Exhibit 10.19
July 30, 2001
AEROFLEX INCORPORATED
KEY EMPLOYEE DEFERRED COMPENSATION PLAN
Section 1. General Provisions
1.1 Name, General Purpose and Effective Date
The name of this plan is the Aeroflex Incorporated Key Employee Deferred
Compensation Plan (the "Plan"). The Plan is intended to enable Aeroflex
Incorporated and its subsidiaries (collectively the "Company") to defer payment
of a portion of the compensation of key employees of the Company who are
designated to participate in the Plan. As of its effective date, which is July
1, 2001, the Plan will serve as the vehicle (a) for making deferrals under
deferral plans or arrangements for key employees of the Company then or
thereafter in effect and (b) for continuing deferral of amounts theretofore
deferred under any deferral plans or arrangements in effect on or before said
date.
1.2 Definitions
a. "Beneficiary" means any person or entity, or any combination thereof,
designated by a Participant in a form acceptable to the Committee, to
receive benefits under the Plan in the event of the Participant's
death or, in the absence of any such designation, his or her estate.
b. "Board" means the Board of Directors of the Company.
c. "Change in Control" means the occurrence of any of the following
events:
i. the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934 as amended (the "Exchange Act") (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of voting securities of Aeroflex when such
acquisition causes such Person to own 20 percent or more of the
combined voting power of the then outstanding voting securities of
Aeroflex entitled to vote generally in the election of directors (the
"Outstanding Aeroflex Voting Securities"); provided, however, that
for purposes of this subsection (i), the following acquisitions shall
not be deemed to result in a Change in Control: (A) any acquisition
directly from Aeroflex, (B) any acquisition by Aeroflex, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by Aeroflex or any corporation controlled by Aeroflex
or (D) any acquisition pursuant to a transaction that complies with
clauses (A), (B) and (C) of subsection (iii) below; and provided,
further, that if any Person's beneficial ownership of the Oustanding
Aeroflex Voting Securities reaches or exceeds 20 percent as a result
of a transaction described in clause (A) or (B) above, and such
Person subsequently acquires beneficial ownership of additional
voting securities of Aeroflex, such subsequent acquisition shall be
treated as an acquisition that causes such Person to own 20 percent
or more of the Oustanding Aeroflex Voting Securities; or
ii. individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the
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Effective Date whose election, or nomination for election by
Aeroflex's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the
Incumbent Board, but excluding for this purpose any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
iii. consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of
Aeroflex or the acquisition of assets of another entity ("Business
Combination"); excluding, however, such a Business Combination
pursuant to which (A) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Aeroflex
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60 percent of,
respectively, the then outstanding shares of common stock or the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that as a result of
such transaction owns Aeroflex or all or substantially all of
Aeroflex's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the
Outstanding Aeroflex Voting Securities, (B) no Person (excluding any
employee
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benefit plan (or related trust) of Aeroflex or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20 percent or more of, respectively,
the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power
of the then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the Business
Combination and (C) at least a majority of the members of the board
of directors or the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
iv. approval by the stockholders of Aeroflex of a complete liquidation
or dissolution of the Company.
d. "Code" means the Internal Revenue Code of 1986, as in effect at any
applicable time.
e. "Committee" means the Committee referred to in Section 1.3 of the
Plan.
f. "Common Stock" means shares of the Common Stock, par value $.10 per
share, of the Company.
g. "Company" means Aeroflex Incorporated, a corporation organized under
the laws of the State of Delaware or any successor corporation.
h. "Compensation" means, for any applicable Year, salary and bonus
earned by a Participant for such Year for services rendered to the
Company.
i. "Deferral Election Form" means the form provided by the Company
pursuant to which a Participant elects deferral of a portion of his
or her Compensation for any Year.
