute a tortious interference with any Contractual Obligation of the Borrower or any of its Subsidiaries to any Person, or (ii) conflict with or violate such Person's certificate or articles of incorporation or bylaws, or other organizational documents, as the case may be, or (iii) conflict with, result in a breach of or constitute (with or without notice or lapse of time or both) a default under any material Requirement of Law or material Contractual Obligation of the Borrower or any of its Subsidiaries, or require termination of any material Contractual Obligation of any such Person, or (iv) result in or require the creation or imposition of any Lien whatsoever upon any of the properties or assets of the Borrower or any of its Subsidiaries (other than Liens in favor of the Agent arising pursuant to the Loan Documents or Liens permitted pursuant to Section 6.02(a)) of the Credit Agreement, or (v) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of any Loan Party, except for corporate authorizations described in Section 3(a) which have been obtained and are in full force and effect on the HLS Acquisition Closing Date. 7 (c) Governmental Consents. The execution, delivery and performance by --------------------- the Borrower and each of its Subsidiaries of each HLS Transaction Document to which it is a party and the consummation of the transactions contemplated thereby do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by any Governmental Authority, except for filings (i) required pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (all of which have been made), (ii) with the Securities and Exchange Commission under the Securities Exchange Act, and (iii) to perfect the Liens created by the Collateral Documents which, in the case of the foregoing clauses (ii) and (iii), have been, or will in due course prior to the time required, be made. Any waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 applicable to the consummation of the transactions contemplated by the HLS Transaction Documents has, or as of the HLS Acquisition Closing Date shall have, expired. Section 5. Reference to and Effect on the Loan Documents. (a) Upon and --------------------------------------------- after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified and amended hereby. (b) Except as specifically amended above, the Credit Agreement and all other Loan Documents, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Secured Obligations under and as defined therein, in each case as amended hereby. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. Section 6. Costs, Expenses and Taxes. The Borrower agrees to pay on demand ------------------------- to the Agent, all costs and expenses of the Agent in connection with the preparation, execution, delivery and administration of this Amendment and the other instruments and documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities hereunder and thereunder. The Borrower further agrees to pay on demand all costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Amendment and the other instruments and documents to be delivered hereunder, including, without limitation, reasonable counsel fees and expenses in connection with the enforcement of rights under this Section 6. In addition, the Borrower shall pay any and all stamp and other taxes (excluding, in the case --------- of each Lender, net income taxes that are imposed by the United States and franchise taxes and income taxes that are imposed on such Lender by the state or foreign jurisdiction under the laws of which such Lender is organized or any political subdivision thereof or therein, and franchise taxes based on income and income taxes that are imposed on such Lender by any jurisdiction or any political subdivision thereof or therein in which is located such Lender's Applicable Lending Office or principal office), and fees, payable or determined to be payable in connection with the execution, delivery and filing of this Amendment and the other instruments and 8 documents, if any, to be delivered hereunder, and agrees to save the Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. SECTION 7. Execution in Counterparts. This Amendment may be executed in ------------------------- any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment or the Consent hereto