<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended NOVEMBER 30, 1995 Commission file number 1-8738
SEALY CORPORATION
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-3284147
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
520 PIKE STREET
SEATTLE, WASHINGTON 98101
- ----------------------------------------- ---------------
(Address of principal executive offices)* (Zip Code)
Registrant's telephone number, including area code (206) 625-1233
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Warrants to Purchase Class B Common Stock
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 and 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
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 20, 1996 was $7,879,373.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
The number of shares of the registrant's common stock outstanding as of
FEBRUARY 20, 1996 was 29,459,731
DOCUMENTS OR PARTS THEREOF INCORPORATED BY REFERENCE: None
* All Corporate and administrative services are provided by Sealy, Inc., 10th
Floor Halle Building, 1228 Euclid Avenue, Cleveland, Ohio 44115.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Sealy Corporation (the "Company"), through its subsidiaries , is the
largest bedding manufacturer in North America and manufactures a diversified
line of mattress, boxspring and wood furniture products. The Company's
conventional bedding products (mattresses and boxsprings) include the SEALY(R),
SEALY POSTUREPEDIC(R), SEALY COMFORT SERIES(R), and the STEARNS & FOSTER(R)
brands and account for approximately 91% of the Company's total net sales for
the year ended November 30, 1995. The Company also manufactures and markets
its wood furniture under the SAMUEL LAWRENCE(TM) brand name. The Company has a
components parts manufacturing subsidiary which produces substantially all of
the Company's mattress innerspring requirements and approximately 50% of the
Company's boxspring component parts requirements. Another subsidiary, Sealy,
Inc., provides corporate and administrative services for the Company.
HISTORY OF THE COMPANY
The Company was founded in 1907 under the name Ohio Mattress Company. In
1924, the Company was granted its first license to produce Sealy-brand
products. Starting in 1956, the Company began acquiring Sealy-brand licenses
in other geographic areas, and by 1987, had acquired all of the capital stock
of its licensor, then named Sealy, Incorporated (which prior to that time was
independent of the Company), along with all but one of the remaining Sealy
conventional bedding domestic licensees. The Company expanded its bedding
manufacturing operations in 1983 by acquiring Stearns & Foster, a producer of
premium mattresses, boxsprings and convertible sleep sofas. In 1985, the
Company acquired Woodstuff Manufacturing, Inc., a manufacturer of waterbed
furniture, now manufacturing solely conventional wood bedroom furniture and
doing business as Samuel Lawrence Furniture Company.
In 1989, the Company's common stock was acquired through a leveraged
buyout (the "LBO") which was financed in part by First Boston Securities
Corporation ("FBSC"), an affiliate of The First Boston Corporation ("First
Boston"). In April 1990, the Company exchanged certain outstanding debt issued
to FBSC for new debt at lower interest rates plus additional common stock (the
"Exchange"). In December 1990, FBSC transferred its equity and debt interest
in the Company to its affiliate MB L.P. I ("MBLP"). In November 1991, the
Company successfully completed a recapitalization (the "Recapitalization") in
which the Company's capital structure was significantly improved, the face
amount of its indebtedness and interest thereon was reduced by approximately
$417 million, the Company's interest expense obligations were substantially
reduced and the principal repayment schedule on a portion of its existing bank
term loan facility was extended. As a result of the Recapitalization, MBLP's
equity interest in the Company increased to approximately 94%, consisting of
shares of Class A Common Stock, $.01 par value (the "Shares").
On February 12, 1993, Zell/Chilmark Fund, L.P., a Delaware limited
partnership ("Zell/Chilmark"), led an investor group which purchased MBLP's 94%
equity interest in the Company (the "Acquired Shares") for a cash purchase
price of $250 million (the "Acquisition").
On May 7, 1993, the Company completed a refinancing plan (the
"Refinancing"), which consisted of (i) the sale of $200.0 million of 9 1/2%
Senior Subordinated Notes Due 2003 (the "Notes") pursuant to a public offering,
(ii) the application of $194.5 million of net proceeds therefrom to redeem all
of the then outstanding 12.4% Senior Subordinated Notes of the Company Due 2001
(approximately $139.6 million), and to reduce amounts outstanding under the
Company's then existing credit agreement and (iii) the execution of a new
secured credit agreement (the "1993 Credit Agreement") by and among the
Company, certain banks and other financial institutions and Banque Paribas,
Citicorp USA, Inc., Bank of America (formerly Continental Bank N.A.) and
General Electric Capital Corporation, as managing agents.
On May 27, 1994, the Company entered into a restated secured credit
agreement (the "1994 Credit Agreement") with a majority of its then current
group of senior lenders (the "Senior Lenders"), which modified the terms of the
1993 Credit Agreement by reducing the amounts available under its existing term
loan facilities thereunder from an aggregate of $250 million to a single
facility of $150 million (the "Term Loan Facility") and by increasing the
amount available under its existing revolving credit facility thereunder from
$75 million to $125 million (the "Revolving Credit Facility").
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CONVENTIONAL BEDDING
INDUSTRY AND COMPETITION. According to industry sales data compiled by
the International Sleep Products Association ("ISPA"), a bedding industry trade
group, approximately 700 manufacturers of mattresses and boxsprings make up the
domestic conventional bedding industry, generating wholesale revenues estimated
at $3.2 billion during calendar year 1995. The market for conventional bedding
represents more than 85% of the entire bedding market in North America.
According to ISPA, approximately 75% of conventional bedding is sold to
furniture stores and specialty sleep shops. Most of the remaining conventional
bedding is sold to department stores, national mass merchandisers, membership
clubs and contract customers such as motels, hotels and hospitals. Management
estimates that approximately two-thirds of conventional bedding is sold for
replacement purposes and that the average time between consumer purchases of
conventional mattresses is approximately 10 to 12 years. Factors such as
disposable income and sales of homes also have some effect on bedding
purchases.
Management believes that sales by companies with recognized national
brands account for more than half of total conventional bedding sales. The
Company supplies such nationally recognized brands as Sealy(R), Sealy
Posturepedic(R), Sealy Comfort Series(R) and Stearns & Foster(R). Sealy
branded products are considered by management to be the most well-recognized in
the domestic conventional bedding industry. Competition in conventional
bedding is generally based on quality, brand name recognition, service and
price. The Company's largest competitors include Simmons Company, Serta, Inc.
and Spring Air Company. Management believes the Company derives a competitive
advantage over its conventional bedding competitors as a result of strong
consumer recognition of Sealy branded products.
PRODUCTS. The Company manufactures a variety of Sealy(R) and Stearns &
Foster(R) brand conventional bedding in various sizes ranging in retail price
from under $200 to approximately $2,900. Sealy Posturepedic brand mattress is
the largest selling mattress brand in North America. Approximately 97% of the
Sealy brand conventional bedding products sold in North America are produced by
the Company, with the remainder being produced by Sealy Mattress Company of New
Jersey, Inc. ("Sealy New Jersey"), a licensee. The Stearns & Foster product
line consists of top quality, premium mattresses sold under the Stearns &
Foster brand name.
CUSTOMERS. The Company serves over 7,000 retail outlets (approximately
3,200 customers), which include furniture stores, national mass merchandisers,
specialty sleep shops, department stores, contract customers and other stores.
The top five conventional bedding customers accounted for approximately 17% of
the Company's net sales for the year ended November 30, 1995. No single
customer accounted for over 10% of the Company's net sales.
SALES AND MARKETING. The Company's sales depend primarily on its ability
to provide quality products with recognized brand names at competitive prices.
The Company's marketing emphasis has been on increasing the brand loyalty of
its ultimate consumers, principally through national advertising and
cooperative advertising with its dealers, along with superior "point-of-sale"
materials designed to emphasize the various features and benefits of the
Company's products which differentiate them from other brands.
The Company's sales force structure is generally based on regions of the
country and districts within those regions, and also includes a sales staff for
specific national accounts. The Company believes that it has one of the most
comprehensive training and development programs for its sales force, including
its University of Sleep(R) curriculum, which provides ongoing training sessions
with programs focusing on advertising, merchandising and sales education,
including techniques to help analyze a dealer's business and profitability.
The Company's sales force emphasizes follow-up service to retail stores
and provides retailers with promotional and merchandising assistance as well as
extensive specialized professional training and instructional materials.
Training for retail sales personnel focuses on several programs, designed to
assist retailers in maximizing the effectiveness of their own sales personnel,
store operations, and advertising and promotional programs, thereby creating
loyalty to, and enhanced sales of, the Company's products.
SUPPLIERS. The Company purchases fabric, polyfiber, wire and foam from a
variety of vendors. The Company purchases approximately 50% of its Sealy
boxspring parts from a single third-party source, which has patents on various
interlocking wire configurations (the "Wire Patents"), and manufactures the
remainder of these parts as a licensee under the Wire Patents. The Company
purchases substantially all of its Stearns & Foster boxspring parts from the
same single third-party source. In order to reduce the risks of dependence
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on external supply sources and to enhance profitability, the Company has
expanded its own internal components parts manufacturing capacity and, as a
licensee of the Wire Patents, internally produces the remainder of its Sealy
boxspring parts. See "Components Division". As is the case with all of the
Company's product lines, the Company does not consider itself dependent upon
any single outside vendor as a source of supply to its conventional bedding
business and believes that sufficient alternative sources of supply for the
same, similar or alternative components are available.
MANUFACTURING AND FACILITIES. The Company manufactures most conventional
bedding to order and has adopted "just-in-time" inventory techniques in its
manufacturing process to more efficiently serve its dealers' needs and to
minimize their inventory carrying costs. Most bedding orders are scheduled,
produced and shipped within 72 hours of receipt. This rapid delivery
capability allows the Company to minimize its inventory of finished products
and better satisfy customer demand for prompt shipments.
The Company operates 24 plants which manufacture conventional bedding in
18 states, three Canadian provinces and Puerto Rico. See Item 2. "Properties"
herein. The Company also operates a research and development center in
Cleveland, Ohio with a staff which tests new materials and machinery, trains
personnel, compares the quality of the Company's products with those of its
competitors and develops new processes. The Company has developed and patented
a computerized model of an adult person, known as Dataman(R), which is used in
testing the support level of its mattresses.
COMPONENTS DIVISION
The Company operates a Components Division with headquarters in
Rensselaer, Indiana. The Components Division sells its component parts at
current market prices exclusively to the Company's bedding plants and
licensees. The Components Division currently provides substantially all of the
Company's mattress innerspring unit requirements. The Components Division also
supplies approximately 50% of the Company's Sealy boxspring parts requirements
under a license of the Wire Patents. The Components Division began operation
of an insulator pad plant in September, 1995. Management expects the plant
will supply approximately 20% of the Company's insulator pad requirements when
fully operational in 1996. The Components Division operates four owned
manufacturing sites located in Rensselaer, Indiana; Delano, Pennsylvania;
Colorado Springs, Colorado; and South Brunswick, New Jersey. See Item 2.
"Properties" herein.
Over the last six years, the Company has made substantial commitments to
ensure that the coil-making equipment at its component plants remains
state-of-the-art. Since 1989, the Company has installed 26 automated
coil-producing machines. This equipment has resulted in higher capacity at
lower per-unit costs and has increased self-production capacity for the
Company's innerspring requirements over that time period from approximately 60%
to approximately 100%.
In addition to reducing the risks associated with relying on single
sources of supply for certain essential raw materials, the Company believes the
vertical integration resulting from its component manufacturing capability
provides it with a significant competitive advantage. The Company believes
that it is the only conventional bedding manufacturer in the United States with
substantial innerspring, form wire and insulator pad component-making capacity.
WOOD FURNITURE
The Company manufactures and markets conventional bedroom furniture
through its Samuel Lawrence subsidiary under the Samuel Lawrence label. Samuel
Lawrence has approximately 500 customers and is one of many manufacturers of
wood bedroom furniture.
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LICENSING
Sealy New Jersey and Kolcraft Enterprises, Inc. (a crib mattress
manufacturer) are the only domestic bedding manufacturers that are licensed to
use the Sealy trademark, subject to the terms of license agreements. Under the
license agreement between Sealy New Jersey and the Company, Sealy New Jersey
has the perpetual right to use certain Sealy trademarks in the manufacture and
sale of Sealy brand products in the United States.
The Company's licensing division generates royalties by licensing Sealy
brand technology and trademarks to manufacturers located through out the world.
The Company also provides its licensees with product specifications, quality
control inspections, research and development, statistical services and
marketing programs. There are currently 12 separate license arrangements in
effect with independent licensees, including international bedding licensees
and upholstered furniture licensees. In the fiscal year ended November 30,
1995, the licensing division as a whole generated royalties of approximately $5
million, which were accounted for as a reduction of selling, general and
administrative expenses in the Consolidated Financial Statements included
herein.
WARRANTIES
Sealy and Stearns & Foster bedding offer limited warranties on their
manufactured products. The periods for "no-charge" warranty service varies
among products. Prior to fiscal year 1995, such warranties ranged from one
year on promotional bedding to 20 years on certain Posturepedic and Stearns &
Foster bedding. All currently manufactured Sealy Posturepedic models, Stearns
& Foster bedding and some other Sealy-brand products offer a 10-year
non-prorated warranty service period. Historically, the Company's warranty
costs have been immaterial for each of its product lines.
TRADEMARKS AND LICENSES
The Company owns, among others, the Sealy, Stearns & Foster and Samuel
Lawrence trademarks and tradenames and also owns the Posturepedic, Comfort
Series, Dataman and University of Sleep trademarks, service marks and certain
related logos and design marks.
EMPLOYEES
As of November 30, 1995, the Company had 4,520 full-time employees.
Approximately half of the Company's employees at 30 plants are represented by
various labor unions, generally with separate collective bargaining agreements.
Due to the large number of collective bargaining agreements, the Company is
periodically in negotiations with certain of the unions representing its
employees. The Company considers its overall relations with its work force to
be satisfactory.
SEASONALITY/OTHER
The Company's business is somewhat seasonal, with lower sales usually
experienced during the first quarter of each fiscal year and higher bedding
sales usually experienced in the last three quarters of each fiscal year. See
Note 12 to the Consolidated Financial Statements of the Company included in
Part II, Item 8 herein.
The Company has no material long-term contractual relationships with any
customer for its products. Since the level of production of products is
generally promptly adjusted to meet customer order demand, the Company has a
negligible backlog of orders. Finished goods inventories of bedding products
are physically stored at manufacturing locations until shipped (usually within
days of manufacture).
Sealy's Canadian facilities comprise all of the Company's foreign-owned
manufacturing operations at November 30, 1995. As a result of the 1993
expiration of its Korean license agreement, the Company began marketing its
Sealy Brand in South Korea during 1995. In addition, the licensee for Mexico
agreed to terminate its license, thus making it possible for Sealy to enter the
market directly. The Company intends to begin marketing and manufacturing in
Mexico in 1996. The Company does not derive a material portion of its sales or
revenues from its foreign-owned operations or from customers in any other
foreign country.
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ITEM 2. PROPERTIES
The offices of the Company are located at 520 Pike Street, Seattle,
Washington 98101. Corporate, licensing and marketing services are provided to
the Company by Sealy, Inc. (a wholly-owned subsidiary of the Company), located
in Cleveland, Ohio. The principal address of Sealy, Inc. is Halle Building,
10th Floor, 1228 Euclid Avenue, Cleveland, Ohio 44115.
The Company services certain national account customers in offices located
in Chicago, Illinois, and also administers component operations at its
Rensselaer, Indiana facility. The Company leases a research and development
facility in Cleveland, Ohio. The Company's leased facilities are occupied
under leases which expire from 1995 to 2015, including renewal options.
The following table sets forth certain information regarding manufacturing
facilities operated by the Company at February 28, 1996:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
LOCATION FOOTAGE TITLE
- ------------------------------------------------------- ------------------- ------------
<S> <C> <C> <C>
UNITED STATES
Arizona Phoenix 117,400 Leased
Phoenix 76,000 Owned (a)
Phoenix 240,600 Owned (a)
California Richmond 238,000 Owned (a)
South Gate 185,000 Owned (a)
Colorado Colorado Springs 70,000 Owned (a)
Denver 92,900 Owned (a)
Florida Orlando 97,600 Owned (a)
Georgia Atlanta 292,500 Owned (a)(b)
Illinois Batavia 212,700 Leased (c)
Indiana Rensselaer 131,000 Owned (a)
Rensselaer 150,000 Leased (d)
Kansas Kansas City 102,600 Leased
Maryland Williamsport 144,000 Leased
Massachusetts Randolph 187,000 Owned (a)
Michigan Taylor 156,000 Leased
Minnesota St. Paul 93,600 Leased (d)
New Jersey South Brunswick 100,000 Owned (a)
New York Albany 102,300 Owned (a)
North Carolina Lexington 97,400 Owned (a)
Ohio Medina 140,000 Owned (a)
Oregon Portland 140,000 Owned (a)
Pennsylvania Clarion 85,000 Owned (a)
Delano 143,000 Owned (a)
Tennessee Memphis 225,000 Owned (a)
Texas Brenham 220,000 Owned (a)
North Richland Hills 124,500 Owned (a)
CANADA
Alberta Edmonton 144,500 Owned(a)
Quebec Saint Narcisse 76,000 Owned(a)
Ontario Toronto 80,200 Leased
PUERTO RICO Carolina 58,600 Owned(a)
---------
4,323,400
=========
(a) The Company has granted a mortgage or otherwise encumbered its interest in this facility as collateral for secured
indebtedness.
(b) The Company has leased 154,800 square feet to an unrelated tenant.
(c) The Company has subleased 76,000 square feet to an unrelated tenant.
(d) The Company has the option to purchase the property for specified costs at certain intervals during the lease term.
</TABLE>
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The Company considers its present facilities to be generally well
maintained, in sound operating condition and adequate for its needs. When
viewed as a whole, the Company has excess capacity available in its facilities
and the necessary equipment (as owner or lessee) to carry on its business.
REGULATORY MATTERS
The Company's principal wastes are wood, cardboard and other nonhazardous
materials derived from product component supplies and packaging. The Company
also periodically disposes (primarily by recycling) of small amounts of used
machine lubricating oil and air compressor waste oil. Until recently, the
furniture operations of the Company in Phoenix, Arizona used solvent-based wood
stains. In anticipation of new federal and state air emission regulations, the
Company's furniture operations recently switched to non-volatile solvent wood
stains and are exploring the use of water-based wood stains. The Company,
generally, is subject to the Federal Water Pollution Control Act, the
Comprehensive Environmental Response, Compensation and Liability Act and
amendments and regulations thereunder and corresponding state statutes and
regulations. The Company's furniture operations are also subject to the
Resource Conservation and Recovery Act, the Clean Air Act and amendments and
regulations thereunder and corresponding state statutes and regulations. The
Company believes that it is in material compliance with all applicable federal
and state environmental statutes and regulations. Except as set forth in Item
3. "Legal Proceedings" below, compliance with federal, state or local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, should not have any material effect upon the capital expenditures,
earnings or competitive position of the Company. The Company is not aware of
any pending federal environmental legislation (including the amendments to the
Clean Air Act which have been adopted) which would have a material impact on
the Company's operations. Except as set forth in Item 3, "Legal Proceedings,"
the Company has not been required to make, and during the next two fiscal
years, does not expect to make any material capital expenditures for
environmental control facilities.
The Company's conventional bedding and other product lines are subject to
various federal and state laws and regulations relating to flammability,
sanitation and other standards. The Company believes that it is in material
compliance with all such laws and regulations.
ITEM 3. LEGAL PROCEEDINGS
In accordance with procedures established under the Environmental Cleanup
Responsibility Act (now known as the Industrial Site Recovery Act), Sealy and
one of its subsidiaries are parties to an Administrative Consent Order ("ACO")
issued by the New Jersey Department of Environmental Protection ("DEP")
pursuant to which the Company and such subsidiary agreed to conduct soil and
groundwater sampling to determine the extent of environmental contamination at
the plant owned by the subsidiary in South Brunswick, New Jersey. The Company
does not believe that its manufacturing processes were a source of the
contaminants found to exist above regulatorily acceptable levels in the
groundwater. As the current owners of the facility, however, the Company and
its subsidiary are primarily responsible for the investigation and any
necessary clean up plan approved by the DEP under the terms of the ACO. In
March 1994, the Company filed a claim in the U.S. District Court for the
District of New Jersey against former owners of the site and their lenders
under the Comprehensive Environmental Response, Compensation and Liability Act
seeking contribution for site investigation and remedial costs.
In March 1995, the DEP approved the Company's soil remediation plans and
in June, 1995, the Company's groundwater remediation plans, which include
additional monitoring by the Company and, depending upon the results of such
monitoring, the possible installation of a groundwater containment system. By
a November 15, 1993 letter, DEP postponed any required activity by the Company
to delineate and/or remediate contaminants in the fractured bedrock located on
the site, which DEP previously had requested the Company to undertake, and
which DEP could attempt to impose in the future. Because of the nature of
certain of the contaminants, their geological location in and porosity of the
fractured bedrock, the Company and its consultant are unaware of any accepted
technology for successfully remediating the contamination either in the shallow
groundwater or the fractured bedrock. Thus, the groundwater remediation plan
proposes no remedial activity regarding groundwater in the fractured bedrock.
While the Company cannot predict the ultimate timing or cost to remediate
this facility based on facts currently known, management believes the
previously established accrual for site investigation and
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remediation costs is adequate to cover the Company's probable liability. If
additional remediation is required, however, such as the installation of a
groundwater containment system, management estimates it could cost the
Company up to an additional $3 million. Management does not believe that
resolution of this matter will have a material adverse effect on the Company's
financial position or future operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's merger warrants to acquire shares of Class B common stock
(which warrants were issued in conjunction with the LBO, and which became
exercisable subsequent to August 9, 1995), (the "Merger Warrants"), are
registered for trading in the over-the-counter market; however, because of the
extremely limited and sporadic nature of quotations for such Merger Warrants,
there is no established public trading market for the Merger Warrants. There
is no established public trading market for any other class of common equity of
the Company.
As of January 31, 1996, there are 64 holders of record of the Company's
Class A shares, 60 holders of record of the Company's Class B shares, 1,159
holders of record of the Merger Warrants and 47 holders of record of the
warrants issued in the Recapitalization (the "Restructure Warrants"). See Note
9 to the Consolidated Financial Statements, Part II, Item 8 herein.
No dividends have been paid on any class of common equity of the Company
during the last three fiscal years. The Company's 1994 Credit Agreement
provides that, after the occurrence of an initial public offering of at least
20% of capital stock, the Company may pay cash dividends, subject to certain
limitations, on such capital stock. The Company's 9 1/2% Senior Subordinated
Notes contain other provisions which provide certain limitations on the payment
of dividends.
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected consolidated financial and other
data of the Company (some periods of which are less than one year due to
accounting requirements for acquisition transactions) for the years ended
November 30, 1995 and 1994, for the ten months ended November 30, 1993, for the
two months ended January 31, 1993, for the year ended November 30, 1992, for
the one month ended November 30, 1991 and for the eleven months ended October
31, 1991.
During the period from December 1, 1990 through November 30, 1995, the
Company's capital structure changed significantly, in large part as a result of
the 1991 Recapitalization and the Acquisition in February 1993. Due to
required purchase accounting adjustments relating to such transactions, and the
resultant changes in control, the consolidated financial and other data for
each period reflected in the following tables during this period are not
comparable to such data for the other such periods.
The selected consolidated financial and other data set forth in the
following tables have been derived from the Company's audited consolidated
financial statements. The report of KPMG Peat Marwick LLP, independent
auditors, covering the Company's Consolidated Financial Statements for the
years ended November 30, 1995 and 1994, for the ten months ended November 30,
1993 (Successor Periods), and for the two months ended January 31, 1993, is
included elsewhere herein. These tables should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company included
elsewhere herein.
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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
PREDE-
SUCCESSOR (a) PRE-SUCCESSOR (a) CESSOR (a)
---------------------------------- ------------------------------------- ----------
TEN TWO ONE ELEVEN
YEAR YEAR MONTHS MONTHS YEAR MONTH MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
NOV. 30, NOV. 30, NOV. 30, JAN. 31, NOV. 30, NOV. 30, OCT. 31,
1995 1994 1993 1993 1992 1991 1991
-------- --------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
-----------------------------
Net sales $653.9 $697.7 $579.7 $103.5 $654.2 $50.0 $575.9
Costs and expenses 610.9 641.6 531.0 100.9 628.8 49.4 661.8
Income (loss) before income tax
and extraordinary item 43.0 56.1 48.7 2.6 25.4 0.6 (85.9)
Extraordinary loss (b) -- -- 2.9 -- -- -- --
Net income (loss) $ 19.5 $ 29.2 $ 24.7 $ 1.0 $ 10.0 $(0.1) $(73.4)
OTHER DATA:
-----------
Depreciation and amortization of
intangibles $ 24.2 $ 23.6 $ 19.1 $ 4.3 $ 26.4 $ 2.3 $ 33.2
Operating income (c) 74.1 89.5 79.9 9.3 68.1 3.6 27.8
EBITDA (d) 98.3 113.1 99.0 13.7 94.5 5.9 61.0
Capital expenditures 11.8 12.8 10.4 3.3 11.6 0.5 2.7
Interest expense, net 31.0 33.4 31.2 6.7 42.7 3.0 113.7
Ratio of EBITDA to interest
expense, net/(earnings deficiency) 3.2x 3.4x 3.2x 2.0x 2.2x 2.0x $(52.7)
Ratio of earnings to fixed charges/
(earnings deficiency) (e) 2.3x 2.5x 2.4x 1.4x 1.6x 1.2x $(85.9)
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR (a) PRE-SUCCESSOR (a)
AS OF NOVEMBER 30, AS OF NOVEMBER 30,
1995 1994 1993 1992 1991
---------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets $776.2 $810.6 $823.1 $780.3 $805.0
Long-term obligations 269.4 329.5 384.5 404.0 467.6
Total debt 286.9 349.9 406.2 443.5 495.6
Stockholder's equity 330.9 322.2 284.3 179.2 166.5
</TABLE>
(a) The Company employed the purchase method of accounting for the
February, 1993 Acquisition and the November 1991 Recapitalization.
Accordingly, historical financial and other data for the Successor,
Pre-Successor and Predecessor periods are not comparable.
(b) During 1993, the Company recorded an extraordinary loss of $2.9
million, net of income tax of $1.5 million, representing the remaining
unamortized debt issuance costs related to long term obligations repaid as a
result of the Refinancing.
(c) Operating income is calculated by adding interest expense, net to net
sales less costs and expenses.
(d) EBITDA is calculated by adding interest expense, net, income tax
(benefit) and depreciation and amortization of intangibles to net income
(loss) before extraordinary item. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to service and
incur debt. EBITDA does not represent net income or cash flows from
operations as those terms are defined by generally accepted accounting
principles ("GAAP") and does not necessarily indicate whether cash flows
will be sufficient to fund cash needs.
(e) For purposes of calculating the ratio of earnings to fixed charges,
earnings represent income before income tax and extraordinary item plus
fixed charges. Fixed charges consist of interest expense, net, including
amortization of discount and financing costs and the portion of operating
rental expense which management believes is representative of the interest
component of rent expense.
9
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Company employed the purchase method of accounting for the Acquisition in
February, 1993. As a result of the required purchase accounting adjustments,
the post-Acquisition financial statements for the years ended November 30, 1995
and 1994 and the ten months ended November 30, 1993 (the "Successor
Financials") are not comparable to the pre-Acquisition financial statements for
the two months ended January 31, 1993 (the "Pre-Successor Financials").
(See Note 2 to the Consolidated Financial Statements, Part II, Item 8 herein).
The application of purchase accounting for the Acquisition resulted in
decreased depreciation and goodwill amortization for the Successor Financials
when compared with amounts which would have resulted for such periods from the
application of the basis of accounting used in the Pre-Successor Financials.
RESULTS OF OPERATIONS
For ease of reference in the following table, the results of operations of
the Company for the ten months ended November 30, 1993 have been arithmetically
combined with those for the two months ended January 31, 1993. Notes (a) and
(b) to the data contained in Item 6 "Selected Financial Data" also apply to the
preparation of the following table.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1995 1994 1993
------ ------ ------
(DOLLARS IN MILLIONS)
STATEMENT OF INCOME DATA:
<S> <C> <C> <C>
Net sales $653.9 $697.7 $683.2
------ ------ ------
Costs and expenses:
Cost of goods sold 359.2 372.5 362.7
Selling, general and administrative 219.9 211.9 213.9
Performance share plan (13.3) 9.7 3.1
Amortization of intangibles 14.1 14.1 14.3
Interest expense, net 31.0 33.4 37.9
------ ------ ------
610.9 641.6 631.9
------ ------ ------
Income before income tax and
extraordinary item 43.0 56.1 51.3
Income tax 23.5 26.9 22.7
------ ------ ------
Income before extraordinary item 19.5 29.2 28.6
Extraordinary loss -- -- 2.9
------ ------ ------
Net income $ 19.5 $ 29.2 $ 25.7
====== ====== ======
</TABLE>
YEAR ENDED NOVEMBER 30, 1995 COMPARED WITH YEAR ENDED NOVEMBER 30, 1994
Net sales for the year ended November 30, 1995 ("Fiscal 1995"), were $653.9
million, a decrease of $43.8 million, or 6.3%. This decrease is attributable
to a $34.7 million decrease in conventional bedding sales and a $9.1 million
net decrease in upholstered and wood furniture sales.
The bedding sales decrease represents an 11.5%, or $72.4 million decline in
conventional bedding unit shipments, offset partially by a 6.8%, or $37.7
million increase in the average unit selling price. Bedding shipments declined
due to lower volume of promotional and private label bedding units, primarily
attributable to the loss of Sears, Roebuck & Co. ("Sears") private label
business in the year ended November 30, 1994 ("Fiscal 1994").
In addition, sales decreased due to the loss of Sealy brand product
placements at lower retail price points in the second and third quarters. The
loss of placements occurred as a result of certain changes associated with new
bedding lines introduced in March, 1995. Management believes that the Company
has since recaptured a significant number of the lost product placements
through improved product assortment and pricing strategies.
10
<PAGE> 12
The decrease in sales of wood and upholstered furniture sales is due
primarily to the Company's decision in March, 1995 to close its unprofitable
sleep sofa business, resulting in decreased sales of $10.0 million. Sales of
wood bedroom furniture products increased $0.9 million due to expanded retail
distribution.
Cost of goods sold for Fiscal 1995, as a percentage of net sales, increased
1.5 percentage points to 54.9%. This increase is primarily attributable to
increased bedding raw material costs and the impact of lower sales volume on
fixed manufacturing expenses. Management expects bedding raw material cost
increases to continue in Fiscal 1996.
Selling, general and administrative expenses increased $8.0 million,
primarily due to a $9.4 million increase in marketing spending from $108.4
million to $117.8 million. The Company continued to focus its marketing
emphasis on brand preference through national advertising, cooperative
advertising and promotions.
During Fiscal 1995, the Company recorded a non-cash credit of $13.3 million
for the estimated reduction in the value of the Company's Performance Share
Plan (the "Plan"), compared to a non-cash charge of $9.7 million in Fiscal
1994. See Note 11 of Notes to Consolidated Financial Statements.
Interest expense, net for Fiscal 1995 decreased $2.4 million primarily due
to a net reduction of approximately $63 million in total indebtedness other
than subordinated debt. Although the Company did experience increased interest
rates in Fiscal 1995, the impact was not significant as the majority of the
Company's debt, $200 million in Senior Subordinated Notes, is fixed at a rate
of 9.5%.
The Company's effective income tax rate for Fiscal 1995 and 1994 differ
from the Federal statutory rate because of the application of purchase
accounting, certain foreign tax rate differentials and state and local income
taxes. The Company's effective tax rate for Fiscal 1995 versus Fiscal 1994 was
approximately 55% compared to 48% for Fiscal 1994. The higher effective tax
rate for Fiscal 1995 reflects the impact of permanent differences related to
the February, 1993 Acquisition and effects of foreign earnings repatriation
during 1995. See Note 7 to the Consolidated Financial Statements.
For the reasons set forth above, net income for Fiscal 1995 declined $9.7
million to $19.5 million.
YEAR ENDED NOVEMBER 30, 1994 COMPARED WITH YEAR ENDED NOVEMBER 30, 1993
Net sales for the year ended November 30, 1994, were $697.7 million, an
increase of 2.1%. The Company's sales increase was due primarily to a 7.0% (or
$41.4 million) increase in conventional bedding average unit selling price
primarily attributable to a shift in sales to higher-priced Posturepedic
products, partially offset by a 4.3% (or $26.4 million) overall decline in unit
shipments. Decreased shipments of low-end promotional and private label
bedding lines accounted for most of the decrease in unit shipments. The
decrease in shipments of private label bedding units resulted primarily from
the Company's cessation of production of private label bedding for Sears,
Roebuck & Co. during the third quarter of Fiscal 1994. Sales of private label
bedding to Sears accounted for approximately 2.5% of the Company's net sales
during Fiscal 1994 and approximately 5.5% of its net sales during the year
ended November 30, 1993 ("Fiscal 1993"). Private label bedding has
historically accounted for a significant percentage of the Company's net sales.
The Company's marketing emphasis, however, has shifted to increasing brand
preference, and therefore, Sealy has de-emphasized private label products.
Sales of products other than conventional bedding represented approximately
10% of net sales during Fiscal 1994. Increased sales of wood bedroom furniture
products were offset by the loss of sales resulting from the Company's decision
in Fiscal 1993 to discontinue the manufacture and sale of waterbed products.
As a percentage of net sales, cost of goods sold increased to 53.4% from
53.1% in Fiscal 1993. This increase during Fiscal 1994 was primarily
attributable to the transitional inefficiencies resulting from plant shutdowns
and the related transfer of business to ongoing facilities, one-time
inefficiencies resulting from the startup of second shift operations at various
bedding locations, higher direct labor costs associated with the introduction
of the new Stearns & Foster bedding line, and a fourth quarter overall increase
in cost of materials.
11
<PAGE> 13
Selling, general and administrative expenses for Fiscal 1994 decreased 0.9
percentage point. In Fiscal 1994, the Company continued its emphasis on
increasing the brand preference of its products through increased marketing
spending, which increased to approximately $108.4 million from $104.8 million
in the prior fiscal year. Reflecting development of its marketing emphasis on
brand preference, during recent periods the Company has spent an increasing
amount on marketing. The Fiscal 1994 increase in marketing spending was
offset, in part, by a decline of $2.9 million in sales employment costs
resulting from a consolidation of the Sealy and Stearns & Foster sales forces.
In addition, plant consolidation expenditures included in selling, general and
administrative expenses, of $0.8 million in Fiscal 1994 versus $4.1 million in
the prior year, further offset the additional expenditures for marketing
spending.
During Fiscal 1994 and Fiscal 1993, the Company incurred non-cash charges
for Performance Share Plan expense of $9.7 million and $3.1 million,
respectively. Approximately $5.4 million of the non-cash charges incurred
during Fiscal 1994 represent adjustments to give cumulative effect to Plan
expense recorded during prior periods. See Note 11 of Notes to Consolidated
Financial Statements.
Interest expense, net for Fiscal 1994 decreased $4.5 million primarily due
to a net reduction of approximately $56 million in total indebtedness and a
reduction in interest rates as a result of refinancings in May, 1993 and May,
1994.
The Company's effective income tax rates for Fiscal 1994 differ from the
Federal statutory rate because of the application of purchase accounting,
certain foreign tax rate differentials, and state and local taxes. The
Company's effective income tax rate for Fiscal 1994 was approximately 48.0%
compared to approximately 44.3% for Fiscal 1993. The higher effective rate for
Fiscal 1994 versus Fiscal 1993 primarily reflects the impact of permanent
differences relating to the February, 1993 acquisition and statutory rate
changes in 1993. See Note 7 of Notes to Consolidated Financial Statements.
For the reasons set forth above, net income for Fiscal 1994 improved
$3.5 million to $29.2 million.
LIQUIDITY AND CAPITAL RESOURCES
During Fiscal 1995, the Company's principal source of funds consisted of
cash flow from operations. Its principal uses of funds consisted of payments
of principal and interest on its secured indebtedness, capital expenditures
and interest payments on its outstanding 9 1/2% Senior Subordinated Notes
(the "Notes").
During May, 1994, the Company entered into a restated secured credit
agreement (the "1994 Credit Agreement"). The 1994 Credit Agreement provided
the Company with a $150 million term loan facility (the "Term Loan Facility")
and a $125 million revolving credit facility (the "Revolving Credit Facility").
At November 30, 1995, $85 million was outstanding under the Term Loan Facility.
The Company made regularly scheduled principal payments on the Term Loan
Facility of $20 million in each of Fiscal 1995 and 1994. During Fiscal 1995,
the Company made voluntary prepayments aggregating $25 million. These
prepayments were applied pro rata against the remaining mandatory payments.
The Term Loan Facility amortizes according to the following revised schedule:
$17 million in Fiscal 1996; $20 million in Fiscal 1997; and $24 million in each
of fiscal years 1998 and 1999. At November 30, 1995, approximately $112
million was available under the Revolving Credit Facility. The 1994 Credit
Agreement provides that amounts outstanding under the Revolving Credit Facility
may not exceed $75 million for 30 consecutive calendar days in the period
beginning September 1 and ending December 31 in each year. During Fiscal 1995
and 1994, the maximum amount outstanding under the Revolving Credit Facility,
excluding letters of credit, was $21 million and $33 million, respectively.
Amounts outstanding under the 1994 Credit Agreement are secured by
substantially all of the Company's assets, and bear interest at a variable rate
based on an applicable margin over the greater of a corporate base rate or
federal funds rate, or Eurodollar rate, at the Company's option. The
applicable margin fluctuates depending on the Company's performance, as
measured by certain financial ratios. The 1994 Credit Agreement requires that
interest rate protection be maintained on an aggregate notional amount equal to
at least 50% of the amount outstanding from time to time under the Term Loan
Facility from inception through at least May 7, 1996.
The Notes are unsecured, subordinated obligations of the Company. Interest
on the Notes is payable in semi-annual installments at the rate of 9.5% per
annum. The outstanding principal amount of the Notes is payable on May 1,
2003. The Notes may be redeemed at the option of the Company on or after May
1, 1998, under the conditions and at the redemption prices as specified in the
note indenture, dated as of May 7, 1993, under which the Notes were issued (the
"Note Indenture"). At, however, any time prior to May 1, 1996, the Company
may redeem up to $60 million in aggregate principal amount of the Notes with
the proceeds of one
12
<PAGE> 14
or more Public Equity Offerings (as defined in the Note Indenture) at
redemption prices specified in the Note Indenture.
The 1994 Credit Agreement and the Note Indenture contain certain negative
and affirmative covenants including, without limitation, requirements and
restrictions relating to capital expenditures, dividends, working capital, net
worth and other financial ratios. At November 30, 1995, the Company was in
compliance with the financial covenants contained in these agreements,
including a revised fixed charge coverage ratio and a schedule of reduced
future principal repayments resulting from earlier prepayments.
The Company made capital expenditures aggregating $11.8 million and $12.7
million during Fiscal 1995 and 1994, respectively. Management expects to
exceed the historical level of capital expenditures in fiscal year 1996 with
additional expenditures for the automation of manufacturing processes and
enhanced management information systems. The Company intends to fund Fiscal
1996 capital expenditures with cash generated by operations. Management
believes that the annual capital expenditure limitations contained in the 1994
Credit Agreement will not significantly inhibit the Company's ability to meet
its ongoing operating needs. Based upon its results of operations during
periods subsequent to the execution of the 1994 Credit Agreement and its
current financial condition, management believes that cash flow from
operations, together with amounts available under the Revolving Credit
Facility, will provide the Company with the resources necessary to meet its
anticipated capital requirements. As part of the Company's routine analysis of
its capital structure, management continues to review financing alternatives.
The Company's net weighted average borrowing cost was 9.0% for fiscal year 1995
and 8.2% for fiscal year 1994.
FOREIGN OPERATIONS AND EXPORT SALES
The Company has foreign operations in Canada which had net sales of
approximately $40 million, $44 million and $42 million for fiscal years ended
November 30, 1995, 1994 and 1993, respectively, and operating income of
approximately $7 million, $9 million and $8 million, respectively, in each of
such years. The Company's operations in Canada had identifiable assets,
excluding intercompany receivables and payables, of approximately $15 million,
$30 million and $30 million at November 30, 1995, 1994 and 1993, respectively.
As a result of the 1993 expiration of its Korean license agreement, the Company
began marketing its Sealy brand in South Korea during 1995. The Company
generated sales in South Korea of approximately $4.3 million through the end of
the fiscal year. Also, the licensee for Mexico agreed to terminate its
license, thus permitting Sealy to enter the market directly during fiscal 1995.
Production is expected to begin in Mexico in March, 1996. The Company has no
other foreign operations and there were no sales from the Canadian operations
to domestic operations in the three-year period ended November 30, 1995.
CHANGE IN FISCAL YEAR
A Form 8-K was filed October 11, 1995 reporting that the Board of Directors
of the Company approved the change of the Company's fiscal year from one ending
on November 30 in each year to a 52-53 week fiscal year. The first such fiscal
year shall commence on Friday, December 1, 1995 and shall end on the 53rd
Sunday thereafter or Sunday, December 1, 1996. Subsequent fiscal years shall
end on the Sunday nearest the last day of November.
13
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SEALY CORPORATION
Consolidated Financial Statements
November 30, 1995 and 1994
(With Independent Auditors' Report Thereon)
14
<PAGE> 16
REPORT OF INDEPENDENT AUDITORS
------------------------------
The Board of Directors and Stockholders
Sealy Corporation:
We have audited the accompanying consolidated balance sheets of Sealy
Corporation and subsidiaries (Company) as of November 30, 1995 and 1994 and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years ended November 30, 1995, 1994 and the ten months ended November
30, 1993 (Successor periods) and for the two months ended January 31, 1993
(Pre-Successor period). In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedule for
the Successor periods and the Pre-Successor periods as listed in Item 14(a)(2)
of Form 10-K of Sealy Corporation for the year ended November 30, 1995. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of Sealy Corporation
and subsidiaries at November 30, 1995 and 1994, and the results of their
operations and their cash flows for the Successor periods and Pre-Successor
periods in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule for the Successor periods
and Pre-Successor periods, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, on February
12, 1993, a majority of the outstanding common stock of the Company was
acquired in a business combination accounted for as a purchase. As a result of
the acquisition, the consolidated financial statements of the Company for the
Successor periods and Pre-Successor period are presented on a different cost
basis and therefore, are not comparable.
