EX-10.10



 







Exhibit 10.10




K&F INDUSTRIES SAVINGS PLAN




March 2006 Edition




 









 








TABLE OF CONTENTS




	 	 	 	 	 
	INTRODUCTION
	 	 	-1-	 
	 
	 	 	 	 
	ARTICLE I. DEFINITIONS
	 	 	-3-	 
	Account
	 	 	-3-	 
	Affiliate
	 	 	-3-	 
	After-Tax Contributions
	 	 	-3-	 
	Alternate Payee
	 	 	-3-	 
	Bargaining Employee
	 	 	-3-	 
	Beneficiary
	 	 	-4-	 
	Board
	 	 	-4-	 
	Board of Directors
	 	 	-4-	 
	Break in Service
	 	 	-4-	 
	Code
	 	 	-4-	 
	Committee
	 	 	-4-	 
	Company
	 	 	-5-	 
	Compensation
	 	 	-5-	 
	Deferral Change Date
	 	 	-5-	 
	Disability
	 	 	-6-	 
	Disability Retirement Date
	 	 	-6-	 
	Effective Date
	 	 	-6-	 
	Employee
	 	 	-6-	 
	Employer
	 	 	-6-	 
	Employer Contribution Rate
	 	 	-6-	 
	Employment Commencement Date
	 	 	-6-	 
	Enrollment Date
	 	 	-6-	 
	Equity Fund
	 	 	-6-	 
	ERISA
	 	 	-7-	 
	Former Participant
	 	 	-7-	 
	Fund
	 	 	-7-	 
	Highly Compensated Employee
	 	 	-7-	 
	Hour of Service
	 	 	-7-	 
	Income Fund
	 	 	-7-	 
	Investment Funds
	 	 	-7-	 
	Matching Employer Contributions
	 	 	-7-	 
	Normal Retirement Date
	 	 	-7-	 
	Participant
	 	 	-8-	 
	Plan
	 	 	-8-	 






-ii-









 






	 	 	 	 	 
	Plan Year
	 	 	-8-	 
	Period of Severance
	 	 	-8-	 
	Pre-Tax Deferral
	 	 	-8-	 
	Prior Plan
	 	 	-8-	 
	Retirement Date
	 	 	-8-	 
	Rollover Contribution
	 	 	-8-	 
	Salaried Employee
	 	 	-8-	 
	Service
	 	 	-9-	 
	Tax-Deferred Contributions
	 	 	-9-	 
	Total Compensation
	 	 	-9-	 
	Transfer Amount
	 	 	-9-	 
	Trust Agreement
	 	 	-10-	 
	Trustee
	 	 	-10-	 
	Trust
	 	 	-10-	 
	Trust Fund
	 	 	-10-	 
	Valuation Date
	 	 	-10-	 
	Year of Service
	 	 	-10-	 
	 
	 	 	 	 
	ARTICLE II. EMPLOYEE PARTICIPATION
	 	 	-11-	 
	2.1 Eligibility and Election to Participate
	 	 	-11-	 
	2.2 General Rules of Eligibility
	 	 	-11-	 
	2.3 How to Calculate Service for Vesting for K&F and ABS
	 	 	-12-	 
	2.4 How to Calculate Service for Vesting for EFC
	 	 	-14-	 
	2.5 General Restrictions on Participation
	 	 	-15-	 
	 
	 	 	 	 
	ARTICLE III. VESTING AND FORFEITURES
	 	 	-16-	 
	3.1 Immediate Vesting Provisions
	 	 	-16-	 
	3.2 Vesting of Employer Contributions in Matching Employer Contribution Account
	 	 	-16-	 
	3.3 Forfeitures
	 	 	-16-	 
	3.4 Restoring Forfeitures
	 	 	-16-	 
	 
	 	 	 	 
	ARTICLE IV. TAX-DEFERRED AND ROLLOVER CONTRIBUTIONS
	 	 	-17-	 
	4.1 Tax-Deferred Contributions
	 	 	-17-	 
	4.2 After-Tax Contributions
	 	 	-17-	 
	4.3 Amount of Tax-Deferred Contributions
	 	 	-17-	 
	4.4 General Rules
	 	 	-17-	 
	4.5 Timing of Contributions
	 	 	-18-	 
	4.6 Changes in Compensation Reduction Authorization
	 	 	-18-	 
	4.7 Suspension of Contributions
	 	 	-18-	 
	4.8 Resumption of Contributions
	 	 	-18-	 






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	4.9 Rollover Contributions
	 	 	-19-	 
	 
	 	 	 	 
	ARTICLE V. MATCHING EMPLOYER CONTRIBUTIONS
	 	 	-20-	 
	5.1 Payment of Contributions
	 	 	-20-	 
	5.2 Limitation on Amount under Code Sections 404 and 415
	 	 	-20-	 
	5.3 Allocation of Matching Employer Contributions
	 	 	-21-	 
	5.4 Employer Contribution Rate
	 	 	-21-	 
	5.5 Determination of Amount of Employer Contribution
	 	 	-21-	 
	5.6 Effect of Plan Termination
	 	 	-21-	 
	 
	 	 	 	 
	ARTICLE VI. INVESTMENT OF CONTRIBUTIONS TRANSFERS BETWEEN FUNDS
	 	 	-22-	 
	6.1 Investment Elections of Participants
	 	 	-22-	 
	6.2 Deposit of Contributions
	 	 	-22-	 
	 
	 	 	 	 
	ARTICLE VII. FUNDS, ACCOUNTS, AND THEIR VALUATION
	 	 	-23-	 
	7.1 Trust Fund
	 	 	-23-	 
	7.2 Establishment of Funds
	 	 	-23-	 
	7.3 Income on Funds
	 	 	-23-	 
	7.4 Accounts
	 	 	-23-	 
	7.5 Account Balances
	 	 	-24-	 
	7.6 Finality of Determinations
	 	 	-24-	 
	7.7 Notification
	 	 	-24-	 
	 
	 	 	 	 
	ARTICLE VIII. LIMITATIONS ON CONTRIBUTIONS
	 	 	-25-	 
	8.1 Section 401(k) Limit on Pre-Tax Deferrals
	 	 	-25-	 
	8.2 Section 401(m) Limit on Matching Contributions
	 	 	-26-	 
	8.3 Special Rules
	 	 	-28-	 
	8.4 Section 415 Limits
	 	 	-29-	 
	 
	 	 	 	 
	ARTICLE IX. IN-SERVICE WITHDRAWALS; LOANS
	 	 	-33-	 
	9.1 Withdrawal of Rollover and After-Tax Contributions
	 	 	-33-	 
	9.2 Withdrawal of Matching Employer Contributions
	 	 	-33-	 
	9.3 Withdrawal of Tax-Deferred Contributions
	 	 	-33-	 
	9.4 Hardship Withdrawals
	 	 	-34-	 
	9.5 Payment of Withdrawals
	 	 	-35-	 
	9.6 Adjustment of Accounts
	 	 	-36-	 
	9.7 Loans
	 	 	-36-	 
	 
	 	 	 	 
	ARTICLE X. PAYMENT OF BENEFITS
	 	 	-38-	 






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	10.1 Distribution on Termination of Employment
	 	 	-38-	 
	10.2 Method of Distribution
	 	 	-38-	 
	10.3 Required Payment Dates
	 	 	-38-	 
	10.4 Payments on Account of Participant’s Death
	 	 	-39-	 
	10.5 Direct Rollover Distributions to Other Plans or IRAs
	 	 	-40-	 
	 
	 	 	 	 
	ARTICLE XI. ADMINISTRATION
	 	 	-42-	 
	11.1 Named Fiduciary
	 	 	-42-	 
	11.2 Other Fiduciaries Appointed Under Trust Provisions
	 	 	-42-	 
	11.3 The Committee
	 	 	-42-	 
	11.4 Committee’s Discretionary Power to Interpret and Administer the Plan
	 	 	-42-	 
	11.5 Trustee’s Duty to Withhold Taxes
	 	 	-43-	 
	11.6 Claims Procedure
	 	 	-43-	 
	11.7 QDRO Claim
	 	 	-44-	 
	11.8 Indemnification of Committee Members
	 	 	-45-	 
	11.9 Power to Execute Plan and Other Documents
	 	 	-45-	 
	 
	 	 	 	 
	ARTICLE XII. AMENDMENT, TERMINATION AND MERGER
	 	 	-46-	 
	12.1 Trust is Irrevocable
	 	 	-46-	 
	12.2 Limitations on Amendment
	 	 	-46-	 
	12.3 Discontinuance of Contributions
	 	 	-46-	 
	12.4 Termination Date
	 	 	-47-	 
	12.5 Termination
	 	 	-47-	 
	12.6 Merger
	 	 	-47-	 
	 
	 	 	 	 
	ARTICLE XIII. GENERAL PROVISIONS
	 	 	-49-	 
	13.1 No Commitment as to Employment
	 	 	-49-	 
	13.2 Benefits
	 	 	-49-	 
	13.3 No Guarantees
	 	 	-49-	 
	13.4 Expenses
	 	 	-49-	 
	13.5 Precedent
	 	 	-49-	 
	13.6 Duty to Furnish Information
	 	 	-49-	 
	13.7 Withholding
	 	 	-50-	 
	13.8 Back Pay Awards
	 	 	-50-	 
	13.9 Exclusive Benefit and Revision of Employer Contributions
	 	 	-50-	 
	13.10 Return of Contributions to Participants
	 	 	-51-	 
	13.11 Headings
	 	 	-51-	 
	13.12 Applicable State Law
	 	 	-51-	 
	13.13 Plan Shall Comply With Federal Law
	 	 	-52-	 
	13.14 Missing Payee
	 	 	-52-	 
	13.15 Parties Bound
	 	 	-52-	 






-v-









 






	 	 	 	 	 
	13.16 Trust Fund Sole Source of Payments for Plan
	 	 	-52-	 
	13.17 Common Trust Funds
	 	 	-52-	 
	13.18 Transfers Among Affiliates
	 	 	-53-	 
	13.19 Assignments
	 	 	-55-	 
	13.20 QDROs
	 	 	-55-	 
	13.21 Deemed Distribution of Unvested Amounts
	 	 	-56-	 
	13.22 Incompetency or Minority of Payee
	 	 	-56-	 
	13.23 Gender and Number
	 	 	-57-	 
	13.24 ERISA Section 404(c)
	 	 	-57-	 
	13.25 Notice to the Committee
	 	 	-57-	 
	13.26 Consent for Distributions Paid Before Normal Retirement Date
	 	 	-58-	 
	13.27 Illegality of Particular Provisions
	 	 	-58-	 
	13.28 Condition of Contributions
	 	 	-58-	 
	13.29 Qualified Military Service
	 	 	-58-	 
	 
	 	 	 	 
	ARTICLE XIV. TOP-HEAVY PROVISIONS
	 	 	-60-	 






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K&F INDUSTRIES SAVINGS PLAN




INTRODUCTION




Creation of K&F Plan




          The K&F Industries Savings Plan for Salaried Employees (the “Salaried Plan”) was established
on May 1, 1989 as the K&F Industries Savings Plan for Salaried Employees, substantially in the form
of the Loral Systems Group Employee Savings Plan for Salaried Employees (the “Prior Salaried
Plan”), following a corporate spin-off that occurred at that time. Account balances of transferred
Employees who had been covered by the Prior Plan were transferred to the Salaried Plan.



               The Salaried Plan document was restated, as follows:




	 	(1)	 	Restated, effective May 1, 1989, reflecting amendments made through September 1,
1991.
	 
	 	(2)	 	Restated, effective May 1, 1989, reflecting amendments made through December 20,
1994.





          The Engineered Fabrics Savings Plan for Bargaining Unit Employees (the “Bargaining Plan”) was
established on May 1, 1989, substantially in the form of the Loral Systems Group Employee Savings
Plan for Bargaining Unit-Employees (the “Prior Bargaining Plan”), following a corporate spin-off
that occurred at that time. Account balances of transferred Employees who had been covered by the
Prior Bargaining Plan were transferred to the Bargaining Plan.



               The Bargaining Plan document was restated as follows:




	 	(1)	 	Restated, effective May 1, 1989, reflecting amendments made through September 1,
1991.
	 
	 	(2)	 	Restated, effective May 1, 1989, reflecting amendments made through January 1,
1992.





Creation of the Plan — Merger of K&F Plans




           Effective December 31, 1992, the Salaried Plan and the Bargaining Plan were merged. The name
of the merged plan became changed at that time to the K&F Industries Savings Plan, effective
December 31, 1992. This document is the Plan document for the K&F Industries Savings Plan.



 









 





Amendment and Restatement




     Effective January 1, 1997 (except for those sections of the Plan that have a different
effective date), the Plan is amended and restated to comply with all applicable statutes, including
the Employee Retirement Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code of
1986, as amended by the Uruguay Round Agreements Act, the Uniformed Services Employment and
Reemployment Rights Act of 1994,the Small Business Job Protection Act of 1996, the Taxpayer Relief
Act of 1997, the Internal Revenue Restructuring Act of 1998 and all applicable rulings and
regulations issued thereunder. The Plan is also hereby amended and restated to comply with the new
proposed regulations under Code § 401(a)(9) and various provisions of the Economic Growth and Tax
Relief Reconciliation Act of 2001.



          The Trust of the Plan is intended to be a qualified profit-sharing plan as that term is
defined by Section 401 of the Internal Revenue Code of 1986, as amended (the “Code”) and to be a
qualified cash-or-deferred arrangement under Section 401(k) of the Code.




          The Plan is intended to be tax-exempt under Code Section 501(a). Employer contributions need
not be made out of profits.





-2-









 








ARTICLE I. DEFINITIONS




          As used herein, the following words and phrases shall have the meanings set forth below,
unless a different meaning is plainly required by the context:




“Account ” shall mean any of the separate records of accounts maintained by the Trustee in
the name of each Participant which reflect the value of contributions made on his behalf, as
provided in Article VII.




“Affiliate ” shall mean any corporation which is required to be aggregated with an Employer
for purposes of the controlled group rules of Code Section 414(b), the common control rules of Code
Section 414(c), the affiliated service group rules of Code Section 414(m), or the rules of 414(o),
subject to the rules of Code Section 415(h).




“After-Tax Contributions ” shall mean the amount which a Participant has elected to have
deducted from his Compensation on an after-tax basis in accordance with the provisions of Section
4.2, should that Section ever become effective.




“Alternate Payee ” means any appropriate person who is recognized by a court order (deemed
“qualified” by the Committee) as having a right to receive any portion of the benefits payable
under the Plan with respect to the Participant, as defined by Code Section 414(p).




“Bargaining Employee ” shall mean:





	 	(a)	 	any common-law employee in the service of an Employer whose terms of
employment are subject to a
collective bargaining agreement to which the Employer is a party, and
whose agreement specifically calls for participation in this Plan,
including officers, but excluding directors who are not in the
Employer’s employ in any other capacity.
	 
