<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 28, 1994.
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Commission file number 33-762
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LEVI STRAUSS ASSOCIATES INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2973849
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1155 Battery Street, San Francisco, California 94111
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 544-6000
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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock October 1, 1994
--------------------- ----------------
Class E Common, $.10 par value 1,360,995 shares
Class L Common, $.10 par value 51,327,001 shares<PAGE>
FORM 10-Q
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Income . . . . . . . . . . . . . . 3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 19
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
- ----------------------------------------------------------------------------
The following financial statements have been prepared by Levi Strauss
Associates Inc. (the "Company"), without audit, and reflect all adjustments
which are, in the opinion of the Company, necessary for a fair statement of
the results for the interim periods. The statements omit certain information
and footnote disclosures necessary to present the statements in accordance
with generally accepted accounting principles.
The following financial statements should be read in conjunction with the
financial statements and notes included in the Company's Form 10-K for the
year ended November 28, 1993. The Company believes that along with the
following information, the disclosures are adequate to make the information
presented herein not misleading.
All percentage changes in this report are based on unrounded amounts.<PAGE>
<TABLE>
LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands Except Per Share Data)
(Unaudited)
<CAPTION>
Third Quarter Third Quarter Nine Months Nine Months
Ended Ended Ended Ended
August 28, August 29, August 28, August 29,
1994 1993 1994 1993
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Net sales $ 1,588,116 $ 1,565,429 $ 4,308,080 $ 4,298,606
Cost of goods sold 957,119 964,456 2,615,218 2,640,221
-------------- -------------- ------------ --------------
Gross profit 630,997 600,973 1,692,862 1,658,385
Marketing, general and
administrative expenses 365,956 354,414 1,039,437 1,027,219
Management compensation charge -- -- 3,755 --
Other operating (income) expense, net (3,056) 5,047 (6,456) (4,942)
-------------- -------------- ------------ --------------
Operating income 268,097 241,512 656,126 636,108
Interest expense 4,740 9,931 15,472 28,895
Other (income) expense, net 28,466 6,199 35,509 (3,845)
-------------- -------------- ------------ --------------
Income before taxes and
cumulative effect of changes
in accounting principles 234,891 225,382 605,145 611,058
Provision for taxes 93,956 97,716 242,058 259,700
-------------- -------------- ------------ --------------
Income before cumulative effect
of changes in accounting
principles 140,935 127,666 363,087 351,358
Cumulative effect of changes in
accounting principles:
Postretirement benefits other
than pensions (SFAS 106),
net of applicable income tax
benefits of $153,885 -- -- (248,429) --
Income taxes (SFAS 109) -- -- 11,912 --
-------------- -------------- ------------ --------------
Net income $ 140,935 $ 127,666 $ 126,570 $ 351,358
============== ============== ============ ==============
Income (loss) per common share:
Income before cumulative effect
of changes in accounting
principles $ 2.68 $ 2.43 $ 6.90 $ 6.69
Postretirement benefits other
than pensions (SFAS 106) -- -- (4.72) --
Income taxes (SFAS 109) -- -- 0.23 --
-------------- -------------- ------------ --------------
Net income $ 2.68 $ 2.43 $ 2.41 $ 6.69
============== ============== ============ ==============
Average common shares outstanding 52,642,544 52,527,126 52,623,153 52,482,660
============== ============== ============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<TABLE>
Page 1 of 2
LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
August 28, November 28,
1994 1993
------------ --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 661,558 $ 252,673
Trade receivables (less allowance for doubtful accounts:
1994 - $32,742; 1993 - $28,551) 816,504 858,117
Inventories:
Raw materials 118,248 109,289
Work-in-process 169,889 135,797
Finished goods 566,842 546,754
------------ --------------
Total inventories 854,979 791,840
Deferred tax assets 103,338 70,979
Other current assets 126,813 116,815
------------ --------------
Total current assets 2,563,192 2,090,424
Property, plant and equipment (less accumulated depreciation:
1994 - $441,538; 1993 - $364,830) 639,047 594,592
Goodwill and other intangibles (less accumulated amortization:
1994 - $191,247; 1993 - $175,538) 347,869 361,936
Noncurrent deferred tax assets 170,146 20,466
Other assets 33,664 41,242
------------ --------------
$ 3,753,918 $ 3,108,660
============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt and capital lease
obligations $ 28,263 $ 42,695
Short-term borrowings 36,564 10,094
Accounts payable 227,837 259,747
Accrued liabilities 437,095 370,094
Salaries, wages and employee benefits 274,361 250,291
Taxes payable 167,515 139,641
Dividends payable 1,313 688
------------ --------------
Total current liabilities 1,172,948 1,073,250
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</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<TABLE>
Page 2 of 2
LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
