Document:

exv10w28

 

EXHIBIT 10.28

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

between

THE CONNECTICUT WATER COMPANY

CONNECTICUT WATER SERVICE, INC.

and

Daniel J. Meaney

 

 

 

EXHIBIT 10.28

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

     THIS AGREEMENT, dated as of January 12, 2006, is made by and between The Connecticut Water
Company, a Connecticut corporation having its principal place of business in Clinton, Connecticut,
(“Company”), Connecticut Water Service, Inc., a Connecticut corporation and holder of all of the
outstanding capital stock of Company (“Parent”) and DANIEL J. MEANEY (“Executive”), a resident of
Ellington, Connecticut.

W I T N E S S E T H :

     WHEREAS, Executive has been and continues to be employed by Company and Parent in an executive
capacity and has entered into an Employment Agreement between Executive and Company and Parent
dated as of January 12, 2006 which becomes effective upon a “Change-in-Control,” as defined herein,
of Company or Parent; and

     WHEREAS, should Company or Parent receive a proposal from or engage in discussions with a
third person concerning a possible combination with Company or Parent or the acquisition of a
substantial portion of voting securities of Company or Parent, the Boards of Directors of Company
and Parent have deemed it imperative that they and Company and Parent be able to rely on Executive
to continue to serve in Executive’s position and that the Boards of Directors and Company and
Parent be able to rely upon Executive’s advice as being in the best interests of Company and Parent
and their shareholders without concern that Executive might be distracted by the personal
uncertainties and risks that such a proposal or discussions might otherwise create; and

     WHEREAS, Company and Parent desire to reward Executive for Executive’s valuable, dedicated
service to Company and Parent should Executive’s service be terminated under circumstances
hereinafter described: and

     WHEREAS, Executive, Company and Parent are willing to enter into this Amended and Restated
Employment Agreement (“Agreement”) on the terms herein set forth;

     NOW, THEREFORE, to assure Company and Parent of Executive’s continued dedication and the
availability of Executive’s advice and counsel in the event of any such proposal, to induce
Executive to remain in the employ of Company and Parent and to reward Executive for Executive’s
valuable dedicated service to Company and Parent should Executive’s service be terminated under
circumstances hereinafter described, and for other good and valuable consideration, the receipt and
adequacy of which each party acknowledges, Company, Parent and Executive agree as follows:

 

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     1. Definitions. For purposes of this Agreement, the following terms shall have the
following meanings:

          (a) “Cause” shall mean Executive’s serious, willful misconduct in respect of Executive’s
duties under this Agreement, including conviction for a felony or perpetration by Executive of a
common law fraud upon Company or Parent which has resulted or is likely to result in material
economic damage to Company or Parent, as determined by a vote of at least seventy-five percent
(75%) of all of the Directors (excluding Executive) of each of Company’s and Parent’s Board of
Directors;

          (b) “Change-in-Control” shall be deemed to have occurred if after the date hereof (i) a public
announcement shall be made or a report on Schedule 13D shall be filed with the Securities and
Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the “Act”)
disclosing that any Person (as defined below), other than Company or Parent or any employee benefit
plan sponsored by Company or Parent, is the beneficial owner (as the term is defined in Rule 13d-3
under the Act) directly or indirectly, of twenty percent (20%) or more of the total voting power
represented by Company’s or Parent’s then outstanding voting common stock (calculated as provided
in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire voting common stock);
or (ii) any Person, other than Company or Parent or any employee benefit plan sponsored by Company
or Parent, shall purchase shares pursuant to a tender offer or exchange offer to acquire any voting
common stock of Company or Parent (or securities convertible into such voting common stock) for
cash, securities or any other consideration, provided that after consummation of the offer, the
Person in question is the beneficial owner directly or indirectly, of twenty percent (20%) or more
of the total voting power represented by Company’s or Parent’s then outstanding voting common stock
(all as calculated under clause (i)); or (iii) the stockholders of Company or Parent shall approve
(A) any consolidation or merger of Company or Parent in which Company or Parent is not the
continuing or surviving corporation (other than a merger of Company or Parent in which holders of
the outstanding capital stock of Company or Parent immediately prior to the merger have the same
proportionate ownership of the outstanding capital stock of the surviving corporation immediately
after the merger as immediately before), or pursuant to which the outstanding capital stock of
Company or Parent would be converted into cash, securities or other property, or (B) any sale,
lease, exchange or other transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of Company or Parent; or (iv) there shall have been a change in the
composition of the Board of Directors of Company or Parent at any time during any consecutive
twenty-four (24) month period such that “continuing directors” cease for any reason to constitute
at least a majority of the Board unless the election, or the nomination for election of each new
Director was approved by a vote of at least two-thirds (2/3) of the Directors then still in office
who were Directors at the beginning of such period; or (v) the Board of Directors of Company or
Parent, by a vote of a majority of all the Directors (excluding Executive) adopts a resolution to
the effect that a “Change-in-Control” has occurred for purposes of this Agreement.

 

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          (c) “Disability” shall mean the incapacity of Executive by illness or any other cause as
determined under the long-term disability insurance plan of Company in effect at the time in
question, or if no such plan is in effect, then such incapacity of Executive as prevents Executive
from performing the essential functions of Executive’s position with or without reasonable
accommodation for a period in excess of two hundred forty (240) days (whether or not consecutive),
or one hundred eighty (180) days consecutively, as the case may be, during any twelve (12) month
period.

          (d) “Effective Date” shall be the date on which a Change-in-Control occurs. Anything in this
Agreement to the contrary notwithstanding, if Executive’s employment is terminated prior to the
date on which a Change-in-Control occurs, and it is reasonably demonstrated that such termination
(i) was at the request of a third party who has taken steps reasonably calculated to effect a
Change-in-Control or (ii) otherwise arose in connection with or anticipation of a
Change-in-Control, then for all purposes of this Agreement the “Effective Date” shall mean the date
immediately prior to the date of such termination.

          (e) “Good Reason” shall mean the occurrence of any action which (i) removes or changes
Executive’s title or reduces Executive’s job responsibilities or base salary; (ii) results in a
significant worsening of Executive’s work conditions; or (iii) moves Executive’s place of
employment to a location that increases Executive’s commute by more than thirty (30) miles over the
length of Executive’s commute from Executive’s place of principal residence at the time the move is
requested. For purposes of this subparagraph (e), any good faith determination by Executive that
any such action has occurred shall be conclusive. Notwithstanding the foregoing, at any time
during the period commencing on the Effective Date and ending on the 30th day after the first
anniversary of the Effective Date, except for purposes of Paragraph 5(g), “Good Reason” shall mean
any reason or no reason.

          (f) “Person” shall mean any individual, corporation, partnership, company or other entity, and
shall include a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934.

     2. Employment.

          (a) As of the Effective Date, Company hereby agrees to continue to employ Executive and
Executive agrees to remain in the employ of Company for the Term of this Agreement upon the terms
and conditions hereinafter set forth. Subject to the provisions of subparagraph (b) of this
Paragraph 2, and to the provisions of Paragraph 6 below, “Term” shall mean a continuously renewing
period of three (3) years commencing on the Effective Date.

          (b) At any time during the Term, the Board of Directors of Company and Parent may, by written
notice to Executive, advise Executive of their desire to modify or amend any of the terms or
provisions of this Agreement or to delete or add any terms or provisions. Any such notice
(“Notice”) shall describe the proposed modifications in reasonable detail. In the event a Notice
shall be given to Executive, then Company, Parent and Executive agree to discuss

 

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the proposed modification(s) and to attempt in good faith to reach agreement with respect thereto
and to reduce such agreement to writing in an amendment to be executed by all the parties
(“Amendment”). If a Notice is given hereunder and an Amendment shall not have been executed on or
before the sixtieth (60th) day following the date on which Notice is given, then the Term shall
thereupon be automatically converted to a fixed period ending three (3) years after the expiration
of such sixty (60) days.

     3. Duties of Employment.

          (a) During the Term, Executive’s position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and assigned at any time
during the ninety (90)-day period immediately preceding the Effective Date and Executive’s services
shall be performed at such location as Executive shall determine.

          (b) During the Term, Executive will serve Company faithfully, diligently and competently and
will devote full-time to Executive’s employment and will hold, in addition to the offices held on
the Effective Date, such other executive offices of Company or Parent, or their respective
subsidiaries and affiliates, to which Executive may be elected, appointed or assigned by the Boards
of Directors of Company or Parent from time to time and will discharge such executive duties in
connection therewith. Nothing in this Agreement shall preclude Executive, with the prior approval
of the Board of Directors of Company, from devoting reasonable periods of time required for (i)
serving as a director or member of a committee of any organization involving no conflict of
interest with Company or Parent, or (ii) engaging in charitable, religious and community
activities, provided, that such directorships, memberships or activities do not materially
interfere with the performance of Executive’s duties hereunder.

     4. Compensation. During the Term, Company shall pay to Executive as compensation for
the services to be rendered by Executive hereunder the following:

          (a) A base salary at a rate equal to the highest base salary paid or payable to Executive by
Company during the twelve (12)-month period immediately preceding the month in which the Effective
Date occurs, or such larger sum as the Board of Directors of Company may from time to time
determine in connection with regular periodic performance reviews pursuant to Company’s policies
and practices. Such compensation shall be payable in accordance with the normal payroll practices
of Company. Executive shall receive an annual increase in base salary at each normal pay
adjustment date during the Term, but no later than one (1) year after the date of Executive’s last
increase and annually thereafter during the Term, of not less than the percentage increase in the
cost-of-living since Executive’s last pay adjustment, as measured by the Consumer Price Index-All
Urban Consumers of the U.S. Bureau of Labor Statistics.

          (b) In addition, Company shall pay to Executive an annual bonus, payable in cash or other form
of compensation, in accordance with the Company’s practice or plan for annual bonuses for peer
executives which is at least equal to the target percentage of the

 

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midpoint of Executive’s salary grade under the Company’s Officers Incentive Program for the year
preceding the fiscal year in which the Effective Date occurs.

     5. Benefits. During the Term, Executive shall be entitled to the following benefits:

          (a) Incentive, Savings and Retirement Plans. In addition to base salary and bonus
payable as hereinabove provided, Executive shall be entitled to participate during the Term in all
incentive, savings and retirement plans, practices, policies and programs applicable to executive
employees of Company as may be in effect from time to time. Such plans, practices, policies and
programs, in the aggregate, shall provide Executive with compensation, benefits and reward
opportunities at least as favorable as the most favorable of such compensation, benefits and reward
opportunities provided by Company for Executive under such plans, practices, policies and programs
as in effect at any time during the ninety (90)-day period immediately preceding the Effective Date
or, if more favorable to Executive, as provided at any time thereafter with respect to other key
employees of Company or Parent.

          (b) Welfare Benefit Plans. During the Term, Executive and/or Executive’s family, as
the case may be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs applicable to executive employees of
Company (including, without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident insurance plans and
programs) at least as favorable as the most favorable of such plans, practices, policies and
programs in effect at any time during the ninety (90)-day period immediately preceding the
Effective Date or, if more favorable to Executive and/or Executive’s family, as in effect at any
time thereafter with respect to other key employees of Company or Parent.

          (c) Expenses. During the Term, Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by Executive in accordance with the most
favorable policies, practices and procedures of Company in effect at any time during the ninety
(90)-day period immediately preceding the Effective Date or, if more favorable to Executive, as in
effect at any time thereafter with respect to other key employees of Company or Parent.

          (d) Fringe Benefits. During the Term, Executive shall be entitled to fringe benefits,
including use of an automobile and payment of related expenses or payment of an allowance for
automobile related expenses, in accordance with the most favorable plans, practices, programs and
policies of Company in effect at any time during the ninety (90)-day period immediately preceding
the Effective Date or, if more favorable to Executive, as in effect at any time thereafter with
respect to other key employees of Company or Parent.

          (e) Office and Support Staff. During the Term, Executive shall be entitled to an
office or offices of a size and with furnishings and other appointments, and to secretarial and
other assistance, at least equal to the most favorable of the foregoing provided to Executive by
Company at any time during the ninety (90)-day period immediately preceding the Effective Date or,
if more favorable to Executive, as provided at any time thereafter with respect to other key
employees of Company or Parent.

 

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          (f) Vacation. During the Term, Executive shall be entitled to paid vacation in
accordance with the most favorable plans, policies, programs and practices of Company as in effect
at any time during the ninety (90)-day period immediately preceding the Effective Date or, if more
favorable to Executive, as in effect at any time thereafter with respect to other key employees of
Company or Parent.

     6. End of Term and Notice of Termination.

          (a) End of Term. The Term shall end upon the occurrence of any of the following
events:

               (i) Termination of Executive’s employment by Company for Cause.

               (ii) The voluntary termination of Executive’s employment by Executive other than for Good
Reason.

               (iii) The death of Executive.

               (iv) Executive’s attainment of age sixty-five (65).

               (v) Full compliance by Company with the provisions of Paragraph 7(e) below, if Executive’s
employment shall have been terminated by Company during the Term for any reason other than
Cause, or if Executive’s employment shall have been terminated by reason of Executive’s Disability,
or if Executive shall have voluntarily terminated Executive’s employment during the Term for Good
Reason.

          (b) Notice of Termination. Any termination by Company for Cause or by Executive for
Good Reason or on account of Executive’s Disability shall be communicated by notice to the other
party hereto given in accordance with Section 16 of this Agreement. For purposes of this
Agreement, a “notice” means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive’s employment under the provision so
indicated and (iii) if the date of termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not more than fifteen (15) days
after the giving of such notice).

          (c) Date of Termination. The date of termination means the date of receipt of the
notice of termination or any later date specified therein, as the case may be; provided,
however, that (i) if Executive’s employment is terminated by Company other than for Cause or on
account of Executive’s Disability, the date of termination shall be the date on which Company
notifies Executive of such termination and (ii) if Executive’s employment is terminated by reason
of death, the date of termination shall be the date of death of Executive.

     7. Payment Upon Termination.

 

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          (a) If Executive’s employment is terminated by Company for Cause, as defined in Paragraph
1(a), the obligations of Company under this Agreement shall cease and Executive shall forfeit all
right to receive any compensation or other benefits under this Agreement except only compensation
or benefits accrued or earned and vested (if applicable) by Executive as of the date of
termination, including base salary through the date of termination, benefits payable under the
terms of any qualified or nonqualified retirement plans or deferred compensation plans maintained
by Company, any accrued vacation pay as of the date of termination not yet paid by Company and any
benefits required to be paid by law such as continued health care coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) (collectively, the “Accrued
Obligations”).

          (b) If Executive shall voluntarily terminate Executive’s employment during the Term, other
than for Good Reason, as defined in Paragraph 1(e), the obligations of Company under this Agreement
shall cease and Executive shall forfeit all right to receive any compensation or other benefits
under this Agreement except only the Accrued Obligations.

          (c) In the event of the death of Executive during the Term, then, in addition to the Accrued
Obligations and any other benefits which may be payable by Company in respect of the death of
Executive, the base salary then payable hereunder shall continue to be paid at the then current
rate for a period of six (6) months after such death to such beneficiary as shall have been
designated in writing by Executive, or if no effective designation exists, then to the estate of
Executive.

          (d) If Executive’s employment is terminated by reason of Executive’s attainment of age
sixty-five (65), the obligations of Company under this Agreement shall cease and Executive shall
forfeit all right to receive any compensation or other benefits under this Agreement except only
the Accrued Obligations.

          (e) If Executive’s employment is terminated by Company during the Term for any reason
other than for Cause, or Executive’s death, or Executive’s attainment of age sixty-five
(65), or if Executive’s employment is terminated during the Term by reason of Executive’s
Disability, or if Executive shall voluntarily terminate Executive’s employment during the Term for
Good Reason, Executive shall be entitled to receive, and Company shall be obligated to pay and
provide Executive, the following amounts:

               (i) An amount in consideration of the covenants by Executive set forth in Paragraphs 8 and 9
below to be determined by a nationally recognized independent certified public accounting firm
selected and retained by Company to be the reasonable value of said covenants as of the date of
termination of Executive’s employment, but in no event shall such amount be greater than the
aggregate value of the benefits provided in subparagraphs (e)(ii), (iii), (iv), (v), (vii), (viii),
(ix) and (xi) hereinbelow. The benefits otherwise payable to Executive pursuant to said
subparagraphs shall be offset by the amount, if any, payable to Executive in respect of the
covenants by Executive set forth in Paragraphs 8 and 9 below. Notwithstanding the foregoing, if
any benefit otherwise payable to Executive pursuant to said subparagraphs

 

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would be offset by the amount payable to Executive in respect of the covenants set forth in Paragraphs
8 and 9 below, Executive may elect to receive such benefit, but the amount payable to Executive in
respect of the covenants by Executive set forth in Paragraphs 8 and 9 below shall be reduced by the
value of such benefit. Said amount paid in consideration of the covenants by Executive set forth
in Paragraphs 8 and 9 below shall be paid in cash in a lump sum in the month next following
Executive’s date of termination of employment and shall be treated as a supplemental wage payment
under applicable Treasury Regulations subject to federal tax withholding at the flat percentage
rate applicable thereto.

               (ii) An amount equal to three (3) times the base salary of Executive, at the rate in effect
immediately prior to the date of termination, plus an amount equal to three (3) times the target
percentage of the midpoint of Executive’s salary grade under the Company’s Officers Incentive
Program for the year in which termination occurs. There shall be subtracted from the aggregate
amount determined in accordance with the immediately preceding sentence the amount, if any, payable
to Executive under any then effective severance pay plan of Company. Such resulting amount shall
be payable in equal installments over the three (3)-year period commencing on the date of
termination of employment in accordance with the normal payroll practices of Company or, at
Company’s option, the entire amount (determined without any discount) shall be paid in cash in a
lump sum in the month next following Executive’s date of termination of employment and shall be
treated as a supplemental wage payment under applicable Treasury Regulations subject to federal tax
withholding at the flat percentage rate applicable thereto.

               (iii) An amount equal to the aggregate amounts that Company would have contributed on behalf
of Executive under Company’s qualified defined contribution retirement plan(s), if any such plan(s)
shall be in effect (other than amounts attributable to Executive’s before-tax contributions to such
plan(s)) plus estimated earnings thereon had Executive continued in the employ of Company for the
three (3)-year period commencing on the date of termination and made contributions under said
plan(s) at a rate, as a percentage of salary, equal to the rate at which Executive had made
contributions to said plan(s) in the plan year immediately preceding Executive’s termination, to be
payable in a lump sum to Executive within thirty (30) days after the expiration of the
non-competition period specified in Paragraph 9(a) of this Agreement, provided that Executive shall
not have breached said non-competition provisions.

               (iv) An amount equal to the difference between: (A) benefits which would have been payable to
Executive under any deferred compensation agreement between Company and Executive, if any such
agreement shall be in effect, had Executive continued in the employ of Company for the three
(3)-year period commencing on the date of termination, received compensation at least equal to that
specified in Paragraph 4 of this Agreement during such time, and deferred pursuant to said deferred
compensation agreement the amount of compensation specified therein; and (B) the benefits actually
payable to Executive under such deferred compensation agreement; such amount to be payable in a
lump sum to Executive within thirty (30) days after the expiration of the non-competition period
specified in Paragraph 9(a) of

 

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this Agreement, provided that Executive shall not have breached said
non-competition provisions.

               (v) Additional retirement benefits equal to the difference between: (A) the annual pension
benefits that would have been payable to Executive under Company’s qualified defined benefit
retirement plan (the “Plan”) and under any nonqualified supplemental executive retirement plan
covering Executive (the “Supplemental Plan”), if any such Plan or Supplemental Plan shall be in
effect, if Executive had been continued in the employ of Company for the three (3)-year period
commencing on the date of termination and had received compensation at least equal to that
specified in Paragraph 4(a) of this Agreement during such time and had been fully vested in the
benefits payable under any such Plan and Supplemental Plan; and (B) the annual benefits actually
payable to Executive under any such Plan and Supplemental Plan. The discounted present value of
such additional benefits, shall be payable to Executive in a lump sum, as calculated by the
independent actuary for the Plan using the assumptions specified in the Plan, within thirty (30)
days after the expiration of the non-competition period specified in Paragraph 9(a) of this
Agreement, provided that Executive shall not have breached said non-competition provisions.

               (vi) At the date of termination of Executive’s employment, Executive shall be fully vested in
any form of compensation previously granted to Executive (other than benefits payable under a
qualified retirement plan), such as, by way of example only, restricted stock, stock options, and
performance share awards.

               (vii) If Executive’s employment is terminated by reason of Executive’s Disability, Executive
shall be entitled to receive, in addition to the other benefits provided under this Paragraph 7(e),
disability benefits at least equal to the most favorable of those provided by Company or Parent to
disabled employees in accordance with the most favorable plans, programs, practices and policies of
Company or Parent in effect at any time during the ninety (90)-day period immediately preceding the
Effective Date or, if more favorable to Executive, as in effect on the date of Executive’s
Disability with respect to other key employees of Company or Parent.