As discussed in Notes 1 and 7 to the consolidated financial statements, in
connection with the application of purchase accounting, effective February 1,
1993 the Company changed its method of accounting for income taxes to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
KPMG Peat Marwick LLP
Cleveland, Ohio
January 26, 1996
15
<PAGE> 17
SEALY CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------------
1995 1994
----------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,348 $ 21,309
Accounts receivable, less allowance for
doubtful accounts (1995 - $7,475; 1994 - $7,774) 82,288 78,313
Inventories 35,356 42,623
Deferred income taxes 11,612 15,706
Prepaid expenses 1,812 2,764
-------- --------
148,416 160,715
Property, plant and equipment - at cost:
Land 12,809 14,225
Buildings and improvements 56,289 59,677
Machinery and equipment 90,601 83,486
-------- --------
159,699 157,388
Less accumulated depreciation 25,161 16,308
-------- --------
134,538 141,080
Other assets:
Goodwill - net of accumulated amortization
(1995 - $36,037; 1994 - $23,357) 471,741 484,842
Patents and other intangibles - net of accumulated
amortization (1995 - $3,834; 1994 - $2,483) 7,197 8,548
Debt issuance costs, net and other assets 14,289 15,464
-------- --------
493,227 508,854
-------- --------
$776,181 $810,649
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 18
SEALY CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1995 1994
---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current portion - long-term obligations $ 17,488 $ 20,361
Accounts payable 37,037 28,113
Accrued expenses:
Customer incentives and advertising 25,579 15,682
Compensation 9,899 16,884
Insurance 8,013 7,094
Other 18,306 20,054
-------- --------
116,322 108,188
Long-term obligations 269,449 329,528
Other noncurrent liabilities 30,554 29,605
Deferred income taxes 28,975 21,095
Stockholders' equity:
Preferred stock, $.01 par value; Authorized,
10,000 shares; Issued, none -- --
Class A common stock, $.01 par value;
Authorized, 49,500 shares;
Issued (1995 - 29,451; 1994 - 29,434) 295 294
Class B common stock, $.01 par value;
Authorized, 500 shares, Issued (1995 - 9;
1994 - 0) -- --
Additional paid-in capital 258,336 269,229
Retained earnings 73,387 53,917
Foreign currency translation adjustment (1,137) (1,207)
-------- ---------
330,881 322,233
Commitment and contingencies -- --
-------- --------
$776,181 $810,649
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE> 19
(This page intentionally left blank)
18
<PAGE> 20
SEALY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SUCCESSOR PRE-SUCCESSOR
--------------------------------------------------- -------------
YEAR YEAR TEN MONTHS TWO MONTHS
ENDED ENDED ENDED ENDED
NOV. 30, 1995 NOV. 30, 1994 NOV. 30, 1993 JAN. 31, 1993
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales $653,942 $697,664 $579,704 $103,492
-------- -------- -------- --------
Cost and expenses:
Cost of goods sold 359,239 372,466 305,613 57,110
Selling, general and administrative
(including provisions for bad debts
of $812, $1,625, $1,354 and $265,
respectively) 219,847 211,913 180,178 33,692
Performance share plan (13,260) 9,681 2,204 905
Amortization of intangibles 14,056 14,060 11,780 2,473
Interest expense, net 31,018 33,454 31,218 6,675
-------- -------- -------- --------
Income before income taxes and
extraordinary item 43,042 56,090 48,711 2,637
Income taxes 23,572 26,898 21,067 1,660
-------- -------- -------- --------
Income before extraordinary item 19,470 29,192 27,644 977
Extraordinary loss from early
extinguishment of debt (net of
income taxes of $1,504) -- -- 2,919 --
-------- -------- -------- --------
Net income $ 19,470 $ 29,192 $ 24,725 $ 977
========= ========= ========= ========
Earnings per common share:
Income before extraordinary item $ .65 $ .95 $ .91 $ .03
Extraordinary loss -- -- (.10) --
-------- -------- -------- --------
Net income $ .65 $ .95 $ .81 $ .03
========= ========= ========= ========
Weighted average number of common
shares and equivalents outstanding
during period 30,143 30,878 30,496 30,062
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 21
SEALY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A CLASS B FOREIGN
----------------- ---------------- ADDITIONAL RETAINED CURRENCY
COMMON STOCK COMMON STOCK PAID-IN EARNINGS TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT TOTAL
------ ------ ------ ------ --------- -------- ---------- -----
PRE-SUCCESSOR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
November 30, 1992 29,459 $295 -- -- $210,010 $(29,581) $(1,519) $179,205
Net income -- -- -- -- -- 977 -- 977
Performance share plan -- -- -- -- 905 -- -- 905
Foreign currency translation -- -- -- -- -- -- 462 462
------ ---- --- ------- --------- ---------- -------- ---------
January 31, 1993 29,459 $295 -- -- $210,915 $(28,604) $(1,057) $181,549
======= ==== ====== ====== ======== ========= ========== =========
SUCCESSOR
February 1, 1993 (reflects the
purchase of 27,630 common
shares in connection with the
Acquisition) 29,459 $295 -- -- $259,854 -- -- $260,149
Net income -- -- -- -- -- $24,725 -- 24,725
Performance share plan -- -- -- -- 2,204 -- -- 2,204
Valuation adjustment on
common stock and warrants
subject to repurchase -- -- -- -- (1,483) -- -- (1,483)
Repurchase of management
stock, net of stock options
exercised (2) -- -- -- 6 -- -- 6
Foreign currency translation -- -- -- -- - $(1,256) (1,256)
------ ---- --- ------- --------- ---------- -------- ---------
November 30, 1993 29,457 295 -- -- 260,581 24,725 (1,256) 284,345
Net income -- -- -- -- -- 29,192 -- 29,192
Performance share plan -- -- -- 9,681 -- -- 9,681
Valuation adjustment on
common stock and warrants
subject to repurchase -- -- -- -- (1,065) -- -- (1,065)
Repurchase of management
stock, net of stock options
exercised (23) (1) -- -- 32 -- -- 31
Foreign currency translation -- -- -- -- -- -- 49 49
------ ---- --- ------- --------- ---------- -------- ---------
November 30, 1994 29,434 294 -- -- 269,229 53,917 (1,207) 322,233
Net income -- -- -- -- -- 19,470 -- 19,470
Performance share plan -- -- -- -- (13,260) -- -- (13,260)
Management stock award 10 1 -- -- -- -- -- 1
Valuation adjustment on
common stock and warrants
subject to repurchase -- -- -- -- 2,300 -- -- 2,300
Stock options exercised 7 -- -- -- 67 -- -- 67
Warrants exercised -- -- 9 -- -- -- -- --
Foreign currency translation -- -- -- -- -- -- 70 70
------ ---- --- ------ -------- ---------- ------- --------
November 30, 1995 29,451 $295 9 -- $258,336 $ 73,387 $(1,137) $330,881
====== ==== === ====== ======== ========== ======= ========
See accompanying notes to consolidated financial statements.
20
</TABLE>
<PAGE> 22
SEALY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PRE-SUCCESSOR
---------------------------------------------------------- ----------------
YEAR YEAR TEN MONTHS TWO MONTHS
ENDED ENDED ENDED ENDED
NOV. 30, 1995 NOV. 30, 1994 NOV. 30, 1993 JAN. 31, 1993
----------------- ---------------- ----------------- --------------
<S> <C> <C> <C> <C>
Operating activities:
Net income $ 19,470 $ 29,192 $ 24,725 $ 977
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 10,144 9,512 7,275 1,869
Loss on disposal of assets 813 444 -- --
Non cash interest expense -- -- 4,157 2,664
Non cash stock incentive expense (13,260) 9,681 2,204 905
Deferred income taxes 11,974 3,473 17,000 321
Extraordinary loss -- -- 2,919 --
Amortization of:
Intangibles 14,056 14,060 11,780 2,473
Debt issuance cost 3,136 3,248 2,394 202
Other, net (1,502) (142) 3,410 224
Changes in:
Accounts receivable (3,975) (6,185) 3,131 (1,024)
Inventories 7,267 (878) (2,156) (1,425)
Prepaid expenses 952 556 (743) (164)
Accounts payable/accrued expenses/
other noncurrent liabilities 14,252 6,030 6,559 (8,299)
------ ------- ------- --------
Net cash provided by (used in)
operating activities 63,327 68,991 82,655 (1,277)
------- ------ ------- --------
Investing activities:
Purchase of property, plant and (11,804) (12,753) (10,413) (3,330)
equipment
Proceeds from disposal of property,
plant and equipment 7,468 1,659 1,992 248
------- ------- ------- -------
Net cash used in investing activities (4,336) (11,094) (8,421) (3,082)
-------- -------- -------- --------
Financing activities:
Proceeds from 1993 Credit Agreement
and sale of 9 1/2% Senior Subordinated
Notes due 2003 -- -- 450,000 --
Repayment of Old Credit Agreement and
12.4% Senior Subordinated Notes
due 2001 -- -- (433,320) --
Repayment of long-term obligations, net (62,952) (56,290) (63,468) 2,667
Debt issuance costs -- (858) (17,557) --
Management investor redemptions -- (359) (27) --
-------- --------- --------- ---------
Net cash (used in) provided by
financing activities (62,952) (57,507) (64,372) 2,667
--------- -------- -------- -----
Change in cash and cash equivalents (3,961) 390 9,862 (1,692)
Cash and cash equivalents:
Beginning of period 21,309 20,919 11,057 12,749
------- -------- -------- -------
End of period $17,348 $ 21,309 $ 20,919 $11,057
======= ======== ======== =======
Supplemental disclosures:
Taxes paid, net $ 9,405 $ 9,215 $ 3,549 $ 895
Interest paid, net $ 28,670 $ 31,198 $ 26,295 $ 1,037
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 23
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies used in the preparation of the consolidated
financial statements are summarized below.
(a) BUSINESS
--------
Sealy Corporation (the "Company"), is engaged in the home furnishings
business and produces mattresses, boxsprings and bedroom furniture.
Substantially all of the Company's trade accounts receivable are from retail
businesses. Sales to Sears, Roebuck & Co., previously the Company's largest
customer, were approximately 4%, 8%, 12% and 17% of total net sales for the
years ended November 30, 1995 and 1994, the ten months ended November 30, 1993
and the two months ended January 31, 1993 (the "Reporting Periods"). The
Company recognizes revenue upon shipment of goods to customers.
(b) PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.
(c) CASH AND CASH EQUIVALENTS
-------------------------
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. Cash equivalents are stated at cost which
approximates market value.
(d) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment are depreciated over their expected useful
lives principally by the straight-line method for financial reporting purposes
and by both accelerated and straight-line methods for tax reporting purposes.
(e) AMORTIZATION OF INTANGIBLES
---------------------------
Goodwill represents the excess of the purchase price paid over the fair
value of net assets acquired and is amortized on a straight-line basis over a
forty year period. The Company assesses the recoverability of this intangible
asset by determining whether the amortization of the goodwill balance over its
remaining life can be recovered through projected undiscounted future earnings.
The amount of goodwill impairment, if any, would be measured based on projected
discounted future results using a discount rate reflecting the Company's
average cost of funds.
Other intangibles include patents and trademarks which are amortized on the
straight-line method over periods ranging from 5 to 17 years.
The costs related to the issuance of debt are capitalized and amortized to
interest expense using the effective-interest method over the lives of the
related debt.
(f) NET EARNINGS PER COMMON SHARE
-----------------------------
Net earnings per common share is based upon weighted average number of
shares of the Company's common stock and common stock equivalents outstanding
for the periods presented. Common stock equivalents included in the
computation, using the treasury stock method, represent shares issuable upon
the assumed exercise of warrants, stock options and performance shares that
would have a dilutive effect in periods in which there were earnings.
22
<PAGE> 24
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(g) INCOME TAXES
------------
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 109, "Accounting For Income
Taxes" ("Statement 109"). Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
The Company adopted Statement 109 effective February 1, 1993, in connection
with the Acquisition of the Company disclosed in Note 2. The adoption of
Statement 109 had no material effect on the amount of income tax expense
reported in the year ended November 30, 1993. Prior to February 1, 1993, the
Company followed Statement of Financial Accounting Standard No. 96 ("Statement
96") to account for income taxes.
(h) ADVERTISING COSTS
-----------------
The Company expenses all advertising costs as incurred. Advertising
expenses for the Reporting Periods amounted to $92,726, $83,726, $67,319 and
$12,305, respectively.
(i) ACCOUNTING PRONOUNCEMENTS
-------------------------
In March 1995, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. In October 1995, the FASB issued
SFAS No. 123, Accounting for Stock-Based Compensation. These pronouncements
are effective for fiscal year 1997. The Company intends to implement the
pronouncements when effective. The impact of these pronouncements has not been
assessed.
(j) RECLASSIFICATION
----------------
Certain reclassifications of previously reported financial information were
made to conform to the 1995 presentation.
(2) BASIS OF ACCOUNTING
On February 12, 1993, Zell/Chilmark Fund, L.P. ("Zell/Chilmark") led an
investor group which purchased the 93.6% equity interest in the Company held by
MB L.P. I, an affiliate of The First Boston Corporation, for a cash purchase
price of $250 million (the "Acquisition").
The Company employed the purchase method of accounting for the Acquisition.
The consolidated financial statements as of November 30, 1995 and 1994 and for
the years ended November 30, 1995 and 1994 and the ten months ended November
30, 1993, reflect an allocation of the sum of the total consideration paid in
the Acquisition for the approximately 94% equity interest and the remaining 6%
equity interest valued at historical book value (collectively, the "New
Basis"). A summary of the New Basis follows:
<TABLE>
<CAPTION>
<S> <C>
Acquisition of 27,630,000 Common Shares $250.0
Historical basis of shares held by
continuing stockholders 10.1
------
Total New Basis $260.1
======
</TABLE>
The New Basis has been allocated to the tangible and identifiable
intangible assets and liabilities of the Company as of February 1, 1993 based,
in large part, upon independent appraisals of their fair values, with the
remainder of the New Basis allocated to goodwill.
23
<PAGE> 25
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The New Basis in excess of historical book value of the identifiable net
assets acquired is as follows:
<TABLE>
<CAPTION>
<S> <C>
Total New Basis $260.1
Less historical net book value 181.5
------
Excess New Basis allocated to net assets $ 78.6
======
The excess New Basis has been allocated as follows:
Increase (decrease) in net assets:
Property, plant and equipment $ (4.0)
Deferred taxes 69.9
Other, net (6.7)
Goodwill, net 19.4
------
$ 78.6
======
</TABLE>
A favorable ruling with respect to certain tax contingencies and the
recognition of available net operating loss carryforwards has been reflected as
purchase accounting adjustments in the allocation of the New Basis.
As a result of the required purchase accounting adjustments, the
post-Acquisition financial statements as of and for the years ended November
30, 1995 and 1994 and as of and for the ten months ended November 30, 1993,
(the "Successor Financials") are not comparable to the pre-Acquisition
financial statements for the two months ended January 31, 1993 (the
"Pre-Successor Financials").
(3) INVENTORIES
Inventories are valued at cost not in excess of market, using the first-in,
first-out (FIFO) method. The major components of inventory as of November 30,
1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $19,861 $25,185
Work in process 11,195 12,030
Finished goods 4,300 5,408
------- -------
$35,356 $42,623
======= =======
</TABLE>
24
<PAGE> 26
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(4) LONG-TERM OBLIGATIONS
Long-term debt as of November 30, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
1995 1994
-------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
1994 Restated Credit Agreement:
Revolving Credit Facility -- $ 14,000
Term Loan Facility $ 85,000 130,000
9 1/2% Senior Subordinated Notes 200,000 200,000
Other 1,937 5,889
--------- ---------
286,937 349,889
Less current portion 17,488 20,361
--------- ---------
$269,449 $329,528
======== ========
</TABLE>
On May 7, 1993, the Company completed a refinancing plan (the
"Refinancing"), which consisted of (i) the sale of $200.0 million of 9 1/2%
Senior Subordinated Notes Due 2003 (the "Notes") pursuant to a public offering,
(ii) the application of $194.5 million of net proceeds therefrom to redeem all
of the then outstanding 12.4% Senior Subordinated Notes of the Company Due 2001
(approximately $139.6 million), and to reduce amounts outstanding under the
Company's existing credit agreement prior thereto and (iii) the execution of a
new secured credit agreement (the "1993 Credit Agreement"). During May 1993,
the Company recorded a $2.9 million extraordinary loss, net of income tax of
$1.5 million, representing the remaining unamortized debt issuance costs
related to the long-term obligations repaid as a result of the Refinancing.
On May 27, 1994, the Company entered into a restated secured credit
agreement (the "1994 Credit Agreement") with a majority of its then current
group of senior lenders (the "Senior Lenders"), which modified the terms of the
1993 Credit Agreement by reducing the amounts under its existing term loan
facilities thereunder from an aggregate of $250 million to a single facility of
$150 million (the "Term Loan Facility") and by increasing the amount available
under its existing revolving credit facility thereunder from $75 million to
$125 million (the "Revolving Credit Facility"). The Revolving Credit Facility
provides sublimits for a $30 million discretionary letter of credit facility
("Letters of Credit") and a discretionary swing loan facility of up to $5
million. The Revolving Credit Facility terminates and is due and payable on
November 30, 1999.
Under the terms of the 1994 Restated Credit Agreement, the Company is
required to make certain mandatory principal payments of the Term Loan
Facility in the event of the sale of any of the Company's principal operating
subsidiaries, certain sales of assets, sales of stock and issuances of new debt
securities and in certain other circumstances. In addition, the Company is
permitted to make voluntary prepayments. During each of the years ended
November 30, 1995 and 1994, the Company made scheduled principal payments
aggregating $20 million. During the year ended November 30, 1995, the Company
made voluntary prepayments aggregating $25 million. These prepayments were
applied pro rata against the remaining mandatory payments. The Term Loan
Facility amortizes according to the following revised schedule:
<TABLE>
<CAPTION>
Fiscal Year Annual Amounts to be Amortized
----------- ------------------------------
(in thousands)
<S> <C>
1996 $ 17,159
1997 19,953
1998 23,944
1999 23,944
--------
$ 85,000
========
</TABLE>
25
<PAGE> 27
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In addition, the outstanding principal amount of the Revolving Credit
Facility must not exceed $75 million for thirty consecutive calendar days in
the period beginning September 1 and ending December 31 during each year. The
Company has met this requirement for calendar years 1995 and 1994. The Company
is also subject to certain affirmative and negative covenants under both the
1994 Credit Agreement and the 1993 indenture, including, without limitation,
requirements and restrictions with respect to capital expenditures, dividends,
working capital, net worth and other financial ratios.
At November 30, 1995, the Company had approximately $112 million available
under the Revolving Credit Facility, with no outstanding balance and Letters of
Credit issued totaling approximately $13 million. Under the terms of the 1994
Restated Credit Agreement, the Company is initially obligated to pay a
commitment fee rate of 0.375% per annum on the unused portion of the Revolving
Credit Facility. The fee, which is payable quarterly in arrears, is reduced or
increased depending on certain financial ratios.
The May 27, 1994 refinancing lowered the Company's contractual interest
rates and debt service obligations. Two separate interest rate options exist
under the 1994 Credit Agreement and are available to the Company at its option
as follows:
(a) A Floating Rate which is the greater of
(i) A Corporate Base Rate plus a margin, if applicable, or
(ii) A Federal Funds Rate plus 0.25% plus a margin, if applicable, or
(b) A Eurodollar Rate plus an applicable margin.
The applicable margin is zero for the Floating Rate option and 1.25% for
the Eurodollar Rate option. The applicable margin is reduced or increased
depending on certain financial ratios. At November 30, 1995, the weighted
average interest rate on the Term Loan Facility was 7.2%.
In addition, certain other provisions of the 1994 Credit Agreement were
amended to provide more flexibility to the Company relating to, among other
things, investments, capital expenditures and incurrence of debt.
The 1994 Credit Agreement requires that interest rate protection be
maintained on an aggregate notional amount at least equal to 50% of outstanding
Term Loan Facility from inception through at least May 7, 1996.
All obligations of the Company under the 1994 Credit Agreement are jointly
and severally guaranteed by each direct and indirect domestic subsidiary of the
Company and secured by first priority liens on and security interests in
substantially all of the assets of the Company and its domestic subsidiaries
and by first priority pledges of substantially all of the capital stock of most
of the subsidiaries of the Company.
The 9 1/2% Senior Subordinated Notes mature on May 1, 2003 with interest
payable semiannually in cash on May 1 and November 1 of each year. The Notes
may be redeemed at the option of the Company on or after May 1, 1998, under the
conditions and at the redemption prices as specified in the note indenture,
dated as of May 7, 1993, under which the Notes were issued (the "Note
Indenture"). Notwithstanding the foregoing, at any time prior to May 1, 1996,
the Company may redeem with the net proceeds of one or more Public Equity
Offerings as defined in the Note Indenture, up to $60.0 million aggregate
principal amount of the Notes at the redemption prices as specified in the Note
Indenture. The Notes are subordinated to all existing and future Senior Debt
of the Company as defined in the Note Indenture.
26
<PAGE> 28
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(5) LEASE COMMITMENTS
The Company leases certain operating facilities, offices and equipment.
The following is a schedule of future minimum annual lease commitments and
sublease rentals at November 30, 1995.
<TABLE>
<CAPTION>
COMMITMENTS UNDER
-----------------------------
SUBLEASE
YEAR ENDED OPERATING CAPITALIZED RENTAL
NOVEMBER 30, LEASES LEASES INCOME
------------ --------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
1996 $ 6,124 $ 375 $153
1997 4,785 373 153
1998 3,677 371 102
1999 1,856 349 -
2000 1,263 335 -
Later years 3,332 418 -
-------- ------- -------
$21,037 2,221 $408
======= ====
Less amount representing interest 434
Present value of minimum lease payments -------
of capitalized leases $1,787
======
</TABLE>
At November 30, 1995, property, plant and equipment included
approximately $2.1 million of aggregate cost and $0.2 million of accumulated
depreciation related to assets under capitalized leases.
Rental expense charged to operations is as follows:
<TABLE>
<CAPTION>
SUCCESSOR PRE-SUCCESSOR
------------------------------------------------------ --------------------
Year Year Ten Months Two Months
Ended Ended Ended Ended
Nov. 30, 1995 Nov. 30, 1994 Nov. 30, 1993 Jan. 31, 1993
--------------- ---------------- ---------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Minimum rentals $9,084 $8,625 $7,580 $1,516
Contingent rentals (based
upon delivery
equipment mileage) 809 1,361 775 155
------ ------- ------ ------
$9,893 $9,986 $8,355 $1,671
====== ====== ====== ======
</TABLE>
The Company has the option to renew certain plant operating leases,
with the longest renewal period extending through 2015. Most of the operating
leases provide for increased rent through increases in general price levels.
(6) STOCK OPTION PLAN
The Company adopted the 1989 Stock Option Plan ("1989 Plan") in 1989
and the 1992 Stock Option Plan ("1992 Plan") in 1992 and reserved 100,000
shares and 600,000 shares, respectively, of Class A Common Stock of the Company
(the "Shares") for future issuance. Options under the 1989 Plan and the 1992
Plan may be granted either as Incentive Stock Options as defined in Section
422A of the Internal Revenue Code or Nonqualified Stock Options subject to the
provisions of Section 83 of the Internal Revenue Code.
Prior to fiscal year 1995, the Company issued options under the 1989
Plan totaling 5,400 Shares (net of subsequent forfeitures), all of which are
exercisable on or after November 30, 1994. Any unexercised
27
<PAGE> 29
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
options terminate on the tenth anniversary of the date of grant or earlier, in
connection with termination of employment. The exercise price for all 1989
Plan options as of November 30, 1995 is $50.00 per Share. No 1989 Plan options
have been exercised since the date of grant.
Outstanding options under the 1992 Plan are as follows: 55,000 granted
in June, 1992 with an exercise price of $7.52 per Share; 64,000 granted in
June, 1993 with an exercise price of $9.05 per Share; 72,000 granted in June,
1994 with an exercise price of $13.48 per Share; and 92,000 granted in June,
1995 with an exercise price of $15.95 per Share. The 1992 Plan options are
exercisable 25% upon grant and 25% per year thereafter. The exercise price is
equal to the estimated fair value of the Company's stock at the date of grant.
1992 Plan options totaling 11,350 shares were exercised during the Reporting
Periods. At November 30, 1995, options for 162,000 Shares issued under the
1992 Plan are exercisable.
During Fiscal 1993, the Company adopted the 1993 Non-Employee Director
Stock Option Plan (the "1993 Plan"), which was subsequently amended on April 6,
1994 and June 27, 1995. The 1993 Plan provides for the one-time automatic
grant of ten-year options to acquire up to 10,000 Shares to all current and
future directors who are not employed by the Company, by Zell/Chilmark or by
their respective affiliates ("Non-Employee Directors"). Options granted under
the 1993 Plan vest immediately and are initially exercisable at a price equal
to the fair market value of the Shares on the date of grant. For options
granted prior to March 1, 1994, the exercise price of options granted pursuant
to this Plan increased on the first anniversary date of such grant by 4%, which
became the fixed exercise price for all such options. Options issued
thereafter, if any, will be exercisable over their term at the fair market
value on the date of grant. Pursuant to the 1993 Plan, the Company granted
options to acquire up to 50,000 Shares to Non-Employee Directors in fiscal year
1993 at an initial exercise price of $9.05 per Share, which now have a fixed
exercise price of $9.41 per Share. No options under the 1993 Plan have been
exercised. The 1993 Plan was amended on June 27, 1995 to provide for the
grant of an additional option to purchase 5,000 Shares to each eligible
director and thereafter providing for the automatic annual grant of an option
to each eligible director to purchase an additional 5,000 Shares at fair market
value on the date of grant. Pursuant to the 1993 Plan, the Company granted
options to acquire up to 5,000 Shares to each eligible director in fiscal 1995
with a fixed exercise price of $15.95 per Share.
(7) INCOME TAXES
As discussed in Note 1(g), the Company adopted Statement 109 effective
February 1, 1993. Prior years' financial statements have not been restated to
apply the provisions of Statement 109.
The Company and its domestic subsidiaries file a consolidated U.S. Federal
income tax return. Income tax expense attributable to income from continuing
operations consists of:
<TABLE>
<CAPTION>
SUCCESSOR PRE-SUCCESSOR
--------------------------------------------------------- --------------
Year Year Ten Months Two Months
Ended Ended Ended Ended
Nov. 30, 1995 Nov. 30, 1994 Nov. 30, 1993 Jan. 31, 1993
----------------- ----------------- ---------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Current:
Federal $6,384 $15,650 -- $ 674
State and local 1,404 3,287 $ 589 28
Canada and Common-
wealth of Puerto Rico 3,810 4,488 3,478 637
------- -------- ------ ------
11,598 23,425 4,067 1,339
Deferred 11,974 3,473 17,000 321
------- -------- ------ ------
Income tax expense $23,572 $26,898 $21,067 $1,660
======= ======= ======= ======
</TABLE>
Income before income taxes from Canadian operations amount to $7,247,
$8,720, $7,255 and $1,140 for the Reporting Periods.
28
<PAGE> 30
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The differences between the effective tax rate and the statutory U.S.
Federal income tax rate are explained as follows:
<TABLE>
<CAPTION>
SUCCESSOR PRE-SUCCESSOR
----------------------------------------------------------------------- ---------------
Year Year Ten Months Two Months
Ended Ended Ended Ended
Nov. 30, 1995 Nov. 30, 1994 Nov. 30, 1993 Jan. 31, 1993
--------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
Income tax expense (benefit)
computed at statutory U.S.
Federal income tax rate 35.0% 35.0% 35.0% 34.0%
State and local income taxes,
net of Federal tax benefit 4.5 4.6 4.3 2.0
Permanent differences
resulting from purchase
accounting 9.6 7.4 5.4 20.6
Foreign tax rate differential
and effects of foreign
earnings repatriation 5.4 1.5 1.3 6.3
Other items, net 0.3 (0.5) (2.8) --
----- ----- ----- ------
54.8% 48.0% 43.2% 62.9%
==== ==== ==== ====
</TABLE>
As required by Statement 109, the significant components of deferred income
tax expense attributable to income from continuing operations for the ten
months ended November 30, 1993 include adjustments to deferred tax assets and
liabilities for enacted changes in tax rates of $216, and the recognition of
the benefit of Successor net operating losses of $1,936.
At November 30, 1995, 1994 and 1993, the total deferred tax assets were
$23,689, $32,600 and $44,464, respectively, total deferred tax liabilities were
$41,052, $37,989 and $33,257, and the valuation allowance was $0, $0 and
$13,123. The significant components of the deferred tax assets were accrued
salaries and benefits of $9,462, $14,523 and $11,699 and net operating loss
carryforwards of $4,796, $6,475 and $19,579, and the deferred tax liabilities
relating to property, plant and equipment were $26,929, $27,098 and $26,439 and
intangible assets of $13,913, $10,126 and $7,154.
The future usage of net operating losses generated prior to November 6,
1991 will be substantially limited as to annual usage due to a recapitalization
that occurred on that date. The Company has net operating loss carryforwards
of approximately $11 million for U.S. Federal income tax purposes. These
losses cannot be carried back against income of prior periods, and will expire,
if not utilized, by the year 2008.
A provision has not been made for U.S. or foreign taxes on undistributed
earnings of subsidiaries which operate in Canada and Puerto Rico. Upon
repatriation of such earnings, withholding taxes might be imposed that are then
available for use as credits against a U.S. Federal income tax liability,
subject to certain limitations. The amount of taxes that would be payable on
repatriation of the entire amount of undistributed earnings is immaterial.
(8) RETIREMENT PLANS
Substantially all employees are covered by profit sharing plans, where
specific amounts are set aside in trust for retirement benefits. The total
profit sharing expense was $5.4 million, $5.3 million, $4.0 million and $0.8
million for the Reporting Periods, respectively.
(9) WARRANTS
SERIES A AND SERIES B WARRANTS
------------------------------
Series A and Series B Warrants (collectively, "Restructure Warrants") were
issued under a Warrant Agreement dated as of November 6, 1991 between the
Company and its subsidiary, Sealy, Inc., as warrant
29
<PAGE> 31
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
agent. The Restructure Warrants, when exercised, will entitle the Holder
thereof to receive one Share in exchange for the exercise price of $16.00 per
Share for Series A warrants and $22.50 per Share for Series B warrants, subject
to adjustment under certain circumstances. The Series A and Series B Warrants
are exercisable into 4,288,700 and 1,649,500 Shares, respectively.
The Restructure Warrants are exercisable at any time and from time to time
on or prior to November 6, 2001 ("Expiration Date"). The Restructure Warrants
may terminate and become void prior to the Expiration Date in the event that
such warrants are redeemed as described below or if, prior to November 6, 1996
(after notice to Restructure Warrant holders, who may then exercise such
warrants), the Company merges or consolidates with another entity with the
other entity as the survivor.
The Company has the right to redeem the Restructure Warrants on any date
after November 6, 1996 at a redemption price per Share as defined in the
Warrant Agreement.
MERGER WARRANTS
- ---------------
Merger Warrants were issued under a Warrant Agreement ("Agreement") dated
as of August 1, 1989 between the Company and Society National Bank, as
successor warrant agent. Each Merger Warrant, when exercised, will entitle the
holder thereof to receive one fiftieth of one share of Class B Common Stock
("Warrant Shares") of the Company in exchange for the exercise price of $.01
per share, subject to adjustment under certain circumstances.
The Merger Warrants became exercisable subsequent to August 9, 1995. As a
result of exercised Merger Warrants, 8,590 shares of Class B Common Stock were
issued in fiscal 1995.
The Merger Warrants also provided that within 90 days after August 9, 1994
(or sooner, under certain circumstances), the Company would offer to repurchase
for cash all outstanding Merger Warrants and shares issued under such Agreement
in a single transaction ("Repurchase Offer") at a purchase price as defined in
Agreement, provided certain conditions were met and the Company was permitted
by its existing debt agreements. Because the Company's 1994 Restated Credit
Agreement does not allow a repurchase offer, the Company cannot offer to
purchase the Merger Warrants.
The Company is required to offer to repurchase the Merger Warrants and
Warrant Shares upon the removal of any limitations to repurchase or upon the
occurrence of certain other events. Merger Warrants and Warrant Shares are,
therefore, not considered to be a part of the Company's stockholders' equity
but, are included in other noncurrent liabilities in the accompanying
consolidated balance sheets. Authorized Merger Warrants at November 30, 1995
are exercisable into an aggregate of 203,910 shares of Class B Common Stock.
(10) COMMON STOCK
Holders of Class A Common Stock are entitled to one vote per share on all
matters submitted to a vote of stockholders while the holders of Class B Common
Stock are entitled to one-half vote per share. Except with respect to voting
rights, the terms of the Class A Common Stock and the Class B Common Stock are
identical. Shares of Class B Common Stock, under certain circumstances, are
convertible into shares of Class A Common Stock.
(11) PERFORMANCE SHARE PLAN
Effective April 1, 1992, the Company adopted a Performance Share Plan
("Plan") for certain employees of the Company. Under the Plan, the Board of
Directors may approve the issuance of up to 3.0 million performance share units
each representing the right to receive up to one Share if the Company meets
specified cumulative operating cash flow targets over the five-year period
ending November 30, 1996. As of November 30, 1995, there are 2.5 million
performance share units outstanding under the Plan which represent the right to
receive Shares having an estimated fair value of $6.3 million. The performance
share units vest
30
<PAGE> 32
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
over the five years ending November 30, 1996 and, as of November 30, 1995, none
of the units were convertible into Shares.
The Plan is a variable stock compensation plan pursuant to which the fair
value of Shares issuable under the Plan will be recorded as compensation
expense over the Plan's five-year term ending November 30, 1996. In addition
to the annual amount of compensation expense under the Plan, such amount will
be adjusted to give cumulative effect to any change in the amount of non-cash
compensation expense previously recorded in prior reporting periods, resulting
from subsequent increases or decreases in the fair value of the Shares or the
number of performance share units outstanding since such reporting period and
to any change in management's estimate of its ability to achieve the cumulative
operating cash flow targets as defined in the Plan. The Company recorded a
$13.3 million credit to non-cash compensation expense under the Plan for the
year ended November 30, 1995. For the year ended November 30, 1994, the ten
months ended November 30, 1993 and the two months ended January 31, 1993, the
Company recorded $9.7 million, $2.2 million and $0.9 million, respectively, of
non-cash compensation expense under the Plan. To the extent that the fair
value of the Shares or the number of performance share units outstanding
increases or decreases, or for any change in management's estimate of its
ability to achieve the cumulative operating cash flow targets, such non-cash
expense will also increase or decrease in future reporting periods through
November 30, 1996.
(12) SUMMARY OF INTERIM FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
NET EARNINGS
GROSS NET PER COMMON
NET SALES PROFIT INCOME SHARE
----------- ------------ --------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1994:
First quarter $155,607 $ 73,274 $ 5,145 $ .17
Second quarter 176,751 82,550 8,612 .28
Third quarter 193,624 91,418 13,462 .44
Fourth quarter 171,682 77,956 1,973 .06
1995:
First quarter $149,895 $66,744 $(216) $(.01)
Second quarter 153,189 67,170 4,735 .15
Third quarter 179,880 83,848 8,231 .27
Fourth quarter 170,978 76,941 6,720 .22
</TABLE>
During the fourth quarter of Fiscal 1994, the Company recorded an
additional non-cash charge of $5.4 million in connection with the Company's
Performance Share Plan. During the second, third and fourth quarters of Fiscal
1995, the Company recorded non-cash credits of $4.6 million, $2.7 million and
$7.4 million, respectively, in connection with the Company's Performance Share
Plan.
(13) CONTINGENCIES
In accordance with procedures established under the Environmental Cleanup
Responsibility Act (now known as the Industrial Site Recovery Act), Sealy and
one of its subsidiaries are parties to an Administrative Consent Order ("ACO")
issued by the New Jersey Department of Environmental Protection ("DEP")
pursuant to which the Company and such subsidiary agreed to conduct soil and
groundwater sampling to determine the extent of environmental contamination at
the plant owned by the subsidiary in South Brunswick, New Jersey. The Company
does not believe that its manufacturing processes were a source of the
contaminants found to exist above regulatorily acceptable levels in the
groundwater. As the current owners of the facility, however, the Company and
its subsidiary are primarily responsible for the investigation and any
necessary clean up plan approved by the DEP under the terms of the ACO. In
March 1994, the Company filed a claim in the U.S. District Court for the
District of New Jersey against former owners of the site and their lenders
31
<PAGE> 33
SEALY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
under the Comprehensive Environmental Response, Compensation and Liability Act
seeking contribution for site investigation and remedial costs.
In March 1995, the DEP approved the Company's soil/remediation plans and in
June, 1995, the Company's groundwater remediation plans, which include
additional monitoring by the Company and, depending upon the results of such
monitoring, the possible installation of a groundwater containment system. By
a November 15, 1993 letter, DEP postponed any required activity by the Company
to delineate and/or remediate contaminants in the fractured bedrock located on
the site, which DEP previously had requested the Company to undertake, and
which DEP could attempt to impose in the future. Because of the nature of
certain of the contaminants, their geological location in and porosity of the
fractured bedrock, the Company and its consultant are unaware of any accepted
technology for successfully remediating the contamination either in the shallow
groundwater or the fractured bedrock. Thus, the groundwater remediation plan
proposes no remedial activity regarding groundwater in the fractured bedrock.
While the Company cannot predict the ultimate timing or cost to remediate
this facility based on facts currently known, management believes the
previously established accrual for site investigation and remediation costs is
adequate to cover the Company's probable liability. If additional remediation
is required, however, such as the installation of a groundwater containment
system, management estimates it could cost the Company up to an additional $3
million. Management does not believe that resolution of this matter will have
a material adverse effect on the Company's financial position or future
operations.
(14) FINANCIAL INSTRUMENTS
Due to the short maturity of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses, their carrying values
approximate fair value. The carrying amount of long-term debt under the Term
Loan Facility approximates fair value because the interest rate adjusts to
market interest rates. The fair value of long-term debt under the 9 1/2%
Senior Subordinated Notes, based on a quoted market price, was $198 million and
$187 million at November 30, 1995 and 1994, respectively.
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33
<PAGE> 35
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following sets forth the name, age, principal occupation and
employment and business experience during the last five years of each of the
Company's directors:
LYMAN M. BEGGS
Mr. Beggs, age 57, since August 24, 1992 has been Chairman, President
and Chief Executive Officer of the Company. From 1991 until joining the
Company, Mr. Beggs was President and Chief Executive Officer of Topco
Associates, a privately-held, national retail food cooperative with annual
sales in excess of $3 billion. Previously, Mr. Beggs was President of the $300
million Norelco Consumer Products Division of North America Philips
Corporation.
GEORGE L. DAVIS
Mr. Davis, age 61, since February 12, 1993 has been a director of the
Company. Mr. Davis is, and since October 1990 has been, President and Chief
Executive Officer of Scarborough Partners, Inc., consultants to the financial
services industry. From November, 1993 to December, 1995, Mr. Davis was
Chairman and Chief Executive Officer of Banco de Venezuela, Inc., Miami,
Florida. From December, 1991 to November, 1992, Mr. Davis was also President
of First American Bankshares Inc. Previously, since 1987, Mr. Davis was Group
Executive, North America, for Citibank, N.A., a subsidiary of Citicorp.
CHRISTIE A. HEFNER
Ms. Hefner, age 43, since June 23, 1993 has been a director of the
Company. Ms. Hefner is, and since November 1988 has been, Chairman and Chief
Executive Officer of Playboy Enterprises, Inc.
JAMES W. JOHNSTON
Mr. Johnston, age 49, since March 4, 1993 has been a director of the
Company. Mr. Johnston is, and has been since 1993, Chairman of R.J. Reynolds
Tobacco International, Inc. Since 1989, Mr. Johnston has been Chairman and
Chief Executive Officer of R.J. Reynolds Tobacco Company, the domestic tobacco
subsidiary of RJR Nabisco, Inc. From 1984 until joining Reynolds, Mr. Johnston
was Division Executive, Northeast Division, of Citibank, N.A., a subsidiary of
Citicorp, where he was responsible for Citibank's New York Banking Division,
its banking activities in upstate New York, Maine and Mid-Atlantic regions, and
its national student loan business. Mr. Johnston is also a director of The
Wachovia Corporation, RJR Nabisco, Inc. and RJR Nabisco Holdings Corp.
ROLF H. TOWE
Mr. Towe, age 57, since July 10, 1991 has been a director of the
Company. Mr. Towe is, and since April 1991 has been Vice President of Clipper
Asset Management Group, the sole general partner of The Clipper Group L.P., a
Delaware limited partnership, which managed the investments of MBLP in the
Company until the Acquisition; and, since 1989, has been Chairman of Executive
Partner Limited, a management advisory firm. Mr. Towe is also a director of
The American Heritage Life Insurance Company, Long John Silver's Restaurants,
Inc., G.S. Blodgett Corporation and the Jack Morton Company.
SAMUEL ZELL
Mr. Zell, age 54, since February 12, 1993 has been a director of the
Company. Mr. Zell is, and since 1981 has been Chairman of the Board of Equity
Financial and Management Company and, since 1986 has been Chairman of the Board
of Equity Group Investments, Inc., two privately owned affiliated investment
and management companies; is, and since mid-1990 has been, one of two
individuals (the other being Mr. David
34
<PAGE> 36
Schulte) who act as general partners of the general partner of Zell/Chilmark
Fund, L.P.; is, and since 1985 has been, Chairman of the Board of Anixter
International, Inc. (formerly known as Itel Corporation until August 31, 1995),
a company engaged in the distribution of wiring systems products; is, and since
1983 has been, Chairman of the Board, and from 1990 through 1993 has been Chief
Executive Officer and President, of Great American Management and Investment,
Inc., a diversified company with interests in manufacturing, agriculture,
chemicals and fertilizers and financial services; from 1987 has served as
Chairman of the Board of Capsure Holdings Corp. (formerly called Nucorp Inc.),
a company engaged in the business of specialty property and casualty insurance;
is, and since 1992 has been, Co-Chairman of Revco D.S., Inc., a company that
operates a chain of retail drugstores; is, and since 1993 has been, Chairman of
the Board of Equity Residential Properties Trust, a self-administered,
self-managed equity real estate investment trust; is Chairman of the Board of
Falcon Building Products, Inc., a manufacturer and distributor of products for
the residential and commercial construction and home improvement markets; and
is, and from 1993 to January 1994 has been Co-Chairman, and from January 1994,
Chairman of the Board and Chief Executive Officer of Manufactured Home
Communities, Inc., a self-administered and self-managed equity real estate
investment trust which owns and operates properties in 16 states. Mr. Zell is
a member of the board of directors of American Classic Voyages Co., Jacor
Communications, Inc., Quality Food Centers, Inc., Revco D.S., Inc., Falcon
Building Products, Inc., and the Vigoro Corporation. Prior to October 4, 1991,
Mr. Zell was President of Madison Management Group, Inc., which filed a
petition under Chapter 11 of the Bankruptcy Code on November 8, 1991.
ROD F. DAMMEYER
Mr. Dammeyer, age 55, since December, 1995 has been a director of the
Company. Mr. Dammeyer is, and since 1993 has been Chief Executive Officer of
Anixter International, Inc. (formerly known as Itel Corporation until August
31, 1995) and since 1985 is and has been President and Executive Officer of
Anixter International, Inc. Since 1994, he is and has been President and Chief
Executive Officer of Great American Management & Investment, Inc. (GAMI) and
since 1992 has been a director of GAMI. Mr. Dammeyer is a director of Antec
Corporation, Capsure Holdings Corp., Falcon Building Products, Inc., Jacor
Communications, Inc., Lukens, Inc., Revco D.S., Inc., The Vigoro Corporation
and is a trustee of Van Kampen Merritt, Inc., closed end investment companies.
He also serves as director of Kent State University Foundation, the National
Advisory Board of Chemical Bank, and is a member of the Economic Club of
Chicago.
SHELI Z. ROSENBERG
Ms. Rosenberg, age 53, since December, 1995 has been a director of the
Company. Ms. Rosenberg is and since 1990 has been a director of Anixter
International, Inc. (formerly known as Itel Corporation until August 31, 1995),
and has been President of the law firm Rosenberg & Liebentritt P.C., and since
1994 has been President and Chief Executive Officer of Equity Group
Investments, Inc. and its subsidiary Equity Financial and Management Company,
and has been an executive officer and director of Great American Management and
Investment, Inc. for more than the past five years. Ms. Rosenberg is a
director of Capsure Holdings Corp., Falcon Building Products, Inc., The Vigoro
Corporation, American Classic Voyages Co., Revco D.S., Inc. and Industries,
Inc.; trustee of Equity Residential Properties Trust; was an Executive officer
and director until October 4, 1991 of Madison Management Group, Inc., which
filed a petition under the Federal bankruptcy laws in November 1991; and was
Vice President of First Capital Benefit Administrators, Inc. which filed a
petition under the Federal bankruptcy laws in January 1995.
EXECUTIVE OFFICERS
The following sets forth the name, age, title and certain other
information with respect to the executive and certain other appointed officers
of the Company:
EXECUTIVE OFFICERS
- ------------------
BRUCE G. BARMAN
Dr. Barman, age 47, since January, 1995 has been Vice President
Research and Development of the Company. From 1991 until he joined the
Company, Dr. Barman was Vice President-Research and Development of Griffith
Laboratories N.A., a custom food products producer for a customer base of major
North American food service and food processing companies. From 1988 to 1991,
Dr. Barman served as Vice President-Research and Development-Personal Care
Products Division of the Weyerhaueser Company.
35
<PAGE> 37
JOHN G. BARTIK
Mr. Bartik, age 44, since March, 1995 has been Vice President Tax and
Assistant Treasurer of the Company. From 1990 to 1995, he was Treasurer of the
Company and from 1985 has served as the Company's Director of Taxation.
LYMAN M. BEGGS
Mr. Beggs, age 57, since August 24, 1992 has been Chairman, President
and Chief Executive Officer of the Company. For further information concerning
Mr. Beggs, see "Directors" above.
JEFFREY C. CLAYPOOL
Mr. Claypool, age 48, since September, 1991 has been Vice President
Human Resources of the Company. Previously, Mr. Claypool was employed by
Bridgestone/Firestone, Inc., an international tire manufacturer, in various
positions, including Vice President Human Resources and Corporate Personnel
Manager.
