<PAGE> 1
CONFORMED
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1994
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ________________ to _______________
Commission File Number 1-542
GROSSMAN'S INC.
- --------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 38-0524830
- -------------------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
200 Union Street, Braintree, Massachusetts 02184
- -------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(617) 848-0100
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Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Class on Which Registered
- --------------------------------------- ---------------------------
Common Stock, par value $0.01 per share The Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act:
None
- --------------------------------------------------------------------------
(Title of Class)
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 the 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. [ ]
The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of March 1, 1995 was $59,621,282.
The number of shares of the registrant's class of Common Stock ($.01 par
value) outstanding on March 1, 1995 was 25,782,176, exclusive of 355,171
shares held as treasury shares.
Documents Incorporated By Reference
The Company's definitive Proxy Statement for its 1995 Annual Meeting of
Stockholders, to be filed with the Commission not later than 120 days
after the end of the fiscal year covered hereby, is incorporated by
reference into Part III of this Form 10-K to the extent set forth herein.
1
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Part I
Item 1. BUSINESS
(a) General Development of Business
Grossman's Inc. (the "Company") was first incorporated in Michigan in 1919
as E.S. Evans and Co., Inc., then was reincorporated in Delaware in 1923.
In 1931 the Company's name was changed to Evans Products Company. In
1986, in conjunction with the reorganization of the Company described
herein, the Company adopted the name Grossman's Inc.
On March 11, 1985, Evans Products Company ("Evans") and certain of its
subsidiaries filed voluntary petitions for relief under Chapter 11 of the
Federal Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of Florida. On November 19, 1986, the Company emerged
from the Chapter 11 proceedings. Under a court approved Reorganization
Plan, the following transactions took place in 1986. Substantially all of
Evans' assets, other than those of the retail building materials business
conducted by Evans' wholly-owned subsidiary, Grossman's Inc. ("Old
Grossman's"), were transferred to Evans Asset Holding Company ("EAHC") and
a trust (collectively "AHC"), each beneficially owned by the lenders to
Evans and one of its subsidiaries (the "Lenders") for the purpose of
liquidating such assets. Evans and its filing subsidiaries (including Old
Grossman's) were discharged from substantially all of their pre-Chapter 11
petition indebtedness. All of Evans' outstanding shares of common stock
and preferred stock were cancelled. Old Grossman's was then merged into
Evans, which adopted the name Grossman's Inc. (the "Company"), and the
Company distributed to its creditors or to a trust or reserve for unpaid
and unliquidated claims, $60,000,000 of its 13% Debentures, which matured
in 1991, $73,000,000 of its 14% Debentures due 1996, $105,200,000 face
value of its Zero Coupon Notes, which matured and the final installment
paid in January 1993, and 20,000,000 shares of its Common Stock (of which
1,859,852 shares were sold by the trust and the Company in a private
placement in December, 1986).
On July 31, 1987, the Company completed a public offering of 11,000,000
shares of its Common Stock. Of the shares offered, 6,131,347 shares were
sold by the Company, with the net proceeds of $45,092,000 used to purchase
13% and 14% Debentures. The remaining 4,868,653 shares sold in the
offering were sold by stockholders.
On February 1, 1989, the Company announced that it had engaged Shearson
Lehman Hutton Inc. as the Company's financial adviser to assist the
Company in reviewing strategic alternatives to realize the values inherent
in its business. As a result of this effort, on September 12, 1989, the
Company sold the assets and business of its Moore's Division to Harcros
Lumber & Building Supplies Inc., an indirect wholly-owned subsidiary of
Harrisons & Crosfield plc of London, England. The Moore's Division
consisted of 59 retail building materials stores and yards located in
Maryland, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia
and West Virginia.
2
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Independent of the Shearson engagement, on August 25, 1989, the Company
sold its Northwest Division, consisting of 28 retail building materials
stores located in California to GNW Partners, L.P., a California limited
partnership. Certain of the former management employees of the Northwest
Division were partners in GNW.
Net proceeds from the 1989 sales of the Moore's and Northwest Divisions
totalled $105.7 million. Such proceeds were principally used for the
retirement of long-term debt.
In September 1993, the Company announced plans to close 22 Eastern
Division stores. In September 1994, the Company announced plans to close
an additional 15 Eastern Division stores. The closings were completed in
the respective fourth quarters.
(b) Financial Information About Industry Segments
The Company's operations during the last three years have been entirely in
the retail building materials industry.
(c) Narrative Description of Business
Grossman's is a retailer of lumber, building materials, and other home
improvement products emphasizing sales to its target customers;
contractors, remodelers and serious do-it-yourselfers. The Company
operates 106 stores, under the names "Grossman's", "Contractors'
Warehouse" and "Mr. 2nd's Bargain Outlets", as listed in Item 2 below.
The Company has a 50% interest in a Mexican joint venture, which operates
one store in Monterrey, Mexico under the name "Builder's Mart". In 1994,
the Company's 80% owned subsidiary, Project-Pro's, opened three home
improvement showrooms.
The following are descriptions of each operation, as presented in the 1994
Annual Report to Stockholders:
Grossman's
Grossman's stores serve customers in over 70 locations in nine states.
Product assortment is concentrated in the core departments of lumber,
building materials, doors and windows, hardware, paint, plumbing and
electrical supplies. Stores are typically located on five acres with
35,000 square feet of selling space, including a 15,000 square foot drive-
thru lumber yard.
Grossman's stores are designed to compete in a niche market that includes
contractors, remodelers and serious do-it-yourself customers, on the basis
of lumber quality, a broad selection of brand name products, convenience,
competitive pricing and a consistently high level of in-stock items in the
quantities that customers require.
To serve these target customers, stores have Contractor Sales Offices and
provide services specifically for building professionals. An automated,
integrated replenishment system allows stores to cost effectively maintain
a high in-stock position. Stores have been equipped with electronic
point-of-sale register systems that ensure fast checkout and communicate
with the replenishment system.
3
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Contractors' Warehouse
The 13 Contractors' Warehouse stores operate in California, Nevada, Ohio
and Indiana. Stores range in size from 80,000 to 100,000 square feet on
approximately seven acres. All stores have large, drive-thru lumber
yards, well-stocked with the varieties, sizes and quantities of lumber and
building materials that target customers require. Focused on the needs of
contractors, remodelers, tradespeople, and other building professionals,
Contractors' Warehouse provides competitive pricing and the convenience of
one-stop shopping for these target customers.
Contractors' Warehouse stores operate on the basis of in-depth knowledge
about the requirements of local customers. The result is a merchandise
mix selectively focused on the lumber, materials, products and supplies
that satisfy professional customers in the quantities they need.
Contractors' Warehouse appeals to its target market by providing
specialized services that add value. Contractor services include
development of material lists and prices from blueprints, professional
tool rental, specialized delivery services and early morning openings.
Architectural services are also available at some locations.
Mr. 2nd's Bargain Outlets
These specialty stores, which first opened in 1971, operate at 19
locations in Massachusetts, New York, and Rhode Island, with a new store
scheduled to open in Schenectady, New York in the spring of 1995. Mr.
2nd's Bargain Outlet stores offer close-outs, seconds and over-stocks in a
wide range of building materials and building-related merchandise.
A Mr. 2nd's Bargain Outlet store typically consists of approximately
20,000 square feet located on a two-acre site. These no-frills, low
overhead stores offer steep discount pricing on an everyday basis,
communicated to customers through print advertising.
The market niche for Mr. 2nd's Bargain Outlet stores is do-it-yourself
customers who are looking for a cost-effective alternative to traditional
home improvement centers.
Project-Pro's
Project-Pro's is an 80% owned affiliate that provides materials and design
and building services for a variety of home improvement projects including
fencing, decks, windows and doors, siding and roofing, electric and
alarms, painting, kitchens and baths, plumbing, landscaping, masonry and
additions. Marketed as "America's Do-It-For-You Company", Project-Pro's
opened three home-improvement showrooms in 1994 to showcase project
opportunities. Project-Pro's fills a market niche for customers who
choose to have home-improvement projects completed by skilled
professionals upon whose craftsmanship, level of service and
responsiveness can be relied.
Project-Pro's began to offer franchised territories in the Greater Boston
to Cape Cod market. Franchise owners enjoy the advantage of association
with a strong marketing organization and a company built upon principles
of quality and customer satisfaction. Project-Pro's works with franchise
owners to assist in setting quality, service and performance standards
that add value and create a sustainable competitive advantage.
4
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Builder's Mart
Builder's Mart is a joint venture with a Mexican partner. Modeled on the
Contractors' Warehouse format and tailored to the specific needs of its
local customers and marketplace, the first Builder's Mart opened in
Monterrey, Mexico in 1994.
Market research indicates that building professionals would be attracted
to a store that could offer convenience, selection and superior pricing.
The demand for housing in Mexico has been strong and thus provides the
potential for future growth opportunities.
Working with partners under joint venture and licensing arrangements,
Grossman's Inc. is using its experience to expand the Contractors'
Warehouse concept into additional international markets. Grossman's
provides business know how, systems, software, and personnel training and
participates in future growth and revenues.
Sales Mix
<TABLE>
The Company's sales mix by product category, as a percentage of total
sales, is shown in the following table:
<CAPTION>
Year Ended December 31,
----------------------------
Products 1994 1993 1992 1991 1990
- -------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Wood building materials 28% 28% 27% 25% 25%
Non-wood building materials 15 14 13 13 16
Millwork, doors and windows 16 16 17 17 17
Paint, decorator products, panelling,
floor coverings and ceilings 10 10 11 12 11
Kitchen, bath and plumbing products 13 13 13 14 13
Hardware, electrical supplies and tools 14 15 15 15 14
Seasonal items 4 4 4 4 4
---- ---- ---- ---- ----
100% 100% 100% 100% 100%
==== ==== ==== ==== ====
</TABLE>
Customers
<TABLE>
The following table shows the percentage of total sales by type of
customer within each of the Company's divisions:
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
% of Total Sales
Grossman's Stores
Retail Sales 37.8% 42.9% 49.8% 59.2% 65.3%
Professional Sales 27.5 27.9 25.4 18.9 15.8
------ ------ ------ ------ ------
Total Grossman's Stores 65.3 70.8 75.2 78.1 81.1
Mr. 2nd's Bargain Outlet Stores 5.8 5.5 5.4 5.3 4.8
Contractors' Warehouse Division 28.5 23.7 19.4 16.6 14.1
Project-Pro's Inc. 0.4 NA NA NA NA
------ ------ ------ ------ ------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
</TABLE>
5
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Customers (Continued)
Retail sales are primarily to serious do-it-yourself customers,
principally homeowners purchasing materials for projects on a
cash-and-carry basis. Professional sales within the Eastern Division and
most Contractors' Warehouse Division sales are made to remodelers, small
independent contractors, home builders and other contractors primarily for
work at job sites. The Company extends credit on open account to
qualified contractors.
The Company's stores are one-stop shopping centers designed to supply
customers with materials and tools necessary to carry out home improvement
projects. Stores are organized and operated on the principle of customer
self-selection. Merchandise layout is designed for ease in locating and
loading products including, in many locations, a drive-thru outdoor lumber
yard. Each store is staffed with knowledgeable store personnel who are
able to assist customers in selecting the building materials and other
home improvement products needed for their projects. Customers are
provided with information, usually in the form of "how-to" pamphlets and
in-store seminars providing detailed instructions and advice needed to
enable customers to carry out their home improvement projects.
Within most of its stores, the Company operates Contractor Services
Offices which provide designated contractor specialists, free computer
estimating services, quick bid job quotes, special discount pricing and
early opening hours for remodelers and contractors. In addition,
Contractor Appreciation Nights are held throughout the year, during which
customers are given the opportunity to talk with manufacturers'
representatives.
As a service to home builders and other contractors, trained sales
personnel specializing in contractor sales call upon contractors on the
job site, and a fleet of trucks is available to make timely delivery of
materials.
The Company's customers number in the millions. Accordingly, its business
is not dependent upon any limited number of customers.
Promotion
The Company considers its advertising program vital in attracting
remodeler contractors and serious do-it-yourself customers to its stores.
The Company relies on printed materials in its advertising, including
newspaper circulars, flyers, tabloids and direct mailings. In addition,
in certain markets, the Company uses radio and television advertising.
Contractors' Warehouse customers are provided catalogs which describe
stores, services and products, including prices. Grossman's stores'
professional customers are provided a newspaper, "Grossman's Gazette",
which includes Company, industry and product information and advertising.
The newspaper was published four times in 1994 and six issues are planned
in 1995.
6
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Suppliers
The Company purchases its merchandise from several thousand manufacturers
and suppliers. No single supplier accounted for more than 7% of purchases
in 1994, and alternative sources of supply are generally available for
most major product categories. Contractual arrangements with suppliers
are generally limited to individual purchase orders.
The Company stocks inventory at levels designed to meet both the recurring
and seasonal needs of its customers. Inventory levels are highest during
the increased sales activity periods of the second and third quarters. In
1992, the Company began to implement an automated, integrated
replenishment system in its Eastern Division. Now fully operational, the
system is used to improve in-stock position on all inventory items and
allows for just-in-time inventory management. In the Company's
Contractors' Warehouse Division, an automated, integrated replenishment
system is in place.
The Company receives merchandise directly from manufacturers or through
distributors. Bulk materials are ordered in full railcar or truckload
quantities. Shipments are made directly to stores or to a distribution
center or redistribution locations for ultimate distribution to stores.
Competition
Competition in the retail building materials industry is highly
fragmented, with the 10 largest retail building materials chains
accounting for approximately 26% of the total retail lumber, building
materials and hardware supply sales nationwide (source: National Home
Center News - May 23, 1994, covering calendar 1993 year). The Company
competes with national building materials and home center chains and with
regional or local firms. In addition, certain general merchandise chains
are significant retail merchandisers of home improvement products. In
Eastern markets, competition has intensified in recent years, as national
building materials chains have opened building material warehouse stores
to compete with the smaller stores more prevalent in the region. These
chains have also announced plans to continue actively pursuing growth in
the Northeast. Increased competition has resulted in large concentrations
of building material retailers in certain geographic locations. In order
to effectively compete, the Company has instituted programs designed to
create a market niche for itself serving professional customers, for which
its drive-thru lumber yards and Contractors Services Offices offer a
competitive advantage. In California, the Company primarily competes with
retail building material warehouses.
Competition in the Company's markets has also increased as a result of
decline in housing construction and the economic downturn, particularly in
the Northeast and California.
Seasonality
Historically, the Company has recorded its highest sales level in the
second and third quarters. The first quarter has traditionally been a
period of low sales activity with resultant operating losses for most of
the stores, as fewer home improvement projects in the Company's markets
are undertaken during winter months.
7
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Employees
The Company employs approximately 4,100 people, including 1,800 part-time
employees. Management personnel at all levels, including store managers
and assistant managers, participate in incentive bonus programs based upon
sales, cost center profitability, inventory management or other defined
goals.
Trade Names
The Company has no material patents, trademarks, licenses, franchises, or
concessions other than the names "Grossman's" and "Mr. 2nd's". Eastern
Division stores operate under the names "Grossman's" and "Mr. 2nd's
Bargain Outlet". An application has been made for the use of "Project-
Pro's", the name of the Company's installed sales subsidiary.
8
<PAGE> 9
<TABLE>
Executive Officers of the Company
<CAPTION>
YEARS
OF
NAME AGE POSITION SERVICE (1)
---- --- -------- -------
<S> <C> <C> <C>
Sydney L. Katz 53 President and Chief Executive 12
Officer
David T. Krawczyk 38 Executive Vice President - 22
President of Contractors'
Warehouse Division
Robert L. Flowers 69 Executive Vice President - 25
Real Estate and Assistant
Secretary
Richard E. Kent 66 Vice President, Secretary and 23
General Counsel
Steven L. Shapiro 37 Controller 9
<FN>
(1) Years of service represent total years with the Company
and its predecessors.
</TABLE>
9
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SYDNEY L. KATZ President and Chief Executive Officer
Mr. Katz has been President and Chief Executive Officer since December 1,
1994, before which he had been Executive Vice President, Chief Financial
Officer and Treasurer since November 19, 1986. Mr. Katz was Executive
Vice President and Chief Financial Officer of Old Grossman's from October
1983 to November 1986. Mr. Katz has been a director since February 1,
1994. Prior to October 1983, he was Senior Vice President and Chief
Financial Officer of the Retail Group of W.R. Grace & Co. Mr. Katz held a
number of financial positions with W.R. Grace & Co. from 1968 to 1983.
From 1963 to 1968 he was employed in public accounting as a Certified
Public Accountant.
DAVID T. KRAWCZYK Executive Vice President -
President of Contractors' Warehouse Division
Mr. Krawczyk was elected Executive Vice President - President of
Contractors' Warehouse Division in April 1993. Prior to that time he
served as President of Contractors' Warehouse Division and in other
administrative capacities of the division for more than five years, except
for a four month period in 1992 when he was engaged in his own business.
Mr. Krawczyk began his employment with the Company in 1973.
ROBERT L. FLOWERS Executive Vice President - Real Estate
and Assistant Secretary
Mr. Flowers has been Executive Vice President - Real Estate since April
24, 1990. Prior to such date he was Vice President - Real Estate since
November 19, 1986 and held the same position with Old Grossman's for more
than five years prior to such date.
RICHARD E. KENT Vice President, Secretary and
General Counsel
Mr. Kent has been Vice President, Secretary and General Counsel since
November 19, 1986. He was in the private practice of law in Portland,
Oregon from May 1984 to November 19, 1986 and prior to May 1984 was Vice
President, Secretary and General Counsel of Evans for more than five
years. Mr. Kent serves as a director and Vice Chairman of Epigen, Inc.
STEVEN L. SHAPIRO Controller
Mr. Shapiro has been Controller since May 3, 1993. Prior to such date he
was Assistant Controller since August 11, 1986. Mr. Shapiro was employed
as a Certified Public Accountant with Arthur Andersen & Co. from September
1979 to August 1986.
10
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Item 2. PROPERTIES
The Company's stores are generally located on or adjacent to major
transportation arteries to be convenient to urban and suburban markets.
The Company seeks to match the size of a store to market sales potential.
The typical store in smaller markets contains 49,000 square feet of
selling space, 24,000 square feet under roof and the remainder in a
merchandised outdoor lumber yard. In larger markets, the Company's stores
may have as much as 100,000 square feet of selling space, up to 60,000
square feet of which is enclosed and the remainder in an adjacent lumber
yard. Most stores have an adjacent outdoor sales area with storage
buildings to dispense lumber and other building materials.
The Company's dual yard stores, which cater to consumers, builders and
contractors, are typically located on three or more acres of land and have
approximately 45,000 square feet under roof, including showroom and
warehouse space. Dual yards also have large outside selling and storage
areas (40,000 to 60,000 square feet) to service the contractor business.
<TABLE>
The Company's 106 stores (including the Indianapolis, Indiana store opened
in January 1995) operate under the names Contractors' Warehouse,
Grossman's and Mr. 2nd's Bargain Outlet and are located in cities and
towns in 12 states, as follows:
<CAPTION>
CONTRACTORS' WAREHOUSE
______________________
<S> <C> <C>
CALIFORNIA INDIANA OHIO
- ---------- ------- ----
Carson Indianapolis Cincinnati
Colton Dayton
La Habra
Long Beach NEVADA
Montebello ------
North Hollywood Reno
Pomona
Sacramento
Ventura
</TABLE>
<TABLE>
<CAPTION>
GROSSMAN'S
__________
<S> <C> <C>
CONNECTICUT MASSACHUSETTS
- ----------- -----------------------------------------
Branford Auburn North Plymouth
Bristol Braintree Pittsfield
Brookfield Fitchburg Raynham
Groton Gardner Saugus
Manchester Hatfield Walpole
Middletown Hyannis West Springfield
Torrington Indian Orchard Worcester
Waterbury North Attleboro
</TABLE>
11
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<TABLE>
<CAPTION>
GROSSMAN'S (Continued)
______________________
<S> <C> <C>
MAINE NEW YORK PENNSYLVANIA
- ----- -------- ------------
Auburn Amherst Harbor Creek
Augusta Auburn Hazelton
Bangor Binghamton Scranton
Brunswick Camillus
Ellsworth Canandaigua
Houlton Cortland RHODE ISLAND
Portland Depew ------------
Presque Isle Dewitt Johnston
Rockland Glens Falls
Scarborough Hamburg
Waterville Herkimer VERMONT
Hudson -------
Ithaca Montpelier
NEW HAMPSHIRE Johnstown Rutland
- ------------- Kingston South Burlington
Dover Lakewood
Keene Malone
Laconia Niagara Falls
North Haverhill Olean
Portsmouth Plattsburgh
Rensselaer
Rome
NEW JERSEY Saranac Lake
- ---------- Utica
Lawrenceville Wappinger Falls
Watertown
</TABLE>
<TABLE>
<CAPTION>
MR. 2ND'S BARGAIN OUTLET
________________________
<S> <C> <C>
MASSACHUSETTS NEW YORK Rhode Island
- ------------- -------- ------------
Braintree Brighton Central Falls
Brighton Buffalo Warwick
Framingham Cheektowaga
Malden East Dewitt
Marshfield North Syracuse
Peabody Rochester
Waltham Tonawanda
Webster
West Seneca
</TABLE>
BUILDER'S MART
______________
MEXICO
- ------
Monterrey
12
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The Company owns 60 of its stores and leases 46 stores, of which 27 have
leases that expire without renewal or purchase options within the next ten
years. Historically, leases without renewal options have been actively
negotiated and renewed by the Company prior to expiration.
Four leases have options for the Company to purchase the stores from the
lessors at various times at an aggregate purchase price estimated to be
below aggregate current market value.
During 1993 and 1994, a total of 38 Eastern Division stores were closed.
Of the 21 owned stores within this group, one was sold in 1993, eight were
sold in 1994, four are under agreement to be sold, and two were designated
to be reopened as Mr. 2nd's Bargain Outlets, the first of which recently
opened. Of the 17 leased properties within this group, 8 leases have been
terminated and 4 leases are due to be terminated in 1995 upon sales of
property under contract.
In addition to the Company's stores, the Company owns and operates two
distribution centers, a data processing center and two office facilities,
one of which includes the Company's corporate office.
The net book value of the Company's owned real properties as of December
31, 1994 is approximately $64.4 million. Mortgage debt of approximately
$15.8 million is outstanding on nine of the Company's owned properties.
The Company's properties are considered well maintained and are in good
condition. Since 1986, the Company has invested $126.1 million in capital
assets in its Eastern and Contractors' Warehouse Division stores and
distribution centers.
<TABLE>
Changes in the number of stores since 1986 are as follows:
<CAPTION>
Stores Opened Stores Closed Stores of
(including (including Divisions Period End
Year relocations) relocations) Sold Total
- ---- ------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
1986 3 7 - 272
1987 3 17 - 258
1988 8 20 - 246
1989 4 7 87 156
1990 1 2 - 155
1991 1 17 - 139
1992 1 2 - 138
1993 5 24 - 119
1994 3 17 - 105
</TABLE>
13
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Item 3. LEGAL PROCEEDINGS
The Company is a party to litigation incidental to the conduct of its
business, most of which is covered by insurance and none of which is
expected to have a material adverse effect on the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Part II
<TABLE>
Item 5. MARKET FOR THE COMPANY'S COMMON EQUITY
AND RELATED SECURITY HOLDER MATTERS
Grossman's Inc. Common Stock trades on The Nasdaq Stock Market under
the symbol GROS. The number of holders of the Company's Common
Stock on February 1, 1995 was 1,879. This number does not include
beneficial owners holding Common Stock in bank or broker name, which
the Company believes represents approximately 7,000 owners.
<CAPTION>
1994 1993
------------- -------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $4 3/4 $3 $4 7/8 $3 3/4
Second Quarter 4 1/8 2 4 1/8 2 7/8
Third Quarter 2 5/8 1 7/8 3 5/8 2 7/8
Fourth Quarter 3 1/4 2 1/8 3 5/8 2 5/8
</TABLE>
No cash dividends have been paid on the Company's Common Stock
since its initial issuance on November 19, 1986.
14
<PAGE> 15
<TABLE>
Item 6. SELECTED FINANCIAL DATA
The following selected financial and statistical data for the eight years
ended December 31, 1994 are derived from the audited consolidated
financial statements of the Company and other available operating
information. The data should be read in conjunction with the consolidated
financial statements, related notes and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
<CAPTION>
(Dollar amounts in thousands, except 1994 1993
per share and per square foot data) (53 Weeks)
- --------------------------------------------------------------------------
<S> <C> <C>
OPERATING INFORMATION
Sales $759,156 $841,974
Gross profit 187,061 212,885
Operating expenses 182,890 241,988
Operating income (loss) 4,171 (29,103)
Interest expense 7,376 8,422
Other income (expenses) (1,578) (595)
Income (loss) before income taxes (2,117) (38,120)
Income taxes (credits) (212) 30,228
Extraordinary items, net - -
Net income (loss) (1,905) (68,348)
Net income (loss) per share (0.07) (2.66)
Weighted average number of shares (000's) 25,752 25,661
SELECTED OPERATING INFORMATION
AS A PERCENTAGE OF SALES
Gross profit 24.6% 25.3%
Operating expenses 24.1 28.7
Operating income (loss) 0.5 (3.5)
Interest expense 1.0 1.0
Income (loss) before income taxes (0.3) (4.5)
Net income (loss) (0.3) (8.1)
BALANCE SHEET INFORMATION
Inventories $116,602 $121,820
Current assets 148,133 154,594
Property, plant and equipment, net 114,897 130,164
Total assets 266,620 287,448
Current liabilities 104,649 119,768
Working capital 43,484 34,826
Long-term obligations 59,927 64,505
Total stockholders' investment 80,645 72,368
OTHER FINANCIAL INFORMATION
Capital expenditures, excluding
capital lease additions $ 4,801 $ 15,050
Long-term debt to equity ratio 0.9:1 1.1:1
Inventory turnover (1) 4.4 4.3
STORES AND EMPLOYEES
Number of stores - year end 105 119
Average sales per store (2) $ 6,718 $ 6,200
Square footage (000's) 3,996 4,216
Average sales per square foot (3) $ 183.20 $ 174.40
Number of employees
Full time 2,300 2,700
Part time 1,800 1,600
----- -----
4,100 4,300
<FN>
(1) Calculated based upon inventory at the end of each quarterly period.
(2) Calculated based upon the number of stores in operation at the end of
each quarterly period (adjusted for divisions sold in 1989).
(3) Calculated based upon the square footage at the end of each quarterly
period (adjusted for divisions sold in 1989).
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except 1992 1991 1990
per share and per square foot data)
- --------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INFORMATION
Sales $833,370 $806,636 $812,485
Gross profit 223,390 219,057 224,651
Operating expenses 208,902 205,533 224,795
Operating income (loss) 14,488 13,524 (144)
Interest expense 8,275 9,444 11,410
Other income (expenses) 3,839 2,833 8,105
Income (loss) before income taxes 10,052 6,913 (3,449)
Income taxes (credits) 3,820 2,622 (1,050)
Extraordinary items, net - - -
Net income (loss) 6,232 4,291 (2,399)
Net income (loss) per share 0.24 0.17 (0.09)
Weighted average number of shares (000's) 26,193 25,878 26,052
SELECTED OPERATING INFORMATION
AS A PERCENTAGE OF SALES
Gross profit 26.8% 27.2% 27.6%
Operating expenses 25.1 25.5 27.7
Operating income (loss) 1.7 1.7 -
Interest expense 1.0 1.2 1.4
Income (loss) before income taxes 1.2 0.9 (0.4)
Net income (loss) 0.7 0.5 (0.3)
BALANCE SHEET INFORMATION
Inventories $123,230 $109,815 $119,537
Current assets 179,587 193,787 202,263
Property, plant and equipment, net 134,693 118,635 120,095
Total assets 339,002 341,944 353,600
Current liabilities 112,980 113,047 132,786
Working capital 66,607 80,740 69,477
Long-term obligations 52,985 64,177 62,126
Total stockholders' investment 161,023 154,529 148,161
OTHER FINANCIAL INFORMATION
Capital expenditures, excluding
capital lease additions $ 26,602 $ 11,929 $ 20,864
Long-term debt to equity ratio 0.4:1 0.5:1 0.6:1
Inventory turnover (1) 4.6 4.6 4.1
STORES AND EMPLOYEES
Number of stores - year end 138 139 155
Average sales per store (2) $ 5,995 $ 5,563 $ 5,208
Square footage (000's) 4,628 4,565 4,718
Average sales per square foot (3) $ 180.57 $ 174.73 $ 172.22
Number of employees
Full time 3,100 2,900 3,200
Part time 1,900 1,800 2,000
----- ----- -----
5,000 4,700 5,200
<FN>
(1) Calculated based upon inventory at the end of each quarterly period.
(2) Calculated based upon the number of stores in operation at the end of
each quarterly period (adjusted for divisions sold in 1989).
(3) Calculated based upon the square footage at the end of each quarterly
period (adjusted for divisions sold in 1989).
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
(Dollar amounts in thousands, except 1989 1988 1987
per share and per square foot data) (53 Weeks)
- -------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INFORMATION
Sales $1,052,095 $1,141,602 $1,077,297
Gross profit 296,387 331,762 315,733
Operating expenses 272,346 303,277 275,679
Operating income 24,041 28,485 40,054
Interest expense 19,818 22,013 26,131
Interest and other income 15,166 7,562 8,001
Income (loss) before income taxes 19,389 14,034 21,924
Income taxes 7,396 5,209 9,753
Extraordinary items, net (1,262) - (1,204)
Net income (loss) 10,731 8,825 10,967
Net income (loss) per share 0.41 0.34 0.49
Weighted average number of shares (000's) 26,397 26,216 22,707
SELECTED OPERATING INFORMATION
AS A PERCENTAGE OF SALES
Gross profit 28.2% 29.1% 29.3%
Operating expenses 25.9 26.6 25.6
Operating income 2.3 2.5 3.7
Interest expense 1.9 1.9 2.4
Income (loss) before income taxes 1.8 1.2 2.0
Net income (loss) 1.0 0.8 1.0
BALANCE SHEET INFORMATION
Inventory $ 132,825 $ 164,364 $ 155,964
Current assets 220,693 251,317 273,044
Property, plant and equipment, net 107,602 156,722 115,922
Total assets 357,310 434,689 421,994
Current liabilities 112,417 129,091 126,821
Working capital 108,276 122,226 146,223
Long-term obligations 87,784 160,574 159,966
Total stockholders' investment 154,189 143,432 134,657
OTHER FINANCIAL INFORMATION
Capital expenditures, excluding
capital lease additions $ 17,959 $ 43,402 $ 21,505
Long-term debt to equity ratio 0.7:1 1.3:1 1.3:1
Inventory turnover (1) 4.4 4.5 4.6
STORES AND EMPLOYEES
Number of stores - year end 156 246 258
Average sales per store (2) 4,726 $ 4,505 $ 4,023
Square footage (000's) 4,599 7,840 7,560
Average sales per square foot (3) $ 156.50 $ 150.33 $ 139.10
Number of employees
Full time 3,300 5,600 5,200
Part time 2,000 2,500 2,500
----- ----- -----
5,300 8,100 7,700
<FN>
(1) Calculated based upon inventory at the end of each quarterly period.
(2) Calculated based upon the number of stores in operation at the end of
each quarterly period (adjusted for divisions sold in 1989).
(3) Calculated based upon the square footage at the end of each quarterly
period (adjusted for divisions sold in 1989).
</TABLE>
17
<PAGE> 18
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Grossman's Inc. financial condition at December 31, 1994 reflects efforts
to consolidate Eastern Division operations and redeploy capital assets
toward the addition of new Contractors' Warehouse stores, modifications to
Eastern Division stores with potential to improve operational performance
and investment in other ventures with higher projected long-term returns.
Significant 1994 events affecting year end financial condition are as
follows:
/// Certain Eastern Division stores were closed, as current operating
results and future expectations did not meet performance criteria. In
1994, 16 stores were closed, following 22 closings in 1993.
/// Capital from sales of closed store properties was redeployed into
enhancements to Eastern Division stores and two Contractors' Warehouse
store openings, one in 1994 and one shortly after year end. New business
ventures included the first store opening by the Company's 50% owned
Mexican joint venture and the development of Project-Pro's Inc., the
Company's 80% owned installed sales subsidiary.
/// A $10.0 million non-cash increase to stockholders' investment was
recorded to reflect improvement in the difference between the accumulated
pension benefit obligation and the estimated value of pension assets.
The adjustment resulted from an increase in the discount rate assumption
used to compute actuarially the cost of the pension obligation.
Other ongoing events which will have an effect on future liquidity are as
follows:
/// In November 1994, site plan approval was given by the Town of
Braintree Planning Board for the sale of the Company's 35-acre
headquarters to Kmart Corporation. Completion of the transaction will
greatly improve liquidity, add working capital and provide cash resources
for additional investment in growth initiatives.
/// Modifications designed to attract professional sales are being made in
all Grossman's stores in the East prior to the 1995 spring selling season.
These modifications will focus primarily on merchandise mix changes.
/// Installation of Eastern Division point-of-sale register systems will
be completed in 1995 in time for the spring selling season.
/// Subject to site availability, up to four new Contractors' Warehouse
stores are planned to open in the Midwest during 1995. The first such
store opened in Indianapolis in January.
/// The Company will continue to expand into international markets with
a planned second store opening in the Monterrey, Mexico market by its
joint venture and exploration of licensing arrangements with international
partners.
Triggered by lower than planned 1994 operating performance, in the third
quarter the Company reviewed all Eastern Division stores to identify
capital which could be redeployed to growth initiatives expected to
18
<PAGE> 19
generate more attractive long-term returns. These initiatives include the
aggressive Midwest expansion of the Company's Contractors' Warehouse
concept and the continued repositioning of Eastern Division stores to
enhance their appeal to target customers. Consideration was given to past
and future expectations of individual store and market operating
performance, as well as the estimated real estate value of each location.
Following this review, at the end of the third quarter, the Company closed
15 stores, nine owned and six leased. A $6.5 million pre-tax charge was
recorded related to closing costs, lease expenses, inventory writedowns,
other expenses and the expected net recovery of property, plant and
equipment. The store closings were completed during the fourth quarter
and proceeds from the liquidation of inventory were used to reduce related
accounts payable and borrowings under the revolving credit agreement.
During 1993 and 1994, a total of 38 Eastern Division stores were closed.
Of the 21 owned stores within this group, one was sold in 1993, eight were
sold in 1994, four are under agreement to be sold, and two were designated
to be reopened as Mr. 2nd's Bargain Outlets, the first of which recently
opened. Net proceeds from the disposal of these properties exceeded $13.6
million in 1994 and remaining unsold properties continue to be actively
marketed. It is anticipated that sales of some or all of the remaining
properties will occur over a period of years, resulting in a liquidity
improvement at the time of each respective sale.
Capital expenditures in 1994 totalled $4.8 million, as compared to $15.0
million in 1993, with $1.5 million related to Project-Pro's, the Company's
80% owned subsidiary which began operations in 1994, and the remainder
principally related to Contractors' Warehouse store openings and Eastern
Division point-of-sale register systems. Within the Contractors'
Warehouse Division, its second Midwest store was opened in Dayton, Ohio in
June 1994 and its third store, located in Indianapolis, Indiana, opened
shortly after year end 1994. Subject to site availability and financing,
up to three more Midwest stores are planned for openings in 1995 and
additional stores are planned for future years. In the Eastern Division,
the first of the two closed store properties designated for reopening as
Mr. 2nd's Bargain Outlets opened in Woonsocket, Rhode Island in December
1994, and the second store is scheduled for a spring 1995 opening in
Schenectady, New York.
Reflected in the year end balance sheet are two new ventures;
Project-Pro's, an 80% owned consolidated subsidiary, and Construcentro,
a 50% owned unconsolidated joint venture. Project-Pro's opened its first
three home-improvement showrooms and began operations during 1994.
Franchising of the concept to professional contractors began in the fourth
quarter. Approximately $2.4 million has been invested in Construcentro,
which opened its first store in May 1994 in Monterrey, Mexico, under the
name Builder's Mart. The investment in Construcentro has been accounted
for under the equity method of accounting. A second store in the
Monterrey market is presently planned. Recent economic instability in
Mexico, including significant devaluation of the peso, may result in
market changes, insufficient sales or supply shortages, at which time
expansion plans may be reassessed.
At December 31, 1994, the actuarial assumption for the discount rate used
to value pension benefit obligations was changed from 7.0% to 8.5%, on par
with current yields for appropriate high-quality debt instruments. As a
result, a non-cash adjustment of $10.5 million was recorded reducing the
minimum pension liability, the intangible pension asset was reduced by
19
<PAGE> 20
$552 thousand to equal unrecognized prior service cost, and the difference
of $10.0 million was recorded as an increase to stockholders' investment.
The minimum liability, intangible asset and adjustment to stockholders'
investment will be measured annually and will change based upon interest
rate assumptions, changes in the benefit obligation and changes in the
value of plan assets.
In 1993, the Company announced an agreement to sell its 35-acre
headquarters site in Braintree, Massachusetts to Kmart Corporation. The
Town of Braintree Planning Board approved Kmart's site plan in November
1994. Under the terms of the Company's agreement with Kmart, the closing
for this transaction is to occur by October 4, 1995, subject to a six-
month extension option at Kmart's election. The Company is currently
discussing a closing timetable with representatives of Kmart and is unable
to predict when this transaction will be consummated. Financial reporting
of the transaction will be deferred until sale consummation. Proceeds
from the sale will initially be used to reduce borrowings under the
revolving term note payable and, in the future, will be used for capital
expenditures, operating needs and, if available, retirement of the $16.2
million of 14% Debentures due January 1996.
Inventory at December 31, 1994 totalled $116.6 million, a $5.2 million
decrease from the prior year end. Inventory declines as a result of
Eastern Division store closings were offset in part by inventory in newly
opened Contractors' Warehouse stores. The Eastern Division's automated,
integrated replenishment system, with virtually all lines of merchandise
now being automatically replenished, contributed to more efficient
inventory management in 1994. Also related to the inventory decrease,
accounts payable declined by $1.2 million from the prior year end, offset
in part due to timing of payments.
Declines in property, plant and equipment reflect the sale of closed store
properties offset in part by the capital expenditures described above.
The decline in long-term debt and capital lease obligations also reflect
the property sales. Of the total $14.2 million in payments on long-term
debt and capital lease obligations, $4.2 million was related to closed
store properties. Also impacting capital lease obligations was a decline
in capital intensive Eastern Division store renovations. Capital lease
additions in 1994 totalled $813 thousand compared to $7.3 million in 1993.
Reformatting of stores in 1995 to better serve professional customers is
not expected to be capital intensive, due to most changes being related to
inventory mix, as opposed to store renovations.
The Company believes that existing funds, funds generated from operations,
proceeds to be received from the sale of properties and funds available
under the $60 million loan and security agreement will be sufficient to
satisfy debt service requirements, to pay other liabilities in the normal
course of business and to finance planned capital expenditures.
20
<PAGE> 21
RESULTS OF OPERATIONS
1994 Compared with 1993
The 1994 net loss of $1.9 million compared to a net loss of $68.3
million in 1993, with non-recurring items occurring in each year. The
1994 results include a $6.5 million provision for the closing of 15
Eastern Division stores. One additional store was closed earlier in the
year. The 1993 results include a $34.3 million provision for the closing
of 22 Eastern Division stores and a non-cash adjustment to the provision
for income taxes of $30.2 million to record a valuation allowance against
previously recorded deferred tax assets. Excluding these non-recurring
items, operating income improved to $10.7 million in 1994 from $5.2
million in 1993. Negatively impacting the 1994 results were start up
costs of the Company's 80% owned subsidiary, Project-Pro's, and the
Company's 50% share of initial operating losses of its Mexican joint
venture.
21
<PAGE> 22
<TABLE>
The following table shows three year comparative sales results by store
type (dollars in millions):
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
SALES
Grossman's Stores
Retail Sales $287.3 $361.3 $415.2
Professional Sales 208.6 235.0 210.8
------ ------ ------
Total Grossman's Stores 495.9 596.3 626.0
Mr. 2nd's Bargain Outlet Stores 43.5 46.2 45.4
Contractors' Warehouse Division 216.8 199.5 162.0
Project-Pro's Inc. 3.0 NA NA
------ ------ ------
Total Grossman's Inc. $759.2 $842.0 $833.4
====== ====== ======
% OF TOTAL SALES
Grossman's Stores
Retail Sales 37.8% 42.9% 49.9%
Professional Sales 27.5 27.9 25.3
------- ------- -------
Total Grossman's Stores 65.3 70.8 75.2
Mr. 2nd's Bargain Outlet Stores 5.8 5.5 5.4
Contractors' Warehouse Division 28.5 23.7 19.4
Project-Pro's Inc. 0.4 NA NA
------- ------- -------
Total Grossman's Inc. 100.0% 100.0% 100.0%
======= ======= =======
SALES % INCREASE (DECREASE)
VERSUS PRIOR YEAR
Grossman's Stores
Retail Sales (20.5)% (13.0)% (13.2)%
Professional Sales (11.2) 11.5 38.9
-------- -------- --------
Total Grossman's Stores (16.8) (4.7) (0.6)
Mr. 2nd's Bargain Outlet Stores (5.8) 1.8 6.6
Contractors' Warehouse Division 8.7 23.1 20.9
Project-Pro's Inc. NA NA NA
-------- -------- --------
Total Grossman's Inc. (9.8)% 1.0 % 3.3 %
======== ======== ========
COMPARABLE STORE SALES % INCREASE
(DECREASE) VERSUS PRIOR YEAR
Grossman's Stores
Retail Sales (5.2)% (7.0)% (10.8)%
Professional Sales 14.5 23.5 40.2
-------- -------- --------
Total Grossman's Stores 2.2 2.5 1.7
Mr. 2nd's Bargain Outlet Stores 2.2 (13.0) (3.3)
Contractors' Warehouse Division (4.3) 1.0 1.7
Project-Pro's Inc. NA NA NA
-------- -------- --------
Total Grossman's Inc. 0.4 % 1.2 % 1.4 %
======== ======== ========
NUMBER OF STORES AT YEAR END
Grossman's Stores 74 90 112
Mr. 2nd's Bargain Outlet Stores 19 18 18
Contractors' Warehouse Division 12 11 8
-------- -------- ---------
Total Number of Stores 105 119 138
======== ======== =========
</TABLE>
22
<PAGE> 23
Total sales results were impacted by Eastern Division store closings and
Contractors' Warehouse store openings in both 1993 and 1994.
Within Grossman's stores, comparable store sales results are indicative of
the Company's strategy to strengthen the appeal of stores to target
customers - contractors, remodelers and serious do-it-yourselfers.
Comparable increases in professional sales have offset a decline in retail
sales, reflective of increasingly competitive conditions. Contractors'
Warehouse comparable store sales results in 1994 were impacted by
division-wide promotional activities in March and June 1993, prior to and
concurrent with three store openings, and throughout 1994 by a slowing
economy in the Southern California market in which 8 of the division's 12
stores operate.
Gross profit declined by $25.8 million as the result of the sales decline
and a decline in gross margin from 25.3% in 1993 to 24.6% in 1994. The
decline in gross margin reflects the increase in sales mix toward
professional sales, including Contractors' Warehouse, from 51.6% of total
sales in 1993 to 56.1% in 1994. Overall gross margin reductions will
continue as the sales mix continues to shift toward professional
customers, who receive discounts from normal retail pricing, and as
additional Contractors' Warehouse stores are opened. Contractors'
Warehouse stores operate at higher per store sales volume with lower gross
margins. Efforts are ongoing to improve margins on products sold to the
growing professional sales base, by expanding the inventory product mix in
all Grossman's stores prior to the spring selling season. Competitive
market conditions and volatile lumber prices, expected to continue in the
future, have also impacted retail margins. Competitive conditions
continue to cause lumber margins to be below historical levels.
Selling and administrative expenses declined in 1994 by $31.3 million, or
16.1%, reflecting reduced overhead as a result of closed stores and
additional Eastern Division staff reductions which occurred in the latter
periods of 1993. As a percent of sales, selling and administrative
expenses declined from 23.0% in 1993 to 21.4% in 1994. Included in
selling and administrative expenses is pension expense, which increased
from $1.8 million in 1993 to $4.5 million in 1994 as the result of changes
in assumptions used to actuarially determine the pension liability and
expense. As a result of assumption changes at December 31, 1994 and a
decline in workforce, pension expense in 1995 is expected to decline to
$2.3 million. In 1995, additional expenses incurred in the first quarter
related to Eastern Division store modifications are expected to be
recovered during the balance of the year.
