_________________________________________________________________
_________________________________________________________________
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 September 19, 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 October 17, 1997
____________________________ _______________________________
Common Stock, $.01 par value 24,888,866
_________________________________________________________________
_________________________________________________________________
<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 6-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 12-22
Part II. OTHER INFORMATION
_________________
Item 1. Legal Proceedings 23
Item 4. Submission of Matters to a Vote of
Security Holders 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
______________________________________________________________________
(In thousands, except Quarter Ended 38 Weeks Ended
per share amounts) September 19 September 20 September 19 September 20
1997 1996 1997 1996
______________________________________________________________________
Revenues $653,232 $646,123 $1,958,753 $2,013,515
______________________________________________________________________
Expenses 629,352 597,305 1,925,007 1,904,573
______________________________________________________________________
Operating Income 23,880 48,818 33,746 108,942
Interest Income 6,361 6,468 18,724 19,466
Interest Expense (13,523) (14,483) (42,431) (47,043)
______________________________________________________________________
Income Before Taxes 16,718 40,803 10,039 81,365
Federal, State and
Foreign Tax Expense 5,270 12,659 1,012 28,478
______________________________________________________________________
Net Income $ 11,448 $ 28,144 $ 9,027 $ 52,887
______________________________________________________________________
______________________________________________________________________
Earnings Per Common Share
______________________________________________________________________
Primary $0.44 $1.07 $0.35 $2.01
Fully Diluted $0.44 $1.07 $0.35 $2.01
______________________________________________________________________
Dividends Per
Common Share $0.10 $0.10 $0.30 $0.30
______________________________________________________________________
______________________________________________________________________
See notes to consolidated financial statements.
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED BALANCE SHEET (Unaudited)
_________________________________________________________________
(In thousands, except share amounts) September 19 December 27
1997 1996
_________________________________________________________________
ASSETS
Current Assets
Cash and Cash Equivalents $ 299,539 $102,370
Short-Term Investments 57,472 180,628
Trade and Other Receivables, Net 229,318 242,460
Fuel and Operating Supplies 31,614 29,220
Prepaid Expenses and Other Current Assets 70,296 61,804
_________________________________________________________________
Total Current Assets 688,239 616,482
_________________________________________________________________
Property and Equipment
Ships 905,759 903,227
Containers, Chassis and Rail Cars 760,874 764,294
Leasehold Improvements and Other 240,832 252,466
Construction in Progress 5,075 29,078
_________________________________________________________________
1,912,540 1,949,065
Accumulated Depreciation and Amortization (841,997) (825,846)
_________________________________________________________________
Property and Equipment, Net 1,070,543 1,123,219
_________________________________________________________________
INVESTMENTS AND OTHER ASSETS 142,781 140,477
_________________________________________________________________
Total Assets $1,901,563 $1,880,178
_________________________________________________________________
_________________________________________________________________
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Portion of Long-Term Debt
and Capital Leases $ 359 $ 9,866
Accounts Payable and Accrued Liabilities 420,189 380,690
_________________________________________________________________
Total Current Liabilities 420,548 390,556
_________________________________________________________________
Deferred Income Taxes 174,852 173,867
_________________________________________________________________
Other Liabilities 116,144 116,569
_________________________________________________________________
Long-Term Debt 680,669 695,546
Capital Lease Obligations 532 801
_________________________________________________________________
Total Long-Term Debt and
Capital Lease Obligations 681,201 696,347
_________________________________________________________________
Commitments and Contingencies
_________________________________________________________________
Stockholders' Equity
Common Stock $.01 Par Value, Stated at $1.00
Authorized-60,000,000 Shares
Shares Issued and Outstanding-
24,879,000 in 1997 and 24,564,000 in 1996 24,879 24,564
Additional Paid-In Capital 4,682 632
Retained Earnings 479,257 477,643
_________________________________________________________________
Total Stockholders' Equity 508,818 502,839
_________________________________________________________________
Total Liabilities and
Stockholders' Equity $1,901,563 $1,880,178
_________________________________________________________________
_________________________________________________________________
See notes to consolidated financial statements.
<PAGE>
APL Limited and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
_________________________________________________________________
(In thousands) 38 Weeks Ended
September 19 September 20
1997 1996
_________________________________________________________________
Cash Flows from Operating Activities
Net Income $ 9,027 $52,887
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used in)Operating Activities:
Depreciation and Amortization 77,813 83,466
Deferred Income Taxes 985 12,094
Change in Receivables 13,142 3,006
Change in Fuel and Operating Supplies (2,394) 9,884
Change in Prepaid Expenses and Other
Current Assets (8,492) 5,642
Gain on Sale of Property and Equipment (6,286) (2,364)
Gain on Sale of Leased Barges (16,152)
Gain on Sale of Distribution Services (6,900)
Change in Accounts Payable and Accrued
Liabilities 39,499 2,234
Gain on Curtailment of Pension and
Postretirement Benefits (12,934)
Other (11,672) (31,561)
_________________________________________________________________
Net Cash Provided by Operating Activities 95,470 115,454
_________________________________________________________________
Cash Flows from Investing Activities
Capital Expenditures (107,832) (102,776)
Proceeds from Sales of Property and
Equipment 89,193 161,728
Proceeds from Sale of Leased Barges 41,463
Proceeds from Sale of Distribution Services 2,000
Purchase of Short-Term Investments (113,934) (407,725)
Proceeds from Sales of Short-Term
Investments 237,090 288,943
Transfer from Capital Construction Fund 2,688
Other (18,995) (1,546)
_________________________________________________________________
Net Cash Provided by (Used in)
Investing Activities 129,673 (59,376)
_________________________________________________________________
Cash Flows from Financing Activities
Repurchase of Common Stock (14,755)
Issuance of Debt 62,215
Repayments of Debt (24,563) (31,342)
Repayments of Capital Lease Obligations (246) (11,604)
Dividends Paid (7,410) (7,713)
Debt Issue Costs (1,624)
Other 4,362 2,265
_________________________________________________________________
Net Cash Used in Financing Activities (27,857) (2,558)
_________________________________________________________________
Effect of Exchange Rate Changes on Cash (117) 551
_________________________________________________________________
Net Increase in Cash and Cash
Equivalents 197,169 54,071
_________________________________________________________________
Cash and Cash Equivalents at Beginning
of Period 102,370 76,564
_________________________________________________________________
Cash and Cash Equivalents at End of Period $299,539 $130,635
_________________________________________________________________
_________________________________________________________________
SUPPLEMENTAL DATA:
_________________________________________________________________
Cash Paid (Received) for:
Interest, Net of Capitalized Interest $ 42,306 $45,073
Income Taxes, Net of Refunds $ (2,360) $17,671
_________________________________________________________________
Noncash Investing Activities:
Notes Receivable from the Sale of
Distribution Services $ 6,000
_________________________________________________________________
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).
Foreign Currency Instruments
The company periodically enters into contracts to buy
foreign currencies in the future to hedge the impact of foreign
currency fluctuations on certain operating commitments. The
gains or losses on contracts related to firm commitments are
deferred and recognized when the related operating expenses are
incurred, and are recorded as a decrease or increase in
Expenses on the accompanying Consolidated Statement of Income.
Gains or losses on foreign currency contracts related to
anticipated transactions are reflected in Expenses on the
accompanying Consolidated Statement of Income in the period in
which the currency fluctuation occurs.
Capitalized Interest
Interest costs relating to cash paid for construction of
port facilities were capitalized in 1997 and 1996. These costs
totaled $0.2 million and $1.4 million for the third quarter and
the three quarters ended September 19, 1997, respectively, and
$0.2 million and $0.5 million for the third quarter and the
three quarters ended September 20, 1996, respectively.
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 three
quarters of 1997 was 30%. During the first quarter of 1997,
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 three quarters of 1996
was 35%. 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. 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 were
$6.7 million and $10.7 million for the quarters ended September
19, 1997 and September 20, 1996, respectively, and $21.4
million and $36.1 million for
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 2. Operating-Differential Subsidy Agreement (continued)
the three quarters ended September 19, 1997 and September 20,
1996, respectively, and have been included as a reduction of
Expenses on the accompanying Consolidated Statement of Income.
MarAd has determined that the ODS agreement will terminate
immediately prior to the company's proposed merger with Neptune
Orient Lines Limited ("NOL") discussed in Note 8.
Note 3.Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities at September 19,
1997 and December 27, 1996, were as follows:
_________________________________________________________________
(In thousands) September 19 December 27
1997 1996
_________________________________________________________________
Accounts Payable $ 74,354 $52,316
Accrued Liabilities 271,127 250,523
Current Portion of Insurance Claims 13,405 15,326
Unearned Revenue 59,582 50,566
Restructuring Charge 1,721 11,959
_________________________________________________________________
Total Accounts Payable and
Accrued Liabilities $420,189 $380,690
_________________________________________________________________
_________________________________________________________________
Note 4. Long-Term Debt
Long-Term Debt at September 19, 1997 and December 27, 1996
consisted of the following:
_________________________________________________________________
(In thousands) September 19 December 27
1997 1996
_________________________________________________________________
Vessel Mortgage Notes Due
Through 2008 (1) $365,994 $380,880
8% Senior Debentures $150 million Face
Amount Due on January 15, 2024 (2) 147,219 147,198
7 1/8% Senior Notes $150 million Face
Amount Due on November 15, 2003 (2) 148,534 148,399
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 6,922 7,069
_________________________________________________________________
Total Debt 680,669 705,076
Current Portion (9,530)
_________________________________________________________________
Total Long-Term Debt $680,669 $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.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4. Long-Term Debt (continued)
The company entered into interest rate swap agreements on
four of the vessel mortgage notes, with a notional amount of
$251.5 million at September 19, 1997, to exchange the
variable interest rate obligations on such notes for fixed
rate obligations for initial periods ranging between 7 and
12 years. The current variable interest rates for all of
the vessel mortgage notes range between 6.735% and 7.02%.
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 $1.5 million at September 19, 1997. The Senior
Debentures had an effective interest rate of 8.172%, and an
unamortized discount of $2.8 million at September 19, 1997.
(3)The Series I Vessel Mortgage Bonds were fully repaid during
the first quarter of 1997.
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.
Consummation of the proposed merger with NOL may result in
the termination of the company's credit agreement and its
option under that agreement to sell accounts receivable.
Note 5. Leases
In connection with its new terminal in Los Angeles, the
company entered into an agreement to purchase new cranes and,
in April 1997, reached an agreement with a group of banks
pursuant to which the company assigned its rights to the cranes
to the banks, and the banks leased the cranes to the company,
subject to certain terms and conditions on a year-to-year
basis. Under the agreement, the company made all payments to
the crane manufacturer and was subsequently reimbursed by the
banks. The payments and receipts have been included in the
Consolidated Statement of Cash Flows as Capital Expenditures
and Proceeds from the Sales of Property and Equipment,
respectively. The cost of the cranes included in the lease
transaction is approximately $81.5 million. Under the terms of
its agreement, the company has annual options to either renew
the lease, purchase the cranes or arrange for the sale of the
cranes to a third party. As part of the sale option, the
company has guaranteed the lessors a minimum estimated value of
$58.9 million at September 19, 1997 which will decline over
time.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 6. Stockholders' Equity
Earnings Per Common Share
For the periods presented, earnings per common share on a
primary and fully diluted basis were computed by dividing net
income by the weighted average number of common shares and
common equivalent shares outstanding. The number of shares
used in these computations was as follows:
____________________________________________________________________
Weighted Average Number of Common and Common Equivalent Shares
____________________________________________________________________
(In millions) Quarter Ended 38 Weeks Ended
September 19 September 20 September 19 September 20
1997 1996 1997 1996
____________________________________________________________________
Primary 26.1 26.3 25.6 26.3
Fully Diluted 26.1 26.3 26.0 26.3
____________________________________________________________________
____________________________________________________________________
Weighted average shares for the third quarter and first
three quarters of 1997 reflect the repurchase of 1.3 million
shares of the companyOs common stock in the third and fourth
quarters of 1996. In addition, weighted average shares for the
third quarter and first three quarters of 1996 reflect the
repurchase of 0.6 million shares of the companyOs common stock
in the third quarter 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 third quarter and first
three quarters of 1997 and 1996, basic and diluted earnings per
share would have been as follows:
___________________________________________________________________
Quarter Ended 38 Weeks Ended
September 19 September 20 September 19 September 20
1997 1996 1997 1996
___________________________________________________________________
Basic $0.46 $1.10 $0.37 $2.06
Diluted $0.44 $1.07 $0.35 $2.01
___________________________________________________________________
___________________________________________________________________
Note 7. 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.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7. Commitments and Contingencies (continued)
Commitments (continued)
Alliances (continued)
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"). P&O-NL has advised the Global Alliance that NLL
will be withdrawing from the Global Alliance. The future
alliance participation of the company following consummation of
the proposed merger of the company and NOL, discussed in Note
8, has not yet been determined. The company cannot predict, 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 company. However,
while no assurances can be given, the company believes that it
will be able to reach acceptable agreements for future alliance
participation.
In July 1997, the company and the remaining members of the
Global Alliance entered into a letter of intent with Hyundai
Merchant Marine Co. Ltd. ("Hyundai") to enter into a multi-year
agreement to share vessel space and coordinate vessel sailings
in the trans-Pacific and Asia-Europe trades. The parties
expect to complete detailed agreements and vessel deployments
and obtain necessary government approvals by the end of 1997,
and to initiate new services during the first quarter of 1998.
The five carriers began exchanging vessel space in the trans-
Pacific and Asia-Europe trades on a limited basis late in the
third quarter of 1997. There can be no assurances whether or
when the detailed agreements will be completed or government
approvals will be obtained.
In June 1997, the company and Transportacion Maritima
Mexicana ("TMM") entered into a joint operating company
agreement pursuant to which the companies began offering trans-
Pacific services in July 1997 in the Asia-Mexico trade. As
part of the agreement, the company is managing the operations
of six time chartered vessels and is guarantying the charter
hire of five vessels, two of which it had previously agreed to
guarantee. The charter hire payments for the additional three
vessels guaranteed through the expiration of the charters in
1999 are estimated to be $43.9 million. Agreements necessary
to implement the transaction are being finalized.
Facilities, Equipment and Services
The company had outstanding purchase commitments to
acquire facilities, equipment and services totaling $24.2
million at September 19, 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 actual services performed. At September 19, 1997, the
company had outstanding letters of credit and other agreements
totaling $77.0 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
September 19, 1997. Certain of these employment agreements
contain provisions requiring additional payments, including
excise taxes and supplemental pension benefits, if applicable.
<PAGE>
APL Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 7. Commitments and Contingencies (continued)
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
vessels from Lykes, and Lykes chartered vessels from the
company. In July 1996, the Bankruptcy Court approved a
settlement agreement between the company and Lykes,
establishing terms for the payment of the company's claims
against Lykes for unpaid charter hire. The settlement allowed
Lykes the use of three of the company's vessels until December
31, 1997 and required Lykes to obtain the release of liens it
permitted to be established against those vessels.
In April 1997, Lykes' Plan of Reorganization was
confirmed, and on July 29, 1997, Lykes and Canadian Pacific,
Ltd. ("CP") finalized its agreement for CP's acquisition of
Lykes' U.S. container shipping services. In addition, the
company and CP reached an agreement which allows the company to
realize most of the remaining benefits due under its settlement
with Lykes and vessels chartered by Lykes from the company were
returned to the company. Appeals of certain Bankruptcy Court
orders underlying the company's agreement with Lykes have been
dismissed. As a result of the settlement and CP acquisition,
LykesO bankruptcy 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 8. Proposed Merger with Neptune Orient Lines Limited
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 and by the
holders of a majority of the outstanding shares of the
company's Common Stock, is subject to certain other conditions,
including approval by MarAd of the transfer of the company's
Maritime Security Program ("MSP") operating agreements. On
October 16, 1997, MarAd approved the transfer to be made
immediately prior to the Proposed Merger, subject to the review
of the Secretary of Transportation. The company expects to
consummate the Proposed Merger in mid-November 1997, following
completion of such review.
<PAGE>
APL Limited and Subsidiaries
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 quarter and 38
weeks ended September 19, 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.
Proposed Merger with Neptune Orient Lines Limited
On April 13, 1997, the company entered into a merger
agreement with NOL, and Neptune U.S.A., Inc. ("Sub"), pursuant
to which Sub will merge with and into the company. 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 and by the
holders of a majority of the outstanding shares of the
company's Common Stock, is subject to certain other conditions,
including approval by MarAd of the transfer of the company's
MSP operating agreements. On October 16, 1997, MarAd approved
the transfer to be made immediately prior to the Proposed
Merger, subject to the review of the Secretary of
Transportation. The company expects to consummate the Proposed
Merger in mid-November 1997, following the completion of such
review.
RESULTS OF OPERATIONS
Summary Results Third Quarter Year to Date
(In millions) 1997 1996 Change 1997 1996 Change
___________________________________________________________________
Revenues
Container
Transportation $563.7 $ 556.0 1% $1,692.9 $1,749.9 (3%)
Logistics Services
and Other 89.5 90.2 (1%) 265.8 263.7 1%
___________________________________________________________________
Operating Income $ 23.9 $ 48.9 (51%) $ 33.7 $ 109.0 (69%)
___________________________________________________________________
Pretax Income $ 16.7 $ 40.9 (59%) $ 10.0 $ 81.4 (88%)
___________________________________________________________________
___________________________________________________________________
Overview
Operating income for the third quarter and first three
quarters of 1997 was $23.9 million and $33.7 million,
respectively, compared with operating income for the third
quarter and first three quarters of 1996 of $48.9 million and
$109.0 million, respectively. Included in operating income for
the third quarter of 1997 was a gain of $16.2 million from the
sale of lease receivables related to five barges, an additional
gain of $2.0 million from the favorable settlement of claims
related to the 1994 collision of a vessel and costs of $2.7
million related to the proposed merger with NOL. In addition
to the items above, operating income for the first three
quarters of 1997 also included a gain of $5.3 million from the
sale of chassis, a gain of $3.0 million from the favorable
settlement of claims related to the 1994 collision of a vessel,
a gain of $1.5 million from the favorable settlement of claims
related to the 1995 Kobe earthquake and costs of $2.7 million
related to the proposed merger with NOL. Included in operating
income for the third quarter of 1996 was a gain of $12.9
million resulting from the curtailment of obligations for
pension and postretirement benefits due to workforce
reductions. Also included in operating income for the first
three quarters of 1996 was a second quarter gain of $6.9
million on the sale of the company's domestic distribution
services segment of its freight brokerage business, and a $1.6
million gain from the sale of a vessel which occurred in the
first quarter.
<PAGE>
In the third quarter of 1997 compared with the third
quarter of 1996, the company's earnings decreased as a result
of reduced container transportation revenues per unit due to
significant rate pressure and increased expenses, primarily
ocean transportation. The reduced revenues per unit and the
increased expenses were partially offset by increased container
transportation revenues reflecting increased volumes in most of
the company's markets. The company's earnings also decreased
in the first three quarters of 1997 compared with the same
period in 1996, as a result of reduced container transportation
revenues per unit in most of the company's markets. In
addition, the decrease in revenues in the first three quarters
of 1997 was compounded by an increase in expenses as compared
with the first three quarters of 1996.
CONTAINER VOLUMES Third Quarter Year to Date
BY MAJOR MARKET (1) 1997 1996 Change 1997 1996 Change
_________________________________________________________________
Asia to North America 54.2 52.9 3% 141.1 133.6 6%
North America to Asia 27.9 26.5 6% 89.4 92.5 (3%)
Intra-Asia 46.7 36.6 28% 142.6 112.3 27%
Asia-Europe 11.1 10.1 10% 32.1 28.8 12%
Latin America 7.5 4.5 66% 20.4 11.1 84%
Refrigerated 10.2 11.5 (11%) 35.6 36.8 (3%)
Stacktrain 106.4 94.0 13% 336.5 287.5 17%
Automotive 15.4 16.6 (7%) 49.7 65.8 (24%)
_________________________________________________________________
_________________________________________________________________
(1)Volumes are stated in thousands of forty-foot equivalent
units ("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
The company's volumes increased in the third quarter of
1997 compared with the comparable 1996 period due primarily to
strong export activities in North and South China and Korea.
