-----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, DPpqYDrJsZhhF3nT/40DZM4iYqxoltbpQFvzu7D1jhiN88BWQ7WNZUmq7Bc5/KfZ v59BfVt3QmuvDRHTpydO7Q== 0000912057-96-012004.txt : 19960613 0000912057-96-012004.hdr.sgml : 19960613 ACCESSION NUMBER: 0000912057-96-012004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960610 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENT ELECTRONICS CORP CENTRAL INDEX KEY: 0000793024 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 741763541 STATE OF INCORPORATION: TX FISCAL YEAR END: 0328 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09520 FILM NUMBER: 96579085 BUSINESS ADDRESS: STREET 1: 7433 HARWIN DR CITY: HOUSTON STATE: TX ZIP: 77036-2015 BUSINESS PHONE: 7137807770 MAIL ADDRESS: STREET 1: 7433 HARWIN DRIVE CITY: HOUSTON STATE: TX ZIP: 77036-2015 10-K 1 FORM 10-K - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended March 30, 1996 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . -------- -------- Commission file number 0-14643 KENT ELECTRONICS CORPORATION (Exact Name of Registrant as Specified in its Charter) Texas 74-1763541 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) 7433 Harwin Drive 77036-2015 Houston, Texas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (713) 780-7770 Securities registered pursuant to Section 12(b) of the Act: Common Stock, without par value New York Stock Exchange, Inc. (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) The aggregate market value of the voting stock held by non-affiliates of the Registrant as of May 7, 1996 was approximately $884,248,622. As of May 7, 1996 there were outstanding 23,937,176 shares of Common Stock, without par value. DOCUMENTS INCORPORATED BY REFERENCE The Proxy Statement for the 1996 Annual Meeting of Shareholders of the Registrant (Sections entitled "Common Stock Outstanding and Principal Holders Thereof" and "Proposal No. 1 - Election of Directors") is incorporated by reference in Part III of this Report. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- PART I ITEM 1. BUSINESS GENERAL Kent Electronics Corporation (the "Company") is a leading national specialty distributor of electronic products and a manufacturer of custom-made electronic assemblies. The Company, through its Kent Components Distribution division, distributes electronic connectors, electronic wire and cable, and other passive and electromechanical products and interconnect assemblies used in assembling and manufacturing electronic products. The Company, through its wholly owned subsidiary K * TEC Electronics Corporation ("K * TEC"), also manufactures custom-made electronic interconnect assemblies, specially fabricated battery power packs, and other sub-assemblies that are built to customers' specifications, and provides a wide variety of other fully integrated electronic manufacturing services. Through Kent Datacomm ("Datacomm"), the Company distributes a broad range of premise wiring products, such as fiber optic cables, patch panels and enclosures, and local area network ("LAN") and wide area network ("WAN") equipment, such as modems, hubs, bridges and routers, directly to commercial end-users and professionals who install and service voice and data communications networks. The Company has concentrated its efforts on certain market niches and has not attempted to be a broad-line distributor. Moreover, it has followed a strategy of distributing the products of a selected group of leading suppliers. The Company believes that these factors provide its marketing personnel with the advantage of greater familiarity with the products they sell. The Company is increasingly focused on providing materials management services, such as bar code auto replenishment, in-plant stores, and electronic data interchange capabilities, that reduce its customers' total acquisition costs. In response to customer needs and market opportunities, the Company regularly reviews the possibility of adding other products and services to its distribution network to provide customers with an entire materials management solution. K * TEC concentrates on developing long-term relationships with a select group of original equipment manufacturers ("OEMs") desiring to lower their total production cost through outsourcing. The Company's customers are primarily industrial users and OEMs involved in a wide range of industries, including the data communication/collection, computer, industrial/capital goods and medical industries. The Company maintains its primary distribution facility in Houston, Texas, with sales offices in 18 states, some of which maintain a limited amount of local inventory and provide selected services to support specific customer needs. The Company operates manufacturing facilities in Houston and Dallas, Texas and the San Jose, California area. 2 DISTRIBUTION GENERAL. The principal focus of the Company's distribution business, conducted through its Components division, is to provide its industrial and OEM customers with rapid and reliable deliveries of specialty wiring and connector products and other passive and electromechanical products and assembled parts as well as a wide variety of materials management services. The Company utilizes a computerized inventory control system to assist in the marketing of its products and coordinate purchases from suppliers with sales to customers. The Company's computer system provides detailed on-line information regarding the availability of the Company's entire stock of inventory located at its stocking facilities as well as on-line access to the inventories of most of the Company's major suppliers. Through the Company's integrated real-time information system, customers' orders can readily be tracked through the entire process of entering the order, reserving products to fill the order, ordering components from suppliers, if necessary, and shipping products to customers on scheduled dates. The Company is thus able to provide the type of distributor service required by its OEM customers that have adopted the "just-in-time" method of inventory procurement. The "just-in-time" method is utilized in an effort to operate more efficiently and profitably by relying on scheduled deliveries of such components at the time they are needed in the production process and thereby reducing inventories of components. The principal products the Company distributes consist of connectors, receptacles and sockets, which collectively accounted for approximately 15%, 19% and 20% of the Company's total sales in its fiscal years ended in 1996, 1995 and 1994, respectively, and other electronic connecting components, such as cable and wiring products, which accounted for approximately 6%, 8% and 8% of the Company's total sales in such years. In addition, the Company distributes capacitors, resistors and electromechanical parts. Sales to Compaq Computer Corporation represented 12.2% and 11.2% of net sales in 1996 and 1995, respectively. Sales to Applied Materials represented 13.0% and 10.3% of net sales for the same years, respectively. No customer constituted 10% or more of net sales in 1994. As is customary in the electronic distribution industry, the Company primarily operates under short-term contracts with its suppliers. In the Company's past experience, such contracts have typically been renewed from year to year. In the year ended March 30, 1996, the Company's purchases from AMP Incorporated represented approximately 22% of its total purchases. Although the Company believes that it may be able to obtain competitive products of comparable quality from other suppliers, the loss of such supplier could have an adverse impact on the Company's operations. AFTERMARKET OPERATIONS. Datacomm serves the voice and data communications after-market. Through a focused sales effort, Datacomm offers a broad range of premise wiring products and LAN and WAN equipment to commercial end-users and professionals who install or service voice and data communications networks. Through such a marketing approach, the Company believes it is able to participate directly in the large and rapidly growing market for connection devices, reflecting the increasing use of microcomputers in LANs and WANs and 3 the continued growth in networking and cabling needs of minicomputer and mainframe users. Datacomm can provide customers with immediate off-the-shelf delivery of voice and data communications wiring products. The Company, through Datacomm, is an authorized distributor of AMP, AT&T, Belden, Cabletron and other LAN and WAN products. Datacomm serves numerous industries, including financial, government, airline, medical, media, food, manufacturing and aerospace. MANUFACTURING K * TEC provides fully integrated electronic manufacturing services, including printed circuit board assembly and test, electronic interconnect assemblies, specially fabricated battery power packs, subassemblies, sheet metal, plastic injection molding and system integration (box build). The Company has developed innovative material requirements planning (MRP) relationships with a select group of OEMs in the data processing, telecommunications, medical instrumentation and energy industries. These relationships are supported by sophisticated in-house product design and technical support capabilities. K * TEC support teams work closely with K * TEC's customers through all stages of product planning and production to apply the latest design and production technology. K * TEC's computer systems have a computer aided design capability that allows its engineers to be on-line with an OEM's engineer when developing and changing product designs. K * TEC's quality control standards provide another means of serving the needs of the Company's just-in-time customers, since an important aspect of the just-in-time method is that OEMs rely on suppliers to assure quality control for subassemblies rather than providing such quality control themselves. The Company believes that K * TEC's adherence to strict quality control standards and investment in state-of-the-art production facilities and equipment have attracted and retained important customers who have established extremely rigid product quality standards. Substantially all of the Company's manufacturing business is contract manufacturing. The contract manufacturing business is generally characterized by close working relationships with a select group of customers. Sales of K * TEC's products represented approximately 44%, 38% and 34% of the Company's total sales for the fiscal years ended in 1996, 1995 and 1994, respectively. The Company believes that its profit margins from sales of manufactured products is generally greater than its profit margin on sales of distributed products. MARKETING The Company's sales representatives undergo continuous training and attend classes in order to enhance both their technical expertise and sales techniques. Sales associates are compensated primarily on a commission basis. The Company uses direct mailings of brochures and catalogs as well as advertising in trade journals in the marketing of its products. 4 The Company has concentrated its efforts in certain market niches in which it only distributes the products of a select group of leading suppliers. In addition, because sales personnel specialize within related product groupings, they are able to develop a high degree of technical expertise. COMPETITION The Company faces substantial competition from a large number of distributors, suppliers and manufacturers, some of which are larger, have greater financial resources, broader name recognition, and may, in some instances, have lower costs than the Company. The Company's manufacturing operations encounter competition from both domestically manufactured products and products manufactured outside the United States. Such foreign-manufactured products are often sold at prices below the Company's prices for comparable products. The Company's products are not protected from competition by virtue of any proprietary rights such as trade secrets or patents. The Company competes by providing its customers with reliable, rapid delivery of products that are priced at competitive levels and meet strict quality control standards. BACKLOG Based upon the Company's internal backlog tracking system, and including verbal orders from customers as well as written purchase orders, the Company believes its backlog was approximately $51 million and $39 million at March 30, 1996 and April 1, 1995, respectively. Backlog has traditionally consisted of orders the Company believed to be firm, a substantial portion of which were scheduled for shipment within three months. Customers have generally been permitted to modify, reschedule or cancel their orders without penalty. With an increasing amount of the Company's business being conducted through "just-in-time" and other materials management program methods, traditional backlog is becoming a less meaningful indicator of future sales. Many of these programs require that the Company provide materials in accordance with a continually changing forecast. Although historically the Company's backlog figures have provided an indication of sales in the short term, due to the changing nature of the Company's business, backlog may no longer be a reliable indicator of future sales. EMPLOYEES At March 30, 1996, the Company employed 1,191 persons, all on a full time basis. The Company's employees are not subject to any collective bargaining agreement. In addition to its employees, the Company uses other workers on a contract basis, as its needs require. TRADEMARKS The Company has registered a number of trademarks and service marks relating to the operation of its business. These have been of value to the Company in the past and are expected to be of value in the future. The loss of a single trademark or service mark other than "KE Kent Electronics" or "K * TEC Electronics," in the opinion of management, would not have a material adverse effect on the conduct of its business. 5 ITEM 2. PROPERTIES The Company's headquarters are located in a 66,000 square foot office facility in Houston, Texas, of which approximately 56,000 square feet are presently used by the Company. The Company also owns a 2.7 acre tract of vacant land adjacent to the office facility. In nearby facilities, the Company uses approximately 10,000 square feet of space for office purposes and approximately 118,000 square feet for distribution and manufacturing operations. The Company owns a 10.8 acre tract of vacant land adjoining these Houston facilities. The distribution and manufacturing facilities in Dallas, Texas are located in approximately 34,000 square feet of space and are subject to a lease expiring in May 1999. The Company has a lease expiring in April 1998 in the San Jose, California area covering approximately 40,000 square feet for manufacturing facilities. The Company's San Jose, California distribution facility contains approximately 13,000 square feet with a lease expiring in February 2000. The Company's St. Paul, Minnesota distribution facilities comprise approximately 22,000 square feet subject to a lease expiring in October 1997. At the end of fiscal 1996, the Company's other facilities, located in Austin, Texas; Fountain Valley, California; Seattle, Washington; Philadelphia, Pennsylvania; Wallingford, Connecticut; Baltimore, Maryland; Syracuse, New York; Orlando, Florida; San Diego, California; Phoenix, Arizona; Denver, Colorado; Kansas City, Kansas; Cedar Rapids, Iowa; Huntsville, Alabama; Pine Brook, New Jersey; Boston, Massachusetts; Portland, Oregon; Chicago, Illinois; and Raleigh, North Carolina occupied an aggregate of approximately 103,000 square feet subject to leases expiring at various times through the year 2000. Most of the leases are subject to renewal at the option of the Company for a term at least equal to the initial term, but at a newly determined rental rate. In March 1995, the Company purchased a 66 acre parcel of land and acquired a four-year option to purchase an adjacent 30 acres in Sugar Land, Texas. In January 1996, the Company completed phase one of a K * TEC facility at its Sugar Land location, consisting of approximately 210,000 square feet for manufacturing and warehouse operations and approximately 40,000 square feet for office purposes. Construction of the second phase of this project, consisting of approximately 210,000 square feet, is planned to begin during the first quarter of fiscal 1997 and is anticipated to take approximately 7 months to complete. In addition to the K * TEC manufacturing facility, the Company's new distribution facility of approximately 215,000 square feet to be located at its Sugar Land location is currently in the design phase. The Company estimates construction on the distribution facility will begin during the first quarter of fiscal 1997, with completion within 18 to 24 months. ITEM 3. LEGAL PROCEEDINGS The Company is engaged in litigation occurring in the normal course of business. In the opinion of management, based upon advice of counsel, the ultimate outcome of these lawsuits will not have a material impact on the Company's consolidated financial statements. 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS COMMON STOCK PRICE RANGE The Company's Common Stock is listed on the New York Stock Exchange and trades under the symbol "KNT." The following table presents the high and low closing prices for the Common Stock for each fiscal quarter of the Company's fiscal years ended 1995 and 1996 and for a portion of the Company's current quarter, as reported by the New York Stock Exchange and as adjusted to reflect (i) a three-for-two stock split to shareholders of record on February 15, 1995 effected on March 1, 1995 as a 50% stock dividend, and (ii) a two-for-one stock split to shareholders of record on February 15, 1996, effected on March 1, 1996 as a 100% stock dividend.
HIGH LOW ------ ------ FISCAL YEAR ENDED 1995 First Quarter. . . . . . . . . . . $10.67 $ 8.92 Second Quarter . . . . . . . . . . 12.17 10.17 Third Quarter. . . . . . . . . . . 13.33 11.42 Fourth Quarter . . . . . . . . . . 15.38 12.92 FISCAL YEAR ENDED 1996 First Quarter. . . . . . . . . . . $18.94 $14.06 Second Quarter . . . . . . . . . . 22.38 18.75 Third Quarter. . . . . . . . . . . 29.25 19.31 Fourth Quarter . . . . . . . . . . 35.38 26.00 FISCAL YEAR ENDING 1997 First Quarter (through May 7). . . $43.25 $34.25
On May 7, 1996, there were 1,137 holders of record of the Company's Common Stock. 7 DIVIDEND POLICY Historically, the Company has reinvested earnings available to Common Stock in its business and, accordingly, has not paid any cash dividends on its Common Stock. Although the Company intends to continue to invest future earnings in its business, it may determine at some future date that payment of cash dividends on Common Stock would be desirable. The payment of any such dividends would depend, among other things, upon the earnings and financial condition of the Company. ITEM 6. SELECTED FINANCIAL DATA The following table summarizes selected consolidated financial data of the Company for each fiscal year of the five-year period ended March 30, 1996, and should be read in conjunction with the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements included elsewhere herein.
FISCAL YEAR ENDED ----------------------------------------------------- MARCH 30, APRIL 1, APRIL 2, APRIL 3, MARCH 28, 1996 1995 1994 1993 1992 --------- -------- -------- -------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AND PERCENTAGE AMOUNTS) Operating Statement Data: Net sales. . . . . . . $372,019 $253,484 $192,887 $154,677 $ 94,695 Gross profit . . . . . 98,728 64,877 50,648 42,270 26,489 Earnings before income taxes . . . . 46,885 22,075 15,379 12,162 9,166 Income taxes . . . . . 18,910 8,689 5,844 4,439 3,397 Net earnings . . . . . $ 27,975 $ 13,386 $ 9,535 $ 7,723 $ 5,769 Net earnings as a percentage of sales . 7.5% 5.3% 5.0% 5.0% 6.1% Earnings per share . . $ 1.22 $ 0.66 $ 0.48 $ 0.40 $ 0.34 Weighted average shares. . . . . . . . 22,987 20,275 19,762 19,351 16,838
MARCH 30, APRIL 1, APRIL 2, APRIL 3, MARCH 28, 1996 1995 1994 1993 1992 --------- -------- -------- -------- ---------- (In thousands) Balance Sheet Data: Total assets . . . . . $277,461 $133,890 $114,507 $98,390 $84,581 Long-term debt, less current maturities. . -- -- -- -- -- Stockholders' equity . 225,308 108,800 92,519 81,695 71,592
8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table presents, as a percentage of sales, certain selected consolidated financial data for each of the three years, as indicated.
FISCAL YEAR ENDED ---------------------------------- MARCH 30, APRIL 1, APRIL 2, 1996 1995 1994 --------- ---------- --------- Manufacturing. . . . . . . . . . . . 44.2% 38.0% 34.4% Distribution . . . . . . . . . . . . 55.8 62.0 65.6 ----- ----- ----- Net sales. . . . . . . . . . . . . . 100.0 100.0 100.0 Cost of sales. . . . . . . . . . . . 73.5 74.4 73.7 ----- ----- ----- Gross profit . . . . . . . . . . . . 26.5 25.6 26.3 Selling, general and administrative expenses. . . . . . . . . . . . . . 15.0 17.3 18.7 ----- ----- ----- Operating profit . . . . . . . . . . 11.5 8.3 7.6 Other income (expense) Interest expense . . . . . . . . . -- -- -- Other - net (principally interest and dividend income). . . . . . . 1.1 0.4 0.4 ----- ----- ----- Earnings before income taxes . . . . 12.6 8.7 8.0 Income taxes . . . . . . . . . . . . 5.1 3.4 3.0 ----- ----- ----- Net earnings . . . . . . . . . . . . 7.5% 5.3% 5.0% ----- ----- ----- ----- ----- -----
COMPARISON OF FISCAL YEAR 1996 WITH FISCAL YEAR 1995 Net sales for the fiscal year ended March 30, 1996 increased $118,535,189, or 46.8%, when compared to the fiscal year ended April 1, 1995. The sales increase reflected internal growth primarily from increased demand from existing customers and an expanded customer base. Gross profit increased $33,850,786, or 52.2%, compared to the preceding year. Gross profit as a percentage of sales increased to 26.5% from 25.6% in the prior year. The increase in gross profit was primarily due to increased sales and an increase in the gross profit percentage that benefited from the substantial gains in contract manufacturing as a percentage of total sales. The Company believes that its profit margins from sales of manufactured products are generally higher than its profit margins on sales of distributed products. Selling, general and administrative (SG&A) expenses increased $11,833,358, or 26.9%, compared to the prior fiscal year. However, as a percentage of sales, SG&A expenses declined to 15.0% from 17.3% in the preceding year. The decline in SG&A expenses as a percentage of sales reflects the Company's continued focus on cost containment to reduce such expenses as 9 a percentage of sales. The increase in SG&A expenses was primarily due to the expenses necessary to support the growth in the Company's existing operations. Other-net consists principally of interest and dividend income generated by cash, cash equivalents and trading securities. The increase in interest and dividend income was primarily due to the invested net proceeds from the September 1995 public offering. Net earnings increased $14,589,133, or 109.0% when compared to the prior year. The improved profitability was primarily due to the incremental profit associated with the increase in sales volume, the increase in the gross profit percentage and the Company's continued focus on cost containment. COMPARISON OF FISCAL YEAR 1995 WITH FISCAL YEAR 1994 Net sales for the fiscal year ended April 1, 1995, increased $60,596,687, or 31.4%, compared to the prior year. The sales increase reflected internal growth, primarily from increased demand from existing customers and an expanded customer base. Gross profit increased $14,229,197, or 28.1%, when compared to the prior year. Gross profit as a percentage of sales decreased to 25.6% from 26.3% in the previous year. The decline in the gross profit percentage was primarily due to the highly competitive conditions in the electronics and personal computer industries, creating downward pressure on margins. The increase in gross profit was primarily due to increased sales, partially offset by a slight decline in the gross profit percentage. SG&A expenses increased $7,904,923, or 22.0%, when compared to the preceding year. As a percentage of sales, expenses decreased to 17.3% from 18.7% when compared to the previous year. The decline reflected the Company's continued focus on cost containment to reduce expenses as a percentage of sales. The increase in expense was primarily due to the expenses necessary to support the growth of the Company's existing operations. Other-net consisted principally of interest and dividend income generated by cash, cash equivalents and trading securities. The increase in interest income was due to the Company shifting a portion of available funds into a higher yielding taxable investment vehicle from a tax exempt municipal money market fund, and higher interest rates. Net earnings increased $3,851,048, or 40.4%, when compared to the prior year. The improved profitability was primarily due to the incremental profit associated with the increase in sales volume. 10 LIQUIDITY AND CAPITAL RESOURCES Working capital at March 30, 1996 was $165,682,111, an increase of $99,363,687 from April 1, 1995. The increase was primarily the result of net proceeds from the September 1995 public offering, as well as accounts receivable growing in response to current sales levels and inventories growing in anticipation of future sales. Included in the Company's working capital at March 30, 1996 are investments of $114,298,457. The Company's investment strategy is low-risk and short-term, keeping the funds readily available to meet capital requirements as they arise in the normal course of business. At March 30, 1996, funds were invested primarily in a reverse repurchase agreement, a managed fund consisting primarily of taxable, high quality corporate debt instruments, an institutional money market fund consisting primarily of taxable, high quality money market type instruments and a portfolio managed by a professional investment management firm. All are compatible with the Company's stated investment strategy. The Company intends to apply its capital resources to expand its business by establishing or acquiring similar distribution and manufacturing operations in geographic areas that are attractive to the Company, by acquiring new facilities and by enlarging or improving existing facilities. In addition to the capital required to purchase existing businesses or to fund start-up operations, the expansion of the Company's operations at both new and existing locations will require greater levels of capital to finance the purchase of additional equipment, increased levels of inventory and greater accounts receivable. The Company is currently constructing the second phase of the K * TEC manufacturing, warehouse and administrative facility and a new distribution facility at its Sugar Land location which will require aggregate capital expenditures of approximately $22 million in fiscal 1997 and approximately $12 million in fiscal 1998. Management believes that current resources, along with funds generated from operations, should be sufficient to meet its current capital requirements and those anticipated in the near future. 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Kent Electronics Corporation We have audited the consolidated balance sheets of Kent Electronics Corporation and Subsidiaries as of March 30, 1996 and April 1, 1995, and the related consolidated statements of earnings, cash flows and stockholders' equity for each of the three years in the period ended March 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 audits 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 Kent Electronics Corporation and Subsidiaries as of March 30, 1996 and April 1, 1995, and the consolidated results of their operations and cash flows for each of the three years in the period ended March 30, 1996, in conformity with generally accepted accounting principles. GRANT THORNTON LLP Houston, Texas May 6, 1996 12 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 30, 1996 AND APRIL 1, 1995
ASSETS 1996 1995 ------------- ------------ CURRENT ASSETS Cash and cash equivalents (including temporary investments of $75,551,602 in 1996 and $6,395,425 in 1995). . . . . . . $ 73,191,479 $ 4,434,457 Trading securities, net. . . . . . . . . . 38,746,855 16,832,467 Accounts receivable, net . . . . . . . . . 52,469,442 33,963,810 Inventories Materials and purchased products . . . . 44,741,013 30,080,372 Work in process . . . . . . . . . . . . 3,413,779 3,039,140 ------------ ------------ 48,154,792 33,119,512 Other. . . . . . . . . . . . . . . . . . . 4,296,511 2,778,348 ------------ ------------ Total current assets . . . . . . . . . 216,859,079 91,128,594 PROPERTY AND EQUIPMENT Land . . . . . . . . . . . . . . . . . . . 7,422,183 7,089,838 Buildings. . . . . . . . . . . . . . . . . 18,589,883 6,697,207 Equipment, furniture and fixtures. . . . . 34,444,175 26,205,888 Leasehold improvements . . . . . . . . . . 1,722,276 1,362,806 ------------ ------------ 62,178,517 41,355,739 Less accumulated depreciation and amortization. . . . . . . . . . . . . (17,328,591) (13,620,455) ------------ ------------ 44,849,926 27,735,284 DEFERRED INCOME TAXES. . . . . . . . . . . . 1,369,000 838,000 OTHER ASSETS . . . . . . . . . . . . . . . . 1,582,162 1,022,244 COST IN EXCESS OF NET ASSETS ACQUIRED, less accumulated amortization of $1,994,127 in 1996 and $1,629,122 in 1995. . . . . . . . 12,801,855 13,166,859 ------------ ------------ $277,462,022 $133,890,981 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable. . . . . . . . . . . . . $ 30,924,194 $ 15,479,278 Accrued compensation. . . . . . . . . . . 9,904,241 4,579,595 Other accrued liabilities . . . . . . . . 5,177,053 3,057,149 Income taxes. . . . . . . . . . . . . . . 5,171,480 1,694,148 ------------ ------------ Total current liabilities . . . . . . 51,176,968 24,810,170 LONG-TERM LIABILITIES . . . . . . . . . . . 976,418 281,205 COMMITMENTS AND CONTINGENCIES . . . . . . . -- -- STOCKHOLDERS' EQUITY Preferred stock, $1 par value; authorized 2,000,000 shares; none issued. . . . . . -- -- Common stock, no par value; authorized 30,000,000 shares; issued and outstanding 23,937,176 shares in 1996 and 19,609,486 shares in 1995 . . . . . . . . . . . . . 38,335,899 34,742,597 Additional paid-in capital. . . . . . . . 110,154,419 25,213,946 Retained earnings . . . . . . . . . . . . 76,818,318 48,843,063 ------------ ------------ 225,308,636 108,799,606 ------------ ------------ $277,462,022 $133,890,981 ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these statements. 13 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS YEARS ENDED MARCH 30, 1996, APRIL 1, 1995 AND APRIL 2, 1994
1996 1995 1994 ------------ ------------ ------------ Net sales. . . . . . . . . . . . . . $372,018,931 $253,483,742 $192,887,055 Cost of sales. . . . . . . . . . . . 273,290,618 188,606,215 142,238,725 ------------ ------------ ------------ Gross profit . . . . . . . . . . 98,728,313 64,877,527 50,648,330 Selling, general and administrative expenses. . . . . . . . . . . . . . 55,750,449 43,917,091 36,012,168 ------------ ------------ ------------ Operating profit . . . . . . . . 42,977,864 20,960,436 14,636,162 Other income (expense) Interest expense . . . . . . . . . (20,004) (18,000) (15,000) Other-net (principally interest and dividend income). . . . . . . 3,927,495 1,132,686 757,912 ------------ ------------ ------------ Earnings before income taxes . 46,885,355 22,075,122 15,379,074 Income taxes . . . . . . . . . . . . 18,910,100 8,689,000 5,844,000 ------------ ------------ ------------ NET EARNINGS . . . . . . . . . $ 27,975,255 $ 13,386,122 $ 9,535,074 ------------ ------------ ------------ ------------ ------------ ------------ Earnings per share . . . . . . . . . $ 1.22 $ 0.66 $ 0.48 ------------ ------------ ------------ ------------ ------------ ------------ Weighted average shares. . . . . . . 22,986,500 20,275,000 19,762,000 ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these statements. 14 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY YEARS ENDED APRIL 2, 1994, APRIL 1, 1995 AND MARCH 30, 1996
COMMON STOCK ADDITIONAL ----------------------- PAID-IN RETAINED SHARES AMOUNT CAPITAL EARNINGS ---------- ----------- ------------- ------------ Balance at April 3, 1993 . . . . . . 19,248,368 $32,035,669 $23,737,053 $25,921,867 Common stock issued upon exercise of employee stock options, including tax effect. . . . . . . . 126,750 666,891 -- -- Amortization of unearned compensation related to stock option plans. . . . . . . . . . . . -- -- 622,454 -- Net earnings for the year. . . . . . -- -- -- 9,535,074 ---------- ----------- ------------ ----------- Balance at April 2, 1994 . . . . . . 19,375,118 32,702,560 24,359,507 35,456,941 Common stock issued upon exercise of employee stock options, including tax effect. . . . . . . . . . . . . 235,202 2,040,037 -- -- Common stock split fractional shares. . . . . . . . . . . . . . . (834) -- (16,325) -- Amortization of unearned compensation related to stock option plans. . . . . . . . . . . . -- -- 870,764 -- Net earnings for the year. . . . . . -- -- -- 13,386,122 ---------- ----------- ------------ ----------- Balance at April 1, 1995 . . . . . . 19,609,486 34,742,597 25,213,946 48,843,063 Net proceeds from public stock offering. . . . . . . . . . . . . . 4,000,000 20,000 83,825,670 -- Common stock issued upon exercise of employee stock options, including tax effect. . . . . . . . . . . . . 327,690 3,572,302 -- -- Common stock split . . . . . . . . . -- 1,000 (1,000) Amortization of unearned compensation related to stock option plans . . . -- -- 1,115,803 -- Net earnings for the year. . . . . . -- -- -- 27,975,255 ---------- ----------- ------------ ----------- Balance at March 30, 1996. . . . . . 23,937,176 $38,335,899 $110,154,419 $76,818,318 ---------- ----------- ------------ ----------- ---------- ----------- ------------ -----------
The accompanying notes are an integral part of this statement. 15 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 30, 1996, APRIL 1, 1995 AND APRIL 2, 1994
1996 1995 1994 ------------ ------------ -------------- Cash flows from operating activities Net earnings . . . . . . . . . . . . $ 27,975,255 $13,386,122 $ 9,535,074 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation and amortization . . 4,251,771 3,806,652 3,202,761 Provision for losses on accounts receivable . . . . . . . . . . . 192,522 163,171 334,691 Loss (gain) on sale of property and equipment. . . . . . . . . . 35,285 (268) 6,688 Stock option expense. . . . . . . 1,115,803 870,764 622,454 Unrealized (gains) losses on trading securities . . . . . . . (44,547) 224,684 -- Unrealized losses on short-term investments. . . . . . . . . . . -- -- 77,300 Net purchases of trading securities . . . . . . . . . . . (21,869,841) (1,872,972) -- Change in assets and liabilities Increase in accounts receivable (18,698,154) (8,088,900) (4,212,860) Increase in inventories. . . . . (15,035,280) (9,919,652) (5,819,343) Increase in other. . . . . . . . (1,518,163) (708,151) (375,091) (Increase) decrease in other assets. . . . . . . . . . . . . (601,625) (421,951) 3,942 (Increase) decrease in deferred income taxes. . . . . . . . . . (531,000) 432,000 812,000 Increase (decrease) in accounts payable. . . . . . . . . . . . 15,444,916 (910,333) 4,514,425 Increase in accrued compensation . . . . . . . . . 5,324,646 2,057,693 288,398 Increase in other accrued liabilities. . . . . . . . . . 2,119,904 1,036,733 399,723 Increase in income taxes. . . . 3,477,332 638,390 89,495 Increase in long-term liabilities. . . . . . . . . . 695,213 281,205 -- ------------ ----------- ------------ Net cash provided by operating activities . . . 2,334,037 975,187 9,479,657 Cash flows from investing activities Capital expenditures . . . . . . . . (21,042,565) (9,960,471) (5,751,781) Net purchases of short-term investments . . . . . . . . . . . . -- -- (15,261,479) Proceeds from sale of property and equipment . . . . . . . . . . . . . 47,578 13,850 16,223 ------------ ----------- ------------ Net cash used by investing activities . . . (20,994,987) (9,946,621) (20,997,037) Cash flows from financing activities Issuance of common stock . . . . . . 86,280,972 1,526,037 365,167 Payment for fractional shares. . . . -- (16,325) -- Tax effect of common stock issued upon exercise of employee stock options. . . . . . . . . . . . . . . 1,137,000 514,000 301,724 ------------ ----------- ------------ Net cash provided by financing activities . . . 87,417,972 2,023,712 666,891 ------------ ----------- ------------ Net increase (decrease) in cash . . . 68,757,022 (6,947,722) (10,850,489) Cash and cash equivalents at beginning of year. . . . . . . . . . 4,434,457 11,382,179 22,232,668 ------------ ----------- ------------ Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . $ 73,191,479 $ 4,434,457 $ 11,382,179 ------------ ----------- ------------ ------------ ----------- ------------ Supplemental disclosures of cash flow information: Cash paid during the year for: Interest . . . . . . . . . . . . . . $ 20,004 $ 18,000 $ 15,000 Income taxes . . . . . . . . . . . . $ 16,235,768 $ 7,713,610 $ 4,813,667
The accompanying notes are an integral part of these statements. 16 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED MARCH 30, 1996, APRIL 1, 1995 AND APRIL 2, 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies: PRINCIPLES OF CONSOLIDATION Kent Electronics Corporation consolidates its accounts with those of its wholly-owned subsidiaries. All material intercompany transactions have been eliminated. FISCAL YEAR The Company's fiscal year ends on the Saturday closest to the end of March. The fiscal years ended March 30, 1996, April 1, 1995 and April 2, 1994 all consisted of 52 weeks. USE OF ESTIMATES In preparing the financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS The Company's presentation of cash includes cash equivalents. Cash equivalents are defined as short-term investments with maturity dates at purchase of ninety days or less. Securities purchased under agreements to resell, reverse repurchase agreements, result from transactions that are collateralized by negotiable securities and are carried at the amounts at which the securities will subsequently be resold. It is the policy of the Company not to take possession of securities purchased under agreements to resell. At March 30, 1996, agreements to resell securities in the amount of $25,538,000 with a two-day maturity were outstanding. Temporary investments may be greater than the cash and cash equivalents balance because they may be offset by individual bank accounts with a book overdraft position within the same bank where multiple accounts are maintained. 17 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) TRADING SECURITIES AND SHORT-TERM INVESTMENTS In 1995, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities". This statement established standards of financial accounting and reporting for investments in equity securities that have a readily determinable fair value and for all investments in debt securities. The Company has classified all investment securities as trading securities which are measured at fair value in the financial statements with unrealized gains and losses included in earnings. Net unrealized holding gains on trading securities of $44,600 are included in net earnings for 1996 as indicated in the following table: Net Unrealized loss on trading securities at beginning of year. . . . . . . . . . . . . . . . . . . . . . $302,000 Decrease in unrealized loss included in earnings during the year . . . . . . . . . . . . . . . . . . (44,600) -------- Net unrealized loss on trading securities at end of year. . . $257,400 -------- --------
ACCOUNTS RECEIVABLE The Company's allowance for doubtful accounts was $999,000 at March 30, 1996 and $979,000 at April 1, 1995. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the life of the lease or the service life of the improvements, whichever is shorter. 18 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) COST IN EXCESS OF NET ASSETS ACQUIRED Cost in excess of net assets acquired represents the excess of the purchase price over the value of net assets acquired for previous acquisitions, and is being amortized on a straight-line basis over 40 years. on an ongoing basis, management reviews the valuation and amortization of the cost in excess of net assets. as part of this review, the company considers the current and future levels of net income generated by the related acquisition to determine that no impairment has occurred. NEW PRONOUNCEMENTS In 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived assets to Be Disposed Of" (SFAS No. 121). SFAS No. 121 established guidance for the recognition and measurement of impairment losses for long-lived assets and certain intangibles and valuation of long-lived assets to be disposed. This Statement is effective for years beginning after December 15, 1995. The Company does not expect the effect of SFAS No. 121 to be material to the financial statements taken as a whole. In 1995, the FASB also issued SFAS No. 123 "Accounting for Stock-Based Compensation" (SFAS No. 123). the SFAS allows entities to compute compensation cost related to employee stock options by either using a fair-value-based method or by continuing to use the method prescribed in APB No. 25 "Accounting for Stock Issued to Employees" (APB No. 25). Even if entities plan to continue to apply apb no. 25, they will be required to adopt the new disclosure requirements of SFAS No. 123. The effective date of this Statement is for years beginning after December 15, 1995. The Company plans to continue to apply APB No. 25. 2. INCOME TAXES The company accounts for income taxes using the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. deferred tax expense is the result of changes in deferred tax assets and liabilities. 19 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The provision for income taxes consisted of the following:
FISCAL YEARS ENDED -------------------------------------- 1996 1995 1994 ----------- ---------- ---------- Currently payable. . . . . . . . . . . . $ 19,562,000 $8,308,000 $4,978,000 Tax reduction for exercise of stock options credited to stockholders' equity. . . . . . . . . . 1,137,000 514,000 302,000 Deferred (benefit) expense . . . . . . . (1,788,900) (133,000) 564,000 ----------- ---------- ---------- $18,910,100 $8,689,000 $5,844,000 ----------- ---------- ---------- ----------- ---------- ----------
A reconciliation of income taxes computed at the statutory federal income tax rate and income taxes reported in the consolidated statements of earnings follows:
FISCAL YEARS ENDED -------------------------------------- 1996 1995 1994 ----------- ---------- ---------- Tax at statutory rate. . . . . . . . . . $16,410,000 $7,726,000 $5,229,000 Increases (reductions) State income taxes, net of federal tax effect. . . . . . . . . . . . . . . . . 1,652,000 742,000 482,000 Other - net . . . . . . . . . . . . . . 848,100 221,000 133,000 ---------- --------- --------- Income taxes as reported. . . . . . . . $18,910,100 $8,689,000 $5,844,000 ---------- --------- --------- ---------- --------- ---------
20 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Deferred tax assets and liabilities at March 30, 1996 and April 1, 1995 consist of the following: 1996 1995 -------------- -------------- CURRENT DEFERRED ASSET Allowance for doubtful accounts. . . . . . . . $ 395,000 $ 392,000 Capitalization of additional inventory costs . . . . . . . . . . . . . . . . . . . . 870,000 672,000 Accrued expenses not currently deductible, net of reversals. . . . . . . . . 517,000 320,000 Net operating losses . . . . . . . . . . . . . 320,000 330,000 Deferred compensation. . . . . . . . . . . . . 616,000 -- Other. . . . . . . . . . . . . . . . . . . . . 562,000 157,000 ---------- ---------- $ 3,280,000 $1,871,000 ---------- ---------- ---------- ---------- LONG-TERM DEFERRED ASSET Depreciation . . . . . . . . . . . . . . . . . (2,007,000) (1,763,000) Fixed asset bases differences. . . . . . . . . 630,000 649,000 Stock compensation . . . . . . . . . . . . . . 1,291,000 861,000 Net operating losses . . . . . . . . . . . . . 770,000 1,091,000 Deferred compensation. . . . . . . . . . . . . 685,000 -- ---------- ---------- $ 1,369,000 $ 838,000 ---------- ---------- ---------- ----------
Acquired net operating losses are approximately $3,116,000 at March 30, 1996, expire in various amounts through 2003, and are subject to annual usage limitations. The current deferred asset is included in other current assets and the long-term deferred asset is included in other assets in the accompanying Balance Sheets. 21 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. COMMITMENTS AND CONTINGENCIES The Company conducts a portion of its operations in leased office, warehouse, and manufacturing facilities and leases transportation equipment. Rent expense for 1996, 1995, and 1994 was approximately $2,036,000, $1,695,000 and $1,472,000, respectively. The following is a schedule by years of minimum future rentals as of March 30, 1996:
Fiscal years ending in Amount ------------ ------ 1997 $1,794,000 1998 1,513,000 1999 1,010,000 2000 550,000 2001 100,000 Thereafter 6,000 ---------- Total minimum future rentals $4,973,000 ---------- ----------
The Company has instituted a self-insurance program for employees' major medical coverages. Claims under the self-insurance program are insured for amounts greater than $50,000 per employee. The aggregate annual amount self-insured varies based on participant levels and was limited to approximately $2,100,000 as of March 30, 1996. Claims are accrued as incurred and the total expense under the program was approximately $2,103,000, $2,121,000 and $1,258,000 in 1996, 1995 and 1994, respectively. The Company is engaged in litigation occurring in the normal course of business. In the opinion of management, based upon advice of counsel, the ultimate outcome of these lawsuits will not have a material impact on the Company's consolidated financial statements. 4. SALES TO MAJOR CUSTOMERS Sales to Compaq Computer Corporation represented 12.2% and 11.2% of net sales in 1996 and 1995, respectively. Sales to Applied Materials represented 13.0% and 10.3% of net sales for the same years, respectively. No customer constituted 10% or more of net sales in 1994. 22 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. STOCKHOLDERS' EQUITY FAIR PRICE PROVISION The Company has adopted a fair price provision relating to certain business combinations. The fair price provision provides that, except in certain circumstances, a business combination between the Company and an interested shareholder must be approved by the affirmative vote of the holders of 80% of the outstanding voting stock, unless certain pricing and procedural requirements regarding the business combination are satisfied. STOCKHOLDER RIGHTS PLAN The Company has adopted a stockholder rights plan, declaring a distribution of one equity purchase right on each outstanding share of the Company's common stock. Upon the occurrence of certain events, each right would entitle the holder to purchase, at a price of $40, one one-hundredth of a share of the Company's Series A Preferred Stock. Additionally, under certain circumstances, the holder of rights may be entitled to purchase either the Company's common stock or securities of an acquiring entity at half of market value. STOCK SPLIT The Company's common stock was split three-for-two to stockholders of record on February 15, 1995, and was effected as a 50% stock dividend. The Company's common stock was split two-for-one to stockholders of record on February 15, 1996, and was effected as a 100% stock dividend. All issued and outstanding shares, stock option data and earnings per share amounts in the consolidated financial statements have been restated to give effect to the stock splits. 6. BENEFIT PLANS STOCK OPTIONS At March 30, 1996, the Company had nonqualified stock option plans which allow for the grant of 5,982,500 common shares for options, of which 1,650,709 are available for future grants. Options granted under the plans have a maximum term of 15 years and are exercisable under the terms of the respective option agreements. Under some plans, options may be granted with exercise prices of less than the stock's market value at the date of grant. 23 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Number of Option price shares range under option per share ------------ ------------ Outstanding at April 3, 1993 . . . 1,260,948 $2.00 - $8.80 Granted . . . . . . . . . . . 1,228,500 3.59 - 9.63 Exercised . . . . . . . . . . (126,750) 2.00 - 7.25 Lapsed/forfeited. . . . . . . (46,600) 2.05 - 8.59 --------- ------------- Outstanding at April 2, 1994 . . . 2,316,098 2.34 - 9.63 Granted . . . . . . . . . . . 143,250 9.13 - 13.88 Exercised . . . . . . . . . . (235,202) 2.34 - 8.80 Lapsed/forfeited. . . . . . . (43,502) 6.96 - 6.96 --------- ------------- Outstanding at April 1, 1995 . . . 2,180,644 3.43 - 13.88 Granted . . . . . . . . . . . 802,400 7.25 - 32.69 Exercised . . . . . . . . . . (327,691) 3.43 - 18.88 Lapsed/forfeited. . . . . . . (85,852) 6.96 - 19.19 --------- ------------- Outstanding at March 30, 1996. . . 2,569,501 $3.46 -$32.69 --------- ------------- --------- -------------
At March 30, 1996, options representing 449,701 shares were exercisable. 24 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) TAX-DEFERRED SAVINGS AND RETIREMENT PLAN AND TRUST The Company sponsors a Tax-Deferred Savings and Retirement Plan (the Plan) covering substantially all employees. Under the Plan, a participating employee may allocate up to 12% of salary, and the Company makes matching contributions of up to 3% thereof. Additionally, the Company may elect to make additional contributions at its option. Such contributions accrue to employee accounts regardless of whether they have elected to participate in the salary deferral option of the Plan. The Company contributed approximately $618,000, $639,000 and $514,000 to the Plan in fiscal years ended March 30, 1996, April 1, 1995 and April 2, 1994, respectively. The Company has deferred compensation plans for management and highly compensated associates of the Company. Under one plan, a participant may elect to defer a minimum of 3% of their compensation. The Company has agreed to match the participant's compensation amount, limited to 50% of the first 6% of compensation deferred. Participants become vested in the Company matching contributions at the rate of 10% per plan year, or vest fully at age 60. Under another deferred benefit plan, the participant will receive minimum annual payments subsequent to retirement of the participant for the greater of 15 years or life. Under the first plan, the Company has accrued at March 30, 1996 and April 1, 1995, approximately $976,000 and $281,000, respectively, for participant and Company contributions which are recorded as long-term liabilities on the Balance Sheet. Under the second plan, annual expense will range from $1.2 million to $1.6 million through March 31, 2001, based on accruing the present value of the minimum benefits through the date the participant vests in the payments. 7. EARNINGS PER SHARE Earnings per share are based upon the weighted average number of common shares outstanding during each year. Options are included in periods where they have a dilutive effect. 25 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of unaudited quarterly financial data for fiscal years 1996, 1995 and 1994:
First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- -------- -------- (In thousands, except per share amounts) Year ended March 30, 1996 - ------------------------- Net sales . . . . . . . . . . . $77,585 $90,190 $100,059 $104,185 Gross profit. . . . . . . . . . 19,973 23,803 26,880 28,072 Net earnings. . . . . . . . . . 4,679 6,018 8,253 9,025 Earnings per share. . . . . . . 0.23 0.29 0.33 0.36 Year ended April 1, 1995 - ------------------------ Net sales . . . . . . . . . . . $56,527 $60,335 $64,462 $72,160 Gross profit. . . . . . . . . . 14,524 15,440 16,480 18,433 Net earnings. . . . . . . . . . 2,831 3,215 3,466 3,874 Earnings per share. . . . . . . 0.14 0.16 0.17 0.19 Year ended April 2, 1994 - ------------------------ Net sales . . . . . . . . . . . $43,245 $46,914 $49,238 $53,490 Gross profit. . . . . . . . . . 11,532 12,434 12,935 13,747 Net earnings. . . . . . . . . . 2,073 2,293 2,509 2,660 Earnings per share. . . . . . . 0.11 0.12 0.13 0.13
26 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III In accordance with paragraph (3) of General Instruction G to Form 10-K, Part III of this Report is omitted because the Registrant has filed with the Securities and Exchange Commission, not later than 120 days after March 30, 1996, a definitive proxy statement pursuant to Regulation 14A involving the election of directors. Reference is made to the sections of such proxy statement entitled "Common Stock Outstanding and Principal Holders Thereof" and "Proposal No. 1 -- Election of Directors" which sections of such proxy statement are incorporated herein. 27 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS: PAGE ---- Report of Independent Certified Public Accountants . . . . . . . . . . . . 12 Consolidated balance sheets at March 30, 1996 and April 1, 1995. . . . . . 13 Consolidated statements of earnings for the years ended March 30, 1996, April 1, 1995 and April 2, 1994 . . . . . . . . . . . . . . . . . . . 14 Consolidated statement of stockholders' equity for the years ended April 2, 1994, April 1, 1995 and March 30, 1996 . . . . . . . . . . . 15 Consolidated statements of cash flows for the years ended March 30, 1996, April 1, 1995 and April 2, 1994. . . . . . . . . . . . . . . . . . . 16 Notes to consolidated financial statements . . . . . . . . . . . . . . . . 17 2. FINANCIAL STATEMENT SCHEDULE: Schedule II--Allowance for Doubtful Receivables for the years ended April 2, 1994 , April 1, 1995 and March 30, 1996 3. EXHIBITS: 3.1* -- Articles of Incorporation of Kent Electronics Corporation, including amendments thereto filed through July 2, 1987. Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 2, 1988. 3.2* -- Articles of Amendment to Articles of Incorporation of Kent Electronics Corporation. Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-1 (Registration No. 33-24018) filed with the Securities and Exchange Commission ("SEC") on August 26, 1988. 3.3* -- Certificate of Designation, Preferences and Rights of Series A Preferred Stock. Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended March 30, 1991 (the "1991 Form 10-K"). 28 3.4* -- Articles of Amendment to Articles of Incorporation of Kent Electronics Corporation. Incorporated by reference to Exhibit 3.4 to 1991 Form 10-K. 3.5 -- Amended and Restated Bylaws of Kent Electronics Corporation. 4.1* -- Specimen stock certificate for the Common Stock of Kent Electronics Corporation. Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-2 (Registration No. 33-40066) filed with the SEC on April 19, 1991 (the "1991 Registration Statement"). 4.2* -- Rights Agreement dated as of May 14, 1990 between Kent Electronics Corporation and Ameritrust Company National Association. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K dated May 14, 1990. 4.3* -- First Amendment to Rights Agreement dated as of May 14, 1990 between Kent Electronics Corporation and Ameritrust Company National Association. Incorporated by reference to Exhibit 4.3 to 1992 Form 10-K. 10.1* -- Chief Executive Stock Option Plan and Agreement between Kent Electronics Corporation and Morrie K. Abramson dated July 24, 1991. Incorporated by reference to Exhibit 10.1 to 1992 Form 10-K.(1) 10.2* -- Amendment to Chief Executive Stock Option Plan between Kent Electronics Corporation and Morrie K. Abramson dated June 26, 1992. Incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 3, 1993 (the "1993 Form 10-K").(1) 10.3* -- Amendment to Chief Executive Officer Stock Option Plan and Agreement between Kent Electronics Corporation and Morrie K. Abramson dated June 30, 1994. Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 1, 1995 (the "1995 Form 10-K").(1) 10.4* -- K * TEC President Stock Option Plan and Agreement between Kent Electronics Corporation and Randy J. Corporron dated May 1, 1993. Incorporated by reference to Exhibit 10.4 to 1993 Form 10-K.(1) 10.5* -- K * TEC General Manager Stock Option Plan and Agreement between Kent Electronics Corporation and Rodney J. Corporron dated May 1, 1993. Incorporated by referenced to Exhibit 10.5 to 1993 Form 10-K.(1) 29 10.6* -- 1991 Non-Employee Director Stock Option Plan, as amended. Incorporated by reference to Exhibit 10.2 to 1992 Form 10-K.(1) 10.7 -- 1996 Non-Employee Director Stock Option Plan.(1) 10.8* -- Amended and Restated 1987 Stock Option Plan. Incorporated by reference to Exhibit 10.3 to 1992 Form 10-K.(1) 10.9* -- Amendments of Amended and Restated 1987 Stock Option Plan. Incorporated by reference to Exhibit 10.8 to 1993 Form 10-K.(1) 10.10* -- Kent Electronics Corporation Stock Option Plan and Agreement for the Company's Executive Vice President Sales-Distribution between Kent Electronics Corporation and Larry D. Olson dated May 8, 1995. Incorporated by reference to Exhibit 10.11 to 1995 Form 10-K.(1) 10.11* -- Kent Electronics Corporation Stock Option Plan and Agreement for the Company's Executive Vice President Operations-Distribution between Kent Electronics Corporation and Mark A. Zerbe dated May 8, 1995. Incorporated by reference to Exhibit 10.12 to 1995 Form 10-K.(1) 10.12* -- Kent Electronics Corporation Stock Option Plan and Agreement for the Company's Vice President, Secretary and Treasurer between Kent Electronics Corporation and Stephen J. Chapko dated May 8, 1995. Incorporated by reference to Exhibit 10.13 to 1995 Form 10-K.(1) 10.13 -- Kent Electronics Corporation Stock Option Plan and Agreement for the Company's Vice President, Corporate Controller between Kent Electronics Corporation and David D. Johnson dated May 9, 1996.(1) 10.14 -- Kent Electronics Corporation 1996 Employee Incentive Plan.(1) 10.15 -- Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan and Trust (As Amended and Restated Effective March 26, 1989).(1) 10.16* -- Kent Electronics Corporation Deferred Compensation Plan dated July 28, 1994. Incorporated by reference to Exhibit 10.15 to 1995 Form 10-K.(1) 10.17 -- First Amendment to the Kent Electronics Corporation Deferred Compensation Plan.(1) 10.18* -- Trust Agreement for Kent Electronics Corporation Deferred Compensation Plan dated July 28, 1994. Incorporated by reference to Exhibit 10.16 to 1995 Form 10-K.(1) 30 10.19* -- Contracts between Kent Electronics Corporation and AMP Products Corporation effective as of July 22, 1988 and July 31, 1986, respectively, and addenda thereto. Incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 1, 1989. 10.20* -- Form of Agreement by and between Kent Electronics Corporation and Morrie K. Abramson dated March 16, 1993. Incorporated by reference to Exhibit 10.21 to 1993 Form 10-K.(1) 10.21* -- Form of Executive Health Care Benefits and Consulting Agreement by and between Kent Electronics Corporation and Morrie K. Abramson dated January 27, 1993. Incorporated by reference to Exhibit 10.22 to 1993 Form 10-K.(1) 10.22 -- Employment Agreement dated January 3, 1996 by and between Morrie K. Abramson and Kent Electronics Corporation.(1) 10.23 -- Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement dated January 3, 1996 by and between Kent Electronics Corporation and Morrie K. Abramson.(1) 10.24 -- Trust Agreement for Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement and Employment Agreement dated January 3, 1996 by and between Kent Electronics Corporation and Texas Commerce Bank National Association, as trustee.(1) 10.25* -- Special Warranty Deed from Sugarland Properties Incorporated to Kent Electronics Corporation dated March 7, 1995 for 51 acres of land. Incorporated by reference to Exhibit 10.23 to 1995 Form 10-K. 10.26* -- Special Warranty Deed from Sugarland Properties Incorporated to Kent Electronics Corporation dated March 7, 1995 for 15 acres of land. Incorporated by reference to Exhibit 10.24 to 1995 Form 10-K. 10.27* -- Development and Construction Management Agreement by and between Sugarland Properties Incorporated and Kent Electronics Corporation dated April 21, 1995. Incorporated by reference to Exhibit 10.25 to 1995 Form 10-K. 10.28* -- Irrevocable Standby Letter of Credit with Texas Commerce Bank National Association dated May 2, 1995. Incorporated by reference to Exhibit 10.26 to 1995 Form 10-K. 31 11 -- Computation of earnings per share. 21 -- Subsidiaries of Kent Electronics Corporation. 23.1 -- Consent of Independent Certified Public Accountants. 27 -- Financial Data Schedule. - ---------------- * Incorporated by reference. (1) Management contract or compensatory plan or agreement (B) REPORTS ON FORM 8-K: None. 32 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 of the undersigned, thereunto duly authorized. KENT ELECTRONICS CORPORATION (Registrant) By: /s/ MORRIE K. ABRAMSON ------------------------------------- Morrie K. Abramson Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) Date: June 10, 1996 33 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ----- /s/ MORRIE K. ABRAMSON Chairman of the Board, Chief Executive June 10, 1996 - ------------------------ Officer, President and Director Morrie K. Abramson (Principal Executive Officer) /s/ STEPHEN J. Chapko Vice President, Treasurer and June 10, 1996 - ------------------------ Secretary (Principal Financial Stephen J. Chapko Officer) /s/ DAVID D. JOHNSON Vice President, Corporate Controller June 10, 1996 - ------------------------ (Principal Accounting Officer) David D. Johnson /s/ MAX S. LEVIT Director June 10, 1996 - ------------------------ Max S. Levit /s/ DAVID SIEGEL Director June 10, 1996 - ------------------------ David Siegel /s/ RICHARD C. WEBB Director June 10, 1996 - ------------------------ Richard C. Webb /s/ ALVIN L. ZIMMERMAN Director June 10, 1996 - ------------------------ Alvin L. Zimmerman 34 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE Board of Directors and Stockholders Kent Electronics Corporation In connection with our audit of the consolidated financial statements of Kent Electronics Corporation and Subsidiaries for the year ended March 30, 1996, we have also audited Schedule II for each of the three years in the period ended March 30, 1996. In our opinion, this consolidated schedule presents fairly, in all material respects, the information required to be set forth therein. GRANT THORNTON LLP Houston, Texas May 6, 1996 S-1 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED APRIL 2, 1994, APRIL 1, 1995 AND MARCH 30, 1996 ALLOWANCE FOR DOUBTFUL RECEIVABLES
Column A Column B Column C Column D Column E - ----------------------------------------------------------------------------------------- Additions Deductions -------------------- ----------- (1) (2) Charged Charged Balance at to costs to other Balance at beginning and accounts Amounts end of Description of period expenses recoveries written-off period - ------------------------------ ---------- -------- ---------- ----------- ---------- Year ended April 2, 1994 . . . $798,684 $334,691 $16,199 $194,836 $954,738 Year ended April 1, 1995 . . . 954,738 163,171 0 139,024 978,885 Year ended March 30, 1996. . . 978,885 192,522 12,307 184,340 999,374
S-2 EXHIBIT INDEX SEQUENTIALLY EXHIBIT NO. ITEM NUMBERED PAGES - ----------- ---- -------------- 3.5 Amended and Restated Bylaws of Kent Electronics Corporation. 10.7 1996 Non-Employee Director Stock Option Plan. 10.13 Kent Electronics Corporation Stock Option Plan and Agreement for the Company's Vice President, Corporate Controller between Kent Electronics Corporation and David D. Johnson dated May 9, 1996. 10.14 Kent Electronics Corporation 1996 Employee Incentive Plan. 10.15 Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan and Trust (As Amended and Restated Effective March 26, 1989). 10.17 First Amendment to the Kent Electronics Corporation Deferred Compensation Plan. 10.22 Employment Agreement dated January 3, 1996 between Morrie K. Abramson and Kent Electronics Corporation. 10.23 Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement dated January 3, 1996 between Kent Electronics Corporation and Morrie K. Abramson. 10.24 Trust Agreement for Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement and Employment Agreement dated January 3, 1996 between Kent Electronics Corporation and Texas Commerce Bank National Association, as trustee. 11 Computation of earnings per share. 21 Subsidiaries of Kent Electronics Corporation. 23.1 Consent of Independent Certified Public Accountants. 27 Financial Data Schedule. EX-3.5 2 EXHIBIT 3.5 AMENDED AND RESTATED BYLAWS OF KENT ELECTRONICS CORPORATION (the "Company") OFFICES SECTION 1.1 OFFICES. The principal business office of the Company shall be in the City of Houston, Harris County, Texas. The Company may have such other business offices within or without the State of Texas as the board of directors may from time to time establish. ARTICLE II CAPITAL STOCK SECTION 2.1 CERTIFICATE REPRESENTING SHARES. Shares of the capital stock of the Company shall be represented by certificates in such form or forms as the board of directors may approve, provided that such form or forms shall comply with all applicable requirements of law or of the articles of incorporation. Such certificates shall be signed by the chairman of the board, the president or a vice president, and by the secretary or an assistant secretary, of the Company and may be sealed with the seal of the Company or imprinted or otherwise marked with a facsimile of such seal. In the case of any certificate countersigned by any transfer agent or registrar, provided such countersigner is not the Company itself or an employee thereof, the signature of any or all of the foregoing officers of the Company may be represented by a printed facsimile thereof. If any officer whose signature, or a facsimile thereof, shall have been set upon any certificate shall cease, prior to the issuance of such certificate, to occupy the position in right of which his signature, or facsimile thereof, was so set upon such certificate, the Company may nevertheless adopt and issue such certificate with the same effect as if such officer occupied such position as of such date of issuance; and issuance and delivery of such certificate by the Company shall constitute adoption thereof by the Company. The certificates shall be consecutively numbered, and as they are issued, a record of such issuance shall be entered in the books of the Company. SECTION 2.2 STOCK CERTIFICATE BOOK AND SHAREHOLDERS OF RECORD. Except as to any class of the Company's stock as to which it has appointed a transfer agent and registrar pursuant to Section 2.5, the secretary of the Company shall maintain, among other records, a stock certificate book, the stubs in which shall set forth the names and addresses of the holders of all issued shares of the Company, the number of shares held by each, the number of certificates representing such shares, the date of issue of such certificates, and whether or not such shares originate from original issue or from transfer. The names and addresses of shareholders as they appear on the stock certificate book or the records of such transfer agent shall be the official list of shareholders of record of the Company for all purposes. The Company shall be entitled to treat the holder of record of any shares as the owner thereof for all purposes, and shall not be bound to recognize any equitable or other claim to, or interest in, such shares or any rights deriving from such shares on the part of any other person, including, but without limitation, a purchaser, assignee, or transferee, unless and until such other person becomes the holder of record of such shares, whether or not the Company shall have either actual or constructive notice of the interest of such other person. SECTION 2.3 SHAREHOLDER'S CHANGE OF NAME OR ADDRESS. Each shareholder shall promptly notify the secretary of the Company, at its principal business office, by written notice sent by certified mail, return receipt requested, of any change in name or address of the shareholder from that as it appears upon the official list of shareholders of record of the Company. The secretary of the Company shall then enter such changes into all affected Company records, including, but not limited to, the official list of shareholders of record. SECTION 2.4 TRANSFER OF STOCK. The shares represented by any certificate of the Company are transferable only on the books of the Company by the holder of record thereof or by his duly authorized attorney or legal representative upon surrender of the certificate for such shares, properly endorsed or assigned. The board of directors may make such rules and regulations concerning the issue, transfer, registration and replacement of certificates as they deem desirable or necessary. SECTION 2.5 TRANSFER AGENT AND REGISTRAR. The board of directors may appoint one or more transfer agents or registrars of the shares, or both, and may require all share certificates to bear the signature of a transfer agent or registrar, or both. SECTION 2.6 LOST, STOLEN OR DESTROYED CERTIFICATES. The Company may issue a new certificate for shares of stock in the place of any certificate theretofore issued and alleged to have been lost, stolen or destroyed, but the board of directors may require the owner of such lost, stolen or destroyed certificate, or his legal representative, to furnish an affidavit as to such loss, theft, or destruction and to give a bond in such form and substance, and with such surety or sureties, with fixed or open penalty, as the board may direct, in order to indemnify the Company and its transfer agents and registrars, if any, against any claim that may be made on account of the alleged loss, theft or destruction of such certificate. SECTION 2.7 FRACTIONAL SHARES. Only whole shares of the common stock of the Company shall be issued. In case of any transaction by reason of which a fractional share of common stock might otherwise be issued, the directors, or the officers in the exercise of powers delegated by the directors, shall take such measures consistent with the law, the articles of incorporation and these bylaws, including (for example, and not by way of limitation) the payment in cash of an amount equal to the fair value of any fractional share of common stock as they may deem proper to avoid the issuance of any fractional share of common stock. The Company may issue fractional shares of preferred stock. 2 ARTICLE III THE SHAREHOLDERS SECTION 3.1 ANNUAL MEETING. The annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly come before the meeting, shall be held at the principal office of the Company, at 2:00 p.m. local time, on the second Tuesday in August of each year commencing in the calendar year 1987, unless such day is a legal holiday, in which case such meeting shall be held at such hour on the first day thereafter which is not a legal holiday; or at such other place and time as may be designated by the board of directors. Failure to hold any annual meeting or meetings shall not work a forfeiture or dissolution of the Company. SECTION 3.2 SPECIAL MEETINGS. Except as otherwise provided by law or by the articles of incorporation, special meetings of the shareholders may be called by the chairman of the board of directors, the president, any one of the directors, or the holders of not less than one-tenth of all the shares having voting power at such meeting, and shall be held at the principal office of the Company or at such other place, and at such time, as may be stated in the notice calling such meeting. Business transacted at any special meeting of shareholders shall be limited to the purpose stated in the notice of such meeting given in accordance with the terms of section 3.3. SECTION 3.3 NOTICE OF MEETINGS - WAIVER. Written or printed notice of each meeting of shareholders, stating the place, day and hour of any meeting, and in the case of a special shareholder's meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the president, the secretary or the officer or person calling the meeting, to each shareholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his address as it appears on the stock transfer books of the Company, with postage thereon prepaid. Such further or earlier notice shall be given as may be required by law. The signing by a shareholder of a written waiver of notice of any shareholders' meeting, whether before or after the time stated in such waiver, shall be equivalent to the receiving by him of all notice required to be given with respect to such meeting. Attendance by a shareholder, whether in person or by proxy, at a shareholders' meeting shall constitute a waiver of notice of such meeting. No notice of any adjournment of any meeting shall be required. SECTION 3.4 CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE. For the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders or any adjournment thereof, or shareholders entitled to receive payment of any dividend or in order to make a determination of shareholders for any other proper purpose, the board of directors of the Company may provide that the stock transfer books shall be closed for a stated period in no case to exceed sixty (60) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least the ten days immediately preceding such meeting. In lieu of closing 3 the stock transfer books, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in no case to be more than sixty (60) days nor, in the case of a meeting of shareholders, less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date of such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made, as provided in this section, such determination shall apply to any adjournment thereof except where the determination has been made through the closing of stock transfer books and the stated period of closing has expired. SECTION 3.5 VOTING LIST. The officer or agent having charge of the stock transfer books for shares of the Company shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the Company and shall be subject to lawful inspection by any shareholder at any time during the usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. Failure to comply with this section shall not affect the validity of any action taken at such meeting. SECTION 3.6 QUORUM AND OFFICERS. Except as otherwise provided by law, by the articles of incorporation or by these bylaws, the holders of a majority of the shares entitled to vote and represented in person or by proxy shall constitute a quorum at a meeting of shareholders, but the shareholders present at any meeting, although representing less than a quorum, may from time to time adjourn the meeting to some other day and hour, without notice other than announcement at the meeting. