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<SEC-DOCUMENT>0000950129-02-001544.txt : 20020415
<SEC-HEADER>0000950129-02-001544.hdr.sgml : 20020415
ACCESSION NUMBER: 0000950129-02-001544
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 13
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020327
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: OCEANEERING INTERNATIONAL INC
CENTRAL INDEX KEY: 0000073756
STANDARD INDUSTRIAL CLASSIFICATION: OIL, GAS FIELD SERVICES, NBC [1389]
IRS NUMBER: 952628227
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0331
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10945
FILM NUMBER: 02588988
BUSINESS ADDRESS:
STREET 1: 11911 FM 529
CITY: HOUSTON
STATE: TX
ZIP: 77041
BUSINESS PHONE: 713-329-4500
MAIL ADDRESS:
STREET 1: 11911 FM 529
CITY: HOUSTON
STATE: TX
ZIP: 77041
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>h95099e10-k405.txt
<DESCRIPTION>OCEANEERING INTERNATIONAL, INC. - 12/31/2001
<TEXT>
<PAGE>
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 December 31, 2001
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 1-10945
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2628227
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
11911 FM 529
HOUSTON, TEXAS 77041
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 329-4500
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
Common Stock, $0.25 par value New York Stock Exchange
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. Yes X , No .
--- ---
Aggregate market value of the voting stock held by non-affiliates of
the registrant at March 15, 2002 based upon the closing sale price of the Common
Stock on the New York Stock Exchange: $637,764,000
Number of shares of Common Stock outstanding at March 15, 2002:
24,313,122
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement relating to the registrant's 2002 annual meeting
of shareholders, to be filed on or before April 30, 2002 pursuant to Regulation
14A of the Securities Exchange Act of 1934, are incorporated by reference to the
extent set forth in Part III, Items 10-13 of this report.
1
<PAGE>
PART I
ITEM 1. BUSINESS.
General Development of Business
Oceaneering International, Inc. is an advanced applied technology company that
provides a comprehensive range of integrated technical services and hardware to
customers who operate in harsh environments such as underwater, space and other
hazardous areas. Oceaneering was organized in 1969 out of the combination of
three diving service companies founded in the early 1960s. Since our
establishment, we have concentrated on the development and marketing of
underwater services and products requiring the use of advanced deepwater
technology. We are one of the world's largest underwater services contractors.
We provide most of our services and products to the oil and gas industry. These
include drilling support, subsea construction, design, lease and operation of
production systems, facilities maintenance and repair, specialty subsea hardware
and specialized onshore and offshore engineering and inspection. We have
locations in the United States and 18 other countries. Our international
operations, principally in the North Sea, Africa, Brazil, Asia and Australia,
accounted for approximately 47% of our revenue, or $246 million, for the year
ended December 31, 2001.
We operate in five business segments. The segments are contained within two
businesses - services and products provided to the offshore oil and gas industry
("Offshore Oil and Gas") and all other services and products ("Advanced
Technologies"). Our business segments within the Offshore Oil and Gas business
are Remotely Operated Vehicles ("ROVs"), Subsea Products, Mobile Offshore
Production Systems and Other Services. We report our Advanced Technologies
business as one segment. In each of our businesses, we have been concentrating
on expanding our capabilities to provide technical solutions to our customers.
Effective November 1, 2000, our Board of Directors changed our fiscal year-end
to December 31 from March 31. Last year we reported on the nine-month transition
period from April 1, 2000 to December 31, 2000. Unless the context indicates
otherwise, references to fiscal years indicate the twelve months ended March 31
of that year. For example, fiscal 2000 refers to the twelve-month period ended
March 31, 2000.
OFFSHORE OIL AND GAS. In the last few years, the focus of our Offshore Oil and
Gas business has been toward increasing our asset base for servicing offshore
projects and subsea completions. Prior to 1996, we purchased most of our
remotely operated vehicles, often referred to as ROVs, which are submersible
vehicles operated from the surface and widely used in the offshore oil and gas
industry. However, in response to increased demand for more powerful systems
operating in deeper water, we expanded our capabilities and established an
in-house facility to design and build ROVs to meet the continued expansion of
our ROV fleet. This facility was established and became fully operational in
January 1998. We have built over 50 ROV systems and we are producing all our new
ROVs in-house. In September 2000, we exchanged our diving-related assets in
Asia, Australia and the Middle East for 11 ROVs. The diving-related assets were
part of our Other Services segment.
Through our Oceaneering Multiflex division, we are a leading provider of subsea
hydraulic and electrohydraulic umbilicals. These umbilicals are the means by
which offshore operators control subsea wellhead hydrocarbon flow rates. We
entered this market in March 1994 through our purchase of the operating
subsidiaries of Multiflex International Inc. During fiscal 1999, we constructed
a new umbilical plant in Brazil and relocated, modernized and increased the
capabilities of our umbilical manufacturing facility in Scotland. The plant in
Brazil began operations in fiscal 1999, and the plant in Scotland was
commissioned in early fiscal 2000.
We own three operating mobile offshore production systems:
o the floating production, storage and offloading system Ocean
Producer, which has been operating offshore West Africa since
December 1991;
o the production barge San Jacinto, acquired in December 1997
and currently under contract offshore Indonesia; and
o the mobile offshore production system Ocean Legend, which has
been operating offshore Western Australia since May 2001.
2
<PAGE>
In November 1995, we contracted with a major oil company for the provision of a
floating production, storage and offloading unit. We converted a crude oil
tanker and delivered the Zafiro Producer to its first operational location off
West Africa in August 1996. In December 1996, the customer exercised an option
to purchase the unit. We continue to participate as a member of the customer's
integrated team to operate and enhance the unit's production facilities.
We own and operate two multiservice vessels, the Ocean Intervention and the
Ocean Intervention II, which went into service in the fourth quarter of calendar
1998 and the third quarter of calendar 2000, respectively. These multiservice
vessels are equipped with thrusters that allow them to be dynamically
positioned, which means the vessels can maintain a constant position at a
location without the use of anchors. They are used in pipeline or flowline
tie-ins, pipeline crossings and subsea hardware interventions and installations.
Both vessels can carry and install significant lengths of coiled tubing or
umbilicals required to bring subsea well completions into production (tie-back
to production facilities). These vessels are part of our Other Services segment.
ADVANCED TECHNOLOGIES. In August 1992 and May 1993, we purchased two businesses
that formed the basis of our Advanced Technologies segment. The first business
designed, developed and operated robotic systems and ROVs specializing in
non-oilfield markets and provided the basis for our expansion into commercial
and government subsea cable field support, maintenance and repair, civil works
projects and commercial theme park animation in 1993. The second business
designed, developed and fabricated spacecraft hardware and high temperature
insulation products.
We intend to continue our strategy of acquiring, as opportunities arise,
additional assets or businesses, to improve our market position or expand into
related service and product lines, either directly through merger, consolidation
or purchase, or indirectly through joint ventures. We are also applying our
skills and technology in further developing business unrelated to the oil and
gas industry and performing services for government agencies and firms in the
telecommunications, aerospace and civil engineering and construction industries.
Financial Information about Segments
For financial information about our business segments, please see the table in
Note 6 of the Notes to Consolidated Financial Statements in this report, which
presents revenue, income (loss) from operations, depreciation and amortization
expense, identifiable assets and capital expenditures by business segment for
the year ended December 31, 2001, the nine-month period ended December 31, 2000
and the fiscal year ended March 31, 2000.
Description of Business
OFFSHORE OIL AND GAS
Our Offshore Oil and Gas business consists of ROVs, Subsea Products, Mobile
Offshore Production Systems and Other Services.
ROVS. ROVs are submersible vehicles operated from the surface. They are widely
used in the offshore oil and gas industry for a variety of underwater tasks
including drill support, installation and construction support, pipeline
inspection and surveys and subsea production facility operation and maintenance.
ROVs may be outfitted with manipulators, sonar, video cameras, specialized
tooling packages and other equipment or features to facilitate the performance
of specific underwater tasks. We use ROVs at water depths or in situations where
the use of divers would be uneconomical or infeasible. We own 125 work class
ROVs and are the industry leader in providing ROV services on deepwater wells,
which are the most technically demanding. We believe we operate the largest and
most technically advanced fleet of ROVs in the world.
3
<PAGE>
ROV revenue:
<Table>
<Caption>
Percent of
Amount Total Revenue
------------ -------------
<S> <C> <C>
Year ended December 31, 2001 $153,929,000 29%
Nine-month period ended December 31, 2000 78,953,000 26%
Fiscal year ended March 31, 2000 94,617,000 23%
</Table>
SUBSEA PRODUCTS. We manufacture a variety of built-to-order specialty subsea
hardware to ISO 9001 quality requirements. These products include:
o hydraulic, electrohydraulic, chemical injection, thermoplastic and
steel tube umbilicals;
o production control equipment;
o pipeline repair systems; and
o ROV tooling and work packages.
We market these products under the trade names Oceaneering Multiflex and
Oceaneering Intervention Engineering.
Subsea umbilicals and production control equipment are the means by which
offshore well operators control subsea wellhead hydrocarbon flow, monitor
downhole and wellhead conditions and perform chemical injection. Pipeline repair
systems make the effective repair of pipelines and risers possible without
requiring underwater welding. ROV tooling and work packages provide the
operational link between an ROV and permanently installed equipment located on
the sea floor.
Subsea Products revenue:
<Table>
<Caption>
Percent of
Amount Total Revenue
------------ -------------
<S> <C> <C>
Year ended December 31, 2001 $125,608,000 24%
Nine-month period ended December 31, 2000 65,771,000 21%
Fiscal year ended March 31, 2000 69,744,000 17%
</Table>
MOBILE OFFSHORE PRODUCTION SYSTEMS. We presently own three operating mobile
offshore production systems, the Ocean Legend, the Ocean Producer and the San
Jacinto. In addition, we provide operational support to the Zafiro Producer on
behalf of a major oil company.
We also undertake engineering and project management of projects related to
mobile offshore production systems. We have managed the conversion of a jackup
to a production unit and in-field life extension and modifications to the Zafiro
Producer. We also perform engineering studies for customers evaluating field
development projects.
Mobile Offshore Production Systems revenue:
<Table>
<Caption>
Percent of
Amount Total Revenue
------------ -------------
<S> <C> <C>
Year ended December 31, 2001 $39,154,000 7%
Nine-month period ended December 31, 2000 15,788,000 5%
Fiscal year ended March 31, 2000 23,983,000 6%
</Table>
OTHER SERVICES. We perform subsea intervention and hardware installation
services from our multiservice vessels. These services include: subsea well
tie-backs; pipeline/flowline tie-ins and repairs; pipeline crossings; umbilical
and other subsea equipment installations; and subsea intervention. We also
provide oilfield diving, nondestructive inspection and testing services and
supporting vessel operations, which are utilized principally in inspection,
repair and maintenance activities.
We supply commercial diving services to the oil and gas industry in the United
States using the traditional techniques of air, mixed gas and saturation diving,
all of which use surface-supplied breathing gas. We do not use divers in water
depths greater
4
<PAGE>
than 1,000 feet. We also use atmospheric diving systems, which enclose the
operator in a surface pressure diving suit, in water depths up to 2,300 feet. In
September 2000, we exchanged our diving-related assets in Asia, Australia and
the Middle East for 11 ROVs.
Through our Solus Schall division, we offer a wide range of inspection services
to customers required to obtain third-party inspections to satisfy contractual
structural specifications, internal safety standards or regulatory requirements.
We focus on the inspection of pipelines and onshore fabrication of offshore
facilities for the oil and gas industry. Certain of Solus Schall's pipeline
inspection activities are performed through the use of specialized x-ray
crawlers, which travel inside pipelines, stopping to perform radiographic
inspection of welds.
Other Services revenue:
<Table>
<Caption>
Percent of
Amount Total Revenue
------------ -------------
<S> <C> <C>
Year ended December 31, 2001 $102,250,000 20%
Nine-month period ended December 31, 2000 65,206,000 21%
Fiscal year ended March 31, 2000 105,505,000 25%
</Table>
ADVANCED TECHNOLOGIES
Our Advanced Technologies segment provides underwater intervention, engineering
services and related manufacturing to meet a variety of industrial requirements,
including ship and submarine husbandry, search and recovery, commercial and
government subsea cable field support, maintenance and repair, civil works
projects and commercial theme park animation. We do this in part by extending
the use of existing assets and technology developed in oilfield operations to
new applications.
We work for customers having specialized requirements in underwater or other
environments outside the oil and gas industry. We provide various engineering
and underwater services for the U.S. Navy, including undersea operations,
development of new underwater systems and inspection and maintenance of the
Navy's fleet of surface ships and submarines. Through a joint venture we formed
with a subsidiary of Smit Internationale, N.V., we also maintain and operate
commercial cable lay and maintenance equipment. The current term of the joint
venture agreement expires in March 2006. It automatically extends for five-year
periods unless one of the participants gives cancellation notice at least one
year before the end of the then current term.
We design and operate ROVs that are capable of being worked in water depths to
25,000 feet. Our other specialized equipment includes ROV cable lay and
maintenance equipment rated to 10,000 feet and deep tow, side scan sonar systems
designed for use in depths to 20,000 feet. In 2001, we located and filmed two
sunken World War II warships, the British battle cruiser H.M.S. Hood and the
German battleship Bismarck, in water depths over 9,000 and 15,000 feet,
respectively. In fiscal 2000, we located and recovered the Mercury space capsule
Liberty Bell 7 from a water depth over 16,000 feet.
We also design and develop specialized tools and build ROV systems to customer
specifications for use in deepwater and hazardous environments. In addition to
commercial applications, we also develop systems for the U.S. Navy and the
Department of Energy.
We entered the commercial theme park animation market in 1993. We believe we are
the industry leader in large animated figures and we have provided more than 30
large figures for theme parks in the U.S. and overseas.
As part of our Advanced Technologies segment, Oceaneering Space and Thermal
Systems directs our efforts towards applying undersea technology and experience
in the space industry. We provide products and services to NASA and NASA prime
contractors in the engineering, design and fabrication of space flight hardware,
including systems engineering and integration. Our product lines include
extravehicular activity tools, logistics carriers, space refrigerators, robotic
devices, life support systems, habitability hardware and high temperature
thermal protection systems for launch vehicles. These activities substantially
depend on continued government funding for space programs.
5
<PAGE>
Advanced Technologies revenue:
<Table>
<Caption>
Percent of
Amount Total Revenue
------------ -------------
<S> <C> <C>
Year ended December 31, 2001 $102,879,000 20%
Nine-month period ended December 31, 2000 82,012,000 27%
Fiscal year ended March 31, 2000 122,971,000 29%
</Table>
MARKETING
OFFSHORE OIL AND GAS. Oil and gas exploration and development expenditures
fluctuate from year to year. In particular, budgetary approval for more
expensive drilling and production in deepwater, an area in which we have a high
degree of focus, may be postponed or suspended during periods when exploration
and production companies reduce their offshore capital spending.
We market our ROVs, Subsea Products and Other Services to international and
foreign national oil and gas companies engaged in offshore exploration,
development and production. We also provide services and products as a
subcontractor to other oilfield service companies operating as prime
contractors. Customers for these services typically award contracts on a
competitive bid basis. These contracts are typically less than one year in
duration.
We market our Mobile Offshore Production Systems primarily to international and
foreign national oil and gas companies. We offer systems for extended well
testing, early production and development of marginal fields and prospects in
areas lacking pipelines and processing infrastructure. Contracts are typically
awarded on a competitive basis, generally for periods of one or more years.
In connection with the services we perform in our Offshore Oil and Gas business,
we generally seek contracts that compensate us on a dayrate basis. Under dayrate
contracts, the contractor provides the ROV or vessel and the required personnel
to operate the unit. Compensation under a dayrate contract is based on a rate
per day for each day the unit is used. The typical dayrate depends on market
conditions, the nature of the operations to be performed, the duration of the
work, the equipment and services to be provided, the geographical areas involved
and other variables. Dayrate contracts may also contain an alternate, lower
dayrate that applies when a unit is in route to a new site or when operations
are interrupted or restricted by equipment breakdowns, adverse weather or water
conditions or other conditions beyond the contractor's control. Some dayrate
contracts provide for revision of the specified dayrates in the event of
material changes in certain items of cost being incurred by the contractor.
Contracts for our products are generally for a fixed price.
ADVANCED TECHNOLOGIES. We market our marine services and related engineering
services to government agencies, major defense contractors, NASA and NASA prime
contractors and telecommunications, construction and other industrial customers
outside the energy sector. We also market to insurance companies, salvage
associations and other customers who have requirements for specialized
operations in deep water.
MAJOR CUSTOMERS. Our top five customers in the year ended December 31, 2001 and
in the nine-month period ended December 31, 2000 accounted for 30% and 29%,
respectively, of our consolidated revenue. Our top five customers in fiscal 2000
accounted for approximately 25% of our consolidated revenue. In the year ended
December 31, 2001, our top five customers were all oil and gas exploration and
production companies served by our Offshore Oil and Gas business segments. For
the nine-month period ended December 31, 2000 and for fiscal 2000, four of our
top five customers were oil and gas exploration and production companies served
by our Offshore Oil and Gas business segments. The other top five customer was
the U.S. Navy, which was served by our Advanced Technologies segment. No single
customer accounted for more than 10% of our consolidated revenue in any of those
three periods. While we do not depend on any one customer, the loss of one of
our significant customers could, at least on a short-term basis, have an adverse
effect on our results of operations.
RAW MATERIALS
Most of the raw materials we use in our manufacturing operations, such as steel
in various forms, electronic components and plastics, are available from many
sources, and we are not dependent on any single supplier or source for any of
our raw
6
<PAGE>
materials. However, some components we use to manufacture subsea umbilicals are
available from limited sources. While we have not experienced any difficulties
in obtaining those materials in the past and do not anticipate any such
difficulties in the foreseeable future, it is possible that a shortage of supply
could develop. Any significant, prolonged shortage of these materials could
result in increased costs for these materials and delays in our subsea
umbilicals manufacturing operations.
COMPETITION
Our businesses are highly competitive.
OFFSHORE OIL AND GAS
We are one of several companies that provide underwater services on a worldwide
basis. We compete for contracts with companies that have worldwide operations,
as well as numerous others operating locally in various areas. We believe that
our ability to provide a wide range of underwater services, including
technological applications in deeper water (greater than 1,000 feet) on a
worldwide basis, should enable us to compete effectively in the oilfield
exploration and development market. In some cases involving projects that
require less sophisticated equipment, small companies have been able to bid for
contracts at prices uneconomical to us.
ROVS. We believe we are the world's largest owner/operator of work class ROVs
employed in oil and gas related operations. We estimate we have a market share
in excess of 30%. At December 31, 2001, we had 125 work class ROVs in service.
We compete with several major companies on a worldwide basis and with numerous
others operating locally in various areas. We have fewer competitors in deeper
water depths, as more sophisticated equipment and technology is needed in deeper
water. We estimate that, during calendar 2001, we provided ROV drilling support
on approximately 68% of the wells drilled worldwide in water depths of 1,000
feet or more and approximately 77% of the wells drilled worldwide in water
depths of 3,000 feet or more.
Competition for ROV services historically has been based on equipment
availability, location of or ability to deploy the equipment, quality of service
and price. The relative importance of these factors can vary from year to year
based on market conditions. The ability to develop improved equipment and
techniques and to attract and retain skilled personnel is also an important
competitive factor in our markets.
SUBSEA PRODUCTS. Although there are many competitors offering either specialized
products or operating in limited geographic areas, we believe we are one of a
small number of companies that compete on a worldwide basis for the provision of
thermoplastic subsea control umbilical cables.
MOBILE OFFSHORE PRODUCTION SYSTEMS. We believe we are well positioned to compete
in this market through our ability to identify and offer optimum solutions,
supply equipment and utilize our expertise in associated subsea technology and
offshore construction and operations gained through our extensive operational
experience worldwide. We are one of many companies that offer leased mobile
offshore production systems.
OTHER SERVICES. We perform subsea intervention and hardware installation
services from our multiservice vessels in the Gulf of Mexico. These services
include: subsea well tie-backs; pipeline/flowline tie-ins and repairs; pipeline
crossings; umbilical and other subsea equipment installations; and subsea
intervention. We are one of many companies that offer these services. In
addition, other companies can move their vessels to the Gulf of Mexico from
other areas with relative ease.
The worldwide inspection market consists of a wide range of inspection and
certification requirements in many industries. Solus Schall competes in only
selected portions of this market. We believe that our broad geographic sales and
operational coverage, long history of operations, technical reputation,
application of x-ray pipeline inspection technology and accreditation to
international quality standards enable us to compete effectively in our selected
inspection services market segments.
Frequently, oil and gas companies use prequalification procedures that reduce
the number of prospective bidders for their projects. In some countries,
political considerations tend to favor local contractors. While these
considerations have not materially impacted this segment's results in recent
periods, our view of the increasing trend to favor local contractors in West
Africa was a factor in our decisions to sell our diving operations in West
Africa in fiscal 2000 and to exchange our diving-
7
<PAGE>
related assets in Asia, Australia and the Middle East for ROVs in September
2000. We no longer provide oilfield diving services outside of the United
States.
ADVANCED TECHNOLOGIES. We believe our specialized ROV assets and experience in
deepwater operations give us an advantage in obtaining contracts in water depths
greater than 5,000 feet. We have fewer competitors in deeper water depths due to
the advanced technical knowledge and sophisticated equipment required for
deepwater operations.
Engineering services is a very broad market with a large number of competitors.
We compete in specialized areas in which we can combine our extensive program
management experience, mechanical engineering expertise and the capability to
continue the development of conceptual project designs into the manufacture of
prototype equipment.
We also use the administrative and operational support structures of our
Offshore Oil and Gas business to provide additional local support for services
provided to this segment's customers.
SEASONALITY, BACKLOG AND RESEARCH AND DEVELOPMENT
A material amount of our consolidated revenue is generated from contracts for
marine services in the Gulf of Mexico and the North Sea, which are usually more
active from April through November compared to the rest of the year. However,
our exit from the diving sector in the North Sea in early 1998 and the
substantial number of multiyear ROV contracts we entered into since 1997 have
reduced the seasonality of our ROV and Other Services operations. Revenues in
our Mobile Offshore Production Systems, Subsea Products and Advanced
Technologies segments are generally not seasonal.
The amounts of backlog orders we believe to be firm as of December 31, 2001
and 2000 were as follows:
<Table>
<Caption>
As of December 31, 2001 As of December 31, 2000
----------------------- -----------------------
(in millions) (in millions)
Offshore Oil and Gas Total 1 + yr* Total 1 + yr*
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ROVs $ 182 $ 95 $ 229 $ 133
Subsea Products 61 -- 50 5
Mobile Offshore Production Systems 166 119 100 71
Other Services 51 9 45 2
-------- -------- -------- --------
Total Offshore Oil and Gas 460 223 424 211
Advanced Technologies 74 30 38 5
-------- -------- -------- --------
Total $ 534 $ 253 $ 462 $ 216
======== ======== ======== ========
</Table>
* Represents amounts that were not expected to be performed within one
year.
No material portion of our business is subject to renegotiation of profits or
termination of contracts by the United States government.
Our research and development expenditures were approximately $5 million, $5
million and $4 million during the year ended December 31, 2001, the nine-month
period ended December 31, 2000 and fiscal 2000, respectively. These amounts do
not include the expenditures by others in connection with joint research
activities in which we participated or expenditures we incurred in connection
with research conducted during the course of performing our operations.
REGULATION
Our operations are affected from time to time and in varying degrees by foreign
and domestic political developments and foreign, federal and local laws and
regulations. In particular, oil and gas production operations and economics are
affected by tax, environmental and other laws relating to the petroleum
industry, by changes in such laws and by constantly changing administrative
regulations. Those developments may directly or indirectly affect our operations
and those of our customers.
Compliance with federal, state and local provisions regulating the discharge of
materials into the environment or relating to the protection of the environment
has not had a material impact on our capital expenditures, earnings or
competitive position.
8
<PAGE>
While not a legal requirement, within our Offshore Oil and Gas business we
maintain various quality management systems. Our quality management systems in
the United Kingdom and Norway are certified to the substantial equivalent of ISO
9001 and cover all our Offshore Oil and Gas products and services. The quality
management systems of our Subsea Products segment are certified to ISO 9001 for
its products and services. The quality management systems of both the
Oceaneering Space and Thermal Systems and Oceaneering Technologies units of our
Advanced Technologies segment are also certified to ISO 9001. ISO 9001 is an
internationally recognized verification system for quality management
established by the International Standards Organization.
RISKS AND INSURANCE
WE DERIVE MOST OF OUR REVENUE FROM COMPANIES IN THE OFFSHORE OIL AND GAS
INDUSTRY, A HISTORICALLY CYCLICAL INDUSTRY WITH LEVELS OF ACTIVITY THAT ARE
SIGNIFICANTLY AFFECTED BY THE LEVELS AND VOLATILITY OF OIL AND GAS PRICES.
We derive most of our revenue from customers in the offshore oil and gas
exploration, development and production industry. The offshore oil and gas
industry is a historically cyclical industry characterized by significant
changes in the levels of exploration and development activities. Oil and gas
prices, and market expectations of potential changes in those prices,
significantly affect the levels of those activities. Worldwide political,
economic and military events have contributed to oil and gas price volatility
and are likely to continue to do so in the future. Any prolonged reduction in
the overall level of offshore oil and gas exploration and development
activities, whether resulting from changes in oil and gas prices or otherwise,
could materially and adversely affect our financial condition and results of
operations in our segments within our offshore oil and gas business. Some
factors that have affected and are likely to continue affecting oil and gas
prices and the level of demand for our services and products include the
following:
o worldwide demand for oil and gas;
o the ability of the Organization of Petroleum Exporting Countries, or
OPEC, to set and maintain production levels and pricing;
o the level of production by non-OPEC countries;
o the cost of exploring for, producing and delivering oil and gas;
o domestic and foreign tax policy;
o laws and governmental regulations that restrict exploration and
development of oil and gas in various offshore jurisdictions;
o advances in exploration and development technology;
o political instability or armed conflict in oil-producing regions;
o the price and availability of alternative fuels; and o overall
economic conditions.
The recent terrorists' attacks on the United States may directly and indirectly
negatively affect our operating results. The national and global responses to
those attacks, many of which are still being formulated, including recent
military, diplomatic and financial responses, and any possible reprisals as a
consequence of unilateral U.S. actions and/or allied actions, may materially
adversely affect us in ways we cannot predict at this time.
OUR INTERNATIONAL OPERATIONS INVOLVE ADDITIONAL RISKS NOT ASSOCIATED WITH
DOMESTIC OPERATIONS.
A significant portion of our revenue is attributable to operations in foreign
countries. These activities accounted for approximately 47% of our consolidated
revenue in the year ended December 31, 2001. Risks associated with our
operations in foreign areas include risks of:
o war and civil disturbances or other risks that may limit or disrupt
markets;
o expropriation, confiscation or nationalization of assets;
o renegotiation or nullification of existing contracts;
o foreign exchange restrictions;
o foreign currency fluctuations;
o foreign taxation;
9
<PAGE>
o the inability to repatriate earnings or capital;
o changing political conditions;
o changing foreign and domestic monetary policies; and
o regional economic downturns.
Additionally, in some jurisdictions we are subject to foreign governmental
regulations favoring or requiring the awarding of contracts to local contractors
or requiring foreign contractors to employ citizens of, or purchase supplies
from, a particular jurisdiction. These regulations may adversely affect our
ability to compete.
Our exposure to the risks we described above varies from country to country. In
recent periods, political instability and civil unrest in Indonesia and West
Africa and general economic downturns in Asia and Brazil have been our greatest
concerns. There is a risk that a continuation or worsening of these conditions
could materially and adversely impact our future business, operations, financial
condition and results of operations. Of our total consolidated revenue for the
year ended December 31, 2001, we generated approximately 2% from our operations
in Indonesia, 11% from our operations in West Africa, 4% from our operations in
Asia, excluding Indonesia, and 8% from our operations in Brazil.
OUR OFFSHORE OILFIELD OPERATIONS INVOLVE A VARIETY OF OPERATING HAZARDS AND
RISKS THAT COULD CAUSE LOSSES.
Our operations are subject to the hazards inherent in the offshore oilfield
business. These include blowouts, explosions, fires, collisions, capsizings and
severe weather conditions. These hazards could result in personal injury and
loss of life, severe damage to or destruction of property and equipment,
pollution or environmental damage and suspension of operations. We may incur
substantial liabilities or losses as a result of these hazards. While we
maintain insurance protection against some of these risks, and seek to obtain
indemnity agreements from our customers requiring the customers to hold us
harmless from some of these risks, our insurance and contractual indemnity
protection may not be sufficient or effective to protect us under all
circumstances or against all risks. Some of the risks inherent in our operations
are either not insurable or insurance is available only at rates that we
consider uneconomical, particularly after the impact on the insurance markets of
the September 11, 2001 terrorists' attacks in the United States. The occurrence
of a significant event not fully insured or indemnified against or the failure
of a customer to meet its indemnification obligations to us could materially and
adversely affect our results of operations and financial condition.
LAWS AND GOVERNMENTAL REGULATIONS MAY ADD TO OUR COSTS OR ADVERSELY AFFECT OUR
OPERATIONS.
Our business is affected by changes in public policy and by federal, state,
local and foreign laws and regulations relating to the energy industry. Oil and
gas exploration and production operations are affected by tax, environmental and
other laws relating to the petroleum industry, by changes in those laws and
changes in related administrative regulations. It is also possible that these
laws and regulations may in the future add significantly to our operating costs
or those of our customers or otherwise directly or indirectly affect our
operations.
ENVIRONMENTAL LAWS AND REGULATIONS CAN INCREASE OUR COSTS, AND OUR FAILURE TO
COMPLY WITH THOSE LAWS AND REGULATIONS CAN EXPOSE US TO SIGNIFICANT LIABILITIES.
Risks of substantial costs and liabilities related to environmental compliance
issues are inherent in our operations. Our operations are subject to extensive
federal, state, local and foreign laws and regulations relating to the
generation, storage, handling, emission, transportation and discharge of
materials into the environment. Permits are required for the operation of
various facilities, and those permits are subject to revocation, modification
and renewal. Governmental authorities have the power to enforce compliance with
their regulations, and violations are subject to fines, injunctions or both. In
some cases, those governmental requirements can impose liability for the entire
cost of cleanup on any responsible party without regard to negligence or fault
and impose liability on us for the conduct of or conditions others have caused,
or for our acts that complied with all applicable requirements when we performed
them. It is possible that other developments, such as stricter environmental
laws and regulations, and claims for damages to property or persons resulting
from our operations, would result in substantial costs and liabilities. Our
insurance policies and the contractual indemnity protection we seek to obtain
from our customers may not be sufficient or effective to protect us under all
circumstances or against all risks involving compliance with environmental laws
and regulations.
10
<PAGE>
EMPLOYEES
As of December 31, 2001, we had approximately 3,500 employees. Our workforce
varies seasonally and peaks during the summer months. Approximately 10% of our
employees are represented by unions. We consider our relations with our
employees to be satisfactory.
Financial Information about Geographic Areas
For financial information about our geographic areas of operation, please see
the table in Note 6 of the Notes to Consolidated Financial Statements in this
report, which presents revenue and assets attributable to each of our geographic
areas for the year ended December 31, 2001, the nine-month period ended December
31, 2000 and the fiscal year ended March 31, 2000.
ITEM 2. PROPERTIES.
See Item 1 - "Business - Description of Business - Offshore Oil and Gas" and
"Business - Description of Business - Advanced Technologies" for a description
of equipment and manufacturing facilities used in providing our services and
products.
We maintain office, shop and yard facilities in various parts of the world to
support our operations. We consider these facilities, which we describe below,
to be suitable for their intended use. In these locations, we typically lease or
own office facilities for our administrative and engineering staff, shops
equipped for fabrication, testing, repair and maintenance activities and
warehouses and yard areas for storage and mobilization of equipment to work
sites. All sites are available to support any of our business segments as the
need arises. The groupings which follow associate our significant offices with
the primary business segment they serve.
OFFSHORE OIL AND GAS. In general, our ROV and Other Services segments share
facilities. The largest location is in Morgan City, Louisiana and consists of
ROV manufacturing and training facilities, open and covered storage space and
offices. The Morgan City facilities primarily support operations in the United
States. We have regional support offices for our North Sea and Southeast Asia
operations in Aberdeen, Scotland and Indonesia. We also have operational bases
in various other locations, the most significant of which are in Norway,
Australia and Nigeria.
We use workshop and office space in Houston, Texas in both our Mobile Offshore
Production Systems and Subsea Products business segments. Our manufacturing
facilities for our Subsea Products segment are located in or near Houston,
Texas, Edinburgh, Scotland and Rio de Janeiro, Brazil. Each of these
manufacturing facilities is suitable for its intended purpose and has sufficient
excess capacity to respond to increases in demand for our subsea products that
may be reasonably anticipated in the foreseeable future. Operations of the
mobile offshore production unit Ocean Producer are supported through our
regional office in Aberdeen. Operations of the San Jacinto and the Ocean Legend
are supported from our office in Perth, Australia.
Our principal manufacturing facilities are located on properties we own or hold
under a long-term lease, expiring in 2014. The other facilities we use in our
Offshore Oil and Gas business segments are on properties we lease.
ADVANCED TECHNOLOGIES. Our primary facilities for our Advanced Technologies
segment are leased offices and workshops in Upper Marlboro, Maryland, which
support our services for the U.S. Navy and our commercial theme park animation
activities. We also lease facilities in Houston, Texas, which primarily support
our space industry activities and our subsea telecommunications installation
joint venture.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, we are subject to actions for damages
alleging personal injury under the general maritime laws of the United States,
including the Jones Act, for alleged negligence. We report actions for personal
injury to our insurance carriers and believe that the settlement or disposition
of those suits will not have a material effect on our financial position or
results of operations. For additional information, see "Commitments and
Contingencies - Litigation" in Note 5 of the Notes to Consolidated Financial
Statements included in this report.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of our security holders, through the
solicitation of proxies or otherwise, during the last three months of the year
December 31, 2001.
EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS. The following information relates to our executive officers
as of March 15, 2002:
<Table>
<Caption>
NAME AGE POSITION OFFICER SINCE EMPLOYEE SINCE
- ---- --- -------- ------------- --------------
<S> <C> <C> <C> <C>
John R. Huff 56 Chairman of the Board and 1986 1986
Chief Executive Officer
T. Jay Collins 55 President and Chief Operating 1993 1993
Officer and Director
Marvin J. Migura 51 Senior Vice President and 1995 1995
Chief Financial Officer
M. Kevin McEvoy 51 Senior Vice President 1990 1979
George R. Haubenreich, Jr. 54 Senior Vice President, General 1988 1988
Counsel and Secretary
John L. Zachary 48 Controller and Chief 1998 1988
Accounting Officer
</Table>
Each executive officer serves at the discretion of our Chief Executive Officer
and our Board of Directors and is subject to reelection or reappointment each
year after the annual meeting of our shareholders. We do not know of any
arrangement or understanding between any of the above persons and any other
person or persons pursuant to which he was selected or appointed as an officer.
BUSINESS EXPERIENCE. John R. Huff, Chairman and Chief Executive Officer, joined
Oceaneering as a director, President and Chief Executive Officer in 1986. He was
elected Chairman of the Board in August 1990. He is a director of BJ Services
Company and Suncor Energy Inc.
T. Jay Collins, President and Chief Operating Officer, joined Oceaneering in
October 1993 as Senior Vice President and Chief Financial Officer. In May 1995,
he was appointed Executive Vice President - Oilfield Marine Services and held
that position until becoming President and Chief Operating Officer in November
1998. He was elected a director of Oceaneering in March 2002. He is a director
of Friede Goldman Halter, Inc.
Marvin J. Migura, Senior Vice President and Chief Financial Officer, joined
Oceaneering in May 1995. From 1975 to 1994, he held various financial positions
with Zapata Corporation, then a diversified energy services company, most
recently as Senior Vice President and Chief Financial Officer from 1987 to 1994.
M. Kevin McEvoy, Senior Vice President, joined Oceaneering in 1984 when we
acquired Solus Ocean Systems, Inc. Since 1984, he has held various senior
management positions in each of our operating groups and geographic areas. He
was appointed a Vice President in 1990 and Senior Vice President in November
1998.
George R. Haubenreich, Jr., Senior Vice President, General Counsel and
Secretary, joined Oceaneering in 1988.
John L. Zachary, Controller and Chief Accounting Officer, joined Oceaneering in
1988 as Controller for the Advanced Technologies and Mobile Offshore Production
Systems divisions. From 1993 until 1998, he was Controller for the Americas
Region and was appointed to his present position in October 1998.
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<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.
We are including the following discussion to inform our existing and potential
security holders generally of some of the risks and uncertainties that can
affect our company and to take advantage of the "safe harbor" protection for
forward-looking statements that applicable federal securities law affords.
From time to time, our management or persons acting on our behalf make
forward-looking statements to inform existing and potential security holders
about our company. These statements may include projections and estimates
concerning the timing and success of specific projects and our future backlog,
revenue, income and capital spending. Forward-looking statements are generally
accompanied by words such as "estimate," "project," "predict," "believe,"
"expect," "anticipate," "plan," "forecast," "budget," "goal" or other words that
convey the uncertainty of future events or outcomes. In addition, sometimes we
will specifically describe a statement as being a forward-looking statement and
refer to this cautionary statement.
In addition, various statements this report contains, including those that
express a belief, expectation or intention, as well as those that are not
statements of historical fact, are forward-looking statements. Those
forward-looking statements appear in Item 1 - "Business," Item 2 - "Properties"
and Item 3 - "Legal Proceedings" in Part I of this report and in Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Item 7A - "Quantitative and Qualitative Disclosures About Market
Risk" and in the Notes to Consolidated Financial Statements incorporated into
Item 8 of Part II of this report and elsewhere in this report. These
forward-looking statements speak only as of the date of this report, we disclaim
any obligation to update these statements, and we caution you not to rely unduly
on them. We have based these forward-looking statements on our current
expectations and assumptions about future events. While our management considers
these expectations and assumptions to be reasonable, they are inherently subject
to significant business, economic, competitive, regulatory and other risks,
contingencies and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and uncertainties
relate to, among other matters, the following:
o worldwide demand for oil and gas;
o general economic and business conditions and industry trends;
o the continued strength of the industry segments in which we are
involved;
o decisions about offshore developments to be made by oil and gas
companies;
o the highly competitive nature of our businesses;
o our future financial performance, including availability, terms and
deployment of capital;
o the continued availability of qualified personnel;
o operating risks normally incident to offshore exploration, development
and production operations;
o changes in, or our ability to comply with, government regulations,
including those relating to the environment;
o rapid technological changes; and
o social, political, military and economic situations in foreign
countries where we do business.
We believe the items we have outlined above are important factors that could
cause our actual results to differ materially from those expressed in a
forward-looking statement made in this report or elsewhere by us or on our
behalf. We have discussed most of these factors in more detail elsewhere in this
report. These factors are not necessarily all the important factors that could
affect us. Unpredictable or unknown factors we have not discussed in this report
could also have material adverse effects on actual results of matters that are
the subject of our forward-looking statements. We do not intend to update our
description of important factors each time a potential important factor arises.
We advise our security holders that they should (1) be aware that important
factors we do not refer to above could affect the accuracy of our
forward-looking statements and (2) use caution and common sense when considering
our forward-looking statements.
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Oceaneering's common stock is listed on the New York Stock Exchange under the
symbol OII. The following table sets out, for the periods indicated, the high
and low sales prices for our common stock as reported on the New York Stock
Exchange (consolidated transaction reporting system):
<Table>
<Caption>
Year Ended Nine-month Period Ended
December 31, 2001 December 31, 2000
---------------------------- ----------------------------
For the quarter ended: High Low High Low
----------- ------------ ------------- ----------
<S> <C> <C> <C> <C>
March 31 $23.75 $16.81 N/A N/A
June 30 27.20 18.64 $21.50 $15.25
September 30 22.27 13.96 19.94 13.56
December 31 23.30 14.90 20.38 13.25
</Table>
On March 15, 2002, there were 454 holders of record of our common stock. On that
date, the closing sales price, as quoted on the New York Stock Exchange, was
$27.39. We have not made any common stock dividend payments since 1977 and we
currently have no plans to pay cash dividends. Our credit agreements contain
restrictions on the payment of dividends. See Note 3 of Notes to Consolidated
Financial Statements included in this report.
ITEM 6. SELECTED FINANCIAL DATA.
Results of Operations:
<Table>
<Caption>
Nine-month Fiscal Years Ended March 31,
Year Ended Period Ended ----------------------------------------
(in thousands, except per share amounts) Dec. 31, 2001 Dec. 31, 2000 2000 1999 1998
- ---------------------------------------- ------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue $ 523,820 $ 307,730 $ 416,820 $ 400,322 $ 358,121
Cost of services and products 420,679 254,659 345,178 314,638 282,830
---------- ---------- ---------- ---------- ----------
Gross margin 103,141 53,071 71,642 85,684 75,291
Selling, general and administrative
expense 43,733 30,860 39,343 41,328 39,009
---------- ---------- ---------- ---------- ----------
Income from operations $ 59,408 $ 22,211 $ 32,299 $ 44,356 $ 36,282
========== ========== ========== ========== ==========
Net income $ 33,109 $ 11,313 $ 16,784 $ 25,707 $ 22,001
Diluted earnings per share 1.38 0.49 0.73 1.12 0.93
Depreciation and amortization 47,906 30,664 33,948 29,961 23,176
Capital expenditures 57,661 101,641 80,758 102,014 94,413
</Table>
Other Financial Data:
<Table>
<Caption>
As of Dec. 31, As of March 31,
------------------------- ----------------------------------------
(in thousands, except ratios) 2001 2000 2000 1999 1998
- ----------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Working capital ratio 1.80 1.62 1.55 1.47 1.52
Working capital $ 91,384 $ 58,380 $ 52,775 $ 41,398 $ 44,890
Total assets 579,611 515,517 450,976 387,343 316,543
Long-term debt 170,000 180,000 128,000 100,312 54,626
Shareholders' equity 251,433 206,894 195,700 179,439 160,322
</Table>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
All statements in this Form 10-K, other than statements of historical facts,
including, without limitation, statements regarding our business strategy, plans
for future operations and industry conditions, are forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to various
risks, uncertainties and assumptions, including those we refer to under the
heading "Cautionary Statement Concerning Forward-Looking Statements" in Part I
of this report. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, because of the inherent limitations
in the forecasting process, as well as the relatively volatile nature of the
industries in which we operate, we can give no assurance that those expectations
will prove to have been correct. Accordingly, evaluation of our future prospects
must be made with caution when relying on forward-looking information.
Selected Major Accounting Policies
Our revenues are primarily derived from billings under contracts that provide
for specific time, material and equipment charges, which are accrued daily and
billed periodically, ranging from weekly to monthly. We account for significant
lump-sum contracts, particularly in our Subsea Products segment, using the
percentage of completion method, based on physical progress.
Periodically, and upon the occurrence of a triggering event, we review the
realizability of goodwill and other long-term assets and we make any appropriate
impairment adjustments and disclosures.
For a more detailed description of our major accounting policies, please read
Note 1 to our Consolidated Financial Statements.
Liquidity and Capital Resources
We consider our liquidity and capital resources adequate to support our
operations and internally generated growth initiatives. At December 31, 2001, we
had working capital of $91 million. Additionally, we had $57 million available
under our revolving credit facility, which is scheduled to expire in October
2003.
We expect operating cash flow to meet our ongoing annual cash requirements,
including debt service, for the foreseeable future. Net cash provided by
operating activities was $60 million for the year ended December 31, 2001, $41
million for the nine-month period ended December 31, 2000 and $53 million for
fiscal 2000.
Our capital expenditures for the year ended December 31, 2001, the nine-month
period ended December 31, 2000 and the fiscal year ended March 31, 2000 were $58
million, $102 million and $81 million, respectively. Capital expenditures during
the year ended December 31, 2001 consisted of expenditures for additional ROVs,
completion of the Ocean Legend and upgrades and life extension of the Ocean
Producer necessary for its new seven-year contract which began in the fourth
quarter of 2001. Capital expenditures during the nine-month period ended
December 31, 2000 consisted of expenditures for the conversion of a jackup
drilling rig to a mobile offshore production unit, the Ocean Legend, for initial
use offshore Western Australia under a three-year contract, ROV additions and
construction costs to complete our second multiservice vessel. Capital
expenditures in fiscal 2000 consisted of construction costs for the second
multiservice vessel, additions to our ROV fleet and the start of the conversion
of the Ocean Legend.
