________________________________________________________________________________
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 7, 1995
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 Number 1-8544
AMERICAN PRESIDENT COMPANIES, LTD.
(Exact name of registrant as specified in its charter)
Delaware 94-2911022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 Broadway
Oakland, California 94607
(Address of principal executive offices)
Registrant's telephone number: (510) 272-8000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months 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 May 5, 1995
___________________________ __________________________
Common Stock, $.01 par value 27,363,380
________________________________________________________________________________
________________________________________________________________________________
<PAGE>
AMERICAN PRESIDENT COMPANIES, LTD.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
_____________________
Item 1. Consolidated Financial Statements
<S> <C>
Statement of Income 3
Balance Sheet 4
Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 13-21
Part II. OTHER INFORMATION
_________________
Item 1. Legal Proceedings 22
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
</TABLE>
The consolidated financial statements presented herein include the
accounts of American President Companies, Ltd. and its wholly-owned
subsidiaries (the "company") and have been prepared by the company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. The company believes that the disclosures are adequate to make
the information presented not misleading, although certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. In the opinion of
management, the consolidated financial statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the company's results of operations, financial position and
cash flows. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the company's Annual Report on Form 10-K for the year ended
December 30, 1994 (Commission File No. 1-8544).
<PAGE>
American President Companies, Ltd. and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
<CAPTION>
_______________________________________________________________________________________________
14 Weeks Ended
(In thousands, except per share amounts) April 7, 1995 April 8, 1994
_______________________________________________________________________________________________
<S> <C> <C>
REVENUES $ 740,661 $ 703,128
_______________________________________________________________________________________________
EXPENSES
Operating, Net of Operating-
Differential Subsidy 687,402 636,064
General and Administrative 21,340 19,369
Depreciation and Amortization 28,314 28,440
_______________________________________________________________________________________________
Total Expenses 737,056 683,873
_______________________________________________________________________________________________
OPERATING INCOME 3,605 19,255
_______________________________________________________________________________________________
Interest Income 6,128 3,269
_______________________________________________________________________________________________
Interest Expense (8,023) (7,211)
_______________________________________________________________________________________________
Income Before Taxes 1,710 15,313
Federal, State and Foreign Tax Expense 650 5,145
_______________________________________________________________________________________________
NET INCOME $ 1,060 $ 10,168
_______________________________________________________________________________________________
Less Dividends on Preferred Stock 1,688 1,688
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCK $ (628) $ 8,480
_______________________________________________________________________________________________
_______________________________________________________________________________________________
EARNINGS (LOSS) PER COMMON SHARE
_______________________________________________________________________________________________
Primary Earnings (Loss) Common Per Share $ (0.02) $ 0.30
_______________________________________________________________________________________________
Fully Diluted Earnings (Loss) Common Per Share (0.02) $ 0.30
_______________________________________________________________________________________________
DIVIDENDS PER COMMON SHARE $ 0.10 $ 0.10
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
See notes to consolidated financial statements.
<PAGE>
American President Companies, Ltd. and Subsidiaries
<TABLE>
CONSOLIDATED BALANCE SHEET (Unaudited)
<CAPTION>
_______________________________________________________________________________________________
April 7 December 30
(In thousands, except share amounts) 1995 1994
_______________________________________________________________________________________________
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and Cash Equivalents $ 74,868 $ 39,754
Short-Term Investments 123,676 214,898
Trade and Other Receivables, Net 280,565 280,736
Fuel and Operating Supplies 39,442 36,549
Prepaid Expenses and Other 38,887 37,135
_______________________________________________________________________________________________
Total Current Assets 557,438 609,072
_______________________________________________________________________________________________
PROPERTY AND EQUIPMENT
Ships 678,645 678,453
Containers, Chassis and Rail Cars 791,647 781,100
Leasehold Improvements and Other 266,101 260,699
Construction in Progress 134,804 116,845
_______________________________________________________________________________________________
1,871,197 1,837,097
Accumulated Depreciation and Amortization (921,938) (896,802)
_______________________________________________________________________________________________
Property and Equipment, Net 949,259 940,295
_______________________________________________________________________________________________
INVESTMENTS AND OTHER ASSETS 119,431 114,590
_______________________________________________________________________________________________
Total Assets $ 1,626,128 $ 1,663,957
_______________________________________________________________________________________________
_______________________________________________________________________________________________
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Portion of Long-Term Debt
and Capital Leases $ 12,560 $ 4,797
Accounts Payable and Accrued Liabilities 369,144 397,969
_______________________________________________________________________________________________
Total Current Liabilities 381,704 402,766
_______________________________________________________________________________________________
DEFERRED INCOME TAXES 142,829 139,955
_______________________________________________________________________________________________
OTHER LIABILITIES 121,441 118,603
_______________________________________________________________________________________________
LONG-TERM DEBT 362,896 373,142
CAPITAL LEASE OBLIGATIONS 3,888 13,108
_______________________________________________________________________________________________
Total Long-Term Debt and Capital Lease Obligations 366,784 386,250
_______________________________________________________________________________________________
COMMITMENTS AND CONTINGENCIES
_______________________________________________________________________________________________
REDEEMABLE PREFERRED STOCK, $.01 Par Value,
Stated at $50.00, Authorized-2,000,000
Shares Series C, Shares Issued and Outstanding-
1,500,000 in 1995 and 1994 75,000 75,000
_______________________________________________________________________________________________
STOCKHOLDERS' EQUITY
Common Stock $.01 Par Value, Stated at $1.00
Authorized-60,000,000 Shares
Shares Issued and Outstanding-
27,344,000 in 1995 and 27,318,000 in 1994 27,344 27,318
Additional Paid-In Capital 71,181 70,853
Retained Earnings 439,845 443,212
_______________________________________________________________________________________________
Total Stockholders' Equity 538,370 541,383
_______________________________________________________________________________________________
Total Liabilities, Redeemable Preferred Stock
and Stockholders' Equity $ 1,626,128 $ 1,663,957
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
See notes to consolidated financial statements.
<PAGE>
American President Companies, Ltd. and Subsidiaries
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
<CAPTION>
_______________________________________________________________________________________________
14 Weeks Ended
(In thousands) April 7, 1995 April 8, 1994
_______________________________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 1,060 $ 10,168
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in) Operating Activities:
Depreciation and Amortization 28,314 28,440
Deferred Income Taxes 137 2,808
Change in Receivables 171 (15,839)
Issuance of Notes Receivable on
Sales of Real Estate (1,170)
Change in Fuel and Operating Supplies (2,893) (3,277)
Change in Prepaid Expenses and Other Current Assets 141 (16)
(Gain) Loss on Sale of Property and Equipment 423 (650)
Change in Accounts Payable and Accrued Liabilities (28,825) 6,161
Other 1,950 2,271
_______________________________________________________________________________________________
Net Cash Provided by Operating Activities 478 28,896
_______________________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures (37,786) (20,355)
Proceeds from Sales of Property and Equipment 333 1,794
Purchase of Short-Term Investments (40,890) (51,717)
Proceeds from Sales of Short-Term Investments 132,112
Other (3,210) (3,329)
_______________________________________________________________________________________________
Net Cash Provided by (Used in)
Investing Activities 50,559 (73,607)
_______________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Debt 147,348
Repayments of Capital Lease Obligations (1,507) (1,456)
Repayments of Debt (10,244) (10,014)
Dividends Paid (4,419) (4,403)
Other 346 4,830
_______________________________________________________________________________________________
Net Cash Provided by (Used in)
Financing Activities (15,824) 136,305
_______________________________________________________________________________________________
Effect of Exchange Rate Changes on Cash (99) (346)
_______________________________________________________________________________________________
NET INCREASE IN CASH AND CASH EQUIVALENTS 35,114 91,248
_______________________________________________________________________________________________
Cash and Cash Equivalents at Beginning of Period 39,754 84,053
_______________________________________________________________________________________________
Cash and Cash Equivalents at End of Period $ 74,868 $ 175,301
_______________________________________________________________________________________________
SUPPLEMENTAL DATA:
_______________________________________________________________________________________________
CASH PAID FOR:
Interest, Net of Capitalized Interest $ 8,858 $ 1,812
Income Taxes (Refunds) $ 2,426 $ (344)
_______________________________________________________________________________________________
</TABLE>
See notes to consolidated financial statements.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Significant Accounting Policies
Allowance for Doubtful Accounts
At April 7, 1995 and December 30, 1994 the allowance for doubtful
accounts, included in Trade and Other Receivables on the accompanying
Consolidated Balance Sheet, amounted to $20.0 million and $21.9 million,
respectively.
Capitalized Interest
Interest costs of $2.6 and $1.6 million relating to cash paid for
the construction of vessels were capitalized in the first quarter of 1995
and 1994, respectively.
Income Taxes
The provision for income taxes has been calculated using the
effective tax rate estimated for the respective years. The tax rates were
38% and 34% for the first quarters of 1995 and 1994, respectively. The 1994
estimated effective tax rate includes the effect of revisions of prior
years' estimated tax liabilities.
Note 2. United States Maritime Administration Agreements
Operating-Differential Subsidy Agreement
The company and the United States Maritime Administration ("MarAd")
are parties to an Operating-Differential Subsidy ("ODS") agreement expiring
December 31, 1997, which provides for payment by the U.S. government to
partially compensate the company for the relatively greater expense of
vessel operation under United States registry. The ODS amounts were $16.4
million for each of the quarters ended April 7, 1995 and April 8, 1994, and
have been included as a reduction of operating expenses.
In June 1992, the Bush Administration announced that no new ODS
agreements would be entered into and existing ODS agreements would be
allowed to expire. The Clinton Administration and Congress have been
reviewing U.S. maritime policy. Proposed maritime support legislation
introduced in 1994 was not enacted. The Administration's 1995 budget
includes a proposal for a 10-year subsidy program with $100 million in
annual payments to be requested and appropriated on a year-to-year basis.
The company is not able to predict whether or when maritime support
legislation will be enacted or what terms such legislation may have, if
enacted.
While the company continues to encourage efforts to enact maritime
support legislation, prospects for passage of a program acceptable to the
company are unclear. Accordingly, in July 1993, the company filed
applications with MarAd to operate under foreign flag its six C11-class
containerships, presently under construction, and to transfer to foreign
flag seven of the 15 U.S.-flag containerships in its trans-Pacific fleet.
On November 15, 1994, MarAd issued a waiver that will allow the company to
operate its C11-class vessels under foreign registry on the condition that
the vessels be returned to U.S.-flag in the event acceptable maritime reform
legislation is enacted. The remaining application is still pending
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 2. United States Maritime Administration Agreements (continued)
and no assurances can be given as to whether, or when, the authority will be
granted.
Management of the company believes that, in the absence of ODS or an
equivalent government support program, it will be generally no longer
commercially viable to own or operate containerships in foreign trade under
the U.S. flag because of the higher labor costs and the more restrictive
design, maintenance and operating standards applicable to U.S.-flag liner
vessels. The company continues to evaluate its strategic alternatives in
light of the pending expiration of its ODS agreement and the uncertainties
as to whether a new U.S. government maritime support program acceptable to
the company will be enacted, whether sufficient labor efficiencies can be
achieved through the collective bargaining process, and whether the
company's remaining application to flag its vessels under foreign registry
will be approved. While no assurances can be given, management of the
company believes that it will be able to structure its operations to enable
it to continue to operate on a competitive basis without direct U.S.
government support.
In 1995, lawsuits were filed against the company and the U.S.
Department of Transportation by certain of the company's unions and union
members challenging MarAd's November 15, 1994 action granting the company
the waiver allowing it to operate its C11-class vessels under foreign flag.
While no assurances can be given, management believes these legal challenges
will not be successful.
Capital Construction Fund
The company also has an agreement with MarAd pursuant to which the
company has established a Capital Construction Fund ("CCF") to which the
company makes contributions to provide funding for certain U.S.-built assets
and for the repayment of certain vessel acquisition debt. In 1994, the
company made a deposit of $36.9 million to its CCF and sold an undivided
interest in $40 million of its trade accounts receivable to its CCF for
$36.9 million in cash. At April 7, 1995 and December 30, 1994, the CCF
totaled $38.6 million and $37.8 million, respectively, and is included in
Investments and Other Assets on the accompanying Consolidated Balance Sheet.
Note 3. Accounts Payable and Accrued Liabilities
Accounts Payable and Accrued Liabilities at April 7, 1995 and
December 30, 1994 were as follows:
<TABLE>
<CAPTION>
_______________________________________________________________________________________________
(In thousands) April 7 December 30
1995 1994
_______________________________________________________________________________________________
<S> <C> <C>
Accounts Payable $ 71,740 $ 54,009
Accrued Liabilities 221,792 259,933
Current Portion of Accrued Claims 19,773 24,468
Income Taxes 1,388 2,883
Unearned Revenue 54,451 56,676
_______________________________________________________________________________________________
Total Accounts Payable and Accrued Liabilities $ 369,144 $ 397,969
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4. Long-Term Debt
Long-Term Debt at April 7, 1995 and December 30, 1994 consisted of
the following:
<TABLE>
<CAPTION>
_______________________________________________________________________________________________
(In thousands) April 7 December 30
1995 1994
_______________________________________________________________________________________________
8% Senior Debentures $150 million Face Amount,
<C> <C>
Due on January 15, 2024 (1) $ 147,150 $ 147,144
7 1/8% Senior Notes $150 million Face Amount,
Due on November 15, 2003 (1) 148,107 148,065
Series I 8% Vessel Mortgage Bonds
Due Through 1997 (2) 47,647 57,176
8% Refunding Revenue Bonds Due on November 1, 2009 12,000 12,000
Refunding Revenue Bonds, at Various Rates Not to
Exceed 12%, Due on November 1, 2009 6,495 6,495
Note Payable at 9% Due Through 1997 2,060 2,591
Notes Payable at Prime plus 1% 572 572
Note Payable at 10% Due Through 1998 (3) 184
_______________________________________________________________________________________________
Total Debt 364,031 374,227
Current Portion (1,135) (1,085)
_______________________________________________________________________________________________
Long-Term Debt $ 362,896 $ 373,142
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
(1) In November 1993, the company filed a shelf registration statement
covering the issuance from time to time of up to $400 million of debt
securities of varying terms and amounts. Pursuant to this
registration statement the company issued 7 1/8% Senior Notes and 8%
Senior Debentures in November 1993 and January 1994, respectively.
Interest payments are due semiannually. The Senior Notes had an
effective interest rate of 7.325%, and an unamortized discount of $1.9
million and $1.9 million at April 7, 1995 and December 30, 1994,
respectively. The Senior Debentures had an effective interest rate of
8.172%, and an unamortized discount of $2.8 and $2.9 million at April
7, 1995 and December 30, 1994, respectively.
(2) Principal payments are due in equal semiannual installments. The
company has the option to issue Series II Bonds due sequentially in
semiannual payments at the end of the term of the Series I Bonds in
lieu of up to five of the remaining cash payments, which it has not
yet exercised. Principal payments are classified as long-term debt on
the basis that the company issues Series II Bonds totaling up to $23.8
million per year in lieu of the next five semiannual cash payments.
(3) The note was repaid by the company in the first quarter of 1995.
The company has a credit agreement with a group of banks which
provides for an aggregate commitment of up to $200 million through March
1999. The credit agreement contains, among other things, various financial
covenants that require the company to meet certain levels of interest
coverage, leverage and net worth. The borrowings bear interest at rates
based upon various indices as elected by the company. The annual commitment
fee is a maximum of one-half of one percent of the available amount. There
have been no borrowings under this agreement.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4. Long-Term Debt (continued)
As an alternative to borrowing under its credit agreement, the
company has an option under that agreement to sell up to $150 million of
certain of its accounts receivable to the banks. This alternative is
subject to less restrictive financial covenants than the borrowing option.
Note 5. Stockholders' Equity
Earnings (Loss) Per Common Share
For the quarter ended April 7, 1995, the loss per common share on a
primary and fully diluted basis was computed by dividing net income, reduced
by the amount of the dividends on the Series C Cumulative Convertible
Preferred Stock, by the weighted average number of common shares
outstanding. For the quarter April 8, 1994, primary and fully diluted
earnings per common share were computed by dividing net income, reduced by
the amount of the dividends on the Series C Cumulative Convertible Preferred
Stock, by the weighted average number of common shares and common equivalent
shares outstanding. The number of shares used in these computations were as
follows:
<TABLE>
<CAPTION>
_______________________________________________________________________________________________
Weighted Average Number of Common and Common Equivalent Shares
_______________________________________________________________________________________________
14 Weeks Ended
(In millions) April 7, 1995 April 8, 1994
_______________________________________________________________________________________________
<S><C> <C> <C>
Primary 27.3 28.6
Fully Diluted 27.3 28.6
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
Cash Dividends
On May 2, 1995, the Board of Directors declared a quarterly cash
dividend of $0.10 per share of common stock, payable on May 31, 1995 to
common stockholders of record on May 15, 1995. The Board of Directors also
declared a cash dividend of $1.125 on the 9% Series C Cumulative Convertible
Preferred Stock, payable on June 15, 1995 to preferred stockholders of
record on June 1, 1995.
Note 6. Commitments and Contingencies
Commitments
Ship Purchases and Related Financing
In May 1993, the company entered into contracts for the construction
and purchase of six new C11-class containerships from Howaldtswerke-Deutsche
Werft AG, of Germany ("HDW") (three ships) and Daewoo Shipbuilding and Heavy
Machinery, Ltd., of Korea ("Daewoo") (three ships). The total estimated
project cost for the construction of these vessels is $535 million. The
company has made progress payments of $99 million, including progress
payments of $16 million in the first quarter of 1995. A remaining progress
payment of $4 million is due in the second quarter of 1995, and the
remaining 80% of each vessel's purchase price is due upon delivery of the
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Commitments and Contingencies
Commitments (continued)
Ship Purchases and Related Financing (continued)
vessel. Delivery dates are scheduled between May and November 1995. In
March 1994, the company entered into a loan agreement with European banks to
finance approximately $400 million of the purchase price of the six C11-
class vessels. Principal payments on any draw-downs would be due in
semiannual installments over a 12-year period commencing six months after
the delivery of each vessel. Interest rates would be based upon various
margins over LIBOR or the banks' cost of funds as elected by the company.
In connection with the construction and purchase of the ships from
HDW, the company entered into foreign currency contracts to buy Deutsche
marks in the future to lock in the U.S. dollar cost of the Deutsche-mark
denominated price of the vessels. Any gains or losses on these contracts
will be deferred and recognized as an adjustment to the cost basis of the
ships when the related payments are made. At April 7, 1995, the company had
contracts to purchase $213.9 million in Deutsche marks.
In January 1995, the company and Columbia Shipmanagement Ltd., a
Cyprus company ("Columbia"), entered into an agreement under which Columbia
would provide crewing, maintenance, operations and insurance for the
company's six C11-class vessels for a per diem fee per vessel. The
agreement may be terminated at any time by either party with notice.
In December 1993, the company entered into contracts with Daewoo for
the construction and purchase of three diesel-powered K10-class
containerships scheduled to be delivered in 1996. The total estimated cost
for construction of these vessels is $195 million. The company is engaged
in efforts related to the possible sale of the K10 contracts to third party
investors and the possible formation of a joint venture with certain
alliance partners to charter back these vessels for use in the Asia-Europe
trade. No assurances can be given at this time with respect to whether
these negotiations will be successful. The company has made progress
payments of $18 million to date for these vessels. Remaining installments
totaling $36 million are due in 1995, and the final 70% is due upon delivery
of the vessels in 1996.
Alliances
The company and Orient Overseas Container Line ("OOCL") are parties
to agreements enabling them to exchange vessel space and coordinate vessel
sailings through 2005. Currently, each party is guaranteed vessel space and
buys extra space as needed. Since December 1993, the company has been
required to purchase additional vessel space from OOCL and to compensate
OOCL for this space at a rate currently calculated at $6.6 million per year,
accrued ratably over each year. This commitment reduces as the company
increases the capacity it can exchange with OOCL, which is expected to begin
with the scheduled delivery of the company's C11-class vessels in 1995.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Commitments and Contingencies
Commitments (continued)
Alliances (continued)
In September 1994, the company, Mitsui OSK Lines, Ltd. ("MOL"), and
OOCL signed an agreement to exchange vessel space, coordinate vessel
sailings and cooperate in the use of port terminals and equipment for ocean
transportation services in the Asia-U.S. West Coast trade through 2005. The
carriers currently expect to commence service under this agreement in late
1995 or early 1996.
The three carriers and Nedlloyd Lines B.V. signed a separate
agreement to exchange vessel space, coordinate vessel sailings and cooperate
in the use of port terminals and equipment in an all-water service in the
Asia-U.S. East Coast trade via Panama for a minimum of three years. The
four carriers initiated service under this agreement in March 1995, and
weekly service is currently expected to commence by August 1995.
Additionally, in September 1994, the four carriers and Malaysian
International Shipping Corporation BHD signed an agreement to exchange
vessel space, coordinate vessel sailings and cooperate in the use of port
terminals and equipment for ocean transportation services in the Asia-Europe
trade through 2001. The carriers currently expect to commence service under
the agreement in January 1996. The company entered the Asia-Europe trade in
March 1995 by chartering vessel space through MOL.
The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe
alliance agreements are all expected to be fully implemented by late 1995 or
early 1996. Under the terms of the three agreements, alliance partners
contribute and are allocated vessel space, which may be adjusted from time
to time. The value of vessel space provided by the company to the alliance
is less than the value of the total capacity allocated to it through the
alliance, resulting in an annual net cash purchase commitment from the
company to its alliance partners currently estimated to be $29 million,
beginning in 1996. For 1995, the company currently estimates its net
purchase commitment to its alliance partners for vessel space in the Asia-
U.S. East Coast and Asia-Europe trades to be approximately $35 million.
Agreements covering terminal and equipment sharing among the alliance
partners have not been finalized, and the company's net cash commitment, if
any, to the alliance partners for these services cannot be determined at
this time.
In April 1994, the company and Transportacion Maritima Mexicana
("TMM"), a Mexican transportation company, entered into an agreement
enabling them to reciprocally charter vessel space for a period of three
years. Under the agreement, cargo is being transported between major Asian
ports and certain ports on the Pacific Coast of the U.S. and Mexico. Each
party is committed to purchase a minimum amount of vessel space at contract
rates and may buy available extra space as needed. The company's minimum
space purchase commitment exceeds that of TMM by approximately $5.3 million
per year.
<PAGE>
American President Companies, Ltd. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Commitments and Contingencies
Commitments (continued)
Facilities, Equipment and Services
At April 7, 1995, the company has outstanding purchase commitments
to acquire cranes, facilities, equipment and services totaling $84.2
million. In addition, the company has commitments to purchase terminal
services for its major Asian operations. These commitments range from one
to ten years, and the amounts of the commitments under these contracts are
based upon the actual services performed. At April 7, 1995, the company had
outstanding letters of credit totaling $11.1 million, which guarantee the
company's performance under certain of its commitments.
Employment Agreements
The company has entered into employment agreements with certain of
its executive officers. The agreements provide for certain payments to each
officer upon termination of employment, other than as a result of death,
disability in most cases, or justified cause, as defined. The aggregate
estimated commitment under these agreements was $18.2 million at April 7,
1995.
Contingencies
The company is a party to various legal proceedings, claims and
assessments arising in the course of its business activities. Based upon
information presently available, and in light of legal and other defenses
and insurance coverage and other potential sources of payment available to
the company, management does not expect these legal proceedings, claims and
assessments, individually or in the aggregate, to have a material adverse
impact on the company's consolidated financial position or operations.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
RESULTS OF OPERATIONS
<CAPTION>
First Quarter First Quarter
(In millions) 1995 Change 1994
_______________________________________________________________________________________________
Revenues
<S> <C> <C> <C>
International Transportation $ 527 4% $ 508
North America Transportation 214 13% 190
Real Estate (100%) 5
_______________________________________________________________________________________________
Operating Income $ 4 (81%) $ 19
_______________________________________________________________________________________________
Pretax Income $ 2 (89%) $ 15
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
Pretax income for the first quarter of 1995 was $2 million compared
with pretax income of $15 million in the first quarter of 1994. Included in
the 1994 results were $8 million from the collection of Desert Storm
detention charges and a $3 million contribution from real estate sales.
There was no collection of Desert Storm detention charges or contribution
from real estate sales in the first quarter of 1995. The company completed
the sales of its remaining real estate holdings in the second quarter of
1994, and final Desert Storm detention collections were received in the
fourth quarter of 1994. Excluding these items, pretax income was $2 million
and $4 million for the first quarters of 1995 and 1994, respectively.
The decrease in pretax income from last year's first quarter is
attributable to increases in operating expenses primarily related to the
continued weakening of the U.S. dollar, particularly against the Japanese
yen, and a 44% increase in fuel cost per barrel. Partially offsetting these
increased costs were improvements in volumes in the company's North America
stacktrain, U.S. import and U.S. export markets and improvements in revenue
per forty-foot equivalent unit ("FEU") in the company's international
markets.
<TABLE>
INTERNATIONAL TRANSPORTATION (1)
<CAPTION>
First Quarter First Quarter
(Volumes in thousands of FEUs) 1995 Change 1994
_______________________________________________________________________________________________
Import
<S> <C> <C> <C>
Volumes 52.4 5% 49.8
Average Revenue per FEU $ 4,069 1% $ 4,048
_______________________________________________________________________________________________
Export
Volumes 44.2 4% 42.5
Average Revenue per FEU $ 3,170 3% $ 3,090
_______________________________________________________________________________________________
Intra-Asia
Volumes 46.0 (8%) 50.1
Average Revenue per FEU $ 1,996 6% $ 1,879
_______________________________________________________________________________________________
Asia-Europe
Volumes 0.3
Average Revenue per FEU $ 2,706
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
(1) Volumes and average revenue per FEU data are based upon shipments
originating during the period, which differs from the percentage-of-
completion method used for financial reporting purposes.
The company's U.S. import volumes increased in the first quarter of
1995 compared with the same period last year due to increases in shipments
of commercial dry cargo from Hong Kong and the Philippines, which more than
offset the decrease in import volumes from Kobe caused by the earthquake in
January 1995. Volumes of the company's U.S. export cargo increased in the
first quarter of 1995 compared with the first quarter of 1994, primarily
<PAGE>
resulting from increased U.S. cotton shipments due to poor harvests in India
and Pakistan, and an increase in shipments of refrigerated cargo. These
increases were partially offset by a decrease in military shipments due to
the loss of the company's position as preferred carrier of military cargo in
June 1994. The company's intra-Asia volumes decreased in the first quarter
of 1995 compared with last year's first quarter as a result of decreased
shipments to and from Kobe and the poor cotton harvests in India and
Pakistan. Asia-Europe service began in mid-March with shipments to Denmark,
the United Kingdom and the Netherlands.
Utilization of the company's containership capacity in the first
quarter of 1995 was 83% and 98% for import and export shipments,
respectively, compared with 77% and 94%, respectively, in 1994. The
increases in import and export utilization in the first quarter of 1995
resulted from increases in volumes shipped by the company compared with the
first quarter of 1994.
Average revenue per FEU for the company's U.S. import shipments
increased in the first quarter of 1995 compared with the first quarter of
1994 due to an increase in the proportion of higher-rated cargo. Average
revenue per FEU in the company's U.S. export market increased in the first
quarter of 1995 from last year's first quarter due an increase in higher-
rated refrigerated and intermodal cargo, which was partially offset by the
increased lower-rated cotton shipments. Average revenue per FEU in the
company's intra-Asia market increased in the first quarter of 1995 compared
with the first quarter of 1994, attributable to an increase in the
proportion of higher-rated refrigerated cargo.
Other international transportation revenues, which primarily
comprises cargo handling, freight consolidation, logistics services and per
diem revenues, were $79 million in the first quarter 1995 compared with $75
million in the first quarter 1994. Included in the first quarter of 1994
were approximately $8 million in collections of Desert Storm detention
charges. The increase in other revenue was primarily attributable to
increases in cargo handling revenues in Asia and North America. In
addition, freight consolidation and logistics services revenues increased
due to higher volumes, and the Kobe earthquake insurance claim for business
interruption, net of the deductible of $1 million, is also included in these
revenues.
The company incurred incremental operating expenses and a loss of
ocean freight revenues during the first quarter of 1995 resulting from the
earthquake in Kobe on January 17, 1995, in which the ocean terminal leased
by the company was damaged, requiring extensive repairs. All but $1 million
of these expenses and lost revenues are expected to be recovered through the
company's business interruption insurance. The company and OOCL have
resumed limited service to Kobe, and the company and OOCL have adjusted
their shared trans-Pacific schedule to and from Japan. The company cannot
estimate the extent to which its volumes to and from Japan will be affected
by the damage caused by the earthquake in future quarters, which will depend
upon the timing of port repairs and the recovery of the infrastructure and
economy in the region. Additionally, the company cannot estimate the actual
amount that would be recovered under its insurance policies.
The new C11-class vessels are scheduled to be delivered beginning in
May 1995, and the Asia-U.S. East Coast alliance and Asia-Europe service
began in March 1995. Start-up expenses related to these programs were
incurred in the first quarter and will continue to be incurred during the
remainder of 1995, with limited related revenues. The weaker U.S. dollar
and higher fuel costs are expected to continue to impact operating expenses,
and are expected to be partially offset by currency and fuel surcharges.
<PAGE>
The company expects improvements in the maritime rate environment,
specifically in the U.S. import market as a result of general rate increases
which went into effect on May 1, 1995. The company currently expects soft
earnings in the first half of 1995, with improvement in the second half
based on the company's expected utilization of its new capacity and an
improvement in per unit operating costs when the new vessels are fully
deployed. However, utilization depends to a great extent upon the level of
demand for transportation services and competition among carriers in the
company's markets, and there is no assurance that such utilization and
resulting improvement in per unit operating costs will materialize.
The company and Orient Overseas Container Line ("OOCL") are parties
to agreements enabling them to exchange vessel space and coordinate vessel
sailings through 2005. The agreements permit both companies to offer faster
transit times, more frequent sailings between key markets in Asia and the
U.S. West Coast, and to share terminals and several feeder operations within
Asia. Since December 1993, the company has been required to purchase
additional vessel space from OOCL for approximately $7 million annually,
accrued ratably over each year. This commitment reduces as the company
increases the capacity it can exchange with OOCL, which is expected to begin
with the scheduled delivery of the company's C11-class vessels in 1995.
In September 1994, the company, Mitsui OSK Lines, Ltd. ("MOL"), and
OOCL signed an agreement to exchange vessel space, coordinate vessel
sailings and cooperate in the use of port terminals and equipment for ocean
transportation services in the Asia-U.S. West Coast trade through 2005. The
carriers currently expect to commence service under this agreement in late
1995 or early 1996.
The three carriers and Nedlloyd Lines B.V. signed a separate
agreement to exchange vessel space, coordinate vessel sailings and cooperate
in the use of port terminals and equipment in an all-water service in the
Asia-U.S. East Coast trade via Panama for a minimum of three years. The
four carriers initiated service under this agreement in March 1995, and
weekly service is currently expected to commence by August 1995.
Additionally, in September 1994, the four carriers and Malaysian
International Shipping Corporation BHD signed an agreement to exchange
vessel space, coordinate vessel sailings and cooperate in the use of port
terminals and equipment for ocean transportation services in the Asia-Europe
trade through 2001. The carriers currently expect to commence service under
the agreement in January 1996. The company entered the Asia-Europe trade in
March 1995 by chartering vessel space through MOL.
The Asia-U.S. West Coast, Asia-U.S. East Coast and Asia-Europe
alliance agreements are all expected to be fully implemented by late 1995 or
early 1996. Under the terms of the three agreements, alliance partners
contribute and are allocated vessel space, which may be adjusted from time
to time. The value of vessel space provided by the company to the alliance
is less than the value of the total capacity allocated to it through the
alliance, resulting in an annual net cash purchase commitment from the
company to its alliance partners currently estimated to be $29 million,
beginning in 1996. For 1995, the company currently estimates its net
purchase commitment to its alliance partners for vessel space in the Asia-
U.S. East Coast and Asia-Europe trades to be approximately $35 million.
Agreements covering terminal and equipment sharing among the alliance
partners have not been finalized, and the company's net cash commitment, if
any, to the alliance partners for these services cannot be determined at
this time.
<PAGE>
In April 1994, the company and Transportacion Maritima Mexicana
("TMM"), a Mexican transportation company, entered into an agreement
enabling them to reciprocally charter vessel space for a period of three
years. Under the agreement, cargo is being transported between major Asian
ports and certain ports on the Pacific Coast of the U.S. and Mexico. Each
party is committed to purchase a minimum amount of vessel space at contract
rates and may buy available extra space as needed. The company's minimum
space purchase commitment exceeds that of TMM by approximately $5 million
per year.
The company is party to an Operating-Differential Subsidy ("ODS")
agreement with the U.S. government, expiring on December 31, 1997, which
provides for payment by the U.S. government to partially compensate the
company for the relatively greater expense of vessel operation under U.S.
registry. ODS payments to the company were approximately $16 million in
each of the first quarters of 1995 and 1994, and totaled $61 million in
1994.
In June 1992, the Bush Administration announced that no new ODS
agreements would be entered into and existing ODS agreements would be
allowed to expire. The Clinton Administration and Congress have been
reviewing U.S. maritime policy. Proposed maritime support legislation
introduced in 1994 was not enacted. The Administration's 1995 budget
includes a proposal for a 10-year subsidy program with $100 million in
annual payments to be requested and appropriated on a year-to-year basis.
The company is not able to predict whether or when maritime support
legislation will be enacted or what terms such legislation may have, if
enacted.
While the company continues to encourage efforts to enact maritime
support legislation, prospects for passage of a program acceptable to the
company are unclear. Accordingly, in July 1993, the company filed
applications with the United States Maritime Administration ("MarAd") to
operate under foreign flag its six C11-class containerships, presently under
construction, and to transfer to foreign flag seven of the 15 U.S.-flag
containerships in its trans-Pacific fleet. On November 15, 1994, MarAd
issued a waiver that will allow the company to operate its C11-class vessels
under foreign registry on the condition that the vessels be returned to U.S.-
flag in the event acceptable maritime reform legislation is enacted. The
remaining application is still pending and no assurances can be given as to
whether, or when, the authority will be granted.
In 1995, lawsuits were filed against the company and the U.S.
Department of Transportation by certain of the company's unions and union
members challenging MarAd's November 15, 1994 action granting the company
the waiver allowing it to operate its C11-class vessels under foreign flag.
While no assurances can be given, management believes these legal challenges
will not be successful.
Management of the company believes that, in the absence of ODS or an
equivalent government support program, it will be generally no longer
commercially viable to own or operate containerships in foreign trade under
the U.S. flag because of the higher labor costs and the more restrictive
design, maintenance and operating standards applicable to U.S.-flag liner
vessels. The company continues to evaluate its strategic alternatives in
light of the pending expiration of its ODS agreement and the uncertainties
as to whether a new U.S. government maritime support program acceptable to
the company will be enacted, whether sufficient labor efficiencies can be
achieved through the collective bargaining process, and whether the
company's remaining application to flag its vessels under foreign registry
will be approved. While no assurances can be given, management of the
<PAGE>
company believes that it will be able to structure its operations to enable
it to continue to operate on a competitive basis without direct U.S.
government support.
