SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Mark One
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission File No. 0-13365
OshKosh B'Gosh, Inc.
A DELAWARE Corporation IRS EMPLOYER IDENTIFICATION NO 39-519915
112 Otter Avenue
Oshkosh, Wisconsin 54901
Telephone number: (414) 231-8800
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Par Value $.01 per share
Class B Common Stock, Par Value $.01 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
[X] 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 definite proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10K.
As of March 17, 1997, there were outstanding 10,535,571 shares of
Class A Common Stock and 1,260,704 shares of Class B Common
Stock, of which 8,712,383 shares and 225,049 shares,
respectively, were held by non-affiliates of the registrant.
Based upon the closing sales prices as of March 17, 1997, the
aggregate market value of the Class A Common Stock and Class B
Common Stock held by non-affiliates was $147,021,463.13 and
$4,388,455.50, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
OshKosh B'Gosh, Inc. definitive Proxy Statement for its annual
meeting to be held on May 2, 1997 (or such later date as the
directors may determine), incorporated into Part III.
INDEX
PART I PAGE
Item 1. Business
(a) General Development of Business
(b) Financial Information About Industry Segments
(c) Narrative Description of Business
Products
Raw Materials, Manufacturing and Sourcing
Sales and Marketing
Trademarks
Seasonality
Working Capital
Backlog
Competitive Conditions
Environmental Matters
Employees
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security
Holders
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Conditions
Item 8. Financial Statements and Supplementary Data
Item 9. Disagreements on Accounting and Financial
Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports
on Form 8-K
PART I
ITEM 1. BUSINESS
(a) General Development of Business
OshKosh B'Gosh, Inc. (together with its subsidiaries, the
"Company") was founded in 1895 and was incorporated in the state
of Delaware in 1929. The Company designs, manufactures, sources
and markets apparel for the children's wear, youth wear, and
men's wear markets. The Company also offers a children's
footwear collection. While its heritage is in the men's work
wear market, the Company is currently best known for its line of
high quality children's wear. The children's wear and youth wear
business represented approximately 93% of consolidated Company
revenues for 1996. The success of the children's wear business
can be attributed to the Company's core themes: quality,
durability, style, trust and Americana. These themes have
propelled the Company to the position of market leader in the
branded children's wear industry. The Company strategically
extends the product line and also leverages the economic value of
the OshKosh B'Gosh name via both domestic and international
licensing agreements.
In addition to the Company's wholesale business, the Company
also operates a chain of 115 domestic OshKosh B'Gosh branded
stores, including 110 factory outlet stores and five
showcase/mall stores, which sell first quality and irregular
OshKosh B'Gosh merchandise throughout the United States. In
1994, The Company opened an OshKosh B'Gosh showcase store in New
York City to feature a full line of OshKosh product in a
signature environment designed to reinforce brand awareness among
consumers. During 1996 the Company opened four first quality
retail stores in regional mall locations. The Company will be
expanding its retail product line in its OshKosh B'Gosh branded
stores by offering youth wear sizes for girls and boys under the
trade names Genuine Girls (girls sizes 7-16) and Genuine Blues
(boys sizes 8-16).
During 1996, the Company completed a comprehensive strategic
planning initiative. As part of this initiative and combined
with management's commitment to more efficient utilization of
working capital, the Company has taken steps to improve product
marketability, streamline operations, reduce its capital base and
cost structure and improve delivery performance. These actions
include limiting distribution of its children's wear product by
narrowing the distribution channels in which the Company's
products are sold over the next two years, discontinuing under-
performing business units and closing certain domestic
manufacturing facilities based on an on-going review of the
Company's manufacturing capacity and alternative sourcing
opportunities.
In accordance with the strategic planning initiative, the
Company reviewed the operations of its Genuine Kids business unit
and decided to discontinue the Genuine Kids brand which was used
to market a line of children's and youth apparel through a chain
of Company owned Genuine Kids retail stores. The wind-down of
the Genuine Kids store chain was completed in January 1997. See
"Item 7 Management's Discussion and Analysis of Results of
Operations and Financial Conditions" and "Special Charges" in the
Notes to the Consolidated Financial Statements, included in Item
8.
In 1985, OshKosh B'Gosh International Sales, Inc. was
created for the sale of OshKosh B'Gosh products to foreign
distributors. Over the next few years, the Company expanded
internationally through the creation of additional subsidiaries
in France, Hong Kong, Germany and the United Kingdom. During
1996, the Company decided to close the Hong Kong subsidiary, and
wind-down its unprofitable European operations. The Company's
European business will be transferred to a licensee beginning in
1997. Ownership of retail showcase stores in London and Paris
will be transferred to the Company's European licensee.
As an integrated manufacturer and marketer, the Company is
responsible for the design, manufacture and sourcing of its
apparel. Through its manufacturing facilities and third-party
contractors, the Company utilizes quality materials and skilled
workmanship from around the world to produce apparel and footwear
in accordance with Company specifications and production
schedules. The Company has been expanding its utilization of off-
shore sourcing as a cost-effective means to produce its products
and to this end, leased a production facility in Honduras in 1990
through its wholly owned subsidiary Manufacturera International
Apparel S.A. During 1996, as a part of the Company's ongoing
review of its internal manufacturing capacity, operational
effectiveness, and alternative sourcing opportunities, the
Company decided to close additional domestic manufacturing
facilities.
The Company licenses the OshKosh B'Gosh name for a wide
variety of children's products including sleepwear, outerwear,
apparel accessories, eyewear, educational toys, and bedding
products. The Company also receives royalties from international
licensees for the use of the OshKosh B'Gosh name on children's
and men's wear products. Prior to 1995, the Company had licensed
its name for use on footwear. In 1995, the Company began
sourcing and distributing footwear directly, both domestically
and internationally. During 1996, all footwear operations were
brought in-house, with the assumption of the sales and domestic
distribution functions, which were previously handled by a third-
party agent.
(b) Financial Information About Industry Segments
The Company is engaged in only one line of business, namely,
the apparel industry.
(c) Narrative Description of Business
Products
The Company designs, manufactures, sources and markets a
broad range of children's clothing as well as lines of youth wear
and men's casual work wear clothing under the OshKosh, OshKosh
B'Gosh, Baby B'Gosh or Genuine Kids labels. The Company added
the Genuine Girlsr and Genuine Bluesr labels during 1996. The
products are distributed primarily through better quality
department and specialty stores, 115 Company owned domestic
stores, and foreign retailers. The children's wear and youth
wear business, which is the largest segment of the business,
accounted for approximately 93% of 1996 sales compared to
approximately 92% of such sales in 1995 and 94% in 1994.
The children's wear and youth wear business is targeted to
reach the middle to upper middle segment of the sportswear
market, through the use of innovative designs, quality fabrics
and classic styling. The Company believes that its trade name is
a valuable asset in the marketing of its apparel, signifying
apparel that is classic in design and of high quality
construction. The Company tradename and trademarks are generally
displayed prominently on OshKosh product. Children's wear is
marketed in size ranges from layette/newborn and infant/toddler
to girls 6X and boys 7. Youth wear is in size ranges girls 7 to
16 and boys 8 to 16.
The Company's children's wear and youth wear business
includes a broad range of product categories, which are offered
in two main groups: Fashion and Basics. The Fashion group is
organized primarily in a collection format of seasonal themes,
developed by an in-house product development staff. The products
in a collection share a primary design theme which is carried out
through fabric design and the distinctive use of colors,
screenprint, embroidery, and trim applications. These
collections are presented as three to five small groups within
each merchandising season.
The Company also offers a Basics product line, consisting
primarily of staple denim products with multiple wash treatments.
The Basics product offerings for each season will typically
consist of a variety of clothing items including bib overalls,
pants, jeans, shorts and shortalls (overalls with short pant
legs), shirts, blouses and knit tops, skirts, jumpers, sweaters,
dresses, playwear and fleece. This product line is developed to
be relatively seasonless, with signature OshKosh B'Gosh classic
styling. These styles are available to retail customers for
replenishment throughout the year. Some Basics items are also
designed to serve as a foundation for the Fashion group, with
seasonal colors and styles to complement the Company's Fashion
product offering.
The men's wear line is the original business that started
the Company in 1895. The current line comprises the traditional
bib overalls, several styles of waistband-work, carpenter, and
painters-pants, five pocket jeans, work shirts and flannel
shirts, as well as coats and jackets. The line is designed with
a full array of sizes up to and including size 60 inch waists and
5x size shirts. Company management is currently re-evaluating
the men's wear product offering and anticipates a more focused
line.
Most products are designed by an in-house staff. Product
design requires long lead times, with products generally being
designed a year in advance of the time they actually reach the
retail market. While the Company's products are generally
traditional in nature and not intended to be "designer" items,
the Company attempts to incorporate current trends and consumer
preferences in its designs.
In selecting fabric and prints for its products, the Company
seeks, where possible, to obtain exclusive rights to the fabric
design from its suppliers in order to provide the Company for a
limited period of time with some protection from imitation by
competitors.
Raw Materials, Manufacturing, and Sourcing
All raw materials used in the manufacture of Company
products are purchased from unaffiliated suppliers. The Company
purchases its raw materials directly for its owned manufacturing
facilities and may also procure and retain ownership of fabric
related to garments cut and assembled by contract manufacturers.
In other circumstances, fabric is procured by the contract
manufacturer directly but in accordance with the Company's
specifications. In 1996, approximately 77% of the Company's
direct expenditures for raw materials (fabric) were from its five
largest suppliers, with the largest such supplier accounting for
approximately 28% of total raw material expenditures. Fabric and
various non-fabric items, such as thread, zippers, rivets,
buckles and snaps are purchased from a variety of domestic and
foreign sources, based on quality, pricing, and availability.
The fabric and accessory market in which OshKosh B'Gosh purchases
its raw materials is composed of a substantial number of
suppliers with similar products and capabilities, and is
characterized by a high degree of competition. As is customary
in its industry, the Company has no long-term contracts with its
suppliers. To date, the Company has experienced little
difficulty in satisfying its requirements for raw materials,
considers its sources of supply to be adequate, and believes that
it would be able to obtain sufficient raw materials should any
one of its product suppliers become unavailable.
Product development and administration are primarily
coordinated from the Company's headquarters facility in Oshkosh,
WI or its regional office in New York City. The majority of the
product engineering and sample making, allocation of production
among plants and independent suppliers, material purchases and
invoice payments is done through the Company's Oshkosh
headquarters. All designs and specifications utilized by
independent manufacturers are provided by the Company.
Approximately 65% of the Company's product line (excluding
footwear) is produced at Company-owned facilities, with the
remainder produced by numerous third party contractors throughout
the world, in accordance with the Company's specifications. Most
domestic production takes place in the Company's four Tennessee
and two Kentucky plants. The Company also leases a sewing plant
in Honduras, where cut apparel pieces are received from the
United States and are reimported by OshKosh B'Gosh as finished
goods under Section 9802 (previously Section 807). In 1996, as
part of the Company's review of manufacturing capacity and
utilization, the Company announced the closure of certain
domestic manufacturing facilities and continued to expand its use
of offshore manufacturing capabilities. These actions were part
of the Company's on-going effort to improve its product cost
structure. The Company has established guidelines for each of
its third party manufacturers in order to monitor product
quality, labor practices and financial viability. The Company
believes that its overall global manufacturing strategy gives the
Company maximum flexibility to properly balance the need for
timely shipments, high quality products and competitive pricing.
While no long-term, formal arrangements exist with its third-
party manufacturers, the Company considers these relationships to
be satisfactory. The Company believes it could, over a period of
time, obtain adequate alternative production capacity if any of
its independent manufacturers become unavailable. A sustained
disruption of such sources of supply could, particularly on a
short-term basis, have an adverse impact on the Company's
operations.
Because higher quality apparel manufacturing is generally
labor intensive (sewing, pressing, finishing and quality
control), the Company has continually sought to take advantage of
time saving technical advances in areas like computer-assisted
design, computer-controlled fabric cutting, computer evaluation
and matching of fabric colors, automated sewing processes, and
computer-assisted inventory control and shipping. In order to
realize economies of operation within the domestic production
facilities, cutting operations are located in one of the
Company's six plants, with all domestic product washing, pressing
and finishing done in one facility in Tennessee and all
screenprint and embroidery done in one facility in Kentucky.
Quality control inspections of both semi-finished and finished
products are required at each plant, including those of
independent manufacturers, to assure compliance.
Customer orders for Fashion products are booked from three
to six months in advance of shipping. Because most Company
production of styled products is scheduled to fill orders already
booked, the Company believes that it is better able to plan its
production and delivery schedules than would be the case if
production were in advance of actual orders. In order to secure
necessary fabrics on a timely basis and to obtain manufacturing
capacity from independent suppliers, the Company must make
substantial advance commitments, sometimes as much as five to
seven months prior to receipt of customer orders. Inventory
levels therefore depend on Company judgment of market demand.
Sales and Marketing
In order to meet the diverse needs of its broad customer
base, the Company uses a wide variety of distribution channels to
market its products. Wholesale distribution is made primarily
through better quality department and specialty stores, although
sales are also made through direct mail catalog companies,
foreign retailers and other outlets. In 1996, the Company's
products were sold to approximately 2,700 wholesale customers
(approximately 9,700 stores) throughout the United States, and a
sizable number of international accounts.
Product sales to better quality department and specialty
stores are made primarily by an employee sales force with the
balance of sales made by manufacturer's representatives or
through in-house accounts. In addition to the central sales
office in Oshkosh, the Company maintains regional sales offices
and product showrooms in Dallas and New York. Most members of
the Company's sales force are assigned to defined geographic
territories, with some assigned to specific large national
accounts. In sparsely populated areas and new markets,
manufacturer's representatives represent the Company on a non-
exclusive basis.
In addition to its wholesale activities, OshKosh B'Gosh
products are also sold through 115 Company-owned domestic retail
stores, operating under two formats-- factory outlet stores and
mall-based specialty stores. The Company operated 110 domestic
factory outlet stores, which carry a large selection of first
quality Company branded apparel at a discount to conventional
retail prices. The factory outlet stores also provide a means of
distributing excess and out-of-season product, reducing the
amount of such product sold to discounters at excessively low
prices. In addition, the Company also operates four regional
mall-based stores and one showcase store. These full price, full
service stores feature a full line of OshKosh B'Gosh product in a
signature environment designed to convey the total OshKosh image
and build brand recognition among customers. The stores are also
used to test new styles and merchandising strategies.
The Company's broad distribution base insulates the Company
from reliance on any one customer. No one customer accounted for
more than 10% of the Company's 1996 sales. The Company's largest
ten and largest 100 customers accounted for approximately 40% and
60% of 1996 sales, respectively.
Domestic marketing programs are aimed at both the Company's
retail accounts and ultimate consumers, with a main goal of
increasing overall brand awareness. A national marketing program
includes advertising in both consumer and trade publications,
local cooperative advertising, promotions and in-store
merchandising. The Company also offers a cooperative
advertising program to its retail customers, paying a portion of
its retail customers' advertising expenditures up to a maximum
percentage of qualifying sales.
Trademarks
The Company utilizes the OshKosh, OshKosh B'Gosh, Baby
B'Gosh, Genuine Kids, Genuine Girls or Genuine Blues
trademarks on most of its products. Other significant trademarks
include a white triangular patch on the back of bib garments and
the Genuine Article. The Company currently has approximately 35
trademark registrations and 13 pending trademark applications in
the United States and has trademark registrations in 87 countries
outside the U.S. These trademarks and universal awareness of the
OshKosh B'Gosh name are significant in marketing the products.
Therefore, it is the Company's policy to vigorously defend its
trademarks against infringement under the laws of the U.S. and
other countries. The Company is not aware of any material
infringing uses.
Seasonality
Products are designed and marketed primarily for three
principal selling seasons:
PRIMARY
RETAIL SALES SEASON BOOKING PERIOD SHIPPING PERIOD
Spring/Summer August-September January-April
Fall/Back-to-School January-February May-August
Winter/Holiday April-May September-December
The Company's business is increasingly seasonal, with
highest sales and income in the third quarter which is the
Company's peak wholesale shipping period and a major retail
selling season at its retail outlet stores. The Company's second
quarter sales and income are the lowest because of both
relatively low domestic wholesale unit shipments and relatively
modest retail outlet store sales during this period. The Company
anticipates this seasonality trend to continue to impact 1997
quarterly sales and income.
Working Capital
Working capital needs are affected primarily by inventory
levels, outstanding accounts receivable and trade payables. The
Company maintains a credit agreement with a number of banks which
provides a $60 million revolving credit facility and a $40
million revocable demand line of credit for cash borrowings,
issuance of commercial paper and letters of credit. The
agreement expires in June 1999. There were no outstanding
borrowings against these credit arrangements at December 31,
1996. Letters of credit or approximately $24 million were
outstanding at December 31, 1996.
Inventory levels are affected by order backlog and
anticipated sales. Accounts receivable are affected by payment
terms offered. It is general practice in the apparel industry to
offer payment terms of ten to sixty days from date of shipment.
The Company offers net 30 days terms only.
The Company believes that its working capital requirements
and financing resources are comparable with those of other major,
financially sound apparel manufacturers.
Backlog
The dollar amount of backlog of orders believed to be firm
as of the end of the Company's fiscal year and as of the
preceding fiscal year end is not material for an understanding of
the business of the Company taken as a whole.
Competitive Conditions
The apparel industry is highly competitive and consists of a
number of domestic and foreign companies. Some competitors have
assets and sales greater than those of the Company. In addition,
the Company competes with a number of firms that produce and
distribute only a limited number of products similar to those
sold by the Company or sell only in certain geographic areas
being supplied by the Company.
A characteristic of the apparel industry is the requirement
that a marketer recognize fashion trends and adequately provide
products to meet such trends. Competition within the apparel
industry is generally in terms of quality, price, service, style
and, with respect to branded product lines, consumer recognition
and to a lesser extent on the basis of service and price. The
Company is focusing attention on the issues of price and service
and has taken and will continue to take steps to reduce costs,
become more competitive in the eyes of value conscious consumers
and deliver the service expected by its customers.
The Company's share of the overall children's wear market is
quite small. This is due to the diverse structure of the market
where there is no truly dominant producer of children's garments
across all size ranges and garment types. In the Company's
primary channel of distribution, department and specialty stores,
it holds the largest share of the branded children's wear market.
Environmental Matters
The Company's compliance with Federal, State, and local
environmental laws and regulations had no material effect upon
its capital expenditures, earnings, or competitive position. The
Company does not anticipate any material capital expenditures for
environmental control in either the current or succeeding fiscal
years.
Employees
At December 31, 1996, the Company employed approximately
4,700 persons. Approximately 30% of the Company's personnel are
covered by collective bargaining agreements with the United
Garment Workers of America.
ITEM 2. PROPERTIES
Approximate
Floor Area in
Location Square Feet Principal Use
Albany, KY 20,000 Manufacturing
Byrdstown, TN 32,000 Manufacturing
Celina, TN 100,000 Vacant/Held for Sale
Celina, TN 90,000 Laundering/Pressing
Columbia, KY 78,000 Vacant/Held for Sale
Dallas, TX (1) 1,995 Sales Offices/Showroom
Gainesboro, TN 61,000 Manufacturing
Jamestown, TN 43,000 Manufacturing
Liberty, KY 218,000 Manufacturing/Warehousing
Liberty, KY (2) 32,000 Warehousing
New York City, NY (3) 18,255 Sales Offices/Showroom
Oshkosh, WI 99,000 Exec. & Operating Offices
Oshkosh, WI 88,000 Vacant/Held for Sale
Oshkosh, WI 128,000 Distribution/Warehousing
Red Boiling Springs, TN 41,000 Vacant/Held for Sale
White House, TN 284,000 Distribution/Warehousing
All properties are owned by the Registrant with the exception of:
(1) Lease expiration date--1998, (2) Lease expiration date--1999,
(3) Lease expiration date--2007.
The Company believes that its properties are well maintained
and its manufacturing equipment is in good operating condition
and adequate for current production. The Company determined that
it no longer required the manufacturing capacity of its plants in
Celina TN, Columbia KY, Oshkosh WI and Red Boiling Springs TN.
These facilities were closed in 1996 or will be closed in early
1997. The carrying value of these facilities have been written
down to their net realizable value.
During 1996, the Company experienced increasing difficulties
in selling its idle manufacturing facilities and equipment,
necessitating that the Company reevaluate the fair market value
of its remaining manufacturing property and equipment. The
Company recorded significant special charges during the fourth
quarter of 1996 related to the impairment of assets. All
impacted manufacturing assets being used in production have been
written down to management's estimate of fair value. See "Item 7
Management's Discussion and Analysis of Results of Operations and
Financial Conditions" and "Special Charges" in the Notes to the
Consolidated Financial Statements included in Item 8.
Substantially all of the Company's retail stores occupy
leased premises, with lease terms generally in the range of 5-7
years. During the year, the Company reached agreements
concerning the termination of substantially all Genuine Kids
retail store leases. Costs incurred to settle the remaining
lease obligations have been included in the special charges
recorded by the Company during the year. For further information
regarding the terms of the leases and rental payments thereunder,
refer to "Leases" in the Notes to the Consolidated Financial
Statements included in Item 8 of this filing.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are not parties to any material
pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
Quarterly Common Stock Data
1996 1995
Dividends Dividends
High Low per share High Low per share
Class A Common Stock
1st $17-1/2 $14-1/8 $0.07 $13-1/2 $0.07
$15
2nd 18-1/4 14-1/8 0.07 16-3/4 14 0.07
3rd 18-1/4 15-1/2 0.07 18 15-1/2 0.07
4th 17 14 0.07 17-1/2 11-1/2 0.07
Class B Common Stock
1st $19-1/2 $18-1/2 $0.06 $15 $13-1/2 $0.06
2nd 19-3/8 18-3/4 0.06 16-1/2 14-1/4 0.06
3rd 19-1/4 18-3/4 0.06 18 16-1/4 0.06
4th 19 18-7/8 0.06 18-3/4 17-1/4 0.06
The Company's Class A common stock and Class B common stock
trade on the Over-The-Counter market and are quoted on NASDAQ
under the symbols GOSHA and GOSHB, respectively. The table
reflects the "last" price quotation on the NASDAQ National Market
System and does not reflect mark-ups, mark-downs, or commissions
and may not represent actual transactions.
As of February 21,1997, there were 1,574 Class A common
stock shareholders of record and 179 Class B common stock
shareholders of record.
ITEM 6. SELECTED FINANCIAL DATA
Financial Highlights
(Dollars in thousands, except per share amounts)
Year ended December 31,
1996 1995 1994 1993 1992
Financial results
Net sales $ 444,766 $ 432,266 $ 363,363 $ 340,186 $ 346,206
Net income 1,119 10,947 7,039 4,523 15,135*
Return on sales 0.3% 2.5% 1.9% 1.3% 4.4%
Financial condition
Working capital $ 104,641 $ 95,414 $ 101,946 $ 111,794 $ 111,075
Total assets 196,033 208,579 217,211 229,131 226,195
Shareholders' equity 138,077 150,078 158,814 171,998 175,153
Data per common share
Net income $ .09 $ .85 $ .50 $ .31 $ 1.04*
Cash dividends declared
Class A .28 .28 .3775 .5125 .5125
Class B .24 .24 .33 .45 .45
Shareholders' equity 11.72 12.05 11.76 11.79 12.01
* After a charge of $601 or $.04 per share to reflect cumulative
effect of change in accounting for nonpension postretirement
benefits.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The following table sets forth, for the periods indicated,
selected Company income statement data expressed as a percentage
of net sales and the percentage change in dollar amounts compared
to the previous years.
As a percentage of net sales Percentage change in
for the years dollar amounts
December 31, from fiscal year
1996 1995 1994 1996 to 1995 1995 to 1994
Net sales 100.0% 100.0% 100.0 2.9% 19.0%
%
Cost of products sold 67.6% 68.2% 71.4% 1.9% 13.6%
Gross profit 32.4% 31.8% 28.6% 4.9% 32.3%
Selling, general and
administrative expenses 27.4% 27.9% 26.5% 1.2% 25.1%
Special charges 7.4% 0.6% -- 1118.5% N/A
Royalty income, net -1.4% -1.3% -1.3% 6.3% 19.1%
Operating income (loss) -1.0% 4.6% 3.4% -123.0% 60.8%
Other income--net 0.1% 0.1% 0.2% 99.6% -56.2%
Income (loss) before income
taxes -0.9% 4.7% 3.6% -120.3% 55.8%
Income taxes (benefit) -1.2% 2.2% 1.7% -156.4% 56.1%
Net income 0.3% 2.5% 1.9% -89.8% 55.5%
1996 Compared to 1995
Net Sales
Net sales in 1996 were $444.8 million, an increase of $12.5
million (2.9%) over 1995 net sales of $432.3 million. The
Company's 1996 domestic wholesale business of approximately
$250.5 million was 1.8% less than 1995 sales of approximately
$255 million. Shipments for 1996 were up 1.9% over 1995 unit
shipments. The decrease in dollar sales in 1996 was due
primarily to lower fall back-to-school (shipped primarily during
the Company's third quarter) and holiday (shipped during the
Company's third and fourth quarters) season order bookings,
combined with higher than anticipated order cancellations. Order
cancellations during the second half of 1996 resulted from a
combination of relatively weak retail "sell-thrus" at the
Company's retail customers (which occurred during the first half
of 1996), along with the implementation of the Company's
strategic direction to limit wholesale distribution. Actual unit
shipments during 1996 were slightly higher than in 1995 due to
higher shipments of close-out merchandise at significantly lower
prices.
A summary of the Company's retail sales at its OshKosh B'Gosh
branded stores and Genuine Kids stores follows:
Year ended December 31,
%
1996 1995 Change
(Dollars in millions)
Net sales
OshKosh B'Gosh $ 126.6 $ 97.5 29.8%
Genuine Kids 33.9 40.9 (17.1)%
Total $ 160.5 $ 138.4 16.0%
Comparable store sales in percentages
OshKosh B'Gosh +13.1% +7.9%
Genuine Kids -13.8% -4.9%
Combined +6.9% +3.6%
The Company's 29.8% increase in retail sales at its OshKosh
B'Gosh branded stores resulted from a combination of new store
openings, conversion of and combination with certain Genuine Kids
stores into OshKosh stores, as well as a 13.1% increase in
comparable store sales.
During 1996, the Company opened 15 OshKosh B'Gosh stores,
converted 4 Genuine Kids stores to OshKosh stores, combined 1
Genuine Kids store into an OshKosh store (the Genuine Kids store
was immediately adjacent to the OshKosh store), and closed 29
Genuine Kids stores. At year-end, the Company operated 100
domestic OshKosh retail stores, including 95 outlet stores and 5
showcase stores. At December 31, 1996, the Company was also
operating 58 Genuine Kids stores. In January, 1997, in
connection with the Company's previously announced plan to
discontinue its Genuine Kids retail store chain, the Company
converted an additional 15 Genuine Kids stores to OshKosh stores,
combined 7 Genuine Kids stores with OshKosh stores, and closed
the remaining 36 stores.
Gross Profit
The Company's gross profit margin as a percent of net sales
increased to 32.4% in 1996 compared with 31.8% in 1995. This
gross profit margin improvement was due to the impact of the
Company's increased retail sales at higher gross margins relative
to its domestic wholesale business, offset in part by lower
domestic wholesale business gross profit margins. The Company's
gross profit margins for its domestic wholesale business during
1996 were adversely affected by a much higher sales level of
close-out merchandise.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses (excluding special
charges) for 1996 increased $1.5 million over 1995. As a percent
of net sales, these costs decreased to 27.4% as compared to 27.9%
in 1995 due to increased sales. The increase in selling, general
and administrative expenses in dollars relates primarily to
continued expansion of the Company's retail operations, offset in
part by the discontinuance of the Company's catalog business in
late 1995.
Special Charges
During the second quarter of 1996, the Company recorded pre-tax
special charges of $20.9 million which, net of income tax
benefits, reduced net income by $8 million ($.65 per share). The
special charges related to the discontinuance of the Company's
Genuine Kids retail store chain, wind-down of the Company's
European subsidiaries and transfer of the European business to a
licensee, and the closing of the Red Boiling Springs and Celina,
Tennessee sewing facilities. These actions eliminate the under-
performing Genuine Kids and European components of the Company's
business. The plant closings are a part of the Company's on-
going review of its manufacturing capacity, operational
effectiveness, and alternative sourcing opportunities.
During the second half of 1996, the Company began to execute its
plan to discontinue the Company's Genuine Kids retail store
chain, wind-down of the Company's European subsidiaries and
transfer of the European business to a licensee, and close its
manufacturing facilities in Red Boiling Springs and Celina,
Tennessee. Severance and related benefits for approximately
1,100 affected employees are expected to total approximately $3.9
million. Through December 31, 1996, approximately 875 employees
have been severed, with a total cost of approximately $1.7
million. The remaining affected employees are expected to be
terminated in the first quarter of 1997.
The second quarter 1996 special charges also included
approximately $6.9 million related to other exit costs, including
estimated lease settlements and anticipated costs to dispose of
certain operating assets as part of the exit plan, and $2.0
million related to anticipated losses on inventory disposals.
Through December 31, 1996, approximately $2.9 million of these
other exit costs have been incurred. The second quarter 1996
special charges also include approximately $8.1 million related
to impaired assets, recognized in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed Of." The Company's decision to
implement the aforementioned changes resulted in unamortized
retail leasehold improvements and excess manufacturing space in
Tennessee. All assets held for sale but not disposed of as of
December 31, 1996 have been written down to management's estimate
of fair value (approximately $2.3 million, net of disposal costs)
as part of the special charges.
The wind-down of the European entities permitted the recognition
of certain U.S. tax deductions previously unrecognized, resulting
in an approximate $4.5 million income tax benefit. This income
tax benefit, along with the $8.4 million income tax credit
resulting from the special charges, reduced the net impact on
Company earnings by $12.9 million.
During the second half of 1996, the Company experienced
increasing difficulties in selling its idle manufacturing
facilities and equipment. In addition, in October 1996 a long
standing customer contract for apparel finishing services was not
renewed, creating significant excess capacity in the Company's
garment finishing facility. These events along with related
adverse changes in the economic environment affecting U.S.
apparel manufacturers necessitated that the Company reevaluate
the fair market value of its remaining manufacturing property and
equipment in the fourth quarter of 1996.
As a result of this analysis, and a decision to close the
Company's Columbia, Kentucky sewing facility, the Company
recorded pre-tax special charges of $12 million in the fourth
quarter which, net of income tax benefits, reduced net income by
$7.2 million ($.58 per share). The special charge includes asset
impairments of approximately $9.5 million and severance and
related benefits for approximately 500 manufacturing employees
totaling approximately $2.5 million. All impacted manufacturing
assets being used in production have been written down to
management's estimate of fair value (approximately $10.9 million)
as part of this special charge.
In total, all 1996 special charges will require approximately
$11.2 million of cash outlays. This amount will be more than
offset by the cash generated from the income tax benefit of these
special charges and asset sales. As of December 31, 1996 the
cash expenditures related to these 1996 special charges amounted
to approximately $4.2 million.
The special charges are based on management's best estimates of
costs related to these decisions. The actual costs the Company
will ultimately incur are dependent on certain risks and
uncertainties and could differ from the amounts used to record
the estimated effects of these decisions. The Company is
currently on target to substantially complete these strategic
changes during the first half of 1997 and does not anticipate any
material changes to the special charges recorded during 1996.
During the third quarter of 1995, the Company recorded a pre-tax
charge for plant closings of $2.7 million. This plant closing
charge (net of income tax benefit) reduced net income by $1.6
million ($.13 per share) in 1995. The $2.7 million pre-tax
charge for plant closings included approximately $1.9 million of
severance and related costs pertaining to work force reductions
as well as $.8 million for facility closings and the write-down
of related assets.
These plant closings were completed in early 1996, with no
material changes in cost to fully effect these actions. The
Company's cash expenditures (net of income tax benefit) to carry
out these plant closings were approximately $1 million.
Royalty Income
The Company licenses the use of its trade name to selected
licensees in the U.S. and in foreign countries. The Company's
net royalty income was $6.1 million in 1996, a $.4 million
increase over 1995 net royalty income of $5.7 million. Royalty
income from domestic licensees was approximately $2.8 million in
both 1996 and 1995. Royalty income from foreign licensees was
approximately $3.3 million in 1996 as compared to $2.9 million in
1995.
Operating Income
The Company's 1996 operating loss of $4.6 million was $24.5
million lower than 1995 operating income. Excluding the impact
of the special charges recorded in 1996 and 1995, the Company's
operating income increased to $28.3 million as compared to $22.6
million in 1995.
Income Taxes
The Company recorded a $5.2 million income tax benefit during
1996, which includes an approximate $4.5 million income tax
benefit resulting from the recognition of previously unrecorded
U.S. tax benefits related to the discontinuance of the Company's
European subsidiaries. The remaining 1996 tax benefit relates to
the Company's net loss from operations during 1996. The
Company's effective tax rate for 1995 was 45.8%. This relatively
high effective tax rate resulted primarily from the Company's
foreign operating losses (principally in Europe) which provided
no tax benefit. Company management believes that deferred tax
assets totaling $21.9 million at December 31, 1996 can be fully
realized through reversals of existing taxable temporary
differences and the Company's history of substantial taxable
income which allows the opportunity for carrybacks of current or
future losses.
1995 Compared to 1994
Net Sales
Net sales in 1995 were $432.3 million, an increase of $68.9
million (19%) over 1994 sales of $363.4 million. The Company's
1995 domestic wholesale business of approximately $255 million
was 9% more than 1994 sales of approximately $234 million, with a
corresponding increase in unit shipments of approximately 11.7%.
The average unit selling price during 1995 was down slightly due
primarily to product mix (i.e., consumer preference toward
garments with lighter weight fabrics). The increase in domestic
wholesale unit shipments was the result of a number of factors.
Improved product design during 1994 contributed to better "sell-
thrus" and margins for a majority of our wholesale customers, and
resulted in significantly higher spring 1995 (shipped primarily
during the Company's first quarter) and fall back-to-school
children's fashion shipments. In addition, Company initiatives
undertaken during 1994, and continuing during 1995, resulted in
significantly improved shipping performance to customers on
spring and fall back-to-school orders. Difficulties experienced
by the Company in coordinating the transition of its sourcing
strategy (which calls for increasing sourcing of its product from
offshore contractors) resulted in the inability of the Company to
make timely deliveries on certain holiday orders to customers.
This resulted in a slowdown in the rate of unit shipment growth
during the fourth quarter of 1995.
Company retail sales at its OshKosh B'Gosh branded outlet stores
and Genuine Kids stores were approximately $138.4 million for
1995, a 39.2% increase over 1994 retail sales of approximately
$99.4 million. This retail sales increase was primarily driven
by the opening of an additional 35 retail stores during 1995. In
addition, the Company's comparable store sales for 1995 were up
approximately 3.6%. At December 31, 1995, the Company operated
81 OshKosh B'Gosh branded stores and 92 Genuine Kids stores.
Gross Profit
The Company's gross profit margin as a percent of sales increased
to 31.8% in 1995 compared with 28.6% in 1994. This gross profit
margin improvement was due to the impact of the Company's
increased retail sales at higher gross margins relative to its
domestic wholesale business, as well as improvement in the
wholesale business gross profit margin.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses for 1995 (excluding
the $2.7 million charge for plant closures recorded during the
third quarter) increased $24.2 million over 1994. As a percent
of net sales, these costs increased to 27.9% as compared to 26.5%
in 1994. The primary reason for the increase in the Company's
selling, general, and administrative expenses is the Company's
expansion of its retail business. In addition, the Company's
expansion of its international operations have added to these
costs.
Special Charges
The Company recorded a pre-tax restructuring charge of $10.8
million in 1993. The restructuring charge included approximately
$3.3 million for facility closings, write-down of the related
assets, and severance costs pertaining to workforce reductions.
The restructuring charge also reflected the Company's decision to
market its Trader Kids line of children's apparel under the new
name of Genuine Kids and the resulting costs of the Company's
decision not to renew its Boston Trader license arrangement
beyond 1994, as well as expenses to consolidate its retail
operations. Accordingly, the restructuring charge included
approximately $7.5 million for write-off of unamortized trademark
rights and expenses related to consolidating the Company's retail
operations.
During 1994, the Company implemented its restructuring plan. The
Company closed its McKenzie, Tennessee facility and reached
satisfactory agreements with all affected workforce concerning
severance arrangements. The Company began to market a portion of
its children's wear line under the Genuine Kids label,
discontinuing the Trader Kids line of children's apparel. The
Company also successfully consolidated the operations of its
retail business into its Oshkosh office.
During 1995, the Company finalized its 1993 restructuring plan by
closing its Marrowbone, Kentucky and Dover, Tennessee facilities.
The Dover and Marrowbone facilities have been sold, and the
Company reached satisfactory agreements with the workforce
concerning severance arrangements.
There were no material changes in cost to fully implement the
Company's 1993 restructuring plan. The Company's cash
expenditures (net of income tax benefit) to carry out this
restructuring plan were approximately $4.4 million.
Royalty Income
The Company licenses the use of its trade names to selected
licensees in the U.S. and in foreign countries. The Company's
net royalty income was $5.7 million in 1995, a $.9 million
increase over 1994 net royalty income of $4.8 million. Net
royalty income from domestic licensees was approximately $2.8
million in 1995 as compared to $2.9 million in 1994. Net royalty
income from foreign licensees was approximately $2.9 million in
1995 as compared to $1.9 million in 1994. The increase in
royalty income from foreign licensees is the result of both the
addition of new licensees during 1994 and 1995 as well as
increased royalties from existing licensees.
Interest Expense
Interest expense for 1995 was $1.8 million compared to $1.0
million in 1994. This increase is the result of additional
Company borrowings to finance the Company's stock repurchase
program.
Income Taxes
The Company's effective tax rate for 1995 was 45.8% compared to
45.7% in 1994. The relatively high effective tax rates for both
years result primarily from the Company's foreign operating
losses (principally in Europe), which provided no tax benefit in
those years.
Seasonality of Business
The Company's business is increasingly seasonal, with highest
sales and income in the third quarter, which is the Company's
peak wholesale shipping period and a major retail selling season
at its retail outlet stores. The Company's second quarter sales
and income are the lowest both because of relatively low domestic
wholesale unit shipments and relatively modest retail outlet
store sales during this period. The Company anticipates this
seasonality trend to continue to impact 1997 quarterly sales and
income.
Financial Position, Capital Resources and Liquidity
The Company's financial position remains strong, as demonstrated
by its balance sheet. The Company had no outstanding long-term
debt at December 31, 1996 or 1995. At December 31, 1996, the
Company's cash, cash equivalents and short-term investments were
$41.2 million, compared to $2.4 million at the end of 1995. This
substantial increase relates to cash generated from operations,
combined with modest capital expenditures and proceeds from the
disposal of assets. Net working capital at the end of 1996 was
$104.6 million compared to $95.4 million at December 31, 1995,
and $101.9 million at 1994 year end. Cash provided by operations
increased to approximately $55.6 million in 1996, compared to
$19.5 million in 1995 and $22.1 million in 1994.
Accounts receivable at December 31, 1996 were $20.5 million
compared to $24.7 million at December 31, 1995. This reduction
is primarily attributable to the wind-down of the Company's
European wholesale business. Inventories at December 31, 1996
were $66.8 million, compared to $95.7 million at the end of 1995.
This substantial decrease in inventories is attributable to the
wind-down of the Company's European business, the discontinuance
of its Genuine Kids chain of retail stores, sourcing adjustments
made by the Company for the reduced volume of anticipated spring
1997 unit shipments, and an overall corporate focus on management
of working capital. Management believes that year-end 1996
inventory levels are generally appropriate for anticipated 1997
business activities. Capital expenditures were $7.3 million in
1996, compared with $9.7 million in 1995 and $9.9 million in
1994. The majority of 1996 capital expenditures related to build-
outs of new retail stores opened by the Company.
On August 6, 1996, the Company's Board of Directors authorized a
one million share repurchase program of the Company's Class A
common stock. Through December 31, 1996, the Company had
repurchased 672,600 shares of its Class A common stock under this
program for approximately $10.1 million. Since May 1994, the
Company has repurchased 2,822,600 shares of its Class A common
stock, representing approximately 19.4% of its total common stock
outstanding on that date.
The Company has a credit agreement with participating banks.
This arrangement provides a $60 million revolving credit facility
and a $40 million revocable demand line of credit for cash
borrowings, issuance of commercial paper and letters of credit.
The agreement expires in June, 1999. The Company believes that
these credit facilities, along with cash generated from
operations, will be sufficient to finance the Company's seasonal
working capital needs as well as its capital expenditures,
remaining special charges, and business development needs.
Dividends on the Company's Class A and Class B common stock
totaled $.28 per share and $.24 per share, respectively, in 1996
and 1995.
Inflation
The effects of inflation on the Company's operating results and
financial condition were not significant.
Outlook
The information contained in this outlook section is based on
current assumptions and expectations. This information is
forward looking and as such, is subject to certain risks and
uncertainties. Actual results may differ materially.
During 1996, the Company completed a comprehensive strategic
planning initiative. Over the past several years, the Company's
children's wear products have become widely distributed in the
United States. Management reached a strategic decision to shrink
distribution over the next two years. Company management has
undertaken a comprehensive review of its wholesale customer list
and has begun the process of limiting its distribution.
As a result of this strategic decision, along with the
competitive nature of the Company's business and relatively weak
"sell-thru" results experienced during the first half of 1996,
the Company anticipates a reduction in its wholesale business for
both the first quarter and all of 1997. The Company currently
anticipates that its spring 1997 season wholesale unit shipments
are estimated to be approximately 25% below the first quarter of
1996. Preliminary order bookings for the Company's fall back-to-
school season indicate that the Company's wholesale unit
shipments for the third quarter of 1997 are estimated to be
approximately 12% below the third quarter of 1996, primarily as a
result of the decision to limit distribution. Actual unit
shipments during these periods are contingent on a number of
factors, including the Company's ability to manufacture or source
products in a time frame which permits on-time shipments, the
financial strength of the retail industry, the level of consumer
spending for apparel, particularly in the children's wear
segment, as well as overall consumer acceptance of the Company
product styling.
Current Company plans for 1997 call for the opening of
approximately 11 new OshKosh B'Gosh retail stores and the closing
of 6 stores, along with the conversion of 15 Genuine Kids stores
to OshKosh stores. The Company will also be expanding its retail
product line by offering Genuine Girls (girls sizes 7-16) and
Genuine Blues (boys sizes 8-16) in its OshKosh retail stores
during the first quarter of 1997. All Genuine Kids stores
remaining at the end of 1996 were closed during January, 1997.
The Company's gross profit margin is impacted by a number of
factors, including product mix, the competitive pricing
environment within the children's wear segment of the apparel
industry, unit volume of products "closed out" at significantly
reduced prices, and the Company's ability to successfully move
labor intensive segments of the manufacturing process offshore.
The Company currently anticipates modest improvement in its gross
profit margin during 1997 as compared to 1996, primarily as a
result of the impact of the Company's anticipated increased
retail sales at higher gross margins relative to its domestic
wholesale business.
With the Company's wind-down of its European business operations
and transition of this business to a licensee, along with
anticipated growth in other foreign markets, the Company
currently anticipates an increase in its net royalty income from
foreign licensees of more than 40%.
The Company currently expects its effective tax rate to be
approximately 40% for 1997. This estimate is based on current
tax law and is subject to change.
Capital expenditures for 1997 are currently budgeted at
approximately $12.0 million. Depreciation expense is currently
estimated to be approximately $9.0 million.
The Company's future results of operations and the other forward
looking statements contained in this outlook section involve a
number of risks and uncertainties. In addition to the factors
discussed above, other factors could cause actual results to
differ materially. Such factors include, but are not limited to,
business conditions and the general economy, competitive factors,
risk of non-payment of accounts receivable, inability to ship
Company products within agreed to time frames due to
unanticipated manufacturing delays, failure of Company
contractors to deliver products within scheduled time frames, the
failure of Company suppliers to timely deliver needed raw
materials, as well as risks associated with foreign operations.
The forward looking statements included herein are only made as
of the date of this report. The Company undertakes no obligation
to publicly update such forward looking statements to reflect
subsequent events or circumstances.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Financial Statements:
Report of Independent Auditors
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - years ended December 31,
1996, 1995 and 1994
Consolidated Statements of Changes in Shareholders' Equity -
years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - years ended December 31,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
OshKosh B'Gosh, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets
of OshKosh B'Gosh, Inc. and Subsidiaries (the Company) as of
December 31, 1996 and 1995, and the related consolidated
statements of income, changes in shareholders' equity and cash
flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of the Company at December 31, 1996 and 1995,
and the consolidated results of its operations and its cash flows
for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
Milwaukee, Wisconsin /S/ ERNST & YOUNG LLP
February 10, 1997
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
December 31,
ASSETS
1996 1995
Current assets
Cash and cash equivalents $ 31,201 $ 2,418
Short-term investments 10,040 --
Accounts receivable, less allowances of 20,504 24,691
$5,474 in 1996 and $3,970 in 1995
Inventories 66,799 95,743
Prepaid expenses and other current assets 1,890 3,127
Deferred income taxes 18,500 11,400
Total current assets 148,934 137,379
Property, plant and equipment, net 41,782 65,011
Deferred income taxes 3,400 --
Other assets 1,917 6,189
Total assets $ 196,033 $ 208,579
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,408 $ 13,910
Accrued liabilities 38,885 28,055
Total current liabilities 44,293 41,965
Deferred income taxes -- 2,700
Employee benefit plan liabilities 13,663 13,836
Commitments -- --
Shareholders' equity
Preferred stock, par value $.01 per share:
Authorized -- 1,000,000 shares;
Issued and outstanding -- None -- --
Common stock, par value $.01 per share:
Class A, authorized --30,000,000 shares;
Issued and outstanding -- 10,525,571
shares in 1996, 11,189,387 shares in 1995 105 112
Class B, authorized -- 3,750,000 shares;
Issued and outstanding -- 1,260,704
shares in 1996, 1,266,413 shares in 1995 13 13
Retained earnings 137,349 149,720
Cumulative foreign currency translation
adjustments 610 233
Total shareholders' equity 138,077 150,078
Total liabilities and shareholders' equity $ 196,033 $ 208,579
See notes to consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars and shares in thousands, except per share amounts)
Year ended December 31,
1996 1995 1994
Net sales $ 444,766 $ 432,266 $ 363,363
Cost of products sold 300,495 294,770 259,416
Gross profit 144,271 137,496 103,947
Selling, general and administrative
expenses 122,055 120,589 96,363
Special charges and plant closings 32,900 2,700 --
Royalty income, net ( 6,100) (5,737) (4,817)
Operating income (loss) (4,584) 19,944 12,401
Other income (expense):
Interest expense (1,088) (1,772) (1,034)
Interest income 1,326 1,383 1,048
Miscellaneous 249 633 543
Other income - net 487 244 557
Income (loss) before income taxes (4,097) 20,188 12,958
Income taxes (benefit) (5,216) 9,241 5,919
Net income $ 1,119 $ 10,947 $ 7,039
Weighted average common shares outstanding 12,339 12,865 14,144
Net income per common share $ .09 $ .85 $ .50
See notes to consolidated financial statements.
<TABLE>
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity
(Dollars and shares in thousands, except per share amounts)
<CAPTION>
Cumulative
Common Stock Additional Currency
Class A Class B Paid-In Retained Translation
Shares Amount Shares Amount Capital Earnings Adjustments
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1993 13,281 $133 1,305 $13 $ 2,971 $169,182 $ (301)
Net income -- -- -- -- -- 7,039 --
Dividends
- Class A ($.3775 per share) -- -- -- -- -- (4,886) --
- Class B ($.33 per share) -- -- -- -- -- (425) --
Foreign currency translation
adjustments -- -- -- -- -- -- 47
Conversions of common shares 37 -- (37) -- -- -- --
Repurchase of common shares 1,084) (11) -- -- (2,971) 11,977) --
Balance - December 31, 1994 12,234 122 1,268 13 -- 158,933 (254)
Net income -- -- -- -- -- 10,947 --
Dividends
- Class A ($.28 per share) -- -- -- -- -- (3,260) --
- Class B ($.24 per share) -- -- -- -- -- (304) --
Foreign currency translation
adjustments -- -- -- -- -- -- 487
Conversions of common shares 2 -- (2) -- -- -- --
Repurchase of common shares,
net (1,046) (10) -- -- -- (16,596) --
Balance - December 31, 1995 11,190 112 1,266 13 -- 149,720 233
Net income -- -- -- -- -- 1,119 --
Dividends
- Class A ($.28 per share) -- -- -- -- -- (3,091) --
- Class B ($.24 per share) -- -- -- -- -- (303) --
Foreign currency translation
adjustments -- -- -- -- -- -- 377
Conversions of common shares 5 -- (5) -- -- -- --
Stock options exercised 3 -- -- -- 45 -- --
Repurchase of common shares,
net (673) (7) -- -- (45) (10,096) --
Balance - December 31, 1996 10,525 $105 1,261 $13 $ -- $137,349 $ 610
See notes to consolidated financial statements.
</TABLE>
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
Year Ended December 31,
1996 1995 1994
Cash flows from operating activities
Net income $ 1,119 $10,947 $ 7,039
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 10,998 10,591 9,972
Amortization 712 765 720
(Gain) loss on disposal of assets 242 79 (185)
Provision for deferred income taxes (13,200) (59) (965)
Pension expense, net of contributions 1,827 (1,331) 979
Special charges and plant closings 32,900 2,700 --
Changes in operating assets and liabilities:
Accounts receivable 4,187 (834) (4,380)
Inventories 28,944 (1,827) 6,083
Prepaid expenses and other current assets 1,237 (617) 1,300
Accounts payable (8,502) 4,474 (284)
Accrued liabilities (4,847) (5,416) 1,863
Net cash provided by operating activities 55,617 19,472 22,142
Cash flows from investing activities
Additions to property, plant and equipment (7,274) (9,728) (9,914)
Proceeds from disposal of assets 3,246 3,722 1,425
Purchase of short-term investments (10,040) -- --
Additions to other assets 731 (1,392) (186)
Net cash used in investing activities (13,337) (7,398) (8,675)
Cash flows from financing activities
Payments of long-term debt -- -- (536)
Dividends paid (3,394) (3,564) (5,311)
Repurchase of common shares, net (10,103) (16,606) (14,959)
Net cash used in financing activities (13,497) (20,170) (20,806)
Net increase (decrease) in cash and cash
equivalents 28,783 (8,096) (7,339)
Cash and cash equivalents at beginning of year 2,418 10,514 17,853
Cash and cash equivalents at end of year $31,201 $ 2,418 $10,514
Supplementary disclosures
Cash paid for interest $ 948 $ 1,547 $ 638
Cash paid for income taxes $ 5,213 $ 8,544 $ 3,937
See notes to consolidated financial statements.
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands, except share and per share amounts)
Note 1. Significant accounting policies
Business - OshKosh B'Gosh, Inc. and its wholly-owned
subsidiaries (the Company) are engaged primarily in the
design, sourcing, and marketing of apparel to wholesale
customers and through Company-owned retail stores. The
Company provides credit, in the normal course of
business, to department and specialty stores which are
not concentrated in any geographic region. The Company
performs ongoing credit evaluations of its customers and
maintains allowances for potential credit losses.
Principles of consolidation - The consolidated financial
statements include the accounts of all wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
Cash equivalents - Cash equivalents consist of highly
liquid debt instruments such as money market accounts
and commercial paper with original maturities of three
months or less. The Company's policy is to invest cash
in conservative instruments as part of its cash
management program and to evaluate the credit exposure
of any investment. Cash and cash equivalents are
stated at cost, which approximates market value.
Short-term investments - Short-term investments are
classified as available-for-sale securities and are
highly liquid debt instruments. These securities have
a put option feature that allows the Company to
liquidate the investments at their discretion and are
backed by a letter of credit from financial
institutions. These investments are stated at cost,
which approximates market value.
Inventories - Inventories are stated at the lower of
cost or market. Inventories stated on the last-in,
first-out (LIFO) basis represent 99.0% of total 1996
and 95.3% of total 1995 inventories. Remaining
inventories are valued using the first-in, first-out
(FIFO) method.
Long-lived assets - In March 1995, the FASB issued
Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," (SFAS No. 121) which requires impairment
losses to be recorded on long-lived assets used in
operations when indicators of impairment are present
and the undiscounted cash flows estimated to be
generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to
be disposed of. Effective January 1, 1996, the Company
adopted the provisions of SFAS No. 121 and determined
that the effect of initially applying this
pronouncement was not material.
Property, plant, and equipment - Property, plant, and
equipment are carried at cost or at management's
estimate of fair market value if considered impaired
under the provisions of SFAS No. 121. Depreciation and
amortization for financial reporting purposes is
calculated using the straight-line method based on the
following useful lives:
Years
Land improvements 10 to 15
Buildings 10 to 40
Leasehold improvements 5 to 10
Machinery and equipment 3 to 10
Foreign currency translation - The functional currency
for certain foreign subsidiaries is the local currency.
Accordingly, assets and liabilities are translated at
year end exchange rates, and income statement items are
translated at average exchange rates prevailing during
the year. Such translation adjustments are recorded as
a separate component of shareholders' equity.
Revenue recognition - Revenue within wholesale
operations is recognized at the time merchandise is
shipped to customers. Retail store revenues are
recognized at the time of sale.
Use of estimates - The preparation of financial
statements in conformity with generally accepted
accounting principles requires management to make
estimates and assumptions that affect the amounts
reported in the financial statements and accompanying
notes. Actual results could differ from those
estimates.
Deferred rent - Many of the Company's retail operating
leases contain predetermined fixed increases of the
minimum rental rate during the initial lease term. The
Company recognizes the related rental expense for these
leases on a straight-line basis and records the
difference between the amount charged to expense and
the rent paid as deferred rent.
Advertising - Advertising costs are expensed as
incurred and totaled $11,448, $12,213, and $9,858 in
1996, 1995, and 1994, respectively.
Income per common share - Income per common share
amounts are computed by dividing income by the weighted
average number of shares of common stock outstanding.
The dilutive effect of stock options on net income per
share is immaterial.
Reclassifications - Certain reclassifications of prior
year information have been made to conform to the 1996
presentation.
Note 2. Special charges
A table summarizing the major components of the special
charges and plant closings recorded in 1996 and 1995
follows:
Year ended December 31,
1996 1995
2nd Quarter 4th Quarter Total
Severance $ 3,900 $ 2,500 $ 6,400 $ 1,900
Asset impairment 8,100 9,500 17,600 800
Other exit costs 8,900 -- 8,900 --
Total $ 20,900 $ 12,000 $ 32,900 $ 2,700
During the second half of 1996, the Company experienced
increasing difficulties in selling its idle
manufacturing facilities and equipment. In addition,
in October 1996 a long standing customer contract for
apparel finishing services was not renewed, creating
significant excess capacity in the Company's garment
finishing facility. These events along with related
adverse changes in the economic environment affecting
U.S. apparel manufacturers necessitated that the
Company reevaluate the fair market value of its
remaining manufacturing property and equipment in the
fourth quarter of 1996.
As a result of this analysis, and a decision to close
the Company's Columbia, Kentucky sewing facility, the
Company recorded pre-tax special charges of $12,000 in
the fourth quarter which, net of income tax benefits,
reduced net income by $7,200 ($.58 per share). The
special charge includes asset impairments of
approximately $9,500 and severance and related benefits
for approximately 500 manufacturing employees totaling
approximately $2,500. All impacted manufacturing
assets being used in production have been written down
to management's estimate of fair value (approximately
$10,900) as part of this special charge.
During the second quarter of 1996, the Company recorded
special charges of $20,900 which amount to $8,000 ($.65
per share), net of tax benefits, related to the
discontinuance of the Company's Genuine Kids retail
store chain, wind-down of the Company's European
subsidiaries and transfer of the European business to a
licensee, and the closing of its Red Boiling Springs
and Celina, Tennessee sewing facilities. These actions
will eliminate the underperforming Genuine Kids and
European components of the Company's business. The
plant closings will accelerate the Company's strategic
direction to source product based solely on price,
quality and delivery factors, which has resulted in
more product being sourced outside of the United
States.
These decisions will affect approximately 1,100
employees, including approximately 500 retail store
employees throughout the United States, approximately
550 manufacturing employees from our plants in
Tennessee, and approximately 50 employees from the
Company's European subsidiaries. This special charge
includes severance and related benefits totaling
approximately $3,900. Through December 31 1996,
approximately 875 employees have been affected, with a
total cost to date of approximately $1,700. The
remaining employees are expected to be terminated in
the first quarter of 1997.
The second quarter special charges include
approximately $6,900 related to other exit costs,
including estimated lease settlements and anticipated
costs to dispose of certain operating assets as part of
the exit plan and $2,000 related to anticipated losses
on inventory disposals. Through December 31, 1996,
approximately $2,900 of these other exit costs have
been incurred. The special charges also include
approximately $8,100 related to impaired assets,
recognized in accordance with SFAS No. 121. The
Company's decision to implement the aforementioned
changes resulted in unamortized retail leasehold
improvements and excess manufacturing space in
Tennessee. All assets held for sale but not disposed
of as of December 31, 1996 have been written down to
management's estimate of fair value (approximately
$2,300, net of disposal costs) as part of the special
charges. The Company is actively pursuing buyers for
its excess manufacturing facilities.
The wind down of the European entities permitted the
recognition of certain U.S. tax deductions previously
unrecognized, resulting in an approximate $4,500 income
tax benefit. This income tax benefit, along with the
$8,400 income tax credit resulting from the special
charges, reduced the net impact on Company earnings by
$12,900.
In total, all 1996 special charges will require
approximately $11,200 of cash outlays. However, this
amount will be more than offset by the cash generated
from the income tax benefit and asset sales. As of
December 31, 1996, the cash expenditures related to
these 1996 special charges amount to $4,200.
During the third quarter of 1995, the Company recorded
a pretax charge for plant closings of $2,700. This
plant closing charge (net of income tax benefit)
reduced net income by $1,600 ($.13 per share) in 1995.
As a part of the Company's ongoing review of its
manufacturing capacity, operational effectiveness, and
alternative sourcing opportunities, the Company decided
to close its Hermitage Springs and McEwen, Tennessee
facilities and downsize its Oshkosh, Wisconsin sewing
facility. The $2,700 pretax charge for plant closings
included approximately $1,900 of severance and related
costs pertaining to workforce reductions as well as
$800 for facility closings and the write-down of the
related assets.
These plant closings were completed in early 1996, with
no material changes in previously estimated costs to
fully effect these plant closings. The Company's cash
expenditures (net of income tax benefit) to carry out
these plant closings were approximately $1,000. The
remaining reserve at December 31, 1996 of approximately
$500 is expected to be settled in cash.
These special charges and plant closings are based on
management's best estimates of costs related to these
decisions. The actual costs the Company will
ultimately incur are dependent on certain risks and
uncertainties and could differ from the amounts used to
record the estimated effect of these decisions.
Note 3. Inventories
A summary of inventories follows:
December 31,
1996 1995
Finished goods $ 51,584 $ 70,837
Work in process 10,698 15,462
Raw materials 4,517 9,444
Total $ 66,799 $ 95,743
The replacement cost of inventory exceeds the above
LIFO costs by $15,100 and $16,158 at December 31, 1996
and 1995, respectively.
Partial liquidation of certain LIFO layers in 1996
increased net income by approximately $660.
Note 4. Property, plant and equipment.
A summary of property, plant, and equipment
follows:
December 31,
1996 1995
Land and improvements $ 3,910 $ 4,123
Buildings 17,999 35,478
Leasehold improvements 15,231 11,964
Machinery and equipment 30,607 64,759
Construction in progress -- 33
Total 67,747 116,357
Less: accumulated depreciation
and amortization 25,965 51,346
Property, plant and equipment, net $ 41,782 $ 65,011
The balances in 1996 reflect charges for impairments of
certain assets as required by SFAS No. 121, described
in Note 2, and the elimination of historical
accumulated depreciation and amortization related to
these items.
Note 5. Lines of credit
The Company maintains an unsecured credit
agreement with a number of banks which provides a
$60,000 revolving credit facility and a $40,000
revocable demand line of credit for cash borrowings,
issuance of commercial paper, and letters of credit.
All borrowing and commercial paper issues under this
agreement are supported by the revolving credit
facility which expires in June, 1999.
Under the terms of the agreement, interest rates are
determined at the time of borrowing and are based on
London Interbank Offered Rates plus .625% or the prime
rate. Commitment fees of .125% are required on the
revolving credit facility. The Company is required to
maintain certain financial ratios in connection with
this agreement.
There were no outstanding borrowings against these
credit arrangements at December 31, 1996. Letters of
credit of approximately $24,000 were outstanding at
December 31, 1996, with $76,000 of the unused credit
facilities available for borrowing.
Note 6. Accrued liabilities
A summary of accrued liabilities follows:
1996 1995
Compensation $ 5,063 $ 5,893
Worker's compensation 10,750 10,400
Income taxes 5,292 2,288
Restructuring costs 10,694 334
Other 7,086 9,140
Total $ 38,885 $ 28,055
Note 7. Leases
The Company leases certain property and equipment
including retail sales facilities and regional sales
offices under operating leases. Certain leases provide
the Company with renewal options. Leases for retail
sales facilities provide for minimum rentals plus
contingent rentals based on sales volume.
Minimum future rental payments under noncancellable
operating leases are as follows:
Year ending December 31,
1997 $ 10,525
1998 9,838
1999 8,951
2000 6,998
2001 4,909
Thereafter 10,362
Total minimum lease payments $ 51,583
Total rent expense charged to operations for all
operating leases is as follows:
Year ended December 31,
1996 1995 1994
Minimum rentals $ 17,691 $ 15,760 $ 11,139
Contingent 493 279 196
rentals
Total rent $ 18,184 $ 6,039 $ 11,335
expense
Note 8. Income taxes
Income tax expense (benefit) is comprised of the
following:
Year ended December 31,
1996 1995 1994
Current:
Federal $ 7,224 $ 7,440 $ 5,653
State and local 760 1,860 1,231
7,984 9,300 6,884
Deferred (13,200) (59) (965)
Total $ (5,216) $ 9,241 $ 5,919
Deferred tax assets and liabilities relate to temporary
differences between the financial reporting and income
tax basis of Company assets and liabilities, and
include the following components:
December 31,
1996 1995
[Assets
(Liabilities)]
Current deferred taxes
Accounts receivable allowances $ 1,552 $ 1,398
Inventory valuation 5,562 3,778
Accrued liabilities 5,595 5,685
Restructuring costs 5,188 134
Other 603 405
Total net current deferred tax
assets $18,500 $11,400
Non-current deferred taxes
Depreciation $(2,583) $(7,881)
Deferred employee benefits 5,438 4,734
Trademark 545 447
Foreign loss carryforwards -- 3,971
Valuation allowance -- (3,971)
Total net non current deferred $ 3,400 $(2,700)
tax assets (liabilities)
The valuation allowance in 1995 related to foreign loss
carryforwards for which utilization was uncertain. In
conjunction with the wind down of the Company's
European operations as described in Note 2, all
material foreign loss carryforwards have been
eliminated and accordingly no future benefit is
expected to be realized.
For financial reporting purposes, income (loss) before
income taxes includes the following components:
Year Ended December 31
1996 1995 1994
Pre-tax income (loss):
United States $ 6,308 $24,513 $14,319
Foreign (10,405) (4,325) (1,361)
Total $(4,097) $20,188 $12,958
A reconciliation of the federal statutory income tax
rate to the effective tax rates reflected in the
consolidated statements of income follows:
Year Ended December 31,
1996 1995 1994
Federal statutory tax rate (35.0)% 35.0% 35.0%
Differences resulting from:
State and local income taxes, net of
federal income tax benefit (4.6) 4.7 4.5
Tax effect of foreign losses 13.6 7.5 3.7
U.S. tax deductions related to European
subsidiaries (109.8) -- --
Other 8.5 (1.4) 2.5
Total (127.3)% 45.8% 45.7%
As discussed in Note 2, the wind down of its European
subsidiaries permitted the recognition of certain U.S.
tax deductions previously unrecognized, resulting in a
1996 income tax benefit of approximately $4,500.
Note 9. Retirement plans
The Company has defined contribution and defined
benefit pension plans covering substantially all
employees. Charges to operations by the Company for
these pension plans totaled $3,795, $4,002, and $4,309
for 1996, 1995 and 1994, respectively.
Defined benefit pension plans - The Company sponsors
several qualified defined benefit pension plans
covering certain hourly and salaried employees. In
addition, the Company maintains a supplemental unfunded
salaried pension plan to provide those benefits
otherwise due employees under the salaried plan's
benefit formulas, but which are in excess of benefits
permitted by the Internal Revenue Service.