GARY T. FAZIO
Mr. Fazio, age 45, since 1990 has been Vice President Sales of the
Company. Mr. Fazio joined the Company as a general manager in 1981. From 1987
to 1990, he was Regional Vice President of the Company.
DOUGLAS E. FELLMY
Mr. Fellmy, age 46, since July, 1992 has been Vice President
Operations of the Company. Previously, Mr. Fellmy served as Regional Vice
President-Operations since April 1990 and also as President of the Components
Division since December 1989. Mr. Fellmy has served, since 1971, in numerous
other capacities with the Company's Components Division.
THOMAS M. FORMAN
Mr. Forman, age 50, since June,1994 has been Vice President General
Counsel of the Company. Previously, Mr. Forman was President of Forman Venture
Capital, Inc. and from 1981 to 1990 held various executive positions with
Bridgestone/Firestone, Inc., an international tire manufacturer, most recently
as an Executive Vice President and member of the board of directors. Mr.
Forman is a director of Olympic Steel, Inc., a NASDAQ-listed steel distribution
company.
JESSE E. HOGAN
Mr. Hogan, age 49, since June, 1994 has been Senior Vice President and
Chief Financial Officer of the Company. Previously, from 1992, Mr. Hogan
served as President, Columbo Fresh Products, a division of Bongrain, S.A., a
worldwide dairy company; from 1991 to 1992 as General Manager of Alta Dena
Certified Dairy; and from 1988 to 1991 as Operations Controller of Bongrain,
S.A.
DAVID J. MCILQUHAM
Mr. McIlquham, age 41, since April, 1990 has been Vice
President-Marketing of the Company. Mr. McIlquham served as Vice President-
Marketing of Samsonite Corp. (USA) from December, 1988 to March, 1990 and
General Manager of Samsonite Canada Ltd. from May, 1987 to December, 1988.
JOHN D. MORAN
Mr. Moran, age 37, since December, 1990 has been Secretary of the
Company. Mr. Moran joined the Company in 1987 and was elected Assistant
Secretary.
36
<PAGE> 38
LARRY J. ROGERS
Mr. Rogers, age 47, since February,1994 has been Vice President
International of the Company. Previously, Mr. Rogers has served, since 1979,
in numerous other capacities within the Company's operations, including
President-Sealy Canada.
RICHARD F. SOWERBY
Mr. Sowerby, age 41, since April, 1995 has been Vice President
Controller of the Company. Previously, from 1991, Mr. Sowerby served as
Corporate Controller of Elliott Company, a manufacturer and servicer of turbo
machinery equipment, and from 1990 to 1991 as Vice President-Controller of
Sunbeam-Oster Housewares.
RONALD H. STOLLE
Mr. Stolle, age 47, since March, 1995 has been Vice President and
Treasurer of the Company. Previously, from 1987, Mr. Stolle served as
Director, Treasury Operations for Reliance Electric Company, a manufacturer of
industrial and telecommunication products.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4, and amendments thereto,
furnished to the Company pursuant to Rule 16a-3(e) during Fiscal 1995 and Form
5, and amendments thereto, furnished to the Company with respect to Fiscal
1995, the Company is not aware of any person that is subject to Section 16 of
the Securities Exchange Act of 1934 (the "Exchange Act") with respect to the
Company, that has failed to file, on a timely basis, (as disclosed in the
aforementioned Forms) reports required by Section 16 (a) of the Exchange Act
during Fiscal 1995 or prior fiscal years.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for each
of the years ended November 30, 1995, 1994 and 1993, of those persons who were,
at November 30, 1995 (i) the chief executive officer and (ii) the other four
most highly compensated executive officers of the Company for the year ended
November 30, 1995 (collectively, the "Named Executive Officers"):
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<PAGE> 39
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------- -----------------------------
Securities
Other Restricted Underlying
Name and Annual Stock Options/ LTIP All Other
Principal Position Year Salary Bonus Compensation Award(s) SARs Payouts Compensation
- ------------------ ---- -------- ------- ------------ -------------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lyman M. Beggs (a) 1995 $525,336 $ -0- $75,914(a) $107,000(b) -- -- $21,261(c)
Chairman, Chief 1994 522,918 550,807 78,778(a) -- -- -- 19,569(c)
Executive Officer
and 1993 500,016 314,542 117,045(a) -- -- -- 19,240(c)
President
Jesse E. Hogan 1995 203,830 -0- 28,613(d) -- -- -- 16,402(c)
Sr. Vice President
and 1994 100,000 52,811 -- -- -- -- 711(c)
Chief Financial
Officer 1993 -- -- -- -- -- -- --
Gary T. Fazio 1995 187,765 -0- -- -- -- -- 15,151(c)
Vice President 1994 178,785 56,136 -- -- -- -- 14,457(c)
-Sales 1993 174,000 34,617 -- -- -- -- 14,209(c)
Thomas M. Forman 1995 177,518 -0- -- -- -- -- 14,306(c)
Vice President
and 1994 87,500 30,807 1,285(d) -- -- -- 622(c)
General Counsel 1993 -- -- -- -- -- -- --
Jeffrey C. Claypool 1995 171,753 -0- -- -- -- -- 13,859(c)
Vice President 1994 164,580 57,786 -- -- -- -- 13,308(c)
-Human Resources 1993 156,000 32,478 -- -- -- -- 12,739(c)
</TABLE>
(a) Pursuant to his Employment Agreement (as hereinafter defined),
Mr. Beggs commenced employment with the Company as of August 24, 1992.
Under the terms of his Employment Agreement, Mr. Beggs received
$75,914, $78,778 and $117,045 in 1995, 1994 and 1993, respectively,
as the result of: (i) the forgiveness of a portion of an equity loan
from the Company to Mr. Beggs, reflecting the loss of equity in his
previous residence (1995-$45,383; 1994-$47,029; 1993-$44,034);
(ii) moving expenses (1993-$44,000); (iii) professional
fees, personal use of auto, travel and entertainment expenses; and
(iv) payments to cover Mr. Beggs' tax liabilities on the foregoing
items, all as described more fully in "Compensation Pursuant to
Plans and Other Arrangements -- Executive Employment
Agreements."
(b) Such amount reflects the Company's determination of the fair value at
the date of grant of 10,000 shares issued to Mr. Beggs as of November
30, 1995 pursuant to his Employment Agreement, which Shares are no
longer subject to forfeiture. Although the 1994 Credit Agreement and
Note Indenture contain restrictions on the Company's ability to pay
dividends, if dividends were declared and paid on the Company's
Shares, such dividends would be paid on such Shares issued to Mr.
Beggs. The Employment Agreement also provides for the future issuance
to Mr. Beggs of an additional 90,000 Shares, subject to certain
conditions. See "Compensation Pursuant to Plans and Other
Arrangements--Executive Employment Agreements." Hence, Mr. Beggs'
aggregate stock holdings consist of 110,000 Shares with an estimated
fair market value of $1,177,000 at the end of Fiscal 1995. No other
Named Executive Officer had any restricted stock holdings at the end
of Fiscal 1995.
(c) Represents amounts paid on behalf of each of the Named Executive
Officers for the following three respective categories of
compensation: (i) Company premiums for life and accidental death and
dismemberment insurance, (ii) Company premiums for long-term
disability benefits, and (iii) Company contributions to the Company's
defined contribution plans. Amounts for each of the Named Executive
Officers for each of the three respective preceding categories is as
follows: Mr. Beggs: (1995-$3,501, $800, $16,960; 1994- $2,220, $840,
$16,509; 1993- $2,220, $1,000, $16,020); Mr. Hogan: (1995-$1,334,
$800, $14,268; 1994-$444, $267, $0); Mr. Fazio: (1995- $1,254, $753,
$13,144; 1994- $1,191, $751, $12,515; 1993- $1,159, $870, $12,180);
Mr. Forman: (1995-$1,170, $710, $12,426; 1994-$389, $233, $0); Mr.
Claypool: (1995-$1,148, $688, $12,023; 1994- $1,096, $691, $11,521;
1993- $1,039, $780, $10,920).
(d) The amount paid to Mr. Hogan represents reimbursement for moving
expenses and the tax liabilities thereon. The amount paid to Mr.
Forman represents reimbursement for the cost of medical insurance
premiums prior to obtaining coverage through the Company plan.
38
<PAGE> 40
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Performance
Number of or Other
Shares, Units Period Until
or Other Right Maturity or Threshold Target Maximum
Name (#) (a) Payout (#) (#) (#)
-------------------------- --------------- -------------- ----------- ----------- ------------
- ----- ---- -- --
<S> <C> <C> <C> <C> <C>
Lyman M. Beggs 1,000,000 11/30/96 100,000 417,000 1,000,000
Gary T. Fazio 110,000 11/30/96 11,000 45,870 110,000
Jeffrey C. Claypool 90,000 11/30/96 9,000 37,530 90,000
Jesse E. Hogan 90,000 11/30/96 9,000 37,530 90,000
Thomas M. Forman 75,000 11/30/96 7,500 31,275 75,000
</TABLE>
(a) The Company's Performance Share Plan (the "Plan") effective in 1992
provides for the issuance to key employees of the Company and its
subsidiaries (the "Participants") of performance share units
("Performance Shares"), each of which represents the right to receive,
without any additional consideration, up to one Share, based on the
extent to which the Company achieves specified cumulative operating
cash flow ("COCF") targets over the five-year period ending November
30, 1996 (the "Measurement Period"). An aggregate of 2,443,800
Performance Shares, net of forfeitures, have been granted to
Participants as of November 30, 1995. The maximum number of
Performance Shares authorized to be granted is 3,000,000.
Generally, the Plan provides that if the Company's COCF for the
Measurement Period is $500 million, then each vested Performance Share
shall convert into .10 Shares (the "Threshold"); if COCF is $575
million, then each vested Performance Share shall convert into .417
Shares (the "Target"), and if COCF equals or exceeds $650 million,
then each vested Performance Share shall convert into one Share (the
"Maximum"). If COCF for such period is between $500 million and $650
million, then the conversion ratio will be interpolated on a
straight-line basis between the two closest of the three
aforementioned target ratios. If COCF is less than $500 million, then
all Performance Shares shall be forfeited without conversion. The
estimated fair value of one Share on November 30, 1995 was $10.70. In
the event that the Company is a party to an acquisition, merger or
other significant corporate event or makes an in-kind distribution on
any equity security, the COCF targets or ratios may be equitably
adjusted to reflect an equivalent value.
The Performance Shares generally vest over a five-year period. If a
Participant incurs a termination of employment during the periods
indicated, the following percentages of Initial Performance Shares
become vested: from December 1, 1992 through November 30, 1993 -- 30%;
from December 1, 1993 through November 30, 1994 -- 45%; from December
1, 1994 through November 30, 1995 -- 60%; from December 1, 1995
through November 29, 1996 -- 80%; and on or after November 30, 1996 --
100%. In the event that a Participant incurs a termination of
employment for cause (as defined in the Plan) or engages in a breach
of certain noncompetition covenants following a voluntary termination,
the Participant shall forfeit all Performance Shares, whether or not
vested.
The Human Resources Committee of the Board (the "Human Resources
Committee") may, in its sole discretion, terminate the Plan at any time
without the consent of any Participant. The Plan shall terminate
automatically on the date upon which the Performance Shares are
converted into Shares (or are forfeited) following the Measurement
Period (the "Payment Date") or, if earlier, upon a Change in Control
(as defined in the Plan) unless the person(s) who purchased 50% or more
of the common stock or substantially all of the assets of the Company
in effecting such a Change in Control (a "Third Party Purchaser")
agrees to continue the Plan or a replacement plan in a manner that is
fair and equitable to the Participants. As part of the Acquisition,
Zell/Chilmark consented to the continuation of the Plan. In the event
that the Plan is terminated because of changes in the laws or
accounting rules which frustrate the intent of the Plan or because of
the inability to preserve the integrity of the
39
<PAGE> 41
COCF formula by reason of material changes to the business or
operations of the Company, then the disinterested members of the Board
may replace the Plan with an alternative plan that is comparable in
scope and effect or the Board may have the Company distribute that
number of Shares as would be arrived at by multiplying the unforfeited
Performance Shares by a fraction (which may not be greater than one)
the numerator of which is the COCF through the date of termination and
the denominator of which is $650 million. In all other cases of
termination of the Plan, all Performance Shares awarded to a
Participant, which have not previously been forfeited, shall become
vested Performance Shares and the Participant shall receive that
number of Shares equal to the number of that Participant's vested
Performance Shares on the date of termination of the Plan.
Notwithstanding any of the foregoing, upon the termination of the Plan
because of a Change in Control where the Third Party Purchaser did not
offer the same or a replacement plan, the Company shall, unless the
common stock of the Company is publicly traded on the termination date
of the Change in Control, make a lump-sum cash payment to the
Participant equal to the fair market value of the applicable number of
Shares, less applicable withholdings, in satisfaction of all rights of
such Participant under the Plan.
Upon the conversion of the Performance Shares into Shares following
the Payment Date, the Company will, at the discretion of the
Participant, lend to those Participants that are still employees a sum
(bearing interest at the prime rate) sufficient to cover his or her
estimated tax liability (a "Tax Loan") or, alternatively, the
Participant can elect to have the Company withhold a sufficient number
of Shares as necessary to cover such estimated tax liability, and pay
such withholding tax liability, in cash, on behalf of the
Participants. The holders of Shares issued under the Plan also will
have certain registration rights which will apply after an initial
public offering of Shares (the "Initial IPO"), for a period of five
years following the Payment Date. The Tax Loans, if any, would be due
and payable 30 days following the Initial IPO or such other time as
designated by the Human Resources Committee.
Mr. Beggs was granted his Performance Shares in connection with his
execution of the Employment Agreement. See "Compensation Pursuant
to Plans and Other Arrangements -- Executive Employment Agreements."
COMPENSATION PURSUANT TO PLANS AND OTHER ARRANGEMENTS
SEVERANCE BENEFIT PLANS. Effective December 1, 1992, the Company
established the Sealy Executive Severance Benefit Plan (the "Executive
Severance Plan") for employees in certain salary grades. Benefit eligibility
includes, with certain exceptions, termination as a result of a permanent
reduction in work force or the closing of a plant or other facility,
termination for inadequate job performance, termination of employment by the
participant following a reduction in base compensation, reduction in salary
grade which would result in the reduction in potential plan benefits or
involuntary transfer to another location. Benefits include cash severance
payments calculated using various multipliers varying by salary grade, subject
to specified minimums and maximums depending on such salary grades. Such cash
severance payments are made in equal semi-monthly installments calculated in
accordance with the Executive Severance Plan until paid in full. Certain
executive-level officers would be entitled to a minimum of one-year's salary
and a maximum of two-year's salary under the Executive Severance Plan.
However, if a Participant becomes employed prior to completion of the payment
of benefits, such semi-monthly installments shall be reduced by the
Participant's base compensation for the corresponding period from the
Participant's new employer. Participants receiving cash severance payments
under the Executive Severance Plan also would receive six months of
contributory health and dental coverage and six months of group term life
insurance coverage.
The Company currently follows the terminal accrual approach to
accounting for severance benefits under the Executive Severance Plan and records
the estimated cost of these benefits as expense at the date of the event giving
rise to payment of the benefits.
EXECUTIVE EMPLOYMENT AGREEMENTS. Effective October 31, 1992, the
Company entered into an employment agreement and related reimbursement letter
agreement (collectively, the "Employment Agreement") with Mr. Beggs, pursuant
to which Mr. Beggs became employed as Chairman, President and Chief Executive
Officer of the Company for a period (the "Employment Period") commencing on
August 24, 1992 and continuing through November 30, 1997 (the "Expiration
Date"). Pursuant to the Employment Agreement, Mr. Beggs' minimum base salary
is $500,000 annually. Such salary may be increased but not decreased in an
annual review, and Mr. Beggs is also entitled to receive an annual cash bonus
in an amount
40
<PAGE> 42
to be determined on the basis of certain corporate and individual performance
targets determined by the Board of Directors, or a committee thereof.
Pursuant to the Employment Agreement, Mr. Beggs was granted an
aggregate of 200,000 Shares, 100,000 of which were issued as of October 31,
1992 subject to certain forfeiture provisions which lapsed as of November 30,
1995 and 10,000 issued at November 30, 1995. In addition, the following number
of additional Shares will be issued if he remains employed by the Company on
the dates indicated: November 30, 1996 -- 40,000 shares; and November 30, 1997
- -- 50,000 shares. Mr. Beggs also entered into a Stockholder's Agreement with
the Company (the "Stockholder's Agreement") in connection with the Employment
Agreement, which provides that, prior to the Expiration Date, Mr. Beggs may
sell his Shares only after an Initial IPO or approval by the Board of Directors
and, after the Expiration Date, the Company shall have certain rights of first
refusal with respect to any proposed transfers of Mr. Beggs' Shares (other than
to certain permitted transferees). The Stockholder's Agreement also provides
that the holders of the Shares issued to Mr. Beggs under the Employment
Agreement shall have certain "piggyback" registration rights with respect to
such Shares. Mr. Beggs recognized taxable income in 1992 in connection with
the Issued Shares and borrowed $279,300 from the Company (the "Stock Loan") to
be used in payment of the required withholding taxes. The Stock Loan bears
interest at the applicable federal rate in effect on the date of the loan, with
all unpaid and outstanding principal and interest due and payable on November
30, 1995. The Stock Loan was repaid in full on February 21, 1995. In
addition, Mr. Beggs was granted an award of 1,000,000 Performance Shares,
representing the right to receive up to 1,000,000 Shares pursuant to, and
subject to the terms of the Plan. See Note (a) to "Long-Term Incentive Plan
Awards in Last Fiscal Year."
Pursuant to the Employment Agreement, Mr. Beggs received relocation
expenses and is entitled to health and life insurance and certain other
benefits. The Company purchased Mr. Beggs' previous residence from him for
$712,500 and sold such residence for $690,000 in February 1993. Mr. Beggs
borrowed $157,673 from the Company (the "Equity Loan") upon the purchase of a
new home in the Cleveland area, reflecting the loss of equity in his previous
residence. Such Equity Loan is interest free to the extent allowed under
applicable tax laws and otherwise bears interest at the applicable federal
rate. In accordance with the terms of the Employment Agreement, $20,000 of the
Equity Loan was forgiven on each of November 30, 1995, 1994 and 1993. In
addition, $2,442, $3,256 and $4,070 in interest related to such equity loan was
also forgiven on November 30, 1995, 1994 and 1993, respectively, and the
Company paid Mr. Beggs an additional $45,383, $47,029 and $44,034, as
additional compensation for his tax liability as a result of such forgiveness
of indebtedness in each period, respectively. The balance of the Equity Loan
has two equal annual payments of principal due on November 30, 1996 and 1997.
If Mr. Beggs remains employed by the Company through the date when a payment is
due, such indebtedness will be forgiven by the Company and the Company will pay
Mr. Beggs an amount necessary to offset any tax liability to him as a result of
such forgiveness of indebtedness. If Mr. Beggs voluntarily terminates his
employment with the Company, other than for good reason, the remaining balance
of the Equity Loan and any accrued interest will become immediately due and
payable.
If Mr. Beggs' employment is terminated prior to the Expiration Date
other than for cause, (as defined in the Employment Agreement), death or
disability or if Mr. Beggs terminates his employment for good reason, he will
continue to receive his base salary until the later of November 30, 1997 or one
year, and he will also receive the forgiveness of the Equity Loan, the payment
of a portion of any then-applicable bonus on a pro-rata basis and the issuance
of the remainder of the unissued Shares noted above. In addition, if Mr.
Beggs' employment is terminated prior to the Expiration Date under such
circumstances, then the Stockholder's Agreement grants to Mr. Beggs or his
representative the right to cause the Company to repurchase all of Mr. Beggs'
Shares at their "fair market value" (determined in accordance with the
Stockholders' Agreement). In the event that Mr. Beggs' employment is
terminated prior to the Expiration Date for "cause" or if he voluntarily
terminates his employment other than for "good reason," then the Company shall
have the option to repurchase Mr. Beggs' Shares for their "fair market value."
REMUNERATION OF DIRECTORS. Effective upon the Acquisition, the
Company began compensating its directors who are not employees with a retainer
at the rate of $30,000 on an annual basis, reduced by $1,000 for each Board
meeting not attended, plus $1,000 ($1,250 for Committee Chairmen, if any) for
each Committee meeting attended if such meeting is on a date other than a Board
meeting date, and incidental expenses in connection with traveling to or
attending such meetings. Directors Zell, Dammeyer, Rosenberg, Davis, Towe,
Johnston and Hefner are eligible for such remuneration.
41
<PAGE> 43
During Fiscal 1993, the Company adopted the 1993 Non-Employee Director
Stock Option Plan (the "1993 Plan"), which was subsequently amended on April 6,
1994 and June 27, 1995. The 1993 Plan provides for the one-time automatic
grant of ten-year options to acquire up to 10,000 Shares to all current and
future directors who are not employed by the Company, by Zell/Chilmark or by
their respective affiliates ("Non-Employee Directors"). Options granted under
the 1993 Plan vest immediately and are initially exercisable at a price equal
to the fair market value of the Shares on the date of grant. For options
granted prior to March 1, 1994, the exercise price of options granted pursuant
to this Plan increased on the first anniversary date of such grant by 4%, which
became the fixed exercise price for all such options. Options issued
thereafter, if any, will be exercisable over their term at the fair market
value on the date of grant. Pursuant to the 1993 Plan, the Company granted
options to acquire up to 50,000 Shares to Non-Employee Directors in fiscal year
1993 at an initial exercise price of $9.05 per Share, which now have a fixed
exercise price of $9.41 per Share. No options under the 1993 Plan have been
exercised. The 1993 Plan was amended on June 27, 1995 to provide for the
grant of an additional option to purchase 5,000 Shares to each eligible
director and thereafter providing for the automatic annual grant of an option
to each eligible director to purchase an additional 5,000 Shares at fair market
value on the date of grant. Pursuant to the 1993 Plan, the Company granted
options to acquire up to 5,000 Shares to each eligible director in Fiscal 1995
with a fixed exercise price of $15.95 per Share.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
those holders which, according to the records of the Company, beneficially own
more than 5% of the outstanding Shares as of February 20, 1996:
<TABLE>
<CAPTION>
PERCENT OF
NAME NUMBER OF SHARES CLASS (a)
------------------------------------ ------------------- -----
(A)
- ---
<S> <C> <C>
Zell/Chilmark Fund, L.P. 26,171,506(b) 88.8%
Two North Riverside Plaza
Suite 1500
Chicago, IL 60606
The Fulcrum III Limited Partnership 2,632,773(c) 8.4%(c)
600 Madison Avenue
New York, New York 10022
The Second Fulcrum III Limited Partnership 1,789,667(c) 5.8%(c)
600 Madison Avenue
New York, New York 10022
</TABLE>
(a) The percent of class calculation assumes that the stockholder for whom
the percent of class is being calculated has exercised all Merger and
Restructure Warrants (as described in Note 9 of the Notes to the
Consolidated Financial Statements) owned by such stockholder and that
no other stockholder has exercised any other Merger and Restructure
Warrants. Accordingly, the total of the percentages for all the
stockholders listed exceeds 100%.
(b) For further information with respect to Zell/Chilmark, see Item 10,
"Directors and Executive Officers" and Item 13, "Certain Relationships
and Related Transactions."
(c) Assumes the exercise of Restructure Warrants owned by such
Partnerships. See Note 9 of the Notes to the Consolidated Financial
Statements contained in Part II, Item 8 included herein.
42
<PAGE> 44
The following table sets forth certain information with respect to the
beneficial ownership of the Shares by each of the directors and Named Executive
Officers of the Company and by all directors and executive officers of the
Company as a group, as of February 20, 1996:
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS(a)
------------------- -------------- ---------
<S> <C> <C>
Lyman M. Beggs (b) 110,000 **
Samuel Zell 26,171,506 (c) 88.8%
Rod F. Dammeyer 26,171,506 (c) 88.8%
Sheli Z. Rosenberg 26,171,506 (c) 88.8%
George L. Davis 15,000 **
Rolf H. Towe 42,630 **
James W. Johnston 15,000 **
Christie A. Hefner 15,000 **
All directors and executive officers as a group 26,402,973 89.4%
<FN>
** Less than 1%
(a) The percent of class calculation for each of the listed individuals
assumes that the stockholder for whom the percent of class is being
calculated has exercised all Merger and Restructure Warrants owned by
such stockholder and that no other stockholder has exercised any other
Merger and Restructure Warrants. Accordingly, the total of the
percentages for each of the listed individuals exceeds 100%. However,
the total percent of class for all executive officers and directors as a
group assumes that each of the executive officers and directors have
exercised any Merger and Restructure Warrants beneficially owned by them
and that no other stockholder has exercised any other Merger and
Restructure Warrants.
(b) Pursuant to the terms of the Employment Agreement, Mr. Beggs may have
issued to him an aggregate of 200,000 Shares to the extent he remains in
the employ of the Company through November 30, 1997. See
"Compensation Pursuant to Plans and Other Arrangements--Executive
Employment Agreements."
(c) The securities reported herein are beneficially owned by the
Zell/Chilmark Fund L.P., a Delaware limited partnership
("Zell/Chilmark"). The sole general partner of Zell/Chilmark is ZC
Limited Partnership, an Illinois limited partnership ("ZC Limited"). The
sole general partner of ZC Limited is ZC Partnership, a Delaware general
partnership. The sole partners of ZC Partnership are CZ Inc., a
Delaware corporation, and ZC, Inc., an Illinois corporation. The Samuel
Zell Revocable Trust under trust agreement dated January 17, 1990
("Trust") is the sole shareholder of ZC, Inc. Samuel Zell is the
trustee and beneficiary of the Trust and may be deemed to be the
beneficial owner of the shares reported herein. One of the limited
partners of ZC Limited is COP General Partnership, an Illinois general
partnership ("COP"). One of the general partners of COP is COP Seniors
General Partnership, an Illinois general partnership ("COP Seniors").
Two of the general partners of COP Seniors are Rod F. Dammeyer and Sheli
Z. Rosenberg. As a result, Mr. Dammeyer and Ms. Rosenberg may be deemed
to be beneficial owners of the securities reported herein.
The management of ZC Limited, the sole general partner of Zell/Chilmark
is conducted through an executive committee. Mr. Dammeyer, Ms.
Rosenberg and Mr. Zell are members of the executive committee and as
such may share the right to vote or direct the vote and may share the
right to dispose or direct the disposition of the securities reported
herein and as such may be deemed to be a beneficial owner of the
securities reported herein. Mr. Dammeyer, Ms. Rosenberg and Mr. Zell
each disclaims beneficial ownership of the securities reported
herein.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In Fiscal 1995, the Human Resources Committee (which functions as the
Compensation Committee) of the Board of Directors consisted of Ms. Hefner and
Messrs. Zell, Johnston, Joel Friedland and Towe. Effective December 5, 1995,
the Committee consisted of Ms. Hefner, Ms. Rosenberg, Mr. Johnston, Mr.
Dammeyer, Mr. Towe and Mr. Zell.
43
<PAGE> 45
As part of the Acquisition and pursuant to the Stock Purchase Agreement
(defined below), Zell/Chilmark, MBLP and the Company entered into a
registration rights agreement relating to the Acquired Shares, including the
27,630 Shares purchased by Mr. Towe. Pursuant to the Stock Purchase Agreement,
the holders of a majority of such Acquired Shares have the right to demand, up
to five times but no more than once every six months, registration of their
Acquired Shares under the Securities Act of 1933 as amended. In addition,
under certain conditions, the holders of the Acquired Shares have a right to
include some or all of their Acquired Shares in any subsequent registration
statement filed by the Company with respect to the sale of Shares. The Company
has agreed to bear all expenses associated with any registration statement
relating to the Acquired Stares other than any underwriting discounts or
commissions, brokerage commissions and fees.
MANAGEMENT SUBSCRIPTION AND BENEFIT ARRANGEMENTS. See "Management --
Compensation Pursuant to Plans and Other Arrangements -- Severance
Arrangements" for a description of the Company's severance arrangements with
certain executive officers. See "Management -- Compensation Pursuant to Plans
and Other Arrangements -- Executive Employment Agreements" for a description of
the Company's employment arrangements with Mr. Beggs.
STOCK REPURCHASE AGREEMENTS. Certain officers, key employees of the Company
and certain former employees of the Company (collectively, the "Management
Investors") are the beneficial owners of 63,830 Shares, not including 110,000
Shares held by Mr. Beggs pursuant to his Employment Agreement (the "Management
Investors' Shares"). Such Shares were acquired in connection with the LBO
pursuant to subscription agreements between the Company and such individuals
(the "Subscription Agreements") or subsequently acquired as stock bonuses
pursuant to the same Subscription Agreements. The Subscription Agreements
provide that the Management Investors' Shares were subject to put options
whereby the Company may be required to redeem such Shares at fair market value
in the event of a Management Investor's death, disability, or termination of
employment under certain circumstances, prior to January 1, 1994, at the option
of the Management Investor or his estate. Under certain circumstances, such
Shares also are subject to call options whereby the Company, at its option, may
purchase such Shares from a Management Investor at fair market value, so long
as the Company has not effected a public offering of its common stock, in the
event of either (i) a Management Investor's voluntary termination of employment
on or before January 1, 1994, or (ii) a Management Investor's termination for
cause (as defined). Due to the possibility of repurchase in connection with
the put options, such Management Investors' Shares were not considered to be
part of the Company's stockholders' equity for periods prior to January 1,
1994. The Subscription Agreements also grant to the Management Investors
certain registration rights in the event that the Company (or, in certain
circumstances, other investors in the Company) registers any common stock under
the Securities Act.
FULCRUM. In connection with the LBO, The Fulcrum III Limited Partnership and
The Second Fulcrum III Limited Partnership (together, the "Fulcrum
Partnerships"), purchased, after giving effect to the reverse stock split,
961,400 Shares pursuant to a stock subscription agreement with the Company (the
"Fulcrum Stock Subscription Agreement") which provides that, under certain
circumstances, the Company has a right of first refusal in the event of a
proposed sale of such Shares by the Fulcrum Partnerships. The Fulcrum
Subscription Agreement also grants to the Fulcrum Partnerships certain rights
to demand the registration of their Shares and certain registration rights in
the event that the Company (or, in certain circumstances, other investors in
the Company) registers any common stock under the Securities Act. In addition,
in connection with the Recapitalization, the Fulcrum Partnerships were issued
Restructure Warrants to acquire up to an aggregate of 3,461,040 Shares.
44
<PAGE> 46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of Sealy Corporation
and its subsidiaries are included in Part II, Item 8:
Sealy Corporation
Report of Independent Auditors
Consolidated Balance Sheets at November 30, 1995 and 1994
Consolidated Statements of Income for the years ended November
30, 1995 and 1994, for the ten months ended November 30, 1993
(Successor Periods), and the two months ended January 31, 1993
(Pre-Successor Period).
Consolidated Statements of Stockholders' Equity for the years
ended November 30, 1995 and 1994, for the ten months ended
November 30, 1993 (Successor Periods) and the two months ended
January 31, 1993 (Pre-Successor Period).
Consolidated Statements of Cash Flows for the years ended
November 30, 1995 and 1994, for the ten months ended November
30, 1993 (Successor Periods) and the two months ended January
31, 1993 (Pre-Successor Period).
Notes to consolidated financial statements
(a)(2) Financial Statement Schedules
Schedule VIII -- Valuation Accounts
(a)(3) The exhibits to this report are listed in section (c) of Item 14
below.
(b) A Form 8-K was filed October 11, 1995 reporting that the Board of
Directors of the Company approved the change of the Company's
fiscal year from one ending on November 30 in each year to a 52-53
week fiscal year. The first such fiscal year shall commence on
Friday, December 1, 1995 and shall end on the 53rd Sunday
thereafter or Sunday, December 1, 1996. Subsequent fiscal years
shall end on the Sunday nearest the last day of November.
(c) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
3.1 Restated Certificate of Incorporation of Sealy Corporation dated as of November 5, 1991. (Incorporated herein by
reference to the appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K for the fiscal year ended November
30, 1991 (File No. 1-8738)).
3.2 By-Laws of Sealy Corporation adopted as of November 4, 1991. (Incorporated herein by reference to the appropriate
exhibit to Sealy Corporation's Annual Report on Form 10-K for the fiscal year ended November 30, 1991 (File No.
1-8738)).
4.1 Warrant Agreement, dated as of November 6, 1991 between Sealy Corporation and Sealy, Inc., Warrant Agent, including the
form of Series A and Series B Warrant. (Incorporated herein by reference to the appropriate exhibit to Sealy Corporation's
Annual Report on Form 10-K for the fiscal year ended November 30, 1991 (File No. 1-8738)).
4.2 Form of Series A and Series B Warrant (included as Exhibit A to the Warrant Agreement filed as Exhibit 4.1).
(Incorporated herein by reference to the appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K for the
fiscal year ended November 30, 1991 (File No. 1-8738)).
</TABLE>
45
<PAGE> 47
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
4.3 Warrant Agreement, dated as of August 1, 1989 between GGvA Holding Corp. (renamed Sealy Holdings, Inc. and merged
with and into Sealy Corporation) and First Chicago Trust Company of New York, Warrant Agent, including the form of
Merger Warrant (Incorporated herein by reference to Exhibit 4.1 to Annual Report on Form 10-K of The Ohio Mattress
Holding Company and The Ohio Mattress Company for the year ended November 30, 1989, File No. 33-29246, filed March
2, 1990.)
4.4 Form of Merger Warrant (included as Exhibit A to the Warrant Agreement filed as Exhibit 4.3) (Incorporated herein by
reference to Exhibit 4.2 to Annual Report on Form 10-K of Sealy Holdings, Inc. and Sealy Holdings, Inc. (merged with and
into Sealy Corporation) for the year ended November 30, 1990, File No. 33-29246, filed February 28, 1991.)
4.5 Indenture dated as of November 1, 1991, among Sealy Corporation, certain subsidiaries of Sealy Corporation
listed on the signature pages thereto and Ameritrust company National Association. (Incorporated herein by reference to
the appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K for the fiscal year ended November 30, 1991
(File No. 1-8738.)
4.6 Stock Subscription Agreement, dated as of March 30, 1989 by and among GGvA Holding Corp. (renamed Sealy Holdings,
Inc. and merged with and into Sealy Corporation) and the purchasers listed therein. (Incorporated herein by reference
to Exhibit 4.4 to Registration Statement of The Ohio Mattress Holding Company and The Ohio Mattress Company of form S-4,
File no. 33-29246, filed June 13, 1989.)
4.7 Management Stock Subscription Agreement, dated as of March 30, 1989 by and among GGvA Holding Corp. (renamed Sealy
Holdings, and merged with and into Sealy Corporation) and the management purchasers listed therein. (Incorporated
herein by reference to Exhibit 4.5 to Registration Statement of The Ohio Mattress Holding Company on form S-4, File
No. 33-29246, filed June 13, 1989.)
4.8 First Supplemental Indenture, dated as of February 12, 1993, by and among Sealy Corporation, certain subsidiaries of
Sealy Corporation listed on the signature pages thereto as Ameritrust Company National Association (n.k.a. Society
National Bank). (Incorporated herein by reference to the appropriate exhibit to the Form 10-K for the fiscal year ended
November 30, 1992, File No. 1-8738.)
4.9 Indenture, dated as of May 7, 1993, by and between Sealy Corporation and Society National Bank relating to the Sealy
Corporation's 9 1/2% Senior Subordinated Notes. (Incorporated herein by reference to the appropriate exhibit to the
Form 8-K Current Report of Sealy Corporation dated May 7, 1993.)
4.10 Form of 9 1/2% Senior Subordinated Note Due 2003. (Incorporated herein by reference to the appropriate exhibit to
the Form 8-K Current Report of Sealy Corporation dated May 7, 1993.)
4.11 Restated Secured Credit Agreement, dated as of May 27, 1994, by and among Sealy Corporation, Certain Banks and Other
Financial Institutions and Banque Paribas, Citicorp USA, Inc., Bank of America (formerly Continental Bank N.A.) and
General Electric Capital Corporation, as Managing Agents. (Incorporated herein by reference to the appropriate exhibit
to the Form 10-Q Quarterly Report of Sealy Corporation dated May 31, 1994.)
4.12 Amendment No. 1 to Warrant Agreement between Sealy Corporation and Society National Bank as Warrant Agent, dated April
1, 1995.
4.13 First Amendment and consent to Restated Secured Credit Agreement, dated May 27, 1994 by and among Sealy Corporation,
Certain Banks and Other Financial Institutions and Banque Paribas, Citicorp USA, Inc., Bank of America and General
Electric Capital Corporation, as Managing Agents.
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
4.14 Second Amendment to Restated Secured Credit Agreement, dated May 27, 1994 by and among Sealy Corporation, Certain
Banks and Other Financial Institutions and Banque Paribas, Citicorp USA, Inc., Bank of America and General Electric
Capital Corporation, as Managing Agents.
10.1 Sealy Profit Sharing Plan, Amended and Restated Date: December 1, 1989.
10.2 Sealy Benefit Equalization Plan, dated December 1, 1994.
*10.3 Sealy Trust Agreement dated June 1, 1990. (Incorporated herein by reference to the appropriate exhibit to Sealy
Corporation's Annual Report on Form 10-K for the fiscal year ended November 30, 1991 (File No. 1-8738)).
*10.4 The Ohio Mattress Holding Company 1989 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.16 to
Annual Report on Form 10-K of The Ohio Mattress Holding Company and The Ohio Mattress Company for the year ended
November 30, 1989, File No. 33-29246, filed March 2, 1990).
10.5 Sealy Corporation Bonus Program.
10.6 Not used.
*10.7 Sealy Corporation 1992 Stock Option Plan. (Incorporated herein by reference to the appropriate exhibit to Sealy
Corporation's Annual Report on Form 10-K for the fiscal year ended November 30, 1992 (File No. 1-8738)).
*10.8 Sealy Corporation Performance Share Plan. (Incorporated herein by reference to the appropriate exhibit to Sealy
Corporation's Annual Report on Form 10-K for the fiscal year ended November 30, 1992 (File No. 1-8738)).
*10.9 Employment Agreement dated as of October 31, 1992, by and between Sealy Corporation and Lyman M. Beggs.
(Incorporated herein by reference to the appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K for the
fiscal year ended November 30, 1992 (File No. 1-8738)).
*10.10 Letter Agreement, dated as of October 31, 1992 by and between Sealy Corporation and Lyman M. Beggs. (Incorporated
herein by reference to the appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K for the fiscal year
ended November 30, 1992 (File No. 1-8738)).
*10.11 Stockholder Agreement, dated as of October 31, 1992 by and between Sealy Corporation and Lyman M. Beggs.
(Incorporated herein by reference to the appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K for the
fiscal year ended November 30, 1992 (File No. 1-8738)).
*10.12 Letter Agreement, dated June 5, 1991 by and between Sealy Corporation and Sam F. Smith, Jr. (Incorporated herein by
reference to the appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K for the fiscal year ended
November 30, 1992 (File No. 1-8738)).
10.13 Sealy Corporation 1993 Non-Employee Director Stock Option Plan. (Incorporated herein by reference to the appropriate
exhibit to the Form S-1 Registration Statement of Sealy Corporation (File No. 33-59134)). (As amended by Amendment No.
1 dated April 6, 1994.)
10.14 Amendment No. 2 to Sealy Corporation 1993 Non-Employee Director Stock Option Plan, dated June 27, 1995.
</TABLE>
47
<PAGE> 49
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
- ------ -------------------
<S> <C>
21.1 List of subsidiaries of Sealy Corporation (Incorporated herein by reference to the appropriate exhibit to Sealy
Corporation's Annual Report on Form 10-K for the fiscal year ended November 30, 1992 (File No. 1-8738)).
27.1 Financial Data Schedule
99.1 Certificate of Ownership and Merger merging Sealy Holdings, Inc. with and into Sealy Corporation dated as of November
5, 1991. (Incorporated herein by reference to the appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K
for the fiscal year ended November 30, 1991 (File No. 1-8738)).
99.2 Sealy Corporation Executive Severance Benefit Plan dated January 25, 1993. (Incorporated herein by reference to the
appropriate exhibit to Sealy Corporation's Annual Report on Form 10-K for the fiscal year ended November 30, 1992 (File
No. 1-8738)).
(d) The financial statement schedules filed with this report are listed
in section (a)(2) of Item 14 above.
- --------------------
<FN>
* Management contract or compensatory plan or arrangement identified pursuant
to Item 14(a) of this Form 10-K.
</TABLE>
48
<PAGE> 50
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, SEALY CORPORATION HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SEALY CORPORATION
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
By: /s/ Lyman M. Beggs Chairman, President and Chief Executive Officer
----------------------------- (Principal Executive Officer)
Lyman M. Beggs
Date: February 22, 1996
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<S> <C> <C>
/s/ Jesse E. Hogan Senior Vice President and February 22, 1996
- ------------------------------------ Chief Financial Officer
Jesse E. Hogan (Principal Financial and
Accounting Officer)
/s/ Samuel Zell Director February 22, 1996
- --------------------------------------
Samuel Zell
/s/ Sheli Z. Rosenberg Director February 22, 1996
- ----------------------------------
Sheli Z. Rosenberg
/s/ Rod F. Dammeyer Director February 22, 1996
- ---------------------------------
Rod F. Dammeyer
/s/ George L. Davis Director February 22, 1996
- ------------------------------------
George L. Davis
/s/ Christie A. Hefner Director February 22, 1996
- -------------------------------------
Christie A. Hefner
/s/ James W. Johnston Director February 22, 1996
- ----------------------------------
James W. Johnston
/s/ Rolf H. Towe Director February 22, 1996
- --------------------------------------
Rolf H. Towe
</TABLE>
49
<PAGE> 51
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULES
YEARS ENDED NOVEMBER 30, 1995 AND 1994,
TEN MONTHS ENDED NOVEMBER 30, 1993, TWO MONTHS ENDED JANUARY 31, 1993
FORMING A PART OF ANNUAL REPORT PURSUANT TO
THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
OF
SEALY CORPORATION
50
<PAGE> 52
SEALY CORPORATION
SCHEDULE VIII -- VALUATION ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT BALANCE
BEGINNING END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
- --------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
SUCCESSOR
Fiscal year ended November 30, 1995:
Allowance for doubtful accounts
receivable $7,774 $ 812 $1,111 $7,475
Fiscal year ended November 30, 1994:
Allowance for doubtful accounts
receivable $7,650 $1,625 $1,501 $7,774
Ten months ended November 30, 1993:
Allowance for doubtful accounts
receivable $9,683 $1,354 $3,387 $7,650
PRE-SUCCESSOR
Two months ended January 31, 1993:
Allowance for doubtful accounts
receivable $9,438 $ 265 $ 20 $9,683
</TABLE>
51
<PAGE> 53
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, SEALY CORPORATION HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SEALY CORPORATION
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
By: Chairman, President and Chief Executive Officer
---------------------------------
Lyman M. Beggs (Principal Executive Officer)
Date: February 22, 1996
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<S> <C> <C> <C>
SeniorEVice President and February 22, 1996
Jesse E. Hogan Chief Financial Officer
(Principal Financial and
Accounting Officer)
Director February 22, 1996
- ---------------------------------
Samuel Zell
Director February 22, 1996
- ---------------------------------
Sheli Z. Rosenberg
Director February 22, 1996
- ---------------------------------
Rod Dammeyer
Director February 22, 1996
- ---------------------------------
George L. Davis
Director February 22, 1996
- ---------------------------------
Christie A. Hefner
Director February 22, 1996
- ---------------------------------
James W. Johnston
Director February 22, 1996
- ---------------------------------
Rolf H. Towe
</TABLE>
52
<PAGE> 1
EXHIBIT 4.12
AMENDMENT NO. 1
---------------
TO WARRANT AGREEMENT BETWEEN
----------------------------
SEALY CORPORATION AND
---------------------
SOCIETY NATIONAL BANK AS WARRANT AGENT
--------------------------------------
THIS AMENDMENT NO. 1 TO WARRANT AGREEMENT between SEALY CORPORATION
(successor in interest to The Ohio Mattress Holding Company), a Delaware
corporation (the "Company"), and SOCIETY NATIONAL BANK as the Warrant Agent
(successor Warrant Agent to First Chicago Trust Company of New York), is dated
as of the 1st day of April, 1995. Capitalized terms not otherwise defined in
this Amendment No.1 shall have the meanings given them in the Warrant Agreement
(as defined below).