	 	(b)	 	“Bargaining Employees” shall, as prescribed by the Code, also include
employees of Affiliates. Leased employees as described by Code Section 414(n), shall
be considered Employees for the sole purpose of Code Section 414(n)(3).




“Beneficiary ” means the person who is entitled to receive Plan benefits in the event of a
Participant’s death. As required by the context of the Plan, “Beneficiaries” may also include
Alternate Payees.





-3-









 









	 	(a)	 	The Beneficiary of any married Participant shall normally be his legally
married spouse, at the time of death. Married Participants may designate someone
other than a spouse as Beneficiary, only if the designation includes the written
consent of the Participant’s spouse acknowledging the effect of the Beneficiary
designation and witnessed by a Plan representative or a notary public. If these
requirements are not met then the designation of a non-spouse Beneficiary is invalid.
However, the Committee may not require the spouse’s written consent if it is
established to the satisfaction of a Plan representative that such consent cannot be
obtained because (a) there is no spouse, (b) the spouse cannot be located, or (c)
such other circumstances exist as may be prescribed by applicable regulation. Any
such written spousal consent or
establishment that consent cannot be obtained shall be effective only with
respect to that spouse.
	 
	 	(b)	 	Beneficiary designations may be changed at any time. If no proper
Beneficiary is designated or survives, the Participant’s Beneficiary shall be, in the
following order of priority: (1) his spouse, if living at the time of such payment;
(2) his children (including adopted children but excluding stepchildren) per stirpes;
(3) his estate.
	 
	 	(c)	 	If the Committee is in doubt as to the right of any person to receive a
Plan benefit, the Committee may direct the Trustee to retain such amount, without
liability for any interest thereon, until the rights thereto are determined, or the
Committee may direct the Trustee to pay such amount into any court of appropriate
jurisdiction and such payment shall be a complete discharge of the liability of the
Plan and the Trust therefor.




“Board ” or “Board of Directors ” means the Board of Directors of the Company.



“Break in Service ” is defined in Sections 2.3 and 2.4.



“Code ” shall mean the Internal Revenue Code of 1986, as amended, and all appropriate
regulations and administrative guidance.



“Committee ” shall mean the administrative Committee which administers the Plan in
accordance with ARTICLE XI. As context requires, the word “Committee” shall be read to mean the
Committee or its delegates.



“Company ” shall mean K&F Industries, Inc., its corporate successors, and any corporation
or corporations into or with which it may be merged or consolidated. The Company shall act by
resolution of its Board of Directors.





-4-









 







“Compensation “ for a Plan Year shall mean:





	 	(a)	 	all cash remuneration paid by the Employer that is includible during the
relevant Plan Year, including regular earnings; bonus; commissions; overtime pay;
lump sum vacation pay; Code Section 125 elective, payroll deduction contributions;
and elective employee deferrals or deduction contributions made under this Plan or
any other qualified retirement plan during the Plan Year. However, the following
items will be excluded: distributions from this Plan or any other qualified
retirement plan; distributions from employee welfare plans; all supplemental
unemployment pay; lump sum severance pay; deferred income; fringe benefits; stock
options (with respect to their granting or execution); reimbursed expenses; any
unemployment benefits; imputed income from life insurance, or any other imputed
income; any employer contributions made under any qualified retirement plan or
welfare plan.
	 
	 	(b)	 	(1) Effective as of January 1, 1997, Compensation accounted under this Plan
shall not exceed $160,000, as adjusted for cost of living, as provided by Code
Section 401(a)(17) (the “Compensation Limit”). Effective as of January 1, 2002, the
Compensation Limit shall be $200,000.









	 
	 	(2)	 	If a cost of living adjustment is declared under the
Code with respect to any calendar year, it shall affect
the Compensation accounted for the Plan Year that begins during the
course of that calendar year, or that begins on the January 1st of that
same calendar year.
	 
	 	(3)	 	Should the Plan be amended so that Compensation paid
for any prior Plan Year is taken into account in determining benefit
accruals for the current Plan Year, then the Compensation Limit for the
prior year will be subject to the Code Section 401(a)(17) limit applicable
(adjusted for the cost of living) for that prior year.
	 
	 	(4)	 	If a Participant is not actively employed for a full
Plan Year, then his credited Compensation under Code Section 401(a)(17)
shall not be reduced, prorated, or limited because of his incomplete year
of service.




“Deferral Change Date ” means the date as of which an active Participant can elect to
change his deferral percentage rate with respect to his Basic Tax-Deferred Savings, Voluntary
Tax-Deferred Savings, or, if applicable, after-tax employee deferrals.





-5-









 







“Disability ” shall mean the permanent incapacity of a Participant, by reason of physical
or mental illness, to perform his usual duties for the Employer, which directly leads to his
separation of service from the Employer. Disability shall be determined by the Committee in a
uniform and nondiscriminatory manner after consideration of such evidence as it may require, which
may include a report of such physician or physicians as it may designate. A determination of
Disability made under this Plan shall have no effect (and shall not be considered) with respect to
any other determination regarding the Employee’s disability, made under any other employee benefit
plan.



“Disability Retirement Date ” means the date, determined by the Committee, upon which a
Participant’s vested Plan benefits shall be payable, on account of his termination of employment,
due to Disability.



“Effective Date ” of this Plan shall mean May 1, 1989.



“Employee ” shall mean Bargaining Employee or Salaried Employee.



“Employer ” shall mean the Company, Aircraft Braking Systems Corporation, Engineered
Fabrics Corporation, and any Affiliate or other corporation, which adopts the Plan by action of its
board of directors, with the consent of the Board. As to any Employee, at any time of reference,
“Employer” shall mean his Employer.



“Employer Contribution Rate ” shall mean the percentage rate to be determined by the Board
for a specific Plan Year in determining the amount of Matching Employer Contributions for such Plan
Year, with respect to each separate Employer, under Article V.



“Employment Commencement Date ” of an Employee shall mean the date on which he first
performed an Hour of Service with the Company or any Affiliate.



“Enrollment Date ”shall mean the first, or any subsequent payroll period following a
Participant’s first date of employment (or re-employment).



“Equity Fund ” shall mean an Investment Fund which is either a growth or growth
and income fund which invests its assets in part or in whole in common stock, securities
convertible into common stock, or preferred stock.





-6-









 







“ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended, and
all appropriate regulations and administrative guidance.



5%-Owner means a person owning (or considered as owning, within the meaning of section
416(i) of the Code) more than five percent (5%) of the outstanding stock of an Employer or an
Affiliate, or stock possessing more than five percent (5%) of the total combined voting power of
all stock of the Employer or an Affiliate (or having more than five percent (5%) of the capital or
profits interest in any Employer or an Affiliate that is not a corporation, determined under
similar principles).



“Former Participant ” means an individual who retains Account balances, under the Plan, but
who is ineligible to make Tax-Deferred Contributions.



“Fund ” shall have the same meaning as “Investment Fund.”



“Highly Compensated Employee ” means for Plan Years beginning after December 31, 1996, any
Employee (1) who during the Plan Year or the prior Plan Year was a 5%-Owner, or (2) for the prior
Plan Year had Compensation under Code Section 415(c)(3) in excess of $80,000, as adjusted under
Code Section 415(d).



“Hour of Service ” with respect to an Employee shall mean each hour for which he is paid,
or entitled to payment, for the performance of duties for an Employer.



“Income Fund ” shall mean an Investment Fund which is either a fixed income or money market
fund which invests its assets entirely in corporate or governmental fixed-income obligations.



“Investment Funds ” mean the investment funds with varying investment objectives
established from time to time by the Trustee for the investment of contributions hereunder, and
which are intended to comply with ERISA 404(c). The Trustee may, at any time, direct that a new
Investment Fund or Funds be established and discontinue an existing Investment Fund or Funds,
without formal Plan amendment.



“Matching Employer Contributions ” shall mean contributions made under Article V with
respect to Participants who make Tax-Deferred Contributions.



“Normal Retirement Date ” shall mean the day on which a Participant reaches age 65.






-7-









 







“Participant ” shall mean an Employee who elects to participate in the Plan in accordance
with the provisions of Article II, and whose participation has not been terminated.



“Plan ” shall mean this K&F Industries Savings Plan, including the Trust Agreement.



“Plan Year ” shall mean a calendar year.



“Period of Severance ” is defined in Sections 2.3 and 2.4.



“Pre-Tax Deferral ” means all elective deferrals under the Plan, as described in section
402(g)(3) of the Code.



“Prior
Plan ” shall mean:





	 	(a)	 	The Loral Systems Group Employee Savings Plan for Salaried Employees, with
respect to Participants who are Salaried Employees, and






	 	(b)	 	The Loral Systems Group Employee Savings Plan for Bargaining Unit
Employees, with respect to Participants who are Bargaining Employees.
	 
	 	(c)	 	Account balances from the Prior Plan were transferred to this Plan.




“Retirement Date ” means either a Participant’s Normal Retirement Date or Disability
Retirement Date.



“Rollover Contribution ” means a pre-tax contribution made to the Plan, either through (1)
described in Section 4.9, or (2) a Transfer Amount.



“Salaried Employee ” shall mean:





	 	(a)	 	any common-law employee of an Employer, including officers, but excluding
directors who are not in the Employer’s employ in any other capacity.
	 
	 	(b)	 	Salaried “Employees” shall, as prescribed by the Code, also include
employees of Affiliates. Leased employees as described by Code Section 414(n), shall
be considered Employees for the sole purpose of Code Section 414(n)(3).




-8-









 










The following shall not be a Salaried Employee:





	 	(x)	 	a person who is employed in an excluded unit or
excluded subsidiary which the Board of Directors may designate, or change
any such designation, from time to time and upon any reasonable basis of
classification, without formal Plan amendment, or
	 
	 	(y)	 	persons whose terms of employment with an Employer are
subject to a collective bargaining agreement to which the Employer is a
party, unless the agreement specifically provides for participation in the
Plan.




“Service” of an Employee shall mean:





	 	(i)	 	the period for which the Employee is paid or is entitled to payment
(including any back pay, irrespective of mitigation of damages), subject to the rules
and restrictions of Article II, for the performance of duties for an Employer. For
the purposes of calculating vesting service, “Service” shall also include Service
performed for an Affiliate.
	 
	 	(ii)	 	With respect to any period for which an Employee was subject to a Prior
Plan, or an earlier restatement of this Plan, then service shall be calculated under
that earlier Plan.




“Tax-Deferred Contributions ” shall mean contributions made by an Employer for a
Participant under Article IV, based on the amount by which the Participant elects to reduce his
Total Compensation otherwise payable in cash.



“Total Compensation ”: shall mean all remuneration paid by an Employer or Affiliate to an
employee as shown on Form W-2, determined before giving effect to any salary reduction agreement
under the Plan (or any other cash or deferred arrangement described in section 401(k) of the Code)
or to any similar reduction agreement pursuant to any cafeteria plan (within the meaning of section
125 of the Code). Total Compensation taken into account for any Plan Year for any individual (a)
shall be recognized only for the portion of the Plan Year in which the individual is a Participant
and (b) shall not exceed the “Compensation Limit”.



“Transfer Amount ” means an Employee’s vested interest under the Prior Plan, which has been
transferred to the Plan.





-9-









 







“Trust Agreement ” shall mean the agreement entered into between the Company and the
Trustee, as provided in hereof, together with all amendments thereto. The Trust Agreement is fully
a part of this Plan.



“Trustee ” shall mean the trustee which at the time shall be designated, qualified, and
acting under the Trust Agreement.



“Trust ” or “Trust Fund ” shall mean the vehicle under which Plan assets are
maintained by the Trustee under the Trust Agreement.



“Valuation Date ” shall mean each business day, or any other dates, as determined by the
Trustee, without formal Plan amendment.



“Year of Service ” shall mean a twelve-consecutive-month period beginning on the Employee’s
date of hire during which the Employee is credited with continuous Service, under Article II.




-10-









 








ARTICLE II. EMPLOYEE PARTICIPATION




2.1 Eligibility and Election to Participate 





	 	(a)	 	Timing of Eligibility.






	 	(1)	 	Each Employee who was a Participant
in the Plan on December 31, 1996, shall continue as a Participant
on and after January 1, 1997.
	 
	 	(2)	 	Each other Employee shall become a
Participant as of any Enrollment Date, if he has filed with the
Committee or its delegate a written election in the form
prescribed by the Committee within a reasonable time prior to the
applicable Enrollment Date.






	 	(b)	 	Method of Election. An Employee’s election shall contain:






	 	(1)	 	his authorization for his Employer to
reduce his Compensation and to make Tax-
Deferred Contributions on his
behalf in accordance with the
provisions of Article IV,
	 
	 	(2)	 	an authorization for his Employer to
make any payroll deductions with respect to his After-Tax
Contributions to the Plan in accordance with the provisions of
Article IV, and
	 
	 	(3)	 	his election as to the investment of
his Tax-Deferred Contributions and After-Tax Contributions, if
applicable, in accordance with the provisions of Section 6.1.





2.2 General Rules of Eligibility 





	 	(a)	 	Upon becoming a Participant, an Employee shall be entitled to the benefits
and shall be bound by all the terms and conditions of the Plan and the Trust
Agreement.
	 
	 	(b)	 	Participants shall cease to be Participants should (i) they cease to be
Employees, (ii) they cease to be eligible Employees under the Plan, or
(ii) the Plan be so amended, or terminated.




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	 	(c)	 	In the event that an Employee shall go from a classification of an eligible
Employee to a non-eligible Employee, he shall continue to be a Participant for all
purposes until the date he became a non-eligible Employee, and shall thereafter be a
Former Participant for so long as he is entitled to receive any benefits under the
Plan.
	 
	 	(d)	 	Participants or Former Participants who participated in the Prior Plan
shall similarly be subject to the terms of the Prior Plan (including, but not limited
to its provisions regarding benefits and vesting) as they were in effect during the
relevant periods.
	 
	 	(e)	 	Should any Employee who is excluded from participation because (1) he is
subject to a collective bargaining agreement that does not provide for Plan
participation, or (2) he is employed by an excluded unit or subsidiary, no longer be
excluded for either of such reasons, then he shall be eligible to participate in the
Plan on the first payroll period following the date that he (1) is no longer excluded
and (2) is eligible under this Article.
	 
	 	(f)	 	A former Participant who is reemployed by the Employer shall again become a
Participant as of the date he again becomes an Employee, provided he renews his
elective deferrals, under Plan procedures.





2.3 How to Calculate Service for Vesting for K&F and ABS 




          Service shall be calculated in the following manner for Participants whose Employer is K&F
Industries Inc. or Aircraft Braking Systems Corp.:





	 	(a)	 	Service shall be calculated under this Section only for the purposes of
vesting under Article III.
	 