The benefits provided are based primarily on years of
service and average compensation. The pension plans'
assets are comprised primarily of listed securities,
bonds, treasury securities, commingled equity and fixed
income investment funds and cash equivalents.
The Company's funding policy for qualified plans is to
contribute amounts which are actuarially determined to
provide the plans with sufficient assets to meet future
benefit payment requirements consistent with the
funding requirements of federal laws and regulations.
The actuarial computations utilized the following
assumptions.
December 31,
1996 1995 1994
Discount rate 7.5% 7.0% 7.5%
Expected long-term rate of
return on assets 8.0% 8.0% 8.0%
Rates of increase in compensation
levels 0-4.5% 0-4.5% 0-4.5%
Net periodic pension cost was comprised of:
Year ended December 31,
1996 1995 1994
Service cost - benefits earned during
the period $ 2,315 $1,923 $ 2,212
Interest cost on projected benefit 1,888
obligations 2,230 1,947
Actual return on plan assets (2,572) (4,818) (1,118)
Net amortization and deferral 1,047 3,982 552
Net periodic pension cost $ 3,020 $3,034 $ 3,534
In conjunction with the special charges discussed in
Note 2, the Company curtailed defined benefit plans for
the affected plants. Curtailment and settlement costs
of approximately $271 are included in the special
charges.
The following table sets forth the funded status of the
Company's defined benefit plans and the amount
recognized in the Company's consolidated balance
sheets. The funded status of plans with assets
exceeding the accumulated benefit obligation (ABO) is
segregated by column, from that of plans with the ABO
exceeding assets.
<TABLE>
<CAPTION>
December 31,
1996 1995
Assets ABO Assets ABO
Exceed Exceeds Exceed Exceeds
ABO Assets ABO Assets
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits $ 16,397 $ 4,686 $ 11,957 $ 8,293
Nonvested benefits 633 86 740 211
Total accumulated benefit $ 17,030 $ 4,772 $ 12,697 $ 8,504
obligation
Projected benefit obligation $ 25,974 $ 5,364 $ 22,791 $ 8,864
Plan net assets at fair value 22,888 3,186 18,184 5,761
Projected benefit obligation in
excess of plan net assets (3,086) (2,178) (4,607) (3,103)
Unamortized transition asset (1,125) (13) (1,245) (58)
Unrecognized prior service cost 2,336 941 2,264 2,447
Unrecognized net (gain) loss (4,883) (193) (2,012) (100)
Adjustment to recognize minimum
liability -- -- -- (2,000)
Accrued pension liability at Dec. 31 $ (6,758) $(1,443) $ (5,600) $ (2,814)
</TABLE>
Defined contribution plan - The Company maintains a
defined contribution retirement plan covering certain
salaried employees. Annual contributions are
discretionary and are determined by the Company's
Executive Committee. Charges to operations by the
Company for contributions under this plan totaled $627,
$923 and $531 for 1996, 1995 and 1994, respectively.
In 1996, the Company initiated a profit-sharing plan
covering certain salaried and hourly employees pursuant
to Section 401(k) of the Internal Revenue Code, whereby
participants may contribute a percentage of
compensation, but not in excess of the maximum allowed
under the Code. The plan provides for a matching
contribution by the Company which amounted to
approximately $89 for 1996.
The Company also has a supplemental retirement program
for designated employees. Annual provisions to this
unfunded plan are discretionary and are determined by
the Company's Executive Committee. Charges to
operations by the Company for additions to this plan
totaled $59, $45 and $244 for 1996, 1995 and 1994,
respectively.
Deferred employee benefit plans - The Company has
deferred compensation and supplemental retirement
arrangements with certain key officers.
Postretirement health and life insurance plan - The
Company sponsors an unfunded defined benefit
postretirement health insurance plan that covers
eligible salaried employees. Life insurance benefits
are provided under the plan to qualifying retired
employees. The postretirement health insurance plan is
offered, on a shared cost basis, only to employees
electing early retirement. This coverage ceases when
the employee reaches age 65 and becomes eligible for
Medicare. Retiree contributions are adjusted
periodically.
The following table sets forth the funded status of the
plan and the postretirement benefit cost recognized in
the Company's consolidated balance sheets:
December 31,
1996 1995
Accumulated postretirement benefit obligation:
Retirees $ 112 $ 189
Fully eligible active plan participants 297 157
Other active plan participants 808 404
1,217 750
Plan assets -- --
Unrecognized net gain 249 630
Accrued postretirement benefit cost $ 1,466 $1,380
Net periodic postretirment benefit cost was comprised of:
December 31,
1996 1995 1994
Service cost - benefit attributed to employee
service during the year $ 78 $ 42 $ 67
Interest cost on accumulated postretirement
benefit obligation 84 48 53
Net amortization and deferral (8) (34) (38)
Net periodic postretirment benefit cost $154 $ 56 $ 82
The discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% in 1996 and
7.0% in 1995 and 1994. The assumed health care cost
trend rate used in measuring the accumulated
postretirement benefit obligation was 12%, declining
gradually to 6% by 2012 and then declining further to
an ultimate rate of 4% by 2022.
The health care cost trend rate assumption has a
significant impact on the amounts reported. Increasing
the assumed health care cost trend rate by one
percentage point would increase the accumulated
postretirement benefit obligation at December 31, 1996
by approximately $86 and the aggregate of the service
and interest cost components of net periodic
postretirement benefit cost for 1996 by approximately
$16.
Note 10. Common stock
The Company maintains a stock conversion plan whereby
shares of Class B common stock may be converted to an
equal number of Class A common shares.
The Company's common stock authorization provides that
dividends be paid on both the Class A and Class B
common stock at any time that dividends are paid on
either. Whenever dividends (other than dividends of
Company stock) are paid on the common stock, each share
of Class A common stock is entitled to receive 115% of
the dividend paid on each share of Class B common
stock.
The Class A common stock shareholders are entitled to
receive a liquidation preference of $3.75 per share
before any payment or distribution to holders of the
Class B common stock. Thereafter, holders of the Class
B common stock are entitled to receive $3.75 per share
before any further payment or distribution to holders
of the Class A common stock. Thereafter, holders of
the Class A common stock and Class B common stock share
on a pro-rata basis in all payments or distributions
upon liquidation, dissolution, or winding up of the
Company.
The Class A common stock shareholders have the right to
elect or remove, as a class, 25% of the entire board of
directors of the Company. Class B common stock
shareholders are entitled to elect or remove, as a
class, the other 75% of the directors (subject to any
rights granted to any series of preferred stock) and
are entitled to one vote per share on all matters
(including an increase or decrease in the unissued
authorized capital stock of any class) presented to the
shareholders for vote.
On August 6, 1996, the Company's Board of Directors
authorized a one million share repurchase program of
the Company's Class A common stock. Through December
31, 1996, the Company had repurchased 672,600 shares of
its Class A common stock under this program for
approximately $10.1 million. Since May 1994, the
Company has repurchased 2,822,600 shares of its Class A
common stock, representing approximately 19.4% of its
total common stock outstanding on that date.
The Company's 1994 Incentive Stock Option Plan has
authorized the grant of options to management personnel
and directors for up to 1,470,000 shares of the
Company's common stock. As of December 31, 1996
1,147,000 shares are available for grant. Options
granted generally have 10 year terms and vest ratably
over a four year period following date of grant.
The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) in accounting for its employee
stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals
the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
The following pro forma information regarding net
income and earnings per share required by SFAS No. 123,
"Accounting for Stock Based Compensation" has been
determined as if the Company had accounted for its
employee stock options under the fair value method of
that statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-
average assumptions for 1996 and 1995, respectively:
risk-free interest rates of 5.81% and 7.47%; dividends
of $.28 and $.28; volatility factors of the expected
market price of the Company's common stock of .409 and
.415; and a weighted-average expected life of the
option of approximately 8 years. Changes in these
subjective assumptions can significantly affect the
fair value calculations.
The estimated fair value of the options is amortized to
expense over the options' vesting period. (Amounts in
thousands except for earnings per share information):
Years ended December 31,
1996 1995
Net income as reported $1,119 $10,947
Pro forma net income 880 10,814
Earnings per share as reported .09 .85
Pro forma earnings per share .07 .84
A summary of the Company's stock option activity, and related
information for the years ended December 31 follows:
1996 1995
Weighted- Weighted-
Options average Options average
(000) exercise price (000) exercise price
Outstanding-beginning
of year 156 $15 0 $--
Granted 162 16 161 15
Exercised (3) 15 -- --
Forfeited (13) 15 (5) 15
Outstanding end of year 302 $15 156 $15
Exerciseable at end of
year 45 $15 -- --
Weighted-average fair
value of options
granted during year $5.12 $5.01
Exercise prices for options outstanding as of December 31, 1996
ranged from $14 to $16. The weighted-average remaining contractual
life of those options is 8.7 years.
The Class A common stock shareholders have the right to elect or remove, as a
class, 25% of the entire board of directors of the Company. Class B common
stock shareholders are entitled to elect or remove, as a class, the other
75% of the directors (subject to any rights granted to any series of preferred
stock) and are entitled to one vote per share on all matters (including an
increase or decrease in the unissued authorized capital stock of any class)
presented to the shareholders for vote.
In February 1995, the Company initiated stock option plans for certain
employees and directors. A total of 1,470,000 shares have been authorized for
these option programs. As of December 31, 1995, 155,800 options have been
granted to purchase Company Class A common stock at the fair market value at
date of grant issuance, primarily $14.50 per share. Rights to exercise these
options vest over a four year period. At December 31, 1995, no options have
vested.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options. Under APB 25, since the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to the
definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to
be held on May 2, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to
be held on May 2, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to
be held on May 2, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
definitive Proxy Statement of OshKosh B'Gosh, Inc. for its annual meeting to
be held on May 2, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
Financial statements for OshKosh B'Gosh, Inc. listed in the Index to
Financial Statements and Supplementary Data are filed as part
of this Annual Report.
(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
Schedules not included have been omitted because they are not
applicable, immaterial, or the required information is included in
the consolidated financial statements or notes thereto.
(3) Index to Exhibits
(b) Reports on Form 8-K.
None.
(c) Exhibits
3.1 Certificate of Incorporation of OshKosh B'Gosh, Inc. as restated,
May 7, 1993, previously filed as Exhibit 99.3 to the Registrant's
Current Report on Form 8-K dated October 25, 1995, Commission File
Number 0-13365, is incorporated herein by reference.
3.2 By-laws of OshKosh B'Gosh, Inc., as amended through March 31, 1995,
previously filed as Exhibit 3.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, Commission
File Number 0-13365, is incorporated herein by reference.
*10.1 Employment Agreement dated July 7, 1980, between OshKosh B'Gosh, Inc.
and Charles F. Hyde as extended by "Request for Later Retirement"
dated April 15, 1986 and accepted by the Board of Directors'
resolution on May 2, 1986, previously filed as Exhibit 10.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1986, Commission file Number 0-13365, is incorporated
herein by reference.
*10.2 Employment Agreement dated July 7, 1980, between OshKosh B'Gosh, Inc.
and Thomas R. Wyman, previously filed as Exhibit 10.2 to the
Registrant's Registration Statement No. 2-96586 on Form S-1, is
incorporated herein by reference.
*10.3 OshKosh B'Gosh, Inc. Profit Sharing Plan, as amended on Februrary 19,
1996 previously filed as Exhibit 10.3 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995,
Commission File Number 0-13365, is incorporated herein by reference.
*10.4 OshKosh B'Gosh, Inc. Restated Excess Benefit Plan as amended,
previously filed as Exhibit 10.5 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, Commission File
Number 0-13365, is incorporated herein by reference.
*10.5 OshKosh B'Gosh, Inc. Executive Deferred Compensation Plan as amended,
previously filed as Exhibit 10.6 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, Commission
File Nnumber 0-13365, is incorporated herein by reference.
*10.6 OshKosh B'Gosh, Inc. Officers Medical and Dental Reimbursement Plan,
as amended previously filed as Exhibit 10.18 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994, Commission File Number 0-13365, is incorporated herein by
reference.
10.7 Acknowledgement of Guaranty Agreement between City of Liberty Casey
County, Kentucky and OshKosh B'Gosh, Inc., dated October 4, 1984, and
related Contract of Lease and Rent dated as of November 26, 1968,
previously filed as Exhibit 10.14 to the Registrant's Registration
Statement No. 2-96586 on Form S-1, is incorporated herein by
reference.
10.8 Indemnity Agreement between OshKosh B'Gosh, Inc. and William P.
Jacobsen (Vice President and Treasurer of OshKosh B'Gosh, Inc.) dated
as of June 8, 1987, previously filed as Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, Commission File Number 0-13365, is incorporated
herein by reference. (Note: Identical agreements have been entered
into by the Company with each of the following officers: Anthony S.
Giordano, Douglas W. Hyde, Michael D. Wachtel and Kenneth H. Masters).
*10.9 OshKosh B'Gosh, Inc. Executive Non-Qualified Profit Sharing Plan
effective as of January 1, 1989, previously filed as Exhibit 10.18 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, Commission File Number 0-13365, is incorporated
herein by reference.
10.10 Employment agreement dated and effective may 1, 1994, by and among
OshKosh B'Gosh, Inc., Essex Outfitters, Inc. and Barbara Widder-Lowry
previously filed as Exhibit 10.14 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, Commission
File Number 000-13365, is incorporated herein by reference.
10.11 Employment agreement dated and effective May 1, 1994 by and among
OshKosh B'Gosh, Inc., Essex Outfitters, Inc. and Paul A. Lowry
previously filed as Exhibit 10.15 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994, Commission
File Number 000-13365, is incorporated herein by reference.
10.12 Credit agreement between OshKosh B'Gosh, Inc. and Firstar Bank
Milwaukee, N.A. and participating banks as amended, dated as of June
28, 1996.
*10.13 OshKosh B'Gosh, Inc. 1994 Incentive Stock Plan previously filed as
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, Commission File Number 000-13365,
is incorporated herein by reference.
10.14 OshKosh B'Gosh, Inc. 1995 Outside Director's Stock Option Plan
previously filed as Exhibit 10.18 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, Commission File
Number 000-13365, is incorporated herein by reference.
*10.15 OshKosh B'Gosh, Inc. Flexible Nonstandardized 401(k) Adoption
Agreement and Smith Barney Prototype Defined Contribution Plan
Document #05.
21. The following is a list of subsidiaries of the Company as of December
31, 1996. The consolidated financial statements reflect the
operations of all subsidiaries as they existed on December 31, 1996.
State or Other
Jurisdiction of
Incorporation or
Name of Subsidiary Organization
Grove Industries Delaware
Manufacturera International Apparel, S.A. Honduras
OshKosh B'Gosh Europe, SNC France
OshKosh B'Gosh International Sales, Inc. Virgin Islands
OshKosh B'Gosh Asia/Pacific Ltd. (Inactive) Hong Kong
OshKosh B'Gosh U.K. Ltd. United Kingdom
OshKosh B'Gosh Deutschland GmbH Germany
23. Consent of Ernst & Young LLP, Independent Auditors
27. Financial Data Schedule
* Represents a plan that covers compensation, benefits and/or related
arrangements for executive management.
SIGNATURES
Date: March 27, 1997
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
OSHKOSH B'GOSH, INC.
By:/S/ DOUGLAS W. HYDE
Chairman of the Board, President and Chief Executive Officer
By:/S/DAVID L. OMACHINSKI
Vice President, Treasurer and Chief Financial Officer
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.
Signature Title
/S/DOUGLAS W. HYDE Chairman of the Board,
President and Chief Excutive
Officer
/S/MICHAEL D. WACHTEL Executive Vice President,
Chief Operating Officer
/S/DAVID L. OMACHINSKI Vice President, Treasurer
and Chief Financial Officer
/S/STEVEN R. DUBACK Secretary and Director
/S/WILLIAM F. WYMAN Vice President, Domestic
Licensing
Date: March 27, 1997
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
(Dollars in Thousands)
Years ended December 31,
1996 1995 1994
Accounts receivable - allowances:
Balance at beginning of period $ 3,970 $ 3,700 $ 3,310
Charged to costs and expenses 10,392 8,084 6,508
Deductions - bad debts written off,
net of recoveries and other
allowances (8,888) (7,814) (6,118)
Balance at end of period $ 5,474 $ 3,970 $ 3,700
Years ended December 31,
1996 1995 1994
Restructuring costs - allowances:
Balance at beginning of period $ 334 $ 2,381 $ 8,186
Charged to cost and expenses 15,300 -- --
Actual restructuring costs incurred (4,940) (2,047) (5,805)
Balance at end of period $10,694 $ 334 $ 2,381
EXHIBIT 10.12
OshKosh B'Gosh, Inc.
112 Otter Avenuen
Oshkosh, Wisconsin 54901-5008
CREDIT AGREEMENT
June 24, 1994
Firstar Bank Milwaukee,
National Association
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Bank One, Milwaukee, NA
111 East Wisconsin Ave.
Milwaukee, Wisconsin 53202
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Norwest Bank Wisconsin,
National Association
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
OshKosh B'Gosh, Inc., a Delaware corporation with its
principal offices located in the City of Oshkosh, Wisconsin (the
"Company"), hereby requests that each of you (collectively the
"Banks" and individually a "Bank") severally agree to make loans
to the Company from time to time on the terms and conditions set
forth below:
ARTICLE I
LOANS AND NOTES
1.1 Revolving Credit. From time to time prior to June 24,
1997 or the earlier termination in full of the
Commitments (in either case the "Termination Date"),
the Company may obtain loans from each of the Banks,
pro rata according to each Bank's Percentage Interest,
up to an aggregate principal amount equal to the amount
by which (i) $60,000,000 (the "Aggregate Commitment"
and as to each Bank's respective Percentage Interest
thereof, its "Commitment"), as terminated or reduced
pursuant to section 1.7, exceeds (ii) the sum of (A)
the aggregate amount of Letter of Credit obligations
(as defined in section 10.1(o) below), and (B) the
aggregate face amount of outstanding Commercial Paper
(as defined in section 10.1(d) below), including for
this purpose all Nicolet Funding Corp. Loans (as
defined in section 1.9(e)below). The Commitment and
Percentage Interest of each Bank
is set forth in the table below:
Percentage
Name of Bank Commitment Interest
Firstar Bank Milwaukee, $19,500,000 32.5%
National Association
Bank One, Milwaukee, NA $16,500,000 27.5%
Harris Trust and Savings $12,000,000 20.0%
Bank
Norwest Bank Wisconsin, $12,000,000 20.0%
National Association
Total: $60,000,000 100%
The failure of any one or more of the Banks to lend in accordance
with its Commitment shall not relieve the other Banks of their
several obligations hereunder, but no Bank shall be liable in
respect to the obligation of any other Bank hereunder or be
obligated in any event to lend in excess of its Commitment.
Subject to the limitations of section 2.2(d)(3) the Company may
repay such loans and reborrow hereunder from time to time prior
to the Termination Date. Each loan hereunder from the Banks
collectively shall be in a multiple of $100,000 (except that any
such loan subject to a LIBOR Pricing option shall be in an amount
of $1,000,000 or any multiple of $100,000 in excess of such
amount). The loans from each Bank advanced under this section
1.1 shall be evidenced by a single promissory note of the Company
(each a "Revolving Credit Note", and collectively with the Demand
Notes (as defined in section 1.2 below), sometimes called the
"Notes") in the form of Exhibit 1.1 annexed hereto, payable to
the order of the lending Bank.
1.2 Demand Line of Credit. There is hereby
established a revocable line of credit in the aggregate principal
amount of $40,000,000 (the "Demand Line") for the current use of
the Company. The amount of the Demand Line provided by each Bank
is set forth in the table below:
Name of Bank Demand Line
Firstar Bank Milwaukee, $13,000,000
National Association
Bank one, Milwaukee, NA $11,000,000
Harris Trust and Savings Bank $8,000,000
Norwest Bank Wisconsin, National
Association $8,000,000
Total: $40,000,000
Each Bank in its sole discretion may decline to make advances
under the Demand Line at any time without having made demand
for payment. Any Bank so declining to make advances shall
immediately give written notice of such declination to the
Company and the Agent, but failure to give such notice shall
not affect the validity or effectiveness of such declination.
Any loans under the Demand Line shall be made pro rata according
to the participating Banks, respective shares of the Demand Line
from time to time in effect, up to an aggregate principal amount
equal to (i) $40,000,000 minus (ii) the amount by which (A) the
sum of (1) the outstanding principal amount of all revolving
credit loans made pursuant to section
1.1, (2) the aggregate amount of Letter of Credit
Obligations, and (3) the aggregate face amount of
outstanding Commercial Paper, including for this
purpose all Nicolet Funding Corp. Loans, exceeds (E)
the Aggregate Commitment. The Demand Line shall be
unused for at least 90 consecutive days during each
twelve-month period commencing July I of a given year
and ending June 30 the following year. Each advance
under the Demand Line from the Banks collectively shall
be in a multiple of $100,000 (except that any such
advance subject to a LIBOR Pricing Option shall be in
an amount of $1,000,000 or any multiple of $100,000 in
excess of such amount). The advances under the Demand
Line from each Bank shall be evidenced by a single
promissory note of the Company (each a "Demand Note",
and collectively with the Revolving Credit Notes,
sometimes called the "Notes"), payable on demand to the
order of the lending Bank in the form of Exhibit 1.2
attached hereto. The Company acknowledges that all
amounts due under the Demand Notes are payable on
demand, regardless of whether the Company has breached
any of the terms, covenants and conditions set forth in
this Agreement, the Notes, any Collateral Document or
any other document or agreement applicable to the loans
described herein.
1.3 Notes. The Notes shall be executed by
the Company and delivered to the Banks prior to the
initial loans. Although the Notes shall be expressed
to be payable in the full amounts specified above, the
Company shall be obligated to pay only the amounts
actually disbursed to or for the account of the
Company, together with interest on the unpaid balance
of sums so disbursed which remains outstanding from
time to time, at the rates and on the dates specified
in the Notes, together with the other amounts provided
therein.
1.4 Letters of Credit.
(a) Firstar Bank Milwaukee, N.A. and such
other Bank or Banks as the Company may from time to
time designate with the consent of the Agent (each an
"LOC Bank") shall from time to time when so requested
by the Company issue standby and import letters of
credit, respectively (each a "Letter of Credit" and
collectively the "Letters of Credit") for the account
of the Company up to an aggregate face amount equal to
the amount by which (i) the sum of (A) the Aggregate
Commitment and (B) the Demand Line from time to time in
effect exceeds (ii) the sum of (A) the outstanding
principal amount of loans made pursuant to sections 1.1
and 1.2, (B) the aggregate amount of all unpaid
Reimbursement obligations (as defined in section
lo.l(r) below) and (C) the aggregate face amount of
outstanding Commercial Paper, including for this
purpose all
Nicolet Funding Corp. Loans. In addition to the
foregoing aggregate limitation on Letters of Credit,
standby Letters of Credit shall not exceed $25,000,000
in aggregate face amount at any time outstanding and
import Letters of Credit shall not exceed $35,000,000
in aggregate face amount at any time outstanding. Each
LOC Bank hereby grants to each other Bank, and each
other Bank hereby agrees to take, a pro rata
participation in each Letter of Credit issued hereunder
and all rights (including rights to reimbursement from
the Company under paragraph (c) below) and obligations
associated therewith in accordance with the Percentage
Interest of each Bank. In the event of any drawing on
a Letter of Credit which is not reimbursed by or on
behalf of the Company, each Bank shall pay to the
appropriate LOC Bank a proportionate amount of such
drawing equal to its Percentage Interest therein. Each
LOC Bank shall divide the proceeds of any reimbursement
of a drawing on a Letter of Credit with the other Banks
that have made payment to the LOC Bank pursuant to the
foregoing sentence, pro rata according to the
respective contributions of such other Banks.
(b) The Company agrees to pay to the Agent for
the pro rata benefit of the Banks a letter of credit
fee in respect of each standby Letter of Credit in the
amount of three quarters of one percent (3/4!k) per
annum of the face amount of such standby Letter of
Credit. Such fees shall be payable quarterly in
arrears on the first day of each calendar quarter.
(c) The Company hereby unconditionally promises
to pay to the appropriate LOC Bank upon demand, without
defense, setoff or counterclaim, the amount of each
drawing under Letters of Credit issued by such LOC Bank
plus interest on the foregoing from the date due at the
Prime Rate (as defined in section 2.2(b)(2)).
(d) Reliance on Documents. Delivery to the LOC Banks
of any documents strictly complying on their face with
the requirements of any Letter of Credit shall be
sufficient evidence of the validity, genuineness and
sufficiency thereof and of the good faith and proper
performance of drawers and users of such Letter of
Credit, their agents and assignees; and the LOC Banks
may rely thereon without liability or responsibility
with respect thereto, even if such documents should in
fact prove to be in any or all respects invalid,
fraudulent or forged.
(e) Non-Liability for Other Matters. The LOC Banks
shall not be liable to the Company for (i)
honoring any requests for payment under any Letter
of Credit which strictly comply on their face with
the terms of such Letter of Credit, (ii) any delay
in giving or failing to give any notice, (iii)
errors, delays, misdeliveries or losses in
transmission of telegrams, cables, letters or
other communications or documents or items
forwarded in connection with any Letter of Credit
or any draft, (iv) accepting and relying upon the
name, signature or act of any party who is or
purports to be acting in strict compliance with
the terms of any Letter of Credit; or (v) any
other action taken or omitted by the LOC Banks in
good faith in connection with any Letter of Credit
or any draft; except only that the Company shall
have a claim against an LOC Bank, and such LOC
Bank shall be liable to the Company, to the extent
of damages suffered by the Company which the
Company proves were caused by (A) the LOC Bank's
willful misconduct or gross negligence or (B) the
LOC Bank's willful and wrongful failure to pay
under any Letter of Credit after the presentation
to it of documents strictly complying with the
terms and conditions of the Letter of Credit.
1.5 Use of Proceeds. The Company
represents, warrants and agrees that:
(a) The proceeds of the loans made hereunder
will be used solely for the following purposes:
(i) contemporaneously with the making of the
initial loan hereunder, the proceeds of such
initial loan shall be used to the extent necessary
to pay all indebtedness of Company outstanding
under its demand lines of credit with Firstar Bank
Milwaukee, N.A. and Norwest Bank Wisconsin; and
(ii) all other proceeds shall be used (A) for the
repayment at maturity of outstanding Commercial
Paper (to the extent necessary), and (B) for
working capital and other lawful corporate
purposes.
(b) No part of the proceeds of any loan made
hereunder will be used to "purchase" or "carry"
any "margin stock" or to extend credit to others
for the purpose of "purchasing" or "carrying" any
"margin stock" (as such terms are defined in the
Regulation U of the Board of Governors of the
Federal Reserve System), and the assets of the
Company and its Subsidiaries do not include, and
neither the Company nor any Subsidiary has any
present intention of acquiring, any such security.
1.6 Commitment Fee. The Company shall pay to the
Agent for the account of the Banks, pro rata according
to their respective Percentage Interests, a commitment
fee computed at the rate of one-eighth of one percent
(1/8W) per annum on the Aggregate Commitment (as
reduced pursuant to section 1.7). Such commitment fees
shall accrue during the period from the date of this
Agreement to and including the Termination Date and be
payable quarterly in advance on the date of the initial
loan and on the first day of each calendar quarter
thereafter.
1.7 Termination or Reduction.
(a) The Company shall have the right, upon
five business days' prior written notice to each
Bank, to ratably reduce in part the Commitments,
provided, however, that (i) each partial reduction
of the Aggregate Commitment shall be in the amount
of $100,000 or an integral multiple thereof, and
(ii) no reduction shall reduce the Aggregate
Commitment to an amount less than the sum of (A)
the aggregate principal amount of outstanding
revolving credit loans made under Section 1.1, (B)
the aggregate amount of Letter of Credit
obligations, and (C) the aggregate face amount of
outstanding Commercial Paper, including for this
purpose all Nicolet Funding Corp. Loans. Subject
to the limitations of the preceding sentence, the
entire Commitments of all of the Banks may be
terminated in whole at any time upon five Business
Days, prior written notice to each Bank.
(b) Each Bank in its sole discretion may at
any time reduce or terminate its individual Demand
Line by giving written notice of such reduction or
termination to the Agent and the Company. If any
Bank shall decline to make additional advances
pursuant to the Demand Line or shall demand
payment of any amount outstanding under its Demand
Note, the aggregate Demand Line shall
automatically be reduced by an amount equal to
such Bank's individual Demand Line.
1.8 Optional Prepayment. The Notes may be
prepaid in whole or in part at the option of the
Company at any time without premium or penalty except
as otherwise provided in section 2.2(d)(3). All
prepayments shall be applied as set forth in section
2.4(b) pro rata among the Banks in accordance with
their respective Percentage Interests. All prepayments
shall be accompanied by interest accrued on the amount
prepaid through the date of prepayment.
1.9 Commercial Paper.
(a) The Company may issue Commercial Paper
from time to time, including sales of Commercial Paper
through one or more of the Banks acting as placement
agent pursuant to separate agreements between the
Company and such Bank or Banks. The aggregate face
amount of all outstanding Commercial Paper (but not
including for this purpose any Nicolet Funding Corp.
Loans) shall not at any time exceed the lesser of (i)
$60,000,000 and (ii) the amount by which (A) the sum of
(1) the Aggregate Commitment and (2) the Demand Line in
effect from time to time, exceeds (B) the sum of (1)
the outstanding principal amount of loans made pursuant
to sections 1.1 and 1.2, (2) the aggregate amount of
Letter of Credit Obligations and (3) the outstanding
principal amount of all Nicolet Funding Corp. Loans.
No Commercial Paper shall have a term to maturity
greater than 100 days.
(b) The Company shall pay a Commercial Paper
placement fee in respect of Commercial Paper placed by
any of the Banks computed at a rate of one-quarter of
one percent (1/4%) per annum of the aggregate face
amount of such Commercial Paper, payable at the time
such Commercial Paper is issued as follows: (i) one-
eighth of one percent (1/8%) to the Bank acting as
placement agent for the sale of such Commercial Paper
and (ii) one-eighth of one percent (1/8%) to the Agent
for the pro rata benefit of the Banks.
(c) The Company will give written notice to
the Agent in the form of Part 1 to Exhibit 2.1 hereto
on each Business Day on which there is any change in
the aggregate outstanding face amount of Commercial
Paper and Nicolet Funding Corp. Loans, setting forth
the aggregate principal amount of all Commercial Paper
and Nicolet Funding Corp. Loans then outstanding after
giving effect to the issuance or repayment of
Commercial Paper and Nicolet Funding Corp. Loans (as
the case may be) taking place on such Business Day.
(d) For all purposes of this Agreement, the
outstanding face amount of all Commercial Paper
(but not including for this purpose any Nicolet
Funding Corp. Loans) shall be deemed to be use of
the Aggregate Commitment. The principal amount of
outstanding loans (including Nicolet Funding Corp.
Loans) and the face amount of outstanding Letters
of Credit shall be deemed to be use of the
Aggregate Commitment to the extent that the
Aggregate Commitment exceeds the face amount of
outstanding Commercial Paper (but not including
for this purpose any Nicolet Funding Corp. Loans)
from time to time, and otherwise shall be deemed
to be use of the Demand Line.
(e) The Company may also obtain direct
loans from Nicolet Funding Corp. ("Nicolet Funding
Corp. Loans") from time to time. The aggregate
principal amount of such loans at any time
outstanding shall not exceed the lesser of (i)
$20,000,000 and (ii) the sum of (A) the amount by
which the Aggregate Commitment exceeds the
aggregate principal amount of Commercial Paper
from time to time outstanding, plus (B) the amount
available to be borrowed from time to time under
the Demand Line provided by Norwest Bank
Wisconsin, National Association. Such loans shall
have maturities not exceeding 100 days, and shall
bear interest at rates to be agreed upon by the
Company and Nicolet Funding Corp.
ARTICLE II
ADMINISTRATION OF CREDIT
2.1 Borrowing Procedure. Loans hereunder shall he
made at the principal banking office of the Agent in
Milwaukee, Wisconsin, on written or telephonic
notice from the Company to the Agent received not later
than 10:30 a.m. on the date of the proposed borrowing
(subject to the notice requirement of section 2.2(c)(2)
if the Company wishes to elect a LIBOR Pricing option
with respect to such loan), which notice shall specify
the date and the aggregate principal amount of such
borrowing. Each written request for a borrowing
hereunder shall be given in the form of Part 2 to
Exhibit 2.1 hereto; each telephonic request for a
borrowing hereunder shall be confirmed within three (3)
Business Days of the borrowing date by delivery of a
written request in such form. Upon its receipt of such
notice from the Company, the Agent shall promptly
give
notice to the other Banks, each of which shall have its
respective portion of the loans available to the Agent
in Milwaukee in immediately available funds not later
than 2:00 p.m. on the date of the borrowing. Out of
thefunds received from the Banks for the making of
the loans hereunder, the Agent will make a loan to the
Company in such amount on behalf of such Banks. Notes
and other required documents delivered to the Agent for
the account of each Bank shall be promptly delivered to
such Bank, or in accordance with instructions received
from it, together with copies of such other documents
received in connection with the borrowing as such Bank
shall request.
2.2 Interest Calculation.
(a) Interest. The principal amount of the
indebtedness from time to time evidenced by the Notes
shall accrue and bear interest at a rate per annum
which shall at all times equal the Applicable Rate (as
defined in section 2.2(b)). To the extent that any
portion of the indebtedness evidenced by the Notes
bears interest at the Prime Rate (defined below), the
Company will pay such interest monthly in arrears on
the last day of each month. On the last day of each
LIBOR Interest Period or on any earlier termination of
any LIBOR Pricing Option, the Company will pay the
accrued and unpaid interest on the indebtedness
evidenced by the Notes which was subject to the LIBOR
Pricing Option which expired or terminated on such
date. On any stated or accelerated maturity of the
indebtedness evidenced by the Notes all accrued and
unpaid interest on such indebtedness shall be forthwith
due and payable, including without limitation any
accrued and unpaid interest on such indebtedness which
is subject to a LIBOR Pricing Option. In addition, the
Company will, on demand, pay interest on any overdue
installments of principal and pay interest during the
continuance of any Event of Default both at a rate per
annum which is at all times equal to the sum of (a) the
Applicable Rate (or, if more than one Applicable Rate
is then in effect, the weighted average of the
Applicable Rates then in effect), plus (b) 2%r per
annum.
(b) Applicable Rate. The term "Applicable Rate"
shall mean:
(1) With respect to any portion of the
indebtedness evidenced by the Notes which is at
the time subject to an effective LIBOR Pricing
Option, the applicable LIBOR Rate set forth in
section 2.2(c)(1)(D).
(2) With respect to any portion of the
indebtedness evidenced by the Notes which is not
at the time subject to an effective LIBOR Pricing
Option, the rate announced by Firstar Bank
Milwaukee, N.A. from time to time as its prime
rate (changing as and when such prime rate
changes) (the "Prime Rate").
(c) The LIBOR Pricing Options. The following
provisions shall apply to the LIBOR Pricing Options:
(1) Certain Definitions. For purposes of
this Agreement:
(A) The term "Basic LIBOR Rate" as applied to any
LIBOR Interest Period shall mean the per annum rate of
interest determined by the Agent (which shall be
applicable to all of the Banks) to be the average
(rounded up, if necessary, to the nearest 1/16 of 1%)
of the offered rates for deposits in U.S. dollars for
the applicable LIBOR Interest Period which appear on
the Reuters Screen LIBO Page (or such other page on
which the appropriate information may be displayed), on
the electronic communications terminals in the Agent's
money center as of 11:00 a.m. (London time) on the day
which is two Business Days prior to the first day of
such LIBOR Interest Period ("Calculation Date"), except
as provided below. if fewer than two offered rates
appear for the applicable LIBOR Interest Period or if
the appropriate screen is not accessible as of such
time, the term "Basic LIBOR Rate" shall mean the per
annum rate of interest determined by the Agent (but
which shall be applicable to all of the Banks) to be
the average (rounded up, if necessary, to the nearest
1/16 of 1%) of the rates at which deposits in U.S.
dollars are offered to the Agent by four major banks in
the London interbank market, as selected by the Agent
("Reference Banks"), at approximately 11 a.m., London
time, on the Calculation Date for the applicable LIBOR
Interest Period and in an amount equal to the principal
amount of the loans subject to the applicable LIBOR
Pricing Option. The Agent will request the principal
London office of each of the Reference Banks to provide
a quotation of its rate. If at least two such
quotations are provided, the applicable rate will be
the mean of the quotations. If fewer than two
quotations are provided as requested, the applicable
rate will be the mean of the rates quoted by major
banks in New York City, selected by the Agent, at
approximately 11 a.m., New York City time, on the
Calculation Date for loans in U.S. dollars to leading
European banks for the applicable LIBOR Interest Period
and in an amount equal to the principal amount of the
loans subject to the applicable LIBOR Pricing Option.
(B)The term "LIBOR Interest Period" shall mean any
period, selected as provided below in this section
2.2(c) of one, two or three months, each commencing on
any Business Day. Such LIBOR Interest Period shall
end on the day in the succeeding calendar month which
corresponds numerically to the beginning day of such
LIBOR Interest Period, provided, however, that if there
is no such numerically corresponding day in such
succeeding month, such LIBOR Interest Period shall end
on the last Business Day of such succeeding month. If
any LIBOR Interest Period so selected would otherwise
end on a date which is not a Business Day, such LIBOR
Interest Period shall instead end on the immediately
succeeding Business Day, provided, however, that if
said next succeeding Business Day falls in a new month,
such LIBOR Interest Period shall end on the immediately
preceding Business Day.
(C) The term "LIBOR Pricing Options" shall mean
the options granted pursuant to this section 2.2(c) to
have the interest on all or any portion of the
principal amount of indebtedness evidenced by the Notes
computed with reference to a LIBOR Rate.
(D) The term "LIBOR Rate" for any LIBOR Interest
Period shall mean a rate per annum equal to the sum of
(i) the quotient of (A) the Basic LIBOR Rate applicable
to that LIBOR Interest Period divided by (B) one minus
the LIBOR Reserve Requirement (expressed as a decimal)
applicable to that LIBOR Interest Period, plus (ii)
five-eighths of one percent (5/8%). The LIBOR Rate
shall be rounded, if necessary, to the next higher 1/16
of 1%.
(E) The term "LIBOR Reserve Requirement" shall
mean, with respect to each LIBOR Interest Period,
the stated rate of all reserve requirements
(including all basic, supplemental, marginal and
other reserves and taking into account any
transitional adjustments or other scheduled
changes in reserve requirements during such LIBOR
Interest Period) that is specified on the first
day of such LIBOR Interest Period by the Board of
Governors of the Federal Reserve System for
determining the maximum reserve requirement with
respect to eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in
Regulation D of such Board of Governors)
applicable to the Agent.
(F)The term "Regulatory Change" means any change
enacted or issued after the date of this Agreement
of any (or the adoption after the date of this
Agreementof any new) federal or state law,
regulation, interpretation, direction, policy or
guideline, or any court decision, which in any
case has general application to banks of the class
of which any Bank is a member and which affects
the treatment of any loans of such Bank, all as
set forth below.
(2) Election of LIBOR Pricing Options. Subject to
all the terms and conditions hereof, the
Company may, by notice to the Agent received
not later than 10:30 a.m. (Milwaukee time) on
the day which is three Business Days prior to
the first day of the LIBOR Interest Period
selected in such notice, elect to have all or
such portion of the principal amount of
indebtedness then evidenced (or to be evidenced
at the commencement of such LIBOR Interest
Period) by the Notes as the Company may specify
in such notice (in the minimum amount of
$1,000,000 or any multiple of $100,000 in
excess of such amount) accrue and bear daily
interest during the LIBOR Interest Period so
selected at a per annum rate equal to the LIBOR
Rate for such LIBOR Interest Period; provided,
however, that no such election shall become
effective if the Agent determines (which
determination shall be binding and conclusive
on all parties) that (i) by reason of
circumstances affecting the London interbank
market adequate and reasonable means do not
exist for ascertaining the applicable LIBOR
Rate; (ii) the LIBOR Rate does not accurately
reflect the cost to the Banks of making or
maintaining LIBOR-based loans in general; or
(iii) any Default or Event of Default has
occurred and is continuing. Each notice of
election of a LIBOR Pricing Option shall be
irrevocable.
(d) Special Provisions.
(1) Increased Costs. If any Regulatory Change,
(A) shall subject any Bank to any tax, duty
or other charge with respect to any of its loans,
Letters of Credit or participations therein, or
Reimbursement Obligations owed to it hereunder, or
shall change the basis of taxation of payments to
any Bank of the principal of or interest on its
loans hereunder or Reimbursement Obligations owed
to it, or any other amounts due under this
Agreement in respect of such loans or
Reimbursement obligations, or its obligation to
make loans hereunder or issue Letters of Credit or
participate therein (except for changes in the
rate of tax on the overall net income of such
Bank);
(B) shall impose, modify or make applicable
any reserve (including, without limitation, any
reserve imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve
included in the determination of the LIBOR Rate),
special deposit or similar requirement against
assets of, deposits with or for the account of, or
credit extended by, any Bank; or
(C) shall impose on any Bank any
other condition affecting its loans,
Letters of Credit or participations
therein, or any Reimbursement Obligation
owed to it hereunder; and the result of
any of the foregoing is to increase the
cost to (or in the case of Regulation D or
any other analogous law, rule or regulation, to
impose a cost on) such Bank of making or
maintaining any loans, issuing or maintaining any
Letter of Credit, or participating therein, or to
reduce the amount of any sum received or
receivable by such Bank under this Agreement and
any document or instrument related hereto, then
after 30 days' notice from such Bank (which notice
shall be sent to the Agent and the Company and
shall be
accompanied by a statement setting forth in
reasonable detail the basis of such increased cost
or other effect on the loans, Letters of Credit or
Reimbursement obligations), the Company shall pay
directly to such Bank, on demand, such
additional amount or amounts as will compensate
such Bank for such increased cost or such
reduction incurred on or after the date of the
giving of such notice to the Agent and the
Company.
Each of the Banks represents to the Company
that, as of the date hereof, it is not aware of
any fact or circumstance that would give rise to
any increased cost under this section 2.2(d)(1).
Each Bank further agrees that, for purposes of
this section 2.2(d)(1), it will not treat the
Company in a manner different from its other
commercial loan customers having similar loan
relationships with the Bank.
(2) Changes in Law Rendering Certain
Loans Unlawful. In the event that any Regulatory
Change should make it (or, in the good faith judgment
of a Bank, should raise substantial questions as to
whether it is) unlawful for a Bank to make, maintain or
fund a loan subject to a LIBOR Rate, then (i) such Bank
shall promptly notify each of the other parties hereto,
(ii) the obligation of all Banks to make such loan
shall, upon the effectiveness of such event, be
suspended for the duration of such unlawfulness, and
(iii) to the extent that it is unlawful for such Bank
to maintain an outstanding loan subject to a LIBOR
Rate, such loan shall thereafter bear interest at the
Prime Rate or such other lower rate as may be agreed
upon by the Company and the Bank.
(3) Funding Losses. The Company hereby agrees
that upon demand by any Bank (which demand shall be
sent to the Agent and the Company and shall be
accompanied by a statement setting forth in reasonable
detail the basis for the calculations of the amount
being claimed) the Company will indemnify such Bank
against any net loss or expense which such Bank may
sustain or incur (including, without limitation, any
net loss or expense incurred by reason of the
liquidation or reemployment of
deposits or other funds acquired by such Bank to fund
or maintain loans hereunder), as reasonably determined
by such Bank, as a result of (i) any payment or
prepayment of any loan subject to a LIBOR Rate of such
Bank on a date other than the last day of a LIBOR
Interest Period for such loan whether or not required
by any other provision of this Agreement, or (ii) any
failure of the Company to borrow any loans on a date
specified therefor in a notice of borrowing pursuant to
this Agreement.
(4) Discretion of Banks as to Manner of
Funding. Notwithstanding any provision of this
Agreement to the contrary, each Bank shall be
entitled to fund and maintain its funding of all or any
part of its loans hereunder in any manner it sees fit.
(5) Capital Adequacy. If any Regulatory Change
affects the treatment of any loan, Letter of Credit or
participation therein of a Bank as an asset or other
item included for the purpose of calculating the
appropriate amount of capital to be maintained by such
Bank or any corporation controlling such Bank and has
the effect of reducing the rate of return on such
Bank's or such corporation's capital as a consequence
of the obligations of such Bank hereunder to a level
below that which such Bank or such corporation could
have achieved but for such Regulatory Change (taking
into account such Bank's or such corporation's policies
with respect to capital adequacy) by an amount deemed
in good faith by such Bank to be material, then after
30 days' notice from such Bank to the Company and the
Agent of such Regulatory Change, the Company shall pay
to such Bank, on demand, such additional amount or
amounts as will compensate such Bank or such
corporation, as the case may be, for such reduction
incurred on or after the date of the giving of such
notice to the Agent and the Company. Such Bank shall
submit, to the Agent and the Company, a statement as to
the amount of such compensation, prepared in good faith
and in reasonable detail. Each of the Banks represents
to the Company that, as of the date hereof, it is not
aware of any fact or circumstance that would give rise
to a claim for compensation under this section
2.2(d)(5).
(6) Conclusiveness of Statements; Survival of Prov
isions.Determinations and statements of any Bank pursuant to
sections
2.2(d)(1), (2), (3) and (5) shall be rebuttably
presumptive evidence of the correctness of the
determinations and statements and shall be conclusive
absent manifest error if the Company fails to deliver
written notice to the Agent within 30 days of (i) the
date of mailing of such statement or (ii) the giving of
notice of such determination if no such statement is
mailed. The provisions of section 2.2(d)(1),
(3) and (5) shall survive the obligation of the Banks
to extend credit under this Agreement and the repayment
of the loans and Reimbursement obligations.
2.3 Computations; Non-Business Days. All fees, and
all interest payable on the Notes, shall be computed for the
actual number of days elapsed using a daily rate determined by
dividing the annual rate by 360. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a non-
Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall be included in the
computation of interest under the Notes, or fees payable
hereunder, as the case may be.
2.4 Application of Payments.
(a) All payments of principal, interest and
fees under this Agreement and the Notes shall be made to the
Agent in immediately available funds for the ratable account
of the Banks and the holders of the Notes then outstanding,
as appropriate, in respect of amounts then due hereunder.
The Agent shall promptly distribute to each such Bank or
holder pro rata the amount of principal, interest or fees
received by the Agent for the account of such holder. Any
payment to the Agent for the account of a Bank or a holder
of a Note under this Agreement shall constitute a payment by
the Company to such Bank or holder of the amount so paid to
the Agent, and any Notes or portions thereof so paid shall
not be considered outstanding for any purpose after the date
of such payment to the Agent.
(b) All payments received by the Agent under this
Agreement from any source shall be applied to the
obligations of the Company hereunder in the following order
of priority:
(i) First, to the payment of all unreimbursed
fees and expenses due hereunder;
(ii) Second, to the repayment of all outstanding loans
under the Demand Line and all accrued interest thereon;
(iii) Third, to the payment of all
outstanding loans under the Aggregate
Commitment, to the extent then due and
payable, and all accrued interest thereon;
(iv) Fourth, to secure reimbursement of
the outstanding face amount of all Letters of
Credit issued against the Demand Line;
(v) Fifth, to secure reimbursement of
the outstanding face amount of all Letters of
Credit issued against the Aggregate
Commitment; and
(vi) Sixth, to secure payment at
maturity of all outstanding Commercial Paper,
including for this purpose all Nicolet
Funding Corp. Loans.
2.5 Pro Rata Treatment. All payments or
prepayments of principal, interest or fees shall be
made pro rata in accordance with the amounts of the
Notes then due. In the event that any Bank shall
receive from the Company or any other source (other
than the sale of a participation to another commercial
lender pursuant to section 10.10) any payment of, on
account of, or for any obligation of the Company
hereunder or under the Notes (whether pursuant to the
exercise of any right of set off, banker's lien,
realization upon any security held for or appropriated
to such obligation, counterclaim or otherwise) other
than as above provided, then such Bank shall
immediately purchase, without recourse and for cash, an
interest in the obligations of the same nature held by
the other Banks so that each Bank shall thereafter have
a percentage interest in all of such obligations eclual
to the percentage interest which such Bank held in the
Notes outstanding immediately before such payment;
provided, that if any payment so received shall be
recovered in whole or in part from such purchasing
Bank, the purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but
without interest. The Company specifically
acknowledges and consents to the preceding sentence.
2.6 Set Off. In the event that the unpaid
principal balance of the Notes or any other amount
becomes immediately due and payable pursuant to section
7.2, each Bank may offset and apply any monies,
balances, accounts and deposits (including certificates
of deposit) of the Company
then at such Bank toward the payment of the Note or
Notes held by such Bank or other amounts owed to it
hereunder. Promptly upon its charging any account of
the Company pursuant to this section, the Bank shall
give the Company notice thereof, provided that failure
to give such notice shall not affect the obligations of
the Company hereunder.
ARTICLE III
CONDITIONS OF BORROWING
Without limiting any of the other terms of
this Agreement, none of the Banks shall be required to
make any loan to the Company hereunder or issue any
Letter of Credit unless each of the following
conditions has been satisfied:
3.1 Representations. The representations
and warranties contained in Article IV hereof continue
to be true and correct on the date of such loan and no
Default or Event of Default hereunder shall have
occurred and be continuing.
3.2 Insurance Certificate. Prior to the
initial loan the Banks shall have received satisfactory
evidence that the Company maintains hazard and
liability insurance coverage reasonably satisfactory to
the Banks.
3.3 Form U-1. Prior to the initial loan the
Company shall have executed and delivered to the Banks
a Federal Reserve Form U-1 provided for in Regulation U
of the Board of Governors of the Federal Reserve
System, and the statements made therein shall be such,
in the reasonable opinion of the Banks, as to permit
the transactions contemplated hereby without violation
of Regulation U.
3.4 Counsel opinion. Prior to the initial
loan the Banks shall have received from their special
counsel and from Company's counsel, satisfactory
opinions as to such matters relating to the Company and
its Subsidiaries, the validity and enforceability of
this Agreement, the loans to be made hereunder and the
other documents required by this Article III as the
Banks shall reasonably require. The Company shall
execute and/or deliver to the Banks or their respective
counsel such documents concerning its corporate status
and the authorization of such transactions as may be
requested.
3.5 Proceedings Satisfactory. All
proceedings taken in connection with the transactions
contemplated by this Agreement, and all instruments,
authorizations and other documents applicable thereto,
shall be satisfactory in form and substance to the
Banks and their respective counsel.
3.6 Violation of Environmental Laws. In the
reasonable opinion of the Banks there shall not exist
any uncorrected violation by the Company or any
Subsidiary of an Environmental Law or any condition
which requires, or may require, a cleanup, removal or
other remedial action by the Company or any Subsidiary
under any Environmental Laws costing $2,500,000 or more
in the aggregate.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to make the
loans as provided herein, the Company represents and
warrants to the Banks as follows, except as set forth
in a letter (the "Information and Exceptions Letter")
delivered to the Banks not later than three (3)
Business Days prior to the date of this Agreement.
4.1 Organization. The Company and each of
its Subsidiaries is a corporation duly organized and
existing in good standing under the laws of the
jurisdiction under which it was incorporated, and has
all requisite power and authority, corporate or
otherwise, to conduct its business and to own its
properties. Set forth in the Information and
Exceptions Letter is a complete and accurate list of
all of its Subsidiaries, showing as of the date hereof
(as to each such Subsidiary) the jurisdiction of its
incorporation, the percentage of the outstanding shares
of each class of capital stock owned (directly or
indirectly) by the Company and the number of shares
covered by all outstanding options, warrants, rights of
conversion or purchase, and similar rights. All of the
outstanding stock of all of the Subsidiaries has been
legally and validly issued, is fully paid and non-
assessable except as provided by section 180.0622(2)(b)
of the Wisconsin Business Corporation Law and its
predecessor statute, as judicially interpreted, and is
owned by the Company or one or more other Subsidiaries
free and clear of all pledges, liens, security
interests and other charges or encumbrances. The
Company is duly licensed or qualified to do business in
all jurisdictions in which such qualification is
required, and failure to so qualify could have a
material adverse effect on the property, financial
condition or business operations of the Company.
4.2 Authority. The execution, delivery and
performance of this Agreement, the Notes and the
documents required by Article III (the "Collateral
Documents") are within the corporate powers of the
Company, have been duly authorized by all necessary
corporate action and do not and will not (i) require
any consent or approval of the stockholders of the
Company, (ii) violate any provision of the articles of
incorporation or by-laws of the Company or of any law,
rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect
having applicability to the Company or any Subsidiary;
(iii) require the consent or approval of, or filing or
registration with, any governmental body, agency or
authority; or (iv) result in a breach of or constitute
a default under, or result in the imposition of any
lien, charge or encumbrance upon any property of the
Company or any Subsidiary pursuant to, any indenture or
other agreement or instrument under which the
Company or any Subsidiary is a party or by which it or
its properties may be bound or affected. This
Agreement constitutes, and each of the Notes and
each of the Collateral Documents when executed and
delivered hereunder will constitute, legal, valid and
binding obligations of the Company or other signatory
enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy or
similar laws affecting the enforceability of creditors'
rights generally.
4.3 Investment Company Act of 1940. Neither the
Company nor any Subsidiary is an "investment company"
or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of
1940, as amended.
4.4 Employee Retirement Income Security Act.
All Plans are in compliance in all material respects
with the applicable provisions of ERISA. Neither the
Company nor any Subsidiary has incurred any material
"accumulated funding deficiency" within the meaning of
section 302(a)(2) of ERISA in connection with any Plan.
There has been no Reportable Event for any Plan, the
occurrence of which would have a materially adverse
effect on the Company or any Subsidiary, nor has the
Company or any Subsidiary incurred any material
liability to the Pension Benefit Guaranty Corporation
under section 4062 of ERISA in connection with any
Plan. The Unfunded Liabilities of all Plans do not in
the aggregate exceed $2,500,000.
4.5 Financial Statements. The consolidated and
consolidating balance sheets of the Company and its
Subsidiaries as of December 31, 1993, and the
consolidated and consolidating statements of profit and
loss and surplus of the Company and its Subsidiaries
for the year ended on that date, as prepared by the
Company and certified by Ernst & Young and heretofore
furnished to the Banks, present fairly the financial
condition of the Company and such Subsidiaries as of
that date, and the results of their operations for the
fiscal year ended on that date. Since December 31,
1993, there has been no material adverse change in the
property, financial condition or business operations of
the Company or any Subsidiary.
4.6 Liens. The Company and each Subsidiary
has good and marketable title to all of its assets,
real and personal, free and clear of all liens,
security interests, mortgages and encumbrances of any
kind, except Permitted Liens. To the best of the
Company's knowledge and belief, all owned and leased
buildings and equipment of the Company and its
Subsidiaries are in good condition, repair and working
order in all material respects and conform in all
material respects to all applicable laws, regulations
and ordinances.
4.7 Contingent Liabilities. Neither the
Company nor any Subsidiary has any guarantees or other
contingent liabilities outstanding (including, without
limitation, liabilities by way of agreement, contingent
or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the
debtor or otherwise to assure the creditor against
loss), except those permitted by section 5.7 hereof.
4.8 Taxes. Except as expressly disclosed in the
financial statements referred to in section 4.5 above,
neither the Company nor any Subsidiary has any material
outstanding unpaid tax liability (except for taxes
which are currently accruing from current operations
and ownership of property, which are not delinquent),
and no tax deficiencies have been proposed or assessed
against the Company or any Subsidiary. The most recent
completed audit of the Company's federal income tax
returns was for the Company's income tax year ending
December 31, 1989, and all taxes shown by such returns
(together with any adjustments arising out of such
audit, if any) have been paid.
4.9 Absence of Litigation. Neither the Company nor
any Subsidiary is a party to any litigation or
administrative proceeding, nor so far as is known by
the Company is any litigation or administrative
proceeding threatened against it or any Subsidiary,
which in either case (i) relates to the execution,
delivery or performance of this Agreement, the Notes,
or any of the Collateral Documents, (ii) could, if
adversely determined, cause any material adverse change
in the property, financial condition or the conduct of
the business of the Company and its Subsidiaries taken
as a whole, (iii)asserts or alleges the Company or
any Subsidiary violated Environmental Laws, (iv)
asserts or alleges that Company or any Subsidiary is
required to cleanup, remove, or take remedial or other
response action due to the disposal, depositing,
discharge, leaking or other release of any hazardous
substances or materials, or (v) asserts or alleges that
Company or any Subsidiary is required to pay all or a
portion of the cost of any past, present or future
cleanup, removal or remedial or other response action
which arises out of or is related to the disposal,
depositing, discharge, leaking or other release of any
hazardous substances or materials by Company or any
Subsidiary, except with respect to violations,
cleanups, removals and other remedial and response
actions referred to clauses (iii), (iv) and (v) above
which will cost the Company and its Subsidiaries less
than $2,500,000 in the aggregate.
4.10 Absence of Default. No event has
occurred which either of itself or with the lapse of
time or the giving of notice or both, would give any
creditor of the Company or any Subsidiary the right to
accelerate the maturity of any indebtedness of the
Company or any Subsidiary for borrowed money. Neither
the Company nor any Subsidiary is in default under any
other lease, agreement or instrument, or any law, rule,
regulation, order, writ, injunction, decree,
determination or award, non-compliance with which could
materially adversely affect its property, financial
condition or business operations.
4.11 No Burdensome Agreements. Neither the Company nor
any Subsidiary is a party to any agreement, instrument
or undertaking, or subject to any other restriction,
(i) which materially adversely affects the property,
financial condition or business operations of the
Company and its Subsidiaries taken as a whole, or (ii)
under or pursuant to which the Company or any
Subsidiary is or will be required to place (or under
which any other person may place) a lien upon any of
its properties securing indebtedness either upon demand
or upon the happening of a condition, with or without
such demand, other than Permitted Liens.
4.12 Trademarks, etc. The Company and its
Subsidiaries possess adequate trademarks, trade names,
copyrights, patents, permits, service marks and
licenses, or rights thereto, for the present and
planned future conduct of their respective businesses
substantially as now conducted, without any known
conflict with the rights of others which might result
in a material adverse effect on the Company and its
Subsidiaries taken as a whole.
4.13 Partnerships; Joint Ventures. Neither
the Company nor any Subsidiary is a member of any
partnership or joint venture except as permitted under
section 5.4.
4.14 Full Disclosure. No information,
exhibit or report furnished by the Company or any
Subsidiary to any Bank in connection with the
negotiation or execution of this Agreement contained
any material misstatement of fact as of the date when
made or omitted to state a material fact or any fact
necessary to make the statements contained therein not
misleading as of the date when made.
4.15 Fiscal Year. The fiscal year of the Company
and each Subsidiary ends on December 31 of each year.
4.16 Environmental Conditions. To the Company's
knowledge after reasonable investigation, there are no
conditions existing currently or likely to exist during
the term of this Agreement which would subject the
Company or any Subsidiary to damages, penalties,
injunctive relief or cleanup costs under any
Environmental Laws or which require or are likely to
require cleanup, removal, remedial action or other
response pursuant to Environmental Laws by the Company
or any Subsidiary, except for such matters which will
cost the Company and its Subsidiaries less than
$2,500,000 in the aggregate.
4.17 Environmental Judgments, Decrees and
orders. Neither the Company nor any Subsidiary is
subject to any judgment, decree, order or citation
related to or arising out of Environmental Laws and
neither the Company nor any Subsidiary has been named
or listed as a potentially responsible party by any
governmental body or agency in a matter arising under
any Environmental Laws, except for such matters which
will cost the Company and its Subsidiaries less than
$2,500,000 in the aggregate.
ARTICLE V
NEGATIVE COVENANTS
While any part of the credit granted to the
Company is available and while any part of the
principal of or interest on any Note remains unpaid or
any Letter of Credit Obligation remains outstanding,
the Company shall not do any of the following, or
permit any Subsidiary to do any of the following,
without the prior written consent of the Required
Banks:
5.1 Restriction of Indebtedness. Create,
incur, assume or have outstanding any indebtedness for
borrowed money or the deferred purchase price of any
asset (including obligations under Capitalized Leases),
except:
(a) the Notes issued under this Agreement;
(b) outstanding indebtedness in respect of
industrial revenue bond financing shown on the
financial statements referred to in section 4.5 above,
provided that such indebtedness shall not be renewed,
extended or increased;
(c) additional long-term indebtedness
incurred pursuant to an offering of long-term notes,
bonds or similar obligations of the Company; provided
that, simultaneously with the closing of such debt
offering, the Aggregate Commitment shall be reduced by
an amount equal to the net proceeds to the Company of
such long-term indebtedness;
(d) indebtedness described in section
lo.l(p)(iv), provided such indebtedness does not exceed
an aggregate of $5,000,000 outstanding at any one time;
(e) Commercial Paper in an aggregate face
amount of not more than the amount permitted by section
1.9(a);
(f) Nicolet Funding Corp. Loans in aggregate
principal amount of not more than the amount permitted
by section 1.9(e);
(g) unsecured indebtedness which is
subordinated to the prior payment of the Company's
obligations under this Agreement in a manner
satisfactory to the Banks;
(h) indebtedness in respect of Capitalized
Leases, provided that the aggregate lease payments
thereunder do not exceed $1,000,000 in any fiscal year
of the Company; and
(i) other indebtedness not exceeding
$5,000,000 in aggregate principal amount at any time
outstanding.
5.2 Restriction on Liens. Create or permit
to be created or allow to exist any mortgage, pledge,
encumbrance or other lien upon or security interest in
any property or asset now owned or hereafter acquired
by the Company or any Subsidiary, except Permitted
Liens.
5.3 Sale and Leaseback. Enter into any
agreement providing for the leasing by the Company or
a Subsidiary of property which has been or is to be
sold or transferred by the Company or a Subsidiary to
the lessor thereof, or which is substantially similar
in purpose to property so sold or transferred, except
for agreements relating to sales of property not
exceeding $5,000,000 (in gross sales proceeds to the
Company) in the aggregate.
5.4 Acquisitions and Investments. Acquire any
other business or make any loan, advance or extension
of credit to, or investment in, any other person,
corporation or other entity (including without
limitation Subsidiaries, partnerships and joint
ventures), including investments acquired in exchange
for stock or other securities or obligations of any
nature of the Company or any Subsidiary, except:
(a) investments in (i) bank repurchase
agreements; (ii) savings accounts or certificates
of deposit in a financial institution of
recognized standing; (iii) obligations issued or
fully guaranteed by the United States; and (iv)
prime commercial paper maturing within 90 days of
the date of acquisition by the Company or a
Subsidiary;
(b) loans and advances made to employees and
agents in the ordinary course of business, such as
travel and entertainment advances and similar
items;
(c) investments in the Company by a
Subsidiary;
(d) credit extended to customers in the
ordinary course of business;
(e) other investments outstanding on
December 31, 1993, and shown on the financial
statements referred to in section 4.5 above,
provided that such investments shall not be
increased; and
(f)additional acquisitions and investments in
present and future Subsidiaries and joint
ventures, provided that all such acquisitions and
investments (valued at original cost without
regard to subsequent increases or decreases in the
value thereof) shall not exceed (i)$15,000,000 in
the aggregate and (ii)$5,000,000 with respect to
any single entity.
5.5 Liquidation; Merger; Disposition of
Assets. Liquidate or dissolve; or merge with or into
or consolidate with or into any other corporation or
entity except a merger of a wholly-owned Subsidiary
into the Company or another wholly-owned Subsidiary; or
sell, lease, transfer or otherwise dispose of all or
any substantial part of its property, assets or
business (other than sales made in the ordinary course
of business), or any stock of any Subsidiary.
5.6 Accounts Receivable. Discount or sell with
recourse, or sell for less than the face amount
thereof, any of its notes or accounts receivable,
whether now owned or hereafter acquired.
5.7 Contingent Liabilities. Guarantee or
become a surety or otherwise contingently liable
(including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to
provide funds for payment, to supply funds to or
otherwise invest in the debtor or otherwise to assure
the creditor against loss) for any obligations of
others, except (i) pursuant to the deposit and
collection of checks and similar items in the ordinary
course of business, (ii) in connection with letters of
credit issued for the account of the Company from time
to time by Republic National Bank of New York, provided
that (A) such letters of credit shall not exceed
$10,000,000 in aggregate face amount at any time
outstanding and (B) none of such letters of credit
shall remain outstanding on or after June 1, 1995, and
(iii) other contingent liabilities in respect of third
party obligations not exceeding an aggregate of
$5,000,000 outstanding at any one time.
5.8 Affiliates. Suffer or permit any
transaction with any Affiliate, except on terms not
less favorable to the Company or Subsidiary than would
be usual and customary in similar transactions with non-
affiliated persons.