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. The vote of the holders of a majority of the shares entitled to vote and thus represented at a meeting at which a quorum is present shall be the act of the shareholders' meeting, unless the vote of a greater number is required by law. The chairman of the board, or in his absence the president, of the Company shall preside at, and the secretary shall keep the records of, each meeting of shareholders, and in the absence of any such officer, his duties shall be performed by any other officer authorized by these bylaws or any person appointed by resolution duly adopted at the meeting. SECTION 3.7 VOTING AT MEETINGS. Each outstanding share shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders except to the extent that the articles of incorporation, or bylaws of the Company or the laws of the State of Texas provide otherwise. 4 SECTION 3.8 PROXIES. A shareholder may vote either in person or by proxy executed in writing by the shareholder, or by his duly authorized attorney-in-fact. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. A proxy shall be revocable unless expressly provided therein to be irrevocable and unless otherwise made irrevocable by law. SECTION 3.9 BALLOTING. Upon the demand of any shareholder, the vote upon any question before the meeting shall be by ballot. At each meeting inspectors of election may be appointed by the presiding officer of the meeting, and at any meeting for the election of directors, inspectors shall be so appointed on the demand of any shareholder present or represented by proxy and entitled to vote in such election of directors. No director or candidate for the office of director shall be appointed as such inspector. The number of votes cast by shares in the election of directors shall be recorded in the minutes. SECTION 3.10 PROHIBITION OF CUMULATIVE VOTING FOR DIRECTORS. No shareholder shall have the right to cumulative voting in the election of directors, but each share shall be entitled to one vote in the election of each director. In the case of any contested election for any directorship, the candidate for such position receiving a plurality of the votes cast in such election shall be elected to such position. SECTION 3.11 RECORD OF SHAREHOLDERS. The Company shall keep at its principal business office, or the office of its transfer agents or registrars, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each. SECTION 3.12 ACTION WITHOUT MEETING. Any action required by statute to be taken at a meeting of the shareholders of the Company, or any action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof and such consent shall have the same force and effect as a unanimous vote of the shareholders. Any such signed consent, or a signed copy thereof, shall be placed in the minute book of the Company. ARTICLE IV THE BOARD OF DIRECTORS SECTION 4.1 QUALIFICATION AND NUMBER. (a) The property, business and affairs of the Company shall be managed and controlled by the board of directors and, subject to any restrictions imposed by law, by the articles of incorporation or by these bylaws, the board of directors may exercise all the powers of the Company. Directors need not be residents of Texas or shareholders of the Company absent provision to the contrary in the articles of incorporation or laws of the State of Texas. 5 (b) The number of directors of the Company (exclusive of directors to be elected by the holders of any one or more classes or series of preferred stock of the Company or any other class or series of stock of the Company, other than the common stock, which may at some time be outstanding, voting separately as a class or classes) shall be fixed at six and may be increased, subject to Section 7.2 of these bylaws, or decreased (provided that any decrease does not shorten the term of any incumbent director) from time to time by amendment of these bylaws. Such number shall, without the necessity of any amendment of this Section 4.1(b), automatically be increased from time to time as may be necessary to permit the inclusion on the board of directors of any director elected by a separate vote of holders of any one or more classes or series of preferred stock of the Company, or any other class or series of stock of the Company, other than common stock, that are outstanding at the time of such increase. SECTION 4.2 TERM, REMOVAL AND VACANCIES. (a) The board of directors (exclusive of directors to be elected by the holders of any one or more classes or series of preferred stock of the Company or any other class or series of stock of the Company other than the common stock, which may at some time be outstanding, voting separately as a class or classes) shall be divided into three classes, as nearly equal in number as possible as determined by the board of directors, with the term of office of one class expiring each year. At the annual meeting of stockholders in 1990, one director of the first class shall be elected to hold office for a term expiring at the next succeeding annual meeting, two directors of the second class shall be elected to hold office for a term expiring at the second succeeding annual meeting and two directors of the third class shall be elected to hold office for a term expiring at the third succeeding annual meeting. At each annual meeting of stockholders, the respective successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting. Any increase in the number of directors elected by holders of common stock shall be apportioned among the classes of directors so as to make each class as nearly equal in number as is practicable. (b) Notwithstanding any other provision of the articles of incorporation or these bylaws (and notwithstanding the fact that some lesser percentage may be specified by law, the articles of incorporation or these bylaws), any director or the entire board of directors may be removed only for cause and only by the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) of all shares of stock of the Company entitled to vote at a meeting of stockholders, voting together as a single class. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more classes or series of preferred stock of the Company or any other class or series of stock of the Company other than the common stock, which may at some time be outstanding, shall have the right, voting separately as a class or classes, to elect one or more directors of the Company, the provisions of this Section 4.2(b) shall not apply with respect to the director or directors elected by such holders of preferred stock or other stock. (c) Any vacancies in the board of directors, for any reason, and any newly created directorships resulting from any increase in the number of directors (to the extent permitted by 6 law) shall be filled by the board of directors, acting by not less than a majority of the directors then in office, even if less than a quorum (which majority may consist of a sole remaining director). Any directors so chosen to fill any such vacancies or newly created directorships shall, unless otherwise required by law, hold office until the next election of the class for which such directors shall have been chosen and until their respective successors shall be duly elected and qualified. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more classes or series of preferred stock of the Company or any other class or series of stock of the Company other than the common stock, which may at some time be outstanding, shall have the right, voting separately as a class or classes, to elect one or more directors of the Company, the provisions of this Section 4.2(c) shall not apply with respect to the director or directors elected by such holders of preferred stock or other stock. SECTION 4.3 VACANCIES. Any vacancy occurring in the board of directors may be filled by the vote of a majority of the remaining directors, even if such remaining directors comprise less than a quorum of the board of directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any position on the board of directors to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting of the shareholders, or at a special meeting of shareholders duly called for such purpose. 4.3A NOMINATIONS. No person (other than a person nominated or recommended for nomination by the board of directors or any nominating committee thereof or any person to be elected by the holders of any one or more classes or series of preferred stock of the Company or any other class or series of stock of the Company other than the common stock which may be outstanding at some time, voting separately as a class or classes) shall be eligible for election as a director at any annual or special meeting of stockholders unless a written notice regarding such person's nomination, together with written consent of such person to serve as a director, is received from a stockholder of record by the Secretary of the Company not later than the close of business on the tenth day following the date on which notice of such meeting is first given to stockholder. Each such notice shall set forth (i) the name, age, business address and residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of stock of the Company which are beneficially owned by each such nominee, and (iv) such other information in respect of such nominee as would be required by the federal securities laws and the rules and regulations promulgated thereunder in respect of an individual nominated as a director of the Company and for whom proxies are solicited by the board of directors. The Chairman of any meeting of stockholders may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. SECTION 4.4 REGULAR MEETINGS. Regular meetings of the board of directors shall be held immediately following each annual meeting of shareholders, at the place of such meeting, and at such other times and places as the board of directors shall determine. No notice of any kind of such regular meetings needs to be given to either old or new members of the board of directors. 7 SECTION 4.5 SPECIAL MEETINGS. Special meetings of the board of directors shall be held at any time by call of the chairman of the board, the president, or a majority of the directors. The secretary shall give notice of each special meeting to each director at his usual business or residence address by mail at least three days before the meeting or in person, by telegraph or telephone at least one day before such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid. Except as otherwise provided by law, by the articles of incorporation, or by these bylaws, such notice need not specify the business to be transacted at, or the purpose of, such meeting. No notice shall be necessary for any adjournment of any meeting. The signing of a written waiver of notice of any special meeting by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the receiving of such notice. Attendance of a director at a meeting shall also constitute a waiver of notice of such meeting, except where a director attends a meeting for the express and announced purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 4.6 QUORUM. A majority of the number of directors fixed by these bylaws shall constitute a quorum for the transaction of business and the act of not less than a majority of the directors present at a meeting at which a quorum is present shall be required in order to constitute the act of the board of directors, unless the act of a greater number shall be required by law, by the articles of incorporation or by these bylaws. SECTION 4.7 PROCEDURE AT MEETINGS. The board of directors, at each regular meeting held immediately following the annual meeting of shareholders, may appoint one of their number as chairman of the board of directors, to preside at all meetings of the board of directors. In the event of failure to designate a chairman of the board, or in his absence, the president of the Company, if a director, shall perform the functions of the chairman of the board and shall preside at meetings of the board. In the absence of the designated chairman or the president of the Company, at any meeting, any officer authorized by these bylaws to act in the absence of the president, who is a director, or any member of the board selected by the members present shall preside. The secretary of the Company shall act as secretary at all meetings of the board. In his absence, the presiding officer of the meeting may designate any person to act as secretary. At meetings of the board of directors, the business shall be transacted in such order as the board may from time to time determine. SECTION 4.8 PRESUMPTION OF ASSENT. Any director of the Company who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the Company immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 4.9 ACTION WITHOUT A MEETING. Any action required by stature to be taken at a meeting of the directors of the Company, or which may be taken at such meeting, may be taken 8 without a meeting if a consent in writing, setting forth the action so taken, shall be signed by each director entitled to vote at such meeting, and such consent shall have the same force and effect as a unanimous vote of the directors. Such signed consent, or a signed copy thereof, shall be placed in the minute book of the Company. SECTION 4.10 COMPENSATION. Directors as such shall not receive any stated salary for their service, but by resolution of the board of directors, may receive a fixed sum and reimbursement for attendance at each regular or special meeting of the board of directors or at any meeting of the executive committee of directors, if any, to which such director may be elected in accordance with the following section 4.11; but nothing herein shall preclude any director from serving the Company in any other capacity or receiving compensation therefor. SECTION 4.11 EXECUTIVE COMMITTEE. The board of directors, by resolution adopted by a majority of the full board of directors, may designate an executive committee, which committee shall consist of one or more of the directors of the Company. Such executive committee may exercise such authority of the board of directors in the business and affairs of the Company as the board of directors may, by resolution duly adopted, delegate to it except as prohibited by law. The designation of such committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed upon it or him by law. Any member of the executive committee may be removed by the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board of directors when required. The minutes of the proceeds of the executive committee shall be placed in the minute book of the Company. Members of the executive committee shall receive such compensation as may be approved by the board of directors and will be reimbursed for reasonable expenses actually incurred by reason of membership on the executive committee. SECTION 4.12 OTHER COMMITTEES. The board of directors, by resolution adopted by a majority of the full board of directors, may appoint one or more committees of two or more directors each. Such committees may exercise such authority of the board of directors in the business and affairs of the Company as the board of directors may, by resolution duly adopted, delegate, except as prohibited by law. The designation of any committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed on it or him by law. Any member of a committee may be removed at any time by the board of directors. Members of any such committees shall receive such compensation as may be approved by the board of directors and will be reimbursed for reasonable expenses actually incurred by reason of membership on a committee. 9 ARTICLE V OFFICERS SECTION 5.1 NUMBER. The officers of the Company shall consist of a chairman of the board, a president, one or more vice presidents, a secretary and a treasurer; and, in addition, such other officers and assistant officers and agents as may be deemed necessary or desirable. Officers shall be elected or appointed by the board of directors. In its discretion, the board of directors may leave unfilled any office except those of president, treasurer and secretary. SECTION 5.2 ELECTION; TERM; QUALIFICATION. Officers shall be chosen by the board of directors annually at the meeting of the board of directors following the annual shareholders' meeting. Each officer shall hold office until his successor has been chosen and qualified, or until his death, resignation, or removal. SECTION 5.3 REMOVAL. Any officer or agent elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the Company will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create any contract rights. SECTION 5.4 VACANCIES. Any vacancy in any office for any cause may be filled by the board of directors at any meeting. SECTION 5.5 DUTIES. The officers of the Company shall have such powers and duties, except as modified by the board of directors, as generally pertain to their offices, respectively, as well as such powers and duties as from time to time shall be conferred by the board of directors and by these bylaws. SECTION 5.6 THE CHAIRMAN OF THE BOARD. The chairman of the board shall be the chief executive officer and shall have general direction of the affairs of the Company and general supervision over its several officers, subject however, to the control of the board of directors. He shall at each annual meeting, and from time to time, report to the shareholders and to the board of directors all matters within his knowledge which, in his opinion, the interest of the Company may require to be brought to the notice of such persons. He may sign, with the secretary or an assistant secretary, any or all certificates of stock of the Company. He shall preside at all meetings of the shareholders, and, in the absence of a chairman, at meetings of the board of directors, shall sign and execute in the name of the Company (i) all contracts or other instruments authorized by the board of directors, and (ii) all contracts or instruments in the usual and regular course of business, pursuant to section 6.2 hereof, except in cases when the signing and execution thereof shall be expressly delegated or permitted by the board or by these bylaws to some other officer or agent of the Company; and, in general, shall perform all duties incident to the office of president, and such other duties as from time to time may be assigned to him by the board of directors or as are prescribed by these bylaws. 10 SECTION 5.7 THE PRESIDENT. The president shall be the chief operating officer of the corporation. The president shall, in the absence or disability of the chairman of the board, perform the duties and exercise the powers of the chairman of the board and shall perform such other duties and have such other powers as the board of directors may form time to time prescribe. The President may sign certificates of stock of the Company. SECTION 5.8 THE VICE PRESIDENTS. At the request of the president, or in his absence or disability, the vice presidents, in the order of their election, shall perform the duties of the president, and, when so acting shall have all the powers of, and be subject to all restrictions upon, the president. Any action taken by a vice president in the performance of the duties of the president shall be conclusive evidence of the absence or inability to act of the president at the time such action was taken. The vice presidents shall perform such other duties as may, from time to time, be assigned to them by the board of directors or the president. A vice president may sign, with the secretary or an assistant secretary, certificates of stock of the Company. SECTION 5.9 SECRETARY. The secretary shall keep the minutes of all meetings of the shareholders, of the board of directors, and of the executive committee, if any, of the board of directors, in one or more books provided for such purpose and shall see that all notices are duly given in accordance with the provisions of these bylaws or as required by law. He shall be custodian of the corporate records and of the seal (if any) of the Company and see, if the Company has a seal, that the seal of the Company is affixed to all documents the execution of which on behalf of the Company under its seal is duly authorized; shall have general charge of the stock certificate books, transfer books and stock ledgers, and such other books and papers of the Company as the board of directors may direct, all of which shall, at all reasonable times, be open to the examination of any director, upon application at the office of the Company during business hours; and in general shall perform all duties and exercise all powers incident to the office of the secretary and such other duties and powers as the board of directors or the president from time to time may assign to or confer on him. SECTION 5.10 TREASURER. The treasurer shall keep complete and accurate records of account, showing at all times the financial condition of the Company. He shall be the legal custodian of all money, notes, securities and other valuables which may from time to time come into the possession of the Company. He shall furnish at meetings of the board of directors, or whenever requested, a statement of the financial condition of the Company, and shall perform such other duties as these bylaws may require or the board of directors may prescribe. SECTION 5.11 ASSISTANT OFFICERS. Any assistant secretary or assistant treasurer appointed by the board of directors shall have power to perform, and shall perform, all duties incumbent upon the secretary or treasurer of the Company, respectively, subject to the general direction of such respective officers, and shall perform such other duties as these bylaws may require or the board of directors may prescribe. SECTION 5.12 SALARIES. The salaries or other compensation of the officers shall be fixed from time to time by the board of directors. No officer shall be prevented from receiving such 11 salary or other compensation by reason of the fact that he is also a director of the Company. SECTION 5.13 BONDS OF OFFICERS. The board of directors may secure the fidelity of any officer of the Company by bond or otherwise, on such terms and with such surety or sureties, conditions, penalties or securities as shall be deemed proper by the board of directors. SECTION 5.14 DELEGATION. The board of directors may delegate temporarily the powers and duties of any officer of the Company, in case of his absence or for any other reason, to any other officer, and may authorize the delegation by any officer of the Company of any of his powers and duties to any agent or employee, subject to the general supervision of such officer. ARTICLE VI MISCELLANEOUS SECTION 6.1 DIVIDENDS. Dividends on the outstanding shares of the Company, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid by the Company in cash, in property, or in the Company's own shares, but only out of the unreserved and unrestricted earned surplus of the Company, except as otherwise allowed by law. Subject to limitations upon the authority of the board of directors imposed by law or by the articles of incorporation, the declaration of and provision for payment of dividends shall be at the discretion of the board of directors. SECTION 6.2 CONTRACTS. The chairman of the board and the president shall have the power and authority to execute, on behalf of the Company, contracts or instruments in the usual and regular course of business, and in addition the board of directors may authorize any officer or officers, agent or agents, of the Company to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Company, and such authority may be general or confined to specific instances. Unless so authorized by the board of directors or by these bylaws, no officer, agent or employee shall have any power or authority to bind the Company by any contract or engagement, or to pledge its credit or to render it pecuniarily liable for any purpose or in any amount. SECTION 6.3 CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for the payment of money, notes, or other evidences of indebtedness issued in the name of the Company shall be signed by such officers or employees of the Company as shall from time to time be authorized pursuant to these bylaws or by resolution of the board of directors. SECTION 6.4 DEPOSITORIES. All funds of the Company shall be deposited from time to time to the credit of the Company in such banks or other depositories as the board of directors may from time to time designate, and upon such terms and conditions as shall be fixed by the 12 board of directors. The board of directors may from time to time authorize the opening and maintaining within any such depository as it may designate, of general and special accounts, and may make such special rules and regulations with respect thereto as it may deem expedient. SECTION 6.5 ENDORSEMENT OF STOCK CERTIFICATES. Subject to the specific directions of the board of directors, any share or shares of stock issued by a corporation and owned by the Company, including reacquired shares of the Company's own stock, may, for sale or transfer, be endorsed in the name of the Company by the president or any vice president; and such endorsement may be attested or witnessed by the secretary or any assistant secretary either with or without the affixing thereto of the corporate seal. SECTION 6.6 CORPORATE SEAL. The corporate seal, if any, shall be in such form as the board of directors shall approve, and such seal, or a facsimile thereof, may be impressed on, affixed to, or in any manner reproduced upon, instruments of any nature required to be executed by officers of the Company. SECTION 6.7 FISCAL YEAR. The fiscal year of the Company shall begin and end on such dates as the board of directors at any time shall determine. SECTION 6.8 BOOKS AND RECORDS. The Company shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders and board of directors, and shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of the shares held by each. SECTION 6.9 RESIGNATIONS. Any director or officer may resign at any time. Such resignations shall be made in writing and shall take effect at the time specified therein, or, if no time is specified, at the time of its receipt by the chairman of the board, the president or secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. SECTION 6.10 INDEMNIFICATION OF DIRECTORS AND OFFICERS AND INSURANCE. (a) The Company shall, to the maximum extent permissible under applicable provisions of the Texas Business Corporation Act, pay, reimburse or otherwise indemnify any present or former director or officer of the Company in respect of any costs or expenses incurred by that person in any action, suit or proceeding to which the officer is made a party by reason of holding such position or any other position held by such person at the request of the Company. (b) The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of the Company, or who is or was serving at the request of the Company as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, other enterprise, or employee benefit plan, against any liability asserted against and incurred by that person in such a capacity or arising out of his status as such a person, 13 whether or not the Company would have the power to indemnify such person against such liability under this Article. (c) Any indemnification of a director or an officer of the Company in accordance with this Article shall be reported in writing to the shareholders when and as required by applicable provisions of the Texas Business Corporation Act. SECTION 6.11 MEETINGS BY TELEPHONE. Subject to the provisions required or permitted by these bylaws or the laws of the State of Texas for notice of meetings, shareholders, members of the board of directors, or members of any committee designated by the board of directors may participate in and hold any meeting required or permitted under these bylaws by telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute presence in person at such a meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE VII AMENDMENTS SECTION 7.1 AMENDMENTS. These bylaws may be altered, amended, or repealed, or new bylaws may be adopted, by a majority of the board of directors at any duly held meeting of directors or by the holders of a majority of the shares represented at any duly held meeting of shareholders provided that notice of such proposed action shall have been contained in the notice of any such meeting. SECTION 7.2 RESTRICTIONS ON AMENDMENTS. Notwithstanding any other provisions of these bylaws and in addition to any requirements of the provisions of any class or series of stock of the Company that may be outstanding, no amendment to these bylaws shall amend, alter, change or repeal any of the provisions of this Section 7.2 or Section 4.2 of these bylaws, nor shall any amendment increase the number of directors provided in accordance with Section 4.1(b) of these bylaws, unless such amendment, alteration, change or repeal shall receive either (a) the affirmative vote of the holders of not less than eighty percent (80%) of all shares of stock of the Company entitled to vote at a meeting of stockholders, voting together as a single class; or (b) the affirmative vote of a majority of directors in office. 14 EX-10.7 3 EXHIBIT 10.7 KENT ELECTRONICS CORPORATION 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN ARTICLE I PURPOSE Kent Electronics Corporation, a Texas corporation (the "Company"), is dependent for the successful conduct of its business on the initiative, effort and judgment of its directors. This 1996 Non-Employee Director Stock Option Plan (the "Plan") is intended to provide the independent directors of the Company additional compensation for their service as directors and an incentive, through options to acquire stock in the Company, to increase the value of the Company's common stock, without par value ("Common Stock"). ARTICLE II ADMINISTRATION The Plan shall be administered by the Board of Directors of the Company (the "Board"). Subject to the express provisions of the Plan and the policies of each stock exchange on which any of the Company's stock at any time may be traded, the Board shall have plenary authority (i) to construe and interpret the Plan, (ii) to define the terms used therein, (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, and (iv) to make all other determinations necessary or advisable for the administration of the Plan. All determinations and interpretations made by the Board shall be binding and conclusive on all participants in the Plan and their legal representatives and beneficiaries. No member of the Board shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to the Plan or any transaction under the Plan. ARTICLE III ELIGIBILITY AND PARTICIPATION Under the Plan each director who is not a full-time employee of the Company or any of its subsidiaries (each, a "Non-Employee Director") shall, effective as of the date of his initial election to the Board, be granted a stock option to purchase from the Company 5,000 shares of Common Stock, and effective as of the date of each annual meeting of shareholders, be granted a stock option to purchase from the Company 5,000 shares of Common Stock, at a price determined as set forth in ARTICLE IV below. ARTICLE IV TERMS AND CONDITIONS OF STOCK OPTIONS; STOCK OPTION PRICE; TRANSFERABILITY (a) Each stock option granted under the Plan shall be evidenced by a Stock Option Agreement (the "Agreement") in such form as may be hereafter approved by the Board on the advice of counsel to the Company. The Agreement shall be executed by the Company and the optionee. The sale of the shares issued on the exercise of a stock option by any person subject to Section 16 of the 1934 Act shall not be allowed until at least six months after the later of (i) the approval of this Plan by the stockholders of the Company in accordance with ARTICLE IX hereof or (ii) the grant of the stock option. Such determination for each stock option is to be made prior to or at the time that stock option is granted. Each stock option granted hereunder shall expire if not exercised within five years of the date of grant. (b) The per share stock option price shall be an amount equal to the Fair Market Value (as defined below) of the Common Stock on the date of grant of the stock option. In no event shall the stock option price be less than the par value of the Company's Common Stock. (c) Except as set forth below, the stock options granted hereunder shall not be transferable otherwise than by will or operation of the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Internal Revenue Code of 1986, as amended (the "Code"), or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder. During the lifetime of the optionee, stock options granted hereunder shall be exercisable only by the optionee, the optionee's guardian or legal representative. In addition to non-transferable stock options, the Board may allow stock options to be granted that are transferable, without payment of consideration, to immediate family members of the optionee or to trusts or partnerships for such family members; the Board may also amend outstanding stock options to provide for such transferability. (d) No stock option granted hereunder shall be exercisable unless the Plan and all shares issuable on the exercise thereof have been registered under the Securities Act of 1933, as amended (the "1933 Act") and all other applicable securities laws, and there is available for delivery a prospectus meeting the requirements of Section 10 of the 1933 Act, or the Company shall have first received the opinion of its counsel that registration under the 1933 Act and all other applicable securities laws is not required in connection with such issuance. At the time of exercise, if the shares with respect to which the stock option is being exercised have not been registered under the 1933 Act and all other applicable securities laws, the Company may require the optionee to provide the Company whatever written assurance counsel for the Company may require that the shares are being acquired for investment and not with a view to the distribution thereof, and that the shares will not be disposed of without the written opinion of such counsel that registration under the 1933 Act and all other applicable securities laws is not required. Share certificates issued to the optionee upon exercise of the stock option shall bear a legend to the foregoing effect to the extent counsel for the Company deems it advisable. (e) For all purposes under the Plan, the Fair Market Value of a share of Common Stock on a particular date, or on the most recent prior date on which Common Stock was traded, shall be equal to the reported closing price per share as reported by the New York Stock Exchange, Inc. or other principal exchange or market on which the Common Stock is traded. In the event Common Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its Fair Market Value shall be made by the Board of Directors in such manner as it deems appropriate. -2- (f) A stock option shall lapse in the following situations: (1) If the directorship of a Non-Employee Director terminates for any reason other than death, all unexercised stock options theretofore granted shall expire ten days after the date of such termination of directorship, unless such stock options shall have terminated earlier under the terms or under other provisions of the Plan. (2) If the directorship of a Non-Employee Director terminates by reason of death, all unexercised stock options, if any, shall become immediately exercisable and may be exercised until the expiration of one year from the date of death of the Non-Employee Director or until the expiration of the term of the stock option, whichever is earlier. Such stock option may be exercised by any designated beneficiary of the Non-Employee Director, subject to all other provisions of the Plan. ARTICLE V SHARES SUBJECT TO PLAN AND DURATION OF PLAN The Plan shall expire and terminate on the earlier of (i) the date ten years from the effective date of this Plan, or (ii) the date on which there have been granted to Non-Employee Directors pursuant to the Plan stock options to purchase an aggregate of 100,000 shares of the Common Stock. Shares subject to stock options under the Plan may be either authorized and unissued shares or issued shares that have been acquired by the Company and held in its treasury, in the sole discretion of the Board. When stock options have been granted under the Plan and have lapsed unexercised or partially unexercised or have been surrendered for cancellation by the optionee thereof, the unexercised shares which were subject thereto may be reoptioned under the Plan. ARTICLE VI ADJUSTMENTS (a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required action by the Company's directors and stockholders, the number of shares provided for in each outstanding stock option and the price per share thereof, and the number of shares provided for in the Plan, shall be proportionately adjusted for any increase or decrease in the number of issued shares of the Company's Common Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend (but only on the Common Stock), a stock split, a reverse stock split, or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company, and shall also be proportionately adjusted in the event of a spin-off, spin-out, or other distribution of assets to stockholders of the Company, to the extent necessary to prevent dilution of the interests of grantees pursuant to the Plan or of the other stockholders of the Company, as applicable. If the Company shall engage in a merger, consolidation, reorganization or recapitalization, each outstanding stock option (or if such transaction involves less than all of the shares of the Company's Common Stock, then a number of stock options proportionate to the number of such involved shares), shall become exercisable for the securities and other consideration to which a holder of the number of shares of the -3- Company's Common Stock subject to each such stock option would have been entitled to receive in any such merger, consolidation, reorganization or recapitalization. (b) If, while unexercised stock options remain outstanding under the Plan, (i) the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation or where the Common Stock is converted into other securities, cash or other property in connection with such merger or consolidation, (ii) the Company is recapitalized in such a manner that shares of the Common Stock are converted into or exchanged for other securities of the Company, (iii) the Company sells or otherwise disposes of substantially all of its assets to another person, corporation or entity, (iv) over 30% of the Common Stock of the Company is acquired by another person, corporation or entity in exchange for stock (or stock and securities) of such corporation or (v) over 30% of the then outstanding Common Stock is acquired in a single transaction or a series of related transactions, then, unless the terms of the transaction described in clauses (i), (ii), (iii), (iv) or (v) above provide that after the effective date of such merger, consolidation, recapitalization, exchange, sale or acquisition, as the case may be, each holder of an outstanding stock option shall be entitled, upon exercise of such stock option to receive, in lieu of shares of the Company's Common Stock, shares of such stock or other securities of the Company or the surviving or acquiring corporation or such other property at the same rate per share as the holders of shares of the Company's Common Stock received pursuant to the terms of the merger, consolidation, exchange, recapitalization, sale or acquisition, all outstanding stock options shall be cancelled as of the effective date of any such merger, consolidation, recapitalization, exchange, sale or acquisition. At least 30 days notice of such cancellation shall be given to each holder of a stock option and each holder of a stock option shall have the right to exercise such stock options in full during a 30-day period preceding the effective date of such merger, consolidation, recapitalization, exchange, sale or acquisition. (c) CHANGE OF PAR VALUE. In the event of a change in the Company's Common Stock which is limited to a change of all of its authorized shares without par value into the same number of shares with a par value, the shares resulting from any such change shall be deemed to be Common Stock within the meaning of the Plan. (d) MISCELLANEOUS. The adjustments provided for in this Article shall be made by the Board whose determination in that respect shall be final, binding and conclusive. Except as hereinbefore expressly provided in this Article, the holder of a stock option shall not be entitled to the privilege of stock ownership as to any shares of Common Stock or other stock not actually issued and delivered to the holder, and any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect and no adjustment by reason thereof shall be made with respect to the number or price of shares of the Company's Common Stock subject to any stock option. The grant of a stock option pursuant to the Plan shall not affect in any way the right or power of the Company to, among other things, make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve or liquidate or sell or transfer all or any part of its business or assets. -4- ARTICLE VII POWER TO AMEND The Board of Directors may amend, terminate or suspend this Plan at any time and from time to time; provided, however, that the Plan shall not be amended more than once every six months, other than to comport with changes in the Code, ERISA, or the regulations thereunder, or the regulations thereunder; and provided, further, that to the extent the Board desires for any amendment to the Plan to maintain qualification of the Plan under Rule 16b-3 of the Exchange Act, no amendment shall (i) materially increase the benefits accruing to participants under the Plan; (ii) change the aggregate number of Shares which may be issued under Options pursuant to the provisions of the Plan; (iii) reduce the Option price at which Options have been granted; or (iv) change the class of persons eligible to receive Options. However, no termination or amendment of the Plan may, without the consent of the holder of any Option then outstanding, adversely affect the rights of such holder under the Options. ARTICLE VIII EFFECTIVE DATE; STOCKHOLDER APPROVAL The Plan shall be effective as of May 7, 1996, the date on which it received the approval of a majority of the disinterested members of the Board. However, the Plan and all stock options granted under the Plan shall be void if the Plan is not approved by the stockholders within 12 months from the date the Plan is approved by the Board. The Plan shall be deemed approved by the holders of the outstanding voting stock of the Company by the affirmative votes of the holders of a majority of the outstanding voting stock of the Company present, or represented, and entitled to vote at a meeting of such stockholders duly held in accordance with the applicable laws of the state or other jurisdiction in which the Company is incorporated. No stock option granted under the Plan shall be exercisable in whole or in part unless and until such stockholder approval is obtained. -5- EX-10.13 4 EXHIBIT 10.13 KENT ELECTRONICS CORPORATION STOCK OPTION PLAN AND AGREEMENT FOR VICE PRESIDENT, CORPORATE CONTROLLER 1. GRANT. Under the terms, provisions, and conditions of this Stock Option Plan and Agreement by and between Kent Electronics Corporation (the "Company"), and David D. Johnson (the "Optionee"), the Company hereby grants to Optionee the option to purchase 25,000 shares of the Company's Common Stock, without par value (the "Stock"), at the option price specified herein, subject to adjustment as provided herein (the "Option"). The Option is not an "incentive stock option" as described in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. DURATION OF OPTION AND OPTION PRICE. The Option shall be for a term commencing on the date hereof and ending fifteen (15) years from the date hereof. The option price payable by the Optionee upon exercise of the Option as to each share subject to the Option will be $19.31, which equals one-half of the closing price of one share of the Stock, as reported by the New York Stock Exchange, on the date hereof. 3. AMOUNT EXERCISABLE AND SCHEDULE OF EXERCISABILITY. Except as otherwise provided herein, this Option may be exercised as to 2,500 shares, on and after May 1, 2000; as to an additional 5,000 shares, on and after May 1, 2001; as to an additional 7,500 shares, on and after May 1, 2002; and as to all remaining shares, on and after May 1, 2003. This Option shall immediately become fully vested and exercisable as to all shares subject hereto upon the death or Disability (as hereinafter defined) of Optionee, or upon the occurrence of a "Change in Control" (as hereinafter defined), or upon the Company's termination of its employment of Optionee at the election of the Company, or upon Optionee's termination of his employment by the Company for "Good Reason" (as defined herein at Section 11), or such earlier date as set forth in Section 9 hereof. The Option may be exercised, so long as it is valid and outstanding, from time to time in whole (as to shares then exercisable) or in part; provided, however, no fractional shares of Stock shall be issued. The Option is cumulative, and may be exercised as to any or all shares of Stock covered hereby from and after the time it becomes exercisable as to such shares through the date of termination of the Option. 4. EXERCISE OF OPTIONS. The Option shall be exercisable, in whole or in part, by the delivery of written notice to the Company setting forth the number of shares of Stock with respect to which the Option is to be exercised. In order to be effective, such written notice shall be accompanied at the time of its delivery to the Company by payment of the option price for such shares of Stock, which payment shall be made (a) in cash or by personal check, cashier's check, certified check, or postal or express money order payable to the order of the Company in an amount (in United States dollars) equal to the option price multiplied by the number of shares of Stock with respect to which the Option is exercised or (b) in shares of Stock as set forth in this Section 4. Such notice may be delivered in person or by messenger or courier service to the Secretary of the Company, or shall be sent by registered mail, return receipt requested, to the Secretary of the Company, and in all such cases delivery shall be deemed to have been made on the date such notice is received. At the time when the Optionee (or other holder of the Option pursuant to Section 5) makes payment to the Company for the shares of Stock issuable upon the exercise of the Option, the Company may require the Optionee to pay to the Company an additional amount equal to any federal, state or local taxes (which the Company deems necessary or appropriate to be withheld in connection with the exercise of such Option) in such forms of payment as are described in the first paragraph of this Section 4. In the event that Optionee does not pay to the Company any such amount required for withholding taxes, to the extent applicable, the employer (for payroll tax purposes) of Optionee shall have the right to withhold such required amount from any sum payable, or to become payable, to Optionee, upon such terms and conditions as the Company in its discretion shall prescribe. Payment of the option price may be made, in whole or in part, in shares of Stock previously held by the Optionee (or other holder of the Option pursuant to Section 5). If payment is made in whole or in part in shares of Stock, then the Optionee (or other holder of the Option pursuant to Section 5) shall deliver to the Company, in payment of the option price of the shares of Stock with respect to which such Option is exercised, (i) certificates registered in the name of such Optionee (or other holder of the Option pursuant to Section 5) representing a number of shares of Stock legally and beneficially owned by such Optionee (or other holder of the Option pursuant to Section 5), free of all liens, claims and encumbrances of every kind, such certificates to be accompanied by stock powers duly endorsed in blank by the record holder of the shares represented by such certificates; and (ii), if the option price of the shares of Stock with respect to which such Option is to be exercised exceeds the fair market value of such shares of Stock, cash or a personal check, cashier's check, certified check, or postal or express money order payable to the order of the Company in an amount (in United States dollars) equal to the amount of such excess. If the fair market value of such Shares of Stock delivered to the Company exceeds the option price of the shares of Stock with respect to which such Option is to be exercised, the Company shall promptly deliver, or cause to be delivered, to Optionee a replacement share certificate representing the number of shares of Stock in excess of those surrendered in payment of the option price. As promptly as practicable after the receipt by the Company of (i) such written notice from the Optionee (or other holder of the Option pursuant to Section 5) setting forth the number of shares of Stock with respect to which such Option is to be exercised, (ii) payment of the option price of such shares in the form required by the foregoing provisions of this Section 4, and (iii) an amount equal to any federal, state or local taxes which the Company deems necessary or appropriate to be withheld incident to the exercise of the Option, the Company shall cause to be delivered to such Optionee (or other holder of the Option pursuant to Section 5) certificates representing the number of shares of Stock with respect to which such Option has been so exercised. -2- All proceeds received pursuant to the exercise of the Option shall be added to the general funds of the Company to be used for any corporate purpose. For purposes of determining the value of shares of Stock delivered in payment of all or any portion of the option price pursuant to this Section 4, the "fair market value" of such shares shall equal the average of the daily averages of the high and low sales price per share of the Stock as reported by the New York Stock Exchange (or such other principal exchange or market on which the Stock is traded as of the applicable dates) on each day on which such trades are reported of the five trading days prior to Optionee's exercise of the Option. 5. TRANSFERABILITY OF OPTION. The Option shall not be subject to sale, assignment or transfer, other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code. The designation of a beneficiary by Optionee shall not constitute a transfer. The Option shall be exercisable (i) during Optionee's lifetime, only by Optionee (or in the event of his incapacity, by his legal representative) or (ii) following Optionee's death, by such persons as set forth in Section 6. 6. TERMINATION OF OPTIONS IN CERTAIN CASES. In the event of the death of the Optionee while in the employ of the Company (or while affiliated with the Company in the discretion of the Board), the Option shall become fully vested and shall terminate on the earlier of (i) the date of expiration of the Option, or (ii) twelve (12) months following the date of Optionee's death. After the death of the Optionee, his executors, administrators or any person(s) to whom the Option was transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to the expiration of the period described in the first sentence of this paragraph, to exercise the Option. If, before the date of expiration of the Option, the Optionee shall be retired in good standing from the employ of the Company (or from another affiliation with the Company in the discretion of the Board) including retirement for reasons of Disability, the Option shall terminate on the earlier of (i) the date of expiration of the Option, or (ii) three (3) years following the date of such retirement. As used herein, the term "Disability" shall mean a total and permanent disability resulting from a mental or physical incapacity which prevents Optionee from performing the full scope of his duties for the Company (as such duties exist on the date immediately prior to the occurrence of such incapacity) and lasting or expected to last for a period of at least 180 days. Disability shall be determined in good faith by the Board of Directors of the Company based on the opinion of a licensed physician. In the event of such retirement, the Optionee (or, in the event of his incapacity, his legal representative) shall have the right, at any time prior to the expiration of the period described in the first sentence of this paragraph, to exercise the Option to the same extent to which he was entitled to exercise it immediately prior to such retirement (and, in the case of retirement for Disability or under circumstances constituting a termination of Optionee's employment by the Company at the Company's election, the Option shall fully vest and become exercisable, as set forth herein). -3- If, before the date of expiration of the Option, the Optionee's employment by the Company shall be terminated by the Company at its election, or shall be terminated by Optionee for Good Reason, this Option shall immediately vest fully and become exercisable as to all shares covered hereby. In such event, Optionee shall have the right to exercise the Option at any time prior to the earlier of (i) the date of expiration of the Option or (ii) twelve (12) months following the date of such termination of employment. If, before the date of expiration of the Option, the Optionee's employment or other affiliation with the Company terminates at the election of Optionee for any reason other than Good Reason (other than in connection with Optionee's retirement in accordance with the second paragraph of this Section 6), the Option shall terminate on the earlier of (i) the date of expiration of such Option, or (ii) ninety (90) days after the date of termination of the Optionee's employment or other affiliation with the Company. In such event, the Option shall be exercisable and shall vest as to all shares that, pursuant to the schedule set forth in Section 3 hereof, become exercisable on or prior to the date of termination of the Option. For purposes of this Stock Option Plan and Agreement, employment by the Company shall include employment by any subsidiary of the Company. 7. NO RIGHTS AS SHAREHOLDER. No holder of the Option shall have any rights as a shareholder with respect to shares covered by the Option until the date of exercise of the Option as to such shares; and, except as otherwise provided in Section 9 hereof, no adjustment for dividends, or otherwise, shall be made if the record date therefor is prior to the date of such exercise. 8. EMPLOYMENT OR AFFILIATION OBLIGATION. The grant of this Option shall not impose upon the Company any obligation to employ or to continue any employment or other affiliation with the Optionee. The right of the Company to terminate its employment or affiliate relationship with any person, including the Optionee, shall not be diminished or affected by reason of the fact that this Option has been granted. 9. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of the Option shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of, or affecting,the Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. The number of shares covered by this Option and the price per share thereof shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from the subdivision or consolidation of shares or any other capital adjustment, the payment of a stock dividend or any other increase in such shares effected without receipt of -4- consideration by the Company or any other decrease therein effected without a distribution of cash, property, or other securities in connection therewith. If (i) the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation or where the Stock is converted into other securities, cash or other property in connection with such merger or consolidation, (ii) the Company is recapitalized in such a manner that shares of Stock are converted into or exchanged for other securities of the Company, (iii) the Company sells or otherwise disposes of substantially all its assets to another person, corporation or entity, or (iv) a tender offer is announced that, if successfully completed, would result in a Change in Control, then in any such case, on a date at least 30 days prior to the effective date of any such merger, consolidation, recapitalization, exchange, sale or acquisition or tender offer (or, in the case of such tender offer, on such later date as is practicable, but in any such case at least ten days prior to the termination of such tender offer), as the case may be, any limitations as to amount exercisable each year shall be modified so that Option from and after such date shall be exercisable in full. In addition, with respect to any event described in the preceding sentence, after the effective date of such merger, consolidation, recapitalization, exchange, sale or acquisition, as the case may be, Optionee shall be entitled, upon exercise of such Option to receive in lieu of shares of Stock, shares of such stock or other securities of the Company or the surviving or acquiring corporation or such other property at the rate per share as the holders of shares of Stock received pursuant to the terms of the merger, consolidation, exchange, recapitalization, sale or acquisition. Except as hereinbefore expressly provided, the issue by the Company of shares of stock of any class or securities convertible into shares of stock of any class for cash or property or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number, class or price of shares of Stock then subject to the Option. 10. CHANGE IN CONTROL. A "Change in Control" shall be deemed to have occurred on the earliest of the following dates: (i) The date any entity or person (including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) shall have become the beneficial owner of, or shall have obtained voting control over, thirty percent (30%) or more of the outstanding common shares of the Company; (ii) The date the shareholders of the Company approve a definitive agreement (A) to merge or consolidate the Company with or into another corporation, in which the Company is not the continuing or surviving corporation or pursuant to which any common shares of the Company would be converted into cash, securities or other property of another corporation, other than a merger of the Company in which holders of common shares immediately prior to the -5- merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger as immediately before, or (B) to sell or otherwise dispose of substantially all the assets of the Company; or (iii) The first date as of which Continuing Directors (as defined in Article IX of the Company's Articles of Incorporation) fail to constitute a majority of the members of the Company's Board of Directors. 11. TERMINATION OF EMPLOYMENT BY OPTIONEE FOR GOOD REASON. For purposes of this Stock Option Plan and Agreement a termination of Optionee's employment for "Good Reason" shall be deemed to occur if Optionee tenders his resignation to the Board of Directors after there has been a significant and material diminishment in the nature and scope of the authority, power, function and duty attached to Optionee's management position with the Company as of the effective date of this Agreement (which shall include, but not be limited to, the appointment of any officer to whom Optionee shall report other than the Chairman of the Board and Chief Executive Officer, the President and Chief Operating Officer or the Chief Financial Officer), and such diminishment lasts for at least thirty (30) consecutive days and is not cured or corrected by the Company within ten (10) days after Optionee provides notice of same to the Company pursuant to the notice provisions hereof. Executive's termination of his employment with the Company for Good Reason may take place at any time after the events set forth in the preceding sentence have occurred, and such termination need not be effected within any specified time period after the occurrence of such events. Such termination for Good Reason shall result in the Option immediately becoming fully vested and exercisable as to all shares covered hereby. 12. LIMITED STOCK APPRECIATION RIGHTS. Notwithstanding any other provisions in this Stock Option Plan and Agreement, upon the occurrence of any Change in Control, and thereafter so long as this Option is in effect, Optionee shall have the right to require the Company (or if the Company is not the survivor of a merger, consolidation or reorganization, such survivor) to purchase from him any or all unexercised options granted under this Stock Option Plan and Agreement at a purchase price equal to (i) the excess of the Change in Control Price (as hereinafter defined) per share over the option price per share multiplied by (ii) the number of shares subject to the Option specified by the Optionee for purchase in a written notice to the Company or such survivor, addressed to the attention of the Corporate Secretary. For purposes of this Stock Option Plan and Agreement, the term "Change in Control Price" of shares of Stock shall mean (a) except in the case of a Change in Control that results from a merger, consolidation or reorganization in which the Company is not the survivor or shares of Stock are converted into cash or other securities or other assets (a "Termination Merger"), the higher of (I) the highest sales price per share of the Stock on the New York Stock Exchange (or if the Company's Stock is not then traded on the New York Stock Exchange, on the principal exchange or market where such Stock is actively traded) on the trading days during the thirty (30) days immediately preceding the date the Optionee so notified the Company of his election pursuant to the preceding paragraph or (II) the highest sales price per share of the Stock on the New York Stock Exchange (or if the Company's Stock is not then traded on the New -6- York Stock Exchange, on the principal exchange or market where such stock is actively traded) on the trading days during the thirty (30) days immediately preceding the date of the Change in Control; and (b) in the case of a Change in Control that results from a Termination Merger, the higher of (I) the fair market value of the consideration receivable per share by holders of Stock of the Company in such Termination Merger (which fair market value as to any securities included in such consideration shall be the highest sales price per unit of such security on the principal exchange or market where such security is actively traded on the trading days during the thirty (30) days immediately preceding the date of the Termination Merger, and as to any such security not actively traded in any market, and as to all other property included in such consideration, shall be the fair market value determined by the Committee (hereinafter defined) in good faith exercised in a reasonable manner) or (II) the amount determined pursuant to clause (a)(II) of this Section 12. The amount payable to Optionee by the Company or the survivor in a Termination Merger, as the case may be, shall be paid in cash or by certified check, and shall be reduced by the amount of any taxes required to be withheld. 13. ADMINISTRATION. This Stock Option Plan and Agreement shall be administered by a committee of at least two persons to be appointed by the Board of Directors of the Company (the "Committee"). All members of the Committee shall be persons who are "disinterested persons," as set forth in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any successor rule thereto ("Rule 16b-3"). Meetings shall be held at such times and places as shall be determined by the Committee. A majority of the members of the Committee shall constitute a quorum for the transaction of business, and the vote of a majority of those members present at any meeting shall decide any question brought before the meeting. No member of the Committee shall be liable for any act or omission of any other member of the Committee or for any act or omission on his own part, including but not limited to the exercise of any power or discretion given to him under this Stock Option Plan and Agreement, except those resulting from his own gross negligence or willful misconduct. 14. NOTICES. Any notice, consent, request or other communication ("Notice") required or permitted to be given hereunder shall be in writing. Such Notice shall be (a) personally delivered or delivered by messenger, or (b) mailed by certified mail, return receipt requested, postage prepaid, or (c) sent by telecopy or the equivalent (provided, however, that the original Notice of which a facsimile has been transmitted shall in all cases be delivered to the addressee within two (2) business days following such transmission). Notices given hereunder shall be addressed as follows: If to Company: If to Optionee: Kent Electronics Corporation David D. Johnson 7433 Harwin Drive c/o Kent Electronics Corporation Houston, Texas 77036 7433 Harwin Drive Attention: Secretary Houston, Texas 77036 -7- Any Notice given in accordance herewith shall be deemed effective and to have been received by the party to whom such Notice is directed (a) upon delivery, if delivered personally or by messenger or sent by telecopy or the equivalent, or (b) three (3) days after the date of deposit in the U.S. Mail, if sent by mail and the return receipt is received by the sender, or upon actual receipt by the party receiving Notice in the event that such return receipt is not received by the sender. 15. AMENDMENT. This Stock Option Plan and Agreement may be modified or amended only by a written instrument executed by Company and Optionee, and any such modification or amendment may be authorized on behalf of the Company by the Committee; provided, however, that so long as Optionee and the Company desire that this Stock Option Plan and Agreement comply with Rule 16b-3, or any successor or similar provisions thereto, any such amendment that would require the vote or approval of a specified percentage of the Company's shareholders in order to assure that this Stock Option Plan and Agreement complies with Rule 16b-3, or any successor or similar provisions thereto, shall only be made upon obtaining such required shareholder vote, or taking such other action in connection with such amendment as the Board of Directors or such authorized Committee deems advisable to operate this Stock Option Plan and Agreement in accordance with Rule 16b-3 or such successor or similar rule. However, no termination or amendment of this Stock Option Plan and Agreement may, without the consent of the Optionee, adversely affect the rights of Optionee as to any portion of the Option then outstanding. 16. SEVERABILITY. In the event that any provision of this Stock Option Plan and Agreement shall be held illegal, invalid, or unenforceable for any reason, such provision shall be fully severable, but shall not affect the remaining provisions hereof, and this Stock Option Plan and Agreement shall be construed and enforced as if the illegal, invalid, or unenforceable provision had not been included herein. 17. GENDER, TENSE AND HEADINGS. Whenever the context so requires, words of the masculine gender used herein shall include the feminine and neuter, and words used in the singular shall include the plural. Section headings as used herein are inserted solely for convenience and reference and are not to be interpreted as part of the construction of this Stock Option Plan and Agreement. 18. GOVERNING LAW. The provisions of this Stock Option Plan and Agreement shall be construed according to the laws of the State of Texas, except as superseded by federal law. This Agreement is performable in Harris County, Texas. In the event that any dispute arises under this Agreement, the Optionee shall have the right, in addition to all other rights and remedies provided by law, at his election to seek arbitration in Houston, Texas under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company, or to institute a judicial proceeding in a court of competent jurisdiction located in Harris County, Texas. In the event that the Company institutes any legal proceeding against the Optionee to resolve a dispute under this Agreement, the Optionee shall have the right either to seek arbitration in Houston, Texas or to institute a judicial proceeding in a court located in Harris -8- County, Texas, as provided in the preceding sentence, and the Company shall dismiss its proceeding or take such other action as may be reasonably requested by the Optionee in order for such proceeding to be brought in the forum selected by the Optionee in accordance with the preceding sentence. 19. SHAREHOLDER APPROVAL. This Stock Option Plan and Agreement is subject to approval and ratification by the vote of the holders of a majority of shares of Stock present in person or by proxy and entitled to vote at a meeting of shareholders of the Company. If such shareholder approval is not received on or before December 31, 1996, the Option shall be null and void. 20. REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES. (a) In the event that the Optionee is deemed to have received an excess parachute payment (as such term is defined in Section 280G(b) of the Internal Revenue Code of 1986, as amended (the "Code")) which is subject to the excise taxes (the "Excise Taxes") imposed by Section 4999 of the Code in respect of any payment of compensation to the Optionee from the Company pursuant to this Stock Option Plan and Agreement, whether in the form of cash, property, stock, stock options, securities or otherwise, the Company shall make the Bonus Payment to the Optionee promptly after the date on which the Optionee received or is deemed to have received any excess parachute payments. (b) (i) The term "Bonus Payment" means a cash payment in an amount equal to the sum of (A) all Excise Taxes payable by the Optionee, plus (B) all additional Excise Taxes and federal or state income taxes to the extent such taxes are imposed in respect of the Bonus Payment, such that the Optionee shall be in the same after-tax position and shall have received the same benefits that he would have received if the Excise Taxes had not been imposed. For purposes of calculating any income taxes attributable to the Bonus Payment, the Optionee shall be deemed for all purposes to be paying income taxes at the highest marginal federal income tax rate, taking into account any applicable surtaxes and other generally applicable taxes which have the effect of increasing the marginal federal income tax rate and, if applicable, at the highest marginal state income tax rate to which the Bonus Payment and the Optionee are subject. (ii) An example of the calculation of the Bonus Payment is set forth below: Assume that the Excise Tax rate is 20%, that the highest federal marginal income tax rate is 36% and that the Optionee is not subject to state income taxes. Assume that the Optionee has received an excess parachute payment in the amount of $1,000,000, on which $200,000 in Excise Taxes are payable. The amount of the required Bonus Payment is $454,545.45. The Bonus Payment, less Excise Taxes of $90,909.09 and income taxes of $163,636.36, yields $200,000.00, the amount of the Excise Taxes payable in respect of the excess parachute payment. (c) The Optionee agrees to cooperate reasonably with the Company to minimize the amount of the excess parachute payments, including without limitation assisting the Company -9- in establishing that some or all of the payments received by the Optionee contingent on a change described in Section 280G(b)(2)(A)(i) of the Code are reasonable compensation for personal services actually rendered by the Optionee before the date of such change or to be rendered by the Optionee on or after the date of such change. In the event that the Company is able to establish that the amount of the excess parachute payments is less than originally anticipated by the Optionee, the Optionee shall refund to the Company any excess Bonus Payment to the extent not required to pay Excise Taxes or income taxes (including those incurred in respect of the payment of the Bonus Payment). Notwithstanding the foregoing, the Optionee shall not be required to take any actions which his tax advisor advises him in writing (i) is improper or (ii) exposes the Optionee to material personal liability, and the Optionee may require the Company to deliver to the Optionee an indemnification agreement in form and substance satisfactory to the Optionee as a condition to taking any action required by this Section 20. (d) The Company shall make any payment required to be made under this Agreement in cash and on demand. Any payment required to be paid by the Company under this Agreement which is not paid within five days of receipt by the Company of the Optionee's demand therefor shall thereafter be deemed delinquent, and the Company shall pay to the Optionee immediately upon demand interest at the highest nonusurious rate per annum allowed by applicable law from the date such payment becomes delinquent to the date of payment of such delinquent sum. (e) In the event that there is any change to the Code which results in the recodification of Section 280G or Section 4999 of the Code, or in the event that either such section of the Code is amended, replaced or supplemented by other provisions of the Code of similar import ("Successor Provisions"), then this Agreement shall be applied and enforced with respect to such new Code provisions in a manner consistent with the intent of the parties as expressed herein, which is to assure that the Optionee is in the same after-tax position and has received the same benefits that he would have been in and received if any taxes imposed by Section 4999 or any Successor Provisions had not been imposed. (f) There shall be no right of set-off or counterclaim, in respect of any claim, debt or obligation, against any payments required under this Section 20 to the Optionee provided for in this Agreement. No right or interest to or in any payments required under this Section 20 shall be assignable by the Optionee; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term "beneficiary" as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of the Optionee's estate. No right, benefit or interest under this Section 20 shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or -10- involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect. 21. SUCCESSORS TO THE COMPANY. