401K_Summary_Plan_Description.pdf

SUMMARY PLAN DESCRIPTION

Pacific Architects and Engineers Incorporated 401(k)

Savings Plan

Pacific Architects and Engineers Incorporated 401(k) Savings Plan i

Pacific Architects and Engineers Incorporated 401(k) Savings Plan

SUMMARY PLAN DESCRIPTION

I. BASIC PLAN INFORMATION

A. ACCOUNT

B. BENEFICIARY

C. DEFERRAL CONTRIBUTION

D. EMPLOYEE

E. EMPLOYER

F. ERISA

G. HIGHLY COMPENSATED EMPLOYEE

H. NON-HIGHLY COMPENSATED EMPLOYEE

I. PARTICIPANT

J. PLAN TYPE

K. PLAN ADMINISTRATOR

L. PLAN NUMBER

M. PLAN SPONSOR

N. PLAN YEAR

O. SERVICE OF PROCESS

P. TRUSTEE

Q. QUALIFIED MILITARY SERVICE

II. PARTICIPATION

A. ELIGIBILITY REQUIREMENTS

III. CONTRIBUTIONS

A. COMPENSATION

B. EMPLOYEE DEFERRAL CONTRIBUTIONS

1. Regular Deferral Contributions

2. Additional Deferrals

3. Bonus Contributions

4. Age 50 and Over Catch-Up Contributions

C. EMPLOYEE AFTER-TAX CONTRIBUTIONS

D. EMPLOYER MATCHING CONTRIBUTIONS

1. Discretionary Matching Contributions

2. Qualified Matching Contributions

E. NONELECTIVE CONTRIBUTIONS

1. Fixed Nonelective Contributions

2. Discretionary Nonelective Contributions

F. QUALIFIED NONELECTIVE CONTRIBUTIONS

G. LIMIT ON CONTRIBUTIONS

H. ROLLOVER CONTRIBUTIONS

IV. INVESTMENTS

A. INVESTMENTS

B. STATEMENT OF ACCOUNT

C. ELECTION

V. VESTING

VI. PARTICIPANT LOANS

A. GENERAL LOAN RULES

Pacific Architects and Engineers Incorporated 401(k) Savings Plan ii

B. SPECIFIC LOAN PROCEDURES

1. Loan Application

2. Loan Amount

3. Number of Loans

4. Interest Rate

5. Loan Repayments and Loan Maturity

6. Default or Termination of Employment

VII. IN SERVICE WITHDRAWALS

A. HARDSHIP WITHDRAWALS

B. WITHDRAWALS AFTER AGE 59½

C. WITHDRAWALS AFTER AGE 70½

D. WITHDRAWALS AFTER NORMAL RETIREMENT AGE

E. WITHDRAWALS OF AFTER-TAX CONTRIBUTIONS

F. WITHDRAWALS OF ROLLOVER CONTRIBUTIONS

G. QUALIFIED RESERVIST DISTRIBUTION

H. WITHDRAWAL FOR PARTICIPANTS PERFORMING QUALIFIED MILITARY SERVICE

VIII. DISTRIBUTION OF BENEFITS

A. ELIGIBILITY FOR BENEFITS

B. DISTRIBUTABLE EVENTS

1. Death

2. Disability

3. Retirement

4. Minimum Required Distributions

5. Termination of Employment

C. FORM OF PAYMENTS

1. Lump Sum Distributions

a) Non-rollover Distribution

b) Direct Rollover Distribution

c) Combination Non-rollover Distribution and Direct Rollover Distribution

IX. MISCELLANEOUS INFORMATION

A. BENEFITS NOT INSURED

B. ATTACHMENT OF YOUR ACCOUNT

C. PLAN-TO-PLAN TRANSFER OF ASSETS

D. PLAN AMENDMENT

E. PLAN TERMINATION

F. INTERPRETATION OF PLAN

G. ELECTRONIC DELIVERY

X. INTERNAL REVENUE CODE TESTS

A. NON-DISCRIMINATION TESTS

B. TOP HEAVY TEST

XI. PARTICIPANT RIGHTS

A. CLAIMS

1. Claims Procedures

2. Review Procedures (For Appeal of an Adverse Benefit Determination)

B. STATEMENT OF ERISA RIGHTS

XII. SERVICES AND FEES

APPENDIX A. INVESTMENT OPTIONS

Pacific Architects and Engineers Incorporated 401(k) Savings Plan 1

SUMMARY PLAN DESCRIPTION

PACIFIC ARCHITECTS AND ENGINEERS INCORPORATED 401(K) SAVINGS PLAN

The Pacific Architects and Engineers Incorporated 401(k) Savings Plan (the “Plan”) of Pacific Architects and

Engineers, Inc. has been amended as of 01/01/2014 (the “Effective Date”). This Plan is intended to be a qualified retirement plan under the Internal Revenue Code.

The purpose of the plan is to enable eligible Employees to save for retirement. As well as retirement benefits, the plan provides certain benefits in the event of death, disability, or other termination of employment. The Plan is for the exclusive benefit of eligible Employees and their Beneficiaries.

This booklet is called a Summary Plan Description (“SPD”) and it contains a summary in understandable language of your rights and benefits under the plan. If you have difficulty understanding any part of this SPD, you should contact the Plan Administrator identified in the Basic Plan Information section of this document during normal business hours for assistance.