WITNESSETH:
WHEREAS: The Company and the original Warrant Agent entered into a
Warrant Agreement, dated as of the 1st day of August 1989 (the "Warrant
Agreement"), to issue the Warrants which entitled the holders thereof to
purchase shares of Class B Common Stock of the Company; and
WHEREAS: The Company plans to offer its Common Stock for sale to the
public (the "Offering") pursuant to a Registration Statement on Form S-2 to be
filed with the Securities and Exchange Commission; and
WHEREAS: The Company plans on amending its Restated Certificate of
Incorporation to provide for the automatic conversion upon consummation of the
Offering of shares of Class B Common Stock into Common Stock, $.O1 par value
per share ("Common Stock"); and
WHEREAS: The Company and the Warrant Agent desire to amend the Warrant
Agreement provide for an exercise date of the Warrants of the earlier of (1) a
date beginning 30 days after consummation of the Offering or (2) a date as
otherwise determined under the Warrant Agreement, and to permit holders of the
Warrants to exercise the same through the surrender of Warrants having a value
equal to the exercise price of the underlying shares of Common Stock.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth in the Warrant Agreement and this Amendment, the parties hereby agree
as follows:
1. Section 1.01 of the Warrant Agreement is hereby amended by adding
the following definitions thereto:
1
<PAGE> 2
"Offering" is defined in the preamble.
"Representatives" means the representatives of the underwriters for the
Offering.
2. Section 3.02 is deleted in its entirety and replaced with the
following:
"SECTION 3.02 EXERCISE PERIODS. Subject to the terms and conditions set
forth herein (including Sections 3.03 and 3.08), the Warrants shall be
exercisable at any time or from time to time:
(i) subsequent to August 9, 1995;
(ii) subsequent to the occurrence of any Triggering Event;
(iii) in connection with an Initial Public Offering, but only to the
extent that Warrant Shares issued upon exercise of the Warrants are included in
the registration statement pertaining to the Initial Public Offering pursuant
to Section 4.01, and subsequently sold in such Initial Public Offering;
(iv) during the 90-day period subsequent to the date of notice by
the Company of the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company ("Liquidation"); or
(v) subsequent to the thirtieth day following the first date that
the Company receives payment for its shares sold in the Offering from the
Representatives."
3. Section 3.04 is deleted in its entirety and replaced with the
following:
"SECTION 3.04 MANNER OF EXERCISE. A Warrant may be exercised upon
(i) surrender to the Company of the certificate evidencing the Warrant at the
office of the Warrant Agent, together with the form of election to purchase on
the reverse thereof duly filled in and signed and (ii) payment to the Warrant
Agent, for the account of the Company, of the Exercise Price for the number of
Warrant Shares in respect of which such Warrant is then exercised. Such payment
shall be made (a) by a certified or official bank check payable to the order of
the Warrant Agent as agent for the Company or by wire transfer of funds to any
account designated by the Company for such purpose and/or (b) by surrendering
to the Company Warrants having a value equal to the aggregate exercise price
payable with respect to the number of Warrant Shares to be purchased. In the
event that a Holder of the Warrants determines to pay the exercise price for
Warrant Shares by surrendering to the Company a portion of such Holder's
Warrants, the number of Warrants to be
2
<PAGE> 3
surrendered in exchange for each Warrant Share shall be determined by
dividing fifty (subject to any adjustment required under Section 7.02 or 7.06)
one hundredths (.50) by the Current Market Value of a share of Common Stock.
Subject to Section 3.02, the rights of purchase represented by the Warrants
shall be exercisable at the election of the Holders either in full at any time
or from time to time in part and in the event that a Warrant Certificate is
surrendered for exercise in respect of less than all of the Warrant Shares
purchasable on such exercise, a new Warrant Certificate exercisable for the
remaining Warrant Shares will be issued. The Warrant Agent shall countersign
and deliver the required new Warrant Certificates, and the Company, at the
Warrant Agent's request, shall supply the Warrant Agent with Warrant
Certificates duly signed on behalf of the Company for such purpose."
4. Except as set forth herein, the Warrant Agreement shall remain in
full force and effect and shall be otherwise unaffected hereby.
5. This Amendment No.1 may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
1 to be duly executed, all as of the day and year first above written.
SEALY CORPORATION
By: John D. Moran
-----------------------
Its: Secretary
-----------------------
SOCIETY NATIONAL BANK AS SUCCESSOR
WARRANT AGENT
By: Laura Kress
-----------------------
Its: Trust Officer
-----------------------
3
<PAGE> 1
Exhibit 4.13
October 23, 1995
Sealy Corporation
1228 Euclid Avenue
Cleveland, Ohio 44115-1886
Re: First Amendment and Consent
---------------------------
Ladies/Gentlemen:
Please refer to the Restated Secured Credit Agreement dated as of May 27, 1994
(the "Credit Agreement") among Sealy Corporation, as Borrower, various banks
and other financial institutions, Banque Paribas, Citicorp USA, Inc., Bank of
America Illinois (formerly known as Continental Bank N.A.) and General Electric
Capital Corporation, as Managing Agents, and Bank of America Illinois, as
Administrative Agent. Terms defined in the Credit Agreement are used herein as
so defined.
The Borrower has advised the Banks that it desires to change its Fiscal
Year so that the last day of Fiscal Year 1996 will be December 1, 1996, the
last day of Fiscal Year 1997 will be November 30, 1997, the last day of Fiscal
Year 1998 will be November 29, 1998 and the last day of Fiscal Year 1999 will
be November 28, 1999. The Required Banks hereby consent to such change and
agree that the definition of Fiscal Year set forth in Section 1.01 of the
Credit Agreement is amended in its entirety to read as follows:
"Fiscal Year" means each period of four consecutive Fiscal Quarters
ending on November 30, 1994, November 30, 1995, December 1, 1996,
November 30, 1997, November 29, 1998 and November 28, 1999, respectively.
This First Amendment and Consent may be executed in counterparts and
shall become effective when the Administrative Agent has received
counterparts hereof signed by the Borrower and
<PAGE> 2
the Required Banks. This First Amendment and Consent shall be
governed by the laws of the State of New York.
Very truly yours,
BANK OF AMERICA ILLINOIS,
as Administrative Agent
and Managing Agent
By: /s/ Peggy A. Zymeto
---------------------------------
Title: Vice President
-----------------------------
BANK OF AMERICA ILLINOIS, as a Bank
By: /s/ William Staford
---------------------------------
Title: Vice President
-----------------------------
BANQUE PARIBAS, individually
and as Managing Agent
By: /s/ SM Heiner Albert A. Young, Jr.
---------------------------------
Title: Senior Credit Officer
-----------------------------
CITICORP USA, INC.,
individually and as Managing
Agent
By: /s/ David L. Harris
---------------------------------
Title: Assistant Vice President
-----------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, individually
and as Managing Agent
By: /s/ William Brasse
---------------------------------
Title:
-----------------------------
BANK OF SCOTLAND
By: /s/ Catherine M. Orieffy
---------------------------------
Title: Vice President
-----------------------------
-2-
<PAGE> 3
COMPAGNIE FINANCIERE de CIC et
de L'UNION EUROPEENNE
By: /s/ Marcus Edward Sean Monier
--------------------------------------------
Title: Vice President
----------------------------------------
Title: First Vice President
----------------------------------------
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ David Bouhl,
--------------------------------------------
F.V.P.
Title: Head of Corporate Banking
----------------------------------------
CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ [illegible Signature]
--------------------------------------------
Title: Vice President
----------------------------------------
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ [illegible Signature]
--------------------------------------------
Title: Authorized Signature
----------------------------------------
DRESDNER BANK AG CHICAGO AND GRAND
CAYMAN BRANCHES
By: /s/ E. Ronald Holder
--------------------------------------------
Title: Senior Vice President and Branch Manager
----------------------------------------
By: /s/ John Schaus
--------------------------------------------
Title: First Vice President
----------------------------------------
FIRST BANK NATIONAL ASSOCIATION
By: /s/ Megan G. Mourning
--------------------------------------------
Title: Vice President
----------------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Stephanie L. Tucker
--------------------------------------------
Title: Vice President
----------------------------------------
-3-
<PAGE> 4
THE FUJI BANK, LIMITED
By: /s/ Peter L. Chinnici
---------------------------------
Title: Joint General Manager
-----------------------------
HELLER FINANCIAL, INC.
By: /s/ James D. Young
---------------------------------
Title: Vice President
-----------------------------
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., CHICAGO BRANCH
By: /s/ illegible Signature]
---------------------------------
Title: Vice President & Deputy General Manager
-----------------------------
MELLON BANK N.A.
By: /s/ J. M. Anderson
---------------------------------
Title: Vice President
-----------------------------
NATIONAL CANADA FINANCE CORP.
By: /s/
---------------------------------
Title: Assistant Vice President
-----------------------------
By: /s/
---------------------------------
Title: Vice President
-----------------------------
NATIONSBANK, N.A. (CAROLINAS)
By: /s/ Michael D. Monte
---------------------------------
Title: Senior Vice President
-----------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/
---------------------------------
Title: Corporate Banking Officer
-----------------------------
-4-
<PAGE> 5
SHAWMUT BANK CONNECTICUT, N.A.
By: /s/ [illegible Signature]
---------------------------------
Title: Managing Dirctor
-----------------------------
UNITED STATES NATIONAL BANK OF
OREGON
By: /s/ Chris J. Karlin
---------------------------------
Title: Vice President
-----------------------------
ACCEPTED AND AGREED as of
the date first written above
SEALY CORPORATION
By: /s/ [Illegible Signature]
------------------------------
Title: Vice President & Treasurer
---------------------------
-5-
<PAGE> 1
EXHIBIT 4.14
As of November 30, 1995
Sealy Corporation
1228 Euclid Avenue
Cleveland, Ohio 44115-1886
Re: Second Amendment
----------------
Ladies/Gentlemen:
Please refer to the Restated Secured Credit Agreement dated as of May 27,
1994 (as previously amended, the "Credit Agreement") among Sealy Corporation,
as Borrower, various banks and other financial institutions, Banque Paribas,
Citicorp USA, Inc., Bank of America Illinois (formerly known as Continental
Bank N.A.) and General Electric Capital Corporation, as Managing Agents, and
Bank of America Illinois, as Administrative Agent. Terms defined in the Credit
Agreement are used herein as so defined.
The Borrower, the Required Banks and the Agent agree that the Credit
Agreement shall be amended, effective as of November 30, 1995 as follows:
(a) CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Section 6.02.04(c) shall
be amended in its entirety to read as follows:
"SECTION 6.02.04(c). The Consolidated Fixed Charge Coverage Ratio on the
last day of any Fiscal Quarter occurring during any period set forth below
to be less than the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Minimum Fixed
Period Charge
------ Coverage Ratio
---------------
<S> <C>
Any Fiscal Quarter through Third 1.05 to 1.00
Quarter of 1995 Fiscal Year
Fourth Quarter of 1995 Fiscal Year 1.00 to 1.00
First Quarter of 1996 Fiscal Year 1.05 to 1.00
through Third Quarter of 1997 Fiscal
Year
Fourth Quarter of 1997 Fiscal Year 1.10 to 1.00."
and thereafter
</TABLE>
<PAGE> 2
(b) SECTION 1.01 DEFINITIONS. The definition of "Consolidated Fixed
Charge Coverage Ratio" in Section 1.01 shall be amended by inserting the
following parenthetical clause immediately after the phrase "pursuant to
Section 2.09(a)" in subclause (b) (iii) (A):
"(PROVIDED, HOWEVER, that beginning with the scheduled payment due on
February 28, 1996, the scheduled principal amount of each installment
shall be deemed to be the amount set forth on Schedule I to the Second
Amendment to this Agreement dated as of November 30, 1995)."
Attached hereto as SCHEDULE I is a table setting forth the
revised scheduled principal payments for purposes of computation
of the Consolidated Fixed Charge Coverage Ratio pursuant to the
Credit Agreement as amended hereby.
Except as amended above, all terms and provisions of the Credit Agreement
shall remain in full force and effect and are hereby ratified and confirmed in
all respects.
This Second Amendment may be executed in counterparts and shall become
effective when the Administrative Agent has received counterparts hereof signed
by the Borrower and the Reguired Banks. This Second Amendment shall be
governed by the laws of the State of New York.
Very truly yours,
BANK OF AMERICA ILLINOIS,
as Administrative Agent and
Managing Agent
By: /s/ Peggy A. Djmoto
------------------------------
Title: VICE PRESIDENT
----------------------------
BANK OF AMERICA ILLINOIS, as a
Bank
By: /s/ William J. Stafeil
------------------------------
Title: VICE PRESIDENT
----------------------------
<PAGE> 3
BANQUE PARIBAS, individually
and as Managing Agent
By: /s/ Albert A. Young, Jr.
-------------------------------------
Title: SENIOR CREDIT OFFICER
----------------------------------
By: /s/ Steven M. Heinen
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
CITICORP USA, INC.,
individually and as Managing
Agent
By: /s/ Marjorie Futornick
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
GENERAL ELECTRIC CAPITAL
CORPORATION, individually
and as Managing Agent
By: /s/ William Brasse
-------------------------------------
Title: ONLY AUTHORIZED SIGNATORY
----------------------------------
BANK OF SCOTLAND
By: /s/ Catherine M. Oniffrey
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
COMPAGNIE FINANCIERE de CIC et
de L'UNION EUROPEENNE
By: /s/ Marcus Edward
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
By: /s/ Sean Mounier
-------------------------------------
Title: FIRST VICE PRESIDENT
----------------------------------
CAISSE NATIONALE DE CREDIT
AGRICOLE
By: /s/ David Bouhl, F.V.P.
-------------------------------------
Title: HEAD OF CORPORATE BANKING, CHICAGO
----------------------------------
<PAGE> 4
CREDIT LYONNAIS CHICAGO BRANCH
By: /s/ Mary Ann Klemm
-------------------------------------
Title: VICE PRESIDENT AND GROUP HEAD
----------------------------------
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /s/ Mary Ann Klemm
-------------------------------------
Title: AUTHORIZED SIGNATURE
----------------------------------
DRESDNER BANK AG CHICAGO AND
GRAND CAYMAN BRANCHES
By: /s/ E. P. Holder
-------------------------------------
Title: SVP
----------------------------------
By: /s/ ???
-------------------------------------
Title: AVP
----------------------------------
FIRST BANK NATIONAL
ASSOCIATION
By: /s/ Megan G. Mourning
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
THE FIRST NATIONAL BANK OF
CHICAGO
By: /s/ Stephanie L. Tucker
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
THE FUJI BANK, LIMITED
By: /s/ Peter L. Chinnici
-------------------------------------
Title: Joint General Manager
----------------------------------
<PAGE> 5
HELLER FINANCIAL, INC.
By: /s/ James D. Young
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO BRANCH
By: /s/ Brady S. Sadek
-------------------------------------
Title: Vice President and Deputy
----------------------------------
General Manager
----------------------------------
MELLON BANK N.A.
By: /s/ J. M. Anderson
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
NATIONAL CANADA FINANCE CORP.
By: /s/ Damon E. Winet
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
By:
-------------------------------------
Title:
----------------------------------
NATIONSBANK, N.A. (CAROLINAS)
By:
-------------------------------------
Title:
----------------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ James A. Wiene
-------------------------------------
Title: Commercial Banking Officer
----------------------------------
<PAGE> 6
SHAWMUT BANK CONNECTICUT, N.A.
By:
-------------------------------------
Title:
----------------------------------
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Douglas A. Rich
-------------------------------------
Title: VICE PRESIDENT
----------------------------------
ACCEPTED AND AGREED as of
the date first written above
SEALY CORPORATION
By: /s/ ???
-------------------------------------
Title: Vice President and Treasure
----------------------------------
<PAGE> 7
SCHEDULE I
----------
REVISED SCHEDULE OF "SCHEDULED PAYMENTS" FOR PURPOSES OF THE
------------------------------------------------------------
CONSOLIDATED FIXED CHARGE COVERAGE RATIO
----------------------------------------
<TABLE>
<CAPTION>
DATE AMOUNT
---- ------
<S> <C>
1996
- ----
February 28, 1996 0
May 31, 1996 1,154,923.60
August 31, 1996 7,699,530.52
November 30, 1996 7,699,530.52
1997
- ----
February 28, 1997 1,924,882.60
May 31, 1997 1,924,882.60
August 31, 1997 7,699,530.52
November 30, 1997 7,699,530.52
1998
- ----
February 28, 1998 2,309,859.17
May 31, 1998 2,309,859.17
August 31, 1998 9,239,442.61
November 30, 1998 9,239,436.61
1999
- ----
February 28, 1999 2,309,859.17
May 31, 1999 2,309,859.17
August 31, 1999 9,239,436.61
November 30, 1999 9,239,436.61
</TABLE>
<PAGE> 1
EXHIBIT 10.1
SEALY
-----
PROFIT SHARING PLAN
-------------------
Amendment and
Restatement Date: December 1, 1989
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE NO.
-----------
<S> <C>
NAME AND PURPOSE 1
DEFINITIONS 2
ELIGIBILITY AND PARTICIPATION 3
DEFERRED PAY OPTION 4
COMPANY CONTRIBUTIONS 5
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS 6
INVESTMENT FUNDS AND DIRECTION OF INVESTMENT 7
ACCOUNTS 8
VESTING 9
RETIREMENT BENEFITS 10
DEATH BENEFITS 11
DISTRIBUTIONS 12
LOANS TO PARTICIPANTS 13
ADMINISTRATION 14
PROHIBITION AGAINST ALIENATION 15
AMENDMENT AND TERMINATION 16
TOP-HEAVY PROVISIONS 17
ROLLOVERS AND TRANSFERS INVOLVING OTHER QUALIFIED
RETIREMENT PLANS 18
TRANSFERRED EMPLOYEES 19
PARTICIPATING COMPANIES 20
LIMITATIONS ON ANNUAL ADDITIONS 21
MISCELLANEOUS 22
</TABLE>
ii
<PAGE> 3
SEALY
-----
PROFIT SHARING PLAN
-------------------
THIS AMENDMENT AND RESTATEMENT is entered into by SEALY
CORPORATION, a Delaware corporation, (hereinafter called the "Company");
W I T N E S S E T H:
--------------------
WHEREAS, the Company previously established the Sealy,
Incorporated Employees' Thrift Plan (the "Thrift Plan"), effective January 1,
1977; and
WHEREAS, the Company amended and restated the Thrift Plan as
the Sealy Profit Sharing Plan (the "Plan"), effective January 1, 1988, in order
to provide Participants with the opportunity to make deferred pay contributions
pursuant to Section 401(k) of the Internal Revenue Code and to make certain
other desirable changes; and
WHEREAS, the Company desires to amend the Plan in order to
conform it to the Tax Reform Act of 1986, the Consolidated Omnibus Budget
Reconciliation Act of 1986, the Omnibus Budget Reconciliation Act of 1987, the
Technical and Miscellaneous Revenue Act of 1988, and subsequent legislation and
to make certain other necessary or desirable changes;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings of the parties hereto, it is agreed that said Plan be amended,
generally effective the 1st day of December, 1989, except as hereinafter
provided, as follows:
iii
<PAGE> 4
ARTICLE 1
---------
PRELIMINARY PROVISIONS
----------------------
1.1 NAME. The name of this Plan, as amended and
restated, shall be the SEALY PROFIT SHARING PLAN.
1.2 EFFECTIVE DATE. The provisions of the Plan were
originally effective January 1, 1977.
1.3 RESTATEMENT DATE. The provisions of the Plan as
amended and restated herein are effective December 1, 1989, except as
otherwise provided herein.
1.4 PURPOSE. This Plan was originally created and is
hereby continued for the purpose of providing benefits to the Participants in
this Plan upon their Retirement and for the purpose of providing such other
benefits to such Participants and their Beneficiaries as are hereinafter
described.
1
<PAGE> 5
ARTICLE 2
---------
DEFINITIONS
-----------
The use of neuter, masculine and feminine pronouns shall each
be read to include the others and the use of the singular shall be read to
include the plural and vice versa. Unless the context otherwise indicates, the
following terms used herein shall have the following meanings whenever used in
this instrument:
2.1 ACCOUNTS. The word "Accounts" shall mean "Deferred
Pay Accounts" established pursuant to Articles 4, 5 and 8 hereof, "Employer
Base Accounts" established pursuant to Articles 5 and 8 hereof, "Profit Sharing
Accounts" established pursuant to Articles 5 and 8 hereof, "Employee After-Tax
Accounts" established pursuant to Article 8 hereof, "Distributable Accounts"
established pursuant to Articles 8, 9, 10 and 11 hereof and "Rollover Accounts"
established pursuant to Articles 8 and 18 hereof.
2.2 ACTIVE PARTICIPANT. The words "Active Participant"
shall mean a Participant during any year in which he is a Covered Employee of a
Participating Company; provided, however, that a Participant who transfers
employment from a Participating Company to an Affiliate or from an Affiliate to
a Participating Company shall be subject to the provisions set forth in Article
19 hereof; and provided further that, effective June 1, 1990, a Participant who
remains in the employ of the Company but shall not satisfy the requirements for
active participation shall be deemed to be an inactive Participant.
2
<PAGE> 6
2.3 AFFILIATE. The word "Affiliate" shall mean a
corporation which would be defined as a member of a controlled group of
corporations which includes a Participating Company or any business
organization which would be defined as a trade or business (whether or not
incorporated) which is under "common control" with a Participating Company
within the meaning of Sections 414(b) and (c) of the Code, and any member of an
"affiliated service group," as defined in Section 414(m) of the Code or is a
part of any other arrangement as defined in regulations under Section 414(o) of
the Code, which includes a Participating Company but, in each case, only during
the periods any such corporation, business organization or member would be so
defined.
2.4 ALLOCATION DATE. The words "Allocation Date" shall
mean a date selected by the Company as of which allocations are made to
Accounts. As of the Restatement Date, such date shall be the last day of each
of the Participating Companies' Taxable Years.
2.5 ANNUAL ADDITIONS. The words "Annual Additions" shall
mean with respect to each Participant the sum of the following amounts in any
Plan Year:
(a) the contributions of a Participating Company
(including amounts contributed by the Participating
Companies to the Trustee pursuant to a Participant's
election under Section 4.1 hereof) or a Related
Company credited to his accounts with respect to such
Plan Year under all defined contribution plans of the
Company or any Related Company which plans meet the
requirements of Section 401(a) of the Code;
(b) forfeitures creditable to his accounts under all such
defined contribution plans of a Participating Company
or any Related Company with respect to such Plan
Year;
3
<PAGE> 7
(c) unless the provisions of this Section 2.6(c) cease to
be required by the Code, amounts allocated, in Plan
Years beginning after March 31, 1984, to an
individual medical account, as defined in Section
415(1)(2) of the Code, which is part of a pension or
annuity plan maintained by a Participating Company or
any Related Company and amounts derived from
contributions paid or accrued after December 31,
1985, in Plan Years ending after such date, which are
attributable to the separate account of a key
employee, as defined in Section 419A(d)(3) of the
Code, under a welfare benefit fund, as defined in
Section 419(e) of the Code, maintained by a
Participating Company or any Related Company.
2.6 BENEFICIARY. The word "Beneficiary" shall mean any
person, other than an alternate payee as defined in Section 15.1 hereof, who
receives or is designated to receive payment of any benefit under the terms of
this Plan because of the participation of another person in this Plan.
2.7 CODE. The word "Code" shall mean the Internal
Revenue Code of 1986, as it may be amended from time to time, and lawful
regulations and pronouncements promulgated thereunder. Whenever a reference is
made to a specific Code section, such reference shall be deemed to include any
successor Code section having the same or a similar purpose.
2.8 COMMITTEE. The word "Committee" shall mean the
Benefit Appeals Committee constituted under the provisions of Article 14 of
this Plan.
2.9 COMPANY. Effective June 1, 1990, the word "Company"
shall mean Sealy Corporation or any corporation or any other business
organization which shall assume the obligations of Sealy Corporation under this
Plan as provided herein with respect to the Participants.
4
<PAGE> 8
For periods on and after the Restatement Date but prior to
June 1, 1990, the word "Company" shall mean The Ohio Mattress Company Licensing
and Components Group (formerly known as Sealy, Incorporated), or any
corporation or any other business organization which shall assume the
obligations of The Ohio Mattress Company Licensing and Components Group, as
provided herein with respect to the Participants.
2.10 COMPENSATION. Effective December 1, 1992, the word
"Compensation" shall mean all remuneration paid by Participating Companies to a
Participant during a Plan Year for services rendered as a Covered Employee to
Participating Companies, including wages or salaries (including amounts
contributed by the Participating Company to the Trustee pursuant to a
Participant's election under Section 401(k) of the Code and further including
amounts contributed to any plan of the Company under Section 125 of the Code),
incentive payments to sales representatives under the Sealy Sales Incentive
Compensation Program, commissions and overtime but shall not include bonuses,
whether discretionary or non-discretionary, any extra benefits such as payment
by the Company of hospitalization, group insurance, expense reimbursement,
amounts allocated under Section 5.1 of this Plan, severance pay or other
special benefits. The amount of a Participant's Compensation for any Plan Year
shall be determined as of the last day of such year.
Notwithstanding the foregoing, the maximum Compensation of any
Highly Compensated Employee that can be considered for any purpose under this
Plan prior to December 1, 1994 shall be Two Hundred Thousand Dollars
($200,000.00) and on and after December 1,
5
<PAGE> 9
1994, shall be One Hundred Fifty Thousand Dollars ($150,000.00), both subject
to adjustments for increases in the cost of living as shall be prescribed by
the Secretary of the Treasury pursuant to Section 401(a)(17) of the Code. In
determining the limit on Compensation set forth in the preceding sentence, the
family aggregation rules contained in Section 414(q) (6) of the Code shall
apply, except that in applying such rules, the term "family" shall include only
the spouse of the Employee and any lineal descendants of the Employee who have
not attained age nineteen (19) before the close of the Plan Year. If, as a
result of the application of such family aggregation rules, the limit on
Compensation set forth above is exceeded, the amount of each family member's
Compensation which shall count toward the limit shall equal that portion of the
limit which bears the same relationship to the limit as such family member's
Compensation, determined under this Section 2.10 prior to the application of
such Compensation limit ("unlimited compensation"), bears to the total
unlimited compensation of all the family members.
2.11 CONTINUOUS SERVICE. Effective June 1, 1990, the
words "Continuous Service" shall mean for an Employee of a Participating
Company, his length of service from the later of his Date of Hire to his date
of Termination of Employment which follows such Date of Hire, even if such
company was not a Participating Company at the time of the Participant's Date
of Hire.
2.12 COVERED EMPLOYEE. The words "Covered Employee" shall
mean an Employee during any period that he is employed by a
6
<PAGE> 10
Participating Company; provided, however, that no such Employee shall be a
"Covered Employee" during any period that he:
(a) is employed in a unit of Employees which is covered
by a collective bargaining agreement to which a
Participating Company is a party (unless such
collective bargaining agreement provides for
participation in this Plan);
(b) is employed only by an Affiliate which is not a
Participating Company;
(c) on and after June 1, 1990, is covered by a defined
benefit plan, qualified under Section 401(a) of the
Code, to which a Participating Company makes
contributions; or
(d) is employed as a Leased Employee.
2.13 DATE OF HIRE. The words "Date of Hire" shall mean
the date on which an Employee commences employment and works at least one (1)
Hour for a Participating Company or any Affiliate, even if such company was not
a Participating Company at the time of such Date of Hire, and shall mean, in
the case of a rehired Employee, the first date following his previous
Termination of Employment on which he works at least one (1) Hour for a
Participating Company or any Affiliate, even if such company was not a
Participating Company on such date.
2.14 DISABILITY. The word "Disability" shall mean any
disability which prevents an Employee from performing each of the material
duties of his regular occupation.
2.15 EFFECTIVE DATE. The words "Effective Date" of this
Plan shall mean January 1, 1977.
2.16 EMPLOYEE. The word "Employee" shall mean any
common-law employee or Leased Employee of a Participating Company or an
Affiliate. The word "Employee" shall not include any person
7
<PAGE> 11
who renders service to a Participating Company or an Affiliate solely as a
director or independent contractor.
2.17 ERISA. The acronym "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as it may be amended from time to time,
and lawful regulations and pronouncements promulgated thereunder. Whenever a
reference is made to a specific ERISA section, such reference shall be deemed
to include any successor ERISA section having the same or similar purpose.
2.18 HIGHLY COMPENSATED EMPLOYEE. The words "Highly
Compensated Employee" shall mean an Employee or a former Employee who is highly
compensated for a Plan Year as described in Section 414(q) of the Code, which
is hereby incorporated by reference, and who is described for informational
purposes herein as an Employee during a Plan Year if either:
(a) during the preceding Plan Year, he:
(i) was at any time a five percent (5%) or more
actual or constructive owner of a
Participating Company or any Affiliate;
(ii) received Testing Compensation from a
Participating Company and any Affiliate
greater than Seventy-Five Thousand Dollars
($75,000.00) (plus any increase for cost of
living as determined by the Secretary of the
Treasury or his delegate);
(iii) received Testing Compensation from a
Participating Company and any Affiliate
greater than Fifty Thousand Dollars
($50,000.00) (plus any increase for cost of
living after 1994 as determined by the
Secretary of the Treasury or his delegate)
and was in the "top paid group" of Employees
of a Participating Company or any Affiliate
for such Plan Year; or
(iv) was at any time an officer of a Participating
Company or any Affiliate and received Testing
8
<PAGE> 12
Compensation greater than Forty-Five Thousand
Dollars ($45,000.00) or, if greater, fifty
percent (50%) of the amount specified in Section
415(b)(1)(A) of the Code for such Plan Year
(plus any increase for cost of living after 1994
as determined by the Secretary of the Treasury
or his delegate); or
(b) during the current Plan Year, he either:
(i) was at any time a five percent (5%) or more
actual or constructive owner of a
Participating Company or any Affiliate; or
(ii) was one of the one hundred (100) highest paid
Employees of a Participating Company or any
Affiliate for the current Plan Year and meets
the requirements of (a)(ii), (a)(iii) or
(a)(iv) above for the current Plan Year.
For purposes of determining the members of the "top paid group"
under subsection (a)(iii) above, an Employee is a member of the top paid group
for any Plan Year if for such Plan Year the Employee is a member of a group
consisting of the top paid twenty percent (20%) of Employees of a Participating
Company or any Affiliate ranked on the basis of Testing Compensation from a
Participating Company and any Affiliate paid during the Plan Year. In
determining the members of the top paid group, the following Employees shall be
excluded:
(A) Employees who have not completed six (6) months of
service;
(B) Employees who normally work less than seventeen and
one-half (17-1/2) Hours per week;
(C) Employees who normally work in less than six (6)
months during any year;
(D) Employees who have not attained age twenty-one (21);
(E) except to the extent provided in regulations,
Employees who are included in a unit of Employees
covered by any agreement which the Secretary of
9
<PAGE> 13
Labor finds to be a collective bargaining agreement
between employee representatives and a Participating
Company or any Affiliate; and
(F) Employees who are nonresident aliens and who receive
no earned income (within the meaning of Section
911(d)(2) of the Code) from a Participating Company
and any Affiliate which constitutes income from
sources within the United States (within the meaning
of Section 861(a)(3) of the Code).
The Company may elect (in such manner as may be provided by the Secretary of
the Treasury or his delegate) to apply subsections (A), (B), (C), or (D) above
by substituting a shorter period of service, smaller number of Hours or months,
or lower age for the period of service, number of Hours or months, or age (as
the case may be) than that specified in such subsection.
For purposes of determining the number and identity of
"officers" in subsection (a)(iv) above:
(1) The total number of Employees treated as officers
shall be limited to the lesser of:
(I) fifty (50); or
(II) the greater of three (3) Employees or ten
percent (10%) of all Employees of a
Participating Company and any Affiliate; but
(2) If no Employee would be described as an officer
pursuant to subsection (a)(iv), the highest paid
officer shall be treated as described in such
subsection.
A highly compensated former employee is described for
informational purposes herein as a former Employee if either:
(a) such former Employee was a Highly Compensated
Employee when such former Employee terminated his
employment; or
(b) such former Employee was a Highly Compensated
Employee at any time after attaining age fifty-five
(55).
10
<PAGE> 14
If any individual is a member of the family of a five percent
(5%) owner or of a Highly Compensated Employee in the group consisting of the
ten (10) Highly Compensated Employees paid the greatest Testing Compensation by
a Participating Company or any Affiliate during the Plan Year, then for
purposes of any Section of this Plan which uses the term Highly Compensated
Employee, (A) such individual shall not be considered a separate Employee, and
(B) any such Testing Compensation paid to such individual by a Participating
Company or any Affiliate (and any applicable contribution or benefit on behalf
of such individual) shall be treated as if it were paid to (or on behalf of)
the five percent (5%) owner or Highly Compensated Employee. For purposes of
the foregoing, the word "family" shall mean, with respect to any Employee, such
Employee's spouse and lineal ascendants or descendants and the spouses of such
lineal ascendants or descendants. Notwithstanding the foregoing, for purposes
of Section 2.10, the word "family" shall only include the Employee's spouse and
lineal descendants under age nineteen (19).
2.19 HOURS. The word "Hours" shall mean for any Employee
who is covered by the Fair Labor Standards Act, as amended, the actual number
of Hours for which he is directly or indirectly paid or entitled to payment by
a Participating Company or any Affiliate, including payments pursuant to an
award or agreement requiring a Participating Company or an Affiliate to pay
back wages, irrespective of mitigation of damages. Hours under this paragraph
shall be calculated and credited pursuant to Section 2530.200b-2(b) and (c) of
the Department of Labor Regulations which are
11
<PAGE> 15
incorporated herein by reference. For any Employee who is not covered by the
Fair Labor Standards Act, as amended, such an Employee shall be credited with
the equivalent of one hundred ninety (190) Hours for each month he is paid or
entitled to payment by the Company or any Affiliate for at least one (1) Hour
pursuant to Section 2530.200b-3(e)(ii) of the Department of Labor Regulations
which are incorporated herein by reference.
Notwithstanding the foregoing,
(a) no Employee shall be credited with more than 501
Hours with respect to payments he receives or is
entitled to receive during any single continuous
period during which he performs no services for a
Participating Company or an Affiliate (irrespective
of whether he has terminated employment) due to
vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or
leave of absence;
(b) no Employee shall be credited with Hours with respect
to payments he receives or is entitled to receive
during a period when he performs no services for a
Participating Company or an Affiliate under a plan
maintained solely for the purpose of complying with
applicable workmen's compensation, unemployment
compensation, disability insurance or Federal Social
Security laws; and
(c) no Employee or former Employee shall be credited with
Hours with respect to payments he receives or is
entitled to receive under a pension benefit plan to
which a Participating Company or an Affiliate has
contributed during a period when he performs no
services for a Participating Company or an Affiliate.
Notwithstanding the foregoing provisions of this Section 2.19, in the event any
Employee does not perform services for the Company or any Affiliate by reason
of either:
(i) the pregnancy of such Employee; or
(ii) the birth of a child of such Employee; or
12
<PAGE> 16
(iii) the placement of a child with such Employee in
connection with the adoption of such child by such
Employee; or
(iv) caring for such child for a period beginning
immediately following such birth of placement;
such Employee shall, solely for purposes of determining whether the Employee
has incurred a One (1) Year Break-In-Service pursuant to Section 2.24 hereof,
be credited either with the Hours which otherwise would normally have been
credited to such Employee but for such absence or, in any case in which the
Plan Administrator is unable to determine the Hours described in the preceding
clause, eight (8) Hours per day of such absence provided, however, that the
total number of Hours which an Employee may be credited with by reason of any
such pregnancy, birth or placement shall not exceed 501 Hours. An Employee
shall be credited with the Hours described in the preceding sentence only in
the Taxable Year in which the absence from work begins if the Employee would be
prevented from incurring a One (1) Year Break-In-Service in such Plan Year
solely because the Employee is credited with Hours pursuant to the preceding
sentence or, in any other case, in the immediately following Taxable Year. The
Plan Administrator may require any Employee who is absent from work because of
any such pregnancy, birth or placement to furnish to the Plan Administrator
such timely information as the Plan Administrator may reasonably require to
establish both that the Employee's absence from work is because of such
pregnancy, birth or placement and the number of days during which the Employee
was absent because of such pregnancy, birth or placement.
13
<PAGE> 17
2.20 LEASED EMPLOYEE. The words "Leased Employee" shall
mean an individual who is an employee of an organization which has entered into
an employee leasing arrangement with a Participating Company or an Affiliate
and who is required to be treated as an Employee of a Participating Company or
an Affiliate for certain employee benefits law purposes pursuant to Section
414(n) of the Code.
2.21 LIMITATION YEAR. The words "Limitation Year" shall
mean the twelve (12) month period ending on December 31 in each calendar year.
For periods prior to the effective date, the words "Limitation Year" shall mean
the Limitation Years and, with appropriate adjustments, short limitation
periods, established by the Company or by regulations issued by the Secretary
of the Treasury or his delegate, for purposes of determining compliance with
Section 415 of the Code.
2.22 MILITARY SERVICE. The words "Military Service" shall
mean duty in the Armed Forces of the United States, whether voluntary or
involuntary, provided that the Employee serves not more than one voluntary
enlistment or tour of duty, and further provided that such voluntary enlistment
or tour of duty does not follow involuntary duty.
2.23 NORMAL RETIREMENT DATE. The words "Normal Retirement
Date" shall mean for each Participant the date upon which he attains age
sixty-five (65).
2.24 ONE (1) YEAR BREAK-IN-SERVICE. The words "One (1)
Year Break-In-Service" shall mean for any Employee or former Employee a Plan
Year, ending after his Termination of Employment,
14
<PAGE> 18
during which the Employee or former Employee did not complete more than five
hundred (500) Hours for a Participating Company or any Affiliate.
2.25 PARTICIPANT. The word "Participant" shall mean any
person who becomes a Participant in this Plan in accordance with Article 3
hereof. A person shall cease to be a Participant upon his Termination of
Employment.
2.26 PARTICIPATING COMPANY. The words "Participating
Company" shall mean the Company and any plant locations of the Company, its
subsidiaries and its Affiliates which shall be designated as Participating
Companies by the Company.
2.27 PERIOD OF SEVERANCE. The words "Period of Severance"
shall mean for any Employee or former Employee a period commencing on his
Termination of Employment and ending on the date such Employee or former
Employee is rehired by a Participating Company or any Affiliate.
Notwithstanding the foregoing provisions of this Section 2.27, in the event any
Employee ceases to be actively employed by reason of either:
(a) the pregnancy of such Employee; or
(b) the birth of a child of such Employee; or
(c) the placement of a child with such Employee in
connection with the adoption of such child by such
Employee; or
(d) caring for such child for a period beginning
immediately following such birth or placement;
such Employee's Period of Severance shall be deemed to have commenced on the
later of the first anniversary of the date he ceased to be actively employed or
his Termination of Employment.
15
<PAGE> 19
2.28 PLAN. The word "Plan" shall mean this Plan as
originally executed and as may be amended from time to time.
2.29 PLAN ADMINISTRATOR. The words "Plan Administrator"
shall mean the person or persons, corporation or partnership designated as Plan
Administrator under Article 14 hereof.
2.30 PLAN YEAR. The words "Plan Year" shall mean the
twelve (12) month period ending on November 30 in each calendar year.
2.31 RELATED EMPLOYER. The words "Related Employer" shall
mean a corporation which would be defined as a member of a controlled group of
corporations which includes a Participating Company or any business
organization which would be defined as a trade or business (whether or not
incorporated) which is under "common control" with a Participating Company
within the meaning of Sections 414(b) and (c) of the Code, after substituting
the phrase "more than fifty percent (50%)" for the phrase "at least eighty
percent (80%)" each place that the latter phrase appears in Section 1563(a)(1)
of the Code, and any member of an "affiliated service group", as defined in
Section 414(m) of the Code, which includes a Participating Company but, in each
case, only during the periods any such corporation, business organization or
member would be so defined.
2.32 RESTATEMENT DATE. The words "Restatement Date" shall
mean the Effective Date of this Amendment and Restatement which date is
December 1, 1989.
16
<PAGE> 20
2.33 TAXABLE YEAR. The words "Taxable Year" shall mean
the annual accounting period of each of the Participating Companies.
2.34 TERMINATION OF EMPLOYMENT. The words "Termination of
Employment" shall mean for any Employee the occurrence of any one of the
following events:
(a) he is discharged by a Participating Company or any
Affiliate unless he is subsequently reemployed and
given pay back to his date of discharge;
(b) he voluntarily terminates employment with a
Participating Company or any Affiliate;
(c) he retires from employment with a Participating
Company or any Affiliate;
(d) he fails to return to work at the end of any leave of
absence authorized by a Participating Company or any
Affiliate, or within ninety (90) days following such
Employee's release from Military Service or within
any other period following Military Service in which
his right to reemployment with a Participating
Company or any Affiliate is guaranteed by law, or
within three (3) days after he has been recalled to
work following a period of layoff;
(e) he has been disabled for at least eighteen (18)
months or for a lesser period if such Employee has
requested to be considered terminated and there is no
reasonable expectation that such Employee will return
to work; or
(f) he has been continuously laid-off for twelve (12)
months.
In the case of the occurrence of any event described in (d) or (e) of this
Section 2.34, the date of such Employee's Termination of Employment shall be
deemed to be the first day of any such period of leave of absence, layoff, or
Military Service.
2.35 TESTING COMPENSATION. The words "Testing
Compensation" shall mean remuneration used for testing purposes
17
<PAGE> 21
under this Trust and Plan. The words "Testing Compensation" shall be
interpreted according to their context and:
(a) when used to determine compliance with Section 415 of
the Code pursuant to Article 21 hereof, Testing
Compensation shall mean all amounts paid to him as
payment for services rendered by him to the Company
or any Related Employer which may be taken into
account for purposes of determining limitations on
Annual Additions and benefits under Section 415 of
the Code but shall not include, among other items,
amounts contributed by a Participating Company to the
Trustee pursuant to a Participant's election under
Section 4.1 hereof;
(b) when used to determine the identity of Highly
Compensated Employees, Testing Compensation shall
mean Testing Compensation adjusted to include and
exclude certain items of remuneration as required by
Section 414(q) of the Code, including adding amounts
contributed by a Participating Company to the Trustee
pursuant to a Participant's election under Section
4.1 hereof and a Participant's elective contributions
to a cafeteria plan pursuant to Section 125 of the
Code and adjusted to exclude remuneration from a
Related Employer which is not a Participating Company
or Affiliate;
(c) when used to determine satisfaction of the deferral
percentage limit, the contribution percentage limit
and the multiple use test of Article 6 of this Trust
and Plan, Testing Compensation shall mean
"compensation" for such Plan Year as defined in
Section 414(s) of the Code; and
(d) when used to determine top heavy status pursuant to
Article 17 hereof, Testing Compensation shall mean
Testing Compensation as defined in (a) above,
adjusted to exclude remuneration from a Related
Employer which is not a Participating Company or
Affiliate.
2.36 TRUST FUND. The word "Trust Fund" shall mean the
trust maintained pursuant to the Sealy Profit Sharing Trust, as it may be
amended from time to time.
2.37 TRUSTEE. The word "Trustee" shall mean such Trustee
as is appointed by the Company and any successor Trustee or
18
<PAGE> 22
Trustees. Effective June 1, 1990, the Trustee shall be IDS Trust Company, a
division of IDS Bank and Trust, now known as American Express Trust Company.
2.38 VALUATION DATE. The term "Valuation Date" shall mean
the date upon which a Participant's Account may be valued for purposes of
investment direction and distribution of accrued vested benefit. Each business
day of the Plan Year shall be considered as a Valuation Date.
2.39 VESTED INTEREST. The words "Vested Interest" shall
mean with respect to any Participant (a) plus (b) minus (c), where:
(a) equals the amount, if any, then credited to his
Deferred Pay Account, Employer Base Account, Rollover
Account and Distributable Account which previously
was a Profit Sharing Account maintained on his
behalf;
(b) equals the sum of:
(i) his Profit Sharing Account multiplied by his
Vested Percentage; plus
(ii) any distributions made to the Participant
from his Profit Sharing Account since his
earliest Date of Hire which has not been
followed by five (5) consecutive One (1) Year
Breaks-In-Service, multiplied by his Vested
Percentage; and
(c) equals the amount of any distributions made to the
Participant from his Profit Sharing Account since his
earliest Date of Hire which has not been followed by
five (5) consecutive One (1) Year Breaks-In-Service.