	 	(b)	 	Service begins on the date of hire, or the first day of reemployment with
an Employer or an Affiliate. Service includes periods of lay-off, vacation, or
Employer-approved leave of absence, provided that such periods of vacation, lay-off
or leave do not exceed twenty-four consecutive months. (Should such periods of
vacation, lay-off or leave occur simultaneously, or consecutively, they shall be
aggregated in determining the maximum period of twenty-four months of credited
Service.) If a period of vacation, lay-off, and/or leave exceeds twenty-four
continuous months, then the portion that is more than twenty-four months shall not be
credited as Service.
	 
	 	(c)	 	If a Break in Service occurs, then any Period of Severance that occurs on
account of a retirement, quit, or discharge shall not be credited as Service.
Service accrual ends with a Break in Service. Upon incurring a Break in Service, a
Participant shall become a Former Participant.




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	 	(d)	 	A Break in Service occurs when a Period of Severance continues for twenty-four or more
consecutive months, during
which the individual does not perform an Hour of Service.
	 
	 	(e)	 	A Period of Severance is any continuous period, during which the individual
has had a separation from service from an Employer or any Affiliate, on account of
lay-off, leave, vacation, retirement, quit, discharge, any other reason, or any
combination of the preceding reasons.
	 
	 	(f)	 	However, if an individual incurs a Period of Severance on account of a
retirement, quit, or discharge, but has not incurred a Break in Service, then his
Period of Severance shall be credited as Service. By the same rule, if (in this
instance) he does incur a Break in Service, then the Period of Severance is not
credited as service.
	 
	 	(g)	 	A special rule applies to Employer-approved leave on account of maternity
or paternity, meaning on account of pregnancy, the birth of a child, the placement of
a child in connection with an adoption, or the caring for such a child immediately
following the birth or placement. Any period of Employer-approved leave on account
of maternity or paternity shall be credited as Service, through the first anniversary
of the first date of such an absence. Any period of such an Employer-approved leave
that continues past the first anniversary, through the second anniversary (that is,
any continuous period of two years or less), shall not be credited as Service, nor
shall it count as any Period of Severance. The Period of Severance relating to such
an Employer-approved leave shall only begin on the second anniversary
of the first date of the maternity or paternity absence from service.
	 
	 	(h)	 	For the purposes of vesting only, Service performed for Loral Defense
Systems (formerly known as Loral Systems Group), a division of Loral Corporation,
will be credited if it was performed before May 1, 1991. In no circumstances will
any Plan participant be given credit for the purposes of Plan benefit accruals, for
any service performed for Loral Defense Systems after that date.
	 
	 	(i)	 	Service shall not be credited for service under the Prior Plan unless the
Employee was (1) an active Employee under the Prior Plan on April 30, 1989, and (2)
was immediately transferred as an active Employee under this Plan as of May 1, 1989.






	(j) 	 	Service shall be credited for vesting purposes for service performed by a common-law employee
of an Employer who is not an Employee.





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2.4 How to Calculate Service for Vesting for EFC




          Service shall be calculated in the following manner
for Participants whose Employer is Engineered Fabrics
Corp.:





	 	(a)	 	Service shall be calculated under this Section only for the purposes of
vesting under Article III.
	 
	 	(b)	 	Service begins on the date of hire, or the first day of reemployment with
an Employer or an Affiliate. Service includes periods of lay-off, vacation, or
Employer-approved leave
of absence, provided that such periods of vacation, lay-off or leave do
not exceed twelve consecutive months. (Should such periods of
vacation, lay-off or leave occur simultaneously, or consecutively, they
shall be aggregated in determining the maximum period of twelve months
of credited Service.) If a period of vacation, lay-off, and/or leave
exceeds twelve continuous months, then the portion that is more than
twelve months shall not be credited as Service.
	 
	 	(c)	 	If a Break in Service occurs, then any Period of Severance that occurs on
account of retirement, quit, or discharge shall not be credited as Service. Service
accrual ends with a Break in Service. Upon incurring a Break in Service, a
Participant shall become a Former Participant.
	 
	 	(d)	 	A Break in Service occurs when a Period of Severance continues for twelve
or more consecutive months, during which the individual does not perform an Hour of
Service.
	 
	 	(e)	 	A Period of Severance is any continuous period, during which the individual
has had a separation from service from an Employer or any Affiliate, on account of
lay-off, leave, vacation, retirement, quit, discharge, any other reason, or any
combination of the preceding reasons.
	 
	 	(f)	 	However, if an individual incurs a Period of Severance on account of a
retirement, quit, or discharge, but has not incurred a Break in Service, then his
Period of Severance shall be credited as Service. By the same rule, if (in this
instance) he does
incur a Break in Service, then the Period of Severance is not credited
as service.
	 
	 	(g)	 	A special rule applies to Employer-approved leave on account of maternity
or paternity, meaning on account of pregnancy, the birth of a child, the placement of
a child in connection with an adoption, or the caring for such a child immediately
following the birth or placement. Any period of Employer-approved leave on account
of maternity or paternity shall be credited as Service, through the first anniversary
of the first date of such an absence. Any period of such an Employer-approved leave
that




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	 	 	 	continues past the first anniversary, through the second anniversary (that is,
any continuous period of two years or less), shall not be credited as Service, nor
shall it count as any Period of Severance. The Period of Severance relating to such
an Employer-approved leave shall only begin on the second anniversary of the first
date of the maternity or paternity absence from service.
	 
	 	(h)	 	For the purposes of vesting only, Service performed for Loral Defense
Systems (formerly known as Loral Systems Group), a division of Loral Corporation,
will be credited if it was performed before May 1, 1991. In no circumstances will
any Plan participant be given credit for the purposes of Plan benefit accruals, for
any service performed for Loral Defense Systems after that date.
	 
	 	(i)	 	Service shall not be credited for service under the Prior Plan unless the
Employee was (1) an active Employee under the Prior Plan on
April 30, 1989, and (2) was immediately transferred as an active
Employee under this Plan as of May 1, 1989.
	 
	 	(j)	 	Service shall be credited for vesting purposes for service performed by a
common-law employee of an Employer who is not an Employee.





2.5 General Restrictions on Participation





	 	(a)	 	An eligible Employee will be able to actively participate in this Plan only
during those periods during which he is (1) in service with the specific
participating Employer (rather than with any Affiliate), and (2) the Plan is in
effect.
	 
	 	(b)	 	In order to become a Participant, each eligible Employee must make proper
application, on the appropriate forms (written or electronic) provided by the
Committee, to participate in the Plan, agree to the terms of the Plan, and agree to
make Tax-Deferred Contributions. Continued participation will always be conditioned
on the Employee’s continued Tax-Deferred Contributions.
	 
	 	(c)	 	Leased employees, as described in Code Section 414(n), are not eligible to
be Participants.




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ARTICLE III. VESTING AND FORFEITURES




3.1 Immediate Vesting Provisions 




          A Participant shall always be 100% vested in his Tax-Deferred Contribution Account, After-Tax
Contribution Account, and his Rollover Contribution Account. Such Accounts shall not be subject to
forfeiture for any reason.




3.2 Vesting of Employer Contributions in Matching Employer Contribution Account 




          A Participant shall become fully vested in contributions and earnings allocated to his
Matching Employer Contribution Account only (1) after completing five Years of Service (three Years
of Service for Participants who have an Hour of Service on or after January 1, 2002) or (2) while
actively employed, incurs a Disability, dies, or reaches his Normal Retirement Date.




3.3 Forfeitures 




          Forfeitures shall arise if any Participant who is not fully vested in his Matching Employer
Contribution Account incurs a termination of employment. Such unvested Account balances shall then
be forfeited, and these Forfeitures shall be applied to pay Plan expenses.




3.4 Restoring Forfeitures 




          If a Participant’s nonvested interest in his Matching Employer Contribution Account is
forfeited, and the Participant subsequently resumes
employment with an Employer or Affiliate before incurring a Break in Service of at least 5 years,
then the forfeited amount shall be restored.




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ARTICLE IV. TAX-DEFERRED AND ROLLOVER CONTRIBUTIONS




4.1 Tax-Deferred Contributions 




          Tax-Deferred Contributions can be made only by eligible Participants, subject to this Article
and Article II.




4.2 After-Tax Contributions 




          After-Tax Contributions shall be permitted under this Plan only by action of the Board.




4.3 Amount of Tax-Deferred Contributions 




          The Employer may make Tax-Deferred Contributions to the Plan, on behalf of each Participant.
The amount of such Tax-Deferred Contributions shall be in increments of hundredths of a percent of
the Participant’s Compensation. The minimum Tax-Deferred Contribution shall be one percent of
Compensation. Notwithstanding the previous sentence, the maximum Tax-deferred Contribution for
Participants who are Salaried Participants shall be 15 percent (18 percent for Plan Years beginning
on or after January 1, 2000 and before January 1, 2002 and 50 percent for Plan Years beginning on
or after January 1, 2002). However, the maximum dollar amount of Tax-Deferred Contributions for
any Plan Year shall be capped at $10,000 (subject to annual adjustments set by Federal law, under
Code Section 402(g)(5)). Further, the rate of Tax-Deferred Contributions, when added to the rate
of After-Tax Contributions, if any, cannot exceed 15 percent (18 percent for Plan Years beginning
on or after January 1, 2000 and before January 1, 2002 and 50 percent for Plan Years beginning on
or after January 1, 2002) of a
Participant’s Compensation for any Plan Year. Each Employer may change the permitted percentage of
employee deferrals without formal Plan amendment.




4.4 General Rules




          In the event a Participant so elects to have his Employer make Tax-Deferred and/or After-Tax
Contributions on his behalf, his Compensation shall be reduced for each payroll period by the
percentage he elects to have contributed on his behalf to the Plan in accordance with the terms of
the Compensation reduction authorization in effect pursuant to Section 2.1 subject, however, to the
$10,000 (as adjusted) annual aggregate limitation on Tax-Deferred Contributions and other elective
deferrals. In the event that a Participant’s aggregate elective deferrals with respect to a Plan
Year, including his Tax-Deferred Contributions hereunder, exceed the then applicable annual
aggregate limitation on elective deferrals, the Participant, not later than the first March 1
following the close of the





-17-









 







Plan Year, may allocate the excess deferrals among the plans under which
the deferrals occurred and notify each plan of the portion allocated to it, and the Committee, not
later than the first April 15 following the close of the Plan Year, shall cause to be distributed
to the Participant the amount of the excess deferral allocated to the Plan and any income allocable
thereto; provided, however, that any such distributed excess deferral shall nevertheless be taken
into account for purposes of computing deferral percentages for the Plan Year under Article VIII.




4.5 Timing of Contributions 




          Each Employer shall cause to be delivered to the Trustee in cash all Tax-Deferred, After-Tax
Contributions, and Matching Employer Contributions made with respect to payroll periods ending
during each calendar month as soon as practicable, but not
later than the 15th business day of the next succeeding calendar month. Subject to the provisions
of Article VII, the Trustee shall credit the amount of such Contributions made by each Employer on
behalf of each Participant for each calendar month to such Participant’s Investment Fund Accounts,
as applicable, as soon as practicable following the date such contributions are made to the Trust
Fund.




4.6 Changes in Compensation Reduction Authorization




          A Participant may change the percentage of his Compensation that his Employer contributes on
his behalf as Tax-Deferred Contributions as of any Deferral Change Date upon timely notice to the
Committee or its delegate.




4.7 Suspension of Contributions 




          A Participant for whom Tax-Deferred and/or After-Tax Contributions are being made under this
Article IV may have such contributions suspended, upon timely notice to the Committee, on forms
provided by the Committee, under Plan procedures. The suspension shall remain in effect until any
such Contributions are resumed as hereinafter set forth. A Participant’s Tax-Deferred
Contributions shall automatically be suspended for the remainder of the calendar year on the date
that his Tax-Deferred Contributions for the Plan Year first equals or exceed $10,000 (or such
adjusted amount established by the Secretary of the Treasury pursuant to Section 402(g)(5) of the
Code).




4.8 Resumption of Contributions 




          A Participant who voluntarily suspended his Tax-Deferred and/or After-Tax Contributions in
accordance with the provisions of Section 4.8 may
have such contributions resumed as of any Deferral Change Date upon timely notice to the Committee.





-18-









 








4.9 Rollover Contributions





	 	(a)	 	The Committee may, in its sole discretion, authorize Employees to make
contributions under the Plan which qualify as rollover amounts under to the extent
permitted by applicable law. Such rollovers shall exclude after-tax employee
contributions. The Committee shall exercise such discretion on a nondiscriminatory
basis. An Employee who makes a Rollover Contribution shall be deemed a Participant
under this Plan solely with respect to his Rollover Account until he otherwise
qualifies as a Participant in accordance with the other provisions of this Plan. All
Rollover Contributions shall be received by the Trustee, and shall be credited to the
Employee’s name as of such date as the Committee shall specify. Such Rollover
Contributions shall be accounted for and distributed in accordance with the rules
applicable to Tax-Deferred Contribution Accounts (except as otherwise provided in
Articles IX and X). An Employee who makes a rollover shall be entitled to invest his
initial Rollover Contribution in any one or more of the available Investment Funds by
designating on the written election form the percentage of such Rollover
Contributions to be invested in each of the Funds. Thereafter, his Rollover
Contribution Account shall be invested in accordance with any election the
Participant otherwise makes regarding the investment of existing account balances
pursuant to Section 6.1.




-19-









 











ARTICLE V. MATCHING EMPLOYER CONTRIBUTIONS




5.1 Payment of Contributions 





	 	(a)	 	Each Employer shall pay to the Trustee as its Matching Employer
Contributions hereunder for each calendar month an amount that is equal to the
Employer Contribution Rate multiplied by the aggregate of:






	 	(1)	 	the Tax-Deferred Contributions made
by such Employer on behalf of each Participant during such
calendar month; plus
	 
	 	(2)	 	the After-Tax Contributions (if any)
made by each Participant during such calendar month based on
Compensation paid by such Employer during such calendar month;
	 
	 	 	 	provided, however, that such aggregate amount shall not include any
portion of the sum of the Tax-Deferred Contributions and After-Tax
Contributions (if any) of a Participant with respect to such calendar
month that is in excess of six percent of his Compensation for such
calendar month.






	 	(b)	 	Notwithstanding the preceding provisions, the schedule for making Matching
Employer Contributions may be changed, as determined within the sole discretion of
the Committee, which shall be effective without formal Plan amendment.
	 
	 	(c)	 	The payment of Matching Employer Contributions for any month will be made
in cash deposited into Investment Funds in accordance with the Participant’s election
made under Article VI.
	 
	 	(d)	 	Notwithstanding any other provision of the Plan, the Employer may, within
its sole discretion, determine not to make Matching Employer Contributions with
respect to any number of months or number of Plan Years. Such a determination shall
be made by the Employer’s Board of Directors, subject to ERISA.





