Document:

EXHIBIT
10.4

 

 

 

WASHINGTON GROUP
INTERNATIONAL

VOLUNTARY DEFERRED
COMPENSATION PLAN

 

Effective as of
January 1, 2003

(As Amended and Restated August 14, 2003)

 

 

 

TABLE
OF CONTENTS

 

 

	
  ARTICLE I

  	
  -

  	
  PURPOSE OF PLAN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  -

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  -

  	
  ELIGIBILITY; DEFERRAL ELECTIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  -

  	
  ESTABLISHMENT AND MAINTENANCE OF ACCOUNTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  -

  	
  DISTRIBUTION OF ACCOUNTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  -

  	
  ADMINISTRATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  -

  	
  BENEFICIARY DESIGNATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  -

  	
  AMENDMENT OR TERMINATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  -

  	
  MISCELLANEOUS

  	
   

  

 

 

ARTICLE I

 

PURPOSE OF PLAN

 

The purpose of the Washington Group International
Voluntary Deferred Compensation Plan is to provide certain key employees of
Washington Group International, Inc. and its affiliates with an opportunity to
defer all or a portion of their salary and certain types of incentive
compensation as a means of supplementing their retirement income or satisfying
other personal financial objectives. 
The Plan is intended to qualify under Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA as an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees.

 

ARTICLE
II

 

DEFINITIONS

 

Section 2.1                                      Definitions.  Whenever used in this instrument the
following terms shall have the following respective meanings set forth in this
Section 2.1:

 

“Account” means the deferred compensation
account maintained for a Participant pursuant to Article IV.

 

“Administrative
Committee” means an administrative committee designated by the
Committee for the purpose of overseeing the day-to-day administration and
operation of the Plan in accordance with Section 6.1.

 

“Beneficiary” means the person
designated, or deemed designated, by the Participant pursuant to Article VII,
who will receive payments as provided under the Plan in the event of the
Participant’s death.

 

“Board”
means the Board of Directors of the Plan Sponsor.

 

“Incentive Compensation” means cash
compensation which is in excess of a Participant’s base salary and which is
payable by a Company to the Participant for a Plan Year pursuant to a
short-term or project incentive compensation plan or arrangement maintained by
the Company, including any emergence or retention bonus payments.  The term “Incentive Compensation” shall not
include any amounts awarded or received with respect to the Washington Group
International, Inc. Equity and Performance Incentive Plan or any other
remuneration defined as long-term compensation by the Company or any amounts
designated by the Company as not being eligible compensation under this Plan.

 

“Code” means the Internal Revenue Code
of 1986, as amended.

 

“Committee” means the Compensation
Committee of the Board, which committee shall be responsible for administering
and operating the Plan in accordance with Article VI.

 

1

 

“Company” means the Plan Sponsor and each
affiliate of the Plan Sponsor.

 

“Deferral Election” means an election to
defer all or a portion of Salary or Incentive Compensation for a Plan Year that
is made by a person who is an eligible employee under Section 3.1 or who has
already become a Participant in a prior Plan Year.

 

“Disability” has the meaning assigned to
such term in the Participant’s employment agreement with a Company, or if there
is no such employment agreement in effect in which such term is defined,
“Disability” means any illness or other physical or mental condition of the
Participant for which he is eligible to receive benefits under the long-term
disability plan of a Company in which such Participant participates.  In the event that a Participant does not
participate in such a long-term disability plan of a Company, the determination
of whether a “Disability” exists for purposes of the Plan shall be determined
by the Committee.

 

“Effective Date” means January 1, 2003.

 

“Election Period” means (i) for any Plan
Year, the period commencing on November 1 and ending on December 1 of the
immediately preceding Plan Year, or (ii) such other periods as the Committee
may designate.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended.

 

“Participant” means a Washington Group
Participant or a Westinghouse Participant.

 

“Plan” means the Washington Group
International Voluntary Deferred Compensation Plan, as set forth herein and as
amended from time to time.

 

“Plan Sponsor”
means Washington Group International, Inc., and its successors and assigns.

 

“Plan Year” means the calendar year.

 

“Qualifying
Position” has the meaning ascribed to such term in Section 3.1.

 

“Salary”
means the base salary payable in cash to a Participant by a Company.

 

“Retirement” means a voluntary termination
of employment by a Participant that is designated as a “retirement” by a
Company.

 

“Washington Group
Participant” means an employee of a Company who satisfies all of
the following: (i) the employee is eligible to participate in the Plan pursuant
to Section 3.1, (ii) the employee has made a Deferral Election pursuant to
Section 3.2, and (iii) the employee is eligible to participate in the
Washington Group International, Inc. 401(k) Retirement Savings Plan.

 

“Westinghouse
Participant” means an employee of a Company who satisfies all of
the following: (i) the employee is eligible to participate in the Plan pursuant
to Section 3.1, (ii) the employee has made a Deferral Election pursuant to
Section 3.2, and (iii) the employee is eligible 

 

2

 

to participate in the Westinghouse Government Services
Group Savings Plan or the Westinghouse Savannah River Company/Bechtel Savannah
River, Inc. Savings and Investment Plan.

 

Section 2.2                                      Rules of
Construction.  Unless the context
otherwise requires (i) a term shall have the meaning assigned to it in Section
2.1; (ii) all references to “Section” and “Article” shall be to sections and
articles of this instrument; (iii) when reference is made herein to
“Retirement” or “termination of employment” from a Company in the case of a
Participant who is an employee of more than one Company, such reference shall
mean Retirement or termination of employment from all Companies which employ
such Participant; (iv) words in the singular shall include the plural, and
vice-versa; and (v) words in the masculine gender shall include the feminine
and neuter, and vice-versa.