We had no major commitments for capital expenditures at December 31, 2001.
In April 1997, we approved a plan to purchase up to a maximum of 3 million
shares of our common stock, and we repurchased 2.9 million shares under this
plan through December 31, 2001, at a total cost of $40 million. We have reissued
approximately 2.65 million of these shares through incentive plans, as
restricted stock, contributions to our 401(k) plan, or for exercised stock
options. For a description of our incentive plans, please read Note 4 to our
Consolidated Financial Statements. We repurchased 10,000 shares of common stock
during the year ended December 31, 2001 at a cost of $141,000.
At December 31, 2001, we had long-term debt of $170 million and a 40%
debt-to-total capitalization ratio. We have $100 million of 6.72% Senior Notes
to be repaid from 2006 through 2010. We have an $80 million revolving credit
facility, under which we had $23 million in outstanding borrowings and $57
million available for future borrowings at December 31, 2001. This facility
expires in October 2003. In March 2000, we added a $50 million term loan
facility, which is to be repaid through
15
<PAGE>
April 2004. At December 31, 2001, we had $47 million in outstanding borrowings
under the term loan facility. Both the revolving credit and term loan facilities
have short-term interest rates that float with market rates, plus applicable
spreads. We have effectively fixed the interest rate on the term loan at
approximately 4% through an interest rate swap. We have no off balance sheet
debt and have not guaranteed any debt not reflected on our consolidated balance
sheet.
Because of our significant foreign operations, we are exposed to currency
fluctuations and exchange risks. We generally minimize these risks primarily
through matching, to the extent possible, revenues and expenses in the various
currencies in which we operate. Cumulative translation adjustments as of
December 31, 2001 relate primarily to our permanent investments in and loans to
our foreign subsidiaries. Inflation has not had a material effect on us in the
past two years and no such effect is expected in the near future.
See Item 1 - "Business - Description of Business - Risks and Insurance."
Results of Operations
The table below sets out revenue and profitability for the
years ended December 31, 2001 and 2000, the nine-month periods ended December
31, 2000 and 1999 and the fiscal year ended March 31, 2000.
<Table>
<Caption>
Year Ended Nine-Month Period Fiscal Year
December 31, Ended December 31, Ended March 31,
(dollars in thousands) 2001 2000 2000 1999 2000
- ---------------------- ---------- ---------- ---------- ---------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenue $ 523,820 $ 418,773 $ 307,730 $ 305,777 $ 416,820
Gross Margin 103,141 70,548 53,071 54,165 71,642
Gross Margin % 20% 17% 17% 18% 17%
Net Income 33,109 14,952 11,313 13,145 16,784
</Table>
Information on our business segments is shown in Note 6 of the Notes to
Consolidated Financial Statements included in this report.
OFFSHORE OIL AND GAS. The table below sets out revenue and profitability for our
Offshore Oil and Gas business for the years ended December 31, 2001 and 2000,
the nine-month periods ended December 31, 2000 and 1999 and the fiscal year
ended March 31, 2000.
<Table>
<Caption>
Year Ended Nine-Month Period Fiscal Year
December 31, Ended December 31, Ended March 31,
(dollars in thousands) 2001 2000 2000 1999 2000
- ---------------------- ---------- ---------- ---------- ---------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Remotely Operated Vehicles
Revenue $ 153,929 $ 100,985 $ 78,953 $ 72,585 $ 94,617
Gross Margin 43,690 25,905 19,879 16,806 22,832
Gross Margin % 28% 26% 25% 23% 24%
Operating Income 32,784 16,525 12,316 9,855 14,064
Operating Income % 21% 16% 16% 14% 15%
Subsea Products
Revenue 125,608 92,165 65,771 43,350 69,744
Gross Margin 18,330 10,741 7,647 5,690 8,784
Gross Margin % 15% 12% 12% 13% 13%
Operating Income 7,243 2,334 1,225 390 1,499
Operating Income % 6% 3% 2% 1% 2%
</Table>
16
<PAGE>
<Table>
<S> <C> <C> <C> <C> <C>
Mobile Offshore Production Systems
Revenue 39,154 21,653 15,788 18,118 23,983
Gross Margin 11,357 7,962 5,774 6,048 8,236
Gross Margin % 29% 37% 37% 33% 34%
Operating Income 8,552 6,303 4,271 5,597 7,629
Operating Income % 22% 29% 27% 31% 32%
Other Services
Revenue 102,250 93,291 65,206 77,420 105,505
Gross Margin 12,472 7,892 7,732 11,231 11,391
Gross Margin % 12% 8% 12% 15% 11%
Operating Income (Loss) 3,543 (4,668) (636) 863 (3,169)
Operating Income (Loss) % 3% (5)% (1)% 1% (3)%
Total Offshore Oil and Gas
Revenue $ 420,941 $ 308,094 $ 225,718 $ 211,473 $ 293,849
Gross Margin 85,849 52,500 41,032 39,775 51,243
Gross Margin % 20% 17% 18% 19% 17%
Operating Income 52,122 20,494 17,176 16,705 20,023
Operating Income % 12% 7% 8% 8% 7%
</Table>
In response to (1) continued increasing demand to support deepwater drilling and
(2) identified future construction and production maintenance work, we extended
our ROV fleet expansion program in 1997 by announcing plans for additional new
ROVs. These new vehicles are designed for use around the world in water depths
to 10,000 feet and in severe weather conditions. We have added over 50 ROVs to
our fleet during the last several years and we plan to add additional vehicles
at a rate dependent on market demand.
In the past few years, we have sold or exchanged our foreign diving-related
assets, which were part of our Other Services segment, to concentrate on our
other deepwater services and products which have potential for higher margins:
o In April 1997, we sold our North Sea diving assets, including a diving
support vessel;
o In fiscal 2000, we sold our West Africa diving and related vessel
assets; and
o In September 2000, we exchanged our Asia, Australia and Middle East
diving assets, including a diving support vessel, for 11 ROVs.
For the year ended December 31, 2001, ROV revenue was 52% higher than the prior
year. Gross margin rose 69% and gross margin percentage rose 2%. These
improvements were the result of an increase in average fleet size of 20% and an
increase in utilization from 66% to 76%. In the nine-month period ended December
31, 2000, ROV revenue was 9% higher than the comparable nine-month period of the
prior year. Gross margin percentage rose 2%. These increases were the result of
more ROVs available for service and an increase in ROV utilization from 63% to
67%. We anticipate ROV utilization and margins to slightly decrease in 2002,
particularly in the Gulf of Mexico during the first half of the year, due to an
expected reduction in drill support service demand onboard floating drilling
rigs.
Subsea Products revenue was 36% higher for the year ended December 31, 2001 than
the prior year. Gross margin was 71% higher and gross margin percentage rose 3%.
The increased revenue was attributable to the production of orders which had
been delayed in Brazil and to increased production from our U.K. plant, which in
2000 had difficulties in completing its initial steel-tube umbilical order.
Margins and margin percentage were higher as a result of improved pricing.
Subsea Products revenue was 52% higher for the nine-month period ended December
31, 2000 than the comparable period of the prior year. This increase was
primarily due to (1) increased demand in Brazil and the U.S., as oil and gas
companies proceeded with offshore capital projects which had been delayed, and
(2) a large steel tube umbilical order in the U.K. While total gross margin was
$2.0 million higher, margin percentages were relatively flat, as increased
profitability in Brazil and the U.S. was offset by the large steel tube
umbilical order in our U.K. plant, which earned a low margin. We anticipate
improved Subsea Product results in 2002 from higher margins on existing backlog
supplemented by additional orders for international markets.
17
<PAGE>
Mobile Offshore Production Systems revenue was up 81% for the year ended
December 31, 2001 as compared to the prior year, primarily from placement of the
Ocean Legend into service in May 2001. At December 31, 2001, we had not
recorded $2.3 million of billed revenue questioned by our customer under the
Ocean Legend contract. While we feel that we are entitled to the revenue under
the terms of the contract, we have not recorded it pending the outcome of
negotiations with our customer. Gross margin was up 43%, but gross margin
percentage was down 8%. Gross margin in 2001 included an additional $1.5 million
writedown of the out-of-service tanker Ocean Venture, which we are holding for
disposition or for possible conversion. We recorded the additional writedown as
a result of lower scrap steel prices than in 2000, when we had previously
written down the vessel by $2.5 million as explained below. Mobile Offshore
Production Systems revenue was down 13% for the nine-month period ended December
31, 2000 from the comparable period of the prior year, as production-based
revenue from the Ocean Producer was lower due to declining production levels and
we had lower project management and engineering service revenue from lower
demand. In the fourth quarter of 2001, the Ocean Producer began operations under
a seven-year contract to produce from another property in the area and we expect
to earn higher margins on the new contract than those attained during the last
two years of the prior contract. Gross margin percentage in the nine-month
period ended December 31, 2000 was higher than in the corresponding period of
the prior year due to $4.3 million of gains on the sales of two out-of-service
semisubmersible rigs. In addition, we wrote down the carrying value of the Ocean
Venture by $2.5 million in the nine-month period ended December 31, 2000, as our
assessment of the market it was targeted for, conversion into production
service, had changed. This tanker is not of the size prevalently in demand in
the current market and there have been few opportunities to bid the vessel. We
anticipate improved Mobile Offshore Production Systems results in 2002 with a
full year of Ocean Legend and Ocean Producer operations under their long-term
contracts.
Other Services revenue increased 10% for the year ended December 31, 2001 over
the prior year. Gross margin was 58% higher and gross margin percentage was 4%
higher. Revenue was higher in 2001 from a full year of service from the
multiservice vessel Ocean Intervention II, which was placed into service in the
third quarter of 2000. As a result, we had more subsea tie-back contracts in the
Gulf of Mexico in 2001. Margin percentage was higher as 2000 included losses
from two large fixed-price jobs in India. Other Services revenue was 16% lower
in the nine-month period ended December 31, 2000 than the comparable period of
the prior year. The lower revenue reflects our dispositions of (1) our West
Africa diving operations in fiscal 2000 and (2) our Asia, Australia and Middle
East diving operations in September 2000, along with more competitive conditions
resulting from lower capital expenditures by our oilfield customers. Gross
margin was lower due to lower vessel utilization and related services in the
Gulf of Mexico. The net operating loss was attributed to the two large
fixed-price jobs in India mentioned above. We anticipate lower Other Services
results in 2002 from further market deterioration due to announced reductions in
capital spending plans by oil and gas companies operating in the Gulf of Mexico.
We are hopeful that, by the second half of 2002, demand for these services will
recover.
ADVANCED TECHNOLOGIES. The table below sets out revenue and profitability for
this segment for the years ended December 31, 2001 and 2000, the nine-month
periods ended December 31, 2000 and 1999 and the fiscal year ended March 31,
2000.
<Table>
<Caption>
Year Ended Nine-Month Period Fiscal Year
December 31, Ended December 31, Ended March 31,
(dollars in thousands) 2001 2000 2000 1999 2000
- ---------------------- ---------- ---------- ------------ ---------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenue $ 102,879 $ 110,679 $ 82,012 $ 94,304 $ 122,971
Gross Margin 17,292 18,048 12,039 14,390 20,399
Gross Margin % 17% 16% 15% 15% 17%
Operating Income 7,286 8,965 5,035 8,346 12,276
Operating Income % 7% 8% 6% 9% 10%
</Table>
Advanced Technologies revenue and gross margin were slightly lower in 2001 as
compared to 2000 as a result of lower telecommunications subsea cable field
support operations. Revenue was 13% lower in the nine-month period ended
December 31, 2000 than the comparable period of the prior year as the prior
period included a large outfall job in Southeast Asia, which was performed using
resources associated with our Other Services segment. These resources were part
of those we exchanged in September 2000 for ROVs. Gross margin was lower as the
December 2000 period included provisions totaling $1.8 million relating to
operations of a division we no longer own. We anticipate similar results from
Advanced Technologies in the next year, contingent on (1) the level of
government funding for NASA and U.S. Navy
18
<PAGE>
programs in which we currently participate or are pursuing and (2) our ability
to obtain contracts for the design and manufacture of animated figures for theme
parks.
OTHER. General and administrative expenses were relatively flat over the periods
presented. Interest expense increased over the three-year period as a result of
our increased borrowings to fund capital expenditures and repurchases of common
stock. Interest expense is net of capitalized interest of $2.0 million for the
year ended December 31, 2001, $3.0 million for the nine-month period ended
December 31, 2000 and $1.8 million for fiscal 2000.
Our effective tax rate, determined after consideration of valuation allowances
and foreign, state and local taxes, was 35%, 36% and 36% for the year ended
December 31, 2001, the nine-month period ended December 31, 2000 and for fiscal
2000, respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are currently exposed to certain market risks arising from transactions we
have entered into in the normal course of business. These risks relate to
interest rate changes and fluctuations in foreign exchange rates. We do not
believe these risks are material. We have not entered into any market risk
sensitive instruments for trading purposes. We manage our exposure to interest
rate changes through the use of a combination of fixed and floating rate debt
and an interest rate hedge. See Note 3 of Notes to Consolidated Financial
Statements included in this report for a description of our long-term debt
agreements, interest rates and maturities. We believe that significant interest
rate changes will not have a material near-term impact on our future earnings or
cash flows. We manage our exposure to changes in foreign exchange rates
primarily through arranging compensation in U.S. dollars or freely convertible
currency and, to the extent possible, by limiting compensation received in other
currencies to amounts necessary to meet obligations denominated in those
currencies. We will sometimes hedge foreign currency receivables with short-term
hedges. We believe that a significant fluctuation in the foreign exchange rates
would not have a material near-term effect on our future earnings or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
In this report, our consolidated financial statements and supplementary data
appear following the signature page to this report and are hereby incorporated
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information with respect to the directors and nominees for election to our
Board of Directors is incorporated by reference from the section "Election of
Directors" in our definitive proxy statement to be filed on or before April 30,
2002, relating to our 2002 Annual Meeting of Shareholders.
The information with respect to our executive officers is provided under the
heading "Executive Officers of the Registrant" following Item 4 of Part I of
this report. There are no family relationships between any director or executive
officer.
19
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated by reference from the
section "Executive Compensation" in the proxy statement described in Item 10
above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is incorporated by reference from the
section "Election of Directors - Security Ownership of Management and Certain
Beneficial Owners" in the proxy statement described in Item 10 above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is incorporated by reference from the
section "Certain Relationships and Related Transactions" in the proxy statement
described in Item 10 above.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report.
1. Financial Statements.
(i) Report of Independent Public Accountants
(ii) Consolidated Balance Sheets
(iii) Consolidated Statements of Income
(iv) Consolidated Statements of Cash Flows
(v) Consolidated Statements of Shareholders'
Equity and Comprehensive Income
(vi) Notes to Consolidated Financial Statements
2. Exhibits:
<Table>
<Caption>
Registration
or File Form or Report Exhibit
Number Report Date Number
------------ ------- ------ -------
<S> <C> <C> <C> <C>
*3.01 Restated Certificate of Incorporation 1-10945 10-K Dec. 2000 3.01
3.02 Amended and Restated By-Laws
*4.01 Specimen of Common Stock Certificate 1-10945 10-K March 1993 4(a)
*4.02 Amended and Restated Shareholder Rights Agreement dated
as of November 16, 2001 1-10945 8-K Nov. 2001 4.1
*4.03 Note Purchase Agreement dated as of September 8, 1998 relating to
$100,000,000 6.72% Senior Notes due September 8, 2010 1-10945 10-Q Sept. 1998 4.01
*4.04 Loan Agreement ($80,000,000 Revolving Credit Facility)
dated as of October 23, 1998 1-10945 10-Q Sept. 1998 4.02
*4.05 Loan Agreement ($50,000,000 Term Loan) dated as of
March 30, 2000 1-10945 10-K/A March 2000 4.05
</Table>
We and certain of our consolidated subsidiaries are parties to debt instruments
under which the total amount of securities authorized does not exceed 10 percent
of our total consolidated assets. Pursuant to paragraph 4(ii)(A) of Item 601(b)
of Regulation S-K, we agree to furnish a copy of those instruments to the
Securities and Exchange Commission on request.
20
<PAGE>
<Table>
<S> <C> <C> <C> <C>
10.01+ Defined Contribution Master Plan and Trust Agreement and
Adoption Agreement for the Oceaneering International, Inc.
Retirement Investment Plan
10.02+ Service Agreement dated as of November 16, 2001 between
Oceaneering and John R. Huff
*10.03+ 2000 Non-Executive Incentive Plan 333-50400 S-8 Nov. 2000 4.6
*10.04+ Amended and Restated Supplemental Executive Retirement Plan 1-10945 10-Q Dec. 1999 10.1
*10.05+ 1999 Restricted Stock Award Incentive Agreements
dated August 19, 1999 1-10945 10-Q Sept. 1999 10.1
10.06+ Change of Control Agreements dated as of November 16, 2001
between Oceaneering and John R. Huff, T. Jay Collins, Marvin J. Migura,
M. Kevin McEvoy and George R. Haubenreich, Jr., respectively
*10.07+ 1999 Bonus Restricted Stock Award Agreements 1-10945 10-K/A March 2000 10.20
*10.08+ 1999 Incentive Plan 1-10945 10-K March 2000 10.08
10.09+ 2001 Bonus Award Plan
*10.10+ 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f)
*10.11+ 1990 Nonemployee Directors Stock Option Plan 33-36872 S-8 Sept. 1990 4(g)
10.12+ Form of Indemnification Agreement dated November 16, 2001 between
Oceaneering and each of its Directors, T. Jay Collins, Marvin J. Migura,
M. Kevin McEvoy and George R. Haubenreich, Jr
*10.14+ 1996 Incentive Plan of Oceaneering International, Inc. 1-10945 10-Q Sept. 1996 10.02
*10.15+ 1996 Restricted Stock Award Incentive Agreements
dated August 23, 1996 1-10945 10-Q Sept. 1996 10.03
*10.16+ 1997 Bonus Restricted Stock Award Agreements
dated April 22, 1997 1-10945 10-K March 1997 10.20
*10.17+ Amendment No. 1 to 1990 Nonemployee Director Stock
Option Plan 1-10945 10-K March 1999 10.19
*10.18+ 1998 Bonus Restricted Stock Award Agreements 1-10945 10-K March 1999 10.20
12.01 Statement showing Computation of Ratio of Earnings to Fixed Charges
21.01 Subsidiaries of Oceaneering
23.01 Consent of Independent Public Accountants
24.01 Powers of Attorney
99.01 Letter to the Securities and Exchange Commission re Arthur Andersen LLP
</Table>
* Indicates exhibit previously filed with the Securities and Exchange
Commission as indicated and incorporated herein by reference.
+ Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
We filed the following reports on Form 8-K during the last quarter of the
period covered by this report:
<Table>
<Caption>
Date Description
---- -----------
<S> <C>
November 14, 2001 Information furnished under Item 9, Regulation FD Disclosure, regarding the posting of a
presentation on our Web site.
November 16, 2001 Information filed under Item 5, Other Events, regarding the extension of the expiration date of
the Shareholder Rights Agreement dated as of November 20, 1992 to November 16, 2011 and other
changes to that agreement.
December 10, 2001 Information furnished under Item 9, Regulation FD Disclosure, regarding the posting of a
presentation on our Web site.
</Table>
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
OCEANEERING INTERNATIONAL, INC.
Date: March 27, 2002 By: /s/ JOHN R. HUFF
----------------------------
John R. Huff
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<Table>
<Caption>
Signature Title Date
<S> <C> <C>
/s/ JOHN R. HUFF Chairman of the Board and March 27, 2002
- ------------------------------- Chief Executive Officer
John R. Huff (Principal Executive Officer)
/s/ MARVIN J. MIGURA Senior Vice President and March 27, 2002
- ------------------------------- Chief Financial Officer
Marvin J. Migura (Principal Financial Officer)
/s/ JOHN L. ZACHARY Controller March 27, 2002
- ------------------------------- (Principal Accounting Officer)
John L. Zachary
/s/ T. JAY COLLINS President, Chief Operating Officer March 27, 2002
- ------------------------------- and Director
T. Jay Collins
/s/ CHARLES B. EVANS* Director March 27, 2002
- -------------------------------
Charles B. Evans
/s/ DAVID S. HOOKER* Director March 27, 2002
- -------------------------------
David S. Hooker
/s/ D. MICHAEL HUGHES* Director March 27, 2002
- -------------------------------
D. Michael Hughes
/s/ HARRIS J. PAPPAS* Director March 27, 2002
- -------------------------------
Harris J. Pappas
*By: /s/ GEORGE R. HAUBENREICH, JR.
-------------------------------
George R. Haubenreich, Jr.
Attorney-in-Fact
</Table>
22
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Index to Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity and Comprehensive Income
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data (unaudited)
Index to Schedules
All schedules for which provision is made in the applicable regulations of the
Securities and Exchange Commission have been omitted because they are not
required under the relevant instructions or because the required information is
included in the financial statements included herein or in the related footnotes
thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Oceaneering International, Inc.:
We have audited the accompanying consolidated balance sheets of Oceaneering
International, Inc. (a Delaware corporation) and subsidiaries as of December 31,
2001 and 2000 and the related consolidated statements of income, cash flows and
shareholders' equity and comprehensive income for the year ended December 31,
2001, the nine-month period ended December 31, 2000 and for the fiscal year
ended March 31, 2000. These consolidated 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Oceaneering
International, Inc. and subsidiaries as of December 31, 2001 and 2000 and the
results of their operations and their cash flows for the year ended December 31,
2001, the nine-month period ended December 31, 2000 and the fiscal year ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
February 13, 2002
23
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
December 31,
(in thousands, except share data) 2001 2000
- --------------------------------- ---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,474 $ 9,911
Accounts receivable, net of allowances for doubtful accounts
of $1,349 and $510 128,559 80,857
Revenue in excess of amounts billed 25,805 26,560
Prepaid expenses and other 40,380 35,076
---------- ----------
Total current assets 205,218 152,404
---------- ----------
PROPERTY AND EQUIPMENT, AT COST:
Marine services equipment 340,114 313,853
Mobile offshore production equipment, including construction
in progress of $83,321 in 2000 142,186 124,785
Manufacturing facilities 45,335 41,024
Other 46,103 43,723
---------- ----------
573,738 523,385
Less accumulated depreciation 231,402 187,025
---------- ----------
Net property and equipment 342,336 336,360
---------- ----------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $9,221 and $7,526 13,884 11,493
Other 18,173 15,260
---------- ----------
TOTAL ASSETS $ 579,611 $ 515,517
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 28,902 $ 25,076
Accrued liabilities 74,193 60,139
Income taxes payable 10,739 8,736
Current portion of long-term debt -- 73
---------- ----------
Total current liabilities 113,834 94,024
---------- ----------
LONG-TERM DEBT, NET OF CURRENT PORTION 170,000 180,000
---------- ----------
OTHER LONG-TERM LIABILITIES 44,344 34,599
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, par value $0.25 per share; 90,000,000 shares
authorized; 24,017,046 shares issued 6,004 6,004
Additional paid-in capital 84,105 78,945
Treasury stock; 249,872 and 979,285 shares at cost (3,353) (13,123)
Retained earnings 184,915 151,806
Other comprehensive income (20,238) (16,738)
---------- ----------
Total shareholders' equity 251,433 206,894
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 579,611 $ 515,517
========== ==========
</Table>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
24
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<Table>
<Caption>
Nine-Month Fiscal Year
Year Ended Period Ended Ended
December 31, December 31, March 31,
(in thousands, except per share data) 2001 2000 2000 2000
- ------------------------------------- ---------- ---------- ------------ ----------
(unaudited)
<S> <C> <C> <C> <C>
REVENUE $ 523,820 $ 418,773 $ 307,730 $ 416,820
COST OF SERVICES AND PRODUCTS 420,679 348,225 254,659 345,178
---------- ---------- ---------- ----------
GROSS MARGIN 103,141 70,548 53,071 71,642
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 43,733 41,089 30,860 39,343
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 59,408 29,459 22,211 32,299
INTEREST INCOME 491 497 386 533
INTEREST EXPENSE, NET OF AMOUNTS CAPITALIZED (9,928) (7,104) (5,629) (5,936)
OTHER INCOME (EXPENSE), NET 614 (207) 122 (330)
MINORITY INTERESTS 352 717 586 (341)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 50,937 23,362 17,676 26,225
PROVISION FOR INCOME TAXES (17,828) (8,410) (6,363) (9,441)
---------- ---------- ---------- ----------
NET INCOME $ 33,109 $ 14,952 $ 11,313 $ 16,784
========== ========== ========== ==========
BASIC EARNINGS PER SHARE $ 1.41 $ 0.65 $ 0.49 $ 0.74
DILUTED EARNINGS PER SHARE $ 1.38 $ 0.64 $ 0.49 $ 0.73
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 23,473 22,895 22,935 22,757
INCREMENTAL SHARES FROM STOCK OPTIONS 442 293 291 279
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENTS
23,915 23,188 23,226 23,036
</Table>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
25
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
Nine-Month Fiscal Year
Year Ended Period Ended Ended
December 31, December 31, March 31,
(in thousands) 2001 2000 2000 2000
- -------------- ---------- ---------- ------------ ----------
(unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 33,109 $ 14,952 $ 11,313 $ 16,784
---------- ---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 47,906 39,748 30,664 33,948
Currency translation adjustments and other 1,767 (720) (46) 1,582
Increase (decrease) in cash from:
Accounts receivable and revenue in excess of
amounts billed, net (46,947) 3,073 11,155 (14,734)
Prepaid expenses and other current assets (9,876) (6,192) (8,029) (2,131)
Other assets 4,809 (5,012) (3,036) (2,922)
Accounts payable 3,826 1,579 (9,517) 11,112
Accrued liabilities 14,054 (1,352) 6,494 (962)
Income taxes payable 7,639 (1,534) 1,595 (2,801)
Other long-term liabilities 3,553 11,190 278 13,192
---------- ---------- ---------- ----------
Total adjustments to net income 26,731 40,780 29,558 36,284
---------- ---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 59,840 55,732 40,871 53,068
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (57,661) (138,662) (101,641) (80,758)
Dispositions of property and equipment 116 12,188 8,122 5,309
Increase in other assets (2,415) (2,827) (2,884) (593)
---------- ---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (59,960) (129,301) (96,403) (76,042)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) on revolving credit, term loan
and other long-term debt (10,073) 69,395 51,748 27,419
Proceeds from issuance of common stock 10,897 3,735 2,694 6,246
Purchases of treasury stock (141) (754) -- (8,057)
---------- ---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 683 72,376 54,442 25,608
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 563 (1,193) (1,090) 2,634
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 9,911 11,104 11,001 8,367
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 10,474 $ 9,911 $ 9,911 $ 11,001
========== ========== ========== ==========
</Table>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
26
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
<Table>
<Caption>
Common Stock Additional Other
Issued Paid-in Treasury Retained Comprehensive
(in thousands) Shares Amounts Capital Stock Earnings Income Total
- -------------- ---------- --------- ---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1999 24,017 $ 6,004 $ 82,421 $ (22,803) $ 123,709 $ (9,892) $ 179,439
Comprehensive Income:
Net Income -- -- -- -- 16,784 -- 16,784
Translation adjustments -- -- -- -- -- (2,827) (2,827)
---------- --------- ---------- ---------- ---------- ------------ ----------
Total Comprehensive Income -- -- -- -- 16,784 (2,827) 13,957
Restricted stock issued -- -- (8,165) 8,165 -- -- --
Stock options exercised -- -- 461 4,233 -- -- 4,694
Restricted stock plan compensation expense -- -- 3,255 -- -- -- 3,255
Treasury stock purchases -- -- -- (8,057) -- -- (8,057)
Treasury stock issued to company benefit
plan, at average cost -- -- -- 2,412 -- -- 2,412
---------- --------- ---------- ---------- ---------- ------------ ----------
BALANCE, MARCH 31, 2000 24,017 6,004 77,972 (16,050) 140,493 (12,719) 195,700
Comprehensive Income:
Net Income -- -- -- -- 11,313 -- 11,313
Translation adjustments -- -- -- -- -- (4,019) (4,019)
---------- --------- ---------- ---------- ---------- ------------ ----------
Total Comprehensive Income -- -- -- -- 11,313 (4,019) 7,294
Restricted stock issued -- -- (175) 175 -- -- --
Stock options exercised -- -- 39 880 -- -- 919
Restricted stock plan compensation expense -- -- 1,109 -- -- -- 1,109
Treasury stock issued to company benefit
plan, at average cost -- -- -- 1,872 -- -- 1,872
---------- --------- ---------- ---------- ---------- ------------ ----------
BALANCE, DECEMBER 31, 2000 24,017 6,004 78,945 (13,123) 151,806 (16,738) 206,894
Comprehensive Income:
Net Income -- -- -- -- 33,109 -- 33,109
Change in fair value of interest
rate hedge -- -- -- -- -- 64 64
Translation adjustments -- -- -- -- -- (3,564) (3,564)
---------- --------- ---------- ---------- ---------- ------------ ----------
Total Comprehensive Income -- -- -- -- 33,109 (3,500) 29,609
Restricted stock issued -- -- 786 (786) -- -- --
Stock options exercised -- -- 1,945 8,271 -- -- 10,216
Restricted stock plan compensation expense -- -- 2,429 -- -- -- 2,429
Treasury stock purchases -- -- -- (141) -- -- (141)
Treasury stock issued to company benefit
plan, at average cost -- -- -- 2,426 -- -- 2,426
---------- --------- ---------- ---------- ---------- ------------ ----------
BALANCE, DECEMBER 31, 2001 24,017 $ 6,004 $ 84,105 $ (3,353) $ 184,915 $ (20,238) $ 251,433
========== ========= ========== ========== ========== ============ ==========
</Table>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
27
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF MAJOR ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Oceaneering
International, Inc. and its 50% or more owned and controlled subsidiaries.
Oceaneering accounts for its investments in unconsolidated affiliated companies
under the equity method. All significant intercompany accounts and transactions
have been eliminated. As used in these notes, references to "Oceaneering" mean
Oceaneering International, Inc. and its 50% or more owned and controlled
subsidiaries.
Effective November 1, 2000, Oceaneering's Board of Directors approved the change
of its year end to December 31 from March 31. The accompanying financial
statements for the year ended December 31, 2000 are presented for comparative
purposes and are unaudited. Management has reflected all adjustments that it
believes are necessary to present fairly Oceaneering's results of operations and
cash flows for that unaudited period. All such adjustments are of a normal
recurring nature.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and highly liquid investments
with original maturities of three months or less from the date of the
investment.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
-------------- ---------- ----------
<S> <C> <C>
Spare parts for remotely operated vehicles $ 14,316 $ 10,568
Inventories, primarily raw materials 9,385 8,848
Deferred taxes 10,359 8,057
Other 6,320 7,603
---------- ----------
Total $ 40,380 $ 35,076
========== ==========
</Table>
Inventory is priced at lower of cost or market. Oceaneering determines cost
using the weighted-average method.
Property and Equipment and Goodwill
Oceaneering provides for depreciation of property and equipment primarily on the
straight-line method over estimated useful lives of three to 20 years for marine
services equipment, up to 12 years for mobile offshore production equipment and
three to 25 years for buildings, improvements and other equipment. Goodwill
arising from business acquisitions made before June 30, 2001 was amortized on
the straight-line method over 15 years.
The costs of repair and maintenance of property and equipment are charged to
operations as incurred, while the costs of improvements are capitalized.
Oceaneering accrues in advance for anticipated drydocking expenses of its larger
vessels. Accrued drydock costs, which are included in accrued liabilities on the
balance sheets, were $3.6 million and $3.2 million at December 31, 2001 and
2000, respectively. Interest is capitalized on assets where the construction
period is anticipated to be more than three months. Oceaneering does not
allocate general administrative costs to capital projects. Upon the disposition
of property and equipment, the related cost and accumulated depreciation
accounts are relieved and the resulting gain or loss is included as an
adjustment to cost of services and products.
28
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
During the nine-month period ended December 31, 2000, Oceaneering exchanged its
diving-related assets, including a vessel, in Asia, Australia and the Middle
East for 11 remotely operated vehicles. The assets acquired were recorded at
their fair market value and the transaction did not result in a material gain or
loss to Oceaneering.
Management periodically, and upon the occurrence of a triggering event, reviews
the realizability of goodwill and other long-term assets and makes any
appropriate impairment adjustments and disclosures. During the year ended
December 31, 2001 and the nine-month period ended December 31, 2000, Oceaneering
recorded impairment adjustments of $1.5 million and $2.5 million, respectively,
in the form of additional depreciation included in Cost of Services and Products
within the Mobile Offshore Production Systems business segment. These
adjustments decreased the carrying value of an out-of-service tanker to its
estimated scrap value. During the year ended December 31, 2001, Oceaneering also
recorded an impairment adjustment of $600,000 in the form of additional
depreciation included in the Cost of Services and Products within the Other
Services business segment. This adjustment decreased the carrying value of a
crane barge held for sale to its estimated market value. No other impairment
adjustments were made during the periods presented.
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that
all business combinations be accounted for under the purchase method. SFAS No.
141 also establishes criteria for the separate recognition of intangible assets
acquired in a business combination. The adoption of SFAS No. 141 will have no
effect on our consolidated financial position or results of operations. SFAS No.
142 requires for 2002 that goodwill no longer be amortized to earnings, but
instead be subject to periodic testing for impairment. In addition, goodwill for
acquisitions after June 30, 2001 is not amortized. SFAS No. 142 is effective for
fiscal years beginning after December 15, 2001 and the non-amortization
provisions are effective for acquisitions taking place after June 30, 2001. For
the year ended December 31, 2001, Oceaneering amortized $1,696,000 of goodwill.
Oceaneering also made an acquisition in the third quarter of 2001 which
generated $3,259,000 of goodwill which, in accordance with the provisions of
SFAS No. 142, was not amortized. We are reviewing the effect SFAS No. 142 will
have on our consolidated financial position and results of operations and, other
than ceasing goodwill amortization effective January 1, 2002, we do not
presently anticipate that SFAS No. 142 will have a significant impact on our
consolidated financial position or results of operations.
Revenue Recognition
Oceaneering's revenue is primarily derived from billings under contracts that
provide for specific time, material and equipment charges, which are accrued
daily and billed periodically, ranging from weekly to monthly. Significant
lump-sum contracts, particularly in the Subsea Products segment, are accounted
for using the percentage-of-completion method. Under this method, we measure the
extent of progress toward completion based on physical progress. Revenue in
Excess of Amounts Billed relates to recoverable costs and accrued profits on
contracts in process. Billings in Excess of Revenue Recognized on uncompleted
contracts are classified in accrued liabilities. Revenue on contracts with a
substantial element of research and development is recognized to the extent of
cost until such time as the probable final profitability can be determined.
Anticipated losses on contracts, if any, are recorded in the period that such
losses are first determinable. Oceaneering believes its revenue recognition
accounting policies comply with SEC Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements."
Revenue in Excess of Amounts Billed are summarized as follows:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
-------------- ---------- ----------
<S> <C> <C>
Revenues recognized on uncompleted contracts $ 157,858 $ 117,177
Less: Billings of customers (132,053) (90,617)
---------- ----------
Revenue in excess of amounts billed $ 25,805 $ 26,560
========== ==========
</Table>
29
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
Billings in Excess of Revenues Recognized are summarized as follows:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
-------------- ---------- ----------
<S> <C> <C>
Amounts billed to customers $ 26,745 $ 8,269
Less: Revenues recognized (23,752) (5,356)
---------- ----------
Billings in excess of revenue recognized $ 2,993 $ 2,913
========== ==========
</Table>
Income Taxes
Oceaneering provides income taxes at appropriate tax rates in accordance with
its interpretation of the respective tax laws and regulations after review and
consultation with its internal tax department, tax advisors and, in some cases,
legal counsel in the various jurisdictions. Deferred income taxes are provided
for temporary differences in the recognition of income and expense for financial
and tax reporting purposes. Oceaneering's policy is to provide for deferred U.S.
income taxes on repatriated foreign income only to the extent such income is not
to be invested indefinitely in the related foreign entity.
Foreign Currency Translation
The functional currency for several of Oceaneering's foreign subsidiaries is the
applicable local currency. Results of operations for foreign subsidiaries with
functional currencies other than the U.S. dollar are translated into U.S.
dollars using average exchange rates during the period. Assets and liabilities
of these foreign subsidiaries are translated into U.S. dollars using the
exchange rates in effect at the balance sheet date and the resulting translation
adjustments are accumulated as a component of shareholders' equity. All foreign
currency transaction gains and losses are recognized currently in the
Consolidated Statements of Income.
Earnings Per Share
Basic and diluted earnings per share are computed by dividing net income by the
weighted average number of common shares and the weighted average number of
common shares plus common share equivalents, respectively. The weighted average
number of common shares and equivalents for 2001 exclude an average of 667,000
stock options which were antidilutive.
Other Long-term Liabilities
At December 31, 2001 and 2000, other long-term liabilities include $10.0 million
and $9.1 million, respectively, for self-insurance reserves not expected to be
paid out in the following year and $28.5 million and $22.0 million,
respectively, for deferred income taxes.
Financial Instruments
Oceaneering recognizes all derivative instruments as either assets or
liabilities in the balance sheet and measures those instruments at fair value.
Subsequent changes in fair value are reflected in current earnings or other
comprehensive income, depending on whether a derivative instrument is designated
as part of a hedge relationship and, if it is, the type of hedge relationship.
Reclassifications
Certain amounts from prior periods have been reclassified to conform with the
current year presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and
30
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
2. INCOME TAXES
Oceaneering and its domestic subsidiaries, including acquired companies from
their respective dates of acquisition, file a consolidated U.S. federal income
tax return. Oceaneering conducts its international operations in a number of
locations that have varying laws and regulations with regard to income and other
taxes, some of which are subject to interpretation. Management believes that
adequate provisions have been made for all taxes that will ultimately be
payable. On a geographic basis, income before minority interests and income
taxes attributable to the United States was $5.4 million, $6.7 million and $10.5
million for the year ended December 31, 2001, the nine-month period ended
December 31, 2000 and the fiscal year ended March 31, 2000, respectively.
The provisions for income taxes were as follows:
<Table>
<Caption>
Nine-Month Fiscal Year
Year Ended Period Ended Ended
December 31, December 31, March 31,
(in thousands) 2001 2000 2000
-------------- ------------ ------------ -----------
<S> <C> <C> <C>
U.S. federal and state $ 9,764 $ 1,671 $ 4,988
Foreign 8,064 4,692 4,453
---------- ---------- ----------
Total provision $ 17,828 $ 6,363 $ 9,441
========== ========== ==========
Current $ 13,623 $ 6,375 $ 2,135
Deferred 4,205 (12) 7,306
---------- ---------- ----------
Total provision $ 17,828 $ 6,363 $ 9,441
========== ========== ==========
Cash taxes paid $ 10,320 $ 4,538 $ 7,906
========== ========== ==========
</Table>
During the nine-month period ended December 31, 2000, Oceaneering also received
a cash tax refund of $4,353,000.
As of December 31, 2001, Oceaneering's Brazil subsidiary had net operating loss
carryforwards ("NOLs") of approximately $9 million, which are available to
reduce future Brazil income taxes that would otherwise be payable.
As of December 31, 2001 and 2000, Oceaneering's worldwide deferred tax assets
and liabilities were as follows:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
-------------- ---------- ----------
<S> <C> <C>
Current deferred tax assets $ 10,359 $ 8,057
========== ==========
Gross deferred tax assets - long-term $ 3,216 $ 5,612
Valuation allowance (3,150) (5,600)
---------- ----------
Net deferred tax assets - long-term $ 66 $ 12
========== ==========
Deferred tax liabilities $ 28,517 $ 21,956
========== ==========
</Table>
Oceaneering's gross deferred tax assets consist primarily of NOLs in its
Brazilian subsidiary, which have no expiration date, and insurance claim
reserves for which a tax deduction has not yet been allowed. Deferred tax
liabilities consist primarily of depreciation and amortization book/tax
differences and provisions for income of foreign subsidiaries expected to be
repatriated.
31
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
Oceaneering has established a valuation allowance for deferred tax assets after
taking into account factors that are likely to affect Oceaneering's ability to
utilize the tax assets. In particular, Oceaneering conducts its business through
several foreign subsidiaries and, although Oceaneering expects its consolidated
operations to be profitable, there is no assurance that profits will be earned
in entities or jurisdictions that have NOLs available. Changes in the valuation
allowance primarily relate to the expected utilization of foreign NOLs and
realization of foreign tax credits. Income taxes, computed by applying the
federal statutory income tax rate of 35% to income before income taxes and
minority interests, are reconciled to the actual provisions for income taxes as
follows:
<Table>
<Caption>
Nine-Month Fiscal Year
Year Ended Period Ended Ended
December 31, December 31, March 31,
(in thousands) 2001 2000 2000
-------------- ------------ ----------- ----------
<S> <C> <C> <C>
Computed U.S. statutory expense $ 17,705 $ 5,981 $ 9,298
Change in valuation allowances (2,450) 1,224 (6,008)
Withholding taxes and foreign earnings taxed
at rates different from U.S. statutory rates 2,319 1,066 3,375
State and local taxes and other, net 254 (1,908) 2,776
---------- ---------- ----------
Total provision for income taxes $ 17,828 $ 6,363 $ 9,441
========== ========== ==========
</Table>
3. DEBT
Long-term Debt consisted of the following:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
-------------- ---------- ----------
<S> <C> <C>
6.72% Senior Notes $ 100,000 $ 100,000
Revolving credit facility 23,000 65,000
Term loan agreement 47,000 15,000
Capital lease -- 73
---------- ----------
Long-term Debt 170,000 180,073
Current portion -- (73)
---------- ----------
Long-term Debt, net of current portion $ 170,000 $ 180,000
========== ==========
</Table>
Oceaneering has $100 million aggregate principal amount of 6.72% Senior Notes
outstanding and scheduled to be paid in five equal annual installments beginning
September 2006.
Oceaneering has an $80 million revolving credit facility (the "Credit
Agreement"). There is a commitment fee ranging from .20% to .25% per annum,
depending on Oceaneering's debt-to-capitalization ratio, on the unused portion
of the banks' commitments. Principal maturity is in October 2003. Under the
Credit Agreement, Oceaneering has the option to borrow dollars at the London
Interbank Offered Rate ("LIBOR") plus a margin ranging from .50% to 1.00%,
depending on Oceaneering's debt-to-capitalization ratio, or at the agent bank's
prime rate. The weighted average interest rate for borrowings under the Credit
Agreement was 2.56% at December 31, 2001.
In March 2000, Oceaneering entered into a four-year, $50 million term loan
agreement (the "Term Loan"). Borrowings under the Term Loan were made until
March 2001 and principal repayments commenced in October 2001 with final
maturity in April 2004. There are no further borrowings available and no
commitment fees on the Term Loan. Under the Term Loan, Oceaneering pays interest
at LIBOR plus a margin ranging from .75% to 1.25%, depending on Oceaneering's
debt-to-capitalization ratio. The weighted average interest rate for borrowings
under the Term Loan was 3.21% at December 31, 2001. At December 31, 2001,
Oceaneering had an interest rate hedge in place that effectively fixed LIBOR at
3.24% for the remainder of the Term Loan.
32
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
Scheduled maturities of Long-term Debt outstanding as of December 31, 2001 were
as follows:
<Table>
<Caption>
6.72% Credit Term
(in thousands) Notes Agreement Loan Total
-------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
2002 $ -- $ -- $ 12,000 $ 12,000
2003 -- 23,000 12,000 35,000
2004 -- -- 23,000 23,000
2005 -- -- -- --
2006 20,000 -- -- 20,000
Thereafter 80,000 -- -- 80,000
---------- ---------- ---------- ----------
Total $ 100,000 $ 23,000 $ 47,000 $ 170,000
========== ========== ========== ==========
</Table>
Maturities in 2002 are not classified as current as of December 31, 2001 since
Oceaneering can extend the maturity by re-borrowing under the Credit Agreement
with a maturity date after one year.