5.2 Limitation on Amount under Code Sections 404 and 415




          Notwithstanding anything to the contrary contained in the Plan, the Matching Employer
Contributions of the Employers for any Plan Year, when combined with the Tax-Deferred Contributions
made by the Employers for such Plan Year, shall in no event exceed (i) the maximum amount which
will constitute an allowable deduction for such year to the Employers under Section 404




-20-









 







of the
Code, (ii) the maximum amount which may be contributed by the Employers under Section 415 of the
Code, or (iii) the maximum amount which may be contributed pursuant to any wage stabilization law,
or any regulation, ruling, or order issued pursuant to law.




5.3 Allocation of Matching Employer Contributions 




          The Matching Employer Contributions for each calendar month shall be allocated among
Participants on whose behalf Tax-Deferred Contributions were made (or who made After-Tax
Contributions, if applicable) during such month as soon as practicable after such contributions are
made to the Trust Fund. Subject to the limitation provisions of Article VIII, the Trustee shall
credit the amount of Matching Employer Contributions on behalf of each Participant for each
calendar month to such Participant’s Investment Fund subaccounts of his Matching Employer
Contribution Account as soon as practicable following the date such contributions are made to the
Trust Fund.




5.4 Employer Contribution Rate 




          The Employer Contribution Rate or Rates for each Employer shall be determined for each
Employer and shall remain in effect until the board of directors of each Employer, in their sole
discretion (subject only to any controlling collective bargaining agreements), shall determine
another Employer Contribution Rate to be effective for a specific period and to apply to a
designated Employer or Employers, which rate shall be changed by resolution of the Employer’s board
of directors without formal Plan amendment. Any such changed Employer Contribution Rate shall
remain in effect until further changed in accordance with the next preceding sentence.




5.5 Determination of Amount of Employer Contribution 




          The Committee shall determine the amount to be contributed by each Employer for each month in
accordance with the provisions of the Plan.




5.6 Effect of Plan Termination 




          Notwithstanding anything to the contrary contained in the Plan, any termination of the Plan
shall terminate the liability of the Employers to make further contributions to the Plan, other
than contributions for any month ended prior to the time of such termination.




-21-









 








ARTICLE VI

INVESTMENT OF CONTRIBUTIONS

TRANSFERS BETWEEN FUNDS




6.1 Investment Elections of Participants 




          Each Participant shall, upon electing to participate under the Plan in accordance with the
provisions of Article II, make an investment election on forms prescribed by the Committee,
directing the manner in which his Tax-Deferred Contributions, After-Tax Contributions (if
applicable), Matching Employer Contributions and Rollover Contributions shall be deposited and held
by the Trustee. The investment election of a Participant with respect to such Contributions shall
specify the percentage of such contributions that is to be deposited in one or more of the
Investment Funds in multiples of 5% (or such other percentage as determined by the Committee,
without formal Plan amendment). The investment election by a Participant shall remain in effect
until he ceases to be a Participant or Former Participant. A Participant may change his investment
election at any time, subject to rules set forth by the Committee and applied in a uniform and
non-discriminatory manner.




6.2 Deposit of Contributions 




          All Matching Employer Contributions, Tax-Deferred Contributions, After-Tax Contributions (if
applicable) and Rollover Contributions shall be deposited by the Trustee upon receipt in the
Investment Funds as the Committee shall direct. However, the Committee’s directions with respect
to all Contributions shall be based on the investment election of each Participant made in
accordance with the provisions of this Article. The Trustee shall have no duty to collect or
enforce payment of
contributions or inquire into the amount or method used in determining the amount of contributions,
and shall be accountable only for contributions received by it.




6.3 Modification of Investment Procedures




     Notwithstanding any other provisions of this Article, the Committee and the Trustee shall have
the power to establish uniform and nondiscriminatory rules and, from time to time, to modify or
change such rules governing the manner and method by which Participants shall direct the investment
of their Accounts, without formal amendment of the Plan or Trust Agreement.



-22-









 





ARTICLE VII. FUNDS, ACCOUNTS, AND THEIR VALUATION




7.1 Trust Fund 




          The Company has executed a Trust Agreement with Fidelity Management Trust Company, a trust
company organized and existing under the laws of the Commonwealth of Massachusetts, as Trustee,
setting forth the terms, provisions, and conditions of a trust for the Plan, pursuant to which the
Trustee shall hold, manage, and administer all trust property so as to effectuate the provisions of
the Plan. The Trust Agreement is subject to amendment and termination, and the Company may change
the Trustee, all as provided in the Trust Agreement. The terms and provisions of the Trust
Agreement are hereby incorporated by reference.




7.2 Establishment of Funds 




          The Trust Fund shall consist of several Investment Funds selected by the Committee. Each such
Fund shall be held and administered by the Trustee as a separate trust fund. The interest of each
Participant and Former Participant, under the Plan in any such Fund shall be an undivided interest.




7.3 Income on Funds 




          Any dividends, interest, distributions, proceeds received from the sale or exchange of
securities or other property, or other income received by the Trustee in respect of an Investment
Fund shall be reinvested by the Trustee in the respective Fund for which such income was received.




7.4 Accounts 




          On the date an Employee first becomes a Participant, there shall be established or continued
Accounts in his name, which shall reflect the portion of Tax-Deferred Contributions and Matching
Employer Contributions made on his behalf (and of his After-Tax Contributions and Rollover
Contributions, if applicable) deposited in the applicable Investment Fund, as well as such
Account’s pro rata share of the net increase or decrease in value of the assets of such Fund.




          The Trustee shall cause each such Account to be maintained and administered for each
Participant, Former Participant, and Beneficiary in accordance with the provisions of the Plan.




-23-









 








7.5 Account Balances




          For all purposes hereof, the balance of each Account of a Participant and Former Participant,
including sub-accounts, as of any business day shall be the balance of such Account or sub-account
after all credits and charges thereto, for and as of such date, have been made as provided herein.




7.6 Finality of Determinations 




          The Trustee shall have exclusive responsibility for determining the net income, liabilities,
and value of the assets of each Investment Fund and for determining the balance of each Account and
sub-account maintained hereunder. The Trustee’s determinations thereof shall be conclusive upon
the Employers, and all Participants, Former Participants, and Beneficiaries hereunder.




7.7 Notification 




          As soon as reasonably possible after the end of each calendar quarter, the Committee shall
notify each Participant and Former Participant of
the balance of his Accounts and sub-accounts as of the last day of such calendar quarter.




-24-









 








ARTICLE VIII. LIMITATIONS ON CONTRIBUTIONS




8.1 Section 401(k) Limit on Pre-Tax Deferrals 





	 	(a)	 	The Committee shall determine, during and as of the end of each Plan Year,
the Actual Deferral Percentages relevant for purposes of this Section based on the
actual and projected rate for each Participant of his Total Compensation and Pre-Tax
Deferrals for the remainder of the Plan Year. If, based on such determination, the
Committee concludes that a reduction in the Pre-Tax Deferrals for any Participant is
necessary or advisable in order to comply with the limitations of clause (A) or (B)
of this paragraph, it shall so notify each affected Participant and his Employer of
the reduction that it deems necessary or desirable for this purpose. In such event,
the maximum allowable Pre-Tax Deferrals shall be reduced in accordance with the
direction of the Committee, and the contribution election of each Participant
affected by such determination shall be modified accordingly. Any such reduction may
apply either to all Participants, only to Participants who are Highly Compensated
Employees, or to any other group as the Committee shall determine, and in such manner
as the Committee shall determine in its sole discretion.






	 	(A)	 	The Actual
Deferral Percentage (as defined in clause (C) of this paragraph) for the group of Highly Compensated
Employees being tested is not more than the prior Plan Year’s Actual Deferral Percentage of
Participants who were not Highly Compensated Employees for the prior Plan Year
multiplied by 1.25.
	 
	 	(B)	 	The excess of the
Actual Deferral Percentage for such group of Highly
Compensated Employees over the prior Plan Year’s Actual
Deferral Percentage for Participants who were not Highly
Compensated Employees for the prior Plan Year is not
more than
2%, and the Actual Deferral Percentage for such group is not more than the Actual Deferral
Percentage of Participants who were not Highly Compensated Employees in the prior Plan Year
multiplied by 2.0.
	 
	 	(C)	 	For the purposes
of clauses (A) and (B) of this paragraph:






     (x) The “Actual Deferral Percentage” for a specified group of Participants
for a Plan Year shall be the average of the ratios (calculated separately for
each Participant



-25-









 







who was a Participant for part or all of such Plan Year and
rounded to the nearest one-hundredth of one percent (0.01%)) in such group.




	 	(A)	 	The amount of Pre-Tax Deferrals on
behalf of each such Participant for such Plan Year (including the
amount of any Excess Deferrals (as defined in the Plan)
distributed to a Participant pursuant to the Plan), bears to
	 
	 	(B)	 	Such Participant’s Total Compensation
for such Plan Year;






          (y) For the purposes of the Actual Deferral Percentage test only,
“Participant” means any Employee who is eligible to participate in the Plan for
part or all of any Plan Year.




	 	(b)	 	Any “excess contributions” paid into the Plan for any Plan Year shall be
distributed in cash to the Highly Compensated Employees on whose behalf they were
paid into the Plan, no later than 21/2 months after the end of such Plan Year, if at
all possible, and in any event no later than the close of such following Plan Year.
The amount distributed to any such Participant shall be increased or decreased by a
pro rata share of the net income or loss attributable to such “excess contributions”
as determined by the Committee in accordance with applicable regulations. If such
Participant’s Account is invested in more than one Investment Fund, such distribution
shall be made pro rata, to the extent practicable, from all such
Investment Funds. For purposes of this Subsection 8.1(b), “excess
contributions” means, with respect to any Plan Year, the excess of (a)
the aggregate amount of Pre-Tax Deferrals actually paid into the Plan
on behalf of Highly Compensated Employees for such Plan Year, over (b)
the maximum amount of such contributions permitted for such Plan Year
under the limitations set forth above, determined by reducing the
amount of Pre-Tax Deferrals to be permitted beginning with the Highly
Compensated Employee with the largest dollar amount of such Pre-Tax
Deferrals and continuing in descending order until all the “excess
contributions” have been distributed.





8.2 Section 401(m) Limit on Matching Contributions 





	 	(a)	 	The Committee shall determine, during and as of the end of each Plan Year,
the Contribution Percentage relevant for purposes of this Section, based on the
actual and projected rate for each Participant of his Total Compensation, any
matching Employer Contributions, and employee after-tax contributions. If, based on
such determination, the Committee concludes that a reduction in matching Employer
Contributions or after-tax contributions made for any Participant is necessary or
advisable in order to comply




-26-









 






	 	 	 	with the limitations of this clause (A) or (B) of this
paragraph, it shall so notify each affected Participant and his Employer of the
reduction that it
deems necessary or desirable for this purpose. In such event, the
maximum allowable with respect to any matching Employer Contributions
and after-tax contributions shall be reduced in accordance with the
direction of the Committee. Any such reduction may apply either to all
Participants, only to Participants who are Highly Compensated
Employees, or to any other group as the Committee shall determine, and
in such manner as the Committee shall determine in its sole discretion.






	 	(1)	 	The Contribution Percentage (as
defined below) for the group of Highly-Compensated Employees being
tested is not more than the prior Plan Year’s Contribution
Percentage of Participants who were not Highly Compensated
Employees multiplied by 1.25.
	 
	 	(2)	 	The excess of the Contribution
Percentage for such group of Highly-Compensated Participants over
the Contribution Percentage over the prior Plan Year’s
Contribution
Percentage for Participants who
were not Highly Compensated
Employees is not more than 2%,
and the Contribution Percentage
for such group of
Highly-Compensated Participants
is not more than the Contribution
Percentage of all other
Participants who were not Highly
Compensated Employees in the
prior Plan Year multiplied by
2.0.
	 
	 	(3)	 	For the purposes of clauses (i) and
(ii) of this paragraph;






      (x) The “Contribution Percentage” for a specified group of
Participants for a Plan Year shall be the average of the ratios
(calculated separately for each Participant who was a Participant for
part or all of such Plan Year and rounded to the nearest one-hundredth
of one percent (0.01%)) in such group




	 	(A)	 	The amount of any matching Employer
Contributions on behalf of, and the after-tax contributions by,
each such Participant for such Plan Year, bears to
	 
	 	(B)	 	Such
Participant’s Total Compensation, for such Plan Year;
and






      (y) For the purposes of the Contribution Percentage test only,
“Participant” means any Employee who is eligible to participate in the
Plan for part or all of any Plan Year.



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	 	(b)	 	Any “excess aggregate contributions” paid into the Plan for any Plan Year
shall be distributed in cash to the Highly Compensated Employees on whose behalf they
were paid into the Plan, no later than 21/2 months after the end of such Plan Year, if
at all possible, and in any event no later than the close of such following Plan
Year. The amount distributed to any such Participant shall be increased or decreased
by a pro rata share of the net income or loss attributable to such “excess aggregate
contributions” as determined by the Committee in accordance with applicable
regulations. If such Participant’s Account is invested in more than one Investment
Fund, such distribution shall be made pro rata, to the extent practicable, from all
such Investment Funds. For purposes of this Section, “excess aggregate
contributions” means, with respect to any Plan Year, the excess of (a) the aggregate
amount of any Matching Employer Contributions or After-Tax Contributions actually
paid into the Plan on behalf of Highly Compensated Employees for such Plan Year, over
(b) the maximum amount of such contributions permitted for such Plan Year under the
limitations set forth above, determined by reducing the amount of any Matching
Employer
Contributions and After-Tax Contributions on behalf of Highly
Compensated Employees beginning with the Highly Compensated Employee
with the largest amount of “excess aggregate contributions” and
continuing in descending order until all the “excess aggregate
contributions” have been distributed.





8.3 Special Rules 





	 	(a)	 	Aggregate Limit. For Plan Years beginning prior to January 1,
2002, in the event that both the Actual Deferral Percentage and the Contribution
Percentage (as defined above) for Participants who are Highly Compensated Employees
for the Plan Year are more than one and one-quarter (11/4) times the corresponding
percentage for Participants who are not Highly Compensated Employees for the prior
Plan Year, the Pre-Tax Deferrals for Participants who are Highly Compensated
Employees for the Plan Year shall be further reduced in order that the sum of the
Actual Deferral Percentage plus the Contribution Percentage for Participants who are
Highly Compensated Employees does not exceed the “aggregate limit” (as defined below)
for the Plan Year.






The “aggregate limit” for any Plan Year shall mean a
percentage equal to the greater of the sums described in (1)
or (2) below:




(1) The sum of:




(a) 125 percent of the greater of (i) the prior Plan
Year’s Actual Deferral Percentage for Participants
who were not



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Highly Compensated Employees for
the Plan Year, or (ii) the Contribution Percentage
of such Participants, and




(b) Two percent plus the lesser of (a)(i) or (ii)
above; in no event, however, shall the aggregate
limit thus determined exceed 200 percent of the
lesser of (a)(i) or (ii) above; or




(2) The sum of:




(a) 125 percent of the lesser of (i) the prior Plan
Year’s Actual Deferral Percentage for Participants
who were not Highly Compensated Employees for the
Plan Year or (ii) the Contribution Percentage of
such Participants, and




(b) two percent plus the greater of (a)(i) or (ii)
above; in no event, however, shall the aggregate
limit thus determined exceed 200 percent of the
greater of (a)(i) or (ii) above.