 

ARTICLE
III

 

ELIGIBILITY; DEFERRAL ELECTIONS

 

Section 3.1                                      Eligibility.  An employee of a Company shall be eligible to
participate in the Plan if (i) the employee has attained a position within a
Company of Vice President or functional leader or an equivalent thereof as
determined by the Committee for an officer and the Chief Executive Officer for
a non-officer, or has attained a higher position within a Company (any such
position a “Qualifying Position”), (ii) the employee is selected for
participation in this Plan as directed by the Committee or the Chief Executive
Officer, and (iii) the employee is notified by the Committee of such
selection.  The notice of selection sent
by the Committee shall be in such form and shall be provided in such manner as
the Committee may determine.  Subject to
Section 3.3, once an employee becomes a Participant, he shall continue to be a
Participant until the entire balance credited to his Account is paid in full in
accordance with Article IV.

 

Section 3.2                                      Deferrals.

 

(a)                                  Election
Periods and Deferral Elections.  An
eligible employee shall become a Participant on the January 1 immediately succeeding
the Election Period during which he first makes a Deferral Election, and he
shall continue to be a Participant until the entire balance credited to his
Account is paid in full in accordance with Article V.  Notwithstanding the foregoing, the Committee may in its sole and
absolute discretion permit an eligible employee to make a Deferral Election
within thirty (30) days of initial eligibility to participate, and in the event
such a Deferral Election is made, the Deferral Election shall relate only to
Salary and Incentive Compensation earned for the remainder of the Plan Year
following the expiration of such thirty (30) day period.

 

(b)                                 Effect
of Deferral Election.  A Deferral
Election shall constitute an irrevocable election by a Participant, and an express
authorization to the Company which employs such Participant, to defer the
receipt of all or a portion of the Salary and Incentive Compensation that would
otherwise have been payable to the Participant for the Plan Year covered by the
Deferral Election.

 

3

 

(c)                                  Amount
of Deferral.  A Washington Group
Participant may elect to defer an amount (i) between five percent (5%) and
fifty percent (50%) of his Salary for a Plan Year, and (ii) between five percent
(5%) and one hundred percent (100%) of his Incentive Compensation for a Plan
Year, expressed in whole numbers.  A
Westinghouse Participant may elect to defer an amount (ii) between five percent
(5%) and fifty percent (50%) of his Salary for a Plan Year, and (ii) between
five percent (5%) and fifty percent (50%) of his Incentive Compensation for a
Plan Year, expressed in whole numbers. 
A separate Deferral Election must be made with respect to each Plan Year
in order for the Participant to defer Salary or Incentive Compensation for that
Plan Year.  In the event a Participant
does not make a Deferral Election during the Election Period with respect to a
particular Plan Year, no amount of the Participant’s Salary or Incentive
Compensation for that Plan Year shall be deferred hereunder.

 

(d)                                 Limitation
On Amount of Deferral. 
Notwithstanding Section 3.2(c) or any other provision of the Plan to the
contrary, if the Company determines that the portion of a Participant’s
Incentive Compensation for a Plan Year that is not deferred hereunder is less
than the amount of withholding taxes applicable to such Participant’s entire
Incentive Compensation for such Plan Year, the amount of such withholding taxes
shall be subtracted from and shall reduce the Incentive Compensation which the
Participant elects to defer pursuant to Section 3.2(c).

 

Section 3.3                                      Termination of
Deferrals.  In the event a
Participant ceases to hold any Qualifying Position, the Participant shall no
longer be eligible to defer any amounts under this Plan.  The Committee shall so notify the
Participant, and the crediting of deferral amounts under this Plan on behalf of
such Participant shall cease as of the date specified in such notice.

 

ARTICLE
IV

 

ESTABLISHMENT AND MAINTENANCE OF ACCOUNTS

 

Section 4.1                                      Establishment
of Accounts.  The Committee shall
establish a separate bookkeeping account for each Participant that shall be
designated as the Participant’s “Account” under the Plan.  The Plan Sponsor shall credit to such
Account an amount equal to the Salary and Incentive Compensation deferred
pursuant to the Participant’s Deferral Elections plus interest credited
pursuant to Section 4.2, and shall charge such Account for any distributions
under the Plan with respect to the Participant or his Beneficiary.  Salary or Incentive Compensation deferred
hereunder shall be credited to the Account of a Participant as soon as
administratively feasible following the date the Salary or Incentive
Compensation would have been paid to the Participant.

 

Section 4.2                                      Interest
Credits.  Each Account shall be
credited with interest commencing on the date the Account is established and up
until the date of a Participant’s Retirement or other termination of
employment.  The interest rate credited
for any Plan Year shall be the Moody’s Average Corporate Bond Rate for August
of the immediately preceding year, and the Plan Sponsor shall notify each
Participant of such rate prior to commencement of a Plan Year.  Such interest shall be credited monthly and
compounded daily.  Following a
Participant’s Retirement or termination of employment from a Company, interest
shall be credited at such rate and in such 

 

4

 

manner as the Administrative Committee determines is
consistent with the rate at which interest is credited and the manner in which
interest is credited hereunder prior to such Retirement or termination of
employment.

 

Section 4.3                                      Account
Valuation; Participant Statements. 
For each Plan Year or more frequently as the Committee may determine,
the Committee shall provide a written statement to each Participant setting
forth as of a date specified in such statement: (i) the amount of his Salary
and Incentive Compensation, if any, deferred under the Plan, (ii) the rate at
which interest was credited to his Account and the aggregate amount of interest
credited to the Account since the last such statement, and (iii) his total
Account balance.

 

ARTICLE V

 

DISTRIBUTION OF ACCOUNTS

 

Section 5.1                                      Form and
Timing of Payment.

