FORM 10-Q
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 27, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ... to ...
Commission File No. 1-8739
Burlington Coat Factory Warehouse Corporation
_____________________________________________
(Exact name of registrant as specified in its charter)
Delaware 22-1970303
- ------------------------------ -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1830 Route 130 North
Burlington, New Jersey 08016
- ------------------------------ -------------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (609)387-7800
Indicate by check mark whether the Registrant
(1) has filed all reports required 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 the number of shares outstanding of
each of the issuer's classes of common stock,
as of the latest practicable date.
Class Outstanding at March 31, 1999
- -------------------------- ---------------------------------
Common stock, par value $1 46,456,156
Page 1 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
I N D E X
Page
----
Part I - Financial Information:
Item 1. Financial Statements:
Condensed consolidated balance sheets - February 27, 1999 3
(unaudited) and May 30, 1998
Condensed consolidated statements of operations - Nine 4
and three months ended February 27, 1999 and February 28,
1998 (unaudited)
Condensed consolidated statements of cash flows - Nine 5
months ended February 27, 1999 and February 28, 1998
(unaudited)
Notes to condensed consolidated financial statements 6 - 9
Item 2. Management's discussion and analysis of 10 - 17
results of operations and financial condition
Part II - Other Information:
Item 1. Legal Proceedings 18
Item 6. Exhibits and reports on Form 8-K 19
SIGNATURES 20
* * * * * * * * * * * *
Page 2 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<TABLE>
<CAPTION>
February 27, May 30,
1999 1998
(Unaudited) (Note A)
----------- --------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and Cash Equivalents $137,113 $153,964
Accounts Receivable 14,746 17,578
Merchandise Inventories 499,879 474,817
Deferred Tax Asset 11,964 11,207
Prepaid and Other Current Asset 12,104 22,993
------- -------
Total Current Assets 675,806 680,559
Property and Equipment (Net of Accumulated
Depreciation and Amortization) 235,246 222,813
Long Term Investments 4,200 -
Other Assets 10,646 6,435
------- -------
Total Assets $925,898 $909,807
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts Payable $205,877 $198,597
Income Taxes Payable 5,525 10,372
Other Current Liabilities 87,839 94,339
Current Maturities of Long Term Debt 8,808 8,792
------- -------
Total Current Liabilities 308,049 312,100
Long Term Debt 53,022 60,890
Other Liabilities 16,732 16,977
Deferred Tax Liability 4,016 3,771
Stockholders' Equity:
Unearned Compensation (9) (29)
Preferred Stock - -
Common Stock 49,611 49,594
Capital in Excess of Par Value 18,903 18,710
Retained Earnings 509,925 468,958
Less Treasury Stock at Cost (34,351) (21,164)
------- -------
Total Stockholders' Equity 544,079 516,069
------- -------
Total Liabilities and Stockholders' Equity $925,898 $909,807
======= =======
See notes to the condensed consolidated financial statements.
NOTE A: The balance sheet at May 30, 1998 has been derived from the audited
financial statements at that date.
Page 3 of 74<PAGE>
</TABLE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(All amounts in thousands except share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
February 27, February 28, February 27, February 28,
1999 1998 1999 1998
-------------------------- -------------------------
<S> <C> <C> <C> <C>
REVENUES:
Net Sales $ 1,533,006 $ 1,484,342 $ 586,992 $ 572,532
Other Income 12,281 13,708 4,379 5,154
---------- ---------- ---------- ----------
1,545,287 1,498,050 591,371 577,686
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of Sales (Exclusive of
Depreciation and
Amortization) 994,040 947,652 393,371 376,852
Selling and Administrative
Expenses 453,106 425,884 151,115 144,281
Depreciation and Amortization 25,487 24,240 8,856 8,048
Interest Expenses 5,146 5,511 1,671 1,830
---------- ---------- ---------- ----------
1,477,779 1,403,287 555,013 531,011
---------- ---------- ---------- ----------
Income Before Provision for
Income Taxes 67,508 94,763 36,358 46,675
Provision for Income Taxes 25,611 37,688 13,187 18,116
---------- ---------- ---------- ----------
Net Income $ 41,897 $ 57,075 $ 23,171 $ 28,559
========== ========== ========== ==========
Earnings Per Share:
Basic and Diluted Net
Income Per Share $ .89 $ 1.20 $ .50 $ .60
========== ========== ========== ==========
Weighted Average Shares
Outstanding 47,023,546 47,407,432 46,684,693 47,425,430
========== ========== ========== ==========
Dividends Per Share $ .02 $ .02 $ - $ -
========== ========== ========== ==========
See notes to the condensed consolidated financial statements.
</TABLE>
Page 4 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(All amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
February 27, February 28,
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 41,897 $ 57,075
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 25,487 24,240
Provision for Losses on Accounts Receivable 5,661 5,701
Provision for Deferred Income Taxes (512) (208)
Loss on Disposition of Fixed Assets 769 589
Non-Cash Rent Expense and Other 583 769
Changes in Operating Assets and Liabilities:
Accounts Receivable (5,543) (1,477)
Merchandise Inventories (25,062) (67,859)
Prepaids and Other Current Assets 10,889 (6,612)
Accounts Payable 7,280 (9,340)
Other Current Liabilities (11,014) 1,145
------- -------
Net Cash Provided in Operating Activities 50,435 4,023
------- -------
INVESTING ACTIVITIES
Acquisition of Property and Equipment (39,143) (35,630)
Proceeds From Sale of Fixed Assets 172 9
Acquisition of Leaseholds (5,408) -
Receipts Against Long Term Notes Receivable 2,987 836
Minority Interest 45 67
Acquisition of Long Term Investments (4,200) -
Deferred Rent Incentives - 6,973
------- -------
Net Cash Used in Investing Activities (45,547) (27,745)
------- -------
FINANCING ACTIVITIES
Principal Payments on Long Term Debt (7,852) (7,809)
Issuance of Common Stock Upon Exercise of
Stock Options 230 623
Purchase of Treasury Stock (13,187) (9,464)
Payment of Dividends (930) (797)
------- -------
Net Cash Used in Financing Activities (21,739) (17,447)
------- -------
Decrease in Cash and Cash Equivalents (16,851) (41,169)
Cash and Cash Equivalents at Beginning of Period 153,964 197,069
------- -------
Cash and Cash Equivalents at End of Period $137,113 $155,900
======= =======
Interest Paid: $ 6,380 $ 7,230
======= =======
Income Taxes Paid: $ 30,970 $ 24,431
======= =======
See notes to the condensed consolidated financial statements.
</TABLE>
Page 5 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE AND THREE MONTHS ENDED FEBRUARY 27,1999 AND FEBRUARY 28, 1998
1. The condensed consolidated financial statements include the
accounts of the Company and all its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated. The accompanying financial statements are unaudited,
but in the opinion of management reflect all adjustments (which
are of a normal and recurring nature) necessary for a fair
presentation of the results of operations for the interim period.
Because the Company's business is seasonal in nature, the
operating results for the nine and three months ended February
27, 1999 and the corresponding periods ended February 28,1998 are
not necessarily indicative of results for the fiscal year.
2. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on August 27, 1998.
3. During fiscal 1998, the Company changed its fiscal year end
from a 52-53 week fiscal year ending on the Saturday closest to
June 30 of each year to a 52-53 week fiscal year ending on the
Saturday closest to May 31 of each year. For comparability
purposes, the information presented within the accompanying
unaudited condensed consolidated financial statements for the nine
and three months ended February 28, 1998 have been recast to
conform with the new fiscal year end.
4. Merchandise inventories as of February 27, 1999 and May 30,
1998 are valued at the lower of cost, on a First In First Out
("FIFO") basis, or market, as determined by the retail inventory
method. Prior to the first quarter of fiscal 1999, on an interim
basis, the Company stated inventory at the lower of FIFO cost or
market, as valued by the gross profit method, which approximated
the retail inventory method.
5. As of February 27, 1999, the Company had a deferred tax
liability of $4.0 million and a current deferred tax asset of
$12.0 million. As of May 30, 1998, the Company had a deferred
tax liability of $3.8 million and a current deferred tax asset of
$11.2 million. Valuation allowances were not required. Deferred
Page 6 of 74<PAGE>
tax assets consisted primarily of certain operating costs,
provisions for uncollectible receivables, and certain inventory
related costs, not currently deductible for tax purposes.
Deferred tax liabilities primarily reflected the excess of tax
depreciation over book depreciation.
6. Licensee department sales, included in net sales, amounted
to $35.0 million and $13.5 million, respectively, for the nine
and three month periods ended February 27, 1999 compared with
$31.8 million and $12.5 million for the similar periods of a year
ago.
7. Other current liabilities primarily consisted of sales tax
payable, accrued operating expenses, payroll taxes payable and
other miscellaneous items.
8. On September 10, 1998, the Board of Directors of the Company
declared a cash dividend in the amount of two cents ($0.02) per
share. The cash dividend was paid on October 26, 1998 to
stockholders of record on September 30, 1998 and amounted to $0.9
million.
9. The Company's net advertising costs consist primarily of
television and newspaper costs. The production costs of net
advertising are charged to expenses as incurred. Net advertising
expenses for the nine and three month periods ended February 27,
1999 were $38.0 million and $9.2 million, respectively. For the
nine and three month periods ended February 28, 1998, net
advertising costs amounted to $36.4 million and $8.4 million,
respectively.
10. Basic and diluted net income per share is based on the
weighted average number of shares outstanding during each period.
The amounts used in calculation of basic and dilutive net income
per share are as follows:
Page 7 of 74<PAGE>
<TABLE>
<CAPTION>
Nine Nine Three Three
Months Months Months Months
Ended Ended Ended Ended
February 27, February 28, February 27, February 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
(all amounts in thousands except per share data)
<S> <C> <C> <C> <C>
Net Income $41,897 $57,075 $23,171 $28,559
- --------------------------------------------------------------------------------
Weighted Average
Shares Outstanding 47,024 47,407 46,685 47,425
- --------------------------------------------------------------------------------
Effect of Dilutive Stock 91 107 75 92
Options
- --------------------------------------------------------------------------------
Weighted Average
Shares Outstanding
Assuming Dilution 47,115 47,514 46,760 47,517
- --------------------------------------------------------------------------------
Basic and Diluted
Net Income Per Share $ .89 $ 1.20 $ .50 $ .60
- --------------------------------------------------------------------------------
</TABLE>
11. The Company accounts for marketable securities in accordance
with the provisions of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS 115). The Company's investment in debt
securities qualify under the provisions of SFAS 115 as "held-to-
maturity." Such securities are recorded at amortized cost. At
February 27, 1999, the Company held $4.2 million in Federal
National Mortgage Association notes due February 25, 2002. These
notes are pledged as collateral under certain insurance contracts
which previously had been collateralized through the use of
letter of credit agreements.
12. a. In June 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income. This
statement, which establishes standards for reporting and
disclosure of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose
financial statements, is effective for fiscal years beginning
after December 15, 1997. The Company adopted this statement in
the first quarter of fiscal 1999. Its adoption did not have any
impact on the Company's condensed consolidated financial
statements.
b. In June 1997, the FASB issued SFAS No. 131, Disclosures
about Segments of an Enterprise and Related Information. This
statement, which establishes standards for the reporting of
information on operating segments and requires the reporting of
selected information about operating segments in interim
financial statements, is effective for fiscal years beginning
after December 15, 1997. However, this statement is not required
for interim statements in the initial year of adoption. The
Company does not expect adoption of this statement to result in
significant changes to its presentation of financial data.
c. In June 1998, the FASB issued SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. This
Page 8 of 74<PAGE>
statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities
in the condensed consolidated balance sheets and measure those
instruments at fair value. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999.
The Company has not yet assessed what the impact of SFAS No. 133
will be on the Company's future earnings or financial position.
d. In March 1998, the AICPA issued Statement of Position
("SOP") 98-1, Accounting for the Costs of Computer Software
Developed for or Obtained for Internal-Use. The SOP is effective
for the Company in fiscal 2000. The SOP will require the
capitalization of certain costs incurred after the date of
adoption in connection with developing or obtaining software for
internal use. The Company has not yet assessed what the impact
of the SOP will be on the Company's future earnings or financial
position.
13. On September 8, 1997, the Board of Directors declared a six-
for-five split of the Company's common stock effective October
16, 1997, to stockholders of record on October 1, 1997. This
stock split was effected in the form of a 20% stock dividend by
the distribution of one additional share for every five shares of
stock already issued. The par value of the Common Stock remained
at $1.00 per share. As a result, $8.3 million, representing the
total par value of the new shares issued, were transferred from
the capital in excess of par value account to common stock. The
prior year's weighted average shares outstanding and net income
per share amounts have been restated to reflect the six for five
stock split.
Page 9 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Results of
Operations.