	 	(b)	 	Multiple Arrangements for Highly Compensated Employees Combined.
If more than one plan providing a cash or deferred arrangement, matching
contributions, or employee contributions (within the meaning of sections 401(k) and
401(m) of the Code) is maintained by the Employer or an Affiliate, the Actual
Deferral Percentage and Contribution Percentage of any Participant who is a Highly
Compensated Employee who participates in more than one such plan or arrangement shall
be
determined as if all such arrangements were a single plan or arrangement.
	 
	 	(c)	 	Aggregation of Plans. In the event that the Plan satisfies the requirements
of section 410(b) of the Code only if aggregated with one or more other plans, then the
foregoing provisions of this Article shall be applied by determining the Actual Deferral
Percentage and Contribution Percentage of Participants as if all such plans were a single
plan.





8.4 Section 415 Limits 





	 	(a)	 	Notwithstanding any other contrary provision of the Plan, the maximum
amount of annual additions which may be credited to a Participant’s Accounts for any
Limitation Year (that is, the Plan Year) shall not exceed the lesser of (i) the
dollar limit set forth in Code Section 415(c)(1)(A); or (ii) 25% (100% for Plan Years
beginning on or after January 1,2002) of his Section 415 earnings (as defined in
paragraph (d) of this Section) for such Plan Year. For the purpose of this
paragraph, a Participant’s “annual additions” for any Limitation Year shall mean the
sum of (a) employer contributions and forfeitures allocable to a Participant under
all plans (or portions thereof) maintained by




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	 	 	 	an Employer or an Affiliate subject to
section 415(c) of the Code, (b) the Participant’s employee contributions under all
such plans (or portions thereof), and (c) amounts described in section 419A(d)(2) of
the Code (relating to post-retirement medical benefits of key employees) or allocated
to a pension plan individual medical account described in section 415(l) of the Code,
to the
extent includible for purposes of section 415(c)(2) of the Code. A
Participant’s employee contributions described in clause (b) shall be
determined without regard to (i) any rollover contributions, (ii) any
repayments of loans, or (iii) any prior distributions repaid upon the
exercise of buy-back rights. Employer and employee contributions taken
into account as Annual Additions shall include “excess contributions”
as defined in section 401(k)(8)(B) of the Code, “excess aggregate
contributions” as defined in section 401(m)(6)(B) of the Code, and
“excess deferrals” as described in section 402(g) of the Code,
regardless of whether such amounts are distributed or forfeited (to the
extent such “excess deferrals” are not distributed to the Participant
before the end of the taxable year of the Participant in which such
deferrals were made).






	 	(b)	 	In the event that the annual additions to the Accounts of a Participant for
any Limitation Year would exceed the limitation set forth in paragraph (a) of this
Section, such Participant’s annual additions for such Limitation Year shall be
reduced by the amount required in order to eliminate such excess in the following
order:






	 	(1)	 	the After-Tax Contributions made by a
Participant for such Limitation Year, if any, shall be reduced;
	 
	 	(2)	 	the Pre-Tax Deferrals not subject to
any Matching Employer Contributions on such Participant’s behalf
for such Limitation Year, if any, shall be reduced;
	 
	 	(3)	 	the Pre-Tax Deferrals subject to any
Matching Employer Contributions on such Participant’s behalf and
any matching Employer Contributions and forfeitures for such
Limitation Year shall then be reduced pro rata in the proportion
that the Pre-Tax Deferrals bear to any Matching Employer
Contributions for such year; and
	 
	 	(4)	 	the Pre-Tax Deferrals subject to any
Matching Employer Contributions on such Participant’s behalf for
such Limitation Year shall then be reduced.





               To the extent that any contribution made under this Plan or any forfeitures are required to be
reduced in order to meet the requirements of paragraph (a) of this Section, (i) any such after-tax
contributions shall be returned to the Participant as soon as practicable thereafter and (ii) to
the extent




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that Treas. Reg. § 1.415-6(b)(6)(iv) is applicable, the Participant’s Pre-Tax Deferrals
shall be returned to the Participant as soon as practicable, and otherwise, (iii) the balance of
such contributions and forfeitures shall be credited to a suspense account which shall be used as
soon as practicable thereafter to reduce future Employer contributions to the Plan.





	 	(c)	 	For the purposes of this Section, this Plan and all other defined
contribution plans (as defined in Section 414(i) of the Code) maintained by the
Employer or any Affiliate (whether or not terminated) shall be treated as one defined
contribution plan.
	 
	 	(d)	 	For purposes of this Section, a Participant’s “Section 415 earnings” means
gross compensation actually paid or made available by all Employers and Affiliates
and, prior to January 1, 1998, determined after giving effect to any Tax-Deferred
Contributions under this Plan or any salary reduction arrangement under any cafeteria
plan (within the meaning of Code Section 125).
	 
	 	(e)	 	Prior to January 1, 2000, a Participant in this Plan who has at any time
been a participant in a defined benefit plan maintained by the Employer or Affiliate,
for any Limitation Year the sum of such Participant’s “defined benefit plan fraction”
for such Limitation Year (as defined in paragraph (f) of this
Section) and his “defined contribution plan fraction” for such
Limitation Year (as defined in paragraph (f) of this Section) shall not
exceed 1.0. In the event the sum of such fractions would exceed 1.0,
such Participant’s retirement benefit under the defined benefit plan
shall automatically be reduced by the amount required in order that the
sum of such fractions not exceed 1.0.
	 
	 	(f)	 	For the purposes of this Section:






	 	(1)	 	A Participant’s “defined benefit plan
fraction” for any Limitation Year shall mean a fraction: (x) the
numerator of which is the projected annual benefit under any
defined benefit plan (as defined in Section 414(j) of the Code)
maintained by the Employer or Affiliate for the Participant as of
the end of the Limitation Year, and (y) the denominator of which
is the lesser of (A) or (B):






	 	(A)	 	125 percent of the dollar limitation in effect for
such Limitation Year under Section 415(b)(1)(A
) of the Code.
	 
	 	(B)	 	140 percent of the compensation
limitation that may be taken into account for
such Limitation Year under Section 415(b)(1)(
B) of the Code.




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	 	(2)	 	A Participant’s “defined contribution
plan fraction” for any Limitation Year shall mean a fraction: (x)
the numerator of which is the sum of all “annual additions” (as
defined in Section 415(c) of the Code) under this Plan and any
other defined contribution plan (as defined in Section 414(i) of
the Code) maintained by the Employer or Affiliate for the
Participant as of the end of the Limitation Year, and (y) the
denominator of which is the lesser of (A) or
(B), as determined for each
Limitation Year of the
Participant’s employment with the
Employer or Affiliate:






	 	(A)	 	125 percent of the dollar limitation
in effect for such Limitation Year under Section 415(c)(1)(A) of the Code.
	 
	 	(B)	 	140 percent of the compensation limitation that may be taken into account for such Limitation Year under Section 415(c)(1)(B) of the Code.






The limits of (A) and (B) shall be determined as if
the Plan and the sections of the Code referred to
therein had been in effect during the entire period
of the Participant’s employment with the Employer or
Affiliate.



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ARTICLE IX. IN-SERVICE WITHDRAWALS; LOANS




9.1 Withdrawal of Rollover and After-Tax Contributions 





	 	(a)	 	By filing written notice with the Committee or its delegate, a Participant
may elect to withdraw an amount equal to all, or a portion equal to at least $100, of
the value of the aggregate balance of his sub-accounts attributable to his Rollover
and/or After-Tax Contributions, if applicable.
	 
	 	(b)	 	In the event a Participant has at least two sub-accounts attributable to
any Rollover and/or After-Tax Contributions and he withdraws only a portion of the
aggregate balance of such sub-accounts, the withdrawal shall be charged to each of
the sub-accounts in the ratio that the balance of the sub-account as of the
distribution date bears to the aggregate balance of all of his sub-accounts as of
such date.





9.2 Withdrawal of Matching Employer Contributions 




               Prior to his attainment of age 591/2, a Participant may not withdraw amounts attributable to
Matching Employer Contributions unless the Committee has made a determination that a hardship
exists and such withdrawal is made in accordance with the provisions of Section 9.4. By filing
written notice with the Committee, a Participant who has attained the age of 591/2 may elect to
withdraw an amount equal to all, or a portion equal to at least $100, of his
vested interest in the value of the balance of his Account attributable to Matching Employer
Contributions. A Participant’s vested interest in Matching Employer Contributions shall be the
amount in which he would be vested under the Plan had he terminated his employment with his
Employer as of the last day of the applicable month.




9.3 Withdrawal of Tax-Deferred Contributions 





	 	(a)	 	Prior to his attainment of age 591/2, a Participant may not make an
in-service withdrawal of amounts attributable to Tax-Deferred Contributions unless
the Committee has made a determination that a hardship exists and such withdrawal is
made in accordance with the provisions of the next Section.
	 
	 	(b)	 	Alternatively, by filing written notice with the Committee, a Participant
who has attained the age of 591/2 may elect to withdraw an amount equal to all, or a
portion equal to at least $100, of the value of the aggregate balance of his
sub-accounts attributable to his Tax-Deferred Contributions.




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	 	(c)	 	In the event a Participant has at least two sub-accounts attributable to
Tax-Deferred Contributions and he withdraws only a portion of the aggregate balance
of such sub-accounts, the withdrawal shall be charged to each of the sub-accounts in
the ratio that the balance of the sub-account as of the distribution date bears to
the aggregate balance of all of his sub-accounts as of such date.





9.4 Hardship Withdrawals 




               Hardship withdrawals, under this Section, shall be permitted. No hardship withdrawal will be
permitted with respect to earnings accrued after December 31, 1988, that are attributable to
Tax-Deferred Contributions.





	 	(a)	 	Any Participant may request a hardship withdrawal of all or a portion of
his vested account balance in any Account. The request shall specify the amount of
withdrawal requested and shall include such evidence documenting the hardship, as is
requested by the Committee. Such withdrawal may be made only with the consent of the
Committee. For the purpose of this Article, a withdrawal is on account of “hardship”
only:






	 	(1)	 	if the distribution is made on
account of an immediate and heavy financial need of the
Participant, and
	 
	 	(2)	 	is necessary to satisfy such
financial need.






	 	(b)	 	A withdrawal will be deemed to be made on account of an immediate and heavy
financial need if the withdrawal is on account of:






	 	(1)	 	unreimbursed, tax-deductible expenses
for medical care previously
incurred by the Participant, his
spouse or dependents, or expenses
necessary to obtain such past or
future medical care;
	 
	 	(2)	 	costs directly related to the
purchase of a principal residence of the Participant (excluding
mortgage payments);
	 
	 	(3)	 	payment of tuition and related
educational fees for the next 12 months of post-secondary
education for the Participant, his spouse, children or dependents;




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	 	(4)	 	payments necessary to prevent the
eviction of the Participant from his principal residence or
foreclosure of the mortgage on the Participant’s principal
residence;
	 
	 	(5)	 	funeral expenses; or
	 
	 	(6)	 	such other events as shall be
determined by the Internal Revenue Service, or as determined
within the sole discretion of the Committee.






	 	(c)	 	A withdrawal will not be treated as necessary to satisfy an immediate and
heavy financial need of a Participant to the extent that the amount of the withdrawal
is in excess of the amount required to relieve the financial need or to the extent
such need may be satisfied from other resources reasonably available to the
Participant, as shall be determined by the Committee in a uniform and
non-discriminatory manner on the basis of all the relevant facts and circumstances.
	 
	 	(d)	 	A distribution will be deemed necessary to satisfy an immediate and heavy
financial need of the Participant if the Committee relies on the Participant’s
written representation that the need cannot be relieved:






	 	(1)	 	through reimbursement or compensation
by insurance or otherwise;
	 
	 	(2)	 	by reasonable liquidation of the
Participant’s assets (or those
of his spouse or minor children)
to the extent such liquidation
does not create a financial
hardship;
	 
	 	(3)	 	by the Participant’s cessation of
elective and voluntary contributions under the Plan;
	 
	 	(4)	 	by the Participant making other
withdrawals or nontaxable loans from all plans in which he
participates; or
	 
	 	(5)	 	by borrowing from commercial sources
on reasonable commercial terms.






The Committee is not required to make an independent investigation to
verify the accuracy of an Participant’s representation.




	 	(e)	 	Any hardship withdrawal shall be taken from the Participant’s several
Accounts, in a particular order that shall be determined by the Committee.




-35-









 











9.5 Payment of Withdrawals 





	 	(a)	 	In the case of an in-service withdrawal under this Article, the amount
withdrawn will be paid to the Participant in a lump sum in cash as soon as
practicable after the ast day of the month in which the Participant gives notice of
such withdrawal to the Committee or its delegate.
	 
	 	(b)	 	In the case of a hardship withdrawal under this Article, the amount
withdrawn will be paid to the Participant in a lump sum in cash as soon as
practicable following the date on which the Committee approves the withdrawal.





9.6 Adjustment of Accounts 




          The Trustee shall adjust the Accounts and sub-accounts of each Participant who makes a
withdrawal or loan under this Article to reflect such withdrawal or loan as of the date of such
withdrawal or loan, charging any such withdrawal or loan against his Account in any Investment
Fund.




9.7 Loans 





	 	(a)	 	Upon the application of any Participant and approval thereof by the
Committee in accordance with uniform and non-discriminatory policies, the Committee
shall direct the Trustee to make a loan to such Participant. The maximum amount of
any such loan shall be the lesser of (i) $50,000 reduced by the highest outstanding
balance of any loan from the Plan during the one-year period ending on the day before
the date on which such loan is made or (ii) 50% of the value of his Accounts under
the Plan in which he is vested.






The minimum amount of any such loan shall be $1,000. A Participant may
have only one loan outstanding at any time. As a condition for the
granting of such loan, the Participant shall execute and deliver to the
Committee a promissory note and loan agreement payable to the Trustee
in the amount of such loan in a form prescribed by the Committee.




	 	(b)	 	Any loan pursuant to paragraph (a) of this Section will be made from the
Participant’s Account, in the order prescribed by the Committee, and charged against
the Funds in which the Accounts from which the loan is made are invested, as shall be
designated by the Participant, subject to such restrictions and limitations as shall
be established by the Committee as to any such Fund. Immediately upon being made,
the Participant’s Account balances shall be reduced, to reflect the outstanding loan
balance. All




-36-









 






	 	 	 	repayments of principal and interest on the Participant’s note shall be
invested in the Fund(s) in accordance with the general rules of Article VI.
	 