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j. "Deferred Compensation Account" means the account established in the
name of a Participant, as provided in Section 2.2 below.
k. "Early Distribution" means withdrawal by a Participant of amounts
from his or her Deferred Compensation Account before he or she would
otherwise be entitled to such amounts, as provided in Section 3.8
below.
l. "Earnings" means the amount credited to a Participant's Deferred
Compensation Account, as provided in Section 2.3 below.
m. "ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect at any applicable time.
n. "Fair Market Value" means the closing market price of the Common
Stock on the Nasdaq Stock Market on the trading day prior to any date
on which the Common Stock is to be valued hereunder. If no sale shall
have been reported on the Nasdaq Stock Market on such date, Fair
Market Value shall be determined by the Committee.
o. "Hardship" means a severe financial stringency to a Participant
resulting from a sudden and unexpected illness or accident of the
Participant or his or her dependent (as defined in Code Section
154(a)), loss of his or her property due to casualty, or other
similar or extraordinary and unforeseeable circumstance arising as a
result of events beyond the control of the Participant.
p. "Investment Designation" means the designation made by a Participant,
pursuant to a Deferral Election Form, for the actual or putative
investment of the Compensation that he or she has elected to defer
under the Plan.
q. "Participant" means any key employee of the Company who is designated
by the Committee to participate in the Plan.
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r. "Retirement" means termination of a Participant's employment with the
Company other than by reason of death or Total Disability.
s. "Total Disability" means bodily injury or sickness that wholly and
continuously disables a Participant. The Committee shall make any
determination of Total Disability, which shall be final, based on the
finding of an independent physician selected by the Board.
t. "Trust" means the Aeroflex Incorporated Key Employee Deferred
Compensation Plan Trust.
u. "Trustee" means the Trustee of the Trust.
v. "Year" means the fiscal year of the Company, which is the 12-month
period beginning on July 1 of any year and ending on June 30 of the
next subsequent year.
1.3 Administration of the Plan
The Plan shall be administered by the Committee, which shall be
appointed by the Board and consist of two or more members of the Board. The
Committee shall serve at the pleasure of the Board and shall have such powers as
the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it may from time to time
deem advisable, and to interpret the terms and provisions of the Plan.
The Committee shall keep minutes of its meetings and of action taken by
it without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the
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members present at any meeting at which a quorum is present, or acts approved in
writing by all of the members of the Committee without a meeting, shall
constitute the acts of the Committee.
1.4 Participation
For any Year, the Committee shall designate those key employees of the
Company who may elect to defer a portion of their Compensation for such Year.
1.5 Non-Alienation of Benefits
Except as herein specifically provided, no right or unpaid benefit under
the Plan shall be subject to alienation, assignment, pledge or charge and any
attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant or other person entitled to benefits hereunder should attempt to
alienate, assign, pledge or charge any benefit hereunder, then such benefit
shall, in the discretion of the Committee, cease.
1.6 Withholding or Deduction for Taxes
If at any time the Company is required, under applicable laws and
regulations, to withhold, or make any deduction for, any taxes, or take any
other action in connection with payment of benefits from a Participant's
Deferred Compensation Account, the Participant, or his or her Beneficiary as
applicable, shall pay to the Company the amount of any taxes required to be
withheld. Alternatively, when shares of Common Stock are being distributed from
a Participant's Deferred Compensation Account, the Company at its option may
accept a sufficient number of shares of Common Stock to cover the amount of any
taxes required to be withheld.
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1.7 Administrative Expenses
The entire expense of administering the Plan shall be borne by the
Company.
1.8 General Conditions
a. The Board may, from time to time, amend, suspend or terminate any
or all of the provisions of the Plan, provided that no change may
be made that would alter or impair any right theretofore granted to
any Participant without such Participant's approval.
b. Nothing in the Plan shall be deemed to limit, in any way, the right
of the Company to terminate a Participant's employment at any time.
c. Any decision or action taken by the Board or the Committee arising
out of or in connection with the construction, administration,
interpretation and effect of the Plan shall be conclusive and
binding upon all Participants and any person claiming under or
through any Participant.
d. No member of the Board or of the Committee shall be liable for any
act or action, whether of commission or omission, (i) by such
member except in circumstances involving actual bad faith, or (ii)
by any other member or by any officer, agent or employee.