               (viii) During the three (3)-year period commencing on the date of termination, or such longer
period as any plan, program, practice or policy may provide, Executive shall continue to
participate in all life, health, disability and similar welfare benefit plans and programs of
Company to the extent that such continued participation is possible under the general terms and
provisions of such plans and programs, and Executive shall be credited with additional service
attributable to the three (3)-year period commencing on the date of termination for purposes of
determining eligibility to participate in any such plans or programs maintained by Company for
retirees, with Company and Executive paying the same portion of the cost of each such plan or
program as existed at the time of Executive’s termination. In the event that Executive’s continued
participation (or commencement of participation for plans or programs for retirees) is not
permitted, then in lieu thereof, Company shall acquire, with the same cost sharing, individual
insurance policies providing comparable coverage for Executive; provided, however, that Company
shall not be obligated to pay more than three (3) times

 

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Company’s current cost for comparable group
coverage. If any such individual coverage is unavailable, then Company shall pay to Executive
annually for the three (3)-year period commencing on the date of termination an amount equal to the
sum of the average annual contributions, payments, credits, or allocations made by Company for such
coverage on Executive’s behalf (or the average such contributions,
payments, credits, or allocations for retirees, in the case of retiree coverage) over the
three (3) calendar years preceding the date of termination of Executive’s employment.

               (ix) During the three (3)-year period commencing on the date of termination, Executive shall
continue to receive such perquisites, other than those specified in the preceding subparagraphs
above, as Executive was receiving at the date of termination of employment with, to the extent
applicable, the same cost sharing with Company as was in effect immediately prior to Executive’s
termination of employment.

               (x) Company shall reimburse Executive for the amount of any reasonable legal or accounting
fees and expenses incurred by Executive to obtain or enforce any right or benefit provided to
Executive by Company hereunder or as confirmed or acknowledged hereunder.

     8. Confidential Information. Executive understands that in the course of Executive’s
employment by Company, Executive will receive or have access to confidential information concerning
the business or purposes of Company and Parent, and which Company and Parent desire to protect.
Such confidential information shall be deemed to include, but not be limited to, Company’s customer
lists and information, and employee lists, including, if known, personnel information and data.
Executive agrees that Executive will not, at any time during the period ending two (2) years after
the date of termination of Executive’s employment, reveal to anyone outside Company or Parent or
use for Executive’s own benefit any such information without specific written authorization by
Company or Parent. Executive further agrees not to use any such confidential information or trade
secrets in competing with Company or Parent at any time during or in the two (2) year period
immediately following the date of termination of Executive’s employment with Company.

9. Covenants by Executive Not to Compete With Company or Parent.

          (a) Upon the date of termination of Executive’s employment with Company for any reason,
Executive covenants and agrees that Executive will not at any time during the period of two (2)
years from and after such date of termination directly or indirectly in any manner or under any
circumstances or conditions whatsoever be or become interested, as an individual, partner,
principal, agent, clerk, employee, stockholder, officer, director, trustee, or in any other
capacity whatsoever, except as a nominal owner of stock of a public corporation, in any other
business which, at the date of Executive’s termination, is a Competitor (as defined herein), either
directly or indirectly, with Company or Parent, or engage or participate in, directly or indirectly
(whether as an officer, director, employee, partner, consultant, holder of an equity or debt
investment, lender or in any other manner or capacity), or lend Executive’s name (or any

 

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part or variant thereof) to, any business which, at the date of Executive’s termination, is a Competitor,
either directly or indirectly, with Company or Parent, or as a result of Executive’s engagement or
participation would become, a Competitor, either directly or indirectly, with any aspect of the
business of Company or Parent as it exists at the time of Executive’s termination, or solicit any
officer, director, employee or agent of Company or Parent or any subsidiary or affiliate of
Company or Parent to become an officer, director, employee or agent of Executive, Executive’s
respective affiliates or anyone else. Ownership, in the aggregate, of less than one percent (1 %)
of the outstanding shares of capital stock of any corporation with one or more classes of its
capital stock listed on a national securities exchange or publicly traded in the over-the-counter
market shall not constitute a violation of the foregoing provision. For the purposes of this
Agreement, a Competitor is any business which is similar to the business of Company or Parent or in
any way in competition with the business of Company or Parent within any of the then-existing water
utility service areas of Company.

          (b) Executive hereby acknowledges that Executive’s services are unique and extraordinary, and
are not readily replaceable, and hereby expressly agrees that Company and Parent, in enforcing the
covenants contained in Paragraphs 8 and 9 herein, in addition to any other remedies provided for
herein or otherwise available at law, shall be entitled in any court of equity having jurisdiction
to an injunction restraining Executive in the event of a breach, actual or threatened, of the
agreements and covenants contained in these Paragraphs.

          (c) The parties hereto believe that the restrictive covenants of these Paragraphs are
reasonable. However, if at any time it shall be determined by any court of competent jurisdiction
that these Paragraphs or any portion of them as written, are unenforceable because the restrictions
are unreasonable, the parties hereto agree that such portions as shall have been determined to be
unreasonably restrictive shall thereupon be deemed so amended as to make such restrictions
reasonable in the determination of such court, and the said covenants, as so modified, shall be
enforceable between the parties to the same extent as if such amendments had been made prior to the
date of any alleged breach of said covenants.

          (d) The provisions of this Paragraph 9 shall not apply if Company and Parent shall be
prohibited under Paragraph 15 below from making any payments to Executive pursuant to Paragraph 7
above.

     10. No Obligation to Mitigate. So long as Executive shall not be in breach of any
provision of Paragraph 8 or 9, Executive shall have no duty to mitigate damages in the event of a
termination and if Executive voluntarily obtains other employment (including self-employment), any
compensation or profits received or accrued, directly or indirectly, from such other employment
shall not reduce or otherwise affect the obligations of Company and Parent to make payments
hereunder.

     11. Resignation. In the event that Executive’s services hereunder are terminated
under any of the provisions of this Agreement (except by death), Executive agrees that Executive
will deliver Executive’s written resignation as an officer of Company or Parent, or their

 

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subsidiaries and affiliates, to the Board of Directors, such resignation to become effective
immediately, or, at the option of the Board of Directors, on a later date as specified by the
Board.

     12. Insurance. Company shall have the right at its own cost and expense to apply for
and to secure in its own name, or otherwise, life, health or accident insurance or any or all of
them covering Executive, and Executive agrees to submit to the usual and customary medical
examination and otherwise to cooperate with Company in connection with the procurement of any
such insurance, and any claims thereunder.

     13. Release. As a condition of receiving payments or benefits provided for in this
Agreement, at the request of Company or Parent, Executive shall execute and deliver for the benefit
of Company and Parent, and any subsidiary or affiliate of Company or Parent, a general release in
the form set forth in Attachment A, and such release shall become effective in accordance with its
terms. The failure or refusal of Executive to sign such a release or the revocation of such a
release shall cause the termination of any and all obligations of Company and Parent to make
payments or provide benefits hereunder, and the forfeiture of the right of Executive to receive any
such payments and benefits. Executive acknowledges that Company and Parent have advised Executive
to consult with an attorney prior to signing this Agreement and that Executive has had an
opportunity to do so.

     14. Regulatory Limitation. Notwithstanding any other provision of this Agreement,
Company shall not be obligated to make, and Executive shall have no right to receive, any payment,
benefit or amount under this Agreement which would violate any law, regulation or regulatory order
applicable to Company or Parent at the time such payment, benefit or amount is due (“Prohibited
Payment”). If and to the extent Company shall at a later date be relieved of the restriction on
its ability to make any Prohibited Payment, then at such time Company or Parent shall promptly make
payment of any such amounts to Executive.

     15. Notices. All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person to Executive or to the Secretary of Company and Parent, or if
mailed, postage prepaid, registered or certified mail, addressed, in the case of Executive, to
Executive’s last known address as carried on the personnel records of Company, and, in the case of
Company and Parent, to the corporate headquarters, attention of the Secretary, or to such other
address as the party to be notified may specify by notice to the other party.

     16. Successors and Binding Agreement.

          (a) Company and Parent will require any successor, whether direct or indirect, by purchase,
merger, consolidation or otherwise to all or substantially all of the business and/or assets of
Company and/or Parent, as the case may be, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that Company and Parent are required to perform it.
Failure of Company and Parent to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle Executive to compensation
and benefits from Company and Parent in the same amount and on the same terms as Executive would be
entitled hereunder if Executive had terminated

 

-13-

employment for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes effective shall be
deemed the date on which Executive’s employment with Company was terminated. As used in this
Agreement, “Company” and “Parent” shall include any successor to Company’s and/or Parent’s, as the
case may be, business and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.

          (b) This Agreement shall inure to the benefit of, and be enforceable by, Executive’s personal
or legal representatives, executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive dies while any amount is still payable hereunder, all such amounts shall be
paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other
designee or, if there is no such designee, to Executive’s estate.

     17. Arbitration. Any dispute which may arise between the parties hereto may, if both
parties agree, be submitted to binding arbitration in the State of Connecticut in accordance with
the Rules of the American Arbitration Association; provided that any such dispute shall first be
submitted to Company’s Board of Directors in an effort to resolve such dispute without resort to
arbitration.

     18. Severability. If any of the terms or conditions of this Agreement shall be
declared void or unenforceable by any court or administrative body of competent jurisdiction, such
term or condition shall be deemed severable from the remainder of this Agreement, and the other
terms and conditions of this Agreement shall continue to be valid and enforceable.

     19. Amendment. This Agreement may be modified or amended only by an instrument in
writing executed by the parties hereto; provided, however, that the Board of Directors of Company
and Parent may amend this Agreement without the consent of Executive upon receipt of a written
opinion of Company’s accounting firm that a provision or provisions of this Agreement would prevent
“pooling” accounting treatment in connection with any Change-in-Control and such “pooling”
accounting treatment would otherwise be available in connection with such Change-in-Control, to the
extent necessary to permit “pooling” accounting treatment in connection with such a
Change-in-Control, provided that such amendment may not adversely affect any benefit to which
Executive was entitled under the terms of this Agreement as in effect on November 17 1999, and must
preserve the benefits to Executive under this Agreement to the maximum extent possible consistent
with obtaining such accounting treatment.

     20. Construction. This Agreement shall supersede and replace all prior agreements and
understandings between the parties hereto on the subject matter covered hereby. This Agreement
shall be governed and construed under the laws of the State of Connecticut. Words of the masculine
gender mean and include correlative words of the feminine gender. Paragraph headings are for
convenience only and shall not be considered a part of the terms and provisions of the Agreement.

 

-14-

     IN WITNESS WHEREOF, Company and Parent have caused this Agreement to be executed by a duly
authorized officer, and Executive has hereunto set Executive’s hand, this
12th day of January 2006.

	 	 	 	 	 	 	 
	 	 	The Connecticut Water Company	 	 
	 
	 	 	 	 	 	 
	 

	 	By
	 	 

     Michele G. DiAcri
	 	 
	 

	 	 	 	     Corporate Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	Connecticut Water Service, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	  DANIEL J. MEANEY	 	 
	 

	 	 	 	  (Executive)	 	 

 

-15-

ATTACHMENT A

RELEASE

     We advise you to consult an attorney before you sign this Release. You have until the date
which is seven (7) days after the Release is signed and returned to ___
(“Company”) to change your mind and revoke your Release. Your Release shall not become effective
or enforceable until after that date.

     In consideration for the benefits provided under your Employment Agreement dated
___with Company and ___(“Parent”), and more specifically
enumerated in Exhibit 1 hereto, by your signature below you agree to accept such benefits and not
to make any claims of any kind against Company, its past and present and future parent
corporations, subsidiaries, divisions, subdivisions, affiliates and related companies or their
successors and assigns, including without limitation Parent, or any and all past, present and
future Directors, officers, fiduciaries or employees of any of the foregoing (all parties referred
to in the foregoing are hereinafter referred to as the “Releasees”) before any agency, court or
other forum, and you agree to release the Releasees from all claims, known or unknown, arising in
any way from any actions taken by the Releasees up to the date of this Release, including, without
limiting the foregoing, any claim for wrongful discharge or breach of contract or any claims
arising under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act
of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act
of 1974, Connecticut’s Fair Employment Practices Act or any other federal, state or local statute
or regulation and any claim for attorneys’ fees, expenses or costs of litigation.

     THE PRECEDING PARAGRAPH MEANS THAT BY SIGNING THIS RELEASE YOU WILL HAVE WAIVED ANY RIGHT YOU
MAY HAVE TO BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE RELEASEES BASED ON ANY ACTIONS
TAKEN BY THE RELEASEES UP TO THE DATE OF THIS RELEASE.

     By signing this Release, you further agree as follows:

     1. You have read this Release carefully and fully understand its terms;

     2. You have had at least twenty-one (21) days to consider the terms of the Release;

     3. You have seven (7) days from the date you sign this Release to revoke it by written
notification to Company. After this seven (7) day period, this Release is final and binding and
may not be revoked;

     4. You have been advised to seek legal counsel and have had an opportunity to do so;

 

-16-

     5. You would not otherwise be entitled to the benefits provided under your Employment
Agreement with Company and Parent had you not agreed to waive any right you have to bring a lawsuit
or legal claim against the Releasees; and

     6. Your agreement to the terms set forth above is voluntary.

	 	 	 	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Signature:

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Received by:

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 

 

 

EXHIBIT 1

1.

2.

3.

4.

5.

etc.

NOTE: THIS EXHIBIT IS TO BE COMPLETED AT THE TIME OF TERMINATION TO REFLECT ALL BENEFITS AND
PAYMENTS MADE UNDER THE EMPLOYMENT AGREEMENT.

Acknowledged and Agreed:

	 	 	 	 	 	 	 	 	 
	THE CONNECTICUT WATER COMPANY	 	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 	 	 
	By
	 	 	 	 	 	 	 	 
	 

	 	 

     Its
	 	 	 	 

	 	 

	 	 	 	 	 
	CONNECTICUT WATER SERVICE, INC.	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	 

	 	 

     ItsEX-10.9

 

Exhibit 10.9

K&F INDUSTRIES

RETIREMENT PLAN FOR SALARIED EMPLOYEES

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	INTRODUCTION	 	 	-1-	 
	 
	 	 	 	 	 	 	 	 
	General Description	 	 	-1-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE I. DEFINITIONS	 	 	-2-	 
	 	 	ABS Participant	 	 	-2-	 
	 	 	Actuarial Equivalent	 	 	-2-	 
	 	 	Adjusted Earnings	 	 	-2-	 
	 	 	Affiliate	 	 	-2-	 
	 	 	Alternate Payee	 	 	-3-	 
	 	 	Annual Accrued Benefit	 	 	-3-	 
	 	 	Annuity Starting Date	 	 	-3-	 
	 	 	Base Amount	 	 	-3-	 
	 	 	Basic Benefit	 	 	-3-	 
	 	 	Beneficiary	 	 	-3-	 
	 	 	Board	 	 	-4-	 
	 	 	Class A Survivor	 	 	-4-	 
	 	 	Class B Survivor	 	 	-4-	 
	 	 	Class C Survivor	 	 	-4-	 
	 	 	Code	 	 	-4-	 
	 	 	Committee	 	 	-5-	 
	 	 	Company	 	 	-5-	 
	 	 	Contribution Base Amount	 	 	-5-	 
	 	 	Contributing Participant	 	 	-5-	 
	 	 	Contributory Benefit	 	 	-5-	 
	 	 	Contributory Service	 	 	-5-	 
	 	 	Deferred Vested Benefit	 	 	-5-	 
	 	 	Deferred Vested Termination Date	 	 	-5-	 
	 	 	Early Commencement Factor	 	 	-6-	 
	 	 	Early Retirement Benefit	 	 	-6-	 
	 	 	Early Retirement Date	 	 	-6-	 
	 	 	Earnings	 	 	-6-	 
	 	 	Effective Date	 	 	-7-	 

-i-

 

	 	 	 	 	 	 	 	 	 
	 	 	EF Participant	 	 	-7-	 
	 	 	Election Period	 	 	-7-	 
	 	 	Eligibility Service	 	 	-7-	 
	 	 	Eligible Employee	 	 	-7-	 
	 
	 	Eligible	 	Spouse	 	 	-8-	 
	 	 	Employer	 	 	-8-	 
	 	 	Employment Date	 	 	-9-	 
	 	 	ERISA	 	 	-9-	 
	 	 	Forfeitures	 	 	-9-	 
	 	 	Former Participant	 	 	-9-	 
	 	 	Goodyear Participant	 	 	-9-	 
	 	 	Goodyear Plan	 	 	-9-	 
	 	 	Highly Compensated Employee	 	 	-9-	 
	 	 	Hour of Service	 	 	-9-	 
	 	 	K&F Participant	 	 	-9-	 
	 	 	Late Retirement Benefit	 	 	-9-	 
	 	 	Late Retirement Date	 	 	-9-	 
	 	 	Normal Retirement Date	 	 	-9-	 
	 	 	Normal Retirement Benefit	 	 	-10-	 
	 	 	Option	 	 	-10-	 
	 	 	Participant	 	 	-10-	 
	 	 	Period of Severance	 	 	-10-	 
	 	 	Plan	 	 	-10-	 
	 	 	Plan Year	 	 	-10-	 
	 	 	Prior Plan	 	 	-10-	 
	 	 	Prior Plan Participant	 	 	-10-	 
	 	 	Proper Application	 	 	-10-	 
	 	 	QDRO	 	 	-10-	 
	 	 	QJSA	 	 	-10-	 
	 	 	QPSA	 	 	-10-	 
	 	 	Qualified Joint and Survivor Annuity	 	 	-10-	 
	 	 	Qualified Pre-Retirement Survivor Annuity	 	 	-11-	 
	 	 	Regular Survivor Benefit	 	 	-11-	 
	 	 	Required Beginning Date	 	 	-11-	 
	 	 	Retirement Date	 	 	-11-	 
	 	 	Severance from Service Date	 	 	-11-	 
	 	 	Social Security Wage Base	 	 	-11-	 
	 	 	Special Supplemental Non-Contributory Benefit	 	 	-11-	 
	 	 	Survivor	 	 	-11-	 
	 	 	Transition Survivor Benefit	 	 	-11-	 
	 	 	Trust Agreement	 	 	-11-	 

-ii-

 

	 	 	 	 	 	 	 	 	 
	 	 	Trust	 	 	-11-	 
	 	 	Trustee	 	 	-11-	 
	 	 	Vested Percentage	 	 	-11-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II. ADMINISTRATION	 	 	-12-	 
	 
	 	2.1	 	Committee’s Discretionary Power to Interpret and Administer the Plan	 	 	-12-	 
	 
	 	2.2	 	Rules of the Committee	 	 	-13-	 
	 
	 	2.3	 	Claims Procedure	 	 	-13-	 
	 
	 	2.4	 	QDRO Claim	 	 	-14-	 
	 
	 	2.5	 	Indemnification of Committee Participants	 	 	-15-	 
	 
	 	2.6	 	Power to Execute Plan and Other Documents	 	 	-15-	 
	 
	 	2.7	 	Conclusiveness of Records	 	 	-15-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III. ELIGIBILITY AND HOW TO CALCULATE SERVICE	 	 	-16-	 
	 
	 	3.1	 	When Participation Starts and Ends	 	 	-16-	 
	 
	 	3.2	 	How to Calculate Eligibility Service	 	 	-16-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV. VESTING AND FORFEITURES	 	 	-18-	 
	 
	 	4.1	 	Vesting	 	 	-18-	 
	 
	 	4.2	 	Forfeitures	 	 	-18-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V AMOUNT OF RETIREMENT BENEFIT	 	 	-19-	 
	 
	 	5.1	 	General Rules for Calculating Amount of Plan Benefits	 	 	-19-	 
	 
	 	5.2	 	The Different Plan Benefits	 	 	-19-	 
	 
	 	5.3	 	Annual Accrued Benefit	 	 	-19-	 
	 
	 	5.4	 	Special Section 401(a)(17) Provision Regarding Plan Benefits	 	 	-22-	 
	 
	 	5.5	 	Normal Retirement Benefit	 	 	-23-	 
	 
	 	5.6	 	Late Retirement Benefit	 	 	-23-	 
	 
	 	5.7	 	Early Retirement Benefit	 	 	-23-	 
	 
	 	5.8	 	Special Supplemental Non-Contributory Benefit	 	 	-24-	 
	 
	 	5.9	 	Deferred Vested Benefit	 	 	-25-	 
	 
	 	5.10	 	Co-ordination with Prior Plan	 	 	-26-	 
	 
	 	5.11	 	Effect of Deferred Payment	 	 	-26-	 
	 
	 	5.12	 	Reemployment After Receipt of Plan Benefits	 	 	-26-	 
	 
	 	5.13	 	Employment After Normal Retirement Date	 	 	-27-	 
	 
	 	5.14	 	Transition Survivor Benefit	 	 	-27-	 
	 
	 	5.15	 	Regular Survivor Benefit	 	 	-29-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI. PAYMENT OF RETIREMENT AND DEATH BENEFITS	 	 	-31-	 
	 
	 	6.1	 	How to Retire	 	 	-31-	 
	 
	 	6.2	 	Timing of Participant’s Benefits	 	 	-32-	 

-iii-

 

	 	 	 	 	 	 	 	 	 
	 
	 	6.3	 	Normal Form of Benefits	 	 	-34-	 
	 
	 	6.4	 	Notice and Election Period	 	 	-34-	 
	 
	 	6.5	 	Waiver and Spousal Consent Necessary for Optional Forms of Benefit	 	 	-35-	 
	 
	 	6.6	 	Optional Forms of Benefit	 	 	-37-	 
	 
	 	6.7	 	Qualified Pre-Retirement Survivor Annuity	 	 	-38-	 
	 
	 	6.8	 	Special Qualified Pre-Retirement Survivor Annuity for Non-Spouse Beneficiaries	 	 	-40-	 
	 
	 	6.9	 	Form of Benefit Fixed as of Annuity Starting Date	 	 	-41-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII. EMPLOYEE CONTRIBUTIONS	 	 	-42-	 
	 
