______________________________________________________________________________
______________________________________________________________________________
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 4, 1997
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
APL LIMITED
(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 2, 1997
___________________________ __________________________
Common Stock, $.01 par value 24,636,744
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
APL LIMITED
INDEX
PART I. FINANCIAL INFORMATION Page
_____________________
Item 1. Consolidated Financial Statements
Statement of Income 3
Balance Sheet 4
Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 11-18
Part II. OTHER INFORMATION
_________________
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
The consolidated financial statements presented herein
include the accounts of APL Limited 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 27, 1996 (Commission File No. 1-
8544).
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
_________________________________________________________________
14 Weeks Ended
(In thousands, except
per share amounts) April 4, 1997 April 5, 1996
_________________________________________________________________
Revenues $678,850 $726,337
_________________________________________________________________
Expenses 687,696 708,770
_________________________________________________________________
Operating Income (Loss) (8,846) 17,567
Interest Income 6,611 6,745
Interest Expense (15,600) (17,734)
_________________________________________________________________
Income (Loss) Before Taxes (17,835) 6,578
Federal, State and Foreign Tax
Expense (Benefit) (8,028) 2,697
_________________________________________________________________
Net Income (Loss) $(9,807) $ 3,881
_________________________________________________________________
_________________________________________________________________
Earnings (Loss) Per Common Share
_________________________________________________________________
Primary $ (0.40) $ 0.15
Fully Diluted $ (0.40) $ 0.15
_________________________________________________________________
Dividends Per Common Share $ 0.10 $ 0.10
_________________________________________________________________
_________________________________________________________________
See notes to consolidated financial statements.
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED BALANCE SHEET (Unaudited)
________________________________________________________________
April 4 December 27
(In thousands, except share amounts) 1997 1996
________________________________________________________________
ASSETS
Current Assets
Cash and Cash Equivalents $ 118,847 $ 102,370
Short-Term Investments 141,796 180,628
Trade and Other Receivables, Net 212,412 242,460
Fuel and Operating Supplies 28,731 29,220
Prepaid Expenses and Other Current Assets 58,427 61,804
_________________________________________________________________
Total Current Assets 560,213 616,482
_________________________________________________________________
Property and Equipment
Ships 903,326 903,227
Containers, Chassis and Rail Cars 769,476 764,294
Leasehold Improvements and Other 255,983 252,466
Construction in Progress 44,715 29,078
_________________________________________________________________
1,973,500 1,949,065
Accumulated Depreciation
and Amortization (848,879) (825,846)
_________________________________________________________________
Property and Equipment, Net 1,124,621 1,123,219
_________________________________________________________________
Investments and Other Assets 147,066 140,477
_________________________________________________________________
Total Assets $1,831,900 $1,880,178
_________________________________________________________________
_________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt
and Capital Leases $ 337 $ 9,866
Accounts Payable and Accrued Liabilities 368,956 380,690
_________________________________________________________________
Total Current Liabilities 369,293 390,556
_________________________________________________________________
Deferred Income Taxes 165,814 173,867
_________________________________________________________________
Other Liabilities 114,205 116,569
_________________________________________________________________
Long-Term Debt 690,248 695,546
Capital Lease Obligations 714 801
_________________________________________________________________
Total Long-Term Debt and
Capital Lease Obligations 690,962 696,347
_________________________________________________________________
Commitments and Contingencies
_________________________________________________________________
Stockholders' Equity
Common Stock $.01 Par Value, Stated at $1.00
Authorized-60,000,000 Shares
Shares Issued and Outstanding-
24,599,000 in 1997 and 24,564,000 in 1996 24,599 24,564
Additional Paid-In Capital 1,654 632
Retained Earnings 465,373 477,643
_________________________________________________________________
Total Stockholders' Equity 491,626 502,839
_________________________________________________________________
Total Liabilities and
Stockholders' Equity $1,831,900 $1,880,178
_________________________________________________________________
_________________________________________________________________
See notes to consolidated financial statements.
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
_________________________________________________________________
14 Weeks Ended
(In thousands) April 4, 1997 April 5, 1996
_________________________________________________________________
Cash Flows from Operating Activities
Net Income (Loss) $(9,807) $ 3,881
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization 28,613 31,621
Deferred Income Taxes (8,053) 1,636
Change in Receivables 30,048 1,528
Change in Fuel and Operating Supplies 489 6,571
Change in Prepaid Expenses and
Other Current Assets 3,377 8,601
Gain on Sale of Property and Equipment (197) (1,864)
Change in Accounts Payable and
Accrued Liabilities (11,734) 844
Other (2,745) (16,895)
_________________________________________________________________
Net Cash Provided by
Operating Activities 29,991 35,923
_________________________________________________________________
Cash Flows from Investing Activities
Capital Expenditures (31,724) (75,004)
Proceeds from Sales of
Property and Equipment 1,839 159,515
Purchase of Short-Term Investments (64,801) (220,442)
Proceeds from Sales of
Short-Term Investments 103,633 128,361
Transfer from Capital Construction Fund 2,953
Deposit to Capital Construction Fund (2,940)
Other (2,859) (3,045)
_________________________________________________________________
Net Cash Provided by (Used in)
Investing Activities 6,101 (10,615)
_________________________________________________________________
Cash Flows from Financing Activities
Issuance of Debt 62,215
Repayments of Capital Lease Obligations (86) (8,790)
Repayments of Debt (14,883) (12,918)
Dividends Paid (2,459) (2,569)
Debt Issue Costs (1,554)
Other 1,053 842
_________________________________________________________________
Net Cash Provided by (Used in)
Financing Activities (16,375) 37,226
_________________________________________________________________
Effect of Exchange Rate Changes on Cash (3,240) (216)
_________________________________________________________________
Net Increase in Cash and Cash Equivalents 16,477 62,318
_________________________________________________________________
Cash and Cash Equivalents at
Beginning of Period 102,370 76,564
_________________________________________________________________
Cash and Cash Equivalents at
End of Period $118,847 $138,882
_________________________________________________________________
Supplemental Data:
_________________________________________________________________
Cash Paid (Received) for:
Interest, Net of Capitalized Interest $ 15,211 $ 16,049
Income Taxes, Net of Refunds $(7,760) $ 4,785
_________________________________________________________________
See notes to consolidated financial statements.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1. Significant Accounting Policies
The consolidated financial statements presented herein
include the accounts of APL Limited 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 27, 1996 (Commission File No. 1-
8544).
Income Taxes
The provision for income taxes has been calculated using the
effective tax rate estimated for the respective years. The
company's estimated income tax rate for the first quarter of 1997
was 34%. During the quarter, the company also recorded a tax
benefit of $2.0 million relating to a prior year state income tax
settlement. The effective income tax rate for the first quarter
of 1996 was 41%. The full year effective tax rate for 1996 was
33%, which was reduced during 1996 to reflect the availability of
additional tax credits and deductions.
Note 2. United States Maritime 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 labor expense of vessel
operation under United States registry. The ODS amounts for the
quarters ended April 4, 1997 and April 5, 1996 were $7.8 million
and $13.6 million, respectively, and have been included as a
reduction of expenses.
Note 3.Accounts Payable and Accrued Liabilities
Accounts Payable and Accrued Liabilities at April 4, 1997
and December 27, 1996 were as follows:
_________________________________________________________________
(In thousands) April 4 December 27
1997 1996
_________________________________________________________________
Accounts Payable $ 53,375 $ 52,316
Accrued Liabilities 241,318 250,523
Current Portion of Insurance Claims 13,565 15,326
Unearned Revenue 55,876 50,566
Restructuring Charge 4,822 11,959
_________________________________________________________________
Total Accounts Payable and
Accrued Liabilities $ 368,956 $ 380,690
_________________________________________________________________
_________________________________________________________________
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4. Long-Term Debt
Long-Term Debt at April 4, 1997 and December 27, 1996
consisted of the following:
_________________________________________________________________
(In thousands) April 4 December 27
1997 1996
_________________________________________________________________
Vessel Mortgage Notes
Due Through 2008 (1) $ 375,527 $ 380,880
8% Senior Debentures $150 million Face Amount,
Due on January 15, 2024 (2) 147,205 147,198
7 1/8% Senior Notes $150 million Face Amount,
Due on November 15, 2003 (2) 148,448 148,399
Series I 8% Vessel Mortgage Bonds,
Due Through 1997 (3) 9,530
8% Refunding Revenue Bonds
Due on November 1, 2009 12,000 12,000
Other 7,068 7,069
_________________________________________________________________
Total Debt 690,248 705,076
Current Portion (9,530)
_________________________________________________________________
Long-Term Debt $ 690,248 $ 695,546
_________________________________________________________________
_________________________________________________________________
(1) To finance a portion of the purchase price of its six C11-
class vessels, the company borrowed $402.1 million in 1995 and
1996 under a loan agreement with European banks pursuant to vessel
mortgage notes due through 2008. Principal payments are due in
semiannual installments over a 12-year period commencing six
months after the delivery of the respective vessels. The interest
rates on the notes are based upon various margins over LIBOR or
the banks' cost of funds, as elected by the company. Until the
sixth anniversary of the delivery date, the company may defer up
to four principal payments. Aggregate deferred payments are due
at the end of the term of the notes. Principal payments on this
debt are classified as long-term on the basis that the company has
the ability to defer at least two payments. The notes issued
under this loan agreement are collateralized by the C11-class
vessels.
The company entered into interest rate swap agreements on
four of the vessel mortgage notes, with a notional amount of
$257.6 million at April 4, 1997, to exchange the variable
interest rate obligations on such notes for fixed rate
obligations for periods ranging between 7 and 12 years. The
current variable interest rates for all of the vessel
mortgage notes range between 6.415% and 6.86%. As a result
of the swaps, the effective interest rates range between
6.625% and 7.531% for the first five years after inception,
and 6.625% and 7.656% for the remaining terms of the swaps.
Net payments or receipts under the agreements are included in
interest expense.
(2)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 $1.6 million at April 4, 1997. The Senior
Debentures had an effective interest rate of 8.172%, and an
unamortized discount of $2.8 million at April 4, 1997.
(3)The Series I Vessel Mortgage Bonds were fully repaid during
the first quarter of 1997.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4. Long-Term Debt (continued)
The company has a credit agreement with a group of banks
which provides for an aggregate commitment of $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 and fixed charge coverage,
leverage and net worth. The borrowings bear interest at rates
based upon various indices as elected by the company. 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.
Note 5. Stockholders' Equity
Earnings (Loss) Per Common Share
For the quarter ended April 4, 1997, primary and fully
diluted loss per common share were computed by dividing the net
loss by the weighted average number of common shares outstanding
during the quarter. For the quarter ended April 5, 1996, primary
and fully diluted earnings per common share were computed by
dividing net income by the weighted average number of common
shares and common equivalent shares outstanding during the
quarter. The number of shares used in these computations were as
follows:
_________________________________________________________________
Weighted Average Number of Common and Common Equivalent Shares
_________________________________________________________________
14 Weeks Ended
(In millions) April 4, 1997 April 5, 1996
_________________________________________________________________
Primary 24.6 26.1
Fully Diluted 24.6 26.4
_________________________________________________________________
_________________________________________________________________
Weighted average shares for the first quarter of 1997
reflects the repurchase of 1.3 million shares of the company's
common stock in the third and fourth quarters of 1996.
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
"Earnings per Share", which is effective for interim and annual
periods ending after December 15, 1997 (early application is not
permitted). Under this new standard, primary earnings per share
and fully diluted earnings per share have been replaced by basic
earnings per share and diluted earnings per share. Basic
earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the
period. Diluted earnings per share is calculated by dividing net
income by the weighted average number of common shares
outstanding during the period plus the dilutive effect of stock
options outstanding. For the first quarter of 1997 and 1996,
basic and diluted earnings (loss) per share would be the same as
the reported primary and fully diluted earnings (loss) per share.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Commitments and Contingencies
Commitments
Alliances
The alliance agreements between the company, Orient Overseas
Container Line ("OOCL"), Mitsui OSK Lines, Ltd. ("MOL"), Nedlloyd
Lines B.V. ("NLL") and Malaysian International Shipping
Corporation BHD ("MISC"), collectively referred to as the Global
Alliance, were fully implemented in the first quarter of 1996.
NLL merged with the container line operations of The
Peninsular and Oriental Steam Navigation Company ("P&O") on
December 31, 1996 to form P&O Nedlloyd Container Line Limited
("P&O-NL"). NLL and P&O were each members of different
alliances, and the future alliance participation of P&O-NL has
not yet been determined. The company and Neptune Orient Lines
Ltd ("NOL") are also each members of different alliances, and the
future alliance participation of the company and NOL following
consummation of the Proposed Merger as discussed in Note 7, has
not yet been determined. The company cannot predict when the
alliance participation of P&O-NL or, if the Proposed Merger is
consummated, when the alliance participation of the company and
NOL, will be determined or the resulting impact on the operations
of the Global Alliance. However, while no assurances can be
given, the company believes that acceptable alternatives may be
available.
Facilities, Equipment and Services
The company had outstanding purchase commitments to acquire
cranes, facilities, equipment and services totaling $71.0 million
at April 4, 1997. 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 4, 1997, the company had
outstanding letters of credit and other agreements totaling $61.9
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 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 $16.6 million at April 4, 1997. Certain
employment agreements contain provisions requiring additional
payments including excise taxes and supplemental pension benefits,
if applicable.
Contingencies
In October 1995, Lykes Bros. Steamship Co., Inc. ("Lykes")
filed a petition seeking protection from its creditors under
Chapter 11 of the U.S. Bankruptcy laws. The company chartered
four L9-class vessels from Lykes, and Lykes operates three
Pacesetter vessels chartered from the company. All four L9s were
redelivered to Lykes by September 25, 1996, and the three
Pacesetters continue to be operated by Lykes. On July 26, 1996,
the Bankruptcy Court gave its final approval to a settlement
agreement, which became effective on August 9, 1996, between the
company and Lykes, establishing terms for the payment of the
company's claims against Lykes for unpaid charter hire. The
settlement also allows Lykes the use of the three Pacesetters
until December 31, 1997 and requires Lykes to obtain the release
of liens it permitted to be established against those vessels.
<PAGE>
APL Limited and Subsidiaries
Note 6. Commitments and Contingencies (continued)
Contingencies (continued)
On April 2, 1997, Lykes' Plan of Reorganization was
confirmed. Also on April 2, 1997, Lykes and Canadian Pacific,
Ltd. ("CP") finalized an agreement for CP's acquisition of Lykes'
U.S. container shipping services for approximately $30 million,
subject to certain conditions including the approval of MarAd.
In addition, the company and CP have reached an agreement which
allows the company to realize most of the remaining benefits due
under its settlement with Lykes, which agreement is conditioned
upon the consummation of CP's acquisition of Lykes and,
therefore, on MarAd's approval of such acquisition.
Certain Bankruptcy Court orders underlying the company's
agreement with Lykes have been appealed, but these appeals are
expected to be withdrawn if Lykes' Plan of Reorganization becomes
effective. Lykes' bankruptcy filing is not expected to have a
material adverse impact on the company's consolidated financial
position or results of operations.
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.