All of these credit arrangements contain similar restrictive covenants as to
minimum net worth, debt-to-capitalization ratio, fixed charge coverage, interest
coverage and restricted payments. Restricted payments, which include dividends
and treasury stock purchases, are limited from April 1, 1998, on a net basis, to
the sum of $25 million plus 50% of Oceaneering's consolidated net income after
April 1, 1998, plus cash proceeds from any sales of common stock.
Cash interest payments of $12.0 million, $6.7 million and $7.7 million were made
in the year ended December 31, 2001, the nine-month period ended December 31,
2000 and the fiscal year ended March 31, 2000, respectively. Interest charges of
$2.0 million, $3.0 million and $1.8 million were capitalized as part of
construction in progress in the year ended December 31, 2001, the nine-month
period ended December 31, 2000 and the fiscal year ended March 31, 2000,
respectively.
4. EMPLOYEE BENEFIT PLANS AND SHAREHOLDER RIGHTS PLAN
Retirement Investment Plans
Oceaneering has three separate employee retirement investment plans which, taken
together, cover most of its full-time employees. The Oceaneering Retirement
Investment Plan is a 401(k) plan in which domestic employees may participate by
deferring a portion of their gross monthly salary and directing Oceaneering to
contribute the deferred amount to the plan. Oceaneering matches a portion of the
employees' deferred compensation. Oceaneering's contributions to the plan were
$3,679,000, $3,220,000 and $2,867,000 for the plan years ended December 31,
2001, 2000 and 1999, respectively.
The second plan is the Oceaneering International Services Pension Scheme for
employees in the United Kingdom. Under this plan, employees may contribute a
portion of their gross monthly salary. Oceaneering also contributes an amount
equal to a portion of the participant's gross monthly salary. The plan assets
exceed vested benefits and are not material to the assets of Oceaneering.
Company contributions to this plan for the year ended December 31, 2001, the
nine-month period ended December 31, 2000 and the fiscal year ended March 31,
2000 were $207,000, $41,000 and $32,000, respectively.
The third plan is the Oceaneering International, Inc. Supplemental Executive
Retirement Plan, which covers selected key management employees and executives
of Oceaneering as approved by the Compensation Committee of Oceaneering's Board
of Directors (the "Compensation Committee"). Under the plan, Oceaneering accrues
an amount determined as a percentage of the participant's gross monthly salary
and the amounts accrued are treated as if they are invested in one or more
investment vehicles pursuant to this plan. Expenses related to this plan during
the year ended December 31, 2001, the nine-month period ended December 31, 2000
and the fiscal year ended March 31, 2000 were $2,134,000, $921,000 and $972,000,
respectively.
Incentive and Stock Option Plans
Under the 1996 and 1999 Incentive Plans and the 2000 Non-Executive Incentive
Plan (the "Incentive Plans"), totals of 1,165,000, 1,450,000 and 1,000,000
shares of common stock of Oceaneering, respectively, were made available for
awards to employees and other persons (excluding nonemployee directors except
with respect to automatic grants as described
33
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
below and, with respect to the 2000 Non-Executive Incentive Plan, excluding
executive officers) having an important business relationship or affiliation
with Oceaneering. Under the 1999 Incentive Plan, each director of Oceaneering is
automatically granted an option to purchase 10,000 shares of common stock on the
date the director becomes a nonemployee director and each year thereafter at an
exercise price per share equal to the fair market value of a share of common
stock on the date the option was granted. These options granted to nonemployee
directors become fully exercisable six months following the date of grant.
The Incentive Plans are administered by the Compensation Committee, which
determines the type or types of award(s) to be made to each participant and sets
forth in the related award agreement the terms, conditions and limitations
applicable to each award. The Compensation Committee may grant stock options,
stock appreciation rights and stock and cash awards. The exercise price for each
option is not less than the fair market value of the optioned shares at the date
of grant. Options outstanding vest over a three- or four-year period and are
exercisable over a period of four, five or ten years after the date of grant or
five years after the date of vesting.
Oceaneering recognizes no compensation cost for stock options it issues unless
options are granted at an option price below the fair market value of the stock
at the date of the grant. Had compensation cost for these stock options been
determined based on fair value, Oceaneering's pro forma net income for the year
ended December 31, 2001, the nine-month period ended December 31, 2000 and for
fiscal 2000 would have been $29,302,000, $9,137,000 and $15,442,000,
respectively, and its diluted earnings per share for those periods would have
been $1.23, $0.39 and $0.67, respectively.
34
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
Information regarding these option plans is as follows:
<Table>
<Caption>
Shares under Weighted Average
Option Exercise Price
------------ ----------------
<S> <C> <C>
Balance at March 31, 1999 1,685,170 $ 13.37
Granted 384,000 16.88
Exercised (319,760) 12.48
Forfeited (45,280) 14.12
------------ ------------
Balance at March 31, 2000 1,704,130 14.31
Granted 803,800 14.57
Exercised (66,035) 12.51
Forfeited (93,620) 15.47
------------ ------------
Balance at December 31, 2000 2,348,275 14.40
Granted 748,400 23.57
Exercised (620,685) 13.74
Forfeited (141,330) 17.19
------------ ------------
Balance at December 31, 2001 2,334,660 $ 17.35
============ ============
</Table>
The weighted average fair value of options granted in the year ended December
31, 2001, the nine-month period ended December 31, 2000 and the fiscal year
ended March 31, 2000 was $9.98, $7.18 and $8.90, respectively. The fair value of
the stock options granted was estimated on the date of grant using the
Black-Scholes option pricing model, with the following assumptions:
<Table>
<Caption>
Nine-Month Fiscal Year
Year Ended Period Ended Ended
December 31, December 31, March 31,
(in thousands) 2001 2000 2000
-------------- ------------ ------------ ------------
<S> <C> <C> <C>
Risk-free interest rate 4.69% 6.13% 5.87%
Expected dividend yield 0% 0% 0%
Expected life 3.0 years 4.5 years 6.0 years
Expected volatility 57.09% 51.24% 46.14%
</Table>
The following table provides information about the options outstanding at
December 31, 2001.
<Table>
<Caption>
Outstanding Exercisable
---------------------------------------------- -----------------------------
Weighted
Number of Average Weighted Number of Weighted
Range of Shares at Remaining Average Shares at Average
Exercise December 31, Contractual Exercise December 31, Exercise
Prices 2001 Life (years) Price 2001 Price
- -------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$4.72 - 14.36 403,300 2.07 $ 10.65 317,525 $ 10.73
$14.37 - 16.56 988,360 3.37 $ 15.03 507,160 $ 15.05
$16.57 - 23.82 943,000 3.71 $ 22.65 434,250 $ 21.62
</Table>
At December 31, 2001, there were 277,450 shares of Oceaneering common stock
under these plans available for grant, in the form of stock options, stock
appreciation rights or stock awards, subject to no more than 144,150 shares
being used for awards other than stock options or stock appreciation rights to
employees.
During the nine-month period ended December 31, 2000 and the fiscal year ended
March 31, 2000, the Compensation Committee granted restricted common stock of
Oceaneering to certain of its key executives. No restricted common stock of
Oceaneering was granted in 2001. These grants are subject to earning
requirements on the basis of a percentage change between the price of the common
stock of Oceaneering versus the average of the common stock price of a peer
group of companies over two- and three- year periods, respectively. Up to
one-half of the grant made in the nine-month period ended December 31, 2000 and
up to one-third of the grants made in the fiscal year ended March 31, 2000 may
be earned each year depending on Oceaneering's cumulative common stock
performance, with any amount earned subject to vesting in four equal
installments over a four-year period, conditional upon continued employment. At
the time of each vesting, a participant receives a tax assistance payment for
which the participant must reimburse Oceaneering if the vested common stock is
sold by the participant within three years after the vesting date. As of
December 31, 2001, one-half of the grant made in the nine-month period ended
December 31, 2000 had been earned and two-thirds of the grants made in the
fiscal year ended March 31, 2000 had been earned. As of December 31, 2001, a
total of 533,000 shares of restricted stock was outstanding and unvested under
these and former, similar grants, of which 360,000 shares were earned, subject
to vesting requirements. The numbers and weighted average grant date fair values
of restricted stock granted were 16,000 and $19.87, respectively, during the
nine-month period ended December 31, 2000 and 549,000 and $17.06, respectively,
during the fiscal year ended March 31, 2000. In June 1999, certain key
executives also elected to receive restricted common stock of Oceaneering
totaling 42,812 shares with grant date fair values of $16.56 per share, subject
to similar vesting requirements and tax assistance payments, in lieu of cash for
all or part of their fiscal 1999 bonus awards. Each grantee of shares of
restricted stock mentioned in this paragraph is deemed to be the record owner of
those shares during the restriction period, with the right to vote and receive
any dividends on those shares.
Shareholder Rights Plan
Oceaneering has a Shareholder Rights Plan dated as of November 20, 1992, as
amended and restated as of November 16, 2001. One preferred share purchase right
exists for each outstanding share of Oceaneering's common stock. The plan will
cause substantial dilution to a party that attempts to acquire Oceaneering in a
manner or on terms not approved by
35
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
Oceaneering's Board of Directors. The rights, which do not have voting rights
and are not entitled to dividends until such time as they become exercisable,
are scheduled to expire in November 2011.
5. COMMITMENTS AND CONTINGENCIES
Lease Commitments
At December 31, 2001, Oceaneering occupied several facilities under
noncancellable operating leases expiring at various dates through 2023. Future
minimum rentals under these leases are as follows:
<Table>
<Caption>
(in thousands)
<S> <C>
2002 $ 4,617
2003 3,893
2004 3,543
2005 2,794
2006 2,532
Thereafter 8,497
-------
Total Lease Commitments $25,876
=======
</Table>
Rental expense, which includes hire of vessels, specialized equipment and real
estate rental, was approximately $14 million, $13 million and $22 million for
the year ended December 31, 2001, the nine-month period ended December 31, 2000
and the fiscal year ended March 31, 2000, respectively.
Insurance
Oceaneering self-insures for workers' compensation, maritime employer's
liability and comprehensive general liability claims to levels it considers
financially prudent and carries insurance after it reaches the initial claim
levels, which can be by occurrence or in the aggregate. Oceaneering determines
the level of accruals by reviewing its historical experience and current year
claim activity. It does not record accruals on a present-value basis.
Oceaneering reviews each claim with insurance adjusters and establishes specific
reserves for all known liabilities. It establishes an additional reserve for
incidents incurred but not reported to Oceaneering for each year using
management estimates and based on prior experience. Oceaneering's management
believes that Oceaneering has established adequate accruals for uninsured
expected liabilities arising from those obligations.
Litigation
Various actions and claims are pending against Oceaneering, most of which are
covered by insurance. In the opinion of Oceaneering's management, the ultimate
liability, if any, that may result from these actions and claims will not
materially affect Oceaneering's financial position or results of operations.
Letters of Credit
Oceaneering had $23 million and $17 million in letters of credit outstanding as
of December 31, 2001 and 2000, respectively, as guarantees in force for
self-insurance requirements and various performance and bid bonds, which are
usually for a period of approximately one year or the duration of the applicable
contract.
Financial Instruments and Risk Concentration
In the normal course of business, Oceaneering manages risks associated with
foreign exchange rates and interest rates through a variety of strategies,
including the use of hedging transactions. As a matter of policy, Oceaneering
does not use derivative instruments unless there is an underlying exposure. We
do not use derivative instruments for trading or speculative purposes.
36
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
As of December 31, 2001, Oceaneering had an interest rate hedge in place, which
fixed three-month LIBOR at 3.24%, effective January 2, 2002. This applies to the
scheduled balance of the Term Loan, and the amount is reduced by the scheduled
amortization of the Term Loan.
Other financial instruments that potentially subject Oceaneering to
concentrations of credit risk are primarily cash and cash equivalents, long-term
bank and other borrowings and accounts receivable. The carrying values of cash
and cash equivalents and bank borrowings approximate their fair values due to
the short maturity of those instruments or the short-term duration of the
associated interest rate periods. Accounts receivable are generated from a broad
and diverse group of customers, primarily from within the energy industry, which
is Oceaneering's major source of revenue. Oceaneering maintains an allowance for
doubtful accounts based on expected collectibility.
Oceaneering estimated the fair value of its $100 million of 6.72% Senior Notes
(see Note 3) to be $101 million as of December 31, 2001. This estimate was
arrived at by computing the present value of the future principal and interest
payments using a yield-to-maturity interest rate for securities of similar
quality and term.
Post-Employment Benefit
In November 2001, Oceaneering entered into an agreement with its Chairman and
Chief Executive Officer (the "Chairman"). The agreement provides for a specific
employment period with Oceaneering through August 15, 2006, followed by a
specific service period ending no later than August 15, 2011, during which the
Chairman, acting as an independent contractor, has agreed to serve as
non-executive Chairman of the Board of Directors of Oceaneering if requested to
serve in such capacity by the Board of Directors of Oceaneering. The agreement
provides the Chairman with a post-employment benefit of ten years following his
services to Oceaneering. The agreement also provides for medical coverage on an
after-tax basis to the Chairman, his spouse and children during his employment
with Oceaneering, and, under certain circumstances, thereafter for their lives.
Oceaneering is recognizing the net present value of the post-employment benefits
over the expected service period. If the service period is reduced or
terminated, Oceaneering will recognize the previously unaccrued benefits.
6. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
Business Segment Information
Oceaneering supplies a comprehensive range of integrated technical services to a
variety of industries and is one of the world's largest underwater services
contractors. Oceaneering's Offshore Oil and Gas business consists of remotely
operated vehicles ("ROVs"), Subsea Products, Mobile Offshore Production Systems
and Other Services. Oceaneering's Subsea Products segment supplies umbilicals,
production control equipment, pipeline repair systems and ROV tooling and work
packages. Oceaneering's Other Services segment provides multiservice vessels,
oilfield diving, nondestructive inspection and testing and support vessel
operations, which are used primarily in inspection, repair and maintenance
activities. Oceaneering's Advanced Technologies business provides project
management, engineering services and equipment for applications in non-oilfield
markets.
37
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
The following table presents Revenues, Income (Loss) from Operations and
Depreciation and Amortization Expense for the years ended December 31, 2001 and
2000, for the nine-month period ended December 31, 2000 and the fiscal year
ended March 31, 2000 by business segment:
<Table>
<Caption>
Nine-Month Fiscal Year
Year Ended Period Ended Ended
December 31, December 31, March 31,
(in thousands) 2001 2000 2000 2000
- -------------- ---------- ---------- ------------ -----------
(unaudited)
<S> <C> <C> <C> <C>
REVENUE
Offshore Oil and Gas
Remotely Operated Vehicles $ 153,929 $ 100,985 $ 78,953 $ 94,617
Subsea Products 125,608 92,165 65,771 69,744
Mobile Offshore Production Systems 39,154 21,653 15,788 23,983
Other Services 102,250 93,291 65,206 105,505
---------- ---------- ---------- ----------
Total Offshore Oil and Gas 420,941 308,094 225,718 293,849
Advanced Technologies 102,879 110,679 82,012 122,971
---------- ---------- ---------- ----------
Total $ 523,820 $ 418,773 $ 307,730 $ 416,820
========== ========== ========== ==========
INCOME (LOSS) FROM OPERATIONS
Offshore Oil and Gas
Remotely Operated Vehicles $ 32,784 $ 16,525 $ 12,316 $ 14,064
Subsea Products 7,243 2,334 1,225 1,499
Mobile Offshore Production Systems 8,552 6,303 4,271 7,629
Other Services 3,543 (4,668) (636) (3,169)
---------- ---------- ---------- ----------
Total Offshore Oil and Gas 52,122 20,494 17,176 20,023
Advanced Technologies 7,286 8,965 5,035 12,276
---------- ---------- ---------- ----------
Total $ 59,408 $ 29,459 $ 22,211 $ 32,299
========== ========== ========== ==========
DEPRECIATION AND AMORTIZATION EXPENSE
Offshore Oil and Gas
Remotely Operated Vehicles $ 22,611 $ 17,649 $ 13,719 $ 13,827
Subsea Products 5,449 4,525 3,401 4,212
Mobile Offshore Production Systems 8,800 6,534 5,497 4,239
Other Services 8,225 7,965 5,791 7,906
---------- ---------- ---------- ----------
Total Offshore Oil and Gas 45,085 36,673 28,408 30,184
Advanced Technologies 2,821 3,075 2,256 3,764
---------- ---------- ---------- ----------
Total $ 47,906 $ 39,748 $ 30,664 $ 33,948
========== ========== ========== ==========
</Table>
38
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
The following tables present Assets and Capital Expenditures by business segment
as of and for the periods indicated:
<Table>
<Caption>
As of December 31,
(in thousands) 2001 2000
- -------------- ---------- ----------
<S> <C> <C>
ASSETS
Offshore Oil and Gas
Remotely Operated Vehicles $ 169,410 $ 161,355
Subsea Products 109,522 85,401
Mobile Offshore Production Systems 115,186 107,677
Other Services 93,500 84,110
---------- ----------
Total Offshore Oil and Gas 487,618 438,543
Advanced Technologies 50,729 49,555
Other 41,264 27,419
---------- ----------
Total $ 579,611 $ 515,517
========== ==========
</Table>
<Table>
<Caption>
Nine-Month Fiscal Year
Year Ended Period Ended Ended
December 31, December 31, March 31,
(in thousands) 2001 2000 2000
- -------------- ------------ ------------ ------------
<S> <C> <C> <C>
CAPITAL EXPENDITURES
Offshore Oil and Gas
Remotely Operated Vehicles $ 23,242 $ 25,293 $ 29,614
Subsea Products 8,506 6,299 4,700
Mobile Offshore Production Systems 19,225 61,972 16,590
Other Services 5,078 7,480 20,320
------------ ------------ ------------
Total Offshore Oil and Gas 56,051 101,044 71,224
Advanced Technologies 1,610 597 9,534
------------ ------------ ------------
Total $ 57,661 $ 101,641 $ 80,758
============ ============ ============
</Table>
Income (loss) from operations for each business segment is determined before
interest income or expense, other income (expense), minority interests and
provision for income taxes. An allocation of these items is not considered
practical. All assets specifically identified with a particular business segment
have been segregated. Cash and cash equivalents, certain prepaid expenses and
other current assets, certain investments and other assets have not been
allocated to particular business segments.
No individual customer accounted for more than 10% of Oceaneering's consolidated
revenue in the year ended December 31, 2001, the nine-month period ended
December 31, 2000 or the fiscal year ended March 31, 2000.
39
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
Geographic Operating Areas
The following table summarizes certain financial data by geographic area:
<Table>
<Caption>
Nine-Month Fiscal Year
Year Ended Period Ended Ended
December 31, December 31, March 31,
(in thousands) 2001 2000 2000
- -------------- ------------ ------------ ------------
<S> <C> <C> <C>
REVENUE
United States $ 277,550 $ 165,858 $ 207,415
Norway 27,671 18,484 26,934
United Kingdom 43,173 20,127 26,504
Australia 23,665 2,325 3,942
Indonesia 8,116 6,389 25,983
Other Asia 23,376 22,585 37,439
Africa 60,200 35,798 49,673
Brazil 40,349 21,061 16,515
Other 19,720 15,103 22,415
------------ ------------ ------------
Total $ 523,820 $ 307,730 $ 416,820
============ ============ ============
</Table>
<Table>
<Caption>
LONG-LIVED ASSETS December 31, 2001 December 31, 2000 March 31, 2000
----------------- ----------------- --------------
<S> <C> <C> <C>
United States $ 184,375 $ 182,881 $ 205,861
Europe 39,738 50,614 46,614
Africa 26,012 8,736 10,088
Asia 23,225 18,456 22,494
Australia 86,968 83,321 --
Brazil 8,792 14,814 14,738
------------ ------------ ------------
Total $ 369,110 $ 358,822 $ 299,795
============ ============ ============
</Table>
Revenue is based on location for services and facility location for products.
7. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
<Table>
<Caption>
December 31,
(in thousands) 2001 2000
-------------- ---------- ----------
<S> <C> <C>
Payroll and related costs $ 25,230 $ 18,130
Accrued job costs 28,172 22,415
Self insurance reserves for claims expected to be paid within one year 6,323 5,422
Billings in excess of revenue recognized 2,993 2,913
Other 11,475 11,259
---------- ----------
Total Accrued Liabilities $ 74,193 $ 60,139
========== ==========
</Table>
40
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share data)
<Table>
<Caption>
Year Ended December 31, 2001
QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue $ 104,254 $ 132,223 $ 141,681 $ 145,662 $ 523,820
Gross profit 20,804 24,741 29,045 28,551 103,141
Income from operations 10,288 14,122 18,169 16,829 59,408
Net income 5,204 7,717 10,342 9,846 33,109
Diluted earnings per share $ 0.22 $ 0.32 $ 0.43 $ 0.41 $ 1.38
Weighted average number of
common shares and equivalents 23,650 24,022 23,973 24,013 23,915
</Table>
<Table>
<Caption>
Year Ended December 31, 2000
QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31 TOTAL
- ------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue $ 111,043 $ 104,039 $ 100,464 $ 103,227 $ 418,773
Gross profit 17,477 15,373 18,373 19,325 70,548
Income from operations 7,248 5,378 7,980 8,853 29,459
Net income 3,639 2,703 4,112 4,498 14,952
Diluted earnings per share $ 0.16 $ 0.12 $ 0.18 $ 0.19 $ 0.64
Weighted average number of
common shares and equivalents 23,074 23,186 23,221 23,271 23,188
</Table>
41
<PAGE>
INDEX TO EXHIBITS
<Table>
<Caption>
Registration
or File Form or Report Exhibit
Number Report Date Number
------------ ------- ------ -------
<S> <C> <C> <C> <C>
*3.01 Restated Certificate of Incorporation 1-10945 10-K Dec. 2000 3.01
3.02 Amended and Restated By-Laws
*4.01 Specimen of Common Stock Certificate 1-10945 10-K March 1993 4(a)
*4.02 Amended and Restated Shareholder Rights Agreement dated
as of November 16, 2001 1-10945 8-K Nov. 2001 4.1
*4.03 Note Purchase Agreement dated as of September 8, 1998 relating to
$100,000,000 6.72% Senior Notes due September 8, 2010 1-10945 10-Q Sept. 1998 4.01
*4.04 Loan Agreement ($80,000,000 Revolving Credit Facility)
dated as of October 23, 1998 1-10945 10-Q Sept. 1998 4.02
*4.05 Loan Agreement ($50,000,000 Term Loan) dated as of
March 30, 2000 1-10945 10-K/A March 2000 4.05
</Table>
We and certain of our consolidated subsidiaries are parties to debt instruments
under which the total amount of securities authorized does not exceed 10 percent
of our total consolidated assets. Pursuant to paragraph 4(ii)(A) of Item 601(b)
of Regulation S-K, we agree to furnish a copy of those instruments to the
Securities and Exchange Commission on request.
<Table>
<S> <C> <C> <C> <C>
10.01+ Defined Contribution Master Plan and Trust Agreement and
Adoption Agreement for the Oceaneering International, Inc.
Retirement Investment Plan
10.02+ Service Agreement dated as of November 16, 2001 between
Oceaneering and John R. Huff
*10.03+ 2000 Non-Executive Incentive Plan 333-50400 S-8 Nov. 2000 4.6
*10.04+ Amended and Restated Supplemental Executive Retirement Plan 1-10945 10-Q Dec. 1999 10.1
*10.05+ 1999 Restricted Stock Award Incentive Agreements
dated August 19, 1999 1-10945 10-Q Sept. 1999 10.1
10.06+ Change of Control Agreements dated as of November 16, 2001
between Oceaneering and John R. Huff, T. Jay Collins, Marvin J. Migura,
M. Kevin McEvoy and George R. Haubenreich, Jr., respectively
*10.07+ 1999 Bonus Restricted Stock Award Agreements 1-10945 10-K/A March 2000 10.20
*10.08+ 1999 Incentive Plan 1-10945 10-K March 2000 10.08
10.09+ 2001 Bonus Award Plan
*10.10+ 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f)
*10.11+ 1990 Nonemployee Directors Stock Option Plan 33-36872 S-8 Sept. 1990 4(g)
10.12+ Form of Indemnification Agreement dated November 16, 2001 between
Oceaneering and each of its Directors, T. Jay Collins, Marvin J. Migura,
M. Kevin McEvoy and George R. Haubenreich, Jr
*10.14+ 1996 Incentive Plan of Oceaneering International, Inc. 1-10945 10-Q Sept. 1996 10.02
*10.15+ 1996 Restricted Stock Award Incentive Agreements
dated August 23, 1996 1-10945 10-Q Sept. 1996 10.03
*10.16+ 1997 Bonus Restricted Stock Award Agreements
dated April 22, 1997 1-10945 10-K March 1997 10.20
*10.17+ Amendment No. 1 to 1990 Nonemployee Director Stock
Option Plan 1-10945 10-K March 1999 10.19
*10.18+ 1998 Bonus Restricted Stock Award Agreements 1-10945 10-K March 1999 10.20
12.01 Statement showing Computation of Ratio of Earnings to Fixed Charges
21.01 Subsidiaries of Oceaneering
23.01 Consent of Independent Public Accountants
24.01 Powers of Attorney
99.01 Letter to the Securities and Exchange Commission re Arthur Andersen LLP
</Table>
* Indicates exhibit previously filed with the Securities and Exchange
Commission as indicated and incorporated herein by reference.
+ Indicates management contract or compensatory plan or arrangement.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.02
<SEQUENCE>3
<FILENAME>h95099ex3-02.txt
<DESCRIPTION>AMENDED BY-LAWS
<TEXT>
<PAGE>
EXHIBIT 3.02
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
BYLAWS
OF
OCEANEERING INTERNATIONAL, INC.
AMENDED THROUGH NOVEMBER 16, 2001
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
--------
<S> <C>
ARTICLE I STOCKHOLDERS ................................................................................. 1
Section 1.1 Annual Meetings.............................................................. 1
Section 1.2 Special Meetings............................................................. 1
Section 1.3 Notice of Meetings........................................................... 1
Section 1.4 Adjournments................................................................. 2
Section 1.5 Quorum....................................................................... 2
Section 1.6 Organization................................................................. 2
Section 1.7 Voting; Proxies.............................................................. 2
Section 1.8 Fixing Date for Determination of Stockholders of Record...................... 3
Section 1.9 List of Stockholders Entitled To Vote........................................ 4
Section 1.10 Election of Directors........................................................ 4
Section 1.11 Other Stockholder Business................................................... 6
Section 1.12 Approval or Ratification of Acts or Contracts by Stockholders................ 8
Section 1.13 Action By Consent of Stockholders............................................ 8
Section 1.14 Conduct of Meetings.......................................................... 9
ARTICLE II BOARD OF DIRECTORS........................................................................... 9
Section 2.1 Number; Board Classification; Term; Eligibility for Election; Vacancies...... 9
Section 2.2 Regular Meetings............................................................. 9
Section 2.3 Special Meetings............................................................. 9
Section 2.4 Telephonic Meetings.......................................................... 10
Section 2.5 Organization................................................................. 10
Section 2.6 Order of Business............................................................ 10
Section 2.7 Notice of Meetings........................................................... 10
Section 2.8 Quorum; Vote Required for Action............................................. 10
Section 2.9 Informal Action by Directors................................................. 10
Section 2.10 Director Compensation........................................................ 11
ARTICLE III BOARD COMMITTEES............................................................................ 11
Section 3.1 Board Committees............................................................. 11
Section 3.2 Board Committee Rules; Minutes............................................... 11
Section 3.3 Existing Committees.......................................................... 12
ARTICLE IV OFFICERS .................................................................................... 12
Section 4.1 Designation.................................................................. 12
Section 4.2 CEO.......................................................................... 12
Section 4.3 Powers and Duties of Other Officers.......................................... 12
Section 4.4 Term of Office, etc.......................................................... 12
ARTICLE V CAPITAL STOCK ................................................................................ 13
Section 5.1 Certificates................................................................. 13
Section 5.2 Transfer of Shares........................................................... 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 5.3 Ownership of Shares.......................................................... 13
Section 5.4 Regulations Regarding Certificates........................................... 13
Section 5.5 Lost or Destroyed Certificates............................................... 13
ARTICLE VI INDEMNIFICATION ............................................................................. 13
Section 6.1 Indemnification.............................................................. 13
Section 6.2 Advancement of Expenses...................................................... 15
Section 6.3 Notification and Defense of Claims........................................... 15
Section 6.4 Procedure for Determination of Entitlement to Indemnification................ 16
Section 6.5 Presumptions and Effect of Certain Proceedings............................... 19
Section 6.6 Remedies of Indemnitee in Certain Cases...................................... 20
Section 6.7 Non-exclusivity; Survival of Rights; Insurance; Subrogation.................. 22
Section 6.8 Benefit of this Article VI................................................... 23
Section 6.9 Severability................................................................. 23
Section 6.10 Exceptions to Right of Indemnification or Advancement of Expenses............ 23
Section 6.11 Definitions.................................................................. 23
Section 6.12 Contribution................................................................. 26
Section 6.13 Submission to Jurisdiction................................................... 26
ARTICLE VII MISCELLANEOUS .............................................................................. 26
Section 7.1 Offices...................................................................... 26
Section 7.2 Fiscal Year.................................................................. 27
Section 7.3 Seal......................................................................... 27
Section 7.4 Interested Directors; Quorum................................................. 27
Section 7.5 Form of Records.............................................................. 27
Section 7.6 Bylaw Amendments............................................................. 27
Section 7.7 Notices; Waiver of Notice.................................................... 28
Section 7.8 Resignations................................................................. 28
Section 7.9 Facsimile Signatures......................................................... 28
Section 7.10 Reliance on Books, Reports and Records....................................... 28
Section 7.11 Certain Definitional Provisions.............................................. 28
Section 7.12 Captions..................................................................... 29
</TABLE>
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
OCEANEERING INTERNATIONAL, INC.
The Board of Directors of Oceaneering International, Inc. (the
"Corporation") by resolution has duly adopted these Amended and Restated Bylaws
(these "Bylaws") to govern the Corporation's internal affairs.
ARTICLE I
STOCKHOLDERS
Section 1.1 Annual Meetings. The Corporation will, if applicable law
so requires, hold an annual meeting of the holders of its capital stock (each, a
"Stockholder") for the election of directors of the Corporation (each, a
"Director") at such date, hour and place, if any, as the Board of Directors of
the Corporation (the "Board") by resolution may designate from time to time. The
Corporation may transact any other business at an annual meeting which has
properly come before that meeting in accordance with Section 1.11.
Section 1.2 Special Meetings. Any of the following may call special
meetings of Stockholders for any purpose or purposes at any time and designate
the date, hour and place, if any, of any such meeting: (i) the Board pursuant to
a resolution that a majority of the total number of Directors the Corporation
would have if there were no vacancies (the "Whole Board") has duly adopted; (ii)
any committee of the Board (each, a "Board Committee") the Board has duly
designated and empowered to call special meetings; (iii) the chairman of the
Board (the "Chairman"); and (iv) the CEO (as hereinafter defined). Except as the
certificate of incorporation of the Corporation (as amended from time to time
and including each certificate of designation, if any, respecting any class or
series of preferred stock of the Corporation which has been executed,
acknowledged and filed in accordance with applicable law, the "Certificate of
Incorporation") or applicable law otherwise provides, no other Person or Persons
may call a special meeting of Stockholders.
Section 1.3 Notice of Meetings. By or at the direction of the
Chairman or the secretary of the Corporation (the "Secretary") whenever
Stockholders are to take any action at a meeting, the Corporation will give a
written notice of that meeting to the Stockholders entitled to vote at that
meeting which states the date, hour and place, if any, of that meeting, the
means of remote communications, if any, by which Stockholders and holders of
proxies for Stockholders may participate in that meeting and be deemed present
in person and vote at that meeting and, in the case of a special meeting, the
purpose or purposes for which that meeting is called. Unless the Certificate of
Incorporation, these Bylaws or applicable law otherwise provides, the
Corporation will give the written notice of any meeting of Stockholders not less
than 10 nor more than 60 days before the date of that meeting. If mailed to any
Stockholder, any such notice will be deemed given (whether or not delivered)
when deposited in the United States mail,
1
<PAGE>
postage prepaid, directed to that Stockholder at his address as it appears in
the stock records of the Corporation.
Section 1.4 Adjournments. Any meeting of Stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the hour,
place, if any, thereof and the means of remote communications, if any, by which
Stockholders and holders of proxies for Stockholders may be deemed present in
person and vote at that adjourned meeting are announced at the meeting at which
the adjournment is taken. At the adjourned meeting the Corporation may transact
any business it might have transacted at the original meeting. If the
adjournment is for more than 30 days, or if after the adjournment the Board
fixes a new record date for the adjourned meeting, the Corporation will give, in
accordance with Section 1.3, notice of the adjourned meeting to each Stockholder
of record and entitled to vote at the adjourned meeting.
Section 1.5 Quorum. Except as the Certificate of Incorporation,
these Bylaws or applicable law otherwise provides: (i) at each meeting of
Stockholders the presence in person or by proxy of the holders of shares of
stock having a majority of the votes the holders of all outstanding shares of
stock entitled to vote at the meeting could cast will be necessary and
sufficient to constitute a quorum; and (ii) the holders of stock so present and
entitled to vote at any duly convened meeting at which the necessary quorum has
been ascertained may continue to transact business until that meeting adjourns
notwithstanding any withdrawal from that meeting of shares of stock counted in
determining the existence of that quorum. In the absence of a quorum, the
chairman of the meeting or the Stockholders so present may, by majority vote,
adjourn the meeting from time to time in the manner Section 1.4 provides until a
quorum attends. Shares of its own stock belonging to the Corporation or to
another corporation, limited liability company, partnership or other entity
(each, an "Entity"), if the Corporation, directly or indirectly, holds a
majority of the shares entitled to vote in the election of directors (or the
equivalent) of that other Entity, will be neither entitled to vote nor counted
for quorum purposes; provided, however, that the foregoing will not limit the
right of the Corporation to vote stock, including but not limited to its own
stock, it holds in a fiduciary capacity.
Section 1.6 Organization. The Chairman will chair and preside over
any meeting of Stockholders at which he is present. The Board will designate the
chairman and presiding officer over any meeting of Stockholders from which the
Chairman is absent. The Secretary will act as secretary of meetings of
Stockholders, but in his absence from any such meeting the chairman of that
meeting may appoint any person to act as secretary of that meeting. The chairman
of any meeting of Stockholders will announce at that meeting the date and time
of the opening and the closing of the polls for each matter on which the
Stockholders will vote at that meeting.
Section 1.7 Voting; Proxies. (a) Except as the Certificate of
Incorporation otherwise provides, each Stockholder entitled to vote at any
meeting of Stockholders will be entitled to one vote for each share of capital
stock of the Corporation he holds which has voting power on the matter in
question. Each Stockholder entitled to vote at a meeting of Stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for that Stockholder by proxy, but no
proxy will be voted or acted on after three years from its date, unless that
proxy provides for a longer period. A proxy
2
<PAGE>
will be irrevocable if it states that it is irrevocable and if, and only so long
as, it is coupled with an interest sufficient in law to support an irrevocable
power. A Stockholder may revoke any proxy that Stockholder has given by filing
an instrument in writing revoking the proxy or by delivering a proxy in
accordance with applicable law which bears a later date to the Secretary or, if
that proxy is for a meeting, by attending that meeting and voting in person.
Proxies for use at any meeting of Stockholders must be filed, before or at the
time of that meeting, with the Secretary or such other person as the Board by
resolution may designate from time to time.
(b) The secretary of any meeting of Stockholders will take charge of
and canvass all ballots delivered at that meeting and will decide all questions
relating to the qualification of voters, the validity of proxies and the
acceptance or rejection of votes at that meeting, unless the chairman has
appointed an inspector or inspectors to decide those questions. Voting at
meetings of Stockholders: (i) need not be by written ballot unless the Board, in
its discretion, by resolution so requires or, in the case of any such meeting,
the chairman of that meeting, in his discretion, so requires; and (ii) unless
applicable law otherwise requires, need not be conducted by inspectors of
election unless so determined by the holders of shares of stock having a
majority of the votes the holders of all outstanding shares of stock entitled to
vote thereon which are present in person or by proxy at that meeting could cast.
(c) At all meetings of Stockholders at which a quorum is present for
the election of Directors, a plurality of the votes cast by the holders of
outstanding shares of stock of the Corporation entitled to vote in the election
of Directors will be sufficient to elect, except as the Certificate of
Incorporation may otherwise provide. In the case of any question to which the
stockholder approval policy of any national securities exchange or quotation
system on which capital stock of the Corporation is traded or quoted on the
Corporation's application, the requirements under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or any provision of the Internal Revenue
Code of 1986, as amended, or the rules and regulations thereunder (the "Code")
applies, in each case for which question the Certificate of Incorporation, these
Bylaws or the General Corporation Law of the State of Delaware, as amended (the
"DGCL"), does not specify a higher voting requirement, that question will be
decided by the requisite vote that stockholder approval policy, Exchange Act
requirement or Code provision, as the case may be, specifies (or the highest
requisite vote if more than one applies). A majority of the votes cast on the
question whether to approve the appointment of independent public accountants
(if that question is submitted for a vote of Stockholders) will be sufficient to
approve. All other elections and questions which have properly come before any
meeting will, unless the Certificate of Incorporation, these Bylaws or
applicable law otherwise provides, be decided by the vote of the holders of
shares of stock of the Corporation present in person or by proxy at that meeting
and having a majority of the votes entitled to vote thereon.
Section 1.8 Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the Stockholders entitled to notice
of or to vote at any meeting of Stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board by
resolution may fix a record date, which record date: (i) must not precede the
date on which the Board adopts that resolution; (ii) in the case of a
determination of Stockholders entitled to vote at any meeting of
3
<PAGE>
Stockholders or adjournment thereof, will, unless applicable law otherwise
requires, not be more than 60 nor less than 10 days before the date of that
meeting; (iii) in the case of a determination of Stockholders entitled to
express consent to corporate action in writing without a meeting, will not be
more than 10 days from the date on which the Board adopts the resolution fixing
the record date; and (iv) in the case of any other action, will not be more than
60 days prior to that other action. If the Board does not fix a record date: (i)
the record date for determining Stockholders entitled to notice of or to vote at
a meeting of Stockholders will be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (ii) the record date for determining Stockholders entitled to express
consent to corporate action in writing without a meeting will be (A) if
applicable law does not require a prior action by the Board, the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation in accordance with applicable law; and (B)
if applicable law requires prior action by the Board, at the close of business
on the day on which the Board adopts the resolution taking that prior action;
and (iii) the record date for determining Stockholders for any other purpose
will be at the close of business on the day on which the Board adopts the
resolution relating thereto. A determination of Stockholders of record entitled
to notice of or to vote at a meeting of Stockholders will apply to any
adjournment of that meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
Section 1.9 List of Stockholders Entitled To Vote. The Secretary
will prepare and make, at least 10 days before each meeting of Stockholders, a
list of the Stockholders entitled to vote at that meeting which complies with
the requirements of Section 219 of the DGCL as in effect at that time.
Section 1.10 Election of Directors. (a) Subject to such rights of
the holders of any class or series of the Corporation's capital stock as the
Certificate of Incorporation may prescribe, only persons who are nominated in
accordance with the procedures this Section 1.10 sets forth will be eligible for
election by Stockholders as Directors. Nominations of persons for election to
the Board may be made at any meeting of Stockholders at which Directors are to
be elected: (i) by or at the direction of the Board or any Board Committee the
Board has duly designated and empowered to nominate persons for election as
Directors; or (ii) by any Stockholder who (A) is a Stockholder of record at the
time that Stockholder gives the notice this Section 1.10 specifies below, (B)
will be entitled to vote at that meeting in the election of the Director for
which that Stockholder is making the nomination and (C) complies with this
Section 1.10.
(b) For a Stockholder to bring any nomination of a person for
election as a Director properly before any meeting of Stockholders, that
Stockholder must have given timely notice of that nomination (a "Nomination
Notice") in proper written form to the Secretary. To be timely, a Stockholder's
Nomination Notice must be delivered to the Secretary, or mailed and received by
the Secretary, at the principal executive offices of the Corporation: (i) if it
relates to an election at any annual meeting of Stockholders, not later than the
close
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of business on the 120th day and not earlier than the 180th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that, if the date of the pending annual meeting is more than 30 days before or
more than 60 days after that anniversary date, that Nomination Notice will be
timely if it is so delivered, or so mailed and received, not later than the last
to occur of the close of business on (A) the 120th day prior to the pending
annual meeting or (B) the 10th day following the day on which the Corporation
first makes a public announcement of the date of the pending annual meeting; and
(ii) if it relates to any special meeting of Stockholders at which the Board has
determined that one or more Directors is or are to be elected, not earlier than
180 days prior to that special meeting and not later than the last to occur of
the close of business on (A) the 120th day prior to that special meeting or (B)
the 10th day following the day on which the Corporation first makes a public
announcement of the date of that special meeting. The public disclosure of an
adjournment of any annual or special meeting will not in any event commence a
new time period for the giving of any Nomination Notice.
(c) To be in proper written form, any Nomination Notice of a
Stockholder must: (i) accurately set forth (A) as to each person whom that
Stockholder proposes to nominate for election as a Director, (1) the name, age
and business address of that person, (2) the principal occupation or employment
of that person, (3) the class or series and number of shares of capital stock of
the Corporation which that person owns beneficially or of record and (4) all
other information, if any, relating to that person which Section 14 of the
Exchange Act and the rules and regulations thereunder would require the
Corporation or that Stockholder to disclose in a proxy statement or any other
filing in connection with solicitations of proxies for an election of directors
and (B) as to that Stockholder and the beneficial owner, if any, of capital
stock of the Corporation on whose behalf the nomination is being made, (1) the
name and address of that Stockholder as they appear in the stock records of the
Corporation and the name and address of that beneficial owner, (2) the class or
series and the number of shares of capital stock of the Corporation which that
Stockholder and that beneficial owner each owns beneficially or of record, (3) a
description of all arrangements and understandings between that Stockholder or
that beneficial owner and each proposed nominee of that Stockholder and any
other person or persons (including their names) pursuant to which the
nomination(s) are to be made by that Stockholder, (4) a representation by that
Stockholder that he intends to appear in person or by proxy at that meeting to
nominate the person(s) named in that Nomination Notice, (5) a representation as
to whether that Stockholder or that beneficial owner, if any, intends, or is a
part of a group, as Exchange Act Rule 13d-5(b) uses that term, which intends,
(a) to deliver a proxy statement and/or form of proxy to the holders of shares
of stock of the Corporation having at least the percentage of the total votes
the holders of all outstanding shares of stock of the Corporation entitled to
vote in the election of each proposed nominee of that Stockholder which is
required to elect that proposed nominee and/or (b) otherwise to solicit proxies
in support of the nomination and (6) all other information, if any, relating to
that Stockholder and that beneficial owner which Section 14 of the Exchange Act
and the rules and regulations thereunder would require the Corporation or that
Stockholder to disclose in a proxy statement or any other filing in connection
with solicitations of proxies for an election of directors; and (ii) be
accompanied by a written consent of each person that Stockholder proposes to
nominate for election as a Director to be named as such a nominee and to serve
as a Director if elected. The Corporation may require any person a Stockholder
proposes to nominate for election as a Director under this Section 1.10 to
furnish such additional written information as it reasonably may require to
determine the eligibility of that Person to serve as a Director.
(d) Except as the Certificate of Incorporation, these Bylaws or
applicable law otherwise provides, the chairman of any meeting of Stockholders
at which Directors are to be elected will have the power and duty (i) to
determine whether nominations of persons for
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election as Directors have been made in accordance with the procedures this
Section 1.10 sets forth (including whether the applicable Nomination Notice was
accurate in all material respects) and, if that chairman determines that any
such nomination has not been made in compliance with these procedures, or if the
Stockholder proposing any such nomination has not appeared in person or by proxy
at that meeting to make any such nomination, (ii) to declare to that meeting
that such nomination is defective and will be disregarded, even if the
Corporation shall have received proxies voting in favor of such nomination.