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company, including, without limitation, any corporation or other entity acquiring directly or indirectly all or substantially all of the assets of the Company whether by merger, consolidation, sale or otherwise (and such successor shall thereafter be deemed "the Company" for the purposes of this Agreement), but shall not otherwise be assignable by the Company. IN WITNESS WHEREOF, this Stock Option Plan and Agreement is executed, subject to shareholder approval as set forth herein, effective as of the 9th day of May, 1996. KENT ELECTRONICS CORPORATION By: /s/ Morrie K. Abramson ----------------------------------- Morrie K. Abramson, Chairman and Chief Executive Officer OPTIONEE /s/ David D. Johnson --------------------------------------- David D. Johnson -11- EX-10.14 5 EXHIBIT 10.14 KENT ELECTRONICS CORPORATION 1996 EMPLOYEE INCENTIVE PLAN KENT ELECTRONICS CORPORATION 1996 EMPLOYEE INCENTIVE PLAN ARTICLE I PLAN 1.1 PURPOSE. The Kent Electronics Corporation 1996 Employee Incentive Plan is intended to provide a means whereby certain Employees of Kent Electronics Corporation, a Texas corporation, and its Affiliates may develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. Accordingly, the Company may grant Awards to certain Employees in the form of Incentive Stock Options, Nonqualified Stock Options and Performance Grants, subject to the terms of the Plan. 1.2 EFFECTIVE DATE OF PLAN. The Plan is effective May 7, 1996, if within 12 months of such date, it shall have been approved by the vote of the holders of a majority of the shares of Stock of the Company present in person or by proxy and represented at a duly held shareholders' meeting. No Award shall be granted pursuant to the Plan after May 6, 2006. ARTICLE II DEFINITIONS The words and phrases defined in this Article shall have the meaning set out in these definitions throughout the Plan, unless the context in which any such word or phrase appears reasonably requires a broader, narrower, or different meaning. 2.1 "AFFILIATE" means any parent corporation and any subsidiary corporation. The term "parent corporation" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the action or transaction, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. The term "subsidiary corporation" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the action or transaction, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. -2- 2.2 "AWARD" means an award or grant made to an Employee under Articles V through IX herein. 2.3 "AWARD AGREEMENT" means the written agreement provided in connection with an Award setting forth the terms and conditions of the Award. Such Agreement may contain any other provisions that the Committee, in its sole discretion, shall deem advisable which are not inconsistent with the terms of the Plan. 2.4 "BOARD OF DIRECTORS" or "Board" means the board of directors of the Company. 2.5 "CHANGE OF CONTROL" means the happening of any of the following events: (i) the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation or the Stock is converted into other securities, cash or other property in connection with such merger or consolidation; (ii) the Company is recapitalized in such a manner that shares of Stock are converted into or exchanged for other securities of the Company; (iii) the Company sells or otherwise disposes of substantially all its assets to another person, corporation or entity; (iv) over 30% of the then outstanding Stock is acquired by another corporation in exchange for stock (or stock and securities) of such corporation; or (v) over 30% of the then outstanding Stock is acquired in a single transaction or a series of related transactions. 2.6 "CODE" means the Internal Revenue Code of 1986, as amended. 2.7 "COMMITTEE" means the Compensation Committee of the Board of Directors or such other committee designated by the Board of Directors. The Committee shall at all times consist solely of two or more members of the Board of Directors, and all members of the Committee shall be both Disinterested Persons and Outside Directors. Any member who no longer qualifies as a Disinterested Person or an Outside Director shall automatically be removed from the Committee. 2.8 "COMPANY" means Kent Electronics Corporation, a Texas corporation. 2.9 "DISINTERESTED PERSON" means a "disinterested person" as that term is defined in Rule 16b-3 under the Exchange Act. -3- 2.10 "EMPLOYEE" means a key employee employed by the Company or any Affiliate to whom an Award is granted. 2.11 "FAIR MARKET VALUE" means, on a particular date or on the most recent prior date on which Stock was traded, the reported closing price per share of the Stock of the Company as reported by the New York Stock Exchange, Inc. or other principal exchange or market on which the Stock is traded; in the event the Stock of the Company is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its Fair Market Value shall be made by the Committee in such manner as it deems appropriate. 2.12 "INCENTIVE OPTION" means an option granted under the Plan which is designated as an "Incentive Option" and satisfies the requirements of Section 422 of the Code. 2.13 "NONQUALIFIED OPTION" means an option granted under the Plan other than an Incentive Option. 2.14 "OPTION" means an Incentive Option or a Nonqualified Option granted under the Plan to purchase shares of Stock. 2.15 "OUTSIDE DIRECTOR" means a member of the Board of Directors serving on the Committee who satisfies the requirements of Section 162(m) of the Code. 2.16 "PERFORMANCE GRANT" means an Award, denominated in cash or in Stock, made to an Employee under Article VI which is intended to qualify as performance based compensation as defined in Section 162(m) of the Code and regulations issued thereunder. 2.17 "PLAN" means the Kent Electronics Corporation 1996 Employee Incentive Plan, as set out in this document and as it may be amended from time to time. 2.18 "STOCK" means the voting common stock of the Company, without par value, or in the event that the outstanding shares of voting common stock are later changed into or exchanged for a different class of stock or securities of the Company or another corporation, that other stock or security. 2.19 "10% SHAREHOLDER" means an individual who, at the time the Option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any Affiliate. An individual shall be considered as owning the stock owned, directly or indirectly, by or for his brothers and sisters (whether by whole or half blood), spouse, ancestors, and lineal descendants; and stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, shall be considered as being owned proportionately by or for its shareholders, partners or beneficiaries. -4- ARTICLE III ELIGIBILITY The individuals who shall be eligible to receive Awards shall be those Employees as the Committee shall determine from time to time. However, no non-Employee director shall be eligible to receive any Award or to receive stock, stock options, or stock appreciation rights under any other plan of the Company or any of its Affiliates, if receipt of it would cause the individual not to be a Disinterested Person or Outside Director. ARTICLE IV GENERAL PROVISIONS RELATING TO AWARDS 4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant Awards to those Employees as it shall determine from time to time under the terms and conditions of the Plan. Subject only to any applicable limitations set out in the Plan, the amount of any Award and the number of shares of Stock to be covered by any Award to be granted to an Employee shall be as determined by the Committee. Each Award shall be evidenced by an Award Agreement which shall set forth the terms and conditions of the Award. Except as otherwise provided herein, no Award granted pursuant to the Plan shall vest in whole or in part in less than six months after the date the Award is granted. An Employee who has received an Award in any year may receive an additional Award or Awards in the same year or in subsequent years. The Committee may, in its discretion, waive or accelerate any restrictions to which the Awards may be subject; provided, however, that the Committee may not alter, amend or modify pre-established performance based criteria to which any Award may be subject. 4.2 DEDICATED SHARES. The total number of shares of Stock with respect to which Awards may be granted under the Plan shall be 1,600,000 shares. The shares of Stock may be treasury shares or authorized but unissued shares. The numbers of shares of Stock stated in this Section 4.2 shall be subject to adjustment in accordance with the provisions of Section 4.5. In the event that any Award shall expire or terminate for any reason or any Award is surrendered, the shares of Stock allocable to that Award may again be subject to an Award under the Plan. Upon approval by the shareholders of the Plan, the Committee will not issue any additional stock options under the Company's Amended and Restated 1987 Stock Option Plan. 4.3 NON-TRANSFERABILITY. Except as set forth below, the Awards granted hereunder shall not be transferable by the Employee otherwise than by will or operation of the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. During the Employee's lifetime, Awards granted hereunder shall be -5- exercisable only by the Employee. The Committee may grant Awards that are transferable, without payment of consideration, to immediate family members of the Employee or to trusts or partnerships for such family members; the Committee may also amend outstanding Awards to provide for such transferability. 4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or issue any Stock under any Award if issuing that Stock would constitute or result in a violation by the Employee or the Company of any provision of any law, statute, or regulation of any governmental authority. Specifically, in connection with any applicable statute or regulation relating to the registration of securities, the Company shall not be required to issue any Stock unless the Committee has received evidence satisfactory to it to the effect that the holder of that Award will not transfer the Stock except in accordance with applicable law, including receipt of an opinion of counsel satisfactory to the Company to the effect that any proposed transfer complies with applicable law. The determination by the Committee on this matter shall be final, binding and conclusive. The Company may, but shall in no event be obligated to, register any Stock covered by the Plan pursuant to applicable securities laws of any country or any political subdivision. In the event the Stock issuable pursuant to an Award is not registered, the Company may imprint on the certificate evidencing the Stock any legend that counsel for the Company considers necessary or advisable to comply with applicable law. The Company shall not be obligated to take any other affirmative action in order to cause the exercise of, or the issuance of shares under, an Award to comply with any law or regulation of any governmental authority. 4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of the Plan and the Awards granted hereunder shall not affect or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Stock or the rights thereof, the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of similar character or otherwise. In the event of any change in the outstanding shares of Stock of the Company by reason of any stock split, stock dividend, split-up, split-off, spin-off, recapitalization, merger, consolidation, liquidation, rights offering, share offering, reorganization, combination or exchange of shares, a sale by the Company of all or part of its assets, any distribution to shareholders other than a normal cash dividend, or other extraordinary or unusual event, if the Committee shall determine, in its discretion, that such change equitably requires an adjustment in the terms of any Award or the number of shares of Stock available for Awards, such adjustment may be made by the Committee subject to Section 162(m) of the Code, and shall be final, conclusive and binding for all purposes of the Plan. -6- 4.6 TERMINATION OF EMPLOYMENT. Except as specifically provided herein, the Committee shall set forth in the Award Agreement the status of any Award or shares of Stock underlying any Award upon the termination of the Employee's employment for any reason. 4.7 ELECTION UNDER SECTION 83(b) OF THE CODE. No Employee shall exercise the election permitted under Section 83(b) of the Code without written approval of the Committee. Any Employee doing so shall forfeit all Awards issued to the Employee under the Plan. ARTICLE V OPTIONS 5.1 TYPE OF OPTION. The Committee shall specify whether a given option shall constitute an Incentive Option or a Nonqualified Option. 5.2 OPTION PRICE. The price per share at which shares of Stock may be purchased under an Incentive Option shall not be less than the greater of: (a) 100% of the Fair Market Value per share of Stock on the date the Option is granted or (b) the per share par value of the Stock on the date the Option is granted. The Committee in its discretion may provide that the price per share at which shares of Stock may be purchased shall be more than 100% of Fair Market Value per share. In the case of any 10% Shareholder, the price per share at which shares of Stock may be purchased under an Incentive Option shall not be less than the greater of: (a) 110% of the Fair Market Value per share of Stock on the date the Incentive Option is granted or (b) the per share par value of the Stock on the date the Incentive Option is granted. The price per share at which shares of Stock may be purchased under a Nonqualified Option shall not be less than the greater of: (a) 100% of the Fair Market Value per share of Stock on the date the Option is granted or (b) the per share par value of the Stock on the date the Option is granted. The Committee in its discretion may provide that the price per share at which shares of Stock may be purchased shall be more than 100% of Fair Market Value per share. 5.3 DURATION OF OPTIONS. No Option shall be exercisable after the expiration of ten years from the date the Option is granted. In the case of a 10% Shareholder, no Incentive Option shall be exercisable after the expiration of five years from the date the Incentive Option is granted. 5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to time, in whole or in part, in the manner and subject to the conditions the Committee, in its discretion, may provide in the Award Agreement, as long as the Option is valid and outstanding. To the extent that the aggregate Fair Market Value (determined as of the time an Incentive Option is granted) of the Stock with respect to which Incentive Options first become exercisable by the optionee -7- during any calendar year (under the Plan and any other incentive stock option plan(s) of the Company or any Affiliate) exceeds $100,000, the Incentive Options shall be treated as Nonqualified Options. In making this determination, Incentive Options shall be taken into account in the order in which they were granted. 5.5 EXERCISE OF OPTIONS. Subject to the tax withholding requirements set forth in Section 9.3 herein, options shall be exercised by the delivery of written notice to the Company setting forth the number of shares with respect to which the Option is to be exercised and the address to which the certificates representing shares of Stock issuable upon the exercise of such Option shall be mailed, together with: (a) cash, check, certified check, bank draft, or postal or express money order payable to the order of the Company for an amount equal to the Option Price of the shares, (b) Stock at its Fair Market Value equal to the Option Price of the shares on the date of exercise, and/or (c) any other form of payment which is acceptable to the Committee. In order to enable an Employee to have sufficient funds to pay the Option Price, the Committee may, to the extent permitted by law, cause the Company to loan funds to the Employee, to guarantee a loan by a third party to the Employee or to take such other action as the Committee deems appropriate. The proceeds of the sale of shares subject to the Options are to be added to the general funds of the Company and used for its corporate purposes. No fractional shares shall be issued under the Plan. Subject to the tax withholding requirements set forth in Section 9.3 herein, as promptly as practicable after receipt of written notification and payment, the Company or a stock transfer agent of the Company shall deliver to the Employee certificates for the number of shares with respect to which the Option has been exercised, issued in the Employee's name. If shares of Stock are used in payment, the Fair Market Value of the shares of Stock tendered must be less than the Option Price of the shares being purchased, and the difference must be paid by check. Delivery shall be deemed effected for all purposes when the Company or a stock transfer agent of the Company shall have deposited the certificates in the United States mail, addressed to the optionee, at the address specified by the Employee. Whenever an Option is exercised by exchanging shares of Stock owned by the Employee, the Employee shall deliver to the Company certificates registered in the name of the Employee representing a number of shares of Stock legally and beneficially owned by the Employee, free of all liens, claims, and encumbrances of every kind, accompanied by stock powers duly endorsed in blank by the record holder of the shares represented by the certificates (with signature guaranteed by the Company or a commercial bank or trust company or by a brokerage firm having a membership on a registered national stock exchange). The delivery of certificates upon the exercise of Options is subject to the condition that the person exercising the Option provide the Company with the information the Company might reasonably request pertaining to exercise, sale or other disposition. 5.6 SUBSTITUTION OPTIONS. Options may be granted under the Plan from time to time in substitution for stock options held by employees of other corporations who are about to -8- become employees of or affiliated with the Company or any Affiliate as the result of a merger or consolidation of the employing corporation with the Company or any Affiliate, or the acquisition by the Company or any Affiliate of the assets of the employing corporation, or the acquisition by the Company or any Affiliate of stock of the employing corporation as the result of which it becomes an Affiliate of the Company. The terms and conditions of the substitute Options granted may vary from the terms and conditions set out in the Plan to the extent the Committee, at the time of grant, may deem appropriate to conform, in whole or in part, to the provisions of the stock options in substitution for which they are granted. 5.7 NO RIGHTS AS STOCKHOLDER. No Employee shall have any rights as a stockholder with respect to Stock covered by an Option until the date a stock certificate is issued for the Stock. 5.8 LIMITATIONS. The maximum number of Options which may be awarded under this Article V during the term of the Plan shall be 1,600,000 shares, and the maximum number of Options which may be awarded to any Employee under this Article V during the term of the Plan shall be 1,600,000 shares. 5.9 CHANGE IN CONTROL. On a date at least 30 days prior to the effective date of a Change in Control, any limitations as to the amount exercisable each year may be modified at the discretion of the Committee so that all Options from and after such date shall, if the Committee in its discretion so determines, be exercisable in full. In addition, with respect to any event described in clauses (i) through (v) of the definition of Change in Control, either (a) after the effective date of such Change in Control, each holder of an outstanding Option shall be entitled, upon exercise of such Option, to receive, in lieu of shares of Stock, shares of such stock or other securities of the Company or the surviving or acquiring corporation or such other property at the same rate per share as the holders of shares of Stock received pursuant to the Change in Control, or (b) all outstanding Options may be canceled by the Board as of the effective date of the Change in Control, provided that notice of such cancellation shall be given to each holder of an Option and each holder of an Option shall have the right to exercise such Options in full (without regard to any limitations that might be set forth in the Award Agreement) during a 30-day period preceding the effective date of the Change in Control. ARTICLE VI PERFORMANCE GRANTS 6.1 PERFORMANCE GRANTS AND ELIGIBILITY. The Committee, in its sole discretion, may designate certain key Employees of the Company who are eligible to receive a Performance Grant if certain pre-established performance goals are met. In determining which Employees shall be eligible for a Performance Grant, the Committee may, in its discretion, consider the nature of the Employee's duties, past and potential contributions to the success of the Company -9- and its Affiliates, and such other factors as the Committee deems relevant in connection with accomplishing the purposes of the Plan. 6.2 ESTABLISHMENT OF PERFORMANCE GRANT. The Committee shall determine the terms of the Performance Grant, if any, to be made to an Employee for such period designated by the Committee (the "Performance Cycle"). 6.3 CRITERIA FOR PERFORMANCE GOALS. The performance goals shall be pre-established by the Committee in accordance with Section 162(m) of the Code and regulations issued thereunder. Performance goals determined by the Committee may be based upon, but are not limited to, net profits, operating income, Stock price, earnings per share, sales and/or return on equity. 6.4 COMMITTEE CERTIFICATION. The Committee must certify in writing that a performance goal has been met prior to payment to any Employee of the Performance Grant by issuance of a certificate for Stock or payment in cash. If the Committee certifies the entitlement of an Employee to the performance based Performance Grant, the payment shall be made to the Employee subject to other applicable provisions of the Plan, including but not limited to, all legal requirements and tax withholding. 6.5 PAYMENT AND LIMITATIONS. Performance Grants shall be paid on or before the 30th day following both (a) the end of the Performance Cycle and (b) certification by the Committee that the performance goals and any other material terms of the Performance Grant and the Plan have been satisfied, or as soon thereafter as is reasonably practicable. The Performance Grant may be paid in Stock, cash, or a combination of Stock and cash, in the sole discretion of the Committee. If paid in whole or in part in Stock, the Stock shall be valued at Fair Market Value as of the date the Committee directs payments to be made in whole or in part in Stock. However, no fractional shares of Stock shall be issued, and the balance due, if any, shall be paid in cash. The maximum amount which may be paid to any Employee pursuant to one or more Performance Grants under this Article VI shall not exceed $8 million per year. 6.6 TERMINATION OF EMPLOYMENT DURING PERFORMANCE CYCLE. Unless the terms of an employment agreement, severance agreement or the Award Agreement provide otherwise, if an Employee's employment with the Company and all Affiliates terminates during a Performance Cycle (other than in connection with or within one year after a Change of Control), he shall not be entitled to any payment under this Article VI for that Performance Cycle. 6.7 CHANGE IN CONTROL. Upon a Change in Control, all Performance Grants shall become immediately payable to the fullest extent of the Award regardless of whether the Performance Cycle (hereinafter defined) upon which it is based has been completed. -10- ARTICLE VII ADMINISTRATION The Plan shall be administered by the Committee. All questions of interpretation and application of the Plan and Awards granted thereunder shall be subject to the determination of the Committee. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by a majority of the members shall be as effective as if it had been made by a majority vote at a meeting properly called and held. The Plan shall be administered in such a manner as to permit the Options granted under it which are designated to be Incentive Options to qualify as Incentive Options. In carrying out its authority under the Plan, the Committee shall have full and final authority and discretion, including but not limited to the following rights, powers and authorities, to: (a) determine the Employees to whom and the time or times at which Awards will be made, (b) determine the number of shares and the purchase price of Stock or dollar amount of cash covered in each Award, subject to the terms of the Plan, (c) determine the terms, provisions and conditions of each Award, which need not be identical, (d) define the effect, if any, on an Award of the death, disability, retirement, or termination of employment of the Employee, (e) proscribe, amend and rescind rules and regulations relating to administration of the Plan, and (f) make all other determinations and take all other actions deemed necessary, appropriate, or advisable for the proper administration of the Plan. The actions of the Committee in exercising all of the rights, powers, and authorities set out in this Article and all other Articles of the Plan, when performed in good faith and in its sole judgment, shall be final, conclusive and binding on all parties. -11- ARTICLE VIII AMENDMENT OR TERMINATION OF PLAN The Board may amend, terminate or suspend the Plan at any time, in its sole and absolute discretion; provided, however, that to the extent the Board desires for any amendment to the Plan to maintain qualification of the Plan under Rule 16b-3 promulgated under the Exchange Act, no amendment that would (a) materially increase the number of shares of Stock that may be issued under the Plan, (b) materially modify the requirements as to eligibility for participation in the Plan, or (c) otherwise materially increase the benefits accruing to participants under the Plan, shall be made without the approval of the Company's shareholders; provided further, however, that to the extent required to maintain the status of any Incentive Option under the Code, no amendment that would (a) change the aggregate number of shares of Stock which may be issued under Incentive Options, (b) change the class of employees eligible to receive Incentive Options, or (c) decrease the Option price for Incentive Options below the Fair Market Value of the Stock at the time it is granted, shall be made without the approval of the Company's shareholders. Subject to the preceding sentence, the Board shall have the power to make any changes in the Plan and in the regulations and administrative provisions under it or in any outstanding Incentive Option as in the opinion of counsel for the Company may be necessary or appropriate from time to time to enable any Incentive Option granted under the Plan to continue to qualify as an incentive stock option or such other stock option as may be defined under the Code so as to receive preferential federal income tax treatment. ARTICLE IX MISCELLANEOUS 9.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside nor shall a trust fund of any kind be established to secure the rights of any Employee under the Plan. All Employees shall at all times rely solely upon the general credit of the Company for the payment of any benefit which becomes payable under the Plan. 9.2 NO EMPLOYMENT OBLIGATION. The granting of any Award shall not constitute an employment contract, express or implied, nor impose upon the Company or any Affiliate any obligation to employ or continue to employ any Employee. The right of the Company or any Affiliate to terminate the employment of any person shall not be diminished or affected by reason of the fact that an Award has been granted to him. 9.3 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to deduct from other compensation payable to each Employee any sums required by federal, state, or local tax law to be withheld with respect to the grant or exercise of an Option, the cash payment of a Performance Grant, or issuance of Stock in payment of a Performance Grant. In the alternative, -12- the Company may require the Employee (or other person exercising the Option or receiving Stock) to pay the sum directly to the employer corporation. If the Employee (or other person exercising the Option or receiving the Stock) is required to pay the sum directly, payment in cash or by check of such sums for taxes shall be delivered (a) on the date of exercise, or (b) on the date of payment of all or part of a Performance Grant in Stock, whichever is applicable. The Company shall have no obligation upon exercise of any Option, or notice of the Committee's decision to pay all or part of the Performance Grant in Stock, until payment has been received, unless withholding (or offset against a cash payment) as of or prior to the date of exercise or issuance of Stock is sufficient to cover all sums due with respect to that exercise or issuance of Stock. The Company and its Affiliates shall not be obligated to advise an Employee of the existence of the tax or the amount which the employer corporation will be required to withhold. 9.4 FORFEITURE FOR DISHONESTY. Notwithstanding anything to the contrary in the Plan, if the Committee finds, after full consideration of the facts presented on behalf of both the Company and the Employee, that the Employee has been engaged in fraud, embezzlement, theft, commission of a felony or dishonesty in the course of his employment by the Company which damaged the Company or an Affiliate, or for disclosing trade secrets of the Company or an Affiliate, the Employee shall forfeit all unexercised Options and all exercised Options under which the Company has not yet delivered the certificates. The decision of the Committee shall be final. No decision of the Committee, however, shall affect the finality of the discharge of such Employee by the Company in any manner. 9.5 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With respect to administration of the Plan, the Company shall indemnify each present and future member of the Committee and the Board of Directors, and each member of the Committee and the Board of Directors shall be entitled without further act on his part to indemnity from the Company to the fullest extent allowed under the Texas Business Corporation Act. 9.6 GENDER. If the context requires, words of one gender when used in the Plan shall include the others and words used in the singular or plural shall include the other. 9.7 HEADINGS. Headings of Articles and Sections are included for convenience of reference only and do not constitute part of the Plan and shall not be used in construing the terms of the Plan. 9.8 OTHER COMPENSATION PLANS. The adoption of the Plan shall not preclude the Company from establishing any other forms of incentive or other compensation for employees of the Company or any Affiliate. 9.9 OTHER AWARDS. The grant of an Award shall not confer upon the Employee the right to receive any future or other Awards under the Plan, whether or not Awards may be -13- granted to similarly situated Employees, or the right to receive future Awards upon the same terms or conditions as previously granted. 9.10 GOVERNING LAW. The provisions of the Plan shall be construed, administered, and governed under the laws of the State of Texas. -14- EX-10.15 6 EXHIBIT 10.15 THIS DOCUMENT HAS BEEN CONFORMED TO INCLUDE THE FIRST AMENDMENT TO THE KENT ELECTRONICS CORPORATION TAX-DEFERRED SAVINGS AND RETIREMENT PLAN EXECUTED ON NOVEMBER 15, 1995. KENT ELECTRONICS CORPORATION TAX-DEFERRED SAVINGS AND RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE MARCH 26, 1989) TABLE OF CONTENTS Section ARTICLE I - DEFINITIONS Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2 Active Service . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.3 Administrative Committee . . . . . . . . . . . . . . . . . . . . . . .1.4 Affiliated Employer . . . . . . . . . . . . . . . . . . . . . . . . .1.5 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.6 Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.7 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.8 Compensation Deferral Agreement . . . . . . . . . . . . . . . . . . .1.9 Considered Compensation . . . . . . . . . . . . . . . . . . . . . . 1.10 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.11 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.12 Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.13 Entry Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14 Highly Compensated Employee . . . . . . . . . . . . . . . . . . . . 1.15 Leased Employee . . . . . . . . . . . . . . . . . . . . . . . . . . 1.16 Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.17 Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.18 Non-Highly Compensated Employee . . . . . . . . . . . . . . . . . . 1.19 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.20 Plan Sponsor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.21 Plan Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.22 Prior Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.23 Rollover Contribution . . . . . . . . . . . . . . . . . . . . . . . 1.24 Total and Permanent Disability . . . . . . . . . . . . . . . . . . . 1.25 Transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.26 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.27 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.28 Trust Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.29 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.30 ARTICLE II - EMPLOYEES ELIGIBLE TO PARTICIPATE Eligibility Requirements . . . . . . . . . . . . . . . . . . . . . . .2.1 Certification and Notice of Eligibility . . . . . . . . . . . . . . .2.2 Frozen Participation . . . . . . . . . . . . . . . . . . . . . . . . .2.3 i ARTICLE III - CONTRIBUTIONS Compensation Deferral Agreements for Elective Contributions . . . . .3.1 Rollover Contributions . . . . . . . . . . . . . . . . . . . . . . . .3.2 Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . .3.3 Composition of and Deadline for Payment of Employer Contributions . . . . . . . . . . . . . . . . . . . .3.4 Return of Contributions for Mistake, Disqualification or Disallowance of Deduction. . . . . . . . . . . . . . . . . . .3.5 ARTICLE IV - PARTICIPATION Periodic Certification by Employer . . . . . . . . . . . . . . . . . .4.1 Allocation of Employer Contributions . . . . . . . . . . . . . . . . .4.2 Limitation on Additions to Account . . . . . . . . . . . . . . . . . .4.3 Periodic Valuation of Trust Fund . . . . . . . . . . . . . . . . . . .4.4 Extraordinary Valuation of Trust Fund . . . . . . . . . . . . . . . .4.5 Forfeitures and Allocation Thereof . . . . . . . . . . . . . . . . . .4.6 Effective Date of Allocations and Adjustments . . . . . . . . . . . .4.7 Accounting for Transferred Member . . . . . . . . . . . . . . . . . .4.8 No Vesting Unless Otherwise Prescribed . . . . . . . . . . . . . . . .4.9 Investment Elections with Respect to Commingled Funds . . . . . . . 4.10 Diversification Election . . . . . . . . . . . . . . . . . . . . . . 4.11 Purchase of Life Insurance for Individual Accounts . . . . . . . . . 4.12 Special Transition Rule . . . . . . . . . . . . . . . . . . . . . . 4.13 Section 16(b) Restrictions on Insiders . . . . . . . . . . . . . . . 4.14 ARTICLE V - RETIREMENT Early Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . .5.1 Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . . . .5.2 Late Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . .5.3 Rights of Members and Prohibition of Unauthorized Distribution . . . . . . . . . . . . . . . . . . . .5.4 ARTICLE VI - DISTRIBUTION OF BENEFITS Death Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.1 Retirement Benefit . . . . . . . . . . . . . . . . . . . . . . . . . .6.2 Total and Permanent Disability Benefit . . . . . . . . . . . . . . . .6.3 Severance Benefit . . . . . . . . . . . . . . . . . . . . . . . . . .6.4 Accounting for Distributions; Offsets in Special Circumstances . . . . . . . . . . . . . . . . . . . . . .6.5 ii Distributions - Settlement Options . . . . . . . . . . . . . . . . . .6.6 Lost Members or Beneficiaries; Escheat . . . . . . . . . . . . . . . .6.7 Withdrawals by Members . . . . . . . . . . . . . . . . . . . . . . . .6.8 Claims Procedure for Benefits . . . . . . . . . . . . . . . . . . . .6.9 Distributions to Divorced Spouse . . . . . . . . . . . . . . . . . . 6.10 Special Transition Rule . . . . . . . . . . . . . . . . . . . . . . 6.11 ARTICLE VII - TOP-HEAVY PLAN PROVISIONS General Rules for Determining Top-Heavy Status . . . . . . . . . . . .7.1 Computation of Present Value of Accrued Benefits . . . . . . . . . . .7.2 Special Rules for Plan Years that Plan is Top-Heavy . . . . . . . . .7.3 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7.4 ARTICLE VIII - ADMINISTRATIVE COMMITTEE Appointment, Term of Service and Removal . . . . . . . . . . . . . . .8.1 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.2 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.3 Quorum and Majority Action . . . . . . . . . . . . . . . . . . . . . .8.4 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8.5 Self-Interest of Committee Member . . . . . . . . . . . . . . . . . .8.6 Disclosure to Members . . . . . . . . . . . . . . . . . . . . . . . .8.7 Standard of Performance . . . . . . . . . . . . . . . . . . . . . . .8.8 Liability of Committee and Liability Insurance . . . . . . . . . . . .8.9 Exemption from Bond . . . . . . . . . . . . . . . . . . . . . . . . 8.10 No Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . 8.11 Persons Serving in Dual Fiduciary Roles . . . . . . . . . . . . . . 8.12 Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.13 Indemnification of Members of Administrative Committee . . . . . . . 8.14 ARTICLE IX - TRUST AGREEMENT AND TRUST FUND Trust Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . .9.1 Benefits Paid Solely from Trust Fund . . . . . . . . . . . . . . . . .9.2 ARTICLE X - ADOPTION OF PLAN BY OTHER EMPLOYERS Adoption Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 10.1 No Joint Venture Implied . . . . . . . . . . . . . . . . . . . . . . 10.2 Transfer of Members . . . . . . . . . . . . . . . . . . . . . . . . 10.3 iii ARTICLE XI - AMENDMENT AND TERMINATION Right to Amend and Limitations Thereon . . . . . . . . . . . . . . . 11.1 Mandatory Amendments . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Withdrawal of an Employer . . . . . . . . . . . . . . . . . . . . . 11.3 Voluntary and Involuntary Termination . . . . . . . . . . . . . . . 11.4 Vesting Upon Discontinuance of Employer Contributions, Total or Partial Termination . . . . . . . . . . . . . . . . . 11.5 Continuance Permitted Upon Sale or Transfer of Assets . . . . . . . 11.6 Requirement on Merger, Transfer, etc. . . . . . . . . . . . . . . . 11.7 ARTICLE XII - MISCELLANEOUS Plan Not An Employment Contract . . . . . . . . . . . . . . . . . . 12.1 Benefits Provided Solely From Trust Fund . . . . . . . . . . . . . . 12.2 Spendthrift Provision . . . . . . . . . . . . . . . . . . . . . . . 12.3 Gender, Tense and Headings . . . . . . . . . . . . . . . . . . . . . 12.4 General Transition Rules Relating to Amendment, Restatement and Continuation of Plan . . . . . . . . . . . . . 12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.6 Governing Law; Parties to Legal Actions . . . . . . . . . . . . . . 12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9 iv KENT ELECTRONICS CORPORATION TAX-DEFERRED SAVINGS AND RETIREMENT PLAN For the exclusive benefit of its eligible employees and their beneficiaries, Kent Electronics Corporation, a Texas Corporation (the "Plan Sponsor"), heretofore adopted the stock bonus plan and trust which are embodied in the instrument entitled "Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan and Trust" (the "Prior Plan") which instrument is intended to meet the requirements for qualification and exemption under applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code") and to comply with applicable provisions of the Employee Retirement Income Security Act of 1974, as amended (the "Act"). The Plan Sponsor has determined that said Prior Plan and Trust should be completely amended, restated and continued without a gap or lapse in coverage, time or effect of a qualified plan and exempt trust under applicable provisions of the Code in order (i) to effect numerous technical changes for the benefit of eligible employees and their beneficiaries and (ii) to ensure that the terms and provisions of the Prior Plan continue to meet the requirements for qualification and exemption under applicable provisions of the Code and to comply with applicable provisions of the Act following amendment of the Code and the Act by the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1986, the Omnibus Budget Reconciliation Act of 1987, the Technical and Miscellaneous Revenue Act of 1988 and the Omnibus Budget Reconciliation Act of 1989 and the issuance of regulations thereunder. It is intended that certain other business organizations may adopt the form of the Plan for the exclusive benefit of their eligible employees and their eligible employees' beneficiaries. It is intended that the benefits offered under the Plan will help retain and attract the highest quality employees by providing additional financial incentives and financial security for eligible employees and their beneficiaries. NOW, THEREFORE, the Plan Sponsor completely amends, restates and continues the Prior Plan under the form of the Plan hereinafter set forth, without a gap or lapse in coverage, time or effect of a qualified plan and exempt trust under applicable provisions of the Code, as follows: I-1 ARTICLE I DEFINITIONS As used herein, the words and phrases set forth below shall have the meaning next below attributed to them unless the context in which any such word or phrase appears reasonably requires a broader, narrower or different meaning: 1.1 ACCOUNT: "Account" shall mean, with respect to a Member, all of the ledger accounts maintained by the Administrative Committee to set out such Member's proportionate interest in the Trust Fund. An "EMPLOYER ACCOUNT" shall be maintained, as necessary, for each Member which reflects the portion of the Employer's Contributions allocated to the Member, and the appreciation or depreciation and income or loss incurred by the Trust Fund allocated to such Employer Account. The Employer Account maintained for each Member shall consist of (i) an "EMPLOYER NONFORFEITABLE CONTRIBUTIONS ACCOUNT" which shall separately reflect (a) any Elective Contributions which are authorized by the Member and made by the Employer on behalf of such Member, and (b) any Qualified Non-Elective Contributions which are made by the Employer on behalf of the Member and (c) the portion of the Profit Sharing Contributions, if any, which are made by the Employer on behalf of the Member and are designated (in resolutions adopted by the Board and communicated to Members) as allocable to the Employer Nonforfeitable Contributions Account; and/or (ii) an "EMPLOYER CONTRIBUTIONS ACCOUNT" which shall reflect (a) the Matching Contributions, if any, which are made by the Employer on behalf of the Member in order to match Elective Contributions and (b) the portion of the Profit Sharing Contributions, if any, which are made by the Employer on behalf of such Member and not specifically designated (in resolutions adopted by the Board and communicated to Members) as allocable to the Employer Nonforfeitable Contributions Account. A "PREDECESSOR PLAN ACCOUNT" shall be maintained, as necessary, which reflects (i) the portion of the Member's accrued benefit derived from employee contributions and/or the Member's accrued benefit derived from employer contributions (under any defined contribution plan, other than the Plan or any Prior Plan, that is described in Section 414(i) of the Code (excluding any plan that is subject to the minimum funding standards of Section 412 of the Code or that is required to provide a qualified joint and survivor annuity or a qualified preretirement survivor annuity described in Sections 401(a)(11) and 417 of the Code) or any defined benefit plan which is described in Section 414(j) of the Code, which plan at all times relevant meets the requirements for qualification under Section 401(a) or 403(a) of the Code) and which accrued benefit, with the consent or ratification of the Board, is transferred directly from such defined contribution plan or defined benefit plan to the Trust Fund, at such time and in such manner as the Administrative Committee, with the consent or ratification of the Board, may determine pursuant to uniformly applied nondiscriminatory rules established by the Administrative I-2 Committee, and (ii) the appreciation or depreciation and income or loss incurred by the Trust Fund allocated to the Predecessor Plan Account. A "ROLLOVER ACCOUNT" shall be maintained for each Member who has made a Rollover Contribution to the Plan, which reflects the amount of the Rollover Contribution and the appreciation or depreciation and income or loss incurred by the Trust Fund allocated to the Rollover Account. Should the Administrative Committee in its absolute discretion so direct, any of the above-described Accounts may be divided into subaccounts in order to facilitate administration of the Plan. A Member's Employer Accounts shall be reduced as of the end of the preceding Plan Year (or such shorter accounting period as may be prescribed by the Administrative Committee) for any amount of funds used during the Plan Year (or such shorter accounting period as may be prescribed by the Administrative Committee) to purchase a life insurance contract under Section 4.11 for the Member's benefit. However, such life insurance contract shall constitute an investment of the Trust Fund allocable to such Member, and the Trustee shall maintain all information relevant to any life insurance purchased for the Member's benefit separate from the Member's Employer Accounts. 1.2 ACT: "Act" shall mean the Employee Retirement Income Security Act of 1974, as amended, and regulations and other authority issued thereunder by the appropriate governmental authority. Reference to any section of the Act shall include reference to any successor section or provision of the Act. 1.3 ACTIVE SERVICE: "Active Service" shall mean, as to any Employee, the number of whole years and complete months of the Employee's period(s) of service with any Employer or Affiliated Employer, whether or not such period(s) of service were completed consecutively. Except as otherwise provided below, in determining the number of whole years and complete months of an Employee's period of service, non-successive periods of service shall be aggregated, and less than whole year periods of service (whether or not consecutive) shall be aggregated on the basis that twelve complete months of service (thirty days shall be deemed to be a complete month in the case of aggregation of fractional months) equal a whole year of Active Service. If an Employee severs from service by reason of a quit, discharge, or retirement, and the Employee then performs an hour of service within twelve months of the severance from service date, such Employee's period of severance shall be deemed to have been a period of service. If an Employee severs from service by reason of a quit, discharge, or retirement during an absence from service for any reason other than a quit, discharge, or retirement, and then performs an hour of service within twelve months of the date on which the Employee was first absent from service, such Employee's period of severance shall be deemed to have been a period of service. I-3 Periods of severance taken into account as periods of service shall not be taken into account for purposes of determining whether an Employee is in the employ of the Employer for purposes of allocating Employer Contributions in accordance with Section 4.2. All service with any Affiliated Employer shall be deemed to be service with the Employer. Furthermore, all covered service and contiguous noncovered service with an Employer which has adopted the Plan but which is not an Affiliated Employer shall be deemed to be service with the Employer. In the event that an Employer assumes and maintains the plan of a predecessor employer described in Section 414(a)(2) of the Code, Active Service for such predecessor employer shall be treated as Active Service for the Employer in accordance with the provisions of Section 414(a)(1) of the Code. However, if the Employer does not maintain the plan of a predecessor employer, the Plan shall treat any Employee's service with the predecessor employer as service with the Employer only to the extent prescribed in Section 414(a)(2) of the Code. In addition, pursuant to uniform and nondiscriminatory rules established by the Administrative Committee with the consent or approval of the Board, the Administrative Committee may vote to allow Employees to be credited with Active Service for eligibility or vesting with respect to periods of service which would otherwise be disregarded under the Plan. Any such decision shall be evidenced by formal minutes reflecting such action of the Administrative Committee, or by unanimous written consent of the members of the Administrative Committee, and must be approved or ratified by the Board, unless pursuant to the rules described in the preceding sentence, approval or ratification by the Board is not required. Any such decision shall be appropriately communicated to the affected Members. Notwithstanding any other provision hereof, any period of service occurring prior to the effective date of the adoption of the Plan by an Employer shall be taken into account for purposes of determining vesting credit hereunder. In the case of an Employee who completes at least one hour of service under the Plan (i) if he has incurred five (or more) consecutive periods of severance, the period of service completed after such period of severance shall not be taken into account for purposes of determining the Member's vested percentage in amounts credited to his Employer Contributions Account prior to such five (or more) consecutive periods of severance, and (ii) if he does not have any vested right under the Plan to Employer Contributions credited to his Account at the time he incurs a period of five (or more) consecutive one year periods of severance, the period of service completed by such Employee before such period of severance shall not be taken into account for any reason when the period of five (or more) consecutive periods of severance equals or exceeds his period of service, whether or not consecutive, completed before such period of severance; provided, however, in the case of an Employee who completes at least one hour of service under the Plan, any period of service which would have been disregarded under the Plan or any Prior Plan as of the date immediately prior to the first day of any Plan Year after December 31, 1984, shall not be recognized under the Plan. In computing the aggregate period of service prior to any such period of severance, I-4 any periods of service which may be disregarded by reason of any prior period of severance shall be disregarded. A "period of service" shall mean a period of service with any Employer or Affiliated Employer commencing on the Employee's employment commencement date or reemployment commencement date, whichever is applicable, and ending on the severance from service date. "Employment commencement date" and "reemployment commencement date" shall mean, respectively, the dates on which the Employee first performs an hour of service initially, and following a period of severance not deemed to have been a period of service. A "period of severance" shall mean the period of time commencing on the severance from service date and ending on the date on which the Employee again performs an hour of service. A "one year period of severance" shall mean a 12-consecutive-month period beginning on the severance from service date and ending on the first anniversary of such date if the Employee does not perform an hour of service during such 12-consecutive-month period; provided, however, solely for purposes of determining whether an Employee has incurred a one year period of severance, any Employee who is absent from employment with the Employer or Affiliated Employer for a period of absence which either (1) begins after the first day of the Plan Year beginning after December 31, 1984, and which is incurred by reason of (i) the pregnancy of the Employee, (ii) the birth of a child of the Employee, (iii) the placement of a child with the Employee in connection with adoption of such child by the Employee or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement, or (2) begins on or after August 5, 1993, and to which the Employee is entitled under the Family and Medical Leave Act of 1993 ("FMLA"), shall not be charged with a period of severance with respect to (a) the 12-consecutive-month period beginning on the first day of such absence or (b) the 12-consecutive-month period commencing on the first anniversary date of the first day of the period described in clause (a) if the period in clause (a) is included in the Employee's period of service. The applicable 12-consecutive-month period described in clause (a) or (b) shall be subtracted from any period of severance which would otherwise include the period described in clause (a) or (b), as applicable. An Employee's "severance from service date" shall occur on the earlier of (i) the date on which the Employee quits, retires, is discharged, or dies; or (ii) the first anniversary of the first day of a period in which the Employee remains absent from service (with or without pay) for any reason other than a quit, retirement, discharge, or death, such as vacation, holiday, sickness, disability, leave of absence, or layoff. In addition, any period of absence which is not described in the preceding sentence, which begins on or after the first day of the Plan Year beginning after December 31, 1984, and which is incurred by reason of (i) the pregnancy of the Employee, (ii) the birth of a child of the Employee, (iii) the placement of a child with the Employee in connection with the adoption of such child by the Employee or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement, shall be deemed to be a period of absence described in, and subject to, clause (ii) of the preceding sentence. I-5 An "hour of service" shall mean an hour for which an Employee is paid, or entitled to payment, for the performance of duties for any Employer or Affiliated Employer. "Covered service" shall mean service within a job classification or class of employees covered under the Plan. "Contiguous noncovered service" shall mean service other than covered service, which precedes or follows covered service, if no quit, discharge, or retirement occurs between such covered service and such other service. Notwithstanding any other provisions of the Plan to the contrary, the provisions of this paragraph shall govern the method for determining and crediting Active Service with respect to any Employee covered under any Prior Plan. For purposes of determining the Active Service of a Member who was a participant in and had an interest under a Prior Plan as of the date immediately prior to the date that the Prior Plan was amended and continued under the form of the Plan, such Member shall be credited with Active Service (for his period(s) of service prior to the date that the Prior Plan was amended and continued under the form of the Plan) equal to the service determined and credited to such Member under applicable provisions of the Prior Plan as of the date immediately prior to the date that the Prior Plan was amended and continued under the form of the Plan. For purposes of determining such Member's Active Service for the period(s) of service continuing or commencing on or after the date that the Prior Plan was amended and continued under the form of the Plan, such Member's Active Service shall be determined using the methods set out under applicable provisions of the Plan, unless the Plan is retroactively effective as of a date which occurs within a computation period of a Prior Plan (under which service credit was determined with reference to computation periods and hours of service credited thereto). In such event, Active Service shall be determined and credited with respect to such computation period under applicable provisions of the Prior Plan if necessary to ensure that a Member does not lose service credit otherwise recognizable under the Prior Plan with respect to such computation period, and then Active Service of any such Member for period(s) of service continuing or commencing on or after the end of such computation period shall be determined using the methods set out under applicable provisions of the Plan. 1.4 ADMINISTRATIVE COMMITTEE: "Administrative Committee" shall mean the committee appointed by the Board. 1.5 AFFILIATED EMPLOYER: "Affiliated Employer" shall mean an employer which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code), or which is a trade or business (whether or not incorporated) which is under common control (within the meaning of Section 414(c) of the Code), or which is a member of an affiliated service group of employers (within the meaning of Section 414(m) of the Code), which related group of corporations, businesses or employers includes the Employer; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. I-6 1.6 BENEFICIARY: "Beneficiary" shall mean the person, the trust created for the benefit of a person who is the natural object of the Member's bounty or estate, whichever is designated by the Member to receive the benefits payable hereunder upon his death. 1.7 BOARD: "Board" shall mean the Board of Directors (or equivalent governing authority) of the Plan Sponsor. 1.8 CODE: "Code" shall mean the Internal Revenue Code of 1986, as amended, and regulations and other authority issued thereunder by the appropriate governmental authority. References to any section of the Code or the Income Tax Regulations shall include reference to any successor section or provision of the Code or Income Tax Regulations, as applicable. 1.9 COMPENSATION DEFERRAL AGREEMENT: "Compensation Deferral Agreement" shall mean a written agreement between an eligible Employee and the Employer in a form satisfactory to the Administrative Committee to permit the Employer, in lieu of paying such amounts to the Employee in cash, to reduce such Employee's current Base Compensation (as defined in Section 3.1(a)) and contribute the amount of the reduction to the Trust as an Elective Contribution for the benefit of the Member. 1.10 CONSIDERED COMPENSATION: "Considered Compensation" shall mean, as to each Employee, compensation received during the Plan Year by the Employee from the Employer which is required to be reported as wages on the Employee's form W-2 (or its successor) for federal income tax withholding purposes, but determined without regard to any rules under 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). Notwithstanding the previous sentence, Considered Compensation shall be determined without regard to (a) cash payments for (i) auto allowances, (ii) third party promotion funds, (iii) company/division-wide special contests, (iv) stock option exercises, (v) Employee suggestion winners, and (vi) reimbursements under the officers' medical reimbursement plan, as well as (b) non-monetary compensation such as (i) awards, e.g., sales trips, (ii) Employer-provided automobile and (iii) imputed income on term life insurance benefits. Considered Compensation shall also be determined before reduction under a compensation deferral agreement under (i) the Plan or another plan described in Section 401(k) or 408(k) of the Code, (ii) an annuity described in Section 403(b) of the Code or (iii) an election under a cafeteria plan described in Section 125 of the Code. The definition of Considered Compensation as used herein is intended to be reasonable, nondiscriminatory and not by design to favor Highly Compensated Employees. With respect to Plan Years commencing after December 31, 1988, Considered Compensation in excess of the limit imposed under Section 401(a)(17) of the Code, which, for Plan Years commencing after December 31, 1988 but on or before December 31, 1993, shall be $200,000 (as adjusted, as may be determined by the Commissioner of Internal Revenue, at the same time and in the same manner as prescribed in Section 401(a)(17) of the Code) for the I-7 Plan Year shall be disregarded, and the rules pertaining to treatment of family members set out in the third paragraph of the definition of Highly Compensated Employee shall apply, except that in applying such rules, the term "family" shall include only the spouse and any lineal descendants of the Employee who have not attained age 19 before the close of the applicable Plan Year. For Plan Years commencing on or after January 1, 1994, Considered Compensation shall not exceed $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17) of the Code. For purposes of this definition of "Considered Compensation", and for purposes of the corresponding limitations on Considered Compensation in Sections 3.3(h); 3.3(j); 7.3(b); and 7.4(l) of the Plan, the following provisions shall apply: (i) 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 applicable 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; and (ii) If Considered Compensation for any prior determination period is taken into account in determining an eligible Employee's benefits accruing in the current Plan Year, the Considered Compensation for that prior determination period is subject to the applicable compensation limit in effect for that prior determination period. 1.11 CONTRIBUTION: "Contribution" shall mean as to the Employer all amounts which the Employer contributes to the Trust Fund under the terms of the Plan. "ELECTIVE CONTRIBUTION" means the amounts which the Employer contributes to the Trust Fund on behalf of Members pursuant to Compensation Deferral Agreements. "MATCHING CONTRIBUTION" means the amount, if any, which the Employer contributes to the Trust Fund pursuant to applicable provisions of the Plan in order to match Elective Contributions. "PROFIT SHARING CONTRIBUTION" means the amount, if any, which the Employer contributes to the Trust pursuant to applicable provisions of the Plan. "QUALIFIED NON-ELECTIVE CONTRIBUTION" means the amount, if any, which the Employer contributes to the Trust on behalf of the Non-Highly Compensated Employees who are Members in order to satisfy the actual deferral percentage test and/or the actual contribution percentage test under Section 3.3. 1.12 EMPLOYEE: "Employee" shall mean every person employed as a common law employee by an Employer, including, in the case of a corporation, officers (but excluding any director unless the director is also a salaried officer or other common law employee). In accordance with the requirements of Section 414(n) of the Code, any Leased Employee shall be treated as an Employee of the recipient Employer, however, contributions or benefits provided by the Leasing Organization (described in the definition of Leased Employee) which are attributable to services performed for the recipient Employer shall be treated as provided by the I-8 recipient Employer. Provided that Leased Employees do not comprise more than 20 percent of the recipient's nonhighly compensated work force (described in Section 414(n)(5)(C) of the Code), the preceding sentence shall not apply if such Leased Employee is covered by a money purchase pension plan providing: (i) an nonintegrated employer contribution rate of at least 10 percent of compensation, (ii) immediate participation by each employee of the Leasing Organization other than (a) employees who perform substantially all of their services for the Leasing Organization and (b) any individual whose compensation (as defined in Section 415(c)(3) of the Code, including also amounts contributed pursuant to a salary reduction agreement which are excludable from the individual's gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code) from the Leasing Organization in each Plan Year during the 4-year period ending with the Plan Year is less than $1,000, and (iii) full and immediate vesting. 1.13 EMPLOYER: "Employer" shall mean the Plan Sponsor and any other person (described in Section 7701(a) of the Code) which adopts the Plan in accordance with applicable provisions thereof. 1.14 ENTRY DATE: "Entry Date" shall mean the date on which an Employee becomes a Member by commencing participation in the Plan after having met the eligibility requirements under applicable provisions of the Plan, which date shall be the first day of the periodic pay period commencing coincident with or next following the first day of the Plan Year and the first day of the seventh month of the Plan Year and anniversaries thereof. 1.15 HIGHLY COMPENSATED EMPLOYEE: "Highly Compensated Employee" shall mean (subject to the subsequent provisions hereof) any Employee, who during the Plan Year for which the determination is being made (the "determination year") or during the 12-month period immediately preceding the Plan Year (the "look-back year"): (i) was at any time a 5-percent owner (as defined in Section 416(i)(1) of the Code and Section 7.4), (ii) received compensation (described below) from the Employer in excess of $75,000 (as adjusted at such time and in such manner as may be prescribed under Section 414(q) and Section 415(d) of the Code), (iii) received compensation from the Employer in excess of $50,000 (as adjusted at such time and in such manner as may be prescribed under Section 414(q) and Section 415(d) of the Code), and was in the top-paid group of Employees consisting of the top 20-percent of the Employees when ranked on the basis of compensation paid during such year, excluding, however, for purposes of determining the number (but, except for Employees covered by collective bargaining agreements described below, not identity) of Employees which comprise such top-paid group of Employees, (a) any Employee who has not completed six months of service as of the end of the current year I-9 after aggregating the Employee's service for the Employer during the current year and the immediately preceding year, (b) any Employee who normally works less than 17-1/2 hours per week for 50% or more of the total weeks worked during such year (excluding weeks during which an Employee did not work for the Employer), (c) any Employee who normally works during not more than six months during any year (an Employee who works on one day during a month is deemed to have worked during that month), (d) any Employee who has not attained age 21 as of the end of the applicable year, and (e) except to the extent provided in regulations issued under Section 414(q) of the Code by the appropriate governmental authority, any Employee who is included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between Employee representatives and the Employer, if at least 90 percent of the Employees of the Employer are covered under one or more such collective bargaining agreements and the Plan does not cover any Employee who is covered by any such collective bargaining agreement. (iv) was at any time an officer (within the meaning of Section 416(i) of the Code) and received compensation greater than 50-percent of the dollar amount in effect under Section 415(b)(1)(A) of the Code for the calendar year in which the determination year or look-back year begins. With respect to the exclusions for Employees who normally work less than 17 1/2 hours per week or during not more than six months during any year (as described in clauses (iii)(b) and (iii)(c), respectively, above), such exclusion determinations may be made separately with respect to each Employee, or on the basis of groups of Employees who fall within particular job categories as established by the Employer on a reasonable and consistent basis. For purposes of clause (iii)(b) above, the Employer may exclude Employees who are members of a particular job category if (i) 80% of the positions within that job category are filled by Employees who normally work less than 17 1/2 hours per week, or (ii) the median number of hours of service credited to Employees in that job category during a determination year or look-back year, as the case may be, is less than or equal to 500. Any Employee who is a non-resident alien who receives 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 an Employee for the purpose of determining whether an Employee is a Highly Compensated Employee or a Non-Highly Compensated Employee. An Employee shall not be treated as described in clause (ii), (iii) or (iv) of the first paragraph for the determination year unless such Employee is also a member of the group consisting of the 100 Employees paid the greatest compensation (described below) during the determination year. For purposes of clause (iv) of the first paragraph, without regard to any exclusions applicable for purposes of determining the number of Employees in the top-paid group of Employees, no more than 50 Employees (or, if lesser, the greater of (a) three Employees who perform services during the determination or look-back year or (b) 10% of such I-10 Employees) shall be treated as officers with respect to the determination year or the look-back year, whichever may be applicable. Provided, however, that if for either such year the number of officers of the Employer who satisfy the requirements of clause (iv) of the first paragraph (as limited by the first sentence of this paragraph) exceeds the 50-Employee limitation of the immediately preceding sentence, then the officers who receive the greatest compensation during the determination year or look-back year will be considered includible officers; and, further provided, that if for any such year, no officer of the Employer is described in clause (iv) of the first paragraph, the highest paid officer of the Employer for such year (without regard to the amount of compensation paid to such officer in relation to the dollar limit of Section 415(c)(1)(A) of the Code for the year) shall be treated as described in such clause (iv) whether or not such Employee is also a Highly Compensated Employee on any other basis. An individual who is a Highly Compensated Employee for the determination year or the look-back year by reason of being described in two or more of clauses (i) through (iv) of the first sentence of the immediately preceding paragraph shall not be disregarded in determining whether another individual is a Highly Compensated Employee. The Administrative Committee shall prescribe reasonable and nondiscriminatory rules which shall be uniformly and consistently applied for the purposes of (i) rounding calculations incident to determining the number of Employees in the top-paid group of Employees and (ii) breaking ties among two or more Employees incident to identifying particular Employees who are in the top-paid group of Employees, who are among the top-10 Highly Compensated Employees, or who are among the 100 Employees paid the greatest compensation during the determination year. If, on any single day during any determination year or look-back year, an Employee is a member of the family (described below) of another individual who is (i) a 5-percent owner who is a current or former Employee or (ii) a Highly Compensated Employee (including former Employees) in the group consisting of the 10 Highly Compensated Employees paid the greatest compensation during the determination year or the look-back year, then such family member and 5-percent owner or top-10 Highly Compensated Employee shall be considered to be a single Employee receiving an amount of compensation and a Plan contribution that is based on the compensation and Plan contribution attributable to such family member and the 5-percent owner or top-10 Highly Compensated Employee. For purposes of the immediately preceding sentence, family members of any Employee or former Employee include the Employee's or former Employee's spouse and lineal ascendants or descendants and the spouses of lineal ascendants and descendants. Family members are subject to the aggregation rule described in the second preceding sentence whether or not (i) they fall within the categories of Employees that may be excluded for purposes of determining the number of Employees in the top-paid group consisting of the top 20-percent of the Employees when ranked on the basis of compensation (as such toppaid group is described in clause (iii) of the first paragraph hereof), or (ii) they are Highly Compensated Employees when considered separately. A former Employee who, with respect to the Employer, had a "separation year" (described below) or a "deemed separation year" (described below) prior to the determination year will be treated as a Highly Compensated Employee for the determination year if such I-11 former Employee was (i) a Highly Compensated Employee for such former Employee's separation year or deemed separation year, or (ii) a Highly Compensated Employee for any determination year ending on or after such former Employee attained age 55. For purposes of the immediately preceding sentence, an Employee who performs no services for the Employer during a determination year (including a leave of absence throughout the determination year) is treated as a former Employee. A "separation year" is the determination year during which the Employee separates from service with the Employer; provided, however, an Employee who performs no services for the Employer during a determination year will be treated as having separated from service with the Employer in the year in which such Employee last performed services for the Employer. An Employee who performs services for the Employer during a determination year will incur a "deemed separation year" if, in any determination year which ends prior to such Employee's attainment of age 55, the Employee receives compensation in an amount less than 50% of the Employee's average annual compensation for the three consecutive calendar years preceding such determination year during which the Employee received the greatest amount of compensation from the Employer; provided, however, an Employee will not be treated as a Highly Compensated Employee (solely by reason of a 8-deemed separation in a deemed separation year), if after such deemed separation and before the year of the Employee's actual separation, such Employee's compensation increased sufficiently to permit the Employee to be treated as having a deemed resumption of employment with respect to a determination year, as prescribed in regulations issued under Section 414(q) of the Code by the appropriate governmental authority. Former Employees are not counted for purposes of determining the top-paid group consisting of the top 20-percent of the Employees when ranked on the basis of compensation (as such top-paid group is described in clause (iii) of the first paragraph hereof). Furthermore, with respect to the determination year, former Employees are not included in (i) the group consisting of the 100 Employees paid the greatest compensation, or (ii) the group of includible officers of the Employer, as such groups are described in the second paragraph of this Section. For purposes of this Section, "compensation" shall mean the wages (as defined in Section 3401(a) of the Code for purposes of income tax withholding at the source) that are paid (within the meaning of Section 1.415-2(d)(3) and (4) of the Income Tax Regulations) to the Employee by the Employer during the Plan Year for services performed and reportable on the Employee's form W-2 (or its successor), 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), but including elective or salary reduction contributions to cafeteria plans under Section 125 of the Code, or to cash or deferred arrangements under Sections 402(a)(8) and 402(h)(1)(B) of the Code, or to tax-sheltered annuities under Section 403(b) of the Code. Only compensation received by the Employee from an Employer, or deemed to be received pursuant to the preceding sentence, shall be considered for purposes of this Section; therefore, compensation shall not be annualized in order to compute an Employee's compensation in the determination year or the look-back year. I-12 The rules of Section 414(b), (c), (m), (n) and (o) of the Code shall be applied before the above provisions of this Section are applied. The rules described in the immediately preceding sentence do not apply for purposes of determining who is a 5-percent owner. Notwithstanding any provision hereof to the contrary, the determination of who is a Highly Compensated Employee shall be made in accordance with Section 414(q) of the Code. In the event that the Administrative Committee elects to have one or more of the provisions of this paragraph apply for purposes of determining the status of an Employee as a Highly Compensated Employee or a Non-Highly Compensated Employee, the Administrative Committee shall adopt a resolution which shall specifically identify the provision or provisions of this paragraph which shall apply and the effective date of such application, and a certified copy of such resolution shall be attached to the Plan as an exhibit which shall be referenced to this Section and shall be deemed to be an amendment of the Plan which is incorporated in and made a part of this Section for all purposes of the Plan. Any provision of this paragraph which becomes operative by virtue of application of the preceding sentence shall override or supersede and control over any provision of this Section which may be inconsistent with the operative provisions of this paragraph. Accordingly, to the extent elected by the Administrative Committee in compliance with the requirements of the first sentence of this paragraph, the following provision or provisions shall apply: (i) To the extent permitted in regulations issued under Section 414(q) of the Code, the look-back year calculation for a determination year shall be made on the basis of the calendar year ending with or within the applicable determination year (or, in the case of a determination year that is shorter than twelve months, the calendar year ending with or within the twelve month period ending with the end of the applicable determination year); provided, however, the computation contemplated hereunder shall apply only if the Administrative Committee elects, as described above, to apply the same computation provisions to all plans, entities and arrangements of the Employer which are required to apply the definition of Highly Compensated Employee set forth in Section 414(q) of the Code. (ii) To the extent permitted in regulations issued under Section 414(q) of the Code, Leased Employees covered under a qualified money purchase pension plan maintained by a leasing organization and not covered under a qualified retirement plan of the Employer (including the Plan), shall be included for purposes of determining the group of Highly Compensated Employees hereunder. (iii) To the extent permitted in regulations issued under Section 414(q) of the Code, the special definition (described in such regulations) for purposes of determining whether former Employees who separated from service with the Employer prior to January 1, 1987 are Highly Compensated Employees shall apply; provided, however, the special definition contemplated hereunder shall apply only if the Administrative Committee elects, as described above, to apply the special definition to all plans, entities and arrangements of the Employer which are required to apply the definition of Highly Compensated Employee set forth in Section 414(q) of the Code, and further, provided that such election to use such special definition may not be changed by the Employer without the consent of the Internal Revenue Service. I-13 Subject to any governmental approval as may be required under applicable regulations or other authority issued by the appropriate governmental authority, any operative provision of this paragraph may be changed by attaching a certified resolution of the Administrative Committee (which resolution shall be attached to the Plan as an exhibit) which (i) shall identify the provision or provisions of the paragraph that are to be changed and the effective date of such change, (ii) shall be referenced to this Section, and (iii) shall be deemed to be an amendment of the Plan which is incorporated in and made part of this Section for all purposes of the Plan. If elected by a resolution duly adopted by the Administrative Committee, Section 1.15 shall be modified by: (i) Substituting $50,000 for $75,000 in clause (ii) of the first paragraph of Section 1.15 and by disregarding clause (iii) of the first paragraph of Section 1.15. This simplified definition of Highly Compensated Employee may apply if the Employer maintains significant business activities (and employs employees) in at least two significantly separate geographic areas; or (ii) Substituting the simplified method pursuant to Section 4 of Revenue Procedure 93-42, in which case the Highly Compensated Employees shall be determined under Section 1.15 on the basis of (a) the look-back year and determination year or (b) the determination year only, as determined by the Administrative Committee, taking into account all Employees employed during such year. 1.16 LEASED EMPLOYEE: "Leased Employee" shall mean any person (i) who is not a common law employee of the recipient Employer and (ii) who (pursuant to an agreement between an Employer (or Affiliated Employer) and any other person ("Leasing Organization")) has performed services for the Employer (or for the Employer and related persons determined in accordance with Section 414(n)(6) of the Code) (a) on a substantially full time basis for a period of at least one year (including periods of service for the recipient Employer for which such person would have been a Leased Employee but for the requirements of this subclause (a)) and (b) such services are of a type historically performed by employees in the business field of the recipient Employer. 