This SPD is a brief description of the principal features of the plan document and trust agreement and is not meant to interpret, extend or change these provisions in any way. A copy of the plan document is on file with the Plan

Administrator and may be read by any employee at any reasonable time. The plan document and trust agreement shall govern if there is a discrepancy between this SPD and the actual provisions of the plan.

This SPD is based on the federal tax implications of your participation in the Plan, transactions made within your

Account, and distributions you may receive from the plan. The state tax implications of your participation and these transactions should be determined based on an examination of appropriate state law. Please consult with your tax advisor if you have any questions regarding state tax law.

Pacific Architects and Engineers Incorporated 401(k) Savings Plan 2

I. Basic Plan Information

The information in this section contains definitions to some of the terms that may be used in this SPD and general

Plan information. If the first letter of any of the terms defined below is capitalized when it is used within this SPD, then it represents the indicated defined term.

A. Account

An Account shall be established by the Trustee to record contributions made on your behalf and any related income, expenses, gains or losses. It may also be referred to as an Account balance.

B. Beneficiary

This is the person or persons (including a trust) you designate, or who are identified by the plan document if you fail to designate or improperly designate, who will receive your benefits in the event of your death. You may designate more than one Beneficiary.

C. Deferral Contribution

This is a contribution taken directly from the pay of an Employee and contributed to the Plan, subject to certain limits (described below). The Plan permits you to make both pre-tax and certain after-tax (Roth) Deferral

Contribution amounts.

D. Employee

An Employee is an individual who is employed by your Employer as a common law employee or, in certain cases, as a leased employee and is not terminated.

E. Employer

The name and address of your Employer is:

Pacific Architects and Engineers, Inc.

1320 N. Courthouse Road

Suite 800

Arlington, VA 22201

(703) 717-6101

Your Employer’s federal tax identification number is: 98-0000105

The following Employer(s) also participate in the Plan and employees of each employer listed below shall be eligible to participate in accordance with the Participation section of this Summary Plan Description.

Federal Tax

Identification Number Participating Employer Name Designation

95-4340820 PAE Government Services, Inc. Related

42-1628965 Defense Support Services LLC Related

51-0511566 Space Coast Launch Services LLC Related

95-4179763 CSR, Computer Sciences Raytheon -a Joint Venture

Related

54-1920428 PAE Applied Technologies LLC Related

46-3286918 PAE ISR LLC Related

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F. ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) identifies the rights of Participants and

Beneficiaries covered by a qualified retirement plan.

G. Highly Compensated Employee

An Employee is considered a highly compensated Employee if (i) at anytime during the current or prior year you own, or are considered to own, at least five percent of your Employer, or (ii) received compensation from your

Employer during the prior year in excess of $115,000, as adjusted and you are in the top paid group consisting of the top 20% of employees ranked by compensation.

H. Non-Highly Compensated Employee

An Employee who is not a Highly Compensated Employee.

I. Participant

A participant is an eligible Employee who has satisfied the eligibility and entry date requirements and is eligible to participate in the Plan or a formerly eligible Employee who has an account balance remaining in the Plan.

J. Plan Type

The Pacific Architects and Engineers Incorporated 401(k) Savings Plan is a defined contribution plan. These types of plans are commonly described by the method by which contributions for participants are made to the plan. The

Pacific Architects and Engineers Incorporated 401(k) Savings Plan is a 401(k) deferral plan. More information about the contributions made to the plan can be found in Section III, Contributions.

K. Plan Administrator

The Plan Administrator is responsible for the administration of the Plan and its duties are identified in the plan document. In general, the Plan Administrator is responsible for providing you and your Beneficiaries with information about your rights and benefits under the Plan. The name and address of the Plan Administrator is:

Pacific Architects and Engineers, Inc.

1320 N. Courthouse Road

Suite 800

Arlington, VA 22201

(703) 717-6101

L. Plan Number

The three digit IRS number for the Plan is 002.

M. Plan Sponsor

Your Employer is the sponsor of the Plan.

N. Plan Year

The Plan Year is the twelve-month period ending on the last day of December. Your Employer may only change or have changed the Plan Year by amending and restating to a new Plan Document.

O. Service of Process

The plan's agent for service of legal process is the Plan Administrator.

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P. Trustee

The trustee is responsible for trusteeing the Plan’s assets. The trustee’s duties are identified in the trust agreement and relate only to the assets in its possession. The name and address of the Plan's Trustee are:

Fidelity Management Trust Company

82 Devonshire Street

Boston, MA 02109

Q. Qualified Military Service

Qualified Military Service is service in the uniformed services of the United States for a period of greater than 30 days that results in the Participant having a right of reemployment with the Employer under federal law.

II. Participation

A. Eligibility Requirements

You are eligible to participate in the Plan if you are an Employee.

However, you are not eligible to participate if you are:

a resident of Puerto Rico a Leased Employee a nonresident alien with no income from a U.S. source

Casual and Temporary Employees. However, if you are in the group(s) listed below, you shall become eligible to participate in the plan on the first entry date after you have reached age 21 and have completed at least 1,000 Hours of Service during an Eligibility Computation Period:

Casual and Temporary Employees.