ARTICLE VI
AFFIRMATIVE COVENANTS
While any part of the credit granted to the
Company is available and while any part of the
principal of or interest on any Note remains unpaid or
any Letter of Credit Obligation is outstanding, and
unless waived in writing by the Required Banks, the
Company shall:
6.1 Financial Status. Maintain:
(a) At all times a Consolidated Current Ratio
of at least 2.00 to 1.00;
(b) A ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth of
(i) not more than 1.00 to 1.00 at all times prior
to January 1, 1996 and (ii) not more than 0.85 to
1.00 at all times after December 31, 1995; and
(c) At the end of each fiscal quarter a
Consolidated Fixed Charge Coverage Ratio for the
four consecutive fiscal quarters then ended of at
least 3.00 to 1.00.
6.2 Insurance. Maintain insurance in such
amounts and against such risks as is customary by
companies engaged in the same or similar businesses and
similarly situated.
6.3 Corporate Existence; Obligations. Do,
and cause each Subsidiary to do, all things necessary
to: maintain its corporate existence (except for
mergers permitted by section 5.5) and all rights and
franchises necessary or desirable for the conduct of
its business; (ii) comply in all material respects with
all applicable laws, rules, regulations and ordinances,
and all restrictions imposed by governmental
authorities, including those relating to environmental
standards and controls; and (iii) pay, before the same
become delinquent and before penalties accrue thereon,
all taxes, assessments and other governmental charges
against it or its property, and all of its other
liabilities, except to the extent and so long as the
same are being contested in good faith by appropriate
proceedings in such manner as not to cause any material
adverse effect upon its property, financial condition
or business operations, with adequate reserves provided
for such payments.
6.4 Business Activities. Continue to carry
on its business activities in substantially the manner
such activities are conducted on the date of this
Agreement and not make any material change in the
nature of its business.
6.5 Properties. Keep and cause each
Subsidiary to keep its properties (whether owned or
leased) in good condition, repair and working order,
ordinary wear and tear and obsolescence excepted, and
make or cause to be made from time to time all
necessary repairs thereto (including external or
structural repairs) and renewals and replacements
thereof consistent with the exercise of its reasonable
business judgment.
6.6 Accounting Records; Reports. Maintain and cause
each Subsidiary to maintain a standard and modern
system for accounting in accordance with generally
accepted principles of accounting consistently applied
throughout all accounting periods and consistent with
those applied in the preparation of the financial
statements referred to in section 4.5; and furnish to
the Agent such information respecting the business,
assets and financial condition of the Company and its
Subsidiaries as any Bank may reasonably request and,
without request, furnish to the Agent:
(a) Within 45 days after the end of each of the
first three quarters of each fiscal year of
the Company (i) consolidated and
consolidating balance sheets of the Company
and all of its Subsidiaries as of the close
of such quarter and of the comparable
quarter in the preceding fiscal year; and
(ii) consolidated and consolidating
statements of income and surplus of the
Company and all of its Subsidiaries for such
quarter and for that part of the fiscal year
ending with such quarter and for the
corresponding periods of the preceding
fiscal year; all in reasonable detail and
certified as true and correct (subject to
audit and normal year-end adjustments) by
the chief financial officer of the Company;
and
(b) As soon as available, and in any event
within 90 days after the close of each fiscal year
of the Company, a copy of the audit report for such
year and accompanying consolidated and consolidating
financial statements of the Company and its
Subsidiaries, as prepared by independent public
accountants of recognized standing selected by the
Company and reasonably satisfactory to the Required
Banks, which audit report shall be accompanied by an
opinion of such accountants, in form reasonably
satisfactory to the Required Banks, to the effect that
the same fairly present the financial condition of the
Company and its Subsidiaries and the results of its and
their operations as of the relevant dates thereof; and
(c) As soon as available, copies of all reports
or materials submitted or distributed to shareholders
of the Company or filed with the Securities and
Exchange Commission or other governmental agency having
regulatory authority over the Company or any Subsidiary
or with any national securities exchange; and
(d) Promptly, and in any event within 10 days after an
officer of the Company has actual knowledge thereof a
statement of the chief financial officer of the Company
describing: (i) any Default or Event of Default
hereunder, or any other event which, either of itself
or with the lapse of time or the giving of notice or
both, would constitute a default under any other
material agreement to which the Company or any
Subsidiary is a party, together with a statement of the
actions which the Company proposes to take with respect
thereto; (ii) any pending or threatened litigation or
administrative proceeding of the type described in
section 4.9; and (iii) any fact or circumstance which
is materially adverse to the property, financial
condition or business operations of the Company and its
Subsidiaries taken as a whole; and
(e)(i) Promptly, and in any event within 30 days, after
an officer of the Company acquires actual
knowledge that any Reportable Event with respect
to any Plan has occurred, a statement of the chief
financial officer of the Company setting forth
details as to such Reportable Event and the action
which the Company proposes to take with respect
thereto, together with a copy of any notice of
such Reportable Event given to the Pension Benefit
Guaranty Corporation if a copy of such notice is
available to the Company, (ii) promptly after the
filing thereof with the Internal Revenue Service,
copies of each annual report with respect to each
Plan administered by the Company and (iii)
promptly after receipt thereof, a copy of any
notice (other than a notice of general
application) the Company, any Subsidiary or any
member of the Controlled Group may receive from
the Pension Benefit Guaranty Corporation or the
Internal Revenue Service with respect to any Plan
administered by the Company.
The financial statements referred to in (a)
and (b) above shall be accompanied by a certificate by
the chief financial officer of the Company
demonstrating compliance with the covenants in section
6.1 during the relevant period and stating that, as of
the close of the last period covered in such financial
statements, no condition or event had occurred which
constitutes a Default hereunder or which, after notice
or lapse of time or both, would constitute a Default
hereunder (or if there was such a condition or event,
specifying the same). The audit report referred to in
(b) above shall be accompanied by a certificate by the
accountants who prepared the audit report, as of the
date of such audit report, stating that in the course
of their audit, nothing has come to their attention
suggesting that a condition or event has occurred which
constitutes a Default hereunder or which, after notice
or lapse of time or both, would constitute a Default
hereunder (or if there was such a condition or event,
specifying the same); but such accountants shall not be
liable for any failure to obtain knowledge of any such
condition or event. The Agent shall promptly furnish
to each of the Banks (i) copies of the certificates
delivered to the Agent pursuant to this paragraph, and
(ii) copies of any statements delivered to the Agent
pursuant to section 6.6(d) or (e) above.
6.7 Inspection of Records. Permit representatives
of the Banks at their own expense to visit and inspect
any of the properties and examine any of the books and
records of the Company and its Subsidiaries at any
reasonable time and as often as may be reasonably
desired.
6.8 Compliance with Environmental Laws. Timely comply in all
material respects, and cause each Subsidiary to comply in all
material respects, with all applicable Environmental Laws.
6.9 Environmental Audit. Permit, at its expense, at
the request of the Required Banks, an Environmental Audit solely
for the benefit of the Banks, to be conducted by the Banks or an
independent agent selected by the Banks, but only in the event of
a circumstance or condition of the nature described in section
6.10 below which, in the reasonable judgment of the Required
Banks, will cost the Company $2,500,000 or more in the aggregate.
This provision shall not relieve the Company or any Subsidiary
from conducting its own Environmental Audits or taking any other
steps necessary to comply with Environmental Laws.
6.10 Orders, Decrees and other Documents. Provide to
the Agent, immediately upon receipt, copies of any
correspondence, notice, pleading, citation, indictment,
complaint, order, decree, or other document from any source
asserting or alleging a circumstance or condition which requires
or may recfuire a financial contribution by the Company or any
Subsidiary or a cleanup, removal, remedial action, or other
response by or on the part of the Company or any Subsidiary under
Environmental Laws or which seeks damages or civil, criminal or
punitive penalties from the Company or any Subsidiary for an
alleged violation of Environmental Laws; provided, however, such
documentation need not be delivered to the Agent unless and until
the circumstances or conditions referred to therein will,
individually or in the aggregate with any other such matters,
likely result in costs to the Company and its Subsidiaries of
$1,000,000 or more.
ARTICLE VII
DEFAULTS
7.1 Defaults. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) The Company shall fail to pay (i) any interest due on
any Revolving Credit Note, or any other amount payable
hereunder (other than a principal payment on any Note or a
Reimbursement Obligation) by five days after the same
becomes due; or (ii) any principal amount due on any
Revolving Credit Note or any Reimbursement Obligation when
due;
(b) The Company shall default in the performance or observance
of any agreement, covenant, condition, provision or
term contained in Article V (other than section 5.8) or
section 6.1 of this Agreement;
(c) The Company shall default in the performance
or observance of any of the other agreements,
covenants, conditions, provisions or terms in this
Agreement or any Collateral Document and such default
continues for a period of thirty days after written
notice thereof is given to the Company by any of the
Banks;
(d) Any representation or warranty made by the
Company herein or any certificate delivered pursuant
hereto, or any financial statement delivered to any
Bank hereunder, shall prove to have been false in any
material respect as of the time when made or given;
(e) The Company or any Subsidiary shall fail to
pay as and when due and payable (whether at maturity,
by acceleration or otherwise) all or any part of the
principal of or interest on any indebtedness of or
assumed by it (including without limitation the Demand
Notes), or of the rentals due under any lease or
sublease, or of any other obligation for the payment of
money, in each case where such payments aggregate
$1,000,000 or more, and such default shall not be cured
within the period or periods of grace, if any,
specified in the instruments governing such
obligations; or default shall occur under any evidence
of, or any indenture, lease, sublease, agreement or
other instrument governing such obligations, and such
default shall continue for a period of time sufficient
to permit the acceleration of the maturity of any such
indebtedness or other obligation or the termination of
such lease or sublease, unless the Company or such
Subsidiary shall be contesting such default in good
faith by appropriate proceedings;
(f) A final judgment which, together with all
other outstanding final judgments against the Company
and its Subsidiaries, or any of them, exceeds an
aggregate of $100,000 shall be entered against the
Company or any Subsidiary and shall remain outstanding
and unsatisfied, unbonded, unstayed or uninsured after
60 days from the date of entry thereof;
(g) The Company or any Subsidiary shall: (i)
become insolvent; or (ii) be unable, or admit in
writing its inability to pay its debts as they
mature; or (iii) make a general assignment for the
benefit of creditors or to an agent authorized to
liquidate any substantial amount of its property; or
(iv) become the subject of an "order for relief" within
the meaning of the United States Bankruptcy Code; or
(v) become the subject of a creditor's petition for
liquidation, reorganization or to effect a plan or
other arrangement with creditors; or (vi) apply to a
court for the appointment of a custodian or receiver
for any of its assets; or (vii) have a custodian or
receiver appointed for any of its assets (with or
without its consent); or (viii) otherwise become the
subject of any insolvency proceedings or propose or
enter into any formal or informal composition or
arrangement with its creditors;
(h) This Agreement, any Note or any Collateral
Document shall, at any time after their respective
execution and delivery, and for any reason, cease to be
in full force and effect or be declared null and void,
or be revoked or terminated, or the validity or
enforceability thereof or hereof shall be contested by
the Company, or the Company shall deny that it has any
or further liability or obligation thereunder or
hereunder, as the case may be; or
(i) Any Reportable Event, which the Required
Banks determine in good faith to constitute grounds for
the termination of any Plan by the Pension Benefit
Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee
to administer any Plan, shall have occurred, or any
Plan shall be terminated within the meaning of Title IV
of ERISA, or a trustee shall be appointed by the
appropriate United States District Court to administer
any Plan, or the Pension Benefit Guaranty Corporation
shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan, and in case
of any event described in the preceding provisions of
this subsection (i) the Required Banks determine in
good faith that the aggregate amount of the Company's
liability to the Pension Benefit Guaranty Corporation
under ERISA shall exceed $1,000,000 and such liability
is not covered, for the benefit of the Company, by
insurance.
7.2 Termination of Aggregate Commitment and
Acceleration of Obligations. Upon the occurrence of
any Event of Default:
(a) As to any Event of Default under section
7.1(a) and at any time thereafter, and in each
case, the Required Banks (or the Agent with the
written consent of the Required Banks) may, by
written notice to the Company, immediately
terminate the obligation of the Banks to make
revolving credit loans and issue Letters of Credit
hereunder and declare the unpaid principal balance
of the Revolving Credit Notes, together with all
interest accrued thereon, to be immediately due
and payable; and the unpaid principal balance of
such Notes and all unreimbursed amounts drawn on
Letters of Credit, together with all interest
accrued thereon, shall thereupon be due and
payable without further notice of any kind, all of
which are hereby waived, and notwithstanding
anything to the contrary herein or in the Notes
contained;
(b) As to any Event of Default under section
7.1(g), the obligation of the Banks to make
revolving credit loans and issue Letters of Credit
hereunder shall immediately terminate and the
unpaid principal balance of all Revolving Credit
Notes and all unreimbursed amounts drawn on
Letters of Credit, together with all interest
accrued thereon, shall immediately and forthwith
be due and payable, all without presentment,
demand, protest, or further notice of any kind,
all of which are hereby waived, notwithstanding
anything to the contrary herein or in the Notes
contained;
(c) As to any Event of Default other than an
Event of Default under section 7.1(a) or section
7.1(g) and at any time thereafter, and in each
case, the Required Banks, with the written consent
of all Banks that have acted as placement agent in
the sale of any Commercial Paper then outstanding
(or the Agent with the written consent of such
Banks) may take the actions and exercise the
remedies provided by this section 7.2.
(d) As to each Event of Default, subject to
the limitations set forth in section 7.2(c) above,
the Banks shall have all the remedies for default
provided by the Collateral Documents, as well as
applicable law.
(e) In the event that the unpaid principal balance of
the Revolving Credit Notes becomes immediately due
and payable pursuant to this section 7.2, the
Company shall pay (i) to the appropriate LOC Bank
the sum of the largest drafts which could then or
thereafter be drawn under all outstanding Letters
of Credit, which sum the LOC Bank may hold for the
account of the Company, without interest, for the
purpose of paying any draft presented, with the
excess, if any, to be returned to the Company upon
termination or expiration of such Letters of
Credit, and (ii) to the Agent the aggregate face
amount of all Commercial Paper (including for this
purpose all Nicolet Funding Corp. Loans) then
outstanding, which amount may be held by the
Agent, without interest, to secure the payment in
full of all such Commercial Paper at maturity,
with the excess, if any, to be returned to the
Company upon payment in full of all such
Commercial Paper.
ARTICLE VIII
DEMAND NOTES
8.1 Right of each Bank to Demand Payment.
All amounts outstanding under each of the Demand Notes
are due ON DEMAND by the holder thereof in its sole
discretion; provided that such holder shall give at
least three Business Days' prior written notice of its
intention to make such demand to the Company and the
Agent. Notwithstanding the foregoing, the unpaid
principal balance of the Demand Notes, together with
all interest accrued thereon, shall automatically
become immediately due and payable, without
presentment, demand, protest or further notice of any
kind, all of which are hereby waived, if an Event of
Default under section 7.1(g) shall occur.
Notwithstanding reference to any Event of Default or
termination in this Agreement or any Collateral
Document (except for automatic acceleration provisions
referred to above), such provisions shall have no
application to, or otherwise restrict, each Bank's
right to demand payment under its Demand Note at any
time.
8.2 Cash Collateral. If at any time when
demand for payment is made on any Demand Note, the
aggregate outstanding face amount of all Letters of
Credit shall exceed the Aggregate Commitment (net of
all outstanding Commercial Paper and Nicolet Funding
Corp. Loans issued by the Company thereunder), the
Company shall immediately pay the amount of such excess
to the Agent, which amount (together with all accrued
interest thereon) may be held by the Agent in an
interest-bearing account as cash collateral for the
purpose of securing the repayment of any draft
presented in respect of outstanding Letters of Credit,
with the excess, if any, to be returned to the Company
as and when such Letters of Credit terminate or expire.
ARTICLE IX
THE AGENT
9.1 Appointment and Powers. Each of the
Banks hereby appoints Firstar Bank Milwaukee, National
Association as Agent for the Banks hereunder, and
authorizes the Agent to take such action as Agent on
its behalf and to exercise such powers as are
specifically delegated to the Agent by the terms
hereof, together with such powers as are reasonably
incidental thereto. The duties of the Agent shall be
entirely ministerial; the Agent shall not have any duty
to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions
of this Agreement, the Notes or any related document,
or to enforce such performance, or to inspect the
property (including the books and records) of the
Company or any of its subsidiaries; and the Agent shall
not be required to take any action which exposes the
Agent to personal liability (unless indemnification
with respect to such action satisfactory to the Agent
in its sole discretion is provided to the Agent by the
Required Banks) or which is contrary to this Agreement
or the Notes or applicable law. Firstar Bank
Milwaukee, National Association agrees to act as Agent
upon the express terms and conditions contained in this
Article IX.
9.2 Responsibility. The Agent (i) makes no
representation or warranty to any Bank and shall not be
responsible to any Bank for any oral or written
recitals, reports, statements, warranties or
representations made in or in connection with this
Agreement or any Note; (ii) shall not be responsible
for the due execution, legality, validity,
enforceability, genuineness, sufficiency,
collectibility or value of this Agreement or any Note
or any other instrument or document furnished pursuant
thereto; (iii) may treat the payee of any Note as the
owner thereof until the Agent receives written notice
of the assignment or transfer thereof signed by such
payee and in form satisfactory to the Agent; (iv) may
execute any of its duties under this Agreement by or
through employees, agents and attorneys in fact and
shall not be answerable for the default or misconduct
of any such employee, agent or attorney in fact
selected by it with reasonable care; (v) may (but shall
not be required to) consult with legal counsel
(including counsel for the Company), independent public
accountants and other experts selected by it and shall
not be liable for any action taken or omitted to be
taken in good faith by it in accordance with advice of
such counsel, accountants or experts; (vi) shall be
entitled to rely upon any note, notice, consent,
waiver, amendment, certificate, affidavit, letter,
telegram, telex, cable or other document or
communication believed by it to be genuine and signed
or sent by the proper party or parties, and may rely on
statements contained therein without further inquiry or
investigation. Neither the Agent nor any of its
directors, officers, agents, or employees shall be
liable for any action taken or omitted to be taken by
it or them under or in connection with this Agreement
or the Notes, except for its or their own gross
negligence or willful misconduct.
9.3 Agent's Indemnification. The Banks
agree to indemnify and reimburse the Agent (to the
extent not reimbursed by the Company), ratably from and
against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or
asserted against the Agent as such in any way relating
to or arising out of this Agreement or any action taken
or omitted by the Agent under this Agreement, provided
that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross
negligence or willful misconduct. Without limitation
of the foregoing, each Bank agrees to reimburse the
Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees)
incurred by the Agent in connection with the
preparation, execution, administration or enforcement
of, or the preservation of any rights under, this
Agreement to the extent that the Agent is not
reimbursed for such expenses by the Company.
9.4 Rights as a Lender. With respect to its
Commitment and the Notes issued to it, Firstar Bank
Milwaukee, National Association, in its individual
capacity as a Bank, shall have, and may exercise, the
same rights and powers under this Agreement and the
Notes payable to it as any other Bank has under this
Agreement and Notes, and the terms "Bank" and "Banks",
unless the context otherwise requires, shall include
Firstar Bank Milwaukee, National Association in its
individual capacity as a Bank. Firstar Bank Milwaukee,
National Association and its affiliates may accept
deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of
banking or trust business with, the Company or any of
its subsidiaries and any person, firm or corporation
who may do business with or own securities of the
Company or any subsidiary, all as if it were not the
Agent, and without any duty to account therefor to the
Banks.
9.5 Credit Investigation. Each of the Banks severally
represents and warrants to each of the other Banks and
to the Agent that it has made its own independent
investigation and evaluation of the financial condition
and affairs of the Company and its Subsidiaries in
connection with such Bank's execution and delivery of
this Agreement and the making of its loans and has not
relied on any information or evaluation provided by any
other Bank or the Agent in connection with any of the
foregoing (other than information provided by the
Company to the Agent for transmittal to the Banks in
connection with the foregoing); and each Bank
represents and warrants to each other Bank and to the
Agent that it shall continue to make its own
independent investigation and evaluation of the credit-
worthiness of the Company and its Subsidiaries while
the Commitments and/or the Notes are outstanding.
9.6 Compensation. The Agent shall receive
such compensation for its services as Agent under this
Agreement as may be agreed from time to time by the
Company and the Agent.
ARTICLE X
MISCELLANEOUS
10.1 Accounting Terms; Definitions. Except
as otherwise provided, all accounting terms shall be
construed in accordance with generally accepted
accounting principles consistently applied and
consistent with those applied in the preparation of the
financial statements referred to in section 4.5, and
financial data submitted pursuant to this Agreement
shall be prepared in accordance with such principles.
As used herein:
(a) the term "Affiliate,, means any person,
firm or corporation, which, directly or
indirectly, controls, is controlled by, or is
under common control with, the Company or a
Subsidiary.
(b) the term "Business Day" means any day
other than a Saturday or Sunday on which banks in
the States of Wisconsin and Illinois are open for
the transaction of substantially all of their
banking functions; provided, however, that for
purposes of calculating the Basic LIBOR Rate, the
LIBOR Interest Periods, and the election of LIBOR
Pricing Options, the term "Business Day" shall
mean in addition only those days on which dealings
in U.S. dollar deposits are carried out by U.S.
financial institutions in the London interbank
market.
(c) the term "Capitalized Lease,, means any
lease which is capitalized on the books of the
lessee, or should be so capitalized under
generally accepted accounting principles.
(d) the term "Commercial Paper" means (i) all commercial paper
issued by the Company from time to time, including sales of
commercial paper through one or more of the Banks acting as
placement agent pursuant to separate agreements between the
Company and such Bank or Banks, and (ii) where expressly so
included by the terms of this Agreement, all Nicolet Funding
Corp. Loans described in section 1.9(e).
(e) the term "Consolidated Current Ratio,, means the
relationship, expressed as a numerical ratio, between:
(i) the amount of all assets which under generally
accepted principles of accounting would appear as current
assets on the consolidated balance sheet of the Company and
its Subsidiaries, excluding prepaid expenses which are not
refundable on the date the determination is made,
And
(ii) the amount of all liabilities which under generally
accepted principles of accounting would appear as current
liabilities on such balance sheet, including all indebtedness
payable on demand or maturing (whether by reason of specified
maturity, fixed prepayments, sinking funds or accruals of any
kind, or otherwise) within 12 months or less from the date of
the relevant statement, including all lease and rental
obligations due in 12 months or less under leases, whether or
not Capitalized Leases, and including customers' advances and
progress billings on contracts.
(f) the term "Consolidated Fixed Charge Coverage Ratio" means,
for any period, the relationship, expressed as a numerical
ratio, between:
(i) the Consolidated Net Earnings of the Company for such
period plus the sum of (A) depreciation, amortization and
all other noncash deductions arising in the normal course
of operations and shown on the Company's financial
statements for such period, (B) net interest expense on
indebtedness of the Company (including the interest
component of Capitalized Leases) for such period and (C)
rental expense under leases other than Capitalized
Leases for such period; and
(ii) the sum of (A) net interest expense on
indebtedness of the Company (including the
interest component of Capitalized Leases) for such
period, (B) scheduled principal payments on
indebtedness of the Company during such period,
(C) the principal component of required payments
in respect of Capitalized Leases during such
period and (D) rental expense under leases other
than Capitalized Leases for such period.
(g) the term "Consolidated Total Liabilities,,
means all liabilities of the Company and its
Subsidiaries properly appearing on a consolidated
balance sheet of the Company and its Subsidiaries in
accordance with generally accepted accounting
principles.
(h) the term "Consolidated Net Earnings" means
the excess of:
(i) all revenues and income derived
from operation in the ordinary course of business
(excluding extraordinary gains and profits upon the
disposition of investments and fixed assets),
Over:
(ii) all expenses and other proper
charges against income (including payment or provision
for all applicable income and other taxes, but
excluding extraordinary losses and losses upon the
disposition of investments and fixed assets), all as
determined in accordance with generally accepted
accounting principles as applied on a consolidated
basis to the Company and its Subsidiaries.
(i) the term "Consolidated Tangible Net Worth"
means the total of all assets properly appearing on the
consolidated balance sheet of the Company and its
Subsidiaries in accordance with generally accepted
accounting principles, less the sum of the following:
the book amount of all such assets which would be
treated as intangibles under generally accepted
accounting principles, including, without limitation,
all such items as good will, trademarks, trademark
rights, trade names, tradename rights, brands,
copyrights, patents, patent rights, licenses and
unamortized debt discount and expense;
any write-up in the book value of
any such assets resulting from a revaluation thereof
subsequent to December 31, 1993;
(iii) all reserves, including
reserves for depreciation, obsolescence, depletion,
insurance, and inventory valuation, but excluding
contingency reserves not allocated for any particular
purpose and not deducted from assets;
(iv) the amount, if any, at which any
shares of stock of the Company or any Subsidiary appear
on the asset side of such consolidated balance sheet;
(v) all liabilities of the Company and
its Subsidiaries shown on such balance sheet; and
(vi) all investments in foreign
affiliates and nonconsolidated domestic affiliates.
(j) the term "Controlled Group" means a
controlled group of corporations as defined in section
1563 of the Internal Revenue Code of 1986, as amended,
of which the Company is a part.
(k) The term "Default" means any event or
condition which with the passage of time, the giving of
notice or both would constitute an Event of Default.
(1) The term "Environmental Audit" means a review
for the purpose of determining whether the Company and
each Subsidiary complies with Environmental Laws and
whether there exists any condition or circumstance
which requires or will require a cleanup, removal, or
other remedial action under Environmental Laws on the
part of the Company or any Subsidiary including, but
not limited to, some or all of the following:
(i) on site inspection including review
of site geology, hydrogeology, demography, land use and
population;
(ii) taking and analyzing soil borings
and installing ground water monitoring wells and
analyzing samples taken from such wells;
(iii) taking and analyzing of air samples and
testing of underground tanks;
(iv) reviewing plant permits, compliance
records and regulatory correspondence, and interviewing
enforcement staff at regulatory agencies;
(v) reviewing the operations,
procedures and documentation of the Company and its
Subsidiaries; and
(vi) interviewing past and present
employees of the Company and its Subsidiaries.
(m) The term "Environmental Laws" means all
federal, state and local laws including statutes,
regulations, ordinances, codes, rules and other
governmental restrictions and requirements relating to
the discharge of air pollutants, water pollutants or
process waste water or otherwise relating to the
environment or hazardous substances including, but not
limited to, the Federal Solid Waste Disposal Act, the
Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976,
the Federal Comprehensive Environmental Responsibility
Cleanup and Liability Act of 1980, regulations of the
Environmental Protection Agency, regulations of the
Nuclear Regulatory Agency, and regulations of any state
department of natural resources or state environmental
protection agency now or at any time hereafter in
effect.
(n) the term "ERISAII means the Employee
Retirement Income Security Act of 1974, as the same may
be in effect from time to time.
(o) the term "Letter of Credit Obligations" means
the aggregate undrawn face amounts of all outstanding
Letters of Credit and all unpaid Reimbursement
obligations.
(p) the term "Permitted Liens" means:
(i) liens on property financed with
the proceeds of industrial revenue bonds permitted
by section 5.1(b) given to secure indebtedness
evidenced by such bonds and other obligations of the
Company directly relating thereto;
(ii) liens for taxes, assessments or
governmental charges, and liens incident to
construction, which are either not delinquent or are
being contested in good faith by the Company or a
Subsidiary by appropriate proceedings which will
prevent foreclosure of such liens, and against which
adequate reserves have been provided; and easements,
restrictions, minor title irregularities and similar
matters which have no adverse effect as a practical
matter upon the ownership and use of the affected
property by the Company or any Subsidiary;
(iii) liens or deposits in
connection with worker's compensation or other
insurance or to secure customs, duties, public or
statutory obligations in lieu of surety, stay or appeal
bonds, or to secure performance of contracts or bids
(other than contracts for the payment of money
borrowed), or deposits required by law or governmental
regulations or by any court order, decree, judgment or
rule as a condition to the transaction of business or
the exercise of any right, privilege or license; or
other liens or deposits of a like nature made in the
ordinary course of business; provided that the
aggregate amount of liabilities (including interest and
penalties, if any) of the Company secured by any stay
or appeal bond shall not exceed $10,000,000 at any one
time outstanding; and
(iv) purchase money liens on property
acquired in the ordinary course of business, to finance
or secure a portion of the purchase price thereof, and
liens on property acquired existing at the time of
acquisition; provided that in each case such lien shall
be limited to the property so acquired, the liability
secured by such lien does not exceed either the
purchase price or the fair market value of the asset
acquired, and the indebtedness secured by such lien is
permitted by section 5.1.
(q) the term "Plan" means any employee pension
benefit plan subject to Title IV of ERISA maintained by
the Company, any of its Subsidiaries, or any member of
the Controlled Group, or any such plan to which the
Company, any of its Subsidiaries, or any member of the
Controlled Group is required to contribute on behalf of
any of its employees.
(r) the term "Reimbursement obligations" means
all obligations of the Company to reimburse each LOC
Bank for all drawings under Letters of Credit.
(s) the term "Reportable Event" means a
reportable event as that term is defined in Title iv of
ERISA.
(t) The term "Required Banks" means Banks
holding at least 66 2/3% of the Aggregate
Commitment, or if the Aggregate Commitment has
been terminated, Banks holding at least 66 2/3% in
aggregate principal amount of the loans and Letter
of Credit Obligations outstanding hereunder.
(u) the term "Subsidiary" means a
corporation of which the Company owns, directly or
through another Subsidiary, at the date of
determination, more than 50% of the outstanding
stock having ordinary voting power for the
election of directors, irrespective of whether or
not at such time stock of any other class or
classes might have voting power by reason of the
happening of any contingency.
(v) The term "Unfunded Liabilities" means,
with regard to any Plan, the excess of the current
value of the Plan's benefits guaranteed under
ERISA over the current value of the Plan's assets
allocable to such benefits.
10.2 Amendments, Etc. No waiver, amendment,
settlement or compromise of any of the rights of any
Bank under this Agreement, any Note or any of the
Collateral Documents shall be effective for any purpose
unless it is in a written instrument executed and
delivered by the parties authorized to act by this
section 10.2. Subject to the provisions of this section
10.2, the Required Banks (or the Agent with the written
consent of the Required Banks) and the Company may
enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to this
Agreement, the Notes, or the Collateral Documents or
changing in any manner the rights of the Banks or the
Company hereunder or thereunder or waiving any Event of
Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of
all of the Banks:
(a) Extend the maturity of any Note or
reduce the principal amount thereof, or reduce the
rate or amount or change the time of payment of
interest or fees payable on any Note or otherwise
under this Agreement.
(b) Amend the definition of Required Banks.
(c) Extend the Termination Date, or increase
the amount of the Commitment of any Bank
hereunder, or permit the Company to assign its
rights under this Agreement.
(d) Alter the provisions of section 2.5 of
this Agreement.
(e) Amend any provision of this Agreement
requiring a pro rata sharing among the Banks.
(f) Amend this section 10.2.
No amendment of any provision of this Agreement
relating to the Agent shall be effective without the
written consent of the Agent.
10.3 Expenses; Indemnity.
(a) The Company shall pay, or reimburse each Bank for
(i) all reasonable out-of-pocket costs and expenses
(including, without limitation, reasonable attorneys'
fees and expenses) paid or incurred by such Bank in
connection with the negotiation, preparation,
execution, delivery, and administration of this
Agreement, the Notes, the Collateral Documents and any
other document required hereunder or thereunder,
including without limitation any amendment, supplement,
modification or waiver of or to any of the foregoing;
provided that such costs and expenses of each Bank
(other than the Agent) in connection with the
negotiation, preparation, execution and delivery of
this Agreement, the Notes and the Collateral Documents
shall not exceed $2,500; (ii) all reasonable out-of-
pocket costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses)
paid or incurred by such Bank after Default, before and
after judgment, in enforcing, protecting or preserving
its rights under this Agreement, the Notes, the
Collateral Documents and any other document required
hereunder or thereunder, including without limitation
the enforcement of rights against, or realization on,
any collateral or security therefor; and (iii) any and
all recording and filing fees and any and all stamp,
excise, intangibles and other taxes, if any,
(including, without limitation, any sales, occupation,
excise, gross receipts, franchise, general corporation,
personal property, privilege or license taxes, but not
including taxes levied upon the net income of such Bank
by the federal government or the state (or political
subdivision of a state) where such Bank's principal
office is located), which may be payable or determined
to be payable in connection with the negotiation,
preparation, execution, delivery, administration or
enforcement of this Agreement, the Notes, the
Collateral Documents or any other document required
hereunder or thereunder or any amendment, supplement,
modification or waiver of or to any of the foregoing,
or consummation of any of the transactions contemplated
hereby or thereby, including all costs and expenses
incurred in contesting the imposition of any such tax,
and any and all liability with respect to or resulting
from any delay in paying the same, whether such taxes
are levied upon such Bank, the Company or otherwise.
(b) The Company agrees to indemnify each Bank
against any and all losses, claims, damages,
liabilities and expenses, (including, without
limitation, reasonable attorneys' fees and expenses)
incurred by such Bank arising out of, in any way
connected with, or as a result of (i) any acquisition
or attempted acquisition of stock or assets of another
person or entity by the Company or any subsidiary, (ii)
the use of any of the proceeds of any loans made
hereunder by the Company or any subsidiary for the
making or furtherance of any such acquisition or
attempted acquisition, (iii) the construction or
operation of any facility owned or
operated by the Company or any Subsidiary, or
resulting from any pollution or other environmental
condition on the site of, or caused by, any such
facility, (iv) the negotiation, preparation, execution,
delivery, administration, and enforcement of this
Agreement, the Note, the Collateral Documents and any
other document required hereunder or thereunder,
including without limitation any amendment, supplement,
modification or waiver of or to any of the foregoing or
the consummation or failure to consummate the
transactions contemplated hereby or thereby, or the
performance by the parties of their obligations
hereunder or thereunder, (v) any claim, litigation,
investigation or proceedings related to any of the
foregoing, whether or not any Bank is a party thereto;
provided, however, that such indemnity shall not apply
to any ouch losses, claims, damages, liabilities or
related expenses arising from (A) any unexcused breach
by such Bank of its obligations under this Agreement or
any Collateral Document, (B) any commitment made by
such Bank to a person other than the Company or any
Subsidiary which would be breached by the performance
of such Bank's obligations under this Agreement or (C)
gross negligence or willful misconduct of such Bank.
(c) The foregoing agreements and indemnities
shall remain operative and in full force and
effect regardless of termination of this
Agreement, the consummation of or failure to
consummate either the transactions contemplated by
this Agreement or any amendment, supplement,
modification or waiver, the repayment of any loans
made hereunder, the termination of the Letter of
Credit Obligations, the invalidity or
unenforceability of any term or provision of this
Agreement or any of the Notes or any Collateral
Document, or any other document required hereunder
or thereunder, any investigation made by or on
behalf of any Bank, the Company or any Subsidiary,
or the content or accuracy of any representation
or warranty made under this Agreement, any
Collateral Document or any other document required
hereunder or thereunder.
(d) The foregoing indemnities shall remain
operative and in full force and effect regardless
of the termination of this Agreement, the
consummation of the transactions contemplated by
this Agreement, the repayment of the loans made
hereunder, the invalidity or unenforceability of
any term or provision of this Agreement or any of
the Notes, any investigation made by or on behalf
of the Bank or the Company, and the content of
accuracy of any representation or warranty made
under this Agreement.
10.4 Securities Act of 1933. Each Bank
represents that it is acquiring the Notes payable to it
without any present intention of making a sale or other
distribution of such Notes, provided each Bank reserves
the right to sell its Notes or participations therein.
10.5 No Agency. Except as expressly provided
herein, nothing in this Agreement and no action taken
pursuant hereto shall cause any Bank to be treated as
the agent of any other Bank, or shall be deemed to
constitute the Banks a partnership, association, joint
venture or other entity.
10.6 Successors. The provisions of this
Agreement shall inure to the benefit of any holder of
one or more of the Notes, and shall inure to the
benefit of and be binding upon any successor to any of
the parties hereto. This Agreement shall not create
any rights in favor of any other party (including
without limitation any holder of Commercial Paper,
including for this purpose Nicolet Funding Corp. Loans)
and the Banks shall have no liability whatsoever to any
holder of Commercial Paper as a result of this
Agreement. No delay on the part of any Bank or any
holder of any of the Notes in exercising any right,
power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any
right, power or privilege hereunder preclude other or
further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies
herein specified are cumulative and are not exclusive
of any rights or remedies which the Banks or the holder
of any of the Notes would otherwise have.
10.7 Survival. All agreements,
representations and warranties made herein shall
survive the execution of this Agreement, the making of
the loans hereunder and the execution and delivery of
the Notes.
10.8 Wisconsin Law. This Agreement and the
Notes issued hereunder shall be governed by and
construed in accordance with the internal laws of the
State of Wisconsin, except to the extent superseded by
federal law.
10.9 Counterparts. This Agreement may be
signed in any number of counterparts with the same
effect as if the signatures thereto and hereto were
upon the same instrument.
10.10 Notices. All communications or
notices required under this Agreement shall be deemed
to have been given on the date when deposited in the
United States mail, postage prepaid, and addressed as
follows (unless and until any of such parties advises
the other in writing of a change in such address): (a)
if to the Company, with the full name and address of
the Company as shown on this Agreement below;
and (b) if to any of the Banks with the full name and
address of such Bank as shown on this Agreement above,
to the attention of the officer of the Bank executing
the form of acceptance of this Agreement.
10.11 Participations. With the prior written
consent of the Company and the Agent, each Bank may
sell to another financial institution or institutions
interests in its Notes (except that each Bank may sell
such interests without such consent to other financial
institutions owned directly or indirectly by it or by
its controlling corporation) and, in connection with
each such sale, and thereafter, disclose to any
purchaser or potential purchaser of such interest any
financial information such Bank may have concerning the
Company and its Subsidiaries.
10.12 Entire Agreement; No Agency. This
Agreement and the other documents referred to herein
contain the entire agreement between the Banks and the
Company with respect to the subject matter hereof,
superseding all previous communications and
negotiations, and no representation, undertaking,
promise or condition concerning the subject matter
hereof shall be binding upon the Banks unless clearly
expressed in this Agreement or in the other documents
referred to herein. Nothing in this Agreement or in
the other documents referred to herein and no action
taken pursuant hereto shall cause the Company to be
treated as an agent of any Bank, or shall be deemed to
constitute the Banks and the Company a partnership,
association, joint venture or other entity.
10.13 Consent to Jurisdiction. The
Company hereby consents to the jurisdiction of any
state or federal court situated in Milwaukee County,
Wisconsin, and waives any objection based on lack of
personal jurisdiction, improper venue or forum non
conveniens, with regard to any actions, claims,
disputes or proceedings relating to this Agreement, any
Note, any of the Collateral Documents, or any other
document delivered hereunder or in connection herewith,
or any transaction arising from or connected to any of
the foregoing. Nothing herein shall affect the right
of the Banks, or any of them, to serve process in any
manner permitted by law, or limit the right of any
Banks, or any of them, to bring proceedings against the
Company or its property or assets in the competent
courts of any other jurisdiction or jurisdictions.
If the foregoing is satisfactory to you, please sign
the form of acceptance below and return a signed
counterpart hereof to the Company. When this
instrument has been executed and delivered by all of
the Banks, it will evidence a binding agreement between
the Banks and the Company.
Very truly yours,
OSHKOSH BIGOSH, INC.
Address: 112 Otter
Avenue Oshkosh,
WI 54901-5008
By: /S/ DAVID L. OMACHINSKI
(CORPORATE SEAL) Vice President of Finance
The foregoing Agreement is hereby confirmed
and accepted as of the date thereof.
FIRSTAR BANK MILWAUKEE,
NATIONAL ASSOCIATION, as
the Agent and as a Bank
By: /S/ STEVE CARLTON
Title: Assistant Vice
President
BANK ONE, MILWAUKEE, NA
By: /S/ A.F. MAGGORIE
Title: Vice President
HARRIS TRUST AND SAVINGS
BANK
By: /S/ GEORGE M.
DELUHY
Title: Vice President
NORWEST BANK WISCONSIN,
NATIONAL ASSOCIATION
By: /S/ DANIEL G.
FRAZIER
Title: Vice President
EXHIBIT 1.1
REVOLVING CREDIT NOTE
$ 1
9-
FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a Wisconsin
corporation, promises to pay to the order of
, the
principal sum of Dollars ($ )
at the Main Office of Firstar Bank Milwaukee, National
Association in Milwaukee, Wisconsin, on June 24, 1997.
The unpaid principal balance hereof shall bear
interest, payable on the dates specified in the Credit
Agreement referred to below, computed at the Applicable
Rate as defined in such Credit Agreement.
Principal amounts unpaid at the maturity hereof
(whether by fixed maturity or acceleration) shall bear
interest from and after maturity until paid computed at
a rate equal to 2% per annum plus the rate otherwise
payable hereunder. Principal of and interest on this
Note shall be payable in lawful money of the United
States of America.
This Note constitutes one of the Revolving Credit
Notes issued under a Credit Agreement dated as of June
24, 1994, among the undersigned and Firstar Bank
Milwaukee, National Association, for itself and as
Agent, and the other banks party thereto, to which
Agreement reference is hereby made for a statement of
the terms and conditions on which loans in part
evidenced hereby were or may be made, and for a
description of the conditions upon which this Note may
be prepaid, in whole or in part, or its maturity
accelerated.
OSHKOSH BIGOSH, INC.
By:
Vice President of Finance
(CORPORATE SEAL)
EXHIBIT 1.2
DEMAND NOTE
$ 19-
FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a
Wisconsin corporation, promises to pay to the order of
the principal sum of Dollars ($ )at the Main Office
of Firstar Bank Milwaukee, National Association, in
Milwaukee, Wisconsin, ON DEMAND. The unpaid principal
balance hereof shall bear interest, payable on the dates
specified in the Credit Agreement referred to below, computed
at the Applicable Rate as defined in such Credit Agreement.
Principal amounts unpaid at the maturity thereof (whether by
fixed maturity or acceleration) shall bear interest from and
after demand until paid computed at a rate equal to 2% per annum
plus the rate otherwise payable
hereunder. Principal of and interest on this Note shall be
payable in lawful money of the United States.
This Note constitutes one of the Demand Notes issued
under a Credit Agreement dated as of June 24, 1994 among the
undersigned and Firstar Bank Milwaukee, National Association,
for itself and as Agent, and the other banks party thereto, to
which Agreement reference is hereby made for a statement of the
terms and conditions on which loans in part evidenced hereby
were made and for a description of the terms and conditions upon
which this Note may be prepaid, in whole or in part, or its
maturity accelerated.
OSHKOSH B'GOSH, INC.
By:
Vice President of Finance
(CORPORATE SEAL)
EXHIBIT 2.1
COMMERCIAL PAPER REPORT/LOAN REQUEST
19-
Memorandum to:
Firstar Bank Milwaukee,
National Association, as Agent
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Re: Credit Agreement Dated as of June 24, 1994
(the "Credit Agreement")
Part 1: Commercial Paper Report
The aggregate principal amount of all Commercial
Paper (including for this purpose all Nicolet Funding Corp.
Loans) of the Company now outstanding is $
Part 2: Loan Request
The Company hereby applies to the Agent for a loan under the
Credit Agreement to be made on 19 in the principal amount of
$ . If such loan is to be subject to a LIBOR Pricing Option,
the LIBOR Interest Period is months.
The Company hereby certifies as follows:
(a) All of the representations and
warranties set forth in Article IV of the Credit
Agreement continue to be true on the date hereof,
except that the financial statements referred to in
section 4.5 of the Credit Agreement shall be deemed to
be the most recent consolidated financial statements of
the Company delivered pursuant to section 6.6(a) or (b)
of the Credit Agreement.
(b) At the date hereof, no Default or Event
of Default under the Credit Agreement has occurred and
is continuing.
OSHKOSH B'GOSH, INC.
By:
Title:
AMENDMENT NO. 1 TO CREDIT AGREEMENT
As of June 30, 1994
Firstar Bank Milwaukee,
National Association
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Bank one, Milwaukee, NA
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Norwest Bank Wisconsin,
National Association
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
Please refer to that certain Credit Agreement
dated as of June 24, 1994 (the "Credit Agreement")
between the undersigned Oshkosh B'Gosh, Inc., a
Delaware corporation (the "Company") and you (the
"Banks"). All capitalized terms used and not otherwise
defined herein shall have the meanings given to such
terms by the Credit Agreement.
1. Amendments to Credit Agreement. The Company
requests that the Banks agree to amend the Consolidated Fixed
Charge Coverage Ratio covenant set forth in section 6.1(c) of the
Credit Agreement as set forth below. Subject to all of the terms
and conditions hereof, the Banks agree to amend such covenant as
set forth below.
Therefore, subject to the terms and conditions set forth
herein, the Credit Agreement shall be amended, as of the date
first written above, as follows:
(a) All references to the Credit Agreement in the
Credit Agreement and in any of the Collateral Documents shall
refer to the Credit Agreement as amended hereby.
(b) Section 6.1(c) of the Credit Agreement is amended
to read in its entirety as follows:
(c) At the end of each fiscal quarter set forth in the table
below, a Consolidated Fixed Charge Coverage Ratio for the four
consecutive fiscal quarters then ended of at least the amount set
forth opposite such fiscal quarter:
Consolidated Fixed
Fiscal Quarter Ending Charge Coverage Ratio
1. June 30, 1994 and 1.5:1.0
September 30, 1994
2. December 31, 1994, 2.0:1.0
March 31, 1995,
June 30, 1995 and
September 30, 1995
3. December 31, 1995, 2.5:1.0
March 31, 1996,
June 30, 1996 and
September 30, 1996
4. December 31, 1996 3.0:1.0
and thereafter
2. Representations. The Company repeats and reaffirms the
representations and warranties set forth in Article IV of the
Credit Agreement. The Company also represents and warrants that
the execution, delivery and performance of this Amendment are
within the corporate powers of the Company, have been duly
authorized by all necessary corporate action and do not and will
not (i) violate any provision of the certificate of incorporation
or by-laws of the Company or of any law, regulation, order, or
judgment presently in effect having applicability to the Company
or (ii) require the consent or approval of, or filing or
registration with, any governmental body, agency or authority; or
(iii) result in any breach of or constitute a default under any
indenture or other agreement or instrument under which the
Company is a party.
3. Confirmation of Credit Agreement. Except as
expressly provided above, the Credit Agreement shall
remain in full force and effect.
4. Fees and Expenses. The Company shall be
responsible for the payment of all fees and out-of-
pocket disbursements incurred by the Banks in
connection with the preparation, execution, delivery,
administration and enforcement of this Amendment and
including without limitation the reasonable fees and
disbursements of counsel for the Agent.
5. Miscellaneous. The provisions of this Amendment
shall inure to the benefit of and be binding upon any
successor to any of the parties hereto. All
agreements, representations and warranties made herein
shall survive the execution of this Amendment and the
extension of credit under the Credit Agreement, as so
amended. This Amendment shall be governed by and
construed in accordance with the internal laws of the
State of Wisconsin. This Amendment may be signed in
any number of counterparts with the same effect as if
the signatures thereto and hereto were upon the same
instrument.
If the foregoing is satisfactory to you, please
sign the form of acceptance below and return a signed
counterpart hereof to the Company.
Very truly yours,
OSHKOSH BIGOSH, INC.
By: /S/ DAVID L.
OMACHINSKI
Vice President of Finance
(Corporate Seal)
Agreed to as of the date first above written.
FIRSTAR BANK MILWAUKEE,
NATIONAL ASSOCIATION
By: /S/STEVE CARLTON
Title: Assistant
Vice President
BANK ONE, MILWAUKEE, NA
By: /S/ A.F. MAGGIORE
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: /S/GEORGE M. DELUHY
Title: Vice President
NORWEST BANK WISCONSIN,
NATIONAL ASSOCIATION
By: /S/ DANIEL G. FRAZIER
Title: Vice President
AMENDMENT NO. 2 TO CREDIT AGREEMENT
As of December 31, 1994
Firstar Bank Milwaukee,
National Association
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Bank One, Milwaukee, NA
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Norwest Bank Wisconsin,
National Association
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
Please refer to that certain
Credit Agreement dated as of June 24, 1994, as amended by
Amendment No. 1 thereto dated as of June 30, 1994 (the "Credit
Agreement") between the undersigned Oshkosh B'Gosh, Inc., a
Delaware corporation (the "Company") and you (the
Banks"). All capitalized terms used and not otherwise
defined herein shall have the meanings given to such
terms by the Credit Agreement.
I.Amendments to Credit Agreement. The Company
requests that the Banks agree to amend clause (ii)
of section 5.7 of the Credit Agreement (Contingent
Liabilities) permitting certain outstanding letters
of credit issued for the account of the Company by
Republic National Bank of New York. Subject to all
of the terms and conditions hereof, the Banks agree
to amend such covenant as set forth below.
Therefore, subject to the terms and conditions set
forth herein, the Credit Agreement shall be amended,
as of the date first written above, as follows:
(a) All references to the Credit Agreement in the
Credit Agreement and in any of the Collateral
Documents shall refer to the Credit Agreement as
amended hereby.
(b) Clause (ii) of section 5.7 of the Credit
Agreement is amended to read in its entirety as
follows:
(ii) in connection with letters of credit
issued for the account of the Company from
time to time by Republic National Bank of
New York, provided that (A) such letters
of credit shall not exceed $15,000,000 in
aggregate face amount at any time
outstanding and (B) none of such letters
of credit shall remain outstanding on or
after October 1, 1995, and
2.Representations. The Company repeats and reaffirms
the representations and warranties set forth in
Article IV of the Credit Agreement as if made on and
as of the date hereof. The Company also represents
and warrants that the execution, delivery and
performance of this Amendment are within the
corporate powers of the Company, have been duly
authorized by all necessary corporate action and do
not and will not (i) violate any provision of the
certificate of incorporation or by-laws of the
Company or of any law, regulation, order, or
judgment presently in effect having applicability to
the Company or (ii) require the consent or approval
of, or filing or registration with, any governmental
body, agency or authority; or (iii) result in any
breach of or constitute a default under any
indenture or other agreement or instrument under
which the Company is a party.
3.Confirmation of Credit Agreement. Except as expressly
provided above, the Credit Agreement shall remain in full
force and effect.
4.Fees and Expenses. The Company shall be responsible for the
payment of all fees and out-of-pocket disbursements incurred
by the Banks in connection with the preparation, execution,
delivery, administration and enforcement of this Amendment and
including without limitation the reasonable fees and
disbursements of counsel for the Agent.
5.Miscellaneous. The provisions of this Amendment shall inure
to the benefit of and be binding upon any successor to any of
the parties hereto. All agreements, representations and
warranties made herein shall survive the execution of this
Amendment and the extension of credit under the Credit
Agreement, as so amended. This Amendment shall be governed by
and construed in accordance with the internal laws of the
State of Wisconsin. This Amendment may be signed in any
number of counterparts with the same effect as if the
signatures thereto and hereto were upon the same instrument.
If the foregoing is satisfactory to you, please sign the form
of acceptance below and return a signed counterpart hereof to
the Company.
Very truly yours,
OSHKOSH BIGOSH, INC.
By: /S/ DAVID L. OMACHINSKI
Vice President of Finance
(Corporate Seal)
Agreed to as of the date first above written.
FIRSTAR BANK MILWAUKEE,
NATIONAL ASSOCIATION
By: /S/ STEVE CARLTON
Title: Assistant Vice President
BANK ONE, MILWAUKEE, NA
By: /S/ A.F. MAGGORIE
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: /S/ GEORGE M. DELUHY
Title: Vice President
NORWEST BANK WISCONSIN,
NATIONAL ASSOCIATION
By: /S/ DANIEL G. FRAZIER
Title: Vice President
AMENDMENT NO. 3 TO CREDIT AGREEMENT
As of December 21, 1995
Firstar Bank Milwaukee,
National Association
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Bank One, Milwaukee, NA
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Norwest Bank Wisconsin,
National Association
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Gentlemen:
Please refer to that
certain Credit Agreement dated as of June 24, 1994, as
amended through Amendment No. 2 thereto dated as of
December 31, 1994 (the "Credit Agreement") between the
undersigned Oshkosh B'Gosh, Inc., a Delaware
corporation (the "Company") and you (the "Banks"). All
capitalized terms used and not otherwise defined herein
shall have the meanings given to such terms by the
Credit Agreement.
1.Amendments to Credit Agreement. The Company requests
that the Banks agree to amend the Consolidated Fixed
Charge Coverage Ratio covenant set forth in section
6.1(c) of the Credit Agreement as set forth below.
Subject to all of the terms and conditions hereof, the
Banks agree to amend such covenant as set forth below.
Therefore, subject to the terms and conditions set forth
herein, the Credit Agreement shall be amended, as of the
date first written above, as follows:
(a) All references to the Credit Agreement in the Credit
Agreement and in any of the Collateral Documents shall
refer to the Credit Agreement as amended hereby.
(b) Section 6.1(c) of the Credit Agreement is amended to read
in its entirety as follows:
(c) At the end of each fiscal quarter during each period set
forth in the table below, a Consolidated Fixed Charge
Coverage
Ratio for the four consecutive fiscal quarters then ended of
at least the amount set forth opposite such period:
Consolidated Fixed
Period Charge Coverage Ratio
1. From December 31, 2.0:1.0
1994 through and
including December
31, 1996
2. From January 1, 2.5:1.0
1997 through and
including
September 30, 1997
3. From October 1, 3.0:1.0
1997 and thereafter
2. Representations. The Company repeats and reaffirms the
representations and warranties set forth in Article IV of the
Credit Agreement. The Company also represents and warrants
that the execution, delivery and performance of this Amendment
are within the corporate powers of the Company, have been duly
authorized by all necessary corporate action and do not and
will not (i) violate any provision of the certificate of
incorporation or by-laws of the Company or of any law,
regulation, order, or judgment presently in effect having
applicability to the Company or (ii) require the consent or
approval of, or filing or registration with, any governmental
body, agency or authority; or (iii) result in any
breach of or constitute a default under any
indenture or other agreement or instrument under
which the Company is a party.
3. Confirmation of Credit Agreement. Except as
expressly provided above, the Credit Agreement shall
remain in full force and effect.
4. Fees and Expenses. The Company shall be
responsible for the payment of all fees and out-of-
pocket disbursements incurred by the Banks in
connection with the preparation, execution,
delivery, administration and enforcement of this
Amendment and including without limitation the
reasonable fees and disbursements of counsel for the
Agent.
5. Miscellaneous. The provisions of this Amendment
shall inure to the benefit of and be binding upon
any successor to any of the parties hereto. All
agreements, representations and warranties made
herein shall survive the execution of this Amendment
and the extension of credit under the Credit
Agreement, as so amended. This Amendment shall be
governed by and construed in accordance with the
internal laws of the State of Wisconsin. This
Amendment may be signed in any number of
counterparts with the same effect as if the
signatures thereto and hereto were upon the same
instrument.
If the foregoing is satisfactory to you, please
sign the form of acceptance below and return a
signed counterpart hereof to the Company.
Very truly yours,
OSHKOSH BIGOSH, INC.
BY /S/ DAVID L. OMACHINSKI
Vice President of Finance
(Corporate Seal)
Agreed to as of the date first above written.
FIRSTAR BANK MILWAUKEE,
NATIONAL ASSOCIATION
By: /S/STEVE CARLTON
Title: Assistant Vice
President
BANK ONE, MILWAUKEE, NA
By: /S/ A. F. MAGGORIE
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: /S/ GEORGE M. DELUHY
Title: Vice President
NORWEST BANK WISCONSIN,
NATIONAL ASSOCIATION
By: /S/ DANIEL G. FRAZIER
Title: Vice President
AMENDMENT NO. 4 TO CREDIT AGREEMENT
As of January 30, 1996
Firstar Bank Milwaukee,
National Association
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Bank One, Milwaukee, NA
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Harris Trust and Savings Bank
ill West Monroe Street
Chicago, Illinois 60603
Norwest Bank Wisconsin,
National Association
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
The First National Bank of Boston 100 Federal Street
Boston, Massachusetts 02110 Gentlemen:
Oshkosh B,Gosh, Inc., a Delaware corporation (the
"Company"), hereby agrees with each of you as
follows:
I. Definitions. Reference is made to that certain
Credit Agreement dated as of June 24, 1994, as
amended through Amendment No. 3 thereto dated as of
December 21, 1995 (the "Credit Agreement") between
the Company and each of you other than The First
National Bank of Boston, pursuant to which the
Company has issued (i) its Revolving Credit Notes to
each of you other than The First National Bank of
Boston in the aggregate principal amount of
$60,000,000, and (ii) its Demand Notes to each of
you other than The First National Bank of Boston in
the aggregate principal amount of $40,000,000, each
dated as of June 24, 1994 (collectively, the
"Existing Notes"). All capitalized terms used and
not otherwise defined herein shall have the meanings
given to such terms by the Credit Agreement as
amended hereby.
2. Addition of The First National Bank of Boston;
New Notes. The Company has informed each of you
that it wishes, and The First National Bank of
Boston has informed the Company and each of you other
than itself that it wishes, that The First National
Bank of Boston become a party to the Credit Agreement
on the terms and conditions herein and therein set forth.
On the effective date of this Amendment, all loans
made or continued pursuant to the Credit Agreement,
including the unpaid balances of the Existing Notes,
shall be evidenced by (i) new Revolving Credit Notes
of the Company in the form of Exhibit 1.1 annexed
hereto in the aggregate principal amount of
$60,000,000, and (ii) new Demand Notes of the
Company in the form of Exhibit 1.2 annexed hereto in
the aggregate principal amount of $40,000,000, each
to be dated as of the date hereof (collectively, the
"New Notes"). The New Notes shall be executed by
the Company and delivered to each of you on the date
hereof against the return of the Existing Notes to
the Company. Accrued interest on the Existing Notes
outstanding on the date of issuance of the New Notes
shall be included in the interest due on the New
Notes issued in replacement of such Existing Notes
on the first interest payment date specified
therein.
3.Amendments to Credit Agreement. Subject to the
terms and conditions set forth herein, the Credit
Agreement shall be amended, as of the date first
written above, as follows:
(a) All references in the Credit Agreement to the
Notes issued thereunder and the loans evidenced
thereby shall refer to the New Notes issued
hereunder and the loans evidenced thereby (including
the unpaid balances of the Existing Notes).
(b) All references to the Credit Agreement in the
Credit Agreement and in any other agreements
relating thereto shall refer to the Credit
Agreement as amended hereby.
(c) The first page of the Credit Agreement is
amended by adding The First National Bank of Boston,
at its address set forth on the first page of this
Amendment, as an additional addressee. The First
National Bank of Boston shall be included as one of
the Banks for all purposes of the Credit Agreement,
and all references to the Banks in the Credit
Agreement and all other agreements relating thereto
shall hereafter be deemed to refer collectively to
Firstar Bank Milwaukee, National Association, Bank
One, Milwaukee, NA, Harris Trust and Savings Bank,
Norwest Bank Wisconsin, National Association, and
The First National Bank of Boston.
(d) The table set forth in Section 1.1 of the
Credit Agreement (Revolving Credit) is amended to
read in its entirety as follows:
Percentage
Name of Bank Commitment Interest
Firstar Bank Milwaukee,
National Association $18,000,000 30.0%
Bank one, Milwaukee, NA $12,000,000 20.0%
Harris Trust and
Savings Bank $10,500,000 17.5%
Norwest Bank Wisconsin,
National Association $10,500,000 17.5%
The First National
Bank of Boston $ 9,000,000 15.0%
TOTAL $60,000,000 100%
(e) The table set forth in Section 1.2 of the
Credit Agreement (Demand Line of Credit)is
amended to read in its entirety as follows:
Name of Bank Demand Line
Firstar Bank Milwaukee,
National Association $12,000,000
Bank One, Milwaukee, NA $ 8,000,000
Harris Trust and Savings Bank $ 7,000,000
Norwest Bank Wisconsin,
National Association $ 7,000,000
The First National Bank of
Boston $ 6,000,000
TOTAL $40,000,000
(f) The first clause of the definition of "Business
Day" prior to the semicolon) set forth in Section l0.l(b)
of the Credit Agreement is hereby amended to read in its
entirety as follows:
(b) the term "Business Day" means any day other
than a Saturday or Sunday on which banks in the
States of Wisconsin, Illinois and Massachusetts
are open for the transaction of substantially all
of their banking functions;
4. Representations. The Company repeats and
reaffirms the representations and warranties set forth in
Article IV of the Credit Agreement. The Company also
represents and warrants that the execution, delivery and
performance of this Amendment are within the corporate
powers of the Company, have been duly authorized by all
necessary corporate action and do not and will not (i)
violate any provision of the certificate of incorporation
or by-laws of the Company or of any law, regulation, order,
or judgment presently in effect having applicability to the
Company or (ii) require the consent or approval of, or filing
or registration with, any governmental body, agency or
authority; or (iii) result in any breach of or constitute a
default under any indenture or other agreement or instrument
under which the Company is a party.
5. Related Transactions; Computations. Upon
issuance of the New Notes, (i) The First National Bank of
Boston shall become a party to the Credit Agreement as
amended hereby with the same force and effect as if a
signatory thereto and shall have (a) the Commitment and
Percentage Interest in the revolving credit loans to be made
under the Credit Agreement set forth opposite its name in
Section 1.1 of the Credit Agreement as amended hereby, and (b)
its respective share of the Demand Line set forth in Section
1.2 of the Credit Agreement as amended hereby, (ii) each of
you will make such adjustments among yourselves as are
necessary so that after giving effect to such adjustments,
the Percentage Interest of each of you in the revolving
credit loans outstanding under the Credit Agreement will
be the Percentage Interest set forth under Section 1.1 of the
Credit Agreement as amended hereby, and your respective
shares of the outstanding portion of the Demand Line will
be as set forth under Section 1.2 of the Credit Agreement as
amended hereby, and (iii) the obligations of the Company to The
First National Bank of Boston under the Credit Agreement as
amended hereby shall begin to accrue. The interest and
commitment fees due each of you other than The First National
Bank of Boston with respect to periods prior to the date
hereof shall be determined in accordance with the Credit
Agreement as in effect prior to the date hereof, and the
interest and commitment fees due each of you with respect to
the periods beginning on or after the date hereof shall be
determined in accordance with the Percentage Interests in
effect on and after the date hereof.
6. Conditions. Without limiting any of the other terms of the
Credit Agreement as amended hereby, this Amendment
shall not become effective, and the Banks shall not be
required to make any further loans to the Company
unless and until:
(a) No Default or Event of Default shall
have occurred and be continuing and neither the
business nor the assets nor the financial condition of
the Company shall have been materially adversely
affected as the result of any event or development
since December 31, 1994.
(b) The Banks shall have received such
documents concerning the corporate status of the
Company and the authorization of the transactions
contemplated hereby as may be reasonably requested, and
such other matters as the Banks shall reasonably
require; and
(c) All proceedings taken in connection with
the transactions contemplated by this Amendment and all
instruments, authorizations and other documents
applicable thereto shall be satisfactory in form and
substance in the reasonable opinion of the Banks and
their counsel.
7. Confirmation of Credit Agreement.
Except as expressly provided above, the Credit
Agreement shall remain in full force and effect.
8. Fees and Expenses. The Company shall be
responsible for the payment of all fees and out-of-
pocket disbursements incurred by the Banks in
connection with the preparation, execution, delivery,
administration and enforcement of this Amendment and
including without limitation the reasonable fees and
disbursements of counsel for the Agent.
9. Miscellaneous. The provisions of this
Amendment shall inure to the benefit of and be binding
upon any successor to any of the parties hereto. All
agreements, representations and warranties made herein
shall survive the execution of this Amendment and the
extension of credit under the Credit Agreement, as so
amended. This Amendment shall be governed by and
construed in accordance with the internal laws of the
State of Wisconsin. This Amendment may be signed in
any number of counterparts with the same effect as if
the signatures thereto and hereto were upon the same
instrument.
If the foregoing is satisfactory to you,
please sign the form of acceptance below and return a
signed counterpart hereof to the Company.
Very truly yours,
OSHKOSH BIGOSH, INC.
By: /S/ DAVID L. OMACHINSKI
Vice President of
Finance
(Corporate Seal)
Agreed to as of the date first above written.