2.40 VESTED PERCENTAGE. The words "Vested Percentage"
shall mean for any Participant a percentage determined on the basis of his
number of years of Vesting Service in accordance with the following table:
19
<PAGE> 23
<TABLE>
<CAPTION>
Years of Vesting Service Vested Percentage
------------------------ -----------------
<S> <C>
Less than 2 years 0%
2 but less than 3 years 20%
3 " " " 4 " 40%
4 " " " 5 " 60%
5 " " " 6 " 80%
6 or more years 100%
</TABLE>
2.41 VESTING SERVICE. The words "Vesting Service" shall
mean for any Employee the sum of (a) plus (b) plus (c) below, where:
(a) equals the aggregate of all his periods of Continuous
Service prior to the Restatement Date;
(b) equals one (1) year for the Plan Year commencing
immediately prior to the Restatement Date, provided
that such Employee completed at least one thousand
(1,000) Hours for a Participating Company or an
Affiliate during said Plan Year; and
(c) equals the number of Plan Years, commencing on and
after the Restatement Date during which such Employee
completed at least one thousand (1,000) Hours for a
Participating Company or an Affiliate.
A Participant's Vesting Service shall exclude any years of Vesting Service
which a rehired Employee had prior to the date of his most recent Termination
of Employment, determined as of such date of Termination of Employment pursuant
to this Section 2.41 and this sentence provided that such rehired Employee:
(i) did not have a Vested Interest under this
Plan on such date of Termination of
Employment;
(ii) has had either five (5) consecutive One (1)
Year Breaks-In-Service since the last day of
such Vesting Service; and
(iii) the number of years of such Vesting Service
is less than or equal to the number of
consecutive One (1) Year Breaks-In-Service
which he had after the last day of such
Vesting Service.
20
<PAGE> 24
ARTICLE 3
---------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 CONTINUED PARTICIPATION OF PRIOR PARTICIPANTS. Every
Covered Employee employed at a facility of a Participating Company identified
in Article 20 who was a Participant in the Plan as constituted immediately
prior to the Restatement Date (or in the Ohio Mattress Company Profit Sharing
Plan prior to its merger with this Plan) shall become a Participant or continue
as a Participant under this Plan, as amended, and shall remain a Participant
until his Termination of Employment.
3.2 ELIGIBILITY OF NEW EMPLOYEES. Any other Covered
Employee employed at a facility of a Participating Company identified in
Article 20 shall be qualified to become a Participant under the Plan when he
has completed at least six (6) months of eligibility service.
For purposes of this Section 3.2, "eligibility service" shall
be the aggregate of all of an Employee's periods of employment. Each such
period of employment shall be measured from his Date of Hire to his following
date of Termination of Employment. In addition, if any Employee is rehired
within twelve (12) months of:
(1) the date of his Termination of Employment; or
(2) if earlier, the first day of any period of leave of
absence, layoff, or Military Service after the end of
which the Employee did not return to work for a
Participating Company prior to his Termination of
Employment;
21
<PAGE> 25
such Employee's eligibility service shall include the Period of Severance
measured from his date of Termination of Employment until his subsequent date
of rehire.
Two or more periods of employment or Periods of Severance that
are included in a Participant's eligibility service and that contain fractions
of a year (computed in months and days) shall be aggregated on the basis of
twelve (12) months constituting a year and thirty (30) days constituting a
month.
3.3 ENTRY DATES. Each Covered Employee who is eligible
to become a Participant on the Restatement Date shall become a Participant as
of that date. Each Covered Employee who may become eligible on or after the
Restatement Date but prior to December 1 1992 shall become a Participant as of
the first day of the Plan Year coinciding with or next following his
eligibility, if he then continues to be eligible. Each Covered Employee who
may become eligible on or after December 1, 1992 shall become a Participant as
of the June 1 or December 1 of the Plan Year coinciding with or next following
his eligibility, if he then continues to be eligible.
3.4 ACTIVE, INACTIVE AND REHIRED PARTICIPANT. A
Participant shall be considered to be an Active Participant as determined in
accordance with Article 2 of the Plan. If a Participant ceases to be a Covered
Employee but continues to be an Employee of a Participating Company or any
Affiliate, he will be an inactive Participant during such period of employment.
An inactive Participant who again becomes a Covered Employee shall become an
Active Participant immediately upon his again becoming a Covered
22
<PAGE> 26
Employee. In the event a Participant incurs a Termination of Employment, he
shall cease to be a Participant upon such Termination of Employment. If he is
later reemployed by a Participating Company, he shall again become a
Participant upon his date of rehire. If he becomes a Covered Employee upon his
date of rehire or thereafter, he shall become an Active Participant in this
Plan on the date he again becomes a Covered Employee. If a former Active
Participant again becomes an Active Participant, he shall become eligible to
make an immediate election pursuant to Section 4.1 to make deferred pay
contributions to the Plan effective in accordance with reasonable and uniform
procedures established by the Administrator.
23
<PAGE> 27
ARTICLE 4
---------
DEFERRED PAY OPTION
-------------------
4.1 ELECTION TO DEFER PAY. Pursuant to uniform rules and
procedures prescribed by the Plan Administrator, an Active Participant may
elect in writing that a stated whole percentage (such percentage being within
the limitations set forth in Section 4.2 hereof) of his unpaid Compensation for
a Taxable Year shall be paid by a Participating Company to the Trustee
hereunder and be treated as a contribution by the Participating Company. A
Participant's election hereunder shall be conditioned upon:
(a) his right to defer the imposition of federal income
tax on such deferred Compensation until a subsequent
distribution of such amount under this Plan; and
(b) the Participating Company's right to deduct such
amount for federal income tax purposes before taking
into account any contributions made by the
Participating Company under Article 5 hereof and
after taking into account any contributions made by
the Participating Company under any other profit
sharing, pension and stock bonus plans maintained by
a Participating Company which meet the requirements
of Section 401(a) of the Code.
4.2 PERCENTAGE LIMITATIONS. A Participant shall be
permitted to elect to have a Participating Company make contributions to this
Plan equal to any stated whole percentage of his for a Plan Year by means of a
Compensation reduction arrangement described in Section 4.1 hereof. The
minimum and maximum percentage which may be designated by a Participant shall
be determined by the Plan Administrator in its sole discretion. As of the
Restatement Date, a Participant may elect to defer
24
<PAGE> 28
between two percent (2%) and twelve percent (12%), inclusive, of his
Compensation for a Plan Year, subject to the dollar limit set forth in Section
6.2 hereof. The percentage designated by a Participant pursuant to this
Article 4 shall continue in effect until changed or revoked, notwithstanding
any changes in the amount of such Participant's Compensation.
4.3 PAYMENTS OF DEFERRALS TO TRUST. All amounts paid by
a Participating Company to the Trustee pursuant to Section 4.1 above shall be
paid in cash no later than the date on which such amounts can reasonably be
segregated from a Participating Company's general assets. In any event, such
amounts shall be paid to the Trustee not later than ninety (90) days after the
date on which such amount would otherwise have been payable to the Participant
in cash.
4.4 DEFERRED PAY ACCOUNT. Any amounts contributed by a
Participating Company pursuant to a Participant's election under Section 4.1
above shall be held by the Trustee as a part of the Trust Fund, shall be
specifically allocated to a Deferred Pay Account for the benefit of such
Participant and shall be invested and reinvested, valued and administered in
accordance with the terms of this Plan. Any amounts credited to a
Participant's Deferred Pay Account shall be fully vested and nonforfeitable at
all times.
4.5 CHANGES IN DEFERRED PAY ELECTIONS. A Participant may
change the percentage of his Compensation to be contributed to this Plan
pursuant to Section 4.1 hereof by providing such notice
25
<PAGE> 29
as the Plan Administrator shall in its sole discretion require; provided,
however, that:
(a) on or after the Restatement Date but prior to June 1,
1992, each Participant may change such percentage
only once in each Plan Year, effective on the
December following such notice; and
(b) effective June 1, 1992, each Participant may change
such percentage no more than twice each Plan Year
effective the June 1 or December 1, whichever shall
first occur, after such notice.
Notwithstanding the foregoing, a Participant may suspend his deferred pay
contributions to this Plan at any time, by giving the Plan Administrator
appropriate notice of such suspension. In the event that a Participant
suspends his deferred pay contributions to this Plan, he may elect to
recommence making deferred pay contributions as follows:
(1) on or after the Restatement Date but prior to June 1,
1992, as of the December 1 following such suspension;
and
(2) effective on or after June 1, 1992, as of any June 1
or December 1 following such suspension.
26
<PAGE> 30
ARTICLE 5
---------
COMPANY CONTRIBUTIONS
---------------------
5.1 COMPANY CONTRIBUTION. For each Taxable Year, a
Participating Company may, not later than the last day upon which it may make a
contribution under this Plan and secure under the Code a deduction of such
contribution in the computation of its Federal income taxes for the Taxable
Year for which such payment is made, make a contribution in cash or other
property. The amount of each such contribution shall be approved, ratified or
confirmed by the Board of Directors of such Participating Company. At the time
the Participating Company pays the contribution to the Trustee, it shall
designate whether said contribution or a portion thereof is an employer profit
sharing contribution or an employer base contribution to be allocated as set
forth in Section 5.2 below.
5.2 ALLOCATION OF COMPANY CONTRIBUTION. A Participating
Company's contribution made pursuant to Section 5.1 above shall be allocated as
set forth below in Section 5.3 among either the Profit Sharing Accounts or
Employer Base Accounts of:
(a) each Participant who:
(i) was an Active Participant on the Allocation
Date coinciding with the last day of the
Plan Year; and
(ii) completed at least one thousand (1,000) Hours
during such Plan Year; and
(b) each Participant who:
(i) ceased to be an Active Participant on the
Allocation Date coinciding with the last
day of the Plan Year; and
27
<PAGE> 31
(ii) completed at least one thousand (1,000) Hours
during such Plan Year; and
(c) each Participant who:
(i) on or after the Restatement Date but prior to
June 1, 1990, retired from a position as an
Active Participant during the Plan Year; and
(ii) on or after June 1, 1990, died, became
disabled or retired after having attained his
early or normal retirement date during the
Plan Year, provided such Participant died,
became disabled or retired from a position as
an Active Participant and completed at least
one thousand (1,000) Hours during such Plan
Year.
Except as set forth in paragraph (c) above and Article 19 hereof, the Profit
Sharing Accounts and Employer Base Accounts of Participants whose employment
terminated prior to such Allocation Date shall not be allocated any portion of
said contribution.
5.3 EMPLOYER PROFIT SHARING CONTRIBUTIONS AND BASE
CONTRIBUTIONS. The Profit Sharing Account of each Participant eligible to
receive an allocation of the contributions made pursuant to Section 5.1 hereof
and designated as an employer profit sharing contribution shall be credited
with that portion of the Participating Company's contribution (after the
deduction of expenses of administering this Plan and the Trust pursuant to
Section 3.9 of the Trust Agreement, if applicable) for such Plan Year which
bears the same relationship to the Participating Company's contribution as such
Participant's Compensation during such Plan Year bears to the total
Compensation of all such Participants employed by such Participating Company
during such Plan Year whose Profit Sharing Accounts are eligible to receive
such an allocation.
28
<PAGE> 32
A Participating Company's contribution which has been
designated as an employer base contribution pursuant to Section 5.1 above shall
be allocated to the Employer Base Account of each Participant who is eligible
to receive an allocation as set forth above in Section 5.2 in an amount equal
to that portion of the contribution which is allocated as set forth above in
the first paragraph of this Section 5.3.
Amounts credited to a Participant's Profit Sharing Account
shall be subject to the vesting schedule set forth in Article 2 hereof.
Amounts credited to a Participant's Employer Base Account shall be fully vested
and nonforfeitable at all times.
5.4 TIMING OF ALLOCATIONS. The amounts allocated to any
Participant's Profit Sharing Account or Employer Base Account under this
Article 5 shall for all purposes be deemed to have been credited not later than
the Allocation Date which occurred within the Plan Year as to which the
contributions were made.
29
<PAGE> 33
ARTICLE 6
---------
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
--------------------------------------------
6.1 CONTRIBUTIONS ARE SUBJECT TO LIMITATIONS. The amount
and allocation of contributions and the allocation of forfeitures under this
Plan shall be subject to several limitations. Those limitations shall be as
follows:
(a) deferred pay contributions made to the Plan pursuant
to a Participant's deferral election under Article 4
of the Plan shall be subject to the individual dollar
limit described in Section 6.2 hereof;
(b) deferred pay contributions made to the Plan pursuant
to a Participant's deferral election under Article 4
of the Plan and the employer base contributions made
to the Plan pursuant to Article 5 hereof shall be
subject to the deferral percentage limit set forth in
Section 6.3 hereof;
(c) All contributions made pursuant to Article 4 and
Article 5 of the Plan shall, in the aggregate, be
subject to the deductibility limit set forth in
Section 6.4 hereof; and
(d) The allocation of all of the foregoing contributions
and the allocation of all forfeitures shall, in the
aggregate, be subject to the limitation on Annual
Additions set forth in Article 21 hereof.
6.2 THE DOLLAR LIMIT. The amount of the Participating
Company contribution under Article 4 of the Plan with respect to the taxable
year of a Participant made pursuant to a Participant's deferral election plus
similar amounts contributed on a similar basis by any other employer (whether
or not related to a Participating Company) required by law to be aggregated
with such contributions under this Plan shall not exceed Seven Thousand Dollars
($7,000.00) plus any increase for cost-of-living as
30
<PAGE> 34
determined from time to time pursuant to regulations issued by the Secretary of
the Treasury or his delegate pursuant to Section 415(d) of the Code. In the
event that the contributions pursuant to Section 4.1 of the Plan for a
Participant's taxable year exceed such limit, the excess contributions together
with any earnings allocable to such excess contributions shall be refunded to
the Participant by the April 15th next following the close of such taxable
year. The amount of any such refund shall be debited to the Participant's
Deferred Pay Account.
In the event that the Plan Administrator shall receive notice
from a Participant by the March 1 next following the close of a Participant's
taxable year that the contributions on behalf of the Participant under Section
4.1 hereof together with similar contributions under plans of other employers
shall have exceeded such limit, the Plan Administrator shall cause the amount
of excess contributions specified by the Participant together with any earnings
allocable to such excess contributions to be refunded to the Participant by the
April 15th next following the receipt of such notice. The amount of any such
refund shall be debited to the Participant's Deferred Pay Account.
6.3 DEFERRAL PERCENTAGE LIMIT. The contributions made
for a Plan Year pursuant to an Active Participant's deferral election under
Section 4.1 hereof shall be limited so that the average deferral percentage for
the Active Participants who are Highly Compensated Employees shall not exceed
an amount determined based upon the average deferral percentage for the Active
Participants who are not Highly Compensated Employees, as follows:
31
<PAGE> 35
<TABLE>
<CAPTION>
(A) (B)
Average Deferral Limit on Average
Percentage for Deferral Percentage for
Active Participants who Highly Compensated
are not Highly Active Participants
Compensated -----------------------
-----------------------
<S> <C>
Less than 2% 2 times Column (A)
2% or more but less than 8% Column (A) plus 2%
8% or more 1.25 times Column (A)
</TABLE>
For purposes of the foregoing, the "deferral percentage" for an Active
Participant for any Plan Year shall equal a fraction, the numerator of which
shall equal the total of the employee deferred pay contributions made on his
behalf for such Plan Year pursuant to Article 4 hereof plus, the employer base
contributions made on his behalf for such Plan Year pursuant to Article 5
hereof and the denominator of which shall equal his Testing Compensation for
such Plan Year.
6.4 DEDUCTIBILITY LIMIT. In no event shall the amount of
all contributions by a Participating Company pursuant to Article 5 hereof,
together with all amounts contributed by such Participating Company to the
Trustee pursuant to Participants' elections under Section 4.1 hereof, exceed
the maximum amount allowable as a deduction under Section 404(a)(3) of the Code
or any statute of similar import, including the amount of any contribution
carryforward allowable under said Section 404(a)(3). This limitation shall not
apply to contributions which may be required in order to provide the minimum
contributions described in Article 17 for any Plan Year in which this Plan is
top-heavy. Nor shall this limitation apply to contributions which may be
required in order to recredit the Account of any rehired Participant whose
32
<PAGE> 36
Account is to be recredited with previously forfeited amounts as described in
Section 9.5 hereof.
6.5 CORRECTING EXCESS CONTRIBUTIONS. In the event that
the limitations set forth in Sections 6.2 or 6.3 shall be exceeded, the Plan
Administrator shall take action to reduce future contributions made pursuant to
Section 4.1 and Article 5 hereof as appropriate. Such action may include a
reduction in the future rate of deferral pursuant to Section 4.1 hereof of any
Participant who is a Highly Compensated Employee pursuant to any legally
permissible procedure. In the event that such action shall fail to prevent the
excess, prior contributions made pursuant to Section 4.1 hereof shall be
distributed to the Participant on whose behalf such contribution was made. In
the event that distributions must be made in order to bring the Plan into
compliance with Section 6.3 or 6.4 hereof, the Plan Administrator shall reduce
the deferral percentage of Participants who are Highly Compensated Employees in
descending order, beginning with the highly compensated participant(s) with the
highest deferral percentage, until such limitations have been satisfied. In
performing such reduction, the reduced deferral percentage of any affected
Participant who is a Highly Compensated Employee shall in no event be lower
than that of the highly compensated participant with the next highest deferral
percentage. Any Participant whose deferral percentage is reduced pursuant to
this Section 6.5 for any Plan Year shall have the portion of the amounts
contributed pursuant to Section 4.1 hereof for such Plan Year which exceeds
such reduced percentage plus any income allocable to such excess contributions
during such Plan Year
33
<PAGE> 37
distributed to him within two and one-half (2-1/2) months after the end of such
Plan Year. For purposes of adjusting excess contributions to take into account
income and losses during the Plan Year, the income or loss shall be allocated
in accordance with the procedures for the allocation of income and loss as set
forth in Article 8 hereof. In the event that the contribution percentage of
any Participant who is a Highly Compensated Employee must be reduced in order
to bring the Plan into compliance with Section 6.5 hereof, the same procedure
as is set forth above for reducing Participants' deferral percentages shall
apply in reducing their contribution percentages. Any adjustments made in
Deferred Pay Accounts shall be made in a uniform manner for similarly situated
Participants.
34
<PAGE> 38
ARTICLE 7
---------
INVESTMENT FUNDS AND DIRECTION OF INVESTMENT
--------------------------------------------
7.1 PERMITTED INVESTMENTS BY PARTICIPANTS. The Plan
Administrator may, in its sole discretion, from time to time, direct that
Participants, former Participants and Beneficiaries be permitted to direct the
investment of any or all their Profit Sharing Accounts, Employer Base Accounts,
Deferred Pay Accounts, Rollover Accounts and Distributable Accounts under the
Plan in such investment media, whether limited or unlimited, as shall be
designated by the Plan Administrator, from time to time, subject to the
limitations hereinafter set forth in this Article 7. Any direction of the Plan
Administrator pursuant to this Section 7.1 shall apply to all Participants,
former Participants and Beneficiaries in a uniform and nondiscriminatory
manner. In the event the Plan Administrator directs that Participants be
permitted to direct the investment of any such Accounts, the Plan Administrator
shall notify the Participants, former Participants and Beneficiaries of such
fact. To the extent that any Participant, former Participant or Beneficiary
fails to give investment directions to the Trustee, amounts credited to any
such Accounts shall be invested in accordance with the direction of the Plan
Administrator. If the Company shall determine that the Plan should comply with
the provisions of Section 404(c) of ERISA insofar as is practical, it shall
direct that appropriate steps be taken in furtherance thereof.
35
<PAGE> 39
7.2 INVESTMENT FUNDS. The investment funds which may be
selected by the Company shall include, but not be limited to, the following:
(a) Money Market Funds;
(b) Mutual Funds;
(c) Equity Funds;
(d) Fixed Income Funds;
(e) Any pooled investment fund established by a bank;
(f) Any insurance company's general account; and
(g) Any special account established and maintained by
any insurance company.
The Company shall have the sole discretion to determine the number of
investment funds to be maintained hereunder and the nature of the funds and may
change or eliminate the funds provided hereunder from time to time, except that
on or after January 1, 1994, the number of such funds shall not be less than
three (3), and of the funds selected, at least three (3) shall be diversified
and have materially different risk and return characteristics, as determined by
the Company.
Effective as of June 1, 1990, investments shall be made in
certain collective trust funds of IDS Trust Company, now known as American
Express Trust Company, and certain mutual funds of IDS Trust Company, now known
as American Express Trust Company.
7.3 INVESTMENT DIRECTIONS. A Participant, former
Participant or Beneficiary shall, by appropriate direction to the Trustee,
acceptable in form and manner to the Plan Administrator and the Trustee, direct
the investment of amounts contributed on
36
<PAGE> 40
his behalf in such funds, as noted in Section 7.2, as may be provided by the
Plan Administrator. In doing so, any such individual's investment elections
shall be made in accordance with such rules as are established by the Plan
Administrator from time to time in its sole discretion. Any rules established
by the Plan Administrator pursuant to this Section 7.3 shall apply to all
Participants, former Participants and Beneficiaries in a uniform and
nondiscriminatory manner. In the event that a Participant, former Participant
or Beneficiary does not direct the investment of amounts credited to his
Accounts, such amounts shall be invested in a default fund designated by the
Company.
Notwithstanding anything to the contrary in this Article 7,
the Company, Plan Administrator and Trustee may decline to follow any
investment direction which, if implemented:
(a) would not be in accordance with the Plan documents;
(b) would cause the indicia of ownership of Plan assets
to be maintained outside the jurisdiction of the
United States District Courts;
(c) would jeopardize this Plan's tax-qualified status;
(d) could result in a loss in excess of the balance of
the Participant's, former Participant's, or
Beneficiary's Accounts;
(e) would cause this Plan to engage in:
(i) a sale or exchange with a Participating
Company or Affiliate (except as with respect
to certain qualifying employer securities as
defined in Section 407(d)(5) of ERISA which
meet the requirements of Section 408(e) of
ERISA and 29 CFR Section
2550.404c-1(d)(2)(ii)(E)(4));
(ii) a lease between this Plan and a Participating
Company or Affiliate or a loan to a
Participating Company or Affiliate;
37
<PAGE> 41
(iii) acquisition or sale of real property of a
Participating Company or Affiliate; or
(iv) acquisition or sale of securities of a
Participating Company or Affiliate other than
certain qualifying employer securities as
defined in Section 407(d)(5) of ERISA which
meet the requirements of Section 408(e) of
ERISA and 29 CFR Section
2550.404c-1(d)(2)(ii)(E)(4);
(f) would result in a prohibited transaction within the
meaning of Section 4975 of the Code or Section 406
of ERISA; or
(g) would generate income taxable to this Plan.
7.4 CHANGES IN INVESTMENT DIRECTIONS. All directions as
to the investment of his Accounts by a Participant, former Participant or
Beneficiary shall be deemed to be continuing directions until they shall have
been changed. A Participant, former Participant or Beneficiary may change his
direction of investment in any of the funds designated by the Plan
Administrator pursuant to Section 7.2 above by providing such notice as the
Plan Administrator, in its sole discretion, shall require. Effective as of
June 1, 1990, such changes may be made during any business day of any Plan
Year.
7.5 VALUATION OF INVESTMENT FUNDS. Any fund established
pursuant to this Article 7 shall be valued and adjusted according to the
procedures set forth in Article 8 hereof as a separate Trust Fund. It is
intended that this Section 7.5 operate to adjust each investment fund to
reflect all income attributable to each such fund and changes in the value of
each such fund's assets, as the case may be, along with contributions received
and distributions made as of any Valuation Date.
38
<PAGE> 42
7.6 CESSATION OF DIRECTED INVESTMENTS BY PARTICIPANTS.
Pursuant to uniform and nondiscriminatory rules, the Plan Administrator may
direct that the Accounts of Participants previously directed for investment
purposes by Participants shall cease to be so directed, effective as of a date
specified by the Plan Administrator. As of the date immediately preceding the
date as of which such Accounts shall cease to be directed for investment
purposes by Participants, the Trustee shall value the assets of the Accounts
pursuant to Section 7.5 hereof and credit or debit such Accounts with any gain
or loss in the value of the assets of said Accounts since the most recent prior
Valuation Date. Upon completion of said valuation and adjustment of Accounts,
the Accounts shall cease to have specific assets allocated to them and shall
thereafter be adjusted as provided in Article 8 hereof.
39
<PAGE> 43
ARTICLE 8
---------
ACCOUNTS
--------
8.1 DESIGNATION OF DIFFERENT ACCOUNTS. Accounts being
maintained under the Plan immediately prior to June 1, 1990 shall continue to
be maintained under the Plan as amended and restated herein, and shall be
credited, debited and adjusted as provided in this Plan. Such Accounts shall
be categorized, as of June 1, 1990 and thereafter, as follows:
(a) If such Account had been credited with a
Participant's voluntary after-tax contributions, such
Account shall be deemed to be an Employee After-Tax
Account;
(b) If such Account had been credited with employee
elective (salary deferral) contributions, such
Account shall be deemed to be a Deferred Pay Account;
(c) If such Account had been credited with employer
profit sharing contributions pursuant to Section 5.1,
such Account shall be deemed to be a Profit Sharing
Account;
(d) If such Account had been credited with employer base
contributions pursuant to Section 5.1, such Account
shall be deemed to be an Employer Base Account;
(e) If such Account had been credited with amounts
transferred from another tax qualified retirement
plan, such Account shall be deemed to be a Rollover
Account;
(f) If such Account had been credited with employer
profit sharing contributions pursuant to Section 5.1
and the Participant had retired, died, become
disabled or terminated his employment, such Account
shall be deemed to be a Distributable Account.
8.2 ESTABLISHMENT OF ACCOUNTS. Upon an Employee becoming
a Participant the Plan Administrator shall notify the
40
<PAGE> 44
Trustee and provide the Trustee with such information concerning said
Participant as the Trustee may need. Upon being notified by the Plan
Administrator that an Employee has become a Participant, the Trustee shall
establish a Profit Sharing Account an Employer Base Account and, if the
Participant has elected to defer a portion of his Compensation into the Plan
pursuant to Article 4 hereof, a Deferred Pay Account in the name of such
Participant. A Profit Sharing Account or an Employer Base Account established
on behalf of a new Participant shall be deemed to have been established on the
date upon which or as of which such Participant became a Participant.
8.3 CREDITS AND DEBITS TO ACCOUNTS. Said Accounts shall
be credited with contributions in the amounts specified in Articles 4 and 5
hereof, shall be credited or debited with the income, gains or losses of the
Trust Fund pursuant to this Article 8, and shall be debited with the amount of
any distributions made from such Accounts pursuant to Articles 9, 10, 11 or 12
hereof. All such credits and debits to the Accounts of a Participant shall be
made as of the dates specified in the appropriate Sections of this Plan.
8.4 VALUATION PROCEDURE FOR ACCOUNTS ON AND AFTER JUNE 1,
1990. Effective June 1, 1990, the Trustee shall, following the end of each
business day, evaluate all assets of the Trust Fund as of that business day in
the following manner. For the purposes of valuation of the Trust Fund and
distribution of the accrued vested benefit of each Participant, Valuation Date
shall mean each business day of the Plan Year:
41
<PAGE> 45
(a) The Trustee shall first compute the fair market value
of securities and/or the other assets in each
investment fund, designated by the Plan Administrator
pursuant to Section 7.2 for direction of investment
by the Participants of this Plan. This market value
shall be equal to the market price of the fund on the
prior business day applied to the balance of the fund
as of the close of business on the current business
day.
(b) The Trustee shall then account for any requests for
additions or withdrawals made to or from a specific
designated investment fund by any Participant,
including allocations of employer contributions and
forfeitures made as of the Allocation Date as defined
in Section 2.4, and received by the Trustee prior to
3:00 P.M. Central Time on such business day.
(c) The Trustee shall, following the computation of the
fair market value of the accounting for additions or
withdrawals from each specific investment fund,
compute each Participant's share in the fund and
assign a gain or loss to each Participant's Account.
Such adjustments in the amounts credited to such Accounts
shall be deemed to have been made on the business day to which the investment
activity relates. It is intended that this Section 8.4 operate to distribute
among each Participant Account in the Trust Fund, all income of the Trust Fund
and changes in the value of the Trust Fund's assets. Adjustments in each
Participant Account resulting from the daily valuation of the Trust Fund as of
any daily Valuation Date shall be made, subject to the requirements that no
employer profit sharing contribution or employer base contribution made by a
Participating Company pursuant to Article 5 hereof shall be taken into account
until the Allocation Date coinciding with or next following the date such
contribution was both actually paid to the Trustee by a Participating Company
and allocated among the Accounts of Participants pursuant to Article 5.
42
<PAGE> 46
8.5 VALUATION PROCEDURE FOR ACCOUNTS PRIOR TO JUNE 1,
1990. Effective as of the Restatement Date but prior to June 1, 1990, the
Trustee shall, as soon as practicable following each Allocation Date, and on
such other dates as the Plan Administrator may in its sole discretion designate
pursuant to Section 8.6 hereof, evaluate all assets of the Trust Fund as of
such Valuation Date. The Trustee shall use the fair market values of
securities or other assets in making said determination. The Trustee shall
then subtract from the total value of the assets of said Trust Fund the total
of all Accounts as of said Valuation Date. Each such Account shall be credited
with that portion of the excess of the value of the assets over the total of
all such Accounts which bears the same relationship to the total of such excess
as the amount in said Account bears to the total of all Accounts. The amount
credited to each Account shall be reduced in similar proportion in the event
the total of all Accounts as of said date exceeds the total value of all assets
of the Trust Fund as of said Valuation Date. Such adjustments in the amounts
credited to such Accounts shall be deemed to have been made on said Valuation
Date. It is intended that this Section 8.5 operate to either (1) distribute
among all such Accounts in the Trust Fund, all income of the Trust Fund and
changes in the value of the Trust Fund's assets or, (2) if separate investment
funds have been established pursuant to Article 7 above, distribute among all
such Accounts in such separate investment fund, all the income of such
investment fund and changes in the value of such investment fund, as the case
may be. Adjustments in Accounts resulting from the valuation of the assets
43
<PAGE> 47
of the Trust Fund as of any Valuation Date shall be made subject to the
following:
(a) in determining the amount credited to the Employee
Deferred Pay Account of a Participant, all payments
made to such Account since the previous Valuation
Date shall be taken into account in allocating the
changes in the value of the Trust Fund's assets by
adjusting the value of the Account to which such
contributions were made in the following manner:
(i) determine the amount credited to such Account
as of the most recent previous Valuation Date
and as of the current Valuation Date;
(ii) add together the amounts determined in
paragraph (i) for each such Account; and
(iii) determine the average Account balance for
each such Account by dividing the amount
determined in paragraph (ii) for each such
Account by two (2);
(b) no employer profit sharing contribution or employer
base contribution made by a Participating Company
pursuant to Article 5 hereof shall be taken into
account until the Allocation Date coinciding with or
next following the date such contribution was both
actually paid to the Trustee by a Participating
Company and allocated among the Accounts of
Participants pursuant to Article 5 hereof; and
(c) in determining the amount credited to the Rollover
Account of a Participant, if any, all payments made
to such Account since the previous Valuation Date
shall be taken into account in allocating the changes
in the value of the Trust Fund's assets by adjusting
the value of the Account to which such contribution
was made in the following manner:
(i) determine the amount credited to such Account
as of the most recent previous Allocation
Date and at the end of each calendar month
thereafter;
(ii) add together the amounts determined in
paragraph (i) for each such Account; and
(iii) determine the average Account balance for
each such Account by dividing the amount
determined
44
<PAGE> 48
in paragraph (ii) for each such Account by the
number of amounts which were added together.
8.6 DISCRETIONARY INTERIM VALUATIONS. In addition to or
in lieu of the Valuation Dates set forth in Section 8.5 hereof and for the
period commencing on the Restatement Date and ending on May 31, 1990, the Plan
Administrator, in its sole discretion, may instruct the Trustee to make an
interim valuation of assets of the Trust Fund. In exercising its discretion as
to whether to instruct the Trustee to evaluate the assets of the Trust Fund,
the Plan Administrator shall consider the following factors:
(a) the expense of any such interim valuation;
(b) the length of time involved in making any such
interim valuation and the resulting delay in making
any distributions from the Trust Fund;
(c) the magnitude of the estimated change in the value of
the assets of the Trust Fund; and
(d) the size of any distribution or distributions
involved.
Upon instruction by the Plan Administrator, the Trustee shall evaluate the
assets of the Trust Fund and adjust all the Accounts of the Plan in accordance
with the methods and procedures contained in Section 8.5 hereof as of the date
specified by the Plan Administrator.
45
<PAGE> 49
ARTICLE 9
---------
VESTING
-------
9.1 ELIGIBILITY FOR DISTRIBUTION OF VESTED INTEREST. In
the event of the Termination of Employment of a Participant for any reason
other than death, disability, or retirement, he shall be entitled to receive a
distribution of his Vested Interest.
9.2 COMMENCEMENT OF DISTRIBUTION. The Vested Interest of
a terminated Participant shall be distributed to him in accordance with the
rules and procedures set forth in Article 12 hereof. Such distribution shall
be made or shall commence to be made within sixty (60) days after the close of
the Plan Year which includes his Normal Retirement Date, unless such terminated
Participant selects an earlier date which is administratively reasonable.
Notwithstanding the foregoing, a Participant may elect to defer his
distribution to a later date in accordance with Section 12.1 hereof.
9.3 AMOUNTS CREDITED TO DISTRIBUTABLE ACCOUNT;
FORFEITURES. If a terminated Participant's Vested Percentage is 100%, his
Profit Sharing Account shall be deemed to have become a Distributable Account
on his date of Termination of Employment and shall thereafter be held,
administered and distributed in accordance with Article 12 hereof. If his
Vested Percentage is less than one hundred percent (100%), his Profit Sharing
Account shall continue to be administered as such and shall be revalued
periodically in accordance with the provisions of Article 8 hereof until the
earliest to occur of any of the following events:
46
<PAGE> 50
(a) he has received a distribution of his entire Vested
Interest;
(b) he has incurred five (5) consecutive One (1) Year
Breaks-In-Service;
(c) he dies; or
(d) he is rehired by a Participating Company or any
Affiliate.
If the earliest to occur of said events is either his having
received a distribution of his entire Vested Interest, his having incurred five
(5) consecutive One Year Breaks-In-Service or his death, an amount equal to the
excess of:
(i) the balance in his Profit Sharing Account
plus the amount, if any, then credited to any
Deferred Pay, Employer Base, Rollover and
Distributable Accounts held for his benefit;
over
(ii) his Vested Interest;
shall be forfeited as of such date and shall be debited to his Profit Sharing
Account. If any amounts remain credited to said Account after said forfeiture,
it shall thereafter be deemed to have become a Distributable Account and shall
be held, administered and distributed in accordance with Article 12 hereof.
If a terminated Participant does not have a Vested Interest,
he will be deemed, for purposes of Section 9.3(a) above, to have received a
distribution of his entire Vested Interest as of the date of his Termination of
Employment.
If the earliest of said events shall be the terminated
Participant's rehire by a Participating Company or any Affiliate, he shall
immediately be reinstated as a Participant in this Plan
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and this Article 9 shall not apply to him until a subsequent Termination of
Employment described in Section 9.1.
9.4 ALLOCATION OF FORFEITURES. The amounts forfeited
pursuant to Section 9.3 hereof shall, on the Allocation Date coinciding with
or next following the date of forfeiture be allocated among the profit Sharing
Accounts of:
(a) each Participant who:
(i) was an Active Participant on the Allocation
Date coinciding with the last day of the
Plan Year; and
(ii) completed at least one thousand (1,000) Hours
during such Plan Year; and
(b) each Participant who:
(i) ceased to be an Active Participant on the
Allocation Date coinciding with the last day
of the Plan Year; and
(ii) completed at least one thousand (1,000) Hours
during such Plan Year.
The Profit Sharing Accounts of Participants whose Termination of Employment was
prior to such Allocation Date shall not be allocated any portion of such
forfeitures.
Each such Profit Sharing Account shall be credited with the
portion of the value of the forfeitures which bears the same relationship to
the total of the forfeitures as each such Participant's Compensation from a
Participating Company during the year of forfeiture bears to the total of all
such Participants' Compensation from such Participating Company during the year
of forfeiture whose Profit Sharing Accounts are eligible to receive such an
allocation. No forfeitures shall be allocated to the Profit Sharing Account of
any Participant in excess of the
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limitations on Annual Additions set forth in Article 21 hereof. Allocation of
forfeitures shall be made prior to the valuations provided for in Article 8.
9.5 RECREDITING FORFEITED AMOUNTS OF REHIRED
PARTICIPANTS. In the event a terminated Participant is rehired by the Company
or any Affiliate prior to incurring five (5) consecutive One (1) Year
Breaks-In-Service, he shall immediately be reinstated as a Participant in this
Plan and any amounts forfeited pursuant to Section 9.3 above shall be
recredited to his Profit Sharing Account on his date of rehire, provided that
such Participant recontributes to this Plan on or before the first to occur of:
(a) the date he incurs five (5) consecutive One (1) Year
Breaks-In-Service; and
(b) the fifth (5th) anniversary of his date of rehire;
the full amount distributed to him following his earlier Termination of
Employment. Such amount shall be recredited to the Account from which it was
distributed. For purposes of this Section 9.5, if a rehired Participant did
not have a Vested Interest at the time of his prior Termination of Employment,
and was deemed for purposes of Section 9.3 hereof to have received a
distribution of his entire Vested Interest as of the date of such Termination
of Employment, he shall be deemed to have recontributed such entire Vested
Interest as of his date of rehire, provided such date of rehire is timely as
hereinbefore provided in this Section 9.5.
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Notwithstanding any other provision of this Plan to the
contrary, in order to balance the Accounts maintained under this Plan after
giving effect to the recrediting of previously forfeited amounts to a rehired
Participant's Profit Sharing Account, a Participating Company may, at its
option, direct the Trustee to:
(i) first reduce the value of the forfeitures, if any,
which would otherwise be reallocated as of the
Allocation Date coinciding with or next following the
date such Participant was rehired, or, if later, the
Plan Year in which he recontributed his prior
distribution as hereinbefore provided; and
(ii) in the event the Accounts maintained under this Plan
are not balanced after the reduction in (i) above,
reduce the gain, if any, in the value of the Plan's
assets since the most recent Valuation Date as of the
Valuation Date coinciding with or next following the
date such Participant was rehired, or, if later, the
Plan Year in which he recontributed his prior
distribution as hereinbefore provided and coinciding
with or following the date such Participant was
rehired, or made such recontribution; or
(iii) take some combination of the actions described in (a)
and (b) above as the Company shall, in its sole
discretion, determine;
provided that the total of the reductions described in (i) and (ii) above with
respect to any Plan Year shall not exceed the aggregate previously forfeited
amounts which were recredited to the Profit Sharing Accounts of Participants
who were rehired during such Plan Year.
To the extent that the sum of the amounts described in (i),
(ii) and (iii) above for any Plan Year is less than the aggregate previously
forfeited amounts which were recredited to the Profit Sharing Accounts of
Participants who were rehired during the Plan Year, the Plan Administrator
shall direct one or more of the
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Participating Companies to contribute to this Plan an amount equal to the
difference between the aggregate previously forfeited amounts which were
recredited to the Profit Sharing Accounts of Participants who were rehired
during the Plan Year and the sum of the amounts described in (i), (ii) and
(iii) above. Such contribution shall be made by the Participating Companies no
later than the due date (including extensions) of their tax return for the
Taxable Year during which such Participants were rehired. In addition, any
portion of such contribution which represents amounts previously contributed by
a Participating Company to this Plan shall not be deemed to have been
contributed for purposes of Article 21 hereof at the time it is recontributed,
but shall be deemed to have been contributed at the time of the original
contribution.
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ARTICLE 10
----------
RETIREMENT BENEFITS
-------------------
10.1 NORMAL RETIREMENT DISTRIBUTIONS. The Profit Sharing
Account of a Participant who has attained his Normal Retirement Date shall be
fully vested and nonforfeitable. A Participant who retires on his Normal
Retirement Date shall be entitled to receive an amount equal to the sum of the
amounts then credited to all Accounts held for his benefit. Unless a
Participant elects to defer his distribution pursuant to Section 12.1 hereof,
such amounts shall be distributed or shall commence to be distributed within
sixty (60) days after the close of the Plan Year which includes the date of his
retirement. Such distribution shall be made in accordance with the provisions
of Article 12 hereof. Effective June 1, 1990, a Participant who has attained
his Normal Retirement Date shall have the right, prior to Termination of
Employment, to receive an amount equal to the sum of the amounts then credited
to all Accounts held for his benefit. This right may be exercised only once.
Such distribution shall be made in accordance with the provisions of Article 12
hereof.
10.2 EARLY RETIREMENT DISTRIBUTIONS. A Participant may
elect to retire before reaching his Normal Retirement Date, but not before the
later of his attainment of age fifty-five (55) and his completion of ten (10)
years of Vesting Service. In the event of such early retirement, a Participant
shall be deemed to have retired upon the date of his Termination of Employment
with a Participating Company or any Affiliate. Such Participant shall be
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entitled to receive an amount equal to the sum of the amounts then credited to
all Accounts held for his benefit. Unless a Participant elects to defer his
distribution pursuant to Section 12.1 hereof, amounts shall be distributed or
shall commence to be distributed on such date on or after his early retirement
date but no later than his Normal Retirement Date as such retired Participant
shall select. Such distribution shall be made in accordance with the
provisions of Article 12 hereof.
10.3 LATE RETIREMENT DISTRIBUTIONS. In the event a
Participant works beyond his Normal Retirement Date, his retirement shall be
deemed to have occurred on the date of his Termination of Employment with a
Participating Company or any Affiliate for any reason other than death. In the
event of such late retirement, such Participant shall be entitled to receive
the amounts credited to his Accounts. Unless a Participant elects to defer his
distribution pursuant to Section 12.1 hereof, such amounts shall be distributed
or shall commence to be distributed within sixty (60) days after the close of
the Plan Year which includes his date of late retirement. Such distribution
shall be made in accordance with the provisions of Article 12 hereof.
10.4 DISABILITY DISTRIBUTIONS. Upon receipt from a
Participant or a person authorized by him or on his behalf of a request that
distributions be made on account of such Participant's Disability, or upon its
motion, the Plan Administrator shall determine the extent of the Participant's
Disability, and may to assist it in making such determination cause appropriate
medical diagnoses and tests to be made at the expense of the Participating
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Company. If the Plan Administrator shall determine that the Participant is
disabled, as defined in Section 2.14 hereof, his date of disability retirement
shall be deemed to have been the date on which his application for benefits
under this Section 10.4 was filed with the Plan Administrator and he will be
deemed to have ceased to be a Participant on that date. Such a disabled
Participant shall be entitled to receive an amount equal to the sum of the
amounts then credited to all Accounts held for his benefit. Unless a
Participant elects to defer his distribution pursuant to Section 12.1 hereof,
such amounts shall be distributed or shall commence to be distributed within
sixty (60) days after the close of the Plan Year which includes his Normal
Retirement Date or such earlier date as the Participant shall elect, but not
earlier than as soon as reasonably possible following the later of the date
such Participant has a Termination of Employment or the date upon which it is
determined that the Participant is disabled. Such distribution shall be made
in accordance with the provisions of Article 12 hereof.
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ARTICLE 11
----------
DEATH BENEFITS
--------------
11.1 DISTRIBUTION UPON DEATH OF ACTIVE PARTICIPANT. In
the event of the Termination of Employment of a Participant by reason of his
death, his death Beneficiary shall be entitled to receive a distribution
commencing within sixty (60) days after the close of the Plan Year in which his
death occurs, unless such Beneficiary defers the distribution until a later
date pursuant to Section 12.1 hereof. The amount of such distribution shall be
equal to the amount then credited to all of the deceased Participant's
Accounts. As of the date of death of a Participant his Profit Sharing Account
shall be deemed to have become a Distributable Account and shall thereafter be
held, administered and distributed in accordance with Article 12 hereof.
11.2 DISTRIBUTION UPON DEATH OF RETIRED OR TERMINATED
PARTICIPANT BEFORE DISTRIBUTION IS MADE. In the event of the death of a
retired or terminated Participant prior to the date distribution has been made
or commenced to be made to him, his death Beneficiary shall be entitled to
receive a distribution commencing within sixty (60) days after the close of the
Plan Year in which his death occurs, unless such Beneficiary defers the
distribution until a later date pursuant to Section 12.1 hereof. The amount of
such distribution shall be equal to the sum of the amounts then credited to all
Accounts then held for such terminated or retired Participant's benefit. Such
distribution shall be made in accordance with the provisions of Article 12
hereof.