At the end of the third quarter in both 1993 and 1994, non-recurring
charges for store closings were recorded to cover costs related to leases,
severance and outplacement expenses, inventory writedowns, other
anticipated expenses and the net unrecoverable amount of property, plant
and equipment. In 1993, the Company closed 22 Eastern Division stores and
$34.3 million was provided, and in 1994 15 Eastern Division stores were
closed and $6.5 million was provided. One additional store was closed in
early 1994. Sales from stores closed represented 20.3% and 5.4%,
respectively, of total sales in 1993 and 1994.
Included in operating expenses in 1994 are $5.3 million of expenses
related to the development and start-up of Project-Pro's, the Company's
80% owned subsidiary, which opened its first three project centers in
1994. Development activities and expenses should significantly decline
23
<PAGE> 24
in the future, as franchising of Project-Pro's territories began in the
1994 fourth quarter. Store preopening expense, related to Contractors'
Warehouse store openings, increased by $200 thousand due to continued
openings.
Interest expense declined from $8.4 million in 1993 to $7.4 million in
1994, reflecting a reduction in average borrowings, offset in part by an
increase in the average interest rate. In 1995, rising interest rates and
an increase in average borrowings until consummation of the Braintree
property sale, will result in additional interest expense.
Reflected in the statement of operations in 1994 is a $490 thousand net
loss on the operations of Construcentro, the Company's 50% unconsolidated
joint venture, which opened its first store, located in Monterrey, Mexico,
during the 1994 second quarter. Recent economic instability in the
Mexican economy, including devaluation of the peso, may result in market
changes, insufficient sales or supply shortages, impacting future results.
In 1993, based on unanticipated operating losses and a reassessment of
future expectations, the Company established a valuation allowance to
reduce the carrying value of the deferred tax assets to zero. Tax credits
recorded earlier in 1993 were also reversed, resulting in a provision for
income taxes of $30.2 million. In 1994, income taxes were insignificant.
Other than the effects of unstable lumber prices, as previously discussed,
the Company's business was not materially affected by inflation in any of
the years presented.
1993 Compared with 1992
The 1993 net loss of $68.3 million compared to net income of $6.2 million
in 1992. The 1993 results included a $34.3 million provision for store
closings and a non-cash adjustment of $30.2 million to deferred tax
assets.
In both 1992 and 1993, the Company's strategy was to emphasize sales to
the professional customer. In both years, comparable retail sales
declines were offset by comparable professional sales increases. In 1993,
Eastern Division retail sales declines; however, were not fully offset by
professional sales increases. Sales in the first four months of 1993 were
negatively affected by severe weather conditions and prolonged wet ground
conditions, partially offset by sales improvements in subsequent months.
Gross margin declined from 26.8% in 1992 to 25.3% in 1993. Throughout
1993, margin declines occurred as the result of the increase in sales to
professional customers, who receive discounts from normal retail pricing,
and the growth in Contractors' Warehouse stores, which operate at higher
per stores sales volume with lower gross margins. Margin declines were
also due to competitive market conditions and rising lumber prices.
Economic and competitive conditions did not fully allow these price
increases to be passed on to customers. Gross profit declined from $223.4
million in 1992 to $212.9 million in 1993, reflecting the combination of
the overall sales and gross margin declines.
Operating losses during the first quarter, which are normal due to the
seasonality of the Company's business, were higher in 1993 due to the
severe weather conditions in the Northeast and West, the Company's two
24
<PAGE> 25
principal operating markets. In the first quarter of 1993, the operating
loss was $11.3 million, compared to a $4.8 million loss in the comparable
period of 1992. In the 1993 second quarter, as conditions improved,
operating income of $11.7 million compared favorably to the 1992 level of
$10.7 million.
In the 1993 third quarter, the Company's operating income prior to
recognition of store closing expense was $2.9 million, as compared to $9.8
million for the same period in 1992. The decline in operating income was
principally due to Eastern Division store results. Steps taken to react
to diminishing store performance, including price reductions, inventory
management, and promotional activities, did not counteract the declining
operational results, particularly in those stores most greatly affected by
competition. As the third quarter progressed, management performed a
review of each Eastern Division store and a determination was made to
close 22 marginally performing stores. Store closing expense of $34.3
million was provided at the end of the quarter to cover costs related to
the leases of 11 of the stores to be closed, severance and outplacement
expenses, inventory writedowns, other expenses and the expected net
recovery of property, plant and equipment.
Selling and administrative expenses in 1993 approximated the 1992 level,
but varied significantly by quarter, with a first quarter increase of $3.6
million, a second quarter decrease of $2.6 million, a third quarter
increase of $2.2 million and a fourth quarter decrease of $3.3 million.
The first quarter increase was primarily due to activities in support of
strategic initiatives. Expenses related to these activities were higher
in the second quarter of 1992 than in the same period in 1993, the
principal reason for the second quarter decline. At the end of the second
quarter, the Company announced a restructuring of the Eastern Division,
largely as a result of the continued implementation of the automated
replenishment system. In the third quarter of 1993, staff reductions were
effected and selling and administrative expenses included severance
payments, outplacement services and other expenses related to the
restructuring, resulting in the overall expense increase.
Depreciation and amortization increased by $1.8 million in 1993, related
to ongoing capital spending in support of strategic initiatives.
Preopening expense, associated with the development, opening, expansion
and modernization of stores, decreased from $3.5 million in 1992 to $630
thousand in 1993, as the result of a curtailment of the repositioning of
Eastern Division stores. Interest expense remained relatively constant
from 1992 to 1993. Interest expense savings related to the retirement of
high-interest rate debt were offset by $1.3 million of interest expense on
borrowings under the Company's revolving credit agreement. There were no
revolving credit borrowings in 1992.
At September 30, 1993, based upon unanticipated operating losses and a
reassessment of future expectations, the Company established a valuation
allowance to reduce the carrying value of deferred tax assets to zero.
Tax credits recorded earlier in 1993 were also reversed, resulting in a
total provision for income taxes of $30.2 million.
25
<PAGE> 26
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and Board of Directors
Grossman's Inc.
We have audited the accompanying consolidated balance sheets of Grossman's
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, changes in stockholders'
investment, and cash flows for each of the three years in the period ended
December 31, 1994. Our audits included the financial statement schedule
listed in the index of Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
Grossman's Inc. and subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
Boston, Massachusetts
January 31, 1995
26
<PAGE> 27
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<CAPTION>
December 31,
-------------------------
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,034 $ 2,163
Receivables, less allowance of
$4,157 in 1994 and $5,212 in 1993
for doubtful accounts 19,449 20,751
Inventories 116,602 121,820
Other current assets 9,048 9,860
--------- ---------
Total current assets 148,133 154,594
PROPERTY, PLANT AND EQUIPMENT
Land 24,128 25,740
Buildings and leasehold improvements 95,325 103,949
Machinery and equipment 54,214 59,009
Construction in progress 2,665 1,222
--------- ---------
176,332 189,920
Accumulated depreciation and
amortization (61,435) (59,756)
--------- ---------
114,897 130,164
INVESTMENT IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATE 1,896 486
OTHER ASSETS 1,694 2,204
--------- ---------
TOTAL ASSETS $266,620 $287,448
========= =========
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
December 31,
---------------------------
1994 1993
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 89,816 $102,616
Accrued interest 1,555 2,174
Current portion of long-term debt and
capital lease obligations 13,278 14,978
--------- ---------
Total current liabilities 104,649 119,768
REVOLVING TERM NOTE PAYABLE 29,888 23,238
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 30,039 41,267
PENSION LIABILITY 4,348 15,199
OTHER LIABILITIES 17,051 15,608
--------- ---------
Total liabilities 185,975 215,080
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT
Common stock, $.01 par value:
Shares authorized - 50,000
Shares issued - 26,137 in 1994 and 1993 261 261
Additional paid-in-capital 155,840 155,852
Retained earnings (deficit) (64,008) (62,103)
Minimum pension liability (10,576) (20,528)
Less 359 shares in 1994 and 458 shares
in 1993 in treasury, at cost (872) (1,114)
--------- ---------
Total stockholders' investment 80,645 72,368
========= =========
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $266,620 $287,448
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
28
<PAGE> 29
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<CAPTION>
Year Ended December 31,
---------------------------------
1994 1993 1992
---- ---- ----
(53 weeks)
<S> <C> <C> <C>
SALES $759,156 $841,974 $833,370
COST OF SALES 572,095 629,089 609,980
--------- --------- ---------
Gross Profit 187,061 212,885 223,390
OPERATING EXPENSES
Selling and administrative 162,387 193,662 193,755
Depreciation and amortization 12,625 13,433 11,655
Store closing expense 6,500 34,263 -
Preopening expense 1,378 630 3,492
--------- --------- ---------
182,890 241,988 208,902
--------- --------- ---------
OPERATING INCOME (LOSS) 4,171 (29,103) 14,488
OTHER EXPENSES (INCOME)
Interest expense 7,376 8,422 8,275
Other (1,578) 595 (3,839)
--------- --------- ---------
5,798 9,017 4,436
EQUITY IN NET LOSS OF UNCONSOLIDATED
AFFILIATE 490 - -
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (2,117) (38,120) 10,052
PROVISION (CREDIT) FOR INCOME TAXES (212) 30,228 3,820
--------- --------- ---------
NET INCOME (LOSS) $ (1,905) $(68,348) $ 6,232
========= ========= =========
NET INCOME (LOSS) PER COMMON SHARE
(PRIMARY AND FULLY DILUTED) $ (0.07) $ (2.66) $ 0.24
========= ========= =========
WEIGHTED AVERAGE SHARES AND EQUIVALENT
SHARES OUTSTANDING
Primary 25,752 25,661 26,193
========= ========= =========
Fully Diluted 25,752 25,661 26,241
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
29
<PAGE> 30
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Year Ended December 31,
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (1,905) $(68,348) $ 6,232
Adjustments to reconcile net income (loss)
to net cash (used for) provided by
operating activities:
Depreciation and amortization 12,625 13,433 11,655
Deferred income taxes - 30,228 2,620
Amortization of discount on Zero Coupon
Notes - - 1,321
Net gain on disposals of property (364) (215) (4,159)
Provision for losses on accounts receivable 1,300 2,911 1,944
Provision for store closing 5,100 19,069 -
Undistributed loss of unconsolidated
affiliate 490 - -
(Increase) decrease in assets:
Receivables 2 (2,011) (3,952)
Inventories 5,218 1,410 (13,415)
Other assets (2,007) 948 (1,525)
Increase (decrease) in accounts payable
and accrued and other liabilities (19,614) (5,643) 4,161
--------- --------- ---------
Total adjustments 2,750 60,130 (1,350)
--------- --------- ---------
NET CASH (USED FOR) PROVIDED BY OPERATING
ACTIVITIES 845 (8,218) 4,882
INVESTING ACTIVITIES
Capital expenditures (4,801) (15,050) (21,702)
Proceeds from sales of property, net 13,589 1,014 5,787
Investment in unconsolidated affiliate (1,900) (486) -
--------- --------- ---------
NET CASH (USED FOR) PROVIDED BY INVESTING
ACTIVITIES 6,888 (14,522) (15,915)
FINANCING ACTIVITIES
Payments on long-term debt and capital
lease obligations (14,164) (27,637) (22,557)
Proceeds from mortgage financings 422 6,974 -
Net borrowings from revolving term note
payables 6,650 23,238 -
Issuance of common stock 230 221 262
-------- --------- ---------
NET CASH (USED FOR) PROVIDED BY FINANCING
ACTIVITIES (6,862) 2,796 (22,295)
-------- --------- ---------
Net increase (decrease) in cash and cash
equivalents 871 (19,944) (33,328)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 2,163 22,107 55,435
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,034 $ 2,163 $ 22,107
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
30
<PAGE> 31
<TABLE>
GROSSMAN'S INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' INVESTMENT
(in thousands, except per share data)
<CAPTION>
Common
Stock
$.01 Additional Retained Minimum Total
Par Paid-In- Earnings Pension Treasury Stockholders'
Value Capital (Deficit) Liability Stock Investment
----- ---------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1992 $261 $155,865 $ 13 $ - $(1,610) $154,529
Net income 6,232 6,232
Exercise of
stock options (13) 259 246
Issuance of
treasury stock 5 11 16
---- --------- -------- --------- -------- ---------
Balance at
December 31,
1992 261 155,857 6,245 - (1,340) 161,023
Net (loss) (68,348) (68,348)
Exercise of
stock options (10) 215 205
Issuance of
treasury stock 5 11 16
Minimum
pension
liability (20,528) (20,528)
---- -------- --------- --------- -------- ---------
Balance at
December 31,
1993 261 155,852 (62,103) (20,528) (1,114) 72,368
Net (loss) (1,905) (1,905)
Exercise of
stock options (12) 242 230
Minimum
pension
liability 9,952 9,952
---- --------- --------- --------- -------- ---------
Balance at
December 31,
1994 $261 $155,840 $(64,008) $(10,576) $ (872) $ 80,645
==== ========= ========= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
31
<PAGE> 32
GROSSMAN'S INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
- ---------------------------
The consolidated financial statements present the results of operations,
financial position and cash flows of Grossman's Inc. and its subsidiaries
(the "Company"). The investment in an unconsolidated affiliate is
accounted for on the equity method. All significant intercompany balances
and transactions have been eliminated.
Fiscal Periods
- --------------
The Company's year end is December 31. The Company records activity in
quarterly accounting periods of equal length ending on the last Saturday
of each quarter. Differences in amounts presented and those which would
have been presented using actual quarter-end dates are not material.
Fiscal years 1994 and 1992 contained 52 weeks while fiscal year 1993
contained 53 weeks. The additional week in 1993 was included in the
fourth quarter.
Cash Equivalents
- ----------------
All highly liquid investments, with a maturity of three months or less at
date of purchase, are considered to be cash equivalents.
Accounts Receivable
- -------------------
Credit is extended on open account to qualified contractors and
remodelers.
Finance charge income, included in other income, amounted to $513.0
thousand, $587.4 thousand and $619.6 thousand in 1994, 1993 and 1992,
respectively.
Inventories
- -----------
Merchandise inventories are valued at the lower of cost, as determined by
the average cost method, or market.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost and are depreciated using
the straight-line method over estimated useful lives of the assets.
Leasehold improvements are amortized over the shorter of the lease term or
the estimated useful life of the improvements, which range up to 20 years.
Ranges of useful lives by principal classification for property, plant and
equipment are as follows:
Buildings 20 - 33 years
Machinery and equipment 3 - 7 years
Furniture and fixtures 3 - 10 years
32
<PAGE> 33
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------
Accrued Insurance Claims
- ------------------------
Insurance coverage is maintained for general liability and workers'
compensation risks under contractual arrangements which retroactively
adjust premiums for claims paid subject to specified limitations.
Expenses associated with such risks are accrued as amounts required to
cover incurred incidents can be estimated.
Leases
- ------
Capital leases, those leases which transfer substantially all benefits and
risks of ownership, are accounted for as acquisitions of assets and
incurrences of obligations. Capital lease amortization is included in
depreciation and amortization expense, with the amortization period
restricted to the lease term. Interest on the related obligation is
recognized over the lease term at a constant periodic rate.
Income Taxes
- ------------
Tax provisions and credits are recorded at statutory rates for taxable
items included in the consolidated statements of operations regardless of
the period for which such items are reported for tax purposes. Deferred
income taxes are recognized for temporary differences between financial
statement and income tax bases of assets and liabilities. Deferred tax
assets are reduced by a valuation allowance when the determination cannot
be made that it is more likely than not that some portion or all of the
related tax asset will be realized.
Pension Plan
- ------------
A noncontributory retirement plan is sponsored for the benefit of
substantially all employees. Pension costs are funded in accordance with
the Employee Retirement Income Security Act. Prior service costs, the
unrecognized net transition asset, and gains and losses, whether realized
or unrealized, are amortized over estimated average remaining service
periods.
Preopening Expense
- ------------------
Expenses associated with the opening of new stores and facilities and the
expansion or major remodeling of existing stores are expensed as incurred.
Store Closing Expense
- ---------------------
Store closing costs, net of amounts expected to be recovered, are recorded
when the decision to close a store is made. Store closing costs include
estimated losses, lease payments, other expenses and the net unrecoverable
amount from sales of property, plant and equipment.
Earnings Per Common Share
- -------------------------
Earnings per common share are computed based on the weighted average
number of common shares outstanding, less shares in treasury, plus common
share equivalents attributable to stock options, when dilutive.
33
<PAGE> 34
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- ----------------------------------------------------
Business Segment
- ----------------
The Company operates in one business segment: the retail sale,
distribution and installation of building materials and related products.
Classification
- --------------
Certain amounts in the consolidated financial statements for prior years
have been reclassified to conform to the current year presentation. Such
reclassifications had no effect on previously reported results of
operations.
<TABLE>
NOTE 2 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
- -------------------------------------------------
Accounts payable and accrued liabilities consist of the following (in
thousands):
<CAPTION>
December 31,
--------------------------------
1994 1993
------------ ------------
<S> <C> <C>
Accounts payable $ 59,383 $ 60,607
Accrued salaries, wages,
commissions and related taxes 6,007 8,155
Accrued income and franchise taxes 844 734
Accrued taxes other than income and
franchise 3,107 4,809
Accrued store closing costs 2,240 8,343
Accrued insurance 10,618 10,273
Other accrued liabilities 7,617 9,695
-------- --------
$ 89,816 $102,616
======== ========
</TABLE>
NOTE 3 - REVOLVING TERM NOTE PAYABLE
- ------------------------------------
On December 15, 1993, the Company entered into a loan and security
agreement with BankAmerica Business Credit, Inc., which provides for
borrowings up to $60 million, including letters of credit up to $15
million, under a formula based arrangement based on a percentage of
qualified inventory and accounts receivable. Borrowings pursuant to this
agreement are secured by inventories, receivables and certain other
assets. At December 31, 1994, cash borrowings under this agreement
totalled $29.9 million and outstanding standby letters of credit, issued
in the normal course of business, principally to guaranty payment of
insurance obligations, totalled $9.7 million. The agreement has a
three-year term, with one-year renewal periods thereafter. Interest is
payable monthly at 1% over Prime Rate (8.5% at December 31, 1994), with a
Eurodollar option available for borrowings in excess of $5 million. The
agreement also provides for a 1/2% per annum commitment fee on the average
daily unused amount under $50 million. The agreement grants the lender
rights to seek to increase or decrease the percentages loaned upon, which
34
<PAGE> 35
NOTE 3 - REVOLVING TERM NOTE PAYABLE (CONTINUED)
- ------------------------------------------------
may affect availability, and contains various covenants which, among other
things, require minimum levels of net worth, establish minimum interest
and fixed charge coverage ratios, and establish maximum levels of capital
expenditures.
The maximum borrowings and letters of credit in 1993, under this
agreement, were $23.2 million and $12.1 million, respectively. The
maximum borrowings and letters of credit in 1994, under this agreement,
were $39.3 million and $13.1 million, respectively. The weighted average
annual interest rate on such borrowings in 1993 and 1994 was 7.0% and
7.5%, respectively.
Upon entering into the loan and security agreement, the Company's prior
revolving credit agreement with a group of banks was terminated. The
maximum borrowings in 1993 under the prior revolving credit agreement was
$36.0 million. The weighted average annual interest rate on such
borrowings was 5.9%.
<TABLE>
NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
- -----------------------------------------------------
Long-term debt and capital lease obligations consist of the following (in
thousands):
<CAPTION>
December 31,
----------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
14% Debentures, due January 1, 1996 $16,201 $16,201
Mortgage notes 15,759 22,638
Capital lease obligations 11,357 17,406
------- -------
43,317 56,245
Less current portion 13,278 14,978
------- -------
$30,039 $41,267
======= =======
</TABLE>
Interest on the 14% Debentures is payable semi-annually on January 1 and
July 1. At any time prior to maturity, upon 30 days notice, the Company
may redeem the 14% Debentures, in whole or in part, on any interest
payment date, at 100% of principal (in minimum amounts of $5 million),
plus a yield maintenance premium based upon quoted Treasury Constant
Maturity Series yields.
Mortgage notes bear interest at a weighted average rate of 10.0% and are
secured by real estate and equipment with a net book value of $32.3
million at December 31, 1994. The 14% Debentures, mortgage notes and
certain lease agreements contain various covenants which, among other
things, restrict dividends and distributions on and repurchases of Common
Stock; require specified levels of net worth; limit capital expenditures;
restrict liens, the incurrence of indebtedness and lease obligations; and
35
<PAGE> 36
NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
- -----------------------------------------------------------------
restrict loans and investments. Under the most restrictive of these
agreements, the Company had no retained earnings available for the payment
of dividends at December 31, 1994.
<TABLE>
As of December 31, 1994, long-term debt maturities in each of the next
five fiscal years and thereafter are as follows (in thousands):
<CAPTION>
14% Debentures Mortgage Notes
-------------- --------------
<S> <C> <C>
Year Ending December 31,
1995 $ - $ 6,668
1996 16,201 861
1997 - 818
1998 - 788
1999 - 823
Thereafter - 5,801
------- -------
$16,201 $15,759
======= =======
</TABLE>
Interest paid during 1994, 1993 and 1992 amounted to (in thousands)
$7,995, $7,639 and $8,286, respectively.
NOTE 5 - LEASE COMMITMENTS (IN THOUSANDS)
- -----------------------------------------
Leases have been entered into for certain retail locations, office
space, equipment and vehicles. The fixed terms of the leases range up to
fourteen years and, in general, leases for retail locations contain
multiple renewal options for various periods between one and ten years.
Certain leases contain provisions which include additional payments based
upon sales performance, operating and real estate tax escalations and
purchase options.
Total rent expense charged to operations during 1994, 1993 and 1992
amounted to $5,698, $7,615 and $8,819, respectively. Total contingent
rentals included in rent expense were $757, $923 and $999, respectively.
Included in property, plant and equipment as of December 31, 1994 and 1993
is $32,158 and $36,359, respectively, of machinery and equipment under
capital leases. The related accumulated amortization is $23,673 and
$24,049, respectively. Capital lease additions for machinery and
equipment totalled $813 in 1994, $7,238 in 1993 and $2,739 in 1992.
36
<PAGE> 37
NOTE 5 - LEASE COMMITMENTS (IN THOUSANDS) (Continued)
- -----------------------------------------------------
<TABLE>
Future minimum lease payments in each of the next five years and
thereafter are as follows:
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
<S> <C> <C>
Year Ending December 31,
1995 $ 7,155 $ 5,341
1996 3,234 4,713
1997 1,289 4,027
1998 654 3,194
1999 86 1,886
Thereafter 171 2,603
-------------- --------------
Total minimum lease payments 12,589 $21,764
Less imputed interest 1,232 ==============
--------------
Present value of net minimum
lease payments 11,357
Less current portion 6,610
--------------
Long-term capital lease obligations $ 4,747
==============
</TABLE>
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------
Fair values are estimated based on the following assumptions: cash and
cash equivalents are reported in the balance sheet at amounts which
approximate fair value; and the carrying values of long-term debt and
revolving term note payable are estimated using discounted cash flow
analyses, based upon the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
<TABLE>
The estimated fair values are as follows (in thousands):
<CAPTION>
December 31,
----------------------------------------
1994 1993
------------------- -------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Revolving term note payable $29,888 $29,888 $23,238 $23,238
14% Debentures, due
January 1, 1996 16,201 17,000 16,201 18,900
Mortgage notes 15,759 15,800 22,638 23,900
------- ------- ------- -------
$61,848 $62,688 $62,077 $66,038
======= ======= ======= =======
</TABLE>
37
<PAGE> 38
NOTE 7 - SALE OF PROPERTY
- -------------------------
In October 1993, the Company announced an agreement for the sale of its 35
acre headquarters site in Braintree, Massachusetts to Kmart Corporation.
The Town of Braintree Planning Board approved Kmart's site plan in
November 1994. Under the terms of the Company's agreement with Kmart, the
closing for this transaction is to occur by October 4, 1995, subject to a
six-month extension option at Kmart's election. The Company is currently
discussing a closing timetable with representatives of Kmart and is unable
to predict when this transaction will be consummated.
NOTE 8 - STOCKHOLDERS' INVESTMENT
- ---------------------------------
The Company's Restated Certificate of Incorporation contains certain
provisions restricting accumulations of Common Stock. Under these
provisions, as modified by the Board of Directors and currently in effect,
no person may acquire shares of Common Stock on or prior to December 31,
1996 (or such later date as may be fixed by the Board of Directors) if the
number of shares actually and constructively owned by such person, as
defined, would exceed 5% of the outstanding Common Stock on any date.
Attempted acquisitions of Common Stock in excess of these limits will be
null and void and all shares purportedly acquired in excess of these
limits will have no rights, except the right to receive out of the
proceeds of resale thereof an amount not in excess of the amount paid for
such excess shares plus brokers' commissions. Such restrictions may be
waived by the Board of Directors and are not applicable to an acquisition
of more than 50% of the outstanding shares of Common Stock for cash
pursuant to a tender offer, merger or other business combination in which
all holders of Common Stock are afforded an opportunity to sell all their
shares.
NOTE 9 - EMPLOYEE BENEFIT PLANS
- -------------------------------
A noncontributory defined benefit pension plan, the Grossman's Inc.
Retirement Plan (the "Retirement Plan"), is sponsored covering
substantially all employees. Employees are eligible to participate in the
Retirement Plan at age 21 with one year of service. Benefits through 1990
are based upon years of service multiplied by a percentage of reference
earnings. Beginning in 1991, the benefit is based upon annual reference
earnings.
38
<PAGE> 39
NOTE 9 - EMPLOYEE BENEFIT PLANS (CONTINUED)
- -------------------------------------------
<TABLE>
The components of net periodic pension cost are as follows (in thousands):
<CAPTION>
Year Ended December 31,
--------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost for the year $ 1,942 $ 1,376 $ 1,325
Interest accrued on projected benefit
obligation 4,724 4,277 3,896
Return on plan assets (4,244) (4,019) (2,894)
Net amortization and deferral 2,120 180 (661)
-------- -------- --------
Net periodic pension cost for the year $ 4,542 $ 1,814 $ 1,666
======== ======== ========
</TABLE>
<TABLE>
The funded status of the Retirement Plan is as follows (in thousands):
<CAPTION>
December 31,
----------------------
1994 1993
------ ------
<S> <C> <C>
Actuarial present value of projected
benefit obligation:
Vested employees $ 51,752 $ 61,823
Non-vested employees 827 1,766
--------- ---------
Accumulated benefit obligation 52,579 63,589
Impact of future salary increases 2,011 3,480
--------- ---------
Projected benefit obligation for service rendered
to date 54,590 67,069
Market value of plan assets, primarily cash
equivalents and publicly traded stocks and bonds 48,231 48,390
--------- ---------
Projected benefit obligation in excess of
plan assets 6,359 18,679
Items not yet recognized in earnings:
Unrecognized net transition asset 1,272 1,795
Unrecognized prior service cost (858) (1,410)
Adjustment required to recognize minimum liability 11,434 21,938
Unrecognized net loss (13,859) (25,803)
--------- --------
Pension liability $ 4,348 $ 15,199
========= ========
</TABLE>
Statement of Financial Accounting Standards No. 87 ("FAS 87") requires the
recognition of a minimum liability, to the extent that actuarially
computed plan benefits exceed the fair value of plan assets, and the
recognition of a related intangible asset, to the extent of any unfunded
prior service cost. In 1993, the discount rate assumption was changed
from 9.5% to 7.0%, resulting in a December 31, 1993 adjustment of $21,938
thousand, reducing the prepaid pension asset and establishing a minimum
liability of $15,199 thousand. An intangible asset of $1,410 thousand was
also recorded, equal to unrecognized prior service cost. The difference
39
<PAGE> 40
NOTE 9 - EMPLOYEE BENEFIT PLANS (CONTINUED)
- -------------------------------------------
between the minimum pension liability adjustment and the intangible asset
was charged to stockholders' investment. The increase in net periodic
pension cost from 1993 to 1994 was principally attributable to the
discount rate assumption decrease at year end 1993. As of December 31,
1994, in accordance with the guidelines of FAS 87, the discount rate
assumption was reevaluated and changed to 8.5%. As a result, an
adjustment of $10,504 thousand was recorded to reduce the minimum pension
liability, the intangible asset was reduced by $552 thousand to equal
unrecognized prior service cost, and the difference of $9,952 thousand was
credited to stockholders' investment.
<TABLE>
Assumptions used by the Retirement Plan's actuaries to develop the funded
status of the Retirement Plan under the unit credit actuarial cost method
are as follows:
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Discount rate 8.5% 7.0% 9.5%
Expected long-term rate of return on assets 9.0 9.0 10.0
Rate of general wage increase 4.5 4.5 4.5
</TABLE>
A savings plan is also sponsored for the benefit of substantially all
employees. The plan provides that employees may contribute up to 14% of
their compensation, with a fully vested Company match of a portion of the
contribution. The Company contributed $552 thousand in 1994, $574
thousand in 1993 and $555 thousand in 1992 to the plan.
NOTE 10 - OTHER LIABILITIES
- ---------------------------
<TABLE>
Other long-term liabilities consist of the following (in thousands):
<CAPTION>
December 31,
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
Accrued insurance claims $ 8,014 $ 9,424
Accrued store closing costs 8,307 5,418
Other accrued liabilities 730 766
------- -------
$17,051 $15,608
======= =======
</TABLE>
Standby letters of credit which guarantee general liability and workers'
compensation insurance claims are outstanding under the Company's
revolving term note payable.
40
<PAGE> 41
NOTE 11 - EMPLOYEE STOCK OPTION PLANS
- -------------------------------------
A nonqualified stock option plan covers officers and other key management
employees ("1986 Plan"). The 1986 Plan provides for nonqualified options
to purchase a total of 3,750,000 shares of Common Stock.
A nonqualified stock option plan covers key management employees who are
not officers ("1993 Plan"). The 1993 Plan provides for nonqualified
options to purchase a total of 600,000 shares of Common Stock, with a
maximum of 5,000 shares per employee. The maximum number of options which
may be granted in any calendar year is 300,000.
<TABLE>
A summary of option transactions is as follows:
<CAPTION>
Year Ended December 31,
------------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Options outstanding, January 1 3,312,700 2,932,500 1,848,000
Options granted 668,300 915,300 1,611,000
Price range $2.25-$3.88 $2.75-$4.38 $3.63-$4.50
Options exercised 99,500 88,000 106,250
Price range $ 2.31 $ 2.31 $ 2.31
Options cancelled 927,400 447,100 420,250
Price range $2.31-$4.50 $2.31-$4.50 $2.31-$4.50
------------ ------------ ------------
Options outstanding,
December 31 2,954,100 3,312,700 2,932,500
Price range $2.25-$4.50 $2.31-$4.50 $2.31-$4.50
============ ============ ============
Options exercisable,
December 31 1,640,000 1,376,500 867,917
Price range $2.31-$4.50 $2.31-$4.50 $2.31-$3.75
============ ============ ============
</TABLE>
All options granted are ten-year nonqualified options and were granted at
market value. Of the options outstanding at December 31, 1994, 200,000
were exercisable when issued, and the balance become exercisable in either
three or four equal annual installments following the respective dates of
grant. All outstanding options become exercisable upon a change in
control, as defined in the option agreements. At December 31, 1994,
4,056,250 shares of Common Stock were reserved for future issuance under
the plans.
41
<PAGE> 42
NOTE 12 - INCOME TAXES
- ----------------------
Income taxes are accounted for in accordance with statement of Financial
Accounting Standards No. 109-Accounting for Income Taxes. This standard
requires, among other things, recognition of future tax benefits, measured
by enacted tax rates, attributable to deductible temporary differences
between financial statement and income tax bases of assets and liabilities
and net operating loss carryforwards to the extent that management
assesses the utilization of such net operating loss carryforwards to be
more likely than not. The statement also requires deferred tax assets to
be reduced by a valuation allowance if, based on the weight of available
evidence, management cannot make a determination that it is more likely
than not that some portion or all of the related tax benefits will be
realized. Furthermore, the statement requires that a valuation allowance
be established or adjusted if a change in circumstances causes a change in
judgment about the future realizability of the deferred tax assets.
At December 31, 1992, deferred tax assets were recorded totalling $30.2
million, with no related valuation allowance, based upon management's
assessment at that time that taxable income would more likely than not be
sufficient to utilize fully the net operating loss carryforwards prior to
their ultimate expiration in the year 2001. At September 30, 1993, based
upon unanticipated 1993 operating results and a reassessment of future
expectations, the Company established a valuation allowance to reduce the
carrying value of deferred tax assets to zero.
At December 31, 1994, the Company has net operating loss carryforwards of
$117 million, expiring as follows: 1998-$15 million, 1999-$28 million,
2000-$23 million, 2001-$15 million, 2008-$28 million and 2009-$8 million.
<TABLE>
The provision (credit) for income taxes consists of the following (in
thousands):
<CAPTION>
Year Ended December 31,
-----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Federal
Current $ - $ - $ 240
Deferred - 27,046 2,977
----- -------- -------
- 27,046 3,217
State
Current 319 - 960
Deferred (531) 3,182 (357)
------ -------- -------
(212) 3,182 603
------ -------- -------
$(212) $30,228 $3,820
====== ======== =======
</TABLE>
42
<PAGE> 43
NOTE 12 - INCOME TAXES (CONTINUED)
- ----------------------------------
<TABLE>
The difference between income taxes at the Company's effective tax rate
and the U.S. federal statutory rate is as follows (in thousands):
<CAPTION>
Year ended December 31,
------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
U.S. federal income tax (benefit) at
statutory rate $(720) $(12,961) $3,418
1993 taxable losses for which tax
benefits were not recognized - 12,961 -
Valuation allowance for deferred tax
assets 720 30,228 -
Other items - - (201)
------ --------- -------
Total federal - 30,228 3,217
State and other local income taxes (benefit) (212) - 603
------ --------- -------
$(212) $ 30,228 $3,820
====== ========= =======
</TABLE>
<TABLE>
Deferred income taxes reflect the future tax benefits attributable to net
operating loss carryforwards and temporary differences as follows (in
thousands):
<CAPTION>
December 31,
----------------------
1994 1993
---------- ----------
<S> <C> <C>
Net operating loss carryforwards $ 40,940 $ 38,299
Allowance for doubtful accounts 1,480 1,615
Accrued store closing costs 3,492 5,685
Depreciation (1,839) (1,789)
Other (1,097) (16)
--------- ---------
42,976 43,794
Less valuation allowance (42,976) (43,794)
--------- ---------
Deferred income taxes $ - $ -
========= =========
</TABLE>
The Company's tax returns for years subsequent to 1982 have not been
reviewed by the Internal Revenue Service ("IRS"). Availability of the net
operating loss carryforwards might be challenged by the IRS upon review of
such returns and may be limited under the Tax Reform Act of 1986 as a
result of changes that may occur in the ownership of the Company's stock
in the future, principally relating to a change in control.
The Company believes; however, that IRS challenges that would limit the
utilization of available net operating loss carryforwards are unlikely,
and that the adjustments to tax liability, if any, for years through 1994
will not have a material adverse effect on the Company's financial
position.
Income and franchise taxes paid in 1994, 1993 and 1992 amounted to (in
thousands) $423, $920 and $1,158, respectively.
43
<PAGE> 44
NOTE 13 - INVESTMENT IN UNCONSOLIDATED AFFILIATE
- ------------------------------------------------
<TABLE>
The Company has a 50% interest in a Mexican retailer of building materials
and related products. The joint venture was formed in 1993 and began
operations in 1994. Summarized financial information for this joint
venture is as follows (in thousands):
<CAPTION>
December 31, 1994
-----------------
<S> <C>
Assets:
Current assets $ 5,139
Other assets 2,033
--------
Total assets $ 7,172
========
Liabilities and Equity:
Current liabilities $ 3,878
Equity 3,294
--------
Total liabilities and equity $ 7,172
========
Company's share of equity $ 1,647
========
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31, 1994
-----------------
<S> <C>
Gross revenue $ 9,248
Cost of sales and expenses 10,228
--------
Net (loss) $ (980)
========
Company's interest in net (loss) $ (490)
========
<FN>
Expenses include $251 reimbursed to the Company for technical support
provided to the joint venture in 1994.
</TABLE>
44
<PAGE> 45
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following selected quarterly financial data should be read in
conjunction with the consolidated financial statements, related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Certain amounts in individual quarters have been reclassified
to conform with year end presentation.
<CAPTION>
1994
-------------------------------------------------------
Three Months Ended
---------------------------------------------
March 31 June 30 September 30 December 31 Full Year
(in thousands, except per share data)
__________________________________________________________________________
<S> <C> <C> <C> <C> <C>
SALES $135,076 $220,145 $226,111 $177,824 $759,156
COST OF SALES 101,465 165,105 171,124 134,401 572,095
-------- -------- -------- -------- --------
Gross Profit 33,611 55,040 54,987 43,423 187,061
OPERATING EXPENSES
Selling and
administrative 37,335 42,826 43,130 39,096 162,387
Depreciation and
amortization 3,157 3,213 3,214 3,041 12,625
Store closing expense - - 6,500 - 6,500
Preopening expense 192 440 103 643 1,378
--------- --------- --------- --------- ---------
40,684 46,479 52,947 42,780 182,890
--------- --------- --------- --------- ---------
OPERATING INCOME
(LOSS) (7,073) 8,561 2,040 643 4,171
OTHER EXPENSES (INCOME)
Interest expense 1,881 1,903 1,837 1,755 7,376
Other (257) (595) (514) (212) (1,578)
--------- --------- --------- --------- ---------
1,624 1,308 1,323 1,543 5,798
EQUITY IN NET LOSS
OF UNCONSOLIDATED
AFFILIATE - 82 156 252 490
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (8,697) 7,171 561 (1,152) (2,117)
PROVISION (CREDIT)
FOR INCOME TAXES (870) 717 56 (115) (212)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ (7,827) $ 6,454 $ 505 $ (1,037) $ (1,905)
========= ========= ========= ========= =========
NET INCOME (LOSS)
PER COMMON SHARE
(PRIMARY AND
FULLY DILUTED) $ (0.30) $ 0.25 $ 0.02 $ (0.04) $ (0.07)
========= ========= ========= ========= =========
WEIGHTED AVERAGE
SHARES AND EQUIVALENT
SHARES OUTSTANDING
Primary 25,725 26,134 25,823 25,762 25,752
========= ========= ========= ========= =========
Fully Diluted 25,725 26,134 25,899 25,762 25,752
========= ========= ========= ========= =========
</TABLE>
45
<PAGE> 46
<TABLE>
The following selected quarterly financial data should be read in
conjunction with the consolidated financial statements, related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations. Certain amounts in individual quarters have been reclassified
to conform with year end presentation.
<CAPTION>
1993
-------------------------------------------------------
Three Months Ended
---------------------------------------------
March 31 June 30 September 30 December 31 Full Year
(in thousands, except per share data) (14 Weeks) (53 Weeks)
__________________________________________________________________________
<S> <C> <C> <C> <C> <C>
SALES $141,562 $253,105 $247,671 $199,636 $841,974
COST OF SALES 102,530 186,879 189,099 150,581 629,089
--------- --------- --------- --------- ---------
Gross Profit 39,032 66,226 58,572 49,055 212,885
OPERATING EXPENSES
Selling and
administrative 46,902 50,797 52,053 43,910 193,662
Depreciation and
amortization 3,020 3,442 3,617 3,354 13,433
Store closing expense - - 34,263 - 34,263
Preopening expense 391 239 - - 630
--------- --------- --------- --------- ---------
50,313 54,478 89,933 47,264 241,988
--------- --------- --------- --------- ---------
OPERATING INCOME
(LOSS) (11,281) 11,748 (31,361) 1,791 (29,103)
OTHER EXPENSES (INCOME)
Interest expense 1,922 2,110 2,233 2,157 8,422
Other (19) 472 271 (129) 595
--------- --------- --------- --------- ---------
1,903 2,582 2,504 2,028 9,017
EQUITY IN NET LOSS
OF UNCONSOLIDATED
AFFILIATE - - - - -
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (13,184) 9,166 (33,865) (237) (38,120)
PROVISION (CREDIT)
FOR INCOME TAXES (5,010) 3,483 31,755 - 30,228
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ (8,174) $ 5,683 $(65,620) $ (237) $(68,348)
========= ========= ========= ========= =========
NET INCOME (LOSS)
PER COMMON SHARE
(PRIMARY AND
FULLY DILUTED) $ (0.32) $ 0.22 $ (2.56) $ (0.01) $ (2.66)
========= ========= ========= ========= =========
WEIGHTED AVERAGE
SHARES AND EQUIVALENT
SHARES OUTSTANDING
Primary 25,617 26,121 25,677 25,679 25,661
========= ========= ========= ========= =========
Fully Diluted 25,617 26,121 25,677 25,679 25,661
========= ========= ========= ========= =========
</TABLE>
46
<PAGE> 47
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item regarding Directors is hereby incorporated by reference
to the Company's definitive proxy statement for its 1995 Annual Meeting of
Stockholders to be filed pursuant to Regulation 14A with the Commission
not later than 120 days after the end of the fiscal year covered by this
Form 10-K. Information regarding the Company's Executive Officers is set
forth above following Item 1 of Part I of this report.
Item 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference to the Company's
definitive proxy statement for its 1995 Annual Meeting of Stockholders to
be filed pursuant to Regulation 14A with the Commission not later than 120
days after the end of the fiscal year covered by this Form 10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference to the Company's
definitive proxy statement for its 1995 Annual Meeting of Stockholders to
be filed pursuant to Regulation 14A with the Commission not later than 120
days after the end of the fiscal year covered by this Form 10-K.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3) of Form 10-K, the information called
for by this item is hereby incorporated by reference to the Company's
definitive proxy statement for its 1995 Annual Meeting of Stockholders to
be filed pursuant to Regulation 14A with the Commission not later than 120
days after the end of the fiscal year covered by this Form 10-K.
47
<PAGE> 48
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) 1 - Index to Financial Statements
Page
Number
in this
Report
Consolidated Balance Sheets
December 31, 1994 and 1993................................... 27
Consolidated Statements of Operations
Years Ended December 31, 1994, 1993 and 1992................. 29
Consolidated Statements of Cash Flows
Years Ended December 31, 1994, 1993 and 1992................. 30
Consolidated Statements of Changes in Stockholders' Investment
Years Ended December 31, 1994, 1993 and 1992................. 31
Notes to Consolidated Financial Statements..................... 32
(a) 2 - Index to Financial Statement Schedules
The following consolidated financial statement schedules
of Grossman's Inc. and Subsidiaries are included in
Item 14(d) and filed herewith (page numbers refer to page
numbers in this Form 10-K):
Schedule II - Valuation and Qualifying Accounts................ 56
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
are not required under the related instructions, or are inapplicable,
and, therefore, have been omitted.
(b) Reports on Form 8-K
None.
(a) 3. and (c) - Exhibits
48
<PAGE> 49
Exhibit
Number
2(e) Final Decree and Order Closing Cases, dated October 2,
1987, of the United States Bankruptcy Court for the
Southern District of Florida, filed as Exhibit 2(e) to
the Company's Form 10-Q for the quarter ended September
30, 1987, is incorporated herein by reference.
2(f) Asset Purchase Agreement between GNW Partners, L.P. and
Grossman's Inc., dated June 28, 1989, without exhibits,
filed as Exhibit 2(f) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1989 (File
1-542), is incorporated herein by reference.
2(g) Asset Purchase Agreement between Harcros Lumber &
Building Supplies Inc. and Grossman's Inc., dated
August 14, 1989, without exhibits, filed as Exhibit 2(a)
to the Company's Form 8-K, dated September 12, 1989, is
incorporated herein by reference.
3(a) Restated Certificate of Incorporation of the Company, as
in effect November 19, 1986, filed as Exhibit 3(a) to
the Company's Form 8-K, dated November 19, 1986 (File
No. 1-542), is incorporated herein by reference.
3(a)-1 Resolutions adopted by the Company's Board of Directors
on December 15, 1987, modifying and extending
restrictions on acquisition of Common Stock under
Article Ninth of Company's Restated Certificate of
Incorporation, filed as Exhibit 3(a)-1 to the Company's
Form 8-K, dated December 15, 1987 (File 1-542), is
incorporated herein by reference.