You are also not eligible to participate if you are an individual who is a signatory to a contract, letter of agreement, or other document that acknowledges your status as an independent contractor not entitled to benefits under the Plan and you are not otherwise classified by the Employer as a common law employee or the Employer does not withhold income taxes, file Form W-2 (or any replacement form), or remit Social Security payments to the Federal government for you, even if you are later adjudicated to be a common law employee.

You will become eligible to participate in the Plan according to the table below:

Contribution type Age Requirement Service Requirement Entry Date

All Sources None None First day of each month

Once you become a Participant you are eligible to participate in the Plan until you terminate your employment with your Employer or become a member of a class of Employees excluded from the Plan. If you terminate your employment after you have met the eligibility requirements, and are later re-employed by your Employer, you will again be eligible to participate in the Plan when you complete one hour of service.

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III. Contributions

After you satisfy the participation requirements in Section II of this Summary Plan Description, you will be eligible to make Deferral Contributions and after-tax contributions. As described below, if you do not elect a Deferral

Contribution rate, you may be automatically enrolled to make Deferral Contributions. In addition, your Employer may make matching and nonelective contributions to your Account. The type(s) of contributions available under the

Plan are described in this section.

A. Compensation

Compensation must be defined to compute contributions under the Plan. For purposes of determining contributions, only Compensation paid to you for services you performed while employed as an Eligible Employee shall be considered. Eligible compensation for computing contributions under the Plan is the taxable compensation for a

Plan Year reportable by your Employer on your IRS Form W-2, excluding reimbursements or other expense allowances, fringe benefits, moving expenses, deferred compensation, any payments made to an Employee performing Qualified Military Service in lieu of wages the individual would have received from the Employer if the individual were performing service for the Employer, and welfare benefits and including salary reduction contributions you made to an Employer sponsored cafeteria, qualified transportation fringe, simplified employee pension, 401(k), 457(b) or 403(b) plan.

The definition of compensation for your plan for purposes of computing contributions also excludes certain amounts from certain contribution source types as indicated in the table below.

Source Exclusion (s)

Employee Deferral Contributions, Employee After-Tax Contributions and

Qualified Nonelective Contributions

No Exclusions.

Employer Matching Contributions No Exclusions.

Employer Nonelective Contributions No Exclusions.

Compensation for your first year of eligible Plan participation will be based upon eligible compensation paid for the entire Plan Year. Tax laws limit the amount of compensation that may be taken into account each Plan Year; the maximum amount for the 2014 Plan Year is $260,000.

B. Employee Deferral Contributions

1. Regular Deferral Contributions

You may elect to defer a percentage of your eligible compensation into the Plan after you satisfy the Plan’s eligibility requirements. The percentage of your eligible compensation you elect will be withheld from each payroll and contributed to an Account in the Plan on your behalf. For pre-tax contributions being withheld from your compensation, the percentage you defer is subject to an annual limit of the lesser of 60% of eligible compensation or $17,500 (in 2014; thereafter as adjusted by the Secretary of the Treasury) in a calendar year.

This plan also contains an automatic enrollment feature. If you are subject to automatic enrollment, you will be notified approximately 30 days prior to when your Employer will begin to automatically deduct from your pay on a pre-tax basis as a Deferral Contribution for you to the Plan. You may stop or change this automatic contribution by following the instructions provided in the notice. Deferral Contributions made automatically for you are treated the same under the Plan as Deferral Contributions made by your own election.

You will be eligible to designate some or all of your Deferral Contribution as a Roth Deferral Contribution at the time you make your deferral election. Once made, this election will be irrevocable (that is, Roth Deferral

Contributions cannot later be re-characterized as pre-tax Deferral Contributions). If you elect to make Roth

Deferral Contributions, the amount of your contribution will be included in your income for tax purposes, and the income tax withholding amounts will be deducted from the remainder of your pay, not from the Roth

Deferral Contribution amount.

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For example, if you have annual compensation of $30,000 and elect to make a Roth Deferral Contribution to the

Plan equal to 5% of your compensation, your Roth Deferral Contribution to the Plan will equal $1,500 (5% of

$30,000). The tax withholding applicable to the amount you have elected to contribute to the Plan as a Roth

Deferral Contribution will be applied against the remainder of your compensation.

Except with respect to the income taxation of Roth Deferral Contributions at contribution (described above) and to the distribution of amounts attributable to Roth Deferral Contributions (described below), Roth Deferral

Contributions are subject to the same rules applicable to pre-tax Deferral Contributions. For example, pre-tax and Roth Deferral Contributions are added together to determine whether you have hit the Federal tax law limit on Deferral Contributions ($17,500 in 2014 for those not eligible to make age 50 and over catch-up contributions) or the Plan’s deferral limit.

Your Deferral Contributions cannot be forfeited for any reason, however, there are special Internal Revenue

Code rules that must be satisfied and may require that some of your contributions be returned to you. The Plan

Administrator will notify you if any of your contributions will be returned. You may increase or decrease the amount you contribute as of the first day of each month. If you were automatically enrolled, you may have your

Deferral Contribution rate increased each year until it reaches a maximum of 5% of compensation, unless you elect otherwise. You may also completely suspend your contributions which you may resume as of the first day of the next month. If you want to increase, decrease, suspend, or resume your Deferral Contributions, you must call the Fidelity Retirement Benefits Line at 1-800-294-4015 or access the NetBenefits® web site at www.netbenefits.com.