FIRSTAR BANK MILWAUKEE,
NATIONAL ASSOCIATION
By: /S/ STEVE CARLTON
Title: Vice President
BANK ONE, MILWAUKEE, NA
By: /S/ A.F. MAGGORIE
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
By: /S/ GEORGE M. DELUHY
Title: Vice President
NORWEST BANK WISCONSIN,
NATIONAL ASSOCIATION
By: /S/ DANIEL G. FRAZIER
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /S/ PETER GRISWOLD
Title: Director
EXHIBIT 1.1
PROMISSORY NOTE
$ 19-
FOR VALUE RECEIVED, OshKosh B'Gosh, Inc., a Delaware
corporation, promises to pay to the order of
, the principal Dum of Dollars ($ ) at the Main
Office of Firstar Bank Milwaukee, ational Association in
Milwaukee, Wisconsin, on June 24, 1997. The unpaid principal
balance hereof shall bear interest, payable on the dates
specified in the Credit Agreement referred to below, computed at
the Applicable Rate as defined in such Credit Agreement.
Principal amounts unpaid at the maturity hereof
(whether by fixed maturity or acceleration) shall bear
interest from and after maturity until paid computed at a rate
equal to 2% per annum plus the rate otherwise payable
hereunder. Principal of and interest on this Note shall be
payable in lawful money of the United States of America.
This Note constitutes one of the Revolving Credit
Notes issued under a Credit Agreement dated as of June 24, 1994,
as amended, among the undersigned and Firstar Bank Milwaukee,
National Association, for itself and as Agent, and the other
banks party thereto, to which Agreement reference is hereby made
for a statement of the terms and conditions on which loans in
part evidenced hereby were or may be made, and for a description
of the conditions upon which this Note may be prepaid, in whole
or in part, or its maturity accelerated.
OSHKOSH B'GOSH, INC.
By:
Vice President of Finance
(CORPORATE SEAL)
EXHIBIT 1.2
DEMAND NOTE
$ 19-
FOR VALUE RECEIVED, OshKosh B,Gosh, Inc., a Delaware
corporation, promises to pay to the order of
, the principal
sum Of Dollars ($ ) at the Main office of Firstar Bank
Milwaukee, ational Association in Milwaukee, Wisconsin, ON
DEMAND. The unpaid principal balance hereof shall bear interest,
payable on the dates specified in the Credit Agreement referred
to below, computed at the Applicable Rate as defined in such
Credit Agreement.
Principal amounts unpaid at the maturity hereof
(whether by fixed maturity or acceleration) shall bear
interest from and after demand until paid computed at a rate
equal to 2% per annum plus the rate otherwise payable
hereunder. Principal of and interest on this Note shall be
payable in lawful money of the United States of America.
This Note constitutes one of the Demand Notes issued
under a Credit Agreement dated as of June 24, 1994, as amended,
among the undersigned and Firstar Bank Milwaukee, National
Association, for itself and as Agent, and the other banks party
thereto, to which Agreement reference is hereby made for a
statement of the terms and conditions on which loans in part
evidenced hereby were made and for a description of the terms and
conditions on which loans in part evidenced hereby were made and
for a description of the terms and conditions upon which this
Note may be prepaid, in whole or in part, or its maturity
accelerated.
OSHKOSH BIGOSH, INC.
By:
Vice President of Finance
(CORPORATE SEAL)
AMENDMENT NO. 5 TO CREDIT AGREEMENT
As of June 28, 1996
Firstar Bank Milwaukee, NA
777 East Wisconsin Ave.
Milwaukee, WI 53202
Bank One, Milwaukee, NA
111 East Wisconsin Ave.
Milwaukee, WI 53202
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, IL 60603
Norwest Bank Wisconsin, NA
100 East Wisconsin Ave.
Milwaukee, WI 53202
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
Gentlemen:
OshKosh B'Gosh, Inc., a Delaware corporation (the
"Company"), hereby agrees with each of you as follows:
1. Definitions. Reference is made to that certain
Credit Agreement dated as of June 24, 1994, as amended
through Amendment No. 4 thereto dated as of January 30, 1996
(the "Credit Agreement") between the Company and each of
you, pursuant to which the Company has issued its Revolving
Credit Notes to each of you in the aggregate principal
amount of $60,000,000, each dated as of January 20, 1996
(collectively, the "Existing Notes"). All capitalized terms
used and not otherwise defined herein shall have the
meanings given to such terms by the Credit Agreement as
amended hereby.
2. New Notes. The Company has informed each of you
that it wishes to (I) extend the Termination Date to June
24, 1999, (ii) incorporate Competitive Bid Loans (as defined
below) into the Credit Agreement, and (iii) make certain
other changes in the Credit Agreement as set forth below.
Subject to all of the terms and conditions hereof, you have
agreed to such amendments to the Credit Agreement as
provided below. On the effective date of this Amendment,
all loans made or continued pursuant to the Revolving Credit
established pursuant to section 1.1 of the Credit Agreement,
including the unpaid balances of the Existing Notes, shall
be evidenced by new Revolving Credit Notes of the Company in
the form of Exhibit 1.1 annexed hereto in the aggregate
principal amount of $60,000,000, each to be dated as of the
date hereof (collectively, the "New Notes"). The New Notes
shall be executed by the Company and delivered to each of
you on the date hereof against the return of the Existing
Notes to the Company. Accrued interest on the Existing
Notes outstanding on the date of issuance of the New Notes
shall be included in the interest due on the New Notes
issued in replacement of such Existing Notes on the first
interest payment date specifed therein.
3. Amendments to Credit Agreement. Subject to the
terms and conditions set forth herein, the Credit Agreement
shall be amended, as of the date first written above, as
follows:
(a) All references in the Credit Agreement to the
Revolving Credit Notes issue thereunder and the loans
evidenced thereby shall refer to the New Notes issued
hereunder and the loans evidenced thereby (including the
unpaid balances of the Existing Notes).
(b) All references to the Credit Agreement in the
Credit Agreement and in any other agreements relating
thereto shall refer to the Credit Agreement as amended
hereby.
(c) The date of June 24, 1997 set forth in Section 1.1
of the Credit Agreement is amended to June 24, 1999.
(d) The amount of $35,000,000 set forth in Section
1.4(a) of the Credit Agreement (relating to import Letters
of Credit) is amended to $50,000,000.
(e) The letter of credit fee of three-quarters of one
percent (3/4%) per annum set forht in Section 1.4(b) of the
Credit Agreement is amended to five-eighths of one percent
(5/8%) per annum.
(f) Section 1.9(e) is deleted from the Credit
Agreement in its entirety. In addition, all references to
"Nicolet Funding Corp. Loans" throughout the Credit
Agreement are deleted and shall be of no further force or
effect.
(g) A new Section 1.10 is hereby added to the Credit
Agreement reading in its entirety as follows:
1.10 Competitive Bid Loans. The Company may obtain
loans under Sections 1.1 and 1.2 pursuant to the competitive
bid procedures set forth in the Section 1.10 ("Competitive
Bid Loans"), subject to the terms and conditions of Section
1.1 or 1.1 (as the case may be), except as otherwise
provided in this Section 1.10. Each Bank may make such
Competitive Bid Loans to the Company, subject to the terms
and conditions hereof, in such amounts as such Bank, in its
sole discretion, desires to make to the Company.
Notwithstanding any contrary provision of Section 1.1, the
aggregate outstanding amount of Competitive Bid Loans made
against the Aggregate Commitment shall reduce each Bank's
Commitment pro rata in accordance with its respective
Percentage Interest, regardless of which Bank makes such
Competitive Bid Loans. Any Competitive Bid Loan made under
the Demand Line shall be due and payable upon demand in
accordance with the terms of this Agreement, notwithstanding
any of the terms of such Competitive Bid Loan. The
procedure for making Competitive Bid Loans shall be as
follows:
(a) The Company may make requests for bids from the
Banks to make Competitive Bid Loans ("Competitive Bids") not
later than 9:00 a.m., Milwaukee time, on the proposed
borrowing date for one or more Competitive Bid Loans. Each
such request shall be given directly to each of the Banks,
shall be given in writing (which may be a facsimile
transmission) signed by the Company, and shall specify (I)
the proposed borrowing date, which shall be a Business Day,
(ii) the aggregate amount of the requested Competitive Bid
Loans, which shall not be less than $1,000,000 or, for
amounts in excess thereof, an integral multiple of $100,000,
(iii) the interest period for each Competitive Bid Loan
("Loan Period"), which shall commence on the applicable
borrowing date and end on a specified date thereafter not
exceeding 180 days from such borrowing date (up to three (3)
Loan Periods may be requested pursuant to each Competitive
Bid), and the last day of each such Loan Period, and (iv) if
more than one Loan Period is so specified, the principal
amount allocable to each such Loan Period.
(b) Each Bank in its sole discretion may (but is not
obligated to) submit one or more Competitive Bids to the
Company not later than 11:00 a.m., Milwaukee time, on the
proposed borrowing date specified in such request for
Competitive Bids (such 11:00 a.m. time being herein called
the "Submission Deadline") by facsimile or in writing, and
thereby irrevocably offer to make all or any part (any such
part referred to as a "Portion") of any Competitive Bid Loan
described in the relevant request for Competitive Bids at a
fixed rate of interest per annum (each a "Bid Rate")
specified therein, without reference to the LIBOR Rate or
other basis for interest rates, in an aggregate principal
amount of not less than $1,000,000 and, for amounts in
excess thereof, an integral multiple of $100,000. Multiple
Competitive Bids may be delivered by any Bank.
(c) The Company shall, in its sole discretion but
subject to paragraph (d) below, irrevocably accept or reject
any such Competitive Bid (or any Portion thereof) not later
than 12:00 noon on the proposed borrowing date by notice to
the appropriate Bank by telephone (confirmed in writing
promptly delivered to such Bank and the Agent the same day).
If a Bank fails to receive notice from the Company of its
acceptance or rejection of any Competitive Bids made by such
Bank at or prior to 12:00 noon on such day, all such
Competitive Bids shall be deemed to have been rejected by
the Company. The Company's written acceptance of any
Competitive Bid shall constitute a borrowing notice of the
Company, and shall specify the amount, maturity date and Bid
Rate for each Competitive Bid Loan. The Company will give
written notice to the Agent in the form of Part 3 to Exhibit
2.1 hereto on each Business Day on which there is any change
in the aggregate outstanding principal amount of Competitive
Bid Loans, setting forth the aggregate principal amount of
all Competitive Bid Loans then outstanding after giving
effect to any Competitive Bid Loans made on such Business
Day.
(d) If the Company accepts a Portion of a proposed
Competitive Bid Loan for a single Loan Period at the Bid
Rate provided therefor in a Bank's Competitive Bid, such
Portion shall be in a principal amount of $1,000,000 or, for
amounts in excess thereof, an integral multiple of $100,000.
If the Company accepts any Competitive Bid Loan or Portion
offered in any Competitive Bid, the Company must accept
Competitive Bids (and Competitive Bid Loans and Portions
thereby offered) based exclusively upon the successively
lowest Bid Rates within each Loan Period an no other
criteria. If two (2) or more Banks submit Competitive Bids
with identical Bid Rates for the same Loan Period and the
Company accepts any thereof, the Company shall accept all
such Competitive Bids as nearly as possible in proportion to
the amounts of such Banks' respective Competitive Bids with
identical Bid Rates for such Loan Period, provided, that if
the amount of Competitive Bid Loans to be so allocated is
not sufficient to enable each such Bank to make such
Competitive Bid Loan (or Portions thereof) in an aggregate
principal amount of $1,000,000, or for amounts in excess
thereof, an integral multiple of $100,000, the Company shall
round the Competitive Bid Loans (or Portions thereof)
allocated to such Bank or Banks as the Company shall select
as necessary to a minimum of $1,000,000 and, if greater than
$1,000,000 the nearest multiple of $100,000, or select the
Competitive Bid of only one of such Banks.
(e) Not later than 1:30 p.m., Milwaukee time, on the
relevant borrowing date, each Bank whose Competitive Bid was
accepted by the Company shall make available to the Agent,
in immediately available funds, the proceeds of such Bank's
Competitive Bid Loan(s). Upon fulfillment of the applicable
borrowing conditions, the Agent shall deposit in the
Company's account maintained with the Agent or as the
Company may otherwise direct in writing on the relevant
borrowing date the proceeds of such Competitive Bid Loans,
in immediately available funds.
(h) Section 2.2(b) of the Credit Agreement is amended
by adding an additional subparagraph (3) thereto, reading in
its entirety as follows:
(3) With respect to any portion of the
indebtedness evidenced by the Notes which consists of
Competitive Bid Loans made pursuant to Section 1.10, the
applicable Bid Rate determined pursuant to the procedure set
forth in Section 1.10.
(i) Section 5.4 of the Credit Agreement is amended by
adding an additional clause (v) at the end of subparagraph
(a) thereor, reading in its entirety as follows:
and (v) other short-term fixed income investments of
high credit quality selected by the Company;
(j) Section 6.1(c) of the Credit Agreement is
amended to read in its entirety as follows:
(k) At the end of each fiscal quarter during each
period set forth in the table below, a Consolidated Fixed
Charge Coverage Ratio for the four consecutive fiscal
quarters then ended of at least the amount set forth
opposite such period:
Consolidated
Fixed Charge
Period Coverage Ratio
From December 31, 1994 through and
including December 31, 1997 2.0:1.0
From January 1, 1998 through and
including December 31, 1998 2.5:1.0
From January 1, 1999 and thereafter 3.0:1.0
(1) Clause (i) of Section 10.1(f) of the Credit
Agreement (definition of "Consolidated Fixed Charge Coverage
Ratio") is amended to read in its entirety as follows:
(i) the Consolidated Net Earnings of the Company for
such period (without taking into account any effects of the
$20.9 million pre-tax charge against income taken by the
Company in the fiscal quarter ending June 30,1996) plus the
sum of (A) depreciation, amortization and all other non-cash
deductions arising in the normal course of operations and
shown on the Company's financial statements for such period,
(B) net (including the interest component of Capitalized
Leases) for such period and (C) rental expense under leases
other than Capitalized Leases for such period; and
(m) Exhibit 2.1 to the Credit Agreement is amended to
read as set forth in Exhibit 2.1 attached to this Amendment.
4. Representations. The Company repeats and
reaffirms the representations and warranties set forth in
Article IV of the Credit Agreement. The Company also
represents and warrants that the execution, delivery and
performance of this Amendment are within the corporate
powers of the Company, have been duly authorized by all
necessary corporate action and do not and will not (i)
violate any provision of the certificate of incorporation or
by-laws of the Company or of any law, regulation, order, or
judgment presently in effect having applicability to the
Company of (ii) require consent or approval of, or filing or
registration with, any governmental body, agency or
authority; or (iii) result in any breach of or constitute a
default under any indenture or other agreement or instrument
under which the Company is a party.
5. Conditions. Without limiting any of the other
terms of the Credit Agreement as amended hereby, this
Amendment shall not become effective, and the Banks shall
not be required to make any further loans to the Company
unless and until:
(a) No Default or Event of Default shall have occurred
and be continuing and neither the business nor the assets
nor the adversely affected as the result of any event or
development since December 31, 1995.
(b) The Banks shall have received such documents
concerning the corporate status of the Company and the
authorization of the transactions contemplated hereby as may
be reasonably requested, and such other matters as the Banks
shall reasonably require; and
(c) All proceedings taken in condition with the
transactions contemplated by this Amendment and all
instruments, authorizations and other documents applicable
thereto shall be satisfactory in form and substance in the
reasonable opinion of the Banks and their counsel.
6. Confirmation of Credit Agreement. Except as
expressly provided above, the Credit Agreement shall remain
in full force and effect.
7. Fees and Expenses. The Company shall be
responsible for the payment of all fees and out-of-pocket
disbursements incurred by the Banks in connection with the
preparation, execution, delivery, administration and
enforcement of this Amendment and including without
limitation the reasonable fees and disbursements of counsel
for the Agent.
8. Miscellaneous. The provisions of this Amendment
shall inure to the benefit of and be binding upon any
successor to any of the parties hereto. All agreements,
representations and warranties made herein shall survive the
execution of this Amendment and the extension of credit
under the Credit Agreement, as so amended. This Amendment
shall be governed by and construed in accordance with the
internal laws of the State of Wisconsin. This Amendment may
be signed in any number of counterparts with the same effect
as if the signatures thereto and hereto were upon the same
instrument.
If the foregoing is satisfactory to you, please sign
the form of acceptance below and return a signed counterpart
hereof to the Company.
Very truly yours,
OSHKOSH B'GOSH, INC.
BY: /s/David L. Omachinski
Vice President of Finance
(Corporate Seal)
Agreed to as of the date fist above written.
FIRSTAR BANK MILWAUKEE, NA
BY: /s/Stephen Carlton
Title: Vice President
BANK ONE, MILWAUKEE, NA
BY: /s/A.F. Maggiore
Title: Vice President
HARRIS TRUST AND SAVINGS BANK
BY: /s/ G. Deluhy
Title: Vice President
NORWEST BANK WISCONSIN, NA
BY: /s/Daniel Frazier
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
BY: Peter Griswold
Title: Director
EXHIBIT 1.1
PROMISSORY NOTE
$ , 19
FOR THE VALUE RECEIVED, OshKosh B'Gosh, Inc., a
Delaware corporation, promises to pay to the order of
, the principal sum of
Dollars ($ ) at the Main Office of
Firstar Bank Milwaukee, National Association in Milwaukee,
Wisbonsin, on June 24, 1999. The unpaid principal balance
hereof shall bear interest, payable on the dates specified
in the Credit Agreement referred to below, computed at the
Applicable Rate as defined in such Credit Agreement.
Principal amounts unpaid at the maturity hereof
(whether by fixed maturity or acceleration) shall bear
interest from and after maturity until paid computed at a
rate equal to 2% per annum plus the rate otherwise payable
hereunder. Principal of and interest on this Note shall be
payable in lawful money of the United States of America.
This Note constitutes one of the Revolving Credit Notes
issued under a Credit Agreement dated as of June 24, 1994,
as amended, among the undersigned and Firstar Bank
Milwaukee, National Association, for itself and as Agent,
and the other banks party thereto, to which Agreement
reference is hereby made for a statement of the terms and
conditions on which loans in part evidenced hereby were or
may be made, and for a description of the conditions upon
which this Note may be prepaid, in whole or in part, or its
maturity accelerated.
OSHKOSH B'GOSH, INC.
BY:
Vice President of Finance
(CORPORATE SEAL)
EXHIBIT 2.1
COMMERCIAL PAPER AND COMPETITIVE BID LOAN
REPORT/LOAN REQUEST
, 19
Memorandum to:
Firstar Bank Milwaukee, NA, as Agent
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Re: Credit Agreement Dated as of June 24, 1994, as
amended (the "Credit Agreement")
Part 1: Commercial Paper Report
The aggregate principal amount of all Commercial
Paper of the Company now outstanding is $ .
Part 2: Loan Request
The Company hereby applies to the Agent for a loan
under the Credit Agreement to be made on , 19 ,
in the principal amount of $ . If such loan
is to be subject to a LIBOR Pricing Option, the LIBOR
Interest Period is months.
The Company hereby certifies as follows:
(a) All of the representations and warranties set
forth in Article IV of the Credit Agreement continue to be
true on the date hereof, except that the financial
statements referred to in Section 4.5 of the Credit
Agreement shall be deemed to be the most recent consolidated
financial statements of the Company delivered pursuant to
Section 6.6(a) or (b) of the Credit Agreement.
(b) At the date hereof, no Default or Event of Default
under the Credit Agreement has occurred and is continuing.
Part 3: Competitive Bid Loan Report
The aggregate principal amount of all Competitive
Bid Loans now outstanding is $ . The
Portions of outstanding Competitive Bid Loans held by each
of the Banks are as follows:
Firstar Bank Milwaukee, NA $
Bank One, Milwaukee, NA $
Harris Trust and Savings Bank $
Norwest Bank Wisconsin, NA $
The First National Bank of Boston $
OSHKOSH B'GOSH, INC.
By:
Title:
EXHIBIT 10.15
Flexible Nonstandardized 401(k) Adoption Agreement (#007) 062493
I. Employer Information
A. Name: OshKosh B'Gosh, Inc.
B. Address: 112 Otter Avenue
Oshkosh, WI 54902
C. Taxable Year: 1996
D. EIN: 39-0519915
II. Plan Information
A. Plan Name: OshKosh B'Gosh, Inc. 401(k) Plan
B. Plan Year: the period which ends on 12/31
C. Construction. Except as provided in Section 1.2, the Plan
and the Trust Agreement will be subject to the laws of the
State of Wisconsin.
D. Plan Adoption. The Plan is hereby adopted as [Check one.
See Section 14.1.]
1. [ x ] a new profit sharing plan (with cash or deferred
arrangement).
2. [ ] an amendment and restatement of the
("Pre-Existing Plan") which was originally
effective , 19 .
E. Effective Date of this Adoption Agreement: October 1, 1996.
III. Eligibility and Participation
A. Eligible Employees. All Employees of the Employer and all
Employees of the Participating Affiliates who satisfy the
Participation Requirement generally will be eligible to
participate in the Plan except certain nonresident aliens
and: [Check one. See Section 2.19.]
1. [ ] Standard: no other exclusions.
2. [ x ] the following additional categories of Employees:
[The Plan must satisfy the nondiscrimination,
minimum coverage and minimum participation rules
on a continuing basis. See Section 2.19(b).]
1. Exclude retail store employee is store is scheduled
to close within 60 days after start date of Plan and
exclude Celina Mfg. facility employees.
However, notwithstanding any contrary language, participation
in this Plan by Employees who are covered by a collective
bargaining agreement and the extend of such participation, if
any, will be determined by collective bargaining.
B. Participation Requirement. In order to participate in this
Plan, an Eligible Employee must [Check one. See Section
2.46, Section 4 and Part V.B.1. Enter "N/A" if there will be
no minimum age or no waiting period, as applicable.]
1. [ x ] Standard: reach minimum age of 21 and complete
waiting period of 1 Year of Service.
2. [ ] no minimum age or waiting period.
3. [ ] reach minimum age of [not to exceed 21] and
complete waiting period of Year of Service
[not to exceed 1].
4. [ ] reach minimum age of [not to exceed 21] and
complete waiting period of Year of Service [not
to exceed 1]; however, each Employee who is an
Eligible Employee on the Effective Date will be
deemed to satisfy the Participation Requirement on
the Effective Date regardless of such Employee's
actual age or service.
C. Entry Date: [Check one. See Section 2.26 and Section 4.]
1. [ ] Standard; the first day of each Plan Year and the
first day of the seventh month of each Plan year.
2. [ ] the date on which the Participant satisfies the
Participation Requirement.
3. [ x ] other: first day of the month [Specify date(s).
If a single Entry Date is entered, the minimum age
in Part III.B cannot exceed 20-1/2 and the maximum
waiting period in Part III.B cannot exceed 1/2
year.]
IV.Vesting.
A. Death, Disability or Retirement. [See Section 8.1(b).]
1. [ x ] Standard. A Participant's Employer
Account and Matching Account will be 100% vested
if, while an Employee, that Participant dies,
becomes Disabled, or reaches Normal Retirement Age
or, if applicable, Early Retirement Age.
2. [ ] A Participant's Employer Account and
Matching Account will be 100% vested if, while an
Employee, that Participant reaches Normal
Retirement Age or if the Participant satisfies the
following condition: [Check one or more only if
desired.]
a. [ ] dies while an Employee
b. [ ] becomes Disabled while an
Employee
c. [ ] reaches Early Retirement Age
while an Employee.
B. General Vesting Schedule. [See Section 8.1 and Section
14.3(c). Generally, the vesting schedule under this Plan
must be at least as favorable at the completion of each year
as the vesting schedule under the Pre-Existing Plan. The Top-
Heavy Vesting Schedule selected in Part XI.A will apply for
all Plan Years in which the Plan is a Top-Heavy Plan. See
Section 12.4.]
1. Matching Account. [Check one. "Full and Immediate
Vesting" must be selected if the 2-year requirement for
Matching Contributions is selected in Part VII.A.2.b.5.]
a. [ ] Standard. Full and Immediate
Vesting. 100% at all times.
b. [ x ] Cliff Vesting. 100% after
completion of 3 Years of Service [not to
exceed 5] or after completion of 0 Years of
Service in the event of involuntary
termination due to reduction in force or a
facility closure, provided either such event
occurs at a manufacturing plant, distribution
center, (which does not include retail
stores), or a finishing center.
c. [ ] Graded Vesting.
Years of Service Nonforfeitable
Percentage
Less than 1 %
1 %
2 %
3 %
[at least 20%]
4 %
[at least 40%]
5 %
[at least 60%]
6 %
[at least 80%]
7 or more 100%
d. [ ] Top-Heavy. The Top-Heavy
Vesting Schedule in Part XI.A will apply for
all Plan Years.
2. Employer Account. [Check one. "Full and Immediate
Vesting" must be selected if the 2-year requirement for
Employer Contributions is selected in Part VII.D.2.b.5.]
a. [ ] Standard. Full and Immediate
Vesting. 100% at all times.
b. [ x ] Cliff Vesting. 100% after
completion of 3 Years of Service [not to
exceed 5] or after completion of 0 Years of
Service in the event of involuntary
termination due to reduction in force or a
facility closure, provided either such event
occurs at a manufacturing plant, distribution
center, (which does not include retail
stores), or a finishing center.
c. [ ] Graded Vesting.
Years of Service Nonforfeitable
Percentage
Less than 1 %
1 %
2 %
3 %
[at least 20%]
4 %
[at least 40%]
5 %
[at least 60%]
6 %
[at least 80%]
7 or more 100%
d. [ ] Top-Heavy. The Top-Heavy
Vesting Schedule in Part XI.A will apply for
all Plan Years.
C. Normal Retirement Age. [Check one. See Section 2.43 and
Part XIII.B.]
1. [ x ] Standard. age 65
2. [ ] age [not to exceed 65]
3. [ ] the later of age [not to exceed 65]
or the
[not to exceed 5th] anniversary of the date on
which the Participant commenced participation in
the Plan.
D. Early Retirement Age: [The designation of an Early
Retirement Age may accelerate vesting and distribution.
Early Retirement Age cannot exceed Normal Retirement Age.
Check one. See Section 2.13 and Section 9.1.]
1. [ x ] Standard: No Early Retirement Age.
2. [ ] age
3. [ ] the later of age or the completion
of Years of Service (for vesting purposes).
V. Service for Participation and Vesting.
A. Method for Crediting Service. [Check one. See
Section 3.]
1. [ x ] Standard: "Hour of Service"
method. [See Section 3.1.]
a. Crediting Hours. Hours will be credited during each
Computation Period [Check one. See Section 3.1(c).]
(1) [ ] Standard: by maintaining records of the
actual hours worked. [See Section
3.1(c)(2)(i).]
(2) [ x ] by using the following equivalency
[Check one. See Section 3.1(c)(2)(ii).]
[ ] 10 Hours of Service for each day.
[ ] 45 Hours of Service for each week.
[ ] 95 Hours of Service for each semi-
monthly payroll period.
[ x ] 190 Hours of Service for each month for
any employee not paid on an hourly basis.
b. Vesting Computation Period. The Computation Period
for vesting purposes will be [Check one. See Section
3.1(b)(2).]
(1) [ x ] Standard: the Plan Year
(2) [ ] the 12 month period beginning on the
Participant's hire date and each
anniversary of that hire date.
c. Participation Computation Period. The
initial Computation Period for participation purposes
will be the 12 month period beginning on the
Participant's hire date. Each subsequent Computation
Period after the initial 12 months of employment will
be [Check one. See Section 3.1(b)(3).]
(1) [ x ] Standard: Plan years beginning
after the Participant's hire date.
(2) [ ] subsequent 12 month periods
beginning on the anniversaries of the
Participant's hire date.
d. Year of Service for Vesting. For vesting
purposes, an Employee will be credited with a Year of
Service if, during a Computation Period, the Employee
completes at least [Check one. See Section 3.1(d).]
(1) [ x ] Standard: 1,000 Hours of
Service
(2) [ ] [not more than 1,000]
Hours of Service.
e. Year of Service for Participation. For
participation purposes, an Employee will be credited
with a Year of Service [Check one. See Section
3.1(b)(3) and Section 3.1(d).]
(1) [ x ] Standard: at the end of the
Computation Period in which the
Employee completes at least 1,000 Hours
of Service.
(2) [ ] on the date on which the
Employee completes at least
[not more than 1,000] Hours of
Service.
(3) [ ] at the end of the Computation
Period on which the Employee
completes at least [not more than
1,000] Hours of Service.
Notwithstanding the foregoing, if a partial
Year of Service is selected in Part III.B, no minimum
number of Hours of Service will be required.
2. [ ] "Elapsed Time" method. [See
Section 3.2.]
For purposes of determining whether
a Participant is entitled to an allocation of
contributions or forfeitures, the Participant will
be deemed to have completed more than 500 Hours of
Service in a Plan Year if the Participant
completes the following period of employment in
the Plan Year: [Check one. See Section 2.2(d)
and Part VII.]
a. [ ] Standard: more than 91
consecutive calendar days.
b. [ ] more than 3 consecutive
months.
B. Special Rules.
1.Vesting Service Exclusions. [See Section 3.8.] In
addition to any service that is disregarding under the
Break in Service rules described below and in Section
3.7(c), the following service will be excluded for
vesting purposes:
a.[ x ] Standard: No other exclusions.
b.[ ] Years of Service before age 18.
c.[ ] Years of Service before the Employer or an
Affiliate maintained this Plan or a
predecessor plan.
d.[ ] Years of Service during a period for which
the Employee made no mandatory contributions
under a Pre-Existing Plan.
2.Predecessor Employer Service (Vesting and
Participation). Generally, unless the Employer
maintains the plan of a predecessor employer (for
example, an acquired company), service for a predecessor
employer will not be credited as service under this
Plan. [Check and attach appropriate addendum only if
desired. See Section 3.4.]
[ ] Service credit will be given under this Plan
for certain predecessor employers for participation
and/or vesting purposes to the extent provided in
Addendum V.B.2.
3.Break in Service Rules. [See Section 3.7 and Section
8.2.] Generally, all service completed before a Break
in Service will be credited upon reemployment. Certain
service may be excluded under the following rules:
a. [ x ] Standard: No exclusions. [See
Section 3.7(a).]
b. [ ] "One Year Hold Out Rule." [See
Section 3.7(b)(1).] This rule, generally,
requires rehired Employees to complete a Year
of Service before prior vesting and
participation service is restored.
c. [ ] "Rule of Parity". [See Section
3.7(b)(3).] This rule, generally, disregards
vesting and participation service completed
before 5 uninterrupted Breaks in Service.
d. [ ] "Alternative Maternity/Paternity
Rule." [Not applicable if "Elapsed Time" is
selected. See Section 3.7(b)(4).] This rule,
generally, increases the number of Breaks in
Service from 5 to 6 for all Employees in lieu
of crediting service for maternity/paternity
leave.
e. [ ] Alternative to "Buy Back Rule".
[See Section 8.2(b).] This rule, generally,
does not require former participants (less than
100% vested) to pay back previous distributions
upon reemployment (vesting only). A rehired
Participant's vested interest in restored
amounts will be determined under: [Check one.
See Section 8.2(a), Section 8.2(b) and Section
8.2(c).]
(1) [ ] Standard: Formula A
(2) [ ] Formula B
VI. Employee Contributions.
A. Elective Deferrals. [See Section 5.3(f).
Check one.]
1. [ x ] Standard: will be allowed. [Complete formula
below; enter "N/A" if not applicable.]
a. Minimum Amount. Not less
than 1% of a Participant's Compensation or $
N/A.
b. Maximum Amount. For Plan
Years ending on and before 12/31/96, not more
than 15% of a Participant's Compensation or $
, and for each Plan Year thereafter, not more
than 15% of a Participant's Compensation or $
.
2. [ ] will not be allowed.
B. Employee Contributions. Employee Contributions [See Section
5.3(g). Check one.]
1. [ x ] Standard: will not be allowed.
2. [ ] will be allowed. [Complete formula
below; enter "N/A" if not applicable.]
a. Minimum Amount. Not less than
% of a Participant's Compensation or $ .
b. Maximum Amount. For Plan
years ending on and before , not more
than % of a Participant's Compensation or
$ , and for each Plan Year thereafter,
not more than % of a Participant's
Compensation or $ .
C. Election Rules. [Check one. See Section
5.3(h).]
1. [ ] Standard: If a Participant does
not elect to begin Elective Deferrals or Employee
Contributions on the Participant's Entry Date, the
Participant may elect to begin such contributions
as of any following pay date. A Participant's
election can be revised (prospectively only) as of
any pay date. A Participation who terminates
contributions may elect to resume contributions
prospectively as of any pay date.
2. [ x ] Alternatives to Standard: A
Participant's elections may be made as follows:
[Must include at least one day in each calendar
year.]
a. [ x ] Commencement.
[See Section 5.3(h)(2).] effective
only as of any first day of any month
following the Participant's Entry
Date.
b. [ x ] Revision.
[See Section 5.3(h)(3).] effective
only as of any following last day of
any month.
c. [ x ] Resumption.
[See Section 5.3(h)(5).] effective
only as of any following a minimum
suspension of deferrals of six months.
D. Rollover Contributions. Rollover Contributions [Check one.
See Section 5.5.]
1. [ x ] Standard: will be allowed and may
be made by [Check one.]
a. [ x ] Standard:
any Eligible Employee.
b. [ ] any Eligible
Employee who is a Participant.
2. [ ] will not be allowed.
E. Limitations on Elective Deferrals.
1. Claims. Claims for a refund of Excess Elective
Deferrals must be made no later than [See Section
7.3(f). Check one.]
a. [ x ] Standard: March 1.
b. [ ] [no earlier than March 1 and no later
than April 15.]
2. Deemed Claims. Corrections of Excess Elective Deferrals
will be made [See Section 7.3(f)(2). Check one.]
a. [ x ] Standard: from this Plan.
b. [ ] from the following plan(s):
3. "Gap Period" Income. The income or loss allocable to
the "gap period" [Check one. See Section 7.3(e),
Section 7.4(d)(2) and Section 7.5(d)(2).]
a. [ x ] Standard: shall not be distributed.
b. [ ] shall be distributed.
4. Highly Compensated Employees. The following special
rules in the temporary Code Section 414(q) regulations
and in Code Section 414(q)(12) will apply: [Check one.
See Section 7.4(a)(5)(v).]
a. [ x ] Standard: no special rules.
b. [ ] The special rules set forth in Addendum
V.E.3.
5. Recharacterization. Recharacterization of Excess
Contributions as Employee Contributions [See Section
7.4(e). Check one.]
a. [ x ] Standard: will not be allowed.
b. [ ] [Do not check this option 2 if Employee
Contributions are not allowed in Part VI.B]
will be allowed.
VII. Employer Contributions.
A. Matching Contributions. [See Section 5.3(b) and Part VII.F.]
1. Formula. [Check one.]
a. [ ] Standard: No Matching Contributions will be
made.
b. [ x ] Matching Contributions will be made on
account of: [Check one or both.]
[ x ] Elective Deferrals
[ ] Employee Contributions
under the following formula:
[Check and complete one. Enter "N/A" if not
applicable. The formula specified and
completed must not provide a higher rate of
Matching Contributions for Participants who
make a higher amount of contributions.]
[ ] % of the
Participant's contributions which do
not exceed $ or % of the
Participant's Compensation plus %
of the Participant's contributions
which exceed $ or %, but
contributions in excess of $ or
% of the Participant's Compensation
will not be matched.
[ x ] such percentage
of the Participant's contributions as
determined by the Employer in its
discretion for each Plan Year.
[ ] in an amount
equal to .
2. Eligible Participant. The Matching Contribution for
any Allocation Date will be made only for each
Participant who makes Elective Deferrals or Employee
Contributions, as applicable, during the period ending
on the Allocation Date and who satisfies all of the
following requirements: [Check one.]
a. [ x ] Standard: no
additional requirements.
b. [ ] Alternative:
[Check one or more.]
(1) [ ] the
Participant is employed (or on an
authorized leave of absence) on the
Allocation Date.
(2) [ ] the
Participant is credited with at
least 1,000 Hours of Service in the
Plan Year ending on such Allocation
Date. [Do not check if "Elapsed
Time" is selected or Allocation
Date is not Standard Option.]
(3) [ ] the
Participant is a Nonhighly
Compensated Employee.
(4) [ ] the
Participant is not employed as of
the last day of the Plan Year but
is credited with more than 500
Hours of Service in the Plan Year.
[Do not check if Allocation Date is
not Standard Option. Special Hour
of Service equivalencies apply if
"Elapsed Time" is selected. See
Part V.A.2.]
(5) [ ] the
Participant is credited with at
least 2 Years of Service (for
participation purposes) on such
Allocation Date.
(6) [ ]
notwithstanding anything to the
contrary in clause (1), (2) or (4)
of this Part VII.A.2.b, a
Participant who died, retired or
became disabled during the period
ending on the Allocation Date will
be eligible [Check one.]
[ ]
without regard to the number
of Hours of Service.
[ ] only
if he completes the
Hours of Service specified in
clause (2) or (4), as
applicable. [Do not check if
Allocation Date is not
Standard Option.]
3. Allocation Date. Matching Contributions will be made
and allocated as of [Check one.]
a. [ ] Standard: the last
day of each Plan year.
b. [ x ] each month.
4. Forfeitures. Forfeitures attributable to Matching
Accounts. [Check one. See Section 6.3(c)(2)(ii).]
a. [ x ] Standard: will be
applied to reduce Matching Contributions as
of the Allocation Date: [Check one. See
Section 8.2(e).]
(1) [ x ] Standard: which
immediately follows the
date the Forfeiture
occurs.
(2) [ ] which
immediately follows the last day of
the Plan Year in which the
Forfeiture occurs.
b. [ ] will be reallocated to
Active Participants as of the last day of
each Plan Year. [Complete Part VII.D.2 to
specify who is an Active Participant for this
purpose.]
c. [ ] will be allocated in
accordance with the formula set forth in
Addendum VII.A.4.c. [The addendum should
describe Allocation Date, eligible
Participants and allocation formula.]
B. Qualified Matching Contributions. [See Section 5.3(c) and
Part VII.F.]
1. Formula. [Check one.]
a. [ x ] Standard: No Qualified
Matching Contributions will be made.
b. [ ] Qualified Matching
Contributions will be made on account of:
[Check one or both.]
[ ] Elective Deferrals
[ ] Employee Contributions
under the following formula:
[Check and complete one. Enter "N/A" if not
applicable. The formula specified and
completed must not provide a higher rate of
Qualified Matching Contributions for
Participants who make a higher amount of
contributions.]
[ ] % of the
Participant's contributions which do
not exceed $ or % of the
Participant's Compensation plus %
of the Participant's contributions
which exceed $ or %, but
contributions in excess of $ or
% of the Participant's Compensation
will not be matched.
[ ] such
percentage of the Participant's
contributions as determined by the
Employer in its discretion for each
Plan Year.
[ ] in an amount
equal to .
2. Eligible Participant. The Qualified Matching
Contribution for any Allocation Date will be made only
for each Participant who makes Elective Deferrals or
Employee Contributions, as applicable, during the period
ending on the Allocation Date and who satisfies all of
the following requirements: [Check one.]
a. [ ] Standard: no
additional requirements.
b. [ ] Alternative:
[Check one or more.]
(1) [ ] the
Participant is employed (or on an
authorized leave of absence) on the
Allocation Date.
(2) [ ] the
Participant is credited with at
least 1,000 Hours of Service in the
Plan Year ending on such Allocation
Date. [Do not check if "Elapsed
Time" is selected or Allocation
Date is not Standard Option.]
(3) [ ] the
Participant is a Nonhighly
Compensated Employee.
(4) [ ] the
Participant is not employed as of
the last day of the Plan Year but
is credited with more than 500
Hours of Service in the Plan Year.
[Do not check if Allocation Date is
not Standard Option. Special Hour
of Service equivalencies apply if
"Elapsed Time" is selected. See
Part V.A.2.]
(5) [ ] the
Participant is credited with at
least 2 Years of Service (for
participation purposes) on such
Allocation Date.
(6) [ ]
notwithstanding anything to the
contrary in clause (1), (2) or (4)
of this Part VII.B.2.b, a
Participant who died, retired or
became disabled during the period
ending on the Allocation Date will
be eligible [Check one.]
[ ]
without regard to the number
of Hours of Service.
[ ] only
if he completes the
Hours of Service specified in
clause (2) or (4), as
applicable. [Do not check if
Allocation Date is not
Standard Option.]
3. Allocation Date. Qualified Matching Contributions
will be made and allocated as of [Check one.]
a. [ ] Standard: the last
day of each Plan Year.
b. [ ] each .
C. Qualified Nonelective Contributions. [See Section 5.3(d) and
Part VII.F.]
1. Formula. In addition to the Qualified Nonelective
Contributions which may be made for Nonhighly
Compensated Employees to satisfy the ADP or ACP limits,
[Check one.]
a. [ x ] Standard: no additional
Qualified Nonelective Contributions will be
made.
b. [ ] additional Qualified
Nonelective Contributions will be made in an
amount equal to .
2. Eligible Participant. The Additional Qualified
Nonelective Contribution described in this Part VII.C
for any Allocation Date will be made only for each
Participant who is an Eligible Employee at any time
during the period ending on the Allocation Date and who
satisfies all of the following requirements: [Check
one.]
a. [ ] Standard: no
additional requirements.
b. [ ] Alternative:
[Check one or more.]
(1) [ ] the
Participant is employed (or on an
authorized leave of absence) on the
Allocation Date.
(2) [ ] the
Participant is credited with at
least 1,000 Hours of Service in the
Plan Year ending on such Allocation
Date. [Do not check if "Elapsed
Time" is selected or Allocation
Date is not Standard Option.]
(3) [ ] the
Participant is a Nonhighly
Compensated Employee.
(4) [ ] the
Participant is not employed as of
the last day of the Plan Year but
is credited with more than 500
Hours of Service in the Plan Year.
[Do not check if Allocation Date is
not Standard Option. Special Hour
of Service equivalencies apply if
"Elapsed Time" is selected. See
Part V.A.2.]
(5) [ ] the
Participant is credited with at
least 2 Years of Service (for
participation purposes) on such
Allocation Date.
(6) [ ]
notwithstanding anything to the
contrary in clause (1), (2) or (4)
of this Part VII.C.2.b, a
Participant who died, retired or
became disabled during the period
ending on the Allocation Date will
be eligible [Check one.]
[ ]
without regard to the number
of Hours of Service.
[ ] only
if he completes the
Hours of Service specified in
clause (2) or (4), as
applicable. [Do not check if
Allocation Date is not
Standard Option.]
3. Allocation Date. The Qualified Nonelective
Contributions described in this Part VII.C will be made
and allocated as of [Check one.]
a. [ ] Standard: the last
day of each Plan Year.
b. [ ] each
.
D. Discretionary Employer Contributions.
1. Allocation Formula. The discretionary Employer
Contributions will be allocated among Active
Participants as follows: [Check one. See Section
5.3(e), Section 6.3(a), Section 6.3(c)(4) and Part
VII.F. Do not select an integrated formula for Plan
years beginning on and after the Final Compliance Date
if the Employer also maintains another integrated plan
for such Plan Year.]
a. [ x ] Standard: Nonintegrated. [See
Section 6.3(a)(1) and Section
6.3(c)(4)(i)(A).]
b. [ ] Integrated. [See Section 6.3(a)(2),
Section 6.3(c)(4)(i)(B) and Section 12.3(h).]
(1) Integration Percentage. [Check one.
If the Integration Level is less than the
Taxable Wage Base, the Maximum Disparity
Rate must be reduced. See Section
2.39.]
[ ] Standard: the Maximum
Disparity Rate.
[ ] % [not to exceed the
Maximum Disparity Rate.]
(2) Integration Level. [Check one. See
Section 2.35.]
[ ] Standard: the Taxable Wage
Base.
[ ] $ or % of the Taxable
Wage Base [not to exceed the
Taxable Wage Base.]
2. Active Participant. The discretionary Employer
Contributions and Forfeitures, if applicable, will only
be allocated to: [Check one. See Section 2.2, Section
5.3(e) and Part VII.F.]
a. [ x ] Standard: each
Participant who is an Eligible Employee at
any time during the Plan Year and (1) who is
employed (or on an authorized leave of
absence) on the last day of the Plan Year and
(if the "Hours of Service" method is
selected) who is credited with more than
1,000 Hours of Service during the Plan Year
or (2) who terminated employment during the
Plan Year due to death, disability or
retirement.
b. [ ] Alternatives to standard:
[Check one or more.]
(1) [ ] The
last day employment requirement
will not apply.
(2) [ ] The
1,000 hours requirement will not
apply.
(3) [ ] The
exceptions for death, disability
and retirement will not apply.
(4) [ ]
Each Participant who is not
employed on the last day of the
Plan Year but is credited with
more than 500 Hours of Service
during the Plan Year will be an
Active Participant. [Special
equivalencies apply if "Elapsed
Time" is selected. See Part
V.A.2.]
(5) [ ] The
Participant must also be credited
with at least 2 Years of Service
on the last day of the Plan Year.
3. Forfeitures. Forfeitures attributable to Employer
Accounts [Check one. See Section 5.3(i) and Section
6.3(c)(4)(ii).]
a. [ x ] Standard: will be
reallocated to Active Participants as of the
last day of each Plan Year in the same manner
as Employer Contributions.
b. [ ] will be applied to reduce
Matching Contributions, Qualified Matching
Contributions and/or Qualified Nonelective
Contributions.
E. Net Profits.
1. General. [Check one. See Section
5.3(a).]
a. [ ] Standard: All Employer
contributions other than Elective Deferrals
will be made out of Net Profits.
b. [ x ] Alternatives to Standard:
In addition to Elective Deferrals, the
following contributions will be made without
regard to Net Profits: [Check one or more.]
1. [ x ] Matching
Contributions
2. [ ] Qualified Matching
Contributions
3. [ x ] Qualified Nonelective
Contributions
4. [ x ] Discretionary
Employer Contributions
2. Definition. For this purpose, Net Profits will be as
defined [Check one. See Section 2.41.]
a. [ ] Standard: in Section
2.41(a).
b. [ ] in the attached Addendum
VII.E.2.
F. Minimum Allocations. Each Active Participant (determined
without regard to the Participant's completed Hours of
Service) who is not a Key Employee, generally, will receive
the minimum top-heavy allocation if the Plan is top-heavy.
[See Section 6.3(e) and Section 12.] Requiring a Participant
to complete a minimum number of hours or to be employed on
the last day of a period may result in a failure to satisfy
the nondiscrimination rules, minimum coverage rules and
minimum participation rules. [See Section 2.2 and Section
2.19.]
VIII. Compensation. Compensation for any Plan Year generally
means total compensation (not to exceed $200,000 indexed for
inflation after 1989) actually paid to a Participant during such
Plan Year (unless another determination period is selected).
[See Section 2.10.]
A. Basic Definition: Total compensation means: [Check one. See
Section 2.10(a).]
1. [ x ] Standard: wages, tips and other
compensation reportable on Form W-2. [See Section
2.10(a)(1).]
2. [ ] wages subject to federal income tax
withholding. [See Section 2.10(a)(2)(i).]
3. [ ] general Code Section 415
compensation. [See Section 2.10(a)(2)(ii) and
Section 7.2(a)(2)(ii)(B).]
4. [ ] regular or base salary or wages,
including [This option may not be selected if the
integrated formula is selected in Part VII.D.1.b.
Check one or more only if desired.]
a. [ ] overtime
b. [ ] bonuses
c. [ ] commissions
d. [ ] other:
Reimbursements or other expense allowances, fringe benefits
(cash and noncash), moving expenses, deferred compensation
and welfare benefits (even if includible in gross income):
[Check one. See Section 2.10(a)(2)(iv).]
[ ] Standard: will [ x ] will not
be included in Compensation as determined in accordance with
the definition selected above.
B. Determination Period: [Check one. See Section 2.10(d).]
1. [ x ] Standard: the Plan Year
2. [ ] the calendar year ending in the Plan Year.
3. [ ] a period beginning each [Enter the
day and month the period begins. The
determination period must end with or within the
Plan Year, must be at least 12 consecutive months
in duration and must apply uniformly to all
Employees in the Plan.]
C. Salary Reductions. Participant salary reduction
contributions (for example, Section 401(k) or flexible
benefit plan contributions) [Check one. See Section
2.10(f).]
1. [ x ] Standard: will
2. [ ] will not
be included in total compensation.
D. Special Rules. [Complete only if desired. See Section
2.10(g).]
1. [ ] Compensation for periods ending
before the Entry Date on which an Eligible
Employee becomes a Participant will be excluded.
[See Section 2.10 (g)(1).]
2. [ ] If this is an amendment to a Pre-
Existing Plan, the definition of Compensation will
be effective as of [No later than
the first day of the first Plan Year after this
Plan is adopted. See Section 2.10(g)(2). The
definition in the Pre-Existing Plan will continue
to apply until that date.]
3. [ ] Compensation for any Plan Year in
excess of $ will be excluded. [See Section
2.10(g)(3).]
4. [ ] The following shall be excluded
when determining Compensation of Highly
Compensated Employee: . [See Section
2.10(g)(4).]
IX. Distributions.
A. Timing. Vested Plan benefits, generally, will be distributed
as follows: [Check one. See Section 9.1(a).]
1. [ x ] Standard: as soon as practical
after the Participant separates from service
subject to the Participant's consent, if required.
2. [ ] no earlier than the Participant's
Normal Retirement Age, Early Retirement Age or
Disability, whichever is earlier.
B. Elections to Defer. A Participant whose Account is more than
$3500 may elect that distribution of vested Plan benefits be
deferred until: [Check one. See Section 9.1(e).]
1. [ x ] Standard: the Participant's
Required Beginning Date (generally age 70.5).
2. [ ] the later of the Participant's
Normal Retirement Age or age 62.
C. In-Service Distributions. [See Section 9.2(b).]
1. Elective Deferral Accounts. In-service
distributions from Elective Deferral Accounts will be
allowed as follows: [Check applicable box(es).]
a. [ ] Standard: no distributions
before separation from service.
b. [ ] on or after age 59.5. [See
Section 9.2(b)(4).]
c. [ x ] for the following financial
hardship(s): [See Section 9.2(b)(3). Check
one or more.]
(1) [ x ] medical expenses [See
Section 9.2(b)(3)(ii)(A).]
(2) [ x ] purchase of principal
residence [See Section
9.2(b)(3)(ii)(B).]
(3) [ x ] tuition [See Section
9.2(b)(3)(ii)(C).]
(4) [ x ] foreclosure or eviction
[See Section 9.2(b)(3)(ii)(D).]
(5) [ x ] other IRS "deemed"
financial hardship [See Section
9.2(b)(3)(ii)(E).]
2. Matching Accounts. In-service distributions from
Matching Accounts will be allowed as follows: [Check
applicable box(es).]
a. [ x ] Standard: no distributions before
separation from service.
b. [ ] on or after age .
c. [ ] after the anniversary of Plan
participation.
d. [ ] for a financial hardship under the
safe harbor tests. [See Section 9.2(b)(3).]
e. [ ] in accordance with the rules set forth
in Addendum IX.C.2. [See Section 9.2(b)(5).
The addendum should describe nondiscriminatory
objective standards for an in-service
distribution after a fixed number of years or
upon the prior occurrence of some event such as
layoff, illness or hardship.]
3. Employer Accounts. In-service distributions from
Employer Accounts will be allowed as follows: [Check
applicable box(es).]
a. [ x ] Standard: no distributions before
separation from service.
b. [ ] on or after age .
c. [ ] after the anniversary of Plan
participation.
d. [ ] for a financial hardship under the
safe harbor tests. [See Section 9.2(b)(3).]
e. [ ] in accordance with the rules set forth
in Addendum IX.C.3. [See Section 9.2(b)(5).
The addendum should describe nondiscriminatory
objective standards for an in-service
distribution after a fixed number of years or
upon the prior occurrence of some event such as
layoff, illness or hardship.]
4. Qualified Nonelective and Qualified Matching Accounts.
In-service distributions from Qualified Nonelective and
Qualified Matching Accounts will be allowed as follows:
[Check applicable box(es).]
a. [ x ] Standard: no distributions
before separation from service.
b. [ ] on or after age 59.5.
c. [ ] for financial hardship (pre-
89 amounts only). [See Section 9.2(b)(3).]
5. Employee Accounts. Withdrawals from Employee Accounts
[See Section 9.2(d). Check one.]
a. [ x ] Standard: will be allowed.
b. [ ] will not be allowed.
D. Joint and Survivor Annuity Rules. [Check one. See Section
10.]
1. [ ] Standard: The entire vested
balance will be paid (a) to married Participants
as a 50% joint and survivor annuity, (b) to single
Participants as a 100% life annuity and (c) to the
surviving Spouse of a married Participant who dies
before retirement as a 100% preretirement survivor
annuity.
2. [ ] The entire vested balance will be
paid under the standard joint and survivor annuity
rules except the percentages will be: [Percentages
must not be less than 50% nor more than 100%.]
a. Qualified Joint and
Survivor Annuity: % [See Section
10.1(f).]
b. Qualified Preretirement
Survivor Annuity: % [See Section 10.1(g).]
3. [ x ] The standard joint and survivor
annuity rules will not apply. [Check only if the
safe harbor rule described in Section 10.5 will be
satisfied. This option generally is not available
if this Plan or a Pre-Existing Plan provides
annuities and separate accounts are not maintained
for such Pre-Existing Plan balances. Under this
option, the entire vested balance eligible for the
safe harbor will be paid to the surviving Spouse
of a married Participant who dies before
retirement. See Section 10.5.]
E. Optional Distribution Forms. [See Section 10.6(c).] In
addition to single sum distributions in cash, Participants
may also request:
1. [ ] Installments [See Section
10.6(c)(2)(ii).]
2. [ ] Annuity contracts [See Section
10.6(c)(2)(iii).]
3. [ ] The optional forms or in kind
distributions offered under a Pre-Existing Plan as
described in Addendum XIII.A.
4. [ ] Single sum distributions in kind
[See Section 10.6(e).]
X. Investment Provisions.
A. Individually Directed Investments. An individual's direction
of the investment of that individual's Account. [Check one.
See Section 13.2.]
1. [ ] Standard: will not be allowed.
2. [ x ] will be allowed and will apply:
[Check one.]
a. [ x ] Standard: to the entire
Account
b. [ ] only to the following:
B. Participant Loans. Participant loans [Check one. See
Section 13.3.]
1. [ ] Standard: will not be allowed.
2. [ x ] will be allowed.
a. Accounting. Loans will be
treated as an asset of [See Section 13.3(e).
Check one.]
(1) [ x ] Standard: the
Participant's Account.
(2) [ ] the Fund.
b. Amounts. The $10,000
exception for loans in excess of 50% of Account
value [Check one. See Section 13.3(f)(2).]
(1) [ x ] Standard: shall
not apply.
(2) [ ] shall apply.
[Note: Loans under this exception
must be secured by collateral in
addition to the Participant's
vested Account.]
C. Insurance. A Participant's direction to purchase insurance
contracts [Check one. See Section 13.1.]
1. [ x ] Standard: will not be allowed.
2. [ ] will be allowed.
XI. Top-Heavy Rules. [See Section 12.]
A. Top-Heavy Vesting Schedule. The vesting schedule for any
Plan Year in which this plan is a Top-Heavy Plan will be:
[Check one. See Section 12.4.]
1. [ ] Standard. Full and Immediate Vesting.
100% of all times.
2. [ x ] Cliff. 100% after completion of 3 Years
of Service [not to exceed 3].
3. [ ] Graded.
Years of Service Nonforfeitable Percentage
Less than 1 %
1 %
2 % [at least 20%]
3 % [at least 40%]
4 % [at least 60%]
5 % [at least 80%]
6 or more 100%
B. Other Plans. [Complete only if the Employer maintains or has
ever maintained another plan.]
1. Minimum Allocation. The minimum top-heavy contributions
or benefit, if any, will be made under [Check one. See
Section 12.3(d) and (g).]
a. [ ] Standard: this Plan.
b. [ x ] the following plan(s): The OshKosh B'Gosh,
Inc. Pension Plan
2. Present Value. [See Section 12.2(f)(3)(iii). Complete
only if Employer maintains a defined benefit plan.]
"Present value" will be determined using an interest rate
of % and the following mortality table: as specified
in the defined benefit plan, currently 5.5% and the Unisex
Pension 1984 mortality table.
3. Valuation Date. The Top-Heavy Valuation Date for each
other plan will be: [See Section 12.2(g). Check one.]
a. [ x ] Standard: the most recent valuation date.
b. [ ] Other:
XII. Limitations on Allocations (Code Section 415). [See Section
7.2.]
A. Compensation. For Code Section 415 purposes, Compensation
means: [Check one. See Section 7.2(a)(2).]
1. [ x ] Standard: wages, tips and other compensation
reportable on Form W-2. [See Section
7.2(a)(2)(i).]
2. [ ] wages, subject to federal income tax withholding.
[See Section 7.2(a)(2)(ii)(A) and Section
2.10(a)(2)(i).]
3. [ ] general Code Section 415 compensation. [See
Section 7.2(a)(2)(ii)(B).]
B. Limitation Year. The Limitation Year will be: [Check one.
See Section 7.2(a)(9).]
1. [ x ] Standard: the Plan Year.
2. [ ] the 12 consecutive month period which ends on each
C. Other Plans. [Complete only if the Employer maintains or has
ever maintained another plan.]
1. Other Defined Contribution Plan. The Annual Additions
attributable to this Plan will be determined: [Check one.
See Section 7.2(d).]
a. [ x ] Standard: by treating the other plan as a
Master or Prototype Plan.
b. [ ] by using the method described in Addendum
XII.C.1.b.
2. Defined Benefit Plan. [Check and attach appropriate
addendum only if applicable. See Section 7.2(a)(3),
Section 7.2(a)(11), Section 7.2(e) and Section 12.3(g).]
[ x ] The Annual Additions attributable
to this Plan will be limited by using the method
described in Addendum XII.C.2.
XIII. Special Provisions for Amendment and Restatement of Pre-
Existing Plan, Mergers or Transfers.
A. Vesting or Distribution Rules. [Check and attach appropriate
description only if applicable. See Section 10.6, Section
14.1(b) and Section 14.5.]
[ ] The special vesting or distribution rules which
must be preserved under Code Section 411 are described in
Addendum XIII.A.
B. Normal Retirement Age. [Check only if the normal retirement
age under the Pre-Existing Plan was determined with reference
to the participation commencement date and the special
transitional rule in Section 2.43 is desired. See Section
2.43.]
[ ] The Normal Retirement Age of a Participant who
commenced participation in the Pre-Existing Plan in a
Plan Year beginning before 1988 will be determined
under the transitional rule described in Section 2.43.
C. Effective Dates. [Check and attach appropriate addendum only
if any of the selections made in this Adoption Agreement will
become effective as of a date other than the Effective Date
set forth in Part II.E. However, the addendum shall in no
event delay the effective date of any Plan provisions beyond
the latest effective date required for such provision under
TRA 86 or other applicable law or regulations.]
[ ] Certain elections in this Adoption Agreement shall
be effective as of the date(s) specified in Addendum XIII.C.
XIV. Trustee Appointment and Trust Agreement. [Check one. See
Section 2.66 and Section 2.68.]
A. [ x ] Standard Trust Agreement. The standard Trust
Agreement will apply and the Trustee will be the
following individual(s), bank(s) or other
person(s) who can serve as a fiduciary and trustee
under the laws of the State shown in Part II.C.
Smith Barney Corporate Trust Company
[If Smith Barney Shearson Trust Company
("SBSTC") is the Trustee, SBSTC will charge a fee and
may require the Employer to complete other documents
prior to accepting its appointment as Trustee.
Further, SBSTC will act only as a nondiscretionary
Trustee and the investment of the Fund will be made as
directed by the Plan Administrator or the Employer.
See Section 15 and the Trust Agreement.]
B. [ ] Alternate Trust Agreement. The alternate
Trust Agreement for 401(k) Plans will apply and the
Trustee will be , which is a
bank or trust company organized under the laws of the
State of
and which is authorized
to serve as a fiduciary and trustee under the laws of
such State.
[The trustee will charge a fee and will
require the Employer to complete other documents,
including execution of the alternate Trust Agreement,
prior to accepting its appointment as Trustee. Except
as described in the Trust Agreement, the Trustee will
act only as a nondiscretionary Trustee and will be
subject to the directions of the Plan Administrator as
a named fiduciary under the Plan in the control and
management of the assets of the Fund. Such directions
will be communicated to the Trustee by the Recordkeeper
as described in the Trust Agreement.]
XV. IRS Approval
This Plan is a "nonstandardized" plan and an adopting Employer
may not rely on the opinion letter issued to the Prototype
Sponsor by the National Office of the Internal Revenue Service as
evidence that this Plan is qualified under Code Section 401.
Any Employer who wishes to obtain reliance that this Plan as
adopted by the Employer is qualified must apply to the
appropriate Key District Office for a favorable determination
letter on this Plan.
Smith Barney Shearson will notify each adopting Employer of any
amendments that have been made to the Plan by Smith Barney
Shearson as Prototype Sponsor or of any intention to discontinue
or abandon its sponsorship of the Plan as a prototype plan.
SIGNATURES
Important:
In order to have a valid plan and trust, this Adoption
Agreement must be signed by individuals authorized to sign
for the Employer and, if applicable, the Trustee and each
Participating Affiliate. If the alternate Trust Agreement
is specified in Part XIV.B, the Trust Agreement must be
signed by the Employer, and Trustee and, if applicable, each
Participating Affiliate.
This Adoption Agreement will not become effective as a
prototype plan unless and until it is accepted by Smith
Barney Shearson as the Prototype Sponsor but, upon such
acceptance, will be effective as a prototype plan
retroactive to the Effective Date.
An Affiliate (i.e., member of a controlled group of
corporations, commonly controlled group of trades or
businesses, or an affiliated service group within the
meaning of Code Section 414) may adopt this Plan as a
Participating Affiliate.
Employer Representations. The undersigned hereby certifies that
the adoption of the Plan and the Trust Agreement is authorized by
(1) a Board of Directors' resolution for an Employer which is a
corporation, or (2) a written authorization by the person or
persons duly authorized to act on behalf of an Employer which is
not a corporation. If this Adoption Agreement amends and
restates a Pre-Existing Plan, the undersigned hereby certifies
that such amendment is duly authorized by the Employer. The
undersigned hereby acknowledges that the Prototype Sponsor (1) is
not responsible for the elections made in this Adoption
Agreement, (2) shall have no responsibility whatsoever with
respect to the Fund or the operation and administration of this
Plan, and (3) has advised the Employer to consult with legal
counsel for the Employer regarding the adoption and operation of
this Plan. The undersigned further acknowledges that the
Employer is solely responsible for the elections made in this
Adoption Agreement and for the operation and administration of
this Plan. Finally, the undersigned acknowledges that the
Prototype Sponsor will charge an annual prototype maintenance fee
and hereby authorizes the Prototype Sponsor to charge such fees
against any brokerage account maintained for the Plan.
Employer Execution. Subject to the terms and conditions of the
Plan, the Trust Agreement and this Adoption Agreement, the
undersigned hereby has executed this Adoption Agreement to
evidence its adoption (or, if applicable, amendment) of the Plan
and the Trust Agreement.
Signature: /s/David L. Omachinski
Title: CFO Date: September 24, 1996
Trustee Execution. Subject to the terms and conditions of the
Plan, the Trust Agreement and this Adoption Agreement, the
undersigned hereby accepts its appointment as Trustee and has
executed this Adoption Agreement to evidence its adoption of the
Trust Agreement. [Attach additional signature pages if there are
more than three Trustees. If the alternate Trust Agreement is
specified in Part XIV.B, the Trustee should execute the alternate
Trust Agreement in lieu of executing the Adoption Agreement in
this section.]
Signature: /s/Marianne Quinn, SBSTC Date: October 1, 1996
Signature: Date:
Signature: Date:
Participating Affiliates Execution. [Attach additional signature
pages if there are more than three Participating Affiliates. An
Affiliate which adopts this Plan after this Adoption Agreement is
executed should evidence its adoption of this Plan by executing
and attaching to this Adoption Agreement a signature page which
includes the information set forth below.]
Subject to the terms and conditions of the Plan, the Trust
Agreement and this Adoption Agreement, the undersigned hereby has
executed this Adoption Agreement to evidence its adoption (or, if
applicable, amendment) of the Plan and the Trust Agreement.
Affiliate Name:
Signature: Date:
Effective Date of Adoption of Plan by Affiliate (if different
from the Effective Date in Part II.E.):
Affiliate Name:
Signature: Date:
Effective Date of Adoption of Plan by Affiliate (if different
from the Effective Date in Part II.E.):
Affiliate Name:
Signature: Date:
Effective Date of Adoption of Plan by Affiliate (if different
from the Effective Date in Part II.E.):
Prototype Sponsor Acceptance. Subject to the terms and
conditions of the Plan, the Trust Agreement and this Adoption
Agreement, this Adoption Agreement is accepted by the Prototype
Sponsor.