Volume increases in the first three quarters of 1997 compared
with the first three quarters of 1996 were due primarily to
strong export activities in North and South China, India and
Singapore. Lower manufacturing costs in China have shifted
customer production facilities to that region, thereby
increasing volumes from that area.
North America to Asia
The company's volumes increased in this market in the
third quarter of 1997 compared with the third quarter of 1996
due primarily to increased shipments to North and South China,
Hong Kong and Japan due to increased demand in those markets
during the quarter. Volumes declined in this market in the
first three quarters of 1997 compared with the first three
quarters of 1996 due primarily to decreased shipments to North
China, Hong Kong and Indonesia. The decreased volumes for the
first three quarters of 1997 are the result of reduced demand
in this market compared to the comparable 1996 period. In
addition, the sale by the company of five vessels and its Guam
business to Matson Navigation Company, Inc. ("Matson") in the
first quarter of 1996 also contributed to the decline in the
company's volumes in the first three quarters of 1997. The
changes in volumes in the third quarter and first three
quarters of 1997, compared with last year's third quarter and
first three quarters, also reflect increased military cargoes
to Japan and Korea as a result of the company's increased share
of military business under the U.S. government's contract award
program.
<PAGE>
Intra-Asia
The company's intra-Asia volumes increased in the third
quarter and first three quarters of 1997 compared with similar
periods in 1996 primarily as a result of increased shipments to
and from Taiwan and Japan. The increased volumes were the
result of focused marketing efforts in this market.
Asia-Europe
The company's volumes increased eastbound and westbound in
the third quarter of 1997 as compared with the third quarter of
1996. Eastbound volumes increased due to shipments from the
Netherlands, Germany and Belgium as the company pursued
additional cargo. Westbound volumes increased due to shipments
from North and South China and India reflecting market strength
due to seasonal factors and the company's pursuit of additional
cargo. Volumes increased in both directions in the first three
quarters of 1997 over the first three quarters of 1996 as a
result of the company's pursuit of additional cargo in order to
gain market share. Eastbound volumes increased due to
shipments from the Netherlands, the United Kingdom, Belgium and
Germany, and westbound volumes increased due to shipments from
North and South China, Thailand and Taiwan.
Latin America
The company's volumes in this market increased in the
third quarter and first three quarters of 1997 compared with
the third quarter and first three quarters of 1996 due
primarily to increased eastbound shipments from Indonesia,
South China and Taiwan to Mexico and Panama. The increase in
volumes resulted from more focused marketing efforts. In
addition, westbound and intra-Caribbean volumes also increased
during the periods due to the introduction of intra-Caribbean
services in mid-1996 and increased marketing efforts.
Refrigerated
The company's refrigerated volumes decreased in the third
quarter of 1997 compared with the third quarter of 1996 in most
of the company's markets, with the intra-Asia market
contributing the largest decline. Compared with the first
three quarters of 1996, volumes of refrigerated cargo decreased
in 1997 due to decreased volumes in the intra-Asia market,
partially offset by increased exports to Japan, Hong Kong,
Indonesia and the United Arab Emirates. The changes in volumes
resulted from changes in overall demand in the markets in which
the company operates.
Stacktrain
The company's North America stacktrain volumes increased
significantly in the third quarter and first three quarters of
1997 compared with last year's third quarter and first three
quarters due to growth in demand and the company's pricing
strategies to remain competitive. Partially offsetting the
increase in the first three quarters of 1997 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
The company's automotive volumes declined in the third
quarter and first three quarters of 1997 compared with the same
periods in 1996, due to reduced stacktrain shipments by U.S.
automobile manufacturers between the U.S. and Mexico as a
result of changes in the mode of rail shipments by the
manufacturers.
<PAGE>
AVERAGE REVENUE
PER UNIT (1) Third Quarter Year to Date
1997 1996 Change 1997 1996 Change
_________________________________________________________________
Trans-Pacific $3,129 $3,365 (7%) $3,165$3,464 (9%)
Other Ocean
Transportation $1,778 $2,086 (15%) $1,816 $2,151 (16%)
Stacktrain $1,192 $1,211 (2%) $1,182 $1,270 (7%)
_________________________________________________________________
_________________________________________________________________
(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 third quarter and first three quarters of 1997, the
company's trans-Pacific average revenue per FEU declined from
the same periods in 1996 due primarily to significant rate
pressures in the Asia to North America market resulting from
capacity slightly outpacing growth in trade, and continued rate
reductions by the company and its competitors. 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 the remainder of
1997 or in 1998, 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. Lower rates and a lower
percentage of high value cargo in the North America to Asia
market also contributed to lower trans-Pacific average revenue
per FEU.
Other Ocean Transportation
The company's average revenue per FEU in its other ocean
transportation markets decreased in the third quarter and first
three quarters of 1997 compared with the third quarter and
first three quarters 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 three quarters of 1997 due to excess vessel
capacity and significant rate pressure as carriers competed for
market share.
Stacktrain
The company's average revenue per stacktrain shipment
declined in the third quarter and first three quarters of 1997
compared with the same periods in 1996 primarily due to lower
rates resulting from increased competition and excess equipment
capacity in this market.
Logistics Services and Other Revenues
Logistics Services and Other Revenues, which include cargo
handling, freight consolidation, logistics services and charter
hire revenues, totaled $89.5 million and $265.8 million in the
third quarter and first three quarters of 1997, respectively,
and $90.2 million and $263.7 million during comparable periods
of 1996. The decrease in Logistics Services and Other Revenues
in the third quarter of 1997 compared to the third quarter of
1996, reflects reduced cargo handling revenues in Asia and
North America due to TMM's discontinued service between the
U.S. and Asia, partially offset by increased cargo handling
revenues from other third parties and revenues from the
company's joint venture with TMM. The increase in these
revenues for the first three quarters of 1997 compared with the
same periods in 1996 reflects increased cargo handling and
logistics services revenues partially offset by decreased
charter hire revenues.
<PAGE>
Outlook
Rate pressures are continuing in most of the company's
major markets as increased capacity continues to exceed market
growth. In addition, the company is incurring increased costs
due to the service problems of a major rail carrier. The
company currently expects that, taking into account volume
increases and its focus on cost reductions, the company's
results (exclusive of merger-related costs) will be at break-
even or a modest loss for the second half and full year of
1997. Aggregate costs to be incurred by the company in
connection with the Proposed Merger will be substantial.
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-NL. P&O-NL has advised the
Global Alliance that NLL will be withdrawing from the Global
Alliance. The future alliance participation of the company
following consummation of the proposed merger of the company
and NOL, discussed in Note 8 of Notes to Consolidated Financial
Statements, has not yet been determined. The company cannot
predict, 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
company. However, while no assurances can be given, the
company believes that it will be able to reach acceptable
agreements for future alliance participation.
In July 1997, the company and the remaining members of the
Global Alliance entered into a letter of intent with Hyundai to
enter into a multi-year agreement to share vessel space and
coordinate vessel sailings in the trans-Pacific and Asia-Europe
trades. The parties expect to complete detailed agreements and
vessel deployments and obtain necessary government approvals by
the end of 1997, and to initiate new services during the first
quarter of 1998. The five carriers began exchanging vessel
space in the trans-Pacific and Asia-Europe trades on a limited
basis late in the third quarter of 1997. There can be no
assurances whether or when the detailed agreements will be
completed or government approvals will be obtained.
In June 1997, the company and TMM entered into a joint
operating company agreement pursuant to which the companies
began offering trans-Pacific services in July 1997 in the Asia-
Mexico trade. As part of the agreement, the company is
managing the operations of six time chartered vessels and is
guarantying the charter hire of five vessels, two of which it
had previously agreed to guarantee. The charter hire payments
for the additional three vessels guaranteed through the
expiration of the charters in 1999 are estimated to be $43.9
million. Agreements necessary to implement the transaction are
being finalized.
Maritime Regulation and Subsidy
Under the company's ODS agreement with MarAd, which
expires December 31, 1997, payments to the company were
approximately $6.7 million and $21.4 million in the third
quarter and first three quarters of 1997, respectively, and
$10.7 million and $36.1 million during comparable periods of
1996. ODS payments in 1997 have been 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 and returned five chartered U.S. flag
vessels.
In October 1996, the Maritime Security Act of 1996 was
signed into law. This legislation provides for a Maritime
Security Program 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.
<PAGE>
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. In connection with the Proposed Merger, on June 25,
1997, the company submitted a notice to MarAd detailing plans
to transfer its ODS agreement and its nine MSP Operating
Agreements to American Ship Management, LLC ("ASM"), a newly
formed, U.S.-owned and operated company that will be
independent of the company and NOL. The filing requested that
MarAd allow the transfer to become effective immediately prior
to consummation of the Proposed Merger between the company and
NOL. On October 16, 1997, MarAd approved the proposed transfer
of the company's MSP operating agreements, approved certain
other agreements and transfers, and determined that the
company's ODS agreement will terminate immediately prior to the
Proposed Merger. The approvals are subject to review by the
U.S. Secretary of Transportation and do not become final until
the expiration of 20 days (25 days if an appeal is filed), and
the U.S. Secretary of Transportation can further postpone the
effective date of the action. The company and NOL resubmitted
a voluntary notice with respect to the Proposed Merger to the
Staff Chairman of the Committee on Foreign Investment in the
United States ("CFIUS") pursuant to the Exon-Florio laws on
September 22, 1997. On October 22, 1997, CFIUS notified the
company and NOL that it had completed its review.
Subject to completion of the review by the Secretary of
Transportation, the company expects to consummate the Proposed
Merger in mid-November 1997.
The company's collective bargaining agreement covering its
unlicensed personnel expires in June 1999 and its agreements
with three unions representing its licensed personnel expire in
June 2005. All of these contracts have been ratified by the
unions' members and will be adopted by ASM upon the
consummation of the Proposed Merger.
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 would amend
the Shipping Act to mandate the right of 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. Limited continuing oversight by a successor agency
to the Federal Maritime Commission would continue under this
legislation, with no change to the companyOs 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.
<PAGE>
EXPENSES Third Quarter Year to Date
(In millions) 1997 1996 Change 1997 1996 Change
_____________________________________________________________________
Transportation
Land $209.0 $209.2 (<1%) $ 637.5 $ 672.5 (5%)
Ocean 118.7 95.9 24% 334.9 308.8 8%
Equipment 64.5 58.7 10% 195.2 184.5 6%
Cargo Handling 169.1 167.8 1% 508.7 481.7 6%
Sales, General &
Administrative 83.5 78.6 6% 271.3 278.5 (3%)
Other (Income) Expense (15.5) (12.9) 20% (22.6) (21.4) 5%
_____________________________________________________________________
Total $629.3 $597.3 5% $1,925.0 $1,904.6 1%
_____________________________________________________________________
Operating Ratio (1) 99% 94% 99% 96%
_____________________________________________________________________
_____________________________________________________________________
(1)Other (Income)/Expense is excluded from this calculation.
Land Transportation
Land transportation expenses decreased slightly in the
third quarter of 1997 from the third quarter of 1996, 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. This decrease was offset by increased stacktrain
volumes. Land transportation expenses decreased in the first
three quarters of 1997 as compared with the first three
quarters of 1996 primarily due to the volume decreases
resulting from such sale of servicing rights.
Ocean Transportation
Ocean transportation expenses increased in the third
quarter and first three quarters of 1997 compared with the
third quarter and first three quarters of 1996 as a result of
increased purchases of vessel space by the company from its
joint operation with TMM in the Asia-Mexico trade and its
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 and prior year
subsidy adjustments. Partially offsetting these increased
expenses were reductions in costs resulting from the operation
of fewer vessels in 1997 due to the sale of five U.S. flag
vessels and the return of five chartered U.S. flag vessels
during 1996.
Transportation Equipment
Transportation equipment costs increased in the third
quarter and first three quarters of 1997 compared with the
third quarter and first three quarters of 1996 due to increased
container lease costs resulting from increased volumes, and
maintenance costs.
Cargo Handling
Cargo handling expenses increased in the third quarter and
first three quarters of 1997 compared with the same periods in
1996, as a result of higher cargo volumes from both the company
and its alliance partners, primarily in the intra-Asia, Latin
America and North America-Asia markets, and from higher labor
rates. These increases were partially offset by the
strengthening value of the U.S. dollar against the Japanese yen
in the third quarter and first three quarters of 1997 compared
to the dollar-yen exchange ratios in the same periods in 1996.
<PAGE>
Sales, General and Administrative
Sales, general and administrative expenses increased in
the third quarter of 1997 compared with the same period last
year, because of the elimination of rail reimbursement
programs, offset by salary and benefit savings from the
company's 1995 restructuring which resulted in position
reductions during 1996. Sales, general and administrative
expenses decreased in the first three quarters of 1997 compared
with the first three quarters of 1996, as the company realized
salary and benefit savings from its 1995 restructuring. Other
factors which reduced sales, general and administrative
expenses for the 1997 periods were lower accruals for certain
employee benefit costs due to workforce reductions and
favorable insurance claims experience.
Other Income and Expense
In the third quarter of 1997 the company recognized a gain
of $16.2 million from the sale of lease receivables related to
five barges, and an additional gain of $2.0 million from the
favorable settlement of claims related to the 1994 collision of
a vessel and incurred costs of $2.7 million related to the
proposed merger with NOL. In the second quarter of 1997, the
company recognized a gain of $5.3 million from the sale of
chassis, recorded a gain of $1.5 million from the favorable
settlement of claims related to the 1995 Kobe earthquake and
incurred $2.7 million in costs related to the proposed merger
with NOL. In addition, in the first quarter of 1997, the
company recorded $3.0 million from the favorable settlement of
claims related to the 1994 collision of a vessel. In the third
quarter of 1996 the company recognized a gain of $12.9 million
resulting from the curtailment of obligations for pension and
postretirement benefits due to workforce reductions. Also, in
the second quarter and first quarter of 1996, the company
recognized gains of $6.9 million from the sale of the companyOs
rights to service certain domestic intermodal customers and
$1.6 million from the sale of a vessel to Matson, respectively.
Net Interest Expense
Net interest expense decreased from $8.0 million and $27.6
million in the third quarter and first three quarters of 1996,
respectively, to $7.2 million and $23.7 million in the third
quarter and first three quarters of 1997, respectively. The
decrease was 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 higher interest capitalized
under terminal construction contracts compared with the same
periods in 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Summary of Financial Resources
(In millions) September 19 December 27
As of: 1997 1996
_________________________________________________________________
Cash, Cash Equivalents and
Short-term Investments $ 357.0 $ 283.0
Working Capital 267.6 225.9
Total Assets 1,901.6 1,880.2
Long-Term Debt and Capital
Lease Obligations (1) 681.6 706.2
_________________________________________________________________
September 19 September 20
For the 38 weeks ending: 1997 1996
_________________________________________________________________
Cash Provided by Operations $ 95.5 $ 115.5
_________________________________________________________________
Investing Activities
Proceeds from Sales of
Property and Equipment $ 89.2 $ 161.7
Proceeds from Sale of
Lease Receivables 41.5
Proceeds from Sale of
Distribution Services 2.0
Capital Expenditures
Ships $ 2.5 $ 69.5
Containers, Chassis and Rail Cars 88.5 20.3
Leasehold Improvements and Other 16.8 13.0
_________________________________________________________________
Total Net Capital Expenditures $ 107.8 $ 102.8
_________________________________________________________________
Financing Activities
Repurchase of Common Stock $ (14.8)
Borrowings 62.2
Repayment of Debt and
Capital Leases $ (24.8) (43.0)
Dividend Payments (7.4) (7.7)
_________________________________________________________________
_________________________________________________________________
(1)Includes current and long-term portions.
Cash Flows
During the third quarter of 1997, the company sold lease
receivables related to five barges for $41.5 million in cash
and repaid existing deposits related to the barges of $12.3
million.
In connection with its new terminal in Los Angeles, the
company entered into an agreement to purchase new cranes and,
in April 1997, reached an agreement with a group of banks
pursuant to which the company assigned its rights to the cranes
to the banks, and the banks leased the cranes to the company,
subject to certain terms and conditions on a year-to-year
basis. Under the agreement, the company made all payments to
the crane manufacturer and was subsequently reimbursed by the
banks. The payments and receipts have been included in the
Consolidated Statement of Cash Flows as Capital Expenditures
and Proceeds from the Sales of Property and Equipment,
respectively. The cost of the cranes included in the lease
transaction is approximately $81.5 million. Under the terms of
its agreement, the company has annual options to either renew
the lease, purchase the cranes or arrange for the sale of the
cranes to a third party. As part of the sale option, the
company has guaranteed the lessors a minimum estimated value of
$58.9 million at September 19, 1997 which will decline over
time.
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.
<PAGE>
Capital Spending
Capital expenditures of $107.8 million in the first three
quarters of 1997 were primarily for purchases of cranes,
containers, and terminal and leasehold improvements. Capital
expenditures in 1997, including expenditures for the Los
Angeles and Kaohsiung cranes, are expected to be approximately
$125 million; the remaining non-crane expenditures will be
primarily for terminal and leasehold improvements. The company
has outstanding purchase commitments to acquire facilities,
equipment and services totaling $24.2 million. In addition to
vessel expenditures of $69.5 million, the company made capital
expenditures in the first three quarters of 1996 of $33.3
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 initial 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 three
quarters 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.
Consummation of the Proposed Merger with NOL may result in
the termination of the company's credit agreement and its
option under that agreement to sell accounts receivable.
The company believes its existing resources, cash flows
from operations and current 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, regulatory approvals 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.
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 currently
be determined. The Proposed Merger is also subject to review
by the Secretary of Transportation of approvals by MarAd of
certain agreements and transfers. No assurances can be given
that the Secretary will approve MarAd's decisions or that the
Proposed Merger will be consummated. If the Proposed Merger is
not consummated the company would again consider alternatives
to increase shareholder value, which alternatives may include
continued operations as an independent company with increased
focus on its terminal, intermodal and logistics operations and
possible corporate restructurings to take advantage of more
competitive tax structures, the sale of certain lines of
business or assets of the company, a spin-off of one or more of
the business divisions of the company and a leveraged
recapitalization of the capital stock of the company (or a
combination of the foregoing), as well as a sale or merger of
the company.
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 3,800 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. On
June 25, 1997, the Court issued a clarifying order permitting
vessel owners to add third party claims against specific
manufacturers. In discussion with shipowners' counsel, the
Court expanded its intention to allow the reinstatement of
cross-claims and third party claims already asserted. 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 December 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 defendants filed their answer to the
complaint, generally denying the allegations, on August 15,
1997. The case is in early stages of discovery, and the
company believes the claims are without merit.
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 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders was held on August 28,
1997 in Oakland, California. The election of directors,
approval and adoption of the merger agreement with NOL and
transactions contemplated thereby, and ratification of
auditors, were submitted to the stockholders, as described in
the company's Proxy Statement dated July 21, 1997, and were
voted upon and approved by the stockholders at the meeting.
The following table describes the results of the stockholder
votes:
Votes Votes Withheld Broker
For Against /Abstain Non-Votes
________________________________________________________________
Election of Directors:
Charles S. Arledge 21,854,667 123,653
F. Warren Hellman 21,850,256 128,064
Timothy J. Rhein 21,837,078 141,242
Forrest N. Shumway 21,849,110 129,210
Barry L. Williams 21,854,516 123,804
Approval and adoption
of the Merger agreement
and the transactions
contemplated
thereby, including the
Merger 18,699,356 117,627 47,723 3,113,614
Ratification of Auditors 21,858,773 84,684 34,863
At the meeting, 21,978,320 shares of common stock (each of
which was entitled to one vote) were present and represented,
constituting 88.6% of the outstanding shares of common stock on
the record date of July 10, 1997.
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
_______ _______________________
10.1 Amended and restated Retirement Account Plan as of June 1,
1997.
27 Financial Data Schedules filed under Article 5 of
Regulation S-X for the third quarter ended September 19,
1997.
(b) Reports on Form 8-K
On July 18, 1997, the company filed a Form 8-K dated July
17, 1997, relating to the company's Press Release dated
July 17, 1997, which announced the company's financial
results for the second quarter of 1997.