 

(a)                                  Deferred
Payment Date.  At the time a
Participant makes his initial Deferral Election, he shall elect the form and
timing of payment of his Account after Retirement or other termination of
employment.  A Participant is permitted
to choose payment in the form of either a lump sum or annual installments over
a period of five (5), ten (10) or fifteen (15) years; provided, however, that
notwithstanding any such election, if a Participant’s Account balance is less
than Fifty Thousand Dollars ($50,000) on the date of his Retirement or
termination of employment from a Company, his Account shall be paid in a lump
sum.  A Participant may elect to receive
payment of his Account as soon as practical after his Retirement or termination
of employment or as soon as practical after the end of the calendar year in
which the Participant’s Retirement or termination of employment occurs.  A Participant may change such elections;
provided, however, that any such change shall be effective only if approved by
the Committee and if received at least twelve (12) months before the date of
the Participant’s Retirement or termination of employment with a Company.

 

(b)                                 Payment
Upon Disability or Death. 
Notwithstanding Section 5.1(a), in the event the Participant terminates
employment with the Company due to Disability, such Participant’s Account shall
be distributed in a lump sum to the Participant or his legal representative,
and in the event the Participant’s termination of employment is due to his
death, the Participant’s Account shall be distributed in a lump sum to his
Beneficiary(ies).  A distribution
pursuant to this Section 5.1(b) shall be made as soon as practical after the
Committee receives evidence that is satisfactory to the Committee confirming
the Participant’s Disability or death and the status of an individual as a
legal representative or Beneficiary of the Participant.

 

Section 5.2                                      Committee
Action.  The Committee may, in its
sole and absolute discretion, accelerate the payment of all or any portion of
the balance credited to a Participant’s Account (i) in the event the Committee
determines that the Participant must include all or any portion of such Account
in his gross income for federal income tax purposes even though such Account
has not been distributed to the Participant, or (ii) if the Committee
determines that such payment is in the best interests of the Company.

 

5

 

ARTICLE
VI

 

ADMINISTRATION

 

Section 6.1                                      Authority and
Duties of Administrator.  The
Committee shall be responsible for administering the Plan and shall have sole
and absolute discretion to (i) determine the eligibility of employees to
participate in the Plan, (ii) interpret, construe and make determinations under
the Plan, (iii) establish such rules as may be necessary or appropriate for the
administration of the Plan, (iv) maintain Accounts, books and records with
respect to the Plan, (v) calculate the amount of Salary and Incentive
Compensation deferred and interest credited under the Plan, (vi) delegate to an
Administrative Committee authority to take certain actions on behalf of the
Committee and to oversee the day-to-day operation of the Plan, and (vii) take
such other action in the administration of the Plan as the Committee deems
necessary or appropriate in furtherance hereof.  Any interpretation, construction or determination made or action
taken by the Committee with respect to the Plan shall be conclusive and binding
on all persons interested therein.

 

Section 6.2                                      Manner of
Taking Action.  All actions
permitted or required to be taken hereunder by a person who is an eligible
employee under Section 3.1 or a Participant shall be effective only if such
action is taken at the time and in the manner prescribed by the Committee and
in accordance with the terms of the Plan. 
All actions permitted or required to be taken hereunder by the Committee
may be taken by a majority of its members at a meeting in person or by
telephone, or by unanimous written consent of such members.  The Committee may delegate to any one or
more of its members authority to individually take any action the Committee is
authorized to take hereunder.

 

Section 6.3                                      Plan Expenses.  All expenses of administering the Plan shall
be borne by the Company.

 

Section 6.4                                      Indemnification
of Administrator.  To the extent
permitted by law, the Plan Sponsor shall indemnify and save harmless any person
serving as a member of the Committee or the Administrative Committee, or both,
from claims for liability, loss or damage (including payment of expenses in
connection with defense against any such claim) which result from such person’s
good faith exercise or failure to exercise any responsibilities with respect to
the Plan.

 

Section 6.5                                      Claims
Procedure.

 

(a)                                  Benefit
Claims.  A Participant (or his legal
representative in the event of the Participant’s Disability or his
Beneficiaries in the event of the Participant’s death) may file a claim with
respect to amounts asserted to be due hereunder by filing a written claim with
the Committee specifying the nature of such claim in detail.  Such a claim shall not be permitted unless
submitted within two years from (i) in the case of a lump sum payment, the date
on which the payment was made, (ii) in the case of installment payments, the
date on which the first in the series of payments was made, or (iii) in the
case of all other claims, the date on which the action complained of occurred
or the inaction complained of should have occurred.  The Committee shall notify the claimant within ninety (90) days
as to whether the claim is allowed or denied, 

 

6

 

unless the claimant receives written notice from the
Committee prior to the end of the ninety (90) day period stating that special
circumstances require an extension of time for a decision on the claim, in
which case the period shall be extended by an additional sixty (60) days.  Notice of the Committee’s decision shall be
in writing, sent by mail to the Participant’s or Beneficiary’s last known address
and, if the claim is denied, such notice shall (i) state the specific reasons
for denial, (ii) refer to the specific provisions of the Plan upon which such
denial is based, and (iii) describe any additional information or material
necessary to perfect the claim, an explanation of why such information or
material is necessary, and an explanation of the review procedure in Section
6.5(b), including a statement of the claimant’s right to bring a civil action
under Section 502(a) of ERISA following an adverse determination on review.

 

(b)                                 Review
Procedure.  A claimant is entitled
to request a review of any denial of his claim under Section 6.5(a).  The request for review must be submitted to
the Committee in writing within sixty (60) days of mailing by the Committee of
notice of the denial.  Absent a request
for review within the sixty (60) day period, the claim shall be deemed
extinguished in its entirety.  The
claimant or his representative shall be entitled to submit issues and comments
orally and in writing as well as other relevant documents to the
Committee.  The claimant shall also be
entitled to receive from the Committee, upon request and free of charge,
reasonable access to and copies of all documents, records and other information
relating to his claim.  The review shall
be conducted by the Committee, which shall afford the claimant a hearing and
which shall render a decision in writing within sixty (60) days of a request
for a review, provided that, if the Committee determines prior to the end of
such sixty (60) day review period that special circumstances require an
extension of time for the review and decision of the denial, the period for
review and decision on the denial shall be extended by an additional sixty (60)
days.  The review shall take account of
all comments, documents, records and other information submitted by the
claimant relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination under Section
6.5(a).  The claimant shall receive
written notice of the Committee’s review decision, together with specific
reasons for the decision and reference to the pertinent provisions of the
Plan.  The claimant shall also be
notified that, upon request and free of charge, the claimant can have
reasonable access to and copies of all documents, records and other information
relevant to his claim.