1.17 MEMBER: "Member" shall mean an Employee who is participating in the Plan during the Plan Year and, if consistent with the context in which such term is used, a former Member of the Plan. I-14 1.18 NET INCOME: "Net Income" shall mean, as to an Employer, its net profit for any given year as determined by its accountant or accounting firm and reflected on its profit and loss statement for such year, without reduction for contributions under the Plan or payments of, or reserves for, federal and state taxes based on income, and after elimination of all gains from the sale or disposition of property not held for sale to customers in the ordinary course of business. 1.19 NON-HIGHLY COMPENSATED EMPLOYEE: "Non-Highly Compensated Employee" shall mean a Employee who is neither a Highly Compensated Employee nor a family member thereof described in Section 414(q)(6) of the Code. 1.20 PLAN: "Plan" shall mean the Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan herein set forth and all subsequent amendments hereto. The Plan is hereby designated as a profit sharing plan for purposes of Sections 401, 402, 412, 417 and other applicable provisions of the Code. 1.21 PLAN SPONSOR: "Plan Sponsor" shall mean Kent Electronics Corporation and any successor thereto which adopts and continues the Plan. 1.22 PLAN YEAR: "Plan Year" shall mean the fiscal year of the Plan which shall end on the Saturday closest to March 31 of each year; provided, however, that the Plan Year commencing April 2, 1995 shall end on December 31, 1995 and that from and after January 1, 1996, "Plan Year" shall mean the period commencing on January 1 of a calendar year and ending on December 31 of the same year. 1.23 PRIOR PLAN: "Prior Plan" shall mean the Plan, as in effect prior to its amendment, restatement and continuation under the form of this Plan. The term "Prior Plan" shall also include any other defined contribution plan described in Section 414(i) of the Code (excluding any plan that is subject to the minimum funding standards of Section 412 of the Code or that is required to provide a qualified joint and survivor annuity or a qualified preretirement survivor annuity described in Sections 401(a)(11) and 417 of the Code) or any defined benefit plan described in Section 414(j) of the Code, which plan at all times relevant met the requirements for qualification under Section 401(a) or 403(a) of the Code as in effect on the date immediately prior to the date that such plan was completely amended, restated and continued under the form of the Plan, without a gap or lapse in coverage, time or effect of a qualified plan and exempt trust under applicable provisions of the Code. 1.24 ROLLOVER CONTRIBUTION: "Rollover Contribution" shall mean an amount (i) which the Administrative Committee determines may be deposited in the Trust Fund in accordance with Section(s) 402(c), 402(e) or 408(d)(3) of the Code without endangering the qualification and exemption of the Plan and the Trust under Sections 401(a) and 501(a) of the Code, respectively, and (ii) which is contributed by a Member to his Rollover Account. I-15 1.25 TOTAL AND PERMANENT DISABILITY: "Total and Permanent Disability" shall mean a mental or physical disability which, in the opinion of a physician selected or pre-approved by the Administrative Committee, will prevent a Member from earning a reasonable livelihood with the Employer or any Affiliated Employer, which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months and which: (a) Was not contracted, suffered or incurred while such Member was engaged in, or did not result from his having engaged in, a felonious criminal enterprise; (b) Did not result from alcoholism or addiction to narcotics or any self-inflicted injury; and (c) Did not result from an injury incurred while a member of the armed forces of the United States after the effective date of the Plan and for which such Member receives a military pension. 1.26 TRANSFERRED: "Transferred" as used with respect to an Employee and "Transfer of an Employee" shall mean the termination of employment with one Employer and the contemporaneous commencement of employment with another Employer. 1.27 TRUST: "Trust" shall mean the trust estate created under the Trust Agreement. 1.28 TRUSTEE: "Trustee" shall mean the trustee or trustees qualified and acting hereunder or any successor or successors appointed by the Board. 1.29 TRUST AGREEMENT: "Trust Agreement" shall mean the trust agreement provided for in Article IX hereof, as amended from time to time. 1.30 TRUST FUND: "Trust Fund" shall mean the cash, bonds, stock and other assets or liabilities held by the Trustee under the terms of the Trust Agreement. I-16 ARTICLE II EMPLOYEES ELIGIBLE TO PARTICIPATE 2.1 ELIGIBILITY REQUIREMENTS: An Employee who was a Member or participant in a Prior Plan on the date immediately prior to the date such Prior Plan was amended, restated and continued under the form of the Plan, shall be deemed to be a Member hereunder as of the date such Prior Plan was amended, restated and continued under the form of the Plan. Every other Employee shall be eligible to participate in the Plan commencing on the Entry Date coincident with or next following the latest of (i) the effective date of the adoption of the Plan by the Employee's Employer or (ii) the Employee's attainment of the age of twenty-one (21) years or (iii) the date on which the Employee first completes six (6) of more months of Active Service. Notwithstanding the preceding provisions of this paragraph, student interns are not eligible to participate in the Plan. In addition, pursuant to uniform and nondiscriminatory rules established by the Administrative Committee with the consent or ratification of the Board, the Administrative Committee may vote to allow Employees to enter the Plan as Members on any date which would not otherwise be permitted under the Plan. Any such decision shall be evidenced by formal minutes reflecting such action of the Administrative Committee or by unanimous written consent of the members of the Administrative Committee and shall be appropriately communicated to the affected Members, and must be approved or ratified by the Board, unless pursuant to the rules described in the preceding sentence, approval or ratification by the Board is not required. Should an Employee be separated from the service of the Employer for any reason during a period which includes an Entry Date, such Employee shall be eligible to commence participation in the Plan on the date he completes an hour of service following his return to employment with the Employer. An Employee who has become a Member shall continue as such until his severance from service date. A former Member shall be eligible to recommence participation in the Plan on the first day on which he completes an hour of service following his return to employment with the Employer. Employees who are included in a unit of Employees covered by a collective bargaining agreement between the Employees' representative and an Employer shall be excluded from participation in the Plan if retirement benefits were the subject of good faith bargaining between the Employees' representative and the Employer and the agreement does not require the Employer to include such Employees in the Plan. For purposes of the preceding sentence, the term "Employees' representative" shall not include any organization more than one-half of the members of which are Employees who are owners, officers or executives of the Employer. 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 be excluded from participation in the Plan. II-1 Notwithstanding any other provision of the Plan to the contrary, (i) any individual who was considered by the Employer to be an independent contractor, but who is later reclassified as a common-law Employee (excluding any Leased Employee described in clause (ii) below) of the Employer with respect to any portion of the period in which such individual was paid by the Employer as an independent contractor, or (ii) any Leased Employee, shall be excluded from participation in the Plan with respect to the period in which any individual described in clause (i) was considered to be an independent contractor, or the period in which any individual described in clause (ii) is a Leased Employee. The immediately preceding sentence shall fully apply only with respect to Plan Years (or portions thereof) in which none of the individuals described in such sentence is required to be covered in order to ensure that the Plan is operated in compliance with the requirements of Sections 401(a) and 410(b) of the Code. In the event that any individual who is included in the class of reclassified independent contractors or Leased Employees described in clause (i) or (ii) of the first sentence of this paragraph, must be covered with respect to a Plan Year (or portion thereof) in order to ensure that the requirements of the immediately preceding sentence are met, starting with the class of reclassified independent contractors, only such number of individuals within the class which includes the individual (beginning with the individuals with the lowest Considered Compensation determined on an annualized basis) as is necessary to ensure compliance with the requirements of the immediately preceding sentence shall be covered in the Plan only for the Plan Year (or portion thereof) that is necessary to ensure that the requirements of the immediately preceding sentence are met. 2.2 CERTIFICATION AND NOTICE OF ELIGIBILITY: Eligibility shall be determined and each Employee shall be notified of his admission as a Member by the Administrative Committee. 2.3 FROZEN PARTICIPATION: While service with an Affiliated Employer which is not an Employer is counted for purposes of determining Active Service, no person shall authorize Elective Contributions to the Plan except for the period(s) of service that he is actually employed in covered employment with and paid by an Employer. If an Employee is (i) transferred from an Employer to an Affiliated Employer which is not an Employer or (ii) otherwise ceases to be employed in covered employment with and paid by an Employer (but does not have a severance from service), his Account shall thereupon be frozen: he shall not be permitted to authorize contributions to the Plan, and his Account shall not share in the allocation of any Employer Contribution or, if applicable, any forfeitures (except for the period(s) of service that he is actually employed in covered employment with and paid by an Employer), but his Account will continue to share in any appreciation or depreciation and income or loss incurred by the Trust Fund during the period of time that he is employed by an Affiliated Employer which is not an Employer or that he is otherwise excluded from covered employment; provided, however, he shall continue to accrue Active Service. II-2 ARTICLE III CONTRIBUTIONS INDEX OF PLAN PROVISIONS COVERED IN ARTICLE III Section or Subsection Section Number - --------------------- -------------- Compensation Deferral Agreements for Elective Contributions 3.1 Compensation Deferral Agreements 3.1(a) Special Compensation Deferral Agreements 3.1(b) Dollar Limit on Elective Deferrals 3.1(c) Remedying Excess Deferrals 3.1(d) Rollover Contributions 3.2 Employer Contributions 3.3 Elective Contributions 3.3(a) Matching Contributions 3.3(b) Profit Sharing Contributions 3.3(c) Qualified Non-Elective Contributions 3.3(d) Restoration of Forfeited Benefits 3.3(e) Top-Heavy Minimum Contribution 3.3(f) Contribution Limits 3.3(g) Actual Deferral Percentage Test 3.3(h) Excess Contributions over ADP Limits 3.3(i) Actual Contribution Percentage Test 3.3(j) Prohibited Multiple Use of 2.0/2% Alternative Limit for the ADP and ACP tests 3.3(k) Excess Aggregate Contributions over ACP Limits 3.3(l) Composition of and Deadline for Payment of Employer Contributions 3.4 Return of Contributions for Mistake, Disqualification and Disallowance of Deduction 3.5 III-1 3.1 COMPENSATION DEFERRAL AGREEMENTS FOR ELECTIVE CONTRIBUTIONS: (a) COMPENSATION DEFERRAL AGREEMENTS: Subject to applicable conditions and limitations of the Plan, at such time or times as may be permitted by the Administrative Committee and in such manner and amounts as shall be consistent with the provisions of this Section, in lieu of receipt of such amounts in cash, Members may authorize the Employer to make Elective Contributions to the Plan on their behalf. Elective Contributions shall be held, invested and distributed as provided under applicable provisions of the Plan. Provided, however, no Compensation Deferral Agreement (or any other deferral mechanism that may be permitted under the Plan) may be adopted retroactively. In the event Elective Contributions are permitted, the opportunity to authorize Elective Contributions hereunder shall be announced and made available to all Members on an equal basis. Once Elective Contributions have been permitted, if the Administrative Committee determines to stop Elective Contributions, an announcement shall be made to all Employees and the Elective Contributions to the effective date of the announcement shall be retained in the Plan subject to its terms and provisions. From and after the date, if any, established by the Board pursuant to the preceding paragraph of this Section, or the Entry Date or other date with respect to which a Member is eligible to participate, if later, each Member may execute a Compensation Deferral Agreement in a form satisfactory to the Administrative Committee whereunder the Member shall agree subject to any necessary adjustments pursuant to this Section and Sections 3.3 and 4.3 (i) to a reduction (expressed in whole percentages only) of not less than one percent (1%) nor more than twelve percent (12%) of his Base Compensation (before such authorized reduction) attributable to the applicable pay periods, and (ii) to have the Employer contribute (as an Elective Contribution) to the Plan an amount equal to the amount of the authorized reduction, which Elective Contribution shall be allocated and credited to the Member's Employer Nonforfeitable Contributions Account. For purposes of this Section 3.1 and any other provisions of the Plan that utilize the term, "Base Compensation" shall mean, as to each Employee, compensation received during the Plan Year by the Employee from the Employer which is required to be reported as wages on the Employee's form W-2 (or its successor) for federal income tax withholding purposes, but determined without regard to any rules under 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). Notwithstanding the previous sentence, Base Compensation shall be determined without regard to (a) cash payments for (i) auto allowances, (ii) third party promotion funds, (iii) company/division-wide special contests, (iv) stock option III-2 exercises, (v) Employee suggestion winners, and (vi) reimbursements under the officers' medical reimbursement plan, as well as (b) non-monetary compensation such as (i) awards, e.g., sales trips, (ii) Employer-provided automobile and (iii) imputed income on term life insurance benefits. Base Compensation shall also be determined before reduction under a compensation deferral agreement under (i) the Plan or another plan described in Section 401(k) or 408(k) of the Code, (ii) an annuity described in Section 403(b) of the Code or (iii) an election under a cafeteria plan described in Section 125 of the Code. The definition of Base Compensation as used herein is intended to be reasonable, nondiscriminatory and not by design to favor Highly Compensated Employees. Reductions authorized under Compensation Deferral Agreements shall be irrevocable, except that Elective Contributions may be increased or decreased on the first day of any periodic pay period coincident with or next following any subsequent first day of the first quarter or third quarter of the Plan Year (or such other date(s) as may be prescribed by the Administrative Committee) with reasonable notice as may be required by the Administrative Committee. Elective Contributions may be discontinued at any time with reasonable notice as may be required by the Administrative Committee; provided, however, if Elective Contributions are discontinued at the request of a Member, such Contributions may not be resumed until the first day of any periodic pay period coincident with or next following the first day of the first quarter or third quarter of the Plan Year (or such other date(s) as may be prescribed by the Administrative Committee) following receipt by the Administrative Committee of reasonable notice as may be required by the Administrative Committee. Under special circumstances, the Administrative Committee may permit different or additional effective dates for increases or decreases of Elective Contributions authorized under Compensation Deferral Agreements, or may waive the otherwise applicable notice requirement, in order to prevent hardship to any Member, provided that the waiver is not contrary to the best interests of the other Members. (b) SPECIAL COMPENSATION DEFERRAL AGREEMENTS: Notwithstanding the preceding subsection, if the Administrative Committee so determines in its sole discretion, prior to the first day of the last month of the calendar year (or such other month during a Plan Year as determined by the Administrative Committee), each Member may execute a Compensation Deferral Agreement (in such form as is satisfactory to the Administrative Committee and hereinafter referred to as a "Special Compensation Deferral Agreement") providing for an increase or a reduction of Elective Contributions with respect to any part or all of the Member's Base Compensation for any part or all of the selected month during the Plan Year; provided, however, (i) such Special Compensation Deferral Agreement shall be deemed to modify and override any prior Compensation Deferral Agreement during the period covered by the Special Compensation III-3 Deferral Agreement, (ii) the deferrals authorized under the Special Compensation Deferral Agreement may be increased, reduced or revoked only if permitted by the Administrative Committee and (iii) the Special Compensation Deferral Agreement shall automatically terminate as of the earlier of such time (a) it is revoked by the Member in accordance with nondiscriminatory rules established by the Administrative Committee or (b) the last day of the period with respect to which authorized reductions thereunder are contributed to the Plan. All deferrals required under the Plan as a result of the execution of a Special Compensation Deferral Agreement shall be subject to all applicable terms, conditions, and limitations of the Plan. As of the date that the Special Compensation Deferral Agreement ceases to be operative, the Member's then otherwise operative Compensation Deferral Agreement shall govern deferrals to be made on behalf of the Member. (c) DOLLAR LIMIT ON ELECTIVE DEFERRALS: Notwithstanding any other provision of the Plan to the contrary, deferrals under the Plan in lieu of cash Considered Compensation, pursuant to any Compensation Deferral Agreement and Special Compensation Deferral Agreement, when added to (i) any employer contribution under the Plan or any other cash or deferred arrangement (described in Section 401(k) of the Code) to the extent not includible in gross income for the taxable year under Section 402(a)(8) of the Code, (ii) any employer contribution (to a simplified pension plan under a salary reduction agreement) to the extent not includible in gross income for the taxable year under Section 402(h)(1)(B) of the Code, (iii) any employer contribution to purchase an annuity contract (described in Section 403(b) of the Code) under a salary reduction agreement (within the meaning of Section 3121(a)(5)(D) of the Code) to the extent not includible in gross income for the taxable year under Section 403(b) of the Code, and (iv) any employer contribution (pursuant to any election to defer under any eligible deferred compensation plan) to the extent not includible in gross income under Section 457 of the Code, are limited to $7,000 (as adjusted, as may be determined by the Commissioner of Internal Revenue, at the same time and in the same manner as prescribed in Section 415(d) of the Code). In addition, without limiting the scope of the immediately preceding sentence, Elective Contributions and/or any similar elective deferrals (described in Section 402(g)(3) of the Code) to the Plan and/or any other qualified plan, contract or arrangement, which is described in the immediately preceding sentence and maintained by the Employer and/or any Affiliated Employer, shall not in the aggregate exceed the dollar limitation (as adjusted) of the immediately preceding sentence and Section 402(g) of the Code as in effect at the beginning of such taxable year. (d) REMEDYING EXCESS DEFERRALS: To the extent that a Member's elective deferrals authorized pursuant to the Sections of the Code referenced in the immediately preceding subsection exceed the applicable limit for the III-4 applicable year so that any amount otherwise excludable from such Member's gross income for federal income tax purposes is includible in his gross income, then, not later than the first March 1 following the close of the taxable year of such excess deferral, the Member shall notify the Administrative Committee in writing of any portion of any such excess deferrals which the Member has elected to allocate to the Plan. Such notice shall include the Member's certified written claim for a specified amount of excess deferrals for the preceding calendar year and shall be accompanied by the Member's certified written statement that if such amounts are not distributed, such excess deferrals, when added to amounts deferred under other plans or arrangements described in Sections 401(k), 408(k), 403(b) or 457 of the Code, exceeds the limit imposed under Section 402(g) of the Code for the year in which the deferral occurred. In accordance with Section 1.402(g)-1(e)(2) of the Income Tax Regulations, to the extent that the Member only has elective deferrals for the taxable year under the Plan and any other plan or arrangement described in the previous sentence which is maintained by the same Employer, such Employer may notify the Administrative Committee of any excess deferrals made on behalf of the Member. Following actual receipt by the Administrative Committee of the notice described in the immediately preceding paragraph, (notwithstanding any other provision of law or the Plan relating to spousal consent), not later than the first April 15 immediately following such March 1 deadline for written notification of the Administrative Committee, the Plan shall distribute to such Member in a lump sum (in cash or in kind) the amount of excess elective deferrals allocated to the Plan (and any income allocable to such amount). Such distribution shall be made first by distribution of nonmatched Elective Contributions, if any, allocated to the Member's Employer Nonforfeitable Contributions Account, and, if necessary, next by distribution of Elective Contributions which were matched by Matching Contributions. To the extent that such excess deferrals are attributable to matched Elective Contributions (and any income allocable thereto) which amounts are distributed to the Member pursuant to the preceding provisions of this Section, Matching Contributions (and any income allocable thereto) will be appropriately reduced and such reduced Matching Contributions (and any income allocable thereto) shall be applied as forfeitures pursuant to Section 4.6. Such reduction shall be made first by reduction of any Matching Contributions allocated to the Member's Employer Nonforfeitable Contributions Account, and, if necessary, next by reduction of Matching Contributions allocated to the Member's Employer Contributions Account. The provisions of this paragraph (which provide for reduction of Matching Contributions made with respect to Elective Contributions which are distributed hereunder) are intended to comply with the requirements of Sections 401(a), 401(k), 401(m) and 411 of the Code. To the extent that any provision of this paragraph is inconsistent with the preceding sentence, such provision shall be deemed to be inoperative and the Plan shall be operated in a manner that complies with the requirements of the immediately preceding sentence. III-5 Income or loss allocable to the portion of the Member's Employer Nonforfeitable Contributions Account that is attributable to excess elective deferrals (described below) shall be income or loss for the taxable year allocable to the portion of Member's Employer Nonforfeitable Contributions Account that is attributable to elective deferrals multiplied by a fraction, the numerator of which is the Member's excess elective deferrals for the year and the denominator of which is the balance as of the end of such year of the portion of the Member's Employer Nonforfeitable Contributions Account that is attributable to elective deferrals reduced by any gain and increased by any loss allocable to such balance for the taxable year. In the event that a separate subaccount is not maintained with respect to elective deferrals attributable to Elective Contributions (and any income allocable thereto), the portion of the Employer Nonforfeitable Contributions Account which is attributable to elective deferrals is determined by multiplying the balance of the Member's Employer Nonforfeitable Contributions Account by a fraction, the numerator of which is the Elective Contributions made on behalf of the Member and credited to the Member's Employer Nonforfeitable Contributions Account less any withdrawals, and the denominator of which is the sum of all Employer Contributions made on behalf of the Member and credited to the Member's Employer Nonforfeitable Contributions Account less any withdrawals. Similar rules apply with respect to determination of Matching Contributions allocated to the Employer Contributions Account and any income allocable thereto. No income or loss will be allocated for the gap period between the end of the taxable year to the date of distribution for Plan Years beginning on or after March 28, 1992 and, with respect to Plan Years beginning before such date, income or loss shall be allocated in accordance with the applicable Income Tax Regulations and Plan document as then in effect. Notwithstanding the preceding provisions of this subsection, any Member who has excess elective deferrals for a taxable year may receive a corrective distribution of such deferrals (and income attributable thereto) during the same year if the Member notifies the Administrative Committee of an excess deferral, the correcting distribution is made after the date on which the Plan received the excess deferral and the Plan designates and treats the distribution as a distribution of an excess deferral. Any distribution described in the immediately preceding sentence shall be made as soon as practicable, but absent circumstances beyond the control of the Administrative Committee, not later than 60 days after the first day of the month that occurs on or after the later of (i) the actual receipt by Administrative Committee of the Member's notification of an excess deferral or (ii) the date that the Plan actually receives the excess elective deferral. The income allocable to elective deferrals from the first day of the taxable year to the date of the distribution shall be determined by using the method described in the immediately preceding paragraph. III-6 Notwithstanding any other provision of this subsection to the contrary, the amount of excess elective deferrals that may be distributed under this subsection shall be reduced by any excess contributions over the ADP limit (described in Section 3.3) previously distributed with respect to a Member for the Plan Year beginning with or within such Member's taxable year. In no event shall any Member receive from the Plan a corrective distribution for the taxable year of an amount in excess of the Member's total elective deferrals under the Plan for the taxable year. Except as may be otherwise required under Section 3.3, any excess deferral not timely distributed shall remain in the Plan and be subject to otherwise applicable conditions and limitations thereof. In addition, any excess elective deferrals which are timely distributed under the preceding provisions of this subsection shall not be treated as an annual addition under Section 4.3. Also, excess deferrals by Non-Highly Compensated Employees shall not be taken into account under the ADP test of Section 3.3 to the extent such excess deferrals are made under the Plan or any other qualified plan of the Employer or any Affiliated Employer. A distribution of elective deferrals (and allocable income thereon) under this subsection shall not be considered as a distribution for purposes of compliance with the minimum distribution provisions of Section 6.6. 3.2 ROLLOVER CONTRIBUTIONS: (a) Qualified cash Rollover Contributions may be made to the Plan by any Employee other than a Leased Employee of amounts received by such Employee from an individual retirement account or annuity or from another qualified retirement plan, but only if such Rollover Contributions are made pursuant to and in accordance with applicable provisions of the Code as determined by the Administrative Committee. Any Employee who desires to make a Rollover Contribution to the Plan must complete, execute and file with the Administrative Committee a form prescribed by the Administrative Committee for such purpose. If the Administrative Committee on a nondiscriminatory basis approves the Rollover Contribution, it shall be credited to the Rollover Account of the Employee making such Rollover Contribution as of the last day of the month in which the Rollover Contribution is made. (b) Qualified direct Rollover Contributions may be made to the Plan by any Employee other than a Leased Employee of amounts which are eligible rollover distributions within the meaning of Section 402(f)(2)(A) of the Code from an employees' trust described in Section 401(a) of the Code which is exempt from tax under Section 501(a) of the Code, but only if such Rollover Contributions are made pursuant to and in accordance with applicable provisions of the Code as determined by the Administrative Committee. Any Employee desiring to effect such Rollover Contributions to the Plan must complete, execute and file with the Administrative Committee a form prescribed by the Administrative Committee for such purpose. Direct Rollover Contributions to the Plan must be in cash and may be effectuated only by wire transfer directed to the Trustee or by issuance of a check made payable to the Trustee which is negotiable only by the Trustee and which identifies the Employee for whose benefit the Rollover Contribution is being made. If the Administrative Committee on a nondiscriminatory basis approves the direct Rollover Contribution, it shall be credited to the Rollover Account of the Employee for whose benefit such Rollover Contribution is being made as of the last day of the month in which the Rollover Contribution is made. III-7 (c) The Rollover Account shall share in any income or loss and appreciation or depreciation of the Trust Fund. Rollover Contributions shall not have an effect on limitations under the Plan that are based on Contributions. (d) An Employee who has made a Rollover Contribution in accordance with Paragraph (a) or Paragraph (b) of this Section who has not otherwise become a Member of the Plan shall become a Member coincident with such Rollover Contribution; provided, however, that such Member shall not have a right to defer Compensation or have Employer Contributions made on his behalf until he has otherwise satisfied the eligibility requirements imposed by Article II. 3.3 EMPLOYER CONTRIBUTIONS: (a) ELECTIVE CONTRIBUTIONS: Subject to the applicable limitations of the Plan set forth below, each periodic pay period the Employer shall contribute to the Trust (without regard to its Net Income or accumulated earnings and profits) Elective Contributions for each Member in an amount equal to the amount by which the Member's Base Compensation was reduced pursuant to a Compensation Deferral Agreement (and, if applicable, Special Compensation Deferral Agreement) executed by the Member in accordance with Section 3.1. (b) MATCHING CONTRIBUTIONS: Subject to the applicable limitations of the Plan set forth below, in addition to the Elective Contributions described in the preceding subparagraph, with respect to each Plan Year (or such shorter period as may be prescribed by the Administrative Committee), the Employer may, in the discretion of the Board, contribute to the Trust (without regard to its Net Income or accumulated earnings and profits) Matching Contributions on behalf of each eligible Member in an amount equal to the lesser of (i) one hundred percent (100%) of the amount by which the Member's Base Compensation was reduced for the Plan Year (or such shorter period as may be prescribed by the Administrative Committee) pursuant to a Compensation Deferral Agreement (and, if applicable, Special Compensation Deferral Agreement) under Section 3.1, or (ii) three percent (3%) of the Member's Base Compensation for the Plan Year (or such shorter period as may be prescribed by the Administrative Committee), or such other percentage or dollar amount as may be established by the Board pursuant to uniformly applied nondiscriminatory rules. Any decision to provide a Matching Contribution or any increase or decrease in the percentage described in clause (i) or (ii) in effect from time to time, shall be communicated to all eligible Employees at least seven (7) days prior to the date on which eligible Employees are required to inform the Administrative Committee of an increase or decrease in their Elective Contributions pursuant to Section 3.1. III-8 Matching Contributions shall be made on behalf of each Member notwithstanding the fact that a Member does not remain in the employ of the Employer as of the last day of the Plan Year (or such shorter period as may be prescribed by the Administrative Committee). (c) PROFIT SHARING CONTRIBUTIONS: Subject to applicable limitations of the Plan set forth below, with respect to each Plan Year, the Employer may contribute to the Trust (from its Net Income or accumulated earnings and profits) Profit Sharing Contributions in such amount as may be determined by the Board in its discretion. Profit-Sharing Contributions, if any, shall be made on behalf of each Member who remains in the employ of the Employer on the last day of the Plan Year, notwithstanding the fact that the Member did not elect to authorize Elective Contributions under Section 3.1 at any time during such Plan Year. For purposes of the preceding sentence, (i) any Employee whose employment terminates on account of normal retirement, Total and Permanent Disability, or death, shall be deemed to be in the employ of the Employer on the last day of the Plan Year in which the termination of employment occurs, and (ii) any Employee who is, on the last day of the Plan Year (or applicable shorter period), on a leave of absence to which such Employee is entitled under the FMLA shall be deemed to be in the employ of the Employer on such last day unless final regulations issued under the FMLA do not require such treatment for this purpose. Notwithstanding any other provision of the Plan to the contrary, any Member (i) whose employment terminates prior to the last day of the Plan Year, or (ii) who would otherwise not be treated as employed in covered employment on the last day of the Plan Year, shall nevertheless be treated as employed on the last day of the Plan Year, to the extent necessary to ensure compliance with Section 401(a)(4), Section 401(a)(26) and/or Section 410(b) of the Code. (d) QUALIFIED NON-ELECTIVE CONTRIBUTIONS: At the election of the Board, in lieu of distributing excess Employer Contributions to Highly Compensated Employees in order to satisfy the ADP test or the ACP test, as described below in this Section, the Employer may make Qualified Non-Elective Contributions on behalf of Non-Highly Compensated Employees who are Members in such amounts as are sufficient to satisfy the ADP test or the ACP test, as applicable. Qualified Non-Elective Contributions, if any, shall be made on behalf of each Member who (i) is a Non-Highly Compensated Employee and (ii) remains in the employ of the Employer as of the last day of the Plan Year. For purposes of the preceding sentence, (i) any Employee whose employment terminates on account of normal retirement, Total and Permanent Disability, or death, shall be deemed to be in the employ of the Employer on the last day of the Plan Year in which the termination of employment occurs, and (ii) any Employee who is, on the last day of the Plan Year (or applicable shorter period), on a leave of absence to which such Employee is entitled under the FMLA shall be deemed to be in the employ of the Employer on such last day unless final regulations issued under the FMLA do not require such treatment for this purpose. III-9 In addition, notwithstanding any other provision of the Plan to the contrary, any Member whose employment terminates prior to the last day of the Plan Year, and who would otherwise not be treated as employed in covered employment on the last day of the Plan Year, shall, nevertheless, be treated as employed on the last day of the Plan Year, to the extent necessary to ensure compliance with Section 401(a)(4), Section 401(a)(26) and/or Section 410(b) of the Code. (e) RESTORATION OF FORFEITED BENEFITS: Not later than the last day of the Plan Year in which occurs any repayment described in Section 4.6, the Employer shall contribute (without regard to its Net Income or accumulated earnings and profits) an amount which, when added to unallocated forfeitures, shall be equal to the amount previously forfeited under applicable provisions of the Plan by any Member entitled to have his Account restored in accordance with Section 4.6. In addition, as soon as administratively practicable following receipt of a claim under circumstances described in Section 6.7, the Employer shall contribute (without regard to its Net Income or accumulated earnings and profits) an amount equal to the value of the forfeited benefits described in and payable under Section 6.7. (f) TOP-HEAVY MINIMUM CONTRIBUTION: In the event that the Plan is a Top-Heavy Plan described in Article VII with respect to any Plan Year, the Employer shall contribute (without regard to its Net Income or accumulated earnings and profits) any amount necessary to ensure that Members who are entitled to a minimum allocation pursuant to Section 7.3(c) in fact receive such allocation. III-10 (g) CONTRIBUTION LIMITS: No Contribution by the Employer shall exceed a sum equal to fifteen percent (15%) of the total compensation paid or accrued during its taxable year ending with or within the Plan Year to all Members. No Contribution shall be made to the Plan under circumstances which would result in any violation of the limitations of Section 3.1, this Section or Section 4.3 of the Plan. The Employer shall maintain such records as may be necessary to demonstrate compliance with the nondiscrimination tests set forth below in this Section. (h) ACTUAL DEFERRAL PERCENTAGE TEST: The actual deferral percentage ("ADP") for all eligible Highly Compensated Employees shall not exceed the greater of: (i) the actual deferral percentage for the group of all eligible Non-Highly Compensated Employees multiplied by 1.25, or (ii) the actual deferral percentage of the group of all eligible Non-highly Compensated Employees multiplied by 2.0; provided, however, that the actual deferral percentage for the group of eligible Highly Compensated Employees may not exceed the actual deferral percentage of the group of all eligible Non-Highly Compensated Employees by more than two percentage points. For purposes of the immediately preceding sentence, the provisions of Section 401(k)(3) of the Code and Section 1.401(k)-1(b) of the Income Tax Regulations are hereby incorporated into the Plan for all purposes. In addition, for Plan Years beginning after December 31, 1988, if (i) any Highly Compensated Employee is eligible to authorize Elective Contributions under the Plan and to have Matching Contributions allocated with respect thereto or (ii) such Highly Compensated Employee is eligible to make elective deferrals (described in Section 402(g)(3) of the Code) under any other cash or deferred arrangement (described in Section 401(k) of the Code) and/or to make employee contributions (described in Section 401(m) of the Code) or to receive matching contributions (described in Section 401(m)(4)(A) of the Code) under any other qualified plan of the Employer and/or any Affiliated Employer regardless of whether such plan contains a cash or deferred arrangement, the disparities between the actual deferral percentages of the respective groups of eligible Highly Compensated Employees and Non-Highly Compensated Employees shall be reduced as described in Section 1.401(m)-2 of the Income Tax Regulations, and the provisions of subsection (k) below. III-11 Subject to the provisions of the Plan set forth below, the actual deferral percentage for a specified group of eligible Employees for a Plan Year shall be the average of the actual deferral ratios (calculated separately for each Employee in such group) of the sum of Elective Contributions, Qualified Non-Elective Contributions, if any, and Profit Sharing Contributions, if any, actually paid over to the Trust on behalf of each such Employee for such Plan Year, and allocated to the Employee's Employer Nonforfeitable Contributions Account for such Plan Year, to the Employee's Considered Compensation for the Plan Year. For the purposes of the immediately preceding paragraph, provided that the ADP test is satisfied both with and without exclusion of these Elective Contributions, Elective Contributions shall include excess elective deferrals over the annual dollar limit described in Section 3.1 (even if distributed under Section 3.1) made by Highly Compensated Employees, as well as all Elective Contributions made by all Members that are not taken into account in the ACP test described in a subsection below. In accordance with Section 1.402(g)-1(e)(1)(ii) of the Income Tax Regulations, excess elective deferrals described in Section 3.1 made by Non-Highly Compensated Employees, to the extent made under the Plan or a plan maintained by an Affiliated Employer, shall not be taken into account under the ADP test described in this subsection. For the purpose of calculating the actual deferral percentages hereunder, subject to and in accordance with regulations or other authority issued under Sections 401(k) and/or 401(m) of the Code by the appropriate governmental authority, only such portion of the applicable Contributions (as described in the second preceding paragraph) as may be necessary to ensure compliance with the ADP test shall be taken into account for purposes of that test. With respect to Plan Years commencing after December 31, 1988, such actual deferral ratios of each eligible Employee and the ADP of each group shall be calculated to the nearest one-hundredth of one percent of the eligible Employee's Considered Compensation. The actual deferral ratio of an eligible Employee is zero if no applicable Contributions were allocated to such Employee's Employer Nonforfeitable Contributions Account for the Plan Year. In accordance with the requirements of Section 1.401(k)-1(b)(3) of the Income Tax Regulations, two or more cash or deferred arrangements (as defined in Section 401(k) of the Code) may be considered one such arrangement for purposes of determining whether such arrangements satisfy the requirements of Sections 401(a)(4), Section 401(k) and 410(b) of the Code. In such case, the cash or deferred arrangements included in such plans and the plans including such arrangements shall be treated as one arrangement and as one plan for purposes of applying this Section 3.3 and Sections 401(a)(4), 401(k) and 410(b) of the Code. If the Employer and any Affiliated Employer individually or collectively III-12 maintain two or more plans that are treated as a single plan for purposes of Section 401(a)(4) or 410(b) of the Code (other than Section 410(b)(2)(A)(ii) of the Code as in effect for Plan Years which begin after December 31, 1988), all cash or deferred arrangements that are included in such plans are to be treated as a single arrangement for purposes of this Section and Sections 401(a)(4), 401(k) and 410(b) of the Code. For Plan Years beginning after December 31, 1989, plans may be aggregated under the preceding provisions of this paragraph only if they have the same Plan Year. If any Highly Compensated Employee is a participant under two or more cash or deferred arrangements (as defined in Section 401(k) of the Code) of the Employer, for purposes of determining the actual deferral ratio with respect to such Highly Compensated Employee, all such cash or deferred arrangements shall be treated as one cash or deferred arrangement. For Plan Years beginning after December 31, 1988, if a Highly Compensated Employee participates in two or more cash or deferred arrangements that have different plan years, the immediately preceding sentence shall be applied by treating all cash or deferred arrangements with years ending with or within the same calendar year as a single arrangement. For Plan Years beginning after 1988, contributions and allocations under an employee stock ownership plan described in Section 4975(e)(7) of the Code may not be combined with contributions or allocations under any plan not described in Section 4975(e)(7) of the Code. With respect to Plan Years beginning prior to January 1, 1992, the Plan or, if the Plan is aggregated with another cash or deferred arrangement pursuant to the previous paragraph, such aggregated Plan may, in the discretion of the Administrative Committee, be restructured (in accordance with Sections 1.401(k)-1(h)(3)(iii), 1.401(a)(4)-1(c)(8)(iii) and 1.401(a)(4)-9(c) of the Income Tax Regulations) into two or more component plans for purposes of determining whether the Plan or aggregated Plan satisfies Section 401(a)(4) of the Code and the actual deferral percentage test set forth above. If each of the component plans of the Plan or aggregated Plan satisfies all of the requirements of Sections 401(a)(4) and 410(b) of the Code as if it were a separate Plan or aggregated Plan, then the Plan or aggregated Plan is treated as satisfying Section 401(a)(4) of the Code. If the Plan or aggregated Plan is restructured into component plans for purposes of testing for compliance with Section 401(a)(4) of the Code and the actual deferral percentage test, each component plan resulting from such restructuring shall consist of all of the allocations, accruals and other benefits, rights and features provided to a group of Employees under the Plan or aggregated Plan. Each Employee is permitted to be included in only one such component plan. If an eligible Highly Compensated Employee is subject to the family aggregation rules of Section 414(q)(6) of the Code (as described in the third III-13 paragraph of the Highly Compensated Employee definition in Article I) because such person is either a 5-percent owner (described in the Highly Compensated Employee definition) or a Highly Compensated Employee in the group consisting of the ten Highly Compensated Employees paid the greatest compensation (as described in the Highly Compensated Employee definition), the combined actual deferral ratio of the family group (which is treated as one Highly Compensated Employee) shall be determined by combining the Considered Compensation and the applicable Contributions (described above) which are allocated to the Employer Nonforfeitable Contributions Account of all such eligible family members described in this sentence. The Considered Compensation and the applicable Contributions (described above) allocated to the Employer Nonforfeitable Contributions Accounts of all eligible family members are disregarded for purposes of determining the ADP of the group of Non-Highly Compensated Employees. If any eligible Employee is required to be aggregated as a member of more than one family group, all eligible Employees who are members of those family groups that include such Employee are aggregated as one family group in accordance with the preceding provisions of this paragraph. (i) DISTRIBUTION OF EXCESS EMPLOYER CONTRIBUTIONS OVER ADP LIMITS: In the event that with respect to any Plan Year, the aggregate amount of Employer Contributions (taken into account in computing the ADP of Highly Compensated Employees for the Plan Year) exceeds the maximum amount of such Employer Contributions permitted under the ADP test set out above, then (to the extent that another means of satisfying the ADP test is not implemented by the Administrative Committee), within two and one-half months from the end of the Plan Year or as soon as practicable, but not later than the end of the Plan Year immediately following the Plan Year to which any such excess Employer Contributions pertain, such excess (plus allocable income or loss) shall be distributed to Highly Compensated Employees as provided below. In lieu of distribution of excess Contributions, within twelve (12) months after the end of the Plan Year, the Employer may make Qualified Non-Elective Contributions on behalf of Non-Highly Compensated Employees pursuant to Section 3.3(d) in an amount sufficient to satisfy the ADP test for the Plan Year. The amount of such excess Employer Contributions for a Highly Compensated Employee for a Plan Year shall be determined by the following leveling method, under which the actual deferral ratio of the Highly Compensated Employee with the highest actual deferral ratio is reduced to the extent required to (i) enable the Plan to satisfy the ADP test set out above, or (ii) cause such Highly Compensated Employee's actual deferral ratio to equal the ratio of the Highly Compensated Employee with the next highest actual deferral ratio. This process shall be repeated until the Plan satisfies the ADP test. For each Highly Compensated Employee, the amount of such excess Employer Contributions is III-14 equal to the applicable Contributions (described above) that were allocated to such Employee's Employer Nonforfeitable Contributions Account and taken into account in computing his actual deferral ratio (determined prior to the application of this and the immediately preceding sentence), minus the amount determined by multiplying such Employee's actual deferral ratio (determined after application of this and the immediately preceding sentence) by his Compensation used in determining such ratio. Any such excess Employer Contributions shall be allocated to Members who are subject to the family member aggregation rules of Section 414(q)(6) of the Code (described in the third paragraph of the Highly Compensated Employee definition) in the manner prescribed under Section 1.401(k)-1(f)(5) of the Income Tax Regulations. Any such excess Employer Contributions shall be treated as annual additions subject to Section 4.3 of the Plan. For purposes of this subsection, in accordance with Section 1.401(k)-1(f)(4)(ii)(C) of the Income Tax Regulations, income or loss that is allocable to excess Employer Contributions (described above) for the Plan Year shall be the income or loss allocable to the Member's Employer Nonforfeitable Contributions Account (to the extent attributable to applicable Contributions (described above) used in the ADP test), multiplied by a fraction. The numerator of this fraction is the Member's excess Employer Contributions for the Plan Year. The denominator is the balance of the Member's Employer Nonforfeitable Contributions Account (to the extent attributable to applicable Contributions (described above) used in the ADP test), as of the beginning of that Plan Year, plus the applicable Contributions (described above) allocated to his Employer Nonforfeitable Contributions Account for the Plan Year. No income or loss will be allocated for the gap period between the end of the Plan Year to the date of distribution for Plan Years beginning on or after March 28, 1992 and, with respect to Plan Years beginning before such date, income or loss shall be allocated in accordance with the applicable Income Tax Regulations and Plan document as then in effect. Excess Employer Contributions (and any income allocable thereto) shall be distributed from the portion of the Employer Nonforfeitable Contributions Account attributable to the Contributions used in the ADP test. In addition, to the extent that such excess Employer Contributions are attributable to Elective Contributions (and any income allocable thereto) which amounts are distributed to the Member pursuant to the preceding provisions of this subsection, Matching Contributions (and any income allocable thereto determined in the same manner as for other contributions) will be appropriately reduced and such reduced Matching Contributions (and any income allocable thereto) shall be applied as forfeitures pursuant to Section 4.6. Such reduction shall be made first by reduction of any Matching Contributions allocated to the Member's Employer III-15 Nonforfeitable Contributions Account, and, if necessary, next by reduction of Matching Contributions allocated to the Member's Employer Contributions Account. The provisions of this paragraph (which provide for reduction of Matching Contributions made with respect to excess Elective Contributions which are distributed hereunder) are intended to comply with the requirements of Sections 401(a), 401(k), 401(m) and 411 of the Code. To the extent that any provision of this paragraph is inconsistent with the preceding sentence, such provision shall be deemed to be inoperative and the plan shall be operated in a manner that complies with the requirements of the immediately preceding sentence. (j) ACTUAL CONTRIBUTION PERCENTAGE TEST: The actual contribution percentage ("ACP"), as determined for a Plan Year pursuant to this subsection, for all eligible Highly Compensated Employees shall not exceed the greater of: (i) the ACP for the group of all eligible Non-Highly Compensated Employees multiplied by 1.25, or (ii) the ACP of the group of all eligible Non-Highly Compensated Employees multiplied by 2.0; provided, however, that the ACP for the group of eligible Highly Compensated Employees may not exceed the ACP for the group of all eligible Non-Highly Compensated Employees by more than two percentage points (2%). For purposes of the immediately preceding paragraph, the provisions of Section 401(m) of the Code and Section 1.401(m)-1 of the Income Tax Regulations are hereby incorporated into the Plan for all purposes. In addition, for Plan Years beginning after December 31, 1988, if any Highly Compensated Employee is eligible to authorize Elective Contributions under the Plan and to have Matching Contributions allocated with respect thereto, or if such Highly Compensated Employee is eligible to make elective contributions (described in Section 402(g)(3) of the Code) under any other cash or deferred arrangement (described in Section 401(k) of the Code) and/or to make employee contributions (described in Section 401(m) of the Code) or to receive matching contributions (described in Section 401(m)(4)(A) of the Code) under any other qualified plan of the Employer and/or any Affiliated Employer regardless of whether such plan contains a cash or deferred arrangement, the disparities between the ACPs of the respective groups of eligible Highly Compensated Employees and Non-Highly Compensated Employees shall be reduced as described in Section 1.401(m)-2 of the Income Tax Regulations and subsequent provisions of this subsection. Subject to the limitations set forth below, the ACP for a specified group of eligible Employees for a Plan Year shall be the average of the actual III-16 contribution ratios (calculated separately for each Employee in such group) of the sum of any (i) Matching Contributions and allocated to his Employer Contributions Account for the Plan Year, and (ii) to the extent taken into account under Section 1.401(m)-1(b)(5) of the Income Tax Regulations and this subsection, any Elective Contributions, Qualified Non-Elective Contributions, and Profit Sharing Contributions allocated to the Employee's Employer Nonforfeitable Contributions Account for such Plan Year, to the Employee's Considered Compensation for the Plan Year. Notwithstanding anything in the preceding sentence to the contrary, the ACP described in the preceding sentence shall not include 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. To the extent that any Contribution is required to satisfy the ADP test set forth above in this Section, it may not be used to satisfy the ACP test. For purposes of computing the ACP ratios, Elective Contributions shall include excess elective deferrals described in Section 3.1 and any Elective Contributions that are not taken into account in the ADP test, provided that the ADP test is satisfied both with and without exclusion of these Elective Contributions. Any Qualified Non-Elective Contributions and any Profit Sharing Contributions allocated to the Member's Employer Nonforfeitable Contributions Account, as provided above, shall be taken into account for purposes of the ACP test to the extent that such amounts are not needed to pass the ADP test. With respect to Plan Years commencing after December 31, 1988, actual contribution ratios of each eligible Employee and the ACP of each group shall be calculated to the nearest one-hundredth of one percent of the eligible Employee's Considered Compensation. The actual contributions ratio of an eligible Employee is zero if no Contributions which are used in computing actual contribution ratios are allocated on behalf of such Employee. If the Employer and any Affiliated Employer, individually or collectively, maintain two or more plans that are treated as a single plan for purposes of Section 401(a)(4) or 410(b) of the Code (other than Section 410(b)(2)(A)(ii) of the Code as in effect for Plan Years which began after December 31, 1988), all employee contributions and matching contributions, as such contributions are defined in Section 1.401(m)-1(f) of the Income Tax Regulations, are to be treated as made under a single plan for purposes of this Section and Sections 401(a)(4), 401(k) and 410(b) of the Code. For Plan Years beginning after December 31, 1989, plans may be aggregated under the preceding provisions of this paragraph only if they have the same Plan Year. If any Highly Compensated Employee is a participant under two or more plans of the Employer or any Affiliated Employer which are subject to Section 401(m) of the Code, for purposes of determining the actual contribution ratio with respect to such Highly Compensated III-17 Employee, all employee and/or matching contributions described in Section 1.401(m)-1(f) of the Income Tax Regulations made under such plans must be aggregated. For Plan Years beginning after 1988, contributions and allocations under an employee stock ownership plan described in Section 4975(e)(7) of the Code may not be combined with contributions or allocations under any plan not described in Section 4975(e)(7) of the Code. With respect to Plan Years beginning prior to January 1, 1992, the Plan or, if the Plan is aggregated with another plan pursuant to the previous paragraph, such aggregated Plan may, in the discretion of the Administrative Committee, be restructured (in accordance with Sections 1.401(m)-1(g)(5), 1.401(a)(4)-1 (c)(8)(iii) and 1.401(a)(4)-9(c) of the Income Tax Regulations) into two or more component plans for purposes of determining whether the Plan or aggregated Plan satisfies Section 401(a)(4) of the Code and the ACP test set forth above. If each of the component plans of the Plan or aggregated Plan satisfies all of the requirements of Sections 401(a)(4) and 410(b) of the Code as if it were a separate Plan or aggregated Plan, then the Plan or aggregated Plan is treated as satisfying Section 401(a)(4) of the Code. If the Plan or aggregated Plan is restructured into component plans for purposes of testing for compliance with Section 401(a)(4) of the Code and the ACP test, each component plan resulting from such restructuring shall consist of all the allocations, accruals, and other benefits, rights and features provided to a group of Employees under the Plan or aggregated Plan. Each Employee is permitted to be included in only one such component plan. If an eligible Highly Compensated Employee is subject to the family aggregation rules of Section 414(q)(6) of the Code (described in the third paragraph of the Highly Compensated Employee definition in Article I) because such person is either a 5-percent owner (as described in the Highly Compensated Employee definition) or a Highly Compensated Employee in the group consisting of the ten Highly Compensated Employees paid the greatest compensation (as described in the Highly Compensated Employee definition), the combined actual contribution ratio of the family group (which is treated as one Highly Compensated Employee) shall be determined by combining the Considered Compensation and the applicable Contributions (described above) which are allocated to the appropriate Accounts of all eligible family members described in this sentence. The Considered Compensation and the applicable Contributions (described above) which are allocated to the appropriate Accounts of all eligible family members are disregarded for purposes of determining the ACP of the group of Non-Highly Compensated Employees. If any eligible Employee is required to be aggregated as a member of more than one family group, all eligible Employees who are members of those family groups that include that Employee shall be aggregated as one family group in accordance with the preceding provisions of this paragraph. III-18 (k) PROHIBITED MULTIPLE USE OF 2.0/2% ALTERNATIVE LIMITS FOR THE ADP AND ACP TESTS: Any disparity between the ADP or ACP of the respective groups of Highly Compensated Employees and Non-Highly Compensated Employees shall be reduced as described in Section 1.401(m)-2 of the Income Tax Regulations. Without limiting the scope of the immediately preceding sentence, any multiple use of the alternative method of compliance with the ADP and ACP tests (i.e., the 2.0/2% alternative limit which is described in clauses (ii) and (iv) below and in Sections 401(k)(3)(A)(ii)(II) and 401(m)(2)(A)(ii) of the Code) shall be determined and corrected, as appropriate, in accordance with the provisions of this subsection. Multiple use of the alternative limitation shall occur if the sum of (a) the ADP of the entire group of eligible Highly Compensated Employees under the Plan or any other cash or deferred arrangement (described in Section 401(k) of the Code) of the Employer or an Affiliated Employer and (b) the ACP of the entire group of eligible Highly Compensated Employees under the Plan or any other qualified plan of the Employer or an Affiliated Employer that is subject to Section 401(m) of the Code, exceeds the greater of: (i) 125 percent of the GREATER of (1) the ADP of the group of Non-Highly Compensated Employees eligible under the Plan (or other arrangement of the Employer or Affiliated Employer that is subject to Section 401(k) of the Code) for the Plan Year, or (2) the ACP of the group of Non-Highly Compensated Employees under the Plan (or other plan of the Employer or Affiliated Employer that is subject to Section 401(m) of the Code) for the Plan Year beginning with the Plan Year of the Plan (or other arrangement that is subject to Section 401(k) of the Code), plus (ii) the number two (2) plus the LESSER of clause (1) or (2) of (i) above; provided, however, in no event shall the amount computed under this (ii) exceed 200 percent of the lesser of clause (1) or (2) of (i) above; OR (iii) 125 percent of the LESSER of (1) the ADP of the group of Non-Highly Compensated Employees eligible under the Plan (or other arrangement of the Employer or Affiliated Employer that is subject to Section 401(k) of the Code) for the Plan Year, or (2) the ACP of the group of Non-Highly Compensated Employees under the Plan (or other plan of the Employer or Affiliated Employer that is subject to Section 401(m) of the Code) for the Plan Year beginning with the Plan Year of the Plan (or other arrangement that is subject to Section 401(k) of the Code), plus III-19 (iv) the number two (2) plus the GREATER of clause (1) or (2) of (iii) above; provided, however, in no event shall the amount computed under this (iv) exceed 200 percent of the lesser of clause (1) or (2) of (iii) above. Notwithstanding the previous paragraph, multiple use of the alternative limitation does not occur if (i) the ADP of the group of Highly Compensated Employees does not exceed the product of 1.25 multiplied by the ADP of the group of Non-Highly Compensated Employees, or (ii) the ACP of the group of Highly Compensated Employees does not exceed the product of 1.25 multiplied by the ACP of the group of Non-Highly Compensated Employees. The ADP and ACP of the group of eligible Highly Compensated Employees shall be determined after the use of all applicable Contributions to meet the ADP test and after use of all applicable Contributions to meet the requirements of the ACP test. In addition, the ADP and the ACP of the group of eligible Highly Compensated Employees shall be determined after any required corrective distribution of excess deferrals, excess Employer Contributions or excess aggregate contributions (described below) without regard to the rules hereunder relating to multiple use of the alternative methods of compliance contained in this subsection and Sections 401(k)(3)(A)(ii)(II) and 401(m)(2)(A)(ii) of the Code. If a multiple use of the alternative method of compliance with Sections 401(k) and 401(m) occurs, in order to eliminate the multiple use of such alternative method of compliance, the amount of the reduction to the ADP of the entire group of eligible Highly Compensated Employees under the Plan (and each other arrangement subject to Section 401(k) of the Code) shall be calculated in the manner described in Section 3.3(i) of the Plan and Section 1.401(k)-1(f)(2) of the Income Tax Regulations. Such required reduction shall be treated as an excess contribution under the arrangement subject to Section 401(k) of the Code. Instead of reducing the actual deferral ratios of Highly Compensated Employees, the Employer may eliminate the multiple use of the alternative limitation by making Qualified Non-Elective Contributions on behalf of Non-Highly Compensated Employees (pursuant to Section 3.3(d)) within twelve (12) months after the end of the Plan Year. (l) EXCESS AGGREGATE CONTRIBUTIONS OVER ACP LIMITS: In the event that with respect to any Plan Year, the aggregate amount of applicable III-20 Contributions taken into account under the ACP test (set forth above) on behalf of Highly Compensated Employees exceeds the maximum amount of such Contributions permitted under the ACP test set out above (determined by reducing such Contributions made on behalf of Highly Compensated Employees in order of ACPs beginning with the highest of such percentages), then, within two and one-half months from the end of the Plan Year or as soon as practicable, but not later than the end of the Plan Year immediately following the Plan Year to which any such excess aggregate contributions pertain, as described below, such excess (plus allocable income or loss) shall be forfeited, if forfeitable, or distributed to Highly Compensated Employees on the basis of the respective portions of such excess aggregate contributions attributable to each of the Highly Compensated Employees as provided below. In lieu of forfeiture or distribution of such excess aggregate contributions, within twelve (12) months after the end of the Plan Year, the Employer may make Qualified Non-Elective Contributions on behalf of Non-Highly Compensated Employees pursuant to Section 3.3(d) in an amount sufficient to satisfy the ACP test for the Plan Year. The amount of such excess aggregate contributions for a Highly Compensated Employee for a Plan Year shall be determined by the following leveling method, under which the actual contribution ratio of the Highly Compensated Employee with the highest actual contribution ratio is reduced to the extent required to (i) enable the Plan to satisfy the ACP test, or (ii) cause such Highly Compensated Employee's actual contribution ratio to equal the ratio of the Highly Compensated Employee with the next highest actual contribution ratio. This leveling process shall be repeated until the Plan satisfies the ACP test. For each Highly Compensated Employee, the amount of such excess aggregate contributions is equal to the applicable Contributions (described above) that were taken into account in computing his actual contribution ratio (determined prior to the application of this and the immediately preceding sentence), minus the amount determined by multiplying such Employee's actual contribution ratio (determined after application of this and the immediately preceding sentence) by his Compensation used in determining such ratio. Any such excess aggregate contributions shall be allocated to Members who are subject to the family member aggregation rules of Section 414(q)(6) of the Code (described in the third paragraph of the Highly Compensated Employee definition) in the manner prescribed under Section 1.401(k)-l(f)(5) of the Income Tax Regulations. For purposes of this subsection, in accordance with Section 1.401(m)-1(e)(3)(ii)(C) of the Income Tax Regulations, income or loss that is allocable to excess aggregate contributions (described above) for the Plan Year shall be the income or loss allocable to the applicable Contributions (described above) used in the ACP test multiplied by a fraction. The numerator of this fraction is the Member's excess aggregate contributions for the Plan Year. III-21 The denominator is the balance in the Member's Account to the extent used in the ACP test as of the beginning of the Plan Year, plus the applicable Contributions (described above) used in the ACP test for the Plan Year. No income or loss will be allocated for the gap period between the end of the Plan Year and the date of distribution for Plan Years beginning on or after March 28, 1992 and, with respect to Plan Years beginning before such date, income or loss shall be allocated in accordance with the Income Tax Regulations and Plan document as then in effect. The Administrative Committee (on or before the fifteenth day of the third month following the end of the Plan Year but, in any event, before the end of the next Plan Year) shall direct the Trustee to distribute to the Highly Compensated Employee having the highest actual contribution ratio, his portion of the excess aggregate contributions (and income allocable thereto) or, if forfeitable, forfeit such non-vested excess aggregate contributions attributable to Matching Contributions (and income allocable thereto) pursuant to Section 4.6. This process shall be repeated until the ACP test is satisfied, or until the actual contribution ratio of such Highly Compensated Employee equals the actual contribution ratio of the Highly Compensated Employee having the next highest actual contribution ratio. Vested Matching Contributions may not be forfeited to correct excess aggregate contributions; provided, however, an otherwise vested Matching Contribution may be forfeited if the Elective Contribution to which such Matching Contribution relates is an excess contribution (above the ADP limits of Section 401(k)(3) of the Code) or an excess deferral (above the annual dollar limit of Section 402(g) of the Code). The forfeiture or distribution of excess aggregate contributions (and allocable income) shall be made in the following order: (1) Forfeiture of non-vested Matching Contributions, if any; and (2) Distribution of vested Matching Contributions, if any. Forfeitures of excess aggregate contributions (and income allocable thereto) shall be administered in accordance with Section 4.6; provided, however, if forfeitures are allocated to Members under Section 4.6, no forfeitures may be allocated to a Highly Compensated Employee whose excess aggregate contributions were reduced pursuant to the previous paragraph. Excess aggregate contributions are still counted as Employer Contributions, for purposes of Sections 404 and 415 of the Code, for the Plan Year when made, even if distributed from the Plan. In addition, forfeitures of excess Matching Contributions to satisfy the ACP test are still counted as annual additions under Section 415 of the Code for the Plan Year when made on behalf of the applicable Highly Compensated Employees from whose Accounts such III-22 amounts were forfeited. If forfeitures are re-allocated to Members' Accounts pursuant to Section 4.6, such forfeitures are also treated as annual additions under Section 415 of the Code on behalf of such Members for the Plan Year in which such amounts are re-allocated. (m) MANDATORY DISAGGREGATION OF CERTAIN PLANS: Notwithstanding any provision of this Section 3.3 to the contrary, the Plan shall be operated in accordance with Section 1.401(k)-1(g)(11) of the Income Tax Regulations concerning mandatory disaggregation of certain types of plans. Subject to all the requirements of Section 1.401(k)-1(g)(11)(iii) of the Income Tax Regulations, the following plans shall be treated as comprising separate plans: (i) PLANS BENEFITING COLLECTIVE BARGAINING UNIT EMPLOYEES. A plan that benefits employees who are included in a unit of employees covered by a collective bargaining agreement and employees who are not included in such a collective bargaining unit is treated as comprising separate plans. (ii) ESOPS AND NON-ESOPS. For Plan Years beginning on or after January 1, 1991, the portion of a plan that is an employee stock ownership plan described in Section 4975(e) or 409 of the Code (an ESOP) and the portion of the plan that is not an ESOP are treated as separate plans, except as otherwise permitted under Section 54.4975-11(e) of the Income Tax Regulations. (iii) PLANS BENEFITING EMPLOYEES OF QUALIFIED SEPARATE LINES OF BUSINESS. If an Employer is treated as operating qualified separate lines of business for purposes of Section 410(b) of the Code, the portion of a plan that benefits employees of one qualified separate line of business is treated as a separate plan from the portions of the same plan that benefit employees of the other qualified separate lines of business of the Employer. (iv) PLANS MAINTAINED BY MORE THAN ONE EMPLOYER. (A) MULTIPLE EMPLOYER PLANS. If a plan benefits employees of more than one Employer and the employees are not included in a unit of employees covered by a collective bargaining agreement (a multiple employer plan), the plan is treated as comprising separate plans each of which is maintained by a separate Employer. (B) MULTIEMPLOYER PLANS. The portion of a plan that benefits employees who are included in a collective bargaining unit, the portion of a plan that benefits employees who are included in another collective bargaining unit and the portion of a plan that benefits III-23 non-collective bargaining unit employees are all treated as separate plans. Consistent with Section 413(b) of the Code, the portion of a plan that is maintained pursuant to a collective bargaining agreement is treated as a single plan maintained by a single employer that employs all the employees benefiting under the same benefit computation formula and covered pursuant to that collective bargaining agreement. The non-collectively bargained portion of the plan is treated as maintained by one or more employers, depending on whether the non-collective bargaining unit employees who benefit under the plan are employed by one or more employers. 