Recently, proposals have been made to substantially repeal the
Shipping Act of 1984 (the "Act"), which provides the company with certain
immunity from antitrust laws, and eliminate the Federal Maritime Commission,
which administers the Act. Related hearings have been held before a
subcommittee of the U.S. House of Representatives Transportation and
Infrastructure Committee. The company is unable to predict whether or to
what extent efforts to eliminate or amend the Act may be successful, but the
repeal of the Act could have a material adverse impact on the competitive
environment in which the company operates and on the company's results of
operations.
The company and Matson Navigation Company, Inc. ("Matson") have
signed a memorandum of understanding to pursue negotiations to form a ten-
year alliance between the companies. Pursuant to the terms of this
alliance, the company would sell to Matson its three C9-class and three C8-
class containerships, its Guam assets, and discontinue its westbound service
to Guam. Matson would operate a five-ship Far East to U.S. West Coast
service, including the C9-class vessels, one C8-class vessel and a Matson
vessel. The company would have use of the vessels' eastbound capacity, and
Matson would have use of their westbound capacity, with a certain number of
container slots to be held available to the company for the westbound
service and to Matson for the eastbound service. The company expects the
sale of the ships and the Guam assets to be completed in late-October, and
to start services under the alliance in early 1996, subject to governmental
approvals. There can be no assurances, however, that negotiations with
Matson will be successful or governmental approvals will be received.
In January 1995, the company and Columbia Shipmanagement Ltd., a
Cyprus company ("Columbia"), entered into an agreement under which Columbia
would provide crewing, maintenance, operations and insurance for the
company's six C11-class vessels for a per diem fee per vessel. The
agreement may be terminated at any time by either party with notice.
<TABLE>
NORTH AMERICA TRANSPORTATION (1)
<CAPTION>
First Quarter First Quarter
(Volumes in thousands of FEUs) 1995 Change 1994
_______________________________________________________________________________________________
Revenues (2) (In millions)
<S> <C> <C> <C>
Stacktrain $ 146 10% $ 133
Non-Stacktrain 68 19% 57
_______________________________________________________________________________________________
Stacktrain Volumes
North America 110.3 11% 99.7
International 51.5 6% 48.4
_______________________________________________________________________________________________
Stacktrain Average
Revenue per FEU (2) $ 1,321 (1%) $ 1,335
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
(1) Volumes and revenue per FEU data are based upon shipments originating
during the period, which differs from the percentage-of-completion
method used for financial reporting purposes.
(2) In addition to North America third party business, the transportation
of containers for the company's international customers is a
significant component of its stacktrain operations. These shipments
are represented above as International Stacktrain Volumes and, since
they are eliminated in consolidation, are excluded in Revenues and
Stacktrain Average Revenue per FEU.
<PAGE>
Revenues from the company's North America transportation operations
increased in the first quarter of 1995 compared with first quarter of 1994,
as a result of higher stacktrain volumes. The increase in stacktrain
volumes in the first quarter 1995 was due to improvement in the U.S. economy
and domestic transportation market, increases in Mexican and Canadian
shipments, particularly automotive shipments between the U.S. and Mexico,
and containers and chassis added to its fleet during 1994, which enabled the
company to meet increasing demand. Stacktrain average revenue per FEU
decreased in the first quarter of 1995 compared with the first quarter of
1994 due to a change in cargo mix. The company's North America non-
stacktrain revenues also improved in the first quarter of 1995 compared with
the same period in 1994, primarily due to increased volumes.
On May 9, 1995, the company and Burlington Motor Carriers ("BMC")
signed an agreement in principle to transfer the company's U.S. trucking
operations to BMC. The transaction, which is subject to certain conditions,
is expected to be completed in early June and is not expected to have a
material effect on the company's operating results.
During the remainder of 1995, the company expects growth in volumes
compared with 1994 in the North America stacktrain markets as the U.S. economy
continues to improve and more cargo converts from long-haul trucking to
stacktrain service. There can be no assurances, however, that such demand
will materialize. Additionally, growth in demand for stacktrain services to
and from Mexico is dependent upon conditions in the Mexican economy, which
have been extremely volatile recently, and the extent to which U.S. automakers
continue operations in Mexico, among other factors.
<TABLE>
TRANSPORTATION OPERATING EXPENSES
<CAPTION>
(In millions, except First Quarter First Quarter
Operating Cost per FEU) 1995 Change 1994
_______________________________________________________________________________________________
<S> <C> <C> <C>
Land Transportation $ 280 9% $ 257
Cargo Handling 152 10% 139
Vessel, Net 89 3% 86
Transportation Equipment 55 6% 52
Information Systems 15 4% 14
Other 96 11% 86
_______________________________________________________________________________________________
Total $ 687 8% $ 634
_______________________________________________________________________________________________
Operating Cost per FEU (1) $ 2,715 4% $ 2,619
_______________________________________________________________________________________________
Percentage of Transportation Revenue 93% 91%
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
(1) Operating expenses used in this calculation include costs associated
with certain International and North America revenues that are not
volume related.
Land transportation expenses increased in the first quarter of 1995
from the first quarter of 1994, due to an increase in North America
stacktrain volumes and an increase in international intermodal volumes. The
weakening of the U.S. dollar relative to Asian currencies, particularly the
Japanese yen, which averaged 94 to $1 in the first quarter of 1995 compared
with 108 to $1 in last year's first quarter, resulted in higher cargo
handling expenses. Additionally, the increase in cargo handling expenses in
the first quarter of 1995 compared with 1994 was attributable to higher
stevedoring labor rates in Asia and the U.S., and increased volumes. Vessel
expenses increased in the first quarter of 1995 compared with last year's
first quarter due to an increase in fuel cost from $11 per barrel in the
first quarter of 1994 to $16 per barrel in the first quarter of 1995, and
charter hire activity resulting from additional vessel space purchased from
TMM and through other alliance partners in the Asia-Europe and Asia-Latin
America markets. The increase was partially offset by a reduction of
insurance claims expense. Transportation equipment costs increased in the
<PAGE>
first quarter of 1995 compared with the first quarter of 1994 due to
increased container lease costs and increased repair and maintenance costs.
The increase in information systems costs was due to increased
telecommunications costs in the first quarter of 1995. Other operating
expenses increased in the first quarter of 1995 compared with the first
quarter of 1994 due to unfavorable foreign currency changes in Asia,
particularly in Japan. Also contributing to the increase in other operating
expenses in the first quarter of 1995 were costs related to eliminating the
company's administrative offices in Hong Kong, and costs for the start-up of
the Asia-U.S. East Coast alliance and the Asia-Europe service.
General and administrative expenses increased 10% in the first
quarter of 1995 compared with the first quarter of 1994, primarily due to
increases in employee relocation costs and ongoing support costs related to
a new financial system. Expenditures were approximately $7 million and $8
million for the first quarters of 1995 and 1994, respectively, for corporate
initiatives to improve the company's financial and order cycle processes.
Spending on corporate initiatives are currently estimated to total $33
million in 1995 and $12 million in 1996. The company currently anticipates
that during 1995 and 1996, between 550 and 900 positions will be eliminated
as a result of order cycle process changes, and approximately 50 positions
will be eliminated as a result of financial process changes. The actual
number of position reductions, however, will not be finally determined until
design and implementation of the new processes in 1995 and 1996, and costs
associated with eliminating these positions cannot yet be estimated.
Anticipated cost savings resulting from these initiatives are expected to be
realized in future years, but no assurances can be given as to the timing or
amount of these savings. Depreciation and amortization expense remained
constant in the first quarter of 1995 compared with the first quarter of
1994. Net interest expense decreased from $4 million in the first quarter
of 1994 to $2 million in the first quarter of 1995. Interest income in the
first quarter of 1995 increased due to higher cash balances and higher
interest rates, more than offsetting the increase in interest expense
resulting from a full quarter of interest expense from the mid-January 1994
issuance of the $150 million Senior Debentures. Interest and depreciation
expense will increase beginning with the second quarter of 1995 compared
with the comparable 1994 periods as the company takes delivery of its new
C11-class vessels.
The company's estimated income tax rate for 1995 is 38%, compared
with 34% in 1994. The 1994 income tax rate includes the effect of revisions
of prior years' estimated tax liabilities.
<PAGE>
<TABLE>
LIQUIDITY AND CAPITAL RESOURCES
<CAPTION>
(In millions)
April 7 December 30
As of: 1995 1994
_______________________________________________________________________________________________
Cash, Cash Equivalents and
<S> <C> <C>
Short-Term Investments $ 199 $ 255
Working Capital 176 206
Total Assets 1,626 1,664
Long-Term Debt and Capital
Lease Obligations (1) 379 391
_______________________________________________________________________________________________
April 7 April 8
For the quarter ending: 1995 1994
_______________________________________________________________________________________________
Cash Provided by Operations $ 0 $ 29
_______________________________________________________________________________________________
Net Capital Expenditures
Ships $ 20 $ 6
Containers, Chassis and Rail Cars 8 6
Leasehold Improvements and Other 10 8
_______________________________________________________________________________________________
Total $ 38 $ 20
_______________________________________________________________________________________________
Financing Activities
Borrowings $ 147
Repayment of Debt and Capital Leases $ (12) (11)
Dividend Payments (4) (4)
_______________________________________________________________________________________________
_______________________________________________________________________________________________
</TABLE>
(1) Includes current and long-term portions.
In November 1993, the company issued $150 million of 10-year Senior
Notes at an effective interest rate of 7.3%, and in January 1994, issued
$150 million of 30-year Senior Debentures at an effective interest rate of
8.2%. A portion of the proceeds from the issuance of this debt was used to
repay $72 million of bank borrowings, and the remainder will be used to
finance vessel purchases, other capital expenditures and for general
corporate purposes. The remaining proceeds have been invested in commercial
paper and other cash instruments.
In 1993, the company began a fleet modernization program pursuant to
which it has placed orders for the construction of six new C11-class
containerships ("C11s") and three new Kl0-class containerships ("K10s") for
an aggregate cost of approximately $730 million. OOCL has placed orders to
purchase six vessels similar in size and speed to the company's C11s. The
company's C11s and OOCL's similar vessels are scheduled to be delivered
during 1995 and 1996. The company and OOCL have agreed to initially operate
six and five of these vessels, respectively, under their existing trans-
Pacific coordinated sailing and slot-sharing agreements, and in late 1995 or
early 1996, under their Asia-U.S. West Coast alliance agreement with MOL.
The deployment of the 11 new C11-type vessels by the company and OOCL,
replacing 14 older vessels, will increase the combined trans-Pacific
capacity of the company and OOCL by approximately 15%. The company
currently expects growth in demand in the trans-Pacific market and believes
that the increase in combined capacity should be sufficient to permit the
company and OOCL to maintain their combined relative market share in that
market. However, other competing ocean carriers have also placed orders for
the construction of new vessels, and no assurances can be given with respect
to anticipated growth in demand, utilization of the increased capacity or
the potential negative impact of the increased capacity on rates.
Additionally, no assurances can be made that the company and OOCL will be
able to maintain their combined market share.
<PAGE>
The C11-class vessels are being constructed by Howaldtswerke-
Deutsche Werft AG, of Germany ("HDW") (three ships) and Daewoo Shipbuilding
and Heavy Machinery, Ltd., of Korea ("Daewoo") (three ships). The total
estimated project cost for the construction of these vessels is $535
million. The company has made progress payments of $99 million, including
progress payments of $16 million in the first quarter of 1995. A remaining
progress payment of $4 million is due in the second quarter of 1995, and the
remaining 80% of each vessel's purchase price is due upon delivery of the
vessel. Delivery dates are scheduled between May and November 1995. In
March 1994, the company entered into a loan agreement with European banks to
finance approximately $400 million of the purchase price of the six C11-
class vessels. Principal payments on any draw-downs would be due in
semiannual installments over a 12-year period commencing six months after
the delivery of each vessel. Interest rates would be based upon various
margins over LIBOR or the banks' cost of funds as elected by the company.
The K10s are being constructed by Daewoo. The total estimated cost
for construction of these vessels is $195 million. The company is engaged
in efforts related to the possible sale of the K10 contracts to third party
investors and the possible formation of a joint venture with certain
alliance partners to charter back these vessels for use in the Asia-Europe
trade. No assurances can be given at this time with respect to whether
these negotiations will be successful. The company has made progress
payments of $18 million to date for these vessels. Remaining installments
totaling $36 million are due in 1995, and the final 70% is due upon delivery
of the vessels in 1996.
Other than vessel progress payments of $16 million, the company's
capital expenditures in the first quarter of 1995 totaled $22 million and
were primarily for purchases of chassis, and terminal and leasehold
improvements. Capital expenditures in 1995 are expected to be approximately
$540 million, including $437 million of vessel costs. The balance is
expected to be spent primarily on terminal equipment in North America and
Asia, terminal improvements in North America and chassis and computer
systems. The company has outstanding purchase commitments to acquire
cranes, facilities, equipment and services totaling $84 million. Other than
vessel progress payments of $4 million, the company's capital expenditures
in the first quarter of 1994 were primarily for purchases of chassis,
leasehold improvements and an office in Mexico.
The company has a credit agreement with a group of banks which
provides for an aggregate commitment of up to $200 million through March
1999. The credit agreement contains, among other things, various financial
covenants that require the company to meet certain levels of interest
coverage, leverage and net worth. The borrowings bear interest at rates
based upon various indices as elected by the company. The annual commitment
fee is a maximum of one-half of one percent of the available amount. There
have been no borrowings under this agreement.
As an alternative to borrowing under its credit agreement, the
company has an option under that agreement to sell up to $150 million of
certain of its accounts receivable to the banks. This alternative is
subject to less restrictive financial covenants than the borrowing option.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The company is a party to various pending legal proceedings, claims
and assessments arising in the course of its business activities, including
actions relating to trade practices, personal injury or property damage,
alleged breaches of contracts, torts, labor matters, employment practices,
tax matters and miscellaneous other matters. Some of these proceedings
involve claims for punitive damages, in addition to other specific relief.
Among these actions are approximately 1,600 cases pending against
the company, together with numerous other ship owners and equipment
manufacturers, involving injuries or illnesses allegedly caused by exposure
to asbestos or other toxic substances on ships.
The company insures its potential liability for bodily injury to
seamen through mutual insurance associations. Industry-wide resolution of
asbestos-related claims and resolutions of claims against bankrupt shipping
companies at higher than expected amounts could result in additional
contributions to those associations by the company and other association
members.
In December 1989, the government of Guam filed a complaint with the
Federal Maritime Commission ("FMC") alleging that American President Lines,
Ltd. and an unrelated company charged excessive rates for carrying cargo
between the U.S. and Guam, in violation of the Shipping Act, 1916 and the
Intercoastal Shipping Act of 1933, and seeking an undetermined amount of
reparations. Three private shippers are also complainants in this
proceeding. Evidentiary hearings have been concluded and a decision by the
FMC is not expected until 1996.
In April 1994, a lawsuit, Hockert Pressman & Flohr Money Purchase
Plan, et. al. vs. American President Companies, Ltd., et. al., was filed
against the company and certain of its officers in United States District
Court for the Northern District of California. The suit alleges that the
company and certain officers made false and misleading statements about the
company's operating and financial performance in violation of federal
securities laws, and seeks unspecified damages on behalf of a purported
class of stockholders who purchased shares of the company's common stock
during the period October 7, 1993 through March 30, 1994. The company
believes that it has meritorious defenses and intends to defend itself
vigorously against this lawsuit.
Based upon information presently available, and in light of legal
and other defenses and insurance coverage and other potential sources of
payment available to the company, management does not expect the legal
proceedings described, individually or in the aggregate, to have a material
adverse impact on the company's consolidated financial position or
operations.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
The following documents are exhibits to this Form 10-Q:
Exhibit No. Description of Document
_____________________________________________________________________________
3.1 Integrated copy of the amended Certificate of Incorporation.
10.1* 1995 Stock Bonus Plan of the company, effective May 2, 1995, filed
with the company's Proxy Statement (File No. 1-8544) for the
Annual Meeting of Shareholders held on May 2, 1995.**
10.2 American President Companies, Ltd. Retirement Plan, second
amendment and restatement effective January 1, 1993.**
10.3 Employment Agreement between the company and L. Dale Crandall
dated February 1, 1995.**
27 Financial Data Schedules filed under Article 5 of Regulation S-X
for the first quarter ended April 7, 1995.
*Incorporated by Reference
**Denotes management contract or compensatory plan.
(b) Reports on Form 8-K
No current report on Form 8-K was filed during the quarter for
which this report on Form 10-Q is filed.
<PAGE>
American President Companies, Ltd. and Subsidiaries
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.
AMERICAN PRESIDENT COMPANIES, LTD.
Dated: May 17, 1995 By /s/ William J. Stuebgen
_______________________________
William J. Stuebgen
Vice President,
Controller and
Chief Accounting Officer
PC:11938007
[THIS DOCUMENT CONSTITUTES AN INTEGRATED COPY OF THE REGISTRANT'S CERTIFICATE OF
INCORPORATION, AS AMENDED THROUGH THE DATE OF THIS FILING. THE DOCUMENTS SO
INTEGRATED ARE ON FILE WITH THE DELAWARE SECRETARY OF STATE.]
CERTIFICATE OF INCORPORATION
OF
AMERICAN PRESIDENT COMPANIES, LTD.
First: The name of this Corporation is:
American President Companies, Ltd.
Second: The address of its registered office in the State of Delaware is
32 Loockerman Square, Suite L-100, City of Dover 19901, County of Kent. The
name of its registered agent at such address is The Prentice-Hall Corporation
System, Inc.
Third: The nature of the business of this Corporation and the objects or
purposes proposed to be transacted, promoted or conducted by it are to engage in
and transact a shipping and transportation business in any and all of its
branches throughout the world; to buy or otherwise acquire and sell, dispose of,
and in any manner deal with and in real property, improved or unimproved,
throughout the world; and to engage in any other lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware. The foregoing shall be construed both as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the powers of this Corporation.
Fourth:
A. Capital Stock. The total number of shares of stock which this
Corporation shall have authority to issue is sixty-five million (65,000,000).
Of said shares sixty million (60,000,000) shall be Common Stock, with a par
value of One Cent ($.01) each, and five million (5,000,000) shall be Preferred
Stock, with a par value of One Cent ($.01) each.
B. Authorization of Board of Directors To Establish Series of
Preferred Stock and Fix Consideration Therefor. The Board of Directors is
hereby expressly authorized, within the limitations and restrictions stated
herein from time to time, by resolution:
(i) to divide the Preferred Stock into series;
(ii) to fix the consideration for which such Preferred
Stock shall be issued;
(iii) to determine the voting powers of each such
series;
(iv) to determine and fix the number of shares which
will constitute any such series and the distinctive designation
of each series;
(v) to make any such series of stock subject to
redemption at such time or times and at such price or prices as
shall be stated and expressed in such resolution;
(vi) to determine whether or not the shares of such
series shall be subject to the operation of a retirement or
sinking fund and, if so subject, the extent to and the manner in
which it shall be applied to the purchase or redemption of the
shares of such series and the terms and provisions relative to
the operation thereof;
(vii) to fix the rights of the holders of stock of each
series of Preferred Stock to receive dividends at such rates, on
such conditions and at such times as shall be stated and
expressed in the resolution and whether payable in preference to,
or in relation to, the dividends payable on any other class or
classes of stock or other series of the same class and whether
cumulative or noncumulative as shall be so stated and expressed.
(viii) to fix the rights of the holders of the stock of
each series upon the dissolution of, or upon any distribution of
the assets of, this Corporation;
(ix) to make any series of Preferred Stock convertible
or automatically converted into or exchangeable for shares of any
other class or classes or of any other series of the same or any
other class or classes of the stock of this Corporation at such
price or prices or at such rates of exchange and with such
adjustments as shall be stated and expressed in such resolution;
and
(x) to determine whether or not the shares of any series
shall be subject or entitled to any other preferences, and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions which shall be stated
and expressed in such resolution and which shall not be
inconsistent with the terms and provisions of this Article
Fourth.
1. Series A Participating Preferred Stock.
(a) Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 500,000.
(b) Dividends and Distributions.
(i) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash
(or, as provided below, in kind) on the fifteenth day of March, June, September
and December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (1) $10.00 or (2) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $.01 per share, of the Corporation (the "Common Stock")
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Junior Participating Preferred
Stock. In the event the Corporation shall at any time after April 7, 1986
(a) declare any dividend on Common Stock payable in shares of Common Stock,
(b) subdivide the outstanding Common Stock into a greater number of shares, or
(c) combine the outstanding Common Stock into a smaller number of shares, by
reclassification or otherwise, whether or not any Series A Preferred Stock is
then outstanding, then in each such case the amounts to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately prior
to such event under clause (ii) of the preceding sentence shall be adjusted by
multiplying each such amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event, provided that in the case of a
stock dividend in which the aggregate number of shares issuable pursuant thereto
is less than 15% of the shares of Common Stock outstanding on the record date
for determining the stockholders entitled to such dividend then, in its sole
discretion, the Corporation may determine that no such adjustment shall be
required.
(ii) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (i) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on
the Series A Junior Participating Preferred Stock shall nevertheless be declared
and made payable on such subsequent Quarterly Dividend Payment Date.
(iii) Dividends shall begin to be payable and to accrue on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of
Series A Junior Participating Preferred Stock, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Junior Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
(c) Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(i) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after April 7,
1986 (1) declare any dividend on Common Stock payable in shares of Common Stock,
(2) subdivide the outstanding Common Stock into a greater number of shares, or
(3) combine the outstanding Common Stock into a smaller number of shares, by
reclassification or otherwise, whether or not any Series A Preferred Stock is
then outstanding, then in each such case the number of votes per share to which
holders of shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock outstanding immediately prior to such event.
(ii) Except as otherwise provided herein or by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(iii)(a) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "Default Period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each Default Period, the holders of
Preferred Stock, voting as a class, irrespective of series, shall have the right
to elect two (2) Directors.
(b) During any Default Period, such voting right of the holders of
Series A Junior Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (c) of this Section 1(c)(iii) or
at any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing Default Period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
Default Period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Junior
Participating Preferred Stock.
(c) Unless the holders of Preferred Stock shall, during an existing
Default Period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which holders
of Preferred Stock are entitled to vote pursuant to this paragraph (c) shall be
given to each holder of record of Preferred Stock by mailing a copy of such
notice to him at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20 days
and not later than 60 days after such order or request or, in default of the
calling of such meeting within 60 days after such order or request, such meeting
may be called on similar notice by any stockholder or stockholders owning in the
aggregate not less than 108 of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (c), no such
special meeting shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(d) In any Default Period the holders of Common Stock, and other classes
of stock of the Corporation if applicable, shall continue to be entitled to
elect the whole number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two (2) Directors voting as a class, after
the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the Default Period, and
(y) any vacancy in the Board of Directors may (except as provided in
paragraph (b) of this Section 1(c)(iii) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of stock
which elected the Director whose office shall have become vacant. References in
this paragraph (iii) to Directors elected by the holders of a particular class
of stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(e) Immediately upon the expiration of a Default Period, (x) the right
of the holders of Preferred Stock as a class to elect Directors shall cease,
(y) the term of any Directors elected by the holders of Preferred Stock as a
class shall terminate, and (z) the number of Directors shall be such number as
may be provided for in the Certificate of Incorporation or By-laws irrespective
of any increase made pursuant to the provisions of paragraph (b) of this Section
1(c)(iii) (such number being subject, however, to change thereafter in any
manner provided by law or in the Certificate of Incorporation or By-laws). Any
vacancies in the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled by a majority of the remaining
Directors.
(iv) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
(d) Certain Restrictions.
(i) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 1(b) hereof are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
(1) declare or pay dividends (except a dividend payable in Common Stock)
on, make any other distributions on, or redeem or purchase or otherwise acquire
for consideration any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Junior
Participating Preferred Stock, except for purchases
pursuant to the terms of the Corporation's employee benefit plans or agreements
entered into thereunder;
(2) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, except dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(3) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Participating
Preferred Stock; or
(4) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of stock ranking on
a parity with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(ii) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (i) of
this Section 1(d), purchase or otherwise acquire such shares at such time and in
such manner.
(e) Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
(f) Liquidation, Dissolution or Winding Up.
(i) Upon any voluntary liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (1) the Series A Liquidation
Preference by (2) 100, subject to the provisions for adjustment as hereinafter
set forth (such number in clause (ii), the "Adjustment Number"). Following the
payment of the full amount of the Series A Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series A Junior Participating
Preferred Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed, on a per share basis, in the ratio of 100 to 1 with respect to such
Preferred Stock and Common Stock, respectively.
(ii) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Junior Participating Preferred Stock,
then such remaining assets shall be distributed ratably to the holders of such
parity shares in proportion to their respective liquidation preferences.
(iii) In the event the Corporation shall at any time after April 7, 1986
(1) declare any dividend on Common Stock payable in shares of Common Stock,
(2) subdivide the outstanding Common Stock into a greater number of shares, or
(3) combine the outstanding Common Stock into a smaller number of shares, by
reclassification or otherwise, whether or not any Series A Preferred Stock is
then outstanding, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock outstanding immediately prior to such
event.
(g) Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after April 7, 1986
(1) declare any dividend on Common Stock payable in shares of Common Stock,
(2) subdivide the outstanding Common Stock into a greater number of shares, or
(3) combine the outstanding Common Stock into a smaller number of shares, by
reclassification or otherwise, whether or not any Series A Preferred Stock is
then outstanding, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Junior
Participating Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock outstanding immediately prior to such event.
(h) No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
(i) Ranking. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
(j) Amendment. The Certificate of Incorporation and the By-laws of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least 66-2/3% of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a class.
(k) Fractional Shares. Series A Junior Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
2. 9% Series C Cumulative Convertible Preferred Stock, par
value $.01 per share.
(a) Designation, Amount and Stated Value. The series of preferred stock
to which this Section 2 relates shall be designated as the "9% Series C
Cumulative Convertible Preferred Stock" (the "Series C Preferred Stock") and the
number of shares constituting such series shall be 2,000,000, which number may
be decreased (but not increased) by the Board of Directors without a vote of
stockholders; provided, however, that such number may not be decreased below the
number of then currently outstanding shares of Series C Preferred Stock. The
Series C Preferred Stock shall have a stated value of $50 per share (the "Stated
Value").
(b) Dividends and Distributions.
(i) The holders of record of shares of Series C Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of funds
legally available for the payment of dividends, cumulative cash dividends at the
annual rate per share of 9% of the Stated Value of such shares. Dividends shall
be payable quarterly, in arrears, on the 15th day of March, June, September and
December in each year (each such date being referred to herein as a "Dividend
Payment Date"), commencing on the first Dividend Payment Date which is at least
fifteen (15) days after the date of original issue of any Series C Preferred
Stock. In addition, holders of record of shares of Series C Preferred Stock
shall be entitled to receive dividends paid in accordance with the terms of the
Rights Agreement, dated as of March 26, 1986, as amended or as may be amended
from time to time (the "Rights Agreement"), between the Corporation and
Manufacturers Hanover Trust Company of California, as Rights Agent, or any
successor rights agreement entered into by the Corporation.
(ii) Dividends payable pursuant to paragraph (i) of this Section 2(b)
shall begin to accrue on each share of Series C Preferred Stock on a daily basis
and be cumulative from September 16, 1988, whether or not earned or declared.
The amount of dividends so payable shall be determined on the basis of twelve
30-day months and a 360-day year. Accrued by unpaid dividends shall not bear
interest. Dividends paid on the shares of Series C Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series C Preferred Stock entitled
to receive payment of a dividend declared thereon, which record date shall be no
more than sixty (60) days prior to the date fixed for the payment thereof.
(c) Voting Rights. In addition to any voting rights provided
elsewhere in the Corporation's Certificate of Incorporation, as amended and as
it may be amended or restated from time to time (the "Certificate of
Incorporation"), and any voting rights provided by law, the holders of shares of
Series C Preferred Stock shall have the following voting rights:
(i) Except as otherwise provided herein, each holder of
shares of Series C Preferred Stock shall be entitled to the
number of votes equal to the largest number of full shares of
Common Stock, par value $.01 per share (the "Common Stock"), into
which all of such holder's shares of Series C Preferred Stock are
convertible as of the record date for determining the
stockholders entitled to vote on such matter or, if no record
date is set, the date of such stockholder action (disregarding
for purposes of this paragraph (a) any restriction set forth in
Section 2(h) hereof on the ability of the holder to convert such
share). Except as otherwise provided by this Section 2(c), or by
law, the shares of Series C Preferred Stock and the shares of
Common Stock (and any other shares of capital stock of the
Corporation at the time entitled thereto) shall vote together as
one class of all matters submitted to a vote of stockholders of
the Corporation.
(ii) So long as the shares of Series C Preferred Stock
issued and outstanding represent at least seven percent (7%) of
the Voting Power of the Corporation or for so long as all shares
of Series C Preferred Stock outstanding as of September 30, 1988
remain outstanding, the affirmative vote of the holders of at
least 66-2/3% of the outstanding shares of Series C Preferred
Stock, voting separately as a single class, in person or by
proxy, at a special or annual meeting of stockholders called for
such purpose shall be necessary to (1) effect (x) the merger or
consolidation of the Corporation with or into any other Person,
or (y) any sale or other transfer by the Corporation, or one or
more of its Subsidiaries, in one transaction or a series of
related transactions, of assets or earning power aggregating more
than 50% of the assets or earning power of the Corporation and
its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Corporation or any Subsidiary of the Corpora
tion), or (z) any recapitalization of the outstanding capital
stock of the Corporation, unless such transaction has been
approved by a majority of the Independent Directors of the
Corporation prior to submitting such transaction to the stock
holders of the Corporation for their approval, (2) authorize the
issuance of, or issue, any additional shares of Series C
Preferred Stock in excess of 2,000,000 shares, (3) authorize the
issuance of, or issue, any class or series of the Corporation's
capital stock having any preference or priority as to dividends
or upon liquidation, dissolution or winding up ("Senior Stock")
over the Series C Preferred Stock, (4) reclassify any share of
stock into Series C Preferred Stock or Senior Stock,
(5) authorize the issuance of any class or series of the
Corporation's capital stock (other than additional shares of the
Corporation's existing Common Stock or capital stock issued
pursuant to any rights agreement entered into by the Corporation
which contains provisions for participation by the shares of
Series C Preferred Stock at least as favorable as those set forth
in the Rights Agreement) having voting and other rights which are
substantially more extensive than the corresponding rights of the
$3.50 Series B Convertible Exchangeable Preferred Stock, par
value $.01 per share (the "Series B Preferred Stock"), of the
Corporation as outstanding on the date hereof, or (6) amend,
repeal or change any of the provisions of the Certificate of
Incorporation or the provisions of the Certificate of Designation
with respect to the Series C Preferred Stock if such amendment,
repeal or change would alter or change the powers, preferences or
special rights of the shares of the Series C Preferred Stock so
as to affect them adversely.
(iii) In addition to the voting rights set forth herein,
if at any time accrued dividends on the Series C Preferred Stock
or any shares of the Corporation ranking on a parity as to divi
dends and upon liquidation, dissolution or winding up ("Parity
Stock") with the Series C Preferred Stock shall not have been
paid in an aggregate amount equal to or greater than six (6)
quarterly dividends on the shares of Series C Preferred Stock or
such Parity Stock at the time outstanding, then, and in any such
event, the number of Directors then constituting the entire Board
of Directors of the Corporation shall automatically be increased
by two (2) Directors and the holders of shares of Series C
Preferred Stock and the holders of shares of Parity Stock, voting
together as a single class, shall be entitled to fill such newly
created directorships. Such right to vote as a single class to
elect two (2) Directors shall, when vested, continue until all
dividends in default on the shares of Series C Preferred Stock
and any such Parity Stock shall have been paid in full and, when
so paid, such right to elect two (2) Directors separately as a
class shall cease, subject, always, to the same provisions for
the vesting of such right to elect two (2) Directors separately
as a class in the case of future dividend defaults. At any time
when such right to elect two (2) Directors separately as a class
shall have so vested the Corporation may, and upon the written
request of the holders of record of not less than twenty percent
(20%) of the total number of shares of Series C Preferred Stock
and such Parity Stock then outstanding shall, call a special
meeting of the holders of such shares to fill such newly created
directorships for the election of Directors in the case of such a
written request, such special meeting shall be held within ninety
(90) days after the delivery of such request, and in either case,
at the place and upon the notice provided by law and in the By-
Laws of the Corporation, provided that the Corporation shall not
be required to call such a special meeting if such request is
received fewer than one hundred twenty (120) days before the date
fixed for the next ensuing annual meeting of stockholders of the
Corporation, at which meeting such newly created directorships
shall be filled by the holders of such shares of Series C
Preferred Stock and such Parity Stock.
(iv) So long as any shares of Series C Preferred Stock
are outstanding the Certificate of Incorporation shall contain
and the Board of Directors of the Corporation shall use its best
efforts to ensure that the By-Laws of the Corporation contain
provisions ensuring that the number of Directors of the
Corporation shall at all times be such that the exercise, by the
holders of shares of Series C Preferred Stock and the holders of
shares of Parity Stock, of the right to elect Directors under the
circumstances provided in paragraph (c), will not contravene any
provisions of the By-Laws or the Certificates of Incorporation.
The Series C Preferred Stock shall be entitled to one vote for
each share of Series C Preferred Stock outstanding when
exercising voting rights under paragraph (c) or in connection
with any class vote required by law with outstanding Parity
Stock.
(v) A Director elected pursuant to paragraph (iii) shall
serve until the earlier of (x) the next annual meeting of the
stockholders of the Corporation at which such Director's suc
cessor is to be elected and the election (by the holders of
shares of Series C Preferred Stock and Parity Stock) and qual
ification of his respective successor or (y) the next annual
meeting of the stockholders of the Corporation following the date
upon which all dividends in default on the shares of Series C
Preferred Stock and such Parity Stock shall have been paid in
full. If, prior to the end of the term of any Director elected
as aforesaid, a vacancy in the office of such Director shall
occur during the continuance of a default in dividends on the
shares of Series C Preferred Stock or such Parity Stock by reason
of death, resignation or disability, such vacancy shall be filled
for the unexpired term by the appointment by the remaining
Director elected as aforesaid of a new Director for the unexpired
term of such former Director. If both Directors elected pursuant
to paragraph (iii) cease to serve as Directors before their terms
expire, or if for any other reason the remaining Director elected
as aforesaid shall be unable to elect a new Director for the
unexpired term of such former Director, then in either case the
holders of the Series C Preferred Stock and such Parity Stock
then outstanding and entitled to vote for such Directors may, at
a special meeting of such holders called as provided above, elect
successors to hold office for the unexpired terms of the
Directors whose places shall be vacant.
(d) Certain Restrictions.