	 	7.1	 	Period of Participation	 	 	-42-	 
	 
	 	7.2	 	Employee Contributions	 	 	-42-	 
	 
	 	7.3	 	Withdrawal of Contributions	 	 	-43-	 
	 
	 	7.4	 	Repayment of Contributions Previously Withdrawn	 	 	-44-	 
	 
	 	7.5	 	Return of Contributions in Event of Death	 	 	-44-	 
	 
	 	7.6	 	Additional Death Benefit	 	 	-45-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII. THE TRUST, FUNDING AND CONTRIBUTIONS	 	 	-46-	 
	 
	 	8.1	 	Employer Contributions to the Trust Fund	 	 	-46-	 
	 
	 	8.2	 	Employee Contributions to the Trust Fund	 	 	-46-	 
	 
	 	8.3	 	The Trust	 	 	-46-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX. AMENDMENT AND TERMINATION	 	 	-47-	 
	 
	 	9.1	 	Power to Amend Plan	 	 	-47-	 
	 
	 	9.2	 	Power to Terminate Plan	 	 	-47-	 
	 
	 	9.3	 	Allocation of Assets Upon Termination	 	 	-47-	 
	 
	 	9.4	 	Reversion to Employer	 	 	-48-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X. LIMITATION OF BENEFITS	 	 	-49-	 
	 
	 	10.1	 	Construction	 	 	-49-	 
	 
	 	10.2	 	Definitions	 	 	-49-	 
	 
	 	10.3	 	Limitation on Annual Benefits	 	 	-50-	 
	 
	 	10.4	 	Adjustments for Early or Late Payment	 	 	-50-	 
	 
	 	10.5	 	Conditional Exemption for Pensions Under $10,000	 	 	-51-	 
	 
	 	10.6	 	Participants with Fewer Than Ten Years of Service	 	 	-51-	 
	 
	 	10.7	 	Participants with Fewer Than Ten Years of Participation	 	 	-51-	 
	 
	 	10.8	 	Benefits Payable under More Than One Defined Benefit Plan	 	 	-52-	 
	 
	 	10.9	 	Participation in Defined Contribution Plan	 	 	-52-	 
	 
	 	10.10	 	Limitation Year	 	 	-54-	 
	 
	 	10.11	 	Protection of Current Accrued Benefit	 	 	-54-	 
	 
	 	10.12	 	Rules Regarding 25 Top-Paid Employees	 	 	-54-	 

-iv-

 

	 	 	 	 	 	 	 	 	 
	ARTICLE XI. GENERAL PROVISIONS	 	 	-56-	 
	 
	 	11.1	 	No Contract of Employment	 	 	-56-	 
	 
	 	11.2	 	Employer Not Liable for Plan Benefits	 	 	-56-	 
	 
	 	11.3	 	Exclusive Benefit and Return of Employer Contributions	 	 	-56-	 
	 
	 	11.4	 	Tax Withholding	 	 	-57-	 
	 
	 	11.5	 	Incompetency or Minority of Payee	 	 	-57-	 
	 
	 	11.6	 	Missing Payees	 	 	-57-	 
	 
	 	11.7	 	Alienation and QDROs	 	 	-58-	 
	 
	 	11.8	 	Notice to Committee, Elections	 	 	-59-	 
	 
	 	11.9	 	Merger or Transfer With Other Plans	 	 	-59-	 
	 
	 	11.10	 	Fiduciaries	 	 	-59-	 
	 
	 	11.11	 	Plans Shall Comply with Law; and Choice of Law	 	 	-59-	 
	 
	 	11.12	 	Qualified Military Service	 	 	-59-	 
	 
	 	11.13	 	Gender and Number	 	 	-60-	 
	 
	 	11.14	 	Headings of Sections and Articles	 	 	-60-	 
	 
	 	11.15	 	Illegality of Particular Provisions	 	 	-60-	 
	 
	 	11.16	 	Receipt and Release for Payments	 	 	-60-	 
	 
	 	11.17	 	Action by the Employer	 	 	-60-	 
	 
	 	11.18	 	Mistaken Payments	 	 	-60-	 
	 
	 	11.19	 	Participants and Beneficiaries Bound by the Plan	 	 	-61-	 
	 
	 	11.20	 	Direct Rollover Distributions to Other Plans or IRAs	 	 	-61-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XII. SPECIAL PROVISIONS FOR GOODYEAR PARTICIPANTS	 	 	-63-	 
	 
	 	12.1	 	Reductions for Goodyear Plan Benefits	 	 	-63-	 
	 
	 	12.2	 	Miscellaneous Provisions Regarding Goodyear Plan Participants	 	 	-63-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIII. “TOP-HEAVY” PROVISIONS	 	 	-64-	 
	 
	 	13.1	 	Applicable Plans Included in
Determination of “Top Heavy” Status	 	 	-64-	 
	 
	 	13.2	 	“Key Employee”	 	 	-64-	 
	 
	 	13.3	 	“Top Heavy” Test	 	 	-65-	 
	 
	 	13.4	 	Determination Dates	 	 	-65-	 
	 
	 	13.5	 	Add-Back of Prior Distributions	 	 	-66-	 
	 
	 	13.6	 	Former Employees Disregarded after Five Plan Years	 	 	-66-	 
	 
	 	13.7	 	Compliance with Code Section 416	 	 	-66-	 
	 
	 	13.8	 	Beneficiaries	 	 	-66-	 
	 
	 	13.9	 	Provisions Applicable in “Top
Heavy” Plan Years	 	 	-66-	 
	 
	 	13.10	 	Represented Employees	 	 	-68-	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIV. LEASED EMPLOYEES	 	 	-69-	 
	 
	 	14.1	 	Applicable Plans Included Definitions	 	 	-69-	 

-v-

 

	 	 	 	 	 	 	 	 	 
	 
	 	14.2	 	Treatment of Leased Employees	 	 	-69-	 
	 
	 	14.3	 	Exception for Employees Covered by Plans of Leasing Organization	 	 	-69-	 
	 
	 	14.4	 	Construction	 	 	-70-	 
	 
	 	 	 	 	 	 	 	 
	Supplement A	 	 	-71-	 

-vi-

 

K&F INDUSTRIES

RETIREMENT PLAN FOR SALARIED EMPLOYEES

INTRODUCTION

          This Plan was originally established effective May 1, 1989, as the K&F Industries Retirement
Plan for Salaried Employees (the “Plan”), as a spin-off of assets and liabilities from the Loral
Systems Group Retirement Plan for Salaried Employees.

          The Plan was established to provide retirement benefits to eligible employees, as a defined
benefit plan. It is intended to qualify under Code Section 401(a) and its trust fund is intended to
be tax-exempt under Code Section 501.

          The Plan has been restated as follows:

	 	(1)	 	Effective May 1, 1989, reflecting amendments made through January 1, 1990;
	 
	 	(2)	 	Effective May 1, 1989, reflecting amendments made through December 20, 1994; and
	 
	 	(3)	 	Effective January 1, 1997, reflecting amendments made through December 31, 2001.

          This restatement applies only to Participants who have an Hour of Service on or after January
1, 1997. The prior version of this Plan shall determine benefits for other Participants.

General Description

          Benefits under this Plan are attributable to Employer and elective employee contributions, and
are integrated with Social Security. Employee
contributions, although elective, are considered to be “mandatory” under Code Section 411(c)
because, under certain circumstances, enhanced Plan benefits can result from Employee
contributions.

          Benefits under the Plan are calculated according to a Participant’s Earnings (for Contributory
Benefit only) and Years of Service (measured using the elapsed time method) according to the
formulas in Article V, and vary according to the Employee’s location.

          The Plan provides for a subsidized early retirement benefit. There is no charge for a QPSA.

 

 

ARTICLE I. DEFINITIONS

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

“ABS Participant ” means a Participant whose Employer is Aircraft Braking Systems Corp.

“Actuarial Equivalent ” shall mean:

	 	(a)	 	A benefit of equal value based upon the Unisex Pension-1984 Mortality Table and an
interest rate of 6% per annum, compounded annually, except as provided further in this
definition.
	 
	 	(b)	 	Effective for lump sum distributions made on or after January 1, 2000, in
determining the present value of any vested accrued benefit under this Plan, the interest
rate used shall equal the annual rate of interest on 30-year Treasury securities as
specified by the Commissioner of Internal Revenue for the second calendar month preceding
the first day of the Plan Year during which the Annuity Starting Date occurs; and the
mortality assumption post-retirement will be the 1983 Group Annuity Mortality Table,
gender neutral, blended 50/50 Male/Female or such other mortality table as may be
required by the Code or applicable regulations. For lump sum distributions made prior to
January 1, 2000, the prior version of this Plan shall determine the actuarial assumptions
used for this purpose.

“Adjusted Earnings ” of an Eligible Employee shall mean an amount equal to his average
annual Earnings while an EF Participant for the 10-year period (or his entire period of service as
an EF Participant if less than 10-years) while he made contributions immediately prior to the
earliest of (i) his retirement or other termination of active employment, (ii) the last month for
which he made contributions under Article VII or (iii) if
Section 5.3(d)(1)(B) is applicable to him, January 1, 1992.

“Affiliate ” means any corporation, trade or business during any period when it is, along
with the Company, a member of a controlled group of corporations or a controlled group of trades or
businesses, as described in 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). Loral Corporation and its subsidiaries and affiliates shall be
considered to be an Affiliate prior to May 1, 1991 for employees hired prior to that date.

-2-

 

“Alternate Payee ” means any Eligible Spouse, former Eligible Spouse, child or other
dependent of a Participant who is recognized by a “qualified” court domestic relations order as
having a right to receive all, or a portion of, the benefits payable under the Plan with respect to
such Participant, as described in Code Section 414(p). The determination of whether a court order
is “qualified” shall be made in the sole discretion of the Committee.

“Annual Accrued Benefit ” is defined in Section 5.3.

“Annuity Starting Date ” shall mean:

	 	(a)	 	with respect to any lump sum or installment payment, the date as of which the
Participant is both (1) eligible to receive payments and (2) has completed his Proper
Application (if applicable).
	 
	 	(b)	 	with respect to any one of a series of payments over the life or life expectancy of
one or more distributees, the first date for which the benefit is paid, even if this date
is not the date of actual payment.
	 
	 	(c)	 	The term “Annuity Starting Date” shall be determined with respect to payments made
to the Participant, rather than with respect to any survivor benefit payments (excepting
only the QPSA).
	 
	 	(d)	 	The term “Annuity Starting Date” shall, in all events, be defined by Code
Regulation Section 1.401(a)-20.

“Base Amount ” of a Participant shall mean 90% of the average of the Social Security Wage
Base as in effect during the period of 10 years immediately prior to the earliest of (i) his
retirement or other termination of employment, (ii) the last month for which he made the
contributions under Article VII, or (iii) if Section is applicable to him, January 1, 1992.

“Basic Benefit ” for a Participant shall have the meaning set forth in Section 5.3.

“Beneficiary ” means a Participant’s designated beneficiary, under Plan procedures. As
required by the context of the Plan, “Beneficiaries” may also include Alternate Payees.

	 	(a)	 	The Beneficiary of any married Participant shall normally be his legally married
spouse, at the time of death (whether or not she or he is an Eligible Spouse). Married
Participants may designate someone other than a spouse as Beneficiary, only if the
designation includes the written consent of the Participant’s spouse, as set out in
Section 6.5. If these requirements are not met, then the designation of a non-spouse
Beneficiary is invalid. However, the Committee 

-3-

 

	 	 	 	may not require the spouse’s written
consent if it is established to the satisfaction of the Committee 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 before the Annuity
Starting Date. 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.

“Benefit Service” shall mean a Participant’s period of employment as an Eligible
Employee, during which he is being paid for a period in which he is working, which shall be
measured in whole years and fractions of a year in months. Any fraction of a month remaining after
aggregation shall be rounded to the nearest whole month. In addition, if an Eligible Employee has
an approved period of absence, whether paid or unpaid, including a period of layoff (as defined in
the written layoff policy of the Employer), the first twelve continuous months (twenty-four months
for K&F and ABS Participants) of such period shall count towards Benefit Service.

“Board ” or “Board of Directors” shall mean the Company’s Board of Directors.

“Class A Survivor ” is defined in Section 5.14.

“Class B Survivor ” is defined in Section 5.14.

“Class C Survivor ” is defined in Section 5.14.

“Code ” means the Internal Revenue Code of 1986, as amended from time to time, and all
appropriate regulations and administrative guidance.

-4-

 

“Committee ” shall mean the Pension Committee which administers the Plan in accordance with
Article II. As context requires, the word “Committee” shall refer to the Committee or its
delegates.

“Company ” means K&F Industries, Inc., a New York corporation, and any successor thereto
which adopts this Plan. The Company shall act by resolution of its Board of Directors.

“Contribution Base Amount ” of an Eligible Employee for any payroll period shall be 1/26th
of the Social Security Wage Base as in effect at the time he makes the contributions under Section
7.3.

“Contributing Participant ” means a Participant who, for a particular payroll period,
makes contributions to the Plan under Article VII.

“Contributory Benefit ” is the Plan benefit accrued with respect to the employee
contributions made under Article VII, as calculated under Section 5.3.

“Contributory Service ” shall mean, subject to Section 5.3(e), the portion of a
Participant’s Benefit Service during which he is a Contributing Participant.

“Deferred Vested Benefit ” is defined in Section 5.9.

“Deferred Vested Termination Date ” means:

	 	(a)	 	the first day of the month coincident with or next following the date that a
Participant terminates active employment. A Deferred Vested Termination Date will always
precede any date that might have been the Participant’s Retirement Date.
	 
	 	(b)	 	Generally, a Deferred Vested Termination Date will arise only with respect to a
Participant whose Vested Percentage is more than 0%.
However, a Contributing Participant who retains a Contributory Benefit may incur a
Deferred Vested Termination Date even if he has no Vested Percentage.
	 
	 	(c)	 	A Deferred Vested Termination Date will be the date as of which a Participant’s
Deferred Vested Benefit is calculated, under Article V.
	 
	 	(d)	 	A Deferred Vested Termination Date is not a “Retirement Date” per se. Accordingly,
if any benefit under any welfare plan is dependent upon “retirement,” then such a benefit
may not be 

-5-

 

	 	 	 	available to a Participant who terminates employment as of his Deferred Vested
Termination Date.

“Early Commencement Factor ” is described in Section 5.7.

“Early Retirement Benefit ” is described in Section 5.7.

“Early Retirement Date ” means the first day of the month coincident with or immediately
following the date the Participant:

	 	(a)	 	retires under the terms of the Plan;
	 
	 	(b)	 	has not reached his Normal Retirement Date;
	 
	 	(c)	 	is not receiving benefits under his Employer’s long term disability policy; and
	 
	 	(d)	 	has completed one of the following requirements:

	 	(1)	 	30 years of Eligibility Service; or
	 
	 	(2)	 	attained age 55 plus

	 	(A)	 	10 years of Eligibility Service; or
	 
	 	(B)	 	attained age plus years of
Eligibility Service equal
to at least 70.

“Earnings ” shall mean:

	 	(a)	 	the total cash remuneration actually paid by an Employer, including regular
earnings; commissions; overtime pay; bonuses; incentive compensation; elective
employee deferrals or contributions made under any qualified retirement plan; Code
Section 125 elective payroll deduction contributions; and lump sum vacation
allowances.
	 
	 	(b)	 	Any compensation that is accrued but not paid during the relevant Plan Year
shall be included only in the Plan Year when paid. The following items shall also be
excluded: any special allowances; distributions from any employer qualified
retirement or welfare plan; the execution or granting of stock options; imputed
income from life insurance; fringe benefits; employer 

-6-

 

	 	 	 	contributions made to any
welfare plan, or to any qualified retirement plan; any reimbursed expenses such as
relocation expenses; all severance pay and unemployment benefits.

	 	 	 	 	 	 	 	 	 
	 

	 	(c)
	 	 	(1	)	 	Effective as of January 1, 1994, in addition to other applicable limits set
out in this Plan, and notwithstanding any contrary Plan provisions, Earnings
accounted under this Plan shall be capped at $150,000 (adjusted for cost of
living, as provided by Code Section 401(a)(17)).
	 
	 

	 	 	 	 	(2	)	 	If a cost of living adjustment is
declared under the Code with respect to any calendar year, it
shall affect the Earnings accounted for the Plan Year that begins
on the January 1st of that same calendar year.
	 
	 

	 	 	 	 	(3	)	 	Generally, if Earnings paid for any
prior Plan Year are taken into account
in determining benefit accruals for the current
Plan Year, then the Earnings 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 Earnings under
Code Section 401(a)(17) shall not be reduced, prorated, or limited
because of his incomplete year of service.
	 
	 

	 	 	 	 	(5	)	 	However, if this Plan should be
amended to base its benefit allocation or accrual formula on
compensation paid for a period of less than a Plan Year, then
Earnings taken into account under this Plan shall be prorated, to
correspond to the period of time used in the Plan formula. For
example, if the Plan formula is based on compensation paid each
quarter, then the 401(a)(17) limit for that Plan Year shall be
divided by four, when applying the Plan benefit formula.

	 	(e)	 	To the extent that any Participant’s Earnings exceeded $150,000 prior to January 1,
1994, Section 5.4 shall apply to his Annual Accrued Benefit.

“Effective Date ” of this Plan shall mean May 1, 1989. Unless specified within the Plan,
all Plan provisions are effective as of the Effective Date. However, the terms of the Prior Plan,
or any earlier restatement of this Plan, shall apply with respect to periods before the Effective
Date.

“EF Participant ” means a Participant whose Employer is Engineered Fabrics Corp..

-7-

 

“Election Period ” refers to a period during which certain elections must be made
concerning the form of benefit paid under the Plan. It is described in Section 6.4.

“Eligibility Service ” shall have the meaning set forth in Article III.

“Eligible Employee ” shall mean any employee of an Employer, subject to the following:

	 	(a)	 	An Employer may, in its discretion, determine that employees employed in a
specified division, subdivision, plant, location or job classification of such
Employer shall not be Eligible Employees, provided that any such determination shall
not discriminate in favor of Highly Compensated Employees so as to prevent the Plan
from qualifying under section 401(a) of the Code;
	 
	 	(b)	 	If an employee is employed primarily to render services within the
jurisdiction of a union and his compensation, hours of work, or conditions of
employment are determined by collective bargaining with such union, he shall not be
an Eligible Employee unless the applicable collective bargaining agreement expressly
provides that he shall be eligible to participate in this Plan, in which event he
shall be entitled to participate in this Plan only to the extent and on the terms and
conditions specified in such collective bargaining agreement.
	 
	 	(c)	 	An employee shall not be an Eligible Employee if he is a nonresident alien;
and
	 
	 	(d)	 	An individual who performs services for an Employer under an agreement or
arrangement (which may be written, oral,
and/or evidenced by the Employer’s payroll practice) with such individual or
with any other organization that provides the services of such individual to
the Employer, pursuant to which such individual is treated as an independent
contractor or is otherwise treated as an individual ineligible for
participation in this Plan, shall not be an Eligible Employee irrespective of
whether he or she is treated as an employee of an Employer under common law
employment principles or pursuant to the provisions of section 414(m), 414(n)
or 414(o) of the Code.

“Eligible Spouse ” shall mean:

	 	(a)	 	A Participant’s legally married spouse. Further, with respect to a
spouse’s eligibility to receive a QPSA survivor benefit, an Eligible Spouse must have
been married to the Participant for at least one full year before the Participant’s
date of death.
	 
	 	(b)	 	Whether or not an individual is an Eligible Spouse shall in all events be
determined under Code Regulation section 1.401(a)-20.

-8-

 

“Employer ” shall mean the Company or any of its divisions, and any corporation, business
association, partnership or proprietorship or any division or unit, which shall be approved, by
appropriate action of the Board as a participating Employer under the Plan and which shall adopt
the terms and provisions of the Plan by appropriate action of its board of directors. Any Employer
which is not a corporation shall act by resolution of the board of directors of the Corporation of
which it is a part. Any Employer which is a corporation shall act by resolution of its Board of
Directors. As to any employee, at any time of reference, “Employer” shall mean his Employer. For
any period prior to May 1, 1989, “Employer” shall mean an Employer as defined in the Prior Plan.

“Employment Date ” means the first day of employment with an Employer, as determined by the
Employer’s procedures, and within its discretion.

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

“Forfeitures ” are defined in Section 4.3.

“Former Participant ” means:

	 	(a)	 	An individual who has ceased to be a Participant for any of the reasons set out in
Article III.
	 
	 	(b)	 	A Former Participant is ineligible to accrue further benefits under the Plan.

“Goodyear Participant ” means a Prior Plan Participant who was, prior to March 13, 1987, a
participant in the Goodyear Plan.

“Goodyear Plan ” shall mean The Goodyear Tire & Rubber Company Retirement Plan for Salaried
Employees, as in effect from time to time prior to March 13, 1987.

“Highly Compensated Employee ” shall mean for Plan Years beginning after December 31, 1996,
any employee (1) who during the Plan Year or the look-back year was a 5% owner as defined in Code
§416(i)(1); or (2) who for the look-back year had Earnings in excess of $80,000 as adjusted under
Code §415(d). The look-back year will be the 12 month period immediately preceding the Plan Year
for which the determination is being made.