Results of Operations
- ---------------------
The following table sets forth certain items in the condensed
consolidated statements of operations as a percentage of net
sales for the nine and three month periods ended February 27,
1999 and February 28, 1998.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------
Nine Months Ended Three Months Ended
----------------- ------------------
February 27, February 28, February 27, February 28,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 64.8 63.8 67.0 65.8
Selling & adminis-
trative expenses 29.6 28.7 25.7 25.2
Depreciation &
amortization 1.7 1.6 1.5 1.4
Interest expense .3 .4 .3 .3
----- ----- ----- -----
96.4 94.5 94.5 92.7
----- ----- ----- -----
Other income .8 .9 .7 .9
----- ----- ----- -----
Income before income
taxes 4.4 6.4 6.2 8.2
----- ----- ----- -----
Provision for income
taxes 1.7 2.5 2.2 3.2
----- ----- ----- -----
Net Income 2.7% 3.9% 4.0% 5.0%
===== ===== ===== =====
</TABLE>
Page 10 of 74<PAGE>
Net sales increased $48.7 million (3.3%) for the nine month
period ended February 27, 1999 compared with the similar period
of a year ago. Comparative stores sales increased 1.4% for the
period. Sales from stores operating in the current year, but not
open during the comparative period last year, contributed $52.4
million to this year's sales. Stores which were in operation a
year ago, but which were closed prior to February 27, 1999,
contributed $25.4 million to last year's net sales. Sales from
leased departments, included in the nine month sales figure,
amounted to $35.0 million compared with $31.8 million for the
similar period of a year ago.
Net sales increased $14.5 million (2.5%) for the three month
period ended February 27, 1999, compared with the similar period
a year ago. Comparative stores sales increased 0.9%. The
Company believes that milder than usual weather directly affected
the sale of outerwear and comparative sales. During the third
fiscal quarter, comparative store sales of coats decreased
approximately 13%. Comparative store sales of non-coat
departments increased 7.8% in the third quarter of fiscal 1999.
Sales from stores operating during the current year's third
quarter, but not open in the comparative period a year ago,
amounted to $18.8 million. Stores closed prior to this year's
third quarter contributed $9.4 million to last year's sales.
Sales from leased departments, included in the three month net
sales figure, were $13.5 million, compared with $12.5 million for
the similar period of a year ago.
Other income (consisting of investment income, rental income from
leased departments and miscellaneous items) was $12.3 million for
the nine months ended February 27, 1999 and $13.7 million for the
corresponding period of fiscal 1998. Investment income decreases
of $2.4 million, resulting from a decrease in investable funds,
and a decrease in interest rates, during the comparative periods,
was offset in part by increases in other miscellaneous income
items of approximately $0.9 million. For the three month periods
ended February 27, 1999 and February 28, 1998, other income
amounted to $4.4 million and $5.2 million, respectively. For the
comparative third quarters of fiscal 1999 and fiscal 1998,
investment income decreased $1.3 million while other
miscellaneous income items increased approximately $0.5 million.
Cost of sales increased by $46.4 million (4.9%) for the nine
month period ended February 27, 1999 compared with the similar
period of a year ago. For the three months ended February 27,
1999, compared with the three months ended February 28, 1998,
cost of sales increased from $376.9 million to $393.4 million.
Page 11 of 74<PAGE>
The dollar change in cost of sales primarily reflects the dollar
change in sales for the comparative periods and an increase in
cost of sales as a percentage of sales. As a percentage of net
sales, cost of sales increased to 64.8% from 63.8% for the
comparative nine month period and increased to 67.0% from 65.8%
for the comparative three month period. These percentage
increases are primarily the result of increases in markdowns
taken during the current nine and three month periods compared
with the similar periods of a year ago.
Selling and administrative expenses were $453.1 million and
$151.1 million for the nine and three months ended February 27,
1999, respectively, compared with $425.9 million and $144.3
million for the comparative periods of a year ago. As a
percentage of net sales, selling and administrative expenses were
29.6% and 25.7% for the nine and three months ended February 27,
1999, respectively. For the comparative nine and three month
periods of fiscal 1998, selling and administrative expenses were
28.7% and 25.2% of sales, respectively. The percentage and
dollar increases are primarily the result of increases in payroll
expenditures relating to new store openings, new shoe
departments, annual pay increases, and increased staffing levels
at the home office. In addition, advertising costs increased
approximately $0.9 million (10%) during the current year's third
quarter compared with the third quarter of a year ago, as the
Company concentrated a greater portion of its marketing in prime
time television spots.
Interest expense decreased $0.4 million for the nine months ended
February 27, 1999 compared with the nine months ended February
28, 1998. For the three months ended February 27, 1999, interest
expense was $1.7 million, a decrease of $0.1 million compared
with the three months ended February 28, 1998. The nine and
three month decreases in interest expense are the result of the
Company's scheduled reductions of long term debt.
The provision for income taxes decreased to $25.6 million for the
nine months ended February 27, 1999 from $37.7 million for the
similar period of a year ago. For the three months ended
February 27, 1999, the provision for income taxes decreased to
$13.2 million from $18.1 million for the comparative quarter of
last fiscal year. The effective tax rates for the nine and three
months ended February 27, 1999 were 37.9% and 36.3%, respectively,
compared with 39.8% and 38.8% for the nine and three months ended
February 28, 1998. The decrease in the nine and three month
rates is the result of expected decreases in the Company's
effective state income tax rate and the effect of tax credits on
Page 12 of 74<PAGE>
a lower taxable income.
Net income decreased $15.2 million to $41.9 million for the nine
months ended February 27, 1999, from $57.1 million for the
comparative period of fiscal 1998. Income per share was $0.89
per share for the current year's nine month period compared with
$1.20 per share for the similar period of a year ago. Net income
was $23.2 million for the three month period ended February 27,
1999 compared with $28.6 million for the three months ended
February 28, 1998. Net income per share decreased to $0.50 per
share for the three months ended February 27, 1999 from $0.60 per
share for the similar period of a year ago.
The Company's business is seasonal, with its highest sales
occurring in the period from September through January of each
year. For the past five fiscal years, approximately 57% of the
Company's net sales have occurred during the period from
September through January. Weather, however, continues to be an
important contributing factor to the sale of clothing in the
fall, winter and spring seasons. Generally, the Company's sales
are higher if the weather is cold during the fall and warm during
the early spring.
Year 2000
- ---------
The inability of computers, software, and any equipment utilizing
microprocessors or embedded systems to properly recognize and
process date information prior to, during and after January 1,
2000 is commonly referred to as the Year 2000 ("Y2K") compliance
problem.
The Company continues assessment of how Y2K will impact
operations. Considerable progress has been achieved in the areas
of identifying, remediating, testing, and implementing Y2K
products which are critical to the business computing systems
infrastructure. An inventory of all in-house software has been
completed, and such software is being remediated, where
applicable, for compliance. A survey of third party software and
equipment has been conducted in order to determine critical
business systems requiring Y2K compliance verification. Hardware
systems are actively being examined and appropriate paths charted
to ensure complete Y2K compatibility. Critical vendors with
which the Company conducts business have been identified and are
being contacted to assure their goods and/or services are
compliant with Company Y2K standards. The goal for completing
fiscal year 2000 compliance for all business mission-critical
computing system environments is May 29, 1999, followed by
Page 13 of 74<PAGE>
calendar year 2000 compliance of business mission-critical
computing system environments by September 1, 1999.
All costs associated with the Y2K project to date have been
expensed as incurred. The Company's total estimated cost of the
Y2K compliance program is approximately $2 million to $3 million,
of which approximately $0.2 million was incurred as of May 30,
1998 and $0.8 million in the first nine months of fiscal 1999.
The remaining expenditures are expected to occur primarily in the
remainder of fiscal 1999 and the first six months of fiscal 2000.
A significant portion of these costs are not likely to be
incremental costs to the Company, but rather will represent the
redeployment of existing information technology resources. Based
upon current benchmarks, the Company believes that it has the
necessary resources in-house to complete all required Y2K
remediation. In the event that internal resources are
insufficient to complete the project in a timely manner, out-
sourcing the Y2K project, either in part or whole, to a Y2K
Service Provider may be necessary.
The Company will not know with absolute certainty how the
transition from 1999 to 2000 will affect its operations until all
inventory and analysis phases have been completed. Moreover,
there is no guarantee that computing systems and associated
applications of other companies with which the Company conducts
business will be converted on a timely basis or that a failure by
those companies to address their Y2K compliance would not have an
adverse material impact on the Company. Disruption of business
functions due to events beyond the Company's reasonable control,
such as power grid or telecommunications failures and disruption
of product supply and distribution channels, may result in
temporary interruption of operations localized within the region
of failure.
Contingency plans are in progress to address the aforementioned
scenarios, as well as those events associated with minor
disruptions within the Company business cycle.
Liquidity and Capital Resources
- -------------------------------
The Company estimates spending approximately $60 million in
capital expenditures during fiscal 1999 including $19 million for
new store openings, $23 million for store relocations and
expansions, $4 million for upgrades and expansion of warehouse
Page 14 of 74<PAGE>
facilities, $5 million for purchases of an existing store's land and
buildings, and $9 million for computer and other equipment
expenditures. During the first nine months of fiscal 1999
capital expenditures amounted to approximately $39.1 million.
The Company repurchased 844,700 shares of its stock costing
approximately $13.2 million during the first nine months of the
current fiscal year. These purchases are reflected as treasury
stock in the equity section of the balance sheet. As of February
27, 1999, the Company had authorization to purchase an additional
$9.9 million of its stock. Subsequent to February 27, 1999, the
Company repurchased an additional 105,500 shares costing
approximately $1.2 million.
Working capital was $367.8 million at February 27, 1999 compared
with $368.5 million at May 30, 1998. Net cash provided by
operating activities was $50.4 million for the nine months ended
February 27, 1999. The primary use of cash during the current
nine month period was for the purchase of additional inventory,
acquisition of property and equipment, and the purchasing of
treasury stock. Inventory levels are approximately 5% above
inventory levels maintained at last year end and 6.7% over the
inventory levels of a year ago. Inventory increases resulted
primarily from the stocking of new stores and purchases for the
Company's new shoe departments.
On September 10, 1998, the Board of Directors of the Company
declared the Company's annual cash dividend in the amount of two
cents ($0.02) per share. The cash dividend was paid on October
26, 1998, to stockholders of record on September 30, 1998. The
paid dividend amounted to $0.9 million.
The Company's long-term borrowings at February 27, 1999 include
$51.8 million of long term subordinated notes issued by the
Company to institutional investors in June 1990 (the "Notes") and
an industrial development bond of $8.9 million issued by the New
Jersey Economic Development Authority (the "Refunding Bonds").
The Notes mature on June 27, 2005 and bear interest at the rate
of 10.6% per annum. The Notes have an average remaining maturity
of 3.3 years and are subject to mandatory payment in installments
of $7.4 million, each without premium, on June 27 of each year.
The Notes are subordinated to senior debt, including, among
others, bank debt and indebtedness for borrowed money. During
the current year's first fiscal quarter, the Company repaid $7.4
million of the Notes. The Company has no current plan to
repurchase or repay any additional amounts earlier than scheduled
Page 15 of 74<PAGE>
due to prohibitive prepayment penalties, but may consider doing
so in the future should conditions favorable to the Company
present themselves.
The Refunding Bonds consist of serial and term bonds. The serial
bonds aggregate $3.6 million and mature in series annually on
September 1, beginning in 1996 and continuing to and including
2003. The term bonds consist of two portions, $1.4 million
maturing on September 1, 2005 and $5.0 million maturing on
September 1, 2010.
The serial bonds bear interest ranging from 3.75% to 5.4% per
annum, and the term bonds bear interest at the rates of 5.60% per
annum for the portion maturing on September 1, 2005 and 6.125%
per annum for the portion maturing on September 1, 2010. The
average interest rate and average maturity of the Refunding Bonds
are 5.7% and 7.0 years, respectively. During the current year's
first fiscal quarter, the Company expended approximately $0.4
million for the repayment of the Refunding Bonds.
The Company has in place a committed line of credit agreement in
the amount of $50.0 million and $50.0 million in uncommitted
lines of credit. The Company had no borrowings under these
credit lines during the first nine months of fiscal 1999. The
Company had letter of credit commitments outstanding against
these lines of credit of $19.8 million as of the end of the third
quarter of fiscal 1999 and $33.8 million at May 30, 1998.
The Company believes that its current capital expenditures and
operating requirements can be satisfied from internally generated
funds, from short term borrowings under its revolving credit and
term loan agreement as well as from uncommitted lines of credit.
Furthermore, to the extent that the Company decides to purchase
additional store locations, it may be necessary to finance such
acquisitions with additional long term borrowings.