On July 18, 1997, the company filed a Form 8-K dated July
17, 1997, relating to the company's Press Release dated
July 17, 1997, which announced that the company had
successfully concluded negotiations for new labor
agreements with the Marine Engineers' Beneficial
Association, District No. 1 - Pacific Coast District and
with the American Radio Association.
<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: October 24, 1997 By /s/ William J. Stuebgen
___________________________ ___________________________
William J. Stuebgen
Vice President,
Controller and
Chief Accounting Officer
APL RETIREMENT ACCOUNT PLAN
(Amended and Restated as of June 1, 1997)
Execution Copy
TABLE OF CONTENTS
Page
PREAMBLE v
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 ELIGIBILITY 9
2.1 Date of Participation 9
2.2 Participation Requirements 9
ARTICLE 3 RETIREMENT DATE 11
3.1 Retirement Date 11
3.2 Normal Retirement Date 11
3.3 Early Retirement Date 11
3.4 Vested Termination Date 11
3.5 Postponed Retirement Date 11
3.6 In-Service Retirement Date 12
ARTICLE 4 AMOUNT OF RETIREMENT INCOME 13
4.1 Retirement Income 13
4.2 Minimum Benefit 13
4.3 Retirement Account 13
4.4 Supplemental Retirement Income 16
4.5 Protected Benefit 16
4.6 Late Retirement 17
4.7 Special Rule for Any Participant Who
Ceased To Be an Eligible Employee Prior to
June 1, 1997 and Who Again Becomes an
Eligible Employee After June 1, 1997 17
4.8 Retirement Income Limitations 17
4.9 Return to Employment Following Retirement 23
4.10 Deemed Termination After Normal
Retirement Date 23
4.11 Grandfathered Participants 23
4.12 Participants Transferring to/from Another
Company-Supported Plan 24
ARTICLE 5 TERMINATION OF EMPLOYMENT PRIOR TO
RETIREMENT 25
5.1 Termination of Service After Vesting 25
5.2 Termination of Service Before Vesting 25
5.3 Forfeitures 25
ARTICLE 6 FORMS OF BENEFIT PAYMENT 26
6.1 Normal Form of Retirement Income 26
6.2Normal Form of Supplemental Retirement Income 26
6.3 Optional Forms of Retirement Income 27
6.4 Small Payments 30
6.5 General Rule on Commencement Dates 31
ARTICLE 7 PRERETIREMENT DEATH BENEFITS 32
7.1 Benefit Eligibility 32
7.2 Payment of Death Benefit 32
7.3 Form and Amount of Death Benefit 32
7.4 Involuntary Lump Sum Cash-Outs 33
7.5 Beneficiary Designation for Preretirement
Death Benefit 33
7.6 Notice of Death Benefit Options 34
7.7 Other Death Benefits 35
ARTICLE 8 FINANCING THE PLAN 36
8.1 Participant Contributions 36
8.2 Employer Contributions 36
8.3 Trust Agreement 36
8.4 Reversion of Assets 36
ARTICLE 9 ADMINISTRATION OF THE PLAN AND
MANAGEMENT OF ASSETS 38
9.1 Plan Sponsor and Plan Administrator 38
9.2 Administrative Responsibilities 38
9.3 Management of Plan Assets 38
9.4 Trustee and Investment Managers 38
9.5 Delegation of Fiduciary Responsibilities 39
9.6 Enrolled Actuary 39
9.7 Reliance Upon Advice 39
9.8 Funding Policy 40
9.9 Communication of Financial Needs 40
9.10 Administrative Expenses 40
9.11 Manner of Payments 40
ARTICLE 10 AMENDMENT OR TERMINATION 41
10.1 Amendments 41
10.2 Merger, Consolidation or Transfer 41
10.3 Rights and Obligations Upon Termination 41
10.4 Limitations Upon Highest-Paid Employees 42
ARTICLE 11 GENERAL PROVISIONS 44
11.1 No Implied Employment Contract 44
11.2 Benefits Not Assignable 44
11.3 Payments Under Qualified Domestic
Relations Order (QDRO) 44
11.4 Payments of Benefits to Infants or
Incompetents 45
11.5 Proof of Age and Marriage 45
11.6 Source of Benefits 45
11.7 Overpayments and Underpayments 45
11.8 Service in Multiple Fiduciary Capacities 46
11.9 Criminal Acts 46
11.10 IRS Qualification 46
11.11 Construction of Plan 46
11.12 Forms for Plan Communications 47
11.13 Governing Law 47
ARTICLE 12 PERIOD OF SERVICE 48
12.1 Period of Employment Relationship 48
12.2 Interval Between Periods of Employment 48
12.3 Predecessor Companies 49
12.4 Other Periods 49
12.5 Years in a Period of Service 49
ARTICLE 13 CLAIMS AND INQUIRIES 51
13.1 Application for Benefits 51
13.2 Denial of Application 51
ARTICLE 14 REVIEW OF DENIED CLAIMS 52
14.1 Review Panel 52
14.2 Request for Review 52
14.3 Decision on Review 52
14.4 Rules and Interpretations 53
14.5 Exhaustion of Remedies 53
ARTICLE 15 TOP-HEAVY PROVISIONS 54
15.1 Determination of Top-Heavy Status 54
15.2 Minimum Benefit 54
15.3 Minimum Vesting 54
15.4 Effect of Change in Top-Heavy Status 54
15.5 Impact on Benefit Limitations 54
15.6 Definitions 55
ARTICLE 16 EXECUTION 57
APPENDIX A ACTUARIAL EQUIVALENT FACTORS 58
APPENDIX B DIRECT ROLLOVER PROVISIONS 62
APPENDIX C GRANDFATHERED BENEFIT 64
APPENDIX D SUPPLEMENTAL RETIREMENT INCOME 73
APPENDIX E MINIMUM CASH BALANCE BENEFITS 75
PREAMBLE
The APL Retirement Account Plan, as set forth herein,
shall become effective as of June 1, 1997, except as
otherwise provided. It constitutes an amendment and
restatement and continuation of the Plan effective as of
January 1, 1993. Except as may specifically be provided
otherwise in the Plan, the rights of Participants who
retired or who terminated their employment prior to June 1,
1997, shall be determined solely in accordance with the
provisions of the Plan then in effect. In addition, the
rights of Participants who retire on an Early, Normal or
Postponed Retirement Date prior to June 1, 1997, shall be
determined in accordance with the provisions of the Plan in
effect on May 31, 1997, and the amendments taking effect on
June 1, 1997, shall not apply to such Participants.
The Plan is a defined benefit pension plan intended to
qualify under section 401(a) of the Internal Revenue Code of
1986, as amended. The purpose of this Plan is to provide
Eligible Employees with retirement income. Effective as of
June 1, 1997 these benefits are provided pursuant to the
cash balance formula set forth herein. All accrued benefits
under the provisions of the Plan in effect as of May 31,
1997 shall be preserved and continued under the Plan.
ARTICLE 1
DEFINITIONS
Unless clearly indicated by the context, the capitalized
terms set forth in this Plan shall have the meanings set
forth below.
1.1 "Actuarial Equivalent" means the equivalent of the
benefit otherwise payable to a Participant, determined
in accordance with the actuarial equivalent factors set
forth in Appendix A to the Plan, attached hereto.
1.2 "Affiliate" means any member of a group of one or more
chains of corporations connected through stock
ownership with the Company, if:
(A) Stock possessing at least eighty
percent (80%) of the total combined voting power
of all classes of stock entitled to vote or at
least eighty percent (80%) of the total value of
shares of all classes of stock of each of the
corporations, except the Company, is owned by one
or more of the other corporations; and
(B) The Company owns stock possessing at least
eighty percent (80%) of the total combined voting
power of all classes of stock entitled to vote or
at least eighty percent (80%) of the total value
of shares of all classes of stock of at least one
of the other corporations excluding, in computing
such voting power or value, stock owned directly
by such other corporations.
In addition, the term "Affiliate" includes any other
entity which the Company has designated in writing as
an Affiliate for purposes of the Plan. An entity shall
be considered an Affiliate only with respect to periods
for which such designation is in effect or during which
the relationship described in Paragraphs (A) and (B)
above exists.
1.3 "Allocation Percentage" means the percentage determined
in accordance with Section 4.3(D).
1.4 "Alternate Payee" means any spouse, former spouse,
child or other dependent of a Participant who is
recognized by a qualified domestic relations order (as
defined in section 414(p) of the Code) as having a
right to receive all or a portion of the benefits
payable under the Plan with respect to the Participant.
1.5 "Base Compensation" means a Participant's basic
earnings while the Participant is an Eligible Employee,
including amounts contributed on a pretax basis under
sections 125 or 401(k) of the Code to a plan maintained
by the Employer, and excluding overtime pay, bonuses,
commissions, incentive compensation and Employer
contributions (other than salary deferrals) to this or
any other benefit plan.
1.6 "Beneficiary" means one or more persons designated by
the Participant by filing the prescribed form with the
Company prior to his death. If the Participant has not
designated a Beneficiary, or if the designated
Beneficiary (or Beneficiaries) are not living at the
time any payment is to be made hereunder, then (i) the
spouse of the deceased Participant shall be his or her
Beneficiary; or (ii) if the Participant has no spouse
living at the time of such payment, his or her then
living children shall be his or her Beneficiaries, in
equal shares; or (iii) if the Participant has neither a
spouse nor children living at the time of such payment,
his or her then living parents shall be his or her
Beneficiaries, in equal shares; or (iv) if none of the
individuals described in (i) through (iii) are living
at the time of such payment, his or her estate shall be
his or her Beneficiary. The designation of a
Beneficiary other than the Participant's Spouse to
receive a death benefit under Article 7 shall be
subject to the rules, including the spousal consent
rules, described in Section 7.5.
1.7 "Benefit Compensation" shall mean a Participant's
Eligible Compensation divided by two. Benefit
Compensation taken into account under the Plan shall in
no event exceed the limitation in effect for that year
under section 401(a)(17) of the Code. This limitation
shall automatically be adjusted for each calendar year
to reflect the cost-of-living adjustment (if any)
announced by the Commissioner of Internal Revenue for
such calendar year.
1.8 "Benefit Distribution Date" means the first day of the
period for which Retirement Income is paid as an
annuity or, in the case of Retirement Income payable in
the form of a lump sum, the date on which the lump sum
is paid.
1.9 "Cash Balance Benefit" means the benefit provided based
on the Participant's Retirement Account.
1.10 "Code" means the Internal Revenue Code of 1986, as
amended.
1.11 "Company" means APL Limited, a Delaware corporation.
1.12 "Death Benefit" means the benefit provided to a
Participant's Beneficiary pursuant to Article 7.
1.13 "Eligible Compensation" for any calendar year means the
sum of:
(A) The Participant's annual Base Compensation
during such calendar year;
(B) Any bonus that he receives during the 1997
calendar year under the Company's year-end bonus
plan for executives and key employees;
(C) Any overtime pay that he receives during such
calendar year as an Eligible Employee;
(D) Any payment he receives during such calendar
year under the Company's Team Up For Success
program during the 1997 calendar year;
(E) Any bonus received under the Company's
Worldwide Bonus program during such calendar year;
and
(F) Any portion of a Participant's annual
earnings (including any bonus which would
otherwise be includible as Eligible Compensation)
deferred by the Participant pursuant to a
nonqualified plan sponsored by the Participant's
Employer.
1.14 "Eligible Employee" means an Employee who meets the
requirements of Section 2.2, except an Employee who is
a "leased employee" (within the meaning of section
414(n) of the Code) with respect to an Employer.
1.15 "Employee" means an individual who is (i) a common-law
employee of an Employer or (ii) a "leased employee"
(within the meaning of section 414(n) of the Code) with
respect to an Employer.
1.16 "Employee Aggregate Contributions" shall have the
meaning set forth in Appendix D.
1.17 "Employer" means each Affiliate which has been
designated in writing as an Employer by the Company,
while such designation is in effect. The Company, in
writing, may designate an Affiliate as an Employer with
respect to certain Employees, to the exclusion of the
other Employees of such Affiliate.
1.18 "Enrolled Actuary" means an individual who has been
approved by the Joint Board for the Enrollment of
Actuaries to perform actuarial services required by
ERISA or the regulations thereunder.
1.19 "ERISA" means Public Law No. 93-406, the Employee
Retirement Income Security Act of 1974, as amended.
1.20 "Grandfathered Benefit" means the amount of Retirement
Income accrued by a Grandfathered Participant in
accordance with Section 4.11(B).
1.21 "Grandfathered Participant" means an individual who is
both a Participant and an Eligible Employee on June 1,
1997 and who satisfies the following requirements:
(A) Has attained age 45 on or before June 1,
1997;
(B) Has a Period of Service equal to five (5) or
more years as of June 1, 1997; and
(C) The sum of his age and Period of Service
equals or exceeds fifty-five (55) as of June 1,
1997.
For purposes of Section 1.21(C), the sum of a
Participant's age and Period of Service shall be
determined in the same manner as the Participant's
"Allocation Points" are determined under Section
4(D).
1.22 "Highly Compensated Employee" means an active Employee
who:
(A) During the look-back year received Total
Compensation of more than $80,000 (or such
larger amount as may be adopted by the
Commissioner of Internal Revenue to reflect a
cost-of-living adjustment) and was a member
of the Top-Paid Group; or
(B) At any time during the look-back year or
the determination year was a five-percent
owner (as defined in section 416(i)(1) of the
Code).
For purposes of this Section, the determination year
shall be the Plan Year and the look-back year shall be
the 12-month period immediately preceding the
determination year, unless the Company has made the
calendar-year election described in Income Tax
Regulations section 1.414(q)-1T A-14(b) or its
successor.
The determination of who is a Highly Compensated
Employee, including the determinations of the number
and identity of Employees in the Top-Paid Group and the
Total Compensation that is considered, will be made in
accordance with section 414(q) of the Code and
regulations thereunder.
The Company may elect to modify the method described in
this Section for defining "Highly Compensated Employee"
by electing to apply the $80,000 limit described above
without regard to whether an Employee is in the Top-
Paid Group.
1.23 "Highly Compensated Former Employee" means a former
Employee who separated from service (or is deemed to
have separated) prior to the determination year,
performs no service for any member of the Affiliated
Group during the determination year, and was a Highly
Compensated Employee as an active Employee for either
the separation year or any determination year ending on
or after the Employee's 55th birthday. The
determination of who is a Highly Compensated Former
Employee will be made in accordance with section 414(q)
of the Code and regulations thereunder.
1.24 "Hour of Service" means:
(A) Each hour for which an Employee is directly
or indirectly paid, or entitled to payment, by an
Employer for the performance of services,
(B) Each hour for which an Employee is directly
or indirectly paid, or entitled to payment, by an
Employer on account of a period of time during
which no services are performed (without regard to
whether the employment relationship between the
Employee and the Employer has terminated) due to
vacation, holiday, illness, incapacity,
disability, layoff, jury duty, military duty or
leave of absence with pay, and
(C) Each hour for which an Employee is directly
or indirectly paid, or entitled to payment of an
amount as back pay (without regard to mitigation
of damages) either awarded or agreed to by an
Employer.
The foregoing notwithstanding:
(1) No more than 501 Hours of
Service shall be credited to an Employee
under Paragraph (B) or (C) above on
account of any single continuous period
of time during which no services are
performed.
(2) An hour for which an Employee
is directly or indirectly paid or
entitled to payment by an Employer on
account of a period during which no
services are performed shall not
constitute an Hour of Service hereunder
if such payment is made or due under a
plan maintained solely for the purpose
of complying with applicable workers'
compensation, unemployment compensation
or disability insurance laws.
(3) Hours of Service shall not be
credited for payments that solely
reimburse an Employee for medical or
medically related expenses.
(4) The same Hour of Service shall
not be credited to an Employee both
under Paragraph (A) or (B) and under
Paragraph (C).
(5) The computation period to
which Hours of Service determined under
Paragraph (B) or (C) are to be credited
shall be determined under applicable
federal law and regulations, including,
without limitation, Department of Labor
Regulation section 2530.204-2.
Each Employee for whom monthly records are
not kept shall be credited with 190 hours for each
month for which such Employee would be entitled to
credit for one Hour of Service under Subsection
(A), (B) or (C) above.
The Company shall determine the number of
Hours of Service, if any, to be credited to an
Employee under the foregoing rules in a uniform
and nondiscriminatory manner and in accordance
with applicable federal laws and regulations,
including, without limitation, Department of Labor
Regulations section 2530.200b-2.
1.25 "Interest" means the rate determined in accordance with
Section 4.3(C).
1.26 "Investment Manager" means any person who is
(i) registered as an investment adviser under the
Investment Advisers Act of 1940, (ii) a bank, as
defined in such Act, or (iii) an insurance company
qualified to perform investment management services
under the laws of more than one state.
1.27 "Married Participant" means a Participant who is
lawfully married, as determined under the laws of the
state where such Participant is domiciled.
1.28 "Payroll" means the system used by an entity to pay
those individuals it regards as its common law
employees for their services and to withhold employment
taxes from the compensation it pays to such common law
employees. "Payroll" does not include any system an
entity uses to pay individuals whom it does not regard
as its common law employees and for whom it does not
actually withhold employment taxes (including, but not
limited to, individuals it regards as independent
contractors) for their services.
1.29 "Participant" means an Eligible Employee who becomes a
Participant pursuant to Article 2 and who continues to
be entitled to any benefits under the Plan.
1.30 "Period of Service" means an individual's period of
employment with any Affiliate, as determined under
Article 12.
1.31 "Plan" means this APL Retirement Account Plan, as
amended from time to time.
1.32 "Plan Year" means the twelve (12) consecutive month
period ending each May 31.
1.33 "Retirement Account" shall mean the hypothetical
account established for each Participant to which the
allocations and credits described in Section 4.3 are
made.
1.34 "Retirement Income" means the retirement benefits
provided to Participants and their spouses, joint
annuitants and Beneficiaries in accordance with the
applicable provisions of Articles 4 and 5, except that
such term shall not include any benefits which are
payable to an Alternate Payee pursuant to a qualified
domestic relations order under section 414(p) of the
Code.
1.35 "Supplemental Retirement Income" means the benefit
provided by Appendix D.
1.36 "Termination Date" means the date on which a
Participant ceases to be an Employee.
1.37 "Top-Paid Group" for any Plan Year means the top
20 percent (in terms of Total Compensation) of all
Employees of the Company and its Affiliates, excluding
the following:
(A) Any Employee covered by a collective
bargaining agreement who is not an Eligible
Employee;
(B) Any Employee who is a nonresident alien with
respect to the United States who receives no
income with a source within the United States from
a the Company or its Affiliates;
(C) Any Employee who has not completed six months
of service by the end of the applicable year
(including service in the preceding year);
(D) Any Employee who normally works less than 17 1/2
hours per week;
(E) Any Employee who normally works no more than
six months during any year; and
(F) Any Employee who has not attained the age of
21 at the end of the Plan Year."
1.38 "Total Compensation" means "wages" as defined in
section 3401(a) of the Code for purposes of income tax
withholding at the source, but determined:
(A) Without regard to any rules that limit the
remuneration included in "wages" based on the
nature or location of the employment or the
services performed (such as the exception for
agricultural labor in section 3401(a)(2) of the
Code); and
(B) By including amounts deferred but not
refunded under a cafeteria plan, as such term is
defined in section 125(c) of the Code and under a
plan qualified under section 401(k) of the Code.
1.39 "Trust Agreement" means the trust agreement between the
Company and the Trustee, established for the purpose of
funding benefits under the Plan, or any successor trust
agreement or agreements.
1.40 "Trustee" means the trustee or trustees appointed by
the Company pursuant to Section 9.3.
1.41 "Trust Fund" means all money or other property held by
the Trustee pursuant to the terms of the Trust
Agreement.
1.42 "United States" means the 50 states of the United
States, the District of Columbia, Puerto Rico and Guam.
ARTICLE 2
ELIGIBILITY
2.1 Date of Participation
Each individual who is an Employee and who meets the
requirements specified in Section 2.2 shall become a
Participant upon completion of one hour of service.