 

ARTICLE
VII

 

BENEFICIARY DESIGNATION

 

A Participant may, on a form prescribed by and filed
with the Committee, designate one or more Beneficiaries to receive the balance
credited to the Participant’s Account, if any, in the event of the
Participant’s death prior to full payment thereof.  If the designated Beneficiary is not the spouse of the
Participant, the spouse must consent to the nonspousal Beneficiary designation,
acknowledging his or her waiver of rights to the benefit, by providing the
spouse’s notarized consent on the signature form.  Such beneficiary designation may be changed by the Participant at
any time without the consent of any prior Beneficiary (other than the spouse)
upon receipt by the Committee of a new designation to that effect; provided,
however, that no such designation shall be effective unless received by the
Committee prior to the Participant’s death. 
If a 

 

7

 

Participant fails to designate a Beneficiary
hereunder, or if no Beneficiary survives the Participant, the Participant’s
estate shall be deemed to be the Beneficiary.

 

ARTICLE
VIII

 

AMENDMENT OR TERMINATION

 

The Committee may amend the Plan from time to time or
terminate the Plan at any time; provided, however, that no
amendment or termination shall reduce the Participant’s Account balance
immediately prior to such amendment or termination.  In the event the Plan is terminated, payment of Accounts shall
not be accelerated unless the Committee determines otherwise, and the terms of
the Plan shall continue to apply until full payment thereof is made to the
Participant or Beneficiary.

 

ARTICLE
IX

 

MISCELLANEOUS

 

Section 9.1                                      Liability of
Company; Nature of Obligation. 
Nothing herein shall be deemed to constitute the creation of a trust or
other fiduciary relationship between a Company and any of its employees or
between a Company and any other person. 
Neither the Plan Sponsor nor any Company shall be considered a trustee
by reason of this Plan.  Participants,
Beneficiaries and any other person who may have rights hereunder shall be mere
unsecured general creditors of the Company with respect to a Participant’s
Account and any Salary and Incentive Compensation deferred or interest credited
hereunder, and all amounts deferred or credited to an Account shall be payable
solely from the general assets of the Company.

 

Section 9.2                                      Right of
Set-Off.  Notwithstanding any
provision of the Plan to the contrary, the Plan Sponsor shall have the right to
reduce and offset any payment a Participant or Beneficiary is entitled to
receive hereunder by the amount of any debt or other amount owed to a Company
by the Participant at the time of such payment.

 

Section 9.3                                      No Guarantee
of Employment.  Nothing contained
herein shall require the Plan Sponsor or any Company to continue the employment
of any person, and the Plan Sponsor and any Company shall have the right to
terminate the employment of any person at any time notwithstanding the terms of
the Plan.

 

Section 9.4                                      Benefits Not
Assignable.  The Account of a
Participant and any right or interest in any Salary or Incentive Compensation
deferred or interest credited hereunder shall not be subject to alienation,
transfer, assignment, garnishment, execution or levy of any kind or nature, or
claim for alimony or support pursuant to a divorce decree or other court order,
and any attempt to accomplish the foregoing shall be null and void.

 

Section 9.5                                      Severability.  If any particular provision of the Plan
shall be found by final judgement of a court or administrative tribunal of
competent jurisdiction to be illegal, invalid or 

 

8

 

unenforceable, such illegal, invalid or unenforceable
provision shall not affect any other provision of the Plan and the other
provisions of the Plan shall remain in full force and effect.

 

Section 9.6                                      Tax
Withholding.  Any amounts payable
hereunder shall be subject to all applicable federal, state and local tax
withholding.

 

Section 9.7                                        Headings.  The headings of the several Articles and
Sections of this Agreement have been inserted for convenience of reference only
and shall in no way restrict or modify any of the terms of the provisions
hereof.

 

Section 9.8                                      Governing Law.  To the extent not subject to ERISA, the Plan
shall be governed by and construed and enforced in accordance with the laws of
the State of Idaho, without regard to conflicts of laws principles thereof.

 

9Exhibit 4.1

                           CERTIFICATE OF DESIGNATION

                                       OF

                            SERIES A PREFERRED STOCK

                                       OF

                                WATER CHEF, INC.

Pursuant to Section 141 (f) of the Delaware General Corporation Law, Water Chef,
Inc., a Delaware corporation (the "Corporation"), does hereby certify as
follows:

1. The following resolution was duly adopted by a majority of the Shareholders
of the Corporation on September 8, 1993:

RESOLVED, that there be created a series of the Preferred Stock, par value $.001
per share, of this Corporation consisting of 400,000 shares, to be designated as
the Series A Preferred Stock ("Series A Preferred Stock"), and that the holders
of such shares shall have the rights, preferences and privileges set forth on
Exhibit A to this Resolution; and it was further

RESOLVED, that the officers of the corporation be, and they hereby are,
authorized and empowered to execute and file with the Secretary of State of the
State of Delaware, a certificate of designation setting forth the rights,
preferences and privileges of the holders of the Series A Preferred Stock and to
make such other filings as may be required by any jurisdiction in which the
Corporation may be authorized to do business.

2. Set forth as Exhibit A to this Certificate of Designation is a true and
correct copy of the rights, preferences and privileges of the holders of the
Series A Preferred Stock.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by
its Chairman and its Secretary this 11th day of January, 1994.