On or about September 23, 1994, three separate putative class
actions were filed against the Company. These three actions were
consolidated and an amended complaint was served on January 17,
1995. On March 3, 1995, the Company served a motion to dismiss,
and a hearing on the motion was held on July 20, 1995. On
February 20, 1996, the District Court dismissed the plaintiffs'
amended complaint in its entirety. In March, 1996, the
plaintiffs filed an appeal from the District Court's decision,
and in December, 1996, the U.S. Court of Appeals for the Third
Circuit heard oral argument on the appeal. In June, 1997, the
U.S. Court of Appeals for the Third Circuit affirmed the District
Page 16 of 74<PAGE>
Court's dismissal of the class action suit but held that
plaintiffs should be granted leave to attempt to replead two of
the six claims that were dismissed. After remand to the District
Court, the plaintiffs filed a further amended complaint in an
effort to cure the legal deficiencies of the two claims in
question. Among other changes, the amended complaint dropped all
claims against Andrew Milstein, Stephen Milstein and Mark Nesci.
On July 1, 1998, the Company filed a further motion to dismiss on
the grounds that the amended complaint failed to cure such
deficiencies. By order entered on February 25, 1999, the District
Court granted the Company's motion in its entirety and thereby
dismissed the amended complaint without leave to replead. (See
Part II - Other Information, Item 1 - Legal Proceedings.)
Safe Harbor Statement
- ---------------------
Statements made in this report that are forward-looking (within
the meaning of the Private Securities Litigation Reform Act of
1995) are not historical facts and involve a number of risks and
uncertainties. Such statements include but are not limited to,
proposed store openings and closings, proposed capital
expenditures, projected financing requirements, proposed
developmental projects, projected sales and earnings, the
Company's ability to maintain selling margins, and the Company's
anticipated ability to resolve Year 2000 computer problems, if
any. Among the factors that could cause actual results to differ
materially are the following: general economic conditions;
consumer demand; consumer preferences; weather patterns;
competitive factors, including pricing and promotional activities
of major competitors; the availability of desirable store
locations on suitable terms; the availability, selection and
purchasing of attractive merchandise on favorable terms; import
risks; the Company's ability to control costs and expenses;
unforeseen computer related problems; any unforeseen material
loss or casualty; the effect of inflation; and other factors that
may be described in the Company's filings with the Securities and
Exchange Commission. The Company does not undertake to publicly
update or revise its forward-looking statements even if
experience or future changes make it clear that any projected
results expressed or implied will not be realized.
Page 17 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
In late September 1994, three putative class action
lawsuits, P. Gregory Buchanan v. Monroe G. Milstein, et al., No.
94-CV-4663, Jacob Turner v. Monroe G. Milstein, et al., No.
94-CV-4737, and Ronald Abramoff v. Monroe G. Milstein, et al.,
No. 94-CV-4751 (collectively, the "Class Actions"), were filed
against the Company, Monroe G. Milstein, Stephen E. Milstein and
Robert L. LaPenta, Jr. in the United States District Court for
the District of New Jersey. By Order entered November 15, 1994,
the Court consolidated the Class Actions under the caption In re
Burlington Coat Factory Securities Litigation. On January 17,
1995, plaintiffs filed their Consolidated Amended and
Supplemental Class Action Complaint (the "Amended Complaint"),
naming as defendants, in addition to those originally named in
September 1994, Andrew R. Milstein and Mark A. Nesci. The
Amended Complaint sought unspecified damages in connection with
alleged violations of Sections 10(b) (and Rule 10b-5 promulgated
thereunder) and 20(a) of the Securities Exchange Act of 1934, as
amended. The Amended Complaint alleged material misstatements
and omissions by the Company and certain of its officers and
directors that plaintiffs alleged caused the Company's common
stock to be artificially inflated during the proposed Class
Period, which was defined in the Amended Complaint as the period
from October 4, 1993 through September 23, 1994. On March 3,
1995, the Company and the individual defendants served a motion
to dismiss plaintiffs' Amended Complaint. On February 20, 1996,
the District Court granted the Company's motion to dismiss the
plaintiffs' Amended Complaint in its entirety. On June 10, 1997,
following plaintiff's appeal of the District Court's decision,
the United States Court of Appeals for the Third Circuit Court
rendered a unanimous decision affirming the District Court's
dismissal of the action but ruled that the District Court should
allow the plaintiffs to attempt to replead two of the six claims.
After remand to the District Court, the plaintiffs filed a
further amended complaint in an effort to cure the legal
deficiencies of the two claims in question. Among other changes,
the amended complaint dropped all claims against Andrew Milstein,
Stephen Milstein and Mark Nesci. On July 1, 1998, the Company
filed a further motion to dismiss on the grounds that the amended
complaint failed to cure such deficiencies. By Order entered on
February 25, 1999, the District Court granted the Company's
Page 18 of 74<PAGE>
motion in its entirety and thereby dismissed the amended
complaint without leave to replead.
Item 6. Exhibits and Reports on Form 8-K.
Page No.
--------
a. Exhibits
10.6 Burlington Coat Factory Warehouse 21
Corporation 401(k) Profit Sharing
Plan as Amended and Restated
Effective as of January 1, 1999.
27. Financial Data Schedule 74
b. The Company filed no report on Form 8-K
during the period ended February 27, 1999.
Page 19 of 74<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
/s/ Monroe G. Milstein
-----------------------------------
Monroe G. Milstein
President & Chief Executive Officer
/s/ Robert L. LaPenta, Jr.
-----------------------------------
Robert L. LaPenta, Jr.
Corporate Controller & Chief Accounting
Officer
Date: April 9, 1999
Page 20 of 74<PAGE>
Exhibit 10.6
Page 21 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
401(k) PROFIT SHARING PLAN
As Amended and Restated Effective as of January 1, 1999 (with
certain other effective dates as noted herein)
January 1999
Page 22 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
401(k) PROFIT SHARING PLAN
TABLE OF CONTENTS
-----------------
Page
----
Definitions . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE I Participation . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II Participant Deferral Contributions . . . . . . . . . 10
ARTICLE III Employer Matching Contributions . . . . . . . . . . . 13
ARTICLE IV Profit Sharing Contributions . . . . . . . . . . . . 17
ARTICLE V Rollover Contributions; Direct Transfers . . . . . . 17
ARTICLE VI Contribution Limitations . . . . . . . . . . . . . . 21
ARTICLE VII Investment of Funds . . . . . . . . . . . . . . . . . 23
ARTICLE VIII Vesting of Interest . . . . . . . . . . . . . . . . . 30
ARTICLE IX Payments from Accounts . . . . . . . . . . . . . . . 33
ARTICLE X Loans . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE XI Administration . . . . . . . . . . . . . . . . . . . 42
ARTICLE XII Trustee . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XIII Termination and Amendment . . . . . . . . . . . . . . 44
ARTICLE XIV Miscellaneous . . . . . . . . . . . . . . . . . . . . 45
ARTICLE XV Top Heavy Provisions . . . . . . . . . . . . . . . . 46
APPENDIX A
Page 23 of 74<PAGE>
BURLINGTON COAT FACTORY WAREHOUSE CORPORATION
401(k) PROFIT SHARING PLAN
As Amended and Restated Effective as of January 1, 1999
(with certain other effective dates as noted herein)
The Burlington Coat Factory Warehouse Corporation
Employees' Profit Sharing Plan was originally established by the
Board of Directors of Burlington Coat Factory Warehouse
Corporation, effective November 1, 1983, for the exclusive
benefit of eligible employees of the Company and their
beneficiaries. The Plan, as renamed, was previously amended and
restated, (i) effective as of July 1, 1989 (with certain later
effective dates), in order to comply with the provisions of the
Tax Reform Act of 1986 as well as certain other subsequent
legislative and regulatory changes, (ii) effective as of
September 1, 1995, to incorporate a cash or deferred arrangement
qualifying under section 401(k) of the Code, and (iii) effective
as of June 29, 1997, (A) to implement certain changes required by
the Small Business Job Protection Act of 1996, (B) to change the
Plan Year to the calendar year, commencing January 1, 1998, (C)
to make certain minor changes to conform to current
administrative practice, and (D) to add, effective at such time
as determined in the discretion of the Committee, the Stock Fund
as an additional Investment Fund available to Participants. The
purpose of this amendment and restatement of the Plan, effective
as of January 1, 1999 (with certain other effective dates as
noted herein) is (i) to increase the amount which may be cashed
out without a Participant's consent to $5,000, effective as of
January 1, 1998, (ii) to provide for a 90-day eligibility
requirement for eligibility to make Salary Deferrals, effective
as of January 1, 1999, (iii) to provide that the amount, if any,
of the Employer matching contribution for any Plan Year is made
Page 24 of 74<PAGE>
at the sole discretion of the Company, effective as of January 1,
1999, (iv) to provide that forfeitures of Participants' Company
Accounts occurring on and after January 1, 1999 will be applied
towards future Employer matching contributions, (v) to make
certain minor changes to conform to current administrative
practice and (vi) to implement, as of various effective dates,
certain additional changes required by the Uniformed Services
Employment and Reemployment Rights Act of 1994, the Small
Business Job Protection Act of 1996, the Taxpayer Relief Act of
1997 and the Internal Revenue Service Restructuring and Reform
Act of 1998.
Since the statutory effective dates with respect to the
Plan of certain changes required by the Small Business Job
Protection Act of 1996 and the Taxpayer Relief Act of 1997
precede the Effective Date of this amendment and restatement of
the Plan, it is the intent of the Committee that certain
provisions of the Plan be retroactively applied as of dates
preceding the Effective Date. Accordingly, the following
sections of this amendment and restatement of the Plan are
retroactively amended as follows:
(a) Sections 2.4, 3.2, 3.3 and 9.11 are effective
as of January 1, 1997;
(b) the provisions of Sections 9.5 and 9.7
concerning the cash-out of a Participant's
benefit without the consent of the Participant
are effective as of January 1, 1998.
Except as otherwise expressly provided, the provisions of
the Plan, as set forth in this document and as may be amended
from time to time, establish the rights and obligations with
respect to Participants on and after the Effective Date. Rights
(2)
Page 25 of 74<PAGE>
and obligations under the Plan with respect to any Employee who
terminated employment with the Employer for any reason prior to
the Effective Date shall be determined in accordance with the
provisions of the Plan as in effect on the date of such
termination.
Definitions:
- -----------
The following words and phrases shall have the meanings
provided below, except as otherwise required by the context. As
used in the Plan, the masculine pronoun shall be deemed to
include the feminine, and the singular number, the plural, unless
a different meaning is clearly indicated by the context.
"Accounts" means the Profit Sharing Account, Company
Account, Deferral Account, Rollover Account, Transfer
Account and Prior Plan Account, as applicable, maintained
for a Participant or inactive Participant (as defined in
Section 1.4).
"Affiliate" means the Company and any corporation which
is a member of a controlled group of corporations (as
defined in Code section 414(b)) which includes the Company,
or any trade or business (whether or not incorporated) which
is under common control (within the meaning of Code section
414(c)) with the Company.
"Allocation Date" means the date as soon as practicable
after each Valuation Date on which income, gains and profits are
credited to, and losses and expenses are debited from, a
Participant's Prior Plan Account.
"Board of Directors" means the Board of Directors of
the Company.
"Break in Service" means a Plan Year during which a
Participant fails to complete at least 501 Hours of Service. For
purposes of determining whether a Break in Service has occurred,
a Participant who is absent from employment because of a Leave of
Absence, pregnancy, the birth of the Participant's child, the
placement of a child with the Participant for adoption, or the
need to care for such child during the period immediately
following such birth or placement shall be given credit for each
(3)
Page 26 of 74<PAGE>
Hour of Service which otherwise would normally have been credited
to such Participant but for such absence. If the Committee is
unable to determine the number of such hours, eight Hours of
Service shall be credited per day of absence. No more than 501
Hours of Service shall be credited to a Participant under this
paragraph because of such Leave of Absence, pregnancy or
placement. Hours of Service shall not be credited to a
Participant under this paragraph unless such Participant
furnishes to the Committee such timely information as the
Committee may require to establish that the absence from
employment is for reasons described above and to establish the
number of days for which there was such an absence. Hours of
Service credited under this paragraph shall be credited only for
the Plan Year in which the absence begins, if the Participant
would be prevented from incurring a Break in Service in such Plan
Year solely because the period of absence is treated as Hours of
Service or, in any other case, in the immediately following Plan
Year.
"Code" means the Internal Revenue Code of 1986, as may
be amended from time to time, and the regulations and
rulings promulgated thereunder.
"Committee" means the committee appointed by the Board
of Directors pursuant to Section 11.1.
"Company" means Burlington Coat Factory Warehouse
Corporation, or any successor entity.
"Company Account" means the separate account maintained
for each Participant to which Employer matching
contributions and related earnings are credited under
ARTICLE III.
"Compensation" means the total annual wages and salary
(not in excess of $160,000, as may be adjusted by the
Secretary of the Treasury from time to time) of an Employee
from the Employer, but excluding other contributions to this
Plan or contributions to other employee benefit plans of the
Employer.