2.2 Participation Requirements
The requirements for becoming a Participant are that
the Employee must be employed in the United States, or
be employed outside the United States and be eligible
for home leave. In addition, to be eligible, an
Employee must be paid on the U.S. dollar Payroll.
Notwithstanding anything in this Plan to the contrary,
an individual shall be ineligible to become a
Participant if he is:
(A) A member of a collective bargaining unit
covered by a collective bargaining agreement,
unless such agreement provides for coverage of the
bargaining unit members under the Plan;
(B) Classified by the Company as a temporary
employee;
(C) Eligible to participate in or accrue benefits
under any other funded pension or retirement plan
to which his Employer makes contributions, other
than federal Social Security and the APL Limited
SMART Plan;
(D) Designated by the Company in writing as an
individual or member of a class not eligible to
participate in the Plan;
(E) Compensated for services by a person other
than an Employer and for any reason is deemed to
be an Employee;
(F) A leased employee within the meaning of
section 414(n) of the Code, or would be a leased
employee but for the period-of-service requirement
of Code section 414(n)(2)(B), and who is providing
services to an Employer;
(G) Subject to a written agreement that provides
that such individual shall not be eligible to
participate in the Plan;
(H) Not on the Payroll of an Employer and who, at
any time and for any reason, is deemed to be an
Employee;
If, during any period, the Employer has not regarded an
individual as an Employee and, for that reason, has not
withheld employment taxes with respect to that
individual, then that individual shall not be a
Participant for that period, even in the event that the
individual is determined, retroactively, to have been
an Employee during all or any portion of that period.
An individual's status as a Participant shall be
determined by the Company. All such determinations
shall be conclusive and binding on all persons.
ARTICLE 3
RETIREMENT DATE
3.1 Retirement Date
A Participant's "Retirement Date" shall be his Normal,
Early, Postponed or In-Service Retirement Date or his
Vested Termination date (whichever is applicable)
unless the Participant's Retirement Income commences or
is paid as of another date pursuant to Section 3.3 or
5.1, which date shall be his Retirement Date. In no
event, however, shall a Participant's Retirement Income
commence later than his In-Service Retirement Date.
3.2 Normal Retirement Date
A Participant's "Normal Retirement Date" shall be the
first day of the month coincident with or next
following his sixty-fifth (65th) birthday.
3.3 Early Retirement Date
An individual who became a Participant before
November 11, 1986, may retire on the first day of any
month coincident with or subsequent to his fifty-fifth
(55th) birthday, which day shall be his "Early
Retirement Date."
An individual who becomes a Participant on or after
November 11, 1986, may retire on the first day of any
month coincident with or subsequent to the later of
(i) his fifty-fifth (55th) birthday or (ii) the date
when he completes a Period of Service of five (5)
years, which day shall be his "Early Retirement Date."
3.4 Vested Termination Date
Notwithstanding any provision of this Plan to the
contrary, a Participant who separates from all service
with any Affiliate shall, if the Participant's
Retirement Income is 100% vested, be entitled to elect
to receive an immediate distribution of his Retirement
Income. In such case the Participant's "Vested
Termination Date" shall be the first day of any month
coincident or subsequent to the Participant's
Termination Date.
3.5 Postponed Retirement Date
If a Participant continues in the service of any
Affiliate beyond his Normal Retirement Date, the first
day of the month coincident with or next following the
termination of his employment after his Normal
Retirement Date shall be his "Postponed Retirement
Date."
ARTICLE 4
AMOUNT OF RETIREMENT INCOME
4.1 Retirement Income
This Plan is a defined-benefit plan within the meaning
of section 3(35) of ERISA (without regard to
paragraphs (A) and (B) thereof). Under the Plan,
subject to the second paragraph of this Section 4.1, a
Participant's Retirement Income shall be determined
based on the Participant's Cash Balance Benefit. The
Participant's Cash Balance Benefit is equal to the
amount of the benefit which may be provided by the
Retirement Account described below in Section 4.3.
This Retirement Account represents the benefit promised
by the Plan and is not an actual account to which Plan
assets and investment income are allocated. The
account balance is credited with interest at the rate
specified in Section 4.3 to the Participant's
Retirement Date.
Subject to the remaining Sections of this Article 4 and
the provisions of Article 6 (Forms of Benefit Payment)
and Section 10.4 (Limitations Upon Highest-Paid
Employees), a Participant's Retirement Income
commencing on his Retirement Date, shall be equal to
the greater of the amount described in Sections 4.2,
4.3 or 4.5. In addition, a Grandfathered Participant's
Retirement Income shall not be less than the amount
described in Section 4.11. Any Participant who is not
described in Section 4.3(B), except for a Participant
described in Section 4.7, shall receive as his
Retirement Income the amount accrued under the Plan as
of May 31, 1997.
4.2 Minimum Benefit
As a minimum benefit, a Participant shall be entitled
to receive the greater of:
(A) a single life annuity commencing on the
Participant's Normal Retirement Date equal to one
thousand dollars ($1,000) per year; or
(B) a Cash Balance Benefit which is based on the
amount of his Retirement Account as set forth in
Appendix E.
4.3 Retirement Account
A Participant's Retirement Account consists of the sum
of the following hypothetical credits to the account of
the Participant: the Participant's "Basic Employer
Allocations," the Participant's "Initial Employer
Allocation" (if any) and "Interest" credited on such
allocations. Initial Employer Allocations under
Section 4.3 shall be credited as of June 1, 1997. A
Participant may alternatively receive an Initial
Employer Allocation under Section 4.7 under the terms
therein described. These hypothetical allocations and
the Interest credit are determined as follows:
(A) Basic Employer Allocation
For each Plan Year commencing on or after
June 1, 1997, at the end of each calendar year, a
Participant's Retirement Account shall be credited
with an amount equal to the Participant's
Allocation Percentage multiplied by the
Participant's Benefit Compensation. With respect
to the period from June 1, 1997 to December 31,
1997, the amount determined under this Subsection
shall be multiplied by 7/12; provided, however,
that this sentence shall be inapplicable to any
individual who first becomes a Participant on or
after June 1, 1997.
Notwithstanding the above, with respect to
any Participant who terminates employment during
any Plan Year, the allocation described above
shall occur as of the Participant's Termination
Date, provided, however, with respect to any
Participant whose Termination Date is on or after
June 1, 1997, but before December 31, 1997, any
allocation with respect to such a terminated
Participant shall equal the Participant's
Allocation Percentage multiplied by the
Participant's Benefit Compensation multiplied by a
fraction, the numerator of which is the number of
days between June 1, 1997 and the Termination Date
(inclusive) and the denominator of which is the
number of days between January 1, 1997 and the
Termination Date (inclusive).
(B) Initial Employer Allocation
Each Participant who is (i) an Eligible
Employee on June 1, 1997; and who is (ii) either
(1) receiving Compensation from the Employer, or
(2) on short-term sick or other paid leave shall
receive an initial allocation as of June 1, 1997
equal to the greater of:
(1) the Actuarially Equivalent single
sum present value of the Participant's
adjusted Retirement Income under this Plan as
of May 31, 1997, determined under the terms
of the Plan as then in effect (taking into
account the factors set forth in Appendix A)
as though the Participant had a Termination
Date of May 31, 1997. With respect to any
Participant who was hired on or after June 1,
1996, but prior to June 1, 1997, and who is
an Eligible Employee on June 1, 1997, such a
Participant shall receive an initial
allocation as of June 1, 1997 equal to the
Actuarial Equivalent single sum present value
of the Participant's adjusted Retirement
Income as determined under the terms of this
Plan as in effect on May 31, 1997 (taking
into account the factors set forth in
Appendix A), but disregarding the one-year of
service participation requirement in effect
on May 31, 1997 and substituting the
Participant's rate of pay when he became an
Eligible Employee for the rate of pay on June
1; or
(2) the amount set forth in Appendix E.
The Initial Employer Allocation shall not
include any amount attributable to the
Participant's Supplemental Retirement Income.
(C) Interest
As of December 31 of each Plan Year beginning
on or after June 1, 1997 and prior to the
Participant's Retirement Date, a Participant's
Retirement Account shall be increased by the rate
of Interest.
The rate of Interest shall be determined
as of the beginning of each calendar year.
This rate shall be equal to the annual rate
of interest on 30-year Treasury Securities
(within the meaning of section 417(e)(3) of
the Code) for the month of November which
precedes the beginning of the applicable
calendar year. With regard to any partial
allocation of Interest, the allocation shall
be made based on the number of days in the
applicable period divided by 365.
(D) Allocation Percentage
As of the end of each calendar year, each
Participant's Allocation Percentage shall be
determined based upon the Participant's Allocation
Points (determined as of the allocation date
determined pursuant to Section 4.3(A)). The
Applicable Percentage shall be determined from the
chart set forth below:
Allocation Applicable Percentage
Points
On all Benefit On Benefit
Compensation Compensation
over One-half
of the FICA
Wage Basis
Under 45 6% 6%
45 and over, 8% 8%
but under 55
55 and over, 10% 10%
but under 65
65 and over 12% 10%
A Participant's "Allocation Points" shall be
the sum of the Participant's Period of Service and
age. Solely for purposes of Section 1.21 and this
Section 4.3(D), a Participant's age shall be
expressed as a number rounded to the fourth
decimal place determined by dividing the number of
days from the Participant's birth date to the
allocation date by three hundred sixty-five (365).
The amount of Allocation Points obtained by adding
together the Participant's Period of Service and
age shall not be rounded up.
4.4 Supplemental Retirement Income
If a Participant is described in Appendix D, then, in
addition to his Retirement Income, the Participant
shall also be entitled to receive a Supplemental
Retirement Income.
4.5 Protected Benefit
(A) Notwithstanding any provision of this Plan to
the contrary, the Participant's Retirement Income
under this Plan shall not be less than his or her
accrued benefit under the terms of the Plan as in
effect through May 31, 1997, based on the terms of
the Plan in effect on May 31, 1997.
(B) With respect to a period of reemployment, a
Participant shall cease to be entitled to a
protected benefit under this Section 4.5 if prior
to his reemployment the Participant received a
lump sum distribution of his entire nonforfeitable
interest in the Plan.
4.6 Late Retirement
Any Participant who is entitled to receive a pension
under Section 3.5 and whose In-Service Retirement Date
precedes his Termination Date shall nonetheless
continue to be credited with allocations under
Section 4.3 for service on or after his In-Service
Retirement Date. This additional accrual shall be
distributed to the Participant in the same form as
previously elected by the Participant.
4.7 Special Rule for Any Participant Who Ceased To Be an
Eligible Employee Prior to June 1, 1997 and Who Again
Becomes an Eligible Employee After June 1, 1997
If a Participant ceased be an Eligible Employee prior
to June 1, 1997 (or ceased active participation in the
Plan due to a leave of absence or disability) and again
becomes an active Participant in the Plan after June 1,
1997 upon again becoming an Eligible Employee (or
returning from such a leave or disability) and if such
Participant has earned Retirement Income attributable
to his prior period of active participation in the
Plan, the Retirement Income shall be converted to an
Initial Employer Allocation credited as of December 31
of the calendar year in which the Eligible Employee
again becomes an active Participant in the Plan. The
initial allocation under this Section 4.7 shall be made
in a manner consistent with Section 4.3(B) utilizing
the actuarial factors applicable on June 1, 1997.
4.8 Retirement Income Limitations
The provisions of this Section 4.8 shall apply with
respect to all calendar years after December 31, 1986.
(A) General Rule
Unless the alternative limitation of
Paragraph (B) below applies, a Participant's
Annual Benefit shall not exceed the lesser of the
following amounts:
(1) Ninety thousand dollars ($90,000),
adjusted as described below; or
(2) The amount of the Participant's
Average Annual Compensation, as defined in
Paragraph (I) below.
As of January 1 of each calendar year, the
adjusted dollar limitation for such calendar year
announced by the Commissioner of Internal Revenue
pursuant to section 415(d) of the Code shall
automatically be substituted for the ninety
thousand dollar ($90,000) amount set forth in
Subparagraph (1) above and shall become the dollar
limitation applicable under the Plan during such
calendar year. The adjusted dollar limitation for
a calendar year shall apply in determining the
amount of all Annual Benefits commencing in such
calendar year, and such Annual Benefits thereafter
shall not be adjusted (except as provided in the
following sentence). In the case of a Participant
whose Employment terminates on or after January 1,
1993, and whose Annual Benefit is limited by the
dollar limitation under Subparagraph (1) above,
such Annual Benefit shall automatically be
recalculated as of January 1 of each calendar year
following the termination of his Employment,
commencing on January 1, 1994, to reflect the
adjusted dollar limitation for such calendar year.
An increased Retirement Benefit resulting from the
recalculation of the Annual Benefit shall be
payable under the Plan in the same form as the
original Retirement Benefit. No further
adjustments shall be made once the adjusted dollar
limitation exceeds the amount of the Annual
Benefit.
If a Participant's Annual Benefit would
exceed the limitation of this Section 4.8, then
such Annual Benefit shall be reduced by reducing
the components thereof as necessary in the order
in which they are listed in Paragraph (H) below;
provided, however, that a Participant's Annual
Benefit shall in no event be reduced below the
amount of such Annual Benefit as of December 31,
1986, determined under the applicable plans
(including their benefit limitations) as then in
effect.
(B) Alternative Limitation for Retirement Income
up to $10,000
A Participant's Retirement Income shall not
be subject to the limitations of Paragraph (A)
above if each of the following requirements is
met:
(1) The sum of the Participant's annual
Retirement Income under this Plan and his
aggregate annual retirement benefits under
all other qualified defined-benefit plans
maintained by any Affiliate does not exceed
the lesser of (i) ten thousand dollars
($10,000) or (ii) the amount determined under
Paragraph (D) below (concerning only
Particiants whose Period of Service is less
than ten (10) years); and
(2) The Participant has never
participated in a qualified
defined-contribution plan maintained by any
Affiliate.
(C) Reduced Limitations for Participants With
Less Than 10 Years of Participation
In the case of a Participant whose Credited
Period of Service is less than ten (10) years, the
amount described in Paragraph (A)(1) above shall
be multiplied by a fraction determined as follows:
(1) The numerator of such fraction
shall be the number of completed months in
such Credited Period of Service (but not less
than twelve (12)); and
(2) The denominator of such fraction
shall be one hundred twenty (120).
To the extent provided in Income Tax
Regulations, this Paragraph (C) shall apply
separately to each change in the benefit structure
of the Plan, as if such change caused the
commencement of a new Credited Period of Service.
(D) Reduced Limitations for Participants With
Less Than 10 Years of Service
In the case of a Participant whose Period of
Service is less than ten (10) years, the amount
described in Paragraph (A)(2) above and the ten
thousand dollar ($10,000) amount described in
Paragraph (B)(1) above shall be multiplied by a
fraction determined as follows:
(1) The numerator of such fraction
shall be the number of completed months in
such Period of Service (but not less than
twelve (12)); and
(E) Adjusted Dollar Limitation for Benefits
Commencing Before or After the Social
Security Retirement Age
In the case of a Participant whose Retirement
Income commences before his Social Security
retirement age, the dollar amount described in
Paragraph (A)(1) above shall be reduced. The
reduced dollar amount shall be determined by
treating the dollar limitation in Paragraph (A)(1)
above as an annual annuity payable for life
commencing at the Participant's Social Security
retirement age and then converting it to an
actuarially equivalent annual annuity payable for
life commencing as of the date when the
Participant's Retirement Income commences.
Actuarial equivalency for this purpose shall be
based on the following actuarial assumptions:
(1) For calendar years prior to
January 1, 1995, the actuarial assumptions
specified in Appendix A, provided that the
interest rate assumption shall equal the
greater of the rate specified in Appendix A
or five percent (5%); and
(2) For calendar years after
December 31, 1994, an interest rate
assumption equal to the greater of the rate
specified in Appendix A or the Applicable
Interest Rate.
In the case of a Participant whose Retirement
Income commences after his Social Security
retirement age, the amount described in Paragraph
(A)(1) above shall be increased. The increased
dollar limit shall be determined by treating the
dollar limitation in Paragraph (A)(1) above as an
annual annuity payable for life commencing at the
Participant's Social Security retirement age and
then converting it to an actuarially equivalent
annual annuity payable for life commencing as of
the date when the Retirement Income commences.
Actuarial equivalency for this purpose shall be
based on the following actuarial assumptions:
(1) For calendar years prior to
January 1, 1995, the actuarial assumptions
specified in Appendix A, provided that the
interest rate assumption shall equal the
lesser of the rate specified in Appendix A or
five percent (5%); and
(2) For calendar years after
December 31, 1994, an interest rate
assumption equal to the lesser of the rate
specified in Appendix A or five percent (5%).
For purposes of this Paragraph (E), a
Participant's "Social Security retirement age"
means the age determined pursuant to the following
schedule:
Date of Participant's Birth Age
Before January 1, 1938 65
On or after January 1, 1938
but before January 1, 1955 66
On or after January 1, 1955 67
(F) Combined Limitation on Benefits and
Contributions
The sum of a Participant's Defined-Benefit
Plan Fraction and his Defined-Contribution Plan
Fraction shall not exceed one (1) with respect to
any calendar year beginning prior to January 1,
2000. The terms "Defined-Benefit Plan Fraction"
and "Defined-Contribution Plan Fraction" shall
have the meaning given to such terms by
section 415(e) of the Code and the regulations
thereunder. If a Participant would exceed the
foregoing limitation, then his Annual Benefit
shall be reduced as necessary pursuant to
Paragraph (A) above; provided, however, that the
changes in this Section 4.8 taking effect on
January 1, 1987 shall in no event reduce a
Participant's Annual Benefit (in any form) below
the amount of such Annual Benefit as of
December 31, 1986, determined under the applicable
plans (including their benefit limitations) as
then in effect.
(G) Affiliate
For purposes of this Section 4.8, the term
"Affiliate" shall include any Affiliate (as
defined in Section 1.2), except that, for purposes
of this Section 4.8 only, the phrase "more than
fifty percent (50%)" shall be substituted for the
phrase "at least eighty percent (80%)" wherever it
occurs in Section 1.2, and the penultimate
sentence of Section 1.2 shall not apply.
(H) Annual Benefit
For purposes of this Section 4.8, a
Participant's "Annual Benefit" shall be equal to
the sum of the following:
(1) The annual Retirement Income to
which the Participant is entitled under this
Plan; and
(2) The aggregate annual retirement
benefits (if any) to which the Participant is
entitled under all other qualified
defined-benefit plans maintained by any
Affiliate.
A Participant's Supplemental Retirement
Income shall not be considered a part of the
Participant's "Annual Benefit."
If an Annual Benefit (or any portion thereof)
is payable in any form other than a single-life
annuity or a qualified joint and survivor annuity,
as defined in section 417(b) of the Code, then
such Annual Benefit (or such portion) shall, for
purposes of this Paragraph (H), be converted into
a single-life annuity which is its actuarial
equivalent. Actuarial equivalency for this
purpose shall be based on the following actuarial
assumptions:
(1) For calendar years prior to
January 1, 1995, the actuarial assumptions
specified in Appendix A, provided that the
interest rate assumption shall equal the
greater of the rate specified in Appendix A
or five percent (5%); and
(2) For calendar years after
December 31, 1994, the Applicable Mortality
Table and an interest rate assumption equal
to the greater of the rate specified in
Appendix A or the Applicable Interest Rate.
(I) Applicable Interest Rate
For purposes of this Section 4.8, the term
"Applicable Interest Rate" shall mean the annual
rate of interest set forth in Appendix A for these
purposes.
(J) Applicable Mortality Table
For purposes of this Section 4.8, the term
"Applicable Mortality Table" shall mean the table
prescribed by Appendix A for these purposes.
(K) Average Annual Compensation
For purposes of this Section 4.8 only, the
term "Average Annual Compensation" shall mean the
Participant's annual Compensation, as defined in
Paragraph (L) below, averaged over that series of
consecutive twelve (12) month periods (not in
excess of three (3)) for which his cumulative
Compensation is highest. In the case of a
Participant who has severed from all employment
with any Affiliate, the amount determined under
the preceding sentence shall be increased with
respect to any calendar year following his
separation from employment by multiplying it by a
fraction determined as follows:
(1) The numerator of such fraction
shall be the amount described in
Paragraph (A)(1) above, as in effect for such
calendar year; and
(2) The denominator of such fraction
shall be the amount described in
Paragraph (A)(1) above, as in effect for the
calendar year in which the Participant
severed from all employment with any
Affiliate; provided that such denominator
shall in no event be greater than the
numerator described in Subparagraph (1)
above.