3.4 COMPOSITION OF AND DEADLINE FOR PAYMENT OF EMPLOYER CONTRIBUTIONS: Employer Contributions shall be paid to the Trustee in cash or in kind (including shares of common stock of the Plan Sponsor). Should contributions be made in the form of common stock of the Plan Sponsor, which is not issued and purchased on the open market or otherwise, for purposes of determining the number of shares to be contributed to the Plan, common stock of the Plan Sponsor shall be valued at its closing price on the date last traded on or prior to the most recent valuation date (or its closing price or average closing prices on such other date(s) as may be prescribed by the Administrative Committee under nondiscriminatory rules uniformly applied and announced to all Members) immediately preceding the date on which such shares are contributed to the Plan. Any Employer Elective Contributions made pursuant to Compensation Deferral Agreements for the Plan Year shall be paid to the Trustee (in installments based on the Employer's pay period and in an amount equal to the amount by which all Members' Base Compensation was reduced pursuant to Compensation Deferral Agreements applicable to the pay period) not later than thirty (30) days after the end of the Employer's pay period to which such Contributions are attributable, while all other Contributions of an Employer for each Plan Year shall be paid to the Trustee in one or more installments as the Administrative Committee may from time to time determine; provided, however, the Contribution may be paid not later than the time prescribed by law for filing the Employer's federal income tax return (including extensions thereof) for such Employer's taxable year ending with or within the Plan Year if (i) the Contribution is treated by the Plan in the same manner that the Plan would treat a Contribution actually received on the last day of such taxable year and (ii) either of the following conditions are satisfied: (1) the Employer designates the Contribution in writing to the Trustee as a payment on account of such taxable year, or (2) the Employer claims such Contribution as a deduction on its federal income tax return for such taxable year; and, further provided, that to the extent required under regulations or other authority prescribed by the appropriate governmental authority, any Contributions (other than Elective Contributions) which are to be taken into account for purposes of determining the ADP or ACP (defined in Section 3.3) shall be paid to the Trustee not later than the last day of the 12-month period that immediately follows the end of the Plan Year to which such Contributions pertain. III-24 3.5 RETURN OF CONTRIBUTIONS FOR MISTAKE, DISQUALIFICATION OR DISALLOWANCE OF DEDUCTION: The assets of the Trust Fund shall in no event be paid to or revert to any Employer or be used for any purpose other than the exclusive benefit of the Members and their Beneficiaries and the reasonable expenses of administering the Plan except that: (a) If an Employer makes a Contribution by mistake of fact, such mistaken Contribution may revert and be repaid to the Employer within one year after the payment of the Contribution; (b) The Employer's Contribution for each Plan Year is conditioned on the Plan's initial qualification under Section 401 of the Code and the Employer's Contribution may revert and be repaid to the Employer within one year after the date of denial of the initial qualification of the Plan; and (c) The Employer's Contribution is conditioned upon the deductibility thereof under Section 404 of the Code and, to the extent the deduction is disallowed, the Contribution may revert and be repaid to the Employer within one year after the disallowance of the deduction. In any case hereinabove described in clauses (a), (b), or (c) of this Section, the Employer shall, subject to the limitations set forth below, have exclusive authority and absolute discretion to determine whether a Contribution, or any part thereof, shall revert and be repaid to it or shall instead remain a part of the Trust Fund. The amount which may be repaid to the Employer under clauses (a) or (c) of this Section may not exceed the excess of (i) the amount contributed over (ii) the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Earnings attributable to such excess contribution shall not be repaid, and losses attributable thereto shall reduce the amount which may be returned. If the repayment of the amount attributable to the mistaken Contribution would cause the balance of any Member's Account to be reduced to less than the balance which would have been in the Account had the mistaken amount not been contributed, then the amount which may be repaid to the Employer shall be limited so as to avoid such reduction. III-25 ARTICLE IV PARTICIPATION 4.1 PERIODIC CERTIFICATION BY EMPLOYER: As soon as practicable after each Plan Year (or such shorter period as may be prescribed by the Administrative Committee), each Employer shall certify to the Administrative Committee the amount of any Elective, Matching, Qualified Non-Elective, and/or Profit Sharing Contributions that it made for the period then ended, the names of its Members entitled to share in each type of Contribution, the number of years of Active Service of its Members, the amount of Base Compensation paid to each Member for such period, the amount of Considered Compensation paid to each such Member for such period, and the amount of Considered Compensation paid to all its Members for such period. Such certification shall be conclusive evidence of such facts. 4.2 ALLOCATION OF EMPLOYER CONTRIBUTIONS: (a) ELECTIVE CONTRIBUTIONS: As of the end of each pay period to which Elective Contributions described in Section 3.1 apply, Elective Contributions authorized by the Member for such pay period pursuant to a Compensation Deferral Agreement (and permitted under applicable limitations of the Plan to be made by the Employer on behalf of the Member) shall be allocated to the Member's Employer Nonforfeitable Contributions Account. (b) MATCHING CONTRIBUTIONS: As of the last day of each Plan Year (or such shorter period as may be prescribed by the Board) to which any Matching Contributions apply, Matching Contributions described in Section 3.3(b) on behalf of each appropriate Member shall be allocated to the Member's Employer Contributions Account. (c) PROFIT SHARING CONTRIBUTIONS: As of the end of the Plan Year to which any Profit Sharing Contribution applies, the Administrative Committee shall allocate any Profit Sharing Contribution (made in accordance with applicable provisions of Section 3.3(c)) among each Member who satisfies the requirements of Section 3.3(c) in the proportion that the total Considered Compensation of each such Member for such Plan Year bears to the total Considered Compensation for all such Members for such Plan Year, and shall credit each such Member's proportionate share to the Member's Employer Nonforfeitable Contributions Account and/or Employer Contributions Account, as specified in resolutions adopted by the Board and communicated to Members; provided, however, absent such specification, the Administrative Committee shall credit each Member's proportionate share to the Member's Employer Contributions Account. IV-1 (d) QUALIFIED NON-ELECTIVE CONTRIBUTIONS: As of the end of the Plan Year to which any Qualified Non-Elective Contribution applies, the Administrative Committee shall allocate the Qualified Non-Elective Contribution for the Plan Year (made in accordance with applicable provisions of Section 3.3(d)) among each eligible Member who satisfies the requirements of Section 3.3(d) in the proportion that total Considered Compensation of each such Member for the Plan Year bears to total Considered Compensation for all such Members for such Plan Year, and shall credit each such Member's proportionate share to the Member's Employer Nonforfeitable Contributions Account. (e) TOP-HEAVY MINIMUM CONTRIBUTION: Notwithstanding any other provision of the Plan to the contrary, if the Plan is a Top-Heavy Plan described in Article VII for the Plan Year, such portion of the Employer's Contribution (made pursuant to applicable provisions of Section 3.3(f)) shall be allocated among the Employer's Members who are in its employ at the end of the Plan Year (including Members who, except for Section 7.4(f) of the Plan, may not otherwise be entitled to share in the allocation) as may be required to ensure that each such Member is credited with an amount which when added to any other portion of the Employer Contribution allocated to his Account will equal the minimum allocation required under Section 7.3(c) of the Plan. Any such amount allocated hereunder shall be specially allocated pursuant hereto and credited to the Member's Employer Contributions Account. (f) RESTORATION OF FORFEITED AMOUNTS: The Administrative Committee shall allocate any Employer Contribution (made in accordance with applicable provisions of Section 3.3(e) to restore an Account in accordance with the requirements of Section 4.6) to the Account required to be restored under applicable provisions of Section 4.6. The Administrative Committee shall temporarily hold any Employer Contribution (made in accordance with Section 3.3 to restore an Account in accordance with the requirements of Section 6.7) in an unallocated distribution account until it can be paid out in accordance with Section 6.7. Distribution from the unallocated distribution account to the appropriate person shall be made as soon as practicable. If a Member has been Transferred during a pay period or the Plan Year, such Member shall be entitled to have allocated to his Account a portion of the Employer Contribution made by each Employer by whom such Member was employed during such pay period or Plan Year, and such Member's share of each Employer's Contribution shall be computed with respect to each such Employer in the manner hereinabove provided. IV-2 4.3 LIMITATION ON ADDITIONS TO ACCOUNT: Capitalized terms used in this Section which are not otherwise defined in Article I of the Plan are defined in Section 4.3(d). (a) MEMBER COVERED SOLELY IN THIS PLAN: This Section 4.3(a) applies only if the Member does not participate in, and has never participated in, another qualified plan, a welfare benefit fund, as defined in Section 419(e) of the Code, or an individual medical account, as defined in Section 415(l)(2) of the Code, maintained by the Employer, which provides an Annual Addition. (i) If the Member does not participate in, and has never participated in another qualified plan, a welfare benefit fund, as defined in Section 419(e) of the Code, or an individual medical account, as defined in Section 415(l)(2) of the Code, maintained by the Employer, the amount of Annual Additions which may be credited to the Member's Account as of any allocation date for any Limitation Year will not exceed the lesser of (1) the Maximum Permissible Amount or (2) any other limitation contained in the Plan. If the Employer Contribution that would otherwise be contributed or allocated to the Member's Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Permissible Amount, the amount contributed or allocated will be reduced so that the Annual Additions for the Limitation Year will equal the Maximum Permissible Amount. (ii) Prior to the determination of the Member's actual compensation for a Limitation Year, the Employer may determine the Maximum Permissible Amount on the basis of a reasonable estimation of the Member's annual Compensation for such Limitation Year, uniformly determined for all Members similarly situated. (iii) As soon as is administratively feasible after the end of the Limitation Year, the Maximum Permissible Amount for such Limitation Year shall be determined on the basis of the Member's actual Compensation for such Limitation Year. (iv) Pursuant to Section 1.415-6(b)(6) of the Income Tax Regulations, if, as a result of the allocation of forfeitures, a reasonable error in estimating a Member's annual compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of Section 3.1 of the Plan and Section 402(g)(3) of the Code) that may be made with respect to a Member under the limits of Section 415 of the Code, or any other facts and circumstances as the Internal Revenue IV-3 Service determines justify the availability of this Section 4.3(a)(iv), there is an Excess Amount with respect to a Member for a Limitation Year, such Excess Amount shall be disposed of as follows: (1) First, if the Member is in the service of the Employer at the end of the Limitation Year, then such Excess Amounts in the Member's Account must not be distributed to the Member, but shall be reallocated to a temporary suspense account and shall be reapplied to reduce future Employer Contributions under the Plan for such Member in the next Limitation Year, and for each succeeding Limitation Year, if necessary. (2) If after application of Section 4.3(a)(iv)(1) an Excess Amount still exists, and the Member is not in the service of the Employer at the end of the Limitation Year, then such Excess Amounts in the Member's Account must not be distributed to the Member, but shall be reallocated to a temporary suspense account and shall be reapplied to reduce future Employer Contributions for all remaining Members in the next Limitation Year and each succeeding Limitation Year if necessary. (3) If a temporary suspense account is in existence at any time during the Limitation Year pursuant to this Section, it will not participate in the allocation of the Trust Fund's investment gains and losses. If a temporary suspense account is in existence at any time during a Limitation Year, all amounts in the suspense account must be applied as set forth above before any Employer Contributions may be made to the Plan for that Limitation Year. Excess Amounts may not be distributed to Members or former Members. If due to a reasonable error in determining the amount of Elective Contributions that may be made within the limits of Section 415 of the Code, in accordance with Section 1.415-6(b)(6) of the Income Tax Regulations, the Plan shall distribute Elective Contributions to the extent that such distribution reduces the Excess Amount. Any such amounts distributed shall not be taken into account for purposes of computing (i) the dollar limit on Elective Contributions under Section 3.1 of the Plan and Section 402(g) of the Code, (ii) the ADP test under Section 3.3 of the Plan and Section 401(k)(3) of the Code, and (iii) the ACP test under Section 3.3 of the Plan and Section 401(m)(2) of the Code. IV-4 (b) MEMBER COVERED UNDER ANOTHER DEFINED CONTRIBUTION PLAN: This Section 4.3(b) applies if, in addition to the Plan, the Member is covered under another qualified plan which is a defined contribution plan, a welfare benefit fund, as defined in Section 419(e) of the Code, or an individual medical account, as defined in Section 415(l)(2) of the Code, maintained by the Employer during any Limitation Year, which provides an Annual Addition during the Limitation Year. (i) The Annual Additions which may be credited to a Member's Account under the Plan for any such Limitation Year will not exceed the lesser of (1) the Maximum Permissible Amount reduced by the Annual Additions credited to a Member's account under the other plans, welfare benefit funds and individual medical accounts for the same Limitation Year or (2) any other limitation contained in the Plan. If the Annual Additions with respect to the Member under other defined contribution plans, welfare benefit funds, and individual medical accounts, maintained by the Employer are less than the Maximum Permissible Amount and the Employer Contribution that would otherwise be contributed or allocated to the Member's Account under the Plan would cause the Annual Additions for the Limitation Year to exceed this limitation, the amount contributed or allocated will be reduced so that the Annual Additions under all such plans and funds for the Limitation Year will equal the Maximum Permissible Amount. If the Annual Additions with respect to the Member under such other defined contribution plans, welfare benefit funds, and individual medical accounts, in the aggregate, are equal to or greater than the Maximum Permissible Amount, no amount will be contributed or allocated to the Member's Account under the Plan for the Limitation Year. (ii) Prior to determining the Member's actual Compensation for the Limitation Year, the Employer may determine the Maximum Permissible Amount in the manner described in Section 4.3(a)(ii). (iii) As soon as is 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 Member's actual Compensation for such Limitation Year. (iv) Pursuant to Section 1.415-6(b)(6) of the Income Tax Regulations, if, as a result of the allocation of forfeitures, a reasonable error in estimating a Member's annual compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of Section 3.1 of the Plan and Section 402(g)(3) of the Code) that may be made with respect to a Member under the IV-5 limits of Section 415 of the Code, or any other facts and circumstances as the Internal Revenue Service determines justify the availability of this Section 4.3(b)(iv), a Member's Annual Additions under the Plan and all such other plans result in an Excess Amount, such Excess Amount shall be deemed to consist of the Annual Additions last allocated, except that Annual Additions attributable to a welfare benefit fund will be deemed to have been allocated first regardless of the actual allocation date. (v) If an Excess Amount was allocated to a Member's Account on an allocation date of the Plan which coincides with an allocation date of another plan, the Excess Amount attributed to the Plan will be the product of: (1) the total Excess Amount allocated as of such date, multiplied by (2) the ratio of (A) the Annual Additions allocated to the Member's Account for the Limitation Year as of such date under the Plan, divided by (B) the total Annual Additions allocated to the Member's Account for the Limitation Year as of such date under the Plan and all qualified defined contribution plans. (vi) Any Excess Amounts attributed to the Plan shall be disposed of as provided in Section 4.3(a)(iv). If due to a reasonable error in determining the amount of Elective Contributions that may be made within the limits of Section 415 of the Code, in accordance with Section 1.415-6(b)(6) of the Income Tax Regulations, the Plan shall distribute Elective Contributions to the extent that such distribution reduces the Excess Amount. Any such amounts distributed shall not be taken into account for purposes of computing (i) the dollar limit on Elective Contributions under Section 3.1 of the Plan and Section 402(g) of the Code, (ii) the ADP test under Section 3.3 of the Plan and Section 401(k)(3) of the Code, and (iii) the ACP test under Section 3.3 of the Plan and Section 401(m)(2) of the Code. (c) MEMBER COVERED UNDER DEFINED BENEFIT PLAN: If the Employer maintains, or at any time maintained, a qualified defined benefit plan covering any Member of the Plan, the sum of the Member's Defined Benefit Fraction and Defined Contribution Fraction will not exceed 1.0. For purposes of this Section 4.3, all defined contribution plans of an Employer are to be IV-6 treated as one defined contribution plan and all defined benefit plans of an Employer are to be treated as one defined benefit plan, whether or not such plans have been terminated. If the sum of the Defined Contribution Fraction and Defined Benefit Plan Fraction exceeds 1.0, the rate of accrual of the annual benefit of the defined benefit plan(s) will be reduced so that the sum of the fractions will not exceed 1.0. In no event will the annual benefit be decreased below the amount of the accrued benefit to date. If additional reductions are required for the sum of the fractions to equal 1.0, the reductions will then be made to the Annual Additions of the defined contribution plans. If the defined benefit plan does not contain provisions which correspond to this provision, the Annual Addition to the defined contribution plans for the Limitation Year will be reduced so that the sum of the fractions will not exceed 1.0. (d) DEFINITIONS: For purposes of this Section 4.3, the following terms shall be defined as follows: (i) ANNUAL ADDITION -- With respect to any Member, an Annual Addition for the Limitation Year shall be the sum of (1) all Employer Contributions allocated to his Account; (2) any forfeitures allocated to his Account; and (3) the amount of any nondeductible after-tax Member Voluntary Contributions allocated to his Account. Moreover, any Excess Amounts applied under Section 4.3(a)(iv) or 4.3(b)(vi) during the Limitation Year to reduce Employer Contributions shall be considered to be Annual Additions for such Limitation Year. Subject to the correction rules of Section 4.3(a)(iv), Contributions do not fail to be Annual Additions merely because they are excess deferrals (described in Section 3.1(c) of the Plan), excess contributions above the ADP limits (described in Section 3.3(h) of the Plan), or excess aggregate contributions above the ACP limits (described in Section 3.3(j) of the Plan); provided, however, excess deferrals which are timely distributed by April 15 following the year of deferral to the applicable Member pursuant to Section 3.1(d) of the Plan are not Annual Additions. Amounts allocated, after March 31, 1984, to an individual medical account, as defined in Section 415(l) of the Code, which is part of a defined benefit plan maintained by the Employer, are treated as Annual Additions to a defined contribution plan. Also, amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to postretirement 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. The Annual Addition for any Limitation Year beginning before January 1, 1987 shall not be recomputed to treat all Employee Contributions as Annual Additions. IV-7 (ii) COMPENSATION -- For each Limitation Year commencing after December 31, 1989, a Member's wages (as defined in Section 3401(a) of the Code for purposes of income tax withholding at the source) that are paid (within the meaning of Section 1.415-2(d)(3) and (4) of the Income Tax Regulations) to the Member by the Employer during the Limitation Year for services performed and reportable on the Member's form W-2 (or its successor), 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). For each Limitation Year commencing prior to January 1, 1990, Compensation for purposes of this Section shall be defined by reference to Section 1.415-2(d)(1) and (2) of the Income Tax Regulations. (iii) DEFINED BENEFIT FRACTION -- A fraction, the numerator of which is the sum of the Member's Projected Annual Benefits under all the defined benefit plans (whether or not terminated) maintained by the Employer and, subject to application of Section 416(h) of the Code and Article VII of the Plan relating to Top-Heavy Plans, the denominator of which is the lesser of 125 percent of the dollar limitation in effect for the Limitation Year under Section 415(b)(1)(A) and Section 415(d) of the Code or 140 percent of the Highest Average Compensation, including any adjustments under Section 415(b) of the Code. (iv) DEFINED CONTRIBUTION FRACTION -- A fraction, the numerator of which is the sum of the Annual Additions to the Member'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 Member's nondeductible employee contributions to all defined benefit plans, whether or not terminated, maintained by the Employer, and the Annual Additions to all welfare benefit funds as defined in Section 419(e) of the Code, and individual medical accounts as 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). Subject to application of Section 416(h) of the Code and Article VII of the Plan relating to Top-Heavy Plans, the Maximum Aggregate Amount in any Limitation Year is the lesser of 125 percent of the dollar limitation in effect under Section 415(c)(1)(A) of the Code or 35 percent of the Member's Compensation for such year. IV-8 The Annual Addition for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat any Employee Contributions as Annual Additions. (v) EMPLOYER -- The Employer that adopts the Plan. In the case of a group of Employers which constitutes a controlled group of corporations (as defined in Section 414(b) of the Code as modified by Section 415(h) of the Code) or which constitutes trades or businesses (whether or not incorporated) which are under common control (as defined in Section 414(c) as modified by Section 415(h) of the Code) or all members of an affiliated service group (as defined in Section 414(m) of the Code) or any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code, all such Employers shall be considered a single Employer for purposes of applying the limitations of this Section 4.3. (vi) EXCESS AMOUNT -- The excess of the Annual Additions credited to the Member's Account for the Limitation Year over the Maximum Permissible Amount. (vii) HIGHEST AVERAGE COMPENSATION -- 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 which corresponds with the Limitation Year. (viii) LIMITATION YEAR -- The 12-consecutive-month period which begins on the first day of the Plan Year and anniversaries thereof. 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. (ix) MAXIMUM PERMISSIBLE AMOUNT -- The Maximum Permissible Amount with respect to any Member shall be the lesser of (1) $30,000 (or, if greater, one-fourth of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code as in effect for the Limitation Year) or (2) except as otherwise provided below, 25 percent of his actual Compensation for the Limitation Year. Effective on January 1 of the calendar year prescribed in Section 415(d) of the Code and each January 1 IV-9 thereafter, the $30,000 limitation above will be automatically adjusted to the new dollar limitation determined by the Commissioner of Internal Revenue for that calendar year in accordance with applicable provisions of Sections 415(b), 415(c) and 415(d) of the Code. The new limitation will apply to Limitation Years ending within the calendar year of the date of the adjustment. The 25 percent of actual Compensation limitation referred to above shall not apply to any contribution for medical benefits (within the meaning of Section 401(h) or Section 419A(f)(2) of the Code) after separation from service which is otherwise treated as an Annual Addition, or to any other amount otherwise treated as an Annual Addition under Section 415(l)(1) or Section 419A(d)(2) of the Code. If a short Limitation Year is created because of an amendment changing the limitation to a different 12-consecutive-month period, the Maximum Permissible Amount shall not exceed the defined contribution dollar limitation for the short Limitation Year determined as follows: the dollar limitation in effect for the calendar year in which the short Limitation Year ends will be multiplied by a fraction, the numerator of which is the number of months in the short Limitation Year, and the denominator of which is 12. (x) PROJECTED ANNUAL BENEFIT -- A Member's annual retirement benefit (adjusted to the actuarial equivalent of a straight life annuity if expressed in a form other than a straight life or qualified joint and survivor annuity) to which the Member would be entitled under the respective plan, assuming that the Member will continue employment until the later of current age or normal retirement age under the respective plan, and that the participant's compensation for the current Limitation Year and all other relevant factors used to determine benefits under the respective plan will remain constant for all future Limitation Years. 4.4 PERIODIC VALUATION OF TRUST FUND: Subject to Section 4.10 concerning investment elections in individual investment funds, at the end of each Plan Year (or such shorter accounting period as may be prescribed by the Administrative Committee) the Trustee shall revalue the Trust Fund (excluding any Contributions made to the Trust during such Plan Year and any life insurance policies purchased under Section 4.11) at its then fair market value, determine the amount of income or loss and appreciation or depreciation incurred by the Trust Fund for the applicable accounting period then ended, and certify such information to the Administrative Committee. Subject to Section 4.10, with respect to Members' Accounts, the balances of which have not been withdrawn, distributed or otherwise paid pursuant to applicable provisions of the Plan as of the last day of the applicable accounting period, the Administrative Committee shall allocate such income or loss and any appreciation or depreciation of the Trust Fund to each Member's Account (without regard to whether the Member is employed by the IV-10 Employer at the end of the applicable accounting period) in the ratio that the balance credited to each Member's Account as of the first day of the applicable accounting period bears to the total of the balances credited to all such Members' Accounts as of the first day of the applicable accounting period. The Administrative Committee shall then allocate the income or loss and any appreciation or depreciation among each Member's individual accounts maintained under his Account in the ratio that the balance credited to each individual account as of the first day of the applicable accounting period bears to the total balance credited to his Account as of the first day of the applicable accounting period. Provided, however, the income or loss and any appreciation or depreciation for the first Plan Year (or such shorter accounting period as may be prescribed by the Administrative Committee) only will be allocated to Members' Accounts on the basis of Account balances as of the end of the first Plan Year or other applicable accounting period. Prior to the allocations described in this Section and subject to Section 4.10, Account balances shall be reduced as appropriate by amounts used to purchase insurance, forfeitures, withdrawals, payments or distributions, or other amounts properly chargeable to Members' Accounts under the Plan during the applicable accounting period. Notwithstanding the above, solely for purposes of the allocations made under this Section pursuant to nondiscriminatory rules which may be established by the Administrative Committee, on or after the first day of the applicable accounting period, any Rollover Contributions credited to the Member's Rollover Account, any direct transfers credited to the Member's Predecessor Plan Account, and/or any other Contributions credited to the Member's Account, shall be taken into account to ensure that such amounts transferred or contributed to the Plan share in the allocations hereunder with respect to such accounting period; provided, however, the Administrative Committee shall not be required to establish any such rules. 4.5 EXTRAORDINARY VALUATION OF TRUST FUND: Subject to Section 4.10 concerning investment elections in individual investment funds, at any time or times during a Plan Year that one or more of the Members become eligible for a distribution hereunder or request a withdrawal in accordance with applicable provisions of Article VI, and the Administrative Committee determines that because of such distribution or withdrawal a revaluation of the Trust Fund, a determination of the Trust Fund's income or loss, and an interim allocation are necessary to prevent discrimination against those Members who have not requested a distribution or withdrawal, the Trustee shall revalue the Trust Fund (excluding any Contributions made to the Trust during such Plan Year and any life insurance policies purchased under Section 4.11), as of a date selected by the Administrative Committee (which is administratively practical and is near the date of distribution or withdrawal), at its then fair market value, determine the amount of income earned or loss suffered by the Trust Fund for the period then ended, and certify such information to the Administrative Committee. Subject to Section 4.10, with respect to Members' Accounts, the balances of which have not been withdrawn, distributed or otherwise paid pursuant to applicable provisions of the Plan as of the date that an extraordinary valuation is required, the Administrative Committee shall allocate such income or loss and appreciation or depreciation of the Trust Fund to each IV-11 Member's Account (without regard to whether the Member is employed by the Employer on the date that an extraordinary valuation is required) in the ratio that the balance credited to each Member's Account as of the first day of the applicable accounting period bears to the total of the balances credited to all such Members' Accounts as of the first day of the applicable accounting period. The Administrative Committee shall then allocate the income or loss and appreciation or depreciation which was allocated to each Member's Account among each Member's individual accounts maintained under his Account in the ratio that the balance credited to each individual account as of the first day of the applicable accounting period bears to the total balance credited to his Account as of the first day of the applicable accounting period. Prior to the allocations described in this Section and subject to Section 4.10, Account balances shall be reduced as appropriate by amounts used to purchase insurance, forfeitures, withdrawals, payments or distributions, or other amounts properly chargeable to Members' Accounts during the applicable accounting period. Notwithstanding the above, solely for purposes of the allocations made under this Section pursuant to nondiscriminatory rules which may be established by the Administrative Committee, on or after the first day of the applicable accounting period, any Rollover Contributions credited to the Member's Rollover Account, any direct transfer allocated to the Member's Predecessor Plan Account, and/or any other Contributions credited to the Member's Account, shall be taken into account to ensure that such amounts transferred or contributed to the Plan share in the allocations hereunder with respect to such accounting period; provided, however, the Administrative Committee shall not be required to establish any such rules. 4.6 FORFEITURES AND ALLOCATION THEREOF: (a) GENERAL RULE: In the event that a Member terminates employment with any Employer and all Affiliated Employers, his vested interest in his Account will be paid (or deemed to be paid in the case of a nonvested Member, as described below) in accordance with this Section and Section 6.6, and any nonvested amount shall be forfeited at such time as is provided under subsequent provisions of this Section. Not later than the last day of the Plan Year in which such distribution (or deemed distribution) occurred, such forfeiture shall be applied first to reinstate any Account required to be reinstated during the Plan Year under the subsequent provisions of this Section, and any remaining forfeitures shall then be applied to reduce any subsequent Contributions of the Employer that contributed with respect to the amounts forfeited. (b) ACTUAL AND DEEMED CASH-OUTS OF NONVESTED OR PARTIALLY VESTED ACCOUNTS WITHIN TWO PLAN YEARS AFTER THE MEMBER'S TERMINATION OF EMPLOYMENT; REINSTATEMENT OF SUCH ACCOUNTS: With respect to any Member (i) who terminates employment with any Employer and all Affiliated Employers, (ii) who has a zero percent (0%) vested interest in his Employer Contributions Account or who has a vested interest in his Employer Contributions Account that is IV-12 greater than zero percent (0%), but is less than one hundred percent (100%) and (iii) who, pursuant to Section 6.6, receives a distribution of the full amount of his entire vested interest in his Employer Account in the form of a lump sum distribution by the close of the second Plan Year following the Plan Year in which his employment terminated (or is deemed under this Section and Section 6.6 to have received such distribution of zero dollars on the date his employment terminated in the case of a nonvested terminated Member described in clause (ii) above), which distribution (i) includes the full amount of his entire vested interest in his Employer Account as a result of his termination of participation in the Plan, and (ii) is $3,500 or less, or is more than $3,500 but is consented to, then, the nonvested, forfeitable amount credited to his Employer Contributions Account (as of the valuation date with respect to which the amount of the distribution is determined) shall become a forfeiture as of the distribution date (or as of the date his employment terminated if no amount is payable from Employer Contributions on his behalf, but such Member is deemed under this Section and Section 6.6 to have received a distribution of zero dollars on the date his employment terminated). Provided, however, in the event that a partially vested terminated Member (described in clause (ii) of the first sentence of this Section 4.6(b)) who received a distribution described in the immediately preceding sentence resumes employment covered under the Plan, his Employer Account shall be restored pursuant to Section 4.6(c) if he repays to the Trustee the full amount of such distribution attributable to Employer Contributions prior to the earlier of (i) the date on which the Member incurs a period of five (5) consecutive one year periods of severance, or (ii) five (5) years after the first date that he is subsequently re-employed by the Employer. If a terminated Member had a zero percent (0%) vested interest in his Employer Contributions Account at the time of his termination of employment and thus is deemed under this Section and Section 6.6 to have received a distribution of a vested interest in his Employer Contributions Account equal to zero dollars (thus actually receiving no distribution from his Employer Contributions Account as a result of his termination of employment), his Employer Contributions Account will be restored if he resumes employment covered under the Plan prior to incurring a period of five (5) consecutive one year periods of severance. Such reemployed Member shall be deemed to have repaid a distribution of zero dollars on the date of his reemployment with the Employer. (c) AMOUNT AND TIMING OF RESTORATION OF ACCOUNTS: With respect to Employer Accounts which are entitled to be restored as a result of compliance with all of the requirements of Section 4.6(b), the amount to be restored under the provisions of this Section 4.6(c) shall be the amount credited to the Member's Employer Account, both the vested and the nonvested portions, immediately prior to the rehired Member's distribution (or deemed distribution), unadjusted by any subsequent gains or losses. Such restoration shall be made as soon as administratively practicable after the later of the date the Member resumes employment covered under the Plan or the date on which any required repayment is completed and shall be effective as of the end of the Plan Year (or other period designated by the Administrative Committee) coincident with or next following the occurrence of the event which gives rise to the restoration of the Member's Employer Account. IV-13 Except as otherwise provided above, a Member's Employer Account shall not be restored upon resumption of employment covered under the Plan. Any portion of the Trust Fund attributable to Active Service prior to resumption of employment by a Member whose Employer Account has not been restored shall be held and distributed in accordance with applicable provisions of the Plan and elections made thereunder. Separate accounts may be established and maintained for Contributions allocable to such a Member after his resumption of employment covered under the Plan. (d) CASH-OUTS OF FULLY VESTED ACCOUNTS WITHIN TWO PLAN YEARS AFTER THE MEMBER'S TERMINATION OF EMPLOYMENT; NON-REINSTATEMENT OF SUCH ACCOUNTS: With respect to any Member (i) who terminates employment with any Employer and all Affiliated Employers, (ii) who has a vested interest in his Employer Contributions Account equal to 100% and (iii) who received a distribution from his Employer Account in the form of a lump sum distribution by the close of the second Plan Year following the Plan Year in which his employment terminated, which distribution (i) includes the full amount of his entire vested interest in his Employer Account as a result of his termination of participation in the Plan, and (ii) is $3,500 or less, or is more than $3,500 but is consented to, shall not be permitted to repay to the Trustee the full amount of such distribution attributable to Employer Contributions in order to restore his Employer Account. (e) DISTRIBUTIONS MADE MORE THAN TWO PLAN YEARS AFTER THE MEMBER'S TERMINATION OF EMPLOYMENT: With respect to a Member (i) who terminates employment with any Employer and all Affiliated Employers with greater than a zero percent (0%), but less than a one hundred percent (100%), vested interest in his Employer Contributions Account and (ii) who received a termination distribution from his Employer Account after the close of the second Plan Year following the Plan Year in which his employment terminated, any amount remaining in his Employer Contributions Account shall continue to be maintained as a separate account. At any relevant time, such Member's nonforfeitable portion of his separate account shall be determined in accordance with the following formula: X = P (AB + D) - D IV-14 For purposes of applying the formula: X is the nonforfeitable portion of such separate account at the relevant time; P is the Member's vested interest in his Employer Contributions Account at the relevant time; AB is the balance of such separate account at the relevant time; and D is the amount of the distribution. For all other purposes of the Plan, a Member's separate account shall be treated as an Employer Contributions Account. The forfeitable portion of a terminated Member's separate Employer Contributions Account that is subject to such formula shall be forfeited on the date on which such Member incurs a period of five (5) consecutive one year periods of severance. (f) DEFERRED DISTRIBUTIONS OF PARTIALLY VESTED ACCOUNTS: With respect to a Member (i) who terminates employment with any Employer and all Affiliated Employers with greater than a zero percent (0%), but less than a one hundred percent (100%), vested interest in his Employer Contributions Account and (ii) who is not otherwise subject to the forfeiture provisions of Sections 4.6(b) or (e) above, the forfeitable portion of such terminated Member's Employer Contributions Account shall be forfeited on the date on which such Member incurs a period of five (5) consecutive one year periods of severance. (g) INVESTMENT OF NONFORFEITABLE PORTION OF EMPLOYER ACCOUNT: If Members are permitted to direct the investment of their Accounts in accordance with Section 4.10, a terminated Member shall be entitled to direct the investment of his Account up until such time as investments are liquidated, if applicable, and distribution of his entire vested interest is made in accordance with Article VI. Thereafter, the forfeitable portion of such Account shall be invested by the Trustee subject to the provisions of Article IX and the Trust Agreement. 4.7 EFFECTIVE DATE OF ALLOCATIONS AND ADJUSTMENTS: The Administrative Committee will credit to each eligible Member's Account the Member's portion of the Employer Contributions referred to in Section 4.2 so that all Employer Contributions will become effective and will be credited to each Member's Account as of the end of the Plan Year (or such shorter accounting period as may be prescribed by the Administrative Committee) for which they are attributable. In addition, any amounts contributed to any Member's Rollover Account or Predecessor Plan Account shall be credited to the appropriate Account as of the end of the Plan Year (or such shorter accounting period as may be prescribed by the Administrative Committee) to which they are attributable. The Administrative Committee shall credit to each Member's Account the Member's portion of the periodic adjustments and allocations required by Section 4.4 so that all periodic adjustments and allocations will become effective and will be credited to each Member's Account as of the end of the Plan Year (or such shorter accounting period as may be prescribed by the Administrative Committee) for which they are attributable. IV-15 In the event that interim adjustments and allocations are required by Section 4.5, they will become effective and will be entered in each Member's Account as of the end of the applicable accounting period next preceding the event requiring the interim adjustment and, additionally, allocation and distribution of benefits during the accounting period in which the interim adjustment or allocation is made shall take into account the interim adjustment and allocation. 4.8 ACCOUNTING FOR TRANSFERRED MEMBER: In the case of a Member who is Transferred during a Plan Year, the Administrative Committee, as of the date that the Member is Transferred, shall transfer on their books such Member's Account (including that portion of the Trust Fund allocated thereto) so that such Member's Account will always be reflected on the Administrative Committee's books as being attributable to the Employer with whom such Member is currently employed. 4.9 NO VESTING UNLESS OTHERWISE PRESCRIBED: No allocations, adjustments, credits or transfers shall ever vest in any Member any right, title or interest in the Trust Fund except at the times and upon the terms and conditions herein set forth. Except as otherwise may be provided in Section 4.10, the Trust Fund shall be, as to all Member's Accounts, a commingled fund. 4.10 INVESTMENT ELECTIONS WITH RESPECT TO COMMINGLED FUNDS: (a) INVESTMENT FUNDS ESTABLISHED: The assets of the Plan shall be invested in one or more categories of assets (which conform to any portfolio standards and guidelines established by the Trustee), including common stock issued by the Plan Sponsor, as may be determined from time to time in the discretion of the Administrative Committee and announced and made available on an equal basis to all Members subject to the provisions of this Section 4.10. When the Trustee or any agent thereof (i) receives funds to be invested or determines that assets from those funds, if applicable, should be sold and the proceeds held for a period of time pending reinvestment or other purpose, or (ii) has notice that required or appropriate filings with the Securities and Exchange Commission have not been timely accepted as filed and funds received have been designated to be invested in shares of common stock issued by the Plan Sponsor, then, prior to completion of required or appropriate filings with the Securities and Exchange Commission, such funds may be held in cash, or invested in short-term investments such as U.S. Treasury bills, commercial paper, demand notes, money market funds, any savings accounts, money market accounts, certificates of deposit or like investments with the commercial department of any bank, including any bank serving as Trustee, as long as they bear a reasonable rate of IV-16 interest and the bank is supervised by the United States or a state, any common, pooled or collective trust funds which any bank, including any bank serving as Trustee, or any other corporation may now have or in the future may adopt for such short-term investments (the governing document of such common, pooled or collective trust fund(s) being hereby incorporated herein by reference), and other similar assets which may be offered by the federal government, or any national or state bank (whether or not serving as Trustee hereunder), and as may be determined by the Trustee, in its discretion, which assets will remain a part of the fund to which they would otherwise relate. (b) ELECTION PROCEDURES ESTABLISHED: If Members are given the right to designate the funds in which their Accounts are invested pursuant to Section 4.10(a), on such form as shall be prescribed by the Administrative Committee, each Member shall designate the percentage of his Account (as such Account presently exists and the percentage of future contributions, if any, to be allocated to such Account) to be invested in any one or more funds, as such funds may be established from time to time as set forth in Section 4.10(a). Except as provided in Section 4.11, Matching, Profit Sharing and Qualified Non-Elective Contributions shall be exclusively invested in Common Stock issued by the Plan Sponsor. At such times as shall be prescribed by the Administrative Committee in its discretion, the percentage elected to be placed in any one fund may be changed by the Member, which change will be effective after such period of time as shall be established by the Administrative Committee. The Administrative Committee shall determine whether any such change as to investments will change the Member's Account as it presently exists or whether it will only be effective as to succeeding investments of Contributions; however, any such change, when made, shall continue to be effective until revoked or changed in a like manner. The rules established and the discretion exercised by the Administrative Committee hereunder shall apply to all Members on a nondiscriminatory basis. (c) ALLOCATIONS ATTRIBUTABLE TO DIRECTED INVESTMENTS IN COMMINGLED FUNDS: If Members are given the right to designate the fund in which their Accounts are invested pursuant to Section 4.10(a), each valuation and determination of income or loss and appreciation or depreciation provided for hereunder shall reflect the value of the different categories of assets separately. The Administrative Committee shall allocate appreciation, depreciation, income, and loss attributable to each such category of assets among the Members' various Accounts (each type of account being considered separately) in the ratio that the amount in each account which was invested in a particular category as of the first day of the applicable accounting period bears to the amount in all accounts which was invested in such category as of the first day of such applicable accounting period. IV-17 Notwithstanding the foregoing, if a fund is invested in shares of an open-end mutual fund or in an investment account maintained by an insurance company, the procedures set forth in this Paragraph shall be adjusted to the extent necessary to correspond to such mutual fund's or insurance company's net income (or net loss) allocation procedure. 4.11 DIVERSIFICATION ELECTION: Effective June 30, 1993, each Member who (i) is age 55 or older and (ii) has been credited with a period of at least five (5) years of Active Service for vesting purposes (hereinafter a "Qualified Member") shall be permitted to direct the investment of up to fifty percent (50%) of the balance credited to his Accounts that is invested in Common Stock issued by the Plan Sponsor (the "Company Stock Fund") into one or more of the other investment funds then available under the Plan pursuant to Section 4.10. The procedural requirements pertaining to this diversification election shall be established by the Administrative Committee in the exercise of its discretion and shall apply to all Qualified Members on a uniform and nondiscriminatory basis. In accordance with Section 401(a)(4) of the Code, the right to make a diversification election pursuant to the foregoing provisions of this Section shall be currently and effectively available to all Qualified Members and shall not substantially favor Highly Compensated Employees who are Qualified Members. 4.12 PURCHASE OF LIFE INSURANCE FOR INDIVIDUAL ACCOUNTS: The Administrative Committee may direct the Trustee to purchase insurance for the Account of individual Members on each Member's life, whether ordinary life, term life, universal life and/or any other life insurance contracts which are not ordinary life insurance contracts, in such amount as shall be determined by the Administrative Committee in its discretion with or without consultation with the Members. In the alternative, the Administrative Committee may permit each Member to select the amount of insurance, if any, to be purchased by the Trustee for the Account of the Member. If the Administrative Committee permits its Members to elect insurance coverage, each Member must notify the Administrative Committee in writing regarding the amount and type of insurance he desires and the Administrative Committee will direct the Trustee to effect the purchases as appropriate. If the Administrative Committee elects (or permits the Members to elect) to purchase incidental life insurance coverage, the Administrative Committee must select the insurance company which will act as insurer for its Members and notify the Trustee of its election in writing. The premium on the amount of life insurance purchased for each Member shall be limited as follows: (i) if only ordinary life insurance contracts (i.e. contracts with both nondecreasing death benefits and nonincreasing premiums) are purchased, the premium may not exceed an amount which, when added to the total amount of the Employer's Contributions previously allocated to the purchase of ordinary life insurance for the Member, will be less than one-half of the Employer's total Contributions allocated to such Member at such time; (ii) if only term insurance contracts, universal life insurance contracts and/or any other life insurance contracts which are not ordinary life insurance contracts are purchased, the premium may not exceed an amount which, when added to the total amount of the Employer's Contributions previously IV-18 allocated to the purchase of term insurance for the Member will be less than one-quarter of the Employer's total Contributions allocated to such Member at such time; and (iii) if a combination of ordinary life insurance contracts and term insurance contracts, universal life insurance contracts and/or any other life insurance contracts which are not ordinary life insurance contracts are purchased, the premium may not exceed an amount which, when added to the total amount of the Employer's Contributions previously allocated to the purchase of life insurance for the Member, will be less than one-quarter of the Employer's total Contributions allocated to such Member at such time (for the purpose of computing the present premium and amount previously allocated to the purchase of insurance for purpose of this clause (iii), only one-half of the funds expended for premiums on ordinary life insurance contracts shall be counted but all funds expended for premiums on term life insurance shall be counted). The Trustee shall be the sole owner of all policies so purchased, and the Trustee shall be so designated in all policies and applications therefor. The Trustee will pay from the funds in the Member's Employer Account the initial and renewal premiums under policies on the Member's life. For any year that a Member's share of the Employer's Contribution is insufficient to meet the required premium payment, any amounts available in the Member's Employer Account will be applied to pay the premium, provided, however, in no event shall the aggregate of premiums paid from a Member's Employer Account under any life insurance contract exceed the above limits on the aggregate Employer Contributions made on behalf of such Member. In the event sufficient funds are not available within the limits of this Section for the payment of premiums, the policy shall be allowed to lapse or shall be endorsed as a paid up policy in a lesser amount, and a new policy of a lesser amount shall be acquired within the permissible premium limits. If the Member is uninsurable or is insurable only at substandard rates then all of the Contributions of the Employer shall instead be invested in assets other than life insurance to be held for the Member's benefit in his Account. Any insurer from which life insurance is purchased under this Section shall not be deemed a party to the Plan, and its rights and obligations shall be measured and determined solely by the terms of its policy contracts. Any policy issued or based on the life of a Member shall constitute an investment of funds to the credit of the Account of such Member and the premiums paid for such policy shall be charged to the Member's Account. Upon the death of a Member, the proceeds of any such policy shall be added to the amount distributable pursuant to applicable provisions of the Plan. In the event of a Member's retirement for reasons of age or disability, or his termination of employment, his Account shall include the vested cash value of any policy issued or based on his life. Any dividend or refunds payable upon policies purchased by the Trustee shall be used and applied in reduction of the next premium payable upon such policy. However, dividends or refunds payable upon the event of the death of a Member on whose life the policy is issued or based shall form a part of the death proceeds of such policy and shall be payable pursuant to applicable provisions of the Plan. The Administrative Committee shall direct the Trustee to convert the entire value of the life insurance policy at or before normal retirement age into cash or to provide periodic income, so that no portion of such value may be used to continue life insurance protection beyond retirement, or to distribute the contract to the Member. IV-19 Any insurance policy purchased hereunder shall provide that the proceeds of such policy or policies shall be payable to the Trustee; provided, however, the Trustee shall be required to pay over all proceeds of the policy to the Member's designated Beneficiary in accordance with the distribution provisions of Section 6.6. All insurance policies shall be non-transferable when owned by any person other than the Trustee. In the event of any conflict between applicable provisions of the Plan and the provisions of any insurance policies purchased hereunder, the provisions of the Plan shall control. Except as provided by the Act and any other applicable state or federal law which cannot be waived, the failure of the Administrative Committee to direct the purchase of any policy or the failure of the Trustee to obtain any policy under the Plan upon such direction, or the failure of the Trustee to pay any premium when due (whether or not funds are available therefor) under the Plan, will not give rise to any right, claim or benefit to any Member, Beneficiary, or other person against the Trustee, the Employer or the Administrative Committee. The Trustee shall have no right or obligation to determine whether any policy meets the requirements of this Section. The Trustee shall purchase such policies as of such dates, containing such terms, and requiring such premiums as the Administrative Committee shall, in its discretion, direct. Except as provided by the Act and any other applicable state or federal law which cannot be waived, neither the Trustee, the Administrative Committee, nor any Employer is responsible for the validity of any policies issued by an insurer, or for the failure on the part of an insurer to make payments provided by any such policies or for the action of any person which may render a policy null and void or unenforceable in whole or in part. 4.13 SPECIAL TRANSITION RULE: Notwithstanding any other provision of the Plan to the contrary, if the Plan is retroactively effective with respect to any Plan Year (or other applicable accounting period) of a Prior Plan, the Account of any individual who was a participant or Member during such Plan Year (or other applicable accounting period) shall be credited with any Employer Contributions under the Plan attributable to such accounting period, if such Member's Account would have been entitled to such an allocation under the Prior Plan immediately prior to the later of (i) the adoption of or (ii) the effective date of the amendment, restatement and continuation of the Prior Plan under the form of the Plan. In addition, notwithstanding any other provision of the Plan to the contrary, if the participant or Member described in the preceding sentence would have been so entitled under the Prior Plan immediately prior to the later of (i) the adoption of or (ii) the effective date of, its amendment, restatement and continuation under the form of the Plan, the Account of such Member shall be charged or credited, in accordance with the terms of the Prior Plan, with its proportionate share of the Trust Fund's income, loss, appreciation or depreciation attributable to such accounting period. IV-20 4.14 SECTION 16(b) RESTRICTIONS ON INSIDERS. (a) WITHDRAWALS FROM KENT STOCK FUND. In accordance with Rule 16b-3(d)(2)(i)(B) promulgated under Section 16 of the Securities Exchange Act of 1934, as amended ("Section 16"), if an officer, director or 10% shareholder of the Employer (as defined in Section 16 and referred to as an "insider") while in service withdraws cash or securities from an investment fund maintained under the Trust which invests in Employer securities ("Company Stock Fund"), the Administrative Committee will cease further Elective Contributions from being directed on the insider's behalf into the Company Stock Fund for a period of six (6) months from the date of the withdrawal. The requirements of the immediately preceding sentence shall not apply in the event of (i) an extraordinary distribution of all of the Employer's securities held by the Plan or (ii) a distribution in connection with death, retirement, disability, termination of employment, or a qualified domestic relations order as defined in Section 6.10. The only in-service withdrawals permitted under the Plan are hardship withdrawals pursuant to Section 6.8. In accordance with the Code and Section 6.8, the receipt of a hardship withdrawal by any Member results in a suspension of Elective Contributions by such Member for 12 consecutive months following receipt of the amount withdrawn. Consequently, the requirement set forth in the first sentence of this paragraph should be satisfied if an insider receives a hardship withdrawal since he will be prohibited from authorizing any future Elective Contributions for 12 months, which period exceeds the 6-month restrictions period required under Section 16. (b) CESSATION OF ELECTIVE CONTRIBUTIONS TO KENT STOCK FUND. If an insider's Elective Contributions are (i) no longer directed into the Company Stock Fund or (ii) only directed into the Company Stock Fund at a nominal level, the insider cannot resume or increase the investment of his Elective Contributions into the Company Stock Fund for at least six (6) months from the effective date of such direction. The requirement set forth in the immediately preceding sentence should be satisfied to the extent that Members are not permitted to change their investment elections under Section 4.10 more often than once every six months. The requirement of the first sentence of this paragraph does not apply to automatic purchases of Employer securities as a result of (i) the reinvestment of dividends, earnings and forfeitures and (ii) the allocation of Matching Contributions to the Company Stock Fund, to the extent that such purchases and allocations are non-elective and required by the terms of the Plan. Furthermore, in accordance with Section 4.10, the insider can authorize that his Elective Contributions be directed into investment funds that do not invest in Employer securities. (c) TRANSFER ACCOUNT BALANCE FROM KENT STOCK FUND TO ANOTHER INVESTMENT FUND. When a Member elects to switch all or a portion of his Account balance out of the Company Stock Fund into another investment fund, the Member effectively has made a decision to sell his interest in Employer securities. Similarly, a transfer of funds into the Company Stock Fund is treated as a purchase of Employer securities. With respect to insiders, such intra-plan transfers IV-21 will be exempt transactions, in accordance with Rule 16b-3(d)(2)(ii) under Section 16, provided that the transfer into or out of the Company Stock Fund is pursuant to an election made by the insider during a quarterly window period at least six months after the date of any previous intra-plan transfer election relating to the Company Stock Fund that was made by the insider. Consequently, intra-plan transfers by insiders may be effected only twice a year in six-month intervals. For purposes of this rule, a window period begins on the third business day following release for publication of the Plan Sponsor's quarterly statement of sales and earnings and ends on the twelfth business day following such date. In order to qualify for the exemption for intra-plan transfers, only the transfer election must take place during the window period; the actual transfer can occur outside the window period. (d) CESSATION OF FURTHER PURCHASES AFTER WITHDRAWAL FROM KENT STOCK FUND. In accordance with Rule 16b-3(d)(2)(i)(B) under Section 16, an intra-fund transfer by an insider out of the Company Stock Fund constitutes a withdrawal. Consequently, the Administrative Committee will cease future Elective Contributions from being invested on the insider's behalf into the Company Stock Fund for a period of six (6) months from the date of the intra-fund transfer out of the Company Stock Fund; therefore, if an insider authorizes an intra-fund transfer out of the Company Stock Fund, no portion of his future Elective Contributions may be directed into the Company Stock Fund for at least six months, however, such Elective Contributions can be directed into other investment funds maintained pursuant to Section 4.10. IV-22 ARTICLE V RETIREMENT 5.1 EARLY RETIREMENT: A Member may retire on the last day of any month in which he has attained age fifty-five (55) years or older and completed at least five (5) years of Active Service for vesting purposes. 5.2 NORMAL RETIREMENT: A Member may retire on the last day of the month ending coincident with or immediately following his normal retirement age. A Member's normal retirement age shall be his sixty-fifth (65th) birthday, from which time he shall henceforth be one hundred percent (100%) vested in his Account. 5.3 LATE RETIREMENT: A Member may continue his employment after he attains normal retirement age; provided, however, that he shall have the right to retire on any subsequent date. 5.4 RIGHTS OF MEMBERS AND PROHIBITION OF UNAUTHORIZED DISTRIBUTION: Until a Member retires or otherwise terminates service he shall be accorded all rights as a Member under the Plan, but, subject to Section 6.6, he shall receive no distribution until he actually retires or otherwise becomes entitled to a distribution under the provisions of Article VI. V-1 ARTICLE VI DISTRIBUTION OF BENEFITS Distributions under the Trust shall be made to Members, spouses, Beneficiaries, executors or administrators, as the case may be, only upon the following conditions and in the manner specified. 