"Deferral Account" means the separate account
maintained for each Participant to which a Participant's
deferral contributions and related earnings are credited
under ARTICLE II.
"Effective Date" means January 1, 1999, the effective
(4)
Page 27 of 74<PAGE>
date of this amendment and restatement of the Plan.
"Eligible Employee" means each Employee who meets the
eligibility requirements for Plan participation under
ARTICLE I. Notwithstanding the foregoing, for purposes of
Sections 2.4 and 2.5, an Eligible Employee includes an
Employee whose eligibility to make contributions to the Plan
has been suspended because of a hardship withdrawal pursuant
to Section 9.9.
"Employee" means an individual in the regular
employment of the Employer, but excluding a non-resident
alien with no U.S. - source income, and an employee covered
by a collective bargaining unit whose retirement benefits
were the subject of good faith bargaining between the
Employer and the employee's representative representing such
unit unless agreed upon between such representative and
Employer. The term "Employee" shall also not include any
person who performs services for an Employer under an
agreement or arrangement (which may be written, oral and/or
evidenced by the Employer's payroll practice) with the
individual or with another organization that provides the
services of the individual to the Employer, pursuant to
which the person is treated as an independent contractor or
is otherwise treated as an employee of an entity other than
the Employer, irrespective of whether the individual is
treated as an employee of the Employer under common law
employment principles or pursuant to the provisions of Code
section 414(m), 414(n) or 414(o).
"Employer" means the Company or a Participating
Affiliate.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as it may be amended from time to time, and the
regulations and rulings promulgated thereunder.
"Highly Compensated Employee" means (a) any Employee
who is a 5% owner (as defined in Code section 416(i)(1)) at
any time during the current year or the immediately
preceding year, or (b) during the year immediately preceding
the current year, had compensation (as defined in Code
section 414(q)(4)) from the Employer in excess of $80,000
(as adjusted pursuant to Code section 415(d), except that
the base period for determining any such adjustment shall be
the calendar quarter ending September 30, 1996).
(5)
Page 28 of 74<PAGE>
Company, the determination of Highly Compensated Employees
pursuant to (b) above, shall be limited to those Employees
who are in the "top paid group" (as defined in Code section
414(q)(3)) for such preceding year.
"Hour of Service" means each hour for which an Employee
either is directly or indirectly paid, or entitled to
payment by the Employer or an Affiliate. The number of
Hours of Service, and the period to which such hours shall
be credited, will be determined in accordance with
Department of Labor regulations section 2530.200b-2. An hour
for which an Employee is paid at an overtime or premium rate
shall be included only as a single hour. An Employee with
respect to whom the Employer or an Affiliate does not
maintain records reflecting the number of hours for which he
is paid shall be credited with 45 Hours of Service for each
week or part thereof he is paid or entitled to be paid by
the Employer or an Affiliate.
"Investment Funds" means each of the investment funds
as may be authorized by the Committee from time to time for
the investment of Plan assets.
"Key Employee" means an individual described in Code
section 416(i)(1).
"Leave of Absence" means a period of absence from
employment because (i) an Employer grants an Employee a
leave of absence for a specified period of time (not to
exceed two years) and such leaves are granted on a
nondiscriminatory basis; (ii) an Employee is on active
military duty; or (iii) the Employee is temporarily laid off
by an Employer. Notwithstanding anything contained in the
Plan to the contrary, effective as of December 12, 1994,
contributions, benefits and service credit with respect to
qualified military service will be provided in accordance
with Code section 414(u).
"Participant" means an Eligible Employee participating
in the Plan in accordance with ARTICLE I.
"Participating Affiliate" means an Affiliate to which
the Board of Directors has extended the Plan and which
adopts the Plan as a participating employer by action of its
board of directors or other governing body.
"Plan" means the Burlington Coat Factory Warehouse
(6)
Page 29 of 74<PAGE>
Corporation 401(k) Profit Sharing Plan, as set forth herein
(including any Appendices hereto), and as it may be amended
from time to time.
"Plan Year" means the calendar year.
"Prior Plan" means the Burlington Coat Factory
Warehouse Corporation Employees Profit Sharing Plan, as in
effect prior to September 1, 1995.
"Prior Plan Account" means the separate account for a
Participant in which the Participant's account balance under
the Prior Plan and related earnings are credited. The
Trustee may establish one or more subaccounts within a
Participant's Prior Plan Account to reflect the portion of
such Prior Plan Account which is invested in one or more of
the Investment Funds, in accordance with Section 7.3.
"Profit Sharing Account" means the separate account for
a Participant in which the Participant's profit sharing
contributions and related earnings are credited under
ARTICLE IV.
"Retirement" means the later of (i) a Participant's
termination of employment with the Employer on or after age
65 (other than on account of a transfer of employment to an
Affiliate) or (ii) the fifth anniversary of the date on
which he commenced participation in the Plan.
"Rollover Account" means the separate account
maintained for a Participant to which the Participant's
rollover contributions and related earnings are credited
under Section 5.1.
"Stock" means the Company's common stock, par value
$1.00 per share.
"Stock Fund" means the Investment Fund which is
invested in Stock.
"Tender Offer" means any offer to acquire the Stock
which is subject to either section 13(e) or 14(d) of the
Securities Exchange Act of 1934, as amended, and which under
the applicable rules and regulations is required to be the
subject of a filing with the Securities and Exchange
Commission on either Schedule 13E-4 or Schedule 14D-9.
(7)
Page 30 of 74<PAGE>
"Total Disability" means the incapacity of a
Participant, either mental or physical, resulting in his
inability to perform the usual duties of his employment with
his Employer, such incapacity to be deemed to exist when so
declared by the Committee in its judgment and discretion,
supported by the written opinion of at least one physician
approved by the Committee.
"Transfer Account" means the separate account
maintained for a Participant to which amounts transferred on
behalf of a Participant and related earnings are credited
under Section 5.2.
"Trust Agreement" means the agreement between the
Trustee and the Company pursuant to which the Trust Fund is
established and maintained, as provided in ARTICLE XII.
"Trustee" means the trustee under the Trust Agreement.
"Trust Fund" means the trust under the Plan established
pursuant to the Trust Agreement, as provided for in ARTICLE
XII.
"Valuation Date" means (i) in the case of the portion
of a Participant's Prior Plan Account which is not
Participant-directed pursuant to Section 7.5(b), the last
business day of each calendar month and (ii) in the case of
the portion of a Participant's Accounts which is
Participant-directed, each business day, and, in each case,
such other date as may be determined by the Committee in its
sole discretion.
"Year of Service" means a Plan Year during which a
Participant completes at least 1,000 Hours of Service;
provided, that (i) for purposes of determining an Employee's
eligibility to participate in the profit sharing feature of
the Plan, pursuant to ARTICLE I, a Year of Service shall
mean any twelve (12) consecutive month period, beginning on
or after the date of the Employee's employment with an
Affiliate, during which he completes at least 1,000 Hours of
Service; and (ii) for purposes of determining the vesting of
a Participant's interest, pursuant to ARTICLE VIII, (A) an
Employee who is credited with at least 1,000 Hours of
Service in both his first twelve (12) consecutive months of
employment and the Plan Year which begins during such twelve
(12) month period shall be credited with two (2) Years of
Service at the end of such Plan Year and (B) Years of
(8)
Page 31 of 74<PAGE>
Service completed by the Participant prior to his attainment
of age eighteen (18) shall be disregarded.
ARTICLE I
PARTICIPATION
-------------
1.1 Participation in the Plan shall be offered only to
Eligible Employees of the Employer. Each Employee shall become
an Eligible Employee (i) with respect to the salary deferral
feature of the Plan immediately following the attainment of age
21 and the earlier of (A) the completion of 90 days of continuous
employment (during which the Employee completes at least 250
Hours of Service) or (B) the completion of one Year of Service
and (ii) with respect to the profit sharing feature of the Plan
immediately following the attainment of age 21 and the completion
of one Year of Service. Once an Employee has become an Eligible
Employee, he will continue to be an Eligible Employee until he
ceases to be an Employee.
1.2 Each Eligible Employee on the Effective Date who
was a Participant in the Plan immediately prior to the Effective
Date shall continue as a Participant on the Effective Date. Each
other Eligible Employee shall become a Participant in the Plan
upon satisfaction of the requirements of Section 1.1; provided,
however, that an Eligible Employee must also satisfy the
requirements of Section 1.3 to become a Participant with respect
to the salary deferral feature of the Plan.
1.3 At the time an Employee becomes an Eligible
Employee, he will be provided with a written application for
participation in the salary deferral feature of the Plan, as
described in ARTICLE II, and an explanation of the Plan. Each
(9)
Page 32 of 74<PAGE>
Eligible Employee who files a salary deferral election with the
Committee shall become a Participant with respect to the salary
deferral feature of the Plan as soon as administratively feasible
following the date on which his properly completed application is
received by the Committee.
1.4 A Participant who (a) ceases to be an Employee or
(b) enters the military service of the United States, shall be an
inactive Participant. Any interest of such inactive Participant
in the Investment Funds shall be allowed to remain, subject to
ARTICLE IX.
ARTICLE II
PARTICIPANT DEFERRAL CONTRIBUTIONS
----------------------------------
2.1 Subject to Sections 2.4 and 2.5 and ARTICLE VI, a
Participant may elect to defer prospectively by payroll deduction
from 1% to 15% of his Compensation in 1/2% increments.
2.2 A Participant may change or suspend his deferral
contributions at any time, effective as of the next
administratively feasible payroll date (but in no event later
than one month after such Participant requests such a change or
suspension), by timely delivering the appropriate form to the
Committee.
2.3 The Employer shall contribute to the Plan, on
behalf of each Participant who elects pursuant to Section 2.1 to
defer a percentage of his Compensation, an amount in cash equal
to the amount deferred by the Participant. All such
contributions, together with any related earnings, shall be
credited to the Participant's Deferral Account.
(10)
Page 33 of 74<PAGE>
2.4 (a) If the actual deferral percentage (as defined
in paragraph (c) below) of Compensation paid during the Plan
Year, or within 2-1/2 months thereafter attributable to services
performed in such Plan Year, for Participants who are Highly
Compensated Employees is more than the amount permitted under the
deferral limitations set forth in paragraph (b) below, the
deferral contributions of such Highly Compensated Employees shall
be reduced by the amount of "excess contributions" (as determined
in accordance with Code section 401(k)(8)(B)). The reduction of
the deferral contributions of Highly Compensated Employees shall
be allocated among such Highly Compensated Employees in the order
of the highest dollar amounts of deferral contribution until such
deferral limitations are satisfied. The Employer shall attempt
to distribute to such Participants any such excess contributions,
and any related earnings, no later than 2-1/2 months following the
Plan Year in which such excess contributions are made. In
addition, if the Employer believes that contributions would be in
excess of the deferral limitations set forth in paragraph (b)
below, the Employer may in its sole discretion suspend, in whole
or part, deferral contributions to the Plan made on behalf of
Participants who are Highly Compensated Employees. In such case
the amounts which would ordinarily be deferred in a payroll
period shall be paid directly to such Participants.
(b) The actual deferral percentage for any Plan
Year of all Eligible Employees who are Highly Compensated
Employees shall not exceed, alternatively: (i) 125% of the prior
Plan Year's actual deferral percentage for all Eligible Employees
during such prior Plan Year who were not Highly Compensated
Employees; or (ii) 200% of the prior Plan Year's actual deferral
percentage for all Eligible Employees during such prior Plan Year
(11)
Page 34 of 74<PAGE>
who were not Highly Compensated Employees; provided, that solely
for purposes of clause (ii) above, the actual deferral percentage
for all Eligible Employees who are Highly Compensated Employees
does not exceed the prior Plan Year's actual deferral percentage
for all Eligible Employees during such prior Plan Year who were
not Highly Compensated Employees by more than two percentage
points, or such other amount that the Secretary of the Treasury
shall prescribe.
(c) For purposes of this Section 2.4, the actual
deferral percentage for a specified group of Eligible Employees
for the applicable Plan Year shall be the average of the ratios,
calculated separately for each Eligible Employee in such group,
of (i) the amount of contributions under all plans of the
Employer which are subject to Code section 401(k) (other than
plans which may not be permissively aggregated) to the Deferral
Account and Company Account (to the extent taken into account for
purposes of the actual deferral percentage test) made on behalf
of each Eligible Employee for such Plan Year to (ii) the Eligible
Employee's Compensation for such Plan Year. For purposes of
determining the actual deferral percentage test, deferral
contributions and Employer matching contributions must be made
before the last day of the 12-month period immediately following
the Plan Year to which contributions relate.
(d) If a reduction in the amount of deferral
contributions on behalf of a Participant is required because of
the application of paragraph (a) above, the reduction shall be
treated as taxable earnings to the Participant for the pay period
in which the reduction occurs, and the Employer shall withhold
any taxes required by law on such taxable earnings.
