FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
Commission File No. 0-1051
Consolidated Papers, Inc.
(A Wisconsin Corporation)
IRS Employer Identification No. 39-0223100
Wisconsin Rapids, Wisconsin 54495-8050
Telephone No. 715-422-3111
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS: Common Stock, Par Value $1.00
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. (X)
The aggregate market value on March 8, 1994 of the voting stock held by
nonaffiliates of the registrant was approximately $1.19 billion, based upon
the NASDAQ closing price on March 8, 1994 and an estimate that 60.0% of the
stock is owned by nonaffiliates.
On March 8, 1994 there were 44,056,666 shares of common stock outstanding.
Information required by Items 10, 11, and 12 of Form 10-K is incorporated by
reference (except as specifically excepted in the Proxy Statement) into
Part III hereof from the registrant's Proxy Statement to Shareholders for the
Annual Meeting of Shareholders to be held April 25, 1994.
<PAGE>
PART I
Item 1. BUSINESS.
Consolidated Papers, Inc. was incorporated in Wisconsin in 1894. The company
and its subsidiaries (collectively, the "Company") operate primarily in the
pulp and paper industry. Operations in pulp and paper involve the manufacture
and sale of enamel printing paper (also known as coated printing paper) for
the printed communications industry, coated specialty papers used largely in
the packaging and labeling of food and consumer products, and the manufacture
of pulp for use in the manufacture of these papers. The Company also
manufactures paperboard, paperboard products and corrugated products.
Integrated in the business are electrical power operations, which have nominal
sales to others.
There was no change in the business done by the Company during 1993.
The Company's principal product is coated printing paper. The Company is a
leading producer of these papers and of coated specialty papers.
The percent of coated printing paper sales to total sales was 84.7% (1989),
84.6% (1990), 81.5% (1991), 80.7% (1992), and 79.8% (1993).
Coated printing papers are sold directly to magazine publishers and through
paper merchants to publishers and commercial printers. Distribution of other
paper products is by means of direct sales to quantity users.
<TABLE>
DISTRIBUTION OF ENAMEL PRINTING PAPER SALES IN TONS
<CAPTION>
Direct
Publisher Merchant
Accounts And Other
Year % %
<C> <C> <C>
1989 62% 38%
1990 62% 38%
1991 62% 38%
1992 61% 39%
1993 56% 44%
The Company competes in the coated printing paper market and coated specialty
paper market (1) by providing paper of high quality incorporating special
qualities desired by its customers, (2) by pricing its products competitively,
and (3) by emphasizing service to customers in the form of prompt attention to
orders, prompt and reliable delivery of products to customers, and technical
assistance to printers that use the Company's products.
Few paper manufacturers have unique qualities in coated papers or coated
specialty papers, or unique machines or secret processes that give them a
strong competitive advantage over other paper manufacturers. Because of this,
price competition is a more important marketing factor during periods of
excess supply of, or low demand for, this product. Unfortunately, all too
often these two factors occur at once.
The Company competes in the coated printing paper market with other paper
companies, some of which are substantially larger, more diversified, and with
greater financial resources. However, the Company is one of the largest
manufacturers of coated printing papers in the United States, having shipped
875,715 tons of coated printing papers in 1993, which represents approximately
12% of the U.S. market for this product. The Company's principal U.S.
competitors in this market are Blandin Paper Company, a subsidiary of Fletcher
Challenge Canada Ltd.; Boise Cascade Corporation; Bowater Incorporated;
Champion International Corporation; James River Corp.; International Paper
Company; Mead Corporation; Repap Wisconsin Inc., an affiliate of Repap
Enterprises Corporation Inc.; Pentair, Inc.; Northwest Paper Division of
Potlatch Corporation; S.D. Warren Division of Scott Paper Company; Westvaco
Corporation; and Weyerhaeuser Company.
The Company's energy sources during 1993 were:
<S> <C>
Coal 26.6%
Process Waste 44.8%
Natural Gas 13.8%
Electricity 14.5%
Petroleum products .3%
The Company experienced no shortages of energy in 1993. The Company currently
purchases 100% of its coal requirement under two contracts, one for low-sulfur
western U.S. coal, for which we are currently negotiating an extension from
December 31, 1996 to December 31, 1999, and the other for Kentucky coal, which
expires September 30, 1994. Coal is currently in ample supply and we
anticipate no problem extending or replacing the Kentucky coal contract.
The Company is in the first year of a five-year agreement for the firm
transportation of approximately 80% of its total natural gas supply.
Approximately 20% of the Company's natural gas consumption is in the
interruptible category, which means it is subject to reduction in supply
whenever cold weather or other events decrease the amount of pipeline gas
available. When such reductions occur, production is maintained by
substituting fuel oil or propane, of which the Company has an adequate supply.
Natural gas is currently in good supply and minimal interruption is expected
in 1994.
The Company is integrated through ownership of forest lands and through its
own pulp-producing facilities. The harvest during 1993 from Company lands was
the equivalent of 16% of the wood used in the Company's pulp mills. Wood used
in the Company's pulp mills from outside Company land came from independent
producers who obtain their wood products from public and private lands, and
from sawmill residues. The Company was able to acquire an adequate supply of
pulpwood and wood chips during 1993 and expects that its regular suppliers
will be able to furnish it with an adequate supply of pulpwood and wood chips
for 1994 operations.
The Company also purchases market pulp on a regular basis and purchased 22% of
the total pulp consumed by the Company's paper mills during 1993. The Company
has been able to acquire sufficient pulp to operate its mills at planned rates
to date and has contracts and other commitments to cover substantially all of
its estimated requirements in 1994.
The principal raw materials consumed in the manufacture of kraft pulp include
pulpwood, chlorine, caustic soda, oxygen, hydrogen peroxide, sulfuric acid,
sodium chlorate, and lime. The principal raw materials consumed in the
manufacture of coated papers include kraft pulp, groundwood pulp,
thermomechanical pulp, starch, soya protein, clay, calcium carbonate, latex,
and titanium dioxide pigment.
The Company has multiple sources for all principal raw materials consumed and
purchases most raw materials from domestic sources. The majority of the
purchased kraft pulp is imported from Canada, along with small quantities of
wood chips. During 1993, the Company was able to procure adequate supplies of
all principal raw materials and thus experienced no interruptions of
production due to materials shortages. All raw materials remain in good
supply and no interruptions of production due to materials shortages are
anticipated in 1994.
The Company has various patents but does not believe its business is dependent
on any one patent or group of patents.
The Company spent an estimated $6 million in 1993, $5.6 million in 1992, and
$7 million in 1991 on research and development. These funds were devoted to
the development of improved processes and new process control systems, the
development of new products and the improvement of existing products, and
environmental projects.
The Company is committed to complying with all state and federal environmental
regulations.
Our wastewater permits expired on June 30, 1993. The Company's wastewater
permit renewal applications were completed and submitted to the Wisconsin
Department of Natural Resources (WDNR) six months prior to expiration in
accordance to regulatory requirements. The WDNR informed us that our
wastewater permits were not renewed on schedule due to their large backlog of
permit applications requiring renewal. Until our permits are renewed, all
conditions and limitations of the expired permits remain in effect. The
renewed permits will be public noticed for comments. If any permit conditions
or limits are unreasonable, we will challenge through the adjudicatory hearing
process. We expect the renewed permits will have conditions and limitations
similar to our existing permits plus new nutrient and toxics monitoring
requirements and limitations. The Company anticipates that its wastewater
permits will be renewed in 1994. We remain in compliance with all conditions
and limitations of our effective wastewater permits. The Company does not
expect that compliance with its renewed wastewater permits will cause material
changes in its business or effect its competitive position. The Company is
unable to predict the effect of future amendments to the Clean Water Act which
may require additional wastewater treatment. The Company continues to invest
capital funds to upgrade wastewater treatment facilities in preparation for
production increases and future regulations.
The Company submitted storm water permit applications for all applicable
operations in accordance with regulatory compliance dates. The WDNR is
currently reviewing storm water permit applications to determine priority of
reissuance. The WDNR plans to issue general storm water permits in phases
beginning in 1994. The permits will include a pollution prevention plan, may
require storm water sampling and testing and may require pollution control.
The Company will define storm water permit requirements and schedule as soon
as possible and implement a cost-effective strategy to comply. The storm
water permit requirements are not expected to cause material changes in the
Company's business or effect its competitive position.
The Company continues to implement plans to assure continued compliance with
WDNR's hazardous air emissions regulations.
The Federal Clean Air Act Amendments of 1990 and the Clean Water Act Effluent
Guidelines are expected to have a significant financial impact on the paper
industry. The Environmental Protection Agency proposed rules to reduce the
discharge of water pollutants and emissions of hazardous air pollutants from
the paper industry on December 17, 1993. These proposed regulations are
commonly referred to as the "Cluster Rule." The Company's preliminary review
of the proposed Cluster Rule indicates that capital expenditures of
$60 million to $95 million for process and equipment changes may be required
by the end of 1998. Additional annual operating costs of $20 million to
$25 million may be required to comply with the Cluster Rule. The industry's
national trade associations are working with Company representatives to
carefully review these significant regulations. Detailed comments are being
prepared seeking relief as appropriate. Comments on the proposed Cluster Rule
are due by March 17, 1994. The proposed Cluster Rule is subject to change
prior to final promulgation which is currently scheduled for late 1995.
Therefore, our capital and operating cost estimates are also subject to change
and will be updated as required by the final Cluster Rule. Because the
Company's principal competitors will also be subject to similar regulatory
requirements, the Company does not expect that compliance with the Cluster
Rule will affect its competitive position.
The Company remains in compliance with the monitoring and reporting
requirements of state groundwater regulations applicable to its active and
inactive landfills. The Company continues to explore solid waste reduction
and recycling alternatives to decrease costs and reliance on landfills. The
Company obtained regulatory approval to restart its ConsoGro agricultural
landspreading program in 1993. The ConsoGro program began operation on
November 1, 1993. The ConsoGro program reduces our dependence on landfills,
and benefits the local agricultural community and environment. The Company
continues to distribute wet and dry lime sludge from its Kraft pulp mill as a
liming agent and for use in asphalt mixtures. The Company completes landfill
site life evaluations annually to assure adequate lead time for permitting and
constructing required new sites. The Company continues to make progress in
obtaining all approvals and permits to expand landfill capacity at the Water
Quality Center. At this time, the Company is unable to predict the effect of
future landfill, groundwater or sediment remediation regulations.
The Company's Hazardous Materials Committee continues to ensure timely and
full compliance with all regulations applicable to the purchase,
transportation and disposal of hazardous materials. The committee also
ensures compliance with the Department of Transportation rules regarding
training of all employees who handle and transport hazardous materials.
The unintended generation of dioxin is a global concern and a challenge for
the paper industry. The industry's use of elemental chlorine in the pulp-
bleaching process has been linked to the formation of trace amounts of
dioxins, furans, chloroform and other chlorinated organics. The Company has
developed a multi-phase program to reduce the use of elemental chlorine in the
pulp-bleaching process. The Company's multi-phase chlorine reduction program
achieved new levels of success in 1993. Phase 1 of the chlorine-reduction
program was completed in 1992 and included improved hardwood brownstock
washing, increased substitution of chlorine dioxide in the first stage of pulp
bleaching and use of hydrogen peroxide and oxygen in the lignin-extraction
stage. Phase 2 of the chlorine-reduction program was completed in 1993 and
includes the addition of softwood oxygen delignification and associated
brownstock washing. The Company has been using oxygen delignification on
hardwood since 1986. Phase 1 produced nondectable levels of dioxin (2,3,7,8-
TCDD) in our treated wastewater effluent and assures compliance with permit
limits. Phase 2 will be optimized during 1994 with emphasis on further
reducing elemental chlorine. Phase 2 is expected to reduce dioxin levels
further in pulp and wastewater treatment plant sludge and also further reduce
the formation of other chlorinated organics, including chloroform. Our
chlorine-reduction efforts will continue. During 1994, phases 1 and 2 of the
chlorine-reduction program will be optimized and the environmental results
reviewed and compared to the proposed Cluster Rule. We will define technology
options, implementation schedule and budget to meet future regulatory
requirements and market demand. The Company continues to evaluate the
technical and economical feasibility of nonchlorine bleaching if required by
future regulation or the marketplace.
The Company continues to comply with its voluntary commitment to the Food and
Drug Administration to reduce dioxin (2,3,7,8-TCDD) in bleached wood pulp used
to manufacture food packaging to two parts per trillion or less.
During 1993, the Company settled a lawsuit brought by the United States for
violation of the Company's Clean Air Act permit relating to technology-based
particulate emission limits applicable to Kraft Division's lime kiln. The
consent decree settling the litigation required payment of $510,000, which was
paid during the fourth quarter of 1993. To remedy the violation the Company
installed a $2.4 million electrostatic precipitator that will assure
compliance with current and anticipated future particulate emission limits.
The consent decree also contains various operational and reporting
requirements for the lime kiln that will remain in effect until October 1995.
We have developed an internal management system to assure compliance with all
conditions of the consent decree.
The Company also settled a lawsuit brought by the United States seeking
recovery of cleanup expenses incurred at a Superfund site (Schmalz Dump) in
Harrison, Wisconsin. The Company expects to pay approximately $1.3 million to
the United States as a result of this settlement. Of this amount,
approximately $1 million was paid in 1993. The Company recovered a portion of
this expense as a result of a 1993 settlement of its contribution action
against several other defendants involved with the site. The Company also
finalized an agreement with several of its insurers to cover an additional
portion of its expenses at this site.
Settlement of the lime kiln air emission violation and the Schmalz Superfund
cleanup are not expected to cause material changes in the Company business or
affect its competitive position.
The Company remains in compliance with all provisions of emergency planning
community right-to-know legislation and federal and state underground storage
tank regulations. Environmental activities not only are directed at
protecting the environment through pollution control, but also through
pollution prevention. The Company actively participates in the Wisconsin
Paper Council's innovative pollution prevention partnership with the WDNR.
The Company is defining pollution prevention/reduction options and costs.
Internal environmental audits are intended to assure strict compliance with
rapidly expanding complex environmental regulations in the most cost-effective
manner.
The Company estimates current environmental operating costs to be
$22.7 million annually, including depreciation of $6.8 million. In 1993, the
Company spent $17.4 million on capitalized environmental improvements and will
spend another $10.0 million in 1994. The Company anticipates that compliance
with regulations to be promulgated to implement the Clean Air Act Amendments
of 1990 will require significant capital expenditures over the next five years
and will significantly increase operating costs at the Company's Kraft
Division. These costs are described in more detail in Part II, Item 7,
Management's Discussion and Analysis of Liquidity and Capital Resources -
Environmental Matters. The Company attempts to recover some of its
environmental expenses through increased prices of its products.
At the end of 1993 the Company employed approximately 4,800 people,
essentially all of whom were full-time employees. In 1990 new four-year labor
contracts were signed with five unions that currently represent approximately
3,470 employees. The Company considers its labor relations to be excellent.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officer
Name Age Since Positions
<S> <C> <C> <S>
George W. Mead 66 1971 Chairman of the Board
Patrick F. Brennan 62 1988 President and
Chief Executive Officer
William P. Orcutt 65 1977 Vice President, Manufacturing
Roy E. Schulz 63 1988 Vice President, Manufacturing
Donald L. Stein 63 1988 Vice President
James R. Kolinski 55 1993 Vice President
Gorton M. Evans, Jr. 55 1989 Vice President, Marketing, Enamel
Printing Papers
Richard J. Kenney 53 1989 Vice President, Finance
Carl H. Wartman 41 1990 Secretary and Corporate Attorney
James E. Shewchuk 57 1989 Controller
John D. Steinberg 58 1990 Treasurer
All executive officers of the Company are elected annually by the Board of
Directors.
All of the executive officers of the Company, except Mr. Wartman, have served
in executive or managerial positions in the Company for the past five years.
Mr. Wartman joined the Company in 1989 as Assistant Secretary. In 1990, he
was elected Secretary and Corporate Attorney. Prior to his association with
the Company, Mr. Wartman was a partner in the law firm of McDermott, Will &
Emery, Chicago, Illinois.
<PAGE>
Item 2. PROPERTIES.
The Company, at the close of 1993, operated seven manufacturing plants in five
municipalities. The following table describes the Company's facilities.
No. Sq. Ft.
Manufac- Production, Plant
turing Plant Office, Sites
Industry Plants Locations Whse. Space (Acres)
<S> <C> <S> <C> <C>
Paper and pulp 7 3 - Wisconsin Rapids, WI)
1 - Biron, WI )
1 - Whiting, WI ) 6,184,591 581
1 - Stevens Point, WI )
1 - Adams, WI )
Equipment in operation at the close of 1993 included 15 paper machines, two
continuous kraft-pulp digesters, one paperboard machine, one corrugating
machine, and power production facilities with an aggregate rated capacity of
186,110 KW (with actual capacity at any time subject to boiler capacity and
river flow availability for power production).
The Water Quality Center in Wisconsin Rapids is a pollution-abatement facility
on a 417-acre site which treats the mill effluent of two paper mills and one
pulp mill.
The Water Renewal Center in the Town of Linwood is a pollution-abatement
facility on a 192-acre site that currently treats the effluent of two paper
mills.
Available capacity utilization during 1993 was 87.8% for coated papers.
Production facilities are considered to be well maintained and adequate for
their purpose.
The Company owns 316,555 acres of timberlands in the United States and 356,927
acres in Canada. A forest-management plan prescribes allowable cuts on all
timberlands with the objective of maximum return from this resource while
keeping harvests in balance with growth.
Item 3. LEGAL PROCEEDINGS.
Kraft Division - Clean Air Act Litigation. During 1993, the Company settled a
lawsuit brought by the United States for violation of certain requirements of
the Company's Clean Air Act permits relating to operation of the lime kiln at
the Company's Kraft Division. The consent decree settling the litigation
required a payment of $510,000, which the Company paid in the fourth quarter
of 1993. The consent decree also contains various operational and reporting
requirements for the lime kiln which will remain in effect until October,
1995.
Schmalz Dump Superfund Site. During 1993, the Company settled a suit brought
by the United States seeking recovery of cleanup expenses incurred at a
Superfund site in Harrison, Wisconsin. The Company expects to pay
approximately $1.3 million to the United States as a result of this
settlement. The Company recovered a portion of this expense as a result of
the settlement (also in 1993) of its contribution action against several other
defendants involved at the site. The Company also finalized an agreement with
several of its insurers to cover an additional portion of its expenses at this
site.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Form 10-K.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The number of record holders of the Company's common stock as of December 31,
1993 is 7,350.
The Company's common stock is traded on the over-the-counter market and is
included in the National Association of Securities Dealers Automated
Quotations (NASDAQ) National Market System (NMS) listings. The Company's
symbol is CPER.
COMMON STOCK MARKET PRICE AND CASH DIVIDENDS
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
1993
<S> <C> <C> <C> <C> <C>
High $ 40.50 $ 53.75 $ 54.25 $ 46.00 $ 54.25
Low 37.50 39.00 38.50 39.50 37.50
Close 40.13 53.50 41.50 43.25 43.25
Cash dividend .32 .32 .32 .32 1.28
1992
High $ 44.75 $ 41.25 $ 41.75 $ 41.25 $ 44.75
Low 36.00 38.50 38.50 38.25 36.00
Close 41.00 40.00 41.25 40.25 40.25
Cash dividend .32 .32 .32 .32 1.28
Item 6. SELECTED FINANCIAL DATA.
FIVE-YEAR COMPARISON OF SELECTED
FINANCIAL DATA
FOR THE YEARS 1989 THROUGH 1993
(Dollars in thousands, except per share data)
Year Net Income Cash
Ended Per Total Long-Term Dividends
Dec. 31Net Sales Amount Share Assets Debt Per Share
<C> <C> <C> <C> <C> <C> <C>
1993 $ 947,336 $ 64,195$ 1.46 $ 1,467,067 $ 121,000 $ 1.28
1992 904,232 12,359* .28* 1,486,967 171,000 1.28
1991 871,864 91,445 2.10 1,410,707 178,000 1.28
1990 948,815 142,494 3.27 1,191,970 - 1.26
1989 952,521 167,919 3.85 1,086,344 - 1.15
* 1992 amounts reflect the cumulative effect of changes in accounting principles as detailed on
the Consolidated Statements of Income on page 14.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Sales and Cost of Sales.
Net sales increased 4.8% in 1993 to $947 million, compared to $904 million in
1992 and $872 million in 1991. Record shipments of 1,048,000 tons were an
increase of 3.3% over the previous record year of 1992. Additional shipments
were possible because of the new capacity provided by the Company's two newest
paper machines (No. 16 started up in the first quarter of 1992 and No. 34
started up in the fourth quarter of 1990). Gross margin as a percent of sales
was 18.5% in 1993, compared with 16.2% in 1992 and 22.8% in 1991. The 1993
increase was primarily due to a mix of higher margin grades, lower costs for
purchased pulp, and the elimination of $23 million of start-up costs relating
to the No. 16 machine.
Plant Operations.
Groundwood-free coated shipments (Wisconsin Rapids Division) increased because
the No. 16 paper machine was available the entire year 1993. Following the
start-up of No. 16, the division's smallest machine (No. 11) was shut down and
did not operate in 1993. In addition, the division's 12, 14, and 15 machines
were down for 32, 51, and 140 days, respectively, due to lack of orders.
Overall, the division operated at 86.8% of available capacity in 1993,
compared with 81.9% in 1992 and 87.6% in 1991. The U.S. industry average
capacity utilization was 90.2% for groundwood-free grades in 1993, 89.7% in
1992 and 84.7% in 1991. For the third consecutive year, average selling
prices declined because of excess industry capacity. Since 1990, our industry
has added more than 1 million tons of free-sheet coated printing paper
capacity in North America.
Lightweight enamel groundwood shipments (Biron and Wisconsin River divisions)
declined primarily, due to weak demand in the second half caused by declining
magazine advertising pages and increased imports. Our smallest machine
(No. 61) was down 191 days, compared with 92 days in 1992 and 244 days in
1991. The four machines at Biron Division were down for 38 days and the other
two machines at Wisconsin River Division were down 30 days for lack of orders.
Overall, the groundwood mills operated at 88.4% of available capacity in 1993,
compared with 94.3% and 93.1% in 1992 and 1991, respectively. The U.S.
industry average capacity utilization was 92.5% for groundwood grades in 1993
and 93.0% in 1992 and 91.2% in 1991. On average, the selling prices were up
slightly in 1993, following a decline in 1992 and 1991.
Coated specialty paper shipments (Stevens Point Division) in 1993 recorded a
third consecutive record year, increasing 24.3% over 1992. This followed
increases of 21.5% in 1992 and 21.2% in 1991. The trend reflects the Stevens
Point Division's No. 34 machine approaching its design capacity, following its
start-up in late 1990. Operations were at 99.2% of available capacity for
1993, compared with 80.1% in 1992 and 84.4% in 1991.
Paperboard products shipments decreased 4.1% in 1993. Corrugated products
shipments held steady in 1993. The paperboard products and corrugated
products businesses both operated in highly competitive markets and continued
their marketing emphasis on producing high-value-added specialty products.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses increased $1 million in 1993 to
$62 million, compared with a $1 million decrease in 1992 and a $2 million
increase in 1991. The 1993 changes are considered normal in the current
environment.
Other Income and Income Taxes.
Other income (expense) decreased $2 million in 1993, following decreases of
$13 million in 1992 and $7 million in 1991. Interest expense was $8 million
in 1993 compared with $9 million in 1992 and zero in 1991. Interest costs
prior to April 1992 were capitalized. Capitalized interest amounted to $2
million in 1992 and $7 million in 1991. In 1991, a cross-border lease on
equipment for No. 34 machine resulted in a one-time reportable income of $3
million.
Effective tax rates were 41.8%, 37.9% and 37.2% in 1993, 1992 and 1991,
respectively. In 1993, the Company adjusted its deferred income tax balances
and current income taxes to reflect the increased federal income tax rate from
34% to 35%. The increased taxes for deferred tax liabilities at January 1,
1993, totaled $3.6 million, and the tax provision for the current year
increased $1.1 million, due to the federal tax rate increase. In 1992, the
Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions," and
No. 109, "Accounting for Income Taxes." Details are included in Notes 2 and
5, respectively, of the Notes to Consolidated Financial Statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES
Current Account Changes.
Accounts receivable decreased by $11 million compared with an increase of
$15 million in 1992 and a decrease of $9 million in 1991. The 1993 decrease
was due to reduced sales late in the fourth quarter, compared with the fourth
quarter of 1992. The days' sales outstanding has not materially changed since
1987. The Company believes its collection period is well within the
industry's standards. Inventory is unchanged compared to 1992. Finished
goods inventory increased $3 million to allow the Company to be more
responsive to customers' needs. The increase in finished goods inventory was
offset by a decrease in raw materials inventory due to improved control
procedures. Accounts payable decreased by $6 million for 1993 due to timing
of payments.
The year-end ratio of current assets to current liabilities was 1.2:1 in 1993
and 1992, and 2.0:1 in 1991.
Capital Commitments and Spending.
At the end of 1993, authorized but uncompleted capital commitments totaled
$77 million. An $85 million 1994 approved capital budget for new projects has
been authorized by the board of directors. This $85 million, plus the
$77 million carryover, less the anticipated carryover of $62 million at the
end of 1994, will result in planned capital spending of $100 million in 1994
and compares with expenditures of $83 million in 1993, $137 million in 1992,
and $280 million in 1991. The major 1993 expenditures included $14 million
for the chlorine-reduction program at the Kraft Division and $11 million for a
major speed-up and rebuild of a paper machine at Wisconsin River Division.
Both 1992 and 1991 capital expenditures were buoyed by the spending for the
$495 million No. 16 paper machine project that was completed in the first
quarter of 1992. The 1994 authorized $85 million capital budget includes
$61 million for necessary replacement and quality projects, $14 million for
high-return projects, and $10 million for environmental-control projects.
Long-Term Debt.
The Company's borrowings as of December 31, 1993 were $171 million, a decrease
of $50 million after increasing $43 million in 1992 and $178 million in 1991.
Current plans are to continue to pay down the debt until it is fully repaid in
1997. Interest costs totaled almost $9 million in 1993 with $8 million
charged against income in 1993, and $1 million capitalized as part of the cost
of related capital projects.
Environmental Matters.
The Company has completed the second phase of a multiphase chlorine-reduction
program involving equipment and process changes at our Kraft pulp mill
designed to ensure full compliance with dioxin wastewater permit limitations
and with Wisconsin regulations requiring best-available chloroform emission
control technology. The second phase of this program was completed in
November 1993. Completion of the first two phases of this program cost $35
million.
During 1993, the Company settled a lawsuit brought by the United States for
violation of the Company's Clean Air Act permit relating to technology-based
particulate emission limits applicable to Kraft Division's lime kiln. The
consent decree settling the litigation required payment of $510,000. The
Company also settled a lawsuit brought by the United States seeking recovery
of cleanup expenses incurred at a Superfund site in Harrison, Wisconsin. It
is possible that the Company will be named as a potentially responsible party
with respect to several other sites (probably in Wisconsin), although the
Company has not been advised of any formal action regarding other sites to
date. The State of Wisconsin has undertaken sediment remediation studies on
various watershed systems, including the Wisconsin River and the Fox River.
Substantially all of the Company's current manufacturing operations use water
from and discharge treated effluent into the Wisconsin River. The studies
with respect to the Wisconsin River system are very preliminary. The Company
does not know whether any action will be necessary with respect to the
Wisconsin River, or whether the Company may be involved in any remediation
efforts on the Wisconsin River system. The Company's Appleton Division,
closed in 1982, was on the Fox River. To date, the Company has not been
involved in any discussions concerning the Fox River.
The Clean Air Act Amendments of 1990 and the Clean Water Act Effluent
Guidelines Limitations are expected to have a significant financial impact on
the paper industry. The Environmental Protection Agency proposed rules to
reduce the discharge of water pollutants and emissions of hazardous air
pollutants from the pulp and paper industry on December 17, 1993. These
proposed regulations are commonly referred to as the "Cluster Rule." The
Company's preliminary review of the proposed Cluster Rule indicates that
capital expenditures of $60 million to $95 million for process and equipment
changes may be required by the end of 1998. Additional annual operating costs
of $20 million to $25 million may be required. The EPA's proposed Cluster
Rule is subject to change prior to final promulgation, which is scheduled for
late 1995.
The management believes that the resolution of existing environmental matters
will not have a material impact on the Company's result of operations.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
Consolidated Balance Sheets Consolidated Papers, Inc. and Subsidiaries
As of December 31
(Dollars in thousands) 1993 1992 1991
Current Assets
<S> <C> <C> <C>
Cash and cash equivalents $ 2,123 $ 1,965 $ 6,618
Accounts and notes receivable, net of reserves
of $3,558 in 1993, $3,300 in 1992 and
$4,255 in 1991 61,321 72,013 56,672
Inventories
Finished and partly finished products 44,481 41,273 38,412
Raw materials 24,921 27,434 28,774
Stores supplies 30,885 31,324 25,786
100,287 100,031 92,972
Prepaid expenses 17,859 10,567 5,999
Total Current Assets 181,590 184,576 162,261
Investments and Other Assets
Investments in affiliates, at cost plus equity
in undistributed earnings 29,147 27,471 24,715
Other assets 33,075 31,431 25,064
62,222 58,902 49,779
Plant and Equipment
Buildings 159,464 159,397 114,480
Machinery and equipment 1,674,455 1,608,066 1,170,818
1,833,919 1,767,463 1,285,298
Less: Accumulated depreciation 680,767 589,407 507,532
1,153,152 1,178,056 777,766
Land and riparian rights 7,309 7,235 7,135
Timber and timberlands, net of depletion 21,006 20,059 19,420
Capital additions in process 41,788 38,139 394,346
1,223,255 1,243,489 1,198,667
$ 1,467,067 $ 1,486,967 $ 1,410,707
Current Liabilities
Current maturities of long-term debt $ 50,000 $ 50,000 -
Accounts payable 33,352 39,653 $ 32,593
Payroll and employee benefits 39,351 29,890 27,464
Income taxes - 5,207 3,464
Property taxes 8,983 8,878 8,173
Other current liabilities 13,999 24,305 11,253
Total Current Liabilities 145,685 157,933 82,947
Noncurrent Liabilities and Deferred Credits
Long-term debt 121,000 171,000 178,000
Deferred income taxes 158,448 133,398 183,242
Postretirement benefits 98,776 99,575 -
Other noncurrent liabilities 4,110 3,458 6,391
382,334 407,431 367,633
Shareholders' Investment
Preferred stock, authorized and unissued 15,000,000 shares - - -
Common stock, authorized 93,750,000 shares, par value
$1.00 per share; issued 44,014,385 shares in 1993,
43,826,911 shares in 1992, and 43,709,472 shares in 1991 44,014 43,827 43,709
Capital in excess of par value 48,770 40,448 36,084
Cumulative translation adjustment (2,047) (2,004) (1,643)
ESOP loan guarantee - (1,000) (2,000)
Reinvested earnings 848,311 840,332 883,977
Total Shareholders' Investment 939,048 921,603 960,127
$ 1,467,067 $ 1,486,967 $ 1,410,707
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
<PAGE>
Consolidated Statements of Income Consolidated Papers, Inc. and Subsidiaries
For the Years Ended December 31
(Dollars in thousands, except per share data) 1993 1992 1991
<S> <C> <C> <C>
Net sales $ 947,336 $ 904,232 $ 871,864
Cost of goods sold 772,066 758,112 673,101
Gross profit 175,270 146,120 198,763
Selling, general and administrative expenses 62,097 60,654 61,527
Income From Operations 113,173 85,466 137,236
Other Income (Expense)
Interest expense ( 8,200) ( 8,881) -
Interest income 456 20 735
Miscellaneous, net 4,939 4,551 7,710
Total ( 2,805) ( 4,310) 8,445
Income Before Provision for Income Taxes 110,368 81,156 145,681
Provision for Income Taxes
Current 24,213 22,765 45,467
Deferred 21,960 7,984 8,769
Total 46,173 30,749 54,236
Net income before cumulative effect of changes
in accounting principles 64,195 50,407 91,445
Cumulative effect of changes in accounting principles
Postretirement benefits (less income tax
benefit of $37,658 in 1992) - (59,901) -
Income taxes - 21,853 -
Net Income $ 64,195 $ 12,359 $ 91,445
Net income per share before cumulative effect of
changes in accounting principles $ 1.46 $ 1.15 $ 2.10
Cumulative effect of changes in accounting principles
Postretirement benefits - (1.37) -
Income taxes - .50 -
Net Income Per Share $ 1.46 $ .28 $ 2.10
Average Number of Common Shares Outstanding 43,923,577 43,758,559 43,648,894
Consolidated Statements of Reinvested Earnings
For the Years Ended December 31
(Dollars in thousands, except per share data) 1993 1992 1991
<S> <C> <C> <C>
Balance beginning of year $ 840,332 $ 883,977 $ 848,398
Add - Net income 64,195 12,359 91,445
Deduct - Cash dividends of $1.28 per share in 1993,
1992, and 1991 ( 56,216) (56,004) (55,866)
Balance End of Year $ 848,311 $ 840,332 $ 883,977
The accompanying notes to consolidated financial statements are an integral part of these statements.
<PAGE>
Consolidated Statements of Cash Flow Consolidated Papers, Inc. and Subsidiaries
For the Years Ended December 31
(Dollars in thousands) 1993 1992 1991
Cash Flows from Operating Activities
<S> <C> <C> <C>
Net Income $ 64,195 $ 12,359 $ 91,445
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and depletion 99,560 89,463 64,935
Undepreciated cost of plant and equipment retirements 3,277 2,984 1,952
Undistributed earnings of affiliates ( 3,186) ( 2,784) ( 3,606)
Deferred income taxes - cumulative effect of changes
in accounting principles - (59,511) -
Deferred income taxes - current year 21,960 7,984 8,389
(Increase) decrease in accounts receivable 10,692 (15,341) 9,265
(Increase) decrease in inventories ( 256) ( 7,059) (14,198)
(Increase) decrease in prepaid expenses ( 4,304) ( 4,568) 68
Increase (decrease) in accounts payable ( 6,301) 7,060 (14,146)
Increase (decrease) in current liabilities, other
than current maturities of long-term debt and
accounts payable ( 5,845) 17,926 6,179
Postretirement benefits - cumulative effect of change
in accounting principles - 97,559 -
Increase (decrease) in postretirement benefits ( 799) 2,016 -
Increase (decrease) in other noncurrent liabilities 1,652 ( 250) 1,586
Net Cash Provided by Operating Activities 180,645 147,838 151,869
Cash Flows from Investing Activities
Capital expenditures ( 82,603) (137,269) (279,705)
(Increase) decrease in investments and other assets ( 177) ( 6,700) ( 2,908)
Net Cash Used in Investing Activities ( 82,780) (143,969) (282,613)
Cash Flows from Financing Activities
Cash dividends (56,216) ( 56,004) ( 55,866)
Increase (decrease) in long-term debt (50,000) 43,000 178,000
Common stock issued 8,509 4,482 3,124
Net Cash Provided by (Used in) Financing Activities (97,707) ( 8,522) 125,258
Net increase (decrease) in cash and cash equivalents 158 ( 4,653) ( 5,486)
Cash and cash equivalents - beginning of year 1,965 6,618 12,104
Cash and Cash Equivalents - End of Year $ 2,123 $ 1,965 $ 6,618
Cash paid during the year for:
Interest $ 9,239 $ 10,883 $ 6,229
Income Taxes 35,476 22,930 45,365
The accompanying notes to consolidated financial statements are an integral part of these statements.
<PAGE>
Consolidated Papers, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993, 1992 and 1991
1. Summary of Accounting Policies. Principles of Consolidation - The
consolidated financial statements include the accounts of all
subsidiaries. Investments in companies in which ownership is at least
20%, but less than a majority of the voting stock, are accounted for
using the equity method. The Company operates in a single segment, which
is paper and paper-related products. The Company grants credit to
customers with businesses throughout the United States. A substantial
portion of the Company's accounts receivable is with customers in the
media and publishing industries. All receivables arising out of the
normal course of business are uncollateralized. No sales to a single
customer exceeded 10% of net sales in 1993, 1992 and 1991.