                                            /s/  C. Gus Grant
                                            -----------------------------------
                                                 C. Gus Grant, Chairman

ATTEST: /s/  August A. Perry
        -------------------------------
             August A. Perry, Secretary

                                       1

<PAGE>

                                    EXHIBIT A

The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to the Series A Preferred
Stock are as follows:

1. Designation and Number of Shares. The designation of this series of 400,000
shares of Preferred Stock, par value $.001 per share, created by the Board of
Directors of the Corporation pursuant to the authority granted to it by the
Certificate of Incorporation of the Corporation, is "Series A Preferred Stock."
In the event that the Corporation does not issue the maximum number of shares of
Series A Preferred Stock, the corporation may, from time to time, by resolution
of the Board of Directors, reduce the number of shares of Series A Preferred
Stock authorized, provided, that no such reduction shall reduce the number of
authorized shares to a number which is less than the number of shares of Series
A Preferred Stock then issued. The number of shares by which the Series A
Preferred Stock is reduced shall have the status of authorized but unissued
shares of Preferred Stock, without designation as to series until such stock is
once more designated as part of a particular series by the Corporation's Board
of Directors.

2. Dividend Rights.

(a) Holders of shares of Series A Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, dividends at an annual rate of
one Dollar ($1.00) per share (equal to 10% of the $10.00 purchase price per
Series A Preferred Share on original issuance) (i) out of funds of the
Corporation legally available therefor, or (ii) in the whole number of Shares
based on the "current market price" per share of the Common stock. The current
market price shall be deemed to be the average of the daily closing bid prices
for the five (5) consecutive trading days commencing such number of days prior
to (but not including) the dividend payment date, computed pursuant to
4(d)(iii)(B), as if such shares had been purchased for cash using the dividend
amount per share payable to the holder of the Preferred Stock on the applicable
dividend payment date. If less than one (1) whole share is issuable based on the
foregoing computation, the dividend shall be paid in cash. Any fractions of
shares in excess of whole shares shall be paid in cash. No fractional shares or
scrip shall be issued, subject to the provisions of Paragraph 2(c) of this
Certificate of Designation. The Corporation may retain a firm of independent
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Corporation) to make any
calculation required by this paragraph 2(a), and a certificate signed by such
firm shall be conclusive evidence of the correctness of such calculation.
Dividends shall be payable as follows: For the period ending December 31, 1994,
the dividend payment date shall be December 31, 1994; dividends thereafter shall
be paid in quarterly installments on the dividend payment dates hereinafter
redefined. Dividend payment dates subsequent to December 31, 1994 shall be March
31, June 30, September 30, and December 31, of each year commencing March 31,
1995. Dividends shall be payable on the dividend payment dates to holders of
Series A Preferred stock of record on the first day of the month in which such
dividend payment date occurs. Each quarterly period ending on a dividend payment
date is referred to as a "dividend period." Dividends on the Series A Preferred
Stock shall be fully cumulative and accrue, with respect to each share of Series
A Preferred Stock, from the date such share of Series A Preferred Stock is
originally issued.

                                        2

<PAGE>

(b) The amount of any dividends "accrued" on any share of Series A Preferred
Stock at any, dividend payment date shall be deemed to be the amount of any
unpaid dividends accumulated thereon to and including such dividend payment
date, whether or not earned or declared, and the account of dividends "accrued"
on any share of Series A Preferred Stock at any date other than a dividend
payment date shall be calculated as the amount of any unpaid dividends
accumulated thereon to and including the last preceding dividend payment date,
whether or not earned or declared, plus an amount calculated on the basis of the
annual dividend rate set forth in paragraph 2 (a), above, per share for the
period after such last preceding dividend payment date to and including the date
as of which the calculation is made, based on a three hundred sixty (360) day
year of twelve (12) months, each having thirty (30) days.

(c) So long as any shares of Series A Preferred Stock shall be outstanding, no
class or series of capital stock shall be established that ranks senior to or on
a parity with, the Series A Preferred Stock with respect to the payment of
dividends. Except as provided in this Certificate of Designation, no dividends
shall be declared or paid or set aside for payment on any shares of Common Stock
or any other classes or series of capital stock ranking junior to the Series A
Preferred Stock as to dividends for any dividend period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for payment thereof is set aside for such payment on the Series A
Preferred Stock for all dividend periods terminating on or prior to the dividend
payment date of such dividends on any such aeries or class. Holders of shares of
Series A Preferred Stock shall not be entitled to dividends thereon, whether
payable in cash, property or stock, in excess of the full cumulative dividends
thereon, as provided in this Certificate of Designation.

(d) So long as any shares of Series A Preferred Stock shall be outstanding, no
class or series of capital stock shall be established that rank senior to or on
a parity with, the Series A Preferred Stock in the event of voluntary or
involuntary dissolution, liquidation or winding up, and no distribution shall be
declared or made upon any junior series or class of capital stock in the event
of voluntary and involuntary dissolution, liquidation or winding up shall be
redeemed, purchased or otherwise acquired for any consideration by the
Corporation or by any subsidiary (which shall mean any corporation or entity,
the majority of voting power to elect directors of which is held directly or
indirectly by the Corporation), except by conversion into or exchange for any
such junior series or class of capital stock; unless, in each case, the full
cumulative dividends on all outstanding shares of Series A Preferred Stock shall
have been paid in full for all past dividend periods or unless the holders of a
majority of the Series A Preferred Stock then outstanding shall consent thereto.

3. Voting Rights.

(a) Holders of shares of Series A Preferred Stock shall have the same voting
rights in respect thereof as are accorded to the holders of common Stock of the
Corporation pursuant to the Amended and Restated Certificate of Incorporation of
the Corporation and by law and shall exercise such voting rights with the
holders of such Common Stock and not as a class, except as set forth in
Paragraph 3(b) below.