(12)
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(e) If a distribution of excess deferral
contributions (and related earnings) is required because of the
application of paragraph (a) above, the Employer shall withhold
any taxes required by law on such distribution.
2.5 Notwithstanding anything contained herein to the
contrary, the maximum amount of contributions credited to the
Deferral Account on behalf of a Participant in any calendar year
may not exceed $10,000 (as may be adjusted by the Secretary of
the Treasury to reflect increases in the cost of living), and any
such contributions made to the Deferral Account in excess of such
amount (as adjusted), plus any related earnings on such excess
amount, may be distributed to the Participant no later than April
15 following the close of the calendar year in which such excess
contributions are made.
ARTICLE III
EMPLOYER MATCHING CONTRIBUTIONS
-------------------------------
3.1 Subject to the provisions of Sections 3.2 and 3.3
and ARTICLE VI, each Employer shall contribute in cash to the
Plan for each Plan Year an amount equal to that percentage of
each Participant's deferral contributions, if any, made pursuant
to Section 2.1 on behalf of each Participant, as determined by
the Company in its sole discretion; provided, that nothing herein
shall obligate the Company to determine to make any matching
contribution for any Plan Year; and provided further, that the
Company may, in its discretion, contribute Stock, valued at its
fair market value, in lieu of cash for all or any part of its
contribution, if any, under this Section 3.1. Employer matching
contributions, if any, shall be credited as soon as practicable
after, and as of, the end of each Plan Year with respect to which
(13)
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such contribution is to be made to the Company Accounts of
Participants who are in the employ of an Employer on the last day
of such Plan Year. Notwithstanding the foregoing, the Company
may, in its sole discretion and on a nondiscriminatory basis,
contribute matching contributions to the Plan at such other times
during the Plan Year as it determines, and credit such
contributions to the Company Accounts of the Participants at such
time regardless of whether such Participants are in the employ of
an Employer on the last day of such Plan Year.
3.2 (a) If the contribution percentage (as defined in
paragraph (c) below) of Compensation for Participants who are
Highly Compensated Employees is more than the amount permitted
under the special limitations set forth in paragraph (b) below,
the Employer matching contributions of such Highly Compensated
Employees shall be reduced by the amount of "excess aggregate
contributions" (as determined in accordance with Code section
401(m)(6)(B)). The reduction of the Employer matching
contributions of Highly Compensated Employees shall be allocated
among such Highly Compensated Employees in the order of the
highest dollar amounts of Employer matching contributions
credited until such special limitations are satisfied. Any
excess Employer matching contributions made to the Trust Fund
(plus any related earnings) shall, to the extent possible, be
distributed to such Participants before the end of the Plan Year
following the Plan Year in which such excess Employer matching
contributions are made. In addition, if the Employer or the
Committee determines that Employer matching contributions would
be in excess of the special limitations set forth in paragraph
(b) below, the Employer may, in its sole discretion, suspend, in
whole or in part, deferral contributions to the Plan made on
(14)
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behalf of Participants who are Highly Compensated Employees and,
therefore, related Employer matching contributions with respect
to such Participants (in which case the deferral contributions
that would ordinarily be contributed to the Trust Fund on such
Participants' behalf in a payroll period shall be paid directly
to such Participants).
(b) The contribution percentage for any Plan Year
of all Eligible Employees who are Highly Compensated Employees
shall not exceed, alternatively: (i) 125% of the prior Plan
Year's contribution percentage for all Eligible Employees during
such prior Plan Year who were not Highly Compensated Employees,
or (ii) 200% of the prior Plan Year's contribution percentage for
all Eligible Employees during such prior Plan Year who were not
Highly Compensated Employees; provided, that solely for purposes
of clause (ii) above, the contribution percentage for all
Eligible Employees who are Highly Compensated Employees does not
exceed the prior Plan Year's contribution percentage for all
Eligible Employees during such prior Plan Year who were not
Highly Compensated Employees by more than two percentage points,
or such other amount that the Secretary of the Treasury shall
prescribe.
(c) For purposes of this Section 3.2, the
contribution percentage for a specified group of Eligible
Employees for the applicable Plan Year shall be the average of
the ratios, calculated separately for each Eligible Employee in
such group, of (i) the amount of Employer matching contributions
under all plans of the Employer which are subject to Code section
401(m) (other than plans which may not be permissively
aggregated) made on behalf of each Eligible Employee for such
(15)
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Plan Year (to the extent not taken into account for purposes of
the actual deferral percentage test) to (ii) the Eligible
Employee's Compensation for such Plan Year. For purposes of
determining the contribution percentage test, Employer matching
contributions will be considered made for a Plan Year if made
before the last day of the 12-month period immediately following
the Plan Year to which contributions relate.
(d) If a distribution of excess Employer matching
contributions (and related earnings) is required because of the
application of (a) above, the Employer shall withhold any taxes
required by law on such distribution.
(e) In the event an active Participant is
required to reduce his deferral contributions to the Plan as a
result of the application of the provisions of Section 2.4(a),
the Employer matching contribution under Section 3.1(a) made on
behalf of the Participant for the remainder of the Plan Year
shall be applied to the reduced amount of deferral contributions.
3.3 If both the actual deferral percentage and the
actual contribution percentage of Highly Compensated Employees
exceeds 1.25 multiplied by the actual deferral percentage and
contribution percentage of the non-Highly Compensated Employees,
multiple use will occur. In the event of multiple use, if one or
more Highly Compensated Employees participate in a plan(s)
subject to both the actual deferral percentage and contribution
percentage tests and the sum of the two percentages of those
Highly Compensated Employees subject to either or both tests
exceeds the "aggregate limit," then the average contribution
percentage of those Highly Compensated Employees who also
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participate in a salary deferral arrangement will be reduced
(beginning with the Highly Compensated Employee whose dollar
amount of contribution is the highest) so that the limit is not
exceeded. For the purposes of this Section, "aggregate limit"
shall mean the sum of (i) 125% of the greater of the actual
deferral percentage or the average contribution percentage for
non-Highly Compensated Employees for the Plan Year and (ii) the
lesser of 200% of, or two percentage points plus, the smaller of
such actual deferral percentage or average contribution
percentage.
ARTICLE IV
PROFIT SHARING CONTRIBUTIONS
----------------------------
4.1 Subject to ARTICLE VI, the Company shall
contribute to the Plan for each Plan Year such amount in cash as
shall be authorized by the Board of Directors in its sole
discretion.
4.2 The amount contributed for any Plan Year shall be
allocated proportionately among the Profit Sharing Accounts of
Eligible Employees who completed a Year of Service during, and
are employed on the last day of, such Plan Year. The Profit
Sharing Account of each Eligible Employee shall be credited with
a proportionate amount of the contribution for such Plan Year
equal to the proportion that his Compensation for such Plan Year
bears to the total Compensation of all those Eligible Employees
who are employed on the last day of the Year.
ARTICLE V
ROLLOVER CONTRIBUTIONS; DIRECT TRANSFERS
----------------------------------------
5.1 Subject to the provisions of the Plan and to rules
(17)
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of uniform application to be promulgated by the Committee, an
Eligible Employee, or Employee who is not yet an Eligible
Employee, may make a contribution to the Plan in cash which
qualifies as a "rollover amount," "rollover contribution," or
"eligible rollover distribution" under Code section 403(a)(4),
408(d)(3) or 402(f)(2)(A), respectively. An Employee who wishes
to make such a contribution shall timely file with the Committee
a written notice requesting approval for such contribution,
affirming that his contribution qualifies as a rollover amount,
rollover contribution or eligible rollover distribution.
Investment of such contribution, as between or among the
Investment Funds, as applicable, shall be as directed by the
Employee in accordance with the provisions of Sections 7.3 and
7.4. In addition to the written notice required under this
Section 5.1, the Committee may require documentation from the
Employee, or the applicable trustee, plan sponsor, custodian or
other appropriate person in the form of a statement from the plan
administrator of the plan from which the amount sought to be
rolled over was distributed that such plan has received a
favorable determination letter from the Internal Revenue Service,
as evidence of the contribution being qualified as a rollover
amount, rollover contribution or eligible rollover distribution,
and until such written notice and documentary evidence
satisfactory to the Committee have been so provided, the
Committee shall not approve such contribution to the Plan. The
Committee shall be fully protected in relying on such written and
documentary evidence presented by or on behalf of the Employee.
Contributions made by the Employee pursuant to this Section 5.1
shall be credited to the Employee's Rollover Account.
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5.2 Subject to the provisions of the Plan and to rules
of uniform application to be promulgated by the Committee, and in
addition to deferral contributions or rollover contributions to
the Plan in accordance with ARTICLE II and Section 5.1, an
Eligible Employee, or Employee who has not yet become an Eligible
Employee, may have transferred directly to the Plan on his behalf
his accrued benefit in another retirement plan qualified under
Code section 401(a) (provided such plan is not described in Code
section 401(a)(11)(B)). An Employee who wishes to have such an
amount transferred shall timely file with the Committee a written
notice requesting approval for such transfer, affirming that the
transfer is from a tax-qualified plan. Such transfer shall be
effected directly from the transferor plan without distribution
to the Employee, as soon as practicable after receipt of such
notice and approval by the Committee. Investment of such
transferred amount, as between or among the Investment Funds, as
applicable, shall be as directed by the Employee in accordance
with the provisions of Sections 7.3 and 7.4. In addition to the
written notice required under this Section 5.2, the Committee may
require such further documentation from the Employee, or the
applicable trustee, plan sponsor, custodian or other appropriate
person, as evidence of the transfer being from a plan qualified
under Code section 401(a), and until such written notice and
documentary evidence satisfactory to the Committee have been so
provided, the Committee shall not approve such transfer to the
Plan. The Committee shall be fully protected in relying on such
written and documentary evidence presented by or on behalf of the
Employee. Transfers made by the Employee pursuant to this
Section 5.2 shall be credited to the Employee's Transfer Account.
5.3 Upon the occurrence of an event of distribution as
(19)
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described in Section 9.1, and notwithstanding any other
provisions of the Plan to the contrary that would otherwise limit
a distributee's election under this Section 5.3, a distributee
may elect, at the time and in the manner prescribed by the
Company, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the
distributee in a direct rollover. For purposes of this Section
5.3, the following definitions apply:
"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 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 Code section 401(a)(9); any
hardship distribution described in Code section
401(k)(2)(B)(i)(IV); 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).
"Eligible retirement plan" is an individual
retirement account described in Code section
408(a), an individual retirement annuity
described in Code section 408(b), an annuity
plan described in Code section 403(a), or a
qualified trust described in Code section
401(a), 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.
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"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 Code section 414(p), are
distributees with regard to the interest of the
spouse or former spouse.
"Direct rollover" is a payment by the Plan to
the eligible retirement plan specified by the
distributee.
ARTICLE VI
CONTRIBUTION LIMITATIONS
------------------------
6.1 (a) Any provision of the Plan to the contrary
notwithstanding, no annual additions to a Participant's Accounts
will be made in any Plan Year in excess of the lesser of $30,000
(as adjusted from time to time by the Secretary of the Treasury)
or 25% of the Participant's "compensation" (within the meaning of
Code section 415(c)(3)).
(b) Any provision of the Plan to the contrary
notwithstanding, in the case of a Participant who is a
participant in a defined benefit plan of the Company, his maximum
annual additions shall not exceed the amount which will result in
a defined contribution plan fraction which when added to the
defined benefit plan fraction of such Participant will exceed 1.0
for any Plan Year. Except as may otherwise be required by law,
this Section 6.1(b) shall no longer apply after December 31,
1999.
(c) For purposes of applying this Section 6.1,
all defined benefit plans of the Company and any Affiliates (as
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determined in accordance with Code section 415(h)), and all
defined contribution plans of the Company and any Affiliates (as
determined in accordance with Code section 415(h)), including the
Plan, shall be combined or aggregated and the maximum benefit or
annual additions limitation shall be determined on the basis of a
Participant's annual additions and benefits under all such plans.
(d) For purposes of this Section 6.1, (i) annual
additions means, for each Plan Year, (A) a Participant's deferral
contributions; plus (B) such Participant's share of Employer
matching contributions; plus (C) such Participant's share of
Company profit sharing contributions (if any); plus (D) any
forfeitures allocated to such Participant's Accounts; (ii) a
defined contribution plan means a plan which provides for an
individual account for each participant and for benefits based
solely upon the amount contributed to the participant's account,
and any income, expenses, gains and losses, and any forfeitures
of accounts of other participants which may be allocated to such
participants' accounts; (iii) a defined benefit plan means a plan
which is not a defined contribution plan; provided however, in
the case of a defined benefit plan which provides a benefit
derived from employer contributions which is based partly on the
balance of the separate account of a participant, such plan shall
be treated as a defined contribution plan to the extent benefits
are based on the separate account of a participant and as a
defined benefit plan with respect to the remaining portion of the
benefits under the plan; (iv) the defined benefit plan fraction
for a participant shall be a fraction the numerator of which is
the lesser of (A) the product of 1.25 multiplied by the dollar
limitation in effect for the plan, or (B) the product of 1.4
multiplied by an amount equal to 100% of the participant's
(22)
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average compensation for his high three years projected annual
benefit under the plan, if such plan provided the maximum benefit
allowed by law; and (v) the defined contribution plan fraction
for a Participant shall be a fraction the numerator of which is
the sum of the annual additions to the Participant's accounts
under a defined contribution plan of the Company and Affiliates
(as determined in accordance with Code section 415(h)) and the
denominator of which is the sum of the lesser of the following
amounts for such Plan Year and for each prior Plan Year: (A) the
product of 1.25 multiplied by the dollar limitation in effect for
such Plan Year, or (B) the product of 1.4 multiplied by the 25%
of Participant's compensation (within the meaning of Code section
415(c)(3)).