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents. Cash and cash equivalents are carried at
cost, which approximates fair market value.
Inventories - Inventories accounted for using the last-in, first-out
(LIFO) cost method (approximately 63% in 1993, 62% in 1992 and 66% in
1991) are stated at amounts which do not exceed market. If the first-in,
first-out (FIFO) method of accounting for inventories had been used by
the Company, inventories would have been higher than that reported at
December 31, 1993, 1992 and 1991, by $14,098,000, $12,621,000 and
$10,739,000, respectively. The remaining inventories are stated at the
lower of cost or market using the FIFO method, except for stores supplies
and certain manufacturing supplies which are accounted for on a moving
average cost basis.
Plant and Equipment - Plant and equipment are recorded at cost and are
depreciated over the estimated useful lives of the assets using
principally the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes.
The Company's policy is to capitalize interest incurred on debt during
the course of major projects that exceed one year in construction.
Interest capitalized in 1993, 1992 and 1991 was $.7 million, $2 million
and $7 million, respectively.
The cost and related accumulated depreciation of all plant and equipment
retired or otherwise disposed of are removed from the accounts. Any gain
or loss is included in income.
Maintenance and repair costs are charged to expense as incurred, and
renewals and improvements which extend the useful life of the assets are
added to the plant and equipment accounts.
Start-up Costs - Start-up costs of new capital projects are charged to
expense as incurred. In 1992 and 1991, approximately $23 million and
$6 million, respectively, of start-up costs and capacity-related costs
during the start-up period relating to the Company's No. 16 paper machine
project were charged against income. There were no start-up costs in
1993.
Timber and Timberlands - Timber and timberlands are recorded at cost,
less amortization for cost of timber harvested. Amortization is computed
on the unit-of-production method. Timber carrying costs are expensed as
incurred.
Accounts Payable - The Company's banking system provides for the daily
replenishment of major bank accounts for check clearing requirements.
Accordingly, there were negative book cash balances of $8 million,
$9 million and $4 million at December 31, 1993, 1992 and 1991,
respectively. Such balances result from outstanding checks that had not
yet been paid by the bank and are reflected in accounts payable in the
consolidated balance sheets.
Income Taxes - Deferred income taxes have been provided to recognize the
deduction of certain costs for financial reporting purposes on a basis
different from that permitted for income tax purposes.
Net Income per Share - Net income per share is based upon the weighted
average number of shares outstanding during the year.
2. Employee Pension and Other Benefit Plans. The Company and its
subsidiaries sponsor non-contributory pension plans covering
substantially all employees. Retirement benefits are provided based on
employees' years of service and earnings. Normal retirement age is 65,
with provisions for earlier retirement. The Company's funding policy is
to contribute amounts to the plans when deductible for income tax
purposes. This policy generally includes amortization of unfunded prior
service costs over a 10-year period.
The Company's net periodic pension cost includes the following
components:
(In Thousands)
1993 1992 1991
<S> <C> <C> <C>
Service cost-benefits earned during year$ 8,045$ 7,753$ 7,671
Interest cost on projected benefits 22,702 21,708 21,022
Actual return on plan assets (58,568) (24,052) (50,766)
Amortization of net asset at transition ( 2,839) ( 2,839) ( 2,839)
Amortization of unrecognized prior
service cost 2,180 2,180 2,180
Deferral of net asset gains or (losses) 29,942 ( 2,331) 27,827
Net Periodic Pension Cost $ 1,462 $ 2,419 $ 5,095
<PAGE>
The funded status of the Company's pension plans as of December 31, 1993, 1992
and 1991, based on October 31, 1993, 1992 and 1991 asset values, is as
follows:
(In Thousands)
1993 1992 1991
<S> <C> <C> <C>
Actuarial Present Value of
Benefit Obligation:
Vested Benefit Obligation $(247,690)$(215,040)$(201,152)
Accumulated Benefit Obligation $(267,903)$(231,947)$(217,833)
Projected benefit obligation $(334,030)$(291,700)$(281,887)
Plan assets at market value 420,702 366,450 347,408
Plan assets in excess of projected
benefit obligation 86,672 74,750 65,521
Unrecognized net asset at transition (28,383) ( 31,222) ( 34,061)
Unrecognized net gain (80,026) ( 69,434) ( 56,579)
Unrecognized prior service cost 23,118 25,299 27,479
Prepaid (Accrued) Pension Cost $ 1,381 $( 607)$ 2,360
The actuarial assumptions used for determining the present value of the
projected benefit obligation, as measured on December 31, 1993, 1992 and
1991, included a 7.25% discount rate in 1993, 8.0% in 1992 and 8.0% in
1991 and assumed an increase in compensation levels based on historical
patterns. The decrease in the discount rate in 1993 resulted in a $20.9
million increase in the accumulated benefit obligation. The expected
long-term rate of return on the market-related value of plan assets was
8.5% in 1993 and 1992 and 8.0% in 1991. Plan assets are comprised
primarily of corporate and U.S. Treasury debt securities and corporate
equities, including Company common stock purchased from the estate of a
significant shareholder of 202,000 shares at a cost of $8 million in
1991.
The Company provides certain medical, dental and life insurance benefits
to qualifying retirees. Effective January 1, 1992, the Company adopted
the requirements of Statement of Financial Accounting Standards (SFAS)
No. 106 "Employers' Accounting for Postretirement Benefits Other than
Pensions." This statement requires the accrual of the cost of providing
these postretirement benefits over the active service period of the
employee. Effective January 1, 1992, the Company recorded the transition
obligation as a cumulative effect of an accounting change. Prior to
January 1, 1992, the cost of medical, dental and life coverage was
expensed as incurred.
<PAGE>
Postretirement benefit cost for 1993 and 1992 includes the following
components:
(In Thousands)
1993 1992
<S> <C> <C>
Service cost - benefits earned during the year$ 3,580 $ 3,084
Interest cost on accumulated postretirement
benefit obligation 9,234 8,034
Total Postretirement Benefit Cost $ 12,814 $ 11,118
The plan's status at December 31, 1993 and 1992, was as follows:
(In Thousands)
1993 1992
<S> <C> <C>
Actuarial present value of benefit obligation:
Retirees $( 57,117)$( 40,706)
Fully eligible active participants ( 20,265) ( 15,904)
Other active participants ( 55,792) ( 48,840)
Accumulated Postretirement Benefit Obligation$(133,174)$(105,450)
Plan assets at market value - -
Accumulated postretirement benefit
obligation in excess of plan assets $(133,174)$(105,450)
Unrecognized net loss 20,199 -
Accrued Postretirement Benefit Cost $(112,975)$(105,450)
As of December 31, 1993 and 1992, there were no plan assets.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.25% and 8.0% as of December 31, 1993 and 1992.
The decrease in the discount rate in 1993 resulted in a $12.1 million
increase in the accumulated benefit obligation. An 8.0% annual rate of
increase in the per capita cost of covered health, dental and life
insurance benefits was assumed through the year 2001; the rate was then
assumed to decrease to 5.5% and remain at that level thereafter. A one-
percentage-point increase in the assumed postretirement benefits cost trend
rates would increase the accumulated postretirement benefit obligation as
of December 31, 1993, by approximately $17.3 million, and the total of the
service and interest cost components of postretirement benefits cost for
the year then ended by approximately $2.3 million.
3.Shareholders' Investment. In April 1989, the shareholders approved a Stock
Option Plan providing for granting of options to directors, officers and
all other nonunion employees. The plan reserves 2.5 million shares of
common stock to be issued at prices equal to 100% of the fair market value
of the shares on the date the option is granted. Options are exercisable
not earlier than six months and not later than 10 years after the date of
the grant. An analysis of the options outstanding and exercisable follows:
1993 1992 1991
<S> <C> <C> <C>
Options outstanding, beginning of year1,361,5521,434,369 970,795
Granted - $40.25 to $48.125 per share 13,000 - 525,341
Exercised - $35.125 to $39.75 per share (133,160) (48,204) (41,670)
Expired or canceled ( 20,972) (24,613) (20,097)
Options Outstanding, End of Year 1,220,4201,361,552 1,434,369
Options Available for Grant
at December 31 1,012,6291,004,657 980,044
There are also 15 million shares of Class A Preferred Stock authorized
with a par value of $.01 per share, to be issued at the discretion of the
board of directors. As of December 31, 1993, none of the shares had been
issued.
In February 1989, Consolidated Employees' Stock Ownership Trust obtained
a $5 million loan and used the proceeds to purchase 142,000 shares of
Company common stock from the estate of a significant shareholder. The
Company guarantee of the loan was recorded as a liability and a reduction
of shareholders' investment. This guarantee and the related loan have
been reduced by $1 million in each of the years 1993, 1992 and 1991. The
loan was completely repaid as of December 31, 1993.
Changes in common stock outstanding and capital in excess of par value
resulted from the net exercise of stock options of 132,048 shares for
$4,816,000 in 1993, 42,357 shares for $1,484,000 in 1992 and 35,571
shares for $1,223,000 in 1991. As of January 1, 1991, the board of
directors authorized the establishment of a Dividend Reinvestment and
Stock Purchase Plan and reserved 750,000 shares of common stock for this
purpose. The Company issued 69,726 shares for $3,098,000 in 1993, 75,064
shares for $2,998,000 in 1992 and 49,447 shares for $1,901,000 in 1991
under this plan. During 1993, the Company canceled 14,300 shares of
treasury stock.
4. Lines of Credit and Long-Term Debt. A summary of long-term debt as of
December 31 is as follows:
1993 1992 1991
<S> <C> <C> <C>
Term loan from a financial institution,
unsecured, with interest at 8.27%, due
December 15, 1993 $ - $ 50,000,000$ 50,000,000
Line of credit agreements with financial
institutions, unsecured, with a weighted
average interest rate of 3.25%, 3.76%
and 4.61%, respectively 137,000,000 119,000,000 34,000,000
Revolving credit agreements with financial
institutions, unsecured, with a weighted
average interest rate of 3.38%, 3.79% and
4.83%, respectively 34,000,000 52,000,000 94,000,000
171,000,000 221,000,000 178,000,000
Less - current maturities 50,000,000 50,000,000 -
Total Long-Term Debt $ 121,000,000$ 171,000,000$ 178,000,000
The Company has $238 million in unsecured lines of credit with eight
financial institutions, of which $137 million was outstanding at
December 31, 1993 at a weighted average rate of 3.25% and $119 million
was outstanding at December 31, 1992, at a weighted average rate of
3.76%. There are no commitment fees for these lines of credit, however,
compensating balances are required in certain instances. There are no
restrictions on the Company's use of these compensating balances.
Amounts due under these lines of credit have been classified as long-term
debt because the Company has the intent and the unused facilities to
refinance the loans on a long-term basis.
The Company has a $120 million unsecured revolving credit agreement with
five participating financial institutions, of which $34 million was
outstanding at December 31, 1993. This agreement expires March 20, 1995,
and has a competitive bid loan option with varying rates of interest.
The Company pays the banks a facility fee under these agreements, and
there are no compensating balance arrangements. The weighted average
interest rate on borrowings outstanding at December 31, 1993, was 3.38%.
The debt agreements contain restrictions on net worth and other matters.
Under the terms of the restrictions, as of December 31, 1993, the Company
had $31 million available for the payment of dividends.
As of December 31, 1993, the portion of debt expected to be repaid in the
subsequent years is as follows:
<C> <C>
1994 $ 50,000,000
1995 $ 66,000,000
1996 $ 28,000,000
1997 $ 27,000,000
The difference between book value and fair value of the long-term debt is
not material.
5. Income Taxes. The Company adopted the provisions of SFAS No. 109
effective January 1, 1992, resulting in a gain of $21.9 million or $.50
per share.
Provision for income taxes includes the following components:
(In Thousands)
1993 1992 1991
Current:
<S> <C> <C> <C>
Federal $ 23,223 $ 22,726 $ 38,990
State 990 39 6,477
Total Current 24,213 22,765 45,467
Deferred:
Federal 18,181 4,646 7,239
State 3,779 3,338 1,530
Total Deferred 21,960 7,984 8,769
Total Provision $ 46,173 $ 30,749 $ 54,236
The following summarizes the major differences between the U.S. statutory tax
rates and the Company's effective tax rates:
1993 1992 1991
<S> <C> <C> <C>
Statutory tax rates 35.0% 34.0% 34.0%
State income taxes 4.1 4.1 4.0
Federal rate increase 3.3 - -
Other items (.6) (.2) (.8)
Effective Tax Rates 41.8% 37.9% 37.2%
Deferred taxes are determined based on the estimated future tax effects
of differences between the financial statement and tax bases of assets
and liabilities given the provisions of the enacted tax laws. The net
deferred tax liability is comprised of the following:
1993 1992
Current deferred taxes
<S> <C> <C>
Gross assets $ 9,111 $ 5,654
Gross liabilities (2,128) (2,296)
Total Current Deferred Taxes 6,983 3,358
Non-current deferred taxes
Gross assets 82,180 63,225
Gross liabilities (240,628) (196,623)
Total Non-current Deferred Taxes (158,448) (133,398)
Total Deferred Taxes $(151,465) $(130,040)
The Company did not record any valuation allowances against deferred tax
assets at December 31, 1993 and 1992.
During 1993 and 1992, the Company was in an alternative minimum tax
paying position. As of December 31, 1993, the excess of tax paid over
the amount of regular tax that would have been paid was approximately
$27.5 million. This amount may be used to reduce regular tax in future
years.
The Company adjusted its deferred income tax balances and current income
taxes to reflect the increased federal income tax rate from 34 percent to
35 percent in 1993. The cumulative effect of the change in the tax rate
totaled $3.6 million, or $.08 per share, for deferred tax liabilities at
January 1, 1993 and $1.1 million, or $.03 per share, for the current
year's tax provision.
6. Research & Development. Research and development expenses in 1993, 1992
and 1991 were approximately $6.0 million, $5.6 million and $7.0 million,
respectively.
7. Commitments. As of December 31, 1993, the Company had capital
expenditure purchase commitments outstanding of approximately
$25 million.
8. Environmental Matters. The company accrues for closure and long-term
care costs for its landfills over the estimated useful life of the asset.
As of December 31, 1993, the company has accrued $2.5 million of the
anticipated $3.5 million for such costs.
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for 1993 and
1992:
(Dollars in
thousands, except First Second Third Fourth
per share data) Quarter Quarter Quarter Quarter Year
<S> <C> <C> <C> <C> <C>
1993
Net sales $ 241,596 $ 260,302 $ 228,776 $ 216,662 $ 947,336
Gross profit 44,380 57,524 34,328 39,038 175,270
Net income 17,473 25,554 7,283 13,885 64,195
Net income per share .40 .58 .17 .31 1.46
1992
Net sales $ 217,274 $ 221,688 $ 233,114 $ 232,156 $ 904,232
Gross profit 37,417 40,195 33,274 35,234 146,120
Net income (23,553)* 15,113 11,014 9,785 12,359*
Net income per share ( .54)* .35 .25 .22 .28*
Net income per share is based upon the weighted average number of shares
outstanding during the period.
* 1992 amounts reflect the cumulative effect of changes in accounting principles as detailed on
the Consolidated Statements of Income on page 14.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and the Board of Directors of
Consolidated Papers, Inc.
We have audited the accompanying consolidated balance sheets of Consolidated
Papers, Inc. (a Wisconsin corporation) and subsidiaries as of December 31,
1993, 1992 and 1991, and the related consolidated statements of income,
reinvested earnings and cash flows (see pages 13, 14, and 15) for each of the
years in the three-year period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinions.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Consolidated Papers, Inc. and subsidiaries as of December 31, 1993, 1992 and
1991, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Note 2 and Note 5 of the Notes to Consolidated Financial
Statements, effective January 1, 1992, the Company changed its method of
accounting for postretirement benefits other than pensions and income taxes.
/s/ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Milwaukee, Wisconsin,
January 21, 1994.
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes in or disagreements with the independent public
accountants (Arthur Andersen & Co.) on accounting and financial disclosure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The identification of directors and all persons nominated to become directors,
as required by Item 10 of this Form 10-K, is included in the Proxy Statement
to Shareholders which has been filed with the Securities and Exchange
Commission for the Annual Meeting of Shareholders to be held April 25, 1994
and is incorporated herein by reference.
The identification of executive officers of the registrant, as required by
Item 10 of this Form 10-K, is included in Item 1 of Part I of this Form 10-K
Annual Report.
Item 11. EXECUTIVE COMPENSATION.
The information regarding executive compensation required by Item 11 of this
Form 10-K is included in the Proxy Statement to Shareholders which has been
filed with the Securities and Exchange Commission for the Annual Meeting of
Shareholders to be held April 25, 1994 and is incorporated herein by
reference.
Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information about security ownership required by Item 12 of this Form 10-K
is included in the Proxy Statement to Shareholders which has been filed with
the Securities and Exchange Commission for the Annual Meeting of Shareholders
to be held April 25, 1994 and is incorporated herein by reference.
Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no relationships or transactions since the beginning of the last
fiscal year of the nature required to be reported under Item 13 of this Form
10-K.
<PAGE>
PART IV
Item 14.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ONFORM 8-K.
(a) The following documents are filed as a part of this Form 10-K Annual
Report:
1. Financial Statements.
Included in Item 8 of Part II of this Form 10-K are the following
financial statements, related notes thereto, and auditor's report:
Consolidated Balance Sheets As Of December 31, 1991, 1992 and
1993.
Consolidated Statements of Income for the Years Ended
December 31, 1991, 1992 and 1993.
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1991, 1992 and 1993.
Consolidated Statements of Reinvested Earnings for the Years
Ended December 31, 1991, 1992 and 1993.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants (Arthur Andersen &
Co.).
2. Financial Statement Schedules.
The following schedules are filed as part of this Form 10-K and
should be read in conjunction with the financial statements:
Schedules V and VI - Plant and Equipment and Accumulated
Depreciation
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-term Borrowings
Schedule X - Supplementary Income Statement Information
The following schedules are omitted as not applicable or not
required under rules of Regulation S-X: I, II, III, IV, VII, XI,
XII, XIII, and XIV.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into Consolidated Papers, Inc.'s
previously filed Registration Statement File No. 2-87423, Registration
Statement File No. 33-28786, and Registration Statement File No. 33-37838.
/s/ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Milwaukee, Wisconsin
March 17, 1994<PAGE>
(b) The following exhibits are filed as a part of this Form 10-K Annual
Report:
3.a.Restated Articles of Incorporation of Consolidated Papers, Inc.
(Filed as Exhibit 3.a. to Form 10-Q for the quarter ended
March 31, 1989 and incorporated herein by reference.)
3.b.Bylaws of Consolidated Papers, Inc. (Filed as Exhibit 3.b. to Form
10-Q for the quarter ended September 30, 1993 and incorporated
herein by reference.)
9. Mead Voting Trust Agreement dated December 20, 1986. (Filed as
Exhibit 9 to Form 10-K for the fiscal year ended December 31, 1986
and incorporated herein by reference.)
10.a.Consolidated Papers, Inc. 1989 Stock Option Plan. (Filed as
Exhibit 10 to Form 10-Q for the quarter ended March 31, 1989 and
incorporated herein by reference.)
10.b.Consolidated Employees' Tax-saver & Investment Plan. (Filed
electronically herewith.)
10.c.Consolidated Employees' Stock Ownership Plan. (Filed
electronically herewith.)
10.d.Consolidated Salaried Employees' Retirement Plan. (Filed
electronically herewith.)
10.e.1992 Compensation Award Program description. (Filed electronically
herewith.)
10.f.1993 Compensation Award Program description. (Filed electronically
herewith.)
21. Subsidiaries of the Registrant. (Filed electronically herewith.)
99. Form 11-K Annual Report of the Consolidated Employees' Tax-saver &
Investment Plan for the year ended December 31, 1993 (to be filed
within 180 days after the Plan's year-end).
Exhibits 2, 4, 11, 12, 13, 16, 18, 22, 23, 24, 27 and 28 are omitted as
not applicable or not required under rules of Regulation S-K.
(c) Individual financial statements of 50% or less owned companies included
in the consolidated financial statements on the equity basis of
accounting are not filed because those companies do not, in aggregate,
constitute significant subsidiaries.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CONSOLIDATED PAPERS, INC.
Registrant
/s/ Patrick F. Brennan March 17, 1994
Patrick F. Brennan, President and Date
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ George W. Mead Date March 17, 1994
George W. Mead, Chairman of the Board,
and Director
/s/ Patrick F. Brennan Date March 17, 1994
Patrick F. Brennan, President and
Chief Executive Officer, and Director
/s/ Richard J. Kenney Date March 17, 1994
Richard J. Kenney, Vice President, Finance
(Principal Financial Officer)
/s/ James E. Shewchuk Date March 17, 1994
James E. Shewchuk, Controller
/s/ Ruth Baldwin Barker Date March 17, 1994
Ruth Baldwin Barker, Director
Date
James R. Bostic, Director
/s/ Wiley N. Caldwell Date March 17, 1994
Wiley N. Caldwell, Director
/s/ Sally M. Hands Date March 17, 1994
Sally M. Hands, Director
/s/ Bernard S. Kubale Date March 17, 1994
Bernard S. Kubale, Director
/s/ D. Richard Mead, Jr. Date March 17, 1994
D. Richard Mead, Jr., Director
/s/ Gilbert D. Mead Date March 17, 1994
Gilbert D. Mead, Director
/s/ Lawrence R. Nash Date March 17, 1994
Lawrence R. Nash, Director
/s/ Glenn N. Rupp Date March 17, 1994
Glenn N. Rupp, Director
<PAGE>
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
Schedules V and VI -Plant and Equipment and Accumulated Depreciation (Dollars in Thousands).
Analyses of the plant and equipment accounts for the years ending December 31, 1993, 1992 and 1991 are as
follows:
Balance At Additions Retirements Balance At
Classification Dec. 31,1992 At Cost Or Sales Dec. 31, 1993
<S> <C> <C> <C> <C>
Nonutility:
Land $ 4,888 $ 87 $ 13 $ 4,962
Timberlands, net of depletion 20,059 1,254 307 21,006
Buildings, machinery and equipment 1,737,830 77,202 11,141 1,803,891
Capital additions in progress 37,730 3,526 - 41,256
$ 1,800,507 $ 82,069 $ 11,461 $ 1,871,115
Hydroelectric utility:
Land and riparian rights $ 2,347 - - $ 2,347
Reservoirs, dams and waterways 4,118 $ 208 - 4,326
Production plant and equipment 8,848 112 $ 10 8,950
Transmission plant and equipment 16,667 90 5 16,752
Capital additions in progress 409 124 - 533
$ 32,389 $ 534 $ 15 $ 32,908
$ 1,832,896 $ 82,603 $ 11,476 $ 1,904,023
Balance At Additions Retirements Balance At
Classification Dec. 31,1991 At Cost Or Sales Dec. 31, 1992
<S> <C> <C> <C> <C>
Nonutility:
Land $ 4,786 $ 116 $ 14 $ 4,888
Timberlands, net of depletion 19,420 903 264 20,059
Buildings, machinery and equipment 1,256,709 491,374 10,253 1,737,830
Capital additions in progress 393,707 (355,977) - 37,730
$ 1,674,622 $ 136,416 $ 10,531 $ 1,800,507
Hydroelectric utility:
Land and riparian rights $ 2,349 $ 1 $ 3 $ 2,347
Reservoirs, dams and waterways 4,038 104 24 4,118
Production plant and equipment 8,189 671 12 8,848
Transmission plant and equipment 16,362 307 2 16,667
Capital additions in progress 639 ( 230) - 409
$ 31,577 $ 853 $ 41 $ 32,389
$ 1,706,199 $ 137,269 $ 10,572 $ 1,832,896
Balance At Additions Retirements Balance At
Classification Dec. 31,1990 At Cost Or Sales Dec. 31, 1991
<S> <C> <C> <C> <C>
Nonutility:
Land $ 4,585 $ 201 $ - $ 4,786
Timberlands, net of depletion 18,437 1,224 241 19,420
Buildings, machinery and equipment 1,145,826 121,330 10,447 1,256,709
Capital additions in progress 237,996 155,711 - 393,707
$ 1,406,844 $ 278,466 $ 10,688 $ 1,674,622
Hydroelectric utility:
Land and riparian rights $ 2,340 $ 9 - $ 2,349
Reservoirs, dams and waterways 3,852 188 $ 2 4,038
Production plant and equipment 7,919 579 309 8,189
Transmission plant and equipment 14,409 2,074 121 16,362
Capital additions in progress 2,250 ( 1,611) - 639
$ 30,770 $ 1,239 $ 432 $ 31,577
$ 1,437,614 $ 279,705 $ 11,120 $ 1,706,199
<PAGE>
Analyses of the reserves for accumulated depreciation for the years ending December 31, 1993, 1992 and
1991 are as follows:
Balance At Provision For Retirements Balance At
Classification Dec. 31,1992 Depreciation Or Sales Dec. 31, 1993
<S> <C> <C> <C> <C>
Nonutility:
Buildings, machinery and equipment $ 577,648 $ 98,544 $ 8,083 $ 668,109
Hydroelectric utility 11,759 926 26 12,659
$ 589,407 $ 99,470 $ 8,109 $ 680,768
Balance At Provision For Retirements Balance At
Classification Dec. 31,1991 Depreciation Or Sales Dec. 31, 1992
<S> <C> <C> <C> <C>
Nonutility:
Buildings, machinery and equipment $ 496,531 $ 88,449 $ 7,332 $ 577,648
Hydroelectric utility 11,001 843 85 11,759
$ 507,532 $ 89,292 $ 7,417 $ 589,407
Balance At Provision For Retirements Balance At
Classification Dec. 31,1990 Depreciation Or Sales Dec. 31, 1991
<S> <C> <C> <C> <C>
Nonutility:
Buildings, machinery and equipment $ 440,920 $ 63,943 $ 8,332 $ 496,531
Hydroelectric utility 10,845 809 653 11,001
$ 451,765 $ 64,752 $ 8,985 $ 507,532
Depreciation rates used by the companies are as follows:
Classification Rate
<S> <C>
Nonutility property -
Buildings 2.5 - 10.0%
Machinery and equipment 4.4 - 20.0
Hydroelectric utility property -
Reservoirs, dams and waterways 2.3
Production plant and equipment 2.60- 14.3
Transmission plant and equipment 2.4 - 3.3
<PAGE>
Schedule VIII - Valuation and Qualifying Accounts (Dollars in Thousands).
Changes in the reserves other than accumulated depreciation for the years ended December 31, 1993, 1992
and 1991 are summarized as follows:
Charges For
Purposes
Additions For Which
Beginning Charged Reserve Was Ending
Balance To Income Created Balance
<S> <C> <C> <C> <C>
Reserves deducted from
assets in consolidated
balance sheet -
Reserve for doubtful
accounts - year ended
December 31, 1993 $ 3,300 $ 508 $ 250 $ 3,558
1992 $ 4,255 $ - $ 955 $ 3,300
1991 $ 4,302 $ - $ 47 $ 4,255
Schedule IX - Short-Term Borrowings (Dollars in Thousands).
Weighted Maximum Average Weighted
Balance Average Amount Amount Average
at Interest Outstanding Outstanding Interest Rate
Category of Aggregate End of Rate End of During During During
Short-Term Borrowing Period Period Period Period Period
<S> <C> <C> <C> <C> <C>
Line of credit agreement* $ 137,000 3.25% $ 137,000 $ 65,372 3.32%
<FN>
Note:
* $121 million of the line of credit agreement was classified as long-term debt at December 31, 1993,
because the Company has the intent and unused facilities to refinance the loans on a long-term
basis.
Schedule X - Supplementary Income Statement Information (Dollars in Thousands).
The following are included as deductions in the accompanying consolidated statements of income:
1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs $ 87,092 $ 86,362 $ 82,711
Included in maintenance and repairs is an undeterminable amount of operating supplies which cannot be
segregated under the Company's accounting system.
Royalties, advertising costs and taxes, other than payroll and income taxes, do not exceed one percent of
total sales. There was no depreciation and amortization of intangible assets charged to income in 1993,
1992 or 1991.
<PAGE>
EXHIBIT 10.b. TO FORM 10-K FOR
CONSOLIDATED PAPERS, INC. FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1993
CONSOLIDATED
EMPLOYEES' TAX-SAVER & INVESTMENT PLAN
(AS IN EFFECT JANUARY 1, 1991)
SECTION 1
Introduction
1.1. Purpose. CONSOLIDATED EMPLOYEES' TAX-SAVER & INVESTMENT PLAN (the "plan")
is maintained by CONSOLIDATED PAPERS, INC. ("Consolidated") for eligible
employees of Consolidated and those of Consolidated's United States
subsidiaries which adopt the plan, with the consent of Consolidated. Prior
to January 1, 1983, the plan was known as Consolidated Salaried Employees'
Stock Ownership Plan (the "original plan"). Effective January 1, 1983, the
plan was amended and restated as a tax credit employee stock ownership plan
intended to meet the requirements of such a plan under Section 409A of the
Internal Revenue Code of 1986, as amended, (the "Code") and as a qualified
profit sharing plan under Sections 401(a) and 401(k) of such Code. The tax
credit employee stock ownership portion of the plan is designed to invest
primarily in common stock of Consolidated [or any common stock issued by
any corporation which is a member of a controlled group of corporations
which includes Consolidated within the meaning of Section 1563(a) of the
Internal Revenue Code of 1954, determined without regard to Section
1563(a)(4) and (e)(3)(C) thereof and as modified by Section 409(1)(4)
thereof]. The purpose of the plan as again amended and restated is to
permit eligible employees of Consolidated and adopting subsidiaries of
Consolidated to defer receipt of current compensation under the qualified
cash or deferred arrangement which forms part of the plan and to share in
employer matching contributions, thereby providing for future financial
security.
1.2. Effective Date, Plan Year. The original plan was established January 1,
1977 and amended and restated effective January 1, 1983. The "effective
date" of the amendment and restatement of the plan as set forth herein is
January 1, 1987. A "plan year" means Consolidated's taxable year for
federal income tax purposes, which taxable year is the calendar year.
1.3. Employers. Consolidated and any United States subsidiary of Consolidated
which adopts the plan and trust with the consent of Consolidated are
sometimes referred to hereinafter collectively as the "employers" and
individually as an "employer."
1.4. Plan Administration. Effective January 1, 1987, the plan will be
administered by a Tax-Saver & Investment Board (the "Tax-Saver & Investment
Board") consisting of four members appointed by Consolidated, as described
in Section 8. Participants will be notified of the identity of the board
members and of any change in the membership of such board.
1.5. Trustee, Trust Agreement, Trust Fund. Funds (or stock) contributed by the
employers under the plan will be held and invested in a trust fund, until
distributed, by a trustee (the "trustee") appointed by Consolidated. The
trustee will act under a trust agreement between the employers and the
trustee. Participants will be notified of the identity of the trustee, and
of any change in trustee.
1.6. Examination of Plan Documents. Copies of the plan and trust agreement, and
any amendments thereto, will be made available at the principal office of
each employer where they may be examined by any participant or beneficiary
entitled to receive benefits under the plan. The provisions of and
benefits under the plan are subject to the terms and provisions of the
trust agreement.
1.7. Notices. Any notice or document required to be given to or filed with the
Tax-Saver & Investment Board shall be considered as given or filed if
delivered or mailed by registered mail, postage prepaid, addressed as
follows:
Tax-Saver & Investment Board
c/o Consolidated Papers, Inc.
P.O. Box 8050
Wisconsin Rapids, WI 54495-8050
1.8. Gender and Number. Words in the masculine gender shall include the
feminine and neuter genders and, where the context admits, the plural shall
include the singular, and the singular shall include the plural.
1.9. Plan Supplements. The provisions of the plan may be modified by
supplements to the plan. The terms and provisions of each supplement are a
part of the plan and supersede the provisions of the plan to the extent
necessary to eliminate inconsistencies between the plan and the supplement.
1.10. Benefits for Participants Terminating Prior to January 1, 1987. Except as
otherwise specifically provided under this plan, the benefits of a
participant who retired or otherwise terminated employment with the
employers prior to January 1, 1987 will be determined in accordance with
the terms of the plan as in effect on the date of such participant's
retirement or termination of employment.
SECTION 2
Eligibility and Participation
2.1. Eligibility. Subject to the limitations and conditions of the plan, each
employee of an employer who was an active participant in the plan
immediately prior to the effective date will continue as a participant on
and after that date. Each other employee of an employer will become a
participant in the plan on the date he meets both of the following
requirements:
(a) He has completed one year of service (as defined in subsection 2.2);
and
(b) He does not belong to a collective bargaining unit of employees
represented by a collective bargaining representative, except to the
extent that an agreement between the employer and such representative
extends the plan to such unit of employees.
Each employee will be notified of the date as of which he becomes a
participant and will be furnished with a summary plan description in
accordance with governmental rules and regulations. Each participant will
become eligible to make income deferral contributions under subsection 2.6
on the payment date coincident with or next following the first January 1,
April 1, July 1, or October 1 on or after the date he becomes a
participant. An employee who would be eligible to participate in the plan
except for subparagraph 2.1(b) above will become a participant on the date
he satisfies the conditions for participation under subparagraph 2.1(b) and
will be eligible to make income deferral contributions under subsection 2.6
on the payment date coincident with or next following the first January 1,
April 1, July 1, or October 1 on or after the date he satisfies the
conditions for participation under subparagraph 2.1(b).
2.2. Year of Service. A "year of service" means each 12-consecutive month
period commencing on the date an employee is first employed by an employer,
and on each anniversary date thereof, during which he completes 1,000 hours
of service (as defined below), subject to the following:
(a) A leave of absence (as defined below) will not interrupt continuity
of employment for purposes of the plan but not more than 501 hours of
service will be credited to an employee for any one continuous period
of leave of absence.
(b) A period of concurrent employment with two or more employers will be
considered as employment with one employer during that period and an
employee's employment with any predecessor to an employer will be
considered as employment with that employer.
(c) The termination of any employee's employment with one employer will
not interrupt the continuity of his employment or participation if,
concurrently with or immediately after such termination, he is
employed by one or more other employers.
(d) If a former employee of the employers is re-employed by an employer
before he has incurred a one-year break in service (as defined in
subparagraph (f) below) his employment with the employers shall not
be deemed to have terminated.
(e) A period of employment with a controlled group member (as defined
below) which is not an employer will be considered a period of
employment with an employer for purposes of determining years of
service. A "controlled group member" means any corporation or other
trade or business which is under common control with an employer
within the meaning of Sections 414(b) and 414(c) of the Internal
Revenue Code of 1986.
(f) If a former employee of the employers who has not satisfied the
requirements of subparagraph 2.1(a) is re-employed by an employer
after he has incurred a one-year break in service, his prior period
of employment and years of service with the employers prior to such
one-year break in service shall be disregarded for all purposes of
the plan upon his re-employment and such employee shall be treated as
a new employee for all purposes of the plan. A "one-year break in
service" will be deemed to have occurred for each 12-month period
(which 12-month period shall be the same period for which a year of
service is computed) ending on or after the date of an employee's
termination of employment during which he has completed less than 501
hours of service.
(g) In the case of a maternity or paternity absence (as defined below)
which commences on or after January 1, 1985, an employee shall be
credited, for the first 12-month period (which 12-month period shall
be the same period for which breaks in service are computed as
described in subparagraph (f) above) in which he otherwise would have
incurred a one-year break in service (and solely for purposes of
determining whether such a break in service has occurred), with the
hours of service which normally would have been credited to him but
for such absence (or, if the Tax-Saver & Investment Board is unable
to determine the hours which would have been so credited, 8 hours for
each workday of absence). A "maternity or paternity absence" means
an employee's absence from work because of the pregnancy of the
employee or birth of a child of the employee, the placement of a
child with the employee in connection with the adoption of such child
by the employee, or for purposes of caring for the child immediately
following such birth or placement. The board may require the
employee to furnish such information as the board considers necessary
to establish that the employee's absence was for one of the reasons
specified above.