(i) Whenever quarterly dividends payable on shares of Series C Preferred
Stock as provided in Section 2(b) hereof are accrued and unpaid as of the most
recent Dividend Payment Date, thereafter and until all such dividends, whether
or not earned or declared, on the outstanding shares of Series C Preferred Stock
shall have been paid in full or declared and set apart for payment, the
Corporation shall not: (1) declare or pay dividends, or make any other
distributions, on any shares of capital stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series C
Preferred Stock, other than dividends or distributions payable in Common Stock;
or (2) declare or pay dividends, or make any other distributions, on any shares
of Parity Stock or the Series C Preferred Stock, other than dividends or
distributions payable in Common Stock, except dividends paid ratably on the
Series C Preferred Stock and all Parity Stock on which dividends are payable or
in arrears, in proportion to the total amounts to which the holders of all such
shares are then entitled.
(ii) Whenever quarterly dividends payable on shares of Series C
Preferred Stock as provided in Section 2(b) hereof are accrued and unpaid as of
the most recent Dividend Payment Date, thereafter and until all such dividends,
whether or not earned or declared, on the outstanding shares of Series C
Preferred Stock shall have been paid in full or declared and set apart for
payment, the Corporation shall not: (1) redeem or purchase or otherwise acquire
for consideration any shares of capital stock ranking (either as to dividends or
upon liquidation, dissolution or winding up) junior to, or on a parity with, the
Series C Preferred Stock; or (2) redeem or purchase or otherwise acquire for
consideration any shares of Series C Preferred Stock (other than by exchanging
Parity Stock therefor).
(iii) The Corporation shall not permit any Subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of capital stock
of the Corporation unless the Corporation could, pursuant to paragraph (ii) of
this Section 2(d), purchase such shares at such time and in such manner.
Nothing contained in this Section 2(d) shall restrict or otherwise
interfere with the issuance of Rights Certificates, the redemption of any
Rights, the exercise of any Rights and the issuance of shares of capital stock
of the Corporation upon the exercise of any Rights, in each case in accordance
with the Rights Agreement or any successor rights agreement entered into by the
Corporation.
(e) Redemption.
(i) Shares of Series C Preferred Stock shall be redeemable for cash at
the sole option and election of the Corporation made in accordance with
paragraph (c) of this Section 2(e), in whole or in part, out of funds legally
available therefor, at any time and from time to time on or after July 31, 1995
at the Stated Value per share, plus any accrued and unpaid dividends, whether or
not earned or declared ("Accrued Dividends"), to the date of redemption. The
Corporation may not purchase or redeem less than all the Series C Preferred
Stock then outstanding if, as of such time, the Corporation has failed to pay
all Accrued Dividends thereon. If less than all shares of Series C Preferred
Stock at the time outstanding are to be redeemed, the shares to be redeemed
shall be selected pro rata.
(ii) On January 31, 2001, the Corporation shall redeem, out of funds
legally available therefor, all outstanding shares of Series C Preferred Stock
by paying therefor in cash the Stated Value per share, plus Accrued Dividends to
such date.
(iii) Notice of any redemption of shares of Series C Preferred Stock
pursuant to paragraph (i) or (ii) of this Section 2(e) shall be mailed at least
fifteen (15), but not more than sixty (60), days prior to the date fixed for
redemption to each holder of shares of Series C Preferred Stock to be redeemed,
at such holder's address as it appears on the transfer books of the Corporation.
In order to facilitate the redemption of shares of Series C Preferred Stock, the
Board of Directors may fix a record date for the determination of shares of
Series C Preferred Stock to be redeemed, not more than sixty (60) days or less
than thirty (30) days prior to the date fixed for such redemption.
(iv) On the date of any redemption being made pursuant to paragraph (i)
or (ii) of this Section 2(e) which is specified in the notice given pursuant to
paragraph (c), the Corporation shall, and at any time after such notice shall
have been mailed and before such date of redemption the Corporation may,
irrevocably deposit for the benefit of the holders of shares of Series C
Preferred Stock called for redemption the funds necessary for such redemption
with a bank or trust company in San Francisco, California, having a capital and
surplus of at least $50,000,000. Any moneys so deposited by the Corporation and
unclaimed at the end of two (2) years from the date designated for such
redemption shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof, and any holder of
shares of Series C Preferred Stock so called for redemption shall look only to
the Corporation for the payment of the redemption price. In the event that
moneys are deposited pursuant to this paragraph (iv) in respect of shares of
Series C Preferred Stock that are converted in accordance with the provisions of
Section 2(h) hereof, such moneys shall, upon such conversion, revert to the
general funds of the Corporation and, upon demand, such bank or trust company
shall pay over to the Corporation such moneys and shall be relieved of all
responsibility to the holders of such converted shares in respect thereof. Any
interest accrued on funds deposited pursuant to this paragraph (iv) shall be
paid from time to time to the Corporation for its own account.
(v) Upon the deposit of funds pursuant to paragraph (iv) in respect of
shares of Series C Preferred Stock called for redemption pursuant to
paragraph (i) or (ii) of this Section 2(e), notwithstanding that any
certificates for such shares shall not have been surrendered for cancellation,
the shares represented thereby shall no longer be deemed outstanding, the rights
to receive dividends thereon shall cease to accrue from and after the date of
redemption designated in the notice of redemption and all rights of the holders
of shares of Series C Preferred Stock called for redemption shall cease and
terminate, excepting only the right to receive the redemption price therefor
(including any Accrued Dividends to the redemption date) and the right to
convert such shares into shares of Common Stock until the close of business on
the Business Day preceding the date of redemption, in accordance with
Section 2(h) hereof.
(f) Reacquired Shares. Any shares of Series C Preferred Stock
converted, redeemed, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of preferred stock, par value $.01 per share, of the Corporation
and may be reissued as part of another series of preferred stock, par value $.01
per share, of the Corporation subject to the conditions or restrictions on
issuance set forth herein.
(g) Liquidation, Dissolution or Winding Up.
(i) Except as provided in paragraph (ii) of this Section 2(g), upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of Common Stock or other capital stock of
the Corporation ranking junior (upon liquidation, dissolution or winding up) to
the Series C Preferred Stock unless, prior thereto, the holders of shares of
Series C Preferred Stock shall, subject to Section 2(h) hereof, have received
the greater of (x) 110% of the Stated Value per share, plus Accrued Dividends to
the date of payment or (y) the Trading Value per share of Series C Preferred
Stock on the date of such payment or (2) to the holders of shares of Parity
Stock, except distributions made ratably on the Series C Preferred Stock and all
such Parity Stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
(ii) If the Corporation shall commence a voluntary case under the
federal bankruptcy laws or any other applicable federal or state bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in any involuntary case under the federal
bankruptcy laws or any other applicable federal or state bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of ninety (90) consecutive days and on account of any such event the
Corporation shall liquidate, dissolve or wind up, no distribution shall be made
(1) to the holders of shares of capital stock of the Corporation ranking junior
(upon liquidation, dissolution or winding up) to the Series C Preferred Stock
unless, prior thereto, the holders of shares of Series C Preferred Stock shall
have received the Stated Value per share, plus Accrued Dividends to the date of
such payment or (2) to the holders of shares of Parity Stock, except
distributions made ratably on the Series C Preferred Stock and all such Parity
Stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up.
(iii) Neither the consolidation, merger or other business combination of
the Corporation with or into any other Person or Persons nor the sale of all or
substantially all of the assets of the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section 2(g).
(h) Conversion. Each share of Series C Preferred Stock may, at the
option of the holder thereof, be converted into shares of Common Stock, on the
terms and conditions set forth in this Section 2(h) at any time on or after
July 31, 1992 or, if earlier, (1) such time as there shall not have been an
Acceptable Chief Executive Officer of the Corporation for a period of one
hundred eighty (180) days; (2) the date any Person acquires directly or
indirectly securities having a majority of the Voting Power of the Corporation,
(3) the date an entire class of Directors not nominated by the Board of
Directors of the Corporation is elected at an annual or special meeting of
stockholders of the Corporation, (4) the date a majority of the Directors of the
Corporation are persons who are not Continuing Directors, (5) the date holders
of shares of Series C Preferred Stock and holders of shares of Parity Stock
shall become entitled to elect two (2) Directors of the Corporation pursuant to
paragraph (iii) of Section 2(c) hereof, or (6) the date the Corporation delivers
a Call Notice relating to a Mandatory Call, as such terms are defined in
Paragraph 6(a)(v) of that certain Preferred Stock Purchase Agreement dated
August 3, 1988 among the Corporation and the initial purchasers of the Series C
Preferred Stock.
(i) Subject to the provisions for adjustment hereinafter set forth, each
share of Series C Preferred Stock shall be convertible in the manner hereinafter
set forth, into the number of fully paid and nonassessable shares of Common
Stock calculated by dividing the Stated Value of $39 (the "Conversion Factor").
The Conversion Factor shall be automatically adjusted immediately after the
close of business on the 30th consecutive Trading Day after August 2, 1988 to an
amount equal to 125% of the average of the Closing Prices of the Common Stock
for the thirty (30) consecutive Trading Days ending on August 2, 1988 and the
thirty (30) consecutive Trading Days ending after August 2, 1988; provided that
in no event shall the Conversion Factor be less than $37 or greater than $40.
(ii) The number of shares of Common Stock into which each share of
Series C Preferred Stock is convertible shall be subject to adjustment from time
to time as follows:
(a) In case the Corporation shall at any time or from
time to time declare a dividend, or make a distribution, on the
outstanding shares of Common Stock in shares of Common Stock or
subdivide or reclassify the outstanding shares of Common Stock
into a greater number of shares of Common Stock or combine or
reclassify the outstanding shares of Common Stock into a smaller
number of shares of Common Stock, then, and in each such case,
the number of shares of Common Stock into which each share of
Series C Preferred Stock is convertible shall be adjusted so that
the holder of each share thereof shall be entitled to receive,
upon the conversion thereof, the number of shares of Common Stock
which the holder of a share of Series C Preferred Stock would
have been entitled to receive after the happening of any of the
events described above had such share been converted immediately
prior to the happening of such event or the record date therefor,
whichever is earlier. An adjustment made pursuant to this
clause (i) shall become effective (1) in the case of any such
dividend or distribution, immediately after the close of business
on the day upon which such dividend or distribution is paid or
distributed, or (2) in the case of any such subdivision,
reclassification or combination, at the close of business on the
day upon which such corporate action becomes effective. No
adjustment shall be made pursuant to this clause (a) in
connection with any transaction to which clause (d) of this
paragraph (ii) applies.
(b) In case the Corporation shall at any time or from
time to time issue rights or warrants to subscribe for or
purchase shares of Common Stock (or securities convertible into
Common Stock) or issue shares of Common Stock (or securities
convertible into shares of Common Stock) (other than shares with
respect to which proper adjustment has previously been made
pursuant to this clause (b) of Section 2(h)(ii)) at a price per
share (or having a conversion price per share) less than the
Current Market Price per share of Common Stock as of the date of
issuance of such rights, warrants, shares or convertible
securities, then, and in each such case, the number of shares of
Common Stock into which each share of Series C Preferred Stock is
convertible shall be adjusted so that the holder of each share
thereof shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying a. the number of shares of Common Stock into which
such share was convertible on the day immediately prior to such
date by b. a fraction, the numerator of which shall be the sum of
(1) the number of shares of Common Stock outstanding on such date
and (2) the number of additional shares of Common Stock issued
(or issuable upon exercise of such rights or warrants or into
which the convertible securities may convert), and the
denominator of which shall be the sum of (1) the number of shares
of Common Stock outstanding on such date and (2) the number of
shares of Common Stock which the aggregate consideration
receivable by the Corporation for the total number of shares of
Common Stock so issued (or issuable upon exercise of such rights
or warrants or into which the convertible securities may convert)
would purchase at such Current Market Price per share of Common
Stock on such date. An adjustment made pursuant to this
clause (b) shall be made on the next Business Day following the
date on which any such issuance is made and shall be effective
retroactively immediately after the close of business on such
date. For purposes of this clause (b) the aggregate
consideration receivable by the Corporation in connection with
the issuance of such rights or warrants, of shares of Common
Stock or of securities convertible into shares of Common Stock
shall be deemed to be equal to the sum of the aggregate offering
price (before deduction of reasonable underwriting discounts or
commissions and expenses) of all such securities plus the minimum
aggregate amount, if any, payable upon exercise of such rights or
warrants or conversion of any such convertible securities into
shares of Common Stock. The issuance of any options, warrants,
rights, convertible securities or shares of Common Stock (whether
treasury shares or newly issued shares) pursuant to (A) a
dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock
requiring an adjustment in the conversion ratio pursuant to
clause (a) of this paragraph (ii), or (B) any employee benefit
plan of the Corporation, up to an aggregate of 1,500,000 shares
of Common Stock issued after the date hereof or issued pursuant
to options, warrants, rights or convertible securities granted or
issued after the date hereof, or (C) any exercise or conversion
of any option, warrant, right or convertible security outstanding
as of the date hereof, or (D) the terms of a firmly committed
underwritten public offering, or (E) in connection with any
offering or sale of Common Stock in which the holders of Series C
Preferred Stock participate, shall not be deemed to constitute an
issuance of Common Stock or convertible securities by the
Corporation to which this clause (b) applies. All shares of
Common Stock issued and all shares of Common Stock reserved for
issuance pursuant to any outstanding options, warrants, rights or
convertible securities deemed not to constitute an issuance
pursuant to the previous sentence shall nevertheless be deemed to
be outstanding for all computations pursuant to this Section 2(h)
until such shares are no longer outstanding or such options,
warrants, rights or convertible securities shall expire. Upon
the expiration of any options, warrants or rights or the
termination of any rights to convert any convertible securities
for which an adjustment has been made pursuant to this clause
(b) (without exercise of such options, warrants, rights or
convertible securities), the adjustments shall forthwith be
reversed to effect such rate of conversion as would have been in
effect at the time of such expiration or termination had such
options, warrants or rights or convertible securities, to the
extent outstanding immediately prior to such expiration or
termination, never been issued. No adjustment shall be made
pursuant to this clause (b) in connection with any transaction to
which clause (d) of this paragraph (ii) applies.
(c) In case the Corporation shall at any time or from
time to time declare, order, pay or make a dividend or other
distribution (including without limitation any distribution of
stock or other securities or property or rights or warrants to
subscribe for securities of the Corporation or any of its
Subsidiaries) by way of dividend or spin off, on its Common
Stock, other than (A) regular quarterly dividends payable in
cash, (B) shares of Common Stock which are referred to in
clause (a) of this paragraph (ii), or (C) rights or warrants
which are referred to in clause (b) of this paragraph (ii), then,
and in each such case, the number of shares of Common Stock into
which each share of Series C Preferred Stock is convertible shall
be adjusted so that the holder of each share thereof shall be
entitled to receive, upon the conversion thereof, the number of
shares of Common Stock determined by multiplying (1) the number
of shares of Common Stock into which such share was convertible
on the day immediately prior to the record date fixed for the
determination of stockholders entitled to receive such dividend
or distribution by (2) a fraction, the numerator of which shall
be the Current Market Price per share of Common Stock as of such
record date, and the denominator of which shall be such Current
Market Price per share of Common Stock less the fair Market Value
per share of Common Stock (as determined in good faith by the
Board of Directors of the Corporation, a certified resolution
with respect to which shall be mailed to each holder of shares of
Series C Preferred Stock) of such dividend or distribution;
provided, however, that in the event of a distribution of shares
of capital stock of a Subsidiary of the Corporation (a "Spin-
Off") made to holders of shares of Common Stock, the numerator of
such fraction shall be the sum of the Current Market Price per
share of Common Stock as of the 35th Trading Day after the
effective date of such Spin-Off and the Current Market Price of
the number of shares (or the fraction of a share) of capital
stock of the Subsidiary which is distributed in such Spin-Off in
respect of one share of Common Stock as of such 35th Trading Day
and the denominator of which shall be the Current Market Price
per share of Common Stock as of such 35th Trading Day. An
adjustment made pursuant to this clause (c) shall be made upon
the opening of business on the next Business Day following the
date on which any such dividend or distribution is made and shall
be effective retroactively immediately after the close of
business on the record date fixed for the determination of
stockholders entitled to receive such dividend or distribution;
provided, however, if the proviso to the preceding sentence
applies, then such adjustment shall be made and be effective as
of such 35th Trading Day after the effective date of such Spin-
Off. No adjustment shall be made pursuant to this clause (c) in
connection with any transaction to which clause (d) of this
paragraph (ii) applies.
(d) In case at any time the Corporation shall be a party
to any transaction (including without limitation a merger,
consolidation, sale of all or substantially all of the
Corporation's assets, liquidation or recapitalization of the
Common Stock) in which the Common Stock shall be changed into or
exchanged for different securities of the Corporation or
securities of another corporation or interests in a noncorporate
entity or other property (including cash) or any combination of
any of the foregoing (each such transaction being herein called
the "Transaction"; the date of consummation of the Transaction
being herein called the "Consummation Date," the Corporation (in
the case of a recapitalization of the Common Stock to which this
clause (d) applies or any other such transaction in which the
Corporation retains substantially all of its assets and survives
as a corporation) or such other corporation or entity (in each
other case) being herein called the "Acquiring Company," and the
common stock (or equivalent equity interests) of the Acquiring
Company being herein called the "Acquirer's Common Stock"), then,
as a condition of the consummation of the Transaction, lawful and
adequate provisions shall be made so that each holder of shares
of Series C Preferred Stock shall be entitled, at the election of
the holders of shares of Series C Preferred Stock, to the
treatment accorded pursuant to subclause (A), (B) or (C). The
selection by the holders of shares of Series C Preferred Stock of
the treatment to be accorded such shares from among the
alternatives specified in the preceding sentence shall require
the affirmative vote of the holders of at least 66-2/3% of the
outstanding shares of Series C Preferred Stock, voting in person
or by proxy at a meeting of such stockholders which vote shall be
taken on or before the Consummation Date, and which vote shall
bind all holders of shares of Series C Preferred Stock and their
transferees; if the holders of shares of Series C Preferred Stock
are unable to or for any other reason do not make a selection,
then the Board of Directors of the Corporation shall make such
selection in good faith to attempt to maximize the value to be
received by such holders, in accordance with this clause (d),
from among the alternatives specified in this clause (d).
In case of any Transaction:
A. each share of Series C Preferred Stock shall be
converted, to the extent funds are legally available therefor,
into an amount in cash equal to the Stated Value per share plus
Accrued Dividends to the Consummation Date, or
B. each share of Series C Preferred Stock shall be
converted into the amount of securities or other property to
which such holder would actually have been entitled as a holder
of shares of Common Stock upon the consummation of the
Transaction if such holder had converted such shares of Series C
Preferred Stock immediately prior to such Transaction, or
C. if the shares of Series C Preferred Stock issued and
outstanding represent at least seven percent (7%) of the Voting
Power of the Corporation or if all shares of Series C Preferred
Stock outstanding as of September 30, 1988 are then outstanding,
and a class vote pursuant to paragraph (ii) of Section 2(c) is
not required to authorize such Transaction:
(x) if the Acquiring Company or any corporation (herein called a
"Parent") which directly or indirectly controls the Acquiring Company is
a Public Company, each share of Series C Preferred Stock shall be
exchanged for a new series of senior preferred stock of the Acquiring
Company or in the case of a Person other than a corporation, comparable
securities of such Person (such securities being the "Acquirer's
Preferred Stock") having economic terms as nearly equivalent as possible
to the Series C Preferred Stock and substantially the same voting and
other rights as the Series B Preferred Stock such that each share of the
Acquirer's Preferred Stock shall thereafter be convertible into, in lieu
of the Common Stock issuable upon such conversion prior to the
Consummation Date, shares of the Acquirer's Common Stock, unless the
Acquiring Company is not a Public Company, in which case each share of
the Acquirer's Preferred Stock shall thereafter be convertible into
shares of the common stock of the Parent; the number of shares of the
Acquirer's Common Stock or the common stock of the Parent, as the case
may be, into which each share of the Acquirer's Preferred Stock is
convertible shall be equal to the number of shares of Common Stock
issuable upon conversion of the Series C Preferred Stock immediately
prior to the Consummation Date multiplied by a fraction the numerator of
which is the Current Market Price per share of Common Stock immediately
prior to the Consummation Date and the denominator of which is the
market price per share (determined in the same manner as provided in the
definition of Current Market Price) of the Acquirer's Common Stock or
the Parent's common stock, as the case may be, immediately prior to the
Consummation Date (subject in each case to adjustments from and after
the Consummation Date as nearly equivalent as possible to the
adjustments provided for in this paragraph (ii) of Section 2(h)), or
(y) if neither the Acquiring Company nor the Parent is a
Public Company, each share of Series C Preferred Stock shall be
converted, to the extent funds are legally available therefor,
into an amount in cash equal to the percentage of the Stated
Value per share set forth below, if the Consummation Date for
such Transaction occurs during the twelve-month period ending on
July 31 of the years indicated, plus Accrued Dividends to the
Consummation Date:
Year Percentage of Stated Value
1989 110%
1990 112%
1991 119%
1992 128%
1993 137%
1994 148%
1995 161%
1996 and thereafter 100%
Notwithstanding anything contained herein to the
contrary, the Corporation shall not effect any Transaction unless
prior to the consummation thereof each corporation or entity
(other than the Corporation) which may be required to deliver any
securities or other property upon the conversion of shares of
Series C Preferred Stock, or the satisfaction of conversion
rights as provided herein, shall assume, by written instrument
delivered to each holder of shares of Series C Preferred Stock,
the obligation to deliver to such holder such securities or other
property to which, in accordance with the foregoing provisions,
such holder may be entitled, and such corporation or entity shall
have similarly delivered to each holder of shares of Series C
Preferred Stock an opinion of counsel for such corporation or
entity, which opinion shall state that the rights, powers and
privileges of the Acquirer's Preferred Stock, including without
limitation the conversion provisions applicable thereto, if any,
shall thereafter be in full force and effect and shall be
enforceable against such corporation or entity in accordance with
the terms hereof and thereof.
All calculations of shares to be received upon conversion
under this paragraph (ii) of Section 2(h) shall be made to the
nearest one one-hundredth of a share.
(iii) If any adjustment in the number of shares of Common Stock into
which each share of Series C Preferred Stock may be converted required pursuant
to this Section 2(h) would result in an increase or decrease of less than 1% in
the number of shares of Common Stock into which each share of Series C Preferred
Stock is then convertible, the amount of any such adjustment shall be carried
forward and adjustment with respect thereto shall be made at the earlier of
(1) the time of and together with any subsequent adjustment, which, together
with such amount and any other amount or amounts so carried forward, shall
aggregate at least 1% of the number of shares of Common Stock into which each
share of Series C Preferred Stock is then convertible or (2) three years after
the date on which such adjustment otherwise would have been made.
(iv) The Board of Directors shall increase the number of shares of
Common Stock into which each share of Series C Preferred Stock may be converted,
in addition to the adjustments required by this Section 2(h), as shall be
determined by it (as evidenced by a resolution of the Board of Directors) to be
advisable in order to avoid or diminish any income deemed to be received by any
holder for federal income tax purposes of shares of Common Stock or Series C
Preferred Stock resulting from any events or occurrences giving rise to
adjustments pursuant to this Section 2(h) or from any other similar event.
(v) The holder of any shares of Series C Preferred Stock may exercise
his right to convert such shares into shares of Common Stock by surrendering for
such purpose to the Corporation, at its principal office or at such other office
or agency maintained by the Corporation for that purpose, a certificate or
certificates representing the shares of Series C Preferred Stock to be converted
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of such shares in accordance with the provisions of
this Section 2(h) and specifying the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock to be issued. In
case such notice shall specify a name or names other than that of such holder,
such notice shall be accompanied by payment of all transfer taxes payable upon
the issuance of shares of Common Stock in such name or names. Other than such
taxes, the Corporation will pay any and all issue and other taxes (other than
taxes based on income) that may be payable in respect of any issue or delivery
of shares of Common Stock on conversion of Series C Preferred Stock pursuant
hereto. As promptly as practicable, and in any event within five (5) business
days after the surrender of such certificate or certificates and the receipt of
such notice relating thereto and, if applicable, payment of all transfer taxes
(or the demonstration to the satisfaction of the Corporation that such taxes
have been paid), the Corporation shall deliver or cause to be delivered
(1) certificates representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock to which the holder of shares of
Series C Preferred Stock so converted shall be entitled and (2) if less than the
full number of shares of Series C Preferred Stock evidenced by the surrendered
certificate or certificates are being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares converted.
Such conversion shall be deemed to have been made at the close of business on
the date of giving of such notice and of such surrender of the certificate or
certificates representing the shares of Series C Preferred Stock to be converted
so that the rights of the holder thereof as to the shares being converted shall
cease except for the right to receive shares of Common Stock in accordance
herewith, and the person entitled to receive the shares of Common Stock shall be
treated for all purposes as having become the record holder of such shares of
Common Stock at such time. The Corporation shall not be required to convert,
and no surrender of shares of Series C Preferred Stock shall be effective for
that purpose, while the transfer books of the Corporation for the Common Stock
are closed for any purpose (but not for any period in excess of fifteen
(15) days); but the surrender of shares of Series C Preferred Stock for
conversion during any period while such books are so closed shall become
effective for conversion immediately upon the reopening of such books, as if the
conversion had been made on the date such shares of Series C Preferred Stock
were surrendered, and at the conversion rate in effect at the date of such
surrender.
(vi) Subject to the limitations on conversion set forth in the first
sentence of this Section 2(h) and paragraph (xi) below, shares of Series C
Preferred Stock may be converted at any time up to the close of business on the
Business Day preceding the date fixed for redemption of such shares pursuant to
Section 2(e) hereof.
(vii) Upon conversion of any shares of Series C Preferred Stock, the
holder thereof shall be entitled to receive all Accrued Dividends payable up to
and including the Dividend Payment Date immediately preceding the date such
shares are deemed to have been converted but not for any period thereafter;
provided, that such holder shall be entitled to receive any dividends on such
shares of Series C Preferred Stock declared prior to such conversion if such
holder held such shares on the record date fixed for the determination of
holders of shares of Series C Preferred Stock entitled to receive payment of
such dividend.
(viii) In connection with the conversion of any shares of Series C
Preferred Stock, no fractional shares of Common Stock shall be issued; rather,
in lieu thereof, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Current Market Price per share of Common Stock on the day on which such
shares of Series C Preferred Stock are deemed to have been converted.
(ix) The Corporation shall at all times reserve and keep available out
of its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Series C Preferred Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
then outstanding shares of Series C Preferred Stock. The Corporation shall from
time to time, subject to and in accordance with the laws of Delaware, increase
the authorized amount of Common Stock if at any time the number of authorized
shares of Common Stock remaining unissued shall not be sufficient to permit the
conversion at such time of all then outstanding shares of Series C Preferred
Stock.
(x) No adjustment to the number of shares into which each share of
Series C Preferred Stock is convertible shall be made pursuant to
Section 2(h)(ii) on account of the issuance of rights certificates, rights or
capital stock issuable upon exercise of any rights in each case in accordance
with the Rights Agreement, or any successor rights agreement entered into by the
Corporation which contains provisions for participation by the shares of
Series C Preferred Stock at least as favorable as those set forth in the Rights
Agreement.
(xi) Notwithstanding anything herein to the contrary, the rights of the
holder to convert shares of Series C Preferred Stock shall cease at the close of
business on the tenth (10th) day following the delivery of a Call Notice
relating to a Mandatory Call, as such terms are defined in that certain
Preferred Stock Purchase Agreement dated August 3, 1988, as amended, between the
Corporation and the initial purchasers of the Series C Preferred Stock, as set
forth in paragraph 6(a)(v) thereof.
(i) Reports as to Adjustments. Whenever the number of shares of Common
Stock into which each share of Series C Preferred Stock is convertible is
adjusted as provided in Section 2(h) hereof, the Corporation shall promptly mail
to the holders of record of the outstanding shares of Series C Preferred Stock
at their respective addresses as the same shall appear in the Corporation's
stock records a notice stating that the number of shares of Common Stock into
which the shares of Series C Preferred Stock are convertible has been adjusted
and setting forth the new number of shares of Common Stock (or describing the
new stock, securities, cash or other property) into which each share of Series C
Preferred Stock is convertible as a result of such adjustment, a brief statement
of the facts requiring such adjustment and the computation thereof, and when
such adjustment became effective.
(j) Definitions. For the purposes of this Section 2 of the Certificate
of Incorporation the following definitions shall apply:
"Acceptable Chief Executive Officer of the Corporation" means W. B.
Seaton and any successor chief executive officer of the Corporation who is
supported by holders of a majority of the shares of Series C Preferred Stock.
The holders of a majority of shares of Series C Preferred Stock shall
irrebuttably be presumed to support the chief executive officer of the
Corporation unless persons having the power to vote a majority of such shares
then outstanding shall submit a written statement to the Secretary of the
Corporation within 180 days after a chief executive officer supported by holders
of a majority of shares of Series C Preferred Stock shall have ceased to be the
chief executive officer of the Company stating that the Board of Directors has
failed to elect a chief executive officer acceptable to such holders.
"Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
"Business Day" means any day other than a Saturday, a Sunday, or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Closing Price" per share of Common Stock on any date shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the last quoted sale price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by NASDAQ or such
other system then in use, or, if on any such date the Common Stock is not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors. If the Common Stock is not publicly held or
so listed or publicly traded. "Closing Price" shall mean the Fair Market Value
per share as determined in good faith by the Board of Directors of the
Corporation.
"Continuing Director" means any Director who was a member of the Board of
Directors of the Corporation as of the date the Certificate of Designation with
respect to the Series C Preferred Stock was filed with the Secretary of State of
the State of Delaware, or any Director nominated by a majority of the Continuing
Directors.
"Current Market Price" per share of Common Stock on any date shall be
deemed to be the average of the daily Closing Prices per share of Common Stock
for the 20 Consecutive Trading Days immediately prior to such date.
"Fair Market Value" means the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
"Independent Director" means any member of the Board of Directors of the
Corporation who is not (i) an employee of the Corporation, (ii) an Affiliate or
Associate of the holders of shares of Series C Preferred Stock or (iii) an
Affiliate or Associate of any Person who beneficially owns ten percent (10%) or
more of the Voting Power of the Corporation.
"Person" means any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Public Company" means a corporation or other entity organized under the
laws of any state of the United States of America having its common stock or, in
the case of an entity other than a corporation, equivalent equity securities,
listed on the New York Stock Exchange or the American Stock Exchange or quoted
by NASDAQ or any successor thereto or comparable system, and such common stock
or equivalent equity security continues to meet the requirements for such
listing or quotation.
"Subsidiary" of any Person means any corporation or other entity of which
a majority of the voting power of the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Trading Value" per share of Series C Preferred Stock on any particular
date is the product of (i) the number of shares of Common Stock into which one
share of Series C Preferred Stock is convertible on such date (disregarding for
the purposes of this definition any limitations on conversion set forth in
Section 2(h) hereof) and (ii) the Current Market Price per share of Common Stock
as of such date.
"Voting Power" shall mean the right to vote generally in the election of
Directors through the beneficial ownership of Common Stock or other securities
entitled to vote generally in the election of Directors. For purposes of
calculating the percentage ownership of Voting Power of any Person, all
warrants, options or rights (excluding such rights as may exist under the Rights
Agreement or any successor rights agreement entered into by the Corporation)
held by any Person shall be deemed to have been exercised and all convertible or
exchangeable securities shall be deemed to have been converted or exchanged, as
the case may be (disregarding for such purposes any restrictions on conversion,
exchange or exercise), in each case for the maximum number of shares of Common
Stock or other securities entitled to vote generally in the election of
Directors.
(k) Rank. The Series C Preferred Stock shall rank senior to the
Series A Junior Participating Preferred Stock, par value $.01 per share, and the
Common Stock and on a parity with the Series B Preferred Stock as to the payment
of dividends and upon the liquidation, dissolution or winding up of the
Corporation.
3. 9% Series D Convertible Preferred Stock, par value $.01
per share.
(a) Designation. The designation of the series of the preferred
stock to which this Section 3 relates shall be "9% Series D Convertible
Preferred Stock, par value $.01 per share" (the "Series D"). The number of
shares of Series D shall be 2,000,000. The Series D shall have a stated value
of $50 per share (the "Stated Value").
(b) Dividends. Holders of shares of Series D shall be entitled to
receive, when and as declared by the Board of Directors out of funds legally
available therefor, cash dividends from the date of issue thereof at the annual
rate per share of 9% of the Stated Value of such shares, payable quarterly, in
arrears, on March 15, June 15, September 15 and December 15 (a "Dividend Payment
Date") in each year, commencing on the first Dividend Payment Date which is at
least 15 days after the date of original issue of any Series D Preferred Stock.
Such dividends shall be cumulative with respect to each share from the date of
original issuance, whether or not earned or declared. In addition, holders of
record of shares of Series D shall be entitled to receive dividends paid in
accordance with the terms of the Amended and Restated Rights Agreement, dated as
of October 22, 1991, as it may be amended from time to time, between the
Corporation and The First National Bank of Boston, as Rights Agent, or any
successor rights agreement entered into by the Corporation. The holders of
shares of Series D will not be entitled to any dividends other than the
dividends described in this clause (b). Accrued but unpaid dividends shall not
bear interest.
If at any time the Corporation has failed to pay accrued dividends on any
shares of the Series D and the 9% Series C Cumulative Convertible Preferred
Stock (the "Series C"), or any other class of preferred stock ranking on a
parity with the Series D as to dividends and upon liquidation at the time such
dividends are payable (the Series C and any such parity class being the "Parity
Stock"), the Corporation will not (a) declare or pay any dividend on the common
stock, par value $.01 per share (the "Common Stock"), of the Corporation or on
the Series A Junior Participating Preferred Stock (the "Series A") or on any
other class of stock ranking junior to the Series D as to dividends or upon
liquidation (the Common Stock, the Series A and any such junior class being the
"Junior Stock") or make any payment on account of, or set apart money for, a
sinking or other analogous fund for, the purchase, redemption or other
retirement of, any Junior Stock or make any distribution in respect thereof,
either directly or indirectly and whether in cash or property or in obligations
or shares of the Corporation (other than in shares of stock ranking junior to
the Series D as to dividends and upon liquidation), (b) purchase any shares of
the Series D or Parity Stock (except for a consideration payable in Junior
Stock) or redeem fewer than all of the Series D and Parity Stock then
outstanding, or (c) permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase any shares of Junior Stock,
Series D or Parity Stock, unless all accrued and payable but unpaid dividends on
Series D and any Parity Stock have been or contemporaneously are declared and
paid in full or declared and a sum sufficient for payment of such dividends has
been set aside. Unless and until all dividends accrued and payable but unpaid
on the Series D and any Parity Stock at the time outstanding have been paid in
full, all dividends declared by the Corporation upon the Series D or such Parity
Stock shall be declared pro rata with respect to all Series D and Parity Stock
then outstanding, so that the amounts of any dividends declared on the Series D
and such Parity Stock shall in all cases bear to each other the same ratio that,
at the time of such declaration, all accrued and payable but unpaid dividends on
the Series D and such other Parity Stock, respectively, bear to each other.