(e) Notwithstanding anything in Section 1.10(b) to the contrary, if
the number of Directors to be elected at an annual meeting of Stockholders is
increased and the Corporation has not made a public announcement at least 100
days prior to the first anniversary of the preceding year's annual meeting,
which announcement (i) names all the nominees for Director of the Board or any
duly designated and empowered Board Committee or (ii) specifies the size of the
increased Board, a Stockholder's Nomination Notice will be timely, but only with
respect to nominees for any new positions that increase creates, if that
Nomination Notice is delivered to the Secretary, or mailed and received by the
Secretary at, the principal executive offices of the Corporation not later than
the close of business on the 10th day following the day on which the Corporation
first makes that public announcement.
(f) For purposes of Section 1.11 and this Section 1.10, "public
announcement" means disclosure in a press release the Dow Jones News Service,
Associated Press or any comparable national news service in the United States
reports or in a document the Corporation publicly files with the Securities and
Exchange Commission (the "SEC") pursuant to the Exchange Act.
(g) Notwithstanding the foregoing provisions of this Section 1.10, a
Stockholder also must comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters this
Section 1.10 sets forth.
Section 1.11 Other Stockholder Business. (a) At any annual meeting
the Corporation holds pursuant to Section 1.1, the Stockholders will transact
only such business, in addition to the election of Directors, as has been
properly brought before that meeting. Except as the Certificate of Incorporation
otherwise provides, to be brought properly before any annual meeting, business
other than the election of Directors ("Other Business") must be (i) business the
notice of that meeting (or any supplement thereto) given by or at the direction
of the Board specifies, (ii) business otherwise properly brought before that
meeting by or at the direction of the Board and (iii) business (A) properly
brought before that meeting by a Stockholder who (1) is a Stockholder of record
at the time that Stockholder gives the notice this Section 1.11 specifies below,
(2) will be entitled to vote on that business at that meeting and (3) complies
with this Section 1.11, (B) that is a proper subject for Stockholder action and
(C) is properly introduced at that meeting.
(b) For a Stockholder to bring any Other Business properly before
any annual meeting of Stockholders, that Stockholder must have given timely
notice thereof (a "Business Notice") in proper written form to the Secretary. To
be timely, a Stockholder's Business Notice must be delivered to the Secretary,
or mailed and received by the Secretary, at the principal executive offices of
the Corporation not later than the close of business on the 120th day and not
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earlier than the 180th day prior to the first anniversary of the preceding
year's annual meeting; provided, however, that if the date of the pending annual
meeting is more than 30 days before or more than 60 days after that anniversary
date, that Business Notice will be timely if it is so delivered, or so mailed
and received, not later than the last to occur of the close of business on (A)
the 120th day prior to that pending annual meeting or (B) the 10th day following
the day on which the Corporation first makes a public announcement of the date
of the pending meeting. The public disclosure of an adjournment of any annual
meeting will not in any event commence a new time period for the giving of any
Business Notice.
(c) To be in proper written form, any Business Notice of a
Stockholder must accurately set forth: (i) as to each matter of Other Business
that Stockholder proposes to bring before an annual meeting, (A) a brief
description of that Other Business and the text of the proposal for action on
that Other Business (including the text of any resolutions proposed for
consideration and, if that Other Business is an amendment of these Bylaws, the
language of the proposed amendment), (B) the reasons for conducting that Other
Business at an annual meeting and (C) each material interest in that Other
Business of that Stockholder and the beneficial owner, if any, of capital stock
of the Corporation on whose behalf that proposal is being made; and (ii) as to
that Stockholder and each such beneficial owner, (A) the name and address of
that Stockholder as they appear on the Corporation's books and the name and
address of that beneficial owner, (B) the class or series and the number of
shares of capital stock of the Corporation which that Stockholder and that
beneficial owner each owns beneficially or of record, (C) a description of all
arrangements and understandings between that Stockholder or that beneficial
owner and any other person or persons (including their names) in connection with
that Other Business, (D) a representation by that Stockholder that he intends to
appear in person or by proxy at that meeting to bring that Other Business before
that meeting and (E) a representation as to whether that Stockholder or that
beneficial owner, if any, intends, or is a part of a group, as Exchange Act Rule
13d-5(b) uses that term, which intends, (1) to deliver a proxy statement and/or
form of proxy to the holders of shares of stock of the Corporation having at
least the percentage of the total votes the holders of all outstanding shares of
stock of the Corporation entitled to vote on such proposal which is required for
the adoption of such proposal and/or (2) otherwise to solicit proxies in support
of such proposal. The notice requirements of this Section 1.11 will be deemed
satisfied by a Stockholder if (i) that Stockholder has notified the Corporation
in compliance with Exchange Act Rule 14a-8, or any rule successor thereto, of
that Stockholder's intention to present a proposal relating to Other Business at
an annual meeting and (ii) the proxy statement the Corporation has prepared to
solicit proxies for that annual meeting includes that proposal.
(d) Except as applicable law or the last sentence of Section 1.11(c)
otherwise provides, the chairman of any annual meeting of Stockholders will have
the power and duty (i) to determine whether proposals by Stockholders of any
Other Business to be brought before that meeting have been made in accordance
with the procedures this Section 1.11 sets forth (including whether any such
proposal was accurate in all material respects) and, if that chairman determines
that any such proposal has not been made in compliance with these procedures, or
if the Stockholder offering any such proposal has not appeared in person or by
proxy at that meeting to make that proposal, (ii) to declare to that meeting
that such proposal is defective and will be disregarded, even if the Corporation
has received proxies voting in favor of that proposal.
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(e) At any special meeting the Corporation holds pursuant to Section
1.2, the Stockholders will transact only such business as (i) the notice given
of that meeting pursuant to Section 1.3 sets forth and (ii) constitutes matters
incident to the conduct of that meeting as the chairman of that meeting
determines to be appropriate.
(f) Notwithstanding the foregoing provisions of this Section 1.11, a
Stockholder also must comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters this
Section 1.11 sets forth.
Section 1.12 Approval or Ratification of Acts or Contracts by
Stockholders. The Board in its discretion may submit any act or contract for
approval or ratification at any annual meeting of Stockholders, or at any
special meeting of Stockholders called for the purpose of considering any such
act or contract, and, except as applicable law or the Certificate of
Incorporation otherwise provides, any act or contract that the holders of shares
of stock of the Corporation present in person or by proxy at that meeting and
having a majority of the votes entitled to vote on that approval or ratification
approve or ratify will (provided that a quorum is present) be as valid and as
binding on the Corporation and on all Stockholders as if every Stockholder had
approved or ratified it.
Section 1.13 Action By Consent of Stockholders. Unless the
Certificate of Incorporation otherwise provides, Stockholders may, without a
meeting, prior notice or a vote, take any action they must or may take at any
annual or special meeting, if the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all shares entitled to vote thereon were
present sign a written consent to that action which sets forth that action and
cause the delivery of that consent to the Corporation (i) at its registered
office in the State of Delaware or its principal place of business or (ii) to an
officer or agent of the Corporation having custody of the books in which the
Corporation records minutes of proceedings or other actions of Stockholders. Any
such delivery made to the Corporation's registered office in the State of
Delaware must be made by hand or by certified or registered mail, return receipt
requested. Stockholders may execute any consent pursuant to this Section 1.13 in
counterparts, all of which together will constitute a single consent. Every
written consent pursuant to this Section 1.13 shall bear the date of signature
of each Stockholder who signs the consent and no written consent shall be
effective to take the corporate action referred to therein unless, within 60
days of the earliest dated consent delivered to the Corporation in the manner
this Section 1.13 requires, written consents signed by a sufficient number of
holders to take action are delivered to the Corporation in accordance with the
provisions of this Section 1.13. Any telegram, cablegram or other electronic
transmission consenting to an action under this Section 1.13 which is deemed
written, signed and dated for purposes of Section 228 of the DGCL will be deemed
written, signed and dated for purposes of this Section 1.13. The Corporation
will give prompt notice of the taking pursuant to this Section 1.13 of any
action without a meeting by less than unanimous written consent to those
Stockholders who have not consented to that action in writing and who, if the
action had been taken at a meeting, would have been entitled to notice of the
meeting if the record date for that meeting had been the date that written
consents signed by a sufficient number of holders to take the action were
delivered to the Corporation as this Section 1.13 provides.
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Section 1.14 Conduct of Meetings. The Board may adopt by resolution
such rules and regulations for the conduct of meetings of Stockholders as it
deems appropriate. Except to the extent inconsistent with those rules and
regulations, if any, the chairman of any meeting of Stockholders will have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of that chairman, are appropriate for the
proper conduct of that meeting. Those rules, regulations or procedures, by
whomever so adopted, may include, without limitation, the following: (i) the
establishment of an agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety of those present;
(iii) limitations on attendance at or participation in the meeting to
Stockholders of record, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting may determine; (iv) restrictions on
entry to the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions or comments by participants.
Except to the extent the Board or the chairman of any meeting otherwise
prescribes, no rules or parliamentary procedure will govern any meeting of
Stockholders.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number; Board Classification; Term; Eligibility for
Election; Vacancies. The number of Directors of the Corporation (exclusive of
any Directors to be elected by the holders of any one or more series of the
Corporation's preferred stock voting separately as a class or classes, as the
Certificate of Incorporation may provide for) shall not be less than three nor
more than 12, the exact number of Directors to be determined from time to time
by resolution adopted by the affirmative vote of a majority of the Whole Board.
In accordance with the provisions of the Certificate of Incorporation, the Board
(exclusive of any Directors to be elected by the holders of any one or more
series of the Corporation's preferred stock voting separately as a class or
classes, as the Certificate of Incorporation may provide for) shall be divided
into three classes, Class I, Class I and Class III, which shall be as nearly
equal in number as possible. Each Director will hold office for a term ending on
the date of the third annual meeting following the annual meeting at which that
Director was elected and, the foregoing notwithstanding, will serve until his
successor shall have been duly elected and qualified or until his earlier death,
resignation or removal. Only persons who are nominated in accordance with the
procedures Section 1.10 sets forth will be eligible for election as Directors.
Any vacancies in the Board may be filled in such manner as the Certificate of
Incorporation provides.
Section 2.2 Regular Meetings. The Board will hold its regular
meetings at such places, on such dates and at such times as the Board by
resolution may determine from time to time, and any such resolution will
constitute due notice to all Directors of the regular meeting or meetings to
which it relates. By notice pursuant to Section 2.7, the Chairman or a majority
of the Board may change the place, date or time of any regular meeting of the
Board.
Section 2.3 Special Meetings. The Board will hold a special meeting
at any place or time whenever the Chairman or a majority of the Board by
resolution calls that meeting by notice pursuant to Section 2.7.
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Section 2.4 Telephonic Meetings. Members of the Board may hold and
participate in any Board meeting by means of conference telephone or other
communications equipment that permits all persons participating in the meeting
to hear each other, and participation of any Director in a meeting pursuant to
this Section 2.4 will constitute the presence in person of that Director at that
meeting for purposes of these Bylaws, except in the case of a Director who so
participates only for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been called or convened in accordance with applicable law or these Bylaws.
Section 2.5 Organization. The Chairman will chair and preside over
meetings of the Board at which he is present. A majority of the Directors
present at any meeting of the Board from which the Chairman is absent will
designate one of their number as chairman and presiding officer over that
meeting. The Secretary will act as secretary of meetings of the Board, but in
his absence from any such meeting the chairman of that meeting may appoint any
person to act as secretary of that meeting.
Section 2.6 Order of Business. The Board will transact business at
its meetings in such order as the Chairman or the Board by resolution will
determine.
Section 2.7 Notice of Meetings. To call a special meeting of the
Board, the Chairman or a majority of the Board must give a timely notice in
writing or by electronic transmission to each Director of the time and place of,
and the general nature of the business the Board will transact at, all special
meetings of the Board. To change the time or place of any regular meeting of the
Board, the Chairman or a majority of the Board must give a timely notice in
writing or by electronic transmission to each Director of that change. To be
timely, any notice this Section 2.7 requires must be delivered to each Director
personally or by mail, telegraph, telecopier or other communications equipment
at least two days before the meeting to which it relates; provided, however,
that notice of any meeting of the Board need not be given to any Director who
waives the requirement of that notice in writing or by electronic transmission
(whether after that meeting or otherwise) or is present at that meeting.
Section 2.8 Quorum; Vote Required for Action. At all meetings of the
Board, the presence in person of a majority of the total number of Directors
then in office will constitute a quorum for the transaction of business, and the
participation by a Director in any meeting of the Board will constitute that
Director's presence in person at that meeting unless that Director expressly
limits that participation to objecting to the transaction of any business at
that meeting on the ground that the meeting has not been called or convened in
accordance with applicable law or these Bylaws. Except in cases in which the
Certificate of Incorporation or these Bylaws otherwise provide, the vote of a
majority of the Directors present at a meeting at which a quorum is present will
be the act of the Board.
Section 2.9 Informal Action by Directors. Unless the Certificate of
Incorporation or these Bylaws otherwise provides, the Board may, without a
meeting, prior notice or a vote, take any action it must or may take at any
meeting, if all members of the Board consent thereto in writing or by electronic
transmission, and the written consents or electronic transmissions are filed
with the minutes of proceedings of the Board the Secretary maintains.
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Section 2.10 Director Compensation. The Directors shall be paid
their expenses, if any, of attendance at each meeting of the Board and or any
Board Committee, and nonmanagement Directors shall be paid such sums, retainers
and fees for attending and performing services in connection with meetings of
the Board or any Board Committee as the Board may fix from time to time by
resolution. No such payment will preclude any Director from serving the
Corporation in any other capacity or from receiving compensation therefor.
Nonmanagement Directors who are members of special or standing Board Committees
will be allowed compensation for attending meetings of those Board Committees in
such amounts as the Board may fix from time to time by resolution.
ARTICLE III
BOARD COMMITTEES
Section 3.1 Board Committees. (a) The Board, by resolution a
majority of the Whole Board adopts, may designate one or more Board Committees
consisting of one or more of the Directors. The Board may designate one or more
Directors as alternate members of any Board Committee, who may replace any
absent or disqualified member at any meeting of that committee. The member or
members present at any meeting of any Board Committee and not disqualified from
voting at that meeting may, whether or not constituting a quorum, unanimously
appoint another Director to act at that meeting in any place of any member of
that committee who is absent from or disqualified to vote at that meeting.
(b) The Board by resolution may change the membership of any Board
Committee at any time and fill vacancies on any of those committees. A majority
of the members of any Board Committee will constitute a quorum for the
transaction of business by that committee unless the Board by resolution
requires a greater number for that purpose. The Board by resolution may elect a
chairman of any Board Committee. The election or appointment of any Director to
a Board Committee will not create any contract rights of that Director, and the
Board's removal of any member of any Board Committee will not prejudice any
contract rights that member otherwise may have.
(c) Pursuant to Section 3.1(a), the Board may designate an executive
committee (the "Executive Committee") to exercise, subject to applicable
provisions of law, all the powers of the Board in the management of the business
and affairs of the Corporation when the Board is not in session, including the
powers to (i) declare dividends and (ii) authorize the issuance by the
Corporation of any class or series of its capital stock. The Executive Committee
will include the Chairman among its members.
(d) Each other Board Committee the Board may designate pursuant to
Section 3.1(a) will, subject to applicable provisions of law, have and may
exercise all the powers and authorities of the Board to the extent the Board
resolution designating that committee so provides.
Section 3.2 Board Committee Rules; Minutes. Unless the Board
otherwise provides, each Board Committee may make, alter and repeal rules for
the conduct of its business. In the absence of those rules, each Board Committee
will conduct its business in the same
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manner as the Board conducts its business pursuant to Article II. Each committee
shall keep regular minutes of its meetings and shall report the same to the
Board as a whole.
Section 3.3 Existing Committees. The Board has heretofore designated
the Board Committees Exhibit A to these Bylaws lists, and has assigned to those
Board Committees the responsibilities that Exhibit A sets forth or refers to.
ARTICLE IV
OFFICERS
Section 4.1 Designation. The officers of the Corporation will
consist of a chief executive officer ("CEO"), president, chief financial
officer, chief operating officer, chief accounting officer, secretary, treasurer
and such senior or other vice presidents, assistant secretaries, assistant
treasurers and other officers as the Board or the CEO may elect or appoint from
time to time. Any person may hold any number of offices of the Corporation.
Section 4.2 CEO. The CEO will, subject to the control of the Board:
(i) have general supervision and control of the affairs, business, operations
and properties of the Corporation; (ii) see that all orders and resolutions of
the Board are carried into effect; (iii) have the power to appoint and remove
all subordinate officers, employees and agents of the Corporation, except for
those the Board elects or appoints; and (iv) sign and execute, under the seal of
the Corporation, all contracts, instruments, mortgages and other documents
(collectively, "documents") of the Corporation which require that seal, except
as applicable law otherwise requires or permits any document to be signed and
executed and except as these Bylaws, the Board or the CEO authorize other
officers of the Corporation to sign and execute documents. The CEO also will
perform such other duties and may exercise such other powers as generally
pertain to his office or these Bylaws or the Board by resolution assigns to him
from time to time.
Section 4.3 Powers and Duties of Other Officers. The other officers
of the Corporation will have such powers and duties in the management of the
Corporation as the Board by resolution may prescribe and, except to the extent
so prescribed, as generally pertain to their respective offices, subject to the
control of the Board. The Board may require any officer, agent or employee to
give security for the faithful performance of his duties.
Section 4.4 Term of Office, etc. Each officer will hold office until
the first meeting of the Board after the annual meeting of Stockholders next
succeeding his election, and until his successor is elected and qualified or
until his earlier resignation or removal. No officer of the Corporation will
have any contractual right against the Corporation for compensation by reason of
his election or appointment as an officer of the Corporation beyond the date of
his service as such, except as a written employment or other contract otherwise
may provide. The Board may remove any officer with or without cause at any time,
but any such removal will not prejudice the contractual rights of that officer,
if any, against the Corporation. The Board by resolution may fill any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise for the unexpired portion of the term of that office at any time.
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ARTICLE V
CAPITAL STOCK
Section 5.1 Certificates. Shares of capital stock of the Corporation
will be evidenced by certificates in such form or forms as the Board by
resolution may approve from time to time or, if and to the extent the Board so
authorizes by resolution, may be uncertificated. The Chairman, the president or
any vice president of the Corporation and the Secretary or any assistant
secretary of the Corporation may sign certificates evidencing certificated
shares. Any of or all the signatures and the Corporation's seal on each such
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before the
Corporation issues that certificate, the Corporation may issue that certificate
with the same effect as if he were such officer, transfer agent or registrar at
the date of that issue.
Section 5.2 Transfer of Shares. The Corporation may act as its own
transfer agent and registrar for shares of its capital stock or use the services
of such one or more transfer agents and registrars as the Board by resolution
may appoint from time to time. Shares of the Corporation's capital stock will be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives on
surrender and cancellation of certificates for a like number of shares.
Section 5.3 Ownership of Shares. The Corporation will be entitled to
treat the holder of record of any share or shares of its capital stock as the
holder in fact thereof and, accordingly, will not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it has express or other notice thereof, except
as the applicable laws of the State of Delaware otherwise provide.
Section 5.4 Regulations Regarding Certificates. The Board will have
the power and authority to make all such rules and regulations as it may deem
expedient concerning the issue, transfer and registration or the replacement of
certificates for shares of capital stock of the Corporation.
Section 5.5 Lost or Destroyed Certificates. The Board may determine
the conditions on which a new certificate of stock may be issued in place of a
certificate alleged to have been lost, stolen or destroyed and may, in its
discretion, require the owner of the allegedly lost, stolen or destroyed
certificate or his legal representative to give bond, with sufficient surety, to
indemnify the Corporation and each transfer agent and registrar against any and
all losses or claims that may arise by reason of the issue of a new certificate
in the place of the one allegedly so lost, stolen or destroyed.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification. (a) If and whenever:
(1) any Indemnitee was or is, or is threatened to be made, a party
to any Proceeding by reason of:
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(A) the fact that that Indemnitee serves or served (1) as a
Director or officer of the Corporation or, while serving as a
Director or officer of the Corporation, (2) serves or served in
another Functionary capacity for the Corporation or, at the request
of the Corporation, as a Functionary of a Related Enterprise; or
(B) the actual or alleged service or conduct of that
Indemnitee in that Indemnitee's capacity as that Functionary,
including any act actually or allegedly done or not done by that
Indemnitee;
and
(2) that Indemnitee (A) engaged in the service or conduct at issue
in that Proceeding in good faith and in a manner that Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Corporation and, in the event that Proceeding was or is a criminal action
or proceeding involving that Indemnitee's conduct, (B) had no reasonable
cause to believe that that conduct was unlawful,
the Corporation will, or will cause another Corporation Entity to, indemnify
that Indemnitee against, and hold that Indemnitee harmless from and in respect
of:
(1) in the case of each Claim in that Proceeding, other than a
Corporation Claim, all liabilities and losses, including the amounts of
all judgments, penalties and fines, including excise taxes, and amounts
paid in settlement, that Indemnitee has suffered or will suffer, and all
Expenses that Indemnitee reasonably has incurred or will incur, as a
result of or in connection with that Claim; and
(2) in the case of each Corporation Claim in that Proceeding, all
Expenses that Indemnitee reasonably has incurred or will incur as a result
of or in connection with that Corporation Claim; provided, however, that
the Corporation will not have any obligation under this clause (2) to, or
to cause another Corporation Entity to, indemnify that Indemnitee against,
or hold that Indemnitee harmless from or in respect of, any Corporation
Claim as to which that Indemnitee was or is adjudged to be liable to the
Corporation or any Related Enterprise unless, and only to the extent that,
the Court of Chancery or the court in which that Corporation Claim was or
is brought determines on application that, despite the adjudication of
liability, but in view of all the circumstances of the case, that
Indemnitee is fairly and reasonably entitled to indemnity for such of
those Expenses as the Court of Chancery or that other court shall deem
proper.
(b) If and whenever any Indemnitee was or is, or is threatened to be
made, a party to any Proceeding of any type to which Section 6.1(a) refers has
been successful, on the merits or otherwise, in defense of that Proceeding, or
in defense of any Claim therein, the Corporation will, or will cause another
Corporation Entity to, indemnify that Indemnitee against, and hold that
Indemnitee harmless from and in respect of, all Expenses that Indemnitee
reasonably has incurred in connection therewith. For purposes of this Section
6.1(b), the termination of any Claim in any Proceeding by dismissal, with or
without prejudice, will be deemed a successful result as to that Claim.
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Section 6.2 Advancement of Expenses. (a) If and whenever any Indemnitee
is, or is threatened to be made, a party to any Proceeding that may give rise to
a right of that Indemnitee to indemnification under Section 6.1(a), the
Corporation will advance all Expenses reasonably incurred by or on behalf of
that Indemnitee in connection with that Proceeding within 10 days after the
Corporation receives a statement or statements from that Indemnitee requesting
the advance or advances from time to time, whether prior to or after final
disposition of that Proceeding. Each such statement must reasonably evidence the
Expenses incurred by or on behalf of that Indemnitee and include or be preceded
or accompanied by an undertaking by or on behalf of that Indemnitee to repay any
Expenses advanced if it ultimately is determined that the Indemnitee is not
entitled to be indemnified by the Corporation under Section 6.1(a) against those
Expenses. The Corporation will accept any such undertaking without reference to
the financial ability of Indemnitee to make repayment. If the Corporation
advances Expenses in connection with any Claim as to which an Indemnitee has
requested or may request indemnification under Section 6.1(a) and a
determination is made under Section 6.4 that the Indemnitee is not entitled to
that indemnification, the Indemnitee will not be required to reimburse the
Corporation for those advances until the 180th day following the date of that
determination; provided, however, that if the Indemnitee timely commences and
thereafter prosecutes in good faith a judicial proceeding or arbitration under
Section 6.6 or otherwise to obtain that indemnification, the Indemnitee will not
be required to reimburse the Corporation for those Expenses until a
determination in that proceeding or arbitration that the Indemnitee is not
entitled to that indemnification has become final and nonappealable.
(b) The Corporation may advance Expenses under Section 6.2(a) to an
Indemnitee or, at the Corporation's option, directly to the Person to which
those Expenses are owed, and any Indemnitee's request for an advance under
Section 6.2(a) will constitute that Indemnitee's consent to any such direct
payment, to Indemnitee's legal counsel or any other Person.
Section 6.3 Notification and Defense of Claims. (a) If any Indemnitee
receives notice, otherwise than from the Corporation, that the Indemnitee is or
will be made, or is threatened to be made, a party to any Proceeding in respect
of which the Indemnitee intends to seek indemnification under this Article VI,
the Indemnitee must promptly notify the Corporation in writing of the nature
and, to the Indemnitee's knowledge, status of that Proceeding. If this Section
6.3(a) requires any Indemnitee to give such a notice, but that Indemnitee fails
to do so, that failure will not relieve the Corporation from, or otherwise
affect the obligations the Corporation may have to indemnify that Indemnitee
under this Article VI, unless the Corporation can establish that the failure has
resulted in actual prejudice to the Corporation.
(b) Except as this Section 6.3(b) otherwise provides below, in the case of
any Proceeding in respect of which any Indemnitee seeks indemnification under
this Article VI:
(1) the Corporation and any Related Enterprise that also may be
obligated to indemnify that Indemnitee in respect of that Proceeding will
be entitled to participate at its own expense in that Proceeding;
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(2) the Corporation or that Related Enterprise, or either of them,
will be entitled to assume the defense of all Claims, other than (A)
Corporation Claims, if any, and (B) other Claims, if any, as to which that
Indemnitee shall reasonably reach the conclusion clause (3) of the next
sentence describes, in that Proceeding against that Indemnitee by prompt
written notice of that election to that Indemnitee; and
(3) if clause (2) above entitles the Corporation or that Related
Enterprise to assume the defense of any of those Claims and it delivers to
that Indemnitee notice of that assumption under clause (2), the
Corporation will not be liable to that Indemnitee under this Article VI
for any fees or expenses of legal counsel for that Indemnitee which that
Indemnitee incurs after that Indemnitee receives that notice.
That Indemnitee will have the right to employ that Indemnitee's own legal
counsel in that Proceeding, but, as clause (3) of the preceding sentence
provides, will bear the fees and expenses of that counsel unless:
(1) the Corporation has authorized that Indemnitee in writing to
retain that counsel;
(2) the Corporation shall not within a reasonable period of time
actually have employed counsel to assume the defense of those Claims; or
(3) that Indemnitee shall have (A) reasonably concluded that a
conflict of interest may exist between that Indemnitee and the Corporation
as to the defense of one or more of those Claims and (B) communicated that
conclusion to the Corporation in writing.
(c) The Corporation will not be obligated hereunder to, or to cause
another Corporation Entity to, indemnify any Indemnitee against or hold that
Indemnitee harmless from and in respect of any amounts paid, or agreed to be
paid, by that Indemnitee in settlement of any Claim against that Indemnitee
which that Indemnitee effects without the Corporation's prior written consent.
The Corporation will not settle any Claim against any Indemnitee in any manner
that would impose any penalty or limitation on that Indemnitee without that
Indemnitee's prior written consent. Neither the Corporation nor any Indemnitee
will unreasonably delay or withhold consent to any such settlement the other
party proposes to effect.
Section 6.4 Procedure for Determination of Entitlement to
Indemnification. (a) To obtain indemnification under this Article VI, any
Indemnitee must submit to the Corporation a written request therefor which
specifies the Section or Sections under which that Indemnitee is seeking
indemnification and which includes, or is accompanied by, such documentation and
information as is reasonably available to that Indemnitee and is reasonably
necessary to determine whether and to what extent that Indemnitee is entitled to
that indemnification. Any Indemnitee may request indemnification under this
Article VI at any time and from time to time as that Indemnitee deems
appropriate in that Indemnitee's sole discretion. In the case of any request by
any Indemnitee for indemnification under Section 6.1(a) as to any Claim which is
pending or threatened at the time that Indemnitee delivers that request to the
Corporation and would not be resolved with finality, whether by judgment, order,
settlement or
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otherwise, on payment of the indemnification requested, the Corporation may
defer the determination under Section 6.4(c) of that Indemnitee's entitlement to
that indemnification to a date that is no later than 45 days after the effective
date of that final resolution if the Board concludes in good faith that an
earlier determination would be materially prejudicial to the Corporation or a
Related Enterprise.
(b) On written request by any Indemnitee under Section 6.4(a) for
indemnification under Section 6.1(a), the determination of that Indemnitee's
entitlement to that indemnification will be made:
(1) if that Indemnitee will be a director or officer of the
Corporation at the time that determination is made, under Section 6.4(c)
in each case; or
(2) if that Indemnitee will not be a director or officer of the
Corporation at the time that determination is made, under Section 6.4(c)
in any case, if so requested in writing by that Indemnitee or so directed
by the Board, or, in the absence of that request and direction, as the
Board shall duly authorize or direct.
(c) Each determination of any Indemnitee's entitlement to
indemnification under Section 6.1(a) to which this Section 6.4(c) applies will
be made as follows:
(1) by a majority vote of the Disinterested Directors, even though
less than a quorum; or
(2) by a committee of Disinterested Directors a majority vote of the
Disinterested Directors may designate, even though less than a quorum; or
(3) if (A) there are no Disinterested Directors or (B) a majority
vote of the Disinterested Directors so directs, by an Independent Counsel
in a written opinion to the Board, a copy of which the Corporation will
deliver to that Indemnitee;
provided, however, that if that Indemnitee has so requested in that Indemnitee's
request for indemnification, an Independent Counsel will make that determination
in a written opinion to the Board, a copy of which the Corporation will deliver
to Indemnitee.
(d) If it is determined that any Indemnitee is entitled to
indemnification under Section 6.1(a), the Corporation will, or will cause
another Corporation Entity to, subject to the provisions of Section 6.4(f):
(1) within 10 days after that determination pay to that Indemnitee
all amounts (A) theretofore incurred by or on behalf of that Indemnitee in
respect of which that Indemnitee is entitled to that indemnification by
reason of that determination and (B) requested from the Corporation in
writing by that Indemnitee; and
(2) thereafter on written request by that Indemnitee, pay to that
Indemnitee within 10 days after that request such additional amounts
theretofore incurred by or on behalf of that Indemnitee in respect of
which that Indemnitee is entitled to that indemnification by reason of
that determination.
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Each Indemnitee must cooperate with the person, persons or entity making the
determination under Section 6.4(c) with respect to that Indemnitee's entitlement
to indemnification under Section 6.1(a), including providing to such person,
persons or entity, on reasonable advance request, any documentation or
information that is:
(1) not privileged or otherwise protected from disclosure;
(2) reasonably available to that Indemnitee; and
(3) reasonably necessary to that determination.
(e) If an Independent Counsel is to make a determination under
Section 6.4(c) of entitlement of any Indemnitee to indemnification under Section
6.1(a), the Board will select the Independent Counsel and give written notice to
that Indemnitee which names the person or firm it has selected, whereupon that
Indemnitee may, within 10 days after that Indemnitee's receipt of that notice,
deliver to the Secretary a written objection to the selection; provided,
however, that any such objection may be asserted only on the ground that the
person or firm selected is not an "Independent Counsel" as Section 6.11 defines
that term, and the objection must set forth with particularity the factual basis
for that assertion. Absent a proper and timely objection, the person or firm so
selected will act as Independent Counsel under Section 6.4(c). If any such
written objection is so made and substantiated, the person or firm so selected
may not serve as Independent Counsel unless and until the objection is withdrawn
or a court of competent jurisdiction has determined that the objection is
without merit.
If the person or firm that will act as Independent Counsel has not
been determined within 30 days after any Indemnitee's submission of the related
request for indemnification, either the Corporation or that Indemnitee may
petition the Court of Chancery for resolution of any objection that has been
made by that Indemnitee to the Board's selection of Independent Counsel or for
the appointment as Independent Counsel of a person or firm selected by the Court
of Chancery or by such other person or firm as the Court of Chancery designates,
and the person or firm with respect to whom all objections are so resolved or
the person or firm so appointed will act as Independent Counsel under Section
6.4(c).
The Corporation will pay any and all reasonable fees and expenses
the Independent Counsel incurs in connection with acting under Section 6.4(c),
and the Corporation will pay all reasonable fees and expenses incident to the
procedures this Section 6.4(e) sets forth, regardless of the manner in which the
Independent Counsel is selected or appointed.
If any Indemnitee becomes entitled to, and does, initiate any
judicial proceeding or arbitration under Section 6.6, the Corporation will
terminate its engagement of the person or firm acting as Independent Counsel,
whereupon that person or firm will be, subject to the applicable standards of
professional conduct then prevailing, relieved of any further responsibility in
the capacity of Independent Counsel.
(f) The amount of any indemnification against Expenses to which any
Indemnitee becomes entitled under any provision of this Article VI, including
Section 6.1(a), will be determined subject to the provisions of this Section
6.4(f). Each Indemnitee will have the burden of showing that that Indemnitee
actually has incurred the Expenses for which that
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Indemnitee requests indemnification. If the Corporation or a Corporation Entity
has made any advance in respect of any Expense incurred by any Indemnitee
without objecting in writing to that Indemnitee at the time of the advance to
the reasonableness thereof, the incurrence of that Expense by that Indemnitee
will be deemed for all purposes hereof to have been reasonable. In the case of
any Expense as to which such an objection has been made, or any Expense for
which no advance has been made, the incurrence of that Expense will be presumed
to have been reasonable, and the Corporation will have the burden of proof to
overcome that presumption.
Section 6.5 Presumptions and Effect of Certain Proceedings. (a) In
making a determination under Section 6.4(c) with respect to entitlement of any
Indemnitee to indemnification under Section 6.1(a), the person, persons or
entity making that determination must presume that that Indemnitee is entitled
to that indemnification if that Indemnitee has submitted a request for
indemnification in accordance with Section 6.4(a), and the Corporation will have
the burden of proof to overcome that presumption in connection with the making
by any person, persons or entity of any determination contrary to that
presumption.
(b) The termination of any Proceeding or of any Claim therein, by
judgment, order, settlement or conviction, or on a plea of nolo contendere or
its equivalent, will not, except as this Article VI otherwise expressly
provides, of itself adversely affect the right of any Indemnitee to
indemnification under this Article VI or, in the case of any determination under
Section 6.4(c) of any Indemnitee's entitlement to indemnification under Section
6.1(a), create a presumption that that Indemnitee did not act in good faith and
in a manner that Indemnitee reasonably believed to be in or not opposed to the
best interests of the Corporation or, with respect to any criminal action or
proceeding, that Indemnitee had reasonable cause to believe that that
Indemnitee's conduct was unlawful.
(c) Any service of any Indemnitee as a Functionary of the
Corporation or any Related Enterprise which imposes duties on, or involves
services by, that Indemnitee with respect to any Related Enterprise that is an
employee benefit or welfare plan or related trust, if any, or that plan's
participants or that trust's beneficiaries, will be deemed for all purposes
hereof as service at the request of the Corporation, and any action that
Indemnitee takes or omits to take in connection with any such plan or trust
will, if taken or omitted in good faith by that Indemnitee and in a manner that
Indemnitee reasonably believed to be in the interest of the participants in or
beneficiaries of that plan or trust, be deemed to have been taken or omitted in
a manner "not opposed to the best interests of the Corporation" for all purposes
of this Article VI.
(d) For purposes of any determination under this Article VI as to
whether any Indemnitee has performed services or engaged in conduct on behalf of
any Enterprise in good faith, that Indemnitee will be deemed to have acted in
good faith if that Indemnitee acted in reliance on the records of the Enterprise
or on information, opinions, reports or statements, including financial
statements and other financial information, concerning the Enterprise or any
other Person which were prepared or supplied to that Indemnitee by:
(1) one or more of the officers or employees of the Enterprise;
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(2) appraisers, engineers, investment bankers, legal counsel or
other Persons as to matters that Indemnitee reasonably believed were
within the professional or expert competence of those Persons; and
(3) any committee of the board of directors or equivalent managing
body of the Enterprise of which that Indemnitee is or was, at the relevant
time, not a member;
provided, however, that if that Indemnitee has actual knowledge as to any matter
that makes any such reliance unwarranted as to that matter, this Section 6.5(d)
will not entitle that Indemnitee to any presumption that that Indemnitee acted
in good faith respecting that matter.
(e) For purposes of any determination under this Article VI as to
whether any Indemnitee is entitled to indemnification under Section 6.1(a),
neither the knowledge nor the conduct of any other Functionary of the
Corporation or any Related Enterprise shall be imputed to that Indemnitee.
(f) Any Indemnitee will be deemed a party to a Proceeding for all
purposes of this Article VI if that Indemnitee is named as a defendant or
respondent in a complaint or petition for relief in that Proceeding, regardless
of whether that Indemnitee ever is served with process or makes an appearance in
that Proceeding.
(g) If any Indemnitee serves or served as a Functionary of a Related
Enterprise, that service will be deemed to be "at the request of the
Corporation" for all purposes of this Article VI notwithstanding that the
request is not evidenced by a writing or shown to have been made orally. In the
event the Corporation were to extend the rights of indemnification and
advancement of Expenses under this Article VI to any Indemnitee's serving at the
request of the Corporation as a Functionary of any Enterprise other than the
Corporation or a Related Enterprise, that Indemnitee must show that the request
was made by the Board or at its authorization.
Section 6.6 Remedies of Indemnitee in Certain Cases. (a) If any
Indemnitee makes a written request in compliance with Section 6.4(a) for
indemnification under Section 6.1(a) and either:
(1) no determination as to the entitlement of that Indemnitee to
that indemnification is made before the last to occur of (A) the close of
business on the date, if any, the Corporation has specified under Section
6.4(a) as the outside date for that determination or (B) the elapse of the
45-day period beginning the day after the date the Corporation receives
that request; or
(2) a determination is made under Section 6.4(c) that that
Indemnitee is not entitled to that indemnification in whole or in any part
in respect of any Claim to which that request related,
that Indemnitee will be entitled to an adjudication from the Court of Chancery
of that Indemnitee's entitlement to that indemnification. Alternatively, that
Indemnitee, at that Indemnitee's option, may seek an award in arbitration to be
conducted by a single arbitrator in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. In
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the case of any determination under Section 5(d) that is adverse to an
Indemnitee, that Indemnitee must commence any such judicial proceeding or
arbitration within 180 days following the date on which that Indemnitee first
has the right to commence that proceeding under this Section 6.6(a) or that
Indemnitee will be bound by that determination for all purposes of this Article
VI.
(b) If a determination has been made under Section 6.4 that an
Indemnitee is not entitled to indemnification under Section 6.1(a), any judicial
proceeding or arbitration commenced by that Indemnitee under this Section 6.6
will be conducted in all respects as a de novo trial or arbitration on the
merits, and that Indemnitee will not be prejudiced by reason of that adverse
determination. In any judicial proceeding or arbitration commenced under this
Section 6.6, the Corporation will have the burden of proving that the Indemnitee
is not entitled to indemnification hereunder, and the Corporation may not, for
any purpose, refer to or introduce into evidence any determination under Section
6.4(c) which is adverse to the Indemnitee.
(c) If a determination has been made under Section 6.4 that any
Indemnitee is entitled to indemnification under Section 6.1(a), the Corporation
will be bound by that determination in any judicial proceeding or arbitration
that Indemnitee thereafter commences under this Section 6.6 or otherwise,
absent:
(1) a misstatement by that Indemnitee of a material fact, or an
omission by that Indemnitee of a material fact necessary to make that
Indemnitee's statements not materially misleading, in connection with that
Indemnitee's request for indemnification; or
(2) a prohibition of that indemnification under applicable law.
(d) If any Indemnitee, under this Section 6.6 or otherwise, seeks a
judicial adjudication of or an award in arbitration to enforce that Indemnitee's
rights under this Article VI, that Indemnitee will be entitled to recover from
the Corporation, and will be indemnified by the Corporation against, any and all
expenses, of the types the definition of Expenses in Section 6.11 describes,
reasonably incurred by or on behalf of that Indemnitee in that judicial
adjudication or arbitration, but only if that Indemnitee prevails therein. If it
is determined in that judicial adjudication or arbitration that that Indemnitee
is entitled to receive part of, but not all, the indemnification or advancement
of expenses sought, the expenses incurred by that Indemnitee in connection with
that judicial adjudication or arbitration will be appropriately prorated between
those in respect of which this Article VI entitles that Indemnitee to
indemnification and those that Indemnitee must bear.
(e) In any judicial proceeding or arbitration under this Section
6.6, the Corporation:
(1) will not, and will not permit any other Person acting on its
behalf to, assert that the procedures or presumptions this Article VI
establishes are not valid, binding and enforceable; and
(2) will stipulate that it is bound by all the provisions of this
Article VI.
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Section 6.7 Non-exclusivity; Survival of Rights; Insurance;
Subrogation. (a) The rights to indemnification and advancement of Expenses and
the remedies this Article VI provides are not and will not be deemed exclusive
of any other rights or remedies to which any Indemnitee may at any time be
entitled under applicable law, the Certificate of Incorporation, any agreement,
a vote of stockholders or Disinterested Directors, or otherwise, but each such
right or remedy under this Article VI will be cumulative with all such other
rights and remedies. No amendment, modification or repeal of this Article VI or
any provision hereof will limit or restrict any right of any Indemnitee under
this Article VI in respect of any action that Indemnitee has taken or omitted in
that Indemnitee's capacity as a Functionary of the Corporation or any Related
Enterprise prior to that amendment, modification or repeal. This Article VI will
not limit or restrict the power or right of the Corporation, to the extent and
in the manner applicable law permits, to indemnify and advance expenses to
Persons other than Indemnitees when and as authorized by the Board or by other
appropriate corporate action.
(b) If the Corporation maintains an insurance policy or policies
providing liability insurance for Directors or officers of the Corporation ,
each Indemnitee will be covered by the policy or policies in accordance with its
or their terms to the maximum extent of the coverage available for any such
Director or officer under the policy or policies. If the Corporation receives
written notice from any source of a pending Proceeding to which any Indemnitee
is a party and in respect of which that Indemnitee might be entitled to
indemnification under Section 6.1(a) and the Corporation then maintains any such
policy of which that Indemnitee is a beneficiary, the Corporation will:
(1) promptly give notice of that Proceeding to the relevant insurers
in accordance with the applicable policy procedures; and
(2) thereafter take all action necessary to cause those insurers to
pay, on behalf of that Indemnitee, all amounts payable in accordance with
the applicable policy terms as a result of that Proceeding;
provided, however, that the Corporation need not comply with the provisions of
this sentence if its failure to do so would not actually be prejudicial to that
Indemnitee in any material respect.
(c) The Corporation will not be liable under this Article VI to make
or cause to be made any payment of amounts otherwise indemnifiable under this
Article VI, or to make or cause to be made any advance this Article VI otherwise
requires it to make or cause to be made, to or for the account of any
Indemnitee, if and to the extent that the Indemnitee has otherwise actually
received or had applied for the Indemnitee's benefit that payment or advance or
otherwise obtained the entire benefit therefrom under any insurance policy, any
other contract or agreement or otherwise.
(d) If the Corporation makes or causes to be made any payment under
this Article VI to or for the account of any Indemnitee, it will be subrogated
to the extent of that payment to all the rights of recovery of that Indemnitee,
who must execute all papers required and take all action necessary to secure
those rights, including execution of such documents as are necessary to enable
the Corporation to bring suit to enforce those rights.
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(e) The Corporation's obligation to make or cause to be made any
payment or advance under this Article VI to or for the account of any Indemnitee
with respect to that Indemnitee's service at the request of the Corporation as a
Functionary of any Related Enterprise will be reduced by any amount that
Indemnitee has actually received as indemnification or advancement of expenses
from that Related Enterprise.
Section 6.8 Benefit of this Article VI. The provisions of this
Article VI will inure to the benefit of each Indemnitee and that Indemnitee's
spouse, if that Indemnitee resides in Texas or another community property state,
heirs, executors and administrators.
Section 6.9 Severability. If any provision or provisions of this
Article VI is or are invalid, illegal or unenforceable for any reason
whatsoever:
(1) the validity, legality and enforceability of the remaining
provisions of this Article VI, including each portion of any Section
containing any such invalid, illegal or unenforceable provision which is
not itself invalid, illegal or unenforceable, will not in any way be
affected or impaired thereby;
(2) such provision or provisions will be deemed reformed to the
extent necessary to conform to applicable law and to give the maximum
effect to the intent of the Corporation as expressed in this Article VI;
and
(3) to the fullest extent possible, the provisions of this Article
VI, including each portion of any Section containing any such invalid,
illegal or unenforceable provision which is not itself invalid, illegal or
unenforceable, will be construed so as to give effect to the intent
manifested thereby.