Section 2. Deferral of Compensation
2.1 Deferral Election Form
As a condition of participation in the Plan, each Year a Participant
shall execute and file with the Company one or more Deferral Election
Forms, designating the portion of his or
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her Compensation for such Year, and any other amounts or entitlements
that will vest in such Year, the payment of which is to be deferred
hereunder. Any such Deferral Election Form shall be filed in advance of
(a) the Participant's entitlement to the element of Compensation to
which it relates or (b) the amount of such Compensation becoming
definitely determinable.
a. Salary. A Participant may not defer more of his or her salary to be
earned for any Year than the percentage specified by the Company
and in effect at the time of execution and filing of the applicable
Deferral Election Form.
b. Bonus. A Participant may defer up to 100 percent of his or her
bonus to be earned for any Year, pursuant to execution and timely
filing of the applicable Deferral Election Form.
c. Deferral Increments. Deferrals of salary or bonus shall be in
increments of 1 percent, but may be stated as the dollar amount to
which a specified percentage translates; provided, however, that a
Participant may elect to receive currently a specified dollar
amount of his or her bonus and defer the balance.
d. Deferral of Other Amounts or Items. Pursuant to a Deferral Election
Form executed by a Participant and filed with the Company, a
Participant may defer any other amount or item that the Company
authorizes to be deferred (as, for example, the gain on exercise of
nonstatutory stock options and settlement of rights to restricted
shares of Common Stock).
e. Annual Deferral Election Required. A Deferral Election Form
executed by a Participant and filed with the Company for any Year
shall apply only to the elements of Compensation or other amounts
or items added to his or her Deferred
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Compensation Account for such Year, and the Company shall require
execution and filing of a Deferral Election Form for new deferrals
for each subsequent Year. Once filed with the Company for any Year,
a Participant's Deferral Election Form shall be irrevocable for
such Year.
f. New Participants During Any Year. If an individual becomes a
Participant other than at the beginning of a Year, he or she shall
execute and file with the Company one or more Deferral Election
Forms with respect to elements of Compensation not yet earned for
such Year, or not yet determinable, that are to be deferred and
other amounts or items, if any, that will vest in such Year and are
to be deferred.
2.2 Deferred Compensation Account
a. Bookkeeping Account. Any Compensation or other amounts or items
deferred by a Participant shall be credited to a deferred
compensation bookkeeping account in the Participant's name (the
"Deferred Compensation Account"), and such Account shall be
maintained by the Company or by an organization appointed by the
Company. The Company or its appointee shall update the
Participant's Deferred Compensation Account on a quarterly basis.
b. Earnings. Earnings on amounts in a Participant's Deferred
Compensation Account shall be credited to the Account in accordance
with the Participant's Investment Designation as approved by the
Committee. The available choices for Investment Designation, to be
made in increments of not less than 10 percent of any deferral,
shall be:
i. Common Stock, at Fair Market Value, and
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ii. One or more of the following funds run by a qualified
investment manager:
1. A broad-based common stock fund,
2. A fixed-income fund,
3. A short-term securities fund,
4. An interest-based fund, with interest credited at an
annual rate equal to a designated federal long-term rate,
and
5. A diversified investment fund.
Earnings credited to a Participant's Deferred Compensation Account
shall be equal to the amount that is, or would have been, earned if
the Account is, or had been, invested in accordance with his or her
Investment Designation, as it may be amended from time to time. In
the event of any losses based on an Investment Designation, the
Account shall be reduced accordingly, and the Company shall have no
obligation or responsibility with respect to any such losses.
c. Change in Investment Designation. By filing of notice with the
Company on a form provided by it, a Participant may change the
Investment Designation with respect to his or her Deferred
Compensation Account balance once during any Year, to take effect
on the first day of the next succeeding calendar quarter.