Authorized Signature: /s/M. Quinn Date: October 1, 1996
Smith Barney
Prototype Defined Contribution
Plan Document #05
TABLE OF CONTENTS
Page
Part 1. Defined Contribution Plan Document # 05
Section 1 Introduction and Construction 1
Section 2. Definitions 1
Section 3. Service Definitions and Rules 6
Section 4. Participation 8
Section 5. Contributions 9
Section 6. Allocations to Accounts 13
Section 7. Statutory Limitations on Allocations 14
Section 8. Vesting and Forfeitures 21
Section 9. Account Distribution - General Rules 22
Section 10. Benefit Payment Forms - Joint and
Survivor Annuity Requirements 24
Section 11. Minimum Distribution Requirements 27
Section 12. Top-Heavy Plan Rules 29
Section 13. Insurance, Individually Directed
Investments and Participant Loans 31
Section 14. Adoption, Amendment, Withdrawal &
Conversion, Merger, Asset Transfers and
Termination 33
Section 15. Administration 35
Section 16. Miscellaneous 35
Appendix One to the Smith Barney
Prototype Defined Contribution Plan 36
SMITH BARNEY
DEFINED CONTRIBUTION PLAN
DOCUMENT #05
SECTION 1. INTRODUCTION AND CONSTRUCTION
1.1 Introduction. This Smith Barney Prototype Defined
Contribution Plan is established and maintained as a prototype
plan by the Prototype Sponsor for its customers and the customers
of its subsidiaries and affiliates. This Plan shall be adopted as
a prototype plan only with the consent of the Prototype Sponsor
or one of its subsidiaries or affiliates as set forth in the
related Adoption Agreements and shall be maintained as a
prototype plan only in accordance with the terms and conditions
set forth in this Plan.
1.2 Controlling Laws. To the extent such laws are not
preempted by federal law, this Plan and the related Adoption
Agreement and Trust Agreement shall be construed and interpreted
under the laws of the state specified in the Adoption Agreement;
provided, if Smith Barney Corporate Trust Company has been
appointed as Trustee, the Trust Agreement shall be governed by
and construed in accordance with the laws of the State of
Delaware.
1.3 Construction. The headings and subheadings in this Plan
have been inserted for convenience of reference only and are to
be ignored in the construction of its provisions. Wherever
appropriate, the masculine shall be read as the feminine, the
plural as the singular, and the singular as the plural.
References in this Plan to a section shall be to a section in
this Plan unless otherwise indicated. References in this Plan to
a section of the Code, ERISA or any other federal law shall also
refer to the regulations issued under such section. Unless an
alternative option is specified in the Adoption Agreement, the
option identified as the "Standard Option" will control.
The Employer intends that this Plan and the related Trust
Agreement and Adoption Agreement which are part of this Plan
satisfy the requirements for tax exempt status under Code section
401(a), Code section 501(a)and related Code sections and that the
provisions of this Plan, the Trust Agreement and the Adoption
Agreement be construed and interpreted in accordance with the
requirements of the Code and the regulations under the Code.
Further, except as expressly stated otherwise, no provision of
this Plan or the related Trust Agreement or Adoption Agreement is
intended to nor shall grant any rights to Participants or
Beneficiaries or any interest in the Fund in addition to those
minimum rights or interests required to be provided under ERISA
and the Code and the regulations under ERISA and the Code.
Nothing in this Plan or the related Trust Agreement or Adoption
Agreement shall be construed to prohibit the adoption or the
maintenance of this Plan or the Trust Agreement as an
individually designed plan or as a trust agreement which is part
of an individually designed plan, but in such event, the Employer
may not rely on the opinion letter issued to the Prototype
Sponsor and the Prototype Sponsor shall have absolutely no
responsibility for such individually designed plan.
Finally, in the event of any conflict between the terms of this
Plan and the terms of the Trust Agreement or the Adoption
Agreement, the terms of this Plan shall control.
1.4 TRA 86 Amendments. If this Plan is adopted as an
amendment to a Pre-Existing Plan in order to satisfy the
requirements of TRA 86, the retroactive effective date of any
provision required under TRA 86 is intended solely to comply with
the Code and is not intended to grant any substantive rights
under ERISA to the extent that such provision is different from
the Pre-Existing Plan as in effect between the applicable
effective date of TRA 86 and the effective date in the final
regulations ("transition years").
SECTION 2. DEFINITIONS
The capitalized terms in this Plan and the related Adoption
Agreement and Trust Agreement shall have the meanings shown
opposite those terms in this section 2 and in section 3 for
purposes of this Plan.
2.1 Account - means the bookkeeping account maintained under
this Plan to show as of any Valuation Date a Participant's
interest in the Fund attributable to the contributions made by or
on behalf of such Participant and the Fund Earnings on such
contributions, and an Account shall cease to exist when exhausted
through forfeiture or distributions made in accordance with this
Plan.
2.2 Active Participant - means for purposes of eligibility to
receive an allocation of the Employer Contribution or Forfeitures
for each Plan Year, each Participant who is an Eligible Employee
at any time during the Plan Year and who satisfies the following
conditions:
2.2(a) Standard Option.
2.2(a)(1) Standardized Plans. If this Plan is adopted as a
standardized Plan, such Participant (i) is employed as an
Eligible Employee (or on an authorized leave of absence as an
Eligible Employee) on the last day of such Plan Year, (ii)
terminated employment as an Eligible Employee during such Plan
Year on or after Normal Retirement Age or Early Retirement Age or
by reason of death or Disability, or (iii) such Participant is
not employed on the last day of such Plan Year but completed more
than 500 Hours of Service during such Plan Year (or the
equivalent period described in section 2.2(d) if the "Elapsed
Time" method is specified in the Adoption Agreement).
Notwithstanding the foregoing, if the "Hours of Service" method
is specified in the Adoption Agreement for a Plan Year beginning
before the Final Compliance Date, section 2.2(a)(1)(iii) shall
not apply and a Participant who satisfies the requirements of
section 2.2(a)(1)(i) shall not be eligible to receive an
allocation of the Employer Contribution or Forfeitures for such
Plan Year unless such Participant also is credited with at least
1,000 Hours of Service in such Plan Year.
2.2(a)(2) Nonstandardized Plans. If this Plan is adopted as
a nonstandardized Plan, such Participant (i) is employed as an
Eligible Employee (or on an authorized leave of absence as an
Eligible Employee) on the last day of such Plan Year and, if the
"Hours of Service" method is specified in the Adoption Agreement,
is credited with at least 1,000 Hours of Service in such Plan
Year, or (ii) terminated employment as an Eligible Employee
during such Plan Year on or after Normal Retirement Age or Early
Retirement Age or by reason of death or Disability.
2.2(b) Alternative. Such Participant satisfies the alternative
conditions specified in the Adoption Agreement.
2.2(c) Minimum Coverage Requirement. If this Plan is adopted as a
nonstandardized Plan and fails to satisfy the minimum coverage
and participation requirements of Code section 401(a)(26) and
section 410(b)for any Plan Year beginning on and after the Final
Compliance Date as a result of the application of the minimum
hours or last day employment requirements in this section 2.2,
such minimum participation and coverage requirements shall be
retroactively amended by executing a new Adoption Agreement
within the applicable retroactive correction period in the
regulations or, if no such amendment is made, shall be satisfied
as follows:
2.2(c)(1) If the Plan utilizes both the minimum hours and
last day employment requirements:
(i) Step 1 - Each Participant who completes at least
1,000 Hours of Service without regard to whether such Participant
is employed on the last day of the Plan Year shall be deemed to
be an Active Participant for such Plan Year.
(ii) Step 2 - If the minimum participation and coverage
requirements are not satisfied after the application of Step 1,
then each Participant who completes more than 500 Hours of
Service and who is employed on the last day of the Plan Year
shall be deemed to be an Active Participant for such Plan Year.
(iii) Step 3 - If the minimum participation and coverage
requirements are not satisfied after the application of Step 1
and Step 2, then each Participant who is not employed on the last
day of the Plan Year but who completed more than 500 Hours of
Service in such Plan Year also shall be deemed to be an Active
Participant.
(iv) Step 4 - If the minimum participation and coverage
requirements are not satisfied after the application of Steps 1
through 3, then each Participant who satisfies the last day of
employment requirement also shall be deemed to be an active
participant without regard to the number of Hours of Service
actually completed by such Participant during such Plan Year.
2.2(c)(2) If the Plan utilizes only the last day employment
requirement, each Participant who is not employed on the last day
of the Plan Year but who completed more than 500 Hours of Service
in such Plan Year (or the equivalent period described in section
2.2(d) if the "Elapsed Time" method is specified in the Adoption
Agreement) also shall be deemed to be an Active Participant.
2.2 (c) (3)If the Plan utilizes only the minimum hours
requirement:
(i) Step 1 - Each Participant who completes more than 500
Hours of Service without regard to whether such Participant is
employed on the last day of the Plan Year shall be deemed to be
an Active Participant.
(ii) Step 2 - If the minimum participation and coverage
requirements are not satisfied after the application of Step 1,
then each Participant who is employed on the last day of the Plan
Year shall be deemed to be an Active Participant.
2.2(d) Special Elapsed Time Equivalency Rule. If the "Elapsed
Time" method is specified in the Adoption Agreement, a
Participant shall be treated as completing more than 500 Hours of
Service during such Plan Year for purposes of this section 2.2
if, during such Plan year, the Participant completes more than
(A) Standard Option - 91 consecutive calendar days of
employment, or
(B) Alternative - if so specified in the Adoption
Agreement, 3 consecutive calendar months of employment.
2.3 Adoption Agreement - means the agreement by which the
Employer adopted this Plan.
2.4 Affiliate - means at any time (a) any parent, subsidiary
or sister corporation which at such time is a member of a
controlled group of corporations (as defined in Code section
414(b)) with the Employer, (b) any trade or business, whether or
not incorporated, which at such time is considered to be under
common control (as defined in Code section 414(c)) with the
Employer, (c) any person or organization which at such time is a
member of an affiliated service group (as defined in Code section
414(m)) with the Employer, and (d) any other organization which
at such time is required to be aggregated with the Employer under
Code section 414(o).
2.5 Allocation Date - means for a 401(k) Plan the respective
dates specified in the Adoption Agreement as of which Matching
Contributions, Qualified Matching Contributions and Qualified
Nonelective Contributions, as applicable, are made.
2.6 Average Annual Compensation - means for a Target Benefit
Plan the average of an Employee's Compensation for the
consecutive Plan Year period specified in the Adoption Agreement
during which such average is the highest, or if such Employee's
entire period of participation in the Plan is less than the
number of Plan Years so specified, the Employee's Average Annual
Compensation shall be determined by averaging (on an annual
basis) the Employee's Compensation for his or her actual period
of participation. For purposes of determining a Participant's
Average Annual Compensation for any Plan Year beginning after the
Final Compliance Date, the annual Compensation taken into account
for any prior Plan Year shall not exceed (a) for Plan Years
beginning before January 1, 1990, $200,000 and (b) for Plan Years
beginning on or after January 1, 1990, the annual Compensation
limit described in section 2.1 O(e) in effect for such prior Plan
Year.
2.7 Beneficiary - means for each Participant the person or
persons so designated in writing by the Participant on a properly
completed Election Form. However, if no such designation is made,
if no person so designated survives the Participant, or if after
checking the last known mailing address the whereabouts of the
person so designated is unknown and no death benefit claim is
submitted to the Plan Administrator by such person within one
year after the Participant's date of death, the Beneficiary shall
be deemed to be (a) the Participant's surviving Spouse, or if
there is no surviving Spouse, (b) the personal representative of
such Participant in his or her fiduciary capacity, if any has
qualified within one year from the date of the Participant's
death, or if no personal representative has so qualified or
remains so qualified, (c) any person determined by a court of
competent jurisdiction to be the Participant's Beneficiary for
this purpose. If a Beneficiary is not identified and located
within 3 years of the Participant's date of death, section 9.6,
Missing Person, shall control the distribution of the
Participant's Account.
2.8 Board - means (a) for any Employer which is a
corporation, the Board of Directors of such Employer and (b) for
any Employer which is not a corporation, the person or persons
duly authorized to act on behalf of such Employer.
2.9 Code - means the Internal Revenue Code, as amended.
2.10 Compensation.
2.1 0(a) Common Law Employees. For an Employee who is not a
Self-Employed Individual or a Leased Employee, the term
"Compensation" means for any determination period
2.10(a)(1) Standard Option - the total compensation which is
actually paid (in cash or other benefits) by the Employer or any
Participating Affiliate to such Employee for such period and
which is reportable to the Internal Revenue Service on Form W-2
as wages within the meaning of Code section 3401(a) and all other
payments of compensation to such Employee from the Employer or
Participating Affiliate (in the course of its trade or business)
for which a written statement is required to be furnished to the
Employee under Code section 6041(d), Code section 6051 (a)(3) and
Code section 6052. Such Compensation shall be determined without
regard to any rules under Code section 3401 (a) that limit the
remuneration included in wages based on the nature or location of
the employment or the services performed (such as the exception
for agricultural labor in Code section 3401 (a)(2)), or
2.10(a)(2) Alternative - if so specified in the Adoption
Agreement, the total compensation which is actually paid (in cash
or other benefits) by the Employer or any Participating Affiliate
to such Employee for such period and which is
(i) considered as wages within the meaning of Code
section 3401(a) for the purposes of federal income tax
withholding at the source but determined without regard to any
rules under Code section 3401(a) that limit the remuneration
included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Code section 3401(a)(2)),
(ii) considered as compensation within the meaning of
Code section 415(c)(3) as described in section 7.2(a)(2)(ii)(B),
(iii) for a nonintegrated nonstandardized Plan (other
than a Target Benefit Pension Plan), compensation identified on
the payroll records of the Employer or Participating Affiliate as
regular or base salary or wages (whether hourly, weekly, monthly,
annually or otherwise) and, if so specified in the Adoption
Agreement, overtime, bonuses, commissions, and/or other specific
compensation, or
(iv) compensation as described in section 2.10(a)(1),
section 2.10(a)(2)(i) or section 2.10(a)(2)(ii), reduced by all
of the following items (even if includable in gross income):
reimbursements or other expense allowances, fringe benefits (cash
and noncash), moving expenses, deferred compensation and welfare
benefits, or
2.10(b) Self-Employed. For an Employee who is a Self-Employed
Individual, the term "Compensation" means the Employee's Earned
Income for such period.
2.10(c) Leased Employees. All compensation paid by a leasing
organization to a Leased Employee for personal services rendered
to the Employer or a Participating Affiliate for such period
shall be treated as Compensation to the extent required under
Code section 414(n).
2.10(d) Determination Period. For purposes of this definition and
unless otherwise specified in this Plan or the Adoption
Agreement, the phrase "determination period" means
2.1 0(d)(1) Standard Option - the Plan Year or
2.10(d)(2) Alternative - the calendar year or other 12
consecutive month period ending with or within the Plan Year
specified in the Adoption Agreement.
2.10(e) Limitation. No more than $200,000 (as adjusted in
accordance with Code section 401(a)(17)) shall be taken into
account under this Plan for any determination period beginning on
or after January 1, 1989. The annual Compensation limit under
this section 2.10(e) for any determination period shall be
adjusted in accordance with Code section 401(a)(17) for the
calendar year in which such determination period begins.
If the determination period is less than 12 months as a result of
a short Plan Year, the annual Compensation limit under this
section 2.10(e) shall equal the annual limit for such
determination period multiplied by a fraction, the numerator of
which is the number of full months in such period and the
denominator of which is 12.
For purposes of this Compensation limit, the family aggregation
rules of Code section 414(q)(6) shall be applied by aggregating
only the Participant's spouse and lineal descendants who have not
reached age 19 before the end of such determination period. If
the limit is exceeded for any determination period as a result of
the application of the family aggregation rule, the limit shall
be prorated among the individuals affected by this limit in
proportion to each such individual's Compensation for such
determination period as determined under this section 2.10 before
the application of this section 2.10(e).
However, if this Plan is adopted as an integrated plan, the
preceding sentence shall not apply for purposes of determining
the portion of compensation which does not exceed the Integration
Level.
2.10(f) Salary Reductions. Any amount which is contributed by the
Employer or any Participating Affiliate pursuant to a salary
reduction agreement which is not currently includable in an
Employee's gross income under Code section 125, section
402(e)(3), section 402(h) or section 403(b)
2.10(f)(1) Standard Option - shall be included in an Employee's
Compensation, or
2.10(f)(2) Alternative - if so specified in the Adoption
Agreement, shall not be included in an Employee's Compensation.
2.10(g) Special Rules.
2.10(g)(1) If so specified in the Adoption Agreement, an
Employee's Compensation shall not include Compensation which is
paid to the Employee for periods ending before the Entry Date on
which the Employee becomes a Participant.
2.10(g)(2) If this Plan is adopted as an amendment and
restatement of a Pre-Existing Plan, this definition shall be
effective for Plan Years beginning on or after January 1, 1989
unless a later effective date is specified in the Adoption
Agreement; provided, the $200,000 limitation of section 2.10(e)
shall not be effective later than the first day of the first Plan
Year beginning on or after January 1, 1989 and any such later
effective date specified in the Adoption Agreement for the other,
provisions of this section 2.10 shall not be later than the Final
Compliance Date.
2.10(g)(3) If so specified in the Adoption Agreement for a
nonstandardized Plan, a Participant's Compensation in excess of
the dollar amount or percentage specified in the Adoption
Agreement shall not be taken into account for purposes of
determining the amount or allocation of any contributions made by
or on behalf of such Participant under this Plan.
2.10(g)(4) If so specified in the Adoption Agreement for a
nonstandardized Plan, the Compensation of a Participant who is a
Highly Compensated Employee shall not include the specific types
of Compensation specified in the Adoption Agreement.
2.11 Covered Compensation - means for each Participant for
each Plan Year beginning on or after January 1, 1989, the average
(without indexing) of the Taxable Wage Bases in effect under the
Social Security Act for each calendar year during the 35-year
period ending with the last day of the calendar year in which the
Participant attains (or will attain) Social Security Retirement
Age, determined by assuming that the Taxable Wage Base for all
future years shall be the same as the Taxable Wage Base in effect
as of the beginning of such Plan Year.
A Participant's Covered Compensation for a Plan Year beginning
before the 35-year period ending with the last day of the
calendar year in which the Participant attains Social Security
Retirement Age is the Taxable Wage Base in effect as of the
beginning of the Plan Year. A Participant's Covered Compensation
for a Plan Year beginning after such 35-year period is the
Participant's Covered Compensation for the Plan Year during which
the 35-year period ends.
However, a Participant's Covered Compensation shall automatically
be adjusted each Plan Year and any increase in a Participant's
Covered Compensation shall not result in a decrease in the
Participant's accrued benefit which would be impermissible under
Code section 411(b)(1)(G) or section 411(d)(6).
For purposes of this section 2.11, Social Security Retirement Age
means (a) age 65 in the case of a Participant who was born before
January 1, 1938, (b) age 66 for a Participant who was born after
December 31, 1937, but before January 1, 1955, and (c) age 67 for
a Participant who was born after December 31, 1954.
2.12 Disability or Disabled - means an individual's inability
to engage in any substantially gainful activity at the
individual's customary level of compensation or competence and
responsibility as an Employee due to any medically determinable
physical or mental impairment or impairments which may be
expected to result in death or to last for a continuous period of
at least 12 months as determined by a qualified physician or
other medical practitioner selected by the Plan Administrator for
this purpose in accordance with uniform and nondiscriminatory
standards.
2.13 Early Retirement Age - means
2.13(a) Standard Option - the Normal Retirement Age or
2.13(b) Alternative - the alternative Early Retirement Age
specified in the Adoption Agreement.
2.14 Earned Income - means for any Self-Employed Individual
for any period the net earnings from self-employment (as defined
in Code section 1402(a)) for such period from the Employer or any
Participating Affiliate for which the personal services of such
Employee are a material income-producing factor, where such net
earnings are (a) determined without regard to items not included
in gross income for purposes of Chapter 1 of the Code and the
deductions properly attributable to such items, (b) determined
with regard to the deduction allowed to the Self-Employed
Individual under Code section 164(f) for taxable years beginning
after December 31, 1989, and (c) reduced by the contributions
made on behalf of such Employee to any qualified plan (as
described in Code 4401 (a)) maintained by the Employer or any
Participating Affiliate to the extent such contributions are
deductible under Code section 404.
2.15 Effective Date - means the effective date of the
Employer's adoption or amendment of this Plan as specified in the
Adoption Agreement. However, if this Plan is adopted as an
amendment and restatement of a Pre-Existing Plan, certain
provisions of this Plan may be effective retroactive to Plan
Years beginning before such Effective Date or may be effective at
a date later than such Effective Date as specified in this Plan
document or in the Adoption Agreement.
2.16 Election Form - means the form or forms provided by or
acceptable to the Plan Administrator for making the elections and
designations called for under this Plan and no such form shall
become effective unless properly completed and timely delivered
to the Plan Administrator in accordance with the terms of this
Plan and such rules as the Plan Administrator shall adopt from
time to time.
2.17 Elective Deferral - means the nonforfeitable
contribution made to the Fund by the Employer or a Participating
Affiliate on a Participant's behalf under section 5.3(f).
2.18 Elective Deferral Account - means the subaccount
established as part of a Participant's Account to record the
Participant's Elective Deferrals and the Fund Earnings
attributable to such contributions,
2.19 Eligible Employee - means
2.19(a) Standard Option - each Employee of the Employer or a
Participating Affiliate other than
2.19(a)(1) an Employee who is included in a unit of
employees covered by a collective bargaining agreement between
the Employer and employee representatives which agreement does
not provide for participation in this Plan if retirement benefits
under this Plan were the subject of good faith bargaining;
provided, however, that
(i) the term "employee representatives" shall not
include an organization more than half of whose members are
employees who are owners, officers or executives of the Employer,
and
(ii) an Employee shall not be treated as covered under a
collective bargaining agreement if more than 2% of the Employees
covered under such agreement are "professionals" (as defined in
section 1.410(b)-9(g) of the Federal Income Tax Regulations); and
2.19(a)(2) an Employee who is a nonresident alien (within
the meaning of Code section 7701(b)(1)(B) and who receives no
earned income (within the meaning of Code section 911(d)(2)) from
the Employer or any Participating Affiliate which constitutes
income from sources within the United States (within the meaning
of Code section 861(a)(3)).
2.19(b) Alternative - If this Plan is adopted as a
nonstandardized Plan, the Employer may specify in the Adoption
Agreement a category of Employees who shall not be treated as
Eligible Employees under this Plan. However, the Plan must
satisfy on a continuing basis the nondiscrimination rules under
Code section 401(a)(4), the coverage rules under Code section
410(b), and the minimum participation rules under Code section
401(a)(26).
2.20 Employee - means each person who is treated as an
employee of the Employer or an Affiliate which is required to be
aggregated with the Employer under Code section 414(b), section
414(c), section 414(m) or section 414(o) including (a) a common-
law employee (whether full-time, part-time, regular, temporary or
otherwise), (b) a Self-Employed Individual, (c) an Owner-
Employee, (d) a Leased Employee and (e) each person who is deemed
to be an employee under Code section 414(o).
2.21 Employee Account - means the subaccount established as
part of a Participant's Account to record (1) the Participant's
Employee Contributions under this Plan, (2) the Participant's
nondeductible employee contributions, if any, under a Pre-
Existing Plan or a plan which is merged into this Plan under
section 14.5, and (3) the Fund Earnings attributable to such
contributions. It a separate account was not maintained for
contributions under other plans as described in clause (2) above,
the account balance attributable to such contributions shall be
the Participant's total account balance under such other plans
multiplied by a fraction, the numerator of which is the total
amount of the Participant's nondeductible employee contributions
(less withdrawals) and the denominator of which is the sum of the
numerator and the total contributions made by the Employer on
behalf of the Participant (less withdrawals). For purposes of
calculating such fraction, contributed amounts used to provide
ancillary benefits shall be treated as contributions and only
amounts actually distributed to the Participant (but not amounts
which reflect the cost of any death benefits) shall be treated as
withdrawals.
2.22 Employee Contribution - means any contribution made by
or on behalf of a Participant to the Fund under section 5.3(g)
that is includable in the Participant's gross income for the year
in which made.
2.23 Employer - means the sole proprietorship, partnership or
corporation identified as the Employer in the Adoption Agreement
and any successor in interest to such organization.
2.24 Employer Account - means the subaccount established as
part of a Participant's Account to record the Participant's share
of the Employer Contributions and Forfeitures and the Fund
Earnings attributable to such amounts.
2.25 Employer Contribution - means the contributions made by
the Employer and by any Participating Affiliate to the Fund under
section 5.1, section 5.2, section 5.3(e) or section 5.4.
2.26 Entry Date - means
2.26(a) Standard Option - the first day of each Plan Year
and the first day of the 7th month in each Plan Year or
2.26(b) Alternative - the alternative Entry Date specified
in the Adoption Agreement.
2.27 ERISA - means the Employee Retirement Income Security Act of
1974, as amended.
2.28 Family Members - means for any year, with respect to a
Highly Compensated Employee who is a 5% owner or who is in the
group consisting of the 10 Highly Compensated Employees paid the
greatest Compensation during such year, (a) such individual's
spouse, (b) such individual's lineal ascendants and lineal
descendants and (c) the spouses of such lineal ascendants or
descendants as determined under Code section 414(q)(6).
2.29 Final Compliance Date - means the first day of the first
Plan Year beginning after December 31, 1993 or such other
applicable effective date of the final nondiscrimination and
other TRA 86 regulations.
2.30 Forfeiture - means the portion of an Account of a
Participant which is deducted from such Account in accordance
with the terms of this Plan.
2.31 401(k) Plan - means this Plan as adopted by entering
into the Standardized 401(k) Plan Adoption Agreement or the
Nonstandardized 401(k) Plan Adoption Agreement.
2.32 Fund - means the trust fund created in accordance with
this Plan and the Trust Agreement which is a part of this Plan.
2.33 Fund Earnings - means for each period ending on a
Valuation Date the investment gains and losses (whether realized
or unrealized), income and expenses (other than expenses
allocable directly to a specific Account) of the Fund for such
period as determined based on the fair market value of the assets
of the Fund on such Valuation Date.
2.34 Highly Compensated Employee - means a highly compensated
employee within the meaning of Code section 414(q) (as described
in section 7.4(a)(5)).
2.35 Integration Level - means the amount of Compensation
specified in the Adoption Agreement at or below which the rate of
contributions or benefits (expressed as a percentage of such
Compensation) provided under the Plan is less than the rate of
contributions or benefits (expressed as a percentage of such
Compensation) provided under the Plan with respect to
Compensation above such amount. The Integration Level for any
Plan Year shall not exceed the Taxable Wage Base in effect at the
beginning of such Plan Year.
2.36 Leased Employee - means for each Plan Year beginning on
or after January 1, 1987 each person who is not a common-law
employee of the Employer or an Affiliate, but who, pursuant to an
agreement between the Employer or an Affiliate ("recipient") and
any other person ("leasing organization"), has performed services
for the recipient or the recipient and a related person (as
determined in accordance with Code section 414(n)(6)) on a
substantially full-time basis for a period of at least one year,
which services are of a type historically performed by employees
in the business field of the recipient or related person for whom
such services are being performed. However, subject to the rules
set forth in the regulations under Code section 414(n), such
person shall not be treated as a Leased Employee it (a) the total
number of such persons does not constitute more than 20% of the
total nonhighly compensated work force of the recipient and (b)
such person is covered by a money purchase pension plan which is
maintained by the leasing organization and which provides for (1)
a nonintegrated employer contribution rate of at least 10% of
compensation (as defined in Code section 415(c)(3) but including
amounts contributed pursuant to a salary reduction agreement
which are excludable from the individual's gross income under
Code section 125, section 402(e)(3), section 402(h) or section
403(b)), (2) immediate participation and (3) full and immediate
vesting.
2.37 Matching Account - means the subaccount established as
part of a Participant's Account to record the Matching
Contributions made on the Participant's behalf under this Plan
and the Fund Earnings attributable to such contributions.
2.38 Matching Contribution - means the contribution made by
the Employer and by any Participating Affiliate to the Fund under
section 5.3(b) by reason of a Participant's Elective Deferrals or
Employee Contributions.
2.39 Maximum Disparity Rate - means
2.39(a) Standard Option - if the Integration Level is equal to
the Taxable Wage Base, the greater of 5.7% or the portion of the
tax rate under Code section 3111(a) which is attributable to old-
age insurance as in effect on the first day of such Plan Year,
and
2.39(b) Alternative - if the Integration Level is less than the
Taxable Wage Base, the applicable percentage determined in
accordance with the following table, where
X = the greater of $10,000 or 20% of the Taxable Wage Base
TWB = the Taxable Wage Base
If the Integration Level:
Is More Than But Not More Than Applicable Percentage
$0 X 5.7%
X 80% of TWB 4.3%
80% of TWB 100% of TWB 5.4%
or, if the portion of the tax rate under Code 3111(a) which is
attributable to old-age insurance as in effect on the first day
of such Plan Year is greater than 5.7%, the applicable percentage
in the table above shall be such portion of the tax rate,
proportionately reduced in the same manner as the 5.7% amount in
the table above.
2.40 Money Purchase Pension Plan - means this Plan as adopted
by entering into the Standardized Money Purchase Pension Plan
Adoption Agreement or the Nonstandardized Money Purchase Pension
Plan Adoption Agreement.
2.41 Net Profits -
2.41(a) Standard Option. The term "Net Profits" means
2.41(a)(1) for an Employer or Participating Affiliate other than
a non-profit entity, the current or accumulated earnings for the
taxable year for which the Employer contribution is made as
determined before federal and state taxes and contributions to
this Plan or any other qualified plan, or
2.41(a)(2) for an Employer or Participating Affiliate which is a
non-profit entity, the current or accumulated excess of receipts
over disbursements for the fiscal year for which the Employer
contribution is made.
2.41(b) Alternative. The Employer may specify in an alternative
definition of Net Profits in the Adoption Agreement.
2.42 Nonhighly Compensated Employee - means each Employee who
is neither a Highly Compensated Employee nor a Family Member.
2.43 Normal Retirement Age -
2.43(a) General. The term "Normal Retirement Age" means
2.43(a)(1) Standard Option - age 65 or
2.43(a)(2) Alternative - the alternative Normal Retirement Age
specified in the Adoption Agreement.
2.43(b) Special Rules.
2.43(b)(1) Mandatory Retirement Age. If, consistent with
applicable age discrimination law, the Employer enforces a
mandatory retirement age, the Normal Retirement Age shall be the
earlier of (1) the date the Participant reaches such mandatory
retirement age or (2) the date the Participant reaches age 65 or,
if an alternative is specified in the Adoption Agreement, the
date the Participant reaches Normal Retirement Age as specified
in the Adoption Agreement.
2.43(b)(2) Transitional Rule. If
(i) the normal retirement age under the terms of the Pre-
Existing Plan as in effect for Plan Years beginning before
January 1, 1988 was determined with reference to an anniversary
of the date on which a Participant commenced participation in
such plan ("participation commencement date"),
(ii) such anniversary was later than the 5th anniversary of
the participation commencement date,
(iii) the Normal Retirement Age specified in the Adoption
Agreement is determined with reference to an anniversary of the
participation commencement date, and
(iv) this transitional rule is specified in the Adoption
Agreement,
then the anniversary for any Participant whose participation
commencement date occurred in a Plan Year beginning before
January 1, 1988 shall be the earlier of (A) the anniversary under
the terms of the Pre-Existing Plan, or (B) the 5th anniversary of
the first day of the first Plan Year beginning after December 31,
1987.
2.44 Owner-Employee - means each Self-Employed Individual
who is (a) a sole proprietor of the Employer or a Participating
Affiliate or (b) a partner owning more than 10% of either the
capital or profits interest of the Employer or a Participating
Affiliate.
2.45 Paired Plans - means (a) a combination of two or more
standardized defined contribution Plans under this Smith Barney
Prototype Defined Contribution Plan (Plan Document #05) or (b) a
combination of one or more such standardized defined contribution
Plans with a standardized defined benefit plan under the Smith
Barney Prototype Defined Benefit Plan (Plan Document #06).
However, such Plans shall be treated as Paired Plans only if (1)
such Paired Plans have the same Plan Year, and (2) no more than
one such plan is integrated with social security.
2.46 Participant - means (a) an Eligible Employee who has
satisfied the Participation Requirement specified in the Adoption
Agreement and has become a Participant in accordance with 4, and
(b) any individual for whom an Account continues to exist under
the Plan.
2.47 Participating Affiliate - means (a) if this Plan is a
standardized Plan, each Affiliate of the Employer or (b) if this
Plan is a nonstandardized Plan, each Affiliate which participates
in this Plan, as set forth in section l4.1(c) of the Plan;
provided, an Affiliate automatically shall cease to be a
Participating Affiliate it, and at the time, it ceases to be an
Affiliate as set forth in section 14.6(a).
2.48 Participation Requirement - means
2.48(a) Standard Option - attainment of age 21 and
completion of a waiting period equal to one Year of Service or
2.48(b) Alternative - the alternative minimum age and
waiting period requirement specified in the Adoption Agreement.
2.49 Plan - means this Smith Barney Prototype Defined
Contribution Plan, as adopted by the Employer in the form of a
Profit Sharing Plan, a 401(k) Plan, a Money Purchase Pension Plan
or a Target Benefit Pension Plan, and as amended from time to
time in accordance with section 14.2.
2.50 Plan Administrator -means
2.50(a) Standard Option - the Employer or
2.50(b) Alternative - the person or persons designated in
writing by the Employer as the Plan Administrator for this Plan.
2.51 Plan Year - means the 12 consecutive month period or the
52/53 week period which ends on the date specified in the
Adoption Agreement; provided, however, if this Plan is adopted as
a new Plan, the first Plan Year shall be the period beginning on
the Effective Date and ending on the date specified in the
Adoption Agreement.
2.52 Pre-Existing Plan - means the Employer's prior defined
contribution plan and the related trust agreement or other
funding arrangement which is described in the Adoption Agreement
and which is amended and restated in the form of this Plan.
2.53 Profit Sharing Plan - means this Plan as adopted by
entering into the Standardized Profit Sharing Plan Adoption
Agreement or the Nonstandardized Profit Sharing Plan Adoption
Agreement.
2.54 Prototype Sponsor - means Smith Barney Inc. and any
successor to such corporation.
2.55 Qualified Matching Contribution - means the contribution
made by the Employer and by any Participating Affiliate to the
Fund under section 5.3(c) by reason of a Participant's Elective
Deferrals or Employee Contributions.
2.56 Qualified Matching Account - means the subaccount
established as part of a Participant's Account to record the
Qualified Matching Contributions made on the Participant's behalf
under this Plan and the Fund Earnings attributable to such
contributions.
2.57 Qualified Nonelective Contribution - means the
contribution (other than Matching Contributions, Qualified
Matching Contributions and Employer Contributions) made by the
Employer and by any Participating Affiliate to the Fund under
section 5.3(d).
2.58 Qualified Nonelective Account - means the subaccount
established as part of a Participant's Account to record the
Qualified Nonelective Contributions made on the Participant's
behalf under this Plan and the Fund Earnings attributable to such
contributions.
2.59 Rollover Account - means the subaccount established as
part of a Participant's Account to record the Participant's
Rollover Contributions and the Fund Earnings attributable to such
contributions.
2.60 Rollover Contribution - means (a) a contribution of an
amount, or more than one amount, which satisfies the applicable
rollover requirements under Code section 402 or Code section 408
made by a Participant to the Fund under section 5.5 and (b)
effective January 1, 1993, an eligible rollover distribution
which is directly transferred to the Fund on or after such date
pursuant to a Participant's election under Code section 401
(a)(31).
2.61 Self-Employed Individual - means an individual who is
self-employed and who receives Earned Income from the Employer or
a Participating Affiliate or who would have received such Earned
Income but for the fact that the Employer or the Participating
Affiliate did not have Net Profits.
2.62 Spouse - means the person who is lawfully married to the
Participant on the date the Participant's Account becomes payable
under this Plan or, if a Participant dies before such date, the
person who was lawfully married to such Participant on the
Participant's date of death. However, a former spouse shall be
treated as the Spouse and a current spouse shall not be treated
as the Spouse to the extent provided under a qualified domestic
relations order as described in Code section 414(p).
2.63 Target Benefit Pension Plan - means this Plan as adopted
by entering into the Standardized Target Benefit Pension Plan
Adoption Agreement or the Nonstandardized Target Benefit Pension
Plan Adoption Agreement.
2.64 Taxable Wage Base - means for any Plan Year the
contribution and benefit base in effect under section 230 of the
Social Security Act at the beginning of such Plan Year.
2.65 TRA 86 - means the Tax Reform Act of 1986 ("Act") and
any other legislation and related regulations, notices or other
guidance for which amendments are required to be made at the same
time as amendments for such Act.
2.66 Trust Agreement - means the trust agreement between the
Employer and the Trustee which is established as part of this
Plan and which is set forth in the attached Smith Barney
Prototype Defined Contribution Plan Trust Agreement or, if so
specified in the Adoption Agreement for a 401(k) Plan, the Smith
Barney Prototype Defined Contribution Plan Alternative Trust
Agreement for 401(k) Plans.
2.67 Trustee - means the person or persons specified in the
Adoption Agreement who serve as the trustee for the Fund under
the Trust Agreement and any successor to such person or persons.
2.68 Valuation Date - means (a) the last day of each Plan
Year and (b) each other date, if any, agreed upon in advance by
the Employer and the Trustee, provided the selection of such
other date does not result in discrimination in favor of Highly
Compensated Employees which would be prohibited under Code
section 401(a).
SECTION 3. SERVICE DEFINITIONS AND RULES
The definitions and rules in this section 3 shall apply for
purposes of measuring an Employee's service (a) for participation
purposes - to determine when the Employee has satisfied the
Participation Requirement and (b) for vesting purposes - to
determine the nonforfeitable interest in his or her Account.
3.1 Hour of Service Method (Standard Option). The definitions
and rules in this section 3.1 shall apply unless the "Elapsed
Time" method of crediting service is specified in the Adoption
Agreement.
3.1(a) Break in Service.
3.1 (a)(1) General. The term "Break in Service" means
each Computation Period during which an Employee fails to
complete more than 500 Hours of Service.
3.1(a)(2) Maternity/Paternity Rule. Solely for purposes of
determining whether an Employee has a Break in Service, an
Employee who is absent from work for "maternity or paternity
reasons" and who timely furnishes proof of the reason for such
absence (in accordance with such nondiscriminatory rules as may
be established by the Plan Administrator and communicated to
Employees) shall be credited with each Hour of Service for which
the Employee would otherwise have been credited but for such
absence, or if such Hours of Service cannot be determined, with 8
Hours of Service for each day of such absence. However, the total
number of Hours of Service so credited to such Employee shall not
exceed 501 Hours of Service. The Hours of Service so credited
shall be credited to the Computation Period in which such absence
begins if such credit is necessary to prevent a Break in Service
in such Computation Period or, if such credit is unnecessary, in
the immediately following Computation Period. For purposes of
this special maternity/paternity rule, an absence for "maternity
or paternity reasons" means an absence (i) by reason of the
pregnancy of the Employee, (ii) by reason of the birth of a child
of the Employee, (iii) by reason of the placement of a child with
the Employee in connection with the adoption of such child by
such Employee, or (iv) for purposes of caring for such child for
a period beginning immediately following such birth or placement.
3.1(b) Computation Period.
3.1(b)(1) General. The term "Computation Period' for
purposes of determining Years of Service and Breaks in Service
means the applicable period described in this section 3.1(b).
3.1(b)(2) Vesting. The relevant Computation Period for
measuring Years of Service and Breaks in Service for vesting
purposes shall be
(i)Standard Option - the Plan Year or
(ii)Alternative - if so specified in the Adoption Agreement,
(A) the 12 consecutive month period which begins on the
date the Employee first performs an Hour of Service ("hire date")
and ends on the date immediately preceding the first anniversary
of such hire date and (B) each 12 consecutive month period
thereafter beginning on each anniversary of such hire date and
ending on the date immediately preceding the next anniversary of
such date.
3.1(b)(3) Participation. The initial Computation Period for
measuring Years of Service and Breaks in Service for
participation purposes shall be the 12 consecutive month period
which begins on the first day an Employee first performs an Hour
of Service as an Employee ("hire date") and ends on the date
immediately preceding the first anniversary of such date. Each
subsequent Computation Period shall be
(i) Standard Option - each Plan Year, beginning with the
Plan Year which begins before the first anniversary of the
Employee's hire date (regardless of whether the Employee is
credited with 1,000 Hours of Service in the Employee's initial
Computation Period). An Employee shall be credited with two Years
of Service for participation purposes if the Employee completes
1,000 or more Hours of Service in both the initial Computation
Period and the first Plan Year which begins within such initial
Computation Period, or
(ii) Alternative - if so specified in the Adoption
Agreement, the 12 consecutive month period which begins on each
anniversary of an Employee's hire date and ends on the date
immediately preceding the next anniversary of the Employee's hire
date.
For participation purposes, an Employee shall be credited with a
Year of Service
(A) Standard Option - on the last day of the
Computation Period in which the Employee is credited with at
least 1,000 Hours of Service (or such lesser number of hours
specified in the Adoption Agreement) or
(B) Alternative - on the first date on which the
Employee is credited with at least 1,000 Hours of Service (or
such lesser number of hours specified in the Adoption Agreement)
provided the Employee completes such specified number of Hours of
Service in one Computation Period.
Notwithstanding the foregoing, if the Participation Requirement
includes a partial Year of Service, no minimum number of Hours of
Service shall be required for such partial year and an Employee
shall be credited with such partial Year of Service on the date
on which such partial period of service is completed.
3.1(b)(4) Change in Computation Period. If an amendment results
in a change in the Computation Period, the first Computation
Period established under such amendment shall begin before the
last day of the preceding Computation Period and each Employee to
whom both such Computation Periods apply and who completes 1,000
or more Hours of Service in both such Computation Periods shall
be credited with one Year of Service for each such Computation
Period.
3.1(c) Hour of Service.
3.1(c)(1) General. The term `Hour of Service" means
(i) each hour for which an Employee is paid, or entitled to
payment, by the Employer or an Affiliate for the performance of
duties as an Employee, which hours shall be credited to the
Employee for the relevant Computation Period in which such duties
are performed;
(ii) each hour for which an Employee is paid, or entitled to
payment, by the Employer or an Affiliate on account of a period
of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence; provided
(A) no more than 501 hours shall be credited under this clause
(ii) for any single continuous period during which no duties are
performed (whether or not such period covers more than one
relevant Computation Period) and (B) hours under this clause (ii)
shall be calculated and credited pursuant to section 2530.200b-2
of the Department of Labor Regulations which are incorporated as
part of this Plan by this reference; and
(iii) each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the
Employer or an Affiliate; provided (A) no credit shall be given
for an hour described in this clause (iii) it credit also is
given for such hour under clause (i) or clause (ii), and (B) an
hour described in this clause (iii) shall be credited to the
Employee for the relevant Computation Period or Computation
Periods to which the award or agreement pertains rather than to
the Computation Period in which the award, agreement or payment
is made.
3.1(c)(2) Determination. The Employer shall determine an
Employee's Hours of Service
(i) Standard Option - by actually counting hours and
maintaining records which reflect the actual hours worked, or
(ii) Alternative - if so specified in the Adoption Agreement,
by crediting each such Employee with
(A)10 Hours of Service for each day,
(B)45 Hours of Service for each week,
(C)95 Hours of Service for each semi-monthly payroll period,
or
(D) 190 Hours of Service for each month
during which the Employee otherwise would be credited with at
least one Hour of Service.
3.1 (d) Year of Service. The term "Year of Service" means each
Computation Period during which an Employee completes at least
3.1(d)(1) Standard Option - 1,000 Hours of Service or
3.1(d)(2) Alternative - such lesser number of Hours of
Service specified in the Adoption Agreement.
Notwithstanding the foregoing, if the Participation Requirement
includes a partial Year of Service, no minimum number of Hours of
Service shall be required for such partial year.
3.1(e) Change in Service Calculation Method. If an amendment
changes the method of crediting service from the "Elapsed Time"
method to the "Hours of Service" method, each Employee who was
credited with service under the "Elapsed Time" method shall be
credited with service
3.1(e)(1)for the Employee's employment before the
Computation Period in which such amendment is adopted, as
determined on the basis that one Year of Service credited to the
Employee under the "Elapsed Time" method for such employment
shall equal one Year of Service under this section 3.1,
3.1(e)(2) for the Employee's employment during the Computation
Period in which such amendment is adopted, for a number of Hours
of Service determined by uniformly applying one of the
equivalencies set forth in section 3.1(c)(2)(ii) to any
fractional part of a year credited to the Employee under the
"Elapsed Time" method as of the effective date of the amendment,
and
3.1(e)(3) for the Employee's employment on and after the
effective date of the amendment, as determined under the rules in
this section 3.l.
3.2 Elapsed Time Method (Alternative). If the "Elapsed Time"
method of crediting service is specified in the Adoption
Agreement, the definitions and rules in this section 3.2 shall
apply in lieu of the definitions and rules in section 3.1.
3.2(a) Break in Service.
3.2(a)(1) General. The term "Break in Service" means a
Period of Severance of at least 12 consecutive months.
3.2(a)(2) Maternity/Paternity Rule. If an Employee is absent
from service for "maternity or paternity reasons" and the
Employee timely furnishes proof of the reason for such absence
(in accordance with such nondiscriminatory rules as may be
established by the Plan Administrator and communicated to
Employees), the 12 consecutive month period beginning on the
first anniversary of the first date of such absence shall not
constitute a Break in Service. Such 12 consecutive month period
shall be neither a Period of Severance nor a period of Service.
For purposes of this special maternity/paternity rule, an absence
for "maternity or paternity reasons" means an absence (i) by
reason of the pregnancy of the Employee, (ii) by reason of the
birth of a child of the Employee, (iii) by reason of the
placement of a child with the Employee in connection with the
adoption of such child by the Employee, or (iv) for purposes of
caring for such child for a period beginning immediately
following such birth or placement.
3.2(b) Hour of Service. The term "Hour of Service" means each
hour for which an Employee is paid, or entitled to payment, by
the Employer or an Affiliate for the performance of duties as an
Employee during any period of employment.
3.2(c) Period of Severance. The term "Period of Severance" means
a continuous period of time during which an Employee is not
employed by the Employer or an Affiliate beginning on the date
the Employee retires, quits or is discharged, or if earlier, the
12 month anniversary of the date on which the Employee was
otherwise first absent from service.
3.2(d) Period of Service.
3.2(d)(1) General. For participation purposes and for
vesting purposes, the term "Period of Service" means an
Employee's employment completed as an Employee of the Employer
and any Affiliate beginning on such Employee's first day of
employment or reemployment and ending on the date a Break in
Service begins. An Employee's first day of employment or
reemployment shall be the first day the Employee performs an Hour
of Service. A Period of Service also shall include any Period of
Severance of less than 12 consecutive months.
3.2(d)(2) Aggregation. An Employee's employment completed in
all Periods of Service shall be aggregated (to the extent that
such service is not disregarded under section 3.7 or section 3.8)
and the number of days in each Period of Service in excess of a
whole year of employment (or, if there is no whole year of
employment in any such period, the number of days in such period)
shall be aggregated into additional whole years of employment on
the assumption that 365 days equals one whole year of employment.
3.2(e) Year of Service. The term "Year of Service" means
each 12 consecutive month period of employment completed in any
Period of Service beginning on the date an Employee first
completes an Hour of Service ("hire date") and ending on the date
immediately preceding the anniversary of such hire date.
Subsequent Years of Service shall begin on each anniversary of
the Employee's hire date and end on the date immediately
preceding the next anniversary of such hire date.
3.2(f) Change in Service Calculation Method. If an amendment
changes the method of crediting service from the "Hour of
Service" method to the "Elapsed Time" method, each Employee who
had any service credit under the "Hour of Service" method shall
be credited with service
3.2(f)(1) for the Employee's employment before the
Computation Period in which such amendment is adopted, as
determined on the basis that one Year of Service credited to the
Employee under the "Hour of Service" method for such employment
shall equal one Year of Service under this section 3.2,
3.2(f)(2) for the Employee's employment during the
Computation Period in which such amendment is adopted, as
determined under the rules in this section 3.2 or, if greater, as
determined for such period under the "Hour of Service" method as
converted to Years of Service under the assumption that 365 days
equals one Year of Service, and
3.2(f)(3) for the Employee's employment after the last day
of the Computation Period in which such amendment is adopted, as
determined under the rules in this section 3.2.
3.3 Service Before Effective Date. For participation purposes
all periods of employment with the Employer or an Affiliate
completed before the Employer adopted this Plan or a predecessor
plan ("pre-effective date employment") shall be included (to the
extent such service is not disregarded under section 3.7). For
vesting purposes all periods of pre-effective date employment
shall be included unless such service is disregarded under
section 3.7 or section 3.8. Notwithstanding the foregoing,
service credit for vesting purposes automatically shall be
granted for pre-effective date employment to the extent required
by Code section 411(a) for periods during which the Employer or
an Affiliate maintained a predecessor plan.
3.4 Service with Predecessor Employer. All periods of
employment with a predecessor employer or employers shall be
included in calculating an Employee's service to the extent
required by Code section 414(a) if the Employer or an Affiliate
maintains a plan of such predecessor employer. However, if the
Employer or an Affiliate does not maintain a plan of such
predecessor employer, periods of employment with such predecessor
employer shall be included in calculating an Employee's service
3.4(a) Standard Option - only to the extent required under
regulations under Code section 414(a) or
3.4(b) Alternative - only if so specified in the Adoption
Agreement.
3.5 Leased Employees. A Leased Employee shall be credited
with service as an Employee of the Employer or an Affiliate in
accordance with Code section 414(n) or section 414(o).
3.6 Service with Affiliates. An Employee shall be credited
with all service with any Affiliate and any other entity which is
required to be aggregated with the Employer under Code section
414(o).
3.7 Special Break in Service Rules.
3.7(a) Standard Option. Except as provided in section 3.7(c)
and section 8.2, an Employee who has a Break in Service shall be
credited after such Break in Service for both participation and
vesting purposes with all Years of Service completed before such
Break in Service.
3.7(b) Alternative. In addition to the exceptions in section
3.7(c) and section 8.2, the Employer may specify in the Adoption
Agreement that certain service completed before a Break in
Service may be disregarded under one or more of the rules set
forth in this section 3.7(b).
3.7(b)(1) One Year Hold-Out Rule. If the "One Year Hold-Out
Rule" is specified in the Adoption Agreement for a
nonstandardized Plan, an Employee who has a Break in Service (two
Breaks in Service if the Alternative Maternity/Paternity Rule
applies) shall not be credited after such Break in Service for
participation purposes or vesting purposes with any Year of
Service completed before such Break in Service until the Employee
completes a Year of Service after such Break in Service.
In applying this rule for participation purposes, such Year of
Service shall be measured by the Computation Period which begins
on an Employee's "reemployment commencement date" and, if
necessary, subsequent Computation Periods beginning
(i) with the Plan Year which includes the first
anniversary of the "reemployment commencement date" if the
standard Computation Period in section 3.1(b)(3)(i) is specified
in the Adoption Agreement, or
(ii) on anniversaries of the "reemployment commencement
date" if the alternative Computation Period in section
3.1(b)(3)(ii) is specified in the Adoption Agreement.
The "reemployment commencement date" shall be the first day on
which the Employee is credited with an Hour of Service for the
performance of duties after the first Computation Period in which
the Employee incurs a Break in Service. If an Employee who was a
Participant before his or her Break in Service completes a Year
of Service in accordance with this provision, such Employee's
participation shall be reinstated as of his or her reemployment
commencement date.
3.7(b)(2) Pre-Participation Rule. If the "Pre-Participation Rule"
is specified in the Adoption Agreement, an Employee who has a
Break in Service (two Breaks in Service if the Alternative
Maternity/Paternity Rule applies) before the Employee satisfies
the Participation Requirement shall not be credited for
participation purposes with any Year of Service completed before
such Break in Service. However, this rule shall only apply if the
Participation Requirement for the Plan requires more than
one Year of Service and the vesting schedule specified in the
Adoption Agreement provides for full and immediate vesting.
3.7(b)(3)Rule of Parity. If the "Rule of Parity" is specified in
the Adoption Agreement, the following rules shall apply:
(i)General. If an Employee does not have any nonforfeitable
interest in the portion of the Employee's Account which is
attributable to Employer contributions, the Employee's Years of
Service before a period of consecutive Breaks in Service shall
not be taken into account in computing service for participation
or vesting purposes if the number of consecutive Breaks in
Service in such period equals or exceeds the greater of 5 (6 if
the Alternative Maternity/Paternity Rule applies) or the
aggregate number of Years of Service completed before such Breaks
in Service ("pre-break service"). Such pre-break service shall
not include any pre-break service disregarded under the preceding
sentence by reason of prior breaks in Service.
(ii) Participation. If an Employee's Years of Service
are disregarded under this rule of parity, the Employee shall be
treated as a new Employee for participation purposes. If the
Employee's Years of Service are not disregarded under this rule,
the Employee shall continue to participate in the Plan, or, if
the Employee separated from service, shall participate
immediately upon the Employee's reemployment.
(iii) Vesting. If a Participant's Years of Service are
disregarded under this rule of parity, the Participant's pre-
break Years of Service shall be disregarded for purposes of
determining the Participant's nonforfeitable interest in the
Participant's post-break Employer Account. If a Participant's pre-
break Years of Service are not disregarded under this rule of
parity, the Participant's pre-break Years of Service shall be
counted for purposes of determining the Participant's
nonforfeitable interest in the Participant's post-break Employer
Account.
3.7(b)(4) Alternative Maternity/Paternity Rule. If the
"Alternative Maternity/Paternity Rule" is specified in the
Adoption Agreement, the special Maternity/Paternity rule set
forth in section 3.1(a)(2) shall not apply and the minimum period
of consecutive Breaks in Service required to disregard any
service or to deprive any Employee of any right under this Plan
shall be increased by one as specified in the parentheticals in
this section 3.7 and in section 8.2.
3.7(c) Vesting on Reemployment After Break in Service. If a
Participant has 5 or more consecutive Breaks in Service (6 or
more consecutive Breaks in Service if the Alternative
maternity/Paternity Rule applies), all Years of Service completed
after such Breaks in Service shall be disregarded for purposes of
determining the Participant's nonforfeitable interest in the
Participant's Employer Account and Matching Account that accrued
before such Breaks in Service. Accordingly, as set forth in 8.2,
the Employer shall not be required to restore a Forfeiture upon
such reemployment. Unless the Adoption Agreement specifies the
Rule of Parity, both the Participant's pre-break service and post-
break service shall count for purposes of determining the
nonforfeitable interest in the Participant's post-break Employer
Account and Matching Account. If the Adoption Agreement specifies
the Rule of Parity and the Participant's pre-break Years of
Service are disregarded under that rule, then the Participant's
pre-break Years of Service shall not count for purposes of
determining the nonforfeitable interest in the Participant's post-
break Employer Account and Matching Account. As provided in 8.2,
separate accounts shall be maintained for the Participant's pre-
break and post-break Employer Account and Matching Account and
such accounts shall share in Fund Earnings.
If a Participant does not have 5 consecutive Breaks in Service (6
or more consecutive Breaks in Service if the Alternative
Maternity/Paternity Rule applies), both the Participant's pre-
break and post-break Years of Service shall count in determining
the nonforfeitable interest in both the pre-break and post-break
Employer Account and Matching Account balance. However, unless
the Adoption Agreement s edifies the "Alternative to the Buy Back
Rule" (as described in section 8.2(b)), a Participant's pre-break
Employer Account and Matching Account balance shall be zero
unless the Participant repays any distribution as provided in
section 8.2(a).
3.8 Service Exclusions for Vesting Purposes.
3.8(a) Standard Option - An Employee shall be credited with
all Years of Service for vesting purposes (to the extent such
service is not disregarded under section 3.7 and section 8.2).
3.8(b) Alternative - The Employer may specify in the
Adoption Agreement service which is expressly excluded for
vesting purposes.
SECTION 4. PARTICIPATION
4.1 General Rule. Each Eligible Employee shall become a
Participant in this Plan on the Entry Date which coincides with
or immediately follows the date on which the Eligible Employee
satisfies the Participation Requirement (provided he or she is an
Eligible Employee on such Entry Date).
4.2 Special Rules.
4.2(a) Pre-Existing Plan. Any Employee who was a participant in
the Pre-Existing Plan on the date immediately preceding the
Effective Date or who would have become a participant in the Pre-
Existing Plan on the Effective Date shall become a Participant
under this Plan on such Effective Date. However, no contributions
shall be made by or on behalf of such Participant unless the
Participant is otherwise entitled to a contribution under section
5.
4.2(b) Reemployment Before Satisfying Participation
Requirement. If an Employee separates from service prior to
satisfying the Participation Requirement and is thereafter
reemployed, all employment completed by such Employee prior to
such separation shall be aggregated with such Employee's
employment completed after reemployment for purposes of
satisfying the Participation Requirement unless such prior
employment is excluded under the rules set forth in section 3.
4.2(c) Reemployment After Satisfying Participation Requirement.
If an Employee satisfies the Participation Requirement before he
or she separates from service and the Employee thereafter is
reemployed, the Employee shall become a Participant on the later
of (1) the first day he or she completes an Hour of Service as an
Eligible Employee upon reemployment or (2) the first Entry Date
following the date on which he or she satisfies the Participation
Requirement. However, any such Employee whose prior service is
disregarded under section 3 shall be treated as a new Employee
for participation purposes.
4.2(d) Status Change. If the status of an Eligible Employee for
whom no Account is maintained changes to that of an Employee
(other than an Eligible Employee) and such person's status
thereafter changes back to that of an Eligible Employee, such
person shall become a Participant on the later of (1) the date
the status changes back to that of an Eligible Employee or (2)
the first Entry Date which coincides with or immediately follows
the date on which he or she satisfies the Participation
Requirement.
4.3 Participant Information. Each Participant shall file with
the Plan Administrator such personal information and data as the
Plan Administrator deems necessary for the orderly administration
of this Plan.
4.4 No Employment Rights. This Plan is not a contract of
employment and participation in this Plan shall not give any
Employee or former Employee the right to be retained in the
employ of the Employer or any Affiliate or, upon termination of
such employment, to have any interest or right in the Fund other
than as expressly provided in this Plan.
SECTION 5. CONTRIBUTIONS
5.1 Profit Sharing Plan. If this Plan is adopted as a Profit
Sharing Plan, the Employer Contribution made by the Employer and
each Participating Affiliate for each Plan Year shall equal such
amount, if any, as the Board determines in its discretion that
the Employer and each Participating Affiliate shall contribute
for such year. Employer Contributions under this section 5.1
shall be made
5.1 (a) Standard Option - from Net Profits or
5.1(b) Alternative - if so specified in the Adoption Agreement,
without regard to Net Profits. Notwithstanding any such election,
the Employer intends that this Plan shall be a "profit-sharing
plan" for purposes of the Code and ERISA.
5.2 Money Purchase Pension Plan. If this Plan is adopted as a
Money Purchase Pension Plan, the Employer Contribution made by
the Employer and each Participating Affiliate for each Plan Year
shall be an amount equal to the sum of the contribution for each
Active Participant as determined under the formula specified in
the Adoption Agreement. The Forfeitures for each Plan Year shall
be
5.2(a) Standard Option - applied to reduce the Employer
Contribution for such Plan Year or
5.2(b) Alternative - if so specified in the Adoption Agreement,
allocated to the Employer Account of each Active Participant in
accordance with section 6.3(b). Notwithstanding any such
election, the Employer intends that this Plan shall be a "money
purchase pension plan" for purposes of the Code and ERISA.
5.3 401(k) Plan.
5.3(a) General. If this Plan is adopted as a 401(k) Plan,
the contributions made by the Employer and each Participating
Affiliate shall be determined in accordance with the elections
made by the Employer in the Adoption Agreement and the rules set
forth in this section 5.3. Contributions made under this section
5.3 other than Elective Deferrals and Employee Contributions
shall be made
5.3(a)(1) Standard Option - from Net Profits or
5.3(a)(2) Alternative - if so specified in the Adoption
Agreement, without regard to Net Profits.
Elective Deferrals and Employee Contributions shall be made
without regard to Net Profits. Notwithstanding any such election,
the Employer intends that this Plan shall be a "profit-sharing
plan" for purposes of the Code and ERISA.
5.3(b) Matching Contributions. If the Employer specifies in the
Adoption Agreement that Matching Contributions shall be made to
the Plan, the Employer and each Participating Affiliate shall
make a Matching Contribution for each eligible Participant based
on the Employee Contributions and Elective Deferrals made by or
on behalf of such eligible Participant in such amount and as of
each Allocation Date as specified in the Adoption Agreement.
Notwithstanding the foregoing,
5.3(b)(1) for Plan Years beginning on or after the Final
Compliance Date, no Matching Contribution shall be made on
account of a Participant's Elective Deferrals or Employee
Contributions which are Excess Elective Deferrals under section
7.3, Excess Contributions under section 7.4 or Excess Aggregate
Contributions under section 7.5, and
5.3(b)(2) for Plan Years beginning before the Final
Compliance Date, no Matching Contribution shall be made on
account of such excess amounts unless specified in the formula
for Matching Contributions set forth in the Adoption Agreement.
5.3(c) Qualified Matching Contributions. If the Employer
specifies in the Adoption Agreement that Qualified Matching
Contributions s shall be made to the Plan, the Employer and each
Participating Affiliate shall make a Qualified Matching
Contribution for each eligible Participant based on the Employee
Contributions and Elective Deferrals made by or on behalf of such
eligible Participant in such amount and as of each Allocation
Date as specified in the Adoption Agreement. Qualified Matching
Contributions shall be subject to the following special rules:
5.3(c)(1) the Participant may not elect to receive such
contributions in cash until distributed from the Plan;
5.3(c)(2) such contributions shall be completely
nonforfeitable when made;
5.3(c)(3) such contributions shall be subject to the same
distribution and withdrawal restrictions applicable to Elective
Deferrals set forth in section 9.2(b);
5.3(c)(4) for Plan Years beginning on and after the Final
Compliance Date, no Qualified Matching Contribution shall be made
on account of a Participant's Elective Deferrals or Employee
Contributions which are Excess Elective Deferrals under section
7.3, Excess Contributions under section 7.4 or Excess Aggregate
Contributions under section 7.5; and
5.3(c)(5) for Plan Years beginning before the Final
Compliance Date, no Qualified Matching Contribution shall be made
on account of such excess amounts unless specified in the formula
for Qualified Matching Contributions set forth in the Adoption
Agreement.
5.3(d) Qualified Nonelective Contribution. If the Employer
specifies in the Adoption Agreement that Qualified Nonelective
Contributions shall be made to the Plan, the Employer and each
Participating Affiliate shall make Qualified Nonelective
Contributions for each eligible Participant in such amount and as
of each Allocation Date specified in the Adoption Agreement.
In addition, in lieu of distributing Excess Contributions as
provided in section 7.4(d) or Excess Aggregate Contributions as
provided in section 7.5(d), the Employer and each Participating
Affiliate may contribute on behalf of each Participant who is a
Nonhighly Compensated Employee on the last day of each Plan Year
such amount, if any, as the Employer and each Participating
Affiliate determine in their discretion to contribute for such
Plan Year to satisfy the ADP limit of section 7.4(b) or the ACP
limit of section 7.5(b), or both, pursuant to the regulations
under Code section 401(k) and Code section 401(m).
Qualified Nonelective Contributions shall be subject to the
following special rules:
5.3(d)(1) the Participant may not elect to receive such
contributions in cash until distributed from the Plan;
5.3(d)(2) such contributions shall be completely
nonforfeitable when made; and
5.3(d)(3) such contributions shall be subject to the same
distribution and withdrawal restrictions applicable to Elective
Deferrals set forth in section 9.2(b).
5.3(e) Discretionary Employer Contribution. If the Employer
specifies in the Adoption Agreement that discretionary Employer
Contributions shall be made, the Employer Contribution made by
the Employer and each Participating Affiliate for each Plan Year
shall equal such amount, if any, as the Board determines in its
discretion that the Employer and each Participating Affiliate
shall contribute for such year.
5.3(f) Elective Deferrals. If the Employer specifies in the
Adoption Agreement that Elective Deferrals may be made, each
Participant who is an Eligible Employee may elect pursuant to a
cash or deferred election that the Employer and each
Participating Affiliate make Elective Deferrals to the Plan on
the Participant's behalf in lieu of cash compensation for each
pay period ending on any date on or after he or she becomes a
Participant and on which he or she is an Eligible Employee in
such amounts as specified in the Adoption Agreement. All Elective
Deferrals shall be made exclusively through payroll withholding
and shall be transferred by the Employer or Participating
Affiliate to the Trustee as soon as practicable after the date
such Elective Deferrals are withheld.