3(a)-2 Notice to Stockholders of modification and extension of
restrictions on acquisition of Common Stock pursuant to
Article Ninth of Company's Restated Certificate of
Incorporation, filed as Exhibit 3(a)-2 to the Company's
Form 8-K, dated December 15, 1987 (File 1-542), is
incorporated herein by reference.
3(a)-3 Certificate of Designation Relating to Certain
Restrictions on the Acquisition of Common Stock pursuant
to Article Ninth of the Company's Restated Certificate
of Incorporation, filed as Exhibit 3(1)-2 to the
Company's Form 8-K dated November 19, 1986 (File No.
1-542), is incorporated herein by reference.
3(a)-4 Resolutions adopted by the Company's Board of Directors
on October 23, 1990 extending restrictions on
acquisition of Common Stock under Article Ninth of
Company's Restated Certificate of Incorporation, filed
as Exhibit 3(a)-4 to the Company's Annual Report on Form
10-K for the year ended December 31, 1990 (File No.
1-542), is incorporated herein by reference.
49
<PAGE> 50
3(a)-5 Notice to Stockholders of extension of restrictions on
acquisition of Common Stock pursuant to Article Ninth of
the Company's Restated Certificate of Incorporation,
filed as Exhibit 3(a)-5 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1990 (File
No. 1-542), is incorporated herein by reference.
3(a)-6 Certificate of Designation Relating to Certain
Restrictions on the Acquisition of Common Stock pursuant
to Article Ninth of the Company's Restated Certificate
of Incorporation, filed as Exhibit 3(a)-6 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1990 (File No. 1-542), is incorporated
herein by reference.
3(a)-7 Notice to Stockholders of extension of restrictions on
acquisition of Common Stock pursuant to Article Ninth of
the Company's Restated Certificate of Incorporation, is
incorporated herein by reference.
3(a)-8 Certificate of Designation Relating to Certain
Restrictions on the Acquisition of Common Stock pursuant
to Article Ninth of the Company's Restated Certificate
of Incorporation, is incorporated herein by reference.
3(b) By-Laws of the Company, as in effect November 19, 1986,
filed as Exhibit 3(b) to the Company's Form 8-K, dated
November 19, 1986 (File No. 1-542), is incorporated
herein by reference.
3(b)-1 Copy of the amendments to the Grossman's Inc. By-Laws as
adopted by the Board of Directors of Grossman's Inc. on
December 15, 1987, filed as Exhibit 3(b)-1 to the
Company's Form 8-K, dated December 15, 1987 (File
1-542), is incorporated herein by reference.
4(c) Indenture, dated January 1, 1986, from the Company to
United States Trust Company of New York, as Trustee,
with respect to the Company's 14% Debentures due 1996,
filed as Exhibit 4(c) to the Company's Form 8-K, dated
November 19, 1986 (File No. 1-542), is incorporated
herein by reference.
4(c)-1 First Supplemental Indenture, dated January 1, 1987, to
Indenture, dated January 1, 1986 (Exhibit 4(c) above),
for the Company's 14% Debentures due 1996, filed as
Exhibit 4(h) to the Company's Registration Statement on
Form S-1, No. 33-15107, is incorporated herein by
reference.
4(c)-2 Second Supplemental Indenture, dated March 15, 1987, to
Indenture, dated January 1, 1986, for the Company's 14%
Debentures due 1996 (Exhibit 4(c) above), filed as
Exhibit 4(j) to the Company's Registration Statement on
Form S-1, No. 33-15107, is incorporated herein by
reference.
50
<PAGE> 51
4(c)-3 Third Supplemental Indenture, dated June 15, 1987, to
Indenture, dated January 1, 1986, for the Company's 14%
Debentures due 1996 (Exhibit 4(c) above), filed as
Exhibit 4(c)-3 to the Company's Form 8-K, dated July 15,
1988 (File No. 1-542), is incorporated herein by
reference.
4(c)-4 Fourth Supplemental Indenture, dated June 15, 1987, to
Indenture, dated January 1, 1986, for the Company's 14%
Debentures due 1996 (Exhibit 4(c) above), filed as
Exhibit 4(c)-4 to the Company's Form 8-K, dated July 15,
1988 (File No. 1-542), is incorporated herein by
reference.
4(c)-5 Form of Waiver dated December 21, 1988 of certain
provisions of Section 5.11 to the Indenture, dated
January 1, 1986, for the Company's 14% Debentures due
1996 (Exhibit 4(c) above), filed as Exhibit 4(c)-5 to
the Company's Form 8-K, dated December 13, 1988, is
incorporated herein by reference.
4(c)-6 Fifth Supplemental Indenture, dated September 30, 1989,
to Indenture, dated January 1, 1986, for the Company's
14% Debentures due 1996 (Exhibit 4(c) above), filed as
Exhibit 4(c)-6 to the Company's Annual Report on Form
10-K for the year ended December 31, 1989 (File No.
1-542), is incorporated herein by reference.
4(c)-7 Sixth Supplemental Indenture, dated March 1, 1990, to
Indenture, dated January 1, 1986, for the Company's 14%
Debentures due 1996 (Exhibit 4(c) above), filed as
Exhibit 4(c)-7 to the Company's Form 10-Q for the
quarter ended June 30, 1990, is incorporated herein by
reference.
4(c)-8 Seventh Supplemental Indenture, dated May 17, 1991, to
Indenture, dated January 1, 1986, for the Company's 14%
Debentures due 1996 (Exhibit 4(c) above), filed as
Exhibit 4(c)-8 to the Company's Form 10-K for the year
ended December 31, 1991 (File No. 1-542), is
incorporated herein by reference.
4(e)-1 Amended and Restated Registration Rights and Transfer
Restriction Agreement, dated April 30, 1987, among the
Company; the Common Holders, Debt Holders, Offering
Committee and Custodian named therein; and Herzog, Heine
Geduld Inc., filed as Exhibit 4(e)-1 to the Company's
Registration Statement on Form S-1, No. 33-15107, is
incorporated herein by reference.
4(m) Term Loan and Security Agreement without Exhibits and
Installment Note, dated October 15, 1991, between
Grossman's Inc. and Sanwa Business Credit Corporation,
filed as Exhibit 4(m) to the Company's Form 10-Q for the
quarter ended September 30, 1991, is incorporated herein
by reference.
51
<PAGE> 52
4(n) First Amendment, dated December 14, 1993, to Term Loan
and Security Agreement between Grossman's Inc. and Sanwa
Business Credit Corporation, dated October 15, 1991, is
incorporated herein by reference.
4(n)-1 Second Amendment, dated October 30, 1994, to Term Loan
and Security Agreement between Grossman's Inc. and Sanwa
Business Credit Corporation, dated October 15, 1991,
filed as Exhibit 4(n)-1 to the Company's Form 10-Q for
the quarter ended September 30, 1994 (File No. 1-542),
is incorporated herein by reference.
4(n)-2 Third Amendment, dated January 31, 1995, to Term Loan
and Security Agreement between Grossman's Inc. and Sanwa
Business Credit Corporation, dated October 15, 1991
(without exhibit), filed herewith.
4(o) Loan and Security Agreement between Grossman's Inc. and
BankAmerica Business Credit, Inc. dated December 15,
1993 (without exhibits), filed as Exhibit 4(o) to the
Company's Form 10-K for the year ended December 31, 1993
(File No. 1-542), is incorporated herein by reference.
4(o)-1 Waiver and Second Amendment, dated as of July 11, 1994,
to the Loan and Security Agreement between Grossman's
Inc. and BankAmerica Business Credit, Inc., dated
December 15, 1993, filed herewith.
10(iii)(g)-2 Separation Agreement, dated November 28, 1994, between
Grossman's Inc. and Thomas R. Schwarz, filed herewith.
10(iii)(h)-2 Employment Agreement, dated December 1, 1994 between
Grossman's Inc and Sydney L. Katz, filed herewith.
10(iii)(k) Amended and Restated Employment Agreement, dated July 1,
1991, between Grossman's Inc. and Robert L. Flowers,
filed as Exhibit 10(iii)(k) to the Company's Annual
Report on Form 10-K for year ended December 31, 1991
(File No. 1-542), is incorporated herein by reference.
10(iii)(k)-1 Amendment No. 1, dated September 26, 1994, to Amended
and Restated Employment Agreement dated as of July 1,
1991, between Grossman's Inc. and Robert L. Flowers,
filed as Exhibit 10(iii)(k)-1 to the Company Form 10-Q
for the quarter ended September 30, 1994 (File No.
1-542), is incorporated herein by reference.
10(iii)(l) Amended and Restated Employment Agreement, dated July 1,
1991, between Grossman's Inc. and Richard E. Kent, filed
as Exhibit 10(iii)(l) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993 (File No.
1-542), is incorporated herein by reference.
52
<PAGE> 53
10(iii)(l)-1 Amendment No. 1, dated September 26, 1994, to Amended
and Restated Employment Agreement dated as of July 1,
1991, between Grossman's Inc. and Richard E. Kent, filed
as Exhibit 10(iii)(l)-1 to the Company's Form 10-Q for
the quarter ended September 30, 1994 (File No. 1-542),
is incorporated herein by reference.
10(iii)(m)-1 Severance Agreement, dated August 22, 1994, between
Grossman's Inc. and Alan T. Kane, filed herewith.
10(iii)(n) Employment Agreement, dated June 8, 1992, between
Grossman's Inc. and David Krawczyk, filed herewith.
10(iii)(n)-1 Amendment No. 1, dated September 26, 1994, to Employment
Agreement dated as of June 8, 1992, between Grossman's
Inc. and David Krawczyk, filed herewith.
10(iii)(o) Employment Agreement, dated November 23, 1994, between
Grossman's Inc. and Robert K. Swanson, filed herewith.
10(b) Restated and Amended Grossman's Inc./Evans Asset Holding
Company General Pension Plan, filed as Exhibit 10(b) to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1986 (File No. 1-542), is
incorporated herein by reference.
10(c) Agreement Re General Pension Plan, dated November 18,
1986, among Evans Products Company, Grossman's Inc.,
Evans Financial Corp., Evans Transportation Company and
Evans Asset Holding Company, filed as Exhibit 10(c) to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1986 (File No. 1-542), is
incorporated herein by reference.
10(c)-1 Agreement Re Spin-off of General Pension Plan, dated
January 1, 1987, among the Company, Evans Asset Holding
Company, Evans Financial Corp. and Evans Transportation
Company, filed as Exhibit 10(c)-1 to the Company's
Annual Report on Form 10-K for the year ended December
31, 1987 (File No. 1-542), is incorporated herein by
reference.
10(c)-2 Letter, dated December 30, 1987, documenting certain
understandings reached among the Company, Grossman's
Inc. Retirement Plan, Evans Asset Holding Company and
Evans Asset Holding Company/Grossman's Inc. General
Pension Plan, regarding the proper interpretation of the
Agreement Re Spin-off of General Pension Plan (Exhibit
10(c)-1 above), filed as Exhibit 10(c)-2 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 1-542), is incorporated
herein by reference.
10(c)-8 Grossman's Inc. Restated Retirement Plan, dated
February 15, 1995, filed herewith.
53
<PAGE> 54
10(d) Claim Allocation Agreement, dated November 19, 1986, by
and between Evans Asset Holding Company, EFC Mortgage
Trust and Grossman's Inc., filed as Exhibit 10(d) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1986 (File No. 1-542), is incorporated
herein by reference.
10(e) EPC Asset Transfer Agreement, dated November 19, 1986,
among Evans Products Company, Evans Asset Holding
Company, EPC Properties Company, Minneapolis Electric
Steel Castings Company, Racine Steel Castings Company,
RSC Properties Company, Duluth Steel Castings Company,
Aberdeen Forest Products Company and Evans Engineered
Products Company, filed as Exhibit 10(e) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1986 (File No. 1-542), is incorporated
herein by reference.
10(f) EFC Asset Transfer Agreement, dated November 19, 1986,
among Evans Financial Corp. and EFC Mortgage Trust,
filed as Exhibit 10(f) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1986 (File No.
1-542), is incorporated herein by reference.
10(g) Assumption Agreement, dated November 19, 1986, among
Evans Asset Holding Company, EFC Mortgage Trust, Evans
Products Company, Evans Financial Corp. and Bank of
America National Trust and Savings Association, as
agent, filed as Exhibit 10(g) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1986
(File No. 1-542), is incorporated herein by reference.
10(h) Grossman's Inc. 1986 Nonqualified Stock Option Plan,
filed as Exhibit A to the Company's Proxy Statement for
the 1987 Annual Meeting of Stockholders, dated September
28, 1987, is incorporated herein by reference.
10(h)-1 Amendment, dated December 11, 1990, to 1986 Nonqualified
Stock Option Plan, filed as Exhibit 10(h)-1 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1990 (File No. 1-542), is incorporated
herein by reference.
10(h)-2 Amendment, dated January 28, 1992, to 1986 Nonqualified
Stock Option Plan, filed as Exhibit 10(h)-2 to the
Company's Form 10-Q for the quarter ended March 31, 1992
(File No. 1-542), is incorporated herein by reference.
10(i)-3 Grossman's Inc. Restated Executive Severance Plan, dated
December 14, 1994, filed herewith.
10(m)-1 Grossman's Inc. Supplemental Executive Retirement Plan,
dated January 1, 1992, filed as Exhibit 10(m)-1 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1991 (File No. 1-542), is incorporated
herein by reference.
54
<PAGE> 55
10(n)-5 Grossman's Inc. Restated Savings and Profit Sharing
Plan, dated February 15, 1995, filed herewith.
10(o) Grossman's Inc. 1993 Key Employee Stock Option Plan,
dated April 27, 1993, filed as Exhibit 10(o) to the
Company's Form 10-K for the year ended December 31, 1993
(File No. 1-542) is incorporated herein by reference.
11(a) Statement re computation of earnings per share, filed
herewith.
22 Subsidiaries of the Company, filed as Exhibit 22 to the
Company's Annual Report on Form 10-Q for the quarter
ended September 30, 1991 (File No. 1-542), is
incorporated herein by reference.
23 Consent of Ernst & Young LLP, Independent Auditors,
filed herewith.
55
<PAGE> 56
<TABLE>
GROSSMAN'S INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Deductions (1) of Year
- ----------- ---------- ---------- -------------- -------
<S> <C> <C> <C> <C>
Year Ended
December 31, 1994
Allowance for
doubtful accounts $5,212 $1,300 $2,355 $4,157
======== ======== ======== ========
Year Ended
December 31, 1993
Allowance for
doubtful accounts $3,904 $2,911 $1,603 $5,212
======== ======== ======== ========
Year Ended
December 31, 1992
Allowance for
doubtful accounts $3,974 $1,944 $2,014 $3,904
======== ======== ======== ========
<FN>
(1) Write-off of bad debts less recoveries.
</TABLE>
56
<PAGE> 57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
GROSSMAN'S INC.
---------------
Company
Date: March 16, 1995 By /s/ Steven L. Shapiro
---------------------
Steven L. Shapiro
Controller
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
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert K. Swanson Chairman of the Board March 16, 1995
- ----------------------------
Robert K. Swanson
/s/ Sydney L. Katz President and Chief March 16, 1995
- ---------------------------- Executive Officer
Sydney L. Katz (Principle Executive
Officer) (Principal
Financial Officer)
/s/ Steven L. Shapiro Controller March 16, 1995
- ---------------------------- (Principal Accounting
Steven L. Shapiro Officer)
/s/ Russell Cox Director March 16, 1995
- ----------------------------
Russell Cox
/s/ John Grey Director March 16, 1995
- ----------------------------
John Grey
/s/ Maurice Grossman Director March 16, 1995
- ----------------------------
Maurice Grossman
/s/ Leo Kahn Director March 16, 1995
- ----------------------------
Leo Kahn
/s/ W. Wallace McDowell, Jr. Director March 16, 1995
- ----------------------------
W. Wallace McDowell, Jr.
/s/ Stephen B. Oresman Director March 16, 1995
- ----------------------------
Stephen B. Oresman
/s/ Harold Tanner Director March 16, 1995
- ----------------------------
Harold Tanner
</TABLE>
57
<PAGE>1
THIRD AMENDMENT TO TERM LOAN AND SECURITY AGREEMENT
---------------------------------------------------
THIS THIRD AMENDMENT TO TERM LOAN AND SECURITY AGREEMENT
(this "Amendment") is made as of this 31st day of January, 1995, by
and between GROSSMAN'S INC., a Delaware corporation ("Borrower"), and
SANWA BUSINESS CREDIT CORPORATION, a Delaware corporation ("Lender").
BACKGROUND
----------
A. Borrower and Lender are parties to a Term Loan and
Security Agreement dated October 15, 1991, as amended by a First
Amendment (the "First Amendment") to Term Loan and Security Agreement
dated as of December 14, 1993, and as further amended by a Second
Amendment (the "Second Amendment") to Term Loan and Security
Agreement dated as of October 30, 1994 (including all exhibits and
riders thereto and as supplemented and amended from time to time
referred to herein collectively as the "Loan Agreement").
B. In December, 1993 Borrower closed and ceased to
operate its Danvers, Massachusetts store and as a consequence,
pursuant to Section 3.8 of the Loan Agreement, Borrower either had
to (i) immediately prepay the outstanding principal balance of the
Term Note plus all accrued interest, or (ii) subject to the approval
of Lender, substitute as Collateral another of its properties having
a minimum appraised value equal to at least Four Million Seven
Hundred Fifty Thousand and No/100 Dollars ($4,750,000.00). Borrower
was unable to substitute suitable Collateral or prepay the
outstanding balance of this Note.
C. At the request of Borrower, pursuant to the terms of
the First Amendment and the Second Amendment, Lender agreed to waive
the requirement that Borrower immediately prepay the outstanding
principal balance of the Note and agreed to waive certain defaults
that were created by the Danvers closing and certain other store
closings.
D. The maturity date of the Term Note was reset to
January 31, 1995 pursuant to the Second Amendment and the Second Note
Modification Agreement executed by Borrower and delivered to Lender
pursuant to such Second Amendment. Borrower has advised Lender that
it is unable to pay the Term Loan in full on the January 31, 1995
maturity date and has requested Lender to extend the maturity date.
E. Lender has considered Borrower's request and is
amenable to such request provided that Borrower executes this
Amendment and complies with all of the terms and conditions contained
herein.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises set forth
above and the mutual covenants and promises contained in this
Amendment, Borrower and Lender agree as follows:
1. Amendment to Loan Agreement. Effective as of the date
hereof and subject to the conditions set forth in Paragraph 4, Lender
and Borrower agree to further amend the Loan Agreement as follows:
(a) Section 2.2 Repayment of Term Loan; Interest Payments.
Section 2.2(a) of the Loan Agreement is amended in full to read as
follows:
"(a) Payments of principal and interest due on the
Term Note shall be made in installments as follows:
(i) An installment of principal only in the amount
of One Million and No/100 Dollars ($1,000,000.00)
payable on January 31, 1995;
(ii) An installment of principal only in the amount
of One Hundred Thousand and No/100 Dollars
($100,000.00) payable on February 28, 1995;
(iii) An installment of principal only in the amount
of One Hundred Thousand and No/100 Dollars
($100,000.00) payable on March 31, 1995;
(iv) An installment of Ninety-Three Thousand Seven
Hundred Fifty and No/100 Dollars ($93,750.00) plus
interest on the principal balance of the Term Loan
then remaining unpaid, calculated at the Original
Interest Rate as set forth in Section 2.4 below,
payable on April 15, 1995; and
(v) A final installment in an amount equal to the sum
of the then outstanding principal amount of the Term
Loan and all accrued and unpaid interest thereon
calculated at the Original Interest Rate, payable on
or before the earlier to occur of the following dates:
(a) April 30, 1995, or (b) the earliest to occur of
the dates Borrower has the right to receive proceeds
from the sale or refinancing of the following property
locations of Borrower: (i) Danvers, Massachusetts,
(ii) Braintree, Massachusetts, and (iii) Sacramento
(North Highland), California."
(b) Article 7 Financial Covenants. Article 7 of the Loan
Agreement is amended in full to read as follows:
<PAGE> 3
"Borrower covenants and agrees that as at the end of each
month after the date hereof (as provided below) and so long as any
of the Obligations of Borrower to Lender under this Agreement
exist or this Agreement remains in effect, unless otherwise
consented to by Lender in writing:
7.1 Adjusted Tangible Net Worth. The Borrower shall not
permit Adjusted Tangible Net Worth to be less than Seventy Five
Million and No/100 Dollars ($75,000,000.00) at any time the
Obligations of Borrower to Lender under this Agreement remain
outstanding or this Agreement remains in effect.
2. Fees.
(a) Borrower shall pay Lender an extension fee (the
"Extension Fee") in the amount of $50,000.00, which Extension Fee
shall be payable on January 31, 1995.
(b) The "Accelerating Charge" as defined and provided for
in Paragraph 2(b) of the First Amendment shall remain payable at the
rate of $15,000.00 per month, for each month that the Term Loan is
unpaid, payable on the 15th day of each month it is due, with the
next $15,000.00 Accelerating Charge payment due on February 15, 1994.
(c) Section 2.3 Prepayments. No Prepayment Fee shall be
due and payable pursuant to Section 2.3 of the Loan Agreement if
payment of the Term Loan is made as provided in Section 2.2 of the
Loan Agreement, as amended.
(d) Borrower agrees to pay all fees and expenses of Lender
in connection with the preparation of this Amendment and all other
documents related thereto, including without limitation all
attorneys' fees and expenses (including any title or search fees and
recordation taxes) incurred in connection with the negotiation and
preparation of this Amendment and all other documents related hereto.
3. Appraisals. Pursuant to Section 3.6 of the Loan
Agreement, after the occurrence of an Event of Default, Borrower
shall, at the request of Lender, provide Lender at Borrower's expense
with appraisals or updates thereof of any or all of the Collateral
from an appraiser reasonably satisfactory to the Lender. Lender did
not require Borrower to provide Lender with appraisals prior to
granting certain waivers to Borrower in connection with the First
Amendment and the Second Amendment; provided, however, Borrower
agrees that Lender may require Borrower to provide Lender with
appraisals pursuant to Section 3.6 of the Loan Agreement at any time
after the occurrence of an Event of Default or before agreeing to (i)
any future waiver of any covenant or agreement contained in the Loan
Agreement or (ii) the extension of a maturity date of the Term Note,
either of which will be in Lender's sole discretion.
4. Effectiveness of Amendment. This Amendment shall
become effective and be deemed effective as of the date hereof
provided that on or before such date, Lender shall have received (i)
three (3) copies of this Amendment executed by Borrower, (ii) one (1)
<PAGE>
copy of the Third Note Modification Agreement executed by Borrower
in the form attached to this Amendment as Exhibit "A", (iii) a
Certificate of the Secretary of Borrower certifying Resolutions
adopted by the Executive Committee of the Board of Directors of
Borrower authorizing the transactions and documentation and documents
entered into in connection with this Amendment, (iv) payment of the
Extension Fee, and (v) payment of the $1,000,000 principal
installment due on January 31, 1995.
5. To induce Lender to amend the Loan Agreement, Borrower
represents and warrants to Lender that:
(a) Compliance with Loan Agreement. On the date hereof,
Borrower is in compliance with all of the terms and provisions set
forth in the Loan Agreement (as modified by this Amendment) and no
Event of Default specified in Section 10.1 of the Loan Agreement, nor
any event which, upon notice or lapse of time or both, would
constitute such an Event of Default, has occurred.
(b) Representations and Warranties. On the date hereof,
the representations and warranties set forth in Article 4 of the Loan
Agreement (as modified by this Amendment) are true and correct with
the same effect as though such representations and warranties had
been made on the date hereof, except to the extent that such
representations and warranties expressly relate to an earlier date.
(c) Corporate Authority of Borrower. Borrower has the
full power and authority to enter into this Amendment, to make the
borrowings under the Loan Agreement as amended by this Amendment, and
to incur and perform the obligations provided for under the Loan
Agreement and this Amendment, all of which have been duly authorized
by all proper and necessary corporate action. No consent or approval
of shareholders or of any public authority or regulatory body is
required as a condition to the validity or enforceability of this
Amendment.
(d) Amendment as Binding Agreement. This Amendment
constitutes the valid and legally binding obligations of Borrower,
fully enforceable against Borrower in accordance with its terms.
(e) No Conflicting Agreements. The execution and
performance by Borrower of this Amendment and the borrowings by
Borrower under the Loan Agreement, as amended, will not (i) violate
any provision of law, any order of any court or other agency of
government, or the Charter or By-Laws of Borrower, or (ii) violate
any indenture, contract, agreement or other instrument to which
Borrower is a party, or by which its property is bound, or be in
conflict with, result in a breach of or constitute (with due notice
and/or lapse of time) a default under, any such indenture, contract,
agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any
of the property or assets of Borrower.
6. Effect Upon Loan Agreement.
<PAGE> 4
(a) Except as specifically set forth in Paragraph 1, (i)
the Loan Agreement shall remain in full force and effect and is
hereby ratified and confirmed; (ii) the rights and obligations of the
parties set forth in the Loan Agreement and the Term Note remain
unchanged; and (iii) the execution, delivery and performance of this
Amendment shall not operate as a waiver of any right, power or remedy
of the Lender under the Loan Agreement, and shall not constitute a
waiver of any provision of the Loan Agreement.
(b) Borrower and Lender hereby agree that this Amendment
shall not be construed as an agreement to substitute a new obligation
or to extinguish the obligations under the Loan Agreement and shall
not constitute a novation of the obligations of Borrower under the
Loan Agreement or the Term Note.
7. Capitalized Terms. The capitalized terms used in this
Amendment shall have the same meanings ascribed to them in the Loan
Agreement unless otherwise defined herein.
8. Governing Law. This Amendment has been delivered and
shall be deemed to have been made at Chicago, Illinois and shall be
interpreted, and the rights and liabilities of the parties hereto
determined, in accordance with the internal laws (as opposed to the
conflicts of law provisions) of the State of Illinois.
9. Section Titles. The section title contained in this
Amendment are and shall be without substance, meaning or content of
any kind whatsoever and are not a part of the agreement between the
parties.
10. Counterparts. This Amendment may be executed in any
number of counterparts, each of which, when so executed and
delivered, shall be an original, but such counterparts shall together
constitute but one and the same Amendment.
IN WITNESS WHEREOF, the parties to this Agreement, have
executed it as of the day and year set forth above.
BORROWER:
GROSSMAN'S INC.
By: /s/ Arthur S. Ryan
Arthur S. Ryan, Vice President
LENDER:
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Peter L. Skavla
Peter L. Skavla, Vice President
<PAGE> 1
EXECUTION COPY
WAIVER AND SECOND AMENDMENT, dated as of July 11, 1994 (this
"Amendment"), to the Loan and Security Agreement, dated as of December 15,
1993 (as heretofore amended, supplemented or otherwise modified, the "Loan
Agreement"), between BankAmerica Business Credit, Inc. (the "Lender") and
Grossman's Inc. (the "Borrower").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Lender and the Borrower are parties to the Loan
Agreement;
WHEREAS, the Borrower has requested that the Lender waive the
provisions of Section 9.10 of the Loan Agreement to the extent necessary
to permit the Borrower to make a prepayment in respect of certain
equipment leases and amend certain provisions of the Loan Agreement to
provide for (i) the issuance of certain standby Letters of Credit having
automatic or "evergreen" renewal provisions and (ii) a temporary increase
in the sublimit for Letters of Credit; and
WHEREAS, the Lender is willing to grant such waiver and make such
amendments but only on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein have the respective meanings ascribed thereto in the
Loan Agreement.
2. Waiver of Section 9.10 (Prepayment). The Lender hereby waives
the provisions of Section 9.10 of the Loan Agreement to the extent
necessary to permit the Borrower to make a prepayment in an aggregate
principal amount not to exceed $117,000 of certain equipment leases
between the Borrower, as lessee, and Prudential Interfunding Corp., as
lessor.
3. Amendment of Section 1.1 (Defined Terms). Section 1.1 of the
Loan Agreement is hereby amended by:
(a) deleting from the definition of "Availability" contained
therein clause (i)(B) of paragraph (b) of such definition and
substituting therefor the following:
<PAGE> 2
"(B) the undrawn amount of all Letters of Credit (provided,
however, that if at any time during the period from August 1,
1994 through October 1, 1994, both the Bank of Boston Letter
of Credit and the Insurance Company Letters of Credit are
outstanding, only the undrawn amount of the Insurance Company
Letters of Credit shall be included in this clause (B))"; and
(b) adding the following new defined terms in their
appropriate alphabetical order:
"'Bank of Boston Letter of Credit' means standby letter
of credit number PG753287, in the face amount of $7,398,334,
issued by The Chase Manhattan Bank, N.A. in favor of The First
National Bank of Boston pursuant to the Letter of Credit
Agreement."
"'Insurance Company Letters of Credit' means,
collectively, (i) the standby letter of credit in the face
amount of $6,928,334, issued by The Chase Manhattan Bank, N.A.
in favor of Lumberman's Mutual Casualty Co. pursuant to the
Letter of Credit Agreement, and (ii) the standby letter of
credit in the face amount of $307,000, issued by The Chase
Manhattan Bank, N.A. in favor of Travelers Indemnity Company
pursuant to the Letter of Credit Agreement."
4. Amendment of Section 2.3 (Letters of Credit). Section 2.3 of
the Loan Agreement is hereby amended by:
(a) deleting the parenthetical phrase from clause (ii) of the
second sentence thereof; and
(b) deleting clause (a) of the third sentence thereof and
substituting therefor the following:
"(a) the maximum face amount of the requested Letter of Credit, plus
the aggregate undrawn amount of all outstanding Letters of Credit
and the aggregate amount of unreimbursed drawings under Letters of
Credit to the extent not included in the Revolving Loans, would
exceed the sum of (i) $15,000,000 plus (ii) if at any time during
the period from August 1, 1994 through October 1, 1994 both the Bank
of Boston Letter of Credit and the Insurance Company Letters of
Credit are outstanding, the aggregate undrawn face amount of the
Insurance Company Letters of Credit;".
5. Representations and Warranties. To induce the Lender to enter
into this Amendment, the Borrower hereby represents and warrants to the
Lender as follows, with the same effect as if such representations and
warranties were set forth in the Loan Agreement:
<PAGE> 3
(a) The Borrower has the corporate power and authority to
enter into this Amendment and has taken all corporate action
required to authorize its execution and delivery of this Amendment
and its performance of the Loan Agreement, as amended hereby (as so
amended, the "Amended Agreement"). This Amendment has been duly
executed and delivered by the Borrower and the Amended Agreement
constitutes the valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms. The
execution, delivery, and performance of this Amendment and the
Amended Agreement by the Borrower will not violate its certificate
of incorporation or by-laws or any agreement or legal requirement
binding on the Borrower.
(b) On the date hereof and after giving effect to the terms
of this Amendment, (i) the Loan Agreement and the other Loan
Documents are in full force and effect and constitute the Borrower's
binding obligations, enforceable against the Borrower in accordance
with their respective terms; (ii) no Event or Event of Default has
occurred and is continuing; and (iii) the Borrower does not have any
defense to or setoff, counterclaim or claim against payment of the
Obligations and enforcement of the Loan Documents based upon a fact
or circumstance existing or occurring on or prior to the date
hereof.
6. Effectiveness. This Amendment shall be effective as of the
date first written above upon receipt by the Lender of (a) a counterpart
hereof duly executed by the Borrower, (b) a letter agreement in
substantially the form of Exhibit A hereto duly executed by Lumberman's
Mutual Casualty Co., and (c) a letter agreement in substantially the form
of Exhibit A hereto duly executed by Travelers Indemnity Company.
7. Limited Effect. This Amendment shall be limited solely to the
matters expressly set forth herein and shall not (a) constitute a waiver
or amendment of any other term or condition of the Loan Agreement or of
any instrument or agreement referred to therein or (b) prejudice any right
or rights which the Lender may now have or may have in the future under or
in connection with the Loan Agreement or any instrument or agreement
referred to therein. Except as expressly amended and waived hereby, all of
the covenants and provisions of the Loan Agreement are and shall continue
to be in full force and effect.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
9. Counterparts. This Amendment may be executed by the parties
hereto in any number of separate counterparts, each of which shall be an
original, and all of which taken together shall be deemed to constitute
one and the same instrument.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
BANKAMERICA BUSINESS CREDIT, INC.
By: ___________________________
Name:
Title:
GROSSMAN'S INC.
By: ___________________________
Name:
Title:
<PAGE> 5
EXHIBIT A
---------
[Letterhead of Lumberman's Mutual Casualty Co.]
[Date]
The Chase Manhattan Bank, N.A.
North American Trade Operations
4 Chase Metrotech Center - 8th Floor
Brooklyn, New York 11245
BankAmerica Business Credit, Inc.
40 East 52nd Street
New York, New York 10022
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attention: Richard Hill, Jr.
Ladies and Gentlemen:
We refer to restated letters of credit listed on Schedule I attached
hereto and made a part hereof, which restated letters of credit were
issued by The First National Bank of Boston ("Bank of Boston") for the
account of Grossman's Inc. ("Grossman's") for the benefit of Lumberman's
Mutual Casualty Co. (the "Beneficiary") (collectively, the "Existing
Letters of Credit").
We have been informed by BankAmerica Business Credit, Inc. ("BABC")
that pursuant to a Loan and Security Agreement between BABC and
Grossman's, BABC will cause The Chase Manhattan Bank, N.A. ("Chase") to
issue a new letter of credit in favor of the Beneficiary (the "Replacement
Letter of Credit") in an amount equal to the aggregate face amount of the
Existing Letters of Credit and in substantially the form of the Existing
Letters of Credit.
In consideration of the delivery of the Replacement Letter of Credit
to the Beneficiary before the return of the Existing Letters of Credit to
Bank of Boston by the Beneficiary, the Beneficiary hereby agrees as
follows:
(a) Immediately upon receipt by the Beneficiary of the
Replacement Letter of Credit, the Beneficiary shall deem the
Existing Letters of Credit to be cancelled and in no event shall the
Beneficiary attempt to make a drawing under both the Replacement
Letter of Credit and any Existing Letter of Credit while both the
Replacement Letter of Credit and the Existing Letters of Credit are
in its possession.
<PAGE> 6
(b) Forthwith upon receipt by the Beneficiary of the
Replacement Letter of Credit, the Beneficiary shall return the
Existing Letters of Credit to Bank of Boston at its address set
forth above.
(c) The Beneficiary will indemnify and hold harmless Bank of
Boston, Chase and BABC from and against all claims, losses,
liabilities, damages, obligations, penalties, actions, judgments,
suits, costs and expenses arising out of the failure by the
Beneficiary to comply with the agreements set forth in paragraphs
(a) and (b) above.
This letter agreement shall be binding upon the Beneficiary and its
successors and assigns and shall inure to the benefit of the Bank of
Boston, Chase, BABC and their respective successors and assigns.
Very truly yours,
LUMBERMAN'S MUTUAL CASUALTY CO.
By: __________________________
Name:
Title:
<PAGE> 7
SCHEDULE I
The First National Bank of Boston Letters of Credit
---------------------------------------------------
Policy Period Letter of Credit # Amount
- ------------- ------------------ ------
10/1/88-10/1/89 50014715 $ 228,100
10/1/89-10/1/90 50014958 $ 515,216
10/1/90-10/1/91 50053553 $1,432,620
10/1/91-10/1/92 50015201 $ 860,569
10/1/91-10/1/92 50015202 $ 554,240
10/1/92-10/1/93 50080619 $3,337,589
<PAGE> 8
EXHIBIT B
---------
[Letterhead of Travelers Indemnity Company]
[Date]
The Chase Manhattan Bank, N.A.
North American Trade Operations
4 Chase Metrotech Center - 8th Floor
Brooklyn, New York 11245
BankAmerica Business Credit, Inc.
40 East 52nd Street
New York, New York 10022
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attention: Richard Hill, Jr.
Ladies and Gentlemen:
We refer to restated Letter of Credit number 50006596 in the face
amount of $307,000 covering the period October 1, 1987 to October 1, 1988
issued by The First National Bank of Boston ("Bank of Boston") for the
account of Grossman's Inc. ("Grossman's") for the benefit of Travelers
Indemnity Company (the "Beneficiary") (the "Existing Letter of Credit").
We have been informed by BankAmerica Business Credit, Inc. ("BABC")
that pursuant to a Loan and Security Agreement between BABC and
Grossman's, BABC will cause The Chase Manhattan Bank, N.A. ("Chase") to
issue a new letter of credit in favor of the Beneficiary (the "Replacement
Letter of Credit") in an amount equal to the face amount of the Existing
Letter of Credit and in substantially the form of the Existing Letter of
Credit.
In consideration of the delivery of the Replacement Letter of Credit
to the Beneficiary before the return of the Existing Letter of Credit to
Bank of Boston by the Beneficiary, the Beneficiary hereby agrees as
follows:
(a) Immediately upon receipt by the Beneficiary of the
Replacement Letter of Credit, the Beneficiary shall deem the
Existing Letter of Credit to be cancelled and in no event shall the
Beneficiary attempt to make a drawing under both the Replacement
Letter of Credit and the Existing Letter of Credit while both such
letters of credit are in its possession.
<PAGE> 9
(b) Forthwith upon receipt by the Beneficiary of the
Replacement Letter of Credit, the Beneficiary shall return the
Existing Letter of Credit to Bank of Boston at its address set forth
above.
(c) The Beneficiary will indemnify and hold harmless Bank of
Boston, Chase and BABC from and against all claims, losses,
liabilities, damages, obligations, penalties, actions, judgments,
suits, costs and expenses arising out of the failure by the
Beneficiary to comply with the agreements set forth in paragraphs
(a) and (b) above.
This letter agreement shall be binding upon the Beneficiary and its
successors and assigns and shall inure to the benefit of the Bank of
Boston, Chase, BABC and their respective successors and assigns.
Very truly yours,
TRAVELERS INDEMNITY COMPANY
By: __________________________
Name:
Title:
<PAGE> 1
SEPARATION AGREEMENT
--------------------
Grossman's, Inc., a Delaware corporation ("Grossman's"), and Thomas
R. Schwarz ("Mr. Schwarz") hereby agree with respect to Mr. Schwarz's
resignation from the employ of Grossman's, as follows:
1. Mr. Schwarz hereby resigns from the office of Chief Executive
Officer and as a member of the Board of Directors of Grossman's and such
of its subsidiaries and affiliates effective at 11:59 p.m. Eastern
Standard Time, on November 28, 1994. Mr. Schwarz also hereby resigns as
an employee of Grossman's, effective at 11:59 p.m., Eastern Standard Time,
on November 28, 1994.
2. Until November 30, 1994, Mr. Schwarz will continue to receive
his Base Salary (as defined in the Employment Agreement dated as of May
23, 1990, as amended to date (the "Employment Agreement"), between
Grossman's and Mr. Schwarz) in accordance with past practice, and shall
otherwise be considered an employee of Grossman's for all purposes until
such date.
3. On November 29, 1994, Grossman's shall pay to Mr. Schwarz an
amount equal to $1,875,600.00, subject to withholdings for taxes, by wire
transfer of immediately available funds or by delivery of a certified or
bank check in full satisfaction of Grossman's obligations under Paragraph
8(c) of the Employment Agreement. Mr. Schwarz agrees to cooperate with
Grossman's to terminate his beneficial interest in the irrevocable grantor
trust established pursuant to Paragraph 8(d) of the Employment Agreement.
[ 4. Deleted paragraph is not related to compensation of Mr.
Schwarz or release of his rights. ]
5. At the time of Mr. Schwarz' retirement from office, Grossman's
agrees that he will be entitled to exercise options for the purchase of
common stock of Grossman's as follows:
<TABLE>
<CAPTION>
Date of Total Shares Per Share
Option Shares Vested Exercise Price
------ ------ ------ --------------
<S> <C> <C> <C>
12/11/90 400,000 400,000 $2.3125
</TABLE>
In consideration of the agreements herein, Mr. Schwarz agrees to
relinquish any and all rights to any other options previously granted to
him whether or not such options have vested prior to the duties of this
Agreement. For purposes of the provisions of the options regarding
exercise, notwithstanding any such provisions to the contrary, Mr. Schwarz
shall have the right to exercise said options, in whole or in part, at any
time or times on or prior to December 31, 1995, at which time all such
options shall terminate. All vested options are fully exercisable. No
additional shares shall vest after November 28, 1994.
6. Following the execution of this agreement, Mr. Schwarz will
not disparage Grossman's, including its products or management, in any
communications (whether in writing or otherwise) with or to any of its
customers, suppliers, employees or investors (including investment
analysts). It shall not be considered disparagement of Grossman's for Mr.
Schwarz to state publicly that he has retired in part as a result of a
disagreement in philosophy with the Board of Directors of Grossman's
concerning operations and management.
<PAGE> 2
7. Grossman's will issue the attached press release regarding Mr.
Schwarz' retirement on November 29, 1994. Mr. Schwarz agrees to attend
one or more meetings with his direct reports on November 29, 1994 in
Braintree to discuss his retirement from Grossman's. Inquiries from third
parties to Grossman's directors and officers will be referred to Sydney L.
Katz, President and Chief Executive Officer, who will respond in a manner
which is consistent with the press release. Grossman's agrees not to
disparage Mr. Schwarz, including his work, in any communications (whether
in writing or otherwise).
8. Except as otherwise set forth herein and except for the
provisions of Paragraph 10 of the Employment Agreement, which shall
survive in full force and effect the execution and delivery of this
Agreement, the Employment Agreement shall terminate and be of no further
force and effect after November 28, 1994.
9. Mr. Schwarz shall return to Grossman's any keys, credit cards,
records and other property of Grossman's which he may have in his
possession.
10. Grossman's agrees to pay the reasonable fees and expenses of
Mr. Schwarz' counsel, Skadden, Arps, Slate, Meagher & Flom in connection
with the negotiation of this Agreement.
11. Nothing in this Agreement shall impair or prejudice Mr.
Schwarz' rights to indemnification under Grossman's charter or bylaws or
to the benefits of any directors and officers liability insurance policies
maintained by Grossman's.
12. Grossman's shall, promptly after the receipt of appropriate
documentation, reimburse Mr. Schwarz for any business expenses incurred by
him prior to the date of this Agreement.
13. In the event that any amounts paid to Mr. Schwarz pursuant to
this Agreement are sought to be set aside or recovered as a "preference"
item in any proceeding under the federal bankruptcy laws, Mr. Schwarz
shall be entitled to pursue (or assert in his defense) any claims for
monetary or other damages he may then have against Grossman's.
14. The obligations of Grossman's set forth herein are in full
payment of any amounts due Mr. Schwarz in respect of his employment by
Grossman's and the termination thereof. Except as provided herein, Mr.
Schwarz has no claim of any nature against Grossman's related to such
employment or termination, and Mr. Schwarz, on behalf of himself and his
heirs and legal representatives, releases and discharges Grossman's and
its directors and officers from all such claims, including without
limitation any such claim arising under federal or state laws relating to
the payment of compensation or benefits or to discriminatory employment
practices. Notwithstanding the foregoing, Mr. Schwarz shall be entitled
to his rights to continue certain health coverage benefits in accordance
with the applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1986. November 28, 1994 shall be Mr. Schwarz' date
of termination for purposes of determining such rights.
<PAGE> 3
15. Except as provided herein, Grossman's has no claim of any
nature against Mr. Schwarz related to his employment and Grossman's, on
behalf of itself, its officers and directors, releases and discharges Mr.
Schwarz, his heirs and legal representatives from all such claims.
16. This Agreement shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts.
If any provision of this Agreement should for any reason be held invalid
or unenforceable in any respect, such holding shall not affect any other
provision of this Agreement, and such invalid or unenforceable provision
shall be construed so as to be enforceable to the maximum extent
compatible with applicable law.
17. In signing this Agreement, you represent that you do so
voluntarily and that you have been afforded a full and reasonable
opportunity to consider its terms and to consult with or seek advice from
any person of your choosing. You further represent that in signing this
Agreement you have not relied on any agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter
hereof which are not set forth expressly in this Agreement.
GROSSMAN'S INC. THOMAS R. SCHWARZ
___________________________ _____________________________
Dated: November 28, 1994 Dated: November 28, 1994
<PAGE> 1
EMPLOYMENT AGREEMENT
This is an EMPLOYMENT AGREEMENT (the "Agreement"), effective as of
December 1, 1994, between Sydney L. Katz, ("Executive") and GROSSMAN'S
INC. (the "Company"), a Delaware corporation.
