-----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, F5DMtEK0KN2pXRX0ICDOAxQWe2naKTH1/wRfriZaAWKhfK8D4+rb80A/zgbgd0Ml +YEDgnUG9040OsX5V9ANtg== 0000950124-96-005577.txt : 19961227 0000950124-96-005577.hdr.sgml : 19961227 ACCESSION NUMBER: 0000950124-96-005577 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961226 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLEXUS CORP CENTRAL INDEX KEY: 0000785786 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 391344447 STATE OF INCORPORATION: WI FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-14824 FILM NUMBER: 96686413 BUSINESS ADDRESS: STREET 1: 55 JEWELERS PARK DR CITY: NEENAH STATE: WI ZIP: 54957-0156 BUSINESS PHONE: 4147223451 MAIL ADDRESS: STREET 1: PLEXUS CORP STREET 2: 55 JEWELERS PARK DR CITY: NEENAH STATE: WI ZIP: 54957-0156 10-K405 1 10-K405 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X Annual Report Pursuant to Section 13 or 15(d) --- of the Securities Exchange Act of 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-14824 PLEXUS CORP. (Exact name of registrant as specified in its charter) WISCONSIN 39-1344447 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 JEWELERS PARK DRIVE, NEENAH, WISCONSIN 54957-0156 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (414) 722-3451 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s)) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of December 13, 1996, 6,543,804 shares of Common Stock were outstanding, and the aggregate market value of the shares of Common Stock (based upon the $17.75 closing sale price on that date, as reported on the NASDAQ National Market System) held by non-affiliates (excludes shares reported as beneficially owned by directors and officers - does not constitute an admission as to affiliate status) was approximately $105 million. DOCUMENTS INCORPORATED BY REFERENCE PART OF FORM 10-K INTO WHICH PORTIONS OF DOCUMENT DOCUMENT ARE INCORPORATED -------- ------------------------- Proxy Statement for 1997 Annual Meeting of Shareholders Part III 2 PART I ITEM 1. BUSINESS GENERAL Plexus Corp., through its subsidiaries (together "Plexus" or the "Company"), offers contract development, design, manufacturing and test services primarily to original equipment manufacturers in the computer (primarily mainframes and peripherals), medical, industrial, telecommunications and transportation electronics industries. Plexus offers a full range of services including product development, printed circuit board (PCB) design, material procurement and management, PCB and higher level assembly, functional and in-circuit testing, final system box build and distribution. The contract manufacturing services are provided on either a turnkey basis, where the Company procures certain or all of the materials required for product assembly, or on a consignment basis, where the customer supplies materials necessary for product assembly. Turnkey services include material procurement and warehousing, in addition to manufacturing, and involve greater resource investment then consignment services. Other than test equipment products, the Company does not design or manufacture its own proprietary products. Plexus is a Wisconsin corporation incorporated in 1979. Its principle subsidiaries are Electronic Assembly Corporation and Technology Group, Inc. The Company's principal office is located at 55 Jewelers Park Drive, Neenah, Wisconsin 54957-0156, and its telephone number is (414) 722-3451. The Company has operations in Neenah, Wisconsin and Richmond, Kentucky. ELECTRONIC PRODUCTS GENERAL BACKGROUND. The Company's services involve the design of electronic products and systems, the arrangement of electronic components thereon, and the assembly and testing of such products including the incorporation of the electronic assemblies into the final product housing. The products designed and assembled by the Company consist primarily of electronic components assembled on printed circuit boards and programmed to perform specific functions. The electronic components include computer memory chips, microprocessors, integrated circuits, resistors, capacitors, transformers, and switches. Printed circuit boards are the basic element in the manufacture of most electronic products and act as the interconnection platforms for various integrated circuits and electronic components. In addition to the Company's ability to design and manufacture complete electronic products, the Company also has the capacity of designing and assembling printed circuitry products and products utilizing circuit boards with multiple layers of circuitry. The various types of electronic product services offered by the Company are discussed below. A customer of the Company may utilize any or all of these services. The Company charges for these services under a variety of pricing methods that vary accordingly to the customer or type of service involved. PRODUCT DESIGN. The Company, primarily through its Technology Group, Inc. subsidiary, provides product design and engineering services. These services include software development, circuit design, printed circuit board layout, and product housing design. The Company's design services provide customers with a product which is capable of performing an intended function and which can be manufactured in an efficient and economical manner. The Company's technologies involve the design of electronic systems, including printed circuit boards and the arrangement of electronic components thereon, and the development and/or programming of the application software necessary to control the functions of those components. The Company's personnel design printed circuit boards using computer assisted design equipment and software. This equipment permits the design of complex multi-layered printed circuit boards which not only have wiring on the top and bottom surfaces but also incorporate multiple inside layers of circuitry. 3 The Company's design service may include initial feasibility studies, product concept definition, development or specifications for product feature and functions, product engineering specifications, microprocessor design, design of circuit and custom or semi-custom computer chips, software development, drafting, prototype production and testing, and development of test specifications and procedures. See "Engineering, Testing and Development." PRODUCT MANUFACTURE. The Company, primarily through its Electronic Assembly Corporation subsidiary, manufactures electronic products and assemblies for use in a wide variety of industries and applications. The Company's assembly processes involve the fabrication of products from components manufactured to specification by others. Electronic components such as memory chips, microprocessing units, integrated circuits, resistors, capacitors, transformers, switches, wire and related items are purchased as stock items from a variety of manufacturers and distributors. The Company is not dependent upon any single supplier for such material. The Company's printed circuit boards and certain other components are manufactured for it to its customers' specifications. The Company believes these products would be available from a variety of sources and that the loss of any single source of supply would not materially affect the Company's business. The Company's manufacturing operations include printed circuit board assembly, testing, and final system box build into the final product housing. While the Company has automated various aspects of many processes, the assembly of components into electronic products remains a labor-intensive process generally requiring a high degree of precision and dexterity in the assembly stage and integration of quality control checks into the manufacturing processes. The Company utilizes specially designed equipment and techniques to maintain its ability to assemble efficiently a wide variety of electronic products. PRODUCT TESTING. The increasingly complex design and assembly techniques for production of electronic products have created a need for the Company's services in designing and assembling test equipment for electronic assemblies. Such test equipment includes functional test fixtures for testing printed circuit assemblies; in-circuit component measurement testers; and intelligent burn-in chambers, which temperature cycle products under load. The Company designs and assembles test products for testing customers' products. The Company believes that the design and production of test equipment is an important factor in its ability to provide products of consistent and high quality. SMARTHOUSE PARTNERSHIP. As a result of the poor market acceptance of the home automation systems developed and promoted by SmartHouse, L.P. ("SmartHouse"), the Company's production and marketing of SmartHouse-related products during fiscal 1996 was not material. Although the Company continues to produce such items, it does not expect the SmartHouse program to provide significant revenues in the near future. To finance certain expenditures relating to the development and design of the SmartHouse-related products and to reduce its potential risk, the Company had sponsored and invested in a research and development partnership, Plexus Home Automation Limited Partnership ("PHALP"), of which a Plexus subsidiary is general partner and investor. CUSTOMERS AND MARKETING The Company performs services for a wide variety of customers ranging from large multi-national companies to smaller companies. Because of the variety of services it offers, its flexibility in design and manufacturing, and its ability to timely respond to customer needs, the Company believes it is well positioned to offer its services to customers in its market segments. For many customers, the Company functions as both a design and production arm, thus permitting customers to concentrate on concept development and marketing and to avoid the expense of development of manufacturing capacity. This method provides an economical and efficient alternative to in-house production. -2- 4 The Company markets its services primarily through its own employees. It also employs several sales representative agencies covering selected customer accounts. The representatives are paid commissions based upon sales. During fiscal 1996, the Company's services were sold to approximately 104 customers. The customers include five subsidiaries or divisions of International Business Machines Corporation ("IBM") and three subsidiaries or divisions of General Electric Company ("GE"), all of which the Company considers separate customers. Other than IBM and GE, no customer accounted for as much as 10% of the Company's fiscal 1996 sales. Although sales to the various IBM and GE subsidiaries, divisions and locations represented approximately 26% and 13%, respectively, of the Company's total sales in fiscal 1996 (compared to 26% and 17%, respectively, in fiscal 1995 and 39% and 16%, respectively, in fiscal 1994), orders were received from the various independent IBM and GE production facilities, each of which contracts independently of the others. The Company believes that its sales to different IBM and GE locations are not dependent on sales to other locations. The decrease in sales to GE in fiscal 1996 reflects both a decrease in actual sales volume and reduced pricing to certain GE divisions. While the complete loss of either IBM or GE as a customer would have a significant negative impact on the Company, the Company does not believe the loss of all IBM or GE divisions to be a likely possibility. Substantially all of Plexus' business is done on a project by project basis for its customers. Although Plexus has several projects and customers for which it provides services on a continuing basis, the timing and nature of particular customer projects can vary significantly from period to period. Substantial changes in the nature or timing of these projects affect the Company's sales and profitability from period to period. Company also from time to time considers strategic acquisitions, joint ventures and strategic partnerships with other companies. Under certain circumstances, and subject to identification of appropriate candidates, the Company believes that such transactions may provide an attractive means of growth by providing access to additional customers and/or by adding new capabilities, capacity or locations. COMPETITION The market for electronic products and services provided by the Company is highly competitive, primarily on the basis of engineering, testing and production capability, and the capacity for prompt delivery, quality and price. The capability to design in a timely manner and the capacity to produce quality items and to assure prompt delivery are particularly important in the electronics industry. The average product designed and assembled by the Company has a technologically useful life of only 18 months to three years. Through its design and production services, the Company serves as an extension or replacement for its customers' engineering, testing and manufacturing operations. Competitors in the electronics design and assembly field are numerous and range in size from several very large multi-national companies with substantially greater resources than the Company to many smaller companies competing only in specific aspects of the Company's business. The Company also competes against companies which determine to manufacture items in-house rather than contract with a third-party manufacturer. The Company estimates that it controls less than one percent of the global market in the outsourced electronics manufacturing services industry. -3- 5 EMPLOYEES As of December 1, 1996, the Company employed full time approximately 2,159 persons. These employees included approximately 772 professional and engineering employees and approximately 1,387 employees who work in assembly. The Company also employed 336 temporary employees through various temporary employment agencies. The Company has never experienced a work stoppage due to a labor dispute, considers its relations with employees to be very good, and is not a party to any labor contract. To date, the Company has not had any difficulty fulfilling its employment needs. PATENTS AND TRADEMARKS The Company does not own any material patents or copyrights. The Company owns the servicemark "Plexus". ENGINEERING, TESTING AND DEVELOPMENT The Company believes that its engineering, testing and development capabilities are significant factors in the success of its business. The Company maintains a design team of 133 employees, including 125 hardware and software design engineers and support staff, and utilizes an integrated design system in the Company's engineering services. To supplement its internal capabilities, Plexus has formed a strategic alliance with Battelle, a leading private independent research and development organization. The Company believes that Battelle will make available to Plexus a wide spectrum of advanced technology and innovative product development experience, to complement the Company's capacities in electronic product design, testing and manufacturing. In selected circumstances in which the Company and Battelle believe use of the alliance is appropriate, the Company believes it will be able to use this alliance to accelerate new product introduction for its customers. MATERIALS AND COMPONENTS The Company does not generally fabricate the component parts which it uses for the products which it assembles. However, the Company uses various component parts which are manufactured by others. Important components include integrated circuits (primarily logic and memory devices), resistors, capacitors and printed circuit boards; these components may be either custom or standard. The Company has numerous suppliers for these components and has generally not experienced difficulties obtaining the components needed for its assemblies. The industry-wide shortage of certain component parts (primarily logic and memory devices) which negatively impacted the Company in the early part of fiscal 1996 and prior periods has subsided. The Company currently anticipates an adequate supply going forward. ENVIRONMENTAL COMPLIANCE The Company believes that it is in compliance with all federal, state and local environmental laws, and does not anticipate any significant expenditures in maintaining its compliance. ITEM 2. PROPERTIES The Company owns its headquarters, the Plexus Technology Center, in Neenah, Wisconsin, which consists of approximately 45,000 square feet and includes Plexus' headquarters office. The Technology Center provides office, design and testing space for the Company. -4- 6 Three of the Company's manufacturing facilities are located at Neenah, Wisconsin, and the fourth at Richmond, Kentucky. The facilities in the original Neenah complex, which are owned by the Company and were built in the period from 1980 to 1985, contain an aggregate of approximately 80,000 square feet of assembly and office space. The two Wisconsin facilities owned by the Company (the headquarters and the original manufacturing complex) are subject to mortgages securing the Company's bank debt. In 1990, the Company occupied an additional assembly facility in Neenah, Wisconsin, with approximately 110,000 square feet of assembly and office space, which provides additional capacity. The Company leases this facility under a fifteen year lease. In January 1994, the Company occupied a new surface mount assembly facility in Neenah, Wisconsin. This facility is approximately 175,000 square feet, and is used for manufacturing purposes. The Company leases the facility under a twenty year lease. In 1985, the Company opened an assembly facility with approximately 45,000 square feet of assembly and office space, which it owns in Richmond, Kentucky. In February 1996, the Company entered into a lease agreement with Oneida Nation Electronics ("ONE"), corporation chartered by the Oneida tribe of Indians of Wisconsin. Pursuant to the lease agreement, ONE has agreed to construct and equip an approximately 110,000 square foot manufacturing facility located in the Green Bay, Wisconsin area for the use by the Company. Based on current construction plans, this facility is expected to be completed in the second quarter of calendar 1997. Annual lease payments by the Company for the building and equipment will be based on the profitability of the facility pursuant to a formula defined in the lease agreement. There are no required minimum lease payments. Company management believes this lease provides a financial arrangement under which the Company's earnings would be less likely to be negatively impacted during the start-up phase of the facility than under conventional financing methods and capital commitments would be minimized, although it involves a sharing of potential future profits (if any) from the facility. In July 1996, the Company occupied an additional office building, with approximately 19,000 square feet of office space, in Neenah, Wisconsin. The Company leases this office building under a ten-year lease. The Company also uses substantial specialized equipment in its operations. The Company leases a substantial amount of this equipment. The Company believes that its equipment and facilities are modern, well maintained and, together with the planned ONE facility, adequate for its present needs. However, continued expansion of the Company's business may require additional facility expansion in the future. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Company is a party or of which any of its property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1996. -5- 7 EXECUTIVE OFFICERS OF THE REGISTRANT The following table contains certain information regarding the present executive officers of the Company, who are elected by the Board of Directors after each annual meeting of shareholders for one-year terms or until replaced by the Board of Directors.
Present Office Name Age Position Held Since ---- --- -------- ---------- Peter Strandwitz 59 Chairman, Chief Executive Office, Director 1979 John L. Nussbaum 54 President, Chief Operating Officer, 1996(1) Director Gerald A. Pitner 55 Executive Vice President, Director 1989 Charles C. Williams 60 Vice President 1989 Thomas B. Sabol 37 Vice President-Finance and Chief Financial 1996(2) Officer Joseph D. Kaufman 39 Vice President, Secretary and General 1990 Counsel William F. Denney 63 Vice President, Treasurer and Controller 1995(3)
(1) Mr. Nussbaum has served as President and a director of the Company since 1980. Mr. Nussbaum became Chief Operating Officer in 1996. (2) Mr. Sabol joined the Company in January 1996. From 1993 to 1995, Mr. Sabol served as Vice President and General Auditor for Kemper Corporation. Prior to that time, Mr. Sabol served as Business Assurance Manager for Coopers & Lybrand, LLP. (3) Mr. Denney has served as the Vice President and Controller of the Company since 1990, and became Treasurer in 1995. * * * "SAFE HARBOR" CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: The statements contained in this Form 10-K which are not historical facts (certain of which include terms such as "believe," "expect," "plan," "look forward to" or "anticipate") are forward looking statements that involve risks and uncertainties, including, but not limited to, the Company's ability to secure new customers and maintain its current customer base, the risk of customer reductions, delays or cancellations in both on-going and new programs, the results of cost reduction efforts, the adequate availability of components and related parts for production, the effect of economic conditions, the impact of technological changes and increased competition, design and manufacturing deficiencies, and other risks detailed herein and in the Company's other Securities and Exchange Commissions filings. -6- 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS For the years ended September 30, 1996 and 1995, the Company's Common Stock has traded on the NASDAQ National Market System; the price information for that period represents high and low sale prices. The Company has not paid any cash dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the Company's dividend intentions.
PRICE RANGE OF PRICE RANGE OF FISCAL YEAR ENDED COMMON STOCK FISCAL YEAR ENDED COMMON STOCK SEPTEMBER 30, 1996 HIGH LOW SEPTEMBER 30, 1995 HIGH LOW First Quarter 18 3/4 14 3/4 First Quarter 10 3/4 8 1/4 Second Quarter 17 1/4 12 1/2 Second Quarter 12 7/8 8 1/2 Third Quarter 15 1/4 11 1/4 Third Quarter 14 3/4 11 1/4 Fourth Quarter 16 13 Fourth Quarter 18 7/8 13 1/2 Year 18 3/4 11 1/4 Year 18 7/8 8 1/4
On December 13, 1996, there were approximately 850 holders of record of the Company's Common Stock, and The Company estimates that on that date there were approximately 6,000 total beneficial owners of the Company's Common Stock. -7- 9 ITEM 6. SELECTED FINANCIAL DATA.
FOR THE YEARS ENDED SEPTEMBER 30, (dollars in thousands, except per share amounts) OPERATING STATEMENT DATA 1996 1995 1994 1993 1992 Net Sales $316,124 $283,134 $242,483 $159,597 $157,376 Gross profit 27,333 23,696 16,170 13,074 16,695 Operating income 13,987 12,435 7,926 6,310 9,727 Net income 7,431 6,343 3,057 2,570 5,050 Fully diluted net income per share $ 1.03 $ .88 $ .46 $ .40 $ .80 Balance Sheet Data Working capital $ 51,425 $ 71,302 $ 62,784 $ 45,169 $ 31,370 Total assets 107,374 115,088 122,021 95,149 62,689 Long-term debt 15,372 41,734 40,691 40,064 20,461 Stockholders' equity 48,017 41,009 34,879 24,801 23,130
-8- 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Management's Discussion and Analysis of Financial Condition and Results of Operations, with the exception of historical matters, contains forward-looking statements (such as statements including the terms "believe," "expect," "anticipate" and similar concepts) which involve risks and uncertainties. Actual results may differ materially from these statements as a result of various factors, including those discussed herein. GENERAL Plexus Corp. is a contract provider of design, manufacturing and testing services to the electronics industry. Headquartered in Neenah, Wisconsin, the Company is the largest electronic assembly organization in the Midwest. Through its two wholly-owned subsidiaries, Technology Group, Inc. and Electronic Assembly Corporation, the Company offers a full range of services including product development, printed circuit board (PCB) design, material procurement and management, PCB and higher level assembly, functional and in-circuit testing, final system box build and distribution. Services are provided to original equipment manufacturers in the computer (primarily mainframe and peripheral products), medical, industrial, telecommunications and transportation/automotive electronics industries. The Company has operations in Neenah, Wisconsin and Richmond, Kentucky. The contract manufacturing services are provided on either a turnkey basis, where the Company procures certain or all of the materials required for product assembly, or on a consignment basis, where the customer supplies some or occasionally all materials necessary for product assembly. Turnkey services include material procurement and warehousing, in addition to manufacturing, and involve greater resource investment and inventory risk management than consignment services. Turnkey manufacturing currently represents almost all of the Company's sales. Turnkey sales typically generate higher net sales and higher gross profit dollars with lower gross margin percentages than consignment sales due to the inclusion of component costs, and related mark-up, in the Company's net sales. Variations in the Company's turnkey sales have caused and could continue to cause the Company's gross margin to fluctuate year to year and quarter to quarter. Many of the industries for which the Company currently provides electronic products are subject to rapid technological change, product obsolescence, increased competition, and pricing pressures. These and other factors which affect the industries the Company serves, and which affect any of the Company's major customers in particular, could have a material adverse effect on the Company's results of operations. The Company has no long-term volume commitments from its customers, and lead-times for customer orders and product-life cycles continue to contract. Customer programs can be canceled and volume levels can be changed or delayed at any time. The timely replacement of delayed, canceled or reduced programs with new business cannot be assured. Because of these and other factors, there can be no assurance that the Company's recent historical sales growth rate will continue. The Company's sales can be negatively impacted by component shortages. Shortages of key electronic components which are provided directly from customers or suppliers can cause manufacturing interruptions, customer rescheduling issues, production downtime and production set-up and restart inefficiencies. Allocations of components are an integral part of the electronics industry. Shortages that occurred in the past few years including the first half of fiscal 1996, mainly in logic and memory devices, have been mitigated over the past six months due to a shift in the supply-demand cycle for such components. While in general the marketplace for such components has eased allowing greater availability, key component shortage issues can still occur with respect to specific industries or particular components. In response to this dynamic environment, the Company has a corporate procurement organization whose primary purpose is to create strong supplier alliances to assure a steady flow of components at competitive prices and mitigate shortages. However, because of the limited number of suppliers for certain electronic components and other supply and demand concerns, the Company can neither eliminate component shortages nor determine the timing or impact of such shortages on the Company's results. As a result, the Company's sales and profitability can be affected from period to period. Start-up costs and the management of labor and equipment efficiencies for new programs and new customers can have an effect on the Company's gross margins. Due to these and other factors, gross margins can be negatively impacted early on in the life cycle of new programs. In -9- 11 addition, labor efficiency and equipment utilization rates ultimately achieved and maintained by the Company for new and current programs impact the Company's gross margins. The Company operates in a highly competitive industry. The Company faces competition from a number of electronic manufacturing services companies, some with financial and manufacturing resources greater than the Company's. The Company also faces competition in the form of current and prospective customers that have the capabilities to develop and manufacture products internally. In order to remain a viable alternative, the Company must continue to enhance its total engineering and manufacturing technologies. Other factors that could adversely affect forward-looking statements include the Company's ability to maintain and expand its customer base, gross margin pressures, the overall economic conditions affecting the electronics industry, and other factors and risks detailed herein and in the Company's other Securities and Exchange Commission filings. RESULTS OF OPERATIONS NET SALES In fiscal 1996, net sales grew to $316 million, an increase of $33 million, or 12%, over the previous year. Net sales in fiscal 1995 were $283 million, an increase of $41 million, or 17% over fiscal 1994. The sales increase in fiscal 1996 was due to increased orders from existing customers, including ongoing and new programs, and the addition of new customers. However, the increases were not as extensive as originally anticipated by Company management due to a number of factors. First, in the first half of fiscal 1996, the Company experienced delays in several major new programs from certain new and existing customers, especially at its Advanced Manufacturing Facility. These delays occurred primarily due to customer cutbacks in original forecasts, component shortages and customer time-to-market issues caused by design changes or other customer-specific factors. Secondly, certain ongoing programs had volume reductions from prior years based on revised customer forecasts. Finally, certain customers in fiscal 1996 adjusted production schedules because of their own internal excess manufacturing capacity. This resulted in a reduction in the Company's recent sales growth percentage. The increase in fiscal 1995 over fiscal 1994 was due to an increased customer base and an increase in the amount of component parts sales from its turnkey business. While the Company experienced sales growth in fiscal 1996 across all the industries it services, except industrial, growth was more pronounced in the telecommunications, medical and transportation/automotive segments of the electronics market. Sales to the industrial electronics segment were impacted in fiscal 1996 by the timing and changeover for a new generation product from one of the Company's top ten customers resulting in reduced sales levels from fiscal 1995. Sales to the computer segment of the electronics market in fiscal 1996 increased over 1995. However, the percentage of overall computer segment sales declined to 38% from 40% of total net sales due to increases in sales to other segments of the electronics market. The Company's two largest customers continue to be International Business Machines Corporation (IBM) and General Electric Company (GE). Net sales to IBM (including up to six subsidiaries or divisions) were 26%, 26%, and 39% for fiscal 1996, 1995, and 1994, respectively. Net sales to GE (including up to five subsidiaries or divisions) were 13%, 17%, and 16% for fiscal 1996, 1995, and 1994, respectively. Each division or subsidiary of these customers contracts independently of the other divisions or subsidiaries. While the combined net sales for these two customers increased in absolute dollar amounts in fiscal 1996 compared to fiscal 1995, the Company has continued to obtain new business from other customers that has resulted in a reduced dependency on IBM and GE. The decrease in sales to GE in fiscal 1996 reflects both a decrease in actual sales volume and reduced unit pricing to certain GE divisions. In fiscal 1995, sales to IBM were reduced due to the termination of several projects relating to IBM product lines, while GE sales increased due to programs with a new division of GE. The Company expects that while sales from IBM and GE should increase in dollar amounts in fiscal 1997, the percentage of total Company sales could continue to decline. Net sales to the Company's ten largest customers accounted for 70%, 75%, and 80% of total revenues in fiscal 1996, 1995, and 1994, respectively. The decline has occurred primarily due to the Company's ability to obtain new business from other customers, thereby reducing its dependency on these customers. The Company is still dependent upon continued sales to IBM, GE, and its other significant customers. Any material change in orders from these or other customers could have a material effect on the Company's results of operations. -10- 12 The Company believes that its growth has been achieved in significant part by its approach to partnering with customers mainly through its product design and development services. The Company intends to continue to leverage this aspect of its product design and development services for continued growth in contract manufacturing revenues. In order to achieve expanded sales growth, the Company must continue to generate additional sales from existing customers from both current and future programs, and must successfully market to new customers. In addition, the Company must continue to attract and retain top quality product development engineers in order to continue to expand its design and development services. Because of these and other factors, there can be no assurance that the Company's historic growth rates will continue. GROSS PROFIT Gross profit increased by $3.6 million, or 15%, in fiscal 1996 compared to fiscal 1995 and by $7.6 million, or 47%, during fiscal 1995 compared to fiscal 1994. The gross margin increased to 8.6% in fiscal 1996, from 8.4% in fiscal 1995. The gross margin in fiscal 1994 was 6.7%. The slight increase in gross margin in fiscal 1996 compared to fiscal 1995 resulted from the cost-savings initiatives commenced by the Company in the second quarter of fiscal 1996, together with enhanced procurement management, the continued broadening of the Company's customers base, declining material pricing and the increased utilization of the Company's Advanced Manufacturing Facility resulting from increased sales. These factors were mitigated by slower first half sales growth that was unable to absorb certain increased fixed and variable manufacturing costs that had been put in place in early fiscal 1996 in anticipation of higher sales volumes, and increased reserves and write-offs of inventories and accounts receivable, primarily due to improved inventory management procedures instituted in fiscal 1996. In addition, start-up costs and manufacturing labor inefficiencies associated with several new programs impacted negatively on gross margins. The increase in the gross profit percentage in fiscal 1995 over fiscal 1994 was due to the increased utilization of the Advanced Manufacturing Facility which was opened in fiscal 1994 and more efficient use of capacity in the Company's other manufacturing plants offset by increased key electronic component pricing and shortages (primarily logic and memory devices). The fiscal 1996 cost-savings initiatives included reductions in production and administrative personnel, and equipment lease reductions. Specifically, the Company reduced production and administrative personnel by approximately 140 since February 1, 1996, through layoffs and attrition. These reductions amounted to an approximate 6% decrease in overall employment at the Company. In addition to the staffing decreases, the Company reduced fixed expenses, primarily through equipment lease reductions. Severance and related costs with respect to staff reductions and equipment lease reductions were not material. In the second half of fiscal 1996 the Company realized pre-tax cost savings of approximately $1.5 million. Based on actions taken, the Company expects to realize at least $3 million in annual cost savings, on a pre-tax basis. The Company also implemented tighter controls over the monitoring and addition of variable and fixed costs. The Company's ability to maintain these realigned expense levels are dependent on a number of factors including adherence to cost savings discipline, and increased labor and equipment efficiencies, which cannot be assured. During the third quarter of fiscal 1996, the Company also implemented a flexible labor force program, which utilizes temporary employment agencies to provide trained production personnel on an as-needed basis, within its Wisconsin operations. This program should enable the Company to react more rapidly to fluctuations in its labor force requirements, while converting a portion of its fixed manufacturing costs to variable costs that can be managed based on customer needs. While this program did result in some gross profit improvement in fiscal 1996, until this program is fully implemented into the management of the Company's manufacturing operations, the long-term benefits of such a program on the Company's operations cannot be determined. The Company's gross margin also reflects a number of other factors including product mix, the level of start-up costs and efficiencies of new programs, capacity utilization of surface mount and other equipment, labor costs and efficiencies, the management of inventories, component pricing and shortages, fluctuations and timing of customer orders, changing demand for customers' products, pricing and competition within the electronics business. These and other factors can cause variations in the Company's operating results. While the Company's focus is on maintaining and expanding gross margins, there can be no assurance that gross margins will not decrease in future periods. -11- 13 SELLING AND ADMINISTRATIVE EXPENSES Selling and administrative (S&A) expenses increased to $13.4 million in fiscal 1996, compared to $11.3 million in fiscal 1995, and $8.2 million in fiscal 1994. As a percentage of sales, S&A expenses were 4.2%, 4.0% and 3.4% in fiscal 1996, 1995, and 1994, respectively. These increases reflect the Company's planned expansion of its sales and marketing efforts, enhancement of its information systems to support the Company's continued growth, and increase in its customer support function. In addition, in the fourth quarter of fiscal 1995 the Company incurred larger than normal expenditures for group health, employee procurement, supplies and charitable donations that are not expected to reoccur at similar levels. The Company anticipates that future S&A expenses will increase in absolute dollars and could increase as a percentage of net sales over the near term, as the Company continues to expand the above support areas. INTEREST EXPENSE Interest expense was $1.9 million in fiscal 1996, compared to $2.5 million in fiscal 1995, and $3.2 million in fiscal 1994. The decrease in interest expense in fiscal 1996 was primarily due to reduced borrowings required to support working capital, coupled with lower interest rates. The decrease in fiscal 1995 was due to decreases in the average daily borrowings on the Company's long-term revolving credit agreement related to working capital requirements in the latter half of the fiscal year and decreases in interest rates. See "Liquidity and Capital Resources." INCOME TAXES Income taxes increased to $4.9 million in fiscal 1996, from $3.9 million in fiscal 1995, and $1.9 million in fiscal 1994. The Company's effective income tax rate has remained constant at rates between 38% to 40% in fiscal 1996, 1995, and 1994. These rates approximate the blended Federal and state statutory rate as a result of the Company's operations being located within the United States. LIQUIDITY AND CAPITAL RESOURCES Cash flows from operating activities were $29.2 million in fiscal 1996 compared to $4.2 million in fiscal 1995. Cash from operations was provided primarily by decreases in accounts receivable and increases in accounts payable and customer deposits offset by an increase in inventories. The changes in accounts receivable and accounts payable reflect improved cash management. Inventory increases have occurred due to increased sales volumes, purchases required to facilitate the start-up of new programs, and customer-imposed program reductions or delays. The Company is attempting to mitigate the impact of customer-imposed program reductions or delays on working capital by obtaining customer deposits for inventories carried by the Company in situations of this nature. This resulted in a $5 million increase in customer deposits during fiscal 1996. The Company has also further mitigated inventory increases through improved materials management that resulted in improved inventory turns. Inventory turnover improved to 5.6 turns as of September 30, 1996, from 4.8 turns as of September 30, 1995. The cash generated from operating activities was utilized primarily to reduce outstanding debt. Borrowings under the Company's long-term revolving credit agreement have been reduced by $26.3 million to $15.2 million as of September 30, 1996, from $41.5 million as of September 30, 1995. In 1996, the Company's revolving credit agreement was amended and restated resulting in a reduction in the Company's borrowing rates and reduced the maximum borrowings to $40 million (previously $55 million). All other major terms were unchanged from the previous agreement. The new rates range from LIBOR plus 0.875% to LIBOR plus 2% and from prime less 1/4% to prime plus 1/4% (previously LIBOR plus 2% to LIBOR plus 2 1/2% and prime plus 1/4% to prime plus 1/2%) depending on the Company's consolidated debt-to-worth ratio, as defined by the Amended and Restated Credit Agreement. The Company determined to reduce the maximum borrowings due to the reduction in need for overall outstanding long-term debt as described above. The Company's revolving credit agreement extends through July 1998. The Company anticipates that it will be able to arrange an appropriate extension prior to that time. Capital additions of $4.1 million for fiscal 1996 were primarily concentrated in surface mount assembly equipment and management information systems hardware and software. Included in capital additions is $1.7 million of manufacturing equipment that was previously subject to operating leases that were acquired by the Company in August of 1996. No similar operating lease buyouts are anticipated at the present time. Payment for property, plant and equipment for fiscal 1995 and 1994 was $2.1 million and $5.3 million, respectively. Except for the Advanced Manufacturing Facility, these acquisitions were financed from working capital. The Advanced Manufacturing Facility was permanently financed by use of a sale and leaseback transaction in August, 1994. -12- 14 The Company has historically utilized operating leases to fund the majority of its manufacturing equipment needs. The Company now anticipates utilizing operating leases primarily in situations where technical obsolescence concerns are determined to outweigh the benefits of financing the equipment purchase. Due to this change in strategy, the Company anticipates increased future capital additions due to the number of operating leases expiring through fiscal 1997 and other anticipated equipment requirements. The Company estimates that capital expenditures for fiscal 1997 should increase to approximately $10-$12 million which the Company expects to fund through cash flows from operations and the revolving credit agreement. In February 1996, the Company entered into a lease agreement with Oneida Nation Electronics (ONE), a corporation chartered by the Oneida tribe of Indians of Wisconsin. Pursuant to the lease agreement, ONE has agreed to construct and equip an approximately 110,000-square-foot manufacturing facility located in the Green Bay, Wisconsin area for use by the Company. Based on current construction plans, this facility is expected to be completed in the second quarter of calendar 1997. Annual lease payments by the Company for the building and equipment will be based on the profitability of the facility pursuant to a formula defined in the lease agreement. There are no required minimum lease payments. Company management believes this lease provides a financial arrangement under which the Company's earnings would be less likely to be negatively impacted during the start-up phase of the facility than under conventional financing methods, and capital commitments would be minimized, although it involves a sharing of potential future profits from the facility. The ratio of total debt-to-equity as of September 30, 1996 was 1.2 to 1 compared to 1.8 to 1 as of September 30, 1995. The Company anticipates future increases in working capital needs in order to facilitate growth. However, because of the dynamics of the Company's industry, the exact timing and amount of these increases cannot be determined. The Company believes that its credit facilities, leasing capabilities and projected cash flows from operations will be sufficient to meet its anticipated working capital needs and its anticipated short-term and long-term capital requirements. The Company has not paid dividends on its common stock, but has reinvested its earnings to support its working capital and expansion requirements. Except for future dividend requirements on the Series A preferred stock, the Company intends to continue to utilize its earnings in the development and expansion of the business and does not expect to pay cash dividends in the foreseeable future. NEW ACCOUNTING PRINCIPLES The Company is required to adopt Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-Based Compensation" (the "Statement") in 1997. The Statement allows companies to measure compensation cost in connection with employee stock compensation plans using a fair value based method or continue to use an intrinsic value method, which generally does not result in compensation cost. The Company currently plans to continue using the intrinsic value based method. -13- 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See following "List of Financial Statements and Financial Statement Schedules", and accompanying reports, statements and schedules, which follow beginning on page F.1, all of which are incorporated by reference herein. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. -14- 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information in response to this item is incorporated herein by reference to "Election of Directors" in the Registrant's Proxy Statement for its 1997 Annual Meeting of Shareholders ("1997 Proxy Statement") and from "Security Ownership of Certain Beneficial Owners and Management-- Section 16(a) Beneficial Ownership Reporting Compliance" in the 1997 Proxy Statement and "Executive Officers of the Registrant" in Part I hereof. ITEM 11. EXECUTIVE COMPENSATION Incorporated herein by reference to the paragraph under "Election of Directors --Directors' Compensation" and "Executive Compensation" in the 1997 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference to "Security Ownership of Certain Beneficial Owners and Management" in the 1997 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. -15- 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed: 1. and 2. Financial Statements and Financial Statement Schedules. See following List of Financial Statements and Financial Statement Schedules, on page F-1, which is incorporated herein by reference. 3. Exhibits. See Exhibit Index included as the last pages of this report, which index is incorporated herein by reference. (b) Reports on Form 8-K. No reports on Form 8-K filed by the Company during the last quarter of fiscal 1996. -16- 18 PLEXUS CORP. 10-K LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE SEPTEMBER 30, 1996 CONTENTS
Pages ----- Report of Independent Accountants F-2 Consolidated Statements of Operations for the three years ended F-3 September 30, 1996, 1995 and 1994 Consolidated Balance Sheets as of September 30, 1996 and 1995 F-4 Consolidated Statements of Stockholders' Equity for the three years ended September 30, 1996, 1995 and 1994 F-5 Consolidated Statements of Cash Flows for the three years ended September 30, 1996, 1995 and 1994 F-6 Notes to Consolidated Financial Statements F-7 to F-11 Financial Statement Schedule: Report of Independent Accountants F-12 Schedule II - Valuation and Qualifying Accounts F-13
F-1 19 REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND BOARD OF DIRECTORS PLEXUS CORP. We have audited the accompanying consolidated balance sheets of Plexus Corp. and Subsidiaries as of September 30, 1996 and 1995 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Plexus Corp. and Subsidiaries as of September 30, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Milwaukee, Wisconsin November 13, 1996 F-2 20 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994 (dollars in thousands, except per share amounts)
1996 1995 1994 Net sales $316,124 $283,134 $242,483 Cost of sales 288,791 259,438 226,313 - ------------------------------------------------------------------------------------------------------- Gross profit 27,333 23,696 16,170 Selling and administrative expenses 13,346 11,261 8,244 - ------------------------------------------------------------------------------------------------------- Operating income 13,987 12,435 7,926 - ------------------------------------------------------------------------------------------------------- Other income (expense): Interest (1,924) (2,470) (3,152) Miscellaneous 314 317 156 - ------------------------------------------------------------------------------------------------------- (1,610) (2,153) (2,996) - ------------------------------------------------------------------------------------------------------- Income before income taxes 12,377 10,282 4,930 Income taxes 4,946 3,939 1,873 - ------------------------------------------------------------------------------------------------------- Net income $ 7,431 $ 6,343 $ 3,057 ======================================================================================================= Net income per common and common equivalent share: Primary $ 1.04 $ .89 $ .46 ======================================================================================================= Fully diluted $ 1.03 $ .88 $ .46 =======================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-3 21 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1996 AND 1995 (dollars in thousands, except per share amounts)
Assets 1996 1995 Current assets: Cash and cash equivalents $ 1,847 $ 3,569 Accounts receivable, net of allowance of $275 and $145 in 1996 and 1995, respectively 35,312 47,560 Inventories 54,386 48,966 Deferred income taxes 1,753 904 Prepaid expenses and other 1,451 1,930 - ------------------------------------------------------------------------------------------------------ Total current assets 94,749 102,929 Property, plant and equipment, net 12,423 11,829 Other 202 330 - ------------------------------------------------------------------------------------------------------ Total assets $107,374 $115,088 ====================================================================================================== Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $ 63 $ 107 Accounts payable 27,758 23,279 Customer deposits 8,614 3,530 Accrued liabilities: Salaries and wages 3,148 2,618 Other 3,741 2,093 - ------------------------------------------------------------------------------------------------------ Total current liabilities 43,324 31,627 Long-term debt 15,372 41,734 Deferred income taxes 661 718 Stockholders' equity: Series A preferred stock, $.01 par value, $1,000 face value, 7,000 shares authorized, issued and outstanding (aggregate liquidation preference of $7 million) 0 0 Preferred stock, $.01 par value, 4,993,000 shares authorized, none issued or outstanding - - Common stock, $.01 par value, 30,000,000 shares authorized, 6,501,196 and 6,491,332 issued and outstanding, respectively 65 65 Additional paid-in capital 14,253 14,160 Retained earnings 33,699 26,784 - ------------------------------------------------------------------------------------------------------ 48,017 41,009 - ------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $107,374 $115,088 ======================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-4 22 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994 (dollars in thousands, except per share amounts)
ADDITIONAL TOTAL PREFERRED STOCK COMMON STOCK PAID-IN RETAINED STOCKHOLDER'S SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY - -------------------------------------------------------------------------------------------------------------- Balances, October 1, 1993 - $- 6,448,173 $64 $ 6,809 $17,928 $24,801 Exercise of stock options - - 12,325 1 20 - 21 Issuance of Series A Preferred Stock 7,000 0 - - 7,000 - 7,000 Net income - - - - - 3,057 3,057 - -------------------------------------------------------------------------------------------------------------- Balances, September 30, 1994 7,000 0 6,460,498 65 13,829 20,985 34,879 Exercise of stock options - - 30,834 - 331 - 331 Net income - - - - - 6,343 6,343 Preferred stock dividends ($77.69 per share) - - - - - (544) (544) - -------------------------------------------------------------------------------------------------------------- Balances, September 30, 1995 7,000 0 6,491,332 65 14,160 26,784 41,009 Exercise of stock options - - 9,864 - 93 - 93 Net income - - - - - 7,431 7,431 Preferred stock dividends ($73.71 per share) - - - - - (516) (516) - -------------------------------------------------------------------------------------------------------------- Balances, September 30, 1996 7,000 $0 6,501,196 $65 $14,253 $33,699 $48,017 ==============================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-5 23 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994 (in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995 1994 Net income $ 7,431 $ 6,343 $ 3,057 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 3,653 3,237 3,103 Provision for inventories and accounts receivable allowances 2,145 341 566 Deferred income taxes (906) 92 (156) Changes in assets and liabilities: Accounts receivable 12,060 (4,050) (22,374) Inventories (7,377) 10,929 (11,158) Prepaid expenses and other 479 1,270 (690) Accounts payable 4,479 (13,612) 12,869 Customer deposits 5,084 29 2,627 Accrued liabilities 2,178 (333) 860 Other 17 (58) 125 - --------------------------------------------------------------------------------------------- Cash flows provided by (used in) operating activities 29,243 4,188 (11,171) - --------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on sale of property, plant and equipment 8 19 9,104 Payments for property, plant and equipment (4,144) (2,106) (5,288) - --------------------------------------------------------------------------------------------- Cash flows provided by (used in) investing activities (4,136) (2,087) 3,816 - --------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from debt 196,300 121,900 110,791 Payments on debt (222,706) (121,300) (110,219) Issuance of preferred stock - - 7,000 Issuance of common stock 93 331 21 Payments of preferred stock dividends (516) (544) - - --------------------------------------------------------------------------------------------- Cash flows provided by (used in) financing activities (26,829) 387 7,593 - --------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (1,722) 2,488 238 Cash and cash equivalents, beginning of year 3,569 1,081 843 - --------------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 1,847 $ 3,569 $ 1,081 =============================================================================================
The accompanying notes are an integral part of these consolidated financial statements. F-6 24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 / / DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES Description of Business: Plexus Corp. offers contract development, design, manufacturing and test services primarily to original equipment manufacturers in the computer (primarily mainframes and peripherals), medical, industrial, telecommunications and transportation electronics industries. The Company offers a full range of services including product development, printed circuit board (PCB) design, material procurement and management, PCB and higher level assembly, functional and in-circuit testing, final system box build and distribution. The contract manufacturing services are provided on either a turnkey basis, where the Company procures certain or all of the materials required for product assembly, or on a consignment basis, where the customer supplies materials necessary for product assembly. Turnkey services include material procurement and warehousing, in addition to manufacturing, and involve greater resource investment than consignment services. The Company has operations in Neenah, Wisconsin and Richmond, Kentucky. Consolidation Principles: The consolidated financial statements include the accounts of Plexus Corp. and its subsidiaries (together "the Company"). All significant intercompany transactions have been eliminated. Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Inventories: Inventories are valued primarily at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Property, Plant and Equipment and Depreciation: These assets are stated at cost. Depreciation, determined on the straight-line method, is based on lives assigned to the major classes of depreciable assets as follows: Buildings and improvements 18-40 years Machinery and equipment 3-10 years
Revenue Recognition: Revenue is recognized primarily when inventory is shipped. Revenue and profit relating to product design and development contracts (such sales are less than 10% of total revenue) are recognized as costs are incurred utilizing the percentage-of-completion method; any losses are recognized when anticipated. Progress towards completion of product design and development contracts are consistently based on units of work for labor content and cost for component content. Income Taxes: Deferred income taxes are provided for differences between the bases of assets and liabilities for financial and tax reporting purposes. Stock Options: Proceeds from the sale of newly issued common stock to employees under the Company's stock option plan are credited to common stock to the extent of par value and the excess to additional paid-in capital. Income tax benefits attributable to stock options exercised are recorded as an increase in additional paid-in capital. Net Income Per Common and Common Equivalent Share: The computation of primary net income per common share is based upon the weighted average number of common shares outstanding plus the effect of common shares contingently issuable relating to outstanding stock options using the treasury stock method (weighted average shares were 6,632,363 in fiscal 1996, 6,583,032 in fiscal 1995 and 6,566,625 in fiscal 1994) and net income reduced for preferred stock dividends. The computation of fully diluted net income per common share reflects additional dilution from stock options and convertible preferred shares using the if-converted method (weighted average shares were 7,188,214 in fiscal 1996, 7,249,286 in fiscal 1995 and 6,705,239 in fiscal 1994). Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassification: Certain prior years' amounts have been reclassified to conform to the 1996 presentation. F-7 25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 / / INVENTORIES Inventories as of September 30, 1996 and 1995 consist of (in thousands):
1996 1995 Assembly parts $37,941 $33,950 Work-in-process 16,281 14,782 Finished goods 164 234 --------------------------- $54,386 $48,966 ===========================
NOTE 3 / / PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment as of September 30, 1996 and 1995 consist of (in thousands):
1996 1995 Land, buildings and improvements $ 8,414 $ 8,395 Machinery and equipment 25,262 21,699 ------------------------------ 33,676 30,094 Less accumulated depreciation 21,253 18,265 ------------------------------ $12,423 $11,829 ==============================
NOTE 4 / / DEBT Long-term debt as of September 30, 1996 and 1995 consists of (in thousands):
1996 1995 Revolving credit arrangement $15,200 $41,500 Other notes and obligations with a weighted average interest rate of 5.5% 235 341 -------------------------- 15,435 41,841 Less current portion 63 107 -------------------------- $15,372 $41,734 ==========================
The Company's revolving credit arrangement was amended in August 1996. The agreement provides for maximum borrowings of $40 million (previously $55 million), with all or a portion of the principal bearing interest at a prime-based or a LIBOR-based rate as elected by the Company. These rates range from LIBOR plus 0.875% to LIBOR plus 2% and prime less 1/4% to prime plus 1/4% (previously LIBOR plus 2% to LIBOR plus 2 1/2% and prime plus 1/4% to prime plus 1/2%), depending on the Company's consolidated debt-to-net worth ratio, as defined by the loan agreement. The weighted average interest rate of this agreement was 6.5% as of September 30, 1996. The amount available under the agreement is limited to the sum of 80% of qualified accounts receivable and the lesser of 50% or $27.5 million of qualified inventory, and is collateralized by accounts receivable and inventories. A commitment fee of 1/8 of 1% (previously 1/4 of 1%) per annum on the unused portion of this agreement is payable quarterly. The agreement matures in July 1998. The revolving credit agreement, as amended, includes covenants which require the maintenance of various debt-to-net worth ratios. The carrying amount of the Company's long-term debt approximates fair value. The aggregate scheduled maturities of long-term debt in subsequent years are as follows (in thousands): 1997 $ 63 1998 15,209 1999 10 2000 10 2001 11 Thereafter 132 ------- $15,435 =======
Cash paid for interest in fiscal 1996, 1995 and 1994 was $2.0 million, $3.0 million and $3.2 million, respectively. F-8 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 / / INCOME TAXES Income tax expense (benefit) consists of (in thousands):
1996 1995 1994 Currently payable: Federal $4,983 $3,209 $1,706 State 869 638 323 ------------------------ 5,852 3,847 2,029 ------------------------ Deferred Federal (800) 52 (210) State (106) 40 54 ------------------------ (906) 92 (156) ------------------------ $4,946 $3,939 $1,873 ========================
Following is a reconciliation of the Federal statutory income tax rate to the effective tax rates reflected in the consolidated statements of operations for fiscal 1996, 1995 and 1994: 1996 1995 1994 Federal statutory income tax rate 34.0% 34.0% 34.0% Increase (decrease) resulting from: State income taxes, net of Federal income tax benefit 4.1 4.4 5.0 Other, net 1.9 (0.1) (1.0) ------------------------ Effective income tax rate 40.0% 38.3% 38.0% ========================
The components of the net deferred income tax asset as of September 30, 1996 and 1995, consist of (in thousands):
1996 1995 Deferred tax assets: Inventories $ 713 $ 426 Accrued benefits 582 521 Capital losses 207 237 Other 458 371 ---------------------- 1,960 1,555 Less valuation allowance (207) (181) ---------------------- 1,753 1,374 ---------------------- Deferred tax liabilities: Property, plant and equipment 661 997 Other - 191 ---------------------- 661 1,188 ---------------------- Net deferred income tax asset $1,092 $ 186 ======================
The Company records a valuation allowance to reflect the estimated amount of deferred tax assets which relate to the realization of capital losses. Cash paid for income taxes in fiscal 1996, 1995 and 1994 was $5.0 million, $4.6 million and $1.4 million, respectively. NOTE 6 / / STOCKHOLDERS' EQUITY During 1994, the Company issued 7,000 shares of Series A Preferred Stock (the "Preferred Shares") with a face value of $1,000 per share. Dividends are earned on the face value of the Preferred Shares at the prime rate less 1%. Dividends are cumulative and payable semi-annually in arrears when and as declared by the Company's Board of Directors. At September 30, 1996, dividends of $18.125 per share (aggregate $126,876) were in arrears on the Preferred Shares. The Company may redeem the Preferred Shares at face value plus any accrued but unpaid dividends, whether declared or not, with notice as defined in the agreement. Through June 30, 2004, the Preferred Shares are convertible into common stock at a conversion price of $12.625 per share. The Company has reserved 554,455 shares of its authorized but unissued common stock for possible conversion. NOTE 7 / / LEASE COMMITMENTS The Company has a number of operating lease agreements primarily involving manufacturing equipment, computerized design equipment and manufacturing facilities. These leases are noncancelable and expire on various dates through 2014. Rent expense under all operating leases during fiscal 1996, 1995 and 1994 was approximately $13.5 million, $12.5 million and $10.5 million, respectively. Renewal and purchase options are available on certain of these leases. During 1996, the Company acquired certain manufacturing equipment that was subject to operating leases for $1.9 million. The equipment was recorded at its fair value which resulted in a writedown of approximately $200,000. The equipment is being depreciated over its remaining useful life. F-9 27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future minimum annual payments on operating leases are as follows (in thousands): 1997 $ 8,054 1998 4,013 1999 2,082 2000 1,968 2001 1,848 Thereafter 16,844 ------- $34,809 =======
NOTE 8 / / BENEFIT PLANS The Company has reserved 1.9 million shares of common stock for grant to officers and key employees under employee stock option plans. The exercise price of each option granted shall not be less than the fair market value on the date of grant and vest over a three year period from date of grant. The plan also authorizes the Company to grant 750,000 stock appreciation rights, none of which have been granted. Additionally, each independent outside director is granted 1,500 stock options each December 1 with option pricing and vesting terms similar to the employee plans. The 100,000 shares of common stock authorized under this plan may come from any combination of authorized but unissued shares, treasury stock or the open market. A summary of stock option activity follows:
1996 1995 1994 Outstanding at beginning of year 750,705 561,377 402,877 Granted 281,700 245,000 178,000 Exercised (between $3.88 and $13.69 per share) (9,864) (30,834) (16,500) Lapsed (8,002) (24,838) (3,000) ------------------------------ Outstanding at end of year 1,014,539 750,705 561,377 ============================== Exercisable at end of year 530,540 349,945 252,696 ============================== Shares available for future options at end of year 606,142 879,840 2 ==============================
Options outstanding as of September 30, 1996 have exercise prices ranging from $2.54 to $17.44 per share. The Company is required to adopt Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123) in 1997. The Statement allows companies to measure compensation cost in connection with employee stock compensation plans using a fair value based method or continue to use an intrinsic value method, which generally does not result in compensation cost. The Company currently plans to continue using the intrinsic value-based method. The Company's 401(k) savings plan covers all employees with one or more years of service. The Company matches employee contributions up to 2.5% of eligible earnings. The Company's contributions for fiscal 1996, 1995 and 1994 totaled $828,000, $644,000 and $563,000, respectively. In September 1996, the Company entered into nonqualified deferred compensation agreements with certain of its officers. Under the agreements, the Company has agreed to pay certain amounts annually for the first 15 years subsequent to retirement or to a designated beneficiary upon death. It is management's intent that life insurance contracts owned by the Company will fund these agreements. Expense for these agreements totaled $29,000 in fiscal 1996. The Company is not obligated to provide any postretirement medical or life insurance benefits to employees. NOTE 9 / / BUSINESS SEGMENT AND MAJOR CUSTOMERS The Company and its subsidiaries operate in one business segment, the production and sale of electronic products including the designing, manufacturing, programming and testing of computerized electronic assemblies. The following table summarizes the percentage of net sales to customers that account for more than 10% of net sales in fiscal 1996, 1995 and 1994:
1996 1995 1994 Customer A 26% 26% 39% Customer B 13% 17% 16%
Accounts receivable related to customers A and B represented 27% of the Company's trade accounts receivable as of September 30, 1996. F-10 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 / / QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for fiscal 1996 and 1995 consists of (in thousands except per share amounts):
First Second Third Fourth 1996 Quarter Quarter Quarter Quarter Total Net sales $71,308 $75,286 $86,066 $83,464 $316,124 Gross profit 4,673 5,176 7,923 9,561 27,333 Net income 805 839 2,604 3,183 7,431 Income per common share Primary $ 0.11 $ 0.12 $ 0.36 $ 0.45 $ 1.04 Fully diluted 0.11 0.12 0.36 0.44 1.03 1995 Net sales $65,341 $69,380 $72,354 $76,059 $283,134 Gross profit 4,358 5,938 6,275 7,125 23,696 Net income 895 1,470 1,823 2,155 6,343 Income per common share* Primary $ 0.13 $ 0.21 $ 0.26 $ 0.30 $ 0.89 Fully diluted 0.13 0.21 0.26 0.30 0.88
(*) Income per common share is computed independently for each quarter. The annual per share amount may not equal the sum of the quarterly amounts due to rounding. F-11 29 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors Plexus Corp. Our report on the consolidated financial statements of Plexus Corp. is included on page F-2 of the Form 10-K. In connection with our audits of such financial statements, we have also audited the related consolidated financial statement schedule listed in the index on page F-1 of this Form 10-K. In our opinion, the consolidated financial statement schedule referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Milwaukee, Wisconsin November 13, 1996 F-12 30 PLEXUS CORP. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended September 30, 1996, 1995 and 1994 (Dollars in thousands)
Additions Balance at Charged to Balance Beginning Costs and Deductions At End of Descriptions of Period Expenses (A) Period - ---------------------------------------------- -------------- -------------- -------------- -------------- 1996: Allowance for losses on accounts receivable (deducted from the asset to which it relates) $ 145 $ 188 $ 58 $ 275 Allowance for inventory obsolescence (deducted from the asset to which it relates) 307 1,957 798 1,466 -------------- -------------- -------------- -------------- $ 452 $ 2,145 $ 856 $ 1,741 ============== ============== ============== ============== 1995: Allowance for losses on accounts receivable (deducted from the asset to which it relates) $ 130 $ 189 $ 174 $ 145 Allowance for inventory obsolescence (deducted from the asset to which it relates) 735 152 580 307 -------------- -------------- -------------- -------------- $ 865 $ 341 $ 754 $ 452 ============== ============== ============== ============== 1994: Allowance for losses on accounts receivable (deducted from the asset to which it relates $ 130 $ 7 $ 7 $ 130 Allowance for inventory obsolescence (deducted from the asset to which it relates) 176 559 --- 735 -------------- -------------- -------------- -------------- $ 306 $ 566 $ 7 $ 865 ============== ============== ============== ==============
F-13 31 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. December 20, 1996 PLEXUS CORP. By /s/ PETER STRANDWITZ (Registrant) --------------------------- Peter Strandwitz, Chairman POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter Strandwitz, John L. Nussbaum and Joseph D. Kaufman, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and any other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirement of the Security Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.* SIGNATURE AND TITLE /s/ Peter Strandwitz /s/ John J. McDonough - ------------------------------------- ------------------------------------ Peter Strandwitz, Chairman and John J. McDonough, Director Chief Executive Officer, and Director /s/ John L. Nussbaum /s/ Harold R. Miller - ------------------------------------- ------------------------------------ John L. Nussbaum, President and Harold R. Miller, Director Chief Operating Officer, and Director /s/ Thomas B. Sabol /s/ Gerald A. Pitner - ------------------------------------- ------------------------------------ Thomas B. Sabol, Vice President- Gerald A. Pitner, Director Finance and Chief Financial Officer /s/ William F. Denney /s/ Thomas J. Prosser - ------------------------------------- ------------------------------------ William F. Denney, Vice President, Thomas J. Prosser, Director Treasurer and Controller /s/ Rudolph T. Hoppe - ------------------------------------- Rudolph T. Hoppe, Director - --------------- * Each of the above signatures is affixed as of December 20, 1996. 32 EXHIBIT INDEX PLEXUS CORP. 10-K FOR YEAR ENDED SEPTEMBER 30, 1996
INCORPORATED BY FILED EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH - ----------- ------- ------------ -------- 3(i) Restated Articles of Plexus Exhibit 3(i) to Corp., as amended through Plexus' Quarterly June 29, 1994 Report on Form 10-Q for the quarter ended June 30, 1994 ("6/30/94 10-Q") 3(ii) Bylaws of Plexus Corp., as amended through November 14, 1996 X 4.1 Restated Articles of Exhibit 3(i) to Incorporation of Plexus Corp. 6/30/94 10-Q 10.1 Supplemental Executive Retirement Agreements dated as of September 19, 1996** (a) Peter Strandwitz X (b) John Nussbaum X 10.2 Employment Agreements dated 11/15/88** with (a) William F. Denney Exhibit 10.10(b) to 1988 10-K (b) Joseph D. Kaufman Exhibit 10.10(c) to 1988 10-K 10.3 Employee Savings Plan and Trust**: (a) Plan Document X (b) Non-Standardized Form Adoption X Agreement 10.4 1988 Stock Option Plan, as amended** Exhibit 12.12 to Plexus' Annual Report on Form 10-K for the year ended September 30, 1992 ("1992 10-K")
EI-1 33
INCORPORATED BY FILED EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH ----------- ------- ------------ -------- 10.5(a) Amended and Restated Revolving Exhibit 10.17 to Credit Agreement dated as of Plexus' Quarterly March 18, 1996 among Firstar Bank Report on Form 10-Q of Milwaukee, Bank One of for the quarter ended Milwaukee, LaSalle National Bank March 31, 1996 of Chicago, and Harris Trust and ("3/31/96 10-Q") Savings Bank, and Firstar Bank as Agent for the Banks (the "Credit Agreement")* (b) Security and Guaranty Agreements related thereto by: (i) EAC Exhibit 10.14(b)(1) to Plexus' Quarterly Report on Form 10-Q for the quarter ended March 31, 1991 ("3/3/91 10-Q") (ii)(A) Plexus Corp. Exhibit 10.14(b)(ii) to 3/31/91 10-Q (B) Amendment No. 1 thereto Exhibit dated March 1, 1992 10.5(b)(ii)(B) to Plexus' Annual Report on Form 10-K for the year ended September 30, 1993 ("1993 10- K") (C) Amendment No. 2 thereto Exhibit dated July 30, 1993 10.5(b)(ii)(C) to 1993 10-K (iii) Technology Group, Inc. Exhibit 10.14(b)(iii) to 3/31/91 10-Q (c) Amendment No. 1 to the Credit X Agreement dated as of August 28, 1996 10.6(a) Plexus Home Automation Limited Exhibit 10.16 to 1992 Partnership Agreement dated as of 10-K 4/1/92 among Plexus General Partner Corp. and the Limited Partners (b) Amendments thereto Exhibit 10.7(b) to 1993 10-K EI-2