“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 or any Affiliate.

“K&F Participant ” means a Participant whose Employer is K&F Industries, Inc.

-9-

 

“Late Retirement Benefit ” is defined in Section 5.6.

“Late Retirement Date ” means the first day of the month coincident with or next following
the date on which a Participant retires, under the terms of the Plan, after his Normal Retirement
Date.

“Normal Retirement Date ” shall mean the first day of the month coincident with or
immediately following the later of:

	 	(a)	 	an employee’s 65th birthday, or
	 
	 	(b)	 	the date an employee completes five years of Eligibility Service, or the fifth
anniversary of the date such individual became a Participant if earlier (provided that
such an employee has been in continuous Service during all five years).

“Normal Retirement Benefit ” is defined in Section 5.5.

“Option ” means Option A or Option B as defined in Section 6.6.

“Participant ” means any person who is participating in the Plan, under the terms of the
Plan, after meeting the eligibility requirements of Article III. Participant shall include ABS, EF
and K&F Participants.

“Period of Severance ” is defined in Section 3.3.

“Plan ” shall mean this K&F Industries Retirement Plan for Salaried Employees, as amended
from time to time, as well as the Trust Agreement.

“Plan Year ” shall mean a calendar year; provided, however, that the first Plan Year of the
Plan shall be the period commencing on May 1, 1989 and ending on December 31, 1989.

“Prior Plan ” shall collectively mean The Loral Systems
Group Retirement Plan for Salaried Employees, as in effect from time to time prior to May 1, 1989,
the Loral Corporation Pension Plan and the Goodyear Plan.

“Prior Plan Participant ” means an individual Participant who was participating in the
Prior Plan as a participant immediately prior to May 1, 1989 and who became an Eligible Employee on
May 1, 1989.

“Proper Application ” is defined in Section 6.1.

-10-

 

“QDRO ” is an abbreviation for “qualified domestic relations order,” defined in Section
11.7.

“QJSA ” is an abbreviation for “Qualified Joint and Survivor Annuity.”

“QPSA ” is an abbreviation for “Qualified Pre-Retirement Survivor Annuity.”

“Qualified Joint and Survivor Annuity ” means an annuity for the life of a Participant with
a survivor annuity for the life of his Eligible Spouse (provided the recipient was his Eligible
Spouse as of his Annuity Starting Date). The amount of the survivor annuity shall be 50% of the
amount payable during the lifetime of the Participant with a 5 year period certain (as described in
Section 6.3(b)). The QJSA shall be calculated to be the Actuarial Equivalent of a single life
annuity for the life of the Participant, as of his Normal Retirement Date, under the Plan. In all
events, a QJSA shall be as defined by Code Regulation Section 1.401(a)-20.

“Qualified Pre-Retirement Survivor Annuity ” means an annuity for the life of a Eligible
Spouse who survives a Participant, under the circumstances and in the amount described in Section
6.8. In all events a QPSA shall be defined by Code Regulation Section 1.401(a)-20.

“Regular Survivor Benefit ” is defined in Section 5.15.

“Required Beginning Date ” means the April 1 following the calendar year in which a
Participant attains age 70-1/2.

“Retirement Date ” means a Participant’s Normal, Early or Late Retirement Date, whichever
is applicable. A Deferred Vested Participant shall not have a Retirement Date, per se.
Accordingly, if any benefit under any welfare plan is conditioned upon “retirement,” then such a
benefit may not be available to a Participant who terminates employment as of his Deferred Vested
Termination Date.

“Severance from Service Date ” is defined in Section 3.3.

“Social Security Wage Base ” means, for any Plan Year, the maximum amount of a
Participant’s annual remuneration which may be treated as wages under Section 3121(a) of the
Federal Insurance Contributions Act for such year, indexed to the extent required by Code Section
401(l).

“Special Supplemental Non-Contributory Benefit ” is defined in Section 5.8.

“Survivor ” includes Class A, B, and C Survivors and is defined in Section 5.14.

“Transition Survivor Benefit ” is defined in Section 5.14.

“Trust Agreement ” means the separate agreement between the Company and Trustee concerning
the assets of this Plan. The Trust Agreement is fully a part of the Plan.

-11-

 

“Trust ” or “Trust Fund” means the fund held by the Trustee into which
contributions under the Plan will be paid by the Employer and Eligible Employees and out of which
benefits under the Plan will be paid.

“Trustee ” means the trustee(s) appointed under the Trust Agreement.

“Vested Percentage ” is defined in Section 4.1.

-12-

 

ARTICLE II. ADMINISTRATION

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

	 	(a)	 	Appointment. The Committee shall be appointed from time to time by
the Board to serve until the Board appoints successor members. Any member of the
Committee may resign by delivering his written resignation to the Board.
	 
	 	(b)	 	Role under ERISA. The Committee is the “named fiduciary” for
operation and administration of the Plan, and the “administrator” as those are terms
defined by ERISA. The Committee is designated as agent for service of legal process.
	 
	 	(c)	 	Committee establishes Plan procedures. The Committee and its
delegates shall from time to time establish rules and procedures for the
administration and interpretation of the Plan and the transaction of its business.
	 
	 	(d)	 	Role of Human Resource and Benefits Personnel. Employees of the
Employer who are human resources personnel or benefits representatives are the
Committee’s delegates and shall, under the authority of the Committee, perform the
routine administration of the Plan, such as distributing and collecting forms,
establishing Plan rules and procedures, and providing information about Plan
procedures.
	 
	 	(e)	 	Discretionary Power to Interpret Plan

	 	(1)	 	The Committee has complete
discretionary and final authority to (1) determine all questions
concerning eligibility, elections, contributions, and benefits
under the Plan, (2) construe all terms under the Plan, including
any uncertain terms, and (3) 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.
	 
	 	(2)	 	Information that concerns an
interpretation of the Plan or a discretionary determination, can
be properly provided only by the Committee itself, rather than any
delegate (other than legal counsel).
	 
	 	(3)	 	Should any individual receive oral or
written information concerning the Plan from an Employer
representative or a Committee delegate, which is contradicted by a
subsequent determination by the Committee, then the Committee’s
final determination shall control.

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	2.2	 	Rules of the Committee

	 	(a)	 	Any act which the Plan authorizes or requires the Committee to do may be
done by a majority of its members. The action of such majority, shall constitute the
action of the Committee and shall have the same effect for all purposes as if made by
all members of the Committee at the time in office. The Committee may act without
any writing that records its decisions, and need not document its meetings or
teleconferences. The Committee may also act through any authorized representative or
legal counsel.
	 
	 	(b)	 	The members of the Committee may authorize one or more of their number to
execute or deliver any instrument, make any payment or perform any other act which
the Plan authorizes or
requires the Committee to do.
	 
	 	(c)	 	The Committee may employ counsel and other agents and may procure such
clerical, accounting, actuarial and other services as they may require in carrying
out the provisions of the Plan. Legal counsel are authorized to act as the
Committee’s delegates in interpreting the Plan.
	 
	 	(d)	 	No member of the Committee shall receive any compensation for his services
as such. All expenses of administering the Plan, including, but not limited to, fees
of accountants, counsel, actuaries or any other advisors or experts hired by the
Committee shall be paid from the Trust Fund, except to the extent paid by the
Employer.
	 
	 	(e)	 	Each member of the Committee may delegate Committee responsibilities among
the Employer directors, officers, or employees. The expenses of such experts shall
be paid by the Trust Fund to the extent that they are not paid by an Employer.

	2.3	 	Claims Procedure 

	 	(a)	 	The Committee shall determine Participants and Beneficiaries’ rights to
benefits under the Plan. In the event that a Participant or Beneficiary disagrees
with 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;

-14-

 

	 	(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 (if applicable); and
	 
	 	(4)	 	Appropriate information as to the
steps to be taken if the claimant wishes the Committee to revise
the initial denial. 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.
	 
	 	(5)	 	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 60 days after the date the request for review was received, on which the
Committee will notify the claimant of its decision, which shall be no more than 120
days after the date the request for review was received.
	 
	 	(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, within
the specified deadlines, before legal recourse of any type is sought.

	2.4	 	QDRO Claim 

          Claims relating to or affected by a domestic relations order (as defined by Code Section
414(p)) or draft order shall be determined under the Committee’s procedures concerning domestic

-15-

 

relations orders. The claims procedure described in the preceding section shall not apply to any
such domestic relations order claim.

	2.5	 	Indemnification of Committee Participants 

          To the fullest extent permitted by law, the Employer agrees to indemnify, to defend, and hold
harmless the members of the Committee and its delegates, 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 and its delegates to cover any of their
potential liabilities with regard to the Plan and Trust.

	2.6	 	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.

	2.7	 	Conclusiveness of Records

          In administering the Plan, the Committee may conclusively rely upon the Employer’s payroll and
personnel records maintained in the ordinary course of business.

-16-

 

ARTICLE III. ELIGIBILITY AND HOW TO CALCULATE SERVICE

	 	 	3.1 When Participation Starts and Ends 

	 	(a)	 	Participants before 1997. Each Eligible Employee on January 1,
1997 who was a Participant on the preceding day shall continue to be a Participant of
the Plan.
	 
	 	(b)	 	General rule of participation.

	 	(1)	 	Participation in Basic
Benefits. Each Eligible Employee not referred to in
Subsection (a) shall become a Plan Participant on his Employment
Date.
	 
	 	(2)	 	Participation in Contributory
Benefits. Each Eligible Employee not referred to in
Subsection (a) shall become a Contributing Participant on the
first day of any month when he meets each of the following
requirements:

	 	(i)	 	He has completed six months of Eligibility
Service; and
	 
	 	(ii)	 	makes contributions pursuant to Article VII.

	 	(c)	 	End of participation. A Participant ceases to be a Participant and
becomes a Former Participant when he terminates his
employment (as determined within the sole discretion of the Employer) for any
reason.
	 
	 	(d)	 	Becoming a Participant through change in status. An individual who
otherwise satisfies the requirements of this Section 3.1 but is not an Eligible
Employee shall become a Participant on the day he subsequently becomes an Eligible
Employee.
	 
	 	(e)	 	Re-entry into the Plan. A Former Participant shall become a
Participant as of the first day he again becomes an Eligible Employee.

	 	 	3.2 How to Calculate Eligibility Service 

	 	(a)	 	Eligibility Service shall be the aggregate of the following (applied without duplication):
	 
	 		 	(1) Each period from an employee’s Date of Employment (or Reemployment Date) to his next
Severance Date;

-17-

 

	 	(2)	 	If an employee performs an Hour of Service within twelve (12) months of
a Severance Date, the period from such Severance Date to such Hour of Service,
except that; and
	 
	 	(3)	 	In the case of an employee who leaves employment to enter
service with the Armed Forces of the United States, the period of such
military service, provided that the employee resumes employment with an
Employer or Affiliate within the period during which his reemployment rights
are protected by applicable law.

Notwithstanding the foregoing, no employee shall receive more than 24 months of Eligibility Service
for a period in which he remains continuously absent from service (with or without pay).

	 	(b)	 	Definitions. For purposes of this Article III, the following terms
shall have the designated meaning:

	 	(c)	 	Date of Employment. The first day on which an
employee completes an Hour of Service during the employee’s most recent
period of service with an Employer or Affiliate.

	 	(1)	 	Severance Date. The earlier of:
	 
	 		 	(A) The date on which an employee quits, retires, is discharged or dies; or
	 
	 		 	(B) The first anniversary (second anniversary for K&F
and ABS Participants) of the first date of a period in which an
employee remains continuously absent from service (with or without pay)
for any approved reason (such as vacation, holiday, sickness,
disability, leave of absence, or layoff) other than quit, retirement,
discharge or death.

	 	(d)	 	Eligibility Service shall be credited for service credited under the Prior
Plan if the employee was (1) an active Eligible Employee under the Prior Plan on
April 30, 1989 and, (2) was transferred as an Eligible Employee under this Plan on or
around May 1, 1989.
	 
	 	(e)	 	The Eligibility Service and Benefit Service of a Participant who has not
completed five years of Eligibility Service shall be forfeited upon his termination
of employment but shall be reinstated upon his rehire for any reason.

-18-

 

ARTICLE IV. VESTING AND FORFEITURES

	4.1	 	 Vesting 

	 	(a)	 	Full vesting at Normal Retirement Date. Upon attainment of his
Normal Retirement Date, (while in active service) a Participant’s rights in his Basic
and Contributory Benefit shall be non-forfeitable.
	 
	 	(b)	 	General Vesting Schedule.

A Participant’s nonforfeitable interest in his Basic and Contributory Benefit is
his Vested Percentage of such Benefit. A Participant’s Vested Percentage is based
on his completed Years of Eligibility Service as follows:

	 	 	 	 	 
	Completed Years of	 	 
	Eligibility Service	 	Vested Percentage
	Less than 5
	 	 	0	%
	5 or more
	 	 	100	%

	4.2	 	Forfeitures

          Forfeitures shall arise if any Participant whose Vested Percentage is not 100% incurs a
Severance from Service Date. Such unvested accrued Plan benefits shall then be forfeited, and
these Forfeitures shall be applied to reduce future Employer contributions and to pay Plan
expenses. Forfeitures shall not be used to increase Plan benefits.

-19-

 

ARTICLE V. AMOUNT OF RETIREMENT BENEFIT

	5.1	 	General Rules for Calculating Amount of Plan Benefits 

	 	(a)	 	Must be vested. A Participant shall be paid only those accrued
Plan benefits in which he is vested.
	 
	 	(b)	 	This Article limited by Article X. The provisions of this Article
shall be subject to the limitations of Article X.
	 
	 	(c)	 	All terms of this Article apply. Any Plan benefit calculation shall
be subject to all the terms of this Article and the Plan.

	5.2	 	The Different Plan Benefits 

          A Participant’s Annual Accrued Benefit shall be paid as one of the following:

	 	(a)	 	Normal Retirement Benefit. A Participant will be eligible to
receive his Normal Retirement Benefit if he retires under the Plan as of his Normal
Retirement Date.
	 
	 	(b)	 	Late Retirement Benefit. A Participant will be eligible to receive
his Late Retirement Benefit if he retires under the Plan as of his Late Retirement
Date (and continues to accrue Eligibility Service after his Normal Retirement Date).
	 
	 	(c)	 	Early Retirement Benefit. A Participant will be eligible to
receive his Early Retirement Benefit if he retires under the Plan as of his Early
Retirement Date.
	 
	 	(d)	 	Deferred Vested Benefit. A Participant will be eligible to receive
his Deferred Vested Benefit if he terminates employment under the Plan as of his
Deferred Vested Termination Date.

	5.3	 	Annual Accrued Benefit 

	 	(a)	 	Formula for Accrued Benefit.

               (1) Subject to the provisions of this Article, the annual amount of a Participant’s “Annual
Accrued Benefit” shall equal his Basic Benefit and, if he is a Contributing Participant, his
Contributory Benefit.

-20-

 

	 	(2)	 	The Annual Accrued Benefit shall not
include any Special Supplemental Non-Contributory Benefit,
Transition Survivor Benefit, or Regular Survivor Benefit.

	 	(b)	 	Basic Benefit. The annual Basic Benefit with respect to all Participants is the sum
of (1) and (2) below:

	 	(1)	 	$240.00 multiplied by his Benefit
Service prior to January 1, 1990.
	 
	 	(2)	 	For Benefit Service after December
31, 1989, an amount equal to the greater of (A) or (B).

	 	(A)	 	0.7% multiplied by his Earnings for each year
of Benefit Service up to the Social Security
Wage Base for such year.
	 
	 	(B)	 	$288.00 multiplied by his Benefit Service.

	 	(c)	 	Contributory Benefit for EF Participants. The annual Contributory
Benefit for EF Participants shall equal the greater of (1) or (2).

	 	(1)	 	60% of the aggregate contributions
made by the Participant under the Plan and the Prior Plan (which
were not withdrawn).
	 
	 	(2)	 	An amount equal to the product of

	 	(A)	 	His Adjusted
Earnings in excess of his Base Amount, multiplied by
	 
	 	(B)	 	2.4% for each of
his first 10 years of Contributory Service, plus
	 
	 	 	 	1.8% for each of his next 10 years of Contributory Service, plus
	 
	 	 	 	1.2% for each of his next 10 years of Contributory Service, plus
	 
	 	 	 	0.6% for each year of Contributory Service in excess of 30;

subject, however, to a maximum of 2.2% for each year of Contributory Service
if he has less than 15 years of Contributory Service.

-21-

 

	 	(d)	 	Contributory Benefit for K&F and ABS Participants. The
Contributory Benefit for K&F and ABS Participants shall be the sum of (1) and
(2).

	 	(1)	 	An amount equal to the greater of (A)
or (B).

	 	(A)	 	60% of the aggregate contributions made by the
Participant prior to January 1, 1990 under the
Plan and the Prior Plan (which were not
withdrawn).
	 
	 	(B)	 	For Contributory Service prior to January 1,
1990:

(i) His Adjusted Earnings in excess of his Base Amount,
multiplied by

(ii) 2.4% for each of his first 10 Years of Contributory Service, plus

1.8% for each of his next 10 Years of Contributory
Service, plus

1.2% for each of his next 10 Years of Contributory
Service, plus

0.6% for each Year of Contributory Service in excess
of 30;

subject, however, to a maximum of 2.2% for
each year of Contributory Service if he has less than 15
Years of Contributory Service.

	 	(2)	 	An amount equal to the greater of (A)
or (B).

	 	(A)	 	60% of the aggregate contributions made by him
under the Plan after December 31, 1989.
	 
	 	(B)	 	For each year of Contributory Service after
December 31, 1989:

	 	(i)	 	If such year is prior to the year in which the Participant completes 15 years of Contributory
Service, 1.05% of his Earnings for such year over $19,800 and up to the Social
Security Wage Base for such year, plus
2.25% of his Earnings for such year over the Social Security Wage Base for such year.

-22-

 

	 	(ii)	 	Beginning January 1 of the calendar year in which he completes 15 years of Contributory Service or any
subsequent year, 1.35% of his Earnings for each such calendar year of Contributory Service over $19,800 and
up to the Social Security Wage Base for such year, plus 2.65% of his Earnings for such year
over the Social Security Wage Base for
such year.

	 	(e)	 	Special Adjustments to Contributory Benefit Service. A
Participant’s Contributory Service shall be increased by the difference between his
Benefit Service and his Contributory Service if such Participant (i) made
contributions under Article III during the entire period time he was eligible to do
so, (ii) did not withdraw such contributions at any time, and (iii) has not made
contributions under any other defined benefit plan of an Employer or Affiliate
(whether or not qualified).
	 
	 	(f)	 	Correlation with Early Retirement Benefit. In no event, however,
shall the Annual Accrued Benefit as of a Participant’s Normal Retirement Date be less
than the amount of any Early Retirement Benefit, without regard to any early
retirement subsidy, to which he would have been entitled under the Plan, prior to his
Normal Retirement Date.
	 
	 	(g)	 	Effect of withdrawals. In the case of an employee who has
completely withdrawn his contributions and such contributions are not repaid, no
Contributory Benefit or other benefit shall be paid to the employee as provided in
Article V.

	5.4	 	Special Section 401(a)(17) Provision Regarding Plan Benefits 

	 	(a)	 	Application. This Section shall apply only to those Participants
whose current accrued Plan benefit as of or after January 1, 1994 is based on
Earnings (1) incurred at any time
prior to January 1, 1994, and (2) in excess of $150,000.
	 
	 	(b)	 	Calculation of accrued Plan benefit. Unless otherwise provided
under the Plan, each such Participant’s accrued Plan benefit shall be the greater of
(1) or (2):

	 	(1)	 	the Participant’s accrued Plan
benefit determined under the Plan, as amended effective on or
after January 1, 1994, as applied with respect to his total
Service (credited under the Plan for accrual purposes) performed
as of such a date, or
	 
	 	(2)	 	The sum of:

	 	(A)	 	the Participants’s accrued Plan benefit as of
December 31, 1993, frozen as provided in Code
Regulation Section 1.401(a)(4)-13, and

-23-

 

	 	(B)	 	the Participant’s accrued Plan benefit
determined under the Plan, as amended effective
on or after
January 1, 1994, as applied with respect to his
service (credited under the Plan for accrual
purposes) performed on or after January 1, 1994.

	5.5	 	Normal Retirement Benefit 

          The amount of a Participant’s Normal Retirement Benefit under the Plan shall equal his vested
Annual Accrued Benefit, payable monthly beginning as of his Normal Retirement Date.

	5.6	 	Late Retirement Benefit

          A Participant’s Late Retirement Benefit under the Plan shall generally equal his Annual
Accrued Benefit payable monthly beginning as of his Late Retirement Date.

	5.7	 	Early Retirement Benefit 

	 	(a)	 	Timing affects amount of benefit.

	 	(1)	 	A Participant’s Early Retirement
Benefit will be affected by the exact date of his Annuity Starting
Date.
	 
	 	(2)	 	Generally, the earlier that his
Annuity Starting Date precedes his Normal Retirement
Date, the lower a Participant’s monthly Early
Retirement Benefit payment will be.

	 	(b)	 	Formula for Early Retirement Benefit.

	 	(1)	 	A Participant’s Early Retirement
Benefit shall equal his vested Annual Accrued Benefit at his Early
Retirement Date multiplied by his Early Commencement Factor.
	 