6.1 DEATH BENEFIT: On the death of a Member prior to complete distribution of such Member's Account, his death benefit shall be (i) 100% of the amount credited to his Account as of the end of the applicable accounting period (for which the last valuation was made) coincident with or next preceding the date of the Member's death, exclusive of any life insurance purchased under Section 4.11, (ii) an amount equal to any Rollover Contributions, and any direct transfers allocable to the Member's Predecessor Plan Account, made after the end of such accounting period which were not used to purchase life insurance under Section 4.11, (iii) an amount equal to any Employer Contributions made on behalf of such Member after the end of such accounting period which were not used to purchase life insurance under Section 4.11, (iv) the death benefit under any such life insurance contract, and (v) to the extent that the Member's Account has any undistributed balance which has not been paid as of the end of the applicable accounting period (for which the last valuation was made), that portion of the periodic adjustments and allocations required by Article IV to be credited to the Member's Account as of the end of the applicable accounting period next preceding or coincident with payment of the benefits described above. The death benefit shall be paid to the Member's surviving spouse, or if there is no surviving spouse or the surviving spouse consents in the manner described below, to such Member's designated Beneficiary (other than such surviving spouse). At any time, subject to the following provisions of this Section, each Member shall have the right to designate any Beneficiary or Beneficiaries to receive his death benefit and shall have the unrestricted right to revoke any such designation; provided, however, subject to the subsequent provisions hereof which permit the spouse to consent to the Member's waiver of the requirements of this sentence, any new designation of a Beneficiary (other than the Member's spouse) by a Member who is lawfully married (or deemed to be married under applicable local law) shall require a new spousal consent. Each such designation or revocation by a Member shall be evidenced by a written instrument which shall be (i) limited to a benefit for at least one specific Beneficiary (including a nonspouse Beneficiary, or a class of Beneficiaries or contingent Beneficiaries), (ii) filed with the Administrative Committee, (iii) signed by the Member, and (iv) bear the signature of at least one person who shall be a representative designated by the Administrative Committee or a Notary Public as witness to his signature. With respect to any Member who is lawfully married (or deemed to be married under applicable state law), any such Member's designation of a Beneficiary (other than the Member's spouse) to receive any portion of such death benefit shall be deemed to be ineffective, unless the VI-1 Member's spouse consents to such designation and acknowledges the effect of such election, which consent and acknowledgement shall be evidenced by a written instrument which shall be (i) limited to a benefit for at least one specific Beneficiary which may not be changed without spousal consent (or the spouse's consent expressly permits at least one additional designation of another Beneficiary without any requirement of further consent by such spouse if such spouse's consent expressly acknowledges that a more limited consent could be provided), (ii) filed with the Administrative Committee, (iii) signed by the spouse and (iv) bear the signature of at least one person who shall be a representative designated by the Administrative Committee or a Notary Public as witness to the signature. Notwithstanding the immediately preceding sentence, a Member's designation of a Beneficiary (other than the Member's spouse) shall be effective if it is established to the satisfaction of the Administrative Committee that the consent required in the preceding sentence may not be obtained because (i) there is no spouse, (ii) the spouse cannot be located, (iii) the Member has provided a duly certified copy of a court order issued by a court of competent jurisdiction which recognizes that the Member is legally separated or has been abandoned (under applicable local law) and the Administrative Committee has not received a duly certified copy of a qualified domestic relations order (described in Section 414(p) of the Code) which requires spousal consent, or (iv) there exists such other circumstance (as are prescribed under Sections 401(a)(11) and 417(a)(2) of the Code) which obviate the necessity of obtaining the consent described in the preceding sentence. In addition, if the surviving spouse is not legally competent to give consent, such spouse's legal guardian, who may be the Member, may give the required consent. Any consent by a Member's spouse (or establishment that the consent of a Member's spouse may not be obtained) shall be effective only with respect to such spouse. Notwithstanding any other provision hereof to the contrary, commencing with Plan Years beginning after October 22, 1986, any spousal consent which expressly acknowledges that a more limited consent could be provided may expressly provide that the spouse consents to the designation by the Member of any Beneficiary (or any number of specified Beneficiaries) without any requirement of further consent by the spouse and, in such event, no further spousal consent shall be required, provided that any change of Beneficiary by the Member does not exceed any limit contained in the spouse's consent on such Member's right to change his Beneficiary. Any spousal consent shall be deemed to be revocable unless it is expressly made irrevocable at the election of the Member's spouse. Any designation of a Beneficiary (other than the Member's spouse) which otherwise meets the above requirements of this Section shall become inoperative in the event that (i) the Member subsequently marries (or subsequently is deemed to be married under applicable state law), (ii) any missing spouse is located or (iii) any other circumstance which earlier precluded the necessity of obtaining consent of the Member's spouse no longer exists. If no designation of Beneficiary is on file with the Administrative Committee at the time of the Member's death, or if the Administrative Committee for any reason determines that such designation is ineffective, then such Member's spouse, if then living, or if not, then the executor, administrator, or other personal representative of the estate of such Member shall be conclusively deemed to be the Beneficiary designated to receive such Member's death benefit. VI-2 The provisions of this Section are intended to comply with the requirements of Sections 401(a)(11) and 417(a)(2) of the Code. To the extent any provision hereof is inconsistent with the preceding sentence, such provision shall be deemed to be inoperative and the Plan shall be operated in a manner which complies with the requirements of the immediately preceding sentence. Whenever the Trustee is authorized by this Plan or by a designation of Beneficiary to pay funds to a minor or an incompetent, the Trustee shall be authorized to pay such funds to a parent of such minor, to a guardian of such minor or incompetent, or directly to such minor, or to apply such funds for the benefit of such minor or incompetent in such manner as the Administrative Committee may in writing direct. The Trustee, Administrative Committee, and Employer shall be fully discharged with respect to any payment made in accordance with the preceding sentence. 6.2 RETIREMENT BENEFIT: Upon the normal retirement of a Member, his retirement benefit shall be (i) 100% of the amount credited to his Account as of the end of the applicable accounting period (for which the last valuation was made) coincident with or next preceding his retirement, exclusive of any life insurance purchased under Section 4.11, (ii) an amount equal to any Rollover Contributions, and any direct transfers allocable to the Member's Predecessor Plan Account, made after the end of such period, which were not used to purchase life insurance under Section 4.11, (iii) an amount equal to any Employer Contributions made on behalf of such Member after the end of such accounting period which were not used to purchase life insurance under Section 4.11, (iv) the value of any life insurance purchased under Section 4.11, and (v) to the extent that the Member's Account has any undistributed balance which has not been paid as of the end of the applicable accounting period (for which the last valuation was made), that portion of the periodic adjustments and allocations required by Article IV to be credited to the Member's Account as of the end of the applicable accounting period next preceding or coincident with payment of benefits described above. 6.3 TOTAL AND PERMANENT DISABILITY BENEFIT: In the event that the Administrative Committee determines that a Member is suffering from a Total and Permanent Disability, his disability benefit shall be (i) 100% of the amount credited to his Account as of the end of the applicable accounting period (for which the last valuation was made) coincident with or next preceding such determination, exclusive of any life insurance purchased under Section 4.11, (ii) an amount equal to any Rollover Contributions, and any direct transfers allocable to the Member's Predecessor Plan Account, made after the end of such period, which were not used to purchase life insurance under Section 4.11, (iii) an amount equal to any Employer Contributions made on behalf of such Member after the end of such accounting period which were not used to purchase life insurance under Section 4.11, (iv) the value of any life insurance purchased under Section 4.11, and, if applicable, (v) to the extent that the Member's Account has any undistributed balance which has not been paid as of the end of the applicable accounting VI-3 period (for which the last valuation was made), that portion of the periodic adjustments and allocations required by Article IV to be credited to the Member's Account as of the end of the applicable accounting period next preceding or coincident with payment of benefits described above. The Administrative Committee's determination as to whether there is a Total and Permanent Disability and the date on which such disability occurred shall be based upon the opinion of a physician selected or preapproved by the Administrative Committee, and shall be final and conclusive with respect to all persons and entities. 6.4 SEVERANCE BENEFIT: Upon a Member's severance from employment with the Employer and all Affiliated Employers, for any reason other than death, normal retirement, or Total and Permanent Disability, his severance benefit shall be an amount equal to the sum of: (i) 100% of the total amount credited to his Employer Nonforfeitable Contributions Account, Rollover Account, and Predecessor Plan Account, as of the end of the applicable accounting period (for which the last valuation was made) coincident with or next preceding the date of such Member's severance, any Contributions, Rollover Contributions or direct transfers made by or on behalf of the Member after the end of such accounting period which were allocated to any of the above-listed accounts, (ii) the percentage of the total amount credited to his Employer Contributions Account, as of the end of such accounting period coincident with or next preceding the date of such Member's severance, together with the percentage of the amount of any Contributions made on behalf of such Member after the end of such accounting period which were allocated to his Employer Contributions Account, as such percentage is shown in the table set out below for the number of whole years of Active Service credited to the Member prior to his date of severance of employment, (iii) the sum of (x) the portion of the cash surrender value of any life insurance policy purchased for the benefit of the Member and (y), the percentage of the balance of the cash surrender value of any life insurance policy purchased for the benefit of the Member as shown in the table set out below in this Section for the number of whole years of Active Service prior to his date of severance of employment, and, if applicable, (iv) to the extent that the Member's Account has any undistributed balance which has not been paid as of the end of the applicable accounting period (for which the last valuation was made), that portion of the periodic adjustments and allocations required by Article IV to be credited to the Member's Account as of the end of the applicable accounting period next preceding or coincident with payment of benefits described above. Less than two years. . . . . . . . . . . . . . .0% Two years, but less than three years . . . . . 40% Three years, but less than four years. . . . . 60% Four years, but less than five years . . . . . 80% Five years, or more. . . . . . . . . . . . . .100% All Contributions credited to the Member's Account after the end of the applicable accounting period (for which the last valuation was made) shall be net of any amount used to purchase life insurance pursuant to Section 4.11. The above vesting schedule is subject to automatic 100% vesting in the event of a full or partial termination of the Plan pursuant to Section 11.5. VI-4 The amount credited to such Member's Account which is not vested upon distribution shall be forfeited and applied as provided in Section 4.6. 6.5 ACCOUNTING FOR DISTRIBUTIONS; OFFSETS IN SPECIAL CIRCUMSTANCES: Subject to Section 4.6 concerning restoration of Members' Accounts and to Section 4.10 concerning individual investment direction, if applicable, any distribution of benefits under the Plan (and any forfeitures arising incident thereto) shall be subtracted from the affected Member's Account balance as of the end of the Plan Year (or such shorter accounting period as may be prescribed by the Administrative Committee) coincident with or next preceding the applicable accounting period in which such distribution was paid. Moreover, notwithstanding any other provision of the Plan to the contrary, if after a former Member's employment with the Employer and all other Affiliated Employers terminates, such person is (i) reemployed by the Employer after receiving a distribution pursuant to Section 6.6 and again becomes eligible for membership, and (ii) has his Employer Account restored pursuant to Section 4.6, then any benefits that such Member may become entitled to receive after reentry in the Plan shall be reduced by any amounts distributed from his Employer Account which were not repaid by such Member incident to restoration of his Employer Account pursuant to Section 4.6. 6.6 DISTRIBUTIONS-SETTLEMENT OPTIONS: (i) FORM AND METHOD OF PAYMENT OF BENEFITS: Except in the event of a special circumstance described in Sections 3.1, 3.3, 6.8, 11.4, 11.7 or 12.3, distributions shall be made under the Plan only upon the occurrence of one of the events described in Sections 6.1 through 6.4. To the extent required by Section 401(k) of the Code, the limits of this sentence shall continue to apply even if Trust Fund assets attributable to any Member's Account are transferred to another plan pursuant to applicable provisions of the Trust Agreement or Section 11.7. Subject to the next paragraph and Section 6.6(v), distributions provided for under the Plan shall be made only in the form of a lump sum payment in cash. With respect to any amounts invested in common stock of the Plan Sponsor, distribution shall be paid in cash in an amount equal to the value (as of the date or dates shares of common stock of the Plan Sponsor credited to the Member's Account are converted into cash) of the Member's vested interest in shares of common stock of the Plan Sponsor credited to such Member's Account, or in whole shares of common stock of the Plan Sponsor, or in any combination thereof as elected by the Member. In the event that the Member fails to make an election between cash or stock with respect to the portion of his vested Account balance that is invested in common stock of the Plan Sponsor, such Member shall receive cash. Any fractional shares of the Plan Sponsor to which the Member may be entitled shall always be valued and paid in cash. VI-5 A Member must consent, in writing, to any required distribution if the present value of the Member's vested Account balance (derived from Employer and any Employee Contributions) distributable under the Plan exceeds $3,500 and the Member has not attained the normal retirement age described in Article V. Notwithstanding any other provision of the Plan to the contrary, any Member who does not have a greater than zero percent (0%) vested interest in his Employer Contributions Account as of the date his employment by the Employer and all Affiliated Employers terminates, but who otherwise would have been eligible to receive a distribution as of such date had any portion of his Employer Contributions Account been more than zero percent (0%) vested, shall be deemed as of such date to have received a distribution of the vested balance of his Employer Contributions Account equal to zero dollars. After the Member's death, benefits may be paid in accordance with applicable provisions of the Plan without regard to the requirements of the first sentence of this paragraph. (ii) DISTRIBUTABLE ACCOUNT BALANCE DOES NOT EXCEED $3,500. If the present value of a Member's vested Account balance (derived from Employer Contributions and any Employee Contributions) which is distributable under the Plan does not exceed $3,500, the Member's vested Account balance shall be distributed in a lump sum payment. Such distribution may be made without the necessity of obtaining the consent of the Member and/or his spouse or any other Beneficiary. Such payment may be made as soon as practicable, but (absent circumstances beyond the control of the Administrative Committee) in no event later than sixty (60) days after the last day of the Plan Year in which the Member's employment with the Employer and all Affiliated Employers is terminated. (iii) DISTRIBUTABLE ACCOUNT BALANCE EXCEEDS $3,500: If the present value of a Member's vested Account balance (derived from Employer Contributions and any Employee Contributions) which is distributable under the Plan is in excess of $3,500 and if the Member provides the Administrative Committee with written consent to the distribution, the Administrative Committee shall direct the Trustee to make settlement of the Member's Account within the 60-day period (or as soon as practicable) after the Administrative Committee receives such consent, but (absent circumstances beyond the control of the Administrative Committee) in no event later than sixty (60) days after the last day of the Plan Year in which the Member's employment with the Employer and all Affiliated Employers was terminated. No such written consent shall be considered valid unless (within the period which shall begin no more than ninety (90) days before the annuity starting date (described below) and end no less than thirty (30) days before the annuity starting date) such Member has received a general written explanation of the general features and values of each optional form of payment available under the Plan, and has been informed in writing of his VI-6 right to defer receipt of the distribution. Such written explanation may be provided by mail, personal delivery, or other means which would normally ensure or facilitate the continued attention of the Member during the period prescribed below in which the Member is to consent to the distribution or otherwise be deemed to have elected to defer receipt (as set out below). Written consent of the Member shall be invalid unless it is given after receipt of the written explanation described above and not more than ninety (90) days before the annuity starting date. The term "annuity starting date" means the first day of the first period for which an amount is paid pursuant to the settlement option elected under the Plan. In addition, subject to a designated Beneficiary's right to elect the date of settlement in the case of a Member who dies prior to receipt of any benefits under the Plan, a valid written consent to distribution may be made by a Member without the necessity of obtaining the consent of the Member's spouse or any other Beneficiary. If the Administrative Committee fails to receive the Member's written consent to the distribution within 60 days after his receipt of the written explanation described above, absent circumstances beyond the control of the Administrative Committee, the settlement shall be made within 60 days after the last day of the Plan Year in which occurs the earlier of the date the Member dies or attains the normal retirement age. Subject to application of the forfeiture provisions of Section 4.6, the Account balance of any Member described in the immediately preceding sentence shall continue to be part of the Trust Fund and thus shall continue to be allocated its proportionate share of any income, loss, appreciation or depreciation pending distribution of such Account balance; provided, however, no further Contributions shall be credited to his Account. If a distribution is one to which Section 401(a)(11) and Section 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (1) the Administrative Committee clearly informs the Member that the Member has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Member, after receiving the notice, affirmatively elects a distribution. If Members are permitted to direct the investment of their Accounts in accordance with Section 4.10, a terminated Member shall be entitled to direct the VI-7 investment of his Account up until such time as investments are liquidated, if applicable, and distribution of his entire vested interest is made in accordance with Article VI. Thereafter, the forfeitable portion of such Account shall be invested by the Trustee subject to the provisions of Article IX and the Trust Agreement. (iv) DISTRIBUTION REQUIREMENTS: Capitalized terms used in this Section 6.6(a)(iv) which are not otherwise defined in Article I are defined in Section 6.6(a)(iv)(3). The requirements of this Section 6.6(a)(iv) shall apply to any distribution of a Member's or Beneficiary's vested Benefit and will take precedence over any inconsistent provisions of the Plan. All distributions required under Article VI shall be determined and made in accordance with Section 401(a)(9) of the Code, including the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed Income Tax Regulations or any successor or final regulation issued with respect thereto. (1) REQUIRED BEGINNING DATE. Notwithstanding any other provision of the Plan to the contrary, but subject to the next paragraph, the Trustee must make full settlement or begin Benefit payments to the Member not later than the 60th day after the latest of the close of the Plan Year in which: (a) the Member attains the normal retirement age set out in Article V, (b) occurs the tenth (10th) anniversary of the year in which the Member commenced participation in the Plan, or (c) the Member terminates employment with the Employer. The entire vested Benefit payable to a Member must be distributed or commence to be distributed no later than the Required Beginning Date. (2) MEMBER'S DEATH PRIOR TO RECEIPT OF ALL VESTED BENEFITS. 5-YEAR RULE. In the event that the Member dies prior to payment or commencement of payment of Benefits hereunder, such Member's entire vested Benefit shall be distributed following the Member's date of death on, or as soon as is administratively practicable following, the date elected by the Member's Designated Beneficiary (but in any event not later than December 31 of the calendar year in which occurs the fifth (5th) anniversary of the date of the Member's death) in the form of a lump sum payment. Any such election must be made (and shall be deemed irrevocable) as of the earlier of (i) December 31 of the calendar year in which occurs the fifth (5th) anniversary of the Member's date of death or (ii) the date on which payment must commence under applicable provisions of this Section set out below. Provided, however, if the present value of the Member's vested VI-8 Account balance (derived from Employer Contributions and any Employee Contributions) which is distributable on account of the death of the Member does not exceed $3,500, such Member's entire vested Account balance shall be distributed in a lump sum payment, which payment shall be made as soon as practicable, but (absent circumstances beyond the control of the Administrative Committee) in no event later than sixty (60) days after the last day of the Plan Year in which the Member's date of death occurs. (3) DEFINITIONS. (A) DESIGNATED BENEFICIARY. The individual who is designated as the Beneficiary under the Plan in accordance with Section 401(a)(9) of the Code. (B) BENEFIT. (i) The Account Balance as of the last valuation date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions allocated to the Account as of dates in the valuation calendar year after the valuation date, and decreased by distributions made in the valuation calendar year after the valuation date. (ii) For purposes of paragraph (i) immediately above, if any portion of the minimum distribution for the first Distribution Calendar Year is made in the second Distribution Calendar Year on or before the Required Beginning Date, the amount of the minimum distribution made in the second Distribution Calendar Year shall be treated as if it had been made in the immediately preceding Distribution Calendar Year. (C) DISTRIBUTION CALENDAR YEAR. A calendar year for which a minimum distribution is required. For distributions beginning before the Member's death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Member's Required Beginning Date. For distributions beginning after the Member's death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin pursuant to the 5-year rule in subsection (iv)(2) above. VI-9 (D) REQUIRED BEGINNING DATE. (i) GENERAL RULE. The Required Beginning Date of a Member is the first day of April of the calendar year following the calendar year in which the Member attains age 70-1/2. (ii) TRANSITIONAL RULES. The Required Beginning Date of a Member who attains age 70-1/2 before January 1, 1988, shall be determined in accordance with (1) or (2) below: (1) NON-5-PERCENT OWNERS. The Required Beginning Date of a Member who is not a 5-percent Owner (defined below) 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 Member who is not a 5-percent Owner who attains age 70-1/2 during 1988 and who has not retired as of January 1, 1989, is April 1, 1990. (2) 5-PERCENT OWNERS. The Required Beginning Date of a Member who is a 5-percent Owner during any year beginning after December 31, 1979, is the first day of April following the later of: (A) the calendar year in which the Member attains age 70-1/2, or (B) the earlier of the calendar year with or within which ends the Plan Year in which the Member becomes a 5-percent Owner, or the calendar year in which the Member retires. (iii) 5-PERCENT OWNER. A Member is treated as a 5-percent Owner for purposes of this Section if such Member is a 5-percent Owner as defined in Section 416(i) of the Code (determined in accordance with Section 416 VI-10 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. (iv) DISTRIBUTIONS BEGUN TO 5-PERCENT OWNER. Once distributions have begun to a 5-percent Owner under this Section, they must continue to be distributed, even if the Member ceases to be a 5-percent Owner in a subsequent year. (v) SPECIAL RULES REGARDING ELIGIBLE ROLLOVER DISTRIBUTIONS. Effective for distributions made after December 31, 1992, the Employer shall impose income tax withholding at a flat rate of twenty percent (20%) on any "eligible rollover distribution" (defined below) from the Plan that is not transferred directly to an "eligible retirement plan" (defined below). The Employer shall provide a notice to the recipient of a Plan distribution prior to making the distribution, which notice shall generally explain the tax withholding and rollover rules that apply to such distribution. The requirements of this Section 6.6(v) shall be construed in accordance with Section 401(a)(31) of the Code. (1) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section 6.6(v), a distributee may elect, at the time and in the manner prescribed by the Administrative Committee, to have any portion of an eligible rollover distribution (other than, if applicable, any portion attributable to the offset of the Member's outstanding loan balance pursuant to the Plan's loan procedures, if any) paid directly to an eligible retirement plan specified by the distributee in a direct rollover. The provisions of this Paragraph shall apply only if the Member's eligible rollover distributions during the Plan Year are reasonably expected to total $200 or more or, if less than 100% of the Member's eligible rollover distribution is to be a direct rollover, the direct rollover is $500 or more. Prior to any direct rollover pursuant to this Paragraph, the distributee shall furnish the Administrative Committee with a statement from the plan administrator or trustee of the qualified plan, or the trustee or custodian of the individual retirement account or annuity, to which the direct rollover is to be transferred that such plan, account or annuity is, or is intended to be, an eligible retirement plan. (2) DEFINITIONS. VI-11 (A) ELIGIBLE ROLLOVER DISTRIBUTION: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (B) ELIGIBLE RETIREMENT PLAN: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the Member's surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (3) DISTRIBUTEE: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code and Section 6.10 hereof, are distributees with regard to the interest of the spouse or former spouse. (4) DIRECT ROLLOVER: A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. 6.7 LOST MEMBERS OR BENEFICIARIES; ESCHEAT: If a former Member or Beneficiary cannot be located within sixty (60) days of the date any benefits payable under the Plan should be paid or commence to be paid pursuant to Section 6.6, the former Member's entire Account may be forfeited and allocated as any other forfeiture pursuant to applicable provisions of Section 4.6. Notwithstanding the preceding sentence, if the former Member or Beneficiary files a valid claim pursuant to Section 6.10 for the forfeited benefits payable under the Plan, then (i) as soon as administratively practicable, the forfeited benefits payable to such former Member or Beneficiary shall be reinstated effective as of the date of receipt of the claim and (ii) as soon as administratively practicable following the Employer's Contribution (pursuant to applicable VI-12 provisions of Section 3.3) of an amount equal to the value of such forfeited benefits, the value of the reinstated benefits shall be paid pursuant to Section 6.6. Should the Plan be joined as a part to any escheat proceedings concerning rights to any benefits payable to a former Member or Beneficiary, the Plan shall comply with any final judgment (of the appropriate court declaring that title to any benefits payable under the Plan to a former Member or Beneficiary vests in the State) by (i) treating the judgment as if it were a claim filed by the former Member or Beneficiary on the effective date of the final judgment and (ii) paying the State as if it were the former Member or Beneficiary who filed the claim for benefits which the court determined to have escheated to the State. 6.8 WITHDRAWALS BY MEMBERS: Subject to the conditions of this Section, upon giving thirty (30) days' written notice to the Administrative Committee, any Member who is suffering an immediate and heavy financial hardship (i) because of expenses previously incurred, or necessary to be incurred, for medical care described in Section 213(d) of the Code (not covered by insurance or otherwise reimbursable from any other source) of the Member, the Member's spouse or any other person who qualifies as a dependent of the Member under Section 152 of the Code, (ii) due to lack of funds required to pay expenses and/or other amounts required (excluding mortgage payments) to effect the purchase of a principal residence for the Member, (iii) due to a lack of funds required to make any payment required to avoid eviction from the Member's principal residence, or (iv) due to lack of funds required to make any payment required to avoid foreclosure on the Member's principal residence, or (v) due to a lack of funds to pay tuition or related educational fees for the next twelve (12) months of post-secondary education for the Member, the Member's spouse or dependents (described above), shall be entitled to withdraw from his Account, in the order of priority set out below, an amount equal to THE LESSER OF (A) the amount needed to alleviate the hardship or (B) the Distributable Amount (defined below) then credited to the Member's Account. The requested withdrawal under clause (A) of the immediately preceding sentence may also include an additional amount necessary to pay any federal, state or local income taxes or penalties (including additional taxes under Section 72(t) of the Code) that are reasonably expected to result from the withdrawal. For purposes of clause (B) of the second preceding sentence, in accordance with Section 1.401(k)-1(d)(2)(ii) of the Income Tax Regulations, the Distributable Amount shall be equal to the Member's total Elective Contributions credited to his Employer Nonforfeitable Contributions Account as of the date of withdrawal; provided, however, the Distributable Amount may be increased by any Qualified Non-Elective Contributions and net earnings and appreciation on Elective Contributions and Qualified Non-Elective Contributions that were credited to the Member's Nonforfeitable Contributions Account as of December 31, 1988. The Distributable Amount shall not include any (i) Qualified Non-Elective Contributions and (ii) earnings and appreciation, that were credited to the Member's Nonforfeitable Contributions Account after December 31, 1988. Notwithstanding the immediately preceding paragraph, effective as of October 1, 1992, in the event that the amount available to the Member for withdrawal from his Non-Forfeitable Contributions Account is not sufficient to relieve his financial hardship that is attributable to a VI-13 lack of funds to pay tuition or related educational fees for the next twelve (12) months of post-secondary education for the Member, the Member's spouse or dependents then, in that event only, the Member may withdraw the additional amount needed to satisfy the hardship from the vested portion of his Employer Contributions Account and Rollover Account, if any. The requested withdrawal may also include an additional amount necessary to pay any federal, state or local income taxes or penalties (including additional taxes under Section 72(t) of the Code) that are reasonably expected to result from the withdrawal. If a withdrawal is made at a time when the Member is not fully vested in his Employer Contributions Account and such Member can increase his vested percentage in his Employer Contributions Account, the Member's vested interest in his Employer Contributions Account at any relevant time will be determined under the following formula: X = P(AB + D)-D. For purposes of applying the formula: P is the vested percentage at the relevant time; AB is the Employer Contributions Account balance at the relevant time; and D is the amount of the withdrawal. A Member shall not be considered as suffering an immediate and heavy financial hardship unless such Member submits to the Administrative Committee (i) written evidence (satisfactory to the Administrative Committee) of such hardship and the amount needed to alleviate the hardship (ii) and any other written agreement or other documentation which the Administrative Committee deems to be necessary or appropriate in order to ensure that the Member understands and will comply with the requirements of this Section. Absent actual knowledge to the contrary, any Member shall be deemed to have met the requirements of the immediately preceding sentence if the Member complies with the requirements of the next sentence and if he submits a written request in which he specifically identifies the hardship and attaches a photocopy of (i) bills for medical care (described in the first paragraph of this Section) previously incurred or physician's reports and other evidence of medical care to be incurred, (ii) a contract to purchase property which he represents to be his principal residence, (iii) a notice or other evidence of imminent eviction from property which the Member represents to be his principal residence, (iv) a notice or other evidence of imminent foreclosure action with respect to property which the Member represents to be his principal residence, (v) enrollment or registration forms or other evidence of tuition and related educational fees due for the next twelve (12) months of post-secondary education, (vi) other evidence of the claimed hardship and the amount of funds required to alleviate such hardship. In addition, the Member must represent in writing that (i) his financial need cannot be relieved through reimbursement or compensation by insurance or otherwise, (ii) his financial need cannot be relieved through liquidation of any of his remaining assets (or any remaining assets of his spouse or minor children that are readily available to him) without such liquidation itself causing an immediate and heavy financial hardship, (iii) his financial need cannot be relieved through his cessation of any contributions authorized by such Member to the Plan, (iv) the Member has received or applied for all other distributions available to him from plans maintained by the Employer and any other employer, and such distributions have not or will not VI-14 relieve the claimed financial hardship, and (v) such Member has received or applied for all nontaxable loans available to him from plans maintained by the Employer (or any other employer) and from commercial sources, and such loans have not or will not relieve the claimed financial hardship. For purposes of this paragraph, a need cannot reasonably be relieved by one of the actions listed in items (i) through (v) above if the effect would be to increase the amount of the need. For example, the need for funds to purchase a principal residence cannot reasonably be relieved by a Plan loan if the loan would disqualify the employee from obtaining other necessary financing. The Administrative Committee shall have no duty or obligation to independently investigate or verify the truth or accuracy of any representation of the Member or the authenticity or accuracy of any documentary evidence provided by the Member and, absent actual knowledge to the contrary, the Administrative Committee shall assume that any such representation is true and correct and any such documentary evidence is authentic and correct. Any withdrawal hereunder shall result in suspension (for a period of 12 months after the Member's receipt of amounts withdrawn hereunder) of Elective Contributions and any other elective deferrals (described in Section 402(g)(3) of the Code) and any employee contributions described in Section 401(m) of the Code under any other plan of deferred compensation maintained by the Employer and/or any Affiliated Employer. The term "any other plan of deferred compensation" as used in the immediately preceding sentence shall mean any plan of deferred compensation maintained by the Employer or any Affiliated Employer, including stock option, stock purchase and similar plans, as well as a cash or deferred arrangement under a cafeteria plan described in Section 125 of the Code, but excluding health or welfare benefit plans and excluding the mandatory contributions portion of any defined benefit plan maintained by the Employer or any Affiliated Employer. Accordingly, as a prior condition of any hardship withdrawal, the Member shall execute any written agreement or other document that the Administrative Committee deems necessary to ensure that during the one-year suspension period, the Member is on notice and will comply with requirements of Section 401(k) of the Code. In addition, under the Plan and any other plan maintained by the Employer and/or any Affiliated Employer, the Member may not authorize Elective Contributions or any other elective deferrals (described in Section 402(g)(3) of the Code) for the Member's taxable year next following the taxable year of receipt of the amount withdrawn hereunder which are in excess of the applicable dollar limit under Section 402(g) of the Code for such next taxable year, less the amount of such Member's Elective Contributions and any other elective deferrals (described above) for the Member's taxable year of receipt of the amount withdrawn hereunder. No withdrawal hereunder shall result in any forfeiture of a Member's vested Account balance and no repayment of amounts withdrawn in order to wholly or partially restore a withdrawing Member's Account shall be permitted. VI-15 Subject to Section 4.10, if applicable, for the purposes of allocating appreciation or depreciation of the Trust Fund and income or loss of the Trust Fund, such withdrawal shall be subtracted from the Member's Account balance at the beginning of the applicable accounting period in which the withdrawal is made. A Member shall not be allowed to make more than one withdrawal from his Account under this Section during any given Plan Year. Effective for distributions made after December 31, 1992, the Employer shall impose income tax withholding at a flat rate of twenty percent (20%) on any eligible rollover distribution (including a hardship withdrawal) from the Plan that is not transferred directly to an eligible retirement plan in accordance with Section 6.6(v). Recipients of distributions that are not transferred may not elect out of the withholding requirement for such distributions. The Employer shall provide a notice to the recipient of a Plan distribution, prior to making the distribution, which notice shall generally explain the tax withholding and rollover rules that apply to such distributions. The requirements of this paragraph shall be construed in accordance with Section 401(a)(31) of the Code. 6.9 CLAIMS PROCEDURE FOR BENEFITS: When a benefit is due under the Plan, a claim should be submitted to the personnel office of the Employer by which the Member is or was employed. Under normal circumstances a final decision on a claimant's request for benefits shall be made within ninety (90) days after receipt of the claim. However, if special circumstances require an extension of time to process a claim, a final decision may be deferred up to one hundred eighty (180) days after receipt of the claim if, prior to the end of the initial ninety (90) day period, the claimant is furnished with written notice of the special circumstances requiring the extension and the anticipated date of a final decision. If the claim is denied, within the applicable period of time set out above, the claimant shall receive written notification of the denial, which notice shall set forth the specific reasons for the denial, the relevant Plan provisions on which the denial is based, and the claims review procedure under the Plan. In the event that a claim is denied, or in the event that no action is taken on the claim within the above-described period(s) of time, the following procedure shall be used: (a) First, in the event that the claimant does not timely receive the above-described written notification, the claimant's request for benefits shall be deemed to be denied as of the last day of the relevant period and the claimant shall be entitled to a full review of his claim in accordance with the following provisions of this Section. (b) Second, a claimant is entitled to a full review of his claim after actual or constructive notification of a denial. A claimant desiring a review must make a written request to the Administrative Committee requesting such a review, which may include whatever comments or arguments the claimant wishes to submit. Incident to the review, the claimant may represent himself or appoint a representative to do so, and will have the right to VI-16 inspect all documents pertaining to the issue. The Administrative Committee, in its sole discretion, may schedule any meeting(s) with the claimant and/or the claimant's representative that it deems necessary or appropriate to facilitate or expedite its review of a denied claim. A request for a review must be filed with the Administrative Committee within ninety (90) days after the denial of the claim for benefits was actually or constructively received by the claimant. If no request is received within the 90-day time limit, the denial of benefits will be final. However, if a request for review of a denied claim is timely filed, the Administrative Committee must render its decision under normal circumstances within sixty (60) days of its receipt of the request for review. In special circumstances the decision may be delayed if, prior to expiration of the initial 60-day period, the claimant is notified of the extension, but must in any event be rendered no later than one hundred twenty (120) days after receipt of the request. If the decision on review is not furnished to the claimant within the applicable time period(s) set above, the claim shall be deemed denied on the last day of the relevant period. All decisions of the Administrative Committee shall be in writing and shall include specific reasons for whatever action has been taken, including the specific Plan provisions on which the decision is based. 6.10 DISTRIBUTIONS TO DIVORCED SPOUSE: Subject to the provisions of Section 12.3 which pertain to qualified domestic relations orders ("QDRO") and pursuant to the QDRO procedures of the Plan, in the event that the Administrative Committee receives a domestic relations order that it determines to be a valid QDRO, and if such QDRO provides that distribution of vested benefits to an alternate payee described therein is not to commence or be made immediately, but the QDRO provides for the apportionment of such benefits to be made immediately, the Administrative Committee shall establish a separate account under the Plan for the alternate payee. Subject to Section 12.3 and the QDRO procedures of the Plan, if the Administrative Committee receives a domestic relations order that it determines to be a valid QDRO, and if the QDRO provides that distribution of vested benefits to an alternative payee described therein is to commence or be made immediately, then the Administrative Committee shall direct the Trustee to effect distribution to the alternate payee who, for the purpose of effecting such distribution, shall be considered and treated as any other Member who is entitled to receive a benefit payable under the Plan. The Administrative Committee shall comply with the terms and provisions of any QDRO, including orders which require distributions to an alternate payee prior to a Member's "earliest retirement age" as such term is defined in Section 206(d)(3)(E)(ii) of the Act and Section 414(p)(4)(B) of the Code, and shall establish appropriate procedures to effect the same. If any such distribution pursuant to a QDRO is made at a time when the Member is not fully vested in his Employer Contributions Account and the Member can increase his vested percentage in his Employer Contributions Account, the Member's vested interest in his Employer Contributions Account shall be determined by the following formula: X = P(AB + D)-D. For purposes of applying the formula: P is the vested percentage at the relevant time; VI-17 AB is the Employer Contributions Account balance at the relevant time; and D is the amount of the distribution. For purposes of allocating income or loss and appreciation or depreciation of the Trust Fund, such distribution shall be subtracted from the Member's Account balance at the beginning of the Plan Year (or such other accounting period prescribed by the Administrative Committee) in which the distribution is made. 6.11 SPECIAL TRANSITION RULE: Notwithstanding any other provisions of the Plan to the contrary, if the Plan is retroactively effective with respect to any Plan Year (or other applicable accounting period) of a Prior Plan, the benefits payable under the Plan to any Member who terminated employment during such Plan Year (or other applicable accounting period) shall be determined with reference to the special transition rules of Sections 1.3, 4.12 and 12.5. VI-18 ARTICLE VII TOP-HEAVY PLAN PROVISIONS Capitalized terms used in this Article VII which are not otherwise defined in Article I of the Plan are defined in Section 7.4. 7.1 GENERAL RULES FOR DETERMINING TOP-HEAVY STATUS: In order to determine whether the Plan is Top-Heavy for a Plan Year, it is necessary to determine (i) whether the Employer must be aggregated with other employers which will be treated as a single employer, (ii) what the Determination Date is for the Plan Year, (iii) which Employees or former Employees or other individuals who perform or performed services as owners or employees of any Affiliated Employer which is not an Employer (whether or not Qualified Plan participants) are, or formerly were, Key Employees, (iv) which former Employees or other individuals who performed services as owners or employees of any Affiliated Employer which is not an Employer (whether or not Qualified Plan participants) have not performed any service for the Employer (or any Affiliated Employer which is not an Employer) at any time during the five-year period ending on the Determination Date, (v) if, at any time during the five-year period ending on the Determination Date, the Employer and the Affiliated Employers maintain or maintained Qualified Plans (whether or not terminated) in addition to the Plan, which Qualified Plans (including the Plan) are required or permitted to be aggregated to determine Top-Heavy status and (vi) the present value of accrued benefits (including distributions made during the plan year of the Qualified Plan(s) and the four preceding plan years of the Qualified Plan(s)) of Key Employees, former Key Employees and non-Key Employees. For this purpose, the Employer and all Affiliated Employers must be treated as one employer and the Employees or former Employees or other individuals who perform or performed services as owners or employees of any Affiliated Employer which is not an Employer (whether or not participants in all Qualified Plans maintained by the Employer and the Affiliated Employers) must be categorized as Key Employees, former Key Employees or non-Key Employees. Former Key Employees are non-Key Employees and are excluded entirely from the calculation used to determine if a plan or aggregation group of plans is Top-Heavy. With respect to plan years beginning after December 31, 1984, the accrued benefit of any individual who has not performed any services for the Employer or any Affiliated Employer at any time during the five-year period ending on the Determination Date shall be excluded from the calculation used to determine if the plan or aggregation group of plans is Top-Heavy. In addition, incident to testing whether any such Plan or group of plans is Top-Heavy, an individual's present value of accrued benefits is used only once. All Qualified Plans (of the Employer and the Affiliated Employers) in which a Key Employee participates, and certain other Qualified Plans, must be aggregated to form the Required Aggregation Group. Other Qualified Plans may be aggregated with the Required Aggregation Group to form a Permissive Aggregation Group. Once aggregated, all Qualified Plans that are required to be aggregated will be Top-Heavy Plans only if the aggregation group is Top-Heavy. No Qualified Plan in the VII-1 Required Aggregation Group will be Top-Heavy if the Required Aggregation Group is not Top- Heavy. If a Permissive Aggregation Group is Top-Heavy, only those Qualified Plans which are part of the Required Aggregation Group shall be treated as Top-Heavy Plans subject to the provisions of this Article VII. 7.2 COMPUTATION OF PRESENT VALUE OF ACCRUED BENEFITS: (a) DEFINED CONTRIBUTION PLAN(S): The present value of accrued benefits as of the Determination Date for any individual who is a participant in a Qualified Plan which is (or is treated as) a defined contribution plan is the sum of (i) the account balance as of the most recent valuation date occurring within a 12-month period ending on the Determination Date, and (ii) an adjustment for contributions due as of the Determination Date. In the case of such a Qualified Plan not subject to the minimum funding requirements of Section 412 of the Code, the adjustment in (ii) is generally the amount of any contributions actually made after the valuation date but on or before the Determination Date. However, in the first plan year of the Qualified Plan, the adjustment in (ii) should also reflect the amount of any contributions made after the Determination Date that are allocated as of a date in that first plan year of the plan. In the case of a Qualified Plan that is a defined contribution plan and is subject to the minimum funding requirements, the account balance in (i) should include contributions that would be allocated as of a date not later than the Determination Date, even though those amounts are not yet required to be contributed. Thus, the account balance will include contributions waived in prior years as reflected in the adjusted account balance and contributions not paid that resulted in a funding deficiency. The adjusted account balance is described in Rev. Rul. 78-223, 1978-1 C.B. 125. Also, the adjustment in (ii) should reflect the amount of any contribution actually made (or due to be made) after the valuation date but before the expiration of the extended payment period in Section 412(c)(10) of the Code. The account balance of any individual who has not performed services for the Employer at any time during the 5-year period ending on the Determination Date shall be disregarded. (b) DEFINED BENEFIT PLANS: The present value of an accrued benefit under a Qualified Plan that is a defined benefit plan as of the Determination Date must be determined as of the most recent valuation date which is within a 12month period ending on the Determination Date. In the first plan year of a plan, the accrued benefit for a current participant must be determined either (i) as if the individual terminated service as of the Determination Date (i.e., the last day of plan year of the plan) or, (ii) as if the individual terminated service as of the valuation date, but taking into account the estimated accrued benefit as of the Determination Date. However, for any other year, the accrued benefit for a current participant must be determined as if the individual terminated service as of such valuation date. For this purpose, the valuation date must be the same VII-2 valuation date used for computing plan costs for minimum funding, regardless of whether a valuation is performed that year. For purposes of this paragraph, present value shall be determined with reference to the interest rate and mortality table used to determine Actuarial Equivalent optional benefits under the defined benefit plan. The accrued benefit of a Member (other than a Key Employee) shall be determined (i) under the method which is used for accrual purposes for all plans of the Employer or (ii) if there is no method described in clause (i), as if such benefit occurred not more rapidly than the slowest accrual rate permitted under Section 411(b)(1)(c) of the Code. The accrued benefit of any individual who has not performed services for the Employer at any time during the 5-year period ending on the Determination Date shall be disregarded. (c) EMPLOYEE CONTRIBUTIONS: For purposes of determining the present value of accrued benefits in either a defined benefit or defined contribution plan, the accrued benefits attributable to employee contributions are considered to be part of the accrued benefits whether such contributions are mandatory or voluntary. However, the amounts attributable to deductible employee contributions are not considered to be part of the accrued benefits. (d) DISTRIBUTIONS: For purposes of determining the present value of accrued benefits, distributions made within the plan year of the Qualified Plan that includes the Determination Date or within the four preceding plan years of such plan are added to the present value of accrued benefits in testing for topheaviness. However, in the case of distributions made after the valuation date and prior to the Determination Date, such distributions are not included as distributions in Section 416(g)(3)(A) of the Code to the extent that such distributions are included in the present value of the accrued benefits as of the valuation date. In the case of the distribution of an annuity contract, the amount of such distribution is deemed to be the current actuarial value of the contract, determined on the date of the distribution. Benefits paid on account of death are treated as distributions hereunder to the extent such benefits do not exceed the present value of accrued benefits immediately prior to death. (e) ROLLOVER CONTRIBUTIONS AND PLAN-TO-PLAN TRANSFERS: With respect to proper treatment of rollover contributions and plan-to-plan transfers incident to determining the present value of accrued benefits, it must first be determined whether the rollovers and plan-to-plan transfers are unrelated (both initiated by the employee and made from a plan maintained by one employer to a plan maintained by another employer) or whether they are related (a rollover either not initiated by the employee or made to a plan maintained by the same employer). For purposes of determining whether the employer is the same employer, all employers aggregated under Section 414(b), (c), (m) or (o) of the Code are treated as the same employer. Thus, the Employer and all Affiliated Employers are to be treated as a single employer. In the case of unrelated VII-3 rollovers, (i) the plan providing the distributions shall count the distribution as a distribution under Section 416(g)(3)(B) of the Code and (ii) the plan accepting the rollover shall not consider the rollover part of the accrued benefit if such rollover was accepted after December 31, 1983, but must consider it part of the accrued benefit if such rollover was accepted prior to January 1, 1984. In the case of related rollovers, the plan providing the rollover shall not count the rollover as a distribution under Section 416(g)(3)(B) of the Code and the plan accepting the rollover counts the rollover in the present value of the accrued benefits. Rules for related rollovers do not depend on whether the rollover was accepted prior to January 1, 1984. 7.3 SPECIAL RULES FOR PLAN YEARS THAT PLAN IS TOP-HEAVY: Notwithstanding any other provision of the Plan to the contrary, if the Plan is Top-Heavy for any Plan Year beginning after December 31, 1983, then the following provisions shall be applicable and shall supersede and override any conflicting provision of the Plan for such Plan Year: (a) VESTING: Vesting of accrued benefits (described in Section 411(a)(7) of the Code) shall be determined in accordance with the vesting table set out in Section 6.4. (b) TOP-HEAVY COMPENSATION: Considered Compensation and Top Heavy Compensation for any one Member for such Plan Year in excess of $200,000 or, for Plan Years beginning after December 31, 1993, $150,000 (as adjusted at such time and in such manner as may be prescribed in Section 401(a)(17) of the Code), shall be disregarded for any Plan Year in which the Plan is Top-Heavy. (c) MINIMUM ALLOCATIONS: Subject to the following provisions hereof, for any Plan Year in which the Plan is Top-Heavy, each Member shall receive an allocation of the Employer Contribution and forfeitures, if any, for the Plan Year in an amount equal to the lesser of (i) three percent (3%) of the Members' Top-Heavy Compensation and (ii) the largest percentage of Top-Heavy Compensation provided on behalf of any Key Employee. The minimum allocation shall be made without regard to any contribution to Social Security. To the extent permitted under applicable law or other authority issued thereunder by the appropriate governmental authority, in determining whether an allocation of Employer Contributions equal to the required percentage of Top-Heavy Compensation meets the requirements of this Section, all benefits allocated under defined contribution plans required to be aggregated under Section 7.1 shall be considered benefits allocated under the Plan and, with respect to Plan Years beginning after December 31, 1984, any Employer Contribution attributable to a salary reduction or similar arrangement shall be taken into account. Accordingly, for the purpose of clarity and without limiting the scope of the immediately preceding sentence, VII-4 (i) with respect to Plan Years beginning after December 31, 1988, any elective deferral (described in Section 402(g)(3) of the Code) under the Plan or any plan described in the immediately preceding sentence on behalf of any Member who is not a Key Employee shall not be treated as an Employer Contribution for purposes of this Section, but will be treated as an Employer Contribution for purposes of determining the percentage at which Contributions are made for the Key Employee with the highest percentage; (ii) qualified nonelective contributions (described in Section 401(m)(4)(C) of the Code) under the Plan or any plan described in the immediately preceding sentence on behalf of any Member shall be treated as an Employer Contribution for purposes of this Section; and (iii) with respect to Plan Years beginning after December 31, 1988, any matching contribution (described in Section 401(m)(4)(A) of the Code) under the Plan or any plan described in the immediately preceding sentence on behalf of any Member who is not a Key Employee shall not be treated as an Employer Contribution for purposes of this Section to the extent such matching contribution is treated as an elective deferral for purposes of satisfying the ADP test of Section 401(k)(3) of the Code or a matching contribution for purposes of satisfying the ACP of Section 401(m)(2) of the Code. Notwithstanding the preceding paragraph, in the event that an Employee is a Member of the Plan and another Qualified Plan which is a defined benefit plan maintained by the Employer and/or any Affiliated Employer, such Employee shall not receive both the minimum benefit provided hereunder and the minimum benefit provided under the defined benefit plan on account of such plans being Top-Heavy. Instead, the aggregate minimum benefit requirement for any Employee who is a Member under the Plan, and any defined benefit plan described in the preceding sentence, shall be provided under the defined benefit plan, which defined benefit minimum shall be offset by the value of the Member's vested and nonforfeitable interest in his accrued benefit derived from Employer Contributions under the Plan. If the defined benefit minimum will be paid in the form of an annuity, the offset shall be effected by converting the Member's vested accrued benefit derived from Employer Contributions under the Plan into an annuity (payable in the same form and commencing at the same time as the defined benefit minimum) which can be provided by the Member's vested accrued benefit derived from Employer Contributions using the interest rate and mortality table for immediate annuities published by the Pension Benefit Guaranty Corporation as in effect on the date the defined benefit minimum is to commence. If the defined benefit minimum is paid in the form of a lump sum, the lump sum value of the Member's accrued benefit derived from Employer Contributions under the Plan shall be offset against the single sum value of the defined benefit minimum calculated in accordance with the applicable provisions of the defined benefit plan. For purposes of this Section, a Member's accrued benefit derived from Employer Contributions shall include any prior withdrawals or distributions attributable thereto. VII-5 (d) SPECIAL RULES: For any Plan Year that the Plan is (i) Top-Heavy and the additional minimum benefit described in Section 416(h) of the Code is not provided or (ii) Super Top-Heavy, the limitations of Section 4.3(d)(iv) and (v) shall be applied by substituting "100 percent" for "125 percent" wherever it appears therein. Such substitution shall not cause a reduction in any account balances attributable to Contributions for a Plan Year prior to the Plan Year in which the Plan is Top-Heavy or Super Top-Heavy. 7.4 DEFINITIONS: For purposes of this Article VII, the following terms shall be defined as follows: (a) AFFILIATED EMPLOYER: "Affiliated Employer" shall mean the Affiliated Employer described in Article I of the Plan. (b) DETERMINATION DATE: "Determination Date" shall mean with respect to a single Qualified Plan, (i) the last day of the preceding plan year of the Qualified Plan, or (ii) in the case of the first plan year of the Qualified Plan, the last day of such plan year. When aggregating Qualified Plans, the value of accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. (c) EMPLOYEE: "Employee" shall mean the Employee described in Article I of the Plan. (d) EMPLOYER: "Employer" shall mean the Employer described in Article I of the Plan. (e) KEY EMPLOYEE: "Key Employee" shall mean with respect to any Qualified Plan, any Employee or former Employee (or any other person (i) who is or was employed by any Affiliated Employer or (ii) who owns or owned any interest in any Affiliated Employer and who derives or derived earned income from such Affiliated Employer or would have derived earned income had such Affiliated Employer had net profits), including any beneficiary described below, who, at any time during the Qualified Plan's plan year containing the Determination Date or any of the four (4) preceding plan years of such Qualified Plan, is: (i) An officer of any Employer or any Affiliated Employer treated separately, if such individual earns annual compensation for a plan year (for services rendered to the VII-6 Employer and any Affiliated Employer during the relevant plan year of the Qualified Plan) greater than fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the Code as in effect for the calendar year in which such plan year ends for plan years beginning after December 31, 1986 (one hundred fifty percent (150%) of the maximum dollar limitation set forth under Section 415(c)(1)(A) of the Code as in effect for the calendar year in which such plan year ends for plan years beginning prior to January 1, 1987); provided, however, subject to the last paragraph of this Section 7.4(e), no more than fifty (50) individuals who are or were Employees of the Employer and/or employees of an Affiliated Employer or, if less, the greater of three (3) individuals who are Employees of the Employer and/or employees of an Affiliated Employer or ten percent (10%) of all such individuals, shall be considered Key Employees by reason of being officers; (ii) One of the ten (10) individuals owning (or considered as owning within the meaning of Section 318 of the Code) both more than a 1/2 percent interest and the largest interests in the Employer or any Affiliated Employer, treated separately, if such individual earns annual compensation for a plan year (for services rendered to the Employer and any Affiliated Employer during the relevant plan year of the Qualified Plan) more than the maximum dollar limitation set forth under Section 415(c)(1)(A) of the Code as in effect for the calendar year in which such plan year ends; provided, however, if two such individuals have the same interest in the Employer or Affiliated Employer, treated separately, the individual earning the greater compensation (for purposes of this Section 7.4(e)(ii)) shall be treated as having a larger interest; (iii) Any individual owning (or considered as owning within the meaning of Section 318 of the Code) more than five percent (5%) of the outstanding stock of any corporate Employer or any corporate Affiliated Employer treated separately, or stock possessing more than five percent (5%) of the total combined voting power of all stock of any corporate Employer or any corporate Affiliated Employer, treated separately, or, if the Employer or Affiliated Employer is not a corporation, any individual owning more than five percent (5%) of the capital or profits interest of such Employer, or Affiliated Employer treated separately; or VII-7 (iv) Any individual whose aggregate annual compensation for a plan year (for services rendered to the Employer and any Affiliated Employer during the relevant plan year of the Qualified Plan) is more than $150,000 and who would be described in Section 7.4(e)(iii) if one percent (1%) were substituted for five percent (5%) therein. Any Beneficiary of an Employee who is a Key Employee or a former Key Employee and any Beneficiary of any other individual described above who is a Key Employee or former Key Employee shall be treated as a Key Employee or former Key Employee, whichever is applicable. Similarly, any Beneficiary of an Employee who is a former non-Key Employee and any Beneficiary of any other individual described above who is a former non-Key Employee shall be treated as a former non-Key Employee. For purposes of applying Section 318 of the Code to the provisions of this Section, subparagraph (C) of Section 318(a)(2) of the Code shall be applied by substituting five percent (5%) for fifty percent (50%). For purposes of this Section, annual compensation for the plan year of the Qualified Plan shall include all remuneration described in Treasury Regulation Section 1.415-2(d) and any successor thereto, but including amounts contributed by the Employer or Affiliated Employer pursuant to a salary reduction agreement which are excludable from the individual's gross income under Section 125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code. In the event that the number of Key Employees determined under Subsection (e)(i) of this Section would, but for the numerical limitations of that Subsection, exceed the number determined under that Subsection, then those officers having the largest annual compensation during the plan year of the Qualified Plan and the four (4) preceding plan years of such Qualified Plan shall be the Key Employees. Such term shall not include any officer or employee of an entity referred to in Section 414(d) of the Code. Notwithstanding any provision hereof to the contrary, determination of who is a Key Employee shall be made in accordance with Section 416(i)(1) of the Code. (f) MEMBER: "Member" shall mean any Member described in Article I of the Plan except that if the Plan is Top-Heavy, in addition to Employees who would otherwise be considered to be Members under the Plan, the following Employees shall be considered to be Members solely for purposes of determining the individuals entitled to share in the minimum benefit described in Section 7.3(c): (i) Members who have not separated from service at the end of the Plan Year, (ii) individuals who are otherwise eligible to participate in the Plan but who have failed to complete 1000 hours of service (or the equivalent) during the Plan VII-8 Year, (iii) individuals who are otherwise eligible to participate in the Plan but who declined to make any required Contributions to the Plan or, in the case of a cash or deferred arrangement, any elective contributions permitted or required under the Plan, or (iv) individuals who are eligible to participate in the Plan but who have been excluded from the Plan because each such individual's Considered Compensation is less than a stated amount. (g) PERMISSIVE AGGREGATION GROUP: "Permissive Aggregation Group" shall mean a Required Aggregation Group plus one or more Qualified Plans which are not part of the Required Aggregation Group but which satisfy the requirements of Section 401(a)(4) and 410 when considered together with the Required Aggregation Group. (h) QUALIFIED PLAN: "Qualified Plan" shall mean the Plan and any other defined contribution plan (whether or not terminated) described in Section 414(i) of the Code and/or any defined benefit plan (whether or not terminated) described in Section 414(j) of the Code which is/are (or with respect to any such plan which has been terminated, was/were) maintained at any time during the five-year period ending on the Determination Date by the Employer and/or the Affiliated Employers and intended to meet the requirements of Section 401(a) of the Code; provided, however, a simplified employee pension plan described in Section 408(k) of the Code shall be treated as a defined contribution plan. (i) REQUIRED AGGREGATION GROUP: "Required Aggregation Group" shall mean a group of Qualified Plans, which group shall include each Qualified Plan maintained by the Employer and/or the Affiliated Employers in which a Key Employee participates in the relevant plan year including the Determination Date, or any of the four preceding plan years, and which group shall exclude any Qualified Plan in which a Key Employee does not participate at any time during the plan year, or any of the four preceding plan years, unless during such period such Qualified Plan enables any Qualified Plan in which a Key Employee participates to meet the requirements of Sections 401(a)(4) or 410 of the Code. (j) SUPER TOP-HEAVY: "Super Top-Heavy" shall mean Top-Heavy except for purposes of this Section 7.4(j), "ninety percent (90%)" shall be substituted for "sixty percent (60%)" wherever the latter percent appears in Section 7.4(k). (k) TOP-HEAVY: "Top-Heavy" shall mean with respect to any Qualified Plan, which is not included in any aggregation group, any such Qualified Plan whereunder, as of the Determination Date, the sum of the present value of the accrued benefits for Key Employees is more than sixty percent (60%) of the sum of the present value of the accrued benefits of all Employees of the Employer VII-9 plus, if applicable, all employees (and self-employed individuals) of all Affiliated Employers, excluding former Key Employees, and shall mean with respect to any aggregation group, Required Aggregation Group or Permissive Aggregation Group, whereunder as of the Determination Date, the sum of the present value of the accrued benefits for Key Employees is more than sixty percent (60%) of the sum of the present value of accrued benefits of all Employees of the Employer plus all employees (and self-employed individuals) of all Affiliated Employers, excluding former Key Employees. For purposes of this Section 7.4(k), the accrued benefit of any individual who is not a Key Employee, but who is a former Key Employee will be disregarded, and, with respect to Plan Years beginning after December 31, 1984, the accrued benefit of any individual described in this Section 7.4(k) who has not performed any service for the Employer and any Affiliated Employer(s) maintaining any Qualified Plan at any time during the five-year period ending on the Determination Date shall be disregarded. In addition, when aggregating Qualified Plans, the value of accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. (l) TOP-HEAVY COMPENSATION: "Top-Heavy Compensation" shall mean with respect to Plan Years beginning on or after January 1, 1989, (i) the wages (as defined in Section 3401(a) of the Code for purposes of income tax withholding at the source) that are paid (within the meaning of Section 1.415-2(d)(3) and (4) of the Income Tax Regulations) to the Employee by the Employer during the Plan Year for services performed and reportable on the Employee's form W-2 (or its successor), 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), plus any reduction under a compensation deferral agreement under (a) a plan described in Section 401(k) or 408(k) of the Code, (b) an annuity described in Section 403(b) of the Code or (c) an election under a cafeteria plan described in Section 125 of the Code, (ii) that is actually paid to or is includible in the gross income of the Member within the relevant Plan Year, or would have been so paid or includible but for a reduction described in clause (i) immediately above, and (iii) that does not exceed $200,000 or, for Plan Years beginning after December 31, 1993, $150,000 (as adjusted at such time and in such manner as may be prescribed in Section 401(a)(17) of the Code). With respect to Plan Years beginning prior to January 1, 1994, "Top Heavy Compensation" shall mean compensation as defined in Section 1.415-2(d)(1) and (2) of the Income Tax Regulations. VII-10 ARTICLE VIII ADMINISTRATIVE COMMITTEE 8.1 APPOINTMENT, TERM OF SERVICE AND REMOVAL: The Board shall appoint an Administrative Committee of not less than two (2) persons, the members of which shall serve until their resignation, death or removal. Any member of the Administrative Committee may resign at any time by mailing or delivering written notice of such resignation to the Board. Any member of the Administrative Committee may be removed by the Board, with or without cause, at any time by mailing or delivering written notice to such person at the address set forth in the records of the Employer. Vacancies in the Administrative Committee arising by resignation, death, removal or otherwise shall be filled by such persons as may be appointed by the Board. 