34
INCORPORATED BY FILED EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH ----------- ------- ------------ -------- 10.7(a) Lease Agreement between Neenah Exhibit 10.8(a) to (WI) QRS 11-31, Inc. ("QRS: 1994 10-K 11-31") and EAC, dated August 11, 1994* (b) Bill of Sale of EAC to QRS: 11-31 Exhibit 10.8(b) to dated August 31, 1994, together 1994 10-K with related Seller's/Lessee's Certificate of EAC (c) Guaranty and Suretyship Agreement Exhibit 10.8(c) to between Plexus Corp. and QRS: 11- 1994 10-K 31 dated August 11, 1994, together with related Guarantor's Certificate of Plexus Corp. 10.8 Plexus Corp. 1995 Executive Stock Exhibit 10.9 to 1994 Option Plan** 10-K 10.9 Plexus Corp. 1995 Directors' Exhibit 10.10 to 1994 Stock Option Plan** 10-K 10.10 Plexus Corp. 1995 Senior Exhibit 10.11 to 1994 Executive Incentive Compensation 10-K Plan** 10.11 Master Lease dated October 21, Exhibit 10.12 to 1994 1994 between Plexus and Norwest 10-K Equipment Finance* 10.12 Master Lease Agreement dated Exhibit 10.13 to 1994 August 17, 1992 between Plexus 10-K and Capital Associates Intl., Inc.* 10.13 Lease Agreement dated January 31, Exhibit 10.14 to 1994 1992 between Plexus and Hewlett- 10-K Packard Company* 10.14 Form of Lease of Personal Exhibit 10.15 to 1994 Property between EAC and M&I 10-K First National Leasing Corp. 10.15 Lease Agreement dated Exhibit 10.16 to February 12, 1996 between Plexus 3/31/96 10-Q and Oneida Nation Electronics EI-3
35
INCORPORATED BY FILED EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH ----------- ------- ------------ -------- 10.16 Master Equipment Lease dated X January 25, 1996 between Cargill Leasing Corporation and Plexus 11 Statement regarding computation X of Per Share Earnings 21 List of Subsidiaries X 23 Consent of Coopers & Lybrand X L.L.P. 24 Power of Attorney (Signature Page Hereto) 27 Financial Data Schedule X
- ---------------------- * Excludes certain schedules and/or exhibits, which will be furnished to the Commission upon request. ** Designates management compensatory plans or agreements. EI-4 EX-3.II 2 BY LAWS OF PLEXUS CORP. 1 EXHIBIT 3(ii) BYLAWS of PLEXUS CORP. as Amended and Restated by the Board of Directors on November 14, 1996 2 ARTICLE I. OFFICES; RECORDS 1.01. Principal and Business Offices. The corporation may have such principal and other business offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the corporation may require from time to time. 1.02. Registered Office and Registered Agent. The registered office of the corporation required by the Wisconsin Business Corporation Law to be maintained in the State of Wisconsin may be, but need not be, identical with the principal office in the State of Wisconsin. The address of the registered office may be changed from time to time by any officer or by the registered agent. The office of the registered agent of the corporation shall be identical to such registered office. 1.03. Corporate Records. The following documents and records shall be kept at the corporation's principal office or at such other reasonable location as may be specified by the corporation: (a) Minutes of shareholders' and Board of Directors' meetings and any written notices thereof. (b) Records of actions taken by the shareholders or directors without a meeting. (c) Records of actions taken by committees of the Board of Directors. (d) Accounting records. (e) Records of its shareholders. (f) Current Bylaws. (g) Written waivers of notice by shareholders or directors (if any). (h) Written consents by shareholders or directors for actions without a meeting (if any). (i) Voting trust agreements (if any). (j) Stock transfer agreements to which the corporation is a party or of which it has notice (if any). -2- 3 ARTICLE II. SHAREHOLDERS 2.01. Annual Meeting. The annual meeting of the shareholders shall be held on the third Wednesday of February, or on such other date and at such time as may be fixed by or under the authority of the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting is a legal holiday in the State of Wisconsin, such meeting shall be held on the next succeeding business day. If the election of directors is not held on the day designated herein, or fixed as herein provided, for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a meeting of the shareholders as soon thereafter as may be convenient. 2.02. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board and Chief Executive Officer, the President or the Board of Directors. If and as required by the Wisconsin Business Corporation Law, a special meeting shall be called upon written demand describing one or more purposes for which it is to be held by holders of shares with at least 10% of the votes entitled to be cast on any issue proposed to be considered at the meeting. The purpose or purposes of any special meeting shall be described in the notice required by Section 2.04 of these Bylaws. 2.03. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Wisconsin, as the place of meeting for any annual meeting or any special meeting. If no designation is made, the place of meeting shall be the principal office of the corporation but any meeting may be adjourned to reconvene at any place designated by vote of a majority of the shares represented thereat. 2.04. Notices to Shareholders. (a) Required Notice. Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) days nor more than sixty (60) days before the date of the meeting (unless a different time is provided by law or the Articles of Incorporation), by or at the direction of the Chairman of the Board, if there is one, the President or the Secretary, to each shareholder entitled to vote at such meeting or, for the fundamental transactions described in subsections (e)(1) to (4) below (for which the Wisconsin Business Corporation Law requires that notice be given to shareholders not entitled to vote), to all shareholders. If mailed, such notice is effective when deposited in the United States mail, and shall be addressed to the shareholder's address shown in the current record of shareholders of the corporation, with postage thereon prepaid. -3- 4 At least twenty (20) days' notice shall be provided if the purpose, or one of the purposes, of the meeting is to consider a plan of merger or share exchange for which shareholder approval is required by law, or the sale, lease, exchange or other disposition of all or substantially all of the corporation's property, with or without good will, otherwise than in the usual and regular course of business. (b) Adjourned Meeting. Except as provided in the next sentence, if any shareholder meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, and place, if the new date, time, and place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed, then notice must be given pursuant to the requirements of paragraph (a) of this Section 2.04, to those persons who are shareholders as of the new record date. (c) Waiver of Notice. A shareholder may waive notice in accordance with Article VI of these Bylaws. (d) Contents of Notice. The notice of each special shareholder meeting shall include a description of the purpose or purposes for which the meeting is called. Except as otherwise provided in subsection (e) of this Section 2.04, in the Articles of Incorporation, or in the Wisconsin Business Corporation Law, the notice of an annual shareholder meeting need not include a description of the purpose or purposes for which the meeting is called. (e) Fundamental Transactions. If a purpose of any shareholder meeting is to consider either: (1) a proposed amendment to the Articles of Incorporation (including any restated articles); (2) a plan of merger or share exchange for which shareholder approval is required by law; (3) the sale, lease, exchange or other disposition of all or substantially all of the corporation's property, with or without good will, otherwise than in the usual and regular course of business; (4) the dissolution of the corporation; or (5) the removal of a director, the notice must so state and in cases (1), (2) and (3) above must be accompanied by, respectively, a copy or summary of the: (1) proposed articles of amendment or a copy of the restated articles that identifies any amendment or other change; (2) proposed plan of merger or share exchange; or (3) proposed transaction for disposition of all or substantially all of the corporation's property. If the proposed corporate action creates dissenters' rights, the notice must state that shareholders and beneficial shareholders are or may be entitled to assert dissenters' rights, and must be accompanied by a copy of Sections 180.1301 to 180.1331 of the Wisconsin Business Corporation Law. 2.05. Fixing of Record Date. The Board of Directors may fix in advance a date as the record date for one or more -4- 5 voting groups for any determination of shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote, or to take any other action, such date in any case to be not more than seventy (70) days prior to the meeting or action requiring such determination of shareholders, and may fix the record date for determining shareholders entitled to a share dividend or distribution. If no record date is fixed for the determination of shareholders entitled to demand a shareholder meeting, to notice of or to vote at a meeting of shareholders, or to consent to action without a meeting, (a) the close of business on the day before the corporation receives the first written demand for a shareholder meeting, (b) the close of business on the day before the first notice of the meeting is mailed or otherwise delivered to shareholders, or (c) the close of business on the day before the first written consent to shareholder action without a meeting is received by the corporation, as the case may be, shall be the record date for the determination of shareholders. If no record date is fixed for the determination of shareholders entitled to receive a share dividend or distribution (other than a distribution involving a purchase, redemption or other acquisition of the corporation's shares), the close of business on the day on which the resolution of the Board of Directors is adopted declaring the dividend or distribution shall be the record date. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall be applied to any adjournment thereof unless the Board of Directors fixes a new record date and except as otherwise required by law. A new record date must be set if a meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. 2.06. Shareholder List. The officer or agent having charge of the stock transfer books for shares of the corporation shall, before each meeting of shareholders, make a complete record of the shareholders entitled to notice of such meeting, arranged by class or series of shares and showing the address of and the number of shares held by each shareholder. The shareholder list shall be available at the meeting and may be inspected by any shareholder or his or her agent or attorney at any time during the meeting or any adjournment. Any shareholder or his or her agent or attorney may inspect the shareholder list beginning two (2) business days after the notice of the meeting is given and continuing to the date of the meeting, at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held and, subject to Section 180.1602(2)(b) 3 to 5 of the Wisconsin Business Corporation Law, may copy the list, during regular business hours and at his or her expense, during the period that it is available for inspection hereunder. The original stock transfer books and nominee certificates on file with the corporation (if any) shall be prima facie evidence as to who are the shareholders entitled to inspect the shareholder list or to vote at any meeting of shareholders. Failure to comply with the -5- 6 requirements of this section shall not affect the validity of any action taken at such meeting. 2.07. Quorum and Voting Requirements. Except as otherwise provided in the Articles of Incorporation or in the Wisconsin Business Corporation Law, a majority of the votes entitled to be cast by shares entitled to vote as a separate voting group on a matter, represented in person or by proxy, shall constitute a quorum of that voting group for action on that matter at a meeting of shareholders. If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action unless a greater number of affirmative votes is required by the Wisconsin Business Corporation Law or the Articles of Incorporation. If the Articles of Incorporation or the Wisconsin Business Corporation Law provide for voting by two (2) or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately. Action may be taken by one (1) voting group on a matter even though no action is taken by another voting group entitled to vote on the matter. Once a share is represented for any purpose at a meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that meeting. 2.08. Conduct of Meetings. The Chairman of the Board and Chief Executive Officer, or if there is none, or in his or her absence, the President, and in the President's absence, the Executive Vice President, and in the Executive Vice President's absence, a Vice President in the order provided under Section 4.07 of these Bylaws, and in their absence, any person chosen by the shareholders present shall call the meeting of the shareholders to order and shall act as chairperson of the meeting, and the Secretary shall act as secretary of all meetings of the shareholders, but, in the absence of the Secretary, the presiding officer may appoint any other person to act as secretary of the meeting. 2.09. Proxies. At all meetings of shareholders, a shareholder entitled to vote may vote in person or by proxy appointed in writing by the shareholder or by his or her duly authorized attorney-in-fact. All proxy appointment forms shall be filed with the Secretary or other officer or agent of the corporation authorized to tabulate votes before or at the time of the meeting. Unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest, a proxy appointment may be revoked at any time. The presence of a shareholder who has filed a proxy appointment shall not of itself constitute a revocation. No proxy appointment -6- 7 shall be valid after eleven months from the date of its execution, unless otherwise expressly provided in the appointment form. The Board of Directors shall have the power and authority to make rules that are not inconsistent with the Wisconsin Business Corporation Law as to the validity and sufficiency of proxy appointments. 2.10. Voting of Shares. Each outstanding share shall be entitled to one (1) vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares are enlarged, limited or denied by the Articles of Incorporation or the Wisconsin Business Corporation Law. Shares owned directly or indirectly by another corporation are not entitled to vote if this corporation owns, directly or indirectly, sufficient shares to elect a majority of the directors of such other corporation. However, the prior sentence shall not limit the power of the corporation to vote any shares, including its own shares, held by it in a fiduciary capacity. Redeemable shares are not entitled to vote after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares. 2.11. Prior Notice of Shareholder Nominations and/or Proposals. (a) Prior Notice for Annual Meetings. Except with respect to nominations or proposals adopted or recommended by the Board of Directors for inclusion in the corporation's proxy statement for its annual meeting, a shareholder entitled to vote at a meeting may nominate a person or persons for election as directors or propose action(s) to be taken at a meeting only if written notice of any shareholder nomination and/or proposal to be considered for a vote at an annual meeting of shareholders is delivered personally or mailed by certified mail return receipt requested at least seventy (70) days before the scheduled date of such meeting to the Secretary of the corporation at the principal business office of the corporation. (b) Nominations. With respect to shareholder nomination(s) for the election of directors, each such notice shall set forth: (1) the name and address of the shareholder who intends to make the nomination(s), of any beneficial owner of shares on whose behalf such nomination is being made, and of the person(s) to be nominated; -7- 8 (2) a representation that the shareholder is a holder of record of stock of the corporation entitled to vote at such meeting (including the number of shares the shareholder owns and the length of time the shares have been held) and that the shareholder intends to appear in person or by proxy at the meeting to nominate the person(s) specified in the notice; (3) a description of all arrangements and understandings between the shareholder or any beneficial holder on whose behalf it holds such shares, and their respective affiliates, of each nominee and any other person(s), naming such person(s), pursuant to which the nomination(s) are to be made by the shareholder; (4) such other information regarding each nominee proposed by such shareholder which would have been required to be included in the proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, whether or not such rules are applicable, had such nominee be nominated by the Board of Directors; and (5) the consent of each nominee to serve as a director of the corporation. (c) Proposals. With respect to stockholder proposal(s) for action to be taken at the annual meeting of shareholders, the notice shall clearly set forth: (1) the name and address of the shareholder who intends to make the proposal(s); (2) a representation that the shareholder is a holder of record of stock of the corporation entitled to vote at such meeting (including the number of shares the shareholder owns and the length of time the shares have been held) and that the shareholder intends to appear in person or by proxy at the meeting to make the proposal(s) specified in the notice; (3) the proposal(s) and a brief supporting statement of such proposal(s); and (4) such other information regarding the proposal(s) as would have been required to be included in a proxy statement filed pursuant to the rules of the Securities and Exchange -8- 9 Commission, whether or not such rules are applicable. (d) Prior Notice for Special Meetings. Except with respect to the nomination(s) or proposal(s) adopted or recommended by the Board of Directors for inclusion in the notice to shareholders for a special meeting of the shareholders, a shareholder entitled to vote at a special meeting may nominate a person or persons for election as director(s) and/or propose action(s) to be taken at a meeting only if written notice of any shareholder nomination(s) and/or proposal(s) to be considered for a vote of the special meeting is delivered personally or mailed by certified mail-return receipt requested to the Secretary of the corporation at the principal office of the corporation so that it is received in a reasonable period of time before such special meeting and only if such nomination or proposal is within the purposes described in the notice to shareholders of the special meeting. All of the notice requirements regarding shareholder nominations and/or proposals applicable to annual meetings shall also apply to nominations and/or proposals for special meetings. (e) Role of Chair. The chair of the meeting may refuse to acknowledge any nomination and/or proposal of any person made without compliance with the foregoing procedures. This section shall not affect the corporation's rights or responsibilities with respect to its proxies or proxy statements for any meeting. ARTICLE III. BOARD OF DIRECTORS 3.01. General Powers and Number. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, its Board of Directors. The number of directors of the corporation shall be not less than five (5) nor more than nine (9), as determined from time to time by the Board of Directors. 3.02. Election, Removal, Tenure and Qualifications. (a) Unless action is taken without a meeting under Section 7.01 of these Bylaws, directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a shareholders meeting at which a quorum is present; i.e., the individuals with the largest number of votes in favor of their election are elected as directors up to the -9- 10 maximum number of directors to be chosen in the election. Votes against a candidate are not given legal effect and are not counted as votes cast in an election of directors. In the event two (2) or more persons tie for the last vacancy to be filled, a run-off vote shall be taken from among the candidates receiving the tie vote. (b) Each director shall hold office for the remainder of the term for which he or she has been elected and until the director's successor shall have been elected or there is a decrease in the number of directors, or until his or her prior death, resignation or removal. (c) Any director or directors may be removed from office by the shareholders if the number of votes cast to remove the director exceeds the number cast not to remove him or her, taken at a meeting of shareholders called for that purpose, provided that the meeting notice states that the purpose, or one of the purposes, of the meeting is removal of the director. The removal may be made with or without cause unless the Articles of Incorporation or these Bylaws provide that directors may be removed only for cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that director. (d) No person who shall have attained the age of 70 years shall be eligible for election or re-election to the Board of Directors; provided, however, that with respect to persons who have been elected as directors prior to the corporation's 1997 annual meeting of shareholders, the age "70" in the preceding clause shall be age 72; and, notwithstanding the foregoing, such restrictions shall not apply to any director who is also at that time a full-time employee of the corporation. Any person attaining age 70 (or 72, as the case may be) during his or her term may continue to serve as a director until the expiration of such term. (e) A director may resign at any time by delivering a written resignation to the Board of Directors, to the Chairman and Chief Executive Officer or to the corporation through the Secretary or otherwise. (f) Directors need not be residents of the State of Wisconsin or shareholders of the corporation, although the Board of Directors may establish share ownership expectations for persons who serve as directors. -10- 11 3.03. Regular Meetings. A regular meeting of the Board of Directors shall be held, without other notice than this Bylaw, immediately after the annual meeting of shareholders, and each adjourned session thereof. The place of such regular meeting shall be the same as the place of the meeting of shareholders which precedes it, or such other suitable place as may be announced at such meeting of shareholders. The Board of Directors and any committee may provide, by resolution, the time and place, either within or without the State of Wisconsin, for the holding of additional regular meetings without other notice than such resolution. 3.04. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman and Chief Executive Officer, the President or any two (2) directors. Special meetings of any committee may be called by or at the request of the foregoing persons or the chairperson of the committee. The persons calling any special meeting of the Board of Directors or committee may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting called by them, and if no other place is fixed the place of meeting shall be the principal office of the corporation in the State of Wisconsin. 3.05 Meetings By Telephone or Other Communication Technology. (a) Any or all directors may participate in a regular or special meeting or in a committee meeting of the Board of Directors by, or conduct the meeting through the use of, telephone or any other means of communication by which either: (i) all participating directors may simultaneously hear each other during the meeting or (ii) all communication during the meeting is immediately transmitted to each participating director, and each participating director is able to immediately send messages to all other participating directors. (b) If a meeting will be conducted through the use of any means described in paragraph (a), all participating directors shall be informed that a meeting is taking place at which official business may be transacted. A director participating in a meeting by any means described in paragraph (a) is deemed to be present in person at the meeting. 3.06. Notice of Meetings. Except as otherwise provided in the Articles of Incorporation or the Wisconsin Business Corporation Law, notice of the date, time and place of any special meeting of the Board of Directors and of any special meeting of a committee of the Board shall be given orally, in writing (which shall include facsimile and E-mail) to each director or committee member at least 72 hours prior to the -11- 12 meeting, except that notice by telegram or personal delivery shall be effective if given at least 24 hours prior to the meeting. The notice need not describe the purpose of the meeting. Notice may be communicated in person, by telephone, telegraph, facsimile or E-mail, or by mail or private carrier. Oral notice is effective when communicated. Written notice is effective as follows: If delivered in person, when received; if given by mail, when deposited, postage prepaid, in the United States mail addressed to the director at his or her business or home address (or such other address as the director may have designated in writing filed with the Secretary); if given by facsimile, at the time transmitted to a facsimile number at any address designated above; if given by E-mail, at the time transmitted to an E-mail address provided by the director; and if given by telegraph, when delivered to the telegraph company. 3.07. Quorum. Except as otherwise provided by the Wisconsin Business Corporation Law, a majority of the number of directors as provided in Section 3.01 shall constitute a quorum of the Board of Directors. Except as otherwise provided by the Wisconsin Business Corporation Law, a majority of the number of directors appointed to serve on a committee shall constitute a quorum of the committee. 3.08. Manner of Acting. Except as otherwise provided by the Wisconsin Business Corporation Law or the Articles of Incorporation, the affirmative vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors or any committee thereof. 3.09. Conduct of Meetings. The Chairman and Chief Executive Officer, or if there is none, or in his or her absence, the President, and in the President's absence, the Executive Vice President, or in his or her absence, a Vice President in the order provided under Section 4.07 of these Bylaws, and in their absence, any director chosen by the directors present, shall call meetings of the Board of Directors to order and shall chair the meeting. The Secretary of the corporation shall act as secretary of all meetings of the Board of Directors, but in the absence of the Secretary, the presiding officer may appoint any assistant secretary or any director or other person present to act as secretary of the meeting. 3.10. Vacancies. Any vacancy occurring in the Board of Directors, including a vacancy created by an increase in the number of directors, may be filled by the shareholders or the Board of Directors. If the directors remaining in office constitute fewer than a quorum of the Board, the directors may fill a vacancy by the affirmative vote of a majority of all directors remaining in office. If the vacant office was held by a director elected by a voting group of shareholders, only the holders of shares of that voting group may vote to fill the vacancy if it is filled by the shareholders, and only the -12- 13 remaining directors elected by that voting group may vote to fill the vacancy if it is filled by the directors. A vacancy that will occur at a specific later date (because of a resignation effective at a later date or otherwise) may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs. 3.11. Compensation. The Board of Directors, irrespective of any personal interest of any of its members, may fix the compensation of directors. 3.12. Presumption of Assent. A director who is present and is announced as present at a meeting of the Board of Directors or a committee thereof at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless (i) the director objects at the beginning of the meeting or promptly upon his or her arrival to holding the meeting or transacting business at the meeting, or (ii) the director's dissent or abstention from the action taken is entered in the minutes of the meeting, or (iii) the director delivers his or her written dissent or abstention to the presiding officer of the meeting before the adjournment thereof or to the corporation immediately after the adjournment of the meeting. Such right to dissent or abstain shall not apply to a director who voted in favor of such action. 3.13. Committees. Unless the Articles of Incorporation otherwise provide, the Board of Directors, by resolution adopted by the affirmative vote of a majority of all the directors then in office, may create one (1) or more committees, each committee to consist of two (2) or more directors as members, which to the extent provided in the resolution as initially adopted, and as thereafter supplemented or amended by further resolution adopted by a like vote, may exercise the authority of the Board of Directors, except that no committee may: (a) authorize distributions; (b) approve or propose to shareholders action that the Wisconsin Business Corporation Law requires be approved by shareholders; (c) fill vacancies on the Board of Directors or any of its committees, except that the Board of Directors may provide by resolution that any vacancies on a committee shall be filled by the affirmative vote of a majority of the remaining committee members; (d) amend the Articles of Incorporation; (e) adopt, amend or repeal Bylaws; (f) approve a plan of merger not requiring shareholder approval; (g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors or (h) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except within limits prescribed by the Board of Directors. The Board of Directors may elect one or more of its members as alternate members of any such committee who may take the place of any absent member or members at any meeting of such -13- 14 committee, upon request by the Chairman and Chief Executive Officer, the President or upon request by the chairperson of such meeting. Each such committee shall fix its own rules (consistent with the Wisconsin Business Corporation Law, the Articles of Incorporation and these Bylaws) governing the conduct of its activities and shall make such reports to the Board of Directors of its activities as the Board of Directors may request. Unless otherwise provided by the Board of Directors in creating a committee, a committee may employ counsel, accountants and other consultants to assist it in the exercise of authority. The creation of a committee, delegation of authority to a committee or action by a committee does not relieve the Board of Directors or any of its members of any responsibility imposed on the Board of Directors or its members by law. ARTICLE IV. OFFICERS 4.01. Appointment. The principal officers shall include a Chairman (or Chairperson) of the Board (and Chief Executive Officer), a President (and Chief Operating Officer), one or more Vice Presidents (the number and designations to be determined by the Board of Directors), a Secretary and such other officers if any, as may be deemed necessary by the Board of Directors, each of whom shall be appointed by the Board of Directors. The Board of Directors may designate one of the Vice Presidents as the Executive Vice President; and in that event all references herein to Vice President(s) include the Executive Vice President unless the context otherwise requires. Any two or more offices may be held by the same person. 4.02. Election; Resignation and Removal. (a) The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of shareholders. If the election officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. (b) An officer shall hold office until he or she resigns, dies, is removed hereunder, or a different person is appointed to the office. An officer may resign at any time by delivering an appropriate written notice to the corporation. The resignation is effective when the notice is delivered, unless the notice specifies a later effective date and the corporation accepts the later effective date. Any officer may be removed by the Board of Directors with or without cause and notwithstanding the contract rights, if any, of the person removed. Except as -14- 15 provided in the preceding sentence, the resignation or removal is subject to any remedies provided by any contract between the officer and the corporation or otherwise provided by law. Appointment shall not of itself create contract rights. 4.03. Vacancies. A vacancy in any office because of death, resignation, removal or otherwise, shall be filled by the Board of Directors. If a resignation is effective at a later date, the Board of Directors may fill the vacancy before the effective date if the Board of Directors provides that the successor may not take office until the effective date. 4.04. Chairman of the Board; Chief Executive Officer. The Chairman of the Board and Chief Executive Officer shall be the chief executive officer of the corporation and, subject to the control and direction of the Board of Directors, shall in general supervise and control all of the business and affairs of the corporation. He or she shall, when present, preside at all meetings of the shareholders and of the Board of Directors. The Chairman shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such agents and employees shall hold office at the discretion of the Chairman and Chief Executive Officer. The Chairman and Chief Executive Officer shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or directed by the Board of Directors, the Chairman may authorize the President, any Vice President or other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his or her place and stead. In general he or she shall perform all duties incident to the office of Chairman and Chief Executive Officer and such other duties as may be prescribed by the Board of Directors from time to time. 4.05. President; Chief Operating Officer. The President and Chief Operating Officer shall be the chief operating officer of the corporation, and subject to the direction of the Chairman and Chief Executive Officer, shall be responsible for the detailed supervision and control of the operations of this corporation and its wholly-owned subsidiaries. The officers of the corporation (with the exception of the Chairman and Chief Executive Officer) and the presidents and vice presidents of the corporation's wholly-owned subsidiaries shall report directly to the President. In addition, the president shall have authority to sign, execute and acknowledge, on behalf -15- 16 of the corporation all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors or by the Chairman and Chief Executive Officer; and, except as otherwise provided by law or directed by the Board of Directors or the Chairman and Chief Executive Officer, the President may authorize any vice president or other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his place or stead. In general, he or she shall perform all the duties incident to the office of President such other duties as may be prescribed by the Board of Directors and the Chairman and Chief Executive Officer from time to time. In the absence of the Chairman and Chief Executive Officer, the President shall preside at all meetings of the shareholders and of the Board of Directors. 4.06. Executive Vice President. The Executive Vice President, if one be designated, shall assist the Chairman and Chief Executive Officer and the President in the discharge of supervisory, managerial and executive duties and functions. In the absence of the President or in the event of his death, inability or refusal to act, the Executive Vice President shall perform the duties of the President and when so acting shall have all the powers and duties of the President. He shall perform such other duties as from time to time may be assigned to him by the Board of Directors, the Chairman and Chief Executive Officer or the President. 4.07. Vice Presidents. In the absence of the President, or in the event of the President's death, inability or refusal to act, or in the event for any reason it shall be impracticable for the President to act personally, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their appointment) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign, with the Secretary or Assistant Secretary, certificates for shares of the corporation; and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him or her by the Chairman and Chief Executive Officer, the President or the Board of Directors. The execution of any instrument of the corporation by any Vice President shall be conclusive evidence, as to third parties, of the Vice President's authority to act in the stead of the President. 4.08. Secretary. The Secretary shall: (a) keep (or cause to be kept) regular minutes of all meetings of the shareholders, the Board of Directors and any committees of the Board of Directors in one or more books provided for that -16- 17 purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation, if any, and see that the seal of the corporation, if any, is affixed to all documents which are authorized to be executed on behalf of the corporation under its seal; (d) keep or arrange for the keeping of a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (e) sign with the President, or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of Secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned to him or her by the Chairman and Chief Executive Officer, the President or by the Board of Directors. 4.09. Treasurer. If the Board of Directors appoints a Treasurer, the Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall be selected by the corporation; and (c) in general perform all of the duties incident to the office of Treasurer and have such other duties and exercise such other authority as from time to time may be delegated or assigned to him or her by the Chairman and Chief Executive Officer, the President or by the Board of Directors. 4.10. Assistant and Acting Officers. The Board of Directors and the Chairman and Chief Executive Officer shall have the power to appoint any person to act as assistant to any officer, or as agent for the corporation in the officer's stead, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer or other agent so appointed by the Board of Directors or Chairman shall have the power to perform all the duties of the office to which that person is so appointed to be assistant, or as to which he or she is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors or the Chairman and Chief Executive Officer. 4.11. Salaries. The salaries of the principal officers shall be fixed from time to time by the Board of Directors or by a duly authorized committee thereof, and no officer shall be prevented from receiving such salary by reason of the fact that such officer is also a director of the corporation. -17- 18 ARTICLE V. CERTIFICATES FOR SHARES AND THEIR TRANSFER 5.01. Certificates for Shares. All shares of this corporation shall be represented by certificates. Certificates representing shares of the corporation shall be in such form, consistent with law, as shall be determined by the Board of Directors. At a minimum, a share certificate shall state on its face the name of the corporation and that it is organized under the laws of the State of Wisconsin, the name of the person to whom issued, and the number and class of shares and the designation of the series, if any, that the certificate represents. If the corporation is authorized to issue different classes of shares or different series within a class, the front or back of the certificate must contain either (a) a summary of the designations, relative rights, preferences and limitations applicable to each class, and the variations in the rights, preferences and limitations determined for each series and the authority of the Board of Directors to determine variations for future series, or (b) a conspicuous statement that the corporation will furnish the shareholder the information described in clause (a) on request, in writing and without charge. Such certificates shall be signed, either manually or in facsimile, by the Chairman and Chief Executive Officer, the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except as provided in Section 5.05. 5.02. Signature by Former Officers. If an officer or assistant officer, who has signed or whose facsimile signature has been placed upon any certificate for shares, has ceased to be such officer or assistant officer before such certificate is issued, the certificate may be issued by the corporation with the same effect as if that person were still an officer or assistant officer at the date of its issue. 5.03. Transfer of Shares. Prior to due presentment of a certificate for shares for registration of transfer, and unless the corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the corporation as the shareholder, the corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to have and exercise all the rights and power of an owner. The corporation may require reasonable assurance that all transfer endorsements are genuine and effective and in compliance with all -18- 19 regulations prescribed by or under the authority of the Board of Directors. 5.04. Restrictions on Transfer. The face or reverse side of each certificate representing shares shall bear a conspicuous notation of any restriction upon the transfer of such shares imposed by the corporation or imposed by any agreement of which the corporation has written notice. 5.05. Lost, Destroyed or Stolen Certificates. Where the owner claims that his or her certificate for shares has been lost, destroyed or wrongfully taken, a new certificate shall be issued in place thereof if the owner (a) so requests before the corporation has notice that such shares have been acquired by a bona fide purchaser, and (b) if required by the corporation, files with the corporation a sufficient indemnity bond, and (c) satisfies such other reasonable requirements as may be prescribed by or under the authority of the Board of Directors. 5.06. Consideration for Shares. The shares of the corporation may be issued for such consideration as shall be fixed from time to time and determined to be adequate by the Board of Directors, provided that any shares having a par value shall not be issued for a consideration less than the par value thereof. The consideration may consist of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation. When the corporation receives the consideration for which the Board of Directors authorized the issuance of shares, such shares shall be deemed to be fully paid and nonassessable by the corporation. 5.07. Stock Regulations. The Board of Directors shall have the power and authority to make all such rules and regulations not inconsistent with the statutes of the State of Wisconsin as it may deem expedient concerning the issue, transfer and registration of certificates representing shares of the corporation, including the appointment or designation of one or more stock transfer agents and one or more registrars. ARTICLE VI WAIVER OF NOTICE 6.01 Shareholder Written Waiver. A shareholder may waive any notice required by the Wisconsin Business Corporation Law, the Articles of Incorporation or these Bylaws before or after the date and time stated in the notice. The waiver shall be in writing and signed by the shareholder entitled to the notice, shall contain the same information that would have been required in the notice under the Wisconsin Business Corporation -19- 20 Law except that the time and place of meeting need not be stated, and shall be delivered to the corporation for inclusion in the corporate records. 6.02 Shareholder Waiver by Attendance. A shareholder's attendance at a meeting, in person or by proxy, waives objection to both of the following: (a) Lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting or promptly upon arrival objects to holding the meeting or transacting business at the meeting. (b) Consideration of a particular matter at the meeting that is not within the purpose described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. 6.03 Director Written Waiver. A director may waive any notice required by the Wisconsin Business Corporation Law, the Articles of Incorporation or the Bylaws before or after the date and time stated in the notice. The waiver shall be in writing, signed by the director entitled to the notice and retained by the corporation. 6.04 Director Waiver by Attendance. A director's attendance at or participation in a meeting of the Board of Directors or any committee thereof waives any required notice to him or her of the meeting unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. ARTICLE VII ACTION WITHOUT MEETINGS 7.01 Shareholder Action Without Meeting. Action required or permitted by the Wisconsin Business Corporation Law to be taken at a shareholders' meeting may be taken without a meeting by all shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by the shareholders consenting thereto and delivered to the corporation for inclusion in its corporate records. A consent hereunder has the effect of a meeting vote and may be described as such in any document. The Wisconsin Business Corporation Law requires that notice of the action be given to certain shareholders and specifies the effective date thereof and the record date in respect thereto. -20- 21 7.02 Director Action Without Meeting. Unless the Articles of Incorporation provide otherwise, action required or permitted by the Wisconsin Business Corporation Law to be taken at a Board of Directors meeting or committee meeting may be taken without a meeting if the action is taken by all members of the Board or committee. The action shall be evidenced by one or more written consents describing the action taken, signed by each director and retained by the corporation. Action taken hereunder is effective when the last director signs the consent, unless the consent specifies a different effective date. A consent signed hereunder has the effect of a unanimous vote taken at a meeting at which all directors or committee members were present, and may be described as such in any document. ARTICLE VIII INDEMNIFICATION 8.01 Indemnification for Successful Defense. Within twenty (20) days after receipt of a written request pursuant to Section 8.03, the corporation shall indemnify a director or officer, to the extent he or she has been successful on the merits or otherwise in the defense of a proceeding, for all reasonable expenses incurred in the proceeding if the director or officer was a party because he or she is a director or officer of the corporation. 8.02 Other Indemnification. (a) In cases not included under Section 8.01, the corporation shall indemnify a director or officer against all liabilities and expenses incurred by the director or officer in a proceeding to which the director or officer was a party because he or she is a director or officer of the corporation, unless liability was incurred because the director or officer breached or failed to perform a duty he or she owes to the corporation and the breach or failure to perform constitutes any of the following: (1) A willful failure to deal fairly with the corporation or its shareholders in connection with a matter in which the director or officer has a material conflict of interest. (2) A violation of criminal law, unless the director or officer had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful. -21- 22 (3) A transaction from which the director or officer derived an improper personal profit. (4) Willful misconduct. (b) Determination of whether indemnification is required under this Section shall be made pursuant to Section 8.05. (c) The termination of a proceeding by judgment, order, settlement or conviction, or upon a plea of no contest or an equivalent plea, does not, by itself, create a presumption that indemnification of the director or officer is not required under this Section. 8.03 Written Request. A director or officer who seeks indemnification under Sections 8.01 or 8.02 shall make a written request to the corporation. 8.04 Nonduplication. The corporation shall not indemnify a director or officer under Sections 8.01 or 8.02 if the director or officer has previously received indemnification or allowance of expenses from any person, including the corporation, in connection with the same proceeding. However, the director or officer has no duty to look to any other person for indemnification. 8.05 Determination of Right to Indemnification. (a) Unless otherwise provided by the Articles of Incorporation or by written agreement between the director or officer and the corporation, the director or officer seeking indemnification under Section 8.02 shall select one of the following means for determining his or her right to indemnification: (1) By a majority vote of a quorum of the Board of Directors consisting of directors not at the time parties to the same or related proceedings. If a quorum of disinterested directors cannot be obtained, by majority vote of a committee duly appointed by the Board of Directors and consisting solely of two (2) or more directors who are not at the time parties to the same or related proceedings. Directors who are parties to the same or related proceedings may participate in the designation of members of the committee. (2) By independent legal counsel selected by a quorum of the Board of Directors or its committee in the manner prescribed in subsection (1) or, if unable to obtain such a quorum or -22- 23 committee, by a majority vote of the full Board of Directors, including directors who are parties to the same or related proceedings. (3) By a panel of three (3) arbitrators consisting of one arbitrator selected by those directors entitled under subsection (2) to select independent legal counsel, one arbitrator selected by the director or officer seeking indemnification and one arbitrator selected by the two (2) arbitrators previously selected. (4) By an affirmative vote of shares represented at a meeting of shareholders at which a quorum of the voting group entitled to vote thereon is present. Shares owned by, or voted under the control of, persons who are at the time parties to the same or related proceedings, whether as plaintiffs or defendants or in any other capacity, may not be voted in making the determination. (5) By a court under Section 8.08. (6) By any other method provided for in any additional right to indemnification permitted under Section 8.07. (b) In any determination under (a), the burden of proof is on the corporation to prove by clear and convincing evidence that indemnification under Section 8.02 should not be allowed. (c) A written determination as to a director's or officer's indemnification under Section 8.02 shall be submitted to both the corporation and the director or officer within 60 days of the selection made under (a). (d) If it is determined that indemnification is required under Section 8.02, the corporation shall pay all liabilities and expenses not prohibited by Section 8.04 within ten (10) days after receipt of the written determination under (c). The corporation shall also pay all expenses incurred by the director or officer in the determination process under (a). 8.06 Advance of Expenses. Within ten (10) days after receipt of a written request by a director or officer who is a party to a proceeding, the corporation shall pay or reimburse his or her reasonable expenses as incurred if the director or officer provides the corporation with all of the following: -23- 24 (a) A written affirmation of his or her good faith belief that he or she has not breached or failed to perform his or her duties to the corporation. (b) A written undertaking, executed personally or on his or her behalf, to repay the allowance to the extent that it is ultimately determined under Section 8.05 that indemnification under Section 8.02 is not required and that indemnification is not ordered by a court under Section 8.08(b)(2). The undertaking under this subsection shall be an unlimited general obligation of the director or officer and may be accepted without reference to his or her ability to repay the allowance. The undertaking may be secured or unsecured. 8.07 Nonexclusivity. (a) Except as provided in (b), Sections 8.01, 8.02 and 8.06 do not preclude any additional right to indemnification or allowance of expenses that a director or officer may have under any of the following: (1) The Articles of Incorporation. (2) A written agreement between the director or officer and the corporation. (3) A resolution of the Board of Directors. (4) A resolution, after notice, adopted by a majority vote of all of the corporation's voting shares then issued and outstanding. (b) Regardless of the existence of an additional right under (a), the corporation shall not indemnify a director or officer, or permit a director or officer to retain any allowance of expenses unless it is determined by or on behalf of the corporation that the director or officer did not breach or fail to perform a duty he or she owes to the corporation which constitutes conduct under Section 8.02(a)(1), (2), (3) or (4). A director or officer who is a party to the same or related proceeding for which indemnification or an allowance of expenses is sought may not participate in a determination under this subsection. (c) Sections 8.01 to 8.14 do not affect the corporation's power to pay or reimburse expenses incurred by a director or officer in any of the following circumstances. -24- 25 (1) As a witness in a proceeding to which he or she is not a party. (2) As a plaintiff or petitioner in a proceeding because he or she is or was an employee, agent, director or officer of the corporation. 8.08 Court-Ordered Indemnification. (a) Except as provided otherwise by written agreement between the director or officer and the corporation, a director or officer who is a party to a proceeding may apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. Application shall be made for an initial determination by the court under Section 8.05(a)(5) or for review by the court of an adverse determination under Section 8.05(a) (1), (2), (3), (4) or (6). After receipt of an application, the court shall give any notice it considers necessary. (b) The court shall order indemnification if it determines any of the following: (1) That the director or officer is entitled to indemnification under Sections 8.01 or 8.02. (2) That the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, regardless of whether indemnification is required under Section 8.02. (c) If the court determines under (b) that the director or officer is entitled to indemnification, the corporation shall pay the director's or officer's expenses incurred to obtain the court-ordered indemnification. 8.09 Indemnification and Allowance of Expenses of Employees and Agents. The corporation shall indemnify an employee of the corporation who is not a director or officer of the corporation, to the extent that he or she has been successful on the merits or otherwise in defense of a proceeding, for all expenses incurred in the proceeding if the employee was a party because he or she was an employee of the corporation. In addition, the corporation may indemnify and allow reasonable expenses of an employee or agent who is not a director or officer of the corporation to the extent provided by the Articles of Incorporation or these Bylaws, by general or specific action of the Board of Directors or by contract. -25- 26 8.10 Insurance. The corporation may purchase and maintain insurance on behalf of an individual who is an employee, agent, director or officer of the corporation against liability asserted against or incurred by the individual in his or her capacity as an employee, agent, director or officer, regardless of whether the corporation is required or authorized to indemnify or allow expenses to the individual against the same liability under Sections 8.01, 8.02, 8.06, 8.07 and 8.09. 8.11 Securities Law Claims. (a) Pursuant to the public policy of the State of Wisconsin, the corporation shall provide indemnification and allowance of expenses and may insure for any liability incurred in connection with a proceeding involving securities regulation described under (b) to the extent required or permitted under Sections 8.01 to 8.10. (b) Sections 8.01 to 8.10 apply, to the extent applicable to any other proceeding, to any proceeding involving a federal or state statute, rule or regulation regulating the offer, sale or purchase of securities, securities brokers or dealers, or investment companies or investment advisers. 8.12 Liberal Construction. In order for the corporation to obtain and retain qualified directors, officers and employees, the foregoing provisions shall be liberally administered in order to afford maximum indemnification of directors, officers and, where Section 8.09 of these Bylaws applies, employees. The indemnification above provided for shall be granted in all applicable cases unless to do so would clearly contravene law, controlling precedent or public policy. 8.13 Definitions Applicable to this Article. For purposes of this Article: (a) "Affiliate" shall include, without limitation, any corporation, partnership, joint venture, employee benefit plan, trust or other enterprise that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the corporation. (b) "Corporation" means this corporation and any domestic or foreign predecessor of this corporation where the predecessor corporation's existence ceased upon the consummation of a merger or other transaction. (c) "Director or officer" means any of the following: -26- 27 (1) An individual who is or was a director or officer of this corporation. (2) An individual who, while a director or officer of this corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, member of any governing or decision-making committee, employee or agent of another corporation or foreign corporation, partnership, joint venture, trust or other enterprise. (3) An individual who, while a director or officer of this corporation, is or was serving an employee benefit plan because his or her duties to the corporation also impose duties on, or otherwise involve services by, the person to the plan or to participants in or beneficiaries of the plan. (4) Unless the context requires otherwise, the estate or personal representative of a director or officer. For purposes of this Article, it shall be conclusively presumed that any director or officer serving as a director, officer, partner, trustee, member of any governing or decision-making committee, employee or agent of an affiliate shall be so serving at the request of the corporation. (d) "Expenses" include fees, costs, charges, disbursements, attorney fees and other expenses incurred in connection with a proceeding. (e) "Liability" includes the obligation to pay a judgment, settlement, penalty, assessment, forfeiture or fine, including an excise tax assessed with respect to an employee benefit plan, and reasonable expenses. (f) "Party" includes an individual who was or is, or who is threatened to be made, a named defendant or respondent in a proceeding. (g) "Proceeding" means any threatened, pending or completed civil, criminal, administrative or investigative action, suit, arbitration or other proceeding, whether formal or informal, which involves foreign, federal, state or local law and which is brought by or in the right of the corporation or by any other person. -27- 28 ARTICLE IX. SEAL The Board of Directors may provide a corporate seal which may be circular in form and have inscribed thereon the name of the corporation and the state of incorporation and the words "Corporate Seal." ARTICLE X. AMENDMENTS 10.01. By Shareholders. These Bylaws may be amended or repealed and new Bylaws may be adopted by the shareholders by the vote provided in Section 2.07 of these Bylaws or as specifically provided below. If authorized by the Articles of Incorporation, the shareholders may adopt or amend a Bylaw that fixes a greater or lower quorum requirement or a greater voting requirement for shareholders or voting groups of shareholders than otherwise is provided in the Wisconsin Business Corporation Law. The adoption or amendment of a Bylaw that adds, changes or deletes a greater or lower quorum requirement or a greater voting requirement for shareholders must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirement then in effect. 10.02. By Directors. Except as the Articles of Incorporation may otherwise provide, these Bylaws may also be amended or repealed and new Bylaws may be adopted by the Board of Directors by the vote provided in Section 3.08, but (a) no Bylaw adopted by the shareholders shall be amended, repealed or readopted by the Board of Directors if the Bylaw so adopted so provides and (b) a Bylaw adopted or amended by the shareholders that fixes a greater or lower quorum requirement or a greater voting requirement for the Board of Directors than otherwise is provided in the Wisconsin Business Corporation Law may not be amended or repealed by the Board of Directors unless the Bylaw expressly provides that it may be amended or repealed by a specified vote of the Board of Directors. Action by the Board of Directors to adopt or amend a Bylaw that changes the quorum or voting requirement for the Board of Directors must meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then in effect, unless a different voting requirement is specified as provided by the preceding sentence. A Bylaw that fixes a greater or lower quorum requirement or a greater voting requirement for shareholders or voting groups of shareholders than otherwise is provided in the Wisconsin Business Corporation Law may not be adopted, amended or repealed by the Board of Directors. -28- 29 10.03. Implied Amendments. Any action taken or authorized by the shareholders or by the Board of Directors, which would be inconsistent with the Bylaws then in effect but is taken or authorized by a vote that would be sufficient to amend the Bylaws so that the Bylaws would be consistent with such action, shall be given the same effect as though the Bylaws had been temporarily amended or suspended so far, but only so far, as is necessary to permit the specific action so taken or authorized. -29- EX-10.1(A) 3 SUPPLMT. EXEC. RETIRMT. AGREEMTS. PETER STRANDWITZ 1 EXHIBIT 10.1(a) SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT THIS AGREEMENT is made as of this 19th day of September, 1996 between PLEXUS CORP., a Wisconsin corporation (the "Company"), and PETER STRANDWITZ (the "Employee"). WHEREAS, the Employee is a key executive officer of the Company and the Company wishes to continue to receive the benefit of the Employee's knowledge and experience and is willing to offer the Employee certain deferred composition arrangements as set forth herein as an inducement for continued service. NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: SECTION 1 DEFINITIONS 1.1 "Account" means the bookkeeping reserve account for the Employee which shall be established by the Company solely as a device for determining the amounts which may become payable to or on behalf of the Employee hereunder. The Company shall keep a record in the Account of the current fair values of all contributions and any Policy or other property or funds held therein from time to time. Such Account shall not constitute or be treated as a trust fund of any kind, it being expressly provided that the amounts credited to such Account shall at all time be and remain the sole property of the Company. The Employee shall have no proprietary rights of any nature whatsoever with respect thereto but shall simply be an unsecured creditor of the Company, unless and until such time as a payment under this Agreement is made to or on behalf of the Employee. 1.2 "Annual Contribution" means the sum of $193,599.98. 1.3 "Beneficiary" means any one or more primary or secondary beneficiaries designated in writing by the Employee on a form provided by the Company to receive any benefits which may become payable under this Agreement on or after the Employee's death. The Employee shall have the right to name, change or revoke his designation of Beneficiary on a form provided by the Company. The designation on file with the Company at the time of the Employee's death shall be controlling. Should the Employee fail to make a valid Beneficiary designation or leave no named Beneficiary surviving, any benefits due shall be paid to the Employee's spouse, if living; or if not living, then to the Employee's estate. 2 1.4 "Board" means the Board of Directors of the Company. 1.5 "Cause" in connection with any termination of the Employee's employment by the Company means (i) the willful and continued failure of the Employee to substantially perform the duties of his position with the Company (other than as a result of physical or mental illness or injury), after the Board has given written notice to the Employee demanding substantial performance, which notice specifically identifies the manner in which the Board believes the Employee has not substantially performed such duties, (ii) commission or conviction of any felony, misdemeanor or other offense, the circumstance of which substantially relate to the circumstances of the Employee's job, or (iii) the willful engaging by the Employee in illegal or gross misconduct resulting in a demonstrably material injury to the Company. No act or failure to act on the Employee's part shall be considered to be "willful" unless it is done, or permitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. 1.6 "Change of Control" with respect to the Company means the occurrence of any one of the following events, as a result of one transaction or a series of transaction: (a) any "person (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding the Company, its affiliates as of the date of this Agreement, and any qualified or non-qualified plan maintained by the Company or its affiliates), becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under such Act) of securities of the Company representing more than 25% of the combined voting power of the Company's then outstanding voting securities; (b) individuals who constitute a majority of the Board immediately prior to a contested election for positions in the Board cease to constitute a majority as a result of such contested election; (c) the Company is combined with or acquired by (by merger, share exchange, consolidation, tender offer or otherwise) another corporation or business entity and a result thereof, less than 67% of the outstanding securities of or voting power in the surviving or resulting corporation or other business entity is owned in the aggregate by the former shareholders of the Company; (d) the Company sells, leases, or otherwise transfers all or substantially all of its properties or assets -2- 3 not in the ordinary course of business to another person or entity; (e) the Board determines in its sole and absolute discretion either that there has been a change in control of the Company or that such change in control is imminent; or (f) the outstanding voting securities of the Company are no longer listed on either the NASDAQ National Market System, the New York Stock Exchange or the American Stock Exchange or the Company is no longer registered under Section 12 of the Securities Exchange Act of 1934, as amended. 1.7 "Disability" means the absence of the Employee from the Employee's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness or accident which is determined to be of continued and indefinite duration and to render the Employee unable to continue in the regular duties of his job. When used in the context of the Employee's duties under a consulting agreement entered into after employment has ceased, the term means such incapacity due to mental illness or accident which is determined to be of continued and indefinite duration and to render the former Employee unable to perform his duties under the consulting agreement. If necessary, such determination shall be made by a physician selected by the Employee or his legal representatives and acceptable to the Company, with the Company's agreement as to acceptability not to be withheld unreasonably. 1.8 "Good Reason" in connection with any termination of the Employee's employment with the Company means any termination because of Disability, any termination at or after attainment of age 55 and completion of 10 years of service with the Company, or any termination at any time on or after the occurrence of a Change of Control. The term also means in connection with any termination by the Employee of his employment with the Company (i) the Employee's duties and responsibilities are materially and adversely diminished in comparison to the duties and responsibilities enjoyed by him on the date this Agreement is signed, (ii) any reduction of the Employee's base salary below the level in effect on the date this Agreement is signed, without the consent of the Employee, (iii) any request by the Company that the Employee's services be rendered primarily at a location or locations outside Winnebago County, Wisconsin, or (iv) any material breach of this Agreement shall occur that either is not taken by the Company in good faith or is not remedied by the Company promptly after receipt of written notice thereof from the Employee. The Employee may terminate his employment with the Company for Good Reason by giving the Company written notice of termination setting forth the specific conduct of the Company that constitutes Good Reason. Any termination of employment -3- 4 covered by this paragraph shall be referred to as a "Good Reason Termination." 1.9 "Policy" means any policy or policies of life insurance which the Company may purchase on the life of the Employee and hold in the Account. While any such Policy may be used as a device for measuring the amounts which may become payable to or on behalf of the Employee under this Agreement, the Company (or the trustee of any grantor Trust established by the Company) shall be the applicant, owner and sole beneficiary of the Policy, with all rights and all incidents of ownership. The Employee shall have no proprietary rights of any nature whatsoever with respect to the Policy, unless and until otherwise provided under this Agreement. 1.10 "Trust" means such grantor trust (a "rabbi trust") as the Company shall establish to serve as a vehicle to hold any Policy or contributions held in the Account as the Company may choose to make in connection with this Agreement, but the Trust shall be designed so that all assets therein are subject to the claims of the Company or any of its affiliates which have used such rabbi trust in the event of insolvency, consistent with the provision of Revenue Procedure 92-64 issued by the Internal Revenue Service. Notwithstanding the existence of such a rabbi trust, this Agreement shall remain an unfunded agreement, with the Employee's rights to benefits hereunder being those of an unsecured creditor. SECTION 2 CONTRIBUTIONS TO ACCOUNT 2.1 Contributions. The Company will credit annually to the Employee's Account an amount equal to the Annual Contribution, starting on the date hereof and continuing on the anniversary thereof thereafter for the next five years, provided that the Employee is continuing in employ of the Company on each such anniversary date or has entered into a consulting agreement with the Company in the form attached hereto as Exhibit A and made a part hereof and continues in the absence of Disability to comply with the terms thereof. 2.2 Credits to Account. Any amounts credited to the Employee's Account shall be invested in a Policy which shall be held in the Trust. 2.3 Special Contribution in the Event of a Change of Control. Upon the occurrence of a Change of Control, the Company shall, as soon as possible, but in no event later than thirty (30) days following the Change of Control, make a contribution to the Trust and credit the Account in a lump sum amount equal to the present value of all Annual Contributions that would have been made under the provisions of paragraph 2.1 -4- 5 above, discounted at 5%, and the Company shall have no further contribution obligations thereafter. SECTION 3 PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFITS 3.1 Retirement or Termination Other Than For Cause At or After 65. Upon the Employee's retirement or termination other than for Cause at or after attainment of age 65, the Company shall pay the Employee fifteen (15) annual installments, with the first installment to be made within sixty (60) days of the date of such retirement or termination, in an annual amount equal to the sum of the following: (a) an amount equal to one-fifteenth (1/15) of the cash values in each Policy as of the date the Employee retires or terminates, plus (b) an amount equal to the increase, if any, in the cash values in each Policy, over those in the immediately prior Policy year. 3.2 Death Before Employee has Begun Receiving Payments. Should the Employee die while in the employ of the Company before he has begun to receive the payments provided in under paragraph 3.1 above, the Company shall make a lump sum payment to the Employee's Beneficiary in an amount equal to the death proceeds then payable under each Policy. 3.3 Death After the Employee has Begun Receiving Payments. Should the Employee die after he has begun to receive the payments provided in under paragraph 3.1 above, but before all fifteen annual payments have been made, the Company shall make a lump sum payment to the Employee's Beneficiary in an amount equal to the death proceeds then payable under each Policy, minus the total amount of annual payments previously made to the Employee. 3.4 Termination of Employment by the Company Other Than for Cause or Good Reason Termination. Should the Company terminate the Employee's employment, other than for Cause or death, or if a Good Reason Termination occurs, and provided that the Employee continues in the absence of Disability to comply with the terms of the consulting agreement attached hereto as Exhibit A and made a part hereof, the Company shall continue to credit the Employee's Account annually with an amount equal to the Annual Contribution for the number of years specified in paragraph 2.1 above, just as if the Employee had remained employed pursuant to this Agreement until the end of such period, or until the Employee's death, if earlier. Thereafter, if the Employee survives to age 65, the payments called for by paragraph 3.1 shall be made, just as if the Employee had continued in the employ of the Company and had retired upon reaching age 65. -5- 6 Paragraph 3.3 shall apply should the Employee die after he has begun to receive such payments, but before all of the same have been made. If the Employee does not survive to age 65 but dies before he has begun to receive the payments provided for in paragraph 3.1, paragraph 3.2 shall apply. If the Employee fails in the absence of Disability to comply with the terms of the consulting agreement attached as Exhibit A, the provisions of Paragraph 3.5 below shall apply, as if the Employee had voluntarily terminated other than for Good Reason prior to the commencement of payments under this Agreement. 