Note 7. Proposed Merger with Neptune Orient Lines Ltd
On April 13, 1997, the company entered into a merger
agreement with NOL, a Singapore corporation, and Neptune U.S.A.,
Inc., a Delaware corporation and an indirect, wholly-owned
subsidiary of NOL ("Sub"), pursuant to which Sub will merge with
and into the company (the "Proposed Merger"). As a result of the
Proposed Merger, the outstanding shares of the company's stock
will be converted into the right to receive $33.50 per share in
cash and the company will become a wholly-owned subsidiary of
NOL. The Proposed Merger, which has been approved by each
company's Board of Directors, is conditioned upon approval by
holders of a majority of the outstanding shares of the company's
Common Stock and is subject to other conditions, including review
under the Exon-Florio Amendment and the approval of MarAd. The
parties expect to consummate the transaction in the fall of 1997,
following the receipt of regulatory approvals.
<PAGE>
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the first quarter of 1997 should be
read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the
company's Annual Report on Form 10-K for the year ended December
27, 1996.
RESULTS OF OPERATIONS
Summary Results First Quarter First Quarter
(In millions) 1997 Change 1996
_________________________________________________________________
Revenues
Container Transportation $ 575.7 (9%) $633.4
Logistics Services and Other 103.2 11% 92.9
_________________________________________________________________
Total $ 678.9 (7%) $726.3
_________________________________________________________________
Operating Income (Loss) $ (8.8) >(100%) $ 17.6
_________________________________________________________________
Pretax Income (Loss) $ (17.8) >(100%) $ 6.6
_________________________________________________________________
_________________________________________________________________
Overview
The operating loss for the first quarter of 1997 was $8.8
million compared with operating income for the first quarter of
1996 of $17.6 million. Included in operating income for the
first quarter of 1997 and 1996 was $3.0 million from the
favorable settlement of claims related to the 1995 collision of a
vessel and a $1.6 million gain from the sale of a vessel,
respectively.
In the first quarter of 1997, the company's earnings
decreased as a result of reduced container transportation
revenues due to decreased average revenue per forty-foot
equivalent unit ("FEU") in all of the company's markets as
compared with the first quarter of 1996. The decrease in
revenues was offset in part by increased logistic services and
other revenues, and a reduction in total expenses as compared
with 1996.
Container Volumes First Quarter First Quarter
by Major Market (1) 1997 Change 1996
_________________________________________________________________
Asia to North America 44.5 12% 39.8
North America to Asia 32.7 (9%) 36.1
Intra-Asia 48.4 24% 39.0
Asia-Europe 10.4 19% 8.7
Latin America 6.1 92% 3.2
Refrigerated 14.3 2% 14.0
Stacktrain 116.6 15% 101.2
Automotive 19.1 (30%) 27.2
_________________________________________________________________
_________________________________________________________________
(1)Volumes are stated in thousands of FEUs, except Stacktrain
and Automotive, which are stated in thousands of shipments.
Volumes data are based upon shipments originating during the
period, which differs from the percentage-of-completion
method used for financial reporting purposes.
Asia to North America
Volumes increased in the first quarter of 1997 due primarily
to strong export activities in North and South China, Hong Kong
and India. Lower manufacturing costs in South China have shifted
customer production facilities to that region, thereby increasing
volumes from that area.
<PAGE>
North America to Asia
Volumes declined in this market in the first quarter of 1997
compared with the first quarter of 1996 due primarily to
decreased shipments to North China, Hong Kong and Indonesia
resulting from reduced demand in this market. In addition, the
company sold five vessels and its Guam business to Matson
Navigation Company, Inc. ("Matson") in the first quarter of 1996,
which also contributed to the decline in volumes. The decrease
in volumes was partially offset by increased military cargoes to
Japan and Korea as a result the company's increased share of
military business.
Intra-Asia
The company's intra-Asia volumes increased in the first
quarter of 1997 compared with last year's first quarter primarily
as a result of increased shipments to and from North China,
India, Korea and Taiwan due to focused marketing efforts.
Asia-Europe
Volumes increased in both directions in the first quarter of
1997 over the first quarter of 1996 as the company pursued
additional cargo in order to gain market share. Eastbound
volumes increased due to shipments from the Netherlands and the
United Kingdom and westbound volumes increased due to shipments
from Hong Kong to Belgium, Denmark, the Netherlands and the
United Kingdom.
Latin America
Volumes in this market increased in the first quarter of
1997 compared with the first quarter of 1996 due primarily to an
increase in eastbound shipments from Hong Kong, Indonesia and
Taiwan to Mexico and Panama resulting from more focused sales
efforts. In addition, westbound and intra-Caribbean volumes also
increased due to the introduction of intra-Caribbean services in
mid-1996 and increased marketing efforts.
Refrigerated
Compared with the first quarter of 1996, volumes of
commercial refrigerated cargo increased slightly in 1997. This
was due primarily to increased volumes in the U.S. import market
resulting from increased exports from Japan, Taiwan and Thailand,
and increased volumes in the intra-Asia market. These increases
were partially offset by lower export and military refrigerated
cargo volumes.
Stacktrain
North America stacktrain volumes increased significantly in
the first quarter of 1997 compared with last year's first quarter
due to growth in demand and the company's pricing strategies to
remain competitive. Partially offsetting the increased volumes
was the loss of volumes related to the sale of the company's
rights to service certain domestic intermodal customers in the
second quarter of 1996.
Automotive
Automotive volumes declined in the first quarter of 1997
compared with the same period in 1996, due to reduced volumes of
both stacktrain and non-stacktrain shipments by U.S. automobile
manufacturers between the U.S. and Mexico and within the U.S.
<PAGE>
First Quarter First Quarter
Average Revenue per Unit (1) 1997 Change 1996
_________________________________________________________________
Trans-Pacific $3,198 (10%) $3,573
Other Ocean Transportation $1,886 (14%) $2,193
Stacktrain $1,162 (11%) $1,304
_________________________________________________________________
_________________________________________________________________
(1)Average revenue per unit is stated in FEUs, except for
Stacktrain, which is in shipments. Average revenue per unit
data are based upon shipments originating during the period,
which differs from the percentage-of-completion method used
for financial reporting purposes. Stacktrain revenue per
unit includes Automotive.
Trans-Pacific
In the first quarter of 1997, the company's trans-Pacific
average revenue per FEU declined from the same period in 1996 due
primarily to considerable pressure on rates in the Asia to North
America market as a result of over-capacity, slower growth in
trade, and continued rate reductions by the company and other
carriers. Considerable rate instability persists in this market,
and the company cannot predict whether rate reductions will
continue to be taken by the company or its competitors in 1997,
or the extent of such reductions, if any. Continued
destabilization of rates, if extensive, could have a material
adverse impact on the results of operations of carriers,
including the company. Also contributing to lower trans-Pacific
average revenue per FEU are lower rates and a lower percentage of
high value cargo in the North America to Asia market.
Other Ocean Transportation
Average revenue per FEU in the company's other ocean
transportation markets decreased in the first quarter of 1997
compared with the first quarter of 1996, due primarily to an
increase in lower-rated, short-leg cargo in the intra-Asia
market. The decrease in average revenue per FEU was compounded
by continued rate deterioration in the Asia-Europe market
throughout 1996 and the first quarter of 1997 due to excess
vessel capacity and significant rate pressure as carriers compete
for market share.
Stacktrain
Stacktrain average revenue per shipment declined in the
first quarter of 1997 compared with the same period in 1996
primarily due to lower rates resulting from increased competition
and excess equipment capacity in this market.
Proposed Merger with Neptune Orient Lines Ltd
On April 13, 1997, the company entered into a merger
agreement with NOL, and Neptune U.S.A., Inc., a Delaware
corporation and an indirect, wholly-owned subsidiary of NOL
("Sub"), pursuant to which Sub will merge with and into the
company (the "Proposed Merger"). As a result of the Proposed
Merger, the outstanding shares of the company's stock will be
converted into the right to receive $33.50 per share in cash and
the company will become a wholly-owned subsidiary of NOL. The
Proposed Merger, which has been approved by each company's Board
of Directors, is conditioned upon approval by holders of a
majority of the outstanding shares of the company's Common Stock
and is subject to other conditions, including review under the
Exon-Florio Amendment and the approval of MarAd. The parties
expect to consummate the transaction in the fall of 1997,
following the receipt of regulatory approvals.
Outlook
The company expects stronger volumes to be offset by
continued rate pressures in most of its major markets through
1997 as increased capacity continues to exceed market growth.
Anticipated lower rates combined with seasonal factors are
expected to result in reduced earnings, particularly in the first
half of the year.
<PAGE>
Logistics Services and Other Revenues
Logistics Services and Other Revenues, which include cargo
handling, freight consolidation, logistics services and charter
hire revenues, totaled $103.2 million and $92.9 million in the
1997 and 1996 first quarters, respectively. The increase
reflects increased cargo handling revenues in Asia and North
America associated with greater use of the company's terminals by
third parties.
Alliances
The alliance agreements between the company, OOCL, MOL, NLL
and MISC, collectively referred to as the Global Alliance, were
fully implemented in the first quarter of 1996.
NLL merged with the container line operations of P&O on
December 31, 1996 to form P&O Nedlloyd Container Line Limited.
NLL and P&O were each members of different alliances, and the
future alliance participation of P&O-NL has not yet been
determined. The company and NOL are also each members of
different alliances, and the future alliance participation of the
company and NOL following consummation of the Proposed Merger,
has not yet been determined. The company cannot predict when the
alliance participation of P&O-NL or, if the Proposed Merger is
consummated, when the alliance participation of the company and
NOL, will be determined or the resulting impact on the operations
of the Global Alliance. However, while no assurances can be
given, the company believes that acceptable alternatives may be
available.
Maritime Regulation and Subsidy
Under the company's ODS agreement with the MarAd, which
expires December 31, 1997, payments to the company were
approximately $7.8 million and $13.6 million in first quarter of
1997 and 1996, respectively. The company expects ODS payments in
1997 to be substantially lower than in 1996 as a result of a
reduction in the number of U.S. flag vessels operated by the
company. During 1996, the company sold five U.S. flag vessels to
Matson and returned five chartered U.S. flag vessels, four of
which had been chartered from Lykes.
In October 1996, the Maritime Security Act of 1996 was
signed into law. This legislation provides for a Maritime
Security Program ("MSP") administered by MarAd with up to $100
million in payments per annum to be appropriated by Congress on
an annual basis. MSP provides $2.1 million per vessel per year,
compared with up to $3.6 million per vessel per year under ODS,
and will expire on October 1, 2005.
In January 1997, the company signed operating agreements
under MSP for nine ships, including five C10-class vessels and
four C11-class vessels. The company has a one-year period in
which to begin the participation of those vessels in the program.
Vessels participating in MSP must be registered under U.S. flag
and manned by U.S. crews and must participate in the Emergency
Preparedness Program established by the Maritime Security Act.
Certain U.S. citizenship requirements are applicable to the
participating carrier. Transfers of operating agreements and
substitution of vessels are permitted under specified
circumstances, subject to the prior approval of MarAd. The
operating agreements are one-year contracts, which will be
automatically renewed through September 30, 2005 subject to
available funding. If annual funding is not appropriated by the
U.S. Congress, the operating agreements may be terminated on 60
days' notice by MarAd. The agreements may also be terminated by
the participating carrier on 60 days' notice at any time,
provided that the carrier continues to participate in the
Emergency Preparedness Program and the vessels continue under
U.S. flag registry through the end of the then-current fiscal
year.
Due to the enactment of MSP, the company's collective
bargaining agreement covering its unlicensed personnel expired
and was renegotiated, and a new agreement was reached in December
1996. The new contract expires in June 1999. Existing
agreements covering licensed personnel expire in December 1997
and June 1998, and the company has been engaged in negotiations
with the
<PAGE>
representative unions regarding continuation of those
agreements. The company is unable to predict when or whether new
agreements may be reached, and labor disturbances could result
which could have a material adverse impact on the company.
In 1997, legislation was introduced in the U.S Senate that
would substantially modify the Shipping Act of 1984 (the
"Shipping Act"). The Shipping Act, among other things, provides
the company with certain immunity from antitrust laws and
requires the company and other carriers in U.S. foreign commerce
to file tariffs publicly. The legislation contains provisions
that require tariffs to be published and available to the public
but not filed with a government agency, allow independent
contracts between shippers and ocean carriers, allow contract
terms to be treated confidentially except for specific terms, and
strengthen remedies to combat predatory activities by foreign
carriers, under limited continuing oversight by a successor
agency to the Federal Maritime Commission, while continuing the
company's existing antitrust immunity. The company is unable to
predict whether this or other proposed legislation will be
introduced or enacted. Enactment of legislation modifying the
Shipping Act, depending upon its terms, could have a material
impact on the competitive environment in which the company
operates and on the company's results of operations. The company
is unable to predict the nature or extent of the impact of this
legislation, if enacted.
EXPENSES
Expenses First Quarter First Quarter
(In millions) 1997 Change 1996
_________________________________________________________________
Transportation
Land $ 223.9 (11%) $252.1
Ocean 119.3 (2%) 121.4
Equipment 70.0 3% 68.3
Cargo Handling 179.7 11% 162.0
Sales General & Administrative 97.8 (8%) 106.5
Other (Income) Expense (3.0) 84% (1.6)
_________________________________________________________________
Total $ 687.7 (3%) $708.7
_________________________________________________________________
Operating Ratio (1) 102% 98%
_________________________________________________________________
_________________________________________________________________
(1)Other (Income)/Expense is excluded from this calculation.
Land Transportation
Land transportation expenses decreased in the first quarter
of 1997 from the first quarter of 1996, primarily due to
decreases in domestic automotive and freight brokerage volumes as
a result of the sale of the company's rights to service certain
domestic intermodal customers in the second quarter of 1996.
Ocean Transportation
Ocean transportation expenses decreased in the first quarter
of 1997 compared with the first quarter of 1996 as a result of
fewer vessels operating in the 1997 period due to the sale of
five U.S. flag vessels to Matson in 1996 and the return of five
chartered U.S. flag vessels, four of which had been chartered
from and returned to Lykes, during 1996. Partially offsetting
these decreases were increased purchases of vessel space from the
alliance partners in the Asia-Latin America service, additional
feeder costs in Asia due to slot purchase arrangements and
additional vessel charters, and lower subsidy payments resulting
from operating fewer vessels in 1997.
Transportation Equipment
Transportation equipment costs increased in the first
quarter of 1997 compared with the first quarter of 1996 due to
increased container lease and maintenance costs.
<PAGE>
Cargo Handling
Cargo handling expenses increased in the first quarter of
1997 compared with the same period in 1996, as result of higher
cargo volumes from both the company and its alliances, primarily
in intra-Asia and Latin America, and from higher labor rates.
This increase was partially offset by the strengthening value of
the U.S. dollar against the Japanese yen in the first quarter of
1997 compared with the same period in 1996.
Sales, General and Administrative
Sales, general and administrative expenses decreased in the
first quarter of 1997 compared with the first quarter of 1996, as
the company realized salary and benefit savings from the 1995
restructuring which resulted in the elimination of certain
positions in the U.S. and Asia during 1996. Other factors were
lower agency fees, lower accruals for certain employee benefit
costs due to workforce reductions, and favorable insurance claims
experience.
Other Income and Expense
In the first quarter of 1997, the company recorded $3.0
million in other income from the favorable settlement of claims
related to the 1995 collision of a vessel. In the first quarter
of 1996, the company recognized a gain of $1.6 million from the
sale of a vessel to Matson.