An "hour of service" means each hour for which an employee is directly or
indirectly paid, or entitled to payment, by an employer for the performance
of duties and for reasons other than the performance of duties, including
each hour for which back pay, irrespective of mitigation of damages, has
been either awarded or agreed to by an employer, determined and credited in
accordance with Department of Labor Reg. Sec. 2530.200b-2.
2.3. Leave of Absence. A leave of absence will not interrupt continuity of
service or participation in the plan. A "leave of absence" for plan
purposes means a leave of absence required by law or granted by an employer
on account of service in military or governmental branches described in any
applicable statute granting re-employment rights to employees who entered
such branches, or any other military or governmental branch designated by
the employers, and also means any other absence from active employment with
an employer under conditions which are not treated by it as a termination
of employment including, but not limited to, vacations, holidays,
maternity, illness, incapacity, or jury duty. Leaves of absence will be
governed by rules uniformly applied to all employees similarly situated.
2.4. Re-employed Former Participant. If a former participant in the plan is re-
employed by an employer after incurring a one-year break in service, he
will again become a participant in the plan on the date he meets the
requirements of subparagraph 2.1(b) and will be eligible to make income
deferral contributions under subsection 2.6 on the payment date coincident
with or next following the January 1, April 1, July 1, or October 1 on or
after the date he becomes a participant.
2.5. Restricted Participation. In the event a participant in the plan is
transferred to employment with a unit of employees described in
subparagraph 2.1(b) to which the plan has not been extended, he shall be
treated as a participant for all purposes of the plan except that the
participant shall not be entitled to defer additional amounts under the
plan as provided in subsection 2.6 after the date of such transfer. If
such a participant subsequently again satisfies the requirements of
subsection 2.1 of the plan, he will become an active participant in the
plan on the date he meets the requirements of subsection 2.1 and will be
eligible to make income deferral contributions under subsection 2.6 on the
payment date coincident with or next following the January 1, April 1, July
1, or October 1 on or after the date he becomes a participant.
2.6. Election to Defer Compensation. Subject to the limitations of subsection
3.2, by writing filed with the Tax-Saver & Investment Board, a participant,
if he so desires, may defer payment of a percentage (in increments of one-
half percent) of his compensation ("income deferral contributions"), not
exceeding l0 percent thereof, by electing to have such percentage withheld
from his compensation and contributed to the plan on his behalf by his
employer. For plan years beginning on or after January 1, 1987, no
participant may elect to make income deferral contributions for any
calendar year in excess of $7,000 (or such greater amount as determined
pursuant to Section 402(g)(5) of the Code). The amounts withheld from a
participant's compensation pursuant to the participant's election shall be
contributed to the plan by the participant's employer and credited to his
investment account(s) as provided in subsection 3.2. A participant may
elect to change the rate of his deferrals, suspend or resume such
deferrals, within the limits stated above, by filing a new election with
the board. Each election under this subsection shall be made at such time,
in such manner and in accordance with such rules as the board shall
determine and initially shall be effective for compensation paid for pay
periods beginning on or after October 1, 1983, and thereafter shall be
effective for compensation paid on the first payment date coincident with
or next following the January 1, April 1, July 1, or October 1 for which
such election is effective.
2.7. Compensation and Adjusted Compensation. A participant's "compensation" for
any plan year means the sum total of the adjusted compensation (as defined
below) paid to him during that plan year for services rendered to the
employers as an employee and the amount of any income deferral
contributions made for such year under subsection 2.6. A participant's
"adjusted compensation" for any plan year means a participant's
compensation to be reported on Internal Revenue Service Form W-2 excluding
any extraordinary compensation (including, but not limited to, non-cash
items, disability payments, safety shoe and clothing allowances, taxable
group term life insurance, taxable moving expense reimbursements, taxable
compensation relating to the exercise, sale, or other disposition of option
stock, directors' fees, awards, prizes, or any other unusual compensation).
For plan years beginning on and after January 1, 1989, no "compensation" in
excess of $200,000 (or such greater amount as permitted under Section
401(a)(17) of the Code for such plan year) shall be taken into account for
purposes of the plan.
SECTION 3
Employer Contributions
3.1. Employer Tax Credit Contributions. All employer tax credit contributions
have been made or will be made for plan years ended prior to January 1,
1987. No additional employer tax credit contributions will be made under
the plan for plan years beginning on and after January 1, 1987.
3.2. Income Deferral Contributions. Subject to the limitations of this Section
3, each participant may elect to have contributed to the plan on his behalf
by filing an election with the Tax-Saver & Investment Board pursuant to
subsection 2.6, the amount such participant has directed to have withheld
from his compensation. Such contributions shall be paid to the trustee and
credited to the participant's investment account(s) in accordance with the
participant's investment election filed with the board as provided in
subsection 4.6, as soon as practicable after being withheld but, in any
event, not later than 30 days following the end of the plan year during
which such amounts are withheld.
3.3. Matching Employer Contributions. Subject to the limitations of this
Section 3 and in addition to the income deferral contributions made under
subsection 3.2, each employer will contribute 25 percent of the income
deferral contributions made on behalf of the participant under subsections
2.6 and 3.2. Such contributions shall be paid to the trustee and credited
to the participant's investment account(s) in accordance with the
participant's investment election filed with the board as provided in
subsection 4.6, as soon as practicable after the end of the pay period for
which such contribution is made.
3.4. Matching Employer Contributions Made From Profits. Subject to the
limitations of Section 6 and the provisions of subsection 3.9, each
employer's matching employer contributions for or during a plan year shall
be made from net income (i.e., its net profits before federal and state
taxes on income) for that plan year, or its accumulated profits (i.e., its
net profits after federal and state taxes on income which have been
accumulated and retained in the business), or both. An employer's income
deferral contributions and matching employer contribution are conditioned
on their deductibility under Section 404 of such Code and, unless an
employer specifies otherwise, shall not exceed an amount equal to the
maximum amount deductible on account thereof by the employer for that year
for purposes of federal taxes on income.
3.5. Limitations on Income Deferrals. In no event shall the actual deferral
percentage (as defined below) of highly compensated participants (as
defined in subsection 3.6) for any plan year beginning on or after January
1, 1987 exceed the greater of:
(a) The actual deferral percentage of all other participants for such
plan year multiplied by 1.25; or
(b) The actual deferral percentage of all other participants for such
plan year multiplied by 2.0; provided that the actual deferral
percentage of the highly compensated participants does not exceed
that of all other participants by more than 2 percentage points.
The "actual deferral percentage" of a group of participants for a plan year
means the average of the ratios (determined separately for each participant
in such group) of A to B where A equals the sum of:
(c) The income deferral contributions credited to each such participant's
investment accounts (as described in subsection 4.2) for such plan
year, and
(d) The matching employer contributions credited to each such
participant's investment accounts (as described in subsection 4.2)
for such plan year.
and B equals the participant's "compensation" for such plan year. For
purposes of this subsection "compensation" means an employee's compensation
(as defined in Section 414(s) of the Code), including income deferral
contributions made for such year. The Tax-Saver & Investment Board shall
determine from time to time from the income deferral elections then on file
with the board whether the foregoing limitation will be satisfied and, to
the extent necessary to insure compliance with such limitation, shall
reduce the applicable percentages of compensation to be withheld for highly
compensated participants starting with the participant with the highest
income deferral percentage first and reducing such percentage to the next
highest deferral percentage and so on until such limitation is satisfied.
In addition, it at any time, because of the foregoing limitations, a
portion of the income deferrals withheld from a participant's compensation
cannot be credited to his investment accounts, the participant shall be
deemed not to have elected such income deferrals and the amount of such
income deferral contributions (and any income allocable to such
contributions) will be distributed to such highly compensated participant
no later than two and one-half months after the close of the plan year for
which such excess contribution was made. For purposes of determining the
amount of any income for a plan year attributable to any excess
contributions by a highly compensated participant (as defined in subsection
3.6) to be returned to such participant, the following formula will be
used:
(i) First, the value of his account as of the beginning of the plan
year and as of the last day of the plan year shall be determined.
(ii) Next, the gain or loss on such account shall be determined after
first reducing the difference between the balance of the account
as at the end of the year and the balance as at the beginning of
the year by income deferral contributions made for such year.
(iii) Next, the amount calculated under paragraph (ii) shall be
multiplied by a fraction the numerator of which is the excess
contributions made by the participant for such year and the
denominator of which is such participant's account as of the last
day of such year, reduced by the amount of any gain for such year
and increased by the amount of any loss for such year.
(iv) Finally, 10% of the amount computed in paragraph (iii) shall be
multiplied by the number of calendar months from the last day of
the plan year to the date such excess is returned (payments made
before the 15th day of a month will be considered as made on the
last day of the preceding month). The sum of the amount
calculated under paragraph (iii) and this paragraph shall be the
amount of income to be returned to the participant for such year.
The actual deferred percentage of a highly compensated participant to whom
the family attribution rules described in subsection 3.6 apply shall be the
greater of:
(a) The actual deferral ratio obtained by aggregating the income deferral
contributions and compensation of only those family members who are
highly compensated participants; or
(b) The actual deferral ratio obtained by aggregating the income deferral
contributions and compensation of all family members who are
participants.
For purposes of this subparagraph, certain former employees (as determined
under Section 414(q)(9) of the Code) shall be treated as employees for
purposes of determining highly compensated participants.
3.6. Highly Compensated Participants. For purposes of subsection 3.5 of the
plan, a "highly compensated participant" means any participant who, during
the current or immediately preceding plan year:
(a) Was a 5 percent owner of an employer or controlled group member;
(b) Received annual compensation from an employer and/or controlled group
member of more than $75,000;
(c) Received annual compensation from an employer and/or controlled group
member of more than $50,000 and was in the top-paid 20% of the
employees; or
(d) Was an officer of an employer and/or controlled group member
receiving annual compensation greater than 150 percent of the
limitation in effect under Section 415(c)(1)(A) of the Code;
provided, that for purposes of this subparagraph (d), not more than
50 employees of the employer (or, if less, the greater of 3 employees
or 10 percent of the employees) shall be treated as officers.
A participant not described in (b), (c), or (d) above for the immediately
preceding year will not be considered a highly compensated participant for
the current plan year under (b), (c), or (d) unless such participant is
included within the group of the 100 highest paid employees of the employer
and controlled group members for such current year. For purposes of this
subsection "compensation" shall mean total compensation (as defined in
Section 415(c)(3) of the Code). If any participant is a family member of a
highly compensated participant who is either a five percent owner or one of
the ten most highly compensated employees with respect to any plan year,
such participant will not be treated as a separate participant and
compensation paid to such participant will be treated as if paid to such
highly compensated participant. A "family member" of a highly compensated
participant means such participant's spouse, lineal ascendants or
descendants, and the spouses of such lineal ascendants or descendants.
3.7. Company Stock. For purposes of the plan "company stock" means common stock
of Consolidated which constitutes "employer securities" under Section
409(1) of the code and also constitutes "qualifying employer securities"
under Section 407(d)(5) of the Employee Retirement Income Security Act of
1974.
3.8. Verification of Employer Contributions. A certificate of an independent
certified public accountant selected by Consolidated shall be conclusive on
all persons as to the amount of an employer's contributions under the plan
for any plan year.
3.9. No Interest in Employers. The employers shall have no right, title, or
interest in the trust fund, nor will any part of the trust fund at any time
revert or be repaid to an employer, unless:
(a) A contribution is made by such employer by mistake of fact and such
contribution is returned to the employer within one year after
payment to the trustee, or
(b) A contribution conditioned on the deductibility thereof is disallowed
as an expense for federal income tax purposes and such contribution
(to the extent disallowed) is returned to the employer within one
year after payment to the trustee.
The amount of any contribution that may be returned to an employer pursuant
to subparagraph (a) or (b) above shall be reduced by any portion thereof
previously distributed from the trust fund and by any losses of the trust
fund allocable thereto and in no event may the return of such contribution
cause any participant's account balances to be less than the amount of such
balances had the contribution not been made under the plan.
3.10. Substitute Employer Contributions. If because of the limitations specified
in subsection 3.4, an employer is prevented from making all or any portion
of its contribution under subsection 3.3 for any plan year, then so much of
such contribution which the employer is prevented from making will be made
by the other employers as follows:
(a) If a consolidated federal income tax return is filed by Consolidated
and the employers for such fiscal year, in such proportions as
Consolidated shall specify, or
(b) If a consolidated federal income tax return is not filed by
Consolidated and the employers for that fiscal year, each employer
which is so prevented from making a contribution shall contribute an
amount equal to the proportion of its total net income or accumulated
profits remaining after deduction of its contributions made without
regard to this subparagraph which the total contributions which one
or more of such employers were so prevented from making bears to the
total net income or accumulated profits of the employers which were
not so prevented from making such contributions, determined after
deducting all contributions which would have been made by them
without regard to this subparagraph.
The provisions of this subsection shall apply only to a group of
corporations which is an "affiliated group" within the meaning of Section
1504 of the Code. For all purposes of the plan, any contributions made by
Consolidated or any of the employers under this subsection on behalf of an
employer prevented from making all or any portion of its contribution shall
be considered as having been made by the employer so prevented from making
its contribution.
SECTION 4
Plan Accounting
4.1. Separate Accounts. The Tax-Saver & Investment Board will maintain a
"company stock account" in the name of each participant which will reflect
his interest in company stock contributed or purchased for his benefit by
his employer as part of the tax credit contribution under subsection 3.1 of
the plan made for plan years ended prior to January 1, 1987. The Tax-Saver
& Investment Board will maintain a separate account in the name of each
participant which will reflect the contributions made by his employer for
his benefit under subsection 3.2 and subsection 3.3 and his interest in
each of the investment funds, if any, described in subsection 4.2. The
board may maintain such other accounts or subaccounts as it deems necessary
or desirable for purposes of plan administration. Unless the context,
indicates otherwise, references in the plan to a participant's "accounts"
means all accounts maintained in his name under the plan.
4.2. The Trust Fund and Investment Funds. The trust fund as at any date means
all property of every kind then held by the trustee. As of January 1,
1987, the trust fund shall include the following "investment funds:"
(a) Fixed Income Fund. This investment fund is invested primarily in
fixed income securities of a marketable nature, the investment
objective being a favorable total rate of return emphasizing income.
(b) U.S. Government Fund. This investment fund is invested primarily in
treasury bills, bonds, notes, and other evidences of indebtedness
issued by the United States or any agency or instrumentality thereof.
(c) Common Stock Fund. This investment fund is invested primarily in
common stocks or debt securities convertible into common stocks of
domestic and foreign corporations.
(d) Consolidated Papers, Inc. Common Stock Fund. This investment fund
will be invested in company stock.
Consolidated may appoint investment managers to manage any of the
investment funds, including the power to acquire and dispose of assets of
such funds. The trustee, in its discretion, may invest part or all of the
Fixed Income Fund, the U.S. Government Fund, or the Common Stock Fund in a
commingled or collective trust fund which is designed for investments of
the type in which such fund is to be invested and in other short-term
investments.
4.3. Allocation of Matching Employer Contributions. Matching employer
contributions under subsection 3.3 of the plan will be allocated among and
credited to the investment accounts of participants as soon as practicable
after the end of the pay period for which such contributions are made but
not later than the time for filing the employer's federal income tax return
for such year (including extensions thereof).
4.4. Company Stock Account Adjustments. As of each December 31 and each
dividend payment date, any cash dividends received by the trustee with
respect to company stock in the company stock account shall be applied by
the trustee as of such date (to the extent not directed by the Tax-Saver &
Investment Board to be used to pay any cash distribution under subsection
5.3) to purchase additional shares of company stock at the then fair market
value of such stock, which shares (including fractional shares) shall be
allocated among and credited to the company stock accounts of participants,
pro rata, according to the shares (including fractional shares) credited to
the company stock accounts of participants on the applicable dividend
record date. Any company stock received by the trustee as a stock split or
stock dividend or as a result of a reorganization or recapitalization shall
be allocated and credited to the company stock accounts of participants,
pro rata, according to the shares (including fractional shares) of company
stock previously credited to such accounts.
4.5. Other Account Adjustments. Except as otherwise provided below, at such
times during the plan year as the Tax-Saver & Investment Board may direct
(an "adjustment date"), but not less than once annually on each December
31, the trustee shall adjust the amount invested by each such participant
in one or more of the investment funds (referred to hereafter as an
"investment account"), as follows:
(a) First, charge or credit to the proper investment accounts all
withdrawals, transfers, or distributions, one-half of the income
deferral contributions, if any, under subsection 2.6 and 3.2 and one-
half of the matching employer contributions, if any, under
subsections 3.3 and 4.3 made since the last preceding adjustment date
that have not been charged or credited previously;
(b) Next, adjust the credit balances in the investment accounts of all
participants in each investment fund upward or downward pro rata
according to the credit balances so that the total of the credit
balances in each fund will equal the then adjusted net worth (as
defined below) of that fund as of that date;
(c) Next, credit the remaining income deferrals not already credited
under subparagraph (a) above, if any, that are to be credited as of
that date pursuant to subsections 2.6 and 3.2; and
(d) Finally, credit the remaining matching employer contributions not
already credited under subparagraph (a) above, if any, that are to be
credited as of that date pursuant to subsections 3.3 and 4.3.
The "adjusted net worth" of an investment fund as of any adjustment date
means the then net worth of that fund (that is, the fair market value of
the assets in the fund, less liabilities other than liabilities to persons
entitled to benefits under the plan) determined by the trustee, exclusive
of one-half of the income deferral contributions or matching employer
contributions paid to the trustee and invested in the fund but not credited
to the participant's investment account as of a prior adjustment date. The
trustee may account for and make any adjustments under any investment fund
in any other method or manner specified or permitted under such investment
fund provided that such account adjustment is made at least once annually
on each December 31.
4.6. Investment Elections. Each participant, by writing filed with the Tax-
Saver & Investment Board, at least 30 days prior to any January 1, April 1,
July 1, or October 1 may elect the respective percentages of his income
deferral contributions or matching employer contributions to be allocated
to and invested in each of the investment funds. An election, once made,
shall continue in effect until such election is changed or revoked by
subsequent election. If no election has been made by a participant, 100
percent of his income deferral contributions and matching employer
contributions will be invested in the Consolidated Papers, Inc. Common
Stock Fund.
4.7. Transfers Between Investment Funds. Subject to any restrictions on the
transfer from or to a particular investment fund which may be established
by the Tax-Saver & Investment Board, each participant may elect to transfer
amounts credited to his account under one investment fund to his account
under any other investment fund. Such transfers (the number and frequency
of which shall be established from time to time by the board) will occur as
of any adjustment date or as soon as practicable thereafter provided that
the participant files his transfer election in writing with the board in
proper and timely fashion according to procedures established by the board
for this purpose. As soon as possible after each adjustment date, the
trustee shall make appropriate account transfers in accordance with the
transfer elections filed with the board in accordance with this subsection.
Amounts allocated to company stock accounts may not be transferred to an
investment fund.
4.8. Statement of Accounts. The Tax-Saver & Investment Board shall furnish each
participant with a statement reflecting the balances in his investment
accounts and in his company stock account as at each January 1, April 1,
July 1, or October 1 (or at such dates as may be designated by the board)
after all adjustments required under the plan have been made. No
participant, except a member of the board, shall have the right to inspect
the accounts of any other participant.
4.9. Rollovers. With the consent of the Tax-Saver & Investment Board and in
accordance with such rules as the board may establish from time to time,
rollover amounts described in Section 402(a)(5) of the Code rollover
contributions described in Section 408(d)(3) of the Code, and benefits of
an employee under any other plan qualified under Section 401(a) of the Code
may be transferred to and held by the trustee and will be credited to an
account established in the name of the employee. Any amount received by
the trustee for an employee in accordance with the foregoing will be
subject to all applicable accounting provisions of Section 4 until
distributed in accordance with subsection 5.3 of the plan. Such balance,
as adjusted under the plan, will be fully vested and nonforfeitable.
SECTION 5
Nonforfeitable Rights, Voting of Shares, and Distribution
5.1. Nonforfeitable Rights. Subject to the provisions of subsection 3.9, each
participant's accounts, as adjusted under the terms of the plan, shall at
all times be fully vested and nonforfeitable. A participant's "retirement"
means his termination of employment with all the employers on or after
attaining age 55 years.
5.2. Voting of Company Stock. Consolidated shall furnish to each participant
who has shares of company stock credited to his company stock account or
his investment account under the Consolidated Papers, Inc. Common Stock
Fund notice of the date of each meeting of the stockholders of Consolidated
at which company shares are entitled to be voted. Such notice shall
include all information provided other stockholders with respect to the
exercise of voting rights and request from each participant instructions as
to the voting (or the exercise of any rights other than voting rights) at
that meeting of shares of company stock credited to his company stock
account or in his account under the Consolidated Papers, Inc. Common Stock
Fund. If the participant furnishes such instructions to Consolidated
within the time specified in the notification given to him, the trustee
shall vote such shares (or exercise any other rights other than voting
rights) in accordance with the participant's instructions. All shares of
company stock credited to participants' company stock accounts or
investment accounts under Consolidated Papers, Inc. Common Stock Fund as to
which the trustee does not receive voting instructions as specified above
shall not be voted by the trustee.
5.3. Distribution Upon Termination. If a participant's employment with all of
the employers is terminated on account of retirement or for any other
reason, distribution of his accounts shall be made to him or, in the event
of his death, to his beneficiary (as defined in subsection 5.4) as soon as
practicable after the first adjustment date coincident with or next
following the date on which his employment terminates after all adjustments
required under the plan as of that adjustment date have been made in
accordance with Section 4. Distribution of a participant's account shall
be made at the direction of the Tax-Saver & Investment Board in one lump
sum or in a series of monthly, quarterly, or annual installments, of
substantially equal amounts, over a reasonable period of time, as directed
by the participant, not exceeding the lesser of l0 years or the joint life
expectancy of the participant and his beneficiary. If the value of a
participant's accounts at the date of distribution exceeds $3,500, such
participant's benefits will be distributed to the participant prior to age
65 only with the participant's written consent. If a participant dies
after payment of his benefits has begun, the remaining portion of such
benefits shall be distributed over a period not exceeding the period over
which payments are being made to the participant. If a participant dies
before payment of his benefits has begun, his benefits must be distributed
over a period not exceeding the greatest of: (i) five years from the death
of the participant; (ii) in the case of payments to a designated
beneficiary other than the participant's spouse, the life expectancy of
such beneficiary, provided payments begin within one year of the
participant's death; or (iii) in the case of payments to the participant's
spouse, the life expectancy of such spouse, provided payments begin by the
date the participant would have attained age 70-1/2. A participant's
company stock account shall be distributed in the form of shares of company
stock equal to the number of full shares credited to his company stock
account and cash representing the balance of any fractional share in his
account, with the fair market value of any share being determined as of the
date of distribution to the participant or, the participant or his
beneficiary may elect to receive the value of his company stock account in
cash. Distribution of all other amounts shall be made in cash or, in the
case of a participant whose investment accounts include company stock,
company stock. By writing filed with the board, and subject to the board's
approval, a participant may elect to defer distribution of his account
balances but not beyond the end of the calendar year in which he attains
age 70-1/2. Distribution of a participant's benefits must begin not later
than April 1 of the plan year next following the plan year in which the
participant attains age 70-1/2, notwithstanding the fact that his
employment has not terminated. Until all of a participant's benefits have
been distributed under the plan, all appropriate accounting provisions of
Section 4 shall apply to the participant's accounts under the plan. All
distributions under the plan shall comply with Section 401(a)(9) of the
Code.
5.4. Designation of Beneficiary. Each participant from time to time, by signing
a form furnished by the Tax-Saver & Investment Board, may designate any
natural or legal person or persons (who may be designated concurrently,
contingently, or successively) to whom his benefits are to be paid if he
dies before he receives any or all of his benefits; provided, however, that
the beneficiary of a participant who is married on the date of his death
shall be his surviving spouse, if any, unless the participant has
designated another person as his beneficiary and the participant's spouse
consents thereto in writing and such consent acknowledges the effect of the
designation and is witnessed by a member of the Tax-Saver & Investment
Board or a notary public. A beneficiary designation form and any spousal
consent will be effective only when filed with the board while the
participant is alive and will cancel all beneficiary designation forms
previously filed with the board. If a deceased participant who was not
married on the date of his death failed to designate a beneficiary as
provided above, or if the deceased participant's spouse or other
beneficiary designated by him dies before him or before complete payment of
the participant's benefits, the board, in its sole discretion, may direct
that the participant's benefits be paid to:
(a) The legal representative or representatives of the estate of the last
to die of the participant, his spouse, and any natural person chosen
as the participant's designated beneficiary or, if the estate has
been closed, to
(b) One or more of the participant's relatives by blood, adoption, or
marriage and in such proportions as the board determines.
The term "designated beneficiary" as used in the plan means the natural or
legal person or persons (including a trustee or other legal representative
acting in a fiduciary capacity) designated by a participant as his
beneficiary in the last effective beneficiary designation form filed with
the board under this subsection. The term "beneficiary" as used in the
plan means the natural or legal person or persons to whom a deceased
participant's benefits are payable under this subsection.
5.5. Hardship Withdrawals. A participant, with the consent of the Tax-Saver &
Investment Board, may elect to withdraw all or any portion of the net
credit balance in his investment accounts provided that the withdrawal is
necessary because of a hardship causing immediate and heavy financial needs
on the participant and the participant certifies to the Tax-Saver &
Investment Board that such withdrawal does not exceed the amount required
to meet such immediate financial need and not reasonably available from
other resources of the participant, including the borrowing from commercial
sources on reasonable commercial terms, reimbursement or compensation by
insurance or otherwise, reasonable liquidation of assets, cessation of
income deferral contributions to the plan or loans from the plan. Such
withdrawal shall not exceed the value of such accounts as of the adjustment
date coincident with or next preceding the date of withdrawal. Each such
election shall be in writing, shall be filed with the board at such time
and in such manner as the board shall determine, and shall be effective in
accordance with such rules as the board shall establish from time to time.
A hardship causing immediate and heavy financial needs shall include
amounts necessary to enable the participant to meet any extraordinary
expenses incurred on account of accident, sickness, disability, or other
financial emergency affecting him or any of his dependents, to provide for
his post-secondary education or the post-secondary education of his
dependents, or to make a capital investment (as defined below) in his
principal residence. A "capital investment" in a participant's principal
residence shall include payment on the purchase price, payments of
principal on a mortgage on such residence or payments for initial
construction or improvement of, or constructions of additions to, a
residence actually occupied or to be occupied by the participant, but shall
not include any expenditures for nonstructural capital items. A
participant may not withdraw any portion of his company stock account and,
beginning January 1, 1989, may not withdraw an amount greater than the sum
of (i) the amount of his income deferral contributions made after January
1, 1989 plus (ii) amounts credited to his account as at December 31, 1988
and any amounts credited to his account under subsection 4.9.
5.6. Pre-Termination Distributions. By writing filed with the Tax-Saver &
Investment Board, and subject to the board's approval, a participant who
has attained age 59-1/2 may irrevocably elect that the entire net credit
balance in his investment accounts (after any adjustments required under
the plan have been made) be distributed to him as soon as practicable
thereafter by payment in a lump sum. A distribution to a participant under
this subsection shall immediately be charged to such participant's account
but shall not prohibit the participant from continuing to participate in
the plan. A participant may not receive distribution of any portion of his
company stock account under this subsection.
5.7. Loans to Participants. While it is the primary purpose of the plan to
provide benefits for participants when they terminate employment with the
employers, the Tax-Saver & Investment Board, pursuant to such rules as the
board may from time to time establish, may direct the trustee to make a
loan to a participant from the participant's account up to an amount to be
determined in accordance with subparagraph (e) below as of any January 1,
April 1, July 1, or October 1 and after all adjustments to such accounts
have been made, subject to the following terms and conditions:
(a) Loans will only be permitted for "hardship" cases described in
subsection 5.5 and each request for a loan must be by written
application filed with the board, on a form provided by the board,
not less than 15 days prior to such January 1, April 1, July 1, or
October 1. Each such loan shall be effective on such date.
(b) Each loan shall be evidenced by a written note in a form approved by
the board and shall provide for reasonable rate of interest as
defined in subparagraph (c) below. Such loan shall provide that
principal and interest will be payable on at least a quarterly basis
during a repayment period which shall not extend beyond the earlier
of five years or a participant's anticipated termination of
employment; provided, however, that such five-year limit shall not
apply to any loan used to acquire any dwelling unit which within a
reasonable time is to be used (determined at the time the loan is
made) as the principal residence of the participant. The minimum
principal amount of any loan permitted under the plan will be $1,000.
Each such loan shall be repaid by payroll deduction.
(c) The interest rate each loan shall bear will be set by the board at an
effective annual percentage rate that provides the plan with a return
commensurate with the interest rates charged by persons in the
business of lending money for loans under similar circumstances.
(d) Each loan shall be secured by a pledge of up to one-half of the
participant's vested account balances under the plan.
(e) The total amount of any loan made to a participant shall not exceed
the lesser of:
(i) $50,000, reduced by the excess (if any) of:
(A) The highest outstanding balance of any loan made
during the 1-year period ending immediately preceding
the date of the loan over
(B) The outstanding balance on the date of the loan; and
(ii) The sum of the participant's income deferral contributions
under the plan and any amounts held in an account under
subsection 4.9, after all adjustments to such accounts have
been made; and
(iii) One-half of the participant's vested account balances,
including any amounts held in an account under subsection
4.9 of the plan.
(f) The amount of any loan made to a participant from his account will be
considered an investment account invested in a Loan Fund and will be
charged against the participant's investment accounts in the other
investment funds as of the next preceding adjustment date as directed
by the participant. The credit balance in the account of each
participant invested in the Loan Fund shall be adjusted upward as of
each accounting date to reflect the interest paid by each such
participant under such participant's loan to the trustee since the
last preceding accounting date. Participants may direct the Tax-
Saver & Investment Board as to which of the investment funds such
loan is to be charged and if so provided for by the board, as to
which investment fund repayment of principal and interest on such
loan is to be credited in accordance with subsection 4.7 of the plan.
Otherwise, principal and interest will be credited to the U.S.
Government Fund.
(g) To the extent permitted by law, if there is a default in the payment
of principal or interest on a loan, the board shall treat such
default as a hardship distribution under the plan at the accounting
date coincident with or next following the date of such default. In
any event, if upon a participant's termination of employment, any
loan made to him or any portion thereof, together with accrued
interest thereon, remains unpaid, the total of the unpaid balance of
such loans and accrued interest thereon shall be deemed distributed
to the participant and charged against his account before
distribution of the participant's account balance is made to the
participant.
SECTION 6
Limitations on Contributions
6.1 Contribution Limitations. For each plan year beginning with the plan year
commencing January 1, 1987, the "annual addition" (as defined below) to a
participant's accounts under this plan shall not exceed the lesser of:
(a) $30,000 (or such greater amount as may be determined by the
Commissioner of Internal Revenue); or
(b) 25 percent of the participant's compensation for such plan year.
The term "annual addition" for any plan year beginning with the plan year
commencing January 1, 1987 means the sum of the following amounts credited
to a participant's accounts under such plan for that year:
(c) Employer contributions;
(d) Participant's contributions, if any; and
(e) Forfeitures.
The annual addition to a participant's accounts under this plan will be
reduced by the amount of annual additions credited to such participant's
accounts under any other defined contribution plan maintained by the
employers or controlled group members. If for any plan year the amount
allocable to any participant under the plan would exceed the maximum annual
addition, such excess amount shall be reduced by returning part, or (if
necessary) all, of the matching employer contributions and then the income
deferral contributions credited to the participant's investment accounts
during the plan year.
6.2. Combined Benefit Limitations. If a participant in this plan also is a
participant in a defined benefit pension plan maintained by an employer or
controlled group member, the aggregate benefits payable to, or on account
of, him under both plans will be determined in a manner consistent with
Section 415 of the Internal Revenue Code of 1954. Accordingly, in general,
there will be determined with respect to this plan and the defined benefit
plan a fraction indicating the ratio of (i) the participant's benefit under
each of said plans to (ii) the maximum plan benefits (as adjusted pursuant
to Section 415(e) of such Code) that could be provided for him in
accordance with said Section 415. For the purpose of determining such
fractions, all defined contribution plans maintained by the employers and
controlled group members in which the participant participates shall be
aggregated and all defined benefit plans maintained by the employers and
controlled group members in which the participant participates shall also
be aggregated. If the sum of such fractions determined with respect to the
participant for any plan year exceeds 1.0, then the annual addition for the
participant under this plan for the plan year shall be reduced to the
extent necessary as provided in subsection 6.1 before any reduction is made
in the defined benefit pension plan.
SECTION 7
General Provisions
7.1. Interests Not Transferable. The interests of persons entitled to benefits
under the plan are not subject to their debts or other obligations and,
except as may be required by the tax withholding provisions of the Internal
Revenue Code or any state's income tax act or pursuant to a qualified
domestic relations order as defined in Section 414(p) of the Internal
Revenue Code, may not be voluntarily or involuntarily sold, transferred,
alienated, assigned, or encumbered.
7.2. Facility of Payment. When a participant or other person entitled to
benefits under the plan is under a legal disability or, in the Tax-Saver &
Investment Board's opinion, is in any way incapacitated so as to be unable
to manage his financial affairs, the board may direct that such
participant's or person's benefits be distributed to his legal
representative or to a relative or friend of such person for his benefit,
or the board may apply the benefits of such person in any manner that the
board may select which is consistent with the plan and permitted by law.
7.3. Absence of Guaranty. The Trustee, the Tax-Saver & Investment Board, and
the employers do not in any way guarantee the trust fund from loss or
depreciation. The employers do not guarantee any payment to any person.
The liability of the board and the trustee to make distribution under the
plan is limited to the available assets of the trust fund.
7.4. Employment Rights. The plan does not constitute a contract of employment,
and participation in the plan will not give any employee the right to be
retained in the employ of the employers, nor any right or claim to any
benefit under the plan, unless such right or claim has specifically accrued
under the terms of the plan.
7.5. Litigation by Participants or Other Persons. To the extent permitted by
law, if a legal action begun against an employer, the Tax-Saver &
Investment Board (or any member thereof), or the trustee by or on behalf of
any person with respect to benefits under the plan results adversely to
that person, or if a legal action arises because of conflicting claims to a
participant's or beneficiary's benefits, the cost to any employer, the
board (or any member thereof), or the trustee of defending the action will
be charged to the extent possible to the sums, if any, that were involved
in the action or were payable to the participant or beneficiary concerned.
7.6. Evidence. Evidence required of anyone under the plan may be by
certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable, and signed, made or
presented by the proper party or parties.
7.7. Action by Employers. Any action required or permitted of an employer under
the plan shall be by resolution of its Board of Directors or by a duly
authorized committee of its Board of Directors, or by a person or persons
authorized by resolution of its Board of Directors or such committee.
7.8. Review of Benefit Determinations. The Tax-Saver & Investment Board will
provide notice in writing to any participant, beneficiary, or other person
whose claim for benefits under the plan is denied and the board shall
afford such participant, beneficiary, or other person a full and fair
review of its decision, if so requested, in accordance with governmental
rules and regulations.
7.9. Waiver of Notice. Any notice required under the plan may be waived by the
person entitled to notice.
7.10. Controlling Law. Except to the extent superseded by federal law, the laws
of Wisconsin shall be controlling in all matters relating to the plan.
7.11. Determination of Fair Market Value. The fair market value of company stock
on any particular date shall be determined in accordance with paragraph
III-2 of the trust or under any other method required under regulations
adopted by the Internal Revenue Service. In the event an employer
contribution is made in company stock, the value of such stock shall be
equal to the fair market value, as determined in good faith and in
accordance with regulations prescribed by the Internal Revenue Service.
7.12. Statutory References. Any reference in the plan to a section of the
Internal Revenue Code, of the Employee Retirement Income Security Act of
1974, or to a section of any other federal law, shall include any
comparable section or sections of any future legislation that amends,
supplements, or supersedes that section.
7.13. Severability. In the event any provision of the plan is held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining provisions of the plan, and the plan shall be construed and
enforced as if such illegal and invalid provision had never been
incorporated in the plan.