                                       3

<PAGE>

(b) Unless the vote of the holders of a greater number of shares of Series A
Preferred Stock shall be then required by law, the consent of the holders of a
majority of the shares of Series A Preferred Stock at the time outstanding,
given in person or by proxy by a vote at a meeting called for such purpose or
given by written consent signed by the holders of the number of shares of Series
A Preferred Stock required for approval, voting or giving consent as a single
class, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the Amended and
Restated Certificate of Incorporation or any amendment thereto or restatement
thereof (including any Certificate of Designation or similar document relating
to the Series A Preferred Stock) which affects or would affect adversely the
preferences, rights, powers or privileges of the holders of shares of Series A
Preferred Stock. The Corporation is not restricted from creating other series of
Preferred Stock which may be senior or junior to or on a parity with the Series
A Preferred stock as to dividends and/or on voluntary or involuntary
dissolution, liquidation or winding up without the consent of the holders of the
Series A Preferred Stock.

4. Right of Corporation to Redeem or Call the Series A Preferred Stock.

(a) Anything contained in this Certificate of Designation to the contrary
notwithstanding, the Corporation shall have the right to redeem or call the
Series A Preferred Stock then outstanding, at any time, and from time to time,
following three years from January 17, 1994, at a price of $11.00 cash per share
called or redeemed, together with any accrued but unpaid dividends thereon to
and including the date of redemption (the "Redemption Price").

(b) The Directors of the Corporation shall have the right in their sole,
exclusive and absolute discretion to determine which, if any, and whether pro
rata or by lot, of the shares of Series A Preferred Stock should be redeemed or
called.

(c) The Directors of the Corporation shall cause written notice of redemption to
be given as set forth in (d) below, to each registered holder of Series A
Preferred Stock to be called or redeemed, at their respective addresses as they
appear on the records of the Corporation, specifying the certificate numbers) of
the shares to be redeemed, the name and address of the Redemption Agent, as
defined below, and the name and address of the transfer agent for the Series A
Preferred Stock. Such notice shall be mailed to said registered holders by first
class, postage prepaid mail no later than the thirtieth day before the date
fixed for redemption (the "Redemption pate"). The notice of redemption shall set
forth the redemption price, the date set for redemption and the place where
certificates for Series A Preferred Stock shall be delivered.

(d) The Corporation shall appoint as its agent for the purpose of acting as
redemption agent for the Series A Preferred Stock a bank or trust company in
good standing, organized under the laws of the United States of America or any
jurisdiction thereof, and having capital, surplus and undivided profits
aggregating at least Twenty Million Dollars ($20,000,000), and may appoint any
one or more additional such agents which shall in each case be a bank or trust
company in good standing organized under the laws of the United States of
America or of any jurisdiction thereof, having an office or offices in the City
of Phoenix, or such other place as shall have been designated by the
Corporation, and having capital, surplus and undivided profits aggregating at
least Twenty Million Dollars ($20,000,000). Such bank or trust company is
hereinafter referred to as the "Redemption Agent." Following such appointment
and prior to any redemption, the Corporation shall deliver to the Redemption
Agent irrevocable written instructions authorizing the Redemption Agent, on
behalf and et the expense of the Corporation, to cause such notice of redemption
to be duly mailed as above provided as soon as practicable after receipt of such
irrevocable instructions and in accordance with the above provisions. All funds
necessary for the redemption shall be deposited with the Redemption Agent in
trust at least two business days prior to the Redemption Date, for the pro rata
benefit of the holders of the shares so called for redemption, so as to be and
continue to be available therefor. Neither failure to mail any such notice to
one or more such holders nor any defect in any notice shall affect the
sufficiency of the proceedings for redemption as to other holders.

                                        4

<PAGE>

(e) If notice of redemption shall have been given as hereinbefore provided, and
the Corporation shall not default in the payment of the Redemption Price, then
each holder of shares called for redemption shall be entitled to all preferences
and relative and other rights accorded by this resolution until and including
the date prior to the Redemption Date. If the Corporation shall default in
making payment or delivery as aforesaid on the Redemption Date, then each holder
of the shares called for redemption shall be entitled to all preferences and
relative and other rights accorded by this resolution until and including the
date prior to the date (the "Final Redemption Date") when the corporation makes
payment or delivery as aforesaid to the holders of the Preferred Stock. From and
after the Redemption Date or, if the Corporation shall default in making payment
or delivery as aforesaid, the final Redemption Date, the shares called for
redemption shall no longer be deemed to be outstanding, and all rights of the
holders of such shares shall cease and terminate, except the right of the
holders of such shares, upon surrender of certificates therefor, to receive
amounts to be paid hereunder. The deposits of monies in trust with the
Redemption Agent. shall be irrevocable except that the Corporation shall be
entitled to receive from the Redemption Agent the interest or other earnings, if
any, earned on any monies so deposited in trust, and the holders of any shares
redeemed shall have no claim to such interest or other earnings, if any, earned
on any monies so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings, and any balance of
monies so deposited by the Corporation and unclaimed by the holders of the
Preferred stock entitled thereto at the expiration of two (2) years from the
Redemption Date (or the Final Redemption Date, as applicable) shall be repaid,
together with any interest or other earnings thereon, to the Corporation, and
after any such repayment, the holders of the shares entitled to the funds so
repaid to the Corporation shall look only to the Corporation for such payment,
without interest.

5. Liquidation Rights.

(a) In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, holders of the Series A Preferred
Stock shall be entitled to receive out of the assets of the Corporation the sum
of $10.00 per share of Series A Preferred Stock then outstanding, plus a sum
equal to all dividends (whether or not earned or declared) on such shares
accrued and unpaid thereon to the date of final payment or distribution, before
any payment or distribution upon dissolution, liquidation or winding up shall be
made on any series or class of capital stock ranking junior to series A
Preferred Stock as to such payment or distribution.