(L) Compensation
For purposes of this Section 4.8 only, the
term "Compensation" shall mean "wages," as defined
in section 3401(a) of the Code for purposes of
income tax withholding at the source, but
determined without regard to any rules that limit
the remuneration included in "wages" based on the
nature or location of the employment or the
services performed (such as the exception for
agricultural labor in section 3401(a)(2) of the
Code).
4.9 Return to Employment Following Retirement
If a Participant returns to the service of an Employer
after his Retirement Date (other than an In-Service
Retirement Date) and is receiving annuity or
installment payments, then payment of his Retirement
Income and Supplemental Retirement Income benefits
shall continue to be paid to him during his period of
reemployment.
4.10 Deemed Termination After Normal Retirement Date
Section 4.6 notwithstanding, in the case of a
Participant who is employed beyond his Normal
Retirement Date, the Participant's employment shall be
deemed to terminate for the purposes of the Plan
immediately prior to the first day of any calendar
month in which there are less than eight days during
which he is paid (or is entitled to payment) by an
Affiliate, whether for the performance of duties or for
any other reason. Accordingly, the first day of such
month shall be considered a Postponed Retirement Date
and payment of the Participant's Retirement Income and
Supplemental Retirement Income (if any) shall commence
as of such date, as provided in Section 4.6. Upon a
Participant's actual Postponed Retirement Date or In-
Service Retirement Date, this Section 4.10 shall cease
to apply and the Participant's Retirement Income and
Supplemental Retirement Income shall be recomputed in
the manner described in Section 4.6. For the purposes
of this Section 4.10, whether a corporation is an
Affiliate shall be determined as of the Participant's
Normal Retirement Date and without regard to the
penultimate sentence of Section 1.2.
4.11 Grandfathered Participants
The Retirement Income of each Participant who is a
Grandfathered Participant shall equal the greater of:
(A) The Cash Balance Benefit determined pursuant
to the provisions of this Article 4, without
regard to this Section 4.11; and
(B) The single sum value of the Participant's
adjusted Retirement Income calculated in
accordance with the provisions of Appendix C
(taking into account the factors set forth in
Appendix A).
Notwithstanding the above, effective June 1, 2007, the
benefit determined in accordance with Section 4.11(B)
shall be converted on June 1, 2007 into an Initial
Employer Allocation (in a manner consistent with
Section 4.3(B) utilizing the actuarial factors
applicable on June 1, 2007) and, thereafter, the
Participant shall have his Retirement Income determined
in accordance with the method set forth in Section 4.3.
4.12 Participants Transferring to/from Another
Company-Supported Plan
In the case of an Employee who becomes eligible to
participate in another plan funded at least in part by
Employer contributions (and who, therefore, ceases
active participation in this Plan pursuant to
Section 2.2), the Retirement Income shall be computed
as of the date he ceases active participation pursuant
to Section 2.2 and upon the Plan's benefit formula then
in effect. With respect to any Participant who was a
participant in the Retirement Plan for Employees of
American President Lines, Ltd. Represented by The
Professional, Office and Industrial Division, Marine
Engineers' Beneficial Association (AFL-CIO) and The
Marine Clerks Association, Local 63, I.L.W.U. (the
"Bargained Retirement Plan") and who becomes eligible
to participate in this Plan, the Company may elect to
transfer from the Bargained Retirement Plan to this
Plan assets and liabilities associated with the
benefits of such a Participant. Any such transfer
shall be made in accordance with section 414(l) of the
Code and shall not result in the reduction of any
protected benefits within the meaning of section
411(d)(6) of the Code and the regulations promulgated
thereunder. After any such transfer, the affected
Participant shall cease to be a Participant in the
Bargained Retirement Plan and shall receive his entire
benefit from this Plan.
ARTICLE 5
TERMINATION OF EMPLOYMENT PRIOR TO RETIREMENT
5.1 Termination of Service After Vesting
If a Participant (i) separates from all service with
any Affiliate prior to an Early Retirement Date, other
than by reason of death, and (ii) has completed a five
(5) or more year Period of Service, then he shall be
entitled to receive one hundred percent (100%) of the
Retirement Income accrued by him pursuant to Article 4
commencing as of a date determined in accordance with
Article 3.
5.2 Termination of Service Before Vesting
A Participant who separates from all service with any
Affiliate prior to his attainment of age sixty-five
(65), and prior to his completion of a five (5) year
Period of Service or death, for reasons other than
retirement on his Retirement Date, shall not be
entitled to any Retirement Income benefits under the
Plan.
5.3 Forfeitures
Prior to the termination of the Plan, any forfeiture
arising from the operation of this Article 5 or any
other provision of the Plan shall be used to reduce
future Employer contributions pursuant to Article 8.
ARTICLE 6
FORMS OF BENEFIT PAYMENT
6.1 Normal Form of Retirement Income
Although a Participant may, in accordance with the
provisions of this Article 6, elect to receive his
Retirement Income in the form of a lump sum payment, a
Participant's "Normal Form of Retirement Income" shall
be the form of benefit described in this Section 6.1.
(A) Single Participants
Except as otherwise provided for Married
Participants pursuant to Paragraph (B) below, the
Retirement Income shall be payable in the form of
a life annuity commencing as of the Participant's
Retirement Date and terminating with the last
monthly payment due prior to his death. The life
annuity shall be the Actuarial Equivalent of the
Participant's Retirement Income.
(B) Married Participants
In the case of a Married Participant who has
been married for at least one (1) year at the time
of his death and had been married to the same
spouse before his Benefit Distribution Date, the
Actuarial Equivalent of the Participant's
Retirement Income shall be payable to him in the
form of a monthly payment commencing as of the
Participant's Retirement Date and, after the
Participant's death, such spouse who is living at
the time of the Participant's death shall continue
to receive fifty percent (50%) of such monthly
payments for life.
6.2 Normal Form of Supplemental Retirement Income
(A) Single Participants
Except as otherwise provided for Married
Participants pursuant to Paragraph (B) below, or
unless an optional form of Retirement Income
described in Section 6.3 is duly elected by a
Participant pursuant to Section 6.3(F), the
Supplemental Retirement Income provided pursuant
to Section 4.4 and Appendix D, if any, shall be
payable in the form of a monthly payment
commencing as of his Retirement Date and
terminating with the last monthly payment due
prior to his death.
(B) Married Participants
Solely with respect to Married Participants,
unless an optional form of Retirement Income
described in Section 6.3 is duly elected, the
Supplemental Retirement Income provided pursuant
to Section 4.4 and Appendix D shall be the
Actuarial Equivalent of the Supplemental
Retirement Income provided under Paragraph (A)
above, payable as a reduced monthly Supplemental
Retirement Income to such Married Participant for
life commencing as of his Retirement Date. Upon
the death of the Married Participant, fifty
percent (50%) of the reduced Supplemental
Retirement Income shall be paid to and during the
life of the spouse to whom the Participant was
married on the date when the Supplemental
Retirement Income became payable, if such spouse
is then living. Such payments shall terminate
with the last monthly payment due prior to the
spouse's death.
6.3 Optional Forms of Retirement Income
Within a reasonable time before the Participant's
Benefit Distribution Date, the Company shall make
available to such Participant (i) a written explanation
of the terms and conditions of the normal form of
Retirement Income, (ii) a written explanation of the
Participant's right to make or revoke an election of an
optional form of Retirement Income and of the effect of
such election or revocation, (iii) a written
explanation of the effect of a failure to make an
election of an optional form of payment and (iv) a
written explanation of the rights of the Participant's
spouse under Paragraph (F) below.
In lieu of the normal form of Retirement Income
provided in Section 6.1 and the normal form of
Supplemental Retirement Income provided in Section 6.2,
a Participant may elect one of the following options,
subject to the conditions of Paragraph (F) below:
(A) Supplemental Retirement Income Options
A Participant who is not eligible to receive
a Retirement Income but who is eligible to receive
a Supplemental Retirement Income pursuant to
Section 4.4 and Appendix D may elect, during the
election period described in Paragraph (F) below,
to receive his Employee Aggregate Contributions in
a single lump sum, payable upon his separation
from all service with any Affiliate. The amount
of his Employee Aggregate Contributions shall
contain interest accrued to the date of payment in
accordance with Section 1(e) of Appendix D. In
the case of a Married Participant, the election
shall be effective only when agreed to in writing
by such Participant's spouse in the manner
described in Paragraph (F) below.
A Married Participant who (i) does not elect
to receive his Supplemental Retirement Income
pursuant to the foregoing paragraph and (ii) does
not elect to receive an optional form of
Retirement Income pursuant to Paragraphs (B) or
(D) below may elect, during the election period
described in Paragraph (F) below, to receive his
Supplemental Retirement Income commencing upon his
Retirement Date and terminating with the last
monthly payment prior to his death. Such
Supplemental Retirement Income shall be the
Actuarial Equivalent of the Supplemental
Retirement Income otherwise payable under
Section 6.2(B). The election shall be effective
only when agreed to in writing by the Married
Participant's spouse in the manner described in
Paragraph (F) below. However, the election may be
revoked by the Married Participant by means of a
written notice to the Company at any time prior to
the commencement of such payments, which
revocation shall become effective immediately.
A Participant who (i) does not elect to
receive his Supplemental Retirement Income in an
optional form described above and (ii) elects to
receive his Retirement Income in an optional form
pursuant to Paragraphs (B), (C) or (D) below shall
receive his Supplemental Retirement Income in the
same form as his Retirement Income. If
Paragraph (B) below is elected, the actual
Supplemental Retirement Income payable shall be
the Actuarial Equivalent of the benefit payable
under Section 6.2. If a lump sum payment under
Paragraph (D) below is elected, the Participant
shall receive his employee contributions with
interest accrued to the date of payment pursuant
to Section 1(e) of Appendix D. If an installment
distribution under Paragraph (D) below is elected,
the Participant's employee contributions with
interest accrued to the date of the first
installment pursuant to Section 1(e) of Appendix
D shall be added to the Participant's entire
interest pursuant to Paragraph (D).
(B) Contingent Annuitant Options
A Participant may elect to receive the
Actuarial Equivalent of the Retirement Income
otherwise payable under Section 6.1, commencing
upon his Retirement Date and, after his death,
payable to the contingent annuitant designated by
the Participant, if then living, in the same
amount or in an amount equal to fifty percent
(50%) of the payments made to the Participant.
If the Participant's contingent annuitant
dies before the Participant's Benefit Distribution
Date, the normal form of Retirement Income
automatically shall become payable, as if a
contingent annuitant option had not been elected,
unless the Participant elects another optional
form of payment within the applicable election
period. If the contingent annuitant predeceases
the Participant after his Benefit Distribution
Date, the Retirement Income payments to the
Participant will not be adjusted and will cease
upon the Participant's death. Except as provided
in Article 7, no income will be payable to a
surviving contingent annuitant if the Participant
dies before his Benefit Distribution Date.
An election of a contingent annuitant option
shall not become effective if an annual rate of
Retirement Income of less than one hundred twenty
dollars ($120) would be payable either to the
Participant or to his contingent annuitant.
(C) Single Life Annuity for Married Participant
A Married Participant may elect to receive
his Retirement Income in the form of a monthly
payment commencing as of the Participant's
Retirement Date and terminating with the last
monthly payment due prior to his death. An
election pursuant to this Paragraph (C) shall be
effective only when agreed to in writing by such
Participant's spouse in the manner described in
Paragraph (F) below.
(D) Payment in a Lump Sum or in Installments
At the request of the Participant, payment to
a retiring Participant may be made in a lump sum
or, in the case of a Participant who is an
Employee on December 31, 1992, in annual
installments. The lump sum payment of a
Participant's Cash Balance Benefit shall equal the
Participant's Retirement Account. The lump sum
payment of any other benefit payable under this
Plan shall equal the Actuarial Equivalent of the
Participant's normal form of Retirement Income as
of his Retirement Date.
Installments shall be paid over one of the
following periods:
(1) A period certain not longer than
the life expectancy of the Participant; or
(2) A period certain not longer than
the joint life expectancy of the Participant
and his spouse.
The amount to be distributed each year shall
not be smaller than the amount obtained by
dividing the entire interest of the Participant at
the time the distribution is made by the life
expectancy of the Participant or the joint life
expectancy of the Participant and his spouse
(whichever is applicable). However, no
distribution need be made in any year, or a lesser
amount may be distributed, if the aggregate
amounts distributed by the end of such year are at
least equal to the aggregate of the minimum
amounts required by this Paragraph (D) to be
distributed by the end of such year. Any
installments that remain unpaid upon the
Participant's death shall be paid to his
Beneficiary in a lump sum.
A Participant's "entire interest" shall equal
the lump sum value of his Retirement Income as of
the Participant's Retirement Date, increased by
earnings (in accordance with Section 6.3(E) or, if
the Participant's entire interest is maintained in
a separate interest-bearing account at a financial
institution, the amount actually earned), and
decreased by the amount of installment payments
previously made.
Life expectancies shall be determined in
accordance with the regulations and tables issued
under section 72 of the Code.
(E) Interest on Installments
If the payment of a Participant's Retirement
Income is made in installments, the unpaid amount
shall be credited with interest compounded
annually at the rate prescribed in Section 4.3(C).
(F) Election Requirements
An election of an optional form of payment or
a Retirement Date before the Normal Retirement
Date shall be made by a Participant on the
prescribed form and filed with the Company. Such
election may be made only during an election
period consisting of the ninety (90) consecutive
days prior to the Participant's Benefit
Distribution Date. A Participant may revoke such
an election by providing a written notice to the
Company on the prescribed form at any time prior
to the end of the election period.
6.4 Small Payments
If the Actuarial Equivalent of all benefits payable to
any person under the Plan, expressed as a lump sum, is
not more than three thousand five hundred dollars
($3,500), then the Actuarial Equivalent of such
benefits shall be paid to such person in a single lump
sum in lieu of monthly payments. For this purpose, a
Retirement Income of $0 shall be deemed paid to any
Participant who separates from service without being
entitled to any Retirement Income benefits, as provided
under Section 5.2 of the Plan. The lump sum payment
shall be made as soon as reasonably practicable after
the Participant separates from service or, in the case
of a death benefit, the date of the Participant's
death. However, no distribution shall be made under
the preceding sentence after a Married Participant's
Benefit Distribution Date, unless the Married
Participant and his spouse (or surviving spouse if the
Married Participant has died) consent in writing to the
distribution within the ninety- (90-) day period prior
to distribution.
6.5 General Rule on Commencement Dates
All distributions under the Plan shall be made in
accordance with the Income Tax Regulations under
section 401(a)(9) of the Code. Such regulations are
incorporated in the Plan by reference and shall
override any inconsistent provisions of the Plan. In
applying such regulations, no individual's life
expectancy shall be recalculated with respect to the
payment of any Retirement Income under the Plan, except
to the extent that a recalculation is requested by such
individual in writing and is permitted by such
regulations.
ARTICLE 7
PRERETIREMENT DEATH BENEFITS
7.1 Benefit Eligibility
The Beneficiary of a Participant shall be entitled to a
Death Benefit under this Article 7 if the Participant
dies prior to his Benefit Distribution Date, but on or
after June 1, 1997. Any benefit payable with respect
to a Participant who dies prior to June 1, 1997 shall
be determined in accordance with the provisions of the
Plan in effect on May 31, 1997.
7.2 Payment of Death Benefit
(A) If the Beneficiary is not the surviving
spouse of the Participant, payment shall be made
as soon as is practicable after the Participant's
death.
(B) If the Beneficiary is the surviving spouse of
the Participant, payment of the Death Benefit
shall commence as of the first day of the month
coincident or next following the later of (1) the
Participant's Normal Retirement Date or (2) the
date of the Participant's death. If the
Participant's death occurs prior to the
Participant's Normal Retirement Date, the
surviving spouse may, in the manner prescribed by
the Company, elect to receive the Death Benefit on
an earlier commencement date, provided the
surviving spouse's election is made within the
ninety (90) day period prior to the desired
commencement date. If, pursuant to Section 7.3,
the Death Benefit is to be paid in a lump sum
payment, then the payment shall be made as soon as
practicable on or after the date set forth herein.
If payment is in the form of an annuity, the
payments shall be computed as of the date set
forth herein and shall commence as soon as
practicable on or after such date.
7.3 Form and Amount of Death Beneficiary
If the Participant's Beneficiary is not the surviving
spouse, payment of the Death Benefit shall be made in a
lump-sum payment in cash. If the Participant's
Beneficiary is not the surviving spouse, and if the
Participant is eligible for the Supplemental Retirement
Income provided by Appendix D, then the Participant's
death benefit shall also include the Participant's
employee contributions plus interest pursuant to the
provisions of Section 1(e) of Appendix D to the date of
payment.
If the Participant's surviving spouse is his
Beneficiary, payment shall be made as an annuity for
the life of the surviving spouse that is payable
monthly, unless the surviving spouse elects to receive
the benefit as a lump-sum payment in cash. For
purposes of this Section 7.3:
(A) If payable in a lump-sum and accrued under
Section 4.3, the vested portion of the Death
Benefit shall be in an amount equal to the
Participant's Cash Balance Benefit as of the date
payment of such benefit is commenced. If payable
in a lump-sum and accrued under any other
provision of the Plan, the Death Benefit shall be
equal to the Actuarial Equivalent of the vested
Retirement Income based on the factors set forth
in Appendix A.
(B) If payable to the surviving spouse as a
single- life annuity and accrued under Section
4.3, the Death Benefit shall be payable in an
Actuarially Equivalent single-life annuity based
on the factors set forth in Appendix A and the
surviving spouse's age at the time the benefit is
commenced in accordance with the factors set forth
in Appendix A. If the Participant is eligible for
the Supplemental Retirement Income provided by
Appendix D, then the Death Benefit shall also
include an amount, payable for the life of such
spouse, which is the Actuarial Equivalent of the
Participant's employee contributions plus interest
pursuant to Section 1(e) of Appendix D. If,
however, the spouse does not survive to receive a
total Death Benefit equal to the Participant's
employee contributions plus interest pursuant to
Section 1(e) of Appendix D at his death, then the
excess shall be paid in a lump sum to the
Participant's Beneficiary.
7.4 Involuntary Lump Sum Cash-Outs
Any other provision of the Article notwithstanding, if
the value of the Participant's vested Retirement Income
is not more than $3,500 as of the date of his death,
payment of the Death Benefit shall be made to the
Beneficiary in a single lump-sum payment in cash as
soon as practicable after the date of the Participant's
death.
7.5 Beneficiary Designation for Preretirement Death Benefit
The Participant may not designate a non-spouse
Beneficiary to receive the Death Benefit under this
Article 7 without the consent of his spouse in
accordance with this Section 7.5. Any spousal consent
under this Section 7.5 above shall be in writing, shall
identify the non-spouse Beneficiary, shall acknowledge
the effect of such election and shall be witnessed by a
Plan representative (if permitted by the Employer) or
by a notary public. A consent, once given by a spouse,
shall not be revocable by such spouse, unless the
Participant revokes the designation. The spouse's
consent shall not be required if (a) the Participant
establishes to the Employer's satisfaction that the
spouse's consent cannot be obtained because the spouse
cannot be located or (b) the Participant is legally
separated or has been abandoned (within the meaning of
local law) and has an appropriate court order (unless a
qualified domestic relations order provides otherwise)
and, in either such case, (c) the Participant's
designated Beneficiary agrees in writing that, if the
Employer is compelled by a court of competent
jurisdiction or other authority to pay all or any
portion of the Death Benefit to or on behalf of such
spouse, the designated Beneficiary will indemnify the
Employer, by paying to the Employer, upon written
demand, an amount equal to such payment, together with
reasonable attorneys' fees and expenses. The Employer
may, in its sole discretion, waive the indemnification
requirement. If the spouse is legally incompetent to
give consent, the spouse's legal guardian (including
the Participant) may give consent.