5.3(g) Employee Contributions. If the Employer specifies in the
Adoption Agreement that Employee Contributions may be made, each
Participant who is an Eligible Employee may elect to make
Employee Contributions to the Plan for each pay period ending on
any date on or after he or she becomes a Participant and on which
he or she is an Eligible Employee in such amounts as specified in
the Adoption Agreement. All Employee Contributions shall be made
exclusively through payroll withholding and shall be transferred
by the Employer or Participating Affiliate to the Trustee as soon
as practicable after the date such Employee Contributions are
withheld.
5.3(h) Election Rules and Limitations.
5.3(h)(1) General. The Plan Administrator from time to time
shall establish and shall communicate in writing to Participants
who are Eligible Employees such reasonable nondiscriminatory
deadlines, rules and procedures for making the elections
described in this 5.3 as the Plan Administrator deems
appropriate under the circumstances for the proper administration
of this Plan. A Participant's election shall be made on an
Election Form and no election shall be effective unless such
Election Form is properly completed and timely filed in
accordance with such established deadlines, rules and procedures.
The Plan Administrator shall have the right at any time
unilaterally to reduce the amount or percentage of Elective
Deferrals or Employee Contributions elected under this section
5.3 if the Plan Administrator determines that such reduction is
necessary to satisfy the limitations under section 7 of the Plan.
5.3(h)(2) Commencement of Election. A Participant's initial
election to make Elective Deferrals or Employee Contributions
under this section 5.3 for any period of employment may be
effective as early as the Entry Date on which he or she becomes a
Participant in the Plan. If a Participant does not make a proper
election to make Elective Deferrals or Employee Contributions as
of such Entry Date, the Participant may thereafter make an
election
(i)Standard Option - effective on any date or
(ii)Alternative - effective only as of the dates specified
in the Adoption Agreement.
A Participant's election shall remain in effect until
revised or terminated in accordance with this section 5.3(h).
5.3(h)(3) Revision of Election. An election, once effective,
can thereafter be revised by a Participant
(i)Standard Option - effective on any date or
(ii)Alternative - effective only as of the dates specified
in the Adoption Agreement.
5.3(h)(4) Termination of Election. A Participant shall have
the right to completely terminate an election under this section
5.3 at any time, and any such termination shall become effective
as of the first day of the first pay period following the date he
or she timely files a properly completed Election Form
terminating such election. Any Participant whose status as an
Eligible Employee terminates shall be deemed to have completely
terminated his or her election, if any, under this section 5.3 as
of the date the Participant's status as such so terminates.
5.3(h)(5) Resumption after termination. A Participant whose
election terminates may thereafter elect to resume contributions
under this section 5.3
(i)Standard Option - effective as of any date, or
(ii)Alternative - effective only as of the dates specified
in the Adoption Agreement.
5.3(h)(6) Effective Dates of Elections. A Participant's
initial, revised or resumed election shall be effective only if
he or she is an Eligible Employee on the effective date of such
elections set forth in this section 5.3(h). Elective Deferrals
and Employee Contributions made pursuant to a Participant's
elections shall be withheld from Compensation which otherwise
would be paid on pr after the effective date of such election and
while he or she is an Eligible Employee. Under no circumstances
shall a Participant's Elective Deferral election apply to defer
Compensation which has been paid to the Participant or which he
or she is currently eligible to receive (in cash or otherwise) at
his or her discretion.
5.3(i) Application of Forfeitures. The Forfeitures attributable
to Matching Contributions and Employer Contributions shall be
5.3(i)(1) Standard Option - applied to reduce the Matching
Contributions, Qualified Matching Contributions and Qualified
Nonelective Contributions, if any, in accordance with section
6.3(c)(2)(ii)(A) or
5.3(i)(2) Alternative - if so specified in the Adoption
Agreement,
(i) allocated to the Employer Account or Matching
Account, as applicable, of each Active Participant in accordance
with section 6.3(c)(2)(ii)(B)(1), or
(ii) for a nonstandardized Plan, allocated in accordance
with the formula specified in the Adoption Agreement.
5.4 Target Benefit Pension Plan.
5.4(a) General. If this Plan is adopted as a Target Benefit
Pension Plan, the Employer Contribution made by the Employer and
each Participating Affiliate for each Plan Year shall be an
amount equal to the sum of the contributions required to fund
each Active Participant's "Target Benefit" specified in the
Adoption Agreement. The Forfeitures for each Plan Year shall be
applied to reduce the Employer Contribution for such Plan Year.
Such contribution shall be determined as of the last day of such
Plan Year under the individual level premium funding method,
using the interest rate and mortality table specified in the
Adoption Agreement, the Participant's age on his or her last
birthday and the assumption of a constant rate of future
Compensation, in accordance with the following:
5.4(a)(1) Step 1. If the Participant has not reached the
Plan's Normal Retirement Age, calculate the present value of the
"Target Benefit" specified in the Adoption Agreement by
multiplying the "Target Benefit" by the product of (1) the
applicable factor from Table l(a) or (b), whichever is
appropriate, in Exhibit A to the Adoption Agreement and (2) the
applicable factor from Table 111(a) or (b), whichever is
appropriate, in Exhibit A to the Adoption Agreement. It the
Participant is at or beyond the Plan's Normal Retirement Age,
calculate the present value of the "Target Benefit" specified in
the Adoption Agreement by multiplying the "Target Benefit" by the
applicable factor from Table IV(a) or (b), whichever is
appropriate, in Exhibit A to the Adoption Agreement.
5.4(a)(2) Step 2. Calculate the excess, if any, of the
amount determined in Step 1 over the theoretical reserve.
5.4(a)(3) Step 3. Amortize the result in Step 2 by
multiplying it by the applicable factor from Table 11 in Exhibit
A to the Adoption Agreement. For the Plan Year in which the
Participant attains Normal Retirement Age and for subsequent Plan
Years, the applicable factor is 1.0.
5.4(b) Theoretical Reserve. For purposes of this section
5.4, the theoretical reserve is determined as follows:
5.4(b)(1) A Participant's theoretical reserve as of the last
day of the first Plan Year in which the Participant participates
in the Plan, and as of the last day of the first Plan Year after
any Plan Year in which the Plan either did not satisfy the safe
harbor in section 1.401(a)(4)-8(b)(3) of the Federal Income Tax
Regulations or was not a Prior Safe Harbor Plan, is zero. In all
other cases, in the first Plan Year in which this theoretical
reserve provision is adopted or made effective, if later, as
specified in the Adoption Agreement ("year 1"), the initial
theoretical reserve is determined as follows:
(i) Calculate as of the last day of the Plan Year
immediately preceding year 1 the present value of the "Target
Benefit", using the actuarial assumptions, the provisions of the
Plan, and the Participant's Average Annual Compensation as of
such date; provided, however, for a Participant who is beyond
Normal Retirement Age in year 1, the straight life annuity factor
used for such determination shall be the factor applicable for
such Normal Retirement Age.
(ii) Calculate as of the last day of the Plan Year
immediately preceding year 1 the present value of future Employer
Contributions, i.e., the contributions due each Plan Year using
the actuarial assumptions, the provisions of the Plan
(disregarding those provisions of the Plan providing for the
limitations of Code section 415 or the minimum contributions
under Code section 416), and the Participant's Average Annual
Compensation as of such date, beginning with year 1 through the
end of the Plan Year in which the Participant attains Normal
Retirement Age.
(iii) Subtract the amount determined in clause (ii) from
the amount determined in clause (i).
5.4(b)(2) Accumulate the initial theoretical reserve in
section 5.4(b)(1) and the Employer Contribution (as limited by
Code section 415, but without regard to any required minimum
contributions under Code section 416) for each Plan Year
beginning in year 1 up through the last day of the current Plan
Year (excluding contributions, if any, made for the current Plan
Year) using the Plan's interest assumption in effect for each
such year. In any Plan Year following the Plan Year in which the
Participant attains Normal Retirement Age, the accumulation is
calculated assuming an interest rate of 0%.
5.4(b)(3) The calculations in this section 5.4(b) shall be
made as of the last day of each Plan Year, on the basis of the
Participant's age on his or her last birthday and the interest
rate in effect on the last day of the prior Plan Year.
5.4(c) Past Service Credits. If the Plan is adopted as a
standardized Plan, upon initial adoption of this Plan or upon a
Plan amendment which is effective on or after the Final
Compliance Date, no more than 5 years of credit shall be granted
for service completed before the effective date of such adoption
or amendment, and any such past service credit shall be granted
on a uniform basis to all Participants in the Plan on such
effective date.
5.4(d) TRA 86 Amendment. A Participant's Account balance shall
not be reduced as a result of an amendment to this Plan or a Pre-
Existing Plan to satisfy the requirements of TRA 86. To the
extent that contributions actually made on a Participant's behalf
for Plan Years beginning after December 31, 1988 exceed the
contributions that would have been required under the formula as
effective for such years as a result of the amendment of this
Plan or a Pre-Existing Plan to satisfy TRA 86, such excess shall
be applied to offset contributions required to such Participant's
Account for Plan Years beginning after the date such TRA 86
amendment is adopted or, if later, the date such TRA 86 amendment
is effective consistent with ERISA 204(h).
5.4(e) Special Definitions and Rules. The special definitions and
rules in this section 5.4(e) shall apply for purposes of
determining the Employer Contributions under a Target Benefit
Pension Plan.
5.4(e)(1) Cumulative Disparity Limit. For a Plan with a Unit
Benefit Formula, a Participant's Cumulative Disparity Limit is
equal to 35 minus (1) the number of the Participant's Years of
Participation under this Plan during which this Plan did not
satisfy the safe harbor for target benefit plans in section 1.401
(a)(4)-8(b)(3) of the Federal Income Tax Regulations or was not a
Prior Safe Harbor Plan, and (2) the number of years during which
the Participant participated in one or more qualified plans or
simplified employee pension plans ever maintained by the Employer
(other than years counted in clause (1) or counted toward a
Participant's total Years of Projected Participation). The
Cumulative Disparity Limit shall be determined taking into
account only those Years of Participation in this Plan beginning
after December 31, 1988 when this Plan had an integrated benefit
formula and those years of participation in such other qualified
plans and simplified employee pension plans beginning after
December 31, 1988 during which the Participant actually received
an allocation under an integrated defined contribution plan
(other than a target benefit pension plan), during which the
Participant was eligible to receive a benefit under an integrated
defined benefit pension plan or an integrated target benefit
pension plan), or during which the Participant received an
allocation or accrued a benefit under a plan which imputed
permitted disparity pursuant to section 1.401(a)-7 of the Federal
Income Tax Regulations.
5.4(e)(2) Cumulative Disparity Reduction. For a Plan with a Fixed
Benefit Formula, the Excess Benefit Percentage will further be
reduced as set forth in this section 5.4(e)(2) for a Participant
with more than 35 "cumulative disparity years." A Participant's
"cumulative disparity years" consist of the sum of (1) the
Participant's total Years of Projected Participation, (2) the
Participant's Years of Participation during which this Plan did
not satisfy the safe harbor for target benefit plans in
regulations section 1.401(a)(4)-8(b)(3) of the Federal Income Tax
Regulations or was not a Prior Safe Harbor Plan, and (3) the
number of years during which the Participant participated in one
or more qualified plans or simplified employee pension plans ever
maintained by the Employer (other than years in clause (1) or (2)
above); provided that the cumulative disparity years shall be
determined taking into account only those Years of Participation
in this Plan beginning after December 31, 1988 when this Plan had
an integrated benefit formula and those years of participation in
such other qualified plans and simplified employee pension plans
beginning after December 31, 1988 during which the Participant
actually received an allocation under an integrated defined
contribution plan (other than a target benefit pension plan),
during which the Participant was eligible to receive a benefit
under an integrated defined benefit pension plan (or an
integrated target benefit pension plan), or during which the
Participant received an allocation or accrued a benefit under a
plan which imputed permitted disparity pursuant to section 1.401
(a)-7 of the Federal Income Tax Regulations.
If this Cumulative Disparity Reduction applies, the Excess
Benefit Percentage will be reduced as follows:
(A)Subtract the Participant's Base Benefit Percentage from
the Participant's Excess Benefit Percentage (after modification
as required in the Adoption Agreement for less than 35 Years of
Projected Participation).
(B)Multiply the results determined in (A) by a fraction (not
less than 0), the numerator of which is 35 minus the sum of the
years in clauses (2) and (3) of this Section 5.4(e)(2), and the
denominator of which is 35.
(C)The Participant's Excess Benefit Percentage is equal to
the sum of the result in (B) and the Participant's Base
Benefit Percentage, as otherwise modified in the Adoption
Agreement.
5.4(e)(3) Current Stated Benefit. Each Participant's Current
Stated Benefit will be the product of (1) the amount derived from
the formula specified in the Adoption Agreement, and (2) a
fraction, the numerator of which is the Participant's number of
Years of Participation from the latest Fresh-Start Date (if any)
through and including the later of the year in which the
Participant attains Normal Retirement Age or the current Plan
Year, and the denominator of which is the Participant's total
Years of Projected Participation. If this Plan has not had a
Fresh-Start Date, such fraction will equal 1.0 for all
Participants. In any event, for those Participants who first
participated in the Plan after the latest Fresh-Start Date, such
fraction will equal 1.0. For purposes of determining the
numerator of the fraction described in clause (2), only those
current and prior years during which a Participant was eligible
to receive a contribution under the Plan will be taken into
account.
5.4(e)(4) Fresh-Start Date. Fresh-Start Date means the last day
of a Plan Year preceding a Plan Year for which provisions that
would affect the amount of the Current Stated Benefit are
amended. If applicable, the latest Fresh-Start Date of the Plan
shall be designated in the Adoption Agreement.
5.4(e)(5) Frozen Accrued Stated Benefit. A Participant's Frozen
Accrued Stated Benefit is determined as of the Plan's latest
Fresh-Start Date as if the Participant terminated employment with
the Employer as of that date, without regard to any amendment
made to the Plan after that date except as permitted under
regulations.
A Participant's Frozen Accrued Stated Benefit is equal to the
amount of the Current Stated Benefit in effect on the latest
Fresh-Start Date that a Participant has accrued as of that date,
assuming that such Current Stated Benefit accrues ratably from
the year in which the Participant first participated in this Plan
(or, if later, the immediately preceding Fresh-Start Date under
this Plan) through and including the Plan Year in which the
Participant attains Normal Retirement Age.
The amount of the Current Stated Benefit in effect on the latest
Fresh-Start Date that a Participant is assumed to have ratably
accrued is determined by multiplying the Plan's Current Stated
Benefit in effect on that date by a fraction, the numerator of
which is the number of Years of Participation from the later of
the Participant's first Year of Participation in this Plan or the
immediately preceding Fresh-Start Date (if any) through and
including the year that contains the latest Fresh-Start Date, and
the denominator of which is the number of Years of Participation
from the later of the Participant's first Year of Participation
in this Plan or the immediately preceding Fresh-Start Date (if
any) through and including the later of the year in which the
Participant attains Normal Retirement Age or the current Plan
Year. For purposes of this paragraph, only those Years of
Participation during which a Participant was eligible to receive
a contribution under the Plan will be taken into account.
If this Plan has had a preceding Fresh-Start Date, each
Participant's Frozen Accrued Stated Benefit as of the latest
Fresh-Start Date will equal the sum of the amount of the Current
Stated Benefit in effect on the latest Fresh-Start Date that a
Participant is assumed to have ratably accrued as of that date
under the preceding paragraph, and the Frozen Accrued Stated
Benefit determined as of the preceding Fresh-Start Date(s).
If (1) the Current Stated Benefit formula in effect on the latest
Fresh-Start Date was not expressed as a straight life annuity for
all Participants, and/or (2) the Normal Retirement Age for any
Participant on the latest Fresh-Start Date was greater than the
Normal Retirement Age for that Participant under the Current
Stated Benefit formula in effect after the latest Fresh-Start
Date, the Frozen Accrued Stated Benefit will be converted to an
actuarially equivalent straight life annuity commencing at the
Participant's Normal Retirement Age under the Current Stated
Benefit formula in effect after the latest Fresh-Start Date,
using the actuarial assumptions in effect under the Current
Stated Benefit formula in effect on the latest Fresh-Start Date.
Notwithstanding the above, if in the immediately preceding Plan
Year this Plan did not satisfy the safe harbor for target benefit
plans in section 1.401(a)(4)-8(b)(3) of the Federal Income Tax
Regulations or was not a Prior Safe Harbor Plan, the Frozen
Accrued Stated Benefit for any Participant in the Plan,
determined for the next Plan Year during 9 which section 1.401
(a)(4)-8(b)(3) of the Federal Income Tax Regulations is
satisfied until the year following the next Fresh-Start Date, if
any, will be zero.
5.4(e)(6) Maximum Excess Allowance. The Maximum Excess
Allowance is equal to the lesser of the Base Benefit Percentage
or
(1) for a Plan with a Unit Benefit Formula, the Applicable
Factor determined from Table A or Table B in Exhibit B to
the Adoption Agreement, and
(2) for a Plan with a Fixed Benefit Formula, 35 times the
Applicable Factor determined from Table A or Table B in Exhibit B
to the Adoption Agreement.
5.4(e)(7) Overall Permitted Disparity Limit. If for any Plan
Year this Plan benefits any Participant who also benefits under
another qualified plan or simplified employee pension plan
maintained by the Employer that provides for permitted disparity
(or imputes permitted disparity), the Current Stated Benefit for
all Participants under this Plan will be equal to the Excess
Benefit Percentage set forth in the Adoption Agreement multiplied
times
(1) for a Plan with a Unit Benefit Formula, the
Participant's total Average Annual Compensation times the
Participant's total Years of Projected Participation under the
Plan up to the maximum total Years of Projected Participation
specified in the Adoption Agreement, and
(2) for a Plan with a Fixed Benefit Formula, the
Participant's total Average Annual Compensation (prorated for
years less than 35).
If this paragraph is applicable, this Plan will have a Fresh-
Start Date on the last day of the Plan Year preceding the Plan
Year in which this paragraph is first applicable. In addition, if
in any subsequent Plan Year this Plan no longer benefits any
Participant who also benefits under another plan of the Employer,
this Plan will have a Fresh-Start Date on the last day of the
Plan Year preceding the Plan Year in which this paragraph is no
longer applicable.
5.4(e)(8) Prior Safe Harbor Plan. Prior Safe Harbor Plan
means a Plan adopted and in effect on September 19, 1991, that
satisfied the applicable nondiscrimination requirements for
target benefit plans on that date and in all prior periods
(taking into account no amendments to the Plan after September
19, 1991, other than amendments necessary to satisfy Code section
401(1)).
5.4(e)(9) Year of Participation - means each Year of Service
(as determined in the same manner as a Year of Service for
vesting purposes) completed after the Participant first becomes a
Participant in this Plan or the Pre-Existing Plan.
5.4(e)(10) Years of Projected Participation. For purposes of
determining a Participant's Current Stated Benefit, a
Participant's total Years of Projected Participation under the
Plan is the sum of the Participant's total number of Years of
Participation under this Plan for the years this Plan
consecutively satisfies the safe harbor for target benefit plans
in section 1.401(a)(4)-8(b)(3) of the Federal Income Tax
Regulations or was a Prior Safe Harbor Plan , if applicable,
projected through the later of the end of the Plan Year in which
the Participant attains Normal Retirement Age or the end of the
current Plan Year. For purposes of determining a Participant's
total Years of Projected Participation, only those current and
prior years during which a Participant was eligible to receive a
contribution under the Plan will be taken into account.
5.5 Rollover Contributions.
5.5(a) Standard Option - An Eligible Employee may contribute
on his or her own behalf (or elect a direct transfer of) a
Rollover Contribution to the Fund, provided (1) such contribution
shall be made (or transferred) in cash or in a form which is
acceptable to the trustee,(2) such contribution shall be made in
accordance with such rules as the Plan Administrator and the
Trustee deem appropriate under the circumstances, and (3) if so
specified in the Adoption Agreement, no Rollover Contribution may
be made prior to the Entry Date on which the Eligible Employee
becomes a Participant in this Plan.
5.5(b) Alternative - The Employer may specify in the
Adoption Agreement that no Rollover Contributions may be made.
5.6 No Employee or Matching Contributions. Unless this Plan
is adopted as a 401(k) Plan which permits Employee Contributions,
no nondeductible employee contributions or matching contributions
(as defined in Code section 401(m)) shall be made to this Plan
after the Plan Year in which this Plan is adopted by the
Employer. Any nondeductible employee contributions and matching
contributions made under a Pre-Existing Plan or under this Plan
(in accordance with the preceding sentence) for Plan Years
beginning after December 31, 1986 shall be subject to the
nondiscrimination limitations under Code section 401(m) as set
forth in section 7.5.
5.7 No Deductible Voluntary Employee Contributions. No
voluntary deductible employee contributions shall be made to this
Plan for a taxable year beginning after December 31, 1986. Any
voluntary deductible employee contributions made under a Pre-
Existing Plan prior to such date shall be maintained in a
separate account under this Plan. Such account shall be
nonforfeitable at all times and shall share in the Fund Earnings
in the same manner as described in section 6.2. No part of such
account shall be used to purchase life insurance. Subject to
section 10, Joint and Survivor Annuity Requirements (if
applicable), a Participant may withdraw any part of the
Participant's voluntary deductible employee contribution account
by making a written application to the Plan Administrator,
5.8 General Rules Applicable to All Contributions.
5.8(a) Limitations on Contributions. The contributions made
under this section 5 and the allocation of those contributions
under section 6 shall be subject to the limitations set forth in
the Adoption Agreement, this section 5 and section 7.
5.8(b) Code section 415. The contributions for any Plan Year
shall not (based on the Employer's understanding of the facts at
the time the contribution is made) exceed the total amount
allocable for such year among the Accounts of all Participants in
light of the restrictions in Code section 415 as set forth in
section 7.2. If a suspense account as described in section 7.2(b)
is in existence at any time during a particular Limitation Year
(1) no Employer Contribution shall be made for such
Limitation Year if (based on the Employer's understanding of the
facts at the time the contribution is made) the allocation of the
amount in such suspense account would be precluded by Code
section 415 for such Limitation Year and (2) if this Plan is
adopted as a Money Purchase Pension Plan or a Target Benefit
Pension Plan, the Employer Contribution required under this
section 5 shall be reduced by the amount in such suspense
account.
5.8(c) Code section 416. If this Plan is a Top-Heavy Plan
(as defined in section l2) for any Plan Year, the minimum
allocation required under Code section 416 shall be made in
accordance with section 12.
5.8(d) Leased Employees. Contributions or benefits which are
provided by a leasing organization on behalf of a Participant who
is a Leased Employee and which are attributable to services
performed by such Participant for the Employer or a Participating
Affiliate shall be credited against the contribution, if any, due
to be allocated to such Participant under this Plan in accordance
with Code section 414(n).
5.8(e) Owner-Employees.
5.8(e)(1) General. If this Plan provides contributions or
benefits for one or more Owner-Employees who control the Employer
or a Participating Affiliate, then
(i) if such Owner-Employee, or Owner-Employees, also
control one or more other trades or businesses,
(A) this Plan and the plans established for such
other trades or businesses shall, when viewed as a single plan,
satisfy the applicable requirements of Code section 401(a) and
Code section 401(d) for the employees of the Employer or the
Participating Affiliate and such other trades or businesses, and
(B) the employees of such other trades or
businesses shall be included in a plan which satisfies the
applicable requirements of Code section 401(a) and Code section
401(d) and which provides contributions and benefits which are at
least as favorable as those provided under this Plan for such
Owner-Employees, or
(ii) it such Owner-Employee is covered as an owner-
employee (within the meaning of Code section 401(c)(3)) under the
plans of two or more other trades or businesses which such Owner-
Employee does not control, then the contributions or benefits
provided under this Plan must be at least as favorable as those
provided for such Owner-Employee under the most favorable plan of
such other trade or business.
5.8(e)(2) Control. For purposes of this section 5.8(e), an
Owner-Employee, or two or more such Owner-Employees, shall be
considered to control a trade or business if such Owner-
Employee, or such Owner-Employees together,
(i) own the entire interest in an unincorporated trade
or business, or
(ii) in the case of a partnership, own more than 50% of
either the capital interest or the profits interest in such
partnership. Such Owner-Employee, or such Owner-Employees, shall
be treated as owning any interest in a partnership which is
owned, directly or indirectly, by a partnership which is
controlled by such Owner-Employee, or such Owner-Employees,
within the meaning of clause (ii).
SECTION 6. ALLOCATIONS TO ACCOUNTS
6.1 Establishment and Maintenance of Accounts. An Account
shall be established and maintained for each Participant under
the Plan and the Plan Administrator shall establish reasonable
and nondiscretionary procedures under which (a) any Forfeitures,
insurance premium payments, loans, withdrawals, distributions and
other charges properly allocable to such Account shall be debited
from such Account and (b) any insurance contract dividends,
insurance contract surrender proceeds, loan repayments and other
amounts properly allocable to such Account (other than amounts
described in section 6.2 and section 6.3) shall be credited to
such Account.
6.2 Allocation of Fund Earnings.
6.2(a) General. As of each Valuation Date the fair market
value of the Fund and the Fund Earnings for the period which ends
on such Valuation Date shall be determined. Such Fund Earnings
shall be allocated (and posted) among all Accounts in the
proportion that the balance in each such Account (determined in
accordance with section 6.2(b)) bears to the total balance in all
such Accounts in order that each Account shall proportionately
benefit from any earnings or appreciation in the value of the
Fund assets in which such Account is invested or proportionately
suffer any losses or depreciation in the value of the Fund assets
in which such Account is invested. Subject to section 13, each
Participant shall have a ratable interest in all assets of
the Fund.
6.2(b) Allocation Procedures. The Plan Administrator shall
establish nondiscretionary allocation procedures for purposes of
the allocation of Fund Earnings under section 6.2(a), which
procedures shall be set forth in writing with the records of this
Plan. If so specified in such procedures, the balance in each
Account shall be determined after adjusting for all or a portion
of the contributions and other amounts credited to or debited
from such Account since the preceding Valuation Date. Further, if
so provided in such allocation procedures, Fund Earnings shall
not be allocated to any Forfeiture or to the balance in any
suspense account described in section 7.2(b).
6.3 Allocation of Contributions and Forfeitures. Subject to the
limitations in section 7, the Forfeitures (and any amount deemed
to be a Forfeiture under the terms of this Plan) and the
contributions shall be allocated (and posted) in accordance with
the following rules:
6.3(a) Profit Sharing Plan.
6.3(a)(1) Nonintegrated. If this Plan is adopted as a Profit
Sharing Plan and the nonintegrated allocation formula is
specified in the Adoption Agreement, the Forfeitures and the
Employer Contribution for each Plan Year shall be allocated (and
posted) as of the last day of such Plan Year to the Employer
Account of each Active Participant in the same ratio that each
Active Participant's Compensation for such Plan Year bears to the
total Compensation of all Active Participants for such Plan Year.
6.3(a)(2) Integrated. If this Plan is adopted as a Profit Sharing
Plan and the integrated allocation formula is specified in the
Adoption Agreement, the Forfeitures and the Employer Contribution
shall be allocated (and posted) as of the last day of each Plan
Year to the Employer Account of each Active Participant in
accordance with the following:
(i) Step One - First, the lesser of (A) the sum of the
Employer Contribution and Forfeitures for such Plan Year or (B)
the Integration Amount for such Plan Year shall be allocated to
the Employer Account of each Active Participant in the same ratio
that the sum of the total Compensation and Excess Compensation of
each Active Participant for such Plan Year bears to the sum of
the total Compensation and Excess Compensation of all Active
Participants for such Plan Year.
(ii) Step Two - Second, the remaining Employer
Contribution and the Forfeitures, it any, for such Plan Year
shall be allocated to the Employer Account of each Active
Participant (whether or not he or she had Excess Compensation) in
the same ratio that each Active Participant's total Compensation
for such Plan Year bears to the total Compensation of all Active
Participants for such Plan Year.
(iii)Special Definitions - For purpose of this 6.3(a)(2),
(A) "Integration Amount" means the product of (1) the total
Compensation and the total Excess Compensation of all Active
Participants and (2) the Integration Percentage specified in the
Adoption Agreement, but in no event shall the Integration
Percentage exceed the Maximum Disparity Rate for any Plan Year
beginning after December 31, 1988.
(B) "Excess Compensation" means the amount, if any, of a
Participant's Compensation for such Plan Year which exceeds the
Integration Level for such Plan Year.
(iv) Top-Heavy. If this Plan is a Top-Heavy Plan for any
Plan Year, the allocation formula in section 12.3(h)(1) shall
apply in lieu of the formula in this section 6.3(a)(2) for such
Plan Year.
6.3(b) Money Purchase Pension Plan. If this Plan is adopted as
a Money Purchase Pension Plan, the Forfeitures and the Employer
Contribution actually made under section 5.2 (as adjusted, if
applicable, in accordance with section 12.3(h)(2) for a Top-Heavy
Plan) shall be allocated (and posted) as of the last day of each
Plan Year to the Employer Account of each Active Participant in
accordance with the formula specified in the Adoption Agreement.
If Forfeitures are applied to reduce the Employer Contribution
and the Forfeitures available under section 8.2(e) for any Plan
Year exceed the contribution specified in the Adoption Agreement
for such Plan Year, such excess shall be held in a separate
account and shall be applied in full as a Forfeiture to offset
such contributions in the future until such account is exhausted
under this section 6.3(b). If Forfeitures are to be allocated to
Active Participants, such Forfeitures shall be allocated (and
posted) to the Employer Account of each Active Participant in the
same ratio that such Active Participant's Compensation for such
Plan Year bears to the total Compensation of all such Active
Participants for such Plan Year.
6.3(c) 401(k) Plan. If this Plan is adopted as a 401(k) Plan,
Forfeitures and contributions made under section 5.3 shall be
allocated (and posted) in accordance with the following:
6.3(c)(1) Elective Deferrals and Employee Contributions. Elective
Deferrals made on a Participant's behalf for the period ending on
each Valuation Date shall be credited to the Participant's
Elective Deferral Account as of such Valuation Date and the
Employee Contributions made by a Participant for such period
shall be credited to the Participant's Employee Account as of
such Valuation Date.
6.3(c)(2) Matching Contributions and Qualified Matching
Contributions.
(i) Allocation. Matching Contributions and Qualified
Matching Contributions made on a Participant's behalf shall be
credited to the Participant's Matching Account and Qualified
Matching Account, respectively,
(A)Standard Option - as of the last day of each Plan
Year or
(B)Alternative - only as of each Allocation Date
specified in the Adoption Agreement.
(ii) Forfeitures. Forfeitures attributable to Matching
Accounts shall be allocated or applied in accordance with the
following rules; provided, no Forfeitures attributable to Excess
Aggregate Contributions under section 7.5(d) shall be allocated
to the Account of any Highly Compensated Employee:
(A) Forfeitures to Reduce Matching Contribution (Standard
Option). Forfeitures attributable to Matching Accounts shall be
applied to reduce the Matching Contributions for the applicable
Allocation Date (as specified in 8.2 and the Adoption
Agreement). If the Forfeitures exceed the Matching Contribution
specified in the Adoption Agreement for any Allocation Date, such
excess shall be held in a separate account and shall be applied
in full as a Forfeiture to offset Matching Contributions as of
the next Allocation Date (and succeeding Valuation Dates) until
such account is exhausted under this section 6.3(c)(2).
(B) Forfeitures to be Allocated (Alternative). If so
specified in the Adoption Agreement, Forfeitures attributable to
Matching Accounts shall be allocated (and posted)
(I) as of the last day of such Plan Year to the Matching
Account of each Active Participant in the same ratio that such
Active Participant's Compensation for such Plan Year bears to the
total Compensation of all such Active Participants for such Plan
Year, or
(II) in accordance with the formula specified in the
Adoption Agreement for a nonstandardized Plan.
6.3(c)(3) Qualified Nonelective Contributions. Qualified
Nonelective Contributions made on behalf of a Participant shall
be credited to the Participant's Qualified Nonelective Account
(i) Standard Option - as of the last day of each Plan
Year or
(ii) Alternative - only as of each Allocation Date
specified in the Adoption Agreement.
6.3(c)(4) Discretionary Employer Contribution.
(i) Allocation. As of the last day of each Plan Year,
the Employer Contribution, it any, for such Plan Year shall be
allocated (and posted) to the Employer Account of each Active
Participant
(A) Standard Option - in the nonintegrated method
described in section 6.3(a)(1).
(B) Alternative - if so specified in the Adoption
Agreement, in the integrated method described in 6.3(a)(2).
(ii) Forfeitures. Forfeitures attributable to Employer
Accounts shall be allocated or applied in accordance with the
following:
(A) Standard Option. Forfeitures attributable to
Employer Accounts shall be allocated (and posted) as of the last
day of each Plan Year to the Employer Account of each Active
Participant in the same manner as the Employer Contribution under
section 6.3(c)(4)(i).
(B) Alternative. If so specified in the Adoption
Agreement, Forfeitures attributable to Employer Accounts shall be
(I) applied to reduce Matching Contributions, Qualified
Matching Contributions and Qualified Nonelective Contributions
for the applicable Allocation Date (as specified in section 8.2
and the Adoption Agreement) and succeeding Allocation Dates, if
necessary, or
(II) allocated (and posted) in accordance with the formula
specified in the Adoption Agreement for a nonstandardized Plan.
6.3(d) Target Benefit Pension Plan. If this Plan is adopted as a
Target Benefit Pension Plan, the Forfeitures and the Employer
Contribution actually made under section 5.4 for each Plan Year
shall be allocated (and posted) as of the last day of each Plan
Year to the Employer Account of each Active Participant as
specified in the Adoption Agreement. The Forfeitures for each
Plan Year shall be applied to reduce the Employer Contribution
for such Plan Year. If Forfeitures for any Plan Year exceed the
Employer Contributions determined under section 5.4 for such Plan
Year, such excess shall be held in a separate account and shall
be applied in full to offset Employer Contributions in the future
until such account is exhausted under this section 6.3(d).
6.3(e) Top Heavy Minimum Allocation. It this Plan is a Top-Heavy
Plan (as defined in section 12), the minimum allocation required
to be made under this Plan under section 12.3, if any, shall be
allocated (and posted) as of the last day of the Plan Year (1) to
the Employer Account of each Participant who is not an Active
Participant but for whom a minimum allocation is required under
section 12.3 and (2) to each Active Participant for whom a
minimum allocation is required to be made in this Plan under
section l2.3 to the extent such minimum allocation is not
otherwise satisfied by the allocation under this section 6.3. If
this Plan is adopted as a Profit Sharing Plan, the minimum
allocation may be made by reallocating the Employer Contribution
and Forfeitures allocated under section 6.3(a) in a manner which
satisfies this section 6.3(e) or by contributing an additional
amount which will be allocated in accordance with this section
6.3(e). If this Plan is adopted as a Money Purchase Pension Plan,
a Target Benefit Pension Plan or a 401(k) Plan, an additional
Employer Contribution shall be made to satisfy this section
6.3(e).
6.3(f) Rollover Contributions. Rollover Contributions made by a
Participant during the period ending on each Valuation Date shall
be credited to the Participant's Rollover Contribution Account as
of such Valuation Date.
6.4 Allocation Report. The Plan Administrator shall maintain
records of the allocations and adjustments made to Accounts under
this section 6 and shall at least annually prepare and forward to
each such Participant and Beneficiary a statement which shows the
new balance in such person's Account.
6.5 Allocation Corrections. If an error or omission is
discovered in any Account, then as of the first Valuation Date in
the Plan Year in which the error or omission is discovered, the
Plan Administrator shall make (and post) an adjustment to such
Account as the Plan Administrator deems necessary to remedy in an
equitable manner such error or omission.
SECTION 7. STATUTORY LIMITATIONS ON ALLOCATIONS
7.1 Effective Date. Except as otherwise expressly provided,
this section 7 shall be effective retroactive to Plan Years
beginning on or after January 1, 1987.
7.2 Limitations on Annual Additions Under Code section 415.
7.2(a) Special Definitions. For purposes of this section 7.2, the
terms defined in this section 7.2(a) shall have the meanings
shown opposite such terms.
7.2(a)(1) Annual Additions - means for each Participant for any
Limitation Year
(i) the sum of the employer contributions, forfeitures,
and nondeductible employee contributions creditable (without
regard to the application of this section 7.2) to the
Participant's account under this Plan or under any other defined
contribution plan (including a Master or Prototype Plan and any
defined benefit plan which provides for employee contributions)
maintained by the Employer for such Limitation Year; and for this
purpose, any Excess Amount allocated under section 7.2(b), any
Excess Elective Deferrals under section 7.3 (unless such excess
is distributed by the deadline set forth in section 7.3(d)), any
Excess Contributions under section 7.4 and any Excess Aggregate
Contributions under section 7.5 shall be considered Annual
Additions for such Limitation Year;
(ii) amounts allocated on behalf of such Participant
after March 31, 1984 to an individual medical account (as defined
in Code section 415(l)(2)) which is part of a pension or annuity
plan maintained by the Employer; and
(iii) amounts derived from contributions paid or accrued
after December 31, 1985 in taxable years ending after such date
which are attributable to post-retirement medical benefits
allocated to the separate account of a key employee (as defined
in Code section 419A(d)(3)) under a welfare benefit fund (as
described in Code section 419(e)) maintained by the Employer; and
(iv) allocations under a simplified employee pension (as
defined in Code section 408(k).
7.2(a)(2) Compensation - means for a Self-Employed Individual,
such individual's Earned Income, and for each other Employee
(i) Standard Option - compensation reportable on Form W-
2 as defined in 2.1 0(a)(1), or
(ii)Alternative - if so specified in the Adoption Agreement,
(A) compensation subject to withholding as defined in
section 2.10(a)(2)(i), or
(B) the Employee's wages, salaries, fees for
professional services and other amounts received (without regard
to whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment with the
Employer maintaining the Plan to the extent that the amounts are
includable in gross income during the Limitation Year (including,
but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits and
reimbursements or other expense allowances under a nonaccountable
plan as described in section 1.62-2(c) of the Federal Income Tax
Regulations). Compensation shall not include the following:
(I) Employer contributions to a plan of deferred
compensation which are not includable in the Participant's gross
income for the taxable year in which contributed, or Employer
contributions under any simplified employee pension plan, or any
distributions from a plan of deferred compensation;
(II) amounts realized from the exercise of a non-
qualified stock option, or when restricted stock (or property)
held by the Participant either becomes freely transferable or is
no longer subject to a substantial risk of forfeiture;
(III) amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified
stock option; and
(IV) other amounts which receive special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code 403(b) (whether or not the contributions are
actually excludable from the gross income of the Participant).
For purposes of applying the limitations of this section 7.2, an
Employee's Compensation for Limitation Years beginning on and
after the Final Compliance Date shall not include any
Compensation which is accrued for such Limitation Year.
However, for purposes of applying the limitations of this section
7.2 to a Participant in a defined contribution plan who is
permanently and totally disabled (as defined in Code section
22(e)(3)), the term "Compensation" shall mean the compensation
such Participant would have received for the Limitation Year if
the Participant had been paid at the Participant's rate of
Compensation (as defined in this section 7.2(a)(2)) paid
immediately before becoming permanently and totally disabled,
and, further, such imputed compensation for the disabled
Participant may be taken into account only if the Participant is
not a Highly Compensated Employee and contributions made on
behalf of such Participant are nonforfeitable when made.
7.2(a)(3) Defined Benefit Fraction - means a fraction, (i) the
numerator of which shall be the sum of the Participant's
Projected Annual Benefits under all defined benefit plans
(whether or not terminated) maintained by the Employer, and (ii)
the denominator of which shall be the lesser of (A) 125% of the
dollar limitation determined for the Limitation Year under Code
section 415(b) and section 415(d) or (B) 140% of the
Participant's Highest Average Compensation, including any
adjustments under Code section 415(b). However, if the
Participant was a participant as of the first day of the first
Limitation Year beginning after December 31, 1986 in one or more
defined benefit plans maintained by the Employer which were in
existence on May 6, 1986 and which individually and in the
aggregate satisfied the requirements of Code section 415 for all
Limitation Years beginning before January 1, 1987, the
denominator of such fraction shall be not less than 125% of the
sum of the annual benefits under such plans which the Participant
had accrued as of the end of the last Limitation Year beginning
before January 1, 1987 disregarding any changes in the terms and
conditions in the plan after May 5, 1986. Notwithstanding the
foregoing, "100%" shall be substituted for "l 25%" in any
Limitation Year for which this Plan is a Top-Heavy Plan (as
defined in section 12) unless otherwise specified in the Adoption
Agreement.
7.2(a)(4) Defined Contribution Dollar Limitation - means for each
Limitation Year the greater of (i) $30,000 or (ii) one-fourth of
the defined benefit dollar limitation under Code section
415(b)(1) as in effect for such Limitation Year.
7.2(a)(5) Defined Contribution Fraction - means a fraction, (i)
the numerator of which shall (subject to the adjustment rules set
forth below) be the sum of the Annual Additions credited to the
Participant's accounts under all defined contribution plans
(whether or not terminated) maintained by the Employer for the
current and all prior Limitation Years (including the Annual
Additions attributable to the Participant's nondeductible
employee contributions to all defined benefit plans, whether or
not terminated) maintained by the Employer and the Annual
Additions attributable to all welfare benefit funds (as described
in Code section 419(e)) and all individual medical accounts (as
described in Code section 415(i)(2)) maintained by the Employer
and (ii) the denominator of which shall be the sum of the Maximum
Aggregate Amounts for the current and all prior Limitation Years
of service with the Employer (without regard to whether a defined
contribution plan was maintained by the Employer). The numerator
of such fraction shall be adjusted if the Participant was a
participant as of the first day of the first Limitation Year
beginning after December 31, 1986 in one or more defined
contribution plans maintained by the Employer which were in
existence on May 6, 1986 and the sum of this fraction and the
Defined Benefit Fraction would otherwise exceed 1.0 under the
terms of this Plan. The adjustment shall be made by taking an
amount equal to the product of (A) the excess of the sum of the
fractions over 1.0, times (B) the denominator of this fraction,
and by permanently subtracting such product from the numerator of
this fraction. The adjustment shall be calculated using the
fractions as they would be computed as of the end of the last
Limitation Year beginning before January 1, 1987 and disregarding
any changes in the terms and conditions of the Plan made after
May 5, 1986 but using the Code section 415 limitation applicable
to the first Limitation Year beginning on or after January 1,
1987. The Annual Addition for any Limitation Year beginning
before January 1, 1987 shall not be recomputed to treat all
employee contributions as an Annual Addition.
7.2(a)(6) Employer - means the Employer that adopts this Plan and
all members of a controlled group of corporations (as defined in
Code section 414(b) as modified by Code section 415(h)), all
commonly controlled trades or businesses (as defined in Code
section 414(c) as modified by Code section 415(h)) or affiliated
service groups (as defined in Code section 414(m)) of which the
adopting Employer is a part and any other entity required to be
aggregated with the Employer pursuant to the regulations under
Cede section 414(o).
7.2(a)(7) Excess Amount - means the excess of a Participant's
Annual Additions for the Limitation Year over the Maximum
Permissible Amount.
7.2(a)(8) Highest Average Compensation - means the Participant's
average Compensation for the three consecutive Plan Years of
employment with the Employer (without regard to whether such Plan
Years were before the Effective Date) that produces the highest
average.
7.2(a)(9) Limitation Year - means
(i)Standard Option - the Plan Year or
(ii) Alternative - the alternative 12 consecutive month
period specified in the Adoption Agreement.
All qualified plans maintained by the Employer must use the same
Limitation Year. If the Limitation Year is amended to a different
12 consecutive month period, the new Limitation Year must begin
on a date within the Limitation Year in which the amendment is
made.
7.2(a)(10) Master or Prototype Plan - means a plan the form of
which is the subject of a favorable opinion letter from the
Internal Revenue Service.
7.2(a)(11) Maximum Aggregate Amount - means for any Limitation
Year the lesser of (i) 125% of the dollar limitation determined
under Code section 415(c)(1)(A) or (ii) 35% of the Participant's
Compensation for such year. Notwithstanding the foregoing, "l00%"
shall be substituted for 125% in any Limitation year for which
this Plan is a Top-Heavy Plan (as defined in section 12) unless
otherwise specified in the Adoption Agreement.
7.2(a)(12) Maximum Permissible Amount - means the lesser of (i)
the Defined Contribution Dollar Limitation or (ii) 25% of a
Participant's Compensation for the Limitation Year; provided,
(A) the compensation limitation referred to in clause
(ii)shall not apply to any contribution for medical benefits
(within the meaning of Code section 401(h) or section 419A(f)(2))
which is otherwise treated as an Annual Addition under Code
section 415(l)(1) or section 419(A)(d)(2); and
(B) if a short Limitation Year is created because of an
amendment changing the Limitation Year to a different 12
consecutive month period, the Maximum Permissible Amount shall
not exceed the Defined Contribution Dollar Limitation multiplied
by a fraction, the numerator of which shall be the number of
months in the short Limitation Year and the denominator of which
shall be 12.
7.2(a)(13) Projected Annual Benefit - means the annual retirement
benefit (adjusted to an actuarially equivalent straight life
annuity if such benefit is expressed in a form other than a
straight life annuity or qualified joint and survivor annuity) to
which a Participant would be entitled under the terms of a
defined benefit plan assuming:
(i) the Participant will continue employment until
normal retirement age under the plan (or current age, if later),
and
(ii) the Participant's Compensation for the current
Limitation Year and all other relevant factors used to determine
benefits under the plan will remain constant for all future
Limitation Years.
7.2(b) Limitation If No Other Plans. If a Participant does not
participate in, and has never participated in, another qualified
plan maintained by the Employer or a welfare benefit fund (as
described in Code section 419(e)) or individual medical account
(as described in Code section 415(1)(2)) maintained by the
Employer which provides an Annual Addition as defined in section
7.2(a)(1) or a simplified employee pension (as defined in Code
section 408(k)) maintained by the Employer, the amount of Annual
Additions which actually may be credited to the Account of any
Participant for any Limitation Year shall not exceed the lesser
of the Maximum Permissible Amount or any other limitation set
forth in this Plan. It the Employer Contribution that would
otherwise be credited to the Participant's Account would cause
the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, such amount shall be reduced so that
the Annual Additions actually credited for the Limitation Year
shall equal the Maximum Permissible Amount. If pursuant to
section 7.2(f) or as a result of the allocation of Forfeitures a
Participant's Annual Additions under this Plan would result in an
Excess Amount, such Excess Amount shall be disposed of as
follows:
7.2(b)(1) Profit Sharing Plan. If this Plan is adopted as a
Profit Sharing Plan,
(i) such Excess Amount shall be deemed a Forfeiture
which shall be allocated and reallocated as provided in section
6.3(a) subject to the restrictions of this section 7.2 among the
Employer Accounts of the remaining Active Participants until such
amount has been allocated in its entirety; and
(ii) if the restrictions in this section 7.2 apply
before such amount has been reallocated in its entirety, as the
final allocation step such unallocable Excess Amount shall be
transferred to a suspense account.
7.2(b)(2) Money Purchase Pension Plan or Target Benefit Pension
Plan. If this Plan is adopted as a Money Purchase Pension Plan or
Target Benefit Pension Plan,
(i) Standard Option - such Excess Amount shall be held
unallocated in a suspense account which shall be applied to
offset future Employer Contributions for Active Participants in
the next Limitation Year (and in each succeeding Limitation Year
if necessary).
(ii)Alternative - it so specified in the Adoption Agreement,
(A) for any Participant who is an Active
Participant at the end of the Limitation Year, such Excess Amount
shall be held unallocated in a suspense account which shall be
applied to offset the Employer Contribution for such Active
Participant in the next Limitation Year (and in each succeeding
Limitation Year if necessary); and
(B) for any Participant who is not an Active
Participant at the end of such Limitation Year, such Excess
Amount shall be held unallocated in a suspense account which
shall be applied to offset future Employer Contributions for all
remaining Active Participants in the next Limitation Year (and in
each succeeding Limitation Year if necessary).
7.2(b)(3) 401(k) Plan. If this Plan is adopted as a 401(k)
Plan, any Elective Deferrals and Employee Contributions made by
the Participant during the Limitation Year (and, to the extent
required under regulations, gains attributable to such Employee
Contributions) shall be refunded to the extent such refund would
reduce the Excess Amount and, if an Excess Amount still exists
after such refund,
(i) any such Excess Amount which is attributable to
discretionary Employer Contributions shall be disposed of in the
same manner as an Excess Amount under a Profit Sharing Plan as
described in section 7.2(b)(1), and
(ii) any such Excess Amount which is attributable to a
Matching Contribution, Qualified Nonelective Contribution or
Qualified Matching Contribution shall be held unallocated in a
suspense account which shall be used to offset future Matching
Contributions, Qualified Nonelective Contributions or Qualified
Matching Contributions in the next Limitation Year (and in each
succeeding Limitation Year if necessary).
7.2(b)(4) Suspense Account. A suspense account established
pursuant to this section 7.2(b) shall not be subject to any
allocation of Fund Earnings under section 6.2, and the balance of
such account shall be returned to the Employer in the event this
Plan is terminated prior to the date such account has been
allocated in its entirety as a Forfeiture. In no event shall
Excess Amounts be distributed to Participants or former
Participants.
7.2(c) Limitation If Other Defined Contribution Master or
Prototype Plan. This section 7.2(c) applies if, in addition to
this Plan, a Participant is covered under another defined
contribution Master or Prototype Plan maintained by the Employer
or a welfare benefit fund (as described in Code section 419(e))
or an individual medical account (as described in Code section
415(l)(2)) maintained by the Employer which provides for an
Annual Addition as defined in section 7.2(a)(1) or a simplified
employee pension (as defined in Code section 408(k)) maintained
by the Employer during any Limitation Year. The Annual Additions
which may be credited to a Participant's Account under this Plan
for any such Limitation Year shall not exceed the Maximum
Permissible Amount reduced by the Annual Additions credited to a
Participant's account under such other defined contribution
Master or Prototype Plan and welfare benefit funds for the same
Limitation Year.
7.2(c)(1) If for any Limitation Year (1) the Employer also
maintains another defined contribution Paired Plan, (2) the
Employer does not maintain any other defined contribution Master
or Prototype Plan (other than such Paired Plan) and (3) a
Participant's Annual Additions under such Paired Plans would
result in an Excess Amount for such Limitation Year, the
allocation adjustment required to satisfy the limitations of Code
415 shall be made under such Plans in the following order:
(i) Standard Option - first, under the Profit Sharing
Plan, if any; second under the Money Purchase Pension Plan, if
any; third under the Target Benefit Pension Plan, if any; and
finally, under the 401(k) Plan, if any; or
(ii) Alternative - in the alternative order specified in
the Adoption Agreement.
7.2(c)(2) If the Annual Additions with respect to any
Participant under such other defined contribution Master or
Prototype Plan (other than a defined contribution Paired Plan)
and welfare benefit funds maintained by the Employer are less
than the Maximum Permissible Amount and the Employer Contribution
that would otherwise be contributed or allocated to the
Participant's Account under this Plan would cause the Annual
Additions for the Limitation Year to exceed this limitation, the
amount contributed or allocated shall be reduced so that the
Annual Additions under all such plans and funds for the
Limitation Year shall equal the Maximum Permissible Amount.
7.2(c)(3) If the Annual Additions with respect to the
Participant under such other defined contribution Master and
Prototype Plan (other than a defined contribution Paired Plan)
and welfare benefit funds in the aggregate are equal to or
greater than the Maximum Permissible Amount, no amount shall be
credited to the Participant's Account under this Plan for the
Limitation Year.
7.2(c)(4) If pursuant to section 7.2(f) or as a result of
the allocation of Forfeitures a Participant's Annual Additions
under this Plan and such other defined contribution Master or
Prototype Plan (other than a Paired Plan) and welfare benefit
funds would result in an Excess Amount for any Limitation Year,
(i) the Excess Amount shall be deemed to consist of the
Annual Additions last allocated and the Annual Additions
attributable to a welfare benefit fund or an individual medical
account shall be deemed to have been allocated prior to all other
Annual Additions, and
(ii) if an Excess Amount was allocated to a Participant
on an allocation date of this Plan which coincides with an
allocation date of such other Master or Prototype Plan, then the
Excess Amount attributed to this Plan shall be the product of
(A) the total Excess Amount allocated as of such
date, times
(B) a fraction, the numerator of which shall be the
Annual Additions allocated to the Participant for the Limitation
Year as of such date under this Plan and the denominator of which
is the total Annual Additions allocated to the Participant for
the Limitation Year as of such date under this and all such other
defined contribution Master or Prototype Plans.
7.2(c)(5) Any Excess Amount attributed to this Plan will be
disposed of in the manner described in section 7.2(b).
7.2(d) Limitation If Other Defined Contribution Plan. If any
Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a
Master or Prototype Plan, the Annual Additions which may be
credited to the Participant's Account under this Plan for any
Limitation Year shall be limited
7.2(d)(1) Standard Option - as specified in section 7.2(c) as
though the other plan was a Master or Prototype Plan or
7.2(d)(2) Alternative - under the alternative method specified in
the Adoption Agreement for limiting the Annual Additions under
this Plan.
7.2(e) Limitation If Other Defined Benefit Plan. If the Employer
maintains, or at any time maintained, a qualified defined benefit
plan (other than a defined benefit Paired Plan) covering any
Participant in this Plan, the sum of the Participant's Defined
Benefit Fraction and Defined Contribution Fraction shall not
exceed 1.0 in any Limitation Year. The Annual Additions which may
be credited to any Participant's Account under this Plan for any
Limitation Year shall be limited as specified in the Adoption
Agreement. If the Employer maintains a defined benefit Paired
Plan, any adjustments to satisfy the requirements of Code section
415(e) shall be made only under such defined benefit Paired Plan.
7.2(f) Compensation for Determination of Maximum Permissible
Amount. Prior to determining a Participant's actual Compensation
for the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation
Year, and, if applicable, a reasonable estimation of the amount
of elective deferrals (within the meaning of Code section
402(g)(3)) that the Participant may make for the Limitation Year,
uniformly determined for all similarly situated Participants. As
soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the
Limitation Year shall be determined on the basis of the
Participant's actual Compensation for the Limitation Year.
7.3 Individual Limitation on Elective Deferrals Under Code
section 402(g).
7.3(a) General. A Participant's Elective Deferrals under
this Plan and all other qualified plans, contracts and
arrangements maintained by the Employer or an Affiliate during
any taxable year of the Participant shall not exceed the dollar
limitation under Code section 402(g) in effect at the beginning
of such taxable year.
7.3(b) Elective Deferrals. For purposes of the dollar
limitation under Code section 402(g) and this section 7.3, the
term "Elective Deferrals" shall include all employer
contributions made on behalf of a Participant pursuant to an
election to defer under any qualified cash or deferred
arrangement as described in Code section 401(k), any simplified
employee pension cash or deferred arrangement as described in
Code section 402(h)(1)(B), any plan described under Code section
501(c)(18), and any salary reduction agreement for the purchase
of an annuity contract under Code section 403(b). However, the
term shall not include Elective Deferrals which are properly
distributed to the Participant from this Plan under section 7.2
or such other plans or arrangements to correct for excess annual
additions.
7.3(c) Excess Elective Deferrals. For purposes of this
section 7.3, the term "Excess Elective Deferrals" means for each
Participant the Elective Deferrals that are includable in gross
income under Code section 402(g) to the extent the Participant's
Elective Deferrals for a taxable year exceed the dollar
limitations under Code section 402(g) for such taxable year.
7.3(d) Distribution of Excess Elective Deferrals.
Notwithstanding any other provision of this Plan restricting the
timing of distributions, Excess Elective Deferrals, plus any
income and minus any loss allocable thereto, shall be distributed
no later than April 15 of any calendar year to Participants (1)
whose Excess Elective Deferrals for the preceding taxable year
were assigned to this Plan and (2) who claim (or are deemed to
have claimed) such allocable Excess Elective Deferrals for such
taxable year in accordance with the claims procedure set forth in
section 7.3(f).
7.3(e) Determination of Income or Loss. A corrective
distribution of Excess Elective Deferrals under this section 7.3
shall include the income or loss allocable to such Excess
Elective Deferrals for the Participant's taxable year in which
such excess occurred and, if so specified in the Adoption
Agreement, for the period between the end of such taxable year
and the date of distribution ("gap period"). The income or loss
for such taxable year and gap period, if applicable, shall be
determined in accordance with the regulations under Code section
402(g). In lieu of using the safe harbor method or the
alternative method in the regulations for allocating such income
or loss, the Plan Administrator may use any reasonable method for
computing such income or loss, provided that such method does not
violate Code section 401(a)(4), is used consistently for all
Participants and for all corrective distributions under the Plan
for the Plan Year, and is used by the Plan for allocating income
or loss to Participant's Accounts.
7.3(f) Claims Procedure.
7.3(f)(1) General. A Participant may assign to this Plan any
Excess Elective Deferral made during a taxable year by filing a
claim with the Plan Administrator on or before
(i)Standard Option - March 1 or
(ii)Alternative - the alternative date for filing such
claims specified in the Adoption Agreement,
Unless otherwise provided in administrative procedures
established by the Plan Administrator, such claim shall be in
writing, shall specify the dollar amount of the Participant's
Excess Elective Deferrals assigned to this Plan for such taxable
year, and shall be accompanied by the Participant's written
statement that such amounts, if not distributed to such
Participant, will exceed the limit imposed on the Participant by
Code section 402(g) for the taxable year in which the deferral
occurred.
7.3(f)(2) Deemed Claim. A Participant automatically shall be
deemed to have filed a claim under this section 7.3(f) to the
extent that such Excess Elective Deferrals occurred solely as a
result of Elective Deferrals under this Plan and any other plans
of the Employer and the Affiliates, unless the Employer specifies
in the Adoption Agreement that such Excess Elective Deferrals
shall be distributed from one or more of such other plans.
7.4 Limitations on Elective Deferrals for Highly Compensated
Employees under Code section 401(k).
7.4(a) Special Definitions. For purposes of this section
7.4, the terms defined in this section 7.4(a) shall have the
meanings shown opposite such terms.
7.4(a)(1) Actual Deferral Percentage - means for each Plan Year
for each Participant who is an Eligible Employee at any time
during such Plan Year the ratio (expressed as a percentage and
determined in accordance with section 7.4(c)) of Employer
Contributions made on behalf of such Participant for such Plan
Year to such Participant's Compensation for such Plan Year. The
Actual Deferral Percentage of a Participant who is an Eligible
Employee, but does not make an Elective Deferral and does not
receive an allocation of a Qualified Nonelective Contribution or
a Qualified Matching Contribution, shall be zero.
7.4(a)(2) ADP (or Average Actual Deferral Percentage) -
means for each Plan Year separately for the group of Participants
who are Highly Compensated Employees during such Plan Year and
for the group of Participants who are Nonhighly Compensated
Employees during such Plan Year, the average (expressed as a
percentage) of the Actual Deferral Percentages of the
Participants in each such group who are Eligible Employees at any
time during such Plan Year.
7.4(a)(3) Employer Contributions - means for purposes of
determining a Participant's Actual Deferral Percentage for each
Plan Year, the sum of (i) the Elective Deferrals made pursuant to
the Participant's deferral election, including Excess Elective
Deferrals (as defined in section 7.3(c)) of Highly Compensated
Employees, but excluding Excess Elective Deferrals of Nonhighly
Compensated Employees that arise solely from Elective Deferrals
made under this Plan or any other plans of the Employer and the
Affiliates, and excluding Elective Deferrals that are taken into
account in the ADP test described in section 7.5(b) (provided the
ADP test is satisfied both with and without exclusion of such
Elective Deferrals), and (ii) at the election of the Employer,
Qualified Nonelective Contributions and Qualified Matching
Contributions.
7.4(a)(4) Excess Contributions - means for each Plan Year for
each Highly Compensated Employee the excess of the aggregate
amount of Employer Contributions actually taken into account in
computing the Average Deferral Percentage of such Highly
Compensated Employee for such Plan Year over the maximum amount
of such contributions permitted for such Plan Year under the ADP
limit as set forth in section 7.4(b) (determined by reducing
Elective Deferrals, Qualified Nonelective Contributions and
Qualified Matching Contributions made on behalf of Highly
Compensated Employees in order of their Actual Deferral
Percentages, beginning with the highest of such percentages).
7.4(a)(5) Highly Compensated Employee - means any Employee who is
either a "highly compensated active employee" or a "highly
compensated former employee" as described below.
(i) A "highly compensated active employee" means any Employee
who performs services for the Employer or any Affiliate during
the "determination year" and who, during the "look-back year":
(A) received compensation from the Employer or any Affiliate in
excess of $75,000 (as adjusted pursuant to Code section 415(d));
(B) received compensation from the Employer or any Affiliate in
excess of $50,000 (as adjusted pursuant to Code section 415(d))
and was a member of the "top-paid group" for such year; or (C)
was an officer of the Employer or any Affiliate and received
compensation during such year that is greater than 50% of the
dollar limitation in effect under Code section 415(b)(1)(A). The
term "highly compensated employee" shall also include: (I) an
Employee who is both described in the preceding sentence if the
term "determination year" is substituted for the term "look-back
year" and is one of the 100 Employees who received the most
compensation from the Employer or any Affiliate during the
determination year; and (II) an Employee who is a 5% owner at any
time during the look-back year or determination year. If no
officer has satisfied the compensation requirement of clause (C)
above during either a determination year or look-back year, the
highest paid officer for each such year shall be treated as a
Highly Compensated Employee.
(ii) A "highly compensated former employee" means any
Employee who separated (or was deemed to have separated) from
service prior to the determination year, performs no services for
the Employer or any Affiliate during the determination year, and
was a highly compensated active employee for either the
separation year or any determination year ending on or after the
Employee's 55th birthday.
(iii) For purposes of this definition, the "determination
year" shall mean the Plan Year and the "look-back year" shall
mean the 12-month period immediately preceding the determination
year.
(iv) If an Employee is, during a determination year or look-
back year, a Family Member of either a 5% owner who is an active
or former Employee or a Highly Compensated Employee who is one of
the 10 most Highly Compensated Employees ranked on the basis of
compensation paid by the Employer during such year ("top-ten
Highly Compensated Employee"), then the Family Member and the 5%
owner or top-ten Highly Compensated Employee shall be treated as
a single Employee receiving compensation and Plan contributions
or benefits equal to the sum of such compensation and
contributions or benefits of the Family Member and the 5% owner
or top-ten Highly Compensated Employee.
(v) The determination of who is a Highly Compensated
Employee, including the determination of the number and identity
of Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the compensation that
is considered, shall be made in accordance with Code section
414(q) including any available operational transition rules and
any elections provided in the regulations under Code section
414(q) and specified in the Adoption Agreement.
7.4(b) ADP Limit. The ADP for Highly Compensated Employees for
any Plan Year shall not exceed
7.4(b)(1) the ADP for Nonhighly Compensated Employees for
such Plan Year multiplied by 1.25, or
7.4(b)(2) the ADP for Nonhighly Compensated Employees for
such Plan Year multiplied by 2, provided that the ADP for Highly
Compensated Employees does not exceed the ADP for Nonhighly
Compensated Employees by more than 2 percentage points.
7.4(c) Special Rules.
7.4(c)(1) Other Plans. The Actual Deferral Percentage for
any Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to participate in more than one cash or
deferred arrangement maintained by the Employer or an Affiliate
shall be determined by treating all such arrangements as a single
arrangement. If a Highly Compensated Employee participates in two
or more cash or deferred arrangements that have different plan
years, all such arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, plans which are mandatorily
disaggregated under regulations under Code section 401(k) shall
be treated as separate.
7.4(c)(2) Aggregation. In the event that this Plan satisfies
the requirements of Code section 410(b) only if aggregated with
one or more other plans, or if one or more other plans satisfy
the requirements of such Code section only if aggregated with
this Plan, then this section 7.4 shall be applied by determining
the Actual Deferral Percentages and ADP as if all such plans were
a single plan. For Plan Years beginning on and after the Final
Compliance Date, such plans may be aggregated only if they have
the same plan years and are not mandatorily disaggregated under
regulations under Code section 401(k).
7.4(c)(3) Family Members. For purposes of determining the
Actual Deferral Percentage of a Participant who is a 5% owner or
one of the 10 most highly paid Highly Compensated Employees and
who is an Eligible Employee at any time during the Plan Year, the
Employer Contributions and Compensation of such Participant shall
include the Employer Contributions and Compensation of his or her
Family Members, and such Family Members shall be disregarded as
separate Participants in determining the ADP both for Nonhighly
Compensated Employees and for Highly Compensated Employees.