3.5 Termination of Employment for Cause by the Company or By the Employee Other Than for Good Reason. Notwithstanding any other provision of this Agreement, should the Company terminate the Employee's employment for Cause at any time prior to the occurrence of a Change of Control and prior to the commencement of payments under this Agreement, the Company shall have no obligation to make any payments whatsoever under this Agreement to or on behalf of the Employee. Should the Employee voluntarily terminate other than for Good Reason prior to the commencement of payments under this Agreement, the Employee shall become entitled to receive fifteen (15) annual installment payments from the Company, with the first installment to be made within sixty (60) days of the date such termination, in annual amounts calculated in the same manner as provided in paragraph 3.1 above. However, the Company in its sole discretion may determine to accelerate such payments into a single lump sum equal to the total of the then current fair value held in the Account and may make such payment either in cash or in kind (including a distribution of any Policy held in the Account), as the Company in its sole discretion determines. Paragraph 3.3 shall apply should the Employee die after he has begun to receive any installments payments, but before all of the same have been made. 3.6 Payment of Account Under Certain Circumstances. If at any time on or after the occurrence of a Change of Control, either the Company's Consolidated Tangible Net Worth declines below thirty-five million dollars ($35,000,000.00) or the ratio of the Company's Consolidated Total Debt to the Company's Consolidated Tangible Net Worth becomes greater than 2.5 to 1, then the Employee (or former Employee if he is no longer in the Company's employ but is either receiving or entitled to receive payment hereunder at some future date) shall become entitled to receive an immediate payment from the Company of an amount equal to the total of the then current fair value held in the Account, in full settlement of any and all obligations of the Company hereunder. The Company may make such payment either in cash or in kind (including a distribution of any Policy held in the Account), as the Company in its sole discretion determines. For purposes of this paragraph, the Company's "Consolidated Tangible Net Worth" means the excess, if any, of all consolidated assets of the Company and all subsidiaries (excluding goodwill patents, trademarks, tradenames, copyrights and other assets properly -6- 7 classified as intangible assets) over all consolidated liabilities of the Company and all subsidiaries determined in accordance with generally accepted accounting principles; and the Company's "Consolidated Total Debt" means the total of all consolidated liabilities of the Company and all subsidiaries which would appear as liabilities on a consolidated balance sheet of the Company and all subsidiaries in accordance with generally accepted accounting principles. 3.7 Payment of Account on Company Breach. Should the Company fail to make any payments when due hereunder to the Employee or his Beneficiary or otherwise materially breach any provision of this Agreement and such failure or breach continue for a period of ten (10) days after written notice and demand for payment or cure by the Employee (or Beneficiary, as the case may be) is received by the Company, then the Employee (or Beneficiary) shall become entitled, without prejudice to any other right or remedy the Employee (or Beneficiary) may have for breach of this Agreement, to receive an immediate payment from the Company of an amount equal to the total of the then current fair value held in the Account. The Company, may make such payment either in cash or in kind (including a distribution of any Policy held in Account), as the Company in its sole discretion determines. SECTION 4 CLAIMS PROCEDURE 4.1 Claim Review. If the Employee or his Beneficiary (a "Claimant") is denied all or a portion of a benefit under this Agreement, he or she may file a written claim for benefits with the Company. The Company shall review the claim and notify the Claimant of the Company's decision within sixty (60) days of receipt of such claim, unless the Claimant receives written notice prior to the end of the sixty (60) day period stating that special circumstances require an extension of the time for decision. The Company's decision shall be in writing, sent by mail to the Claimant's last known address, and if a denial of the claim, must contain the specific reasons for the denial, reference to pertinent provisions of this Agreement on which the denial is based, a designation of any additional material necessary to perfect the claim, and an explanation of the claim review procedure. 4.2 Appeal Procedure to the Board. A Claimant is entitled to request a review of any denial by the full Board by written request to the Chair of the Board within 60 days of receipt of the denial. Absent a request for review within the 60-day period, the claim will be deemed to be conclusively denied. The Board shall afford the Claimant the opportunity to review all pertinent documents and submit issues and comments in writing and shall render a review decision in writing, all within sixty -7- 8 (60) days after receipt of a request for review (provided that, in special circumstances the Board may extend the time for decision by not more than sixty (60) days upon written notice to the Claimant.) The Board's review decision shall contain specific reasons for the decision and reference to the pertinent provisions of this Agreement. 4.3 Attorney's Fees. The Company agrees to pay, as incurred, to the fullest extent permitted by law, all legal fees and expenses that the Employee may reasonably incur as a result of any contest (regardless of the outcome) by the Company, the Employee or others of the validity or enforceability of, or liability under, or otherwise involving any provision of this Agreement. SECTION 5 MISCELLANEOUS 5.1 Non-Assignability. This Agreement is personal to the Employee and, without the prior written consent of the Company, shall not be assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and shall also be enforceable by the Employee's legal representatives. 5.2 Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. 5.3 Taxes. No later than the date as of which an amount first becomes includible in the income of the Employee for purposes of employment or income taxes, the Employee agrees to pay to the Company, or make satisfactory arrangements with the Company regarding the payment of any federal, state or other taxes of any kind required to be withheld with respect to such amount. 5.4 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Wisconsin, without reference to principles of conflict of laws, to the extent preempted by federal law. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified -8- 9 except by a written agreement executed by the parties hereto or their respective successors and legal representatives. 5.5 Notices. All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Employee: Peter Strandwitz 2655 Oakridge Road Neenah, WI 54956 If to the Company: Plexus Corp. Attn: Corporate Secretary 55 Jewelers Park Drive Neenah, WI 54957-0156 or to such other address as either party furnishes to the other in writing in accordance with this paragraph. Notices and communications shall be effective when actually received by the addressee. 5.6 Construction. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law. Nothing contained in this Agreement shall give the Employee the right to be retained in the employment of the Company or affect the right of the Company to dismiss the Employee. 5.7 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this paragraph 5.7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest -9- 10 and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of paragraph 5.7 (c), all determinations required to be made under this paragraph 5.7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such certified public accounting firm as may be designated by the Employee (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this paragraph 5.7, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that failure to report the Excise Tax on the Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to paragraph 5.7 (c) and the Employee thereafter is required to make payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such a claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: -10- 11 (i) Give the Company any information reasonably requested by the Company relating to such claim, (ii) Take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) Cooperate with the Company in good faith in order to effectively contest such claim, and (iv) Permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this paragraph 5.7 (c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax including interest or penalties with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to paragraph 5.7 (c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's -11- 12 complying with the requirements of paragraph 5.7 (c) ) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to paragraph 5.7 (c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 5.8 Amendment; Entire Agreement. This Agreement may be amended by a written instrument signed by both parties. This Agreement contains the entire agreement between the parties on the subjects covered and replaces all prior writings, proposals, specifications or other oral or written materials relating thereto. IN WITNESS WHEREOF, the Employee has signed this Agreement and, pursuant to the authorization of the Board, the Company has caused this Agreement to be signed, all as of the date first set forth above. /S/ PETER STRANDWITZ ------------------------------ PETER STRANDWITZ PLEXUS CORP. BY: /S/ JOS. D. KAUFMAN ------------------------------- ATTEST: /S/ JULIE GENSKE ------------------------------- -12- EX-10.1(B) 4 SUPPLMT. EXEC. RETIRMT. AGREEMTS. JOHN NUSSBAUM 1 EXHIBIT 10.1(b) SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT THIS AGREEMENT is made as of this 19th day of September, 1996 between PLEXUS CORP., a Wisconsin corporation (the "Company"), and JOHN NUSSBAUM (the "Employee"). WHEREAS, the Employee is a key executive officer of the Company and the Company wishes to continue to receive the benefit of the Employee's knowledge and experience and is willing to offer the Employee certain deferred composition arrangements as set forth herein as an inducement for continued service. NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: SECTION 1 DEFINITIONS 1.1 "Account" means the bookkeeping reserve account for the Employee which shall be established by the Company solely as a device for determining the amounts which may become payable to or on behalf of the Employee hereunder. The Company shall keep a record in the Account of the current fair values of all contributions and any Policy or other property or funds held therein from time to time. Such Account shall not constitute or be treated as a trust fund of any kind, it being expressly provided that the amounts credited to such Account shall at all time be and remain the sole property of the Company. The Employee shall have no proprietary rights of any nature whatsoever with respect thereto but shall simply be an unsecured creditor of the Company, unless and until such time as a payment under this Agreement is made to or on behalf of the Employee. 1.2 "Annual Contribution" means the sum of $90,920.49. 1.3 "Beneficiary" means any one or more primary or secondary beneficiaries designated in writing by the Employee on a form provided by the Company to receive any benefits which may become payable under this Agreement on or after the Employee's death. The Employee shall have the right to name, change or revoke his designation of Beneficiary on a form provided by the Company. The designation on file with the Company at the time of the Employee's death shall be controlling. Should the Employee fail to make a valid Beneficiary designation or leave no named Beneficiary surviving, any benefits due shall be paid to the Employee's spouse, if living; or if not living, then to the Employee's estate. 1.4 "Board" means the Board of Directors of the Company. 2 1.5 "Cause" in connection with any termination of the Employee's employment by the Company means (i) the willful and continued failure of the Employee to substantially perform the duties of his position with the Company (other than as a result of physical or mental illness or injury), after the Board has given written notice to the Employee demanding substantial performance, which notice specifically identifies the manner in which the Board believes the Employee has not substantially performed such duties, (ii) commission or conviction of any felony, misdemeanor or other offense, the circumstance of which substantially relate to the circumstances of the Employee's job, or (iii) the willful engaging by the Employee in illegal or gross misconduct resulting in a demonstrably material injury to the Company. No act or failure to act on the Employee's part shall be considered to be "willful" unless it is done, or permitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. 1.6 "Change of Control" with respect to the Company means the occurrence of any one of the following events, as a result of one transaction or a series of transaction: (a) any "person (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding the Company, its affiliates as of the date of this Agreement, and any qualified or non-qualified plan maintained by the Company or its affiliates), becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under such Act) of securities of the Company representing more than 25% of the combined voting power of the Company's then outstanding voting securities; (b) individuals who constitute a majority of the Board immediately prior to a contested election for positions in the Board cease to constitute a majority as a result of such contested election; (c) the Company is combined with or acquired by (by merger, share exchange, consolidation, tender offer or otherwise) another corporation or business entity and a result thereof, less than 67% of the outstanding securities of or voting power in the surviving or resulting corporation or other business entity is owned in the aggregate by the former shareholders of the Company; (d) the Company sells, leases, or otherwise transfers all or substantially all of its properties or assets not in the ordinary course of business to another person or entity; -2- 3 (e) the Board determines in its sole and absolute discretion either that there has been a change in control of the Company or that such change in control is imminent; or (f) the outstanding voting securities of the Company are no longer listed on either the NASDAQ National Market System, the New York Stock Exchange or the American Stock Exchange or the Company is no longer registered under Section 12 of the Securities Exchange Act of 1934, as amended. 1.7 "Disability" means the absence of the Employee from the Employee's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness or accident which is determined to be of continued and indefinite duration and to render the Employee unable to continue in the regular duties of his job. When used in the context of the Employee's duties under a consulting agreement entered into after employment has ceased, the term means such incapacity due to mental illness or accident which is determined to be of continued and indefinite duration and to render the former Employee unable to perform his duties under the consulting agreement. If necessary, such determination shall be made by a physician selected by the Employee or his legal representatives and acceptable to the Company, with the Company's agreement as to acceptability not to be withheld unreasonably. 1.8 "Good Reason" in connection with any termination of the Employee's employment with the Company means any termination because of Disability, any termination at or after attainment of age 55 and completion of 10 years of service with the Company, or any termination at any time on or after the occurrence of a Change of Control. The term also means in connection with any termination by the Employee of his employment with the Company (i) the Employee's duties and responsibilities are materially and adversely diminished in comparison to the duties and responsibilities enjoyed by him on the date this Agreement is signed, (ii) any reduction of the Employee's base salary below the level in effect on the date this Agreement is signed, without the consent of the Employee, (iii) any request by the Company that the Employee's services be rendered primarily at a location or locations outside Winnebago County, Wisconsin, or (iv) any material breach of this Agreement shall occur that either is not taken by the Company in good faith or is not remedied by the Company promptly after receipt of written notice thereof from the Employee. The Employee may terminate his employment with the Company for Good Reason by giving the Company written notice of termination setting forth the specific conduct of the Company that constitutes Good Reason. Any termination of employment covered by this paragraph shall be referred to as a "Good Reason Termination." -3- 4 1.9 "Policy" means any policy or policies of life insurance which the Company may purchase on the life of the Employee and hold in the Account. While any such Policy may be used as a device for measuring the amounts which may become payable to or on behalf of the Employee under this Agreement, the Company (or the trustee of any grantor Trust established by the Company) shall be the applicant, owner and sole beneficiary of the Policy, with all rights and all incidents of ownership. The Employee shall have no proprietary rights of any nature whatsoever with respect to the Policy, unless and until otherwise provided under this Agreement. 1.10 "Trust" means such grantor trust (a "rabbi trust") as the Company shall establish to serve as a vehicle to hold any Policy or contributions held in the Account as the Company may choose to make in connection with this Agreement, but the Trust shall be designed so that all assets therein are subject to the claims of the Company or any of its affiliates which have used such rabbi trust in the event of insolvency, consistent with the provision of Revenue Procedure 92-64 issued by the Internal Revenue Service. Notwithstanding the existence of such a rabbi trust, this Agreement shall remain an unfunded agreement, with the Employee's rights to benefits hereunder being those of an unsecured creditor. SECTION 2 CONTRIBUTIONS TO ACCOUNT 2.1 Contributions. The Company will credit annually to the Employee's Account an amount equal to the Annual Contribution, starting on the date hereof and continuing on the anniversary thereof thereafter for the next ten years, provided that the Employee is continuing in employ of the Company on each such anniversary date or has entered into a consulting agreement with the Company in the form attached hereto as Exhibit A and made a part hereof and continues in the absence of to comply with the terms thereof. 2.2 Credits to Account. Any amounts credited to the Employee's Account shall be invested in a Policy which shall be held in the Trust. 2.3 Special Contribution in the Event of a Change of Control. Upon the occurrence of a Change of Control, the Company shall, as soon as possible, but in no event later than thirty (30) days following the Change of Control, make a contribution to the Trust and credit the Account in a lump sum amount equal to the present value of all Annual Contributions that would have been made under the provisions of paragraph 2.1 above, discounted at 5%, and the Company shall have no further contribution obligations thereafter. -4- 5 SECTION 3 PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFITS 3.1 Retirement or Termination Other Than For Cause At or After 65. Upon the Employee's retirement or termination other than for Cause at or after attainment of age 65, the Company shall pay the Employee fifteen (15) annual installments, with the first installment to be made within sixty (60) days of the date of such retirement or termination, in an annual amount equal to the sum of the following: (a) an amount equal to one-fifteenth (1/15) of the cash values in each Policy as of the date the Employee retires or terminates, plus (b) an amount equal to the increase, if any, in the cash values in each Policy, over those in the immediately prior Policy year. 3.2 Death Before Employee has Begun Receiving Payments. Should the Employee die while in the employ of the Company before he has begun to receive the payments provided in under paragraph 3.1 above, the Company shall make a lump sum payment to the Employee's Beneficiary in an amount equal to the death proceeds then payable under each Policy. 3.3 Death After the Employee has Begun Receiving Payments. Should the Employee die after he has begun to receive the payments provided in under paragraph 3.1 above, but before all fifteen annual payments have been made, the Company shall make a lump sum payment to the Employee's Beneficiary in an amount equal to the death proceeds then payable under each Policy, minus the total amount of annual payments previously made to the Employee. 3.4 Termination of Employment by the Company Other Than for Cause or Good Reason Termination. Should the Company terminate the Employee's employment, other than for Cause or death, or if a Good Reason Termination occurs, and provided that the Employee continues in the absence of Disability to comply with the terms of the consulting agreement attached hereto as Exhibit A and made a part hereof, the Company shall continue to credit the Employee's Account annually with an amount equal to the Annual Contribution for the number of years specified in paragraph 2.1 above, just as if the Employee had remained employed pursuant to this Agreement until the end of such period, or until the Employee's death, if earlier. Thereafter, if the Employee survives to age 65, the payments called for by paragraph 3.1 shall be made, just as if the Employee had continued in the employ of the Company and had retired upon reaching age 65. Paragraph 3.3 shall apply should the Employee die after he has begun to receive such payments, but before all of the same have been made. If the Employee does not survive to age 65 but dies before he has begun to receive the payments provided for in -5- 6 paragraph 3.1, paragraph 3.2 shall apply. If the Employee fails in the absence of Disability to comply with the terms of the consulting agreement attached as Exhibit A, the provisions of Paragraph 3.5 below shall apply, as if the Employee had voluntarily terminated other than for Good Reason prior to the commencement of payments under this Agreement. 3.5 Termination of Employment for Cause by the Company or By the Employee Other Than for Good Reason. Notwithstanding any other provision of this Agreement, should the Company terminate the Employee's employment for Cause at any time prior to the occurrence of a Change of Control and prior to the commencement of payments under this Agreement, the Company shall have no obligation to make any payments whatsoever under this Agreement to or on behalf of the Employee. Should the Employee voluntarily terminate other than for Good Reason prior to the commencement of payments under this Agreement, the Employee shall become entitled to receive fifteen (15) annual installment payments from the Company, with the first installment to be made within sixty (60) days of the date such termination, in annual amounts calculated in the same manner as provided in paragraph 3.1 above. However, the Company in its sole discretion may determine to accelerate such payments into a single lump sum equal to the total of the then current fair value held in the Account and may make such payment either in cash or in kind (including a distribution of any Policy held in the Account), as the Company in its sole discretion determines. Paragraph 3.3 shall apply should the Employee die after he has begun to receive any installments payments, but before all of the same have been made. 3.6 Payment of Account Under Certain Circumstances. If at any time on or after the occurrence of a Change of Control, either the Company's Consolidated Tangible Net Worth declines below thirty-five million dollars ($35,000,000.00) or the ratio of the Company's Consolidated Total Debt to the Company's Consolidated Tangible Net Worth becomes greater than 2.5 to 1, then the Employee (or former Employee if he is no longer in the Company's employ but is either receiving or entitled to receive payment hereunder at some future date) shall become entitled to receive an immediate payment from the Company of an amount equal to the total of the then current fair value held in the Account, in full settlement of any and all obligations of the Company hereunder. The Company may make such payment either in cash or in kind (including a distribution of any Policy held in the Account), as the Company in its sole discretion determines. For purposes of this paragraph, the Company's "Consolidated Tangible Net Worth" means the excess, if any, of all consolidated assets of the Company and all subsidiaries (excluding goodwill patents, trademarks, tradenames, copyrights and other assets properly classified as intangible assets) over all consolidated liabilities of the Company and all subsidiaries determined in accordance with generally accepted accounting principles; and the Company's "Consolidated Total Debt" means the total of all -6- 7 consolidated liabilities of the Company and all subsidiaries which would appear as liabilities on a consolidated balance sheet of the Company and all subsidiaries in accordance with generally accepted accounting principles. 3.7 Payment of Account on Company Breach. Should the Company fail to make any payments when due hereunder to the Employee or his Beneficiary or otherwise materially breach any provision of this Agreement and such failure or breach continue for a period of ten (10) days after written notice and demand for payment or cure by the Employee (or Beneficiary, as the case may be) is received by the Company, then the Employee (or Beneficiary) shall become entitled, without prejudice to any other right or remedy the Employee (or Beneficiary) may have for breach of this Agreement, to receive an immediate payment from the Company of an amount equal to the total of the then current fair value held in the Account. The Company, may make such payment either in cash or in kind (including a distribution of any Policy held in Account), as the Company in its sole discretion determines. SECTION 4 CLAIMS PROCEDURE 4.1 Claim Review. If the Employee or his Beneficiary (a "Claimant") is denied all or a portion of a benefit under this Agreement, he or she may file a written claim for benefits with the Company. The Company shall review the claim and notify the Claimant of the Company's decision within sixty (60) days of receipt of such claim, unless the Claimant receives written notice prior to the end of the sixty (60) day period stating that special circumstances require an extension of the time for decision. The Company's decision shall be in writing, sent by mail to the Claimant's last known address, and if a denial of the claim, must contain the specific reasons for the denial, reference to pertinent provisions of this Agreement on which the denial is based, a designation of any additional material necessary to perfect the claim, and an explanation of the claim review procedure. 4.2 Appeal Procedure to the Board. A Claimant is entitled to request a review of any denial by the full Board by written request to the Chair of the Board within 60 days of receipt of the denial. Absent a request for review within the 60-day period, the claim will be deemed to be conclusively denied. The Board shall afford the Claimant the opportunity to review all pertinent documents and submit issues and comments in writing and shall render a review decision in writing, all within sixty (60) days after receipt of a request for review (provided that, in special circumstances the Board may extend the time for decision by not more than sixty (60) days upon written notice to the Claimant.) The Board's review decision shall contain -7- 8 specific reasons for the decision and reference to the pertinent provisions of this Agreement. 4.3 Attorney's Fees. The Company agrees to pay, as incurred, to the fullest extent permitted by law, all legal fees and expenses that the Employee may reasonably incur as a result of any contest (regardless of the outcome) by the Company, the Employee or others of the validity or enforceability of, or liability under, or otherwise involving any provision of this Agreement. SECTION 5 MISCELLANEOUS 5.1 Non-Assignability. This Agreement is personal to the Employee and, without the prior written consent of the Company, shall not be assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and shall also be enforceable by the Employee's legal representatives. 5.2 Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean both the Company as defined above and any such successor that assumes and agrees to perform this Agreement, by operation of law or otherwise. 5.3 Taxes. No later than the date as of which an amount first becomes includible in the income of the Employee for purposes of employment or income taxes, the Employee agrees to pay to the Company, or make satisfactory arrangements with the Company regarding the payment of any federal, state or other taxes of any kind required to be withheld with respect to such amount. 5.4 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Wisconsin, without reference to principles of conflict of laws, to the extent preempted by federal law. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives. 5.5 Notices. All notices and other communications under this Agreement shall be in writing and shall be given by hand -8- 9 delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Employee: John Nussbaum 3532 Grand Meadow Drive Appleton, WI 54915 If to the Company: Plexus Corp. Attn: Corporate Secretary 55 Jewelers Park Drive Neenah, WI 54957-0156 or to such other address as either party furnishes to the other in writing in accordance with this paragraph. Notices and communications shall be effective when actually received by the addressee. 5.6 Construction. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law. Nothing contained in this Agreement shall give the Employee the right to be retained in the employment of the Company or affect the right of the Company to dismiss the Employee. 5.7 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this paragraph 5.7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. -9- 10 (b) Subject to the provisions of paragraph 5.7 (c), all determinations required to be made under this paragraph 5.7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such certified public accounting firm as may be designated by the Employee (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this paragraph 5.7, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that failure to report the Excise Tax on the Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to paragraph 5.7 (c) and the Employee thereafter is required to make payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such a claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall: (i) Give the Company any information reasonably requested by the Company relating to such claim, -10- 11 (ii) Take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) Cooperate with the Company in good faith in order to effectively contest such claim, and (iv) Permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this paragraph 5.7 (c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax including interest or penalties with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to paragraph 5.7 (c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of paragraph 5.7 (c) ) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount -11- 12 advanced by the Company pursuant to paragraph 5.7 (c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 5.8 Amendment; Entire Agreement. This Agreement may be amended by a written instrument signed by both parties. This Agreement contains the entire agreement between the parties on the subjects covered and replaces all prior writings, proposals, specifications or other oral or written materials relating thereto. IN WITNESS WHEREOF, the Employee has signed this Agreement and, pursuant to the authorization of the Board, the Company has caused this Agreement to be signed, all as of the date first set forth above. /S/ JOHN NUSSBAUM -------------------------- JOHN NUSSBAUM PLEXUS CORP. BY: /S/ JOS. D. KAUFMAN --------------------------- ATTEST: /S/ JULIE GENSKE --------------------------- -12- EX-10.3(A) 5 EMPLOYEE SAVINGS PLAN; PLAN DOCUMENT 1 EXHIBIT 10.3(a) GODWINS BOOKE & DICKENSON PROTOTYPE PROFIT SHARING AND EMPLOYEE SAVINGS PLAN AND TRUST PLAN DOCUMENT SECTION 1. DEFINITIONS As used in the plan, including this Section 1, references to one gender shall include the other and, unless otherwise indicated by the context: 1.1 "ACCOUNT" shall mean the aggregate of the separate accounts maintained by the Committee with respect to each participant. To the extent applicable, the separate accounts so maintained shall include the following: (i) the elective deferral account described in Section 2.1.6; (ii) the qualified non-elective contribution account described in Section 2.1.6; (iii) the employee after-tax contribution account described in Section 2.2.3; (iv) the matching contribution account described in Section 2.3.3; (v) the qualified matching contribution account described in Section 2.3.3; (vi) the discretionary Employer contribution account described in Section 2.4; (vii) the deductible contribution account described in Section 2.5; (viii) the mandatory contribution account described in Section 2.6; (ix) the direct transfer account described in Section 18; and (x) the rollover account described in Section 19. 1.2 "ACCRUED BENEFIT" shall mean with respect to each participant the balance in his account (including all of the separate accounts described in Section 1.1) as of the applicable adjustment date following adjustment thereof as provided in Section 7. 1.3 "ACTUAL DEFERRAL PERCENTAGE" or "ADP" shall mean with respect to a participant for a plan year, the average of the ratio (calculated to the nearest one-hundredth of a percentage point) of (i) the amount of Employer contributions actually paid over to the trust on behalf of such participant for the plan year (other than elective deferrals distributed to the participant pursuant to Section 23.1.4) to (ii) the participant's testing compensation for such plan year. Employer contributions on behalf of any participant shall include: (a) any elective deferrals made pursuant to the participant's deferral election (including excess elective deferrals of highly compensated participants), but excluding (1) excess elective deferrals of non-highly compensated participants that arise solely from elective deferrals made under the plan or plans of the Employer and (2) elective deferrals that are taken into account in the ACP test (provided the ADP test is satisfied both with and without exclusion of these elective deferrals); and (b) at the election of the Employer, qualified non-elective contributions and qualified 2 matching contributions. The ADP of an employee who is eligible to make elective deferrals under the plan but fails to do so, and who does not receive an allocation of any qualified non-elective contributions or qualified matching contributions that are taken into account in the ADP test, shall be zero. The ADP of a specified group of participants for a plan year shall be the average (expressed as a percentage and calculated to the nearest one-hundredth of a percentage point) of the ADPs calculated separately for each participant in such group. For purposes of determining the ADP of a participant who is a five percent owner or one of the ten most highly compensated employees, the elective deferrals and testing compensation of such participant shall include the elective deferrals and testing compensation for the plan year of family members (as defined in Section 1.33.6). The determination and treatment of the ADP of any participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 1.4 "ADJUSTMENT DATE" shall mean the last day of each plan year (the "year-end adjustment date"), and such other days during a plan year as shall be designated in the Adoption Agreement. If the Employer shall designate daily adjustment dates under the Adoption Agreement, adjustments to the accounts of participants shall be made on each day securities are traded on a national stock exchange, except regularly scheduled holidays of the Sponsor or Trustee. 1.5 "ADOPTION AGREEMENT" shall mean the written agreement pursuant to which the Employer adopts the plan, which agreement shall be between the Employer and the Trustee. The Adoption Agreement is a part of the plan as applied to the Employer and is expressly incorporated herein by reference. 1.6 "AFFILIATED EMPLOYER" shall mean (i) 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; (ii) any trade or business (whether or not incorporated) that is under common control (as defined in Section 414(c) of the Code) with the Employer; (iii) 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; and (iv) any other entity required to be aggregated with the Employer pursuant to regulations prescribed by the Secretary of the Treasury under Section 414(o) of the Code. 1.7 "AGGREGATE LIMIT" shall mean the sum of (i) 125% of the greater of the ADP of the non-highly compensated participants for the plan year or the ACP of the non-highly compensated participants under the plan subject to Section 401(m) of the Code for the plan year beginning with or within the plan year of the cash or deferred arrangement, as described in Section 401(k) of the Code ("CODA"), and (ii) the lesser of 200% or two plus the lesser of such ADP or ACP. "Lesser" is substituted for "greater" in "(i)", above, and "greater" is substituted for "lesser" after "two plus the" in "(ii)" if such substitutions would result in a larger aggregate limit. 1.8 "AVERAGE CONTRIBUTION PERCENTAGE" or "ACP" shall mean, for a specified group of participants for a plan year, the average of the contribution percentages of the eligible participants in such group (calculated separately for each participant in such group to the nearest one-hundredth of a percentage point). 1.9 "BOARD" shall mean the Board of Directors of the Employer if the Employer is a corporation. If the Employer is an unincorporated employer, "Board" shall mean the Employer. 1.10 A "BREAK IN SERVICE" shall mean, with respect to an employee, the following: 1.10.1 If the Employer shall not designate the elapsed time method of crediting hours of service in the Adoption Agreement, the computation period in which the employee shall not have completed more than 500 hours of service. Such period shall be the plan year unless otherwise specifically provided in Section 1.14.1. 1.10.2 If the Employer shall designate the elapsed time method of crediting hours of service in the Adoption Agreement, a break in service shall mean a period of severance of at least -2- 3 12-consecutive months. Solely for purposes of determining whether a break in service has occurred, in the case of an employee who is absent from work for maternity or paternity reasons, the 12-consecutive month period beginning on the first anniversary of the first date of such absence shall not constitute a break in service. For purposes of this Section 1.10.2, an absence from work for maternity or paternity reasons shall have the same meaning as set forth in Section 1.34.5. 1.11 "CODE" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations issued thereunder. 1.12 "COMMITTEE" shall mean the administrative committee provided for in Section 10. 1.13 "COMPENSATION" shall mean, for purposes of allocating contributions and forfeitures under the plan, compensation as that term is designated by the Employer in the Adoption Agreement. For any self-employed individual covered under the plan, "compensation" shall mean earned income, as defined in Section 1.18. Compensation shall include only that compensation which is actually paid to the participant during the determination period (as described in this Section 1.13). 1.13.1 Except as otherwise provided in the plan, the determination period shall be the period elected by the Employer in the Adoption Agreement. If the Employer makes no election, the determination period shall be the plan year. If the determination year is the plan year, compensation shall be measured only during the portion of the plan year during which the employee is eligible to participate in the plan, provided that if such information is not readily available, compensation for the entire plan year shall be used. 1.13.2 Notwithstanding the foregoing, if elected by the Employer in the Adoption Agreement, compensation shall include any amount which is contributed by the Employer pursuant to a salary reduction agreement and which is not includable in the gross income of the employee under Section 125, 402(e)(3), 402(h), or 403(b) of the Code. 1.13.3 In additional 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, 1989 and before January 1, 1994, the annual Compensation of each Employee taken into account under this Plan for any such Plan Year shall not exceed $200,000, as adjusted for increases in the cost of living pursuant to Code Section 401(a)(17). 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 OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner of the Internal Revenue for increases in the cost of living in accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the 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. 1.13.4 For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA '93 annual compensation limit set forth in the preceding paragraph. If Compensation for any prior determination period is taken into account in determining an Employee's benefits 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. -3- 4 1.13.5 In determining the Compensation of a Participant for purposes of the above Compensation limitation, the family aggregation rules of Code Section 414(q)(6) 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 Plan Year. If, as a result of the application of this paragraph, the Compensation limitation applies to a family aggregation unit, the limitation shall be prorated among the affected individuals in proportion to each such affected individual's Compensation as determined under this Section prior to the application of this limitation, or in accordance with any other method permitted by the Commissioner of Internal Revenue. 1.14 "COMPUTATION PERIOD" shall mean a 12-consecutive month period, as follows: 1.14.1 For purposes of plan participation, the computation period initially shall be the 12-consecutive month period beginning on the date an employee first completes an hour of service. Thereafter, the computation period shall be the plan year, beginning with the plan year containing the first anniversary of the date the employee first completes an hour of service, regardless of whether the employee is entitled to be credited with 1,000 hours of service during the initial 12-month period. 1.14.2 For purposes of determining years of service, the computation period shall be the plan year (and the 12-consecutive month period which is substantially the same as the plan year for periods prior to the effective date of the plan), unless otherwise specifically provided herein. 1.15 "CONTRIBUTION PERCENTAGE" shall mean with respect to a participant for a plan year the ratio (expressed as a percentage and calculated to the nearest one-hundredth of a percentage point) of the participant's contribution percentage amounts to the participant's testing compensation for the plan year. Pursuant to regulations issued by the Secretary of the Treasury, the Committee may elect to take into account elective deferrals made on behalf of any participant to any qualified plan maintained by the Employer for purposes of determining the contribution percentage of such participant. For purposes of determining the contribution percentage of a participant who is a five percent owner or one of the ten most highly compensated employees, the contribution percentage amounts (including elective deferrals if taken into account for purposes of determining the contribution percentage) and testing compensation of such participant shall include the contribution percentage amounts (including elective deferrals, if applicable) and testing compensation for the plan year of family members (as defined in Section 1.33.6). Family members with respect to highly compensated participants shall be disregarded as separate employees in determining the contribution percentage both for non-highly compensated participants and highly compensated participants. The determination and treatment of the contribution percentage of any participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury. 1.16 "CONTRIBUTION PERCENTAGE AMOUNTS" shall mean the sum of the employee after-tax contributions, matching contributions, and qualified matching contributions (to the extent not taken into account (including excess contributions recharacterized as employee after-tax contributions) for purposes of the ADP test) made under the plan on behalf of the participant for the plan year. An excess contribution that is recharacterized is taken into account in the Plan Year in which the excess contribution is includable in the employee's gross income. Such contribution percentage amounts shall not include (i) employee after-tax contributions that are returned to the participant pursuant to Section 23.1.4, or (ii) matching contributions that are forfeited either to correct excess aggregate contributions or because the contributions to which they relate are excess deferrals, excess contributions, or excess aggregate contributions. The Employer may include qualified non-elective contributions in the contribution percentage amounts. The Employer also may elect to use elective deferrals in the contribution percentage amounts so long as the ADP test is met before the elective deferrals are used in the ACP test and continues to be met following the exclusion of those elective deferrals that are used to meet the ACP test. Notwithstanding the foregoing, elective deferrals distributed to a participant pursuant to the provisions of Section 23.1.4 may not be taken into account for purposes of determining the contribution percentage amount of such -4- 5 participant. 1.17 "DISABILITY" shall mean the permanent and total inability of a participant to perform his regular duties with the Employer, or any other duties the Employer is willing to assign him. The determination of the existence or nonexistence of disability shall be made by the Committee in a nondiscriminatory manner pursuant to a medical examination by a medical doctor selected or approved by the Committee. 1.18 "EARNED INCOME" shall mean the net earnings from self-employment in the trade or business with respect to which the plan is established for which personal services of the individual are a material income-producing factor. Net earnings will be determined without regard to items not included in gross income and the deductions allocable to such items. Net earnings are reduced by contributions by the Employer to a qualified plan to the extent deductible by the Employer under Section 404 of the Code. Net earnings shall be determined with regard to the deduction allowed to the Employer by Section 164(f) of the Code for taxable years beginning after December 31, 1989. 1.19 "EFFECTIVE DATE OF THE PLAN" shall mean the date that the plan becomes effective with respect to the Employer, as specified by the Employer in the Adoption Agreement. 1.20 "ELECTIVE DEFERRALS" shall mean contributions made to the plan during the plan year by the Employer, at the election of the participant, in lieu of cash compensation and shall include contributions that are made pursuant to a salary reduction agreement or other deferral mechanism. Such contributions must be nonforfeitable when made and distributable only as specified in Section 3.8. With respect to any taxable year, a participant's elective deferral is the sum of all Employer contributions made on behalf of such participant pursuant to an election to defer under any qualified CODA, any simplified employee pension that includes a cash or deferred arrangement as described in Section 402(h)(1)(B), any eligible deferred compensation plan under Section 457, any plan as described under Section 501(c)(18), and any employer contributions made on the behalf of a participant for the purchase of an annuity contract under Section 403(b) pursuant to a salary reduction agreement. Elective deferrals shall not include any deferrals properly distributed as excess annual additions. 1.21 "ELIGIBLE EMPLOYEE" shall mean each employee of the Employer; provided, that if the plan is not a standardized form plan, "eligible employee" shall mean each employee of the Employer except those excluded pursuant to the Adoption Agreement. 1.22 "ELIGIBLE PARTICIPANT" shall mean, for purposes of the ACP test, any employee of the Employer who is eligible to make an employee after-tax contribution, or an elective deferral (if the Employer takes such contributions into account in the calculation of the contribution percentage), or to receive a matching contribution (including forfeitures) or a qualified matching contribution. If an employee after-tax contribution or an elective deferral is required as a condition of participation in the plan, any employee who would be a participant in the plan if such employee made such a contribution shall be treated as an eligible participant on behalf of whom no employee after-tax contributions or elective deferrals are made. 1.23 "EMPLOYEE" shall mean, except as otherwise provided in this Section 1.23, an individual in the service of the Employer if the relationship between him and the Employer is the legal relationship of employer and employee. In determining who is an employee for the purposes of this plan, the following special provisions shall apply: 1.23.1 Except as provided in Section 23.5.6 and the Adoption Agreement, all employees of an affiliated employer shall be treated as employees of the Employer. 1.23.2 All leased employees deemed to be employees of the Employer or an affiliated employer as provided in Section 414(n) or 414(o) of the Code and the regulations thereunder shall be treated as employees of the Employer. -5- 6 1.23.3 All employees included in a unit of employees covered by a collective bargaining agreement, if retirement benefits were the subject of good faith bargaining, shall not be treated as employees of the Employer, unless representatives of the bargaining unit and the Employer mutually agree to the inclusion of members of such bargaining unit in the plan. 1.23.4 All employees who are nonresident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the Code) from the Employer which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code) shall not be treated as employees of the Employer. See Sections 1.21 and 1.40 for provisions governing eligibility of an employee to become a participant in the plan. See Section 1.6 for definition of an affiliated employer. 1.24 "EMPLOYEE AFTER-TAX CONTRIBUTION" shall mean any contribution made to the plan by or on behalf of a participant that is included in the participant's gross income in the year in which made. 1.25 "EMPLOYER" shall mean each employer entering into an Adoption Agreement. All references herein to the "Employer" shall be applied to each such Employer as if the plan were solely the plan of that Employer. The Employer entering into an Adoption Agreement together with the Trustee may be a corporation, or a partnership or sole proprietorship (herein, an "unincorporated employer"). If the plan is a standardized form plan, each affiliated employer must become a party to the plan by entering into the Adoption Agreement together with the Trustee. If the plan is not a standardized form plan, each affiliated employer may become a party to the plan, if desired, by entering into the Adoption Agreement together with the Trustee. With respect to each affiliated employer which becomes a party to the plan, the following special provisions shall apply: 1.25.1 As used in the plan, unless otherwise indicated by the context, the term "Employer" shall mean collectively all employer-parties to the plan. 1.25.2 The plan shall be applied as a single plan with respect to all employer-parties as if there were only one employer-party, and service for purposes of the plan shall be interchangeable among employer-parties to the plan and shall not be deemed to be interrupted by the transfer at anytime of an employee from the service of one employer-party to the plan to the service of another employer-party. 1.25.3 Notwithstanding anything to the contrary, there shall be a single Committee with respect to all employer-parties to the plan, which shall be the Committee designated under the Adoption Agreement. 1.25.4 If this plan is adopted by two or more affiliated employers, one Employer shall be designated as the "sponsoring Employer," and shall be authorized to amend the Adoption Agreement on behalf of itself and all affiliated employers, subject to Section 11.1.2 of the plan. 1.26 "EMPLOYER STOCK" shall mean shares of any class of stock issued by the Employer or any other corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) which includes the Employer. 1.27 "EMPLOYMENT COMMENCEMENT DATE" shall mean the date on which an employee first completes an hour of service. 1.28 "ENTRY DATE" shall mean the date designated by the Employer in the Adoption Agreement on which an eligible employee shall enter the plan and become a participant. -6- 7 1.29 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended (including amendments of the Code affected thereby), and the rules and regulations issued thereunder. 1.30 "EXCESS AGGREGATE CONTRIBUTIONS" shall mean, with respect to any plan year, the excess of: (i) the aggregate contribution percentage amounts which are taken into account in computing the numerator of the contribution percentage and are actually made on behalf of highly compensated employees for such plan year, over (ii) the maximum contribution percentage amounts permitted by the ACP test (determined in accordance with Section 1.401(m)-1(e)(2) of the Income Tax Regulations by reducing contributions made on behalf of highly compensated employees in order of their contribution percentages, beginning with the highest of such percentages). 1.31 "EXCESS CONTRIBUTIONS" shall mean, with respect to any plan year, the excess of: (i) the aggregate amount of the Employer contributions which are actually taken into account in computing the ADP of highly compensated participants for such plan year and are actually made on behalf of highly compensated employees for such plan year, over (ii) the maximum amount of such contributions permitted under the ADP test (determined in accordance with Section 1.401(k)-1(f)(2) of the Income Tax Regulations by reducing contributions made on behalf of highly compensated participants in order of their ADPs, beginning with the highest of such percentages). 1.32 "EXCESS ELECTIVE DEFERRALS" shall mean those elective deferrals that are includable in a participant's gross income under Section 402(g) of the Code to the extent such elective deferrals exceed the dollar limitation under Section 402(g) of the Code. 1.33 "HIGHLY COMPENSATED PARTICIPANT" shall mean any participant who is a highly compensated employee. A "non-highly compensated participant" shall mean any participant who is neither a highly compensated participant nor a family member (within the meaning of Section 1.33.6) of a highly compensated participant. Any individual who has been a highly compensated participant but who has ceased to be a participant for any reason shall be treated as a highly compensated participant if he is a former employee within the meaning of Section 1.33.7. A "highly compensated employee" shall mean any employee who, during the determination year (as defined in Section 1.33.3) or the look-back year (as defined in Section 1.33.3): (i) was at any time a five percent owner (as defined in Section 416(i)(1)(iii) of the Code); (ii) received compensation from the Employer and affiliated employers in excess of $75,000 (adjusted pursuant to Section 415(d) of the Code); (iii) received compensation from the Employer and affiliated employers in excess of $50,000 (adjusted pursuant to Section 415(d) of the Code) and was in the top-paid group of employees for such year; or (iv) was at any time an officer and received compensation greater than 50% of the dollar limitation in effect under Section 415(b)(1)(A) of the Code for such year. No more than 50 employees (or, if lesser, the greater of three employees or ten percent of the employees) shall be treated as officers. If for any year no officer of the Employer receives compensation greater than 50% of the dollar limitation in effect for such year, the highest paid officer of the Employer for such year shall be treated as a highly compensated employee. For purposes of this Section 1.33, the following special provisions shall apply: 1.33.1 If the Employer at all times during the plan year maintains significant business activities (and employs employees in such activities) in at least two significantly separate geographic areas and satisfies such other conditions as the Secretary of the Treasury may -7- 8 prescribe, the Committee may elect to apply a simplified definition of highly compensated participant under the plan by substituting "$50,000" for "$75,000" in paragraph (ii) above, and disregarding paragraph (iii) above. 1.33.2 Notwithstanding the provisions of Section 1.23, the term "employee" shall mean an individual in the service of the Employer if the relationship between him and the Employer is the legal relationship of employer and employee. 1.33.3 The determination year shall be the plan year. The look-back year shall be the 12-month period immediately preceding the determination year. The Committee may elect to make the look-back year calculation for a determination year on the basis of the calendar year ending with or within the applicable determination year. 1.33.4 An employee not described in paragraph (ii), (iii), or (iv) above for the look-back year (without regard to this Section 1.33.4) shall not be treated as described in paragraph (ii), (iii) or (iv) in the current plan year unless he is one of the 100 employees paid the greatest compensation during the current plan year. 1.33.5 An employee who performs services for the Employer any time during the year is in the top-paid group of employees for any year if such employee is in the group consisting of the top 20% of the employees when ranked on the basis of compensation paid during such year. For purposes of determining the number of employees in the top-paid group (but not for identifying the particular employees in the top-paid group), the following employees shall be excluded: (i) employees who have not completed six months of service; (ii) employees who normally work less than 17 1/2 hours per week; (iii) employees who normally work not more than six months during any year; (iv) employees who have not attained age 21; (v) employees who are included in a unit of employees covered by a bona fide collective bargaining agreement with the Employer; and (vi) employees who are nonresident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the Code) from the Employer which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code). The Committee may elect to apply paragraph (i), (ii), (iii), or (iv) of this Section 1.33.5 by substituting a shorter period of service, smaller number of hours or months, or lower age for that specified in such subparagraphs. 1.33.6 If any individual is a member of the family of a five percent owner or of a highly compensated employee who is one of the ten most highly compensated employees during the plan year, then (i) such individual shall not be considered a separate employee, and (ii) any compensation paid to such individual (and any contribution or benefit on behalf of such individual) shall be treated as if it were paid to (or on behalf of) the five percent owner or highly compensated employee. For purposes of this Section 1.33.6, the term "family" or "family member" -8- 9 means, with respect to any employee, such employee's spouse and lineal ascendants or descendants and the spouses of lineal ascendants or descendants. 1.33.7 A former employee shall be treated as a highly compensated employee if he was a highly compensated employee when he separated from service, or at any time after attaining age 55. The determination of who is a highly compensated employee, including any calendar year calculation election and any determination of the number and identity of employees in the top-paid group, the 100 employees paid the greatest compensation, the number of employees treated as officers, and the compensation considered for purposes of this Section 1.33, shall be made in accordance with Section 414(q) of the Code and the regulations thereunder. 1.34 "HOUR OF SERVICE" shall mean the following: 1.34.1 Each hour for which an employee is paid or entitled to payment by the Employer or an affiliated employer for the performance of service. Each such hour shall be credited to the employee for the computation period (as defined in Section 1.14) in which the service is performed. 1.34.2 Each hour for which an employee is paid, or entitled to payment, by the Employer or an affiliated employer on account of a period of time during which no service is performed, irrespective of whether the employment relationship has terminated, such as vacation, holiday, illness, incapacity (including disability), lay-off, jury duty, military duty, or leave of absence. Each such hour shall be credited to the employee for the computation period in which no duties are performed. In applying this Section 1.34.2, the following provisions shall apply for periods in which an employee is not actually in service: (i) The number of hours to be credited with respect to any single continuous period (whether or not such period occurs in a single computation period for which hours are credited) shall be the lesser of: (a) 501 hours, or (b) the number of hours for which the employee is paid with respect to such single continuous period; provided, that in determining whether an employee has incurred a break in service, the provisions of this paragraph (i) shall not limit the number of hours to be credited to such employee on account of a leave of absence; (ii) No hours shall be credited with respect to payments made to the employee for the purpose of complying with applicable worker's compensation, unemployment compensation or disability insurance laws, or payments solely to reimburse an employee for medical or medically related expenses incurred by the employee; and (iii) An amount paid to an employee by the Employer or an affiliated employer indirectly, such as by a trust, fund, or insurer to which the Employer makes contributions or pays premiums, shall be deemed to be paid by the Employer. 1.34.3 Each hour (to the extent not included in Section 1.34.1 or 1.34.2) for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by the Employer or an affiliated employer. Each such hour shall be credited to the employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment is made. 1.34.4 Each hour for which an employee is not actually in service but is required to be given credit for service under any law of the United States. Each such hour shall be credited to the employee for the computation period for which the employee is required to be given credit for service. -9- 10 1.34.5 Notwithstanding the foregoing provisions of this Section 1.34, solely for the purpose of determining whether an employee has incurred a break in service for participation and vesting purposes in a computation period, the following special provisions shall apply: (i) In addition to hours for which an employee is entitled to credit under the preceding paragraphs of this Section 1.34, such employee shall also receive credit for each hour with respect to the period that he is on a leave of absence approved by the Employer for which he is not paid or entitled to payment. (ii) An employee who is absent from work for maternity or paternity reasons shall receive credit for the hours of service which would otherwise have been credited to such employee but for such absence, or in any case in which such hours cannot be determined, eight hours of service per day of such absence. For purposes of this paragraph (ii), an absence from work for maternity or paternity reasons means an absence (a) by reason of the pregnancy of the employee, (b) by reason of a birth of a child of the employee, (c) by reason of the placement of a child with the employee in connection with the adoption of such child by such employee, or (d) for purposes of caring for such child for a period beginning immediately following such birth or placement. The hours of service credited under this paragraph (ii) shall be credited with respect to the computation period used in determining years of service and breaks in service in which the absence begins, if the crediting is necessary to prevent a break in service in that period; in all other cases, such hours of service shall be credited in the following computation period. No more than 501 hours of service are required to be credited for maternity or paternity reasons. No credit shall be given under this Section 1.34.5 unless the employee furnishes to the Committee such timely information as the Committee reasonably may require to establish that the absence is for a reason described in this Section 1.34.5 and the number of days for which there was such an absence. 1.34.6 Notwithstanding the foregoing, if the Employer shall elect the elapsed time method of crediting hours of service under the Adoption Agreement, an hour of service shall mean each hour for which an employee is paid, or entitled to payment, by the Employer for the performance of duties for the Employer. Hours of service for all employees shall be determined on the basis of actual hours worked or such equivalency as may be designated by the Employer in the Adoption Agreement. The provisions of this Section 1.34 shall be applied in accordance with the provisions of Section 1.52 of the plan and United States Department of Labor Regulations Sections 2530.200b-2(b) and (c) (which provisions are incorporated herein by reference). The method used for determining hours of service shall be as elected by the Employer in the Adoption Agreement. 1.35 "LEASED EMPLOYEE" shall mean any individual, other than an employee of the Employer or an affiliated employer (the "recipient employer"), who, pursuant to an agreement between the recipient employer and any other person (the "leasing organization") has performed services for the recipient employer (or the recipient employer and related persons determined in accordance with Section 414(n) 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 employment in the business field of the recipient employer. Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed for the recipient employer shall be treated as provided by the recipient employer. A leased employee shall not be considered an employee of the recipient employer if: (i) such individual is covered by a money purchase pension plan providing: (a) a nonintegrated employer contribution rate of at least ten percent of compensation, as defined in Section 23.5.2 of the Code, but including -10- 11 amounts contributed pursuant to a salary reduction agreement which are excludable from the employee's gross income under Section 125, 402(e)(3), 402(h), or 403(b) of the Code, (b) immediate participation, and (c) full and immediate vesting; and (ii) leased employees do not constitute more than 20% of the recipient employer's non-highly compensated work force, as defined in Section 414(n)(5)(C)(ii) of the Code. 1.36 "MATCHING CONTRIBUTION" shall mean an Employer contribution made to this or any other defined contribution plan maintained by the Employer on behalf of a participant on account of an employee after-tax contribution made by such participant, or on account of a participant's elective deferrals. 1.37 "NET PROFIT" shall mean the current or accumulated earnings of the Employer as determined according to generally accepted accounting principles and practices by the accountant of the Employer, subject to the following adjustments: (i) gains or losses arising from the sale or other disposition of fixed or capital assets of the Employer shall be excluded; (ii) taxes based upon income shall not be deducted; and (iii) contributions of the Employer under this plan or any other defined contribution plan maintained by the Employer shall not be deducted; provided, that by so specifying in the Adoption Agreement the Employer may exclude from "net profit" a stated base amount, or a specified return on the net worth of the Employer. 1.38 "NORMAL RETIREMENT AGE" of a participant shall mean the age specified in the Adoption Agreement. The "normal retirement date" of a participant shall mean the date he attains his normal retirement age. 1.39 "OWNER-EMPLOYEE" shall mean an individual who is a sole proprietor, or who is a partner owning more than ten percent of either the capital interest or profits interest in a partnership. If this plan provides contributions or benefits for one or more owner-employees who control both the business for which this plan is established and one or more other trades or businesses, this plan and the plan established for such other trades or businesses must, when looked at as a single plan, satisfy Sections 401(a) and (d) of the Code for the employees of this and all other trades or businesses. If the plan provides contributions or benefits for one or more owner-employees who control one or more other trades or businesses, the employees of the other trades or businesses must be included in a plan which satisfies Sections 401(a) and (d) of the Code and which provides contributions and benefits not less favorable than provided for owner-employees under this plan. If an individual is covered as an owner-employee under the plans of two or more trades or businesses which are not controlled and the individual controls a trade or business, then the contributions or benefits of the employees under the plan of the trades or businesses which are controlled must be as favorable as those provided for him under the most favorable plan of the trade or business which is not controlled. For purposes of the preceding provisions of this Section 1.39, an owner-employee, or two or more owner-employees, will be considered to control a trade or business if the owner-employee, or two or more owner-employees together: (i) own the entire interest in an unincorporated trade or business, or (ii) in the case of a partnership, own more than 50% of either the capital interest or the profits interest in the partnership. For purposes of the preceding sentence, an owner-employee, or two or more owner-employees, shall be treated as owning any interest in a partnership which is owned, directly or indirectly, by a partnership which such owner-employee, or such two or more owner-employees, are considered to control within the meaning of the preceding sentence. 1.40 "PARTICIPANT" shall mean with respect to any plan year an eligible employee who has entered the plan and any former employee who has an accrued benefit which is not wholly forfeitable for the plan year pursuant to Section 5. An eligible employee or former employee on the effective date of the plan who was a participant in a prior plan (as specified in Section 17) immediately preceding such effective date shall automatically be a participant in this plan as of such effective date. An eligible employee who was not such a participant in a prior plan and has not otherwise entered the plan shall enter the plan and become a participant in accordance with the provisions elected in the Adoption Agreement. For purposes of determining eligibility to participate, the following special provisions shall apply to the extent applicable: 1.40.1 An eligible employee who is not in service on the date he is eligible to enter the plan shall not enter the plan until he reenters service as an eligible employee, whereupon he shall -11- 12 immediately enter the plan. 1.40.2 If an employee incurs a one year break in service before satisfying the plan's requirements for eligibility to participate, service before such break will not be taken into account for eligibility purposes. 1.40.3 In the case of a participant who does not have any nonforfeitable right to his accrued benefit attributable to elective deferrals, matching contributions, or discretionary Employer contributions, years of service before a period of consecutive one year breaks in service will not be taken into account in computing eligibility service if the number of consecutive one year breaks in service in such period equals or exceeds the greater of five or the aggregate number of his years of service. Such aggregate number of years of service will not include any years of service disregarded under the preceding sentence by reason of prior breaks in service. If a participant's years of service are disregarded pursuant to this Section 1.40.3, such participant will be treated as a new employee for eligibility purposes. If such participant's years of service are not disregarded pursuant to this Section 1.40.3, he shall continue to participate in the plan if such breaks in service were not accompanied by a termination of service, or, if the participant had terminated service, he shall reenter the plan immediately upon his return to service. 1.40.4 A participant who terminates service shall reenter the plan immediately upon his return to service if such participant has a nonforfeitable right to any portion of his accrued benefit attributable to elective deferrals, matching contributions, or discretionary Employer contributions, at the time of such termination of service. 1.40.5 In the event a participant shall lose his status as an eligible employee, but shall not incur a break in service, such employee shall reenter the plan immediately upon his return to such eligible class. If such employee incurs a break in service, his eligibility to reenter the plan shall be determined pursuant to this Section 1.40. In the event an employee who is not a member of the eligible class of employees becomes a member of such eligible class, such employee shall enter the plan immediately if he has satisfied the participation requirements designated by the Employer in the Adoption Agreement and would have previously entered the plan had he been in the eligible class. 1.40.6 Notwithstanding the foregoing, if the Employer shall designate the elapsed time method of crediting hours of service under the Adoption Agreement, an eligible employee who otherwise has not entered the plan shall enter the plan and become a participant as of the entry date designated by the Employer in the Adoption Agreement coincident with or next following the completion of a period or periods of service which when aggregated equal at least 365 days, provided he is in service on such entry date. For the purpose of applying the foregoing provisions of this Section 1.40.6, the following provisions shall apply: (i) an eligible employee who has incurred a severance from service date on or before the date he is eligible to enter the plan and later reenters service before he incurs a break in service shall enter the plan on the date that he reenters service as an eligible employee; (ii) an eligible employee who is absent from service on the date he is eligible to enter the plan and later reenters service before he incurs a severance from service date, shall enter the plan effective as of the first entry date that occurred during his period of absence; and (iii) a participant who has incurred a break in service and later reenters service shall reenter the plan as of the date he reenters service as an eligible employee. 