7.6 Notice of Death Benefit Options
The Employer shall provide each Participant within the
applicable period, a written explanation of the Death
Benefit detailing the terms and conditions on which the
Death Benefit will be paid to the surviving spouse of
the Participant, the Participant's right to elect a non-
spouse Beneficiary to receive the Death Benefit, the
right of the spouse with respect to the Death Benefit,
and the effect on the spouse of the spouse's consent to
the Participant's designation of a non-spouse
Beneficiary.
For purposes of this Section 7.6, the "applicable
period" is whichever of the following periods ends
last:
(A) The period beginning with the first day of
the Plan Year in which the Participant attains age
32 and ending with the close of the Plan Year
preceding the Plan Year in which the Participant
attains age 35; except that in the case of a
Participant who separates from service before
attaining age 35, the applicable period means the
period beginning one year before the separation
from service and ending one year after such
separation. If such a Participant is later
reemployed, notice will be given during the
reemployment applicable period.
(B) A reasonable period ending after the
individual becomes a Participant. A "reasonable
period" is the period beginning one year prior to
and ending on the earlier of 30 days prior to the
Benefit Distribution Date or one year after the
date the individual becomes a Participant.
7.7 Other Death Benefits
If a Participant's death occurs after commencement of
his Retirement Income, the Plan shall not provide any
death benefits except in the following cases:
(A) If the form of Retirement Income which the
Participant was receiving contains provisions for
the payment of benefits after the Participant's
death, a benefit shall be paid accordingly; and
(B) If the Participant made employee
contributions under the Natomas Plan or a Prior
Plan, his Beneficiary shall receive, when the
later to survive of the Participant or his spouse
dies, a lump sum payment equal to the excess (if
any) of the Participant's employee contributions
plus interest pursuant to Section 1(e) of Appendix
D as of the Benefit Distribution Date over the
total amount of Retirement Income and Supplemental
Retirement Income received by the Participant and
his spouse. Payment shall be made as soon as
practicable (but in no event later than five (5)
years) after the Participant's death.
ARTICLE 8
FINANCING THE PLAN
8.1 Participant Contributions
Participants are not required or permitted to
contribute to the Plan. However, for any Participant
who was a Participant in a Prior Plan or the Natomas
Plan and had a balance in his contribution account when
his participation in the Prior Plan or the Natomas Plan
concluded, his balance in that account shall become a
part of the Trust Fund and shall be payable in
accordance with the provisions of this Plan.
8.2 Employer Contributions
Each Employer shall make such contributions from time
to time as it deems necessary to provide the benefits
of the Plan. The minimum amount of such contributions
shall be that amount which is required to meet the
minimum funding standard of ERISA and any governmental
regulations and rulings issued in connection with
ERISA. However, the Employer is under no obligation to
make any contributions under the Plan after the Plan is
terminated, whether or not benefits accrued or vested
prior to the date of termination have been fully
funded.
8.3 Trust Agreement
The Company has entered into a Trust Agreement, which
shall be a part of the Plan. All contributions made
pursuant to this Article 8 shall be paid to the Trust
Fund. All such contributions and increments thereon
shall be held and disbursed in accordance with the
provisions of the Plan and the Trust Agreement. No
person shall have any interest in, or right to, any
part of the funds held in the Trust Fund, except as
expressly provided in the Plan or Trust Agreement.
8.4 Reversion of Assets
Prior to the termination of the Plan, the assets of the
Plan shall not inure to the benefit of an Employer and
shall be held for the exclusive purposes of providing
benefits to Participants and their contingent
annuitants and Beneficiaries and for defraying the
reasonable expenses of administering the Plan, except
that:
(A) In the case of an Employer contribution which
is made because of a mistake of fact, such
contribution shall be returned to the Employer
within one (1) year after the payment of the
contribution; and
(B) Each Employer contribution is expressly condi
tioned upon the deductibility of the contribution
under section 404 of the Code. If the deducti
bility of a contribution is disallowed, the amount
for which a deduction was disallowed (reduced by
any losses incurred with respect to such amount)
shall be returned to the Employer within one (1)
year after the date of disallowance.
ARTICLE 9
ADMINISTRATION OF THE PLAN AND MANAGEMENT OF ASSETS
9.1 Plan Sponsor and Plan Administrator
The Company is the "plan sponsor" and the "plan
administrator" of the Plan, as such terms are used in
ERISA and the Code.
9.2 Administrative Responsibilities
The Company shall be the named fiduciary which has the
authority to control and manage the operation and
administration of the Plan. The Company in its sole
discretion shall make such rules, interpretations and
computations and take such other actions to administer
the Plan as the Company may deem appropriate. The
Company shall have sole discretion to interpret the
terms of the Plan and to determine eligibility for
benefits pursuant to the objective criteria set forth
in the Plan. The rules, interpretations, computations
and other actions of the Company shall be binding and
conclusive on all persons. In administering the Plan,
the Company shall act in a nondiscriminatory manner to
the extent required by section 401(a) and related
provisions of the Code and shall at all times discharge
its duties with respect to the Plan in accordance with
the standards set forth in section 404(a)(1) of ERISA.
9.3 Management of Plan Assets
The Company shall be a named fiduciary with respect to
control and management of the assets of the Plan, but
only to the extent that it shall have the authority
(i) to appoint one or more trustees to hold the assets
of the Plan in trust and to enter into a trust
agreement with each trustee it appoints, (ii) to
appoint one or more Investment Managers for any assets
of the Plan and to enter into an investment management
agreement with each Investment Manager it appoints,
(iii) to direct the investment of any Plan assets not
assigned to an Investment Manager and (iv) to remove
any trustee or Investment Manager it previously
appointed. Each Investment Manager so appointed shall
acknowledge in writing that it is a fiduciary with
respect to the Plan.
9.4 Trustee and Investment Managers
The Trustee shall have the exclusive authority and
discretion to control and manage the Plan assets held
in trust by it, except to the extent that (i) the
Company directs how such assets shall be invested or
(ii) the Company allocates the authority to manage such
assets to one or more Investment Managers. Each
Investment Manager appointed under Section 9.3 shall
have the exclusive authority to manage, including the
power to acquire and dispose of, the Plan assets
assigned to it by the Company. The Trustee and any
Investment Manager shall be solely responsible for
diversifying the investment, in accordance with section
404(a)(1)(C) of ERISA, of the Plan assets assigned to
them by the Company, except to the extent that the
Company directs how such assets shall be invested.
9.5 Delegation of Fiduciary Responsibilities
The Company may engage such attorneys, actuaries,
accountants, consultants or other persons to render
advice or to perform services with regard to any of its
responsibilities under the Plan as it shall determine
to be necessary or appropriate. The Company may
designate by written instrument (signed by both
parties) one or more persons to carry out, where
appropriate, fiduciary responsibilities of the Company.
The duties and responsibilities of the Company under
the Plan shall be carried out by the directors,
officers and employees of the Company, acting on behalf
and in the name of the Company in their capacities as
directors, officers and employees and not as individual
fiduciaries. Except as provided in Section 14.1
(Review Panel), the Company is specifically prohibited
from designating any director, officer or employee of
the Company as a fiduciary and from allocating or
delegating to any such person any of its fiduciary
responsibilities.
9.6 Enrolled Actuary
The Company shall appoint an Enrolled Actuary to make
actuarial valuations of the liabilities under the Plan;
to recommend to it the actuarial funding method and
actuarial assumptions for use from time to time in
actuarial and other computations for any purpose under
the Plan; to recommend to it the range of permissible
contributions to be made by each Employer; and to
perform such other services as the Company shall deem
necessary or desirable in connection with the
administration of the Plan.
9.7 Reliance Upon Advice
To the extent permitted by law, the Company shall be
entitled to rely conclusively upon, and shall be fully
protected in any action taken or suffered in good faith
in reliance upon, any attorney, actuary, accountant,
consultant or other person selected by the Company, or
in reliance upon any tables, valuations, certificates,
opinions or reports which shall be furnished by any of
them or by the Trustee.
9.8 Funding Policy
The Company shall have the fiduciary responsibility for
establishing a funding policy and method that satisfies
the requirements of Part 3 of Subtitle B of Title I of
ERISA, and shall review the funding policy and method
at least annually.
9.9 Communication of Financial Needs
The Company shall communicate to the Trustee (or
Investment Manager, where appropriate) from time to
time (but at least annually) its determination of the
Plan's short- and long-term financial needs.
9.10 Administrative Expenses
All expenses that arise in connection with the
administration of the Plan, including (but not limited
to) the compensation of the Trustee, administrative
expenses and proper charges or disbursements of the
Trustee and compensation or other charges and expenses
of any Investment Manager, attorney, actuary,
accountant, consultant, or other person who shall be
employed by the Company in connection with the
administration of the Plan, shall be paid from the
Trust Fund to the extent not paid by the Company. The
Company shall have complete and unfettered discretion
to determine whether an expense of the Plan shall be
paid by the Company or out of the Trust Fund, and the
Company's discretion and authority to direct the
payment of expenses out of the Trust Fund shall not be
limited in any way by any prior decision or practice
regarding payment of the expenses of the Plan.
9.11 Manner of Payments
Subject to the provisions of the Trust Agreement, the
Company shall determine the manner in which the funds
of the Plan shall be disbursed pursuant to the Plan.
ARTICLE 10
AMENDMENT OR TERMINATION
10.1 Amendments
The Company may amend (retroactively or prospectively)
any or all of the provisions of the Plan at any time
by action of its board of directors or by action of a
committee or individual(s) acting pursuant to a valid
delegation of authority; provided, however, that no
amendment shall make it possible for any part of the
corpus or income of the Trust Fund to be used for, or
diverted to, purposes other than the exclusive benefit
of Participants and their contingent annuitants and
Beneficiaries prior to the satisfaction of all
liabilities with respect to Participants and their
contingent annuitants and Beneficiaries under the
Plan; and provided that no amendment shall make it
possible to deprive any Participant of a previously
accrued benefit, except to the extent permitted by
section 412(c)(8) of the Code.
10.2 Merger, Consolidation or Transfer
Except as otherwise provided in regulations under the
Code, in the event of any merger or consolidation
with, or transfer of assets or liabilities to, any
other plan, the benefit that each Participant would be
entitled to receive if the Plan were to terminate
immediately after the merger, consolidation or
transfer shall not be less than the benefit he would
have been entitled to receive if the Plan had
terminated immediately before the merger,
consolidation or transfer.
10.3 Rights and Obligations Upon Termination
(A) It is the intention of the Company that the
Plan will continue indefinitely, but the Company
may, at any time and for any reason, by action of
its board of directors or by action of a
committee or individual(s) acting pursuant to a
valid delegation of authority, terminate the Plan
or permanently discontinue Company contributions
with respect to any or all Employers hereunder
without terminating the Trust Agreement or the
other provisions of the Plan. Any other
provision hereof notwithstanding, no Employer
shall have any obligation to continue to make
contributions to the Plan after the termination
thereof with respect to such Employer. Upon
termination of the Plan, the accrued benefits of
all Employees (to the extent funded) shall become
fully vested and nonforfeitable.
(B) It is the intent of this Section 10.3 that
any termination of the Plan be accomplished in
accordance with ERISA section 4044 and sections
401(a)(4) and 411(d)(3) of the Code and related
regulations. Prior to any intended termination
of the Plan, the Plan shall be amended to provide
for allocation and distribution of Plan assets
attributable to accrued benefits among
Participants and Beneficiaries in compliance with
such laws, and such allocation and distribution
shall then be made by the Company in accordance
with the Plan as so amended. Upon termination of
the Plan, excess assets of the Trust Fund shall
revert to the Company to the extent permitted by
ERISA.
(C) If any partial termination (as determined by
the Company in accordance with applicable Code
provisions) of the Plan occurs, then the accrued
benefits of those Employees with respect to whom
the Plan is so terminated (to the extent funded)
shall become fully vested and nonforfeitable.
(D) Until the final distribution of all Plan
assets allocated on account of any termination or
partial termination of the Plan, the Trust Fund
shall continue, and the Company and the Trustee
shall continue to have and may exercise all of
the powers conferred upon them by the Plan and
the Trust Agreement.
10.4 Limitations Upon Highest-Paid Employees
(A) Restriction on Benefits
In the event of the termination of the Plan,
the benefit of any Highly Compensated Employee or
any Highly Compensated Former Employee shall be
limited to a benefit that is nondiscriminatory
under section 401(a)(4) of the Code.
(B) Pre-Termination Restrictions on Distributions
(1) Limit on Annual Payments
The annual payments to a Restricted
Employee under the Plan shall be restricted
to an amount equal to the payments that would
be made on behalf of such Restricted Employee
under a single-life annuity that is the
Actuarial Equivalent of the sum of his
accrued benefit and his other Benefits under
the Plan. The restrictions in this Section
10.4 shall not apply, however, if:
(a) After payment to a
Restricted Employee of all Benefits, the
value of the Plan's assets equals or
exceeds one hundred ten percent (110%)
of the value of current liabilities (as
defined in section 412(l)(7) of the
Code); or
(b) The value of the Benefits
for a Restricted Employee is less than
one percent (1%) of the value of current
liabilities; or
(c) The value of the Benefits
for a Restricted Employee is $3,500 or
less.
(2) Definition of Benefit
For purposes of this Section 10.4
only, the term "Benefit" shall include, among
other benefits, loans in excess of the amount
set forth in section 72(p)(2)(A) of the Code,
any periodic income, any withdrawal values
payable to a living Participant and any death
benefits not provided by insurance on the
Participant's life.
(3) Definition of Restricted Employee
For purposes of this Section 10.4
only, the term "Restricted Employee" with
respect to any Plan Year shall mean one of
the twenty-five (25) Highly Compensated
Employees and Highly Compensated Former
Employees whose Compensation (as defined in
Section 4.8) is highest for such Plan Year.
ARTICLE 11
GENERAL PROVISIONS
11.1 No Implied Employment Contract
The Plan shall not be deemed (i) to give any Employee
or other person any right to be retained in the employ
of an Employer nor (ii) to interfere with the right of
an Employer to discharge any Employee or other person
at any time and for any reason.
11.2 Benefits Not Assignable
Except as otherwise provided in Section 11.7 or
section 414(p) of the Code with respect to qualified
domestic relations orders, no distribution or payment
under the Plan to any Participant, Beneficiary or
contingent annuitant shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge the
same shall be void; nor shall any distribution or
payment in any way be liable for or subject to the
debts, contracts, liabilities, engagements or torts of
any person entitled to the distribution or payment.
If any Participant, Beneficiary or contingent
annuitant has been adjudicated a bankrupt or has
purported to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge any distribution or
payment, voluntarily or involuntarily, then the
Company, in its discretion, may direct the Trustee to
hold or apply the distribution or payment or any part
thereof to or for the benefit of such Participant,
Beneficiary or contingent annuitant in such manner as
the Company shall direct. The Company shall establish
reasonable procedures to determine the qualified
status of domestic relations orders and to administer
distributions under qualified domestic relations
orders.
11.3 Payments Under Qualified Domestic Relations Order
The creation or recognition of the right of an
Alternate Payee to any Retirement Income payable with
respect to a Participant by, and the payment of
benefits pursuant to, a qualified domestic relations
order (as defined in section 414(p) of the Code) shall
not constitute a violation of Section 11.2. The
Company shall establish reasonable, written procedures
to determine the qualified status of a domestic
relations order and to administer distributions under
such orders. Pursuant to a qualified domestic
relations order, the Plan may distribute the Actuarial
Equivalent of any benefit payable to an Alternate
Payee prior to the Participant's Benefit Distribution
Date, but no earlier than the Participant's Early
Retirement Date or (if earlier) Normal Retirement
Date, without regard to whether the Participant is
then retired. An Alternate Payee's election of a
contingent annuitant option, lump sum option or
installment option for distribution of his Plan
benefit shall be conditioned upon satisfying any
election requirement equivalent to those applicable to
the Participant. To the extent that a qualified
domestic relations order creates, assigns or
recognizes an Alternate Payee's right to any portion
of the Retirement Income otherwise payable to or with
respect to a Participant, such portion thereafter
shall not be taken into account in determining the
Retirement Income payable to or with respect to such
Participant.
11.4 Payments of Benefits to Infants or Incompetents
If the Company determines that any person entitled to
payments under the Plan is an infant or is incompetent
by reason of a physical or mental disability, then it
may cause all payments thereafter becoming due to such
person to be made to any other person for his benefit,
without responsibility for the application of amounts
so paid. Payments made pursuant to this provision
shall completely discharge the Employer, the Trustee
and the Company.
11.5 Proof of Age and Marriage
Participants, spouses and contingent annuitants shall
furnish proof of age and marital status satisfactory
to the Company at such time or times as the Company
may prescribe. Subject to Section 6.5, the Company
may delay the disbursement of any benefit due under
the Plan until all pertinent information with respect
to age and marital status has been so furnished.
11.6 Source of Benefits
The Trust Fund shall be the sole source of benefits
under the Plan, and each Employee, Participant,
contingent annuitant, Beneficiary or other person who
claims the right to any payment or benefit under the
Plan shall only be entitled to look to the Trust Fund
for such payment or benefit and shall not have any
right, claim or demand therefor against any Employer
or any officer or director of the Employer.
11.7 Overpayments and Underpayments
If any person has received a payment from the Plan in
excess of the amount (if any) to which he was entitled
under the Plan, then the excess may be withheld from
one or more subsequent payments to such person (or to
any person who derives his rights under the Plan from
the person who received the overpayment); provided
that no single periodic payment under the Plan shall
be reduced by more than twenty-five percent (25%) on
account of one or more prior overpayments. In
addition, the Company may employ any other lawful
means to recover overpayments on behalf of the Plan.
If any person has received less than the amount to
which he is entitled under the Plan, then the entire
amount of the deficiency shall be paid to him (or to
his representative) as soon as reasonably practicable
after the discovery of the underpayment.
11.8 Service in Multiple Fiduciary Capacities
Any person or group of persons may serve in more than
one fiduciary capacity with respect to the Plan and
Trust Agreement.
11.9 Criminal Acts
Any Participant who (i) has not attained the age of
sixty-five (65), (ii) has less than a five (5) year
Period of Service and (iii) admits to, or is convicted
of, any criminal act against an Employer shall not be
entitled to any Retirement Income benefits for service
after November 15, 1972, attributable to Employer
contributions, unless the Plan is terminated prior to
the date when he admits to, or is convicted of, such
criminal act.
11.10 IRS Qualification
The Company intends that the Plan (including the Trust
Agreement forming a part thereof) shall be a qualified
pension plan for the exclusive benefit of Employees
and their Beneficiaries, as provided in
sections 401(a) and 501(a) of the Code.
11.11 Construction of Plan
Headings to the Articles, Sections or Subsections of
the Plan are for reference only. In the event of a
conflict between a heading and the text of the Plan,
the text of the Plan shall control. In the event of a
conflict between the text of the Plan and any summary,
description or other information regarding the Plan,
the text of the Plan shall control.
Words indicating gender shall be construed to include
males and females wherever appropriate. The singular
shall include the plural, and the plural shall include
the singular, unless the context otherwise requires.
11.12 Forms for Plan Communications
All communications from a Participant or other person
with regard to the Plan shall become effective only
when made in writing and filed with the Company. If
the Company has adopted prescribed forms for any
communications, such communications shall be effective
only if filed on such forms.
11.13 Governing Law
The provisions of the Plan shall be construed,
administered and governed according to ERISA and, to
the extent not superseded by ERISA, the laws of the
State of California.
ARTICLE 12
PERIOD OF SERVICE
12.1 Period of Employment Relationship
An individual's Period of Service shall include any
period during which he maintains an employment
relationship with any Affiliate, determined as
follows:
(A) General Rule
An individual's employment relationship shall
begin as of the date on which he first performs
duties as an employee of any Affiliate for which
he receives (or is entitled to receive)
compensation and shall end as of the date on
which he retires, dies, quits, is discharged or
otherwise severs from all employment with any
Affiliate.