Net Interest Expense
Net interest expense decreased from $11.0 million in the
first quarter of 1996 to $9.0 million in the first quarter of
1997, primarily due to the repayment of the remaining balance of
the C10-class Series I Vessel Mortgage Bonds in the first quarter
of 1997, reductions in the balance of the C11-class Vessel
Mortgage Notes and interest capitalized under terminal
construction contracts compared with last year's first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Summary of Financial Resources
(In millions) April 4 December 27
As of: 1997 1996
_________________________________________________________________
Cash, Cash Equivalents and
Short-Term Investments $ 260.6 $ 283.0
Working Capital 190.9 225.9
Total Assets 1,831.9 1,880.2
Long-Term Debt and Capital
Lease Obligations (1) 691.3 706.2
_________________________________________________________________
April 4 April 5
For the quarter ending: 1997 1996
_________________________________________________________________
Cash Provided by Operations $ 30.0 $ 35.9
_________________________________________________________________
Investing Activities
Proceeds from the Sales of
Property and Equipment $ 1.8 $ 159.5
Capital Expenditures
Ships $ 0.1 $ 65.0
Containers, Chassis and Rail Cars 9.7 2.4
Leasehold Improvements and Other 21.9 7.6
_________________________________________________________________
Total Capital Expenditures $ 31.7 $ 75.0
_________________________________________________________________
Financing Activities
Borrowings $ 62.2
Repayment of Debt and
Capital Leases $ (15.0) (21.7)
Dividend Payments (2.5) (2.6)
_________________________________________________________________
_________________________________________________________________
(1)Includes current and long-term portions.
<PAGE>
Cash Flows
In the first quarter of 1996, the company sold Matson five
U.S. flag ships (three C9-class vessels and two C8-class vessels)
and certain of its assets in Guam for approximately $158 million
in cash.
Capital Spending
Capital expenditures of $31.7 million in the first quarter
of 1997 were primarily for purchases of chassis, containers, and
terminal and leasehold improvements. Capital expenditures in
1997 are expected to be approximately $108 million primarily for
terminal and leasehold improvements, transportation equipment and
systems. The company has outstanding purchase commitments to
acquire cranes, facilities, equipment and services totaling $71.0
million. In addition to vessel expenditures of $65.0 million,
the company made capital expenditures in the first quarter of
1996 of $10.0 million primarily for purchases of chassis,
containers, and terminal and leasehold improvements.
In January 1996, the company took delivery of the sixth and
final C11-class vessel, five of which were delivered during 1995.
The total cost of the six C11-class vessels was $529 million,
including total payments to the shipyards of $503 million, of
which $62 million was paid in January 1996. To finance a portion
of these vessel purchases, the company borrowed $402 million. Of
this amount, $62.2 million was borrowed in January 1996 and the
remainder in 1995. The company has entered into four interest
rate swap agreements to exchange the variable interest rates on
certain vessel mortgage notes for fixed rates over periods
ranging between 7 and 12 years. This debt is more fully
described in Note 4 of Notes to Consolidated Financial
Statements.
Share Repurchases
In April 1996, the Board of Directors approved a program to
repurchase up to an aggregate of $50 million of the company's
common stock from time to time through open-market or privately
negotiated transactions. In the third and fourth quarters of
1996, the company paid $29 million to repurchase approximately
1.3 million shares of its common stock under this program. No
shares were repurchased during the first quarter of 1997.
Capital Resources
The company has a credit agreement with a group of banks
which provides for an aggregate commitment of $200 million
through March 1999. Under that agreement, the company also has
an option to sell up to $150 million of certain of its accounts
receivable to the banks as an alternative to borrowing. There
have been no borrowings under this agreement.
The company believes its existing resources, cash flows from
operations and borrowing capacity under its existing credit
facilities will be adequate to meet its liquidity needs for the
foreseeable future.
CERTAIN FACTORS THAT MAY AFFECT OPERATING RESULTS
Statements prefaced with "expects", "anticipates",
"estimates", "believes" and similar words , including statements
concerning anticipated rate and volume trends, alliance
participation, and capital spending, are forward-looking
statements based on the company's current expectations as to
prospective events, circumstances and conditions over which it
may have little or no control and as to which it can give no
assurances. All forward-looking statements, by their nature,
involve risks and uncertainties, including those discussed above
and below, that could cause actual results to differ materially
from those projected.
<PAGE>
The company expects that it and the shipping industry
generally will face challenging conditions in coming years. The
adversity of the operating environment and its impact on the
company's operating results will depend on a variety of factors,
including: the timing and extent of an anticipated slowing of
market growth in certain markets served by the company; the
amount and timing of an anticipated significant increase in
industry capacity due to new vessel deliveries to competing
carriers; rate reductions in some market segments due to this
additional capacity and other factors; successful implementation
and continuation of the company's alliances, which comprise a
significant factor in the company's long-term strategy to remain
competitive; and the pace and degree of industry deregulation.
As a result of capacity increases exceeding market growth
and increased competition, considerable rate instability exists
in most of the company's major markets. Destabilization of rates
has in the past had and, if extensive, could in the future have a
material adverse impact on the results of operations of carriers
in these trades, including the company.
Demand in the trans-Pacific market is dependent on factors
such as the quantity of available import and export cargo and
economic conditions in the U.S. and other Pacific Basin
countries. The degree to which any growth or contraction in the
trans-Pacific market impacts the company will depend in large
part on the introduction of additional vessels into the market by
the company's competitors. Because a number of competing ocean
carriers have placed orders for the construction of a significant
number of new vessels, capacity in the trans-Pacific market is
expected to grow significantly more than demand, which could
result in further rate reductions.
Other risks and uncertainties include: growth trends in
other markets served by the company, the company's ability to
respond to those trends, changes in the cost of fuel, the status
of labor relations, the amplitude of recurring seasonal business
fluctuations, and the continuation and effectiveness of the Trans-
Pacific Stabilization Agreement and the various shipping
conferences to which the company belongs. If the company were
unable to negotiate acceptable labor agreements, including those
currently under negotiation, the results could include work
stoppages, strikes or other labor difficulties, or higher labor
costs, any of which could have a material adverse affect on the
company's operating results. The company has experienced such
difficulties at times in the past and can provide no assurance
that they will not occur in the future.
Also, the company is subject to inherent risks of conducting
business internationally, including changes in: legislative or
regulatory requirements, the relative values of the U.S. dollar
and the various foreign currencies with which the company is paid
and funds its local operations, tariffs and other trade barriers
and restrictions affecting its customers, payment cycles, the
difficulty of collecting accounts receivable, taxes, and the
burdens of complying with a variety of foreign laws. In
connection with its international operations, the company is also
subject to general geopolitical risks, such as political and
economic instability and changes in diplomatic and trade
relationships affecting the company or its customers.
The company's Proposed Merger with NOL may have significant
effects on the company's future operations, although the nature
and extent of such effects cannot be currently determined.
Responses of third parties, such as the company's alliance
partners and labor unions, to the proposed merger are also
uncertain at this time. The Proposed Merger is also subject to
the approval of the stockholders of the company and to regulatory
approvals, including the approval of MarAd.
The company expressly disclaims any obligation or
undertaking to update any forward-looking statements contained
herein in the event of any change in the company's expectations
with regard thereto or with regard to current or prospective
conditions or circumstances on which any such statement is based.
<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 3,480 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. In May 1996, an order was entered in the
United States District Court for the Eastern District of
Pennsylvania, which administratively dismissed most of such cases
without prejudice and with all statutes of limitation tolled, and
with reinstatement permitted upon fulfillment by plaintiffs of
certain specified conditions. In July 1996, the Court issued an
order to reinstate 29 cases against vessel owners and to dismiss
the vessel owners' third party claims and cross-claims against
manufacturers of asbestos products. A motion for reconsideration
of such dismissal is pending. The company is presently unable to
ascertain or predict the potential impact of this order on the
disposition or eventual outcome of such cases.
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 and the Intercoastal Shipping Act
of 1933, and seeking an undetermined amount of reparations.
Three private shippers are also complainants in this proceeding.
On June 3, 1996, the FMC administrative law judge ordered that
the complaint be dismissed on the merits. The complainants filed
its appeal with the FMC on July 25, 1996, and American President
Lines, Ltd. filed its reply on September 16, 1996. A decision by
the FMC is expected in August 1997.
The company and its directors have been named as defendants
in a purported class action on behalf of all public stockholders
of the company pending in the Superior Court of the State of
California for the County of Alameda, captioned Soshtain et. al.
v. Arledge et. al., Case No. 781838-3. The complaint was filed
on April 18, 1997 and alleges that the company's directors
breached their fiduciary duties in connection with the Proposed
Merger with NOL by failing to take all necessary steps to ensure
that the company's stockholders would receive the maximum value
realizable for their shares, and seeks damages in an unspecified
amount and equitable relief, including an injunction against
consummation of the Proposed Merger. The time for the defendants
to move or answer with respect to the complaint has not yet
elapsed.
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 By-Laws.
10.1 Fourth Amendment to the APL Limited SMART Plan (Second
Amendment and Restatement Effective as of January 1,
1993), dated March 24, 1997.**
10.2 APL Limited Regular Supplemental Executive Retirement
Plan, amended and restated effective November 9, 1996.**
10.3 APL Limited Pure Excess Supplemental Executive Retirement
Plan, effective November 9, 1996.**
10.4 APL Limited Regular Excess-Benefit Plan, amended and
restated effective November 9, 1996.**
10.5 APL Limited Pure Excess-Benefit Plan, effective November 9,
1996.**
10.6 Amendment No. 4 dated March 17, 1997 to the Credit
Agreement among APL Limited, borrower, and Morgan Guaranty
Trust Company of New York (as agent and participant), Bank
of America National Trust and Savings Association, The
First National Bank of Boston, The Industrial Bank of
Japan, Limited, ABN AMRO Bank N.V. and The First National
Bank of Chicago.
27 Financial Data Schedules filed under Article 5 of
Regulation S-X for the first quarter ended April 4, 1997.
** Denotes management contract or compensatory plan.
(b) Reports on Form 8-K
On April 14, 1997, the company filed a Form 8-K dated
April 13, 1997, relating to the Agreement and Plan of
Merger with Neptune Orient Lines Ltd, a Singapore
corporation ("NOL"), and Neptune U.S.A., Inc., a Delaware
corporation and an indirect, wholly-owned subsidiary of
NOL ("Sub"), pursuant to which Sub will merge with and
into the company and the company will become a wholly-
owned subsidiary of NOL.
<PAGE>
APL Limited 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.
APL LIMITED
Dated: May 16, 1997 By /s/ William J. Stuebgen
_______________________________
William J. Stuebgen
Vice President,
Controller and
Chief Accounting Officer
--
BY-LAWS
of
APL LIMITED
ARTICLE I
Offices
Section 1. Registered Office. The registered office of
the Company in the State of Delaware and the name of the
resident agent in charge thereof is The Prentice-Hall
Corporation System, Inc., 32 Loockerman Square, Suite L-100,
Dover, Delaware 19901.
Section 2. Other Offices. The Company shall have its
principal office at 1111 Broadway, Oakland, California 94607
and shall also have offices at such other places as the
President and the Board of Directors may from time to time
designate or appoint, or as the business of the Company may
require.
ARTICLE II
Directors
Section 1. Powers. The corporate powers, business and
property of the Company shall be vested in and exercised,
conducted and controlled by the Board of Directors which may
exercise all said powers of the Company and do all such
lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these By-Laws directed or
required to be exercised or done by the stockholders.
Section 2. Determination of Number. The exact number of
Directors who
shall constitute the Board of Directors shall be
determined 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; provided, that notice of
such proposed action shall have been given in the notice for
such regular or special meeting; and provided, further,
however, that in no event shall the number of directors be
less than five. No decrease in the number of Directors
shall have the effect of shortening the term of any
incumbent Director.
Section 3. Nominations. Nominations for election to the
Board of Directors of the Company at a meeting of
stockholders may be made by the Board or on behalf of the
Board by the Nominating Committee appointed by the Board, or
by any stockholder of the Company entitled to vote for the
election of Directors at such meeting. Such nominations,
other than those made by or on behalf of the Board, shall be
made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary of the
Company, and received by him not less than thirty (30) days
nor more than sixty (60) days prior to any meeting of
stockholders called for the election of Directors; provided,
however, that if less than thirty-five (35) days' notice of
the meeting is given to stockholders, such nomination shall
have been mailed or delivered to the Secretary of the
Company not later than the close of business on the seventh
(7th) day following the day on which the notice of meeting
was mailed. Such notice shall set forth as to each proposed
nominee who is not an incumbent Director (i) the name, age,
business address and, if known, residence address of each
nominee proposed in such notice, (ii)
the principal occupation or employment of each such
nominee, (iii) the number of shares of stock of the Company
which are beneficially owned by each such nominee and by the
nominating stockholder, and (iv) any other information
concerning the nominee that must be disclosed of nominees in
proxy solicitations Regulation 14A of the Securities
Exchange Act of 1934.
The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was
not made in accordance with the foregoing procedure, and if
he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
ARTICLE III
Meetings of Directors
Section 1. Place of Meetings. Meetings of the Board of
Directors of the Company whether regular, special or
adjourned shall be held at the principal office of the
Company, as specified in Section 2 of Article I hereof, or
at any other place within or without the State of Delaware
which has been designated from time to time by resolution of
the Board or by written consent of all members of the Board.
Any meeting shall be valid wherever held, if held upon the
written consent of all members of the Board of Directors
given either before or after the meeting and filed with the
Secretary of the Company.
Section 2. Regular Meetings. Regular meetings of the
Board of Directors shall be held immediately following the
adjournment of each annual meeting of the stockholders,
every second month thereafter and at such other times as may
be designated from time to time by resolution of the Board
of Directors.
Section 3. Special Meetings. Special meetings of the
Board of Directors may be called at any time by the Chairman
or the President of the Company or by any four Directors.
Section 4. Notice of Meetings. Written notice of the
time and place of special meetings of the Board of Directors
shall be delivered at least two (2) days before the meeting
personally to each Director, or sent in writing, by mail
addressed to such Director, at his address as it appears on
the records of the Company, with postage thereon prepaid;
such notice shall be deemed to be given at the time when the
same shall be deposited in the United States mail; provided,
however, that if a special meeting is called by the Chairman
or the President or by any four Directors because the need
for urgent action exists, then each Director shall be given
not less than three (3) hours' notice, and such notice shall
be deemed given once it has been conveyed to a Director in
person or by telephone or an attempt has been made to give
such notice by telephoning a Director at his home telephone
number and his business office telephone number as such
numbers are shown in the Secretary's records. Notice to
Directors may also be given by telex or telegram.
Whenever any such notice is required to be given, a
waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. If the
address of a Director is not shown on the records and is not
readily ascertainable, notice shall be addressed to him at
the city or place in which the meetings of the Directors are
regularly held. Notice of the time and place of holding an
adjourned meeting need not be given to absent Directors if
the time and place be fixed at the meeting adjourned.
Section 5. Quorum. A majority of the authorized number
of Directors shall constitute a quorum of the Board of
Directors for the transaction of business. Every act or
decision done or made by a majority of the Directors present
at a meeting duly held at which a quorum is present shall be
regarded as the act of the Board of Directors. In the
absence of a quorum, a majority of the Directors present may
adjourn from time to time, without notice other than an
announcement at the meeting, until a quorum shall be
present.
Section 6. Action Without a Meeting. Any action required
or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a
meeting if all members of the Board or committee, as the
case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the
Board or committee.