	 	(2)	 	However, no Early Commencement Factor
shall be applied (a) to the Basic Benefit of a Participant who has
completed at least 30 Years of Eligibility Service, or (b) to
Basic or Contributory Benefits of a Participant who has attained
age 62.
	 
	 	(3)	 	Early Commencement Factor for EF Participants. The
Early Commencement Factor for an EF Participant is 4/10% for each calendar
month by which his Annuity Starting Date precedes the month in which his 62nd
birthday occurs.

-24-

 

	 	(4)	 	Early Commencement Factor for K&F and ABS Participants.

	 	(A)	 	The Early
Commencement Factor for a K&F and ABS Participants is
4/10% for each calendar month by which his Annuity
Starting Date precedes the month in which his 62nd
birthday occurs, for service performed up to
and including December 31, 1989.
	 
	 	(B)	 	The Early Commencement Factor for K&F and ABS Participants shall be determined under the
chart below for service performed on or after January 1, 1990.

	 	 	 	 	 
	Age at	 	Early
	Annuity	 	Commencement
	Starting Date	 	Factor
	61
	 	 	90.8	%
	60
	 	 	82.7	%
	59
	 	 	75.4	%
	58
	 	 	68.9	%
	57
	 	 	63.1	%
	56
	 	 	57.8	%
	55
	 	 	53.1	%

The Early Commencement Factor described above shall be computed in accordance with
the schedule above (computed to the nearest 1/12th of a year) for each calendar
month by which a Participant’s Annuity Starting Date precedes his 62nd birthday.

	5.8	 	Special Supplemental Non-Contributory Benefit 

	 	(a)	 	A Participant who (i) is eligible for an Early Retirement Benefit under
Section 5.2, and (ii) has a Retirement Date which falls after he has completed at
least 30 Years of Eligibility Service and has attained age 55 but not age 62, shall
be eligible for a Special Supplemental Non-Contributory Benefit as described in this
Section. Subject to reduction as provided in Sections 5.14, and 5.15 and Article X,
the monthly amount of the supplemental benefit under this Section
shall be:

-25-

 

Age

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Years of Benefit	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Service	 	55	 	56	 	57	 	58	 	59	 	60	 	61
	30
	 	 	$  90	 	 	$	100	 	 	$	110	 	 	$	120	 	 	$	130	 	 	$	140	 	 	$	150	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	31
	 	 	99	 	 	 	109	 	 	 	119	 	 	 	129	 	 	 	139	 	 	 	149	 	 	 	159	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	32
	 	 	108	 	 	 	118	 	 	 	128	 	 	 	138	 	 	 	148	 	 	 	158	 	 	 	168	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	33
	 	 	117	 	 	 	127	 	 	 	137	 	 	 	147	 	 	 	157	 	 	 	167	 	 	 	177	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	34
	 	 	126	 	 	 	136	 	 	 	146	 	 	 	156	 	 	 	166	 	 	 	176	 	 	 	186	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	35
	 	 	135	 	 	 	145	 	 	 	155	 	 	 	165	 	 	 	175	 	 	 	185	 	 	 	195	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	36
	 	 	144	 	 	 	154	 	 	 	164	 	 	 	174	 	 	 	184	 	 	 	194	 	 	 	204	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	37
	 	 	153	 	 	 	163	 	 	 	173	 	 	 	183	 	 	 	193	 	 	 	203	 	 	 	213	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	38
	 	 	162	 	 	 	172	 	 	 	182	 	 	 	192	 	 	 	202	 	 	 	212	 	 	 	222	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	39
	 	 	171	 	 	 	181	 	 	 	191	 	 	 	201	 	 	 	211	 	 	 	221	 	 	 	231	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	40
	 	 	 	 	 	 	190	 	 	 	200	 	 	 	210	 	 	 	220	 	 	 	230	 	 	 	240	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	41
	 	 	 	 	 	 	 	 	 	 	209	 	 	 	219	 	 	 	229	 	 	 	239	 	 	 	249	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	42
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	228	 	 	 	238	 	 	 	248	 	 	 	258	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	43
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	247	 	 	 	257	 	 	 	267	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	44
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	266	 	 	 	276	 

	 	(b)	 	The Special Supplemental Non-Contributory Benefit shall be paid only to the
eligible Participant, and not to his Beneficiary.

	5.9	 	Deferred Vested Benefit

	 	(a)	 	If a Participant terminates employment on his Deferred Vested Termination
Date, and his Annuity Starting Date is on or after his Normal Retirement Date, the
amount of his Deferred Vested Benefit under the Plan shall equal his Annual Accrued
Benefit as actuarially increased to his Deferred Vested Termination Date.

-26-

 

	 	(b)	 	If a Participant’s Vested Percentage is 0%, and his Annuity Starting Date
is on or after his Normal Retirement Date, the amount of his Deferred Vested Benefit
under the Plan shall equal his accrued benefit attributable to employee contributions
(as determined in Code Section 411(c)(2)).
	 
	 	(c)	 	If a Participant’s Annuity Starting Date is prior to his Normal Retirement
Date, the amount of his Deferred Vested Benefit shall equal the amount determined in
paragraph (a) or (b) of this Section, whichever is applicable, multiplied by his
Early Commencement Factor as determined in Section 5.7.
	 
	 	(d)	 	If any benefit under any welfare plan maintained by an Employer or
Affiliate is dependent on “retirement” under this Plan, then the receipt of a
Deferred Vested Benefit shall not constitute “retirement.”

	5.10	 	Co-ordination with Prior Plan 

	 	(a)	 	Any benefit being paid by the Loral Systems Group Retirement Plan for
Salaried Employees (the “LSG Plan”) immediately prior to the Effective Date shall
continue to be paid in the same amount and form of payment under this Plan on and
after the Effective Date.
	 
	 	(b)	 	Any Former Participant with a Deferred Vested Benefit due under the LSG
Plan immediately prior to the Effective Date shall be paid under this Plan in
accordance with the provisions of the LSG Plan as in effect on the date of the Former
Participant’s Severance from Service Date.

	5.11	 	Effect of Deferred Payment 

          If a Participant or Former Participant who was eligible to retire under this Plan has failed
to make a Proper Application for his Plan Benefit, so that his payment commencement date falls
after the date he terminates employment, he shall receive, in a lump sum, an amount equal to all
payments that would have been made (but were not made), due to the delay. Similarly, a
retroactive, lump sum payment will be made if the amount of the Plan benefit cannot be immediately
ascertained by the Committee or its delegates, or if the payee cannot be immediately located.
However, there shall be no actuarial adjustment made, under this Section.

-27-

 

	5.12	 	Reemployment After Receipt of Plan Benefits

	 	(a)	 	If a Former Participant who is
receiving a Plan benefit becomes
re-employed by an Employer or an
Affiliate, the payment of his Plan
benefits shall immediately cease.
	 
	 	(b)	 	Upon the subsequent termination of employment of a Participant who was
eligible for a Retirement Pension upon his prior termination of employment (whether
or not payment of such Retirement Pension had commenced), the Participant’s
Retirement Pension shall be redetermined in accordance with the provisions of this
Plan applicable to him as of his subsequent termination of employment, as if no prior
benefit payments had been made, and his benefits as so redetermined shall then be
reduced by the Actuarial Equivalent of the benefit payments, if any, previously made
to such Participant (a) prior to his Normal Retirement Date, or (b) in a lump sum.
	 
	 	(c)	 	Should such a suspension permitted under this Section not take place, through administrative
error or any other reason, then the amounts which were paid but which were also suspendible
may be offset from future Plan benefits. Offsets may also be taken against any survivor
benefits, with respect to the Participant.
	 
	 	(d)	 	No suspension of benefits under this Section may take place unless proper
notice is sent to the individual during the calendar month of the suspension, under
ERISA.
	 
	 	(e)	 	Plan payments to the individual shall recommence, generally within four
months after his period of reemployment has ended, provided he has made Proper
Application (with 90 days advance notice) for their recommencement.
	 
	 	(f)	 	The provisions of this Section 5.12 shall be subject to Section  5.13.

	5.13	 	Employment After Normal Retirement Date .

          A benefit otherwise payable for any month beginning on or after a Participant’s Normal
Retirement Date may be permanently suspended for any such month by reason of the application of
Section 5.12 (or Article VI insofar as it provides that a Participant’s benefit shall not begin until
after his termination of employment) only if within such month the Participant completed forty (40)
or more Hours of Service. (1) A benefit otherwise payable for any month beginning on or after a
Participant’s Normal Retirement Date which cannot be permanently suspended shall, in the discretion
of the Committee, either be paid during or as soon as practicable after such month, or the
Actuarial Equivalent thereof shall be paid to the Participant after his termination of employment.
However, the actuarial equivalent of any benefit which could otherwise be permanently suspended
pursuant to the rules of this Section but which is attributable to employment after the
Participant’s Required Beginning Date shall be

-28-

 

added to the benefit payable to the Participant
after his termination of employment. Notwithstanding the foregoing, such actuarial increase shall
be reduced (but not below zero) by any increase in benefits earned by the Participant after his
Required Beginning Date.

	5.14	 	Transition Survivor Benefit 

          If a Participant with 5 years of Eligibility Service dies while actively in the employ of his
Employer or Affiliate, and before retirement under the Plan or other termination of employment
regardless of his period of Eligibility Service, a Transition Survivor Benefit shall be paid to his
qualified Survivor or Survivors in accordance with the provisions of this Section. A Transition
Survivor Benefit shall consist of payments for each of the first 24 months immediately following
the Participant’s death; provided, however, that notwithstanding anything to the contrary contained
herein, no Transition
Survivor Benefit shall be paid for any month unless there is at least one Survivor living on the
first day of such month, and no Transition Survivor benefit shall be paid for any month with
respect to which a Regular Survivor benefit is payable or a Qualified Pre-retirement Survivor
Annuity is payable. The Transition Survivor Benefit is not a part of, or derived from, a
Participant’s Annual Accrued Benefit.

	 	(a)	 	Amount. The amount of the monthly Transition Survivor Benefit shall be
$400 for any month in which there is only one Survivor of the deceased
Participant eligible to receive such benefit. For any month in which there are
two or more Survivors of the deceased Participant eligible for a Transition
Survivor Benefit, the amount of benefit payable hereunder to each such Survivor
for such month shall be a fraction of the benefit that would be paid to him as
a sole Survivor, the numerator of such fraction being one and the denominator
of such fraction being a number equal to the total number of all Survivors who
are eligible for a transition survivor benefit (including those Survivors who
would be eligible for a Transition Survivor Benefit but for their eligibility
for federal Social Security benefits). With regard to ABS Participants, no
monthly Transition Survivor Benefit, however, shall be paid for any month after
the Survivor attains age 62, or for any month for which the Survivor is
eligible for an unreduced old-age, disability, widow’s, or widower’s benefit
under the federal Social Security Act as then in effect.
	 
	 	(b)	 	Payment. The first monthly Transition Survivor Benefit is payable
on the first day of the first month following the Participant’s death. Thereafter, a
monthly Transition Survivor Benefit is payable on the first day of each of the next
23 months; but if on the first day of any month after the Participant’s death no
person then living qualifies as his Survivor, no such benefit is payable for that
month or any subsequent month. In no event shall any Transition Survivor Benefit be
payable for any month after the 24th month next following the date of the
Participant’s death.
	 
	 	(c)	 	Classification of Survivors. Survivors are classified and
defined as follows:

-29-

 

“Class A Survivor” means the Participant’s spouse, whether or not
remarried, but only if married to the Participant (1) for at least a year
immediately prior to the Participant’s death and (2) as of his Annuity Starting
Date.

“Class B Survivor” means the Participant’s child who, at the Participant’s
death and at the time a monthly transition survivor benefit first becomes payable
to such child, is both unmarried and either (A) under 21 years of age, (B) at
least age 21 but under age 25, or (C) totally and permanently disabled (as
determined by the Committee) at any age over 21; provided, however, that a child
under clause (B) or (C) must have been legally residing with and dependent upon
the Participant at the time of his death. A child ceases to be a Class B Survivor
upon marrying or, if not totally and permanently disabled, upon reaching his 25th
birthday. To qualify as the Participant’s child, the child must be one of the
following:

	 	(1)	 	the Participant’s own child born
prior to the first day of the month following the Participant’s
death,
	 
	 	(2)	 	the Participant’s legally adopted child or a child with respect to whom he had initiated
legal adoption proceedings which were terminated by his death, or
	 
	 	(3)	 	the Participant’s step-child whose
primary residence was with him at the time of his death.

“Class C Survivor” means the Participant’s parent for whom he had, during
the calendar year immediately preceding his death, provided at least 50% of such
parent’s support, if such parent was

	 	(1)	 	the Participant’s father or mother by blood relationship,
or
	 
	 	(2)	 	the Participant’s adopting parent.

	 	(d)	 	Qualification of Survivors. The Survivors entitled to each monthly
Transition Survivor Benefit that becomes payable under this Section shall be
determined as follows:

	 	(1)	 	the Participant’s Class A Survivor
who is living on the first day of a month shall be entitled to the
Transition Survivor Benefit payable for such month;
	 
	 	(2)	 	if the Participant’s Class A Survivor
is not then living on the first day of a month, persons who
qualify on that day as his Class B Survivors, excluding any then
deceased, shall be entitled to the Transition Survivor Benefit
payable for that month; and

-30-

 

	 	(3)	 	if the Participant’s Class A Survivor
is not living on the first day of a month and no living person
qualifies on that day as the Participant’s Class B Survivor,
persons who qualify on that day as the Participant’s Class C
Survivors, excluding any then deceased, shall be entitled to the
Transition Survivor Benefit payable for that month.

	5.15	 	Regular Survivor Benefit 

          If a Participant who has completed at least 10 years of Eligibility Service dies while
actively in the employ of an Employer or Affiliate after attaining age 45, a monthly Regular
Survivor Benefit shall be paid to his surviving Eligible Spouse in accordance with the provisions
of this Section. For purposes hereof, a Participant’s surviving Eligible Spouse shall mean only a
Class A Survivor as defined in the preceding Section.

	 	(a)	 	Amount. The monthly amount of the Regular Survivor
Benefit shall be equal to the monthly payment which the surviving Eligible
Spouse would have otherwise received if the Participant had retired on the date
prior to his death and if, the Participant had elected Option A under Section
6.6 and had designated the maximum amount of monthly payments for the surviving
Eligible Spouse which is permitted under Option A; provided, however, that the
portion of such amount which is determined with reference to the Basic Benefit
formula set forth in Section 5.3 shall be not less than $400 per month.
	 
	 	(b)	 	Payment. Payment of the Regular Survivor Benefit shall commence
during the month next following the month in which the death of the Participant
occurs. Monthly payments of such benefit shall continue until the death of the
surviving Eligible Spouse, with the last monthly payment to be made for the month of
death.

	5.16	 	Monthly Payments.

          All payments payable under this Plan in the form of an annuity (as opposed to a lump sum)
shall be payable in monthly installments.

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ARTICLE VI. PAYMENT OF RETIREMENT AND DEATH BENEFITS

	6.1	 	How to Retire 

	 	(a)	 	General rules. Except as provided in the next Section, no Plan
benefit shall be paid unless Proper Application is made to the Committee.
	 
	 	(b)	 	Eligibility for Benefits. Each Participant or Beneficiary will be
eligible to receive a Plan benefit only when:

	 	(1)	 	the Participant is vested in an
accrued Plan benefit, under Article IV,
	 
	 	(2)	 	the Participant has terminated his
employment with the Employer and all Affiliates, under each such
Employer’s procedures, and
	 
	 	(3)	 	the payee has met all the
requirements of this Article, particularly those described in the
next paragraph.

	 	(c)	 	Making “Proper Application” — required forms.

	 	(1)	 	Retirement and death benefits will be
paid only after “Proper Application” has been made. For all
purposes under this Plan, the term “Proper Application” shall mean
making any election, granting any consent, giving any notice or
information, and making any communication whatsoever to the
Committee or its delegates, in compliance with all Plan
procedures, on forms provided by the Committee,
and providing all information required by the
Committee. A Proper Application will be deemed
to have been made only if it is properly
completed, as determined by the Committee.

	 	(d)	 	Advance notice to Committee necessary.

	 	(1)	 	Generally, at least 30 days advance
notice must be made to the Committee, in order to make a Proper
Application to elect any particular Retirement Date.
	 
	 	(2)	 	However, notwithstanding the
preceding paragraph, if a Participant’s Retirement Date would
precede his Normal Retirement Date, then he may make Proper
Application to elect such a Retirement Date only by giving the
Committee 60 day’s advance notice of his election.

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	6.2	 	Timing of Participant’s Benefits

	 	(a)	 	General rules. Generally, a
Participant’s Plan benefit will be
paid, under this Article, as soon as
is feasible after the Retirement
Date or Annuity Starting Date that
he has elected, by making a Proper
Application.
	 
	 	(b)	 	Consent to distribution. With respect to this Article, making a
Proper Application for a Plan distribution shall be considered as giving written
consent to such a distribution.
	 
	 	(c)	 	Payments made only on the first of the month. All benefits paid
under the Plan will be paid only as of the first day of any relevant month. Any
Retirement Date or Annuity Starting Date must therefore fall on the first day of a
month.
	 
	 	(d)	 	Deferred Vested Benefit rules.

	 	(1)	 	Normally, the Annuity Starting Date
for any Participant receiving a Deferred Vested Benefit will be
his Normal Retirement Date.
	 
	 	(2)	 	However, if a Participant who is
eligible to receive a Deferred Vested Benefit has also completed
ten Years of Eligibility Service, then the Participant may make
Proper Application (with 60 days advance notice) to elect an
Annuity Starting Date with respect to his Deferred Vested Benefit
that is:

	 	(A)	 	before his Normal Retirement Date, and
	 
	 	(B)	 	after his 55th birthday.

	 	(e)	 	Final monthly payment. The final monthly payment of any Plan
annuity payment shall be made with respect to the month within which the death of the
Participant or his Beneficiary (whichever is applicable) occurs, provided, however,
that if at the time of his death less than 60 monthly payments of such benefit have
been made, such payments shall continue until the remainder of a total of 60 monthly
payments have been made, unless payment was being made as a QJSA or a QPSA.
	 
	 	(f)	 	Deferred payments. Any failure to make Proper Application (as
determined within the sole discretion of the Committee), shall be deemed to be a
Proper Application to defer payment, provided that deferred payment is permitted
under this Section.
	 
	 	(g)	 	Required payment date of small amounts. If the lump sum Actuarial
Equivalent of a Participant’s vested Plan benefit equals or is less than $5,000
($3,500 prior to January 1, 1998), then a lump sum payment of such an amount shall be
made as soon as is feasible on or 

-33-

 

	 	 	 	after his death or termination of employment with
an Employer and all Affiliates, subject to this Article. Such a payment shall not be
deferred; and payment shall be made even if the Participant or Beneficiary fails to
make any Proper Application for payment. For purposes of this Plan, if the
Participant’s vested Plan benefit is zero, he or she shall be deemed to have received
a single sum distribution of his or her benefit upon his or her termination of
employment. The nonvested portion of such benefit is deemed to have been received in
a single sum distribution pursuant to the foregoing sentence and shall be forfeited
as of the date distribution is deemed to have been made.

	 	(h)	 	General rules for required payment dates. Unless the Participant
elects to defer his benefit payment, Plan benefits will be paid under this Article no
later than the 60th day after the close of the plan year in which the latest of the
following events occurs:

	 	(1)	 	the Participant’s Normal Retirement
Date
	 
	 	(2)	 	the 10th anniversary of the year in
which the Participant commenced participation in the Plan
	 
	 	(3)	 	the Participant terminates service
with the Employer.

	 	(i)	 	Required Distributions. Notwithstanding any provisions to the
contrary contained in this Plan, payments to each Participant shall be made or
commence:

	 	(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) his Normal
Retirement Date, and
	 
	 	(2)	 	if the Participant is a 5-percent
owner as described in Section 14.2.(d), his Required Beginning
Date.

A Participant who attained age 70-1/2 prior to January 1, 2002 and has not terminated
employment, may elect to receive a distribution of his Annual Accrued Benefit (as though
he had terminated employment ) upon suitable notice to the Committee. Distribution
shall be made pursuant to this Article V as though the Participant has retired.

	 	(j)	 	Payments on Account of Participant’s Death

	 	(1)	 	Distribution begun before
death. If the distribution of a Participant’s benefit has
commenced under this Article prior to his death, then the payment
of any remaining portion that is payable under this Article shall
be paid to the Beneficiary as soon as is practicable. The
schedule of such payments shall be at least as rapid
as the

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	 	 	 	schedule used at the Participant’s death. In this event, there
shall be no permitted deferral of payment.

	 	(2)	 	Distribution paid after death to
non-Eligible Spouse Beneficiary. If the
Participant dies before distribution under this
Article has begun, then the payment under this
Article to any non-Eligible Spouse Beneficiary
shall be made:

	 	(A)	 	As soon as is feasible, but no later than five
calendar years following the date of death, if
the Beneficiary is not the surviving Eligible
Spouse of the Participant, and the benefit is
to be paid in any form except payments over the
life or life expectancy of the Beneficiary.
	 
	 	(B)	 	As soon as is feasible, if the benefit is to be
paid over the life or life expectancy of a
non-Eligible
Spouse Beneficiary, but no later than by December 31 of the calendar year immediately following the
calendar year in which the Participant died.