Whereas the Company wishes to have the benefit of the continued
employment of Executive as the principal executive officer of the Company
and to assign to Executive new titles and responsibilities, and Executive
wishes to accept such continued employment and new titles and
responsibilities, the parties agree as follows:
1. Term of Employment. Except as provided in paragraph 7, the Company
shall employ Executive for the period (the "Employment Period") commencing
on December 1, 1994 (the "Commencement Date") and ending on the third
anniversary of the Commencement Date; provided, however, that the
Employment Period shall be automatically extended so that at no time shall
the term of this Agreement be less than three years. Notwithstanding the
foregoing, unless the Executive and the Company shall otherwise agree,
this Agreement shall terminate as of the last day of the month in which
Executive attains age 65.
2. Positions. During the Employment Period, the Company will
employ Executive as President and Chief Executive Officer of the Company.
During the Employment Period, the Company will propose Executive for
reelection to the Board of Directors of the Company (the "Board") at
each appropriate annual meeting of stockholders.
3. Responsibilities and Duties. During the Employment Period,
Executive will have responsibilities and perform such executive management
duties appropriate to his position as the Chief Executive Officer of a
publicly-traded company. During the Employment Period, Executive will
devote his full time and efforts to his employment with the Company.
However, Executive may serve on boards of directors of other businesses
and attend to personal investments and community and charitable service,
provided in each case that such activities are not competitive with the
business of the Company and do not interfere with the performance of his
duties to the Company.
4. Compensation.
(a) Base Salary. During the Employment Period, the Company
will pay to Executive, in equal semi-monthly installments, base salary at
the rate of $400,000 per annum. This amount will be increased by any
cost-of-living increases or other salary increases that the Board, in its
sole discretion, may from time to time approve. The annual base salary,
as so increased, is hereinafter referred to as "Base Salary." The Base
Salary may not be reduced by the Company without Executive's consent.
(b) Signing Bonus. Subject to approval by shareholders of
the 1995 Restricted Stock Plan at the 1995 Annual Meeting of shareholders,
the Company will pay to Executive a bonus of $50,000, payable in 22,222
shares of the Company's Common Stock (the "Bonus Shares"). If the 1995
Restricted Stock Plan is not approved by shareholders, the Company will
pay to Executive a bonus of $50,000 in cash on or before April 30, 1995.
<PAGE> 2
(c) Annual Bonuses. Commencing in 1995, Executive will
participate in the Company's Executive Bonus Program (and in any successor
bonus or incentive program), with Executive's target bonus to be not less
than 50% of base salary. Executive's bonus will be determined based upon
the attainment of objectives to be established in writing by the
Compensation Committee of the Board of Directors of the Company prior to
the end of the first quarter of each calendar year during the Employment
Period. It is understood that these objectives will not be limited solely
to increases in the Company's reported earnings per share.
(d) Stock Awards. Effective December 14, 1994, the Company
has granted to Executive under its 1986 Option Plan an option to purchase
197,500 shares of its Common Stock (which will increase the number of
shares under option to Executive immediately after the Effective Date to
500,000) at an exercise price equal to $2.25 per share, the fair market
value on the date of grant. The option will vest in three annual
installments, with the first installment equal to 33% being vested on
December 14, 1995, the second installment equal to 34% being vest on
December 14, 1996, and the final installment equal to 34% being vested on
December 14, 1997. The option will be governed by the terms of the Plan
and the document by which it is granted which will reflect all relevant
provisions of this Agreement. Executive will be eligible to receive
additional stock options and other equity awards under the 1986 Stock
Option Plan, any successor plan and any other equity compensation
arrangements of the Company for which senior executives are eligible, all
in accordance with the terms of such plan or arrangements and all as
decided by the Board in its sole discretion.
5. Benefits, Perquisites and Expenses.
(a) In General. During the Employment Period, Executive
will be entitled to participate in all employee benefit plans, policies
and programs that are available generally to the Company's full-time
employees and senior executives, including pension, savings and profit-
sharing plans, group life, disability, accident or casualty,
hospitalization and medical insurance plans. Executive will be provided
with perquisites, including vacation time, in accordance with the
Company's plans, policies and programs generally applicable to senior
officers, and the Company will provide Executive with an automobile for
business and personal use consistent with its general policies for
executives. The Company will reimburse Executive for expenses properly
incurred by him in the performance of his Company duties (including travel
expenses for his wife at his discretion) in accordance with policies
established from time to time by the Company. Executive will provide the
Company with substantiation of the expenses in such manner as is
reasonably requested by the Company.
(b) SERP. Within 120 days following the Commencement Date,
the Company will put into place, and thereafter maintain, a supplemental
employee retirement plan (the "SERP") for the benefit of Executive. The
purpose of the SERP will be to ensure that Executive's total retirement
benefits from the Company's defined benefit pension plan (the "Pension
Plan"), ERISA Excess Plan, and the SERP will at least equal the total
retirement benefits he would have received from the Pension Plan and the
ERISA Excess Plan had the Pension Plan not been amended in 1990 to base
benefits on career average pay rather than final pay.
<PAGE> 3
6. Indemnification. Executive will be entitled to
indemnification by the Company and limitation of liability for acts and
omissions in his capacity as employee, officer and/or director of the
Company or any subsidiary to the fullest extent provided by the Restated
Certificate of Incorporation and By-Laws of the Company as in effect on
the Commencement Date or to any greater extent provided by any amendment
to those documents.
7. Termination.
(a) In General. On termination of Executive's employment
with the Company as a result of any event described below in paragraphs
(b) - (f), the Employment Period will end. Executive, or his estate in
the case of his death, will then be entitled to receive (i) any cash
compensation referred to in Section 4 above that has been earned but not
paid and any benefits payable after termination of employment in
accordance with the terms of the plans, policies and programs, including
the SERP referred to in Section 5 above, and (ii) any other payment or
benefit that is specified in paragraphs (c) - (g) below to be paid as a
result of the event. Executive will not be entitled to any other payments
or benefits under this Agreement. This Agreement will survive to the
extent necessary to carry out the intent of the parties, but will
terminate when all rights of the parties under it have been satisfied.
(b) Attainment of Age 65. Executive will retire no later
than the end of the month in which he reaches age 65, or such later date
as the Executive and the Company shall otherwise agree.
(c) Death. If Executive's employment terminates because of
his death, his estate will be entitled to receive a pro-rata portion of
the maximum bonus he could have earned for the year of his death under any
arrangement in effect for such year, regardless of whether or not the
conditions to the payment of such bonus have then been attained. For this
purpose and for other purposes of this Section 7, a "pro-rata portion"
will be determined by dividing the number of months elapsed in the
calendar year of the termination (including any partial month in which the
termination occurred as a full month) by 12.
(d) Disability. The Board, in its discretion, may terminate
Executive's employment with the Company for "Disability" upon 30 days'
written notice if the Board reasonably determines that Executive has been
unable because of illness or physical or mental incapacity to perform his
duties under this Agreement for a period of more than four consecutive
months or for an aggregate of more than six months in any period of 12
months. In the event of termination for Disability, Executive will be
entitled to receive a pro-rata portion of the maximum bonus he could have
earned for the year of his termination under any arrangement in effect for
such year, regardless of whether or not the conditions to the payment of
such bonus have then been attained.
(e) Cause. The Company may terminate Executive's employment
for Cause. For this purpose, "Cause" means a good faith finding by the
Board of a material willful breach of this Agreement by Executive or of
willful malfeasance or gross negligence in the performance by Executive of
his duties, resulting in material harm to the Company. The Company may
terminate Executive for Cause only after (i) giving him written notice of
intention to terminate and of his right to a hearing, (ii) conducting a
hearing at which he may be represented by counsel on a date specified in
the notice but not less than 10 days after the date of the notice, and
(iii) giving him 10 days' written notice of the results of the hearing.
<PAGE> 4
(f) Termination by Executive Following a Change Of Control.
Executive may terminate his employment at any time within one year
following a "Change of Control", as defined in Section 8 below, on 45
days' written notice to the Company.
(g) Effect of Termination. If the Company terminates
Executive's employment other than for Cause, or if Executive terminates
his employment pursuant to paragraph (f) above, the following will apply:
(i) At the time of the termination, the Company will make a
lump-sum cash payment to Executive. Except as provided in the
next sentence, the payment will be equal to either (A) 300% of
his Base Salary in effect immediately before the termination
if the Company terminates Executive's employment other than
for Cause prior to the occurrence of a Change of Control, or
(B) 300% of the sum of his Base Salary in effect immediately
before the termination plus the highest cash bonus earned by
him during any of the last three full calendar years preceding
the termination if the Company terminates Executive's
employment other than for Cause following a Change of Control
or if Executive terminates his employment pursuant to
paragraph (f) above.
(ii) At the time of the termination, the Company will pay to
Executive in cash a pro-rata portion of the maximum bonus he
could have earned for the year of termination under any
arrangement in effect for such year, regardless of whether or
not the conditions to the payment of such bonus have then been
attained.
(iii) For a period of three years following the date of
termination, the Company will maintain in full force for the
continued benefit of Executive and his family all life
insurance, medical insurance, disability programs and similar
arrangements by which Executive was covered at any time during
the 60-day period prior to the termination, or, if Executive's
continued participation is not possible, the Company will
arrange to provide Executive with substantially similar
benefits on comparable terms.
(iv) If Executive terminates his employment pursuant to
paragraph (f) above, or if Executive's employment is
terminated other than for Cause following a Change of Control,
all stock options held by Executive to purchase Company stock
will become fully exercisable as of the date of termination
and will remain exercisable until the earlier of (A) the third
anniversary of the termination and (B) the date on which the
options would expire by passage of time without regard to this
provision. If Executive's employment is terminated prior to a
Change of Control, or for Cause following a Change of Control,
all stock options held by Executive to purchase Company stock
which have not become vested as of the date of termination
will be forfeited by Executive, and the exercise period for
all vested stock options shall be as set forth in the Plan or
other instruments containing the terms of such stock options.
<PAGE> 5
8. Change of Control.
(a) Definition. For purposes of this Agreement, a "Change
of Control" will be deemed to have occurred if (i) any corporation, person
or entity (other than the Company, a majority-owned subsidiary of the
Company or an employee benefit plan maintained by the Company or any of
its subsidiaries), or any "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Act"), becomes the
beneficial owner of stock representing more than twenty-five percent of
the voting power of the Company; (ii) the stockholders of the Company
approve a definitive agreement to merge or consolidate the Company with or
into another corporation other than a majority-owned subsidiary of the
Company, to sell or otherwise dispose of all or substantially all of the
Company's assets or to liquidate the Company, or (iii) within any 24
consecutive month period, persons who were members of the Board
immediately prior to such 24-month period, together with any persons who
were first elected as directors (other than as a result of any settlement
of a proxy or consent solicitation contest or any action taken to avoid
such a contest) during such 24-month period by or upon the recommendation
of persons who were members of the Board immediately prior to such 24-
month period and who constituted a majority of the Board at the time of
such election, cease to constitute a majority of the Board.
(b) Gross-up for Parachute Tax. In the event that the
Company treats any portion of Executive's payments or benefits under this
Agreement or under any other plan, arrangement or agreement with the
Company, any person whose actions resulted in a change of control of the
Company, or any person affiliated with the Company or such person as an
"excess parachute payment" within the meaning of Section 280G of the
Internal Revenue Code (the "Code") or it is otherwise asserted (including
on audit) that any portion of such payments or benefits is an excess
parachute payment, the Company shall promptly make an additional lump-sum
payment (the "gross-up payment") to Executive. The gross-up payment shall
be sufficient, after giving effect to all federal, state and other taxes
and charges (including interest and penalties, if any) with respect to the
gross-up payment, to make Executive whole for all taxes (including
withholding taxes) imposed under section 4999 of the Code with respect to
the excess parachute payment (including the gross-up payment) and any
associated interest and penalties. If Executive later receives a refund
of any part of the taxes imposed under section 4999, interest, or
penalties with respect to which the gross-up payment was made, he shall
pay back to the Company so much of the gross-up payment as is required to
avoid a windfall.
9. Secrecy Agreement. All information obtained or possessed by
Executive relative to the activities of the Company and its subsidiaries
that is of a secret or confidential nature, including business plans,
expansion plans, marketing data, financial data, customer's lists,
technical know-how, patents, trademarks, developments, inventions,
processes or administrative procedures, is the property of the Company and
its subsidiaries or its licensors, and Executive will not, during the
Employment Period or thereafter, use any such information for the benefit
of others than the Company and its subsidiaries or disclose it to others;
provided that nothing in this Agreement is intended to prevent Executive,
after the termination of his employment, from availing himself of his
general commercial, technical and inventive skill, knowledge and
experience, including that pertaining to or derived from the nonsecret and
nonconfidential aspects of the business of the Company and its
subsidiaries.
<PAGE> 6
10. Non-Competition. During the Employment Period and for a
period of one year after its termination Executive may not, without the
consent of the Company, in any manner compete, nor may he own or acquire
any equity interest in any corporation, partnership or other entity that
competes, with the Company or any of its subsidiaries in any part of the
United States in the retail sale of building materials or supplies or in
any other business conducted by the Company presently or during the
Employment Period; provided the Executive may own an equity interest in
any publicly owned corporation that does not exceed 1% of that
corporation's total equity.
11. Notices. All notices and other communications shall be in
writing mailed by first class registered mail, postage prepaid, if to
Executive at the address set forth below under Executive's signature, or
if to the Company, at Grossman's Inc., 200 Union Street, Braintree,
Massachusetts 02184, attention of the Chairman of the Board, or at such
other address as either party shall designate by written notice to the
other. No notice shall be deemed to have been given until actually
received by the party to whom it is addressed; provided that a certified
or registered mail return receipt shall be conclusive evidence of such
receipt.
12. Amendments. This Agreement may not be changed, waived,
discharged or terminated orally, but only by an instrument in writing,
signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
13. Parties in Interest. Neither this Agreement nor any rights or
obligations hereunder may be assigned by either party without the written
consent of the other, except that this Agreement will be binding upon and
inure to the benefit of any successor or successors of the Company whether
by merger, consolidation, sale of assets or otherwise and reference herein
to the Company is intended to include any such successor or successors.
14. Legal Fees. The Company agrees to pay the reasonable fees and
expenses of Executive's counsel in connection with the negotiation and
preparation of this Agreement.
15. Miscellaneous. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. This Agreement embodies the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, including the existing employment agreement
between the Company and Executive, as of the Commencement Date. It is the
intent of the Company that Executive not be required to incur any expenses
associated with the enforcement of his rights under this Agreement by
legal action or arbitration proceeding because the cost and expense
thereof would substantially detract from the benefits intended to be
extended to Executive hereunder. Accordingly, if Executive determines in
good faith that the Company has failed to comply with any of its
obligations under this Agreement, or if the Company or any other person
takes any action to declare this Agreement void or unenforceable, or
institutes any legal action or arbitration proceeding designed to deny
Executive, or to recover from him, the benefits intended to be provided
hereunder, Executive may, at the Company's expense, retain counsel of his
choice to represent Executive in connection with any and all actions and
proceedings, whether by or against the Company or any director, officer,
stockholder or other person affiliated with the company. The Company
shall pay or cause to be paid and shall be solely responsible for any and
<PAGE> 7
all attorney's and related fees and expenses incurred by Executive as a
result of the Company's failure to perform under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
GROSSMAN'S INC.
/s/ Robert Swanson
---------------------------------------
Robert K. Swanson
Chairman of the Board
/s/ Sydney L. Katz
---------------------------------------
Sydney L. Katz
126 Blueberry Lane
Westwood, MA 02090
<PAGE> 1
SEVERANCE AGREEMENT AND RELEASE OF ALL CLAIMS
This Severance Agreement and Release of all claims ("Agreement") is
being entered into this August 22, 1994 date between Alan T. Kane (the
"Employee") and Grossman's Inc. (the "Company").
In consideration of the mutual covenants set forth below, Employee
and the Company acknowledge that these decisions were made freely.
Employee also acknowledges that he had ample opportunity to review and
consider his decision and has had the opportunity to consult with his own
legal counsel.
The complete terms of the Agreement are noted below:
1. Neither the fact that this Agreement was signed nor the
compliance with the terms of this Agreement will be considered as an
admission by the Company of any acts of wrongdoing or discrimination
of any kind whatsoever against Employee. The Company and Employee
specifically deny any wrongdoing.
2. Employee agrees not to bring or pursue any lawsuit in state or
federal court or any administrative proceeding before a federal,
state, or municipal agency, or any other claim against the Company
because of any matter which relates to or arises out of Employee's
employment, termination of employment or other status with the
Company.
3. For the purpose of this Release, Company includes the
stockholders, directors, officers, agents and employees of the
Company. It also includes parent, subsidiary, affiliated or
otherwise related companies and their stockholders, directors,
officers, agents and employees.
4. Employee includes heirs, spouse, legal representatives and
assigns of the Employee.
<PAGE> 2
5. Employee and Company agree that the employee's employment
pursuant to the Employment Agreement between Employee and the
Company dated February 1, 1993 ("Employment Agreement") is
terminated as of the close of business on August 29, 1994, and
Employee shall receive the economic and non-economic benefits listed
below in consideration for the full release of all claims against
Company whether asserted or unasserted. This includes any claims
for emotional distress.
A. The Employee shall receive $575,000 as severance pay,
subject to normal payroll deductions, on August 29, 1994, upon
expiration of the 7 day rescission period set forth in Section
9 hereof.
B. As additional consideration for the execution of this
full release of all claims, the Company will afford the
Employee the use of the Company automobile presently assigned
to him until September 30, 1994. Employee agrees to return
the Automobile to the Company in Braintree, Massachusetts on
or before September 30, 1994, in its present condition, normal
wear excepted, and to hold Company harmless from any liability
arising from the use of the Automobile after the date hereof
until the Automobile is turned in to the Company by Employee.
C. Employee will receive payment for all salary and
vacation earned and not taken through August 29, 1994.
Accrued vacation pay may not exceed four weeks in accordance
with Company policy.
D. The employee may maintain his existing funds in the
Company's 401(k) Plan until September 30, 1994. No additional
funds may be added to the Plan during this period.
6. The Employee may exercise COBRA rights to continue medical
insurance coverage. At the conclusion of the COBRA coverage period,
the Employee, at his discretion and cost, may switch to an
individual non-group health plan as provided by the Company's
current carrier Blue Cross and Blue Shield of Massachusetts.
<PAGE> 2
7. The Employee specifically releases the Company from all claims
arising from his employment or the termination of his employment
with the Company which are the subject of this Agreement, including
any rights under the Employment Agreement and any common law claims
or statutory claims including, but not limited to discrimination
based on age, sex, national origin, handicap, color, race, religion,
or sexual orientation under the Federal Rehabilitation Act of 1973,
Title VII of the Civil Rights Act of 1964, Civil Rights Act of 1991,
the Age Discrimination in Employment Act of 1967, as amended, and
similar provision contained in the Massachusetts General Laws
including but not limited to Chapter 151B.
8. It is expressly understood and acknowledged by Employee that
this Agreement provides Employee with substantial consideration to
which he would not ordinarily be entitled and is entered into for
the purpose of avoiding controversy and litigation between employee
and Company of any and all claims arising out of his employment
relationship, the termination of the employment relationship as
herein provided or any other dealings between the parties.
9. This Agreement is intended to comply with the Older Workers
Benefit Protection Act of 1990 ("OWBPA") with regard to the
Employee's waiver of rights under the Age Discrimination in
Employment Act of 1967 ("ADEA"):
The Employee is specifically waiving rights and claims under
ADEA; the waiver of rights under ADEA does not extend to any
rights or claims arising after the date this Agreement is
signed by the Employee; the Employee is receiving
consideration in addition to that which he would otherwise be
entitled; the Employee acknowledges that he has been advised
to consult with an attorney before signing this Agreement; the
Employee acknowledges receiving a copy of this Agreement on
August 18, 1994 and that he has been given the opportunity in
accordance with OWBPA to consider this document with his
attorney, and Employee hereby waives the 21 day period,
knowingly and voluntarily. This Agreement does not become
effective for a period of 7 days after the Employee signs it.
<PAGE> 3
The Employee has the right to revoke this Agreement during the
7-day period. Revocation must be made in writing, signed by
the Employee and delivered to the Employer during the 7-day
period.
10. Employee represents and warrants that he has not engaged in
any conduct against the best interest of the Company during his
employment and during the negotiations which led to this Agreement.
11. Employee further agrees that he will refrain from engaging in
any conduct which damages the reputation or otherwise defames or
disparages Company, its officers, directors or employees. Employee
also agrees that he will not engage in any unlawful or unfair
competition following the execution of this Agreement.
12. Employee acknowledges that while employed at Company, he had
access to certain confidential or proprietary information. Employee
shall not be permitted to utilize or divulge any confidential or
proprietary information concerning Company to any third party,
including but not limited to competitors, at any time before or
following his termination of employment.
13. Employee also agrees that for a period of two (2) years
following the execution of this Agreement, he will not directly or
indirectly hire or directly or indirectly solicit or cause to be
hired any employee of Company to be employed or otherwise engaged by
any organization with which the Employee becomes affiliated.
14. Employee and Company agree that the terms, amount and other
facts concerning this Agreement shall be confidential. The parties
agree not to disclose any information relating to this Agreement to
any third parties, including, but not limited to other current or
past employees of the Company.
<PAGE> 4
15. Employee agrees that he has carefully read this
Agreement, that he has been given ample opportunity to consult with
his legal counsel, that he is receiving substantial benefits as a
result of this Agreement, and that he is voluntarily signing by his
own free act. This agreement constitutes a voluntary and knowing
waiver of rights under the laws and statutes referenced in
paragraphs 7 and 9 above.
Company and Employee have signed this Agreement under seal on the
dates indicated below.
/s/ Alan T. Kane
_______________________________ DATE August 22, 1994
Alan T. Kane ---------------
WITNESSED AND APPROVED BY:
/s/ Richard E. Kent
_______________________________ DATE August 22, 1994
---------------
GROSSMAN'S INC.
/s/ Thomas R. Schwarz
By_____________________________ DATE August 22, 1994
Thomas R. Schwarz ---------------
<PAGE> 1
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT, dated as of June 8, 1992, between David
Krawczyk, ("Employee") and GROSSMAN'S INC. ("Employer"), a Delaware
corporation:
WHEREAS, Employee and Employer desire to confirm the terms and
conditions upon which Employer will employ Employee;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements herein contained, Employee and Employer agree as follows,
effective as of June 8, 1992:
1. Employment. Employer will employ Employee as Vice President and
Divisional Manager or in such other substantially equivalent senior
executive management capacity consistent with his experience as may be
specified by the Chief Executive Officer or Board of Directors of
Employer, for a term extending from the effective date hereof through
December 31, 1993, provided that on each December 31 commencing December
31, 1992, the term of this Agreement shall be automatically extended to
the second anniversary of such date. During such period, Employee shall
be obligated to perform such executive management duties as the Chief
Executive Officer or the Board of Directors may reasonably request and
shall devote his entire time, attention, services, skill, ability and best
efforts to said employment, subject to the understanding that Employee may
attend to personal investments which are not competitive with the business
of Employer, provided that the same do not interfere with the performance
of his duties hereunder.
2. Compensation. In consideration of the services and duties
rendered and performed by Employee during the term hereof, Employer shall
pay to Employee a base salary at the rate of $150,000 per annum, payable
in equal semi-monthly installments.
<PAGE> 2
The establishment of such base salary is not intended to preclude any
cost-of-living or other salary increases which the Board of Directors of
Employer, in its sole discretion, may approve (such base salary, as so
increased at any time during the term hereof, being called "Base Salary").
A 10% increase in base salary will become effective with the opening of the
first Contractors' Warehouse store by Employee. Employer shall also award
to Employee from time to time such bonus as Employee shall earn under the
Company's executive incentive bonus plan with Employee's target bonus to
be 30% of base salary and with a guaranteed bonus of $25,000 for the year
1992 payable as of the effective date hereof.
3. Benefits, Expenses. (a) Employee shall be entitled to
participate (in a manner consistent with his rate of compensation, age and
length of service, to the extent such factors are determinants of
participation or coverage in the plans and programs referred to below) in
any employee benefit plans and programs accorded by Employer to its senior
executives and other full-time employees, including pension plans, group
life, accident or casualty, hospitalization or medical insurance plans,
severance benefit plans, supplemental executive retirement plans and, to
the extent determined by the Board of Directors, stock option, stock
purchase, bonus or other incentive compensation plans. Employee shall be
entitled to reimbursement for all reasonable and properly documented travel,
entertainment and other business expenses incurred by him in furtherance of
the business and interests of Employer and in accordance with the general
expense reimbursement policy of Employer then in effect for its senior
executives. Employee shall be entitled to the use of an automobile in
accordance with Employer's automobile policy and an annual vacation in
accordance with Employer's vacation policy.
<PAGE> 3
(b) Employee shall be entitled to indemnification by Employer and
limitation of liability for acts and omissions in his capacity as
employee, officer and/or director of Employer or any subsidiary to the
fullest extent provided by the Restated Certificate of Incorporation and
By-Laws of Employer as in effect on the date hereof or pursuant to any
amendment thereof to the extent that such amendment shall afford broader
rights of indemnification.
4. Termination. (a) Cause. Employer shall have the right to
terminate Employee's employment hereunder for Cause, by written notice to
Employee. For the purposes of this Agreement, "Cause" shall mean (a) a
good faith finding by the Board of Directors, after notice and an
opportunity to be heard is given to Employee, of a material breach of this
Agreement, or any action or omission by Employee during the term of this
Agreement involving willful malfeasance or gross negligence in a material
respect in the performance of his duties hereunder, or (b) commission of a
felony.
(b) Permanent Disability. If the Board of Directors of Employer
reasonably determines that Employee shall have been unable through illness
or physical or mental incapacity to perform his duties hereunder for a
period of more than four consecutive months or for an aggregate of more
than six months in any period of 24 months, Employee's employment
hereunder may be terminated by action of the Board of Directors upon 30
days' written notice to Employee of such determination.
(c) Death. Employee's employment hereunder shall terminate on the
date of his death. Employer shall pay any bonus earned and payable in
accordance with Employer's Executive Incentive Bonus Plan but unpaid
through the date of death.
<PAGE> 4
(d) Change of Control. Employer shall have the right to terminate
Employee's employment within one year following a Change of Control upon
45 days' written notice to Employee. Employee shall have the right to
terminate his employment under this Agreement within one year following a
Change of Control upon 45 days' written notice to Employer, provided that
(i) Employee's responsibilities shall have been significantly reduced, or
Employee's compensation and benefits shall in the aggregate have been
materially reduced, (ii) Employee's place of work shall have been
relocated in such manner as to require Employee to commute a distance
greater than 35 miles more than the distance between his residence and his
place of work before the Change of Control, or (iii) Employee shall have
determined in good faith that, due to such Change of Control, he is not
able effectively to discharge his duties hereunder. For purposes of this
Agreement, a "Change of Control" shall be deemed to have occurred if (i)
any corporation, person or other entity (other than the Company, a
majority-owned subsidiary of the Company or any employee benefit plan
maintained by the Company or any of its subsidiaries), including a "group"
as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Act"), becomes the beneficial owner of stock representing
more than twenty-five percent of the voting power of the Company; (ii) the
stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation other than a
majority-owned subsidiary of the Company, to sell or otherwise dispose of
all or substantially all of the Company's assets or to liquidate the
Company, or (iii) within any 24 consecutive month period, persons who were
members of the Board of Directors of the Company immediately prior to such
24-month period, together with any persons who were first elected as
directors (other than as a result of any settlement of a proxy or consent
solicitation contest or any action taken to avoid such a contest) during
such 24-month period by or upon the recommendation of persons who were
members of the Board of Directors of the Company immediately prior to such
<PAGE> 5
24-month period and who constituted a majority of the Board of Directors
of the Company at the time of such election, cease to constitute a majority
ofthe Board.
5. Effect of Termination. (a) Termination by Employer. Upon
termination of the employment of Employee by Employer prior to, or after
the first anniversary of, a Change of Control for any reason other than
those specified in section 4 hereof (including any termination by Employer
without Cause), Employee shall be entitled to receive an amount equal to
the greatest of (i) the sum of Employee's annual Base Salary plus an
amount equal to any cash incentive bonus paid to Employee during the
twelve months preceding the date of termination, payable in a lump sum on
such date of termination of employment, (ii) the average of the sum of
Employee's annual Base Salary plus an amount equal to any cash incentive
bonuses paid to Employee during the three twelve-month periods preceding
the date of termination, payable in a lump sum on the date of termination
of employment, or (iii) the severance benefit payable to Employee under
any severance benefit plan of Employer at the time in effect.
(b) Termination Following a Change of Control. Upon termination of
the employment of Employee by Employer or by Employee pursuant to section
4(d) hereof within one year following a Change of Control, Employee shall
be entitled to receive an amount equal to the greatest of (x) 200% of the
amount determined in accordance with clause (i) of section 5(a) hereof,
payable in a lump sum on the date of termination of employment, (y) 200%
of the amount determined in accordance with clause (ii) of section 5(a)
hereof, payable in a lump sum on the date of termination of employment or
(z) the severance benefit payable to Employee upon a change of control
under any severance benefit plan of Employer at the time in effect.
(c) Notwithstanding anything else in this Agreement to the
contrary, upon termination of the employment of Employee pursuant to
section 4(d) hereof by reason of a Change of Control, or upon termination
of employment of Employee pursuant to any other section of this agreement
<PAGE> 6
if such termination is determined to be contingent upon a Change of
Control within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended or any successor provision thereto ("IRC Section 280G"),
if it will result in a greater net after-tax benefit to Employee, as
determined by the firm (the "Firm") serving as Employer's independent
public accountants immediately prior to the Change of Control, the
aggregate value of all compensation payments or benefits to be paid or
provided to Employee under this Agreement shall be reduced to the extent
necessary so that none of the payments to be made to Employee hereunder or
under any other plan, agreement or arrangement will constitute an "excess
parachute payment" as defined in IRC Section 280G. If Employee believes
that the determination was inconsistent with a final determination of a
court or an Internal Revenue Service proceeding, Employee may request the
Firm to redetermine whether the amount payable to Employee pursuant to
this section 5(c) should have been or shall be reduced in accordance with
such section, or to redetermine the amount of any such reduction. If the
Firm determines that a lesser payment should have been made to Employee,
then an amount equal to the amount of the excess of the earlier payment
over the redetermined amount (the "Excess Amount") shall be deemed for all
purposes to be a loan to Employee made on the date of Employee's receipt
of such Excess Amount, which Employee shall have an obligation to repay to
Employer on demand, together with interest on such amount at the lowest
applicable Federal rate (as defined in section 1274(d) of the Code),
compounded semi-annually (the "Applicable Rate"), from the date of
Employee's receipt of such Excess Amount until the date of such repayment.
If the Firm determines that a greater payment should have been made to
Employee, Employer shall pay to Employee the amount of the deficiency,
together with interest thereon from the date such amount should have been
paid to the date of such payment, at the Applicable Rate, so that Employee
will have received or be entitled to receive the maximum net after-tax
amount to which Employee is entitled under this section 5.
<PAGE> 7
6. Secrecy Agreement. All information obtained or possessed by
Employee relative to the activities of the Employer
and its subsidiaries which is of a secret or confidential nature,
including business plans, expansion plans, marketing data, financial data,
customers' lists, technical know-how, patents, trademarks, developments,
inventions, processes or administrative procedures, is the property of
Employer and its subsidiaries or its licensors, as the case may be, and
Employee shall not, during the term of his employment under this Agreement
or thereafter, use any such information for the benefit of others than
Employer and its subsidiaries or disclose it to others; provided that
nothing herein shall prevent Employee, subsequent to the termination of
his employment hereunder, from using and availing himself of his general
commercial, technical and inventive skill, knowledge and experience,
including that pertaining to or derived from the nonsecret and
nonconfidential aspects of the business of Employer and its subsidiaries.
7. Non-Competition. During the term of Employee's employment under
this Agreement or any extension or renewal hereof, and for a period of one
year after the expiration thereof or the termination thereof for any
reason specified in clause (a) or (b) of section 4 hereof, Employee shall
not, without the consent of Employer, in any manner compete, nor shall he
own or acquire any equity interest in any corporation, partnership or
other entity which competes, with Employer or any of its
subsidiaries in any part of the United States in the retail sale of
building materials or supplies or in any other business conducted by
Employer presently or during the term of his employment under this Agreement;
provided that Employee may own an equity interest in any publicly owned
corporation that does not exceed 1% of the total equity thereof.
<PAGE> 8
8. Notices. All notices and other communications hereunder shall
be in writing mailed by first class registered mail, postage prepaid, if
to Employee at the address set forth below Employee's signature hereon, or
if to Employer, at Grossman's Inc., 200 Union Street, Braintree,
Massachusetts 02184, attention of the Chief Executive Officer, or at such
other address as either party hereto shall designate by written notice to
the other. No notice hereunder shall be deemed to have been given until
actually received by the party to whom it is addressed, provided that a
certified or registered mail return receipt shall be conclusive evidence
of such receipt.
9. Amendments. This Agreement may not be changed, waived,
discharged or terminated orally, but only by an instrument in writing,
signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
10. Parties in Interest. Neither this Agreement nor any rights or
obligations hereunder may be assigned by either party without the written
consent of the other, except that this Agreement shall be binding upon and
inure to the benefit of any successor or successors of Employer whether by
merger, consolidation, sale of assets or otherwise and reference herein
to Employer shall be deemed to include any such successor or successors.
11. Miscellaneous. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts. This Agreement embodies the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements and understandings, including the Existing Employment
Agreement, as of the effective date hereof. In the case of any legal
action or proceeding arising under this Agreement, the unsuccessful party
shall pay all costs and expenses, including reasonable attorney's fees,
incurred by the prevailing party in such action or proceeding and any
appeal in connection therewith, and such costs and expenses shall be
included in any judgment rendered in such action proceeding.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Amended
and Restated Agreement as of the day and year first above written.
GROSSMAN'S INC.
/s/ Thomas R. Schwarz
By: __________________________
Thomas R. Schwarz
Chairman of the Board
/s/ David Krawczyk
___________________________
David Krawczyk
170 Hilton Drive
Applegate, California 95703
9
<PAGE> 1
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
--------------------
This Amendment No. 1 (the "Amendment") to the Employment Agreement
dated as of June 8, 1992 (the "Agreement") is made and entered into as of
this 26th day of September, 1994 by and between Grossman's, Inc., a
Delaware corporation ("Employer"), and David Krawczyk ("Employee").
WHEREAS, Employee and Employer entered into the Agreement providing
for the employment of Employee by Employer; and
WHEREAS, Employee and Employer desire to amend the Agreement as set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements herein contained, Employee and Employer hereby agree to amend
the Agreement as follows, effective as of September 26, 1994:
1. Amendment of Section 5(b). Section 5(b) of the Agreement is
hereby amended by adding the following at the end thereof:
"In the event of such a termination pursuant to Section
4(d) hereof within one year following a Change of Control,
Employee shall be entitled, at his election, to continue to be
covered by the same or substantially equivalent group life,
accident or casualty, hospitalization or medical plans as he
was covered by immediately prior to the Change of Control;
provided, that Employee shall pay monthly premiums for such
coverage to Employer in an amount equal to the average gross
premium per employee (or equivalent cost) borne by Employer
for such plan(s)."
2. Amendment of Section 11. Section 11 of the Agreement is
hereby amended and restated to read in its entirety as follows:
"Miscellaneous. This Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts. This Agreement embodies the entire agreement
of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings as of the
effective date hereof. It is the intent of Employer that
Employee not be required to incur any expenses associated with
the enforcement of his rights under this Agreement by legal
action or arbitration proceeding because the cost and expense
thereof would substantially detract from the benefits intended
to be extended to Employee hereunder. Accordingly, if
Employee determines in good faith that Employer has failed to
comply with any of its obligations under this Agreement, or if
Employer or any other person takes any action to declare this
Agreement void or unenforceable, or institutes any legal
action or arbitration proceeding designed to deny Employee, or
to recover from him, the benefits intended to be provided
hereunder, Employee may, at Employer's expense, retain counsel
<PAGE> 2
of his choice to represent Employee in connection with any and all
actions and proceedings, whether by or against Employer or any
director, officer, stockholder or other person affiliated with
Employer. Employer shall pay or cause to be paid and shall be
solely responsible for any and all attorney's and related fees and
expenses incurred by Employee as a result of Employer's failure to
perform under this Agreement."
3. Defined Terms. Unless otherwise defined herein, capitalized
terms used herein have the respective meanings ascribed thereto in the
Agreement.
4. Limited Effect. This Amendment shall be limited solely to the
matters expressly set forth herein, and, except as expressly amended
hereby, all of the provisions of the Agreement are and shall continue to
be in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first above written.
GROSSMAN'S, INC.
/s/ Thomas R. Schwarz
By:________________________________
Thomas R. Schwarz
Chairman of the Board
/s/ David Krawczyk
________________________________
David Krawczyk
<PAGE> 1
AGREEMENT
---------
This is an Agreement between Robert K. Swanson ("Swanson") and
Grossman's, Inc. ("Grossman's") intended to be effective as of November
23, 1994.
WHEREAS, Swanson has served as a director of Grossman's since 1987;
and
WHEREAS, in connection with the retirement of the Chairman of the
Board and Chief Executive Officer in November 1994, Swanson was elected to
serve as Chairman of the Board; and
WHEREAS, in recognition of the additional services to be performed
by Swanson, the Board has authorized the arrangements set forth in this
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Effective November 23, 1994, Swanson has been elected to serve
as (a) Chairman of the Board of Grossman's, (b) Chairman of the Executive
Committee of the Board of Grossman's, and (c) a member of the Nominating
Committee of the Board of Grossman's.
2. For Swanson's services in the positions listed in paragraph 1,
he will be entitled to receive (a) an annual retainer of $15,000, payable
in cash or shares of the Company's common stock (valued at the average
closing price (the "Market Price") on the NASDAQ National Market System
during the ten trading days immediately preceding the date of issuance),
(b) $2,000 per year, payable in cash, for each year that Swanson serves as
Chairman of the Executive Committee, (c) $500, payable in cash, for
attending each meeting of the Board or each meeting of any committee of
the Board of which Swanson is a member, and (d) reimbursement of all
expenses incurred by Swanson in connection with his service as a director
of Grossman's (upon submission by Swanson of reasonable substantiation
thereof).
3. In addition, subject to approval by shareholders of the 1995
Directors' Stock and Option Plan at the 1995 Annual Meeting of
Shareholders, Swanson will be granted a non-transferable stock option
covering 25,000 shares of common stock which will vest in five equal
annual installments, with the first installment of 20% being vested as of
April, 1995. The option will terminate on April, 2005. The exercise
price will be the fair market value of the common stock on the date of
grant.
4. Swanson has also agreed that, as Chairman of the Board, he will
be available to devote his time to Grossman's affairs for up to a maximum
of 90 days per calendar year (in addition to days spent in Board or
committee meetings), unless the Board approves a greater number of days.
For these additional services, Swanson will be entitled to receive (a)
$20,000 payable in cash on or before February 15, 1995 in respect of his
services in 1994, (b) subject to approval by shareholders of the 1995
Directors' Stock and Option Plan, $20,000 payable in shares of common
<PAGE> 2
stock (valued at the Market Price) payable on or before May 1, 1995 in
respect of his services in 1994, (c) $1,000 per day payable in cash within
30 days after the end of each calendar quarter upon submission of his
invoice therefor, (d) subject to approval by shareholders of the 1995
Directors' Stock and Option Plan, $1,000 per day payable in shares of
common stock (valued at the Market Price) payable within 30 days after the
end of each calendar quarter upon submission of his invoice therefor, and
(e) reimbursement of all expenses incurred by him (including travel
expenses for his wife at his discretion) in connection with his service as
Chairman of the Board of Grossman's (upon submission by him of reasonable
substantiation thereof).
5. In addition, subject to approval by shareholders at the 1995
Annual Meeting of Shareholders, Swanson will be granted a non-transferable
option under the 1995 Directors' Stock and Option Plan covering 50,000
shares of common stock which will vest in five equal annual installments,
with the first installment of 20% being vested as of April 25, 1995. The
option will terminate on April 25, 2005. The exercise price will be the
fair market value of the common stock on the date of grant.
6. Either Swanson or Grossman's may terminate this Agreement and
Swanson's services as Chairman of the Board hereunder upon the giving of
not less than 90 days' prior written notice. In the event of a
termination by Grossman's, Swanson will be entitled to receive a cash
payment equal to the product of (a) $6,000 times (b) the average number of
days spent by Swanson on Grossman's affairs during each of the immediately
preceding six months (or such shorter period as this Agreement has been in
effect).
7. All notices and other communications shall be in writing mailed
by first class registered mail, postage prepaid, if to Swanson at the
address set forth below under Swanson's signature, or, if to Grossman's,
at 200 Union Street, Braintree, Massachusetts 02184, attention of the
President, or at such other address as either party shall designate by
written notice to the other. No notice shall be deemed to have been given
until actually received by the party to whom it is addressed; provided
that a certified or registered mail return receipt shall be conclusive
evidence of such receipt.
8. This Agreement may not be changed, waived, discharged or
terminated orally, but only by an instrument in writing, signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought.
9. Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the written consent of the other,
except that this Agreement will be binding upon and inure to the benefit
of any successor or successors of Grossman's whether by merger,
consolidation, sale of assets or otherwise and reference herein to
Grossman's is intended to include any such successor or successors.
10. Grossman's agrees to pay the reasonable fees and expenses of
Swanson's counsel in connection with the preparation of this Agreement.
<PAGE> 3
11. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts. This
Agreement embodies the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior agreements and
understandings.
12. Nothing in this Agreement shall be construed to make Swanson an
employee of Grossman's, it being understood that Swanson is an independent
contractor and is entitled to no rights as an employee of Grossman's.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
GROSSMAN'S INC.
/s/ Sydney L. Katz
By:____________________________________
Name:
Title:
/s/ Robert K. Swanson
_______________________________________
Robert K. Swanson
c/o RKS,Inc.
5600 North Palo Cristi Road
Paradise Valley, Arizona 85253
<PAGE> 1
GROSSMAN'S INC.