1.41 A "PERIOD OF SERVICE" shall mean a continuous period of time during which the employee is in service with the Employer. A period of service shall begin on the employee's employment commencement date or reemployment commencement date, whichever is applicable, and shall end on the date of the employee's -12- 13 severance from service. Notwithstanding the foregoing, a period of severance of less than 12-consecutive months shall be included in an employee's period of service. 1.42 A "PERIOD OF SEVERANCE" shall mean a continuous period of time during which the employee is not in service with the Employer. A period of severance shall begin on the employee's severance from service date and shall end on the date on which the employee again completes or is credited with an hour of service. 1.43 "PLAN" shall mean the Godwins Booke & Dickenson Prototype Profit Sharing and Employee Savings Plan and Trust as herein set out or as duly amended. The name of the plan as applied to the Employer shall be as set forth in the Adoption Agreement. The plan is intended to be a profit sharing plan, and to permit the Employer to elect under the Adoption Agreement to include a CODA. 1.44 "PLAN ADMINISTRATOR" shall mean the person (or persons) or entity designated by the Employer in the Adoption Agreement to serve as plan administrator, and any successors thereto. 1.45 "PLAN YEAR" shall mean the 12-consecutive month period ending with the last day of the month specified by the Employer in the Adoption Agreement. 1.46 "QUALIFIED MATCHING CONTRIBUTIONS" shall mean any contributions that are (i) made to the plan by the Employer for the plan year and allocated to a participant's account by reason of elective deferrals or employee after-tax contributions, (ii) nonforfeitable when made, and (ii) distributable only as specified in Section 3.8. 1.47 "QUALIFIED NON-ELECTIVE CONTRIBUTIONS" shall mean contributions (other than matching contributions or qualified matching contributions) that are (i) made by the Employer and allocated to a participant's account that the participant may not elect to currently receive in cash, (ii) nonforfeitable when made, and (iii) distributable only as specified in Section 3.8. 1.48 "REEMPLOYMENT COMMENCEMENT DATE" shall mean the first date, following a break in service, on which an employee completes an hour of service. 1.49 "RETIRE" or "RETIREMENT" shall mean retirement within the meaning of Section 3.1, 3.2, 3.3, or 3.5. 1.50 "SALARY REDUCTION AGREEMENT" shall mean the written agreement entered into by a participant pursuant to the provisions of Section 2.1. 1.51 "SELF-EMPLOYED INDIVIDUAL" shall mean an individual who has earned income for the taxable year, or an individual who would have had earned income but for the fact that the trade or business had no net profit for the taxable year. 1.52 "SERVICE" shall mean employment by the Employer as an employee. In determining service, all employees of an affiliated employer and individuals deemed to be employees for purposes of the plan under Section 414(n) or 414(o) of the Code and the regulations thereunder shall be deemed to be in the service of the Employer. For purposes of this Section 1.52, the following special provisions shall apply: 1.52.1 Nothing in this Section 1.52 shall be construed as including as a participant an individual who is in the service of an affiliated employer which is not a party to the plan. See Section 1.25 for requirement that each affiliated employer must become a party to a standardized form plan. 1.52.2 Unless otherwise elected by the Employer in the Adoption Agreement, service -13- 14 with an employer prior to becoming an affiliated employer shall be disregarded for all purposes of the plan. 1.52.3 In any case in which the Employer maintains the plan of a predecessor employer, service with such predecessor employer shall be treated as service with the Employer. 1.53 "SEVERANCE FROM SERVICE DATE" shall mean, with respect to an employee, the earlier of (i) the date he quits, is discharged, retires, or dies; or (ii) the first anniversary of the date he is absent from service (with or without pay) for any other reason (including but not limited to vacation, holiday, sickness, disability, leave of absence, and layoff). 1.54 "SHAREHOLDER-EMPLOYEE" shall mean an individual owning (or considered as owning within the meaning of Section 318(a)(1) of the Code) more than five percent of the outstanding stock of the Employer if, with respect to any taxable year of the Employer, the Employer is an S Corporation within the meaning of Section 1361(a) of the Code. 1.55 "SPONSOR" shall mean Godwins Booke & Dickenson, which has caused the plan to be established. 1.56 "SPOUSE" or "SURVIVING SPOUSE" shall mean, except as otherwise provided in the plan, the legally married spouse or surviving spouse of a participant; provided that a former spouse shall be treated as the spouse or surviving spouse to the extent provided under a qualified domestic relations order described in Section 414(p) of the Code. 1.57 "STANDARDIZED FORM PLAN" shall mean a regional prototype plan which satisfies the requirements of Section 4.11 of Revenue Procedure 89-13. This plan is a standardized form plan if so designated in the Adoption Agreement. 1.58 "TAXABLE WAGE BASE" shall mean the maximum amount of earnings which may be considered wages for a year under Section 3121(a)(1) of the Code, as in effect as of the first day of the plan year. 1.59 "TESTING COMPENSATION" shall mean any of the definitions of compensation which are set forth in Section 23.5.2, as designated by the Committee. If elected by the Committee, each such definition of compensation may be modified to include any amounts excludable from the employee's gross income under Section 125, 402(e)(3), 402(h), or 403(b) of the Code. The amount of testing compensation with respect to any participant shall include his testing compensation for the entire plan year or, if elected by the Committee, that portion of the plan year in which the employee was eligible to participate in the plan. Notwithstanding the above, a participant's testing compensation shall be subject to the annual compensation limitation set forth in Section 1.13.3. 1.60 "TRUST" or "TRUST FUND" shall mean the assets of the plan and trust held by the Trustee. 1.61 "TRUSTEE" shall mean the person (or persons) or entity designated by the Employer in the Adoption Agreement to serve as trustee, and any successors thereto. 1.62 A "YEAR OF SERVICE" shall mean 1,000 or more hours of service during a computation period. 1.62.1 Notwithstanding the foregoing provisions of this Section 1.62, with respect to service prior to the computation date (as defined in this Section 1.62.1), a year of service shall mean uninterrupted service for a full plan year. Service prior to the computation date shall be taken into account only with respect to employees in service on such date, and with respect to each such employee only to the extent of full plan years of uninterrupted service preceding such date -14- 15 (or his normal retirement age, if earlier). For this purpose, the "computation date" shall mean the later of (i) the first day of the plan year beginning in 1976, or (ii) the effective date of the plan (or, if the Employer was a party to a prior plan within the meaning of Section 17, the effective date of the prior plan). 1.62.2 Notwithstanding any provision of this Section 1.62 to the contrary, if the Employer shall designate the elapsed time method of crediting hours of service in the Adoption Agreement, the number of whole years of the employee's period or periods of service shall be subject to the following special provisions: (i) All periods of service of the employee shall be aggregated (including nonsuccessive periods of service), and 365 days shall be deemed to equal a whole year of service. Following such aggregation, any fractional year shall be disregarded. (ii) To the extent not otherwise included in the employee's period or periods of service, the time during which an employee is on a leave of absence approved by the Employer shall be included in determining his years of service. 1.62.3 Years of service shall include any period for which an employee would have been a leased employee but for the requirement that a leased employee perform service for the Employer, or 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 a least one year. SECTION 2. CONTRIBUTIONS TO THE TRUST AND ALLOCATION THEREOF 2.1 ELECTIVE DEFERRALS If elected by the Employer in the Adoption Agreement, a CODA, which satisfies the requirements of Section 401(k) of the Code, shall apply and be a part of the plan. 2.1.1 Administrative rules governing salary reduction agreements: (i) To the extent provided in the Adoption Agreement, a participant may elect to make elective deferrals under this plan by executing and delivering to the Committee a salary reduction agreement in accordance with such rules and procedures as are adopted by the Committee from time to time. Elective deferrals shall be made through payroll deduction pursuant to the participant's salary reduction agreement. A participant may elect to commence elective deferrals as of any entry date, and such election shall remain in effect until modified or terminated. A participant shall be afforded a reasonable period at such times as shall be specified by the Employer in the Adoption Agreement to modify the amount or frequency of his elective deferrals. A participant may terminate his election to make elective deferrals at any time to be effective on the first day of the next full payroll period. If not sooner terminated, a participant's salary reduction agreement shall terminate automatically as of the last day of the payroll period in which the participant shall terminate his service with the Employer. (ii) The Committee may amend or revoke a salary reduction agreement with a participant at any time if the Committee determines that such amendment or revocation is necessary to ensure that the annual additions (as defined in Section 23.5.1) to the account of a participant do not exceed the annual addition limitations (described in Section 23.1.1) for such participant or -15- 16 that the requirements of Section 2.1.4 are met for such plan year. 2.1.2 Maximum amount of elective deferrals: A participant's elective deferrals are subject to any limitations imposed in the Adoption Agreement and any further limitations under the plan. No participant shall be permitted to make elective deferrals under this plan during any taxable year of the participant in excess of the dollar limitation contained in Section 402(g) of the Code in effect at the beginning of such taxable year. 2.1.3 Distribution of excess elective deferrals: (i) Notwithstanding any other provisions of the plan, excess elective deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than each April 15 to participants to whose accounts excess elective deferrals were allocated for the preceding taxable year and who claim excess elective deferrals for such taxable year. Excess elective deferrals shall be treated as annual additions under the plan, unless such amounts are distributed no later than April 15 following the close of the participant's taxable year. The participant's claim under this Section 2.1.3 shall be in writing; shall be submitted to the plan administrator not later than March 1; shall specify the amount of the participant's excess elective deferrals for the preceding taxable year; and shall be accompanied by the participant's written statement that if such amounts are not distributed, such excess elective deferrals, when added to amounts deferred under other plans or arrangements described in Section 401(k), 408(k), or 403(b) of the Code, will exceed the limit imposed on the participant by Section 402(g) of the Code for the taxable year in which the deferral occurred. A participant is deemed to notify the plan administrator of any excess elective deferrals that arise by taking into account only those elective deferrals made to this plan and any other plan of the Employer. The amount of a Participant's excess elective deferrals that must be distributed for a taxable year pursuant to this Section shall be reduced by any Excess Contributions previously distributed or recharacterized with respect to the Participant for the Plan year beginning with or within such taxable year. (ii) Excess elective deferrals shall be adjusted for income or loss up to the date of distribution, provided that the Committee may disregard income or loss allocable to the period between the end of the taxable year and the date such excess elective deferrals are distributed (the "gap period") in determining income or loss. The amount of income or loss allocable to a participant's excess elective deferrals for a taxable year shall be determined under one of the following methods selected by the Committee: (a) General method: The income or loss allocable to a participant's excess elective deferrals for a taxable year shall be determined by multiplying the income or loss allocable to the participant's elective deferral account for the taxable year (and the gap period, if so elected by the Committee) by a fraction, the numerator of which is the participant's excess elective deferrals for the taxable year and the denominator is the sum of: (I) the participant's elective deferral account balance as of the beginning of the taxable year, plus (II) the participant's elective deferrals for the taxable year (and the gap period, if so elected by the Committee); -16- 17 (b) Safe harbor method: The income or loss allocable to a participant's excess elective deferrals for a taxable year shall be determined by adding (I) the amount determined in paragraph (a) above with respect to the participant for the taxable year (without regard to the gap period), plus (II) the amount determined by multiplying ten percent of the amount determined under "(I)" above by the number of whole calendar months in the gap period, counting the month of distribution if distribution occurs after the 15th of such month; or (c) Other alternative methods: The income or loss allocable to a participant's excess elective deferrals for a taxable year (and the gap period, if so elected by the Committee) may be determined by applying any reasonable method selected by the Committee, provided such method is used consistently for all participants and for all corrective distributions under the plan for the taxable year, and is used by the plan for allocating income or loss to participants' accounts. Notwithstanding the above, the determination of income or loss attributable to a participant's excess elective deferrals shall be made in all respects in accordance with Section 1.402(g)-1(e)(5) of the Income Tax Regulations. 2.1.4 Limitations on elective deferrals: (i) Actual deferral percentage: With respect to any plan year beginning on or after January 1, 1987, the ADP for the group of highly compensated participants for each plan year shall bear to the ADP for the group of all non-highly compensated participants for the same plan year a relationship that satisfies either of the following tests: (a) The ADP for the group of highly compensated participants for the plan year is not more than the ADP for the group of non-highly compensated participants for the same plan year multiplied by 1.25; or (b) The ADP for the group of highly compensated participants for the plan year is not more than the ADP for the group of non-highly compensated participants for the same plan year multiplied by 2.0, and the excess of the ADP for the group of highly compensated participants over that of all non-highly compensated participants is not more than two percentage points (or such lesser amount as the Secretary of the Treasury shall prescribe by regulation to prevent the multiple use of this alternative limitation with respect to any highly compensated participant). (ii) Special rules for calculating the ADP: (a) The ADP for any highly compensated participant for the plan year who is eligible to have elective deferrals (and qualified non-elective contributions or qualified -17- 18 matching contributions, or both, if treated as elective deferrals for purposes of the ADP test) allocated to his account under two or more arrangements described in Section 401(k) of the Code that are maintained by the Employer shall be determined as if such elective deferrals (and if applicable, qualified matching contributions or qualified non-elective contributions or both) were made under a single arrangement. 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. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under regulations under Section 401(k) of the Code. (b) In the event that this plan satisfies the requirements of Sections 401(k), 401(a)(4), or 410(b) of the Code 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 the ADP test shall be applied by determining the actual deferral percentages of employees as if all such plans were a single plan. For plan years beginning after December 31, 1989, plans may be aggregated in order to satisfy Section 401(k) of the Code only if they have the same plan year. (c) For purposes of determining the ADP test, elective deferrals, qualified non-elective contributions, and qualified matching contributions must be made before the last day of the 12-month period immediately following the plan year to which such contributions relate. (d) The Employer shall maintain records sufficient to demonstrate satisfaction of the ADP test and the amount of qualified non-elective contributions or qualified matching contributions, or both, used in such test. (e) Notwithstanding anything to the contrary in the plan, the determination and treatment of elective deferrals and the ADP of any participant shall satisfy Section 1.401(k)-1(b) of the Income Tax Regulations and such other requirements as may be prescribed by the Secretary of the Treasury. (iii) Distribution of excess contributions: (a) Notwithstanding any other provisions of the plan and except as otherwise provided in Section 2.1.4(iii)(e), excess contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each plan year to participants to whose accounts such excess contributions were allocated for the preceding plan year. If such excess amounts are distributed -18- 19 more than two and one-half months after the last day of the plan year in which such excess amounts arose, a ten percent excise tax will be imposed on the Employer with respect to such amounts. Such distributions shall be made to highly compensated participants on the basis of the respective portions of the excess contributions attributable to each of such employees. Excess contributions of participants who are subject to the family member aggregation rules shall be allocated among the family members in proportion to the elective deferrals (and amounts treated as elective deferrals) of each family member that is combined to determine the combined ADP. (b) Excess contributions (including the amounts recharacterized as employee after-tax contributions) shall be treated as annual additions under the plan. (c) The amount of a Participant's Excess Contributions to be distributed or recharacterized pursuant to this Section for a Plan Year shall be reduced by any Excess Elective Deferrals previously distributed to the Participant for the Participant's taxable year ending with or within such Plan Year. (d) Determination of income or loss: Excess contributions shall be adjusted for income or loss up to the date of distribution, provided that the Committee may disregard income or loss allocable to the period between the end of the plan year and the date such excess contributions are distributed (the "gap period") in determining income or loss. The income or loss allocable to a participant's excess contributions for a plan year shall be determined under one of the following methods selected by the Committee: (I) General method: The income or loss allocable to a participant's excess contributions for a plan year shall be determined by multiplying the income or loss allocable to the participant's account attributable to elective deferrals (and qualified non-elective contributions and/or qualified matching contributions, if any of such contributions are included in the ADP test) for the plan year (and the gap period, if so elected by the Committee) by a fraction. The numerator of such fraction is the participant's excess contributions for the plan year and the denominator is the sum of: (A) the balance of the participant's account attributable to elective deferrals (and qualified non-elective contributions and/or qualified matching contributions, if any of such contributions are -19- 20 included in the ADP test) as of the beginning of the plan year, plus (B) the participant's elective deferrals (and qualified non-elective contributions and/or qualified matching contributions, if any of such contributions are included in the ADP test) for the plan year (and the gap period, if so elected by the Committee); (II) Safe harbor method: The income or loss allocable to a participant's excess contributions for a plan year shall be determined by adding (A) the amount determined in subparagraph (I) above with respect to the participant for the plan year (without regard to the gap period), plus (B) the amount determined by multiplying ten percent of the amount determined under "(A)" above by the number of whole calendar months in the gap period, counting the month of distribution if distribution occurs after the 15th of such month; or (III) Other alternative methods: The income or loss allocable to a participant's excess contributions for a plan year (and the gap period, if so elected by the Committee) may be determined by applying any reasonable method for computing the income or loss allocable to excess contributions, provided such method is used consistently for all participants and for all corrective distributions under the plan for the plan year, and is used by the plan for allocating income or loss to participants' accounts. Notwithstanding the above, the determination of income or loss attributable to a participant's excess contributions shall be made in all respects in accordance with Section 1.401(k)-1(f)(4) of the Income Tax Regulations. (d) Accounting for excess contributions: Unless otherwise prescribed by the Committee, amounts distributed under Section 2.1.4(iii) shall first be treated as distributions from the participant's elective deferral account and qualified matching contribution account (if applicable) in proportion to the participant's elective deferrals and qualified matching contributions (to the extent used in the ADP test) for the plan year. Excess contributions shall be distributed from the participant's qualified non-elective contribution account only to the extent that such excess contributions exceed the balance in the participant's elective deferral account and qualified -20- 21 matching contribution account. (e) Recharacterization: If the Employer elects in the Adoption Agreement to allow employee after-tax contributions, the Employer may treat a participant's excess contributions (without adjustment for income or loss allocable thereto) as an amount distributed to the participant and then contributed by the participant to the plan. Recharacterized amounts will remain allocated to a participant's elective deferral account, together with any earnings allocated to such recharacterized amounts, and will continue to be subject to the same distribution requirements as elective deferrals. Amounts may not be recharacterized by a highly compensated participant to the extent that such amounts in combination with other employee after-tax contributions made by that employee would exceed any stated limit under the plan for employee after-tax contributions. Recharacterization must occur no later than two and one-half 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 participant is informed in writing of the amount recharacterized and the consequences thereof. Recharacterized amounts will be taxable to the participant for the participant's taxable year in which the participant would have received them in cash. 2.1.5 Qualified non-elective contributions: In lieu of distributing or recharacterizing excess contributions as provided in Section 2.1.4 above, the Employer shall be authorized to make such qualified non-elective contributions on behalf of those employees designated in the Adoption Agreement as shall be needed to satisfy the ADP test described in Section 2.1.4(i) of the plan or the ACP test described in Section 2.3.6(i) of the plan, or both, pursuant to the Income Tax Regulations. Qualified non-elective contributions may be treated as elective deferrals under the ADP test only if the conditions described in Section 1.401(k)-1(b)(5) of the Income Tax Regulations are satisfied. 2.1.6 Separate accounts: The Committee shall maintain a separate account, designated as the participant's "elective deferral account," with respect to that portion of the participant's accrued benefit that is attributable to elective deferrals. The Committee shall maintain a separate account, designated as the participant's "qualified non-elective contribution account," with respect to that portion of the participant's accrued benefit that is attributable to qualified non-elective contributions. Each separate account shall be credited with the applicable contributions, earnings and losses, distributions, and other adjustments in the manner provided in Section 7. 2.1.7 Vesting: A participant's elective deferral account and qualified non-elective contribution account shall be nonforfeitable at all times. 2.1.8 Allocation of elective deferral and qualified non-elective contributions: The Employer shall contribute and allocate to each participant's elective deferral account on each adjustment date an amount equal to the amount of the participant's elective deferrals made pursuant to his salary reduction agreement since the preceding adjustment date. Qualified non-elective contributions shall be allocated to the accounts of those employees designated in the Adoption Agreement in the manner elected by the Employer in the Adoption Agreement. Under no circumstances may elective deferrals be contributed and allocated to the trust under the plan -21- 22 later than 30 days after the close of the plan year for which the contributions are deemed to be made, or such other time as provided in applicable Income Tax Regulations. Qualified non-elective contributions must actually be paid to the trust no later than the end of the 12-month period immediately following the plan year with respect to which the contribution is allocated. 2.2 EMPLOYEE AFTER-TAX CONTRIBUTIONS 2.2.1 Employee after-tax contributions: If the Employer so specifies in the Adoption Agreement, each participant may at his option make employee after-tax contributions to the plan in the form of cash through payroll deduction, subject to such limitations and requirements as shall be determined by the Committee. The Employer shall deliver such contributions to the Trustee as soon as practicable following each payroll date, along with a designation of the participants to whose employee after-tax contribution accounts the contributions are to be credited and such other information as the Trustee shall reasonably require. Employee after-tax contributions made with respect to plan years beginning on and after January 1, 1987 must comply with the average contribution percentage test described in Section 401(m) of the Code. 2.2.2 Administrative rules governing employee after-tax contributions: (i) A participant may elect to commence employee after-tax contributions as of any entry date specified by the Employer in the Adoption Agreement. A participant's election to commence employee after-tax contributions shall remain in effect until modified or terminated. A participant shall be afforded a reasonable period at such times as shall be specified by the Employer in the Adoption Agreement to modify the amount or frequency of his employee after-tax contributions. A participant may terminate his election to make employee after-tax contributions at any time to be effective on the first day of the next full payroll period. If not sooner terminated, a participant's election to make employee after-tax contributions shall terminate automatically as of the last day of the payroll period in which the participant shall terminate his service with the Employer. (ii) The Committee may amend or revoke a participant's election to make employee after-tax contributions at any time if the Committee determines that such amendment or revocation is necessary to ensure that the annual additions (as defined in Section 23.5.1) to the account of a participant do not exceed the annual addition limitations (described in Section 23.1.1) for such participant or that the requirements of Section 2.3.6 are met for such plan year. 2.2.3 Separate accounts: The Committee shall maintain a separate account, designated as the participant's "employee after-tax contribution account," with respect to that portion of a participant's accrued benefit that is attributable to his employee after-tax contributions. The employee after-tax contribution account of a participant shall be credited with the participant's employee after-tax contributions, earnings and losses, distributions, and adjustments in the manner provided in Section 7. In no event shall any forfeiture under the plan be allocated to the participant's employee after-tax contribution account. 2.2.4 Vesting: The employee after-tax contribution account of each participant shall be nonforfeitable at all times. 2.3 MATCHING CONTRIBUTIONS -22- 23 2.3.1 Matching contributions: If elected by the Employer in the Adoption Agreement, the Employer shall make matching contributions to the plan in cash and/or shares of Employer stock, if the Employer shall elect in the Adoption Agreement to permit plan assets to be invested in Employer stock. The amount of such matching contributions shall be calculated by reference to the participant's elective deferrals and/or employee after-tax contributions as specified by the Employer in the Adoption Agreement. 2.3.2 Qualified matching contributions: The Employer shall be authorized to make such qualified matching contributions to the accounts of those employees designated in the Adoption Agreement as shall be needed to satisfy the ADP test described in Section 2.1.4 of the plan. The amount of such qualified matching contributions to be taken into account for the ADP test shall be determined each plan year by the Employer. Qualified matching contributions may be treated as elective deferrals under the ADP test only if the conditions described in Section 1.401(k)-1(b)(5) of the Income Tax Regulations are satisfied. 2.3.3 Separate accounts: The Committee shall maintain a separate account, designated as the participant's "matching contribution account," with respect to that portion of a participant's accrued benefit that is attributable to matching contributions. If all matching contributions made by the Employer do not satisfy the requirements of qualified matching contributions, then the Committee shall maintain a separate account, designated as the participant's "qualified matching contribution account," with respect to that portion of the participant's accrued benefit that is attributable to qualified matching contributions. Each separate account shall be credited with the applicable contributions, earnings and losses, distributions, and other adjustments in the manner provided in Section 7. 2.3.4 Vesting: Matching contributions shall be vested in accordance with the Employer's election in the Adoption Agreement. In any event, matching contributions shall be nonforfeitable upon the occurrence of an event described in Section 5.1. A participant's qualified matching contribution account shall be nonforfeitable at all times. 2.3.5 Forfeitures of matching contributions: Forfeitures of matching contributions other than excess aggregate contributions shall be made in accordance with the forfeiture provisions elected by the Employer in the Adoption Agreement. Notwithstanding any provision in the plan to the contrary, if all or part of a participant's elective deferrals or employee after-tax contributions is treated as an excess elective deferral, an excess contribution, or an excess aggregate contribution, any matching contribution made with respect to such elective deferral or employee after-tax contribution, as appropriate, adjusted for income and losses allocable thereto, and which is not distributed or forfeited in order to enable the plan to comply with the ACP test in Section 2.3.6, shall be forfeited by the participant on or before the March 15 next following the end of the plan year for which the matching contribution was made (the "forfeiture date"). The income or loss allocable to the forfeited matching contribution for the plan year of such matching contribution shall be determined in the same manner as for excess aggregate contributions under Section 2.3.6. 2.3.6 Limitations on matching contributions and employee after-tax contributions: (i) Average contribution percentage: With respect to any plan year beginning on or after January 1, 1987, the ACP for the group of highly compensated participants for each plan year shall bear to the ACP for the group of all non-highly compensated participants for the same plan year a relationship that satisfies either of the following tests: -23- 24 (a) The ACP for the group of highly compensated participants for the plan year is not more than the ACP for the group of all non-highly compensated participants for the same plan year multiplied by 1.25; or (b) The ACP for the group of highly compensated participants for the plan year is not more than the ACP for the group of all non-highly compensated participants for the plan year multiplied by 2.0, and the excess of the ACP for highly compensated participants over that of all non-highly compensated participants is not more than two percentage points (or such lesser amount as the Secretary of the Treasury shall prescribe by regulations to prevent the multiple use of this alternative limitation with respect to any highly compensated participant). (ii) Special rules for calculating the ACP: (a) The following rules shall be applied to prevent the multiple use of the alternative limitation (as defined Section 1.402(m)-2 of the Income Tax Regulations) with respect to any plan year. If one or more highly compensated participants participate in both a CODA and a plan subject to the ACP test maintained by the Employer, and the sum of the ADP and ACP of those highly compensated employees subject to either or both tests exceeds the aggregate limit, then the ACP of those highly compensated participants who also participate in a CODA will be reduced (beginning with the highly compensated employee whose ACP is the highest) so that the limit is not exceeded. The amount by which each highly compensated participant's contribution percentage amount is reduced shall be treated as an excess aggregate contribution. The ADP and ACP of the highly compensated participants are determined after any corrections required to meet the ADP and ACP tests. Multiple use of the alternative limitation does not occur if both the ADP and ACP of the highly compensated participants do not exceed 1.25 multiplied by the ADP and ACP of the group of non-highly compensated participants. (b) For purposes of this Section 2.3.6, the contribution percentage for any highly compensated participant who is eligible to have contribution percentage amounts allocated to his account under two or more plans described in Section 401(a) of the Code, or arrangements described in Section 401(k) of the Code, that are maintained by the Employer, shall be determined as if the total of such contribution percentage amounts was made under each plan. If a highly compensated employee participates in two or more 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 the same arrangement. Notwithstanding the foregoing, certain plans shall be treated as -24- 25 separate if mandatorily disaggregated under regulations under Section 401(m) of the Code. (c) In the event that this plan satisfies the requirements of Section 401(m), 401(a)(4), or 410(b) of the Code 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 the ACP test shall be applied by determining the contribution percentages of participants as if all such plans were a single plan. For plan years beginning after December 31, 1989, plans may be aggregated in order to satisfy Section 401(m) of the Code only if they have the same plan year. (d) For purposes of the ACP test, employee after-tax contributions are considered to have been made in the plan year in which contributed to the trust. Matching contributions and qualified non-elective contributions will be considered made for a plan year if made no later than the end of the 12-month period beginning on the day after the close of the plan year. (e) The Sponsor shall maintain records that enable it (i) to monitor the Employer's compliance with the requirements of Section 401(m) of the Code, (ii) to perform the ACP test for the Employer for the plan year, and (iii) to notify the Employer if it is required to correct any excess aggregate contributions. (f) Notwithstanding anything to the contrary in the plan, the determination and treatment of employee after-tax contributions and matching contributions and the contribution percentage of any participant shall satisfy Section 1.401(m)-1(b) of the Income Tax Regulations and such other requirements as may be prescribed by the Secretary of the Treasury. (iii) Distribution of excess aggregate contributions: (a) General rule: Notwithstanding any other provision of this plan, excess aggregate contributions, plus any income and minus any loss allocable thereto, shall be forfeited, if forfeitable, or if not forfeitable, distributed no later than the last day of each plan year to participants to whose accounts such excess aggregate contributions were allocated for the preceding plan year. Excess aggregate contributions of participants who are subject to the family member aggregation rules shall be allocated among the family members in proportion to the contribution percentage amount of each family member that is combined to determine the combined ACP. If such excess aggregate contributions are distributed more than two and one-half months after the last day of the plan year in which such excess amounts arose, a ten percent excise tax will be -25- 26 imposed on the Employer maintaining the plan with respect to those amounts. Excess aggregate contributions shall be treated as annual additions under the plan. The distribution (or forfeiture, if applicable) of excess aggregate contributions shall be made on the basis of the respective portions of such amounts attributable to each highly compensated employee. (b) Determination of income or loss: Excess aggregate contributions shall be adjusted for income or loss up to the date of distribution, provided that the Committee may disregard income or loss allocable to the period between the end of the plan year and the date such excess aggregate contributions are distributed in determining income or loss (the "gap period"). The income or loss allocable to a participant's excess aggregate contributions for a plan year shall be determined under one of the following methods selected by the Committee: (I) General method: The income or loss allocable to a participant's excess aggregate contributions for a plan year shall be determined by multiplying the income or loss allocable to the participant's account attributable to contribution percentage amounts for the plan year (and the gap period, if so elected by the Committee) by a fraction. The numerator of such fraction is the participant's excess aggregate contributions for the plan year and the denominator is the sum of: (A) the balance of the participant's account attributable to the contribution percentage amounts as of the beginning of the plan year, plus (B) the participant's contribution percentage amounts for the plan year (and the gap period, if so elected by the Committee); (II) Safe harbor method: The income or loss allocable to a participant's excess aggregate contribution for a plan year shall be determined by adding (A) the amount determined in subparagraph (I) above with respect to the participant for the plan year (without regard to the gap period), plus (B) the amount determined by multiplying ten percent of the amount determined under "(A)" above by the number of whole calendar months in the gap period, counting the month of distribution if distribution occurs after the 15th of such month; or (III) Other alternative methods: -26- 27 The income or loss allocable to a participant's excess aggregate contribution for a plan year (and the gap period, if so elected by the Committee) may be determined by applying any reasonable method for computing the income or loss allocable to excess aggregate contributions, provided such method is used consistently for all participants and for all corrective distributions under the plan for the plan year, and is used by the plan for allocating income or loss to participants' accounts. Notwithstanding the above, the determination of income or loss attributable to a participant's excess aggregate contributions shall be made in all respects in accordance with Section 1.401(m)-1(e)(3) of the Income Tax Regulations. (c) Treatment of forfeitures of excess aggregate contributions: Forfeitures of excess aggregate contributions shall be treated in the same manner as elected by the Employer in the Adoption Agreement with respect to forfeitures of matching contributions, except that if such forfeitures are reallocated, they shall only be reallocated among the accounts of non-highly compensated participants. Amounts forfeited by highly compensated participants under this Section 2.3 shall be treated as annual additions under the plan. (d) Accounting for excess aggregate contributions: Unless otherwise prescribed by the Committee, excess aggregate contributions shall be forfeited, if forfeitable, or distributed on a pro rata basis from the participant's employee after-tax contribution account, matching contribution account, and qualified matching contribution account (and, if applicable, the participant's qualified non-elective contribution account or elective deferral account, or both). (e) Order of determination: The determination of the excess aggregate contributions shall be made after first determining the excess elective deferrals, and then determining the excess contributions under the plan. 2.4. DISCRETIONARY EMPLOYER CONTRIBUTIONS The Employer shall contribute to the trust for the taxable year of the Employer that ends with or within the plan year such amount as provided in the Adoption Agreement. Discretionary Employer contributions may be made in cash and/or shares of Employer stock, if the Employer shall elect in the Adoption Agreement to permit plan assets to be invested in Employer stock. The Committee shall maintain a separate account, designated as the participant's "discretionary Employer contribution account," with respect to that portion of the participant's accrued benefit that is attributable to discretionary Employer contributions under the plan. Subject to the provisions of Sections 22 and 23, any discretionary Employer contribution shall be allocated as of each adjustment date as specified by the Employer in the Adoption Agreement. The discretionary Employer contribution account shall be vested in accordance with the Employer's election in the Adoption Agreement, and adjusted as of each adjustment -27- 28 date in accordance with the provisions of Section 7. 2.5 VOLUNTARY DEDUCTIBLE EMPLOYEE CONTRIBUTIONS A participant may not make voluntary deductible employee contributions to the plan with respect to his taxable years beginning after December 31, 1986. The Committee shall maintain a separate account, designated as the participant's "deductible contribution account," with respect to each participant who had made such voluntary deductible employee contributions under a predecessor plan prior to January 1, 1987. The deductible contribution account of each participant shall be nonforfeitable and shall be adjusted as of each adjustment date in accordance with the provisions of Section 7. In no event shall any forfeiture under the plan be allocated to the participant's deductible contribution account. Assets in the participant's deductible contribution account may be commingled for investment with other funds of the trust. 2.6 MANDATORY EMPLOYEE CONTRIBUTIONS A participant shall not be required to make contributions to the trust for any plan year beginning on or after the effective date of the plan. The Committee shall maintain a separate account, designated as the participant's "mandatory contribution account," with respect to each participant having made mandatory contributions under a predecessor plan. The mandatory contribution account of each participant shall be nonforfeitable and shall be adjusted as of each adjustment date in accordance with the provisions of Section 7. In no event shall any forfeiture under the plan be allocated to the participant's mandatory contribution account. Assets in the participant's mandatory contribution account may be commingled for investment with other funds of the trust. 2.7 MAXIMUM CONTRIBUTION PERMITTED In no event shall the total contribution made under this Section 2 for any plan year exceed the maximum amount deductible for federal income tax purposes by the Employer for the taxable year. Each contribution to the plan shall be made conditional upon being deductible under Section 404 of the Code and upon the plan being qualified under Section 401(a) of the Code for the plan year for which such contribution is made. 2.8 REQUIREMENT OF CURRENT OR ACCUMULATED NET PROFITS Elective deferrals, qualified non-elective contributions, matching contributions, and qualified matching contributions shall be made by the Employer to the plan without regard to the current or accumulated net profits of the Employer. If elected by the Employer in the Adoption Agreement, discretionary Employer contributions may be made pursuant to Section 2.4 without regard to the current or accumulated net profits of the Employer. SECTION 3. RETIREMENT; TERMINATION OF SERVICE; DEATH; ENTRY OF QUALIFIED DOMESTIC RELATIONS ORDER 3.1 NORMAL RETIREMENT A participant who is in service may retire from service at his normal retirement date. 3.2 EARLY RETIREMENT If so specified by the Employer in the Adoption Agreement, and subject to the requirements for early retirement set forth therein, a participant may elect early retirement effective as of any adjustment date prior to his normal retirement date by filing written notice with the Committee on or before such adjustment date. Such election shall be irrevocable when filed. 3.3 DELAYED RETIREMENT If a participant shall remain in service following his normal retirement date, his retirement date shall be the date he shall actually retire. During the period that such participant remains in service pursuant to this Section 3.3, he shall continue to participate for and including each plan year in which he meets the requirements therefor. If an employee not otherwise a participant becomes eligible to enter the plan following his normal retirement date, the provisions of this Section 3.3 shall apply in determining his retirement date. -28- 29 3.4 DEATH If a participant dies, his vested accrued benefit shall be paid to his beneficiary pursuant to the provisions of Section 4.2. 3.5 DISABILITY If a participant suffers disability while in service, he may elect to retire as of any adjustment date following the establishment of his disability by filing written notice with the Committee on or before such adjustment date. Such election shall be irrevocable when filed. 3.6 TERMINATION OF SERVICE The following provisions shall apply in the event a participant terminates service before he is eligible to retire under the plan: 3.6.1 Distribution election: Such participant may elect to receive a distribution of his vested accrued benefit as of the termination adjustment date specified in the Adoption Agreement, or to defer such distribution until a later date provided in this Section 3.6. The Committee shall notify the participant of his rights under this Section 3.6.1 at least 30 days, but in no event more than 90 days, prior to the termination adjustment date. Such notification shall include a general description of the material features and an explanation of the relative values of the optional forms of benefit available under the plan. The participant's election shall be submitted in writing to the Committee on or before the participant's termination adjustment date. Such election shall be irrevocable when filed, except that the election shall be disregarded if the participant is in service when benefit payments are to commence. If the participant elects to receive a distribution of his vested accrued benefit as of the termination adjustment date, the manner of distribution shall be determined under Section 4.1 as if the termination adjustment date were the normal retirement date of the participant. The Committee shall advise each participant that the taxable portion of his distribution may be subject to mandatory 20% federal income tax withholding, unless the participant elects to make a direct transfer of the taxable portion of such distribution to another qualified retirement plan or individual retirement arrangement in accordance with Section 19.2. In addition, if a distribution is made to a participant pursuant to Section 4.1 before he attains age 55, the Committee shall advise him that the taxable portion of the distribution may be subject to an additional ten percent income tax. 3.6.2 Deferred distribution election: If the participant has elected not to receive his vested accrued benefit pursuant to Section 3.6.1, he may elect to receive his vested accrued benefit as of the adjustment date coincident with or next following the date on which he satisfies the age requirement for early retirement (the "early retirement adjustment date"). This Section 3.6.2 shall only apply if the plan permits early retirement and the participant has satisfied any service requirement but not the age requirement therefor at the time of his termination from service. The Committee shall notify such participant of his rights under this Section 3.6.2, and the participant shall make the election provided in this Section 3.6.2, at the time and in the manner described in Section 3.6.1, treating for this purpose the early retirement adjustment date as if it were the termination adjustment date. 3.6.3 Distribution in the absence of an election: If the vested accrued benefit of the participant is not distributed pursuant to Section 3.6.1, it shall be held under the plan for future payment until the first to occur of: (i) his death; (ii) his election to receive his vested accrued benefit as of his early retirement adjustment date pursuant to Section 3.6.2; or (iii) the later of his normal retirement age or age 62, whereupon it shall be distributed to him or his beneficiary, as the case may be, in the manner provided in Section 4. If elected by the Employer in the Adoption Agreement, the amount of the vested accrued benefit which shall be held for the participant under this Section 3.6.3 shall be set aside in a special account (the "deferred payment account"). The -29- 30 Trustee shall segregate the deferred payment account from the general assets of the trust as of the participant's termination adjustment date. The deferred payment account shall be invested by the Trustee in short-term, interest-bearing securities or certificates which may be readily converted to cash without penalty, and which provide for maximum safety of principal (the "conservative investments"). The deferred payment account shall be subject to adjustment as of each adjustment date in the manner specified in the applicable provisions of Section 7, treating for this purpose the assets in which the deferred payment account are invested as if they composed the entire trust fund. If a deferred payment account is established pursuant to this Section 3.6.3 and the Trustee maintains directed investment funds (as defined in Section 8.1.1), in lieu of investing the deferred payment account in the conservative investments, at the direction of the Committee the deferred payment account may be invested by the Trustee in the most conservative directed investment fund as designated by the Committee and adjusted in the manner provided in Section 8.1.2. Notwithstanding the foregoing, if the Employer has authorized participant directed investments under the plan, only that portion of the terminated participant's vested accrued benefit which is not credited to his directed separate accounts (as defined in Section 8.1) as of his termination adjustment date, if any, shall be transferred to a deferred payment account and invested in the manner provided in this Section 3.6.3. If elected by the Employer in the Adoption Agreement, such terminated participant may be permitted to continue to direct the investment of his directed separate accounts in accordance with Section 8, until his vested accrued benefit is paid to him or his beneficiary in full as provided in this Section 3.6.3. If a participant is not permitted to direct the investment of his directed separate accounts following his termination of service, the amounts credited to the participant's directed separate accounts will be transferred as of his termination adjustment date to the most conservative directed investment fund designated by the Committee. 3.7 CASH-OUT DISTRIBUTIONS Notwithstanding any other provision of the plan, if the vested accrued benefit of a participant does not exceed $3,500 as of the adjustment date coincident with or next following the date of his termination of service for any reason, including death, and such vested accrued benefit has never exceeded $3,500 as of the date of any prior distribution under the plan, then his vested accrued benefit shall be automatically paid in a lump sum as soon as administratively feasible after such adjustment date to the person entitled thereto without regard to any election made by the participant and without the consent of the participant or the participant's spouse. For purposes of this Section 3.7, if the value of a participant's vested accrued benefit is zero, the participant shall be deemed to have received distribution of such vested accrued benefit. The Committee shall advise each participant that the taxable portion of his cash-out distribution may be subject to mandatory 20% federal income tax withholding, unless the participant elects to make a direct transfer of the taxable portion of such distribution to another qualified retirement plan or individual retirement arrangement in accordance with Section 19.2. In addition, if a distribution is made to a participant before he attains age 59 1/2, the Committee shall advise him that the taxable portion of the distribution may be subject to an additional ten percent income tax. 3.8 LIMITATIONS ON CERTAIN DISTRIBUTIONS Except as provided in the Adoption Agreement, elective deferrals, qualified non-elective contributions, qualified matching contributions, and income allocable thereto are not distributable to the participant, or the participant's beneficiary, earlier than upon separation from service, death, or disability of the participant. 3.9 ENTRY OF A QUALIFIED DOMESTIC RELATIONS ORDER If the participant's accrued benefit becomes subject to a qualified domestic relations order within the meaning of Section 414(p) of the Code, the alternate payee's benefit shall be paid pursuant to the provisions of Section 4.5. SECTION 4. PAYMENT OF BENEFITS 4.1 DISTRIBUTION OF ACCRUED BENEFITS -30- 31 Subject to the provisions of Section 9 relating to the distribution of Employer stock, the following provisions of this Section 4 shall apply to any distribution of a participant's accrued benefit under the plan: 4.1.1 Payment of benefits following retirement: A participant may elect to have the value of his vested accrued benefit determined as of the close of business of the plan on the adjustment date coincident with or next following the date he retires pursuant to Section 3.1, 3.2, 3.3, or 3.5, or as of such later adjustment date as he may elect pursuant to Section 4.1.2, and to have such amount paid to him, or applied for his benefit, in one of the following options, as designated by the Employer in the Adoption Agreement: (i) Term certain: Subject to the provisions of Section 4.1.2, payment of the vested accrued benefit to him in approximately equal monthly installments over a whole number of years not exceeding the life expectancy of the participant or the joint life expectancy of the participant and his designated beneficiary, provided that, if this plan is not an amendment of a prior plan and is not the transferee of assets from another plan maintained by the Employer, the maximum number of years over which installment distributions will be made under the plan shall be ten. (ii) Lump sum: Payment of the vested accrued benefit to him in a single lump sum. 4.1.2 Special distribution rules: In applying the foregoing provisions of Section 4.1.1, the following special provisions shall apply: (i) Any election of a distribution option described in Section 4.1.1 shall be made in writing on a form to be provided by the Committee and filed with the Committee on or before the adjustment date as of which payment is to commence. Such election shall be irrevocable on or after such adjustment date (except as otherwise provided in paragraph (v) of this Section 4.1.2). If a participant shall fail to designate one of the distribution options described in Section 4.1.1, his vested accrued benefit shall be paid to him in a single lump sum. (ii) Any distribution made pursuant to Section 4.1.1 shall commence as soon as practicable following the adjustment date as of which the participant's vested accrued benefit is determined. A participant must be informed of his right to defer the commencement of the distribution of his vested accrued benefit to any adjustment date following his retirement. Prior to any adjustment date elected by a participant, such participant may elect to defer commencement thereof to a subsequent adjustment date. Such election shall be filed in writing with the Committee prior to the adjustment date as of which his benefit would otherwise commence. Such election may be revoked or changed as of any adjustment date between the date filed and the adjustment date to which the vested accrued benefit is deferred by filing a written revocation or change with the Committee prior to the adjustment date as of which the revocation or change is to be effective. If a participant shall fail to designate an adjustment date as of which the distribution of his vested accrued benefit shall begin, he shall be deemed to have elected to defer such distribution until the adjustment date coincident with or immediately following the later of (a) his attainment of his normal retirement age or (b) his termination of service. Notwithstanding any such election (or deemed election) to defer the distribution of his vested accrued -31- 32 benefit, a participant's vested accrued benefit must be distributed, or begin to be distributed, no later than his required beginning date (as defined in Section 4.4.6) in one of the distribution options described in Section 4.1.1, as elected by the participant. (iii) Unless a participant shall elect to defer the commencement of payment of his vested accrued benefit, such payment must commence within 60 days following the last adjustment date for the plan year in which occurs the latest of: (a) the participant's attainment of age 65 (or normal retirement age, if earlier); (b) the tenth anniversary of the year in which the participant commenced participation in the plan; or (c) the participant's retirement or termination of service for any other reason. In the event that, within the applicable 60-day period, the amount of the payment to commence cannot be determined or the recipient thereof cannot be located after a reasonable effort has been made to locate him, payments retroactive to the close of such 60-day period shall be made within 60 days after the amount has been determined or the recipient has been located, whichever shall be applicable. Notwithstanding the foregoing, the failure of a participant to elect to receive a distribution under Sections 3.6.1 or 3.6.2 shall be deemed to be an election to defer commencement of payment sufficient to satisfy the requirements of this paragraph (iii). (iv) If a participant's vested accrued benefit is to be distributed pursuant to the term certain option described in Section 4.1.1(i), each annual distribution made pursuant to such option must satisfy the following requirements: (a) The amount required to be distributed for each calendar year, beginning with the first distribution calendar year (as defined in Section 4.4.3), must at least equal the quotient obtained by dividing the participant's benefit (as defined in Section 4.4.5) by the applicable life expectancy (as defined in Section 4.4.1). (b) For calendar years beginning before January 1, 1989, if the participant's spouse is not the designated beneficiary (as defined in Section 4.4.2), the term certain option elected 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. (c) For calendar years beginning after December 31, 1988, the amount to be distributed each year, beginning with the distribution for the first distribution calendar year shall not be less than the quotient obtained by dividing the participant's benefit by the lesser of the applicable life expectancy or, if the participant's spouse is not the designated beneficiary, the applicable divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of the Income Tax Regulations. Distributions after the death of the participant shall be distributed using the applicable life expectancy determined for purposes of subparagraph (a) above as the relevant divisor without regard to Section 1.401(a)(9)-2 of the -32- 33 Income Tax Regulations. (d) The minimum distribution required for the participant's first distribution calendar year must be made on or before the participant's required beginning date. The minimum distributions for other calendar years, including the minimum distributions for the distribution calendar year in which the participant's required beginning date occurs, must be made on or before December 31 of that distribution calendar year. (v) Upon a written direction to the Committee prior to any adjustment date by a participant who is receiving benefit payments pursuant to the term certain option described in Section 4.1.1(i), the participant may direct that the balance of the participant's vested accrued benefit be paid in a single lump sum payment as of the adjustment date such written direction becomes effective. If a participant marries or remarries following the adjustment date as of which payments commenced under Section 4.1.1(i), his "spouse" for purposes of Section 4.2 shall mean the spouse on such adjustment date. (vi) Notwithstanding the foregoing provisions of this Section 4.1, if a participant who is receiving benefit payments pursuant to the term certain option described in Section 4.1.1(i) shall reenter service prior to his normal retirement date, such payments shall cease during the period that he is in service. When he subsequently retires, dies, or otherwise terminates service, his then vested accrued benefit shall be payable to or with respect to him pursuant to the applicable provisions of the plan; provided, however, that payments must recommence no later than the participant's required beginning date. 4.2 PAYMENT OF DEATH BENEFITS 4.2.1 Payment of death benefits restricted to lump sums: This Section 4.2.1 shall only apply if this plan is (i) a newly adopted plan, or (ii) an amendment of a prior plan of the Employer or the transferee of assets from another plan maintained by the Employer that did not permit the distribution of death benefits in any form other than a single lump sum. Upon the death of a participant before or after the distribution of his vested accrued benefit has begun, the value of the remaining portion of such benefit shall be determined as of the adjustment date coincident with or next following the date of the participant's death, and such amount shall be distributed to his designated beneficiary (as defined in Section 4.2.2(iii)) in a single lump sum as soon as practicable following such adjustment date. 4.2.2. Payment of death benefits for amended plans: This Section 4.2.2 shall apply if this plan amends a prior plan of the Employer or is the transferee of assets from another plan maintained by the Employer and either such prior or transferee plan permitted the distribution of death benefits in forms other than a single lump sum. Upon the death of the participant, the following provisions shall apply: (i) If the participant dies after distribution of his vested accrued benefit has begun, the remaining portion of such benefit shall be distributed to his designated beneficiary at least as rapidly as under the method of distribution in effect at his death. Should the beneficiary die before receiving all the payments due him, any remaining payment shall continue to the recipient determined in accordance with Section 4.2.2(iii). -33- 34 (ii) If the participant dies before distribution of his vested accrued benefit begins, the participant's vested accrued benefit must be distributed no later than December 31 of the calendar year in which occurs the fifth anniversary of the participant's death, except to the extent that an election is made to receive distributions under (a) or (b), as follows: (a) If any portion of the participant's vested accrued benefit is payable to a designated beneficiary, distributions may be made in substantially equal installments over the life or over a term certain not greater than the life expectancy of the designated beneficiary commencing on or before December 31 of the calendar year immediately following the calendar year in which the participant died. (b) If the designated beneficiary is the participant's surviving spouse, the date distributions are required to begin in accordance with (a) above shall not be before the later of December 31 of the calendar year immediately following the calendar year in which the participant died, or December 31 of the calendar year in which the participant would have attained age 70 1/2. If the surviving spouse dies before payments begin, subsequent distributions shall be made pursuant to this paragraph (ii) (except for subparagraph (b) hereof) as if the spouse had been the participant. (iii) A participant's beneficiary shall be his surviving spouse, if any; provided, that if he has no surviving spouse or files a qualified election with the Committee, the participant may designate another beneficiary (which may include more than one person, natural or otherwise, and more than one contingent beneficiary). A "qualified election" means a beneficiary designation by the participant on a form provided by the Committee, which contains a consent and acknowledgment of the effect of such consent executed by the participant's spouse and witnessed by a representative of the Committee or a notary public. Consent of the spouse shall not be required if the spouse cannot be located or other circumstances exist which excuse obtaining spousal consent under applicable law or regulations. A participant's qualified election may be revoked at any time by action of the participant alone, in which case the participant's spouse shall be the beneficiary. Any other change in beneficiary must be made pursuant to a new qualified election. If a participant fails to designate a beneficiary (other than his surviving spouse), the death benefit shall be payable to the participant's estate. If a beneficiary is receiving or entitled to receive payments from the trust fund and dies before receiving all payments due him, any remaining payments shall be made to the contingent beneficiary, or, if there is no contingent beneficiary, to the estate of the beneficiary. Any beneficiary may disclaim part or all of any benefit to which he is entitled by filing a written disclaimer with the Committee at least ten days before payment of such benefit is to commence, in a form which shall be satisfactory to the Committee and irrevocable when filed. Any benefit disclaimed shall be payable as if the beneficiary who filed the disclaimer had died on the date of such filing. (iv) The vested accrued benefit of the participant shall be payable -34- 35 in the manner provided in Section 4.1 (treating the beneficiary for this purpose as the participant), as elected by the participant before his death in writing to the Committee or, if the participant shall not have made such election, as elected by the beneficiary in writing to the Committee no later than the first to occur of: (a) December 31 of the calendar year in which distributions are required to commence under paragraph (b) above, or (b) December 31 of the calendar year in which occurs the fifth anniversary of the participant's death. If the participant has no designated beneficiary or if the designated beneficiary fails to elect a method of distribution, distribution of the participant's vested accrued benefit must be completed by December 31 of the calendar year in which occurs the fifth anniversary of the participant's death. (v) For purposes of this Section 4.2.2, any amount paid to a child of the participant shall be treated as if it had been paid to the surviving spouse if the amount becomes payable to the surviving spouse when the child reaches the age of majority. (vi) Upon a written direction to the Committee prior to any adjustment date by a beneficiary who is receiving benefit payments pursuant to the term certain option described in Section 4.1.1(i), the designated beneficiary may direct that an alternative method of payment of the balance of the participant's vested accrued benefit be made, commencing with the first payment following such adjustment date; provided, that distribution of such balance under any alternative method of payment must be completed at least as rapidly as under the method of payment in effect prior to such adjustment date. (vii) For purposes of this Section 4.2.2, distribution of a participant's vested accrued benefit is considered to begin on the participant's required beginning date (or if the last sentence of paragraph (b) above is applicable, the date distribution is required to begin to the surviving spouse pursuant to paragraph (ii)(b) above). 4.3 TRANSITIONAL RULE FOR REQUIRED DISTRIBUTIONS Notwithstanding any other requirements of this Section 4, distribution on behalf of any participant, including a five percent owner in a top-heavy plan, may be made in accordance with the following requirements (regardless of when such distribution commences): 4.3.1 The distribution is one which would not have disqualified the plan under Section 401(a)(9) of the Code as in effect prior to amendment by the Deficit Reduction Act of 1984 ("DEFRA"). 4.3.2 The distribution is in accordance with a method of distribution designated in a written instrument signed by the participant whose interest in the trust is being distributed or, if the participant is deceased, by a beneficiary of such participant prior to January 1, 1984. 4.3.3 The participant had an accrued benefit under the plan as of December 31, 1983. 4.3.4 The method of distribution designated by the participant or the beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the participant's death, the beneficiaries of the participant listed in order of priority. -35- 36 4.3.5 A distribution upon death will not be covered by this Section 4.3 unless the information in the designation contains the required information described above with respect to the distributions to be made upon the death of the participant. For any distribution which commences before January 1, 1984, but continues after December 31, 1983, the participant, or the beneficiary, to whom such distribution is being made, will be presumed to have designated the method of distribution under which the distribution is being made if the method of distribution was specified in writing and the distribution satisfies the requirements in Sections 4.3.1 and 4.3.4 above. If a designation made pursuant to this Section 4.3 is revoked, any subsequent distribution must satisfy the requirements of Section 401(a)(9) of the Code and the regulations thereunder. If a designation is revoked subsequent to the date distributions are required to begin, the trust must distribute by the end of the calendar year in which the revocation occurs the total amount not yet distributed to satisfy Section 401(a)(9) of the Code and the regulations thereunder, but for the Section 242(b)(2) election. 4.3.6 For calendar years beginning after December 31, 1988, such distributions must meet the minimum distribution incidental benefit requirements in Section 1.401(a)(9)-2 of the Income Tax Regulations. Any change in the designation will be considered to be a revocation of the designation. However, the mere substitution or addition of another beneficiary (one not named in the designation) under the designation will not be considered to be a revocation of the designation, so long as such substitution or addition does not directly or indirectly alter the period over which distributions are to be made under the designation. In the case in which an amount is transferred or rolled over from one plan to another plan, the rules in Q&A J-2 and Q&A J-3 of Sections 1.401(a)(9)-2 of the Income Tax Regulations shall apply. 4.4 DEFINITIONS APPLICABLE TO PLAN DISTRIBUTIONS The following definitions shall apply for purposes of Section 4: 4.4.1 "Applicable life expectancy" shall mean the life expectancy (or joint and last survivor expectancy) calculated using the attained age of the participant (or designated beneficiary) as of the participant's (or designated beneficiary's) birthday in the applicable calendar year reduced by one for each calendar year which has elapsed since the date life expectancy was first calculated. The Employer shall specify in the Adoption Agreement whether the life expectancy of a designated beneficiary will be used to determine distributions under this Section 4. If life expectancy is being recalculated, the applicable life expectancy shall be the life expectancy as so recalculated. The applicable calendar year shall be the first distribution calendar year, and, if life expectancy is being recalculated, each succeeding calendar year. 4.4.2 "Designated beneficiary" shall mean the individual who is designated as the beneficiary under the plan in accordance with Section 401(a)(9) of the Code and the Income Tax Regulations thereunder. 4.4.3 "Distribution calendar year" shall mean a calendar year for which a minimum distribution is required. For distributions beginning before the participant's death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the participant's required beginning date. For distributions beginning after the participant's death, the first distribution calendar year is the calendar year in which distributions are required to begin pursuant to Section 4.2 above. 4.4.4 "Life expectancy" shall mean life expectancy and joint and last survivor expectancy as computed by use of the expected return multiples in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise elected by the participant (or spouse, in the case of distributions described in Section 4.2.2(b)(ii) above) by the time distributions are required to begin, -36- 37 life expectancies shall be recalculated annually. Such election shall be irrevocable as to the participant (or spouse) and shall apply to all subsequent years. The life expectancy of a nonspouse beneficiary may not be recalculated. 