	 	(3)	 	Distribution paid to Eligible
Spouse.

	 	(A)	 	Distributions to an Eligible Spouse under a
QJSA shall be paid as soon as is feasible.
	 
	 	(B)	 	Distributions paid to an Eligible Spouse under
a QPSA shall be paid as provided in Section
6.8.

	6.3	 	Normal Form of Benefits 

	 	(a)	 	Normal form for married Participant. The normal form of a Annual
Accrued Benefit for any married Participant who has a Eligible Spouse on his Annuity
Starting Date shall be a 50%
Qualified Joint and Survivor Annuity, or a “QJSA.”
	 
	 	(b)	 	Normal form for unmarried Participant. The normal form of Annual
Accrued Benefit for any Participant who does not have an Eligible Spouse as of his
Annuity Starting Date shall be a single life annuity paid for his life, with a 5 year
“period certain.” This “period certain” feature means that if a Participant dies
before 60 payments of his Annual Accrued Benefit have been made, the remainder of
these 60 payments will be made to his Beneficiary.

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	6.4	 	Notice and Election Period

	 	(a)	 	Notice concerning benefits. The
Committee shall distribute to each
Participant at least 90 days before
his Annuity Starting Date a written
explanation of:

	 	(1)	 	the QJSA,
	 
	 	(2)	 	how the Participant may waive the QJSA,
	 
	 	(3)	 	the effect of the Participant’s
waiver of the QJSA,
	 
	 	(4)	 	the need for the Participant’s
Eligible Spouse to consent to such a waiver, before the waiver can
be effective, and
	 
	 	(5)	 	the Participant’s and the Eligible
Spouse’s right to revoke their waiver or consent (respectively),
during the Election Period (which is described in the next
paragraph).

	 	(b)	 	Election Period. For the purposes of this Article, the Election
Period shall be the 90 calendar day period preceding any Participant’s Annuity
Starting Date. The last business day preceding the Annuity Starting Date is the last
day of the Election Period.

	 	6.5	 	Waiver and Spousal Consent Necessary for Optional Forms of Benefit 

	 	(a)	 	General rules. A married Participant may elect an optional form of
his Annual Accrued Benefit, in lieu of the normal form of benefit, only if he and his
Eligible Spouse meet all the requirements of this Section.
	 
	 	(b)	 	Waiver.

	 	(1)	 	After receiving the notice explaining
the normal form of benefit, described in the preceding Section,
the married Participant must waive his right to the normal form of
benefit, by making a Proper Application concerning his waiver.
	 
	 	(2)	 	The waiver shall specify the optional
benefit, and, if applicable, the designated non-Eligible Spouse
Beneficiary (or any single or class of contingent Beneficiaries).

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	 	(c)	 	Spousal consent.

	 	(1)	 	After the Participant’s receipt of
notice explaining the normal form of benefit, described in the
preceding Section, the Participant’s Eligible Spouse must give
written consent to
the Participant’s waiver of the normal form of
benefit, in order for the waiver to be
effective. (The Committee’s delivery of the
explanatory notice to the Participant shall be
deemed to also be delivery to the Eligible
Spouse.) The Eligible Spouse’s written consent
shall be made by Proper Application and shall:

	 	(A)	 	express the effect of waiving the normal form
of benefit,
	 
	 	(B)	 	be notarized,
	 
	 	(C)	 	consent to the optional form of benefit being
selected,
	 
	 	(D)	 	consent to a designated Beneficiary other than
himself, if applicable, and
	 
	 	(E)	 	state whether or not the consent is revocable.
However, if the consent form is silent as to
this
issue, then it shall be considered to be revocable,
under the terms of this Section.

	 	(2)	 	If the Participant has designated a
Beneficiary other than his Eligible Spouse, then such a
designation shall not be effective unless the Eligible Spouse
gives written consent to the Beneficiary designation, by making
Proper Application. This consent must state that the Beneficiary
cannot be changed further without further spousal consent, unless
the written consent form explicitly states that no such further
consent with respect to another change in designated Beneficiary
is necessary.
	 
	 	(3)	 	Any waiver of a QJSA or any spousal
consent described in this Section shall be binding only upon the
individual Eligible Spouse who gives the consent. It shall not be
binding upon any subsequent Eligible Spouse of the Participant.

	 	(b)	 	Deadline for waiver and spousal consent. To be effective, the
Participant’s waiver of his normal form of benefit and his Eligible Spouse’s written
consent must be made by Proper Application during the Election Period commencing no
less than 30 days or more than 90 days before a Participant’s Annuity Starting Date.
A Participant may elect not to receive his Annual Accrued Benefit in the form of a
QJSA, but instead to receive such Annual Accrued Benefit in the forms described
in Section 6.6. Distribution of the QJSA may begin less than 30 days before
the Annuity Starting Date if

-37-

 

	 	(1)	 	the Committee clearly informs the
Participant that he has a right to a period of at least 30 days
after receiving the required explanation to consider whether to
waive the QJSA and to consent to another form of benefit,
	 
	 	(2)	 	the Participant is permitted to revoke an affirmative
distribution election at least until the Annuity Starting Date, of, if later,
at any time prior to the expiration of the 7-day period that begins the day
after the explanation of the QJSA is provided to the Participant, and
	 
	 	(3)	 	the Annuity Starting Date is after the date that the
explanation of the QJSA is provided to the Participant (but the Annuity
Starting Date may be before the date that any affirmative distribution
elections are made by the Participant).

	 	(c)	 	Revocation of waiver and spousal consent. Both the Participant’s
waiver of the QJSA and his Eligible Spouse’s consent to the waiver may be revoked
within the Election Period, by making Proper Application. Any such revocation will
cause the normal form of benefit to be paid to the Participant, unless another waiver
and consent is made by Proper Application, within the Election Period.
Notwithstanding the previous provisions of this paragraph, a revocation of the
spousal consent shall not be permitted if the forms on which Proper Application for
the consent were made explicitly disallow such a spousal revocation.

	6.6	 	Optional Forms of Benefit 

	 	(a)	 	Procedural rules. A Participant who retires under the Plan as
of his Normal, Early, Late or Disability Retirement Date may elect an optional
form of his Annual Accrued Benefit, rather than the normal form described in
Section 6.3, if he meets the requirements of the preceding Section, and makes a
Proper Application.
	 
	 	(b)	 	Value of optional forms. Each optional form of benefit described
in this Section shall equal the Actuarial Equivalent of the normal form of the Annual
Accrued Benefit that would be paid with respect to the Participant as of his Normal
Retirement Date.
	 
	 	(c)	 	Optional forms available. The optional forms of benefit offered
under the Plan are as follows:

	 	(1)	 	Option A — Joint and Survivor
(Eligible Spouse Only) Option. Under Option A the Participant
will receive a reduced monthly benefit reflecting his Annual
Accrued Benefit, for his life with the continuance thereafter of
monthly payments in a designated amount to the Participant’s
surviving Eligible Spouse for her life. However, the survivor
benefit of Option A is available only if the surviving Eligible
Spouse was the Eligible Spouse as of the Annuity Starting Date.
The Eligible 

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	 	 	 	Spouse’s remarriage shall not affect her Plan
benefits. If neither the Participant nor the surviving Eligible
Spouse survives the five-year period beginning with the Annuity
Starting Date, monthly payments will be continued to the
Beneficiary for the remainder of the five-year period in an amount
equal to the monthly amount paid under the Option to the
Participant. At the time Option A is
elected, the Participant shall designate the
monthly amount of payments to be made to the
surviving Eligible Spouse under the Option;
however, in no event may the monthly amount of
the payments to the surviving Eligible Spouse
exceed the monthly amount of the reduced monthly
benefit payable to the Participant under the
Option. If the chronological order of death of
the Participant and the surviving Eligible
Spouse cannot be established to the satisfaction
of the Committee, the Participant will be deemed
to have been the survivor for purposes of this
Option.

	 	(2)	 	Option B — Single Life, Period
Certain Option. Under Option B the Participant will receive a
reduced monthly pension representing his Annual Accrued Benefit
for his life or life expectancy, and if the Participant’s death
occurs during a designated period certain beginning with the
Annuity Starting Date, monthly payments will be continued to the
Participant’s Beneficiary for the remainder of the period certain
in the same amount as the Participant’s reduced monthly pension
under the option. At the time Option B is elected, the
Participant shall designate the period certain, which shall be a
period of either 10, 15, or 20 years; provided, however, that no
period may be elected that is in excess of the joint life
expectancy of the Participant and his Option Beneficiary
determined as of the Annuity Starting Date. Any period
chosen shall comply with Code section 401(a)(9)
and the regulations thereunder.
	 
	 	(3)	 	Option C — Joint and Survivor
(Non-Spouse Only) Option. Under Option C the Participant will
receive a reduced monthly benefit reflecting his Annual Accrued
Benefit, for his life with the continuance thereafter of monthly
payments in a designated amount to the Participant’s surviving
contingent annuitant(s) for his, her, or their life or lives. Such
contingent annuitant(s) shall not be the Participant’s spouse. If
neither the Participant nor any contingent annuitant survives the
five-year period beginning with the Annuity Starting Date, monthly
payments will be continued to the Beneficiary for the remainder of
the five-year period in an amount equal to the monthly amount paid
under the Option to the Participant. At the time Option C is
elected, the Participant shall designate the monthly amount of
payments to be made to the contingent annuitant(s) under this
Option; however, in no event may the monthly amount of the
payments to the contingent annuitant(s) exceed (i) the monthly
amount of the reduced monthly benefit payable to the Participant
under this Option, or (ii) the maximum amount payable under Code
section 401(a)(9) and the regulations thereunder. If the
chronological order
of death of the Participant and the surviving
contingent annuitant cannot be established to
the satisfaction of the 

-39-

 

	 	 	 	Committee, the Participant will be deemed to have been the
survivor for purposes of this Option. This
option C shall be available to Participants
whose Annuity Starting Date is on or after
January 1, 2002.

	 	(d)	 	Form of Payments to Estate or Trustee. The Actuarial Equivalent of
any monthly payments payable to the executor or administrator of any person, or to
any trustee, shall be paid in a single sum as soon as practicable after such
executor, administrator or trustee becomes entitled thereto.

	6.7	 	Qualified Pre-Retirement Survivor Annuity

	 	(a)	 	Eligibility for QPSA. Subject to Section 6.8, a Qualified
Pre-Retirement Survivor Annuity, or “QPSA,” will be paid only in the event that a
Participant dies:

	 	(1)	 	with a surviving Eligible Spouse, and:
	 
	 	(2)	 	one of the following:

	 	(A)	 	while in active employment with the Employer,
or
	 
	 	(B)	 	after his termination of employment with the
Employer, but before his Annuity Starting Date.

	 	(b)	 	QPSA is paid to Eligible Spouse. The QPSA shall be paid, under
this Section, to the Eligible Spouse of a Participant who meets the requirements of
the preceding Subsection.
	 
	 	(c)	 	Amount of QPSA. Subject to Section 5.15, the amount of the QPSA shall be as
follows:

	 	(1)	 	A QPSA shall be paid only with
respect to the Participant’s vested, accrued Plan benefits. The
precise amount of QPSA is determined by referring to the 50%
survivor benefit that would have been payable, with respect to the
Participant’s death, had he elected a 50% QJSA and had he died at
the dates described in this Subsection. Different dates apply,
according to the Participant’s age and service history at the time
of his death.
	 
	 	(2)	 	If an eligible Participant dies after
his Normal Retirement Date, then the QPSA shall equal the 100%
QJSA survivor benefit that would have been payable had he retired
with a 100% QJSA on the day before his actual date of death, so
that his QJSA Annuity Starting Date would have been the date
before his actual date of death (or the first day of the next
month).

-40-

 

	 	(3)	 	If a Participant dies (i) with ten
years of Eligibility Service, and (ii) before his Normal
Retirement Date, but (iii) after his 55th birthday, then the QPSA
shall, as in the preceding paragraph, equal the
50% QJSA survivor benefit that would have been
payable had he retired with a 50% QJSA on the
date before his actual date of death, so that
his QJSA Annuity Starting Date would have been
the date before his actual date of death (or the
first day of the next month).
	 
	 	(4)	 	If a Participant dies (i) before his
Normal Retirement Date, and (ii) before completing ten years of
Eligibility Service, then the amount of the QPSA shall equal the
50% QJSA survivor benefit that would have been payable had he (a)
survived, (b) terminated employment as of either his actual
termination date, or his actual date of death (whichever came
first), (c) elected his Normal Retirement Date as his Annuity
Starting Date, and (d) died the next day.
	 
	 	(5)	 	If a Participant dies (i) before his
55th birthday, and (ii) after completing ten years of Eligibility
Service, then the amount of the QPSA shall equal the 50% QJSA
survivor benefit that would have been payable had he (a) survived,
(b) terminated employment as of either his actual termination
date, or his actual date of death (whichever came first), (c)
elected the first day of the month coincident with or next
following his 55th birthday as his Annuity Starting Date, and (d)
died the next day.
	 
	 	(6)	 	With respect to the four preceding
paragraphs, in the event that the Participant dies after his
active employment has ended, the four preceding paragraphs shall
not be construed to credit the Participant with any Eligibility
Service or accruals that he had not earned, as of his termination
of employment.

	 	(d)	 	Special rule for amount of QPSA if optional benefit has been elected.

	 	(1)	 	If a QPSA is payable with respect to
a Participant who had made a Proper Application for an optional
form of benefit which would have provided annuity payments to the
Participant and his Eligible Spouse, then, notwithstanding any
other provisions of this Section, the amount of the QPSA shall
equal the Actuarial Equivalent of the survivor benefit under the
elected optional form of benefit.

	 	(e)	 	Form of the QPSA. The QPSA shall be paid in monthly installments,
over the life of the surviving Eligible Spouse.
	 
	 	(f)	 	Commencement of QPSA payments. QPSA payments shall generally be
made as soon as is feasible following the Eligible Spouse’s Proper Application.
Eligible Spouses may not defer payment later than the first day of the month
coincident with or following:

-41-

 

	 	(1)	 	the Participant’s 55th birthday -

with respect to Participant’s
who had
earned
 10 years of Eligibility
Service and died before
 age 55

	 	(2)	 	the date of death -

with respect to Participant’s
who had earned
 10 years of
Eligibility Service and died
after
 age 55

	 	(3)	 	The Participant’s Normal Retirement Date-

with respect to Participant’s
who died with
 less than 10
years of Eligibility Service.

6.8 Special Qualified Pre-Retirement Survivor Annuity for Non-Spouse Beneficiaries .
Effective January 1, 2002, with the consent of his or her spouse that satisfies the requirements of
Section 6.5, a Participant who remains employed after reaching Normal Retirement Date may, prior to
his or her Annuity Starting Date, waive the Qualified Pre-Retirement Survivor Annuity and designate
one or more beneficiary(ies) who shall receive a benefit upon the death of the Participant. The
amount of such benefit shall be the amount that would be payable to such 
beneficiary(ies) had the
Participant retired on the day before his actual death and elected option C under Section 6.6 with
such beneficiary(ies) designated as his or her contingent annuitants for a survivor benefit of
100%.

6.9 Form of Benefit Fixed as of Annuity Starting Date 

	 	(a)	 	The form of any Plan benefit is fixed as of the Annuity Starting Date, and
is not subject to change, except with respect to the provision of any survivor
benefit under a QJSA or optional form of benefit.
	 
	 	(b)	 	Should a QDRO become effective after a Participant’s Annuity
Starting Date, the Plan payments may be divided, as provided for under the
QDRO, but the total monthly payment that had been made monthly under Plan
(before the QDRO) shall not be changed.

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ARTICLE VII. EMPLOYEE CONTRIBUTIONS

7.1 Period of Participation 

          The period of Contributing Participation of each Participant shall continue from the date of
its commencement to the date of his retirement under the Plan or other termination of employment,
or Participant election to discontinue contributions.

7.2 Employee Contributions 

          Each Participant who satisfies the requirements of Section 3.1(b)(2) shall be eligible to be a
Contributing Participant for any payroll period in which he has Earnings in excess of $761.54 and
elects to make a contribution, determined in accordance with the following provisions:

	 	(a)	 	For contributions made on and after the Effective Date, each Participant’s
contribution shall be in an amount determined as follows:

	 	(1)	 	for each such payroll period an
amount equal to the sum of (A) 1-3/4% of the excess, if any, of
the Contributing Participant’s Earnings for the payroll period
over $761.54, but not in excess of the Contribution Base Amount
for the payroll period, and (B) 31/2% of the excess, if any, of his
Earnings for the payroll period over the Contribution Base Amount
for the payroll period; and
	 
	 	(2)	 	for each such month beginning after
the Contributing Participant’s 55th birthday, an amount equal to
the sum of (A) 2% of the excess, if any, of his Earnings for the
payroll period over
$761.54, but not in excess of the Contribution
Base Amount for the payroll period, and (B) 4%
of the excess, if any, of his Earnings for the
payroll period over the Contribution Base Amount
for the payroll period;

except that for any payroll period in which he has Earnings in excess of $761.54 a Contributing
Participant’s contribution shall in no event be less than $5.00.

Notwithstanding the foregoing provisions of this Section, the following shall apply:

	 	(b)	 	A Participant whose Earnings for any payroll period beginning after March
13, 1987, are not in excess of $761.54 shall be permitted to make a contribution for
such payroll period only if he was a Participant in the Prior Plan on August 31, 1982
(or had performed his first Hour of Service prior to September 1, 1982, and elected
to become a Contributing Participant on or before December 1, 1982) who makes
contributions without interruption until his termination 

-43-

 

	 	 	 	of employment. If such a
Contributing Participant discontinues his contributions for any payroll period, he
will be permitted to make contributions thereafter only if his Earnings for a payroll
period are in excess of $761.54. Furthermore, if such a Participant terminates his
participation for any reason and again becomes a Participant, he will be permitted to
make contributions thereafter only if his Earnings for a payroll period are in excess
of $761.54.

	 	(c)	 	A Contributing Participant shall not be required to make a contribution for
any payroll period commencing after the date on which he makes a Proper Application
to discontinue his contributions to the Plan. A Contributing Participant who elects
to discontinue making contributions may resume contributions only (i) after the
expiration of the 12-month period following the month for which his last contribution
was made, and (ii) he has made a Proper Application, to resume
his contributions to the Plan.

7.3 Withdrawal of Contributions 

	 	(a)	 	Mandatory Distribution

	 	(1)	 	A Contributing Participant will
receive a mandatory distribution of amounts relating to his
employee contributions, as described below.
	 
	 	(2)	 	Such a mandatory distribution will be
made with respect to those Contributing Participants who incur a
Severance from Service Date with no vested Basic Benefit, and
whose “Contribution Amount” (defined in this Section) does not
exceed $5,000 ($3,500 prior to January 1, 1998).
	 
	 	(3)	 	Any such mandatory distribution shall
be made as soon as is practicable, following the Severance from
Service Date.
	 
	 	(4)	 	A Participant’s “Contribution Amount”
shall be determined as the greater of:

	 	(A)	 	the employee contributions made by him under
the Plan or the Prior Plan together with
interest (calculated
under this Section) earned up to the first day of the month in which the Severance from Service
Date occurred, or
	 
	 	(B)	 	the lump sum Actuarial Equivalent as of the
Severance from Service Date of the accrued
benefit attributable to employee contributions
under Code Section 411(c)(2).

	 	(b)	 	Voluntary Withdrawals. If a Participant’s Contribution Amount
(defined in the preceding paragraph) is in excess of $5,000 ($3,500 prior to January
1, 1998), he may withdraw his 

-44-

 

	 	 	 	contribution amount within 60 days after his Severance
from Service Date upon Proper Application; provided, however, that if such
Participant is legally married, no withdrawal may be made unless the Eligible Spouse
consents thereto in accordance with Section 6.5.

	 	(c)	 	Restrictions on Withdrawals. No Contributing Participant shall be
permitted to withdraw his Contribution Amount under the Plan at any time

	 	(1)	 	while he is employed by an Employer
or any Affiliate, or
	 
	 	(2)	 	after he terminated employment, if
he has completed five years of Eligibility Service.

	 	(d)	 	How to calculate interest with respect to withdrawals. Interest on
employee contributions shall be compounded annually and shall be computed from the
January 1 following the date of such contribution. Such interest shall be computed
at an annual rate as determined in accordance with the Prior Plan for periods prior
to March 13, 1987, and at an annual rate of 7% for Plan Year 1987. Effective January
1, 1988, interest shall be calculated at an annual rate which shall be the greater of
7% or 120% of the Federal mid-term rate per Code Section 411(c)(2)(C). Subject to
the provisions of Section 7.5, if any Contributing Participant shall withdraw his
Contribution Amount after March 13, 1987, no Contributory Benefit or other benefit
shall thereafter be payable under the Plan by reason of his being a Contributing
Participant during the period in which such contributions were made.

7.4 Repayment of Contributions Previously Withdrawn 

          Notwithstanding anything to the contrary contained in the Plan, a Former Participant who was a
Contributing Participant and previously had withdrawn his Contribution Amount from the Plan and who
is re-employed by the Employer as an Eligible Employee within five years of his prior Severance
from Service Date, may repay to the Plan prior to the fifth anniversary of his re-employment date
an amount equal to the amount of his previously withdrawn Contribution Amount, plus interest,
computed at the rate established with respect to Section 411(c)(2)(C)(iii) of the Code, and
compounded annually from the date of such withdrawal. Upon making a repayment as described in the
foregoing sentence, such Eligible Employee again shall become a Contributing Participant in the
Plan and shall be reinstated
with his original period of Contributing Participation, and all other rights and obligations
regarding his Contributing Participation in the Plan, in all respects as if no withdrawal of his
Contribution Amount had been made.