(c) Redemption for Cash. Shares of Series D shall be redeemable, out of
funds legally available therefor, at the option of the Corporation at any time
on or after July 31, 1995 at the Stated Value per share, plus any accrued and
unpaid dividends to the redemption date. The Corporation may not purchase or
redeem less than all the Series D and Parity Stock then outstanding if, as of
such time, the Corporation has failed to pay all accrued and unpaid dividends
thereon.
On January 31, 2001, the Corporation shall redeem, out of funds legally
available therefor, all outstanding shares of Series D by paying therefor the
Stated Value per share, plus any accrued and unpaid dividends to the redemption
date.
The Corporation will mail notice of redemption to each holder of record
of Series D to be redeemed no less than 30 nor more than 90 days prior to the
redemption date. Such notice shall specify the time and place of such
redemption and the number of shares to be redeemed and shall be given by first-
class mail, postage prepaid, to the holders of record of the shares of Series D
to be redeemed at their respective addresses as the same shall appear on the
books of the Corporation, but neither failure to mail such notice, nor any
defect therein or in the mailing thereof, to any particular holder shall affect
the sufficiency of the notice or the validity of the proceedings for redemption
with respect to the other holders. Any notice which was mailed in the manner
herein provided shall be conclusively presumed to have been duly given whether
or not the holder receives the notice.
If fewer than all of the shares of Series D are to be redeemed, the
shares to be redeemed shall be selected by lot or pro rata or in some other
equitable manner determined by the Corporation.
If a notice of redemption has been given pursuant to this Clause (c) and
if, on or before the date fixed for redemption, the funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart from
its other funds, in trust for the pro rata benefit of the holders of the shares
so called for redemption, then on and after the redemption date, notwithstanding
that any certificates for such shares have not been surrendered for
cancellation, dividends shall cease to accrue on the shares of Series D to be
redeemed, such shares shall no longer be deemed to be outstanding and all rights
of the holders of such shares as stockholders of the Corporation shall cease
except the right to receive the moneys payable upon such redemption, without
interest, upon surrender of the certificates evidencing such shares. Subject to
applicable escheat laws, any moneys so set aside by the Corporation and
unclaimed at the end of two years from the redemption date shall revert to the
general funds of the Corporation after which reversion the holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of the redemption price. Any interest accrued on
funds so set aside shall be paid to the Corporation from time to time.
(d) Liquidation.
(i) In case of the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of any shares of Series D are
entitled to receive the Stated Value per share, plus an amount equal to the
dividends accrued and unpaid thereon to the payment date, before any
distribution is made to the holders of Junior Stock.
(ii) The holders of shares of Series D and all Parity Stock shall share
ratably, in accordance with the respective amounts payable thereon, in any such
distribution which is not sufficient to pay in full the aggregate of the amounts
payable thereon. After payment in full of the liquidation price to which the
holders of shares of Series D are entitled the holders of shares of Series D
will not be entitled to any further participation in any distribution of assets
by the Corporation.
(iii) Neither a consolidation or merger of the Corporation with or into
any other corporation, nor a merger of any other corporation with or into the
Corporation, nor a sale or transfer of all or substantially all of the
Corporation's assets for cash or securities shall be considered a liquidation,
dissolution or winding up of the Corporation within the meaning of this Clause
(d).
(e) Conversion.
(i) Subject to the provisions for adjustment hereinafter set forth, each
share of Series D shall be convertible at the option of the holder thereof, in
the manner hereinafter set forth, into fully paid and nonassessable shares of
Common Stock at the conversion price, determined as hereinafter provided, in
effect on the date of conversion, provided that if any of the Series D is called
for redemption for cash, the conversion rights pertaining thereto will terminate
at the close of business on the business day preceding the redemption date. Each
share of Series D shall be convertible into the number of shares of Common Stock
that results from dividing the Stated Value by the price at which shares of
Common Stock shall be delivered at the time of conversion (such denominator is
hereinafter referred to as the "Conversion Price"). The Conversion Price shall
initially be that price which, when applying the formula set forth in the
preceding sentence, results in each share of Series D being convertible into the
same number of shares of Common Stock into which each share of Series C would
have been convertible on the date the first share of Series C is exchanged for
Series D (the "First Exchange Date"). The Conversion Price shall be adjusted in
certain instances as hereinafter provided in this Clause (e).
Any holder of shares of Series D desiring to convert the same into shares
of Common Stock shall surrender the certificate or certificates for the shares
of Series D being converted, duly endorsed or assigned to the Corporation or in
blank, at the principal office of the Corporation or at a bank or trust company
appointed by the Corporation for that purpose, accompanied by a written notice
of conversion specifying the number (in whole shares) of shares of Series D to
be converted and the name or names in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued; in case such notice
shall specify a name or names other than that of such holder, such notice shall
be accompanied by payment of all transfer taxes payable upon the issue of shares
of Common Stock in such name or names. In case less than all of the shares of
Series D represented by a certificate are to be converted by a holder, upon such
conversion the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder a certificate or certificates for the shares of
Series D not so converted. The holders of shares of Series D at the close of
business on a dividend payment record date shall be entitled to receive the
dividend payable on such shares (except shares called for redemption on a
redemption date between such record date and the Dividend Payment Date) on the
corresponding Dividend Payment Date notwithstanding the conversion thereof or
the Corporation's default on payment of the dividend due on such Dividend
Payment Date. However, shares of Series D surrendered for conversion during the
period from the close of business on any dividend payment record date for the
Series D to the opening of business on the corresponding Dividend Payment Date
(except shares called for redemption on a redemption date during such period)
must be accompanied by payment of an amount equal to the dividend payable on
such shares on such Dividend Payment Date. A holder of shares of Series D on a
dividend payment record date who (or whose transferee) converts shares of
Series D on a Dividend Payment Date will receive the dividend payable on such
shares by the Corporation on such date, and the converting holder need not
include payment in the amount of such dividend upon surrender of shares of
Series D for conversion. Except as provided above, no payment or adjustment
will be made on account of accrued or unpaid dividends upon the conversion of
shares of Series D.
(ii) The Conversion Price shall be adjusted from time to time as
follows:
(1) If, after the First Exchange Date, the Corporation
shall pay or make a dividend or other distribution on any class
of capital stock of the Corporation in shares of Common Stock,
then the Conversion Price in effect at the opening of business on
the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on
the date fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of
business on the day following the date fixed for such
determination.
(2) If, after the First Exchange Date, the Corporation
shall issue rights or warrants to all holders of its shares of
Common Stock entitling them (for a period expiring within 45 days
after the date fixed for the determination of stockholders
entitled to receive such rights or warrants) to subscribe for or
purchase Common Stock at a price per share less than the current
market price per share (determined as provided in
subclause (iii)) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights or
warrants, then the Conversion Price in effect at the opening of
business on the day following the date fixed for such
determination shall be reduced by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on
the date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of the
total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market
price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock so
offered for subscription or purchase, such reduction to become
effective immediately after the opening of business on the day
following the date fixed for such determination.
(3) If, after the First Exchange Date, the outstanding
shares of Common Stock shall be subdivided into a greater number
of shares, then the Conversion Price in effect at the opening of
business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and,
conversely, in case the outstanding shares of Common Stock shall
be combined into a smaller number of shares, the Conversion Price
in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be
proportionately increased.
(4) If, after the First Exchange Date, the Corporation
shall, by dividend or otherwise, distribute to all holders of
shares of Common Stock evidences of indebtedness or assets
(including rights or warrants to purchase capital stock, or any
other securities, but excluding any dividend or distribution
referred to in subclause (ii)(1), any rights or warrants referred
to in subclause (ii)(2) and any dividend or distribution paid in
cash out of the retained earnings of the Corporation), then the
Conversion Price shall be adjusted by multiplying the Conversion
Price in effect immediately prior to the close of business on the
date fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator
shall be the current market price per share (determined as pro
vided in subclause (iii)) of the Common Stock on the date fixed
for such determination less the then fair market value (as
determined by the Board of Directors, whose determination shall
be conclusive) of the portion of the assets or evidences of
indebtedness so distributed allocable to one share of Common
Stock and the denominator shall be such current market price per
share (determined as provided in subclause (iii)) of the Common
Stock, such adjustment to become effective immediately prior to
the opening of business on the day following the date fixed for
the determination of stockholders entitled to receive such
distribution. In the event that the Corporation shall distribute
or shall have distributed to all holders of shares of Common
Stock rights or warrants to purchase capital stock that are not
initially detachable from the Common Stock (whether or not such
distribution shall have occurred prior to the date of issuance of
the Series D), then the distribution of separate certificates
representing such rights or warrants subsequent to their initial
distribution shall be deemed to be the distribution of such
rights or warrants for purposes of this subclause (ii)(4).
Notwithstanding the foregoing, in the event that the
Corporation shall distribute rights or warrants to purchase
capital stock (other than those referred to in subclause (ii)(2)
above) ("Rights") to holders of Common Stock, the Corporation
may, in lieu of making the foregoing adjustment pursuant to this
subclause (ii)(4), make proper provision so that each holder of
shares of Series D who converts such shares of Series D before
the record date for such distribution shall be entitled to
receive upon such conversion shares of Common Stock issued with
Rights and after the record date for such distribution and prior
to the expiration or redemption of the Rights shall be entitled
to receive upon such conversion, in addition to the shares of
Common Stock issuable upon such conversion, the same number of
Rights to which a holder of the number of shares of Common Stock
into which the shares of Series D so converted were convertible
immediately prior to the record date for such distribution would
have been entitled on the record date for such distribution in
accordance with the terms and provisions of and applicable to the
Rights.
(5) In case the Common Stock issuable upon the
conversion of the Series D shall be changed into the same or a
different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification, or otherwise
(other than a stock dividend or a subdivision or combination of
shares provided for in subclause (ii)(1) or (ii)(3), or a
reorganization, merger, consolidation or sale of assets provided
for in subclause (vi)), then and in each such event the holders
of shares of Series D shall have the right thereafter to convert
such shares into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization,
reclassification or other change, by holders of the number of
shares of Common Stock into which such shares of Series D might
have been converted immediately prior to such reorganization,
reclassification or change.
(iii) For the purpose of any computation under this Clause (e), the
current market price per share of Common Stock on any date shall be deemed to be
the average of the daily Closing Prices for 15 consecutive Business Days
selected by the Board of Directors commencing not more than 60 and not less than
20 Business Days before the date in question. The term "Closing Price" on any
day shall mean (1) the last reported sales price per share of Common Stock on
such day on the New York Stock Exchange, or (2) if the Common Stock is not
listed or admitted for trading on the New York Stock Exchange, the last reported
sales price on the principal national securities exchange on which the Common
Stock is admitted for trading, or (3) if the Common Stock is not listed or
admitted for trading on any national securities exchange, the last reported
sales or transaction price or the average of the closing bid and asked
quotations, as the case may be, with respect to the Common Stock on the National
Association of Securities Dealers, Inc. Automated Quotation System, or any
similar system then in use, or (4) if no such quotations are available, the fair
market value on the date in question of a share of Common Stock as determined in
good faith by the Board of Directors; and the term "Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in The City of New York are authorized or obligated by law
or executive order to close.
(iv) Notwithstanding the provisions of subclause (ii) above, no
adjustment in the Conversion Price shall be required unless such adjustment
(plus any adjustments not previously made by reason of this subclause (iv))
would require an increase or decrease of at least 1% in such price; provided,
however, that any adjustments which by reason of this subclause (iv) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Clause (e) shall be made to
the nearest cent.
(v) The Corporation may make such reductions in the Conversion Price, in
addition to those required by this clause (e), as it considers to be advisable
in order to avoid or diminish any income tax to any holder of shares of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes or for any other reason. The Corporation shall have the
power to resolve any ambiguity or correct any error in this Clause (e) and its
actions in so doing shall be final and conclusive.
(vi) In case the Corporation shall effect any capital reorganization of
the Common Stock (other than a subdivision, combination, capital reorganization
or reclassification provided for in subclause (ii)(3) or (5)) or shall
consolidate or merge with or into any other corporation (other than a merger in
which the Corporation is the surviving corporation and the shares of Common
Stock outstanding immediately prior to such merger are to remain outstanding
immediately after such merger) or shall sell or transfer all or substantially
all its assets to any other corporation, lawful provision shall be made as a
part of the terms of such transaction whereby the holders of shares of Series D
shall receive upon conversion thereof, in lieu of each share of Common Stock
which would have been issuable upon conversion of such shares if converted
immediately prior to the consummation of such transaction, the same kind and
amount of stock (or other securities, cash or property, if any) as may be
issuable or distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of such
transaction, subject to subsequent adjustments for subsequent stock dividends
and distributions, subdivisions or combinations of shares, capital
reorganizations, reclassifications, consolidations or mergers as nearly
equivalent as possible to the adjustments provided for in this Clause (e).
(vii) Whenever the Conversion Price is adjusted as herein provided:
(1) the Corporation shall compute the adjusted
Conversion Price and shall cause to be prepared a certificate
signed by an authorized officer of the Corporation setting forth
the adjusted Conversion Price and showing in reasonable detail
the facts upon which such adjustment is based and the computation
thereof and such certificate shall forthwith be filed with each
transfer agent for the shares of Series D; and
(2) a notice stating that the Conversion Price has
been adjusted and setting forth the adjusted Conversion Price
shall, as soon as practicable, be mailed to the holders of record
of outstanding shares of Series D.
(viii) In case:
(1) the Corporation shall declare a divided or other
distribution on its shares of Common Stock otherwise than in cash
out of its earned surplus;
(2) the Corporation shall authorize the granting to
the holders of its shares of Common Stock of rights or warrants
entitling them to subscribe for or purchase any shares of capital
stock of any class or of any other rights;
(3) of any reclassification of the shares of Common
Stock (other than a subdivision or combination of its outstanding
shares of Common Stock), or of any consolidation or merger to
which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or of the sale or
transfer of all or substantially all the assets of the
Corporation; or
(4) of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
then the Corporation shall cause to be mailed to each transfer agent for the
shares of Series D and to the holders of record of the outstanding shares of
Series D, at least 20 days (or 10 days in any case specified in subclause
(viii)(1) or (2) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date as of which the holders of
record of shares of Common Stock to be entitled to such dividend, distribution,
rights or warrants are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is expected to become effective and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange their shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up. Such notice shall also state whether
such transaction will result in any adjustment in the Conversion Price
applicable to the shares of Series D and, if so, shall state what the adjusted
Conversion Price will be and when it will become effective. Neither the failure
to give the notice required by this subclause (viii), nor any defect therein, to
any particular holder shall affect the sufficiency of the notice or the legality
or validity of any such dividend, distribution, right, warrant, reclassifica
tion, consolidation, merger, sale, transfer, liquidation, dissolution or winding
up, or the vote on any action authorizing such with respect to the other
holders.
(ix) The Corporation shall at all times reserve and keep available out
of its authorized shares of Common Stock, for the purpose of delivery upon
conversion of shares of Series D, the full number of shares of Common Stock then
deliverable upon the conversion of all shares of Series D then outstanding and
shall take all action necessary so that shares of Common Stock so issued will be
validly issued, fully paid and nonassessable.
(x) The Corporation will pay any and all stamp or similar taxes that may
be payable in respect of the issuance or delivery of shares of Common Stock on
conversion of shares of Series D. The Corporation shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of Common Stock in a name other than that
in which the shares of Series D so converted were registered, and no such
issuance or delivery shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been paid.
(xi) No fractional shares or scrip representing fractional shares shall
be issued upon the conversion of shares of Series D. If any such conversion
would otherwise require the issuance of a fractional share an amount equal to
such fraction multiplied by the Closing Price per share of Common Stock
(determined as provided in subclause (iii) above) on the day of conversion shall
be paid to the holder in cash by the Corporation.
(xii) The certificate of any independent firm of public accountants of
recognized standing selected by the Board of Directors shall be presumptive
evidence of the correctness of any computation made under this Clause (e).
(f) Voting Rights. Except as otherwise required by law, holders of
shares of Series D shall have no voting rights; provided, however, that:
(i) Dividend Defaults.
(1) If at any time accrued dividends on the shares of
Series D or any Parity Stock shall not have been paid in an
aggregate amount equal to or greater than six quarterly dividends
on the shares of Series D or such Parity Stock at the time
outstanding, then, and in any such event, the number of Directors
then constituting the entire Board of Directors of the
Corporation shall automatically be increased by two Directors and
the holders of shares of Series D and the holders of shares of
Parity Stock, voting together as a single class, shall be
entitled to fill such newly created directorships. Such right to
vote as a single class to elect two Directors shall, when vested,
continue until all dividends in default on the shares of Series D
and such Parity Stock, as the case may be, shall have been paid
in full and, when so paid, such right to elect two Directors
separately as a class shall cease, subject, always, to the same
provisions for the vesting of such right to elect two Directors
separately as a class in the case of future dividend defaults.
At any time when such right to elect two Directors separately as
a class shall have so vested the Corporation may, and upon the
written request of the holders of record of not less than 20% of
the total number of shares of Series D and such Parity Stock then
outstanding shall, call a special meeting of the holders of such
shares to fill such newly created directorships for the election
of Directors. In the case of such a written request, such
special meeting shall be held within 90 days after the delivery
of such request and in either case, at the place and upon the
notice provided by law and in the By-Laws of the Corporation, pro
vided that the Corporation shall not be required to call such a
special meeting if such request is received less than 120 days
before the date fixed for the next ensuing annual meeting of
stockholders of the Corporation, at which meeting such newly
created directorships shall be filled by the holders of such
shares of Series D and such Parity Stock.
(2) So long as any shares of Series D are outstanding
the By-Laws of the Corporation shall contain provisions ensuring
that the number of Directors of the Corporation shall at all
times be such that the exercise, by the holders of shares of
Series D and the holders of shares of Parity Stock, of the right
to elect Directors under the circumstances provided in
subclause (i)(1) will not contravene any provisions of the By-
Laws or Charter.
(3) A director elected pursuant to subclause (i)(1)
shall serve until the earlier of (x) the next annual meeting of
the stockholders of the Corporation at which such director's
successor is to be elected and the election (by the holders of
shares of Series D and Parity Stock) and qualification of his
respective successor or (y) the next annual meeting of the
stockholders of the Corporation following the date upon which all
dividends in default on the shares of Series D and such Parity
Stock shall have been paid in full. If, prior to the end of the
term of any Director elected as aforesaid, a vacancy in the
office of such Director shall occur during the continuance of a
default in dividends on the shares of Series D or such Parity
Stock by reason of death, resignation or disability, such vacancy
shall be filled for the unexpired term by the appointment by the
remaining Director elected as aforesaid of a new Director for the
unexpired term of such former Director.
(ii) Miscellaneous. Without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series D and outstanding shares of
Parity Stock, voting as a single class, the Corporation may not:
(1) amend any provision of the Charter which would
adversely affect the voting powers or other rights or preferences
of holders of the shares of Series D; or
(2) authorize or create any class of stock senior to
the Series D as to dividends or upon liquidation.
C. Rank. Each series of Preferred Stock shall have such preferences
as to dividends and assets and amounts distributable on liquidation, dissolution
or winding up or otherwise as shall be declared by such resolution or
resolutions establishing such series.
D. Dividends.
(i) The holders of Preferred Stock shall be entitled to receive cash
dividends when and as declared by the Board of Directors at such rate per share
per annum, cumulatively if so provided, and with such preferences, as shall have
been fixed by the Board of Directors, and not more before any dividends shall be
declared or paid upon or set apart for the Common Stock or any other class of
stock ranking junior thereto, and such dividends on each series of Preferred
Stock shall cumulate, if at all, from and after the dates fixed by the Board of
Directors with respect to such cumulation. Unpaid cumulated dividends shall
bear no interest.
(ii) If dividends on any shares of Preferred Stock are not declared in
full, then such dividends as are declared shall be declared ratably on all
shares of stock of each series of equal preference in proportion to the
respective unpaid cumulative dividends, if any, to the end of the then current
dividend period. No ratable distribution shall be made with respect to any
series until cumulative dividends in full have been declared and paid on any
series standing senior in preference.
(iii) Unless dividends on all outstanding shares of Preferred Stock
having cumulative dividend rights shall have been fully paid for all past
quarterly dividend periods and the full dividends thereon for the quarterly
dividend period current at the time shall have been paid or declared and funds
set apart therefor, and unless all required sinking fund payments, if any, shall
have been made or provided for, no dividend (except a dividend payable in Common
Stock) shall be paid upon or declared or set apart for the Common Stock.
(iv) Subject to the foregoing provisions, the Board of Directors may
declare and pay dividends on the Common Stock, to the extent permitted by law.
E. Liquidation or Dissolution.
(i) In the event of any liquidation or dissolution or winding up of this
Corporation (hereinafter referred to as "liquidation") the holders of Preferred
Stock shall be entitled to receive in cash, out of the assets of this
Corporation, full payment of the applicable liquidation preference fixed for
each series pursuant to paragraph B above, together with unpaid cumulative
dividends thereon to the date of liquidation, and no more.
(ii) If upon liquidation the assets of this Corporation available for
distribution to stockholders shall be insufficient to permit the payment in full
of the preferential amounts payable to the holders of Preferred Stock, then all
such assets shall be distributed ratably among the holders of all shares of
stock of each series of equal preference in proportion to the respective amounts
that would be payable per share if such assets were sufficient to permit payment
in full. No ratable distribution shall be made with respect to any series until
distributions in full have been paid to the holders of all series standing
senior in preference.
(iii) After satisfaction of the preferential requirements of the
Preferred Stock upon any liquidation of this Corporation, the holders of Common
Stock shall be entitled to share ratably in the distribution of all remaining
assets of this Corporation available for distribution.
(iv) A consolidation or merger of this Corporation with or into any
other corporation or corporations or the sale or conveyance (whether for cash,
securities or other property) of all or substantially all of the assets of this
Corporation as an entirety shall not be deemed or construed to be a liquidation
of this Corporation for the purpose of the foregoing provisions of this
paragraph E.
F. Voting Rights.
(i) The holders of the Common Stock shall be entitled to one vote for
each share held by them of record on the books of this Corporation. The holders
of each series of Preferred Stock shall have such voting rights, if any, as
shall be provided for in the resolution or resolutions of the Board of Directors
establishing such class or series.
(ii) No action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting and the power
of stockholders to consent in writing, without a meeting, to the taking of any
action is specifically denied.
G. Foreign Ownership. The By-Laws of this Corporation, and procedures
established from time to time by the Board of Directors consistent with the By-
Laws, may provide that the outstanding shares of this Corporation shall at all
times be owned by citizens of the United States to such extent as will in the
judgment of the Board reasonably assure this Corporation's continuing status as
a United States citizen within the provisions of the Shipping Act, 1916, as
amended, or any successor statute applicable to the business being conducted by
this Corporation, and in order to assure such continuing status said provisions
may provide restrictions relating to the transfer of the shares of this
Corporation.
Fifth:
A. Number of Directors. The authorized number of Directors of this
Corporation shall be determined from time to time by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors at any regular
or special meeting of said Board, within any limits prescribed in the By-Laws of
this Corporation; provided, however, that in no event shall the number of
directors be less than five.
B. Classes of Directors. The Board of Directors shall be divided
into three classes, designated Class I, Class II and Class III, as nearly equal
in number as possible, and the term of office of Directors of one class shall
expire at each annual meeting of stockholders, and in all cases as to each
Director until his successor shall be elected and shall qualify or until his
earlier resignation, removal from office, death or incapacity. Additional
directorships resulting from an increase in number of Directors shall be
apportioned among the classes as equally as possible. The initial term of
office of Directors of Class I shall expire at the annual meeting of
stockholders in 1984, that of Class II shall expire at the annual meeting in
1985 and that of Class III shall expire at the annual meeting in 1986, and in
all cases as to each Director until his successor shall be elected and shall
qualify or until his earlier resignation, removal from office, death or
incapacity. At each annual meeting of stockholders the number of Directors
equal to the number of Directors of the class whose term expires at the time of
such meeting (or, if less, the number of Directors properly nominated and
qualified for election) shall be elected to hold office until the third
succeeding annual meeting of stockholders after their election.
C. Vacancies. In case of any increase in the number of Directors,
the additional Directors may be elected by the Board of Directors to hold office
until the next election of the class for which such Directors shall have been
chosen and until their successors are elected and qualified. In case of
vacancies in the Board of Directors, a majority of the remaining members of the
Board may elect Directors to fill such vacancies to hold office until the next
election of the class for which such Directors shall have been chosen and until
their successors are elected and qualified.
Sixth:
A. Except as otherwise expressly provided in paragraph C of this
Article Sixth, none of the following actions or transactions shall be effected
by this Corporation, or approved by this Corporation as stockholder of any
subsidiary of this Corporation, unless authorized by the affirmative vote of
Stockholders required by paragraph B of this Article Sixth, if, as of the record
date for the determination of the stockholders entitled to vote thereon, any
Interested Stockholder (as hereinafter defined) exists:
(i) any merger or consolidation of this Corporation or
any of its subsidiaries with or into such Interested Stockholder,
or
(ii) any sale, lease, exchange or other disposition of
all or any substantial part of the assets of this Corporation or
any of its subsidiaries to or with such Interested Stockholder,
or
(iii) the issuance or delivery of any voting securities
of this Corporation or any of its subsidiaries to such Interested
Stockholder, in exchange for cash, other assets or securities, or
a combination thereof, or
(iv) any dissolution or liquidation of this Corporation.
B. The actions and transactions described in paragraph A of this
Article Sixth shall not be effected by this Corporation, or approved by this
Corporation as stockholder of any subsidiary corporation, as the case may be,
under the circumstances described in said paragraph A, unless authorized by the
affirmative vote of at least seventy-five percent (75%) of the outstanding
shares of this Corporation entitled to vote.
C. The vote of stockholders specified in paragraph A of this Article
Sixth shall not apply to any action or transaction described in such paragraph
if the Board of Directors of this Corporation shall have approved the action or
transaction before any corporation, person or entity became an Interested
Stockholder.
D. For the purpose of this Article Sixth (a) the term "Interested
Stockholder" shall mean any corporation, person or entity other than this
Corporation or any of its subsidiaries or The Signal Companies, Inc., which
beneficially owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of this Corporation entitled to vote; (b) an
Interested Stockholder shall be deemed to own or control, directly or
indirectly, any outstanding shares of stock of this Corporation (i) which it has
the right to acquire pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise, or (ii) which are beneficially owned,
directly or indirectly (including shares deemed owned through application of
clause (i) above), by any other corporation, person or other entity (x) with
which it or its "affiliate" or "associate" (as defined below) has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of stock of this Corporation or (y) which is its "affiliate" or
"associate" as those terms are defined in the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended; (c) "outstanding shares
of this Corporation entitled to vote" and "voting securities" shall mean such
shares as are entitled to vote generally in the election of Directors,
considered as one class; and (d) "subsidiary" or "subsidiaries" shall mean any
corporation of which this Corporation owns, directly or indirectly, fifty
percent (50%) or more of the voting stock.
E. The Board of Directors of this Corporation shall have the power
and duty to determine for the purposes of this Article Sixth, on the basis of
information then known to the Board of Directors, whether (i) any Interested
Stockholder exists, or is an "affiliate" or an "associate" (as defined above) of
another, and (ii) any proposed sale, lease, exchange, or other disposition of
part of the assets of this Corporation involves a substantial part of the assets
of this Corporation or any of its subsidiaries. Any such determination by the
Board shall be conclusive and binding for all purposes.
Seventh: The amendment or repeal of Articles Fifth, Sixth, Seventh,
Eighth, Tenth and paragraphs F and G of Article Fourth of this Certificate of
Incorporation shall require the approval of the holders of shares representing
at least seventy-five percent (75%) of the shares of this Corporation entitled
to vote in the election of Directors, voting as one class.
Eighth:
A. None of the actions or transactions listed below shall be
effected by this Corporation, or approved by this Corporation as stockholder of
any subsidiary of this Corporation if, as of the record date for the
determination of the stockholders entitled to vote thereon, any Interested
Stockholder (as hereinafter defined) exists, unless the requirements of
paragraphs B, C, D and E of this Article Eighth are fully complied with:
(i) any merger or consolidation of this Corporation or
any of its subsidiaries with or into such Interested Stockholder,
or
(ii) any sale, lease, exchange or other disposition of
all or any substantial part of the assets of this Corporation or
any of its subsidiaries to or with such Interested Stockholder,
or
(iii) the issuance or delivery of any voting securities
of this Corporation or any of its subsidiaries to such Interested
Stockholder in exchange for cash, other assets or securities, or
a combination thereof, or
(iv) any dissolution or liquidation of this Corporation.
B. The cash or fair market value of the property, securities or
other consideration to be received per share by holders of the capital stock of
this Corporation in such action or transaction is not less than the highest per
share price paid by the Interested Stockholder or by any persons whose stock it
beneficially owns or controls in acquiring any of its or their holdings of
capital stock of this Corporation; such price shall be proportionately adjusted
for any subsequent increase or decrease in the number of issued shares of this
Corporation's capital stock resulting from a subdivision or consolidation of
shares or any other capital adjustment, the payment of a stock dividend, or
other increase or decrease in such shares effected without receipt of
consideration of this Corporation.
C. After becoming an Interested Stockholder and prior to
consummation of such action or transaction: (i) such Interested Stockholder
shall not have acquired from this Corporation or any of its subsidiaries any
newly issued or treasury shares of capital stock or any newly issued securities
convertible into capital stock of this corporation or any of its subsidiaries,
directly or indirectly (except upon conversion of convertible securities
acquired by it prior to becoming an Interested Stockholder or as a result of a
pro rata stock dividend of stock split or other distribution of stock to all
shareholders pro rata); (ii) such Interested Stockholder shall not have received
the benefit directly or indirectly (except proportionately as a stockholder) of
any loans, advances, guarantees, pledges or other financial assistance or tax
credits provided by this Corporation or any of its subsidiaries, or made any
major changes in this Corporation's or any of its subsidiaries' businesses or
capital structures or reduced the current rate of dividends payable on this
Corporation's capital stock below the rate in effect immediately prior to the
time such Interested Stockholder became an Interested Stockholder (the current
rate of dividends being the rate of the current dividend to the net income of
this Corporation for the full fiscal quarter immediately preceding the quarter
in which such dividend is paid; and the rate of dividends in effect immediately
prior to the time such Interested Stockholder became an Interested Stockholder
being the ratio of (x) the aggregate dividends paid during the four full fiscal
quarters immediately preceding the time such Interested Stockholder became an
Interested Stockholder to (y) the adjusted net income of this Corporation for
the four successive full fiscal quarters immediately preceding the last quarter
in which such dividends were paid); (iii) such Interested Stockholder shall have
taken all required actions to ensure that this Corporation's Board of Directors
includes representation by continuing Directors (as hereinafter defined) at
least proportionate to the stockholders of this Corporation's remaining public
stockholders (with a continuing Director to occupy any Board position resulting
from a fraction and, in any event, with at least one continuing Director to
serve on the Board so long as there are any remaining public stockholders).
D. A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934, as amended whether or not this Corporation is
then subject to such requirements, shall be mailed to the stockholders of this
Corporation for the purpose of soliciting stockholder approval of such action or
transaction and shall contain at the front thereof, in a prominent place, any
recommendations as to the advisability or inadvisability of the action or
transaction which the continuing Directors may choose to state.
E. For the purpose of this Article Eighth, (a) the term "Interested
Stockholder" shall mean any other corporation, person or entity, other than this
Corporation or any of its subsidiaries or The Signal Companies, Inc., which
beneficially owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of this Corporation entitled to vote (for this purpose
the provisions of paragraphs D and E of Article Sixth shall apply to this
paragraph E(a) of this Article Eighth as if set forth in full in this paragraph
E(a) of this Article Eighth, except that the reference to Article Sixth in such
paragraphs D and E of Article Sixth shall be deemed to be a reference to this
Article Eighth); (b) the term "continuing Director" shall mean a Director who
was a member of the Board of Directors of this Corporation immediately prior to
the time that any Interested Stockholder involved in the proposed action or
transaction became an Interested Stockholder or a Director nominated by a
majority of the remaining continuing Directors; and (c) the term "remaining
public stockholders" shall mean the holders of this Corporation's capital stock
other than the Interested Stockholder and stockholders whose shares the
Interested Stockholder beneficially owns or controls.
F. The requirements set forth in paragraph A through E of this
Article Eighth shall not apply to any action or transaction described in
paragraph A if the Board of Directors of this Corporation shall have approved
the action or transaction before any corporation, person or entity became an
Interested Stockholder.
Ninth: The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
Natomas Company 601 California Street
San Francisco, CA 94108
Tenth: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the By-Laws of this Corporation, without any action on the part of the
stockholders, by the affirmative vote of at least two-thirds of the Directors of
this Corporation, which shall include the affirmative vote of at least one
Director of each class of the Board of Directors if the Board shall then be
divided into classes. The By-Laws may also be altered, amended or repealed by
the affirmative vote of the holders of shares representing at least seventy-five
percent (75%) of the shares of this Corporation entitled to vote in the election
of Directors, voting as one class.
Eleventh: This Corporation may in its By-Laws confer powers upon its
Board of Directors in addition to the foregoing and in addition to the powers
and authorities expressly conferred upon them by the laws of the State of
Delaware.
Twelfth: The stockholders and Board of Directors shall have power, if
the By-Laws so provide, to hold their meetings and to keep the books of this
Corporation (except such as are required by the laws of the State of Delaware to
be kept in Delaware) and documents and papers of this Corporation outside the
State of Delaware, and to have one or more offices within or without the State
of Delaware at such places as may be designated from time to time by the Board
of Directors.
Thirteenth: All of the powers of this Corporation, insofar as the same
may be lawfully vested by this Certificate of Incorporation in the Board of
Directors, are hereby conferred upon the Board of Directors of this Corporation.
Fourteenth:
A. Any direct or indirect purchase or other acquisition by this
Corporation of any of this Corporation's voting securities of any class at a
price per share greater than the Fair Market Value of such securities on the
date of such purchase or acquisition or any agreement in respect thereof from
any Interested Stockholder who has beneficially owned such securities for less
than two years prior to such date shall, except as hereinafter expressly
provided, require the affirmative vote of the holders of at least a majority of
the shares of capital stock of this Corporation outstanding and entitled to vote
on such date, excluding any such shares beneficially owned by such Interested
Stockholder, voting together as a single class (it being understood that for the
purposes of this Article Fourteenth, each such share shall have the number of
votes granted to it pursuant to paragraph F of Article Fourth); provided,
however, that no such affirmative vote shall be required with respect to any
purchase or other acquisition of securities made as part of a tender or exchange
offer by this Corporation to purchase securities of the same class made on the
same terms to all holders of such securities and complying with the applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (or any subsequent provisions replacing such Act,
rules or regulations) or which shall have been approved, or is being effected
pursuant to agreements or arrangements which shall have been approved, by the
Board of Directors of this Corporation prior to the time such Interested
Stockholder became an Interested Stockholder.
B. For the purposes of this Article Fourteenth, the provisions of
paragraphs D and E of Article Sixth and paragraph E of Article Eighth shall
apply to this Article Fourteenth as if set forth in full in this paragraph B of
this Article Fourteenth except that the reference of Article Sixth in such
paragraphs D and E of Article Sixth and such paragraph E of Article Eighth shall
be deemed to be a reference to this Article Fourteenth.