                                        5

<PAGE>

(b) The sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
and assets of the Corporation shall be deemed a voluntary dissolution,
liquidation or winding up of the corporation for purposes of this Paragraph 5.
The merger or consolidation of the Corporation into or with any other
corporation or the merger or consolidation of any other corporation into or with
the Corporation, shall not be deemed to be a dissolution, liquidation or winding
up, voluntary or involuntary, for the purposes of this Paragraph 5; provided,
however, that the merger or consolidation of the Corporation into another
corporation shall be deemed to be a voluntary dissolution, liquidation or
winding up of the Corporation for the purposes of this Paragraph 5, unless
either (i) the holders of all shares of Series A Preferred Stock outstanding
upon the effectiveness of such merger or consolidation shall have the right,
upon such effectiveness, to receive for each share of Series A Preferred stock
held by them upon such effectiveness, one share of Preferred Stock of the
resulting or surviving corporation, which share shall have, to the extent
practicable, dividend and voting rights and rights upon dissolution, liquidation
or winding up reasonably equivalent to those of such share of Series A Preferred
Stock, and shall have the right to convert such share of Preferred Stock into
the number of shares of stock or other securities or property receivable upon
such merger or consolidation, as the case may be, by a holder of the number of
shares of Common Stock into which such share of Series A Preferred Stock was
convertible immediately prior to such merger or consolidation, or (ii) the
merger or consolidation was approved by the holders of a majority of the shares
of Series A Preferred Stock then outstanding either at a meeting of such
stockholders or by a written consent in lieu of a meeting.

(c) After the payment in cash to the holders of Series A Preferred Stock of the
full preferential amounts in the amounts which have been fixed hereby for the
shares of Series A Preferred Stock, such holders as such shall have no right or
claim to any of the remaining assets of the Corporation.

(d) In the event the assets of the Corporation available for distribution to the
holders of shares of Series A Preferred Stock upon dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled
pursuant to Paragraph 5(a) of this certificate of Designation, no such
distribution shall be made on account of any shares of any other class or series
of capital stock of the Corporation ranking on a parity with the shares of
Series A Preferred Stock upon such dissolution, liquidation or winding up unless
proportionate distributive amounts shall be paid on account of the shares of
Series A Preferred Stock, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.

(e) Upon the dissolution, liquidation or winding up of the Corporation, the
holders of shares of Series A Preferred Stock then outstanding shall be entitled
to be paid out of the assets of the Corporation available for distribution to
its stockholders all amounts to which such holders are entitled pursuant to
Paragraph 4(a) of this Certificate of Designation before any payment shall be
made to the holders of any class of capital stock of the corporation ranking
junior upon liquidation to Series A Preferred Stock.

6. Bank of Series. For purposes of this certificate of Designation, any stock of
any series or class of the Corporation shall be deemed to rank junior to shares
of Series A Preferred Stock as to dividends or upon liquidation, dissolution car
winding up, as applicable, if such class shall be Common Stock or if the holders
of shares of Series A Preferred Stock shall be entitled to receipt of dividends
or of amounts distributable upon dissolution, liquidation or winding up of the
Corporation, as applicable, in preference or priority to the holders of shares
of such class or classes.

                                        6

<PAGE>

7. No Preemptive Rights. No holder of the Series A Preferred Stock shall, as
such holder, be entitled as of right to purchase or subscribe for any shares of
stock of the Corporation of any class or any series now or hereafter authorized
or any securities convertible into or exchangeable for any shares or any
warrants, options, rights or other instruments evidencing rights to subscribe
for or purchase any such shares, whether such shares, securities, warrants,
options, rights or other instruments be unissued or issued and thereafter
acquired by the Corporation.

8. "Piggy-back" Registration Rights.

(a) When the Corporation files its first registration statement (defined herein
to include a Notification under Regulation A and the Offering Circular included
therein) under the Act at any time after January 17, 1994, which relates to a
current offering of securities of the Corporation (except in connection with an
offering to employees, a stock option or employee benefit plan, an exchange
offer or an offer to acquire assets) such registration statement and the
prospectus included therein shall also, at the written request to the
Corporation by the holder(s) of Common Stock of the Corporation received as
dividends on the Series A Preferred Stock (hereinafter referred to as "Common
Stock"), include such Common Stock in such registration statement and meet the
requirements of the Act with respect to the public offering of such Common Stock
so as to permit the public sale. of such Common Stock in compliance with the
Act. The Corporation shall give written notice to the holder(s) of such Common
Stock (hereinafter referred to collectively as "Holder(s)" of its intention to
file a registration statement under the Act relating to a current offering of
the Common Stock of the Corporation, sixty (60) or more days prior to the filing
of such registration statement, and the written request provided for in the
first sentence of this subsection shall be made by the Holder(s) thirty (30) or
more days prior to the date specified in the notice as the date on which it is
intended to file such registration statement. Any such request by Holder(s)
shall include only shares of Common stock into which such Holder(s) Series A
Preferred Stock received or were then accrued and payable as a dividend thereon.
Neither the delivery of such notice by the corporation nor of such request by
the Holder(s) shall in any way obligate the Corporation to file such
registration statement and notwithstanding the filing of such registration
statement, the Corporation may, at any time prior to the effective date thereof,
determine not to offer the securities to which such registration statement
relates, without liability to the Holder(s), except that the Corporation shall
pay such expenses as are contemplated to be paid by it under subsection (d) of
this Section.

Notwithstanding anything contained in this subsection (a) to the contrary, if
any underwriter who is proposing to offer to the public the Corporation's Common
Stock should object to and fail to proceed with the offering because all of the
Common Stock is proposed to be included in the registration statement, the
Corporation may proceed with the offering either including the number of shares
which the underwriter will agree to include pro rata among those shares of
Common Stock for which registration is requested or none if the underwriter
refuses to proceed if any such shares are included, without registering the
Common Stock; provided, however, the Corporation can legally file and does file
a post-effective amendment to such registration statement, with the consent of
said underwriter, within ninety (90) days of the effective date of such
registration statement, allowing the selling stockholders to sell the remaining
balance, or all, as the case may be, of their Common Stock pursuant to such
registration statement.