If you are automatically enrolled, your Employer will automatically increase your contributions annually until your contributions reach a maximum of 5%and you will receive notice prior to the change taking effect.

If you are subject to automatic enrollment and, if applicable, automatic annual increase, this chart will help you determine how you may be impacted unless you elect otherwise. If you are uncertain how this plan provision impacts you, please consult your Plan Administrator.

Eligible Employee Group Description Automatic Enrollment

Deferral Rate %

Automatic Annual

Increase Rate %

See Superseding Provisions Addendum 3 1

Employees covered by a collective bargaining agreement

0 0

Citizens of the United States but are working for the Employer outside the United States

0 0

Employees of ATDDOMESTIC 3 1

Plan level- all other eligible employees 3 1

2. Additional Deferrals

You may make additional Deferral Contributions during the payroll period(s) designated by your Employer.

You may defer a whole percentage between 1 and 100% of your eligible compensation into the Plan by completing a special election form. The total amount of your additional, bonus, and regular Deferral

Contributions for the Plan Year may not exceed 60% of your eligible compensation or other applicable Internal

Revenue Code limits. Your Employer may refuse to accept any or all of your additional Deferral Contributions if they will have an adverse effect on the Plan’s annually required Internal Revenue Code tests.

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3. Bonus Contributions

You may make Deferral Contributions on any Employer paid bonus. You may defer a whole percentage from

1% to 100% of any bonus designated by your Employer into the Plan by completing a special election form.

The total amount of your bonus, additional, and regular Deferral Contributions for the Plan Year may not exceed

60% of your eligible compensation or other applicable Internal Revenue Code limits. If you fail to make an election with regard to bonus compensation, then your Employer will make a Deferral Contribution into the Plan from your bonus compensation at the same rate as is in place for your Regular Deferral Contributions. Your

Employer may refuse to accept any or all of your bonus contribution if it will have an adverse effect on the

Plan’s annually required Internal Revenue Code test.

4. Age 50 and Over Catch-Up Contributions

The Plan provides that participants who are projected to be age 50 or older by the end of the calendar year and who are making Deferral Contributions to the Plan may also make a catch-up contribution of up to $5,500 (in

2014; thereafter as adjusted by the Secretary of the Treasury).

C. Employee After-Tax Contributions

After you satisfy the Plan’s eligibility and entry date requirements, you may elect to contribute a percentage of your eligible compensation into the Plan on an after-tax basis. You may contribute a percentage of not less than one percent of eligible compensation up to an annual maximum of 10%. However, there are special Internal Revenue

Code rules which must be satisfied and the maximum amount you may contribute may be a lower percentage. The

Plan Administrator will notify you if any of your contributions will be returned. Your Employer may refuse to accept your after-tax contributions if they will have an adverse effect on the Plan’s non-discrimination tests. Your after-tax contributions belong to you and cannot be forfeited for any reason.

D. Employer Matching Contributions

You become eligible for matching contributions only if you make Deferral Contributions and/or employee after-tax contributions. For purposes of determining your matching contributions under the Plan, your Contributions will not include Age 50 and Over Catch-Up Contributions. Employer matching contributions must be allocated to your

Account in the Plan within prescribed legal time limits.

1. Discretionary Matching Contributions

Discretionary matching contributions will be computed by your Employer based on your eligible compensation contributed to the Plan each Plan Year.

Your Employer will communicate the amount of any annual discretionary matching contributions.

2. Qualified Matching Contributions

Your Employer may designate all or a portion of any matching contributions for a Plan Year as “qualified matching contributions” and allocate them to employees to help the Plan pass one or more annually required

Internal Revenue Code nondiscrimination test(s). Any such contributions will be allocated to those Participants eligible to receive the Employer matching contributions described above who made Deferral Contributions during the Plan Year. Participants are 100% vested in these contributions and may not request a hardship withdrawal of these contributions.

E. Nonelective Contributions

1. Fixed Nonelective Contributions

If you perform services covered by the applicable prevailing wage laws, Employer contributions will be allocated to your Account in such amounts as may be required under such laws to meet the required benefit levels for each Plan Year.

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2. Discretionary Nonelective Contributions

Your Employer may make discretionary nonelective contributions in an amount to be determined by the Board of Directors for each payroll period. You cannot receive any nonelective contributions for any Plan Year in which you are considered a Highly Compensated Employee (HCE). Nonelective contributions, if any, made to the Plan by your Employer shall be allocated to your account based upon the ratio that your Compensation bears to the Compensation of all eligible employees within the group of eligible employees to which you belong among the following groups:

Employees of DS2 who are not Service Contract Employees. Effective July 1, 2012, Highly Compensated

Employees of DS2 shall be eligible Participants for purposes of this section.

F. Qualified Nonelective Contributions

Your Employer may designate all or a portion of any nonelective contributions for a Plan Year as “qualified nonelective contributions” and allocate them to Non-Highly Compensated Employees to help the Plan pass one or more annually required Internal Revenue Code nondiscrimination test(s). You will be 100% vested in these contributions and may not request a hardship withdrawal of these contributions.