4.4.5 "Participant's benefit" shall mean his accrued benefit as of the last adjustment date in the calendar year immediately preceding the distribution calendar year ("valuation calendar year") increased by the amount of any contributions or forfeitures allocated to the accrued benefit as of dates in the valuation calendar year after the adjustment date and decreased by distributions made in the valuation calendar year after the adjustment date. Notwithstanding the foregoing, if any portion of the minimum distribution for the first distribution calendar year is made in the second distribution calendar year on or before the required beginning date, the amount of the minimum distribution made in the second distribution calendar year shall be treated as if it had been made in the first distribution calendar year. 4.4.6 "Required beginning date" shall generally mean the first day of April of the calendar year following the calendar year in which the participant attains age 70 1/2. Notwithstanding the foregoing, the following special provisions shall apply: (i) The required beginning date of a participant who attains age 70 1/2 before January 1, 1988, shall be determined in accordance with (a) or (b) below: (a) The required beginning date of a participant who is not a five percent owner is the first day of April of the calendar year following the calendar year in which the later of retirement or attainment of age 70 1/2 occurs. The required beginning date of a participant who is not a five percent owner who attains age 70 1/2 during 1988 and who has not retired as of January 1, 1989, is April 1, 1990. (b) The required beginning date of a participant who is a five percent owner during any year beginning after December 31, 1979 is the first day of April following the later of: (1) the calendar year in which the participant attains age 70 1/2, or (2) the earlier of the calendar year with or within which ends the plan year in which the participant becomes a five percent owner, or the calendar year in which the participant retires. (ii) A participant is treated as a five percent owner for purposes of this Section 4.4.6 if such participant is a five percent owner as defined in Section 416(i) of the Code (determined in accordance with Section 416 but without regard to whether the plan is top-heavy) at any time during the plan year ending with or within the calendar year in which such owner attains age 66 1/2 or any subsequent plan year. (iii) Once distributions have begun to a five percent owner under this Section 4.4.6, they must continue even if the participant ceases to be a five percent owner in a subsequent year. All distributions under this Section 4 shall be determined and made in accordance with Section 401(a)(9) of the Code and the Income Tax Regulations thereunder, including the minimum distribution incidental benefit -37- 38 requirement of Section 1.401(a)(9)-2 of the Income Tax Regulations, which are incorporated herein by reference. 4.5 DISTRIBUTIONS TO ALTERNATE PAYEES If the participant's accrued benefit under the plan shall become subject to any "domestic relations order" which (i) is a "qualified domestic relations order" within the meaning of Section 414(p) of the Code, and (ii) requires the immediate distribution in a single lump sum of the entire portion of the participant's accrued benefit required to be segregated for the benefit of an alternate payee, then the entire interest of such alternate payee shall be distributed in a single lump sum as soon as practicable following the adjustment date coinciding with or immediately following the Committee's notification to the participant and the alternate payee that the domestic relations order is qualified under Section 414(p) of the Code. Such distribution to an alternate payee shall be made even if the participant has not separated from the service of the Employer. Any other distribution pursuant to a qualified domestic relations order shall not be made earlier than the participant's termination of service, or his attainment of age 50, if earlier, and only in a manner permitted under Section 4.1. For purposes of this Section 4.5, "alternate payee" shall mean any spouse, former spouse, child, or other dependent of the participant who is recognized by a domestic relations order as having a right to receive all or a portion of the accrued benefit payable under the plan with respect to such participant. 4.6 INTERIM PAYMENTS At the request of a participant or his designated beneficiary, the Committee may in a nondiscriminatory manner cause one or more interim payments to be made to such participant or beneficiary, as the case may be, between the date the participant shall retire, or the date of death of the participant, and the adjustment date as of which retirement or death benefits would ordinarily be paid or commence to be paid; provided, that in no event shall the aggregate of such interim payments exceed 50% of the vested accrued benefit of such participant as of the close of business of the plan on the adjustment date next preceding the date he shall retire or die. This Section 4.6 shall not apply if the Employer has designated daily adjustment dates in the Adoption Agreement. 4.7 CONTINUED SHARE IN PROFITS OR LOSSES OF TRUST FUND If all or any part of the accrued benefit of any individual is being paid to him from the trust in installments, or is being held in the trust for future payment to him, his account shall continue to be adjusted as provided in Section 7. With respect to an individual who is receiving installment payments from the trust, the amount of the installment payments shall be adjusted as of each adjustment date to reflect the adjusted amount in his account (or deferred payment account as the case may be) as of such adjustment date. Notwithstanding the above, no adjustment for earnings or losses shall be made to the amount of any lump sum or individual installment distribution under the plan between the adjustment date as of which the distribution is valued and the actual date of such distribution. 4.8 MEDIUM OF DISTRIBUTIONS All distributions from the plan shall be made in cash or units as allowed by the investment fund established within the trust or in which plan assets are invested, except, if elected by the Employer in the Adoption Agreement, amounts invested in Employer stock and allocated to a participant's separate account may be distributed in whole shares of Employer stock, with a cash adjustment for any fractional share. 4.9 DAILY ADJUSTMENT DATES Notwithstanding any provision in this Section 4 to the contrary, if daily adjustment dates are designated by the Employer in the Adoption Agreement, the value of the participant's vested accrued benefit for purposes of any distribution made pursuant to this Section 4 shall be determined as of the adjustment date such distribution is actually processed. SECTION 5. VESTING 5.1 VESTING UPON THE OCCURRENCE OF CERTAIN EVENTS Notwithstanding the vesting schedule elected by the Employer in the Adoption Agreement and subject to the provisions of Section 5.3, the matching contribution account and discretionary Employer contribution account of -38- 39 each participant shall be nonforfeitable immediately following the first to occur of: 5.1.1 Completion by the participant of his first hour of service on or after attainment of his normal retirement age; 5.1.2 Retirement of the participant under Section 3, including early retirement, if permitted, and disability retirement; 5.1.3 Death of the participant while in service; 5.1.4 Termination or partial termination of the plan by the Employer; 5.1.5 Termination by the Employer of contributions to the plan, or a suspension or reduction of such contributions which amounts in effect to a termination of contributions; and 5.1.6 A final determination of disqualification of the plan at any time following initial determination by the Internal Revenue Service that the plan is qualified. 5.2 SERVICE REQUIREMENT FOR VESTING A participant whose matching contribution account or discretionary Employer contribution account is subject to forfeiture, as provided in Section 5.1 and 5.3, shall be vested in all or a percentage of such matching contribution account and/or discretionary Employer contribution account based upon the number of his years of service at the time such vested percentage is determined, as specified by the Employer in the Adoption Agreement. For purposes of determining the vested percentage of a participant in his matching contribution account and discretionary Employer account, the following special provisions shall apply: 5.2.1 All years of service shall be taken into account except as otherwise elected by the Employer in the Adoption Agreement. 5.2.2 With respect to any participant who shall have had a prior break in service: (i) If a participant shall have a break in service following the computation date (as defined in Section 1.62) and shall not have any vested interest in his accrued benefit (excluding for this purpose that portion of his accrued benefit that is attributable to his employee after-tax contributions) at the time of such break in service, and the period of consecutive one year breaks in service equals or exceeds the greater of (a) five, or (b) the aggregate number of years of service before such period, all years of such service prior to such period shall be disregarded. For the purpose of determining years of service prior to such period, there shall be excluded any years of service previously disregarded under this paragraph (i). (ii) No years of service following five consecutive one year breaks in service shall be taken into account in determining the vested percentage of his matching contribution account or discretionary Employer contribution account with respect to his service prior to such break. 5.2.3 In the event the Employer shall amend the provisions of the plan for determining the vested percentages of participants, or if the plan is deemed amended by an automatic change to or from a top-heavy vesting schedule as provided in Section 22.2.2, each participant with at least three years of service with the Employer may elect, within a reasonable period after the adoption of the amendment, to have his vested percentage determined without regard to such amendment. -39- 40 For participants who do not have at least one hour of service in any plan year beginning after December 31, 1988, the preceding sentence shall be applied by substituting "five years of service" for "three years of service" where such language appears. The period during which the election may be made shall commence with the date the amendment is adopted or deemed to be made and shall end on the latest of: (i) 60 days after the amendment is adopted; (ii) 60 days after the amendment becomes effective; or (iii) 60 days after the participant is issued written notice of the amendment by the Employer or the Committee. 5.3 FORFEITURE OF NON-VESTED BENEFITS A participant whose matching contribution account or discretionary Employer contribution account is subject to forfeiture shall forfeit the portion of such account or accounts, as appropriate, which is not vested for the plan year in which first occurs the following: (i) he shall have five consecutive one year breaks in service, (ii) he shall terminate service and die following such termination and prior to having a break in service, or (iii) he shall terminate service and receive or be deemed to receive a distribution pursuant to Section 3.6 or 3.7 (regardless of whether he had incurred a break in service). The portion of his matching contribution account or discretionary Employer contribution account so forfeited shall be used first to restore any previously forfeited account in accordance with the provisions of this Section, and then shall be treated as provided in the Adoption Agreement. No forfeitures will occur solely as a result of an employee's withdrawal of employee after-tax contributions. Notwithstanding the foregoing provisions of this Section 5.3, if the participant receives a distribution pursuant to Section 3.6 or 3.7 and subsequently reenters service, the participant's matching contribution account and discretionary Employer contribution account shall be restored to the balance that existed in such accounts as of the distribution date if the participant repays to the trust the full amount of the distribution attributable to the matching contribution account and discretionary Employer contribution account before the earlier of (i) five years after the participant first reenters service or (ii) the last day of the plan year in which the participant incurs his fifth consecutive one year break in service following the distribution date. If a participant is deemed to receive a distribution pursuant to Section 3.7, his matching contribution account and discretionary Employer contribution account shall be restored to the balance that existed in such accounts as of the deemed distribution date if the participant reenters the service of the Employer before the last day of the plan year in which the participant incurs his fifth consecutive one year break in service following the deemed distribution date. In either case, such amount shall be restored not later than the last adjustment date for the plan year in which the participant reenters service, and shall be taken first from available forfeitures of any matching contributions or discretionary Employer contributions, as appropriate. If such forfeitures are insufficient for this purpose, such amount shall be contributed by the Employer to the Trustee on or before such date. SECTION 6. IN-SERVICE WITHDRAWALS AND LOANS 6.1 WITHDRAWAL OF MATCHING CONTRIBUTIONS AND DISCRETIONARY EMPLOYER CONTRIBUTIONS If elected by the Employer in the Adoption Agreement with respect to a participant's matching contribution account and/or discretionary Employer contribution account, a participant in the service of the Employer who is eligible to make a withdrawal in accordance with the Employer's election in the Adoption Agreement may at his option make one or more withdrawals from his matching contribution account and/or discretionary Employer contribution account subject to the following provisions: 6.1.1 Except as provided in Section 6.1.2, no withdrawal hereunder shall exceed the vested amount in the matching contribution account or discretionary Employer contribution account of the participant, as appropriate, as of the adjustment date next preceding the date of the withdrawal. 6.1.2 For purposes of this Section 6.1, if daily adjustment dates are designated by the Employer in the Adoption Agreement, no withdrawal shall exceed the percentage specified by the Employer in the Adoption Agreement of the vested amount in the matching contribution account -40- 41 or discretionary Employer contribution account of the participant, as appropriate, determined on the date the withdrawal request is actually processed. 6.1.3 The maximum number of withdrawals that may be requested by a participant during a plan year shall not exceed the number designated by the Employer in the Adoption Agreement. 6.1.4 Application for a withdrawal shall be made by the participant in writing on a form approved by the Committee and filed with the Committee. 6.1.5 If any portion of a participant's matching contribution account or discretionary Employer contribution account, as appropriate, is distributed to him at a time when he has a nonforfeitable right to less than 100% of the applicable account(s), at any subsequent relevant time the participant's nonforfeitable portion of his matching contribution account or discretionary Employer contribution account shall not be less than an amount ("X") determined by the following formula: X = P (AB + D) - D. For purposes of applying the formula: P is the nonforfeitable percentage at the relevant time; AB is the account balance in the participant's matching contribution account or discretionary Employer contribution account at the relevant time; D is the amount of the distribution, and the relevant time is the time under the plan at which the nonforfeitable percentage of such account balance cannot increase. 6.1.6 The Committee from time to time may adopt additional uniform and nondiscriminatory policies or rules to assist in the administration of the withdrawal requests for matching contributions and discretionary Employer contributions, including, but not limited to, permitting such withdrawals only on account of financial hardship (as defined in Section 6.3). 6.2 WITHDRAWAL OF EMPLOYEE AFTER-TAX CONTRIBUTIONS If elected by the Employer in the Adoption Agreement, a participant may at his option make a withdrawal from his employee after-tax contribution account during a plan year subject to the following provisions: 6.2.1 No withdrawal hereunder shall exceed the amount in the employee after-tax contribution account of the participant as of the adjustment date next preceding the date of the withdrawal. 6.2.2 For purposes of this Section 6.2, if daily adjustment dates are designated by the Employer in the Adoption Agreement, no withdrawal shall exceed the percentage specified by the Employer in the Adoption Agreement of the amount in the employee after-tax contribution account of the participant determined on the date the withdrawal request is actually processed. 6.2.3 A participant may not withdraw any portion of an employee after-tax contribution made during a plan year if a matching contribution is allocable to the participant's account with respect to such employee after-tax contribution for such plan year. 6.2.4 The maximum number of withdrawals that may be requested by a participant during a plan year shall not exceed the number designated by the Employer in the Adoption Agreement. 6.2.5 Application for a withdrawal shall be made by the participant in writing on a form approved by the Committee and filed with the Committee. 6.2.6 The Committee from time to time may adopt additional uniform and nondiscriminatory policies or rules to assist in the administration of the withdrawal requests for -41- 42 employee after-tax contributions. 6.3 WITHDRAWAL OF ROLLOVER CONTRIBUTIONS If elected by the Employer in the Adoption Agreement, a participant may at his option make a withdrawal from his rollover account during a plan year subject to the following provisions: 6.3.1 No withdrawal hereunder shall exceed the amount in the rollover account of the participant as of the adjustment date next preceding the date of the withdrawal. 6.3.2 For purposes of this Section 6.3, if daily adjustment dates are designated by the Employer in the Adoption Agreement, no withdrawal shall exceed the percentage specified by the Employer in the Adoption Agreement of the amount in the rollover account of the participant determined on the date the withdrawal request is actually processed. 6.3.3 The maximum number of withdrawals that may be requested by a participant during a plan year shall not exceed the number designated by the Employer in the Adoption Agreement. 6.3.4 Application for a withdrawal shall be made by the participant in writing on a form approved by the Committee and filed with the Committee. 6.3.5 The Committee from time to time may adopt additional uniform and nondiscriminatory policies or rules to assist in the administration of the withdrawal requests for rollover contributions. 6.4 DISTRIBUTIONS ON OR AFTER ATTAINMENT OF AGE 59 1/2 If elected by the Employer in the Adoption Agreement, a participant who has attained age 59 1/2 may at his option make a withdrawal of all or any portion of his vested interest in all of his amounts, subject to the following provisions: 6.4.1 No withdrawal shall exceed the vested amount in the accounts of the participant as of the adjustment date next preceding the date of the withdrawal. 6.4.2 For purposes of this Section 6.4, if daily adjustment dates are designated by the Employer in the Adoption Agreement, no withdrawal shall exceed the percentage specified by the Employer in the Adoption Agreement of the vested amount in the account if the participant determined on the date the withdrawal request is actually processed. 6.4.3 The maximum number of withdrawals that may be requested by a participant shall not exceed the number designated by the Employer in the Adoption Agreement. 6.4.4 Application for a withdrawal may be made by the participant in writing on a form approved by the Committee and filed with the Committee. 6.4.5 The Committee from time to time may adopt additional uniform and nondiscriminatory policies or rules to assist in the administration of the withdrawal requests pursuant to this Section. 6.5 HARDSHIP DISTRIBUTIONS If elected by the Employer in the Adoption Agreement, a participant may file a written request with the Committee for a distribution on account of financial hardship. A distribution will be on account of financial hardship only if the distribution is on account of an immediate and heavy financial need of the participant, is necessary to satisfy -42- 43 such financial need, and such need cannot be satisfied through other financial resources reasonably available to the participant. The request must specify the nature of the hardship, the total amount requested, and the total amount of the actual expense incurred, or to be incurred, on account of the hardship. Subject to the provisions of this Section 6.5, the Committee in its discretion shall determine whether a hardship constitutes an immediate and heavy financial need, and its decision to grant or deny a hardship distribution shall be final. If the Committee determines that a hardship exists, the Committee shall direct the Trustee to make a distribution to the participant in cash of the amount approved by the Committee. The amount available for such distribution shall be determined as of the adjustment date coincident with or next preceding receipt by the Trustee of such direction from the Committee. The portion of a participant's elective deferral account available for a hardship distribution shall not exceed the amount in the participant's elective deferral account (reduced by any previous hardship distribution not reflected as of such adjustment date), excluding any earnings credited to his elective deferral account as of any plan year ending after July 1, 1989. Amounts allocated to a participant's qualified non-elective contribution account or qualified matching contribution account shall not be available for distribution under this Section 6.5. 6.5.1 Notwithstanding the above, for purposes of this Section 6.5, if daily adjustment dates are designated by the Employer in the Adoption Agreement, the value of a participant's account or accounts subject to a hardship withdrawal shall be determined on the date the withdrawal request is processed. 6.5.2 Special rules for hardship withdrawals: (i) The following are the only financial needs considered immediate and heavy: expenses incurred or necessary for medical care (as defined in Section 213(d) of the Code) of the participant, the participant's spouse, children, or dependents (as defined in Section 152 of the Code); costs directly related to the purchase (excluding mortgage payments) of a principal residence for the participant; payment of tuition and related educational fees for the next 12 months of post-secondary education for the participant, the participant's spouse, children, or dependents; or the need to prevent the eviction of the participant from, or a foreclosure on the mortgage of, the participant's principal residence. (ii) A distribution will be considered as necessary to satisfy an immediate and heavy financial need of the participant only if: (a) The participant has obtained all distributions, other than hardship distributions, and all nontaxable loans under all plans maintained by the Employer; (b) All plans maintained by the Employer provide that, if any portion of the hardship distribution is attributable to a participant's elective deferrals, the participant's elective deferrals and employee after-tax contributions will be suspended for 12 months after the receipt of the hardship distribution; (c) The distribution is not in excess of the amount of an immediate and heavy financial need (including amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution); and (d) All plans maintained by the Employer provide that the participant may not make elective deferrals for the -43- 44 participant's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Section 402(g) of the Code for such taxable year less the amount of such participant's elective deferrals for the taxable year of the hardship distribution. 6.5.3 If a participant's termination of service occurs after a request for a hardship distribution is approved in accordance with the provisions of this Section 6.5, but prior to the actual payment of such distribution, such approval shall be void, and the accrued benefit of such participant shall be payable hereunder as if such approval had not been made. 6.5.4 The Committee from time to time may adopt additional uniform and nondiscriminatory policies or rules to assist in the administration of hardship distribution requests, including, but not limited to, establishing limits on the maximum number of hardship distributions that may requested by plan participants during a plan year. 6.6 LOANS If elected by the Employer in the Adoption Agreement, upon the written application of any participant or beneficiary who is a party-in-interest as defined in Section 3(14) of ERISA (other than an owner-employee or shareholder-employee) (the "borrower"), the Committee in accordance with its uniform, nondiscriminatory policy may direct the Trustee to permit the borrower to borrow from such of his separate accounts designated by the Employer in the Adoption Agreement as available sources for loan proceeds, subject to the following provisions: 6.6.1 Loans shall be available to all borrowers on a reasonably equivalent basis. Loans shall not be available to highly compensated participants in an amount greater than to non-highly compensated participants. 6.6.2 The minimum principal amount of any loan made to a participant shall not be less than the amount designated by the Employer in the Adoption Agreement. The maximum principal amount of any loan made to the borrower, when added to the then unpaid balance on all loans previously made to the borrower, shall not exceed the lesser of: (i) $50,000, reduced by the excess (if any) of the highest outstanding balance of loans during the one-year period ending on the day before the loan is made, over the outstanding balance of loans from the plan on the day the loan is made; or (ii) 50% of the vested accrued benefit of the borrower, other than amounts credited to his deductible contribution account. For purposes of this Section 6.6, the borrower's vested accrued benefit shall be determined as of the adjustment date next preceding the date the loan is processed. Notwithstanding the foregoing sentence, if daily adjustment dates are designated by the Employer in the Adoption Agreement, the borrower's vested accrued benefit shall be determined as of the date the loan paperwork is generated. If a borrower shall have a vested accrued benefit in more than one tax-qualified retirement plan of the Employer or an affiliated employer, the limitation in (i) or (ii) shall be applied both with respect to this plan only and with respect to all such plans in the aggregate. In applying the limitations with respect to this plan, only loans to the borrower under this plan and his vested accrued benefit under this plan shall be taken into account. In applying the limitations with respect to all such plans in the aggregate, all loans to the borrower under all such plans and the sum of his vested accrued benefits under all such plans shall be taken into account. -44- 45 6.6.3 All loans made under this Section 6.6 shall be considered earmarked investments of the borrower's account, and any repayment of principal and interest on such loan shall be credited to the borrower's account. 6.6.4 The principal amount of a loan shall be derived from the borrower's separate accounts designated in the Adoption Agreement as available sources for such loan proceeds in the following order of priority: (i) Qualified non-elective contribution account; (ii) Qualified matching contribution account; (iii) Elective deferral account; (iv) Mandatory contribution account; (v) Discretionary Employer contribution account; (vi) Matching contribution account; (vii) Direct transfer account; (viii) Rollover account; and (ix) Employee after-tax contribution account. Any repayment of principal and interest on a loan shall be credited to the borrower's separate accounts in the reverse order from which the proceeds were first obtained. See Section 8.3 for special provisions that apply in the event the participant's separate account from which an amount is borrowed is also a directed separate account (as defined in Section 8.1.1). 6.6.5 Notwithstanding the provisions of Section 6.6.4 above, if daily adjustment dates are elected by the Employer in the Adoption Agreement, the principal amount of a loan shall be derived on a pro rata basis from the borrower's separate accounts designated in the Adoption Agreement as available sources for such loan proceeds. Any repayment of principal and interest on a loan shall be credited to such separate accounts on a pro rata basis. See Section 8.3 for special provisions that apply in the event the participant's separate account from which an amount is borrowed is also a directed separate account (as defined in Section 8.1.1). 6.6.6 All loans shall by their terms require that repayment be amortized in level payments of principal and interest, not less frequently than quarterly, over a period not exceeding five years from the date the loan is made. Notwithstanding the five-year repayment obligation of the preceding sentence, in the case of loan made to a borrower for the purpose of acquiring any dwelling unit which is used, or will be used, within a reasonable time (determined at the time the loan is made), as the primary residence of the borrower, the repayment period may exceed five years, but shall not extend for more than 15 years from the date the loan is made. The Employer shall establish a procedure for withholding at appropriate intervals from a participant's regular payroll checks amounts necessary to satisfy the borrowing participant's repayment obligations under the note. All amounts so withheld shall be transferred immediately to the Trustee. 6.6.7 Each borrower making an application for a loan shall receive from the Trustee a statement of the charges involved in the loan transaction. This statement shall include the -45- 46 amount financed and the annual interest rate. 6.6.8 Each loan shall be secured by the pledge of 50% of the borrower's vested accrued benefit, other than amounts credited to his deductible contribution account (determined at the time the loan is processed), and by the pledge of such further security as the Committee, in its discretion, deems necessary or desirable to assure repayment of the borrowed amount and all interest payable thereon in accordance with the terms of the loan. 6.6.9 Each loan shall be evidenced by a negotiable promissory note (the "note") in form acceptable to the Trustee, payable to the order of the Trustee, bearing interest at a rate commensurate with the prevailing rate charged by commercial lenders in the geographic region of the Employer, as determined by the Trustee, and, except as provided in Section 6.6.6, payable in full not more than five years from the date thereof. The borrower shall execute any additional documents as shall be deemed necessary or advisable by the Committee to consummate the loan and to provide reasonable safeguards. 6.6.10 The occurrence of any one or more of the following events of default shall constitute a default by the borrower under the terms of the loan, whereupon the unpaid balance of the note, together with accrued interest, will immediately become due and payable without presentment, demand, protest, or notice of any kind. Events of default include: (i) failure to make any payment when due, whether by acceleration or otherwise; (ii) termination of service of a participant who is not a party-in-interest as defined in Section 3(14) of ERISA; (iii) bankruptcy or insolvency of the borrower; and (iv) death of the borrower. Prior to foreclosure and attachment, the unpaid principal and interest of the loan shall bear interest at a rate two percentage points greater than the rate set forth in the note. If the unpaid principal and interest exceed the amount of the defaulting borrower's account that is pledged as security, all or any part of any additional security pledged to secure the loan, in the discretion of the Committee, may be sold at private or public sale. The proceeds of such sale shall be applied first to pay the expenses of conducting the sale, including reasonable attorneys' fees, then to accrued interest, and then to principal of the loan. The borrower shall remain liable for any deficiency. Any surplus shall be paid to the borrower. No distribution under the plan to or on behalf of the borrower shall be made unless and until all unpaid loans, include interest thereon, are satisfied. 6.6.11 If an event of default shall occur with respect to a borrower, the entire unpaid principal amount of the note, plus accrued and unpaid interest shall immediately become due and payable; provided, that foreclosure on the note and attachment of the borrower's vested accrued benefit shall not occur until a distributable event occurs under the plan. 6.6.12 If any portion of the accrued benefit of a participant is applied to repay a loan under this Section 6.6 at a time when such participant's accrued benefit is subject to forfeiture, the participant's vested accrued benefit at any subsequent time until he has a nonforfeitable right to his entire accrued benefit shall not be less than an amount ("X") determined by the formula: X + P(AB + D) - D. For purposes of applying the formula: P is the vested percentage at the relevant time; AB is the accrued benefit at the relevant time; and D is the amount of such participant's vested accrued benefit applied to repay the loan. 6.6.13 During the period a participant's loan request is pending, the participant shall not be permitted to request any distributions or withdrawals (including hardship withdrawals) from his account. 6.6.14 If a participant's termination of service occurs after a request for a loan is approved in accordance with the provisions of this Section 6.6, but prior to the actual payment of -46- 47 such loan proceeds, such approval shall be void, and the vested accrued benefit of such participant shall be payable hereunder as if such approval had not been made. 6.6.15 The Committee from time to time may adopt additional uniform and nondiscriminatory policies or rules to assist in the administration of participant loan requests, including, but not limited to, establishing limits on the maximum number of loans that may be requested during a plan year or outstanding at one time. SECTION 7. ADJUSTMENT OF PARTICIPANT ACCOUNTS 7.1 ESTABLISHMENT OF ACCOUNTS The Committee shall cause an account to be maintained under the plan with respect to each participant, which account shall include to the extent applicable the separate accounts described in Section 1.1. The fair market value of each separate account with respect to the participant shall be determined and adjusted as of each adjustment date under one of the adjustment methods designated by the Employer in the Adoption Agreement. 7.2 GENERAL The Committee shall have and may exercise all powers necessary or advisable in order to implement the provisions of this Section 7 and to ensure that the accounts maintained under the plan are fairly and accurately adjusted as of each adjustment date. SECTION 8. PARTICIPANT DIRECTED INVESTMENTS 8.1 PARTICIPANT DIRECTED INVESTMENTS Notwithstanding any other provisions of the plan, each participant having an amount to his credit under the plan may, acting through the Committee, direct the Trustee as to the investment or reinvestment of his account to the extent permitted by the Employer in the Adoption Agreement, subject to the following provisions of this Section 8 and Section 9: 8.1.1 Directed investment funds: The Committee shall determine from time to time the investment options ("directed investment funds") available to participants. If elected by the Employer in the Adoption Agreement, the directed investment funds may include an Employer stock fund (as defined in Section 9.1). Each participant shall be entitled to direct the investment and reinvestment of such of his separate accounts as shall be permitted in the Adoption Agreement ("directed separate accounts") among the directed investment funds. Each directed separate account of a participant shall be divided into sub-accounts reflecting the portion of such directed separate account invested in each directed investment fund ("fund accounts"). 8.1.2 Adjustment of fund accounts: Except as otherwise specifically provided herein, each fund account shall be adjusted as of each adjustment date in the manner provided in Section 7, as if it were the entire directed separate account of the participant to which it is subsidiary, with respect to distributions, withdrawals, loans, contributions and forfeitures allocated to it and with respect to its share of the net income or net loss of the directed investment fund of which it is a part. 8.1.3 Direction of future contributions: In accordance with procedures adopted by the Committee, contributions allocated to a participant's directed separate accounts shall be apportioned among the directed investment funds in the manner designated by the participant. Any such designation for future contributions shall be made in multiples of the percentage chosen by the Employer in the Adoption Agreement. Any designation among directed investment funds shall remain in effect unless and until the participant shall file a timely application providing for -47- 48 a different designation. A participant may change his investment direction at such intervals during the plan year as designated by the Employer in the Adoption Agreement. If for any reason a participant shall not have made an effective designation with respect to any portion of a contribution allocated to a directed separate account, such contribution for which no designation was made shall be invested by the Trustee at the direction of the Committee. 8.1.4 Reallocations among directed investment funds: In accordance with procedures adopted by the Committee, a participant shall be entitled to reallocate the amount credited to each of his directed separate accounts among the available directed investment funds in multiples of the percentage designated by the Employer in the Adoption Agreement. The Committee specifically reserves the right to restrict transfers out of a directed investment fund to the extent that such transfers will endanger the value and liquidity of the Fund. Such reallocations may be made at such intervals during the plan year as designated by the Employer in the Adoption Agreement. 8.1.5 Notification of Trustee: The Committee shall notify the Trustee of all directions made in accordance with Section 8.1.3 and 8.1.4 as soon as practicable following their receipt. 8.2 RIGHTS IN DIRECTED INVESTMENT FUNDS Notwithstanding the fact that all or a portion of a participant's account may be invested in directed investment funds selected by the Committee and may be expressed in dollars, shares, or units in a particular directed investment fund, such references shall mean the aggregate of the dollar amount and the number of shares of Employer stock, if any, which are credited to the participant's account at any point in time. Nothing contained in this Section 8 shall be deemed to give any participant any interest in any specific property in any directed investment fund or any interest in the plan, other than (i) the right to receive payments or distributions in accordance with the plan, (ii) the right to instruct the Trustee how to vote Employer stock as permitted under Section 9.4, (iii) the right to instruct the Trustee with respect to the sale, exchange, or transfer of Employer stock as permitted under Section 9.5, or (iv) to exercise any other right specifically granted to the participant under the plan. 8.3 EFFECT OF PARTICIPANT LOANS In the event the participant's separate account from which an amount is borrowed pursuant to Section 6.6 is also a directed separate account, the amount borrowed from such account shall be withdrawn from the fund accounts with respect to such directed separate account on a pro rata basis. Any repayment of principal and interest on such borrowed amount shall be reinvested in the participant's fund accounts in accordance with the participant's investment direction in effect on the adjustment date as of which such repayment is credited to the participant's directed separate account. 8.4 DISTRIBUTIONS FROM DIRECTED SEPARATE ACCOUNTS In the event the participant's separate accounts from which an amount is to be distributed or withdrawn are also directed separate accounts, the amount distributed from such accounts shall be withdrawn from the fund accounts with respect to each such directed separate account on a pro rata basis. 8.5 ACCOUNTS NOT SUBJECT TO PARTICIPANT DIRECTION In the event a participant is not permitted to direct the investment and reinvestment of one or more of his separate accounts, such separate accounts shall remain subject to the investment discretion of the Trustee pursuant to Section 20 of the plan. 8.6 AUTHORITY OF TRUSTEE AND COMMITTEE The Trustee shall have and may exercise all powers necessary or advisable in order to implement the provisions of this Section 8. To the extent approved by the Trustee, the Committee may promulgate rules or by-laws supplementing and implementing the provisions of this Section 8, including such rules or by-laws as may be necessary from time to time in order to provide a participant or beneficiary, within the meaning of Section 404(c) of ERISA and the regulations thereunder, an opportunity (i) to exercise control over assets in his account, and (ii) -48- 49 to choose, from a broad range of investment alternatives, the manner in which some or all of the assets in his account are invested. If it is not practicable for the Trustee to effect the transfer of funds on any date provided in this Section 8, the Trustee shall effect such transfer on the first practicable date thereafter. SECTION 9. INVESTMENTS IN EMPLOYER STOCK 9.1 EMPLOYER STOCK FUND I elected by the Employer in the Adoption Agreement, at the direction of the Committee, the Trustee shall establish a special investment fund for the purpose of holding shares of Employer stock which shall be designated as the "Employer stock fund." The Employer may elect under the Adoption Agreement to designate the Employer stock fund as a directed investment fund under Section 8. A portion of the Employer stock fund may be invested in short-term United States Government obligations, other short-term obligations guaranteed by the United States Government, commercial paper, or money market funds for qualified employee benefit trusts while awaiting investment in Employer stock, or to provide sufficient liquidity to satisfy participants' requests for withdrawals, loans, and distributions. 9.2 COMPLIANCE WITH THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934 The Committee shall adopt and implement such procedures as shall be necessary (i) to comply with any applicable registration requirements for the participants' interests in the plan under the Securities Act of 1933, and (ii) to qualify any intra-plan transactions by officers, directors, and ten percent owners of any Employer stock who are participants under the plan from short-swing profit liability under Section 16 of the Securities Exchange Act of 1934. 9.3 RIGHT OF FIRST REFUSAL If elected by the Employer in the Adoption Agreement, any Employer stock distributed under the plan shall be subject to the terms of this Section 9. 9.3.1 Terms and conditions of offer to the Employer: If any participant during his lifetime shall desire to sell, transfer (by gift or otherwise), encumber or otherwise dispose of any Employer stock distributed to him under the plan, the participant shall first offer in writing to sell all of such stock to the Employer. If the Employer does not purchase all of the stock within 14 days after the receipt of such offer, the stock not so purchased may be sold, transferred, encumbered or otherwise disposed of free from the restrictions of this Section 9.3.1 for 30 days following the close of the 14-day period. After the close of such 30-day period, the restrictions of this Section 9.3.1 again shall apply to any of the Employer stock not so sold, transferred, encumbered, or otherwise disposed of. If any Employer stock is encumbered or otherwise disposed of for a temporary period, and the recipient of such stock under the plan receives all or a portion of such stock back at or after the close of such temporary period, such stock again shall be subject to the restrictions of this Section 9.3.1. The purchase price of each share of Employer stock purchased hereunder shall be the fair market value thereof as determined by the Employer pursuant to Section 9.3.2, but in no event less than the amount of any good faith (as determined by the Employer) and then outstanding offer that has been received by the participant desiring to dispose of the stock. The purchase price of any Employer stock purchased in accordance with this Section 9.3.1 shall be paid in full in cash at the time of the closing. The closing shall take place at such time and place agreed upon between the Employer and the participant, but not later than ten days after the Employer notifies such recipient of the exercise of the right of first refusal. At the closing, the participant shall deliver certificates representing the offered Employer stock duly endorsed in blank for transfer, or with stock powers duly executed in blank with all required transfer tax stamps attached or provided for, and the Employer shall deliver the purchase price. 9.3.2 Valuation of Employer stock: Subject to the provisions of Section 9.3.1, all -49- 50 purchases of Employer stock by the Employer shall be made at a price not in excess of fair market value. Any sale of Employer stock to a disqualified person (as defined in Section 4975(e)(2) of the Code) or a party-in-interest (as defined in Section 3(14) of ERISA) shall conform to the requirements of Section 408(e) of ERISA. For all purposes of the plan, the fair market value of Employer stock shall be determined by the Employer in good faith. If there is a generally recognized market for Employer stock, the fair market value shall be a price not less favorable to the plan than the offering price for the Employer stock established by the current bid and asked prices quoted by persons independent of the Employer and any party-in-interest or disqualified person. If there is no generally recognized market for Employer stock, the determination of fair market value by the Employer shall be based on a valuation by an independent appraiser appointed by the Employer. In the case of a transaction between the plan and a disqualified person or a party-in-interest, fair market value shall be determined as of the date of the transaction. For all other purposes, fair market value shall be determined as of the adjustment date coincident with or next preceding the date of the transaction. 9.3.3 Legend: If recommended by legal counsel for the Employer, certificates representing ownership of Employer stock distributed from the plan shall bear an appropriate legend approved by such counsel to ensure that Employer stock is issued in compliance with all applicable federal and state securities laws. 9.4 VOTING OF EMPLOYER STOCK The following provisions shall apply in the event the Employer elects in the Adoption Agreement to pass-through voting of Employer stock allocated to a participant's separate accounts to such participants or their beneficiaries under the plan. 9.4.1 Readily tradeable Employer stock: If the Employer stock allocated to a participant's separate accounts is readily tradable on an established market, each participant or beneficiary shall be entitled to direct the Trustee as to the manner in which shares of Employer stock allocated to the participant's separate accounts shall be voted with respect to any corporate matter that involves voting the Employer stock allocated to the participant's separate accounts as of any record date. For purposes of this Section 9, Employer stock is "readily tradeable on an established market" if it is listed on a national securities exchange registered under Section 6 of the Securities Exchange Act of 1934 or quoted on a system sponsored by a national securities association registered under Section 15A(b) of the Securities Exchange Act and readily tradeable on either such market. 9.4.2 Not readily tradeable Employer stock: If the Employer stock allocated to a participant's separate accounts is not readily tradable on an established market, each participant or beneficiary shall be entitled to direct the Trustee as to the manner in which shares of Employer stock allocated to the participant's separate accounts shall be voted with respect to such matters designated by the Employer in the Adoption Agreement that involve voting the Employer stock allocated to the participant's separate accounts as of any record date. 9.4.3 Trustee's responsibilities: Except as otherwise provided in Sections 9.4.1 and 9.4.2, the Trustee shall vote the Employer stock held by the trust on the record date as directed by the Committee. 9.4.4 Voting instructions from participants: If participants and beneficiaries are entitled to direct the Trustee in voting Employer stock pursuant to Section 9.4.1 or 9.4.2, the Trustee shall vote such Employer stock in accordance with the timely instructions of the respective participants and beneficiaries. The Trustee shall be responsible for soliciting and tabulating such votes. Prior to the voting of Employer stock, the Committee shall distribute to each participant and beneficiary the same information concerning the vote as is furnished by the Employer to its shareholders. If -50- 51 the Employer does not furnish any such information within the appropriate time period under applicable state corporate law prior to the shareholders' meeting, the Committee shall as soon as practicable provide each participant and beneficiary with an explanation of those matters that to the best knowledge of the Committee are to be presented at such meeting for action by shareholders and are subject to direction by the participant or beneficiary and an appropriate form on which the participant or beneficiary may direct voting on such matters. If the Trustee does not receive participant or beneficiary instructions with respect to any Employer stock or such instructions are not timely received, such stock shall be voted by the Trustee as directed by the Committee. Instructions received from participants and beneficiaries by the Trustee shall be held in the strictest confidence and shall not be divulged or released to any person, including the Committee, or the officers, directors or employees of the Employer. 9.5 TENDERING The following provisions of this Section 9.5 shall apply in the event the Employer elects in the Adoption Agreement to pass-through voting of Employer stock to participants and beneficiaries, and a tender offer or exchange offer, including but not limited to a tender offer or exchange offer within the meaning of the Securities Exchange Act of 1934, as amended, for the Employer stock held by the trust (a "tender offer") is commenced. 9.5.1 Independent record keeper; Trustee's responsibilities: In the event a tender offer for the Employer stock held by the trust is commenced, the functions under the plan applicable to participation of such Employer stock in the tender offer shall be undertaken by the independent record keeper appointed by the Committee at the time the tender offer is commenced, and the Committee shall not undertake any record keeping function under the plan that would serve to violate the confidentiality of any directions given by the participants or beneficiaries in connection with the tender offer. The independent record keeper shall use its best efforts to timely distribute or cause to be distributed to each participant and beneficiary such information as is being distributed to other shareholders of the Employer in connection with the tender offer. The Trustee shall have no discretion or authority to sell, exchange or transfer any of the Employer stock held in the participant's separate accounts pursuant to such tender offer except to the extent, and only to the extent, that the Trustee is timely directed to do so in writing as follows: (i) Each participant and beneficiary shall be entitled to direct the independent record keeper with respect to the sale, exchange, or transfer of the Employer stock allocated to the participant's separate accounts. The independent record keeper shall then instruct the Trustee as to the number of shares to be tendered, in accordance with the above directions. The Committee shall instruct the Trustee to follow the directions of the independent record keeper pursuant to the terms of the tender offer. Instructions received from participants and beneficiaries by the independent record keeper shall be held in the strictest confidence and shall not be divulged or released to any person including the Committee, or the officers, directors, or employees of the Employer. (ii) The independent record keeper shall instruct the Committee and the Trustee as to the number of shares for which it did not receive any instructions or instructions were not timely received. The Trustee shall tender or not tender such shares of Employer stock as directed by the Committee. 9.5.2 Records: Following any tender offer that has resulted in the sale or exchange or any shares of Employer stock held by the trust, the independent record keeper to which responsibility has been transferred shall continue to maintain on a confidential basis a record of the separate account of each participant or beneficiary to which shares of Employer stock were -51- 52 allocated at any time during such offer, until complete distribution of such Employer stock. The record keeper shall keep confidential any instructions that it may receive from participants or beneficiaries relating to the tender offer. SECTION 10. ADMINISTRATION BY COMMITTEE 10.1 MEMBERSHIP OF COMMITTEE The Committee shall consist of such individuals who shall be appointed by the Board to serve at the pleasure of the Board from time to time. Any member of the Committee may resign, and his successor, if any, shall be appointed by the Board. The composition of the Committee may be changed by the Board at any time without amending the Adoption Agreement. The Committee shall be responsible for the general administration and interpretation of the plan and for carrying out its provisions, except to the extent all or any of such obligations are specifically imposed on the Trustee or the Board. The Committee shall furnish to the Trustee such information as the Trustee shall require for the proper administration of the trust. The plan administrator shall be the person designated by the Employer in the Adoption Agreement. The Board may designate another plan administrator at any time without amending the Adoption Agreement. The plan administrator shall be agent for service of legal process on the plan. 10.2 COMMITTEE OFFICERS; SUBCOMMITTEE The members of the Committee shall elect a chairman and may elect an acting chairman. They shall also elect a secretary and may elect an acting secretary, either of whom may be but need not be a member of the Committee. The Committee may appoint from its membership such subcommittees with such powers as the Committee shall determine, and may authorize one or more of its members or any agent to execute or deliver any instruments or to make any payment in behalf of the Committee. 10.3 COMMITTEE MEETINGS The Committee shall hold such meetings upon such notice, at such places and at such intervals as it may from time to time determine. Notice of meetings shall not be required if notice is waived in writing by all the members of the Committee at the time in office, or if all such members are present at the meeting. 10.4 TRANSACTION OF BUSINESS A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Committee at any meeting shall be by vote of a majority of those present at any such meeting and entitled to vote. Resolutions may be adopted or other action taken without a meeting upon written consent thereto signed by all of the members of the Committee. 10.5 COMMITTEE RECORDS The Committee shall maintain full and complete records of its deliberations and decisions. The minutes of its proceedings shall be conclusive proof of the facts of the operation of the plan. The records of the Committee shall contain all relevant data pertaining to individual participants and their rights under the plan and in the trust fund. 10.6 ESTABLISHMENT OF RULES Subject to the limitations of the plan and of ERISA, the Committee may from time to time establish rules or by-laws for the administration of the plan and the transaction of its business. 10.7 CONFLICTS OF INTEREST No individual member of the Committee shall have any right to vote or decide upon any matter relating solely to himself or to any of his rights or benefits under the plan (except that such member may sign unanimous written consent to resolutions adopted or other action taken without a meeting), except to the extent such right shall be generally provided to participants pursuant to the terms of the plan. -52- 53 10.8 CORRECTION OF ERRORS The Committee may correct errors and, so far as practicable, may adjust any benefit or credit or payment accordingly. The Committee may in its discretion waive any notice requirements in the plan; provided, that a waiver of a requirement to notify the Trustee shall be made only with the consent of the Trustee. A waiver of notice in one or more cases shall not be deemed to constitute a waiver of notice in any other case. With respect to any power or authority which the Committee has discretion to exercise under the plan, such discretion shall be exercised in a nondiscriminatory manner. 10.9 AUTHORITY TO INTERPRET PLAN Subject to the claims procedure set forth in Section 15, the Committee and the plan administrator shall have the duty, authority, and discretion to interpret and construe the provisions of the plan and to decide any dispute which may arise regarding the rights of participants hereunder, including the authority to construe uncertain provisions of the plan and to make determinations as to the eligibility of employees for plan participation and of employees and beneficiaries for benefits under the plan. Determinations by the Committee or plan administrator shall apply uniformly to all persons similarly situated and shall be binding and conclusive upon all interested persons. Such determinations shall only be set aside if the Committee or plan administrator is found to have acted arbitrarily and capriciously in interpreting and construing the terms of the plan. 10.10 THIRD PARTY ADVISORS The Committee may engage an attorney, accountant or any other technical advisor on matters regarding the operation of the plan and to perform such other duties as shall be required in connection therewith, and may employ such clerical and related personnel as the Committee shall deem requisite or desirable in carrying out the provisions of the plan. The Committee shall from time to time, but no less frequently than annually, review the financial condition of the plan and determine the financial and liquidity needs of the plan as required by ERISA. The Committee shall communicate such needs to the Employer and to the Trustee so that the funding policy and investment policy may be appropriately coordinated to meet such needs. 10.11 COMPENSATION OF MEMBERS No fee or compensation shall be paid to any member of the Committee for his service as such. 10.12 COMMITTEE EXPENSES The Committee shall be entitled to reimbursement out of the trust fund for its reasonable expenses properly and actually incurred in the performance of its duties in the administration of the plan; provided, that the Employer may, in the discretion of the Board, pay such expenses. 10.13 REQUIREMENT OF WRITING All requests, directions, requisitions, and instructions of the Committee to the Trustee shall be in writing and signed by such person or persons as shall be designated in writing by the Committee. 10.14 INDEMNIFICATION OF COMMITTEE To the maximum extent permitted by ERISA, no member of the Committee shall be personally liable by reason of any contract or other instrument executed by him or on his behalf as a member of the Committee nor for any mistake of judgment made in good faith, and the Employer shall indemnify and hold harmless, directly from its own assets (including the proceeds of any insurance policy the premiums for which are paid from the Employer's own assets), each member of the Committee and each other officer, employee, or director of the Employer to whom any duty or power relating to the administration or interpretation of the plan may be delegated or allocated, against any unreimbursed or uninsured cost or expense (including any sum paid in settlement of a claim with the prior written approval of the Board) arising out of any act or omission to act in connection with the plan, unless arising out of such person's own fraud, bad faith, willful misconduct, or gross negligence. -53- 54 SECTION 11. MANAGEMENT OF FUNDS AND AMENDMENT OR TERMINATION OF PLAN 11.1 FIDUCIARY DUTIES All assets of the plan shall be held in a trust forming part of the plan, which shall be administered as a trust fund to provide for the payment to the participants or their successors in interest, out of the income and principal of the trust, of benefits as provided in the plan. All fiduciaries (as defined in ERISA) with respect to the plan shall discharge their duties as such solely in the interest of the participants and their successors in interest, and (i) for the exclusive purposes of providing benefits to participants and their successors in interest and defraying reasonable expenses of administering the plan, including the trust which is a part of the plan, (ii) with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims, and (iii) in accordance with the plan, except to the extent such document may be inconsistent with the then applicable federal laws relating to fiduciary responsibility. The trust fund shall be used for the exclusive benefit of the participants and beneficiaries and to pay administrative expenses of the plan and trust to the extent not paid by the Employer, and no portion of the trust fund shall ever revert to or inure to the benefit of the Employer (except as otherwise provided in this Section 11.1 and in Section 23). Notwithstanding the foregoing provisions of this Section 11.1, the following special provisions shall apply: 11.1.1 The Sponsor expressly reserves the right to amend or terminate the plan and liquidate the trust, and the Employer, by execution of the Adoption Agreement, delegates to the Sponsor the authority to amend or terminate the plan and to liquidate the trust by written instrument signed by the duly authorized representative of the Sponsor, and the Employer shall be deemed to have consented to any such amendments or termination. No amendment to the plan shall be effective to the extent that it has the effect of decreasing a participant's accrued benefit. Notwithstanding the preceding sentence, a participant's accrued benefit may be reduced to the extent permitted under Section 412(c)(8) of the Code. For purposes of this Section 11.1.1, a plan amendment which has the effect of decreasing a participant's accrued benefit or eliminating an optional form of benefit, with respect to benefits attributable to service before the amendment, shall be treated as reducing an accrued benefit. Furthermore, if the vesting schedule of a plan is amended, in the case of an employee who is a participant as of the later of the date such amendment is adopted or the date it becomes effective, the nonforfeitable percentage (determined as of such date) of such employee's right to his matching contribution account or discretionary Employer account will not be less than his percentage computed under the plan without regard to such amendment. 11.1.2 An Employer acting through its Board may amend the plan by (i) changing the choice of options in the Adoption Agreement, (ii) adding overriding plan language to the Adoption Agreement where such language is necessary to satisfy Sections 415 or 416 of the Code because of the required aggregation of multiple plans under these sections, and (iii) adding certain model amendments published by the Internal Revenue Service which specifically provide that their adoption will not cause the plan to be treated as individually designed. The Employer shall be considered to have an individually designed plan if the Employer amends the plan or nonelective portions of the Adoption Agreement for any other reason. The Employer may terminate the plan as applicable to it at any time, subject to the provisions of Sections 14.1 and 14.2. 11.1.3 Notwithstanding any other provisions of the plan, the following provisions shall apply: (i) If the plan receives an adverse determination with respect to the initial qualification of the plan under Section 401(a) of the Code, on written request of the Employer, the Trustee shall return to the Employer the amount -54- 55 of such contribution (increased by earnings attributable thereto and reduced by losses attributable thereto) within one calendar year after the date that qualification of the plan is denied; provided, that the application for the determination is made by the time prescribed by law for filing the Employer's federal income tax return for the taxable year in which the plan is adopted or such later date as the Secretary of the Treasury may prescribe; (ii) On written request of the Employer, the Trustee shall return a disallowed contribution to the extent the deduction is disallowed under Section 404 of the Code (reduced by losses attributable thereto, but not increased by earnings attributable thereto) to the Employer within one year after the date the deduction is disallowed; and (iii) If a contribution or any portion thereof is made by the Employer by mistake of fact, on written request of the Employer, the Trustee shall return the contribution or such portion (reduced by losses attributable thereto, but not increased by earnings attributable thereto) to the Employer within one year after the date of payment to the Trustee. 11.2 ADOPTION OF PLAN The Employer shall, upon proper authorization, adopt the plan and execute the Adoption Agreement. When such Adoption Agreement has been accepted and executed by the Trustee and an initial contribution has been received by the Trustee from the Employer, the plan as applied to the Employer shall become effective as of the date specified in the Adoption Agreement. 11.3 REQUIREMENT OF WRITING All requests, directions, requisitions, and instructions of the Committee to the Trustee shall be in writing, signed by such person or persons as designated by the Committee. SECTION 12. ALLOCATION OF RESPONSIBILITIES AMONG NAMED FIDUCIARIES 12.1 DUTIES OF NAMED FIDUCIARIES The named fiduciaries with respect to the plan and the fiduciary duties and other responsibilities allocated to each, which shall be carried out in accordance with the other applicable terms and provisions of the plan, are as follows: 12.1.1 Board: (i) To amend the plan (subject to Sections 11.1.1 and 11.1.2); (ii) To appoint and remove members of the Committee, including the plan administrator; (iii) To appoint and remove any investment managers; (iv) To appoint and remove the Trustee under the plan; (v) To determine the amount to be contributed to the plan each year by the Employer; (vi) To authorize the Committee to invest assets of the trust in Employer stock or to establish an Employer stock fund as described in Section 9.1; and -55- 56 (vii) To terminate the plan. 12.1.2 Committee: (i) To interpret the provisions of the plan and to determine the rights of participants under the plan, except to the extent otherwise provided in Section 16 relating to claims procedure; (ii) To administer the plan in accordance with its terms, except to the extent powers to administer the plan are specifically delegated to another named fiduciary or other person or persons as provided in the plan; (iii) To designate and approve any investment funds for participant directed investments, if permitted by the Employer under the Adoption Agreement; (iv) To account for the accrued benefits of participants; (v) To direct the Trustee in the distribution of trust assets; (vi) To direct the Trustee in the voting and tendering of Employer stock held by the trust to the extent provided in Section 9; (vii) To direct the Trustee in the purchase and sale of Employer stock for the trust, subject to the provisions of Section 8 and Section 9; and (viii) To establish such procedures as it may be advisable for the proper administration of the plan, including, but not limited to, procedures for changes in investment directions, transfers of assets between fund accounts, and applications for elective deferrals, employee after-tax contributions, participant loans, withdrawals, distributions, direct transfers, and rollover contributions. 12.1.3 Plan Administrator: (i) To file such reports as may be required with the United States Department of Labor, the Internal Revenue Service, and any other government agencies to which reports may be required to be submitted from time to time; (ii) To comply with requirements of law for disclosure of plan provisions and other information relating to the plan to participants and other interested parties; and (iii) To administer the claims procedure to the extent provided in Section 16. 12.1.4 Trustee: (i) To invest and reinvest trust assets, if authorized by the Board, or pursuant to direction of any investment manager(s) appointed by the Board; (ii) To invest and reinvest trust assets in Employer stock, if authorized by the Board and directed by the Committee; -56- 57 (iii) To make distributions to plan participants as directed by the Committee; (iv) To render annual accountings to the Employer as provided in the plan; and (v) Otherwise to hold, administer and control the assets of the trust as provided in Section 20 of the plan. 12.1.5 Investment Manager: In the event the Board shall appoint an investment manager to manage (including the power acquire and dispose of) assets of the trust, as provided in Section 20.1.3 of the plan, the duties of the investment manager shall be to manage, acquire and dispose of assets of the trust, or to direct the Trustee in the management, acquisition, and disposition of assets of the trust. 12.1.6 Custodian: If the Trustee appoints a custodian to hold and manage the assets of the trust under the plan, then notwithstanding the foregoing provisions of this Section 12.1 or any other provisions of the plan, the duties of the custodian shall be to receive, hold, sell, exchange, and otherwise deal with the assets of the trust as instructed by the Trustee (or by the investment manager, if any, to the extent of the authority of the investment manager), to make distributions to participants as directed by the Committee, and to render accounts to the Trustee as provided in Section 20.2. 12.2 CO-FIDUCIARY LIABILITY Except as otherwise provided in ERISA, a named fiduciary shall not be responsible or liable for any act or omission of another named fiduciary with respect to fiduciary responsibilities allocated to such other named fiduciaries, and a named fiduciary of the plan shall be responsible and liable only for its own acts or omissions with respect to fiduciary duties specifically allocated to it and designated as its responsibility. SECTION 13. BENEFITS NOT ASSIGNABLE; FACILITY OF PAYMENTS 13.1 BENEFITS NOT ASSIGNABLE No portion of any benefit held or paid under the plan with respect to any participant shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void, nor shall any portion of such accrued benefit be in any manner payable to any assignee, receiver or trustee, or be liable for his debts, contracts, liabilities, engagements, or torts, or be subject to any legal process to levy upon or attach; provided, that this Section 13.1 shall not apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a participant pursuant to a qualified domestic relations order, as defined in Section 414(p) of the Code, or any domestic relations order entered before January 1, 1985. 13.2 PAYMENT TO MINORS AND OTHERS If any individual entitled to receive any payments under the plan shall be physically, mentally, or legally incapable of receiving or acknowledging receipt of such payment, the Committee, upon the receipt of satisfactory evidence of his incapacity and satisfactory evidence that another person or institution is maintaining him and that no guardian or committee has been appointed for him, may cause any payment otherwise payable to him to be made to such person or institution so maintaining him. Payment to such person or institution shall be in full satisfaction of all claims by or through the participant to the extent of the amount thereof. -57- 58 SECTION 14. TERMINATION OF PLAN AND TRUST; REMOVAL OF TRUSTEE; MERGER OR CONSOLIDATION OF PLAN 14.1 COMPLETE TERMINATION In the event of termination of the plan, all contributions shall cease and no additional participants shall enter the plan. The assets under the plan shall thereupon vest (that is, become nonforfeitable) in the participants, beneficiaries, or other successors in interest, as their interests may appear, and such vested benefit of each such individual shall be held in the plan for distribution in accordance with the provisions of Sections 3 and 4 of the plan; provided, that the Committee may in its discretion provide for a liquidation of the trust and distributions to the participants of their vested accrued benefits in cash, in kind, or in any combination thereof. In addition, the participant's accrued benefit may, without the participant's consent, be distributed to the participant or transferred to another defined contribution plan (other than an employee stock ownership plan defined in Section 4975(e)(7) of the Code) of an affiliated employer. For purposes of the plan, a termination of Employer contributions or a suspension or reduction of such contributions which amounts in effect to a termination of contributions shall be regarded as a termination of the plan. 14.2 PARTIAL TERMINATION In the event of a partial termination of the plan, the provisions of Section 14.1 regarding a complete termination shall apply in determining interests and rights of the participants and their beneficiaries with respect to whom the partial termination shall occur, and shall apply to the portion of the trust fund allocable to such participants and beneficiaries. 14.3 REMOVAL AND RESIGNATION OF TRUSTEE The Employer, at any time by written notice of at least 30 days to the Trustee, may remove the Trustee as trustee under the plan. The Trustee may resign at any time upon 30 days notice in writing to the Employer. As of the date of any such removal or resignation of the Trustee, the Trustee shall transfer the assets of the trust attributable to the plan as applied to the Employer to the successor trustee or custodian named in the notice. Prior to such transfer, the accounts of the Trustee shall be finally settled. Following such transfer, the Trustee shall be released and discharged from all further accountability or liability with respect to the assets of the trust fund and shall not be responsible in any way for further disposition of such assets or any part thereof. 