by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment or such Consent. SECTION 8. Governing Law. This Amendment shall be governed by, and ------------- construed in accordance with, the laws of the State of New York. [Signature Pages Follow] 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. WHITTAKER CORPORATION, a Delaware corporation By: /s/ JOHN K. OTTO -------------------------------- John K. Otto Treasurer NATIONSBANK OF TEXAS, N.A., as Agent By: /s/ ANDREA P. COLLIAS -------------------------------- Andrea P. Collias Vice President 10 Lenders: ------- NATIONSBANK OF TEXAS, N.A. By: /s/ ANDREA P. COLLIAS ----------------------------- Andrea P. Collias Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ LORI KANNEGIETER ----------------------------- Title: Vice President THE BANK OF CALIFORNIA, N.A. By: /s/ J. DEREK WATSON ----------------------------- Title: Corporate Banking Officer CITY NATIONAL BANK By: /s/ ERICH BOLLINGER ----------------------------- Title: Vice President KREDIETBANK N.V. By: /s/ DIANE GRIMMIG ----------------------------- Title: Vice President By: /s/ ROBERT SNAUFFER ----------------------------- Title: Vice President SANWA BANK CALIFORNIA By: /s/ JOE ARCO ----------------------------- Title: Vice President UNION BANK By: /s/ ROBERT C. PETERSEN ----------------------------- Title: 11 CONSENT Dated as of April 21, 1995 The undersigned, as Guarantors under the "Guaranty" and as Grantors under the "Security Agreement" (as such terms are defined in and under the Credit Agreement referred to in the foregoing First Amendment), each hereby consents and agrees to the said First Amendment and hereby confirms and agrees that (i) the Guaranty and Security Agreement are, and shall continue to be, in full force and effect and are hereby ratified and confirmed in all respects except that, upon the effectiveness of, and on and after the date of, the said First Amendment, each reference in the Guaranty and the Security Agreement to the Credit Agreement, "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended by the said First Amendment and (ii) the Security Agreement and all of the Collateral described therein do, and shall continue to, secure the payment of all of the Secured Obligations as defined therein. BLUE BELL LEASE, INC., a California corporation, METROPOLITAN FINANCIAL SERVICES CORPORATION, a Colorado corporation, PARK CHEMICAL COMPANY, a Michigan corporation, WHITTAKER CONTROLS, INC., a California corporation, WHITTAKER CORP., a Maine corporation, WHITTAKER ORDNANCE, INC., a Delaware corporation, WHITTAKER PORTA BELLA DEVELOPMENT, INC., a California corporation, WHITTAKER SERVICES CORPORATION, a California corporation, WHITTAKER TECHNICAL PRODUCTS, INC., a Colorado corporation, and WHITTAKER DEVELOPMENT CO., a Delaware corporation By: /s/ JOHN K. OTTO ------------------------------------- John K. Otto Treasurer of each of the foregoing Loan Parties 12 EX-11 8 CALCULATION OF EARNINGS PER SHARES EXHIBIT 11 WHITTAKER CORPORATION CALCULATION OF EARNINGS PER SHARE
Stated in Thousands of Dollars Year Ended October 31, ------------------------------ 1995 1994 1993 -------- ------- ------ PRIMARY EARNINGS PER SHARE Earnings Income................................... $7,865 $10,061 $7,256 Deduct: Dividends on $5.00 Cumulative Convertible Preferred Stock......... (4) (12) (12) ------ ------- ------ Net income used in primary earnings per share calculations.............. $7,861 $10,049 $7,244 ====== ======= ====== Average Common and Common Equivalent Shares in (000) Weighted average number of common shares outstanding........................... 8,531 8,481 8,281 Common equivalent shares: Series D Participating Convertible Preferred Stock..................... 292 292 316 Stock options included under treasury stock method........................ 802 729 894 ------ ------- ------ TOTAL.................................... 9,625 9,502 9,491 ====== ======= ====== Primary Earnings Per Share............... $ 0.82 $ 1.06 $ 0.76 ====== ======= ======
WHITTAKER CORPORATION CALCULATION OF EARNINGS PER SHARE - (Continued)