Section 7. Telephone Meetings. Members of the Board of
Directors, or any committee designated by the Board of
Directors, may participate in a meeting of such Board or
committee by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in
person at the meeting.
ARTICLE IV
Officers
Section 1. Officers. The officers of the Company shall
consist of a Chairman of the Board, a President, one or more
Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers
and a Controller. The salary which each said officer shall
receive, and the manner and times of its payment, shall be
fixed and determined by the Board of Directors upon the
advice of the Compensation Committee and may be altered by
said Board from time to time at its discretion.
The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time
by the Board.
The officers of the Company shall hold office until
their successors are chosen and qualify. Any officer elected
or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of
Directors. Any vacancy occurring in any office of the
Company shall be filled by the Board of Directors.
Section 2. Chairman of the Board. The Chairman of
the Board shall, when present, preside at all meetings of
the Board of Directors and the stockholders and shall do and
perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 3. President. The President shall be the
Chief Executive Officer of the Company. He shall be a
member of the Board of Directors and of the Executive
Committee thereof and, except for the Compensation Committee
and the Audit Committee, an ex officio member of all other
committees thereof, and he shall have responsibility for the
general management and direction of the business of the
Company, subject to control and direction of the Board of
Directors. In the absence or disability of the Chairman, he
shall perform the duties of the Chairman of the Board and,
when so acting, shall have all of the powers of and be
subject to all the restrictions upon the Chairman of the
Board. The
President shall, in the absence of the Chairman of the
Board, preside at meetings of the Board of Directors and the
stockholders, and shall perform such other duties and have
such other powers as the Board of Directors may from time to
time prescribe.
Section 4. Vice Presidents. In the event of the
absence or disability of the Chairman of the Board and the
President, the Vice Presidents, in the order designated by
the Directors or, in the absence of any designation, then in
the order of their election, shall perform the duties of the
Chairman of the Board and the President and, when so acting,
shall have all the powers of and be subject to all the
restrictions upon the Chairman of the Board and the
President. The Vice Presidents shall perform such other
duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 5. The Secretary and Assistant Secretary. The
Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record
all the proceedings of the meetings of the Company and of
the Board of Directors in a book to be kept for that purpose
and shall perform similar duties for the committees of the
Board when required. The Secretary shall give, or cause to
be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board
of Directors, or the President, under whose supervision such
officer shall be.
The Secretary shall have custody of the corporate seal
of the Company and shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be
attested by the Secretary's signature. The Board of
Directors may give general authority to any other officer to
affix the seal of the Company and to attest the affixing by
his signature.
The Assistant Secretary, or if there be more than one,
the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination,
then in the order of their election) shall, in the absence
of the Secretary or in the event of the Secretary's
inability or refusal to act, perform the duties and exercise
the powers of the Secretary and shall perform such other
duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 6. The Treasurer and Assistant Treasurers. The
Treasurer shall have the custody of the corporate funds and
securities and shall deposit all moneys and other valuable
effects in the name and to the credit of the Company in such
depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Company as
may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the
President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an
account of all his transactions as Treasurer.
The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination,
then in the order of their election), shall, in the absence
of the Treasurer or in the event of the Treasurer's
inability or refusal to act, perform the duties and exercise
the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 7. Controller. The Controller shall have charge
of the Company's books of accounts, records and auditing,
and generally do and perform all such other duties as
pertain to such office, and as may be required by the Board
of Directors. The Controller shall render to the President
and the Board of Directors, at its regular meetings, or when
the Board of Directors so requires, a report on the
financial condition of the Company.
Section 8. Powers of Attorney. Whenever an applicable
statute, decree, rule or regulation requires a document to
be subscribed by a particular officer of the Company, such
document may be signed on behalf of such officer by a duly
appointed attorney-in-fact, except as otherwise directed by
the Board of Directors or limited by law.
ARTICLE V
Meetings of Stockholders
Section 1. Meetings. Annual meetings of stockholders
shall be held in the City of Oakland, State of California,
at the principal office of the Company, as specified in
Section 2 of Article I hereof, or at such other place either
within or without the State of Delaware as shall be
designated from time to time by resolution of the Board of
Directors and stated in the notice of the meeting. Meetings
of stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of
stockholders shall be held at such date and time as shall be
designated from time to time by the Board of Directors and
stated in the notice of meeting. At the annual meeting the
stockholders shall elect by a plurality vote the number of
Directors equal to the number of Directors of the class
whose term expires at such meeting (or, if fewer, the number
of Directors properly nominated and qualified for election)
to hold office until the third succeeding annual meeting of
stockholders after their election and shall transact such
other business as may properly be brought before the
meeting.
To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the
Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors
or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before the
meeting by a stockholder, the Secretary of the Company must
have received notice in writing from the stockholder not
less than thirty (30) days nor more than sixty (60) days
prior to the meeting; provided, however, that if less than
thirty-five (35) days' notice of the meeting is given to
stockholders, such notice shall have been received by the
Secretary of the Company not later than the close of
business on the seventh (7th) day following the day on which
the notice of meeting was mailed.
Such written notice to the Secretary shall set forth,
as to each matter the stockholder proposes to bring before
the annual meeting: (i) a brief description of the
business, (ii) the name and address, as they appear on the
Company's books, of the stockholder proposing such business,
(iii) the class and number of shares of stock of the Company
beneficially owned by such stockholder, and (iv) any
material interest of such stockholder in such business.
Notwithstanding any other provision in these By-Laws to the
contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth
in this Section 2.
Section 3. Stockholder List. The officer who has charge
of the stock ledger of the Company shall prepare and make,
at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice
of the meeting, or, if not so specified, at the place where
the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder
who is present.
Section 4. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, may be called by
the Board of Directors or by the President.
Section 5. Notice of Meeting. Written notice of any
annual or special meeting stating the place, date and hour
of the meeting and, in the case of a special meeting,
stating the purpose or purposes for which the meeting is
called, shall be given not less than ten (l0) nor more than
sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Whenever notice is required to be given to any
stockholder, such notice shall be given in writing, by mail,
addressed to each stockholder at his address as it appears
on the records of the Company, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail.
Whenever any such notice is required to be given, a waiver
thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
Section 6. Quorum. The holders of a majority of the
stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute
a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power
to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall
be present or represented. At such adjourned meeting at
which a quorum shall be present or represented any business
may be transacted which might have been transacted at the
meeting as originally notified. If the adjournment is for
more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 7. Conduct of Meetings. The Chairman of the
Board, or such other officer as may preside at any meeting
of the stockholders, shall have the authority to establish
from time to time, such rules for tile conduct of such
meetings, and to take such action, as may in his judgment be
necessary or proper for the conduct of the meeting and in
the best interests of the Company and the stockholders in
attendance in person or by proxy.
ARTICLE VI
Committees of the Board of Directors
Section 1. Executive Committee. The Board of
Directors shall appoint an Executive Committee to consist of
the President and not less than two (2) nor more than six
(6) other Directors of the Company. The Executive Committee
shall meet at such times and places as it may determine.
The Executive Committee shall have and may exercise when the
Board is not in session all the powers of the Board in the
management of the business and affairs of the Company,
without limitation, except as set forth in Section 9 below.
Section 2. Nominating Committee. The Board of Directors
shall appoint a Nominating Committee consisting of three
Directors of the Company who shall not be officers of the
Company. The Nominating Committee shall recommend to the
Board the number of Directors which best meets the
requirements of the Company; identify, evaluate, review and
recommend to the Board qualified candidates to fill
vacancies on the Board and any newly created directorships
resulting from an increase in the number of Directors;
recommend to the Board the individuals to constitute the
nominees of the Board for election as directors at the
annual meeting of stockholders; recommend to the Board a
list of Directors selected as members of each committee of
the Board; and perform such other duties as may be assigned
by the Board.
Section 3. Compensation Committee. The Board shall
appoint a Compensation Committee consisting of three (3) or
more Directors of the Company. The Compensation Committee
shall review annually and recommend to the Board of
Directors the level of compensation of the Chairman of the
Board and the President, giving consideration for each to
the amount and composition of his total compensation in
terms of salary, stock options and other benefits; review
annually the recommendations of the Chairman of the Board
and the President concerning salaries and other compensation
of all senior officers reporting to each of them, as well as
review from time to time other conditions of employment;
administer the 1989 Stock Incentive Plan, the 1992
Directors' Stock Option Plan, the 1995 Stock Bonus Plan and
year-end bonus plans; review and make recommendations to the
Board of Directors for changes in the Company's compensation
and benefit plans and practices; and administer other
compensation plans that may be adopted from time to time as
authorized by the Board of Directors.
Section 4. Audit Committee. The Board of Directors shall
appoint an Audit Committee of three or more Directors of the
Company who shall not be officers of the Company. The Audit
Committee shall receive from and review with the Company's
independent auditors the annual report of such auditors;
review with the independent auditors the scope of the
succeeding annual examination; nominate the independent
auditors to be appointed each year by the Board; review
consulting services made by the Company's independent
auditors and evaluate the possible effect on the auditors'
independence of performing such services; ascertain the
existence of adequate internal accounting and control
systems; and review with management and the Company's
independent auditors current and emerging accounting and
financial reporting requirements and practices affecting the
Company.
Section 5. Quorum and Vacancies. A majority of the
members of the committee (which majority shall, in the case
of the Executive Committee, include the President) shall
constitute a quorum for the transaction of business. In the
absence or disqualification of a member of a committee, the
member or members present at any meeting and not
disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in
place of any such absent or disqualified member.
Section 6. Notice and Emergency Action. Notice of the
time and place of committee meetings shall be given in
writing or by telephone or in person, by any member of the
committee, to all members of the committee at least two (2)
days' prior to the time of holding such meeting; provided,
however, that such notice requirement shall not be
applicable if any member of the Executive Committee deems it
necessary to cause the Executive Committee to act on an
urgent basis. In the event a member of the Executive
Committee deems such urgent action necessary, such member
shall attempt to contact each other member of the Executive
Committee by telephone for the purpose of having each such
member consider and act upon the urgent matter or matters
presented. Such consideration and action may take place by
telephone without convening in meeting. The quorum and
voting requirements set forth in Section 5 above shall
pertain to such urgent action, and for this purpose all
persons reached by telephone shall be deemed to be present.
The member of the Executive Committee who calls for urgent
action in the manner described herein, immediately following
the approval or disapproval of any action thereby proposed,
shall report such action to the Secretary of the Company for
the purpose of having it described in the minutes of the
Executive Committee. Such report and minutes shall also
include a recitation of all efforts made by the member
calling for such action to contact other Executive Committee
members by telephone.
Section 7. Minutes; Reports to Board. Each committee
shall keep regular minutes of its meetings. All actions of
the committees shall be reported to the Board of Directors
at the meeting of the Board of Directors next succeeding
such action.
Section 8. Other Committees. The Board of Directors,
from time to time, may appoint other committees for any
purpose or purposes, and any such committee shall have such
powers as shall be specified in the resolution of its
appointment.
Section 9. Duties. Any committee, including the
Executive Committee, to the extent provided in the
resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of
the Company, and may authorize the seal of the Company to be
affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to
amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or
substantially all of the Company's property and assets,
recommending to the stockholders a dissolution of the
Company or a revocation of a dissolution, or amending the By-
Laws of the Company; and, unless the resolution of the Board
expressly provides, no such committee shall have the power
or authority to declare a dividend or to authorize the
issuance of stock.
ARTICLE VII
Certificates for Stock
Section 1. Certificates. Every holder of stock in the
Company shall be entitled to have a certificate signed by,
or in the name of the Company by the Chairman of the Board,
or the President or a Vice President and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Company, certifying the number of shares
owned by him in the Company.
Section 2. Signatures. Any of or all the signatures on
the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the
Company with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 3. Foreign Owners. The outstanding shares of the
Company shall at all times be owned by citizens of the
United States to such extent as will, in the judgment of the
Board of Directors, reasonably assure the preservation of
the Company's status as a United States citizen within the
provisions of Section 2 of the Shipping Act, 1916, as
amended, or any successor statute applicable to the business
being conducted by the Company (the "Citizenship
Provisions"). The Board of Directors may restrict any
original issuance of shares of the Company to citizens of
the United States as such term is defined in the Citizenship
Provisions ("United States Citizens"), and, in any event,
shall from time to time establish, as a condition to the
issuance or transfer of shares of the Company to non-United
States Citizens, the minimum percentage of the total
outstanding shares of the Company which shall be owned by
United States Citizens, which minimum percentage may, in the
discretion of the Board of Directors, exceed the minimum
percentage required by law (the "Minimum Percentage").
Nothing herein shall be deemed to preclude ownership by
United States Citizens of shares of the Company in excess of
the Minimum Percentage.
Certificates evidencing shares of stock of the Company
may be issued in separate series, denominated respectively
"Domestic Share Certificates" and "Foreign Share
Certificates." Domestic Share Certificates shall be issued
in respect of shares owned of record and beneficially by
United States Citizens; Foreign Share Certificates shall be
issued in respect of shares owned of record or beneficially
by non-United States Citizens. Holders of Domestic Share
Certificates and of Foreign Share Certificates shall have in
all respects the same corporate status and corporate rights,
share for share, except that transfers of Domestic Share
Certificates to non-United States Citizens shall be
restricted and, in certain circumstances, the rights of
holders of Foreign Share Certificates shall be restricted,
both as herein provided.
If any shares evidenced by Domestic Share Certificates
or Foreign Share Certificates shall be transferred to United
States Citizens, the share certificates issued to the
transferee in respect of the shares transferred shall be
Domestic Share Certificates.
If any shares evidenced by Domestic Share Certificates
shall be proposed to be transferred to non-United States
Citizens, the share certificates issued to the transferee in
respect of the shares transferred shall be Foreign Share
Certificates; provided, however, if the stock records of the
Company shall disclose immediately prior to the time of such
proposed transfer that (i) the maximum percentage of
outstanding shares of voting stock of any class allowed
to be owned by non-United States Citizens has been met or
has been exceeded or (ii) the maximum percentage of
outstanding shares of voting stock of any class allowed to
be owned by non-United States Citizens would be exceeded as
a result of such proposed transfer, no transfer of shares of
such class represented by Domestic Share Certificates shall
be made to non-United States Citizens.
If it shall be found by the Company that stock
represented by a Domestic Share Certificate is, in fact,
owned of record or voted by or for the account of a non-
United States Citizen, the holder of such stock shall, upon
the request of the Secretary or the transfer agent of the
Company, surrender such Domestic Share Certificate for
cancellation in exchange for the issuance of a Foreign Share
Certificate for such stock; provided, however, if the stock
records of the Company shall disclose immediately prior to
the time of such proposed exchange that (i) the maximum
percentage of outstanding shares of voting stock of any
class allowed to be owned by non-United States Citizens has
been met or has been exceeded or (ii) the maximum percentage
of outstanding shares of voting stock of any class allowed
to be owned by non-United States Citizens would be exceeded
as a result of such proposed exchange, then the exchange
shall not be made and the holder of such stock represented
by a Domestic Share Certificate shall not be entitled to
receive dividends or to have any other rights, except the
right to transfer such stock to a United States Citizen.
The Board may establish from time to time reasonable
procedures for establishing the citizenship of stockholders
of the Company and, without limiting the foregoing, may
require that in connection with each issue or transfer of
shares of the Company the purchaser or transferee shall
certify his citizenship status and such matters relevant
thereto as the Board may require.