14.4 MERGER OR CONSOLIDATION In the event of any merger or consolidation of the plan with any other plan, or a transfer of assets or liabilities of the plan to any other plan (which merged, consolidated, or transferee plan shall be referred to in this Section 14.4 as the "successor plan"), the amount which each participant would receive if the successor plan (and this plan, if he has any interest remaining therein) were terminated immediately after the merger, consolidation, or transfer shall be equal to or greater than the amount he would have received if this plan (and the successor plan, if he had any interest therein immediately prior to the merger, consolidation, or transfer) had been terminated immediately preceding the merger, consolidation, or transfer. SECTION 15. COMMUNICATION TO PARTICIPANTS In accordance with the requirements of ERISA, the plan administrator shall communicate the principal terms of the plan to the participants. The plan administrator shall make available for inspection by participants and their beneficiaries during reasonable hours, at the principal office of the Employer and at such other places as may be required by ERISA, a copy of the plan, the trust agreement, and such other documents as may be required by ERISA. SECTION 16. CLAIMS PROCEDURE The following claims procedure shall apply with respect to the plan: -58- 59 16.1 FILING OF A CLAIM FOR BENEFITS If a participant or beneficiary (the "claimant") believes that he is entitled to benefits under the plan which are not being paid to him or which are not being accrued for his benefit, he shall file a written claim therefor with the plan administrator. In the event the plan administrator shall be the claimant, all actions which are required to be taken by the plan administrator pursuant to this Section 16 shall be taken instead by another member of the Committee designated by the Committee. 16.2 NOTIFICATION TO CLAIMANT OF DECISION Within 90 days after receipt of a claim by the plan administrator (or within 180 days if special circumstances require an extension of time), the plan administrator shall notify the claimant of his decision with regard to the claim. In the event of such special circumstances requiring an extension of time, there shall be furnished to the claimant prior to expiration of the initial 90-day period written notice of the extension, which notice shall set forth the special circumstances and the date by which the decision shall be furnished. If such claim shall be wholly or partially denied, notice thereof shall be in writing and worded in a manner calculated to be understood by the claimant, and shall set forth: (i) the specific reason or reasons for the denial; (ii) specific reference to pertinent provisions of the plan on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the procedure for review of the denial. If the plan administrator fails to notify the claimant of the decision in a timely manner, the claim shall be deemed denied as of the close of the initial 90-day period (or the close of the extension period, if applicable). 16.3 PROCEDURE FOR REVIEW Within 60 days following receipt by the claimant of notice denying his claim, in whole or in part, or, if such notice shall not be given, within 60 days following the latest date on which such notice could have been timely given, the claimant shall appeal denial of the claim by filing a written application for review with the Committee. Following such request for review, the Committee shall fully and fairly review the decision denying the claim. Prior to the decision of the Committee, the claimant shall be given an opportunity to review pertinent documents and to submit issues and comments in writing. 16.4 DECISION ON REVIEW The decision on review of a claim denied in whole or in part by the plan administrator shall be made in the following manner: 16.4.1 Within 60 days following receipt by the Committee of the request for review (or within 120 days if special circumstances require an extension of time), the Committee shall notify the claimant in writing of its decision with regard to the claim. In the event of such special circumstances requiring an extension of time, written notice of the extension shall be furnished to the claimant prior to the commencement of the extension. If the decision on review is not furnished in a timely manner, the claim shall be deemed denied as of the close of the initial 60-day period (or the close of the extension period, if applicable). 16.4.2 With respect to a claim that is denied in whole or in part, the decision on review shall set forth specific reasons for the decision, shall be written in a manner calculated to be understood by the claimant, and shall cite specific references to the pertinent plan provisions on which the decision is based. 16.4.3 The decision of the Committee shall be final and conclusive. 16.5 ACTION BY AUTHORIZED REPRESENTATIVE OF CLAIMANT All actions set forth in this Section 16 to be taken by the claimant may likewise be taken by a representative of the claimant duly authorized by him to act in his behalf on such matters. The plan administrator and the Committee may require such evidence as either may reasonably deem necessary or advisable of the authority to act of any such -59- 60 representative. SECTION 17. PREVIOUSLY EXISTING QUALIFIED PLANS OF THE EMPLOYER By so designating in the Adoption Agreement, adoption of the plan shall amend and supersede in its entirety a previously existing defined contribution plan of the Employer which is qualified under Section 401(a) of the Code immediately prior to such adoption, as evidenced by a current favorable determination letter or opinion letter issued by the Commissioner of Internal Revenue or his delegate (which previously existing plan shall be referred to herein as the "prior plan"). Adoption of the instant plan shall be deemed to amend and supersede the prior plan and shall not be deemed to be a termination thereof. Except as permitted by regulations, no plan amendment or transaction having the effect of a plan amendment shall be effective if it eliminates or reduces any benefit protected under Section 411(d)(6) of the Code, or adds or modifies conditions relating to Section 411(d)(6) protected benefits, the result of which is a further restriction on such benefit, unless such protected benefits are preserved with respect to benefits accrued as of the later of the adoption date or effective date of the amendment. In applying the provisions of Section 5.2 following adoption of this plan, each participant in this plan on the effective date of adoption of this plan who was a participant in the prior plan immediately before such effective date shall have a vested percentage in his accrued benefit which shall not be less than the percentage of his benefit in the prior plan which would have been vested in him if the prior plan had continued in effect through the adjustment date for the plan year in which the vested percentage is being determined. SECTION 18. SPECIAL PROVISIONS RELATING TO TRANSFERS FROM QUALIFIED PLANS With the written approval of the Committee in accordance with procedures approved by the Committee, the Trustee shall receive and hold, as a part of the trust fund, assets (hereinafter referred to as the "transferred assets," which shall be deemed to include all increments allocable to such transferred assets) transferred directly from the trustee or custodian of any other retirement plan (hereinafter referred to as the "transferor plan") which is qualified under Section 401(a) of the Code. Such transferred assets may include cash or other types of property allowed as an investment under the plan. In applying the provisions of this Section 18, the following special provisions shall apply: 18.1 CERTAIN TRANSFERS TO THE PLAN NOT PERMITTED The Committee shall not permit nor the Trustee accept any transfer from the trustee of a defined benefit plan, a defined contribution plan which is subject to the funding standards of Section 412 of the Code, or any defined contribution plan that would cause this plan to be the direct or indirect transferee of a plan which is subject to the joint and survivor annuity requirements of Section 401(a)(11) of the Code, or would otherwise cause this plan to become subject to such requirements. 18.2 NONFORFEITABILITY OF TRANSFERRED ASSETS The transferred assets and all rights to or derived therefrom shall be at the time of the transfer and at all times thereafter fully nonforfeitable and vested in the respective participants (and in the proportions) to whom such transferred assets had been allocated under the transferor plan. 18.3 PROTECTED BENEFITS UNDER SECTION 411(D)(6) OF THE CODE The protected benefits of the transferor plan, as defined in Section 411(d)(6) of the Code, shall be preserved with respect to the direct transfer account of each participant. 18.4 LIABILITY OF TRUSTEE The Trustee under this plan shall not be liable or responsible for any acts or omissions in the administration of any transferor plan and the trust thereunder of any other person or entity who was trustee, custodian, or other fiduciary under any such transferor plan, and the Trustee shall be held harmless from such liability or responsibility. 18.5 SEPARATE ACCOUNTS -60- 61 The Trustee shall keep a separate and identifiable account with respect to the transferred assets of each participant (which may be commingled for investment purposes with other assets of the trust), designated as the "direct transfer account." The direct transfer account of each participant shall be adjusted in the manner specified in Section 7. 18.6 GENERAL To the extent not inconsistent with the provisions of this Section 18, the Committee may promulgate rules or by-laws supplementing and implementing the provisions of this Section 18. SECTION 19. ROLLOVERS 19.1 ACCEPTANCE OF ROLLOVERS BY THIS PLAN To the extent elected by the Employer in the Adoption Agreement, an employee or participant who receives, or deemed to receive, a distribution of all or part of his interest from another retirement plan which is qualified under Section 401(a) of the Code on the date of such distribution may, with the written consent of the Committee and in accordance with procedures approved by the Committee, transfer all or a part of such distribution to the Trustee under this plan. The amount so transferred may include cash or other types of property allowed as an investment under the plan. In applying the provisions of this Section 19, the following special provisions shall apply: 19.1.1 The transfer to the Trustee must occur on or before the 60th day following the receipt by the employee or participant of such distribution or, if such distribution has previously been deposited in an individual retirement account or individual retirement annuity (as defined in Section 408 of the Code), the transfer must occur on or before the 60th day following the receipt by the employee or participant of the balance to his credit under such individual retirement account or individual retirement annuity. 19.1.2 For distributions made to the employee or participant prior to January 1, 1993, the distribution must be a qualified total distribution within the meaning of Section 402(a)(5)(E)(i) of the Code. For distributions made to the employee or participant after December 31, 1992, the distribution must be an eligible rollover distribution within the meaning of Section 402(c)(4) of the Code. 19.1.3 The amount transferred to the Trustee is limited to the maximum rollover amount as provided in Section 402(a)(5)(B) of the Code (Section 402(c)(2) of the Code for distributions made to an employee or participant after December 31, 1992). 19.1.4 The amount transferred to the Trustee shall be credited to a separate account with respect to the employee or participant, designated as the "rollover account." With respect to each rollover account, the following special provisions shall apply: (i) Except as provided in paragraph (iii) below, each rollover account shall be adjusted in the manner specified in Section 7. (ii) Each employee or participant having a rollover account shall have a nonforfeitable interest therein. (iii) Except as otherwise provided in this Section 19, the assets in the rollover account shall be administered by the Trustee in the same manner as other trust assets. Assets of the rollover account may be commingled for investment with other assets of the trust fund; provided, that with respect to a rollover contribution made other than on an adjustment date, such contribution shall not be commingled until immediately following the next adjustment date, and for the period preceding such adjustment date the rollover account of an -61- 62 employee or participant shall be adjusted under Section 7 as if such account constituted the entire trust fund. 19.1.5 If an eligible employee shall be permitted under the Adoption Agreement to make such a transfer prior to his completion of the participation requirements of Section 1.40, his rollover account shall represent his sole interest in the plan until he becomes a participant. 19.2 ROLLOVER DISTRIBUTIONS This Section 19.2 shall be effective with respect to distributions made to a participant or beneficiary after December 31, 1992. Subject to the provisions of this Section 19.2, a participant who becomes entitled to receive a distribution of all or part of his account may, in accordance with procedures adopted by the Committee, elect to have such distribution treated as a rollover distribution and transferred by the Trustee directly to the trustee or custodian of another retirement plan or individual retirement arrangement (the "transferee plan"). In applying the provisions of this Section 19.2, the following provisions shall apply: 19.2.1 The distribution to be made to the participant must be an eligible rollover distribution within the meaning of Section 402(c)(4) of the Code. 19.2.2 The amount transferred to the transferee plan may not exceed the amount that would otherwise be includable in the gross income of the participant if not transferred as provided in this Section 19.2. 19.2.3 The transferee plan must be an eligible retirement plan within the meaning of Section 401(a)(31)(D) of the Code. 19.2.4 The election provided for in this Section 19.2 shall also apply to (i) the surviving spouse of a participant who becomes entitled to receive a distribution from the plan upon the death of the participant, and (ii) the spouse or former spouse of a participant who becomes entitled to receive a distribution from the plan pursuant to a qualified domestic relations order (within the meaning of Section 414(p) of the Code). Notwithstanding the foregoing, a surviving spouse of a participant may only elect to have an eligible rollover distribution transferred directly to the trustee or custodian of an individual retirement arrangement that qualifies as an eligible retirement plan under Section 401(a)(31)(D) of the Code. 19.2.5 At least 30 days, but no more than 90 days, before a distribution is to be made from a participant's account, the plan administrator shall provide the participant or other distributee with a written statement advising him of his rights under this Section 19.2, and of the requirement that federal income taxes be withheld on the distribution if he does not elect to have the distribution transferred directly to a transferee plan. The written statement shall contain such other information as is required by Section 402(f) of the Code. 19.2.6 Notwithstanding anything contained in this Section 19.2 to the contrary, the provisions of this Section 19.2 shall at all times be construed and enforced according to the requirements of Section 401(a)(31) of the Code, as the same may be amended from time to time. SECTION 20. TRUST PROVISIONS 20.1 TRUSTEE'S POWERS 20.1.1 The Trustee shall receive, hold, manage, convert, sell, exchange, invest, reinvest, disburse, and otherwise deal with the assets of the trust, including contributions made by the Employer and employees to the trust and the income and profits therefrom, in the manner and -62- 63 for the uses and purposes in the plan and as herein provided. Subject to the fiduciary responsibilities imposed upon the Trustee by ERISA, the plan, and the trust, and subject further to the provisions of Sections 8, 9, 10.1, 20.1.2, and 20.1.3, in the investment, reinvestment and management of the fund constituting the trust, and the Trustee is hereby authorized and empowered: (i) To receive all rents, issues, dividends, income, profits and properties of every nature due the trust, and to hold or make distribution thereof in accordance with the terms of the plan and this trust agreement. (ii) To retain the properties now or hereafter received by the trust, or to dispose of them as and when deemed advisable by public or private sale or exchange or otherwise, for cash or upon credit, or partly upon cash and partly upon credit, and upon such terms and conditions as shall be deemed proper. (iii) To participate in any plan of liquidation, reorganization, consolidation, merger, or other financial adjustment of any corporation or business in which the trust is or shall be financially interested, and to exchange any property held in the trust for property issued under any such plan. (iv) To invest or reinvest principal and income of the funds belonging to the trust in (a) common or preferred stocks or options to buy and sell such stocks, (b) bonds, notes or other securities (including commercial paper and other short-term obligations), (c) mutual funds, (d) guaranteed investment contracts issued by a legal reserve life insurance company, (e) real or personal properties or interests therein, (f) cash equivalent deposits, certificates of deposit or accounts (including such deposits or accounts issued by the Trustee), or any combination of (a) through (f), as shall from time to time be approved by the Trustee, or to hold any part of such principal or income in cash as may from time to time be determined by the Trustee. (v) If authorized by the Board and directed by the Committee, to invest or reinvest principal and income of the funds belonging to the trust in Employer stock. (vi) To hold any investment belonging to the trust in bearer form, or to register and hold the same in the name of the Trustee or in the name of its duly authorized nominee. (vii) To borrow for the benefit of the trust for such periods of time and upon such terms and conditions as may be deemed proper, any sum or sums of money, and to secure such loans by mortgage or pledge of any property belonging to the trust, without personal liability therefor. (viii) To execute such deeds, leases, contracts, bills of sale, notes, proxies, and other instruments in writing as shall be deemed requisite or desirable in the proper administration of the trust. (ix) To compromise, arbitrate, or otherwise adjust or settle claims in favor of or against the trust, except to the extent the plan provides otherwise with respect to claims for benefits under the plan. -63- 64 (x) To make distributions to participants or their beneficiaries at the direction of the Committee. (xi) To renew or extend or participate in the renewal or extension of any mortgage, upon such terms as may be deemed advisable, and to agree to a reduction in the rate of interest on any mortgage or to any other modification or change in the terms of any mortgage or of any guarantee pertaining thereto, in any manner and to any extent that may be deemed advisable for the protection of the trust fund or the preservation of the value of any investment of the trust fund; to waive any default, whether in the performance of any covenant or condition of any mortgage or in the performance of any guarantee, or to enforce any such default in such manner and to such extent as may be deemed advisable; to exercise and enforce any and all rights of foreclosure, to bid in property on foreclosure, to take a deed in lieu of foreclosure with or without paying a consideration therefor, and in connection therewith to release the obligation on the bond secured by such mortgage; and to exercise and enforce in any action, suit, or proceeding at law or in equity any rights or remedies in respect to any mortgage or guarantee. (xii) To repair, alter, or improve any buildings which may be on any real estate forming part of the trust fund or to erect entirely new structures thereon. (xiii) To exercise the right to vote or tender any securities held in the trust, or to grant proxies to vote such securities, except to the extent that the right to vote or tender any such securities may specifically be designated to another hereunder. (xiv) To make loans from the trust to participants in accordance with the provisions of Section 6.6. (xv) To receive and hold, as part of the trust fund, direct transfers (as described in Section 18) and rollovers (as described in Section 19), subject to all limitations and requirements set forth in the plan. (xvi) In accordance with the provisions of Section 8 and subject to the direction of the Committee, to invest and reinvest amounts credited to participants' directed separate accounts in such directed investment funds selected by the Committee, including an Employer stock fund established pursuant to Section 9. (xvii) To transfer, at any time and from time to time, a portion of the assets held by it pursuant to this plan to any common trust fund within the meaning of Section 584 of the Code or to any trust which is qualified under Section 401(a) and exempt under Section 501(a) of the Code, and which common trust fund is maintained as a medium for the pooling of funds of pension and profit-sharing trusts for diversifying investments. The terms and provisions of any such trust shall, upon such transfer and execution, be incorporated by reference into this plan to the extent of the assets so transferred. (xviii) To transfer monies of this trust to a separate fund or funds maintained solely for the assets of the trust established with respect to the plan -64- 65 maintained by the Employer, which fund or funds shall not be commingled, pooled, or consolidated for investment with assets of another qualified trust. Each such fund shall be referred to herein as an "investment fund" and collectively as "investment funds." Assets transferred to an investment fund shall be invested and reinvested by the Trustee in accordance with the provisions of this Section 20. (xix) When and to the extent directed by the Committee, to invest all or a portion of the funds of the trust in a group annuity or guaranteed investment contract issued by a legal reserve life insurance company; provided, that if the Trustee requests, the Employer shall provide the Trustee with satisfactory indemnification against any loss, damage or expense (including expenses of defense) incurred by the Trustees with respect to such investment. (xx) At the direction of the Board, to appoint a custodian designated by the Board who shall have the authority and responsibilities set forth in Section 12.1.6. (xxi) To do all acts and to exercise any and all powers, although not specifically set forth herein, as the Trustee may deem are for and in the best interest of the plan, the participants, and beneficiaries. 20.1.2 In carrying out the powers and duties specified in Section 20.1.1 regarding the investment and reinvestment of trust assets, the Trustee shall consider any general investment guidelines which may be communicated to the Trustee from time to time by the Committee; provided, that the Trustee shall not be required or obligated to follow any such general guidelines, and all investment decisions shall be the sole responsibility of the Trustee unless specifically provided to the contrary in the trust agreement or the plan. 20.1.3 The Board may at any time direct the Trustee to segregate all or a specified portion of the trust assets into a separate fund (the "directed fund") and invest it in accordance with the directions of one or more investment managers appointed by the Board, subject to the following provisions: (i) Any investment manager so appointed shall be (a) registered as an investment advisor under the Investment Advisers Act of 1940; (b) a bank, as defined in the Investment Advisers Act of 1940; or (c) an insurance company qualified under the laws of more than one state to manage, acquire, and dispose of assets of the trust under the plan. (ii) The Board shall deliver to the Trustee a copy of a written acknowledgment by the investment manager that it meets the requirements of paragraph (i), that it is a fiduciary with respect to the plan, and that it has accepted appointment as an investment manager. The Trustee shall be protected in assuming that the appointment of an investment manager remains in effect until the Trustee shall be notified in writing by the Board that such investment manager has been removed or has resigned. (iii) The Trustee shall invest and reinvest the directed funds only to the extent and in the manner directed by the investment manager. If the Trustee has not received instructions from an investment manager with respect to the investment of all or a part of the directed fund, the Trustee shall invest such -65- 66 amounts in interest bearing obligations having maturities of 90 days or less, or in a common fund comprised substantially of such obligations, until directed otherwise by the investment manager. (iv) Any investment manager may from time to time issue orders for the purchase or sale of securities directly to a broker or dealer, and the Trustee, upon direction from the investment manager, shall execute and deliver appropriate trading authorization. Written notice of the issuance of each order and of execution of each order shall be authority to the Trustee to receive securities purchased against payment therefor and to deliver securities sold against receipt of the proceeds therefrom, as the case may be. (v) Upon removal or resignation of an investment manager, and pending appointment of a substitute investment manager, the Trustee shall invest any uninvested cash in the manner described in paragraph (iii), and shall not sell or liquidate any investments of the directed fund. (vi) No plan fiduciary other than an investment manager shall be liable for any act or omission of such investment manager unless such fiduciary participates knowingly in, or knowingly undertakes to conceal, such act or omission which such fiduciary knows to be a breach of the fiduciary responsibility of the investment manager with respect to the plan. Further, no plan fiduciary other than an investment manager shall be under any obligation to invest or otherwise manage the assets of the plan that are subject to the management of the investment manager and, to the maximum extent permitted by ERISA, the plan fiduciaries other than the investment manager shall have no liability or responsibility for acts or failures to act as directed by the investment manager, or, subject to paragraph (iii), failing to act in the absence of any such direction. 20.1.4 Notwithstanding any other provisions of Section 20, in no event shall the Trustee exercise any powers under the plan in a manner that will constitute a prohibited transaction as defined in Section 4975 of the Code and in Section 406 of ERISA. 20.1.5 Whenever a direction or authorization is required or permitted by the plan or trust to be given to the Trustee, such direction or authorization shall be duly made by the Trustee's receipt of: (i) a copy of the corporate resolution or resolutions of the Board certified by the Secretary of the Employer, in the case of any action taken by the Board; (ii) a written instrument signed in the name of the Employer, by its President or Secretary, in the case of any action taken by the Employer; or (iii) a written instrument signed by the duly authorized representative of the Committee, in the case of any action taken by the Committee. Notwithstanding the foregoing, the Trustee, in its sole discretion, may accept such other evidence of the direction or authorization or may require such further evidence of the direction or authorization as it deems reasonable and necessary. The Trustee shall be fully protected in acting upon any instrument, notice, resolution, order, certificate, opinion, facsimile, letter, or other document that the Trustee believes to be genuine. No person dealing with the Trustee in any transaction shall be required to inquire into the decisions or authority of the Trustee or see to the application by the Trustee of any property involved in such transaction; provided, that this provision shall not relieve any plan fiduciary dealing with the Trustee from fulfilling his fiduciary duty. For the purposes of this trust agreement, the "fiduciary duty" of the plan fiduciaries (including the Trustee) shall include the obligation not to enter into prohibited transactions as described in Section 20.1.4 and all other duties imposed on plan fiduciaries by the plan, the trust, and ERISA. -66- 67 20.1.6 In the management of the trust fund, the Trustee may employ agents and delegate to them such ministerial and limited discretionary duties as the Trustee shall see fit, and the Trustee shall not be responsible for any loss occasioned by any such agent unless the Trustee shall commit a breach of its fiduciary duty (as defined in Section 20.1.5) in the designation of such agent, in establishing or implementing a procedure for making such designation, or in continuing such designation in effect. The Trustee may consult with counsel of its own selection, who may also be of counsel to the Sponsor. The reasonable compensation or fees charged by all such persons for their services shall be deemed to be expenses of administration of the trust. 20.1.7 All real and personal property taxes, income taxes, and other taxes of any and all kinds whatsoever upon or in respect of the trust hereby created or any money, income, or property forming a part thereof, and all expenses actually and properly incurred in the administration of the trust, shall be paid by the Trustee out of principal or income of the trust, as the Trustee shall determine; provided, that the Employer may, in the discretion of the Board, pay any of the expenses incurred in the administration of the trust. The payment out of the trust of any taxes and expenses authorized in this Section 20.1.7, and the payment of all other costs, expenses, or compensation authorized by this plan to be paid out of the trust, shall be deemed to be for the exclusive benefit of the participants under the plan. 20.2 ACCOUNTINGS The Trustee shall keep accurate and detailed accounts of all investments, receipts, disbursements, and other transactions and proceedings of the trust and all such accounts and other records relating thereto shall be open to inspection and audit at all reasonable times by any person designated by the Board or the Committee. Within 90 days after the end of each plan year, and at such other times as the Board may reasonably require, the Trustee shall prepare and deliver to the Committee a statement of its accounts and proceedings for such plan year. Each such statement shall be certified as accurate by the Trustee and, with respect to the plan year in question, shall contain the following: 20.2.1 A statement of assets and liabilities aggregated by categories and valued at fair market value as of the close of the plan year in question. 20.2.2 A statement setting forth changes in the net assets available for plan benefits, including a statement of receipts and disbursements during the plan year, aggregated by general source and application. 20.2.3 A statement setting forth all assets held for investment purposes aggregated and identified by issuer, borrower, lessor, or similar party to the transaction, maturity date, rate of interest, collateral, par or maturity value, cost, and current fair market value. 20.2.4 A statement setting forth all loans or fixed income obligations which were in default as of the close of the plan year or were classified during the plan year as uncollectible, and such detailed information with respect thereto as is required by ERISA to be included in the annual report to be filed with the Internal Revenue Service. 20.2.5 A statement setting forth all leases which were in default as of the close of the plan year or were classified during the plan year as uncollectible, and such detailed information with respect thereto as is required by ERISA to be included in the annual report to be filed with the Internal Revenue Service. 20.2.6 If some or all of the assets of the trust are held in a guaranteed investment contract issued by a legal reserve life insurance company, such information as is required by the plan administrator to comply with the requirement to file an annual report with the Internal -67- 68 Revenue Service. 20.2.7 A statement setting forth each reportable transaction (as defined in ERISA), including such detailed information with respect thereto as is required by ERISA to be included in the annual report to be filed with the Internal Revenue Service. 20.2.8 If some or all of the assets of the trust are held in a common or collective trust maintained by the Trustee, the most recent annual statement of assets and liabilities of said common or collective trust. 20.2.9 Such other information as may reasonably be required by the plan administrator to comply with the requirements to file an annual report with the Internal Revenue Service. 20.3 COMPENSATION OF TRUSTEE If the Trustee is a bank or corporation qualified to serve as a trustee under state law, it shall be entitled to retain or receive out of the trust fund (subject to the provisions of Section 20.1.6) as compensation for its services hereunder, compensation in accordance with its usual schedule of fees in effect at the time of performance of such services, but not in excess of reasonable compensation for such services. If the Trustees are individuals, whether or not employees of the Employer, they shall not receive any compensation for their services as Trustees. 20.4 RESPONSIBILITIES AND SCOPE OF DUTIES OF TRUSTEE The Trustee hereby agrees to hold in trust and administer the fund hereunder, subject to all of the terms and conditions of the plan, and to render an annual accounting as provided in Section 20.2. The Trustee shall act in accordance with written instructions or directions of the Committee made in conformity with ERISA and the terms of the plan, and signed by an authorized representative of the Committee. In carrying out such instructions or directions, the Trustee shall not be obligated to inquire into the purpose or purposes for such instructions or directions or whether such instructions or directions are consistent with the plan or are otherwise proper. 20.5 FAILURE TO DIRECT TRUSTEE If at any time the Employer or the Committee shall be incapable for any reason of giving instructions, directions, or authorizations to the Trustee as herein provided, the Trustee may act without such instructions, directions, or authorizations as it, in its discretion, shall deem appropriate or advisable under the circumstances for carrying out the provisions of the plan and trust. The Trustee shall be fully protected with respect to any action taken or omitted consistent with the terms of the plan and trust or at the direction of the Employer, the Committee, or any participant or beneficiary pursuant to Section 8 or Section 9, or any action taken or omitted upon the failure of the Employer or the Committee to give directions to the Trustee as required or permitted by the plan and trust. 20.6 INDEMNIFICATION OF TRUSTEE If the Trustee shall be one or more individuals and not a corporation or banking institution, the Employer shall indemnify the Trustee, directly from the Employer's general assets (including the proceeds of any insurance policy, the premiums for which are paid from the Employer's assets), from and against any and all claims, demands, losses, damages, expenses (including, by way of illustration and not limitation, reasonable attorneys' fees and other legal and litigation costs), judgments, and liabilities arising from, out of, or in connection with the administration of the plan or trust (including without limitation, any action taken or omitted pursuant to directions contained in the plan or trust, at the direction of the Employer, the Committee, or any participant or beneficiary pursuant to Section 8 or Section 9, or any action taken or omitted upon the failure of the Employer or the Committee to give directions to the Trustee as required by or permitted by this trust or the plan) or the Trustee's fiduciary duties under the plan or trust, except when the same are judicially determined to be due to the gross negligence or willful misconduct of the Trustee (the "exception"). The exception shall not apply with respect to any action or failure to act by the Trustee if the action or failure to act was directed by the Employer or the Committee (either directly or by failing to provide directions when requested). The Trustee shall notify the Employer of any claim, demand, loss, damage, expense, judgment, or liability asserted against the Trustee that may give rise to the right of indemnification -68- 69 provided for in this Section 20.6 as soon as practicable after the Trustee has actual knowledge thereof. With the prior written consent of the Trustee, the Employer shall have the right, at its expense, to conduct the defense of the Trustee in any proceeding to which this Section 20.6 applies. The Employer also agrees to reimburse the Trustee for any expense (including, by way of illustration and not limitation, reasonable attorneys' fees and other legal and litigation costs) incurred by the Trustee in enforcing the provisions of this Section 20.6. 20.7 MODIFICATION OF THIS SECTION An Employer may amend or modify the administrative provisions of this Section 20 by adopting a separate trust or custodial account document, provided that such other document does not cause the plan to fail to satisfy the requirements of Section 401(a) of the Code. The provisions of such other document shall override any contrary provisions in this Plan. This subsection shall not apply, however, if the plan as adopted by the Employer is a standardized plan. SECTION 21. QUALIFICATION OF PLAN 21.1 NON-STANDARDIZED PLANS If the plan is not a standardized form plan, the Employer shall promptly submit the plan (including the Adoption Agreement and all necessary supporting documents), and all amendments permitted under Section 11.1.2 which are made by the Employer to the plan, to the Internal Revenue Service with a request for a determination letter that the plan as applied to the Employer meets the qualification requirements of Section 401(a) of the Code and that the trust constituting a part of the plan is exempt under Section 501(a) of the Code. 21.2 DENIAL OF QUALIFICATION Should the Internal Revenue Service determine pursuant to such initial submission that the plan as applied to the Employer does not so qualify, the following procedures shall be followed: 21.2.1 Notwithstanding any other provisions of the plan, the plan as applied to the Employer shall be deemed canceled, the Employer shall not be a party to the plan, and no employee of the Employer or person claiming under any such employee shall have any right or claim to any asset or benefit of the trust fund, except as provided in Section 21.2.3. 21.2.2 The Trustee shall liquidate the trust of the Employer and, after paying or making provision for the compensation of the Trustee and any expenses of administration or liquidation of the trust, shall pay the balance of the proceeds of such liquidation to the Employer. 21.2.3 The Employer shall refund to each employee the amount of any contribution made by him (or, if less, the amount of such contribution then in his account). 21.3 NOTIFICATION OF SPONSOR The Employer shall promptly advise the Sponsor should it be notified by the Internal Revenue Service that the plan as applied to the Employer is no longer qualified as specified in Section 21.1. If the plan as applied to the Employer is disqualified, such plan will no longer participate in this prototype plan and will be considered an individually designed plan. SECTION 22. SPECIAL TOP-HEAVY PROVISIONS The following special provisions shall apply and supersede any conflicting provisions in the plan or Adoption Agreement with respect to any plan year beginning after December 31, 1983 in which the plan is determined to be top-heavy: -69- 70 22.1 DEFINITIONS The following definitions shall apply for purposes of this Section 22: 22.1.1 "Determination date" shall mean for any plan year subsequent to the first plan year, the last day of the preceding plan year. For the first plan year of the plan, the last day of that year shall be the determination date. 22.1.2 "Key employee" shall mean any employee or former employee (and the beneficiaries of such employee) who at any time during the determination period was an officer of the Employer if such individual's annual compensation exceeds 50% of the dollar limitation under Section 415(b)(1)(A) of the Code, an owner (or considered an owner under Section 318 of the Code) of one of the ten largest interests in the Employer if such individual's compensation exceeds 100% of the dollar limitation under Section 415(c)(1)(A) of the Code, a five percent owner of the Employer, or a one percent owner of the Employer who has an annual compensation of more than $150,000. Annual compensation means compensation as defined in Section 23.5.2, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the employee's gross income under Sections 125, 402(e)(3), 402(h) or 403(b) of the Code. The determination period is the plan year containing the determination date and the preceding four plan years. The determination of who is a key employee will be made in accordance with Section 416(i)(1) of the Code and the regulations thereunder. A "non-key employee" shall mean any employee or former employee who is not a key employee. 22.1.3 "Permissive aggregation group" shall mean the required aggregation group of plans plus any other plan or plans of the Employer which, when considered as a group with the required aggregation group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code. 22.1.4 "Present value" shall mean the present value determined by reference to the interest and mortality rates specified in Adoption Agreement. 22.1.5 "Required aggregation group" shall mean (i) each qualified plan of the Employer in which at least one key employee participates or participated at any time during the determination period (regardless of whether the plan has terminated), and (ii) any other qualified plan of the Employer which enables a plan described in (i) to meet the requirements of Sections 401(a)(4) or 410 of the Code. 22.1.6 "Top-heavy plan" shall mean, for any plan year beginning after December 31, 1983, this plan if any of the following conditions exists: (i) The top-heavy ratio for this plan exceeds 60% and this plan is not part of any required aggregation group or permissive aggregation group of plans. (ii) This plan is a part of a required aggregation group of plans but not part of a permissive aggregation group and the top-heavy ratio for the group of plans exceeds 60%. (iii) This plan is a part of a required aggregation group and part of a permissive aggregation group of plans and the top-heavy ratio for the permissive aggregation group exceeds 60%. 22.1.7 "Top-heavy ratio" shall mean the following: -70- 71 (i) If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer has not maintained any defined benefit plan which during the five-year period ending on the determination date(s) has or has had accrued benefits, the top-heavy ratio for this plan alone or for the required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of the accrued benefits of all key employees as of the determination date(s) [including any part of any accrued benefit distributed in the five-year period ending on the determination date(s)], and the denominator of which is the sum of all accrued benefits [including any part of any accrued benefit distributed in the five-year period ending on the determination date(s)], both computed in accordance with Section 416 of the Code and the regulations thereunder. Both the numerator and denominator of the top-heavy ratio are increased to reflect any contribution not actually made as of the determination date, but which is required to be taken into account on that date under Section 416 of the Code and the regulations thereunder. (ii) If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer maintains or has maintained one or more defined benefit plans which during the five-year period ending on the determination date(s) has or has had any accrued benefits, the top-heavy ratio for any required or permissive aggregation group as appropriate is a fraction, the numerator of which is the sum of accrued benefits under the aggregated defined contribution plan or plans for all key employees, determined in accordance with paragraph (i) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all key employees as of the determination date(s), and the denominator of which is the sum of the accrued benefits under the aggregated defined contribution plan or plans for all participants, determined in accordance with paragraph (i) above, and the present value of accrued benefits under the defined benefit plan or plans for all participants as of the determination date(s), all determined in accordance with Section 416 of the Code and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the top-heavy ratio are increased for any distribution of an accrued benefit made in the five-year period ending on the determination date. (iii) For purposes of paragraphs (i) and (ii) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent valuation date that falls within or ends with the 12-month period ending on the determination date, except as provided in Section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan. The account balances and accrued benefits of a participant (a) who is a non-key employee but who was a key employee in a prior year, or (b) who has not been credited with at least one hour of service with any employer maintaining the plan at any time during the five-year period ending on the determination date will be disregarded. The calculation of the top-heavy ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. 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. The -71- 72 accrued benefit of a participant who is a non-key employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code. 22.1.8 "Valuation date" shall mean the adjustment date defined in Section 1.4. 22.2 TOP-HEAVY REQUIREMENTS Notwithstanding any other provisions of the plan, the plan must satisfy the following requirements for any plan year in which the plan is a top-heavy plan: 22.2.1 Minimum allocation requirements: Except as otherwise provided in (a) and (b) below, the Employer contributions and forfeitures allocated on behalf of any participant who is a non-key employee shall not be less than the lesser of three percent of such participant's compensation or, in the case where the Employer has no defined benefit plan which designates this plan to satisfy Section 401 of the Code, the largest percentage of Employer contributions and forfeitures (as a percentage of the first $200,000 of the key employee's compensation) allocated on behalf of any key employee for that year. If the highest percentage of Employer contributions and forfeitures allocated to a key employee is less than three percent, elective deferrals shall be considered when determining the amount of contributions made on behalf of key employees. The minimum allocation is determined without regard to any Social Security contribution. This minimum allocation shall be made even though, under other plan provisions, the participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the year, because of (i) the participant's failure to complete 1,000 hours of service (or any equivalent provided in the plan), (ii) the participant's failure to make mandatory employee contributions to the plan, or (iii) compensation less than a stated amount. For purposes of computing the minimum allocation, compensation shall mean compensation as defined in Section 23.5.2 of the plan. The provisions of this Section 22.2.1 shall not apply: (a) to any participant who was not employed by the Employer on the last day of the plan year, or (b) to any participant to the extent the participant is covered under any other plan or plans of the Employer and the Employer has provided in Section XVII. B. of the Adoption Agreement that the minimum allocation or benefit requirement applicable to top-heavy plans will be met in the other plan or plans. The minimum allocation required (to the extent required to be nonforfeitable under Section 416(b) of the Code) may not be forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the Code. Neither elective deferrals nor matching contributions made by the Employer under Section 2 of the plan shall be taken into account for purposes of the minimum allocation required under this Section 22.2.1 in the event this plan is top-heavy and another plan of the Employer is not designated to satisfy the top-heavy requirements of Section 416 of the Code. If any additional contribution is required to be made by the Employer on behalf of a participant to satisfy the provisions of this Section 22.2.1, such contribution shall be allocated to the participant's matching contribution account or discretionary Employer contribution account, as determined by the Committee. The treatment of any elective deferrals or matching contributions for purposes of the minimum allocation requirement shall be made in accordance with Section 1.416-1 of the Income Tax Regulations. 22.2.2 Minimum vesting requirements: For any plan year in which this plan is top-heavy, one of the minimum vesting schedules as elected by the Employer in the Adoption Agreement shall automatically apply to the plan. The minimum vesting schedule applies to all benefits within the meaning of Section 411(a)(7) of the Code, except those attributable to elective deferrals and employee after-tax contributions, including benefits accrued before the effective date of Section 416 and benefits accrued before the plan became top-heavy. Further, no reduction in vested benefits may occur in the event the plan's status as top-heavy changes for any plan year. However, -72- 73 this Section 22.2.2 does not apply to the accrued benefits of any employee who does not have an hour of service after the plan has initially become top-heavy and such employee's accrued benefit attributable to matching contributions, discretionary Employer contributions, and forfeitures will be determined without regard to this Section. 22.2.3 Adjustment to limitations on allocations: Notwithstanding the provisions of Section 23, if, during any limitation year in which this plan is top-heavy, the Employer maintains a qualified defined benefit plan covering any participant in this plan, the denominator of the participant's defined contribution fraction (as defined in Section 23.5.5) and defined benefit fraction (as defined in Section 23.5.3) shall be determined by substituting "100%" for "125%" each place that it appears in Section 23.5. The provisions of this Section 22.2.3 shall not apply, however, if the plan would not be top-heavy for such limitation year if "90%" were substituted for "60%" each place that it appears in Section 22.1.6 and the minimum contribution allocated to the account of each non-key employee who is otherwise entitled to share in the Employer contribution for such year is one percent greater than the minimum contribution required under Section 22.2.1. SECTION 23. LIMITATIONS ON ALLOCATIONS Limitations on allocations: In administering the plan, the following special provisions shall apply: 23.1 LIMITATIONS ON ALLOCATIONS The following provisions shall apply if the participant does not participate in, and has never participated in, another qualified plan, welfare benefit fund defined in Section 419(e) of the Code, or an individual medical account defined in Section 415(l)(2) of the Code, maintained by the Employer, which provides an annual addition defined in Section 23.5.1: 23.1.1 The amount of annual additions (as defined in Section 23.5.1) which may be credited to the participant's account for any limitation year (as defined in Section 23.5.9) shall not exceed the lesser of the maximum permissible amount (as defined in Section 23.5.10) or any other limitation contained in this plan. If the Employer contribution that would otherwise be contributed or allocated to the participant's account would cause the annual additions for the limitation year to exceed the maximum permissible amount, the amount contributed or allocated shall be reduced so that the annual additions for the limitation year will equal the maximum permissible amount. 23.1.2 Prior to determining the participant's actual compensation (as defined in Section 23.5.2) for the limitation year, the Employer may determine the maximum permissible amount for a participant on the basis of a reasonable estimation of the participant's compensation for the limitation year, uniformly determined for all participants similarly situated. 23.1.3. As soon as administratively feasible after the end of the limitation year, the maximum permissible amount for the limitation year shall be determined on the basis of the participant's actual compensation for the limitation year. 23.1.4. If pursuant to Section 23.1.3 or as a result of an allocation of forfeitures there is an excess amount (as defined in Section 23.5.7), the excess will be disposed of as provided in the Adoption Agreement. 23.2 PARTICIPATION IN MULTIPLE REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLANS The following provisions shall apply if, in addition to this plan, the participant is covered under another qualified regional prototype defined contribution plan, a welfare benefit fund defined in Section 419(e) of the Code, or an individual medical account defined in Section 415(l)(2) of the Code, maintained by the Employer, which provides -73- 74 an annual addition as defined in Section 23.5.1 during any limitation year: 23.2.1 The annual additions which may be credited to a participant's account under this plan for any such limitation year shall not exceed the maximum permissible amount reduced by the annual additions credited to a participant's account under the other plans and welfare benefit funds for the same limitation year. If the annual additions with respect to the participant under other defined contribution plans and welfare benefit funds maintained by the Employer are less than the maximum permissible amount and the Employer contribution that would otherwise be contributed or allocated to the participant's account under this plan would cause the annual additions for the limitation year to exceed this limitation, the amount contributed or allocated shall be reduced so that the annual additions under all such plans and funds for the limitation year will equal the maximum permissible amount. If the annual additions with respect to the participant under such other defined contribution plans and welfare benefit funds in the aggregate are equal to or greater than the maximum permissible amount, no amount shall be contributed or allocated to the participant's account under this plan for the limitation year. 23.2.2 Prior to determining the participant's actual compensation for the limitation year, the Employer may determine the maximum permissible amount for a participant in the manner described in Section 23.1.2. 23.2.3 As soon as administratively feasible after the end of the limitation year, the maximum permissible amount for the limitation year shall be determined on the basis of the participant's actual compensation for the limitation year. 23.2.4 If, pursuant to Section 23.2.3 or as a result of the allocation of forfeitures, a participant's annual additions under this plan and such other plans would result in an excess amount for a limitation year, the excess amount shall be deemed to consist of the annual additions last allocated, except that annual additions attributable to a welfare benefit fund or individual medical account will be deemed to have been allocated first regardless of the actual allocation date. 23.2.5 If an excess amount was allocated to a participant on an adjustment date of this plan which coincides with an adjustment date of another plan, the excess amount attributed to this plan will be the product of (A) multiplied by (B), where (A) is the total excess amount allocated as of such date, and (B) is the ratio of (i) the annual additions allocated to the participant for the limitation year as of such date under this plan to (ii) the total annual additions allocated to the participant for the limitation year as of such date under this and all other qualified regional prototype defined contribution plans. 23.2.6 Any excess amount attributed to this plan will be disposed in the manner described in Section 23.1.4. 23.3 PARTICIPATION IN TWO OR MORE DEFINED CONTRIBUTION PLANS If the participant is covered under another qualified defined contribution plan maintained by the Employer which is not a regional prototype plan (as defined in Section 23.5.12), annual additions which may be credited to the participant's account under this plan for any limitation year shall be limited in accordance with Sections 23.2.1 through 23.2.6 as though the other plan were a regional prototype plan unless the Employer provides other limitations in the Adoption Agreement. 23.4 PARTICIPATION IN THIS PLAN AND A DEFINED BENEFIT PLAN If the Employer maintains, or at any time maintained, a qualified defined benefit plan covering any participant in this plan, the sum of the participant's defined benefit fraction (as defined in Section 23.5.3) and defined contribution -74- 75 fraction (as defined in Section 23.5.5) shall not exceed 1.0 in any limitation year. The annual additions which may be credited to the participant's account under this plan for any limitation year shall be limited in accordance with the Adoption Agreement. 23.5 DEFINITIONS For purposes of this Section 23, the following definitions shall apply: 23.5.1 "Annual additions" shall mean the sum of the following amounts credited to a participant's account for the limitation year: (a) Employer contributions; (b) forfeitures; and (c) employee after-tax contributions. For this purpose, any excess amount applied under Sections 23.1.4 or 23.2.6 in the limitation year to reduce Employer contributions will be considered annual additions for such limitation year. Amounts allocated, after March 31, 1984, to an individual medical account, as defined in Section 415(1)(1) of the Code, which is part of a pension or annuity benefit plan maintained by the Employer, shall be treated as annual additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a key employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit fund, as defined in Section 419(e) of the Code, maintained by the Employer, are treated as annual additions to a defined contribution plan. Excess contributions (including amounts recharacterized as employee after-tax contributions) shall be treated as annual additions under the plan. 23.5.2 "Compensation" shall mean one of the following as elected by the Employer in the Adoption Agreement: (i) Information required to be reported under Sections 6041 and 6051 of the Code (Wages, Tips and Other Compensation Box on Form W-2.): Compensation is defined as wages as defined in Section 3401(a) of the Code and all other payments of compensation to an employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the employee a written statement under Sections 6041(d) and 6051(a)(3) of the Code. Compensation must be determined without regard to any rules under Section 3401(a) of the Code that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2) of the Code). (ii) Section 3401(a) wages: Compensation is defined as wages within the meaning of Section 3401(a) of the Code for the purposes of income tax withholding at the source but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Section 3401(a)(2) of the Code). (iii) 415 safe harbor compensation: Compensation is defined as a participant's earned income, wages, salaries, and fees for professional services -75- 76 and other amounts received for personal services actually rendered in the course of employment with the Employer maintaining the plan (including, but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or other expenses allowances under a nonaccountable plan (as described in Section 1.62-2(c) of the Income Tax Regulations), and excluding the following: (a) Employer contributions to a plan of deferred compensation which are not includable in the employee's gross income for the taxable year in which contributed, Employer contributions under a simplified employee pension plan to the extent such contributions are deductible by the employee, or any distributions from a plan of deferred compensation; (b) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by the employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (c) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (d) Other amounts which receive special tax benefits, contributions made by the Employer (whether or not under a salary reduction agreement) toward the purchase of an annuity contract described in Section 403(b) of the Code (whether or not the contributions are actually excludable from the gross income of the employee). For limitation years beginning after December 31, 1991, for purposes of applying the limitations of this Section 23, compensation for a limitation year is the compensation actually paid or made available during such limitation year. Notwithstanding the preceding sentence, compensation for a participant in a defined contribution plan who is permanently and totally disabled (as defined in Section 22(e)(3) of the Code) is the compensation such participant would have received for the limitation year if the participant had been paid at the rate of compensation paid immediately before becoming permanently and totally disabled; such imputed compensation for the disabled participant may be taken into account only if the participant is not a highly compensated employee (as defined in Section 414(q) of the Code) and contributions made on behalf of such participant are nonforfeitable when made. 23.5.3 "Defined benefit fraction" shall mean a fraction, the numerator of which is the sum of the participant's projected annual benefits (as defined in Section 23.5.11) under all the defined benefit plans (whether or not terminated) maintained by the Employer, and the denominator of which is the lesser of 125% of the dollar limitation determined for the limitation year under Sections 415(b) and (d) of the Code or 140% of the highest average compensation (as defined in Section 23.5.8), including any adjustments under Section 415(b) of the Code. Notwithstanding the above, if the participant was a participant as of the first day of the first -76- 77 limitation year beginning after December 31, 1986, in one or more defined benefit plans maintained by the Employer which were in existence on May 6, 1986, the denominator of this fraction shall not be less than 125% of the sum of the annual benefits under such plans which the participant had accrued as of the close of the last limitation year beginning before January 1, 1987, disregarding any changes in the terms and conditions of the plan after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Section 415 of the Code for all limitation years beginning before January 1, 1987. 23.5.4 "Defined contribution dollar limitation" shall mean $30,000 or, if greater, 25% of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code as in effect for the limitation year. 23.5.5 "Defined contribution fraction" shall mean a fraction, the numerator of which is the sum of the annual additions to the participant's account under all the defined contribution plans (whether or not terminated) maintained by the Employer for the current and all prior limitation years (including the annual additions attributable to the participant's employee after-tax contributions to all defined benefit plans, whether or not terminated, maintained by the Employer, and the annual additions attributable to all welfare benefit funds defined in Section 419(e) of the Code, and individual medical accounts defined in Section 415(l)(2) of the Code, maintained by the Employer), and the denominator of which is the sum of the maximum aggregate amounts for the current and all prior limitation years of service with the Employer (regardless of whether a defined contribution plan was maintained by the Employer). The maximum aggregate amount in any limitation year is the lesser of 125% of the dollar limitation in effect under Section 415(c)(1)(A) of the Code or 35% of the participant's compensation for such year. If the employee was a participant as of the end of the first day of the first limitation year beginning after December 31, 1986, in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986, the numerator of this fraction shall 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) multiplied by (B), where (A) is the excess of the sum of the fractions over 1.0, and (B) is 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, 1987, and disregarding any changes in the terms and conditions of the plan made after May 5, 1986, but using the Section 415 limitation applicable to the first limitation year beginning on or after January 1, 1987. The annual addition for any limitation year beginning before January 1, 1987, shall not be recomputed to treat all employee after-tax contributions as annual additions. 23.5.6 "Employer" shall mean (for purposes of this Section 23) the Employer that adopts this plan, and all affiliated employers. For purposes of this Section 23, determination of the members of a controlled group of employers and employers under common control pursuant to Sections 414(b) and (c) of the Code shall be made by substituting the phrase "more than 50%" for the phrase "at least 80%" where it appears in such Code sections. 23.5.7 "Excess amount" shall mean the excess of the participant's annual additions for the limitation year over the maximum permissible amount. 23.5.8 "Highest average compensation" shall mean the average compensation for the three consecutive years of service with the Employer that produces the highest average. A year of service with the Employer is the 12-consecutive month period defined in Section 1.62. -77- 78 23.5.9 "Limitation year" shall mean a calendar year or the 12-consecutive month period elected by the Employer in the Adoption Agreement. All qualified plans maintained by the Employer must use the same limitation year. If the limitation year is amended to a different 12-consecutive month period, the new limitation year must begin on a date within the limitation year in which the amendment is made. 23.5.10 "Maximum permissible amount" shall mean the maximum annual addition that may be contributed or allocated to a participant's account under the plan for any limitation year, which shall not exceed the lesser of (a) the defined contribution dollar limitation, or (b) 25% of the participant's compensation for the limitation year. The compensation limitation referred to in clause (b) of the preceding sentence shall not apply to any contribution for medical benefits (within the meaning of Sections 401(h) or 419A(f)(2) of the Code) which is otherwise treated as an annual addition under Section 415(l)(1) or 419A(d)(2) of the Code. If a short limitation year is created because of an amendment changing the limitation year to a different 12-consecutive month period, the maximum permissible amount shall not exceed the defined contribution dollar limitation multiplied by the following fraction: Number of months in the short limitation year 12 23.5.11 "Projected annual benefit" shall mean the annual retirement benefit (adjusted to an actuarially equivalent straight life annuity if such benefit is expressed in a form other than a straight life annuity or qualified joint and survivor annuity) to which the participant would be entitled under the terms of the plan assuming: (i) the participant will continue employment until normal retirement age under the plan (or current age, if later), and (ii) 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. 23.5.12 "Regional prototype plan" shall mean a plan which is the subject of a favorable notification letter from the Internal Revenue Service. SECTION 24. MISCELLANEOUS PROVISIONS 24.1 NOTICES Each participant who is not in service and each beneficiary shall be responsible for furnishing the plan administrator with his current address for the mailing of notices, reports, and benefit payments. Any notice required or permitted to be given to such participant or beneficiary shall be deemed given if directed to such address and mailed by regular United States mail, first class, postage prepaid. If any check mailed to such address is returned as undeliverable to the addressee, mailing of checks will be suspended until the participant or beneficiary furnishes the proper address. This provision shall not be construed as requiring the mailing of any notice or notification otherwise permitted to be given by posting or by other publication. 24.2 LOST DISTRIBUTEES A benefit shall be deemed forfeited if the plan administrator is unable after a reasonable period of time, as determined by the Committee, to locate the participant or beneficiary to whom payment is due; provided, however, that such benefit shall be restored from current forfeitures if a valid claim is later made by or on behalf of the participant or beneficiary for the forfeited benefit. -78- 79 24.3 RELIANCE ON DATA The Employer, Trustee, and plan administrator shall have the right to rely on any data provided by the participant or any beneficiary, including representations as to age, health, and marital status. Such representations shall be binding upon any party seeking to claim a benefit through a participant, and the Employer, Trustee, and plan administrator shall have no obligation to inquire into the accuracy of any representation made at any time by a participant or beneficiary. 24.4 BONDING Each fiduciary shall be bonded for each plan year to the extent required by ERISA. The bond shall provide protection to the plan against any loss by reason of acts of fraud or dishonesty by the fiduciary alone or in connivance with others. The cost of the bond shall be an expense of the trust and shall be paid from the trust fund unless the Board shall elect for such cost to be paid by the Employer. 24.5 RECEIPT AND RELEASE FOR PAYMENTS Any payment made from the plan to or with respect to any participant or beneficiary, or pursuant to a disclaimer by a beneficiary, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the plan, the Employer and all fiduciaries with respect to the plan. The recipient of any payment from the plan may be required by the Committee, as a condition precedent to such payment, to execute a receipt and release with respect thereto in such form as shall be acceptable to the Committee. 24.6 NO GUARANTEE The Trustee, the Committee, and the Employer in no way guarantee the trust fund from loss or depreciation, nor do they guarantee the payment of any money or other assets from the trust fund that may be or become due to any person. Nothing herein contained shall give any participant or beneficiary an interest in any specific part of the trust fund or any other interest except the right to receive benefits from the trust fund in accordance with the provisions of the plan and trust. 