	 	(c)	 	The note for any loan under paragraph (a) of this Section shall bear
interest at a reasonable fixed rate as shall be determined by the Committee;
provided, however, that such rate shall not exceed the maximum rate permitted by
law. Principal and interest under any such loan shall be repaid by any Participant
who is an active Employee through payroll deductions; provided, however, that the
Participant may prepay the entire unpaid principal and accrued interest on any loan
at any time. The term of the note and loan must be a number of complete years; it
cannot include any fractional part of a year. The term of such note shall not be
for a period longer than four years (five years for loans made on or after April
4, 2001); provided, however, that such term may be up to nine years (ten years
for loans made on or after April 4, 2001) if the proceeds of such loan are used
to acquire the Participant’s principal residence.
	 
	 	(d)	 	Any loan to a Participant shall be secured by such Participant’s vested
interest in his Accounts hereunder. As a condition of any such loan, the Participant
shall consent to such security interest. Upon the Participant’s termination of
participation prior to the maturity of any outstanding loan, the unpaid principal and
accrued interest shall immediately become due and payable. Following a Participant’s
termination of participation, in the event he does not repay the unpaid principal and
accrued interest on any outstanding loan prior to the distribution of his benefits
under Article X, then as required by the Code and ERISA, the Committee may make a
deemed, taxable distribution to the former Participant of his unpaid loan balance.
Further, the Plan’s final such distribution to the Participant or Beneficiary shall
consist of such Participant’s note (including any claim to principal and accrued
interest due thereunder) and the remaining amount credited to such Participant’s
Accounts, which distribution shall constitute full payment of all benefits to which
such Participant or Beneficiary is entitled under the Plan.
	 
	 	(e)	 	Each Participant to whom such loan is made shall receive a clear statement
of any administrative charges
involved in such loan. This statement shall include the dollar amount
and annual interest rate of the finance charge.




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ARTICLE X. PAYMENT OF BENEFITS




10.1 Distribution on Termination of Employment 




          After a Participant’s employment terminates for any reason, the amount of vested benefits in
his Accounts shall be distributed to him as soon as practicable following his request for
distribution. Such distribution shall be made in accordance with the provisions of this Article X.




10.2 Method of Distribution 




          All amounts distributable pursuant to Section 10.1 shall be paid in a lump sum unless the
Participant elects the following method:





	 	(a)	 	Installments. A Participant can elect payment of his benefit in monthly,
quarterly or annual installments. Notwithstanding the foregoing, the
Participant may change or increase the amount of his installment distribution
at any time upon reasonable notice to the Committee.
	 
	 	(b)	 	Other Requirements. Installment distributions shall comply with
Code Section 401(a)(9) and the regulations thereunder, which are hereby incorporated
by reference.
	 
	 	(c)	 	Minimum Distribution Requirements. With respect to distributions
under the Plan made in calendar years beginning on or after January 1, 2001, the Plan
will apply the minimum distribution requirements of Code Section 401(a)(9) in
accordance with the regulations under Code Section 401(a)(9) that were proposed in
January 2001, notwithstanding any
provision to the contrary. This amendment shall continue in effect until the
end of the last calendar year beginning before the effective date of final
regulations under Code Section 401(a)(9) or such other date specified in
guidance published by the Internal Revenue Service.





10.3 Required Payment Dates 





	 	(a)	 	Payment of small amounts. Notwithstanding any other provision of
the Plan, if the value of a Participant’s vested Account balances under the Plan does
not exceed $5,000, distribution shall be automatically made as soon as
administratively practicable in a lump sum.
	 
	 	(b)	 	Time of Commencement of Benefits. Subject to Section 10.3(c) and
(d), distribution to a Participant under this Plan shall be made or commence no later
than whichever of dates specified in paragraphs (1) or (2) below is earlier:




-38-









 












	 	(1)	 	except as the Participant may otherwise elect, the 60th day after the close of the Plan Year
in which the later of the following events occurs:






	 	(A)	 	the Participant’s termination of employment or
	 
	 	(B)	 	the Participant’s attainment of his Normal Retirement
Date, and






	 	(2)	 	if the Participant is a 5%-Owner,
the first day of April following the calendar year in which the
Participant attains age 70-1/2. Distribution shall be made as
though the
Participant had retired. Any contribution or forfeiture
subsequently allocable to the Participant’s accounts shall be
distributed to the Participant as soon as practicable
following the date of such allocation (or, in the event the
Participant is still employed, as soon as practicable after
the end of the Plan Year in respect of which the contribution
or forfeiture is made).






	 	(c)	 	Transition Rule. A Participant who attains age 70-1/2 and is not
described in Section 10.3(b)(2), may elect to receive a distribution of his Accounts
(as though he had terminated employment) upon suitable notice to the Committee.
	 
	 	(d)	 	Delay of Distribution. Notwithstanding any provisions to the
contrary contained in this Plan, in the event that the amount of a distribution
required to commence on the date otherwise determined under this Plan cannot be
ascertained by such date, or if it is not possible to make such distribution on such
date because the Committee has been unable to locate the Participant (or in the case
of a deceased Participant, his Beneficiary) after making reasonable efforts to do so,
distribution retroactive to such date may be made 60 days after the earliest date on
which the amount of such distribution can be ascertained under this Plan or the date
on which the Participant or Beneficiary is located, whichever is applicable.





10.4 Payments on Account of Participant’s Death





	 	(a)	 	Payment to Beneficiary. If a Participant who is eligible to
receive payment of his Plan benefit under this Article, dies before payment is either
begun or completed, then the unpaid remainder of his vested Account balances shall be
paid to his Beneficiary in a lump sum. No optional forms of benefit are available.
Payments shall be made as soon as is practicable, following the Committee’s receipt
of an appropriate notice of the Participant’s death, under Plan procedures.




-39-









 











10.5 Direct Rollover Distributions to Other Plans or IRAs





	 	(a)	 	General Rules. A Distributee (as defined in this Section) may
elect, under Plan procedures, to have all or any portion of his proper Plan
distribution transferred in a rollover transfer from the Trust Fund to another
qualified plan, certain “IRAs” and certain other vehicles, subject to the
restrictions of this Section.
	 
	 	(b)	 	Definition of “Distributee”. For the purposes of this Section
only, a “Distributee” is a Participant, former Participant, surviving spouse, or
alternate payee (as defined by Code Section 414(p)), who is eligible under the Plan
and Plan procedures to receive any Plan distribution. Distributees shall not include
any other Beneficiary.
	 
	 	(c)	 	Limits on Distribution Eligible for Direct Rollover. Generally, all
or any portion of the accrued, vested Account balance attributable to the Distributee
would be eligible for a rollover under this Section, provided that the amount is
includible in gross income. However, the following distributions are not eligible:






	 	(1)	 	periodic payments paid out over the
life or life expectancy of the Distributee;
	 
	 	(2)	 	equal installment payments scheduled
to be made over ten or more years;
	 
	 	(3)	 	all of any distribution paid to any
Distributee during or after the year that the Participant reaches,
or would have reached, age 701/2;
	 
	 	(4)	 	the portion of any distribution that
is required to be paid under Code Section 401(a)(9);
	 
	 	(5)	 	hardship distributions paid on or
after January 1, 2000;
	 
	 	(6)	 	corrective distributions;
	 
	 	(7)	 	amounts loaned from the Plan, to the
extent that the loan satisfies Code Section 72(p); or
	 
	 	(8)	 	any portion of an unpaid loan
balance, that has been offset from the Participant’s Account.






	 	(d)	 	Limits on recipient plans and IRAs. A rollover transfer from the
Trust Fund under this Section can be made only to the trustee or custodian of one of
the following “eligible




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	 	 	 	retirement plans” listed below, provided that the transfer is
made under Plan procedures, and that the trustee or custodian accepts the rollover.
However, only one rollover can be made with respect to any single distribution. Such
“eligible retirement plans” are:






	 	(1)	 	a qualified, employer defined
contribution plan;
	 
	 	(2)	 	an individual retirement account or
“IRA,” which holds or which will hold only amounts attributable to
qualified employer plans, as described by
Code Section 408(d)(3);
	 
	 	(3)	 	an individual retirement annuity
described in Code Section 408(b); or
	 
	 	(4)	 	an annuity plan described in Code
Section 403(a).






	 	(e)	 	Limits on direct rollovers made by surviving spouses.
Distributees who are surviving spouses, but who are not alternate payees as described
by Code Section 414(p), will be able to elect a rollover transfer only to an IRA or
an individual retirement annuity, subject to all of the preceding rules of this
Section.




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ARTICLE XI. ADMINISTRATION




11.1 Named Fiduciary 




          The “Named Fiduciary” for operation and administration of the Plan, and the “Administrator”
shall be the Committee. The Committee is designated as agent for service of legal process.




11.2 Other Fiduciaries Appointed Under Trust Provisions 




          In addition, procedures for the appointment of investment manager(s), are set forth in the
Trust Agreement.




11.3 The Committee 




          The Board of the Company shall appoint the Committee to manage and administer this Plan and to
establish Plan procedures in accordance with the provisions hereof, each member to serve
indefinitely or until a successor member has been appointed, or until removal by the Board.
Members shall serve without compensation for Committee service. All reasonable expenses of the
Committee shall be paid by the Plan, to the extent that they are not paid by the Company.




11.4 Committee’s Discretionary Power to Interpret and Administer the Plan 





	 	(a)	 	The Committee has complete discretionary and final authority to (1)
determine all questions concerning elections, contributions, and benefits under the
Plan, (2)
construe all terms under the Plan, including any uncertain terms, and
(3) set Plan procedures and determine all questions concerning Plan
administration. All administrative decisions made by the Committee,
and all its interpretations of the Plan documents, shall be given full
deference by any court of law.
	 
	 	(b)	 	Each member of the Committee may delegate Committee responsibilities among
the Employer directors, officers, or employees, and may consult with or hire outside
experts. The expenses of such experts shall be paid by the Plan, to the extent that
they are not paid by an Employer.
	 
	 	(c)	 	Employees of the Employer who are human resources personnel, or benefits
representatives shall, under the authority of the Committee, perform the routine




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	 	 	 	administration of the Plan, such as distributing and collecting forms and providing
information about Plan procedures. However, information that concerns an
interpretation of the Plan or a discretionary determination, can be properly provided
only by the Committee.
	 
	 	(d)	 	Should any individual receive oral or written information concerning the
Plan, which is contradicted by a subsequent determination by the Committee, then the
Committee’s final determination shall control.
	 
	 	(e)	 	The Committee shall have the authority to limit the contributions of Highly
Compensated Employees.





11.5 Trustee’s Duty to Withhold Taxes 




          The Committee hereby specifically delegates to the trustee the responsibility to be liable for
income tax withholding, and to withhold the appropriate amount from any payment made from the Trust
to any payee under the provisions of applicable law and regulation.




11.6 Claims Procedure 





	 	(a)	 	The Committee shall determine Participants and Beneficiaries’ rights to
benefits under the Plan. In the event that a Participant or Beneficiary disputes an
initial determination made by the Committee, then he may dispute the determination
only by filing a written claim for benefits.
	 
	 	(b)	 	If a claim is wholly or partially denied, the Committee shall provide the
claimant with a notice of denial, written in a manner calculated to be understood by
the claimant and setting forth:






	 	(1)	 	The specific reason(s) for such
denial;
	 
	 	(2)	 	Specific references to the pertinent
Plan provisions on which the denial is based;
	 
	 	(3)	 	A description of any additional
material or information
necessary for the claimant to
perfect the claim with an
explanation of why such material
or information is necessary; and
	 
	 	(4)	 	Appropriate information as to the
steps to be taken if the claimant




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	 	 	 	wishes to submit his or her claim for review.
	 
	 	(5)	 	The notice of denial shall be given
within a reasonable time period but no later than 90 days after
the claim is received, unless special circumstances require an
extension of time for processing the claim. If such extension is
required, written notice shall be furnished to the claimant within
90 days of the date the claim was received stating that an
extension of time and the date by which a decision on the claim
can
be expected, which shall be no
more than 180 days from the date
the claim was filed.
	 
	 	(6)	 	If no written notice of denial is
provided by the Committee, then the claim shall be deemed to be
denied, and the claimant may appeal the claim as though the claim
had been denied.






	 	(c)	The claimant and/or his representative may appeal the denied claim and may:






	 	(1)	 	Request a review by making a written
request to the Committee provided that such a request is made
within 65 days of the date of the notification of the denied
claim;
	 
	 	(2)	 	Review pertinent documents.






	 	(d)	 	Upon receipt of a request for review, the Committee shall within a
reasonable time period but not later than 60 days after receiving the request,
provide written notification of its decision to the claimant stating the specific
reasons and
referencing specific plan provisions on which its decision is based,
unless special circumstances require an extension for processing the
review. If such an extension is required, the Committee shall notify
the claimant of the date, no later than 120 days after the original
date the request for review was received, on which the Committee will
notify the claimant of its decision.
	 
	 	(e)	 	In the event of any dispute over benefits under this Plan, all remedies
available to the disputing individual under this Article must be exhausted before
legal recourse of any type is sought.





11.7 QDRO Claim 




          The claims procedure described in Section 11.6 shall not apply to any claim relating to or
affected by a domestic relations order (as defined by Code Section 414(p)). Claims relating to such
an order shall be determined pursuant to Section 13.20.





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11.8 Indemnification of Committee Members




          To the fullest extent permitted by law, the Employer agrees to indemnify, to defend, and hold
harmless the members of the Committee, individually and collectively, against any liability
whatsoever for any action taken or omitted by them in good faith in connection with this Plan or
their duties hereunder and for any expenses or losses for which they may become liable as a result
of any such actions or non-actions unless resultant from their own willful misconduct; and the
Employer will purchase insurance for the Committee to cover any of their potential liabilities with
regard to the Plan and Trust.




11.9 Power to Execute Plan and Other Documents 




          The Chief Financial Officer of K&F Industries, Inc. and the Committee shall have the authority
to execute governmental filings or other documents relating to the Plan (including the Plan
document), or this authority may be delegated to another Employer officer or employee by either the
Chief Financial Officer of K&F Industries, Inc. or the Board.




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ARTICLE XII. AMENDMENT, TERMINATION AND MERGER




12.1 Trust is Irrevocable 




          The Trust shall be irrevocable but shall be subject to amendment and termination as provided
in this Article and the Trust Agreement.




12.2 Limitations on Amendment 





	 	  (a)	 	The Company reserves the right to amend, suspend, freeze, or terminate this
Plan to any extent and in any manner that it may deem advisable (subject only to
collective bargaining agreements), by action of the Board. An amendment, suspension,
or termination may be made retroactively, if appropriate under the Code, ERISA, or
the intention that this Plan be qualified under Code Sections 401(a), 401(k), and
501(a). The Company, all Participants, their Beneficiaries and all other persons
having any interest hereunder shall be bound by any such amendment; provided,
however, that no amendment shall:






	 	(1)	 	Change the duties or liabilities of
the Trustee without its written assent to such amendment; or
	 
	 	(2)	 	Adversely affect or reduce the then
accrued benefits of any
Participants, as prescribed by
the Code.