2.3 Trust Fund
a. Funding. The Company has created a Trust with the Trustee, which it
intends to fund from time to time.
b. No Rights in Specific Assets. Although the principal of the Trust
and any earnings thereon shall be held separate and apart from
other funds of the Company for the uses
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and purposes of Participants and Beneficiaries, neither
Participants nor Beneficiaries shall have any preferred claim to,
or any beneficial interest in, any assets of the Trust prior to the
time such assets are paid to them as benefits. All rights to
receive benefits under this Plan and the Trust shall be unsecured
contractual rights of Participants and Beneficiaries against the
Company and shall be no greater than the rights of any unsecured
creditor of the Company.
c. Change in Control. In the event of (i) a Change in Control or,
(ii) if earlier, upon the failure of management, as the result of a
proxy contest, to elect any of its candidates for membership on the
Board at a meeting of shareholders of the Company, the Company
shall make contributions to the Trust in an amount sufficient to
enable the Trust to pay all benefits earned or accrued as of the
date of such Change in Control and all benefits reasonably expected
to be earned or accrued thereafter, as calculated by the Company
based on reasonable assumptions.
Section 3. Payment of Benefits
3.1 Benefit Commencement Date
a. Participant Election. A Participant shall designate the benefit
commencement date, for payment of the portion of his or her
Deferred Compensation Account attributable to any Year's deferral,
on the Deferral Election From executed and filed with the Company
with respect to such deferral. If a Participant fails to designate
a benefit commencement date, he or she will be deemed to have
elected the first day of the calendar quarter following the date of
his or her Retirement.
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b. Revision of Date. A Participant may extend the benefit commencement
date for payment of the portion of his or her Deferred Compensation
Account attributable to any Year's deferral, provided such change
occurs at least one year before the scheduled benefit commencement
date.
3.2 Retirement
If a Participant's employment with the Company terminates by reason of
Retirement, he or she shall receive benefit payments in the form specified in
his or her Deferral Election Forms as applicable.
If the Participant failed thus to specify any form of benefit payments,
he or she may request payment of any amounts payable in cash (a) in a lump sum
or (b) in substantially equal quarterly installments over five or ten years,
subject in either case to Committee approval. If payment in installments is
elected, each installment shall be an amount equal to the quotient determined by
dividing (i) the remaining balance of the Participant's Deferred Compensation
Account at the time of payment by (ii) the number of remaining installments
(including the current installment).
Notwithstanding the foregoing, to the extent that payment is to be made
in shares of Common Stock, such shares shall be distributed in kind to the
Participant or his or her Beneficiary, as the case may be, in accordance with
the terms of the applicable Deferral Election Form.
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3.3 Death
If a Participant dies while employed by the Company or while receiving
benefit payments, the amount remaining in his or her Deferred Compensation
Account, apart from any shares of Common stock, shall be paid to his or her
Beneficiary in a cash lump sum during the calendar quarter next following the
Company's receipt of notice of the Participant's death, valued as of the last
business day of the calendar quarter in which such notice is received.
3.4 Total Disability
If a Participant's employment with the Company terminates by reason of
Total Disability, his or her previously designated benefit commencement date
shall remain in effect, unless the Parcipant elects to treat such termination as
Retirement, in which case his or her benefit commencement date shall be the
first day of the calendar quarter following the date of termination, as provided
in Section 3.1 above.
3.5 Other Termination of Employment
If a Participant's employment with the Company terminates other than by
reason of Retirement, death or Total Disability, his or her benefit commencement
date shall be the first day of the calendar quarter next following such
termination of employment.
3.6 Change in Control
Notwithstanding the provisions of Section 3.1, in the event of a Change
in Control or, if earlier, management's loss of a proxy contest, as described in
Section 2.3.c., each Participant's benefit commencement date shall be the date
of occurrence of either such event.