Section 6.10 Exceptions to Right of Indemnification or Advancement
of Expenses. No provision in this Article VI will obligate the Corporation to
pay or cause to be paid any indemnity to or for the account of any Indemnitee in
connection with or as a result of:
(1) any Claim made against that Indemnitee for an accounting of
profits, under Section 16(b) of the Exchange Act or similar provision of
state statutory or common law, from the purchase and sale, or sale and
purchase, by that Indemnitee of securities of the Corporation or any
Related Enterprise; or
(2) except for any Claim initiated by that Indemnitee, whether as a
cause of action or as a defense to a cause of action under Section 6.6 or
otherwise, to enforce or establish, by declaratory judgment or otherwise,
that Indemnitee's rights or remedies under this Article VI, any Claim
initiated by that Indemnitee without the prior authorization of the Board
against the Corporation or any Related Enterprise or any of their
respective present or former Functionaries.
Section 6.11 Definitions. (a) For purposes of this Article VI:
"Affiliate" has the meaning Exchange Act Rule 12b-2 specifies.
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"Claim" means any claim for damages or a declaratory, equitable or
other substantive remedy, or any other issue or matter, in any Proceeding.
"Corporation Claim" means, in the case of any Indemnitee, any Claim
brought by or in the right of the Corporation or a Related Enterprise
against that Indemnitee.
"Corporation Entity" means any Related Enterprise, other than an
employee benefit or welfare plan or its related trust, if any.
"Court of Chancery" means the Court of Chancery of the State of
Delaware.
"Disinterested Director" means a director of the Corporation who is
not and was not a party to the Proceeding, or any Claim therein, in
respect of which indemnification is sought by any Indemnitee under this
Article VI.
"Enterprise" means any business trust, corporation, joint venture,
limited liability company, partnership or other entity or enterprise,
including any operational division of any entity, or any employee benefit
or welfare plan or related trust.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Expenses" include all attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, being or preparing to be a witness
in, or otherwise participating in, a Proceeding. Should any payments by
the Corporation to or for the account of any Indemnitee under this Article
VI be determined to be subject to any federal, state or local income or
excise tax, "Expenses" also will include such amounts as are necessary to
place that Indemnitee in the same after-tax position, after giving effect
to all applicable taxes, that Indemnitee would have been in had no such
tax been determined to apply to those payments.
"Functionary" of any Enterprise means any director, officer,
manager, administrator, employee, agent, representative or other
functionary of that Enterprise, including, in the case of any employee
benefit or welfare plan, any member of any committee administering that
plan or any individual to whom the duties of that committee are delegated.
"Indemnitee" means at any time:
(1) any person serving as a Director or as an officer of the
Corporation at that time; and
(2) any person who served as a Director or as an officer of
the Corporation at any time within 10 years prior to that time.
24
<PAGE>
"Independent Counsel" means, in the case of any determination under
Section 6.4(c) of the entitlement of any Indemnitee to indemnification
under Section 6.1(a), a law firm, or a member of a law firm, that or who
is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent:
(1) the Corporation or any of its Affiliates or that
Indemnitee in any matter material to any such Person; or
(2) any other party to the Proceeding giving rise to a claim
of that Indemnitee for that indemnification;
notwithstanding the foregoing, the term "Independent Counsel" does not include
at any time any Person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Corporation or a Related Enterprise or that Indemnitee in an action
to determine that Indemnitee's rights under these Bylaws.
"Person" means any natural person, sole proprietorship, corporation,
partnership, limited liability company, business trust, unincorporated
organization or association, mutual company, joint stock company, joint
venture or any other entity of any kind having a separate legal status or
any estate, trust, union or employee organization or governmental
authority.
"Proceeding" includes:
(1) any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution procedure, investigation,
inquiry or other threatened, actual or completed proceeding, whether
of a civil, criminal, administrative, investigative or private
nature and irrespective of the initiator thereof; and
(2) any appeal in any such proceeding.
"Related Enterprise" means at any time any Enterprise:
(1) 50% or more of the outstanding capital stock or other
ownership interests of which, or the assets of which, the
Corporation owns or controls, or previously owned or controlled,
directly or indirectly, at that time;
(2) 50% or more of the outstanding voting power of the
outstanding capital stock or other ownership interests of which the
Corporation owns or controls, or previously owned or controlled,
directly or indirectly, at that time;
(3) that is, or previously was, an Affiliate of the
Corporation which the Corporation controls, or previously
controlled, by ownership, contract or otherwise and whether alone or
together with another Person, directly or indirectly, at that time;
or
25
<PAGE>
(4) if that Enterprise is an employee benefit or welfare plan
or related trust, whose participants or beneficiaries are present or
former employees of the Corporation or any other Related Enterprise.
Section 6.12 Contribution. If it is established, under Section
6.4(c) or otherwise, that any Indemnitee has the right to be indemnified under
Section 6.1(a) in respect of any Claim, but that right is unenforceable by
reason of any applicable law or public policy, then, to the fullest extent
applicable law permits, the Corporation, in lieu of indemnifying or causing the
indemnification of that Indemnitee under Section 6.1(a), will contribute or
cause to be contributed to the amount that Indemnitee has incurred, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement or for Expenses reasonably incurred, in connection with that Claim,
in such proportion as is deemed fair and reasonable in light of all the
circumstances of that Claim in order to reflect:
(1) the relative benefits that Indemnitee and the Corporation have
received as a result of the event(s) or transaction(s) giving rise to that
Claim; or
(2) the relative fault of that Indemnitee and of the Corporation and
its other Functionaries in connection with those event(s) or
transaction(s).
Section 6.13 Submission to Jurisdiction. Each Indemnitee, by seeking
any indemnification or advance of Expenses under this Article VI, will be
deemed, except with respect to any arbitration that Indemnitee commences under
Section 6.6 or as Section 6.1(a) expressly contemplates otherwise:
(1) to have agreed that any action or proceeding arising out of or
in connection with this Article VI must be brought only in the Court of
Chancery and not in any other state or federal court in the United States
of America or any court in any other country;
(2) to have consented to submit to the exclusive jurisdiction of the
Court of Chancery for purposes of any action or proceeding arising out of
or in connection with this Article VI;
(3) to have waived any objection to the laying of venue of any such
action or proceeding in the Court of Chancery; and
(4) to have waived, and to have agreed not to plead or to make, any
claim that any such action or proceeding brought in the Court of Chancery
has been brought in an improper or otherwise inconvenient forum.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Offices. The Corporation's registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware. The Corporation
may have such other offices within and without the State of Delaware as have
heretofore been established or may
26
<PAGE>
hereafter be established by or with the authority of the Board. The
Corporation's administrative office shall be located at 11911 FM 529, Houston,
Texas.
Section 7.2 Fiscal Year. The fiscal year of the Corporation shall
end on December 31.
Section 7.3 Seal. The corporate seal will have the name of the
Corporation inscribed thereon and will be in such form as the Board by
resolution may approve from time to time. The seal may be used by an officer of
the Corporation causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise applied to any acknowledgments, agreements,
applications, affidavits, certificates, contracts, instruments, statements or
other documents executed for or on behalf of the Corporation.
Section 7.4 Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its Directors or officers, or between
the Corporation and any other Entity in which one or more of its Directors or
officers are directors or officers (or hold equivalent offices or positions), or
have a financial interest, will be void or voidable solely for this reason, or
solely because the Director or officer is present at or participates in the
meeting of the Board or Board Committee which authorizes the contract or
transaction, or solely because his or their votes are counted for that purpose,
if: (i) the material facts as to the relationship or interest of the Director or
officer and as to the contract or transaction are disclosed or are known to the
Board or the Board Committee, and the Board or Board Committee in good faith
authorizes the contract or transaction by the affirmative votes of a majority of
the disinterested Directors, even though the disinterested Directors be less
than a quorum; or (ii) the material facts as to the relationship of the Director
or officer or interest and as to the contract or transaction are disclosed or
are known to the Stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of those
Stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board, a Board
Committee or the Stockholders. Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board or of a Board
Committee which authorizes the contract or transaction.
Section 7.5 Form of Records. Any records the Corporation maintains
in the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time.
Section 7.6 Bylaw Amendments. The Board has the power to adopt,
amend and repeal from time to time the Bylaws of the Corporation, subject to the
right of Stockholders entitled to vote with respect thereto to amend or repeal
those Bylaws as adopted or amended by the Board. Bylaws of the Corporation may
be adopted, amended or repealed by the affirmative vote of the holders of at
least 66.7% of the combined voting power of the outstanding shares of all
classes of capital stock of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class, at any annual meeting,
or at any special meeting if notice of the proposed amendment is contained in
the notice of that special meeting, or by the Board as specified in the
preceding sentence.
27
<PAGE>
Section 7.7 Notices; Waiver of Notice. Whenever any notice is
required to be given to any Stockholder, Director or member of any Board
Committee under the provisions of the DGCL, the Certificate of Incorporation or
these Bylaws, that notice will be deemed to be sufficient if given (i) by
telegraphic, facsimile, cable or wireless or electronic transmission or (ii) by
deposit of the same in the United States mail, with postage paid thereon,
addressed to the person entitled thereto at his address as it appears in the
records of the Corporation, and that notice will be deemed to have been given on
the day of such transmission or mailing, as the case may be.
Whenever any notice is required to be given to any Stockholder or
Director under the provisions of the DGCL, the Certificate of Incorporation or
these Bylaws, a waiver thereof in writing signed by or by electronic
transmission from the person or persons entitled to that notice, whether before
or after the time stated therein, will be equivalent to the giving of that
notice. Attendance of a person at a meeting will constitute a waiver of notice
of that meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Stockholders, the Board or any Board Committee need be specified in any
waiver of notice in writing or by electronic transmission unless the Certificate
of Incorporation or these Bylaws so require.
Section 7.8 Resignations. Any Director or officer of the Corporation
may resign at any time. Any such resignation must be made in writing or by
electronic transmission and will take effect at the time specified in that
writing or electronic transmission, or, if that resignation does not specify any
time, at the time of its receipt by the Chairman or the Secretary. The
acceptance of a resignation will not be necessary to make it effective, unless
that resignation expressly so provides.
Section 7.9 Facsimile Signatures. In addition to the provisions for
the use of facsimile signatures these Bylaws elsewhere specifically authorize,
facsimile signatures of any officer or officers of the Corporation may be used
as and whenever the Board by resolution so authorizes.
Section 7.10 Reliance on Books, Reports and Records. Each Director
and each member of any Board Committee designated by the Board will, in the
performance of his duties, be fully protected in relying in good faith on the
books of account or reports made to the Corporation by any of its officers, or
by an independent certified public accountant, or by an appraiser selected with
reasonable care by the Board or by any such committee, or in relying in good
faith upon other records of the Corporation.
Section 7.11 Certain Definitional Provisions. (a) When used in these
Bylaws, the words "herein," "hereof" and "hereunder" and words of similar import
refer to these Bylaws as a whole and not to any provision of these Bylaws, and
the words "Article" and "Section" refer to Articles and Sections of these Bylaws
unless otherwise specified.
(b) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes the other
gender and the neuter.
28
<PAGE>
(c) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding that word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
Section 7.12 Captions. Captions to Articles and Sections of these
Bylaws are included for convenience of reference only, and these captions do not
constitute a part hereof for any other purpose or in any way affect the meaning
or construction of any provision hereof.
End of Bylaws
29
<PAGE>
BYLAWS
EXHIBIT "A"
COMMITTEES
Per ARTICLE III, of the Bylaws of Oceaneering International, Inc. (the
"Company") the following committees are designated by the Board of Directors of
the Company (the "Board") with the committee authority and responsibility
specified in the Appendix indicated opposite the name of the committee. Members
of the Audit Committee shall be independent members of the Board. The membership
and composition of the committees shall be as designated by the Board from time
to time.
Audit Committee Appendix "A"
Nominating Committee Appendix "B"
Compensation Committee Appendix "C"
<PAGE>
APPENDIX "A"
OCEANEERING INTERNATIONAL, INC.
AUDIT COMMITTEE CHARTER
GENERAL
The Audit Committee of the Board of Directors of Oceaneering
International, Inc. shall consist of three independent directors. Members of the
Committee shall be considered independent if they have no relationship to the
Company that could interfere with the exercise of their independence from
management and the Company. As determined by the Board of Directors, the Members
of the Committee will be financially literate with at least one having
accounting or related financial management expertise. Company management,
internal and independent auditors and the Company's General Counsel may attend
each meeting or portions thereof as required by the Committee. The Committee
will have two meetings each year on a regular basis and will have special
meetings if and when required.
RESPONSIBILITIES
The Audit Committee's role is one of oversight whereas the Company's
management is responsible for preparing the Company's financial statements and
the independent auditors are responsible for auditing those financial
statements. The Audit Committee is not providing any expert or special assurance
as to the Company's financial statements or any professional certification as to
the independent auditor's work. The following functions shall be the key
responsibilities of the Audit Committee in carrying out its oversight function.
1. The Committee and Board shall be ultimately responsible for the
selection, evaluation, and replacement of the independent auditors.
The Committee will:
recommend annually the appointment of the independent auditors to
the Board for its approval and subsequent submission to the
stockholders for ratification, based upon an annual performance
evaluation and a determination of the auditors' independence;
determine the independence of the independent auditors by obtaining
a formal written statement delineating all relationships between the
independent auditors and the Company, including all non-audit
services and fees;
discuss with the independent auditors if any disclosed relationship
or service could impact the auditors' objectivity and independence;
and
recommend that the Board take appropriate action in response to the
auditors statement to ensure the independence of the independent
auditors.
<PAGE>
2. Inquire of company management and independent auditors regarding the
appropriateness of accounting principles followed by the Company,
changes in accounting principles and their impact on the financial
statements.
3. Review with Company management the Company's financial reporting
process, published financial statement and/or major disclosures and
the adequacy of the Company's system of internal controls.
4. Review and discuss with Company management and General Counsel legal
and regulatory matters that may have a material impact on the
Company's financial statements and Company compliance policies.
5. Meet with independent auditors and review their report to the
Committee including comments relating to the system of internal
controls, published financial statements and related disclosures,
the adequacy of the financial reporting process and the scope of the
independent audit. The independent auditors are ultimately
accountable to the Board and the Committee on all such matters.
6. Provide an open avenue of communications between the internal and
independent auditors and the Board of Directors, including private
sessions with the internal and independent auditors, as the
Committee may deem appropriate.
7. Review the internal audit program in terms of scope of audits
conducted or scheduled to be conducted.
8. Review with the internal auditors any major findings and
recommendations from internal audits conducted Company-wide.
Consult with internal auditors regarding on-going monitoring
programs including the Company's Statement of Philosophy and Beliefs
and compliance with policies of the Company.
9. Review with both the internal and independent auditors the plans for
the audit of the Company's information technology procedures and
controls.
10. Review with the internal and independent auditors the coordination
of their respective audit activities.
11. Prepare a Report, for inclusion in the Company's proxy statement as
required, disclosing that the Committee reviewed and discussed the
audited financial statements with management and discussed certain
other matters with the independent auditors. Based upon these
discussions, state in the Report whether the Committee recommended
to the Board that the audited financial statements be included in
the Annual Report.
<PAGE>
12. Review and reassess the adequacy of the Audit Committee's charter
annually. If any revisions therein are deemed necessary or
appropriate, submit the same to the Board for its consideration and
approval.
QUORUM
For the transaction of business at any meeting of the Audit Committee, a
majority of the members shall constitute a quorum.
<PAGE>
APPENDIX "B"
NOMINATING COMMITTEE
RESPONSIBILITIES:
1. Recommending to full Board of Directors of the Company (the "Board")
nominees to fill Board vacancies.
2. Receiving and evaluating stockholder recommendations for nominees to fill
Board vacancies.
3. Recommending to full Board candidates for membership of the committees of
the Board.
4. Recommending to the full Board a director to serve as Chairman of the
Board.
<PAGE>
APPENDIX "C"
COMPENSATION COMMITTEE
RESPONSIBILITIES:
1. Setting salaries of the Officers of the Company
- The Company's Chief Executive Officer (the "CEO") recommends and the
Compensation Committee (the "Committee") approves entry salary for
all officers of the Company (except the CEO).
- The CEO recommends and the Committee approves changes to salaries
for all officers of the Company (except the CEO).
- The Committee recommends and the Board approves the successor to the
CEO and the entry salary when a vacancy occurs; and changes to the
salary of the CEO.
- The Committee recommends and the Board approves the entry salary and
changes to the salary of the Chairman of the Board.
2. Bonus Plans
- The Committee recommends and the Board approves any bonus award
plans.
- The CEO recommends and the Committee approves any bonus awards to
officers within the parameters of the approved plans.
3. Stock Awards
- The Committee recommends and the Board approves any stock option or
stock award plans which require shareholder approval.
- The CEO recommends and the Committee approves any grants of stock
options and restricted stock to any recipient.
4. Senior Executive Severance Agreements
- The Committee recommends and the Board approves participants and
terms of any senior executive severance agreements.
5. Other Compensation Plans in which Officers and Directors are Eligible to
Participate
- The Committee recommends and the Board approves adoption of plans.
<PAGE>
- The CEO recommends and the Committee approves participant changes
within the parameters of approved plans.
- The Chief Financial Officer of the Company administers plans as
provided in the plans.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.01
<SEQUENCE>4
<FILENAME>h95099ex10-01.txt
<DESCRIPTION>DEFINED CONTRIBUTION MASTER PLAN & TRUST AGMT.
<TEXT>
<PAGE>
Exhibit 10.01
WELLS FARGO BANK, N.A.
DEFINED CONTRIBUTION MASTER PLAN
AND
TRUST AGREEMENT
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
ALPHABETICAL LISTING OF DEFINITIONS...................................... vi
ARTICLE I, DEFINITIONS
1.01 Employer..................................................... 1.01
1.02 Trustee...................................................... 1.01
1.03 Plan......................................................... 1.01
1.04 Adoption Agreement........................................... 1.01
1.05 Plan Administrator........................................... 1.02
1.06 Advisory Committee........................................... 1.02
1.07 Employee..................................................... 1.02
1.08 Self-Employed Individual/Owner-Employee...................... 1.02
1.09 Highly Compensated Employee.................................. 1.02
1.10 Participant.................................................. 1.03
1.11 Beneficiary.................................................. 1.03
1.12 Compensation................................................. 1.03
1.13 Earned Income................................................ 1.05
1.14 Account...................................................... 1.05
1.15 Accrued Benefit.............................................. 1.05
1.16 Nonforfeitable............................................... 1.05
1.17 Plan Year/Limitation Year.................................... 1.05
1.18 Effective Date............................................... 1.05
1.19 Plan Entry Date.............................................. 1.05
1.20 Accounting Date.............................................. 1.05
1.21 Trust........................................................ 1.05
1.22 Trust Fund................................................... 1.05
1.23 Nontransferable Annuity...................................... 1.05
1.24 ERISA........................................................ 1.06
1.25 Code......................................................... 1.06
1.26 Service...................................................... 1.06
1.27 Hour of Service.............................................. 1.06
1.28 Disability................................................... 1.07
1.29 Service for Predecessor Employer............................. 1.07
1.30 Related Employers............................................ 1.07
1.31 Leased Employees............................................. 1.08
1.32 Special Rules for Owner-Employers............................ 1.08
1.33 Determination of Top Heavy Status............................ 1.09
1.34 Paired Plans................................................. 1.10
ARTICLE II, EMPLOYEE PARTICIPANTS
2.01 Eligibility.................................................. 2.01
2.02 Year of Service - Participation.............................. 2.01
2.03 Break in Service - Participation............................. 2.01
2.04 Participation upon Re-employment............................. 2.02
2.05 Change in Employee Status.................................... 2.02
2.06 Election Not to Participate.................................. 2.02
ARTICLE III, EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 Amount....................................................... 3.01
3.02 Determination of Contribution................................ 3.01
3.03 Time of Payment of Contribution.............................. 3.01
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
3.04 Contribution Allocation...................................... 3.01
3.05 Forfeiture Allocation........................................ 3.03
3.06 Accrual of Benefit........................................... 3.03
3.07 - 3.16 Limitations on Allocations............................. 3.05
3.17 Special Allocation Limitation................................ 3.07
3.18 Defined Benefit Plan Limitation.............................. 3.07
3.19 Definitions - Article III.................................... 3.07
ARTICLE IV, PARTICIPANT CONTRIBUTIONS
4.01 Participant Nondeductible Contributions...................... 4.01
4.02 Participant Deductible Contributions......................... 4.01
4.03 Participant Rollover Contributions........................... 4.01
4.04 Participant Contribution - Forfeitability.................... 4.02
4.05 Participant Contribution - Withdrawal/Distribution........... 4.02
4.06 Participant Contribution - Accrued Benefit................... 4.02
ARTICLE V, TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 Normal Retirement Age........................................ 5.01
5.02 Participant Disability or Death.............................. 5.01
5.03 Vesting Schedule............................................. 5.01
5.04 Cash-Out Distributions to Partially-Vested Participants/
Restoration of Forfeited Accrued Benefit..................... 5.01
5.05 Segregated Account for Repaid Amount......................... 5.03
5.06 Year of Service - Vesting.................................... 5.03
5.07 Break in Service - Vesting................................... 5.03
5.08 Included Years of Service - Vesting.......................... 5.03
5.09 Forfeiture Occurs............................................ 5.03
ARTICLE VI, TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 Time of Payment of Accrued Benefit........................... 6.01
6.02 Method of Payment of Accrued Benefit......................... 6.03
6.03 Benefit Payment Elections.................................... 6.05
6.04 Annuity Distributions to Participants and Surviving Spouses.. 6.06
6.05 Waiver Election - Qualified Joint and Survivor Annuity....... 6.07
6.06 Waiver Election - Preretirement Survivor Annuity............. 6.08
6.07 Distributions Under Domestic Relations Orders................ 6.09
ARTICLE VII, EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 Information to Committee..................................... 7.01
7.02 No Liability................................................. 7.01
7.03 Indemnity of Certain Fiduciaries............................. 7.01
7.04 Employer Direction of Investment............................. 7.01
7.05 Amendment to Vesting Schedule................................ 7.01
ARTICLE VIII, PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 Beneficiary Designation...................................... 8.01
8.02 No Beneficiary Designation/Death of Beneficiary.............. 8.01
8.03 Personal Data to Committee................................... 8.02
8.04 Address for Notification..................................... 8.02
8.05 Assignment or Alienation..................................... 8.02
8.06 Notice of Change in Terms.................................... 8.02
8.07 Litigation Against the Trust................................. 8.02
8.08 Information Available........................................ 8.02
8.09 Appeal Procedure for Denial of Benefits...................... 8.02
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
8.10 Participant Direction of Investment.......................... 8.03
ARTICLE IX, ADVISORY COMMITTEE - DUTIES WITH RESPECT TO
PARTICIPANTS' ACCOUNTS
9.01 Members' Compensation, Expenses.............................. 9.01
9.02 Term......................................................... 9.01
9.03 Powers....................................................... 9.01
9.04 General...................................................... 9.01
9.05 Funding Policy............................................... 9.02
9.06 Manner of Action............................................. 9.02
9.07 Authorized Representative.................................... 9.02
9.08 Interested Member............................................ 9.02
9.09 Individual Accounts.......................................... 9.02
9.10 Value of Participant's Accrued Benefit....................... 9.02
9.11 Allocation and Distribution of Net Income Gain or Loss....... 9.03
9.12 Individual Statement......................................... 9.03
9.13 Account Charged.............................................. 9.03
9.14 Unclaimed Account Procedure.................................. 9.04
ARTICLE X, CUSTODIAN/TRUSTEE, POWERS AND DUTIES
10.01 Acceptance................................................... 10.01
10.02 Receipt of Contributions..................................... 10.01
10.03 Investment Powers............................................ 10.01
10.04 Records and Statements....................................... 10.05
10.05 Fees and Expenses from Fund.................................. 10.06
10.06 Parties to Litigation........................................ 10.06
10.07 Professional Agents.......................................... 10.06
10.08 Distribution of Cash or Property............................. 10.06
10.09 Distribution Directions...................................... 10.06
10.10 Third Party/Multiple Trustees................................ 10.06
10.11 Resignation.................................................. 10.06
10.12 Removal...................................................... 10.07
10.13 Interim Duties and Successor Trustee......................... 10.07
10.14 Valuation of Trust........................................... 10.07
10.15 Limitation on Liability - If Investment Manager, Ancillary
Trustee or Independent Fiduciary Appointed................... 10.07
10.16 Investment in Group Trust Fund............................... 10.07
10.17 Appointment of Ancillary Trustee or Independent Fiduciary.... 10.08
ARTICLE XI, PROVISIONS RELATING TO INSURANCE AND INSURANCE COMPANY
11.01 Insurance Benefit............................................ 11.01
11.02 Limitation on Life Insurance Protection...................... 11.01
11.03 Definitions.................................................. 11.02
11.04 Dividend Plan................................................ 11.02
11.05 Insurance Company Not a Party to Agreement................... 11.02
11.06 Insurance Company Not Responsible for Trustee's Actions...... 11.03
11.07 Insurance Company Reliance on Trustee's Signature............ 11.03
11.08 Acquittance.................................................. 11.03
11.09 Duties of Insurance Company.................................. 11.03
ARTICLE XII, MISCELLANEOUS
12.01 Evidence..................................................... 12.01
12.02 No Responsibility for Employer Action........................ 12.01
12.03 Fiduciaries Not Insurers..................................... 12.01
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C> <C>
12.04 Waiver of Notice............................................. 12.01
12.05 Successors................................................... 12.01
12.06 Word Usage................................................... 12.01
12.07 State Law.................................................... 12.01
12.08 Employer's Right to Participate.............................. 12.01
12.09 Employment Not Guaranteed.................................... 12.02
ARTICLE XIII, EXCLUSIVE BENEFIT, AMENDMENT, TERMINATION
13.01 Exclusive Benefit............................................ 13.01
13.02 Amendment By Employer........................................ 13.01
13.03 Amendment By Regional Prototype Plan Sponsor................. 13.02
13.04 Discontinuance............................................... 13.02
13.05 Full Vesting on Termination.................................. 13.02
13.06 Merger/Direct Transfer....................................... 13.02
13.07 Termination.................................................. 13.03
ARTICLE XIV, CODE SECTION 401(k) ARRANGEMENTS
14.01 Application.................................................. 14.01
14.02 Code Section 401(k) Arrangement.............................. 14.01
14.03 Definitions.................................................. 14.02
14.04 Matching Contributions/Employee Contributions................ 14.03
14.05 Time of Payment of Contributions............................. 14.04
14.06 Special Allocation Provisions - Deferral Contributions,
Matching Contributions and Qualified Nonelective
Contributions................................................ 14.04
14.07 Annual Elective Deferral Limitation.......................... 14.05
14.08 Actual Deferral Percentage ("ADP") Test...................... 14.06
14.09 Nondiscrimination Rules for Employer Matching Contributions/
Participant Nondeductible Contributions...................... 14.08
14.10 Multiple Use Limitation...................................... 14.10
14.11 Distribution Restrictions.................................... 14.11
14.12 Special Allocation Rules..................................... 14.12
ARTICLE A - APPENDIX TO BASIC PLAN DOCUMENT ............................... A-1
ARTICLE B - APPENDIX TO BASIC PLAN DOCUMENT ............................... B-1
ARTICLE C - APPENDIX TO BASIC PLAN DOCUMENT ............................... C-1
ARTICLE D - APPENDIX TO BASIC PLAN DOCUMENT ............................... D-1
</TABLE>
v
<PAGE>
ALPHABETICAL LISTING OF DEFINITIONS
<TABLE>
<CAPTION>
PLAN DEFINITION SECTION REFERENCE
(PAGE NUMBER)
<S> <C>
100% Limitation.............................. 3.19(l) (3.09)
Account...................................... 1.14 (1.05)
Accounting Date.............................. 1.20 (1.05)
Accrued Benefit.............................. 1.15 (1.05)
Actual Deferral Percentage ("ADP") Test...... 14.08 (14.06)
Adoption Agreement........................... 1.04 (1.01)
Advisory Committee........................... 1.06 (1.02)
Annual Addition.............................. 3.19(a) (3.07)
Average Contribution Percentage Test......... 14.09 (14.08)
Beneficiary.................................. 1.11 (1.03)
Break in Service for Eligibility Purposes.... 2.03 (2.01)
Break in Service for Vesting Purposes........ 5.07 (5.03)
Cash-out Distribution........................ 5.04 (5.01)
Code......................................... 1.25 (1.06)
Code Section 411(d)(6) Protected Benefits.... 13.02 (13.01)
Compensation................................. 1.12 (1.03)
Compensation for Code Section 401(k) Purposes 14.03(f) (14.02)
Compensation for Code Section 415 Purposes... 3.19(b) (3.07)
Compensation for Top Heavy Purposes.......... 1.33(B)(3) (1.10)
Contract(s).................................. 11.03(c) (11.02)
Custodian Designation........................ 10.03[B] (10.02)
Deemed Cash-out Rule......................... 5.04(C) (5.02)
Deferral Contributions....................... 14.03(g) (14.02)
Deferral Contributions Account............... 14.06 (14.04)
Defined Benefit Plan......................... 3.19(i) (3.08)
Defined Benefit Plan Fraction................ 3.19(j) (3.08)
Defined Contribution Plan.................... 3.19(h) (3.08)
Defined Contribution Plan Fraction........... 3.19(k) (3.09)
Determination Date........................... 1.33(B)(7) (1.10)
Disability................................... 1.28 (1.07)
Distribution Date............................ 6.01 (6.01)
Distribution Restrictions.................... 14.03(m) (14.03)
Earned Income................................ 1.13 (1.05)
Effective Date............................... 1.18 (1.05)
Elective Deferrals........................... 14.03(h) (14.02)
Elective Transfer............................ 13.06(A) (13.02)
Eligible Employee............................ 14.03(c) (14.02)
Employee..................................... 1.07 (1.02)
Employee Contributions....................... 14.03(n) (14.03)
Employer..................................... 1.01 (1.01)
Employer Contribution Account................ 14.06 (14.04)
Employer for Code Section 415 Purposes....... 3.19(c) (3.08)
Employer for Top Heavy Purposes.............. 1.33(B)(6) (1.10)
Employment Commencement Date................. 2.02 (2.01)
ERISA........................................ 1.24 (1.06)
Excess Aggregate Contributions............... 14.09 (14.09)
Excess Amount................................ 3.19(d) (3.08)
Excess Contributions......................... 14.08 (14.07)
</TABLE>
vi
<PAGE>
<TABLE>
<S> <C>
Exempt Participant........................... 8.01 (8.01)
Forfeiture Break in Service.................. 5.08 (5.03)
Group Trust Fund............................. 10.16 (10.07)
Hardship..................................... 6.01(A)(4) (6.02)
Hardship for Code Section 401(k) Purposes.... 14.11 (14.11)
Highly Compensated Employee.................. 1.09 (1.02)
Highly Compensated Group..................... 14.03(d) (14.02)
Hour of Service.............................. 1.27 (1.06)
Incidental Insurance Benefits................ 11.01 (11.01)
Insurable Participant........................ 11.03(d) (11.02)
Investment Manager........................... 9.04(i) (9.01)
Issuing Insurance Company.................... 11.03(b) (11.02)
Joint and Survivor Annuity................... 6.04(A) (6.06)
Key Employee................................. 1.33(B)(1) (1.10)
Leased Employees............................. 1.31 (1.08)
Limitation Year.............................. 1.17 and 3.19(e) (1.05) and (3.08)
Loan Policy.................................. 9.04(A) (9.02)
Mandatory Contributions...................... 14.04 (14.04)
Mandatory Contributions Account.............. 14.04 (14.04)
Master or Prototype Plan..................... 3.19(f) (3.08)
Matching Contributions....................... 14.03(i) (14.03)
Maximum Permissible Amount................... 3.19(g) (3.08)
Minimum Distribution Incidental Benefit
(MDIB)....................................... 6.02(A) (6.03)
Multiple Use Limitation...................... 14.10 (14.10)
Named Fiduciary.............................. 10.03[D] (10.04)
Nonelective Contributions.................... 14.03(j) (14.03)
Nonforfeitable............................... 1.16 (1.05)
Nonhighly Compensated Employee............... 14.03(b) (14.02)
Nonhighly Compensated Group.................. 14.03(e) (14.02)
Non-Key Employee............................. 1.33(B)(2) (1.10)
Nontransferable Annuity...................... 1.23 (1.05)
Normal Retirement Age........................ 5.01 (5.01)
Owner-Employee............................... 1.08 (1.02)
Paired Plans................................. 1.34 (1.10)
Participant.................................. 1.10 (1.03)
Participant Deductible Contributions......... 4.02 (4.01)
Participant Forfeiture....................... 3.05 (3.03)
Participant Loans............................ 10.03[E] (10.05)
Participant Nondeductible Contributions...... 4.01 (4.01)
Permissive Aggregation Group................. 1.33(B)(5) (1.10)
Plan......................................... 1.03 (1.01)
Plan Administrator........................... 1.05 (1.02)
Plan Entry Date.............................. 1.19 (1.05)
Plan Year.................................... 1.17 (1.05)
Policy....................................... 11.03(a) (11.02)
Predecessor Employer......................... 1.29 (1.07)
Preretirement Survivor Annuity............... 6.04(B) (6.06)
Qualified Domestic Relations Order........... 6.07 (6.09)
Qualified Matching Contributions............. 14.03(k) (14.03)
Qualified Nonelective Contributions.......... 14.03(l) (14.03)
Qualifying Employer Real Property............ 10.03[F] (10.05)
Qualifying Employer Securities............... 10.03[F] (10.05)
Related Employers............................ 1.30 (1.07)
Required Aggregation Group................... 1.33(B)(4) (1.10)
</TABLE>
vii
<PAGE>
<TABLE>
<S> <C>
Required Beginning Date...................... 6.01(B) (6.02)
Rollover Contributions....................... 4.03 (4.01)
Self-Employed Individual..................... 1.08 (1.02)
Service...................................... 1.26 (1.06)
Term Life Insurance Contract................. 11.03 (11.02)
Top Heavy Minimum Allocation................. 3.04(B) (3.01)
Top Heavy Ratio.............................. 1.33 (1.09)
Trust........................................ 1.21 (1.05)
Trustee...................................... 1.02 (1.01)
Trustee Designation.......................... 10.03[A] (10.01)
Trust Fund................................... 1.22 (1.05)
Weighted Average Allocation Method........... 14.12 (14.12)
Year of Service for Eligibility Purposes..... 2.02 (2.01)
Year of Service for Vesting Purposes......... 5.06 (5.03)
</TABLE>
viii
<PAGE>
WELLS FARGO BANK NEW MEXICO, N.A.
DEFINED CONTRIBUTION MASTER PLAN AND TRUST AGREEMENT
BASIC PLAN DOCUMENT # 01
Wells Fargo Bank New Mexico, N.A., in its capacity as Master Plan Sponsor,
establishes this Master Plan intended to conform to and qualify under Section
401 and Section 501 of the Internal Revenue Code of 1986, as amended. An
Employer establishes a Plan and Trust under this Master Plan by executing an
Adoption Agreement. If the Employer adopts this Plan as a restated Plan in
substitution for, and in amendment of, an existing plan, the provisions of this
Plan, as a restated Plan, apply solely to an Employee whose employment with the
Employer terminates on or after the restated Effective Date of the Employer's
Plan. If an Employee's employment with the Employer terminates prior to the
restated Effective Date, that Employee is entitled to benefits under the Plan as
the Plan existed on the date of the Employee's termination of employment.
ARTICLE I
DEFINITIONS
1.01 "Employer" means each employer who adopts this Plan by executing an
Adoption Agreement.
1.02 "Trustee" means the person or persons who as Trustee execute the
Employer's Adoption Agreement, or any successor in office who in writing accepts
the position of Trustee. The Employer must designate in its Adoption Agreement
whether the Trustee will administer the Trust as a discretionary Trustee or as a
nondiscretionary Trustee. If a person acts as a discretionary Trustee, the
Employer also may appoint a Custodian. See Article X. If the Master Plan Sponsor
is a bank, savings and loan, credit union or similar financial institution, a
person other than the Master Plan Sponsor (or its affiliate) may not serve as
Trustee or as Custodian of the Employer's Plan without the written consent of
the Master Plan Sponsor.
1.03 "Plan" means the retirement plan established or continued by the
Employer in the form of this Agreement, including the Adoption Agreement under
which the Employer has elected to participate in this Master Plan. The Employer
must designate the name of the Plan in its Adoption Agreement. An Employer may
execute more than one Adoption Agreement offered under this Master Plan, each of
which will constitute a separate Plan and Trust established or continued by that
Employer. The Plan and the Trust created by each adopting Employer is a separate
Plan and a separate Trust, independent from the plan and the trust of any other
employer adopting this Master Plan. All section references within the Plan are
Plan section references unless the context clearly indicates otherwise.
1.04 "Adoption Agreement" means the document executed by each Employer
adopting this Master Plan. The terms of this Master Plan as modified by the
terms of an adopting Employer's Adoption Agreement constitute a separate Plan
and Trust to be construed as a single Agreement. Each elective provision of the
Adoption Agreement corresponds by section reference to the section of the Plan
which grants the election. Each Adoption Agreement offered under this Master
Plan is either a Nonstandardized Plan or a Standardized Plan, as identified in
the preamble to that Adoption Agreement. The provisions of this Master Plan
apply equally to Nonstandardized Plans and to Standardized Plans unless
otherwise specified.
1.01
<PAGE>
1.05 "Plan Administrator" is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition to his
other duties, the Plan Administrator has full responsibility for compliance with
the reporting and disclosure rules under ERISA as respects this Agreement.
1.06 "Advisory Committee" means the Employer's Advisory Committee as from
time to time constituted.
1.07 "Employee" means any employee (including a Self-Employed Individual)
of the Employer. The Employer must specify in its Adoption Agreement any
Employee, or class of Employees, not eligible to participate in the Plan. If the
Employer elects to exclude collective bargaining employees, the exclusion
applies to any employee of the Employer 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 one or more employers unless the
collective bargaining agreement requires the employee to be included within the
Plan. The term "employee representatives" does not include any organization more
than half the members of which are owners, officers, or executives of the
Employer.
1.08 "Self-Employed Individual/Owner-Employee." "Self-Employed Individual"
means an individual who has Earned Income (or who would have had Earned Income
but for the fact that the trade or business did not have net earnings) for the
taxable year from the trade or business for which the Plan is established.
"Owner-Employee" means a Self-Employed Individual who is the sole proprietor in
the case of a sole proprietorship. If the Employer is a partnership,
"Owner-Employee" means a Self-Employed Individual who is a partner and owns more
than 10% of either the capital or profits interest of the partnership.
1.09 "Highly Compensated Employee" means an Employee who, during the Plan
Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the constructive
ownership rules of Code Section 318, and applying the principles of Code
Section 318, for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the Commissioner
of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the Commissioner
of Internal Revenue for the relevant year) and is part of the top-paid 20%
group of employees (based on Compensation for the relevant year); or
(d) has Compensation in excess of 50% of the dollar amount prescribed in
Code Section 415(b)(1)(A) (relating to defined benefit plans) and is an
officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in the
Plan Year but does not satisfy clause (b), (c) or (d) during the preceding
12-month period and does not satisfy clause (a) in either period, the Employee
is a Highly Compensated Employee only if he is one of the 100 most highly
compensated Employees for the Plan Year. The number of officers taken into
account under clause (d) will not exceed the greater of 3 or 10% of the total
number (after application of the Code Section 414(q) exclusions) of Employees,
but no more than 50 officers. If no Employee satisfies the Compensation
requirement in clause (d) for the relevant year, the Advisory Committee will
treat the highest paid officer as satisfying clause (d) for that year.
1.02
<PAGE>
For purposes of this Section 1.09, "Compensation" means Compensation as
defined in Section 1.12, except any exclusions from Compensation elected in the
Employer's Adoption Agreement Section 1.12 do not apply, and Compensation must
include "elective contributions" (as defined in Section 1.12). The Advisory
Committee must make the determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of the top paid 20%
group, the top 100 paid Employees, the number of officers includible in clause
(d) and the relevant Compensation, consistent with Code Section 414(q) and
regulations issued under that Code section. The Employer may make a calendar
year election to determine the Highly Compensated Employees for the Plan Year,
as prescribed by Treasury regulations. A calendar year election must apply to
all plans and arrangements of the Employer. For purposes of applying any
nondiscrimination test required under the Plan or under the Code, in a manner
consistent with applicable Treasury regulations, the Advisory Committee will
treat a Highly Compensated Employee and all family members (a spouse, a lineal
ascendant or descendant, or a spouse of a lineal ascendant or descendant) as a
single Highly Compensated Employee, but only if the Highly Compensated Employee
is a more than 5% owner or is one of the 10 Highly Compensated Employees with
the greatest Compensation for the Plan Year. This aggregation rule applies to a
family member even if that family member is a Highly Compensated Employee
without family aggregation.
The term "Highly Compensated Employee" also includes any former Employee
who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs no
Service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
55th birthday. If the former Employee's Separation from Service occurred prior
to January 1, 1987, he is a Highly Compensated Employee only if he satisfied
clause (a) of this Section 1.09 or received Compensation in excess of $50,000
during: (1) the year of his Separation from Service (or the prior year); or (2)
any year ending after his 54th birthday.
1.10 "Participant" is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section 2.01.
1.11 "Beneficiary" is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes entitled
to a benefit under the Plan remains a Beneficiary under the Plan until the
Trustee has fully distributed his benefit to him. A Beneficiary's right to (and
the Plan Administrator's, the Advisory Committee's or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan does not
arise until he first becomes entitled to receive a benefit under the Plan.
1.12 "Compensation" means, except as provided in the Employer's Adoption
Agreement, the Participant's Earned Income, wages, salaries, fees for
professional service and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the plan
(including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses). The Employer must elect in its Adoption Agreement
whether to include elective contributions in the definition of Compensation.
"Elective contributions" are amounts excludible from the Employee's gross income
under Code Sections 125, 402(a)(8), 402(h) or 403(b), and contributed by the
Employer, at the Employee's election, to a Code Section 401(k) arrangement, a
Simplified Employee Pension, cafeteria plan or tax-sheltered annuity. The term
"Compensation" does not include:
(a) Employer contributions (other than "elective contributions," if
includible in the definition of Compensation under Section 1.12 of the
Employer's Adoption Agreement) to a plan of deferred compensation to the
extent the contributions are not included in the gross income of the
Employee for the taxable year in which contributed, on behalf of an
Employee to a Simplified Employee Pension Plan to the extent such
contributions are excludible from the Employee's gross income, and any
distributions from a plan of deferred compensation, regardless of whether
such amounts are includible in the gross income of the Employee when
distributed.
(b) Amounts realized from the exercise of a non-qualified stock option, or
when restricted stock (or property) held by an Employee either becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture.
1.03
<PAGE>
(c) Amounts realized from the sale, exchange or other disposition of stock
acquired under a stock option described in Part II, Subchapter D, Chapter
1 of the Code.
(d) Other amounts which receive special tax benefits, such as premiums for
group term life insurance (but only to the extent that the premiums are
not includible in the gross income of the Employee), or contributions made
by an Employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity contract described in Code Section 403(b)
(whether or not the contributions are excludible from the gross income of
the Employee), other than "elective contributions," if elected in the
Employer's Adoption Agreement.
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.12, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into account
only Compensation actually paid for the relevant period. A Compensation payment
includes Compensation by the Employer through another person under the common
paymaster provisions in Code Sections 3121 and 3306.
(A) LIMITATIONS ON COMPENSATION.
(1) COMPENSATION DOLLAR LIMITATION. For any Plan Year beginning after
December 31, 1988, the Advisory Committee must take into account only the first
$200,000 (or beginning January 1, 1990, such larger amount as the Commissioner
of Internal Revenue may prescribe) of any Participant's Compensation. For any
Plan Year beginning prior to January 1, 1989, this $200,000 limitation (but not
the family aggregation requirement described in the next paragraph) applies only
if the Plan is top heavy for such Plan Year or operates as a deemed top heavy
plan for such Plan Year.