7.4(c)(4) Timing. For purposes of determining the Actual
Deferral Percentages for any Plan Year, Elective Deferrals,
Qualified Nonelective Contributions and Qualified Matching
Contributions shall be considered made for such Plan Year only if
such contributions are allocated as of a date within such Plan
Year and are actually paid to the Fund by the last day of the 12
month period immediately following such Plan Year.
7.4(c)(5) Records. The Plan Administrator shall maintain
records which are sufficient to demonstrate that the Plan
complied with the ADP limits, including the extent to which
Qualified Nonelective Contributions and Qualified Matching
Contributions are taken into account to satisfy such ADP limits.
7.4(c)(6) Other Requirements. The determination and
treatment of the Elective Deferrals and Actual Deferral
Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
7.4(d) Distribution of Excess Contributions.
7.4(d)(1) General. Notwithstanding any other provision of
this Plan restricting the timing of distributions, Excess
Contributions for any Plan Year, plus any income and minus any
loss allocable thereto, shall be distributed no later than the
last day of the immediately following Plan Year to Participants
on whose behalf such Excess Contributions were made. If such
Excess Contributions are distributed more than 2 1/2 months after
the last day of the Plan Year in which such excess occurred, a
10% excise tax shall be imposed under Code section 4979 on the
Employer with respect to such excess. Such distributions shall be
made to such Participants on the basis of the respective portions
of the Excess Contributions attributable to each such
Participant. Excess Contributions shall be allocated to
Participants who are subject to the Family Member aggregation
rules under Code section 414(q)(6) in the manner prescribed by
the regulations under Code section 401(k).
7.4(d)(2) Determination of Income or Loss. A corrective
distribution of Excess Contributions under this section 7.4 shall
include the income or loss allocable to such Excess Contributions
for the Plan Year in which such excess occurred and, if so
specified in the Adoption Agreement, for the period between the
end of such Plan Year and the date of distribution ("gap
period"). The income or loss for such Plan Year and gap period,
if applicable, shall be determined in accordance with the
regulations under Code section 401(k). In lieu of using the safe
harbor method or the alternative method in the regulations for
allocating such income or loss, the Plan Administrator may use
any reasonable method for computing such income or loss, provided
that such method does not violate Code section 401(a)(4), is used
consistently for all Participants and for all corrective
distributions under the Plan for the Plan Year, and is used by
the Plan for allocating income or loss to Participant's Accounts.
7.4(d)(3) Order for Determining Excess Contributions. Excess
Contributions shall be determined after first determining Excess
Elective Deferrals under section 7.3. The Excess Contributions
which would otherwise be distributed to the Participant shall be
reduced, in accordance with regulations, by the Excess Elective
Deferrals distributed to the Participant under section 7.3.
7.4(d)(4) Accounting for Excess Contributions. Excess
Contributions shall be distributed proportionately from the
Participant's Elective Deferral Account and Qualified Matching
Account in the same ratio that such Participant's Elective
Deferrals and Qualified Matching Contributions for the Plan Year
in which such Excess Contributions were made bears to the sum of
the Participant's Elective Deferrals and Qualified Matching
Contributions for such Plan Year. Excess Contributions shall be
distributed from the Participant's Qualified Nonelective Account
only to the extent that such Excess Contributions exceed the
balance in the Participant's Elective Deferral Account and
Qualified Matching Account. Notwithstanding the foregoing, Excess
Contributions may be distributed from the applicable subaccounts
in accordance with procedures established by the Plan
Administrator provided such procedures do not result in
discrimination in favor of Highly Compensated Employees which
would be prohibited under Code section 401(a)(4).
7.4(e) Recharacterization. If the Employer specifies in the
Adoption Agreement that Excess Contributions may be
recharacterized, a Participant may elect to treat Excess
Contributions as an amount distributed to the Participant and
then contributed as an Employee Contribution to the Plan. Any
such Excess Contribution which is so recharacterized as an
Employee Contribution shall remain nonforfeitable and shall
thereafter be subject to the same distribution restrictions
applicable to Elective Deferrals under section 9.2(b). Excess
Contributions shall not be recharacterized by a Participant to
the extent that such amounts, in combination with other Employee
Contributions, would exceed any limits on Employee Contributions
set forth in the Plan or in the Adoption Agreement.
Any such recharacterization must occur no later than 2 1/2 months
after the end of the Plan Year in which such Excess Contribution
occurred and shall be deemed to occur no earlier than the date on
which the last Highly Compensated Employee is informed in writing
of the amount recharacterized and the consequences of such
recharacterization. Any Excess Contributions which are so
recharacterized shall be taxable to the Participant for the
taxable year in which the Participant would have received such
amount in cash but for the deferral election.
7.5 Limitations on Employee Contributions and Matching
Contributions under Code section 401(m).
7.5(a) Special Definitions. For purposes of this section 7.5, the
terms defined in this section 7.5(a) shall have the meanings
shown opposite such terms.
7.5(a)(1) Aggregate Limit - means the sum of
(i) 125% of the greater (or lesser, if it would result
in a larger Aggregate Limit) of
(A) the ADP for Nonhighly Compensated Employees under
the plan subject to Code section 401(k) for the plan year or
(B) the ACP for Nonhighly Compensated Employees under
the plan subject to Code section 401(m) for the plan year
beginning with or within the plan year of the plan which is
subject to Code section 401(k) and
(ii)the lesser of
(A) 200% of such ADP or ACP or
(B) two plus the lesser (or greater, if it would result in
a larger Aggregate Limit) of such ADP or ACP
7.5(a)(2) ACP (or Average Contribution Percentage) - means for
each Plan Year separately for the group of Participants who are
Highly Compensated Employees during such Plan Year and for the
group of Participants who are Nonhighly Compensated Employees
during such Plan Year, the average (expressed as a percentage) of
the Contribution Percentages of the Participants in each such
group who are Eligible Employees at any time during such Plan
Year.
7.5(a)(3) Contribution Percentage - means for each Plan Year for
each Participant who is an Eligible Employee at any time during
such Plan Year, the ratio (expressed as a percentage and
determined in accordance with section 7.5(c)) of such
Participant's Contribution Percentage Amount for such Plan Year
to such Participant's Compensation for such Plan Year. The
Contribution Percentage of a Participant who is eligible to, but
does not, make Employee Contributions or Elective Deferrals and
who, as a result of such failure to make such contributions, does
not receive an allocation of a Matching Contribution or Qualified
Matching Contribution shall be zero.
7.5(a)(4) Contribution Percentage Amount - means for each Plan
Year for each Participant who is an Eligible Employee at any time
during such Plan Year the sum of
(i) the Employee Contributions, Matching Contributions
and Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP test described in section
7.4) made on behalf of such Participant for such Plan Year, other
than Matching Contributions which are forfeited either to correct
Excess Aggregate Contributions or because the contributions to
which they relate are Excess Elective Deferrals, Excess
Contributions or Excess Aggregate Contributions,
(ii) the Forfeitures allocated to such Participant's
Account for such Plan Year which are attributable to Matching
Contributions and Excess Aggregate Contributions,
(iii) at the election of the Employer, the Qualified
Nonelective Contributions made on behalf of such Participant for
such Plan Year (to the extent not taken into account for purposes
of the ADP test described in section 7.4), and
(iv) at the election of the Employer, Elective Deferrals
(provided the ADP limit described in section 7.4 is met both
including and excluding the Elective Deferrals that are used to
meet the ACP limit).
7.5(a)(5) Employee Contribution - means for purposes of
determining a Participant's Contribution Percentage Amount any
contributions made by the Participant which are included in gross
income for the taxable year in which made and which are
maintained in a separate account to which earnings and losses are
allocated.
7.5(a)(6) Excess Aggregate Contribution - means for each Plan
Year for each Highly Compensated Employee the excess of the
aggregate Contribution Percentage Amounts actually taken into
account in computing the ACP of such Highly Compensated Employee
for such Plan Year over the maximum Contribution Percentage
Amounts permitted for such Plan Year under the ACP limit as set
forth in section 7.5(b) (determined by reducing contributions and
Forfeitures on behalf of Highly Compensated Employees in order of
their Contribution Percentages, beginning with the highest of
such percentages).
7.5(a)(7) Matching Contribution - means for purposes of
determining a Participant's Contribution Percentage Amount any
Employer contribution made to this Plan or any other defined
contribution plan on account of an Employee Contribution or
Elective Deferral made by or on behalf of the Participant under a
plan maintained by the Employer.
7.5(b) ACP Limit. The ACP for Participants who are Highly
Compensated Employees for any Plan Year shall not exceed
7.5(b)(1) the ACP for Participants who are Nonhighly Compensated
Employees for such Plan Year multiplied by 1.25, or
7.5(b)(2) the ACP for Participants who are Nonhighly Compensated
Employees for such Plan Year multiplied by 2, provided that the
ACP for Participants who are Highly Compensated Employees does
not exceed the ACP for Participants who are Nonhighly Compensated
Employees by more than 2 percentage points.
7.5(c) Special Rules.
7.5(c)(1) Multiple Use. For Plan Years beginning after the Final
Compliance Date, if
(i) one or more Highly Compensated Employees
participates both in a plan with a qualified cash or deferred
arrangement which is subject to the ADP limitations under Code
section 401(k) as described in section 7.4 and in a plan which is
subject to the ACP limitations under Code section 401(m) as
described in this section 7.5,
(ii) the sum of the ADP of the eligible Highly
Compensated Employees in the plan subject to Code section 401(k)
and the ACP of the eligible Highly Compensated Employees in the
plan subject to Code section 401(m) exceeds the Aggregate Limit,
and
(iii) both the ADP and the ACP of the eligible Highly
Compensated Employees in such plans exceed 125% of the ADP or ACP
respectively of the eligible Nonhighly Compensated Employees in
such plans, then the Contribution Percentages of the Highly
Compensated Employees who participate in both such plans shall be
reduced (beginning with the highest of such percentages) so that
the Aggregate Limit for such plans is not exceeded. Any such
reduction shall be treated as an Excess Aggregate Contribution.
The determination of the limitations under this special rule
shall be made after any corrections required to meet the ADP
limits and the ACP limits and in accordance with the regulations
under Code section 401(m).
7.5(c)(2) Other Plans. The Contribution Percentage for any
Participant who is a Highly Compensated Employee for the Plan
Year and who is eligible to participate in more than one plan
maintained by the Employer or an Affiliate to which "employee
contributions" (within the meaning of Code section 401(m)) or
"matching contributions" (as described in Code section 401(m)(4))
are made shall be determined by treating all such plans as one
plan. If a Highly Compensated Employee participates in two or
more such plans that have different plan years, all such plans
ending with or within the same calendar year shall be treated as
a single plan. Notwithstanding the foregoing, plans which are
mandatorily disaggregated under regulations under Code section
401 (m) shall be treated as separate.
7.5(c)(3) Aggregation. In the event that this Plan satisfies the
requirements of Code section 410(b) only if aggregated with one
or more other plans, or it one or more other plans satisfy the
requirements of such Code sections only if aggregated with this
Plan, then this section 7.5 shall be applied by determining the
Contribution Percentages and ACP as if all such plans were a
single plan. For Plan Years beginning on and after the Final
Compliance Date, such plans may be aggregated only if they have
the same plan years and they are not mandatorily disaggregated
under regulations under Code section 401(m).
7.5(c)(4) Family Members. For purposes of determining the
Contribution Percentage of a Participant who is a 5% owner or one
of the 10 most highly paid Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation of such
Participant shall include the Contribution Percentage Amounts and
Compensation of his or her Family Members, and such Family
Members shall be disregarded as separate Participants in
determining the ACP both for Participants who are Nonhighly
Compensated Employees and for Participants who are Highly
Compensated Employees.
7.5(c)(5) Timing. For purposes of determining the ACP for any
Plan Year, Employee Contributions shall be considered made in the
Plan Year in which they are actually contributed to the Fund and
Matching Contributions (and, if applicable, Qualified Matching
Contributions and Qualified Nonelective Contributions) shall be
considered made for such Plan Year only if such contributions are
allocated as of a date within such Plan Year and are actually
paid to the Fund by the last day of the 12-month period
immediately following such Plan Year.
7.5(c)(6) Records. The Plan Administrator shall maintain records
which are sufficient to demonstrate that the Plan complied with
the ACP limits, including the extent to which Elective Deferrals,
Qualified Nonelective Contributions and Qualified Matching
Contributions are taken into account to satisfy such ACP limits.
7.5(c)(7) Other Requirements. The determination and treatment of
the Contribution Percentage of any Participant shall satisfy such
other requirements as may be prescribed by the Secretary of the
Treasury.
7.5(d) Distribution of Excess Aggregate Contributions.
7.5(d)(1) General. Notwithstanding any other provision of this
Plan restricting the timing of distributions, Excess Aggregate
Contributions for any Plan Year, plus any income and minus any
loss allocable thereto, shall be forfeited (if otherwise
forfeitable under the Plan) or distributed (if not forfeitable)
from the Accounts of Participants on whose behalf such Excess
Aggregate Contributions were made no later than the last day of
the immediately following Plan Year. If such Excess Aggregate
Contributions are distributed more than 2 1/2 months after the
last day of the Plan Year in which such excess occurred, a 10%
excise tax shall be imposed under Code section 4979 on the
Employer with respect to such excess. Excess Aggregate
Contributions shall be allocated to Participants who are subject
to the Family Member aggregation rules under Code section
414(q)(6) in the manner prescribed by the regulations under Code
section 401(m).
7.5(d)(2) Determination of Income or Loss. A corrective
distribution of Excess Aggregate Contributions under this section
7.5 shall include the income or loss allocable to such Excess
Aggregate Contributions for the Plan Year in which such excess
occurred and, if so specified in the Adoption Agreement, for the
period between the end of such Plan Year and the date of
distribution ("gap period"). The income or loss for such Plan
Year and gap period, if applicable, shall be determined in
accordance with the regulations under Code section 401(m). In
lieu of using the safe harbor method or the alternative method in
the regulations for allocating such income or loss, the Plan
Administrator may use any reasonable method for computing such
income or loss, provided that such method does not violate Code
section 401(a)(4), is used consistently for all Participants and
for all corrective distributions under the Plan for the Plan
Year, and is used by the Plan for allocating income or loss to
Participant's Accounts.
7.5(d)(3) Order for Determining Excess Aggregate Contributions.
Excess Aggregate Contributions shall be determined after first
determining Excess Elective Deferrals under section 7.3 and then
determining Excess Contributions under section 7.4.
7.5(d)(4) Accounting for Excess Aggregate Contributions. Excess
Aggregate Contributions shall be forfeited (if otherwise
forfeitable) or distributed (if not forfeitable) to the Highly
Compensated Employee from the Participant's Employee Account,
Matching Account, Qualified Matching Account, Qualified
Nonelective Account and Elective Deferral Account in the same
ratio that the contributions made on the Participant's behalf to
such account (to the extent such contributions are used in the
ACP test) for the Plan Year in which such Excess Aggregate
Contributions were made bears to the total of all such
contributions. Notwithstanding the foregoing, Excess Aggregate
Contributions may be distributed from the applicable subaccounts
in accordance with procedures established by the Plan
Administrator provided such procedures do not result in
discrimination in favor of Highly Compensated Employees which
would be prohibited under Code section 401(a)(4).
7.5(d)(5) Allocation of Forfeitures. Amounts forfeited by Highly
Compensated Employees under this section 7.5 shall be allocated
or applied in accordance with section 6.3(c)(2); provided, no
Forfeitures arising under this section 7.5 shall be allocated to
the Account of any Highly Compensated Employee.
SECTION 8. VESTING AND FORFEITURES
8.1 Determination of Nonforfeitable Percentage.
8.1 (a) Fully Vested Accounts. Each Rollover Account, Employee
Account, Elective Deferral Account, Qualified Matching Account
and Qualified Nonelective Account shall be completely
nonforfeitable at all times.
8.1(b) Death, Disability and Retirement. The Employer Account and
Matching Account of each Participant who reaches Early Retirement
Age or Normal Retirement Age while an Employee shall become
completely nonforfeitable on such date. The Employer Account and
Matching Account of each Participant who dies while an Employee
or who becomes Disabled while an Employee
8.1(b)(1) Standard Option - shall become completely
nonforfeitable on such date.
8.1(b)(2) Alternative - if so specified in the Adoption
Agreement, shall be determined in accordance with the vesting
schedule under section 8.1(c).
8.1(c) Other Separation From Service. Subject to section l2.4,
the nonforfeitable percentage of the Employer Account and
Matching Account of a Participant other than a Participant
described in section 8.1(b) shall be based on the Participant's
Years of Service and on the following vesting schedule:
8.1(c)(1) Standard Option - the full and immediate vesting
schedule.
8.1(c)(2) Alternative - the alternative vesting schedule
specified in the Adoption Agreement;
provided, however, if the Participation Requirement (or the
requirement to receive an allocation of Employer contributions
under a 401(k) Plan) consists of a minimum period of service
which exceeds one year, the full and immediate vesting schedule
shall automatically apply notwithstanding any election to the
contrary in the Adoption Agreement.
8.1(d) Employee Contribution Withdrawals. No Forfeiture shall
occur solely as a result of a Participant's withdrawal of
Employee Contributions.
8.2 Forfeiture and Special Reemployment Rules.
8.2(a) Buy Back Rule (Standard Option).
8.2(a)(1) Forfeiture. The forfeitable portion, if any, of the
Employer Account and Matching Account of a Participant who
separates from service shall become a Forfeiture on the earlier
of
(i) the date as of which the Participant receives (or is
deemed to receive under section 8.2(c)) a distribution of the
Participant's entire nonforfeitable Account balance derived from
Employer Contributions, or
(ii) the date he or she has 5 consecutive Breaks in
Service (6 consecutive Breaks in Service if the Alternative
Maternity/Paternity Rule applies).
If a Participant elects to have distributed less than the entire
nonforfeitable balance of the Participant's Employer Account and
Matching Account, the part of such accounts that shall be treated
as a Forfeiture is the total forfeitable portion of such Accounts
multiplied by a fraction, the numerator of which is the amount of
the distribution from the Participant's Employer Account or
Matching Account and the denominator of which shall be the total
nonforfeitable balance of the Participant's Employer Account or
Matching Account at the time of the distribution.
Any such Forfeiture shall be allocated or applied in accordance
with section 6 on the Valuation Date specified in section 8.2(e).
8.2(a)(2) Reemployment. If a Participant receives a distribution
and resumes employment covered under this Plan before the
Participant has 5 consecutive Breaks in Service (6 consecutive
Breaks in Service if the Alternative Maternity/Paternity Rule
applies), the Employer shall restore to the Participant's
Employer Account and Matching Account an amount equal to the
dollar amount of the Forfeitures from such accounts if the
Participant repays to the Plan an amount equal to the dollar
amount of the distributions from the Participant's Employer
Account and Matching Account in accordance with this section
8.2(a). Such repayment must be made before the earlier of (a) 5
years after the first date on which the Participant is
subsequently reemployed by the Employer or a Participating
Affiliate or (b) the date the Participant incurs 5 consecutive
Breaks in Service (6 consecutive Breaks in Service if the
Alternative Maternity/ Paternity Rule applies) following the date
of the distribution.
If a Participant whose nonforfeitable Account balance is zero is
deemed to receive a distribution under section 8.2(c) and he or
she resumes employment covered under this Plan before he or she
has 5 consecutive Breaks in Service (6 consecutive Breaks in
Service if the Alternative Maternity/Paternity Rule applies), the
forfeitable portion of the Participant's Employer Account and
Matching Account shall automatically be restored by the Employer
upon the Participant's reemployment.
Any amount restored by the Employer under this section 8.2(a)
shall be restored upon repayment from the sources specified in
section 8.2(d). Such restored or repaid amount shall not be
treated as an Annual Addition under section 7.2 and shall be
credited to the Participant's Employer Account and Matching
Account in the same proportion as the distribution was made from
such accounts.
8.2(b) Automatic Restoration (Alternative). This section 8.2(b)
shall apply if the Employer specifies the use of the "Alternative
to the Buy Back Rule" in the Adoption Agreement.
8.2(b)(1) Forfeiture. The forfeitable portion, if any, of the
Employer Account and Matching Account of a Participant who
separates from service shall become a Forfeiture on the earlier
of
(i) the date as of which payment of the nonforfeitable
percentage of the Participant's Account derived from Employer
contributions begins or is deemed to begin under section 8.2(c)
or
(ii) the date he or she has 5 consecutive Breaks in Service
(6 consecutive Breaks in Service if the Alternative
Maternity/Paternity Rule applies) and such Forfeiture shall be
allocated or applied in accordance with section 6 on the
allocation date specified in section 8.2(e) unless he or she is
reemployed on or before such allocation date.
8.2(b)(2) Reemployment. If a Participant is reemployed before the
Participant incurs 5 consecutive Breaks in Service (6 consecutive
Breaks in Service if the Alternative Maternity/ Paternity Rule
applies) but after the date of a Forfeiture under section
8.2(b)(1), the Employer shall restore to such Participant as of
the last day of the Plan Year in which he or she is reemployed an
amount equal to the dollar amount of such Forfeiture.
Any amount restored by the Employer under this section 8.2(b)
shall be restored from the sources specified in section 8.2(d).
Such restored amount shall not be treated as an Annual Addition
under section 7.2 for such Plan Year. The restored amount,
together with any remaining balance of the nonforfeitable portion
of the Employer Account and Matching Account attributable to the
Participant's service prior to reemployment, shall be maintained
thereafter as separate special subaccounts of the Participant's
Employer Account and Matching Account (until such time as it
becomes completely nonforfeitable or again becomes a Forfeiture),
and the dollar amount of the Participant's nonforfeitable
percentage in each such special subaccount thereafter shall be
determined in accordance with Formula A unless Formula B is
specified in the Adoption Agreement:
(i)Formula A (Standard Option): X = P (AB + D) - D
(ii)Formula B (Alternative): X = P (AB + (R x D)) - (R x D)
For purposes of these formulas:
X = The current dollar amount, if any, of the nonforfeitable
percentage in the Participant's special subaccount;
P = The Participant's current nonforfeitable percentage as
determined under section 8.1;
AB = Such dollar amount, if any, as evidenced by the last balance
posted to the Participant's special subaccount;
D = The dollar amount previously paid to the Participant under
section 9 from the Participant's original Employer Account or
Matching Account, as applicable; and
R = The ratio of AB to the dollar amount, if any, posted to the
Participant's Employer Account or Matching Account, as
applicable, immediately after the distribution.
8.2(c) Deemed Distribution. If the nonforfeitable portion of a
Participant's Account balance derived from Employer and Employee
contributions is zero, the Participant shall be deemed to have
received a distribution of the nonforfeitable portion of the
Participant's Account upon the Participant's separation from
service.
A Participant's nonforfeitable Account balance derived from
Employee contributions shall not include accumulated deductible
employee contributions within the meaning of Code section
72(o)(5)(B) for Plan Years beginning prior to January 1, 1989.
8.2(d) Restoration Sources. Any amount restored under this
section 8.2 shall be restored from the following sources in the
following order: first, from Forfeitures occurring in the Plan
Year in which such amounts are restored, if any; second, from
Employer Contributions for such Plan Year, if any; third from
Fund Earnings for such Plan Year; and finally, from additional
Employer Contributions. However, at the election of the Employer,
such amounts shall be restored entirely from additional Employer
Contributions.
8.2(e) Date Forfeitures Applied or Allocated. Any amounts which
become a Forfeiture under this section 8.2 shall be allocated or
applied as of the allocation date specified in section 6 which
coincides with or immediately follows the date such Forfeiture
occurs, except that the Employer may specify in the Adoption
Agreement that Forfeitures which are applied to reduce Employer
Contributions, Matching Contributions, Qualified Matching
Contributions or Qualified Nonelective Contributions shall be so
applied as of the allocation date for such contributions which
immediately follows the last day of the Plan Year in which such
Forfeiture occurs.
8.2(f) In-service Distributions. The provisions of this section
8.2(f) shall apply if the Plan permits in-service distribution
under section 9.2.
If a distribution is made at a time when a Participant has a
nonforfeitable right to less than 100% of his or her Employer
Account or Matching Account and the Participant may increase the
nonforfeitable percentage in such Account:
8.2(f)(1) A separate special subaccount of the Participant's
Employer Account and Matching Account shall be established to
record the Participant's interest in such accounts as of the time
of the distribution; and
8.2(f)(2) At any relevant time the Participant's nonforfeitable
portion of each such special subaccount shall be determined in
accordance with the formula specified in section 8.2(b).
SECTION 9. ACCOUNT DISTRIBUTION - GENERAL RULES
9.1 After Separation From Service. Subject to the rules in
this section 9, section l0, Benefit Payment Forms - Joint and
Survivor Annuity Requirements, and section 11, Minimum
Distribution Requirements, the nonforfeitable portion of each
Participant's Account (as determined in accordance with section
8) shall not be payable to such Participant before he or she
separates from service with the Employer and all Affiliates.
9.1(a) Timing. A Participant who has separated from service with
the Employer and all Affiliates
9.1 (a)(1) Standard Option - may request a distribution of the
nonforfeitable portion of his or her Account as soon as
practicable after such separation from service.
9.1 (a)(2) Alternative - if so specified in the Adoption
Agreement, may not request a distribution of the nonforfeitable
portion of his or her Account until Normal Retirement Age, Early
Retirement Age or Disability, whichever is earlier.
9.1(b) Reemployment. Except as required in section 11, no payment
shall be made under this section 9.1 it the Participant who
separates from service is reemployed as an Employee before
payment is made. If a Participant is reemployed as an Employee
after payment of the nonforfeitable portion of the Participant's
Account has begun but before the entire balance attributable to
such nonforfeitable portion has been paid (or applied to purchase
an annuity), payments to the Participant from such balance shall
be terminated on the date he or she is so reemployed and no
further payments shall be made to the Participant until he or she
is subsequently entitled to such payments in accordance with the
terms of this Plan.
9.1(c) $3500 Cashout. The nonforfeitable portion of a
Participant's Account shall be distributed in a single sum to
such Participant (or to the Participant's Beneficiary in the
event of the Participant's death) as soon as administratively
practicable following the Participant's separation from service
with the Employer and all Affiliates for any reason if the
nonforfeitable portion of such Account is (and at the time of any
prior distribution was) $3500 or less. Any such distributions
made on or after January 1, 1993 shall be made in accordance with
any applicable rules regarding the period for providing notices
under Code section 402(f) and for making direct rollover
elections under Code section 401(a)(31).
9.1(d) Claim. Except as provided in this section 9 and section
11, no payment shall be made until a written claim for such
payment is filed with the Plan Administrator on an Election Form.
The Plan Administrator shall process each such claim in
accordance with the claims procedure described in the summary
plan description for this Plan. If no such claim is submitted and
the Participant does not defer payment pursuant to section
9.1(e), payment may be made as soon as the benefit is not
immediately distributable (within the meaning of section 9.3) and
shall, in any event, begin no later than 60 days following the
end of the Plan Year in which
9.1 (d)(1) the Participant separates from service as an Employee,
9.1(d)(2) the Participant reaches age 65 or Normal Retirement
Age, if earlier, or
9.1(d)(3) occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan, whichever occurs
last.
9.1(e) Election to Defer Payment. If a Participant has separated
from service with the Employer and all Affiliates and the
nonforfeitable portion of the Participant's Account is (or at the
time of any prior distribution was) more than $3500, the
Participant may defer distribution of that nonforfeitable
portion, but in no event beyond
9.1(e)(1) Standard Option - the Participant's Required Beginning
Date (as defined in section 11).
9.1(e)(2) Alternative - if so specified in the Adoption
Agreement, the later of the Participant's Normal Retirement Age
or age 62.
The failure of a Participant and his or her Spouse, if
applicable, to consent to a distribution or make a written
request to defer payment while a benefit is immediately
distributable (within the meaning of section 9.3) shall be deemed
to be an election to defer commencement of payment of any benefit
under this section 9 until the benefit is no longer immediately
distributable or, if section 9.1(e)(1) applies, until the
Required Beginning Date.
Nothing in this section 9.1(e) shall prevent the Plan
Administrator from paying in the normal form a benefit which is
not immediately distributable without regard to whether the
Participant and his or her Spouse consent to such distribution,
unless the Participant has requested a deferral pursuant to
section 9.1(e)(2).
9.1(f) Early Retirement Age. If the Early Retirement Age includes
both an age and service requirement, any Participant who
separates from service before satisfying such age requirement,
but after the Participant has satisfied the service requirement,
may request a distribution of the nonforfeitable portion of his
or her Account upon satisfaction of such age requirement.
9.1(g) Death. In the event of the Participant's death, the
nonforfeitable portion of the Participant's Account shall be
payable to the Participant's Beneficiary as soon as
administratively practicable after the Participant's death.
9.2 Before Separation From Service. Subject to the rules in
this section 9, section 10, Joint and Survivor Annuity
Requirements, and section 11, Minimum Distribution Requirements,
the nonforfeitable portion of a Participant's Account may be paid
to the Participant before he or she separates from service with
the Employer and all Affiliates if so specified in the Adoption
Agreement or by the Board in accordance with section 9.2(b)(2) or
section 9.2(e).
9.2(a) Money Purchase Pension Plan or target Benefit Pension
Plan. If this Plan is adopted as a Money Purchase Pension Plan or
a Target Benefit Pension Plan,
9.2(a)(1) Standard Option - except as provided in section 9.2(d)
or (e), no distributions shall be made before a Participant
separates from service with the Employer and all Affiliates, or
9.2(a)(2) Alternative - if so specified in the Adoption
Agreement, a Participant may request a distribution of all or a
portion of the nonforfeitable portion of the Participant's
Account on or after he or she reaches Normal Retirement Age
without regard to whether he or she has separated from service.
9.2(b) 401(k) Plan.
9.2(b)(1) Distribution Restrictions. If this Plan is adopted as a
401(k) Plan, then, except as provided in this section 9.2(b), a
Participant's Elective Deferral Account, Qualified Nonelective
Account and Qualified Matching Account shall not be distributable
to the Participant or the Participant's Beneficiary earlier than
upon the Participant's separation from service with the Employer
and all Affiliates, death, or Disability.
9.2(b)(2) Termination of Plan or Disposition of Assets or
Subsidiary. Notwithstanding section 9.2(b)(1) and subject to the
Participant and spousal consent rules in section 9.3 and section
10, the Employer may, by action of its Board, make lump sum
distributions (within the meaning of Code section
401(k)(10)(B)(ii)) of a Participant's Account, including the
Participant's Elective Deferral Account, Qualified Nonelective
Account and Qualified Matching Account in accordance with Code
section 401(k) by reason of
(i) the termination of the Plan without the establishment of
another defined contribution plan (other than an employee stock
ownership plan as defined in Code section 4975(e) or Code section
409 or a simplified employee pension as defined in Code section
408(k));
(ii) the disposition by the Employer or a Participating
Affiliate to an unrelated entity of substantially all of the
assets (within the meaning of Code section 409(d)(2)) used by the
Employer or such Participating Affiliate in a trade or business
of the Employer or a Participating Affiliate, if the transferor
continues to maintain this Plan after such disposition, but such
distributions shall be made only with respect to a Participant
who continues employment with the entity acquiring such assets;
or
(iii) the disposition by the Employer or a Participating
Affiliate which is a corporation to an unrelated entity of
interest in a subsidiary (within the meaning of Code section
409(d)(3)), if the transferor continues to maintain this Plan
after such disposition, but such distributions shall be made only
with respect to a Participant who continues employment with such
former subsidiary.
9.2(b)(3) Hardship Distribution.
(i) General. If the Employer specifies in the Adoption
Agreement that hardship distributions shall be permitted, a
Participant may request a hardship distribution before he or she
separates from service from the Participant's Elective Deferral
Account (and, if applicable, from the nonforfeitable portion of
the other subaccounts of such Account specified in the Adoption
Agreement). The Plan Administrator shall grant such request if,
and to the extent that, the Plan Administrator determines that
such distribution is "necessary" to satisfy an "immediate and
heavy financial need" of the Participant as determined in
accordance with this section 9.2(b)(3). Any such request shall be
made in writing, shall set forth in detail the nature of such
hardship and the amount of the distribution needed as a result of
such hardship, and shall include adequate documentation of the
type of financial need and the amount of the need. If the Plan
Administrator grants such request, such application shall be
processed and such distribution shall be made in a single sum as
soon as administratively practicable.
(ii) Safe Harbor Test for Financial Need. An "immediate and
heavy financial need" shall mean one or more of the following, as
specified in the Adoption Agreement,
(A) expenses for medical care described in Code section
213(d) incurred by the Participant or the Participant's spouse or
dependents (as defined in Code section 152) and amounts necessary
for such individuals to obtain such care,
(B) the purchase of (but not the mortgage payments
for) a principal residence of the Participant,
(C) the payment of tuition and related educational fees
for the next 12 months of post-secondary education for
the Participant or the Participant's spouse, children or
dependents (as defined in Code section l52),
(D) the prevention of the eviction of the Participant from
the Participant's principal residence or the foreclosure on the
mortgage of the Participant's principal residence, or
(E) such other events as the Internal Revenue Service deems
to constitute an "immediate and heavy financial need" under Code
section 401(k).
(iii) Safe Harbor Test for Distribution Necessary to
Satisfy Need. A distribution shall be deemed to be "necessary" to
satisfy an immediate and heavy financial need only if all of the
following requirements are satisfied:
(A) the distribution is not in excess of the amount of
such need, including any amounts necessary to pay any federal,
state or local income taxes or penalties reasonably anticipated
to result from such withdrawal;
(B) the Participant has obtained all distributions
(other than hardship distributions) and all nontaxable loans
currently available under this Plan and all other plans
maintained by the Employer or an Affiliate;
(C) the Participant's Elective Deferrals and Employee
Contributions under this Plan and elective deferrals and employee
contributions under all other plans maintained by the Employer or
an Affiliate shall be suspended for the 12-month period following
the date of receipt of such hardship distribution; and
(D) the Participant's Elective Deferrals under this Plan
and elective deferrals under all other plans maintained by the
Employer or an Affiliate for the Participant's taxable year
immediately following the taxable year in which such hardship
distribution was made shall not exceed the applicable dollar
limitation under Code section 402(g) for such following taxable
year less the amount of the Participant's Elective Deferrals
under this Plan and elective deferrals under all such other plans
for the taxable year in which such hardship distribution was
made.
(iv) Account Limitations. For Plan Years beginning after
December 31, 1988, no hardship distribution shall be made under
this section 9.2(b)(3) to a Participant from
(A)the Participant's Qualified Nonelective Account,
(B)the Participant's Qualified Matching Account, or
(C)the Fund Earnings allocated to the Participant's
Elective Deferral Account
except to the extent of amounts credited to such Accounts as of
the end of the last Plan Year ending before July 1, 1989.
9.2(b)(4) Distributions on or after Age 59 1/2. If the Employer
specifies in the Adoption Agreement that distributions shall be
permitted on or after age 59 1/2, a Participant may request a
distribution of all or a portion of the nonforfeitable portion of
the subaccounts of the Participant's Account specified in the
Adoption Agreement at any time on or after he or she reaches age
59 1/2. Any such request shall be made in writing on an Election
Form and such distribution shall be made in a single sum as soon
as practicable in accordance with such reasonable
nondiscretionary procedures as the Plan Administrator deems
appropriate under the circumstances for the proper administration
of the Plan.
9.2(b)(5) Employer Account and Matching Account. If so specified
in the Adoption Agreement, a Participant may request in
accordance with reasonable and nondiscriminatory procedures a
distribution of all or a portion of the nonforfeitable portion of
the Participant's Employer Account and Matching Account after a
fixed number of years, the attainment of a stated age or upon the
occurrence of some prior event as specified in the Adoption
Agreement.
9.2(c) Profit Sharing Plan. It this Plan is adopted as a Profit
Sharing Plan, then, if so specified in the Adoption Agreement, a
Participant may request in accordance with reasonable and
nondiscriminatory procedures a distribution of all or a portion
of the nonforfeitable portion of the Participant's Account after
a fixed number of years, the attainment of a stated age or upon
the occurrence of some prior event as specified in the Adoption
Agreement.
9.2(d) Withdrawals from Employee Account.
9.2(d)(1) Standard Option. A Participant may request a withdrawal
of all or a portion of the Participant's Employee Account at any
time. Any such request shall be made in writing on an Election
Form and such withdrawal shall be made in a single sum as soon as
administratively practicable in accordance with such reasonable
nondiscretionary procedures as the Plan Administrator deems
appropriate under the circumstances for the proper administration
of this Plan.
9.2(d)(2) Alternative. The Employer may specify in the Adoption
Agreement that withdrawals from Employee Accounts shall not be
permitted before the nonforfeitable portion of a Participant's
Account otherwise becomes distributable under this section 9 or
under section 11 or may specify other rules and conditions under
which such withdrawals may be made.
Notwithstanding the foregoing, any portion of a Participant's
Employee Account which is attributable to recharacterized Excess
Contributions under section 7.4(e) may only be withdrawn in
accordance with the rules set forth in section 9.2(b) applicable
to an Elective Deferral Account.
9.2(e) Plan Termination. If this Plan is terminated under
section 14.6 and if the Board so specifies in its written action
effecting such termination, distribution of the nonforfeitable
portion of each Account shall be made as soon as administratively
practical after the Plan is terminated subject to the rules in
section 9.2(b) and to Code section 411.
9.3 Consent.
9.3(a) General. If the nonforfeitable portion of a
Participant's Account exceeds (or at the time of any prior
distribution exceeded) $3500, and such Account is "immediately
distributable", the Participant and the Participant's Spouse, if
any, (or where the Participant has died, the surviving Spouse, if
any) must consent to any distribution from such Account. The
consent of the Participant and the Participant's Spouse shall be
obtained in writing within the 90 day period ending on the
Annuity Starting Date (as defined in section 10.1). The Plan
Administrator shall notify the Participant and the Participant's
Spouse of the right to defer any distribution until the
Participant's Account is no longer "immediately distributable".
Such notification shall include a general description of the
material features, and an explanation of the relative values of,
the optional forms of benefit available under the Plan in a
manner that would satisfy the notice requirements of Code section
417(a)(3) and shall be provided no less than 30 days and no more
than 90 days prior to the Annuity Starting Date.
9.3(b) Exceptions. Notwithstanding the foregoing, only the
Participant need consent to the commencement of a distribution in
the form of a Qualified Joint and Survivor Annuity while the
Participant's Account is immediately distributable. Furthermore,
if payment in the form of a Qualified Joint and Survivor Annuity
is not required with respect to the Participant pursuant to
section 10, only the Participant need consent to the distribution
from an Account that is immediately distributable. The consent of
the Participant and the Participant's Spouse shall not be
required to the extent that a distribution is required to satisfy
Code section 401(a)(9), section 401(k), section 401(m), section
402(g) or section 415. In addition, upon termination of this Plan
if the Plan is not required to offer an annuity option (purchased
from a commercial provider), the nonforfeitable portion of the
Participant's Account shall, without the Participant's consent,
be distributed to the Participant unless the Employer or an
Affiliate maintains another defined contribution plan (other than
an employee stock ownership plan as defined in Code section
4975(e)(7)), in which event, the Account of a Participant who
does not consent to an immediate distribution shall be
transferred to such other plan.
9.3(c) Immediately Distributable. An Account is "immediately
distributable" if any part of the Account could be distributed to
the Participant (or the surviving Spouse) before the Participant
reaches (or would have reached if not deceased) the later of
Normal Retirement Age or age 62.
9.3(d) Accumulated Deductible Employee Contributions. For
purposes of determining the applicability of the consent
requirements under this section 9.3 to distributions made before
the first day of the first Plan Year beginning after December 31,
1988, the nonforfeitable portion of the Participant's Account
shall not include amounts attributable to accumulated deductible
employee contributions within the meaning of Code section
72(o)(5)(B).
9.4 Form of Distribution. All distributions (including
distributions before separation from service under section 9.2
but excluding corrective distributions under section 7) shall be
made in the form specified in section 10.
9.5 Minimum Distributions. The Plan shall satisfy the minimum
distribution requirements of Code section 401(a)(9) as set forth
in section 11.
9.6 Missing Person. In the event that an Account becomes
payable under this Plan pursuant to section 9.1(c), section
9.1(d) or section 9.1(e) and the Plan Administrator is unable to
locate the Participant or his or her Beneficiary after sending
written notice to the last known mailing address and to the
United States Social Security Administration, such Participant or
Beneficiary shall be presumed dead and such Account shall become
a Forfeiture on the third anniversary of the date such Account
first became payable under this Plan. However, the amount of such
Forfeiture shall be paid to such missing Participant or
Beneficiary in the event that such person files a claim for such
benefit while this Plan remains in effect and demonstrates to the
satisfaction of the Plan Administrator that such person in fact
is such missing Participant or Beneficiary.
9.7 No Estoppel of Plan. No person is entitled to any benefit
under this Plan except and to the extent expressly provided under
this Plan. The fact that payments have been made from this Plan
in connection with any claim for benefits under this Plan does
not (1) establish the validity of the claim, (2) provide any
right to have such benefits continue for any period of time, or
(3) prevent this Plan from recovering the benefits paid to the
extent that the Plan Administrator determines that there was no
right to payment of the benefits under this Plan. Thus, if a
benefit is paid under this Plan and it is thereafter determined
by the Plan Administrator that such benefit should not have been
paid (whether or not attributable to an error by the Participant,
the Plan Administrator, the Employer or any other person), then
the Plan Administrator may take such action as the Plan
Administrator deems necessary or appropriate to remedy such
situation, including without limitation by (1) deducting the
amount of any overpayment theretofore made to or on behalf of
such Participant from any succeeding payments to or on behalf of
such Participant under this Plan or from any amounts due or owing
to such Participant by the Employer or any Affiliate or under any
other plan, program or arrangement benefiting the employees or
former employees of the Employer or any Affiliate, or (2)
otherwise recovering such overpayment fro whoever has benefited
from it.
If the Plan Administrator determines that an underpayment of
benefits has been made, the Plan Administrator shall take such
action as it deems necessary or appropriate to remedy such
situation. However, in no event shall interest be paid on the
amount of any underpayment other than the investment gains (or
losses) credited to the Participant's Account pending payment.
9.8 Administration. All distributions shall be made in
accordance with such uniform and nondiscriminatory administrative
and operational procedures for Account distributions as the Plan
Administrator deems Appropriate under the circumstances for the
proper administration of the Plan.
SECTION 10. BENEFIT PAYMENT FORMS - JOINT AND SURVIVOR ANNUITY
REQUIREMENTS
10.1 Application and Special Definitions. This section 10
shall apply to a Participant who is vested at the time of death
or at the time of a distribution from the Participant's Account
in any portion of the Participant's Account, whether such portion
is attributable to Employer contributions, Employee
contributions, or both. For purposes of this section 10, the
terms defined in this section 10.1 shall have the meanings shown
opposite such terms.
10.1(a) Annuity Starting Date - means the first day of the
first period for which an amount is paid as an annuity or any
other form.
10.1(b) Earliest Retirement Age - means
10.1(b)(1) if distributions are permitted only upon
separation from service, the earliest age at which the
Participant could separate from service and receive a
distribution;
10.1(b)(2) if distributions are permitted before separation
from service, the earliest age at which such distribution could
be made; or
10.1(b)(3) if clauses (1) and (2) do not apply, the Early
Retirement Age.
10.1(c) Election Period - means
10.1(c)(i) for a Qualified Preretirement Survivor Annuity,
the period which begins on the earlier of (i) the first day of
the Plan Year in which the Participant attains age 35 or (ii) the
date such Participant separates from service and ends on the date
of the Participant's death and
10.1(c)(2) for a Qualified Joint and Survivor Annuity or a
Life Annuity, the 90 day period ending on the Annuity Starting
Date.
Notwithstanding the foregoing, a Participant who has not yet
reached age 35 (and who will not reach age 35 as of the end of
the current Plan Year) may make a special Qualified Election to
waive the Qualified Preretirement Survivor Annuity for the period
beginning on the date of such election and ending on the first
day of the Plan Year in which the Participant will reach age 35.
Such election shall not be valid unless the Participant receives
a written explanation of the Qualified Preretirement Survivor
Annuity in such terms as are comparable to the explanation
required under section 10.4. Qualified Preretirement Survivor
Annuity coverage shall be automatically reinstated as of the
first day of the Plan Year in which the Participant reaches age
35. Any new waiver on or after such date shall be subject to the
full requirements of this section 10.
10.1(d) Life Annuity - means a nontransferable immediate annuity
payable for the life of the Participant, which is the amount of
benefit which can be purchased with such Participant's Vested
Account Balance as of the Annuity Starting Date.
10.1(e) Qualified Election - means a Participant's selection to
waive the Qualified Joint and Survivor Annuity or the Qualified
Preretirement Survivor Annuity which election shall not be
effective unless (1) the election designates a specific
Beneficiary (including any class of Beneficiaries or any
contingent Beneficiaries) and, for an election to waive a
Qualified Joint and Survivor Annuity, the particular form of
benefit payment, which designations cannot be changed without the
Spouse's consent (or the Spouse expressly permits designations by
the Participant without any further spousal consent); (2) such
Participant's Spouse consents in writing to such election on an
Election Form; (3) such consent acknowledges the effect of such
election; and (4) such consent is witnessed by a notary public;
provided,
(i) if the Participant establishes to the satisfaction of a
Plan representative that such written consent may not be obtained
because there is no Spouse or the Spouse cannot be located or
because of such other circumstances as may be described in the
regulations under Code section 417, a Participant's election
shall be deemed to be a Qualified Election;
(ii) a Spouse's written consent under this section 10.1(e)
shall be irrevocable as to such Spouse and shall be binding only
as against such Spouse;
(iii) no consent shall be valid unless the Participant
received notice as provided in section 10.4;
(iv) a consent that permits designations by the Participant
without any further spousal consent must acknowledge that the
Spouse has the right to limit consent to a specific Beneficiary,
and, if applicable, a specific form of benefit payment, and that
the Spouse voluntarily elects to relinquish either or both of
such rights; and
(v) a Participant may revoke (without the consent of his or
her Spouse) an election to waive the Qualified Joint and Survivor
Annuity or the Qualified Preretirement Survivor Annuity on an
Election Form at any time prior to the date as of which the
Participant's Account becomes payable under section 9.
10.1(f) Qualified Joint and Survivor Annuity - means a
nontransferable immediate annuity payable for the life of the
Participant which is the amount of benefit which can be purchased
with the Participant's Vested Account Balance on the Annuity
Starting Date with a survivor annuity payable for the life of the
Participant's surviving Spouse which is
10.1(f)(1) Standard Option - 50% or
10.1(f)(2) Alternative - such greater percentage (not to exceed
100%) specified in the Adoption Agreement
of the amount of the annuity which is payable during the joint
lives of the Participant and such Spouse.
10.1(g) Qualified Preretirement Survivor Annuity - means a
nontransferable annuity payable for the life of the surviving
Spouse, which is the amount of benefit which can be purchased
with
10.1(g)(1) Standard Option - 100% of the Participant's Vested
Account Balance as of the Annuity Starting Date or
10.1(g)(2) Alternative - such lesser percentage (not less than
50%) specified in the Adoption Agreement of such Participant's
Vested Account Balance (determined by allocating the portion of
such balance which is attributable to employee contributions
proportionately to such annuity and to the remainder of such
balance).
10.1(h) Vested Account Balance - means the nonforfeitable portion
of a Participant's Account derived from Employer contributions
and Employee contributions (including Rollover Contributions),
whether vested before or upon death, including the proceeds of
insurance contracts, if any, on the Participant's life and
reduced, if applicable, for outstanding loans in accordance with
section 13.3(d)(1)(iv).
10.2 Distribution to Participant. Unless a Participant waives
the Qualified Joint and Survivor Annuity and elects an optional
method of distribution (as described in section 10.6) on an
Election Form pursuant to a Qualified Election within the
Election Period, any distribution of such Participant's Vested
Account Balance shall be paid in the form of (a) a Qualified
Joint and Survivor Annuity for each such married Participant and
his or her Spouse or (b) a Life Annuity for each such unmarried
Participant. A Participant may elect that such annuity be
distributed upon attainment of the Earliest Retirement Age.
10.3 Distribution to Surviving Spouse. Unless a Participant
waives the Qualified Preretirement Survivor Annuity and elects an
optional method of distribution (as described in section 10.6) on
an Election Form pursuant to a Qualified Election within the
Election Period, such Participant's Vested Account Balance shall,
in the event of the Participant's death before the Participant's
Annuity Starting Date, be applied to purchase a Qualified
Preretirement Survivor Annuity for the surviving Spouse. If the
Qualified Preretirement Survivor Annuity is less than 100%, the
remaining portion of the Participant's Vested Account Balance
shall be payable to the Participant's Beneficiary under section
9. The surviving Spouse may elect that such Qualified
Preretirement Survivor Annuity be distributed to such Spouse
within a reasonable period following the death of the
Participant. Notwithstanding the foregoing, a surviving Spouse
entitled to a Qualified Preretirement Survivor Annuity may elect
in writing after the Participant's death to have the
Participant's Vested Account Balance distributed in an optional
form of benefit in accordance with section 10.6.
10.4 Notice Requirements.
10.4(a) Qualified Joint and Survivor Annuity and Life Annuity.
The Plan Administrator shall no less than 30 days and no more
than 90 days before the Annuity Starting Date provide each
Participant with a written explanation of the Qualified Joint and
Survivor Annuity and the Life Annuity, which explanation shall
describe
10.4(a)(1) the terms and conditions of such annuity;
10.4(a)(2) the Participant's right to make a Qualified
Election to waive such annuity and the effect of such election;
10.4(a)(3) the rights of the Participant's Spouse, if any;
10.4(a)(4) the right to revoke such election and the effect
of such a revocation; and
10.4(a)(5) the relative values of the various optional forms
of benefits under the Plan.
10.4(b) Qualified Preretirement Survivor Annuity. The Plan
Administrator shall provide to each Participant within the
"applicable period" for such Participant a written explanation of
the Qualified Preretirement Survivor Annuity which includes the
type of information described in section 10.4(a). The "applicable
period" for a Participant is 10.4(b)(1) the period beginning on
the first day of the Plan Year in which such Participant attains
age 32 and ending with the close of the Plan Year preceding the
Plan Year in which the Participant attains age 35,
10.4(b)(2) a reasonable period ending after he or she
becomes a Participant, or
10.4(b)(3) a reasonable period ending after this section l0
applies to such Participant,
whichever period ends last. However, if a Participant separates
from service before he or she reaches age 35, such notice shall
be provided within the two year period beginning one year before
the Participant's separation from service and ending one year
after such separation and if such Participant is subsequently
reemployed, the applicable period for such Participant shall be
redetermined under section 10.4(b)(1) through section 10.4(b)(3).
For purposes of section 10.4(b)(2) and section 10.4(b)(3), a
"reasonable period" is the two year period which begins one year
prior to the occurrence of the event and ends one year after the
occurrence of the event.
10.5 Safe Harbor Rules.
10.5(a) Application. If so specified in the Adoption Agreement,
the provisions in this section 10.5 shall apply in lieu of
section 10.1 through section 10.4 to (1) a Participant in a
Profit Sharing Plan or a 401(k) Plan, and (2) to any distribution
made on or after the first day of the first Plan Year beginning
after December 31, 1988 from or under a separate account
attributable solely to accumulated deductible employee
contributions (as defined in Code section 72(o)(5)(B)) and
maintained on behalf of a Participant in a Money Purchase Pension
Plan or Target Benefit Pension Plan provided that the conditions
specified in section 10.5(b) are satisfied.
10.5(b) Conditions. In order to fit within this safe harbor (1)
the Participant does not or cannot elect payments in the form of
a Life Annuity with respect to the Participant's Vested Account
Balance; (2) on the death of a Participant, the Participant's
Vested Account Balance shall be paid to the Participant's
surviving Spouse, or if there is no surviving Spouse or if the
surviving Spouse has consented in a manner conforming to a
Qualified Election, to the Participant's Beneficiary; and (3)
with respect to a Participant in a Profit Sharing Plan or a
401(k) Plan, the Plan is not a direct or indirect transferee of a
defined benefit plan, money purchase pension plan, target benefit
pension plan, stock bonus plan, or profit sharing plan which is
subject to the survivor annuity requirements of Code section 401
(a)(11) and Code section 417 ("Transferee Plan"), or the Plan
maintains separate bookkeeping accounts for such Participant's
Transferee Plan benefits and all other benefits of the
Participant under the Plan and gains, losses, withdrawals,
contributions, forfeitures, and other credits or charges are
allocated on a reasonable and consistent basis between the
Transferee Plan benefits (which are subject to the survivor
annuity requirements in section 10.1 through section 10.4) and
the other Plan benefits (which are subject to the safe harbor
rule in this section 10.5).
10.5(c) Surviving Spouse. The surviving Spouse may elect to have
distribution of the Vested Account Balance commence within the 90-
day period following the date of the Participant's death. The
Vested Account Balance shall be adjusted for Fund Earnings
occurring after the Participant's death in accordance with
section 6.2 in the same manner that Accounts are adjusted for
other types of distributions.
10.5(d) Waiver of Spousal Benefit. The Participant may waive the
spousal death benefit described in this section l0.5 at any time;
provided, no such waiver shall be effective unless it satisfies
the conditions described in section 10.1(e) (other than the
notification requirement referred to in such section) that would
apply to the Participant's Qualified Election to waive the
Qualified Preretirement Survivor Annuity.
10.5(e) Vested Account Balance. For purposes of this section
10.5, Vested Account Balance shall mean, (1) in the case of a
Money Purchase Pension Plan or Target Benefit Pension Plan, the
Participant's separate account balance attributable solely to
accumulated deductible employee contributions within the meaning
of Code section 72(o)(5)(B) and (2) in the case of a Profit
Sharing Plan or 401(k) Plan, the Participant's Vested Account
Balance as defined in section 10.1(h), excluding the portion of
such Vested Account Balance which is attributable to Transferee
Plan benefits described in section l0.5(b).
10.6 Optional Forms.
10.6(a) General. If a Participant properly and timely waives the
Qualified Joint and Survivor Annuity as described in section l0.2
or to the extent the safe harbor rules of section 10.5 apply to a
distribution, such distribution shall be made in the form
specified in this section 10.6 as selected by the Participant (or
his or her Beneficiary in the event of the Participant's death).
10.6(b) Before Separation From Service. Any distribution made
pursuant to section 9.2 shall, subject to section 10.2, be made
in a single sum.
10.6(c) After Separation From Service.
10.6(c)(1) Standard Option. The optional benefit form
available to any Participant after separation from service with
the Employer and all Affiliates or to his or her Beneficiary in
the event of the Participant's death shall be a single sum.
10.6(c)(2) Alternative. If specified in the Adoption
Agreement, the following optional benefit forms shall be
available to any Participant (or to his or her Beneficiary in the
event of the Participant's death):
(I) Single Sum - by payment in a single sum.
(ii) Installments - by payment in annual installments
(or more frequent installments) over a specified period in
accordance with the minimum distribution rules in section l1.
(iii) Annuity - in the form of an annuity contract under
which the amount of benefits shall be that which can be provided
by applying the nonforfeitable portion of such Participant's
Account to the applicable settlement option or annuity purchase
rate under such contract; or
(iv) Other Forms - under one of the optional forms of
distribution, if any, under the Pre-Existing Plan or a plan
described in section 14.5 which are required to be preserved
under Code section 411(d)(6). Such optional forms shall be
described in the Adoption Agreement and, unless otherwise
specified in the Adoption Agreement, such other forms shall apply
to the Participant's entire Account balance. Notwithstanding the
foregoing, if the Plan Administrator separately accounts for
benefits under a Pre-Existing Plan or a plan described under
section 14.5 or, if applicable, under section 10.5, the optional
forms may be limited to such separate accounts.
10.6(d) No Method Selected. If the safe harbor rules of section
10.5 apply to a distribution, but the Participant or the
Participant's Spouse or Beneficiary fails to specify the method
of distribution, then any distribution made to such Participant,
Spouse or Beneficiary shall be made in a single sum.
10.6(e) Single Sum. A distribution made on account of a
Participant's death or separation from service with the Employer
and all Affiliates which is made in more than one payment shall
be deemed to be a single sum distribution for purposes of this
Plan if the additional payment or payments are necessary to
reflect allocations completed following the Participant's death
or separation from service.
10.6(f) In Kind Distributions. A distribution shall be made in
kind only to the extent provided in the Adoption Agreement and
only to the extent an "in kind" distribution is permissible under
ERISA.
10.7 Annuity Contracts. Any annuity contract distributed by
the Plan to a Participant or a Beneficiary shall be
nontransferable and the terms of such contract shall comply with
the applicable requirements of this Plan and the Code.
10.8 Transitional Rules.
10.8(a) Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the benefits
prescribed by the previous sections of this section l0 must be
given the opportunity to elect to have such sections apply (1) if
such Participant is credited with at least one Hour of Service
under this Plan or a predecessor plan in a Plan Year beginning on
or after January 1, 1976, and (2) such Participant had at least
10 years of vesting service when he or she separated from
service.
10.8(b) Any living Participant not receiving benefits on
August 23, 1984, who was credited with at least one Hour of
Service under this Plan or a predecessor plan on or after
September 2, 1974, and who is not otherwise credited with any
service in a Plan Year beginning on or after January 1, 1976,
must be given the opportunity to have his or her benefits paid in
accordance with section 10.8(d).
10.8(c) The respective opportunities to elect (as described
in section 10.8(a) and (b) above) must be afforded to the
appropriate Participants during the period commencing on August
23, 1984, and ending on the date benefits would otherwise
commence to such Participants.
10.8(d) Any Participant who has elected pursuant to section
10.8(b) and any Participant who does not elect under section
10.8(a) or who meets the requirements of section 10.8(a) except
that such Participant does not have at least 10 years of vesting
service when he or she separates from service, shall have his or
her benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a
life annuity:
10.8(d)(1) If benefits in the form of a life annuity become
payable to a married Participant who:
(i) begins to receive payments under the Plan on or
after Normal Retirement Age; or
(ii) dies on or after Normal Retirement Age while still
working for the Employer; or
(iii) begins to receive payments on or after the
"qualified early retirement age"; or
(iv) separates from service on or after attaining Normal
Retirement Age (or the "qualified early retirement age") and
after satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to
receive such benefits;
then such benefits shall be received under this Plan in the form
of a Qualified Joint and Survivor Annuity, unless the Participant
has elected otherwise during the election period. The election
period must begin at least 6 months before the Participant
attains "qualified early retirement age" and end not more than 90
days before the commencement of benefits. Any such election shall
be in writing and may be changed by the Participant at any time.
10.8(d)(2) A Participant who is employed after attaining the
qualified early retirement age shall be given the opportunity to
elect, during the election period, to have a survivor annuity
payable on death. The election period begins on the later of (i)
the 90th day before the Participant attains the "qualified early
retirement age", or (ii) the date on which participation begins,
and ends on the date the Participant separates from service. Any
such election shall be in writing and may be changed by the
Participant at any time. If the Participant elects the survivor
annuity, payments under such annuity must not be less than the
payments which would have been made to the Spouse under the
Qualified Joint and Survivor Annuity if the Participant had
retired on the day before the Participant's death.
10.8(d)(3) For purposes of this section 10.8(d), "qualified early
retirement age" means the latest of:
(i) the earliest date under the Plan on which the
Participant may elect to receive retirement benefits,
(ii) the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age, or
(iii)the date the Participant begins participation.
10.9 Direct Rollovers.
10.9(a) General. This section 10.9 applies to distributions made
on or after January 1, 1993. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a Distributee's
election under this section 10, a Distributee may elect, at the
time and in the manner prescribed by the Plan Administrator, to
have any portion of an Eligible Rollover Distribution paid
directly by the Plan to an Eligible Retirement Plan specified by
the Distributee in a direct rollover in accordance with Code
section 401(a)(31).
10.9(b) Definitions.
10.9(b)(1) Eligible Rollover Distribution. An Eligible
Rollover Distribution is any distribution of all or any portion
of the balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any distribution
that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under
Code section 401(a)(9); and the portion of any distribution that
is not includable in gross income (determined without regard to
the exclusion for net unrealized appreciation with respect to
employer securities),
10.9(b)(2) Eligible Retirement Plan. An Eligible Retirement
Plan is an individual retirement account described in Code
section 408(a), an individual retirement annuity described in
Code section 408(b), an annuity plan described in Code section
403(a), or a qualified trust described in Code section 401(a),
that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
10.9(b)(3) Distributee. A Distributee includes an Employee
or former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code
section 414(p), are Distributees with regard to the interest of
the spouse or former spouse.
SECTION 11, MINIMUM DISTRIBUTION REQUIREMENTS
11.1 General. Subject to section 10, Benefit Payment Forms -
Joint and Survivor Annuity Requirements, the requirements of this
section 11 shall apply to any distribution of a Participant's
Account and shall take precedence over any inconsistent
provisions of this Plan. Unless otherwise specified, the
provisions of this section 11 shall apply to calendar years
beginning after December 31, 1984. All distributions required
under this section 11 shall be determined and made in accordance
with the proposed regulations under Code section 401(a)(9),
including the minimum distribution incidental benefit requirement
of section 1.401(a)(9)-2 of the proposed regulations.
11.2 Special Definitions.
11.2(a) Applicable Calendar Year - means the first
Distribution Calendar Year, and if life expectancy is being
recalculated, each succeeding calendar year.
11.2(b) Applicable Life Expectancy - means the life expectancy
(or joint and last survivor expectancy) calculated using the
attained age of the Participant (or Designated Beneficiary) as of
the Participant's (or Designated Beneficiary's) birthday in the
Applicable Calendar Year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
Applicable Life Expectancy shall be the life expectancy as so
recalculated.
11.2(c) Designated Beneficiary - means the individual who is
designated as the Beneficiary under this Plan in accordance with
Code section 401(a)(9) and the regulations under such Code
section.
11.2(d) Distribution Calendar Year - means a calendar year for
which a minimum distribution is required. For distributions
beginning before the Participant's death, the first Distribution
Calendar Year shall be the calendar year immediately preceding
the calendar year which contains the Participant's Required
Beginning Date. For distributions beginning after the
Participant's death, the first Distribution Calendar Year shall
be the calendar year in which distributions are required to begin
pursuant to section 11.6.
11.2(e) Life Expectancy - means the life expectancy (or joint and
last survivor expectancy) as computed by use of the expected
return multiples in Tables V and VI of section 1.72-9 of the
Federal Income Tax Regulations. Unless otherwise elected by the
Participant (or Spouse, in the case of distributions described in
section 11.6(b)(2)) by the time distributions are required to
begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable as to the Participant (or Spouse)
and shall apply to all subsequent years. The life expectancy of a
nonspouse Beneficiary may not be recalculated.
11.2(f) Participant's Benefit - means the nonforfeitable portion
of a Participant's Account determined as of the last Valuation
Date in the calendar year immediately preceding the Distribution
Calendar Year ("valuation calendar year") increased by the amount
of any contributions or forfeitures allocated to the Account as
of dates in the valuation calendar year after such Valuation Date
and decreased by distributions made in the valuation calendar
year after such Valuation Date. If any portion of the minimum
distribution for the first Distribution Calendar Year is made in
the second Distribution Calendar Year on or before the Required
Beginning Date, the amount of the minimum distribution made in
the second Distribution Calendar Year shall be treated as if it
had been made in the immediately preceding Distribution Calendar
Year.
11.2(g) Required Beginning Date.
11.2(g)(1) General Rule. The Required Beginning Date of a
Participant who reaches age 70 1/2 after December 31, 1987 is the
first day of April of the calendar year following the calendar
year in which the Participant reaches age 70 1/2.
11.2(g)(2) Age 70 1/2 Before 1988. The Required Beginning Date of
a Participant who reaches age 70 1/2 before January 1, 1988 shall
be,
(i) for a Participant who is not a 5% owner, the first
day of April of the calendar year following the calendar year in
which occurs the later of retirement or reaching age 70 1/2; or
(ii) for a Participant who is a 5% owner during any year
beginning after December 31, 1979, the first day of April
following the later of:
(A) the calendar year in which the Participant reaches
age 70 1/2, or
(B) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant becomes a 5%
owner, or the calendar year in which the Participant retires.
11.2(g)(3) Age 70 1/2 During 1988. The Required Beginning Date of
a Participant who is not a 5% owner, who reaches age 70 1/2
during 1988 and who has not retired before January 1, 1989 shall
be April 1, 1990. The Required Beginning Date of a Participant
who is a 5% owner or who retired before January 1, 1989 and who
reaches age 70 1/2 during 1988 shall be determined in accordance
with section 11.2(g)(1).