G. Limit on Contributions

Federal law requires that amounts contributed by you and on your behalf by your Employer for a given limitation year generally may not exceed the lesser of:

$52,000 (or such amount as may be prescribed by the Secretary of the Treasury); or

100% of your annual compensation.

The limitation year for purposes of applying the above limits is the twelve month period ending December 31st.

Contributions under this Plan, along with Employer contributions under any other Employer-sponsored defined contribution plans, may not exceed the above limits. If this does occur, then excess contributions in your Account may be forfeited or refunded to you based on the provisions of the Plan document. You will be notified by the Plan

Administrator if you have any excess contributions. Income tax consequences may apply on the amount of any refund you receive.

H. Rollover Contributions

You can roll over part or all of an eligible rollover distribution you receive from an eligible retirement plan into this

Plan even if you have not yet satisfied the age and Eligibility service requirements described in Section II above;

however you will not become a Participant in the Plan and become entitled to make Deferral Contributions and share in Employer contributions until you have met the Plan’s eligibility and entry date requirements. An eligible retirement plan is a qualified plan under Section 401(a), a 403(a) annuity plan, a 403(b) annuity contract, an eligible

457(b) plan maintained by a governmental employer, and an individual retirement account and individual retirement annuity. An eligible rollover distribution includes any distribution from an eligible retirement plan, except any distribution from an individual retirement account or an individual retirement annuity consisting of nondeductible contributions or any distribution from a 403(b) annuity contract consisting of after-tax employee contributions.

Making Rollover Contributions to the Plan that consist of assets other than qualified 401(a) plan assets may result in the loss of favorable capital gains or ten year income averaging tax treatment that may otherwise be available with respect to a lump sum distribution to you from the Plan. The loss of this favorable tax treatment may also occur if you make a Rollover Contribution to the Plan that consists of qualified 401(a) plan assets under certain circumstances. If you may be eligible for this special tax treatment, you should consult your tax advisor and carefully consider the impact of making a Rollover Contribution to the Plan.

If your Rollover Contribution to the Plan is not a direct rollover (i.e., you received a cash distribution from your eligible retirement plan), then it must be received by the Trustee within 60 days of your receipt of the distribution.

Rollover Contributions may only be made in the form of cash, allowable fund shares, or (if the Plan allows new loans in accordance with the terms of this SPD) promissory notes from an eligible retirement plan. Your Rollover

Contributions Account will be subject to the terms of this Plan and will always be fully vested and nonforfeitable. In general, if you receive an eligible rollover distribution as a surviving spouse of a participant or as a spouse or former spouse who is an “alternate payee” pursuant to a qualified domestic relations order (“QDRO”), you may also make a

Rollover Contribution to the Plan.

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The Plan will accept direct Rollover Contributions of amounts attributable to Roth Deferral Contributions that you made to another qualified plan that accepted Roth Deferral Contributions and properly segregated them from other contributions. The same rules that apply to other direct Rollover Contributions apply to direct Rollover

Contributions of amounts attributable to Roth Deferral Contributions, except for the income tax treatment on distribution (described below).

IV. Investments

A. Investments

The Employee Retirement Income Security Act of 1974 (ERISA) imposes certain duties on the parties who are responsible for the operation of the Plan. These parties, called fiduciaries, have a duty to invest Plan assets in a prudent manner. However, an exception exists for plans that comply with ERISA Section 404(c) and permit a

Participant to exercise control over the assets in his/her Account and choose from a broad range of investment alternatives. This Plan is intended to be a Section 404(c) plan. To the extent that you have directed the investment of assets in your Account under the Plan, you are responsible for the investment decisions you made relating to those assets and the Plan fiduciaries are not responsible for any losses resulting from your investment instructions. In addition, you have the right to direct the trustee regarding mutual fund proxy voting based on the number of shares you own. Please see Appendix A for a list of the investments currently available under the Plan. If you want additional information about any investment alternative, you may request any of the following information by contacting Fidelity by calling 1-800-294-4015 or by accessing NetBenefits® at www.netbenefits.com:

A description of the annual operating expenses of each investment fund (e.g., investment management fees, administrative fees, transaction costs) which reduce the rate of return to you, and the aggregate amount of such expenses expressed as a percentage of average net assets of the designated investment alternative;

Prospectuses, financial statements and reports, plus any other material provided to the Plan which relates to the available investment alternatives;

A list of the assets comprising the portfolio of each investment fund that constitute plan assets within the meaning of 29 CFR 2510.3-101, the value of each such asset (or the proportion of the investment fund which it comprises), and with respect to each such asset which is a fixed rate investment contract issued by a bank, savings and loan association or insurance company, the name of the issuer of the contract, the term of the contract and the rate of return on the contract;

Information concerning the value of shares or units of the investment funds available to you under the Plan, as well as the past investment performance of such funds, determined net of expenses, on a reasonable and consistent basis; and

Information concerning the value of shares or units in the investment funds held in your Plan account.

B. Statement of Account

The assets in the Plan are invested in available investment options and a separate Account is established for each

Participant who receives and/or makes a contribution. The value of your Account is updated each business day to reflect any contributions, exchanges between investment options, investment earnings or losses for each investment option and withdrawals. Your account statement is available online through NetBenefits® at www.netbenefits.com.