(2) APPLICATION OF COMPENSATION LIMITATION TO CERTAIN FAMILY MEMBERS. The
$200,000 Compensation limitation applies to the combined Compensation of the
Employee and of any family member aggregated with the Employee under Section
1.09 who is either (i) the Employee's spouse; or (ii) the Employee's lineal
descendant under the age of 19. If, for a Plan Year, the combined Compensation
of the Employee and such family members who are Participants entitled to an
allocation for that Plan Year exceeds the $200,000 (or adjusted) limitation,
"Compensation" for each such Participant, for purposes of the contribution and
allocation provisions of Article III, means his Adjusted Compensation. Adjusted
Compensation is the amount which bears the same ratio to the $200,000 (or
adjusted) limitation as the affected Participant's Compensation (without regard
to the $200,000 Compensation limitation) bears to the combined Compensation of
all the affected Participants in the family unit. If the Plan uses permitted
disparity, the Advisory Committee must determine the integration level of each
affected family member Participant prior to the proration of the $200,000
Compensation limitation, but the combined integration level of the affected
Participants may not exceed $200,000 (or the adjusted limitation). The combined
Excess Compensation of the affected Participants in the family unit may not
exceed $200,000 (or the adjusted limitation) minus the affected Participants'
combined integration level (as determined under the preceding sentence). If the
combined Excess Compensation exceeds this limitation, the Advisory Committee
will prorate the Excess Compensation limitation among the affected Participants
in the family unit in proportion to each such individual's Adjusted Compensation
minus his integration level. If the Employer's Plan is a Nonstandardized Plan,
the Employer may elect to use a different method in determining the Adjusted
Compensation of the affected Participants by specifying that method in an
addendum to the Adoption Agreement, numbered Section 1.12.
(B) NONDISCRIMINATION. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation means
Compensation as defined in this Section 1.12, except: (1) the Employer may elect
to include or to exclude elective contributions, irrespective of the Employer's
election in its Adoption Agreement regarding elective contributions; and (2) the
Employer will not give effect to any elections made in the "modifications to
Compensation definition" section of Adoption Agreement Section 1.12. The
Employer's election described in clause (1) must be consistent and uniform with
respect to all Employees and all plans of the Employer for any particular Plan
Year. If the Employer's Plan is a Nonstandardized Plan, the Employer,
irrespective of clause (2), may elect to exclude from this nondiscrimination
definition of Compensation any items of Compensation excludible under Code
Section 414(s) and the applicable Treasury regulations, provided such adjusted
definition conforms to the nondiscrimination requirements of those regulations.
1.04
<PAGE>
1.13 "Earned Income" means net earnings from self-employment in the trade
or business with respect to which the Employer has established the Plan,
provided personal services of the individual are a material income producing
factor. The Advisory Committee will determine net earnings without regard to
items excluded from gross income and the deductions allocable to those items.
The Advisory Committee will determine net earnings after the deduction allowed
to the Self-Employed Individual for all contributions made by the Employer to a
qualified plan and, for Plan Years beginning after December 31, 1989, the
deduction allowed to the Self-Employed under Code Section 164(f) for
self-employment taxes.
1.14 "Account" means the separate account(s) which the Advisory Committee
or the Trustee maintains for a Participant under the Employer's Plan.
1.15 "Accrued Benefit" means the amount standing in a Participant's
Account(s) as of any date derived from both Employer contributions and Employee
contributions, if any.
1.16 "Nonforfeitable" means a Participant's or Beneficiary's unconditional
claim, legally enforceable against the Plan, to the Participant's Accrued
Benefit.
1.17 "Plan Year" means the fiscal year of the Plan, the consecutive month
period specified in the Employer's Adoption Agreement. The Employer's Adoption
Agreement also must specify the "Limitation Year" applicable to the limitations
on allocations described in Article III. If the Employer maintains Paired Plans,
each Plan must have the same Plan Year.
1.18 "Effective Date" of this Plan is the date specified in the Employer's
Adoption Agreement.
1.19 "Plan Entry Date" means the date(s) specified in Section 2.01 of the
Employer's Adoption Agreement.
1.20 "Accounting Date" is the last day of an Employer's Plan Year. Unless
otherwise specified in the Plan, the Advisory Committee will make all Plan
allocations for a particular Plan Year as of the Accounting Date of that Plan
Year.
1.21 "Trust" means the separate Trust created under the Employer's Plan.
1.22 "Trust Fund" means all property of every kind held or acquired by the
Employer's Plan, other than incidental benefit insurance contracts.
1.23 "Nontransferable Annuity" means an annuity which by its terms
provides that it may not be sold, assigned, discounted, pledged as collateral
for a loan or security for the performance of an obligation or for any purpose
to any person other than the insurance company. If the Plan distributes an
annuity contract, the contract must be a Nontransferable Annuity.
1.24 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.25 "Code" means the Internal Revenue Code of 1986, as amended.
1.26 "Service" means any period of time the Employee is in the employ of
the Employer, including any period the Employee is on an unpaid leave of absence
authorized by the Employer under a uniform, nondiscriminatory policy applicable
to all Employees. "Separation from Service" means the Employee no longer has an
employment relationship with the Employer maintaining this Plan.
1.05
<PAGE>
1.27 "Hour of Service" means:
(a) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment, for the performance of duties. The Advisory Committee credits
Hours of Service under this paragraph (a) to the Employee for the
computation period in which the Employee performs the duties, irrespective
of when paid;
(b) Each Hour of Service for back pay, irrespective of mitigation of
damages, to which the Employer has agreed or for which the Employee has
received an award. The Advisory Committee credits Hours of Service under
this paragraph (b) to the Employee for the computation period(s) to which
the award or the agreement pertains rather than for the computation period
in which the award, agreement or payment is made; and
(c) Each Hour of Service for which the Employer, either directly or
indirectly, pays an Employee, or for which the Employee is entitled to
payment (irrespective of whether the employment relationship is
terminated), for reasons other than for the performance of duties during a
computation period, such as leave of absence, vacation, holiday, sick
leave, illness, incapacity (including disability), layoff, jury duty or
military duty. The Advisory Committee will credit no more than 501 Hours
of Service under this paragraph (c) to an Employee on account of any
single continuous period during which the Employee does not perform any
duties (whether or not such period occurs during a single computation
period). The Advisory Committee credits Hours of Service under this
paragraph (c) in accordance with the rules of paragraphs (b) and (c) of
Labor Reg. Section 2530.200b-2, which the Plan, by this reference,
specifically incorporates in full within this paragraph (c).
The Advisory Committee will not credit an Hour of Service under more than
one of the above paragraphs. A computation period for purposes of this Section
1.27 is the Plan Year, Year of Service period, Break in Service period or other
period, as determined under the Plan provision for which the Advisory Committee
is measuring an Employee's Hours of Service. The Advisory Committee will resolve
any ambiguity with respect to the crediting of an Hour of Service in favor of
the Employee.
(A) METHOD OF CREDITING HOURS OF SERVICE. The Employer must elect in its
Adoption Agreement the method the Advisory Committee will use in crediting an
Employee with Hours of Service. For purposes of the Plan, "actual" method means
the determination of Hours of Service from records of hours worked and hours for
which the Employer makes payment or for which payment is due from the Employer.
If the Employer elects to apply an "equivalency" method, for each equivalency
period for which the Advisory Committee would credit the Employee with at least
one Hour of Service, the Advisory Committee will credit the Employee with: (i)
10 Hours of Service for a daily equivalency; (ii) 45 Hours of Service for a
weekly equivalency; (iii) 95 Hours of Service for a semimonthly payroll period
equivalency; and (iv) 190 Hours of Service for a monthly equivalency.
(B) MATERNITY/PATERNITY LEAVE. Solely for purposes of determining whether the
Employee incurs a Break in Service under any provision of this Plan, the
Advisory Committee must credit Hours of Service during an Employee's unpaid
absence period due to maternity or paternity leave. The Advisory Committee
considers an Employee on maternity or paternity leave if the Employee's absence
is due to the Employee's pregnancy, the birth of the Employee's child, the
placement with the Employee of an adopted child, or the care of the Employee's
child immediately following the child's birth or placement. The Advisory
Committee credits Hours of Service under this paragraph on the basis of the
number of Hours of Service the Employee would receive if he were paid during the
absence period or, if the Advisory Committee cannot determine the number of
Hours of Service the Employee would receive, on the basis of 8 hours per day
during the absence period. The Advisory Committee will credit only the number
(not exceeding 501) of Hours of Service necessary to prevent an Employee's Break
in Service. The Advisory Committee credits all Hours of Service described in
this paragraph to the computation period in which the absence period begins or,
if the Employee does not need these Hours of Service to prevent a Break in
Service in the computation period in which his absence period begins, the
Advisory Committee credits these Hours of Service to the immediately following
computation period.
1.06
<PAGE>
1.28 "Disability" means the Participant, because of a physical or mental
disability, will be unable to perform the duties of his customary position of
employment (or is unable to engage in any substantial gainful activity) for an
indefinite period which the Advisory Committee considers will be of long
continued duration. A Participant also is disabled if he incurs the permanent
loss or loss of use of a member or function of the body, or is permanently
disfigured, and incurs a Separation from Service. The Plan considers a
Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.28 in a nondiscriminatory, consistent and uniform manner. If the Employer's
Plan is a Nonstandardized Plan, the Employer may provide an alternate definition
of disability in an addendum to its Adoption Agreement, numbered Section 1.28.
1.29 SERVICE FOR PREDECESSOR EMPLOYER. If the Employer maintains the plan
of a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as service with the Employer. If the Employer does not
maintain the plan of a predecessor employer, the Plan does not credit service
with the predecessor employer, unless the Employer identifies the predecessor in
its Adoption Agreement and specifies the purposes for which the Plan will credit
service with that predecessor employer.
1.30 RELATED EMPLOYERS. A related group is a controlled group of
corporations (as defined in Code Section 414(b)), trades or businesses (whether
or not incorporated) which are under common control (as defined in Code Section
414(c)) or an affiliated service group (as defined in Code Section 414(m) or in
Code Section 414(o)). If the Employer is a member of a related group, the term
"Employer" includes the related group members for purposes of crediting Hours of
Service, determining Years of Service and Breaks in Service under Articles II
and V, applying the Participation Test and the Coverage Test under Section
3.06(E), applying the limitations on allocations in Part 2 of Article III,
applying the top heavy rules and the minimum allocation requirements of Article
III, the definitions of Employee, Highly Compensated Employee, Compensation and
Leased Employee, and for any other purpose required by the applicable Code
section or by a Plan provision. However, an Employer may contribute to the Plan
only by being a signatory to the Execution Page of the Adoption Agreement or to
a Participation Agreement to the Employer's Adoption Agreement. If one or more
of the Employer's related group members become Participating Employers by
executing a Participation Agreement to the Employer's Adoption Agreement, the
term "Employer" includes the participating related group members for all
purposes of the Plan, and "Plan Administrator" means the Employer that is the
signatory to the Execution Page of the Adoption Agreement.
If the Employer's Plan is a Standardized Plan, all Employees of the
Employer or of any member of the Employer's related group, are eligible to
participate in the Plan, irrespective of whether the related group member
directly employing the Employee is a Participating Employer. If the Employer's
Plan is a Nonstandardized Plan, the Employer must specify in Section 1.07 of its
Adoption Agreement, whether the Employees of related group members that are not
Participating Employers are eligible to participate in the Plan. Under a
Nonstandardized Plan, the Employer may elect to exclude from the definition of
"Compensation" for allocation purposes any Compensation received from a related
employer that has not executed a Participation Agreement and whose Employees are
not eligible to participate in the Plan.
1.31 LEASED EMPLOYEES. The Plan treats a Leased Employee as an Employee of
the Employer. A Leased Employee is an individual (who otherwise is not an
Employee of the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer (or for
the Employer and any persons related to the Employer within the meaning of Code
Section 144(a)(3)) on a substantially full time basis for at least one year and
who performs services historically performed by employees in the Employer's
business field. If a Leased Employee is treated as an Employee by reason of this
Section 1.31 of the Plan, "Compensation" includes Compensation from the leasing
organization which is attributable to services performed for the Employer.
1.07
<PAGE>
(A) SAFE HARBOR PLAN EXCEPTION. The Plan does not treat a Leased Employee as an
Employee if the leasing organization covers the employee in a safe harbor plan
and, prior to application of this safe harbor plan exception, 20% or less of the
Employer's Employees (other than Highly Compensated Employees) are Leased
Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a nonintegrated
contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective contributions
(as defined in Section 1.12).
(B) OTHER REQUIREMENTS. The Advisory Committee must apply this Section 1.31 in a
manner consistent with Code Sections 414(n) and 414(o) and the regulations
issued under those Code sections. The Employer must specify in the Adoption
Agreement the manner in which the Plan will determine the allocation of Employer
contributions and Participant forfeitures on behalf of a Participant if the
Participant is a Leased Employee covered by a plan maintained by the leasing
organization.
1.32 SPECIAL RULES FOR OWNER-EMPLOYEES. The following special provisions
and restrictions apply to Owner-Employees:
(a) If the Plan provides contributions or benefits for an Owner-Employee
or for a group of Owner-Employees who controls the trade or business with
respect to which this Plan is established and the Owner-Employee or
Owner-Employees also control as Owner-Employees one or more other trades
or businesses, plans must exist or be established with respect to all the
controlled trades or businesses so that when the plans are combined they
form a single plan which satisfies the requirements of Code Section 401(a)
and Code Section 401(d) with respect to the employees of the controlled
trades or businesses.
(b) The Plan excludes an Owner-Employee or group of Owner-Employees if the
Owner-Employee or group of Owner-Employees controls any other trade or
business, unless the employees of the other controlled trade or business
participate in a plan which satisfies the requirements of Code Section
401(a) and Code Section 401(d). The other qualified plan must provide
contributions and benefits which are not less favorable than the
contributions and benefits provided for the Owner-Employee or group of
Owner-Employees under this Plan, or if an Owner-Employee is covered under
another qualified plan as an Owner-Employee, then the plan established
with respect to the trade or business he does control must provide
contributions or benefits as favorable as those provided under the most
favorable plan of the trade or business he does not control. If the
exclusion of this paragraph (b) applies and the Employer's Plan is a
Standardized Plan, the Employer may not participate or continue to
participate in this Master Plan and the Employer's Plan becomes an
individually-designed plan for purposes of qualification reliance.
(c) For purposes of paragraphs (a) and (b) of this Section 1.32, an
Owner-Employee or group of Owner-Employees controls a trade or business if
the Owner-Employee or Owner-Employees together (1) own the entire interest
in an unincorporated trade or business, or (2) in the case of a
partnership, own more than 50% of either the capital interest or the
profits interest in the partnership.
1.08
<PAGE>
1.33 DETERMINATION OF TOP HEAVY STATUS. If this Plan is the only qualified
plan maintained by the Employer, the Plan is top heavy for a Plan Year if the
top heavy ratio as of the Determination Date exceeds 60%. The top heavy ratio is
a fraction, the numerator of which is the sum of the present value of Accrued
Benefits of all Key Employees as of the Determination Date and the denominator
of which is a similar sum determined for all Employees. The Advisory Committee
must include in the top heavy ratio, as part of the present value of Accrued
Benefits, any contribution not made as of the Determination Date but includible
under Code Section 416 and the applicable Treasury regulations, and
distributions made within the Determination Period. The Advisory Committee must
calculate the top heavy ratio by disregarding the Accrued Benefit (and
distributions, if any, of the Accrued Benefit) of any Non-Key Employee who was
formerly a Key Employee, and by disregarding the Accrued Benefit (including
distributions, if any, of the Accrued Benefit) of an individual who has not
received credit for at least one Hour of Service with the Employer during the
Determination Period. The Advisory Committee must calculate the top heavy ratio,
including the extent to which it must take into account distributions, rollovers
and transfers, in accordance with Code Section 416 and the regulations under
that Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is terminated,
this Plan is top heavy only if it is part of the Required Aggregation Group, and
the top heavy ratio for the Required Aggregation Group and for the Permissive
Aggregation Group, if any, each exceeds 60%. The Advisory Committee will
calculate the top heavy ratio in the same manner as required by the first
paragraph of this Section 1.33, taking into account all plans within the
Aggregation Group. To the extent the Advisory Committee must take into account
distributions to a Participant, the Advisory Committee must include
distributions from a terminated plan which would have been part of the Required
Aggregation Group if it were in existence on the Determination Date. The
Advisory Committee will calculate the present value of accrued benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Code Section 416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his accrued benefit
under the accrual method, if any, which is applicable uniformly to all defined
benefit plans maintained by the Employer or, if there is no uniform method, in
accordance with the slowest accrual rate permitted under the fractional rule
accrual method described in Code Section 411(b)(1)(C). If the Employer maintains
a defined benefit plan, the Employer must specify in Adoption Agreement Section
3.18 the actuarial assumptions (interest and mortality only) the Advisory
Committee will use to calculate the present value of benefits from a defined
benefit plan. If an aggregated plan does not have a valuation date coinciding
with the Determination Date, the Advisory Committee must value the Accrued
Benefits in the aggregated plan as of the most recent valuation date falling
within the twelve-month period ending on the Determination Date, except as Code
Section 416 and applicable Treasury regulations require for the first and second
plan year of a defined benefit plan. The Advisory Committee will calculate the
top heavy ratio with reference to the Determination Dates that fall within the
same calendar year.
(A) STANDARDIZED PLAN. If the Employer's Plan is a Standardized Plan, the Plan
operates as a deemed top heavy plan in all Plan Years, except, if the
Standardized Plan includes a Code Section 401(k) arrangement, the Employer may
elect to apply the top heavy requirements only in Plan Years for which the Plan
actually is top heavy. Under a deemed top heavy plan, the Advisory Committee
need not determine whether the Plan actually is top heavy. However, if the
Employer, in Adoption Agreement Section 3.18, elects to override the 100%
limitation, the Advisory Committee will need to determine whether a deemed top
heavy Plan's top heavy ratio for a Plan Year exceeds 90%.
1.09
<PAGE>
(B) DEFINITIONS. For purposes of applying the provisions of this Section 1.33:
(1) "Key Employee" means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, for any Plan Year
in the Determination Period: (i) has Compensation in excess of 50% of the
dollar amount prescribed in Code Section 415(b)(1)(A) (relating to defined
benefit plans) and is an officer of the Employer; (ii) has Compensation in
excess of the dollar amount prescribed in Code Section 415(c)(1)(A)
(relating to defined contribution plans) and is one of the Employees
owning the ten largest interests in the Employer; (iii) is a more than 5%
owner of the Employer; or (iv) is a more than 1% owner of the Employer and
has Compensation of more than $150,000. The constructive ownership rules
of Code Section 318 (or the principles of that section, in the case of an
unincorporated Employer,) will apply to determine ownership in the
Employer. The number of officers taken into account under clause (i) will
not exceed the greater of 3 or 10% of the total number (after application
of the Code Section 414(q) exclusions) of Employees, but no more than 50
officers. The Advisory Committee will make the determination of who is a
Key Employee in accordance with Code Section 416(i)(1) and the regulations
under that Code section.
(2) "Non-Key Employee" is an employee who does not meet the definition of
Key Employee.
(3) "Compensation" means Compensation as determined under Section 1.09 for
purposes of identifying Highly Compensated Employees.
(4) "Required Aggregation Group" means: (i) each qualified plan of the
Employer in which at least one Key Employee participates at any time
during the Determination Period; and (ii) any other qualified plan of the
Employer which enables a plan described in clause (i) to meet the
requirements of Code Section 401(a)(4) or of Code Section 410.
(5) "Permissive Aggregation Group" is the Required Aggregation Group plus
any other qualified plans maintained by the Employer, but only if such
group would satisfy in the aggregate the requirements of Code Section
401(a)(4) and of Code Section 410. The Advisory Committee will determine
the Permissive Aggregation Group.
(6) "Employer" means the Employer that adopts this Plan and any related
employers described in Section 1.30.
(7) "Determination Date" for any Plan Year is the Accounting Date of the
preceding Plan Year or, in the case of the first Plan Year of the Plan,
the Accounting Date of that Plan Year. The "Determination Period" is the 5
year period ending on the Determination Date.
1.34 "Paired Plans" means the Employer has adopted two Standardized Plan
Adoption Agreements offered with this Master Plan, one Adoption Agreement being
a Paired Profit Sharing Plan and one Adoption Agreement being a Paired Pension
Plan. A Paired Profit Sharing Plan may include a Code Section 401(k)
arrangement. A Paired Pension Plan must be a money purchase pension plan or a
target benefit pension plan. Paired Plans must be the subject of a favorable
opinion letter issued by the National Office of the Internal Revenue Service.
This Master Plan does not pair any of its Standardized Plan Adoption Agreements
with Standardized Plan Adoption Agreements under a defined benefit master plan.
* * * * * * * * * * * * * * *
1.10
<PAGE>
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY. Each Employee becomes a Participant in the Plan in
accordance with the participation option selected by the Employer in its
Adoption Agreement. If this Plan is a restated Plan, each Employee who was a
Participant in the Plan on the day before the Effective Date continues as a
Participant in the Plan, irrespective of whether he satisfies the participation
conditions in the restated Plan, unless otherwise provided in the Employer's
Adoption Agreement.
2.02 YEAR OF SERVICE - PARTICIPATION. For purposes of an Employee's
participation in the Plan under Adoption Agreement Section 2.01, the Plan takes
into account all of his Years of Service with the Employer, except as provided
in Section 2.03. "Year of Service" means an eligibility computation period
during which the Employee completes not less than the number of Hours of Service
specified in the Employer's Adoption Agreement. The initial eligibility
computation period is the first 12 consecutive month period measured from the
Employment Commencement Date. The Plan measures succeeding eligibility
computation periods in accordance with the option selected by the Employer in
its Adoption Agreement. If the Employer elects to measure subsequent periods on
a Plan Year basis, an Employee who receives credit for the required number of
Hours of Service during the initial eligibility computation period and during
the first applicable Plan Year will receive credit for two Years of Service
under Article II. "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service for the Employer. If the Employer
elects a service condition under Adoption Agreement Section 2.01 based on
months, the Plan does not apply any Hour of Service requirement after the
completion of the first Hour of Service.
2.03 BREAK IN SERVICE - PARTICIPATION. An Employee incurs a "Break in
Service" if during any 12 consecutive month period he does not complete more
than 500 Hours of Service with the Employer. The "12 consecutive month period"
under this Section 2.03 is the same 12 consecutive month period for which the
Plan measures "Years of Service" under Section 2.02.
(A) 2-YEAR ELIGIBILITY. If the Employer elects a 2 years of service condition
for eligibility purposes under Adoption Agreement Section 2.01, the Plan treats
an Employee who incurs a one year Break in Service and who has never become a
Participant as a new Employee on the date he first performs an Hour of Service
for the Employer after the Break in Service.
(B) SUSPENSION OF YEARS OF SERVICE. The Employer must elect in its Adoption
Agreement whether a Participant will incur a suspension of Years of Service
after incurring a one year Break in Service. If this rule applies under the
Employer's Plan, the Plan disregards a Participant's Years of Service (as
defined in Section 2.02) earned prior to a Break in Service until the
Participant completes another Year of Service and the Plan suspends the
Participant's participation in the Plan. If the Participant completes a Year of
Service following his Break in Service, the Plan restores that Participant's
pre-Break Years of Service (and the Participant resumes active participation in
the Plan) retroactively to the first day of the computation period in which the
Participant earns the first post-Break Year of Service. The initial computation
period under this Section 2.03(B) is the 12 consecutive month period measured
from the date the Participant first receives credit for an Hour of Service
following the one year Break in Service period. The Plan measures any subsequent
periods, if necessary, in a manner consistent with the computation period
selection in Adoption Agreement Section 2.02. This Section 2.03(B) does not
affect a Participant's vesting credit under Article V and, during a suspension
period, the Participant's Account continues to share fully in Trust Fund
allocations under Section 9.11. Furthermore, this Section 2.03(B) will not
result in the restoration of any Year of Service disregarded under the Break in
Service rule of Section 2.03(A).
2.01
<PAGE>
2.04 PARTICIPATION UPON RE-EMPLOYMENT. A Participant whose employment with
the Employer terminates will re-enter the Plan as a Participant on the date of
his re-employment, subject to the Break in Service rule, if applicable, under
Section 2.03(B). An Employee who satisfies the Plan's eligibility conditions but
who terminates employment with the Employer prior to becoming a Participant will
become a Participant on the later of the Plan Entry Date on which he would have
entered the Plan had he not terminated employment or the date of his
re-employment, subject to the Break in Service rule, if applicable, under
Section 2.03(B). Any Employee who terminates employment prior to satisfying the
Plan's eligibility conditions becomes a Participant in accordance with Adoption
Agreement Section 2.01.
2.05 CHANGE IN EMPLOYEE STATUS. If a Participant has not incurred a
Separation from Service but ceases to be eligible to participate in the Plan, by
reason of employment within an employment classification excluded by the
Employer under Adoption Agreement Section 1.07, the Advisory Committee must
treat the Participant as an Excluded Employee during the period such a
Participant is subject to the Adoption Agreement exclusion. The Advisory
Committee determines a Participant's sharing in the allocation of Employer
contributions and Participant forfeitures, if applicable, by disregarding his
Compensation paid by the Employer for services rendered in his capacity as an
Excluded Employee. However, during such period of exclusion, the Participant,
without regard to employment classification, continues to receive credit for
vesting under Article V for each included Year of Service and the Participant's
Account continues to share fully in Trust Fund allocations under Section 9.11.
If an Excluded Employee who is not a Participant becomes eligible to
participate in the Plan by reason of a change in employment classification, he
will participate in the Plan immediately if he has satisfied the eligibility
conditions of Section 2.01 and would have been a Participant had he not been an
Excluded Employee during his period of Service. Furthermore, the Plan takes into
account all of the Participant's included Years of Service with the Employer as
an Excluded Employee for purposes of vesting credit under Article V.
2.06 ELECTION NOT TO PARTICIPATE. If the Employer's Plan is a Standardized
Plan, the Plan does not permit an otherwise eligible Employee nor any
Participant to elect not to participate in the Plan. If the Employer's Plan is a
Nonstandardized Plan, the Employer must specify in its Adoption Agreement
whether an Employee eligible to participate, or any present Participant, may
elect not to participate in the Plan. For an election to be effective for a
particular Plan Year, the Employee or Participant must file the election in
writing with the Plan Administrator not later than the time specified in the
Employer's Adoption Agreement. The Employer may not make a contribution under
the Plan for the Employee or for the Participant for the Plan Year for which the
election is effective, nor for any succeeding Plan Year, unless the Employee or
Participant re-elects to participate in the Plan. After an Employee's or
Participant's election not to participate has been effective for at least the
minimum period prescribed by the Employer's Adoption Agreement, the Employee or
Participant may re-elect to participate in the Plan for any Plan Year and
subsequent Plan Years. An Employee or Participant may re-elect to participate in
the Plan by filing his election in writing with the Plan Administrator not later
than the time specified in the Employer's Adoption Agreement. An Employee or
Participant who re-elects to participate may again elect not to participate only
as permitted in the Employer's Adoption Agreement. If an Employee is a
Self-Employed Individual, the Employee's election (except as permitted by
Treasury regulations without creating a Code Section 401(k) arrangement with
respect to that Self-Employed Individual) must be effective no later than the
date the Employee first would become a Participant in the Plan and the election
is irrevocable. The Plan Administrator must furnish an Employee or a Participant
any form required for purposes of an election under this Section 2.06. An
election timely filed is effective for the entire Plan Year.
2.02
<PAGE>
A Participant who elects not to participate may not receive a distribution
of his Accrued Benefit attributable either to Employer or to Participant
contributions except as provided under Article IV or under Article VI. However,
for each Plan Year for which a Participant's election not to participate is
effective, the Participant's Account, if any, continues to share in Trust Fund
allocations under Article IX. Furthermore, the Employee or the Participant
receives vesting credit under Article V for each included Year of Service during
the period the election not to participate is effective.
* * * * * * * * * * * * * * *
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
PART 1. AMOUNT OF EMPLOYER CONTRIBUTIONS AND PLAN ALLOCATIONS: SECTIONS 3.01
THROUGH 3.06
3.01 AMOUNT. For each Plan Year, the Employer contributes to the Trust the
amount determined by application of the contribution option selected by the
Employer in its Adoption Agreement. The Employer may not make a contribution to
the Trust for any Plan Year to the extent the contribution would exceed the
Participants' Maximum Permissible Amounts.
The Employer contributes to this Plan on the condition its contribution is
not due to a mistake of fact and the Revenue Service will not disallow the
deduction for its contribution. The Trustee, upon written request from the
Employer, must return to the Employer the amount of the Employer's contribution
made by the Employer by mistake of fact or the amount of the Employer's
contribution disallowed as a deduction under Code Section 404. The Trustee will
not return any portion of the Employer's contribution under the provisions of
this paragraph more than one year after:
(a) The Employer made the contribution by mistake of fact; or
(b) The disallowance of the contribution as a deduction, and then, only to
the extent of the disallowance.
The Trustee will not increase the amount of the Employer contribution
returnable under this Section 3.01 for any earnings attributable to the
contribution, but the Trustee will decrease the Employer contribution returnable
for any losses attributable to it. The Trustee may require the Employer to
furnish it whatever evidence the Trustee deems necessary to enable the Trustee
to confirm the amount the Employer has requested be returned is properly
returnable under ERISA.
3.02 DETERMINATION OF CONTRIBUTION. The Employer, from its records,
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.03 TIME OF PAYMENT OF CONTRIBUTION. The Employer may pay its
contribution for each Plan Year in one or more installments without interest.
The Employer must make its contribution to the Plan within the time prescribed
by the Code or applicable Treasury regulations. Subject to the consent of the
Trustee, the Employer may make its contribution in property rather than in cash,
provided the contribution of property is not a prohibited transaction under the
Code or under ERISA.
3.04 CONTRIBUTION ALLOCATION.
(A) METHOD OF ALLOCATION. The Employer must specify in its Adoption Agreement
the manner of allocating each annual Employer contribution to this Trust.
2.03
<PAGE>
(B) TOP HEAVY MINIMUM ALLOCATION. The Plan must comply with the provisions of
this Section 3.04(B), subject to the elections in the Employer's Adoption
Agreement.
(1) TOP HEAVY MINIMUM ALLOCATION UNDER STANDARDIZED PLAN. Subject to the
Employer's election under Section 3.04(B)(3), the top heavy minimum allocation
requirement applies to a Standardized Plan for each Plan Year, irrespective of
whether the Plan is top heavy.
(a) Each Participant employed by the Employer on the last day of the
Plan Year will receive a top heavy minimum allocation for that Plan
Year. The Employer may elect in Section 3.04 of its Adoption
Agreement to apply this paragraph (a) only to a Participant who is a
Non-Key Employee.
(b) Subject to any overriding elections in Section 3.18 of the
Employer's Adoption Agreement, the top heavy minimum allocation is
the lesser of 3% of the Participant's Compensation for the Plan Year
or the highest contribution rate for the Plan Year made on behalf of
any Participant for the Plan Year. However, if the Employee
participates in Paired Plans, the top heavy minimum allocation is 3%
of his Compensation. If, under Adoption Agreement Section 3.04, the
Employer elects to apply paragraph (a) only to a Participant who is
a Non-Key Employee, the Advisory Committee will determine the
"highest contribution rate" described in the first sentence of this
paragraph (b) by reference only to the contribution rates of
Participants who are Key Employees for the Plan Year.
(2) TOP HEAVY MINIMUM ALLOCATION UNDER NONSTANDARDIZED PLAN. The top heavy
minimum allocation requirement applies to a Nonstandardized Plan only in Plan
Years for which the Plan is top heavy. Except as provided in the Employer's
Adoption Agreement, if the Plan is top heavy in any Plan Year:
(a) Each Non-Key Employee who is a Participant and is employed by
the Employer on the last day of the Plan Year will receive a top
heavy minimum allocation for that Plan Year, irrespective of whether
he satisfies the Hours of Service condition under Section 3.06 of
the Employer's Adoption Agreement; and
(b) The top heavy minimum allocation is the lesser of 3% of the
Non-Key Employee's Compensation for the Plan Year or the highest
contribution rate for the Plan Year made on behalf of any Key
Employee. However, if a defined benefit plan maintained by the
Employer which benefits a Key Employee depends on this Plan to
satisfy the antidiscrimination rules of Code Section 401(a)(4) or
the coverage rules of Code Section 410 (or another plan benefiting
the Key Employee so depends on such defined benefit plan), the top
heavy minimum allocation is 3% of the Non-Key Employee's
Compensation regardless of the contribution rate for the Key
Employees.
(3) SPECIAL ELECTION FOR STANDARDIZED CODE SECTION 401(k) PLAN. If the
Employer's Plan is a Standardized Code Section 401(k) Plan, the Employer may
elect in Adoption Agreement Section 3.04 to apply the top heavy minimum
allocation requirements of Section 3.04(B)(1) only for Plan Years in which the
Plan actually is a top heavy plan.
(4) SPECIAL DEFINITIONS. For purposes of this Section 3.04(B), the term
"Participant" includes any Employee otherwise eligible to participate in the
Plan but who is not a Participant because of his Compensation level or because
of his failure to make elective deferrals under a Code Section 401(k)
arrangement or because of his failure to make mandatory contributions. For
purposes of subparagraph (1)(b) or (2)(b), "Compensation" means Compensation as
defined in Section 1.12, except Compensation does not include elective
contributions, irrespective of whether the Employer has elected to include these
amounts in Section 1.12 of its Adoption Agreement, any exclusion selected in
Section 1.12 of the Adoption Agreement (other than the exclusion of elective
contributions) does not apply, and any modification to the definition of
Compensation in Section 3.06 does not apply.
3.04
<PAGE>
(5) DETERMINING CONTRIBUTION RATES. For purposes of this Section 3.04(B),
a Participant's contribution rate is the sum of all Employer contributions (not
including Employer contributions to Social Security) and forfeitures allocated
to the Participant's Account for the Plan Year divided by his Compensation for
the entire Plan Year. However, for purposes of satisfying a Participant's top
heavy minimum allocation in Plan Years beginning after December 31, 1988, the
Participant's contribution rate does not include any elective contributions
under a Code Section 401(k) arrangement nor any Employer matching contributions
allocated on the basis of those elective contributions or on the basis of
employee contributions, except a Nonstandardized Plan may include in the
contribution rate any matching contributions not necessary to satisfy the
nondiscrimination requirements of Code Section 401(k) or of Code Section 401(m).
If the Employee is a Participant in Paired Plans, the Advisory Committee
will consider the Paired Plans as a single Plan to determine a Participant's
contribution rate and to determine whether the Plans satisfy this top heavy
minimum allocation requirement. To determine a Participant's contribution rate
under a Nonstandardized Plan, the Advisory Committee must treat all qualified
top heavy defined contribution plans maintained by the Employer (or by any
related Employers described in Section 1.30) as a single plan.
(6) NO ALLOCATIONS. If, for a Plan Year, there are no allocations of
Employer contributions or forfeitures for any Participant (for purposes of
Section 3.04 (B)(1)(b)) or for any Key Employee (for purposes of Section
3.04(B)(2)(b)), the Plan does not require any top heavy minimum allocation for
the Plan Year, unless a top heavy minimum allocation applies because of the
maintenance by the Employer of more than one plan.
(7) ELECTION OF METHOD. The Employer must specify in its Adoption
Agreement the manner in which the Plan will satisfy the top heavy minimum
allocation requirement.
(a) If the Employer elects to make any necessary additional contribution
to this Plan, the Advisory Committee first will allocate the Employer
contributions (and Participant forfeitures, if any) for the Plan Year in
accordance with the provisions of Adoption Agreement Section 3.04. The
Employer then will contribute an additional amount for the Account of any
Participant entitled under this Section 3.04(B) to a top heavy minimum
allocation and whose contribution rate for the Plan Year, under this Plan
and any other plan aggregated under paragraph (5), is less than the top
heavy minimum allocation. The additional amount is the amount necessary to
increase the Participant's contribution rate to the top heavy minimum
allocation. The Advisory Committee will allocate the additional
contribution to the Account of the Participant on whose behalf the
Employer makes the contribution.
(b) If the Employer elects to guarantee the top heavy minimum allocation
under another plan, this Plan does not provide the top heavy minimum
allocation and the Advisory Committee will allocate the annual Employer
contributions (and Participant forfeitures) under the Plan solely in
accordance with the allocation method selected under Adoption Agreement
Section 3.04.
3.05 FORFEITURE ALLOCATION. The amount of a Participant's Accrued Benefit
forfeited under the Plan is a Participant forfeiture. The Advisory Committee
will allocate Participant forfeitures in the manner specified by the Employer in
its Adoption Agreement. The Advisory Committee will continue to hold the
undistributed, non-vested portion of a terminated Participant's Accrued Benefit
in his Account solely for his benefit until a forfeiture occurs at the time
specified in Section 5.09 or if applicable, until the time specified in Section
9.14. Except as provided under Section 5.04, a Participant will not share in the
allocation of a forfeiture of any portion of his Accrued Benefit.
3.06 ACCRUAL OF BENEFIT. The Advisory Committee will determine the accrual
of benefit (Employer contributions and Participant forfeitures) on the basis of
the Plan Year in accordance with the Employer's elections in its Adoption
Agreement.
3.05
<PAGE>
(A) COMPENSATION TAKEN INTO ACCOUNT. The Employer must specify in its Adoption
Agreement the Compensation the Advisory Committee is to take into account in
allocating an Employer contribution to a Participant's Account for the Plan Year
in which the Employee first becomes a Participant. For all other Plan Years, the
Advisory Committee will take into account only the Compensation determined for
the portion of the Plan Year in which the Employee actually is a Participant.
The Advisory Committee must take into account the Employee's entire Compensation
for the Plan Year to determine whether the Plan satisfies the top heavy minimum
allocation requirement of Section 3.04(B). The Employer, in an addendum to its
Adoption Agreement numbered 3.06(A), may elect to measure Compensation for the
Plan Year for allocation purposes on the basis of a specified period other than
the Plan Year.
(B) HOURS OF SERVICE REQUIREMENT. Subject to the applicable minimum allocation
requirement of Section 3.04, the Advisory Committee will not allocate any
portion of an Employer contribution for a Plan Year to any Participant's Account
if the Participant does not complete the applicable minimum Hours of Service
requirement specified in the Employer's Adoption Agreement.
(C) EMPLOYMENT REQUIREMENT. If the Employer's Plan is a Standardized Plan, a
Participant who, during a particular Plan Year, completes the accrual
requirements of Adoption Agreement Section 3.06 will share in the allocation of
Employer contributions for that Plan Year without regard to whether he is
employed by the Employer on the Accounting Date of that Plan Year. If the
Employer's Plan is a Nonstandardized Plan, the Employer must specify in its
Adoption Agreement whether the Participant will accrue a benefit if he is not
employed by the Employer on the Accounting Date of the Plan Year. If the
Employer's Plan is a money purchase plan or a target benefit plan, whether
Nonstandardized or Standardized, the Plan conditions benefit accrual on
employment with the Employer on the last day of the Plan Year for the Plan Year
in which the Employer terminates the Plan.
(D) OTHER REQUIREMENTS. If the Employer's Adoption Agreement includes options
for other requirements affecting the Participant's accrual of benefits under the
Plan, the Advisory Committee will apply this Section 3.06 in accordance with the
Employer's Adoption Agreement selections.
(E) SUSPENSION OF ACCRUAL REQUIREMENTS UNDER NONSTANDARDIZED PLAN. If the
Employer's Plan is a Nonstandardized Plan, the Employer may elect in its
Adoption Agreement to suspend the accrual requirements elected under Adoption
Agreement Section 3.06 if, for any Plan Year beginning after December 31, 1989,
the Plan fails to satisfy the Participation Test or the Coverage Test. A Plan
satisfies the Participation Test if, on each day of the Plan Year, the number of
Employees who benefit under the Plan is at least equal to the lesser of 50 or
40% of the total number of Includible Employees as of such day. A Plan satisfies
the Coverage Test if, on the last day of each quarter of the Plan Year, the
number of Nonhighly Compensated Employees who benefit under the Plan is at least
equal to 70% of the total number of Includible Nonhighly Compensated Employees
as of such day. "Includible" Employees are all Employees other than: (1) those
Employees excluded from participating in the Plan for the entire Plan Year by
reason of the collective bargaining unit exclusion or the nonresident alien
exclusion under Adoption Agreement Section 1.07 or by reason of the
participation requirements of Sections 2.01 and 2.03; and (2) any Employee who
incurs a Separation from Service during the Plan Year and fails to complete at
least 501 Hours of Service for the Plan Year. A "Nonhighly Compensated Employee"
is an Employee who is not a Highly Compensated Employee and who is not a family
member aggregated with a Highly Compensated Employee pursuant to Section 1.09 of
the Plan.
For purposes of the Participation Test and the Coverage Test, an Employee
is benefiting under the Plan on a particular date if, under Adoption Agreement
Section 3.04, he is entitled to an allocation for the Plan Year. Under the
Participation Test, when determining whether an Employee is entitled to an
allocation under Adoption Agreement Section 3.04, the Advisory Committee will
disregard any allocation required solely by reason of the top heavy minimum
allocation, unless the top heavy minimum allocation is the only allocation made
under the Plan for the Plan Year.
3.06
<PAGE>
If this Section 3.06(E) applies for a Plan Year, the Advisory Committee
will suspend the accrual requirements for the Includible Employees who are
Participants, beginning first with the Includible Employee(s) employed with the
Employer on the last day of the Plan Year, then the Includible Employee(s) who
have the latest Separation from Service during the Plan Year, and continuing to
suspend in descending order the accrual requirements for each Includible
Employee who incurred an earlier Separation from Service, from the latest to the
earliest Separation from Service date, until the Plan satisfies both the
Participation Test and the Coverage Test for the Plan Year. If two or more
Includible Employees have a Separation from Service on the same day, the
Advisory Committee will suspend the accrual requirements for all such Includible
Employees, irrespective of whether the Plan can satisfy the Participation Test
and the Coverage Test by accruing benefits for fewer than all such Includible
Employees. If the Plan suspends the accrual requirements for an Includible
Employee, that Employee will share in the allocation of Employer contributions
and Participant forfeitures, if any, without regard to the number of Hours of
Service he has earned for the Plan Year and without regard to whether he is
employed by the Employer on the last day of the Plan Year. If the Employer's
Plan includes Employer matching contributions subject to Code Section 401(m),
this suspension of accrual requirements applies separately to the Code Section
401(m) portion of the Plan, and the Advisory Committee will treat an Employee as
benefiting under that portion of the Plan if he is an Eligible Employee for
purposes of the Code Section 401(m) nondiscrimination test. The Employer may
modify the operation of this Section 3.06(E) by electing appropriate
modifications in Section 3.06 of its Adoption Agreement.
PART 2. LIMITATIONS ON ALLOCATIONS: SECTIONS 3.07 THROUGH 3.19
[Note: Sections 3.07 through 3.10 apply only to Participants in this Plan
who do not participate, and who have never participated, in another qualified
plan or in a welfare benefit fund (as defined in Code Section 419(e)) maintained
by the Employer.]
3.07 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount. If the amount the Employer otherwise
would contribute to the Participant's Account would cause the Annual Additions
for the Limitation Year to exceed the Maximum Permissible Amount, the Employer
will reduce the amount of its contribution so the Annual Additions for the
Limitation Year will equal the Maximum Permissible Amount. If an allocation of
Employer contributions, pursuant to Section 3.04, would result in an Excess
Amount (other than an Excess Amount resulting from the circumstances described
in Section 3.10) to the Participant's Account, the Advisory Committee will
reallocate the Excess Amount to the remaining Participants who are eligible for
an allocation of Employer contributions for the Plan Year in which the
Limitation Year ends. The Advisory Committee will make this reallocation on the
basis of the allocation method under the Plan as if the Participant whose
Account otherwise would receive the Excess Amount is not eligible for an
allocation of Employer contributions.
3.08 Prior to the determination of the Participant's actual Compensation
for a Limitation Year, the Advisory Committee may determine the Maximum
Permissible Amount on the basis of the Participant's estimated annual
Compensation for such Limitation Year. The Advisory Committee must make this
determination on a reasonable and uniform basis for all Participants similarly
situated. The Advisory Committee must reduce any Employer contributions
(including any allocation of forfeitures) based on estimated annual Compensation
by any Excess Amounts carried over from prior years.
3.09 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the Maximum Permissible
Amount for such Limitation Year on the basis of the Participant's actual
Compensation for such Limitation Year.