C. For the purposes of this Article Fourteenth, the term "Fair
Market Value" shall mean the last closing sale price on the date immediately
preceding the date in question of a share of such voting securities on the
Composite Tape for New York Stock Exchange--Listed Stocks, or, if such
securities are not quoted on such Composite Tape, on the New York Stock Exchange
or the principal United States securities exchange registered under the
Securities Exchange Act of 1934, as amended, on which such securities are
listed, or, if such securities are not listed on any such exchange, the highest
last transaction price or closing bid quotation, as the case may be, with
respect to a share of such securities on the date immediately preceding the date
in question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any similar system then in use, or, if no such quotations
are available, the fair market value on the date in question of a share of such
securities as determined in good faith by a majority of the continuing
Directors.
D. The amendment or repeal of, or the adoption of any provision
inconsistent with, this Article Fourteenth shall require the approval of the
holders of shares representing at least seventy-five percent (75%) of the shares
of this Corporation entitled to vote in the election of Directors, voting
together as a single class and any such amendment, repeal or adoption which is
proposed by or on behalf of an Interested Stockholder or any affiliate or
associate of an Interested Stockholder shall require the affirmative vote of not
less than a majority of the votes entitled to be cast by the remaining public
stockholders voting together as a single class.
Fifteenth: A. A director of this Corporation shall not be liable to
this Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director except for liability which, by express provision of
the General Corporation Law of Delaware, as in effect from time to time
(hereinafter the "Delaware Law"), cannot be eliminated.
B.(i) This Corporation shall, to the fullest extent
permitted by Delaware Law, indemnify any person (the
"Indemnitee") who is or was involved in any manner (including,
without limitation, as a party or a witness) in any threatened,
pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action, suit or
proceeding brought by or in the right of this Corporation to
procure a judgment in its favor) (a "Proceeding") by reason of
the fact that the Indemnitee is or was a Director, officer or
employee of this Corporation, or is or was serving another entity
in such capacity at the request of this Corporation, against all
liabilities and expenses actually and reasonably incurred by the
Indemnitee in connection with such Proceeding.
(ii) The right to indemnification conferred by this
Article Fifteenth shall be presumed to have been relied upon by
the Indemnitee and shall be enforceable as a contract right.
This Corporation may enter into contracts to provide individual
Indemnitees with specific rights of indemnification to the
fullest extent permitted by Delaware Law and may create trust
funds, grant security interests, obtain letters of credit or use
other means to ensure the payment of such amounts as may be
necessary to effect the rights provided in this Article Fifteenth
or in any such contract.
(iii) Upon making a request for indemnification, the
Indemnitee shall be presumed to be entitled to indemnification
under this Article Fifteenth and this Corporation shall have the
burden of proof to overcome that presumption in reaching any
contrary determination. Such indemnification shall include the
right to receive payment in advance of any expenses incurred by
the Indemnitee in connection with any Proceeding, consistent with
the provisions of Delaware Law.
C. Any repeal or modification of the foregoing provisions of this
Article Fifteenth shall not adversely affect any right or protection of any
Director or any Indemnitee existing at the time of such repeal or modification.
D. The amendment or repeal of this Article Fifteenth shall require
the approval of the holders of shares representing at least seventy-five percent
(75%) of the shares of this Corporation entitled to vote in the election of
Directors, voting as one class.
11903062
AMERICAN PRESIDENT COMPANIES, LTD.
RETIREMENT PLAN
Second Amendment and Restatement
Effective January 1, 1993
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
PREAMBLE iv
<S> <C>
ARTICLE 1: DEFINITIONS 1
ARTICLE 2: ELIGIBILITY 5
2.1 Date of Participation 5
2.2 Participation Requirements 5
ARTICLE 3: RETIREMENT DATE 7
3.1 Retirement Date 7
3.2 Normal Retirement Date 7
3.3 Early Retirement Date 7
3.4 Postponed Retirement Date 7
3.5 In-Service Retirement Date 7
ARTICLE 4: AMOUNT OF RETIREMENT INCOME 8
4.1 Normal Retirement Income 8
4.2 Participants Transferring Among Certain
Companies 10
4.3 Participants Transferring From Another Company-
Supported Plan 14
4.4 Participants Transferring to Another Company-
Supported Plan 14
4.5 Early Retirement Income 14
4.6 Postponed and In-Service Retirement Income 15
4.7 Supplemental Retirement Income 16
4.8 COLA-Adjusted Retirement Income 16
4.9 Interest on Installments 17
4.10 Retirement Income Limitations 18
4.11 Return to Employment Following Retirement 22
4.12 Deemed Termination After Normal Retirement Date 23
4.13 Prior Benefit Accrual 23
4.14 Disabled Participants 24
4.15 Cessation of Disability 25
ARTICLE 5: TERMINATION OF EMPLOYMENT PRIOR TO
RETIREMENT 26
5.1 Termination of Service After Vesting 26
5.2 Termination of Service Before Vesting 26
5.3 Forfeitures 27
ARTICLE 6: FORMS OF BENEFIT PAYMENT 28
6.1 Normal Form of Retirement Income 28
6.2 Normal Form of Supplemental Retirement Income 28
6.3 Optional Forms of Retirement Income 29
6.4 Small Payments 32
6.5 General Rule on Commencement Dates 32
ARTICLE 7: DEATH BENEFITS 33
7.1 Surviving Spouse Benefit 33
7.2 Return of Contributions 34
7.3 Other Death Benefits 34
ARTICLE 8: FINANCING THE PLAN 35
8.1 Participant Contributions 35
8.2 Employer Contributions 35
8.3 Trust Agreement 35
8.4 Reversion of Assets 35
ARTICLE 9: ADMINISTRATION OF THE PLAN AND MANAGEMENT OF
ASSETS 36
9.1 Plan Sponsor and Plan Administrator 36
9.2 Administrative Responsibilities 36
9.3 Management of Plan Assets 36
9.4 Trustee and Investment Managers 36
9.5 Delegation of Fiduciary Responsibilities 37
9.6 Enrolled Actuary 37
9.7 Reliance Upon Advice 37
9.8 Funding Policy 37
9.9 Communication of Financial Needs 37
9.10 Administrative Expenses 38
9.11 Manner of Payments 38
ARTICLE 10: AMENDMENT OR TERMINATION 39
10.1 Amendments 39
10.2 Merger, Consolidation or Transfer 39
10.3 Rights and Obligations Upon Termination 39
10.4 Limitations Upon Highest-Paid Employees 40
ARTICLE 11: GENERAL PROVISIONS 42
11.1 No Implied Employment Contract 42
11.2 Benefits Not Assignable 42
11.3 Payments Under Qualified Domestic Relations
Order (QDRO) 43
11.4 Payments of Benefits to Infants or
Incompetents 43
11.5 Proof of Age and Marriage 43
11.6 Source of Benefits 44
11.7 Overpayments and Underpayments 44
11.8 Service in Multiple Fiduciary Capacities 44
11.9 Criminal Acts 44
11.10 IRS Qualification 44
11.11 Construction of Plan 44
11.12 Forms for Plan Communications 45
11.13 Governing Law 45
ARTICLE 12: PERIOD OF SERVICE 46
12.1 Period of Employment Relationship 46
12.2 Interval Between Periods of Employment 46
12.3 Predecessor Companies 46
12.4 Other Periods 47
12.5 Years in a Period of Service 47
ARTICLE 13: CLAIMS AND INQUIRIES 48
13.1 Application for Benefits 48
13.2 Denial of Application 48
ARTICLE 14: REVIEW OF DENIED CLAIMS 49
14.1 Review Panel 49
14.2 Request for Review 49
14.3 Decision on Review 49
14.4 Rules and Interpretations 49
14.5 Exhaustion of Remedies 50
ARTICLE 15: TOP-HEAVY PROVISIONS 51
15.1 Determination of Top-Heavy Status 51
15.2 Minimum Benefit 51
15.3 Minimum Vesting 51
15.4 Effect of Change in Top-Heavy Status 51
15.5 Impact on Benefit Limitations 51
15.6 Definitions 52
ARTICLE 16: EXECUTION 54
APPENDIX A: ACTUARIAL EQUIVALENT FACTORS 55
APPENDIX B: DIRECT ROLLOVER PROVISIONS 58
</TABLE>
PREAMBLE
The American President Companies, Ltd. Retirement Plan, as set forth herein,
shall become effective as of January 1, 1993, except as otherwise provided. It
constitutes a second amendment, restatement and continuation of the Retirement
Plan for Non-Bargaining Unit Employees of American President Companies, Ltd., as
in effect on December 31, 1992. Except as may specifically be provided
otherwise in the Plan, the rights of Participants who retired or who terminated
their employment prior to January 1, 1993, shall be determined solely in
accordance with the provisions of the Plan then in effect. In addition, the
rights of Participants who retire on an Early, Normal or Postponed Retirement
Date prior to January 1, 1993, shall be determined in accordance with the
provisions of the Plan in effect on December 31, 1992, and the amendments taking
effect on January 1, 1993, shall not apply to such Participants.
ARTICLE 1
DEFINITIONS
1.1 "Accumulated Contributions" means the aggregate of a
Participant's employee contributions, if any, under a Prior Plan or the
Natomas Plan, with interest credited in accordance with such plan to
August 31, 1983, and compounded annually at the rate of five percent
(5%) for the period from September 1, 1983, through May 31, 1988, and at
the rate prescribed by Section 411(c)(2)(C) of the Code for all periods
subsequent to May 31, 1988.
1.2 "Actuarial Equivalent" means the equivalent of the benefit otherwise payable
to a Participant, determined in accordance with the actuarial equivalent
factors set forth in Appendix A to the Plan, attached hereto.
1.3 "Affiliate" means any member of a group of one or more chains of
corporations connected through stock ownership with the Company, if:
(A) Stock possessing at least eighty percent (80%) of the total
combined voting power of all classes of stock entitled to vote or
at least eighty percent (80%) of the total value of shares of all
classes of stock of each of the corporations, except the Company,
is owned by one or more of the other corporations; and
(B) The Company owns stock possessing at least eighty percent (80%)
of the total combined voting power of all classes of stock
entitled to vote or at least eighty percent (80%) of the total
value of shares of all classes of stock of at least one of the
other corporations excluding, in computing such voting power or
value, stock owned directly by such other corporations.
In addition, the term "Affiliate" includes any other entity which the
Company has designated in writing as an Affiliate for purposes of the
Plan. An entity shall be considered an Affiliate only with respect to
periods for which such designation is in effect or during which the
relationship described in Paragraphs (A) and (B) above exists.
1.4 "Alternate Payee" means any spouse, former spouse, child or other dependent
of a Participant who is recognized by a qualified domestic relations
order (as defined in Section 414(p) of the Code) as having a right to
receive all or a portion of the benefits payable under the Plan with
respect to the Participant.
1.5 "Annuity Starting Date" means a Participant's Retirement Date, as
described in Section 3.1, on which a Retirement Income is first payable
as an annuity or, in the case of a Retirement Income not payable as an
annuity, the Retirement Date on which all events have occurred that
entitle the Participant to such Retirement Income.
1.6 "APC Transferee" means a Participant who, at any time prior to
November 30, 1983, has transferred directly from employment with an
Employer to employment with Natomas Company, or with another corporation
which adopted the Natomas Plan, and who is a participant in the Natomas
Plan.
1.7 "Average Annual Compensation" means one fifth (1/5) of the highest sum of a
Participant's Eligible Compensation for any five (5) consecutive
calendar years during the Participant's Credited Period of Service. If
the Participant's Credited Period of Service contains fewer than five
(5) June 1 dates, "Average Annual Compensation" means the sum of his
Eligible Compensation for each of the calendar years that contain a June
1 date divided by the number of such years. If a Participant is on an
approved absence (within the meaning of Section 12.1(B)), without receiv
ing any Base Compensation from an Employer, on June 1 of any calendar
year, then the Participant's Eligible Compensation for the calendar year
that contains the June 1 date immediately preceding the start of the
absence shall be substituted in the computation.
1.8 "Average Social Security Base" means "covered compensation," as defined in
Section 401(l)(5)(E) of the Code.
1.9 "Base Compensation" means a Participant's rate of basic earnings on
June 1 while the Participant is an Eligible Employee, including amounts
contributed on a pre-tax basis under Sections 125 or 401(k) of the Code
to a plan maintained by the Employer, and excluding overtime pay,
bonuses, commissions, incentive compensation and Employer contributions
(other than salary deferrals) to this or any other benefit plan.
1.10 "Beneficiary" means one or more persons designated by the
Participant by filing the prescribed form with the Company prior to his
death. In the event that no beneficiary so designated survives the
Participant, the Participant's estate shall be considered the
Beneficiary.
1.11 "Code" means the Internal Revenue Code of 1986, as amended.
1.12 "Company" means American President Companies, Ltd., a Delaware
corporation.
1.13 "Credited Period of Service" means:
(A) The credited period of service completed by the Participant prior
to August 31, 1983, under the provisions of a Prior Plan
applicable to service for benefit accrual purposes, determined
without regard to any breaks in service; plus
(B) Any period completed by the Participant on or after August 31,
1983, to the extent that (i) such period constitutes a Period of
Service under Article 12 and (ii) the Participant is an Eligible
Employee during such period; plus
(C) In the case of an individual who first becomes an Employee on
or after January 1, 1993 and who thereafter becomes a
Participant, any period completed by such individual prior to
becoming a Participant to the extent that (i) such period
constitutes a Period of Service under Article 12 and (ii) the
individual is an Eligible Employee during such period; plus
(D)In the case of a Natomas Transferee, the credited period of service
completed by the Natomas Transferee prior to his transfer, as
determined under the provisions of the Natomas Plan applicable to
service for benefit accrual purposes; minus
(E)The number of years (and fractions thereof) included in Paragraphs
(A), (B), (C) and (D) above that were used to calculate a
Retirement Income that was paid to the Participant in the form of
a lump sum distribution under the Plan, unless the Participant is
reemployed as an Eligible Employee and repays the lump sum
distribution, together with interest thereon at the rate
specified in Section 1.1, prior to his subsequent Annuity
Starting Date. However, the years described in this
Paragraph (E) shall be taken into account in determining which
accrual rate applies under Section 4.1.
1.14 "Eligible Compensation" for any calendar year means the sum of:
(A) The Participant's rate of annual Base Compensation in effect on
June 1 of such calendar year;
(B) Any cash bonus that he receives during such calendar year under
the Company's year-end bonus plan for executives and key
employees;
(C) The total amount of any overtime pay that he receives during such
calendar year, except that any overtime pay received during a
calendar year in which he completes a Credited Period of Service
of less than twelve (12) months shall be divided by the number of
completed months in such Credited Period of Service and then
multiplied by twelve (12); and
(D) The total amount of any commissions that he receives during such
calendar year, except that any commissions received during a
calendar year in which he completes a Credited Period of Service
of less than twelve (12) months shall be divided by the number of
completed months in such Credited Period of Service and then
multiplied by twelve (12).
The aggregate amount of all Eligible Compensation taken into account
under the Plan for 1993 shall in no event exceed $235,840, which is the
limitation in effect for that year under section 401(a)(17) of the Code,
and for any later calendar year shall in no event exceed one hundred and
fifty thousand dollars ($150,000) for any Employee. The one hundred and
fifty thousand dollars ($150,000) amount shall automatically be adjusted
for each calendar year to reflect the cost-of living adjustment (if any)
announced by the Commissioner of Internal Revenue for such calendar
year. The one hundred and fifty thousand dollars ($150,000) limit, as
adjusted, shall apply separately to Eligible Compensation for each
calendar year, not to Average Annual Compensation.
For purposes of applying the foregoing dollar limitation, the Eligible
Compensation of any of the 10 most highly compensated Highly Compensated
Employees or any five-percent owner shall be determined by combining the
Eligible Compensation of such top-10 Highly Compensated Employee or five-
percent owner with the Eligible Compensation of any Employees who are
family members of such top-10 Highly Compensated Employee or five-
percent owner. (For purposes of this Section 1.14 only, "family
members" means an individual's spouse and any lineal descendants who
have not attained age 19 prior to the end of the Plan Year.) If, as a
result of the application of such family-aggregation rules, the
foregoing dollar limitation is exceeded, then the limitation shall be
prorated among the individuals in each family-aggregation group in
proportion to each such individual's Eligible Compensation, determined
without regard to the application of the family-aggregation rules or the
foregoing limitation.
1.15 "Eligible Employee" means an Employee who meets the requirements of
Section 2.2, except an Employee who is a "leased employee" (within the
meaning of Section 414(n) of the Code) with respect to an Employer.
1.16 "Employee" means an individual who is (i) a common-law employee of an
Employer or (ii) a "leased employee" (within the meaning of Section
414(n) of the Code) with respect to an Employer.
1.17 "Employer" means each Affiliate which has been designated in writing as
an Employer by the Company, while such designation is in effect. The
Company, in writing, may designate an Affiliate as an Employer with
respect to certain employees, to the exclusion of the other employees of
such Affiliate.
1.18 "Enrolled Actuary" means an individual who has been approved by the Joint
Board for the Enrollment of Actuaries to perform actuarial services
required by ERISA or the regulations thereunder.
1.19 "ERISA" means Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as amended.
1.20 "Highly Compensated Employee" for any Plan Year means any active Employee
who, during the look-back year:
(1) Received Total Compensation of more than $50,000 (or such larger
amount as may be adopted by the Commissioner of Internal Revenue
to reflect a cost-of-living adjustment);
(2) Received Total Compensation of more than $50,000 (or such larger
amount as may be adopted by the Commissioner of Internal Revenue
to reflect a cost-of-living adjustment) and (if the Company
elects to apply this limitation) was a member of the Top-Paid
Group; or
(3) Was an officer of a member of the Affiliated Group and received
Total Compensation of more than 50 percent of the dollar
limitation in effect under section 415(b)(1)(A) of the Code.
The term "Highly Compensated Employee" also includes:
(1) Employees who are both described in the preceding sentence if
the term "determination year" is substituted for the term "look-
back year" and the Employee is one of the 100 Employees who
received the most Total Compensation from members of the
Affiliated Group during the determination year; and (2) Employees
who are five-percent owners at any time during the look-back year
or determination year. If no officer has satisfied the Total
Compensation requirement of (iii) above during either a
determination year or look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
If an Employee is, during a determination year or look-back year,
a Family Member of either a five-percent owner who is an active
or former Employee or a Highly Compensated Employee who is one of
the 10 most Highly Compensated Employees ranked on the basis of
Total Compensation paid during such year, then the Family Member
and the five-percent owner or top-10 Highly Compensated Employee
shall be aggregated. In such case, the Family Member and the
five-percent owner or top-10 Highly Compensated Employee shall be
treated as a single Employee receiving Compensation and Plan
benefits of the Family Member and five-percent owner or top-10
Highly Compensated Employee.
For purposes of this Section 1.20, the determination year shall
be the Plan Year and the look-back year shall be the 12-month
period immediately preceding the determination year, unless the
Company has made the calendar-year election described in Income
Tax Regulations section 1.414(q)-1T A-14(b) or its successor.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
Employees in the Top-Paid Group, the top 100 Employees, the
number of Employees treated as officers and the Total
Compensation that is considered, will be made in accordance with
section 414(q) of the Code and regulations thereunder.
1.21 "Highly Compensated Former Employee" for any Plan Year means a
former Employee who separated from service (or is deemed to have
separated from service) prior to the Plan Year, performs no service for
any Affiliate during such Plan Year and was a Highly Compensated
Employee as an active Employee for either the separation year or any
determination year ending on or after the Employee's 55th birthday. The
determination of who is a Highly Compensated Former Employee will be
made in accordance with section 414(q) of the Code and regulations
thereunder.
1.22 "Hour of Service" means:
(A) Each hour for which an Employee is directly or indirectly paid,
or entitled to payment, by an Employer for the performance of
services,
(B) Each hour for which an Employee is directly or indirectly paid,
or entitled to payment, by an Employer on account of a period of
time during which no services are performed (without regard to
whether the employment relationship between the Employee and the
Employer has terminated) due to vacation, holiday, illness,
incapacity, disability, layoff, jury duty, military duty or leave
of absence with pay, and
(C) Each hour for which an Employee is directly or indirectly paid,
or entitled to payment of an amount as back pay (without regard
to mitigation of damages) either awarded or agreed to by an
Employer.
The foregoing notwithstanding:
(1) No more than 501 Hours of Service shall be credited to an
Employee under Paragraph (B) or (C) above on account of
any single continuous period of time during which no
services are performed.
(2) An hour for which an Employee is directly or indirectly
paid or entitled to payment by an Employer on account of
a period during which no services are performed shall not
constitute an Hour of Service hereunder if such payment
is made or due under a plan maintained solely for the
purpose of complying with applicable workers'
compensation, unemployment compensation or disability
insurance laws.
(3) Hours of Service shall not be credited for payments that
solely reimburse an Employee for medical or medically
related expenses.
(4) The same Hour of Service shall not be credited to an
Employee both under Paragraph (A) or (B) and under
Paragraph (C).
(5) The computation period to which Hours of Service
determined under Paragraph (B) or (C) are to be credited
shall be determined under applicable federal law and
regulations, including, without limitation, Department of
Labor Regulation section 2530.204-2.
Each Employee for whom monthly records are not kept shall be
credited with 190 hours for each month for which such Employee
would be entitled to credit for one Hour of Service under
Subsection (A), (B) or (C) above.
The Company shall determine the number of Hours of Service, if
any, to be credited to an Employee under the foregoing rules in a
uniform and nondiscriminatory manner and in accordance with
applicable federal laws and regulations, including, without
limitation, Department of Labor Regulations section 2530.200b-2.
1.23 "Investment Manager" means any person who is (i) registered as an
investment adviser under the Investment Advisers Act of 1940, (ii) a
bank, as defined in such Act, or (iii) an insurance company qualified to
perform investment management services under the laws of more than one
state.
1.24 "Married Participant" means a Participant who is lawfully married, as
determined under the laws of the state where such Participant is
domiciled.
1.25 "Natomas Company" means Natomas Company, a California corporation and,
prior to August 31, 1983, the parent corporation of the Company.
1.26 "Natomas Plan" means the Retirement Plan for Employees of Natomas Company
and Participating Companies, a qualified defined-benefit pension plan
maintained by Natomas Company, as in effect on August 31, 1983.
1.27 "Natomas Transferee" means a Participant who was a participant in the
Natomas Plan and who, at any time prior to November 30, 1983, has
transferred directly from employment with Natomas Company, or with
another corporation which adopted the Natomas Plan, to employment with
an Employer as an Eligible Employee.
1.28 "Participant" means an Eligible Employee who becomes a Participant
pursuant to Article 2 and who continues to be entitled to any benefits
under the Plan.
1.29 "Period of Service" means an individual's period of employment with any
Affiliate, as determined under Article 12.
1.30 "Plan" means this American President Companies, Ltd. Retirement Plan, as
amended from time to time.
1.31 "Plan Year" means the twelve (12) consecutive month period ending each
May 31.
1.32 "Primary Social Security Benefit" means the estimated annual benefit to
which a Participant will be entitled under the Federal Social Security
program upon attaining age 65. A Participant's Primary Social Security
Benefit shall be estimated by the Company as of the date the Participant
ceases to be an Employee on the basis of:
(A) In the case of a Participant who retires on a Retirement Date,
the assumption that such Participant has no income that
constitutes "wages" for purposes of the Federal Social Security
program after the earlier of his Retirement Date or age sixty-
five (65);
(B) In the case of a Participant who ceases to be an Employee prior
to a Retirement Date, the assumption that his income that
constitutes "wages" for purposes of the Federal Social Security
program for each calendar year beginning with the year in which
he ceases to be an Employee and ending with the year that
includes his sixty-fifth (65th) birthday is equal to the
annualized rate of his compensation from the Affiliates that
constitutes "wages" for purposes of the Federal Social Security
program immediately prior to the date such Participant ceases to
be an Employee; and
(C) The Participant's annualized rate of compensation during the
Participant's initial period as an Employee (as determined by the
Company), projected backward to reflect growth at the rate of the
National Average Wage Index plus two percentage points; provided,
however, that a Participant may supply the Company with
documentation of the Participant's actual earnings history prior
to the commencement of benefits under the Plan, in which case the
Participant's Primary Social Security Benefit shall be estimated
on the basis of such actual earnings history.
1.33 "Prior Plan" means (i) the Retirement Plan for Non- Bargaining Unit
Employees of American President Lines, Ltd., as in effect prior to
August 31, 1983, and (ii) each "prior plan," as defined therein.
1.34 "Retirement Income" means the retirement benefits provided to
Participants and their spouses, joint annuitants and Beneficiaries in
accordance with the applicable provisions of Articles 4 and 5, except
that such term shall not include any benefits which are payable to an
Alternate Payee pursuant to a qualified domestic relations order under
Section 414(p) of the Code.
1.35 "Supplemental Retirement Income" means:
(A) In the case of a Participant who is also entitled to a regular
Retirement Income, the annual benefit to which the Participant
would be entitled, commencing on his Normal Retirement Date, in
the form of a single-life annuity equal to the product of (i) his
employee contributions (if any) under a Prior Plan or the Natomas
Plan, plus interest credited in accordance with such plan to
August 31, 1983, and compounded annually at the rate of five
percent (5%) for the period from September 1, 1983, to the date
on which he would attain his Normal Retirement Date, times (ii) a
conversion factor of ten percent (10%); and
(B) In the case of a Participant who is not entitled to a regular
Retirement Income, the annual benefit to which the Participant
would be entitled, commencing on his Normal Retirement Date, in
the form of a single-life annuity equal to the product of (i) his
Accumulated Contributions as of his Normal Retirement Date times
(ii) a conversion factor of ten percent (10%). For purposes of
this calculation, the interest rate to be credited to the Partici
pant's Accumulated Contributions from his Annuity Starting Date
to his Normal Retirement Date shall be the interest rate in
effect under Section 1.1 on his Annuity Starting Date.
1.36 "Top-Paid Group" for any Plan Year means the top 20 percent (in terms of
Total Compensation) of all Employees of the Company and its Affiliates,
excluding the following:
(a) Any Employee covered by a collective bargaining agreement who is
not an Eligible Employee;
(b) Any Employee who is a nonresident alien with respect to the
United States who receives no income with a source within the
United States from a the Company or its Affiliates;
(c) Any Employee who has not completed six months of service by the
end of the applicable year (including service in the preceding
year);
(d) Any Employee who normally works less than 17_ hours per week;
(e) Any Employee who normally works no more than six months during
any year; and
(f) Any Employee who has not attained the age of 21 at the end of the
Plan Year."
1.37 "Total Compensation" means "wages" as defined in section 3401(a) of the
Code for purposes of income tax withholding at the source, but
determined:
(i) Without regard to any rules that limit the remuneration
included in "wages" based on the nature or location of
the employment or the services performed (such as the
exception for agricultural labor in section 3401(a)(2) of
the Code); and
(ii) By including amounts deferred but not refunded under a
cafeteria plan, as such term is defined in section 125(c)
of the Code and under a plan qualified under section
401(k) of the Code.
1.38 "Trust Agreement" means the trust agreement between the Company and the
Trustee, established for the purpose of funding benefits under the Plan,
or any successor trust agreement or agreements.
1.39 "Trustee" means the trustee or trustees appointed by the Company pursuant
to Section 9.3.
1.40 "Trust Fund" means all money or other property held by the Trustee
pursuant to the terms of the Trust Agreement.
1.41 "United States" means the 50 states of the United States, the District of
Columbia, Puerto Rico and Guam.
ARTICLE 2
ELIGIBILITY
2.1 Date of Participation
Each individual who first becomes an Employee prior to January 1, 1993
and who meets the requirements specified in Section 2.2 shall become a
Participant on the first day of the month coincident with or next
following the date on which he completes the requirements. Each
individual who first becomes an Employee on or after January 1, 1993 and
who completes at least 1,000 Hours of Service during the 12-month period
measured from his or her date of hire as an Employee shall become a
Participant on the December 1 or June 1 coincident with or immediately
following the first anniversary of his date of hire, provided that he
has met the requirements specified in Section 2.2. If an Employee does
not complete at least 1,000 Hours of Service during the 12-month period
measured from his date of hire as an Employee, he shall become a Partici
pant on the June 1 following the first Plan Year commencing after his
date of hire during which he completes at least 1,000 Hours of Service,
provided that he has met the requirements specified in Section 2.2. The
foregoing notwithstanding, (A) July 1, 1993 is the first date on which
an Employee who is compensated by an Employer on a nonsalaried basis is
eligible to become a Participant and (B) an Employee who previously had
been an active Participant in the Plan, but who ceased active
participation due to termination of employment, shall resume active
participation immediately upon fulfillment of the requirements specified
in Section 2.2.
2.2 Participation Requirements
Effective as of January 1, 1993, the requirements for becoming a
Participant are that the Employee must:
(A) Be employed in the United States, or be employed outside the
United States and be eligible for home leave;
(B) Not be a member of a collective bargaining unit covered by a
collective bargaining agreement, unless such agreement provides
for coverage of the bargaining unit members under the Plan;
(C) Not be classified by the Company as a driver, driver-trainer or
temporary employee; and
(D) Not be eligible to participate in or accrue benefits under any
other funded pension or retirement plan to which his Employer
makes contributions, other than federal Social Security and the
American President Companies, Ltd. SMART Plan.
For purposes of Article 4, an Employee shall continue to be a
Participant entitled to accrue a Credited Period of Service only during
the period during which he satisfies all of the above requirements,
except that a Participant who is transferred to sea duty after
November 15, 1972, may continue to accrue a Credited Period of Service
if his absence from shoreside employment is due to unusual
circumstances, as authorized by the Company in writing for periods not
in excess of one (1) year.
ARTICLE 3
RETIREMENT DATE
3.1 Retirement Date
A Participant's "Retirement Date" shall be his Normal, Early, Postponed
or In-Service Retirement Date (whichever is applicable) unless the
Participant's Retirement Income commences or is paid as of another date
pursuant to Section 4.5 or 5.1, which date shall be his Retirement Date.
In no event, however, shall a Participant's Retirement Income commence
later than his In-Service Retirement Date.
3.2 Normal Retirement Date
A Participant's "Normal Retirement Date" shall be the first day of the
month coincident with or next following his sixty-fifth (65th) birthday.
3.3 Early Retirement Date
An individual who became a Participant before November 11, 1986, may
retire on the first day of any month coincident with or subsequent to
his fifty-fifth (55th) birthday, which day shall be his "Early Retire
ment Date."
An individual who becomes a Participant on or after November 11, 1986,
may retire on the first day of any month coincident with or subsequent
to the later of (i) his fifty-fifth (55th) birthday or (ii) the date
when he completes a Period of Service of five (5) years, which day shall
be his "Early Retirement Date."
3.4 Postponed Retirement Date
If a Participant continues in the service of any Affiliate beyond his
Normal Retirement Date, the first day of the month coincident with or
next following the termination of his employment after his Normal Retire
ment Date shall be his "Postponed Retirement Date."
3.5 In-Service Retirement Date
If a Participant continues in the service of any Affiliate beyond the
April 1 following the calendar year in which he attains age seventy and
one-half (70_), then such April 1 shall be his "In-Service Retirement
Date." The preceding sentence notwithstanding, if a Participant other
than a five percent (5%) owner of the Company attains age seventy and
one-half (70_) in 1988 or 1989, his In-Service Retirement Date shall be
April 1, 1990.
ARTICLE 4
AMOUNT OF RETIREMENT INCOME
4.1 Normal Retirement Income
A Participant who retires on his Normal Retirement Date (or at any time
between his sixty-fifth (65th) birthday and his Normal Retirement Date)
shall be entitled to receive a Normal Retirement Income.
Subject to the remaining Sections of this Article 4 and the provisions
of Article 6 (Forms of Benefit Payment) and Section 10.4 (Limitations
Upon Highest-Paid Employees), a Participant's annual rate of Retirement
Income, commencing on his Normal Retirement Date, shall be equal to the
amount described in Paragraph (A) below, minus the amount described in
Paragraph (B) below, but not greater than the amount described in
Paragraph (C) below.
(A) The amount described in this Paragraph (A) shall be equal to a
percentage of the Participant's Average Annual Compensation.
Such percentage shall be equal to the sum of:
(1) The product of two and two-tenths percent (2-2/10%) times
the number of years in the Participant's Credited Period
of Service completed prior to January 1, 1993 not in
excess of twenty (20); plus
(2) The product of one percent (1%) times the number of years
in the Participant's Credited Period of Service completed
prior to January 1, 1993 in excess of twenty (20); plus
(3) The product of one and two-thirds percent (1-2/3%) times
the number of years in the Participant's Credited Period
of Service completed after December 31, 1992.
(B) The amount described in this Paragraph (B) shall be equal to a
percentage of the Participant's Primary Social Security Benefit
equal to the product of one and two-thirds percent (1-2/3%) times
the number of years in the Participant's Credited Period of
Service.
(C) The amount described in this Paragraph (C) shall be equal to
fifty percent (50%) of the amount (if any) by which the
Participant's Average Annual Compensation exceeds his Primary
Social Security Benefit.
Partial years in the Participant's Credited Period of Service shall be
rounded up to the next higher whole month and then counted as the
appropriate fraction of a year.
4.2 Participants Transferring Among Certain Companies
In the case of a Natomas Transferee, the annual rate of Retirement
Income, commencing on his Normal Retirement Date, shall be the larger of
the amounts described in Paragraphs (A) or (B) below.
(A) The amount described in this Paragraph (A) shall be equal to the
amount computed pursuant to Section 4.1. For this purpose, the
Natomas Transferee's credited period of service under the Natomas
Plan shall be included, as provided in Section 1.13(D).
(B) The amount described in this Paragraph (B) shall be equal to the
sum of:
(1) The amount computed pursuant to Section 4.1, except that
Section 1.13(D) shall be disregarded and the Natomas
Transferee's credited period of service under the Natomas
Plan shall be excluded; plus
(2) The annual normal retirement benefit which the Natomas
Transferee had accrued under the Natomas Plan as of the
date of his transfer to an Employer (in the form of a
single-life annuity).
In the case of a Participant who (i) had been transferred between
Pacific Far East Lines, Inc. ("PFEL") and an Employer prior to July 1,
1971, (ii) was employed by an Employer on such date and (iii) retires
while employed by an Employer after March 1, 1973, the Participant's
Retirement Income provided in Section 4.1 first shall be computed as if
employment with PFEL had been with an Employer. The amount so
determined then shall be reduced by the annual normal retirement benefit
which the Participant is eligible to receive (in the form of a
single-life annuity) from the retirement plan of PFEL.