You can view and print a statement for any time period up to 24 previous months. A statement is also available to be automatically mailed to you every three months. You can initiate these mailings by logging on to NetBenefits® and selecting Mail Preferences under the Accounts tab.

C. Election

The Plan is intended to qualify as a Participant-directed plan under Section 404(c) of ERISA. This means that you are responsible for your investment decisions under the plan and any resulting investment activity. The plan fiduciaries, including, but not limited to, Fidelity Management Trust Company and Pacific Architects and Engineers, Inc., are not responsible for any losses incurred as a result of your investment decisions.

Pacific Architects and Engineers Incorporated 401(k) Savings Plan 10

V. Vesting

The term “vesting” refers to your nonforfeitable right to the money in your Account.

If you terminate your employment with your Employer, you may be able to receive a portion or all of your Account based on your vested percentage. You are always 100% vested in your Rollover Contributions, Employer

Nonelective Contributions, Employer Matching Contributions, After-Tax Contributions, Qualified Matching

Contributions, Qualified Nonelective Contributions, Deferral Contributions and any earnings thereon.

Additional Vesting Schedule

Employees who are members of certain class(es), specified below, receive a different vesting schedule for the below-specified contribution:

Your Prevailing Wage contributions will be subject to the vesting schedule appearing immediately below if you are a member of the following class: All balances of all Participants with a prevailing wage source.

Years of Service Vesting Percentage less than 1 100

VI. Participant Loans

A. General Loan Rules

Loans shall be made available to all qualifying Participants on a reasonably equivalent basis. Loans are not considered distributions and are not subject to Federal or state income taxes, provided they are repaid as required.

While you do have to pay interest on your loan, both the principal and interest are deposited in your Account.

B. Specific Loan Procedures

1. Loan Application

If you have met the Plan’s eligibility and entry date requirements, you may apply for a loan by calling the

Fidelity Retirement Benefits Line, 1-800-294-4015 or by accessing the NetBenefits® web site at www.netbenefits.com. All telephone calls will be recorded. You may apply for only one loan each calendar year. All loans (except loans for the purchase of a principal residence) have been pre-approved by the Plan

Administrator based on the criteria outlined in the Plan’s loan procedures. Loans will be allowed for any purpose. A loan set up fee of $125 will be deducted from your Account for each new loan processed.

2. Loan Amount

The minimum loan is $1,000 and the maximum amount is the lesser of one-half of your vested Account balance or $50,000 reduced by the highest outstanding loan balance in your Account during the prior twelve month period. All of your loans from plans maintained by your Employer or a Related Employer will be considered for purposes of determining the maximum amount of your loan. Up to 50% of your vested Account balance may be used as collateral for any loan.

3. Number of Loans

You may only have 1 loan outstanding at any given time. If you have an existing loan you may not apply for another loan until the existing loan is paid in full.

4. Interest Rate

All loans shall bear a reasonable rate of interest as determined by the Plan Administrator based on the prevailing interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances. The interest rate shall remain fixed throughout the duration of the loan.

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5. Loan Repayments and Loan Maturity

All loans must be repaid in level payments through after-tax payroll deductions on at least a quarterly basis over a five year period unless it is for the purchase of your principal residence in which case the loan repayment period may not extend beyond 10 years from the date of the loan. If repayment is not made by payroll deduction, a loan shall be repaid to the Plan by payment to the Employer. The level repayment requirement may be waived for a period of one year or less if you are on a leave of absence, however, your loan must still be repaid in full on the maturity date. If you are on a military leave of absence, the repayment schedule may be waived for the entire length of the time missed on leave. Your loan will accrue interest during this time, and upon return from a military leave of absence, your loan will be reamortized to extend the length of the loan by the length of the leave. If a loan is not repaid within its stated period, it will be treated as a taxable distribution to you.

6. Default or Termination of Employment

The Plan Administrator shall consider a loan in default if any scheduled repayment remains unpaid as of the last business day of the calendar quarter following the calendar quarter in which a loan is initially considered past due. In the event of a default, death or termination of employment, the entire outstanding principal and accrued interest shall be immediately due and payable. However, if your termination of employment results from a corporate action on the part of your employer and you remain performing the same job after that corporate action, within 60 days of your termination of employment you may request that the Plan Administrator roll over your loan to your new employer’s retirement plan (if such new plan will accept your loan roll over). Unless you roll over your loan, any default in repayment to the Plan will result in the treating of the balance due for your loan as a taxable distribution from the Plan.