7.14. Fiduciary Responsibilities. Each fiduciary with respect to the plan shall
discharge his duties with respect to the plan solely in the interest of
plan participants and their beneficiaries and with the care, skill,
prudence, and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like aims.
7.15. Withholding. The trustee shall withhold for federal income tax purposes
from any distributions or withdrawals made under the plan such amounts as
are required under Internal Revenue Service regulations.
7.16. Leased Employees. A leased employee (as defined below) shall not be
eligible to participate in the plan. A leased employee means any person
who is not an employee of an employer but who has provided services to an
employer of the type which have historically (within the business field of
the employers) been provided by employees on a substantially full-time
basis for a period of at least 1 year pursuant to an agreement between an
employer and a leasing organization. The period during which a leased
employee performs services for an employer shall be taken into account for
purposes of subsection 2.2 of the plan unless (i) such leased employee is a
participant in a money purchase pension plan maintained by the leasing
organization which provides a nonintegrated employer contribution rate of
at least l0 percent (l0%) of compensation, immediate participation for all
employees, and full and immediate vesting and (ii) leased employees do not
constitute more than 20 percent (20%) of the employer's nonhighly
compensated work force.
SECTION 8
The Tax-Saver & Investment Board
8.1. Membership. A Tax-Saver & Investment Board consisting of 4 members (who
may but need not be employees of an employer) shall be appointed by
Consolidated. The Secretary of Consolidated shall certify to the trustee
from time to time the appointment to (and termination of) office of each
member of the board and the person who is selected as secretary of the
board.
8.2. Board's General Powers, Rights, and Duties. Except as otherwise
specifically provided, and in addition to the powers, rights, and duties
specifically given to the Tax-Saver & Investment Board elsewhere, in the
plan and the trust agreement, the board shall have the following powers,
rights, and duties:
(a) To select a secretary, if it believes it advisable, who may but need
not be a board member.
(b) To determine all questions arising under the plan, including the
power to determine the rights or eligibility of employees or
participants and any other persons to benefits under the plan, and
the amount of their benefits under the plan, and to remedy
ambiguities, inconsistencies or omissions.
(c) To adopt such rules of procedure and regulations as in its opinion
may be necessary for the proper and efficient administration of the
plan and as are consistent with the plan and trust agreement.
(d) To enforce the plan in accordance with the terms of the plan and the
trust agreement and the rules and regulations adopted by the board as
above.
(e) To direct the trustee as respects payments or distributions from the
trust fund in accordance with the provisions of the plan.
(f) To furnish the employers with such information as may be required by
them for tax or other purposes in connection with the plan.
(g) To employ agents, attorneys, accountants or other persons (who also
may be employed by the employers) and to allocate or delegate to them
such powers, rights, and duties as the board may consider necessary
or advisable to properly carry out administration of the plan,
provided that such allocation or delegation and the acceptance
thereof by such agents, attorneys, accountants or other persons,
shall be in writing.
8.3. Manner of Action. During a period in which two or more board members are
acting, the following provisions apply where the context admits:
(a) A board member by writing may delegate any or all of his rights,
powers, duties, and discretions to any other member, with the consent
of the latter.
(b) The board members may act by meeting or by writing signed without
meeting, and may sign any document by signing one document or
concurrent documents.
(c) An action or a decision of a majority of the members of the board as
to a matter shall be as effective as if taken or made by all members
of the board.
(d) If, because of the number qualified to act, there is an even division
of opinion among the board members as to a matter, a disinterested
party selected by the board shall decide the matter and his decision
shall control.
(e) Except as otherwise provided by law, no member of the board shall be
liable or responsible for an act or omission of the other board
members in which the former has not concurred.
(f) The certificate of the secretary of the board or of a majority of the
board members that the board has taken or authorized any action shall
be conclusive in favor of any person relying on the certificate.
8.4. Interested Board Member. If a member of a board also is a participant in
the plan, he may not decide or determine any matter or question concerning
distributions of any kind to be made to him or the nature or mode of
settlement of his benefits unless such decision or determination could be
made by him under the plan if he were serving on the board.
8.5. Resignation or Removal of Board Members. Any member of the board may be
removed by Consolidated at any time by giving 10 days' prior written notice
to him and the other members of the board. A member of the board may
resign at any time by giving 10 days' prior written notice to Consolidated
and the other members of the board. Consolidated may fill any vacancy in
the membership of the board provided, however, that if a vacancy reduces
the membership of the board to less than three, such vacancy shall be
filled as soon as practicable. Consolidated shall give prompt written
notice thereof to the other members of the appropriate board. Until any
such vacancy is filled, the remaining members may exercise all of the
powers, rights, and duties conferred on the board.
8.6. Information Required by Board. Each person entitled to benefits under the
plan shall furnish the board with such documents, evidence, data, or
information as the board considers necessary or desirable for the purpose
of administering the plan. The employers shall furnish the board with such
data and information as the board may deem necessary or desirable in order
to administer the plan. The records of the employers as to an employee's
or participant's period of employment hours of service, termination of
employment and reason therefor, leave of absence, re-employment, and
compensation will be conclusive on all persons unless determined to the
board's satisfaction to be incorrect.
8.7. Uniform Rules. The board shall administer the plan on a reasonable and
nondiscriminatory basis and shall apply uniform rules to all persons
similarly situated.
8.8. Board's Decision Final. Subject to applicable law, any interpretation of
the provisions of the plan and any decisions on any matter within the
discretion of the board made by the board in good faith shall be binding on
all persons. A misstatement or other mistake of fact shall be corrected
when it becomes known and the board shall make such adjustment on account
thereof as it considers equitable and practicable.
SECTION 9
Amendment, Termination, and Plan Merger
9.1. Amendment. While the employers expect and intend to continue the plan,
Consolidated reserves the right to amend the plan from time to time, except
as follows:
(a) The duties and liabilities of the Tax-Saver & Investment Board under
the plan shall not be changed substantially without its consent; and
(b) Except as provided in subsection 3.9, under no condition shall any
amendment result in the return or repayment to any employer of any
part of the trust fund or the income therefrom, or result in the
distribution of the trust fund for the benefit of anyone other than
participants and any other persons entitled to benefits under the
plan.
9.2. Termination. Subject to the provisions of the next sentence, Consolidated
may terminate the plan at any time by giving advance written notice of the
termination to the Tax-Saver & Investment Board, the trustee and other
employers. If the plan is terminated as to all participants (or if there
is a partial termination of the plan as respects some participants), the
accounting provisions of the plan shall continue to apply to the extent
appropriate so that distribution of participants' benefits may be made to
them after their termination of employment with the employers in accordance
with subsection 5.3.
9.3. Plan Merger or Consolidation. In no event shall there be any merger or
consolidation of this plan with, or transfer of assets or liabilities of
this plan to, any other plan unless each participant in the other plan
would (if the other plan were then terminated) receive a benefit
immediately after the merger, consolidation, or transfer which is equal to
or greater than the benefit the participant would have been entitled to
receive immediately before the merger, consolidation, or transfer (if the
plan had then been terminated).
9.4. Notice of Amendment, Termination or Plan Merger. Participants affected
thereby will be notified of an amendment, termination, plan merger or
consolidation within a reasonable time.
<PAGE>
SUPPLEMENT A
Special Rules When Plan is Top-Heavy
A-1. Purpose and Effect. The purpose of this Supplement A is to comply with the
requirements of Section 416 of the Internal Revenue Code of 1986. The
provisions of this Supplement A shall apply for each plan year in which the
plan is a "top-heavy plan" within the meaning of Section 416(g) of the
Internal Revenue Code.
A-2. Top-Heavy Plan. In general, the plan will be a top-heavy plan for any plan
year if, as of the last day of the preceding plan year (the "determination
date"), the sum of amounts in (a), (b), and (c) below for key employees (as
defined below and in Section 415(i)(1) of the Internal Revenue Code)
exceeds 60 percent of the sum of such amounts for all employees who are
covered by a defined contribution plan or defined benefit plan which is
aggregated in accordance with paragraph A-4 below:
(a) The aggregate account balances of participants under this plan.
(b) The aggregate account balances of participants under any other
defined contribution plan included in paragraph A-4.
(c) The present value of cumulative accrued benefits of participants
under any defined benefit plan included in paragraph A-4.
In making the foregoing determination (i) a participant's account balances
shall be increased by the aggregate distributions, if any, made with
respect to the participant during the 5-year period ending on the
determination date, (ii) the account balances of a participant who was
previously a key employee, but who is no longer a key employee, shall be
disregarded, (iii) the accounts of a beneficiary of a participant shall be
considered accounts of the participant and (iv) the account balances of a
participant who has not performed services for an employer during the 5-
year period ending on the determination date shall be disregarded.
A-3. Key Employee. In general, a "key employee" is an employee who, at any time
during the 5-year period ending on the determination date, is or was:
(a) An officer of an employer or controlled group member receiving annual
compensation greater than 50 percent of the limitation in effect
under Section 415(b)(1)(A) of the Internal Revenue Code; provided
that for purposes of this subparagraph (a), no more than 50 employees
of the employer and the controlled group members (or if lesser, the
greater of 3 employees of 10 percent of the employees) shall be
treated as officers;
(b) One of the ten participants receiving annual compensation of more
than the limitation in effect under Section 415(c)(1)(A) of the
Internal Revenue Code and owning the largest interests in an employer
in excess of a 0.5 percent interest;
(c) A 5 percent owner of an employer; or
(d) A 1 percent owner of an employer receiving annual compensation from
the employers and all other controlled group members of more than
$150,000.
For purposes of this Supplement A, the term "compensation" shall mean
compensation within the meaning of Section 1.415-2(d) of the Internal
Revenue Code.
A-4. Aggregation of Plans. Each other defined contribution plan and defined
benefit plan maintained by the employers or controlled group members which
covers a "key employee" as a participant or which is maintained by the
employers or controlled group members in order for a plan covering a "key
employee" to be qualified shall be aggregated in determining whether this
plan is top-heavy.
A-5. Minimum Employer Contribution. For any plan year in which the plan is a
top-heavy plan, the employer contribution credited to each participant who
is not a key employee shall not be less than 3 percent of such
participant's compensation for that year. In no event, however, shall the
employer contribution credited in any year to a participant who is not a
key employee (expressed as a percentage of such participant's compensation)
exceed the maximum employer contribution credited in that year to a key
employee (expressed as a percentage of such key employee's compensation up
to $200,000). Income deferral contributions made under subsection 3.2
shall not be treated as an employer contribution.
A-6. Maximum Compensation. For any plan year in which the plan is a top-heavy
plan, a participant's compensation in excess of $200,000 (or such greater
amount as may be determined by the Commissioner of Internal Revenue for
that plan year) shall be disregarded for purposes of determining an
employer's contribution made under subsections 3.2 and 3.3 of the plan.
A-7. No Duplication of Benefits. If the employer and controlled group members
maintain more than one plan, the minimum contribution otherwise required
under paragraph A-5 above may be reduced in accordance with regulations of
the Secretary of the Treasury to prevent inappropriate duplication of
minimum benefits or contributions.
A-8. Adjustment of Combined Benefit Limitations. For any plan year in which the
plan is a top-heavy plan, the determination of the defined benefit plan
fraction and defined contribution plan fraction under subsection 6.2 of the
plan shall be adjusted in accordance with the provisions of Section 416(h)
of the Internal Revenue Code.
A-9. Use of Terms. All terms and provisions of the plan shall apply to this
Supplement A, except that where the terms and provisions of the plan and
this Supplement A conflict, the terms and provisions of this Supplement A
shall govern.
<PAGE>
EXHIBIT 10.c. TO FORM 10-K FOR
CONSOLIDATED PAPERS, INC. FOR THE
FISCAL YEAR ENDED December 31, 1993
CONSOLIDATED
EMPLOYEES' STOCK OWNERSHIP PLAN
SECTION 1
Introduction
1.1. Purpose. CONSOLIDATED EMPLOYEES' STOCK OWNERSHIP PLAN (the plan is maintained
by Consolidated Papers, Inc. ("Consolidated") for eligible employees of
Consolidated and those of Consolidated's United States subsidiaries which
adopt the plan, with the consent of Consolidated. The purposes of the plan
are to permit eligible employees of Consolidated and adopting subsidiaries of
Consolidated to own common stock of Consolidated. The plan is designed as an
employee stock ownership plan and is intended to meet the requirements of a
stock bonus plan under Sections 401(a) and 4975(e)(7) of the Internal Revenue
Code of 1986, as amended, (the "Code") designed to invest primarily in common
stock of Consolidated [or any common stock issued by any corporation which is
a member of a controlled group of corporations which includes Consolidated
within the meaning of Section 1563(a) of the Internal Revenue Code of 1986,
determined without regard to Sections 1563(a)(4) and (e)(3)(C) thereof and as
modified by Section 409(1)(4) thereof].
1.2. Effective Date, Plan Year. The "effective date" of the plan as set forth
herein is January 1, 1987. A "plan year" means Consolidated's taxable year
for federal income tax purposes, which taxable year is the calendar year.
1.3. Employers. Consolidated and any United States subsidiary of Consolidated
which adopts the plan and trust with the consent of Consolidated are sometimes
referred to hereinafter collectively as the "employers" and individually as an
"employer."
1.4. Plan Administration. The plan will be administered by an employees' stock
ownership board (the "employees' stock ownership board") consisting of four
members appointed by Consolidated, as described in Section 8. Participants
will be notified of the identity of the board members and of any change in the
membership of such board.
1.5. Trustee, Trust Agreement, Trust Fund. Funds (or stock) contributed by the
employers under the plan will be held and invested in a trust fund, until
distributed, by a trustee (the "trustee") appointed by Consolidated. The
trustee will act under a trust agreement between the employers and the
trustee. Participants will be notified of the identity of the trustee, and of
any change in trustee.
1.6. Examination of Plan Documents. Copies of the plan and trust agreement, and
any amendments thereto, will be made available at the principal office of each
employer where they may be examined by any participant or beneficiary entitled
to receive benefits under the plan. The provisions of and benefits under the
plan are subject to the terms and provisions of the trust agreement.
1.7. Notices. Any notice or document required to be given to or filed with the
employees' stock ownership board shall be considered as given or filed if
delivered or mailed by registered mail, postage prepaid, addressed as follows:
Employees' Stock Ownership Board
c/o Consolidated Papers, Inc.
P.O. Box 8050
Wisconsin Rapids, WI 54495-8050
1.8. Gender and Number. Words in the masculine gender shall include the feminine
and neuter genders and, where the context admits, the plural shall include the
singular, and the singular shall include the plural.
1.9. Plan Supplements. The provisions of the plan may be modified by supplements
to the plan. The terms and provisions of each supplement are a part of the
plan and supersede the provisions of the plan to the extent necessary to
eliminate inconsistencies between the plan and the supplement.
SECTION 2
Eligibility and Participation
2.1. Eligibility. Subject to the limitations and conditions of the plan, each
employee of an employer will become a participant in the plan on January 1,
1987, or on the first July 1 or January 1 thereafter coincident with or next
following the date he meets both of the following requirements:
(a) He has completed one year of service (as defined in subsection 2.2); and
(b) He does not belong to a collective bargaining unit of employees represented
by a collective bargaining representative, except to the extent that an
agreement between the employer and such representative extends the plan to
such unit of employees.
Each employee will be notified of the date as of which he becomes a participant
and will be furnished with a summary plan description in accordance with
governmental rules and regulations. An employee who would be eligible to
participate in the plan on the applicable July 1 or January 1, except for
subparagraph 2.1(b) will become a participant on the date he satisfies the
conditions for participation under subparagraph 2.1(b).
2.2. Year of Service. A "year of service" means each 12 consecutive month period
commencing on the date an employee is first employed by an employer, and on
each anniversary date thereof, during which he completes 1,000 hours of
service (as defined below), subject to the following:
(a) A leave of absence (as defined below) will not interrupt continuity of
employment for purposes of the plan but not more than 501 hours of service
will be credited to an employee for any one continuous period of leave of
absence.
(b) A period of concurrent employment with two or more employers will be
considered as employment with one employer during that period and an
employee's employment with any predecessor to an employer will be considered
as employment with that employer.
(c) The termination of any employee's employment with one employer will not
interrupt the continuity of his employment or participation if, concurrently
with or immediately after such termination, he is employed by one or more
other employers.
(d) If a former employee of the employers is re-employed by an employer before
he has incurred five consecutive one-year breaks in service (as defined in
subparagraph (f) below) his employment with the employers shall not be
deemed to have terminated.
(e) A period of employment with a controlled group member (as defined below)
which is not an employer will be considered a period of employment with an
employer for purposes of determining years of service. A "controlled group
member" means any corporation or other trade or business which is under
common control with an employer within the meaning of Sections 414(b) and
414(c) of the Internal Revenue Code of 1986, as amended, including any
corporation described in Section 409(1)(4) of the Code.
(f) If a former employee of the employers who is not vested with respect to his
share account is re-employed by an employer after he has incurred five
consecutive one-year breaks in service, his prior period of employment and
years of service with the employers prior to such break shall be disregarded
for all purposes of the plan upon his re-employment if his consecutive
number of one year breaks in service equal or exceed his years of service
and such employee shall be treated as a new employee for all purposes of the
plan. A "one-year break in service" will be deemed to have occurred for
each 12-month period (which 12-month period shall be the same period for
which a year of service is computed) ending on or after the date of an
employee's termination of employment during which he has completed less than
501 hours of service.
(g) In the case of a maternity or paternity absence (as defined below), an
employee shall be credited, for the first 12-month period (which 12-month
period shall be the same period for which a break in service is computed as
described in subparagraph (f) above) in which he otherwise would have
incurred a one-year break in service (and solely for purposes of determining
whether such a break in service has occurred), with the hours of service
which normally would have been credited to him but for such absence (or, if
the stock ownership board is unable to determine the hours which would have
been so credited, 8 hours for each work day of such absence). A "maternity
or paternity absence" means an employee's absence from work because of the
pregnancy of the employee or birth of a child of the employee, the placement
of a child with the employee in connection with the adoption of such child
by the employee, or for purposes of caring for the child immediately
following such birth or placement. The board may require the employee to
furnish such information as the board considers necessary to establish that
the employee's absence was for one of the reasons specified above.
An "hour of service" means each hour for which an employee is directly or
indirectly paid, or entitled to payment, by an employer for the performance of
duties and for reasons other than the performance of duties, including each hour
for which back pay, irrespective of mitigation of damages, has been either
awarded or agreed to by an employer, determined and credited in accordance with
Department of Labor Reg. Sec. 2530.200b-2.
2.3. Leave of Absence. A leave of absence will not interrupt continuity of
service or participation in the plan. A "leave of absence" for plan
purposes means a leave of absence required by law or granted by an employer
on account of service in military or governmental branches described in any
applicable statute granting re-employment rights to employees who entered
such branches, or any other military or governmental branch designated by
the employers, and also means any other absence from active employment with
an employer under conditions which are not treated by it as a termination of
employment including, but not limited to, vacations, holidays, maternity,
illness, incapacity or jury duty. Leaves of absence will be governed by
rules uniformly applied to all employees similarly situated.
2.4. Re-employed Former Participant. If a former participant in the plan is re-
employed by an employer before incurring five consecutive one-year breaks in
service or after incurring five consecutive one-year breaks in service if
the provisions of subparagraph 2.2(f) do not apply, he will again become a
participant in the plan on the date he meets the requirements of
subparagraph 2.1(b).
SECTION 3
Employer Contributions
3.1. Aggregate Employer Contribution. For each plan year, Consolidated shall
specify either the employers' aggregate contribution to be made under the
plan for that year or a definite basis or formula by which the contribution
can be determined within a reasonable time after the end of that plan year.
Consolidated shall designate the plan year on account of which the
contribution is made. Notwithstanding the foregoing, for any plan year in
which a share purchase loan (as defined in subsection 5.1) to the trustee
remains outstanding, the employers shall make a minimum contribution to the
trustee equal to the amount required to enable the trustee to make payment
of the principal and interest due under such loan for such year, after
application of any amounts pursuant to subparagraph 5.6(b) have been made
toward such payment. Except as otherwise provided under the preceding
sentence, contributions may be made in cash or Consolidated stock (as
defined in subsection 7.1) having an aggregate fair market value equal to
such amount.
3.2. Individual Employer Contribution. For each plan year, each employer will
contribute to the trustee that portion of the aggregate contribution
established for such plan year under subsection 3.1 which the compensation
paid by such employer during such plan year to participants employed by it
and entitled to share in its contribution for such year bears to the total
of the compensation paid by all employers during such plan year to
participants entitled to share in such employers' contributions for the
year.
3.3. Limitations on Employer Contributions. An employer's contribution for a
plan year (other than the minimum contribution described in subsection 3.1
above) is conditioned on its deductibility under Section 404 of the Internal
Revenue Code of l986. An employer's contribution shall comply with the
contribution limitations set forth in subsections 5.16, 5.17, and 5.18.
Unless an employer specifies otherwise, or unless the contribution is a
minimum contribution described in subsection 3.1 above, an employer's
contribution shall not exceed an amount equal to the maximum amount
deductible on account thereof by the employer for that year for purposes of
federal taxes on income.
3.4. Payment of Employer Contributions. Each employer's contribution under the
plan for any plan year shall be due on the last day of that plan year and,
if not paid by the end of that year, shall be payable to the trustee as soon
as practicable thereafter, without interest, but no later than the time
prescribed by law for filing the employer's federal income tax return for
such year, including extensions thereof.
3.5. Verification of Employer Contributions. If for any reason an employer
decides to verify the correctness of any amount of calculation relating to
its contribution for any plan year, the certificate of an independent
accountant selected by the employer as to the correctness of any such amount
or calculation shall be conclusive on all persons.
3.6. No Interest in Employers. The employers shall have no right, title or
interest in the trust fund, nor shall any part of the trust fund revert or
be repaid to the employers, directly or indirectly, unless:
(a) The Internal Revenue Service initially determines that the plan does not
meet the requirements of Sections 401(a) and 4975(e)(7) of the Internal
Revenue Code of 1986, as amended, in which event the assets of the trust
fund shall be returned to the employers within one year of the date of
denial of qualification; or
(b) A contribution is made by an employer by mistake of fact and such
contribution is returned to the employer within one year after payment to
the trustee; or
(c) A contribution conditioned on the deductibility thereof is disallowed as an
expense for federal income tax purposes and such contribution (to the extent
disallowed) is returned to the employer within one year after the
disallowance of the deduction.
The amount of any contribution that may be returned to an employer pursuant to
subparagraph (b) or (c) above shall be reduced by any portion thereof previously
distributed from the trust fund and by any losses of the trust fund allocable
thereto, and in no event may the return of such contribution cause any
participant's share account to be less than the amount of such balance had the
contribution not been made under the plan.
<PAGE>
SECTION 4
Period of Participation
4.1. Settlement Date. A participant's "settlement date" will be the date on
which his employment with all the employers is terminated because of the
first to occur of the following:
(a) Normal or Late Retirement. The date of the participant's retirement on or
after attaining age 65 years (his "normal retirement age"). A participant's
right to his account balances shall be nonforfeitable on and after his
normal retirement age.
(b) Early Retirement. The date of the participant's retirement on or after
attaining age 55 years (his "early retirement age").
(c) Death. The date of the participant's death.
(d) Resignation or Dismissal. The date the participant resigns or is dismissed
from the employ of all the employers before he attains his normal or early
retirement age.
4.2. Restricted Participation. If (i) payment of all of a participant's account
balances is not made at his settlement date of (ii) a participant no longer
meets the requirements of subparagraph 2.1(b), the participant or his
beneficiary will be treated as a participant for all purposes of the plan,
except as follows:
(a) Except as specifically provided in subsection 5.9, the participant will not
share in employer contributions and remainders (as defined in subsection
6.3) after his settlement date or based on any compensation paid for any
period he failed to meet the requirements of subparagraph 2.1(b).
(b) The beneficiary of a deceased participant cannot designate a beneficiary
under subsection 6.6.
If a participant whose participation in the plan is restricted for the reason
specified in (ii) above subsequently satisfies the requirements of subparagraph
2.1(b) for participation, he will again become an active participant in the plan
on the date he satisfies such requirements.
SECTION 5
Accounting
5.1. Trust Fund and Plan Accounts. The "trust fund" as at any date will consist
of all property of any kind then held by the trustee. The employees' stock
ownership board shall maintain two separate accounts in the trust fund: (i)
an "unallocated share account" to which shall be credited the shares of
Consolidated stock acquired by the trustee with the proceeds of any loan (a
"share purchase loan") prior to the transfer of such shares to the
"allocated share account" and (ii) an "allocated share account" which will
reflect all shares of Consolidated stock held in the trust fund which are
not credited to the unallocated share account. The employees' stock
ownership board also may maintain or cause to be maintained other accounts
as it considers advisable.
5.2. Participant Accounts. The employees' stock ownership board will maintain a
separate share account in the name of each participant which will reflect
his interest in the allocated share account. Unless the context clearly
implies or indicates to the contrary, the term "account" as used in the
plan, means all accounts maintained in a participant's name under the plan.
5.3. Accounting Dates. A "regular accounting date" is any March 31, June 30,
September 30, and December 31. A "special accounting date" is any date
designated as such by the employees' stock ownership board and a special
accounting date occurring under subsection 11.3. The term "accounting date"
includes a regular accounting date and a special accounting date. The term
"accounting period" means the period beginning on the day immediately
following an accounting date and ending on the next accounting date.
5.4. When Employer Contributions Considered Made. For purposes of Section 5, an
employer's contribution under the plan for any plan year or accounting
period will be considered to have been made on the last day of that plan
year or accounting period, respectively, regardless of when paid to the
trustee.
5.5. Application of Employer Contributions. As of each accounting date, the
employer's contributions for the accounting period ending on that date will
be applied as follows:
(a) Employer Contributions Applied to Share Purchase Loan. As of each regular
accounting date occurring on the last day of an accounting period during
which principal and interest are outstanding on any share purchase loan,
employer contributions shall be applied (to the extent then required) to
payment of such principal and interest and shares of Consolidated stock
acquired with the proceeds of such loan shall be transferred from the
unallocated share account to the allocated share account as follows:
(i) If the loan provides for annual payments of principal and interest at
a cumulative rate that is not less rapid at any time than level annual
payments of such amount for 10 years, the number of shares to be
transferred (based on the average cost of such shares than held in the
unallocated share account) shall be equal to the amount of payment of
principal paid on the loan for such accounting period, provided, that:
(a) the interest paid on such loan may be disregarded only to the
extent that such interest would be determined to be interest under
standard loan amortization schedules; and (b) this subparagraph (i)
shall not be applicable if by reason of renewal, extension or
refinancing of such loan, such renewal, extension or refinancing has
caused the sum of the expired duration of such loan and the renewal
period, extension period or the duration of the new loan to exceed 10
years.
(ii) If the loan does not meet the requirements of subparagraph (i) above,
the number of shares to be transferred shall be determined by
multiplying: (a) the total number of shares held in the unallocated
share account which were acquired with the proceeds of the loan; by
(b) a fraction, the numerator of which shall be the amount of
principal and interest paid on the loan for such accounting period and
the denominator of which shall be the sum of the numerator plus the
principal and interest to be paid in all future accounting periods
(determined without regard to any possible renewals or extensions on
such loan). If the interest rate under the loan is variable, then for
purposes of this subparagraph (ii), interest to be paid in future
accounting periods shall be determined by using the rate in effect at
the end of the current accounting period.
Notwithstanding the above, an additional number of shares shall be
transferred from the unallocated share account to the allocated share
account as of the regular accounting date occurring on the last day of the
plan year so that the aggregate number of shares transferred as of all
accounting dates during that plan year is not less than the number of shares
that would have been so transferred for that plan year if there had been
just one accounting date during that plan year and if that accounting date
were on the last day of the plan year.
(b) Employer Contributions Not Applied to Share Purchase Loan. As of the
regular accounting date ending any accounting period during which an
employer's contribution is in excess of the amount applied to the principal
and interest on a share purchase loan or, if no loan is then outstanding,
the employer's contribution for that accounting period (or that portion
thereof not applied to payment of principal and interest on the loan) shall
be used by the trustee to acquire shares of Consolidated stock if the shares
are then available and the shares and any shares contributed by the employer
for that accounting period shall be credited to the allocated share account.
If shares of Consolidated stock are not available, the employer contribution
may be invested as described in subsection 5.11.
5.6. Application of Dividends and Other Income. Dividends paid on shares of
Consolidated stock held in the trust fund and other income of the trust fund
shall be applied as follows:
(a) Dividends on Allocated Shares. Cash dividends received on shares of
Consolidated stock held in the allocated share account which were not
acquired with a share purchase loan (and are not attributable to shares
acquired with a share purchase loan) shall be applied to purchase additional
shares of Consolidated stock and the shares so purchased shall be allocated
to the accounts holding shares on which the dividends used to acquire the
shares were paid. Cash dividends received on shares of Consolidated stock
held in the allocated share account acquired with a share purchase loan (or
attributable to shares acquired with a share purchase loan) shall be applied
by the trustee as soon as practicable after the receipt thereof toward
payment of any principal required or permitted to be paid on any share
purchase loan; and the number of shares of Consolidated stock (based on the
average cost of such shares then held in the unallocated share account)
attributable to the dividends so applied shall be transferred to the
allocated share account. If no such loan is then outstanding (or if such
dividends are in excess of the amount applied as a payment of principal on
such loan), such dividends (or the portion thereof not applied to principal
payments) shall be applied as soon as practicable after receipt thereof to
the acquisition of shares of Consolidated stock, which shares shall be
credited to the allocated share account or, in the sole discretion of the
employees' stock ownership board, may be paid to participants to whom such
shares of Consolidated stock are allocated under subsection 5.2.
Dividends paid in stock on shares of Consolidated stock held in the
allocated share account shall be credited to that account.
(b) Dividends on Unallocated Shares. Cash dividends paid on shares of
Consolidated stock held in the unallocated share account received on the
Consolidated stock in the unallocated share account (i) shall be applied as
soon as practicable after the receipt thereof to reduce the employer's
minimum contribution under the plan (as determined in accordance with
subsection 3.2) and when so applied will be treated, for purposes of
subparagraph 5.5(a), as though they were employer contributions under
subsection 3.2; or (ii) shall be applied to reduce the principal and
interest outstanding on any share purchase loan as soon as practicable after
the receipt thereof after the employer's minimum contribution under
subsection 3.1 has been applied under subparagraph 5.5(a) above, as
determined by the employees' stock ownership board in its sole discretion.
Dividends paid in stock on shares of Consolidated stock held in the
unallocated share account shall be credited to that account, and the average
cost per share of Consolidated stock held in such account shall be
appropriately adjusted.
(c) Other Income. Other income received by the trustee with respect to assets
held in the trust fund shall be applied in the same manner and treated as
though it were cash dividends paid on Consolidated stock under subparagraphs
(a) and (b) above.
5.7. Adjustment and Crediting of Participant Accounts. As of each accounting
date, the employees' stock ownership board shall:
(a) First, charge to the proper accounts all payments or distributions made
since the last preceding accounting date that have not been charged
previously;
(b) Next, allocate the shares of Consolidated stock attributable to dividends
and other income in accordance with subsection 5.8; and
(c) Finally, allocate the shares of Consolidated stock attributable to employer
contributions and remainders in accordance with subsection 5.9.
5.8. Allocation of Consolidated Stock Attributable to Dividends and Other Income.
As of each accounting date, the shares of Consolidated stock transferred or
credited under subparagraph 5.6(a) to the allocated share account since the
last preceding accounting date shall be allocated to the accounts of
participants, pro rata, according to the number of shares of Consolidated
stock credited to their respective accounts.
5.9. Allocation of Consolidated Stock Attributable to Employer Contributions and
Remainders. Subject to subsection 5.15, as of each regular accounting date,
the shares of Consolidated stock transferred or credited under subsection
5.5 to the allocated share account as of that date, plus the remainders, if
any, to be allocated as of that date in accordance with subsection 6.3, will
be allocated to the accounts of active participants who are employed by the
employer on that date, pro rata, according to the compensation (as defined
in subsection 5.10) paid to them, respectively, by the employer during the
calendar year next preceding the plan year ending on that date.
5.10. Compensation. A participant's "compensation" for any plan year means the
participant's total cash compensation, exclusive of discretionary bonuses,
for services rendered to the employers. For plan years beginning on and
after January 1, 1989, no "compensation" in excess of $200,000 (or such
greater amount as permitted under Section 401(a)(17) of the Code for such
plan year) shall be taken into account for purposes of the plan.
5.11. Temporary Cash Accounts. Although it is intended that any cash contributed
to or arising from employer contributions to the trust fund will be applied
to pay principal and interest due on share purchase loans or to purchase
additional Consolidated stock as provided in the plan, it is recognized that
there may be instances when the trustee determines that all available cash
in the trust fund cannot be so applied, due to the terms of a share purchase
loan or the marketability of Consolidated stock. In such instances, the
trustee shall segregate such cash from the other assets in the trust fund
and shall invest such cash, to the extent practicable, in short-term
securities or cash equivalents having ready marketability. As of the
accounting date coincident with or next following the segregation of cash
described above, the employees' stock ownership board shall establish a
temporary cash account in the name of each participant and shall allocate
and credit such segregated cash to the temporary cash accounts of
participants and adjust such temporary cash accounts thereafter in an
appropriate manner to be established by the board. As soon as practicable,
amounts held in participants' temporary cash accounts shall be applied in
the same manner as employer contributions toward the release or acquisition
of Consolidated stock which stock shall be allocated to participants'
accounts as provided in subsection 5.9.
5.12. Splits of Shares and Capital Reorganizations. Shares of Consolidated stock
received by the trustee as a result of a stock split, reorganization or
recapitalization shall be credited to the unallocated or allocated share
account in proportion to the number of Consolidated shares in such accounts
and appropriate adjustments shall be made in all participants' accounts so
that the interests of each participant immediately after any such split,
reorganization or recapitalization are the same as such interests
immediately before such event.
5.13. Share Records. The employees' stock ownership board shall maintain, or
cause to be maintained, records as to the number and cost of shares of
Consolidated stock acquired, purchased or transferred in accordance with the
provisions of this Section 5.
5.14. Statement of Accounts. As soon as practicable after each regular accounting
date, the employees' stock ownership board will provide each participant
with a statement reflecting the condition of his account under the plan as
of that date. No participant, except a person authorized by the board,
shall have the right to inspect the records reflecting the account of any
other participant.
5.15. Special Allocation Rule. Notwithstanding the provisions of subparagraph
5.6(b), if as of any accounting date, after any principal or interest
payments then due on a share purchase loan have been made, there remain
unapplied any cash dividends received by the trustee which are attributable
to Consolidated stock held in the unallocated share account or any other
income received with respect to the assets in such account, the amount of
such remaining cash dividends and other income may be held in the
unallocated share account until the next following accounting date for
application as of that date in accordance with the terms of the plan.
5.16. Contribution Limitations. Subject to subsection 5.17, for each plan year,
the "annual addition" (as defined below) to a participant's accounts under
this plan and under any other defined contribution plan maintained by the
employers in which he participates shall not exceed the lesser of:
(a) The sum of:
(i) $30,000 (or, if greater, 1/4 of the dollar limitation in effect under
Section 415(b)(1)(A) of the Internal Revenue Code for the calendar
year which begins with or within that plan year); and
(ii) If the provisions of subsection 5.18 are applicable, the lesser of:
(A) The amount determined under subparagraph (i) above, or
(B) The amount of Consolidated stock contributed by the employers
(or purchased with cash contributed by the employers) to the
trust and allocated to the participant's account for such plan
year; or
(b) 25 percent of the participant's compensation (as defined in Section 415 of
the Code) during that plan year.
The term "annual addition" for any plan year means the sum of the following
amounts credited to a participant's accounts for that year:
(a) That portion of the employer contribution (other than any portion of the
employer contribution used to pay interest on a share purchase loan if
subsection 5.18 is applicable) allocated and credited to his accounts for
that year;
(b) Remainders (other than remainders attributable to Consolidated stock
acquired with the proceeds of a share purchase loan if subsection 5.18 is
applicable); and
(c) Participant contributions, if any, made for such year.