Stated in Thousands of Dollars Year Ended October 31, ------------------------------ 1995 1994 1993 -------- --------- -------- FULLY DILUTED EARNINGS PER SHARE Earnings Net income used in primary earnings per share calculation (Note A)......... $7,861 $10,049 $7,244 Adjustments: - - - ------ ------- ------ Net income used in fully diluted earnings per share calculations................. $7,861 $10,049 $7,244 ====== ======= ====== Average Shares used to Calculate Fully Diluted Earnings Per Share in (000) Average common and common equivalent shares (above)......................... 9,625 9,502 9,491 Add: Additional stock options included under treasury stock method........... - 88 32 ------ ------- ------ TOTAL..................................... 9,625 9,590 9,523 ====== ======= ====== Fully Diluted Earnings Per Share.......... $ 0.82 $ 1.05 $ 0.76 ====== ======= ======
WHITTAKER CORPORATION CALCULATION OF EARNINGS PER SHARE - (Continued) NOTES Earnings per share have been computed based on the weighted average number of common and common equivalent shares outstanding during the periods, after deducting from net income the dividend requirements on the outstanding $5.00 Cumulative Convertible Preferred Stock. Common stock equivalents include Series D Participating Convertible Preferred Stock and dilutive employee stock options, calculated using the treasury stock method. Fully diluted earnings per share include the additional potential dilutive effect of employee stock options. The inclusion of additional shares assuming the conversion of the convertible subordinated debt would have been antidilutive. EX-21 9 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 WHITTAKER CORPORATION A DELAWARE CORPORATION ACTIVE SUBSIDIARIES -------------------
PLACE OF % OWNERSHIP NAME OF COMPANY INCORPORATION (# SHARES) - ------------------- ------------- --------------- Blue Bell Lease, California 100% (1,000) Inc. Metropolitan Colorado 100% ( 100) Financial Services Corporation Park Chemical Michigan 100% (1,000) Company Whittaker California 100% (1,000) Communications, Inc. Whittaker England 100% ( 2) Communications Limited Whittaker Controls, California 100% (1,000) Inc. Whittaker Corp. Maine 100% (1,000) Whittaker Barbados 100% (1,000) International, Inc. Whittaker Ordnance, Delaware 100% ( 1) Inc. Whittaker Political California 100% ( 100) Action Committee, Inc. Whittaker Porta California 100% (1,000) Bella, Inc. Whittaker Services California 100% (1,000) Corporation Whittaker Technical Colorado 100% (1,000) Products, Inc. Division: Whittaker Power Storage Systems
EX-23 10 AUDITORS CONSENT EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Post-Effective Amendment Number 2 to Registration Statement Number 2-74481 on Form S-8 dated January 28, 1983, as amended and supplemented to date, Post-Effective Amendment Number 3 to Registration Statement Number 2-74481 on Form S-8 dated October 10, 1983, Post- Effective Amendment Number 1 to Registration Statement Number 2-97149 on Form S-8 dated September 30, 1985, Post-Effective Amendment Number 3 to Registration Statement Number 2-76480 on Form S-8 dated April 22, 1985, Post-Effective Amendment Number 2 to Registration Statement Number 2-70806 on Form S-8 dated May 20, 1981, Post-Effective Amendment Numbers 2, 1-A and 1-B to Registration Statement Number 33-04320 on Form S-4 dated March 26, 1986, as supplemented and amended to date, Post-Effective Amendment Numbers 2-A and 2-B to Registration Statement Number 33-04320 on Form S-8 to Form S-4 dated June 1, 1987, Registration Statement Numbers 33-35762 and 33-35763 on Form S-8 dated July 6, 1990, Registration Statement Number 33-52295 on Form S-8 dated February 16, 1994, and Registration Statement Number 33-58323 on Form S-8 dated March 31, 1995 of our report dated December 14, 1995 with respect to the consolidated financial statements of Whittaker Corporation in the Annual Report (Form 10-K) for the year ended October 31, 1995. We also consent to the reference to our firm under the caption "Experts" in the aforementioned Registration Statements insofar as that reference relates to our report for the year ended October 31, 1995. ERNST & YOUNG LLP Los Angeles, California January 24, 1996 EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR OCT-31-1995 OCT-31-1995 161 0 66,570 1,176 39,518 123,729 78,059 36,641 250,959 50,228 70,694 0 1 86 102,337 250,959 159,479 159,479 89,974 89,974 11,373 0 5,897 13,026 5,161 7,865 0 0 0 7,865 0.82 0
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