(B) Approved Absence
If an individual is absent (with or without
pay) with the approval of an Affiliate and if the
absence does not exceed twelve (12) months, then
the absence shall not be considered a quit. If
the absence exceeds twelve (12) months but the
individual complies with all terms and conditions
imposed from time to time by the Affiliate (which
may include a requirement of reemployment), then
the absence also shall not be considered a quit.
If the absence exceeds twelve (12) months and if
the individual fails to comply with such terms
and conditions, then the absence shall be
considered a quit as of the expiration of the
first twelve (12) months.
(C) Military Leave
If an individual enters into military service
with the United States, then his entry into
military service shall not be considered a quit;
provided, however, that the entry into military
service shall be considered a quit as of the time
when it occurs if the individual fails to return
to employment with an Affiliate within the period
during which his reemployment rights are
protected by law.
12.2 Interval Between Periods of Employment
The Period of Service of an individual who is rehired
by an Affiliate within 365 days after the end of his
previous employment relationship with an Affiliate, as
determined pursuant to Section 12.1, shall include the
period between the end of the previous employment
relationship and the commencement of the new
employment relationship.
12.3 Predecessor Companies
In determining an individual's nonforfeitable interest
in his Retirement Income, his Period of Service also
shall include any Period of Service with a company
merged or consolidated with an Employer, or a
substantial part of the assets or business of which
has been acquired by an Employer (hereafter
"Predecessor Company"):
(A) If the Employer continues to maintain an
employee pension benefit plan of such Predecessor
Company;
(B) If, and to the extent, such employment with
the Predecessor Company is required to be treated
as employment with the Employer under regulations
prescribed by the Secretary of the Treasury; or
(C) If, and to the extent, granted by the Company
in its sole discretion, effected on a
nondiscriminatory basis, regarding all persons
similarly situated.
For purposes of determining an individual's Retirement
Income benefit, his Period of Service also may include
a Period of Service with a Predecessor Company to the
extent granted by the Company in its sole discretion,
effected on a nondiscriminatory basis regarding all
persons similarly situated.
12.4 Other Periods
An individual's Period of Service shall include the
following:
(A) Any period recognized under the terms of the
Plan as in effect on May 31, 1997; and
(B) Any other period which constitutes a Period
of Service under such written, uniform and
nondiscriminatory rules as the Company may adopt
from time to time.
12.5 Years in a Period of Service
All of an individual's Periods of Service determined
pursuant to this Article 12 shall be aggregated on the
basis of days. The number of years in the
individual's aggregate Period of Service shall be
expressed as a number rounded to the fourth decimal
place determined by dividing the aggregate number of
days in such period by three hundred sixty-five (365).
ARTICLE 13
CLAIMS AND INQUIRIES
13.1 Application for Benefits
Applications for benefits and inquiries concerning the
Plan (or concerning present or future rights to
benefits under the Plan) shall be submitted to the
Company in writing. An application for benefits shall
be submitted on the prescribed form and shall be
signed by the Participant or, in the case of a benefit
payable after his death, by his surviving spouse or
Beneficiary.
13.2 Denial of Application
In the event that an application for benefits is
denied in whole or in part, the Company shall notify
the applicant in writing of the denial and of the
right to a review of the denial. The written notice
shall set forth, in a manner calculated to be
understood by the applicant, specific reasons for the
denial, specific references to the provisions of the
Plan on which the denial is based, a description of
any information or material necessary for the
applicant to perfect the application, an explanation
of why the material is necessary, and an explanation
of the review procedure under the Plan. The written
notice shall be given to the applicant within a
reasonable period of time (not more than ninety (90)
days) after the Company received the application,
unless special circumstances require further time for
processing and the applicant is advised of the
extension. In no event shall the notice be given more
than one hundred eighty (180) days after the Company
received the application.
ARTICLE 14
REVIEW OF DENIED CLAIMS
14.1 Review Panel
The Company shall from time to time appoint a panel
(the "Review Panel") which shall consist of three (3)
individuals who may, but need not, be Employees. The
Review Panel shall be the named fiduciary which has
the authority to act with respect to any appeal from a
denial of benefits or a determination of benefit
rights.
14.2 Request for Review
An applicant whose application for benefits was denied
in whole or in part, or the applicant's duly
authorized representative, may appeal from the denial
by submitting to the Review Panel a request for a
review of the application within ninety (90) days
after receiving written notice of the denial from the
Company. The Company shall give the applicant or his
representative an opportunity to review pertinent
materials, other than legally privileged documents, in
preparing the request for a review. The request for a
review shall be in writing. The request for a review
shall set forth all of the grounds on which it is
based, all facts in support of the request, and any
other matters which the applicant deems pertinent.
The Review Panel may require the applicant to submit
such additional facts, documents or other material as
it may deem necessary or appropriate in making its
review.
14.3 Decision on Review
The Review Panel shall act on each request for a
review within sixty (60) days after receipt, unless
special circumstances require further time for
processing and the applicant is advised of the
extension. In no event shall the decision on review
be rendered more than one hundred twenty (120) days
after the Review Panel received the request for a
review. The Review Panel shall give prompt written
notice of its decision to the applicant and to the
Company. In the event that the Review Panel confirms
the denial of the application for benefits in whole or
in part, the notice shall set forth, in a manner
calculated to be understood by the applicant, the
specific reasons for the decision and specific
references to the provisions of the Plan on which the
decision is based.
14.4 Rules and Interpretations
The Review Panel shall adopt such rules, procedures
and interpretations of the Plan as it deems necessary
or appropriate in carrying out its responsibilities
under this Article 14.
14.5 Exhaustion of Remedies
No legal action for benefits under the Plan shall be
brought unless and until the claimant (i) has
submitted a written application for benefits in
accordance with Section 13.1, (ii) has been notified
by the Company that the application is denied, (iii)
has filed a written request for a review of the
application in accordance with Section 14.2 and (iv)
has been notified in writing that the Review Panel has
affirmed the denial of the application; provided,
however, that legal action may be brought after the
Company or the Review Panel has failed to take any
action on the claim within the time prescribed by
Sections 13.2 and 14.3, respectively.
ARTICLE 15
TOP-HEAVY PROVISIONS
15.1 Determination of Top-Heavy Status
Any other provision of the Plan notwithstanding, this
Article 15 shall become effective for any Plan Year
beginning after December 31, 1983, in which the Plan
is a Top-Heavy Plan. The Plan shall be considered a
"Top-Heavy Plan" for a Plan Year if, as of the
Determination Date for such Plan Year, the Top-Heavy
Ratio for the Aggregation Group exceeds sixty percent
(60%).
15.2 Minimum Benefit
The annual Normal Retirement Income of each
Participant shall not be less than the product of
(i) two percent (2%) of the Participant's Average
Compensation, as defined in Section 15.6(C), and
(ii) the number of the Participant's Qualifying Years
not in excess of ten (10).
15.3 Minimum Vesting
Any other provision of the Plan notwithstanding, the
vesting requirement under Section 5.1 shall be a three
(3) or more year Period of Service (instead of a five
(5) or more year Period of Service) for each
Participant who completes any Period of Service in a
Plan Year in which the Plan is a Top-Heavy Plan.
15.4 Effect of Change in Top-Heavy Status
If the Plan at any time is a Top-Heavy Plan and
thereafter ceases to be a Top-Heavy Plan, each
Participant who would be vested under Section 15.3 as
of the May 31 in the last Plan Year in which the Plan
is a Top-Heavy Plan shall thereafter continue to be
vested. Each other Participant shall be vested in
accordance with Article 4 or 5, whichever is
applicable. After the Plan ceases to be a Top-Heavy
Plan, a Participant's Retirement Income shall be
determined under Article 4 or 5, whichever is
applicable, except that such benefit shall not be less
than the benefit accrued under Section 15.2 as of the
May 31 in the last Plan Year in which the Plan was a
Top-Heavy Plan.
15.5 Impact on Benefit Limitations
For each calendar year within a Plan Year in which the
Plan is a Top-Heavy Plan, the number "1.00" shall be
substituted for the number "1.25" wherever it appears
in sections 415(e)(2) and (3) of the Code; provided,
however, that such substitution shall not have the
effect of reducing any benefit accrued under this Plan
or any other defined-benefit plan maintained by any
Affiliate prior to the first day of the Plan Year in
which this Section 15.5 becomes applicable.
15.6 Definitions
For purposes of this Article 15, the following
definitions shall apply:
(A) "Affiliate" means each Affiliate, as defined
in Section 1.3, except that the penultimate
sentence of Section 1.3 shall not apply.
(B) "Aggregation Group" means a group of
qualified plans consisting of:
(1) Each plan of the Affiliates in
which a Key Employee participates and each
other plan of the Affiliates which enables
any plan in which a Key Employee participates
to meet the requirements of sections
401(a)(4) and 410 of the Code; or
(2) All plans of the Affiliates
included under (1) above, plus, at the
election of the Company, one or more
additional plans of the Affiliates which,
when all such plans are considered together,
satisfy the requirements of sections
401(a)(4) and 410 of the Code.
(C) "Average Compensation" means the
Participant's average annual Compensation for the
series of consecutive Plan Years (not in excess
of five (5)) during which the Participant had the
greatest aggregate Compensation. For purposes of
the preceding sentence, the following Plan Years
shall be disregarded (and the preceding and
following Plan Years shall be considered
consecutive):
(1) Any Plan Year during which the
Participant has no Period of Service;
(2) Any Plan Year ending before June 1,
1984; and
(3) Any Plan Year commencing after the
close of the last Plan Year in which the Plan
was a Top Heavy Plan.
(D) "Compensation" shall have the meaning given
such term in Section 4.8.
(E) "Determination Date" means the last day of
the preceding Plan Year.
(F) "Key Employee" means a key employee, as
defined by section 416(i) of the Code and the
regulations thereunder. In applying section
416(i) of the Code, the term "compensation" shall
have the meaning set forth in Paragraph (D)
above.
(G) "Qualifying Year" means each Plan Year with
respect to which all of the following
requirements are met:
(1) The Plan is a Top-Heavy Plan;
(2) The Participant is not a Key
Employee;
(3) The Participant completes any
Period of Service; and
(4) The Plan Year commenced on or after
June 1, 1984.
(H) "Top-Heavy Ratio" means the top-heavy ratio
for the Affiliates, as computed in accordance
with section 416(g) of the Code and the
regulations thereunder. In applying section
416(g) of the Code, the present value of accrued
benefits shall be determined on the basis of the
interest assumption and the mortality assumptions
used for the computation of plan costs under
section 412 of the Code, and the valuation date
shall be the last day of the Plan Year.
ARTICLE 16
EXECUTION
To record this amendment and restatement of the Plan to read
as set forth herein, effective as of June 1, 1997, the
Company has caused its authorized officer to execute this
document this 14 day of August, 1997.
APL LIMITED
By /s/ Timothy J. Windle
Assistant Secretary
ACTUARIAL EQUIVALENT FACTORS
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the
following meanings:
(a) "Applicable Interest Rate" means the annual rate
of interest described in section 417(e)(3)(A)(ii)(II) of the
Code. This rate shall be determined for each Plan Year, and
shall remain stable throughout the Plan Year. This
determination shall be made as of the "Lookback Month" for
the applicable Plan Year. The "Lookback Month" shall be the
month of April which precedes the Plan Year for which the
determination is being made.
(b) "Applicable Mortality Table" means the table
described in section 417(e)(3)(A)(ii)(I) of the Code.
Capitalized terms used in this Appendix A that are not
defined above shall have the same meaning as those terms do
in the Plan.
SECTION 2. INITIAL EMPLOYER ALLOCATION.
For purposes of determining a Participant's Initial
Employer Allocation as of May 31, 1997, the determination
shall be made utilizing the Applicable Mortality Table in
effect as of June 1, 1997 and an interest rate assumption of
7 percent (7%). A Participant's "adjusted Retirement
Income" shall equal his Retirement Income as of May 31,
1997; however, in the case of a Participant whose Retirement
Income on May 31, 1997 was the Participant's "COLA-Adjusted
Retirement Income" (as defined by the Plan document in
effect on May 31, 1997), the "adjusted Retirement Income"
shall be equal to such COLA-Adjusted Retirement Income
adjusted by applying the following factors:
Factors for Determining Eligibility
for a COLA-Adjusted Retirement Income
Single Factors
Age 2.5% Factors 1.5% Factors
55 1.276 1.166
56 1.269 1.161
57 1.262 1.157
58 1.255 1.153
59 1.248 1.149
60 1.241 1.145
61 1.235 1.141
62 1.228 1.137
63 1.221 1.133
64 1.215 1.129
65 1.208 1.125
Married Factors
Age 2.5% Factors 1.5% Factors
55 1.430 1.307
56 1.423 1.302
57 1.415 1.297
58 1.407 1.293
59 1.399 1.288
60 1.391 1.283
61 1.385 1.279
62 1.377 1.274
63 1.369 1.270
64 1.362 1.266
65 1.354 1.261
Married Factors = Single Factors / 89.2%
SECTION 3. CONVERSION OF RETIREMENT ACCOUNT TO A LIFE
ANNUITY.
For purposes of converting a Participant's Retirement
Account into a life annuity, the life annuity shall be the
Actuarial Equivalent of the Retirement Account determined
utilizing the Applicable Interest Rate and the Applicable
Mortality Table.
SECTION 4. SINGLE SUM VALUE OF GRANDFATHERED BENEFIT.
For purposes of Section 4.11(B), the single sum value
of the Grandfathered Benefit shall be made based on the
Applicable Mortality Table and the Applicable Interest Rate
in effect at the time of such determination. If a
Participant's Grandfathered Benefit is equal to his "COLA-
Adjusted Retirement Income" (as defined in Section 2(d) of
Appendix C), then the determination of the single sum value
shall be made by also taking into account the "Factors for
Determining Eligibility for a COLA-Adjusted Retirement
Income" set forth in Section 2 of this Appendix A.
SECTION 5. JOINT-AND-SURVIVOR ANNUITY OPTION FACTORS.
Joint-and-survivor option factors shall be determined
by the following formulas:
100% Continuation:
Retirement at age 65 80.6% plus .8% for each year
the contingent annuitant is
older than the Employee or
minus .8% for each year the
contingent annuitant is
younger than the Employee, but
in no event greater than 98%.
Retirement at other
than age 65 The initial factor shall
be increased by .6%
for each year the Employee is
under age 65 and decreased by
.6% for each year the Employee
is over age 65, but the result
shall in no event be greater
than 98%.
50% Continuation:
Retirement at age 65 89.2% plus .5% for each year
the contingent annuitant is
older than the Employee or
minus .5% for each year the
contingent annuitant is
younger than the Employee, but
in no event greater than 98%.
Retirement at other
than age 65 The initial factor shall
be increased by .4%
for each year the Employee is
under age 65 and decreased by
.4% for each year the Employee
is over age 65, but the result
shall in no event be greater
than 98%.
Tables Illustrating Joint-and-Survivor
Option Factors at Various Ages
Contingent
Employee's Annuitant's
Age on Age on Nearest 100% 50%
Birthday Birthday Continuance Continuance
65 70 .846 .917
65 65 .806 .892
65 60 .766 .867
65 55 .726 .842
62 64 .840 .914
62 60 .808 .894
60 62 .852 .922
55 53 .850 .922
SECTION 6. ALL OTHER CALCULATIONS.
For all other purposes under the Plan, except as may be
set forth in the applicable Section, calculations shall be
made based on the Applicable Interest Rate and the
Applicable Mortality Table.
APPENDIX B
DIRECT ROLLOVER PROVISIONS
SECTION 1. DIRECT ROLLOVER OPTION.
Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a Distributee's election
under this Appendix B, a Distributee may elect, subject to
the conditions and administrative procedures prescribed by
the Company, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan
specified by the Distributee in a Direct Rollover, as
described in section 401(a)(31) of the Code. In the event
that the Distributee elects to receive a portion of the
Eligible Rollover Distribution and to transfer a portion to
another Eligible Retirement Plan in a Direct Rollover, the
Direct Rollover portion must be at least $500.
SECTION 2. DEFINITIONS.
As used herein, the following terms have the following
meanings:
(a) "Eligible Rollover Distribution" means any
distribution of all or any portion of the balance to the
credit of the Distributee, except that an Eligible Rollover
Distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint
life expectancies) of the Distributee and the Distributee's
designated beneficiary, or for a specified period of 10
years or more; any distribution to the extent such
distribution is required under section 401(a)(9) of the
Code; and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
employer securities); and a distribution of less than $200.
(b) "Eligible Retirement Plan" means an individual
retirement account described in section 408(a) of the Code,
an individual retirement annuity described in section 408(b)
of the Code, an annuity plan described in section 403(a) of
the Code, or a qualified trust described in section 401(a)
of the Code, that accepts the Distributee's Eligible
Rollover Distribution. However, in the case of an Eligible
Rollover Distribution to the surviving spouse, an Eligible
Retirement Plan is an individual retirement account or an
individual retirement annuity.
(c) "Distributee" means a Member, the Member's
surviving spouse and the Member's spouse or former spouse
who is an Alternate Payee.
(d) "Direct Rollover" means a payment by the Plan to
an Eligible Retirement Plan, including payment effected by
delivering to the Distributee a check made payable to the
Eligible Retirement Plan's custodian or trustee.
Capitalized terms used in this Appendix B that are not
defined herein shall have the same meaning as those terms do
in the Plan.
APPENDIX C
GRANDFATHERED BENEFIT
This Appendix C shall be applicable solely with respect
to Grandfathered Participants, as set forth in the Plan.
This Appendix shall be effective as of June 1, 1997.
SECTION 1. DEFINITIONS.
Capitalized terms used in this Appendix C that are not
defined herein shall have the same meaning as those terms do
in the Plan. For purposes of this Appendix C, "Natomas
Company," "Natomas Plan" and "Prior Plan" shall have the
meanings set forth in Appendix D.
(a) "Average Annual Compensation" means one fifth (1/5) of
the highest sum of a Participant's Grandfather Benefit
Compensation for any five (5) consecutive calendar years
during the Participant's Credited Period of Service. If the
Participant's Credited Period of Service contains fewer than
five (5) June 1 dates, "Average Annual Compensation" means
the sum of his Grandfather Benefit Compensation for each of
the calendar years that contain a June 1 date divided by the
number of such years. If a Participant is on an approved
absence (within the meaning of Section 12.1(B)), without
receiving any Base Grandfather Compensation from an
Employer, on June 1 of any calendar year, then the
Participant's Grandfather Benefit Compensation for the
calendar year that contains the June 1 date immediately
preceding the start of the absence shall be substituted in
the computation.
(b) "Average Social Security Base" means "covered
compensation," as defined in section 401(l)(5)(E) of the
Code.
(c) "Base Grandfather Compensation" means a Participant's
rate of basic earnings on June 1 while the Participant is an
Eligible Employee, including amounts contributed on a pretax
basis under section 125 or 401(k) of the Code to a plan
maintained by the Employer, and excluding overtime pay,
bonuses, commissions, incentive compensation and Employer
contributions (other than salary deferrals) to this or any
other benefit plan.
(d) "Credited Period of Service" means:
(1) The credited period of service completed by
the Participant prior to August 31, 1983, under
the provisions of a Prior Plan applicable to
service for benefit accrual purposes, determined
without regard to any breaks in service; plus
(2) Any period completed by the Participant on or
after August 31, 1983, to the extent that (i) such
period constitutes a Period of Service under
Article 12 and (ii) the Participant is an Eligible
Employee during such period; plus
(3) In the case of an individual who first
becomes an Employee on or after January 1, 1993
and who thereafter becomes a Participant, any
period completed by such individual prior to
becoming a Participant to the extent that (i) such
period constitutes a Period of Service under
Article 12 and (ii) the individual is an Eligible
Employee during such period; plus
(4) In the case of a Natomas Transferee, the
credited period of service completed by the
Natomas Transferee prior to his transfer, as
determined under the provisions of the Natomas
Plan applicable to service for benefit accrual
purposes; minus
(5) The number of years (and fractions thereof)
included in Paragraphs (1), (2), (3) and (4) above
that were used to calculate a Retirement Income
that was paid to the Participant in the form of a
lump sum distribution under the Plan, unless the
Participant is reemployed as an Eligible Employee
and repays the lump sum distribution, together
with interest thereon at the rate specified in
Section 1(a) of Appendix D, prior to his
subsequent Benefit Distribution Date.