4.3 Participants Transferring From Another Company-Supported Plan
In the case of an Employee who ceases to be eligible for another defined-
benefit plan qualified under U.S. law and funded at least in part by
Employer contributions (and who, therefore, becomes a Participant in
this Plan pursuant to Section 2.1), the Retirement Income provided in
Section 4.1 shall be computed in accordance with the Retirement Income
formula in effect as of his Retirement Date as if the Participant had
not been excluded from participation under Section 2.2(D). The amount
so determined then shall be reduced by the annual normal retirement
income benefit which the Participant is eligible to receive (in the form
of a single-life annuity) from such other plan. If, in the case of such
a Participant who previously participated in the Retirement Plan for
Employees of American President Lines, Ltd. Represented by the
Professional, Office and Industrial Division, Marine Engineers'
Beneficial Association (AFL-CIO) and the Marine Clerks Association,
Local 63, I.L.W.U. (the "Bargained Retirement Plan"), assets and
liabilities associated with such Participant's benefit under the
Bargained Retirement Plan have been transferred to the Plan in
accordance with Section 4.3 of the Bargained Retirement Plan, then the
Participant's entire benefit shall be paid from the Plan.
4.4 Participants Transferring to Another Company-Supported
Plan
In the case of an Employee who becomes eligible to participate in
another plan funded at least in part by Employer contributions (and who,
therefore, ceases active participation in this Plan pursuant to Section
2.2), the Retirement Income provided in Section 4.1 shall be computed
based upon the Employee's Credited Period of Service and Average Annual
Compensation as of the date he ceases active participation pursuant to
Section 2.2 and upon the Plan's benefit formula then in effect. From
time to time, the Company shall transfer to the Bargained Retirement
Plan assets and liabilities associated with the Plan benefits of
Participants who have ceased active participation in Plan and become
eligible to participate in the Bargained Retirement Plan. All such
transfers shall be made in accordance with section 414(l) of the Code
and shall not result in the reduction of any protected benefits within
the meaning of section 411(d)(6) of the Code and regulations promulgated
thereunder. After any such transfer, the affected Participant shall
cease to be a Participant in this Plan and shall receive his or her
entire benefit from the Bargained Retirement Plan.
4.5 Early Retirement Income
A Participant who retires on an Early Retirement Date may elect to
receive one of the following:
(A) Commencing on his Normal Retirement Date, or on the first day of
any month prior to his Normal Retirement Date but coinciding with
or following his sixty-second (62nd) birthday, the Retirement
Income benefit accrued by him pursuant to Section 4.1.
(B) Commencing on his Early Retirement Date or on the first day of
any month between his Early Retirement Date and his sixty-second
(62nd) birthday (as selected by the Participant pursuant to
Section 6.3(E)), the Retirement Income benefit described in
Paragraph (A) above, reduced by one and one-fourth percent
(1-1/4%) for each of the first twenty-four (24) full months and
one-third of one percent (1/3%) for each of the next sixty (60)
full months by which the commencement of benefits precedes the
first day of the month coinciding with or next following the
Participant's sixty-second (62nd) birthday.
For the purpose of determining a Participant's eligibility to receive a
Retirement Income pursuant to this Section 4.5 (but not the amount of
such Retirement Income), a Participant who transferred from another com
pany described in Sections 4.2 or 4.3 shall be credited with a Credited
Period of Service for his employment with the other company. The amount
of such Retirement Income shall be determined pursuant to Sections 4.2
or 4.3 in conjunction with this Section 4.5.
4.6 Postponed and In-Service Retirement Income
A Participant who retires on a Postponed Retirement Date or who reaches
his In-Service Retirement Date during a Period of Service with any
Affiliate shall receive, commencing on his Postponed or In-Service
Retirement Date, whichever is earlier, the Retirement Income provided by
Section 4.1, based upon the benefit formula then in effect and the
Participant's Credited Period of Service and Average Annual Compensation
as of his Annuity Starting Date.
A Participant's In-Service Retirement Income shall be recalculated as of
each January 1 following his In-Service Retirement Date and before his
Postponed Retirement Date based upon the benefit formula then in effect
and the Participant's total Credited Period of Service and Average
Annual Compensation as of such January 1. If the recalculated In-
Service Retirement Income is greater than the Participant's In-Service
Retirement Income as of the next preceding January 1 (when both are
expressed as a benefit payable in the normal form), then such excess
Retirement Income shall be payable to the Participant as of the
January 1 for which the recalculation is made, in the same form as
previously elected. If the recalculated In-Service Retirement Income is
equal to or less than the previous In-Service Retirement Income, then
there shall be no adjustment to his In-Service Retirement Income. A
Participant who retires on a Postponed Retirement Date that follows his
In-Service Retirement Date shall have his Retirement Income redetermined
and adjusted, if required, as of his Postponed Retirement Date, in the
manner provided above, except that the Participant's total Credited
Period of Service and Average Annual Compensation as of his Postponed
Retirement Date shall be used.
4.7 Supplemental Retirement Income
If a Participant who separates from all service with any Affiliate made
employee contributions under a Prior Plan or the Natomas Plan, the
Participant shall receive a Supplemental Retirement Income determined
under Section 1.33. Such Supplemental Retirement Income shall commence
on the Participant's Normal Retirement Date, unless he receives a
Retirement Income on a Retirement Date other than the Normal Retirement
Date.
If a Participant elects to have his Retirement Income commence on a
Retirement Date which precedes his Normal Retirement Date, his
Supplemental Retirement Income also shall commence on such Retirement
Date and shall be reduced by one one-hundred-eightieth (1/180th) for
each of the first sixty (60) months and by one three-hundred-sixtieth
(1/360th) for each of the next sixty (60) months by which the commence
ment of benefits precedes his Normal Retirement Date.
If a Participant's Retirement Income commences on his Postponed or In-
Service Retirement Date, his Supplemental Retirement Income also shall
commence on his Postponed or In-Service Retirement Date and shall be
increased by one percent (1%) for each month by which retirement is
postponed beyond his Normal Retirement Date.
A Participant's Supplemental Retirement Income shall be payable in a
form described in Article 6.
4.8 COLA-Adjusted Retirement Income
In lieu of a Retirement Income determined under Section 4.1, a
Participant who retires or separates from service after becoming vested
pursuant to Article 5 shall be entitled to receive his benefit accrued
as of December 31, 1992, increased annually pursuant to this Section 4.8
(a "COLA-Adjusted Retirement Income"), beginning on the June 1 next
following the commencement of his Retirement Income, provided that the
Company determines that the present value of the Participant's COLA-
Adjusted Retirement Income is greater than that of his Retirement Income
when both are expressed as Actuarially Equivalent lump sums as of the
date of the Participant's retirement or separation from service. The
surviving spouse or contingent annuitant of a Participant who receives a
COLA-Adjusted Retirement Income shall also be entitled to receive a
benefit increased annually pursuant to this Section 4.8. In the case of
a Participant whom the Company determines is entitled to a COLA-Adjusted
Retirement Income (or such Participant's surviving spouse or contingent
annuitant), references in the Plan to a Participant's Retirement Income
shall be deemed to mean such Participant's COLA-Adjusted Retirement
Income.
Subject to the limitations in the next two sentences, the COLA-Adjusted
Retirement Income that a Participant, spouse or contingent annuitant
eligible under the preceding paragraph receives for any Plan Year shall
be the benefit which results from multiplying the portion of the
original benefit he received attributable to his benefit accrued as of
December 31, 1992 by the ratio of (i) the CPI-W for U.S. Cities on the
February 1 preceding the starting date of the increased benefit to
(ii) the CPI-W for U.S. Cities on the February 1 preceding the starting
date of the original benefit. However, the increase in any Plan Year in
a benefit accrued before September 1, 1990, shall never be larger than
two and one-half percent (2-1/2%) of the benefit received in the
immediately preceding Plan Year. The increase in any Plan Year in a
benefit accrued after August 31, 1990 and prior to January 1, 1993,
shall never be larger than one and one-half percent (1-1/2%) of the bene
fit received in the immediately preceding Plan Year. The "benefit
accrued before September 1, 1990," shall be deemed to be equal to the
Retirement Income that the Participant or his surviving spouse would
have received if the Participant had separated from all service with
Affiliates on August 31, 1990. The "benefit accrued as of December 31,
1992," shall be deemed to be equal to the Retirement Income that the
Participant or his surviving spouse would have received if the
Participant had separated from all service with Affiliates on
December 31, 1992. The "benefit accrued after August 31, 1990 and prior
to January 1, 1993," shall be deemed to be equal to (i) the entire
Retirement Income that the Participant or his surviving spouse would
have received if the Participant had separated from all service with
Affiliates on December 31, 1992 minus (ii) the Retirement Income that
the Participant or his surviving spouse would have received if the
Participant had separated from all service with Affiliates on August 31,
1990.
This Section 4.8 shall be administered so that changes in the base
period of years used in computing the CPI-W for U.S. Cities that occur
after a Participant's retirement or separation from service shall not
affect the cost-of-living adjustments for such Participant, his
surviving spouse or contingent annuitant.
The cost-of-living adjustment provided by this Section 4.8 shall not
apply to the Supplemental Retirement Income payable to a Participant,
his spouse or contingent annuitant.
4.9 Interest on Installments
If the payment of a Participant's Retirement Income is made in
installments, the unpaid amount shall be credited with interest
compounded annually at the rate prescribed in Appendix A for calculating
the amount of the initial lump sum benefit, except as otherwise provided
in Section 6.3(D). The rate of interest shall not be adjusted to match
any subsequent changes in the specified rate.
4.10 Retirement Income Limitations
The provisions of this Section 4.10 shall apply with respect to all
calendar years after December 31, 1986.
(A) General Rule
Unless the alternative limitation of Paragraph (B) below applies, a
Participant's Annual Benefit shall not exceed the lesser of the
following amounts:
(1) Ninety thousand dollars ($90,000), adjusted as described below;
or
(2) The amount of the Participant's Average Annual Compensation, as
defined in Paragraph (I) below.
As of January 1 of each calendar year, the adjusted dollar limitation
for such calendar year announced by the Commissioner of Internal Revenue
pursuant to Section 415(d) of the Code shall automatically be
substituted for the ninety thousand dollar ($90,000) amount set forth in
Subparagraph (1) above and shall become the dollar limitation applicable
under the Plan during such calendar year. The adjusted dollar limi
tation for a calendar year shall apply in determining the amount of all
Annual Benefits commencing in such calendar year, and such Annual Bene
fits thereafter shall not be adjusted (except as provided in the
following sentence). In the case of a Participant whose Employment ter
minates on or after January 1, 1993, and whose Annual Benefit is limited
by the dollar limitation under Subparagraph (1) above, such Annual
Benefit shall automatically be recalculated as of January 1 of each
calendar year following the termination of his or her Employment,
commencing on January 1, 1994, to reflect the adjusted dollar limitation
for such calendar year. An increased Retirement Benefit resulting from
the recalculation of the Annual Benefit shall be payable under the Plan
in the same form as the original Retirement Benefit. No further
adjustments shall be made once the adjusted dollar limitation exceeds
the amount of the Annual Benefit.
If a Participant's Annual Benefit would exceed the limitation of this
Section 4.10, then such Annual Benefit shall be reduced by reducing the
components thereof as necessary in the order in which they are listed in
Paragraph (H) below; provided, however, that a Participant's Annual Bene
fit shall in no event be reduced below the amount of such Annual Benefit
as of December 31, 1986, determined under the applicable plans
(including their benefit limitations) as then in effect.
(B) Alternative Limitation for Retirement Income up to
$10,000
A Participant's Retirement Income shall not be subject to the
limitations of Paragraph (A) above if each of the following
requirements is met:
(1) The sum of the Participant's annual Retirement Income
under this Plan and his aggregate annual retirement
benefits under all other qualified defined-benefit plans
maintained by any Affiliate does not exceed the lesser of
(i) ten thousand dollars ($10,000) or (ii) the amount
determined under Paragraph (D) below (concerning only
Participants whose Period of Service is less than ten
(10) years); and
(2) The Participant has never participated in a qualified
defined-contribution plan maintained by any Affiliate.
(C) Reduced Limitations for Participants With Less Than
10 Years of Participation
In the case of a Participant whose Credited Period of Service is
less than ten (10) years, the amount described in Paragraph
(A)(1) above shall be multiplied by a fraction determined as
follows:
(1) The numerator of such fraction shall be the number of
completed months in such Credited Period of Service (but
not less than twelve (12)); and
(2) The denominator of such fraction shall be one hundred
twenty (120).
To the extent provided in Income Tax Regulations, this Para
graph (C) shall apply separately to each change in the benefit
structure of the Plan, as if such change caused the commencement
of a new Credited Period of Service.
(D) Reduced Limitations for Participants With Less Than
10 Years of Service
In the case of a Participant whose Period of Service is less than
ten (10) years, the amount described in Paragraph (A)(2) above
and the ten thousand dollar ($10,000) amount described in
Paragraph (B)(1) above shall be multiplied by a fraction
determined as follows:
(1) The numerator of such fraction shall be the number of
completed months in such Period of Service (but not less
than twelve (12)); and
(2) The denominator of such fraction shall be one hundred
twenty (120).
(E) Adjusted Dollar Limitation for Benefits Commencing
Before or After the Social Security Retirement Age
In the case of a Participant whose Retirement Income commences
before his Social Security retirement age, the dollar amount
described in Paragraph (A)(1) above shall be reduced. The
reduced dollar amount shall be determined by treating the dollar
limitation in Paragraph (A)(1) above as an annual annuity payable
for life commencing at the Participant's Social Security retire
ment age and then converting it to an actuarially equivalent
annual annuity payable for life commencing as of the date when
the Participant's Retirement Income commences. Actuarial equiva
lency for this purpose shall be based on the following actuarial
assumptions:
(1) For calendar years prior to January 1, 1995, the actuarial
assumptions specified in Appendix A, provided that the
interest rate assumption shall equal the greater of the
rate specified in Appendix A or five percent (5%); and
(2) For calendar years after December 31, 1994, the Applicable
Mortality Table and an interest rate assumption equal to
the greater of the rate specified in Appendix A or the
Applicable Interest Rate.
In the case of a Participant whose Retirement Income commences
after his Social Security retirement age, the amount described in
Paragraph (A)(1) above shall be increased. The increased dollar
limit shall be determined by treating the dollar limitation in
Paragraph (A)(1) above as an annual annuity payable for life
commencing at the Participant's Social Security retirement age
and then converting it to an actuarially equivalent annual
annuity payable for life commencing as of the date when the
Retirement Income commences. Actuarial equivalency for this
purpose shall be based on the following actuarial assumptions:
(1) For calendar years prior to January 1, 1995, the actuarial
assumptions specified in Appendix A, provided that the
interest rate assumption shall equal the lesser of the
rate specified in Appendix A or five percent (5%); and
(2) For calendar years after December 31, 1994, the Applicable
Mortality Table and an interest rate assumption equal to
the lesser of the rate specified in Appendix A or five
percent (5%).
For purposes of this Paragraph (E), a Participant's "Social
Security retirement age" means the age determined pursuant to the
following schedule:
Date of Participant's Birth Age
Before January 1, 1938 ........... 65
On or after January 1, 1938
but before January 1, 1955 ....... 66
On or after January 1, 1955 ...... 67
(F) Combined Limitation on Benefits and Contributions
The sum of a Participant's Defined-Benefit Plan Fraction and his
Defined-Contribution Plan Fraction shall not exceed one (1) with
respect to any calendar year. The terms "Defined-Benefit Plan
Fraction" and "Defined-Contribution Plan Fraction" shall have the
meaning given to such terms by Section 415(e) of the Code and the
regulations thereunder. If a Participant would exceed the
foregoing limitation, then his Annual Benefit shall be reduced as
necessary pursuant to Paragraph (A) above; provided, however,
that the changes in this Section 4.10 taking effect on January 1,
1987 shall in no event reduce a Participant's Annual Benefit (in
any form) below the amount of such Annual Benefit as of
December 31, 1986, determined under the applicable plans
(including their benefit limitations) as then in effect.
(G) Affiliate
For purposes of this Section 4.10, the term "Affiliate" shall
include any Affiliate (as defined in Section 1.3), except that,
for purposes of this Section 4.10 only, the phrase "more than
fifty percent (50%)" shall be substituted for the phrase "at
least eighty percent (80%)" wherever it occurs in Section 1.3,
and the penultimate sentence of Section 1.3 shall not apply.
(H) Annual Benefit
For purposes of this Section 4.10, a Participant's "Annual
Benefit" shall be equal to the sum of the following:
(1) The annual Retirement Income to which the Participant is
entitled under this Plan; and
(2) The aggregate annual retirement benefits (if any) to which
the Participant is entitled under all other qualified
defined-benefit plans maintained by any Affiliate.
A Participant's Supplemental Retirement Income shall not be
considered a part of the Participant's "Annual Benefit."
If an Annual Benefit (or any portion thereof) is payable in any
form other than a single-life annuity or a qualified joint and
survivor annuity, as defined in Section 417(b) of the Code, then
such Annual Benefit (or such portion) shall, for purposes of this
Paragraph (H), be converted into a single-life annuity which is
its actuarial equivalent. Actuarial equivalency for this purpose
shall be based on the following actuarial assumptions:
(1) For calendar years prior to January 1, 1995, the actuarial
assumptions specified in Appendix A, provided that the
interest rate assumption shall equal the greater of the
rate specified in Appendix A or five percent (5%); and
(2) For calendar years after December 31, 1994, the Applicable
Mortality Table and an interest rate assumption equal to
the greater of the rate specified in Appendix A or the
Applicable Interest Rate.
(I) Applicable Interest Rate
For purposes of this Section 4.10, the term "Applicable Interest
Rate" shall mean the annual rate of interest on 30-year Treasury
securities for the month before the date of distribution or such
other time as the Secretary of the Treasury may prescribe.
(J) Applicable Mortality Table
For purposes of this Section 4.10, the term "Applicable Mortality
Table" shall mean the table prescribed by the Secretary of the
Treasury, which is based on the prevailing commissioners'
standard table used to determine reserves for group annuity
contracts issued on the date as of which present value is being
determined.
(K) Average Annual Compensation
For purposes of this Section 4.10 only, the term "Average Annual
Compensation" shall mean the Participant's annual Compensation,
as defined in Paragraph (L) below, averaged over that series of
consecutive twelve (12) month periods (not in excess of three
(3)) for which his cumulative Compensation is highest. In the
case of a Participant who has severed from all employment with
any Affiliate, the amount determined under the preceding sentence
shall be increased with respect to any calendar year following
his separation from employment by multiplying it by a fraction
determined as follows:
(1) The numerator of such fraction shall be the amount
described in Paragraph (A)(1) above, as in effect for
such calendar year; and
(2) The denominator of such fraction shall be the amount
described in Paragraph (A)(1) above, as in effect for the
calendar year in which the Participant severed from all
employment with any Affiliate; provided that such denomi
nator shall in no event be greater than the numerator
described in Subparagraph (1) above.
(L) Compensation
For purposes of this Section 4.10 only, the term "Compensation"
shall mean "wages," as defined in Section 3401(a) of the Code for
purposes of income tax withholding at the source, but determined
without regard to any rules that limit the remuneration included
in "wages" based on the nature or location of the employment or
the services performed (such as the exception for agricultural
labor in Section 3401(a)(2) of the Code).
4.11 Return to Employment Following Retirement
If a Participant returns to the service of an Employer after his
Retirement Date (other than an In-Service Retirement Date):
(A) If he had completed at least a thirty (30) year Credited Period
of Service prior to his Retirement Date, his Retirement Income
and Supplemental Retirement Income benefits shall continue to be
paid to him during his period of reemployment.
(B) If he had completed less than a thirty (30) year Credited Period
of Service prior to his Retirement Date, his Retirement Income
and Supplemental Retirement Income benefits shall cease until a
subsequent Retirement Date (including an In-Service Retirement
Date) occurs.
The Retirement Income benefit of a reemployed Participant shall be
recomputed upon his subsequent retirement, based on his Retirement
Income accrued pursuant to Section 4.1 before and after the return to
employment and his then attained age, and then shall be reduced, in
accordance with the Actuarial Equivalent Factors set forth in
Appendix A, to take into account all Retirement Income payments that he
previously received. The recomputed Retirement Income, however, shall
in no event be lower than the original Retirement Income.
Whenever a Participant has attained the age of sixty- five (65) and such
Participant's Supplemental Retirement Income benefits are suspended
pursuant to this Section 4.11, if the Participant again becomes entitled
to receive Supplemental Retirement Income benefits, such benefits first
shall be increased, in accordance with the Actuarial Equivalent Factors
set forth in Appendix A, to reflect the value of the Supplemental
Retirement Income that was suspended under this Section 4.11 after the
Participant attained the age of sixty-five (65), and then shall be
reduced, in accordance with such factors, to take into account all
Supplemental Retirement Income payments that he previously received.
4.12 Deemed Termination After Normal Retirement Date
Sections 4.6 and 4.11 notwithstanding, in the case of a Participant who
is reemployed after or is employed beyond his Normal Retirement Date,
the Participant's employment shall be deemed to terminate for the pur
poses of the Plan immediately prior to the first day of any calendar
month in which there are less than eight days during which he is paid
(or is entitled to payment) by an Affiliate, whether for the performance
of duties or for any other reason. Accordingly, the first day of such
month shall be considered a Postponed Retirement Date and payment of the
Participant's Retirement Income and Supplemental Retirement Income (if
any) shall commence as of such date, as provided in Section 4.6.
However, the Participant shall be deemed reemployed immediately prior to
the first day of any calendar month in which there are eight or more
such days, and his Retirement Income and Supplemental Retirement Income
shall not be payable for such month unless such benefits otherwise would
be payable pursuant to Section 4.11. Upon a Participant's actual
Postponed Retirement Date or In-Service Retirement Date, this Section
4.12 shall cease to apply and the Participant's Retirement Income and
Supplemental Retirement Income shall be recomputed in the manner
described in Section 4.6. For the purposes of this Section 4.12,
whether a corporation is an Affiliate shall be determined as of the
Participant's Normal Retirement Date and without regard to the
penultimate sentence of Section 1.3.
4.13 Prior Benefit Accrual
The provisions of this Section 4.13 shall supersede any conflicting
provisions of the Plan.
(A) In the case of a Participant who was an Employee on May 31, 1989,
his total Retirement Income shall in no event be less than his
Retirement Income calculated (i) by counting only his Credited
Period of Service before June 1, 1989, and (ii) by applying all
of the provisions of the Plan in effect from time to time before
June 1, 1989. This calculation shall be made on the assumption
that the Participant separated from all service with Affiliates
on May 31, 1989, and without regard to any changes in the amount
of his Average Annual Compensation or primary Social Security
benefit after May 31, 1989.
In calculating Average Annual Compensation for purposes of this
Paragraph (A) only, the dollar limit described in Section 1.14
shall not apply.
(A) In the case of a Participant who was an Employee on December 31,
1992, his total Retirement Income shall in no event be less than
his Retirement Income calculated (i) by counting only his
Credited Period of Service before January 1, 1993 and (ii) by
applying all of the provisions of the Plan in effect from time to
time before January 1, 1993. This calculation shall be made on
the assumption that the Participant separated from all service
with Affiliates on December 31, 1992, and without regard to any
changes in the amount of his Average Annual Compensation or
Average Social Security Base after December 31, 1992.
(B) In the case of a Participant who was an Employee on May 31, 1994,
his total Retirement Income shall in no event be less than the
sum of: (i) his Retirement Income calculated by counting only his
Credited Period of Service before June 1, 1994, and applying all
of the provisions of the Plan in effect from time to time before
June 1, 1994 (ignoring the effects of Sections 4.8 and 4.13(B)),
and (ii) his Retirement Income calculated by counting only his
Credited Period of Service on and after June 1, 1994, and
applying all of the provisions of the Plan in effect from time to
time on and after June 1, 1994. The calculation in (i) above
shall be made on the assumptions that the Participant separated
from all service with Affiliates on May 31, 1994 and that the
limitation in effect under Code section 401(a)(17) was $235,840
for all Plan Years before June 1, 1994, and without regard to any
changes in the amount of his Average Annual Compensation or
primary Social Security benefit after May 31, 1994.
4.14 Disabled Participants
Any other provision of the Plan to the contrary notwithstanding, if a
Participant becomes disabled before his Normal Retirement Date he shall
be subject to the following provisions of this Section 4.14. A disabled
Participant shall be considered to be a Participant and an Employee in
the service of the Employer (for purposes of this Plan only). Subject
to the provisions of Section 4.15, the disabled Participant shall
continue to receive credit toward his Period of Service and Credited
Period of Service during the period of his disability, the latter based
on the assumption that his Compensation for such period is equal to his
rate of basic earnings last paid by the Employer.
"Disabled" means a Participant who is eligible for and receiving
benefits under the Company's Long Term Disability Plan.
4.15 Cessation of Disability
If a Participant who was disabled ceases to be disabled before his
Retirement Date, no further Retirement Income shall be credited to him
pursuant to Section 4.14. If such Participant shall not then resume
active employment with an Employer, he shall be deemed a terminated
Employee as of the date he became disabled and his right to receive
Retirement Income, if any, from the Plan shall be determined pursuant to
Article 5 (Termination of Employment Prior to Retirement). If such
Participant shall resume active employment with an Employer, he shall be
immediately eligible to resume accrual of Retirement Income pursuant to
Section 4.1. The Retirement Income standing to his credit by reason of
Section 4.14, as well as Retirement Income credited after such
resumption of employment, shall be subject to all the provisions of the
Plan.
ARTICLE 5
TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT
5.1 Termination of Service After Vesting
If a Participant (i) separates from all service with any Affiliate prior
to an Early Retirement Date, other than by reason of death, and (ii) has
completed a five (5) or more year Period of Service, then he shall be
entitled to receive either:
(A) Commencing as of his Normal Retirement Date, one hundred percent
(100%) of the Retirement Income accrued by him pursuant to
Article 4; or
(B) Commencing on the first day of any month coincident with or
following his fifty-fifth (55th) birthday and prior to his Normal
Retirement Date, as selected by the Participant pursuant to
Section 6.3(E), the Retirement Income benefit described in
Paragraph (A) above, reduced by five-ninths of one percent (5/9%)
for each of the first sixty (60) months, and five-eighteenths of
one percent (5/18%) for each of the next sixty (60) months, by
which the commencement of such benefit precedes the Participant's
Normal Retirement Date.
If the Participant made employee contributions under a Prior Plan or the
Natomas Plan, the Participant shall receive a Supplemental Retirement
Income benefit. Such benefit shall commence on the Participant's Normal
Retirement Date unless he elects to commence his Retirement Income on an
earlier date pursuant to Paragraph (B) above, in which case his
Supplemental Retirement Income also shall commence on such earlier date
and shall be reduced in accordance with Section 4.7.
For the purpose of determining a Participant's nonforfeitable right to a
Retirement Income pursuant to this Section 5.1, a Participant who
transferred between Pacific Far East Line, Inc. ("PFEL") and the Company
prior to July 1, 1971, was employed by PFEL on such date and terminated
from employment with PFEL after March 1, 1973, shall receive credit
toward his Period of Service for his employment with PFEL.
5.2 Termination of Service Before Vesting
Subject to Section 4.7, a Participant other than a Natomas Transferee
who separates from all service with any Affiliate prior to his
attainment of age sixty-five (65) and prior to his completion of a five
(5) year Period of Service, for reasons other than retirement on his
Retirement Date, shall not be entitled to any Retirement Income benefits
under the Plan.
A Natomas Transferee who separates from service prior to his attainment
of age sixty-five (65) and prior to his completion of a five (5) year
Period of Service, for reasons other than retirement on his Retirement
Date, shall be entitled to a Retirement Income equal to the annual
normal retirement benefit that he had accrued under the Natomas Plan as
of the date of his transfer to an Employer. Such Retirement Income
shall be payable pursuant to the provisions of Section 5.1.
5.3 Forfeitures
Prior to the termination of the Plan, any forfeiture arising from the
operation of this Article 5 or any other provision of the Plan shall be
used to reduce future Employer contributions pursuant to Article 8.
ARTICLE 6
FORMS OF BENEFIT PAYMENT
6.1 Normal Form of Retirement Income
(A) Single Participants
Except as otherwise provided for Married Participants pursuant to
Paragraph (B) below, the Retirement Income shall be payable in
the form of a monthly payment commencing as of the Participant's
Retirement Date and terminating with the last monthly payment due
prior to his death.
(B) Married Participants
In the case of a Married Participant who has been married for at
least one (1) year at the time of his death and had been married
to the same spouse before his Annuity Starting Date, the
Actuarial Equivalent of the Participant's Retirement Income shall
be payable to him in the form of a monthly payment commencing as
of the Participant's Retirement Date and, after the Participant's
death, such spouse who is living at the time of the Participant's
death shall continue to receive fifty percent (50%) of such
monthly payments for life.
(B) Prior Actuarial Assumptions Preserved as to December 31,
1992 Accrued Benefit
Monthly payments to be made to a Participant and surviving spouse
under Paragraph (B) shall in no event be less than the payments
that would be made if the Participant's Retirement Income were no
greater than the Retirement Income calculated as of December 31,
1992, using the assumptions specified in Paragraph (B) of Section
4.13, and such Retirement Income were paid in the form described
in Section 6.1 of the Plan as in effect on December 31, 1992.
6.2 Normal Form of Supplemental Retirement Income
(A) Single Participants
Except as otherwise provided for Married Participants pursuant to
Paragraph (B) below, or unless an optional form of Retirement
Income described in Section 6.3 is duly elected by a Participant
pursuant to Section 6.3(E), the Supplemental Retirement Income
provided pursuant to Section 4.7, if any, shall be payable in the
form of a monthly payment commencing as of his Retirement Date
and terminating with the last monthly payment due prior to his
death.
(B) Married Participants
Solely with respect to Married Participants, unless an optional
form of Retirement Income described in Section 6.3 is duly
elected, the Supplemental Retirement Income provided pursuant to
Section 4.7 shall be the Actuarial Equivalent of the Supplemental
Retirement Income provided under Paragraph (A) above, payable as
a reduced monthly Supplemental Retirement Income to such Married
Participant for life commencing as of his Retirement Date. Upon
the death of the Married Participant, fifty percent (50%) of the
reduced Supplemental Retirement Income shall be paid to and
during the life of the spouse to whom the Participant was married
on the date when the Supplemental Retirement Income became
payable, if such spouse is then living. Such payments shall
terminate with the last monthly payment due prior to the spouse's
death.
6.3 Optional Forms of Retirement Income
Within a reasonable time before the Participant's Annuity Starting Date,
the Company shall make available to such Participant (i) a written
explanation of the terms and conditions of the normal form of Retirement
Income, (ii) a written explanation of the Participant's right to make or
revoke an election of an optional form of Retirement Income and of the
effect of such election or revocation, (iii) a written explanation of
the effect of a failure to make an election of an optional form of
payment and (iv) a written explanation of the rights of the
Participant's spouse under Paragraph (E) below.
In lieu of the normal form of Retirement Income provided in Section 6.1
and the normal form of Supplemental Retirement Income provided in
Section 6.2, a Participant may elect one of the following options,
subject to the conditions of Paragraph (E) below:
(A) Supplemental Retirement Income Options
A Participant who is not eligible to receive a Retirement Income but who
is eligible to receive a Supplemental Retirement Income pursuant to Sec
tion 4.7 may elect, during the election period described in
Paragraph (E) below, to receive his Accumulated Contributions in a
single lump sum, payable upon his separation from all service with any
Affiliate. The amount of his Accumulated Contributions shall contain
interest accrued to the date of payment in accordance with Section 1.1.
In the case of a Married Participant, the election shall be effective
only when agreed to in writing by such Participant's spouse in the
manner described in Paragraph (E) below.
A Married Participant who (i) does not elect to receive his Supplemental
Retirement Income pursuant to the foregoing paragraph and (ii) does not
elect to receive an optional form of Retirement Income pursuant to
Paragraphs (B) or (D) below may elect, during the election period
described in Paragraph (E) below, to receive his Supplemental Retirement
Income commencing upon his Retirement Date and terminating with the last
monthly payment prior to his death. Such Supplemental Retirement Income
shall be the Actuarial Equivalent of the Supplemental Retirement Income
otherwise payable under Section 6.2(B). The election shall be effective
only when agreed to in writing by the Married Participant's spouse in
the manner described in Paragraph (E) below. However, the election may
be revoked by the Married Participant by means of a written notice to
the Company at any time prior to the commencement of such payments,
which revocation shall become effective immediately.
A Participant who (i) does not elect to receive his Supplemental
Retirement Income in an optional form described above and (ii) elects to
receive his Retirement Income in an optional form pursuant to
Paragraphs (B), (C) or (D) below shall receive his Supplemental
Retirement Income in the same form as his Retirement Income. If Para
graph (B) below is elected, the actual Supplemental Retirement Income
payable shall be the Actuarial Equivalent of the benefit payable under
Section 6.2. If a lump sum payment under Paragraph (D) below is
elected, the Participant shall receive his employee contributions with
interest accrued to the date of payment pursuant to Section 1.33(A). If
an installment distribution under Paragraph (D) below is elected, the
Participant's employee contributions with interest accrued to the date
of the first installment pursuant to Section 1.33(A) shall be added to
the Participant's entire interest pursuant to Paragraph (D).
(B) Contingent Annuitant Options
A Participant may elect to receive the Actuarial Equivalent of the
Retirement Income otherwise payable under Section 6.1, commencing upon
his Retirement Date and, after his death, payable to the contingent
annuitant designated by the Participant, if then living, in the same
amount or in an amount equal to fifty percent (50%) of the payments made
to the Participant.
If the Participant's contingent annuitant dies before the Participant's
Annuity Starting Date, the normal form of Retirement Income
automatically shall become payable, as if a contingent annuitant option
had not been elected, unless the Participant elects another optional
form of payment within the applicable election period. If the
contingent annuitant predeceases the Participant after his Annuity
Starting Date, the Retirement Income payments to the Participant will
not be adjusted and will cease upon the Participant's death. Except as
provided in Article 7, no income will be payable to a surviving
contingent annuitant if the Participant dies before his Annuity Starting
Date.
An election of a contingent annuitant option shall not become effective
if an annual rate of Retirement Income of less than one hundred twenty
dollars ($120) would be payable either to the Participant or to his
contingent annuitant.
(C) Single Life Annuity for Married Participant
A Married Participant may elect to receive his Retirement Income in the
form of a monthly payment commencing as of the Participant's Retirement
Date and terminating with the last monthly payment due prior to his
death. An election pursuant to this Paragraph (C) shall be effective
only when agreed to in writing by such Participant's spouse in the
manner described in Paragraph (E) below.
(D) Payment in a Lump Sum or in Installments
At the request of the Participant, payment to a retiring Participant may
be made in a lump sum or, in the case of a Participant who is an
Employee on December 31, 1992, in annual installments. A lump sum
payment shall equal the Actuarial Equivalent of the Participant's normal
form of Retirement Income as of his Retirement Date. Installments shall
be paid over one of the following periods:
(1) A period certain not longer than the life expectancy of the
Participant; or
(2) A period certain not longer than the joint life expectancy of the
Participant and his spouse.
The amount to be distributed each year shall not be smaller than the
amount obtained by dividing the entire interest of the Participant at
the time the distribution is made by the life expectancy of the
Participant or the joint life expectancy of the Participant and his
spouse (whichever is applicable). However, no distribution need be made
in any year, or a lesser amount may be distributed, if the aggregate
amounts distributed by the end of such year are at least equal to the
aggregate of the minimum amounts required by this Paragraph (D) to be
distributed by the end of such year. Any installments that remain
unpaid upon the Participant's death shall be paid to his Beneficiary in
a lump sum.