3.07
<PAGE>
3.10 If, pursuant to Section 3.09, or because of the allocation of
forfeitures, there is an Excess Amount with respect to a Participant for a
Limitation Year, the Advisory Committee will dispose of such Excess Amount as
follows:
(a) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent the return would
reduce the Excess Amount.
(b) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan covers the Participant at the end of the Limitation
Year, then the Advisory Committee will use the Excess Amount(s) to reduce
future Employer contributions (including any allocation of forfeitures)
under the Plan for the next Limitation Year and for each succeeding
Limitation Year, as is necessary, for the Participant. If the Employer's
Plan is a profit sharing plan, the Participant may elect to limit his
Compensation for allocation purposes to the extent necessary to reduce his
allocation for the Limitation Year to the Maximum Permissible Amount and
eliminate the Excess Amount.
(c) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan does not cover the Participant at the end of the
Limitation Year, then the Advisory Committee will hold the Excess Amount
unallocated in a suspense account. The Advisory Committee will apply the
suspense account to reduce Employer Contributions (including allocation of
forfeitures) for all remaining Participants in the next Limitation Year,
and in each succeeding Limitation Year if necessary. Neither the Employer
nor any Employee may contribute to the Plan for any Limitation Year in
which the Plan is unable to allocate fully a suspense account maintained
pursuant to this paragraph (c).
(d) The Advisory Committee will not distribute any Excess Amount(s) to
Participants or to former Participants.
[Note: Sections 3.11 through 3.16 apply only to Participants who, in
addition to this Plan, participate in one or more plans (including Paired
Plans), all of which are qualified Master or Prototype defined contribution
plans or welfare benefit funds (as defined in Code Section 419(e)) maintained by
the Employer during the Limitation Year.]
3.11 The amount of Annual Additions which the Advisory Committee may
allocate under this Plan on a Participant's behalf for a Limitation Year may not
exceed the Maximum Permissible Amount, reduced by the sum of any Annual
Additions allocated to the Participant's Accounts for the same Limitation Year
under this Plan and such other defined contribution plan. If the amount the
Employer otherwise would contribute to the Participant's Account under this Plan
would cause the Annual Additions for the Limitation Year to exceed this
limitation, the Employer will reduce the amount of its contribution so the
Annual Additions under all such plans for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.10) to the Participant's
Account, the Advisory Committee will reallocate the Excess Amount to the
remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The Advisory
Committee will make this reallocation on the basis of the allocation method
under the Plan as if the Participant whose Account otherwise would receive the
Excess Amount is not eligible for an allocation of Employer contributions.
3.12 Prior to the determination of the Participant's actual Compensation
for the Limitation Year, the Advisory Committee may determine the amounts
referred to in 3.11 above on the basis of the Participant's estimated annual
Compensation for such Limitation Year. The Advisory Committee will make this
determination on a reasonable and uniform basis for all Participants similarly
situated. The Advisory Committee must reduce any Employer contribution
(including allocation of forfeitures) based on estimated annual Compensation by
any Excess Amounts carried over from prior years.
3.13 As soon as is administratively feasible after the end of the
Limitation Year, the Advisory Committee will determine the amounts referred to
in 3.11 on the basis of the Participant's actual Compensation for such
Limitation Year.
3.08
<PAGE>
3.14 If pursuant to Section 3.13, or because of the allocation of
forfeitures, a Participant's Annual Additions under this Plan and all such other
plans result in an Excess Amount, such Excess Amount will consist of the Amounts
last allocated. The Advisory Committee will determine the Amounts last allocated
by treating the Annual Additions attributable to a welfare benefit fund as
allocated first, irrespective of the actual allocation date under the welfare
benefit fund.
3.15 The Employer must specify in its Adoption Agreement the Excess Amount
attributed to this Plan, if the Advisory Committee allocates an Excess Amount to
a Participant on an allocation date of this Plan which coincides with an
allocation date of another plan.
3.16 The Advisory Committee will dispose of any Excess Amounts attributed
to this Plan as provided in Section 3.10.
[Note: Section 3.17 applies only to Participants who, in addition to this
Plan, participate in one or more qualified plans which are qualified defined
contribution plans other than a Master or Prototype plan maintained by the
Employer during the Limitation Year.]
3.17 SPECIAL ALLOCATION LIMITATION. The amount of Annual Additions which
the Advisory Committee may allocate under this Plan on behalf of any Participant
are limited in accordance with the provisions of Section 3.11 through 3.16, as
though the other plan were a Master or Prototype plan, unless the Employer
provides other limitations in an addendum to the Adoption Agreement, numbered
Section 3.17.
3.18 DEFINED BENEFIT PLAN LIMITATION. If the Employer maintains a defined
benefit plan, or has ever maintained a defined benefit plan which the Employer
has terminated, then the sum of the defined benefit plan fraction and the
defined contribution plan fraction for any Participant for any Limitation Year
must not exceed 1.0. The Employer must provide in Adoption Agreement Section
3.18 the manner in which the Plan will satisfy this limitation. The Employer
also must provide in its Adoption Agreement Section 3.18 the manner in which the
Plan will satisfy the top heavy requirements of Code Section 416 after taking
into account the existence (or prior maintenance) of the defined benefit plan.
3.19 DEFINITIONS - ARTICLE III. For purposes of Article III, the following
terms mean:
(a) "Annual Addition" - The sum of the following amounts allocated on
behalf of a Participant for a Limitation Year, of (i) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee contributions.
Except to the extent provided in Treasury regulations, Annual Additions
include excess contributions described in Code Section 401(k), excess
aggregate contributions described in Code Section 401(m) and excess
deferrals described in Code Section 402(g), irrespective of whether the
plan distributes or forfeits such excess amounts. Annual Additions also
include Excess Amounts reapplied to reduce Employer contributions under
Section 3.10. Amounts allocated after March 31, 1984, to an individual
medical account (as defined in Code Section 415(l)(2)) included as part of
a defined benefit plan maintained by the Employer are Annual Additions.
Furthermore, Annual Additions include contributions paid or accrued after
December 31, 1985, for taxable years ending after December 31, 1985,
attributable to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit fund (as defined in Code Section 419(e)) maintained by the
Employer.
(b) "Compensation" - For purposes of applying the limitations of Part 2 of
this Article III, "Compensation" means Compensation as defined in Section
1.12, except Compensation does not include elective contributions,
irrespective of whether the Employer has elected to include these amounts
as Compensation under Section 1.12 of its Adoption Agreement, and any
exclusion selected in Section 1.12 of the Adoption Agreement (other than
the exclusion of elective contributions) does not apply.
3.09
<PAGE>
(c) "Employer" - The Employer that adopts this Plan and any related
employers described in Section 1.30. Solely for purposes of applying the
limitations of Part 2 of this Article III, the Advisory Committee will
determine related employers described in Section 1.30 by modifying Code
Sections 414(b) and (c) in accordance with Code Section 415(h).
(d) "Excess Amount" - The excess of the Participant's Annual Additions for
the Limitation Year over the Maximum Permissible Amount.
(e) "Limitation Year" - The period selected by the Employer under Adoption
Agreement Section 1.17. All qualified plans of the Employer must use the
same Limitation Year. If the Employer amends the Limitation Year to a
different 12 consecutive month period, the new Limitation Year must begin
on a date within the Limitation Year for which the Employer makes the
amendment, creating a short Limitation Year.
(f) "Master or Prototype Plan" - A plan the form of which is the subject
of a favorable notification letter or a favorable opinion letter from the
Internal Revenue Service.
(g) "Maximum Permissible Amount" - The lesser of (i) $30,000 (or, if
greater, one-fourth of the defined benefit dollar limitation under Code
Section 415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for
the Limitation Year. If there is a short Limitation Year because of a
change in Limitation Year, the Advisory Committee will multiply the
$30,000 (or adjusted) limitation by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
(h) "Defined contribution plan" - A retirement plan which provides for an
individual account for each participant and for benefits based solely on
the amount contributed to the participant's account, and any income,
expenses, gains and losses, and any forfeitures of accounts of other
participants which the plan may allocate to such participant's account.
The Advisory Committee must treat all defined contribution plans (whether
or not terminated) maintained by the Employer as a single plan. Solely for
purposes of the limitations of Part 2 of this Article III, the Advisory
Committee will treat employee contributions made to a defined benefit plan
maintained by the Employer as a separate defined contribution plan. The
Advisory Committee also will treat as a defined contribution plan an
individual medical account (as defined in Code Section 415(l)(2)) included
as part of a defined benefit plan maintained by the Employer and, for
taxable years ending after December 31, 1985, a welfare benefit fund under
Code Section 419(e) maintained by the Employer to the extent there are
post-retirement medical benefits allocated to the separate account of a
key employee (as defined in Code Section 419A(d)(3)).
(i) "Defined benefit plan" - A retirement plan which does not provide for
individual accounts for Employer contributions. The Advisory Committee
must treat all defined benefit plans (whether or not terminated)
maintained by the Employer as a single plan.
[Note: The definitions in paragraphs (j), (k) and (l) apply only if the
limitation described in Section 3.18 applies to the Employer's Plan.]
(j) "Defined benefit plan fraction" -
Projected annual benefit of the Participant under the defined benefit plan(s)
- --------------------------------------------------------------------------------
The lesser of (i) 125% (subject to the "100% limitation" in paragraph (l))
of the dollar limitation in effect under Code Section 415(b)(1)(A) for the
Limitation Year, or (ii) 140% of the Participant's average Compensation for
his high three (3) consecutive Years of Service
3.010
<PAGE>
To determine the denominator of this fraction, the Advisory
Committee will make any adjustment required under Code Section 415(b) and
will determine a Year of Service, unless otherwise provided in an addendum
to Adoption Agreement Section 3.18, as a Plan Year in which the Employee
completed at least 1,000 Hours of Service. The "projected annual benefit"
is the annual retirement benefit (adjusted to an actuarially equivalent
straight life annuity if the plan expresses such benefit in a form other
than a straight life annuity or qualified joint and survivor annuity) of
the Participant under the terms of the defined benefit plan on the
assumptions he continues employment until his normal retirement age (or
current age, if later) as stated in the defined benefit plan, his
compensation continues at the same rate as in effect in the Limitation
Year under consideration until the date of his normal retirement age and
all other relevant factors used to determine benefits under the defined
benefit plan remain constant as of the current Limitation Year for all
future Limitation Years.
CURRENT ACCRUED BENEFIT. If the Participant accrued benefits in one
or more defined benefit plans maintained by the Employer which were in
existence on May 6, 1986, the dollar limitation used in the denominator of
this fraction will not be less than the Participant's Current Accrued
Benefit. A Participant's Current Accrued Benefit is the sum of the annual
benefits under such defined benefit plans which the Participant had
accrued as of the end of the 1986 Limitation Year (the last Limitation
Year beginning before January 1, 1987), determined without regard to any
change in the terms or conditions of the Plan made after May 5, 1986, and
without regard to any cost of living adjustment occurring after May 5,
1986. This Current Accrued Benefit rule applies only if the defined
benefit plans individually and in the aggregate satisfied the requirements
of Code Section 415 as in effect at the end of the 1986 Limitation Year.
(k) "Defined contribution plan fraction" -
The sum, as of the close of the Limitation Year, of the Annual Additions
to the Participant's Account under the defined contribution plan(s)
----------------------------------------------------------------------------
The sum of the lesser of the following amounts determined for the
Limitation Year and for each prior Year of Service with the Employer:(i) 125%
(subject to the "100% limitation" in paragraph (l)) of the dollar
limitation in effect under Code Section 415(c)(1)(A) for
the Limitation Year (determined without regard to
the special dollar limitations for employee stock ownership plans), or
(ii) 35% of the Participant's Compensation for the Limitation Year
For purposes of determining the defined contribution plan fraction,
the Advisory Committee will not recompute Annual Additions in Limitation
Years beginning prior to January 1, 1987, to treat all Employee
contributions as Annual Additions. If the Plan satisfied Code Section 415
for Limitation Years beginning prior to January 1, 1987, the Advisory
Committee will redetermine the defined contribution plan fraction and the
defined benefit plan fraction as of the end of the 1986 Limitation Year,
in accordance with this Section 3.19. If the sum of the redetermined
fractions exceeds 1.0, the Advisory Committee will subtract permanently
from the numerator of the defined contribution plan fraction an amount
equal to the product of (1) the excess of the sum of the fractions over
1.0, times (2) the denominator of the defined contribution plan fraction.
In making the adjustment, the Advisory Committee must disregard any
accrued benefit under the defined benefit plan which is in excess of the
Current Accrued Benefit. This Plan continues any transitional rules
applicable to the determination of the defined contribution plan fraction
under the Employer's Plan as of the end of the 1986 Limitation Year.
3.11
<PAGE>
(l) "100% limitation." If the 100% limitation applies, the Advisory
Committee must determine the denominator of the defined benefit plan
fraction and the denominator of the defined contribution plan fraction by
substituting 100% for 125%. If the Employer's Plan is a Standardized Plan,
the 100% limitation applies in all Limitation Years, subject to any
override provisions under Section 3.18 of the Employer's Adoption
Agreement. If the Employer overrides the 100% limitation under a
Standardized Plan, the Employer must specify in its Adoption Agreement the
manner in which the Plan satisfies the extra minimum benefit requirement
of Code Section 416(h) and the 100% limitation must continue to apply if
the Plan's top heavy ratio exceeds 90%. If the Employer's Plan is a
Nonstandardized Plan, the 100% limitation applies only if: (i) the Plan's
top heavy ratio exceeds 90%; or (ii) the Plan's top heavy ratio is greater
than 60%, and the Employer does not elect in its Adoption Agreement
Section 3.18 to provide extra minimum benefits which satisfy Code Section
416(h)(2).
* * * * * * * * * * * * * * *
3.12
<PAGE>
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. This Plan does not permit
Participant nondeductible contributions unless the Employer maintains its Plan
under a Code Section 401(k) Adoption Agreement. If the Employer does not
maintain its Plan under a Code Section 401(k) Adoption Agreement and, prior to
the adoption of this Master Plan, the Plan accepted Participant nondeductible
contributions for a Plan Year beginning after December 31, 1986, those
contributions must satisfy the requirements of Code Section 401(m). This Section
4.01 does not prohibit the Plan's acceptance of Participant nondeductible
contributions prior to the first Plan Year commencing after the Plan Year in
which the Employer adopts this Master Plan.
4.02 PARTICIPANT DEDUCTIBLE CONTRIBUTIONS. A qualified Plan may not accept
Participant deductible contributions after April 15, 1987. If the Employer's
Plan includes Participant deductible contributions ("DECs") made prior to April
16, 1987, the Advisory Committee must maintain a separate accounting for the
Participant's Accrued Benefit attributable to DECs, including DECs which are
part of a rollover contribution described in Section 4.03. The Advisory
Committee will treat the accumulated DECs as part of the Participant's Accrued
Benefit for all purposes of the Plan, except for purposes of determining the top
heavy ratio under Section 1.33. The Advisory Committee may not use DECs to
purchase life insurance on the Participant's behalf.
4.03 PARTICIPANT ROLLOVER CONTRIBUTIONS. Any Participant, with the
Employer's written consent and after filing with the Trustee the form prescribed
by the Advisory Committee, may contribute cash or other property to the Trust
other than as a voluntary contribution if the contribution is a "rollover
contribution" which the Code permits an employee to transfer either directly or
indirectly from one qualified plan to another qualified plan. Before accepting a
rollover contribution, the Trustee may require an Employee to furnish
satisfactory evidence that the proposed transfer is in fact a "rollover
contribution" which the Code permits an employee to make to a qualified plan. A
rollover contribution is not an Annual Addition under Part 2 of Article III.
The Trustee will invest the rollover contribution in a segregated
investment Account for the Participant's sole benefit unless the Trustee (or the
Named Fiduciary, in the case of a nondiscretionary Trustee designation), in its
sole discretion, agrees to invest the rollover contribution as part of the Trust
Fund. The Trustee will not have any investment responsibility with respect to a
Participant's segregated rollover Account. The Participant, however, from time
to time, may direct the Trustee in writing as to the investment of his
segregated rollover Account in property, or property interests, of any kind,
real, personal or mixed; provided however, the Participant may not direct the
Trustee to make loans to his Employer. A Participant's segregated rollover
Account alone will bear any extraordinary expenses resulting from investments
made at the direction of the Participant. As of the Accounting Date (or other
valuation date) for each Plan Year, the Advisory Committee will allocate and
credit the net income (or net loss) from a Participant's segregated rollover
Account and the increase or decrease in the fair market value of the assets of a
segregated rollover Account solely to that Account. The Trustee is not liable
nor responsible for any loss resulting to any Beneficiary, nor to any
Participant, by reason of any sale or investment made or other action taken
pursuant to and in accordance with the direction of the Participant. In all
other respects, the Trustee will hold, administer and distribute a rollover
contribution in the same manner as any Employer contribution made to the Trust.
An eligible Employee, prior to satisfying the Plan's eligibility
conditions, may make a rollover contribution to the Trust to the same extent and
in the same manner as a Participant. If an Employee makes a rollover
contribution to the Trust prior to satisfying the Plan's eligibility conditions,
the Advisory Committee and Trustee must treat the Employee as a Participant for
all purposes of the Plan except the Employee is not a Participant for purposes
of sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan. If the Employee has a
Separation from Service prior to becoming a Participant, the Trustee will
distribute his rollover contribution Account to him as if it were an Employer
contribution Account.
4.01
<PAGE>
4.04 PARTICIPANT CONTRIBUTION - FORFEITABILITY. A Participant's Accrued
Benefit is, at all times, 100% Nonforfeitable to the extent the value of his
Accrued Benefit is derived from his Participant contributions described in this
Article IV.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION. A Participant, by
giving prior written notice to the Trustee, may withdraw all or any part of the
value of his Accrued Benefit derived from his Participant contributions
described in this Article IV. A distribution of Participant contributions must
comply with the joint and survivor requirements described in Article VI, if
those requirements apply to the Participant. A Participant may not exercise his
right to withdraw the value of his Accrued Benefit derived from his Participant
contributions more than once during any Plan Year. The Trustee, in accordance
with the direction of the Advisory Committee, will distribute a Participant's
unwithdrawn Accrued Benefit attributable to his Participant contributions in
accordance with the provisions of Article VI applicable to the distribution of
the Participant's Nonforfeitable Accrued Benefit.
4.06 PARTICIPANT CONTRIBUTION - ACCRUED BENEFIT. The Advisory Committee
must maintain a separate Account(s) in the name of each Participant to reflect
the Participant's Accrued Benefit under the Plan derived from his Participant
contributions. A Participant's Accrued Benefit derived from his Participant
contributions as of any applicable date is the balance of his separate
Participant contribution Account(s).
* * * * * * * * * * * * * * *
4.02
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT AGE. The Employer must define Normal Retirement Age
in its Adoption Agreement. A Participant's Accrued Benefit derived from Employer
contributions is 100% Nonforfeitable upon and after his attaining Normal
Retirement Age (if employed by the Employer on or after that date).
5.02 PARTICIPANT DISABILITY OR DEATH. The Employer may elect in its
Adoption Agreement to provide a Participant's Accrued Benefit derived from
Employer contributions will be 100% Nonforfeitable if the Participant's
Separation from Service is a result of his death or his disability.
5.03 VESTING SCHEDULE. Except as provided in Sections 5.01 and 5.02, for
each Year of Service, a Participant's Nonforfeitable percentage of his Accrued
Benefit derived from Employer contributions equals the percentage in the vesting
schedule completed by the Employer in its Adoption Agreement.
(A) ELECTION OF SPECIAL VESTING FORMULA. If the Trustee makes a distribution
(other than a cash-out distribution described in Section 5.04) to a
partially-vested Participant, and the Participant has not incurred a Forfeiture
Break in Service at the relevant time, the Advisory Committee will establish a
separate Account for the Participant's Accrued Benefit. At any relevant time
following the distribution, the Advisory Committee will determine the
Participant's Nonforfeitable Accrued Benefit derived from Employer contributions
in accordance with the following formula: P(AB + (R x D)) - (R x D).
To apply this formula, "P" is the Participant's current vesting percentage
at the relevant time, "AB" is the Participant's Employer-derived Accrued Benefit
at the relevant time, "R" is the ratio of "AB" to the Participant's
Employer-derived Accrued Benefit immediately following the earlier distribution
and "D" is the amount of the earlier distribution. If, under a restated Plan,
the Plan has made distribution to a partially-vested Participant prior to its
restated Effective Date and is unable to apply the cash-out provisions of
Section 5.04 to that prior distribution, this special vesting formula also
applies to that Participant's remaining Account. The Employer, in an addendum to
its Adoption Agreement, numbered Section 5.03, may elect to modify this formula
to read as follows: P(AB + D) - D.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED PARTICIPANTS/ RESTORATION
OF FORFEITED ACCRUED BENEFIT. If, pursuant to Article VI, a partially-vested
Participant receives a cash-out distribution before he incurs a Forfeiture Break
in Service (as defined in Section 5.08), the cash-out distribution will result
in an immediate forfeiture of the nonvested portion of the Participant's Accrued
Benefit derived from Employer contributions. See Section 5.09. A
partially-vested Participant is a Participant whose Nonforfeitable Percentage
determined under Section 5.03 is less than 100%. A cash-out distribution is a
distribution of the entire present value of the Participant's Nonforfeitable
Accrued Benefit.
(A) RESTORATION AND CONDITIONS UPON RESTORATION. A partially-vested Participant
who is re-employed by the Employer after receiving a cash-out distribution of
the Nonforfeitable percentage of his Accrued Benefit may repay the Trustee the
amount of the cash-out distribution attributable to Employer contributions,
unless the Participant no longer has a right to restoration by reason of the
conditions of this Section 5.04(A). If a partially-vested Participant makes the
cash-out distribution repayment, the Advisory Committee, subject to the
conditions of this Section 5.04(A), must restore his Accrued Benefit
attributable to Employer contributions to the same dollar amount as the dollar
amount of his Accrued Benefit on the Accounting Date, or other valuation date,
immediately preceding the date of the cash-out distribution, unadjusted for any
gains or losses occurring subsequent to that Accounting Date, or other valuation
date. Restoration of the Participant's Accrued Benefit includes restoration of
all Code Section 411(d)(6) protected benefits with respect to that restored
Accrued Benefit, in accordance with applicable Treasury regulations. The
Advisory Committee will not restore a re-employed Participant's Accrued Benefit
under this paragraph if:
5.01
<PAGE>
(1) 5 years have elapsed since the Participant's first re-employment date
with the Employer following the cash-out distribution; or
(2) The Participant incurred a Forfeiture Break in Service (as defined in
Section 5.08). This condition also applies if the Participant makes
repayment within the Plan Year in which he incurs the Forfeiture Break in
Service and that Forfeiture Break in Service would result in a complete
forfeiture of the amount the Advisory Committee otherwise would restore.
(B) TIME AND METHOD OF RESTORATION. If neither of the two conditions preventing
restoration of the Participant's Accrued Benefit applies, the Advisory Committee
will restore the Participant's Accrued Benefit as of the Plan Year Accounting
Date coincident with or immediately following the repayment. To restore the
Participant's Accrued Benefit, the Advisory Committee, to the extent necessary,
will allocate to the Participant's Account:
(1) First, the amount, if any, of Participant forfeitures the Advisory
Committee would otherwise allocate under Section 3.05;
(2) Second, the amount, if any, of the Trust Fund net income or gain for
the Plan Year; and
(3) Third, the Employer contribution for the Plan Year to the extent made
under a discretionary formula.
In an addendum to its Adoption Agreement numbered 5.04(B), the Employer
may eliminate as a means of restoration any of the amounts described in clauses
(1), (2) and (3) or may change the order of priority of these amounts. To the
extent the amounts described in clauses (1), (2) and (3) are insufficient to
enable the Advisory Committee to make the required restoration, the Employer
must contribute, without regard to any requirement or condition of Section 3.01,
the additional amount necessary to enable the Advisory Committee to make the
required restoration. If, for a particular Plan Year, the Advisory Committee
must restore the Accrued Benefit of more than one re-employed Participant, then
the Advisory Committee will make the restoration allocations to each such
Participant's Account in the same proportion that a Participant's restored
amount for the Plan Year bears to the restored amount for the Plan Year of all
re-employed Participants. The Advisory Committee will not take into account any
allocation under this Section 5.04 in applying the limitation on allocations
under Part 2 of Article III.
(C) 0% VESTED PARTICIPANT. The Employer must specify in its Adoption Agreement
whether the deemed cash-out rule applies to a 0% vested Participant. A 0% vested
Participant is a Participant whose Accrued Benefit derived from Employer
contributions is entirely forfeitable at the time of his Separation from
Service. If the Participant's Account is not entitled to an allocation of
Employer contributions for the Plan Year in which he has a Separation from
Service, the Advisory Committee will apply the deemed cash-out rule as if the 0%
vested Participant received a cash-out distribution on the date of the
Participant's Separation from Service. If the Participant's Account is entitled
to an allocation of Employer contributions or Participant forfeitures for the
Plan Year in which he has a Separation from Service, the Advisory Committee will
apply the deemed cash-out rule as if the 0% vested Participant received a
cash-out distribution on the first day of the first Plan Year beginning after
his Separation from Service. For purposes of applying the restoration provisions
of this Section 5.04, the Advisory Committee will treat the 0% vested
Participant as repaying his cash-out "distribution" on the first date of his
re-employment with the Employer. If the deemed cash-out rule does not apply to
the Employer's Plan, a 0% vested Participant will not incur a forfeiture until
he incurs a Forfeiture Break in Service.
5.02
<PAGE>
5.05 SEGREGATED ACCOUNT FOR REPAID AMOUNT. Until the Advisory Committee
restores the Participant's Accrued Benefit, as described in Section 5.04, the
Trustee will invest the cash-out amount the Participant has repaid in a
segregated Account maintained solely for that Participant. The Trustee must
invest the amount in the Participant's segregated Account in Federally insured
interest bearing savings account(s) or time deposit(s) (or a combination of
both), or in other fixed income investments. Until commingled with the balance
of the Trust Fund on the date the Advisory Committee restores the Participant's
Accrued Benefit, the Participant's segregated Account remains a part of the
Trust, but it alone shares in any income it earns and it alone bears any expense
or loss it incurs. Unless the repayment qualifies as a rollover contribution,
the Advisory Committee will direct the Trustee to repay to the Participant as
soon as is administratively practicable the full amount of the Participant's
segregated Account if the Advisory Committee determines either of the conditions
of Section 5.04(A) prevents restoration as of the applicable Accounting Date,
notwithstanding the Participant's repayment.
5.06 YEAR OF SERVICE - VESTING. For purposes of vesting under Section
5.03, Year of Service means any 12-consecutive month period designated in the
Employer's Adoption Agreement during which an Employee completes not less than
the number of Hours of Service (not exceeding 1,000) specified in the Employer's
Adoption Agreement. A Year of Service includes any Year of Service earned prior
to the Effective Date of the Plan, except as provided in Section 5.08.
5.07 BREAK IN SERVICE - VESTING. For purposes of this Article V, a
Participant incurs a "Break in Service" if during any vesting computation period
he does not complete more than 500 Hours of Service. If, pursuant to Section
5.06, the Plan does not require more than 500 Hours of Service to receive credit
for a Year of Service, a Participant incurs a Break in Service in a vesting
computation period in which he fails to complete a Year of Service.
5.08 INCLUDED YEARS OF SERVICE - VESTING. For purposes of determining
"Years of Service" under Section 5.06, the Plan takes into account all Years of
Service an Employee completes with the Employer except:
(a) For the sole purpose of determining a Participant's Nonforfeitable
percentage of his Accrued Benefit derived from Employer contributions
which accrued for his benefit prior to a Forfeiture Break in Service, the
Plan disregards any Year of Service after the Participant first incurs a
Forfeiture Break in Service. The Participant incurs a Forfeiture Break in
Service when he incurs 5 consecutive Breaks in Service.
(b) The Plan disregards any Year of Service excluded under the Employer's
Adoption Agreement.
The Plan does not apply the Break in Service rule under Code Section
411(a)(6)(B). Therefore, an Employee need not complete a Year of Service after a
Break in Service before the Plan takes into account the Employee's otherwise
includible Years of Service under this Article V.
5.09 FORFEITURE OCCURS. A Participant's forfeiture, if any, of his Accrued
Benefit derived from Employer contributions occurs under the Plan on the earlier
of:
(a) The last day of the vesting computation period in which the
Participant first incurs a Forfeiture Break in Service; or
(b) The date the Participant receives a cash-out distribution.
The Advisory Committee determines the percentage of a Participant's
Accrued Benefit forfeiture, if any, under this Section 5.09 solely by reference
to the vesting schedule of Section 5.03. A Participant does not forfeit any
portion of his Accrued Benefit for any other reason or cause except as expressly
provided by this Section 5.09 or as provided under Section 9.14.
* * * * * * * * * * * * * * *
5.03
<PAGE>
ARTICLE VI
TIME AND METHOD OF PAYMENT OF BENEFITS
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT. Unless, pursuant to Section 6.03,
the Participant or the Beneficiary elects in writing to a different time or
method of payment, the Advisory Committee will direct the Trustee to commence
distribution of a Participant's Nonforfeitable Accrued Benefit in accordance
with this Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution to
the Participant, exceeds $3,500 and the Participant has not attained the later
of Normal Retirement Age or age 62. Furthermore, the Participant's spouse also
must consent, in writing, to any distribution, for which Section 6.04 requires
the spouse's consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the Plan pays
an amount as an annuity or in any other form. A distribution date under this
Article VI, unless otherwise specified within the Plan, is the date or dates the
Employer specifies in the Adoption Agreement, or as soon as administratively
practicable following that distribution date. For purposes of the consent
requirements under this Article VI, if the present value of the Participant's
Nonforfeitable Accrued Benefit, at the time of any distribution, exceeds $3,500,
the Advisory Committee must treat that present value as exceeding $3,500 for
purposes of all subsequent Plan distributions to the Participant.
(A) SEPARATION FROM SERVICE FOR A REASON OTHER THAN DEATH.
(1) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. If
the Participant's Separation from Service is for any reason other than death,
the Advisory Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in a lump sum, on the distribution date the
Employer specifies in the Adoption Agreement, but in no event later than the
60th day following the close of the Plan Year in which the Participant attains
Normal Retirement Age. If the Participant has attained Normal Retirement Age at
the time of his Separation from Service, the distribution under this paragraph
will occur no later than the 60th day following the close of the Plan Year in
which the Participant's Separation from Service occurs.
(2) PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. If the
Participant's Separation from Service is for any reason other than death, the
Advisory Committee will direct the Trustee to commence distribution of the
Participant's Nonforfeitable Accrued Benefit in a form and at the time elected
by the Participant, pursuant to Section 6.03. In the absence of an election by
the Participant, the Advisory Committee will direct the Trustee to distribute
the Participant's Nonforfeitable Accrued Benefit in a lump sum (or, if
applicable, the normal annuity form of distribution required under Section
6.04), on the 60th day following the close of the Plan Year in which the latest
of the following events occurs: (a) the Participant attains Normal Retirement
Age; (b) the Participant attains age 62; or (c) the Participant's Separation
from Service.
(3) DISABILITY. If the Participant's Separation from Service is because of
his disability, the Advisory Committee will direct the Trustee to pay the
Participant's Nonforfeitable Accrued Benefit in lump sum, on the distribution
date the Employer specifies in the Adoption Agreement, subject to the notice and
consent requirements of this Article VI and subject to the applicable mandatory
commencement dates described in Paragraphs (1) and (2).
6.01
<PAGE>
(4) HARDSHIP. Prior to the time at which the Participant may receive
distribution under Paragraphs (1), (2) or (3), the Participant may request a
distribution from his Nonforfeitable Accrued Benefit in an amount necessary to
satisfy a hardship, if the Employer elects in the Adoption Agreement to permit
hardship distributions. Unless the Employer elects otherwise in the Adoption
Agreement, a hardship distribution must be on account of any of the following:
(a) medical expenses; (b) the purchase (excluding mortgage payments) of the
Participant's principal residence; (c) post-secondary education tuition, for the
next semester or quarter, for the Participant or for the Participant's spouse,
children or dependents; (d) to prevent the eviction of the Participant from his
principal residence or the foreclosure on the mortgage of the Participant's
principal residence; (e) funeral expenses of the Participant's family member; or
(f) the Participant's disability. A partially-vested Participant may not receive
a hardship distribution described in this Paragraph (A)(4) prior to incurring a
Forfeiture Break in Service, unless the hardship distribution is a cash-out
distribution (as defined in Article V). The Advisory Committee will direct the
Trustee to make the hardship distribution as soon as administratively
practicable after the Participant makes a valid request for the hardship
distribution.
(B) REQUIRED BEGINNING DATE. If any distribution commencement date described
under Paragraph (A) of this Section 6.01, either by Plan provision or by
Participant election (or nonelection), is later than the Participant's Required
Beginning Date, the Advisory Committee instead must direct the Trustee to make
distribution on the Participant's Required Beginning Date, subject to the
transitional election, if applicable, under Section 6.03(D). A Participant's
Required Beginning Date is the April 1 following the close of the calendar year
in which the Participant attains age 70 1/2. However, if the Participant, prior
to incurring a Separation from Service, attained age 70 1/2 by January 1, 1988,
and, for the five Plan Year period ending in the calendar year in which he
attained age 70 1/2 and for all subsequent years, the Participant was not a more
than 5% owner, the Required Beginning Date is the April 1 following the close of
the calendar year in which the Participant separates from Service or, if
earlier, the April 1 following the close of the calendar year in which the
Participant becomes a more than 5% owner. Furthermore, if a Participant who was
not a more than 5% owner attained age 70 1/2 during 1988 and did not incur a
Separation from Service prior to January 1, 1989, his Required Beginning Date is
April 1, 1990. A mandatory distribution at the Participant's Required Beginning
Date will be in lump sum (or, if applicable, the normal annuity form of
distribution required under Section 6.04) unless the Participant, pursuant to
the provisions of this Article VI, makes a valid election to receive an
alternative form of payment.
(C) DEATH OF THE PARTICIPANT. The Advisory Committee will direct the Trustee, in
accordance with this Section 6.01(C), to distribute to the Participant's
Beneficiary the Participant's Nonforfeitable Accrued Benefit remaining in the
Trust at the time of the Participant's death. Subject to the requirements of
Section 6.04, the Advisory Committee will determine the death benefit by
reducing the Participant's Nonforfeitable Accrued Benefit by any security
interest the Plan has against that Nonforfeitable Accrued Benefit by reason of
an outstanding Participant loan.
(1) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT DOES NOT EXCEED
$3,500. The Advisory Committee, subject to the requirements of Section 6.04,
must direct the Trustee to distribute the deceased Participant's Nonforfeitable
Accrued Benefit in a single sum, as soon as administratively practicable
following the Participant's death or, if later, the date on which the Advisory
Committee receives notification of or otherwise confirms the Participant's
death.
(2) DECEASED PARTICIPANT'S NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500.
The Advisory Committee will direct the Trustee to distribute the deceased
Participant's Nonforfeitable Accrued Benefit at the time and in the form elected
by the Participant or, if applicable by the Beneficiary, as permitted under this
Article VI. In the absence of an election, subject to the requirements of
Section 6.04, the Advisory Committee will direct the Trustee to distribute the
Participant's undistributed Nonforfeitable Accrued Benefit in a lump sum on the
first distribution date following the close of the Plan Year in which the
Participant's death occurs or, if later, the first distribution date following
the date the Advisory Committee receives notification of or otherwise confirms
the Participant's death.
6.02
<PAGE>
If the death benefit is payable in full to the Participant's surviving
spouse, the surviving spouse, in addition to the distribution options provided
in this Section 6.01(C), may elect distribution at any time or in any form
(other than a joint and survivor annuity) this Article VI would permit for a
Participant.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. Subject to the annuity
distribution requirements, if any, prescribed by Section 6.04, and any
restrictions prescribed by Section 6.03, a Participant or Beneficiary may elect
distribution under one, or any combination, of the following methods: (a) by
payment in a lump sum; or (b) by payment in monthly, quarterly or annual
installments over a fixed reasonable period of time, not exceeding the life
expectancy of the Participant, or the joint life and last survivor expectancy of
the Participant and his Beneficiary. The Employer may elect in its Adoption
Agreement to modify the methods of payment available under this Section 6.02.
The distribution options permitted under this Section 6.02 are available
only if the present value of the Participant Nonforfeitable Accrued Benefit, at
the time of the distribution to the Participant, exceeds $3,500. To facilitate
installment payments under this Article VI, the Advisory Committee may direct
the Trustee to segregate all or any part of the Participant's Accrued Benefit in
a separate Account. The Trustee will invest the Participant's segregated Account
in Federally insured interest bearing savings account(s) or time deposit(s) (or
a combination of both), or in other fixed income investments. A segregated
Account remains a part of the Trust, but it alone shares in any income it earns,
and it alone bears any expense or loss it incurs. A Participant or Beneficiary
may elect to receive an installment distribution in the form of a
Nontransferable Annuity Contract. Under an installment distribution, the
Participant or Beneficiary, at any time, may elect to accelerate the payment of
all, or any portion, of the Participant's unpaid Nonforfeitable Accrued Benefit,
subject to the requirements of Section 6.04.
(A) MINIMUM DISTRIBUTION REQUIREMENTS FOR PARTICIPANTS. The Advisory Committee
may not direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit, nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of payment which, as of the
Required Beginning Date, does not satisfy the minimum distribution requirements
under Code Section 401(a)(9) and the applicable Treasury regulations. The
minimum distribution for a calendar year equals the Participant's Nonforfeitable
Accrued Benefit as of the latest valuation date preceding the beginning of the
calendar year divided by the Participant's life expectancy or, if applicable,
the joint and last survivor expectancy of the Participant and his designated
Beneficiary (as determined under Article VIII, subject to the requirements of
the Code Section 401(a)(9) regulations). The Advisory Committee will increase
the Participant's Nonforfeitable Accrued Benefit, as determined on the relevant
valuation date, for contributions or forfeitures allocated after the valuation
date and by December 31 of the valuation calendar year, and will decrease the
valuation by distributions made after the valuation date and by December 31 of
the valuation calendar year. For purposes of this valuation, the Advisory
Committee will treat any portion of the minimum distribution for the first
distribution calendar year made after the close of that year as a distribution
occurring in that first distribution calendar year. In computing a minimum
distribution, the Advisory Committee must use the unisex life expectancy
multiples under Treas. Reg. Section 1.72-9. The Advisory Committee, only upon
the Participant's written request, will compute the minimum distribution for a
calendar year subsequent to the first calendar year for which the Plan requires
a minimum distribution by redetermining the applicable life expectancy. However,
the Advisory Committee may not redetermine the joint life and last survivor
expectancy of the Participant and a nonspouse designated Beneficiary in a manner
which takes into account any adjustment to a life expectancy other than the
Participant's life expectancy.
6.03
<PAGE>
If the Participant's spouse is not his designated Beneficiary, a method of
payment to the Participant (whether by Participant election or by Advisory
Committee direction) may not provide more than incidental benefits to the
Beneficiary. For Plan Years beginning after December 31, 1988, the Plan must
satisfy the minimum distribution incidental benefit ("MDIB") requirement in the
Treasury regulations issued under Code Section 401(a)(9) for distributions made
on or after the Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the Advisory Committee
will compute the minimum distribution required by this Section 6.02(A) by
substituting the applicable MDIB divisor for the applicable life expectancy
factor, if the MDIB divisor is a lesser number. Following the Participant's
death, the Advisory Committee will compute the minimum distribution required by
this Section 6.02(A) solely on the basis of the applicable life expectancy
factor and will disregard the MDIB factor. For Plan Years beginning prior to
January 1, 1989, the Plan satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB requirement or if the
present value of the retirement benefits payable solely to the Participant is
greater than 50% of the present value of the total benefits payable to the
Participant and his Beneficiaries. The Advisory Committee must determine whether
benefits to the Beneficiary are incidental as of the date the Trustee is to
commence payment of the retirement benefits to the Participant, or as of any
date the Trustee redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar year is due
by the Participant's Required Beginning Date. The minimum distribution for each
subsequent distribution calendar year, including the calendar year in which the
Participant's Required Beginning Date occurs, is due by December 31 of that
year. If the Participant receives distribution in the form of a Nontransferable
Annuity Contract, the distribution satisfies this Section 6.02(A) if the
contract complies with the requirements of Code Section 401(a)(9) and the
applicable Treasury regulations.
(B) MINIMUM DISTRIBUTION REQUIREMENTS FOR BENEFICIARIES. The method of
distribution to the Participant's Beneficiary must satisfy Code Section
401(a)(9) and the applicable Treasury regulations. If the Participant's death
occurs after his Required Beginning Date or, if earlier, the date the
Participant commences an irrevocable annuity pursuant to Section 6.04, the
method of payment to the Beneficiary must provide for completion of payment over
a period which does not exceed the payment period which had commenced for the
Participant. If the Participant's death occurs prior to his Required Beginning
Date, and the Participant had not commenced an irrevocable annuity pursuant to
Section 6.04, the method of payment to the Beneficiary, subject to Section 6.04,
must provide for completion of payment to the Beneficiary over a period not
exceeding: (i) 5 years after the date of the Participant's death; or (ii) if the
Beneficiary is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of the Participant's
Nonforfeitable Accrued Benefit over a period described in clause (ii) unless the
Trustee will commence payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which the Participant's
death occurred or, if later, and the designated Beneficiary is the Participant's
surviving spouse, December 31 of the calendar year in which the Participant
would have attained age 70 1/2. If the Trustee will make distribution in
accordance with clause (ii), the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the designated
Beneficiary's life expectancy. The Advisory Committee must use the unisex life
expectancy multiples under Treas. Reg. Section 1.72-9 for purposes of applying
this paragraph. The Advisory Committee, only upon the written request of the
Participant or of the Participant's surviving spouse, will recalculate the life
expectancy of the Participant's surviving spouse not more frequently than
annually, but may not recalculate the life expectancy of a nonspouse designated
Beneficiary after the Trustee commences payment to the designated Beneficiary.
The Advisory Committee will apply this paragraph by treating any amount paid to
the Participant's child, which becomes payable to the Participant's surviving
spouse upon the child's attaining the age of majority, as paid to the
Participant's surviving spouse. Upon the Beneficiary's written request, the
Advisory Committee must direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon as
administratively practicable following the effective date of that request.
6.04
<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS. Not earlier than 90 days, but not later
than 30 days, before the Participant's annuity starting date, the Advisory
Committee must provide a benefit notice to a Participant who is eligible to make
an election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features and
relative values of those options, and the Participant's right to defer
distribution until he attains the later of Normal Retirement Age or age 62.
If a Participant or Beneficiary makes an election prescribed by this
Section 6.03, the Advisory Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that election.
Any election under this Section 6.03 is subject to the requirements of Section
6.02 and of Section 6.04. The Participant or Beneficiary must make an election
under this Section 6.03 by filing his election with the Advisory Committee at
any time before the Trustee otherwise would commence to pay a Participant's
Accrued Benefit in accordance with the requirements of Article VI.
(A) PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. If the present value of
a Participant's Nonforfeitable Accrued Benefit exceeds $3,500, he may elect to
have the Trustee commence distribution as of any distribution date permitted
under the Employer's Adoption Agreement Section 6.03. The Participant may
reconsider an election at any time prior to the annuity starting date and elect
to commence distribution as of any other distribution date permitted under the
Employer's Adoption Agreement Section 6.03. If the Participant is
partially-vested in his Accrued Benefit, an election under this Paragraph (A) to
distribute prior to the Participant's incurring a Forfeiture Break in Service
(as defined in Section 5.08), must be in the form of a cash-out distribution (as
defined in Article V). A Participant may not receive a cash-out distribution if,
prior to the time the Trustee actually makes the cash-out distribution, the
Participant returns to employment with the Employer. Following his attainment of
Normal Retirement Age, a Participant who has separated from Service may elect
distribution as of any distribution date, irrespective of the elections under
Adoption Agreement Section 6.03.