(e) If necessary to limit the total annual
additions for a Participant for a Plan Year, the Participant's
deferral contributions shall be repaid to him out of his Deferral
Account to the extent necessary to reduce the annual additions
for each Plan Year so that they do not exceed the maximum
limitations pursuant to Section 6.1(a).
ARTICLE VII
INVESTMENT OF FUNDS
-------------------
7.1 The Employer, on a monthly basis or more
frequently, will pay over to the Trustee, or its agent,
contributions made to the Plan to be held in trust and invested
as provided herein and in the Trust Agreement.
7.2 The Trust Fund will be invested in the Investment
Funds.
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7.3 (a) Each Participant's Profit Sharing Account,
Company Account, Deferral Account, Rollover Account, Transfer
Account and the Participant-directed portion of his Prior Plan
Account, (collectively, the "Self-Directed Account") will be
invested in one or more of the Investment Funds. Each
Participant will designate the portion (expressed as a percentage
in multiples of 10%) of his Self-Directed Account to be invested
in each Investment Fund. Such designation, once made, may be
changed at any time. The Participant may also transfer the
amount equivalent to his interest, or any partial interest
(expressed as a percentage in multiples of 10%), in an Investment
Fund from such Investment Fund to another Investment Fund at any
time. Changes will be made by a Participant's direction in
writing to the Committee, or pursuant to a voice response system
approved by the Committee, and will be made effective as soon as
possible after receipt of such direction. In the event that (i)
a Participant fails to make a designation, or (ii) the Committee
does not receive a Participant's written notice or (iii) no
record exists within the voice response system utilized by the
Plan of a Participant's designation of Investment Funds, the
Trustee shall invest any amount it receives with respect to such
Participant in the "Stable Value Fund" and the Committee shall
take reasonable steps to elicit an Investment Fund designation
from the Participant.
(b) Notwithstanding Section 7.3(a), (i) no more
than 35% of a Participant's Self-Directed Account may be invested
in the Stock Fund and (ii) (A) any transfer of a Participant's
interest in any Investment Fund from such Investment Fund into
the Stock Fund and (B) any Participant-directed investment of any
contribution made under the Plan into the Stock Fund shall only
(24)
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be effected to the extent that such transfer or investment does
not result in the value of such Participant's Self-Directed
Account which is invested in the Stock Fund exceeding 35% of the
value of such Participant's Self-Directed Account. For purposes
of determining the limitation under Section 7.3(b)(ii), the value
of a Participant's Self-Directed Account as of the Valuation Date
immediately preceding the Valuation Date on which the transfer or
investment is to take place shall be used.
(c) Any transfer or investment requested by a
Participant pursuant to Section 7.3(a) that does not satisfy the
requirements of Section 7.3(b) shall be null and void to the extent
that the implementation of such transfer or investment would cause
the value of such Participant's Self-Directed Account invested in
the Stock Fund to exceed the 35% limitation described under Section
7.3(b).
(d) Purchases of Stock made pursuant to a
Participant's designation will be made on the open market or with
Stock held in Company's treasury ("Treasury Stock"), and the
Participant's Account will be credited with the number of whole and
fractional shares of Stock so purchased (net of any brokerage
commissions and fees). Sales of Stock from the Stock Fund will
be made on the open market. Purchases and sales of Stock on the
open market will be reflected at the Trustee's cost, net of any
brokerage commissions and fees, of such purchases and sales.
Purchases made with Treasury Stock will be reflected at the
closing sales price for Stock on the day preceding the day on
which (i) a Participant directs the Trustee to transfer amounts
from an Investment Fund to the Stock Fund on his behalf or (ii)
Participant deferral contributions under Article II, Employer
matching contributions under Article III or amounts contributed
(25)
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under Article IV are contributed to the Plan and invested in the
Stock Fund in accordance with a Participant's investment
designation made pursuant to Section 7.3(a) (or if no Stock is
traded on either such day, on the next day on which open market
trades in Stock occur).
7.4 Each Participant shall have an interest in each
Investment Fund in which he has elected to have invested all or
any part of his deferral contributions under Section 2.1, his
Employer matching contributions under Section 3.1, his profit
sharing contribution under Section 4.1, his rollover
contributions under Section 5.1, his transfer amounts under
Section 5.2, and the Participant-directed portion of his Prior
Plan Account pursuant to Section 7.5(b). Each such Participant's
interest at any time in the Investment Funds shall be equal to
the sum of such contributions and transfer amounts, adjusted from
time to time to reflect his proportionate share of the income and
losses realized by such Investment Funds and of the net
appreciation or depreciation in the value of such Investment
Funds. The Committee shall maintain accounts to reflect the
interest of each Participant in each Investment Fund including,
with respect to the Stock Fund, a record of the number of shares
of Stock allocated to the Participant's Accounts and the cost
basis of each such share of Stock. As of each Valuation Date,
the Committee shall ascertain from the Trustee the value of each
Investment Fund and shall on such basis determine the value of
the interests of Participants. Any cash dividends and cash
proceeds from any other distributions received with respect to a
Participant's interest in the Stock Fund will be reinvested in
additional shares of Stock. The determinations of the Trustee
and the Committee shall be conclusive. Each Participant will be
(26)
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furnished a statement of his Accounts at least quarterly.
7.5 (a) Each Participant's Prior Plan Account, if
any, will be invested by the Trustee in its sole discretion and
in accordance with the terms of the Trust Agreement. Each such
Participant's Prior Plan Account shall be credited on each
Allocation Date with a proportionate share of all income, gains
or profits earned from the investment of the portion of the Trust
Fund containing the Participant's Prior Plan Account. Each such
Participant's Prior Plan Account shall be debited on each
Allocation Date with a proportionate share of any losses
sustained by the Trustee from the investment of the Trust Fund
containing the Participant's Prior Plan Account on other
transactions, and of any expense incurred by the Trustee in the
administration of the Prior Plan Account under the Trust Fund.
(b) The Trustee may, in its discretion and on a
uniform and nondiscriminatory basis, designate that the
investment of any portion of the assets in a Participant's Prior
Plan Account shall be governed by the Participant's designation
of Investment Funds pursuant to Section 7.3.
7.6 (a) Before each annual and special meeting of the
shareholders of the Company, and at such other times when
shareholder action is required, the Trustee shall send to each
Participant and beneficiary having an investment in the Stock
Fund the proxy or consent solicitation materials that are sent to
the Company's shareholders of record. Each such Participant
shall have the right to instruct the Trustee confidentially
as to the method of voting the shares of Stock allocated to his Account
as of the record date for determining the shares of Stock that
(27)
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are entitled to vote at the meeting of shareholders or that are
entitled to give or withhold consent to corporate action. Full
and fractional shares of Stock held in the Stock Fund and
allocated to a Participant's Account shall be voted by the
Trustee in accordance with the instructions received from such
Participant. The Trustee shall not vote shares of Stock for
which voting instructions are not received from Participants.
Management and others may solicit such Participants' voting
rights under the same proxy rules applicable to all shareholders.
The Company shall ensure that the requisite voting forms,
together with all information distributed to shareholders of the
Company in general regarding the exercise of voting rights, are
furnished to the Trustee and by the Trustee to Participants
within a reasonable time before such voting rights are to be
exercised with respect to Stock held in the Trust Fund.
(b) In the event that a Tender Offer is made
generally to shareholders of the Company to purchase Stock, the
following procedures shall apply and the following actions shall
be taken with respect to the Stock held in the Trust Fund:
(i) The Trustee or its authorized delegate
shall, in a timely manner, give to each
Participant having, at that time, an investment in
the Stock Fund notice of the terms and conditions
of such Tender Offer.
(ii) Each Participant shall instruct the
Trustee, in accordance with procedures established
by the Committee or Trustee and designed to
protect the confidentiality of the Participants'
exercise of the Tender Offer rights under this
Section 7.6(b) in accordance with Department of
Labor regulation section 2550.404(c)-1, to accept
or decline such Tender Offer with respect to all
or any portion of the shares of Stock allocated to
(28)
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the Participant's Account.
(iii) The response of the Trustee to a
Tender Offer, as to whether the Tender Offer is
accepted or rejected, shall be made in accordance
with instructions of the Participants given to the
Trustee on forms provided for that purpose by the
Trustee. The Trustee shall reject the Tender
Offer with respect to shares for which the Trustee
does not receive instructions from a Participant.
(iv) In the event the Trustee is instructed
to tender shares of Stock pursuant to the terms of
a Tender Offer but less than all of the shares of
Stock for which the Trustee receives instructions
pursuant to Section 7.6(b)(ii) are accepted for
tender pursuant to such Tender Offer, the Trustee
shall tender the percentage of shares of Stock
from each Participant's Account for which the
Trustee received instructions to tender pursuant
to Section 7.6(b)(ii) (rounded to the nearest
whole share) which bears the same ratio as the
total shares accepted for tender bears to the
total number of shares for which the Trustee
originally received instructions to tender
pursuant to Section 7.6(b)(ii). The proceeds of
any sale pursuant to this Section 7.6(b)(iv) shall
be allocated to the Accounts from which the shares
were sold. If any Tender Offer is accepted (in
whole or in part) pursuant to this Section 7.6(b),
the Trustee shall have the power to transfer Stock
in order to effect such acceptance with no further
direction from the Participant or the Committee.
(c) Each Participant shall have right to instruct
the Trustee confidentially as to whether and how stock options,
warrants or other similar rights relating to Stock allocated to the
Participant's Account should be exercised. The Committee or the
Trustee shall establish procedures to notify timely each such
Participant regarding such rights and the terms and conditions for
exercising such rights. If the Trustee fails to receive timely
instructions from the Participant, such rights shall not be
exercised.
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(d) For purposes of this Section 7.6, references to
Participants include their beneficiaries and, pursuant to Section
9.7, alternate payees for whom a separate Account has been
established pursuant to the terms of a qualified domestic relations
order. References to the Trustee shall include any independent
fiduciary appointed by the Committee pursuant to Department of
Labor regulations section 2550.404c-1 to safeguard the
confidentiality of Participants' exercise of rights under this
Section 7.6 where the Committee has determined that such an
appointment is warranted.
7.7 All transactions involving Stock, including
distributions, purchases and sales, shall be made only in
compliance with applicable federal and state laws, regulations and
rules. All such transactions shall also be subject to all
restrictions and limitations imposed by the Company's articles of
incorporation and bylaws as amended from time to time, and by
limitations and restrictions applied by the applicable stock
exchange in which shares of Stock are publicly traded.
ARTICLE VIII
VESTING OF INTEREST
-------------------
8.1 A Participant's interest in his Deferral Account,
Rollover Account and Transfer Account, adjusted for his share of
income or losses and appreciation or depreciation therein, shall
be fully vested at all times.
8.2 (a) A Participant's interest in his Profit
Sharing Account, Company Account and Prior Plan Account, adjusted
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for the share of income or losses and appreciation or
following schedule based on the Participant's Years of Service:
<TABLE>
Years of Service Vested Percentage
---------------- -----------------
<S> <C> <C>
less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
</TABLE>
(b) Notwithstanding the foregoing, a
Participant's interest in his Profit Sharing Account, Company
Account and Prior Plan Account shall become fully and immediately
vested upon the first to occur of the following:
(1) the Participant's Retirement,
(2) the Participant's Total Disability, or
(3) the Participant's death; and,
a Participant who was a participant in the Prior Plan shall be no
less vested in his Prior Plan Account than he was under the Prior
Plan.
Notwithstanding anything contained herein to the contrary, a
Participant shall become fully and immediately vested upon the
later of (i) his attainment of age 65 or (ii) the fifth
anniversary of the date on which he commenced participation in
the Plan.