RETIREMENT PLAN
(1994 RESTATEMENT)
<PAGE> 2
T A B L E O F C O N T E N T S
-------------------------------
PAGE
----
ARTICLE I
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 1
1.1. This GROSSMAN'S INC. RETIREMENT PLAN. . . . . 1
ARTICLE II
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . 2
2.1. "Accrued Pension" . . . . . . . . . . . . . . 2
2.2. "Actuarial Equivalent". . . . . . . . . . . . 2
2.3. "Actuary" . . . . . . . . . . . . . . . . . . 4
2.4. "Affiliated Company". . . . . . . . . . . . . 4
2.5. "Average Monthly Earnings". . . . . . . . . . 4
2.6. "Beneficiary" . . . . . . . . . . . . . . . . 5
2.7. "Board" . . . . . . . . . . . . . . . . . . . 6
2.8. "Break-in-Service". . . . . . . . . . . . . . 6
2.9. "Career Pay Pension Credit" . . . . . . . . . 6
2.10. "Code" . . . . . . . . . . . . . . . . . . . 6
2.11. "Committee". . . . . . . . . . . . . . . . . 6
2.12. "Continuous Service" . . . . . . . . . . . . 6
2.13. "Continuous Service Date". . . . . . . . . . 7
2.14. "Continuous Service Termination Date". . . . 7
2.15. "Covered Compensation" . . . . . . . . . . .10
2.16. "Credited Compensation". . . . . . . . . . .10
2.17. "Credited Service" . . . . . . . . . . . . .11
2.18. "Dependent Child". . . . . . . . . . . . . .11
2.19. "Eligible Spouse". . . . . . . . . . . . . .12
2.20. "Employee" . . . . . . . . . . . . . . . . .12
2.21. "ERISA". . . . . . . . . . . . . . . . . . .12
2.22. "EAHC Plan". . . . . . . . . . . . . . . . .12
2.23. "GPP". . . . . . . . . . . . . . . . . . . .12
2.24. "Normal Retirement Date" . . . . . . . . . .12
2.25. "Participant". . . . . . . . . . . . . . . .12
2.26. "Pension". . . . . . . . . . . . . . . . . .13
2.27. "Plan" . . . . . . . . . . . . . . . . . . .13
2.28. "Plan Sponsor" . . . . . . . . . . . . . . .13
2.29. "Plan Year". . . . . . . . . . . . . . . . .13
2.30. "Postponed Retirement Date". . . . . . . . .13
2.31. "Predecessor Sponsor or Affiliate" . . . . .13
2.32. "Statement". . . . . . . . . . . . . . . . .13
2.33. "Trust Agreement". . . . . . . . . . . . . .13
2.34. "Trust Fund" or "Fund" . . . . . . . . . . .13
2.35. "Trustee". . . . . . . . . . . . . . . . . .14
<PAGE> 3
ARTICLE III
PARTICIPATION AND SERVICE. . . . . . . . . . . . . . . .15
3.1. Eligibility to Participate. . . . . . . . . .15
3.2. Continuous Service. . . . . . . . . . . . . .16
3.3. "Break-in-Service". . . . . . . . . . . . . .16
3.4. Credited Service. . . . . . . . . . . . . . .17
3.5. Reemployment Following a Break-in-Service (Non-Vested
Terminee). . . . . . . . . . . . . . . . . .19
3.6. Reemployment of Vested Terminee . . . . . . .21
ARTICLE IV
ELIGIBILITY FOR AND AMOUNT OF PENSION. . . . . . . . . .25
4.1. Normal Retirement . . . . . . . . . . . . . .25
4.2. Postponed Retirement Date . . . . . . . . . .27
4.3. Early Retirement. . . . . . . . . . . . . . .28
4.4. Vesting . . . . . . . . . . . . . . . . . . .28
4.5. Disability. . . . . . . . . . . . . . . . . .30
4.6. Pension offsets . . . . . . . . . . . . . . .33
ARTICLE V
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . .35
5.1. Surviving Spouse Benefit. . . . . . . . . . .35
5.2. Dependent Child Benefit . . . . . . . . . . .36
5.3. Preretirement Survivor Annuity. . . . . . . .36
ARTICLE VI
PAYMENT OF PENSION . . . . . . . . . . . . . . . . . . .38
6.1. Automatic Form of Payment . . . . . . . . . .38
6.2. Optional Forms of Payment . . . . . . . . . .38
6.3. Required Distributions. . . . . . . . . . . .41
6.4. Lump Sum Payment. . . . . . . . . . . . . . .42
6.5. Income Tax Withholding. . . . . . . . . . . .43
6.6. Distributions Made On or After January 1, 1993.43
ARTICLE VII
ADJUSTMENTS AND LIMITATIONS TO PENSIONS. . . . . . . . .46
7.1. Adjustments for Disability. . . . . . . . . .46
7.2. Adjustments for Other Pensions. . . . . . . .46
7.3. Adjustment for Accident and Sickness Benefits47
7.4. Maximum Benefit . . . . . . . . . . . . . . .47
ARTICLE VIII
TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . .51
8.1. When Applicable . . . . . . . . . . . . . . .51
8.2. Earnings Limited. . . . . . . . . . . . . . .51
8.3. Minimum Accrual . . . . . . . . . . . . . . .51
8.4. Vesting Rules . . . . . . . . . . . . . . . .52
8.5. Vesting Schedule. . . . . . . . . . . . . . .52
8.6. Distribution. . . . . . . . . . . . . . . . .53
8.7. Top-Heavy Determination . . . . . . . . . . .53
8.8. Aggregation Groups. . . . . . . . . . . . . .54
8.9. Key Employee Defined. . . . . . . . . . . . .55
<PAGE> 4
ARTICLE IX
FUNDING. . . . . . . . . . . . . . . . . . . . . . . . .57
9.1. Trust Fund. . . . . . . . . . . . . . . . . .57
9.2. Contributions to the Trust Fund . . . . . . .57
9.3. Return of Contributions . . . . . . . . . . .57
9.4. Funding Policy. . . . . . . . . . . . . . . .58
9.5. Investment Responsibility of the Trustee. . .58
9.6. Obligations of the Plan Sponsor . . . . . . .58
ARTICLE X
ADMINISTRATION . . . . . . . . . . . . . . . . . . . . .60
10.1. Named Fiduciary and Administrator. . . . . .60
10.2. Appointment and Removal of Committee . . . .60
10.3. Duties of Committee. . . . . . . . . . . . .60
10.4. Meetings . . . . . . . . . . . . . . . . . .61
10.5. Action of Majority . . . . . . . . . . . . .61
10.6. Compensation . . . . . . . . . . . . . . . .61
10.7. Establishment of Rules . . . . . . . . . . .61
10.8. Powers . . . . . . . . . . . . . . . . . . .61
10.9. Prudent Conduct. . . . . . . . . . . . . . .62
10.10. Actuary . . . . . . . . . . . . . . . . . .63
10.11. Maintenance of Records. . . . . . . . . . .63
10.12. Claim Appeal Procedure. . . . . . . . . . .63
10.13. Information from Participants . . . . . . .64
ARTICLE XI
PROVISION TO PREVENT DISCRIMINATION. . . . . . . . . . .65
11.1. Restrictions on distributions to certain
highly compensated employees . . . . . . . .65
ARTICLE XIIAMENDMENT AND MERGER . . . . . . . . . . . . . . .66
12.1. Power to Amend . . . . . . . . . . . . . . .66
12.2. Publication of Amendment . . . . . . . . . .66
12.3. No Decrease in Benefits. . . . . . . . . . .66
12.4. Merger, Consolidation or Asset Transfer. . .67
ARTICLE XIIIPLAN TERMINATION. . . . . . . . . . . . . . . . .68
13.1. Termination. . . . . . . . . . . . . . . . .68
13.2. Participating Companies. . . . . . . . . . .68
13.3. Allocation of Assets to Participants . . . .69
13.4. Partial Termination. . . . . . . . . . . . .69
13.5. Residual Amounts . . . . . . . . . . . . . .69
ARTICLE XIVMISCELLANEOUS. . . . . . . . . . . . . . . . . . .70
14.1. No Assignment of Benefit . . . . . . . . . .70
14.2. No Implied Rights to Employment. . . . . . .72
14.3. Facility of Payment. . . . . . . . . . . . .72
14.4. Effectuation of Interest . . . . . . . . . .73
14.5. Headings . . . . . . . . . . . . . . . . . .73
14.6. Copy of Plan . . . . . . . . . . . . . . . .73
14.7. Governing Law. . . . . . . . . . . . . . . .73
<PAGE> 5
ARTICLE I
INTRODUCTION
------------
1.1. This GROSSMAN'S INC. RETIREMENT PLAN (the "Plan"), which
incorporates the plan document as in effect January 1, 1989 and as amended
by the First Amendment dated October 24, 1989, the Second Amendment dated
December 12, 1989, the Third Amendment dated August 1, 1990, the Fourth
Amendment, approved in substance by the Board of Directors on October 23,
1990, and the Fifth Amendment, approved by the Board of Directors on July
28, 1992, and which has received a letter of determination issued by the
Internal Revenue Service on October 28, 1992, is hereby further amended
and adopted to provide retirement income to eligible employees and
beneficiaries. This 1994 Restated Plan also includes the Amendment
adopted in December 1994, changes required by Code Section 401(a)(17) and
401(a)(31) and other recent legislation and regulations, and has received
a letter of determination issued by the Internal Revenue Service on
February 14, 1995. For purposes of calculating Continuous Service and
Credited Service, this Plan is a successor plan to the GPP.
<PAGE> 6
ARTICLE II
DEFINITIONS
The following words and phrases when used in the Plan shall have the
following meanings, unless a different meaning is plainly required by the
context:
2.1. "Accrued Pension" shall mean, as of any date, the sum of the
Participant's normal retirement Pension determined as provided in Section
4.1(b) or (c), as applicable, on the basis of the Participant's Average
Monthly Earnings as of that date or, if earlier, December 31, 1986 (for
purposes of Section 4.1(b)) or December 31, 1990 (for purposes of Section
4.1(c)) and Credited Services completed as the applicable date, and the
Participant's Career Pay Pension Credit as of that date. Notwithstanding
the foregoing, in no event shall a Participant's pension amount be less
than his Accrued Pension on November 15, 1986, as determined under the
provisions of Sections 2.1, 2.5, and 4.1(b) of the GPP in effect as of
December 31, 1985.
2.2. "Actuarial Equivalent" shall mean a benefit of equivalent
current value to the benefit that otherwise would have been payable to the
Participant under Section 6.1(a) on the basis of the assumptions used and
factors stated in section 3 of the Internal Revenue Service's Revenue
Ruling 76-47. For purposes of calculating a benefit under Section
6.2(a)(i), the benefit otherwise payable to the Participant under Section
6.1(a) shall be divided by a factor of .91. For purposes of calculating a
benefit payable under Section 6.2(a)(ii), the benefit otherwise payable to
the Participant under Section 6.2(a)(i) shall be reduced according to the
table set forth below:
<PAGE> 7
<TABLE>
<CAPTION>
Percentage of Percentage of
Benefit Benefit
Continued to Continued to
Beneficiary Beneficiary Beneficiary Beneficiary
Younger by 100% 50% Older by 100% 50%
- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
0-4 Years .79 .88 0-4 Years .79 .88
5-9 Years .73 .84 5-9 Years .85 .92
10-14 Years .69 .82 10-14 Years .90 .95
15-19 Years .65 .79 15-19 Years .93 .96
20 or More Years .63 .78 20 or More Years .96 .98
</TABLE>
For purposes of calculating a benefit under Section 6.2(a)(iii), the
benefit otherwise payable to the Participant under Section 6.2(a)(i) shall
be multiplied by a factor of .98. The amount of any lump sum distribution
under Section 6.2(a)(iv) shall be determined on the basis of the 1984
Unisex Pension Mortality Table and the rate or combination of rates in
effect under I.R.C. 417(e) on the first day of the applicable Plan Year
that would be used by the Pension Benefit Guaranty Corporation to value
the actual benefit of the Participant in the event the Plan were
terminated.
If the Plan's interest rate exceeds the Pension Benefit Guaranty
Corporation's immediate or deferred annuity rate for terminating plans,
whichever is applicable, or another rate prescribed by applicable
regulations, the rate that produces the greater benefit shall be used.
This provision shall not apply, however, to a benefit in the form of a
qualified joint and survivor annuity, a qualified pre-retirement survivor
annuity or a distribution in the form of a nondecreasing annuity payable
for a period not less than the life of the Participant or, in the case of
a qualified pre-retirement survivor annuity, the life of the surviving
spouse.
<PAGE> 8
2.3. "Actuary" shall mean an "enrolled actuary," in accordance with
regulations under ERISA issued by the Joint Board for the Enrollment of
Actuaries, who has been selected by the Plan Sponsor.
2.4. "Affiliated Company" shall mean a member of a controlled group
of corporations, as defined in section 414(b) of the Code, of which the
Plan Sponsor is a member, an unincorporated trade or business that is
under common control with the Plan Sponsor as determined in accordance
with section 414(c) of the Code, a member of an affiliated service group
as defined in section 414(m) of the Code, or a foreign subsidiary as
defined in section 3121(1)(8) of the Code of the Plan Sponsor, provided
the Plan Sponsor has entered into an agreement under section 3121(1) of
the Code with respect to U.S. citizens employed by such foreign subsidi-
ary. A "controlled group of corporations" shall mean a controlled group
of corporations as defined in section 1563(a) of the Code, determined
without regard to sections 1563(a)(4) and 1563(e)(3)(C) thereof. Service
with any entity while it is an Affiliated Company, whether or not as an
Employee as defined herein, shall count as service to determine (i)
vesting and (ii) benefit and contribution limitations.
2.5. "Average Monthly Earnings" shall mean the greater of: The
result obtained by dividing by 60 the Participant's Credited Compensation
for the highest five calendar years during the 10 calendar years
immediately preceding the earlier of (i) his last Credited Service
Termination Date, including the year of his last Credited Service
Termination Date if it occurs on December 31, and (ii) January 1, 1987 or,
for purposes of Section 4.1(c), January 1, 1991. If a Participant has
fewer than 10 but more than five calendar years of Credited Compensation
as of such earlier date, then his total number of calendar years of
Credited Compensation will be substituted for 10.
<PAGE> 9
(a) The result obtained from the following formula for the last
five consecutive years of Credited Service prior to January 1, 1987
or, for purposes of Section 4.1(c), January 1, 1991:
C1+C2+C3
60, where
C1 = Credited Compensation for the partial calendar year in
which the Participant's last Credited Service Termination
Date occurred.
C2 = Credited Compensation for the last four complete calendar
years for which the Participant received Credited Service.
C3 = Credited Compensation for the calendar year immediately
preceding the four calendar years used in C2 multiplied by
a fraction, the numerator of which is equal to 365 minus
the number of days in the partial calendar year of
Credited Service used in C1, and the denominator of which
is 365.
(b) If the Participant has less than five years of Credited
Service as of December 31, 1986 or December 31, 1990, depending upon
whether Section 4.1(b) or (c) is applicable to such Participant, then
the result is obtained by dividing the Participant's Credited
Compensation for his Credited Service before 1987 or 1990, as the case
may be, by the length of such Credited Service.
2.6. "Beneficiary" shall mean any person designated in a written
instrument signed by the Participant and filed with the Committee (which
designation may be changed from time to time) to receive benefits provided
under this Plan payable upon the death of a Participant. If no such
designation is in effect at the time of the death of the Participant, or
if no person so designated shall survive the Participant, the Beneficiary
shall be his Eligible Spouse, if then living, otherwise the surviving
children in equal shares, or if the deceased Participant has no surviving
Eligible Spouse or children, then his estate.
<PAGE> 10
2.7. "Board" shall mean the Board of Directors of the Plan Sponsor.
2.8. "Break-in-Service" shall mean a period which constitutes a break
in an Employee's Continuous Service, as provided in Article III.
2.9. "Career Pay Pension Credit" for any Plan Year shall mean
one-twelfth of the sum of one percent of Credited Compensation for the
Plan Year not in excess of the greater of (A) $10,000 or (B) one-half of
the Covered Compensation of a Participant who attains normal retirement
age in the current Plan Year plus one and one-half percent of his
Credited Compensation for the Plan Year in excess of the greater of (A)
$10,000 or (B) one-half of the Covered Compensation of a Participant who
attains normal retirement age in the current Plan Year.
2.10. "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
2.11. "Committee" shall mean the Employee Benefits Committee,
composed of at least three (3) persons appointed by the Board, to
administer and supervise the Plan as provided in Article X.
2.12. "Continuous Service" shall mean the period of time, computed to
the nearest full month, beginning on the Employee's Continuous Service
Date and ending on his Continuous Service Termination Date.
<PAGE> 11
2.13. "Continuous Service Date" shall mean the following:
(a) With respect to a commencement date occurring on and after
January 1, 1987, Continuous Service Date shall mean an Employee's most
recent employment commencement date with the Plan Sponsor or an
Affiliated Company;
(b) With respect to a commencement date occurring during the
period commencing November 19, 1986 and ending December 31, 1986,
Continuous Service Date shall mean an Employee's most recent
employment commencement date with Grossman's Inc., Evans Asset Holding
Company, Evans Transportation Company, Evans Financial Company, or any
employer that was, during that period, affiliated with any of those
companies (as determined according to the principles described in the
definition of Affiliated Company above); and
(c) With respect to a commencement date occurring prior to
November 19, 1986, Continuous Service Date shall mean an Employee's
most recent employment commencement date with Evans Products Company
or any employer that was, during that period, affiliated with Evans
Products Company (as determined according to the principles described
in the definition of Affiliated Company, above).
2.14. "Continuous Service Termination Date" shall mean the following:
(a) With respect to a termination or other applicable event
occurring on or after January 1, 1987, Continuous Service Termination
Date means the earlier of the date an Employee quits, retires, is
discharged or terminated for cause or otherwise; the last day of the
month in which an Employee dies; the date the entity that is the
employer of an Employee ceases to be the Plan Sponsor or an Affiliated
Company; or subject to Section 3.3(b), the second anniversary of the
date on which an Employee is first absent from service, with or
without pay, for any other reason including an absence, beginning on
or after January 1, 1985, for maternity or paternity purposes;
<PAGE> 12
(b) With respect to a termination or other applicable event
occurring during the period commencing November 19, 1986 and ending
December 31, 1986, Continuous Service Termination Date means the
earlier of the date the Employee quit, retired, was discharged or
terminated for cause or otherwise from his employment with Grossman's
Inc., Evans Asset Holding Company, Evans Transportation Company, Evans
Financial Company, or any employer that was, during that period,
affiliated with any of those companies (as determined according to the
principles described in the definition of Affiliated Company above);
the last day of the month in which the Employee attained age 65 or
died; the date that any affiliated company described in 2.14(b)(1)
above that was the employer of an Employee ceased to be such an
affiliated company; or, subject to Section 3.3(b), the second
anniversary of the date on which an Employee was first absent from
service, with or without pay, for any reason including an absence for
maternity or paternity purposes; and
(c) With respect to a termination or other applicable event
occurring prior to November 19, 1986, Continuous Service Termination
Date means the earlier of the date the Employee quit, retired, was
discharged or terminated for cause or otherwise from his employment
with Evans Products Company or an employer that was, during that
period, affiliated with Evans Products Company (as determined
according to the principles described in the definition of Affiliated
Company above); the last day of the month in which he attained age 65
or died; the date that any affiliated company of Evans Products
Company that was the employer of an Employee ceased to be such an
affiliated company; or, subject to Section 3.3(b), the second
anniversary of the date on which an Employee was first absent from
service, with or without pay, for any reason including an absence,
beginning or after January 1, 1985, for maternity or paternity
purposes.
<PAGE> 13
In no event shall an absence for maternity or paternity purposes be
construed to be a leave of absence (with or without pay) approved by the
Plan Sponsor or an Affiliated Company for any other employment related
purposes. Solely for purposes of this Section, an absence for maternity
or paternity purposes means an absence from work due to (1) pregnancy of
the Participant, (2) birth of a child of the Participant, (3) adoption of
a child by the Participant, or (4) for purposes of caring for a child
during the period immediately following the birth or adoption.
Notwithstanding anything else contained in this Section 2.14 to the
contrary, if an Employee is in the employ of the Plan Sponsor or an
Affiliated Company at any time after December 31, 1986, such Employee
shall not incur (or be treated as having incurred) a Continuous Service
Termination Date solely by reason of attaining or having attained age 65
while in the employ of the Plan Sponsor, an Affiliated Company or a
Predecessor Sponsor or Affiliate and such Employee's Credited Compensation
under this Plan shall include any compensation paid to him by a
Predecessor Sponsor or Affiliate after attaining age 65 and prior to
January 1, 1987.
<PAGE> 14
2.15. "Covered Compensation" shall mean an annual amount determined
on the basis of the average (without indexing) of the taxable wage bases
in effect for each calendar year during the 35-year period ending with the
last day of the calendar year in which a Participant attains normal
retirement age. [Covered Compensation shall be determined in accordance
with Table I of Attachment I to Internal Revenue Service Notice 89-70 or
the applicable provisions of such superseding table or formula as may be
issued by the Secretary of the Treasury]. Covered Compensation shall be
automatically adjusted in each Plan Year.
2.16. "Credited Compensation" shall mean the total cash remuneration
not in excess of the amount permitted to be taken into account under
Section 401(a)(17) of the Code paid by the Plan Sponsor or Affiliated
Company (or, for periods prior to January 1, 1987, by an employer
described in Sections 2.13(b) and 2.13(c)) to the Participant for the Plan
Year while he is accruing Credited Service, including salary reduction
contributions under the Grossman's Profit Sharing and Savings Plan (or
other similar plan), overtime, bonuses, commissions, cost of living
allowances, vacation pay, termination or severance pay and incentive pay
based on sales or manufacturing volume and/or production costs, but
excluding any bonuses granted by the Board to a Participant who is a
highly compensated Employee which is specifically designated by the Board
not to be included as "Credited Compensation" under the Plan, compensation
realized on the exercise or disposition of options to purchase stock, from
the lapse of restrictions on the transfer of or elimination of a
substantial risk of forfeiture with respect to property received from a
Plan Sponsor or Affiliated Company, and any forms of deferred
compensation, such as contributions (other than salary reduction
contributions) to or payments from any qualified employee benefit plan.
The limit referred to above shall not apply for periods prior to
January 1, 1989 except to the extent provided in regulations promulgated
under Section 401(a)(17) of the Code.
<PAGE> 15
For each Plan Year beginning on or after January 1, 1989 and before
January 1, 1994, Compensation shall be limited for all purposes under the
Plan to $200,000 (or such other amount as the Secretary of the Treasury
may determine for such Plan Year under section 401(a)(17) of the Code).
For each Plan Year beginning on or after January 1, 1994, Compensation
shall be limited for all purposes under the Plan to $150,000 (or such
other amount as the Secretary of the Treasury may determine for such Plan
Year under section 401(a)(17) of the Code). In determining the Credited
Compensation of a Participant for purposes of this limitation, the rules
of section 414(q)(6) of the Code shall apply, except in applying such
rules, the term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not attained age 19
before the close of the year. If, as a result of the application of such
rules the Code Section 401(a)(17) limitation is exceeded, then (except for
purposes of determining Average Monthly Earning for purposes of Section
4.1(b)), the limitation shall be prorated among the affected individuals
in proportion to each such individual's Credited Compensation as
determined under this Section 2.16 prior to the application of this
limitation.
2.17. "Credited Service" shall mean for purposes of computing the
amount of benefits under the Plan, the periods of service, computed to the
nearest month, as provided for in Article III.
2.18. "Dependent Child" shall mean any child of the Participant
entitled to receive a survivor's benefit under the Social Security Act due
to the death of the Participant and/or his Eligible Spouse.
<PAGE> 16
2.19. "Eligible Spouse" shall mean the lawful spouse to whom the
Participant was married on the date pension payments commence under the
Plan, or if pension payments had not commenced, the lawful spouse to whom
the Participant was married on the Participant's date of death.
2.20. "Employee" shall mean a common-law employee of the Plan Sponsor
or an Affiliated Company.
2.21. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974 and any amendments thereto and any regulations or interpretations
issued thereunder.
2.22. "EAHC Plan" means the Evans Asset Holding Company Plan.
2.23. "GPP" means the Evans Products Company General Pension Plan
and, after January 1, 1986 and before January 1, 1987, the Grossman's
Inc./Evans Asset Holding Company General Pension Plan.
2.24. "Normal Retirement Date" shall mean the first day of the
calendar month next following the Participant's 65th birthday. A
Participant's normal retirement age is his 65th birthday.
2.25. "Participant" shall mean the following:
(a) any Employee (an "Active Participant") who is not described
in Section 3.1(b)(i)-(v) and who participates in the Plan pursuant to
Article 3; and
<PAGE> 17
(b) an individual who is no longer accruing Continuous Service
or Credited Service under the Plan, but who had acquired a
nonforfeitable right to an Accrued Pension or Normal Retirement
Pension before his Continuous Service Termination Date; provided,
however, that such individual shall cease to be a Participant on the
date as of which no further Plan benefits are payable to him.
2.26. "Pension" shall mean the amount of monthly benefit for which a
Participant is eligible, calculated in accordance with Article IV.
2.27. "Plan" shall mean the Grossman's Inc. Retirement Plan as herein
set forth, and as amended from time to time.
2.28. "Plan Sponsor" shall mean Grossman's Inc., a Delaware
Corporation, or any other company into which it may be merged or
consolidated, or any successor to a major portion of its property or
business or assets that shall agree to continue the Plan, as herein set
forth.
2.29. "Plan Year" shall mean the calendar year January 1 through
December 31.
2.30. "Postponed Retirement Date" shall mean the first day of the
calendar month next following the Participant's actual retirement.
2.31. "Predecessor Sponsor or Affiliate" shall mean an employer
defined in Section 2.13(b) and (c) for the periods of time described in
that Section.
2.32. "Statement" shall mean the STATEMENT OF CONTINUING RIGHTS FOR
CERTAIN PARTICIPANTS, attached hereto. The provisions of the statement
shall be controlling, to the extent allowed by applicable law, in the
event of conflict with any provision of the Plan other than Section 4.6
and Articles V, VI and VII.
2.33. "Trust Agreement" shall mean the agreement, as amended from
time to time, entered into between the Plan Sponsor and the Trustee to
carry out the purposes of the Plan.
2.34. "Trust Fund" or "Fund" shall mean the cash and other investments
held and administered by the Trustee in accordance with the provisions of the
Trust Agreement and the Plan.
<PAGE> 18
2.35. "Trustee" shall mean the trustee or trustees appointed and
acting in accordance with Article IX.
In this Plan document, unless the context clearly requires otherwise,
the singular shall include the plural and the masculine gender shall
include the feminine.
<PAGE> 19
ARTICLE III
PARTICIPATION AND SERVICE
3.1. Eligibility to Participate: Each Employee on January 1, 1987,
who was a Participant in the GPP on December 31, 1986, shall automatically
become a Participant in the Plan on January 1, 1987.
(a) Each Employee who is not described in Section 3.1(a) shall
automatically become a Participant as of the later of the first
anniversary of his Continuous Service Date and his 21st birthday,
provided:
(i) he is not a member of a bargaining unit recognized
for the purpose of collective bargaining where retirement
benefits have been the subject of good faith bargaining and such
bargaining does not provide for coverage under the Plan; and
(ii) he is a citizen of the United States, or is a
resident alien, or receives earned income, within the meaning of
Code section 911(b), from the Plan Sponsor or an Affiliated
Company that constitutes income from sources within the United
States within the meaning of Code section 861(a)(3); and
(iii) he is not (A) a seasonal employee or (B) hired for
a specific task or period with the understanding that there is
no commitment by the Plan Sponsor or an Affiliated Company of
permanent employment after completion of such task or such
period, provided that an employee hired for a specific task or
period shall be eligible to participate in the Plan, retroactive
to the first day of the applicable period, if and when he
completes 1,000 Hours of Service (as defined in Department of
Labor Reg. section 2530.200b-2) in any 12-month period; and
<PAGE> 20
(iv) he is not accruing retirement benefits under the
Railroad Retirement Act of 1974.
3.2. Continuous Service. Except as otherwise provided in this Plan,
an Employee's Continuous Service is the period of time, computed to the
nearest full month, between his Continuous Service Date and his Continuous
Service Termination Date. If an Employee incurs a Continuous Service
Termination Date from the Plan Sponsor or an Affiliated Company and is
later reemployed by the Plan Sponsor or an Affiliated Company within 12
months, the period between his Continuous Service Termination Date and his
reemployment commencement date ("reemployment date") shall be included in
his Continuous Service. If an Employee incurred a Continuous Service
Termination Date from a Predecessor Sponsor or Affiliate prior to 1987 and
was later reemployed by the Plan Sponsor, an Affiliated Company, or a
Predecessor Sponsor or Affiliate within 12 months, the period between his
Continuous Service Termination Date and his reemployment date shall be
included in his Continuous Service. However, if during a period of
absence for reasons such as vacation, sickness, disability, lay off or
approved leave of absence, an Employee's employment is terminated, the
period from his Continuous Service Termination Date to his reemployment
date shall count as Continuous Service only if his reemployment date is
within 12 months of the first day of that absence.
3.38. "Break-in-Service". A Break-in-Service shall occur, as of
the Employee's Continuous Service Termination Date, if he does not have a
reemployment date within 12 months after a Continuous Service Termination
Date. If an Employee has a Break-in-Service, any period before the
Break-in-Service shall be excluded from his Continuous Service, except as
otherwise provided in this Article III.
<PAGE> 21
(a) If after the completion of five years of Continuous
Service, a Participant becomes disabled and is absent from the service
of the Plan Sponsor or an Affiliated Company (or, prior to 1987, of a
Predecessor Sponsor or Affiliate) due to an authorized disability
leave of absence in excess of two years, a Continuous Service
Termination Date shall not occur until the termination of that leave
of absence or the commencement of his Pension or a pension under the
GPP or the EAHC Plan.
(b) The provisions of this Plan relating to Continuous and
Credited Service, including the granting of any leave of absence,
shall be applied in a uniform and nondiscriminatory manner for all
Participants who are similarly situated.
(c) If an Employee is absent from the service of the Plan
Sponsor or an Affiliated Company (or, prior to 1987, of a Predecessor
Sponsor or Affiliate) because of service in the Armed Forces of the
United States, including the Merchant Marine Service of the United
States, and if he shall have returned to the service of the Plan
Sponsor or an Affiliated Company, having applied to return while his
reemployment rights were protected by law, that absence shall be
counted as Continuous Service.
3.4. Credited Service. Except as otherwise expressly provided in
this Section 3.4, all Continuous Service while a Participant shall count
as Credited Service under the Plan and, with respect to a Participant who
is vested in his Accrued Pension, Credited Service shall also include the
year of Continuous Service required as a condition to become a Participant
in the Plan. All periods of Credited Service shall be aggregated for all
purposes of the Plan.
<PAGE> 22
(a) No periods during which the Employee is excluded from
participation under the Plan by reason of Section 3.1(b)(i)-(iv)
(including any period between a Continuous Service Termination Date
and a reemployment date that is counted as Continuous Service as
provided in Section 3.2 but in which the Participant is an Employee
and not eligible to participate in the Plan) shall be counted as
Credited Service.
(b) Notwithstanding the foregoing, any period of not more than
two years during which a Participant is on a leave of absence or
temporary layoff approved by the Plan Sponsor or an Affiliated Company
(or, if the leave commenced prior to 1987, by a Predecessor Sponsor or
Affiliate) that is counted as Continuous Service will be counted as
Credited Service only to the extent provided under rules uniformly
applicable to all Participants similarly situated, provided, however,
that if, after the completion of five years of Continuous Service the
Participant becomes disabled and is absent from the service of the
Plan Sponsor or an Affiliated Company (or, prior to 1987 of a
Predecessor Sponsor or Affiliate) due to an authorized disability
leave of absence in excess of two years, a Continuous Service
Termination Date shall not occur until the termination of that leave
of absence or the commencement of his Pension or a pension under GPP
or the EAHC plan.
<PAGE> 23
(c) Credited Service shall include any period of absence from
service with the Plan Sponsor or Affiliated Company (or, prior to
1987, with a Predecessor Sponsor or Affiliate) due to service in the
Armed Forces of the United States that is counted in a Participant's
Continuous Service under Section 3.3(d).
(d) A credited service termination date shall occur on the
earlier of the Participant's Continuous Service Termination Date, the
date he is transferred or reclassified so that he is no longer
eligible to participate in the Plan as provided in Section 3.1, or the
date he enters into a status described in Section 3.1(b)(i)-(v).
3.5. Reemployment Following a Break-in-Service (Non-Vested
Terminee). If a former Employee of the Plan Sponsor or an Affiliated
Company (or, if termination occurred prior to 1987, of a Predecessor
Sponsor or Affiliate) who is not vested in his Accrued Pension returns to
service with the Plan Sponsor or an Affiliated Company after having had a
Break-in-Service and completes one year of Continuous Service with the
Plan Sponsor or an Affiliated Company after the Break-in-Service, the
following shall apply:
(i) Any Continuous Service and any Credited Service he
was entitled to immediately before the Break-in-Service shall be
restored to him if (A) he had completed five years of Continuous
Service as of his most recent Continuous Service Termination
Date (excluding any Continuous Service disregarded under this
Section 3.5(a) by reason of any earlier Break-in-Service) before
such Break-in-Service or (B) the period of time between his
Continuous Service Termination Date and his reemployment date
does not exceed the greater of (1) the exact length of his
Continuous Service as of his most recent Continuous Service
Termination Date (excluding any Continuous Service disregarded
under this Section 3.5(a) by reason of any earlier
Break-in-Service), or (2) five years; provided, however, that
(B)(2) applies only if the Employee's Break-in-Service occurs on
or after January 1, 1985. If the Employee's Continuous Service
and Credited Service are restored, such Participant shall, if
otherwise eligible as provided in Section 3.1, become a
Participant retroactively as of his reemployment date.
<PAGE> 24
(ii) Any prior periods of Continuous Service and Credited
Service not restored under Section 3.5(a)(i) shall be forfeited
and the Participant shall be treated in all respects as if first
employed by the Plan Sponsor or an Affiliated Company on his
reemployment date.
(iii) Subject to Section 4.6, if a Participant's previous
Credited Service is restored pursuant to this Section 3.5(a),
upon his later retirement his Pension, if any, shall be based on
the benefit formula then in effect and his Credited Compensation
and his aggregated Credited Service before and after his
Break-in Service.
(a) If an individual who was on the active payroll of Evans
Asset Holding Company or Evans Transportation Company (or any of their
subsidiaries) on December 31, 1986, had less than ten years of
Continuous Service as of December 31, 1986 and terminated service
after 1986 with a participating employer in the EAHC Plan, becomes an
Employee of the Plan Sponsor or an Affiliated Company, and completes
one year of Continuous Service with the Plan Sponsor or an Affiliated
Company, the following shall apply:
<PAGE> 25
(i) Any Continuous Service and any Credited Service such
Employee was entitled to under the GPP as of December 31, 1986
shall be restored to him if the period of time between December
31, 1986 and his post-1986 reemployment date with the Plan
Sponsor or an Affiliated Company does not exceed the greater of
(A) the exact length of his Continuous Service as of December
31, 1986 (excluding any Continuous Service previously
disregarded under the GPP because of a Break-in-Service under
those plans), or (B) five years. If the Employee's Continuous
Service and Credited Service are restored, such Participant
shall, if otherwise eligible as provided in Section 3.1, become
a Participant retroactively as of his reemployment date.
(ii) Any periods of pre-1987 Continuous Service and
Credited Service not restored under Section 3.5(b)(i) shall be
forfeited and the Participant shall be treated in all respects
as if first employed on his post-1986 reemployment date with the
Plan Sponsor or an Affiliated Company.
(iii) Subject to Section 4.6, if a Participant's previous
Credited Service is restored pursuant to this Section 3.5(b),
upon his later retirement his Pension, if any, shall be based on
the benefit formula then in effect and his Credited Compensation
and his aggregated Credited Service before and after his
Break-in-Service.
3.6. Reemployment of Vested Terminee. If a former Employee of the
Plan Sponsor or an Affiliated Company (or, if termination occurred prior
to 1987, of a Predecessor Sponsor or Affiliate), who is vested in his
Accrued Pension has a Break-in-Service and returns to service with the
Plan Sponsor or an Affiliated Company before he attains age 55, the
following shall apply:
<PAGE> 26
(i) All of the Employee's prior Continuous Service and
Credited Service shall be restored and the Employee shall, if
otherwise eligible as provided in Section 3.1, again become a
Participant retroactively as of his reemployment date.
(ii) Subject to Section 4.6, if a Participant's previous
Credited Service is restored pursuant to this Section 3.6(a),
upon his later retirement his Pension, if any, shall be based on
the benefit formula then in effect and his Credited Compensation
and his aggregated Credited Service before and after his
Break-in-Service.
(a) If an individual
(i) had a Continuous Service Termination Date from a
Predecessor Sponsor or Affiliate prior to 1987 and at that time
had a nonforfeitable right to an accrued pension under the GPP;
or
(ii) has a Continuous Service Termination Date from the
Plan Sponsor or an Affiliated Company after 1986 and at that
time has a nonforfeitable right to a Pension under the Plan; or
(iii) was on the active payroll of Evans Asset Holding
Company or Evans Transportation Company (or one of their
subsidiaries) on December 31, 1986, terminates service after 1986
from a participating employer in the EAHC Plan, and had a
nonforfeitable right to an accrued pension as of December 31, 1986
under the GPP and such an individual is reemployed by the Plan
Sponsor or an Affiliated Company after age 55, the following shall
apply when he completes one year of Continuous Service with the Plan
Sponsor or an Affiliated Company:
<PAGE> 27
(iv) He shall become an active Participant retroactively
as of his reemployment date (if otherwise eligible as provided
in Section 3.1).
(v) His Pension under the Plan, if otherwise payable,
shall cease and any election of an optional benefit in effect
shall be void; provided that the individual is scheduled to work
at least eight days during a calendar month.
(vi) His pension under the GPP or the EAHC Plan that is
payable or being paid shall be unaffected by this reemployment
under this Section 3.6(b).
(vii) Any Continuous Service and Credited Service to
which he was entitled under the GPP when he retired to
terminated service shall be restored to him.
(viii) Subject to Section 4.6, upon later retirement his
Pension shall be based on the benefit formula then in effect and
his Credited Compensation and Credited Service before and after
the period when he terminated service. If, however, the
Participant received a lump sum payment of his Pension in accor-
dance with Section 6.4, the Actuarial Equivalent of such lump
sum shall be deducted from the amount of any future Pension.
(ix) The part of the Participant's Pension upon later
retirement payable with respect to Credited Service rendered
before his previous retirement or termination of service shall
never be less than the amount of his previous Pension modified
to reflect any option in effect on his later retirement.
<PAGE> 28
ARTICLE IV
ELIGIBILITY FOR AND AMOUNT OF PENSION
4.1. Normal Retirement. The right of a Participant to his normal
retirement Pension shall become nonforfeitable on his 65th birthday. A
Participant may retire from employment on a normal retirement Pension
beginning on his Normal Retirement Date or he may postpone his retirement
and remain in service after his Normal Retirement Date (in which case the
amount of this Pension shall be determined as provided in Section 4.2).
(a) Subject to the provisions of Sections 4.1(d), 4.6 and 6.1,
the monthly amount of the normal retirement Pension payable to a
Participant whose Continuous Service Termination Date occurs on or prior
to December 31, 1990 shall equal the sum of (i) and (ii) below:
(i) one percent of the Participant's Average Monthly
Earnings not in excess of one-twelfth of the greater of (A)
$10,000 or (B) one-half of the Covered Compensation of a
Participant who attains normal retirement age in the Current
Plan Year plus one and one-half percent of his Average Monthly
Earnings in excess of one-twelfth of the greater of (A) $10,000
or (B) one-half of the Covered Compensation of a Participant who
attains normal retirement age in the Current Plan Year,
together, multiplied by the Participant's number of years and
full months of Credited Service earned before January 1, 1986.
(ii) the total of the Participant's Career Pay Pension
Credits for Credited Service earned after December 31, 1985.
<PAGE> 29
(b) Subject to the provisions of Sections 4.6 and 6.1, the
monthly amount of the normal retirement Pension payable to a
Participant whose Continuous Service Termination Date occurs after
December 31, 1990 shall equal the sum of (i) and (ii) below:
(i) the sum of one percent of the Participant's Average Monthly
Earnings not in excess of one-twelfth of the greater of (A) $10,000 or
(B) one-half of the Covered Compensation of a Participant who attains
normal retirement age in the Current Plan Year plus one and one-half
percent of his Average Monthly Earnings in excess of one-twelfth of
the greater of (A) $10,000 or (B) one-half of the Covered Compensation
of a Participant who attains normal retirement age in the Current Plan
Year, multiplied by the Participant's number of years and full months
of Credited Service earned before January 1, 1991;
(ii) the total of the Participant's Career Pay Pension Credits
for Credited Service earned after December 31, 1990.
Nothing in this section shall be construed to provide benefits to persons
who shall have terminated with vested benefits prior to January 1, 1991.
(c) Notwithstanding Section 4.1(b), for any Participant whose
Continuous Service Termination Date occurs after December 31, 1988 and
before January 1, 1991 after having satisfied the requirements for
Early Retirement under Section 4.3, that Participant's pension amount
shall be determined as if the provisions of Section 4.1(b) and Section
2.5 of the GPP as in effect on December 31, 1985 had continued in
force without amendment through December 31, 1990, if such formula
results in a greater benefit for the Participant than would otherwise
be provided under Section 4.1(b).
<PAGE> 30
(d) Notwithstanding any contrary provision in this Article IV,
in no event shall any person's normal retirement Pension be less than
his Accrued Pension.
4.2. Postponed Retirement Date. If a Participant remains in
the employ of the Plan Sponsor or an Affiliated Company beyond his Normal
Retirement Date, he may elect either (i) to have the commencement of his
Pension postponed (in which case the amount of this Pension shall be
determined as provided in Section 4.2(b)) or (ii) to begin a normal
retirement Pension on his Normal Retirement Date (in which case his
Pension shall be adjusted, if applicable, as provided in Section 4.2(c)).
(a) Subject to the provisions of Section 6.3, a postponed
retirement Pension shall commence as of the month on which the
Participant's Postponed Retirement Date occurs. A Participant's
postponed retirement Pension shall be an amount equal to the greater
of (i) his normal retirement Pension increased at the rate of six
percent per annum, compounded annually, from the Participant's Normal
Retirement Date to his Postponed Retirement Date or (ii) the benefit
payable to him under Section 4.1(b) taking into account all of his
Credited Service through his Postponed Retirement Date.
(b) If a Participant who remains in service after his Normal
Retirement Date elects to commence receiving his normal retirement
Pension on his Normal Retirement Date his Pension shall be adjusted,
as of each anniversary of his Normal Retirement Date occurring prior
to his Postponed Retirement Date and as of his Postponed Retirement
Date, if the benefits payable to him under Section 4.1(b) taking into
account all of his Credited Service through such date (the "Additional
Credit Benefit") exceeds the actuarial value of the total Pension
payments payable through such date (the "Actuarial Pension").
Notwithstanding the foregoing, if, as of any such date, the Actuarial
Pension is greater than the Additional Credit Benefit, no adjustment
<PAGE> 31
shall be made as of such date. In any case in which a Participant has
elected a lump sum distribution which is the Actuarial Equivalent of
the normal retirement Pension, the adjustment described in the
foregoing sentences shall be calculated as though the Participant had
received his benefit in the normal form, but, in lieu of annual
payments, the Actuarial Equivalent of any adjustment required shall be
paid in a single lump sum payment as soon as practicable following the
Participant's Postponed Retirement Date.
4.3. Early Retirement. A Participant who incurs a Continuous
Service Termination Date after age 55 but prior to his Normal Retirement
Date and has completed 5 years of Continuous Service shall be entitled to
an early retirement Pension. Such a Participant's Early Retirement Date
shall be the first day of the calendar month following such Continuous
Service Termination Date.
(a) A Participant who satisfies the conditions of Section 6.1
may elect to receive an early retirement Pension beginning on the last
day of any calendar month before his Normal Retirement Date and after
his 55th birthday. In that case, the Participant's Pension shall be
equal to the deferred Pension reduced by one-third of one percent for
each calendar month by which the date the Participant's early
retirement Pension begins precedes the Participant's Normal Retirement
Date.
<PAGE> 32
4.4. Vesting. A Participant shall be 100 percent vested in,
and have a nonforfeitable right to, his Accrued Pension upon completion of
5 years of Continuous Service. If the Participant subsequently incurs a
Continuous Service Termination Date for reasons other than retirement or
death he shall be eligible for a vested Pension after the Committee
receives his written notice requesting payment of the Pension. His
Deferred Vested Retirement Date shall be the first day of the month
following such Continuous Service Termination Date.
(a) The vested Pension shall be a deferred Pension beginning as
if the Participant had retired on his Normal Retirement Date and,
subject to the provisions of Section 6.1, shall be equal to his
Accrued Pension. However, the Participant may elect to have his
vested Pension begin on the last day of any month before his Normal
Retirement Date and after his 55th birthday. In that case, the
Participant's Pension shall be equal to his Accrued Pension, reduced
as provided in Section 4.3(b).
(c) Notwithstanding anything else in this Plan to the contrary,
solely for purposes of determining whether a Participant who was employed
by the Moore's Division on September 12, 1989 and who became an employee
of Harcros Lumber & Building Supplies Inc. ("Harcros") pursuant to an
Asset Purchase Agreement (the "Moore's Purchase Agreement"), as amended,
between the Company, Harcros and, to the extent applicable, Harrison Pauls
Holdings Inc., is vested in his Accrued Pension hereunder, Verified
Service (as defined below) with Harcros shall be treated as through
service with the Company.
Verified Service shall mean service with Harcros which is verified by
Harcros in accordance with the provisions of Section 10.2(c) of the
Moore's Purchase Agreement.
<PAGE> 33
(d) Notwithstanding anything else in this Plan to the contrary, a
Participant who was employed by the Northwest Division on August 25, 1989
shall be vested in at least that portion of his Accrued Pension as is
determined under the schedule set forth below:
<TABLE>
<CAPTION>
Full Years of
Continuous Service Percent Treated
Completed As Though Vested
<S> <C>
A. Less than one A. 0%
B. One or more but B. 33-1/3%
less than three
C. Three or more but C. 66-2/3%
less than five
</TABLE>
(e) Any participant who terminates employment with no vested interest
under the Plan shall be deemed to have received a complete distribution of
his interest under the Plan, subject to reinstatement upon reemployment
prior to the time at which such employee's prior service can be
disregarded under the terms of the Plan.