VII. In Service Withdrawals

If you qualify, as indicated below for each withdrawal, you may obtain a withdrawal from the Plan while you are still an Employee. You can apply for any of the below described distributions by calling the Fidelity Retirement Benefits

Line at 1-800-294-4015 or by accessing the NetBenefits® web site at www.netbenefits.com. All telephone calls will be recorded. The following types of withdrawals are available under the Plan:

A. Hardship Withdrawals

If you are an Employee and request a hardship withdrawal and it is approved by the Plan Administrator, you may withdraw certain contributions to satisfy the following immediate and heavy financial needs: (1) medical expenses for you, your spouse, children, dependents or a primary beneficiary designated by you under the Plan; (2) the purchase of your principal residence; (3) to prevent your eviction from, or foreclosure on, your principal residence;

(4) to pay for post-secondary education expenses (tuition, related educational fees, room and board) for you, your spouse, children, dependents or a primary beneficiary designated by you under the Plan for the next twelve months;

(5) to make payments for burial or funeral expenses for your deceased parent, spouse, child, dependent or a primary beneficiary designated by you under the Plan; (6) to pay expenses for the repair of damage to your principal residence that would qualify for the casualty deduction under Section 165 of the Internal Revenue Code (without regard to whether the loss exceeds 10% of adjusted gross income); or any other immediate and heavy financial need as determined based on Internal Revenue Service regulations. In accordance with Internal Revenue Service regulations, you must first exhaust all other assets reasonably available to you prior to obtaining a hardship withdrawal. This includes obtaining a withdrawal of any after-tax contribution in your Account and a loan from this

Plan and any other qualified plan maintained by your Employer. Your Deferral Contributions to this Plan, and any other Employer-sponsored qualified or non-qualified plan, will be suspended for six months after your receipt of the hardship withdrawal. The minimum hardship withdrawal is $500. Hardship withdrawals will be subject to the 10% nonperiodic income tax withholding rate unless you elect out of the withholding. Contributions available to withdraw under the terms of this section are:

Employee Deferral Contributions (including both pretax and Roth deferral contributions if available in the Participant’s Account)

Pacific Architects and Engineers Incorporated 401(k) Savings Plan 12

B. Withdrawals After Age 59½

If you have reached age 59½, then you may elect to withdraw all or a portion of your entire vested Account while you are still employed by your Employer.

C. Withdrawals After Age 70½

Starting in the calendar year in which you reach age 70½, you may elect to receive distributions calculated in the same manner as Minimum Required Distributions. For more information, please refer to the paragraph so entitled under the Distributable Events subsection of this SPD’s section on Distribution of Benefits below.

D. Withdrawals After Normal Retirement Age

You may elect to withdraw your vested Account balance after you reach the Plan’s normal retirement age, 65, or delay it until you retire. Notwithstanding the above, by law certain contributions including employee deferral, qualified matching, safe harbor matching, qualified nonelective, and safe harbor nonelective contributions cannot be withdrawn prior to age 59½.

E. Withdrawals of After-Tax Contributions

If you have previously made after-tax contributions then you may elect to withdraw all or a portion of your contributions. There is no limit on the number of withdrawals of this type. Also, you cannot withdraw after-tax contributions until they have been held in the Plan for at least 24 months.

F. Withdrawals of Rollover Contributions

If you have a balance in your rollover contributions Account, you may elect to withdraw all or a portion of it. There is no limit on the number of withdrawals of this type.

G. Qualified Reservist Distribution

If you have been called to active military duty for more than 179 days or for an indefinite period, you may elect to withdraw your Deferral Contributions during your active duty period. The withdrawal will not be subject to the 10% early withdrawal penalty tax. You may also elect to repay the distribution to an IRA within two years after the end of your active duty period.

H. Withdrawal for Participants Performing Qualified Military Service

If you are performing Qualified Military Service, you may elect to withdraw your Deferral Contributions, Qualified

Matching Contributions and Qualified Nonelective Contributions during your active duty period. You will be suspended from making any contributions for 6 months following the distribution and the withdrawal may be subject to the 10% early withdrawal penalty tax.

The amount of any taxable withdrawal other than the return of your after-tax contributions that is not rolled over into an Individual Retirement Account or another qualified employer retirement plan will be subject to Federal and state, if applicable, income taxes. In general, the amount of any taxable withdrawal that is not rolled over into an

Individual Retirement Account or another qualified employer retirement plan will be subject to 20% Federal Income

Tax and any applicable State Income Tax. A 10% Internal Revenue Code early withdrawal penalty tax may apply to the amount of your withdrawal if you are under the age of 59½ and do not meet one of the Internal Revenue Code exceptions. For information regarding the taxation of amounts attributable to Roth contributions, see the Cash

Distribution section below.

The Plan Administrator will notify you of the appropriate procedures to make a withdrawal from the Plan. Consult your Plan Administrator for more information.

Pacific Architects and Engineers Incorporated 401(k) Savings Plan 13

VIII. Distribution of Benefits

A. Eligibility For Benefits

A distribution can be made to you if you request one due to your disability, retirement, or termination of employment from your Employer and any Related Employer. Your Beneficiary or Beneficiaries may request a distribution of your vested Account balance in the event of your death. The value of your Account balance will continue to increase or decrease, as appropriate, based on the investment returns until it is distributed.

You may defer receipt of your distribution until a later date. However, you cannot postpone it if your vested

Account balance is $5,000 or less in which case the Plan Administrator will direct the Trustee that any amount exceeding $1,000 be distributed to an Individual Retirement Account or Annuity (“IRA”) for your benefit. If your vested Account balance is $1,000 or less, the Plan Administrator will direct the Trustee to distribute it to you as a lump sum distribution without your consent. Prior to such distribution you still have the right to request that the amount be distributed directly to you in the form of a lump sum payment or to request that it be rolled-over to a different IRA provider or another retirement plan eligible to receive rollover contributions.