	 	  (b)	 	Notwithstanding any contrary provisions in the preceding paragraph, the
Committee may make changes in the Plan procedures without formal Plan amendment.
Further, the Committee and the Employer may make certain other changes, in the Plan
without formal Plan amendment, as specified in the Plan.





12.3 Discontinuance of Contributions 




          The Company has established the Plan with the bona fide intention and expectation that the
Plan will continue indefinitely, and that it will be able to make its Contributions indefinitely,
but neither the Company nor any Employer shall be under any obligation to continue its
Contributions or to maintain the Plan for any given length of time. The Company may, in its sole
discretion, by action of the Board, completely discontinue its Contributions, suspend its
Contributions or terminate the Plan, at any time without any liability whatsoever. In the event of
the earlier of a) the termination of this Plan, or b) the complete and permanent discontinuance of
Contributions hereunder, the full value of the Accounts




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of all Participants of the Plan shall
become fully vested and nonforfeitable. In the event of partial termination of this Plan, the full
value of the Accounts of the Participants involved in the partial termination shall become or
remain fully vested and nonforfeitable as the case may be.




12.4 Termination Date




        The Plan shall terminate:




	 	(a)	 	Upon the effective date determined by the Board; or
	 
	 	(b)	 	Upon the earlier of (1) the complete accomplishment of all purposes for
which the Plan was created, or (2) the death of the last person entitled to receive
any benefits hereunder.





12.5 Termination 




          Upon the termination of this Plan and after payment of all expenses of the Trust, including
any compensation then due the Trustee and agents of the Committee and Trustee, the Trust assets and
all Participants’ Accounts shall be revalued according to the procedures provided in Article VII.
The Accounts of all Participants, as well as forfeitures, shall be allocated as of the date the
Plan is terminated in accordance with Article X. The Trustee shall hold and distribute such
Accounts as directed by the Committee in accordance with the provisions of Article XII, including
payments which had previously been deferred.




          Any distribution, transfer, or other disposition of Plan assets as provided in this Article
shall constitute a complete discharge of all Plan, Committee and Employer liabilities. Upon such
termination, all rights, powers, and duties to be exercised or performed by any Employer may
thereafter be exercised or performed by the Committee, including the filling of vacancies on the
Committee and the amending of the Plan. In the event the Committee is unable to perform, all
rights, powers and duties shall be performed by the Trustee.




12.6 Merger 




          The Board shall have the power to fully or partially merge or consolidate this Plan with any
other plan.




          In no event shall this Plan be merged or consolidated with any other Plan, nor shall there be
any transfer of assets or liabilities from this Plan to any other Plan unless immediately after
such




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merger, consolidation or transfer, each Participant’s benefits, if such other Plan were then
to terminate, are at least equal to or greater than the benefits which the Participant would have
been entitled to had this Plan been terminated immediately before such merger, consolidation or
transfer. Such transactions may be taken by action by the Board.





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ARTICLE XIII. GENERAL PROVISIONS




13.1 No Commitment as to Employment 




          Nothing herein contained shall be construed as a commitment or agreement upon the part of any
Employee hereunder to continue his employment with an Employer, and nothing herein contained shall
be construed as a commitment on the part of any Employer to continue the employment or rate of
Compensation of any Employee hereunder for any period.




13.2 Benefits 




          Nothing in the Plan nor the Trust Agreement shall be construed to confer any right or claim
upon any person, firm, or corporation other than the Employers, the Trustee, Participants, Former
Participants, and Beneficiaries.




13.3 No Guarantees 




          No Employer nor the Trustee guarantees the Trust Fund from loss or depreciation, nor the
payment of any amount which may become due to any person hereunder.




13.4 Expenses 




          All expenses of administering the Plan and Trust Fund, including, but not limited to, fees of
accountants and counsel and fees relating to the investment of the Trust Fund, shall be paid from
the Trust Fund, except to the extent paid by the Company or another Employer.




13.5 Precedent 




          Except as otherwise specifically provided, no action taken in accordance with the Plan by the
Employers or the Trustee shall be construed or relied upon as a precedent for similar action under
similar circumstances.





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13.6 Duty to Furnish Information. 




          Each of the Employers and the Trustee shall furnish to any of the others any documents,
reports, returns, statements, or other information that any other reasonably deems necessary to
perform its duties imposed hereunder or otherwise imposed by law.




13.7 Withholding 




          The Trustee shall withhold any tax which by any present or future law is required to be
withheld, and which the Committee notifies the Trustee in writing is to be so withheld, from any
payment to any Participant, Former Participant, or Beneficiary hereunder.




13.8 Back Pay Awards 




          The provisions of this Section shall apply only to an Employee or former Employee who becomes
entitled to back pay by an award or agreement of an Employer without regard to mitigation of
damages. If a person to whom this Section applies was or would have become an Employee after such
back pay award or agreement has been effected, and if any such person who had not previously become
a Participant pursuant to Section 2.1 shall within 30 days of the date he receives notice of the
provisions of this Section make an election to become a Participant in accordance with such Section
2.1 (retroactive to any Enrollment Date as of which he was or has become eligible to do so), then
such Participant may elect that any Tax-Deferred Contributions not previously made on his behalf
but which, after application of the foregoing provisions
of this Section, would have been made under the provisions of Article IV and any After-Tax
Contributions which he had not previously made but which, after application of the foregoing
provisions of this Section, he would have made under the provisions of Article IV, shall be made
out of the proceeds of such back pay award or agreement. To the extent that any additional
Tax-Deferred Contributions or After-Tax Contributions are made during the month in accordance with
the provisions of the foregoing sentence, his Employer shall make Matching Employer Contributions
for such month equal to the amount of the Matching Employer Contributions which would have been
allocated to such Participant under the provisions of Article V as in effect during each Plan Year
to which such additional contributions relate. The amounts of such additional contributions shall
be credited to the Accounts of such Participant or Former Participant, as appropriate. Any
additional contributions made by such Participant and by an Employer pursuant to this Section shall
be made in accordance with, and subject to the limitations of the applicable provisions of Article
VIII.




13.9 Exclusive Benefit and Revision of Employer Contributions 





	 	(a)	 	Except as provided in paragraphs (b), (c), and (d) of this Section, no part
of the Trust Fund may be used for, or diverted to, purposes other than the exclusive
benefit of the




-50-









 






	 	 	 	Participants in the Plan or their Beneficiaries prior to the
satisfaction of all liabilities with respect to the Participants and their
Beneficiaries.
	 
	 	(b)	 	In the case of contributions made by the Employer prior to the receipt of
an initial favorable determination letter from the Internal Revenue Service with
respect to the Plan, the Employer may direct the Trustee to return to
the Employer those contributions and all earnings thereon within one year after the
Internal Revenue Service refuses in writing to issue such a letter.
	 
	 	(c)	 	In the case of any portion of a contribution made by the Employer by a
mistake of fact, the Employer may direct the Trustee to return to the Employer that
portion of the contribution within one year after the payment of that portion of the
contribution.
	 
	 	(d)	 	In the case of any portion of a contribution made by the Employer and
disallowed by the Internal Revenue Service as a deduction under section 404 of the
Code, the Employer may direct the Trustee to return to the Employer that portion of
the contribution within one year after the Internal Revenue Service disallows the
deduction in writing.
	 
	 	(e)	 	Earnings attributable to the contributions returnable under paragraphs (c)
or (d) shall not be returned to the Employer, and any losses attributable to those
contributions shall reduce the amount returned.





13.10 Return of Contributions to Participants 




               Notwithstanding anything to the contrary contained in the Plan or the Trust Agreement, in the
event of the cessation of a Participant’s participation in the Plan, on a day other than the last
day of a month, or in the event of any termination of the Plan, any After-Tax Contributions which
have been deducted from the Compensation of a Participant and any Tax-Deferred Contributions which
would have reduced his Compensation during such month shall be returned to such Participant or his
Beneficiary, and such After-Tax Contributions and
Tax-Deferred Contributions shall be treated for all Plan purposes as if they had never been made.




13.11 Headings 




               Section and Article headings are provided only for the convenience of the reader. If there is
any apparent conflict between any heading and any Plan text, then the text shall always control.





-51-









 








13.12 Applicable State Law




          All matters respecting the validity, effect, interpretation and administration of this Plan
shall be determined in accordance with the laws of New York (including its statute of limitations
provisions, and all substantive and procedural law and without regard to its conflict of laws
provisions) except where preempted by ERISA or other federal statutes.




13.13 Plan Shall Comply With Federal Law 




          This Plan is intended to conform to the Code and ERISA. The Plan shall be interpreted and
administered accordingly.




          All references herein to sections of ERISA, or the Code, or any regulations or rulings
thereunder, shall be deemed to refer to such sections as they may subsequently be modified, or
amplified.




13.14 Missing Payee 




          If all or a portion of a Participant’s vested Account becomes payable under Article X and the
Committee after a reasonable search cannot locate the Participant (or his Beneficiary if such
Beneficiary is entitled to payment), then, 5 years
after the Participant’s benefit first became payable under Article X, a notice shall be mailed to
the last known address of the Participant. If the Participant does not respond within three
months, the Committee may elect, upon advice of counsel, to remove all records of the Participant’s
Accounts from the Plan’s current records, and the former Account balances shall be used to offset
future Employer Matching Contributions. If the Participant or his Beneficiary subsequently
presents a valid claim for benefits to the Committee, the Committee shall cause the Account, equal
to the amount which was expunged from the records under this Section, to be restored and paid,
under Article X.




13.15 Parties Bound 




          The Plan shall be binding upon the Employers, all Participants, Former Participants, and
Beneficiaries hereunder, and, as the case may be, the heirs, executors, administrators, successors,
and assigns of each of them.




13.16 Trust Fund Sole Source of Payments for Plan 





-52-









 








          The Trust Fund shall be the sole source for the payment of all Participant’s Accounts, and the
Plan’s liability to make such payment shall be limited to the extent that the vested balance in the
Participant’s Account is sufficient to make payment. In no event may assets of any Employer be
applied for the payment of Plan benefits.




13.17 Common Trust Funds 




          The Plan adopts and includes the provisions of any group or common trust fund in which the
Trust participates, but only as long as such group or common trust fund remains qualified under
Section 401(a), and exempt from taxation under
Section 501(a), of the Code in accordance with Revenue Ruling 81-100.




13.18 Transfers Among Affiliates 





	 	(a)	 	Service among Affiliates credited for vesting. Generally, Service
performed for any Employer or Affiliate will be credited among all Affiliates for the
purposes of vesting. Should a Plan Participant be transferred and become an Employee
of an Affiliate, then he may be eligible to immediately become a participant in the
new employer’s plan, provided that (1) he has sufficient Service under the new plan’s
eligibility provisions and (2) he has submitted to the new plan all the proper forms
by the appropriate deadline.
	 
	 	(b)	 	Limits on deferrals. The Committee shall forward to any Affiliate a
record of the year-to-date elective deferrals made by any Plan Participant who has
transferred his employment to any Affiliate, in order to assure that the employee
does not exceed any Code limit on elective deferrals. Similarly, the Committee shall
request such a record with respect to any new Employee, who has transferred from an
Affiliate.
	 
	 	(c)	 	Vesting continues after transfer. Any Participant who transfers
employment to an Affiliate shall not be treated as having terminated employment. His
vesting under the Plan shall continue during his Service with the Affiliate, and he
may not receive a distribution of his Accounts until his Service with any Employer
and
Affiliate ceases (or until his “required beginning date” under Section
10.4(c)).
	 
	 	(d)	 	Accounts transferred only if fully vested. A Plan Participant who
has transferred his employment to an Affiliate may transfer his Plan Accounts to
another qualified Affiliate defined contribution plans only if he is fully vested in
all his Accounts. Such a transfer of Accounts must be applied for, in writing, by
the Participant, and must be approved of in writing by both affected plans. Any such
transfer must include all of the Participant’s Accounts, and must be feasible for the
recipient plan. If necessary, the




-53-









 






	 	 	 	transfer shall be conditioned upon the
Participant’s waiver of certain optional forms of payment provided under the
transferring plan, but not offered by the recipient plan.
	 
	 	(e)	 	Loans






	 	(1)	 	If a Participant has transferred his
Plan Accounts under the preceding paragraph, any outstanding loan
will be similarly transferred, conditioned on the approval of the
recipient plan. Notwithstanding any contrary Plan provision, the
repayment schedule of the
Loan agreement may be amended,
with the Participant’s approval,
in order to accommodate the
payroll practices of the new
employer. Should it prove
infeasible, within the
discretionary determination of
the recipient plan’s
administrator, to effect this
paragraph, then either (i) the
transfer of Accounts shall not
take place, or (ii) the loan
shall become immediately due and
payable (despite any contrary
provision of the Plan or the loan
agreement), or (iii) payroll
deductions may be effected by the
new employer, as described in the
next paragraph.
	 
	 	(2)	 	If a Participant has not transferred
his Accounts to the plan of his new employer, then he
shall generally pay off any
outstanding Plan loan at the time
of transfer. In lieu of this, he
may arrange, conditioned upon the
approval of his former and new
employers, to have payroll
deductions effected by his new
employer and applied toward his
Plan loan repayments. Failing
either a transfer of Accounts or
repayment of the loan, then the
loan shall be in default, under
the terms of the loan agreement.
	 
	 	(3)	 	A Participant who has transferred his
employment to an Affiliate, and not transferred his Accounts, may
nevertheless take out a Plan loan, conditioned upon the approval
of his new employer, and the new employer’s agreement to effect
payroll deductions.






	 	(f)	 	Withdrawals. Withdrawals under the Plan will be fully permitted to
any Participant who has transferred employment to an Affiliate, subject to the Plan’s
rules for withdrawal.
	 
	 	(g)	 	Transfer following a Break in Service. This Sub-section (g)
concerns the situation of an individual who has worked for one Employer or Affiliate,
terminates employment from that employer, but does not immediately transfer to a
second Employer or Affiliate. Instead, this Sub-section (g) concerns those
individuals who incur a period during




-54-









 






	 	 	 	which they are not employed by an Employer or
Affiliate, and then, subsequently, become employed by a second Employer or Affiliate.






	 	(1)	 	If such an individual (described in
the introductory paragraph of this Sub-section (g)) does not incur
a Break in Service prior to his employment with the second
Employer or Affiliate (determined under the sole discretion of the
administrator of the new employer’s plan under the terms of that
plan), then the period of time preceding his employment
with the second Employer or
Affiliate (following his
termination with the first
Employer or Affiliate) shall be
credited for the purpose of
vesting.
	 
	 	(2)	 	If such an individual has incurred a
Break in Service (determined under the sole discretion of the
administrator of the new employer’s plan, under the terms of that
plan) then the terms of the new employer’s plan shall govern how
the individual’s total service among all the Company Affiliates
shall be credited, for the purposes of the new employer’s plan.
	 