The Board may also establish from time to time such
other reasonable procedures as it may deem desirable for the
purposes of implementing these provisions. As of the
OEffective TimeO under the Agreement and Plan of Merger,
dated as of April 13, 1997 (the "Merger Agreement"), by and
among Neptune Orient Lines Ltd., Neptune U.S.A., Inc. and
the Company, this Section 3 of Article VII shall be of no
further force and effect and shall be deemed to be deleted
from this Article VII.
Section 4. New Certificates. The Board of Directors may,
or may designate certain persons to, authorize the issuance
of a new certificate or certificates to replace any
certificate or certificates theretofore issued by the
Company alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate
or certificates, the Board of Directors or such designated
person may, in its discretion and as a condition precedent
to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his
legal representative, to give the Company a bond indemnity
sufficient to indemnify it against any claim that may be
made against the Company on account of the alleged loss,
theft or destruction of any such certificate or the issuance
of such new certificate.
Section 5. Transfer of Stock. Upon surrender to the
Company or the transfer agent of the Company of a
certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Company to issue a new
certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 6. Fixing Record Date. In order that the Company
may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty
days prior to such other action. A determination of
stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
The Company shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of
shares to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any
other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
Dividends
Section 1. Dividends upon the capital stock of the
Company, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of
Directors at any regular or special meeting, pursuant to
law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of
the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be
set aside out of any funds of the Company available for
dividends such sum or sums as the Directors from time to
time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of
the Company, or for such other purpose as the Directors
shall think conducive to the interest of the Company, and
the Directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE IX
Indemnification; Advance of Expenses
Section 1. (a) Each person who was or is made a party
or is threatened to be made a party to or is involved in any
action, suit, or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she or a
person of whom he or she is the legal representative is or
was a director or officer of the Company or is or was
serving at the request of the Company as a director,
officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans
maintained or sponsored by the Company, whether the basis of
such proceeding is alleged action in an official capacity as
a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Company
to the fullest extent authorized by the General Corporation
Law of the State of Delaware as the same exists or may
hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits
the Company to provide broader
indemnification rights than said law permitted the Company
to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification
shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators;
provided, however, that except as provided in Section 3 of
this Article IX, the Company shall indemnify any such person
seeking indemnification in connection with a proceeding (or
part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of
Directors.
(b) Each person referred to in Section 1(a) of this
Article IX shall be paid by the Company the expenses
incurred in connection with any proceeding in advance of its
final disposition, such advances to be paid by the Company
within 20 days after the receipt by the Company of a
statement or statements from the claimant requesting such
advance or advances from time to time; provided, however,
that if the General Corporation Law of the State of Delaware
requires, the advancement of such expenses incurred by a
director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was
or is rendered by such person while a director or officer,
including, without limitation, service to an employee
benefit plan) prior to the final disposition of a
proceeding, shall be made only upon delivery to the Company
of an undertaking by or on behalf of such director or
officer, to repay all amounts so advanced if it shall
ultimately e determined that such director or officer is not
entitled to be indemnified under this Article IX or
otherwise.
(c) The right to indemnification conferred in this
Article IX and the right to be paid by the Company the
expenses incurred in connection with any such proceeding in
advance of its final disposition conferred in this Article
IX each shall be a contract right.
Section 2. To obtain indemnification under this
Article IX, a claimant shall submit to the Company a written
request, including therein or therewith such documentation
and information as is reasonably available to the claimant
and is reasonably necessary to determine whether and to what
extent the claimant is entitled to indemnification. Upon
written request by a claimant for indemnification pursuant
to the first sentence of this Section 2, a determination, if
required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if
requested by the claimant, by Independent Counsel (as
hereinafter defined), or (2) if no request is made by the
claimant for a determination by Independent Counsel, (i) by
the Board of Directors by a majority vote of a quorum
consisting of Disinterested Directors (as hereinafter
defined), or (ii) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or,
even if obtainable, such quorum of Disinterested Directors
so directs, by Independent Counsel in a written opinion to
the Board of Directors, a copy of which shall be delivered
to the claimant, or (iii) if a quorum of Disinterested
Directors so directs, by the stockholders of the Company.
In the event the determination of entitlement to
indemnification is to be made by Independent Counsel at the
request of the claimant, the Independent Counsel shall be
selected by the Board of Directors unless there shall have
occurred within six years prior to the date of the
commencement of the action, suit or proceeding for which
indemnification is claimed a "Change of Control" as defined
in the Company's 1989 Stock Incentive Plan, in which case
the Independent Counsel shall be selected by the claimant
unless the claimant shall request that such selection be
made by the Board of Directors. If it is so determined that
the claimant is entitled to indemnification, payment to the
claimant shall be made within 10 days after such
determination.
Section 3. If a claim under Section 1 of this Article
IX is not paid in full by the Company within thirty days
after a written claim pursuant to Section 2 of this Article
IX has been received by the Company or, in the case of a
claim pursuant to Section 1(b), within the 20-day period
provided therein, the claimant may at any time thereafter
bring suit against the Company to recover the unpaid amount
of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any
is required, has been tendered to the Company) that the
claimant has not met the standard of conduct which makes it
permissible under the General Corporation Law of the State
of Delaware for the Company to indemnify the claimant for
the amount claimed, but the burden of proving such defense
shall be on the Company. Neither the failure of the Company
(including its Board of Directors, Independent Counsel or
stockholders) to have made a determination prior to the
commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an
actual determination by the Company (including its Board of
Directors, Independent Counsel or stockholders) that the
claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption
that the claimant has not met the applicable standard of
conduct.
Section 4. If a determination shall have been made
pursuant to Section 2 of this Article IX that the claimant
is entitled to indemnification, the Company shall be bound
by such determination in any judicial proceeding commenced
pursuant to Section 3 of this Article IX.
Section 5. The Company shall be precluded from
asserting in any judicial proceeding commenced pursuant to
Section 3 of this Article IX that the procedures and
presumptions of this Article IX are not valid, binding and
enforceable and shall stipulate in such proceeding that the
Company is bound by all the provisions of this Article IX.
Section 6. The right to indemnification and the
payment of expenses incurred in defending a proceeding in
advance of its final disposition conferred in this Article
IX shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-Laws,
agreement, vote of stockholders or Disinterested Directors
or otherwise. No repeal or modification of this Article IX
shall in any way diminish or adversely affect the rights of
any director, officer, employee or agent of the Company
hereunder in respect of any occurrence or matter arising
prior to any such repeal or modification.
Section 7. The Company may maintain insurance, at its
expense, to protect itself and any director, officer,
employee or agent of the Company or another corporation,
partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the
Company would have the power to indemnify such person
against such expense, liability or loss under the General
Corporation Law of the State of Delaware. To the extent
that the Company maintains any policy or policies providing
such insurance, each such director or officer, and each
such agent or employee to which rights to indemnification
have been granted as provided in Section 8 of this Article
IX, shall be covered by such policy or policies in
accordance with its or their terms to the maximum extent of
the coverage thereunder for any such director, officer,
employee or agent.
Section 8. The Company may, to the extent authorized
from time to time by the Board of Directors, grant rights to
indemnification, and rights to be paid by the Company the
expenses incurred in defending any proceeding in advance of
its final disposition, to any employee or agent of the
Company to the fullest extent of the provisions of this
Article IX with respect to the indemnification and
advancement of expenses of directors and officers of the
Company.
Section 9. If any provision or provisions of this
Article IX shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of
this Article IX (including, without limitation, each portion
of any Section of this Article IX containing any such
provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and
(2) to the fullest extent possible, the provisions of this
Article IX (including, without limitation, each such portion
of any Section of this Article IX containing any such
provision held to be invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or
unenforceable.
Section 10. For purposes of this Article IX:
a. "Disinterested Director" means a director of the Company
who is not and was not a party to the matter in
respect of which indemnification is sought by the
claimant.
b. "Independent Counsel" means a law firm that is
nationally recognized for its experience in mat
ters of Delaware corporation law and shall not
include any person who, under the applicable
standards of professional conduct then prevailing,
would have a conflict of interest in representing
either the Company or the claimant in an action to
determine the claimant's rights under this Article
IX.
Section 11. Any notice, request or other communication
required or permitted to be given to the Company under this
Article IX shall be in writing and either delivered in
person or sent by telecopy, telex, telegram, overnight mail
or courier service, or certified or registered mail,
postage prepaid, return receipt requested, to the Secretary
of the Company.
ARTICLE X
Corporate Seal
The Corporate seal shall have inscribed thereon the name
of the Company and the words OIncorporated July l4, 1983,
Delaware.O
ARTICLE XI
Amendments
Any of these By-Laws may be altered, a mended or
repealed by the affirmative vote of at least two thirds of
the Directors of the Company, 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 or by the affirmative vote of the holders of
seventy-five percent (75 %) of the shares of the Company
entitled to vote in the election of Directors, voting as one
class.
AMENDMENT TO THE
APL LIMITED SMART PLAN
It is proposed that the Benefits Committee adopt
the attached Fourth Amendment to the current 1993
restatement of the APL Limited SMART Plan.
At its October 9, 1996 meeting, the Board approved
the principal feature of this amendment, which is to
change the current matching formula. As one facet of
the comprehensive redesign of the Company's benefits
package, the purpose of this amendment is to reduce the
base Company matching contribution to 75% from 100% of
participant deferrals (through 6% of compensation).
However, the Board also approved the addition of a
feature enabling the Company to make additional
matching contributions in years in which the Company
determines it has achieved excellent financial results.
The Fourth Amendment also liberalizes the in-
service withdrawal features of the Plan. To permit
employees nearing retirement age the maximum access to
their accounts so that they may make their own
investment choices, management proposes to permit
employees to withdraw all or any portion of their Plan
balances once they have reached age 592. These
withdrawals are generally eligible for IRA rollover
and, after this age, the penalty taxes on "early"
distributions do not apply. The proposed amendments
described in this paragraph are within the Benefits
Committee's discretion to adopt.
In all other respects, the attached Fourth
Amendment is routine and within the Benefits
Committee's discretion to adopt. It adds a supplement
to describe the treatment of certain benefits
transferred to the Plan as a result of the termination
of the American President Profit-Sharing Plan and makes
a few technical clarifying changes to the Plan text.
WHEREAS, the Board has approved a change
in the matching contribution formula under
the APL Limited SMART Plan (Second Amendment
and Restatement Effective as of January 1,
1993) (the "Plan"), and it is deemed
advisable to make certain other liberalizing
and technical changes;
NOW, THEREFORE, BE IT RESOLVED that the
Fourth Amendment to the APL Limited SMART
Plan (Second Amendment and Restatement
Effective as of January 1, 1993) is hereby
adopted effective as of the dates specified
in such amendment; and be it further
RESOLVED, that the officers of this corporation
be, and each of them hereby is, authorized and directed
to execute the attached Fourth Amendment and an updated
plan document incorporating the Fourth Amendment, for
and on behalf of this corporation, with such changes
thereto as such officers shall approve at any time or
from time to time for purposes of compliance with
applicable law or that such officers determine are
minor or merely administrative; and be it further
RESOLVED, that the officers of this corporation
be, and each of them hereby is, authorized and directed
for and on behalf of this corporation to take such
steps and to do all acts and prepare, execute and
deliver any and all documents that they deem necessary
or appropriate to carry out the foregoing resolutions.
FOURTH AMENDMENT TO THE
APL LIMITED SMART PLAN
(Second Amendment and Restatement
Effective as of January 1, 1993)
The APL Limited SMART Plan (Second Amendment and
Restatement Effective as of January 1, 1993) (the
"Plan"), is hereby further amended as follows,
effective as of the dates indicated:
1. Section 4.2 of the Plan is amended to read as
follows effective as of January 1, 1997:
4.2 Allocation of Matching Contributions
All Matching Contributions are subject to the
limitations set forth in Appendix I. For each
payroll period, each Participant who made Matched
Contributions shall be allocated a Matching
Contribution and Forfeitures equal to 75% of the
aggregate Matched Contributions made by the
Participant since the close of the preceding
payroll period. In addition, as of the last day of
each Plan Year, the Company may make an additional
discretionary Matching Contribution in an amount
determined by the Company. Any such discretionary
Matching Contribution shall be allocated to the
accounts of Participants who are Employees on the
last day of such Plan Year in proportion to their
Matched Contributions for such Plan Year.
Discretionary Matching Contributions are subject
to all other terms of the Plan applicable to
Matching Contributions.
As soon as reasonably practicable after the amount
of any Matching Contribution and required
allocation is determined, the Matching
Contribution shall be paid to the Trustee and
shall be allocated, along with Forfeitures, among
eligible Participants. A Participant shall be
allocated no Matching Contribution with respect to
a period for which Matching Contributions are
suspended pursuant to Section 7.2 due to a
withdrawal of Matched After-Tax Contributions.
The foregoing notwithstanding, an individual who
first became an Employee on or after April 1, 1989
(and who did not transfer to this Plan from the AP
Plan as of September 1, 1990), shall in no event
be eligible for an allocation of Matching
Contributions or Forfeitures for any period prior
to the first day of the payroll period that
commences on or after the date on which he or she
completed a six-month Period of Service.
A Participant's share of Matching Contribution and
Forfeitures shall be credited to his or her
Company Accounts. Each Participant's share of new
Company Contributions and reallocated Forfeitures
and his or her new Employee Contributions and
Rollover Contributions shall be invested entirely
in any one Investment Fund or in any combination
of the available Investment Funds, except that not
more than 50% of such contributions shall be
invested in the APC Stock Fund.
2. Article 7 of the Plan is amended to read in
its entirety as follows, and cross references to
Sections in Article 7 renumbered accordingly, effective
as of July 1, 1997:
7.1 Age 592 Withdrawals
A Participant who is an Employee and who has
attained age 592 may withdraw all or any portion
of his or her vested Accounts. A Participant
shall not be permitted to make more than one
withdrawal under this Section 7.1 in any period of
six months. Any withdrawal made by a Participant
who has attained age 592 shall be deemed made
under this Section 7.1, and not under Sections
7.2, 7.3 or 7.4.
7.2 Withdrawals From After-Tax Accounts and Rollover
Accounts
A Participant who is an Employee and who has After-
Tax Accounts or Rollover Accounts may make
withdrawals from such Accounts, as provided by
this Section 7.2.
(a) A Participant may withdraw all or
any portion of his or her After-Tax
Contributions (not including investment
increments) that are credited to his or
her Pre-1987 After-Tax Accounts and that
were not previously withdrawn by or
distributed to the Participant. Any
such withdrawal shall be treated as a
withdrawal of Unmatched After-Tax
Contributions, to the extent that
previously unwithdrawn Unmatched After-
Tax Contributions remain credited to the
Participant's Pre-1987 After-Tax
Accounts. Any additional withdrawal of
After-Tax Contributions shall be treated
as a withdrawal of Matched After-Tax
Contributions. If Matched After-Tax
Contributions are deemed withdrawn, no
Matching Contributions or Forfeitures
shall be allocated to the Participant's
Company Accounts with respect to a
period of six months, commencing as of
the first day of the second payroll
period following the date on which the
withdrawal request was made; provided,
however, that no such suspension of
Matching Contributions or Forfeitures
shall apply to a Participant who is at
the same time withdrawing an amount on
account of hardship pursuant to
Section 7.4.