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11.3 DISTRIBUTION UPON DEATH OF RETIRED OR TERMINATED
PARTICIPANT AFTER DISTRIBUTION HAS BEEN MADE. In the event of the death of a
retired or terminated Participant after the date of distribution or the
commencement of distribution to him, no benefits shall be payable to his
Beneficiary except to the extent provided for by the method under which the
retired or terminated Participant was receiving distributions under Article 12
hereof.
11.4 AUTOMATIC DEATH BENEFICIARIES IN ABSENCE OF
DESIGNATION. Unless a Participant or former Participant has designated a death
Beneficiary in accordance with the provisions of Section 11.5 hereof, his death
Beneficiary shall be deemed to be the person or persons in the first of the
following classes in which there are any survivors of such Participant:
(a) his spouse at the time of his death;
(b) his issue per stirpes; and
(c) the executor or administrator of his estate.
11.5 DESIGNATION OF BENEFICIARY. In lieu of having the
amounts distributable pursuant to this Article 11 distributed to a death
Beneficiary determined in accordance with the provisions of Section 11.4
hereof, a Participant or former Participant may sign a document designating a
death Beneficiary or death Beneficiaries to receive such amounts. If the
Participant is married, any such designation shall be effective only if the
spouse of the Participant is the sole primary Beneficiary or consents to such
designation in accordance with Section 22.6 hereof.
11.6 TRANSMITTAL OF IDENTITY OF DEATH BENEFICIARY TO
TRUSTEE. Upon the death of a Participant or a former Participant,
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the Plan Administrator shall immediately advise the Trustee of the identity of
such Participant's death Beneficiary or Beneficiaries. The Trustee shall be
completely protected in making payments to any person or persons in any sums in
accordance with the instructions it receives from the Plan Administrator.
11.7 EFFECT OF INCOMPLETE OR LACK OF DESIGNATION. In the
event that a Participant or former Participant, dies at a time when he has a
designation on file with the Plan Administrator which does not dispose of all
of the amounts distributable under this Plan upon his death, then the amounts
distributable on behalf of said Participant or former Participant, the
disposition of which was not determined by the deceased Participant's or former
Participant's designation, shall be distributed to a death Beneficiary
determined under the provisions of Section 11.4 hereof.
11.8 CLARIFICATION OF AMBIGUOUS DESIGNATIONS. Any
ambiguity in a Participant's death Beneficiary designation shall be resolved by
the Plan Administrator. Subject to Section 11.5 hereof, the Plan Administrator
may direct a Participant to clarify his designation and if necessary execute a
new designation containing such clarification.
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ARTICLE 12
----------
DISTRIBUTIONS
-------------
12.1 DATE OF DISTRIBUTION. Distributions will normally
commence as of the dates specified in Articles 9, 10 and 11 hereof. However,
if a Participant whose Vested Interest exceeds Three Thousand Five Hundred
Dollars ($3,500.00) retires, becomes disabled or dies, the Participant or his
Beneficiary may elect in writing, subject to Section 12.8 hereof, to defer any
distribution to a later date. Furthermore, if a Participant continues in the
employ of a Participating Company or an Affiliate until his attainment of age
seventy and one-half (70-1/2), distributions must commence as of the date
specified in Section 12.8 hereof even if he remains so employed at the time of
distribution.
Finally, notwithstanding the foregoing provisions of this
Section 12.1 and the contrary provisions of Articles 9, 10 and 11, the
requirement that a distribution commence within sixty (60) days after the close
of the Plan Year in which a Participant's Normal Retirement Date occurs shall
not apply if the amount of payment required to be made on such date cannot be
ascertained by such date or the Plan Administrator is unable to locate the
Participant after making reasonable efforts to do so, provided that, within
sixty (60) days after such amount can be ascertained or the Participant is
located, a payment is made retroactive to such date. This paragraph is not
intended to permit a Participant, former Participant or Beneficiary to elect to
defer payment beyond the dates otherwise provided therefor in this Plan.
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12.2 DISTRIBUTION PROCEDURES. Each Participant, former
Participant or Beneficiary who is eligible for benefits under Article 9, 10 or
11 shall apply therefor on a form which shall be given to him for that purpose
by the Plan Administrator. Upon finding that such Participant satisfies the
eligibility requirements for benefits under Article 9, 10 or 11, the Plan
Administrator shall promptly notify the Trustee in writing of his eligibility
and of the method of distribution selected in accordance with this Article 12.
12.3 ANNUITY PAYMENTS FOR CERTAIN ROLLOVER ACCOUNTS. Unless another
method of distribution is selected under Section 12.6 hereof, the normal method
of distribution of amounts distributable to a Participant, former Participant
or his Beneficiary pursuant to Articles 9, 10 and 11 hereof which are
attributable to amounts credited to his Rollover Account pursuant to Article 18
hereof and which are subject to the joint and survivor annuity requirements
under Section 401(a)(11) of the Code at the time immediately prior to the
transfer of such amounts to this Plan shall be as follows:
(a) Such distributions shall be made to a married
Participant or a married former Participant in the
form of a joint and survivor annuity contract of an
insurance company issued on the joint lives of such
Participant and his spouse, with the provision that
after the Participant's death 50% of his monthly
retirement benefit shall continue during the life of
and be paid to his spouse;
(b) Such distributions shall be made to an unmarried
Participant, an unmarried former Participant or a
Beneficiary of a Participant in the form of a full
cash refund life annuity contract of an insurance
company issued on the life of such Participant or
Beneficiary.
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12.4 OPTIONAL FORM OF PAYMENTS FOR CERTAIN ROLLOVER
ACCOUNTS. A Participant, a former Participant, or a Beneficiary of a
Participant may, subject to the spousal consent requirement set forth in
Section 12.6 hereof, elect to receive the amounts which are credited to his
Rollover Account pursuant to Article 18 hereof and which are subject to the
joint and survivor annuity requirements under Section 401(a)(11) of the Code in
either one or a combination of the following optional methods of distribution:
(a) in a single lump sum payment; or
(b) in such other form of payment as permitted under the
tax qualified retirement plan that transferred such
amounts to this Plan unless the Secretary of the
Treasury has promulgated regulations which state that
such optional forms of payments may be eliminated
without violating Section 411(d)(6) of the Code.
12.5 LUMP SUM PAYMENTS. Distributions to a Participant, a
former Participant, or a Beneficiary of a Participant, other than the amounts
credited to his Accounts which are attributable to amounts subject to Sections
12.3 and 12.4, shall be paid in a single lump sum cash payment.
12.6 ELECTION PROCEDURES FOR OPTIONAL PAYMENTS; SPOUSAL
CONSENT. To elect one or a combination of the optional methods of distribution
set forth in Section 12.4 above, a Participant, former Participant or
Beneficiary shall notify the Plan Administrator of such election in writing
prior to the date his retirement benefits become distributable pursuant to
Article 9, 10 or 11 hereof. The Plan Administrator shall, no less than thirty
(30) days and no more than ninety (90) days prior to such Participant's Annuity
Starting Date, provide such Participant with a written explanation of:
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(a) the terms and conditions of the normal form set forth
in Section 12.3 hereof;
(b) his right to make, and the effect of, an election
under this Section 12.6 not to receive his retirement
benefits pursuant to the normal form set forth in
Section 12.3 hereof;
(c) the rights of his spouse in regard to such election;
(d) his right to make, and the effect of, a revocation of
such an election; and
(e) the relative values of the forms of retirement
benefits described in Section 12.4 hereof.
Any election of another form of retirement benefits shall be
made by a Participant during the ninety (90) day period ending on his Annuity
Starting Date; provided, that a Participant's Annuity Starting Date shall be
delayed, if necessary, to insure that a Participant shall have received the
foregoing written explanation at least thirty (30) days prior to his Annuity
Starting Date. Any such election may be revoked and made again any number of
times as long as such ninety (90) day period has not expired. For purposes of
this Section 12.6, a Participant's "Annuity Starting Date" is the first day of
the first period for which an amount is payable as an annuity under the terms
of this Plan or in the case of a benefit which is not payable in the form of an
annuity, the first day on which all events have occurred which shall entitle a
Participant to such benefit.
If a married Participant or former Participant elects to receive
his retirement benefits under a form other than the joint and survivor annuity
form, described in Section 12.3(a) hereof, such election shall not be of any
effect and the Participant or
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former Participant shall be treated the same as though his election had not
been made unless the Participant's spouse consents in writing to such election
in accordance with Section 22.6 hereof. Any such election by a married
Participant shall designate a specific optional method of distribution which
shall not be changed without his spouse's consent, unless the spouse's original
consent expressly permits further changes by the Participant.
12.7 ADMINISTERING DISTRIBUTION OF ACCOUNTS. The Plan
Administrator shall notify the Trustee immediately of the Participant's, former
Participant's or Beneficiary's election, and the Trustee shall make all
distributions in accordance with such method of distribution. At any time that
amounts remain credited to the Rollover Account or Distributable Account of
such Participant, former Participant or Beneficiary, he may, subject to the
spousal consent requirement described above, file with the Plan Administrator
instructions changing the method of distribution. The Plan Administrator shall
promptly direct the Trustee in writing to adopt the new method of distribution
for any amounts remaining credited to such person's Accounts. In no case shall
the Trustee be obligated to accept any instructions for a change in the method
of distribution, if, in its judgment, it will be unduly expensive to carry out
such instructions. There shall be no liability on the part of the Plan
Administrator to any person because of any delay in notifying the Trustee of a
change in method of distribution filed with it.
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12.8 ADDITIONAL LEGAL RESTRICTIONS ON DISTRIBUTIONS.
Notwithstanding any other provisions of this Plan, distributions hereunder
shall be subject to the following restrictions:
(a) in the case of a living Participant or former
Participant:
(i) distribution must commence on or before:
(A) the April 1 following the end of the
calendar year in which he attains
age seventy and one-half (70-1/2) or
retires, whichever is later, if the
Participant shall have attained age
seventy and one-half (70-1/2) prior
to January 1, 1988 and was not a
five percent (5%) owner at any time
after the beginning of the Plan Year
that ends in the calendar year
during which he attained age
sixty-six and one-half (66-1/2); or
(B) the April 1 following the end of the
calendar year in which he attains
age seventy and one-half (70-1/2) in
all other cases; and
(ii) installment distributions shall not be
payable over a period of years in excess of
his life expectancy or the joint life
expectancies of himself and his spouse or
Beneficiary; and
(iii) annuity payments shall not be payable beyond
the life of the Participant or the joint
lives of the Participant and his Beneficiary;
(b) in the case of a deceased Participant or former
Participant, benefits commencing after his death
shall be payable either:
(i) within five (5) years of the date of his
death; or
(ii) if benefits commence to his Beneficiary
either:
(A) within one (1) year following the
date of his death or on a later date
permitted under any lawful
regulations issued by the Secretary
of the Treasury; or
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(B) if his spouse is his Beneficiary, by
the date such Participant would have
attained age seventy and one-half
(70-1/2);
over a period not extending beyond the life
expectancy of such Beneficiary; or
(iii) if the Participant's distribution had
commenced prior to his death under a form of
payment meeting the requirements of
subsection (a)(ii) or (iii) above, such
distribution must be completed by the
remainder of the period specified in said
subsection (a)(ii) or (iii); and
(c) in the case of the death of a Beneficiary who is the
surviving spouse of a deceased Participant, a
distribution commencing after the death of the spouse
shall be payable either:
(i) within five (5) years of the date of the
spouse's death;
(ii) if distribution commences to the spouse's
Beneficiary within one (1) year of the
spouse's death or on a later date permitted
under any lawful regulations issued by the
Secretary of the Treasury, over a period not
extending beyond the life expectancy of such
Beneficiary; or
(d) in the event payments are made to a Participant's
child, for purposes of this Section 12.8, such
payments shall be deemed to be paid to the
Participant's spouse if such payments will become
payable to such spouse upon such child's reaching
majority or any other event permitted under any
lawful regulations issued by the Secretary of the
Treasury.
A Participant, former Participant or spouse of a Participant or former
Participant may elect to have his life expectancy redetermined from time to
time but not more frequently than annually. In the event that a Participant,
former Participant or spouse of a Participant or former Participant fails to
make such an election, then no redetermination shall be performed.
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<PAGE> 68
All distributions required under this Article 12 shall be
determined and made in accordance with the regulations under Section 401(a)(9)
of the Code, including the minimum distribution incidental benefit requirement
of Section 1.401(a)(9)-2 of the regulations.
12.9 OPTION TO PURCHASE ANNUITY CONTRACTS. The Trustee
shall, upon notification by the Plan Administrator as to the eligibility of and
method of distribution applicable to a Participant, former Participant or
Beneficiary of a Participant, take any one or a combination of the following
actions which the Plan Administrator, in its sole discretion, shall deem proper
to effectuate the method of distribution to such person:
(a) Remit the amount then credited to such person's
Accounts, or a portion thereof, to an insurance
company with instructions to apply the sum remitted
to produce the maximum annuity available thereunder;
or
(b) Purchase from an insurance company an appropriate
annuity contract or contracts; or
(c) Make payments directly from the Trust Fund to such
person.
Any amounts paid from the Trust Fund to an insurance company or to a
Participant, former Participant or Beneficiary shall be debited to such
Account.
12.10 OPTION TO RESTRICT AND DISTRIBUTE ANNUITY CONTRACT.
In the event that the Trustee, pursuant to Section 12.9 hereunder, obtains an
annuity contract or contracts for the benefit of a Participant, a former
Participant or a Beneficiary of a Participant, the Trustee shall, after having
selected such settlement options and placed such restrictive endorsements
thereon
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as are directed by the Plan Administrator, transfer ownership of the contract
or contracts to such Participant, former Participant, or Beneficiary and
deliver said contract or contracts to him.
12.11 VALUATION AND CONSOLIDATION OF REMAINING ACCOUNT
BALANCES. As long as there remain any amounts credited to a Participant's
Account, the Trustee shall continue to maintain said Account and said Account
shall be periodically revalued in accordance with the provisions of Article 8
hereof. In the event that a former Participant shall have more than one
Distributable Account, the Trustee may in its sole discretion consolidate said
Distributable Accounts into a single Distributable Account.
12.12 IMMEDIATE LUMP SUM PAYMENT OF SMALL AMOUNTS.
Notwithstanding anything contained herein, effective December 1, 1994, in the
event that the Accounts of a retired, terminated, disabled or deceased
Participant, after being debited for any forfeiture pursuant to Section 9.3
hereof, have a value less than or equal to (and at the time of any prior
distribution had a value less than or equal to) Three Thousand Five Hundred
Dollars ($3,500.00), the Plan Administrator shall direct the Trustee to
distribute the amount credited to such Participant's Accounts in a single lump
sum payment as soon as reasonably possible after the date of the Participant's
Termination of Employment, but not later than sixty (60) days after the close
of the Plan Year which includes Participant's Normal Retirement Date, without
the consent of the Participant or his Beneficiary. Any such lump sum
distribution shall be subject to the withholding requirements of Section
3405(c) of the Code unless the participant elects a direct
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transfer of the amounts distributable from the Plan to an eligible retirement
plan. Any such lump sum payment shall be in full settlement of such
Participant's or Beneficiary's rights under this Plan.
12.13 CONTINUATION OF DISTRIBUTIONS THAT COMMENCED BEFORE
THE RESTATEMENT DATE. Notwithstanding any provisions of this Article 12 to the
contrary, the method of distribution being utilized, as of the date immediately
prior to the Restatement Date, to distribute benefits to Participants who had
retired, died, become disabled, or terminated employment prior to the
Restatement Date shall not be changed, unless the Plan Administrator consents
to the change and the method of distribution is permitted by this Plan as
amended and restated.
12.14 ELECTIONS REGARDING DIRECT ROLLOVERS. Any
distribution made hereunder after December 31, 1992 to a distributee shall be
made directly to such distributee unless he elects a direct rollover pursuant
to the second paragraph of this Section 12.14; provided, however, that the
distributee must acknowledge in writing that he understands that any payment
after December 31, 1992 which includes more than two hundred dollars ($200.00)
in cash and which is eligible under Section 402(c) of the Code to be rolled
over to an eligible retirement plan will be subject to withholding taxes.
After December 31, 1992, each distributee shall have the right to
direct that any distribution which, under Code Section 402(c), qualifies as an
eligible rollover distribution be transferred directly to an eligible
retirement plan. A distributee
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may direct that part of the distribution be transferred directly to an eligible
retirement plan and the balance be paid to him, provided that the amount
directly transferred to the eligible retirement plan shall be at least five
hundred dollars ($500.00). A distributee is not permitted to direct that his
distribution be transferred directly to more than one eligible retirement plan.
In the event that a distributee fails to make any direction, the distribution
shall be paid directly to him after deduction of appropriate withholding taxes.
Unless the context otherwise indicates, the following terms shall
have the following meanings whenever used in this Section 12.14:
(a) "eligible rollover distribution" shall mean 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:
(i) any distribution that is one of a series of
substantially equal periodic payments (not
less frequently than annually) made for the
life (or life expectancy) of the distributee
or the joint lives (or joint life
expectancies) of the distributee and the
distributee's designated Beneficiary, or for
a specified period of ten years or more;
(ii) any distribution to the extent such
distribution is required under Section 12.8
above which reflects the requirements under
Section 401(a)(9) of the Code; and
(iii) 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).
(b) "eligible retirement plan" shall mean:
(i) an individual retirement account described in
section 408(a) of the Code;
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(ii) an individual retirement annuity described in
section 408(b) of the Code;
(iii) an annuity plan described in section 403(a)
of the Code; or
(iv) a qualified trust described in section 401(a)
of the Code;
that accepts the distributee's eligible rollover
distribution.
Notwithstanding the foregoing, in the case of an
eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(c) "distributee" shall mean:
(i) an Employee or former Employee; and
(ii) an Employee's or a former Employee's
surviving spouse and an Employee's or former
Employee's spouse or former spouse who is the
alternate payee under a qualified domestic
relations order, as defined in Section 414(p)
of the Code, without regard to the interest
of the spouse or former spouse.
(d) "direct rollover" shall mean a payment by the Plan to
the eligible retirement plan specified by the
distributee.
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ARTICLE 13
----------
LOANS TO PARTICIPANTS
---------------------
13.1 PROHIBITION AGAINST NEW LOANS. For the period
commencing January 1, 1988 and ending June 1, 1993, no loans were permitted
under the Plan. Any loans, outstanding as of the Restatement Date, may not be
renegotiated.
13.2 TERMS OF PRIOR LOANS. All loans made pursuant to the
Plan prior to the Restatement Date shall be considered investments of the
borrowing Participant's Accounts. Interest shall continue to be charged on
such loans in accordance with the provisions of the promissory note executed by
the Participant at the time of such loan. The term of any loan made pursuant
to the Plan prior to the Restatement Date shall not exceed one (1) year. Any
loan made after December 31, 1986, shall provide for the level amortization of
the loan (with payments not less frequently than quarterly) over the term of
the loan.
13.3 DOCUMENTATION, COLLATERAL AND ENFORCEMENT OF PRIOR
LOANS. Each loan shall be evidenced by such Participant's note for the amount
of the loan and interest payable to the order of the Trustee and shall be
supported by adequate collateral. Such collateral shall consist of the
assignment of the Participant's entire right, title and interest in and to (i)
the Trust Fund, and (ii) other property, if necessary, of sufficient value to
adequately secure the repayment of the loan. The Plan Administrator may
require such other and further documentation as it deems appropriate. In the
event of a Participant's failure to
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repay any such loan within the time prescribed by the Plan Administrator, the
Plan Administrator shall direct the Trustee to take appropriate action with
respect to the collateral given by such Participant in support of such loan.
13.4 LOAN ADMINISTRATION AND APPLICATIONS. On and after
June 1, 1993, a Participant may apply to the Plan Administrator for a loan from
the Plan. The provisions set forth in this Section 13.4 and in Sections 13.5,
13.6, 13.7 and 13.8 shall govern any such loans made hereunder. If the Plan
Administrator determines that the Participant and the proposed loan satisfy the
requirements set forth below for loan approval, the Plan Administrator shall
direct the Trustee to make a loan to such borrower from his Accounts. A former
Participant, Beneficiary or an Alternate Payee is not eligible to receive a
loan under this Plan.
13.5 AMOUNT OF LOAN. The amount of any such loan shall be
determined by the Plan Administrator; provided, however, that any such loan
shall not, when combined with outstanding loans previously made from this Plan
and loans made under other qualified retirement plans, if any, maintained by
the Company or any Affiliate, cause the aggregate amount of all such loans to
such borrower to exceed the lesser of (a) or (b) below, where:
(a) equals one-half (1/2) of the borrower's Vested
Interest under this Plan and all vested amounts held
under all other qualified retirement plans maintained
by the Company or any Affiliate; and
(b) equals Fifty Thousand Dollars ($50,000.00) reduced by
the remainder, if any, of:
(i) the highest outstanding balance of loans to
such borrower from the plans during the twelve
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(12) month period preceding the date on which
the loan is to be made; minus
(ii) the outstanding balance of loans to such
borrower from the plans on the day the loan
is to be made.
13.6 LOAN ADMINISTRATION. The following additional
provisions shall be applicable to the loan program under this Plan:
(a) LOAN PROGRAM ADMINISTRATION. The loan program under
the Plan shall be administered by the Plan
Administrator, in accordance with uniform rules and
procedures as the Plan Administrator may prescribe.
(b) LOAN APPLICATION PROCEDURE. Each borrower shall
apply for loans in writing on a form acceptable to
the Plan Administrator.
(c) BASIS FOR APPROVAL OR DENIAL OF LOANS. A loan will
be approved only if:
(i) the Plan Administrator believes the borrower
intends and is able to repay the loan in
accordance with its terms; and
(ii) the amount of such loan shall not be in
excess of the amount which is set forth in
Section 13.5 hereof; and
(iii) the loan satisfies the requirements of
Section 13.7 of the Plan.
13.7 TERMS AND CONDITIONS OF LOANS. Any loan made
pursuant to Section 13.4 shall be considered an investment of the Account or
Accounts of the borrower and shall be subject to the following terms and
conditions:
(a) INTEREST. Interest shall be charged at a reasonable
rate, comparable to the rate charged by a commercial
lender for a similar loan.
(b) LOAN TERM AND REPAYMENT SCHEDULE. The term of any
loan shall be for twelve (12) months, twenty-four
(24) months, thirty-six (36) months or forty-eight
(48) months, arrived at by mutual agreement between
the borrower and the Plan Administrator. All loans
shall provide for the substantially level
amortization of the loan, with payments not less
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frequently than quarterly, over the term of the
loan. All loans shall permit early repayment of the
entire outstanding balance of principal and interest
accrued to date on such loan. Any loans must be fully
paid by a Participant within ninety (90) days
following his Termination of Employment.
(c) SEGREGATION OF ACCOUNTS. The Accounts of a borrower
under this Plan shall, to the extent of such
borrowing, be deemed segregated for investment
purposes. The note representing such loan and the
borrower's Accounts, to the extent of such borrowing,
shall not be taken into account in the valuation of
the Plan pursuant to Article 8 hereof.
(d) REPAYMENT PROCEDURES. Repayment of any loan shall be
by payroll deduction while the borrower is employed
by a Participating Company or an Affiliate. Loan
repayments shall be directed back into the investment
fund from which they were borrowed based upon the
Participant's current investment election as set
forth in Article 7 hereof.
(e) DOCUMENTATION AND COLLATERAL. Each loan shall be
evidenced by such borrower's note for the amount of
the loan and interest payable to the order of the
Trustee and shall be supported by adequate
collateral. Such collateral shall consist of (i) up
to fifty percent (50%) of the borrower's entire
right, title and interest in and to the Trust Fund,
and any earnings attributable to such amounts, and
(ii) other property, if necessary, of sufficient
value to adequately secure the repayment of the loan.
The Plan Administrator may require such other and
further documentation as it deems appropriate. The
Plan Administrator, Trustee or any other service
provider who administers loans under the Plan may
charge to the Account of each borrower who receives a
loan, a loan origination fee, loan processing fee,
and/or loan maintenance fee, in such amounts as are
determined by such service provider.
(f) DEFAULT. A borrower shall be in default if he fails
to make any payment of principal or interest
sufficient to meet the substantially level quarterly
amortization requirement above in paragraph (b), if
he fails to make a required payment or if his
collateral becomes inadequate to secure the loan and
he does not provide substitute collateral
satisfactory to the Plan Administrator within ten
(10) days after a request therefor by
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the Plan Administrator or if he fails to repay
in full the entire outstanding balance of the
principal and interest accrued on such loan within
ninety (90) days after his Termination of employment.
In the event of default by a borrower, his loan shall
be accelerated, and:
(i) If his collateral security in this Plan is
adequate to cover all or part of the
outstanding principal and interest, and if
distribution of such amount would not, in the
opinion of the Plan Administrator, put at
risk the tax qualified status of the Plan or
the retirement savings contribution portion
thereof, the Trustee shall execute upon such
Plan collateral; and
(ii) If his collateral security described in
paragraph (f)(i) is not adequate to cover all
of the outstanding principal and interest, or
if execution upon such collateral would, in
the opinion of the Plan Administrator, put at
risk the tax qualified status of the Plan or
the retirement savings contribution portion
thereof, the Trustee shall commence
appropriate collection actions against the
borrower to recover the amounts owed.
Expenses of collection, including legal fees if any,
of any loan in default shall be borne by the borrower
or his Accounts.
13.8 TERMS OF PRIOR LOANS MAY NOT BE RENEGOTIATED OR
EXTENDED. Notwithstanding the foregoing provisions of this Article 13, the
terms of outstanding loans may not be renegotiated and in the event the
proceeds of any loan made hereunder shall be used directly or indirectly to pay
off any obligations under a prior loan made hereunder, the term of the more
recent loan shall not extend beyond the period of repayment under the prior
loan. For purposes of this Section 13.8, the Plan Administrator shall be able
to rely on a certification by the Participant or former Participant as to the
use of the new loan's proceeds.
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ARTICLE 14
----------
ADMINISTRATION
--------------
14.1 APPOINTMENT OF PLAN ADMINISTRATOR. The Board of
Directors of the Company shall appoint the Plan Administrator which shall be
any person(s), corporation or partnership, (including the Company itself) as
said Board of Directors shall deem desirable in its sole discretion. The Plan
Administrator may be removed or resign upon thirty (30) days' written notice or
such lesser period of notice as is mutually agreeable. The Company shall
notify the Trustee of the identity of the Plan Administrator and of any change
in the Plan Administrator. Unless the Board of Directors appoints another Plan
Administrator, Sealy, Inc. shall be the Plan Administrator.
14.2 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR. Except
as expressly set forth herein with respect to the duties and responsibilities
of the Trustee, the Benefit Appeals Committee, the Investment Manager or the
Company, the Plan Administrator shall administer the Plan and shall have all
powers and duties granted or imposed on an "administrator" by ERISA. The Plan
Administrator shall determine any and all questions of fact, resolve all
questions of interpretation of this instrument which may arise under any of the
provisions of this Plan as to which no other provision for determination is
made hereunder, and exercise all other powers and discretions necessary to be
exercised under the terms of this Plan which it is herein given or for which no
contrary provision is made. The Plan Administrator shall have full
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power and discretion to interpret this Plan, to resolve ambiguities,
inconsistencies and omissions, to determine any question of fact, to determine
the right to benefits of, and the amount of benefits, if any, payable to, the
applicant in accordance with the provisions of this Plan. Subject to the
provisions of Section 14.6, the Plan Administrator's decision with respect to
any matter shall be final and binding upon the Trustee and all other parties
concerned, and neither the Plan Administrator nor any of its directors,
officers or employees, if applicable, shall be liable in that regard except for
gross abuse of the discretion given it and them under the terms of this Plan.
All determinations of the Plan Administrator shall be made in a uniform,
consistent and nondiscriminatory manner with respect to all Participants and
Beneficiaries in similar circumstances. The Plan Administrator, from time to
time, may designate one or more persons or agents to carry out any or all of
its duties hereunder.
14.3 ESTABLISHMENT OF BENEFIT APPEALS COMMITTEE. The
Company shall appoint the members of a Benefit Appeals Committee (the
"Committee") which shall consist of three (3) or more members. The members of
the Committee shall remain in office at the will of the Company and the Company
may from time to time remove any of said members with or without cause. A
member of the Committee may resign upon written notice to the remaining member
or members of the Committee and to the Company respectively. In case of the
death, resignation or removal of any member of the Committee, the remaining
members shall act until a successor-member shall be appointed by the Company.
Upon request by the Plan Administrator,
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the Company shall notify the Plan Administrator of the names of the original
members of the Committee, of any and all changes in the membership of the
Committee, of the member designated as Chairman, and the member designated as
Secretary, and of any changes in either office. Until notified of a change,
the Plan Administrator shall be protected in assuming that there has been no
change in the membership of the Committee or the designation of Chairman or of
Secretary since the last notification was filed with it. The Plan
Administrator shall be under no obligation at any time to inquire into the
membership of the Committee or its officers. All communications to the
Committee shall be addressed to its Secretary at the address of the Company.
14.4 GOVERNANCE OF THE COMMITTEE. On all matters and
questions the decision of a majority of the members of the Committee shall
govern and control; but a meeting need not be called or held to make any
decision. The Committee shall appoint one of its members to act as its
Chairman and another member to act as Secretary. The terms of office of these
members shall be determined by the Committee, and the Secretary and/or Chairman
may be removed by the other members of the Committee for any reason which such
other members may deem just and proper. The Secretary shall do all things
directed by the Committee. Although the Committee shall act by decision of a
majority of its members as above provided, nevertheless in the absence of
written notice to the contrary, every person may deal with the Secretary and
consider his acts as having been authorized by the Committee. Any notice
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served or demand made on the Secretary shall be deemed to have been served or
made upon the Committee.
14.5 ADDITIONAL COMMITTEE RULES. No member of the
Committee shall be disqualified from acting on any question because of
his interest therein. No fee or compensation shall be paid to any member of
the Committee for his services as such, but the Committee shall be reimbursed
for its expenses by the Company. The Committee and the Plan Administrator may
hire such attorneys, accountants, actuaries, agents, clerks, and secretaries as
it may deem desirable in the performance of its functions, and the expense
associated with the hiring or retention of any such person or persons shall be
paid directly by the Company.
14.6 CLAIMS PROCEDURE. Claims for benefits shall be made
by application of the Participant in such manner as the Plan Administrator
shall reasonably prescribe. The Plan Administrator shall process each such
claim and determine entitlement to benefits within thirty (30) days of its
receipt of a completed application for benefits. The Plan Administrator shall
notify a Participant in writing, delivered in person or mailed by first-class
mail to such Participant's last known address, if any part of a claim for
benefits under this Plan has been denied, setting forth in such notice:
(a) the specific reason for the denial;
(b) a specific reference to pertinent Plan provisions
upon which the denial is based;
(c) a description of any additional material or
information deemed necessary by the Plan
Administrator for such Participant to perfect his
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claim, and an explanation of why such material or
information is necessary; and
(d) an explanation of the claim review procedure under
the Plan.
Such notice shall set forth the above information in a manner calculated to be
understood by such Participant. If the notice referred to above is not
furnished and if the claim has not been granted within the time specified above
for payment of such claim, the claim shall be deemed denied and shall be
subject to review as set forth below. Any Participant whose claim for benefits
has been denied or deemed denied shall have sixty (60) days from the date the
claim is deemed denied, or sixty (60) days from receipt of the notice denying
the claim, as the case may be, in which to request a review by written
application delivered to the Committee, which must specify the reason such
Participant believes the denial should be reversed. Upon receipt of a request
for review, the Committee shall schedule a hearing to be held not less than
thirty (30) nor more than forty-five (45) days from the receipt of such request
at a time and place convenient for all parties, at which time he may appear
before the Committee for a full and fair review of its decision. The notice
shall specify that such Participant must indicate in writing, at least fifteen
(15) days in advance of the time established for such hearing, his intention to
appear at the appointed time and place, or the hearing will be automatically
canceled. The reply shall specify any other persons who will accompany him to
the hearing, or such other persons will not be admitted to the hearing. The
Participant, or his duly authorized representative, may review all pertinent
documents relating to the
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claim in preparation for the hearing and may submit issues and comments in
writing prior to or during the hearing. The Committee shall determine any and
all questions of fact, resolve all questions of interpretation of this
instrument or related documents which may arise under any of the provisions of
this Plan or such documents as to which no other provision for determination is
made hereunder, and exercise all other powers and discretion necessary to be
exercised under the terms of this Plan which it is herein given or for which no
contrary provision is made. The decision of the Committee shall be delivered
in writing within thirty (30) days after the hearing, or if no hearing is held,
within fifteen (15) days after the date scheduled for the hearing, and shall
include specific reasons for the decision, written in a manner calculated to be
understood by the Participant, and shall contain specific references to the
pertinent provisions of the Plan and/or related documents upon which the
decision is based.
14.7 LIMITATION OF LIABILITY. Except as otherwise
provided in the ERISA, the Plan Administrator, Committee, Board of Trustees,
and their respective officers, employees and members, and officers and
Employees of the Participating Companies, shall incur no personal liability of
any nature whatsoever in connection with any act done or omitted to be done in
the administration of this Plan. No person shall be liable for the act of any
other person.
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ARTICLE 15
----------
PROHIBITION AGAINST ALIENATION
------------------------------
15.1 DEFINITIONS. Unless the context otherwise indicates,
the following terms used herein shall have the following meanings whenever used
in this Article 15:
(a) The words "alternate payee" shall mean any spouse,
former spouse, child or other dependent of a
Participant who is recognized by a domestic relations
order as having a right to receive all, or a portion
of, the benefits hereunder attributable to such
Participant.
(b) The words "domestic relations order" shall mean, with
respect to any Participant, any judgment, decree or
order (including approval of a property settlement
agreement) which both
(i) relates to the provision of child support,
alimony payments or marital property rights
to a spouse, former spouse, child or other
dependent of the Participant; and
(ii) is made pursuant to a State domestic
relations law (including a community
property law).
(c) The words "qualified domestic relations order" shall
mean a domestic relations order which satisfies the
requirements of Section 414(p)(1)(A) of the Code.
15.2 NONALIENATION. Neither any property nor any interest
in any property held for the benefit of any Participant, former Participant, or
Beneficiary of a Participant shall be alienated, disposed of or in any manner
encumbered, voluntarily, involuntarily or by operation of law, while in the
possession or control of the Trustee except by an act of the Trustee or the
Participant, former Participant or Beneficiary specifically authorized
hereunder. If by reason of any act of any Participant,
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former Participant or Beneficiary, or by operation of law or by the happening
of any event, or for any reason, except by an act of the Trustee or such person
specifically authorized hereunder, such property or any interest therein would,
except for this provision, cease to be enjoyed by such person, or if by reason
of an attempt of such person to alienate, charge or encumber such property or
any interest therein, or by reason of the bankruptcy or insolvency of such
person, or by reason of any attachment, garnishment or other proceedings, or by
reason of any order, finding or judgment of court, either at law or in equity,
such property or any interest therein would, except for this provision, vest in
or be enjoyed by some person, firm or corporation otherwise than as provided in
this Plan, in any of such events, the trusts herein expressed concerning all of
such property so payable to or held for the benefit of such person shall cease
and terminate as to him. Thereafter during his life such property, subject to
such interests or rights, if any, as any other person may have in or to such
property as provided in this Plan, shall be held by the Trustee according to
its absolute discretion, but the Trustee meanwhile may pay to or expend for the
support, comfort, and maintenance of such Participant, former Participant or
Beneficiary, may pay to or expend for the support, comfort and maintenance of
his spouse and/or may pay to or expend for the support, comfort and maintenance
of his child or children, such sums and such sums only, as directed by the Plan
Administrator, in writing, retaining any undistributed part of such property
until such Participant's, former Participant's or Beneficiary's death.
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15.3 DISTRIBUTION OF ASSETS ON DEATH. If any person who
shall be subject to the provisions of Section 15.2 hereof shall die before
receiving all of such property which he would have received except for the
operation of the provisions of said Section 15.2, then, upon or after his
death, such undistributed property shall be disposed of as follows:
(a) If such person was a Participant, such undistributed
property shall be disposed of as provided in such
Participant's designation of Beneficiary on file with
the Trustee at the time of his death, or as provided
in Section 11.7 in the event that such designation
shall not provide for complete distribution of such
undistributed property or no designation of
Beneficiary shall be on file with the Trustee; or
(b) If such person shall be a Beneficiary of a
Participant, such undistributed property shall be
distributed to the person or persons who upon such
Beneficiary's death would be entitled to inherit such
undistributed property under the laws of Ohio then in
force if such undistributed property had then
belonged to such Beneficiary and he had then died
intestate domiciled in Ohio.
15.4 NO RIGHT TO BENEFITS BY ALTERNATE PAYEE. Sections
15.2 and 15.3 above shall not be deemed to prohibit the creation, assignment or
recognition of a right to any benefit under the Plan payable in respect of a
Participant to an alternate payee pursuant to a qualified domestic relations
order.
15.5 NOTIFICATION OF PARTIES AND DETERMINATION WHETHER
QUALIFIED. In the event the Plan is served with a domestic relations order,
the Plan Administrator shall promptly notify the concerned Participant and any
concerned alternate payee of the receipt of such domestic relations order and
the Plan's procedures for determining whether such domestic relations order is
a
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qualified domestic relations order. Within a reasonable time after receipt of
such domestic relations order, the Plan Administrator shall determine whether
such domestic relations order is a qualified domestic relations order and shall
notify the Participant and any concerned alternate payee of its determination.
15.6 INTERIM PROCEDURES. During any period in which the
issue of whether a domestic relations order is a qualified domestic relations
order is being determined (whether by the Plan Administrator, a court of
competent jurisdiction, or otherwise), the Plan Administrator shall credit to a
new separate account under the Plan the amounts which would have been payable
to an alternate payee during such period if the order had been, during such
period, determined to be a qualified domestic relations order, and shall debit
the appropriate accounts of the Participant with respect to whom the domestic
relations order was issued for such amounts. If, within eighteen (18) months
after the Plan is served with such domestic relations order, the domestic
relations order (or a modification thereof) is determined to be a qualified
domestic relations order, the Plan Administrator shall hold and dispose of the
amounts credited to the segregated account established with respect to such
domestic relations order in accordance with the terms of the qualified domestic
relations order. If within eighteen (18) months after the Plan is served with
such domestic relations order, it is determined that the domestic relations
order is not a qualified domestic relations order or the issue with respect to
whether the domestic relations order is a qualified domestic relations order is
not resolved, the Plan Administrator
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shall transfer the amounts credited to the segregated account to the
appropriate Accounts maintained for the benefit of the person who would have
been entitled to such amounts as though the Plan had never been served with
such domestic relations order. Any determination that a domestic relations
order is a qualified domestic relations order which is made after the close of
the eighteen (18) month period after the Plan was served with such domestic
relations order shall be applied prospectively only.
15.7 INVESTMENT OF SEPARATE ACCOUNT. The amounts credited
to any new separate account which has been created under Section 15.6 above
after the Plan is served with a domestic relations order shall be invested as
the Plan Administrator shall direct until the Plan Administrator makes a
determination whether such domestic relations order is a qualified domestic
relations order.
15.8 REVIEW PROCEDURES. Any Participant or alternate
payee who is affected by a domestic relations order served upon the Plan may
request a review by such Committee of the Plan Administrator's determination
with respect to the qualification or lack of qualification of such domestic
relations order upon written notice to the Benefit Appeals Committee appointed
pursuant to Article 14 hereof. Any such review by the Committee shall be
subject to the rules and procedures set forth in Article 14 hereof.
15.9 STATUS OF ALTERNATE PAYEE. Any alternate payee who
is entitled to receive amounts from the Plan pursuant to a qualified domestic
relations order shall, with respect to the Plan, to the extent of the alternate
payee's interest in the Plan, have
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such rights as are specified in the qualified domestic relations order.
15.10 IMMEDIATE LUMP SUM PAYMENTS PURSUANT TO QUALIFIED
DOMESTIC RELATIONS ORDERS. Notwithstanding anything contained in the Plan to
the contrary, an immediate lump sum distribution shall be made to an Alternate
Payee if such distribution is authorized by a Qualified Domestic Relations
Order, even if the affected Participant is not eligible for an early retirement
benefit in accordance with Section 11.2 of the Plan.
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ARTICLE 16
----------
AMENDMENT AND TERMINATION
-------------------------
16.1 AUTHORITY TO AMEND OR TERMINATE PLAN. This Plan may
be modified, altered, amended, changed or terminated by a writing executed on
behalf of the Company with respect to all or any one of the Participating
Companies by its proper officer or officers, without the consent of any
Participating Company, but no rights of Participants, former Participants or
Beneficiaries receiving benefits under this Plan and no other vested rights or
optional forms of benefit under this Plan shall in any way be modified except
as permitted by law and except that such rights may be modified if such a
modification is necessary to establish or to continue the qualified status of
this Plan under the terms of Section 401 of the Code. This Plan, as amended
and restated herein, may be modified and amended retroactively, if necessary,
to secure exemption effective on the Restatement Date, under Section 401 of the
Code. After an amendment is adopted, a copy shall be furnished to the Trustee.
16.2 PROCEDURES UPON TERMINATION OF PLAN. Upon
termination of this Plan with respect to any Participating Company, all assets
of the Trust Fund held on behalf of Participants employed by such Participating
Company, after deduction therefrom of such Participating Company's
proportionate share of any accrued expenses and fees of the Trustee and any
expenses and fees relating to such termination incurred or to be incurred by
the Trustee, shall be allocated among the then existing Accounts of
Participants
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employed by such Participating Company. Each such Account shall be allocated
that portion of such assets of the Trust Fund which bears the same relationship
to the total of such assets as the amount then standing credited to such
Account bears to the total amounts then standing credited to all Accounts of
Participants employed by such Participating Company. All such amounts
allocated to the Accounts of Participants employed by such Participating
Company at the time of termination of this Plan shall be fully vested and
nonforfeitable. The amounts thus allocated shall be forthwith distributed to
the Participant for whose benefit the Accounts were established if he is living
on the date of termination, or if he shall have died before distribution, to
his designated Beneficiary, or in the event that his designation of Beneficiary
shall not provide for complete distribution of such amounts or not designation
of Beneficiary shall be on file with the Trustee, in accordance with the
provisions of Section 11.7.
Upon termination of this Plan with respect to any Participating
Company, all annuity policies held by the Trustee on behalf of Participants who
were employed by such Participating Company shall be delivered, and all rights
therein shall be transferred to those persons then receiving benefits or
entitled to receive benefits from them. The Plan Administrator may direct that
any spendthrift provisions contained in such annuity contracts shall be
continued in effect or terminated.
16.3 PARTIAL TERMINATIONS; COMPLETE DISCONTINUANCE OF
CONTRIBUTIONS. Upon the partial termination of this Plan or upon complete
discontinuance of contributions to this Plan by any
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Participating Company, all amounts allocated at the time of such partial
termination or complete discontinuance to the Accounts of Participants affected
by such partial termination or complete discontinuance shall be fully vested
and nonforfeitable. However, after any such partial termination or complete
discontinuance of contributions the Trustee shall continue to administer this
Plan in the manner in which this Plan was administered before any such partial
termination and a Participant shall only be entitled to receive benefits upon
the occurrence of an event which under the terms of this Plan would entitle him
to receive such benefits. For purposes of this Section 16.3, the Trustee shall
not treat an event as a partial termination unless: (i) the Company has so
designated such event in a writing delivered to the Trustee; or (ii) such event
has been finally and expressly determined to be either a partial termination or
a complete discontinuance of contributions within the meaning of Section 411(d)
of the Code in an administrative or judicial proceeding to which both the
Company and the Commissioner of Internal Revenue or his delegate were parties.
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<PAGE> 93
ARTICLE 17
----------
TOP-HEAVY PROVISIONS
--------------------
17.1 APPLICATION OF SPECIAL LIMITATIONS IF PLAN IS TOP
HEAVY. During any Plan Year that this Plan is top-heavy, as determined in
accordance with Section 17.2 hereof, the special restrictions contained in
Sections 17.3, 17.4 and 17.5 hereof shall apply.
17.2 DEFINITIONS TO DETERMINE WHETHER PLAN IS TOP HEAVY.
This Plan shall be considered to be top-heavy in any Plan Year if, as of the
determination date for such Plan Year, all the aggregation groups of which this
Plan is a member are top-heavy groups. In the event that in any Plan Year this
Plan is a member of an aggregation group which is not a top-heavy group, this
Plan shall not be considered to be top-heavy for such Plan Year.