(c) For purposes of this Section 8.2, a
Participant's Years of Service shall include his entire Years of
Service; provided however:
(i) in the case of a Participant who was not
vested in any portion of his Profit Sharing Account,
Company Account and Prior Plan Account, his Years of
(31)
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Service shall not include his Years of Service
completed before a Break in Service if the number of
consecutive one-year Breaks in Service equals or
exceeds the greater of five or the aggregate number of
Years of Service, whether or not consecutive, completed
before such Break in Service (such aggregate number of
Years of Service shall not include any Years of Service
not taken into account by reason of any prior Break in
Service);
(ii) in the case of a Participant who has a
Break in Service of less than 12 months, his Years of
Service shall include both the Years of Service before
and after such Break in Service; and
(iii) in the case of a Participant who
was a participant in the Prior Plan, his Years of
Service shall include the period of his service for
which he was credited for vesting purposes under the
Prior Plan prior to September 1, 1995.
8.3 (a) In the event a Participant's employment
terminates before his interests in his Profit Sharing Account and
Prior Plan Account become fully vested, the portion of such
Accounts which is not vested shall be forfeited and, subject to
Section 8.5, allocated in the manner described in Section 4.2 to
the Profit Sharing Accounts of the remaining active Participants
for the Plan Year in which such forfeiture occurs.
(b) In the event a Participant's employment
terminates before his interest in his Company Account becomes
fully vested, the portion of such Account which is not vested
shall be forfeited and, subject to Section 8.5, applied towards
future Employer matching contributions under Section 3.1 in such
manner as shall be determined by the Committee; provided,
however, that any such forfeiture occurring prior to January 1,
1999 shall be allocated in the manner provided in subsection (a)
of this Section 8.3.
8.4 Notwithstanding the provisions of Section 8.2, in
the event the Plan shall be terminated or partially terminated,
or upon a complete discontinuance of contributions, the interest
(32)
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of an affected Participant in his Profit Sharing Account, Company
Account and Prior Plan Account shall become fully vested.
8.5 In the case of a former Participant who has
received a distribution of his entire vested benefit under the
Plan and forfeited his nonvested interest in his Accounts by
reason of termination of employment for any reason, and who
subsequently becomes a Participant prior to the occurrence of
five consecutive one-year Breaks in Service, he shall be entitled
to repay to the Plan the full amount of such distribution. Upon
such repayment, any interest in such Participant's Accounts which
was forfeited at the time of his termination of employment shall
be restored and his right to receive such interest upon a
subsequent termination of employment shall be determined in
accordance with Section 8.2 based upon his total Years of Service
at that time, if applicable. Such restoration shall be made from
amounts forfeited under Section 8.3 in the year in which an
Employee's right to such restoration arises. To the extent that
current forfeitures are insufficient to make such restoration,
the Company shall make a special contribution to the Plan to
restore the forfeited amount.
ARTICLE IX
PAYMENTS FROM ACCOUNTS
----------------------
9.1 The entire vested interest of a Participant in his
Accounts shall become payable upon any of the following events:
(a) the Participant's
Retirement;
(b) the Participant's Total
Disability;
(33)
Page 56 of 74<PAGE>
(c) the Participant's death;
(d) the Participant's other
termination of employment
with the Employer (other
than on account of a
transfer of employment to
an Affiliate);
(e) upon the Participant's
request in accordance
with Section 9.8, on or
after the Participant's
attainment of age 59-1/2; or
(f) as a hardship withdrawal
under Section 9.9.
9.2 A Participant may, prior to termination of his
employment with the Employer, designate a beneficiary to whom
distribution of his interest in the Trust Fund shall be paid in
the event of his death prior to the full receipt of such
interest; provided however, that in the event the Participant is
married on the date of his death, such beneficiary shall be
deemed to be the Participant's surviving spouse. The Participant
may elect to change or revoke his designated beneficiary at any
time; provided however, that in the event prior to such change or
revocation such beneficiary is the Participant's surviving
spouse, such election shall not be effective unless such
surviving spouse provides written consent which acknowledges the
effect of such election and is witnessed by a Plan representative
or a notary public. The affirmative designation of any
beneficiary and any elected change or revocation thereof by a
Participant shall be made on forms provided by the Committee and
shall not in any event be effective unless and until filed with
the Committee. If no designated or deemed beneficiary survives
the Participant or inactive Participant, or if an unmarried
(34)
Page 57 of 74<PAGE>
Participant or inactive Participant fails to designate a
beneficiary under the Plan, the amount payable upon the death of
the Participant or inactive Participant shall be paid to his
estate.
9.3 Upon termination of employment for any reason, any
part of a Participant's interest in his Accounts that has not
vested shall be forfeited and applied in accordance with Section
8.3, and his active participation under the Plan will terminate
subject to the provisions of Section 9.4. If the amount of the
vested portion of a Participant's Profit Sharing Account, Company
Account and Prior Plan Account at the time of the Participant's
termination of employment is zero, the Participant shall be
deemed to have received a distribution of such zero vested
interest in such Accounts.
9.4 Notwithstanding the foregoing provisions of this
ARTICLE IX, and subject to Section 9.10, payments will be made
from a Participant's Accounts only upon the approval and
direction of the Committee, at the time and in the manner
determined by the Committee in accordance with the provisions of
the Plan. When the vested interest of a Participant becomes
payable in accordance with the provisions of Section 9.1, the
Committee shall direct the Trustee to pay from the Trust Fund an
amount equal to the value of such vested interest as determined
under Sections 7.4 and 7.5 (i) in the case of the portion of a
Participant's Prior Plan Account which is not Participant-
directed, as of the next Valuation Date following the event
giving rise to the right to payment and (ii) in the case of the
portion of a Participant's Accounts which is Participant-
directed, the Valuation Date immediately preceding the date of
payment. Unless the Participant (or, if applicable, his
(35)
Page 58 of 74<PAGE>
beneficiary) does not consent to such payment, pursuant to
Section 9.5, any such amount shall be paid to the Participant (or
his beneficiary) no later than the earlier of (i) 60 days after
the close of the Plan Year in which such Participant's employment
terminates or (ii) the date the payment first becomes
administratively feasible.
9.5 The amounts payable from the Trust Fund shall be
paid as a single sum; provided however, that such single sum
payment shall not be made without the consent of the Participant
(or, if applicable, his beneficiary) if such amount exceeds
$5,000; and further provided, that at the election of the
Participant (or, if applicable, his beneficiary) and subject to
any restrictions contained in Section 7.7, the portion of such
single sum payment that is attributable to the Participant's
investment in the Stock Fund may be paid in whole shares of Stock
equal in value to all or part of the Participant's interest in
the Stock Fund and any remaining interest in the Stock Fund shall
be paid in cash. Notwithstanding anything contained herein to
the contrary, regardless of the form of payment, all
distributions shall comply with Code section 401(a)(9), including
the minimum distribution incidental death benefit requirement of
Code section 401(a)(9)(G).
9.6 If any person who is entitled to receive a payment
from the Plan shall die prior to such payment, the amount
remaining to be paid shall be paid in a single sum to the
beneficiary previously designated by the Participant whose
interest is involved, or, if no such beneficiary survives, to the
estate of the Participant.
(36)
Page 59 of 74<PAGE>
9.7 Except as required (i) by a "qualified domestic
relations order" (within the meaning of Code section 414(p)) or
(ii) in connection with a judgment or settlement entered into on
or after August 5, 1997, involving the Plan pursuant to the
requirements of Code section 401(a)(13)(C) or as otherwise
required by law, no person shall have the right to assign,
alienate, transfer, hypothecate or otherwise subject to lien his
interest in or his benefit under the Plan, nor shall benefits
under the Plan be subject to the claims of any creditor. Any
other provision of the Plan to the contrary notwithstanding, if
the amount payable to an alternate payee under a qualified
domestic relations order is less than or equal to $5,000, such
amount shall be paid as soon as practicable following the
qualification of the order. If such amount exceeds $5,000, it
may be paid as soon as practicable following the qualification of
the order if the alternate payee consents thereto and if such
order provides for such payment; otherwise, it may not be payable
prior to the Participant's "earliest retirement age" (within the
meaning of Code section 414(p)(4)(B)).
9.8 Subject to Section 10.4, upon written application
to the Committee, in such form and manner as the Committee may
prescribe, a Participant who is also an Employee may, on or after
attainment of age 59-1/2, make a withdrawal once in each Plan Year
from any or all of his Accounts. The minimum withdrawal a
Participant may make under this Section 9.8 shall be the lesser
of $500 or the balance in his Accounts, as applicable.
9.9 (a) Upon written application of a Participant,
the Committee shall determine whether the Participant is entitled
to make a hardship withdrawal from his Deferral Account
(37)
Page 60 of 74<PAGE>
(excluding earnings on such Account), from the vested portion of
his Company Account, or from his Profit Sharing Account, Prior
Plan Account, Rollover Account or Transfer Account, as
applicable, subject to the provisions of this Section 9.9. A
hardship entitling a Participant to make a withdrawal will exist
if the Committee determines, pursuant to subsection (b) of this
Section 9.9, that the Participant has an immediate and heavy
financial need. A distribution based upon financial hardship
cannot exceed the amount required to meet the immediate and heavy
financial need created by the hardship and not reasonably
available from reserves or other resources of the Participant.
The amount of immediate and heavy financial need may include any
amount necessary to pay any Federal, state or local income taxes
or penalties reasonably anticipated to result from the
distribution. The determination of the existence of financial
hardship and the amount required to be distributed to meet the
need created by the hardship shall be made by the Committee,
pursuant to subsection (b) of this Section 9.9, in accordance
with uniform and nondiscriminatory standards. Such withdrawal
shall be made in cash upon 30 days' prior written application to
the Committee. In no event may the amount of such hardship
withdrawal exceed the amount necessary to constitute security for
repayment of any outstanding loan made pursuant to ARTICLE X.
(b) For purposes of this Section 9.9:
(i) A distribution will be made on account of an
immediate and heavy financial need of the Participant
if the distribution is on account of (A) medical
expenses described in Code section 213(d) incurred by
the Participant, his spouse, or any dependents (as
defined in Code section 152) or necessary for these
persons to obtain medical care described in Code
section 213(d); (B) the purchase (excluding mortgage
(38)
Page 61 of 74<PAGE>
payments) of a principal residence for the Participant;
(C) the payment of tuition and related educational fees
for the next 12 months of post-secondary education for
the Participant, his spouse, or any dependents; (D) the
need to prevent the eviction of the Participant from,
or the foreclosure on the mortgage of, the
Participant's principal residence; or (E) other events
or conditions as prescribed or permitted by the
Internal Revenue Service through publication of
documents of general applicability;
(ii) A distribution will be necessary to satisfy
an immediate and heavy financial need of a Participant
if (A) the distribution is not in excess of the amount
of the immediate and heavy financial need of the
Participant and (B) the Participant has obtained all
distributions, other than hardship withdrawals, and all
nontaxable loans available under the Plan and any other
plan maintained by the Company in which the Participant
participates; and
(iii) A Participant who receives a hardship
withdrawal in accordance with this Section (A) shall
have contributions to his Deferral Account (as well as
other employee elective contributions under any other
plan of the Employer) suspended for 12 months after
receipt of the hardship withdrawal and (B) the maximum
amount of contributions to his Deferral Account made on
behalf of such Participant under this Plan or any other
plan of the Employer in the tax year following the tax
year in which he receives a hardship withdrawal shall
be the applicable amount described in Section 2.5 for
such tax year reduced by the amount of contributions to
his Deferral Account made on behalf of such Participant
in the tax year in which he receives the hardship
withdrawal.
9.10 All distributions made under this ARTICLE IX shall
be paid to the Participant, beneficiary or alternate payee, with
respect to a qualified domestic relations order, in cash;
provided however, that a Participant, beneficiary or alternate
payee who receives a distribution and who has all or a portion of
his Accounts invested in the Stock Fund may request that all or a
designated portion of such distribution be made in the form of
(39)
Page 62 of 74<PAGE>
whole shares of Stock with the remainder, including any
fractional share value, to be paid in cash.
9.11 Any other provision of the Plan to the contrary
notwithstanding, payment of a benefit under the Plan to a
Participant (i) who is a 5-percent owner (as such term is defined
in Code section 416(i)(1)(B)(i)) and any Participant (other than
such a 5-percent owner) who attains age 70-1/2 prior to January 1,
1999 shall be made, or shall commence, no later than April 1 of
the calendar year following the calendar year in which such
Participant attains age 70-1/2 and (ii) who is not a 5-percent owner
and who attains age 70-1/2 after December 31, 1998, shall be made,
or shall commence no later than April 1 of the calendar year
following the later of (A) the calendar year in which the
Participant attains age 70-1/2, or (B) the calendar year in which
the Participant terminates employment with an Employer.
Notwithstanding the foregoing, in the case of a Participant who
attains age 70-1/2 during 1998 and who has not terminated employment
with an Employer, such Participant may elect to defer receiving
distributions until April 1 of the calendar year following the
calendar year in which the Participant terminates employment with
an Employer.
ARTICLE X
LOANS
-----
10.1 Upon application to the Committee in writing, or
pursuant to a voice response system approved by the Committee, a
Participant shall be permitted to borrow from his Accounts in
accordance with criteria established by the Committee on a
uniform and nondiscriminatory basis. A Participant shall be
permitted to have no more than two loans outstanding at one time.