7.5 Return of Contributions in Event of Death 

-45-

 

          If, upon the death of a Participant or Former Participant, no Contributory Benefit is or will
thereafter become payable under any provision of the Plan, his Contribution Amount (as determined
in accordance with this Article) as of first day of the month in which the death of Participant
occurs, shall be returned as a death benefit to the Beneficiary.

7.6 Additional Death Benefit

          If the amount contributed to the Plan by a Contributing Participant or Former Participant
under this Article as determined as of the first day of the month in which payments of his Annuity
Starting Date, exceed the total amount of all payments of Contributory Benefits and other benefits,
including any QPSA, made by reason of his Contributing Participation, then, upon the termination of
such payments, the excess shall be returned as a death benefit to the Participant’s Beneficiary.

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ARTICLE VIII. THE TRUST, FUNDING AND CONTRIBUTIONS

8.1  Employer Contributions to the Trust Fund 

	 	(a)	 	The Employer shall make Employer contributions under this Plan to the Trust
Fund at least once each quarter during each Plan Year. Notwithstanding the preceding
sentence, the Committee may direct that contributions be made on a different
schedule, as permitted by the Code, without formal Plan amendment.
	 
	 	(b)	 	The amount of such Employer contributions shall be the amount recommended
by the Plan’s enrolled actuary, in compliance with the Code and ERISA, to fund Plan
benefits.
	 
	 	(c)	 	An enrolled actuary hired by the Committee shall make an annual actuarial
valuation to estimate the Employer contributions necessary under this Article.

	8.2	 	Employee Contributions to the Trust Fund 

	 	(a)	 	The Employer shall make contributions under this Plan to the Trust Fund of
employee contributions at least once per month. Notwithstanding the preceding
sentence, the Committee may direct that contributions be made on a different
schedule, as permitted by the Code, without formal Plan amendment.
	 
	 	(b)	 	The amount of such employee contributions shall be in the amount withheld
from the employee’s earnings pursuant to Article VII.

	8.3	 	The Trust 

	 	(a)	 	Amounts contributed to the Trust shall be managed and invested, according
to the Trust Agreement.
	 
	 	(b)	 	The Company shall, to the extent allowed under the Trust, establish a
funding policy and method, consistent with the objectives of the Plan the applicable
requirements of ERISA and the Code.

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ARTICLE IX. AMENDMENT AND TERMINATION

9.1  Power to Amend Plan 

	 	(a)	 	The Company, by action of the Board, may, subject to this Section, at any
time modify or amend, in whole or in part, any or all of the provisions of the Plan.
Any such amendment shall be by an instrument in writing executed by the Board, under
its by-laws. Upon the execution of any such instrument, the Plan shall be deemed to
have been amended in the manner therein set forth.
	 
	 	(b)	 	The Employer, the Trustee and each employee, Participant, Former
Participant, Eligible Spouse, Beneficiary or any person claiming under or through any
of the foregoing shall be bound by any such amendment. However, no such amendment
shall make it possible for any of the assets of the Trust Fund to be used for or
diverted to purposes other than for the exclusive benefit of Participants and their
beneficiaries, increase the duties or responsibilities of the Trustee without its
consent thereto, or adversely affect any benefits accrued by any Participant prior to
such amendment, except as provided in Article XI.
	 
	 	(c)	 	Amendments and changes in the Plan’s rules and procedures may be made by
the Committee and by Employer human resource personnel or benefits representatives,
within their sole discretion under Article II, without formal Plan amendment.

9.2  Power to Terminate Plan 

	 	(a)	 	Although the Company intends to maintain the Plan indefinitely, the
Company, by action of the Board, may
terminate the Plan in its entirety or terminate the participation in the Plan
of any Employer with respect to its employees. Any Employer other than the
Company, by action of its board of directors, may terminate its participation
in the Plan with respect to its employees.

9.3  Allocation of Assets Upon Termination 

	 	(a)	 	General rule. In the event of termination of the Plan, the
Committee shall, allocate the assets of the Trust Fund that are available among the
applicable Participants, Former Participants, and appropriate Beneficiaries in the
manner set forth in Section 4044 of ERISA.
	 
	 	(b)	 	Full vesting upon termination or partial termination. Upon
termination or partial termination of the Plan (as defined by the Code) as to any
Participants hereunder, all rights of such

-48-

 

	 	 	 	Participants to their accrued Plan
benefits theretofore accrued shall become non-forfeitable to the extent then funded.

9.4  Reversion to Employer 

          Any Trust Fund assets which remain by reason of actuarial error after all liabilities of the
Plan to applicable Participants, Former Participants, and other persons have been satisfied and all
expenses of terminating the Plan as to any such persons and liquidating the Trust Fund assets have
been paid, shall upon direction of the Committee be paid to the applicable Employer, provided such
payment does not contravene any applicable provisions of law.

-49-

 

ARTICLE X. LIMITATION OF BENEFITS

10.1  Construction 

          The purpose of this Article is to comply with the provisions of Code Section 415, and all
terms and provisions of this Article shall be interpreted and construed consistently with said
provisions. The provisions of this Article shall apply notwithstanding any contrary provision of
the Plan.

10.2  Definitions

          Solely for the purposes of this Article:

Annual Addition. “Annual Addition” means the sum for any Limitation Year of (a) employer
contributions to a plan (or portion thereof) subject to Code Section 415(c) maintained by an
Employer or Affiliate, (b) forfeitures under all such plans (or portions thereof), if any, credited
to employee accounts, (c) employee contributions under all such plans (or portions thereof), and
(d) amounts described in Code Section 419A(d)(2) (relating to post-retirement medical benefits of
Key Employees (as defined in the Article entitled “Top Heavy Provisions.”)) or allocated to a
pension plan individual medical account described in Code Section 415(l) to the extent includable
for purposes of Code Section 415(c)(2). The employee contributions described in clause (c) shall
be determined without regard to (i) any rollover contributions, (ii) any repayments of loans, or
(iii) any prior distributions repaid to a plan upon the exercise of buyback rights. Employer and
employee contributions taken into account as Annual Additions shall include “excess contributions”
as defined in Code Section 401(k)(8)(B), “excess aggregate contributions” as defined in Code
Section 401(m)(6)(B) and “excess deferrals” as described in Code Section 402(g) (to the extent such
deferrals are not distributed to the Participant before the April 15th following the end of the
taxable year of the Participant in which such deferrals were made), regardless of whether such
amounts are distributed or forfeited. The Annual Additions for any year beginning before January
1, 1987 shall be determined under the law as in effect for such year and shall not be recomputed to
treat all employee contributions as Annual Additions.

Compensation Limit. “Compensation Limit” means 100% of the Participant’s average annual
Earnings for the three (3) consecutive years in which his Earnings were highest.

Dollar Limit. “Dollar Limit” means, subject to the Section of this Article entitled
“Protection of Current Accrued Benefit,” $90,000 as adjusted from time to time (beginning in 1988)
to reflect increases in the cost of living pursuant to applicable regulations. The adjustment
required pursuant to the preceding sentence for any year shall be the cost of living adjustment
which is effective as of the January 1 which

-50-

 

occurs in such year. No such adjustment shall be
taken into account before the year for which such adjustment first takes effect.

Earnings. “Earnings” for any year shall have the meaning set forth in Treas. Reg. §
1.415-2(d)(11)(i).

10.3  Limitation on Annual Benefits 

	 	(a)	 	Unadjusted Limit. If a Participant’s Plan benefit is payable as a
single life annuity or a QJSA, the annual amount of benefit payable to the
Participant shall not exceed the lesser of the Dollar Limit or the Compensation
Limit.
	 
	 	(b)	 	Optional Payment Forms. If a Participant’s Plan benefit is payable
in any form other than a single life annuity or a QJSA, the annual amount of benefit
payable to the Participant shall not exceed the Actuarial Equivalent of a single life
annuity which does not exceed the lesser of the Dollar Limit or the Compensation
Limit. In making such actuarial adjustment, (a) the actuarial assumptions used shall
be those set forth in the Plan, as appropriate according to the form and date of
payment, provided that the interest assumption used shall generally not be less than
5%, and (b) no adjustment shall be made for any ancillary benefit provided under the
Plan (if applicable) which is not directly related to retirement benefits, including,
without limitation, disability benefits, medical
benefits, and pre-retirement death benefits, and any death benefit coverage
described in the Plan.
	 
	 	(c)	 	Multi-employer Plans. Any benefits provided under any
multi-employer plan to which an Employer or any Affiliate is a party shall be taken
into account under this Article only to the extent that the benefits provided under
such plan exceed the benefits that would have been provided under such plan if the
Participant had no service with an Employer or any Affiliate.

10.4  Adjustments for Early or Late Payment 

	 	(a)	 	Payments Starting Before Social Security Retirement Age But After Age
62. If a Participant’s Plan benefit begins before his Social Security Retirement
Age but on or after the date he attains age 62, the Dollar Limit shall be reduced:
(a) if the Participant’s Social Security Retirement Age is 65, by 5/9th of 1% for
each month by which the commencement of payment of his Plan benefit precedes the
month in which he attains age 65; or (b) if the Participant’s Social Security
Retirement Age is 66 or 67, by 5/9th of 1% for each of the first 36 months and 5/12th
of 1% for each additional month by which the commencement of 

-51-

 

	 	 	 	payment of his Plan
benefit precedes the month in which he attains his Social Security Retirement Age.

	 	(b)	 	Payments Starting Before Age 62. If a Participant’s Plan benefit
begins before age 62, the Dollar Limit shall be reduced in accordance with applicable
regulations (using the actuarial assumptions set forth in the Actuarial Equivalent,
this Plan, provided that the interest assumption used shall be not less than 5%), so
that it is equivalent to the Dollar Limit as applied to a pension beginning at age
62.
	 
	 	(c)	 	Payments Starting After Social Security Retirement Age. If a
Participant’s Plan benefit begins after his Social Security Retirement Age, the
Dollar Limit shall be increased in
accordance with applicable regulations (using the actuarial assumptions set
forth in the Actuarial Equivalent, provided that the interest assumption shall
not exceed 5%) so that it is actuarially equivalent to the Dollar Limit as
applied to a pension beginning at his Social Security Retirement Age.

10.5  Conditional Exemption for Pensions Under $10,000 

          The Compensation Limit shall not be applicable to any Plan benefit with respect to a
Participant for any year if (a) the annual amount of employer-provided retirement benefits payable
with respect to such Participant under this Plan and all other defined benefit plans of all
Employers and Affiliates does not exceed $10,000 for such year or any prior year, and (b) such
Participant never participated in any defined contribution plan maintained by any Employer or
Affiliate.

10.6  Participants with Fewer Than Ten Years of Service 

          If a Participant has fewer than 10 years of Service in the aggregate with all Employers and
Affiliates at the time his Plan benefit starts, the Compensation Limit and the $10,000 limit
described in the Section of this Article entitled “Conditional Exemption for Pensions under
$10,000” shall be adjusted by multiplying such amounts by a fraction (a) the numerator of which is
the Participant’s number of years of Service (and fraction thereof) and (b) the denominator of
which is 10. In no event shall such fraction be less than 1/10th.

10.7  Participants with Fewer Than Ten Years of Participation 

          If a Participant has been credited with fewer than 10 “Years of Participation,” the Dollar
Limit shall be adjusted by multiplying such amount by a fraction (a) the numerator of which is the
Participant’s number of Years of Participation in the Plan (and fraction thereof) and (b) the
denominator of which is

-52-

 

10. In no event shall such fraction be less than 1/10th. “Years of
Participation” means years of Service for which the Participant is credited with future Service
benefits excluding any such year of Service credited (a) for a Plan Year prior to the Plan Year in
which the individual first became a Participant, (b) for any period of disability during which the
Participant was not permanently and totally disabled (within the meaning of section 22(e)(3) of the
Code), and (c) for any period prior to the Effective Date.

10.8  Benefits Payable under More Than One Defined Benefit Plan 

          If benefits that are subject to the limitations of Code Section 415 are payable under any
other defined benefit plan maintained by an Employer or Affiliate, the benefits payable under this
Plan, as limited by this Article, shall be subject to further limitation in order that the amount
of employer-provided benefits payable under all defined benefit plans maintained by all Employers
and Affiliates shall not, in the aggregate, exceed the benefit limitations described in this
Article. If a reduction in the benefits under such defined benefit plans in the aggregate is thus
required, such reduction shall be applied in the reverse order in which benefits under such plans
would otherwise accrue except as any such other plan may otherwise expressly provide, provided that
benefits under any multi-employer plan shall be reduced last.

10.9  Participation in Defined Contribution Plan 

	 	(a)	 	Combined Limitation. Prior to January 1, 2000 and subject to the
later paragraph of this Subsection, entitled “Adjustment of Defined Contribution Plan
Fraction,” if a Participant has at any time been a Participant in one or more defined
contribution plans maintained by an Employer or Affiliate (including any plan so
considered as a result of any employee contributions to a defined benefit plan) the
sum of his Defined Contribution Plan Fraction and Defined Benefit Plan Fraction as of
the close of any year shall in no event exceed 1.0. In order to prevent such sum
from exceeding 1.0, benefits under this Plan shall be reduced to the extent necessary
for that purpose. Such reduction shall be made prior to any reduction of
allocations of Annual Additions under such defined contribution plans which
would otherwise be made in order to prevent such sum from exceeding 1.0.
	 
	 	(b)	 	Defined Contribution Plan Fraction Determination. For purposes of
this Section, a Participant’s “Defined Contribution Plan Fraction” shall be
determined as follows:

	 	(1)	 	Numerator. For any year, the
numerator shall be the sum of the Annual Additions to the
Participant’s account(s) under all such defined contribution plans
maintained by any Employer or Affiliate in such year and in all
prior years.

-53-

 

	 	(2)	 	Denominator. For any year,
the denominator shall be the sum of the lesser of the following
amounts, determined for such year and for each prior year of
service with all Employers and Affiliates as if the Participant
were covered by a defined contribution plan maintained by such
Employers or Affiliates for all such years, but were not covered
by any defined benefit plan for any such year:

	 	(A)	 	one hundred and twenty-five percent (125%) of
the maximum dollar limitation applicable to
defined contribution plan allocations for such year (as provided in Code Section 415(c)(1)(A) determined without regard
to section 415(c)(6)), or
	 
	 	(B)	 	thirty-five percent (35%) of the Participant’s
Earnings for such year.

	 	(c)	 	Notwithstanding the foregoing, in computing the denominator of the Defined
Contribution Plan Fraction for any year ending after 1982, the Committee may elect to
determine the portion of such denominator which relates to 1982 and prior years under
the method described in Code Section 415(e)(6), in lieu of the method described
above. Such election may be made at such time and in such manner as may be provided
in applicable Treasury regulations.
	 
	 	(d)	 	Defined Benefit Plan Fraction Determination. For purposes of this
Section, a Participant’s “Defined Benefit Plan Fraction” shall be determined as
follows for any year:

	 	(1)	 	Numerator. The numerator
shall be the total projected annual benefit (as defined in Code
Section 415(b)(2)) of the Participant under all defined benefit
plans maintained by any Employer or Affiliate as of the close of
such year, as determined for each
such plan for purposes of Code Section
415(e)(2)(A), disregarding benefits derived from
employee contributions.
	 
	 	(2)	 	Denominator. The denominator shall be the lesser of the following amounts:

	 	(i)	 	one hundred and twenty-five percent
(125%) of the Dollar Limit, determined after giving effect to the
Section of this Article entitled “Protection of Current Accrued
Benefit”, or
	 
	 	(ii)	 	one hundred and forty percent (140%)
of the Compensation Limit.

For purposes of computing the denominator of the Defined Benefit Plan Fraction,
(A) the Dollar Limit and the Compensation Limit shall be determined as if years of
Service for purposes of the Section of this Article entitled “Participants with
Fewer than Ten Years of Service” included future years before the Participant will
attain age 65, provided that the year in which the Participant will attain age 65
shall not count as a future year unless it

- 54 -

 

can be reasonably anticipated that the
Participant will receive a year of Service for such year and (b) the Dollar Limit shall
be determined as if all years of Service (determined after application of
clause (A) above) were Years of Participation (and fractions thereof) solely for
purposes of the Section of this Article entitled “Participants with Fewer than Ten
Years of Participation.”

	 	(e)	 	Adjustment of Defined Contribution Plan Fraction. If the sum of a
Participant’s Defined Benefit Plan Fraction and Defined Contribution Plan Fraction
determined as of December 31, 1986 would have exceeded 1.0 had the provisions of this
Article as in effect after December 31, 1986 been used to compute such sum, an amount
shall be subtracted from the numerator of the Defined Contribution Plan Fraction (not
exceeding such numerator) so that the sum of the Defined Contribution Plan
Fraction and Defined Benefit Plan Fraction as of the first day of the
Limitation Year beginning in 1987 does not exceed 1.0. Such amount shall be
equal to the product of:

	 	(1)	 	the sum of the Defined Contribution
Plan Fraction plus the Defined Benefit Plan Fraction as of the
determination date minus one, times
	 
	 	(2)	 	the denominator of the Defined
Contribution Plan Fraction as of the determination date.

10.10 Limitation Year 

          All determinations under this Article shall be made by reference to the Limitation Year, which
shall be the Plan Year.

10.11 Protection of Current Accrued Benefit

          If a Participant’s Plan benefit, determined as if the Participant had terminated employment as
of the close of 1986 and expressed in the form of a Qualified Joint and Surviving Spouse Annuity or
a single life annuity, as of January 1, 1987, exceeds the limitations of this Article, then the
Dollar Limit with respect to such participant shall be equal to his Plan benefit determined as
described in this Section. The Dollar Limit as so determined shall include optional benefit forms
and early retirement benefits or retirement subsidies that are protected under Code Section
411(d)(6), whether or not the Participant has met all the requirements to qualify for such forms or
benefits or subsidies, if and to the extent that they remain so protected as of the date on which
the limitations of this Article are applied.

10.12 Rules Regarding 25 Top-Paid Employees 

- 55 -

 

	 	(a)	 	For purposes of this Section, the following terms shall have the indicated
meaning:

Benefits. The term “Benefits” means the sum of the Participant’s accrued benefit and all
other benefits to which he is entitled under the Plan.

Restricted Participant. The term “Restricted Participant” means, with respect to a Plan
Year, a Highly Compensated Employee who is a Participant and who, if there are more than 25 Highly
Compensated Employees, is one of the 25 Highly Compensated Employees with the highest Total Annual
Pay. An individual who is a Restricted Participant in a Plan Year shall be a Restricted
Participant in a subsequent Plan Year only if he satisfies the conditions of the previous sentence
in that subsequent Plan Year. If more than one individual has the same Total Annual Pay, the
younger individual shall be deemed to have the higher Total Annual Pay.

Total Annual Pay. The term “Total Annual Pay” means, with respect to any Plan Year, (a) in
the case of a Highly Compensated Employee who is not currently employed by an Employer or an
Affiliate, the greater of his Earnings (as defined in this Article) for the Plan Year he ceased to
be employed by an Employer or an Affiliate or his Earnings for the Plan Year immediately preceding
such Plan Year and (b) in the case of a Highly Compensated Employee who is currently employed by an
Employer or an Affiliate, the greater of his Earnings for the Plan Year in question or for the
prior Plan Year.

	 	(b)	 	Limitation on Distributions. Subject to the further provisions of
this Section, a Restricted Participant may not receive his benefits under this Plan
in the form of a single sum payment, or other benefit form under which payments
during a single year would exceed the annual payments that would be made on behalf of
the Participant under a single life annuity that is the Actuarial Equivalent of his
Benefits (other than benefits described in paragraph (c)(1) of this Section.
	 
	 	(c)	 	Application of Limitation. The limitation of this Section shall not
apply to:

	 	(1)	 	payment of benefits attributable to
transferred balances from defined contribution plans or to
employee contributions,
	 
	 	(2)	 	any payment, if the value of Plan
assets after such payment equals or exceeds 110 percent of the
value of the Plan’s “current liabilities” (within the meaning of
Code Section 412(l)(7)), or
	 
	 	(3)	 	any payment, if the value of the
Restricted Participant’s benefits is less than one percent of the
value of such “current liabilities.”

- 56 -

 

	 	(d)	 	Changes in Law. In the event that Congress should provide by
statute, or the Internal Revenue Service should provide by regulation or ruling, that
the limitations set forth in this section are no longer necessary for the Plan to
meet the requirements of Code Section 401(a) or other applicable provisions of the
Code then in effect, such limitations shall become void and shall no longer apply
without the necessity of further amendment to the Plan.

- 57 -

 

ARTICLE XI. GENERAL PROVISIONS

11.1 No Contract of Employment 

          Nothing contained in the Plan shall be construed as a contract of employment between the
Employer and any employee, and the Plan shall not afford an employee a right of continued
employment with the Employer.

11.2 Employer Not Liable for Plan Benefits 

          All benefits payable under the Plan shall be paid or provided for solely from the Trust Fund,
and the Employer assumes no liability or responsibility therefor.