Annual additions under any other defined contribution plan shall be limited
before annual additions under this plan are limited. Any employer contributions
which cannot be allocated to a participant because of the foregoing limitations
shall be applied to reduce employer contributions in succeeding plan years, in
order of time.
5.17. Combined Benefit Limitations. If a participant in this plan also is a
participant in a defined benefit pension plan maintained by an employer or
controlled group member, the aggregate benefits payable to him, or on
account of, under both plans will be determined in a manner consistent with
Section 415 of the Internal Revenue Code of 1986 and Section 1106 of the Tax
Reform Act of 1986. Accordingly, in general, there will be determined with
respect to this plan and the defined benefit plan a fraction indicating the
ratio of (i) the participant's benefits under each of said plans to (ii) the
maximum plan benefits (as adjusted pursuant to Section 415(e) of such Code)
that could be provided for him in accordance with said Section 415. For the
purpose of determining such fractions all defined contribution plans
maintained by the employers and controlled group members in which the
participant participates shall be aggregated and all defined benefit plans
maintained by the employers and controlled group members in which the
participant participates shall also be aggregated. If the sum of such
fractions determined with respect to the participant for any plan year
exceeds 1.0, then the annual addition for the participant under this plan
for the plan year shall be reduced to the extent necessary as provided in
subsection 5.16 before any reduction is made in the defined benefit pension
plan.
5.18. Limitation on Allocation of Employer Contributions. If the employers elect
for any plan year to have the provisions of subparagraph 5.16(a)(ii) apply,
in no event shall more than one-third of the employer contributions for such
plan year be allocated to highly compensated participants (as defined
below). A "highly compensated participant" means any participant who,
during the current or immediately preceding plan year:
(a) Was a 5 percent owner of the employer or controlled group member;
(b) Received annual compensation from the employer and/or controlled group
members of more than $75,000;
(c) Received annual compensation from the employer and/or controlled group
members of more than $50,000 and was in the top-paid 20 percent of the
employees; or
(d) Was an officer of the employer and/or controlled group member receiving
annual compensation greater than 150 percent of the limitation in effect
under Section 415(c)(1)(A) of the Code; provided that for purposes of this
subparagraph, not more than 50 employees of the employer (or if less, the
greater of 3 employees or 10 percent of the employees) shall be treated as
officers.
A participant not described in (b), (c) or (d) above for the immediately
preceding year will not be considered a highly compensated participant for the
current plan year under (b), (c) or (d) unless such participant is included
within the group of the 100 highest paid employees of the employer and controlled
group members for such current year. "Compensation" shall mean total
compensation [as defined in Section 415(c)(3) of the Code].
SECTION 6
Payment of Account Balances
6.1. Retirement or Death. If a participant's employment with the employers is
terminated because of retirement under subparagraph 4.1(a) or 4.1(b), or if
a participant dies while in the employ of the employers, the balance in his
account as at the accounting date next following his settlement date (after
all adjustments required under the plan as of that date have been made)
shall be nonforfeitable and shall be distributable to him or, in the event
of his death, to his beneficiary, under subsection 6.4.
6.2. Resignation or Dismissal Before Normal Retirement. If a participant resigns
or is dismissed from the employ of the employers before retirement under
subparagraph 4.1(a) or 4.1(b), the balance in his account as at the
accounting date next following his settlement date (after all adjustments
required under the plan as of that date have been made) will be reduced to a
nonforfeitable percentage calculated by multiplying such balance by the
percentage set forth in the following table opposite his years of service
(as defined in subsection 2.2) as of his settlement date:
If His Number of His Nonforfeitable
Years of Service Is: Percentage Will Be:
Less than 5 0%
5 or more 100%
The resulting balance in his account will be distributable to the
participant under subsection 6.4.
6.3. Remainders. The amount by which a participant's account is reduced under
subsection 6.2 will be a "remainder." A remainder shall be treated as a
separate account until the last day of the plan year in which the
participant's settlement date occurs, and then shall be allocated among and
credited to the accounts of other participants in accordance with subsection
5.9. If the participant is re-employed by an employer before he incurs five
consecutive one-year breaks in service, subsection 9.2 shall apply.
6.4. Manner of Distribution. Subject to the conditions set forth below and in
subsection 6.5, after each participant's settlement date, distribution of
the nonforfeitable net credit balances in the participant's account will be
made to or for the benefit of the participant or, in the case of his death,
to or for the benefit of his beneficiary, by either of the following
methods:
(a) By payment in a series of monthly, quarterly or annual installments, of
substantially equal amounts, over a period not exceeding the life expectancy
of the participant or the joint life expectancy of the participant and his
designated beneficiary; provided that, if such beneficiary is not the
participant's spouse, the installment payments shall be designed so that
more than 50 percent of the participant's account balances at the time
payments commence will be paid over the life expectancy of the participant
and further provided that unless a participant elects to receive payment
under subparagraph (b) below (if his account balance exceeds $3,500) or
elects to receive payment in installments over a period longer than the
period described herein below, installment payments shall be made over a
period not exceeding five years or, if such participant's account balance
exceeds $500,000, a period not exceeding five years plus one additional year
for each $100,000 (or fraction thereof) by which such balance exceeds
$500,000, to a maximum period of ten years; provided that, if the amount
distributable to the participant from his account exceeds $3,500 (or such
greater amount as permitted by law), no payments shall commence to the
participant prior to his normal retirement age without the participant's
consent.
(b) By payment in a lump sum; provided that, if the amount distributed to a
participant from his account exceeds $3,500 (or such greater amount as
permitted by law), the participant must consent to the lump sum payment.
If a participant dies after payment of his benefits has begun, the remaining
portion of such benefits will be distributed over a period not exceeding the
period over which payments were being made to the participant. If a participant
dies before payment of his benefits has begun, his benefits will be distributed
over a period not exceeding the greatest of: (i) five years from the death of
the participant; (ii) in the case of payments to a designated beneficiary other
than the participant's spouse, the life expectancy of such beneficiary, provided
payments begin within one year of the participant's death; or (iii) in the case
of payments to the participant's spouse, the life expectancy of such spouse,
provided payments begin by the date the participant would have attained age 70-
1/2. Except as provided in subparagraph (a) or (b) above, the employees' stock
ownership board will determine, after consulting with the participant, the method
of distributing a participant's benefits to him; a participant, if he so desires
and subject to the provisions of subsection 6.6, may direct how his benefits are
to be paid to his beneficiary; and the employees' stock ownership board shall
select the method of distributing the participant's benefits to his beneficiary
if the participant has not filed a direction with the board. The life expectancy
of a participant, his spouse or his designated beneficiary shall be determined in
accordance with actuarial tables adopted by the employees' stock ownership board
for this purpose. The life expectancy of a participant and his spouse may be
redetermined periodically by the board, but not more frequently than annually.
The employees' stock ownership board will make distributions of a participant's
benefits in the form of cash or shares of Consolidated stock or partly in each;
provided that a participant who has shares of Consolidated stock credited to his
allocated share account may request to receive distribution of such portion in
shares of Consolidated stock.
6.5. Commencement of Distributions. Except as provided below in this subsection,
installment payments of a participant's benefits will commence (or payment
of a participant's benefits will be made) within a reasonable time after the
accounting date next following his settlement date, but not later than one
year after the later of (a) the end of the plan year in which his settlement
date occurs because of normal retirement, disability or death, or (b) the
end of the 5th plan year following the plan year in which such participant's
settlement date occurs for any reason other than normal retirement,
disability or death, provided that such participant is not re-employed by
the employers before the end of such 5th plan year. The foregoing
requirements shall not apply to the portion of a participant's account
balance attributable to Consolidated stock purchased with a share purchase
loan until the close of the plan year in which such loan is repaid in full.
Distribution of a participant's benefits must begin not later than April 1
of the plan year next following the plan year in which the participant
attains age 70-1/2, notwithstanding the fact that his employment has not
terminated. All distributions under the plan shall comply with Section
401(a)(9) of the Code. A participant may elect in accordance with such
rules as the board may establish to defer commencement of his benefits to a
date not later than the earlier to occur of (i) April 1 of the calendar year
next following the calendar year in which he attains age 70-1/2, or (ii) the
date of his death.
6.6. Designation of Beneficiary. Except as provided below, each participant from
time to time, by signing a form furnished by the employees' stock ownership
board, may designate any person or persons (who may be designated
concurrently, contingently or successively) to whom his benefits are to be
paid if he dies before he receives all of his benefits. A beneficiary
designation form will be effective only when the form is filed with the
board while the participant is alive and will cancel all beneficiary
designation forms previously filed with the board. If a deceased
participant failed to designate a beneficiary as provided above, or if the
designated beneficiary dies before the participant or before complete
payment of the participant's benefits, the board, in its discretion, may
direct the trustee to pay the participant's benefits as follows:
(a) To or for the benefit of the participant's spouse, or if the participant
does not have a spouse, to any one or more of his relatives by blood,
adoption or marriage and in such proportions as the board determines; or
(b) To the legal representative or representatives of the estate of the last to
die of the participant and his designated beneficiary.
Notwithstanding the foregoing, if a participant leaves a "surviving spouse" (as
defined below), such spouse will automatically be the participant's designated
beneficiary for all plan benefits unless the participant elects, with the written
consent of such spouse which consent acknowledges the effect of such election and
is witnessed by a plan representative or a notary public, to designate a
beneficiary other than the participant's spouse. A participant's "surviving
spouse" means the spouse to whom the participant was married at the earlier of
his date of death or the date payment of his benefits commenced and who is living
at the date of the participant's death. The term "designated beneficiary" as
used in the plan means the person or persons (including a trustee or other legal
representative acting in a fiduciary capacity) designated by a participant as his
beneficiary in the last effective beneficiary designation form filed with the
employees' stock ownership board under this subsection and to whom a deceased
participant's benefits are payable under the plan. The term "beneficiary" as
used in the plan means the natural or legal person or persons to whom a deceased
participant's benefits are payable under this subsection.
6.7. Missing Participants or Beneficiaries. Each participant and each designated
beneficiary must file with the employees' stock ownership board from time to
time in writing his post office address and each change of post office
address. Any communication, statement, or notice addressed to a participant
or beneficiary at his last post office address filed with the board, or if
no address is filed with the board then, in the case of a participant, at
his last post office address as shown on the employer's records, will be
binding on the participant and his beneficiary for all purposes of the plan.
Neither the employers nor the board will be required to search for or locate
a participant or beneficiary. If the board notifies a participant or
beneficiary that he is entitled to a payment and also notifies him of the
provisions of this subsection, and the participant or beneficiary fails to
claim his benefits or make his whereabouts known to the board within three
years after the notification, the benefits of the participant or beneficiary
will be disposed of, to the extent permitted by applicable law, as follows:
(a) If the whereabouts of the participant then is unknown to the board, but the
whereabouts of the participant's surviving spouse then is known to the
board, payment will be made to the spouse;
(b) If the whereabouts of the participant and his surviving spouse, if any, then
is unknown to the board but the whereabouts of the participant's designated
beneficiary then is known to the board, payment will be made to the
designated beneficiary;
(c) If the whereabouts of the participant, his surviving spouse and the
participant's designated beneficiary then is unknown to the board but the
whereabouts of one or more relatives by blood, adoption, or marriage of the
participant is known to the board, the board may direct the trustee to pay
the participant's benefits to one or more of such relatives and in such
proportions as the board decides; or
(d) If the whereabouts of such relatives and the participant's designated
beneficiary then is unknown to the board, the benefits of such participant
or beneficiary will be disposed of in an equitable manner permitted by law
under rules adopted by the board.
6.8. Facility of Payment. When a person entitled to benefits under the plan is
under legal disability or, in the board's opinion, is in any way
incapacitated so as to be unable to manage his financial affairs, the board
may direct the trustee to pay the benefits to such person's legal
representative, or to a relative or friend of such person for such person's
benefit, or the board may apply such benefits for the benefit of such person
in any manner specified by the board. Any payment made in accordance with
the preceding sentence shall be a full and complete discharge of any
liability for such payment under the plan.
SECTION 7
Relating to Consolidated Stock and Other Investments
7.1. Consolidated Stock. For all purposes of the plan, the term "Consolidated
stock" means common stock of Consolidated or other employer stock which
constitutes "qualifying employer securities" under Section 4975(e)(8) of the
Internal Revenue Code of l986, as amended.
7.2. Investment in Consolidated Stock. Except as otherwise provided n subsection
7.5, all employer contributions under the plan will be invested by the
trustee to provide participants with whole or fractional interests in shares
of Consolidated stock. For any period funds held by the trustee are not
invested in Consolidated stock or are not invested in accordance with
subsection 7.5, such funds may be retained in cash or invested in short-term
securities, as the trustee may determine. Shares of Consolidated stock may
be acquired by the trustee subject to applicable law, through public or
private purchases, purchases from the employers (including purchases from an
employer of treasury shares or authorized but unissued shares), or
otherwise.
7.3. Voting and Tender of Consolidated Stock. A copy of the notice and proxy
statement for each meeting of the holders of Consolidated stock will be
furnished or made available to each participant whose account contains such
shares, together with an appropriate form for the participant's use in
instructing the trustee with respect to voting the shares of Consolidated
stock that, at the record date for determination of the shareholders
entitled to notice of, and to vote at, such meeting, are both: (a) credited
to the allocated share account of the participant, and (b) of record in the
name of the trustee or its nominee. If a participant furnishes timely
instructions to the trustee, the trustee (in person or by proxy) shall vote
the shares (including fractional shares) of Consolidated stock credited to
the participant's allocated share account in accordance with the directions
of the participant. Shares of Consolidated stock allocated to participants'
allocated share accounts for which timely voting instructions are not
received by the trustee and all shares of Consolidated stock held by the
trustee in the unallocated share account shall be voted by the trustee
proportionately in the same manner as the trustee votes shares of
Consolidated stock as to which the trustee has received voting instructions
as specified above.
In the event of a tender offer, the trustee shall furnish each participant
who has shares of Consolidated stock credited to his allocated share account
with notice of any tender offer for (or a request or invitation for tenders
of) Consolidated stock. The trustee shall request from each such
participant instructions as to the tendering of Consolidated stock credited
to his allocated share account, and for this purpose the trustee shall
provide participants with a reasonable period of time in which they may
consider any tender offer for (or request or invitation for tenders of)
Consolidated stock made to the trustee. The trustee shall tender shares of
Consolidated stock for which the trustee has received timely instructions to
tender from participants. Shares of Consolidated stock allocated to
participants' allocated share accounts for which the trustee has not
received timely instructions shall not be tendered. All shares of
Consolidated stock held by the trustee in the unallocated share account
shall not be tendered.
Each participant is, solely for purposes of this subsection 7.3, hereby
designated a "named fiduciary" within the meaning of Section 403(a)(1) of
the Employee Retirement Income Security Act of 1974, as amended, with
respect to the shares of Consolidated stock allocated to his account and,
for purposes of voting rights under the first paragraph above of this
subsection 7.3, his proportionate share (as defined below) of the shares of
Consolidated stock held in the unallocated share account and of the shares
allocated to participants' accounts for which participants have not given
voting directions. A participant shall not be a named fiduciary for any
other purpose under the plan or the trust. The "proportionate share" of any
participant of the shares of nondirected Consolidated stock and shares of
Consolidated stock in the unallocated share account shall be a fraction, the
numerator of which is the number of shares of Consolidated stock allocated
to his account for which he provides voting direction to the trustee, and
the denominator of which is the number of shares of Consolidated stock
allocated to all participants' accounts for which directions are provided to
the trustee.
7.4. Determination of Fair Market Value. The fair market value of Consolidated
stock on any particular date shall be determined by the trustee of the trust
under any method permitted under regulations adopted by the Internal Revenue
Service. In the event an employer contribution is made in Consolidated
stock, the value of such stock shall be equal to the fair market value, as
determined in good faith and in accordance with regulations prescribed by
the Internal Revenue Service.
7.5. Investment in Funds Other Than Consolidated Stock. Each participant in the
plan who has completed 10 years of participation in the plan and attained
age 55 years may elect, within 90 days after the close of each plan year in
the qualified election period (as defined below), to have 25 percent (or 50
percent in the case of an election for the last plan year in such qualified
election period) of the value of his allocated share account (to the extent
such portion exceeds the amount to which a prior election under this
subsection applies) invested in one or more investment funds (other than
Consolidated stock) offered under the plan by the employees' stock ownership
board. The employees' stock ownership board will offer three such
investment funds (permitted under regulations issued by the Internal Revenue
Service) or, alternatively, may direct that such participant's vested
account balance subject to the election specified above be (i) distributed
to the participant within 90 days after the period for which such election
may be made (provided that if the value of such participant's vested account
balance exceeds $3,500, the participant consents to such distribution) or
(ii) transferred to another plan maintained by the employer which permits
the investment of such balance in investment funds satisfying the foregoing
requirements. A "qualified election period" means the 5-plan year period
beginning with the plan year next following the plan year in which the
participant attains age 55 (or, if later, the plan year next following the
plan year in which the participant has attained age 55 and completed 10
years of participation).
SECTION 8
The Employees' Stock Ownership Board
8.1. Membership. An employees' stock ownership board consisting of four members
each (who may but need not be employees of an employer) shall be appointed
by Consolidated. The Secretary of Consolidated shall certify to the trustee
from time to time the appointment to (and termination of) office of each
member of the board and the person who is selected as secretary of the
board.
8.2. Board's General Powers, Rights and Duties. Except as otherwise specifically
provided, and in addition to the powers, rights and duties specifically
given to the employees' stock ownership board elsewhere, in the plan and the
trust agreement, the board shall have the following powers, rights and
duties:
(a) To select a secretary, if it believes it advisable, who may but need not be
a board member.
(b) To determine all questions arising under the plan, including the power to
determine the rights or eligibility of employees or participants and any
other persons to benefits under the plan, and the amount of their benefits
under the plan, and to remedy ambiguities, inconsistencies or omissions.
(c) To adopt such rules of procedure and regulations as in its opinion may be
necessary for the proper and efficient administration of the plan and as are
consistent with the plan and trust agreement.
(d) To enforce the plan in accordance with the terms of the plan and the trust
agreement and the rules and regulations adopted by the board as provided
above.
(e) To direct the trustee as respects payments or distributions from the trust
fund in accordance with the provisions of the plan.
(f) To furnish the employers with such information as may be required by them
for tax or other purposes in connection with the plan.
(g) To employ agents, attorneys, accountants or other persons (who also may be
employed by the employers) and to allocate or delegate to them such powers,
rights and duties as the board may consider necessary or advisable to
properly carry out administration of the plan, provided that such allocation
or delegation and the acceptance thereof by such agents, attorneys,
accountants or other persons, shall be in writing.
8.3. Manner of Action. During a period in which two or more board members are
acting, the following provisions apply where the context admits:
(a) A board member by writing may delegate any or all of his rights, powers,
duties and discretions to any other member, with the consent of the latter.
(b) The board members may act by meeting or by writing signed without meeting,
and may sign any document by signing one document or concurrent documents.
(c) An action or a decision of a majority of the members of the board as to a
matter shall be as effective as if taken or made by all members of the
board.
(d) If, because of the number qualified to act, there is an even division of
opinion among the board members as to a matter, a disinterested party
selected by the board shall decide the matter and his decision shall
control.
(e) Except as otherwise provided by law, no member of the board shall be liable
or responsible for an act or omission of the other board members in which
the former has not concurred.
(f) The certificate of the secretary of the board or of a majority of the board
members that the board has taken or authorized any action shall be
conclusive in favor of any person relying on the certificate.
8.4. Interested Board Member. If a member of a board also is a participant in
the plan, he may not decide or determine any matter or question concerning
distributions of any kind to be made to him or the nature or mode of
settlement of his benefits unless such decision or determination could be
made by him under the plan if he were not serving on the board.
8.5. Resignation or Removal of Board Members. Any member of the board may be
removed by Consolidated at any time by giving l0 days' prior written notice
to him and the other members of the board. A member of the board may resign
at any time by giving l0 days' prior written notice to Consolidated and the
other members of the board. Consolidated may fill any vacancy in the
membership of the board, provided, however, that if a vacancy reduces the
membership of the board to less than three, such vacancy shall be filled as
soon as practicable. Consolidated shall give prompt written notice thereof
to the other members of the board. Until any such vacancy is filled, the
remaining members may exercise all of the powers, rights and duties
conferred on the board.
8.6. Information Required by Board. Each person entitled to benefits under the
plan shall furnish the board with such documents, evidence, data or
information as the board considers necessary or desirable for the purpose of
administering the plan. The employers shall furnish the board with such
data and information as the board may deem necessary or desirable in order
to administer the plan. The records of the employers as to an employee's or
participant's period of employment, hours of service, termination of
employment and reason therefore, leave of absence, re-employment and
compensation will be conclusive on all persons unless determined to the
board's satisfaction to be incorrect.
8.7. Uniform Rules. The board shall administer the plan on a reasonable and
nondiscriminatory basis and shall apply uniform rules to all persons
similarly situated.
8.8. Board's Decision Final. Subject to applicable law, any interpretation of
the provisions of the plan and any decisions on any matter within the
discretion of the board made by such board in good faith shall be binding on
all persons. A misstatement or other mistake of fact shall be corrected
when it becomes known and the board shall make such adjustment on account
thereof as it considers equitable and practicable.
SECTION 9
Re-employment
9.1. Resumption of Participation. If a participant's employment with the
employers should terminate and such participant is subsequently re-employed
by the employers, he shall again become a participant, subject to the
provisions of subsection 2.4, and the years of service to which he was
entitled at the time of termination shall be reinstated, subject to the
provisions of subsection 2.2. If an employee who is not participating in
the plan should terminate employment and then subsequently be re-employed by
the employers, his eligibility for participation shall be determined in
accordance with subsection 2.1, he shall become a participant as of his date
of rehire if (i) he had met the requirements of subparagraph 2.1(a) prior to
his termination and he satisfies the requirements of subparagraph 2.1(b)
upon his re-employment and if (ii) the years of service he had accrued prior
to his termination are not disregarded under subsection 2.2. In no event
shall years of service occurring after a participant incurs five consecutive
one-year breaks in service be used to determine the percentage of his
account to which he was entitled as of a prior settlement date.
9.2. Reinstatement of Remainder. If a participant whose employment had
terminated because of resignation or dismissal before he was entitled to the
full balance in his account is re-employed by the employers before he incurs
five consecutive one-year breaks in service, he may repay to the trustee the
total amount distributed to him from his account as a result of his earlier
termination of employment. If a participant makes such a repayment to the
trustee, both the amount of the repayment and the remainder which resulted
from his earlier termination of employment shall be credited to his account
as of the regular accounting date coincident with or next following the date
of repayment (after all other adjustments required under the plan as of that
date have been made). Remainders which are credited to participants'
accounts as of a regular accounting data under this subsection 9.2 shall
reduce remainders to be allocated as of that date under subsection 6.3 and
to the extent such remainders are not sufficient to restore such amounts,
shall reduce the amount of employer contributions to be credited to
participants' accounts on such date under subsection 5.9.
SECTION 10
General Provisions
10.1. Action by Employers. Any action required or permitted to be taken by
Consolidated or an employer under the plan shall be by resolution of its
Board of Directors, by resolution of a duly authorized committee of its
Board of Directors, or by a person or persons authorized by resolution of
its Board of Directors of such committee.
10.2. Waiver of Notice. Any notice required under the plan may be waived by the
person entitled to such notice.
10.3. Gender and Number. Where the context admits, words in the masculine gender
shall include the feminine and neuter genders, the singular shall include
the plural, and the plural shall include the singular.
10.4. Controlling Law. Except to the extent superseded by laws of the United
States, the laws of Wisconsin shall be controlling in all matters relating
to the plan.
10.5. Employment Rights. The plan does not constitute a contract of employment,
and participation in the plan will not give any employee the right to be
retained in the employ of the employers, nor any right or claim to any
benefit under the plan, unless such right or claim has specifically accrued
under the terms of the plan.
10.6. Litigation by Participants. If a legal action begun against the trustee,
the employers or any member thereof, or the employees' stock ownership board
by or on behalf of any person results adversely to that person, or if a
legal action arises because of conflicting claims to a participant's or
other person's benefits, the cost to the trustee, the employers or any
member thereof or to the board of defending the action will be charged to
the extent permitted by law to the sums, if any, which were involved in the
action or were payable to the person concerned.
10.7. Interests Not Transferable. The interests of persons entitled to benefits
under the plan are not subject to their debts or other obligations and,
except as may be required by the tax withholding provisions of the Internal
Revenue Code or any state's income tax act or pursuant to a qualified
domestic relations order as defined in Section 414(p) of the Internal
Revenue Code which is applicable to the plan under state law, may not be
voluntarily or involuntarily sold, transferred, alienated, assigned or
encumbered.
10.8. Absence of Guaranty. None of the trustees, the employers or the employees'
stock ownership board in any way guarantees the trust fund from loss or
depreciation. The liability of the trustee to make any payment under the
plan will be limited to the assets held by the trustee which are available
for that purpose.
10.9. Evidence. Evidence required of anyone under the plan may be by certificate,
affidavit, document or other information which the person acting on it
considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
10.10. Additional Employers. Any United States subsidiary of Consolidated may
adopt the plan and become a party to the trust agreement in accordance with
Article VII of the trust agreement.
10.11. Withholding. The employees' stock ownership board shall withhold for
federal income tax purposes from any distributions made under the plan such
amounts as are required under Internal Revenue Service regulations.
10.12. Review of Benefit Determinations. The employees' stock ownership board will
provide notice in writing to any participant or beneficiary whose claim for
benefits under the plan is denied and will afford such participant or
beneficiary a full and fair review of its decision if so requested.
10.13. Leased Employees. A leased employee (as defined below) shall not be
eligible to participate in the plan. A leased employee means any person who
is not an employee of an employer but who has provided services to an
employer of the type which have historically (within the business field of
the employers) been provided by employees on a substantially full-time basis
for a period of at least one year pursuant to an agreement between an
employer and a leasing organization. The period during which a leased
employee performs services for an employer shall be taken into account for
purposes of subsection 2.2 of the plan unless (i) such leased employee is a
participant in a money purchase pension plan maintained by a leasing
organization which provides a nonintegrated employer contribution rate of at
least ten percent (10%) of compensation, immediate participation for all
employees and full and immediate vesting and (ii) leased employees do not
constitute more than twenty percent (20%) of the employer's non-highly
compensated work force.
SECTION 11
Amendment and Termination
11.1. Amendment. While the employers expect and intend to continue the plan,
Consolidated reserves the right to amend the plan from time to time, except
as follows:
(a) The duties and liabilities of the employees' stock ownership board cannot be
changed substantially without its consent;
(b) No amendment shall reduce the value of a participant's benefits to less than
the amount he would be entitled to receive if he had resigned from the
employ of the employers on the day preceding the amendment; and
(c) Except as provided in subsection 3.6. under no condition shall an amendment
result in the return or repayment to the employers of any part of the trust
fund or the income from it or result in the distribution of the trust fund
for the benefit of anyone other than persons entitled to benefits under the
plan.
11.2. Termination. The plan will terminate on the first to occur of the
following:
(a) The date it is terminated by that employer if 30 days' advance written
notice of the termination is given to the trustee.
(b) The date that employer is judicially declared bankrupt or insolvent.
(c) The date that employer completely discontinues its contributions under the
plan.
(d) The dissolution, merger, consolidation or reorganization of that employer,
or the sale by that employer of all or substantially all of its assets,
except that in any such event arrangements may be made whereby the plan will
be continued by any successor to the employer or any purchaser of all or
substantially all of its assets, in which case the successor or purchaser
will be substituted for the employer under the plan and the trust agreement.
11.3. Vesting and Distribution on Termination. On termination or partial
termination of the plan, the date of termination will be a "special
accounting date" and, after all adjustments then required have been made,
each affected participant's benefits will be nonforfeitable. If, on
termination of the plan, the participant remains an employee of the
employers, the amount of his benefits shall be retained in the trust fund
until his termination of employment with the employers and then shall be
paid to him in accordance with the provisions of subsection 6.4. In the
event that the participant's employment with the employers is terminated
coincident with the termination of the plan, his benefits shall be paid to
him in a lump sum.
11.4. Notice of Amendment or Termination. Participants will be notified of an
amendment or termination of the plan within a reasonable time.
11.5. Plan Merger, Consolidation, Etc. In the case of any merger or consolidation
with or in the case of any transfer of assets or liabilities to any other
plan, each participant's benefits if the plan terminated immediately after
such merger, consolidation or transfer shall be equal to or greater than the
benefits he would have been entitled to receive if the plan had terminated
immediately before the merger, consolidation or transfer.
<PAGE>
SUPPLEMENT A
Special Rules When Plan is Top Heavy
A-1. Purpose and Effect. The purpose of this Supplement A is to comply with the
requirements of Section 416 of the Internal Revenue Code of 1986. The
provisions of this Supplement A shall apply for each plan year in which the
plan is a "top-heavy plan" within the meaning of Section 416(g) of the
Internal Revenue Code.
A-2. Top-Heavy Plan. In general, the plan will be a top-heavy plan for any plan
year if, as of the last day of the first plan year or the last day of the
preceding plan year in the case of each subsequent plan year (the
"determination date"), the sum of amounts in (a), (b) and (c) below for key
employees (as defined below and in Section 415(i)(1) of the Internal Revenue
Code) exceeds 60 percent of the sum of such amounts for all employees who
are covered by a defined contribution plan or defined benefit plan which is
aggregated in accordance with paragraph A-4 below:
(a) The aggregate account balances of participants under this plan.
(b) The aggregate account balances of participants under any other defined
contribution plan included in paragraph A-4.
(c) The present value of cumulative accrued benefits of participants under any
defined benefit plan included in paragraph A-4.
In making the foregoing determination (i) a participant's account balances shall
be increased by the aggregate distributions, if any, made with respect to the
participant during the 5-year period ending on the determination date, (ii) the
account balances of a participant who was previously a key employee, but who is
no longer a key employee, shall be disregarded, (iii) the accounts of a
beneficiary of a participant shall be considered accounts of the participant and
(iv) the account balances of a participant who has not performed services for an
employer during the 5-year period ending on the determination date shall be
disregarded.
A-3. Key Employee. In general, a "key employee" is an employee who, at any time
during the 5-year period ending on the determination date, is or was:
(a) An officer of an employer or controlled group member receiving annual
compensation greater than 50% of the limitation in effect under Section
415(b)(1)(A) of the Internal Revenue Code; provided that for purposes of
this subparagraph (a), no more than 50 employees of the employer and the
controlled group members (or if lesser the greater of 3 employees or l0
percent of the employees) shall be treated as officers;
(b) One of the ten participants receiving annual compensation of more than the
limitation in effect under Section 415(c)(1)(A) of the Internal Revenue Code
and owning the largest interests in an employer;
(c) A 5 percent owner of an employer; or
(d) A 1 percent owner of an employer receiving annual compensation from the
employers and all other controlled group members of more than $150,000.
For purposes of this Supplement A, the term "compensation" shall mean
compensation within the meaning of Section 1.415-2(d) of the Internal Revenue
Code.
A-4. Aggregation of Plans. Each other defined contribution plan and defined
benefit plan maintained by the employers or controlled group members which
covers a "key employee" as a member or which is maintained by the employers
or controlled group members in order for a plan covering a "key employee" to
be qualified shall be aggregated in determining whether this plan is top-
heavy (including any plan which was terminated during the 5-year period
ending on the determination date).
A-5. Minimum Employer Contribution. For any plan year in which the plan is a
top-heavy plan, the employer contribution and remainders credited to each
participant who is not a key employee shall not be less than 3 percent of
such participant's compensation for that year. In no event, however, shall
the employer contribution and remainders credited in any year to a
participant who is not a key employee (expressed as a percentage of such
participant's compensation) exceed the maximum employer contributions and
remainders credited in that year to a key employee (expressed as a
percentage of such key employee's compensation up to $200,000).
A-6. Minimum Vesting. For any plan year in which the plan is a top-heavy plan, a
participant's vested percentage in his account shall not be less than the
percentage determined under the following table:
Years of Vested
Service Percentage
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
If the foregoing provisions of this subparagraph A-6 become effective, and
the plan subsequently ceases to be a top-heavy plan, each participant who
has then completed five or more years of service may elect to continue to
have the vested percentage of his account determined under the provisions of
this paragraph A-6.
A-7. Maximum Compensation. For any plan year in which the plan is a top-heavy
plan, a participant's compensation in excess of $200,000 (or such greater
amount as may be determined by the Commissioner of Internal Revenue for that
plan year) shall be disregarded for purposes of determining an employer's
contribution made under subsection 5.9 of the plan.
A-8. No Duplication of Benefits. If the employer and controlled group members
maintain more than one plan, the minimum contribution otherwise required
under paragraph A-5 above may be reduced in accordance with regulations of
the Secretary of the Treasury to prevent inappropriate duplication of
minimum benefits or contributions.
A-9. Adjustment of Combined Benefit Limitations. For any plan year in which the
plan is a top-heavy plan, the determination of the defined benefit plan
fraction and defined contribution plan fraction under subsections 5.16 and
5.17 of the plan shall be adjusted in accordance with the provisions of
Section 416(h) of the Internal Revenue Code.
A-10. Use of Terms. All terms and provisions of the plan shall apply to this
Supplement A, except that where the terms and provisions of the plan and
this Supplement A conflict, the terms and provisions of this Supplement A
shall govern.
<PAGE>
EXHIBIT 10.d. TO FORM 10-K FOR
CONSOLIDATED PAPERS, INC. FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1993
CONSOLIDATED
SALARIED EMPLOYEES' RETIREMENT PLAN
(AS IN EFFECT SEPTEMBER 30, 1990)
SECTION 1
Introduction
1.1. Purpose. CONSOLIDATED SALARIED EMPLOYEES' RETIREMENT PLAN (the "plan") has
been established by CONSOLIDATED PAPERS, INC. ("Consolidated") in order to
provide retirement incomes for eligible employees of Consolidated and its
subsidiaries and affiliated companies which have adopted the plan.
Consolidated and any other corporations which have adopted the plan are
referred to below collectively as the "employers" and individually as an
"employer."
1.2. Effective Date and Original Plan. The plan originally was established by
Consolidated effective as of December 31, 1948 and was known as
"Consolidated Employees' Retirement Plan" - the "original plan." The
original plan was amended from time to time and, as applied to certain plan
members, was completely amended and restated in the form of Consolidated
Salaried Employees' Retirement Plan, effective as of January 1, 1973. The
plan was subsequently amended and restated effective January 1, 1976. The
plan, as set forth herein, is an amendment and restatement of the plan
effective January 1, 1983 - the "effective date." The original plan as
applied to plan members who are not members in this plan has been continued
in effect as to those employees and is referred to herein as "Consolidated
Employees' Retirement Plan."
1.3. Anniversary Date and Plan Year. An "anniversary date" of the plan is
January 1 of each year. A "plan year" is the twelve-month period beginning
on each anniversary date.
1.4. Trust Agreement. By agreement dated June 30, 1983, Consolidated
established Consolidated Papers Master Investment Trust (the "Master
Trust") the trustee of which is State Street Bank and Trust Company of
Boston, Massachusetts. The Master Trust was established for the purpose of
collectively funding the benefits provided by the plan, as well as the
benefits provided by qualified employee retirement plans maintained by
Consolidated, any of the employers or other affiliates of Consolidated.
Prior to June 30, 1983, this plan's benefits were funded through two trusts
(namely, Consolidated Salaried Employees' Retirement Trust and Consolidated
Supplemental Retirement Trust). At the time of the establishment of the
Master Trust, both of those trusts were merged into the Master Trust and
their assets became assets of the Master Trust. The Master Trust forms a
part of the plan, and the provisions of and benefits under the plan are
subject to the terms and provisions of the Master Trust. Unless the
context indicates otherwise, any reference hereinafter to the "trust" or
"trusts" shall mean the Master Trust.