(b) A Participant who has withdrawn or
is withdrawing the entire amount of his
or her After-Tax Contributions credited
to his or her Pre-1987 After-Tax
Accounts pursuant to Subsection (a)
above may withdraw all or any part of
the remaining balance credited to his or
her Pre-1987 After-Tax Accounts.
(c) A Participant who has withdrawn or
is withdrawing the entire amount of his
or her After-Tax Contributions credited
to his or her Pre-1987 After-Tax
Accounts pursuant to Subsection (a)
above may withdraw all or any part of
the balance credited to his or her Post-
1986 After-Tax Accounts. The portion of
the amount withdrawn that is taxable to
the Participant under section 72(e) of
the Code, as determined by the Company,
shall be treated as a withdrawal of
investment increments. The portion of
the amount withdrawn that is not so
taxable to the Participant shall be
treated as a withdrawal of his or her
After-Tax Contributions. A withdrawal
of After-Tax Contributions under this
Subsection (c) shall be treated as a
withdrawal of Unmatched After-Tax
Contributions, to the extent that
previously unwithdrawn Unmatched After-
Tax Contributions remain credited to the
Participant's Post-1986 After-Tax
Accounts. After all Unmatched After-Tax
Contributions are withdrawn, any
additional withdrawal of After-Tax
Contributions shall be treated as a
withdrawal of Matched After-Tax Contribu
tions. If Matched After-Tax
Contributions are deemed withdrawn, no
Matching Contributions or Forfeitures
shall be allocated to the Participant's
Company Accounts with respect to a
period of six months, commencing as of
the first day of the second payroll
period following the date on which the
withdrawal request was made; provided,
however, that no such suspension of
Matching Contributions or Forfeitures
shall apply to a Participant who is at
the same time withdrawing an amount on
account of hardship pursuant to
Section 7.4.
(d) A Participant who has Rollover
Accounts may make withdrawals from such
Accounts. The amount that may be
withdrawn under this Subsection (d)
shall not exceed the balance credited to
his or her Rollover Accounts.
(e) A Participant who wishes to make a
withdrawal under this Section 7.2 shall
make an election in accordance with
procedures prescribed by the Company. A
Participant shall not be permitted to
make more than one withdrawal under this
Section 7.2 or Section 7.3 in any period
of six consecutive months; provided,
however, that withdrawals made at the
same time shall be considered a single
withdrawal.
7.3 Withdrawals From Other Accounts
A Participant who is an Employee and who is
withdrawing the maximum amount permissible under
Section 7.2 may at the same time withdraw any
amount that is not less than $500 and that does
not exceed the lesser of:
(a) The value of the Participant's
Company Accounts, Transferred Company
Accounts and Profit-Sharing Accounts,
reduced by the Participant's share of
those Company Contributions that were
actually paid to the Trustee less than
24 months prior to the date of
withdrawal; or
(b) The vested portion of the
Participant's Company Accounts,
Transferred Company Accounts and Profit-
Sharing Accounts.
A Participant shall not be permitted to make more
than one withdrawal under Section 7.2 or this
Section 7.3 in any period of six consecutive
months; provided, however, that withdrawals made
at the same time shall be considered a single
withdrawal.
7.4 Hardship or Disability Withdrawal
This Section 7.4 shall apply only to a Participant
who is subject to a Disability or a Participant
who is an Employee and who satisfies the
requirements of Section 7.4. If such a
Participant is withdrawing the maximum amount
permissible under Sections 7.2 and 7.3 (and under
all other plans of the Affiliated Group), then he
or she may at the same time withdraw from his or
her Salary Deferral Accounts, Company Accounts,
Transferred Company Accounts and Profit-Sharing
Accounts any additional amount that is not less
than $500 and that does not exceed the following
limitations:
(a) The maximum amount that may be
withdrawn from a Participant's Salary
Deferral Accounts is the sum of (i) the
amount of his or her previously
unwithdrawn Salary Deferrals that remain
credited to such Accounts plus (ii) the
amount of the net unwithdrawn investment
income that was credited to such
Accounts or to the corresponding
accounts under the AP Plan as of
December 31, 1988.
(b) The maximum amount that may be
withdrawn from a Participant's Company
Accounts is the vested portion of such
Company Accounts.
7.5 Procedure for Hardship
A Participant who wishes to make a hardship
withdrawal under Section 7.4 shall make a request
in accordance with the procedures prescribed by
the Company. A hardship withdrawal under
Section 7.4 shall be authorized only to the extent
that the Participant has demonstrated that the
after-tax proceeds of the requested funds are
required for one or more of the following reasons:
(a) To pay expenses (i) for medical
care described in section 213(d) of the
Code that were incurred by the
Participant, the Participant's spouse or
any dependents of the Participant (as
defined in section 152 of the Code) or
(ii) necessary for such persons to
obtain medical care described in section
213(d) of the Code;
(b) To pay tuition and related
educational expenses for a period not in
excess of 12 months of post-secondary
education for the Participant or his or
her spouse, children or dependents;
(c) To purchase (excluding mortgage pay
ments) a principal residence of the
Participant;
(d) To prevent the eviction of the
Participant from his or her principal
residence or the foreclosure of the mortgage
on the Participant's principal residence; or
(e) Any other reason described by the
Commissioner of Internal Revenue in a
revenue ruling, notice or other document
of general application.
Based on the foregoing criteria, no hardship
withdrawal or a hardship withdrawal in an amount
that is smaller than the amount requested by the
Participant may be authorized. This Section 7.5
shall not apply to a Participant who is subject to
a Disability.
7.6 Representations Necessary for a Hardship
Withdrawal
No Participant shall be eligible to receive a
hardship withdrawal under Section 7.4 unless:
(a) The Participant represents to the
Company, in the manner specified by the
Company, that the withdrawal does not
exceed the Participant's immediate and
heavy financial need;
(b) The Participant represents to the
Company, in the manner specified by the
Company, that the Participant's
immediate and heavy financial need
cannot be relieved:
(i) Through
reimbursement or compensation
by insurance or otherwise;
(ii) By reasonable
liquidation of the
Participant's assets, to the
extent such liquidation would
not itself cause an immediate
and heavy financial need;
(iii)By cessation of Salary
Deferrals or
After-Tax Contributions; or
(iv) By other
distributions or nontaxable
(at the time of the loan)
loans from this Plan or any
other plans maintained by a
member of the Affiliated
Group, or by borrowing from
commercial sources on
reasonable commercial terms.
This Section 7.6 shall not apply to a Participant
who is subject to a Disability.
7.7 Payment and Source of Withdrawals
A withdrawal shall be paid as soon as reasonably
practicable after the request for such withdrawal
is made in accordance with procedures prescribed
by the Company. The value of a Participant's
Accounts and the vested percentage of a
Participant's Company Accounts shall be determined
on the date when the Trustee effects the
withdrawal transaction. Withdrawals shall be paid
only in the form of a single lump sum in cash. In
the case of a married Participant who participated
in the NPSI Plan, a requested withdrawal shall not
be paid unless the Participant's spouse has
consented in writing to the payment of such
withdrawal in the form of a lump sum (instead of a
Qualified Joint and Survivor Annuity). The
spouse's consent shall comply with Section 16.9
and shall be given within the 90-day period
preceding payment of the withdrawal. If more than
one Account is available to pay the withdrawal
because the Participant elected to invest in more
than one Investment Fund, the withdrawal shall be
made proportionately from each available Account,
subject to such other ordering rules as the
Company may adopt.
7.8 Withdrawal Fees
A Participant who makes a withdrawal under this
Article shall be required to pay such fees as the
Company may impose in order to defray the cost of
processing withdrawals from the Plan.
3. Section 18.4 of the Plan is amended to read
as follows effective as of January 1, 1993:
18.4 Aggregation of Periods
All of an individual's Periods of Service
determined pursuant to this Article 18 shall be
aggregated on the basis of days. The number of
years in the individual's aggregate Period of
Service is determined by dividing the aggregate
number of days in such period by three hundred
sixty-five (365).
4. A new Supplement A is added to the Plan to
read as follows effective as of June 1, 1996:
SUPPLEMENT A TO THE
AMERICAN PRESIDENT COMPANIES, LTD. SMART PLAN
SPECIAL RULES FOR "LOST" AP PLAN PARTICIPANTS
The American President Profit-Sharing Plan (the
"AP Plan") was terminated effective June 3, 1995. In
accordance with applicable rules concerning plan
terminations, all of the assets of the AP Plan were
distributed within approximately one year of the
termination date. To complete distribution of the AP
Plan assets, the accounts of AP Plan participants who
could not be located were transferred to this Plan.
Such transferred AP Plan accounts are to be treated in
accordance with this Plan's provisions concerning
unclaimed benefits.
In the event that a missing participant (or
beneficiary) makes a valid claim to his or her AP Plan
benefit after the transfer to this Plan, such benefit
shall be distributable in accordance with the terms of
the AP Plan as in effect at the time of its
termination, except to the extent that this Plan may
provide for other distribution terms that do not reduce
any legally protected benefit of such claimant.
5. Section 1.14 of Appendix I is amended to read
as follows effective as of January 1, 1993:
1.14 "Top-Paid Group" for any Plan Year means the top
20% (in terms of Total Compensation) of all
Employees of the Affiliated Group, 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 member
of the Affiliated Group;
(c) Any Employee who has not completed
at least 500 Hours of Service during any
six-month period at the end of the Plan
Year;
(d) Any Employee who normally works
less than 172 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.
For purposes of this Section, "Hours of Service"
means all of the following:
(a) Each hour for which the Employee is
paid, or is entitled to payment, for the
performance of duties as an Employee;
(b) Each hour for which the Employee is
paid, or is entitled to payment, by an
Affiliated Group member on account of a
period of time during which the Employee
performs no duties (regardless of
whether employment has terminated) due
to vacation, holiday, illness,
incapacity (including disability),
layoff, jury duty, military duty or
leave of absence; provided, however,
that not more than 501 Hours of Service
shall be credited under this
Subsection (b) to any Employee on
account of a single continuous period
during which such Employee does not
perform duties;
(c) Each hour not otherwise described
herein for which back pay (regardless of
mitigation of damages) is awarded or
agreed to by an Affiliated Group member;
provided, however, that not more than
501 Hours of Service shall be credited
under this Subsection (c) to any
Employee on account of a back-pay award
covering a single continuous period
during which such Employee has not, or
would not have, performed duties; and
(d) Each hour not otherwise described
herein that is recognized as an Hour of
Service by an Affiliated Group member
pursuant to written and
nondiscriminatory rules, subject to such
conditions and limitations as the
Company may adopt.
Hours of Service shall be allocated to the
applicable computation period pursuant to the
regulations adopted by the U.S. Department of
Labor and set forth in 29 C.F.R. '' 2530.200b-2(b)
and (c). The number of Hours of Service to be
credited under Subsection (b) or (c) above with
respect to a period during which the Employee does
not perform duties shall also be determined in
accordance with such regulations.
* * * * *
To record this Fourth Amendment to the Plan as set
forth herein, the corporation has caused its authorized
officer to execute this document this 24th day of
March, 1997.
APL Limited
By: /s/ Timothy J. Windle
Title: Assistant Secretary
APL Limited
Regular Supplemental Executive Retirement Plan
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
The 1995 Supplemental Executive Retirement Plan was
established by the Company effective January 1, 1995.
Effective November 9, 1996, the 1995 Supplemental
Executive Retirement Plan was amended to form two
plans: the APL Limited Regular Supplemental Executive
Retirement Plan (the "Plan") and the APL Limited Pure
Excess Supplemental Executive Retirement Plan (the
"Pure Excess SERP"). This document constitutes an
amendment and restatement of the 1995 Supplemental
Executive Retirement Plan. The purpose of the Plan is
to supplement certain benefits under the Retirement
Plan.
SECTION 2. ELIGIBILITY AND PARTICIPATION.
Participation in this Plan shall be limited to any
participant in the Retirement Plan who is employed by a
member of the Affiliated Group on or after January 1,
1995, and who meets one of the following criteria:
(a) His or her benefits under the Retirement Plan are
affected by the limitations imposed under section
401(a)(17) or 415 of the Code;
(b) His or her benefits under the Retirement Plan are
affected by the exclusion of salaries and bonuses
deferred under the Deferred Compensation Plan or
the Stock Bonus Plan from the compensation taken
into account in calculating such benefits; or
(c) Both:
(1) His or her actual benefits under the
Retirement Plan, at retirement, are lower
than the benefits that he or she would have
received had he or she separated from
employment with the Affiliated Group as of
December 31, 1992, absent the modification of
the Retirement Plan's benefit formula that
was adopted effective June 1, 1989; and
(2) His or her "average annual compensation"
under the Retirement Plan equals or exceeds
$125,000 at any time after May 31, 1989.
On June 1 of each year, starting with June 1, 1990, the
$125,000 amount set forth in the preceding sentence
shall be adjusted for inflation by multiplying it by a
fraction. The numerator of such fraction shall be the
CPI-W for U.S. Cities on the immediately preceding
February 1, and the denominator of such fraction shall
be the CPI-W for U.S. Cities on February 1, 1989.
SECTION 3. PLAN BENEFITS.
(a) Amount of Retirement Plan Supplement. Each
Participant whose pension benefits under the
Retirement Plan are reduced by section 401(a)(17)
or 415 of the Code, by the exclusion of salaries
and bonuses deferred under the Deferred
Compensation Plan or the Stock Bonus Plan from
pension calculations or by the modification of the
formula for calculating his or her "retirement
income" (not including cost-of-living adjustments)
that was adopted on July 10, 1990, effective as of
June 1, 1989, shall be entitled to receive a
monthly benefit under this Plan. The amount of
such benefit shall be equal to:
(1) The monthly benefit payment which would
be payable to the Participant under the
Retirement Plan if the limitations of
sections 401(a)(17) and 415 of the Code, such
exclusion and such modification (to the
extent that such modification results in a
benefit reduction) did not apply; minus
(2) The Participant's actual monthly benefit
payment under the Retirement Plan; minus
(3) The Participant's actual monthly benefit
payments, if any, under the APL Limited Pure
Excess-Benefit Plan and the APL Limited
Regular Excess-Benefit Plan, as amended.
For purposes of this Subsection (a), the
modification of the Retirement Plan formula that
was adopted on July 10, 1990, effective as of
June 1, 1989, shall be deemed to have resulted in
a benefit reduction only to the extent that a
Participant's actual monthly benefit payment under
the Retirement Plan is less than the monthly
benefit pment that such Participant would have
received if such modification had not been adopted
and the Participant had separated from employment
with all members of the Affiliated Group as of
December 31, 1992. The Retirement Plan's
Actuarial Equivalency factors shall be used to
make this comparison.
(b) Calculation and Payment of Pure Excess Portion of
Retirement Plan Supplement. The portion (if any)
of a Participant's Retirement Plan Supplement
determined under Subsection (a) that is
attributable solely to the monthly benefit that
would be payable to the Participant under the
terms of the Retirement Plan if the limitations of
sections 401(a)(17) and 415 of the Code did not
apply shall be deemed earned and payable under the
Pure Excess SERP and not this Plan.