24.7 HEADINGS The headings and subheadings of the plan have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof. 24.8 CONTINUATION OF EMPLOYMENT The establishment of the plan shall not be construed as conferring any legal or other rights upon any employee or any persons for continuation of employment, nor shall it interfere with the right of the Employer to discharge any employee or to deal with him without regard to the effect thereof under the plan. 24.9 CONSTRUCTION The provisions of the plan shall be construed and enforced according to the laws of the state indicated in the Adoption Agreement, except to the extent such laws shall be superseded by the provisions of ERISA. -79- 80 GODWINS BOOKE & DICKENSON PROTOTYPE PROFIT SHARING AND EMPLOYEE SAVINGS PLAN AND TRUST -80- 81 TABLE OF CONTENTS PROTOTYPE PROFIT SHARING AND EMPLOYEE SAVINGS PLAN AND TRUST Page Section 1. Definitions Section 2. Contributions to the Trust and Allocation Thereof 2.1 Elective Deferrals 2.2 Employee After-tax Contributions 2.3 Matching Contributions 2.4. Discretionary Employer Contributions 2.5 Voluntary Deductible Employee Contributions 2.6 Mandatory Employee Contributions 2.7 Maximum Contribution Permitted 2.8 Requirement of Current or Accumulated Net Profits Section 3. Retirement; Termination of Service; Death; Entry of Qualified Domestic Relations Order 3.1 Normal Retirement 3.2 Early Retirement 3.3 Delayed Retirement 3.4 Death 3.5 Disability 3.6 Termination of Service 3.7 Cash-out Distributions 3.8 Limitations on Certain Distributions 3.9 Entry of a Qualified Domestic Relations Order Section 4. Payment of Benefits 4.1 Distribution of Accrued Benefits 4.2 Payment of Death Benefits 4.3 Transitional Rule for Required Distributions 4.4 Definitions Applicable to Plan Distributions 4.5 Distributions to Alternate Payees 4.6 Interim Payments 4.7 Continued Share in Profits or Losses of Trust Fund 4.8 Medium of Distributions 4.9 Daily Adjustment Dates Section 5. Vesting 5.1 Vesting Upon the Occurrence of Certain Events 5.2 Service Requirement for Vesting 5.3 Forfeiture of Non-vested Benefits Section 6. In-Service Withdrawals and Loans 6.1 Withdrawal of Matching Contributions and Discretionary Employer Contributions 6.2 Withdrawal of Employee After-tax Contributions 6.3 Withdrawal of Rollover Contributions -81- 82 6.4 Distributions on or After Attainment of Age 59 1/2 6.5 Hardship Distributions 6.6 Loans Section 7. Adjustment of Participant Accounts 7.1 Establishment of Accounts 7.2 General Section 8. Participant Directed Investments 8.1 Participant Directed Investments 8.2 Rights in Directed Investment Funds 8.3 Effect of Participant Loans 8.4 Distributions from Directed Separate Accounts 8.5 Accounts Not Subject to Participant Direction 8.6 Authority of Trustee and Committee Section 9. Investments in Employer stock 9.1 Employer Stock Fund 9.2 Compliance with the Securities Act of 1933 and the Securities Exchange Act of 1934 9.3 Right of First Refusal 9.4 Voting of Employer Stock 9.5 Tendering Section 10. Administration by Committee 10.1 Membership of Committee 10.2 Committee Officers; Subcommittee 10.3 Committee Meetings 10.4 Transaction of Business 10.5 Committee Records 10.6 Establishment of Rules 10.7 Conflicts of Interest 10.8 Correction of Errors 10.9 Authority to Interpret Plan 10.10 Third Party Advisors 10.11 Compensation of Members 10.12 Committee Expenses 10.13 Requirement of Writing 10.14 Indemnification of Committee Section 11. Management of Funds and Amendment or Termination of Plan 11.1 Fiduciary Duties 11.2 Adoption of Plan 11.3 Requirement of Writing Section 12. Allocation of Responsibilities Among Named Fiduciaries 12.1 Duties of Named Fiduciaries 12.2 Co-fiduciary Liability Section 13. Benefits Not Assignable; Facility of Payments 13.1 Benefits Not Assignable 13.2 Payment to Minors and Others Section 14. Termination of Plan and Trust; Removal of Trustee; Merger or Consolidation of Plan 14.1 Complete Termination 14.2 Partial Termination 14.3 Removal and Resignation of Trustee -82- 83 14.4 Merger or Consolidation Section 15. Communication to Participants Section 16. Claims Procedure 16.1 Filing of a Claim for Benefits 16.2 Notification to Claimant of Decision 16.3 Procedure for Review 16.4 Decision on Review 16.5 Action by Authorized Representative of Claimant Section 17. Previously Existing Qualified Plans of the Employer Section 18. Special Provisions Relating to Transfers From Qualified Plans 18.1 Certain Transfers to the Plan Not Permitted 18.2 Nonforfeitability of Transferred Assets 18.3 Protected Benefits Under Section 411(d)(6) of the Code 18.4 Liability of Trustee 18.5 Separate Accounts 18.6 General Section 19. Rollovers 19.1 Acceptance of Rollovers by this Plan 19.2 Rollover Distributions Section 20. Trust Provisions 20.1 Trustee's Powers 20.2 Accountings 20.3 Compensation of Trustee 20.4 Responsibilities and Scope of Duties of Trustee 20.5 Failure to Direct Trustee 20.6 Indemnification of Trustee 20.7 Modification of this Section Section 21. Qualification of Plan 21.1 Non-standardized Plans 21.2 Denial of Qualification 21.3 Notification of Sponsor Section 22. Special Top-Heavy Provisions 22.1 Definitions 22.2 Top-heavy Requirements Section 23. Limitations on Allocations 23.1 Limitations on Allocations 23.2 Participation in Multiple Regional Prototype Defined Contribution Plans 23.3 Participation in Two or More Defined Contribution Plans 23.4 Participation in this Plan and a Defined Benefit Plan 23.5 Definitions Section 24. Miscellaneous Provisions 24.1 Notices 24.2 Lost Distributees 24.3 Reliance on Data 24.4 Bonding 24.5 Receipt and Release for Payments 24.6 No Guarantee 24.7 Headings -83- 84 24.8 Continuation of Employment 24.9 Construction -84- EX-10.3(B) 6 EMPLYE. SAVINGS PLN; NON STANDARDIZED FORM ADOPT'N 1 EXHIBIT 10.3(b) GODWINS BOOKE & DICKENSON PROTOTYPE PROFIT SHARING AND EMPLOYEE SAVINGS PLAN AND TRUST NON-STANDARDIZED FORM ADOPTION AGREEMENT - 001 The Employer hereby makes the following declarations, designations, and elections for purposes of the plan and trust: I. EMPLOYER INFORMATION A. Name: Plexus Corp. B. Address: 55 Jewelers Park Drive, Neenah WI 54952 C. Telephone: 414-722-3451 D. Employer Identification (or Social Security) Number: 39-1344447 E. Type of entity: [Select one] X (1) Corporation ---- (2) Partnership ---- (3) Sole Proprietorship ---- (4) S Corporation ---- F. Nature of Employer's Business: Electronic - Design & Manufacture G. Primary Standard Industry Code (SIC): 3699 H. Date of Incorporation or Commencement of Business: 12/1979 I. State of Incorporation or State of Principal Business Activity: Wisconsin J. Fiscal Year End: September 30 -1- 2 K. Other corporations or trades or businesses affiliated with or in the same controlled group of corporations or trades or businesses as the Employer: (1) Name: Electronic Assembly Corporation Address: 2121 Harrison Street, Neenah WI Employer Identification Number: 39-1158348 (2) Name: Technology Group Inc. Address: 55 Jewelers Park Drive, Neenah WI Employer Identification Number: 39-1361270 (3) Name: _____________________________________________ Address: __________________________________________ Employer Identification Number: ___________________ If there are additional members of the same affiliated or controlled group of corporations or trades or businesses as the Employer, please attach a statement containing the above information for each additional member. II. PLAN FIDUCIARIES [Numbers shown in parenthesis throughout the remainder of this Adoption Agreement are references to sections of the accompanying plan document.] A. Committee (1.12; 10; 12.1.2): [Insert the names of the individuals to be appointed by the Board] As designated by the Board Joseph D. Kaufman Lori A. Hoersch John L. Nussbaum -2- 3 B. Plan Administrator (1.44; 10; 12.1.3): [Select one and complete, if necessary] (1) The chairman of the Committee. ---- X (2) The Committee. ---- (3) Other: ---- C. Trustee(s) (1.61; 12.1.4; 20): (1) Name: Riggs National Bank Address: 808 17th Street NW Washington DC 20090 Telephone: 202-835-6796 Employer Identification Number or Social Security Number: 52-1956537 (2) Name: ___________________________________________________ Address: ________________________________________________ Telephone: _____________________________________________ Employer Identification Number or Social Security Number: (3) Name: ___________________________________________________ Address: ________________________________________________ Telephone: _____________________________________________ Employer Identification Number or Social Security Number: III. STATUS OF THE PLAN A. Name of the plan (1.43): Plexus Corp. Employee Stock Savings Plan B. Original effective date (1.19): January 1, 1989 C. If this plan is an amendment and restatement of an existing plan, except as otherwise provided in the plan document, the effective date of this amendment and restatement shall be (1.19; 17): January 1, 1996 -3- 4 D. Plan year end (1.45): December 31 E. Limitation year (23.5.9): Plan Year F. Plan number: 001 G. Governing state law (24.9): If this plan is an amendment and restatement, please attach a copy of the most recent determination letter. IV. PARTICIPATION A. All employees of the Employer shall be eligible to participate in the plan, except the following (1.21): [Select the desired exclusions] (1) No exclusions will apply. ---- (2) Employees of an affiliated employer that is not a party to ---- the plan. X (3) Leased employees. ---- (4) Other: _________________________________________________ ---- _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ B. Number of years of service required to participate (1.40): [Select one] (1) 0 Years of Service. ---- X (2) 1 Year of Service. ---- (3) Other: ---- [not to exceed one year of service]. C. Minimum age required to participate (1.40): [Select one] X (1) No minimum age required. ---- (2) 21 years of age. ---- (3) _____ years of age [not to exceed 20 1/2 years of age]. ---- -4- 5 D. Entry date (1.28): [Select one] (1) First day of the first payroll period beginning after the ----- employee's date of hire. (2) First day of the first payroll period after the completion ----- of any minimum age and service requirements chosen above. (3) First day of the month coincident with or next following ----- the completion of any minimum age and service requirements chosen above. (4) First day of the plan year or seventh month of the plan ----- year, whichever is earlier, coincident with or next following the completion of any minimum age and service requirements chosen above. X (5) First day of the plan year quarter coincident with or next ----- following the completion of any minimum age and service requirements chosen above. (6) First day of the plan year coincident with or next ----- following the completion of any minimum age and service requirements chosen above. [Note: This option (6) may only be selected if the number of months of service required to participate is six or less.] (7) First day of the plan year in which any minimum age and ----- service requirements chosen above are completed. [Note: This option (7) is a retroactive entry date.] V. SERVICE A. Method for determining service for each employee (1.34, 1.41): [Select one] X (1) Service will be determined on the basis of hours of service ---- calculated as follows: [Select one] X (a) On the basis of actual hours for which an employee ---- is paid or entitled to payment. (b) On the basis of days worked. An employee shall be ---- credited with 10 hours of service for each day if he would be credited with at least one hour of service for such day under the plan. (c) On the basis of weeks worked. An employee shall be ---- credited with 45 hours of service for each week if he would be credited with at least one hour of service for such week under the plan. (d) On the basis of semi-monthly payroll periods. An ---- employee shall be credited with 95 hours of service for each payroll period if he would be credited with at least one hour of service for such payroll period under the plan. (e) On the basis of calendar months worked. An ---- employee shall be credited with 190 hours of service for each month if he would be credited with at least one hour of service for the month under the plan. -5- 6 (2) Service will be determined on the basis of elapsed time. ---- B. Prior service with certain affiliated employers (1.52.2): [Select one] X (1) Service with an employer prior to such employer becoming an ---- affiliated employer shall not be recognized. (2) Service with an employer prior to such employer becoming ---- an affiliated employer shall be recognized. VI. COMPENSATION A. Compensation defined (1.13; 23.5.2): A participant's "compensation" used in determining the amount of contributions and forfeitures, if any, allocable to such participant's account under the plan shall mean all of his: [Select one] X (1) W-2 earnings (Box 1), as defined in Section 23.5.2(i) of ---- the plan. (2) Code Section 3401(a) wages, as defined in Section ---- 23.5.2(ii) of the plan. (3) Code Section 415 safe-harbor compensation, as defined in ---- Section 23.5.2(iii) of the plan. B. In determining the amount of a participant's compensation to be used in calculating the amount of contributions and forfeitures, if any, allocable to such participant's account, certain salary reduction amounts shall be treated as follows (1.13): [Select one] (1) Compensation shall not include Employer contributions made ---- pursuant to a salary reduction agreement which are not includible in the gross income of the employee under Sections 125, 402(g)(3), 402(h), or 403(b) of the Code. X (2) Compensation shall include Employer contributions made ---- pursuant to a salary reduction agreement which are not includible in the gross income of the employee under Sections 125, 402(g)(3), 402(h), or 403(b) of the Code. C. Compensation excluded (1.13): The compensation of a participant used in determining the amount of contributions and forfeitures, if any, allocable to such participant's account under the plan shall not include the following items: [Select the applicable exclusions] (1) Overtime. ---- (2) Bonuses. ---- (3) Commissions. ---- (4) Compensation in excess of $___________. ---- (5) Other: ---- -6- 7 ___________________________________________________________ ___________________________________________________________ D. Compensation considered (1.13): The compensation considered in determining the amount of contributions and forfeitures, if any, allocable to a participant's account under the plan shall include compensation actually paid to such participant during: [Select one] X (1) The plan year. [Note: This option must be elected if the ---- Employer elects for the plan to include a Cash or Deferred Arrangement under item VII below.] (2) The taxable year ending with or within the plan year. ---- (3) The limitation year ending with or within the plan year. ---- VII. CASH OR DEFERRED ARRANGEMENT A. The plan shall not include a Cash or Deferred Arrangement ---- described in Section 401(k) of the Code (2.1). [If the above option is selected, do not complete the remaining questions of item VII.] X The plan shall include a Cash or Deferred Arrangement described in ---- Section 401(k) of the Code. [If the above option is selected, please complete the remaining questions of item VII.] B. Elective deferrals (1.20; 2.1): (1) Amount of elective deferrals: [Select any applicable options and complete as appropriate] A participant may elect to have his compensation (as selected under Item VI. above) reduced by the following percentage or amount per payroll period, as designated in writing to the plan administrator: [Select and complete one or both options below] X (a) Up to 15 % of the employee's compensation ---- considered under the plan. (b) An amount not in excess of $___________. ---- (2) Change of elective deferrals (2.1.1): A participant may modify the amount of elective deferrals contributed to the plan on his behalf effective as of the first full payroll period beginning on or after the: [Select one] (a) First day of the next succeeding plan year. ---- (b) First day of the plan year and the first day of the ---- seventh month of the plan year. -7- 8 X (c) First day of the next plan year quarter. ---- (d) First day of the next succeeding month. ---- (e) Receipt by the Committee of the participant's ---- election to modify the amount of his elective deferrals. (3) Distribution of elective deferrals (3.8; 6.5): Elective deferrals (and any qualified non-elective contributions and qualified matching contributions) and income allocable to such amounts shall be distributable upon termination of service, death, or disability, and upon: [Select one or more] (a) No other events. ---- X (b) Termination of the plan without the establishment of ---- another defined contribution plan (other than an employee stock ownership plan as defined in Section 4975(e) of the Code). X (c) The disposition by the Employer to an unrelated ---- corporation of substantially all of the assets (within the meaning of section 409(d)(2) of the Code) used in a trade or business of the Employer, where (i) the participant is employed by such trade or business and continues employment with the entity acquiring such assets, and (ii) the Employer continues to maintain the plan after the sale or other disposition. X (d) The disposition by the Employer to an unrelated ---- entity of the Employer's interest in a subsidiary (within the meaning of section 409(d)(3) of the Code), where (i) the participant is employed by such subsidiary and continues employment with such subsidiary following such sale or other disposition, and (ii) the Employer continues to maintain the plan after the sale or other disposition. X (e) The participant's attainment of age 59 1/2. ---- X (f) The hardship of the participant as described in ---- Section 6.3 of the plan. [If elected, this option shall not apply to (i) qualified non-elective contributions, (ii) qualified matching contributions, (iii) income allocable to such amounts, or (iv) income allocable to elective deferrals after the end of the last plan year ending before July 1, 1989.] C. Qualified non-elective contributions (1.47; 2.1.5): (1) Qualified non-elective contributions made by the Employer to enable the plan to satisfy the actual deferral percentage ("ADP") test and the average contribution percentage ("ACP") test shall be allocated to the accounts of: [Select one] (a) All participants. ---- (b) Only non-highly compensated participants. ---- -8- 9 (c) A group of non-highly compensated participants ---- designated by the Committee. (2) The formula for allocating qualified non-elective contributions among those participants selected in Item VII.C.(1) above shall be as follows: [Select one] (a) In the ratio which each participant's compensation ---- for the plan year bears to the total compensation of all participants for such plan year. (b) In the ratio which each participant's compensation ---- not in excess of $___________ for the plan year bears to the total compensation of all participants not in excess of $___________ for such plan year. (c) $__________ for each participant. ---- (3) In order to share in any qualified non-elective contribution made with respect to a plan year, an employee must be a participant during such plan year, and must (2.1.5; 2.1.8): [Select one] (a) Fulfill no additional requirements. ---- (b) Complete a year of service within the plan year. ---- (c) Be in the service of the Employer on the adjustment ---- date as of which the qualified non-elective contribution is allocated. (d) Complete a year of service within the plan year and ---- be in the service of the Employer on the year-end adjustment date as of which the qualified non-elective contribution is allocated. D. Qualified matching contributions (1.46; 2.1.4; 2.3.2): (1) Qualified matching contributions made by the Employer to enable the plan to satisfy the ADP test and/or the ACP test shall be allocated to the accounts of: [Select one] (a) All participants who make elective deferrals or ---- employee after-tax contributions for the plan year. (b) Only non-highly compensated participants who make ---- elective deferrals or employee after-tax contributions for the plan year. (c) A group of non-highly compensated participants ---- designated by the Committee. (2) In order to share in any qualified matching contributions made with respect to a plan year, an employee must be a participant with respect to such plan year, and must (2.3.2): [Select one] (a) Fulfill no additional requirements. ---- (b) Complete a year of service within the plan year. ---- -9- 10 (c) Be in the service of the Employer on the adjustment ---- date as of which the qualified matching contribution is allocated. (d) Complete a year of service within the plan year and ---- be in the service of the Employer on the year-end adjustment date as of which the qualified matching contribution is allocated. VIII. EMPLOYEE AFTER-TAX CONTRIBUTIONS A. X (1) Participants shall not be permitted to make employee ---- after-tax contributions to the plan (2.2). [If the above option is selected, do not complete the remaining questions in this item VIII.] (2) Participants shall be permitted to make employee after-tax ---- contributions to the plan. [If the above option is selected, please complete the remaining questions in this item VIII.] B. Amount of employee after-tax contributions (2.2.1): [Select one or both and complete as appropriate] A participant may elect to make employee after-tax contributions to the plan each payroll period, subject to the following limitations: (a) Up to _____% of the employee's compensation ---- considered under the plan. (b) An amount not in excess of $___________. ---- C. Change of employee after-tax contributions (2.2.2): A participant may modify the amount of his employee after-tax contributions to the plan effective as of the first full payroll period beginning on or after the: [Select one] (a) First day of the next following plan year. ---- (b) First day of the plan year and the first day of the ---- seventh month of the plan year. (c) First day of the next plan year quarter. ---- (d) First day of the next succeeding month. ---- (e) Receipt by the Committee of the participant's ---- election to modify the amount of his employee after-tax contributions. -10- 11 D. Withdrawals from employee after-tax contribution account (6.2): [Select one and complete as appropriate] (1) Except as otherwise provided in XI.E. or G, amounts ---- allocated to a participant's employee after-tax contribution account shall not be withdrawn prior to his termination of service, death, or disability. (2) In addition to any withdrawal rights provided in XI E, or ---- G, at a participant's request, amounts allocated to his employee after-tax contribution account may be withdrawn prior to his termination of service, death, or disability, subject to the following conditions: [Complete (a); complete (b) if daily adjustment dates have been selected, also complete (c) through (f) as appropriate] (a) A participant may not request more than _____ [not to exceed four] withdrawal(s) during a plan year. (b) No withdrawal shall exceed _____% of the amount in the participant's employee after-tax contribution account, determined on the date the withdrawal request is actually processed. (c) No withdrawal shall be made in an amount less than $___________ [Insert amount not in excess of $1,000] (d) No withdrawal may be made until the participant has taken all available withdrawals from the following accounts: __________________________________________ ____________________________________________________ ____________________________________________________ (e) A withdrawal may only be made if the participant incurs a financial hardship. For purposes of this paragraph, a "financial hardship" is defined as ____________________________________________________ _____________________________ ____________________________________________________ ________________________________[specify clear, objective criteria for determining a financial hardship that precludes employer discretion] (f) A participant who receives a withdrawal shall not be eligible to contribute to the plan ______________ ____________________________________________________ ____________________________________________________ [Insert type of contribution affected and period of suspension] IX. MATCHING CONTRIBUTIONS AND DISCRETIONARY EMPLOYER CONTRIBUTIONS A. Matching contributions (1.36; 2.3): The Employer shall not make matching contributions to the plan. ---- [If the above option is selected, do not complete the remaining questions in this item IX.A.; proceed to item IX.B.] X The Employer shall make matching contributions to the plan. ---- -11- 12 [If the above option is selected, please complete the remaining questions in this item IX.] (1) Employer matching contributions shall be allocated according to the terms of the plan among: [Select one] X (a) All participants ---- (b) All participants who are non-highly compensated ---- employees who have made elective deferrals and/or employee after-tax contributions, as appropriate, to the plan for such plan year. (2) The amount of matching contributions contributed to the plan by the Employer with respect to each participant's elective deferrals and/or employee after-tax contributions made during a plan year shall equal: [Select one or more] X (a) 100 % of the first 2.5 % of the participant's ---- elective deferrals, 0 % of the next 0 % of the participant's elective deferrals, and 0 % of the remaining 0 % of the participant's elective deferrals, but not to exceed a total matching contribution of $_____. (b) _____% of the first _____% of the participant's ---- employee after-tax contributions, _____% of the next _____% of the participant's employee after-tax contributions, and _____% of the remaining _____% of the participant's employee after-tax contributions, but not to exceed a total matching contribution of $___________. (c) _____% of the aggregate of the participant's ---- elective deferrals and employee after-tax contributions, not to exceed the first _____% of the participant's compensation, but not to exceed a total matching contribution of $__________ . (d) _____% of the first _____% of the aggregate of the ---- participant's elective deferrals and employee after-tax contributions, _____% of the next _____% of the aggregate of the participant's elective deferrals and employee after-tax contributions, and _____% of the remaining _____% of the aggregate of the participant's elective deferrals and employee after-tax contributions, but not to exceed a total matching contribution of $___________. -12- 13 (e) A uniform amount or percentage of elective ---- deferrals and/or employee after-tax contributions determined with respect to each plan year by the Employer prior to the first day of such plan year, but not to exceed a total matching contribution of $___________. (f) A uniform amount or percentage of elective ---- deferrals and/or employee after-tax contributions determined each plan year by the Employer in its discretion. (g) $_____________ for each participant making elective ---- deferrals during the plan year. (h) $_______ for each participant making employee ---- after-tax contributions during the plan year. (i) $___________ for each participant making elective ---- deferrals and/or employee after-tax contributions during the plan year. (j) Such additional amount or percentage as the ---- Employer in its discretion shall determine to be allocated in the same manner as chosen above. (3) In order to share in any matching contribution made with respect to a plan year, an employee must be a participant with respect to such plan year, and must (2.3): [Select one] X (a) Fulfill no additional requirements. ---- (b) Complete a year of service within the plan year. ---- (c) Be in the service of the Employer on the adjustment ---- date as of which the matching contribution is allocated. (d) Complete a year of service within the plan year and ---- be in the service of the Employer on the year-end adjustment date as of which the matching contribution is allocated. (4) The requirements of item IX.A.(3) above shall not apply ---- with respect to a participant who retires, including disability retirement, or dies while in service during a plan year. The requirements of item IX.A.(3) above shall apply with ---- respect to a participant who retires, including disability retirement, or dies while in service during a plan year. (5) Withdrawals from matching contribution account (6.1): [Select one] X (a) Except or otherwise provided in XI. E. or G., amounts ---- allocated to a participant's matching contribution account shall not be withdrawn prior to his termination of service, death, or disability. (b) In addition to any withdrawals rights provided in XI. E. ---- or G., at a participant's request, amounts allocated to his matching contribution account may be withdrawn prior to his termination of service, death, or disability, subject to the following conditions: [Complete (i), complete (ii) if daily adjustment dates have been selected, and also complete (iii) through (ix), as appropriate] -13- 14 (i) A participant may not request more than _____ [not to exceed four] withdrawal(s) during a plan year. (ii) No withdrawal shall exceed _____% of the vested amount in the participant's matching contribution account, determined on the date the withdrawal request is actually processed. (iii) The participant must have attained at least the ---- fifth anniversary of his initial participation in the plan. (iv) The participant cannot withdraw any matching ---- contributions that have not been in the plan for at least 2 years unless he has attained at least the fifth anniversary of his initial participation in the plan. (v) The participant cannot withdraw any matching ---- contributions that have not been in the plan for at least 2 years. (vi) No withdrawal shall be made in an amount less than ---- $______ [Insert amount not in excess of $1,000] (vii) No withdrawal may be made until the participant has ---- taken all available withdrawals from the following accounts: __________________________________________ ____________________________________________________ ____________________________________________________ (viii) A withdrawal may only be made if the participant ---- incurs a financial hardship. For purposes of this paragraph, a "financial hardship" is defined as ____________________________________________________ ____________________________________________________ ____________________________________________________ ________________________________[Specify clear, objective criteria for determining a financial hardship that precludes employer discretion.] (ix) A participant who receives a withdrawal shall not ---- be eligible to contribute to the plan ____________________________ ________________________________[Insert type of contribution affected and period of suspension.] B. Discretionary Employer contributions (2.4; 2.8): X The Employer shall not make discretionary Employer contributions ---- to the plan. [If the above option is selected, do not complete the remaining questions in this item IX.B.] The Employer may make discretionary Employer contributions to the ---- plan. [If the above option is selected, please complete the remaining questions in this item IX.B.] (1) Any discretionary Employer contributions made to the plan shall be determined as follows: [Select one and complete as appropriate] -14- 15 ____ (a) An amount out of the current or accumulated net profit of the Employer for such year as the Employer in its discretion shall determine. ____ (b) _____% of the net profit of the Employer for such year plus such additional amount, if any, out of the current or accumulated net profit of the Employer as the Employer in its discretion shall determine. ____ (c) An amount of the net profit of the Employer for such year determined as follows: _____% of the first $___________ of such net profit, plus _____% of the next $___________ of such net profit, plus _____% of all such net profit over $___________. ____ (d) _____% of the net profit of the Employer for such year. ____ (e) Such amount as the Employer in its discretion shall determine without regard to current or accumulated net profit. [If option (e) above is selected, do not complete item IX.B.(2) below.] (2) The Employer's net profit for purposes of determining the amount of any discretionary Employer contribution to the plan shall (1.37): [Select one] ____ (a) Exclude a return on the net worth of the Employer of ____% of such net worth. ____ (b) Exclude $___________ from such net profit as computed for other purposes. ____ (c) Not provide for any exclusions. (3) Discretionary Employer contributions shall be allocated as of the adjustment date for which such contribution was made among the participants entitled to share therein in the manner determined as follows (2.4): [Select one] ____ (a) The discretionary Employer contribution shall be allocated in the same ratio that each participant's compensation bears to the compensation for all participants entitled to share in such discretionary Employer contribution. ____ (b) The discretionary Employer contribution shall be allocated as follows: (i) If the plan is top-heavy and the minimum allocation is required in this plan, there shall be allocated to the account of each participant (including for this purpose each employee entitled to the minimum allocation provided in Section 22.2.1 of the plan) the amount determined by multiplying the minimum allocation percentage times his compensation. [If the plan is not top-heavy or the minimum allocation is not required in this plan, disregard paragraph (ii) below.] -15- 16 (ii) If any portion of the discretionary Employer contribution shall remain to be allocated, the remaining portion, not exceeding the amount determined by multiplying the minimum allocation percentage times the excess compensation of participants, shall be allocated in the ratio that each participant's excess compensation bears to the excess compensation for all participants, but not in excess of 3% of each participant's compensation. For purposes of this paragraph (ii), in the case of any participant who has exceeded the cumulative permitted disparity limit described below, such participant's total compensation for the plan year will be taken into account. (iii) If any portion of the discretionary Employer contribution shall remain to be allocated, the remaining portion, not exceeding the amount determined by multiplying (a) times (b), where (a) is the profit-sharing disparity rate and (b) is the sum of the compensation plus the excess compensation of participants, shall be allocated in the ratio that the sum of each participant's compensation plus excess compensation bears to the sum of the compensation plus excess compensation for all participants. For purposes of this paragraph (iii), in the case of any participant who has exceeded the cumulative permitted disparity limit described below, two times such participant's total compensation for the plan year will be taken into account. (iv) If any portion of the discretionary Employer contributions shall remain to be allocated, the remaining portion shall be allocated in the ratio that the compensation of each participant bears to the compensation for all participants. For this purpose, the following definitions shall apply: (a) "Compensation" shall mean compensation as defined in Section 1.13. (b) "Excess compensation" shall mean compensation in excess of the integration level. (c) "Integration level" shall mean: [Select one and complete as appropriate] _____ (i) The taxable wage base. _____ (ii) $___________ [a dollar amount less than the taxable wage base]. _____ (iii) ________% of the taxable wage base [not to exceed 100%]. (d) "Maximum profit-sharing disparity rate" shall mean the lesser of 5.7% (or, if greater, the percentage equal to the portion of the rate of tax under Section 3111(a) of the Code (as of the beginning of the plan year) which is attributable to old-age insurance), or the applicable percentage determined in accordance with the following table: -16- 17 (I) If the integration level is: more than but not more thanthe applicable percentage is --------- ------------------------------- $ 0 X 5.7% X of TWB 80% of TWB 4.3% 80% of TWB Y 5.4% X = the greater of $10,000 or 20% of TWB Y = any amount more than 80% of TWB but less than 100% of TWB. (II) If the integration level is equal to the taxable wage base, the applicable percentage is 5.7% (or, if greater, the percentage equal to the portion of the rate of tax under Section 3111(a) of the Code (as of the beginning of the plan year) which is attributable to old-age insurance). (e) "Minimum allocation percentage" shall mean the percentage specified in item XVII.B of the Adoption Agreement. (f) "Profit-sharing disparity rate" shall mean a percentage equal to _____%. [Insert the desired percentage not to exceed the maximum profit-sharing disparity rate.] If the minimum allocation percentage is allocated in Item IX.B.(3)(b)(i) above, the profit-sharing disparity rate must be reduced (but not below zero) by the minimum allocation percentage before applying Item IX.B.(3)(b)(iii). (g) "Taxable wage base" or "TWB" shall mean the maximum amount of earnings which may be considered wages for a year under Section 3121(a)(1) of the Code as in effect as of the first day of the plan year. Overall permitted disparity limits. Annual overall permitted disparity limit: Notwithstanding the preceding paragraphs, for any plan year this plan benefits any participant who benefits under another qualified plan or simplified employee pension, as defined in section 408(k) of the Code, maintained by the employer that provides for permitted disparity (or imputes disparity), employer contributions and forfeitures will be allocated to the account of each participant entitled to share therein in the ratio that such participant's total compensation bears to the total compensation of all participants. Cumulative permitted disparity limit: Effective for plan years beginning on or after January 1, 1995, the cumulative permitted disparity limit for a participant is 35 total cumulative permitted disparity years. Total cumulative permitted years means the number of years credited to the participant for allocation or accrual purposes under this plan, any other qualified plan or simplified employee pension plan (whether or not terminated) ever maintained by the employer. For purposes of determining the participant's cumulative permitted disparity limit, all years ending in the same calendar year are treated as the same year. If the participant has not benefited under a defined benefit or target benefit plan for any year beginning on or after January 1, 1994, the participant has no cumulative disparity limit. -17- 18 ____ (c) Each such participant shall receive an allocation of $______________. (4) In order to share in any discretionary Employer contribution made with respect to a plan year, an employee must be a participant during such plan year, must not have a break in service during such plan year, and must (2.4): [Select one] ____ (a) Fulfill no additional requirements. ____ (b) Complete a year of service within the plan year. [If this item IX.B.(4)(b) is selected, this condition will not apply in any plan year in which the plan is top-heavy.] ____ (c) Be in the service of the Employer on the last day of such plan year. ____ (d) Complete a year of service within the plan year and be in the service of the Employer on the last day of such plan year. [If this item IX.B.(4)(d) is selected, the condition that an employee complete a year of service within the plan year will not apply in any plan year in which the plan is top-heavy.] (5) ____ The requirements of item IX.B.(4) above shall not apply with respect to a participant who retires, including disability retirement, or dies while in service during a plan year. ____ The requirements of item IX.B.(4) above shall apply with respect to a participant who retires, including disability retirement, or dies while in service during a plan year. If the Employer does not elect under item XII.C below to apply forfeitures to reduce future discretionary Employer contributions, forfeitures of discretionary Employer contributions shall be allocated to the accounts of participants eligible to share in discretionary Employer contributions for a plan year in the same manner as the Employer shall elect above. (6) Withdrawals from discretionary Employer contribution account (6.1): [Select one] ____ (a) Except as otherwise provided in XI. E. or G., amounts allocated to a participant's discretionary Employer contribution account shall not be withdrawn prior to his termination of service, death, or disability. ____ (b) In addition to any withdrawal rights provided in XI. E. or G., at a participant's request, amounts allocated to his discretionary Employer contribution account may be withdrawn prior to his termination of service, death, or disability, subject to the following conditions: [Complete (i), complete (ii) if daily adjustment dates have been selected, and also complete (iii) through (ix), as appropriate] (i) A participant may not request more than _____ [not to exceed four] withdrawal(s) during a plan year. (ii) No withdrawal shall exceed _____% of the vested amount in the participant's discretionary Employer contribution account, determined on the date the withdrawal request is actually processed. _____ (iii) The participant must have attained at least the fifth anniversary of his initial participation in the plan. -18- 19 (iv) The participant cannot withdraw any discretionary ---- Employer contributions that have not been in the plan for at least 2 years unless he has attained at least the fifth anniversary of his initial participation in the plan. (v) The participant cannot withdraw any discretionary ---- employer contributions that have not been in the plan for at least 2 years. (vi) No withdrawal shall be made in an amount less than ---- $______ [Insert amount not in excess of $1,000] (vii) No withdrawal may be made until the participant has ---- taken all available withdrawals from the following accounts: __________________________________________ ____________________________________________________ ____________________________________________________ (viii) A withdrawal may only be made if the participant ---- incurs a financial hardship. For purposes of this paragraph, a "financial hardship" is defined as ____________________________________________________ ____________________________________________________ ____________________________________________________ ________________________________[Specify clear, objective criteria for determining a financial hardship that precludes employer discretion.] (ix) A participant who receives a withdrawal shall not ---- be eligible to contribute to the plan ____________________________________________________ ________________________________[Insert type of contribution affected and period of suspension.] X. ADJUSTMENT DATE AND METHOD A. The separate accounts of each participant shall be adjusted on the last day of each plan year and such other times as may be designated below (1.4; 7; 8.1.2): [Select any additional dates desired] (1) The last day of each month during the plan year. ---- (2) The last day of each third month during the plan year. ---- (3) The last day of each sixth month during the plan year. ---- (4) The last day of each week during the plan year. ---- X (5) On each day shares are traded on a national stock exchange, ---- except for regularly scheduled holidays of the Sponsor or Trustee ("daily adjustment dates"). B. The separate accounts of each participant shall be adjusted as of each adjustment date under the method designated below (7): [Select one. Note: Item X.B.(2) below must be elected if the Employer chooses daily adjustment dates in item X.A.(5) above.] (1) Balance forward method. ---- (a) Payments: Prior to the allocation of net income or loss of the trust, there shall be subtracted from the account any payments made from the account subsequent to the preceding adjustment date. -19- 20 (b) Forfeitures: Prior to the allocation of net income or loss of the trust, there shall be subtracted from the account any amounts forfeited by the participant pursuant to Section 5.3 or Section 23 of the plan subsequent to the preceding adjustment date. (c) Loans: Prior to the allocation of net income or loss of the trust, there shall be subtracted from the account the total amount of any loans made from such account subsequent to the preceding adjustment date. (d) Elective deferrals: Prior to the allocation of net income or loss of the trust, there shall be added to the participant's elective deferral account _____% [indicate a percentage not to exceed 100%] of any elective deferrals made by the participant subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's elective deferral account any elective deferrals made subsequent to the preceding adjustment date that were not added in by the preceding sentence. (e) Employee after-tax contributions: Prior to the allocation of net income or loss of the trust, there shall be added to the participant's employee after-tax contribution account _____% [indicate a percentage not to exceed 100%] of any employee after-tax contributions made by the participant subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's employee after-tax contribution account any employee after-tax contributions made subsequent to the preceding adjustment date that were not added in by the preceding sentence. (f) Employer contributions: (i) Prior to the allocation of net income or loss of the trust, there shall be added to the participant's matching contribution account _____% [indicate a percentage not to exceed 100%] of the Employer matching contributions made on the participant's behalf subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's matching contribution account any Employer matching contributions made on the participant's behalf subsequent to the preceding adjustment date that were not added in by the preceding sentence. (ii) Prior to the allocation of net income or loss of the trust, there shall be added to the participant's discretionary Employer contribution account _____% [indicate a percentage not to exceed 100%] of the discretionary Employer contributions made on the participant's behalf subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's discretionary Employer contribution account any discretionary Employer contributions made on the participant's behalf subsequent to the preceding adjustment date that were not added in by the preceding sentence. (iii) Prior to the allocation of net income or loss of the trust, there shall be added to the participant's qualified matching contribution account _____% [indicate a percentage not to exceed 100%] of the Employer -20- 21 qualified matching contributions made on the participant's behalf subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's qualified matching contribution account any Employer qualified matching contributions made on the participant's behalf subsequent to the preceding adjustment date that were not added in by the preceding sentence. (iv) Prior to the allocation of net income or loss of the trust, there shall be added to the participant's qualified non-elective contribution account _____% [indicate a percentage not to exceed 100%] of the Employer qualified non-elective contributions made on the participant's behalf subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's qualified non-elective contribution account any Employer qualified non-elective contributions made on the participant's behalf subsequent to the preceding adjustment date that were not added in by the preceding sentence. (g) Loan repayments: Prior to the allocation of net income or loss of the trust, there shall be added to the participant's account _______% [indicate a percentage not to exceed 100%] of any loan repayments, including interest, made by the participant subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's account any loan repayments, including interest, made by the participant subsequent to the preceding adjustment date that were not added in the preceding sentence. (h) Employee rollovers: Prior to the allocation of net income or loss of the trust, there shall be added to the participant's rollover account _______% [indicate a percentage not to exceed 100%] of any rollover contributions made subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's rollover account any rollover contribution made subsequent to the preceding adjustment date that were not added in by the preceding sentence. (i) Direct transfers: Prior to the allocation of the net income or loss of the trust, there shall be added to the participant's direct transfer account _______% [indicate a percentage not to exceed 100%] of any amounts transferred to the plan on behalf of the participant pursuant to Section 18 of the plan subsequent to the preceding adjustment date. After the allocation of net income or loss of the trust, there shall be added to the participant's direct transfer account any amounts directly transferred to the plan on behalf of the participant subsequent to the preceding adjustment date that were not added in by the preceding sentence. (j) Reallocation of forfeitures: After the allocation of net income or loss of the trust, there shall be added to the participant's matching contribution account and/or discretionary Employer contribution account, as applicable, any forfeitures derived from matching contributions and/or discretionary Employer contributions in the manner prescribed by Section 5.3 or Section 23 of the plan. -21- 22 (k) Net income or loss: There shall be credited or debited to each separate account that portion of the net income or net loss of the trust since the last preceding adjustment date which the basic credit as of the last preceding adjustment date, as adjusted in the manner prescribed in the above paragraphs, bears to the total of all the basic credits as of such preceding adjustment date, as so adjusted. The net income or net loss of the trust shall be ascertained by the Trustee and shall mean the profits and income actually realized and received, less the losses and expenses actually incurred and paid, plus any net increase or minus any net decrease in the fair market value of the assets of the trust not actually realized and received or incurred and paid. Net income or net loss shall not include elective deferrals, qualified non-elective contributions, employee after-tax contributions, matching contributions, qualified matching contributions, or discretionary Employer contributions. In ascertaining such value, the expense of liquidation shall not be taken in account. "Basic credit as of the last preceding adjustment date" shall be such credit after the adjustments described in the above paragraphs have been made. Any qualified non-elective contributions, matching contributions, qualified matching contributions, or discretionary Employer contributions made after the close of a plan year, but allocated to a participant's account as of the last day of such prior plan year, shall be considered part of the basic credit, as of the adjustment date immediately preceding the date such contributions are actually made. For purposes of this paragraph, to the extent a participant's account shall be invested in a group annuity contract or guaranteed investment contract issued by a legal reserve life insurance company, such contracts shall be valued using an estimated daily earnings rate, if accurate earnings are not otherwise available to the Committee. The determination of net income or net loss to be allocated to the separate accounts of a participant shall be further subject to the requirements of Section 8 of the plan to the extent such accounts are subject to the participant's investment direction. (l) Employee buyback: After the allocation of net income or loss of the trust, there shall be added to the participant's account any amounts repaid by the participant in order to restore his account pursuant to Section 5.3 of the plan. (m) Transfer of investment: Any change in the investment direction by the participant shall become effective on each adjustment date after all adjustments above have been made. There shall be added or subtracted any amounts transferred from one investment fund to another. X (2) Unit adjustment method. [This option must be elected if ----- the Employer chooses daily adjustment dates in item X.A.(5) above.] The value of each participant's account shall be converted to units or shares. Thereafter, when the participant's account is credited with an allocation of any employee and/or Employer contributions, direct transfers from another qualified plan, rollover contributions, principal and interest payments on any loans made to the participant, and/or reallocated forfeitures in accordance with the terms of the plan, the value of such allocation shall be used to purchase units or shares and added to such participant's account. When any distributions, participant loans, withdrawals, transfers between investment funds, and/or administrative fees are charged against the participant's account in accordance with the terms of the plan, the number of units or -22- 23 shares equal in value to the amount paid from the participant's account shall be deducted from the outstanding units or shares. XI. DISTRIBUTIONS TO PARTICIPANTS A. Normal retirement age shall mean the date a participant (1.38; 3.1): [Select one and complete as appropriate] X (1) Attains age 65 [not to exceed 65]. ---- (2) Attains age _____ [not to exceed 65] or the _____ [not to ---- exceed fifth] anniversary of the first day of the plan year in which the participant commenced his participation in the plan. B. Early retirement (3.2): [Select one] X (1) Early retirement shall not be applicable under the plan. ---- (2) A participant may elect to retire prior to his normal ---- retirement date as of the first day of any calendar month following his: [Select one and complete as appropriate] (a) Attainment of age _____. ---- (b) Completion of _____ years of service. ---- (c) Attainment of age _____ and completion of ---- _____ years of service. C. Distributions to terminated participants (3.6): A participant who terminates service before he is eligible to retire may elect to have his vested accrued benefit valued as of the adjustment date specified below (the "termination adjustment date") and distributed as soon as practicable thereafter: [Select one] (1) The adjustment date coincident with or next following the ---- termination of service of the participant. (2) The adjustment date coincident with the close of the plan ---- year in which the participant incurs a one year break in service. (3) The adjustment date coincident with the close of the plan ---- year in which the participant incurs five consecutive one year breaks in service. (4) The adjustment date coincident with or next following the ---- normal retirement date of the participant. (5) The adjustment date next preceding the termination of the ---- participant; provided that such participant's vested accrued benefit shall include any elective deferrals and employee after-tax contributions made and attributable to the period after such adjustment date and allocable to the participant's account, but shall not include any earnings or losses thereon after such adjustment date. [Note: If option (5) above is elected and the participant is entitled to an allocation of qualified non- elective contributions, matching -23- 24 contributions, qualified matching contributions, or discretionary Employer contributions under the plan for any period after his termination adjustment date, an additional distribution of the vested portion of any such contribution shall be made to the participant as soon as practicable after the adjustment date as of which such contributions are made.] X (6) The adjustment date the distribution is actually processed. ---- [This item must be selected if daily adjustment dates have been elected.] [Note: A prior plan cannot be amended to eliminate or reduce an existing optional form of benefit, including payment schedule, time of commencement, and medium of distribution.] D. Segregation of terminated participant's vested benefit (3.6.3): [Select one] [Complete this item XI.D only if a participant is not permitted to direct the investment of his entire account.] X (1) The Trustee shall not segregate for investment purposes ---- that portion of the terminated participant's vested accrued benefit which is not credited to his directed separate accounts (as defined in Section 8.1). (2) The Trustee shall segregate for investment purposes that ---- portion of the terminated participant's vested accrued benefit which is not credited to his directed separate accounts (as defined in Section 8.1). The segregated portion shall be held in a deferred payment account pursuant to Section 3.6.3. E. Distributions on or after attainment of age 59 1/2 (6.4): [If you select this option a participant may withdraw all or any portion of his account on or after attaining age 59 1/2, regardless of whether he is still in service.] X If this option is selected, a participant may withdraw all or any ---- portion of the following separate accounts which are a part of his entire account on or after attainment of age 59 1/2, provided that a participant may not request more than one [not to exceed four] withdrawals during a plan year.[Select one or more ] (a) the discretionary Employer contribution account; ---- (b) the mandatory contribution account; ---- X (c) the elective deferral account; ---- (d) the qualified non-elective contribution account; ---- (e) the employee after-tax contribution account; ---- X (f) the matching contribution account; ---- (g) the qualified matching contribution account; ---- X (h) the rollover account; and ---- -24- 25 (i) the direct transfer account. ---- F. Determination of life expectancies for minimum distributions (4.4): Required minimum distributions under Section 4.4 will be determined based on the life expectancy of: [Select one] X (1) The participant only. ---- (2) The participant and his or her designated beneficiary. ---- G. Hardship withdrawals (6.5): [Select one] (1) Hardship distributions shall not be permitted under the ---- plan. X (2) Hardship distributions shall be permitted under the plan. ---- Hardship distributions shall be available from the vested portion of the following accounts of the participant: [Select one] (a) All of his accounts (other than his qualified ---- matching contribution account and his qualified non-elective contribution account); (b) His elective deferral account only (excluding ---- earnings credited as of any plan year ending after July 1, 1989); X (c) The elective deferrals credited to his elective ---- deferral account only (excluding all earnings). H. Mode of distribution (4.1): All distributions pursuant to Section 4.1.1 of the plan shall be made in accordance with one of the following optional forms of payment. [Select one or more] (1) Term certain as described in 4.1.1(i). ---- X (2) Lump sum as described in 4.1.1(ii). ---- See addendum for protected payout installment option. XII. VESTING OF MATCHING AND DISCRETIONARY EMPLOYER CONTRIBUTIONS A. Vesting schedule (2.3.4; 2.4; 5.1; 5.2): The nonforfeitable percentage of each participant in his matching contribution account and discretionary Employer contribution account shall be determined according to the following schedule: [Select one] (1) 100% vesting after _____ [not to exceed 5] years of ---- service. -25- 26 (2) Number of Years Vesting ---- of Service Percentage ----------------- ---------- Less than 1 ---- 1 ---- 2 ---- 3 (at least 20%) ---- 4 (at least 40%) ---- 5 (at least 60%) ---- 6 (at least 80%) ---- 7 or more ---- X (3) Immediate 100% vesting. ---- B. Years of service counted for vesting purposes (1.62; 5.2): All years of service with the Employer shall be counted to determine the vested percentage of the participant's accrued benefit derived from matching contributions and discretionary Employer contributions except: [Select the desired exclusions, if any]: X (1) No exclusions. ---- (2) Years of service before age _____ [not to exceed age 18]. ---- (3) Years of service during a period for which the participant ---- made no mandatory contributions, if required under a prior plan. (4) Years of service before the Employer maintained this plan. ---- (5) Years of service before January 1, 1971, unless the ---- employee has had at least three years of service after December 31, 1970. (6) Years of service before the effective date of ERISA, if ---- such service would have been disregarded under the break in service rules of a prior plan in effect from time to time before such date. For this purpose, the break in service rules are rules which result in the loss of prior vesting or benefit accruals, or which deny an employee eligibility to participate, by reason of separation or failure to complete a required period of service within a specified period of time. (7) Years of service before a participant's one year break in ---- service, provided that the participant shall be credited with such years of service upon his completion of a year of service following his date of reemployment. C. Allocation of forfeitures of matching contributions and discretionary Employer contributions (5.3): [Select one] [Note: Forfeitures of excess aggregate contributions shall be treated in the same manner as elected in this item XII.C with respect to forfeitures of matching contributions, except that if such forfeitures are reallocated, they shall only be reallocated among the accounts of non-highly compensated participants.] (1) All forfeitures of matching contributions shall be ---- reallocated to the matching contribution account of each participant eligible to share in matching contributions for -26- 27 the plan year in which the forfeiture occurs in the same proportion that the matching contributions allocated to the participant's matching contribution account bears to the matching contributions allocated to the matching contribution accounts of all participants eligible to share in such matching contributions for such plan year. All forfeitures of discretionary Employer contributions under the plan shall be reallocated to the discretionary Employer contribution account of all participants who are entitled to share in such discretionary Employer contributions for the plan year in which the forfeiture occurs in the same proportion that the discretionary Employer contributions allocated under the plan for such plan year (or would have been allocated if a contribution had been made). (2) All forfeitures of matching contributions and ---- discretionary Employer contributions under the plan shall be allocated to a participant's discretionary Employer contribution account in the same ratio that each participant's compensation bears to the compensation for all participants entitled to share in the discretionary Employer contributions. (3) All forfeitures of matching contributions and ---- discretionary Employer contributions under the plan shall be applied to reduce future matching and discretionary Employer contributions, if any. (4) All forfeitures of matching contributions under the plan ---- shall be applied to reduce future matching contributions, if any. All forfeitures of discretionary Employer contributions under the plan shall be reallocated among all participants who are entitled to share in such discretionary Employer contributions for the plan year in which the forfeiture occurs in the same manner as discretionary Employer contributions are allocated under the plan for such plan year (or would have been allocated if a contribution had been made). XIII. PARTICIPANT LOANS A. Permissibility of participant loans (6.4): [Select one] X Loans to participants or beneficiaries shall not be permitted ---- under the plan. [If the above option is selected, do not complete the remaining question in this item XIII.] Loans to participants or beneficiaries (but not owner-employees ---- or shareholder-employees of S corporations) shall be permitted under the plan. [If the above option is selected, please complete the remainder of this item XIII as applicable.] B. Amount of participant loans: The minimum amount of a participant loan that may be obtained under the plan shall be: [Select one] (1) $500 ---- (2) $1,000. ---- C. Sources of participant loans: -27- 28 The principal amount of a participant loan may be obtained from the vested portion of the following accounts of the participant: [Select one] ____ (1) His entire account (other than his deductible contribution account). ____ (2) His elective deferral account only. ____ (3) The following separate accounts which are a part of his entire account: [Select one or more] ____ (a) the discretionary Employer contribution account; ____ (b) the mandatory contribution account; ____ (c) the elective deferral account; ____ (d) the qualified non-elective contribution account; ____ (e) the employee after-tax contribution account; ____ (f) the matching contribution account; ____ (g) the qualified matching contribution account; ____ (h) the rollover account; and ____ (i) the direct transfer account. D. Loans from separate accounts invested in Employer stock: [Select one] ____ (1) Notwithstanding the above, amounts allocated to a participant's separate account that are required to be invested or reinvested in Employer stock shall not be sold or applied to fund the principal amount of a participant loan under the plan. ____ (2) Amounts allocated to a participant's separate account that are required to be invested or reinvested in Employer stock may be sold or applied to fund the principal amount of a participant loan under the plan. XIV. PARTICIPANT DIRECTED INVESTMENTS A. Permissibility of participant directed investments (8.1): [Select one. If option (3) is selected, complete option (3) as instructed.] ____ (1) Each participant shall not be permitted to direct the investment or reinvestment of any portion of his account. [If the above option is selected, do not complete the remaining questions in this item XIV.] ____ (2) Each participant shall be permitted to direct the investment and reinvestment of his entire account among the directed investment funds, including, if elected by the Employer in item XV below, the Employer stock fund. -28- 29 [If the above option is selected, please complete the remaining questions in this item XIV. See item XV below for an election to permit directed investments in Employer stock.] X (3) Each participant shall be permitted to direct the ---- investment and reinvestment of one or more of the following separate accounts, which are a part of his entire account, among the directed investment funds, including, if elected by the Employer in item XV below, the Employer stock fund: [Select one or more as desired] (a) the discretionary Employer contribution account; ---- (b) the deductible contribution account; ---- (c) the mandatory contribution account; ---- X (d) the elective deferral account; ---- (e) the qualified non-elective contribution account; ---- (f) the employee after-tax contribution account; ---- (g) the matching contribution account; ---- (h) the qualified matching contribution account; ---- X (i) the rollover account; and ---- (j) the direct transfer account. ---- [If the above option is selected, please complete the remaining questions in this item XIV. See item XV below for an election to permit directed investments in Employer stock.] B. Direction by terminated participants and beneficiaries (3.6.3; 8.1): [Select one] (1) Following a participant's termination of service for any ---- reason, such participant or his beneficiary shall not be entitled to continue to direct the investment of the participant's directed separate accounts. If the participant's vested accrued benefit will be held under the plan for future payment to him or his beneficiary pursuant to Section 3.6.3, Section 4.1, or Section 4.2, the amounts credited to the participant's directed separate accounts will be transferred as of the adjustment date coincident with or next following the date of his termination of service to the most conservative directed investment fund as designated by the Committee. X (2) Following a participant's termination of service for any ---- reason, such participant or his beneficiary shall be entitled to continue to direct the investment of the participant's directed separate accounts until the participant's benefit is paid to him or his beneficiary in full as provided in Section 3.6.3, Section 4.1, or Section 4.2. C. Allocation among investment funds (8.1.3; 8.1.4): -29- 30 Each participant shall be permitted to direct the investment of future contributions allocated to his directed separate accounts among the available directed investment funds in multiples of the following percentage: [Select one and complete, if necessary] (1) 10% ---- (2) 25% ---- X (3) 5% [Insert any whole percentage that divides evenly into ---- 100] Each participant shall be permitted to reallocate the amounts credited to his directed separate accounts among the available directed investment funds as follows: [Select one or more and complete as appropriate] X (1) In multiples of the following percentage: ---- (a) 10% ---- (b) 25% ---- (c) 5% [Insert any whole percentage that divides ---- evenly into 100]. (2) In units. ---- (3) In dollars. ---- D. Frequency of investment directions (8.1.3; 8.1.4): Each participant shall be permitted to change his direction of the future contributions allocated to his directed separate accounts or to reallocate the amounts credited to his directed separate accounts among the available directed investment funds as of the following adjustment dates: [Select one. Note: The dates selected under this item XIV.D should coincide with the adjustment date(s) selected in item X.A above. Participants should not be permitted to give investment directions more frequently than the adjustment dates selected for the plan.] X (1) Each day during the plan year. ---- [Note: Item XV.D.(1) above should not be elected unless daily adjustment dates have been elected.] (2) The last day of each month during the plan year. ---- (3) The last day of each third month during the plan year. ---- (4) The last day of each sixth month during the plan year. ---- (5) The last day of each week during the plan year. ---- (6) The last day of each plan year. ---- (7) Other: ---- --------------------------------------------------- ---------------------------------------------------------- -30- 31 XV. INVESTMENTS IN EMPLOYER STOCK A. Permissibility of investments in Employer stock (1.26; 9; 20). [Select one] (1) The Trustee shall not be authorized to invest plan assets ---- in Employer stock. [If the above option is selected, do not complete the remaining questions in this item XV.] (2) The Committee shall be authorized to direct the Trustee to ---- invest and reinvest plan assets in shares of Employer stock as a general investment of the trust in accordance with Section 20. [Note: This option should be selected if the Employer does not intend to make matching contributions and/or discretionary Employer contributions to the plan in shares of Employer stock and participants are not permitted to direct the investment of any portion of their accounts (i.e., if item XIV.A.(1) above was selected).] [If the above option is selected, do not complete the remaining questions in this item XV.] X (3) The Committee shall be authorized to direct the Trustee to ---- establish an Employer stock fund (as described in Section 9.1) for the purpose of receiving and holding any shares of Employer stock contributed to the plan as matching contributions and/or discretionary Employer contributions. [Note: This option should be selected if the Employer intends to make matching contributions and/or discretionary Employer contributions to the plan in shares of Employer stock.] If this option (3) is selected and participants are permitted to direct the investment of any portion of their accounts among the other directed investment funds (i.e., if either item XIV.A.(2) or item XIV.A.(3) above was selected), select one of the following additional options : (A) Each participant shall not be permitted to direct the ---- investment or reinvestment of any portion of his account in the Employer stock fund. (B) Each participant shall be permitted to direct the ---- investment and reinvestment of his entire account in the Employer stock fund. X (C) Each participant shall be permitted to direct the ---- investment and reinvestment of one or more of the following separate accounts which are a part of his entire account in the Employer stock fund: [Select one or more as desired] (a) the discretionary Employer contribution account; ---- (b) the deductible contribution account; ---- (c) the mandatory contribution account; ---- X (d) the elective deferral account; ---- -31- 32 (e) the qualified non-elective contribution account; ---- (f) the employee after-tax contribution account; ---- (g) the matching contribution account; ---- (h) the qualified matching contribution account; ---- X (i) the rollover account; and ---- (j) the direct transfer account. ---- [If item XV.A.(3) is selected, please complete the remaining questions in this item XV.] (4) The Committee shall be authorized to direct the Trustee to ---- establish an Employer stock fund (as described in Section 9.1) for the purpose of allowing participants to direct the investment or reinvestment of all or a portion of their accounts in Employer stock as designated below. [Note: This option should be selected if the Employer does not intend to make matching contributions and/or discretionary Employer contributions to the plan in shares of Employer stock, but wants to permit participants to invest and reinvest all or a portion of their accounts in Employer stock.] If this item XV.A.(4) is selected, select one of the following additional options: (A) Each participant shall be permitted to direct the ---- investment or reinvestment of his entire account in the Employer stock fund. (B) Each participant shall be permitted to direct the ---- investment and reinvestment of one or more of the following separate accounts which are a part of his entire account in the Employer stock fund: [Select one or more as desired] (a) the discretionary Employer contribution account; ---- (b) the deductible contribution account; ---- (c) the mandatory contribution account; ---- (d) the elective deferral account; ---- (e) the qualified non-elective contribution account; ---- (f) the employee after-tax contribution account; ---- (g) the matching contribution account; ---- (h) the qualified matching contribution account; ---- (i) the rollover account; and ---- (j) the direct transfer account. ---- -32- 33 [If this item XV.A.(4) is selected, please complete the remaining questions in this item XV.] B. Medium of payment (4.8). To the extent amounts allocated to a participant's separate account are invested in Employer stock, the distribution of such amounts shall be made in: [Select one] (1) Cash. ---- (2) Shares of Employer stock. ---- X (3) Cash or shares of Employer stock, as elected by the ---- participant or beneficiary. [If item XV.B.(1) is selected, please proceed to item XV.D. Do not complete item XV.C.] C. Right of first refusal (9.3): [Select one] X (1) Any participant who receives a distribution of Employer ---- stock under the plan and desires to dispose of such Employer stock shall not be required to first offer to sell such Employer stock to the Employer. (2) Any participant who receives a distribution of Employer ---- stock under the plan and desires to dispose of such Employer stock shall be required to first offer to sell such Employer stock to the Employer. D. Voting of Employer stock (9.4). (1) Readily tradable Employer stock (9.4.1): [Select one] [Complete this item XV.D.(1) only if the Employer stock held by the Trustee is readily tradable on an established market. If it is not readily tradable, please proceed to item XV.D.(2). See Section 9.4.1 for a definition of "readily tradable on an established market."] (a) Each participant or his beneficiaries shall not be ---- entitled to direct the Trustee as to the manner in which shares of Employer stock allocated to the participant's separate accounts shall be voted with respect to any corporate matter that involves voting the Employer stock allocated to the participant's separate accounts. X (b) Each participant or his beneficiaries shall be entitled to ---- direct the Trustee as to the manner in which shares of Employer stock allocated to the participant's separate accounts shall be voted with respect to any corporate matter that involves voting the Employer stock allocated to the participant's separate accounts. [Note: It may be advisable to amend this item XV.D if the Employer stock allocated to a participant's separate accounts should become not readily tradable in the future.] (2) Not readily tradable Employer stock (9.4.2): [Select one] [Complete this item XV.E.(2) only if the Employer stock held by the Trustee is not readily tradable on an established market.] -33- 34 (a) Each participant or his beneficiaries shall not be ---- entitled to direct the Trustee as to the manner in which shares of Employer stock allocated to the participant's separate accounts shall be voted with respect to any corporate matter that involves voting the Employer stock allocated to the participant's separate accounts. (b) Each participant or his beneficiaries shall be entitled to ---- direct the Trustee as to the manner in which shares of Employer stock allocated to the participant's separate accounts shall be voted with respect to any corporate matter that involves voting the Employer stock allocated to the participant's separate accounts. (c) Each participant or his beneficiaries shall be entitled to ---- direct the Trustee as to the manner in which shares of Employer stock allocated to the participant's separate accounts shall be voted with respect to any corporate matter involving the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, or sale of substantially all of the assets of the Employer's trade or business. [Note: It may be advisable to amend this item XV.D if the Employer stock allocated to a participant's separate accounts should become readily tradable in the future.] XVI. ROLLOVERS A. Permissibility of rollovers to the plan (19.1): [Select one] Rollovers to the plan shall not be permitted. ---- [If the above option is selected, do not complete the remaining question in this item XVI.] X Rollovers to the plan shall be permitted by the individuals ---- designated in item XVI.B below. [If the above option is selected, please complete item XVI.B.] See addendum for limits on rollovers. B. Persons eligible to make rollovers to the plan (19.1): [Select one.] X All employees eligible to participate in the plan under Item IV.A, ---- including employees who have not completed the participation requirements under the plan. All participants. ---- C. Withdrawals from rollover account: [Select one or more] (a) Except as provided in XI. E. or G., amounts allocated to a ---- participant's rollover account shall not be withdrawn prior to his termination of service, death, or disability. X (b) In addition to any withdrawal rights provided in XI. E. or ---- G., at a participant's request, amounts allocated to his rollover contribution account may be withdrawn prior to his termination of service, death, or disability, subject to the following conditions: -34- 35 [Complete (i); complete (ii) if daily adjustment dates have been selected; also complete III through V as appropriate] (i) A participant may not request more than 1 [not to exceed four] withdrawal(s) during a plan year. (ii) No withdrawal shall exceed 100 % of the amount in the participant's rollover contribution account, determined on the date the withdrawal request is actually processed. (iii) No withdrawal shall be made in an amount less than ---- $______ [Insert amount not in excess of $1,000.