	 	(3)	 	If an individual described in this
Sub-section (g) has incurred one or more Breaks in Service under
the terms of his first employer’s
plan, and has consequently lost
the recognition of pre-Break in
Service under the first
employer’s plan, then any
provisions in the first
employer’s plan regarding (i)
repayment of distributed amounts
back into the first employer’s
plan, within five years of
“rehire” by the second Employer
or Affiliate in order to have
forfeited amounts restored by the
first employer’s plan and
pre-Break Service recognized by
both plans and (ii) completing
one Year of Service with the new
employer in order to have
forfeited amounts restored under
the former employer’s plan and
pre-Break Service recognized by
both plans must be acknowledged
and effected by the administrator
of the new employer’s plan,
as if these provisions in the
first employer’s plan were fully
a part of the new employer’s
plan. It will therefore be
necessary for the administrators
of the two plans to share
information concerning the
individual.





13.19 Assignments 





	 	(a)	 	Except as provided in the next section or under Code Section 401(a)(13), no
Plan benefit, whether vested or not, of any Participant or former Participant, shall
be subject to alienation, assignment, pledging, encumbrance, attachment, garnishment;
including




-55-









 






	 	 	 	but not limited to execution, sequestration, or other legal or equitable
process, or transferability by operation of law in the event of bankruptcy,
insolvency or otherwise.





13.20 QDROs 





	 	(a)	 	The provisions of the preceding Section above shall not prevent the
creation, assignment or recognition of any individual’s right to a benefit payable
with respect to a Participant pursuant to a Qualified Domestic Relations Order (QDRO)
or any appropriate domestic relations order entered before January 1, 1985.
	 
	 	(b)	 	“Qualified Domestic Relations Order” or “QDRO” shall mean any judgment,
decree or order which (1) meets the basic requirements of Code Section 414(p) and
further (2) meets the QDRO requirements set out in the Plan procedures, concerning
domestic relations orders, as determined by the final, discretionary authority of The
Committee.
	 
	 	(c)	 	The Committee shall establish reasonable procedures to determine whether a
domestic relations order is a QDRO and to administer distributions under a QDRO. If
any domestic relations order is received by the Plan, the Committee shall (1)
promptly notify the Participant and any Alternate Payee that the order has been
received and of the Plan’s procedures for determining whether the order is a QDRO and
(2) notify the Participant and each Alternate Payee (or their representatives) of the
Committee’s determination.
	 
	 	(d)	 	Should any court order be issued after a Participant’s or Alternate Payee’s
death, it will be considered a QDRO only if it (1) relates to and reflects an earlier
order issued before death, and (2) meets the QDRO requirements.
	 
	 	(e)	 	The Committee shall have final, discretionary authority to administer and
interpret any QDRO, including any uncertain terms.





13.21 Deemed Distribution of Unvested Amounts 




          Notwithstanding any contrary provision of the Plan, in the event that (1) a Participant
separates from service with the Employer, and (2) the Participant has not, as of the date he
separates from service, met the Service and other requirements that would enable him to be eligible
for any pension benefit under this Plan, then, (3) as of the date he separates from service, he
shall be deemed to have received a distribution of his accrued benefits under the Plan. The amount
of this deemed distribution shall be zero.






-56-









 








13.22 Incompetency or Minority of Payee





	 	(a)	 	In the event the Committee determines in its discretion that any
Participant or Beneficiary, receiving or entitled to receive benefits under the Plan
is incompetent to care for his affairs, and in the absence of the appointment of a
legal guardian of the property of the incompetent, benefit payments due under the
Plan (unless prior claim thereto has been made by a duly qualified guardian,
committee or other legal representative) may be made to the spouse, parent, brother
or sister or other person, including a hospital or other institution, deemed by the
Committee to have incurred or to be liable for expenses on behalf of such incompetent
	 
	 	(b)	 	In the absence of the appointment of a legal guardian of the property of a
minor, any minor’s share of benefits payable under the Plan may be paid to such adult
or adults as in the discretionary opinion of the Committee have assumed the custody
and principal support of such minor.
	 
	 	(c)	 	The Committee, however, in its sole discretion, may require that a legal
guardian for the property of any such
incompetent or minor be appointed, before authorizing the payment of
benefits in such situations.
	 
	 	(d)	 	If the Committee is in doubt as to the right of any person to receive a
Plan benefit, the Committee may direct the Trustee to retain such amount, without
liability for any interest thereon, until the rights thereto are determined, or the
Committee may direct the Trustee to pay such amount into any court of appropriate
jurisdiction. The Trustee shall not be required to verify or insure that any
distributions made to any third parties under this Section 13.22 are applied for the
benefit of such minor or incompetent or incapacitated Beneficiary.





13.23 Gender and Number 




          Whenever any words are used herein in the masculine gender, they shall be construed as though
they were also used in the feminine gender in all cases where they would so apply, and whenever any
words are used herein in the singular or plural form, they shall be construed as though they were
also used in the other form in all cases where they would so apply.




1324 ERISA Section 404(c) 




          This Plan is intended to comply with ERISA Section 404(c). Participants are therefore
responsible for their own investment choices.





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13.25 Notice to the Committee 




          If any provision in the Plan describes an Employee or Beneficiary’s election application, or
notice to the Committee, then any such action shall only be effective if its is properly made and
submitted on the appropriate forms, prepared by the Committee, under Plan procedures. Any such
written communication shall be deemed to have been made or given on the date received by the
Committee or its representative.




13.26 Consent for Distributions Paid Before Normal Retirement Date





	 	(a)	 	Generally, a Participant or former Participant must give written consent to
the distribution of any Plan benefit exceeding $5,000 (or, any greater amount
determined by the Treasury Department under Code Section 411(a)(11)) paid before his
Normal Retirement Date (even if the Participant has a Disability). Further, such
distributees must receive notice, no less than 30 days and no more than 90 days
before their payment date, of their right to defer payment of the Plan benefit.
	 
	 	(b)	 	Notwithstanding the preceding paragraph, if a distribution under this Plan
is not subject to Code Sections 401(a)(11) and 417, then Plan distributions described
in the preceding paragraph may be made less than 30 days after the Participant has
received the notice, described in the preceding paragraph, provided that:






	 	(1)	 	The Committee clearly notifies the
Participant of his right to delay receipt of
his distribution for 30 days
after he received notice under
this Section, during which he may
consider whether or not to elect
the distribution (and any
applicable, optional form of
benefit), and
	 
	 	(2)	 	the Participant, after receiving
notice under this Section, elects to either receive the
distribution or to make or not to make a rollover transfer under
Section 10.7.





13.27 Illegality of Particular Provisions 




          The illegality of any particular provision of this Plan shall not affect the other provisions
thereof, but the Plan shall be construed in all respects as if such invalid provision were omitted.






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13.28
 Condition of Contributions




          All contributions to this Plan are conditioned on their deductibility under Code Section 404.




13.29
 Qualified Military Service




          Effective December 12, 1994, notwithstanding any provision of this Plan to the contrary,
contributions, benefits and service credited with respect to qualified military service will be
provided in accordance with Code Section 414(u). In addition, any Participant loan repayments
shall be suspended during such military service as required by Code Section 414(u)(4).




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ARTICLE XIV. TOP-HEAVY PROVISIONS




14.1




          In the event this Plan is or becomes Top-Heavy (as defined in this Section) in any Plan Year
beginning on or after the Effective Date, the provisions of this Article shall apply and shall
supersede any conflicting provisions in the Plan.




14.2




          As used in this Article, the following terms shall have the meanings hereinafter set forth:





“Employer” means the Employer and all Affiliates.




“Key Employee” means any employee (including a deceased employee) and a
beneficiary of either of the foregoing who at any time during the determination period (as
defined below) was




	 	(a)	 	An officer of an Employer or an Affiliate having Total Compensation of more
than fifty percent (50%) of the dollar amount in effect under Codes Sections
415(b)(1)(A) and (d) for any such Plan Year; provided, that the number of employees
treated as officers shall be no more than fifty (50) or, if fewer, the greater of
three (3) employees or ten percent (10%) of the employees (exclusive of employees
described in section 414(q)(8) of the Code);
	 
	 	(b)	 	One of the ten (10) employees (i) having Compensation
of more than the dollar limit under section 415(c)(1)(A) of the Code, and
(ii) owning or considered as owning (within the meaning of section 416(i)
of the Code) the largest percentage interests in value of an Employer or
an Affiliate, provided that such percentage interest exceeds one-half
percent (.5%) in value. If two employees have the same interest in the
Employer or an Affiliate, the employee having the greater Top-Heavy
Compensation shall be treated as having a larger interest.
	 
	 	(c)	 	A 5%-Owner.
	 
	 	(d)	 	A one percent (1%) owner of an Employer or an Affiliate
having Top-Heavy Compensation of more than one hundred fifty thousand
dollars ($150,000). “One percent (1%) owner” means any person who would be
described in the definition of 5%-Owner if “one percent (1%)” were
substituted for “five percent (5%)” in each place where it appears.




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For purposes of this definition, the “determination period” shall mean the Plan Year
containing the Determination Date and the four preceding Plan Years. The determination of
who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and
the Regulations thereunder.




“Non-Key Employee” means any employee who is not a Key Employee and includes an
employee who is a former Key Employee.




This Plan shall be “Top-Heavy” for any Plan Year beginning on or after the
Effective Date if the provisions of any of the following clauses are met:




	 	(1)	 	if the Top-Heavy Ratio for this Plan
exceeds 60 percent and this Plan is not part of any Required
Aggregation Group of Plans or Permissive Aggregation Group of
Plans;
	 
	 	(2)	 	if this Plan is a part of a Required
Aggregation Group of Plans (but is not part of a Permissive
Aggregation Group of Plans) and the Top-Heavy Ratio for the
Required Aggregation Group of Plans exceeds 60 percent; or
	 
	 	(3)	 	if this Plan is a part of a Required
Aggregation Group of Plans and part of a Permissive Aggregation
Group of Plans and the 
Top-Heavy Ratio for the Permissive
Aggregation Group of Plans exceeds 60 percent.






“Top-Heavy Ratio” means a fraction: (x) the numerator of which is the sum of the
amount credited to accounts under this Plan and any other defined contribution plan
maintained by the Employer which is required or permitted to be taken into account for all
Key Employees and the Present Value of accrued benefits under any defined benefit plan
maintained by the Employer which is required or permitted to be taken into account for all
Key Employees, and (y) the denominator of which is the sum of the amount credited to the
accounts under such defined contribution plans for all participants and the Present Value
of accrued benefits under such defined benefit plans for all participants.




For purposes of this definition: (i) the amount credited to accounts and the Present
Value of accrued benefits shall be determined as of the last day of the most recent plan
year that falls within or ends with the 12—month period ending on the Determination Date;
(ii) the amount credited to the accounts and accrued benefits of a participant who is a
Non-Key Employee but who was a Key Employee in a prior year will be disregarded; (iii) the
amount credited to the accounts and accrued benefits of a participant who has not been
employed by
the Employer at any time during the five-year period ending on the Determination Date will
be disregarded; and (iv) the numerator and denominator of the Top-Heavy Ratio shall be
increased by any



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withdrawal or distribution of the amount credited to an account or
accrued benefits within the five-year period ending on the Determination Date. The
calculation of the Top-Heavy Ratio will be made in accordance with Section 416 of the Code
and the Regulations thereunder.




“Required Aggregation Group of Plans” means (i) each qualified plan of the
Employer (including a terminated plan) in which at least one Key Employee participates,
and (ii) any other qualified plan of the Employer which enables a plan described in clause
(i) to meet the requirements of Section 401(a)(4) or 410 of the Code.




“Permissive Aggregation Group of Plans” means (i) the Required Aggregation Group
of Plans plus (ii) any other plan or plans of the Employer which, when considered as a
group with the Required Aggregation Group of Plans, would continue to satisfy the
requirements of Sections 401(a)(4) and 410 of the Code.




“Determination Date” for any plan year shall mean the last day of the preceding
plan year; provided, however, that for the first plan year of any plan, the Determination
Date shall mean the last day of such year.




“Present Value” of accrued benefits under any defined benefit plan maintained by
the Employer shall mean a lump sum amount of equivalent actuarial value based on the
Pension Benefit Guaranty Corporation factors and assumptions.



14.3




          Except as otherwise provided in the next Section, for any Plan Year in which this Plan is
Top-Heavy, the Employer contributions and
forfeitures allocated on behalf of any Participant who is a Non-Key Employee (exclusive of any
Pre-Tax Deferrals on his behalf) shall not be less than 3% of such Participant’s Section 415
earnings (as defined in the Article entitled “Limits on Contributions,”) for such Plan Year. The
minimum allocation provided for in this Section shall be determined without regard to any
contribution to or benefit payable under the Social Security law and shall apply even though under
other Plan provisions the Participant would not otherwise be entitled to receive an allocation or
would have received a lesser allocation for the applicable Plan Year for any reason.




14.4





	 	(a)	 	The minimum allocation provided for in the preceding Section shall not
apply to any Participant who was not an Employee on the last day of the applicable
Plan Year.
	 
	 	(b)	 	The minimum allocation provided for in the preceding Section shall not apply
to any Participant to the extent such Participant is covered under any other
plan or plans of the




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	 	 	 	Employer and under the terms of such other plan or plans,
the minimum allocation of Employer contributions and/or accrual of retirement
benefits applicable to a Top-Heavy Plan are provided for.





14.5




                Effective as of the first day of the first Plan Year in which this Plan is Top-Heavy (the
“Top-Heavy Effective Date”), the nonforfeitable interest of each Participant in his Account
attributable to any matching Employer Contributions, shall be determined as follows:




	 	 	 
	Completed	 	 
	Years of Vesting Service	 	Nonforfeitable Interest
	Less than 3

3 or more

	 	0%

100%






          Such vesting schedule shall remain in effect for all Plan Years commencing on and after the
Top-Heavy Effective Date even though the Plan may not be Top-Heavy for any such Plan Year.
Notwithstanding the foregoing provisions of this Section, this Section shall not apply to the
benefit of any Participant whose employment with the Employer had terminated prior to the Top-Heavy
Effective Date and the benefit to which such Participant is entitled under the Plan shall be
determined without regard to this Article.




14.6




          In any Plan Year in which this Plan is Top-Heavy, the denominators of the defined benefit
plan fraction and the defined contribution plan fraction (as defined in the provisions of the
Article entitled “Limitations on Contributions”) shall be determined using 100 percent of the
dollar limitation instead of 125 percent thereof.




          IN WITNESS WHEREOF, K&F INDUSTRIES INC. has caused this Plan to be executed by its duly
authorized officer on the 31st day of December, 2001.




	 	 	 	 	 	 	 
	 	 	K&F INDUSTRIES INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	Kenneth M. Schwartz	 	 
	 

	 	 	 

	 	 
	 
	 	 	 	Kenneth M. Schwartz	 	 
	 

	 	Title:	 	President and Chief Operating
Officer	 	 







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