8.2 POWERS: The Administrative Committee shall be a fiduciary and shall, in that capacity, have the exclusive responsibility for the general administration of the Plan, according to its terms and provisions, and shall have all discretion and powers necessary to accomplish such purposes, including, but not by way of limitation, the right, power, and authority: (a) To make nondiscriminatory rules and regulations for the administration of the Plan which are not inconsistent with the terms and provisions hereof; (b) To construe all terms, provisions, conditions, and limitations of the Plan; and its construction thereof, shall be final and conclusive on all persons or entities; (c) To correct any defect, supply any omission, or reconcile any inconsistency which may appear in the Plan in such manner and to such extent as it shall deem necessary or appropriate, and its judgment in such matters shall be final and conclusive as to all persons and entities; (d) To select, employ, and compensate from time to time such consultants, actuaries, accountants, attorneys, and other agents and employees as the Administrative Committee may deem necessary or advisable for the proper and efficient administration of the Plan; any agent, firm or employee so selected by the Administrative Committee may be a "disqualified person" or a "party in interest" but only if the requirements of Section 4975(d) of the Code and Section 408(b) of the Act have been satisfied; (e) To determine all questions relating to the eligibility of Employees to become Members, and to determine the period of Active Service and the amount of Considered Compensation upon which the benefits of each Member shall be calculated; VIII-1 (f) To determine all controversies relating to the administration of the Plan, including but not limited to: (i) differences of opinion arising between an Employer and the Trustee or a Member, or any combination thereof and (ii) any questions it deems advisable to determine in order to promote nondiscriminatory administration of the Plan for the benefit of the Members and Beneficiaries; (g) Subject to portfolio standards and guidelines which may be established by the Trustee from time to time, to direct and instruct (or to appoint an investment manager which would have the power to direct and instruct) the Trustee in all matters relating to the preservation, investment, reinvestment, management and disposition of the Trust Fund; (h) To direct and instruct the Trustee in all matters relating to the payment of Plan benefits and to determine the entitlement of a Member or a Beneficiary to a benefit should he appeal a denial of his claim, or any portion thereof; (i) With the consent or ratification of the Board, to take any action necessary or appropriate to cause to be directly transferred to the Trustee any or all of the assets held with respect to a Member under any other plan which expressly permits such transfer and which otherwise satisfies the requirements for establishing a Predecessor Plan Account described in Section 1.1. For the limited purpose of being eligible to have a transfer described in the preceding sentence made on behalf of an Employee who is not a Member, such Employee shall be deemed to be a Member; provided, however, such Employee shall not be entitled to authorize Contributions to the Plan or share in the allocation of any Employer Contributions or forfeitures unless and until such Employee satisfies the applicable eligibility requirements of the Plan. Any amounts transferred to such Predecessor Plan Account shall not have any effect on limitations under the Plan on Member or Employer Contributions under the Plan; (j) With the consent or ratification of the Board, to direct the Trustee to enter into any agreement that the Administrative Committee deems to be necessary or appropriate to effect any transaction described in Section 8.2(i) or 11.7; and (k) To delegate by written notice such clerical and recordation duties of the Administrative Committee under the Plan as the Administrative Committee may deem necessary or advisable for the proper and efficient administration of the Plan or the Trust. 8.3 ORGANIZATION: The Administrative Committee shall select from among its members a chairman, who shall preside at all of its meetings, and shall select a secretary, who need not VIII-2 be a member of the Administrative Committee and who shall keep all records, documents and data pertaining to its supervision of the administration of the Plan. 8.4 QUORUM AND MAJORITY ACTION: A majority of the members of the Administrative Committee constitutes a quorum for the transaction of business. The majority vote of the members present at any meeting at which there is a quorum will decide any question brought before that meeting. In addition, the Administrative Committee may decide any question, taken without a meeting, by a majority vote of all of its members, or by a consent executed by all of its members. 8.5 SIGNATURES: The chairman, the secretary and any one or more of the members of the Administrative Committee to which the Administrative Committee has delegated the power, shall each, severally, have the power to execute any document on behalf of the Administrative Committee, and to execute any certificate or other written evidence of the action of the Administrative Committee. The Trustee, after being notified of any such delegation of power in writing, shall thereafter accept and may rely upon any document executed by such member or members as representing the action of the Administrative Committee until the Administrative Committee files with the Trustee a written revocation of that delegation of power. 8.6 SELF-INTEREST OF COMMITTEE MEMBER: No member of the Administrative Committee shall have the right to vote or decide upon any matter relating solely to himself under the Plan or to vote in any case in which his individual right to claim any benefit under the Plan is particularly involved. In any case in which an Administrative Committee member is so disqualified to act and the remaining members cannot agree, the Board shall appoint a temporary substitute member to exercise all the powers of the disqualified member concerning the matter in which he is disqualified. 8.7 DISCLOSURE TO MEMBERS: The Administrative Committee shall make available to each Member and Beneficiary for his examination such records, documents and other data as are required under the Act, but only at reasonable times during business hours. No Member or Beneficiary shall have the right to examine any data or records reflecting the compensation paid to any other Member or Beneficiary, and the Administrative Committee shall not be required to make any other data or records available other than those required by the Act. 8.8 STANDARD OF PERFORMANCE: The Administrative Committee, and each of its members, shall (i) use 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 conducting his business as the administrator of the Plan; (ii) when exercising its power to direct investments, diversify the investments of the Plan so as to minimize the risk of large losses unless under the circumstances it is clearly prudent not to do so; and (iii) otherwise act in accordance with the provisions of the Plan and the Act. VIII-3 The Administrative Committee shall exercise its responsibility and authority hereunder in a uniform and non-discriminatory manner with respect to all Members. 8.9 LIABILITY OF COMMITTEE AND LIABILITY INSURANCE: No member of the Administrative Committee shall be liable for any act or omission of any other member of the Administrative Committee, the Trustee, any investment manager appointed by the Administrative Committee, or any other agent or representative appointed by the Administrative Committee, except to the extent required by the Act and any other applicable state or federal law, which liability cannot be waived. No member of the Administrative Committee shall be liable for any act or omission on his own part except to the extent required by the Act, and any other applicable state or federal law, and then only if and to the extent such liability cannot be waived. It is the express intent of the Plan to waive any such liability to the full extent permitted by law. Further, it is specifically provided that, if so directed by the Administrative Committee, the Trustee may purchase out of the Trust Fund insurance for the members of the Administrative Committee any other fiduciaries appointed by the Administrative Committee and for the Trust Fund itself, to cover liability or losses occurring by reason of the act or omission of any one or more of the members of the Administrative Committee or any other appointed fiduciary under the Plan or any other agents; provided, however, such insurance permits recourse by the insurer against the members of the Administrative Committee or the other concerned fiduciaries in the case of a breach of a fiduciary obligation by one or more members of the Administrative Committee or other fiduciary covered thereby. 8.10 EXEMPTION FROM BOND: No member of the Administrative Committee shall be required to give bond for the performance of his duties hereunder, unless required by the Act or by other law which cannot be waived. 8.11 NO COMPENSATION: The Administrative Committee shall serve without compensation for its services, but shall be reimbursed by the Employer(s) for all expenses properly and actually incurred in the performance of its duties under the Plan, unless the Employer(s) elects to have such expenses paid out of the Trust Fund. Each Employer shall bear such portion of such expense as shall be determined by the Administrative Committee based upon the approximate total amount in the Accounts of Members employed by it as compared to the approximate total amount in the Accounts of all Members. 8.12 PERSONS SERVING IN DUAL FIDUCIARY ROLES: Any person, group of persons, corporation, firm or other entity, may serve in more than one fiduciary capacity with respect to the Plan, including the ability to serve both as Trustee and as a member of the Administrative Committee. 8.13 ADMINISTRATOR: For all purposes of the Act, the Administrator of the Plan shall be the Plan Sponsor. The Administrator of the Plan shall have final responsibility for compliance with all reporting and disclosure requirements imposed with respect to the Plan under any applicable federal or state law, or under any VIII-4 regulations or other authority promulgated thereunder by the appropriate governmental authority. 8.14 INDEMNIFICATION OF MEMBERS OF ADMINISTRATIVE COMMITTEE: To the full extent permitted by law, the Plan Sponsor and each other Employer, jointly and severally, shall indemnify each past, present and future member of the Administrative Committee against, and each member of the Administrative Committee shall be entitled without further act on his part to indemnity from each Employer for, any and all losses, liabilities, costs and expenses (including the amount of judgments, court costs, reasonable attorneys' fees, and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Employer itself) incurred by such member in connection with or arising out of any pending, threatened or anticipated possible action, suit, or other proceeding, including any investigation that might lead to such a proceeding, in which he is or may be involved by reason of or in connection with his being or having been a member of the Administrative Committee, whether or not he continues to be a member of the Administrative Committee at the time of incurring any such losses, liabilities, costs and expenses; provided, however, that such indemnity shall not include any losses, liabilities, costs and expenses incurred by such member of the Administrative Committee (i) with respect to any matters as to which he is finally adjudged in any such action, suit or proceeding to have been guilty of gross negligence or willful and culpable misconduct in the performance of his duties as a member of the Administrative Committee, or (ii) with respect to any matter to the extent that a settlement thereof is effected in an amount in excess of the amount approved by the Plan Sponsor (or by the affected Employer if not an Affiliated Employer), which approval shall not be unreasonably withheld. No right of indemnification hereunder shall be available to, or enforceable by, any such member of the Administrative Committee unless, within sixty (60) days after his actual receipt of service of process in any such action, suit or other proceeding (or such longer period as may be approved by the Board), he shall have offered the Plan Sponsor (or affected Employer if not an Affiliated Employer), in writing, the opportunity to handle and defend same at its sole expense. The decision by the Plan Sponsor or other affected Employer to handle the proceeding shall conclusively determine that such person is entitled to the indemnity provided herein unless then otherwise expressly agreed by the person. Until and unless a final judicial determination has been made that indemnity is not applicable, all such person's expenses shall be promptly and fully paid or reimbursed by the Plan Sponsor and each other Employer upon demand by such person. The foregoing right of indemnification shall inure to the benefit of the heirs, executors, administrators and personal representatives of each such member of the Administrative Committee and shall be in addition to all other rights to which such member may be entitled as a matter of law, contract, or otherwise. VIII-5 ARTICLE IX TRUST AGREEMENT AND TRUST FUND 9.1 TRUST AGREEMENT: The provisions of the Trust Agreement referred to in Article I hereof as the Trust Agreement are herein incorporated by reference as fully as if set out herein. If, for any reason, a separate and duly authorized Trust Agreement is not in force at any time from and after the effective date of this amendment and restatement of the Plan, the provisions of the Prior Plan that relate to the establishment and maintenance of the Trust Agreement shall govern the Trust and the responsibilities of the Trustee appointed by the Plan Sponsor. 9.2 BENEFITS PAID SOLELY FROM TRUST FUND: All of the benefits provided to be paid under Article VI hereof shall be paid by the Trustee out of the Trust Fund to be administered under the Trust Agreement. No fiduciary shall be responsible or liable in any manner for payment of any such benefits, and all Members hereunder shall look solely to such Trust Fund and to the adequacy thereof for the payment of any such benefits of any nature or kind which may at any time be payable hereunder. IX-1 ARTICLE X ADOPTION OF PLAN BY OTHER EMPLOYERS 10.1 ADOPTION PROCEDURE: Any business organization may, with the approval of the Board, adopt the Plan for all or any classification of its Employees, as permitted by Section 401(a) of the Code, by delivering to the Administrative Committee: (a) A certified resolution or consent of the sole proprietor, managing partner(s) or board of directors (or equivalent governing authority) of the adopting Employer, or a duly executed adoption instrument (adopted and approved by the sole proprietor, managing partner(s) or board of directors (or equivalent governing authority) of the adopting Employer)) setting forth its agreement to be bound as an Employer by all the terms, provisions, conditions and limitations of the Plan, except those, if any, specifically set forth in the adoption instrument; (b) All information required by the Administrative Committee and the Trustee with reference to Employees or Members; and (c) The written consent of the Board to the adoption of this Plan. Any adoption may be made retroactive to the beginning of a Plan Year by complying with the foregoing conditions on or before the last day of that Plan Year. The provisions of the Plan shall apply separately and equally to each Employer and its Employees in the same manner as is expressly provided herein with respect to the Plan Sponsor and its Employees, except that the power to appoint or otherwise affect the Administrative Committee or the Trustee and the power to amend or terminate the Plan shall be exercised by the Plan Sponsor alone. Nevertheless, any Employer may, with the consent of the Plan Sponsor, incorporate in its adoption agreement or in an amendment document specific provisions relating to the operation of the Plan, and such provisions shall become a part of the Plan as to such Employer only. 10.2 NO JOINT VENTURE IMPLIED: The adoption instrument executed by an Employer shall become, as to it and its Employees, a part of the Plan. However, except as otherwise provided under the Plan, neither the adoption of the Plan by an Employer, nor any act performed by it in relation to the Plan shall ever create a joint venture or partnership relation between it and any other Employer. Although the Accounts of Members employed by the Employers which adopt the Plan shall be commingled for purposes of investment thereof, unless the Administrative Committee and the Trustee are otherwise directed by the Board, amounts held in the Trust Fund allocable to a particular Employer shall, on an ongoing basis, be available to pay benefits to Members employed by that Employer, and to pay benefits to Members employed by any other Employer which is an Affiliated Employer required to be aggregated with the first such Employer, but not otherwise. In addition, unless the Administrative Committee and Trustee are X-1 otherwise directed by the Board, the Administrative Committee shall maintain completely separate accounts and records for the Plan Sponsor and each other Employer which is an Affiliated Employer required to be aggregated with the Plan Sponsor (and Employees thereof who are Members), but otherwise the Plan shall be maintained on a consolidated basis for the Plan Sponsor and all such other Affiliated Employers. The Administrative Committee shall maintain completely separate accounts and records for any Employer that is not an Affiliated Employer, as distinguished from maintaining the Plan on a consolidated basis with such other Employer. 10.3 TRANSFER OF MEMBERS: If an Employee of one Employer is Transferred to the service of another Employer, the Employee shall maintain all of his rights under the Plan. Contributions to the Transferred Employee's Employer Account shall be handled in accordance with the provisions of Sections 4.2 and 4.8, and his Active Service shall be considered uninterrupted, as if no Transfer had occurred. Unless otherwise provided hereunder, Active Service with any Employer shall count as Active Service with all Employers, whether before or after the date that the Employer adopts the Plan. X-2 ARTICLE XI AMENDMENT AND TERMINATION 11.1 RIGHT TO AMEND AND LIMITATIONS THEREON: The Board shall have the sole right to amend the Plan. Any amendment shall (i) be made by a written instrument and executed by an appropriate officer of the Plan Sponsor, (ii) set forth the nature of the amendment and its effective date (which may be retroactive), and (iii) be supported by a certified copy of the resolution or direction which authorized or ratified it. Although the Trustee shall be expected to execute each amendment of the Plan, failure of the Trustee to execute any such amendment shall not adversely affect the Plan Sponsor's exclusive right to effectively amend the Plan without regard to any act or forbearance on the part of the Trustee. No amendment shall: (a) Except as otherwise specifically provided in the Plan, cause or permit any Trust Fund assets to be diverted to any purpose other than the exclusive benefit of the Members and their Beneficiaries; (b) Decrease the accrued benefit of any Member or eliminate a protected form of benefit in violation of Section 411(d)(6) of the Code; (c) Increase the duties or liabilities of the Trustee without its prior written consent; (d) Change the vesting schedule to one which would result in the nonforfeitable percentage of the accrued benefit derived from Employer Contributions (determined as of the later of the amendment's adoption date or effective date) of any Member being less than such nonforfeitable percentage computed under the Plan without regard to such amendment. If the Plan's vesting schedule is amended, or if the Plan is amended in any way that directly or indirectly affects the computation of the Member's nonforfeitable percentage, or if the Plan is deemed amended by an automatic change to or from a Top-Heavy vesting schedule, each Member with at least three years of service with an Employer may elect, within a reasonable period after the adoption of the amendment or change, to have the nonforfeitable percentage computed under the Plan without regard to such amendment or change. With respect to Members who are not entitled to be credited with at least one hour of service in any Plan Year beginning after December 31, 1988, the immediately preceding sentence shall be applied by substituting "five years of service" for "three years of service". The period during which the election may be made shall begin no later than the date upon which the amendment is adopted or deemed to be made and shall end no later than the latest of the following dates: (1) the date which is sixty (60) days after the day the amendment is adopted or deemed to be made; (2) the date which is sixty (60) days after the day that the amendment becomes XI-1 effective; or (3) the date which is sixty (60) days after the day that the Member is issued written notice of the amendment by the Employer; or (e) In accordance with Rule 16b-3(c)(ii) promulgated under Section 16 of the Securities Exchange Act of 1934, as amended ("Section 16"), change any term or provision in the Plan relating to (i) the eligibility of officers, directors or 10% shareholders of the Employer, as defined in Section 16, to participate in the Plan, or (ii) the timing, pricing, and amount of contributions allocated to such officers, directors and 10% shareholders, more often than once every six (6) months other than as necessary to comport with the Code or the Act. In the event of an amendment, each Employer will be deemed to have consented to and adopted the amendment unless an Employer notifies the Plan Sponsor and the Administrative Committee to the contrary in writing within thirty (30) days after receipt of a copy of the amendment, in which case the rejection will constitute a withdrawal from the Plan by that Employer. 11.2 MANDATORY AMENDMENTS: Except as otherwise provided in the Plan, or except as otherwise prescribed by applicable law or other authority prescribed thereunder by the appropriate governmental authority, the Contributions of each Employer to the Plan are intended to be: (a) Deductible under applicable provisions of the Code; (b) Exempt from the federal Social Security Act, as amended; (c) Exempt from withholding under the Code; and (d) Excludable from any Employee's regular rate of pay, as that term is defined under the Fair Labor Standards Act of 1938, as amended. The Plan Sponsor shall make such amendments to the Plan as may be necessary to carry out this intention, and all such amendments may be made retroactively. 11.3 WITHDRAWAL OF AN EMPLOYER: An Employer may withdraw from the Plan either by rejecting an amendment or by giving written notice of its intent to withdraw to the Plan Sponsor, the Administrative Committee and the Trustee. The Administrative Committee shall then determine, within ninety (90) days following the receipt of the rejection or notice, the portion of the Trust Fund that is attributable to the Members employed by the withdrawing Employer and shall forward a copy of such determination to the Trustee. Upon receipt of the determination, the Trustee shall immediately segregate those assets attributable to the Members employed by the withdrawing Employer and shall transfer those assets to the successor trustee when it receives a designation of such successor from the withdrawing Employer. XI-2 The withdrawal from the Plan will not terminate the Plan with respect to the withdrawing Employer. Instead, the withdrawing Employer shall, as soon as practical, either appoint a successor trustee or trustees and reaffirm the Plan as a new and separate plan and trust intended to qualify under Sections 401(a) and 501(a) of the Code, or establish another plan and trust intended to qualify under Sections 401(a) and 501(a) of the Code. The determination of the Administrative Committee, in its sole discretion, of the portion of the Trust Fund that is attributable to the Members employed by the withdrawing Employer shall be final and binding upon all persons or entities; and, the Trustee's transfer of those assets to the designated successor trustee shall relieve the Trustee of any further obligation or duty to the withdrawing Employer, the Members employed by that Employer and their Beneficiaries, and to the successor trustee. 11.4 VOLUNTARY AND INVOLUNTARY TERMINATION: Any Employer may terminate its participation in the Plan by executing and delivering to the Administrative Committee and the Trustee a notice which specifies the date on which its participation in the Plan shall terminate. Likewise, participation of an Employer in the Plan will automatically terminate upon the general assignment by that Employer to or for the benefit of its creditors or the liquidation or dissolution of that Employer without a successor (whether or not as the result of a bankruptcy proceeding). Upon termination of participation in the Plan by any Employer without provision for continuation of the portion thereof attributable to such Employer, subject to the provisions of this Section, the Trustee shall distribute to each Member employed by the terminating Employer the vested amounts certified by the Administrative Committee as then credited to the Accounts of the Members employed by the terminating Employer. If a Member's vested Account balance (derived from Employer and any Employee Contributions) which is distributable hereunder does not exceed $3,500, such Account balance shall be distributed in the form of a lump sum payment which may be paid in cash or in shares of Company Stock, or both, as elected by the Member in accordance with applicable provisions of Section 6.6. Such distribution may be made without the necessity of obtaining the consent of the Member. If a Member's vested Account balance (derived from Employer and any Employee Contributions) which is distributable hereunder is in excess of $3,500, and if the Member consents to the distribution hereunder in the form of a lump sum payment, the Administrative Committee shall direct the Trustee to make settlement of a Member's Account as provided in the second preceding sentence. If a Member's vested Account balance (derived from Employer and any Employee Contributions) which is distributable hereunder is in excess of $3,500, and if the Member fails to consent to the distribution hereunder, the Administrative Committee shall direct the Trustee to make settlement of the Member's Account by distribution of a deferred commercial annuity which can be purchased (with the net proceeds of the Member's vested Account balance) from any life insurance company licensed to conduct business in the State of the situs of the Trust, provided that such annuity (i) shall provide the same settlement provisions as are set out in Article VI and (ii) shall be issued or endorsed as XI-3 nontransferable so that the owner thereof cannot sell, assign, discount, or pledge as collateral for a loan or as security for the performance of an obligation or for any other purpose his interest in such contract to any person, other than the issuer of such annuity upon the surrender thereof, and, further provided, that in the event of any conflict between applicable terms and provisions of the Plan (regarding the timing or manner of payment of benefit) and the terms and provisions of any such commercial annuity purchased hereunder, the terms and provisions of the Plan shall control. Subject to subsequent provisions hereof, distributions hereunder shall be made as soon as administratively practicable, but in no event later than the time required under applicable provisions of the Code. In the event that (i) the Plan is maintained by the Plan Sponsor and at least one other Employer which is an Affiliated Employer required to be aggregated with the Plan Sponsor, (ii) on an ongoing basis, assets of the Plan are available to pay benefits to any Employee who is a Member (and Beneficiaries thereof) and thus the Plan should be viewed as a single plan for purposes of Section 414(l) of the Code, and (iii) the Plan is operated on a consolidated basis, then, in that event, should any Employer which is an Affiliated Employer terminate participation in the Plan without provision for continuation of the portion thereof attributable to such Employer, subject to application of Section 11.5 (relating to partial terminations), any forfeitures arising incident to the distributions described above shall be allocated in accordance with Section 4.6 among the Plan Sponsor, and any other remaining Employer which is an Affiliated Employer, to reduce future Employer Contributions. Any unapplied portion (comprised of excess amounts arising from or attributable to Contributions of such terminating Affiliated Employer) of any suspense account described in Section 4.3 shall be applied pro-rata to reduce future Contributions of the Plan Sponsor and any other remaining Employer which is an Affiliated Employer. Regardless of whether the Plan is operated on an ongoing basis which should result in the Plan being viewed as a single plan for purposes of Section 414(l) of the Code, in the event that the Plan is not operated on a consolidated basis and separate accounts and records are maintained for each separate Employer under the Plan, then should any Employer which is an Affiliated Employer terminate participation in the Plan without provision for continuation of the portion thereof attributable to such Employer, Members employed by such terminating Employer as of the date of such termination of participation in the Plan shall have a 100% vested and nonforfeitable interest in their Accounts. Similar rules shall apply with respect to any other Employer with respect to which the Plan is not operated on a consolidated basis. If the Plan should terminate, or should an Employer terminate its participation in the Plan without causing the Plan to terminate, the Trustee, as directed by the Administrative Committee, shall notify the Internal Revenue Service of such termination of the Plan or termination of participation in the Plan by an Employer, and the Plan Sponsor shall apply to the Internal Revenue Service for a determination letter with respect to said termination of the Plan or termination of participation in the Plan by an Employer. The Trustee shall not distribute the assets in the Trust Fund in violation of applicable provisions of Article VI of the Plan or prior XI-4 to receipt of a copy of a determination letter from the Internal Revenue Service to the effect that an immediate distribution of Plan assets will not adversely affect the prior qualification of the Plan under Sections 401(a) of the Code and the exemption of the Trust under Section 501(a) of the Code. Provided further, notwithstanding any other provision of the Plan to the contrary, amounts allocated and credited to the affected Members' Accounts may be distributed in any form authorized hereunder which constitutes a lump sum distribution described in Section 401(k)(10) of the Code prior to the time that such amounts would otherwise be distributed if (i) the Plan is terminated without establishment of a successor plan in contravention of Section 401(k)(10)(A)(i) of the Code, (ii) the Plan Sponsor or other Employer effects a disposition (to an employer which is not an Affiliated Employer) of substantially all of the assets (within the meaning of Section 409(d)(2) of the Code) used by such Plan Sponsor or other Employer in a trade or business of such Plan Sponsor or other Employer with respect to any former Member who continues employment with the employer which acquires such assets, and the Plan Sponsor or other Employer continues to maintain the Plan after such disposition, or (iii) the Plan Sponsor or other Employer effects a disposition (to an employer which is not an Affiliated Employer) of its interest in a subsidiary (within the meaning of Section 409(d)(3) of the Code) with respect to any former Member who continues employment with the subsidiary, and the Plan Sponsor or other Employer continues to maintain the Plan after such disposition. A distribution may be made under Section 401(k)(10) of the Code and clauses (ii) and (iii) of this paragraph only if the Plan Sponsor or Employer continues to maintain the Plan after the disposition. This requirement is satisfied only if the purchaser does not maintain the Plan after the disposition. A purchaser maintains the Plan if it adopts the Plan or otherwise becomes an employer whose employees accrue benefits under the Plan. A purchaser also maintains the Plan if the Plan is merged or consolidated with, or any assets or liabilities are transferred from the Plan to, a plan maintained by the purchaser in a transaction subject to Section 414(l)(1) of the Code. A purchaser is not treated as maintaining the Plan merely because a plan that it maintains accepts rollover contributions of amounts distributed by the Plan. For purposes of the previous paragraph, in accordance with Section 1.401(k)-1(d)(3) of the Income Tax Regulations, a successor plan is any other defined contribution plan maintained by the same employer. However, if fewer than two percent (2%) of the employees who are eligible under the Plan at the time of its termination are or were eligible under another defined contribution plan at any time during the 24-month period beginning 12 months before the time of the termination, the other plan is not a successor plan. The term "defined contribution plan" means a plan that is a defined contribution plan as defined in Section 414(i) of the Code, but does not include an employee stock ownership plan as defined in Section 4975(e) or 409 of the Code or a simplified employee pension as defined in Section 408(k) of the Code. A plan is a successor plan only if it exists at the time the Plan is terminated or within the period ending 12 months after distribution of all assets from the Plan. Pursuant to Section 11.5, the termination of participation in the Plan by any one or more of the Employers will not constitute a termination of the Plan with respect to any other XI-5 remaining Employers. Upon satisfaction of all liabilities to all Members and Beneficiaries hereunder, the Trust shall terminate. 11.5 VESTING UPON DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS, TOTAL OR PARTIAL TERMINATION: Notwithstanding any other provision of the Plan, in the event that there is a total or partial termination, or complete discontinuance of the Employer Contributions hereunder, the vesting schedule contained in Sections 6.4 shall be inapplicable to the affected Members and each affected Member thereupon shall have a full 100% vested interest in the amount credited to his Account as of the end of the last Plan Year for which a substantial Employer Contribution was made and in any amounts thereafter credited or allocated to his Account; provided, however, that if the Employer shall thereafter resume making substantial Contributions hereunder, all amounts credited or allocated to an affected Member's Account with respect to the Plan Year for which such Contributions are resumed, and the Plan Years for which they are continued, shall vest only in accordance with the vesting schedules contained in Sections 6.4. During any such period of termination or complete discontinuance of Employer Contributions, all other provisions of the Plan shall nevertheless continue in full force and effect, other than provisions for Employer Contributions and the allocation thereof to the affected Members' Accounts. Except as otherwise provided in Section 11.4, the Plan shall not terminate earlier than the effective date as of which the Plan is voluntarily terminated by the Plan Sponsor or by the Plan Sponsor and the other Employers maintaining the Plan. 11.6 CONTINUANCE PERMITTED UPON SALE OR TRANSFER OF ASSETS: An Employer's participation in the Plan will not automatically terminate in the event that it consolidates, merges, and is not the surviving corporation; sells substantially all of its assets; is a party to a reorganization and its Employees and substantially all of its assets are transferred to another entity; or liquidates or dissolves, if there is a successor entity. Instead, the resulting successor person, firm, corporation, or other entity may assume and continue the Plan and the Trust by executing a direction, entering into a contractual commitment or adopting a resolution, as the case may be, providing for the continuance of the Plan and the Trust simultaneous with or within one hundred twenty (120) days after such consolidation, merger, sale, reorganization, liquidation or dissolution. If after such one hundred twenty (120) day period, the successor entity has not assumed and continued the Plan and otherwise complied with the provisions of Section 11.3, the successor entity shall be deemed to have given notice under Section 11.4 and its participation in the Plan will then automatically terminate on the one hundred twenty-first (121st) day and, in that event, the appropriate portion of the Trust Fund will be distributed exclusively to the affected Members or their Beneficiaries as soon as practicable pursuant to Section 11.4. 11.7 REQUIREMENT ON MERGER, TRANSFER, ETC.: Notwithstanding any other provision hereof, in accordance with Section 414(l) of the Code, the Plan will not be merged or consolidated with, nor shall any assets or liabilities of the Plan be transferred to, any other plan unless each Member would receive (if the XI-6 Plan then terminated) a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit that he would have been entitled to receive immediately before the merger, consolidation, or transfer (if the Plan had then terminated). In addition, any accrued benefits under the Plan which are subject to and protected under Section 411(d)(6) of the Code shall not be reduced or eliminated in violation of Section 411(d)(6) of the Code incident to (i) any merger, consolidation, spin-off or transfer of such accrued benefits or (ii) any transaction involving an amendment or having the effect of an amendment of the Plan to transfer such accrued benefits. Subject to Sections 8.2(i), 8.2(j) and applicable provisions of the Trust Agreement, the Trustee, as directed by the Administrative Committee, shall have the authority to enter into (i) an agreement to merge or consolidate the Plan with another plan which meets the requirements of Sections 401(a) and 501(a) of the Code or (ii) an agreement to accept the direct transfer of assets from any such plan or to transfer Plan assets to any such plan. To the extent that any such assets that are directly transferred to the Plan are comprised of amounts attributable to elective deferrals (described in Section 402(g)(3) of the Code), or qualified nonelective contributions (described in Section 401(m)(4)(C) of the Code), or matching contributions (described in Section 401(m)(4)(A) of the Code) that are treated as elective deferrals under Section 401(k) of the Code, such amounts shall remain subject to any limitations on distribution thereof and, thus, shall not be distributed under the Plan prior to such time as is permitted under the transferor plan and Section 401(k) of the Code. Subject to the Code Sections described in the immediately preceding sentence, if assets are accepted on behalf of any Employee prior to the date that such Employee is eligible to enter the Plan as an active Member, such Employee shall be deemed to be a Member; provided however, such Employee shall not be entitled to authorize Contributions to the Plan or share in the allocation of any Employer Contributions unless and until such Employee meets the applicable eligibility requirements of the Plan. The Trustee shall not consent or be a party to a merger, consolidation or transfer of assets with a defined benefit plan, except with respect to a transfer which the Administrative Committee has determined to be an "elective transfer" (described below). The Trustee shall hold, administer and distribute the transferred assets as a part of the Trust Fund and the Administrative Committee shall maintain a separate Predecessor Plan Account for the benefit of each Employee on whose behalf the Trustee accepted the transfer in order to reflect the value of the transferred assets. Unless a transfer of assets to the Plan is a Rollover Contribution (including a direct rollover contribution described in Section 401(a)(31) of the Code) or an "elective transfer" (defined below), the Plan shall apply the optional forms of benefit protections described in this Section and in Section 11.1 to all of the transferred assets. A transfer is an elective transfer if: (i) the transfer satisfies the preceding provisions of this Section; (ii) the transfer is voluntary, under a fully informed election by the Member; (iii) the Member has an alternative that retains his Code Section 411(d)(6) protected benefits (including an option to leave his benefit in the transferor plan if that plan is not terminating and the Member's transferor plan account exceeds $3,500); (iv) the transfer satisfies the applicable spousal consent requirements of the Code; (v) the transferor plan satisfies the QJSA notice requirements of the Code, if the Member's transferred benefit is subject to those requirements; (vi) the Member has the right to immediate distribution from the transferor plan in lieu of the elective transfer; (vii) the transferred benefit is the entire nonforfeitable accrued benefit under the transferor plan (1) XI-7 calculated to be at least the greater of the single sum distribution provided by the transferor plan for which the Member is eligible or the present value of the Member's accrued benefit under the transferor plan payable at that plan's normal retirement age and (2) calculated by using an interest rate that complies with the requirements of Section 417(e) of the Code and subject to the overall limitations of Section 415 of the Code; (viii) the Member has 100% vested interest in the transferred benefit; and (ix) the transfer otherwise satisfies applicable regulations or other guidance issued under applicable provisions of the Code by the appropriate governmental authority. XI-8 ARTICLE XII MISCELLANEOUS 12.1 PLAN NOT AN EMPLOYMENT CONTRACT: The adoption and maintenance of the Plan shall not be deemed to be a contract between any Employer and its Employees which gives any Employee the right to be retained in the employment of any Employer; to interfere with the rights of any Employer to discharge any Employee at any time; or to interfere with any Employee's right to terminate his employment at any time. 12.2 BENEFITS PROVIDED SOLELY FROM TRUST FUND: All benefits payable under the Plan shall be paid or provided for solely from the Trust Fund; neither the Administrative Committee nor any Employer assumes any liability or responsibility therefor. Each Member assumes all risks in connection with any decrease in the market value of any common stocks or other investments held on his behalf in accordance with the provisions of the Plan. 12.3 SPENDTHRIFT PROVISION: No principal or income payable, or to become payable, from the Trust Fund will be subject to: (i) anticipation or assignment by any Member or by any Beneficiary; (ii) attachment by, interference with, or control of any creditor of a Member or Beneficiary; or (iii) being taken or reached by any legal or equitable process in satisfaction of any debt or liability of a Member or Beneficiary prior to its actual receipt by such Member or Beneficiary. Any attempted conveyance, transfer, assignment, mortgage, pledge, or encumbrance of the Trust Fund, any part or interest in it, by a Member or Beneficiary prior to distribution will be void, whether that conveyance, transfer, assignment, mortgage, pledge, hypothecation or encumbrance is intended to take place or become effective before or after any distribution of Trust Fund assets or the termination of the Trust. Furthermore, the Trustee shall not be required to recognize any conveyance, transfer, assignment, mortgage, pledge or encumbrance by a Member or Beneficiary of the Trust, any part or interest in it, or to pay any money or thing of value to any creditor or assignee of a Member or Beneficiary for any cause whatsoever. This Section shall also apply to the creation, assignment, or recognition of a right to any benefit payable with respect to a Member pursuant to a domestic relations order, unless such order is determined to be a qualified domestic relations order (as defined in Section 414(p) of the Code). In addition, in the event that, pursuant to a qualified domestic relations order described above, an Account or subaccount is established for the benefit of the former spouse or dependent of a Member ("alternate payee"), and in the further event that Members are entitled to direct the investment of their Accounts in accordance with Section 4.10, unless the Administrative Committee otherwise prescribes pursuant to uniformly applied nondiscriminatory rules formulated by the Administrative Committee, any alternate payee shall be considered to be a Member for purposes of Section 4.10 and, thus, shall be entitled to direct the investment of such Account or subaccount. XII-1 In the event that the Administrative Committee receives notice that a domestic relations order that is intended to be a qualified domestic relations order is being prepared and will be provided to the Administrative Committee within a reasonably short time, the Administrative Committee may place a temporary hold on the distribution of benefits under the Plan to the affected Member, pending (a) the determination of whether such order is a qualified domestic relations order within the meaning of Section 414(p) of the Code, and (b) the rights of the alternate payee under such order. 12.4 GENDER, TENSE AND HEADINGS: Whenever the context so requires, words of the masculine gender used herein shall include the feminine and neuter, and words used in the singular shall include the plural. The words "herein," "hereof," "hereunder," and other similar compounds of the word "here" shall refer to the entire Plan, not to any particular Section or provision of the Plan. Headings of Articles, Sections and subsections as used herein are inserted solely for convenience and reference and constitute no part of the Plan. 12.5 GENERAL TRANSITION RULES RELATING TO AMENDMENT, RESTATEMENT AND CONTINUATION OF PLAN: This Section shall generally apply to any Prior Plan. (a) APPLICATION OF PLAN: Except as otherwise provided under the Plan, in the event that the Employer adopts the Plan as an amendment, restatement and continuation of a Prior Plan, the provisions of the Plan shall apply only to Employees whose employment with the Employer terminates after the effective date of the Plan. If an Employee's employment with the Employer terminates prior to the effective date of the Employer's adoption of the Plan, the former Employee shall be entitled to benefits under the terms and provisions of Employer's Prior Plan as that plan existed on the date of the termination of employment. (b) MAINTENANCE OF ACCOUNTS: Amounts credited to a Member's accounts under the Prior Plan as in effect immediately prior to the effective date of its amendment, restatement and continuation hereunder shall constitute the opening balances of corresponding Accounts established under the Plan. (c) EMPLOYEE ELECTIONS: Employee elections (under the Prior Plan as in effect immediately prior to the effective date of its amendment, restatement and continuation hereunder) with respect to Employee contribution rates, investment thereof, etc., shall continue in effect under the Plan unless the Administrative Committee otherwise directs. Similarly, any beneficiary designation in effect under the Prior Plan immediately prior to its amendment, restatement and continuation hereunder shall be deemed to be a valid designation filed with the Administrative Committee under applicable provisions of the Plan, to the extent consistent with the Plan and applicable law and regulations or other authority issued thereunder by the appropriate governmental authority, unless and until the XII-2 Member revokes such Beneficiary designation under applicable provisions of the Plan. (d) WITHDRAWALS AND LOANS: Except to the extent inconsistent with applicable law and regulations or other authority issued thereunder by the appropriate governmental authority, and unless the Administrative Committee otherwise directs, any withdrawals authorized and loans made under the Prior Plan, as in effect immediately prior to the effective date of its amendment, restatement and continuation hereunder, shall continue to be governed by the terms and provisions of the Prior Plan as it existed on the date of the withdrawal and/or loan. Provided, however, any withdrawals or loans permitted under the Plan after its effective date shall be governed solely by applicable terms and provisions of the Plan. (e) ACCOUNTING: Unless the Administrative Committee otherwise directs, Trust accounting for income, gain, loss, appreciation and depreciation and forfeitures under the Prior Plan, as in effect immediately prior to the effective date of its amendment, restatement and continuation hereunder, shall not be affected by the adoption of the Plan. (f) DISTRIBUTION OF BENEFITS: Amounts being paid to a former Member or Beneficiary under the Prior Plan, as in effect immediately prior to the effective date of its amendment, restatement and continuation hereunder, shall continue to be paid in accordance with the terms and provisions of the Prior Plan. 12.6 SEVERABILITY: Each term and provision of the Plan is severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of any other term or provision. 12.7 GOVERNING LAW: PARTIES TO LEGAL ACTIONS: The terms and provisions of the Plan shall be construed, administered, and governed under the laws of the State of Texas and, to the extent applicable, by the laws of the United States. The Trustee or any Employer may at any time initiate a legal action or proceeding for the settlement of the account of the Trustee, for the determination of any question, or for instructions. The only necessary parties to any such action or proceeding are the Trustee, the Plan Sponsor or other affected Employer; however, any other person may be included as a party at the election of the Trustee, the Plan Sponsor or other affected Employer. 12.8 NOTICES: Except as otherwise specifically provided under the Plan, any notice, description, explanation, direction, consent, election, waiver or other information required or permitted to be given under the Plan shall be sufficient if it is in writing and otherwise complies with the requirements of applicable provisions of the Plan and rules established by the Administrative Committee and if hand-delivered to the Member, Beneficiary, member of the XII-3 Administrative Committee, Trustee or other person to whom such communication is to be given, or if sent by registered mail (return receipt requested) or by first class mail or any other reasonable method to such person at the address last furnished by such person. Any such communication described in the immediately preceding sentence shall be effective as of the date of the postmark if mailed via registered mail and the return receipt is received by the sender, or upon actual receipt by the party receiving such communication in the event that (i) such return receipt is not received by the sender or (ii) such communication was given by in-hand delivery or by first class mail or any other reasonable method. 12.9 COUNTERPARTS: This Plan may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. It shall not be necessary that any single counterpart hereof be executed by all parties so long as each party executes at least one counterpart. IN WITNESS WHEREOF, the Plan Sponsor has caused this Plan to be executed this 23rd day of March, 1995, to be effective as of March 26, 1989, except as otherwise provided under certain terms or provisions of the Plan. PLAN SPONSOR: KENT ELECTRONICS CORPORATION ATTEST: By:/S/ STEPHEN J. CHAPKO -------------------------------------- Name: STEPHEN J. CHAPKO ------------------------------------ Title: VICE PRESIDENT & TREASURER ----------------------------------- By: /S/ VICKIE KING --------------------------- Name: VICKIE KING ------------------------- Title: ADMINISTRATIVE ASST. ------------------------ XII-4 THE STATE OF TEXAS Section Section COUNTY OF HARRIS Section This instrument was acknowledged before me on March 23, 1995 by Stephen J. Chapko, Vice President & Treasurer of Kent Electronics Corporation, on behalf of said corporation. /S/ JANICE G. CHAMBERS ------------------------------------ Notary Public in and for the State of Texas Printed Name: JANICE G. CHAMBERS ----------------------- My commission expires: JUNE 15, 1997 -------------- XII-5 ADOPTION AGREEMENT K*Tec Electronics Corporation hereby adopts, approves, ratifies and consents to the complete amendment, restatement and continuation (without a gap or lapse in coverage, time, or effect of a qualified plan and exempt trust under applicable provisions of the Code) of the Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan and Trust. K*TEC ELECTRONICS CORPORATION ATTEST: By:/S/ JAMES F. CORPORRON ------------------------------------- By:/S/ KIM K. JOHNSON Printed Name: JAMES F. CORPORRON -------------------------- --------------------------- Title: SECRETARY & TREASURER ---------------------------------- Printed Name: KIM K. JOHNSON --------------- Title: CORPORATE ACCOUNTING MANAGER --------------------- THE STATE OF TEXAS Section Section COUNTY OF HARRIS Section This instrument was acknowledged before me on March 23, 1995 by James F. Corporron, Secretary & Treasurer of K*Tec Electronics Corporation on behalf of said corporation. /S/ JANICE G. CHAMBERS ---------------------------------------- Notary Public in and for the State of Texas Printed Name: JANICE G. CHAMBERS --------------------------- My Commission expires: JUNE 15, 1997 ------------------ XII-6 FIRST AMENDMENT TO KENT ELECTRONICS CORPORATION TAX-DEFERRED SAVINGS AND RETIREMENT PLAN W I T N E S S E T H WHEREAS, KENT ELECTRONICS CORPORATION (the "Plan Sponsor") maintains the Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan (the "Plan") for the benefit of its eligible employees and their beneficiaries; and WHEREAS, in Section 11.1 of the Plan, the Plan Sponsor reserved the right to amend the Plan at any time; and WHEREAS, it has been determined that the Plan should be amended in order to set forth certain changes requested by the Internal Revenue Service in connection with the issuance of a favorable determination letter for the Plan, NOW, THEREFORE, the Plan is hereby amended, effective as of March 26, 1989, by this First Amendment thereto as follows: 1. The reference to the date "December 31, 1994" in the second paragraph of Section 1.10 of the Plan shall be changed to "December 31, 1993". 2. Except as modified herein, the Plan is specifically ratified and affirmed. 3. In order to effectuate the amendments described in Paragraph 1 above, the substitute page I-7 attached hereto shall be inserted into the Plan in place of the above described original section. IN WITNESS WHEREOF, the First Amendment to the Plan is executed this 15th day of November, 1995. PLAN SPONSOR: KENT ELECTRONICS CORPORATION ATTEST: By:/S/ KIM K. JOHNSON By:/S/ STEPHEN J. CHAPKO ----------------------------- ---------------------------------- Printed Name: Kim K. Johnson Printed Name: Stephen J. Chapko Title: Corporate Accounting Title: Vice President - Treasurer XII-7 TRUSTEE: SMITH BARNEY PRIVATE TRUST COMPANY By:/S/ DONALD E. ROSE --------------------------- Printed Name: Donald E. Rose Title: Vice President XII-8 EX-10.17 7 EXHIBIT 10.17 EXHIBIT 10.17 FIRST AMENDMENT TO THE KENT ELECTRONICS CORPORATION DEFERRED COMPENSATION PLAN Having reserved the right in Article X of the Kent Electronics Corporation Deferred Compensation Plan (the "Plan") to amend the Plan and the Board of Directors of Kent Electronics Corporation having authorized the amendment of the Plan by Board resolution, the Plan is hereby amended as follows: The third paragraph of Article II commencing on page 3 of the Plan and continuing on page 4 of the Plan shall be deleted in its entirety effective as of March 1, 1996. KENT ELECTRONICS CORPORATION By:/s/ Stephen J. Chapko ----------------------------------- Stephen J. Chapko Vice President and Treasurer Date: March 4, 1996 ------------------------------- EX-10.22 8 EXHIBIT 10.22 EMPLOYMENT AGREEMENT This Employment Agreement (this "Agreement") is made and entered into as of January 3, 1996 by and among Morrie K. Abramson ("Employee") and Kent Electronics Corporation, a Texas corporation (the "Company"). The parties agree as follows: 1. EMPLOYMENT. 1.1 TITLE AND DUTIES. The Company hereby agrees to continue to employ Employee, and Employee hereby accepts continuing employment, as Chairman, Chief Executive Officer and President of the Company. Employee shall be given authorities, powers, functions and duties consistent with such offices and positions. 1.2 PLACE. Employee shall not be required to perform any duties described hereunder at any place other than in the Houston, Texas metropolitan area without his consent, except insofar as his duties shall require reasonable business trips and/or visits to investors, suppliers, customers or facilities of the Company. 2. EXTENT OF SERVICES. 2.1 GENERAL. It is recognized that the services to be rendered by Employee are of such a nature as to be peculiarly rendered by Employee, encompass the individual ability of Employee and cannot be measured exclusively in terms of hours or services rendered in any particular period. During the term of his employment pursuant to this Agreement, Employee shall devote substantially his full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations and except for Disability, but nothing in this Agreement shall preclude Employee from serving as a director or member of a committee of any organization involving no conflict of interest with the interests of the Company, from engaging in charitable and community activities, or from managing his personal investments, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement. 2.2 VACATION. Employee shall be entitled to such vacations and other absences from work as shall be reasonably consistent with the performance of his duties as provided in this Agreement. 3. TERM. Subject to the provisions for earlier termination provided herein, the term of this Agreement and the term of Employee's employment by the Company shall continue uninterrupted until March 31, 2001 ("Term of Employment"). 4. COMPENSATION. In consideration of the services to be rendered pursuant to this Agreement by Employee to the Company, Employee shall be compensated as set forth in this Agreement, including this Section 4. 4.1 CASH COMPENSATION. (a) During the Term of Employment, the Company shall compensate Employee for services rendered under this Agreement in a cash amount of not less than $950,000 per fiscal year of the Company payable in respect of such year as determined from time to time by the Board of Directors of the Company. Employee shall be considered in the Company's annual review of executive compensation and Employee shall be a participant in the Company's executive cash bonus plans that may be in effect from time to time. All cash compensation paid to Employee under this Agreement shall be aggregated for purposes of meeting the $950,000 per fiscal year requirement, whether in the form of base salary or in the form of bonuses. (b) Upon a Change in Control (as defined below), the Company shall establish a "rabbi trust" for the benefit of Employee into which there shall be contributed by the Company cash in an amount sufficient to satisfy the Company's obligations to pay the Employee the amounts to which he is entitled under Section 6.1(d)(ii). Any instruments establishing such rabbi trust shall in all respects be satisfactory in form and substance to Employee and his counsel. 4.2 ADDITIONAL BENEFITS. (a) During the Term of Employment, Employee shall be entitled to receive all benefits consistent with Employee's duties and positions, which benefits shall (except as specified below) be no less than those to which he is entitled as of the date hereof, including but not limited to all plans of life, accident and health, salary continuation and other insurance which is or becomes generally available to other employees, officers or executives of the Company and participation in the Company's pension, profit-sharing, or any other deferred compensation plan of the Company generally available to other executives in the Company. Employee shall be provided with the full-time use of an automobile consistent with the Company's corporate policy on automobiles as in effect from time to time. Subject to Section 4.5 hereof, the Company reserves the right to modify, suspend or discontinue any and all benefits referred to in this Section 4.2 at any time without recourse by Employee so long as such action is taken generally with respect to other similarly situated peer executives and does not single out Employee. The Company will, for so long as Employee may have liability to any person for actions taken or omissions by Employee in his capacity as a director or officer of the Company and so long as available on a commercially reasonable basis, maintain in effect directors' and officers' liability insurance covering Employee on terms no less favorable than the directors' and officers' liability insurance maintained by the Company in effect on the date hereof in terms of coverage and amounts. In addition, for so long as Employee may have liability to any person for actions taken or omissions by Employee in his capacity as a director or officer of the Company, the Company shall not terminate or amend any provisions of any such entity's charter, bylaws or other organizational documents so as to reduce or otherwise adversely affect Employee's rights to indemnification from any such entity or the limitation or elimination of Employee's liability -2- to the entity or it shareholders or other beneficial owners for monetary damages to terms less favorable than those in effect on the date hereof. (b) During the Term of Employment, Employee shall be entitled to continue to participate in any stock incentive plan, stock option plan or other equity ownership plan in which he is a participant on the date hereof, and Employee may, in the discretion of the Board of Directors of the Company, participate in any other stock incentive plan, stock option plan or other equity ownership plans adopted by the Company. 4.3 EXPENSES. Employee shall be reimbursed for all expenses reasonably incurred in the furtherance of the business of the Company during the Term of Employment. Employee shall keep complete and accurate records of all expenditures such that Employee may fully account to the Board of Directors, if requested, or as may then be required by the Internal Revenue Service. 4.4 BENEFITS FOLLOWING TERMINATION OF EMPLOYMENT. (a) Upon the termination of Employee's employment by the Company, whether due to death, Disability, resignation, whether or not for Good Reason, or discharge, whether or not for Just Cause, the Company shall, commencing on the first day of the month following the date of the termination of Employee's employment, pay, or cause to be paid, to Employee in equal monthly installments the sum of $750,000 per year (the "Annual Amount"), for a period equal to the greater of 15 years or the life of Employee; provided, however, that in the event of the termination of Employee's employment due to death or Disability prior to March 31, 2001, the Annual Amount described above shall equal $950,000 until March 31, 2001, after which time the Annual Amount shall equal $750,000; and provided further that Employee shall not be entitled to any amounts under this Section 4.4 if Employee's employment is terminated prior to a Change in Control for Just Cause or without Good Reason. In addition, the Annual Amount shall be adjusted annually to reflect increases in the cost of living after the date hereof, as measured by the Consumer Price Index ("CPI") for all urban consumers calculated by the Bureau of Labor Statistics (or any successor or replacement index). If Employee shall die before or after the payments described above shall have commenced and before all amounts required to be paid pursuant to Section 4.4 shall have been paid to Employee, then the unpaid portion of such amounts shall continue to be paid in monthly installments to Employee's surviving spouse. If Employee's surviving spouse dies before all amounts required to be paid have been paid, then any remaining installments shall be paid to the personal representative of the estate of the surviving spouse, and pass as a part thereof. If Employee shall not be married at the time of his death, then any such payments shall be made to Employee's beneficiary designated in writing to the Company by Employee, or in the absence thereof, to the personal representative of the estate of Employee, to pass as a part thereof. (b) Upon the termination of Employee's employment by the Company, whether due to death, Disability, resignation (whether or not for Good Reason) or discharge (whether or not for Just Cause), the Company shall secure its obligations under this Section 4.4 -3- as described below. In the case of a termination of Employee's employment (whether or not after any Change in Control), the Company shall pay to Employee cash in an amount sufficient to permit Employee to purchase a fully paid annuity contract issued by an insurance company acceptable to Employee, in his sole discretion, providing for the payment to Employee of the amounts required to be paid pursuant to this Section 4.4 ("Section 4.4 Payments"), and shall also pay to Employee cash in an amount sufficient to pay Employee's income taxes (calculated at the highest marginal federal income tax rate and after taking into account any applicable surtaxes and other generally applicable taxes which would have the effect of increasing the marginal federal income tax rate, and, if applicable, at the highest marginal state income tax rate in effect in the State of Texas) payable upon receipt of any such annuity contract (which payment of income taxes and its effect on the taxability of the payments under the annuity contract shall be taken into account in establishing the annuity contract, which will be designed to provide Employee with the same after-tax benefit that he would have received if the Company directly made the Section 4.4 Payments assuming the highest federal and Texas marginal income tax rates in effect at the time of the establishment of the annuity); provided however, that such cash payment to Employee to purchase this annuity shall not release the Company from its obligations hereunder in the event that as a result of changes in the CPI such cash is not sufficient to make the payments required by this Section 4.4. (c) Upon the effective date of this Agreement, the Company shall establish a "rabbi trust" for the benefit of Employee into which there shall be contributed by the Company cash in an amount sufficient to purchase the annuity contract and pay the anticipated income taxes contemplated by the preceding subparagraph (b) upon the termination of Employee's employment at any time during the term of this Agreement without any regard as to whether such termination is for Just Cause or without Good Reason prior to a Change in Control. Any instruments establishing such rabbi trust shall in all respects be satisfactory in form and substance to Employee and his counsel. 4.5 MEDICAL BENEFITS. (a) Employee is presently a party to that certain Executive Health Care Benefits and Consulting Agreement between the Company and Employee dated January 27, 1993 (the "Medical Benefits Agreement"), which is incorporated herein by reference. The Medical Benefits Agreement shall remain in full force and effect, except that it is hereby clarified that the Medical Benefits Agreement shall apply upon Employee's termination from employment by the Company, whether due to death, Disability, resignation (whether or not for Good Reason) or discharge (whether or not for Just Cause) and except that the Company further agrees that at no time after the date of the EARLIER of Employee's termination of employment, a Change in Control, or the occurrence of an event constituting Good Reason (whether or not -4- the Employee actually terminates his employment on account of the event) shall the Health Care Plan (as defined in the Medical Benefits Agreement) provide benefits which are not the same, in all material respects, as the coverage being provided under the Company's Health Care Plan to Employee and his spouse as of the date of the EARLIER of Employee's termination of employment, a Change in Control, or the occurrence of an event constituting Good Reason (whether or not the Employee actually terminates his employment on account of the event) and in the event that at any time the Health Care Plan does not provide such coverage the Company shall be required to take the actions provided for in the Medical Benefits Agreement so as to provide to Executive and his Spouse (as defined in the Medical Benefits Agreement) coverage which, in all material respects, is the same as the coverage that is being provided under the Company's Health Care Plan to Executive and his spouse as of the date of the EARLIER of the Employee's termination of employment, a Change in Control, or the occurrence of an event constituting Good Reason (whether or not the Employee actually terminates his employment on account of the event). (b) So long as Employee is employed by the Company (or any successor or assignee of the Company), Employee and his spouse shall be provided coverage under a Health Care Plan at least consistent with the plans providing such coverage to the Chief Executive Officer and other senior officers of the Company (or any successor of the Company) with respect to the terms and conditions of coverage and other substantive provisions of such plans, but in no event shall the Company (or any successor or assignee of the Company) fail to provide to Employee and his spouse coverage under a Health Care Plan which, in all material respects, is the same as the coverage that is being provided under the Company's Health Care Plan to Employee and his spouse as of the date of a Change in Control. (c) To the extent that there are any adverse tax consequences to the Employee in connection with the provision of the benefits under this Section 4.5, the Company shall pay the Employee a cash amount sufficient to pay all federal and state income taxes, calculated at the highest marginal income tax rates then in effect and after taking into account any applicable surtaxes and other generally applicable taxes which would have the effect of increasing the marginal income tax rates, imposed with respect to the benefits provided pursuant to this Section 4.5 or the payment contemplated by this sentence, the effect being that Employee will have no out-of-pocket cost due to income taxes associated with the benefits provided pursuant to this Section 4.5. 4.6 INCAPACITY. If Employee or any other person entitled to the payment of benefits hereunder shall at the time any payment is due be incapacitated, the Company shall make such payment to the legally appointed conservator or guardian of such person, or if no conservatorship or guardianship shall have been established, the Company may, in the case of temporary incapacity, apply such payment, or any portion thereof, for the benefit of such person. 4.7 OFFSETS. The compensation and benefits provided hereunder are in addition to all other compensation and benefits provided by the Company or by any other employer of Employee, or by any governmental agency, and shall not be reduced by any amount payable under any pension or retirement arrangement, social security, or any other government benefit or payment. In addition, the Company hereby agrees that in the event of any dispute with respect to the payment of compensation or benefits to Employee hereunder that they shall not have the right to withhold any such payments or to offset against any such payments any other -5- amounts that may otherwise be payable or owed by Employee to the Company, except in accordance with an order obtained pursuant to the procedures described in Section 7 hereof. 5. CONFIDENTIAL INFORMATION; NON-COMPETITION. 5.1 GENERAL. Employee acknowledges that during his employment by, and as a result of his relationship with, the Company he will obtain knowledge of and gain access to information regarding the Company's (including for purposes of this Section 5 all former, current, and future subsidiaries of the Company) business, operations, products, proposed products, production methods, processes, customer lists, advertising, marketing and promotional plans and materials, price lists, pricing policies, financial information and other trade secrets, confidential information and material proprietary to the Company or designated as being confidential by the Company which is not generally known by non-Company personnel, including information and material originated, discovered or developed in whole or in part by Employee (collectively referred to herein as "Confidential Information"). Employee agrees that during the term of this Agreement and, to the fullest extent permitted by law, thereafter, he will, in a fiduciary capacity for the benefit of the Company, hold all Confidential Information strictly in confidence and will not directly or indirectly reveal, report, disclose, publish or transfer any of such Confidential Information to any person, firm or other entity or utilize any of the Confidential Information for any purpose, except in furtherance of the Company's business or his employment under this Agreement. 