                                        7

<PAGE>

(b) In each instance in which pursuant to subsection (a) of this Section, the
Corporation shall take any action to permit a public offering or sale or other
distribution of the Common Stock, the Corporation shall:

(1) Supply to the Holder(s) desiring to make a public distribution of their
Common Stock and to John MaGee and Co., two executed copies of each registration
statement or Notification and a reasonable number of copies of the preliminary,
final and other prospectus or offering circular in conformity with requirements
of the Act and the Rules and Regulations promulgated thereunder and such other
documents as the Holder(s) or their representative shall reasonably request.

(2) Cooperate in taking such action as may be necessary to register or qualify
the Common Stock under such other securities laws or blue sky laws of such
jurisdictions as the Holder(s) or their representative shall reasonably request
and to do any and all other acts and things which may be necessary or advisable
to enable the Holder(s) of such Common Stock to consummate such proposed sale or
other disposition of the common Stock in any such jurisdiction; provided,
however, the Corporation shall not be required to qualify or register in any
state or jurisdiction which would obligate any present security holder to
subject their shares of the Corporation's Common Stock to any escrow other than
such escrow as may be in effect as of the date hereof, or which would extend or
enlarge upon, any current escrow; provided, further, that in no event shall the
Corporation be obligated, in connection therewith, to quality to do business or
to file a general consent to service of process in any jurisdiction where it
shall not then be qualified.

(3) Keep effective for a period of twenty-four (24) months after the initial
effectiveness thereof all such registrations or Notifications under the Act and
cooperate in taking such action as may be necessary to keep effective such other
registrations and qualifications, and do any and all other acts and things for
such period - not to exceed said twenty-four (24) months - as may be necessary
to permit the public sale or other disposition of such Common Stock by such
Holder(s).

(4) Indemnify and hold harmless each such Holder(s) and each underwriter, within
the meaning of the Act, who may purchase from or sell for any such Holder(s),
any Common Stock, from and against any and all losses, claims, damages, and
liabilities (including, but not limited to, any and all expenses whatsoever
reasonably incurred in investigating, preparing, defending or settling any
claim) arising from (i) any untrue or alleged untrue statement of a material
fact contained in any registration statement or Notification furnished pursuant
to clause (A) of this subsection, or any prospectus or offering circular
included therein or (ii) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading (unless such untrue statement or omission or such alleged
untrue statement or omission was based upon information furnished or required to
be furnished in writing to the Corporation by such Holder(s) or underwriter
expressly for use therein), which indemnification shall include each person, if
any, who controls any such Holder (s) or underwriter within the meaning of the
Act; provided, however, each such holder, underwriter or controlling person
shall at the same time indemnify the Corporation, its directors, each officer
signing any registration statement or Notification or

                                        8

<PAGE>

any amendment to any registration statement or Notification and each person, if
any, who controls the Corporation within the meaning of the Act, from and
against any and all losses, claims, damages and liabilities (including, but not
limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing, defending or settling any claim) arising from (iii)
any untrue or alleged untrue statement of a material fact contained in any
registration statement or Notification or any amendment to any registration
statement or Notification or prospectus or offering circular furnished pursuant
to clause (1) of this subsection, or (iv) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but the indemnity of such holder,
underwriter or controlling person shall be limited to liability based upon
information furnished, or required to be furnished, in writing to the
Corporation by such holder or underwriter or controlling person expressly for
use therein. The indemnity agreement of the Corporation herein shall not inure
to the benefit of any such underwriter (or to the benefit of any person who
controls such underwriter) on account of any losses, claims, damages,
liabilities (or actions or proceedings in respect therefor) arising from the
sale of any of such Common Stock by such underwriter to any parson if such
underwriter failed to send or give a copy of the prospectus or offering circular
furnished pursuant to clause (1) of this subsection, as the same may then be
supplemented or amended (if such supplement or amendment shall have been
furnished pursuant to said clause (1)) , to such person with or prior to the
written confirmation of the sale involved.

(c) The Corporation shall comply with the requirements of subsection (a) of this
Section and shall pay all of the expenses of the offering set forth in
subsection (a). Expenses of the offering for purposes of-this Section are
defined to be and shall include all legal, accounting, engineering, printing,
filing (including blue-sky filings) and NASD fees, out-of-pocket expenses
incurred by Corporation-retained counsel, accountants, and engineers, and
miscellaneous identified expenses. The Holder(s) selling shares of Common Stock
in the offering shall, however, pay the cost of any separate counsel engaged to
review the registration statement on behalf of or to advise the selling
shareholders and any underwriting commissions, transfer taxes and underwriter's
expense allowance attributable to the Common Stock being sold by the Holder(s),
all of which shall be borne by the Common Holder(s) selling such shares of
Common Stock.

The Corporation's obligation under said subsection (a) hereof shall be
conditioned as to each such public offering, upon a timely receipt by the
Corporation in writing such information as the corporation may reasonably
require from such Holder(s), or any underwriter for any of them, for inclusion
in such registration statement or Notification or post-effective amendment.

                                        9

<PAGE>

(d) The Corporation's agreements with respect to the Series A Preferred Stock or
the Common Stock in this Section will continue in effect regardless of the
payment of dividends in Common Stock on the Series A Preferred Stock.

(e) Any notices or certificates by the Corporation to the Holder and by the
Holder to the Corporation shall be deemed delivered if in writing and sent by
certified mail, to the Holder(s) at their addresses shown on the records of the
Corporation for such Holder(s), and, if to the Corporation, addressed to it at:

14555 North Scottsdale Road Suite 220 Scottsdale, Arizona 85254 Attn: C. Gus
Grant, Chairman

The Corporation may change its address by written notice to the Holder (a).

9. Transfer Agent and Registrar. The Corporation may appoint a transfer agent
and registrar for the issuance and transfer of the Series A Preferred Stock and
for the payment of dividends to the holders of the Series A Preferred Stock.

                                       10

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