Unless the context otherwise indicates, the following terms used
herein shall have the following meanings whenever used in this Article 17:
(a) "determination date" shall mean, for the first Plan
Year, the last day thereof, and thereafter shall
mean, for any other Plan Year, the last day of the
preceding Plan Year;
(b) "key employee" shall mean a "key employee" as
described in Section 416(i) of the Code which is
hereby incorporated by reference and which is
described for informational purposes herein as any
Employee or former Employee of a Participating
Company or an Affiliate who at any time during the
Plan Year, or the four (4) preceding Plan Years is:
(i) an officer of a Participating Company or an
Affiliate having Testing Compensation from
the Participating Company and all Affiliates
for the Plan Year of determination greater
than
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<PAGE> 94
Forty-Five Thousand Dollars ($45,000.00) or, if
greater, fifty percent (50%) of the amount
specified in Section 415(b)(1)(A) of the Code
(plus any increase for cost-of-living as
determined from time to time pursuant to
regulations issued by the Secretary of the
Treasury or his delegate pursuant to Section
415(d) of the Code);
(ii) a one-half of one percent (.5%) actual or
constructive owner of a Participating Company
or an Affiliate who owns one of the ten (10)
largest interests in a Participating Company
or an Affiliate and who is an Employee of a
Participating Company or an Affiliate having
Testing Compensation from a Participating
Company and all Affiliates for the Plan Year
of determination greater than Thirty Thousand
Dollars ($30,000.00) or, if greater, the
amount specified in Section 415(c)(1)(A) of
the Code (plus any increase for
cost-of-living as determined from time to
time pursuant to regulations issued by the
Secretary of the Treasury or his delegate
pursuant to Section 415(d) of the Code);
(iii) a five percent (5%) actual or constructive
owner of a Participating Company or an
Affiliate; or
(iv) a one percent (1%) actual or constructive
owner of a Participating Company or an
Affiliate having Testing Compensation from a
Participating Company and all Affiliates for
the Plan Year of determination greater than
One Hundred Fifty Thousand Dollars
($150,000.00);
provided that any such Employee also performed
services for a Participating Company or an Affiliate
during the five (5) Plan Year period ending on the
determination date; and provided that an amount held
for the Beneficiary of a key employee who is deceased
shall be deemed to be an amount held for a key
employee;
(c) "non-key employee" shall mean any Employee of a
Participating Company or an Affiliate who is not a
key employee including any Employee who was formerly
a key employee;
(d) "permissive aggregation group" shall mean the
required aggregation group plus each pension,
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<PAGE> 95
profit sharing and stock bonus plan of a Participating Company or any
Affiliate, including each such plan terminated during the five (5)
year period ending on the determination date, which, when considered
as a group with the required aggregation group, would continue to
comply with Sections 401(a)(4) and 410 of the Code;
(e) "required aggregation group" shall mean each pension,
profit sharing and stock bonus plan of a
Participating Company or any Affiliate, including
each such plan terminated during the five (5) year
period ending on the determination date, in which a
key employee is a participant and each other pension,
profit sharing and stock bonus plan which enables
such plans to meet the requirements of Section
401(a)(4) or 410 of the Code;
(f) "top heavy group" shall mean any aggregation group if
the sum, as of the determination date, of:
(i) the present value of the cumulative accrued
benefits for key employees under all defined
benefit plans included in such group; and
(ii) the aggregate of the account balances of key
employees under all defined contribution
plans included in such group;
exceeds sixty percent (60%) of a similar sum
determined for all Participants, former Participants
and Beneficiaries permitted to be taken into account
pursuant to Section 416(g) of the Code, with such
values being determined for each plan as of the most
recent valuation date occurring within the twelve
(12) month period ending on the determination date
and subject to appropriate adjustments under said
Section 416(g) and lawful regulations issued
thereunder, including the requirement that benefits
and accounts of an Employee be increased by the
aggregate distributions with respect to such Employee
during the five (5) year period ending on the
determination date; and
(g) "valuation date" means:
(i) in the case of a defined contribution plan, a
date as of which account balances are valued,
(ii) in the case of a defined benefit plan, a date
as of which liabilities and assets are valued
for computing plan costs for purposes of
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<PAGE> 96
determining the plan's minimum funding
requirements under Section 412 of the Code.
In making any of the aforementioned determinations,
contributions due but unpaid as of the determination date shall be included in
determining the value of Account balances, if any. In addition, the actuarial
factors and assumptions set forth in the defined benefit plans included in the
aggregation groups shall be utilized in determining the present value of
cumulative accrued benefits. Furthermore, for purposes of making the
aforementioned calculations with respect to defined benefit plans, proportional
subsidies, and benefits not relating to retirement benefits such as
pre-retirement death and disability benefits and post retirement medical
benefits, are to be disregarded but nonproportional subsidies are to be taken
into account.
17.3 TOP-HEAVY MINIMUM CONTRIBUTIONS. During any Plan
Year that this Plan is top-heavy, a Participating Company shall make a
contribution on behalf of each non-key employee employed by such Participating
Company who is a Participant on the Allocation Date coinciding with the last
day of such year, or was a Participant whose employment terminated on or as of
said Allocation Date which is at least equal to the greater of (a) or (b) below
where:
(a) equals the lesser of (i) or (ii) below where:
(i) equals three percent (3%) of the non-key
employee's Testing Compensation from the
Participating Company and all Affiliates
during the Plan Year; and
(ii) equals the largest percentage of Testing
Compensation from the Participating Company
and all Affiliates (disregarding any such
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<PAGE> 97
Testing Compensation in excess of One Hundred
Fifty Thousand Dollars ($150,000.00) (plus such
adjustments for increases in the cost of living
as shall be prescribed by the Secretary of the
Treasury pursuant to Section 401(a)(17) of the
Code) per Plan Year per key employee) provided
to any key employee by the contributions of the
Participating Company; and
(b) equals such other percent of the non-key employee's
Testing Compensation from the Participating Company
and all Affiliates as may be necessary to satisfy the
requirements of Section 401 and 416 of the Code as
prescribed by the Secretary of the Treasury in lawful
regulations.
If this Plan is top-heavy for a Plan Year and if a Participant
who is a non-key employee is also a participant in any other defined
contribution plan maintained by a Participating Company, the minimum provided
hereunder shall be provided before any minimum under such other plan and shall
reduce the amount of the top-heavy minimum, if any, required thereunder.
Furthermore, if this Plan is top-heavy for a Plan Year and if a Participant who
is a non-key employee is also a participant in any defined benefit plan
maintained by a Participating Company, the minimum provided under such defined
benefit plan shall be provided before any minimum under this Plan and the
benefit provided under such defined benefit plan shall be offset by the
actuarial equivalent of the amounts, if any, in the Participant's Accounts
under this Plan and any other defined contribution plan maintained by a
Participating Company.
17.4 DETERMINATION OF SUPER TOP-HEAVY PLAN. This Plan
shall be considered to be super top-heavy in any Plan Year if, as of the
determination date for such Plan Year, all the aggregation
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<PAGE> 98
groups of which this Plan is a member are super top-heavy groups. The
foregoing determination shall be made as provided in Section 17.2 above for the
calculation of top-heavy status, except that for purposes of this Section 17.4,
subparagraph (f) of said Section 17.2 shall be modified by the substitution of
the words "super top-heavy group" for the words "top-heavy group" in said
subparagraph (f) and by the substitution of the percentage "ninety percent
(90%)" for the percentage "sixty percent (60%)" in said subparagraph (f).
17.5 LIMITATIONS ON ANNUAL ADDITIONS UNDER TOP-HEAVY PLAN.
During any Plan Year that this Plan is top-heavy or super top-heavy, the
limitations on Annual Additions and annual benefits under Section 415 of the
Code as described in Article 21 hereof shall be modified as required by Section
416(h) of the Code. Notwithstanding the previous sentence, the modifications
set forth in this Section 17.5 shall not apply for a Plan Year if the Plan is
top-heavy but not super top-heavy for such Plan Year and if the amount
contributed for each Participant who is a non-key employee is computed by
substituting the percentage "4%" for "3%" in Section 17.3(a) above or if each
Participant who is a non-key employee accrues a benefit or is allocated a
contribution which, in the aggregate, satisfies the requirements of Section
416(h)(2) of the Code under another one or more pension, profit sharing or
stock bonus plans which are maintained by the Participating Companies or any
Affiliate. In the event that the Annual Additions or annual benefits of a key
employee shall be in excess of the limitations on Annual Additions or annual
benefits, as described in Article 21
95
<PAGE> 99
hereof as modified herein, no contributions shall be allocated to a
Participant's Accounts under this Plan until he is brought into compliance or
this Plan ceases to be top-heavy or super top-heavy, as the case may be.
96
<PAGE> 100
ARTICLE 18
----------
ROLLOVERS AND TRANSFERS INVOLVING OTHER
---------------------------------------
QUALIFIED RETIREMENT PLANS
--------------------------
18.1 ROLLOVERS AND TRANSFERS FROM OTHER TAX QUALIFIED
PLANS OF AFFILIATES.
In the event that:
(a) any Employee of a Participating Company shall have
been, prior to his becoming an Employee of a
Participating Company, a participant under another
qualified retirement plan sponsored by a
Participating Company or an Affiliate which met the
requirements of Section 401(a) of the Code; and
(b) either:
(i) the custodian or trustee of the assets held
pursuant to said plan on behalf of said
Employee; or
(ii) the custodian or trustee of the assets of an
individual retirement account established
pursuant to Section 408 of the Code to hold
the assets distributed to said Employee from
said plan; or
(iii) the Employee who holds assets distributed to
him during the preceding sixty (60) days from
such plan or from an individual retirement
account described in paragraph (ii) above;
shall agree to transfer said assets to the Trustee
hereunder; and
(c) the assets to be so transferred shall not be made
available to said Employee in the course of the
transfer except to the extent permitted by paragraph
(b)(iii) above; and
(d) the Plan Administrator consents to the transfer;
the Trustee hereunder shall accept such transferred assets and hold and
administer them pursuant to the terms and provisions of this Plan and this
Article 18.
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<PAGE> 101
Upon the receipt of said assets, the Trustee shall appropriately
credit such amount to a Rollover Account established for the Employee on whose
behalf the assets were so transferred.
18.2 TRANSFER TO ANOTHER QUALIFIED RETIREMENT PLAN. In
the event that:
(a) any Participant hereunder shall terminate his
employment and subsequently become a participant
under the qualified retirement plan of another
employer, which plan satisfies the requirements of
Section 401 of the Code;
(b) said former Participant shall have amounts credited
to an Account held for him hereunder which have not
been distributed to the former Participant and which
are distributable to the former Participant;
(c) either
(i) the custodian or trustee of the assets of
such other plan shall apply to the Trustee
hereunder for transfer to it of assets held
pursuant to this Plan representing said
former Participant's Accounts; or
(ii) such other plan shall provide for the receipt
of assets transferred to it from other
qualified retirement plans;
(d) the assets to be transferred shall not be made
available to said Participant in the course of the
transfer except to the extent permitted by Section
402(a)(5) of the Code; and
(e) the Plan Administrator shall consent to such
transfer;
the Trustee hereunder agrees to transfer to the applying trustee an amount
equal to the Participant's Vested Interest on the date of transfer. Said
transfer shall not be made until the Plan Administrator is assured to its full
satisfaction that the Participant's interest to be transferred shall be fully
vested and nonforfeitable under the terms of such other plan, that said
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<PAGE> 102
interest shall continue to be subject to the joint and survivor annuity
requirements, if required by applicable federal law, similar to the provisions
contained in Article 12 hereof, and that said interest shall neither be
alienable, nor otherwise subject to disposition or encumbrance by the
Participant.
99
<PAGE> 103
ARTICLE 19
----------
TRANSFERRED EMPLOYEES
---------------------
19.1 TRANSFER FROM A PARTICIPATING COMPANY OR STATUS TO A
NON-PARTICIPATING COMPANY OR STATUS.
In the event that a Participant's employment is transferred from a
Participating Company to an Affiliate that is not a Participating Company or,
effective June 1, 1990, a Participant's employment status is changed to an
employee group that is ineligible to participate, then such Participant:
(a) shall continue to earn Vesting Service while he is
employed by an Affiliate and otherwise satisfies the
provisions of Section 2.41 below;
(b) shall be eligible in the year that he transfers
employment to have a portion of a Participating
Company's contribution and forfeitures allocated to
either his Profit Sharing Account, Employer Base
Account or his Deferred Pay Account pursuant to
Article 5 or Article 9 based upon:
(i) his Compensation paid from such Participating
Company up to and including his date of
transfer of employment;
(ii) his completion of at least one thousand
(1,000) Hours of employment with such
Participating Company and such Affiliate
during such year;
(iii) his continued employment with such Affiliate
on the last day of such year; and
(c) shall continue as an inactive Participant in the Plan
with his Accounts held hereunder being periodically
revalued pursuant to Article 8 and eligible for
distribution upon his Termination of Employment with
a Participating Company or any Affiliate; provided,
however, that no further contributions or forfeitures
shall be allocated to his Account except as set forth
in paragraph (b) above.
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<PAGE> 104
19.2 TRANSFER FROM A NON-PARTICIPATING COMPANY OR STATUS
TO A PARTICIPATING COMPANY OR STATUS.
In the event that a Participant's employment is transferred from an Affiliate
that is not a Participating Company to a Participating Company or, effective
June 1, 1990, a Participant's employment status is changed to an employee group
that is ineligible to participate, such Participant:
(a) shall be eligible to participate in the Plan as of
his date of transfer of employment provided that he
had completed at least six (6) months of eligibility
service as determined on or after December 1, 1992
under Section 3.2 above as of the June 1 or December
1 coincident with or preceding such date of transfer
of employment;
(b) if he immediately participates in the Plan as set
forth in paragraph (a) above, shall be eligible in
the year that he transfers employment to have a
portion of a Participating Company's contribution and
forfeitures allocated to either his Profit Sharing
Account, Employer Base Account or his Deferred Pay
Account pursuant to Article 5 or Article 9 based upon
his Compensation paid by such Participating Company
from such date of transfer of employment provided he
satisfies the other requirements for such allocation
pursuant to said Article 5 or Article 9; and
(c) shall be credited with the Hours he completed as an
Employee of such Affiliate for purposes of
determining active participation pursuant to Section
3.2 hereof, One (1) Year Breaks-In-Service pursuant
to Section 2.24 hereof and Vesting Service pursuant
to Section 2.41 hereof; and
(d) shall be credited with a Vested Percentage equal to
the greater of the Vested Percentage he was entitled
to on the date of his transfer of employment under
any tax qualified retirement plan maintained by such
Affiliate or the Vested Percentage determined
hereunder pursuant to this Section 19.2 and Section
2.40.
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<PAGE> 105
ARTICLE 20
----------
PARTICIPATING COMPANIES
-----------------------
20.1 DESIGNATION OF PARTICIPATING COMPANIES. The
Participating Companies and their entry dates and termination dates are as
follows:
<TABLE>
<CAPTION>
Participating Company Adoption Date Termination Date
--------------------- ------------- ----------------
<S> <C>
The Ohio Mattress Company Licensing and 01/01/83
--------------------------------------- --------
Components Group, formerly known as Sealy,
------------------------------------------
Incorporated in facilities located at:
--------------------------------------
Chicago, Illinois
-----------------
Delano, Pennsylvania
--------------------
Colorado Springs, Colorado
--------------------------
Rensselaer, Indiana
-------------------
Sealy Mattress Manufacturing Company, Inc. in 01/01/83
--------------------------------------------- --------
facilities located at:
----------------------
Millville, New Jersey
---------------------
Clarion, Pennsylvania
---------------------
Lexington, North Carolina
-------------------------
Orlando, Florida
----------------
Denver, Colorado
----------------
Phoenix, Arizona
----------------
Portland, Oregon
----------------
Richmond, California
--------------------
Southgate, California
---------------------
Honolulu, Hawaii
----------------
Sealy Connecticut, Inc. in facilities located 01/01/88
--------------------------------------------- --------
at:
---
Oakville, Connecticut
---------------------
Putnam, Connecticut
-------------------
Sealy of Maryland and Virginia, Inc. in 01/01/88
--------------------------------------- --------
facilities located at:
----------------------
Williamsport, Maryland (formerly located
----------------------------------------
at Baltimore, Maryland)
-----------------------
Sealy Mattress Company of Albany, Inc. in 01/01/88
----------------------------------------- --------
facilities located at:
----------------------
Albany, New York
----------------
St. Paul, Minnesota
-------------------
</TABLE>
102
<PAGE> 106
<TABLE>
<CAPTION>
Participating Company Adoption Date Termination Date
--------------------- ------------- ----------------
<S> <C> <C>
Sealy Mattress Company of Michigan, 01/01/88
----------------------------------- --------
Inc. in facilities located at:
------------------------------
Taylor, Michigan
----------------
Sealy Mattress Company of Kansas City, Inc. in 12/01/88
---------------------------------------------- --------
facilities located at:
----------------------
Kansas City, Kansas
-------------------
Sealy Mattress Company of Illinois in facilities 06/01/90
------------------------------------------------ ---------
located at:
-----------
Batavia, Illinois
-----------------
Watertown, Wisconsin
--------------------
Grand Rapids, Michigan
----------------------
Sealy, Inc. (formerly (OMT Corp.) in facilities 06/01/90
----------------------------------------------- --------
located at:
-----------
Cleveland, Ohio
---------------
The Stearns & Foster Bedding 06/01/90
---------------------------- --------
Company in facilities located at:
---------------------------------
South Brunswick, New Jersey
---------------------------
Batavia, Illinois
-----------------
Conyers, Georgia
----------------
Lockland, Ohio
--------------
Miami, Florida
--------------
Mira Loma, California
---------------------
Tukwila, Washington
-------------------
Stearns & Foster Upholstery Furniture Co. in 06/01/90
-------------------------------------------- --------
facilities located at:
----------------------
Columbiana, Ohio
----------------
Pontotoc, Mississippi
---------------------
Sealy Mattress Company in facilities located 06/01/90
--------------------------------------------- --------
at:
---
Atlanta, Georgia
----------------
Brenham, Texas
--------------
Fort Worth, Texas
-----------------
Medina, Ohio
------------
Rio Piedras, Puerto Rico
------------------------
Randolph, Massachusetts
-----------------------
Sealy Mattress Company of Memphis in facilities
-----------------------------------------------
located at: 02/16/94
----------- --------
Memphis, Tennessee
------------------
</TABLE>
20.2 DESIGNATION OF PARTICIPATING COMPANIES. A subsidiary
or Affiliate of the Company may become a Participating
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<PAGE> 107
Company under this Plan as of the first day of any month. Such a subsidiary or
Affiliate shall become a Participating Company by an amendment to Section 20.1
hereof which specifies the name of the subsidiary or Affiliate, its entry date
and the location of each facility that will participate in the Plan. Such
amendment shall be executed by the Company and consented to by the subsidiary
or Affiliate.
20.3 ADOPTION OF SUPPLEMENTS. The Company may determine
that special provisions shall be applicable to some or all of the Employees of
a Participating Company, either in addition to or in lieu of the provisions of
this Plan, or may determine that certain Employees otherwise eligible to
participate in this Plan shall not be eligible to participate in this Plan. In
such event, the Company shall adopt a Supplement with respect to the
Participating Company which employs such individuals which Supplement shall
specify the Employees of the Participating Company covered thereby and the
special provisions applicable to such Employees. Any Supplement shall be
deemed to be a part of this Plan solely with respect to the Employees specified
therein.
20.4 AMENDMENT OF SUPPLEMENTS. The Company, from time to
time, may amend, modify or terminate any Supplement; provided, however, that no
such action shall operate so as to deprive any Employee who was covered by such
Supplement of any vested rights to which he is entitled under this Plan or the
Supplement.
20.5 TERMINATION OF PARTICIPATION OF PARTICIPATING
COMPANY. A Participating Company may terminate this Plan with respect to
Participants employed by said Participating Company by
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<PAGE> 108
an instrument in writing executed on behalf of the Participating Company and
delivered to the Company and the Trustee. The Trustee shall thereupon
administer the Accounts of the Participants employed by said Participating
Company in the manner set forth below:
(a) If the Participating Company ceases to be a
Participating Company but continues to be an
Affiliate, the affected Accounts shall be treated as
those of transferred Employees as described in
Section 19.1 hereof unless other provision is made
therefor at such time.
(b) If the Participating Company ceases to be a
Participating Company and also ceases to be an
Affiliate, the affected Accounts shall be treated as
if the Participant had incurred a Termination of
Employment on the date of cessation of Affiliate
status and the Participant's Vested Interest shall
become distributable as if such a Termination of
Employment had occurred subject to the limitations on
distributions under such circumstances as set forth
in Section 401(k) of the Code determined as if such
limitations applied to the Participant's entire
Vested Interest and not merely amounts contributed
under Section 401(k) of the Code.
20.6 DELEGATION OF AUTHORITY. The Company is hereby fully
empowered to act on behalf of itself and the other Participating Companies as
it may deem appropriate in maintaining the Plan. Without limiting the
generality of the foregoing, such actions include obtaining and retaining tax
qualified status for the Plan and appointing attorneys-in-fact in pursuit
thereof. Furthermore, the adoption by the Company of any amendment to the Plan
or the termination thereof, will constitute and represent, without any further
action on the part of any Participating Company, the approval, adoption,
ratification or confirmation by each Participating Company of any such
amendment or termination.
105
<PAGE> 109
In addition, the appointment of or removal by the Company of any member of the
Benefit Appeals Committee, any Plan Administrator, Trustee, Investment Manager
or other person under the Plan shall constitute and represent, without any
further action on the part of any Participating company, the appointment or
removal by each Participating Company of such person.
106
<PAGE> 110
ARTICLE 21
----------
LIMITATIONS ON ANNUAL ADDITIONS
-------------------------------
21.1 MAXIMUM ANNUAL ADDITIONS. Notwithstanding anything
contained in this Plan to the contrary, in no event shall a Participant's
Annual Additions and annual amount of retirement benefits be greater than the
maximum allowable amounts determined in accordance with Section 415 of the Code
and regulations thereunder, taking into account Section 1106 of the Tax Reform
Act of 1986, Section 235(g) of the Tax Equity and Fiscal Responsibility Act of
1982 and Section 2004(d) of ERISA which, respectively, are incorporated herein
by reference.
21.2 REDUCTION OF EXCESS BENEFITS. In the event that a
Participant has excess Annual Additions, adjustment under Section 415 of the
Code shall be made in the following order:
(a) first, employee deferred pay contributions made
pursuant to a Participant's election under Section
4.1 hereof shall be reduced;
(b) second, employer base contributions made pursuant to
Section 5.1 hereof shall be reduced;
(c) third, profit sharing contributions made pursuant to
Section 5.1 hereof shall be reduced; and
(d) fourth, the accrued benefit of such Participant under
any defined benefit pension plan maintained by a
Participating Company or Related Employer shall be
reduced.
21.3 DEFINITIONS. For purposes of calculating the maximum
allowable amounts under Section 21.1 hereof, a Participant's "Annual Additions"
and "Limitation Year" shall have the same meaning as that set forth in Sections
2.5 and 2.21 hereof
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<PAGE> 111
and his compensation shall mean his "Testing Compensation" as defined in
Section 2.35(a) of this Plan and paid and includible in gross income during the
Limitation Year.
21.4 SUSPENSE ACCOUNT. In the event that, after the
application of Section 21.2 above, there still remain Participating Company
contributions which, if allocated to a Participant, would be in excess of the
limits on Annual Additions set forth in Section 21.1 hereof, and which arise as
a result of the allocation of forfeitures, a reasonable error in estimating a
Participant's Compensation or other limited facts and circumstances which the
Commissioner of Internal Revenue finds justify the availability of the rules
set forth in this Section 21.4, such excess amounts shall be used in the next
Limitation Year and any succeeding Limitation Years, as necessary, to reduce
Participating Company contributions which would otherwise be made for such
Participant in such Limitation Year or Years. In the event such a Participant
terminates employment at a time when excess amounts still remain on his behalf,
such excess amounts shall be used as follows:
(a) excess amounts which represent profit sharing
contributions by the Participating Company shall be
used to reduce the profit sharing contributions for
all Participants employed by the Participating
Company; and
(b) excess amounts which represent deferred pay
contributions shall be paid directly to him by the
Participating Company.
Until any excess amounts described above are used to reduce Participating
Company contributions, they shall be held in a suspense account.
108
<PAGE> 112
Effective June 1, 1990, a suspense account established under
this Section 21.4 shall be subject to the periodic valuation procedure
described in Article 8 hereof and will be adjusted to take account of the
income and/or gains or losses of the investment funds of the Trust Fund; for
periods on and after the Restatement Date but prior to June 1, 1990, such
suspense account shall not be subject to the periodic valuation procedure
described in Article 8 hereof. Notwithstanding any other provisions of this
Plan to the contrary (and specifically Section 22.5 hereof), in the event this
Plan is terminated at a time when there are amounts credited to a suspense
account pursuant to this Section 21.4, such amounts shall be returned to the
appropriate Participating Companies. In the event that amounts representing
deferred pay contributions are returned to such Participating Companies
hereunder, the appropriate Participating Company shall make payments to the
Participants on whose behalf such contributions were made equal to the total of
said refunded amounts.
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<PAGE> 113
ARTICLE 22
----------
MISCELLANEOUS
-------------
22.1 RESPONSIBILITY OF INSURANCE COMPANY. No insurance
company shall be deemed to be a party to this Plan for any purpose, nor shall
it be responsible for the validity of this Plan. No such company shall be
required to look into the terms of this Plan or question any action of the
Trustee hereunder or under the Trust Agreement, nor be responsible to see that
any action of the Trustee is authorized by the terms of this Plan or the Trust
Agreement. Any such insurance company shall be fully discharged from any and
all liability for any amount paid to the Trustee or paid in accordance with the
direction of the Trustee, or for any change made or action taken by such
insurance company upon such direction, and no insurance company shall be
obligated to see to the distribution or further application of any moneys so
paid by it. The certificate of the Trustee may be received by any insurance
company as conclusive evidence of any of the matters mentioned in this Plan,
and each insurance company shall be fully protected in taking or permitting any
action on the faith thereof and shall incur no liability or responsibility for
doing so.
22.2 EFFECT OF INSOLVENCY OR CONSOLIDATION ON PLAN. In
the event a Participating Company shall at any time be judicially declared
bankrupt or insolvent, or in the event of its dissolution, merger or
consolidation without any provisions being made for the continuation of this
Plan, the Plan created hereunder shall terminate as to Participants employed by
such Participating Company
110
<PAGE> 114
and the Trustee shall make distributions as provided in Section 21.2 hereof.
22.3 MERGER OR TRANSFER OF PLAN ASSETS. In the event the
Plan shall merge or consolidate with, or transfer any of its assets or
liabilities to any other plan, each Participant shall be entitled to receive,
if the Plan were terminated immediately thereafter, a benefit which is equal to
or greater than the benefit he would have been entitled to receive immediately
before the merger, consolidation or transfer if the Plan had then terminated,
in accordance with Section 414(1) of the Code and Section 208 of ERISA.
22.4 LIMITATION ON RIGHTS GRANTED TO PARTICIPANTS.
Neither anything contained herein, nor any contribution made hereunder, nor any
other acts done in pursuance of this Plan, shall be construed as entitling any
Participant to be continued in the employ of a Participating Company or any
Affiliate for any period of time nor as obliging a Participating Company or any
Affiliate to keep any Participant in its employ for any period of time, nor
shall any Employee of a Participating Company or any Affiliate nor anyone else
have any rights whatsoever, legal or equitable, against a Participating Company
or the Trustee as a result of this Plan except those expressly granted to him
hereunder.
22.5 NON-REVERSION OF PLAN ASSETS TO PARTICIPATING
COMPANIES; EXCEPTIONS. No contribution or payment by a Participating Company
to the Trustee of this Plan, nor any income of the Trust Fund, shall in any
event revert or be credited to or be used for the benefit of a Participating
Company, and all such
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contributions, payments and income shall be used solely and exclusively for the
benefit of the Participants and their Beneficiaries under this Plan, except
that the Trustee shall return to a Participating Company upon written request
of such Participating Company:
(a) any contributions made by the Participating Company
by a mistake of fact, provided such contributions are
returned to the Participating Company within one (1)
year after the date such contributions were made;
(b) any contributions made for Plan Years during which
this Plan does not initially qualify under Section
401(a) of the Code, provided such contributions are
returned to the Participating Company within one (1)
year after the date of denial of qualification, but
only if an application for determination was made
with the Internal Revenue Service by the time
prescribed by law for filing the Participating
Company's tax return for the Taxable Year in which
the Trust and Plan was adopted, or on such later date
as the Secretary of the Treasury may prescribe; and
(c) any contributions, to the extent that their deduction
is disallowed under Section 404 of the Code, provided
that such disallowed contributions are returned to
the Participating Company within one (1) year after
the disallowance of the deduction.
Notwithstanding the foregoing, any contributions or part thereof described in
(a), (b) or (c) above that are made to the Plan by a Participating Company
pursuant to a Participant's election under Section 4.1 hereof shall not be
returned to the Participating Company, but shall instead be returned to the
Participant at whose election such contributions were made.
22.6 PROCEDURES FOR SPOUSAL CONSENT. If any provision of
this Plan shall require the consent of the spouse of a Participant, such
consent shall be in writing with the signature of the spouse
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notarized or witnessed by the Plan Administrator. Notwithstanding any
provision hereof to the contrary, the consent of the spouse shall not be
necessary if it is established to the satisfaction of the Plan Administrator
that the signature of the spouse cannot be obtained either because the spouse
cannot be located or because of such other circumstances as the Secretary of
the Treasury may prescribe by lawful regulations. Any consent given by a
spouse pursuant to this Section 22.6 shall be effective only with respect to
such spouse and shall not be effective with respect to any other spouse of such
Participant.
22.7 SPOUSAL CONSENT. Notwithstanding any provision of
this Plan to the contrary, the Plan Administrator, where required by law or
where it deems appropriate, may require spousal consent for actions taken,
elections made, or the exercise of any rights by a married Participant under
this Plan. Any consent by a spouse pursuant to this Section 22.7 shall be made
in accordance with Section 22.6 hereof.
22.8 INDEMNIFICATION. The Participating Companies shall
jointly and severally indemnify, defend and hold harmless any officers,
Employees or directors or former officers, Employees or directors of any
Participating Company or Affiliate for all acts taken or omitted in carrying
out the responsibilities of the Company, Participating Companies, Plan
Administrator or Benefit Appeals Committee under the terms of this Plan or
other responsibilities imposed upon such individuals by ERISA. This
indemnification for all acts or omissions is intentionally broad, but shall not
provide indemnification for embezzlement or diversion
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of funds for the benefit of any such individuals, nor shall it provide
indemnification for excise taxes imposed under Section 4975 of the Code. The
Participating Companies shall indemnify such individuals for expenses of
defending an action by a Participant, Beneficiary, government entity or other
person, including all legal fees and other costs of such defense. The
Participating Companies will also reimburse such an individual for any monetary
recovery in a successful action against any such person in any federal or state
court or arbitration. In addition, if the claim is settled out of court with
the concurrence of the Company, the Participating Companies shall indemnify
such person for any monetary liability under said settlement. Notwithstanding
the foregoing provisions of this Section 22.8, no indemnification shall be
provided with respect to any person who is not an individual officer, Employee
or director or former officer, Employee or director of a Participating Company
or Affiliate nor with respect to any claim by a Participating Company or
Affiliate against such individual.
22.9 GENDER. Whenever any pronoun is used herein, it
shall be construed to include the masculine pronoun, the feminine pronoun or
the neuter pronoun as shall be appropriate.
22.10 STATE LAW. This Plan shall be construed under and in
accordance with the law and laws of the State of Delaware and of the United
States of America.
22.11 EFFECT OF AMENDMENT AND RESTATEMENT. Notwithstanding
any provision of this Amendment and Restatement to the contrary, this Amendment
and Restatement shall not affect the balances credited to the Accounts of any
Participant as of the
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<PAGE> 118
Restatement Date, which balances shall remain credited to his Accounts until
such date subsequent to the Restatement Date as of which his Accounts shall be
credited, debited, or adjusted as provided in this Plan, and shall not affect
the amount or method of distribution of the Vested Interests of Participants
who died, became disabled, retired or terminated employment prior to the
Restatement Date.
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<PAGE> 119
IN WITNESS WHEREOF, Sealy Corporation, by its appropriate
officer duly authorized, has caused this Plan to be executed as of the 21st
------
day of November , 1995.
----------
SEALY CORPORATION
("Company")
By /s/ Jeffrey C. Claypool
-----------------------
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
Before me, a Notary Public in and for said County and State,
personally appeared the above-named Sealy Corporation by
Jeffrey C. Claypool , its Vice President who acknowledged that he did
- -------------------------- ----------------
sign the foregoing instrument.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Cleveland, Ohio, this 21st day of November , 1995.
---- ----------
/s/ Illegible
---------------------------------
Notary Public
123/21528ADJ.63A
116
<PAGE> 1
EXHIBIT 10.2
SEALY BENEFIT EQUALIZATION PLAN
Effective Date: December 1, 1994
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Article Page
- ------- ----
<S> <C> <C>
ARTICLE I PRELIMINARY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV PROFIT SHARING CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI PAYMENTS AND BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII RIGHTS OF PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IX CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE X ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XI AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XII PARTICIPATING COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XIII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
ii
<PAGE> 3
SEALY BENEFIT EQUALIZATION PLAN
-------------------------------
This Declaration of Plan is hereby made by SEALY CORPORATION,
a corporation organized and existing under and by virtue of the laws of the
State of Delaware (the "Company");
WITNESSETH:
WHEREAS, the Company wishes to establish an unfunded deferred
compensation plan to be known as the Sealy Benefit Equalization Plan (the
"Plan") to provide unfunded deferred compensation to a select group of
management and highly compensated employees of Participating Companies; and
WHEREAS, the Board of Directors of the Company has approved
adoption of the Plan by the Company;
NOW, THEREFORE, effective as of December 1, 1994, the Company
hereby adopts the Plan as follows:
iii
<PAGE> 4
ARTICLE I
---------
PRELIMINARY PROVISIONS
----------------------
1.1 NAME. The name of this Plan shall be the SEALY
BENEFIT EQUALIZATION PLAN.
1.2 EFFECTIVE DATE. The provisions of the Plan are
effective December 1, 1994.
1.3 PURPOSE. This Plan is hereby established in order to
provide unfunded deferred compensation to a select group of management and
highly compensated employees of Participating Companies, under certain
conditions specified herein.
1.4 PLAN FOR A SELECT GROUP. This Plan shall only cover
employees of Participating Companies who are members of a "select group of
management or highly compensated employees" as provided in Sections 201(2),
301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA. This Plan shall be administered
in such a manner, and benefits hereunder shall be so limited, notwithstanding
any contrary provision of this Plan, that this Plan shall constitute such a
plan.
1.5 NOT A FUNDED PLAN. It is the intention and purpose
of the Company, other Participating Companies and Participants that this Plan
shall be deemed to be "unfunded" for tax purposes as well as being such a plan
as would properly be described as "unfunded" for purposes of Title I of ERISA.
This Plan shall be administered in such a manner, notwithstanding any contrary
provision of this Plan, that it will be so deemed and would be so described.
1
<PAGE> 5
ARTICLE II
----------
DEFINITIONS
-----------
The use of neuter, masculine and feminine pronouns shall each be read
to include the others and the use of the singular shall be read to include the
plural and vice versa. Unless the context otherwise indicates, the following
words shall have the following meanings when used in this Plan:
2.1 ACCOUNTS. The word "Accounts" shall mean "Deferred
Compensation Accounts" established pursuant to Article V hereof.
2.2 ADOPTION DATE. The words "Adoption Date" shall mean
the date as of which the Company or a Subsidiary became or becomes a
Participating Company under this Plan.
2.3 AFFILIATE. The word "Affiliate" shall mean a
corporation which would be defined as a member of a controlled group of
corporations which includes a Participating Company or any business
organization which would be defined as a trade or business (whether or not
incorporated) which is under "common control" with a Participating Company
within the meaning of Sections 414(b) and (c) of the Code, and any member of an
"affiliated service group," as defined in Section 414(m) of the Code, or which
is a member of an arrangement described in Section 414(o) of the Code, which
includes a Participating Company but, in each case, only during the periods any
such corporation, business organization or member would be so defined or
described.
2
<PAGE> 6
2.4 BENEFIT APPEALS COMMITTEE. The words "Benefit
Appeals Committee" or "Committee" shall mean the Benefit Appeals Committee
established pursuant to Article IX of this Plan.
2.5 BOARD. The word "Board" shall mean the Board of
Directors of the Company.
2.6 BREACH OF NONCOMPETITION REQUIREMENT. The words
"Breach of Noncompetition Requirement" shall mean the occurrence of an event in
which a Participant, at any time prior to his payment in full hereunder:
(a) either while he is employed by the Company and/or any
Subsidiary or after his Termination of Employment; and
(b) without the prior written permission of the Company;
and
(c) either directly or indirectly operates or performs
any advisory or consulting services for, invests in
(other than an investment in Publicly Traded stock of
a corporation, provided that the ownership of such
equity interest does not give the Participant the
right to control or substantially influence the
policy or operational decisions of such corporation),
or otherwise becomes employed by or associated with,
in any capacity, a Competitive Entity.
2.7 CAUSE. The word "Cause" shall mean for purposes of
this Plan, either:
(a) the Participant's willful violation of any written
policies of the Company which violations are
materially detrimental to the Company;
(b) the Participant's conviction of (or written,
voluntary and freely given confession to) a felony
involving moral turpitude;
(c) the Participant's conviction of (or written,
voluntary and freely given confession to) a felony in
connection with his employment;
3
<PAGE> 7
(d) a Participant's theft, fraud, embezzlement, material
willful destruction of property (including any
operating system of the Company or any Subsidiary) or
material disruption of the operations of the Company
or any Subsidiary;
(e) a Participant's being under the influence of illegal
drugs or habitually under the influence of alcohol
while on the job or on Company or any Subsidiary
property;
(f) a Participant's engaging in conduct, in or out of the
workplace, which has a material adverse effect on the
reputation or business prospects of the Company or
one of its Subsidiaries;
(g) a Participant's willfully engaging in conduct while
an employee of the Company or any of its Subsidiaries
which caused the Company or any of its Subsidiaries
to be found, in a final judgment of a court of law,
to have a material civil or criminal liability under
any federal or state law;
(h) a Participant's disclosure of trade secrets, customer
lists or other confidential information if the
Company or any Subsidiary has taken measures designed
to prevent such disclosure; or
(i) a Participant's Breach of the Noncompetition
Requirement.
2.8 CHANGE OF CONTROL. The words "Change of Control"
shall mean:
(a) a change in the composition of the Board of the
Company such that a majority of such Board members
are not the same persons who were directors twelve
(12) months earlier;
(b) approval by the corporate members of the Company (as
defined in the By Laws of the Company) of a
reorganization, merger or consolidation with respect
to which, in any such case, the persons who were the
corporate members of the Company immediately prior to
such reorganization, merger or consolidation do not,
immediately thereafter, own more than 51% of the
combined voting power entitled to vote in the
election of the directors or trustees of the
reorganized, merged or consolidated company; or
(c) liquidation or dissolution of the Company; or
4
<PAGE> 8
(d) a sale of all or substantially all of the assets of
the Company.
2.9 CODE. The word "Code" shall mean the Internal
Revenue Code of 1986, as such may be amended from time to time, and lawful
regulations and pronouncements promulgated thereunder. Whenever a reference is
made to a specific Code Section, such reference shall be deemed to include any
successor Code Section having the same or a similar purpose.
2.10 COMPANY. The word "Company" shall mean Sealy
Corporation, a Delaware corporation, and any successor corporation or business
organization which shall assume the duties and obligations of Sealy Corporation
by operation of law or otherwise under this Plan.
2.11 COMPENSATION. The word "Compensation" shall mean all
Profit Sharing Plan Compensation:
(a) in excess of One Hundred Fifty Thousand Dollars
($150,000.00), subject to adjustments for increases
in the cost of living as shall be prescribed by the
Secretary of the Treasury pursuant to Section 401(a)
(17) of the Code;
(b) but not in excess of Two Hundred Thousand Dollars
($200,000.00), subject to adjustments for increases
in the cost of living as shall be prescribed by the
Secretary of the Treasury pursuant to Section 415 of
the Code and calculated as if Section 401(a)(17) of
the Code had not been amended either (i) to replace
Two Hundred Thousand Dollars ($200,000.00) with One
Hundred Fifty Thousand Dollars ($150,000.00) or (ii)
to change the method of cost of living adjustment of
the dollar amount [and which was last increased prior
to such amendment to Two Hundred Thirty-Five Thousand
Eight Hundred Forty Dollars ($235,840.00) for plan
years beginning in 1993];
paid by Participating Companies to a Participant during a Plan Year for
services rendered to Participating Companies. The amount of a
5
<PAGE> 9
Participant's Compensation for any Plan Year shall be determined as of the last
day of such year.
In determining the floor and ceiling on Compensation set forth
in the preceding paragraph, the family aggregation rules contained in Section
414(q)(6) of the Code shall apply, except that in applying such rules, the term
"family" shall include only the spouse of the Employee and any lineal
descendants of the Employee who have not attained age nineteen (19) before the
close of the Plan Year. If, as a result of the application of such family
aggregation rules, the limit on Compensation set forth above is exceeded, the
amount of each family member's Compensation which shall count toward the limit
shall equal that portion of the limit which bears the same relationship to the
limit as such family member's Compensation, determined under this Section 2.11
prior to the application of such Compensation limit ("unlimited compensation"),
bears to the total unlimited compensation of all the family members.
2.12 COMPETITIVE ENTITY. The words "Competitive Entity"
shall mean any company, partnership, organization, proprietorship, or other
entity (including any independent trademark licensee of the Company or one or
more of its Subsidiaries) which (as determined by the Plan Administrator)
develops, manufactures, prepares, sells (other than on a retail basis) or
distributes (other than on a retail basis):
(a) in the case of all Participants, bedding, bedding
components or related bedding products including but
not limited to mattresses, boxsprings, foundations,
bedding equipment, innerspring bedding products,
sofabeds, waterbeds, futons and wire
6
<PAGE> 10
formed metal parts and other components used in the
manufacturing of bedding;
(b) in the case of a Participant who is employed as
corporate staff immediately prior to his Termination
of Employment, other products or components of such
products where such product line or lines in the
aggregate constitute ten percent (10%) of gross sales
of the Company and its Subsidiaries; or
(c) in the case of a Participant who is employed by a
Subsidiary or division immediately prior to his
Termination of Employment, other products or
components of such products developed, manufactured,
prepared, sold or distributed by such Subsidiary or
division.
Notwithstanding anything in this Article II to the contrary, a company,
partnership, organization, proprietorship, or other entity which purchases the
stock or assets of a business unit directly from the Company or any Subsidiary
shall not be deemed a Competitive Entity solely with respect to the products
developed, manufactured, prepared, sold, or distributed by and the individuals
employed by such business unit as of the date of such stock or asset purchase.
2.13 CONTINUOUS SERVICE. The words "Continuous Service"
shall mean for an Employee of a Participating Company, his length of service
from the later of his Date of Hire to his date of Termination of Employment
which follows such Date of Hire, even if such company was not a Participating
Company at the time of the Participant's Date of Hire.
2.14 COVERED EMPLOYEE. The words "Covered Employee" shall
mean an Employee of a Participating Company who:
(a) is an "active participant" in the Profit Sharing
Plan as the term "active participant" is defined
in that plan;
7
<PAGE> 11
(b) receives remuneration from one or more Participating
Companies which, in the aggregate for the Plan Year,
exceeds the limit on remuneration which may be taken
into account by a tax qualified retirement plan in
accordance with Section 401(a)(17) of the Code;
(c) is a senior management employee of a Participating
Company, as determined in the discretion of the Plan
Administrator; and
(d) is designated as a Covered Employee in the discretion
of the Plan Administrator.