4.5. Disability. A Participant who has attained his 40th birthday
and completed 15 years of Continuous Service shall be entitled to a
disability retirement Pension provided all of the following conditions are
met:
(i) the Participant is receiving disability insurance
benefits under the Social Security Act,
(ii) such disability was not contracted, suffered or
incurred while the Employee was engaged in, or resulted from
having engaged in, a felonious enterprise,
(iii) such disability has not resulted from an
intentionally self-inflicted injury,
<PAGE> 34
(iv) such disability has not resulted from past or future
service in the Armed Forces of the United States and is
compensable as such by an Armed Forces disability allowance,
(v) the Participant is not a member of any long-term
disability plan of the Plan Sponsor or an Affiliated Company on
the date he incurs the disability,
(vi) the Participant does not incur a Continuous Service
Termination Date on or after the date he incurred the
disability, and
(vii) the Committee receives a written application for
the disability retirement Pension made by or for the
Participant.
The Participant's Disability Retirement Date shall be the first day of
the month next following his completion of the requirements provided above
in this Section 4.5(a). If, however, the disability benefit under Title
II of the Social Security Act is retroactively awarded, the Disability
Retirement Date shall be the first day of the month next following the
effective date of the Social Security award.
(a) The disability retirement Pension shall be based upon the
Participant's Accrued Pension and be payable subject to the
continuance of his disability, as provided in Section 4.5(c). The
amount of disability retirement Pension payable shall depend upon the
Participant's marital status on the effective date of his Pension
commencement. If the disabled Participant does not have an Eligible
Spouse on such date the Pension shall be an amount calculated in
accordance with Section 6.2(a), Option 1. If the Participant does
have an Eligible Spouse on such date, the Pension shall be an amount
calculated in accordance with Section 6.2(a), Option 2 as a 100
percent joint and survivor annuity with the Eligible Spouse as the
Beneficiary. If the Participant dies before commencing receipt of his
<PAGE> 35
Pension other than on account of disability, his disability retirement
Pension shall cease and the amount of death benefits due his surviving
Eligible Spouse and Dependent Children, if any, shall be determined in
accordance with Article V. The foregoing notwithstanding, a married
Participant may elect in writing to waive such joint and survivor
annuity in accordance with procedures of Section 6.1(b) and the
requirements of Section 6.1(c) and receive, in lieu thereof, his
Pension determined in the same manner as for a Participant who does
not have an Eligible Spouse.
(b) As a condition of his continuing to receive a disability
retirement Pension, the Committee may require any Participant
receiving a disability retirement Pension, who has not reached his
Normal Retirement Date, to provide satisfactory proof of his continued
receipt of disability insurance benefits under the Social Security
Act. If any Participant refuses to provide that proof, his disability
retirement Pension shall cease until he no longer refuses to provide
that proof. If his refusal continues for a year all rights to the
disability retirement Pension shall cease, he shall incur a Continuous
Service Termination Date and the election of an optional benefit if
one has been elected shall no longer be effective. If the Committee
finds that the Participant has stopped receiving those disability
insurance benefits under the Social Security Act, his disability
retirement Pension shall cease. In that case, if the Participant does
not again become an Employee, he shall be entitled to retire on a
Normal Retirement Date, a Postponed Retirement Date, an Early
Retirement Date or a Deferred Vested Retirement Date as of the first
day of the calendar month immediately after his disability retirement
<PAGE> 36
Pension ceases, if at the date his disability retirement Pension
ceases he had completed the eligibility requirements for the Pension.
In either case, the Pension shall be based on his Credited Service at
the time his disability retirement Pension ceases, reduced if
applicable, as provided in section 4.3(b).
4.6. Pension offsets.
(a) Predecessor Plan. If an individual
(i) had a nonforfeitable right to an accrued pension
under the GPP as of December 31, 1986;
(ii) became a Participant in the EAHC Plan on January 1,
1987; and
(iii) subsequently attains a nonforfeitable right to a
Pension under this Plan that is based entirely or in part upon
continuous service prior to 1987 under the GPP or both of them;
such individual's Pension under Article IV of this Plan will be calculated
by first reducing his normal retirement Pension under Section 4.1, or his
postponed retirement Pension under Section 4.2, or his accrued Pension
under Section 4.3, 4.4 or 4.5 (whichever is appropriate) by an amount
equal to his accrued pension under the EAHC Plan calculated on the basis
of the individual's average monthly earnings and career pay pension credit
as of December 31, 1986 (or his most recent earlier service termination)
and his credited service as of December 31, 1985 (or his most recent
earlier service termination) under the terms of the GPP in effect as of
December 31, 1986.
(b) Related Plan. If an individual
<PAGE> 37
(i) attains a nonforfeitable right to an accrued pension
after 1986 under the EAHC Plan that is based entirely or in part
upon continuous service prior to 1987 under the GPP; and
(ii) subsequently attains a nonforfeitable right to a
Pension under this Plan that is based entirely or in part upon
continuous service prior to 1987 under the GPP; such
individual's Pension under Article IV of this Plan will be
calculated by first reducing his normal retirement Pension under
Section 4.1, or his postponed retirement Pension under Section
4.2, or his accrued Pension under Section 4.3, 4.4, or 4.5
(whichever is appropriate) by an amount equal to his accrued
pension under the EAHC Plan calculated on the basis of the
individual's average monthly earnings and career pay pension
credit as of December 31, 1986 (or his most recent earlier
service termination) and his credited service as of December 31,
1985 (or his most recent earlier service termination) under the
terms of the GPP in effect as of December 31, 1986.
(c) Workers' Compensation Awards. If a Participant receives
any compensation pursuant to a program of workers' compensation
maintained by the Plan Sponsor or an Affiliated Company, the value of
such compensation, stated as a monthly annuity, but exclusive of any
amounts which are reimbursement for medical expenses or payments for
the loss of a bodily member, shall be subtracted from his Pension.
<PAGE> 38
ARTICLE V
DEATH BENEFITS
5.1. Surviving Spouse Benefit. If a Participant who has attained
his 55th birthday and completed 10 years of Continuous Service dies while
accruing Continuous Service, the Participant's Eligible Spouse shall
receive a benefit equal to the greater of 50 percent of the Participant's
Accrued Pension, or the Actuarial Equivalent of the Participant's Accrued
Pension, adjusted by the appropriate factor for a 100% joint and survivor
annuity otherwise payable to the Participant and Eligible Spouse and
reduced for early commencement as provided in Section 4.3(b), shall be
payable as provided in Section 5.1(c) below, provided that no other
Pension is being paid with respect to the deceased Participant.
(a) If a Participant who has attained his 50th, but not his
55th, birthday and completed 10 years of Continuous Service dies while
accruing Continuous Service, the Participant's Eligible Spouse shall
receive a benefit equal to 50% of the Participant's Accrued Pension,
payable as provided in section 5.1(c) below, provided that no other
Pension is being paid with respect to the deceased Participant. For
purposes of the preceding sentence, a Participant who dies while
accruing Continuous Service during the six month period which ends on
his 50th birthday shall be deemed to have attained his 50th birthday.
(b) The amount determined in accordance with Section 5.1(a) or
(b), as applicable, shall commence as of the last day of the month
next following the Participant's death and shall end with the payment
due for the month in which the Eligible Spouse's death occurs.
<PAGE> 39
5.2. Dependent Child Benefit. If a Participant with respect to
whom a benefit would be payable under Section 5.1(a) or 5.1(b) is not
survived by an Eligible Spouse, the Participant's Dependent Child or
Children (or their legal representatives) shall receive a benefit equal to
50% of the Participant's Accrued Benefit, payable in equal shares,
commencing as of the last day of the month next following the
Participant's death and ending for each such Dependent Child with the
payment for the month in which his 18th birthday occurs or, provided he
is a registered full time student in an accredited school or college as
late as the month in which his 23rd birthday occurs, or the month in
which the Dependent Child's disqualification as such or death occurs, if
earlier. If a Dependent Child dies, the monthly benefit paid to or for
that child shall be paid to any surviving Dependent Children in equal
shares and commencing as of the last day of the month next following the
deceased Dependent Child's death.
(a) If an Eligible Spouse who was receiving a benefit under
Section 5.1 dies and is survived by a Dependent Child or Children,
such Dependent Children shall receive a benefit equal to that benefit
payable to Dependent Children under Section 5.2(a) as though the
Eligible Spouse were the Participant. The benefit provided under this
Section 5.2(b) shall commence as of the last day of the month next
following the Eligible Spouse's death and be payable to or for each
Dependent Child to the same extent provided in Section 5.2(a).
5.3. Preretirement Survivor Annuity. The Eligible Spouse of a
Participant (other than an Eligible Spouse entitled to receive a benefit
under Section 5.1) who dies after having completed 5 years of Continuous
Service (whether or not he had incurred a Continuous Service Termination
Date prior to death) shall receive a Preretirement Survivor Annuity,
provided that no other Pension is due or payable with respect to the
deceased Participant.
<PAGE> 40
(a) A Preretirement Survivor Annuity shall mean a life annuity
payable to the Eligible Spouse of the Participant in an amount equal
to the amount that would have been paid to the Eligible Spouse under
the 50% joint and survivor annuity described in Section 6.2-Option 2.
(b) The earliest period for which a Preretirement Survivor
Annuity is payable to the surviving Eligible Spouse begins with the
month in which the Participant would have reached the earliest
retirement age and could have elected to receive a Pension. A
Preretirement Survivor Annuity is payable on the assumption that in
the case of a Participant who dies after attaining age 55, the
Participant had retired with an immediate 50% joint and survivor
annuity on the day before his death, or in the case of a Participant
who dies before age 55, the Participant had (A) separated from service
on the date of death, (B) survived to age 55, (C) retired with an
immediate 50% joint and survivor annuity at age 55, or (D) died on the
day on which he would have attained age 55.
<PAGE> 41
ARTICLE VI
PAYMENT OF PENSION
6.1. Automatic Form of Payment. A Participant who is not married
to an Eligible Spouse on the day his Pension begins pursuant to Article IV
shall receive his Pension during his lifetime in monthly installments
beginning as of the last day of the month in which his retirement date
occurs (except as otherwise provided in Sections 4.3(b) and 4.4(b)), but
for a guaranteed period of 120 months. Should the Participant die after
his Pension begins but before the payment of 120 monthly installments, the
payment due for the month in which the Participant dies shall be prorated
to the date of death. Except as provided in Section 4.5 with respect to a
disability Pension, the amount accrued to the date of death shall be paid
to the Participant's estate and the amount accrued from the day after the
Participant's death plus any remaining guaranteed installments shall be
paid to the surviving Beneficiary.
(a) A Participant who is married to an Eligible Spouse on the
day his Pension begins pursuant to Article IV shall receive his
Pension in the form of a 100% joint and survivor annuity, providing
for a modified amount payable to the Participant during his life and
after his death a Pension at the same rate payable during the life of,
and to, such surviving Eligible Spouse.
6.2. Optional Forms of Payment. Notwithstanding the provisions of
Section 6.1, any Participant (other than a Participant retiring on a
disability retirement Pension before completing the age and service
requirements for early retirement) may elect by written notice to the
Committee during the election period specified in Section 6.3 to convert
the Pension otherwise payable to him under Section 6.1 into an optional
benefit that is the Actuarial Equivalent of such Pension. However, if the
option elected provides a death or survivor benefit under which the
<PAGE> 42
Beneficiary is not the Participant's Eligible Spouse, the value of the
Pension payable to the Participant under the option elected shall never be
less than 51 percent of the total value of the benefits payable under
Section 6.1 to the Participant and his Beneficiary. The options available
to Participants are as follows:
(i) Option 1. A modified Pension payable solely for the
Participant's life, with no benefits payable after his death regardless of
the period over which the Participant receives benefits.
(ii) Option 2. A modified Pension payable during the Participant's
life, and after his death payable, at the rate of 50 or 100 percent, at
the Participant's election, of such modified Pension, to his Beneficiary
for life.
(iii) Option 3. A modified Pension payable to the Participant for
life, but guaranteed for a period of 60 or 120 months as the Participant
shall elect, with the provision that if the Participant dies before
payment of the guaranteed installments, payment of any remaining
installments shall be paid to his Beneficiary.
(iv) Option 4. If the Participant has attained his Normal Retirement
Date, a lump sum distribution which is the Actuarial Equivalent of the
Participant's Pension.
(a) The Committee, within a reasonable time prior to the
Participant's annuity commencement date, shall furnish each married
Participant a written explanation in nontechnical language of the
terms and conditions of the Pension payable under Section 6.1(b) and
the financial effect upon the Participant's Pension of selecting an
optional benefit. An election under section 6.2 shall be made on a
<PAGE> 43
form supplied by the Committee, and may be made at any time after that
information is furnished to the Participant and before the date the
Participant's Pension begins; provided that the period during which
the election may be made shall be a period of a least 90 days.
However, a married Participant may file with the Committee no later
than 90 days before the date his Pension is to begin a written request
for detailed information as to the amount of his Pension on a joint
and survivor basis under Section 6.1(b) and under Option 1 of Section
6.2. If he makes that request, the period during which an election of
Option 1 may be made shall be extended, if necessary, to include the
60 days following receipt by the Participant of that information.
An election of an option under Section 6.2 may be revoked on a form
supplied by the Committee, and a new election may be made, during the
applicable election period. An election of an optional benefit shall be
effective on the date the Participant's Pension begins. A revocation of
any election shall be effective when the completed form is filed with the
Committee. If a Participant who has elected an optional benefit or the
Beneficiary designated under an option dies before the date the election
of the option becomes effective, the election shall be void.
(b) A Participant who is married to an Eligible Spouse may not
waive the form of Pension payable pursuant to Section 6.1(b) unless
his Eligible Spouse consents to such waiver in a written instrument
received by the Committee acknowledging the financial effect of such
waiver and be witnessed by a notary public.
<PAGE> 44
The consent of an Eligible Spouse shall be irrevocable, unless the
Participant revokes his election of another Beneficiary. The Participant
may revoke the election at any time and any number of times before his
Pension payments begin.
Notwithstanding the foregoing, spousal consent to a Participant's
designation shall not be required if:
(i) the Eligible Spouse is designated as the primary
beneficiary by the Participant and the method of payment chosen
for the Eligible Spouse by the Participant conforms with the
requirements of this Article VI, or
(ii) it is established to the satisfaction of the
Committee that spousal consent cannot be obtained because there
is no Eligible Spouse, because the Eligible Spouse cannot be
located or because of such other circumstances as may be
prescribed in regulations issued by the Secretary of the
Treasury.
6.3. Required Distributions. Unless the Participant elected
otherwise prior to January 1, 1984 and the election was valid under law
when made, the following provisions shall apply to the payment of the
Participant's Pension:
(i) Pension payments must commence no later than the
April 1st following the calendar year in which the Participant
attains age 70-1/2;
(ii) Pension payments must not be made in a form that
will cause the payments to extend beyond the later of (1) the
actual lifetime of the Participant or the Participant and his
Beneficiary or (2) the life expectancy of the Participant or the
joint life expectancy of the Participant and a Beneficiary
determined as of the calendar year in which the Participant
attains age 70-1/2.
(iii) If a Participant begins receiving Pension payments
before his death, and subsequently dies, any remaining portion
of the Participant's interest must be distributed at least as
rapidly as under the method of distribution in effect prior to
death.
<PAGE> 45
(iv) If a Participant dies before receiving any Pension
payments, any remaining interest of the Participant must be
distributed within five years after the death of the
Participant, except that the five years rule shall not apply to
any distribution of benefits if (1)(A) any amount to be
distributed to a Beneficiary will be distributed over a period
not greater than the life of the Beneficiary (or over a period
not extending beyond the life expectancy of the Beneficiary),
and (B) the distribution commences no later than one year after
the date of the Participant's death or (2)(A) the portion of the
Participant's interest to which an Eligible Spouse is entitled
will be distributed over the life of the Eligible Spouse (or
over a period not extending beyond the life expectancy of the
Eligible Spouse), and (B) the distribution begins no later than
the date on which the Participant would have attained age
70-1/2.
6.4. Lump Sum Payment. If the actuarial value of the nonforfeitable
portion of a Participant's Accrued Pension is not greater than $3,500,
calculated by using the Pension Benefit Guaranty Corporation's deferred
annuity rates in effect for the month during which the lump sum payment is
made, such value shall be paid to the Participant in a lump sum payment.
A partial or total lump sum payment cannot be made after the annuity com-
mencement date, regardless of the actuarial value of the Participant's
nonforfeitable portion in his Pension, without the written consent of the
Participant and the Participant's Eligible Spouse, if any, or if the
Participant is deceased, the surviving Eligible Spouse.
<PAGE> 46
(iv) Unless otherwise elected by a Participant, distribution of the
vested portion of the Participant's Accrued Pension shall commence not
later than within sixty (60) days of the close of the Plan Year in which
the latest of the following occurs:
(A) the Participant attains Normal Retirement Age;
(B) the tenth anniversary of the date the Participant commenced
participation in the Plan; or
(C) the Participant's Continuous Service Termination Date.
6.5 Income Tax Withholding. Unless the recipient elects otherwise,
income taxes will be withheld from any benefits paid under this Plan to
the extent required by applicable law.
6.6. Distributions Made On or After January 1, 1993.
(a) Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a distributee's election under this Section
6.6, a distributee may elect, at the time and in the manner prescribed
by the Plan Sponsor, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
(b) Definitions.
(i) "Eligible rollover distribution": An eligible
rollover distribution is any distribution of all or any portion
of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
<PAGE> 47
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the Code;
and the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(ii) "Eligible retirement plan": An eligible retirement
plan is an individual retirement account described in section
408(a) of the Code, an individual retirement annuity described
in section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
(iii) "Distributee": A distributee includes an employee
or former employee. In addition, the employee's or former
employee's surviving spouse and the employee's or former
employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in
section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
<PAGE> 48
(iv) "Direct rollover": A direct rollover is a payment
by the plan to the eligible retirement plan specified by the
distributee.
(c) Notice Requirement. The Plan Sponsor shall give a
distributee notice of his or her right to elect a direct rollover and
an explanation of the withholding consequences if not making the
election. Such notice shall be given no earlier than 90 days and no
less than 30 days before the date of distribution. The distributee,
in his or her sole discretion, may waive, in writing, the right to 30
days' notice.
<PAGE> 49
ARTICLE VII
ADJUSTMENTS AND LIMITATIONS TO PENSIONS
7.1. Adjustments for Disability. To the extent allowed under
applicable law, any amount paid to or on behalf of any Participant
pursuant to any federal, state or local worker's compensation,
occupational disease or disability benefits laws (except fixed statutory
payment for partial or total loss of any bodily member), shall be deducted
from or charged against the amount of any disability Pension payable under
this Plan to the extent that such amount has been provided by premiums,
taxes, or other payments paid by or at the expense of a Plan Sponsor or
Affiliated Company. If any amount of disability Pension payable under
this Plan is determined with respect to a period of time, such deduction
or charge shall be made only with respect to the same period. If any such
amount is not determined with respect to the same period of time, the
Committee shall apportion the amount to a period of time under procedures
reasonably designed to result in deduction or charge comparable to that
which would be made if the amount had been determined with respect to a
period of time.
7.2. Adjustments for Other Pensions. If any Participant shall
receive or become eligible for any payments in the nature of a pension
from any other source or fund to which the Plan Sponsor or any Affiliated
Company directly or indirectly contributes (excluding benefits under the
Social Security Act or under the plans specified below), then the Pension
otherwise payable to or with respect to the Participant from this Plan
shall be reduced by the Actuarial Equivalent of any such other payments
attributable to contributions by the Plan Sponsor or Affiliated Company.
<PAGE> 50
7.3. Adjustment for Accident and Sickness Benefits. Notwithstanding
any other provision of this Plan, no pension payments shall be made for
any month prior to the Participant's attainment of age sixty-five (65)
with respect to which the Participant is eligible to receive and claims
weekly accident and sickness income benefits provided under the Plan
Sponsor or an Affiliated Company-sponsored employee benefit plan, or
similar benefits partially or wholly funded by the Plan Sponsor or
Affiliated Company and provided under law.
7.4. Maximum Benefit. In no event may a Participant's annual
Pension payments, commencing as of the Participant's social security
retirement age (as defined in Section 415(b)(8)), under the Plan, and any
other defined benefit plans of the Plan Sponsor or an Affiliated Company,
exceed the lesser of 100 percent of the Participant's highest average
annual compensation during any three consecutive calendar years of his
active participation under the Plan, or $90,000, adjusted automatically
to reflect future Consumer Price Index changes to the extent permitted by
Treasury Regulations issued under section 415 of the Code. For purposes
of this Section 7.4(a), "compensation" means the Participant's wages,
salaries, fees for professional services and other amounts received for
personal services actually rendered in the course of employment with an
Employer within the meaning of Treas. Reg. 1.415(d)-(1), but does not
include any amounts which are excluded under the definition of
compensation under Treas. Reg. 1.415(d)-(2).
<PAGE> 51
If the Participant's Pension commences before his social security
retirement age, the maximum dollar amount in (ii) above shall be the
Actuarial Equivalent to such maximum dollar amount otherwise applicable at
such social security retirement age. In determining such Actuarial
Equivalent, the interest rate assumption shall be the greater of five
percent or the rate specified in Section 2.2.
If the Participant's Pension commences after his social security
retirement age, the maximum dollar amount in (ii) above shall be the
Actuarial Equivalent to the maximum dollar amount otherwise applicable at
such social security retirement age determined by using an interest rate
assumption of not more than five percent.
If the Participant has not completed 10 years of participation under
the Plan, the maximum annual Pension determined under this Section 7.4(a)
shall be reduced by a ratio (but not more than one) that is such
Participant's Credited Service to 10.
Notwithstanding the foregoing provisions of this Section 7.4(a), if
the amount payable to any Participant as a Pension (including any
Actuarial Equivalent form thereof) is or was limited by the provisions of
this Section 7.4(a), such Participant's Pension shall be adjusted, as
appropriate, to take into account any increases in the maximum dollar
limitation determined under this Section 7.4(a).
(a) If a Participant is, or was, covered under a defined
benefit plan and a defined contribution plan maintained by the Plan
Sponsor or an Affiliated Company, the sum of the Participant's defined
benefit plan fraction and the defined contribution plan fraction may
not exceed one in any calendar year (the "Limitation Year").
The defined benefit plan fraction is a fraction, the numerator of
which is the sum of the Participant's projected annual benefits under all
defined benefit plans (whether or not terminated) maintained by the Plan
Sponsor or any Affiliated Company and the denominator of which is the
lesser of
<PAGE> 52
(i) 1.25 times the dollar limitation of Code section
415(b)(1)(A) in effect for the Limitation Year, or 1.4 times
the Participant's average Credited Compensation for the three
consecutive years that produce the highest average.
The defined contribution plan fraction is a fraction, the numerator of
which is the sum of the annual additions to the Participant's account
under all defined contribution plans (whether or not terminated)
maintained by the Plan Sponsor or any Affiliated Company for the current
and all prior Limitation Years, and the denominator of which is the sum of
the lesser of the following amounts determined for such year and for each
prior year of Service with the employer: (i) 1.25 times the dollar
limitation in effect under section 415(c)(1)(A) of the Code for such year,
or (ii) 1.4 times the amount that may be taken into account under section
415(c)(1)(B) of the Code.
A Participant's projected annual benefit under this Plan means the
annual benefit to which the Participant would be entitled under the terms
of the Plan, if the Participant continued employment until normal
retirement age (or current age, if later) and the Participant's Credited
Compensation for the Limitation Year and all other relevant factors used
to determine such benefit remained constant until normal retirement age
(or current age, if later).
If, in any Limitation Year, the sum of the defined benefit plan
fraction and the defined contribution plan fraction exceeds one, then
appropriate reductions shall first be applied to the Participant's defined
contribution annual additions in order to reduce such sum to one.
<PAGE> 53
For the purpose of this Section 7.4 only, an Affiliated Company shall
be determined as provided in Section 2.4, but assuming that the phrase
"more than 50 percent" is substituted for the phrase "at least 80 percent"
each place it appears in section 1563(a)(1) of the Code.
(b) Notwithstanding any other preceding provisions of this
Section, in no event shall a Participant's annual Pension payable
under this Plan be less than the benefit that the Participant had
accrued under the GPP as of December 31, 1982; provided, however, that
in determining such benefit no changes in the terms and conditions of
the GPP or the Plan on or after July 1, 1982 shall be taken into
account.
<PAGE> 54
ARTICLE VIII
TOP-HEAVY PROVISIONS
8.1. When Applicable. If in any Plan Year, this Plan shall be
considered to be Top-Heavy, as defined in section 416(g) of the Code, the
provisions of this Article shall supersede any conflicting provisions in
the Plan.
8.2. Earnings Limited. For each Plan Year that this Plan is
Top-Heavy, Credited Compensation for Plan purposes shall be limited to the
amount as set forth in Code Section 401(a)(17).
8.3. Minimum Accrual. For each Plan Year that this Plan is
Top-Heavy, each Participant who is not a Key Employee must accrue a
nonintegrated benefit that, when expressed as an annual Pension, is not
less than two percent of the Participant's Average Monthly Earnings
multiplied by his years of Credited Service. Average Monthly Earnings is
averaged over the five consecutive years (disregarding years during which
the Plan is not Top-Heavy) for which the Participant had the highest
Credited Compensation. However, a Participant's minimum benefit is not
required to exceed 20 percent of his Average Monthly Earnings. This
minimum accrual shall be made even though, under other Plan provisions,
the Participant would not otherwise be entitled to receive an accrual, or
would have received a lesser accrual for the year because of the
Participant's failure to be employed on a specified date such as the last
day of the Plan Year, or the Participant's failure to make mandatory
contributions, if any, to the Plan, or the Participant's Monthly Earnings
being less than a stated amount. This requirement shall not apply to the
extent the Participant is covered under any other plan or plans of the
<PAGE> 55
Plan Sponsor or Affiliated Company and such employer has provided that the
benefit requirements or minimum allocation applicable to Top-Heavy plans
will be met in the other plan or plans.
For each Plan Year that this Plan is Top-Heavy and a Key Employee
participates in this Plan and a defined contribution plan maintained by
the Company, an Affiliated company, or a nonparticipating associated
company, then the number "1.00" shall be substituted for the number "1.25"
wherever it appears in the provisions governing the denominator of the
defined benefit fraction and the denominator of the defined contribution
fraction in Section 7.4(b).
8.4. Vesting Rules. For any Plan Year in which this Plan is
Top-Heavy, the minimum vesting schedule as described in Section 8.5 will
automatically apply to the Plan in lieu of the schedule provided in
Section 4.4. The minimum vesting schedule applies to all benefits within
the meaning of Code section 411(a)(7) (except those attributable to
Employee contributions if any), including benefits accrued before the
effective date of Code section 416 and benefits accrued before the Plan
became Top-Heavy. Further, no reduction in vested benefits may occur in
the event the Plan's status as Top-Heavy changes for any Plan Year.
However, this Section 8.4 does not apply to the Accrued Pension of any
Employee who does not complete any Continuous Service regarding any period
after the Plan has initially become Top-Heavy and such Employee's Accrued
Pension will be determined without regard to this Section.
8.5. Vesting Schedule. In the event the minimum vesting schedule
shall apply, the nonforfeitable interest of each Participant in his
Accrued Pension attributable to Plan Sponsor and Affiliated Company
contributions shall be determined on the basis of the following:
<PAGE> 56
<TABLE>
<CAPTION>
Vested
Number of Years of Service Interest
-------------------------- --------
<S> <C>
Less than 2 Years 0%
2 Years but less than 3 20%
3 Years but less than 4 40%
4 Years but less than 5 60%
5 Years but less than 6 80%
6 Years or more 100%
</TABLE>
8.6. Distribution. Any distribution of Plan benefits before age
59-1/2 years to a Participant attributable to years in which he was a Five
Percent Owner (without regard to whether the Plan was Top-Heavy for those
years) are not permitted. Any such distributions are subject to a 10
percent penalty unless the distribution is rolled over pursuant to Code
section 402(a)(5) or is paid to an Alternate Payee under a Qualified
Domestic Relations Order (as hereafter defined). Nor will any penalty be
imposed for a distribution to any Five Percent Owner if he becomes
disabled or dies. Disabled for purposes of this Section 8.6 shall mean if
a Participant is unable to engage in any substantial gainful activity by
reasons of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long and indefinite
duration.
8.7. Top-Heavy Determination. A Top-Heavy Plan is a Plan in which
the ratio of the present value of the accrued benefits for Key Employees
to the present value of the accrued benefit for all Employees exceeds 60
percent. To determine whether the Plan is Top-Heavy, nonproportional
subsidies will be included and proportional subsidies ignored. For
purposes of determining the present value of the accrued benefit of any
Employee, distributions made with respect to such Employees within a five
year period ending on the determination date must be included. The
accrued benefit of an employee who has not performed any service for an
employer maintaining the Plan at any time during the five year period
ending on the determination date shall be excluded to determine Top--
<PAGE> 57
heaviness. The determination date is the last day of the preceding Plan
Year. The valuation date is the first day of the relevant Plan Year. The
actuarial assumptions used to determine whether the Plan is Top-Heavy will
be the same as used to compute the Plan's minimum funding requirements for
the same period.
8.8. Aggregation Groups. The required aggregation group consists of
each plan of the Plan Sponsor or an Affiliated Company in which a Key
Employee is a Participant, and each other plan of the Plan Sponsor or an
Affiliated Company that enables any plan of such employer to meet the
qualification requirements of Code section 401(a)(4) and the minimum
participation standards of Code section 410. The Plan Sponsor may permit
any plan not required to be included in an aggregation group as being part
of such group if such group would continue to meet the Code section
requirements previously set forth.
Each plan of the Plan Sponsor or Affiliated Company required to be
included in an aggregation group shall be treated as a Top-Heavy plan if
such group is a Top-Heavy group. A required aggregation group will be
considered a Top-Heavy group if the present value of the cumulative
accrued benefits for Key Employees under all defined benefit plans
included in such group, and the aggregate of the accounts of Key Employees
under all defined contribution plans included in such group exceed 60
percent of a similar sum determined for all Employees. If a required or
permitted aggregation group includes two or more defined benefit plans,
the same actuarial assumptions must be used with respect to all such plans
to determine Top-Heaviness.
<PAGE> 58
8.9 Key Employee Defined. Key Employee is any Employee or former
Employee (and the Beneficiaries of such Employee) who at any time during
the Plan Year or any of the four preceding Plan Years (i) is an officer,
(ii) is one of the 10 Employees owning the largest interests in the Plan
Sponsor or any Affiliated Company, (iii) is a Five Percent owner, or (iv)
is a One Percent Owner and has annual compensation from the Plan Sponsor
and any Affiliated Company of more than $150,000.
For purposes of determining if an officer is a Key Employee, only
Employees with annual compensation in excess of 1.5 times the yearly
dollar limit on annual additions to defined contribution plans will be
taken into account as Key Employees, provided that the number of Employees
treated as officers shall be no more than 50 or, if fewer, the greater of
three Employees or 10 percent of the Employees.
For purposes of determining the 10 Employees owning the largest
interests in the Plan Sponsor or any Affiliated Company, only Employees
with annual compensation in excess of the yearly dollar limit on annual
additions to defined contribution plans will be taken into account as Key
Employees. If two Employees have the same ownership interest in the Plan
Sponsor or an Affiliated Company, the Employee with greater annual
compensation will be treated as having a larger interest.
(a) A Five Percent Owner is any Employee who owns more than
five percent of the outstanding stock of the corporation, or stock
possessing more than five percent of the total combined voting power
of all stock of the corporation.
(b) A One Percent Owner is any Employee who owns more than one
percent of the outstanding stock of the corporation, or stock
possessing more than one percent of the total combined voting power of
all stock of the corporation.
<PAGE> 59
ARTICLE IX
FUNDING
9.1. Trust Fund. All funds contributed under the Plan shall be held,
invested, and reinvested under a Trust Agreement between the Plan Sponsor
and a Trustee named in such Trust Agreement until they are disbursed to
provide benefits or to pay expenses of this Plan. All expenses in
connection with the operation of the Plan shall be paid from the Trust
Fund. To the extent not paid by the Trust Fund, such expenses shall be
paid by the Plan sponsor.
9.2. Contributions to the Trust Fund. Participants are not required
or permitted to make contributions under the Plan. All contributions to
the Trust Fund shall be made by the Plan Sponsor. However, the Plan
Sponsor may discontinue its contributions for any reason, at any time.
Any forfeitures shall be used to reduce the Plan Sponsor's contribution
otherwise payable. Subject to the provisions of Section 9.6, benefits
shall be payable from the assets of the Trust Fund.
9.3. Return of Contributions. Notwithstanding any other provision of
this Plan, all or part of the Plan Sponsor's contribution may be returned
to the Plan Sponsor in the event that:
(i) The Plan Sponsor's contribution was made by a mistake
of fact, provided that the contribution is returned to the Plan
Sponsor within one year of the mistaken payment; or
(ii) The Plan Sponsor's contribution is disallowed as a
deduction under section 404 of the Code (all contributions to
this Plan being conditioned upon their deductibility under said
section), provided the contribution (to the extent disallowed)
is returned to the Plan Sponsor within one year after
disallowance of the deduction.
<PAGE> 60
9.4. Funding Policy. The Committee shall establish a funding policy
and method consistent with the objectives of the Plan. As an aid to the
Committee's determination of the contributions needed to maintain the Plan
on a sound actuarial basis and to meet the minimum funding standards as
prescribed by law, the Actuary shall provide to the Committee actuarial
valuations of the Plan and shall submit to the Committee actuarial tables
and rates of contributions as the Actuary recommends.
9.5. Investment Responsibility of the Trustee. The Trustee shall
have the responsibility for the administration of the Trust and the
management of the assets held under the Trust, all as specifically
provided in the Trust Agreement. The Trustee shall have the authority and
discretion to manage and control the assets of the Trust Fund for
investment purposes unless the Committee has appointed one or more
Investment Manager(s), in which case such Investment Manager(s) shall have
the authority and responsibility for the management, acquisition, and
disposition of the assets of the Trust Fund for investment purposes.
"Investment Manager" shall have the meaning as set forth in section
3(38) of ERISA.
9.6. Obligations of the Plan Sponsor. The Plan Sponsor has
established the Trust Fund for the purpose of prefunding the Plan
Sponsor's liability as a consequence of the adoption and maintenance of
the Plan; however, it is not intended that a Participant's nonforfeitable
benefit be limited in any way to the assets of the Trust and/or to any
amounts guaranteed by the Pension Benefit Guaranty Corporation. In the
<PAGE> 61
event the assets of the Trust Fund are not sufficient to provide a
Participant's full nonforfeitable benefit, the portion of any amount
properly payable to such a Participant under the terms of the Plan which
will not be provided by the Trust, shall be payable by the Plan Sponsor
and their Affiliated Companies or a successor thereto notwithstanding the
termination or partial termination of the Plan.
<PAGE> 62
ARTICLE X
ADMINISTRATION
10.1. Named Fiduciary and Administrator. The Committee shall be the
"named fiduciary" within the meaning of section 402(a) of ERISA and the
Plan "administrator" as defined in section 3(16) of ERISA.
10.2. Appointment and Removal of Committee. The general
administration of the Plan and the responsibility for carrying out the
provisions of the Plan shall be placed in the Committee, which shall
consist of not less than three (3) persons, all of whom are corporate
officers or directors of the Plan Sponsor as appointed from time to time
by the Board to serve at the pleasure of the Board. Any person appointed
as a member of the Committee shall signify his acceptance by filing
written acceptance with the Board and the secretary of the Committee. Any
member of the Committee may resign by delivering his written resignation
to the Board and the secretary of the Committee.
10.3. Duties of Committee. The members of the Committee shall elect
a chairman from their number and a secretary who may be, but need not be,
one of the members of the Committee; may appoint from their number such
subcommittees with such powers as they shall determine; may authorize one
or more of their number or any agent to execute or deliver any instrument
or make any payment on their behalf; may retain legal counsel, employ
agents and provide for such clerical, accounting, investment management,
actuarial and consulting services as they may require in carrying out the
provisions of the Plan; and may allocate among themselves or delegate to
other persons employed by the Plan Sponsor all or such portion of their
duties under the plan, other than those granted to the Trustee under the
Trust Agreement adopted for use in implementing the plan, as they, in
their sole discretion, shall decide.
<PAGE> 63
10.4. Meetings. The Committee shall hold meetings upon such notice,
at such place or places, and at such time or times as it may from time to
time determine.
10.5. Action of Majority. Any act that the Plan authorizes or
requires the Committee to do may be done by a majority of its members.
The action of that majority expressed from time to time by a vote at a
meeting or in writing without a meeting shall constitute the action of the
Committee and shall have the same effect for all purposes as if assented
to by all members of the Committee at the time in office. If more than
one vacancy in membership of the Committee shall exist at any time, the
remaining members shall have no power to act as the Committee.
10.6. Compensation. No member of the Committee shall receive any
compensation from the Plan for his service as such.
10.7. Establishment of Rules. Subject to the limitations of the
Plan, the Committee from time to time shall establish rules for the
interpretation and administration of the Plan and the transaction of its
business. The determination of the Committee as to any disputed question
shall be conclusive.
10.8. Powers. The Committee shall have such powers as may be
necessary to discharge its duties under the Plan, including the power:
(a) to make and enforce such rules and regulations as it shall
deem necessary or proper for the efficient administration of the Plan;
<PAGE> 64
(b) to interpret the Plan and to decide any and all matters
arising hereunder, including the right to remedy possible ambiguities,
inconsistencies or omissions, provided, however, that all such
interpretations and decisions shall be applied in a uniform manner to
all Employees similarly situated;
(c) to determine all questions with regard to employment,
eligibility, Continuous Service, Credited Service, Credited
Compensation, Pension, disability retirement Pensions, and such
factual matters as date of birth and marital status, and similarly
related matters for the purpose of the Plan. The Committee's
determination of all questions arising under the Plan shall be
conclusive upon all Participants, the Board, the Plan Sponsor, any
Affiliated Companies, the Trustee, and other interested parties;
(d) to instruct the Trustee to make benefit payments pursuant
to the Plan;
(e) to receive and review the periodic valuation of the Plan
made by the Actuary;
(f) to receive and review the periodic reports prepared by
Investment Managers, if any;
(g) to receive and review reports of disbursement from the
Trust Fund made by the Trustee;
(h) to receive and review the periodic audit of the Plan made
by a Certified Public Accountant; and
(i) to prepare and distribute to Participants information
explaining the Plan.
<PAGE> 65
10.9. Prudent Conduct. The members of the Committee shall use that
degree of care, skill, prudence and diligence that a prudent man acting in
a like capacity and familiar with such matters would use in his conduct of
a similar situation.
10.10. Actuary. The Committee shall adopt, from time to time,
mortality and other actuarial tables approved by the Board for use in all
actuarial calculations required in connection with the Plan, and in estab-
lishing the rate of contribution to the Plan. As an aid to the Committee
and the Board in adopting tables and in fixing the rate of contributions
payable to the Plan, the Actuary shall make actuarial valuations of the
contingent assets and liabilities of the Plan, and shall certify to the
Committee the tables and rates of contributions which it would recommend
for use by the Committee.
10.11. Maintenance of Records. The Committee shall maintain accounts
showing the fiscal transactions of the Plan and shall keep in convenient
form such data as may be necessary for actuarial valuations of the Plan.
The Committee shall prepare annually a report showing in reasonable detail
the assets and liabilities of the Plan and giving a brief account of the
operation of the Plan for the past year. That report shall be submitted
to the Board and shall be filed in the office of the Plan, where it shall
be open to inspection by any Participant.
10.12. Claim Appeal Procedure. In the event that a claim for a
benefit under this Plan is denied, the Committee shall thereupon notify
the claimant of the denial. Such notification shall:
(a) Be written in a form calculated to be understood by the
claimant;
(b) Contain a specific reference to the pertinent Plan
provisions;
(c) Describe the material necessary to perfect the claim, if
applicable; and
(d) Explain the claims review procedure.
<PAGE> 66
Any Participant or other person whose claim is denied shall, on or
before the expiration of 60 days from receipt of the denial, have the
right to request a review by the Committee. Such review shall include the
right to a hearing before the Committee or its delegates. Upon review of
a claim denial, both the claimant and the Company shall have the right of
representation, the right to review pertinent plan documents, and the
right to submit issues and comments in writing. The decision of the
Committee shall be made within 60 days after the receipt of the request
for a review. The decision of the Committee on review shall:
(i) Be written in a manner calculated to be understood by
the Participant or beneficiary;
(ii) Contain the specific reason or reasons for the
decision; and
(iii) contain a specific reference to pertinent Plan
provisions.
10.13. Information from Participants. Each Participant or other
person claiming a benefit under this Plan shall be required to furnish to
the Committee, in the form prescribed by it, such personal data,
affidavits, authorizations to obtain information, and other information as
the Committee may deem necessary or appropriate to determine the
claimant's eligibility for and amount of any benefit.
<PAGE> 67
ARTICLE XI
PROVISION TO PREVENT DISCRIMINATION
11.1. Restrictions on distributions to certain highly compensated
employees. Notwithstanding any other provision of the Plan to the
contrary, the annual payments to a highly compensated employee or highly
compensated former employee who is among the 25 such individuals entitled
to benefits under the Plan with the greatest compensation shall be
restricted to an amount equal to the payments that would be made on behalf
of the employee under a single life annuity that is the Actuarial
Equivalent of the sum of the employee's Accrued Benefit and the employee's
other benefits under the Plan, all as determined pursuant to, and to the
extent required by, Treasury Regulation 1.401(a)(4)-5(b)(3). In the
event of Plan termination, the benefit of any highly compensated employee
(and any highly compensated former employee) is limited to a benefit that
is non-discriminatory under section 401(a)(4) of the Code.
<PAGE> 68
ARTICLE XII
AMENDMENT AND MERGER
12.1. Power to Amend. The Board may at any time and from time to
time, and retroactively if deemed necessary or appropriate, modify, alter,
or amend this Plan. Any such action shall comply with applicable laws and
regulations and shall not permit funds in the Trust to be used for any
purpose other than for the exclusive benefit of Employees, Participants,
and their Spouses and Beneficiaries.
12.2. Publication of Amendment. Promptly after an amendment of this
Plan shall have become effective, the Plan Sponsor shall cause a copy of
such amendment to be filed with the Committee and, if applicable, with the
Trustee. The Committee shall cause notice of such amendment to be posted
in such manner in the place or places of business as would reasonably be
expected to bring such notice to the attention of interested parties.
Such notice need not contain the text of the amendment but shall contain
information as to the location of a copy thereof which shall be open to
inspection by interested parties.
12.3. No Decrease in Benefits. No amendment to this Plan shall
decrease the accrued benefit of a Participant. An amendment that has the
effect of reducing an early retirement benefit or retirement type subsidy
(as defined in regulations), or of eliminating an optional form of benefit
with respect to benefits attributable to service before the amendment
shall be treated as reducing accrued benefits in violation of this
Section. An amendment reducing a retirement type subsidy shall violate
this Section only regarding a Participant who satisfied (either before or
after the amendment) the preamendment conditions for the subsidy. Any
amendments made pursuant to section 412(c)(8) of the Code or section 4281
of ERISA will not be treated as reducing accrued benefits.
<PAGE> 69
12.4. Merger, Consolidation or Asset Transfer. This Plan may not be
merged or consolidated with any other plan, nor may any assets or
liabilities of this Plan be transferred to any other plan, unless the
terms of such merger, consolidation, or transfer are such that each
Participant in the Plan would, if such other Plan were terminated
immediately after such merger, consolidation, or transfer, receive a
benefit having a value equal to or greater than the benefit he would have
been entitled to receive if this Plan had terminated immediately prior to
the merger, consolidation, or transfer.
<PAGE> 70
ARTICLE XIII
PLAN TERMINATION
13.1. Termination. The Board may terminate the Plan for any reason
at any time. In case of termination or partial termination of the Plan,
the rights of affected Participants to the benefits accrued under the Plan
to the date of the termination, to the extent then funded, or guaranteed
by the Pension Benefit Guaranty Corporation, if greater, shall be
nonforfeitable. Funds will be allocated to Participants as provided in
Section 13.3.