(c) Payment of Retirement Plan Supplement. A
Participant's Retirement Plan Supplement under
Subsection (a) above, less the pure excess portion
(if any) determined under Subsection (b), shall be
payable to the Participant or to any other person
(including, without limitation, a surviving
spouse) who is receiving benefits under the
Retirement Plan which are derived from the
Participant. Such a Retirement Plan Supplement
shall be payable in the same form and at the same
times as the Participant's benefit under the
Retirement Plan (and in no event earlier), unless
the Participant's benefit under the Retirement
Plan is paid in the form of a single lump sum. In
that event, the Retirement Plan Supplement shall
be payable in the normal form of benefit provided
under the Retirement Plan, computed as if the
benefit actually paid to the Participant under the
Retirement Plan were also payable in the normal
form, unless:
(1) The Participant requests in writing to
receive the Retirement Plan Supplement in a
single lump sum; and
(2) The Committee expressly approves the
Participant's request.
In the case of a Participant who is entitled to a
"COLA-Adjusted Retirement Income" under the
Retirement Plan, the amount of any periodic
Retirement Plan Supplement shall be recalculated
each year in accordance with the provisions of the
Retirement Plan relating to the adjustment of
pension benefits to reflect changes in the cost of
living. The recalculation shall be performed upon
the total of the Retirement Plan Supplement being
paid under this Plan and the Retirement Plan
Supplement (if any) being paid under the Pure
Excess SERP, but the full amount of any resulting
increase shall be payable from this Plan, not the
Pure Excess SERP.
SECTION 4. ADMINISTRATION.
The Plan shall be administered by the Committee. The
Committee shall make such rules, interpretations and
computations as it may deem appropriate. Any decision
of the Committee with respect to the Plan, including
(without limitation) any determination of eligibility
to participate in the Plan and any calculation of
benefits hereunder, shall be conclusive and binding on
all persons.
SECTION 5. CLAIMS AND INQUIRIES.
(a) 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 and addressed to the Chair of the
Committee. 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 or her death, by the
beneficiary.
(b) Denial of Application. In the event that an
application for benefits is denied in whole or in
part, the Chair of the Committee 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 90 days)
after the Chair of the Committee 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 180 days after the Chair
of the Committee received the application.
(c) Review Panel. The Committee shall serve as the
"Review Panel" under the Plan. The Review Panel
shall have the authority to act with respect to
any appeal from a denial of benefits or a
determination of benefit rights.
(d) 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 90 days after
receiving written notice of the denial from the
Chair of the Committee. The Chair of the
Committee shall give the applicant or his or her
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 and
addressed to the Committee. 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 that 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.
(e) The Review Panel shall act on each request for a
review within 60 days after receipt, unless
special circumstances require further time for pro
cessing and the applicant is advised of the
extension. In no event shall the decision on
review be rendered more than 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. 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.
(f) 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
Section 5.
(g) Exhaustion of Remedies. No legal action for
benefits under the Plan shall be brought unless
and until the claimant (1) has submitted a written
application for benefits in accordance with
Subsection (a) above, (2) has been notified by the
Chair of the Committee that the application is
denied, (3) has filed a written request for a
review of the application in accordance with
Subsection (d) above and (4) 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 Chair of the
Committee or the Review Panel has failed to take
any action on the claim within the time prescribed
by Subsections (b) and (e) above, respectively.
SECTION 6. AMENDMENT AND TERMINATION.
The Company expects to continue the Plan indefinitely.
Future conditions, however, cannot be foreseen, and the
Company shall have the authority to amend or terminate
the Plan at any time. In the event of an amendment or
termination of the Plan, a Participant's benefits
hereunder shall not be less than the benefits to which
the Participant would have been entitled if his or her
employment in the Affiliated Group had terminated
immediately prior to such amendment or termination.
SECTION 7. EMPLOYMENT RIGHTS.
Nothing in the Plan shall be deemed to give any person
a right to remain in the employ of any Affiliated Group
member or affect the right of the Affiliated Group
members to terminate such person's employment with or
without cause.
SECTION 8. NO ASSIGNMENT.
The rights of any person to payments or benefits under
the Plan shall not be made subject in any manner to
anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by
creditors. Any act in violation of this Section 8,
whether voluntary or involuntary, shall be void.
SECTION 9. PLAN UNFUNDED.
Participants shall have the status of general unsecured
creditors of the Company. The Plan constitutes a mere
promise by the Company to make benefit payments in the
future. It is the Company's intent that the Plan be
considered unfunded for tax purposes and for purposes
of Title I of ERISA.
SECTION 10. CHOICE OF LAW.
The validity, interpretation, construction and
performance of the Plan shall be governed by ERISA and,
to the extent they are not preempted, by the laws of
the State of California.
SECTION 11. DEFINITIONS.
(a) "Affiliated Group" means a group of one or more
chains of corporations connected through stock
ownership with the Company, if:
(1) Stock possessing at least 80% of
the total combined voting power of all
classes of stock entitled to vote or at
least 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
(2) The Company owns stock possessing
at least 80% of the total combined
voting power of all classes of stock
entitled to vote or at least 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 "Affiliated Group" includes
any other entity which the Company has designated
in writing as a member of the Affiliated Group for
purposes of this Plan or the Retirement Plan. An
entity shall be conidered a member of the
Affiliated Group only with respect to periods for
which such designation is in effect or during
which the relationship described in Paragraphs (1)
and (2) above exists.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Committee" means the Benefits Committee appointed
by the Company's Board of Directors.
(d) "Company" means APL Limited, a Delaware
corporation.
(e) "Deferred Compensation Plan" means the Deferred
Compensation Plan of American President Companies,
Ltd., as amended, the 1988 Deferred Compensation
Plan of American President Companies, Ltd., as
amended, the 1995 Deferred Compensation Plan of
American President Companies, Ltd., as amended,
the 1988 Deferred Compensation Plan of APL
Limited: Pure Excess Deferral Plan, as amended,
the 1988 Deferred Compensation Plan of APL
Limited: Regular Deferral Plan, as amended, the
1995 Deferred Compensation Plan of APL Limited:
Pure Excess Deferral Plan, as amended, and the
1995 Deferred Compensation Plan of APL Limited:
Regular Deferral Plan.
(f) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(g) "Participant" means a participant in the
Retirement Plan who participates in this Plan
under Section 2.
(h) "Plan" means this APL Limited Regular Supplemental
Executive Retirement Plan.
(i) "Pure Excess SERP" means the APL Limited Pure
Excess Supplemental Executive Retirement Plan.
(j) "Retirement Plan" means the APL Limited Retirement
Plan, as amended, or its successor.
(k) "Stock Bonus Plan" means the APL Limited 1995
Stock Bonus Plan, as it may be amended, or its
successor.
SECTION 12. EXECUTION.
To record the amendment and restatement of the Plan,
the Company has caused its duly authorized officer to
affix the corporate name hereto.
APL Limited
By: /s/ Timothy J. Windle
APL Limited
Pure Excess Supplemental Executive Retirement Plan
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
The 1995 Supplemental Executive Retirement Plan was established
by the Company effective January 1, 1995. Effective November 9,
1996, the 1995 Supplemental Executive Retirement Plan was
amended to form two plans: the APL Limited Regular Supplemental
Executive Retirement Plan (the "Regular SERP") and the APL
Limited Pure Excess Supplemental Executive Retirement Plan (the
"Plan"). This document constitutes the Plan, as adopted. The
purpose of the Plan is to supplement certain benefits under the
Retirement Plan.
The Plan shall be administered and operated in accordance with
the provisions of the Regular SERP, and capitalized terms in
this Plan shall have the same meaning as in the Regular SERP,
except to the extent provided in this document.
SECTION 2. ELIGIBILITY AND PARTICIPATION.
Participation in this Plan shall be limited to any participant
in the Retirement Plan who is employed by a member of the
Affiliated Group on or after January 1, 1995, and whose benefits
under the Retirement Plan are affected by the limitations
imposed under section 401(a)(17) or 415 of the Code.
SECTION 3. PLAN BENEFITS.
(a) Amount of Retirement Plan Supplement. The amount of a
Participant's Retirement Plan Supplement under this Plan is
the pure excess portion (if any) of the Retirement Plan
Supplement determined under Section 3 of the Regular SERP,
as described in Section 3(c) of the Regular SERP.
(b) Payment of Retirement Plan Supplement. A Participant's
Retirement Plan Supplement under Subsection (a) above shall
be payable to the Participant or to any other person
(including, without limitation, a surviving spouse) who is
receiving benefits under the Retirement Plan which are
derived from the Participant. Such a Retirement Plan
Supplement shall be payable in the same form and at the
same times as the Participant's benefit under the
Retirement Plan (and in no event earlier), unless the
Participant's benefit under the Retirement Plan is paid in
the form of a single lump sum. In that event, the
Retirement Plan Supplement shall be payable in the normal
form of benefit provided under the Retirement Plan,
computed as if the benefit actually paid to the Participant
under the Retirement Plan were also payable in the normal
form, unless:
(1) The Participant requests in writing to receive
the Retirement Plan Supplement in a single lump sum;
and
(2) The Committee expressly approves the
Participant's request.
SECTION 4. ADMINISTRATION.
The terms of Section 4 of this Plan are the same as the terms of
Section 4 of the Regular SERP.
SECTION 5. CLAIMS AND INQUIRIES.
The terms of Section 5 of this Plan are the same as the terms of
Section 5 of the Regular SERP.
SECTION 6. AMENDMENT AND TERMINATION.
The terms of Section 6 of this Plan are the same as the terms of
Section 6 of the Regular SERP.
SECTION 7. EMPLOYMENT RIGHTS.
The terms of Section 7 of this Plan are the same as the terms of
Section 7 of the Regular SERP.
SECTION 8. NO ASSIGNMENT.
The terms of Section 8 of this Plan are the same as the terms of
Section 8 of the Regular SERP.
SECTION 9. PLAN UNFUNDED.
The terms of Section 9 of this Plan are the same as the terms of
Section 9 of the Regular SERP.
SECTION 10. CHOICE OF LAW.
The terms of Section 10 of this Plan are the same as the terms
of Section 10 of the Regular SERP.
SECTION 11. DEFINITIONS.
Except as follows, the terms of Section 11 of this Plan are the
same as the terms of Section 11 of the Regular SERP:
(a) "Plan" means this APL Limited Pure Excess Supplemental
Executive Retirement Plan.
(b) "Regular SERP" means the APL Limited Regular Supplemental
Executive Retirement Plan.
SECTION 12. EXECUTION.
To record the adoption of the Plan, the Company has caused its
duly authorized officer to affix the corporate name hereto.
APL Limited
By: /s/ Timothy J. Windle
APL Limited
Regular Excess-Benefit Plan
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
The Excess-Benefit Plan of American President Companies, Ltd.
was established by the Company effective September 1, 1983.
Effective November 9, 1996, the Excess-Benefit Plan was amended
to form two plans: The APL Limited Regular Excess-Benefit Plan
(the "Plan") and the APL Limited Pure Excess-Benefit Plan (the
"Pure Excess-Benefit Plan"). Effective as of the same date, the
Excess-Benefit Plan was amended by transferring all benefits
relating to the SMART Plan Reserve Account to the Deferred
Compensation Plan. This document constitutes an amendment and
restatement of the Excess-Benefit Plan. The purpose of the Plan
is to supplement certain benefits under the Retirement Plan.
SECTION 2. ELIGIBILITY AND PARTICIPATION.
Participation in this Plan shall be limited to the following:
(a) Any participant in the Retirement Plan whose benefits under
the Retirement Plan are affected by the limitations imposed
under section 401(a)(17) or 415 of the Code;
(b) Any participant in the Retirement Plan whose benefits under
the Retirement Plan are affected by the Code's requirement
that salaries or bonuses deferred under the Deferred
Compensation Plan cannot be taken into account in computing
such benefits; and
(c) Any participant in the Retirement Plan:
(i) Whose actual benefits under the Retirement Plan,
at retirement, are lower than the benefits that he or
she would have received absent the modification of the
Retirement Plan's benefit formula that was adopted
effective June 1, 1989, had he or she terminated
employment with the Affiliated Group as of
December 31, 1992, or, if earlier, the actual date of
such termination of employment; and
(ii) Whose "average annual compensation" under the
Retirement Plan equals or exceeds $125,000 at any time
after May 31, 1989.
On June 1 of each year, starting with June 1, 1990, the
$125,000 amount set forth in the preceding sentence shall
be adjusted for inflation by multiplying it by a fraction.
The numerator of such fraction shall be the CPI-W for U.S.
Cities on the immediately preceding February 1, and the
denominator of such fraction shall be the CPI-W for U.S.
Cities on February 1, 1989.
Any other provision of the Plan notwithstanding, an individual
who was not a Participant on May 31, 1994, shall in no event
become a Participant thereafter.
SECTION 3. PLAN BENEFITS.
(a) Amount of Retirement Plan Supplement. Each Participant
whose pension benefits under the Retirement Plan are
reduced by section 401(a)(17) or 415 of the Code, by the
exclusion of salaries and bonuses deferred under the
Deferred Compensation Plan from pension calculations or by
the modification of the formula for calculating his or her
"retirement income" (not including cost-of-living
adjustments) that was adopted on July 10, 1990, effective
as of June 1, 1989, shall be entitled to receive a monthly
benefit under this Plan. The amount of such benefit shall
be equal to:
(1) The monthly benefit that would have been payable
to the Participant under the Retirement Plan as of
December 31, 1994, if the limitations of sections
401(a)(17) and 415 of the Code, such exclusion and
such modification (to the extent that such
modification results in a benefit reduction) did not
apply; minus
(2) The actual monthly benefit payable to the
Participant under the Retirement Plan as of December
31, 1994, giving effect to such exclusion, such
modification and the limitations of sections
401(a)(17) and 415 of the Code (as in effect when the
benefit under this Plan is calculated).
For purposes of this Subsection (a), the modification of
the Retirement Plan formula that was adopted on July 10,
1990, effective as of June 1, 1989, shall be deemed to have
resulted in a benefit reduction only to the extent that a
Participant's actual monthly benefit payment under the
Retirement Plan is less than the monthly benefit payment
that such Participant would have received if such
modification had not been adopted and the Participant had
separated from employment with all members of the
Affiliated Group as of the earlier of December 31, 1992, or
the Participant's actual employment termination date. The
Retirement Plan's Actuarial Equivalency factors shall be
used to make this comparison.
(b) Transition Rules. Any other provision of the Plan
notwithstanding:
(1) The amount of a Participant's benefit under
Subsection (a) above shall in no event be greater than
the benefit to which the Participant would have been
entitled under Subsection (a) above if his or her
employment in the Affiliated Group had terminated on
December 31, 1994; and
(2) The amendment of this Plan adopted effective
December 31, 1994, shall in no event cause the amount
of a Participant's benefit under Subsection (a) above
to be smaller than the benefit to which the
Participant would have been entitled under Subsection
(a) above if his or her employment in the Affiliated
Group had terminated on December 31, 1994, but the
amount of such benefit may decline for reasons
unrelated to such amendment.
(c) Calculation and Payment of Pure Excess Portion of
Retirement Plan Supplement. The portion (if any) of a
Participant's Retirement Plan Supplement determined under
Subsection (a) that is attributable solely to the monthly
benefit that would be payable to the Participant under the
terms of the Retirement Plan if the limitations of sections
401(a)(17) and 415 of the Code did not apply shall be
deemed earned and payable under the Pure Excess-Benefit
Plan and not this Plan.
(d) Payment of Retirement Plan Supplement. A Participant's
Retirement Plan Supplement under Subsection (a) above, less
the pure excess portion (if any) determined under
Subsection (c), shall be payable to the Participant or to
any other person (including, without limitation, a
surviving spouse) who is receiving benefits under the
Retirement Plan which are derived from the Participant.