1.5. Plan Administration. The plan is administered by a retirement board (the
"board") consisting of six members appointed by Consolidated. The funds
contributed by the employers and previously contributed by members will be
held until distributed by the trustee (the "trustee") acting under the
Master Trust referred to in subsection 1.4. The trustee will invest the
funds as directed from time to time by an investment manager or managers
appointed by Consolidated. The trustee will pay the benefits provided by
the plan under the supervision and direction of the board. Copies of the
plan and the trust, and any amendments thereto, are available in the office
of the Secretary of the board. Any eligible employee or member of the plan
may examine the plan and the trust if he so desires.
1.6. Notices. Any notices required to be given to or any document required to
be filed with the board will be properly given or filed if delivered or
mailed by registered mail, postage prepaid, addressed as follows:
Retirement Board
Consolidated Salaried Employees' Retirement Plan
c/o Consolidated Papers, Inc.
P.O. Box 8050
Wisconsin Rapids, WI 54495-8050
1.7. Benefits Previously Provided by Plan. Any benefits provided under the
original plan (including any plan Supplement), to or on account of any
member who retired or whose employment otherwise terminated for any reason
prior to January 1, 1973, shall be payable in accordance with the terms of
the original plan and any applicable Supplement as in effect at the time of
the member's retirement or other termination of employment, and shall not
be affected by this plan or any subsequent amendment to this plan or the
trust unless the plan or such amendment specifically provides that such
member's benefits are to be affected thereby. Any benefits provided under
this plan (including any amendments thereto) to or on account of any member
who retired or whose employment otherwise terminated for any reason on or
after January 1, 1973 and before January 1, 1989 shall be payable in
accordance with the terms of the plan, and any applicable amendments, as in
effect at the time of the member's retirement or other termination of
employment, and shall not be affected by any subsequent amendment to the
plan or the trust unless such amendment specifically provides that such
member's benefits are to be affected thereby.
SECTION 2
Membership and Retirement Dates
2.1. Eligibility. Each employee of an employer who was a member of the plan
immediately prior to January 1, 1988 will continue as a member of the plan
subject to the terms and provisions of the plan. Each other employee of an
employer will become a member of the plan on January 1, 1988 or the first
day of any later month if he then meets all of the following requirements:
(a) He has completed one year of service (as defined below in this
subsection).
(b) He does not belong to a group or class of employees that is covered
by Consolidated Employees' Retirement Plan.
(c) He is not an hourly-rate employee of Hotel Mead Corporation or
Consolidated's Castle Rock Container Company Division.
An employee will have completed a "year of service" for purposes of
subparagraph (a) above if he has 1,000 hours of service in the first 12
months of his employment with any of the employers or in any plan year
subsequent to the plan year in which his employment with any of the
employers commenced. An "hour of service" means each hour for which an
employee is directly or indirectly paid, or entitled to payment, by an
employer for the performance of duties including hours normally worked in
an employee's normal or regular workweek during an absence from work as
defined in subparagraph 3.2(c). The board will notify each employee of the
date as of which he becomes a member of the plan.
2.2. Withdrawal From The Plan. Once an employee has become a member of the
plan, he may not withdraw from the plan and continue in the employ of the
employers.
2.3. Normal Retirement Date. A member's "normal retirement date" is the last
day of the calendar month in which he attains age 65 years (his "normal"
retirement age).
A participant's right to his retirement income shall be nonforfeitable on
and after his normal retirement age.
2.4. Early Retirement Date. A member's "early retirement date" is the last day
of the calendar month in which he retires or is retired prior to his normal
retirement date and after having both attained age 55 years and completed
10 or more years of credited service.
2.5. Late Retirement Date. A member's "late retirement date" is the last day of
the calendar month in which he retires or is retired after his normal
retirement date.
2.6. Disability Retirement Date. A member's "disability retirement date" is the
last day of the calendar month in which he is retired because of disability
in accordance with Section 6.
2.7. Retirement Date. A member's "retirement date" is the first one of the
dates specified above as of which he retires or is retired from the employ
of all of the employers.
2.8. Retirement While Absent From Work. If a member is or becomes eligible to
retire under the plan while absent from work under conditions which are not
treated by his employer as a termination of service, he will be entitled to
retire and commence receiving his retirement income without returning to
work with the employers.
2.9. Leased Employees. A leased employee (as defined below) shall not be
eligible to become a member of the plan. A "leased employee" means any
person who is not an employee of the employer, but who has provided
services to the employer of a type which have historically (within the
business field of the employer) been provided by employees, on a
substantially full-time basis for a period of at least one year, pursuant
to an agreement between the employer and a leasing organization. The
period during which a leased employee performs services for the employer
shall be taken into account for purposes of subsections 2.1 and 7.2 of the
plan, unless (i) such leased employee is a member of a money purchase
pension plan maintained by the leasing organization which provides a
nonintegrated employer contribution rate of at least 10 percent of
compensation, immediate membership for all employees and full and immediate
vesting, and (ii) leased employees do not constitute more than 20 percent
of the employer's nonhighly compensated work force.
SECTION 3
Bases of Retirement Incomes
3.1. General. In general, a member's retirement income will be based upon his
credited service and earnings, both as defined below.
3.2. Credited Service. A member's "credited service" will consist of his last
period of continuous employment with the employers ending with his
retirement date or the date of his earlier termination of employment,
subject to the following:
(a) A period of concurrent employment with two or more employers will be
considered as only one period of employment or membership.
(b) The termination of an employee's employment with one employer will
not interrupt the continuity of his employment or membership, if,
concurrently with or immediately after such termination, he is
employed by or continues in the employ of one or more other
employers.
(c) Absence from work (other than layoffs or suspensions) under
conditions which are not treated by an employer as a termination of
service (such as authorized sick leaves, etc.) will be included in
credited service.
(d) A period (not exceeding 3 years) of layoff or suspension will not
interrupt continuity of service if a employee or member returns to
work when called back as provided by his employer's rules, and such
period (not exceeding 3 years) of layoff or suspension will be
included in credited service.
(e) A period of military leave (as defined in subsection 3.3) will be
included in credited service.
(f) A period of employment with Wisconsin River Paper & Pulp Company
before August 1, 1945, a period of employment with Ahdawagam Paper
Products Company, and a period of employment with Castle Rock
Container Corporation (formerly known as "Lewis Container, Inc.")
before January 1, 1972 will be considered as a period of employment
with the employers and will be included in credited service; except
that, in the case of an employee who becomes a member of the plan on
or after December 31, 1971, a period of employment with Castle Rock
Container Corporation before January 1, 1972 will be considered as a
period of employment with the employers only for purposes of
determining his eligibility for plan membership.
(g) If a member who retired on a disability retirement date is re-
employed by an employer, his credited service as of his disability
retirement date will be added to any credited service he might accrue
during his period of re-employment.
(h) Except as otherwise specifically provided in subsection 7.5 or
elsewhere in the plan, a former employee who is re-employed by an
employer will retain all of his credited service based on his prior
period of employment with one or more of the employers.
(i) A member's number of years of credited service will be determined on
the basis of years of employment. A year of employment will consist
of the 12-month period commencing on the date an employee was hired
and each subsequent 12-month period commencing on an anniversary of
his date of hire. Any portion of a member's total credited service
in excess of a whole number of years will be considered as one full
year of credited service for the purposes of determining a member's
"minimum annual amount" under subsection 4.1 or his monthly
disability retirement income under subsection 6.4. If in his year of
employment in which his employment terminates a member has completed
1,000 or more hours of service (as defined in subsection 2.1), such
year of employment will be considered as one full year of credited
service for the purpose of determining whether the member had
completed the number of years of credited service required for
eligibility to receive a retirement income or other benefit under the
plan. For all other purposes under the plan, any portion of a
member's credited service in excess of a full number of years will be
reckoned in terms of full months of credited service. If a member's
total credited service consists of two separate periods of credited
service, determination of whether the member has a fractional year of
credited service will be made after the two periods have been added
together.
Consolidated and, to the extent appropriate, each other employer, will
apply the provisions of this subsection 3.2 in accordance with rules
formulated by it and applied uniformly to all employees who are similarly
situated.
3.3. Military Leave. An employee of the plan who is on a leave of absence
required by law or granted by an employer on account of service in the
United States Armed Forces will be on "military leave" for purposes of the
plan. The term "United States Armed Forces" means one or more of the
United States Army, United States Navy, United States Air Force, United
States Marine Corps, United States Coast Guard, United States Merchant
Marine, United States Public Health Service, the American Red Cross, or any
other governmental service designated by his employer.
3.4. Employer Records. An employer's records of an employee's credited service,
continuous employment, hours of service, breaks in service, leaves of
absence, layoffs, and membership in the plan will be conclusive, unless
shown to the employer's satisfaction to be incorrect.
3.5. Earnings. A member's "earnings" for purposes of the plan means the sum of
(i) the total cash compensation paid to the member for services rendered to
the employers, exclusive of discretionary bonuses, plus (ii) the total
"income deferral contributions" made on behalf of the member, pursuant to
his election, under Consolidated Employees' Tax-saver & Investment Plan.
In determining a member's earnings for any plan year or other period,
income deferral contributions made on his behalf under this Tax-saver &
Investment Plan will be deemed, for purposes of this plan, as earnings at
the time when such contributions would have been paid to the member as cash
compensation had the member not made an election under said Plan to have
the amount of such contributions withheld from his compensation.
In no event shall a member's earnings for any plan year, beginning with the
plan year commencing January 1, 1989, exceed $200,000 (or such greater
amount as may be determined by the Commissioner of Internal Revenue for
that year.)
SECTION 4
Amount of Retirement Incomes
4.1. Normal or Late Retirement. Subject to the terms of the plan, if a member
retires on or after January 1, 1989, and on a normal or late retirement
date, he will be entitled to receive an annual retirement income, payable
in equal monthly installments, in an amount equal to the greater of:
(a) The sum of the applicable amounts determined under (i) and (ii) next
below, where:
(i) Is, for each of the first thirty-five calendar years during
which he is a member of the plan, one and one-eighth percent
of the first $6,400.00 of his earnings in each such calendar
year plus one and one-half percent of that part of his
earnings in each such calendar year in excess of $6,400.00;
plus
(ii) Is one and one-half percent of his earnings in each calendar
year during which he is a member after he has been a member
in the plan for thirty-five calendar years.
(b) The sum of the applicable amounts determined under (i) and (ii) next
below, where:
(i) Is the sum of:
(A) One and one-eighth percent of the first $8,800.00 of
his average annual earnings (as defined below); plus
(B) One and one-half percent of that part of his average
annual earnings in excess of $8,800.00;
Multiplied by a number, not to exceed 35, that is equal to
the sum of (i) his number of years of credited service
elapsed between the date he first became a member of the
plan and the date on which he retires or otherwise
terminates employment, plus (ii) his number of years of
credited service in the period, if any, commencing the
January 1 coincident with or next following the date on
which his credited service commenced and ending with the day
as of which he could first become a member of the plan; and
(ii) Is one and one-half percent of the participant's average
annual earnings multiplied by the number by which the sum of
subparagraphs (i) and (ii) in subparagraph 4.1(b)(i) above
exceeds 35.
In applying the provisions of this subparagraph (b), the term
"average annual earnings" means the annual average of a member's
earnings for the five consecutive calendar years during which the
member's earnings were highest during the ten consecutive calendar
year period that ends on the December 31 coincident with or
immediately preceding the member's retirement or other termination of
employment. Such annual average will be determined by dividing his
total earnings for the five-year period by the number of months in
the period for which he receives such earnings, and then multiplying
the result by 12. In arriving at the amount described in this
subsection, (A) for a member who withdrew from the plan prior to
January 1, 1958, there shall not be included in such member's
credited service any of his credited service during the period
commencing on the date he first became a member of the plan up to the
date he again re-entered the plan and (B) for a re-employed employee,
there shall not be included in his credited service any of his
credited service for which he fails to retain credit pursuant to
subsection 7.5.
Notwithstanding the foregoing provisions of this subsection 4.1, the
minimum annual amount payable under this subsection shall not be less than
an amount equal to $276 (if a member retires on or after January 1, 1989
but before January 1, 1990); or $288 (if a member retires on or after
January 1, 1990 but before January 1, 1991); or $300 (if a member retires
on or after January 1, 1991, but before January 1, 1992); or $312 (if a
member retires on or after January 1, 1992 but before January 1, 1993); or
$324 (if a member retires on or after January 1, 1993); whichever is
applicable, multiplied by the member's number of years of credited service
at his retirement date, provided that if a member did not become a member
when he was first eligible to do so or if a member withdrew from the plan
prior to January 1, 1958, the minimum annual amount determined under this
sentence shall not exceed an amount equal to $276 (if a member retires on
or after January 1, 1989 but before January 1, 1990); or $288 (if a member
retires on or after January 1, 1990 but before January 1, 1991); or $300
(if a member retires on or after January 1, 1991 but before January 1,
1992); or $312 (if a member retires on or after January 1, 1992 but before
January 1, 1993); or $324 (if a member retires on or after January 1,
1993), whichever is applicable, multiplied by the member's total number of
years of credited service in the period of his employment from the date he
was last hired up to the date he first became eligible to become a member,
and in the period of his employment from the date on which he last became a
member up to his retirement date. As to any member who is an hourly-paid
employee in the logging, tug, or hoist operations in the Timberlands
divisions of any employer, the amount determined under the preceding
sentence payable to such member at his retirement date shall not exceed an
amount equal to one percent of his "average earnings" (as defined below)
multiplied by his total number of years of credited service at his
retirement date reduced by the number of years in which he could have been
a member of the plan but failed to do so. For purposes of the preceding
sentence, the "average earnings" of an hourly-paid employee engaged in the
logging, tug, or hoist operations in the Timberlands divisions shall mean
the annual average of his total earnings received by him since he last
became a member of the plan up to his normal or earlier retirement date.
If a member retires on a late retirement date, the amount of a member's
retirement income payable to him in accordance with this subsection 4.1
shall be actuarially increased by an amount equal to the difference, if
any, between (aa) the aggregate amount of retirement income payments which
were not paid to such member for those calendar months (if any) beginning
on or after his normal retirement date during which he received earnings
from the employer for hours of service performed in fewer than 8 days or
separate work shifts in such months and (bb) the additional amount of the
benefit earned under the plan during each such month after his normal
retirement date. If payment of a member's retirement income begins prior
to retirement on his required commencement date, then: (cc) the amount of
any additional retirement income that otherwise would be accrued by the
member after that date shall be reduced (but not below zero) by the
actuarial equivalent of the retirement income payments made to the member
after that date; and (dd) the amount of retirement income payable to the
member shall be adjusted, as of each subsequent January 1 to reflect the
additional benefits, if any, accrued by the member during the immediately
preceding calendar year. In no event shall the amount of a member's
retirement income payable on a late retirement date be less than the
monthly amount received had he retired on his normal retirement date.
Notwithstanding the above, in no event shall a member's retirement income
be less than the income the member would have been entitled to receive
under the terms of the plan as in effect on December 31, 1988, if, in the
case of a member who is a highly compensated employee as described in
section 414(q)(1)(A) or (B) of the Internal Revenue Code, he had terminated
employment with all employers on December 31, 1988 or if, in the case of
any other member, he had terminated employment with all employers on
September 30, 1990 (or the date he actually retired or terminated
employment, if earlier). For purposes of the preceding sentence, a
member's "final average earnings" shall be determined by reference to the
five consecutive calendar years that end on the December 31 coincident with
or immediately preceding the date as of which the benefit is being
determined.
4.2. Early Retirement. If a member retires on an early retirement date after he
attains age 62 years, he will be entitled to an annual retirement income,
payable in equal monthly installments, in an amount equal to the amount to
which he would have been entitled under subsection 4.1 if his early
retirement date were his normal retirement date, but based upon his
credited service and earnings up to his early retirement date. If a member
retires on an early retirement date before he attains age 62 years, he will
be entitled to an annual retirement income, payable in equal monthly
installments, determined in accordance with the next preceding sentence,
except that the amount thereof will be reduced by one-third of 1 percent of
such amount multiplied by the number of months remaining between his early
retirement date and the last day of the month in which he is expected to
attain age 62 years.
4.3. Re-employment After Early Retirement Date. If a member who retired on an
early retirement date is re-employed by an employer, retirement income
payments will be discontinued during his period of re-employment, and when
he again retires under the plan, his retirement income will be recomputed
on the basis of his earnings and total credited service up to his later
retirement date, but will be actuarially reduced to reflect the value of
the retirement incoming payments previously paid to him.
4.4. Minimum Plan Benefits. Notwithstanding any other provisions of the plan,
upon a member's termination of employment with the employers for any
reason, benefits payable to or on account of him hereunder (including any
applicable Supplements) shall be at least as great as those that would have
been paid if the original plan (including Supplements A and B thereto), as
in effect on December 31, 1972, or the plan as in effect on any subsequent
December 31, (occurring before January 1, 1989) had continued in effect
without change; provided, however, any benefits accruing after December 31,
1988 shall comply with Section 401(1) of the Internal Revenue Code and the
regulations promulgated thereunder.
SECTION 5
Payment of Retirement Incomes.
5.1. Normal Method of Payment. Except as otherwise specifically provided in
subsections 5.2 and 5.3, retirement income payments to a member who retires
at or after attaining his normal retirement age or on an early retirement
date normally will be made monthly, the first payment to be made as of the
end of the month next following the member's retirement date and the final
payment to be made as of the end of the month next preceding the month in
which his death occurs.
5.2. Contingent Annuitant Method of Payment. If, at a member's retirement date,
the member has a spouse, his retirement income will be payable to him (at
his retirement date) in the contingent annuitant form of payment described
in subparagraph 5.3(a) with a 50 percent continuing payment being payable
to the member's spouse in the event she survives him, unless the member had
elected otherwise as provided below. If a member continues in the employ
of the employer beyond his normal retirement date and dies before his late
retirement date, payments will be made to his spouse as provided in this
subsection, if such spouse survives the member, as though payment of the
member's retirement income had commenced on the last day of the month next
following the month in which his death occurred, unless the member had
elected otherwise as provided below. A member who is married may make a
written election to waive the contingent annuitant form of payment and to
have payment made under subsection 5.1 or under a different optional form
of payment permitted under subsection 5.3, at any time during the 90-day
period ending on the date payment of his benefits commences. Such an
election will be effective only if the member's spouse consents to the
election in writing, and such consent acknowledges the effect of the waiver
and is witnessed by a member of the board or a notary public. At least
nine months prior to the earliest date on which a member may begin to
receive benefits under the plan, the board shall furnish him with a written
explanation of the terms and conditions of the contingent annuitant form of
payment described above; the member's right to make, and the effect of, an
election to waive such form of payment; the requirement of spousal consent
to such waiver; and the member's right to make, and the effect of, a
revocation of such waiver. An election under this subsection may be
revoked by a member at any time prior to the date payment of his benefits
commences.
5.3. Optional Methods of Payment. Subject to the provisions of subsection 5.4,
in lieu of the normal amount and form of retirement income payable at his
normal, early, or late retirement date under subsection 5.1, or the
contingent annuitant form of payment payable under subsection 5.2, a member
may elect to receive a retirement income of actuarially equivalent value in
one of the following forms:
(a) A smaller retirement income payable during his own life so that after
his death the same or a smaller amount may be paid for life to a
surviving beneficiary (such as his wife) designated by the member.
(b) A smaller retirement income payable during his own life and, if he
dies within a period specified by him (such period to commence on his
normal, early, or late retirement date), a continuing payment of the
same amount to his beneficiary for the balance of the specified
period.
An option may be elected under this subsection 5.3 only if the option is
designed so that more than 50 percent of the actuarial reserve that would
be required to fund the benefits would be applied under the option to
provide benefits that are expected to be paid to the member during his
expected lifetime. Benefits payable under an option shall be paid or
commenced no later than the end of the month next following the member's
normal, early, or late retirement date.
5.4. Evidence of Good Health. Evidence of a member's good health may be
required before election of an optional form of retirement income under
subsection 5.3 will be permitted unless request for payment in the optional
form is made:
(a) At least 60 days before the member's normal, early, or late
retirement date; or, if later,
(b) Within 60 days after the date as of which the plan is adopted by his
employer if he first becomes a member as of the date of such
adoption.
5.5. Option Rules. If a member has elected an optional form of retirement
income under subparagraph 5.3(a) and the person to whom payments are to be
continued after the member's death dies before the member's normal, early,
or late retirement date, the option elected will be automatically canceled
and the member's retirement income will be paid to him under subsection 5.1
or 5.2, whichever is applicable, unless another optional form can be and is
elected by the member. If a member who elected an optional form of
retirement income dies before his normal or early retirement date, no
benefits will be payable to any person under the option elected. If a
member who elected an optional form of retirement income continues in the
employ of the employers beyond his normal retirement date, his retirement
income will be paid commencing with the first to occur of his death or his
retirement date, in accordance with the option elected, in the same manner
and amount as would have been paid if he had retired on a late retirement
date, with a period certain (if such option was elected by him) measured
from his late retirement date. No benefits will be paid pursuant to an
option elected under subsection 5.3 if the member's retirement income is
payable in the contingent annuitant form described in subsection 5.2 or if
a survivorship benefit is payable to a member's spouse under that
subsection.
5.6. Commencement of Benefits. Except in the case of a member who attained age
70-1/2 before January 1, 1988 and who has not been a 5 percent owner of an
employer (as defined in Section 416(i) of the Code) for any plan year
beginning after the year in which such member attained age 65-1/2, payment
of a member's retirement income will commence no later than the March 31 of
the calendar year next following the calendar year in which such member
attains age 70-1/2 even though the member continues in the employ of an
employer and has not incurred a retirement date.
SECTION 6
Disability Retirement Income
6.1. Disability Retirement. If a member who has completed 10 years of credited
service:
(a) Becomes disabled (physically or mentally) so as to be unable to
perform the duties last assigned or offered to him by his employer;
(b) Such disability continues for a period of 26 consecutive weeks; and
(c) In the opinion of the board, the member is likely to remain so
disabled continuously and permanently during the balance of his life;
He shall be retired at the end of the month in which he completes the 26-
week period referred to in subparagraph (b) next above and shall receive a
disability retirement income.
6.2. Disability Exceptions. Regardless of subsection 6.1, a member shall not be
entitled to receive a disability retirement income if his disability is the
result of:
(a) Injury or disease sustained by the member as the result of willful
and illegal participation in fights, riots, or civil insurrections,
or committing a crime or attempting to commit a crime.
(b) Injury or disease sustained by the member as the result of riding in
an airplane except as (i) a fare-paying passenger on a legally
licensed and regularly scheduled airplane or as (ii) a passenger on a
legally licensed chartered airplane in connection with an employer's
business.
(c) Injury or disease sustained by the member while working for anyone
other than the employers and arising out of such other employment.
(d) Injury or disease sustained by the member while serving in the armed
forces of any country.
(e) Any intentionally self-inflicted injury.
6.3. Proof of Disability. The board, before approving payment of any disability
retirement income, will require proof in such form as the board may decide,
including the certificate of a duly licensed physician selected or approved
by the board, that the member has become disabled as provided above in this
Section 6. At least six months after the commencement of the disability
retirement income, or more frequently if the board so decides, the board
may similarly require proof of the continued disability of the member.
6.4. Amount of Disability Retirement Income. The amount of monthly disability
retirement income for a member retiring on a disability retirement date
shall be:
(a) An amount equal to $23.00 (if a member retires on or after January 1,
1989 but before January 1, 1990); or $24.00 (if a member retires on
or after January 1, 1990 but before January 1, 1991); or $25.00 (if a
member retires on or after January 1, 1991 but before January 1,
1992); or $26.00 (if a member retires on or after January 1, 1992 but
before January 1, 1993); or $27.00 (if a member retires on or after
January 1, 1993), whichever amount is applicable, multiplied by his
total number of years of credited service at his disability
retirement date; plus
(b) For any month that the member is not receiving Disability Insurance
Benefits under the Social Security Act, a supplemental payment equal
to $23.00 (if a member retires on or after January 1, 1989 but before
January 1, 1990); or $24.00 (if a member retires on or after January
1, 1990 but before January 1, 1991); or $25.00 (if a member retires
on or after January 1, 1991 but before January 1, 1992); or $26.00
(if a member retires on or after January 1, 1992 but before
January 1, 1993); or $27.00 (if a member retires on or after January
1, 1993), whichever amount is applicable, multiplied by his total
number of years of credited service at his disability retirement
date.
No reduction in the amount of a member's disability retirement income will
be made on account of worker's compensation insurance benefits or other
payments to which he may be entitled under Federal or State law.
6.5. Normal Form of Payment of Disability Retirement Income. Unless payment is
to be made in the optional form described in subsection 6.6, a member's
disability retirement income determined under subparagraph 6.4(a) will be
payable as of the end of each month, the first payment to be made as of the
disabled member's disability retirement date, and the last payment to be
the payment due:
(a) As of the end of the month next preceding the month in which the
member's death occurs; or
(b) As of the end of the month in which the member attains age 65 years;
or
(c) As of the end of the month next preceding the month the member
recovers from such disability.
If a member who is retired because of disability continues to be disabled
until the date he attains age 65 years, thereafter he will be entitled to a
monthly retirement income, commencing with the month next following the
month in which he attains age 65 years, determined in accordance with
subsection 4.1 and payable in accordance with subsection 5.1 as if the date
he attains age 65 years were his normal retirement date, except that his
credited service, earnings, and average annual earnings at his disability
retirement date will be used in determining his monthly retirement income
under subsection 4.1.
6.6. Optional Form of Payment of Disability Retirement Income. In lieu of the
normal form and amount of disability retirement income payable under
subsection 6.5, a member's disability retirement income will be paid in the
optional form described in this subsection if he has a spouse at the time
of his disability retirement date (referred to herein as his "qualifying
spouse") unless the member elects, within the 90-day period immediately
preceding the date payment of such income commences, not to have payment
made in the form described in this subsection and his qualifying spouse
consents in writing to such election; such consent must acknowledge the
effect of the election and be witnessed by a member of the board or a
notary public. Such income will be payable as at the end of each month,
the first payment to be made as of the disabled member's disability
retirement date, and shall be computed and payable in accordance with the
following provisions:
(a) A monthly retirement income will be paid to the member for his
lifetime and, if he is survived by his qualifying spouse, a
continuing monthly retirement income of 50 percent of the monthly
amount paid to the member while living will be paid to such spouse
for the balance of her lifetime. The amount of monthly retirement
income payable to the member (and if she survives him, to his
qualifying spouse) under the preceding sentence will be actuarially
equivalent to a monthly retirement income payable to the member for
his lifetime commencing on his disability retirement date, where the
monthly amount thereof is the lesser of the monthly amount of his
disability retirement income determined under subparagraph 6.4(a) or
the monthly amount of the retirement income that is payable to the
member commencing after he attains age 65 years determined under
subsection 6.5. The monthly retirement income payable under this
subparagraph will be discontinued in the event the member recovers
from his disability prior to his attainment of age 65 years.
(b) If the monthly amount of the member's disability retirement income
determined under subparagraph 6.4(a) exceeds the monthly amount of
his retirement income payable commencing after he attains age 65
years as determined under subsection 6.5, a monthly retirement income
equal to such excess will be payable to the member (in addition to
any payments determined under subparagraph 6.4(b) for any months for
which such payments are due) commencing on his disability retirement
date and continuing until the first to occur of his death, attainment
of age 65 years, or recovery from disability. When such retirement
income terminates, no further payments will be made with respect to
such amount.
(c) If the monthly amount of the member's retirement income payable
commencing after he attains age 65 years as determined under
subsection 6.5 exceeds the monthly amount of his disability
retirement income determined under subparagraph 6.4(a), a monthly
retirement income equal to such excess will be payable to the member
for life commencing at the end of the month next following the month
in which he attains age 65 years. If the member's qualifying spouse
is living when he attains age 65 years, a retirement income
actuarially equivalent to the retirement income described in the
preceding sentence will be payable to the member for his lifetime
and, if his qualifying spouse survives him, a continuing monthly
retirement income of 50 percent of the amount paid to the member
while living will be paid to such spouse for the balance of her
lifetime. If the member dies before attaining age 65 years, no
retirement income will be payable under this subparagraph, but a
survivorship benefit may be payable to his qualifying spouse under
subparagraph (d) below if she survives the member.
(d) If a member for whom a retirement income would be payable under
subparagraph (c) above dies before attaining age 65 years and is
survived by his qualifying spouse, the amount of retirement income
payable under subsection 6.5 when the member would have reached age
65 years will be determined in the manner described in subsection
8.2. If the monthly amount of such preretirement death benefit
payable commencing with the month next following the month in which
the member would have attained age 55 years or, if later, the month
in which the member's death occurred is greater than the monthly
survivorship payments then payable to such qualifying spouse under
subparagraph (a) above, then such greater benefit will be paid in
lieu of the benefit provided under subparagraph (a).
If a member makes a timely election not to have his disability retirement
income paid in accordance with the subsection and the member's qualifying
spouse consents thereto as provided at the beginning of this subsection,
payment of disability retirement income and payment of any monthly
retirement income that becomes payable when a member attains abe 65 years
will be determined in accordance with subsection 6.5.
6.7 Recovery From Disability. If a member who retired on a disability
retirement date recovers from his disability before his normal retirement
date, he will be entitled to a deferred retirement income under subsection
67.2 based on his credited service, earnings, and average annual earnings
at his disability retirement date, except that, if he is re-employed by an
employer before his normal retirement date and again becomes covered by the
plan, the retirement income to which he may be entitled at his later
termination of employment or retirement will be computed upon the basis of
his total earnings, average annual earnings, and credited service
attributable to both his original employment and his period of re-
employment. If it becomes necessary to determine such member's average
annual earnings for purposes of subsection 4.1 and any part of the period
used for determining such earnings falls within the period of his
disability, he will be considered as having received earnings during such
period of disability at the same rate as his annual rate of earnings in
effect immediately before he became disabled.
SECTION 7
Termination of Service Before Retirement
7.1. Member's Contributions. Except as otherwise expressly provided in
subsection 7.2 and Section 8:
(a) On the death of a member while still in the employ of an employer and
before his normal retirement date; or
(b) On the resignation or dismissal of a member from the employ of all of
the employers before he has become eligible to retire or be retired
under the plan;
He or his beneficiary will receive the member's "accumulated contributions"
(i.e., the undistributed contributions made by him under the plan, with
interest as computed in subsection 12.17), payable as of the end of the
calendar month next following the month in which his termination of
employment or death occurs. If a member's employment terminates for any
reason other than death after he has become eligible to retire under the
plan (including early or disability retirement), he will be entitled to the
retirement benefits provided by the plan and no return of his contributions
will be made to him, except that in the event of his death after retirement
such contributions will be paid to his beneficiary to the extent provided
in Section 9.
7.2. Deferred Retirement Income. If a member's employment with the employers
terminates because of his resignation or dismissal before he is eligible
for retirement under the plan but after he completes 5 years of credited
service, he will receive a deferred annual retirement income commencing as
of the end of the month next following the month in which he attains age 65
years in an amount equal to the amount to which he would be entitled under
subsection 4.1 if his date of termination were his normal retirement date,
but based on his credited service and earnings up to the date of his
termination. A member who has completed 10 years of credited service may
elect, in accordance with the provisions of subsection 7.3, to have his
deferred annual retirement income commence as of the end of the month next
following the month in which he attains age 55 years, or as of the end of
any month thereafter, but the amount of such deferred annual retirement
income will be reduced actuarially to take into account his younger age and
the earlier commencement of his retirement income. A member entitled to a
deferred annual retirement income as provided above will not be entitled to
receive payment of his accumulated contributions as provided in subsection
7.1.
7.3. Payment of Deferred Retirement Income. The deferred annual retirement
income payable to a member in accordance with subsection 7.2 will be
payable in accordance with subsections 5.1 or 5.2, whichever is applicable,
as though the date payment is to commence were his retirement date, without
regard to any optional form of payment that the member may have elected
under subsection 5.3. The first payment will be made as of the end of the
month next following the earlier to occur of:
(a) The month in which he attains age 65 years (if the member is then
living); or
(b) If he has completed 10 years of credited service, the month for which
he makes application for earlier payment under subsection 7.2;
provided, however, that such application shall be in writing and
filed with the board within a period of 90 days before the date such
payment is to commence.
7.4 Death Before Payment Commences. Unless the member is married on the date
of his death (in which case subsection 8.2 applies), if a member is to
receive a deferred annual retirement income under subsection 7.2 and dies
before payments to him have commenced, his beneficiary will be entitled to
receive the member's accumulated contributions payable as of the end of the
calendar month next following the month in which such death occurs. Such
payments hall be in full satisfaction of all rights of the member or his
beneficiary under the plan.
7.5. Re-employment. If a former employee of an employer is re-employed by any
of the employers and at the time of his previous employment termination he
was not entitled to a deferred retirement income under this plan or the
original plan, his total number of years of credited service based on his
prior employment will be disregarded for all purposes of the plan if his
total number of consecutive years of break in service equals or exceeds the
greater of five or his total number of years of credited service based on
his prior employment; and such employee will be treated as a new employee
for all purposes under the plan. Except as provided in the preceding and
following sentences, a former employee who is re-employed by an employer
will retain credit for his earnings and years of credited service
attributable to his original employment and if such employee was previously
a member of this plan or the original plan, he will again become a member
on the date of his re-employment provided that he satisfies the conditions
for participation specified in subsection 2.1 of the plan. If such
employee, however, received a distribution of his accumulated contributions
under this plan or the original plan as a result of his first termination
of employment, he will not retain credit for his earnings and credited
service based on the calendar years in the period of his prior employment
during which he made the contributions included in such distribution unless
he repays to the trustees of the trust the amount of such distribution
together with interest thereon at the rate of interest specified in Section
411(c)(2)(C) of the Internal Revenue Code from the date the distribution
was made to the date repayment is made and such repayment is made prior to
retirement or other termination of employment of such employee or, if
later, the earlier to occur of the fifth year following the date on which
the member is re-employed by an employer or the close of the first period
in which such member incurs five consecutive one-year breaks in service
commencing after the date of such distribution. If a re-employed employee
was entitled to a deferred retirement income under this plan or the
original plan at the time of his original employment terminated, the
retirement income that he is entitled to receive under the plan will be
recomputed when he subsequently terminates employment on the basis of his
earnings and total credited service up to that date. In administering the
provisions of this subsection, the board shall take into account the
provisions of subsections 11.1 and 11.2 and any rules established by the
board pursuant to subsection 11.2.
7.6. One-Year Breaks In Service. A "one-year break in service" will occur at
the end of the year of employment in which an employee's employment with
all employers terminates if the employee does not have more than 500 hours
of service during that year, or otherwise at the end of the next following
12-month period which would constitute a year of employment if the employee
were employed for such period. Each additional 12-month period thereafter
during which such former employee remains out of the employ of the
employers will be an additional one-year break in service. In the case of
a maternity or paternity absence (as defined below) which commences on or
after January 1, 1985, an employee shall be credited, for the year of
employment (or 12-month period referred to above) in which he otherwise
would have first incurred a one-year break in service (and solely for
purposes of determining whether such a break in service has occurred), with
the hours of service which normally would have been credited to him during
such year or 12-month period but for such absence (or, if the board is
unable to determine the hours which would have been so credited, 8 hours
for each workday of such absence). A maternity or paternity absence means
an employee's absence from work because of the pregnancy of the employee or
birth of a child of the employee, the placement of a child with the
employee in connection with the adoption of such child by an employee, or
for purposes of caring for the child immediately following such birth or
placement. The board may require the employee to furnish such information
as the board considers necessary to establish that the employee's absence
was for one of the reasons specified above.
SECTION 8
Preretirement Death Benefit
8.1. Preretirement Death Benefit. If a member has attained the age and
completed the number of years of credited service required to retire early
under the plan, he will have qualified for a preretirement death benefit.