A Participant's "entire interest" shall equal the lump sum value of his
Retirement Income as of the Participant's Retirement Date, increased by
earnings (in accordance with Section 4.9 or, if the Participant's entire
interest is maintained in a separate interest-bearing account at a
financial institution, the amount actually earned), and decreased by the
amount of installment payments previously made.
Life expectancies shall be determined in accordance with the regulations
and tables issued under Section 72 of the Code.
(E) Election Requirements
An election of an optional form of payment or a Retirement Date before
the Normal Retirement Date shall be made by a Participant on the
prescribed form and filed with the Company. Such election may be made
only during an election period consisting of the ninety (90) consecutive
days prior to the Participant's Annuity Starting Date. A Participant
may revoke such an election by providing a written notice to the Company
on the prescribed form at any time prior to the end of the election
period.
An election of a contingent annuitant option, the lump sum option or the
installment option shall be conditioned upon submission of evidence that
life insurance would be available to the Participant under the medical
evidence provisions of the Company's Employee-paid life insurance plan.
Any election by a Married Participant to receive an optional form of
payment shall not be effective unless the Participant's spouse consents
in writing within the applicable election period. The consent of the
spouse shall be irrevocable unless the Married Participant revokes his
or her waiver, shall acknowledge the effect of such an election and
shall be witnessed by a notary public or, if permitted by the Company,
by a representative of the Plan. Such consent shall not be required if
(i) the Married Participant establishes, to the satisfaction of the
Company, that the spouse cannot be located or (ii) the Married
Participant is legally separated or has been abandoned (within the
meaning of local law) and has an appropriate court order, unless a
qualified domestic relations order provides otherwise. If the spouse is
legally incompetent to give consent, the spouse's legal guardian (includ
ing the Married Participant) may give consent.
6.4 Small Payments
If the Actuarial Equivalent of all benefits payable to any person under
the Plan, expressed as a lump sum, is not more than three thousand five
hundred dollars ($3,500), then the Actuarial Equivalent of such benefits
shall be paid to such person in a single lump sum in lieu of monthly
payments. For this purpose, a Retirement Income of $0 shall be deemed
paid to any Participant who separates from service without being
entitled to any Retirement Income benefits, as provided under
Section 5.2 of the Plan. The lump sum payment shall be made as soon as
reasonably practicable after the Participant separates from service or,
in the case of a death benefit, the date of the Participant's death.
However, no distribution shall be made under the preceding sentence
after a Married Participant's Annuity Starting Date, unless the Married
Participant and his spouse (or surviving spouse if the Married
Participant has died) consent in writing to the distribution within the
ninety- (90-) day period prior to distribution.
6.5 General Rule on Commencement Dates
All distributions under the Plan shall be made in accordance with the
Income Tax Regulations under Section 401(a)(9) of the Code, including
Income Tax Regulations Section 1.401(a)(9)-2 or its successor. Such
regulations are incorporated in the Plan by reference and shall override
any inconsistent provisions of the Plan. In applying such regulations,
no individual's life expectancy shall be recalculated with respect to
the payment of any Retirement Income under the Plan, except to the
extent that a recalculation is requested by such individual in writing
and is permitted by such regulations.
ARTICLE 7
DEATH BENEFITS
7.1 Surviving Spouse Benefit
This Section 7.1 shall apply only if a Participant meets all of the
following requirements:
(A) The Participant (i) is employed by any Affiliate and has
completed a five (5) or more year Period of Service, (ii) has
retired on his Early Retirement Date and elected to defer
commencement of his Retirement Income pursuant to Section 4.5,
(iii) separated from all service with any Affiliate on or after
June 1, 1976, with a nonforfeitable right to a Retirement Income
pursuant to Sections 5.1 or 5.2, (iv) is employed by any Affil
iate and qualifies as a Natomas Transferee or (v) is disabled
under Section 4.14;
(B) The Participant dies before his Annuity Starting Date; and
(C) The Participant had been married to the surviving spouse for at
least one (1) year as of the date of his death.
The surviving spouse of a Participant who meets the requirements of
Paragraphs (A), (B) and (C) above shall be entitled to receive a
Surviving Spouse Benefit. A Surviving Spouse Benefit may commence as of
the first day of any month which occurs (i) not earlier than the month
following the Participant's fifty-fifth (55th) birthday and (ii) not
later than the later of the Participant's Normal Retirement Date or the
date of the Participant's death, as the surviving spouse may elect on
the prescribed form within the ninety (90) day period immediately prior
to the scheduled commencement date. The amount of the Surviving Spouse
Benefit shall be fifty percent (50%) of the Actuarial Equivalent of the
Retirement Income to which the deceased Participant was entitled as of
the date of his death and adjusted pursuant to Section 4.5 if benefits
commence prior to the deceased Participant's Normal Retirement Date.
If the Participant made employee contributions under the Natomas Plan or
a Prior Plan, the Surviving Spouse Benefit also shall include an amount,
payable for the life of such spouse, which is the Actuarial Equivalent
of the Participant's employee contributions plus interest pursuant to
Section 1.33(A). If, however, the spouse does not survive to receive a
total Surviving Spouse Benefit equal to the Participant's employee con
tributions plus interest pursuant to Section 1.33(A) at his death, then
the excess shall be paid in a lump sum to the Participant's Beneficiary.
7.2 Return of Contributions
If a Participant who made employee contributions under the Natomas Plan
or a Prior Plan dies prior to commencement of his Supplemental
Retirement Income, and his spouse is not entitled to a Surviving Spouse
Benefit pursuant to Section 7.1, then his employee contributions plus
interest pursuant to Section 1.33(A) to the date of payment shall be
paid to his Beneficiary in a lump sum. Payment shall be made as soon as
practicable (but in no event later than five (5) years) after the
Participant's death.
7.3 Other Death Benefits
If a Participant's death occurs after commencement of his Retirement
Income, the Plan shall not provide any death benefits except in the
following cases:
(A) If the form of Retirement Income which the Participant was
receiving contains provisions for the payment of benefits after
the Participant's death, a benefit shall be paid accordingly; and
(B) If the Participant made employee contributions under the Natomas
Plan or a Prior Plan, his Beneficiary shall receive, when the
later to survive of the Participant or his spouse dies, a lump
sum payment equal to the excess (if any) of the Participant's
employee contributions plus interest pursuant to Section 1.33(A)
as of the Annuity Starting Date over the total amount of
Retirement Income and Supplemental Retirement Income received by
the Participant and his spouse. Payment shall be made as soon as
practicable (but in no event later than five (5) years) after the
Participant's death.
ARTICLE 8
FINANCING THE PLAN
8.1 Participant Contributions
Participants are not required or permitted to contribute to the Plan.
However, for any Participant who was a Participant in a Prior Plan or
the Natomas Plan and had a balance in his contribution account when his
participation in the Prior Plan or the Natomas Plan concluded, his
balance in that account shall become a part of the Trust Fund and shall
be payable in accordance with the provisions of this Plan.
8.2 Employer Contributions
Each Employer shall make such contributions from time to time as it
deems necessary to provide the benefits of the Plan. The minimum amount
of such contributions shall be that amount which is required to meet the
minimum funding standard of ERISA and any governmental regulations and
rulings issued in connection with ERISA. However, the Employer is under
no obligation to make any contributions under the Plan after the Plan is
terminated, whether or not benefits accrued or vested prior to the date
of termination have been fully funded.
8.3 Trust Agreement
The Company has entered into a Trust Agreement, which shall be a part of
the Plan. All contributions made pursuant to this Article 8 shall be
paid to the Trust Fund. All such contributions and increments thereon
shall be held and disbursed in accordance with the provisions of the
Plan and the Trust Agreement. No person shall have any interest in, or
right to, any part of the funds held in the Trust Fund, except as
expressly provided in the Plan or Trust Agreement.
8.4 Reversion of Assets
Prior to the termination of the Plan, the assets of the Plan shall not
inure to the benefit of an Employer and shall be held for the exclusive
purposes of providing benefits to Participants and their contingent
annuitants and Beneficiaries and for defraying the reasonable expenses
of administering the Plan, except that:
(A) In the case of an Employer contribution which is made because of
a mistake of fact, such contribution shall be returned to the
Employer within one (1) year after the payment of the
contribution; and
(B) Each Employer contribution is expressly conditioned upon the
deductibility of the contribution under Section 404 of the Code.
If the deductibility of a contribution is disallowed, the amount
for which a deduction was disallowed (reduced by any losses
incurred with respect to such amount) shall be returned to the
Employer within one (1) year after the date of disallowance.
ARTICLE 9
ADMINISTRATION OF THE PLAN AND MANAGEMENT OF ASSETS
9.1 Plan Sponsor and Plan Administrator
The Company is the "plan sponsor" and the "plan administrator" of the
Plan, as such terms are used in ERISA and the Code.
9.2 Administrative Responsibilities
The Company shall be the named fiduciary which has the authority to
control and manage the operation and administration of the Plan. The
Company in its sole discretion shall make such rules, interpretations
and computations and take such other actions to administer the Plan as
the Company may deem appropriate. The Company shall have sole
discretion to interpret the terms of the Plan and to determine
eligibility for benefits pursuant to the objective criteria set forth in
the Plan. The rules, interpretations, computations and other actions of
the Company shall be binding and conclusive on all persons. In
administering the Plan, the Company shall act in a nondiscriminatory
manner to the extent required by Section 401(a) and related provisions
of the Code and shall at all times discharge its duties with respect to
the Plan in accordance with the standards set forth in Section 404(a)(1)
of ERISA.
9.3 Management of Plan Assets
The Company shall be a named fiduciary with respect to control and
management of the assets of the Plan, but only to the extent that it
shall have the authority (i) to appoint one or more trustees to hold the
assets of the Plan in trust and to enter into a trust agreement with
each trustee it appoints, (ii) to appoint one or more Investment
Managers for any assets of the Plan and to enter into an investment
management agreement with each Investment Manager it appoints, (iii) to
direct the investment of any Plan assets not assigned to an Investment
Manager and (iv) to remove any trustee or Investment Manager it
previously appointed. Each Investment Manager so appointed shall
acknowledge in writing that it is a fiduciary with respect to the Plan.
9.4 Trustee and Investment Managers
The Trustee shall have the exclusive authority and discretion to control
and manage the Plan assets held in trust by it, except to the extent
that (i) the Company directs how such assets shall be invested or
(ii) the Company allocates the authority to manage such assets to one or
more Investment Managers. Each Investment Manager appointed under
Section 9.3 shall have the exclusive authority to manage, including the
power to acquire and dispose of, the Plan assets assigned to it by the
Company. The Trustee and any Investment Manager shall be solely
responsible for diversifying the investment, in accordance with Section
404(a)(1)(C) of ERISA, of the Plan assets assigned to them by the
Company, except to the extent that the Company directs how such assets
shall be invested.
9.5 Delegation of Fiduciary Responsibilities
The Company may engage such attorneys, actuaries, accountants,
consultants or other persons to render advice or to perform services
with regard to any of its responsibilities under the Plan as it shall
determine to be necessary or appropriate. The Company may designate by
written instrument (signed by both parties) one or more persons to carry
out, where appropriate, fiduciary responsibilities of the Company. The
duties and responsibilities of the Company under the Plan shall be
carried out by the directors, officers and employees of the Company,
acting on behalf and in the name of the Company in their capacities as
directors, officers and employees and not as individual fiduciaries.
Except as provided in Section 14.1 (Review Panel), the Company is
specifically prohibited from designating any director, officer or
employee of the Company as a fiduciary and from allocating or delegating
to any such person any of its fiduciary responsibilities.
9.6 Enrolled Actuary
The Company shall appoint an Enrolled Actuary to make actuarial
valuations of the liabilities under the Plan; to recommend to it the
actuarial funding method and actuarial assumptions for use from time to
time in actuarial and other computations for any purpose under the Plan;
to recommend to it the range of permissible contributions to be made by
each Employer; and to perform such other services as the Company shall
deem necessary or desirable in connection with the administration of the
Plan.
9.7 Reliance Upon Advice
To the extent permitted by law, the Company shall be entitled to rely
conclusively upon, and shall be fully protected in any action taken or
suffered in good faith in reliance upon, any attorney, actuary,
accountant, consultant or other person selected by the Company, or in
reliance upon any tables, valuations, certificates, opinions or reports
which shall be furnished by any of them or by the Trustee.
9.8 Funding Policy
The Company shall have the fiduciary responsibility for establishing a
funding policy and method that satisfies the requirements of Part 3 of
Subtitle B of Title I of ERISA, and shall review the funding policy and
method at least annually.
9.9 Communication of Financial Needs
The Company shall communicate to the Trustee (or Investment Manager,
where appropriate) from time to time (but at least annually) its
determination of the Plan's short- and long-term financial needs.
9.10 Administrative Expenses
All expenses that arise in connection with the administration of the
Plan, including (but not limited to) the compensation of the Trustee,
administrative expenses and proper charges or disbursements of the
Trustee and compensation or other charges and expenses of any Investment
Manager, attorney, actuary, accountant, consultant, or other person who
shall be employed by the Company in connection with the administration
of the Plan, shall be paid from the Trust Fund to the extent not paid by
the Company. The Company shall have complete and unfettered discretion
to determine whether an expense of the Plan shall be paid by the Company
or out of the Trust Fund, and the Company's discretion and authority to
direct the payment of expenses out of the Trust Fund shall not be
limited in any way by any prior decision or practice regarding payment
of the expenses of the Plan.
9.11 Manner of Payments
Subject to the provisions of the Trust Agreement, the Company shall
determine the manner in which the funds of the Plan shall be disbursed
pursuant to the Plan.
ARTICLE 10
AMENDMENT OR TERMINATION
10.1 Amendments
The Company may amend (retroactively or prospectively) any or all of the
provisions of the Plan at any time by action of its board of directors
or by action of a committee or individual(s) acting pursuant to a valid
delegation of authority; provided, however, that no amendment shall make
it possible for any part of the corpus or income of the Trust Fund to be
used for, or diverted to, purposes other than the exclusive benefit of
Participants and their contingent annuitants and Beneficiaries prior to
the satisfaction of all liabilities with respect to Participants and
their contingent annuitants and Beneficiaries under the Plan; and
provided that no amendment shall make it possible to deprive any
Participant of a previously accrued benefit, except to the extent
permitted by Section 412(c)(8) of the Code.
10.2 Merger, Consolidation or Transfer
Except as otherwise provided in regulations under the Code, in the event
of any merger or consolidation with, or transfer of assets or
liabilities to, any other plan, the benefit that each Participant would
be entitled to receive if the Plan were to terminate immediately after
the merger, consolidation or transfer shall not be less than the benefit
he would have been entitled to receive if the Plan had terminated
immediately before the merger, consolidation or transfer.
10.3 Rights and Obligations Upon Termination
(A) It is the intention of the Company that the Plan will continue
indefinitely, but the Company may, at any time and for any
reason, by action of its board of directors or by action of a
committee or individual(s) acting pursuant to a valid delegation
of authority, terminate the Plan or permanently discontinue
Company contributions with respect to any or all Employers
hereunder without terminating the Trust Agreement or the other
provisions of the Plan. Any other provision hereof
notwithstanding, no Employer shall have any obligation to
continue to make contributions to the Plan after the termination
thereof with respect to such Employer. Upon termination of the
Plan, the accrued benefits of all Employees (to the extent
funded) shall become fully vested and nonforfeitable.
(B) It is the intent of this Section 10.3 that any termination of the
Plan be accomplished in accordance with ERISA Section 4044 and
Sections 401(a)(4) and 411(d)(3) of the Code and related
regulations. Prior to any intended termination of the Plan, the
Plan shall be amended to provide for allocation and distribution
of Plan assets attributable to accrued benefits among
Participants and Beneficiaries in compliance with such laws, and
such allocation and distribution shall then be made by the
Company in accordance with the Plan as so amended. Upon
termination of the Plan, excess assets of the Trust Fund shall
revert to the Company to the extent permitted by ERISA.
(C) If any partial termination (as determined by the Company in
accordance with applicable Code provisions) of the Plan occurs,
then the accrued benefits of those Employees with respect to whom
the Plan is so terminated (to the extent funded) shall become
fully vested and nonforfeitable.
(D) Until the final distribution of all Plan assets allocated on
account of any termination or partial termination of the Plan,
the Trust Fund shall continue, and the Company and the Trustee
shall continue to have and may exercise all of the powers
conferred upon them by the Plan and the Trust Agreement.
10.4 Limitations Upon Highest-Paid Employees
(A) Restriction on Benefits
In the event of the termination of the Plan, the benefit of any
Highly Compensated Employee or any Highly Compensated Former
Employee shall be limited to a benefit that is nondiscriminatory
under Section 401(a)(4) of the Code.
(B) Pre-Termination Restrictions on Distributions
(1) Limit on Annual Payments
The annual payments to a Restricted Employee under the
Plan shall be restricted to an amount equal to the
payments that would be made on behalf of such Restricted
Employee under a single-life annuity that is the
Actuarial Equivalent of the sum of his accrued benefit
and his other Benefits under the Plan. The restrictions
in this Section 10.4 shall not apply, however, if:
(a) After payment to a Restricted Employee of all
Benefits, the value of the Plan's assets equals or
exceeds one hundred ten percent (110%) of the
value of current liabilities (as defined in
Section 412(l)(7) of the Code); or
(b) The value of the Benefits for a Restricted
Employee is less than one percent (1%) of the
value of current liabilities; or
(c) The value of the Benefits for a Restricted
Employee is $3,500 or less.
(2) Definition of Benefit
For purposes of this Section 10.4 only, the term
"Benefit" shall include, among other benefits, loans in
excess of the amount set forth in Section 72(p)(2)(A) of
the Code, any periodic income, any withdrawal values
payable to a living Participant and any death benefits
not provided by insurance on the Participant's life.
(2) Definition of Restricted Employee
For purposes of this Section 10.4 only, the term
"Restricted Employee" with respect to any Plan Year shall
mean one of the twenty-five (25) Highly Compensated
Employees and Highly Compensated Former Employees whose
Compensation (as defined in Section 4.10) is highest for
such Plan Year.
ARTICLE 11
GENERAL PROVISIONS
11.1 No Implied Employment Contract
The Plan shall not be deemed (i) to give any Employee or other person
any right to be retained in the employ of an Employer nor (ii) to
interfere with the right of an Employer to discharge any Employee or
other person at any time and for any reason.
11.2 Benefits Not Assignable
Except as otherwise provided in Section 11.7 or Section 414(p) of the
Code with respect to qualified domestic relations orders, no
distribution or payment under the Plan to any Participant, Beneficiary
or contingent annuitant shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge,
whether voluntary or involuntary, and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge the same
shall be void; nor shall any distribution or payment in any way be
liable for or subject to the debts, contracts, liabilities, engagements
or torts of any person entitled to the distribution or payment. If any
Participant, Beneficiary or contingent annuitant has been adjudicated a
bankrupt or has purported to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge any distribution or payment, voluntar
ily or involuntarily, then the Company, in its discretion, may direct
the Trustee to hold or apply the distribution or payment or any part
thereof to or for the benefit of such Participant, Beneficiary or contin
gent annuitant in such manner as the Company shall direct. The Company
shall establish reasonable procedures to determine the qualified status
of domestic relations orders and to administer distributions under
qualified domestic relations orders.
11.3 Payments Under Qualified Domestic Relations Order (QDRO)
The creation or recognition of the right of an Alternate Payee to any
Retirement Income payable with respect to a Participant by, and the
payment of benefits pursuant to, a qualified domestic relations order
(as defined in Section 414(p) of the Code) shall not constitute a
violation of Section 11.2. The Company shall establish reasonable,
written procedures to determine the qualified status of a domestic
relations order and to administer distributions under such orders. Pur
suant to a qualified domestic relations order, the Plan may distribute
the Actuarial Equiva-lent of any benefit payable to an Alternate Payee
prior to the Participant's Annuity Starting Date, but no earlier than
the Participant's Early Retirement Date or (if earlier) Normal
Retirement Date, without regard to whether the Participant is then
retired. An Alternate Payee's election of a contingent annuitant
option, lump sum option or installment option for distribution of his or
her Plan benefit shall be conditioned upon insurability requirements
equivalent to those applicable to the Participant under Section 6.3(E)
of the Plan. To the extent that a qualified domestic relations order
creates, assigns or recognizes an Alternate Payee's right to any portion
of the Retirement Income otherwise payable to or with respect to a Parti
cipant, such portion thereafter shall not be taken into account in
determining the Retirement Income payable to or with respect to such
Participant.
11.4 Payments of Benefits to Infants or Incompetents
If the Company determines that any person entitled to payments under the
Plan is an infant or is incompetent by reason of a physical or mental
disability, then it may cause all payments thereafter becoming due to
such person to be made to any other person for his benefit, without
responsibility for the application of amounts so paid. Payments made
pursuant to this provision shall completely discharge the Employer, the
Trustee and the Company.
11.5 Proof of Age and Marriage
Participants, spouses and contingent annuitants shall furnish proof of
age and marital status satisfactory to the Company at such time or times
as the Company may prescribe. Subject to Section 6.5, the Company may
delay the disbursement of any benefit due under the Plan until all
pertinent information with respect to age and marital status has been so
furnished.
11.6 Source of Benefits
The Trust Fund shall be the sole source of benefits under the Plan, and
each Employee, Participant, contingent annuitant, Beneficiary or other
person who claims the right to any payment or benefit under the Plan
shall only be entitled to look to the Trust Fund for such payment or
benefit and shall not have any right, claim or demand therefor against
any Employer or any officer or director of the Employer.
11.7 Overpayments and Underpayments
If any person has received a payment from the Plan in excess of the
amount (if any) to which he was entitled under the Plan, then the excess
may be withheld from one or more subsequent payments to such person (or
to any person who derives his rights under the Plan from the person who
received the overpayment); provided that no single periodic payment
under the Plan shall be reduced by more than twenty-five percent (25%)
on account of one or more prior overpayments. In addition, the Company
may employ any other lawful means to recover overpayments on behalf of
the Plan. If any person has received less than the amount to which he
is entitled under the Plan, then the entire amount of the deficiency
shall be paid to him (or to his representative) as soon as reasonably
practicable after the discovery of the underpayment.
11.8 Service in Multiple Fiduciary Capacities
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan and Trust Agreement.
11.9 Criminal Acts
Any Participant who (i) has not attained the age of sixty-five (65),
(ii) has less than a five (5) year Period of Service and (iii) admits
to, or is convicted of, any criminal act against an Employer shall not
be entitled to any Retirement Income benefits for service after
November 15, 1972, attributable to Employer contributions, unless the
Plan is terminated prior to the date when he admits to, or is convicted
of, such criminal act.
11.10 IRS Qualification
The Company intends that the Plan (including the Trust Agreement forming
a part thereof) shall be a qualified pension plan for the exclusive
benefit of Employees and their Beneficiaries, as provided in
Sections 401(a) and 501(a) of the Code.
11.11 Construction of Plan
Headings to the Articles, Sections or Subsections of the Plan are for
reference only. In the event of a conflict between a heading and the
text of the Plan, the text of the Plan shall control. In the event of a
conflict between the text of the Plan and any summary, description or
other information regarding the Plan, the text of the Plan shall
control.
Words indicating gender shall be construed to include males and females
wherever appropriate. The singular shall include the plural, and the
plural shall include the singular, unless the context otherwise
requires.
11.12 Forms for Plan Communications
All communications from a Participant or other person with regard to the
Plan shall become effective only when made in writing and filed with the
Company. If the Company has adopted prescribed forms for any com
munications, such communications shall be effective only if filed on
such forms.
11.13 Governing Law
The provisions of the Plan shall be construed, administered and governed
according to ERISA and, to the extent not superseded by ERISA, the laws
of the State of California.
ARTICLE 12
PERIOD OF SERVICE
12.1 Period of Employment Relationship
An individual's Period of Service shall include any period during which
he maintains an employment relationship with any Affiliate, determined
as follows:
(A) General Rule
An individual's employment relationship shall begin as of the
date on which he first performs duties as an employee of any
Affiliate for which he receives (or is entitled to receive) com
pensation and shall end as of the date on which he retires, dies,
quits, is discharged or otherwise severs from all employment with
any Affiliate.
(B) Approved Absence
If an individual is absent (with or without pay) with the
approval of an Affiliate and if the absence does not exceed
twelve (12) months, then the absence shall not be considered a
quit. If the absence exceeds twelve (12) months but the
individual complies with all terms and conditions imposed from
time to time by the Affiliate (which may include a requirement of
reemployment), then the absence also shall not be considered a
quit. If the absence exceeds twelve (12) months and if the
individual fails to comply with such terms and conditions, then
the absence shall be considered a quit as of the expiration of
the first twelve (12) months.
(C) Military Leave
If an individual enters into military service with the United
States, then his entry into military service shall not be
considered a quit; provided, however, that the entry into
military service shall be considered a quit as of the time when
it occurs if the individual fails to return to employment with an
Affiliate within the period during which his reemployment rights
are protected by law.
12.2 Interval Between Periods of Employment
The Period of Service of an individual who is rehired by an Affiliate
within 365 days after the end of his previous employment relationship
with an Affiliate, as determined pursuant to Section 12.1, shall include
the period between the end of the previous employment relationship and
the commencement of the new employment relationship.
12.3 Predecessor Companies
In determining an individual's nonforfeitable interest in his Retirement
Income, his Period of Service also shall include any Period of Service
with a company merged or consolidated with an Employer, or a substantial
part of the assets or business of which has been acquired by an Employer
(hereafter "Predecessor Company"):
(A) If the Employer continues to maintain an employee pension benefit
plan of such Predecessor Company;
(B) If, and to the extent, such employment with the Predecessor
Company is required to be treated as employment with the Employer
under regulations prescribed by the Secretary of the Treasury; or
(C) If, and to the extent, granted by the Company in its sole
discretion, effected on a nondiscriminatory basis, regarding all
persons similarly situated.
For purposes of determining an individual's Retirement Income benefit,
his Period of Service also may include a Period of Service with a
Predecessor Company to the extent granted by the Company in its sole
discretion, effected on a nondiscriminatory basis regarding all persons
similarly situated.
12.4 Other Periods
An individual's Period of Service shall include the following:
(A) Any period prior to August 31, 1983, which constituted a Period
of Service under a Prior Plan;
(B) In the case of a Natomas Transferee, the period of service
completed by the Natomas Transferee prior to his transfer, as
determined under the provisions of the Natomas Plan applicable to
service for vesting purposes; and
(C) Any other period which constitutes a Period of Service under such
written, uniform and nondiscriminatory rules as the Company may
adopt from time to time.
12.5 Years in a Period of Service
All of an individual's Periods of Service determined pursuant to this
Article 12 shall be aggregated on the basis of months. The number of
years in the individual's aggregate Period of Service is determined by
dividing the number of months in such period by twelve (12). Partial
months of service are rounded up to the next higher whole month.
ARTICLE 13
CLAIMS AND INQUIRIES
13.1 Application for Benefits
Applications for benefits and inquiries concerning the Plan (or
concerning present or future rights to benefits under the Plan) shall be
submitted to the Company in writing. An application for benefits shall
be submitted on the prescribed form and shall be signed by the
Participant or, in the case of a benefit payable after his death, by his
surviving spouse or Beneficiary.
13.2 Denial of Application
In the event that an application for benefits is denied in whole or in
part, the Company shall notify the applicant in writing of the denial
and of the right to a review of the denial. The written notice shall
set forth, in a manner calculated to be understood by the applicant,
specific reasons for the denial, specific references to the provisions
of the Plan on which the denial is based, a description of any
information or material necessary for the applicant to perfect the
application, an explanation of why the material is necessary, and an
explanation of the review procedure under the Plan. The written notice
shall be given to the applicant within a reasonable period of time (not
more than ninety (90) days) after the Company received the application,
unless special circumstances require further time for processing and the
applicant is advised of the extension. In no event shall the notice be
given more than one hundred eighty (180) days after the Company received
the application.
ARTICLE 14
REVIEW OF DENIED CLAIMS
14.1 Review Panel
The Company shall from time to time appoint a panel (the "Review Panel")
which shall consist of three (3) individuals who may, but need not, be
Employees. The Review Panel shall be the named fiduciary which has the
authority to act with respect to any appeal from a denial of benefits or
a determination of benefit rights.
14.2 Request for Review
An applicant whose application for benefits was denied in whole or in
part, or the applicant's duly authorized representative, may appeal from
the denial by submitting to the Review Panel a request for a review of
the application within ninety (90) days after receiving written notice
of the denial from the Company. The Company shall give the applicant or
his representative an opportunity to review pertinent materials, other
than legally privileged documents, in preparing the request for a
review. The request for a review shall be in writing. The request for
a review shall set forth all of the grounds on which it is based, all
facts in support of the request, and any other matters which the
applicant deems pertinent. The Review Panel may require the applicant
to submit such additional facts, documents or other material as it may
deem necessary or appropriate in making its review.
14.3 Decision on Review
The Review Panel shall act on each request for a review within sixty
(60) days after receipt, unless special circumstances require further
time for processing and the applicant is advised of the extension. In
no event shall the decision on review be rendered more than one hundred
twenty (120) days after the Review Panel received the request for a
review. The Review Panel shall give prompt written notice of its
decision to the applicant and to the Company. In the event that the
Review Panel confirms the denial of the application for benefits in
whole or in part, the notice shall set forth, in a manner calculated to
be understood by the applicant, the specific reasons for the decision
and specific references to the provisions of the Plan on which the
decision is based.
14.4 Rules and Interpretations
The Review Panel shall adopt such rules, procedures and interpretations
of the Plan as it deems necessary or appropriate in carrying out its
responsibilities under this Article 14.
14.5 Exhaustion of Remedies
No legal action for benefits under the Plan shall be brought unless and
until the claimant (i) has submitted a written application for benefits
in accordance with Section 13.1, (ii) has been notified by the Company
that the application is denied, (iii) has filed a written request for a
review of the application in accordance Section 14.2 and (iv) has been
notified in writing that the Review Panel has affirmed the denial of the
application; provided, however, that legal action may be brought after
the Company or the Review Panel has failed to take any action on the
claim within the time prescribed by Sections 13.2 and 14.3,
respectively.
ARTICLE 15
TOP-HEAVY PROVISIONS
15.1 Determination of Top-Heavy Status
Any other provision of the Plan notwithstanding, this Article 15 shall
become effective for any Plan Year beginning after December 31, 1983, in
which the Plan is a Top-Heavy Plan. The Plan shall be considered a "Top-
Heavy Plan" for a Plan Year if, as of the Determination Date for such
Plan Year, the Top-Heavy Ratio for the Aggregation Group exceeds sixty
percent (60%).
15.2 Minimum Benefit
The annual Normal Retirement Income of each Participant shall not be
less than the product of (i) two percent (2%) of the Participant's
Average Compensation, as defined in Section 15.6(C), and (ii) the number
of the Participant's Qualifying Years not in excess of ten (10).
15.3 Minimum Vesting
Any other provision of the Plan notwithstanding, the vesting requirement
under Section 5.1 shall be a three (3) or more year Period of Service
(instead of a five (5) or more year Period of Service) for each Partici
pant who completes any Period of Service in a Plan Year in which the
Plan is a Top-Heavy Plan.
15.4 Effect of Change in Top-Heavy Status
If the Plan at any time is a Top-Heavy Plan and thereafter ceases to be
a Top-Heavy Plan, each Participant who would be vested under Section
15.3 as of the May 31 in the last Plan Year in which the Plan is a
Top-Heavy Plan shall thereafter continue to be vested. Each other
Participant shall be vested in accordance with Article 4 or 5, whichever
is applicable. After the Plan ceases to be a Top-Heavy Plan, a
Participant's Retirement Income shall be determined under Article 4 or
5, whichever is applicable, except that such benefit shall not be less
than the benefit accrued under Section 15.2 as of the May 31 in the last
Plan Year in which the Plan was a Top-Heavy Plan.
15.5 Impact on Benefit Limitations
For each calendar year within a Plan Year in which the Plan is a
Top-Heavy Plan, the number "1.00" shall be substituted for the number
"1.25" wherever it appears in Sections 415(e)(2) and (3) of the Code;
provided, however, that such substitution shall not have the effect of
reducing any benefit accrued under this Plan or any other
defined-benefit plan maintained by any Affiliate prior to the first day
of the Plan Year in which this Section 15.5 becomes applicable.
15.6 Definitions
For purposes of this Article 15, the following definitions shall apply:
(A) "Affiliate" means each Affiliate, as defined in Section 1.3,
except that the penultimate sentence of Section 1.3 shall not
apply.
(B) "Aggregation Group" means a group of qualified plans consisting
of:
(1) Each plan of the Affiliates in which a Key Employee
participates and each other plan of the Affiliates which
enables any plan in which a Key Employee participates to
meet the requirements of Sections 401(a)(4) and 410 of
the Code; or
(2) All plans of the Affiliates included under (1) above,
plus, at the election of the Company, one or more
additional plans of the Affiliates which, when all such
plans are considered together, satisfy the requirements
of Sections 401(a)(4) and 410 of the Code.
(C) "Average Compensation" means the Participant's average annual
Compensation for the series of consecutive Plan Years (not in
excess of five (5)) during which the Participant had the greatest
aggregate Compensation. For purposes of the preceding sentence,
the following Plan Years shall be disregarded (and the preceding
and following Plan Years shall be considered consecutive):
(1) Any Plan Year during which the Participant has no Period
of Service;
(2) Any Plan Year ending before June 1, 1984; and
(3) Any Plan Year commencing after the close of the last Plan
Year in which the Plan was a Top-Heavy Plan.
(D) "Compensation" shall have the meaning given such term in Section
4.10.
(E) "Determination Date" means the last day of the preceding Plan
Year.
(F) "Key Employee" means a key employee, as defined by Section 416(i)
of the Code and the regulations thereunder. In applying Section
416(i) of the Code, the term "compensation" shall have the mean
ing set forth in Paragraph (D) above.
(G) "Qualifying Year" means each Plan Year with respect to which all
of the following requirements are met:
(1) The Plan is a Top-Heavy Plan;
(2) The Participant is not a Key Employee;
(3) The Participant completes any Period of Service; and
(4) The Plan Year commenced on or after June 1, 1984.
(H) "Top-Heavy Ratio" means the top-heavy ratio for the Affiliates,
as computed in accordance with Section 416(g) of the Code and the
regulations thereunder. In applying Section 416(g) of the Code,
the present value of accrued benefits shall be determined on the
basis of the interest assumption and the mortality assumptions
used for the computation of plan costs under Section 412 of the
Code, and the valuation date shall be the last day of the Plan
Year.
ARTICLE 16
EXECUTION
To record the second amendment and restatement of the Plan to read as set forth
herein, effective as of January 1, 1993, the Company has caused its authorized
officer to execute this document this 17th day of April, 1995.
AMERICAN PRESIDENT COMPANIES, LTD.