13.2. Participating Companies. The Plan Sponsor or any Affiliated
Company may discontinue its participation in the Plan on any date
specified by that Employer, if 30 days' advance written notice of such
discontinuance of participation in the Plan is given to the Plan Sponsor
and the Committee. Each Affiliated Company's participation in the Plan
shall also automatically terminate on the first to occur of the date that
Affiliated Company ceases to be a member of the controlled group of
corporations containing the Plan Sponsor, the date that Affiliated Company
is judicially declared bankrupt or insolvent, or the dissolution, merger,
consolidation or reorganization of that Affiliated Company or the sale by
that Affiliated Company of all its assets except that in any such event
arrangements may be made with the consent of the Plan Sponsor whereby the
Plan will be continued by any successor to that Affiliated Company or any
purchaser of all or substantially all of its assets without a cessation of
participation in the Plan, in which case the successor or purchaser will
be substituted for that Affiliated Company under the Plan; provided that
if any Affiliated Company is merged, dissolved or in any way reorganized
into, or consolidated with, the Plan Sponsor or any other Affiliated
Company, participation in the Plan will automatically continue in effect
without a discontinuance thereof.
<PAGE> 71
13.3. Allocation of Assets to Participants. The Committee shall
determine on the basis of actuarial valuation, the share of the funds of
the Plan allocable to each person entitled to benefits under the Plan in
accordance with section 4044 of ERISA or corresponding provision of any
applicable law in effect at the time.
13.4. Partial Termination. In the event of a partial termination of
the Plan, the provisions of this Article shall be applicable to the
Participants affected by that partial termination.
13.5. Residual Amounts. If after all fixed and contingent
liabilities or obligations to persons entitled to benefits under the Plan
shall have been paid or provided for in full any Plan assets remain
following the termination of the Plan because of erroneous actuarial
computation, such assets shall be returned to the Plan Sponsor.
<PAGE> 72
ARTICLE XIV
MISCELLANEOUS
14.1. No Assignment of Benefit. No benefit under the Plan, nor any
other interest hereunder of any Participant or Beneficiary, shall be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge any such
benefit shall be void. The Trust Fund shall not be liable for or subject
to the debts, contracts, liabilities, engagements, or torts of any person
entitled to a benefit.
(a) Notwithstanding anything herein to the contrary, the
Committee may direct the Trustee to comply with a Qualified Domestic
Relations Order ("QDRO") pursuant to section 414(p) of the Code.
(b) A QDRO is a judgment, decree or order (including approval
of a property settlement agreement) made pursuant to a state domestic
relations law (including community property law) that relates to the
provision of child support, alimony payments or marital property
rights to a spouse, former spouse, child or other dependent of a
Participant ("Alternate Payee") and that
(i) creates or recognizes the existence of an Alternate
Payee's right to, or assigns to an Alternate Payee the right to
receive all or a portion of the benefits otherwise payable to a
Participant under this Plan; and
(ii) specifies (A) the name and last known mailing
address of the Participant and each Alternate Payee covered by
the order; (B) the amount or percentage of the Participant's
Plan benefits to be paid to any Alternate Payee or the manner in
which such amount or percentage is to be determined; (C) the
number of payments or the period to which the order applies and
each plan to which the order relates; and (D) does not require
the Plan to
<PAGE> 73
(iii) provide any type or form of benefit, or any option
not otherwise provided under the Plan,
(iv) pay any benefits to any Alternate Payee prior to the
earlier of the affected Participant's termination of employment
or attainment of age 55,
(v) provide increased benefits, or
(vi) pay benefits to an Alternate Payee that are required
to be paid to another Alternate Payee under a prior QDRO.
For purposes of this Plan, an Alternate Payee who has been married to
the Participant may be treated as an Eligible Spouse with respect to the
portion of the Participant's benefit in which such Alternate Payee has an
interest provided that the QDRO provides for such treatment. However,
under no circumstances may the spouse of an Alternate Payee (who is not a
Participant hereunder) be treated as an Eligible Spouse under the terms of
the Plan.
(c) Upon receipt of any judgment, decree or order (including
approval of a property settlement agreement) relating to the provision
of payment by the Plan to an Alternate Payee pursuant to a state
domestic relations law, the Committee shall promptly notify the
affected Participant and any Alternate Payee of the receipt of such
judgment, decree or order and shall notify the affected Participant
and any Alternate Payee of the procedure for determining whether or
not the judgment, decree or order is a QDRO.
<PAGE> 74
The Committee shall establish a procedure to determine the status of a
judgment, decree or order as QDRO and to administer Plan distributions in
accordance with QDROs. Such procedure shall be in writing, shall include
a provision specifying the notification requirements enumerated above,
shall permit an Alternate Payee to designate a representative for receipt
of communications from the Committee and shall include such other
provisions as the Committee shall determine, including provisions required
under regulations promulgated by the Secretary of the Treasury.
(d) If distributions are made from a Participant's Accrued
Pension under the Plan pursuant to the requirements of a QDRO prior to
his termination of employment and prior to the date the Participant is
100 percent vested in his Accrued Pension, the Participant's nonfor-
feitable interest in his Accrued Benefit shall not become greater due
to the prior distribution(s) made pursuant to the QDRO.
14.2. No Implied Rights to Employment. Neither this Plan, the
payment of contributions by the Plan Sponsor to the Trust Fund, nor the
payment of any benefits pursuant to the Plan shall be construed to create
any obligation upon the Plan Sponsor to continue to make contributions to
the Plan or to give any present or future Employee any right to continued
employment.
14.3. Facility of Payment. If the Committee determines that a person
entitled to receive any benefit payment is under a legal disability or is
incapacitated in any way so as to be unable to manage his financial af-
fairs, the Committee may direct the Trustee to make payments to his legal
representative or to a relative or other person for his benefit, or to
apply the payment for the benefit of such person in such manner as the
Committee considers advisable. Any payment of a benefit in accordance
with the provisions of this section 14.3 shall be a complete discharge of
any liability to make such payment.
<PAGE> 75
14.4. Effectuation of Interest. If it should become impossible for
the Plan Sponsor or the Committee to perform any act required by the Plan,
the Plan Sponsor or the Committee may perform such other act as it in good
faith determines will most nearly carry out the intent and purpose of the
Plan.
14.5. Headings. The headings of Articles and Sections of this Plan
are for convenience of reference only, and in case of any conflict between
any such headings and the text, the text shall govern.
14.6. Copy of Plan. A copy of the Plan shall be available for
inspection by any Employee or other person entitled to benefits under the
Plan at reasonable times at the office of the Plan Sponsor or any
Affiliated Company.
14.7. Governing Law. Except as otherwise required by law, the Plan
and all matters arising thereunder shall be governed by the laws of the
Commonwealth of Massachusetts.
<PAGE> 76
IN WITNESS WHEREOF, Grossman's Inc. has caused this document to be
adopted by its duly authorized officer on this __________ day of
_____________________, 1995.
GROSSMAN'S INC.
By ________________________________
_________________________(Title)
<PAGE> 1
CONFIDENTIAL
------------
GROSSMAN'S INC.
---------------
EXECUTIVE SEVERANCE PLAN
------------------------
(Restated as of DECEMBER 14, 1994)
I. Definitions
-----------
(a) The following terms when used herein with an
initial capital letter shall have the following meaning
except where the context otherwise requires:
Bonus Unit with respect to an Executive
Employee shall mean one-twelfth of the most recent annual
incentive bonus paid or payable to such Executive Employee.
Cause with respect to an Executive Employee
shall mean any action or mission by such Executive
Employee involving willful malfeasance or gross negligence
in a material respect in the performance of his duties, or
commission of a felony.
Change in Control shall be deemed to have
occurred if
(i) (A) any "person" including a "group" as
defined in Section 13 (d) (3) of the Securities Exchange Act
of 1934, as amended (the "Act"), other than the Lenders, as
defined in the Creditors Modified Joint Plan of
Reorganization of the Company becomes the beneficial owner
of securities of the Company representing more than 25% of
the combined voting power of the then outstanding securities
of the Company,
(B) no other "person" or "group" owns securities
representing a proportion of such voting power greater than
that owned by the "person" or "group" referred to in clause
(i) (A) above, and
(C) as a result of clause (i) (A) above, the
directors of the Company before the "group" or "person"
referred to therein became the beneficial owners of such
voting securities cease to represent a majority of the
directors of the Company;
<PAGE> 2
(ii) the stockholders of the Company approve an
agreement for the merger, consolidation or other business
combination of the Company with or into another entity not
controlled by the Company or for the sale or other
disposition of all or substantially all of the assets of the
Company, and as a result thereof the directors of the
Company immediately before such approval cease to represent
a majority of the directors of the surviving, resulting or
acquiring entity or the parent thereof; or
(iii) the stockholders of the Company approve a plan
for the complete liquidation of the Company.
Company shall mean Grossman's Inc. and as the context
requires with respect to employment of Executive Employees
shall include its majority owned subsidiaries.
Constructive Termination shall mean the voluntary
resignation of an Executive Employee following any reduction
in his salary, any significant reduction in his
responsibilities or any other significant, adverse change in
his position with the Company within 24 months after a
Change in Control.
Involuntary Termination shall mean the termination of
an Executive Employee's employment by the Company for any
reason other than Cause.
Executive Employee shall mean all officers of the
Company, including designated officers of Divisions or
Subsidiaries of the Company, and such other key employees of
the Company as may be designated by the Board of Directors
of the Company to participate in the Plan.
Plan shall mean Grossman's Inc. Executive Severance
Plan.
Salary shall mean the monthly base salary of an
Executive Employee in effect at the applicable date of
determination. For purposes of Article II and Article IV
(a), the date of determination is the date of the Executive
Employee's termination of employment. For purposes of
Article IV (b), the date of determination is the date the
Executive Employee is offered a new position.
Years of Service shall mean the number of years, of the
Executive Employee's credited service under the Company's
General Pension Plan.
<PAGE> 3
II. Benefits
(a) Except as provided in section (b) below
or as a greater amount is otherwise provided in an
employment agreement, each Executive Employee who is
Involuntarily Terminated shall receive Severance Pay and
Bonus Units according to the chart below:
<TABLE>
<CAPTION>
Months of
Years of Service Severance Pay Bonus Units
---------------- ------------- -----------
<S> <C> <C>
Up to 1 Year 6 Months 6 Bonus Units
1 - 2 Years 7 7
2 - 3 8 8
3 - 4 9 9
4 - 5 10 10
5 - 6 11 11
6 and above 12 Months Maximum 12 Maximum
</TABLE>
(b) Each Executive Employee who is Constructively
Terminated or who is Involuntarily Terminated within 24
months following a Change in Control shall receive Severance
Pay and Bonus Units in accordance with the chart below,
except as a greater amount is otherwise provided in an
employment agreement:
<TABLE>
<CAPTION>
Months of
Years of Service Severance Pay Bonus Units
---------------- ------------- -----------
<S> <C> <C>
Up to 1 Year 9 Months 9 Bonus Units
1 - 2 Years 10 1/2 10 1/2
2 - 3 12 12
3 - 4 13 1/2 13 1/2
4 - 5 15 15
5 - 6 16 1/2 16 1/2
6 and above 18 Months Maximum 18 Maximum
</TABLE>
<PAGE> 4
III. Payment of Benefits
-------------------
(a) All severance pay and bonus units payable pursuant to
Article II (b) above shall be paid in a lump sum within two
(2) business days of termination of employment. All other
benefits payable under this Plan shall be paid at the
Company's option either in a lump sum or in equal
installments on the 15th and last day of each month to the
Executive Employee over a number of months equal to the
months of severance pay due, or in the event of his death,
his designated beneficiaries or his legal representatives.
(b) In the event that the Company elects to pay the
Executive Employee's severance pay in equal installments,
then the Executive Employee will continue to participate in
the Company benefits delineated below sharing in the costs
at the same rate being paid by active employees receiving
similar coverage:
1. Medical Coverage
2. Life Insurance - Including Supplement Life
Insurance
3. Accidental Death & Dismemberment Insurance
4. Short and Long-Term Disability
5. If applicable, continued use of the Company car
for a period of up to 90 days. At the
conclusion of the 90 days the Executive
Employee will have the option to buy the
car at the price set by the Company.
6. Accrual of service time for Pension purposes
7. Accrual of Severance Pay for Pension Earnings
purposes
8. Participation in the 401(k) Program
During the severance pay period, the following benefits
WILL NOT CONTINUE:
1. Accrual of Vacation Time.
2. Business Travel/Accident Insurance
3. Participation in the Bonus Program
With respect to any outstanding employee stock option, the
employment of an Executive Employee shall be deemed
terminated upon Constructive Termination or Involuntary
Termination, whether or not severance is paid in
installments.
<PAGE> 5
IV. Exclusions
----------
(a) An Executive Employee (i) whose employment with the
Company is Involuntarily Terminated in connection with a
divestiture by the Company of a subsidiary or of assets, and
(ii) who is offered a position with the acquiring company
(or a subsidiary or affiliate thereof) at a salary which is
not less than such Executive Employee's Salary with the
Company, shall not receive benefits under the Plan
regardless of whether the Executive Employee accepts the
offer of employment.
(b) An Executive Employee who refuses a new position with
the Company and is, as a result, Involuntarily Terminated,
shall not receive any benefits hereunder, provided that such
new position is at a Salary which either equals or exceeds
his Salary in his then current position.
V. Termination of Payments
-----------------------
The benefits payable and extended under
Article II (a), which are being paid in installments and
extended pursuant to Article III (b), hereof, are subject to
cancellation in the event the Executive Employee enters into
or takes part, directly or indirectly, in an activity which,
in the sole judgment of the Company, is inimical to the
interest of the Company including, but not limited to,
becoming an employee of a company which is in competition
with the Company or recruiting or assisting to recruit an
active employee of the Company for a position in a
competitive company.
In the event the Executive Employee finds a full-time
job, other than on a consulting basis, the severance
payments, bonus units and other benefits, which are being
paid in installments and extended pursuant to Article III
(b), hereof, will cease, after the former Executive Employee
has been employed on the new job for 30 days.
<PAGE> 6
VI. Amendment and Termination
-------------------------
The Plan may not be amended, modified or terminated,
except to increase benefits or enlarge the class of
employees eligible for benefits hereunder, for 24 months
following a Change in Control.
VII. No Right to Continued Employment
--------------------------------
Notwithstanding anything in the Plan to the contrary,
this Plan shall not constitute an employment contract or
give any Executive Employee a right of continued
employment or preclude the Company from severing an
Executive Employee's employment.
VIII. Effect of Disability Benefits
-----------------------------
Notwithstanding anything else contained herein to the
contrary, the amount of benefits payable hereunder shall
be reduced on a dollar for dollar basis by the amount of
any benefits provided under any disability benefits
plan.
IX. Withholding
-----------
All benefit payments hereunder shall be made net of any
and all applicable federal, state and local taxes
required to be withheld.
Severance payments made in installments shall also
include deductions for Company benefits listed in
Article III (b).
X. Outplacement
------------
The Company will pay for outplacement services to those
Executive Employees covered by this Plan, as determined
by the Company. These services will include
counselling, resume preparation, and clerical support,
as determined by the Company.
Execsev/smb GROSSMAN'S INC.
<PAGE> 1
GROSSMAN'S
SAVINGS AND PROFIT SHARING PLAN
(1994 RESTATEMENT)
<PAGE> 2
TABLE OF CONTENTS
PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . 2
1.1 "Account" . . . . . . . . . . . . . . . . . . . . . 2
1.2 "Actual Deferral Percentage". . . . . . . . . . . . 2
1.3 "Affiliated Group". . . . . . . . . . . . . . . . . 2
1.4 "After-Tax Contribution Account". . . . . . . . . . 2
1.5 "After-Tax Contributions" . . . . . . . . . . . . . 2
1.6 "Annual Addition" . . . . . . . . . . . . . . . . . 3
1.7 "Before-Tax Contribution Account" . . . . . . . . . 3
1.8 "Before-Tax Contributions". . . . . . . . . . . . . 3
1.9 "Beneficiary" . . . . . . . . . . . . . . . . . . . 3
1.10 "Code" . . . . . . . . . . . . . . . . . . . . . . 3
1.11 "Common Stock" . . . . . . . . . . . . . . . . . . 4
1.12 "Company". . . . . . . . . . . . . . . . . . . . . 4
1.13 "Company Contributions". . . . . . . . . . . . . . 4
1.14 "Company Matching Contribution Account". . . . . . 4
1.15 "Company Matching Contributions" . . . . . . . . . 4
1.16 "Company Profits Contribution Account" . . . . . . 4
1.17 "Company Profits Contributions". . . . . . . . . . 4
1.18 "Compensation" . . . . . . . . . . . . . . . . . . 4
1.19 "Deferral Election". . . . . . . . . . . . . . . . 5
1.20 "Disability" . . . . . . . . . . . . . . . . . . . 5
1.21 "Effective Date" . . . . . . . . . . . . . . . . . 5
1.22 "Employee" . . . . . . . . . . . . . . . . . . . . 5
1.23 "ERISA". . . . . . . . . . . . . . . . . . . . . . 6
1.24 "Hardship" . . . . . . . . . . . . . . . . . . . . 6
1.25 "Highly Compensated Employee". . . . . . . . . . . 6
1.26 "Hour of Service". . . . . . . . . . . . . . . . . 7
1.27 "Investment Funds" . . . . . . . . . . . . . . . . 8
1.28 "Matching/After-Tax Contributions Percentage". . . 8
1.29 "Normal Retirement Age". . . . . . . . . . . . . . 9
1.30 "One Year Break in Service". . . . . . . . . . . . 9
1.31 "Participant". . . . . . . . . . . . . . . . . . . 9
1.32 "Participating Company". . . . . . . . . . . . . . 9
1.33 "Plan" . . . . . . . . . . . . . . . . . . . . . . 9
1.34 "Plan Administrator" . . . . . . . . . . . . . . . 9
1.35 "Plan Year". . . . . . . . . . . . . . . . . . . . 9
1.36 "Rollover Contribution Account". . . . . . . . . . 9
1.37 "Rollover Contributions" . . . . . . . . . . . . . 9
1.38 "Seasonal Employee". . . . . . . . . . . . . . . . 9
<PAGE> 3
1.39 "Separation from Service Date" . . . . . . . . . .10
1.40 "Service". . . . . . . . . . . . . . . . . . . . .10
1.41 "Stock Fund" . . . . . . . . . . . . . . . . . . .10
1.42 "Trust Agreement". . . . . . . . . . . . . . . . .10
1.43 "Trustee". . . . . . . . . . . . . . . . . . . . .10
1.44 "Trust Fund" . . . . . . . . . . . . . . . . . . .10
1.45 "Valuation Date" . . . . . . . . . . . . . . . . .10
1.46 "Year of Service". . . . . . . . . . . . . . . . .10
ARTICLE 2 ELIGIBILITY AND SERVICE. . . . . . . . . . . . . .11
2.1 Eligibility to Make or Direct Contributions.. . . .11
2.2 Credited Service. . . . . . . . . . . . . . . . . .11
2.3 Maternity and Parental Leave. . . . . . . . . . . .12
ARTICLE 3 BEFORE-TAX AND AFTER-TAX CONTRIBUTIONS . . . . . .13
3.1 Before-Tax Contributions. . . . . . . . . . . . . .13
3.2 Allocation of Before-Tax Contributions. . . . . . .13
3.3 Deferral Election.. . . . . . . . . . . . . . . . .13
3.4 After-Tax Contributions. . . . . . . . . . . . . .13
3.5 Allocation of After-Tax Contributions. . . . . . .14
3.6 Change, Reduction and Revocation of Deferral Elections and
After-Tax
Contributions. . . . . . . . . . . . . . . . . . .14
3.7 Minimum Contribution. . . . . . . . . . . . . . . .15
ARTICLE 4 COMPANY CONTRIBUTIONS. . . . . . . . . . . . . . .16
4.1 Matching Contributions. . . . . . . . . . . . . . .16
4.2 Profits Contributions.. . . . . . . . . . . . . . .16
ARTICLE 5 LIMITATIONS ON CONTRIBUTIONS . . . . . . . . . . .19
5.1 Limit Applicable to the Before-Tax Contributions of Highly
Compensated
Employees. . . . . . . . . . . . . . . . . . . . .19
5.2 Limit Applicable to the Company Matching Contributions and
After-Tax
Contributions for Highly Compensated Employees.. .19
5.3 Limit Applicable to Annual Additions. . . . . . . .19
5.4 Combined Plan Limit Applicable to All Participants.20
5.5 Disposition of Excess Before-Tax Contributions. . .22
5.6 Disposition of Excess Company Matching Contributions and After-
Tax
Contributions. . . . . . . . . . . . . . . . . . .22
5.7 Disposition of Excess Annual Additions. . . . . . .23
ARTICLE 6 VESTING. . . . . . . . . . . . . . . . . . . . . .25
6.1 Fully Vested Accounts . . . . . . . . . . . . . . .25
6.2 Graduated Vesting of Company Profits Contribution Account25
6.3 Death, Disability or Normal Retirement Age. . . . .25
<PAGE> 4
6.4 Forfeitures . . . . . . . . . . . . . . . . . . . .25
6.5 Moore's Division Employees. . . . . . . . . . . . .26
ARTICLE 7 PARTICIPANTS' ACCOUNTS . . . . . . . . . . . . . .27
7.1 Contributions to Account. . . . . . . . . . . . . .27
7.2 Separate Accounts . . . . . . . . . . . . . . . . .27
7.3 Valuation of Accounts.. . . . . . . . . . . . . . .28
ARTICLE 8 INVESTMENT OF ACCOUNTS . . . . . . . . . . . . . .29
8.1 General.. . . . . . . . . . . . . . . . . . . . . .29
8.2 Investment Funds. . . . . . . . . . . . . . . . . .29
8.3 Investment Directions . . . . . . . . . . . . . . .29
8.4 Voting of Common Stock. . . . . . . . . . . . . . .30
8.5 Tender Offers.. . . . . . . . . . . . . . . . . . .30
8.6 Limitation on Common Stock Transactions.. . . . . .31
ARTICLE 9 WITHDRAWALS DURING SERVICE . . . . . . . . . . . .33
9.1 After-Tax Contribution Account. . . . . . . . . . .33
9.2 Rollover Contribution Account . . . . . . . . . . .33
9.3 Financial Hardship. . . . . . . . . . . . . . . . .33
9.4 Age 59 1/2. . . . . . . . . . . . . . . . . . . . .33
9.5 Order of Withdrawal Priority. . . . . . . . . . . .33
9.6 No Withdrawal of Company Contributions. . . . . . .34
9.7 Amount and Payment of Withdrawal. . . . . . . . . .34
9.8 Frequency of Withdrawal.. . . . . . . . . . . . . .34
9.9 Mandatory Payment.. . . . . . . . . . . . . . . . .34
ARTICLE 10 LOANS TO PARTICIPANTS . . . . . . . . . . . . . .35
10.1 Right to Borrow. . . . . . . . . . . . . . . . . .35
10.2 In General.. . . . . . . . . . . . . . . . . . . .35
10.3 Rules and Procedures.. . . . . . . . . . . . . . .35
10.4 Maximum Amount of Loan.. . . . . . . . . . . . . .35
10.5 Minimum Amount of Loan.. . . . . . . . . . . . . .36
10.6 Note; Security; Interest.. . . . . . . . . . . . .36
10.7 Repayment. . . . . . . . . . . . . . . . . . . . .36
10.8 Repayment Upon Distribution. . . . . . . . . . . .37
10.9 Default. . . . . . . . . . . . . . . . . . . . . .37
10.10 Nondiscrimination.. . . . . . . . . . . . . . . .38
10.11 Designation of Investment Funds.. . . . . . . . .38
ARTICLE 11 DISTRIBUTIONS AFTER SERVICE . . . . . . . . . . .39
11.1 Termination of Service . . . . . . . . . . . . . .39
11.2 Disability . . . . . . . . . . . . . . . . . . . .39
11.3 Death and Beneficiary Designation. . . . . . . . .39
<PAGE> 5
11.4 Mandatory Distributions. . . . . . . . . . . . . .40
11.5 Optional Direct Transfer of Eligible Rollover Distributions.41
ARTICLE 12 ADMINISTRATION. . . . . . . . . . . . . . . . . .43
12.1 Plan Administrator . . . . . . . . . . . . . . . .43
12.2 Plan Administrator's Authority and Powers. . . . .43
12.3 Delegation of Duties . . . . . . . . . . . . . . .43
12.4 Compensation . . . . . . . . . . . . . . . . . . .43
12.5 Exercise of Discretion . . . . . . . . . . . . . .43
12.6 Fiduciary Liability. . . . . . . . . . . . . . . .43
12.7 Indemnification by Company . . . . . . . . . . . .44
12.8 Payment of Plan Expenses.. . . . . . . . . . . . .44
ARTICLE 13 AMENDMENT AND TERMINATION OF PLAN . . . . . . . .45
13.1 Amendment. . . . . . . . . . . . . . . . . . . . .45
13.2 Company's Right to Terminate Plan. . . . . . . . .45
13.3 Consequences of Termination. . . . . . . . . . . .45
ARTICLE 14 SPECIAL PROVISIONS FOR NON-KEY EMPLOYEES. . . . .47
14.1 Applicability and Definitions. . . . . . . . . . .47
14.2 Minimum Contribution . . . . . . . . . . . . . . .49
ARTICLE 15 MISCELLANEOUS . . . . . . . . . . . . . . . . . .50
15.1 Trust Fund Sole Source of Payments for Plan. . . .50
15.2 Exclusive Benefit. . . . . . . . . . . . . . . . .50
15.3 Return of Contributions. . . . . . . . . . . . . .50
15.4 Non-Alienation . . . . . . . . . . . . . . . . . .51
15.5 Claims Procedure . . . . . . . . . . . . . . . . .51
15.6 Transfer of Assets . . . . . . . . . . . . . . . .52
15.7 Common Trust Funds . . . . . . . . . . . . . . . .53
15.8 Applicable Law . . . . . . . . . . . . . . . . . .53
<PAGE> 6
PURPOSE
The purpose of the Plan is to provide eligible employees with an
opportunity to share in the profits of the Company and to save for their
retirement on a tax-favored basis. The Plan is intended to qualify under
Sections 401(a) and 401(k) of the Code. The Plan is also intended to
comply with the requirements of ERISA.
<PAGE> 7
ARTICLE 1 DEFINITIONS
-----------
Wherever used herein, the following terms shall have the following
meanings:
1.1 "Account" means the total of the interests of a Participant in
the Trust Fund. A Participant's Account shall consist of his After-Tax
Contribution Account, his Before-Tax Contribution Account, his Company
Matching Contribution Account, his Company Profits Contribution Account
and his Rollover Contribution Account.
1.2 "Actual Deferral Percentage" means for each specified group of
Participants, the average percentage for the group which is derived by
calculating separately for each Participant in such group:
(a) the amount of Before-Tax Contributions allocated to the
Participant's Account for the Plan Year; divided by
(b) the amount of the Participant's Compensation for the Plan
Year.
In accordance with regulations promulgated under the Code, for
purposes of the definition of Actual Deferral Percentage, the Plan
Administrator may treat Company Matching Contributions as Before-Tax Con-
tributions.
1.3 "Affiliated Group" means the Company and all corporations,
partnerships or other organizations the employees of which are treated as
employed by the Company pursuant to Code Section 414(b), (c) or (m).
1.4 "After-Tax Contribution Account" means that part of a
Participant's Account which is attributable to After-Tax Contributions.
1.5 "After-Tax Contributions" means contributions made by the
Participant pursuant to Section 3.4.
<PAGE> 8
1.6 "Annual Addition" means the sum of the following amounts
credited to a Participant's Account for a Plan Year:
(a) Any Before-Tax Contributions and Company Contributions
under this Plan and any other employer contributions to such
Participant's account under any other defined contribution plan (as
defined in Section 414(i) of the Code) maintained by the Affiliated
Group; and
(b) Any After-Tax Contributions under this Plan and any other
employee contributions under any other qualified plan maintained by
the Affiliated Group.
The term Annual Addition shall not include any Rollover Contributions.
1.7 "Before-Tax Contribution Account" means that part of
Participant's Account which is attributable to Before-Tax Contributions.
1.8 "Before-Tax Contributions" means the contributions made by a
Participating Company on behalf of a Participant pursuant to Section 3.1.
1.9 "Beneficiary" means any persons or legal entity designated as
such by the Participant pursuant to the Plan or otherwise entitled to
receive any payment pursuant to the Plan upon the death of the
Participant. If no Beneficiary is designated or survives, the Partici-
pant's Beneficiary shall be:
(a) his spouse, if living at the time of such payment;
(b) his descendants per stirpes, if his spouse is not then
living;
(c) his estate, if neither of the foregoing is applicable.
1.10 "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
<PAGE> 9
1.11 "Common Stock" means the common stock issued by the Company,
par value $.01 per share.
1.12 "Company" means Grossman's Inc. and any successor corporation.
1.13 "Company Contributions" means Company Matching Contributions
and Company Profits Contributions but does not include Before-Tax
Contributions.
1.14 "Company Matching Contribution Account" means that part of a
Participant's Account which is attributable to Company Matching
Contributions.
1.15 "Company Matching Contributions" means those contributions
made by a Participating Company on behalf of a Participant pursuant to
Section 4.1.
1.16 "Company Profits Contribution Account" means that part of a
Participant's Account which is attributable to Company Profits
Contributions.
1.17 "Company Profits Contributions" means those contributions made
by a Participating Company on behalf of a Participant in accordance with
the prior plan as in effect December 31, 1990.
1.18 "Compensation" means an Employee's base pay, plus overtime and
commissions, but excluding bonuses, incidental compensation and other
fringe benefits, and before reduction for any Before-Tax Contributions
made under this Plan. For each Plan Year beginning on or after January 1,
1989 and before January 1, 1994, Compensation shall be limited for all
purposes under the Plan to $200,000 (or such other amount as the Secretary
of the Treasury may determine for such Plan Year under section 401(a)(17)
of the Code). For each Plan Year beginning on or after January 1, 1994,
<PAGE> 10
Compensation shall be limited for all purposes under the Plan to $150,000
(or such other amount as the Secretary of the Treasury may determine for
such Plan Year under section 401(a)(17) of the Code). In determining
Compensation for purposes of this limitation, the rules of Code Section
414(q)(6) shall apply, except that in applying such rules, the term
"family" shall include only the spouse of the Participant or any lineal
descendants who have not attained age 19 before the close of the calendar
year. If, as a result of such rules the adjusted limitation as permitted
under Code Section 401(a)(17) is exceeded, then the limitation shall be
prorated among the affected individuals in proportion to each such
individuals in proportion to each such individual's Compensation as
determined under this Section prior to the application of this limitation.
1.19 "Deferral Election" means an election made by the Participant
pursuant to Section 3.3 to have his Compensation, otherwise payable to him
in cash, reduced, and to require a Participating Company to make
Before-Tax Contributions on his behalf equal to the amount by which his
Compensation is thus reduced.
1.20 "Disability" means a physical or mental impairment which, in
the opinion of the Plan Administrator, is of such permanence and degree
that the Participant is unable because of such impairment to perform any
gainful activity for which he is suited by virtue of his experience,
training, or education. The permanence and degree of such impairment shall
be supported by medical evidence.
1.21 "Effective Date" means, in general, May 1, 1988. Certain
other provisions have effective dates as stated within the Plan.
<PAGE> 11
1.22 "Employee" means an individual who is on the payroll records
of a Participating Company, except that if the terms and conditions of any
employee's employment are the subject of collective bargaining, such
employee will not be an Employee hereunder unless a collective bargaining
agreement provides for his participation in the Plan.
1.23 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
1.24 "Hardship" means immediate and heavy financial need of the
Participant which cannot be met by other reasonably available financial
resources of the Participant as determined in the Plan Administrator's
discretion, which shall be exercised in a uniform and nondiscriminatory
manner. Such financial need may include expenses of medical care for the
Participant or a member of his family, expenses related to purchase of the
Participant's principal residence, and expenses related to education of a
member of the Participant's family.
1.25 "Highly Compensated Employee" means any Employee who during
the current or preceding Plan Year
(a) was at any time a 5% owner of the Company or any member
of the Affiliated Group;
(b) received more than $75,000 (as indexed in accordance with
Code Section 414(q)) in compensation;
(c) was an officer of the Company or any member of the
Affiliated Group and received compensation greater than 150 percent
of the dollar amount set forth in Section 5.2(a); and
<PAGE> 12
(d) received more than $50,000 (as indexed in accordance with
Code Section 414(q)) in compensation and received more compensation
than 80 percent of all other employees of the Affiliated Group not
excluded from such calculation under Section 414(g)(8) of the Code.
Notwithstanding the foregoing, (i) not more than 50 individuals shall be
considered as Highly Compensated Employees by reason of subparagraph (c)
above and, unless an Employee is one of the 100 highest paid employees of
the Affiliated Group during the Plan Year, an Employee shall not be
treated as a Highly Compensated Employee by reason of subparagraph (b),
(c) or (d) for such Plan Year if such Employee did not satisfy the
standards of such subparagraphs in the prior Plan Year. Whether any
individual is treated as a Highly Compensated Employee shall be determined
in accordance with the provisions of Section 414(q) of the Code and any
regulations thereunder.
1.26 "Hour of Service" means:
(a) Each hour for which an individual is directly or
indirectly entitled to compensation for the performance of duties
for any member of the Affiliated Group. These hours shall be
credited to the individual for the Plan Year in which duties are
performed;
(b) Each hour for which an individual is directly or
indirectly entitled to compensation from any member of the
Affiliated Group on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty
or leave of absence. No more than five hundred one (501) Hours of
Service shall be credited under this paragraph for any single
continuous period (whether or not such period occurs in a single
Plan Year); and
<PAGE> 13
(c) Each hour for which back pay, irrespective of mitigation
of damages, is either awarded or agreed to by any member of the
Affiliated Group. The same Hours of Service shall not be credited
under either paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). Such back pay hours shall be credited to
an employee for the Plan Year to which the award or agreement per-
tains rather than the Plan Year in which the award, agreement or
payment is made.
The provisions of Section 2530.200-2(b) and (c) of the Department of Labor
Regulations are incorporated herein by reference.
1.27 "Investment Funds" means the investment vehicles described in
Article 8 in which a Participant's Account is invested.
1.28 "Matching/After-Tax Contributions Percentage" means for each
specified group of Participants, the average percentage for the group
which is derived by calculating separately for each Participant in such
group:
(a) the sum of the amount of any Company Matching
Contributions and After-Tax Contribution allocated to the
Participant's Account for the Plan Year; divided by
(b) the amount of the Participant's Compensation for the Plan
Year.
Notwithstanding the foregoing, in accordance with regulations promulgated
under the Code, the Plan Administrator may elect to treat Company Matching
Contributions as Before-Tax Contributions in determining the
Matching/After-Tax Contributions Percentage and the Actual Deferral
Percentage.
<PAGE> 14
1.29 "Normal Retirement Age" means age 65.
1.30 "One Year Break in Service" means a consecutive 12 month
period following a Participant's Separation from Service Date in which the
Participant does not complete an Hour of Service.
1.31 "Participant" means an Employee who is eligible for
participation in the Plan in accordance with Article 2, or a former
Employee entitled to benefits under the Plan.
1.32 "Participating Company" means the Company and any other member
of the Affiliated Group which participates in the Plan with the permission
of the Company.
1.33 "Plan" means the Grossman's Savings and Profit Sharing Plan,
as set forth herein and as may be amended from time to time.
1.34 "Plan Administrator" means the Plan Administrator determined
under Section 11.1.
1.35 "Plan Year" means (i) with respect to 1988, the period from
the Effective Date to December 31, 1988 and (ii) with respect to
subsequent calendar years, the calendar year.
1.36 "Rollover Contribution Account" mean that part of a
Participant's Account which is attributable to such Participant's Rollover
Contributions.
1.37 "Rollover Contributions" means any contribution made by an
Employee in accordance with the rollover provisions of Section 402(a)(5)
or 408(d)(3) of the Code.
<PAGE> 15
1.38 "Seasonal Employee" means any individual who is employed by a
Participating Company for a limited period of time without the expectation
of permanent employment. For purposes of Section 2.2, in the event that
any Seasonal Employee is not an Employee on December 31 of any calendar
year, such Seasonal Employee shall be treated as an Employee if the Plan
Administrator determines that a Participating Company reasonably expects
such Seasonal Employee to return to its employ during the following
calendar year.
1.39 "Separation from Service Date" with respect to any individual
means (i) the date on which such individual quits, dies, is discharged or
retires or (ii) the first anniversary of such individual's absence from
employment for any other reason.
1.40 "Service" with respect to any individual means the period
beginning on the individual's employment date with any member of the
Affiliated Group and ending on such individual's Separation from Service
Date. Service shall also include any period of absence from employment of
less than 12 months following a Separation from Service Date.
1.41 "Stock Fund" means an Investment Fund which shall consist of
investments primarily in Common Stock.
1.42 "Trust Agreement" means one or more agreements between the
Company and the Trustee establishing the trust or trusts forming part of
the Plan.
1.43 "Trustee" means the Trustee or the Trustees named in the Trust
Agreement, or any successor trustee.
1.44 "Trust Fund" means the property held by the Trustee in
accordance with the Trust Agreement.
1.45 "Valuation Date" means the last day of March, June, September
and December and such other dates as the Plan Administrator may determine.
1.46 "Year of Service" means a 12 month period of Service.
<PAGE> 16
ARTICLE 2 ELIGIBILITY AND SERVICE
2.1 Eligibility to Make or Direct Contributions. Any Employee on
the Effective Date (other than a Seasonal Employee) shall be eligible to
make a Deferral Election or After-Tax Contributions as of the Effective
Date, if on such date such Employee has completed one (1) Year of Service.
If an Employee (other than a Seasonal Employee) may not make a Deferral
Election or After-Tax Contributions as of the Effective Date, such
Employee shall be eligible to make a Deferral Election or After-Tax
Contributions on any January, April, July or October 1 coinciding with or
following the date on which such Employee completes one (1) Year of
Service. If an Employee fails to make a Deferral Election or After-Tax
Contributions when first eligible to do so, such Employee shall not be
eligible to make such an election or such contributions until the January,
April, July or October 1 which occurs after the date on which such
Employee first became eligible to make such an election or such
contributions. If a Participant ceases to have a Deferral Election in
effect or to make After-Tax Contributions for any reason, including
termination of employment, such Participant may again make such an
election or such contributions effective as of any subsequent January,
April, July or October 1, provided that he is an Employee on such date.
Notwithstanding the foregoing, any Employee may make Rollover
Contributions, regardless of whether such Employee has met the
requirements to become a Participant hereunder. An Employee who makes
Rollover Contributions shall be treated as a Participant but, until such
Employee shall otherwise qualify to participate in the Plan, shall only be
so treated to the extent of his Rollover Contribution Account.
<PAGE> 17
2.2 Credited Service. Except as provided below, for purposes of
vesting in Company Profits Contributions and being eligible to make a
Deferral Election or After-Tax Contributions, all of an Employee's
Service, whether rendered during his current period of employment and
whether rendered before or after the Effective Date of the Plan, shall be
credited to such Employee.
2.3 Maternity and Parental Leave. If an Employee is absent from
work (1) by reason of such Employee's pregnancy, (2) by reason of the
birth of such Employee's child, (3) by reason of the placement of a child
in connection with such Employee's adoption of the child, or (4) for
purposes of caring for a child described in (2) or (3) above during the
period immediately following the child's birth or placement for adoption,
the Employee will not be treated as incurring a One Year Break in Service
until such Employee has been absent from employment for 24 months
following a Separation from Service Date.
<PAGE> 18
ARTICLE 3 BEFORE-TAX AND AFTER-TAX CONTRIBUTIONS
--------------------------------------
3.1 Before-Tax Contributions. A Participating Company shall
contribute as Before-Tax Contributions an amount equal to the total amount
of Compensation deferred by a Participant employed by such Participating
Company pursuant to a Deferral Election under Section 3.3. Such
Before-Tax Contributions shall be paid by such Participating Company on
behalf of a Participant, in cash to the Trust Fund, within 15 days
following the end of the calendar month in which such amounts are de-
ferred.
3.2 Allocation of Before-Tax Contributions. Before-Tax
Contributions shall be allocated to the Before-Tax Contribution Account
for each Participant in an amount equal to the total amount of
Compensation deferred by the Participant pursuant to a Deferral Election.
3.3 Deferral Election. A Participant may make a Deferral Election
in the form and manner prescribed by the Plan Administrator. The amount
of a Participant's Deferral Election for a Plan Year shall not exceed the
lesser of (i) the amount permitted under Section 402(g)) or (ii) 14% of
such Participant's Compensation for such Plan Year; except that such
amount may be required to be reduced below these limits in order to comply
with Section 3.6(b) and Article 5 hereof. A Deferral Election shall be
made prior to the date as of which such Deferral Election is effective.
3.4 After-Tax Contributions. A Participant may, in the form and
manner prescribed by the Plan Administrator, make After-Tax Contributions
in cash to the Trust Fund. For any Plan Year, the aggregate amount of
After-Tax Contributions shall not exceed the remainder of 14% and the
percent of such Participant's Compensation for such Plan Year which is
contributed to the Plan as a Before-Tax Contribution, provided that in no
event shall a Participant's After-Tax Contributions exceed 10% of such
Participant's Compensation. Such After-Tax Contributions shall be paid in
cash to the Trust Fund within 15 days following the end of the calendar
month in which such amounts are deducted from the Participant's Com-
pensation.
<PAGE> 19
3.5 Allocation of After-Tax Contributions. A Participant's
After-Tax Contributions shall be allocated directly to his After-Tax
Contribution Account.
3.6 Change, Reduction and Revocation of Deferral Elections and
After-Tax Contributions.
(a) A Participant may, in the form and manner prescribed by
the Plan Administrator, change or revoke a Deferral Election or a
direction regarding After-Tax Contributions as to Compensation
payable after the date such change or revocation is effective.
Without limiting the foregoing, Participants can change the level of
their Before-Tax Contributions or After-Tax Contributions, or
suspend or recommence making such contributions, as of any January,
April, July or October 1, and may suspend any such contributions at
any time. Notwithstanding the foregoing, no such change, revocation
or suspension shall become effective until 30 days (or such shorter
period as the Plan Administrator shall permit) after notice of such
change, revocation or suspension is received by the Plan
Administrator.
(b) The Plan Administrator may reduce or revoke the Deferral
Election or After-Tax Contributions of any Participant at any time
if the Plan Administrator determines that such reduction or
revocation is necessary to insure that the limitations set forth in
this Article 3 or in Article 6 are not exceeded. In reducing any
contributions hereunder, the Plan Administrator shall reduce the
contributions of all Participants making the highest level of such
class of contributions until such limitations are satisfied.
<PAGE> 20
3.7 Minimum Contribution. Notwithstanding anything else in this
Article 3 to the contrary, no Employee may direct that Before-Tax
Contributions or After-Tax Contributions be made to his Account unless the
aggregate amount of such contributions is not less than five dollars ($5)
per week. If in any week a Participant does not receive sufficient
Compensation to provide for such minimum contribution, the minimum
contribution shall be the maximum amount available for contribution during
such week. In determining the amount available for contribution, the Plan
Administrator shall first make any Before-Tax Contributions authorized and
then make any After-Tax Contributions which may be made from the available
Compensation.
<PAGE> 21
ARTICLE 4 COMPANY CONTRIBUTIONS
---------------------
4.1 Matching Contributions. A Participating Company shall
contribute to the Company Matching Contribution Account of each
Participant who (i) authorizes such Participating Company to make
Before-Tax Contributions on behalf of such Participant or (ii) makes
After-Tax Contributions, an amount equal to the sum of:
(x) fifty percent (50%) of the first five dollars ($5.00) of
such Participant's Before-Tax contributions and
After-Tax contributions in a given week, and
(y) twenty-five percent (25%) of such Participant's
Before-Tax contributions and After-Tax contributions in
a given week which are greater than five dollars ($5.00)
but not in excess of fifteen dollars ($15.00), and
(z) fifty percent (50%) of such Participant's Before-Tax
contributions in a given week which are greater than
fifteen dollars ($15.00) of Before-Tax contributions but
not in excess of twenty-five dollars ($25.00).
Company Matching Contributions shall be made in cash to the Trust Fund as
soon as practicable following the end of each pay period in which the
amounts with respect to which such contributions are made are deducted or
deferred. The Company Matching Contribution shall be applied first to
Participant's Before-Tax contributions and then to Participant's After-Tax
contributions. The Total Company Matching Contribution shall not exceed
ten dollars ($10.00) per week per participant.