If you fail to request a different treatment of an automatic distribution under the Plan’s Cash-Out Provision, your distribution will be paid over to an IRA provider chosen by the Plan Administrator and invested in a product designed to preserve the principal of that distribution while still providing a reasonable rate of return and preserving liquidity. The fees assessed against this newly established IRA by its provider will be paid by the participant.

If you have questions regarding the Plan’s automatic rollover rules, the Plan’s IRA provider for automatic rollovers, or the fees and expenses applicable to the automatic rollover IRA, please contact the Plan Administrator. Your consent will be required for any distribution if your vested Account balance is greater than $5,000.

You should consult with your tax advisor to determine the financial impact of your situation before you request a distribution. You may apply for a distribution by calling the Fidelity Retirement Benefits Line at 1-800-294-4015.

All telephone calls will be recorded. Most distributions have been pre-approved by the Plan Administrator.

B. Distributable Events

You are eligible to request a distribution of your vested Account balance based on any of the following events:

1. Death

If you are a Participant in the Plan and die, your vested Account balance, if any, will be paid to your designated

Beneficiary or Beneficiaries. You may designate a Beneficiary or Beneficiaries on a designation form that must be properly signed and filed with the Plan Administrator. If you are married and want to designate someone other than your spouse as your primary Beneficiary, your spouse must consent to this designation by signing the form. His/her signature must be witnessed by a Plan representative or a notary public. You should contact the

Plan Administrator to obtain a designation of beneficiary form.

2. Disability

If you become disabled while you are employed by your Employer or a Related Employer, so that you are determined disabled by a physician selected by the Plan Administrator, the full value of your Account balance may be distributed to you upon request. You may request a distribution of your Account balance only if you terminate your employment with your Employer or Related Employer.

3. Retirement

You do not have to terminate your employment with your Employer just because you attain your normal retirement age of 65.

Pacific Architects and Engineers Incorporated 401(k) Savings Plan 14

4. Minimum Required Distributions

You are required by law to receive a minimum required distribution from the Employer’s Plan, unless you are a five percent owner of the Employer, no later than April 1 of the calendar year following the calendar year you turn 70½ or terminate your employment, whichever is later. If you are a five percent owner of the Employer, you must start receiving your distribution no later than April 1 of the calendar year following the calendar year you turn 70½. Once you start receiving your minimum required distribution, you should receive it at least annually and you should complete the appropriate documentation each year until all assets in your Account are distributed. If you have any questions about your minimum required distributions, please contact your Plan

Administrator.

5. Termination of Employment

Generally, if you terminate your employment with your Employer and all Related Employers, you may elect to receive a distribution of your vested Account balance from the Plan.

C. Form of Payments

1. Lump Sum Distributions

Your entire vested Account balance will be paid to you in a single distribution or other distribution that you elect.

a) Non-rollover Distribution

Any distribution paid directly to you will be subject to mandatory Federal income tax withholding of 20% of the taxable distribution and the remaining amount will be paid to you. You cannot elect out of this tax withholding but you can avoid it by electing a direct rollover distribution as described below. This withholding is not a penalty but a prepayment of your Federal income taxes.

Subject to certain exceptions (for example, with respect to a distribution of excess Deferral Contributions to

Highly Compensated Employees due to nondiscrimination test results), the entire amount of your account under the Plan attributable to Roth contributions will be distributed to you free from Federal income tax

(including the earnings portion) if the distribution occurs after the five taxable year period beginning with the first taxable year you made a designated Roth contribution to the Plan (or to a plan you previously participated in, if earlier, if amounts attributable to those previous Roth contributions were directly rolled over to this Plan), provided the distribution is also made:

On or after you attain age 59 ½ or

To your beneficiary (or estate) on or after your death; or

Pursuant to your being disabled.

For example, if you made your first Roth contribution held within the Plan (or another qualified plan, as described in the Rollover Contributions section above) during July, 2006, attained age 59-1/2 on January 1, 2011 and were eligible for a distribution on January 3, 2011, the portion of your distribution attributable to

Roth contributions would not be subject to Federal income tax upon distribution on January 3, 2011.

You may rollover the taxable distribution you receive to an individual retirement account (IRA) or your new employer’s qualified plan, if it accepts rollover contributions and you roll over this distribution within

60 days after receipt. You will not be taxed on any amounts timely rolled over into the IRA or your new employer’s qualified Plan until those amounts are later distributed to you. Any amounts not rolled over may also be subject to certain early withdrawal penalties prescribed under the Internal Revenue Code.

b) Direct Rollover Distribution

As an alternative to a non-rollover distribution paid directly to you, you may request a rollover distribution of your entire eligible Account balance directly into a Fidelity Advisor IRA, a non-Fidelity Advisor IRA or to your new employer’s eligible plan, if it accepts your rollover contributions, or a 403(a) Annuity. Federal income taxes will not be withheld on any direct rollover distribution.

Pacific Architects and Engineers Incorporated 401(k) Savings Plan 15

1. Rollover to a Fidelity Advisor IRA - You must complete the appropriate documentation and a

Fidelity Advisor IRA application. If your distribution is authorized by the…