5.2 RETURN OF MATERIALS. Employee agrees that upon the expiration or earlier termination of this Agreement he will at the Company's request surrender and return to the Company all lists, books, records and other Confidential Information of the Company, or obtained in connection with the Company's business, it being expressly acknowledged by Employee that all such items are the exclusive property of the Company, and Employee shall not make or retain any copies thereof. 5.3 NON-COMPETITION. Employee agrees that during the term of this Agreement he will neither directly nor indirectly engage in a business competing with any of the businesses conducted by the Company or any of its subsidiaries, nor without the prior written consent of the Board of Directors of the Company, directly or indirectly have any equity interest in, own, manage, operate, control, be connected with as a stockholder, joint venturer, director, officer, employee, partner or consultant, or otherwise engage, invest or participate in any business which is competitive with any of the businesses conducted by the Company or by any subsidiary of the Company; provided, however, that nothing contained in this Section 5.3 shall prevent Employee from investing or trading in stocks, bonds, commodities, securities, real estate or other forms of investment for his own account and benefit (directly or indirectly), so long as such investment activities do not interfere with Employee's services to be rendered hereunder and are consistent with the conflict of interest provisions contained in the Company's Business Ethics Policy as it exists from time to time. -6- 6. TERMINATION PRIOR TO EXPIRATION OF TERM. Employee's employment, and his rights under this Agreement, may be terminated prior to the expiration of the term of this Agreement (as provided in Section 3 hereof) only as provided in this Section 6. 6.1 DISCHARGE OR RESIGNATION. (a) Employee may be discharged prior to the expiration of the term of this Agreement only for Just Cause. For the purpose of any provision of this Agreement, the termination of Employee's employment shall be deemed to have been for "Just Cause" only: (i) if termination of his employment shall have been the result of an act or acts of dishonesty on the part of Employee constituting a felony and resulting or intended to result directly or indirectly in gain or personal enrichment at the expense of the Company, or (ii) if during the Term of Employment there has been a breach by Employee of the provisions of Section 2.1 above, relating to the time to be devoted to the business and affairs of the Company, or of Section 5, relating to Confidential Information and non-competition, and such breach results in demonstratable material injury to the Company, and with respect to any alleged breach of Section 2.1 or Section 5, Employee shall have either failed to remedy such alleged breach within 30 days after his receipt of written notice from the Company pursuant to a resolution duly adopted by the Board of Directors of the Company after notice to the Employee and an opportunity to be heard demanding that he remedy such alleged breach, or shall have failed to take all reasonable steps to that end during such 30-day period and thereafter; PROVIDED, that there shall have been delivered to Employee a certified copy of the resolution of the Board of Directors of the Company adopted by the affirmative vote of not less than two- thirds of the entire membership of the Board of Directors (other than Employee, if he is then a member of the Board of Directors) at a meeting called and held for that purpose and at which Employee was given an opportunity to be heard, finding that Employee was guilty of conduct set forth in subparagraphs (i) or (ii) above, specifying the particulars thereof in detail. "Just Cause" shall not include the death or Disability of Employee. (b) Anything in this Section 6.1 or elsewhere in this Agreement to the contrary notwithstanding, the employment of Employee shall in no event be considered to have been terminated for Just Cause if termination of his employment took place as the result of (i) bad judgment or negligence on the part of Employee; (ii) an act or omission without intent of gaining therefrom directly or indirectly a profit to which Employee was not legally entitled; (iii) an act or omission believed by Employee in good faith to have been in or not opposed to the interests of the Company; (iv) an act or omission in respect of which a determination could properly be made that Employee met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the laws of the state of incorporation of the Company or pursuant to the terms of any policy of directors' and officers' liability insurance that may be applicable to directors and officers of the Company, in each case as in effect at the time of such act or omission; (v) an act or omission which occurred more than 12 calendar months prior to the Employee's having been given notice of the termination of his employment for such act or omission unless the commission of such act or such omission could not at the time of such commission or omission have been known to a member of the Board of -7- Directors of the Company (other than Employee, if he is then a member of the Board of Directors), in which case more than 12 calendar months from the date that the commission of such act or such omission was or could reasonably have been so known; or (vi) a continuing course of action which commenced and was or could reasonably have been known to a member of the Board of Directors of the Company (other than Employee) more than 12 calendar months prior to notice having been given to Employee of the termination of his employment. (c) Employee may resign prior to the expiration of the term of this Agreement for Good Reason at any time upon providing written notice to the Company and the Employee's continued employment with the Company after an event constituting Good Reason has occurred shall not be deemed a waiver of the Employee's right to terminate his employment for such Good Reason at any time after the event and receive the benefits under Section 6.1(d)(ii). "Good Reason" shall mean the material failure by the Company to fulfill its obligations under this Agreement, to the extent not remedied in a reasonable period of time, but in no event more than 30 days, after receipt of written notice from Employee specifying the material failure by the Company. Without limiting other circumstances which may constitute Good Reason, (i) any reduction or attempted reduction of compensation or benefits below that required by Section 4, (ii) any failure to elect or reelect Employee to, or removal of Employee from, the offices described in Section 1, (iii) any significant change in the nature or scope of the authorities, powers, functions or duties attached to the offices described in Section 1, (iv) any change in the Employee's position as Chairman, Chief Executive Officer, and President of the Company, or (v) any determination by Employee made in good faith that as a result of a change in circumstances since the date of this Agreement significantly affecting his offices and positions he is unable to carry out the authorities, powers, functions or duties attached to his offices and positions, shall be deemed material failure by the Company to fulfill its obligations under this Agreement. For a resignation which occurs coincident with or following a Change in Control, "Good Reason" shall also mean the failure by the Company or its successors or assigns to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if a succession or assignment had not occurred. (d) (i) If prior to a Change in Control Employee is discharged for Just Cause or resigns without Good Reason, the Company shall not be obligated to pay Employee any sums of money pursuant to Section 4.1 other than a cash lump sum payment equal to all compensation and benefits due Employee as of the date of discharge or resignation, including the bonus for the period of his employment prior to the discharge or resignation (all cash compensation to be based on annual cash compensation of not less than $950,000 per year, irrespective of the time at which such cash compensation is otherwise payable) annualized on a reasonable basis acceptable to the Employee; however, if at the end of such year it is determined that the Employee's annual compensation would have been higher than the annualized amount used to calculate this payment, the Company shall pay the Employee an amount in a cash lump sum equal to a proportionate share in the increase based on his period of employment during the year in which Employee was discharged or resigned. Employee's other compensation and benefits under this Agreement, including without limitation those provided pursuant to -8- Section 4.5, shall not be impaired or otherwise adversely affected by termination of Employee's employment; provided, however, that Employee shall not be entitled to any amounts under Section 4.4 if Employee's employment is terminated prior to a Change in Control for Just Cause or without Good Reason. (ii) If prior to a Change in Control Employee is discharged without Just Cause or resigns for Good Reason, or if Employee's employment is terminated after a Change in Control (even if for Just Cause or without Good Reason), Employee, or his spouse, estate or otherwise designated beneficiary, as the case may be, shall be entitled to the following: (1) a cash lump sum payment equal to all compensation and benefits due Employee pursuant to Section 4.1 as of the date of discharge or resignation, including the bonus for the period of his employment prior to the discharge or resignation (all cash compensation to be based on annual cash compensation of not less than $950,000 per year, irrespective of the time at which such cash compensation is otherwise payable) annualized on a reasonable basis acceptable to the Employee; however, if at the end of such year it is determined that the Employee's annual compensation would have been higher than the annualized amount used to calculate this payment, the Company shall pay the Employee an amount in a cash lump sum equal to a proportionate share in the increase based on his period of employment during the year in which Employee was discharged or resigned; plus (2) a cash lump sum payment equal to the compensation pursuant to Section 4.1 which would be received by Employee for the remainder of the Term of Employment (using annual compensation of $950,000 per year or, if higher, the highest annual amount of Employee's compensation or annualized compensation calculated as described in Section 6(d)(ii)(1) in any year (including the year in which Employee terminates) during which this Agreement was in force). The entire lump sum amount shall be paid concurrent with any discharge or within 3 business days of the date of any resignation. Employee shall have no duty to mitigate or attempt to mitigate his damages. Employee's other compensation and benefits under this Agreement, including without limitation those provided pursuant to Sections 4.4 and 4.5, shall not be impaired or otherwise adversely affected by termination of Employee's employment. (e) For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred on the earliest of the following dates: (i) The date any entity or person (including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, or any comparable successor provisions) shall have become the beneficial owner of, or shall have obtained voting control over, twenty percent (20%) or more of the then outstanding common shares of the Company; (ii) (1) The date the stockholders of the Company approve a definitive agreement to sell or otherwise dispose of substantially all the assets of the Company, or to merge or consolidate the Company with or into another corporation, in which the Company -9- is not the continuing or surviving corporation or pursuant to which any common shares of the Company would be converted into cash, securities or other property of another corporation, other than a merger of the Company in which holders of common shares immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger as immediately before, or (2) the date the Company enters into a binding agreement to sell or otherwise transfer (including without limitation by merger or consolidation) to one or more unaffiliated entities or persons not less than a majority of the outstanding capital stock of the Company; or (iii) The date upon which, during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Company Board") cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's stockholders, of each new Company Board member was approved by a vote of at least three-fourths of the Company Board members then still in office who were Company Board members at the beginning of such period. 6.2 DISABILITY. (a) The term "Disability" shall mean an illness or accident which prevents Employee from performing with reasonable accommodation by the Company his duties under this Agreement for a period of 12 consecutive months. Unless Employee shall have returned to full-time performance of his duties within such 12-month period, this Term of Employment under this Agreement shall be deemed to have ended as of the close of business on the last day of such twelve 12-month period. In the event of the Disability of Employee resulting in the termination of the Term of Employment, Employee shall be entitled to the full cash compensation and benefits provided for in Section 4 above for the period of such Disability, but shall not receive any cash compensation pursuant to Section 4.1 for a period in excess of 12 months after the onset of such Disability. Employee's other compensation and benefits under this Agreement, including without limitation those provided pursuant to Sections 4.4 and 4.5, shall not be impaired or otherwise adversely affected by termination of Employee's employment on account of Disability. 6.3 DEATH. The death of Employee shall result in the termination of the Term of Employment, and his spouse, estate or otherwise designated beneficiary shall be entitled to the benefits described in Section 4, including without limitation Sections 4.4 and 4.5. The Company shall not be obligated to pay the estate or personal representative of Employee any sums of money pursuant to Section 4.1 other than a cash lump sum payment equal to all compensation and benefits due Employee at the date of his death (all cash compensation to be based on annual cash compensation of not less than $950,000 per year, irrespective of the time at which such cash compensation is otherwise payable) annualized on a reasonable basis acceptable to the estate or personal representative of the Employee; however, if at the end of such year it is determined that the Employee's annual compensation would have been higher than the annualized amount used to calculate this payment, the Company shall pay the estate or personal representative of the Employee an amount in a cash lump sum equal to a proportionate share in the increase based on his period of employment during the year in which the Employee died. Employee's other compensation and benefits under this Agreement, including without -10- limitation those provided pursuant to Sections 4.4 and 4.5, shall not be impaired or otherwise adversely affected by termination of Employee's employment on account of death. 6.4 REQUIREMENT OF BONUS PAYMENT IN CERTAIN CIRCUMSTANCES. (a) In the event that Employee is deemed to have received an excess parachute payment (as such term is defined in Section 280G(b) of the Code) which is subject to the excise taxes (the "Excise Taxes") imposed by Section 4999 of the Code in respect of any payment of compensation to Employee from the Company pursuant to this Agreement, in whatever form, the Company shall make the Bonus Payment (as defined below) to Employee promptly after the date on which Employee received or is deemed to have received any excess parachute payments. (b) The term "Bonus Payment" means a cash payment in an amount equal to the sum of (A) all Excise Taxes payable by Employee, plus (B) all additional Excise Taxes and federal or state income taxes to the extent such taxes are imposed in respect of the Bonus Payment, such that Employee shall be in the same after-tax position and shall have received the same benefits that he would have received if the Excise Taxes had not been imposed. For purposes of calculating any income taxes attributable to the Bonus Payment, Employee shall be deemed for all purposes to be paying income taxes at the highest marginal federal income tax rate, taking into account any applicable surtaxes and other generally applicable taxes which have the effect of increasing the marginal federal income tax rate and, if applicable, at the highest marginal state income tax rate to which the Bonus Payment and Employee are subject. An example of the calculation of the Bonus Payment is set forth below: Assume that the Excise Tax rate is 20%, that the highest federal marginal income tax rate is 40% and that Employee is not subject to state income taxes. Assume that Employee has received an excess parachute payment in the amount of $500,000, on which $100,000 in Excise Taxes are payable. The amount of the required Bonus Payment is $250,000. The Bonus Payment, less Excise Taxes of $50,000 and income taxes of $100,000, yields $100,000, the amount of the Excise Taxes payable in respect of the excess parachute payment. (c) Employee agrees to cooperate reasonably with the Company to minimize the amount of the excess parachute payments, including without limitation assisting the Company in establishing that some or all of the payments received by Employee contingent on a change described in Section 280G(b)(2)(A)(i) of the Code are reasonable compensation for personal services actually rendered by Employee before the date of such change or to be rendered by Employee on or after the date of such change. In the event that the Company is able to establish that the amount of the excess parachute payments is less than originally anticipated by Employee, Employee shall refund to the Company any excess Bonus Payment to the extent not required to pay Excise Taxes or income taxes (including those incurred in respect of the payment of the Bonus Payment). Notwithstanding the foregoing, Employee shall not be required to take any actions which his tax advisor advises him in writing (i) is improper or (ii) exposes Employee to material personal liability, and Employee may require the Company to -11- deliver to Employee an indemnification agreement in form and substance satisfactory to Employee as a condition to taking any action required by this Section 6.4. (d) The Company shall make any payment required to be made under this Agreement in cash and on demand. Any payment required to be paid by the Company under this Agreement which is not paid within five days of receipt by the Company of Employee's demand therefor shall thereafter be deemed delinquent, and the Company shall pay to Employee immediately upon demand interest at the highest nonusurious rate per annum allowed by applicable law from the date such payment becomes delinquent to the date of payment of such delinquent sum. (e) In the event that there is any change to the Code which results in the recodification of Section 280G or Section 4999 of the Code, or in the event that either such section of the Code is amended, replaced or supplemented by other provisions of the Code of similar import ("Successor Provisions"), then this Agreement shall be applied and enforced with respect to such new Code provisions in a manner consistent with the intent of the parties as expressed herein, which is to assure that Employee is in the same after-tax position and has received the same benefits that he would have been in and received if any taxes imposed by Section 4999 or any Successor Provisions had not been imposed. 7. ARBITRATION. 7.1 GENERAL. In the event that Employee's employment shall be terminated by the Company during the term of this Agreement and such termination is alleged to be for Just Cause, or Employee's right to terminate his employment for Good Reason under Section 6.1(c) shall be questioned by the Company, or for any other reason, or in the event of any other dispute arising under or in connection with this Agreement, Employee shall have the right, in addition to all other rights and remedies provided by law, at his sole election either to seek arbitration in Houston, Texas under the rules of the American Arbitration Association (the "AAA") by serving a notice to arbitrate upon the Company or to institute a judicial proceeding in a court of competent jurisdiction located in Harris County, Texas. The arbitrator shall be selected by mutual agreement of the parties, if possible. If the parties fail to reach an agreement upon the appointment of an arbitrator within 30 days following the receipt by the Company of Employee's desire to arbitrate, the arbitrator shall be selected from a panel or panels of persons submitted by the AAA. The selection process shall be that which is set forth in the AAA Commercial Arbitration Rules then prevailing. In the event that the Company institutes any legal proceeding against Employee to resolve a dispute under this Agreement, Employee shall have the right either to seek arbitration in Houston, Texas or to institute a judicial proceeding in a court located in Harris County, Texas, as provided in the preceding sentence, and the Company shall dismiss its proceeding or take such other action as may be reasonably requested by Employee in order for such proceeding to be brought in the forum selected by Employee in accordance with the preceding sentence. Any award rendered pursuant to this Section 7.1 shall be final and binding on the parties to this Agreement. -12- 7.2 PROCEDURE. The Company shall have the burden of proving Just Cause for any discharge of Employee under Section 6.1, and the Company shall have the burden of proving that Good Reason did not exist in respect of any resignation by Employee. Judgment upon any award of any arbitrator may be entered in any court having jurisdiction, or application may be made to any such court for the judicial acceptance of the award and for an order of enforcement. 7.3 COSTS AND EXPENSES. The Company shall pay the fees of any arbitrator, witnesses and such other expenses as may be generated by an arbitration, except Employee's attorneys' fees, unless the arbitrator concludes that such arbitration procedure was not instituted in good faith by Employee. In such event the arbitrator shall be empowered to allocate fees and assess costs and other expenses of the arbitration, except attorneys' fees, as the arbitrator may deem appropriate, bearing in mind the relative financial abilities of the parties and the respective merits of their positions. 8. NON-ASSIGNMENT. This Agreement shall not be assignable nor the duties hereunder delegable by Employee. None of the payments hereunder may be encumbered, transferred or in any way anticipated. The Company shall not assign this Agreement nor shall the Company directly or indirectly transfer (including without limitation by merger or consolidation) all or any substantial part of the stock or assets of the Company without first obtaining in conjunction with such transfer the express assumption of all of its obligations in this Agreement by the successor, assignee or transferee. 9. REMEDIES. Employee acknowledges that the services he is to render under this Agreement are of a unique and special nature, the loss of which cannot reasonably or adequately be compensated for in monetary damages, and that irreparable injury and damage will result to the Company in the event of any default or breach of this Agreement by Employee. Because of the unique nature of the Confidential Information, Employee further acknowledges and agrees that the Company will suffer irreparable harm if Employee fails to comply with his obligations in Section 5 hereof and that monetary damages would be inadequate to compensate the Company for such breach. Accordingly, Employee agrees that the Company will, in addition to any other remedies available to either of them at law, in equity or, without limitation, otherwise, be entitled to injunctive relief or specific performance to enforce the terms, or prevent or remedy the violation, of any provisions of this Agreement. This provision shall not constitute a waiver by the Company of any rights to damages or other remedies which it may have pursuant to this Agreement or otherwise. 10. SURVIVAL. The provisions of Sections 5.1, 5.2, 7 and 9 shall survive the expiration or earlier termination of this Agreement. 11. NOTICES. Any notices or other communications relating to this Agreement shall be in writing and delivered personally or mailed by certified mail, return receipt requested, to the party concerned at the address set forth below: -13- If to the Company: Kent Electronics Corporation 7433 Harwin Drive Houston, Texas 77036 Attn: Chairman If to Employee: At his residence address as maintained by the Company in the regular course of its business for payroll purposes. Either party may change the address for the giving of notices at any time by notice given to the other party under the provisions of this Section 11. 12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may not be changed orally, but only by an agreement in writing signed by both parties. 13. CONSTRUCTION. This Agreement shall be governed under and construed in accordance with the laws of the State of Texas, without regard to the conflicts of laws principles thereof. The paragraph headings and captions contained herein are for reference purposes and convenience only and shall not in any way affect the meaning or interpretation of this Agreement. It is intended by the parties that this Agreement be interpreted in accordance with its fair and simple meaning, not for or against either party, and neither party shall be deemed to be the drafter of this Agreement. 14. SEVERABILITY. If any portion or provisions of this Agreement is determined to be invalid, illegal or unenforceable, the remaining portions or provisions hereof shall not be affected. 15. BINDING EFFECT. The rights and obligations of the parties under this Agreement shall be binding upon and inure to the benefit of the permitted successors, assigns, heirs, administrators, executors and personal representatives of the parties. 16. TERMINATION OF CERTAIN OTHER AGREEMENTS. Upon the execution of this Agreement, that certain Executive Agreement between Company and Morrie K. Abramson dated May 29, 1987, as amended by an Amendment to Executive Agreement dated March 16, 1993, and that certain 1994 Kent Electronics Corporation Spousal Salary Continuation Plan adopted on October 10, 1994 for the benefit of Employee shall terminate. All other agreements or arrangements of the Company with or for the benefit of the Employee in effect on the date hereof shall remain effective, including but not limited to the obligations of the Company under the Medical Benefits Agreement and that certain Agreement dated March 16, 1993 between the Company and Employee requiring a Bonus Payment in the event Employee is deemed to have -14- received an excess parachute payment under Section 280G of the Code, and the parties hereto agree that such agreements shall be unaffected except as expressly modified by this Agreement. 17. TAX WITHHOLDING. The Company may withhold from any benefits payable under this Agreement all federal, state, city or other taxes that shall be required to be withheld pursuant to applicable law. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. /s/ Morrie K. Abramson -------------------------------------------- Morrie K. Abramson KENT ELECTRONICS CORPORATION By:/s/ Stephen J. Chapko ----------------------------------------- Stephen J. Chapko Vice President, Treasurer and Secretary -15- EX-10.23 9 EXHIBIT 10.23 KENT ELECTRONICS CORPORATION CHIEF EXECUTIVE OFFICER DEFERRED COMPENSATION PLAN AND AGREEMENT - ------------------------------------------------------------------------------ Kent Electronics Corporation (the "COMPANY") hereby establishes and enters into the following Plan and Agreement with Morrie K. Abramson (the "PARTICIPANT"), Chairman, President and Chief Executive Officer of the Company, on and as of January 3, 1996: W I T N E S S E T H: WHEREAS, the Company desires to establish an executive deferred compensation plan primarily for the purpose of providing deferred compensation to the Participant; and WHEREAS, it is the intention of the Company that the plan and the related grantor trust will be considered to be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and that all benefits paid under the plan shall be payable either from the related grantor trust or the general assets of the Company. NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good and valuable consideration paid by each of the parties hereto to the other, and the mutual agreements set forth herein of such parties, the receipt and sufficiency of which are hereby acknowledged, the Company does hereby establish the Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement (this "AGREEMENT" or "PLAN") and the Company and the Participant do hereby agree as follows: ARTICLE 1. DEFINITIONS - ------------------------------------------------------------------------------ The following additional definitions shall govern this Plan: (a) BENEFICIARY means the person or persons designated in writing to receive benefits, if any, upon the death of the Participant. If no such designation is made or if the designated person is not living at the death of the Participant, the designated Beneficiary shall be the deceased Participant's spouse, if living, otherwise the trustee named under the Participant's last will and testament, otherwise the personal representative, executors, or administrators of the Participant's estate. Notwithstanding the preceding sentence, the designated Beneficiary of a Participant married at date of death shall be the Participant's spouse unless the Participant's spouse has consented in writing to the Participant's naming a non-spouse Beneficiary. The consent of the spouse to a non-spouse Beneficiary shall be irrevocable by the spouse. In the event an unmarried Participant marries, such Participant's designated Beneficiary shall be the Participant's spouse regardless of an existing Beneficiary designation which shall be deemed 1 revoked as of the date of marriage unless consented to in writing by the Participant's spouse. (b) BOARD OF DIRECTORS shall mean the Board of Directors of the Company. (c) CHANGE IN CONTROL shall mean a Change in Control, as defined in the Trust Agreement. (d) CODE shall mean the Internal Revenue Code of 1986, as amended. (e) COMMITTEE shall mean the Compensation Committee of the Board of Directors. (f) COMPENSATION shall mean the Participant's total wages, salaries, fees for professional service and other amounts received for personal services actually rendered in the course of employment with the Company, including commissions, compensation based on a percentage of profits, bonuses and elective contributions. Elective contributions are amounts excludable from the Participant's gross income under Sections 125, 402(e)(3) or 402(h) of the Code and contributed by the Company, at the Participant's election, to a Section 401(k) arrangement, a Simplified Employee Pension, a cafeteria plan or a tax-sheltered annuity. (g) DEFERRED COMPENSATION means the Compensation deferred pursuant to Article 2 hereof. (h) DISABILITY means a total and permanent disability resulting from a mental or physical incapacity which prevents the Participant from performing the full scope of his duties for the Company (as such duties exist on the date immediately prior to the occurrence of such incapacity) and lasting or expected to last for a period of at least 180 days. Disability shall be determined in good faith by the Board of Directors of the Company based on the opinion of a licensed physician. (i) PERMITTED INVESTMENTS shall have the meaning set forth in the Trust Agreement. (j) PLAN YEAR means each fiscal year of the Company (i.e., the 52- or 53-week period which begins on the Sunday following the Saturday which is closest to March 31, and ends on the Saturday which is closest to the following March 31). However, the first Plan Year shall be from the date of this Plan to March 30, 1996. (k) TRUST shall mean the grantor trust established pursuant to the Trust Agreement. (l) TRUST AGREEMENT shall mean the Trust Agreement for the Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement entered into on January 3, 1996, by and between the Company and Texas Commerce Bank National Association, as trustee. 2 (m) TRUSTEE shall mean Texas Commerce Bank National Association, as trustee, or any successor Trustee named under and in accordance with the Trust Agreement. (n) TRUST FUNDS shall have the meaning set forth in the Trust Agreement. ARTICLE 2. PLAN BENEFIT AND DEFERRED COMPENSATION - ------------------------------------------------------------------------------ (a) PERMITTED CASH COMPENSATION DEFERRALS: The Participant, to the extent authorized by the Company, may from time to time defer payment of additional cash Compensation to be earned by the Participant. Any deferral by the Participant shall be made by written notice to the Company prior to the Plan Year in which such cash Compensation is to be earned by or accrued on behalf of the Participant. Any and all deferred cash Compensation shall be contributed by the Company to the Trust and thereafter held in the Trust, subject to the terms of this Plan and the Trust Agreement, for the benefit of the Participant and his Beneficiary. (b) BENEFIT ACCOUNTING. The Company shall maintain the following bookkeeping accounts which shall reflect the interest of the Participant under this Agreement: A "CASH ACCOUNT" which shall reflect any cash bonus or other cash Compensation from time to time deferred by the Participant and placed in the Trust on his behalf pursuant hereto, increased by an amount equivalent to earnings at a specified rate of return on the balance existing in the Cash Account. The rate of return for any period of time shall, unless otherwise agreed to by the Participant, be a rate equal to the average rate of interest or other return earned on the Trust Funds held in the Trust and invested in Permitted Investments for such period, or in the event that for any reason (including without limitation because such Trust Funds have been paid to the Company's creditors upon its insolvency) no Trust Funds held in the Trust are invested in Permitted Investments, at a rate of return of 12% per annum. The Cash Account shall be reduced by the amount of any payments to the Participant. The total balance of the Cash Account shall hereinafter be referred to as the "DEFERRED COMPENSATION ACCOUNT BALANCE." (c) ANNUAL STATEMENT OF TRUSTEE: Within a reasonable period of time after the last day of each Plan Year, the Company will cause the Trustee to furnish the Participant with an annual statement of all Trust assets as of the last day of such Plan Year. The Company will cause the Trustee to credit (debit) the Trust with all investment and reinvestment earnings (and losses) allocable to the Trust. 3 (d) SOURCE OF FUNDS: Amounts payable under this Agreement shall be paid first from any assets held in the Trust, which is intended to provide for the payment of benefits hereunder and then, to the extent that the assets of the Trust are insufficient, out of the general assets of the Company to the extent available. Upon the Participant becoming entitled to any payment under this Plan, the Company shall promptly direct the Trustee to make such payment to the extent there are sufficient assets in the Trust. Any rights of the Participant to payments under this Agreement, regardless of whether payable from the Trust or by the Company, however, shall not be greater than the right of any unsecured creditor of the Company. It is expressly provided hereunder that, except insofar as amounts are contributed by the Company to the Trust, no assets of the Company shall be segregated or set aside to fund the obligations of the Company under this Plan. ARTICLE 3. GENERAL CREDITOR STATUS OF PARTICIPANT ASSET OWNERSHIP - ------------------------------------------------------------------------------ The Participant shall be regarded as an unsecured general creditor of the Company with respect to any rights derived by the Participant from the existence of this Plan or the existence of the Trust. Beneficial ownership of any assets which the Company may use to pay deferred compensation benefits hereunder, including assets held by the Trustee in the Trust, shall at all times remain with the Company. The Participant and his designated Beneficiary shall not have any property interest whatsoever in any specific assets of the Company or the Trust by virtue of this Plan or the Trust. All such assets shall remain subject to the claims of the Company's general creditors until such time as payments are actually made from the Trust to the Participant or his Beneficiary. The Company covenants and agrees that, prior to using assets held by the Trustee in Trust hereunder to satisfy any creditors of the Company (other than the Participant or his Beneficiary), it will use assets of the Company other than assets held by the Trustee in Trust hereunder to satisfy such creditors at all times, including in the event of insolvency or bankruptcy, to the extent such other assets are available. ARTICLE 4. VESTING - ------------------------------------------------------------------------------ The Participant shall at all times be fully vested in the benefits provided by this Plan. 4 ARTICLE 5. PAYMENT OF DEFERRED COMPENSATION - ------------------------------------------------------------------------------ The entire value of the Deferred Compensation Account Balance shall be paid to the Participant on the first to occur of the following: (i) April 2, 2001; (ii) the Participant's death or Disability; (iii) the termination of Participant's employment with the Company; or (iv) a Change in Control. At such time as the Participant is entitled to the receipt of benefits from the Plan, such Participant shall be entitled to receive his benefit hereunder in cash. ARTICLE 6. NON-ASSIGNMENT - ------------------------------------------------------------------------------ The right of the Participant, or designated Beneficiary of the Participant, to any benefit or distribution hereunder shall not be subject in any manner to attachment or other legal process for the debts of such Participant or designated Beneficiary. Any rights, benefits, or payment hereunder shall not be subject to anticipation, alienation, sale, transfer, assignment or encumbrance except by will, intestacy laws, or other laws of descent and distribution or pursuant to a qualified domestic relationship order as defined by the Code or Title I of ERISA, or the rules thereunder. ARTICLE 7. PLAN BINDING - ------------------------------------------------------------------------------ This Plan shall be binding upon and inure to the benefit of the parties hereto and their successors, assigns, heirs, executors, administrators and legal representatives. ARTICLE 8. ADMINISTRATION - ------------------------------------------------------------------------------ Unless otherwise determined by the Board of Directors of the Company, the Committee shall administer this Plan and shall have the authority to determine the nature and amounts of the rights and interests of the Participant under the terms of the Plan. 5 ARTICLE 9. NO GUARANTEE OF EMPLOYMENT - ------------------------------------------------------------------------------ Any distributions under this Plan shall be independent of, and in addition to, those under any other plan, program or agreement which may be in effect between the parties hereto, or any other Compensation payable to the Participant or the Participant's designee by the Company or any other employer. This Plan shall not be construed as a contract of employment nor does it restrict the right of the Company to discharge the Participant at will or the right of the Participant to terminate employment. ARTICLE 11. CONSTRUCTION - ------------------------------------------------------------------------------ This Plan shall be construed in accordance with and governed by the laws of the State of Texas applicable to contracts made and to be wholly performed within the State of Texas, except to the extent subject to federal law. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written in several original counterparts each of which shall be deemed the original, and each of which shall constitute but one and the same document. KENT ELECTRONICS CORPORATION By:/s/ STEPHEN J. CHAPKO ------------------------------------------- Name: Stephen J. Chapko ----------------------------------------- Title: Vice President, Treasurer & Secretary --------------------------------------- /s/ MORRIE K. ABRAMSON -------------------------------------------- Morrie K. Abramson EX-10.24 10 EXHIBIT 10.24 TRUST AGREEMENT FOR KENT ELECTRONICS CORPORATION CHIEF EXECUTIVE OFFICER DEFERRED COMPENSATION PLAN AND AGREEMENT AND EMPLOYMENT AGREEMENT This Trust Agreement is made this 3rd day of January, 1996 by and between Kent Electronics Corporation (the "COMPANY") and Texas Commerce Bank National Association, as trustee (the "TRUSTEE"). WHEREAS, the Company has adopted a nonqualified deferred compensation plan known as the Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement (the "PLAN"); WHEREAS, the Company has entered into an Employment Agreement with Morrie K. Abramson dated January 3, 1996 (the "Employment Agreement"); WHEREAS, the Company has incurred or expects to incur liability under the terms of such Plan with respect to the individual participating in such Plan and under the terms of the Employment Agreement; WHEREAS, the Company wishes to establish a trust (the "TRUST") and to contribute to the Trust assets that shall be held therein, subject to the claims of the Company's creditors in the event the Company is insolvent (as herein defined) until paid to the participant in the Plan and to the employee under the Employment Agreement (collectively the "PARTICIPANT") or his beneficiary under the Plan and Employment Agreement (collectively the "BENEFICIARY") in such manner and at such times as specified in the Plan and Employment Agreement; WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation to the chief executive officer of the Company for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); and; WHEREAS, it is the intention of the Company to make contributions to the Trust for the purpose of accumulating assets to assist it in fulfilling its obligations under the Plan and under the Employment Agreement; NOW, THEREFORE, in consideration of the premises and of the sum of One Dollar ($1.00) paid by the Trustee to the Company, the receipt and sufficiency of which is hereby acknowledged, the Company hereby grants, conveys, assigns, transfers, pledges, sets over and confirms to the Trustee, forever, the securities or other funds or properties now or hereafter contributed in Trust to the Trustee hereunder for the benefit of the Participant or his Beneficiary, and grant a security interest therein for the purposes herein expressed, to be comprised of, held and disposed of as follows: SECTION 1. ESTABLISHMENT OF TRUST. (a) The Trustee hereby accepts this Trust, as evidenced by the Trustee's execution of this Trust Agreement. The Trustee shall hold, administer and invest the Trust Fund and all sums paid to the Trustee in accordance with the provisions of this Trust Agreement. The Trustee shall receive any contributions made to the Trustee in cash, or in the form of such other property as the Trustee may from time to time deem acceptable and which shall have been delivered to the Trustee. All contributions so received, together with all income thereon, and any and all other increments and accruals thereon, shall hereinafter be collectively referred to as the "TRUST FUNDS" and shall be held, administered and paid by the Trustee pursuant to the terms of this Trust Agreement. (b) The Trust hereby established shall be irrevocable; provided, however, that the Trust Funds will be subject to the claims of the Company's general creditors under federal and state law in the event the Company is insolvent. (c) The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The Trust Funds shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of the Participant and general creditors as herein set forth. The Participant and his Beneficiary shall have no preferred claim on, or any beneficial ownership interest in, any Trust Funds. Any rights created under the Plan, the Employment Agreement and this Trust Agreement shall be unsecured contractual rights of the Participant and his Beneficiary against the Company. (e) The Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or property in trust with the Trustee to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. (f) The Company will provide the Trustee any reconciliation, allocation, investment or other information concerning, or representation with respect to, the cash or property contributed to the Trust as the Trustee may require. The Trustee shall have no duty or authority to (1) require any deposits to be made under the Plan or the Employment Agreement, (2) compute any amount to be deposited under the Plan or the Employment Agreement with the Trustee, or (3) determine whether assets received by the Trustee comply with the Plan or the Employment Agreement. The Trust Funds may, in the Trustee's discretion, be held in trust by an affiliate of the Trustee. 2 SECTION 2. PAYMENTS TO PARTICIPANT AND HIS BENEFICIARY. (a) The Company shall deliver to the Trustee written notice (the "PAYMENT NOTICE") that (i) indicates the amounts payable to the Participant or his Beneficiary and the appropriate recipient, (ii) indicates the reason for the payment and (iii) provides instructions acceptable to the Trustee for determining the amount so payable, the form of payment and the time for payment of Trust Funds. Except as otherwise provided herein, the Trustee shall make payments to the Participant or his Beneficiary in accordance with such Payment Notice. The Trustee shall make payments in accordance with directions set out in the Payment Notice without further inquiry of any person, and the Trustee shall have no duty or responsibility to question or determine whether such payments are in accordance with the terms of the Plan or Employment Agreement. The Payment Notice shall be delivered to the Trustee not less than 10 business days prior to the date on which a payment is to be made, unless the Trustee agrees to a shorter notice period. The Trustee shall make provision for the withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan or the Employment Agreement, it being understood among the parties hereto that (1) the Company shall on a timely basis provide the Trustee specific information as to the amount of taxes to be withheld, and (2) the Company shall be obligated to receive such withheld taxes from the Trustee and properly pay and report such amounts to the appropriate taxing authorities. (b) Except as otherwise provided in this Section 2(b), the Trustee shall not make any payment from the Trust except pursuant to the written direction of the Company as provided in Section 2(a) hereof. The Trustee shall make payment in accordance with the Company's direction without any requirement to engage in its own independent investigation regarding the payment, but shall provide the Company with written confirmation of the fact and amount of such payment after it is made in the form designated in the Payment Notice. Notwithstanding anything contained herein to the contrary, upon the Trustee's receipt from the Company or the Participant of written confirmation satisfactory to the Trustee that a Change in Control (as hereinafter defined) with respect to the Company has occurred, which confirmation the Company shall promptly provide in the event of such a Change in Control, the Trustee shall pay all Trust Funds attributable to contributions under the terms of the Plan to the Participant, but such payment shall not change any rights of the Company or the Participant under the Plan. Following a Change in Control, the Trustee shall be directed by the Company or the Participant, in writing, regarding the same information as contained in a Payment Notice and the Trustee shall follow such direction without further inquiry as provided herein. (c) The entitlement of the Participant or his Beneficiary to benefits under the Plan or the Employment Agreement shall be determined by the Company or such party as it shall designate under the Plan or the Employment Agreement. (d) The Company may make payments of benefits directly to the Participant or his Beneficiary, if applicable, as they become due under the terms of the Plan or the Employment Agreement. The Company shall notify the Trustee of its decision to make payments of benefits directly prior to the time amounts are payable to the Participant or his Beneficiary. In addition, 3 if Trust Funds are not sufficient to make payment of benefits in accordance with the terms of the Plan or the Employment Agreement, the Company shall make the balance of each such payment as such benefits are due. The Trustee shall notify the Company in the event that the Trust Funds are not sufficient to make a directed payment in full. (e) The Trustee shall have no responsibility to determine whether the Trust is sufficient to meet the obligations under the Plan or the Employment Agreement, and shall not be liable for payments of any amounts or obligations in excess of the value of the Trust's assets. (f) It is the intention of the Company that the Trust Fund assist in funding, in whole or in part, the Company's legal liabilities under the Plan and the Employment Agreement and to have the balance of funds, if any, revert to the Company after the legal liabilities of the Company under the Plan and the Employment Agreement have been met. All income, deductions and credits of the Trust Fund shall be included on the Company's income tax returns. (g) The Trustee shall not make any payments hereunder to any Beneficiary of the Participant prior to receiving appropriate evidence of the death of the Participant. SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT. (a) The Trustee shall cease payment of benefits to the Participant and his Beneficiary if the Company is insolvent. The Company shall be considered "INSOLVENT" for purposes of this Trust Agreement if (i) the Company is unable to pay its debts as they become due in the usual course of its business, (ii) the Company files any proceeding under federal bankruptcy laws or state insolvency statutes, or (iii) any creditor of the Company files any proceeding against the Company under federal bankruptcy laws or state insolvency statutes, which proceeding is not dismissed within 90 days of filing. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the Trust Funds shall be subject to claims of general creditors of the Company under federal and state law as set forth below. (1) The Company shall have the duty promptly to inform the Trustee in writing of the Company's insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become insolvent, the Trustee shall determine whether the Company is insolvent and, pending such determination, the Trustee shall discontinue payment of benefits to the Participant or his Beneficiary. The Trustee shall not be liable or responsible to the Company, Participant, Beneficiary or any other person for any determination regarding the Company's solvency or insolvency that the Trustee makes in good faith and in accordance with this Trust Agreement. (2) Unless the Trustee has actual knowledge of the Company's insolvency, or has received written notice pursuant to subsection 3(b)(1) above from the Company of the 4 Company's insolvency or a person claiming to be a creditor alleging that the Company is insolvent, the Trustee shall have no duty to inquire whether the Company is insolvent. In making any such inquiry, the Trustee may rely on such evidence concerning the Company's solvency as may be furnished to the Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency. The Company shall reimburse the Trustee for all reasonable costs of making such determination. (3) If at any time the Trustee has determined that the Company is insolvent, the Trustee shall discontinue payments to the Participant or his Beneficiary and shall hold the assets of the Trust for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of the Participant or his Beneficiary to pursue their respective rights as general creditors of the Company with respect to benefits due under the Plan, the Employment Agreement or otherwise. (4) The Trustee shall resume the payment of benefits to the Participant or his Beneficiary in accordance with Section 2 of this Trust Agreement only after the Trustee has determined that the Company is not insolvent (or is no longer insolvent). (c) Provided that there are sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to the Participant or his Beneficiary under the terms of the Plan and/or the Employment Agreement for the period of such discontinuance, less the aggregate amount of any payments made to the Participant or his Beneficiary by the Company in lieu of the payments provided for hereunder during any such period of discontinuance; provided that the Company has given the Trustee the information with respect to such payments made during the period of discontinuance prior to resumption of payments by the Trustee and the Trustee receives a Payment Notice pursuant to Section 2 hereof. SECTION 4. PAYMENTS TO THE COMPANY. Except as otherwise provided herein, the Company shall have no right or power to direct the Trustee to return to the Company or to divert to others any of the Trust Funds before all payment of benefits have been made to the Participant or his Beneficiary pursuant to the terms of the Plan and the Employment Agreement. SECTION 5. INVESTMENT AUTHORITY. (a) The Trustee shall have the authority and discretion to invest and reinvest all or any portion of the Trust Funds and shall invest and reinvest all or any portion of the Trust Funds pursuant to and to the extent directed to do so in writing by the Company. In the event of a Change in Control, the Trustee shall have the sole responsibility and authority to invest and reinvest the assets of the Trust following such Change in Control until such assets are paid to the Participant. Unless otherwise consented to by the Participant, any and all such investment 5 or reinvestment proceeds of Trust Funds shall be invested and reinvested in Permitted Investments only and the Company shall direct investments and reinvestments in Permitted Investments only. (b) The Trustee, or the Trustee's designee, is authorized and empowered: (1) To hold any investment or security contributed to the Trust and to exercise all voting or tendering rights with respect to any investment and to grant proxies, discretionary or otherwise; (2) To invest and reinvest Trust Funds in the following, each of which constitutes a "PERMITTED INVESTMENT": (i) Direct obligations of the United States of America or obligations of any instrumentality or agency thereof the payment of the principal of and interest on which an unconditionally guaranteed by the United States of America; provided, however, that any such obligation shall have a final maturity date no more than one year after the acquisition thereof; (ii) repurchase obligations issued by any bank or trust company including any bank serving as Trustee, fully collateralized by obligations of or guaranteed by the United States of America and maturing within 30 days of the acquisition thereof; and (iii) money market funds or accounts which invest solely in any of the above described Permitted Investments; (3) To hold, manage, improve, repair and control all property, real or personal, forming part of the Trust; to sell, convey, transfer, exchange, partition, lease for any term, even extending beyond the duration of this Trust, and otherwise dispose of the same from time to time; (4) To hold in cash, without liability for interest, such portion of the Trust as is pending investment, or payment of expenses, or payment of benefits, and to invest in time deposits of any bank including any bank serving as Trustee or its affiliates; (5) To settle, compromise or abandon all claims and demands in favor of or against the Trust, and (6) To exercise all of the further rights, powers, options and privileges granted, provided for, or vested in trustees generally under the laws of the State of Texas, so that the powers conferred upon the Trustee herein shall not be in limitation of any authority conferred by law, but shall be in addition thereto. 6 (c) To the extent necessary or which it deems appropriate to implement its powers under Section 6 or otherwise to fulfill any of its duties and responsibilities as trustee of the Trust, the Trustee shall have the following additional powers and authority: (1) To register securities, or any other property, in its name or in the name of any nominee, including the name of any affiliate or the nominee name designated by any affiliate, with or without indication of the capacity in which property shall be held, or to hold securities in bearer form and to deposit any securities or other funds or properties in a depository or clearing corporation; (2) To designate and engage the services of, and to delegate powers and responsibilities to, such agents, representatives, advisers, attorneys and accountants as the Trustee considers necessary or appropriate, any of whom may be an affiliate of the Trustee or a person who renders services to the Trustee or an affiliate, and, as a part of its administrative expenses under this Trust Agreement, to pay their reasonable expenses and compensation from the Trust; (3) To make, execute and deliver, as the Trustee, any and all deeds, leases, mortgages, conveyances, waivers, releases or other instruments in writing necessary or appropriate for the accomplishment of any of the powers listed in this Trust Agreement; and (4) Generally to do all other acts which the Trustee deems necessary or appropriate for the protection of the Trust. SECTION 6. DISPOSITION OF INCOME. During the term of this Trust, all income received by the Trust shall be accumulated and reinvested in the Trust. SECTION 7. ACCOUNTING BY THE TRUSTEE. The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between the Company and the Trustee. Within 60 days following the close of each calendar year and within 60 days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. Within a reasonable period of time after the last day of each Plan Year, the Trustee shall furnish the Participant with an annual statement of all Trust assets as of the last 7 day of such Plan Year. The Company and Participant may approve such accounting by a written notice of approval delivered to the Trustee or by failure to express written objection to such accounting within 60 days from the date upon which the accounting was delivered to the Company or Participant, as applicable. Upon the receipt of such written approval of the accounting or upon passage of such 60-day period without written objection being delivered to the Trustee, such accounting shall be deemed approved in all respects and the Trustee shall be released and discharged as to all items set forth in such accounting as if such accounting had been settled by a final decree of a court of competent jurisdiction. The Trustee shall have the right to apply at any time to a court of competent jurisdiction for judicial settlement of any Trust Funds or for a declaratory judgment as to a question affecting the Trust. SECTION 8. RESPONSIBILITY OF THE TRUSTEE; INDEMNIFICATION. (a) The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by the Company which is contemplated by, and in conformity with, the terms of this Trust Agreement and is given in writing by the Company, Participant or Beneficiary. The Trustee shall incur no liability to any person for any failure to act in the absence of a direction, request or approval from the Company, Participant or Beneficiary which is contemplated by, and in conformity with, the terms of this Trust Agreement. In the event of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If the Trustee undertakes or defends any litigation arising in connection with this Trust, the Company agrees to indemnify the Trustee against the Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust. (c) The Trustee may consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations hereunder and pay their reasonable fees and expenses from the Trust. (d) The Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants, attorneys or other professionals to assist it in performing any of its duties or obligations hereunder and pay their reasonable fees and expenses from the Trust. (e) The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein; provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a 8 beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy. (f) Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or pursuant to applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. (g) The Company hereby indemnifies the Trustee and each of its affiliates (individually and collectively, the "INDEMNIFIED PARTY") against, and shall hold them harmless from, any and all losses, claims, liabilities, damages, costs and expenses, including reasonable attorneys' fees, imposed upon or incurred by any Indemnified Party as a result of any acts taken, or any failure to act, in accordance with directions from the Company or any employee or other designee of the Company, or by reason of the Indemnified Party's execution of its duties with respect to the Trust, including, but not limited to, its holding of assets of the Trust. The Company's obligations described in the preceding sentence are to be satisfied promptly by the Company; provided, however, in the event the loss, claim, liability, damage, cost or expense involved is determined by a no longer appealable final judgment entered in a lawsuit or other proceeding to have resulted from the negligence or willful misconduct of the Trustee, the Trustee shall promptly upon request thereafter return to the Company any amount previously received by the Trustee under this subsection with respect to such loss, claim, liability, damage, cost or expense. If the Company does not pay such amounts due hereunder in a reasonably timely manner, the Trustee may obtain payment from the Trust without direction from the Company. (h) The Trustee shall have no duties with respect to the Plan or the Employment Agreement except as specifically provided herein. The Trustee shall follow the directions of the Company, Participant or Beneficiary, as applicable hereunder, without further inquiry, and, subject to applicable law, the Trustee shall not be liable for the acts or omissions of the Company, Participant or Beneficiary. SECTION 9. COMPENSATION AND EXPENSES OF THE TRUSTEE. The Company shall promptly pay all administrative and Trustee's fees and expenses. If not so paid, such fees and expenses shall constitute a charge or lien on the Trust Funds and shall be paid from the Trust by the Trustee without direction from the Company. SECTION 10. RESIGNATION AND REMOVAL OF THE TRUSTEE. (a) The Trustee may resign at any time by written notice to the Company, which shall be effective 30 days after receipt of such notice, unless the Company and the Trustee agree otherwise. 9 (b) The Trustee may be removed by the Company on 30 days notice or upon shorter notice accepted by the Trustee. (c) Upon a Change in Control the Trustee may not be removed by the Company for five (5) years; provided, however, the Trustee may still resign. (d) If the Trustee resigns within five (5) years after a Change in Control, the Company shall select a successor Trustee. (e) Notwithstanding anything contained herein to the contrary, in the event of a Change in Control, neither the resignation nor removal of the Trustee shall be effective prior to the appointment (and approval, if applicable) of and written acceptance by a successor Trustee; provided, however, notwithstanding any other provision hereof, in no event shall the effective date of the Trustee's resignation be delayed beyond 90 days from the date that the Trustee gives written notice to the Company of its resignation, unless the Trustee agrees in writing to serve for a longer period until an interim or successor Trustee has been appointed. The Company shall make a good faith effort to appoint a successor Trustee as expeditiously as possible. (f) Upon resignation or removal of the Trustee and appointment (and approval, if applicable) and acceptance of a successor Trustee, the appointed successor Trustee, without further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the succeeded Trustee and all assets shall automatically be transferred to the successor Trustee; provided, however, that on request of the Company or the successor Trustee, such succeeded Trustee shall, upon payment of its charges by the Company or the successor Trustee, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the succeeded Trustee, and shall duly assign, transfer and deliver to the successor Trustee all property and money held by such succeeded Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully vesting in and confirming to such successor Trustee all such rights, powers and trusts. (g) If the Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under Section 10(a) or 10(b). If a successor Trustee shall not have accepted its appointment as successor Trustee within 30 days after the giving of notice of resignation or removal, the Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust to be paid by the Company pursuant to Section 9. (h) Upon settlement of the account and transfer of the Trust assets to the successor Trustee, all rights and privileges under this Trust Agreement shall vest in the successor Trustee and all responsibility and liability of the Trustee with respect to the Trust and assets thereof shall fully terminate subject only to the requirement that the Trustee execute all necessary documents to transfer the Trust assets to the successor Trustee pursuant to Section 10(f) above. 10 SECTION 11. APPOINTMENT OF SUCCESSOR. (a) If the Trustee resigns or is removed in accordance with Section 10(a) or 10(b) hereof, the Company may appoint any third party not affiliated with the Company, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace the Trustee upon resignation or removal. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the Company or the successor Trustee to evidence the transfer. (b) If the Trustee resigns pursuant to the provisions of Section 10(d) hereof, the Company may appoint any third party not affiliated with the Company, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace the Trustee upon resignation or removal. The appointment of a successor Trustee shall be effective when approved in writing by the Participant and accepted in writing by the new Trustee, who shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. (c) The successor Trustee need not examine the records and acts of any prior Trustee. The successor Trustee shall not be responsible for and the Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. SECTION 12. AMENDMENT OR TERMINATION. (a) This Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, the Company shall ensure that no such amendment shall conflict with the terms of the Plan or the Employment Agreement, shall make the Trust revocable or shall divest the Participant or his Beneficiary of any amounts or rights to which the Participant or his Beneficiary is entitled under the Plan, the Employment Agreement or this Trust Agreement. (b) The Trust shall not terminate until the date on which the Participant and his Beneficiary are no longer entitled to benefits pursuant to the terms of the Plan or the Employment Agreement. Upon termination of the Trust, any assets remaining in the Trust after payment of all amounts owed to the Participant or his Beneficiary under the Plan, the Employment Agreement or this Trust Agreement shall be returned to the Company. (c) This Trust Agreement may not be amended by the Company without the consent of the Participant for five (5) years following a Change in Control. 11 SECTION 13. MISCELLANEOUS. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to the Participant or his Beneficiary under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of the State of Texas. (d) For purposes of this Trust Agreement, "CHANGE IN CONTROL" shall be deemed to have occurred on the earliest of the following dates: (i) The date any entity or person (including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, or any comparable successor provisions) shall have become the beneficial owner of, or shall have obtained voting control over, twenty percent (20%) or more of the then outstanding common shares of the Company; (ii) (1) The date the stockholders of the Company approve a definitive agreement to sell or otherwise dispose of substantially all the assets of the Company, or to merge or consolidate the Company with or into another corporation, in which the Company is not the continuing or surviving corporation or pursuant to which any common shares of the Company would be converted into cash, securities or other property of another corporation, other than a merger of the Company in which holders of common shares immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger as immediately before, or (2) the date the Company enters into a binding agreement to sell or otherwise transfer (including without limitation by merger or consolidation) to one or more unaffiliated entities or persons not less than a majority of the outstanding capital stock of the Company; or (iii) The date upon which, during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company (the "Company Board") cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's stockholders, of each new Company Board member was approved by a vote of at least three-fourths of the Company Board members then still in office who were Company Board members at the beginning of such period. (e) The provisions of Section 8(g) of this Trust Agreement shall survive termination of this Trust Agreement. 12 (f) The rights, duties, responsibilities, obligations and liabilities of the Trustee are set forth in this Trust Agreement, and no provision of the Plan, the Employment Agreement or any other documents shall affect such rights, responsibilities, obligations and liabilities. If there is a conflict between provisions of the Plan, the Employment Agreement and this Trust Agreement with respect to any subject involving the Trustee, including but not limited to the responsibility, authority or powers of the Trustee, the provisions of this Trust Agreement shall be controlling. (g) Unless otherwise determined by the Board of Directors of the Company, all actions to be taken by the Company under this Trust Agreement, with respect to the Employment Agreement or the Plan shall be taken at the direction of the Compensation Committee of the Company's Board of Directors, which shall have full authority to administer the Plan and this Trust Agreement on behalf of the Company and to provide directions to the Trustee pursuant to procedures established by the Trustee. The Company shall provide specimen signatures to the Trustee as deemed necessary or appropriate and as requested in writing by the Trustee. IN WITNESS WHEREOF, this Trust Agreement has been executed by the parties hereto as of the day and year first above written in several original counterparts each of which shall be deemed an original, and all of which shall constitute but one and the same document. KENT ELECTRONICS CORPORATION By:/S/ STEPHEN J. CHAPKO ----------------------------------------- Name: STEPHEN J. CHAPKO --------------------------------------- Title: VICE PRESIDENT, TREASURER & SECRETARY -------------------------------------- TEXAS COMMERCE BANK NATIONAL ASSOCIATION, AS TRUSTEE By: /S/ MARY GRACE GREENWOOD ----------------------------------------- Name: MARY GRACE GREENWOOD --------------------------------------- Title: VICE PRESIDENT --------------------------------------- 13 EX-11 11 EXHIBIT 11 EXHIBIT 11 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
FISCAL YEAR ENDED ------------------------------------------------------------------------------------------------------- MARCH 30, 1996 APRIL 1, 1995 APRIL 2, 1994 -------------------------------- ------------------------------------- -------------------------------- FULLY FULLY FULLY DILUTED PRIMARY DILUTED PRIMARY DILUTED PRIMARY ----------------- ------------- ----------------- ------------------- ---------------- --------------- Net Earnings. . . . . . . $ 27,975,255 $ 27,975,255 $ 13,386,122 $ 13,386,122 $ 9,535,074 $ 9,535,074 ----------------- ------------- ----------------- ------------------- ---------------- --------------- ----------------- ------------- ----------------- ------------------- ---------------- --------------- Weighted average number of common shares outstanding . . . . . . . 21,759,600 21,759,600 19,492,000 19,492,000 19,302,000 19,302,000 Excess of shares issuable upon exercise of stock options over shares deemed retired utilizing the treasury stock method. . . . . . . . . . 1,226,900 1,404,100 783,000 893,400 460,000 572,400 ----------------- ------------- ----------------- ------------------ ---------------- --------------- 22,986,500 23,163,700 20,275,000 20,385,400 19,762,000 19,874,400 ----------------- ------------- ----------------- ------------------ ---------------- --------------- Earnings per share . . . $ 1.22 $ 1.21 $ 0.66 $ 0.66 $ 0.48 $ 0.48 ----------------- ------------- ----------------- ------------------ ---------------- --------------- ----------------- ------------- ----------------- ------------------ ---------------- ---------------
EX-21 12 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF KENT ELECTRONICS CORPORATION
State of Subsidiary Incorporation ---------- ------------- K * TEC Electronics Corporation Delaware
EX-23.1 13 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our reports dated May 6, 1996, accompanying the consolidated financial statements and schedule included in the Annual Report of Kent Electronics Corporation and Subsidiaries on Form 10-K for the year ended March 30, 1996. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Kent Electronics Corporation on Form S-3, File Nos. 33-59108 and 33-48434 and Forms S-8, File Nos. 33-12028, 33-17821, 33-18527 and 33-66030 GRANT THORNTON LLP Houston, Texas May 6, 1996 EX-27 14 EXHIBIT 27
5 YEAR MAR-30-1996 MAR-30-1996 73,191,479 38,746,855 53,468,816 999,374 48,154,792 216,859,079 62,178,517 17,328,591 277,462,022 51,176,968 0 0 0 38,335,899 186,972,737 277,462,022 372,018,931 372,018,931 273,290,618 273,290,618 0 192,522 20,004 46,885,355 18,910,100 27,975,255 0 0 0 27,975,255 1.22 1.21
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