(6) For purposes of applying Article 12 to
determine a Participant's Credited Period of
Service under this Section of Appendix C, the
following provision shall replace Section 12.5
under Article 12: All of an individual's Periods
of Service determined pursuant to Article 12 shall
be aggregated on the basis of months. The number
of years in the individual's aggregate Period of
Service is determined by dividing the number of
months in such period by twelve (12). Partial
months of service are rounded up to the next
higher whole month.
(e) "Eligible Grandfather Compensation" means, for any
calendar year the sum of:
(1) The Participant's annual Base Grandfather
Compensation during such calendar year;
(2) Any bonus that he receives during such
calendar year under the Company's year-end bonus
plan for executives and key employees;
(3) The total amount of any overtime pay that he
receives during such calendar year, except that
any overtime pay received during a calendar year
in which he completes a Credited Period of Service
of less than twelve (12) months shall be divided
by the number of completed months in such Credited
Period of Service and then multiplied by twelve
(12);
(4) For Plan Years ending on or before May 31,
1997, the total amount of any commissions that he
receives during such calendar year, except that
any commissions received during a calendar year in
which he completes a Credited Period of Service of
less than twelve (12) months shall be divided by
the number of completed months in such Credited
Period of Service and then multiplied by twelve
(12);
(5) Any payment he receives under the Company's
Team Up For Success program during the 1997
calendar year;
(6) Any bonus received under the Company's
Worldwide Bonus program during such calendar year;
and
(7) Any portion of a Participant's annual
earnings (including any bonus which would
otherwise be includible as Eligible Grandfather
Compensation) deferred by the Participant pursuant
to a nonqualified plan sponsored by the
Participant's Employer.
(f) "Grandfather Benefit Compensation" shall mean a
Grandfathered Participant's Eligible Grandfather
Compensation divided by two (2). Grandfather Benefit
Compensation taken into account under the Plan shall in no
event exceed the limitation in effect for that year under
section 401(a)(17) of the Code. This limitation shall
automatically be adjusted for each calendar year to reflect
the cost-of-living adjustment (if any) announced by the
Commissioner of Internal Revenue for such calendar year.
(g) "Natomas Transferee" means a Participant who was a
participant in the Natomas Plan and who, at any time prior
to November 30, 1983, has transferred directly from
employment with Natomas Company, or with another corporation
which adopted the Natomas Plan, to employment with an
Employer as an Eligible Employee.
(h) "Primary Social Security Benefit" means the estimated
annual benefit to which a Participant will be entitled under
the Federal Social Security program upon attaining age 65.
A Participant's Primary Social Security Benefit shall be
estimated by the Company as of the date the Participant
ceases to be an Employee on the basis of:
(1) In the case of a Participant who retires on a
Retirement Date, the assumption that such
Participant has no income that constitutes "wages"
for purposes of the Federal Social Security
program after the earlier of his Retirement Date
or age sixty-five (65);
(2) In the case of a Participant who ceases to be
an Employee prior to a Retirement Date, the
assumption that his income that constitutes
"wages" for purposes of the Federal Social
Security program for each calendar year beginning
with the year in which he ceases to be an Employee
and ending with the year that includes his sixty-
fifth (65th) birthday is equal to the annualized
rate of his compensation from the Affiliates that
constitutes "wages" for purposes of the Federal
Social Security program immediately prior to the
date such Participant ceases to be an Employee;
and
(3) The Participant's annualized rate of
compensation during the Participant's initial
period as an Employee (as determined by the
Company), projected backward to reflect growth at
the rate of the National Average Wage Index plus
two percentage points; provided, however, that a
Participant may supply the Company with
documentation of the Participant's actual earnings
history prior to the commencement of benefits
under the Plan, in which case the Participant's
Primary Social Security Benefit shall be estimated
on the basis of such actual earnings history.
SECTION 2. GRANDFATHERED RETIREMENT BENEFIT.
The benefit described in Section 4.11(B) shall be
determined in accordance with the provisions of this
Section 2 of Appendix C.
(a) Normal Retirement Benefit. Subject to the remaining
Sections of this Appendix, Section 4.8, the provisions of
Article 6 (Forms of Benefit Payment) and Section 10.4
(Limitations Upon Highest-Paid Employees), a Participant's
annual rate of Retirement Income, commencing on his Normal
Retirement Date, shall be equal to the amount described in
Paragraph (1) below, minus the amount described in
Paragraph (2) below, but not greater than the amount
described in Paragraph (3) below.
(1) The amount described in this Paragraph (1)
shall be equal to a percentage of the
Participant's Average Annual Compensation. Such
percentage shall be equal to the sum of:
(A) The product of four and two-fifths
percent (4-2/5%) times the number of years in
the Participant's Credited Period of Service
completed prior to January 1, 1993 not in
excess of twenty (20); plus
(B) The product of two percent (2%)
times the number of years in the
Participant's Credited Period of Service
completed prior to January 1, 1993 in excess
of twenty (20); plus
(C) The product of three and one-thirds
percent (3-1/3%) times the number of years in
the Participant's Credited Period of Service
completed after December 31, 1992.
(2) The amount described in this Paragraph (2)
shall be equal to a percentage of the
Participant's Primary Social Security Benefit
equal to the product of one and two-thirds percent
(1-2/3%) times the number of years in the
Participant's Credited Period of Service.
(3) The amount described in this
Paragraph (3) shall be equal to fifty percent
(50%) of the amount (if any) by which the
Participant's Average Annual Compensation
exceeds his Primary Social Security Benefit.
Solely for purposes of this Section 2(a)(3),
a Participant's Average Annual Compensation
shall be determined based on the definition
of "Grandfather Benefit Compensation"
contained in Section 1(f) of this Appendix C,
but substituting "one (1)" for "two (2)."
Partial years in the Participant's Credited Period of
Service shall be rounded up to the next higher whole
month and then counted as the appropriate fraction of a
year.
(b) Participants Transferring Among Certain Companies. In
the case of a Natomas Transferee, the annual rate of
Retirement Income, commencing on his Normal Retirement Date,
shall be the larger of the amounts described in
Paragraph (1) or (2) below.
(1) The amount described in this Paragraph (1)
shall be equal to the amount computed pursuant to
Section 2(b) of this Appendix C. For this
purpose, the Natomas Transferee's credited period
of service under the Natomas Plan shall be
included, as provided in Section 1(d)(4) of this
Appendix C.
(2) The amount described in this Paragraph (2)
shall be equal to the sum of:
(A) The amount computed pursuant to
Section 2(a) of this Appendix C, except that
Section 1(d)(4) of this Appendix shall be
disregarded and the Natomas Transferee's
credited period of service under the Natomas
Plan shall be excluded; plus
(B) The annual normal retirement
benefit which the Natomas Transferee had
accrued under the Natomas Plan as of the date
of his transfer to an Employer (in the form
of a single-life annuity).
In the case of a Participant who (i) had been
transferred between Pacific Far East Lines, Inc.
("PFEL") and an Employer prior to July 1, 1971,
(ii) was employed by an Employer on such date and
(iii) retires while employed by an Employer after
March 1, 1973, the Participant's Retirement Income
provided in Section 2(a) of this Appendix C first shall
be computed as if employment with PFEL had been with an
Employer. The amount so determined then shall be
reduced by the annual normal retirement benefit which
the Participant is eligible to receive (in the form of
a single-life annuity) from the retirement plan of
PFEL.
(c) Early Retirement Income. A Participant who retires on
an Early Retirement Date may elect to receive one of the
following:
(1) Commencing on his Normal Retirement Date, or
on the first day of any month prior to his Normal
Retirement Date but coinciding with or following
his sixty-second (62nd) birthday, the Retirement
Income benefit accrued by him pursuant to
Section 2(a) of this Appendix C.
(2) Commencing on his Early Retirement Date or on
the first day of any month between his Early
Retirement Date and his sixty-second (62nd)
birthday (as selected by the Participant pursuant
to Section 6.3(F)), the Retirement Income benefit
described in Paragraph (1) above, reduced by the
interest rate assumption set forth in Appendix A.
For the purpose of determining a Participant's
eligibility to receive a Retirement Income pursuant to
this Section of Appendix C (but not the amount of such
Retirement Income), a Participant who transferred from
another company described in Section 2(b) of this
Appendix C shall be credited with a Credited Period of
Service for his employment with the other company. The
amount of such Retirement Income shall be determined
pursuant to such Section in conjunction with this
Section of Appendix C.
(d) COLA-Adjusted Retirement Income. In lieu of a
Retirement Income determined under Section 2(a) of this
Appendix C, a Participant who retires or separates from
service after becoming vested pursuant to Article 5 shall be
entitled to receive his benefit accrued as of December 31,
1992, increased annually pursuant to this Section 2(d) of
Appendix C (a "COLA-Adjusted Retirement Income"), beginning
on the June 1 next following the commencement of his
Retirement Income, provided that the Company determines that
the present value of the Participant's COLA-Adjusted
Retirement Income is greater than that of his Retirement
Income when both are expressed as Actuarially Equivalent
lump sums as of the date of the Participant's retirement or
separation from service. The surviving spouse or contingent
annuitant of a Participant who receives a COLA-Adjusted
Retirement Income shall also be entitled to receive a
benefit increased annually pursuant to this Section 2(d) of
Appendix C. In the case of a Participant whom the Company
determines is entitled to a COLA-Adjusted Retirement Income
(or such Participant's surviving spouse or contingent
annuitant), references in the Plan to a Participant's
Retirement Income shall be deemed to mean such Participant's
COLA-Adjusted Retirement Income.
Subject to the limitations in the next two sentences,
the COLA-Adjusted Retirement Income that a Participant,
spouse or contingent annuitant eligible under the preceding
paragraph receives for any Plan Year shall be the benefit
which results from multiplying the portion of the original
benefit he received attributable to his benefit accrued as
of December 31, 1992 by the ratio of (i) the CPI-W for U.S.
Cities on the February 1 preceding the starting date of the
increased benefit to (ii) the CPI-W for U.S. Cities on the
February 1 preceding the starting date of the original
benefit. However, the increase in any Plan Year in a
benefit accrued before September 1, 1990, shall never be
larger than two and one-half percent (2 1/2%) of the benefit
received in the immediately preceding Plan Year. The
increase in any Plan Year in a benefit accrued after
August 31, 1990 and prior to January 1, 1993, shall never be
larger than one and one-half percent (1 1/2%) of the benefit
received in the immediately preceding Plan Year. The
"benefit accrued before September 1, 1990," shall be deemed
to be equal to the Retirement Income that the Participant or
his surviving spouse would have received if the Participant
had separated from all service with Affiliates on August 31,
1990. The "benefit accrued as of December 31, 1992," shall
be deemed to be equal to the Retirement Income that the
Participant or his surviving spouse would have received if
the Participant had separated from all service with
Affiliates on December 31, 1992. The "benefit accrued after
August 31, 1990 and prior to January 1, 1993," shall be
deemed to be equal to (i) the entire Retirement Income that
the Participant or his surviving spouse would have received
if the Participant had separated from all service with
Affiliates on December 31, 1992 minus (ii) the Retirement
Income that the Participant or his surviving spouse would
have received if the Participant had separated from all
service with Affiliates on August 31, 1990.
This Section 2(d) of Appendix C shall be administered
so that changes in the base period of years used in
computing the CPI-W for U.S. Cities that occur after a
Participant's retirement or separation from service shall
not affect the cost-of-living adjustments for such
Participant, his surviving spouse or contingent annuitant.
The cost-of-living adjustment provided by this Section
2(d) of Appendix C shall not apply to the Supplemental
Retirement Income payable to a Participant, his spouse or
contingent annuitant.
(e) Prior Benefit Accrual. The provisions of this Section
2(e) of Appendix C shall supersede any conflicting
provisions of the Plan.
(1) In the case of a Participant who was an
Employee on May 31, 1989, his total Retirement
Income shall in no event be less than his
Retirement Income calculated (A) by counting only
his Credited Period of Service before June 1,
1989, and (B) by applying all of the provisions of
the Plan in effect from time to time before
June 1, 1989. This calculation shall be made on
the assumption that the Participant separated from
all service with Affiliates on May 31, 1989, and
without regard to any changes in the amount of his
Average Annual Compensation or primary Social
Security benefit after May 31, 1989.
In calculating Average Annual Compensation
for purposes of this Paragraph (1) only, the
dollar limits described in Section 1(d) of this
Appendix C shall not apply.
(2) In the case of a Participant who was an
Employee on December 31, 1992, his total
Retirement Income shall in no event be less than
his Retirement Income calculated (A) by counting
only his Credited Period of Service before
January 1, 1993 and (B) by applying all of the
provisions of the Plan in effect from time to time
before January 1, 1993. This calculation shall be
made on the assumption that the Participant
separated from all service with Affiliates on
December 31, 1992, and without regard to any
changes in the amount of his Average Annual
Compensation or Average Social Security Base after
December 31, 1992.
(3) In the case of a Participant who was an
Employee on May 31, 1994, his total Retirement
Income shall in no event be less than the sum of:
(A) his Retirement Income calculated by counting
only his Credited Period of Service before June 1,
1994, and applying all of the provisions of the
Plan in effect from time to time before June 1,
1994 (ignoring the effects of Section 4.9(B) and
Section 2(d) of this Appendix C, and (B) his
Retirement Income calculated by counting only his
Credited Period of Service on and after June 1,
1994, and applying all of the provisions of the
Plan in effect from time to time on and after
June 1, 1994. The calculation in (i) above shall
be made on the assumptions that the Participant
separated from all service with Affiliates on
May 31, 1994 and that the limitation in effect
under Code section 401(a)(17) was $235,840 for all
Plan Years before June 1, 1994, and without regard
to any changes in the amount of his Average Annual
Compensation or primary Social Security benefit
after May 31, 1994.
(f) Disabled Participants. Any other provision of the Plan
to the contrary notwithstanding, if a Participant becomes
disabled before his Normal Retirement Date he shall be
subject to the following provisions of this Section 2(f) of
this Appendix C. For periods prior to June 1, 1997, a
disabled Participant shall be considered to be a Participant
and an Employee in the service of the Employer (for purposes
of this Plan only). Subject to the additional provisions of
this Appendix, the disabled Participant shall continue to
receive credit toward his Period of Service and Credited
Period of Service during the period of his disability, the
latter based on the assumption that his Compensation for
such period is equal to his rate of basic earnings last paid
by the Employer. For purposes of this Section, "Disabled"
means a Participant who is eligible for and receiving
benefits under the Company's Long Term Disability Plan.
Effective June 1, 1997, a Participant who is Disabled
shall cease to accrue benefits under this Plan.
(g) Cessation of Disability. If a Participant who was
disabled ceases to be disabled before his Retirement Date,
no further Retirement Income shall be credited to him
pursuant to Section 2(f) of this Appendix C. If such
Participant shall not then resume active employment with an
Employer, he shall be deemed a terminated Employee as of the
date he became disabled and his right to receive Retirement
Income, if any, from the Plan shall be determined pursuant
to Article 5 (Termination of Employment Prior to
Retirement). If such Participant shall resume active
employment with an Employer, he shall be immediately
eligible to resume benefit accruals pursuant under the Plan.
The retirement Income standing to his credit by reason of
Section 2(f) of this Appendix C, as well as benefits
credited after such resumption of employment, shall be
subject to all the provisions of the Plan as then in effect.
APPENDIX D
SUPPLEMENTAL RETIREMENT INCOME
SECTION 1. DEFINITIONS.
Capitalized terms used in this Appendix D that are not
defined herein shall have the same meaning as those terms do
in the Plan.
(a) "Employee Aggregate Contributions" means the aggregate
of a Participant's employee contributions, if any, under a
Prior Plan or the Natomas Plan, with interest credited in
accordance with such plan to August 31, 1983, and compounded
annually at the rate of five percent (5%) for the period
from September 1, 1983, through May 31, 1988, and at the
rate prescribed by section 411(c)(2)(C) of the Code for all
periods subsequent to May 31, 1988.
(b) "Natomas Company" means Natomas Company, a California
corporation and, prior to August 31, 1983, the parent
corporation of the Company.
(c) "Natomas Plan" means the Retirement Plan for Employees
of Natomas Company and Participating Companies, a qualified
defined-benefit pension plan maintained by Natomas Company,
as in effect on August 31, 1983.
(d) "Prior Plan" means (i) the Retirement Plan for Non-
Bargaining Unit Employees of American President Lines, Ltd.,
as in effect prior to August 31, 1983, and (ii) each "prior
plan," as defined therein.
(e) "Supplemental Retirement Income" means the annual
benefit to which the Participant would be entitled,
commencing on his Normal Retirement Date, in the form of a
single-life annuity equal to the product of (i) his employee
contributions (if any) under a Prior Plan or the Natomas
Plan, plus interest credited in accordance with such plan to
August 31, 1983, and compounded annually at the rate of five
percent (5%) for the period from September 1, 1983, to the
date on which he would attain his Normal Retirement Date,
times (ii) a conversion factor of ten percent (10%).
SECTION 2. ELIGIBILITY.
An Employee shall be eligible to receive Supplemental
Retirement Income pursuant to this Appendix D only if the
Employee made employee contributions under a Prior Plan or
the Natomas Plan.
SECTION 3. BENEFIT PAYMENT.
If a Participant who is eligible for a Supplemental
Retirement Income separates from all service with any
Affiliate the Participant shall receive a Supplemental
Retirement Income determined under Section 1(e) of this
Appendix D. Such Supplemental Retirement Income shall
commence on the Participant's Normal Retirement Date, unless
he receives a Retirement Income on a Retirement Date other
than the Normal Retirement Date.
If a Participant elects to have his Retirement Income
commence on a Retirement Date which precedes his Normal
Retirement Date, his Supplemental Retirement Income also
shall commence on such Retirement Date and shall be reduced
by one one-hundred-eightieth (1/180th) for each of the first
sixty (60) months and by one three-hundred-sixtieth
(1/360th) for each of the next sixty (60) months by which
the commencement of benefits precedes his Normal Retirement
Date.
If a Participant's Retirement Income commences on his
Postponed or In Service Retirement Date, his Supplemental
Retirement Income also shall commence on his Postponed or In-
Service Retirement Date and shall be increased by one
percent (1%) for each month by which retirement is postponed
beyond his Normal Retirement Date.
A Participant's Supplemental Retirement Income shall be
payable in a form described in Article 6. Death Benefits
payable from the Plan shall include an amount attributable
to the Supplemental Retirement Income in the manner
described in Section 7.
APPENDIX E
MINIMUM CASH BALANCE BENEFITS
The following table specifies the minimum Cash Balance
Benefit described in Section 4.2(B) for the affected
Participants. Each listed Participant is identified by the
employee identification number associated with him or her in
the Plan's records:
Participant's Employee ID Number Minimum Cash Balance
Benefit
2975 $364,103.75
7659 $157,522.06
6029 $ 90,965.43
9743 $209,774.97
3765 $833,934.88
2267 $389,278.60
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Form 10-Q of APL
Limited for the quarter ended September 19, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1997
<PERIOD-END> SEP-19-1997
<CASH> 299,539
<SECURITIES> 57,472
<RECEIVABLES> 229,318<F1>
<ALLOWANCES> 0
<INVENTORY> 31,614
<CURRENT-ASSETS> 688,239
<PP&E> 1,912,540
<DEPRECIATION> 841,997
<TOTAL-ASSETS> 1,901,563
<CURRENT-LIABILITIES> 420,548
<BONDS> 681,201
0
0
<COMMON> 24,879
<OTHER-SE> 483,939
<TOTAL-LIABILITY-AND-EQUITY> 1,901,563
<SALES> 0
<TOTAL-REVENUES> 1,958,753
<CGS> 0
<TOTAL-COSTS> 1,925,007<F2>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,431
<INCOME-PRETAX> 10,039
<INCOME-TAX> 1,012
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,027
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
<FN>
<F1>The allowance for Doubtful Accounts, included in Receivables, amounted to
$15,681 at September 19, 1997.
<F2>The Provision for Doubtful Accounts, included in Total Costs, amounted to
$(597) for the 38 week period ended September 19, 1997.
</FN>
</TABLE>