} (iv) No withdrawal may be made until the participant has ---- taken all available withdrawals from the following accounts: __________________________________________ ____________________________________________________ ____________________________________________________ X (v) A withdrawal may only be made if the participant ---- incurs a financial hardship. For purposes of this paragraph, a "financial hardship" is defined as a hardship within the meaning of Section 6.5.2 of the plan. [Specify clear, objective criteria for determining a financial hardship that precludes employer discretion.] XVII. TOP-HEAVY PROVISIONS A. Top-heavy ratio (22.1.7): For purposes of establishing present value to compute the top-heavy ratio, any benefit shall be discounted only for interest and mortality based on the following: [Complete both] (1) Interest rate: 6 % (2) Mortality table: PBGC I for males, PBGC II for females B. Minimum top-heavy allocations (22.2.1): For purposes of minimum top-heavy allocations, contributions and forfeitures equal to 3 % of each non-key employee's compensation will be allocated to the employee's account when the plan is top-heavy. [Insert a percentage that is not less than 3%; provided that "0" may be inserted if the minimum allocation will be provided to participants under any other plan or plans of the Employer. If permitted pursuant to Section 22.2.1 of the plan, such percentage shall in no event exceed the largest percentage of Employer contributions and forfeitures allocated on behalf of any key employee. Neither elective deferrals nor matching contributions may be taken into account for the purpose of satisfying the minimum top-heavy allocation requirement. The Employer may attach additional provisions as necessary to satisfy Section 416 of the Code because of the required aggregation of multiple plans.] C. Top-heavy vesting schedule (22.2.2): -35- 36 [Complete this question if option (3) of item XII.A is not selected and either (a) option (1) of item XII.A is selected and the number of years of service is greater than three, or (b) option (2) of item XII.A is selected and the vested percentage for any year under such option is less than the vested percentage for the same year under option (2) of this item.] The nonforfeitable percentage of each participant in his accrued benefit attributable to matching contributions and discretionary Employer contributions for any top-heavy plan year shall be determined as follows: [Select one] (1) 100% vesting after _____ [not to exceed 3] years of ---- service. (2) Number of Years Vesting ---- of Service Percentage Less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 or more 100% XVIII. MAXIMUM ALLOCATIONS A. Correction of excess allocations (23.1.4; 23.2.6): If, as a result of the allocation of forfeitures, a reasonable error in estimating a participant's compensation, a reasonable error in determining the amount of elective deferrals that may be made by a participant under the limitations of Section 23 of the plan, or other limited facts and circumstances, the maximum permissible amount would be exceeded for any limitation year, such excess amount with respect to a participant for such limitation year shall be disposed of in the following order: (1) Any employee after-tax contributions (and any gains attributable thereto) to the extent of such excess shall be returned to the participant. (2) If further reductions are necessary, any elective deferrals to the extent of such excess shall be returned to the participant. (3) If further reductions are necessary, then the Committee shall reduce the excess amount in the following manner: [Select one] X (a) First, such participant's share of the discretionary ---- Employer contributions, then his share of the matching contributions, and finally, his share of any forfeitures for the limitation year shall be reduced in that order to the extent of such remaining excess. Such excess amount shall be credited to a separate special account for the participant designated as a "suspense account," and shall be applied in the next limitation year (and succeeding limitation years if necessary) to reduce matching contributions and discretionary Employer contributions for the participant, provided he is covered under the plan as of the adjustment date such matching contributions or discretionary Employer contributions are allocated. If the participant is not covered under the plan at such time, the balance of the suspense account shall be reallocated among the remaining participants in the ratio which each of such participant's compensation during the limitation year in question bears to the aggregate -36- 37 compensation of all such participants during such limitation year, and before any employee after-tax contribution, elective deferrals, qualified non-elective contributions, matching contributions, qualified matching contributions, or discretionary Employer contributions for such limitation year are allocated. The suspense account shall be adjusted annually for additions thereto and distributions therefrom, but not for any net income or net loss attributable thereto. In the event the plan is terminated, any balance in the suspense account shall be returned to the Employer. (b) First, such participant's share of the ---- discretionary Employer contributions, then his share of the matching contributions, and finally, his share of any forfeitures for the limitation year shall be reduced in that order to the extent of such remaining excess. The amount of the reduction shall be reallocated among the remaining participants in the ratio which each of such participant's compensation during the limitation year in question bears to the aggregate compensation of all such participants during such limitation year and before any employee after-tax contributions, elective deferrals, qualified non-elective contributions, matching contributions, qualified matching contributions, or discretionary Employer contributions for such limitation year are allocated. If all of the amount of such reduction cannot be reallocated without causing the account of each other participant to exceed the maximum permissible amount, then such remaining amount shall be credited to a suspense account. The suspense account shall contain the excess amounts of Employer contributions and forfeitures from all limitation years. Such excess amounts shall be allocated for each succeeding limitation year among the accounts of participants in the ratio which each of such participant's compensation for the limitation year in question bears to the aggregate compensation of all such participants during such limitation year and before any employee after- tax contributions, elective deferrals, qualified non-elective contributions, matching contributions, qualified matching contributions, or discretionary Employer contributions for such year are allocated. The suspense account shall be adjusted annually for additions thereto and distributions therefrom, but not for any net income or net loss attributable thereto. In the event the plan is terminated, any balance in the suspense account shall be returned to the Employer. Notwithstanding anything above or in the plan to the contrary, if all or part of a participant's elective deferrals or employee after- tax contributions are distributed to the participant pursuant to the provisions of Section 23 of the plan, the matching contribution made with respect to such elective deferrals or employee after-tax contributions, adjusted for income and losses allocable thereto, shall be forfeited by the participant on or before the March 15 next following the end of the plan year for which the matching contribution was made. The income and losses allocable to the forfeited matching contributions for the plan year shall be determined in the same manner as income and losses allocable to excess aggregate contribution are determined pursuant to Section 2.3.6. Forfeitures of matching contributions (including income and losses allocable thereto) shall be applied in the current or next succeeding plan year in the same manner as elected by the Employer in item XII.C of this Adoption Agreement. B. Limits for multiple plans: -37- 38 If the Employer maintains another qualified defined contribution plan, other than a regional prototype plan: [Select one] X (1) The provisions of Section 23.2.1 through 23.2.6 will apply ---- as if the other plan were a regional prototype plan. (2) [Provide the method under which the plans will limit total ---- annual additions to the maximum permissible amount, and will properly reduce any excess amounts, in a manner that precludes Employer discretion]. C. If the participant is or has ever been a participant in a defined benefit plan maintained by the Employer: [Insert provision which satisfies 1.0 limitation of Section 415(e) of the Code. See Treasury Regulation Section 1.415-1 for guidance.] If the sum of the defined benefit fraction and the defined contribution fraction shall exceed 1.0 in any limitation year for any participant in this plan, the Employer shall adjust the numerator of the defined benefit fraction so that the sum of the defined benefit fraction and the defined contribution fraction shall not be in excess of 1.0 in any year for such participant in accordance with the provisions set forth in the defined benefit plan. -38- 39 XIX. SUBSTITUTE TRUST OR CUSTODIAL ACCOUNT AGREEMENT (20.7) [Complete this Item XIX only if you are adopting a separate trust or custodial account agreement that overrides the trust provisions of Section 20 of the plan.] X The attached trust or custodial agreement overrides the ---- trust provisions of Section 20 of the plan. -39- 40 IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto on the day of 19 ------- --------------------------------, ------. PLEXUS CORP. ------------------------------------------- Name of Employer By: --------------------------------------- President, Partner, or Sole Proprietor Attest/Witness: - ------------------------------------ [Corporate Seal] Name of Trustee(s) By: ---------------------------------------- Individual/Authorized Officer Attest: - ------------------------------------ [Corporate Seal] NOTE: The Employer may not rely on the notification letter issued by the National or District Office of Internal Revenue Service as evidence that this plan is qualified under Section 401 of the Code. In order to obtain reliance with respect to plan qualification, the Employer must apply to the appropriate Key District Office for a determination letter. -40- 41 The plan is adopted by the following affiliated employers: ------------------------------------- Name of Affiliated Employer By: ------------------------------------- President, Partner, or Sole Proprietor Attest/Witness: - ------------------------------------ [Corporate Seal] ------------------------------------ Name of Affiliated Employer By: ------------------------------------ President, Partner, or Sole Proprietor Attest/Witness: - ------------------------------------ [Corporate Seal] ------------------------------------ Name of Affiliated Employer By: ------------------------------------ President, Partner, or Sole Proprietor Attest/Witness: - ----------------------------------- [Corporate Seal] -41- EX-10.5(C) 7 AMENDMENT NO. 1 TO THE CREDIT AGREEMENT 1 EXHIBIT 10.5(c) AMENDMENT NO. 1 TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT AND CORPORATE GUARANTEE AGREEMENT as of August 28, 1996 Firstar Bank Milwaukee, N.A. 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60603 Bank One, Milwaukee, NA 111 East Wisconsin Avenue Milwaukee, Wisconsin 53201 LaSalle National Bank 120 South LaSalle Street Chicago, Illinois 60603 Gentlemen: Each of Electronic Assembly Corporation, a Wisconsin corporation (the "Company"), and Plexus Corp., a Wisconsin corporation ("Plexus"), hereby agrees with you as follows: 1. Definitions. Reference is made to the Amended and Restated Revolving Credit Agreement dated as of March 18, 1996 (the "Loan Agreement") between the Company and each of you, pursuant to which the Company has issued its promissory notes to each of you, each dated as of March 18, 1996 (the "Existing Notes"), in an aggregate principal amount equal to $55,000,000. Further reference is made to the Amended and Restated Corporate Guarantee Agreement dated of March 18, 1996 (the "Plexus Guarantee") made by Plexus in favor of the Banks with respect the obligations of the Company under the Loan Agreement. All capitalized terms used and not otherwise defined herein shall have the meanings given to such terms by the Loan Agreement as supplemented and amended hereby. 2 Firstar Bank Milwaukee, N.A. Harris Trust and Savings Bank Bank One, Milwaukee, NA LaSalle National Bank August 28, 1996 Page 2 2. Decrease in Credit; Other Changes. The Company and Plexus request that you agree to (i) decrease the aggregate amount of credit available to the Company under the Loan Agreement from $55,000,000 to $40,000,000, and (ii) make certain changes to the interest rate pricing option provisions, covenants and other terms and conditions of the Loan Agreement and the Plexus Guarantee. In connection with such credit reduction, the Company and the Banks have agreed that all outstanding principal and accrued interest on the Existing Note held by LaSalle National Bank (the "LaSalle Note"), together with all fees and other amounts due LaSalle National Bank under the Loan Agreement, shall be paid in full on the date hereof, and that effective upon such payment LaSalle National Bank shall no longer be a party to the Loan Agreement. 3. New Notes. Any additional loans made pursuant to the Loan Agreement, together with the unpaid balances of the Existing Notes (other than the LaSalle Note which shall be paid in full), shall be evidenced by new promissory notes of the Company in the form of Exhibit A annexed hereto (the "New Notes") to be dated the date hereof in the principal amounts of the respective Commitments set forth in section 4(d) below. The New Notes shall be executed by the Company and delivered to each of the remaining Banks against return of their Existing Notes to the Company. Accrued interest on such Existing Notes outstanding on the date of issuance of the New Notes shall be included in the interest due on the New Notes issued in replacement of such Existing Notes on the first interest payment date specified therein. 4. Amendments to Loan Agreement. Upon the execution and delivery of the New Notes and the payment in full of the LaSalle Note as provided below, and subject to all of the terms and conditions hereof, the Loan Agreement shall be amended as of the date hereof as follows: (a) All references in the Loan Agreement to the Notes issued thereunder and the loans evidenced thereby shall refer to the New Notes issued hereunder and the loans evidenced thereby (including the unpaid balances of the Existing Notes after giving effect to the transactions contemplated by this Amendment). (b) All references to the Loan Agreement in the Loan Agreement and the other agreements relating 3 Firstar Bank Milwaukee, N.A. Harris Trust and Savings Bank Bank One, Milwaukee, NA LaSalle National Bank August 28, 1996 Page 3 thereto shall refer to the Loan Agreement as amended hereby. (c) The first paragraph of the Loan Agreement is amended by deleting the reference therein to LaSalle National Bank, a national banking association. All references to the "Banks" or the "Creditor" in the Loan Agreement and the other agreements relating thereto shall be deemed to refer only to Firstar Bank Milwaukee, N.A., Harris Trust and Savings Bank, and Bank One, Milwaukee, NA. (d) The table set forth in Section 1.8 of the Loan Agreement (Commitment) shall be amended to read in its entirety as follows:
Bank Percentage Interest Commitment ---- ------------------- ---------- Firstar Bank 45% $18,000,000 Milwaukee, N.A. Harris Trust and 37.5% $15,000,000 Savings Bank Bank One, 17.5% $ 7,000,000 Milwaukee, NA Total 100% $40,000,000 ==== ===========
(e) The reference to $55,000,000 in clause (i) of Section 1.23 of the Loan Agreement (Maximum Amount of Credit) is amended to $40,000,000. (f) Section 2.3(b) of the Loan Agreement (Interest Calculation - Applicable Rate) is amended by deleting the word "monthly" where it appears in clause (ii) thereof. (g) The table set forth in Section 2.3(b) of the Loan Agreement (Interest Calculation - Applicable Rate) is amended to read in its entirety as follows: 4 Firstar Bank Milwaukee, N.A. Harris Trust and Savings Bank Bank One, Milwaukee, NA LaSalle National Bank August 28, 1996 Page 4
Consolidated Debt to Worth Ratio LIBOR Rate Spread Prime Rate Spread ----------------- ----------------- ----------------- greater than or 2.0% 0.25% equal to 2.00 to 1 less than 2.00 to 1 1.5% 0% but greater than or equal to 1.5 to 1 less than 1.5 to 1 1.25% (0.25%) but greater than or equal to 1.25 to 1 less than 1.25 to 1 1.0% (0.25%) but greater than or equal to 1.00 to 1 less than 1.00 to 1 0.875% (0.25%)
(h) The first sentence of Section 2.4 of the Loan Agreement (Commitment Fee) is amended to read in its entirety as follows: "The Company will pay, with respect to each Note, a commitment fee of one-eighth of one percent (1/8%), on a per annum basis, as to the unused portion of the Commitment represented by such Note during the period from the date of this Agreement to the date on which the Commitment is terminated and the entire amount of principal of and interest due on such Note is paid in full." (i) Section 6.6 of the Loan Agreement (Fixed Asset Expenditures) is deleted in its entirety. (j) Section 10.7 of the Loan Agreement (Notices) is amended by deleting the name and address of LaSalle National Bank. 5. Amendments to Plexus Guarantee. Upon the execution and delivery of the New Notes and the payment in full of the 5 Firstar Bank Milwaukee, N.A. Harris Trust and Savings Bank Bank One, Milwaukee, NA LaSalle National Bank August 28, 1996 Page 5 LaSalle Note as provided below, and subject to all of the terms and conditions hereof, the Plexus Guarantee shall be amended as of the date hereof as follows: (a) All references to the Plexus Guarantee in the Loan Agreement and the other agreements relating thereto shall refer to the Plexus Guarantee as amended hereby. (b) Paragraph A of the Recitals to the Plexus Guarantee is amended by deleting the reference therein to LaSalle National Bank. (c) Section 7(a) of the Plexus Guarantee is amended to read in its entirety as follows: "(a) Consolidated Tangible Net Worth. Maintain at all times Consolidated Tangible Net Worth of not less than $37,500,000." (d) Section 7(h)(i) of the Plexus Guarantee is hereby amended to read in its entirety as follows: "(i) Within 45 days after the end of each of the first three fiscal quarters in each fiscal year, consolidated and consolidating balance sheets for the Guarantor as of the end of such quarter and consolidated and consolidating statements of income of the Guarantor for such quarter and for that part of the fiscal year ending with such quarter, all in reasonable detail and certified as true and correct, subject to review and normal year-end adjustments, by the chief financial officer or chief operating officer of the Guarantor;" 6. Representations and Warranties. The Company repeats and reaffirms the representations and warranties set forth in Section 3 of the Loan Agreement as of the date hereof. The Company also represents and warrants that the execution, delivery and performance of this Amendment are within the corporate powers of the Company, have been duly authorized by all necessary corporate action and do not and will not (i) violate any provision of the 6 Firstar Bank Milwaukee, N.A. Harris Trust and Savings Bank Bank One, Milwaukee, NA LaSalle National Bank August 28, 1996 Page 6 articles of incorporation or by-laws of the Company or of any law, rule, regulation, order or judgment presently in effect having applicability to the Company; (ii) require the consent or approval of, or filing or registration with, any governmental body, agency or authority; or (iii) result in any breach of or constitute a default under any indenture or other agreement or instrument under which the Company or any Subsidiary is a party or by which it or its properties may be bound or affected. 7. Payment of LaSalle National Bank; Adjustment of Interests, etc. On the date of this Amendment, the Company shall pay to LaSalle National Bank the aggregate amount of $2,797,787.79, representing the sum of $2,781,200 in respect of unpaid principal of the LaSalle Note, $14,919.98 in respect of accrued and unpaid interest on the LaSalle Note, and $1,667.81 in respect of accrued and unpaid fees and expenses under the Loan Agreement. Upon receipt by LaSalle National Bank of such payment, (i) LaSalle National Bank shall be eliminated as a party to the Loan Agreement, (ii) each of you (other than LaSalle National Bank) will make such adjustments among yourselves as are necessary so that after giving effect to such adjustments, the Percentage Interest of each of you in the loans outstanding under the Loan Agreement will be the Percentage Interest set forth under Section 1.8 of the Loan Agreement as amended hereby, and (iii) all debts and obligations of the Company and the Guarantors to LaSalle National Bank shall be satisfied in full and LaSalle National Bank shall no longer have any rights or obligations under the Loan Agreement or any of the agreements relating thereto. 8. Conditions. Without limiting any of the other terms of the Loan Agreement as amended hereby, this Amendment shall not become effective, and the Banks shall not be required to make any further loans to the Company unless and until: (a) No Default or Event of Default shall have occurred and be continuing and neither the business nor the assets nor the financial condition of the Company or any Guarantor shall have been materially adversely affected as the result of any event or development since September 30, 1995; and (b) All proceedings taken in connection with the transactions contemplated by this Amendment and all 7 Firstar Bank Milwaukee, N.A. Harris Trust and Savings Bank Bank One, Milwaukee, NA LaSalle National Bank August 28, 1996 Page 7 instruments, authorizations and other documents applicable thereto shall be satisfactory in form and substance in the reasonable opinion of the Banks and their counsel. 9. Confirmation of Loan Agreement, etc. Except as expressly provided above, the Loan Agreement and the other agreements related thereto shall remain in full force and effect. 10. Fees and Expenses. The Company shall be responsible for the payment of all fees and out-of-pocket disbursements reasonably incurred by the Banks in connection with the preparation, execution, delivery, administration and enforcement of this Amendment including without limitation the reasonable fees and disbursements of counsel for the Banks, whether or not any transaction contemplated by this Amendment is consummated. 11. Governing Law. This Amendment shall be governed by and construed in accordance with the laws (other than the conflict of laws rules) of the State of Wisconsin. 12. Counterparts. This Amendment may be signed in any number of counterparts with the same effect as if the signatures thereto and hereto were upon the same instrument. If the foregoing is satisfactory to you, please sign the form of acceptance below and return a signed counterpart hereof to us. Very truly yours, ELECTRONIC ASSEMBLY CORPORATION By: ------------------------------------ Title: --------------------------------- PLEXUS CORP. By: ------------------------------------ Title: --------------------------------- 8 Firstar Bank Milwaukee, N.A. Harris Trust and Savings Bank Bank One, Milwaukee, NA LaSalle National Bank August 28, 1996 Page 8 Agreed to as of the date first above written. FIRSTAR BANK MILWAUKEE, N.A. By: ------------------------------------ Title: -------------------------------- HARRIS TRUST AND SAVINGS BANK By: ------------------------------------ Title: -------------------------------- BANK ONE, MILWAUKEE, NA By: ------------------------------------ Title: --------------------------------- LASALLE NATIONAL BANK By: ------------------------------------ Title: --------------------------------- 9 Firstar Bank Milwaukee, N.A. Harris Trust and Savings Bank Bank One, Milwaukee, NA LaSalle National Bank August 28, 1996 Page 9 The undersigned Guarantors hereby consent to the foregoing Amendment, and agree that their respective Corporate Guarantee Agreements, each dated as of March 18, 1996, and all collateral or security therefor, shall remain in full force and effect notwithstanding the amendments made above. Dated as of , 1996. ----------------- PLEXUS CORP. By: ------------------------------------ Title: --------------------------------- TECHNOLOGY GROUP, INC. By: ------------------------------------ Title: -------------------------------- 10 EXHIBIT A REVOLVING CREDIT NOTE $_______________ _______________, 1996 FOR VALUE RECEIVED, the undersigned, ELECTRONIC ASSEMBLY CORPORATION, hereby promises to pay to the order of _______________ (the "Payee"), on July 31, 1998, at the office of Firstar Bank Milwaukee, N.A., as Agent for the payee hereof, at 777 East Wisconsin Avenue, Milwaukee, Wisconsin in lawful money of the United States of America and in immediately available funds, the principal amount of ____________________ Dollars ($______________) or, if less, the aggregate unpaid principal amount of all loans made by the Payee to the undersigned under the Amended and Restated Revolving Credit Agreement dated as of March 18, 1996, as amended from time to time (the "Credit Agreement"), by and among the undersigned, Firstar Bank Milwaukee, N.A., for itself and as Agent, and certain other banks named therein, together with interest on the principal amount hereof from time to time unpaid. Interest (computed on the basis of the actual number of days elapsed and a year of 360 days) shall accrue on such unpaid principal amount from time to time at the rate or rates set forth in the Credit Agreement, and shall be payable monthly on the first Business Day of each month, or at such other times as may be provided in the Credit Agreement. This Note is one of the New Notes issued under the Amended and Restated Credit Agreement, as amended by Amendment No. 1 thereto dated as of August 28, 1996, and is subject to permissive and mandatory prepayment, in each case upon the terms provided in the Credit Agreement. This Note is payable and secured in accordance with, is governed by and subject to, and is entitled to the benefits of, the Credit Agreement. All capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement. This Note shall be construed in accordance with the laws (other than the conflict of laws rules) of the State of Wisconsin. The undersigned waives presentment, protest and notice of dishonor, and agrees, in the event of default hereunder, to pay all costs and expenses of collection, including reasonable attorneys' fees. ELECTRONIC ASSEMBLY CORPORATION By: ___________________________________ Title: _________________________________ EX-10.16 8 MASTER EQUIPMENT LEASE 1 EXHIBIT 10.16 MASTER EQUIPMENT LEASE LEASE NO. 90017 LESSOR: CARGILL LEASING CORPORATION (herein called the "Lessor") 6000 CLEARWATER DRIVE MINNETONKA, MN 55343-9497 LESSEE: PLEXUS CORPORATION (herein called the "Lessee") 55 JEWELERS PARK DRIVE NEENAH, WI 54957 2 1. LEASE Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, pursuant to the terms of this Master Equipment Lease (herein called the "Lease"), the personal property described in Schedule(s) A, attached hereto and incorporated herein, and all attachments, additions, accessories, replacement parts, substitutions and repairs incorporated therein and/or affixed thereto, (herein called the "Equipment") and the proceeds thereof. The parties may from time to time, by mutual agreement, add other items of equipment to this Lease for such terms and at such rates as may be agreed by execution of additional Schedule(s) A, and this Lease shall control and be effective as to such additional items of equipment as though the same were set forth herein. For purposes of construing this Lease, all Schedule(s) A attached hereto shall be incorporated herein and form a part hereof. No respective Schedule A shall be construed as an independent separate lease. 2. TERM This Lease shall be in force with respect to each item of Equipment for a period beginning with the Commencement Date or if earlier, with respect to any item of Equipment, the commencement of the corresponding Interim Rent Period as set forth in the corresponding Schedule(s) A and ending at the expiration of the period ("Expiration Date") set forth in the corresponding Schedule(s) A (herein called the "Lease Term"). 3. RENT Lessee shall pay to Lessor the payment amounts set forth in Schedule(s) A (herein called "Rent") for use of the Equipment for the Lease Term. Rent shall be payable to Lessor at the office of Lessor in Minnetonka, Minnesota 55343-9497 or at such other location as Lessor may from time to time instruct Lessee in writing. In the event Lessee should fail to pay Lessor any Rent within fifteen (15) days of the due date thereof, or any other sum required to be paid to the Lessor within fifteen (15) days of demand, Lessee shall pay unto Lessor a delinquent payment charge from the due date of payment until paid at an annual rate of 18% unless otherwise prohibited by law, in which case interest will be charged at the highest lawful rate allowed. All payments hereunder shall be applied to unpaid obligations then due per schedule. 4. WARRANTIES LESSOR, NOT BEING THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER'S AGENT, MAKES NO EXPRESS OR IMPLIED WARRANTY OF ANY KIND WHATSOEVER WITH RESPECT TO THE EQUIPMENT, INCLUDING BUT NOT LIMITED TO: THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR A PARTICULAR PURPOSE; THE DESIGN OR CONDITION OF THE EQUIPMENT; THE QUALITY OR CAPACITY OF THE EQUIPMENT; THE WORKMANSHIP IN THE EQUIPMENT; COMPLIANCE OF THE EQUIPMENT WITH THE REQUIREMENTS OF ANY LAW, RULE, OR SPECIFICATION; PATENT INFRINGEMENTS OR LATENT DEFECTS, IT BEING AGREED THAT THE EQUIPMENT IS LEASED "AS IS" AND THAT ALL RISKS AS BETWEEN LESSOR AND LESSEE ARE TO BE BORNE BY LESSEE. LESSOR IS NOT RESPONSIBLE FOR INSTALLATION OF, OR FOR ANY REPAIRS OR SERVICE TO, THE EQUIPMENT. LESSOR IS NOT RESPONSIBLE FOR LOSS OF PROFIT OR FINANCIAL LOSS OR INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OR INTERRUPTION OF BUSINESS, WHICH MAY BE DIRECTLY OR INDIRECTLY CAUSED BY OR ATTRIBUTABLE TO THE INADEQUACY OF THE EQUIPMENT. Lessee will be subrogated to Lessor's claims, if any, against the manufacturer or supplier of the Equipment for breach of any warranty or representation and, Lessor shall enforce any such warranty, express or implied, issued on or applicable to any of the Equipment, provided, that Lessee is not in default under the Lease pursuant to Section 13, hereof, and 3 Lessor shall not be obligated to enforce any such warranty unless Lessee agrees in writing to pay all expenses in connection therewith. All proceeds of any such warranty recovery from the manufacturer or supplier of the Equipment shall be used at the discretion of Lessor to either repair or replace the affected Equipment. NOTWITHSTANDING THE FOREGOING, LESSEE'S OBLIGATION TO PAY RENT OR ANY OTHER SUM REQUIRED UNDER THIS LEASE SHALL BE AND IS ABSOLUTE AND UNCONDITIONAL. 5. TITLE AND IDENTIFICATION This Lease is intended to constitute a true lease and not a sale of the related Equipment. However, to the extent, at any time or from time to time, this Lease is construed to be a transaction intended as security, Lessor retains and Lessee hereby grants to Lessor a security interest in and to the Equipment, the proceeds of any sale thereof, the assignment, lease, or sublease thereof, any insurance proceeds with respect thereto, and any other rights of Lessee, tangible or intangible, in and to the Equipment, the Lease, and their proceeds; provided, further, that Lessee may not, to the extent this Lease is construed to be a transaction intended as security, sell or otherwise encumber the Equipment without Lessor's prior written consent. No right, title or interest in the Equipment shall pass to Lessee other than, conditioned upon Lessee's compliance with and fulfillment of the terms and conditions of this Lease, the right to maintain possession and use the Equipment for the Lease Term as provided in Schedule(s) A. Lessee, at its expense, will protect and defend Lessor's title to the Equipment from and against all claims, liens, and legal process of creditors of Lessee and take such action as is necessary to discharge any such claim, lien, or legal process. Lessor may require plates or markings to be affixed to or placed on the Equipment indicating Lessor is the owner and Lessee will not alter, deface, cover or remove such ownership identification. 6. TAXES, REGISTRATION, AND LICENSING Lessee agrees to comply with all laws, regulations and orders relating to the Lease and to pay when due as additional rent and indemnify Lessor on an after-tax basis for, all assessments, license fees, taxes (including but not limited to sales, use, excise, personal property, value added, consumption, franchise, state income, gross receipts, ad valorem, stamp, documentary and federal highway use tax) and all other governmental charges, fees, fines or penalties whatsoever, whether payable by Lessor or Lessee, on or relating to the Equipment or the purchase, manufacture, maintenance, transfer, lease, possession, use, registration, rental, shipment, transportation, delivery, ownership or operation thereof or on or relating to the Lease and the schedules executed in connection therewith except taxes of Lessor on net income imposed by the United States or the State of Minnesota other than sales, use, ad valorem or rental taxes; provided, however, that if under local law or custom such payments may be made only by Lessor, Lessee shall promptly notify Lessor, and shall reimburse Lessor, upon demand, for all payments made by Lessor. Where any tax or government charge is paid or reported directly by Lessor, the amount of such tax attributable to the Equipment or the Lease shall be determined in good faith by Lessor based on the same general assumptions and methodology upon which Lessor and its parent company customarily file their returns. If Lessee disagrees with such determination, such determination shall be verified by KPMG Peat Marwick or another independent firm of certified public accountants acceptable to Lessor; such verification to be based on the provisions of this Section 6 and shall not involve the disclosure of confidential information to Lessee. Lessor shall include the Equipment, if_applicable, on Lessor's personal property tax return and Lessee shall reimburse Lessor, upon demand, for all taxes paid by Lessor with respect thereto. Unless otherwise requested by Lessor, Lessee shall prepare and file all other returns required with respect to charges payable by Lessee hereunder and furnish copies to Lessor; provided, however, that the foregoing shall not include any federal and state income taxes of Lessor. Lessee shall obtain such licensing and registration of the Equipment as is required by federal, state and local law or regulation. Lessee agrees to promptly notify Lessor in writing not more than five (5) days after any attachment, tax lien or other judicial process shall attach to the Equipment and the full particulars thereof. 7. GENERAL INDEMNIFICATION 4 Lessee assumes liability for, and hereby agrees to indemnify, protect and hold harmless Lessor on an after-tax basis, its agents, employees, officers, directors, successors and assigns from and against any and all liabilities, obligations, liens, losses, damages, injuries, claims, demands, penalties, actions, costs and expenses, including reasonable attorney fees of whatsoever kind and nature (including any of the foregoing arising in connection with latent or other defects, or any claim for patent, trademark or copyright infringement or under the doctrine of strict liability) (collectively "Claims"), arising out of the manufacture, possession, use, condition, operation, installation, alteration (with or without Lessor's consent), repair, maintenance, ownership, selection, delivery, leasing, removal or return of the Equipment, by Lessee, its agents, its employees or any permitted sublessees, or arising out of any failure on the part of Lessee to perform or comply with conditions of this Lease or by operation of law; provided such Claims are not solely due to Lessor's gross negligence or willful misconduct. The indemnities and assumptions of liabilities and obligations provided in Sections 6 and 8 hereof and in this Section shall continue in full force and effect notwithstanding assignment, expiration or other termination of the Lease. 8. TAX INDEMNITY Lessee agrees that if (i) Lessor shall not be entitled to accelerated cost recovery deductions (the "MACRS deductions") as allowed under Section 168 of the Internal Revenue Code of 1986, as amended, ("the Code") based on 100% of the Original Cost of the Equipment to Lessor and utilizing the depreciable life and method referred to in the attached Schedule(s) A, or (ii) if Lessor loses any other intended tax benefit as a result of any subsequent change in the Code, (including a change in the maximum federal corporate income tax rates from the rates in effect under the Code as of the date of this Lease hereinafter referred to as a "Tax Rate Change") or rules and regulations promulgated pursuant thereto, whether or not retroactive, which impacts Lessor's intended return and economics from this transaction, or (iii) if Lessor is required to recognize income other than Rent and Stipulated Loss Value (as defined below) as contemplated under the Lease, or (iv) if any item of income, gain, loss or deduction is treated as having been derived from or allocable to sources outside the U.S. (any of clauses (i) through (iv) herein individually and collectively called the "Loss"), then Lessee shall pay to Lessor, within thirty (30) days after the date of such Losses a lump sum amount which, after deduction of all taxes required to be paid by Lessor in respect of the receipt of such sum under the laws of any federal, foreign, state or local government or taxing authority, shall preserve Lessor's after-tax discounted cash flow rate of return on equity, cash flows and book income based on FASB 13, assumed by Lessor in entering into this Lease (hereinafter the "Lessor's Economic Return") plus the amount required to reimburse Lessor on an after tax basis for interest and penalties (including additions to tax because of underpayment of estimated tax) which may be payable to any federal, state or local government or taxing authority in connection with such Loss. Notwithstanding the foregoing, any payment with respect to a Loss (except for the amount of Loss, if any, which has occurred to date) caused by a Tax Rate Change and due during the Lease Term shall be made through an increase to the Rent sufficient to maintain the Lessor's Economic Return on an on-going, current basis. The amount of such Loss and the resulting tax and indemnity payable hereunder shall be determined in good faith by Lessor based on the specific provisions hereof and based on the same general assumptions and methodology upon which Lessor and its consolidated group customarily file their returns (including such methodology used by Lessor for purposes of determining available foreign tax credits), but shall be computed assuming that Lessor has sufficient taxable income to fully utilize the intended tax benefits on a current basis. Such determination shall be subject to the mutual agreement of Lessor and Lessee or, failing such agreement shall be verified, without disclosure to Lessee of confidential information, by KPMG Peat Marwick, or another independent firm of certified public accountants acceptable to Lessor, at Lessee's expense. The determination of such independent firm shall be binding on the parties. For purposes of this Section 8 "Lessor" shall include a reference to any consolidated group of corporations with which Lessor files its federal income tax return. In the event there is a change in tax law which affects the Stipulated Loss Value schedule as originally computed, then as soon as reasonably possible after the change in tax law the Stipulated Loss Value schedule shall be adjusted accordingly. In making the adjustment Lessor shall use the same assumptions as used in computing the original Stipulated Loss Value schedule except that the change in tax law shall be substituted for the old tax 5 law. For the purpose of this Lease, the date of any such Loss shall be the earliest of (i) the occurrence of any event (such as disposition or change in use of the Equipment) which may cause such Loss, or (ii) the payment by Lessor (or the consolidated federal taxpayer group of which Lessor is a part) to the Internal Revenue Service of the tax increase resulting from such Loss, or (iii) receipt by Lessor from the appropriate taxing authority of any notice of proposed deficiency, statutory notice of deficiency or assessment relating to the Loss or (iv) a determination by KPMG Peat Marwick or another independent firm of certified public accountants or an independent tax counsel of a nationally recognized law firm to the effect that Lessor (or the consolidated federal taxpayer group of which Lessor is a part) is not entitled to such deduction or is required to report such Loss, or (v) the adjustment of the tax return of Lessor (or the consolidated federal taxpayer group of which Lessor is a part) to reflect such Loss. If Lessee is not in default as defined in Section 13 hereof, Lessee shall not be required to pay the foregoing amounts if the Loss results solely from the occurrence of any of the following events: (i) a disqualifying disposition due to sale by Lessor of the Equipment or the lease thereof by Lessor unless such sale is initiated by Lessee or otherwise contemplated in accordance with the terms of this Lease, or (ii) a failure of Lessor to timely claim depreciation for the Equipment in the appropriate tax return of Lessor (or the consolidated federal taxpayer group of which Lessor is a part) unless there is no reasonable basis to claim such deductions, or claiming such deductions is inconsistent with previous Internal Revenue Service adjustments. 9. LESSOR'S PERFORMANCE OF LESSEE'S OBLIGATIONS If Lessee shall fail to duly and promptly perform any of its obligations under this Lease with respect to the Equipment, Lessor may, at its option, perform any act or make any payment which Lessor deems necessary for the maintenance and preservation of the Equipment and Lessor's title thereto, including payments for satisfaction of liens, repairs, taxes, levies and insurance, and all sums so paid or incurred by Lessor, together with any delinquent payment charges pursuant to Section 3 hereof, and any reasonable legal fees incurred by Lessor in connection therewith, shall be paid by Lessee to Lessor upon demand. The performance of any act or payment by Lessor as provided herein shall not be deemed a waiver or release of any obligation or default on the part of Lessee. 10. SELECTION, DELIVERY, AND INSTALLATION Lessee has selected the Equipment, including the type, quantity, and the supplier thereof, based solely on its own judgment and expressly disclaims any reliance upon i) any statements or representations, if any, made by Lessor, its agents or employees and ii) Lessor's, its agents or employees, skill of judgement, if any, to select or furnish suitable equipment. Lessee acknowledges that Lessor is not a dealer, manufacturer, merchant or supplier of equipment of any kind and that the Equipment subject to this Lease is of a type, size, design and capacity selected by Lessee and that Lessor is acquiring the Equipment or the right to possession and use of the Equipment in connection with this Lease. Lessor shall have no liability for any delivery or installation of the Equipment or for any failure by supplier to fill the purchase order or meet the conditions thereof. 11. USE AND ASSIGNMENT Lessee, at its sole cost, will cause the Equipment to be operated and maintained in accordance with any applicable manufacturer's manuals or instructions, applicable laws, any insurance policies and any warranties of the manufacturer with respect to the Equipment, by competent and duly qualified personnel only, in accordance with applicable governmental regulations, if any, and for its originally intended business purpose only. Lessee shall not sell, pledge, hypothecate, or otherwise encumber or suffer a lien upon or against any interest in this Lease or the Equipment nor shall Lessee move the Equipment from its place of installation or delivery, as set forth in Schedule(s) A, without Lessor's prior written consent. LESSEE SHALL NOT ASSIGN THE 6 LEASE OR ASSIGN OR SUBLET ANY ITEM OF EQUIPMENT WITHOUT LESSOR'S PRIOR WRITTEN CONSENT. ANY ASSIGNMENT OR SUBLEASE ENTERED INTO BY LESSEE WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, WHICH SHALL NOT BE UNREASONABLY WITHHELD, SHALL BE NULL AND VOID. Lessee agrees that Lessor may assign, sell or encumber all or any part of this Lease, the Equipment and the Rent hereunder, and Lessee acknowledges that any such assignment, sale, or encumbrance will not materially change its duty or materially increase its burden or risk hereunder; and upon written notice Lessee will unconditionally pay to such assignee all or any part of the Rent and other sums due on or to become due under this Lease. Lessee shall not assert against assignee and/or mortgagee any defense, counterclaim or offset that Lessee may have against Lessor. Subject to the other terms and conditions herein, this Lease inures to the benefit of and is binding upon the heirs, legatees, personal representatives, successors and permitted assigns of the parties hereto. 12. ALTERATIONS Without the prior written consent of Lessor, Lessee shall not make any alterations, additions or improvements to the Equipment. All permitted alterations, additions and improvements of whatsoever kind or nature made to the Equipment shall become the property of Lessor upon expiration or earlier termination of this Lease except that any of the foregoing which are not required pursuant to Section 11 and are removed without damage to the Equipment, without adversely affecting the Equipment's commercial value, useful life or originally intended use shall remain the property of Lessee. No advertising or insignia shall be placed on the Equipment without the prior consent of Lessor, unless the Equipment is rolling stock, whereas Lessor hereby consents to the placement of Lessee's insignia. 13. EVENTS OF DEFAULT The occurrence of any of the following events shall constitute a default by Lessee (herein called "Event of Default") in the performance of Lessee's obligations hereunder: (i) failure of Lessee to pay Rent within fifteen (15) days after it is due, or failure of Lessee upon demand to pay any other amount required to be paid herein or under any other agreement with Lessor; or (ii) failure of Lessee to timely comply with any covenant, condition or obligation, other than the payment of Rent and the obligations under Section 25 hereof, imposed on or required to be performed by Lessee under this Lease (and such failure shall continue for fifteen (15) days after written notice by Lessor) or under any material contract, loan or lease agreement or the occurrence of an event of default under any other agreement with Lessor; or (iii) failure of Lessee to perform or observe any covenant required to be performed or observed by Lessee under Section 25 hereof; or (iv) any representation or warranty made by Lessee herein shall prove untrue in any material respect as of the date of issuance or making thereof; or (v) Lessee or any of Lessee's guarantors ("Guarantor") shall become insolvent or bankrupt or generally fails to pay, or shall admit in writing its inability to pay, its debts as they come due, or shall make an assignment for the benefit of, or any composition or arrangement with, its creditors, or shall apply for, consent to or acquiesce in the appointment of a trustee, receiver, liquidator or other custodian for Lessee or Guarantor, its business or all or a substantial part of its property, or, in the absence of such application, consent or acquiescence, a trustee, receiver, liquidator or other custodian shall be appointed for Lessee or Guarantor, its business or all or a substantial part of its property and is not discharged within thirty (30) days; or 7 (vi) any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy, insolvency or similar law of any applicable jurisdiction, or any dissolution, winding up or liquidation case or proceeding shall be commenced in respect of Lessee or Guarantor, and, if such case or proceeding is not commenced by Lessee or Guarantor, as it shall be consented to or acquiesced in by Lessee or Guarantor or remain undismissed for thirty (30) days; or Lessee or Guarantor shall take any action to authorize, or in furtherance of, any of the events described in clause (v) or this clause (vi); or (vii) any guaranty of Lessee's obligations hereunder for any reason ceases to be in full force and effect or Guarantor denies that it has any further liability under any such guaranty or gives notice to such effect; or (viii) Lessee's or Guarantor's business is dissolved, terminated or is discontinued; or Lessee or Guarantor dies, if either of them shall be an individual; or (ix) Lessee or Guarantor sells, transfers or disposes of all or substantially all of its assets or property or a material portion thereof, or merges with any other entity or engages in any form of corporate reorganization or recapitalization without the prior written consent of Lessor; or (x) A failure to notify within thirty (30) business days of any of the following; transfer of ownership of the Lessee's or Guarantor's outstanding voting stock or other action (issuance of new shares, sale of Treasury shares, purchase of outstanding shares, dividends, etc.) resulting in a change in the controlling interest of Lessee or Guarantor; or (xi) Lessee attempts to move, sell, or transfer the Equipment from its place of installation or domicile as described in Schedule(s) A attached hereto, or encumber the Equipment or part with possession, sublet or assign this Lease without Lessor's prior written consent. 14. REMEDIES Upon occurrence of any Event of Default and at any time thereafter so long as the same shall be continuing, Lessor may, at its option, declare this Lease to be in default and may do one or more of the following with respect to any or all Equipment as Lessor in its sole discretion shall elect, all of which are hereby authorized by Lessee, to the extent permitted by and subject to compliance with any mandatory requirements of applicable law then in effect: (i) terminate this Lease effective immediately; or (ii) cause Lessee, upon written demand and at Lessee's expense, to promptly return any or all Equipment under all Schedules to Lessor pursuant to Section l8 hereof; or (iii) take possession of any or all Equipment and remove the same without liability for injuries suffered through or loss caused by such repossession. LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION OR ATTACHMENT OF THE EQUIPMENT BY LESSOR IN THE EVENT OF DEFAULT HEREUNDER BY LESSEE. In the event Lessor proceeds pursuant to this subsection (iii), Lessor may sell any or all Equipment at public or private sale as is commercially reasonable given the existing conditions on an "AS IS, WHERE IS" basis without recourse or warranties of any kind, or otherwise hold, use, operate, or keep idle such Equipment, as Lessor in its sole discretion determines is commercially reasonable free and clear of all rights of Lessee; or (iv) whether or not Lessor has exercised any other right hereunder, by written notice to Lessee, cause Lessee to pay Lessor (as liquidated damages for loss of a bargain and not as a penalty) on the date specified in such notice an amount equal to the Rent due and payable on the first of the month following the date of the notice of Lease termination plus a sum equal to the appropriate Stipulated Loss Value determined as of the first of the month following the date of the notice of Lease termination in accordance with the Stipulated Loss Value 8 Schedule set out in Schedule(s) A. "Stipulated Loss Value" shall mean an amount equal to the product of the Original Cost of such Equipment multiplied by the percentage set forth on the SLV Schedule in Schedule(s) A; or (v) Lessor may exercise any other right or remedy which may be available to it under the Uniform Commercial Code or any other applicable law or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof. In addition, Lessee shall pay Lessor all costs and expenses incurred by Lessor as a result of Lessee's default hereunder or the termination hereof including without limitation, reasonable attorney's fees, and costs arising out of repossession and disposal of the Equipment. Provided Lessee has previously paid to Lessor the sum of the Stipulated Loss Value, Rent due and owing, and other costs and expenses incurred pursuant hereto, Lessee shall be entitled to the net proceeds of any such sale, disposition, or re-lease of the Equipment to the extent they do not exceed the Stipulated Loss Value. Any excess shall be retained by Lessor. To the extent the Equipment is re-leased by Lessor, Lessee shall be credited the present value of the lease rental stream at the discount rate of Chase Manhattan Prime as of the date the re-lease is agreed to between the parties. Furthermore, to the extent the parties to this Lease need to determine the present value of any monies due under the Lease, the parties agree that the discount rate shall be Chase Manhattan Prime. In addition, Lessee shall continue to be liable for all indemnities under this Lease and for all reasonable attorney fees and other costs and expenses resulting from the termination hereof and/or the exercise of Lessor's remedies, including placing any Equipment in the condition required by Section 18 hereof. No remedy referred to in this Section is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity. Any repossession or subsequent sale or lease by Lessor of the Equipment shall not bar an action for a deficiency as herein provided and the bringing of any action or the entry of judgment against the Lessee shall not bar the Lessor's right to repossess any or all Equipment. No expressed or implied waiver by Lessor of any default shall constitute a waiver of any other default by Lessee or a waiver of any of Lessor's rights. 15. NOTICES Any notices or demands required to be given herein shall be given to the parties in writing and shall be deemed given when mailed by certified mail, postage prepaid, by direct courier or by confirmed facsimile to the address herein set forth or to such other address as the parties may hereafter substitute by written notice. 16. REPAIRS: LOSS AND DAMAGE Lessee agrees, at its sole expense, to keep the Equipment in good repair, condition and working order, and to furnish all parts, mechanisms or devices which may be required in the course of so doing. Lessee will maintain in force a maintenance agreement covering the Equipment with the manufacturer thereof or such other party with Lessor's prior written consent and will maintain the Equipment at current engineering standards. Lessee agrees to immediately inform Lessor of any damage to the Equipment or caused by the Equipment or the existence of any Casualty Occurrence as hereinafter defined. All risk of loss with respect to the Equipment shall be borne by Lessee. If Lessor determines that any Equipment is lost, stolen, destroyed, or damaged for any reason, or in the event of any condemnation, confiscation, theft or seizure or requisition of title to or the use of such Equipment (herein called "Casualty Occurrence"), Lessee will, at the option of Lessor, either (a) repair or replace the same with like Equipment in good repair or (b) promptly pay to Lessor: 9 (i) a sum equal to the Stipulated Loss Value of such Equipment determined as of the date following the Casualty Occurrence set forth in the Stipulated Loss Value Schedule in the related Schedule A(s); plus (ii) an amount equal to the Rent in respect of the Equipment suffering a Casualty Occurrence accrued up to the Stipulated Loss Value Date used for calculation of the Stipulated Loss Value payment; less (iii) any physical damage insurance proceeds received by Lessor as a result of said Casualty Occurrence. As of the date on which the Stipulated Loss Value is due, the Rent for such Equipment shall cease to accrue and the term of this Lease as to such Equipment shall terminate and (except in case of the loss, theft or complete destruction), Lessor shall be entitled to recover possession of the Equipment. Lessor hereby appoints Lessee its agent to dispose of any Equipment suffering a Casualty Occurrence at the best price obtainable on an "AS IS, WHERE IS" basis without recourse or warranties of any kind. Provided that Lessor has been paid the Stipulated Loss Value and all Rent or other sums due and owing as to such Equipment, Lessee shall be entitled to the net proceeds of such sale to the extent they do not exceed the Stipulated Loss Value of such Equipment. Any_excess shall be_paid to Lessor. 17. INSPECTION Lessor, or its employees or agents, may, but shall not be obligated to, inspect the Equipment at a reasonable time or place, and for such purpose enter any building or place where said Equipment is located. 18. RETURN OF EQUIPMENT Upon the Expiration Date, or earlier termination as provided herein, unless Lessee shall have duly exercised a renewal or purchase option with respect thereto, Lessee, at its own risk and expense, will immediately return the Equipment as described in such Schedule(s) A to Lessor at such location(s) as Lessor shall designate, freight and insurance prepaid; provided such location is within the continental United States. Lessee hereby acknowledges that any such designation is reasonably convenient to Lessee. Lessee shall have the Equipment certified for the manufacturer's standard maintenance agreement prior to redelivery to Lessor and will provide a letter to that effect if requested by Lessor. In the event that the Equipment is not returned within three (3) days after the Expiration Date or such date as earlier terminated, Lessee shall pay as additional rent an amount equal to the daily equivalent of Rent as described in the applicable Schedule(s) A for each day from, and_including_the Expiration Date or such date as earlier terminated until and including the day on which the Equipment is returned. Payment of additional rent hereunder does not relieve Lessee of its obligation to return the Equipment immediately at such time as set forth herein. 19. FINANCIAL REPORTS Lessee and Guarantor shall furnish Lessor during the Lease Term hereof with annual audited financial statements within one hundred twenty (120) days after the end of its fiscal year and such other public financial information as Lessor may from time to time request including, without limitation, reports filed with federal or state regulatory agencies. Lessee and Guarantor hereby warrant and represent that all financial statements heretofore and hereafter delivered to Lessor by or upon behalf of Lessee and Guarantor have been and will be prepared in accordance with generally accepted accounting principles, and any statements and data submitted in writing to Lessor in connection with this Lease, are true and correct and present fairly the financial condition of Lessee and Guarantor for the period involved. 10 20. NO OFFSET LESSEE HEREBY WAIVES ANY AND ALL EXISTING AND FUTURE CLAIMS AND OFFSETS, AGAINST ANY RENT OR OTHER PAYMENTS DUE HEREUNDER; AND AGREES TO PAY THE RENT AND OTHER AMOUNTS HEREUNDER REGARDLESS OF ANY OFFSET OR CLAIM WHICH MAY BE ASSERTED BY LESSEE OR ON ITS BEHALF. LESSEE HEREBY FURTHER ACKNOWLEDGES THAT THE MANUFACTURER AND/OR SUPPLIER OF THE EQUIPMENT, INCLUDING THEIR RESPECTIVE AGENTS AND EMPLOYEES, WERE AT NO TIME AND ARE NOT NOW THE AGENT OR UNDER THE SUPERVISION OF LESSOR, NOR WAS OR IS LESSOR IN ANY MANNER, THE AGENT OF THE MANUFACTURER AND/OR SUPPLIER. 21. LESSEE'S REPRESENTATIONS Lessee represents, warrants and agrees that (a) it has the full power, authority and legal right to enter into and perform this Lease; the execution, delivery and performance of this Lease have been duly authorized by all necessary corporate or other legal action on the part of Lessee, do not require the approval or consent of any stockholder, trustee or holders of any indebtedness or obligations of Lessee, and will not contravene any law, governmental rule, regulation or order binding on Lessee (or the Certificate or Articles of Incorporation or By-Laws of Lessee if it is a corporation) or contravene the provisions of, or constitute a default under, or result in the creation of any lien or encumbrance upon the property of Lessee under any indenture, mortgage, contract or other agreement to which Lessee is a party, or by which its subsidiaries may be bound or affected; and (b) all consents and approvals of, the giving of notice to, registration with, and the taking of any other action in respect of any federal, state or foreign governmental authority or agency, necessary, if at all, to permit the transactions contemplated by this Lease have been taken; and (c) this Lease constitutes a legal, valid and binding obligation of Lessee enforceable against Lessee in accordance with the terms thereof; and (d) there are no pending or threatened actions or proceedings before any court or administrative agency which will adversely affect the condition, business or operations of Lessee or any of its subsidiaries or the ability of Lessee to perform its obligations under this Lease; and (e) the transactions contemplated by this Lease will raise no presumption of fraud as against and will be effective against all creditors of Lessee under applicable state and federal laws, including, without limitation, laws relating to fraudulent conveyances or bulk transfers; and (f) Lessee shall provide Lessor, upon request, with an opinion of counsel satisfactory to Lessor with respect to the foregoing matters. 22. FURTHER ASSURANCES Lessee shall execute and deliver to Lessor, upon Lessor's request, such further documents, instruments, and assurances as Lessor deems reasonably necessary or advisable for the confirmation or perfection of this Lease and Lessor's rights hereunder and such information as is necessary to support Lessor's treatment of the transaction for tax purposes. Lessee authorizes Lessor to file, at Lessor's option, any such instruments (including financing statements and certificates of title) without Lessee's signature, and if such signature is required by law, Lessee appoints Lessor as Lessee's attorney-in-fact to execute such items. Such appointment is irrevocable and shall be deemed to be coupled with an interest. Lessee shall reimburse Lessor for all reasonable expenses incurred by Lessor in connection with this provision, including the costs of searches and all filings. Any such filing or recording shall not in and of itself be a factor in determining whether or not the Lease is intended as security. 23. QUIET ENJOYMENT Lessor covenants that Lessor will not interfere in Lessee's quiet enjoyment of the Equipment hereunder during the Lease Term so long as (i) Lessee is in compliance with each term and condition hereof, and (ii) no Event 11 of Default has occurred or is continuing. 24. WAIVER The failure of Lessor to insist, in any one or more instances, upon strict performance by_Lessee of any of the covenants of this Lease, or to exercise any option herein contained, shall not be construed as a waiver or relinquishment for the future of such covenant or option, but the same shall continue and remain in full force and effect. The receipt by Lessor of Rent, with knowledge of the breach of any covenant or condition hereof, shall not be deemed a waiver of such breach and no waiver by Lessor of any provision hereof shall be deemed to have been made unless expressed in writing and signed by Lessor. 25. INSURANCE At its own expense, Lessee shall obtain and maintain for the Lease_Term, physical damage and liability insurance. The physical damage insurance shall insure against loss or damage to the Equipment including, without limitation, loss by fire, explosion, wind, hail, flood, malicious mischief, vandalism, theft, collision, upset, overturn, glass breakage and any other physical loss to the Equipment. The amount of insurance against loss or damage shall not be less than the replacement cost of the Equipment. Such policy providing insurance for the damage to the Equipment shall name Lessor as Loss Payee as Lessor's interest may appear and shall not have a deductible amount in excess of $50,000 without the express written consent of Lessor. The liability insurance shall provide coverage for the liability of Lessee and Lessor for damages arising out of the ownership, maintenance, use, and operation of the Equipment. Such liability insurance shall also contain a contractual liability provision. Liability insurance shall have minimum limits of $1,000,000 per person, $1,000,000 occurrence and $1,000,000 property damage, or $1,000,000 combined single limit and shall have no deductible without the express written consent of Lessor. Each insurance policy shall name Lessee as the named insured and Lessor as an additional insured and shall contain a clause requiring the insurer to give Lessor 30 days prior written notice of any material alteration in the terms of the policy or of the cancellation thereof. To the extent that Lessee may have liability insurance in excess of the minimum limits required herein, Lessor shall be named as an additional insured on any such coverage. Lessee or Lessee's insurance agent(s) shall furnish to Lessor a Certificate of Insurance or other evidence satisfactory to Lessor that such insurance coverage is in or will be in effect as of the Commencement Date set forth in Schedule(s) A or the date of Delivery and Acceptance by Lessee, whichever is earlier; provided, however, that Lessor shall be under no duty either to ascertain the existence of or to examine such insurance policy or to advise Lessee in the event such insurance coverage shall not comply with the requirements hereof. Lessee further agrees to give to Lessor prompt written notice not more than five (5) days after any damage to, or loss of, the Equipment or damage or injury caused by the Equipment. Lessee shall, at its own expense and cost, have the duty and responsibility to make all proofs of loss and take all other steps necessary to effect collections from underwriters for any loss under any of the above mentioned policies. The proceeds of such insurance, at the option of Lessor shall be applied (a) toward the replacement, restoration or repair of the Equipment or (b) toward payment of the obligations of Lessee hereunder. Any policies of insurance carried in accordance with this Section shall provide that in respect of the interests of Lessor in such policies, the insurance shall not be invalidated by any action or inaction of Lessee or any other person (other than Lessor) including, but not limited to, any misrepresentation and shall insure Lessor's interests, as they appear, regardless of any breach or violation of any warranties, declarations, or conditions contained in such policies by or binding upon Lessee or any other person (other than Lessor). Lessee shall, to the extent reasonably possible, obtain the liability insurance required hereunder on an occurrence basis rather than a claims-made basis. To the extent that the Lessee must obtain some or all of this coverage on a claims-made basis, Lessee shall provide Lessor with satisfactory evidence that the retroactive date 12 of the claims-made policy is prior to the Commencement Date or the date of Delivery and Acceptance by Lessee, whichever is earlier; that the then remaining aggregate amount of Lessee's coverage is and will be sufficient to meet the minimum amount of coverage required hereunder, and that the policy will either remain in force, be renewed, or a satisfactory discovery period will be purchased to cover any claims which might arise hereunder in the future. Lessee's obligation to keep the Equipment insured as provided herein shall continue until the Equipment is returned to Lessor pursuant to Section 18 hereof. 26. TERMINATION OPTIONS. Provided Lessee shall have complied with all the terms and conditions of the Lease and provided Lessee shall not be in default as defined in Section 13 herein, Lessee shall, at least 120 days prior to the Expiration Date of the Lease, notify Lessor of its intent to exercise one of the following options: (a) to its fair market value rental for no more than 2 years. Each lease renewal will be subject to the approval of Lessor's investment committee; or (b) Lessee shall have the option to purchase on an "as is" basis the Equipment at a cost equaling the then fair market value. The determination of fair market value will assume the Equipment is to be in the condition required under this Lease. (i) The term "fair market value" shall mean the selling price that would be obtained in an arms-length transaction between an informed and willing buyer and an informed and willing seller each under no compulsion to buy or sell. Fair market value shall be determined on the basis that the Equipment is in complete compliance with all conditions specified in this Lease. The fair market value shall be an amount mutually agreed upon by Lessor and Lessee. Lessee's reasonable estimate of the fair market value of the Equipment shall accompany its notice to exercise its purchase option. If Lessor and Lessee are unable to agree upon the fair market value of the Equipment within 30 days after Lessor's receipt of the estimate thereof, then Lessor shall employ a recognized independent appraiser which will be selected by Lessor and consented to by Lessee, which consent shall not be unreasonably withheld, to determine fair market value. If Lessor and Lessee are not able to agree upon an appraisal, or if the fair market value is not so determined within 60 days after Lessor's receipt of Lessee's notice of estimate, the fair market value shall be determined by an appraisal mutually agreed to by two recognized independent appraisal firms, one of which shall chose by Lessor and one by Lessee, or if such appraisers cannot agree on the fair market value, an appraisal arrived at by a third party independent appraiser chosen by the mutual consent of the two appraisers. The fair market value as finally determined shall bear interest at the late rate set forth in section 3 for the period, if any, from the date of the expiration of the Lease with respect to that item of Equipment to the date of payment, and Lessee shall promptly reimburse Lessor for the costs of all appraisals should any appraisal be necessary. c) Lessee will at its sole risk and expense immediately return all but not less than all of the Equipment under such expired Schedule(s) A to Lessor pursuant to Section 18 hereof at such location and at such time as Lessor shall designate within the continental United States. If lessee does not choose any of the above options at least 90 days prior to the Expiration Date of the Lease, then the Lease will automatically extend monthly, under the same terms and conditions then in effect, including Rent. This extension will continue on a month to month basis until terminated by Lessee or Lessor in writing and such termination will become effective 30 days after receipt of such written notice. 13 27. JURISDICTION Lessee hereby consents to jurisdiction and venue of the federal or state courts sitting in the State of Minnesota for purposes of resolving all disputes of any nature whatsoever regarding the Lease, or any transaction contemplated hereby and Lessee hereby waives objection which it may now or hereafter have to the laying of jurisdiction or venue in the federal or state courts of Minnesota. Lessor and Lessee agree that a summons and complaint commencing an action or proceeding in any such court shall be properly served and shall confirm personal jurisdiction if served personally, by certified mail to it at its address designated pursuant to the Lease, or as otherwise provided under the respective rules of the state or federal courts of Minnesota. 28. MISCELLANEOUS If there should be more than one party executing this Lease as Lessee, all obligations hereunder to be performed by Lessee shall be the joint and several liability of all such parties. Any provision of this Lease which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Time is of the essence with respect to this Lease. The captions in this Lease are for convenience only and shall not define or limit any of the terms hereof. The parties hereto acknowledge by INITIALING immediately hereafter that no waiver, amendment, re-lease or modification of this Lease shall be established by conduct, custom, or course of dealing but solely by an instrument in writing duly executed by the parties hereto. LESSEE: LESSOR: ---------- ----------- This Lease consists of the foregoing and the Schedules, Exhibits, Addenda, and Riders referred to herein and correctly sets forth the entire Lease agreement between Lessor and Lessee. No agreements or understandings shall be binding on either of the parties hereto unless specifically set forth in this Lease. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE, REGARDLESS OF THE STATE OF MINNESOTA'S CHOICE OF LAW PROVISIONS. IN WITNESS WHEREOF, the parties hereto through a duly authorized representative have executed this Lease as of this 25th day of January , 19 96 . - ------ ---------------- ---- LESSEE: PLEXUS CORPORATION By: (Lisa M Heid) ---------------------------- WITNESS/ 14 ATTEST: Title: (Asst. Controller) ------------------------- ------------------- LESSOR: CARGILL LEASING CORPORATION By: (David L. Jacobson) ---------------------------------- Title: (Vice President) ------------------------------- EX-11 9 STATMNT REGARD'G COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 1996 10-K PLEXUS CORP. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS for the year ended September 30, 1996 (In thousands, except per share amounts)
Primary Fully Diluted ------- ------------- Net income $7,431 $7,431 Adjustment for preferred stock dividends earned 512 - ------ ------ Adjusted net income $6,919 $7,431 ====== ====== Weighted average number of common shares outstanding 6,496 6,496 Adjustments: Assumed issuances under stock option plan 136 137 Assumed conversion of preferred stock - 555 ------ ------ 6,632 7,188 ====== ====== Net income per common share $ 1.04 $ 1.03 ====== ======
EX-21 10 LIST OF SUBSIDIARIES 1 EXHIBIT 21 1996 10-K Subsidiaries of Plexus Corp. 1. Electronic Assembly Corporation, a Wisconsin corporation 2. Technology Group, Inc., a Wisconsin corporation EX-23 11 CONSENT OF COOPERS & LYBRAND L.L.P. 1 EXHIBIT 23 1996 10-K CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Plexus Corp. and Subsidiaries on Form S-8 (File No.'s 33-06469, 33-23490, 33-28309, 33-56932, 33-89862 and 33-89864) of our reports dated November 13, 1996 on our audits of the consolidated financial statements and the financial statement schedule of Plexus Corp. and Subsidiaries as of September 30, 1996 and 1995, and for each of the three years in the period ended September 30, 1996, which reports are included in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Milwaukee, Wisconsin December 20, 1996 EX-27 12 FINANCIAL DATA STATEMENT
5 1,000 YEAR SEP-30-1996 OCT-01-1995 SEP-30-1996 1,847 0 35,312 275 54,386 94,749 33,676 21,253 107,374 43,324 0 0 0 65 47,952 107,374 316,124 316,124 288,791 288,791 13,346 0 1,924 12,377 4,946 7,431 0 0 0 7,431 1.04 1.03
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