If, after qualifying for such benefit, a member dies while still in the
employ of an employer but before his normal retirement date, there shall be
payable to such member's beneficiary a death benefit in the form and amount
determined as follows:
(a) Amount of Death Benefit Payments. In the event of death occurring
under the conditions stated above, a monthly income will be paid to
the member's designated beneficiary in an amount determined as
follows:
(i) First, the board shall determine, as of the end of the month
in which the member's death occurs, the lump sum amount that
is the actuarial equivalent of a deferred life annuity of an
annual amount (payable in monthly installments commencing on
the member's normal retirement date) equal to the amount of
annual retirement income determined pursuant to subsection
4.2, without regard to the reduction specified in that
subsection in the event of retirement before age 62 years,
as if the end of the month of his death were his early
retirement date.
(ii) Next, after determining the lump sum amount under
subparagraph (i) next above, the board shall then determine,
on an actuarial basis, the amount of monthly income (or
other form of approved payment) that can be provided by such
reduced lump sum amount, taking into account for this
purpose the form or method of payment that has been
designated by the deceased member in accordance with
subparagraph (b) next below. Such monthly income ( or other
form of payment) will be payable to the member's beneficiary
in accordance with the form or method of payment so
designated.
The determination of the amount of preretirement death benefit payable
under this subsection will be based on actuarial factors, assumptions, and
tables adopted by the board from time to time for such purpose.
(b) Designation of Beneficiary. If a member is married at the time of
his death, the member's spouse shall be the primary beneficiary of
any benefits payable under this subsection 8.1 unless the member
designates another person as a primary beneficiary and the member's
spouse consents to the designation in writing and such consent
acknowledges the effect of the designation and is witnessed by a
member of the board or a notary public. Subject to the preceding
sentence, a member may designate his spouse or such other person or
persons (who may be designated concurrently, contingently, or
successively) to whom a pre-retirement death benefit is to be paid in
the event of the member's death after having qualified for such
benefit. A member's beneficiary designation form shall be effective
only when signed by the member and filed with the board while the
member is alive. Subject to the spousal consent requirement
described above in this subparagraph, the member may change his
beneficiary or method of payment at any time by filing a new
beneficiary designation form with the board, which form will be
effective only when filed with the board while the member is alive.
A person who is a beneficiary for purposes of this subsection shall
not be a beneficiary with respect to any other benefits provided
under the plan unless designated as a beneficiary for purposes of
such other benefits in an appropriate option form or beneficiary
designation form. If a subsection and the deceased member does not
have a surviving spouse or had failed to designate a beneficiary or
the person designated as the member's beneficiary dies before the
complete payment of such benefits, the board may direct the trustee
to make payment of such benefit or any remaining portion thereof in
the manner permitted under subsection 12.16 and, where necessary, the
board may designate the method of payment to be used in determining
the amount of such benefit and how it is to be paid.
(c) Method of Payment. If a preretirement death benefit becomes payable
under this subsection to the member's spouse, such benefit will be
paid to the spouse in the form of monthly income payments for the
lifetime of the spouse except that the spouse may elect (before
payment of the benefit commences) to have the benefit paid in any
other form that would be permissible under the provisions set forth
below. Subject to the foregoing, a member may specify in the
beneficiary designation form filed with the board one of the
following methods of payment to be used in paying any benefits that
become payable under this subsection to the member's beneficiary:
(i) Monthly income payments payable to a designated beneficiary
for a period certain of not less than 60 nor more than 240
months (but not exceeding the beneficiary's life
expectancy), with provision for paying the commuted value of
any remaining payments if the beneficiary dies before the
end of the period certain;
(ii) Monthly income payments for the lifetime of a designated
beneficiary and for a period certain of not less than 60 nor
more than 240 months (but not to exceed the life expectancy
of the beneficiary), with provisions for payment of a
commuted value of any remaining payments if the beneficiary
dies before the end of the period certain;
Payment of such benefits must commence as of the last day of the month next
following the month in which the member's death occurs. If the method of
paying such death benefit provides for monthly or periodic payments to a
primary beneficiary, upon the death of such primary beneficiary any
remaining payments that are then payable, in the discretion of the board
(unless required by the method of payment that was designated), may be
commuted to their then present lump sum value and be paid as a lump sum
distribution to the person or persons entitled thereto.
(d) Termination of Death Benefit Coverage. A member who has qualified
for a preretirement death benefit under this subsection 8.11 will
cease to be qualified for such benefit on the first of the following
events to occur:
(i) The member's normal retirement date.
(ii) The last day of the month in which the member's termination
of employment occurs because of retirement or other reason
(other than death) prior to his normal retirement date.
Once a member ceases to be qualified for such benefit, no benefits
whatsoever shall be paid under this subsection unless the member
again becomes qualified for a preretirement death benefit while still
in the employ of the employer and dies while so qualified.
If a preretirement death benefit becomes payable under this subsection,
such benefit will be in lieu of any other form of death or survivorship
benefit payable under the plan, except as provided in Section 9.
8.2. Preretirement Death Benefit - Deferred. If a member has 5 years of
credited service and dies before his normal retirement date and is not
eligible for a preretirement death benefit under subsection 8.1 above,
there shall be payable to the member's surviving spouse a monthly death
benefit of 50 percent of the amount of monthly deferred vested benefit
(computed pursuant to subsection 7.2 but reduced actuarially to take into
account the commencement of retirement income before the member would have
attained age 65) to which the member would have been entitled, if his
benefits were payable in the form specified in subparagraph 5.2, commencing
on his normal retirement date or, if the member has completed 10 years of
credited service, the last day of the month next following the month in
which his 55th birthday occurs (or, if later, the month in which his death
occurs). Such death benefit is payable only to the surviving spouse of a
deceased member who had at least one hour of service under the plan on or
after January 1, 1974, and only in cases of death occurring after August
22, 1984 and is payable regardless of whether the member's death occurs
while employed by an employer or after the member's employment with the
employers had terminated but before payment of the member's retirement
benefits has commenced. Payment of the benefit to the surviving spouse
will commence, if such spouse is then living, on the member's normal
retirement date or, if applicable, the last day of the month next following
the month in which the deceased member's 55th birthday would occur or, if
later, the month in which his death occurs and will continue for the
balance of the spouse's lifetime. If a preretirement death benefit becomes
payable under this subsection, such benefit will be in lieu of any other
form of death or survivorship benefit payable under the plan, except as
provided in Section 9. If a death or survivorship benefit becomes payable
under subsection 6.6, such benefit will be in lieu of any death benefit
payable under this subsection.
SECTION 9
Death After Retirement
Death benefits attributable to a member's contributions will be payable under the
following conditions:
(a) Death benefits will be limited to the excess, if any, of:
(i) The member's accumulated contributions, over
(ii) The aggregate of the retirement income payments made to the
member before his death plus any such payments paid or
payable to any other person following the member's death.
(b) When payments are to be made to another person following the member's
death, no death benefits attributable to the member's contributions
will be paid until the last to die of the member and the persons
entitled to receive retirement income following the member's death.
Section 10
Contribution
10.1. Contributions By Members. Prior to September 30, 1974, employees who were
members of the plan were required to make contributions under the plan. On
and after September 30, 1974, no further contributions by members have been
required and none will be permitted under the plan.
10.2. Employer Contributions. Subject to the provisions of Section 14, the
employers expect and intend to contribute to the trustee under the trust
from time to time such amounts as are required under accepted actuarial
principles to maintain the plan as a qualified employee pension plan
meeting the requirements of Section 401(a) of the Internal Revenue Code.
In this regard, each employer will maintain a funding standard account
which shall be charged and credited each year in accordance with the
provisions of Section 412 of the Internal Revenue Code. Subject to the
provisions of Section 14, any excess funds in the trust at any time
attributable to forfeitures arising with respect to the employees or former
employees of an employer will be applied to meet the costs of the plan
thereafter incurred or accrued with respect to that employer's employees
and will not be used to provide benefits for members in excess of those to
which they are entitled under the plan.
SECTION 11
Change in Employment Status
11.1 Employees Transferred Out of Coverage. If, on or after January 1, 1973, a
member's employment is changed so that he no longer meets the requirements
of subparagraphs 2.1(d) and (3) or is transferred to employment with a
controlled group member (as described in subsection 12.8) which is not an
employer under this plan, he shall continue to accrue credited service
under this plan while continuing in the employ of any of the employers or
controlled group members for purposes of determining his (or his
beneficiary's) eligibility to receive retirement or other benefits
(including death benefits) under this plan. Upon such change in employment
status, however, his earnings and credited service occurring thereafter
shall be disregarded for purposes of determining the amount of any benefits
that he (or his beneficiary) is or will be entitled to receive under this
plan unless he later again meets the requirements of subparagraphs 2.1(d)
and (3) while in the employ of an employer. The amount of any benefits
that such member (or his beneficiary) may be eligible to receive under the
plan shall be based on his contributions, earnings, and credited service
for the period that he was covered by the original plan (provided he was
covered by this plan on January 1, 1973) and for the period that he was
covered by this plan on and after January 1, 1973, but disregarding any
credited service for a period that he was eligible, but has not elected, to
become a member of this plan or the original plan. The amount of such
benefits, except for benefits determined under subparagraph 4.1(b), will be
determined in accordance with the provisions of the plan as in effect at
his retirement date or earlier termination of employment; and the amount of
such benefits determined under subparagraph 4.1(b) will be determined in
accordance with the provisions of the plan as in effect at the time of his
change in employment status.
11.2 Employees Transferred To Coverage. If an employee of an employer who is a
member of Consolidated Employees' Retirement Plan or Castle Rock Hourly
Retirement Plan (referred to below as the "other plans") is transferred to
employment outside of a group or class of employees covered by the other
plans, such employee shall automatically become a member of this plan as of
the date of such transfer, provided he then meets the eligibility
requirements of subparagraphs 2.1(d) and (e). The benefits provided under
this plan for such member shall be determined under (a) or (b) below:
(a) The benefits provided in subsection 4.1 for such member shall be
determined without regard to subparagraph 4.1(b) and shall be based
on the contributions, if any, made by him, his earnings, and credited
service from the date of such transfer and while he remains a member
of this plan. His credited service accumulated prior to such
transfer, however, will be taken into account in determining his
eligibility to receive benefits under the plan.
(b) Subject to subsection 11.1, any benefits provided under this plan in
accordance with subparagraph 4.1(b) for such member shall be based on
his earnings and credited service and determined under the assumption
that he had become a member of this plan as of the date he became a
member of one of the other plans (or the original plan) and had made
all contributions required of him under the plan or plans. The
amount of such benefits, however, will be reduced by the amount of
retirement benefits that such member may become eligible to receive
under the other plans.
Such member's retirement benefits will be computed under both (a) and
(b) above, and the member shall be entitled to receive the greater of
the benefits determined under those subparagraphs. The board may
establish rules for determining benefits of members who incur
multiple transfers, or incur transfers either prior or subsequent to
a break in employment, between this plan and the Other Plans, which
rules shall reflect the principals expressed in this subsection and
subsections 4.3, 7.5, and 11.1.
11.3. Payments From One Source. If a member is entitled to receive retirement
benefits under this plan as well as other retirement or pension plan
maintained by any of the employers, appropriate amounts may be transferred
to or from the trust so that his entire retirement benefits provided under
all such plans may be payable from one source.
SECTION 12
General Provisions
12.1. Notices. Each member and each designated beneficiary must file with the
board from time to time in writing his post office address and each change
of post office address. Any communication, statement or notice addressed
to a member or beneficiary at his last post office address filed with the
board, or if no address was filed with the board, then at his last post
office address shown on his employer's records, will be binding on the
member and his beneficiary for all purposes of the plan. Neither the
board, the employers, nor the trustee shall be obliged to search for or
ascertain the whereabouts of any member or beneficiary.
12.2. Information to be Furnished by the Employers. Each employee shall furnish
the board with such data and information as may be required to manage the
plan.
12.3. Information to be Furnished by Members. In addition to the information
required under subsection 12.1, members and their beneficiaries must
furnish the board with such evidence, data, or information as it considers
desirable to carry out the plan. The benefits of the plan for each person
are upon the condition that he promptly furnish true and complete evidence,
data, and information required by the board.
12.4. Action Taken by Employers. Any action taken by an employer with respect to
the plan shall be by resolution of its Board of Directors or by a person or
persons authorized by resolution of its Board.
12.5. Interests Not Transferable. The interests of persons entitled to benefits
under the plan are not subject to their debts or other obligations and,
except as may be required by the tax withholding provisions of the Internal
Revenue Code or any state's income tax act or pursuant to a qualified
domestic relations order as defined in Section 414(p) of the Internal
Revenue Code, may not be voluntarily or involuntarily sold, transferred,
alienated, assigned, or encumbered.
12.6. Facility of Payment. When, in the board's opinion, a member or beneficiary
is under a legal disability or is incapacitated in any way so as to be
unable to manage his financial affairs, the board may direct that payments
be made to his legal representative, or to a relative or friend of such
person for his benefit, or the board may direct that payments be applied
for the benefit of the member or beneficiary in any way the board considers
advisable.
12.7. Absence of Guaranty. Neither the board, the employers, nor the trustee
guarantee the trust fund from loss of depreciation nor do they guarantee
any payment to any person. The liability of the trustee to make any
payment under the plan is limited to the available assets of the trust
fund.
12.8. Other Employment. If an employer is, or was at any time, a member of a
"controlled group of corporations" (within the meaning of Section 1563(a)
of the Internal Revenue Code), employment of an employee or member by any
of the corporations in such group will be considered as employment with an
employer for purposes of determining the employee's or a member's year of
service, credited service, hours of service, retirement date, employment
termination, and breaks in service. No retirement income or other benefits
provided by the plan, however, will be based on any service with any such
corporations (other than an employer), and no employee of any such
corporations (other than an employer) may become a member of the plan.
Except as provided above, a member receiving monthly retirement income will
continue to be entitled to such income regardless of other employment or
self-employment.
12.9. Employment Rights. The plan does not constitute a contract of employment.
Membership in the plan does not give any employee the right to be retained
in the employ of any employer or any right or claim to any benefit under
the plan unless such right or claim has specifically accrued under the
terms of the plan.
12.10. Board's Decision Final. Any interpretation of the plan and any decision on
any matter within the board's discretion made by it in good faith is
binding on all persons. A misstatement or other mistake of fact shall be
corrected when it becomes known, and the board shall make such adjustment
on account thereof as it considers equitable and practicable.
12.11. Actuarial Equivalent. A retirement income or plan benefit shall be
actuarially equivalent to any other retirement income or plan benefit if
the actuarial reserve required to provide such retirement income or plan
benefit is equal to the actuarial reserve required to provide such other
retirement income or plan benefit, computed on the following bases: the
normal form of benefit under the plan is a straight life annuity; the
interest assumption is six percent; and the mortality assumption is based
on the UP Mortality Table with no age set back for set forward.
12.12. Litigation by Participants or Other Persons. To the extent permitted by
law, if a legal action begun against any employer or any officer thereof,
the board or any member thereof, or the trustee by or on behalf of any
person results adversely to that person, or, if a legal action arises
because of conflicting claims to a member's benefits, the cost to an
employer or officer thereof, the board or any member thereof, or the
trustee of defending the action will be charged to such extent as possible
to the sums, if any, that were involved in the action or were payable to,
or on account of, the member concerned.
12.13. Evidence. Evidence required by anyone under the plan may be by
certificate, affidavit, document, or other information to which the person
acting on it considers pertinent and reliable, and signed, made, or
presented by the proper party or parties.
12.14. Waiver of Notice. Any notice required under the plan may be waived by the
person entitled to notice.
12.15. Gender and Number. Where the context admits, words denoting men include
women, the plural includes the singular, and the singular includes the
plural.
12.16. Designation of Beneficiary. Each member from time to time, by signing and
filing a form furnished by the board, may designate any person or persons
(who may be designated concurrently, contingently, or successively) to whom
any benefits payable at his death are to be distributed. A beneficiary
designation form will be effective only when it is signed and filed with
the board while the member is alive and will cancel all beneficiary
designation forms previously signed and filed with the board. A member may
designate a beneficiary for purposes of benefits that may become payable in
accordance with an optional form of benefit elected by him under subsection
5.3 and, if he so desires, may also designate a beneficiary for purposes of
distribution of any death benefits that are payable independently of any
optional form of benefit. If a deceased member failed to designate a
beneficiary as provided above, of if the beneficiary designed by a deceased
member dies before him or before complete payment of the member's benefits,
the board, in its discretion, may direct that payment of such benefits be
made as follows:
(a) To or for the benefit of any one or more of the member's relatives by
blood, marriage, or adoption and in such proportions as the board
determines; or
(b) To the legal representative or representatives of the estate of the
last to die of the member and his designated beneficiary.
The term "designated beneficiary," as used in the plan, means the person or
persons designated by a member as his beneficiary in the last effective
form filed with the board under this subsection. The term "beneficiary,"
as used in the plan, means the person or persons to whom a deceased
member's benefits are payable in accordance with this subsection.
12.17. Interest. The term "interest," as used in the plan with respect to a
member's contributions, means:
(a) Interest at the rate of 2 percent per annum, compounded annually,
with respect to any period prior to January 1, 1960.
(b) Interest at the rate of 3 percent per annum, compounded annually,
with respect to any period after December 31, 1959 and prior to
January 1, 1969.
(c) Interest at the rate of 4 percent per annum, compounded annually,
with respect to any period after December 31, 1968 and prior to
January 1, 1976.
(d) Interest at the rate of 5 percent per annum compounded annually, with
respect to any period after December 31, 1975 and prior to January 1,
1989.
(e) Interest at the rate calculated under Section 411(c)(2)(C)(iii) of
the Code with respect to any period after December 31, 1988.
Interest on such amounts shall be computed annually until the member's
normal retirement date, or, if earlier, the date such amounts become
distributable to or for the benefit of the member.
12.18. Small Amounts. If upon a member's retirement or other termination of
employment, the actuarially equivalent single-sum value of a member's
retirement income or any preretirement death benefit payable under Section
8 of the plan is less than $3,500, the Board will direct that a lump-sum
payment of such amount be paid to the member or the member's beneficiary.
For purposes of this subsection, a member's single-sum value shall be
determined as of the date of distribution by using an interest rate not
greater than (i) the applicable rate (as defined below) if the single-sum
value using such rate does not exceed $25,000, or (ii) 120 percent of the
applicable rate if the single-sum value using the applicable rate exceeds
$25,000; provided that a single-sum value determined by using 120 percent
of the applicable rate may never be less than $25,000. The term
"applicable rate" means the interest rate which would be used (as of the
date of distribution) by the Pension Benefit Guaranty Corporation for
purposes of determining the present value of a lump-sum distribution on
plan termination. Payment of such lump-sum amount shall be in full
satisfaction of all rights of the member or beneficiary under the plan and
his years of employment before his termination of employment shall be
disregarded in determining his credited service under the plan upon his re-
employment.
12.19. Uniform Rules. In managing the plan, the board will apply uniform rules to
all members who are similarly situated.
12.20. Controlling Laws. Except to the extent superseded by the laws of the
United States, the laws of Wisconsin shall be controlling in all matters
relating to the plan.
12.21. Severability. In the event any provisions of the plan shall be held
illegal or invalid, such illegality or invalidity shall not affect the
remaining provisions of the plan, and the plan shall be construed and
enforced as if such illegal or invalid provisions had never been
incorporated in the plan.
12.22. Fiduciary Responsibility. Each fiduciary, with respect to the plan shall
carry out its or their responsibilities in accordance with the fiduciary
requirements set forth in Part 4, Title 1 of the Employee Retirement Income
Security Act of 1974.
12.23. Benefit Claim. In the event an application for benefits under the plan is
denied in whole or part, notice of the decision to deny such application
shall be promptly furnished to the applicant. Each notice of denial of an
application shall contain the following information.
(a) The reason or reasons for the denial;
(b) Reference to any pertinent plan provisions;
(c) A description of any additional material or information necessary for
the applicant to perfect his application and an explanation of why
such material or information is necessary; and
(d) An explanation of the plan's review procedure described below.
Each applicant, by writing filed with the board no later than 180 days
after an application for benefits is denied, may request a review by the
board. In this regard, each applicant (or his duly authorized
representative) may review pertinent documents relative to the application
for benefits and the denial thereof, and may submit issues and comments in
writing to the board. The board shall decide upon an applicant's request
to review a denied application no later than 60 days after the request for
the review is received, unless special circumstances (such as the need to
hold a hearing) require an extension. In such event, a decision shall be
made by the board as soon as possible but no later than 120 days after
receipt of the request for review. Each decision on a request for review
shall be in writing and shall contain reference to any pertinent plan
provisions upon which the decision is based.
12.24. Indemnification. Any persons who are or were directors, officers, or
employees of the employers, or members of the board, and each of them,
shall be indemnified and saved harmless by their respective employer (to
the extent such persons are not indemnified or saved harmless under
liability insurance contracts) from and against any and all liability or
claim of liability to which such persons may be subjected by reason of any
act done or omitted to be done in good faith with respect to the
establishment, maintenance, and administration of the plan and trust,
including all expenses reasonably incurred in their defense if the
employers fail to provide such defense after having been requested in
writing to do so.
12.25. Additional Employers. Any subsidiary of Consolidated may adopt the plan
and become a party to the trust by:
(a) Filing with Consolidated, the board, and the trustee a written
instrument to that effect; and
(b) Filing with the trustee and the board, a certified copy of a
resolution of the Board of Directors of Consolidated consenting to
such action.
SECTION 13
No Interest in Employers
The employers shall not have any right, title, or interest in the trust fund, nor
will any part of the trust fund at any time revert or be repaid to any employer,
directly or indirectly, except that:
(a) Any amounts remaining in the portion of the trust fund that is
attributable to prior contributions made by an employer because of an
erroneous actuarial assumption and after provision for the
satisfaction of all vested and contingent liabilities or obligations
to persons entitled to benefits under the plan from such portion of
the trust fund will be returned to the employer.
(b) If the Internal Revenue Service initially determines that the plan,
as applied to a corporation that becomes an employer after the
effective date, does not meet the requirements of Section 401(a) of
the Internal Revenue Code, any trust assets attributable to
contributions made by the employer will be returned to it.
SECTION 14
Amendment or Termination
14.1 Amendment. While the employers expect to continue the plan, Consolidated
must necessarily reserve and reserves the right, subject to Section 13, to
amend the plan from time to time, except as follows:
(a) The duties and liabilities of the board under the plan cannot be
changed substantially without its consent.
(b) No amendment will reduce a member's benefits to less than an amount
equal to the benefits he would be entitled to receive if he resigned
from the employ of the employers on the date of the amendment.
(c) Except as provided in Section 13, under no condition shall an
amendment result in the return or repayment to an employer of any
contributions made by it under the plan, or the income attributable
to them, or result in the distribution of any such funds for the
benefit of anyone other than employees and former employees of the
employers, and their beneficiaries, entitled to benefits under the
plan.
14.2. Termination. Consolidated reserves the right to terminate the plan at any
time. The plan will terminate on the date it is terminated by Consolidated
and notice of such termination is filed by the board with the Pension
Benefit Guaranty Corporation in accordance with rules and regulations
established by the Pension Benefit Guaranty Corporation. The actual date
of termination will be the date established by the board in such notice
subject to the provisions of Section 4048 of the Employee Retirement Income
Security Act of 1974. In the event the plan is terminated, the assets held
in the trust attributable to the plan will be allocated to the members,
including methods and priorities of allocation described in subsection
14.3. A partial termination of the plan shall be deemed to occur on the
date the Internal Revenue Service determines that such partial termination
has occurred or the date Consolidated designates a partial termination
under the plan. In the event the plan is terminated or a partial
termination of the plan occurs, each member affected by the termination or
partial termination will cease to accrue benefits under the plan and the
rights of each affected member to benefits accrued to such date, to the
extent funded as of such date, shall be fully vested and nonforfeitable.
14.3. Distribution on Termination. In the event the plan is terminated, the
assets comprising the trust fund and attributable to the plan, after
payment of all expenses of administration and liquidation allocable to such
plan assets, shall be allocated and distributed to such members and other
persons in accordance with the provisions of Section 4044 of the Employee
Retirement Income Security Act of 1974 and the regulations issued
thereunder, in the following manner and order to the extent of the
sufficiency of such plan assets.
(a) First, to each member or other person, the portion of a member's
accrued benefit to which the member or such other person is entitled
which consists of the accrued benefit derived from the member's
contributions.
(b) Next, equally among the members or persons in the following two
classes:
(i) To each person who was receiving a benefit under the plan as
of the beginning of the three-year period ending on the date
of termination of the plan, the portion of such person's
benefit which constitutes the smallest benefit payable to
such person under the terms of the plan as in effect during
the five-year period ending on the date of termination; and
(ii) With respect to each person who was not receiving a benefit
under the plan as of the beginning of the three-year period
ending on the date of termination, but who would have been
receiving a benefit if the member had retired prior to the
beginning of such three-year period and commenced receiving
benefits in the normal form and amount, the portion of such
person's benefit which constitutes the smallest benefit
which would have been payable to such person under the terms
of the plan as in effect during the five-year period ending
on the date of termination.
(c) Next, to each person who was entitled to a benefit under the plan as
of the date of termination of the plan, the portion of such benefit
which constitutes a guaranteed benefit under Title IV of the Employee
Retirement Income Security Act of 1974 [determined without regard to
Section 4022(b)(5) thereof] or which would have constituted a
guaranteed benefit if Section 4022(b)(6) of such Act did not apply,
properly adjusted for any allocation of assets with respect to such
benefit made under subparagraphs (a) and (b) next above.
(d) Next, to each person who was entitled to a benefit under the plan as
of the date of termination of the plan, such person's nonforfeitable
benefit, properly adjusted for any allocation of assets with respect
to such benefit made under subparagraphs (a), (b), and (c) next
above.
(e) Finally, to each person who was a member of the plan on the date of
termination of the plan, such person's benefit under the plan accrued
up to that date, properly adjusted for any allocation of assets with
respect to such benefit made under subparagraphs (a), (b), (c), and
(d) next above.
In making such allocations, the benefits contemplated under subparagraph
(a) next above shall be completely provided for before any allocations are
made under subparagraphs (b), (c), (d), and (e) next above, and the
allocations provided for in subparagraph (b) next above shall be completely
provided for before making any allocations under subparagraphs (c), (d),
and (e) next above, and so forth. In the event that the assets available
for allocation under subparagraph (a), (b), or (c) next above are not
sufficient to satisfy in full the benefits of all persons described in each
of those subparagraphs, the assets shall be allocated pro rata among such
persons on the basis of the lump sum actuarially equivalent value (as of
the date of termination of the plan) of their respective benefits described
in that subparagraph, in the sequential order provided in the preceding
sentence. In the event that the assets available for allocation under
subparagraph (d) next above are not sufficient to satisfy in full the
benefits of persons described in that subparagraph, except as provided in
the following sentence the assets shall be allocated to each such person on
the basis of such person's benefit determined in accordance with the terms
of the plan in effect at the beginning of the five-year period ending on
the date of termination of the plan, properly adjusted for any allocation
of assets with respect to such person's benefit made under subparagraph
(a), (b), or (c) next above. If the assets available for allocation under
subparagraph (d) next above are sufficient to satisfy the benefits
described in the preceding sentence, then the benefits of persons described
in that subparagraph shall be determined on the basis of the plan as
amended by the most recent plan amendment effective during such five-year
period under which the assets available for allocation are sufficient to
satisfy in full the benefits of such persons, and any assets remaining to
be allocated under said subparagraph shall be allocated on the basis of the
plan as amended by the next succeeding plan amendment effective during such
period. In the event that there are not sufficient assets to make the
allocation under subparagraph (e) next above, the allocation otherwise to
be made under that subparagraph shall be proportionately reduced. For
purposes of the plan, the "accrued benefit derived from the member's
contributions" means the amount of monthly retirement income or deferred
retirement income commencing at a member's normal retirement date and
payable in the normal amount and method of payment equal to 1/12 of 10
percent of the member's accumulated contributions or, if such benefit is
paid in a form other than the normal form or at some other date, the
actuarial equivalent thereof. A member's "accumulated contributions" means
an amount equal to the total undistributed contributions made by the member
under the plan plus interest thereon (as computed in subsection 12.17) up
to the member's normal retirement date. Distribution may be made in cash
or property or partly in each, provided property is distributed at its fair
market value as of the date of distribution as determined by the trustee.
If the board so determines, and with the consent of Consolidated, the
benefits distributable hereunder to any member who continues in the employ
of an employer may be retained in the trust fund until the member's
employment with all employers and controlled group members is terminated.
14.4 Plan Merger or Consolidation. In the event of a merger or consolidation of
the plan with, or transfer of assets or liabilities of the plan to, any
other plan, each member in the plan will receive a benefit under such other
plan immediately after the merger, consolidation, or transfer (if the plan
then terminated) which is at least actuarially equivalent to the benefit
the member would have been entitled to receive immediately before the
merger, consolidation, or transfer (if the plan had been terminated).
14.5 Notice of Amendment or Termination. Members will be notified of an
amendment or termination within a reasonable period of time.
SECTION 15
Restrictions on Benefits
15.1 Maximum Benefit Limitations. Notwithstanding any other provisions of the
plan, the following maximum benefit limitations shall be applicable to any
retirement income benefit payable to a member under the plan:
(a) A member's projected "annual benefit" (as defined below) shall not,
at any time during a plan year, exceed $98,064 (or such greater
amount as may be prescribed by regulations issued by the Internal
Revenue Service). A member's projected "annual benefit" determined
as of the end of each plan year is the annual benefit expected to be
paid to the member on his normal retirement date in the normal amount
and method of payment, based on the assumption that he continues in
employment covered by the plan until his normal retirement date, that
his earnings received for the plan year in which the projected annual
benefit is being determined is the same amount he would receive in
each successive plan year until his normal retirement date, and that
all provisions of the plan as in effect for the plan year in which
such projection is being made would continue in effect for all future
plan years.
(b) In the event the annual benefit provided under the plan is to be paid
in a form other than the normal method of payment, the annual benefit
provided under the plan, for purposes of applying the limitations of
subparagraph (a) above, shall be adjusted to an actuarially
equivalent benefit payable in the normal method of payment.
(c) In the event the annual benefit provided under the plan commences
before the member's Social Security retirement age [as defined in
Section 415(b)(8) of the Code], the annual benefit, for purposes of
applying the limitations of subparagraph (a) above, shall be adjusted
downward to the actuarial equivalent of an annual benefit commencing
at the member's Social Security retirement age. For purposes of
adjusting any benefit under this paragraph or paragraph (b), the
interest rate assumption shall not be less than the greater of 5
percent of such other rate specified by the plan.
(d) In the event the annual benefit provided under the plan commences
after the member's Social Security retirement age, the annual
benefit, for purposes of applying the limitations of subparagraph (a)
above, shall be adjusted upward to the actuarial equivalent of an
annual benefit of $98,064 commencing at the member's Social Security
retirement age. For purposes of adjusting the benefit under this
paragraph, the interest rate assumption shall not be greater than the
lesser of 5 percent or such other rate specified by the plan.
(e) In the case of a member with less than 10 years of participation in
the plan, the limitations provided in subparagraphs (a) through (d)
above, whichever are applicable, shall be multiplied by a fraction,
the numerator of which is the number of member's years of
participation and the denominator of which is ten.
(f) In no event shall a member's annual benefit as at the end of any plan
year exceed 100 percent of the member's average compensation for the
three consecutive calendar years of his employment with the employers
(or his actual number of years of employment if less than three) in
which his aggregate compensation from the employers was the greatest.
In the case of a member with less than 10 years of credited service,
the foregoing limitation shall be multiplied by a fraction, the
numerator of which is the number of the years of the member's
credited service and the denominator of which is ten.
(g) If a member in this plan also is a participant in a defined
contribution plan maintained by an employer or member of a controlled
group of corporations, the aggregate benefits payable to or
contributions made for, or on account of, him under both plans will
be determined in a manner of consistent with Section 415(e) of the
Code. Accordingly, in general, there will be determined with respect
to this plan and the defined contribution plan a fraction indicating
the ratio (i) the member's benefits or contributions under each of
said plans to (ii) the maximum plan benefits or contributions (as
adjusted pursuant to Section 415(e) of such Code) that could be
provided for him in accordance with said Section 415. For the
purpose of determining such fractions all defined contribution plans
maintained by the employers and controlled group members in which the
member participates shall be aggregated. If the sum of such
fractions determined with respect to the member for any plan year
exceeds 1.0, it is intended that the annual additions for the member
under the defined contribution plan for the plan year be reduced
before any reduction is made in such member's annual benefit under
this plan.
(h) In no event shall the provisions of this subsection reduce the annual
benefit of a member below such member's accrued benefit as of
December 31, 1986 (determined under the terms of the plan as in
effect on May 5, 1986 as through the member had terminated employment
on December 31, 1986) or any other "grandfather" amount contained in
the Code.
15.2. Temporary Restrictions. Regardless of any other provisions of the plan,
the benefits for certain numbers are subject to the following restrictions:
(a) Until January 1, 1985 (the "first unrestricted date"), the benefits
for a member whose (1) anticipated annual retirement income will
exceed $1,500 and (2) who was one of the 25 highest-paid employees of
an employer on January 1, 1975, will be paid in full to the extent
provided by the employers' contributions to the trustee not exceeding
the greatest of:
(i) $20,000; or
(ii) The sum of (A) the employers' contributions to the trustee
which would have been applied to provide his benefits under
the plan if the plan had been terminated on December 31,
1974 plus (B) an amount equal to 20 percent of the first
$50,000 of the annual average of his compensation received
from the employers during the latest five-year period of his
active employment (or, if he was employed by the employers
for less than five years, then the annual average of his
compensation during the entire period of his employment)
multiplied by the number of years elapsed since December 31,
1974 during which the full current costs of the plan were
met; or
(iii) The amount of the employers' contributions which would have
been applied to provide his benefits if the plan, as in
effect on December 31, 1974, had continued in effect without
change; or
(iv) If such member is not a "substantial owner" as defined in
Section 4022(b)(5) of the Employee Retirement Income
Security Act of 1974 ("ARISE"), an amount equal to the
present value of the maximum benefit described in Section
4022(b)(3)(B) of ARISE [determined on the earlier of the
date the plan terminates or the date his benefits commence
in accordance with Pension Benefit Guaranty Corporation
("PBGC") regulations] without regard to any other
limitations in Section 4022 of ARISE; or
(v) If such member is a substantial owner, an amount equal to
the present value of the benefit guaranteed for such member
(or which would be guaranteed if the plan terminated on the
date his benefits commence) under Section 4022 of ARISE,
determined in accordance with PBGC regulations.
(b) After January 1, 1976, a member's "restricted date" will be the
effective date of any amendment to the plan which increases benefits
and which increases substantially the extent of possible
discrimination under regulations issued by the Internal Revenue
Service or the date as of which the plan first becomes effective as
to an employer. A member's "unrestricted date" shall mean the tenth
anniversary of any restricted date occurring after January 1, 1976.
The benefits for a member whose (1) anticipated annual retirement
income will exceed $1,500 and (2) who was one of the 25 highest-paid
employees of an employer on a restricted date will be paid in full to
the extent provided by the employers' contributions to the trustee
not exceeding the greatest of:
(i) $20,000; or
(ii) The sum of (A) an amount equal to 20 percent of the first
$50,000 of the annual average of his compensation received
from the employers during the latest five-year period of his
active employment (or if he was employed by the employers
for less than five years, then the annual average of his
compensation during the entire period of his active
employment) multiplied by the number of years elapsed since
the restricted ate during which the full current costs of
the plan were met plus, in the event the plan was maintained
by an employer immediately preceding the restricted date,
(B) the employers' contributions to the trustee which would
have been applied to provide his benefits under the plan if
the plan, as in effect on the date immediately preceding the
restricted date, had been terminated on such date; or
(iii) In the event the plan was maintained by an employer
immediately preceding the restricted date, the amount of the
employers' contributions which would have been applied to
provide his benefits if the plan, as in effect on the date
immediately preceding the restricted date, had continued in
effect without change; or
(iv) If such member is not a "substantial owner" as defined in
Section 4022(b)(5) of the Employee Retirement Income
Security Act of 1974 ('ARISE"), an amount equal to the
present value of the maximum benefit described in Section
4022(b)(3)(B) of ARISE [determined on the earlier of the
date the plan terminates or the date his benefits commence
in accordance with Pension Benefit Guaranty Corporation
("PBGC") regulations] without regard to any other
limitations in Section 4022 of ARISE; OR
(v) If such member is a substantial owner, an amount equal to
the present value of the benefit guaranteed for such member
(or which would be guaranteed if the plan terminated on the
date his benefits commence) under Section 4022 of ARISE,
determined in accordance with PBGC regulations.