An Employee shall become a Covered Employee as of the first day on which he
satisfies all of the requirements of (a), (b), (c) and (d) above. An Employee
shall cease to be a Covered Employee as of the first day thereafter on which he
ceases to satisfy any one of such requirements. With respect to requirement
(b) relating to remuneration, an Employee will be deemed to first satisfy such
requirement on the first day as of which his remuneration exceeds the limits
referred to in (b) relating to remuneration; an Employee will be deemed to
cease to satisfy such requirement on the last day of the first Plan Year for
which his remuneration is not so limited. With respect to requirements (c) and
(d) above relating to determination of senior management status or designation
as a Covered Employee, the determination or designation may be current,
prospective or retroactive, provided it cannot be made retroactive more than
the Plan Year preceding the Plan Year in which the determination or designation
is made; an Employee shall not cease to be designated as a Covered Employee
pursuant to (d) above unless he ceases to satisfy any one of the requirements
in (a), (b) or (c) above.
8
<PAGE> 12
2.15 DATE OF HIRE. The words "Date of Hire" shall mean the
date on which an Employee commences employment and works at least one (1) Hour
for a Participating Company or any Affiliate, even if such company was not a
Participating Company at the time of such Date of Hire, and shall mean, in the
case of a rehired Employee, the first date following his previous Termination
of Employment on which he works at least one (1) Hour for a Participating
Company or any Affiliate, even if such company was not a Participating Company
on such date.
2.16 DEFERRED COMPENSATION ACCOUNT. The words "Deferred
Compensation Account" shall mean for each Participant the bookkeeping account
maintained on his behalf to reflect profit sharing contributions made on his
behalf and all earnings and losses thereon.
2.17 DISABILITY. The word "Disability" shall mean any
disability which prevents an Employee from performing each of the material
duties of his regular occupation.
2.18 EFFECTIVE DATE. The words "Effective Date" shall
mean the effective date of this Plan which is December 1, 1994.
2.19 EMPLOYEE. The word "Employee" shall mean any
common-law employee of a Participating Company. The word "Employee"
shall not include any person who renders service to a Participating Company
solely as a director, independent contractor or Leased Employee.
2.20 ERISA. The acronym "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as the same may be amended from time to
time, and lawful regulations and pronouncements
9
<PAGE> 13
promulgated thereunder. Whenever a reference is made to a specific ERISA
Section, such reference shall be deemed to include any successor ERISA Section
having the same or a similar purpose.
2.21 HOURS. The word "Hours" shall mean for any Employee
who is covered by the Fair Labor Standards Act, as amended, the actual number
of Hours for which he is directly or indirectly paid or entitled to payment by
a Participating Company or any Affiliate, including payments pursuant to an
award or agreement requiring a Participating Company or an Affiliate to pay
back wages, irrespective of mitigation of damages. Hours under this paragraph
shall be calculated and credited pursuant to Section 2530.200b-2(b) and (c) of
the Department of Labor Regulations which are incorporated herein by reference.
For any Employee who is not covered by the Fair Labor Standards Act, as
amended, such an Employee shall be credited with the equivalent of one hundred
ninety (190) Hours for each month he is paid or entitled to payment by the
Company or any Affiliate for at least one (1) Hour pursuant to Section
2530.200b-3(e)(ii) of the Department of Labor Regulations which are
incorporated herein by reference.
Notwithstanding the foregoing,
(a) no Employee shall be credited with more than 501
Hours with respect to payments he receives or is
entitled to receive during any single continuous
period during which he performs no services for a
Participating Company or an Affiliate (irrespective
of whether he has terminated employment) due to
vacation, holiday, illness, incapacity (including
disability), layoff, jury duty, military duty, or
leave of absence;
(b) no Employee shall be credited with Hours with respect
to payments he receives or is entitled to receive
during a period when he performs no
10
<PAGE> 14
services for a Participating Company or an Affiliate
under a plan maintained solely for the purpose of
complying with applicable workmen's compensation,
unemployment compensation, disability insurance or
Federal Social Security laws; and
(c) no Employee or former Employee shall be credited with
Hours with respect to payments he receives or is
entitled to receive under a pension benefit plan to
which a Participating Company or an Affiliate has
contributed during a period when he performs no
services for a Participating Company or an Affiliate.
Notwithstanding the foregoing provisions of this Section 2.21, in the event any
Employee does not perform services for the Company or any Affiliate by reason
of either:
(i) the pregnancy of such Employee; or
(ii) the birth of a child of such Employee; or
(iii) the placement of a child with such Employee in
connection with the adoption of such child by such
Employee; or
(iv) caring for such child for a period beginning
immediately following such birth of placement;
such Employee shall, solely for purposes of determining whether the Employee
has incurred a One (1) Year Break-In-Service pursuant to Section 2.23 hereof,
be credited either with the Hours which otherwise would normally have been
credited to such Employee but for such absence or, in any case in which the
Plan Administrator is unable to determine the Hours described in the preceding
clause, eight (8) Hours per day of such absence provided, however, that the
total number of Hours which an Employee may be credited with by reason of any
such pregnancy, birth or placement shall not exceed 501 Hours. An Employee
shall be credited with the Hours described in the preceding sentence only in
the Taxable Year in which the
11
<PAGE> 15
absence from work begins if the Employee would be prevented from incurring a
One (1) Year Break-In-Service in such Plan Year solely because the Employee is
credited with Hours pursuant to the preceding sentence or, in any other case,
in the immediately following Taxable Year. The Plan Administrator may require
any Employee who is absent from work because of any such pregnancy, birth or
placement to furnish to the Plan Administrator such timely information as the
Plan Administrator may reasonably require to establish both that the Employee's
absence from work is because of such pregnancy, birth or placement and the
number of days during which the Employee was absent because of such pregnancy,
birth or placement.
2.22 LEASED EMPLOYEE. The words "Leased Employee" shall
mean an individual who is an employee of an organization which has entered into
an employee leasing arrangement with a Participating Company and who is
required to be treated as an employee of a Participating Company for certain
employee benefits law purposes pursuant to Section 414(n) of the Code.
2.23 ONE (1) YEAR BREAK-IN-SERVICE. The words "One (1)
Year Break-In-Service" shall mean for any Employee or former Employee a Plan
Year, ending after his Termination of Employment, during which the Employee or
former Employee did not complete more than five hundred (500) Hours for a
Participating Company or any Affiliate.
2.24 PARTICIPANT. The word "Participant" shall mean a
Covered Employee who becomes a Participant in this Plan pursuant to
12
<PAGE> 16
Article III hereof. A Participant shall cease to be a Participant upon his
Termination of Employment.
2.25 PARTICIPATING COMPANY. The words "Participating
Company" shall mean the Company and/or any Subsidiary which has been designated
by the Company as a Participating Company. The Participating Companies as of
the Effective Date are listed in Article XII of this Plan.
2.26 PLAN. The word "Plan" shall mean the Sealy Benefit
Equalization Plan, as set forth herein, and as it may be later amended.
2.27 PLAN ADMINISTRATOR. The words "Plan Administrator"
shall mean Sealy, Inc., an Ohio Corporation, or such successor as may be
appointed by the Board of Directors of Sealy Corporation pursuant to Article X
hereof.
2.28 PLAN YEAR. The words "Plan Year" shall mean the
twelve (12) month period commencing on December 1 and ending on the following
November 30. The Plan Year of this Plan shall correspond to the plan year of
the Profit Sharing Plan.
2.29 PROFIT SHARING PLAN. The words "Profit Sharing Plan"
shall mean the Sealy Profit Sharing Plan.
2.30 PROFIT SHARING PLAN COMPENSATION. The words "Profit
Sharing Plan Compensation" shall mean, with respect to a Participant in this
Plan, his "compensation" (as that word is defined in the Profit Sharing Plan)
paid by Participating Companies in this Plan for services rendered to
Participating Companies in this Plan for a Plan Year in which at any time he is
a Participant in this Plan, but determined without regard to the dollar
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<PAGE> 17
limitations on such compensation set forth in the Profit Sharing Plan. The
amount of a Participant's Profit Sharing Plan Compensation for any Plan Year
shall be determined as of the last day of such year.
2.31 SUBSIDIARY. The word "Subsidiary" shall mean any
corporation in which the Company owns, directly or indirectly, stock possessing
at least eighty percent (80%) or more 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 such corporation, as determined
pursuant to Section 1563(a)(1) of the Code, but only during the period any such
corporation would be so defined.
2.32 TERMINATION OF EMPLOYMENT. The words "Termination of
Employment" shall mean for any Employee the occurrence of any one of the
following events:
(a) he is discharged by a Participating Company or any
Affiliate unless he is subsequently reemployed and
given pay back to his date of discharge;
(b) he voluntarily terminates employment with a
Participating Company or any Affiliate;
(c) he retires from employment with a Participating
Company or any Affiliate;
(d) he fails to return to work at the end of any leave of
absence authorized by a Participating Company or any
Affiliate, or within ninety (90) days following such
Employee's release from Military Service or within
any other period following Military Service in which
his right to reemployment with a Participating
Company or any Affiliate is guaranteed by law, or
within three (3) days after he has been recalled to
work following a period of layoff;
(e) he has been disabled for at least eighteen (18)
months or for a lesser period if such Employee has
14
<PAGE> 18
requested to be considered terminated and there is no
reasonable expectation that such Employee will
return to work; or
(f) he has been continuously laid-off for twelve (12)
months.
In the case of the occurrence of any event described in (d) or (e) of this
Section 2.32, the date of such Employee's Termination of Employment shall be
deemed to be the first day of any such period of leave of absence, layoff, or
Military Service.
2.33 VESTED INTEREST. The words "Vested Interest" shall
mean with respect to any Participant (a) minus (b), where:
(a) equals the sum of:
(i) his Deferred Compensation Account multiplied
by his Vested Percentage; plus
(ii) any distributions made to the Participant
from his Deferred Compensation Account since
his earliest Date of Hire which has not been
followed by five (5) consecutive One (1) Year
Breaks-In-Service, multiplied by his Vested
Percentage; and
(b) equals the amount of any distributions made to the
Participant from his Deferred Compensation Account
since his earliest Date of Hire which has not been
followed by five (5) consecutive One (1) Year
Breaks-In-Service.
2.34 VESTED PERCENTAGE. The words "Vested Percentage"
shall mean for any Participant a percentage determined on the basis of his
number of years of Vesting Service in accordance with the following table:
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<PAGE> 19
Years of Vesting Service Vested Percentage
------------------------ -----------------
[S] [C]
Less than 2 years 0%
2 but less than 3 years 20%
3 " " " 4 " 40%
4 " " " 5 " 60%
5 " " " 6 " 80%
6 or more years 100%
Notwithstanding the foregoing provisions of this Section 2.34, the Vested
Percentage of a Participant whose termination is a Termination of Employment
for Cause, or who engages in a Breach of the Noncompetition Requirement, shall
be zero percent (0%).
2.35 VESTING SERVICE. The words "Vesting Service" shall
mean for any Employee the sum of (a) plus (b) plus (c) below, where:
(a) equals the aggregate of all his periods of Continuous
Service prior to November 1, 1989;
(b) equals one (1) year for the Plan Year commencing
immediately prior to November 1, 1989, provided that
such Employee completed at least one thousand (1,000)
Hours for a Participating Company or an Affiliate
during said Plan Year; and
(c) equals the number of Plan Years, commencing on and
after November 1, 1989, during which such Employee
completed at least one thousand (1,000) Hours for a
Participating Company or an Affiliate.
A Participant's Vesting Service shall exclude any years of Vesting Service
which a rehired Employee had prior to the date of his most recent Termination
of Employment, determined as of such date of Termination of Employment pursuant
to this Section 2.35 and this sentence provided that such rehired Employee:
(i) did not have a Vested Interest under this
Plan on such date of Termination of
Employment;
(ii) has had either five (5) consecutive One (1)
Year Breaks-In-Service since the last day of
such Vesting Service; and
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<PAGE> 20
(iii) the number of years of such Vesting Service
is less than or equal to the number of
consecutive One (1) Year Breaks-In-Service
which he had after the last day of such
Vesting Service.
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<PAGE> 21
ARTICLE III
-----------
ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1 ELIGIBILITY. Each Employee who is or becomes a
Covered Employee shall be eligible to become a Participant under this Plan.
3.2 PARTICIPATION. An Employee who is a Covered Employee
on the Effective Date shall commence participation in this Plan as of the
Effective Date. Thereafter, an Employee who satisfies the eligibility
requirement of Section 3.1 hereof shall commence participation as of the later
to occur of:
(a) the date as of which he becomes a participant in the
Profit Sharing Plan; or
(b) the date as of which he becomes a Covered Employee.
3.3 CESSATION OF PARTICIPATION. A Participant shall
cease to be a Participant and shall become a former Participant, as of his
Termination of Employment.
3.4 REHIRED COVERED EMPLOYEE. In the event that a
Participating Company or an Affiliate shall reemploy a former Participant, he
shall be eligible to become a Participant in the Plan on his date of rehire,
provided he is a Covered Employee.
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<PAGE> 22
ARTICLE IV
----------
PROFIT SHARING CONTRIBUTIONS
----------------------------
4.1 AMOUNT OF CONTRIBUTION. If a Participating Company
makes a discretionary profit sharing contribution to the Profit Sharing Plan
for a plan year of the Profit Sharing Plan which corresponds to a Plan Year of
this Plan, and:
(a) if a Participant in this Plan is also a participant
in such Profit Sharing Plan for such plan year; and
(b) if such Participant's account under the Profit
Sharing Plan is entitled to share in the allocation
of such contribution; and
(c) if the allocation to such Participant's account under
the Profit Sharing Plan is limited due to the
limitation on remuneration which may be taken into
account for purposes of tax qualified retirement
plans under Section 401(a)(17) of the Code; then
an amount shall be allocated to such Participant's Account hereunder for the
corresponding Plan Year under this Plan. The amount so allocated to the
Participant's Account under this Plan shall be the same percentage of such
Participant's Compensation for the Plan Year under this Plan as his allocation
under the Profit Sharing Plan is a percentage of his "compensation" under the
Profit Sharing Plan (as the term "compensation" is defined for purposes of the
Profit Sharing Plan) for the corresponding plan year of the Profit Sharing
Plan. Such contribution will be credited to such Participant's Account under
this Plan as of such date as actual cash amounts are first allocated to his
actual accounts under the Profit Sharing Plan as a profit sharing contribution
for the relevant plan year of the Profit Sharing Plan.
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<PAGE> 23
ARTICLE V
---------
ACCOUNTS
--------
5.1 ESTABLISHMENT OF ACCOUNTS. Each Participating
Company shall establish a Deferred Compensation Account in the name of each
Participant who is employed by such Participating Company on its books and
records. All amounts so credited to the Account of any Participant or former
Participant shall constitute a general, unsecured liability of such
Participating Company to such person.
5.2 ALLOCATION OF CONTRIBUTIONS. Amounts contributed on
behalf of a Participant pursuant to Section 4.1 hereof shall be allocated to
such Participant's Account.
5.3 CREDITING OF EARNINGS. Each Participating Company
shall credit the Account of each Participant who is employed by such
Participating Company, or who incurs a Termination of Employment from that
Participating Company and who has not yet been paid his benefits hereunder,
with earnings or losses for the Plan Year or other appropriate period equal to
the time weighted rate of return on investments of the Profit Sharing Plan for
the corresponding Plan Year or other period for the Participant.
20
<PAGE> 24
ARTICLE VI
----------
PAYMENTS AND BENEFITS
---------------------
6.1 TERMINATION OF EMPLOYMENT, DISABILITY OR DEATH. A
Participant who incurs a Termination of Employment prior to his Normal
Retirement Date for a reason other than death or disability shall be entitled
to receive a distribution equal to his Vested Interest. A Participant who
incurs a Termination of Employment on or after his Normal Retirement Date or on
account of Disability shall be entitled to receive a distribution equal to the
amounts credited to his Account. In the event of the Participant's Termination
of Employment, such amounts shall be distributed at the time determined in
accordance with Section 6.3 hereof and in the form determined in accordance
with Section 6.4 hereof.
Notwithstanding the foregoing, the Participant shall not be so
entitled to benefits hereunder in the event that such termination is a
Termination of Employment for Cause or if he engages in a Breach of the
Noncompetition Requirement.
6.2 FORFEITURES. Forfeitures pursuant to Section 6.1
shall not be allocated to the Accounts of other Participants. The
Participant's Account shall be debited to reflect such forfeitures.
6.3 TIME OF DISTRIBUTION. Distributions pursuant to
Section 6.1 shall be made as soon as reasonably possible following the
Participant's Termination of Employment but not later than ninety (90) days
following the date of such Termination of Employment.
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<PAGE> 25
6.4 FORM OF DISTRIBUTION. Subject to such rules,
procedures, limits and restrictions as the Plan Administrator may establish
from time to time, a Participant or a beneficiary of a deceased Participant
shall receive any distribution resulting from the Participant's Termination of
Employment or death, as applicable, in the form of a single lump sum payment,
subject to appropriate withholding.
6.5 PROTECTIVE DISTRIBUTIONS. In the event that the Plan
Administrator determines, in its sole discretion, that a Participant is not, or
may not be, a member of a "select group of management or highly compensated
employees" within the meaning of Section 201(2), 301(a)(3), 401(a)(1) or
4021(b)(6) of ERISA or a "highly compensated employee" within the meaning of
Section 414(q) of the Code, then the Plan Administrator may, in its sole
discretion, terminate such Participant's participation in this Plan, distribute
the Vested Portion of the amounts credited to such Participant's Account in a
single lump sum payment and cause any remaining amounts credited to such
Participant's Account to be forfeited. Any such distribution shall be made at
such time as the Plan Administrator determines in its sole discretion.
22
<PAGE> 26
ARTICLE VII
-----------
BENEFICIARIES
-------------
7.1 BENEFICIARY DESIGNATION. Subject to rules and
procedures promulgated by the Plan Administrator, a Participant or former
Participant may sign a document designating a beneficiary or beneficiaries to
receive any amounts payable under this Plan due to his death. In the event
that a Participant or former Participant fails to designate a beneficiary in
accordance with the provisions of this Section 7.1, his beneficiary shall be
deemed to be the person or persons in the first of the following classes in
which there are any survivors of the Participant or former Participant:
(a) his spouse at the time of his death;
(b) his issue per stirpes; and
(c) the executor or administrator of his estate.
23
<PAGE> 27
ARTICLE VIII
------------
RIGHTS OF PARTICIPANTS
----------------------
8.1 CREDITOR STATUS OF PARTICIPANTS. The profit sharing
contributions made on behalf of a Participant hereunder shall be merely
unfunded, unsecured promises of, and joint and several obligations of, the
Participating Companies to make benefit payments in the future and shall be
liabilities solely against the general assets of the Participating Companies.
The Company and the other Participating Companies shall not be required to
segregate, set aside or escrow the profit sharing contributions nor any
earnings credited thereon. With respect to amounts credited to any Accounts
hereunder and any benefits payable hereunder, a Participant and his beneficiary
shall have the status of general unsecured creditors of the Participating
Companies, and may look only to the Participating Companies and their general
assets for payment of such Accounts and benefits.
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<PAGE> 28
ARTICLE IX
----------
CLAIMS PROCEDURE
----------------
9.1 CLAIMS FOR BENEFITS. Claims for benefits shall be
made by application of the Participant in such manner as the Plan Administrator
shall reasonably prescribe. The Plan Administrator shall process each such
claim and determine entitlement to benefits within thirty (30) days of its
receipt of a completed application for benefits. The Plan Administrator shall
notify a Participant in writing, delivered in person or mailed by first-class
mail to such Participant's last known address, if any part of a claim for
benefits under this Plan has been denied, setting forth in such notice:
(a) the specific reason for the denial;
(b) a specific reference to pertinent Plan provisions
upon which the denial is based;
(c) a description of any additional material or
information deemed necessary by the Plan
Administrator for such Participant to perfect his
claim, and an explanation of why such material or
information is necessary; and
(d) an explanation of the claim review procedure under
the Plan.
Such notice shall set forth the above information in a manner calculated to be
understood by such Participant. If the notice referred to above is not
furnished and if the claim has not been granted within the time specified above
for payment of such claim, the claim shall be deemed denied and shall be
subject to review as set forth below. Any Participant whose claim for benefits
has been denied or deemed denied shall have sixty (60) days from the date
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<PAGE> 29
the claim is deemed denied, or sixty (60) days from receipt of the notice
denying the claim, as the case may be, in which to request a review by written
application delivered to the Committee, which must specify the reason such
Participant believes the denial should be reversed. Upon receipt of a request
for review, the Committee shall schedule a hearing to be held not less than
thirty (30) nor more than forty-five (45) days from the receipt of such request
at a time and place convenient for all parties, at which time he may appear
before the Committee for a full and fair review of its decision. The notice
shall specify that such Participant must indicate in writing, at least fifteen
(15) days in advance of the time established for such hearing, his intention to
appear at the appointed time and place, or the hearing will be automatically
canceled. The reply shall specify any other persons who will accompany him to
the hearing, or such other persons will not be admitted to the hearing. The
Participant, or his duly authorized representative, may review all pertinent
documents relating to the claim in preparation for the hearing and may submit
issues and comments in writing prior to or during the hearing. The Committee
shall determine any and all questions of fact, resolve all questions of
interpretation of this instrument or related documents which may arise under
any of the provisions of this Plan or such documents as to which no other
provision for determination is made hereunder, and exercise all other powers
and discretion necessary to be exercised under the terms of this Plan which it
is herein given or for which no contrary provision is made. The decision of
the Committee shall be delivered in writing within thirty (30) days
26
<PAGE> 30
after the hearing, or if no hearing is held, within fifteen (15) days after the
date scheduled for the hearing, and shall include specific reasons for the
decision, written in a manner calculated to be understood by the Participant,
and shall contain specific references to the pertinent provisions of the Plan
and/or related documents upon which the decision is based.
9.2 ESTABLISHMENT OF BENEFIT APPEALS COMMITTEE. The
Company shall appoint the members of a Benefit Appeals Committee which shall
consist of three (3) or more members. The members of the Committee shall
remain in office at the will of the Company and the Company may from time to
time remove any of said members with or without cause. A member of the
Committee may resign upon written notice to the remaining member or members of
the Committee and to the Company respectively. In case of the death,
resignation or removal of any member of the Committee, the remaining members
shall act until a successor-member shall be appointed by the Company. Upon
request by the Plan Administrator, the Company shall notify the Plan
Administrator of the names of the original members of the Committee, of any and
all changes in the membership of the Committee, of the member designated as
Chairman, and the member designated as Secretary, and of any changes in either
office. Until notified of a change, the Plan Administrator shall be protected
in assuming that there has been no change in the membership of the Committee or
the designation of Chairman or of Secretary since the last notification was
filed with it. The Plan Administrator shall be under no obligation at any time
to inquire into the membership of the Committee or its officers. All
27
<PAGE> 31
communications to the Committee shall be addressed to its Secretary at the
address of the Company.
9.3 GOVERNANCE OF THE COMMITTEE. On all matters and
questions the decision of a majority of the members of the Committee shall
govern and control. Meetings may be held in person or by electronic means. In
lieu of a meeting, decisions may be made by unanimous written consent. The
Committee shall appoint one of its members to act as its Chairman and another
member to act as Secretary. The terms of office of these members shall be
determined by the Committee, and the Secretary and/or Chairman may be removed
by the other members of the Committee for any reason which such other members
may deem just and proper. The Secretary shall do all things directed by the
Committee. Although the Committee shall act by decision of a majority of its
members as above provided, nevertheless in the absence of written notice to the
contrary, every person may deal with the Secretary and consider his acts as
having been authorized by the Committee. Any notice served or demand made on
the Secretary shall be deemed to have been served or made upon the Committee.
9.4 ADDITIONAL COMMITTEE RULES. No member of the
Committee shall be disqualified from acting on any question because of his
interest therein. No fee or compensation shall be paid to any member of the
Committee for his services as such, but the Committee shall be reimbursed for
its expenses by the Company. The Committee and the Plan Administrator may hire
such attorneys, accountants, actuaries, agents, clerks, and secretaries as it
may deem desirable in the performance of its functions, and the expense
28
<PAGE> 32
associated with the hiring or retention of any such person or persons shall be
paid directly by the Company.
29
<PAGE> 33
ARTICLE X
---------
ADMINISTRATION
--------------
10.1 APPOINTMENT OF PLAN ADMINISTRATOR. The Board of
Directors of the Company shall appoint the Plan Administrator which shall be
any person(s), corporation or partnership, (including the Company itself) as
said Board of Directors shall deem desirable in its sole discretion. The Plan
Administrator may be removed or resign upon thirty (30) days' written notice or
such lesser period of notice as is mutually agreeable. Unless the Board of
Directors appoints another Plan Administrator, Sealy, Inc. shall be the Plan
Administrator.
10.2 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR. Except
as expressly otherwise set forth herein, the Plan Administrator shall have the
authority and responsibility granted or imposed on an "administrator" by ERISA.
The Plan Administrator shall determine any and all questions of fact, resolve
all questions of interpretation of this Plan which may arise under any of the
provisions of this Plan as to which no other provision for determination is
made hereunder, and exercise all other powers and discretions necessary to be
exercised under the terms of this Plan which it is herein given or for which no
contrary provision is made. The Plan Administrator shall have full power and
discretion to interpret this Plan and related documents, to resolve
ambiguities, inconsistencies and omissions, to determine any question of fact,
and to determine the rights and benefits, if any, of any Participant or other
applicant, in accordance with the
30
<PAGE> 34
provisions of this Plan. Subject to the provisions of any claims procedure
hereunder, the Plan Administrator's decision with respect to any matter shall
be final and binding on all parties concerned, and neither the Plan
Administrator nor any of its directors, officers, employees or delegates nor,
where applicable, the directors, officers or employees of any delegate, shall
be liable in that regard except for gross abuse of the discretion given it and
them under the terms of this Plan. All determinations of the Plan
Administrator shall be made in a uniform, consistent and nondiscriminatory
manner with respect to all Participants and beneficiaries in similar
circumstances. The Plan Administrator, from time to time, may designate one or
more persons or agents to carry out any or all of its duties hereunder.
10.3 ENGAGEMENT OF ADVISORS. The Plan Administrator may
employ actuaries, attorneys, accountants, brokers, employee benefit
consultants, and other specialists to render advice concerning any
responsibility the Plan Administrator or Committee has under this Plan. Such
persons may also be advisors to any Participating Company.
10.4 PAYMENT OF COSTS AND EXPENSES. The costs and
expenses incurred in the administration of this Plan shall be paid by one or
more of the Participating Companies, as determined by the Company. Such costs
and expenses include those incident to the performance of the responsibilities
of the Plan Administrator or Committee, including but not limited to, claims
administration fees and costs, fees of accountants, legal counsel and other
specialists, bonding expenses, and other costs of administering
31
<PAGE> 35
this Plan. Notwithstanding the foregoing, in no event will any person serving
in the capacity of Plan Administrator, or Committee member who is a full-time
employee of a Participating Company be entitled to any compensation for such
services.
32
<PAGE> 36
ARTICLE XI
----------
AMENDMENT AND TERMINATION
-------------------------
11.1 POWER TO AMEND OR TERMINATE. Except as otherwise
provided herein following a Change of Control, this Plan may be amended by the
Company at any time, or from time to time, and may be terminated by the Company
at any time, but no such amendment, modification or termination shall reduce
the Vested Portion of a Participant's Account, determined as of the date of
such amendment, modification or termination. Such amendment or termination
shall be in writing, executed by two or more officers of the Company who are
authorized to do so. This Plan may not be amended (but may be terminated)
during the two (2) year period following a Change of Control except that
amendments may be made as required by law.
11.2 EFFECTS OF PLAN TERMINATION. If this Plan is terminated
then, on and after the effective date of such termination, all deferrals
hereunder shall cease. Thereafter, all amounts then credited to each
Participant's Accounts shall become fully vested and shall be distributed to
such Participant as a single sum payment.
11.3 NO LIABILITY FOR PLAN AMENDMENT OR TERMINATION.
Neither the Company, nor any other Participating Company, nor any officer,
Employee or director thereof shall have any liability because this Plan is
amended or terminated. Without limiting the generality of the foregoing, the
Company shall have no liability for terminating this Plan notwithstanding the
fact that a
33
<PAGE> 37
Participant may have expected to have future deferrals hereunder had this Plan
remained in effect.
34
<PAGE> 38
ARTICLE XII
-----------
PARTICIPATING COMPANIES
-----------------------
12.1 LIST OF PARTICIPATING COMPANIES. The Participating
Companies and their entry dates are as follows:
PARTICIPATING COMPANIES
Sealy, Inc.
12.2 DESIGNATION OF PARTICIPATING COMPANIES. A subsidiary
or Affiliate of the Company may become a Participating Company under this Plan
as of the first day of any month. Such a subsidiary or Affiliate shall become
a Participating Company by an amendment to Section 12.1 hereof which specifies
the name of the subsidiary or Affiliate, its entry date and the location of
each facility that will participate in the Plan. Such amendment shall be
executed by the Company and consented to by the subsidiary or Affiliate.
12.3 ADOPTION OF SUPPLEMENTS. The Company may determine
that special provisions shall be applicable to some or all of the Employees of
a Participating Company, either in addition to or in lieu of the provisions of
this Plan, or may determine that certain Employees otherwise eligible to
participate in this Plan shall not be eligible to participate in this Plan. In
such event, the Company shall adopt a Supplement with respect to the
Participating Company which employs such individuals which Supplement shall
specify the Employees of the Participating Company covered thereby and the
special provisions applicable to such Employees. Any
35
<PAGE> 39
Supplement shall be deemed to be a part of this Plan solely with respect to the
Employees specified therein.
12.4 AMENDMENT OF SUPPLEMENTS. The Company, from time to
time, may amend, modify or terminate any Supplement; provided, however, that no
such action shall operate so as to deprive any Employee who was covered by
such Supplement of any vested rights to which he is entitled under this Plan or
the Supplement.
12.5 TERMINATION OF PARTICIPATION OF PARTICIPATING
COMPANY. A Participating Company may terminate this Plan with respect to
Participants employed by said Participating Company by an instrument in writing
executed on behalf of the Participating Company and delivered to the Company.
Distribution of the Accounts of Participants employed by said Participating
Company shall thereupon be made in the manner provided in Section 11.2 of this
Plan.
12.6 DELEGATION OF AUTHORITY. The Company is hereby fully
empowered to act on behalf of itself and the other Participating Companies as
it may deem appropriate in maintaining the Plan. Without limiting the
generality of the foregoing, such actions include obtaining and retaining tax
qualified status for the Plan and appointing attorneys-in-fact in pursuit
thereof. Furthermore, the adoption by the Company of any amendment to the Plan
or the termination thereof, will constitute and represent, without any further
action on the part of any Participating Company, the approval, adoption,
ratification or confirmation by each Participating Company of any such
amendment or termination. In addition, the appointment of or removal by the
Company of any
36
<PAGE> 40
member of the Benefit Appeals Committee, any Plan Administrator or other person
under the Plan shall constitute and represent, without any further action on
the part of any Participating company, the appointment or removal by each
Participating Company of such person.
37
<PAGE> 41
ARTICLE XIII
------------
MISCELLANEOUS PROVISIONS
------------------------
13.1 NON-ALIENATION. No benefits or amounts credited to
Accounts under this Plan shall be subject in any manner to be anticipated,
alienated, sold, transferred, assigned, pledged, encumbered, attached,
garnished or charged in any manner (either at law or in equity), and any
attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber,
attach, garnish or charge the same shall be void; nor shall any such benefits
or amounts in any manner be liable for or subject to the debts, contracts,
liabilities, engagements or torts of the person entitled to such benefits as
are herein provided for her or him.
13.2 TAX WITHHOLDING. The Company or any other
Participating Company may withhold from a Participant's Compensation or any
payment made by it under this Plan such amount or amounts as may be required
for purposes of complying with the tax withholding or other provisions of the
Code or the Social Security Act or any state or local income or employment tax
act or for purposes of paying any estate, inheritance or other tax attributable
to any amounts payable hereunder.
13.3 INCAPACITY. If the Plan Administrator determines
that any Participant or beneficiary entitled to payments under this Plan is
incompetent by reason of physical or mental disability and is consequently
unable to give a valid receipt for payments made hereunder, or is a minor, the
Plan Administrator may order the payments becoming due to such person to be
made to another person
38
<PAGE> 42
for his benefit, without responsibility on the part of the Plan Administrator
to follow the application of amounts so paid. Payments made pursuant to this
Section 13.3 shall completely discharge the Plan Administrator, the Company and
the other Participating Companies and the Benefit Appeals Committee with
respect to such payments.
13.4 ADMINISTRATIVE FORMS. All applications, elections
and designations in connection with this Plan made by a Participant or
beneficiary shall become effective only when duly executed on forms provided by
the Plan Administrator and filed with the Plan Administrator.
13.5 INDEPENDENCE OF PLAN. Except as otherwise expressly
provided herein, this Plan shall be independent of, and in addition to, any
other benefit agreement or plan of a Participating Company or any rights that
may exist from time to time thereunder.
13.6 NO EMPLOYMENT RIGHTS CREATED. This Plan shall not be
deemed to constitute a contract of employment between the Company or any other
Participating Company and any Participant, nor confer upon any Participant the
right to be retained in the service of the Company or any other Participating
Company for any period of time, nor shall any provision hereof restrict the
right of any Company to discharge or otherwise deal with any Participant.
13.7 RESPONSIBILITY FOR LEGAL EFFECT. Neither the
Company, nor any other Participating Company, nor the Plan Administrator or the
Benefit Appeals Committee, nor any officer, member, delegate or agent of any of
them, makes any representations or warranties, express or implied, or assumes
any responsibility
39
<PAGE> 43
concerning the legal, tax, or other implications or effects of this Plan.
Without limiting the generality of the foregoing, no Participating Company
shall have any liability for the tax liability which a Participant may incur
resulting from participation in this Plan or the payment of benefits hereunder.
13.8 SUCCESSORS. The terms and conditions of this Plan
shall inure to the benefit of and bind the Company, the other Participating
Companies, the Participants, their beneficiaries, and the successors and
personal representatives of the Participants and their beneficiaries.
13.9 CONTROLLING LAW. This Plan shall be construed in
accordance with the laws of the State of Delaware to the extent not preempted
by laws of the United States.
13.10 HEADINGS AND TITLES. The Section headings and titles
of Articles used in this Plan are for convenience of reference only and shall
not be considered in construing this Plan.
13.11 GENERAL RULES OF CONSTRUCTION. The masculine gender
shall include the feminine and neuter, and vice versa, as the context shall
require. The singular number shall include the plural, and vice versa, as the
context shall require. The present tense of a verb shall include the past and
future tenses, and vice versa, as the context may require.
13.12 EXECUTION IN COUNTERPARTS. This Plan may be executed
in any number of counterparts each of which shall be deemed an original and
said counterparts shall constitute but one and the same instrument and may be
sufficiently evidenced by any one counterpart.
40
<PAGE> 44
13.13 SEVERABILITY. In the event that any provision or term
of this Plan, or any agreement or instrument required by the Plan Administrator
hereunder, is determined by a judicial, quasi-judicial or administrative body
to be void or not enforceable for any reason, all other provisions or terms of
this Plan or such agreement or instrument shall remain in full force and effect
and shall be enforceable as if such void or nonenforceable provision or term
had never been a part of this Plan, or such agreement or instrument except as
to the extent the Plan Administrator determines such result would have been
contrary to the intent of the Company in establishing and maintaining this
Plan.
13.14 INDEMNIFICATION. The Participating Companies shall
jointly and severally indemnify, defend, and hold harmless any Employee,
officer or director of any Participating Company for all acts taken or omitted
in carrying out the responsibilities of the Company, Participating Company,
Plan Administrator or Benefit Appeals Committee under the terms of this Plan or
other responsibilities imposed upon such individual by law. This
indemnification for all such acts taken or omitted is intentionally broad, but
shall not provide indemnification for any civil penalty that may be imposed by
law, nor shall it provide indemnification for embezzlement or diversion of Plan
funds for the benefit of any such individual. The Participating Companies
shall jointly and severally indemnify any such individual for expenses of
defending an action by a Participant, dependent, service provider, government
entity or other person, including all legal fees and other costs of such
defense. The Participating Companies shall also reimburse any
41
<PAGE> 45
such an individual for any monetary recovery in a successful action against
such individual in any federal or state court or arbitration. In addition, if
a claim is settled out of court with the concurrence of the Company, the
Participating Companies shall jointly and severally indemnify any such
individual for any monetary liability under any such settlement, and the
expenses thereof. Such indemnification will not be provided to any person who
is not a present or former Employee of a Participating Company nor shall it be
provided for any claim by a Participating Company against any such individual.
42
<PAGE> 46
IN WITNESS WHEREOF, SEALY CORPORATION, the Company, by its
appropriate officer duly authorized, has caused this Plan to be executed and
adopted as of the 30th day of November, 1995.
SEALY CORPORATION
("Company")
By /s/
-----------------------------
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
Before me, a Notary Public in and for said County and State,
personally appeared the above-named Sealy Corporation by ,
its Vice President, who acknowledged that he did sign the foregoing instrument.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official
seal at Cleveland, Ohio, this 30th day of November, 1995.
_________________________________
Notary Public
43
<PAGE> 1
EXHIBIT 10.5
THE SEALY CORPORATION BONUS PROGRAM
-----------------------------------
1. PURPOSE. The Sealy Corporation Bonus Program is intended to attract and
retain employees in key positions of Sealy Corporation and selected
subsidiaries (the "Company"), to motivate participants toward achieving the
Company's objectives and to reward participants for their contributions to the
success of the Company.
2. ADMINISTRATION. The Program is administered by the Board of Directors of
the Company. The Board may delegate any of its rights and duties under the
Program to the Human Resources Committee or an officer of the Company. The
Board establishes administrative rules, determines employee eligibility,
establishes the awards to be made under the Program and their terms and
conditions. The Board shall construe and interpret the Program and its
determinations shall be final and binding upon all Program participants.
3. PARTICIPATION. Participants in the Program are selected during each fiscal
year by the Board from exempt salaried employees. Participants are assigned to
a bonus group at the sole discretion of the Board, with groupings generally as
follows:
Group 5: Senior Company Executives
Group 4: Division Presidents, Corporate and Regional Vice
Presidents
Group 3: Middle Management including Plant Managers
Group 2: Plant Controllers, Office Managers, Supervisors and
Senior Professionals
Group 1: Selected exempt employees
Non-exempt employees (eligible for overtime) and participants in the
Sealy Corporation sales Management Bonus Program shall not participate in the
Bonus Program. Participation in the Program in one year does not establish an
employment relationship for a fixed duration and does not confer the right to
continue in the employ of the Company or to participate in the Program or any
similar program in any subsequent year. Participants may be added or have
their bonus group changed during a fiscal year on a pro-rated basis at the
discretion of the Board.
4. AMOUNT OF AWARD. Bonus awards under the Program are based on the degree to
which the financial performance of the Company, its operating plants, regions
and selected subsidiaries meet the goals established for each fiscal year.
<PAGE> 2
Individual awards under the Program are based on the performance of
the business segment (i.e., Company, division, plant and/or region) to which
such participant is assigned. The percentage of salary used in the bonus award
calculation for each Group increases from zero to a stated maximum as
performance exceeds the minimum goal according to the following Schedule of
Bonus Awards:
GROUP MINIMUM TARGET MAXIMUM
----- ------- ------ -------
1 0% 5% 10%
2 0% 10% 20%
3 0% 15% 30%
4 0% 20% 40%
5 (As determined by the Board for each participant)
Subject to section 5 below, bonus awards will be calculated as a
percentage of a participant's weighted average annual rate of base salary in
effect for the fiscal year for which a bonus is payable.
5. SPECIAL CIRCUMSTANCES. A participant's bonus award will be prorated based
upon the number of days of active employment during the fiscal year under any
of the following circumstances occurring during the fiscal year:
a) the participant is hired or rehired after the beginning of the
fiscal year;
b) the participant terminates employment by reason of (1) death, (2)
long term disability, or (3) retirement (after attainment of age
65 or attainment of age 62 with 10 or more years of service); or
c) the participant experiences a period of unpaid leave of absence
(whether by layoff, workers compensation leave or other leave of
absence) for a continuous period of 30 days or more.
A participant who is transferred or promoted during the fiscal year
will receive a prorated bonus based upon the number of days worked at each
location/segment and/or in each bonus classification group.
<PAGE> 3
6. GOALS. The bonus targets for the participating segments will be based on
corporate cash requirements, budgets and expected results. The Targets are
defined in dollars as follows:
MAXIMUM is the dollar value assigned to each segment that
provides a bonus payout of two times the target goal.
TARGET is the dollar value assigned to each segment that provides
a bonus payout at target.
MINIMUM is the dollar value assigned to each segment that must be
achieved prior to any bonus payout.
Segments will be measured on one or more Operating Cash Flow (OCF)
goals (i.e., either 100% Corporate or 50% Segment and 50% Corporate) or
Aggregate Income from Plant Operations (IPO/A). These goal measurements
include:
a) Operating Cash Flow (OCF) which equals:
Income from Plant Operations (IPO)
Plus Depreciation
Minus Business or Corporate General and Administrative Expenses
(if applicable)
Plus or minus other Income and Expenses
b) Plant Operating Cash Flow/Capital Charge (OCF/C) which equals:
Income from Plant Operations
Plus Depreciation
Minus Business General and Administrative Expenses (if applicable)
Minus Working Capital Charge (1.5% per month of working capital
-- i.e., Accounts Receivable plus Inventory minus Accounts
Payable, used during the course of the year)
Plus or minus other Income and Expenses
c) Aggregate Income from Plant Operations (IPO/A) which is defined
as aggregate income from plant operations attributed to certain
customers. The Aggregate IPO for any customer is based on the
products sold to those accounts, the gross profit margin of the
products sold from the plants where they were produced and the
fully apportioned selling, administrative and overhead expenses
associated with the accounts
d) Other Targets as determined by the Board
<PAGE> 4
The following table describes the segment percentage and measurement (before
taking into account the application of any other targets described in (d)
above):
Percent of Target Percent of Target
Segment Segment Measure Corporation Measure
- ------------ ---------- ------- ----------- ---------
Sealy, Inc. 100% OCF
USA Bedding 50% OCF/C 50% OCF
National 50% IPO/A 50% OCF
Accounts
Contract 50% IPO/A 50% OCF
Regions 50% OCF/C 50% OCF
Sealy and 50% OCF/C 50% OCF
S&F Plants
Canada 50% OCF/C 50% OCF
Components 50% OCF/C 50% OCF
Upholstery 50% OCF/C 50% OCF
Woodstuff 50% OCF/C 50% OCF
Other (As determined by the Board)
7. ELIGIBILITY AND METHOD OF PAYMENT OF AWARD. A participant must be employed
by the Company on November 30 of the fiscal year for which a bonus is payable,
to be eligible to receive a bonus award for such fiscal year, unless employment
is terminated by reason set forth in Section 5(b). All such bonus awards shall
be paid in a single cash lump sum, less applicable withholding, on the January
31 immediately succeeding the end of such fiscal year, or, if later, promptly
after the completion of the audit of the Company's financial statements.
8. AMENDMENT AND TERMINATION The Board may amend, terminate or otherwise
modify the Program at any time.
<PAGE> 1
EXHIBIT 10.14
SEALY CORPORATION
AMENDMENT NO.2 TO
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Sealy Corporation, hereinafter called the "Company", hereby adopts an amendment
to the Company's 1993 Non-Employee Director Stock Option Plan, as amended by
Amendment No.1 (the "Plan"), which amendment adds the following additional
paragraphs to Section 4 of the Plan, as heretofore in effect:
Subject to the terms of the Plan, on June 27, 1995, an option to purchase
up to an aggregate of 5,000 Common Shares shall be granted to Ms. Hefner,
Messrs. Davis, Towe, and Johnston as the current Eligible Directors at an
option price per share of $15.95.
In addition to the foregoing grants, on each June 1 beginning the year
after a person becomes an Eligible Director, each such Director who is
still an Eligible Director on such June 1 shall be granted an option to
purchase 5,000 Shares at an option price per share equal to the fair
market value of a Common Share of the Company on the date such option is
granted, without further action by the Board. Subject to the provisions of
paragraph 5(c), each such option shall be exercisable for a period of ten
(10) years from the date of grant.
IN WITNESS WHEREOF, SEALY CORPORATION, by its appropriate officers duly
authorized, has executed this instrument effective as of the 27th day of June,
1995.
SEALY CORPORATION
By: /s/ [Illegible Signature]
---------------------------------
Its: Chairman, CEO and President
--------------------------------
By: /s/ John D. Moran
---------------------------------
Its: Secretary
--------------------------------
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<ARTICLE> 5
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<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> NOV-30-1995
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0
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<OTHER-SE> 330,586
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<SALES> 653,942
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