11.2(g)(4) 5% Owner. A Participant shall be treated as a 5% owner
for purposes of this section 11.2(g) if such Participant is a 5%
owner as defined in Code section 416(i) (determined in accordance
with Code section 416 but without regard to whether the Plan is
top-heavy) at any time during the Plan Year ending with or within
the calendar year in which such individual attains age 66 1/2 or
any subsequent Plan Year. Once distributions have begun to a 5%
owner under this section 11, they must continue to be
distributed, even if the Participant ceases to be a 5% owner in a
subsequent year.
11.3 Required Beginning Date. The entire nonforfeitable interest
of a Participant must be distributed or begin to be distributed
no later than the Participant's Required Beginning Date. Such
distribution shall be made
11.3(a) in the form of a Qualified Joint and Survivor Annuity as
described in section 10.2, or
11.3(b) if the Qualified Joint and Survivor Annuity is properly
waived or to the extent the safe harbor rules in section 10.5
apply, in the optional benefit form in section 10.6 selected by
the Participant.
Notwithstanding the foregoing, even if installment distributions
are not otherwise available as an optional benefit form, a
Participant who has not separated from service with the Employer
and all Affiliates as of the Required Beginning Date (or as of
the end of any Distribution Calendar Year thereafter) may elect
to receive the minimum distribution amount for each such
Distribution Calendar Year as described in section 11.5.
11.4 Limits on Distribution Periods. As of the first
Distribution Calendar Year, distributions (if not made in a
single sum) may only be made over one of the following periods
(or a combination thereof):
11.4(a) the life of the Participant,
11.4(b) the life of the Participant and a Designated Beneficiary,
11.4(c) a period certain not extending beyond the life expectancy
of the Participant, or
11.4(d) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated
Beneficiary.
11.5 Determination of Amount to be Distributed Each Year. If
the Participant's interest is to be distributed in other than a
single sum, the following minimum distribution rules shall apply
on or after the Required Beginning Date:
11.5(a) Individual Account.
11.5(a)(1) General. If a Participant's Benefit is to be
distributed over (i) a period not extending beyond the life
expectancy of the Participant or the joint life and last survivor
expectancy of the Participant and the Participant's Designated
Beneficiary or (ii) a period not extending beyond the life
expectancy of the Designated Beneficiary, the amount required to
be distributed for each calendar year, beginning with
distributions for the first Distribution Calendar Year, must at
least equal the quotient obtained by dividing the Participant's
Benefit by the Applicable Life Expectancy.
11.5(a)(2) Incidental Death Benefit Rules.
(i) For calendar years beginning before January 1, 1989, if
the Participant's Spouse is not the Designated Beneficiary,
the method of distribution selected must assure that at least
50% of the present value of the amount available for distribution
is paid within the life expectancy of the Participant.
(ii) For calendar years beginning after December 31, 1988,
the amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year, shall not
be less than the quotient obtained by dividing the Participant's
Benefit by the lesser of (A) the Applicable Life Expectancy or
(B) if the Participant's Spouse is not the Designated
Beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of section 1.401(a)(9)-2 of the proposed
regulations. Distributions after the death of the Participant
shall be distributed using the Applicable Life Expectancy in
section 11.5(a)(1) as the relevant divisor without regard to
section 1.401(a)(9)-2 of the proposed regulations.
11.5(a)(3) Timing. The minimum distribution required for the
Participant's first Distribution Calendar Year must be made on or
before the Participant's Required Beginning Date. The minimum
distribution for subsequent Distribution Calendar Years,
including the minimum distribution for the Distribution Calendar
Year in which the Participant's Required Beginning Date occurs,
must be made on or before December 31 of that Distribution
Calendar Year.
11.5(b) Annuity Contracts. If the Participant's Benefit is
distributed in the form of an annuity purchased from an insurance
company, distributions under such annuity shall be made in
accordance with the requirements of Code section 401(a)(9).
11.6 Death Distribution Provisions.
11.6(a) Distribution Beginning Before Death. If the Participant
dies after distribution of his or her nonforfeitable interest has
begun, the remaining portion of such nonforfeitable interest
shall continue to be distributed at least as rapidly as under the
method of distribution being used prior to the Participant's
death.
11.6(b) Distribution Beginning After Death. If the Participant
dies before distribution of his or her nonforfeitable interest
begins, distribution of the Participant's entire nonforfeitable
interest shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death
except to the extent that an election is made to receive
distributions in accordance with (1) or (2) below:
11.6(b)(1) if any portion of the Participant's
nonforfeitable interest is payable to a Designated Beneficiary,
distributions may be made over the life or over a period certain
not greater than the life expectancy of the Designated
Beneficiary and shall commence on or before December 31 of the
calendar year immediately following the calendar year in which
the Participant died;
11.6(b)(2) if the Designated Beneficiary is the
Participant's surviving Spouse, distributions may be made over
the period described in clause (1) above but the required
commencement date may be deferred until the later of (i) December
31 of the calendar year immediately following the calendar year
in which the Participant died or (ii) December 31 of the calendar
year in which the Participant would have reached age 70 1/2.
If the Participant has not made an election pursuant to this
section 11.6(b) by the time of the Participant's death, the
Participant's Designated Beneficiary must elect the method of
distribution no later than the earlier of (A) December 31 of the
calendar year in which distributions would be required to begin
under this section 11.6, or (B) December 31 of the calendar year
which contains the fifth anniversary of the date of death of the
Participant. If the Participant has no Designated Beneficiary, or
if the Designated Beneficiary does not elect a method of
distribution, distribution of the Participant's entire interest
must be completed by December 31 of the calendar year containing
the fifth anniversary of the Participant's death.
11.6(c) Special Rules.
11.6(c)(1) For purposes of section 11.6(b), if the surviving
Spouse dies after the Participant, but before payments to such
Spouse begin, the provisions of section 11.6(b), with the
exception of section 11.6(b)(2), shall be applied as if the
surviving Spouse were the Participant.
11.6(c)(2) For purposes of this section 11.6, any amount paid to
a child of the Participant shall be treated as if it had been
paid to the surviving Spouse if the amount becomes payable to the
surviving Spouse when the child reaches the age of majority.
11.6(c)(3) For the purposes of this section 11.6, distribution of
a Participant's interest shall be considered to begin on the
Participant's Required Beginning Date (or, if section 11.6(c)(1)
above is applicable, the date distribution is required to begin
to the surviving Spouse pursuant to section 11.6(b)). If
distribution in the form of an annuity irrevocably commences to
the Participant before the Required Beginning Date, the date
distribution is considered to begin shall be the date
distribution actually commences.
11.7 Special Pre-TEFRA Distribution Election.
11.7(a) General Rule. Subject to section 10, Benefit Payment
Forms - Joint and Survivor Annuity Requirements, the
nonforfeitable percentage of the Account of any Participant
(including a "5% owner" as described in section 11.2(g)(4)) who
has in effect a Special Pre-TEFRA Distribution Election (as
described in section 11.7(b)) shall be paid only to the
Participant, or in the case of the Participant's death, only to
his or her beneficiary in accordance with the method of
distribution specified in such election without regard to the
distribution rules set forth in section 11.1 through section
11.6.
11.7(b) Special Pre-TEFRA Distribution Election. For purposes of
this section 11.7, a Special Pre-TEFRA Distribution Election
means a designation in writing, signed by the Participant or his
or her beneficiary, made before January 1, 1984 by a Participant
in this Plan or a Participant in a Pre-Existing Plan who had
accrued a benefit under such plan as of December 31, 1983 which
designation specifies
11.7(b)(1) a distribution method which was permissible under
Code section 401(a)(9) as in effect prior to amendment by the
Deficit Reduction Act of 1984,
11.7(b)(2) the time at which such distribution will
commence,
11.7(b)(3) the period over which such distribution will be
made, and
11.7(b)(4) if such designation is to be effective for a
beneficiary, the beneficiaries of the Participant in order of
priority.
A distribution to be made upon the death of a Participant shall
not be covered under this section 11.7(b) unless the information
in the designation with respect to such distribution satisfies
the requirements of this section 11.7(b).
11.7(c) Current Distributions. Any distribution which began
before January 1, 1984 and continues after such date shall be
deemed to be made pursuant to a Special Pre-TEFRA Distribution
Election if the method of distribution was set forth in writing
and such method satisfies the requirements of section 11.7(b)(1)
through (4).
11.7(d) Revocation. A Participant who made a Special Pre-
TEFRA Distribution Election shall have the right to revoke such
election by completing and filing a distribution Election Form
under section 9. Furthermore, any change (other than the mere
substitution or addition of a beneficiary not originally
designated in such election which does not directly or indirectly
alter the period over which distributions are to be made) to a
Special Pre-TEFRA Distribution Election shall be deemed to be a
revocation of such election. Upon revocation, any subsequent
distribution shall be made in accordance with Code section
401(a)(9). If a designation is revoked subsequent to the date
distributions are required to begin, the Plan must distribute by
the end of the calendar year following the calendar year in which
the revocation occurs the total amount not yet distributed which
would have been required to have been distributed to satisfy Code
section 401(a)(9), but for the Special Pre-TEFRA Distribution
Election. For calendar years beginning after December 31, 1988,
such distributions must meet the minimum distribution incidental
benefit requirements in section 1.401(a)(9)-2 of the proposed
regulations. If an amount is transferred or rolled over from one
plan to another plan, the rules in Q&A J-2 and Q&A J-3 of section
1.401(a)(9)-l of the proposed regulations shall apply.
SECTION 12. TOP-HEAVY PLAN RULES
12.1 Application. The rules set forth in this section 12
shall supersede any provisions of this Plan or the Adoption
Agreement which are inconsistent with these rules as of the first
day of the first Plan Year beginning after December 31, 1983
during which the Plan is or becomes a Top-Heavy Plan and such
rules shall continue to supersede such provisions for so long as
the Plan is a Top-Heavy Plan unless the Code permits such rules
to cease earlier or requires them to remain in effect for a
longer period.
12.2 Special Definitions. For purposes of this section 12,
the terms defined in this section 12.2 shall have the meanings
shown opposite such terms.
12.2(a) Determination Date - means
12.2(a)(1) for the first Plan Year of a Plan which is
adopted as a new Plan under the Adoption Agreement, the last day
of such Plan Year, and
12.2(a)(2) for any subsequent Plan Year, the last day of the
immediately preceding Plan Year, and
12.2(a)(3) for any plan year of each other qualified plan
maintained by the Employer or an Affiliate which is part of a
Permissive Aggregation Group or a Required Aggregation Group, the
date determined under this section 12.2(a) as if the term "Plan
Year" means the plan year for each such qualified plan.
12.2(b) Key Employee - means any Employee or former Employee (and
the Beneficiaries of such Employee) (as determined in accordance
with Code 416(i)(1)) who at any time during the Plan Year or any
of the 4 immediately preceding Plan Years was
12.2(b)(1) an officer of the Employer or an Affiliate whose
compensation for such Plan Year exceeds 50% of the dollar
limitation under Code section 415(b)(1)(A),
12.2(b)(2) an owner (or considered to be an owner within the
meaning of Code section 318) of one of the 10 largest interests
in the Employer or an Affiliate whose compensation for such Plan
Year exceeds the 100% of the dollar limitation under Code section
415(c)(1)(A); provided that the value of such Employee's
ownership interest is more than one half of one percent,
12.2(b)(3) a 5% owner of the Employer or an Affiliate, or
12.2(b)(4) a 1% owner of the Employer or an Affiliate whose
compensation for such Plan Year exceeds $150,000.
For purposes of this section 12.2(b), an Employee's compensation
means compensation within the meaning of Code section 415(c)(3)
(as defined in section 7.2(a)(2)) but including amounts
contributed by the Employer or an Affiliate pursuant to a salary
reduction agreement which are excluded from gross income under
Code section 125, section 402(e)(3), section 402(h) or section
403(b).
12.2(c) Permissive Aggregation Group - means a Required
Aggregation Group and any other qualified plan or plans (as
described in Code section 401(a)) maintained by the Employer or
an Affiliate which, when considered with the Required Aggregation
Group, would continue to satisfy the requirements of Code section
401(a)(4) and Code section 410.
12.2(d) Required Aggregation Group - means (1) each qualified
plan (as described in code section 401(a)) maintained by the
Employer or an Affiliate in which at least one Key Employee
participates or participated at any time during the 5 year period
ending on the Determination Date (without regard to whether such
plan has terminated) and (2) any other qualified plan maintained
by the Employer or an Affiliate which enables any such plan to
satisfy the requirements of Code section 401(a)(4) or Code
section 410.
12.2(e) Top-Heavy Plan - means this Plan if, for any Plan Year
beginning after December 31, 1983, either
12.2(e)(1) this Plan is not part of a Required Aggregation Group
or a Permissive Aggregation Group and the Top-Heavy Ratio for
this Plan exceeds 60%;
12.2(e)(2) this Plan is part of a Required Aggregation Group but
not part of a Permissive Aggregation Group and the Top-Heavy
Ratio for the Required Aggregation Group exceeds 60%; or
12.2(e)(3) this Plan is part of a Required Aggregation Group and
part of a Permissive Aggregation Group and the Top-Heavy Ratio
for the Permissive Aggregation Group exceeds 60%.
12.2(f) Top-Heavy Ratio.
12.2(f)(1) If the Employer or an Affiliate maintains one or more
defined contribution plans (including any simplified employee
pension plan) and the Employer or an Affiliate has never
maintained a defined benefit plan under which benefits have been
accrued for a Participant in this Plan during the 5 year period
ending on the Determination Date, "Top-Heavy Ratio" means for
this Plan alone or for the Required Aggregation Group or
Permissive Aggregation Group, as appropriate, a fraction, the
numerator of which shall be the sum of the account balances of
all Key Employees as of the Determination Date under this and all
other such defined contribution plans and the denominator of
which shall be the sum of the account balances of all employees
as of the Determination Date under this and all other such
defined contribution plans.
12.2(f)(2) If the Employer or an Affiliate maintains one or more
defined contribution plans (including any simplified employee
pension plan) and the Employer or an Affiliate maintains or has
ever maintained one or more defined benefit plans under which
benefits have been accrued for a Participant in this Plan during
the 5 year period ending on the Determination Date, "Top-Heavy
Ratio" means for the Required Aggregation Group or the Permissive
Aggregation Group, as appropriate, a fraction, the numerator of
which shall be the sum of the account balances for all Key
Employees as of the Determination Date under this and all other
such defined contribution plans and the sum of the present value
of the accrued benefits for all Key Employees as of the
Determination Date under all defined benefit plans maintained by
the Employer or an Affiliate and the denominator of which shall
be the sum of the account balances for all employees as of the
Determination Date under this and all other such defined
contribution plans and the sum of the present value of the
accrued benefits for all employees as of the Determination Date
under all defined benefit plans maintained by the Employer or an
Affiliate.
12.2(f)(3) The following rules shall apply for purposes of
calculating the Top-Heavy Ratio:
(i) The value of any account balance and the present
value of any accrued benefit shall be determined as of the most
recent Top-Heavy Valuation Date that falls within, or ends with,
the 12 month period ending on the Determination Date (or, if
plans are aggregated, the Determination Dates that fall within
the same calendar year), except as provided under the regulations
under Code section 416 for the first and second years of a
defined benefit plan;
(ii) The value of any account balance and the present
value of any accrued benefit shall include the value of any
distributions made during the 5 year period ending on such
Determination Date and any contributions due but as yet unpaid as
of the Determination Date which are required to be taken into
account on that date under Code section 416;
(iii) The present value of an accrued benefit under a
defined benefit plan shall be determined in accordance with the
interest rate and mortality assumptions specified in the Adoption
Agreement or, if this Plan and such defined benefit plan are
Paired Plans, as specified in the Adoption Agreement for such
defined benefit Paired Plan;
(iv) The account balance or accrued benefit of a
Participant who is not a Key Employee for the current Plan Year
but who was a Key Employee in a prior Plan Year or who has not
performed an Hour of Service for the Employer or any Affiliate at
any time during the 5 year period ending on the Determination
Date shall be disregarded;
(v) Deductible employee contributions shall be
disregarded;
(vi) The calculation of the Top-Heavy Ratio and the
extent to which contributions, distributions, rollovers, and
transfers are taken into account shall be determined in
accordance with Code section 416; and
(vii) If the Employer maintains more than one defined
benefit plan, the accrued benefit of a Participant other than a
Key Employee shall be determined under the method, if any, that
uniformly applies for accrual purposes under all such defined
benefit plans maintained by the Employer or an Affiliate, or if
there is no such method, as if such benefit accrued not more
rapidly than the slowest accrual rate permitted under the
fractional rule of Code section 411(b)(1)(C).
12.2(g) Top-Heavy Valuation Date - means for this Plan, the last
day of each Plan Year and for each other qualified plan
maintained by the Employer or an Affiliate,
12.2(g)(1) Standard Option - the most recent valuation date
for such plan or
12.2(g)(2) Alternative - the valuation date specified in the
Adoption Agreement.
12.3 Minimum Allocation.
12.3(a) General. Except as otherwise provided in this section
12.3, for any Plan Year in which this Plan is a Top-Heavy Plan,
the "minimum allocation" for each Participant who is not a Key
Employee means an allocation of Employer Contributions and
Forfeitures made in accordance with section 12.3(d) which shall
not be less than the lesser of
12.3(a)(1) 3% of such Participant's Compensation for such
Plan Year or,
12.3(a)(2) if the Employer or an Affiliate has no defined
benefit plan which uses this Plan to satisfy the requirements of
Code section 401(a)(4) or Code section 410, the largest
percentage of the Employer Contributions and Forfeitures
allocated on behalf of any Key Employee (expressed as a
percentage of the first $200,000 of Compensation) for such Plan
Year.
12.3(b) Defined Benefit Paired Plan. If this Plan is adopted in
combination with a defined benefit Paired Plan, the Employer and
the Participating Affiliates shall make a contribution under this
Plan (or, if this Plan is adopted in combination with another
defined contribution Paired Plan, under any combination of
defined contribution Paired Plans) for each Participant who is an
Eligible Employee at any time during such Plan Year who is also a
Participant in the defined benefit Paired Plan equal to at least
5% (or such greater percentage as is specified in the adoption
agreement for the defined benefit Paired Plan) of Compensation
for such Plan Year unless the Employer elects under such defined
benefit Paired Plan to provide the minimum benefit accrual under
such defined benefit Paired Plan.
If this section 12.3(b) applies and the Employer has not elected
to provide the minimum benefit accrual under the defined benefit
Paired Plan, the minimum allocation required under this section
12.3(b) for Plan Years beginning on and after the Final
Compliance Date shall, subject to the ordering rules in section
12.3(c), be made under this Plan without regard to whether the
Participant also benefits under the defined benefit Paired Plan.
Further, if this Plan and the defined benefit Paired Plan do not
benefit the same participants for such Plan Year, the minimum
allocation described in section 12.3(a) shall, subject to the
ordering rules in section 12.3(c), be made under this Plan for
each Participant described in section 12.3(d)(1) and the minimum
benefit accrual shall be made for each participant in the defined
Benefit Paired Plan in accordance with the terms of such Paired
Plan.
12.3(c) Defined Contribution Paired Plan. If this Plan is adopted
in combination with one or more defined contribution Paired
Plans, the minimum allocation required under this section 12.3,
if any, shall be made under such Paired Plans in the following
order:
12.3(c)(1) Standard Option - First, under the Money Purchase
Pension Plan, if any; second, under the Target Benefit Pension
Plan, if any; third, under the Profit Sharing Plan, if any; and
finally, under the 401(k) Plan, if any.
12.3(c)(2) Alternative - in the order specified in the Adoption
Agreement,
12.3(d) Participants Entitled to Allocation. The minimum
allocation required for any Plan Year under this section 12.3
12.3(d)(1) shall be made for each Participant who is not a Key
Employee and who is employed as an Eligible Employee (or on an
authorized leave of absence as an Eligible Employee) on the last
day of such Plan Year, without regard to the number of Hours of
Service actually completed by such Participant in such Plan Year;
and
12.3(d)(2) shall not apply to any Participant (i) who is covered
under any other plan or plans maintained by the Employer or an
Affiliate and the Employer has specified in the Adoption
Agreement that the minimum allocation or the minimum benefit
required under Code section 416 for any Plan Year for which this
Plan is a Top-Heavy Plan shall be made under such other plan or
plans or (ii) to the extent such Participant receives such
minimum allocation or minimum benefit under this Plan or any
other plans maintained by the Employer or an Affiliate.
Notwithstanding section 12.3(d)(2), if this Plan is adopted as a
nonstandardized Plan that intends to satisfy the safe harbor in
the Code section 401(a)(4) regulations, the minimum allocation
required under section 12.3 for Plan Years beginning on and after
the Final Compliance Date must be made for each Participant
described in section 12.3(d)(1) without regard to whether the
Participant also benefits under another plan, but only to the
extent that such minimum allocation is not otherwise received
under this Plan.
12.3(e) Nonforfeitability. The minimum allocation required under
this section 12.3 (to the extent required to be nonforfeitable
under Code section 416(b)) shall not be forfeited under Code
section 411(a)(3)(B) or Code section 411(a)(3)(D).
12.3(f) Compensation. For purposes of computing the minimum
allocation under this section 12.3, the term "Compensation" shall
mean Compensation within the meaning of Code section 415(c)(3) as
described in section 7.2(a)(2).
12.3(g) Multiple Plans. If the Employer or an Affiliate also
maintains another plan, the Employer shall specify in the
Adoption Agreement how the minimum allocation, if any, required
under Code section 416 will be satisfied and, if the Employer or
an Affiliate maintains or has maintained a defined benefit plan,
the method of satisfying Code section 416(h).
12.3(h) Integrated Plans.
12.3(h)(1) Profit Sharing Plan. If this Plan is adopted as a
integrated Profit Sharing Plan, the following allocation formula
shall apply in lieu of the formula in section 6.3(a)(2) for each
Plan Year in which such Plan is a Top-Heavy Plan.
The Forfeitures and the Employer Contribution shall be allocated
(and posted) as of the last day of such Plan Year to the Employee
Account of each Active Participant and each other Participant for
whom a minimum allocation is required to be made under this
section 12.3 in accordance with the following:
Step One - First, the lesser of (A) the sum of the Employee
Contribution and Forfeitures for such Plan Year or (B) the
product of the Top-Heavy Percentage and the total Compensation of
all such Participants shall be allocated i the same ratio that
each such Participant's total Compensation for such Plan Year
bears to the total Compensation of all such Participants for such
Plan Year.
Step Two - Second, the lesser of (A) the remaining Employer
Contribution and Forfeitures for such Plan Year o (B) the product
of the Top-Heavy Percentage (or the Maximum Disparity Rate, if
less) and the total Excess Compensation of all such Participants
shall be allocated in the same ratio that each such Participant's
Excess Compensation for such Plan Year bears to the total Excess
Compensation of all such Participants for such Plan Year.
Step Three - Third, the lesser of (A) the remaining Employer
Contribution and Forfeitures for such Plan Year or (B) the
Integration Amount shall be allocated in the same ratio that the
sum of the total Compensation and Excess Compensation of each
such Participant for such Plan Year bears to the sum of the total
Compensation and Excess Compensation of all such Participants for
such Plan Year.
Step Four - Finally the remaining Employer Contribution and
Forfeitures for such Plan Year shall be allocated in the same
ratio that each such Participant's total Compensation for such
Plan Year bears to the total Compensation of all such
Participants for such Plan Year.
12.3(h)(2) Money Purchase Pension Plan. If this Plan is
adopted as an integrated Money Purchase Pension Plan, (i) the
"Base Contribution Percentage" specified in the Adoption
Agreement, if less than the Top-Heavy Percentage, shall be
increased to equal the Top-Heavy Percentage and (ii) the Employer
Contribution required under section 5.2 (as adjusted in (i)
above) shall be made for each Active Participant and each other
Participant for whom an allocation is required to be made under
this section 12.3.
12.3(h)(3) Special Definitions. For purposes of this section
12.3(h),
(i) "Excess Compensation" means the amount, if any, of a
Participant's Compensation for such Plan Year which exceeds the
Integration Level for such Plan Year.
(ii) "Integration Amount" means the product of (1) the
total Compensation and the total Excess Compensation of all such
Participants and (2) the excess, if any, of the Integration
Percentage specified in the Adoption Agreement over the Top-Heavy
Percentage.
(iii) "Top-Heavy Percentage" means 3% or such greater
percentage required under this section 12.3 or specified in the
Adoption Agreement.
12.4 Vesting Schedule. For any Plan Year in which this Plan is a
Top-Heavy Plan, the Top-Heavy vesting schedule specified in the
Adoption Agreement automatically shall apply to all benefits
under the Plan within the meaning of Code section 411(a)(7)
(other than benefits which are attributable to Employee
Contributions or Rollover Contributions or other contributions
which are nonforfeitable when made), including benefits accrued
before the effective date of Code section 416 and before this
Plan became a Top-Heavy Plan, unless the regular vesting schedule
is at least as favorable as such Top-Heavy vesting schedule.
However, the provisions of this section 12.4 shall not apply to
the Account balance of any Participant who does not complete an
Hour of Service after the Plan first becomes a Top-Heavy Plan and
such Participant's Account balance attributable to Employer
contributions and Forfeitures shall be determined without regard
to this section 12.4. Further, no change in the vesting schedule
as a result of a change in this Plan's status to a Top-Heavy Plan
or to a plan which is not a-Top-Heavy Plan shall deprive a
Participant of the nonforfeitable percentage of the Participant's
Account balance accrued to the date of the change, and any such
change to the vesting schedule shall be subject to the provisions
of section 14.3(c).
12.5 401(k) Plan. Notwithstanding any contrary provision, the
following rules shall apply if this Plan adopted as a 401(k)
Plan:
12.5(a) Qualified Nonelective Contributions shall be treated as
Employer contributions for purposes of satisfying the minimum
allocation under section 12.3.
12.5(b) Matching Contributions allocated to the Account of a Key
Employee shall be treated as Employer contributions for purposes
of determining the amount of the minimum allocation required
under section 12.3. The Plan may use Matching Contributions
allocated on behalf of a non-Key Employee to satisfy the minimum
allocation under section 12.3; provided, however, that for Plan
Years beginning on and after the Final Compliance Date, such
contributions shall not be treated as Matching Contributions for
purposes of satisfying the limitations of section 7.4 and section
7.5 but shall instead be subject to the general nondiscrimination
rules of Code section 401(a)(4).
12.5(c) Elective Deferrals allocated to the Account of a Key
Employee shall be treated as Employer contributions for purposes
of determining the amount of the minimum allocation required
under section 12.3. However, for Plan Years beginning on and
after the Final Compliance Date, Elective Deferrals allocated on
behalf of non-Key Employees shall not be treated as Employer
contributions for purposes of satisfying the minimum allocation
required under section 12.3.
SECTION 13. INSURANCE, INDIVIDUALLY DIRECTED INVESTMENTS AND
PARTICIPANT LOANS
13.1 Insurance Contracts.
13.1(a) Elections and Existing Life Insurance Contracts.
13.1(a)(1) Standard Option. No Participant shall have the right
to elect to have the Trustee purchase an insurance contract on
his or her life for his or her Account under this Plan; however,
any life insurance contract purchased under the terms of a Pre-
Existing Plan, which is acceptable to the Trustee, shall continue
to be held by the Trustee for the benefit of the Participant
subject to the conditions of this section 13.1.
13.1(a)(2) Alternative. If so specified in the Adoption Agreement
each Participant who is an Eligible Employee may elect (subject
to this section 13.1) to have the Trustee purchase an insurance
contract on his or her life for his or her Account under the Plan
by completing and filing an Election Form with the Plan
Administrator.
13.1(b) Premiums. The aggregate annual premiums on any life
insurance contracts held for a Participant's Account under this
Plan shall be subject to the following limitations:
13.1(b)(1) Ordinary Life. If the life insurance contracts are
ordinary whole life insurance contracts which are contracts with
both nondecreasing death benefits and nonincreasing premiums,
such premiums shall be less than one half of the aggregate
Employer Contributions plus Forfeitures credited to the
Participant's Employer Account and Matching Account.
13.1(b)(2) Term and Universal Life. If the life insurance
contracts are term life insurance contracts, universal life
insurance contracts and any other life insurance contracts (other
than whole life), then such premiums shall not exceed one fourth
of the aggregate Employer Contributions plus Forfeitures credited
to the Participant's Employer Account and Matching Account.
13.1(b)(3) Combination. If the life insurance contracts either
combine features of ordinary whole life and other life insurance
or consist of ordinary whole life and other life insurance
contracts, the sum of one half of the ordinary whole life
premiums plus all other life insurance premiums shall not exceed
one fourth of the aggregate Employer Contributions plus
Forfeitures credited to the Participant's Employer Account and
Matching Account.
13.1(c) Owner and Beneficiary. The Trustee shall apply for and be
the owner of each life insurance contract held under this Plan
and also shall be named as the beneficiary of each such life
insurance contract. In the event of the Participant's death prior
to the date as of which the Participant's Account becomes payable
under the Plan, the Trustee, as beneficiary, shall pay the entire
proceeds of such life insurance contracts to the Participant's
Account which shall then be distributed to the surviving Spouse
or, if applicable, to the Participant's Beneficiary in accordance
with section 10. Under no circumstances shall the Fund retain any
part of the proceeds of any life insurance contracts. In the
event of a conflict between the terms of the Plan and the terms
of any life insurance contracts held under this Plan, the Plan
provisions shall control.
13.1(d) Allocations. Any dividends or credits earned on a life
insurance contract held under this Plan shall be allocated to the
Account of the Participant for whom the contract was purchased
and may be applied to pay the annual premium on such life
insurance contract. The amount of the annual premium on each such
insurance contract shall be charged against the Account of the
insured Participant. The value of any such insurance contract
shall be deemed to be zero for the purposes of allocating the
Employer Contribution, Forfeitures or the Fund Earnings for any
Plan Year as provided in section 6.
13.1(e) Distribution to Participant. Subject to section 10, Joint
and Survivor Annuity Requirements, the life insurance contracts
held as part of a Participant's Account shall be distributed in
kind to the Participant upon retirement or other termination of
employment as an Employee for reasons other than death (1) if
such Account is completely nonforfeitable or (2) if the cash
surrender value of such contracts is equal to or less than the
nonforfeitable portion of the Participant's Account. If neither
one of these conditions is satisfied and the Participant does not
elect to purchase the life insurance contracts under section 13.1
(f), the Trustee shall surrender such contracts, add the proceeds
to the Participant's Account and distribute the nonforfeitable
percentage of the Participant's Account in accordance with
section 10.
13.1(f) Termination of Insurance Election. A Participant may
direct the Trustee to stop making premium payments on a life
insurance contract held as part of The Participant's Account and
to surrender such contract or to sell such contract to the
Participant by completing and filing an Election Form with the
Plan Administrator. If the Participant purchases the contract, he
or she shall prepare and deliver to the Trustee all papers needed
to properly effect that purchase and shall pay to the Trustee an
amount equal to the cash surrender value of the contract at the
time of the purchase. The amount paid either by the Participant
for the purchase or by the insurance company in connection with
the surrender of a contract shall be credited to the
Participant's Account as of the date payment is made to the
Trustee. A Participant automatically shall be deemed to have
directed the Trustee to stop premium payments and to surrender a
life insurance contract immediately before a premium due date if
the premium due on that date would exceed the premium payment
limits in section 13.1(b).
13.2 Individually Directed Investments.
13.2(a) General.
13.2(a)(1) Standard Option. No Participant or Beneficiary may
direct the investment of such individual's Account,
13.2(a)(2) Alternative. If so specified in the Adoption
Agreement, a Participant or a Beneficiary may elect how such
individual's Account shall be invested between the investment
alternatives available under the Plan from time to time. The Plan
Administrator shall furnish to each Participant and Beneficiary
sufficient information to make informed decisions with regard to
investment alternatives and, if this Plan is intended to satisfy
ERISA section 404(c), information which satisfies the
requirements of the regulations under ERISA section 404(c). An
individual's investment direction shall apply
(i) Standard Option - to the individual's entire Account or
(ii) Alternative - only to the portion of the individual's
Account specified in the Adoption Agreement.
13.2(b) Election Rules. The Plan Administrator from time to time
shall establish and shall communicate in writing to such
individuals such reasonable restrictions and procedures for
making individual investment elections as the Plan Administrator
deems appropriate under the circumstances for the proper
administration of this Plan. Such restrictions and procedures
shall be applied on a uniform and nondiscriminatory basis to all
similarly situated individuals and, if this Plan is intended to
satisfy ERISA section 404(c), shall be in accordance with the
regulations under ERISA section 404(c).
13.2(c) No Election. The Account of an individual for whom no
investment election is in effect under this section 13.2, either
because such individual failed to make a proper election or
terminated an election under this section 13.2 shall be invested
as designated by the Plan Administrator.
13.3 Participant Loans. This section 13.3 shall apply only if
the Employer specifies in the Adoption Agreement that loans shall
be permitted. However, if loans are not permitted in the Adoption
Agreement, any outstanding loans made under the terms of the Pre-
Existing Plan shall be subject to this section 13.3.
13.3(a) Administration and Procedures. The Plan Administrator
shall establish objective nondiscriminatory written procedures
for the administration of the loan program under this section
13.3 (which written procedures, together with any written
amendments to such procedures, hereby are expressly incorporated
by reference as a part of this Plan), including, but not limited
to,
13.3(a)(1) the class of Participants and Beneficiaries who
are eligible for a loan;
13.3(a)(2) the identity of the person or position authorized
to administer the loan program;
13.3(a)(3) the procedures for applying for a loan;
13.3(a)(4) the basis on which loans will be approved or
denied;
13.3(a)(5) the limitations, if any, on the types and amounts
of loans offered;
13.3(a)(6) the procedures for determining a reasonable rate
of interest;
13.3(a)(7) the types of collateral which may be used as
security for a loan; and
13.3(a)(8) the events constituting default and the steps
that will be taken to preserve Plan assets in the event of such
default.
13.3(b) No Loans to Certain Owners and Family Members. No loan
shall b e made under this Plan to a Participant or Beneficiary
who is
13.3(b)(1) an Owner-Employee,
13.3(b)(2) an employee or officer of an Employer or an
Affiliate which is an electing small business corporation within
the meaning of Code section 1361 ("S Corporation") who owns (or
is considered to own within the meaning of Code section 31
B(a)(1)) on any day during any taxable year of such corporation
for which it is an S Corporation more than 5% of the outstanding
stock of such corporation, or
13.3(b)(3) a member of the family (as defined in
Code section 267(c)(4) of a Participant or Beneficiary described
in clause (1) or (2).
13.3(c) General Conditions. If loans are made available after
October 18, 1989 to any Participant or Beneficiary who is a
"party in interest" (as defined in ERISA section 3(14)) with
respect to the Plan, then loans shall be made available to all
Participants and Beneficiaries who are parties in interest with
respect to the Plan. All loans which are made under this Plan
shall comply with the following requirements under Code section
4975(d)(1) and ERISA section 408(b)(1):
13.3(c)(1) such loans shall be made available to
Participants and Beneficiaries who are eligible for a loan on a
reasonably equivalent basis;
13.3(c)(2) such loans shall not be made available to Highly
Compensated Employees in an amount greater than the amount made
available to other Employees;
13.3(c)(3) such loans shall be made in accordance with
specific provisions regarding such loans set forth in the Plan
and the written procedures described in section 13.3(a);
13.3(c)(4) such loans shall bear a reasonable rate of
interest; and
13.3(c)(5) such loans shall be adequately secured.
13.3(d) Other Conditions. All loans made under this Plan
shall be subject to the following conditions:
13.3(d)(1) If the loan is secured by any portion of the
Participant's Account and section 10.5 does not apply to any
portion of the Participant's Account, the Participant's Spouse,
if any, must consent in writing to the granting of such security
interest or to any increase in the amount of security no earlier
than the beginning of the 90 day period before such loan is made;
provided
(i) such consent must be in writing before a notary public
and must acknowledge the effect of such loan;
(ii) such consent shall be irrevocable and shall be binding
against the person, if any, identified as the Participant's
spouse at the time of such consent and any individual who may
subsequently become the Participant's Spouse;
(iii) a new consent shall be required in the event of any
renegotiation, extension, renewal, or other revision of such a
loan; and
(iv) if a valid spousal consent has been obtained, then,
notwithstanding any other provision of this Plan, the portion of
the Participant's vested Account balance used as a security
interest held by the Plan by reason of a loan outstanding to the
Participant shall be taken into account for purposes of
determining (and may reduce) the amount of the Account balance
payable at the time of death or distribution, but only if the
reduction is used as repayment of the loan. If less than 100% of
the Participant's vested Account balance (determined without
regard to the preceding sentence) is parable to the surviving
Spouse, then the vested Account balance shall be adjusted by
first reducing the vested Account balance by the amount of the
security used as repayment of the loan, and then determining the
benefit payable to the surviving Spouse.
13.3(d)(2) The loan shall provide for the repayment of
principal and interest in substantially level installments with
payments not less frequently than quarterly over a period of 5
years or less unless such loan is classified as a "home loan" (as
described in Code section 72(p));
13.3(d)(3) If the loan is secured by any portion of the
Participant's Account, such Account balance shall not be reduced
as a result of a default until a distributable event occurs under
the Plan; and
13.3(d)(4) The Participant or Beneficiary shall agree to
such other terms and conditions as are required under the written
procedures described in section 13.3(a).
13.3(e) Crediting of Loan Payments.
13.3(e)(1) Account Asset (Standard Option). The loan to a
Participant whose loan request is granted under this section 13.3
shall be made from, and shall be an asset of, the Participant's
Account and all principal and interest payments on such loan
shall be credited exclusively to the Participant's Account.
13.3(e)(2) Fund Asset (Alternative). If the Employer
specifies in the Adoption Agreement that loans shall be treated
as an asset of the Fund or, if any loan which was made under a
Pre-Existing Plan was treated as an asset of the Fund, such loans
shall be treated under this Plan as a general Fund investment and
an asset of the Fund, and all principal and interest payments on
such loan shall be credited exclusively to the Fund as a general
Fund investment.
13.3(f) Limitations on Amounts. The principal amount of any loan
(when added to the outstanding principal balance of any
outstanding loans made under this Plan or under any other plan
which is tax exempt under Code section 401 and which is
maintained by the Employer or an Affiliate) to the Participant
shall not exceed the lesser of (1) and (2) below:
13.3(f)(1) Dollar Limit - $50,000 reduced by the excess, if
any, of
(i) the highest outstanding principal balance of previous
loans to the Participant from the Plan (and any other plan
maintained by the Employer or an Affiliate) during the one year
period ending immediately before the date such current loan is
made, over
(ii) the current outstanding principal balance of such
previous loans on the date such current loan is made, or
13.3(f)(2) Account Limit
(i) Standard Option - 50% of the nonforfeitable interest
in the Participant's Account at the time the loan is made or
(ii) Alternative - if so specified in the Adoption
Agreement, the greater of $10,000 or the amount specified in
section 13.3(f)(2)(i), but in no event more than the
nonforfeitable interest in the Participant's Account.
An assignment or pledge of any portion of the Participant's
interest in the Plan and a loan, pledge or assignment with
respect to any insurance contract purchased under the Plan shall
be treated as a loan for purposes of the limitations in this
section 13.3(f).
13.3(g) Failure to Repay. If (1) the terms of the loan provide
that it shall become due and payable in full if the Participant's
or Beneficiary's obligation to repay the loan has been discharged
through a bankruptcy or any other legal process or action which
did not actually result in payment in full and (2) such loan is
not actually repaid in full, such loan shall be canceled on the
Fund's books and records and the amount otherwise distributable
to such Participant or Beneficiary under this Plan shall be
reduced by the principal amount of the loan plus accrued but
unpaid interest due as determined without regard to whether the
loan had been discharged through a bankruptcy or any other legal
process or action which did not actually result in payment in
full. The Plan Administrator shall have the power to direct the
Trustee to take such action as the Plan Administrator deems
necessary or appropriate to stop the payment of an Account to or
on behalf of a Participant who fails to repay a loan (without
regard to whether the obligation to repay such loan had been
discharges through a bankruptcy or any other legal process or
action) until the Participant's Account has been reduced by the
principal plus accrued but unpaid interest due (without regard to
such discharge) on such loan or to distribute the note which
evidences such loan in full satisfaction of that portion of such
Account which is represented by the value of such note.
Notwithstanding the foregoing, in the event of default,
foreclosure on the note and execution of the Plan's security
interest in the Account shall not occur until a distributable
event occurs under this Plan and interest shall continue to
accrue only to the extent permissible under applicable law.
13.3(h) Distributions. In the event the Participant's Account
becomes distributable before the loan is repaid in full, then the
vested Account balance shall be adjusted by first reducing the
vested Account balance by the amount of the security interest in
the Account and then determining the benefit payable. Nothing
shall preclude the Trustee from canceling the Plan's security
interest in the Account and distributing the note in lieu of any
other Plan assets in full satisfaction of that portion of the
Participant's Account represented by the value of the outstanding
balance of the loan or the amount which would have been
outstanding but for a discharge in bankruptcy or through any
other legal process.
SECTION 14. ADOPTION, AMENDMENT, WITHDRAWAL AND CONVERSION,
MERGER, ASSET TRANSFERS AND TERMINATION
14.1 Adoption.
14.1(a) General. Subject to the terms and conditions of this
Plan, the Trust Agreement and the Adoption Agreement, any sole
proprietorship, partnership or corporation may adopt this Plan by
completing and executing the Adoption Agreement. The Plan as
adopted by the Employer shall be effective for all purposes
(other than as a "prototype plan") as of the Effective Date.
However, the status of the Plan as a "prototype plan" shall be
conditioned upon acceptance of the Adoption Agreement by the
Prototype Sponsor and, upon such acceptance, such status as a
"prototype plan" shall be effective retroactive to the Effective
Date except as provided in section 14.4.
14.1(b) Pre-Existing Plan. If this Plan is adopted as an
amendment and restatement of a Pre-Existing Plan, (1) the Trust
Agreement shall be substituted for the trust or other funding
arrangement under the Pre-Existing Plan, (2) the assets held
under such trust or other funding arrangement shall become assets
of the Fund, (3) an Account shall be established for each person
who is a participant or beneficiary in the Pre-Existing Plan, and
(4) the dollar value assigned to such participant's or
beneficiary's Pre-Existing Plan account or accounts shall be
credited to such person's Account under this Plan (or to one or
more subaccounts under such Account). All optional forms of
benefit available under the Pre-Existing Plan which must be
preserved under Code section 411(d)(6) shall be available to the
Participant under this Plan. Further, such optional forms shall
be described in the Adoption Agreement and shall apply to the
Participant's entire Account balance. Notwithstanding the
foregoing, if the Employer so specifies in the Adoption Agreement
and separately accounts for the benefits attributable to the Pre-
Existing Plan as described in section 14.5(c) or, if applicable,
section 10.5, the optional forms which must be preserved may be
limited to such separate accounts.
14.1(c) Participating Affiliates. If this Plan is adopted as a
standardized Plan, each Affiliate shall automatically become a
Participating Affiliate effective as of the later of the
Effective Date or the date such entity first becomes an
Affiliate. If this Plan is adopted as a nonstandardized Plan, an
Affiliate of the Employer may adopt the Employer's Plan effective
as of any date on or after the Effective Date. An Affiliate's
execution of the Adoption Agreement (or a separate signature page
to the Adoption Agreement) shall evidence the Participating
Affiliate's adoption of the Plan and the effective date of such
adoption. In adopting this Plan, each Participating Affiliate is
deemed to have authorized the Employer to effect all actions
under this Plan on its behalf, including but not limited to the
powers reserved to the Employer under this section 14 and the
power to enter into such agreements with the Trustee or others as
may be necessary or appropriate under the Plan.
14.2 Amendment.
14.2(a) Prototype Sponsor. Subject to the restrictions of section
14.3, the Prototype Sponsor shall have the right at any time and
from time to time to amend this Plan in any respect whatsoever in
writing. To the extent required under the procedures and rules in
effect for master and prototype plans at the time of any such
amendment, notice of such amendment shall be given to the
Employer by the Prototype Sponsor as soon as practicable under
the circumstances.
14.2(b) Employer. Subject to the restrictions of section 14.3,
the Employer shall have no right to amend this Plan except (1) by
entering into a new Adoption Agreement with the Prototype
Sponsor, (2) by adding such language to the Adoption Agreement as
is necessary to allow the Plan to continue to satisfy the
requirements of Code section 415 or Code section 416 because of
the required aggregation of multiple plans, (3) by adopting
certain model amendments published by the Internal Revenue
Service which specifically provide that such adoption would not
cause the Plan to be treated as an individually designed plan, or
(4) by withdrawing this Plan as a prototype and converting it
into an individually designed plan as provided in section 14.4.
14.3 Certain Amendment Restrictions.
14.3(a) General. No amendment to the Plan shall be made which
would (1) deprive a Participant of the nonforfeitable percentage
of his or her Account balance accrued to the later of the
effective date of the amendment or the date the amendment is
adopted, or (2) decrease a Participant's Account balance or
eliminate an optional form of benefit except to the extent
permissible under Code section 412(c)(8), section 401(a)(4) and
section 411(d)(6) and the regulations under those sections.
14.3(b) Change in Service Calculation Method. It an amendment
changes the method of calculating service, each Employee who had
any service credit under such prior method shall be credited with
any service for any computation period during which such
amendment was effective in accordance with the rules in section
3.
14.3(c) Change in Vesting Schedule. It an amendment directly or
indirectly affects the computation of a Participant's
nonforfeitable percentage of his or her Account or it the Plan's
vesting schedule changes as a result of a change in the Plan's
status as a Top-Heavy Plan (as described in section 12.4), each
Participant with at least 3 years of service with the Employer or
an Affiliate may elect, within a reasonable period after the
adoption of the amendment, to have the nonforfeitable percentage
of his or her Account computed under this Plan without regard to
such amendment. In the case of a Participant who does not have at
least one Hour of Service in any Plan Year beginning after
December 31, 1988, the preceding sentence shall be applied by
substituting 5 years of service for 3 years of service. The
period during which the election may be made shall commence with
the date the amendment is adopted and shall end on the later of
14.3(c)(1) 60 days after the amendment is adopted;
14.3(c)(2) 60 days after the amendment becomes effective; or
14.3(c)(3) 60 days after the Participant is issued written
notice of the amendment by the Plan Administrator.
Furthermore, if an amendment changes the Plan's vesting schedule,
the nonforfeitable percentage (determined as of the later of the
date the amendment is adopted or the date it becomes effective)
of the employer-derived Account balance of each Employee who is a
Participant as of such date shall not be less than the percentage
computed under the Plan without regard to such amendment.
14.4 Withdrawal as a Prototype and Conversion to Individually
Designed Plan.
14.4(a) Voluntary Conversion. The Employer may voluntarily
withdraw this Plan as a "prototype plan" and convert it to an
individually designed plan by written notice filed with the
Trustee and the Prototype Sponsor. For purposes of this section
14.4, such withdrawal shall be effective with respect to the
Employer's plan and the Trustee as of the effective date of such
withdrawal, but such withdrawal shall not relieve the Employer of
any responsibilities or liabilities to the Prototype Sponsor
until 60 days after the date the Prototype Sponsor receives
written notice of such withdrawal unless the Prototype Sponsor
agrees in writing to an earlier effective date for such
withdrawal.
14.4(b) Involuntary Conversion. The Employer shall be deemed to
have withdrawn this Plan as a "prototype plan " and converted it
to an individually designed plan effective as of the earlier of
the date
14.4(b)(1) the Internal Revenue Service or a court
determines that this Plan fails to meet the requirements of Code
section 401;
14.4(b)(2) the Trustee ceases to maintain a brokerage
account for the Plan with the Prototype Sponsor or with an
approved subsidiary of the Prototype Sponsor;
14.4(b)(3) the Prototype Sponsor notifies the Employer in
writing that the Prototype Sponsor for reasons sufficient to the
Prototype Sponsor has terminated its sponsorship of its prototype
plan program or of this Plan for the Employer; or
14.4(b)(4) the Employer amends any provision of this Plan or
the Adoption Agreement (other than in accordance with section
14.2(b)(1) through (3)) including an amendment because of a
waiver of the minimum funding requirement under Code section
412(d),
14.4(c) Effect of Withdrawal and Conversion. If this Plan is
withdrawn as a prototype and converted to an individually
designed Plan under this section 14.4, the Employer as of the
effective date of such withdrawal shall assume the right and
responsibility to amend the Plan under section 14.2(a) and
thereafter only the Employer shall make amendments to this Plan;
provided, (1) no such amendment shall affect the Trustee's rights
or duties under this Plan without the Trustee's prior written
consent and (2) any such amendment shall be subject to the
restrictions of section 14.3.
14.5 Merger, Consolidation or Asset Transfers.
14.5(a) General. In the case of any Plan merger or consolidation
with, or transfer of assets or liabilities to or from, any other
employee benefit plan, each person for whom an Account then is
maintained shall be entitled to receive a benefit from such plan,
if it is then terminated, which is equal to or greater than the
benefit such person would have been entitled to receive
immediately before such merger, consolidation or transfer, it
this Plan then had been terminated.
14.5(b) Authorization. The Plan Administrator may authorize the
Trustee to accept a transfer of assets from or transfer Fund
assets to the trustee, custodian or insurance company of any
other plan which satisfies the requirements of Code section
401(a) in connection with a merger or consolidation with, or
other transfer of assets and liabilities to or from any such
plan, provided that the transfer will not affect the
qualification of this Plan under Code section 401(a) and the
assets to be transferred are acceptable to the Trustee.
14.5(c) Separate Account. The Plan Administrator may establish
separate bookkeeping accounts for any assets transferred to the
Trustee under this section 14.5 and shall establish such separate
bookkeeping accounts if required under this Plan. If separate
accounts are maintained with respect to transferred assets, no
contributions or Forfeitures under this Plan shall be credited to
such separate accounts, but such accounts shall share in the Fund
Earnings on the same basis as each other Account under section
6.2. Any individual for whom an Account is established under this
section 14.5 shall become a Participant in this Plan as of the
effective date of the merger, consolidation or asset transfer;
however, no contributions shall be made by or on behalf of such
individual under this Plan unless such individual is otherwise
entitled to such contributions under the terms of this Plan.
14.5(d) Code section 411(d)(6) Protected Benefits. All optional
forms of benefit available under the transferor plan which must
be preserved under Code section 411(d)(6) shall be available to
the Participant under this Plan unless such transfer meets the
requirements of Code section 414(i) and the Participant has made
an elective transfer which satisfies the requirements set forth
in Q&A-3(b) of section 1.411(d)-4 of the Federal Income Tax
Regulations. Further, such optional forms shall be described in
the Adoption Agreement and, generally, shall apply to the
Participant's entire Account balance. Notwithstanding the
foregoing, if the Employer so specifies in the Adoption Agreement
and separately accounts for such transferred assets, the optional
forms which must be preserved may be limited to such separate
account.
14.6 Termination.
14.6(a) Right to Terminate. The Employer may terminate or
partially terminate this Plan or discontinue contributions to
this Plan at any time by written action of the Board filed with
the Trustee and the Prototype Sponsor. The Employer reserves the
right to terminate the participation in this Plan by any
Participating Affiliate at any time by written action.
Furthermore, a Participating Affiliate's participation in this
Plan automatically shall terminate if (and at such time as) its
status as an Affiliate terminates for any reason whatsoever
(other than through a merger or consolidation into another
Participating Affiliate). However, a Participating Affiliate's
termination of participation in this Plan shall not be deemed to
be a termination or partial termination of the Plan except to the
extent required under the Code. Upon complete termination of this
Plan, any unallocated amounts (other than amounts in a Code
section 415 suspense account described in section 7.2(b)) shall
be allocated in accordance with the Plan terms but, if the Plan
terms do not address the allocation of such amounts, they shall
be allocated in a nondiscriminatory manner prior to distribution
of Plan assets.
14.6(b) Full Vesting Upon Termination. If this Plan is
terminated or partially terminated under this section 14.6 or if
there is a complete discontinuance of contributions under this
Plan, the Account of each affected Employee of the Employer or an
Affiliate shall become nonforfeitable on the effective date of
such termination or partial termination or complete
discontinuance of contributions, as the may be. In the event of a
complete termination of this Plan or a complete discontinuance of
contributions, each other Account (except to the extent otherwise
nonforfeitable under the terms of this Plan) shall become a
Forfeiture and shall be allocated as such under section 6.3 as of
the effective date of such complete termination or complete
discontinuance as if such date was the last day of a Plan Year.
SECTION 15. ADMINISTRATION
15.1 Named Fiduciaries. The Plan Administrator and the
Employer (if the Plan Administrator is not the Employer) shall be
the Named Fiduciaries responsible to the extent of their powers
and responsibilities assigned in the Plan for the control,
management and administration of the Plan. The Plan
Administrator, the Employer and the Trustee (other than Smith
Barney Corporate Trust Company) shall be the Named Fiduciaries
responsible to the extent of their respective powers and
responsibilities assigned to them in the Trust Agreement for the
safekeeping, control, management, investment and administration
of the assets of the Fund. Any power or responsibility for the
control, management or administration of the Plan or the Fund
which is not expressly assigned to a Named Fiduciary under the
Plan or the Trust Agreement, or with respect to which the proper
assignment is in doubt, shall be deemed to have been assigned to
the Employer as a Named Fiduciary. One Named Fiduciary shall have
no responsibility to inquire into the acts and omissions of
another Named Fiduciary in the exercise of powers or the
discharge of responsibilities assigned to such other Named
Fiduciary under the Plan or the Trust Agreement. Any person may
serve in more than one fiduciary capacity under the Plan or the
Trust Agreement and a fiduciary may be a Participant provided
such individual otherwise satisfies the requirements of section
4.
A Named Fiduciary, by written instrument filed by the Plan
Administrator with the records of the Plan, may designate a
person who is not a Named Fiduciary to carry out any of its
responsibilities under the Plan or Trust Agreement, other than
the responsibilities of the Trustee for the safekeeping, control,
management, investment and administration of the assets of the
Fund, except to the extent the Trustee's responsibility for
investment decisions is delegated to the Employer, the Plan
Administrator, or an investment manager.
15.2 Administrative Powers and Duties. Except to the extent
expressly reserved under the Plan or the Trust Agreement to the
Employer, the Board, or the Trustee, the Plan Administrator shall
have the exclusive responsibility and complete discretionary
authority to control the operation, management and administration
of the Plan, with all powers necessary to enable it properly to
carry out such responsibilities, including (but not limited to)
the power to construe the Plan, the related Adoption Agreement,
and the Trust Agreement, to determine eligibility for benefits
and to resolve all interpretative, equitable or other questions
that arise under the Plan or the Trust Agreement, The decisions
of the Plan Administrator on all matters within the scope of its
authority shall be final and binding. To the extent a
discretionary power or responsibility under the Plan or Trust
Agreement is expressly assigned to a person other than the Plan
Administrator, such person shall have complete discretionary
authority to carry out such power or responsibility and such
person's decisions on all matters within the scope of such
person's authority shall be final and binding.
15.3 Agent for Service of Process. The agent for service of
process for this Plan shall be the person who is identified as
the agent for service of process in the summary plan description
for this Plan. Neither the Prototype Sponsor nor any of its
affiliates shall be the agent for service of process for the
Plan.
15.4 Reporting and Disclosure. All records regarding the
operation, management and administration of this Plan shall be
maintained by the Plan Administrator. The Plan Administrator
shall satisfy any federal or state requirement to report and
disclose any information regarding this Plan to any federal or
state department or agency, or to any Participant or Beneficiary.
SECTION 16. MISCELLANEOUS
16.1 Spendthrift Clause and Qualified Domestic Relations
Orders. Except to the extent permitted by law, no Account,
benefit, payment or distribution under this Plan or Trust
Agreement shall be subject to attachment, garnishment, levy
execution or any claim or legal process of any creditor of a
Participant or Beneficiary, and no Participant or Beneficiary
shall have any right to alienate, commute, anticipate or assign
all or any part of such individual's Account, benefit, payment or
distribution under this Plan or Trust Agreement. The preceding
sentence also shall apply to the creation, alienation,
assignment, or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order
unless such order is determined to be a qualified domestic
relations order ("QDRO") within the meaning of Code section
414(p) and such order is entered on or after January 1, 1985. The
Plan Administrator shall establish uniform and nondiscriminatory
procedures regarding the determination of whether a domestic
relations order constitutes a QDRO, the timing of distributions
made pursuant to a QDRO and the treatment of any separate account
established under this Plan pursuant to a QDRO. Unless otherwise
expressly specified in such procedures, (1) the Plan
Administrator shall treat a domestic relations order entered
before January 1, 1985 as a QDRO in accordance with Code section
414(p) and (2) a distribution may be made to an alternate payee
pursuant to a QDRO prior to the earliest date that a distribution
could be made to a Participant under the terms of this Plan and
prior to a Participant's "earliest retirement age" under Code
section 414(p). The determinations and the distributions made by,
or at the direction of, the Plan Administrator under this section
16.1 shall be final and binding on the Participant and on all
other persons interested in such order,
16.2 Benefits Supported Only by Trust Fund. Any person having
any claim for any benefit under this Plan shall look solely to
the assets of the Fund for the satisfaction of that claim. In no
event shall the Prototype Sponsor, the Trustee, the Plan
Administrator, the Employer or a Participating Affiliate or any
of their employees, officers, directors or their agents be liable
in their individual capacities to any person whomsoever for the
payment of any benefits under this Plan.
16.3 Discrimination. The Plan Administrator shall administer
the Plan in a manner which it deems equitable under the
circumstances for all similarly situated Employees, Participants,
Spouses and Beneficiaries; provided, the Plan Administrator shall
not permit discrimination in favor of Highly Compensated
Employees of the Employer or any Participating Affiliate which
would be prohibited under Code section 401(a).
16.4 Claims. Any payment to a Participant or Beneficiary or
the legal representative or heirs-at-law of any such person made
in accordance with the provisions of this Plan shall to the
extent of such payment be in full satisfaction of all claims
under this Plan against the Trustee, Plan Administrator, a Named
Fiduciary, the Employer and any Participating Affiliate, any of
whom may require such person, such person's legal representative
or heirs-at-law, as a condition precedent to such payment, to
execute a receipt and release in such form as shall be determined
by the Trustee, Plan Administrator, a Named Fiduciary, the
Employer or a Participating Affiliate, as the case may be.
16.5 Nonreversion. Except as provided in section 7.2(b) and
in this section 16.5, neither the Employer nor any Participating
Affiliate shall have any present or prospective right, claim, or
interest in the Fund or in any Employer contribution made to the
Trustee.
To the extent permitted by the Code and ERISA, the Employer
contributions described in this section 16.5, less any losses on
such contributions, shall be returned by the Trustee to the
Employer or to any Participating Affiliate upon the written
direction of the Plan Administrator in the event that:
16.5(a) an Employer contribution is made by a mistake of fact,
provided such return is effected within one year after the
payment of such contribution;
16.5(b) a final judicial or Internal Revenue Service
determination is made that this Plan fails to satisfy the
requirements of Code section 401 with respect to its initial
qualification (provided, if the Employer is not entitled to rely
on the Prototype Sponsor's opinion letter, the application for
the initial qualification of the Plan is made on or before the
date prescribed by law for filing the Employer's return for the
taxable year in which the Plan is adopted, or such later date as
the Secretary of the Treasury may prescribe), in which event all
Employer contributions made before such judicial or
administrative determination (whichever last occurs) plus any
earnings and minus any losses shall be returned within one year
after such determination, all such contributions being hereby
conditioned upon this Plan satisfying all applicable requirements
under Code section 401 from and after its adoption; or
16.5(c) a deduction for an Employer contribution is disallowed
under Code section 404, in which event such contribution shall be
returned within one year after such disallowance, all such
contributions being hereby conditioned upon being deductible
under Code section 404.
16.6 Exclusive Benefit. The corpus or income of the Fund
shall not be diverted to or used for any purpose other than the
exclusive benefit of Participants or Beneficiaries.
16.7 Expenses. Any expenses of the Fund which are properly
allocable to an individual's Account (including, but not limited
to, expenses related to an individual's investment directions,
annuity contract purchases and other transactional fees for
processing distributions) may be charged directly against such
individuals Account it so provided in the administrative
procedures established by the Plan Administrator.
16.8 Section 16 of Securities Exchange Act of 1934. If this
Plan is invested in employer securities and this Plan permits
employees of the Employer who are subject to the reporting
requirements of section 16 of the Securities Act of 1934, as
amended ("Act") to receive awards, then notwithstanding any other
provision of this Plan, the provisions of this Plan that set
forth the formula or formulas that determine the amount, price or
timing of awards to such persons and any other provisions of this
Plan of the type referred to in section 16b-3(c)(2)(ii) of the
Act shall not be amended more than once every six months, other
than to comport with changes in the Code, ERISA, or the rules
thereunder. Further, to the extent required, the employees
described in the preceding sentence shall be subject to such
withdrawal, investment and other restrictions necessary to
satisfy Rule 16b-3 under the Act. This section 16.8 is intended
to comply with Rule 16b-3 under the Act and shall be effective
only to the extent required by such rule and shall be interpreted
and administered in accordance with such rule.
16.9 Arbitration. Any claims or controversies with the
Prototype Sponsor related to this Plan are subject to arbitration
in accordance with the arbitration provisions of the Smith Barney
Qualified Retirement Plan and IRA Client Agreement or any
successor to such agreement, which provisions hereby are
expressly incorporated herein by reference.
APPENDIX ONE TO THE SMITH BARNEY PROTOTYPE DEFINED CONTRIBUTION
PLAN
OBRA'93 ANNUAL COMPENSATION LIMIT
The Plan is amended by adding the following to the end of section
2.10:
2.10(h) OBRA `93 Annual Compensation Limit. In addition to other
applicable limitations set forth in the Plan, and notwithstanding
any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed
the OBRA `93 annual compensation limit. The OBRA `93 annual
compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with Section
401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period,
not exceeding 12 months, over which Compensation is determined
determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA
`93 annual compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the limitation under Section 401(a)(17)
of the Code shall mean the OBRA'93 annual compensation limit set
forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the
current Plan Year, the Compensation for that prior determination
period is subject to the OBRA'93 annual compensation limit in
effect for that prior determination period. For this purpose, for
determination periods beginning before the first day of the first
Plan Year beginning on or after January 1, 1994, the OBRA'93
annual compensation limit is $150,000.
Waiver of 30-Day Notice Period
[Note to Employer: The following amendment will apply only to
distributions from a Profit Sharing Plan or 401(k) Plan that are
not subject to the qualified joint and survivor annuity rules of
Code section 401(a)(11) and Code section 417. In order for this
amendment to apply to a Plan, the Employer must have selected
Option IX.D.3 in the Adoption Agreement and the distribution must
satisfy the Safe Harbor Rules in section 10.5.]
The Plan is amended by adding the following to the end of section
9.3:
9.3(e) Waiver of 30-Day Notice Period. If a distribution is
one to which Sections 401(a)(11) and 417 of the Internal Revenue
Code do not apply, such distribution may commence less than 30
days after the notice required under Section 1.411(a)-11(c) of
the Income Tax Regulations is given, provided that:
9.3(e)(1) the Plan Administrator clearly informs the
Participant that the Participant has a right to a period of at
least 30 days after receiving the notice to consider the decision
of whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
9.3(e)(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-END] DEC-31-1996
[CASH] 31,201,000
[SECURITIES] 10,040,000
[RECEIVABLES] 25,978,000
[ALLOWANCES] 5,474,000
[INVENTORY] 66,799,000
[CURRENT-ASSETS] 148,934,000
[PP&E] 67,747,000
[DEPRECIATION] 25,965,000
[TOTAL-ASSETS] 196,033,000
[CURRENT-LIABILITIES] 44,293,000
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 118,000
[OTHER-SE] 137,959,000
[TOTAL-LIABILITY-AND-EQUITY] 196,033,000
[SALES] 444,766,000
[TOTAL-REVENUES] 452,441,000
[CGS] 300,495,000
[TOTAL-COSTS] 154,955,000
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 1,088,000
[INCOME-PRETAX] (4,097,000)
[INCOME-TAX] (5,216,000)
[INCOME-CONTINUING] 1,119,000
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 1,119,000
[EPS-PRIMARY] .09
[EPS-DILUTED] .09
</TABLE>
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in Registration Statements
(Forms S-8 No. 333-01051 and No. 333-01053) of OshKosh B'Gosh, Inc. of our
report dated February 10, 1997, with respect to the consolidated financial
statements of OshKosh B'Gosh, Inc. and Subsidiaries included in this Annual
Report (Form 10-K) for the year ended December 31, 1996.
Milwaukee, Wisconsin
March 27, 1997