<PAGE> 22
4.2 Profits Contributions. A Participating Company shall
contribute to the Company Profits Contribution Account of each person who
is an Employee on December 31 of any calendar year providing they have
completed 90 days of Service or who is a New Worker's Compensation
Recipient and is eligible for an allocation of Company Profits
Contributions in accordance with the prior plan as in effect December 31,
1990, an amount equal to the product of (i) the quotient of (A) such
Employee's Compensation for the Plan Year divided by (B) 52 or, in the
case of an Employee on approved medical leave or a New Worker's
Compensation Recipient, the number of weeks during the Plan Year such
person was actively employed, times (ii) the multiplier determined for
such Employee under the following table based on the performance of the
unit of such Participating Company's business in which the Employee is
employed on such date:
<TABLE>
<CAPTION>
Percentage of
Profit Goal Attained Multiplier
-------------------- ----------
<S> <C>
Less than 90% 0
90% but less than 95% 0.50
95% but less than 100% 0.75
100% but less than 105% 1.00
105% but less than 110% 1.50
110% or more 2.00
</TABLE>
The Plan Administrator shall determine the extent to which any unit of a
Participating Company shall have attained its profit goal and shall make
such determinations as its representatives deem appropriate in computing
allocations to Company Profits Contribution Accounts. In making such
determination, the Plan Administrator shall take into account such fac-
tors, and make such adjustments, as it shall deem appropriate. The Plan
Administrator may apply different criteria with respect to different
units, and may attach different values to similar factors or treat similar
<PAGE> 23
factors differently for any unit; provided, however, that the Plan
Administrator shall not exercise its discretion in a manner which benefits
Highly Compensated Employees or reduces the amount of any contribution
otherwise due hereunder. Notwithstanding the foregoing, the maximum
contribution payable with respect to performance of a unit equal to or in
excess of 105% of its profit goals shall not exceed 17% of the amount by
which the unit's performance exceeds 100% of its profit goal. Company
Profits Contributions shall be made in cash not later than the time
required for such contributions to be deducted for the prior calendar year
in accordance with Section 404(a)(6) of the Code.
Notwithstanding the foregoing provision of this Section 4.2, no
Company Profits Contribution will be made under the Plan with respect to
Plan Years ending after December 31, 1990.
<PAGE> 24
ARTICLE 5 LIMITATIONS ON CONTRIBUTIONS
----------------------------
5.1 Limit Applicable to the Before-Tax Contributions of Highly
Compensated Employees. For any Plan Year, the Actual Deferral Percentage
for the group of Highly Compensated Participants shall not exceed the
greater of:
(a) the Actual Deferral Percentage for the group of all other
Participants multiplied by 1.25; or
(b) the Actual Deferral Percentage for the group of all other
Participants multiplied by 2.0, but not exceeding a spread of two (2)
percentage points.
5.2 Limit Applicable to the Company Matching Contributions and
After-Tax Contributions for Highly Compensated Employees. For any Plan
Year, Matching/After-Tax Contributions Percentage for the group of Highly
Compensated Employees shall not exceed the greater of
(a) the Matching/After-Tax Contributions Percentage for the
group of all other Participants multiplied by 1.25; or
(b) the Matching/After-Tax Contributions Percentage for the
group of all other Participants multiplied by 2.0, but not exceeding a
spread of two (2) percentage points.
5.3 Limit Applicable to Annual Additions. The Annual Addition to a
Participant's Account for any Plan Year shall not exceed the lesser of:
(a) thirty thousand Dollars ($30,000) (or such higher amount
permitted under Code Section 415); or
<PAGE> 25
(b) twenty-five percent (25%) of the Participant's total
taxable compensation for the Plan Year (and exclusive of the amount of
any Before-Tax Contribution made pursuant to the Plan for such Plan
Year).
5.4 Combined Plan Limit Applicable to All Participants.
(a) If a Participant participates, or previously participated,
in the Grossman's Inc. Retirement Plan or one or more other defined
benefit plans (as defined in Section 414(j) of the Code) maintained by
the Affiliated Group, the sum of the following fractions shall not
exceed 1.0 as of the end of any Plan Year:
(i) Defined Contribution Fraction -- the numerator of
which is the sum of all Annual Additions for the Participant as
of the end of the Plan Year under all such defined contribution
plans maintained by the Affiliated Group, and the denominator of
which is the sum of the lesser of the following amounts for each
Plan Year in which the Participant was in Service:
(A) one hundred twenty-five percent (125%) of the
dollar limitation in effect for such year under Code
Section 415(c)(1)(A); or
(B) one hundred forty percent (140%) of the maximum
amount that may be taken into account for such year
pursuant to Code Section 415(c)(1)(B).
(ii) Defined Benefit Fraction -- the numerator of which
is the projected annual benefit for the Participant as of the
end of the Plan Year under all defined benefit plans maintained
by the Affiliated Group, and the denominator of which is the
lesser of:
<PAGE> 26
(A) one hundred twenty-five percent (125%) of the
dollar limitation in effect for such Plan Year under Code
Section 415(b)(1)(A); or
(B) one hundred forty percent (140%) of the maximum
amount that may be taken into account under Code Section
415(b)(1)(B) with respect to the Participant for such Plan
Year.
(b) The "one hundred twenty-five percent (125%)" applied in
paragraph (a) of this Section shall be reduced to "one hundred percent
(100%)" for any Plan Year in which either:
(i) the Plan is included in an "Aggregation Group" (as
defined in Section 13.1) which is "Top Heavy" (as defined in
Section 13.1) and the Plan or any other plan within such
"Aggregation Group" fails to provide the minimum benefit pre-
scribed by Code Section 416(h) and the regulations thereunder;
or
(ii) the Plan is included in an "Aggregation Group" which
is "Top Heavy", if "ninety percent (90%)" were substituted for
"sixty percent (60%)" in the definition of 'Top Heavy' contained
in Section 13.1(d).
(c) If the limitations of this Section are exceeded with
respect to a Participant in any Plan Year solely because the
aggregation of the Plan with one or more defined benefit plans
pursuant to paragraph (a) produces a fraction that exceeds 1.0, the
Participant's Annual Additions to this Plan shall be reduced so that
such fraction equals 1.0 only if the terms of the defined benefit plan
in which the Participant is participating does not allow for a
reduction of the Participant's benefit so that such fraction equals
1.0.
<PAGE> 27
5.5 Disposition of Excess Before-Tax Contributions. If the amount
credited to a Participant's Before-Tax Contribution Account is to be
reduced as a result of the limits provided in Section 5.1, the amount of
such reduction shall be effective in the manner described in Section
3.6(b) and shall either be returned to the Participant not later than two
and one-half months after the end of the Plan Year in which such
Before-Tax Contributions were made or recharacterized as an After-Tax
Contribution and deposited to the After-Tax Contribution Account of the
Participant.
5.6 Disposition of Excess Company Matching Contributions and
After-Tax Contributions.
(a) If the amount credited to a Participant's Company Matching
Contribution Account by reason of Company Matching Contributions is to
be reduced as a result of the limits provided in Section 5.2, the
amount of any such reduction shall be effective in the same manner as
described in Section 3.6(b) for Before-Tax Contributions and After-Tax
Contributions and shall be distributed to the Participant not later
than two and one-half months after the end of the Plan Year in which
such Company Matching Contributions were made.
(b) If the amount credited to a Participant's After-Tax
Contribution Account by reason of After-Tax Contributions is to be
reduced as a result of the limits provided in Section 5.2, the amount
of any such reduction shall be effected in the manner described in
Section 3.6(b) and shall be distributed to the Participant not later
than two and one-half months after the end of the Plan Year in which
such After-Tax Contributions were made or recharacterized.
<PAGE> 28
5.7 Disposition of Excess Annual Additions. If the amount credited
to a Participant's Account is to be reduced as a result of the limits
provided in Sections 5.3 or 5.4, such reduction shall be effected in the
following order of priority:
(a) First, the amount of the Participant's After-Tax
Contributions shall be reduced. Any reduction of After-Tax
Contributions shall be paid to the Participant as soon as
administratively feasible.
(b) Second, the amount of any Company Profits Contributions
made on behalf of the Participant shall be reduced. Any reduction of
Company Profits Contributions shall be credited to a suspense account
and treated as the first allocation of Company Profits Contributions
on behalf of such Participant for the next succeeding Plan Year and,
if not able to be fully utilized for such purpose, shall be allocated
pro rata to the Company Profits Contribution Accounts of the other
Participants on the last day of the next succeeding Plan Year.
(c) Third, the amount of any Company Matching Contributions
made on behalf of the Participant shall be reduced. Any reduction of
Company Matching Contributions shall be credited to a suspense account
and treated as the first allocation of Company matching Contributions
on behalf of such Participant for the next succeeding Plan Year and,
if not available to be fully utilized for such purpose, shall be
allocated pro rata to the Company Matching Contribution Accounts of
the other Participants on the last day of the next succeeding Plan
Year.
<PAGE> 29
(d) Fourth, the amount of the Participant's Before-Tax
Contributions shall be reduced. Any reduction of Before-Tax
Contributions shall be credited to a suspense account and treated as
the first allocation of Before-Tax Contributions on behalf of such
Participant for the next succeeding Plan Year and, if not able to be
fully utilized for such purposes, shall be allocated pro rata to the
Before-Tax Contributions Account of the other Participants on the last
day of the next succeeding Plan Year.
<PAGE> 30
ARTICLE 6 VESTING
-------
6.1 Fully Vested Accounts. Amounts credited to a Participant's
Before-Tax Contribution Account, After-Tax Contribution Account, Company
Matching Contribution Account and Rollover Contribution Account shall at
all times and in all events be fully vested and nonforfeitable.
6.2 Graduated Vesting of Company Profits Contribution Account.
Amounts credited to a Participant's Company Profits Contribution Account
shall vest in accordance with the following schedule:
<TABLE>
<CAPTION>
Completed Years of Percentage of Account
Service Vested
------------------ ---------------------
<S> <C>
Less than 3 0%
3 20%
4 50%
5 100%
</TABLE>
Notwithstanding any other provision in the Plan, amounts credited to a
Participant's Company Profits Contribution Account as of December 31, 1990
shall be fully vested.
6.3 Death, Disability or Normal Retirement Age. Notwithstanding the
provisions of Section 6.2, a Participant shall be fully vested in amounts
credited to his Company Profits Contribution Account upon his death,
termination on account of Disability or attainment of Normal Retirement
Age.
<PAGE> 31
6.4 Forfeitures. To the extent that a Participant has not vested in
amounts attributable to his Company Profits Contribution Account at the
time such Participant's employment terminates, such unvested amounts shall
be immediately forfeited and used to reduce the amount of future Company
Contributions. If such a Participant is rehired prior to incurring five
consecutive One Year Breaks in Service (or, if longer, a number of One
Year Breaks in Service equal to his number of Years of Service at the date
of such termination), the amount forfeited shall be restored to the
Participant's Company Profits Contribution Account subject to the re-
payment of any amounts distributed to the Participant from such Company
Profits Contribution Account pursuant to Article 11 not later than the
second anniversary of the date on which such Participant is reemployed.
If such a Participant is rehired prior to incurring a one Year Break in
Service, any forfeited amount shall be restored regardless of whether such
Participant repays the amount which has been distributed, but any future
distributions to the Participant shall reflect such prior distribution.
If an amount is required to be restored pursuant to this Section 6.4, the
Participating Company which employs such Participant shall contribute such
amount to the Plan without regard to any limitation on contributions
otherwise contained in the Plan.
6.5 Moore's Division Employees. Notwithstanding anything else in
this Plan to the contrary, a Participant who was employed by the Moore's
Division on September 12, 1989 and who became an employee of Harcros
Lumber & Building Supplies Inc. ("Harcros") pursuant to an Asset Purchase
Agreement, as amended, between the Company, Harcros and, to the extent
applicable, Harrisons Pauls Holdings Inc., shall be fully vested in his
Account hereunder.
<PAGE> 32
ARTICLE 7 PARTICIPANTS' ACCOUNTS
----------------------
7.1 Contributions to Account. All contributions made by a
Participating Company on behalf of a Participant or made by a Participant
shall be paid to the Trustee, and shall be allocated to the Participant's
Account.
7.2 Separate Accounts.
(a) Accounts shall be established and maintained for each
Participant in which shall be recorded separately:
(i) in an After-Tax Contribution Account, the amounts
attributable to After-Tax Contributions made by the Participant;
(ii) in a Before-Tax Contribution Account, the amounts
attributable to Before-Tax Contributions made on the
Participant's behalf;
(iii) in a Company Matching Contribution Account, the
amount attributable to Company Matching Contributions made on
the Participant's behalf;
(iv) in a Company Profits Contribution Account, the
amount attributable to Company Profits Contributions made on the
Participant's behalf; and
(v) in a Rollover Contribution Account, the amount
attributable to any Rollover Contributions made by the
Participant.
<PAGE> 33
(b) The records of each separate account shall reflect the
manner in which each account specified in paragraph (a) is invested
and the value of such investments, the interest in which the
Participant is vested, any withdrawals by or distributions to the
Participant or other person, any changes or credits made to such ac-
count, and such other information as the Plan Administrator or the
Trustee may deem appropriate.
7.3 Valuation of Accounts. The value of each Participant's Account
shall be determined as of each Valuation Date. As of each Valuation Date,
the Plan Administrator shall adjust the balance of each Participant's
Account to reflect any of the following which have occurred since the last
Valuation Date:
(a) contributions, withdrawals, distributions and any other
changes or credits attributable to the Participant's Account; and
(b) the net increase or decrease in the value of the Trust Fund
due to investment earnings, gains or losses and any expenses of the
Trust Fund, which adjustment shall be made in the same proportion that
the balance in the Participant's Account as of the last Valuation Date
bore to the total balance of all Participants' Accounts as of such
last Valuation Date; provided that such adjustment shall be made for
each Investment Fund in the same proportion that the balance of the
Participant's Account invested in each such Investment Fund bore to
the total balance of all Participants' Accounts in such Investment
Fund.
<PAGE> 34
ARTICLE 8 INVESTMENT OF ACCOUNTS
----------------------
8.1 General. Participants' Accounts (and any suspense account under
Section 5.4) shall be invested and administered in accordance with the
provisions of the Trust Agreement.
8.2 Investment Funds. The Plan Administrator shall provide for the
investment of Participants' Accounts in such number of separate Investment
Funds as it shall determine. Notwithstanding the foregoing, there shall
be at least three Investment Funds, one of which shall consist of
investments in fixed income vehicles, including, but not limited to,
guaranteed investment contracts issued by insurance companies, a second
which shall consist of investments balanced between debt and equity
investments, and a third which shall be the "Common Stock Fund". Any such
required Investment Funds may be invested in shares of a registered
investment company having corresponding investment objectives. The
Trustee shall invest each Participant's Account in any one or more of such
Investment Funds pursuant to the Participant's directions in accordance
with Section 8.3.
8.3 Investment Directions.
(a) A Participant's investment directions shall be made in the
form and manner prescribed by the Plan Administrator. If no
investment direction for a Participant is on file, such Participant's
Account shall be invested in the Investment Fund designated by the
Plan Administrator;
(b) each Participant may change his investment direction by
giving prior notice in the form and manner prescribed by the Plan
Administrator, provided that a Participant may not make a change of
investment direction more often than permitted pursuant to uniform
rules prescribed by the Plan Administrator. Any such change in
investment direction shall apply only with respect to contributions
subsequent to the date on which the direction becomes effective; and
<PAGE> 35
(c) each Participant may transfer funds held in his Account
among the Investment Funds by giving prior notice in the form and
manner prescribed by the Plan Administrator, provided that any such
transfer shall be effective only as a Valuation Date and a Participant
may not make such a transfer more often than permitted pursuant to
uniform rules prescribed by the Plan Administrator.
8.4 Voting of Common Stock. A Participant shall be entitled to
direct the Trustee to vote the full shares of Common Stock held in his
Account. Each Participant shall be furnished a form for the purpose of
communicating his direction to the Trustee. If no Participant direction
is timely received, the Trustee shall not vote such Participant's Common
Stock.
8.5 Tender Offers. In the event of a tender offer for Common Stock,
each Participant (or the Beneficiary of a deceased Participant) shall be
entitled to direct the Trustee to tender and sell the number of shares
(including fractional shares) of Common Stock standing to the credit of
his Account. Promptly after the commencement of a tender offer, the
Company shall provide to each Participant (i) the written tender offer
information provided to shareholders of the Company and (ii) the means by
which a Participant may instruct the Trustee to tender.
<PAGE> 36
Thereafter, during the pendency of the tender offer, the Trustee shall
promptly provide each Participant with any additional written tender offer
information that is provided to shareholders of the Company. The Trustee
shall tender or not tender (or withdraw from tender) shares in accordance
with such instructions. The Trustee shall determined in its own
discretion whether to tender shares for which timely instructions are not
received. If permitted to do so under the terms of the tender offer and
applicable law, the Trustee will withdraw from the tender offer any shares
tendered pursuant to the offer on behalf of a Participant if the
Participant shall have requested the withdrawal of such shares. A
Participant shall not be limited as to the number of instructions to
tender or withdraw that he may give to the Trustee. All shares that have
been tendered pursuant to Participants' instructions and have not been
withdrawn prior to the expiration of the tender offer will be withdrawn
from such Participant's Account and will be sold by the Trustee in
accordance with the terms of the tender offer. Tender offer instructions
received from Participants shall be held in confidence by the Trustee and
shall not be divulged to the Company or to any officer or employee
thereof, or to any other person other than such agents of the Trustee as
they may appoint to perform their duties under this Section 8.5.
The Trustee shall credit to each Account of the Participant from which
the tendered shares of Common Stock were taken the proceeds received by
the Trustee in exchange for the shares of Common Stock tendered from that
Account. As soon as administratively practicable following the
termination of the tender offer, proceeds received from tendering Common
Stock pursuant to such offer shall be invested in accordance with the
provisions of the Plan and Trust Agreement for the Account of each
applicable Participant.
8.6 Limitation on Common Stock Transactions. The Plan Administrator
may require that:
<PAGE> 37
(i) any Participant who is an officer or director of the
Company who receives a distribution of Common Stock under the Plan
must cease receiving any further contributions of, or make any further
investment in, Common Stock under the Plan for a period of six months
from the date of such distribution; provided, however, that
extraordinary distributions of all of the Common Stock in the Plan and
distributions or Common Stock in connection with such Participant's
death, retirement, disability or termination of employment or in
connection with a qualified domestic relations order (as defined in
Section 414(p) of the Code) are not subject to this requirement;
(ii) a Participant who is an officer or director of the Company
and ceased participation (within the meaning of Section 16(b) of the
Securities and Exchange Act of 1934, as amended and the rules
promulgated thereunder) in the Plan may not again participate in the
Plan for at least six months after the date such cessation became
effective; and
(iii) with respect to transfers between the Stock Fund and any
other Investment Fund of assets created to the Account of a
Participant who is an officer or director of the Company, (1) the
election to make such transfer must be made during the period
beginning on the third business day following the date of release of
quarterly or annual summary statements of sales and earnings of the
Company and ending with the twelfth business day following such date
and (2) the actual transfer must occur as of a Valuation Date which is
at least six months after the last Valuation Date as of which any
assets credited to such Participant's Account were transferred between
such Investment Funds.
<PAGE> 38
ARTICLE 9 WITHDRAWALS DURING SERVICE
--------------------------
9.1 After-Tax Contribution Account. A Participant who has been a
Participant in the Plan for at least five full years may withdraw his
entire After-Tax Contribution Account. A Participant who has not completed
five full years of participation may withdraw any amounts from his
After-Tax Contribution Account in excess of any After-Tax Contributions
made during the 24 months preceding the date of such withdrawal.
9.2 Rollover Contribution Account. A Participant may, in the form
and manner prescribed by the Plan Administrator, make a cash withdrawal of
part or all of the balance of his Rollover Contribution Account.
9.3 Financial Hardship. Upon evidence of Hardship satisfactory to
the Plan Administrator, a Participant may, in the form and manner
prescribed by the Plan Administrator, make a cash withdrawal of part or
all of the balance of his Account in an amount which the Plan
Administrator determines is needed by the Participant on account of such
Hardship. Notwithstanding the foregoing, no Participant shall be entitled
to withdraw from his Before-Tax Contribution Account on account of
Hardship an amount in excess of the aggregate amount of such Participant's
Before-Tax Contributions.
9.4 Age 59 1/2. A Participant may, in the form and manner prescribed by
the Plan Administrator, make a cash withdrawal of part or all of the
balance of each or all of his After-Tax Contribution Account, his
Before-Tax Contribution Account and his Rollover Contribution Account, in
any amount in excess of $500 at any time after he attains age 59 1/2.
<PAGE> 39
9.5 Order of Withdrawal Priority. Any withdrawal made under the
provisions of Section 9.2 or 9.3 shall be made in accordance with the
following order of priority, with no distribution made from any portion of
the Participant's Account having a lower priority until all classes having
a higher priority shall have been depleted:
1. the Participant's After-Tax Contribution Account;
2. the Participant's Rollover Contribution Account; and
3. the Participant's Before-Tax Contribution Account.
9.6 No Withdrawal of Company Contributions. A Participant may not
withdraw any amounts attributable to Company Contributions while employed,
regardless of whether such amounts are vested.
9.7 Amount and Payment of Withdrawal. Notwithstanding the foregoing,
no withdrawals shall be permitted under Sections 9.1, 9.2 or 9.4 unless
the aggregate amount withdrawn from all Accounts is the lesser of $500 or
the balance of such Accounts. Payment of any withdrawal under this Article
shall be made as soon as practicable following the Valuation Date
following the Plan Administrator's timely receipt of a form requesting
such withdrawal.
9.8 Frequency of Withdrawal. A Participant who receives a withdrawal
under this Article IX may not make a withdrawal under Section 9.1, 9.2 or
9.4 for a six month period.
9.9 Mandatory Payment. Notwithstanding anything else contained in
this Article 9, a Participant remaining in Service shall commence receipt
of amounts in his Account not later than the April 1st following the
calendar year in which such Participant attains age seventy and one-half
(70 1/2).
<PAGE> 40
ARTICLE 10 LOANS TO PARTICIPANTS
---------------------
10.1 Right to Borrow. The Plan Administrator in its sole discretion
may decide to grant Participants the right to borrow funds from their
respective Accounts. Any such decision shall be communicated to the
Participants in writing by the Plan Administrator. If and when loans to
Participants are permitted, the following provisions of this Article 10
shall apply.
10.2 In General. Upon the written request of an Eligible Borrower on
a form acceptable to the Plan Administrator, and subject to the conditions
of this Article, the Plan Administrator shall direct the Trustee to make a
loan from the Trust to the Eligible Borrower. For purposes of this
Article, an "Eligible Borrower" is a Participant who is an Employee.
10.3 Rules and Procedures. The Plan Administrator shall promulgate
such rules and procedures, not inconsistent with the express provisions of
this Article, as it deems necessary to carry out the purposes of this
Article. All such rules and procedures shall be deemed a part of the Plan
for purposes of the Department of Labor regulation section 2550.408b-1(d).
Loans shall not be made available to Eligible Borrowers who are Highly
Compensated Employees in an amount (determined under Department of Labor
regulation section 2550.408b-1(b)) greater than the amount made available
to other Eligible Borrowers.
10.4 Maximum Amount of Loan. The following limitations shall apply
in determining the amount of any loan to an Eligible Borrower hereunder:
<PAGE> 41
(a) The amount of the loan, together with any other outstanding
indebtedness of the Eligible Borrower under the Plan or any other
qualified retirement plans of the Affiliated Employers, shall not
exceed $50,000 reduced by the excess of (i) the highest outstanding
loan balance of the Eligible Borrower from such plans during the one-
year period ending on the day prior to the date on which the loan is
made, over (ii) the Eligible Borrower's outstanding loan balance from
such plans immediately prior to the loan.
(b) The amount of the loan shall not exceed 50% of the Eligible
Borrower's vested interest in his or her Accounts, determined as of
the Valuation Date immediately preceding the date of the loan, or such
lesser amount as the Plan Administrator may prescribe.
10.5 Minimum Amount of Loan. The Plan Administrator may establish a
minimum amount for any single loan under the Plan, not to exceed $1,000.
10.6 Note; Security; Interest. Each loan shall be evidenced by a
note signed by the Eligible Borrower and shall be secured by 50% of the
Eligible Borrower's vested interest in his or her Accounts, including in
such security the note evidencing the loan. The loan shall bear interest
at a reasonable annual percentage interest rate to be determined by the
Plan Administrator. In determining the interest rate, the Plan
Administrator shall take into consideration interest rates currently being
charged by persons in the business of lending money with respect to loans
made in similar circumstances. The Plan Administrator shall make such
determination through consultation with one or more lending institutions,
as the Plan Administrator deems appropriate.
<PAGE> 42
10.7 Repayment. Each loan made to an Eligible Borrower who is
receiving regular payments of compensation from a Participating Employer
shall be repayable by payroll deduction. Loans made to other Eligible
Borrowers (and, in all events, where payroll deduction is no longer
practicable) shall be repayable in such manner as the Plan Administrator
may from time to time determine. The documents evidencing a loan shall
provide that payments shall be made not less frequently than quarterly and
over a specified term as determined by the Plan Administrator (but not to
exceed five years unless the loan is being applied toward the purchase of
a principal residence for the Eligible Borrower); such documents shall
also require that the loan be amortized with level payments of principal
and interest.
10.8 Repayment Upon Distribution. If, at the time benefits are to be
distributed (or to commence being distributed) to an Eligible Borrower
with respect to a separation from service, there remains any unpaid
balance of a loan hereunder, such unpaid balance shall, to the extent
consistent with Department of Labor regulations, become immediately due
and payable in full. Such unpaid balance, together with any accrued but
unpaid interest on the loan, shall be deducted from the Eligible
Borrower's Accounts, subject to the default provisions below, before any
distribution of benefits is made. Except as may be required in order to
comply (in a manner consistent with continued qualification of the Plan
under Code section 401(a)) with Department of Labor regulations, no loan
shall be made or remain outstanding with respect to a Participant under
this Article after the time distributions to the Participant with respect
to a separation from service are to be paid or commence.
<PAGE> 43
10.9 Default. In the event of a default, as determined in accordance
with rules prescribed by the Plan Administrator, the unpaid principal
balance of the note shall immediately become due and payable in full.
Such unpaid principal, together with any accrued but unpaid interest,
shall thereupon be deducted from the Eligible Borrower's Accounts, at such
time and in such manner as the Plan Administrator shall prescribe, subject
to the further provisions of this Section. The amount so deducted shall
be treated as distributed to the Eligible Borrower and applied by the
Eligible Borrower as a payment of the unpaid interest and principal (in
that order) under the note evidencing such loan. In no event shall the
Plan Administrator apply the Eligible Borrower's Accounts to satisfy the
Eligible Borrower's repayment obligation, whether or not he or she is in
default, unless the amount so applied otherwise could be distributed in
accordance with the Plan.
10.10 Nondiscrimination. Loans shall be made available under this
Article to all Eligible Borrowers on a reasonably equivalent basis, except
that the Plan Administrator may make reasonable distinctions based on
creditworthiness.
10.11 Designation of Investment Funds. The Eligible Borrower may
designate the Account or Accounts and investment fund or funds (other than
the Stock Fund) from which his or her loan is to be made. In the absence
of such a designation, the loan shall be made proportionately from all
Accounts and all investment funds (other than the Stock Fund) to which the
Eligible Borrower's Accounts are allocated.
<PAGE> 44
ARTICLE 11 DISTRIBUTIONS AFTER SERVICE
---------------------------
11.1 Termination of Service. Upon termination of a Participant's
Service the Participant (or if deceased, his Beneficiary) may elect to
receive payment of the vested portion of such Participant's Account in a
single lump sum payment as soon as practicable as of the Valuation Date
coincident with or next following such Participant's termination of
Service. If such Participant does not elect to receive a lump sum as
provided above, payment of his Account shall be made as of the first
Valuation Date subsequent to such Participant's attaining Normal
Retirement Age and until so distributed his Account shall be invested in
the manner prescribed by the Plan Administrator. In no event, however,
shall a Participant's election to defer payment of his Account be
effective if the aggregate value of such Account which has vested is less
than $3,500.
11.2 Disability. Upon a Participant's Disability, the Participant
may, in the discretion of the Plan Administrator, be deemed to have
terminated employment for purposes of the Plan and to have become eligible
for a distribution pursuant to the terms of Section 11.1.
11.3 Death and Beneficiary Designation.
(a) Unless the Participant is not survived by a spouse or shall
have designated another Beneficiary in accordance with Section
11.3(b), upon the Participant's death, the Participant's spouse shall
receive payment of the aggregate value of the Participant's Account in
a single lump sum payment as soon as practical following the Valuation
Date coincident with or next following the Participant's death. In
the event the Participant has made a valid election of a Beneficiary
other than such Participant's spouse, such payment shall be made in a
single lump sum payment to the Participant's Beneficiary designated in
accordance with Section 11.3(b).
<PAGE> 45
(b) Subject to the provisions of this Section 11.3(b), each
Participant may designate one or more persons as the Beneficiary of
such Participant's Account. Such designation shall be made by the
Participant in the form and manner prescribed by the Plan
Administrator and may be changed or revoked by the Participant at any
time or from time to time during his lifetime. No beneficiary
designation shall be effective until received by the Plan
Administrator. Any designation made by a Participant who has a spouse
at the time of his death which designates a primary beneficiary other
than such spouse shall not be effective unless:
(1) the spouse of such Participant consents in writing to
the designation, and the spouse's consent acknowledges the
identity of such Beneficiary and the effect of such designation
and is witnessed by a notary public; or
(2) it is established to the satisfaction of the Plan
Administrator that the required consent may not be obtained
because the spouse cannot be located, or because of such other
circumstances as provided in Treasury regulations under the
applicable provisions of the Code.
11.4 Mandatory Distributions. Unless otherwise elected by a
Participant, distribution of the vested portion of the Participant's
Account shall commence not later than within sixty (60) days after the
close of the Plan Year in which the latest of the following occurs:
<PAGE> 46
(a) the Participant attains Normal Retirement Age;
(b) the tenth (10th) anniversary of the date the Participant
commenced participation in the Plan; or
(c) the termination of the Participant's Service.
Notwithstanding the foregoing, the payment of the Accounts of a
Participant must commence on or before April 1 of the calendar year
following the Plan Year in which such Participant attains age 70 1/2.
11.5 Optional Direct Transfer of Eligible Rollover Distributions.
(a) If a Participant, the surviving spouse of a Participant, or
an alternate payee of the Participant is entitled to receive an
eligible rollover distribution, he or she may elect, at the time and
in the manner prescribed by the Plan Administrator, to have all or any
portion of such distributions paid directly to an eligible retirement
plan. Such transfer shall be made in the form of a direct rollover or
by any other means prescribed by regulations which otherwise satisfy
the requirements for a direct payment to the eligible retirement plan
so specified. For purposes of this Section 11.5, an eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the Participant other than any distribution that is
one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of
the Participant and his or her designated beneficiary, or for a
specified period of ten years or more, any distribution required under
section 401(a)(9) of the Code, and the portion of any distribution not
includible in gross income. An eligible retirement plan is an
individual retirement account described in section 408(a) of the Code,
an annuity plan described in section 403(a) of the Code, or, except
with respect to an eligible rollover distribution to the Participant's
surviving spouse or former spouse who is an alternate payee, a
qualified trust described in section 401(a) of the Code that accepts
such eligible rollover distribution.
<PAGE> 47
(b) Notice Requirement. The Plan Administrator shall give a
distributee notice of his or her right to elect a direct rollover and
an explanation of the withholding consequences if not making the
election. Such notice shall be given no earlier than 90 days and no
less than 30 days before the date of distribution. The distributee,
in his or her sole discretion, may waive, in writing, the right to 30
days' notice.
<PAGE> 48
ARTICLE 12 ADMINISTRATION
--------------
12.1 Plan Administrator. The Plan shall be administered by the
Company. The Company shall be the "administrator" of the Plan within the
meaning of section 3(16)(A) of ERISA and the "named fiduciary" within the
meaning of Section 402(a)(1) of ERISA.
12.2 Plan Administrator's Authority and Powers. The Plan
Administrator shall have the discretionary authority and power to
administer and construe the Plan; determine questions of fact and law
arising under the Plan; direct disbursements by the Trustee; and exercise
the other powers specified herein.
12.3 Delegation of Duties. To the extent consistent with applicable
law, the Plan Administrator may delegate such of its duties and may engage
such experts and other persons as it deems appropriate in connection with
administering the Plan.
12.4 Compensation. The Plan Administrator shall serve without
compensation.
12.5 Exercise of Discretion. Any person with any discretionary power
in the administration of the Plan shall exercise such discretion in a
nondiscriminatory manner and shall discharge his duties with respect to
the Plan in a manner consistent with the provisions of the Plan and with
the standards of fiduciary conduct contained in Title I, Part 4, of ERISA.
12.6 Fiduciary Liability. In administering the Plan, neither the
Plan Administrator nor any person to whom the Plan Administrator delegates
any duty or power in connection with administering the Plan shall be
liable, except in the case of his own gross negligence or willful
misconduct, for:
<PAGE> 49
(a) any action or failure to act;
(b) the payment of any amount under the Plan; or
(c) any mistake of judgment.
12.7 Indemnification by Company. To the extent not compensated by
insurance or otherwise, the Company shall indemnify and hold harmless each
employee of the Company designated to carry out fiduciary responsibility
with respect to the Plan, from any and all claims, losses, damages,
expenses (including counsel fees approved by the Company), and liabilities
(including any amount paid in settlement with the approval of the Company)
arising from any act or omission of such member or employee, except where
the same is judicially determined to be due to the gross negligence or
willful misconduct of such member or employee. No assets of the Plan may
be used for any such indemnification.
12.8 Payment of Plan Expenses. The Plan Administrator in its sole
discretion shall determine what constitutes a proper expense of
administering the Plan. The Plan Administrator may pay (or reimburse a
Participating Employer) for any reasonable expense incurred by the Plan
Administrator or the Participating Employer in the administration of the
Plan and Trust, from the assets of the Trust Fund.
<PAGE> 50
ARTICLE 13 AMENDMENT AND TERMINATION OF PLAN
---------------------------------
13.1 Amendment. The Board of Directors of the Company may amend the
Plan by written instrument provided that:
(a) no amendment which materially affects the Trustee's duties
shall be effective without the consent of the Trustee;
(b) no amendment shall cause the Trust Fund to be used other
than for the exclusive benefit of Participants and Beneficiaries; and
(c) if any amendment changes the vesting provisions of the
Plan, a Participant may, within sixty (60) days after receiving
written notice of such amendment (or such later date prescribed by
regulations under Code Section 411), file with the Plan Administrator
an election to have the vested interest in the Participant's Account
computed under the Plan's vesting provisions in effect prior to the
amendment.
13.2 Company's Right to Terminate Plan. The Company intends to
maintain the Plan as a permanent tax-qualified retirement plan and to
maintain the Trust Agreement. Nevertheless, the Company reserves the
right to terminate the Plan or Trust Agreement at any time by resolution
of the Board of Directors of the Company.
13.3 Consequences of Termination.
(a) If the Plan is terminated in whole or in part, the Account
of each Participant affected by such termination shall be fully vested
as of the date of such termination. In such instance, the Plan
Administrator shall determine the date and manner of distribution of
all Participants' Accounts.
(b) The Plan Administrator shall give prompt notice to each
Participant (or, if deceased, to the Participant's Beneficiary)
affected by the Plan's complete or partial termination.
<PAGE> 51
ARTICLE 14 SPECIAL PROVISIONS FOR NON-KEY EMPLOYEES
----------------------------------------
14.1 Applicability and Definitions. This Article provides for the
minimum contribution required by Code Section 416 which must be made for a
"Non-Key Employee" as defined in paragraph (e). For purposes of this
Article:
(a) "Aggregation Group" means all plans (including any
terminated plans) of the Affiliated Group in which any Key Employee is
a participant, and all other plans maintained by the Affiliated Group
that enables any plan in which any Key Employee is a participant to
comply with the coverage and nondiscrimination requirements of Code
Sections 401(a)(4) and 410; and all plans of the Affiliated Group that
the Company designates as part of the Aggregation Group, provided the
resulting Aggregation Group meets the coverage and nondiscrimination
requirements of Code Sections 401(a)(4) and 410.
(b) "Determination Date" means, for any Plan Year, the last day
of the preceding Plan Year, except that the Determination Date for the
first Plan Year means the last day of such first Plan Year.
(c) "Key Employee" means a "key employee" as defined in Code
Section 416(i) and includes an individual who at any time during the
Plan Year (or during any of the four preceding Plan Years) is:
(i) an owner of any of the ten (10) largest interests in
the Company whose compensation exceeds the dollar amount set
forth in Section 415(c)(1) of the Code;
<PAGE> 52
(ii) an owner of more than a five percent (5%) interest
in the Company;
(iii) an owner of more than a one percent (1%) interest
in the Company and whose compensation exceeds $150,000; or
(iv) an officer of any corporation within the Affiliated
Group whose compensation exceeds one-hundred fifty percent
(150%) of the dollar amount set forth in Section 415(c)(1) of
the Code.
(d) "Top Heavy" means that as of the Determination Date for a
Plan Year, the sum of:
(i) the aggregate Account balances for all Key Employees
under the Plan; plus
(ii) the aggregate account balances and the aggregate
present values of accrued benefits for all employees under all
other plans in the Aggregation Group in which the Plan is
included;
exceeds sixty percent (60%) of all such aggregate values for all
individuals under all plans in such Aggregation Group.
In determining the value of any individual's Account balance in
the Plan or his account balance or the present value of his accrued
benefit under any other plan in the Aggregation Group:
1. the value of such account or the present value of such
accrued benefit shall be increased by the aggregate
distributions made with respect to such individual from such
plan during the five (5) year period ending on the Determination
Date; and
<PAGE> 53
2. in the case of a defined benefit plan, the present
value of such accrued benefit shall be determined by using the
actuarial assumptions specified by the Company which are the
same as the actuarial assumptions used for this purpose under
all other defined benefit plans within the Aggregation Group.
(e) "Non-Key Employee" means a Participant who is not a Key
Employee.
(f) "Top Heavy Plan Year" means a Plan Year for which the Plan
is Top Heavy.
14.2 Minimum Contribution. If the Participant is a Non-Key Employee
on the last day of a Top Heavy Plan Year, the Company Contributions
allocated to his Account for such Top Heavy Plan Year, shall be at least
equal to the lesser (i) the highest percentage of Compensation contributed
on behalf of any Key Employee or (ii) three percent (3%) of such Non-Key
Employee's Compensation for the Top Heavy Plan Year.
<PAGE> 54
ARTICLE 15 MISCELLANEOUS
-------------
15.1 Trust Fund Sole Source of Payments for Plan. The Trust Fund
shall be the sole source for the payment of all Participants' Accounts,
and the Plan's liability to make such payment shall be limited to the
extent that the balance in the Participant's Account is sufficient to make
payment. In no event may assets of any Participating Company be applied
for the payment of Plan benefits.
15.2 Exclusive Benefit. The Plan is established for the exclusive
benefit of Participants and their Beneficiaries, and the Plan shall be
administered in a manner consistent with the provisions of Code Section
401(a) and ERISA.
15.3 Return of Contributions.
(a) Except as specifically provided in the Plan, under no
circumstances shall any funds contributed to the Trust Fund or any
assets of the Trust Fund ever revert to, or be used by, any
Participating Company.
(b) Any Contribution made by any Participating Company
(including Company Contributions and Before-Tax Contributions) is
conditioned upon its deductibility for federal income tax purposes and
may be returned to it if:
(i) the contribution is made by reason of mistake of
fact;
(ii) the deduction of such contribution for federal
income tax purposes is disallowed; or
(iii) the contribution is conditioned on the favorable
determination of the Internal Revenue Service as to initial
qualification of the Plan under Code Section 401(a) and the Plan
fails to so qualify;
<PAGE> 55
provided such return is made within one year of the mistaken
contributions, the disallowance of the deduction for federal income
tax purposes or any notice from the Internal Revenue Service (in
response to the request for its favorable determination) that the plan
fails to qualify under Code Section 401(a), as the case may be. The
amount of contribution which may be returned shall be reduced to
reflect its proportionate share of any net investment loss in the
Trust Fund, but not any investment gain.
15.4 Non-Alienation. Except as provided pursuant to a Qualified
Domestic Relations Order as defined in Section 414(p) of the Code, no
Participant or Beneficiary shall have the right to alienate or assign his
benefits under the Plan, and no Plan benefits shall be subject to
attachment, execution, garnishment, or other legal or equitable process.
If a Participant or Beneficiary attempts to alienate or assign benefits
under the Plan or if his property or estate should be subject to
attachment, execution, garnishment or other legal or equitable process,
the Plan Administrator may direct the Trustee to distribute the benefits
payable under the Plan to members of such Participant's or Beneficiary's
family or may use or hold such benefits for such Participant's or
Beneficiary's benefit.
15.5 Claims Procedure. All claims for benefits under the Plan by a
Participant or Beneficiary with respect to benefits not received by such
person shall be made in writing to the Plan Administrator, which shall
designate a member of the Plan Administrator to review such claims. If
such member believes that a claim should be denied, such member shall
notify the claimant in writing of the denial within ninety (90) days after
receipt of the claim. Such notice shall:
<PAGE> 56
(a) set forth the specific reason or reasons for the denial,
making reference to the pertinent provisions of the Plan or the Plan
document on which the denial is based;
(b) describe any additional material or information that should
be received before the claim may be acted upon favorably, and explain
why such material or information, if any, is needed; and
(c) inform the person making the claim of his right pursuant to
this Section to request review of the decision by the Plan
Administrator.
Any such person who believes that all available and relevant information
has been submitted may appeal the denial of a claim to the Plan
Administrator by submitting a written request for review to the Plan
Administrator within sixty (60) days after the date on which such denial
is received. Such period may be extended by the Plan Administrator for
good cause. The person making the request for review may examine
pertinent Plan documents. The request for review may discuss any issues
relevant to the claim. The Plan Administrator shall decide whether or not
to grant the claim within sixty (60) days after receipt of the request for
review, but this period may be extended by the Plan Administrator for up
to an additional sixty (60) days in special circumstances. If such an
extension of time for review is required because of special circumstances,
written notice of the extension shall be furnished to the claimant prior
to the commencement of the extension. The Plan Administrator's decision
shall be in writing, shall include specific reasons for the decision and
shall refer to pertinent provisions of the Plan or of the Plan documents
on which the decision is based.
<PAGE> 57
15.6 Transfer of Assets. The Plan shall not be merged or
consolidated with, or any of its assets or liabilities transferred to, any
other plan unless each Participant would (if the other plan then
terminated) receive a benefit which is equal to or greater than the
benefit such Participant would have been entitled to receive immediately
before the merger, consolidation or transfer (if the Plan then
terminated).
15.7 Common Trust Funds. The Plan adopts and includes the provisions
of any group or common trust fund in which the Trust participates, but
only as long as such group or common trust fund remains qualified under
Section 401(a), and exempt from taxation under Section 501(a), of the Code
in accordance with Revenue Ruling 81-100.
15.8 Applicable Law. Except as otherwise expressly required by
ERISA, this Plan shall be governed by the laws of the Commonwealth of
Massachusetts.
<PAGE> 58
IN WITNESS WHEREOF, Grossman's Inc. has caused this Plan instrument to
be executed by an officer, duly authorized, this __________ day of
____________________, 1995.
GROSSMAN'S INC.
By: _____________________________
Title:
<PAGE> 1
<TABLE>
Exhibit 11(a)
GROSSMAN'S INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1994 December 31, 1993 December 31, 1992
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net income (loss)
for primary and
fully diluted
earnings per
share $ (1,905) $(68,348) $ 6,232
=========== =========== ===========
Weighted average
number of shares
outstanding 25,752 25,661 25,518
Net effect of
dilutive stock
options - - 675
----------- ----------- -----------
Total weighted
average shares
outstanding and
common stock
equivalents used
in primary
calculation of
earnings per
share 25,752 25,661 26,193
Additional dilution
from stock options - - 48
----------- ----------- -----------
Total weighted
average shares
outstanding and
common stock
equivalents used
in fully diluted
calculation of
earnings per
share 25,752 25,661 26,241
=========== =========== ===========
Net Income Per
Common Share
(Primary and
Fully Diluted) $ (0.07) $ (2.66) $ 0.24
=========== ============ ===========
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-18114 and 33-52861)
pertaining to the Stock Option Plans of Grossman's Inc. of
our report dated January 31, 1995 with respect to the
consolidated financial statements and schedule of Grossman's
Inc. and subsidiaries included in the Annual Report (Form 10-K)
for the year ended December 31, 1994.
ERNST & YOUNG LLP
Boston, Massachusetts
March 10, 1995