(c) The benefits that a member subject to any of the subparagraphs above
may receive shall not exceed the benefits set forth in the applicable
subparagraph in the event the plan is terminated before his
unrestricted date.
(d) If a member subject to any of the subparagraphs above leaves the
employ of the employers, the total benefits he may receive before his
unrestricted date shall not exceed the benefits set forth in the
applicable subparagraph, except as indicated below.
(e) The above restrictions do not apply to death or survivors' benefits
payable under the plan during any period in which the plan is in full
effect.
(f) The above restrictions do not apply to monthly retirement incomes
payable under the plan to any retired member during any period in
which the plan is in full effect and its full current costs have been
met.
(g) If the plan is terminated by an employer before the applicable
unrestricted date, any excess contribution by such employer which,
because of this subsection 15.2 cannot be distributed to members
employed or formerly employed by that employer who are affected by
this subsection 15.2, shall be distributed to or applied for the
benefit of other members employed by that employer in accordance with
the provisions of subsection 14.3.
(h) If a member affected by this subsection 15.2 shall have been employed
by two or more employers, actuaries selected by Consolidated shall
determine the excess contribution made for the benefit of such member
by each employer that fails to meet the full current costs of the
plan or terminates the plan, taking into consideration the earnings
received by the member from each such employer, the extent of
funding, and all other relevant factors, and the excess contribution
made by any employer, as so determined, shall be allocated in
accordance with subparagraph (g) above.
For the purposes of this subsection, the full current costs of the plan for
any employer shall be considered to have been met by such employer as of
any date if the then unfunded past service liability under the plan with
respect to such employer does not exceed the employer's past service
liability under the plan as of the date of adoption of the plan by that
employer plus any supplementary or additional past service liability
incurred by the employer after such date of adoption on account of any
increase in benefits or compensation.
15.3. Responsibility of Retirement Board. The retirement board shall have sole
responsibility to see that the restrictions of this Section 15 are
observed.
SECTION 16
Supplement B
B-1. Background and Purpose. During 1969, Consolidated acquired from Container
Corporation of America ("CCA"), certain assets of CCA's Fibre Can
operations at St. Paul, Minnesota, and certain employees of CCA became
employees of Consolidated (the date of said acquisition is referred to
below as the "acquisition date"). The purpose of this Supplement B to
Consolidated Employees' Retirement Plan (the "plan") is, in general, to
provide for the preservation under the plans of certain employees' benefits
under retirement plans maintained by CCA. References in this Supplement B
to an "applicable plan" mean whichever of the Consolidated plans identified
in this paragraph is applicable to any given participant in this
supplement.
B-2. Participants. Only those former employees of Consolidated's Paperboard
Products Division (Plant No. 2) to whom the provisions of this Supplement B
applied immediately before May 1, 1972 are participants in this Supplement.
B-3. Credited Service of Participants. Except as provided in Paragraph B-7,
solely for purposes of determining eligibility for any benefit provided
with respect to him under the applicable plan, the "credited service' of a
participant in this Supplement B will include his period of continuous
service with CCA as of the acquisition date (including any service with a
predecessor company which was recognized by CCA as service with CCA).
B-4. Normal and Early Retirement Benefits. If a participant in this Supplement
B retires at or after his normal retirement date or on an early retirement
date, he will be entitled to an annual retirement income, payable in equal
monthly installments, of an amount equal to the sum of his "annual prior
benefits" (as defined below) plus the annual amount of retirement income
that otherwise is payable on account of him under the applicable plan. If,
however, a participant retires on an early retirement date before he
attains age 62 years, he will be entitled to an annual retirement income,
payable in equal monthly installments, determined in accordance with the
preceding sentence, except that the amount thereof will be reduced by 1/3
of 1 percent of such amount multiplied by the number of months remaining
between his early retirement date and the last day of the month in which he
is expected to attain age 62 years.
B-5. Prior Benefits and Annual Prior Benefits. For purposes of this Supplement
B, a participant's "prior benefits" means the monthly amount of retirement
income, payable at his normal retirement date, accrued for him under the
CCA plan which applied to him immediately prior to the acquisition date,
based on his credited service, his contributions, and his earnings under
such plan up to the acquisition date. A participant's "annual prior
benefits" means his prior benefits multiplied by 12.
B-6. Disability Retirement Benefits. If a participant in this Supplement B
retires on a disability retirement date, he will be entitled to a monthly
disability retirement income, payable in accordance with the provisions of
the first sentence of subsection 6.5 of the applicable plan, in an amount
equal to the sum of the monthly amount of his prior benefits (calculated as
though he had then attained his normal retirement date) plus the amount of
monthly disability retirement income that otherwise is payable on account
of him under the plan. If a participant retired because of disability and
continues to be disabled until the date he attains age 65 years, thereafter
he will be entitled to a monthly retirement income for life, commencing
with the month next following the month in which he attains age 65 years,
determined in accordance with the first sentence of paragraph B-4, except
that his credited service as at his disability retirement date will be used
in applying that paragraph.
B-7. Termination Benefits. On termination of service of a participant by
resignation or dismissal before he is eligible for retirement under the
plan and after he has completed at least 10 years of credited service, the
participant will receive, in lieu of the benefits specified in subsection
7.1 of the plan, a deferred annual retirement income, payable in accordance
with subsection 7.3 of the applicable plan, in an amount to which he would
have been entitled under the provisions of paragraph B-4 as if his date of
termination were his normal retirement date, except that his credited
service as at the date of his termination will be used in applying that
paragraph.
B-8. Participants' Contributions Under CCA Plans. For all purposes of the plan,
the aggregate amount of any undistributed contributions made by a
participant under any CCA plan which applied to him immediately prior to
the acquisition date, together with interest thereon computed up to the
acquisition date at the rate provided in such CCA plan shall be considered
to be a contribution made by such participant under the plan as of the
acquisition date. After the acquisition date, such amount will bear
interest as determined under subsection 12.17 of the applicable plan but
computed from the acquisition date.
B-9 Use of Terms. Unless otherwise expressly qualified by the context of this
Supplement B, terms used in this Supplement shall have the meanings defined
in the plans.
B-10. Applicability of Provisions of the Plan to This Supplement. All other
provisions of the applicable plan (exclusive of this supplement) shall be
applicable to the provisions of this supplement, except to the extent
otherwise expressly provided to the contrary in this supplement or to the
extent inconsistent with this supplement. In the case of any ambiguity or
inconsistency between the applicable plan (exclusive of this supplement)
and this supplement, the provisions of this supplement shall control.
SECTION 17
Supplement C
Special Rules for Top-Heavy Plans
C-1. Purpose and Effect. The purpose of this Supplement C is to comply with the
requirements of Section 416 of the Internal Revenue Code of 1954. The
provisions of this Supplement C shall apply for each plan year beginning
after December 31, 1983 in which the plan is a "top-heavy plan" within the
meaning of Section 416(g) of the Internal Revenue Code.
C-2. Top-Heavy Plan. In general, the plan will be a top-heavy plan for any plan
year if, as of the last day of the preceding plan year (the "determination
date"), the sum of amounts in (a), (b), and (c) below for key employees [as
defined below and in Section 415(i)(1) of the Internal Revenue Code]
exceeds 60 percent of the sum of such amounts for all employees who are
covered by a defined benefit plan or defined contribution plan which is
aggregated in accordance with paragraph C-4 below:
(a) The present value of cumulative accrued benefits of members under
this plan.
(b) The present value of cumulative accrued benefits of members under any
other defined benefit plan included in paragraph C-4.
(c) The aggregate account balances of members under any defined
contribution plan included in Paragraph C-4.
(d) The accrued benefit of a member who did not perform any services for
the employers during the five-year period ending on the determination
date shall be disregarded.
In determining the present value of cumulative accrued benefits of members
under this plan (i) the present value of cumulative accrued benefits hall
be determined using an interest rate of 6 percent and the UP 1984 Mortality
Table with no age set back or set forward, (ii) a member's cumulative
accrued benefit shall be increased by the aggregate distributions, if any,
made with respect to the member during the 5-year period ending on the
determination date, (iii) the cumulative accrued benefit of a member who
was previously a key employee, but who is no longer a key employee, shall
be disregarded, and (iv) the cumulative accrued benefit of a beneficiary of
a member shall be considered the cumulative accrued benefit of the member.
C-3. Key Employee. In general, a "key employee" is an employee who, at anytime
during the 5-year period ending on the determination date, is:
(a) An officer of an employer or a controlled group member receiving
annual compensation greater than 150% of the limitation in effect
under Section 415(c)(1)(A) of the Internal Revenue Code; provided
that for purposes of this subparagraph (a), no more than 50 employees
of the employers and the controlled group members (or if lesser, the
greater of 3 employees of 10 percent of the employees) shall be
treated as officers.
(b) One of the ten members receiving annual compensation of more than the
limitation in effect under Section 415(c)(1)(A) of the Internal
Revenue Code and owning the largest interests in an employer;
(c) A 5 percent owner of an employer; or
(d) A 1 percent owner of an employer receiving annual compensation from
the employers and all other controlled group members of more than
$150,000.
For purposes of this Supplement C, the term "compensation" shall mean
compensation within the meaning of Section 1.415-2(d) of the Internal
Revenue Code.
C-4. Aggregation of Plans. Each other defined benefit plan and defined
contribution plan maintained by the employers or controlled group members
which covers a "key employee" as a member or which is maintained by the
employers or controlled group members which covers a "key employee" as a
member or which is maintained by the employers or controlled group members
in order for a plan covering a "key employee" to be qualified shall be
aggregated in determining whether this plan is top-heavy.
C-5. Minimum Vesting. For any plan year in which the plan is a top-heavy plan,
a member's vested percentage in his accrued benefit shall not be less than
the percentage determined under the following table:
Years of
Credited Service
(as Defined in Vested
Subsection 3.2) Percentage
<S> <C>
Less than 2 0
2 20
3 40
4 60
5 80
6 or more 100
If the foregoing provisions of this paragraph C-5 become effective, and the
plan subsequently ceases to be a top-heavy plan, each member who has then
completed five or more years of credited service shall continue to have the
vested percentage of his accrued benefit determined under the provisions of
this paragraph C-5.
C-6. Minimum Benefit. A member's monthly retirement income or deferred
retirement income, commencing at his normal retirement date and payable as
a life annuity, shall not be less than an amount equal to 2 percent of his
average compensation (as defined below), multiplied by the number of years
(not to exceed 10) of his top-heavy service (as defined below). A
participant's "average compensation" means the monthly average of his
compensation for the 5 consecutive plan years for which his compensation
was highest disregarding any years (and the compensation paid therein)
after the last plan year in which the plan is a top-heavy plan. A
participant shall be entitled to a year of "top-heavy service" for each
year of his credited service after December 31, 1983 during which the plan
is a top-heavy plan and he is a participant thereunder.
C-7. Maximum Compensation. For any plan year in which the plan is a top-heavy
plan, a member's compensation in excess of $200,000 (or such greater amount
as may be determined by the Commissioner of Internal Revenue for that plan
year) shall be disregarded for purposes of determining a member's monthly
retirement income or deferred retirement income under the plan.
C-8. No Duplication of Benefits. If the employer and controlled group members
maintain more than one plan, the minimum benefit otherwise required under
paragraph C-6 above may be reduced in accordance with regulations of the
Secretary of the Treasury to prevent inappropriate duplication of minimum
benefits or contributions.
C-9. Adjustment of Combined Benefit Limitations. For any plan year in which the
plan is a top-heavy plan, the determination of the defined benefit plan
fraction and defined contribution plan fraction under subsection 15.4 of
the plan shall be adjusted in accordance with the provisions of Section
416(h) of the Internal Revenue Code.
C-10. Use of Terms. All terms and provisions of the plan shall apply to this
Supplement C, except that where the terms and provisions of the plan and
this Supplement C conflict, the terms and provisions of this Supplement C
shall govern.
SECTION 18
Supplement D
Consolidated Salaried Employees' Retirement Plan
D-1. Background and Purpose. For the purpose of this plan, as a result of the
sale of the assets of Consoweld Corporation ("Consoweld"), a Wisconsin
corporation to LOF Plastics Inc. ("LOFP") effective on or about December
26, 1985 (the "Transfer date"), employees of Consoweld will be transferred
to LOFP and Consoweld will no longer participate in the plan as an
employer. The purpose of this Supplement is to set forth provisions which
will apply to members employed by Consoweld (a "Consoweld member") prior to
the transfer date. The term "transfer" for purposes of this Supplement
will mean an employee who is terminated by Consoweld on the transfer date
and who maintains continuity of employment by beginning employment with
LOFP on the first scheduled work day following the transfer date.
D-2. Accrued Retirement Income (Vested Members). As of the transfer date, each
Consoweld member who had attained his normal retirement age or completed
ten years of credited service will be vested in his accrued retirement
income calculated under subsection 4.l, 4.2, 6.1, or 7.2, whichever is
applicable. Except as otherwise provided below, such monthly accrued
retirement income will be paid in accordance with subsection 5.1, 6.5, or
7.3, as the case may be, as if the former Consoweld member had terminated
employment with Consoweld on the transfer date.
D.3. Accrued Retirement Income (Nonvested Members). Each Consoweld member who
had not completed ten years of credited service as of the transfer date
will be vested in his accrued retirement income calculated under subsection
7.2, based on his credited service and earnings as of the transfer date, if
subsequent to such transfer, he completes a total of ten years of credited
service with Consoweld and LOFP. For purposes of this paragraph, any
period of employment by a former Consoweld member with LOFP will be treated
as a period of employment with Consoweld only for purposes of determining
such Consoweld member's right to receive his accrued retirement income as
calculated in the preceding sentence. Such monthly accrued retirement
income will be paid in accordance with subsection 7.3.
D-4. Payment of Early Retirement Income. Each Consoweld member who is eligible
to retire on an early retirement date as of the transfer date may elect, by
writing filed with the board, to have his early retirement income commence
as of the end of the month next following the transfer date or as of the
end of any month subsequent thereto, but not later than the member's normal
retirement date. The provisions of subsection 8.1 shall apply to any
Consoweld member who dies after his early retirement date but prior to the
date payment of his early retirement income has commenced.
D-5. Payment of Deferred Retirement Income to Certain Members Attaining Age 55.
Each Consoweld member described in paragraph D-2 above who is entitled to
receive a deferred retirement income under subsection 7.2, who remains in
the employ of LOFP on and after the transfer date continuously until he
attains age 55 and who elects in accordance with subsection 7.3 to have his
deferred annual retirement income commence before the end of the month next
following the month in which he attains age 65, will have the amount of
such deferred annual retirement income calculated in accordance with
subsection 7.2, but reduced by the early retirement reduction factors
contained in subsection 4.2 as if the date payment of such member's
deferred annual retirement income commenced was his early retirement date.
D-6. Former Consoweld Members. The provisions of this Supplement shall not
affect the payment of benefits to Consoweld members who retired or
otherwise terminated employment prior to the transfer date and their
benefits shall be calculated and payable in accordance with the terms of
the plan as in effect on the date of their retirement or other termination
of employment.
D-7. Effect of Plan Provisions. Except as otherwise expressly provided herein,
the benefits provided in this Supplement to Consoweld members are subject
to all the terms and conditions of the plan as in effect on the transfer
date. Except as provided below, any benefits provided under the plan to a
member covered by this Supplement shall not be affected by any subsequent
amendment to the plan unless such amendment specifically provides that such
member's benefits are to be affected thereby. Any Consoweld member who is
transferred to LOFP as of the transfer date will have his benefits
determined under the terms of the plan as amended through the Seventh
Amendment thereof, which amendment is effective as of January 1, 1986.
Terms used in this Supplement which are defined in the plan are intended to
have the same meaning given them in the plan.
D-8. Effective Date. The effective date of this Supplement D is December 26,
1985.
SECTION 19
Supplement F
Consolidated Salaried Employees' Retirement Plan
F-1. Purpose, Effective Date, and Overriding Provisions. Set forth below is a
Supplement F to the plan containing provisions increasing benefits and
limiting certain changes in the plan in the event of a change in control.
The benefit increases provided in paragraph F-2 shall become effective on a
"restricted date" (as defined in paragraph F-9 below); the other provisions
of this Supplement F shall become effective on a restricted date and, upon
becoming effective, shall remain effective until the following related
unrestricted date and, during that period, shall supersede any other
provisions of the plan to the extent necessary to eliminate any
inconsistencies between the provisions of this Supplement F and any other
provisions of the plan, including any exhibits and supplements thereto.
F-2. Increase in Benefits. Effective as of any restricted date, the benefits of
each member who is employed by an employer on that date shall be increased
by an amount determined as follows:
(a) First, there shall be determined for each member an annual benefit,
commencing on the last day of the month next following the earliest
age at which the member can retire and receive an unreduced benefit
and ending on the last day of the month preceding his death, in an
amount equal to the greatest of (i), (ii), or (iii) below:
(i) The sum of (A) 1.5 percent of his average annual earnings
(as defined in subsection 4.1(b) and determined as though
the restricted date were the date the member retired or
otherwise terminated employment with the employers)
multiplied by his number of years of credited service
elapsed between the date he first became a member of the
plan and the last day of the period used to determine his
final average earnings plus his number of years of credited
service in the period, if any, commencing the January 1
coincident with or next following the date on which his
credited service commenced and ending with the day as of
which he could first become a member of the plan, and (B)
1.5 percent of his earnings in each calendar year beginning
with the later of the first calendar year that begins after
the last day of the period used to determine his final
average earnings or the calendar year in which he first
became a member, but disregarding any earnings after the
restricted date;
(ii) The sum of (A) 1.5 percent of his earnings prior to January
1, 1975 on which he made contributions to the plan after he
last became a member and (B) 1.5 percent of his earnings in
each calendar year, beginning with the calendar year 1975 or
the calendar year in which he last became a member but
disregarding any earnings after the restricted date; and
(iii) The minimum annual amount determined pursuant to that
portion of subsection 4.1 that follows subparagraph 4.1(b),
but disregarding any credited service after the restricted
date.
(b) Next, the retirement board shall determine the present value of the
benefit determined under paragraph (a) above as of the restricted
date, using the actuarial factors and assumptions set forth in
paragraph F-2(g) below;
(c) Next, the retirement board shall determine the "excess assets" in the
trust by determining the amount by which (i) the fair market value as
of the restricted date of all trust fund assets attributable to the
plan exceeds (ii) the present value of all members' plan benefits
(other than any benefits provided in this paragraph F-2) within the
meaning of Section 4044 of the Employee Retirement Income Security
Act of 1974 ("ARISE"), determined using the actuarial factors and
assumptions set forth in paragraph F-2(g) below;
(d) Next, the excess assets determined under (c) above shall be
"allocated" among the present values determined under paragraph (b)
above in the ratio that the present value of each member's benefit
determined under paragraph (b) above bears to the present value of
all members' benefits similarly determined;
(e) Next, the amount "allocated" to a member under paragraph (d) above
shall be converted into an annual benefit commencing on the last day
of the month next following the earliest date the member could retire
and receive unreduced benefits under the plan and payable over his
lifetime with the last payment made for the last day of the month
preceding the member's death, such benefit to be determined using the
actuarial factors and assumptions set forth in paragraph F-2(g)
below;
(f) Last, each member's benefit under Section 4 or 7 shall be increased,
subject to Section 15, by the amount of annual benefit determined
under paragraph (e) next above.
(g) The actuarial factors and assumptions used in paragraphs (b), (c),
and (e) above shall be as follows: The interest rate and mortality
assumptions shall be those that would be used under Section 4044 of
ARISE upon plan termination, and the assumed retirement age shall be
the earliest age at which the member can retire and receive unreduced
benefits under the plan.
Any benefit determined under this paragraph F-2 shall be payable in the
manner and at the time the member's benefits under Section 4.1, 4.2, or 7.2
are payable and shall be considered a benefit determined under such
appropriate subsection for purposes of determining the death benefit
payable under Section 8.
F.3. Restrictions on Appointment of New Trustee. During the period beginning on
a restricted date and ending on the following related unrestricted date,
any additional or successor trustee appointed pursuant to any trust
agreement relating to assets of the plan, must be a bank, trust company or
other corporation. No such additional or successor trustee may be a member
of a controlled group of corporations (determined under Section 414(b) of
the Internal Revenue Code) that includes an employer or be a part of a
trade or business under common control with an employer (as determined
under Section 414(c) of the Internal Revenue Code).
F-4. Prohibitions Against Mergers and Transfers of Assets and Liabilities;
Restrictions on Eligibility to Participant. During the period beginning on
a restricted date and ending on the following related unrestricted date,
(i) the plan may not be merged into, nor may assets of the plan be
transferred to, any other defined benefit pension plan, (ii) no benefit
liabilities under any other defined benefit pension plan may be transferred
to the plan, and (iii) no employee of Consolidated or of any subsidiary or
affiliate of Consolidated (as defined below) shall be eligible to become a
participant in the plan unless the employee is a member of a group of
employees which prior to the restricted date was covered under the plan at
a facility or location which was part of Consolidated or of a subsidiary or
affiliate of Consolidated.
F-5. Prohibition Against Amendment. Except as otherwise required by law, the
provisions of this Supplement F may not be amended, deleted, or superseded
by any other provision of the plan, during the period beginning on a
restricted date and ending on the related unrestricted date. Also during
that period, assets of any trust which forms a part of the plan may not be
transferred to any other trust or funding vehicle which does not contain
all of the provisions contained in this Supplement F.
F-6. Prohibition Against Reversion of Plan Assets if Plan Terminated. The plan
may not be terminated during the period beginning on a restricted date and
ending on the following related unrestricted date in a manner that would
result in a reversion of diversion of any portion of the assets of the
trust fund to Consolidated, a subsidiary, an affiliate or any person (as
defined in paragraph F-9).
F-7. Timing and Method of Distribution. During the period beginning on a
restricted date and ending on the following related unrestricted date, the
timing and methods of distributions of benefits payable to or on behalf of
a member under the plan and the determination of actuarially equivalent
values shall be governed by the applicable provisions of the plan as in
effect on the date immediately preceding the restricted date.
Notwithstanding the preceding sentence, any such member whose benefit is
not required to be distributed in the normal form under Section 5 or the
death benefit form specified under Section 8 may select, in his sole
discretion, the method of distribution of his benefit to himself (or if
applicable, to his beneficiary, where any portion of such benefit is to be
distributed under the terms of the plan to his beneficiary) from among the
optional methods of distribution available to such member with respect to
his benefit under the provisions of the plan as in effect on the date
immediately preceding the restricted date.
F-8. Subsidiaries, Affiliates and Continuing Directors. For purposes of this
Supplement F, a "subsidiary" of Consolidated means any corporation more
than 50 percent of the voting stock of which is owned directly or
indirectly, by Consolidated. An "affiliate" of Consolidated means any
individual, corporation, partnership, trust, or other entity which
controls, is controlled by, or is under common control with Consolidated.
A "Continuing Director" means an individual who was a member of the Board
of Directors of Consolidated immediately prior to the transaction or
election or other event which resulted in there being a restricted date or
who was designated (before his initial election or appointment as a
director) as a Continuing Director by a majority of the whole Board of
Directors but only if the majority of the whole Board of Directors then
consisted of Continuing Directors or, if a majority of the whole Board of
Directors shall not then consist of Continuing Directors, by a majority of
the then Continuing Directors.
F-9. Restricted and Unrestricted Dates. For purposes of this Supplement F, the
term "restricted date" means the first date subsequent to the date of this
Amendment on which either (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), but including (a) the Mead Voting Trust established
pursuant to the agreement dated December 20, 1986, (b) the Mead descendants
as defined in the Mead Voting Trust or any group of them, (c) any voting
trustee of the Mead Voting Trust acting in his or her capacity as such, or
(d) a person who would be deemed to be an owner of 20 percent or more of
the combined voting power of Consolidated securities then outstanding
solely as a result of being a participant in the Mead Voting Trust, becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Consolidated representing at least
20 percent of the combined voting power of Consolidated's then outstanding
securities, or (ii) a majority of the individuals comprising Consolidated's
Board of Directors are not Continuing Directors, or (iii) Consolidated is
involved in any merger, consolidation, share exchange or any other
transaction if, after the consummation thereof, the holders of the voting
securities of Consolidated immediately prior thereto do not own at least a
majority of the combined voting power of the surviving or resulting
corporation, or (iv) all or substantially all of the assets of Consolidated
are sold or otherwise transferred, or (v) a change occurs of a nature that
would be required to be reported in response to item 6(e) of Schedule 14A
of Regulation 14A, promulgated under the Exchange Act, or any other
successor disclosure item. Notwithstanding the foregoing provisions of
this paragraph F-9, if the transaction(s) or elections that otherwise would
cause a date to be a restricted date are approved by the affirmative vote
of a majority of the Continuing Directors and a majority of the whole Board
of Directors, prior to the transaction(s) or election(s) that would
otherwise cause a date to be a restricted date, such date shall not be a
restricted date to the extent so provided by the affirmative vote of a
majority of those Continuing Directors. An "unrestricted date" means the
last day of the five-year period following the restricted date.
SECTION 20
Supplement G
Consolidated Salaried Employees' Retirement Plan
G-1. Purpose. Set forth below is a Supplement G to the plan providing
supplemental retirement benefits for certain members and their
beneficiaries, effective January 1, 1990. Prior to January 1, 1990, such
benefits were provided under the Consolidated Retired Employees'
Supplemental Retirement Plan and Trust.
G-2. Supplement G Member.
(a) The following classes of persons will become "Supplement G members"
as of January 1, 1990:
(1) Each member who is receiving a monthly retirement income under
the plan as of January 1, 1990 and who retired under the plan
before January 1, 1978.
(2) Each member who is receiving a deferred vested monthly
retirement income under the plan as of January 1, 1990, payment
of which commenced before January 1, 1978.
(3) A beneficiary who as of January 1, 1990 was receiving a monthly
benefit under the plan on account of a member who either died
or commenced to receive a monthly retirement income under the
plan before January 1, 1978.
(b) A beneficiary who commences to receive a monthly benefit under the
plan after January 1, 1990 on account of a member who commenced
receiving a monthly retirement income under the plan prior to January
1, 1978, will become a Supplement G member as of the first day of the
month in which such member died.
G-3. Benefit. In addition to any other benefit payable under the plan to or on
behalf of a Supplement G member, a Supplement G member shall receive a
supplemental monthly benefit in an amount equal to the product of 3 percent
of the first $1,666.67 of the monthly retirement income payment that such
member otherwise receives under the plan multiplied by the number of years
and fraction thereof (treating a month as one-twelfth of a year) that the
member's "Supplement G retirement date" preceded December 31, 1977.
Supplement benefits payable under this paragraph G-3 to a member described
in subparagraph G-2(a)(1) or G-2(a)(2) shall be disregarded in determining
the amount of benefits payable under the plan upon the death of such
member.
G-4. Supplement G Retirement Date. For purposes of paragraph G-3, a member's
"Supplement G retirement date" will be his actual retirement date under the
plan or, if earlier, his normal retirement date under the plan and, in the
case of a member who is or was receiving a deferred vested monthly
retirement income under the plan, the date on which his deferred vested
monthly retirement income commenced. For a member who is a beneficiary
receiving monthly survivorship payments under the plan on account of a
deceased member, the Supplement G retirement date will be the earlier of
the date of death of such member or the date that otherwise would have been
considered the Supplement G retirement date for such member.
G-5. Effect of Plan Provisions. Except as otherwise expressly provided herein,
the benefits provided by this Supplement are subject to all the terms and
conditions of the plan. Any benefits provided under this Supplement shall
not be affected by any subsequent amendment to the plan unless such
amendment specifically provides that such benefits are to be affected
thereby. Terms used in this Supplement which are defined in the plan are
intended to have the same meaning given them in the plan.
G-6. Effective Date. The effective date of this Supplement G is December 31,
1989.
EXHIBIT 10.e. TO FORM 10-K FOR
CONSOLIDATED PAPERS, INC.
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1993
M E M O R A N D U M
DATE: January 6, 1992
SUBJECT: Compensation Award Program.
TO: ALL EXEMPT & NON-EXEMPT EMPLOYEES FROM: P.F. Brennan
G.W. Mead
Everyone is aware that 1991 was a difficult year for CPI. We had to cope with a
recession, too much capacity, dumping by foreign nations, price discounting, and
considerable loss of volume. It now appears that we will be facing another tough
market in 1992. The deep discounting pressures continue and that equates to reduced
profits.
In order to help cope with this environment, and provide an incentive to focus on
improving our 1992 performance as it relates to those factors under our control, we
are introducing the Compensation Award Program (CAP).
The contribution of our management employees to the long-term profitability of
Consolidated has long been well recognized. To balance the need to be equitable to
our management employees and remain competitive in this very difficult economic
climate, we are implementing a two-tier approach to the 1992 salary budget.
First tier - A merit budget set along traditional lines and competitive with what
other paper companies are awarding.
Second tier - A potential year-end lump sum payment which gives an opportunity for
additional compensation. The amount of compensation will be based on how well we
perform in 1992 related to those factors under our control.
For example, your daily activities have a direct influence on the productivity of
our equipment and/or our personnel. You have direct control over some of your
departments' budget costs. You can influence payroll (straight time, overtime, call
time, supervision) and repairs (labor, stores, expense work orders, outside
services).
Quality, always a priority, is another key area where you play a role. Your
emphasis should be on making it right the first time in order to reduce broke, job
lot, complaints, returns and costly allowances.
For those involved in inventory control, you need to do everything possible to help
reduce our 56 million dollar inventory, excluding finished goods. This area must be
given special attention in 1992 with emphasis on on-time delivery. Staff
departments will be expected to support operational areas to reach their goals as
well as setting their own specific departmental goals. Keys to good cost control
are attention to detail and doing it right the first time.
To summarize:
1. Corporate Goals - Reduce our inventory and improve controllable budget
variances and other appropriate expenses.
2. Divisional and Staff Department Goals - Set specific goals for 1992 to be
reviewed and approved by P.F. Brennan. I will expect periodic status
reports. Quality improvements with an emphasis on Juran projects should be
included.
3. Personal Goals - At least one goal aimed at improving the bottom line in a
tangible and measurable way. Goals to be reviewed and approved by the
responsible Vice President or Budget Holder.
Our goals for the corporation will be challenging but attainable. If the
controllable unfavorable budget variances for the corporation are reduced by at
least $4 million, each exempt and non-exempt employee will be paid a lump sum in
early 1993. The lump sum will be cash and will be equivalent to 25% of your annual
merit increases for 1992. Should controllable corporate unfavorable variances be
reduced by $8 million, 50% of the 1992 merit increase will be distributed.
Start-up expenses for No. 16 machine will be excluded from the evaluation of
performance of established goals.
The economic times are very difficult and we need everyone's cooperation. Good luck
to everyone.
<PAGE>
EXHIBIT 10.f. TO FORM 10-K FOR
CONSOLIDATED PAPERS, INC.
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1993
Personal & Confidential
February 26, 1993
TO:
Last year we announced the implementation of the Compensation Award Program. We
were concerned that the recession, coupled with excess capacity and dumping by
foreign nations, would result in a considerable loss of volume and resulting price
discounting. We believed that we needed to focus our efforts on improving our 1992
performance as it relates to those factors under our control and, therefore, we
introduced the Compensation Award Program (CAP).
The 1992 market turned out softer than we expected and profits were not acceptable,
but we were nonetheless able to increase volume, improve our market share and
control our costs in such a manner as to meet the $8 million CAP goal! We were able
to accomplish this goal through our individual and collective efforts: controlling
expenses, reducing inventories, monitoring overtime, improving operating
efficiencies, and a multitude of other ways.
Looking ahead, we can't predict the market for 1993 with any degree of accuracy, but
we are planning for improved running. For instance, we expect a positive trend with
industry operating rates increasing 2-4 points over the 1992 average operating rates
of 90-93%. This improvement in running at Consolidated Papers provides an
opportunity to improve our earnings, but we need to continue to focus our efforts on
improving our performance for those factors under our control in order to remain
competitive. We recognize that there are still many areas in which we, management
employees, can contribute to the profitability of Consolidated and accordingly are
continuing a CAP for 1993.
MEASUREMENT
The 1993 CAP will be measured primarily on controllable costs and on inventory
changes. It will be calculated as follows:
A. Controllable Costs -The total of controllable manufacturing cost improvements
over the 1993 Profit Plan; plus,
B. Inventory Changes -As of December 31, 1992, the measurable inventory (excluding
finished goods) was $80 million. Our goal is to reduce this
average inventory. Since we estimate that our cost of
carrying inventory is 20%, any reduction or increase in this
average inventory will receive a 20% credit or charge to the
CAP goal. For example, if the average inventory is
decreased $5 million, 20% of that, or $1 million, will be
credited to the CAP goal. Similarly, if the average
inventory is increased $5 million, there will be an
unfavorable charge of $1 million to the CAP goal.
If the sum of the net cost improvements and 20% of the net inventory change is at
least $4 million favorable, each qualified employee will be paid a lump sum of 25%
of their 1993 annual merit increase. Should the total be at least $8 million, 50%
of the 1993 merit increase will be paid.
TO QUALIFY FOR CAP
A. Corporation must attain total of $4 million or $8 million as outlined above.
B. Must be on the payroll as a full-time exempt or nonexempt management employee
the entire period of January 1 through December 31, 1993.
C. - Your operating division must be favorable for the sum of controllable cost
improvements and inventory changes; or,
- In the case of corporate staff departments, your staff department must
achieve significant progress in meeting its goals.
OTHER
Operating divisions have a direct impact on productivity and departmental budgets.
For example, you have influence over payroll, maintenance and repairs, outside
services, expense work orders, waste, material usage, energy, etc.
Corporate staff departments will be expected to support operational areas to reach
their goals and accomplish their own specific staff department goals. Corporate
staff departments will need to establish performance measures to monitor continuous
improvement. For instance, invoicing errors, billing errors, shipping errors,
untimely production schedule changes, misplaced parts and equipment, untimely
response to operating departments' needs, and delayed vendor shipments all add to
cost and thus reduce earnings.
SUMMARY
1. Control costs.
2. Improve inventory turnover.
3. Set and accomplish corporate staff goals.
We will report the progress on Nos. 1 and 2 above on a regular basis. No. 3 above
should be specific and be aimed at improving the bottom line in a tangible and
measurable way. Specific corporate staff goals for 1993 should be submitted to Pat
Brennan by the end of the first quarter. Personal goals (included on performance
review) may be appropriate. A status report must be submitted at the end of each
subsequent quarter measuring results against the goals. A committee made up of the
staff quality council will evaluate all corporate staff department goals and the
performance against these goals.
With everyone's cooperation, commitment and dedication, a CAP goal of $4 or $8
million presents a challenge which is attainable. The current economic environment
may mask our efforts in the areas of quality, capital improvements, cost control and
inventory control, but we will continue our efforts in those areas to ensure we
remain a high-quality, low-cost producer. As we did in 1992, we will continue to
address those areas over which we can exercise control. This will result in
Consolidated being well-positioned to take advantage of any upturn in our markets.
/s/ George W. Mead /s/ Patrick F. Brennan
<PAGE>
EXHIBIT 21 TO FORM 10-K FOR
CONSOLIDATED PAPERS, INC.
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1993
SUBSIDIARIES OF THE REGISTRANT
Consolidated Papers, Inc. was incorporated under the laws of the State of Wisconsin
and owns or controls the following corporations by means of owning the indicated
percents of their voting securities:
Percent Voting
Securities Owned State Or
By Consolidated Province Of
Papers, Inc. Subsidiary Incorporation
<C> <S> <S>
100% Consolidated Water Power Company Wisconsin
100% Newaygo Forest Products Limited Ontario
</TABLE>