11.3 Exclusive Benefit and Return of Employer Contributions 

	 	(a)	 	Except as provided in this Section, the assets of the Trust Fund shall be
used for the exclusive purposes of providing Plan benefits to Participants and their
Beneficiaries and defraying reasonable expenses of administering the Plan.
	 
	 	(b)	 	All Plan contributions are conditioned on their deductibility under Code
Section 404.
	 
	 	(c)	 	Contributions may be returned to the Employer only:

	 	(1)	 	if a contribution is made to the
Trust Fund by the Employer by a mistake of fact, then such
contribution may be returned to the Employer within one year after
the payment of the contribution;
	 
	 	(2)	 	if any part or all of a contribution
is disallowed as a deduction under Code Section
404, then to the extent a contribution is
disallowed as a deduction it may be returned to
the Employer within one year after the
disallowance;
	 
	 	(3)	 	if the Internal Revenue Service
initially determines that the Plan does not meet the requirements
of Code Section 401(a), the Plan shall be null and void from the
Effective Date and any contributions shall be returned to the
Employer less expenses paid unless the Company elects to make the
changes to the Plan necessary to receive a determination from the
Internal Revenue Service that the requirements of Section 401(a)
are met;

- 58 -

 

	 	(4)	 	if the Plan has been terminated, and
the rules set out in Section 9.4 are met, then the excess Plan
assets shall revert to the Employer.

11.4 Tax Withholding 

          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.

11.5 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 Eligible 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.
	 
	 	(e)	 	The Trustee shall not be required to verify or insure that any
distributions made to any third parties under this Section are applied for the
benefit of such minor or incompetent or incapacitated Beneficiary.

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11.6 Missing Payees 

          If all or portion of a Participant’s vested Plan benefit becomes payable under the Plan and
the Committee after a reasonable search cannot locate the Participant (or his Beneficiary if such
Beneficiary is entitled to payment), then,
five years after the Participant’s benefit first became payable under the Plan, 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 accrued benefit from the Plan’s current records and that benefit shall be used to
offset future Employer contributions. If the Participant or his Beneficiary subsequently presents
a valid claim for benefits to the Committee, the Committee shall restore and pay the appropriate
Plan benefit.

11.7 Alienation and QDROs 

	 	(a)	 	Except as provided in this Section, no accrued Plan benefit whether vested
or not, shall be subject to alienation, assignment, pledging, encumbrance,
attachment, garnishment; including 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.
	 
	 	(b)	 	The provisions of the preceding paragraph 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.
	 
	 	(c)	 	“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.
	 
	 	(d)	 	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.
	 
	 	(e)	 	“Alternate Payee” shall mean any Eligible Spouse, former Eligible Spouse,
child or other dependent of a Participant recognized by a proper domestic relations
order as having a right to receive all, or a portion of, a Participant’s benefits
under the Plan, as prescribed under Code Section 414(p).

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	 	(f)	 	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.
	 
	 	(g)	 	The Committee shall have final, discretionary authority to administer and
interpret any QDRO, including any uncertain terms.

11.8 Notice to Committee, Elections 

          Any election made or notice given by a Participant pursuant to the Plan shall be in writing to
the Committee or to such representative as may be designated by it for such purpose and shall be
deemed to have been made or given on the date received by the Committee or its representative.

11.9 Merger or Transfer With Other Plans 

          The Board shall have the power to completely or partially merge or consolidate this Plan with
any other Plan. In the event of any merger or consolidation of the Plan with, or a transfer of the
assets and liabilities of the Plan to, any other plan, each Participant must (if such other plan
were terminated immediately after such merger, consolidation or transfer) receive a benefit under
such other plan which is equal to or greater than the benefit he would have been entitled to
receive under the Plan (if the Plan had been terminated immediately prior to such merger,
consolidation or transfer).

11.10 Fiduciaries 

          Any person or group of persons may serve in more than one fiduciary capacity with respect to
the Plan.

11.11 Plans Shall Comply with Law; and Choice of Law 

          It is intended that the Plan conform to and meet the applicable requirements of ERISA and the
Code. Except to the extent preempted by ERISA, the validity of the Plan or of any of its
provisions shall be determined under, and it shall be construed and administered according to, the
laws of the State of New York (including its statute of limitations and all substantive and
procedural law, and without regard to its conflict of laws provisions).

11.12 Qualified Military Service .

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          Effective December 12, 1994, notwithstanding any other provision of the 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).

11.13 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.

11.14 Headings of Sections and Articles 

          The headings of Sections and Articles are included solely for convenience of reference, and if
there is any conflict between such headings and the text of the Plan, the text shall control.

11.15 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.

11.16 Receipt and Release for Payments 

          Any payment to any Participant, his legal representative, Beneficiary, or to any guardian or
committee appointed for each Participant, or Beneficiary in accordance with the provisions of this
Plan shall, to the extent thereof, be in full satisfaction of all claims hereunder against the
Trustee and the Employer, either of whom may require such Participant, legal representative,
Beneficiary, guardian or committee, as a condition precedent to such payment, to execute a receipt
and release thereof in such form as shall be determined by the Trustee or Employer.

11.17 Action by the Employer 

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          Whenever the Employer under the terms of this Plan is permitted or required to do or perform
any act or matter or thing, it shall be done and performed by a person duly authorized by its
legally constituted authority.

11.18 Mistaken Payments 

          No Participant or Beneficiary shall have any right to any payment made (1) in error, (2) in
contravention to the terms of the Plan, the Code, or ERISA, or (3) because the Committee or its
delegates were not informed of
any death. The Committee shall have full rights under the law and ERISA to recover any such
mistaken payment, and the right to recover attorney’s fees and other costs incurred with respect to
such recovery. Recovery shall be made from future Plan payments, or by any other available means.

11.19 Participants and Beneficiaries Bound by the Plan 

          All employees, Participants, Beneficiaries, as well as their heirs, successors, and assigns
shall be bound by the terms of this Plan.

11.20 Direct Rollover Distributions to Other Plans or IRAs 

	 	(a)	 	General Rules. This Section applies to distributions made on or
after January 1, 1993. 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 trust-to-trust 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 Eligible
Spouse, or Alternate Payee, who is eligible under the Plan and Plan procedures to
receive any Plan distribution. Distributees shall not include any other non-Eligible
Spouse Beneficiary.
	 
	 	(c)	 	Limits on Distributions Eligible for Direct Rollover. Generally,
all or any portion of the accrued, vested Plan benefit payment attributable to the
Distributee would be eligible for a trust-to-trust transfer 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 (or
joint lives of the Distributee and his
Beneficiary);

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	 	(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; or
	 
	 	(4)	 	the portion of any distribution that
is required to be paid under Code Section 401(a)(9).

	 	(d)	 	Limits on recipient plans and IRAs. A trust-to-trust transfer from
the Trust Fund under this Section can be made only to the trustee or custodian of one
of the following “eligible retirement plans” listed below, provided that the transfer
is made under Plan procedures, and that the trustee or custodian accepts the
trust-to-trust transfer. However, only one trust-to-trust transfer 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); and
	 
	 	(4)	 	an annuity plan described in Code
Section 403(a).

	 	(e)	 	Limits on direct rollovers made by surviving Eligible Spouses.
Distributees who are surviving Eligible Spouses, but who are not alternate payees as
described by Code Section 414(p), will be able to elect a trust-to-trust 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 XII. SPECIAL PROVISIONS FOR GOODYEAR PARTICIPANTS

12.1 Reductions for Goodyear Plan Benefits 

          If any employee, former employee, Participant or Former Participant, or the Eligible Spouse,
Beneficiary or any other person or trust claiming under or through any of the foregoing, who is
entitled to any benefit under this Plan, is or shall become, or upon application would become,
entitled to any benefit under the Goodyear Plan attributable to employment with The Goodyear Tire &
Rubber Company or any subsidiary or affiliate thereof for any period prior to March 13, 1987 which
has been credited as Eligibility Service for the purpose of calculating any pension, benefit or
other payment under this Plan, then the amount of such pension, benefit or other payment determined
in accordance with the provisions of this Plan and otherwise payable to such person or trust at any
time or for any period shall be reduced by the amount (or the Actuarial Equivalent of such amount,
if applicable) of any pension, benefit or other payment paid or payable to him or that would upon
application become payable to him under the provisions of the Prior Plan at such time or for the
corresponding period as determined under the terms of this Plan.

12.2 Miscellaneous Provisions Regarding Goodyear Plan Participants 

          This Section shall apply only to an employee or Participant hereunder who is also an employee
or Participant (or equivalent term) as defined in the Goodyear Plan. If upon such employee’s
separation from service or subsequent death he (or his Eligible Spouse or Beneficiary) is eligible
for a benefit under this Plan and under the Goodyear Plan, such employee’s or other persons’s
benefit under this Plan shall commence on the same date and shall be payable in the same form of
payment as shall apply to his benefit under the Goodyear Plan; provided, however, that if such
person’s pension, benefit or other payment under this Plan is payable at a date prior to the date
his pension, benefit or other payment can be paid under the Goodyear Plan, for purposes of
calculating the applicable reduction under the previous Section, he shall be
deemed to have elected to receive his benefit at the earliest date permitted under the Goodyear
Plan and in the same form of payment as is applicable under this Plan.

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ARTICLE XIII. “TOP-HEAVY” PROVISIONS

13.1 Applicable Plans Included in Determination of “Top Heavy” Status 

          For purposes of this Article, “Applicable Plans” shall include (a) each plan of any Employer
or Affiliate in which a Key Employee (as defined in the next Section for this Plan, and as defined
in Code Section 416(i) for each other Applicable Plan) participates and (b) each other plan of any
Employer or Affiliate which enables any plan described in clause (a) of this sentence to meet the
requirements of Code Section 401(a)(4) or 410. Any plan not required to be included under the
preceding sentence may also be included, at the option of the Committee, provided that the
requirements of Code Sections 401(a)(4) and 410 continue to be satisfied for the group of
Applicable Plans after such inclusion. Applicable Plans may include terminated plans, frozen plans
and, to the extent that benefits are provided with respect to Service with an Employer or
Affiliate, multi-employer plans (described in Code Section 414(f)) and multiple employer plans
(described in Code Section 413(c)) to which an Employer or Affiliate makes contributions.

13.2 “Key Employee” 

	 	(a)	 	For purposes of this Article, “Key Employee” shall mean an employee
(including a former employee, whether or not deceased) of an Employer or an Affiliate
who, at any time during a given Plan Year or any of the four (4) preceding Plan
Years, is one or more of the following:
	 
	 	(b)	 	An officer of an Employer or an Affiliate having “compensation” (as defined
in Code Sections 415(b)(1)(A) and 415(d) (“Top-Heavy Compensation”) greater than
fifty percent (50%) of the maximum dollar limitation described in the Article
entitled “Limitation of Benefits” 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 (including
leased employees as described in
Sections 15.1 and 15.2), exclusive of employees described in Code Section
414(q)(8).
	 
	 	(c)	 	One of the ten (10) employees (a) having Top-Heavy Compensation of more
than the maximum dollar limitation for defined contribution plans in effect under
Code Section 415(c)(1)(A) and (b) owning (or considered as owning, within the meaning
of Code Section 416(i)), 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 (2) employees have the same interest in an Employer or an
Affiliate, the employee having the greater Top-Heavy Compensation shall be treated as
having the larger interest.

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	 	(d)	 	A person owning or considered as owning, within the meaning of Code Section
416(i), 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 corporation (or having more than five percent (5%)
of the capital or profits interest in any Employer or Affiliate that is not a
corporation, determined under similar principles).
	 
	 	(e)	 	A one-percent (1%) owner of an Employer or Affiliate having Top-Heavy
Compensation of more than $150,000. “One-percent owner” means any person who would
be described in the preceding paragraph if “one percent (1%)” were substituted for
“five percent (5%)” in each place where it appears therein.

13.3 “Top Heavy” Test 

          In any Plan Year beginning January 1, 1984 or thereafter during which the sum, for all Key
Employees (as defined in this Section and as defined in Code Section 416(i) for each other
Applicable Plan) (and their beneficiaries) of the present value of the cumulative accrued benefits
under all Applicable Plans which are defined benefit plans (determined based on an interest
assumption of five percent (5%) and the UP-1984 mortality table) and the aggregate of the accounts
under all Applicable Plans which are defined contribution plans, exceeds sixty percent (60%) of a
similar sum determined for all participants in such plans (but excluding participants who are
former Key Employees), the Plan shall be deemed “Top Heavy”. Solely for purposes of determining
whether this Plan or any other Applicable Plan is “Top Heavy” for a given Plan Year, the accrued
benefit of a participant other than a Key Employee shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes under all Applicable Plans that are defined
benefit plans maintained by any Employer or Affiliate, or (b) if there is no method, as if such
benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule
of Code Section 411(b)(1)(C).

13.4 Determination Dates 

          The determination as to whether this Plan is “Top Heavy” for a given Plan Year shall be made
as of the last day of the preceding Plan Year (the “Determination Date”); and other Applicable
Plans shall be included in determining whether this Plan is “Top Heavy” based on the determination
date (as defined in Code Section 414(g)(4)(C)) for each such plan which occurs in the same calendar
year as such Determination Date for this Plan. The date on which plan benefits are valued for the
purpose of determining the topheaviness of any Applicable Plan which is a defined benefit plan
shall be the most recent valuation date used for determining such plan’s minimum funding
requirements that occurs during the 12-month period ending on the Determination Date. The date on
which plan assets are valued for the purpose of determining the topheaviness of an Applicable Plan
which is a defined contribution plan

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is the most recent valuation date used for valuing plan assets
that occurs during the 12-month period ending on the Determination Date.

13.5 Add-Back of Prior Distributions 

          Subject to the next Section, distributions from the Plan or any other Applicable Plan during
the 5-year period ending on the applicable determination date shall be taken into account in
determining whether the Plan is “Top Heavy.”

13.6 Former Employees Disregarded after Five Plan Years 

          For Plan Years beginning on or after January 1, 1985, benefits and distributions under this
Plan or any other Applicable Plan shall not be taken into account with respect to any individual
who has not performed any services as an employee for an Employer or an Affiliate at any time
during the 5-year period ending on the applicable determination date.

13.7 Compliance with Code Section 416 

          The calculation of the Top-Heavy ratio, and the extent to which distributions, amounts
attributable to rollovers or similar transfers to and from this Plan or any other Applicable Plan
shall be taken into account in accordance with Code Section 416 and applicable regulations.

13.8 Beneficiaries 

          The terms “Key Employee” and, for purposes of this Article “participant” include their
beneficiaries.

13.9 Provisions Applicable in “Top Heavy” Plan Years 

          For any Plan Year in which the Plan is deemed to be “Top Heavy”, the following provisions
shall apply:

	 	(a)	 	Minimum Accrued Benefit. The accrued benefit derived from employer
contributions under the Plan of each Participant who is not a Key Employee, expressed
as an annual benefit in single life annuity form beginning at Normal Retirement Date,
shall be at least (a) two percent (2%) of the average of such Participant’s Top-Heavy
Compensation not in excess of the limits

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	 	 	 	under Code Section 401(a)(17), for the five (5) calendar years in which
such average is highest (excluding any such year after the Plan ceased to be
“Top Heavy” or during which the Participant had less than one thousand (1,000)
Hours of Service) multiplied by (b) the number of Plan Years beginning on or
after January 1, 1984 during which the Plan is “Top Heavy” and he has at least
1,000 Hours of Service, but not more than ten (10) years. The foregoing
provisions of this paragraph shall apply before the corresponding provision of
any Applicable Plan that is a defined contribution plan, and shall, to the
extent necessary or appropriate, be deemed satisfied in whole or in part by
benefits to the Participant provided under any other Applicable Plan, including
without limitation, the actuarial equivalent of accumulated account balances
derived from employer contributions under any defined contribution plan (other
than employer contributions described in Code Section 401(k)). A Participant’s
accrued benefit, determined as of the last day of any Plan Year in which the
Plan ceases to be “Top Heavy”, shall not be reduced because the Plan ceased to
be “Top Heavy”.

	 	(b)	 	Adjustment of Combined Limits. Except as otherwise provided by
law, “one hundred and twenty-five percent (125%)” in the Article entitled Limitation
of Benefits shall become “one hundred percent (100%)” unless the following conditions
are met:

	 	(a)	 	the percentage described in the Top-Heavy Test in this
Article does not exceed ninety percent (90%), and
	 
	 	(b)	 	the Company amends paragraph (a) of this Section to
substitute “three percent (3%)” for “two percent (2%)” therein.

Notwithstanding any other provision of this Plan, if the sum of the combined
limitation fractions described in the Article entitled Limitation of Benefits,
calculated by substituting “100%” for “125%” therein, for any Participant exceeds
100% for the last Plan Year before the Plan becomes “Top Heavy”, such fractions
shall be adjusted, in accordance with applicable regulations, so that their sum
does not exceed 100% for such Plan Year.

	 	(c)	 	Vesting. Any Participant shall be vested in his accrued benefit
derived from employer contributions on a basis at least as favorable as is provided
under the following schedule:

	 	 	 	 	 
	Completed	 	 
	Years of Vesting Service	 	Nonforfeitable Interest
	2
	 	 	20	%
	3
	 	 	40	%
	4
	 	 	60	%
	5
	 	 	100	%

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In any Plan Year in which the Plan is not deemed to be “Top Heavy”, the minimum vested
percentage shall be no less than that which was determined as of the last day of the last Plan
Year in which the Plan was deemed to be “Top Heavy”.

13.10
  Represented Employees

          The preceding Sections shall not apply to any employee included in a unit of employees covered
by a collective bargaining agreement, if retirement benefits are the subject of good faith
bargaining.

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ARTICLE XIV. LEASED EMPLOYEES

14.1 Applicable Plans Included Definitions 

          For purposes of this Article XV, the term “Leased Employee” means any person (a) who performs
or performed services under the primary direction or control of an Employer or an Affiliate
(hereinafter referred to as the “Recipient”) pursuant to an agreement between the Recipient and any
other person (hereinafter referred to as the “Leasing Organization”), (b) who has performed such
services for the Recipient (including persons related to the Recipient within the meaning of Code
Section 144(a)(3)) on a substantially full-time basis for a period of at least one year and (c)
whose services are of a type historically performed by employees in the business field of the
Recipient. For this purpose, a person is considered to have performed services on a substantially
full-time basis for a period of at least one year if, during any consecutive 12-month period, such
person has performed: (i) at least 1500 hours of service for the Recipient, or (ii) at least 501
hours of service for the Recipient and a number of hours of service equal to at least seventy-five
percent (75%) of the average number of hours that are customarily performed by an employee of that
Recipient in the particular position.

14.2 Treatment of Leased Employees 

          For purposes of this Plan, a Leased Employee shall be treated as an employee of an Affiliate
whose service for the Recipient (including service during the one-year period referred to in
Section 15.1 ) is to be taken into account in determining his compliance with the service
requirements of the Plan relating to participation and vesting (but not for purposes of determining
the amount of his benefits, his entitlement to retirement subsidies or ancillary benefits, or any
purpose other than participation and vesting). The Leased Employee shall not be eligible to become
a Participant eligible to accrue benefits under the Plan unless and except to the extent that he
shall at some time, either before or after his service as a Leased Employee, qualify as an Eligible
Employee without regard to the provisions of this Article XVIII (in
which event, status as a Leased Employee shall be determined without regard to clause (b) of
Section 14.1, to the extent required by applicable law).

14.3 Exception for Employees Covered by Plans of Leasing Organization 

     Section 15.2 shall not apply to any Leased Employee if such employee is covered by a money
purchase pension plan of the Leasing Organization meeting the requirements of Code Section
414(n)(5) and Leased Employees do not constitute more than 20% of the aggregate “non-highly
compensated work force” (as defined in Code Section 414(n)(5)(C)(ii)) of all Employers and
Affiliates.

 

 

14.4 Construction.

          The purpose of this Article XVIII is to comply with the provisions of Code Section 414(n).
All provisions of this Article shall be construed consistently therewith, and, without limiting the
generality of the foregoing, no individual shall be treated as a Leased Employee except as required
under such section.

               IN WITNESS WHEREOF, K&F Industries, Inc. has caused this amended and restated Plan to be
executed on the 31st day of December, 2001.

	 	 	 	 	 	 	 
	 	 	K&F INDUSTRIES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kenneth M. Schwartz	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Kenneth M. Schwartz	 	 
	 

	 	 	 	Title: President and Chief
Operating Officer	 	 

- 72 -

 

Supplement A

1999 Voluntary Early Retirement

Incentive Program

          A.1 Participation. The following provisions shall apply to all Participants who are
designated by the Company for participation in Aircraft Braking Systems Corp.’s 1999 Voluntary
Early Retirement Incentive Program who terminate employment between October 29, 1999 and December
23, 1999 (“Supplement A Participant”).

          A.2 Addition of Non-Contributory Benefit and Eligibility Service. The Benefit and
Eligibility Service of a Supplement A Participant shall be increased by three (3) years.

          A.3 Increase in Age for Early Retirement Factors. For purposes of the reduction set
forth in Section 57(b)(4), a Supplement A Participant’s age shall be increased by three (3) years.

          A.4 Improvement in Supplemental Pension. For purposes of the Special Supplemental
Non-Contributory Benefit set forth under Section 5.8, a Supplement A Participant’s age shall be
increased by three (3) years and his Eligibility and Benefit Service shall be increased by three
(3) years.

- 73 -

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