Any such loan shall be evidenced by a note.
(40)
Page 63 of 74<PAGE>
10.2 The minimum amount that a Participant shall be
permitted to borrow is $500. The maximum aggregate amount of all
outstanding loans to a Participant under this Plan and any other
plan of the Employer is the lesser of (i) $50,000 (reduced by the
highest outstanding balance of any prior Plan loan during the
one-year period ending on the day before the date the Plan loan
is made), or (ii) 50% of such Participant's accrued vested
balances in his Accounts (less the value of the Participant's
Account invested in the Stock Fund).
10.3 Each loan shall be repaid by the Participant
through equal payroll deductions, on a level amortization basis,
commencing with the date of the loan, over a period of not more
than 60 months. Notwithstanding the preceding sentence, the
Committee may permit repayment of a loan over a period in excess
of five, but not in excess of twenty, years when the loan is used
to acquire any dwelling unit which within a reasonable time is to
be used as a primary residence of the Participant. Interest on
loans shall be charged at a reasonable rate, as determined by the
Committee on a uniform and nondiscriminatory basis. Such rate
will remain fixed for the term of the loan. A Participant may
prepay the entire balance of his loan at any time without
penalty.
10.4 No distributions pursuant to ARTICLE IX (other
than Section 9.9) shall be made until the outstanding balance of
any loan plus interest thereon is repaid in full.
10.5 If a loan is in default, the Committee shall
liquidate all or any portion of the Participant's collateral
account balance as necessary to discharge the Participant's
obligation under the loan agreement before any amounts are paid
to or on behalf of such Participant. In no event shall such
(41)
Page 64 of 74<PAGE>
liquidation occur prior to the time the Participant is entitled
to a distribution under ARTICLE IX. The following events will be
considered a default:
(a) death or Total Disability of the Participant;
(b) termination of the Plan;
(c) retirement or separation from service by the
Participant and
(d) failure to make any required payment of loan
principal and interest.
10.6 All loans granted under this ARTICLE X shall be
granted in a uniform and nondiscriminatory manner in accordance
with written loan procedures established by the Committee. To
the extent required by law and under such rules as the Committee
shall adopt, loans shall be made available on a reasonably
equivalent basis to any beneficiary or former Employee (i) who
maintains a balance in one of more Accounts under the Plan, and
(ii) who is a party-in-interest with respect to the Plan (within
the meaning of ERISA section 3(14)).
10.7 The Company may amend the terms of, or
discontinue, the loan program as it deems appropriate. The
Company or the Committee may also restrict or suspend the making
of loans if it determines that the loan program is having adverse
effects on Plan investment earnings or on Participants in
general.
ARTICLE XI
ADMINISTRATION
--------------
11.1 The Plan shall be administered by a Committee of
not less than three persons appointed by the Board of Directors.
(42)
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The Company shall be the Plan Administrator and "named fiduciary"
(within the meaning of ERISA section 402(a)) and the Committee
shall assume the responsibilities and duties set forth in this
ARTICLE XI.
11.2 The Committee shall establish rules for the
administration of the Plan. It shall interpret the Plan in its
sole discretion and its determinations shall be conclusive and
binding upon all Participants and their beneficiaries.
11.3 All expenses attributable to the administration of
the Plan and the expenses of the Trustee shall be paid out of the
Trust Fund except to the extent paid by the Employer.
11.4 The Committee shall have the power to assign any
of its responsibilities to subcommittees or members of the
Committee and may designate one or more subcommittees or other
persons to carry out any of its responsibilities.
11.5 The Committee may employ such agents and such
clerical and other services as it may deem advisable in carrying
out the provisions of the Plan, and may consult with counsel, who
may be counsel for the Company.
ARTICLE XII
TRUSTEE
-------
12.1 All assets of the Plan shall be held pursuant to a
Trust Agreement between a Trustee designated by the Board of
Directors and the Company. The Trust Agreement shall provide,
among other things, for a Trust Fund, to be administered by the
Trustee, with respect to which all contributions shall be paid,
(43)
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and the Trustee shall have such rights, powers and duties as the
Board of Directors shall from time to time determine. All assets
of the Trust Fund shall be held, invested and reinvested in
accordance with the provisions of the Plan and the Trust
Agreement.
12.2 All Employer contributions to the Plan are
expressly conditioned upon being deductible under Code section
404(a). At no time prior to the satisfaction of all liabilities
with respect to Participants and their beneficiaries shall any
part of the assets of the Plan be used for or diverted to
purposes other than for the exclusive benefit of such persons;
provided however, Employer contributions may be returned to the
Employer (a) within one year after the payment of a contribution,
if made by the Employer by reason of a mistake of fact, or (b)
within one year of the disallowance of a deduction, to the extent
a deduction is disallowed for such contribution under Code
section 404(a).
ARTICLE XIII
TERMINATION AND AMENDMENT
-------------------------
13.1 The Company expects to continue the Plan
indefinitely, but the continuance of the Plan and the payment of
contributions are not assumed as contractual obligations.
13.2 The Plan may be terminated at any time by adoption
of resolutions by the Board of Directors. If the Plan shall be
terminated, the Trustee shall continue to hold, invest and
administer the Trust Fund in accordance with the provisions of
the Trust Agreement and shall make distributions therefrom in
accordance with the provisions of the Plan, as then in effect,
pursuant to instructions filed with the Trustee by the Committee
(44)
Page 67 of 74<PAGE>
upon such termination or from time to time thereafter. Upon a
complete discontinuance of contributions, or upon termination or
partial termination of the Plan, each affected Participant or
beneficiary shall have a nonforfeitable interest in his Accounts
in the Plan.
13.3 The Plan may be amended at any time and from time
to time, including retroactively, by adoption of resolutions by
the Board of Directors; provided however, that no amendment shall
reduce the vested percentage of a Participant's accrued benefit
derived from Employer contributions below the vested percentage
thereof on the date such amendment is adopted or becomes
effective, whichever is later; and provided further, that no
amendment shall decrease the accrued benefit of a Participant.
ARTICLE XIV
MISCELLANEOUS
-------------
14.1 Participation or non-participation in the Plan
shall have no effect upon the employment status of any Employee.
14.2 All benefits payable under the Plan shall be paid
solely from the Plan, and the Employer assumes no liability or
responsibility with respect to such payments.
14.3 In the event of any merger or consolidation of the
Plan with, or transfer of any assets or liabilities of the Plan
to, any other plan, each Participant shall be entitled to receive
a benefit immediately after such merger, consolidation, or
transfer (computed as if such other plan had then terminated)
which is equal to or greater than the benefit he would have been
entitled to receive immediately before such merger,
(45)
Page 68 of 74<PAGE>
consolidation, or transfer (computed as if the Plan had then
terminated).
14.4 The Plan shall be construed and enforced in
accordance with the laws of the State of New Jersey, except to
the extent preempted by the laws of the United States.
ARTICLE XV
TOP HEAVY PROVISIONS
--------------------
The provisions of this ARTICLE XV shall become
applicable only under the circumstances described hereunder.
15.1 For purposes of this ARTICLE XV, the Plan shall be
"top heavy" if, as of the determination date (the last day of the
preceding Plan Year), the present value of the cumulative account
balances for Key Employees under the Plan and all other plans in
the "required aggregation group" or "permissive aggregation
group," as appropriate, exceeds 60% of the present value of the
cumulative account balances under all such plans for all
Employees determined as of the applicable "valuation date." For
purposes of this ARTICLE XV, (a) "required aggregation group"
means (i) each qualified plan of any Employer in which at least
one Key Employee participates, and (ii) any other qualified plan
of any Employer which enables a plan described in (i) to meet the
requirements of Code section 401(a)(4) or 410, (b) "permissive
aggregation group" means the required aggregation group of plans
plus any other plan or plans of any Employer which, when
considered as a group with the required aggregation group, would
continue to satisfy the requirements of Code sections 401(a)(4)
and 410, and (c) "valuation date" means the most recent Valuation
Date within a 12-month period ending on the determination date.
(46)
Page 69 of 74<PAGE>
The present value of such account balances shall be computed in
accordance with Code section 416(g), and the above percentage
ratio shall be determined by a fraction, the numerator of which
is the sum of the present value of the account balances of Key
Employees under the Plan and all other plans in the aggregation
group, and the denominator of which is the sum of the present
value of the account balances under all such plans, including the
Plan, for all Employees. If an individual has not performed any
service for the Employer at any time during the five-year period
ending on a determination date, any accrued benefit of such
individual shall not be taken into account.
15.2 The following provisions shall be applicable only
in a Plan Year with respect to which the Plan becomes top heavy
as defined herein and thereafter to the extent provided herein:
(a) Notwithstanding ARTICLE III, the Employer
shall make a special contribution on behalf of each non-Key
Employee who has satisfied the eligibility requirements of the
Plan, whether or not a Participant in the Plan and who is in
service at the end of the Plan Year, with respect to such Plan
Year in an amount which equals the lesser of (i) 3% of his
Compensation (as defined in Code section 414(s)), or, to the
extent required by the Code and regulations) or (ii) the largest
percentage of Compensation provided under the Plan for any Key
Employee for such Plan Year without regard to this Section 15.2.
Any such special Employer contribution shall be credited to such
Participant's Company Account. Notwithstanding the foregoing
provisions of this Section 15.2(a), if a Participant in the Plan
is also a participant in any defined benefit plan of the
Employer, then for each Plan Year with respect to which the Plan
is top heavy, such Participant's accrual of a minimum benefit
(47)
Page 70 of 74<PAGE>
under such defined benefit plan in accordance with Code section
416(c)(1) shall be deemed to satisfy the special Employer
contribution requirement of this Section 15.2(a). Employer
contributions resulting from a salary reduction election by an
Employee or matching contributions shall not be counted toward
meeting the minimum required allocations under this section.
(b) Notwithstanding Article VIII, a Participant's
interest in his Profit Sharing Account, Company Account and Prior
Plan Account, adjusted for his share of income or losses and
appreciation or depreciation therein, shall become vested in
accordance with the following schedule based on the Participant's
Years of Service, if the application of such schedule would
result in the Participant having a greater vested percentage in
his Profit Sharing Account, Company Account and Prior Plan
Account than he would otherwise have under the terms of Article
VIII of the Plan:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C> <C>
less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
</TABLE>
The minimum allocation required (to the extent not
forfeitable under Code section 416(b)) may not be forfeited under
Code section 411(a)(3)(B) or 411(a)(3)(D). If the Plan is no
longer top-heavy in a later Plan Year, the foregoing vesting
schedule shall continue to apply with respect to employees with
less than three Years of Service except to the extent their
benefits have already vested by application of such schedule.
(48)
Page 71 of 74<PAGE>
(c) Notwithstanding the provisions of Section
6.1, if during any Plan Year an Employee participates in both a
defined contribution plan and a defined benefit plan maintained
by the Company which comprise a "top heavy group," as defined in
Code section 416(g)(2)(B), the denominators of the defined
benefit plan fraction and the defined contribution plan fraction,
as described in Section 6.1(d), shall be calculated by
substituting "1.0" for "1.25" each place it appears in such
Section; provided however, that this Section 15.2(b) shall not
apply with respect to a plan in the top heavy group if (i) such
plan would satisfy the requirements of Code section 416(h)(2)(A)
and (ii) the aggregate accrued benefits and cumulative account
balances of Key Employees under all plans in the top heavy group
do not exceed 90% of the aggregate accrued benefits and
cumulative account balances under all such plans for all
Employees.<PAGE>
(49)
Page 72 of 74<PAGE>
APPENDIX A
GRANDFATHER PROVISIONS
----------------------
This Appendix A shall apply to a Participant in the Prior
Plan with resepct to his Prior Plan Account. Terms in this Appendix
A shall have the same meanings as described in the Plan Document,
unless the context otherwise clearly requires.
Upon the retirement of a Participant on or after the date
on which such Participant attains age 65 or the fifth anniversary
of the date on which he commenced participation in the Plan, whichever
is later, such Participant shall be entitled to have his Prior Plan
Account paid in one of the following manners:
(1) Such amounts shall be paid or applied in monthly,
quarterly, semi-annual or annual installments as nearly equal as
practicable, over a fixed reasonable period of time not to exceed
the life expectancy of such Participant, or the joint life expectancy
of the Participant and his designated Beneficiary; or
(2) Such amounts shall be paid in a lump sum; or
(3) Such amounts shall be used to purchase from an
insurance cmpany selected by the Committee, a nontransferable
immediate or deferred annuity contract which shall provide for a
fixed number of payments over a reasonable period of time not to
exceed the life expectancy of such Participant or the joint life
expectancy of the Participant and his designated beneficiary and
which shall not require the survival of the Participant or his
designated beneficiary as a condition of payment.
(50)
Page 73 of 74<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-29-1999
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0
0
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