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3.7 Hardship
While employed by the Company, a Participant may request a Hardship
distribution on a form provided by and filed with the Company. The Committee
shall make a determination that the requested distribution is due to Hardship.
The amount determined by the Committee as a Hardship distribution shall be paid
to the Participant as soon as practicable thereafter. A Participant receiving a
Hardship distribution will be ineligible to participate in the Plan for the
balance of the Year of such distribution.
3.8 Early Distribution
A Participant may elect an Early Distribution from his or her Deferred
Compensation Account, of an amount up to 50 percent of the Account balance, by
filing an election form with the Committee. Any such election shall be subject
to the approval of the Committee, and the Committee's determination whether or
not to allow such election shall be final.
To the extent that the Committee allows any such election, the amount of
the Participant's Deferred Compensation Account balance to which the approved
Early Distribution percentage translates shall be determined as of the end of
the calendar quarter coincident with or next following the Committee's approval,
and such amount shall be paid to the Participant in a lump sum as soon as
practicable thereafter; provided, however, that, any such Early Distribution
shall be made pro rata from the Participant's Account and, to the extent that
shares of Common Stock are part thereof, the cash payment shall be adjusted to
reflect the value, as of the same determination date, of the shares distributed.
When an Early Distribution is made, the Participant shall forfeit 10
percent of (a) such Early Distribution or (b) the remaining balance of his or
her Deferred Compensation Account,
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whichever is less, and the Company shall have no obligation to the Participant
or his or her Beneficiary, as the case may be, with respect to such forfeited
amount.
A Participant who receives an Early Distribution while employed by the
Company will be ineligible to participate in the Plan for the balance of the
Year in which such Early Distribution is made.
3.9 Certain Withdrawals with Committee Approval
Subject to approval of the Committee, in its sole and complete
discretion, a Participant may withdraw from his or her Deferred Compensation
Account any amount (or portion thereof) deferred for any Year (plus the earnings
thereon) that need not have been deferred to preserve the deductibility of
Compensation paid to the Participant for such Year under Section 162(m) of the
Code.
Section 4. Miscellaneous
4.1 Claims Procedure
Subject to and in compliance with the applicable regulations promulgated
under ERISA, (i) any decision by the Company denying a claim for benefits under
this Plan by a Participant or any other claimant shall be stated in writing by
the Company and delivered or mailed to the claimant; (ii) each such notice shall
set forth the specific reasons for the denial, written to the best of the
Company's ability in a manner that may be understood without legal or actuarial
counsel; and (iii) the Company shall afford a reasonable opportunity to the
claimant whose claim for benefits has been denied for a review of the decision
denying such claim.
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4.2 Nonassignability of Benefits
No Participant or Beneficiary shall have any power or right to transfer,
assign, anticipate, hypothecate or otherwise encumber any part or all of the
amounts payable hereunder. Such amounts shall not be subject to seizure by any
creditor of a Participant or any Beneficiary, by a proceeding at law or in
equity, nor transferable by operation of law in the event of the bankruptcy or
insolvency of any Participant or Beneficiary. Any such attempted assignment or
transfer shall be void and shall terminate the Participant's participation in
the Plan, and the Employer shall thereupon have no further liability hereunder
with respect to such Participant and his or her Beneficiary.
4.3 Impact on Other Benefits
Except as otherwise required by the Code or any other applicable law,
this Plan and the benefits provided herein are in addition to all other benefits
that may be provided by the Company to the Participants from time to time, and
shall not reduce or replace, in any manner, any of such other benefits.
4.4 Notices
Any notice, consent or demand required or permitted to be given under
the provisions of this Plan by the Company or any Participant or Beneficiary
shall be in writing, and shall be signed by the person or entity giving or
making the same. If such notice, consent or demand is mailed, it shall be sent
by United States certified mail, postage prepaid, addressed to the principal
office of the Company, or if to a Participant or Beneficiary to such individual
or entity's last
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known address as shown on the records of the Company. The date of such mailing
shall be deemed the date of notice, consent or demand.
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