By /s/ T.J. Windle
APPENDIX A
ACTUARIAL EQUIVALENT FACTORS
Joint-and-Survivor Option Factors
Joint-and-survivor option factors shall be determined by the following formulas:
100% Continuation:
Retirement at age 65 80.6% plus .8% for each year the contingent
annuitant is older than the
Employee or minus .8% for each year
the contingent annuitant is younger
than the Employee, but in no event
greater than 98%.
Retirement at other than The initial factor shall be
age 65 increased by .6% for each year the Employee
is under age 65 and decreased by
.6% for each year the Employee is
over age 65, but the result shall
in no event be greater than 98%.
50% Continuation:
Retirement at age 65 89.2% plus .5% for each year the contingent
annuitant is older than the
Employee or minus .5% for each year
the contingent annuitant is younger
than the Employee, but in no event
greater than 98%.
Retirement at other than The initial factor shall
age 65 be increased by .4% for each year the
Employee is under age 65 and
decreased by .4% for each year the
Employee is over age 65, but the
result shall in no event be greater
than 98%.
Tables Illustrating Joint-and-Survivor
Option Factors at Various Ages
Contingent
Employee's Annuitant's
Age on Age on
Nearest Nearest 100% 50%
Birthday Birthday Continuance Continuance
65 70 .846 .917
65 65 .806 .892
65 60 .766 .867
65 55 .726 .842
62 64 .840 .914
62 60 .808 .894
60 62 .852 .922
55 53 .850 .922
Lump Sum Factors
Lump sum equivalencies of immediate annuities shall be determined by using the
following mortality and interest assumptions:
(1) Mortality: 1971 Group Annuity Table for Males, using ages set
back one year.
(2) Interest: The PBGC Rates, if the lump sum (calculated by using
the PBGC Rates) does not exceed $25,000.
120% of the PBGC Rates, if the lump sum (calculated by using the
PBGC Rates) would exceed $25,000. In no event shall the actual
amount of a lump sum calculated by using 120% of the PBGC Rates
be less than $25,000.
"PBGC Rates" means the interest rates which would be used (as of
the date of the lump sum distribution) by the Pension Benefit
Guaranty Corporation for purposes of determining the present
value of a lump sum distribution upon plan termination.
Factors for Natomas Transferees and APC Transferees
The present value of the accrued benefit of each Natomas Transferee and APC
Transferee shall be determined by using the following assumptions:
(1) Mortality: 1971 Group Annuity Table.
(2) Interest: 7% per annum.
(3) Cost-of-Living Increases: 2.5% per year.
<TABLE>
Factors for Determining Eligibility
for a COLA-Adjusted Retirement Income
Single Factors
<CAPTION>
Age 2.5% Factors 1.5% Factors
<C> <C> <C>
55 1.276 1.166
56 1.269 1.161
57 1.262 1.157
58 1.255 1.153
59 1.248 1.149
60 1.241 1.145
61 1.235 1.141
62 1.228 1.137
63 1.221 1.133
64 1.215 1.129
65 1.208 1.125
Married Factors
Age 2.5% Factors 1.5% Factors
55 1.430 1.307
56 1.423 1.302
57 1.415 1.297
58 1.407 1.293
59 1.399 1.288
60 1.391 1.283
61 1.385 1.279
62 1.377 1.274
63 1.369 1.270
64 1.362 1.266
65 1.354 1.261
</TABLE>
Married Factors = Single Factors / 89.2%
Other Factors
All other actuarial equivalencies shall be determined by using the following
assumptions:
(1) Mortality: 1971 Group Annuity Table for Males, using ages set
back one year.
(2) Interest: 7% per annum.
APPENDIX B
DIRECT ROLLOVER PROVISIONS
SECTION 1. DIRECT ROLLOVER OPTION.
Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Appendix B, a Distributee
may elect, subject to the conditions and administrative procedures 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, as described in section 401(a)(31) of the Code. In the event that the
Distributee elects to receive a portion of the Eligible Rollover Distribution
and to transfer a portion to another Eligible Retirement Plan in a Direct
Rollover, the Direct Rollover portion must be at least $500.
SECTION 2. DEFINITIONS.
As used herein, the following terms have the following meanings:
(a) "Eligible Rollover Distribution" means 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 10 years or more; any
distribution to the extent such distribution is required under section 401(a)(9)
of the Code; and the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities); and a distribution of less
than $200.
(b) "Eligible Retirement Plan" means an individual retirement
account described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described in section 401(a) of
the Code, that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the surviving
spouse, an Eligible Retirement Plan is an individual retirement account or an
individual retirement annuity.
(c) "Distributee" means a Member, the Member's surviving spouse and
the Member's spouse or former spouse who is an Alternate Payee
(d) "Direct Rollover" means a payment by the Plan to an Eligible
Retirement Plan, including payment effected by delivering to the Distributee a
check made payable to the Eligible Retirement Plan's custodian or trustee.
Capitalized terms used in this Appendix B that are not defined herein
shall have the same meaning as those terms do in the Plan.
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into as of the 1st day of February, 1995,
by and between L. DALE CRANDALL (the "Employee") and AMERICAN PRESIDENT
COMPANIES, LTD., a Delaware corporation (the "Company"),
W I T N E S S E T H:
Whereas the Company is the parent corporation in a group of
affiliated corporations (the "Affiliated Group") which consists of the
Company and all of its direct or indirect subsidiaries;
Whereas the Company wishes to secure the services of the Employee
for the benefit of the Affiliated Group; and
Whereas the Employee is willing to accept employment with the
Affiliated Group upon the terms and conditions set forth below;
N o w, T h e r e f o r e, in consideration of the mutual
covenants herein contained, the parties agree as follows:
1. Term of Employment.
(a) Basic Rule. The Employee agrees to commence full-time
employment with the Affiliated Group on a date to be determined by the
Employee, which shall be after the date of this Agreement but in no
event later than July 31, 1995 (the "Employment Date"). Between the
date of this Agreement and the Employment Date, if the Employee performs
any services for the Affiliated Group, it shall be as a consultant with
Price Waterhouse LLP, which shall be compensated for his services at the
rate of $2,500 per day plus reasonable and necessary expenses. For the
period commencing on the Employment Date and ending no later than
December 31, 1995, the Employee and the Company's Chief Executive
Officer shall agree in writing to a transition plan for the Employee's
services, if any, to be provided to Price Waterhouse LLP. The Company
shall be compensated for any such services at the rate of $2,500 per day
plus reasonable and necessary expenses. The Company agrees to cause the
Employee's employment with the Affiliated Group to continue, and the
Employee agrees to remain in employment with the Affiliated Group, until
the earlier of (i) the first day of the month coinciding with or next
following the Employee's 65th birthday (the "Normal Retirement Date") or
(ii) the date when the Employee's employment terminates pursuant to
Subsections (b), (c) or (d) below. In no event shall a transfer
(whether voluntary or involuntary) of the Employee from one member of
the Affiliated Group to another member be treated as a termination of
employment for any purpose under this Agreement.
(b) Early Termination. Subject to Sections 6 and 7, the Company
may terminate the Employee's employment with the Affiliated Group by
giving the Employee 30 days' advance notice in writing. The Employee
may terminate his employment with the Affiliated Group by giving the
Company 30 days' advance notice in writing. The Employee's employment
shall terminate automatically in the event of his death. Any waiver of
notice shall be valid only if it is made in writing and expressly refers
to the applicable notice requirement of this Section 1.
(c) Cause. Subject to Section 6, the Company may cause the
Employee's employment with the Affiliated Group to terminate at any time
for Cause by giving the Employee written notice. For all purposes under
this Agreement, "Cause" shall mean (i) a willful failure by the Employee
to substantially perform his duties hereunder, other than a failure
resulting from the Employee's complete or partial incapacity due to
physical or mental illness or impairment, or (ii) a willful act by the
Employee which constitutes gross misconduct and which is materially
injurious to a member of the Affiliated Group. No act, or failure to
act, by the Employee shall be considered "willful" unless committed
without good faith and without a reasonable belief that the act or
omission was in such member's best interest.
(d) Disability. Subject to Section 6, the Company may cause the
Employee's employment with the Affiliated Group to terminate for
Disability by giving the Employee 30 days' advance notice in writing.
For all purposes under this Agreement, "Disability" shall mean that the
Employee, at the time notice is given, has been unable to carry out any
of his duties under this Agreement for a period of not less than six
consecutive months as the result of his incapacity due to physical or
mental illness. In the event that the Employee resumes the performance
of his duties hereunder on a full-time basis before the termination of
his employment under this Subsection (d) becomes effective, the notice
of termination shall automatically be deemed to have been revoked.
(e) Termination of Agreement. This Agreement shall terminate
when all obligations of the parties hereunder have been satisfied.
2. Duties and Scope of Employment.
(a) Position. The Employee shall hold the position of Executive
Vice President and Chief Financial Officer of the Company effective as
of the Employment Date and shall hold the position of Treasurer of the
Company effective upon the retirement of the Company's current Treasurer
on or about August 1, 1995, or such other position or positions having a
comparable level of responsibility with any member of the Affiliated
Group as the Company may from time to time assign to him.
(b) Obligations. During the term of his employment under this
Agreement, the Employee shall devote his full business efforts and time
to the Affiliated Group and shall not render services to any other
person or entity without the prior written consent of the Company's
Chief Executive Officer. The foregoing, however, shall not preclude the
Employee from engaging in appropriate civic, charitable or religious
activities or from devoting a reasonable amount of time to private
investments which do not interfere or conflict with his responsibilities
under this Agreement.
3. Base Compensation.
During the term of his employment under this Agreement, the
Employee shall receive as compensation for his services a base salary at
the annual rate of $365,200, or at such higher rate as the Company may
determine from time to time. Such salary shall be payable in
approximately equal biweekly installments. Once the Company has
increased such salary, it thereafter shall not be reduced. (The annual
compensation specified in this Section 3, together with any increases in
such compensation which the Company may grant from time to time, is
referred to in this Agreement as "Base Compensation.")
4. Employee Benefits.
(a) Employee Plans. During the term of his employment under
this Agreement, the Employee shall be eligible to participate in the
employee benefit plans and executive compensation programs maintained by
the Company for executives having a comparable level of responsibility,
including (without limitation) pension plans, thrift or profit-sharing
plans, excess-benefit plans, stock purchase, stock option, restricted
stock or phantom stock plans, incentive or other bonus plans, life,
disability, health, accident and other insurance programs, paid
vacations and similar plans or programs, subject in each case to the
generally applicable terms and conditions of the plan or program in
question and to the determinations of any committee administering such
plan or program; provided, however, that the Employee's rights with
respect to severance pay upon termination of employment shall be
governed exclusively by this Agreement, and the Employee shall not be
eligible to participate in any severance plan maintained by the Company.
Subject to the approval of the Compensation Committee of the Company's
Board of Directors, at the first meeting of such Committee after the
Employment Date, the Employee shall receive an initial grant of options
under the 1989 Stock Incentive Plan of American President Companies,
Ltd. to purchase 80,000 shares of the Company's common stock. Such
options shall have an exercise price equal to the greater of $22.375 or
the market price on the date of grant and other terms and conditions
consistent with the Company's current option program.
(b) Relocation. The Employee shall be eligible to receive the
assistance provided in the Company's domestic relocation policy in
connection with his relocation from Southern California to the San Francisco
Bay Area. In addition, the Employee shall have the following options:
(i) the Employee may elect to sell his home himself, in
which event the Company shall provide the Employee with a loan
for the amount that the actual sales price is below $1,600,000
(the "Protected Price"), up to a maximum of $450,000; or
(ii) the Employee may elect to sell his home to the
Company's relocation service company for the greater of the
appraised value or $1,350,000, and the Company shall provide the
Employee with a loan for the amount that such sale price is below
the Protected Price, up to a maximum of $250,000.
A loan made pursuant to Clause (i) or (ii) of this Subsection (b) shall
bear interest at an appropriate market rate and shall be payable in
annual installments over a term of five years. Payment of such
installments shall be forgiven as they become due, provided the Employee
continues to be employed by the Affiliated Group, or in the event that
the Employee's employment terminates pursuant to Subsection 1(d). The
Employee shall be responsible for the payment of any taxes resulting
from such forgiveness. If the Employee elects to sell his home to the
relocation service company pursuant to Clause (ii) and less than
$1,150,000 is recovered from the subsequent sale of the home, the
difference between $1,150,000 and the amount recovered shall be added to
the original loan and repaid by additional installments after the
original loan term. Payment of these additional installments shall not
be subject to forgiveness.
(c) Entitlement to Minimum Pension. Upon the termination of his
employment with the Affiliated Group, the Employee and his surviving
spouse (if any) shall be entitled to an unfunded retirement benefit
under this Agreement (the "Minimum Pension"). The amount of the Minimum
Pension shall be determined under Subsection (d) below.
(d) Amount of Minimum Pension. The amount of the Minimum
Pension shall be equal to the difference between:
(i) The amount of the pension benefits actually paid to
the Employee or his surviving spouse, as the case may be, under
the American President Companies, Ltd. Retirement Plan (the
"Retirement Plan"), the 1995 Supplemental Executive Retirement
Plan of American President Companies, Ltd. and any other
qualified or nonqualified defined-benefit pension plan maintained
by the Company, and any successor to any of such plans, as in
effect at the time of the employment termination (collectively,
the "Retirement Program"); and
(ii) The amount of a hypothetical pension benefit
determined as follows:
(A) If the Employee's employment with the
Affiliated Group terminates on or after his Normal
Retirement Date, such hypothetical pension benefit shall
be equal to 40 percent of his Average Annual Compensation
minus 40 percent of his Primary Social Security Benefit.
(B) If the Employee's employment with the
Affiliated Group terminates before his Normal Retirement
Date, such hypothetical pension benefit shall be equal to
the greater of (I) $12,500 per month, increased on June 1
of each year by any increase in the CPI-W for U.S. Cities
(but not more than 3 percent per year) or (II) the
product of (y) 40 percent of his Average Annual
Compensation minus 40 percent of his Primary Social
Security Benefit times (z) a fraction. The numerator of
such fraction shall be the number of months of the
Employee's continuous employment with the Affiliated
Group (rounded to the nearest whole month). The
denominator of such fraction shall be the number of
months between the Employee's date of employment with the
Company and the Employee's Normal Retirement Date
(rounded to the nearest whole month). If payment of the
benefit commences prior to age 62, it shall be reduced by
1-1/4 percent for each of the first 24 full months and
1/3 percent for each additional month by which
commencement of payment precedes the first day of the
month coinciding with or next following the Employee's
62nd birthday. The hypothetical pension benefit under
this Subsection (d)(ii)(B) shall be reduced by the amount
of any retirement benefit that the Employee receives from
Price Waterhouse LLP.
The terms "Average Annual Compensation" and "Primary Social Security
Benefit" shall have the meanings given to such terms in the Retirement
Plan.
(e) Form of Minimum Pension. Minimum Pension payments shall be
made in monthly installments, commencing with the first month after
termination of the Employee's employment with the Affiliated Group and
ending with the month for which the last pension payment is made to the
Employee or his surviving spouse under the Retirement Plan (or would be
made if the Employee were vested). If the Employee is not vested under
the Retirement Plan, the Minimum Pension shall be payable in the normal
form of benefit provided under the Retirement Plan. If the Employee is
vested under the Retirement Plan, the Minimum Pension shall be payable
in the same form as the Employee's pension benefit under the Retirement
Plan, unless such pension benefit is paid in the form of a single lump
sum. In that event, the Minimum Pension shall be payable in the normal
form of benefit provided under the Retirement Plan and shall be computed
and paid as if the pension benefits actually paid under the Retirement
Plan were also payable in the normal form. The amount of the Minimum
Pension shall be recalculated each year in accordance with any
provisions of the Retirement Plan which are applicable to the Employee
(or would be applicable if the Employee were vested) and which provide
for the adjustment of pension benefits to reflect changes in the cost of
living.
(f) Retiree Health Care. If, upon the termination of his
employment with the Affiliated Group for any reason, the Employee is not
otherwise eligible for retiree health insurance coverage from the
Company, the Company shall provide the Employee with health insurance
coverage comparable to the coverage then being provided to retiring
employees of the Affiliated Group. The Employee shall be required to
contribute to the cost of his coverage on the same basis as such
retiring employees contribute to the cost their coverage.
5. Business Expenses.
During the term of his employment under this Agreement, the
Employee shall be authorized to incur necessary and reasonable travel,
entertainment and other business expenses in connection with his duties
hereunder. The Employee shall be reimbursed for such expenses upon
presentation of an itemized account and appropriate supporting
documentation, all in accordance with the Company's generally applicable
policies.
6. Change in Control.
(a) Definition. For all purposes under this Agreement, "Change
in Control" shall mean the occurrence of any of the following events:
(i) A change in control required to be reported pursuant
to Item 6(e) of Schedule 14A of Regulation 14A under the
Securities Exchange Act of 1934 (the "Exchange Act");
(ii) A change in the composition of the Company's Board
of Directors, as a result of which fewer than two-thirds of the
incumbent directors are directors who either (A) had been
directors of the Company 24 months prior to such change or (B)
were elected, or nominated for election, to the Company's Board
of Directors with the affirmative votes of at least a majority of
the directors who had been directors of the Company 24 months
prior to such change and who were still in office at the time of
the election or nomination; or
(iii) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 20 percent or more of the combined voting power of
the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the
right to vote at elections of directors (the "Base Capital
Stock"); provided, however, that any change in the relative
beneficial ownership of securities of any person resulting solely
from a reduction in the aggregate number of outstanding shares of Base
Capital Stock, and any decrease thereafter
in such person's ownership of securities, shall be disregarded
until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities
of the Company.
(b) Severance Payment. If, (i) during the term of this
Agreement and at any time after the occurrence of a Change in Control, a
member of the Affiliated Group terminates the Employee's employment for
any reason or no reason, or (ii) during the term of this Agreement and
within one year after a Change in Control, the Employee resigns as a
result of a material change in his responsibilities or the relocation of
his place of employment by more than 20 miles from Oakland, California,
or (iii) during the term of this Agreement and within the 30-day period
commencing one year after the occurrence of a Change in Control, the
Employee resigns his employment for any reason, then the Employee shall
be entitled to receive a severance payment from the Company (the
"Severance Payment"). The Severance Payment shall be made in a lump sum
not less than 31 days nor more than 60 days following the date of the
employment termination and shall be in an amount determined under
Subsection (c) below. The Severance Payment shall be in lieu of any
further payments to the Employee and any further accrual of benefits
under Section 3 and Subsections 4(a) and (b) with respect to periods
subsequent to the date of the employment termination and any termination
benefits under Section 7. The foregoing notwithstanding, the Employee
may elect to receive, in lieu of the Severance Payment, all of the
termination benefits described in Section 7, as if his resignation or
termination as provided in this Subsection (b) were a termination
without Cause; provided, however, that in the event of the Employee's
resignation as provided in Clause (iii) of this Subsection (b), the
Continuation Period to be counted as employment shall be determined by
substituting "24 months after the date of such employment termination"
for Clause (i) of Subsection 7(a). The Employee shall advise the
Company of his election in writing within 30 days after his resignation
or after receiving the Company's notice of termination.
(c) Amount. The amount of the Severance Payment shall be equal
to the product of the following:
(i) 155 percent of the Employee's monthly rate of Base
Compensation, as in effect on the date of the employment
termination; times
(ii) The lesser of (A) 36 months or (B) the number of
months between the date of the employment termination and the
Employee's Normal Retirement Date; provided, however, that in the
event of the Employee's resignation as provided in Clause (iii)
of Subsection (b) above, the amount of the Severance Payment
shall be determined by substituting "24 months" for Clause (A).
For this purpose, a partial month shall be counted as the
appropriate fraction of a full month.
(d) Incentive Programs. If, during the term of this Agreement,
a Change in Control occurs with respect to the Company, the Employee
shall become fully vested in all awards heretofore or hereafter granted
to him under all stock option, stock appreciation rights, restricted
stock, phantom stock or similar plans maintained by the Company, any
contrary provisions of such plans or any agreements issued thereunder
notwithstanding.
(e) No Mitigation. The Employee shall not be required to
mitigate the amount of any payment contemplated by this Section 6
(whether by seeking new employment or in any other manner), nor shall
any such payment be reduced by any earnings that the Employee may
receive from any other source.
7. Involuntary Termination Without Cause.
(a) Continuation Period. In the event that, during the term of
this Agreement, a member of the Affiliated Group terminates the
Employee's employment for any reason other than Cause or Disability or
for no reason, the Employee shall be entitled to receive all of the
payments and benefit coverage described in the succeeding subsections of
this Section 7. Such payments and benefit coverage shall continue for
the period commencing on the date when the employment termination is
effective and ending on the earliest of (i) 36 months after the date of
such employment termination, (ii) the Employee's Normal Retirement Date
or (iii) the date of the Employee's death (the "Continuation Period").
Any other provision of this Agreement notwithstanding, if the Employee
is entitled and elects to receive a severance payment pursuant to
Section 6, then no payments or benefit coverage shall be provided to the
Employee under this Section 7.
(b) Base Compensation. During the Continuation Period, the
Employee shall receive biweekly payments of 155 percent of his biweekly
rate of Base Compensation, as in effect on the date of the employment
termination.
(c) Insurance Coverage. During the Continuation Period, the
Employee (and, where applicable, his dependents) shall be entitled to
continue participation in all insurance or similar plans maintained by
the Company, including (without limitation) life, disability, health and
accident insurance programs, as if he were still an employee of the
Company. Where applicable, the Employee's salary for purposes of such
plans shall be deemed to be equal to his Base Compensation. To the
extent that the Company finds it impossible to cover the Employee under
its group insurance policies during the Continuation Period, the Company
(at its own expense) shall provide the Employee with the same level of
coverage under individual policies.
(d) Incentive Programs. The Continuation Period shall be
counted as employment with the Affiliated Group for purposes of
determining the expiration date of all options on the Company's stock
and for purposes of vesting under all executive compensation programs in
which the Employee participated (any contrary provisions of option
agreements or such programs notwithstanding), including (without
limitation) stock purchase, stock option, restricted stock or phantom
stock plans, incentive or other bonus plans and similar programs, but
not including any pension, thrift or profit-sharing plan intended to
qualify under section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). The preceding sentence shall not be construed to
require the grant of any new awards to the Employee under such executive
compensation programs during the Continuation Period.
(e) Supplemental Benefit. In lieu of accruing additional
pension benefits under the Retirement Program during the Continuation
Period, the Employee and his surviving spouse (if any) shall be entitled
to receive an unfunded supplemental retirement benefit (the
"Supplemental Benefit"). The amount of the Supplemental Benefit shall
be determined under Subsection (f) below. Supplemental Benefit payments
shall be made in monthly installments, commencing with the month for
which the first pension payment is made to the Employee or his surviving
spouse under Subsection 4(e) and ending with the month for which the
last pension payment is made to the Employee or his surviving spouse
under Subsection 4(e). For purposes of this Section 7, the term
"Retirement Program" shall also include the Minimum Pension described in
Section 4.
(f) Amount of Supplemental Benefit. The amount of the
Supplemental Benefit shall be equal to the difference between:
(i) The amount of the pension benefits actually paid to
the Employee or to his surviving spouse, as the case may be,
under the Retirement Program; and
(ii) The amount of the hypothetical pension benefits
that would be payable to the Employee or to his surviving spouse,
as the case may be, under the Retirement Program if the following
assumptions are made:
(A) The projected Continuation Period, determined
without regard to the possibility of the Employee's
death, is counted as employment with the Affiliated Group
for all purposes (including, without limitation, benefit
accrual) under the Retirement Program; and
(B) 155 percent of the projected Base
Compensation to be received by the Employee during the
Continuation Period is counted as compensation for purposes
of determining benefits under the Retirement Program.
The Supplemental Benefit shall be payable in the same form as the
Minimum Pension. The amount of the Supplemental Benefit shall be
recalculated each year in accordance with any provisions of the
Retirement Plan which are applicable to the Employee (or would be
applicable if the Employee were vested) and which provide for the
adjustment of pension benefits to reflect changes in the cost of living.
(g) Equivalency. Subsections (e) and (f) above shall be
construed, to the greatest extent possible, so as to place the Employee
in the position in which he would have been if his active participation
in the Retirement Program had continued during the Continuation Period.
However, any incremental tax costs or benefits associated with the
Supplemental Benefit shall be disregarded for this purpose.
(h) Relocation Loan. The Continuation Period shall be counted
as employment with the Affiliated Group for purposes of Subsection 4(b).
(i) No Mitigation. The Employee shall not be required to
mitigate the amount of any payment or benefit contemplated by this
Section 7, nor shall any such payment or benefit be reduced by any
earnings or benefits that the Employee may receive from any other
source.
8. Limitation on Payments.
(a) Application. This Section 8 shall apply to the Employee
only if, after the application of this Section 8, the present value of
his aggregate payments or property transfers from the Affiliated Group
will be greater than the present value of his payments or property
transfers from the Affiliated Group would have been if (i) this Section
8 did not apply and (ii) such present value had been reduced by the
amount of the excise tax described in section 4999 of the Code. In all
other cases, this Section 8 shall not apply to the Employee. All
determinations under this Subsection (a) shall be made by Arthur
Andersen & Co. (the "Auditors").
(b) Basic Rule. Any provision of this Agreement other than
Subsection (a) above notwithstanding, in the event that the Auditors
determine that any payment, transfer or acceleration of vesting by the
Affiliated Group to or for the benefit of the Employee, whether pursuant
to the terms of this Agreement or any other plan or agreement (a
"Payment"), would be nondeductible by the Affiliated Group for federal
income tax purposes because of section 280G of the Code, then the
aggregate present value of all Payments shall be reduced (but not below
zero) to the Reduced Amount. For purposes of this Section 8, the
"Reduced Amount" shall be the amount, expressed as a present value,
which maximizes the aggregate present value of the Payments without
causing any Payment to be nondeductible by the Affiliated Group because
of section 280G of the Code.
(c) Reduction of Payments. If the Auditors determine that any
Payment would be nondeductible by the Affiliated Group because of
section 280G of the Code, then the Company, within five business days
after being notified by the Auditors, shall give the Employee notice to
that effect and a copy of the detailed calculation thereof and of the
Reduced Amount. The Employee may then elect, in his sole discretion,
which and how much of the Payments shall be eliminated or reduced (as
long as after such election the aggregate present value of the Payments
equals the Reduced Amount) and shall advise the Company in writing of
his election within 30 days of his receipt of notice. If no such
election is made by the Employee within such 30-day period, then the
Company may elect which and how much of the Payments shall be eliminated
or reduced (as long as after such election the aggregate present value
of the Payments equals the Reduced Amount) and shall notify the Employee
promptly of such election. For all purposes under this Section 8,
present value shall be determined in accordance with section 280G(d)(4)
of the Code. All determinations made by the Auditors under this Section
8 shall be binding upon the Affiliated Group and the Employee and shall
be made within 60 days of the date when a Payment becomes payable or
transferable. Within five business days following the completion of
such determinations and the elections hereunder, the Affiliated Group
shall pay or transfer to or for the benefit of the Employee such amounts
as are then due to him under this Agreement. It shall, as promptly as
possible, pay or transfer to or for the benefit of the Employee in the
future such amounts as become due to him under this Agreement.
(d) Overpayments and Underpayments. As a result of uncertainty
in the application of section 280G of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments
will have been made by the Affiliated Group which should not have been
made (an "Overpayment") or that additional Payments which will not have
been made by the Affiliated Group could have been made (an
"Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon
the assertion of a deficiency by the Internal Revenue Service against
the Affiliated Group or the Employee which the Auditors believe has a
high probability of success, determine that an Overpayment has been
made, such Overpayment shall be treated for all purposes as a loan to
the Employee which he shall repay to the Affiliated Group, together with
interest at the applicable federal rate provided for in section
7872(f)(2)(A) of the Code; provided, however, that no amount shall be
payable by the Employee to the Affiliated Group if and to the extent
that such payment would not reduce the amount which is subject to
taxation under section 4999 of the Code. In the event that the Auditors
determine that an Underpayment has occurred, such Underpayment shall
promptly be paid or transferred by the Affiliated Group to or for the
benefit of the Employee, together with interest at the applicable
federal rate provided for in section 7872(f)(2)(A) of the Code.
9. Compensating Payments.
(a) Basic Rule. If the Auditors determine that any Payment
would be nondeductible by the Affiliated Group for federal income tax
purposes because of section 280G of the Code, and if any Payment is
subject to reduction as a result of a provision in any plan or agreement
limiting nondeductible Payments (other than Section 8 of this Agreement)
then the Affiliated Group shall pay the amount of such reduction (the
"Compensating Amount") to the Employee under this Agreement. The
Compensating Amount shall be paid in a lump sum in cash within five
business days after the date when a Payment otherwise would have been
made. All determinations made by the Auditors for purposes of this
Section 9 shall be binding upon the Affiliated Group and the Employee.
(b) Waiver. To the extent that a Compensating Amount is paid
under this Agreement with respect to the value of any Payment, such
Payment shall be forfeited permanently and shall under no circumstances
be paid to the Employee or to any person deriving rights from the
Employee at any future time (whether or not any part of such Payment
would be nondeductible at such future time). The Employee hereby waives
any right to, or interest in, any Payment with respect to which he has
received a Compensating Amount.
(c) Equivalency. Subsection (a) above shall be construed, to
the greatest extent possible, so as to place the Employee in the
economic position in which he would have been if none of the plans and
agreements to which the Employee and the Affiliated Group are a party
provided for the reduction of Payments because of the effects of section
280G of the Code. However, any incremental tax costs or tax benefits
associated with Payments or Compensating Amounts shall be disregarded
for this purpose.
10. Protection of Trade Secrets.
(a) Trade Secrets. The parties acknowledge and agree that
during the term of this Agreement and in the course of his employment
hereunder, the Employee will have access to and become acquainted with
information concerning the operations of
members of the Affiliated Group, including without limitation financial,
personnel, customer, sales, systems and other information that is owned
by members of the Affiliated Group and regularly used in the operation
of their business, and that such information constitutes the trade
secrets of the members of the Affiliated Group. The Employee
specifically agrees that he shall not misuse, misappropriate or disclose
any such trade secrets, directly or indirectly, to any other person or
use them in any way, either during the term of this Agreement or at any
time thereafter, except as required in the course of his employment
hereunder.
(b) Unfair Competition. The Employee acknowledges and agrees
that the unauthorized use or disclosure of any of the trade secrets
obtained by the Employee during the course of his employment under this
Agreement, including information concerning the Affiliated Group's
current, future or proposed work, services or products, the facts that
any such work, services or products are planned, under consideration or
in production, as well as any descriptions thereof, constitute unfair
competition. The Employee promises and agrees not to engage in any
unfair competition with any member of the Affiliated Group, either
during the term of this Agreement or at any time thereafter.
(c) Return of Documents. The Employee further agrees that
all files, records, documents, computer disks, drawings, specifications,
equipment and similar items relating to the business of members of the
Affiliated Group, whether prepared by the Employee or others, are and
shall remain exclusively the property of the members of the Affiliated
Group and shall be returned to the Affiliated Group upon the termination
of his employment hereunder.
11. Successors.
(a) Company's Successors. The Company shall require any
successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company's business and/or assets, by an agreement in
substance and form satisfactory to the Employee, to assume this
Agreement and to agree expressly to perform this Agreement in the same
manner and to the same extent as the Company would be required to
perform it in the absence of a succession. The Company's failure to
obtain such agreement prior to the effectiveness of a succession shall
be a breach of this Agreement and shall entitle the Employee to all of
the compensation and benefits to which he would have been entitled
hereunder if the Company had involuntarily terminated his employment
without Cause on the date when such succession becomes effective. For
all purposes under this Agreement, the term "Company" shall include any
successor to the Company's business and/or assets which executes and
delivers the assumption agreement described in this Subsection (a) or
which becomes bound by this Agreement by operation of law.
(b) Employee's Successors. This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
12. Notice.
Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered mail,
return receipt requested and postage prepaid. In the case of the
Employee, mailed notices shall be addressed to him at the home address
which he most recently communicated to the Company in writing. In the
case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary.
13. Miscellaneous Provisions.
(a) Waiver. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by the Company's
Chief Executive Officer. No waiver by either party of any breach of, or
of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
(b) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied)
which are not expressly set forth in this Agreement have been made or
entered into by either party with respect to the subject matter hereof.
Effective as of the date hereof, this Agreement supersedes all prior
employment agreements between the Employee and any member of the
Affiliated Group.
(c) Presumption. The Company shall make a payment or transfer
described in this Agreement at the time specified herein upon receiving
written notice from the Employee describing such payment or transfer,
referring to the provision of this Agreement under which such payment or
transfer is claimed and certifying that all conditions for such payment
or transfer, as set forth in this Agreement, have been satisfied. The
information so furnished to the Company by the Employee shall be
presumed to be correct, subject to rebuttal by the Company after making
the payment or transfer claimed by the Employee. The Company may seek a
refund of such payment or transfer in accordance with Subsection (g)
below.
(d) No Setoff. There shall be no right of setoff or
counterclaim, with respect to any claim, debt or obligation, against
payments to the Employee under this Agreement.
(e) Choice of Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the
State of California.
(f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity
or enforceability of any other provision hereof, which shall remain in
full force and effect.
(g) Arbitration. Except as otherwise provided in Sections 8 and
9, any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration in
Oakland, California, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and judgment on the award
rendered by the arbitrator may be entered in any court having
jurisdiction thereof. All fees and expenses of the arbitrator and such
Association shall be paid by the Company.
(h) No Assignment. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy,
garnishment, attachment or other creditor's process, and any action in
violation of this Subsection (h) shall be void.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as
of the day and year first above written.
/s/ L. Dale Crandall
__________________________
L. Dale Crandall
AMERICAN PRESIDENT COMPANIES, LTD.
/s/ J. M. Lillie
By ________________________________
J. M. Lillie
Chairman of the Board, President
and Chief Executive Officer
TW950109Cemp-0940tw
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary information extracted from the 10-Q of American
President Companies, Ltd. for the quarter ended April 7, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> APR-7-1995
<CASH> 74,868
<SECURITIES> 123,676
<RECEIVABLES> 280,565<F1>
<ALLOWANCES> 0
<INVENTORY> 39,442
<CURRENT-ASSETS> 557,438
<PP&E> 1,871,097
<DEPRECIATION> 921,938
<TOTAL-ASSETS> 1,626,128
<CURRENT-LIABILITIES> 381,704
<BONDS> 366,784
<COMMON> 27,344
75,000
0
<OTHER-SE> 511,026
<TOTAL-LIABILITY-AND-EQUITY> 1,626,128
<SALES> 0
<TOTAL-REVENUES> 740,661
<CGS> 0
<TOTAL-COSTS> 715,716<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,023
<INCOME-PRETAX> 1,710
<INCOME-TAX> 650
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,060
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
<FN>
<F1>The Allowance for Doubtful Accounts, included in Receivables, amounted to
$20,020.
<F2>The Provision for Doubtful Accounts, included in Total-Costs, was $4,795.
</FN>
</TABLE>