Such a Retirement Plan Supplement shall be payable in the
same form and at the same times as the Participant's
benefit under the Retirement Plan (and in no event
earlier), unless the Participant's benefit under the
Retirement Plan is paid in the form of a single lump sum.
In that event, the Retirement Plan Supplement shall be
payable in the normal form of benefit provided under the
Retirement Plan, computed as if the benefit actually paid
to the Participant under the Retirement Plan were also
payable in the normal form, unless:
(1) The Participant requests in writing to receive
the benefit under Subsection (a) above in a single
lump sum; and
(2) The Committee expressly approves the
Participant's request.
In the case of a Participant who is entitled to a "COLA-
Adjusted Retirement Income" under the Retirement Plan, the
amount of any periodic Retirement Plan Supplement shall be
recalculated each year in accordance with the provisions of
the Retirement Plan relating to the adjustment of pension
benefits to reflect changes in the cost of living. The
recalculation shall be performed upon the total of the
Retirement Plan Supplement being paid under this Plan and
the Retirement Plan Supplement (if any) being paid under
the Pure Excess-Benefit Plan, but the full amount of any
resulting increase shall be payable from this Plan, not the
Pure Excess-Benefit Plan.
SECTION 4. ADMINISTRATION.
The Plan shall be administered by the Committee. The Committee
shall make such rules, interpretations and computations as it
may deem appropriate. Any decision of the Committee with
respect to the Plan, including (without limitation) any
determination of eligibility to participate in the Plan and any
calculation of benefits hereunder, shall be conclusive and
binding on all persons.
SECTION 5. CLAIMS AND INQUIRIES.
(a) 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 and addressed to the
Chair of the Committee. 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 or her death, by the beneficiary.
(b) Denial of Application. In the event that an application
for benefits is denied in whole or in part, the Chair of
the Committee 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
90 days) after the Chair of the Committee 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
180 days after the Chair of the Committee received the
application.
(c) Review Panel. The Committee shall serve as the "Review
Panel" under the Plan. The Review Panel shall have the
authority to act with respect to any appeal from a denial
of benefits or a determination of benefit rights.
(d) 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 90 days after receiving written
notice of the denial from the Chair of the Committee. The
Chair of the Committee shall give the applicant or his or
her 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 and addressed to the Committee.
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 that 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.
(e) Decision on Review. The Review Panel shall act on each
request for a review within 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 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. 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.
(f) 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 Section 5.
(g) Exhaustion of Remedies. No legal action for benefits under
the Plan shall be brought unless and until the claimant
(1) has submitted a written application for benefits in
accordance with Subsection (a) above, (2) has been notified
by the Chair of the Committee that the application is
denied, (3) has filed a written request for a review of the
application in accordance with Subsection (d) above and
(4) 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 Chair of the
Committee or the Review Panel has failed to take any action
on the claim within the time prescribed by Subsections (b)
and (e) above, respectively.
SECTION 6. AMENDMENT AND TERMINATION.
The Company expects to continue the Plan indefinitely. Future
conditions, however, cannot be foreseen, and the Company shall
have the authority to amend or terminate the Plan at any time.
In the event of an amendment or termination of the Plan, a
Participant's benefits hereunder shall not be less than the
benefits to which the Participant would have been entitled if
his or her employment in the Affiliated Group had terminated
immediately prior to such amendment or termination.
SECTION 7. EMPLOYMENT RIGHTS.
Nothing in the Plan shall be deemed to give any person a right
to remain in the employ of any Affiliated Group member or affect
the right of the Affiliated Group members to terminate such
person's employment with or without cause.
SECTION 8. NO ASSIGNMENT.
The rights of any person to payments or benefits under the Plan
shall not be made subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors. Any act in violation of
this Section 8, whether voluntary or involuntary, shall be void.
SECTION 9. PLAN UNFUNDED.
Participants shall have the status of general unsecured
creditors of the Company. The Plan constitutes a mere promise
by the Company to make benefit payments in the future. It is
the Company's intent that the Plan be considered unfunded for
tax purposes and for purposes of Title I of ERISA.
SECTION 10. CHOICE OF LAW.
The validity, interpretation, construction and performance of
the Plan shall be governed by ERISA and, to the extent they are
not preempted, by the laws of the State of California.
SECTION 11. DEFINITIONS.
(a) "Affiliated Group" means a group of one or more chains of
corporations connected through stock ownership with the
Company, if:
(1) Stock possessing at least 80% of the total
combined voting power of all classes of stock entitled
to vote or at least 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
(2) The Company owns stock possessing at least 80% of
the total combined voting power of all classes of
stock entitled to vote or at least 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 "Affiliated Group" includes any other
entity which the Company has designated in writing as a
member of the Affiliated Group for purposes of this Plan or
the Retirement Plan. An entity shall be considered a
member of the Affiliated Group only with respect to periods
for which such designation is in effect or during which the
relationship described in Paragraphs (1) and (2) above
exists.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Benefits Committee appointed by the
Company's Board of Directors.
(d) "Company" means APL Limited, a Delaware corporation.
(e) "Deferred Compensation Plan" means the Deferred
Compensation Plan of American President Companies, Ltd., as
amended, the 1988 Deferred Compensation Plan of American
President Companies, Ltd., as amended, the 1995 Deferred
Compensation Plan of American President Companies, Ltd., as
amended, the 1988 Deferred Compensation Plan of APL
Limited: Pure Excess Deferral Plan, as amended, the 1988
Deferred Compensation Plan of APL Limited: Regular Deferral
Plan, as amended, the 1995 Deferred Compensation Plan of
APL Limited: Pure Excess Deferral Plan, as amended, and the
1995 Deferred Compensation Plan of APL Limited: Regular
Deferral Plan.
(f) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(g) "Participant" means a participant in the Retirement Plan
who participates in this Plan under Section 2.
(h) "Plan" means this APL Limited Regular Excess-Benefit Plan.
(i) "Retirement Plan" means the APL Limited Retirement Plan, as
amended, or its successor.
SECTION 12. EXECUTION.
To record this amendment and restatement of the Plan, the
Company has caused its duly authorized officer to affix the
corporate name hereto.
APL Limited
By: /s/ Timothy J. Windle
APL Limited
Pure Excess-Benefit Plan
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN.
The Excess-Benefit Plan of American President
Companies, Ltd. was established by the Company
effective September 1, 1983. Effective November 9,
1996, the Excess-Benefit Plan was amended to form two
plans: The APL Limited Regular Excess-Benefit Plan
(the "Regular Excess-Benefit Plan") and the APL Limited
Pure Excess-Benefit Plan (the "Plan"). Effective as of
the same date, the Excess-Benefit Plan was amended by
transferring all benefits relating to the SMART Plan
Reserve Account to the Deferred Compensation Plan.
This document constitutes the Plan, as adopted. The
purpose of the Plan is to supplement certain benefits
under the Retirement Plan.
The Plan shall be administered and operated in
accordance with the provisions of the Regular Excess-
Benefit Plan, and capitalized terms in this Plan shall
have the same meaning as in the Regular Excess-Benefit
Plan, except to the extent provided in this document.
SECTION 2. ELIGIBILITY AND PARTICIPATION.
Participation in this Plan shall be limited to any
participant in the Retirement Plan whose benefits under
the Retirement Plan are affected by the limitations
imposed under section 401(a)(17) or 415 of the Code.
SECTION 3. PLAN BENEFITS.
(a) Amount of Retirement Plan Supplement. The amount
of a Participant's Retirement Plan Supplement
under this Plan is the pure excess portion (if
any) of the Retirement Plan Supplement determined
under Section 3 of the Regular Excess-Benefit
Plan, as described in Section 3(c) of the Regular
Excess-Benefit Plan.
(b) Payment of Retirement Plan Supplement. A
Participant's Retirement Plan Supplement under
Subsection (a) above shall be payable to the
Participant or to any other person (including,
without limitation, a surviving spouse) who is
receiving benefits under the Retirement Plan which
are derived from the Participant. Such a
Retirement Plan Supplement shall be payable in the
same form and at the same times as the
Participant's benefit under the Retirement Plan
(and in no event earlier), unless the
Participant's benefit under the Retirement Plan is
paid in the form of a single lump sum. In that
event, the Retirement Plan Supplement shall be
payable in the normal form of benefit provided
under the Retirement Plan, computed as if the
benefit actually paid to the Participant under the
Retient Plan were also payable in the normal form,
unless:
(1) The Participant requests in writing to
receive the Retirement Plan Supplement in a
single lump sum; and
(2) The Committee expressly approves the
Participant's request.
SECTION 4. ADMINISTRATION.
The terms of Section 4 of this Plan are the same as the
terms of Section 4 of the Regular Excess-Benefit Plan.
SECTION 5. CLAIMS AND INQUIRIES.
The terms of Section 5 of this Plan are the same as the
terms of Section 5 of the Regular Excess-Benefit Plan.
SECTION 6. AMENDMENT AND TERMINATION.
The terms of Section 6 of this Plan are the same as the
terms of Section 6 of the Regular Excess-Benefit Plan.
SECTION 7. EMPLOYMENT RIGHTS.
The terms of Section 7 of this Plan are the same as the
terms of Section 7 of the Regular Excess-Benefit Plan.
SECTION 8. NO ASSIGNMENT.
The terms of Section 8 of this Plan are the same as the
terms of Section 8 of the Regular Excess-Benefit Plan.
SECTION 9. PLAN UNFUNDED.
The terms of Section 9 of this Plan are the same as the
terms of Section 9 of the Regular Excess-Benefit Plan.
SECTION 10. CHOICE OF LAW.
The terms of Section 10 of this Plan are the same as
the terms of Section 10 of the Regular Excess-Benefit
Plan.
SECTION 11. DEFINITIONS.
Except as follows, the terms of Section 11 of this Plan
are the same as the terms of Section 11 of the Regular
Excess-Benefit Plan:
(a) "Plan" means this APL Limited Pure Excess-Benefit
Plan.
(b) "Regular Excess-Benefit Plan" means the APL
Limited Regular Excess-Benefit Plan.
SECTION 12. EXECUTION.
To record the adoption of the Plan, the Company has
caused its duly authorized officer to affix the
corporate name hereto.
APL Limited
By: /s/ Timothy J. Windle
/dpw/cw/051/27008/879/AMEND4/amend.4
EXECUTION COPY
AMENDMENT NO. 4 TO CREDIT AGREEMENT
AMENDMENT dated as of March 17, 1997 to the Credit
Agreement dated as of March 25, 1994 (as heretofore amended,
the "Credit Agreement") among APL LIMITED (formerly American
President Companies, Ltd.) (the "Borrower"), the BANKS party
thereto (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower wishes to amend the Credit
Agreement to change the Consolidated Interest Coverage
Ratio, Consolidated Leverage Ratio and Consolidated Fixed
Charge Coverage Ratio specified therein, and the undersigned
Banks are willing so to amend the Credit Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is
defined in the Credit Agreement has the meaning assigned to
such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement" and
each other similar reference contained in the Credit
Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.
Section 2. Consolidated Interest Coverage Ratio.
Section 5.10 of the Credit Agreement is amended by changing
the ratio specified therein from "3.5 to 1" to "2.75 to 1".
Section 3. Consolidated Leverage Ratio. Section
5.11 of the Credit Agreement is amended by replacing the
existing table of ratios with the following table:
Period Ratio
Effective Date 1.10 to 1
through 12/31/97
1/1/98 and thereafter 1.05 to 1
Section 4. Consolidated Fixed Charge Coverage Ratio.
The first sentence of Section 5.16 of the Credit Agreement
is amended by changing the ratio specified in clause (ii)
thereof from "1.85 to 1" to "1.50 to 1".
Section 5. Financial Information. Section 4.04 of the
Credit Agreement is amended to read as follows:
Section 4.04. Financial Information. (a) The
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 29, 1995 and
the related consolidated statements of income and cash
flows for the fiscal year then ended, reported on by
Arthur Andersen LLP and set forth in the Borrower's
annual report on Form 10-K for 1995, as filed with the
Securities and Exchange Commission, fairly present, in
conformity with generally accepted accounting
principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such
date and their consolidated results of operations and
cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of
September 20, 1996 and the related unaudited
consolidated statements of income and cash flows for
the period of three fiscal quarters then ended, set
forth in the Borrower's quarterly report on Form 10-Q
for the fiscal quarter then ended, as filed with the
Securities and Exchange Commission, fairly present, in
conformity with generally accepted accounting
principles applied on a basis consistent with the
financial statements referred to in subsection 4.04(a),
the consolidated financial position of the Borrower and
its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for
such period of three fiscal quarters (subject to normal
year-end adjustments).
(c) Since September 20, 1996 there has been no
material adverse change in the business, financial
position , results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered
as a whole.
Section 6. Representations of Borrower. The Borrower
represents and warrants that (i) the representations and
warranties of the Borrower set forth in Article IV of the
Credit Agreement will be true on and as of the Amendment
Effective Date and (ii) no Default will have occurred and be
continuing on such date.
Section 7. Governing Law. This Amendment shall be
governed by and construed in accordance with the laws of the
State of New York.
Section 8. Counterparts. This Amendment may be signed
in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
Section 9. Effectiveness. This Amendment shall become
effective on the date (the "Amendment Effective Date") when
the Agent shall have received from each of the Borrower and
the Required Banks a counterpart hereof signed by such party
or facsimile or other written confirmation (in form
satisfactory to the Agent) that such party has signed a
counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first above
written.
APL LIMITED
(formerly American President Companies, Ltd.)
By: /s/ Thomas R. Meier
Name: Thomas R. Meier
Title: Assistant Treasurer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/ Diana H Imhof
Name: Diana H Imhof
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ James P Johnson
Name: James P Johnson
Title: Managing Director
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Alicia Szendiuch
Name: Alicia Szendiuch
Title: Director
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By: /s/ Takahide Akiyama
Name: Takahide Akiyama
Title: Joint General Manager
ABN AMRO NORTH AMERICA, INC.,
as Agent for ABN AMRO BANK
By: /s/ Daniel P. Taylor
Name: Daniel P. Taylor
Title: Assistant Vice President
By: /s/ Dianne D. Barkley
Name: Dianne D. Barkley
Title: Group Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Greg Sgullie
Name: Greg Sgullie
Title: Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Form 10-Q of APL
Limited for the quarter ended April 4, 1997 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-26-1997
<PERIOD-END> APR-4-1997
<CASH> 118,847
<SECURITIES> 141,796
<RECEIVABLES> 212,412<F1>
<ALLOWANCES> 0
<INVENTORY> 28,731
<CURRENT-ASSETS> 560,213
<PP&E> 1,973,500
<DEPRECIATION> 848,879
<TOTAL-ASSETS> 1,831,900
<CURRENT-LIABILITIES> 369,293
<BONDS> 690,962
0
0
<COMMON> 24,599
<OTHER-SE> 467,027
<TOTAL-LIABILITY-AND-EQUITY> 1,831,900
<SALES> 0
<TOTAL-REVENUES> 678,850
<CGS> 0
<TOTAL-COSTS> 687,696<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,600
<INCOME-PRETAX> (17,835)
<INCOME-TAX> (8,028)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,807)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
<FN>
<F1>The allowance for Doubtful Accounts, inlcuded in Receivables, amounted to
$18,556 at April 4, 1997.
<F2>The Provision for Doubtful Accounts, included in Total Costs, amounted to $169
for the 14 week period ended April 4, 1997.
</FN>
</TABLE>