(B) PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE. The Employer must
specify in its Adoption Agreement the distribution election rights, if any, a
Participant has prior to his Separation from Service. A Participant must make an
election under this Section 6.03(B) on a form prescribed by the Advisory
Committee at any time during the Plan Year for which his election is to be
effective. In his written election, the Participant must specify the percentage
or dollar amount he wishes the Trustee to distribute to him. The Participant's
election relates solely to the percentage or dollar amount specified in his
election form and his right to elect to receive an amount, if any, for a
particular Plan Year greater than the dollar amount or percentage specified in
his election form terminates on the Accounting Date. The Trustee must make a
distribution to a Participant in accordance with his election under this Section
6.03(B) within the 90 day period (or as soon as administratively practicable)
after the Participant files his written election with the Trustee. The Trustee
will distribute the balance of the Participant's Accrued Benefit not distributed
pursuant to his election(s) in accordance with the other distribution provisions
of this Plan.
(C) DEATH BENEFIT ELECTIONS. If the present value of the deceased Participant's
Nonforfeitable Accrued Benefit exceeds $3,500, the Participant's Beneficiary may
elect to have the Trustee distribute the Participant's Nonforfeitable Accrued
Benefit in a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions designated in writing by
the Participant and not revoked as of his date of death.
6.05
<PAGE>
(D) TRANSITIONAL ELECTIONS. Notwithstanding the provisions of Sections 6.01 and
6.02, if the Participant (or Beneficiary) signed a written distribution
designation prior to January 1, 1984, the Advisory Committee must distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with that
designation, subject however, to the survivor requirements, if applicable, of
Sections 6.04, 6.05 and 6.06. This Section 6.03(D) does not apply to a pre-1984
distribution designation, and the Advisory Committee will not comply with that
designation, if any of the following applies: (1) the method of distribution
would have disqualified the Plan under Code Section 401(a)(9) as in effect on
December 31, 1983; (2) the Participant did not have an Accrued Benefit as of
December 31, 1983; (3) the distribution designation does not specify the timing
and form of the distribution and the death Beneficiaries (in order of priority);
(4) the substitution of a Beneficiary modifies the payment period of the
distribution; or, (5) the Participant (or Beneficiary) modifies or revokes the
distribution designation. In the event of a revocation, the Plan must
distribute, no later than December 31 of the calendar year following the year of
revocation, the amount which the Participant would have received under Section
6.02(A) if the distribution designation had not been in effect or, if the
Beneficiary revokes the distribution designation, the amount which the
Beneficiary would have received under Section 6.02(B) if the distribution
designation had not been in effect. The Advisory Committee will apply this
Section 6.03(D) to rollovers and transfers in accordance with Part J of the Code
Section 401(a)(9) Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES.
(A) JOINT AND SURVIVOR ANNUITY. The Advisory Committee must direct the Trustee
to distribute a married or unmarried Participant's Nonforfeitable Accrued
Benefit in the form of a qualified joint and survivor annuity, unless the
Participant makes a valid waiver election (described in Section 6.05) within the
90 day period ending on the annuity starting date. If, as of the annuity
starting date, the Participant is married, a qualified joint and survivor
annuity is an immediate annuity which is purchasable with the Participant's
Nonforfeitable Accrued Benefit and which provides a life annuity for the
Participant and a survivor annuity payable for the remaining life of the
Participant's surviving spouse equal to 50% of the amount of the annuity payable
during the life of the Participant. If, as of the annuity starting date, the
Participant is not married, a qualified joint and survivor annuity is an
immediate life annuity for the Participant which is purchasable with the
Participant's Nonforfeitable Accrued Benefit. On or before the annuity starting
date, the Advisory Committee, without Participant or spousal consent, must
direct the Trustee to pay the Participant's Nonforfeitable Accrued Benefit in a
lump sum, in lieu of a qualified joint and survivor annuity, in accordance with
Section 6.01, if the Participant's Nonforfeitable Accrued Benefit is not greater
than $3,500. This Section 6.04(A) applies only to a Participant who has
completed at least one Hour of Service with the Employer after August 22, 1984.
(B) PRERETIREMENT SURVIVOR ANNUITY. If a married Participant dies prior to his
annuity starting date, the Advisory Committee will direct the Trustee to
distribute a portion of the Participant's Nonforfeitable Accrued Benefit to the
Participant's surviving spouse in the form of a preretirement survivor annuity,
unless the Participant has a valid waiver election (as described in Section
6.06) in effect, or unless the Participant and his spouse were not married
throughout the one year period ending on the date of his death. A preretirement
survivor annuity is an annuity which is purchasable with 50% of the
Participant's Nonforfeitable Accrued Benefit (determined as of the date of the
Participant's death) and which is payable for the life of the Participant's
surviving spouse. The value of the preretirement survivor annuity is
attributable to Employer contributions and to Employee contributions in the same
proportion as the Participant's Nonforfeitable Accrued Benefit is attributable
to those contributions. The portion of the Participant's Nonforfeitable Accrued
Benefit not payable under this paragraph is payable to the Participant's
Beneficiary, in accordance with the other provisions of this Article VI. If the
present value of the preretirement survivor annuity does not exceed $3,500, the
Advisory Committee, on or before the annuity starting date, must direct the
Trustee to make a lump sum distribution to the Participant's surviving spouse,
in lieu of a preretirement survivor annuity. This Section 6.04(B) applies only
to a Participant who dies after August 22, 1984, and either (i) completes at
least one Hour of Service with the Employer after August 22, 1984, or (ii)
separated from Service with at least 10 Years of Service (as defined in Section
5.06) and completed at least one Hour of Service with the Employer in a Plan
Year beginning after December 31, 1975.
6.06
<PAGE>
(C) SURVIVING SPOUSE ELECTIONS. If the present value of the preretirement
survivor annuity exceeds $3,500, the Participant's surviving spouse may elect to
have the Trustee commence payment of the preretirement survivor annuity at any
time following the date of the Participant's death, but not later than the
mandatory distribution periods described in Section 6.02, and may elect any of
the forms of payment described in Section 6.02, in lieu of the preretirement
survivor annuity. In the absence of an election by the surviving spouse, the
Advisory Committee must direct the Trustee to distribute the preretirement
survivor annuity on the first distribution date following the close of the Plan
Year in which the latest of the following events occurs: (i) the Participant's
death; (ii) the date the Advisory Committee receives notification of or
otherwise confirms the Participant's death; (iii) the date the Participant would
have attained Normal Retirement Age; or (iv) the date the Participant would have
attained age 62.
(D) SPECIAL RULES. If the Participant has in effect a valid waiver election
regarding the qualified joint and survivor annuity or the preretirement survivor
annuity, the Advisory Committee must direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit in accordance with Sections 6.01,
6.02 and 6.03. The Advisory Committee will reduce the Participant's
Nonforfeitable Accrued Benefit by any security interest (pursuant to any offset
rights authorized by Section 10.03[E]) held by the Plan by reason of a
Participant loan to determine the value of the Participant's Nonforfeitable
Accrued Benefit distributable in the form of a qualified joint and survivor
annuity or preretirement survivor annuity, provided any post-August 18, 1985,
loan satisfied the spousal consent requirement described in Section 10.03[E] of
the Plan. For purposes of applying this Article VI, the Advisory Committee
treats a former spouse as the Participant's spouse or surviving spouse to the
extent provided under a qualified domestic relations order described in Section
6.07. The provisions of this Section 6.04, and of Sections 6.05 and 6.06, apply
separately to the portion of the Participant's Nonforfeitable Accrued Benefit
subject to the qualified domestic relations order and to the portion of the
Participant's Nonforfeitable Accrued Benefit not subject to that order.
(E) PROFIT SHARING PLAN ELECTION. If this Plan is a profit sharing plan, the
Employer must elect the extent to which the preceding provisions of Section 6.04
apply. If the Employer elects to apply this Section 6.04 only to a Participant
described in this Section 6.04(E), the preceding provisions of this Section 6.04
apply only to the following Participants: (1) a Participant as respects whom the
Plan is a direct or indirect transferee from a plan subject to the Code Section
417 requirements and the Plan received the transfer after December 31, 1984,
unless the transfer is an elective transfer described in Section 13.06; (2) a
Participant who elects a life annuity distribution (if Section 6.02 or Section
13.02 of the Plan requires the Plan to provide a life annuity distribution
option); and (3) a Participant whose benefits under a defined benefit plan
maintained by the Employer are offset by benefits provided under this Plan. If
the Employer elects to apply this Section 6.04 to all Participants, the
preceding provisions of this Section 6.04 apply to all Participants described in
the first two paragraphs of this Section 6.04, without regard to the limitations
of this Section 6.04(E). Sections 6.05 and 6.06 only apply to Participants to
whom the preceding provisions of this Section 6.04 apply.
6.05 WAIVER ELECTION - QUALIFIED JOINT AND SURVIVOR ANNUITY. Not earlier
than 90 days, but not later than 30 days, before the Participant's annuity
starting date, the Advisory Committee must provide the Participant a written
explanation of the terms and conditions of the qualified joint and survivor
annuity, the Participant's right to make, and the effect of, an election to
waive the joint and survivor form of benefit, the rights of the Participant's
spouse regarding the waiver election and the Participant's right to make, and
the effect of, a revocation of a waiver election. The Plan does not limit the
number of times the Participant may revoke a waiver of the qualified joint and
survivor annuity or make a new waiver during the election period.
6.07
<PAGE>
A married Participant's waiver election is not valid unless (a) the
Participant's spouse (to whom the survivor annuity is payable under the
qualified joint and survivor annuity), after the Participant has received the
written explanation described in this Section 6.05, has consented in writing to
the waiver election, the spouse's consent acknowledges the effect of the
election, and a notary public or the Plan Administrator (or his representative)
witnesses the spouse's consent, (b) the spouse consents to the alternate form of
payment designated by the Participant or to any change in that designated form
of payment, and (c) unless the spouse is the Participant's sole primary
Beneficiary, the spouse consents to the Participant's Beneficiary designation or
to any change in the Participant's Beneficiary designation. The spouse's consent
to a waiver of the qualified joint and survivor annuity is irrevocable, unless
the Participant revokes the waiver election. The spouse may execute a blanket
consent to any form of payment designation or to any Beneficiary designation
made by the Participant, if the spouse acknowledges the right to limit that
consent to a specific designation but, in writing, waives that right. The
consent requirements of this Section 6.05 apply to a former spouse of the
Participant, to the extent required under a qualified domestic relations order
described in Section 6.07.
The Advisory Committee will accept as valid a waiver election which does
not satisfy the spousal consent requirements if the Advisory Committee
establishes the Participant does not have a spouse, the Advisory Committee is
not able to locate the Participant's spouse, the Participant is legally
separated or has been abandoned (within the meaning of State law) and the
Participant has a court order to that effect, or other circumstances exist under
which the Secretary of the Treasury will excuse the consent requirement. If the
Participant's spouse is legally incompetent to give consent, the spouse's legal
guardian (even if the guardian is the Participant) may give consent.
6.06 WAIVER ELECTION - PRERETIREMENT SURVIVOR ANNUITY. The Advisory
Committee must provide a written explanation of the preretirement survivor
annuity to each married Participant, within the following period which ends
last: (1) the period beginning on the first day of the Plan Year in which the
Participant attains age 32 and ending on the last day of the Plan Year in which
the Participant attains age 34; (2) a reasonable period after an Employee
becomes a Participant; (3) a reasonable period after the joint and survivor
rules become applicable to the Participant; or (4) a reasonable period after a
fully subsidized preretirement survivor annuity no longer satisfies the
requirements for a fully subsidized benefit. A reasonable period described in
clauses (2), (3) and (4) is the period beginning one year before and ending one
year after the applicable event. If the Participant separates from Service
before attaining age 35, clauses (1), (2), (3) and (4) do not apply and the
Advisory Committee must provide the written explanation within the period
beginning one year before and ending one year after the Separation from Service.
The written explanation must describe, in a manner consistent with Treasury
regulations, the terms and conditions of the preretirement survivor annuity
comparable to the explanation of the qualified joint and survivor annuity
required under Section 6.05. The Plan does not limit the number of times the
Participant may revoke a waiver of the preretirement survivor annuity or make a
new waiver during the election period.
A Participant's waiver election of the preretirement survivor annuity is
not valid unless (a) the Participant makes the waiver election no earlier than
the first day of the Plan Year in which he attains age 35 and (b) the
Participant's spouse (to whom the preretirement survivor annuity is payable)
satisfies the consent requirements described in Section 6.05, except the spouse
need not consent to the form of benefit payable to the designated Beneficiary.
The spouse's consent to the waiver of the preretirement survivor annuity is
irrevocable, unless the Participant revokes the waiver election. Irrespective of
the time of election requirement described in clause (a), if the Participant
separates from Service prior to the first day of the Plan Year in which he
attains age 35, the Advisory Committee will accept a waiver election as respects
the Participant's Accrued Benefit attributable to his Service prior to his
Separation from Service. Furthermore, if a Participant who has not separated
from Service makes a valid waiver election, except for the timing requirement of
clause (a), the Advisory Committee will accept that election as valid, but only
until the first day of the Plan Year in which the Participant attains age 35. A
waiver election described in this paragraph is not valid unless made after the
Participant has received the written explanation described in this Section 6.06.
6.08
<PAGE>
6.07 DISTRIBUTIONS UNDER DOMESTIC RELATIONS ORDERS. Nothing contained in
this Plan prevents the Trustee, in accordance with the direction of the Advisory
Committee, from complying with the provisions of a qualified domestic relations
order (as defined in Code Section 414(p)). This Plan specifically permits
distribution to an alternate payee under a qualified domestic relations order at
any time, irrespective of whether the Participant has attained his earliest
retirement age (as defined under Code Section 414(p)) under the Plan. A
distribution to an alternate payee prior to the Participant's attainment of
earliest retirement age is available only if: (1) the order specifies
distribution at that time or permits an agreement between the Plan and the
alternate payee to authorize an earlier distribution; and (2) if the present
value of the alternate payee's benefits under the Plan exceeds $3,500, and the
order requires, the alternate payee consents to any distribution occurring prior
to the Participant's attainment of earliest retirement age. The Employer, in an
addendum to its Adoption Agreement numbered 6.07, may elect to limit
distribution to an alternate payee only when the Participant has attained his
earliest retirement age under the Plan. Nothing in this Section 6.07 gives a
Participant a right to receive distribution at a time otherwise not permitted
under the Plan nor does it permit the alternate payee to receive a form of
payment not otherwise permitted under the Plan.
The Advisory Committee must establish reasonable procedures to determine
the qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Advisory Committee promptly will notify the Participant and
any alternate payee named in the order, in writing, of the receipt of the order
and the Plan's procedures for determining the qualified status of the order.
Within a reasonable period of time after receiving the domestic relations order,
the Advisory Committee must determine the qualified status of the order and must
notify the Participant and each alternate payee, in writing, of its
determination. The Advisory Committee must provide notice under this paragraph
by mailing to the individual's address specified in the domestic relations
order, or in a manner consistent with Department of Labor regulations.
If any portion of the Participant's Nonforfeitable Accrued Benefit is
payable during the period the Advisory Committee is making its determination of
the qualified status of the domestic relations order, the Advisory Committee
must make a separate accounting of the amounts payable. If the Advisory
Committee determines the order is a qualified domestic relations order within 18
months of the date amounts first are payable following receipt of the order, the
Advisory Committee will direct the Trustee to distribute the payable amounts in
accordance with the order. If the Advisory Committee does not make its
determination of the qualified status of the order within the 18-month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute if the
order did not exist and will apply the order prospectively if the Advisory
Committee later determines the order is a qualified domestic relations order.
To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the Advisory Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in Federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
The Trustee will make any payments or distributions required under this Section
6.07 by separate benefit checks or other separate distribution to the alternate
payee(s).
* * * * * * * * * * * * * * *
6.09
<PAGE>
ARTICLE VII
EMPLOYER ADMINISTRATIVE PROVISIONS
7.01 INFORMATION TO COMMITTEE. The Employer must supply current
information to the Advisory Committee as to the name, date of birth, date of
employment, annual compensation, leaves of absence, Years of Service and date of
termination of employment of each Employee who is, or who will be eligible to
become, a Participant under the Plan, together with any other information which
the Advisory Committee considers necessary. The Employer's records as to the
current information the Employer furnishes to the Advisory Committee are
conclusive as to all persons.
7.02 NO LIABILITY. The Employer assumes no obligation or responsibility to
any of its Employees, Participants or Beneficiaries for any act of, or failure
to act, on the part of its Advisory Committee (unless the Employer is the
Advisory Committee), the Trustee, the Custodian, if any, or the Plan
Administrator (unless the Employer is the Plan Administrator).
7.03 INDEMNITY OF CERTAIN FIDUCIARIES. The Employer indemnifies and saves
harmless the Plan Administrator and the members of the Advisory Committee, and
each of them, from and against any and all loss resulting from liability to
which the Plan Administrator and the Advisory Committee, or the members of the
Advisory Committee, may be subjected by reason of any act or conduct (except
willful misconduct or gross negligence) in their official capacities in the
administration of this Trust or Plan or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 7.03 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may have
under ERISA for breach of a fiduciary duty. Furthermore, the Plan Administrator
and the Advisory Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
7.03, provided the letter agreement must be consistent with and does not violate
ERISA. The indemnification provisions of this Section 7.03 extend to the Trustee
(or to a Custodian, if any) solely to the extent provided by a letter agreement
executed by the Trustee (or Custodian) and the Employer.
7.04 EMPLOYER DIRECTION OF INVESTMENT. The Employer has the right to
direct the Trustee with respect to the investment and re-investment of assets
comprising the Trust Fund only if the Trustee consents in writing to permit such
direction. If the Trustee consents to Employer direction of investment, the
Trustee and the Employer must execute a letter agreement as a part of this Plan
containing such conditions, limitations and other provisions they deem
appropriate before the Trustee will follow any Employer direction as respects
the investment or re-investment of any part of the Trust Fund.
7.05 AMENDMENT TO VESTING SCHEDULE. Though the Employer reserves the right
to amend the vesting schedule at any time, the Advisory Committee will not apply
the amended vesting schedule to reduce the Nonforfeitable percentage of any
Participant's Accrued Benefit derived from Employer contributions (determined as
of the later of the date the Employer adopts the amendment, or the date the
amendment becomes effective) to a percentage less than the Nonforfeitable
percentage computed under the Plan without regard to the amendment. An amended
vesting schedule will apply to a Participant only if the Participant receives
credit for at least one Hour of Service after the new schedule becomes
effective.
7.01
<PAGE>
If the Employer makes a permissible amendment to the vesting schedule,
each Participant having at least 3 Years of Service with the Employer may elect
to have the percentage of his Nonforfeitable Accrued Benefit computed under the
Plan without regard to the amendment. For Plan Years beginning prior to January
1, 1989, the election described in the preceding sentence applies only to
Participants having at least 5 Years of Service with the Employer. The
Participant must file his election with the Advisory Committee within 60 days of
the latest of (a) the Employer's adoption of the amendment; (b) the effective
date of the amendment; or (c) his receipt of a copy of the amendment. The
Advisory Committee, as soon as practicable, must forward a true copy of any
amendment to the vesting schedule to each affected Participant, together with an
explanation of the effect of the amendment, the appropriate form upon which the
Participant may make an election to remain under the vesting schedule provided
under the Plan prior to the amendment and notice of the time within which the
Participant must make an election to remain under the prior vesting schedule.
The election described in this Section 7.05 does not apply to a Participant if
the amended vesting schedule provides for vesting at least as rapid at all times
as the vesting schedule in effect prior to the amendment. For purposes of this
Section 7.05, an amendment to the vesting schedule includes any Plan amendment
which directly or indirectly affects the computation of the Nonforfeitable
percentage of an Employee's rights to his Employer derived Accrued Benefit.
Furthermore, the Advisory Committee must treat any shift in the vesting
schedule, due to a change in the Plan's top heavy status, as an amendment to the
vesting schedule for purposes of this Section 7.05.
* * * * * * * * * * * * * * *
7.02
<PAGE>
ARTICLE VIII
PARTICIPANT ADMINISTRATIVE PROVISIONS
8.01 BENEFICIARY DESIGNATION. Any Participant may from time to time
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee will pay his Nonforfeitable Accrued Benefit (including any life
insurance proceeds payable to the Participant's Account) in the event of his
death and the Participant may designate the form and method of payment. The
Advisory Committee will prescribe the form for the written designation of
Beneficiary and, upon the Participant's filing the form with the Advisory
Committee, the form effectively revokes all designations filed prior to that
date by the same Participant.
(A) COORDINATION WITH SURVIVOR REQUIREMENTS. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01 does not
impose any special spousal consent requirements on the Participant's Beneficiary
designation. However, in the absence of spousal consent (as required by Article
VI) to the Participant's Beneficiary designation: (1) any waiver of the joint
and survivor annuity or of the preretirement survivor annuity is not valid; and
(2) if the Participant dies prior to his annuity starting date, the
Participant's Beneficiary designation will apply only to the portion of the
death benefit which is not payable as a preretirement survivor annuity.
Regarding clause (2), if the Participant's surviving spouse is a primary
Beneficiary under the Participant's Beneficiary designation, the Trustee will
satisfy the spouse's interest in the Participant's death benefit first from the
portion which is payable as a preretirement survivor annuity.
(B) PROFIT SHARING PLAN EXCEPTION. If the Plan is a profit sharing plan, the
Beneficiary designation of a married Exempt Participant is not valid unless the
Participant's spouse consents (in a manner described in Section 6.05) to the
Beneficiary designation. An "Exempt Participant" is a Participant who is not
subject to the joint and survivor requirements of Article VI. The spousal
consent requirement in this paragraph does not apply if the Exempt Participant
and his spouse are not married throughout the one year period ending on the date
of the Participant's death, or if the Participant's spouse is the Participant's
sole primary Beneficiary.
8.02 NO BENEFICIARY DESIGNATION/DEATH OF BENEFICIARY. If a Participant
fails to name a Beneficiary in accordance with Section 8.01, or if the
Beneficiary named by a Participant predeceases him, then the Trustee will pay
the Participant's Nonforfeitable Accrued Benefit in accordance with Section 6.02
in the following order of priority, unless the Employer specifies a different
order of priority in an addendum to its Adoption Agreement, to:
(a) The Participant's surviving spouse;
(b) The Participant's surviving children, including adopted children, in
equal shares;
(c) The Participant's surviving parents, in equal shares; or
(d) The Participant's estate.
If the Beneficiary does not predecease the Participant, but dies prior to
distribution of the Participant's entire Nonforfeitable Accrued Benefit, the
Trustee will pay the remaining Nonforfeitable Accrued Benefit to the
Beneficiary's estate unless the Participant's Beneficiary designation provides
otherwise or unless the Employer provides otherwise in its Adoption Agreement.
If the Plan is a profit sharing plan, and the Plan includes Exempt Participants,
the Employer may not specify a different order of priority in the Adoption
Agreement unless the Participant's surviving spouse will be first in the
different order of priority. The Advisory Committee will direct the Trustee as
to the method and to whom the Trustee will make payment under this Section 8.02.
8.01
<PAGE>
8.03 PERSONAL DATA TO COMMITTEE. Each Participant and each Beneficiary of
a deceased Participant must furnish to the Advisory Committee such evidence,
data or information as the Advisory Committee considers necessary or desirable
for the purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition precedent that
each Participant will furnish promptly full, true and complete evidence, data
and information when requested by the Advisory Committee, provided the Advisory
Committee advises each Participant of the effect of his failure to comply with
its request.
8.04 ADDRESS FOR NOTIFICATION. Each Participant and each Beneficiary of a
deceased Participant must file with the Advisory Committee from time to time, in
writing, his post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or Beneficiary,
at his last post office address filed with the Advisory Committee, or as shown
on the records of the Employer, binds the Participant, or Beneficiary, for all
purposes of this Plan.
8.05 ASSIGNMENT OR ALIENATION. Subject to Code Section 414(p) relating to
qualified domestic relations orders, neither a Participant nor a Beneficiary may
anticipate, assign or alienate (either at law or in equity) any benefit provided
under the Plan, and the Trustee will not recognize any such anticipation,
assignment or alienation. Furthermore, a benefit under the Plan is not subject
to attachment, garnishment, levy, execution or other legal or equitable
process.
8.06 NOTICE OF CHANGE IN TERMS. The Plan Administrator, within the time
prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
required by ERISA to be furnished without charge.
8.07 LITIGATION AGAINST THE TRUST. A court of competent jurisdiction may
authorize any appropriate equitable relief to redress violations of ERISA or to
enforce any provisions of ERISA or the terms of the Plan. A fiduciary may
receive reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 INFORMATION AVAILABLE. Any Participant in the Plan or any Beneficiary
may examine copies of the Plan description, latest annual report, any bargaining
agreement, this Plan and Trust, contract or any other instrument under which the
Plan was established or is operated. The Plan Administrator will maintain all of
the items listed in this Section 8.08 in his office, or in such other place or
places as he may designate from time to time in order to comply with the
regulations issued under ERISA, for examination during reasonable business
hours. Upon the written request of a Participant or Beneficiary the Plan
Administrator must furnish him with a copy of any item listed in this Section
8.08. The Plan Administrator may make a reasonable charge to the requesting
person for the copy so furnished.
8.09 APPEAL PROCEDURE FOR DENIAL OF BENEFITS. A Participant or a
Beneficiary ("Claimant") may file with the Advisory Committee a written claim
for benefits, if the Participant or Beneficiary determines the distribution
procedures of the Plan have not provided him his proper Nonforfeitable Accrued
Benefit. The Advisory Committee must render a decision on the claim within 60
days of the Claimant's written claim for benefits. The Plan Administrator must
provide adequate notice in writing to the Claimant whose claim for benefits
under the Plan the Advisory Committee has denied. The Plan Administrator's
notice to the Claimant must set forth:
(a) The specific reason for the denial;
(b) Specific references to pertinent Plan provisions on which the Advisory
Committee based its denial;
(c) A description of any additional material and information needed for
the Claimant to perfect his claim and an explanation of why the material
or information is needed; and
8.02
<PAGE>
(d) That any appeal the Claimant wishes to make of the adverse
determination must be in writing to the Advisory Committee within 75 days
after receipt of the Plan Administrator's notice of denial of benefits.
The Plan Administrator's notice must further advise the Claimant that his
failure to appeal the action to the Advisory Committee in writing within
the 75-day period will render the Advisory Committee's determination
final, binding and conclusive.
If the Claimant should appeal to the Advisory Committee, he, or his duly
authorized representative, may submit, in writing, whatever issues and comments
he, or his duly authorized representative, feels are pertinent. The Claimant, or
his duly authorized representative, may review pertinent Plan documents. The
Advisory Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified under the
circumstances. The Advisory Committee must advise the Claimant of its decision
within 60 days of the Claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the 60-day limit unfeasible, but in no event may the Advisory Committee render a
decision respecting a denial for a claim for benefits later than 120 days after
its receipt of a request for review.
The Plan Administrator's notice of denial of benefits must identify the
name of each member of the Advisory Committee and the name and address of the
Advisory Committee member to whom the Claimant may forward his appeal.
8.10 PARTICIPANT DIRECTION OF INVESTMENT. A Participant has the right to
direct the Trustee with respect to the investment or re-investment of the assets
comprising the Participant's individual Account only if the Trustee consents in
writing to permit such direction. If the Trustee consents to Participant
direction of investment, the Trustee will accept direction from each Participant
on a written election form (or other written agreement), as a part of this Plan,
containing such conditions, limitations and other provisions the parties deem
appropriate. The Trustee or, with the Trustee's consent, the Advisory Committee,
may establish written procedures, incorporated specifically as part of this
Plan, relating to Participant direction of investment under this Section 8.10.
The Trustee will maintain a segregated investment Account to the extent a
Participant's Account is subject to Participant self-direction. The Trustee is
not liable for any loss, nor is the Trustee liable for any breach, resulting
from a Participant's direction of the investment of any part of his directed
Account.
The Advisory Committee, to the extent provided in a written loan policy
adopted under Section 9.04, will treat a loan made to a Participant as a
Participant direction of investment under this Section 8.10. To the extent of
the loan outstanding at any time, the borrowing Participant's Account alone
shares in any interest paid on the loan, and it alone bears any expense or loss
it incurs in connection with the loan. The Trustee may retain any principal or
interest paid on the borrowing Participant's loan in an interest bearing
segregated Account on behalf of the borrowing Participant until the Trustee (or
the Named Fiduciary, in the case of a nondiscretionary Trustee) deems it
appropriate to add the amount paid to the Participant's separate Account under
the Plan.
If the Trustee consents to Participant direction of investment of his
Account, the Plan treats any post-December 31, 1981, investment by a
Participant's directed Account in collectibles (as defined by Code Section
408(m)) as a deemed distribution to the Participant for Federal income tax
purposes.
* * * * * * * * * * * * * * *
8.03
<PAGE>
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS' ACCOUNTS
9.01 MEMBERS' COMPENSATION, EXPENSES. The Employer must appoint an
Advisory Committee to administer the Plan, the members of which may or may not
be Participants in the Plan, or which may be the Plan Administrator acting
alone. In the absence of an Advisory Committee appointment, the Plan
Administrator assumes the powers, duties and responsibilities of the Advisory
Committee. The members of the Advisory Committee will serve without compensation
for services as such, but the Employer will pay all expenses of the Advisory
Committee, except to the extent the Trust properly pays for such expenses,
pursuant to Article X.
9.02 TERM. Each member of the Advisory Committee serves until the
appointment of his successor.
9.03 POWERS. In case of a vacancy in the membership of the Advisory
Committee, the remaining members of the Advisory Committee may exercise any and
all of the powers, authority, duties and discretion conferred upon the Advisory
Committee pending the filling of the vacancy.
9.04 GENERAL. The Advisory Committee has the following powers and duties:
(a) To select a Secretary, who need not be a member of the Advisory
Committee;
(b) To determine the rights of eligibility of an Employee to participate
in the Plan, the value of a Participant's Accrued Benefit and the
Nonforfeitable percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations necessary for the proper
and efficient administration of the Plan provided the rules are not
inconsistent with the terms of this Agreement;
(d) To construe and enforce the terms of the Plan and the rules and
regulations it adopts, including interpretation of the Plan documents and
documents related to the Plan's operation;
(e) To direct the Trustee as respects the crediting and distribution of
the Trust;
(f) To review and render decisions respecting a claim for (or denial of a
claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(h) To engage the service of agents whom it may deem advisable to assist
it with the performance of its duties;
(i) To engage the services of an Investment Manager or Managers (as
defined in ERISA Section 3(38)), each of whom will have full power and
authority to manage, acquire or dispose (or direct the Trustee with
respect to acquisition or disposition) of any Plan asset under its
control;
(j) To establish, in its sole discretion, a nondiscriminatory policy (see
Section 9.04(A)) which the Trustee must observe in making loans, if any,
to Participants and Beneficiaries; and
(k) To establish and maintain a funding standard account and to make
credits and charges to the account to the extent required by and in
accordance with the provisions of the Code.
The Advisory Committee must exercise all of its powers, duties and
discretion under the Plan in a uniform and nondiscriminatory manner.
9.01
<PAGE>
(A) LOAN POLICY. If the Advisory Committee adopts a loan policy, pursuant to
paragraph (j), the loan policy must be a written document and must include: (1)
the identity of the person or positions authorized to administer the participant
loan program; (2) a procedure for applying for the loan; (3) the criteria for
approving or denying a loan; (4) the limitations, if any, on the types and
amounts of loans available; (5) the procedure for determining a reasonable rate
of interest; (6) the types of collateral which may secure the loan; and (7) the
events constituting default and the steps the Plan will take to preserve plan
assets in the event of default. This Section 9.04 specifically incorporates a
written loan policy as part of the Employer's Plan.
9.05 FUNDING POLICY. The Advisory Committee will review, not less often
than annually, all pertinent Employee information and Plan data in order to
establish the funding policy of the Plan and to determine the appropriate
methods of carrying out the Plan's objectives. The Advisory Committee must
communicate periodically, as it deems appropriate, to the Trustee and to any
Plan Investment Manager the Plan's short-term and long-term financial needs so
investment policy can be coordinated with Plan financial requirements.
9.06 MANNER OF ACTION. The decision of a majority of the members appointed
and qualified controls.
9.07 AUTHORIZED REPRESENTATIVE. The Advisory Committee may authorize any
one of its members, or its Secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters or
other documents. The Advisory Committee must evidence this authority by an
instrument signed by all members and filed with the Trustee.
9.08 INTERESTED MEMBER. No member of the Advisory Committee may decide or
determine any matter concerning the distribution, nature or method of settlement
of his own benefits under the Plan, except in exercising an election available
to that member in his capacity as a Participant, unless the Plan Administrator
is acting alone in the capacity of the Advisory Committee.
9.09 INDIVIDUAL ACCOUNTS. The Advisory Committee will maintain, or direct
the Trustee to maintain, a separate Account, or multiple Accounts, in the name
of each Participant to reflect the Participant's Accrued Benefit under the Plan.
If a Participant re-enters the Plan subsequent to his having a Forfeiture Break
in Service, the Advisory Committee, or the Trustee, must maintain a separate
Account for the Participant's pre-Forfeiture Break in Service Accrued Benefit
and a separate Account for his post-Forfeiture Break in Service Accrued Benefit,
unless the Participant's entire Accrued Benefit under the Plan is 100%
Nonforfeitable.
The Advisory Committee will make its allocations, or request the Trustee
to make its allocations, to the Accounts of the Participants in accordance with
the provisions of Section 9.11. The Advisory Committee may direct the Trustee to
maintain a temporary segregated investment Account in the name of a Participant
to prevent a distortion of income, gain or loss allocations under Section 9.11.
The Advisory Committee must maintain records of its activities.
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. The value of each
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Employer's Trust Fund which the net credit balance in
his Account (exclusive of the cash value of incidental benefit insurance
contracts) bears to the total net credit balance in the Accounts (exclusive of
the cash value of the incidental benefit insurance contracts) of all
Participants plus the cash surrender value of any incidental benefit insurance
contracts held by the Trustee on the Participant's life.
For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date immediately
preceding the date of the distribution. Any distribution (other than a
distribution from a segregated Account) made to a Participant (or to his
Beneficiary) more than 90 days after the most recent valuation date may include
interest on the amount of the distribution as an expense of the Trust Fund. The
interest, if any, accrues from such valuation date to the date of the
distribution at the rate established in the Employer's Adoption Agreement.
9.02
<PAGE>
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR LOSS. A "valuation
date" under this Plan is each Accounting Date and each interim valuation date
determined under Section 10.14. As of each valuation date the Advisory Committee
must adjust Accounts to reflect net income, gain or loss since the last
valuation date. The valuation period is the period beginning the day after the
last valuation date and ending on the current valuation date.
(A) TRUST FUND ACCOUNTS. The allocation provisions of this paragraph apply to
all Participant Accounts other than segregated investment Accounts. The Advisory
Committee first will adjust the Participant Accounts, as those Accounts stood at
the beginning of the current valuation period, by reducing the Accounts for any
forfeitures arising under Section 5.09 or under Section 9.14, for amounts
charged during the valuation period to the Accounts in accordance with Section
9.13 (relating to distributions) and Section 11.01 (relating to insurance
premiums), and for the cash value of incidental benefit insurance contracts. The
Advisory Committee then, subject to the restoration allocation requirements of
Section 5.04 or of Section 9.14, will allocate the net income, gain or loss pro
rata to the adjusted Participant Accounts. The allocable net income, gain or
loss is the net income (or net loss), including the increase or decrease in the
fair market value of assets, since the last valuation date.
(B) SEGREGATED INVESTMENT ACCOUNTS. A segregated investment Account receives all
income it earns and bears all expense or loss it incurs. The Advisory Committee
will adopt uniform and nondiscriminatory procedures for determining income or
loss of a segregated investment Account in a manner which reasonably reflects
investment directions relating to pooled investments and investment directions
occurring during a valuation period. As of the valuation date, the Advisory
Committee must reduce a segregated Account for any forfeiture arising under
Section 5.09 after the Advisory Committee has made all other allocations,
changes or adjustments to the Account for the Plan Year.
(C) ADDITIONAL RULES. An Excess Amount or suspense account described in Part 2
of Article III does not share in the allocation of net income, gain or loss
described in this Section 9.11. If the Employer maintains its Plan under a Code
Section 401(k) Adoption Agreement, the Employer may specify in its Adoption
Agreement alternate valuation provisions authorized by that Adoption Agreement.
This Section 9.11 applies solely to the allocation of net income, gain or loss
of the Trust. The Advisory Committee will allocate the Employer contributions
and Participant forfeitures, if any, in accordance with Article III.
9.12 INDIVIDUAL STATEMENT. As soon as practicable after the Accounting
Date of each Plan Year, but within the time prescribed by ERISA and the
regulations under ERISA, the Plan Administrator will deliver to each Participant
(and to each Beneficiary) a statement reflecting the condition of his Accrued
Benefit in the Trust as of that date and such other information ERISA requires
be furnished the Participant or Beneficiary. No Participant, except a member of
the Advisory Committee, has the right to inspect the records reflecting the
Account of any other Participant.
9.13 ACCOUNT CHARGED. The Advisory Committee will charge a Participant's
Account for all distributions made from that Account to the Participant, to his
Beneficiary or to an alternate payee. The Advisory Committee also will charge a
Participant's Account for any administrative expenses incurred by the Plan
directly related to that Account.
9.03
<PAGE>
9.14 UNCLAIMED ACCOUNT PROCEDURE. The Plan does not require either the
Trustee or the Advisory Committee to search for, or to ascertain the whereabouts
of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
of record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the Advisory Committee within 6 months from the date of mailing of
the notice, the Advisory Committee will treat the Participant's or Beneficiary's
unclaimed payable Accrued Benefit as forfeited and will reallocate the unclaimed
payable Accrued Benefit in accordance with Section 3.05. A forfeiture under this
paragraph will occur at the end of the notice period or, if later, the earliest
date applicable Treasury regulations would permit the forfeiture. Pending
forfeiture, the Advisory Committee, following the expiration of the notice
period, may direct the Trustee to segregate the Nonforfeitable Accrued Benefit
in a segregated Account and to invest that segregated Account in Federally
insured interest bearing savings accounts or time deposits (or in a combination
of both), or in other fixed income investments.
If a Participant or Beneficiary who has incurred a forfeiture of his
Accrued Benefit under the provisions of the first paragraph of this Section 9.14
makes a claim, at any time, for his forfeited Accrued Benefit, the Advisory
Committee must restore the Participant's or Beneficiary's forfeited Accrued
Benefit to the same dollar amount as the dollar amount of the Accrued Benefit
forfeited, unadjusted for any gains or losses occurring subsequent to the date
of the forfeiture. The Advisory Committee will make the restoration during the
Plan Year in which the Participant or Beneficiary makes the claim, first from
the amount, if any, of Participant forfeitures the Advisory Committee otherwise
would allocate for the Plan Year, then from the amount, if any, of the Trust
Fund net income or gain for the Plan Year and then from the amount, or
additional amount, the Employer contributes to enable the Advisory Committee to
make the required restoration. The Advisory Committee must direct the Trustee to
distribute the Participant's or Beneficiary's restored Accrued Benefit to him
not later than 60 days after the close of the Plan Year in which the Advisory
Committee restores the forfeited Accrued Benefit. The forfeiture provisions of
this Section 9.14 apply solely to the Participant's or to the Beneficiary's
Accrued Benefit derived from Employer contributions.
* * * * * * * * * * * * * * *
9.04
<PAGE>
ARTICLE X
CUSTODIAN/TRUSTEE, POWERS AND DUTIES
10.01 ACCEPTANCE. The Trustee accepts the Trust created under the Plan and
agrees to perform the obligations imposed. The Trustee must provide bond for the
faithful performance of its duties under the Trust to the extent required by
ERISA.
10.02 RECEIPT OF CONTRIBUTIONS. The Trustee is accountable to the Employer
for the funds contributed to it by the Employer, but does not have any duty to
see that the contributions received comply with the provisions of the Plan. The
Trustee is not obliged to collect any contributions from the Employer, nor is
obliged to see that funds deposited with it are deposited according to the
provisions of the Plan.
10.03 INVESTMENT POWERS.
[A] DISCRETIONARY TRUSTEE DESIGNATION. If the Employer, in Adoption Agreement
Section 1.02, designates the Trustee to administer the Trust as a discretionary
Trustee, then the Trustee has full discretion and authority with regard to the
investment of the Trust Fund, except with respect to a Plan asset under the
control or direction of a properly appointed Investment Manager or with respect
to a Plan asset properly subject to Employer, Participant or Advisory Committee
direction of investment. The Trustee must coordinate its investment policy with
Plan financial needs as communicated to it by the Advisory Committee. The
Trustee is authorized and empowered, but not by way of limitation, with the
following powers, rights and duties:
(a) To invest any part or all of the Trust Fund in any common or preferred
stocks, open-end or closed-end mutual funds, put and call options traded
on a national exchange, United States retirement plan bonds, corporate
bonds, debentures, convertible debentures, commercial paper, U.S. Treasury
bills, U.S. Treasury notes and other direct or indirect obligations of the
United States Government or its agencies, improved or unimproved real
estate situated in the United States, limited partnerships, insurance
contracts of any type, mortgages, notes or other property of any kind,
real or personal, to buy or sell options on common stock on a nationally
recognized exchange with or without holding the underlying common stock,
to buy and sell commodities, commodity options and contracts for the
future delivery of commodities, and to make any other investments the
Trustee deems appropriate, as a prudent man would do under like
circumstances with due regard for the purposes of this Plan. Any
investment made or retained by the Trustee in good faith is proper but
must be of a kind constituting a diversification considered by law
suitable for trust investments.
(b) To retain in cash so much of the Trust Fund as it may deem advisable
to satisfy liquidity needs of the Plan and to deposit any cash held in the
Trust Fund in a bank account at reasonable interest.
(c) To invest, if the Trustee is a bank or similar financial institution
supervised by the United States or by a State, in any type of deposit of
the Trustee (or of a bank related to the Trustee within the meaning of
Code Section 414(b)) at a reasonable rate of interest or in a common trust
fund, as described in Code Section 584, or in a collective investment
fund, the provisions of which govern the investment of such assets and
which the Plan incorporates by this reference, which the Trustee (or its
affiliate, as defined in Code Section 1504) maintains exclusively for the
collective investment of money contributed by the bank (or the affiliate)
in its capacity as trustee and which conforms to the rules of the
Comptroller of the Currency.
(d) To manage, sell, contract to sell, grant options to purchase, convey,
exchange, transfer, abandon, improve, repair, insure, lease for any term
even though commencing in the future or extending beyond the term of the
Trust, and otherwise deal with all property, real or personal, in such
manner, for such considerations and on such terms and conditions as the
Trustee decides.
10.01
<PAGE>
(e) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee
or distributee is entitled to any payment or whether the distribution is
proper or within the terms of the Plan, or as to the manner of making any
payment or distribution. The Trustee is accountable only to the Advisory
Committee for any payment or distribution made by it in good faith on the
order or direction of the Advisory Committee.
(f) To borrow money, to assume indebtedness, extend mortgages and encumber
by mortgage or pledge.
(g) To compromise, contest, arbitrate or abandon claims and demands, in
its discretion.
(h) To have with respect to the Trust all of the rights of an individual
owner, including the power to give proxies, to participate in any voting
trusts, mergers, consolidations or liquidations, and to exercise or sell
stock subscriptions or conversion rights.
(i) To lease for oil, gas and other mineral purposes and to create mineral
severances by grant or reservation; to pool or unitize interests in oil,
gas and other minerals; and to enter into operating agreements and to
execute division and transfer orders.
(j) To hold any securities or other property in the name of the Trustee or
its nominee, with depositories or agent depositories or in another form as
it may deem best, with or without disclosing the trust relationship.
(k) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management, investment and
distribution of the Trust.
(l) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make payment or
delivery of the funds or property until final adjudication is made by a
court of competent jurisdiction.
(m) To file all tax returns required of the Trustee.
(n) To furnish to the Employer, the Plan Administrator and the Advisory
Committee an annual statement of account showing the condition of the
Trust Fund and all investments, receipts, disbursements and other
transactions effected by the Trustee during the Plan Year covered by the
statement and also stating the assets of the Trust held at the end of the
Plan Year, which accounts are conclusive on all persons, including the
Employer, the Plan Administrator and the Advisory Committee, except as to
any act or transaction concerning which the Employer, the Plan
Administrator or the Advisory Committee files with the Trustee written
exceptions or objections within 90 days after the receipt of the accounts
or for which ERISA authorizes a longer period within which to object.
(o) To begin, maintain or defend any litigation necessary