August 28, November 28,
1994 1993
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (continued)
Long-term debt and capital lease obligations -
less current maturities 17,410 93,050
------------ -------------
Employee related benefits 726,173 293,147
------------ -------------
Long-term tax liability 348,254 334,627
------------ -------------
Minority interest 35,449 30,047
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Common Stock - Employee Stock Purchase and Award Plan:
Class E common stock - $.10 par value; issued:
1994 - 431,123 shares; 1993 - 300,848 shares
(Redemption value $55,615) 43 30
Additional paid-in capital, common 49,612 33,475
------------ --------------
Total common stock - employee stock purchase
and award plan 49,655 33,505
------------ --------------
Stockholders' Equity:
Class E common stock - $.10 par value; authorized
100,000,000 shares; issued and outstanding:
1994 - 939,747 shares; 1993 - 894,172 shares 94 89
Class L common stock - $.10 par value; authorized
170,000,000 shares; issued: 1994 - 51,826,750
shares; 1993 - 51,910,699 shares 5,183 5,191
Additional paid-in capital, common 251,595 242,572
Retained earnings 1,106,461 990,130
Translation adjustment 76,824 48,322
Pension liability (16,574) (16,574)
Treasury stock, at cost - Class E: 1994 - 8,126
shares; 1993 - 1,379 shares; Class L: 1994 and
1993 - 499,749 shares (19,554) (18,696)
------------ --------------
Total stockholders' equity 1,404,029 1,251,034
------------ --------------
$ 3,753,918 $ 3,108,660
============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
<TABLE>
LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Nine Months
Ended Ended
August 28, August 29,
1994 1993
------------ --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating activities $ 542,751 $ 279,008
------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (97,493) (89,783)
Increase (decrease) in net investment hedge (138) 32,651
Other, net 1,118 3,912
------------ --------------
Net cash used for investing activities (96,513) (53,220)
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (89,647) (357,145)
Net increase (decrease) in short-term borrowings 27,109 (72,155)
Proceeds from sale of common stock to employee plans 21,622 29,512
Purchase of management Class L common stock (5,815) --
Dividends paid (2,289) (82,202)
Proceeds from issuance of long-term debt 16 175,205
Other, net (1,178) (4,452)
------------ --------------
Net cash used for financing activities (50,182) (311,237)
------------ --------------
Effect of exchange rate changes on cash 12,829 9,445
------------ --------------
Net increase (decrease) in cash and cash equivalents 408,885 (76,004)
Beginning cash and cash equivalents 252,673 237,702
------------ --------------
Ending cash and cash equivalents $ 661,558 $ 161,698
============ ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 12,281 $ 23,412
Income taxes 219,466 284,559
Non-cash financing activity:
Notes issued for payment of dividends -- 77,116
</TABLE>
The accompanying notes are an integral part of these financial statements.<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
RECLASSIFICATIONS
A new line item, other operating (income) expense, net was created for the
year-end 1993 Consolidated Statements of Income. This new line includes
certain operations-related items that were classified as other (income)
expense, net or marketing, general and administrative expenses prior to
year-end 1993. The other operating (income) expense, net line represents
operating income or expense items that are not related to marketing, general
and administrative expenses. Consolidated Statements of Income for the third
quarter and year-to-date 1993 have been reclassified to conform to this
presentation format.
The 1994 employee related benefits line item on the Consolidated Balance
Sheets includes postretirement medical benefits of $429.1 million, workers'
compensation liabilities of $158.5 million and other deferred employment
benefits of $138.6 million. The 1993 other liabilities amounts have been
reclassified to conform to this presentation format.
Note 2
POSTRETIREMENT BENEFITS
Statement of Financial Accounting Standards (SFAS) No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" requires the
Company to accrue postretirement benefits (other than pensions), including
health care and life insurance benefits for retired employees over the period
that an employee becomes fully eligible for benefits. The Company adopted
SFAS No. 106 effective November 29, 1993. Previously, the Company used a
"pay-as-you-go" method whereby expenses were recorded as claims were
incurred.
SFAS No. 106 requires the Company to recognize an expense to establish a
"transition obligation", representing the actuarially determined value at
November 29, 1993 of the postretirement benefit obligation earned by
employees and retirees in prior periods. The weighted average discount rate
used to determine the present value of the transition obligation was
6.5 percent. A 12.4 percent annual rate of increase in the per capita claims
cost reducing to 5.0 percent after 14 years was also used to determine the
present value of the transition obligation.
The transition obligation was recorded as a one-time, non-cash charge against
earnings of $402.3 million before taxes and $248.4 million after taxes. The
transition obligation is shown as a cumulative effect of a change in
accounting principles, net of income tax effects, on the Consolidated
Statements of Income. The $153.9 million noncurrent deferred tax benefit
related to the adoption of SFAS No. 106 was recorded in accordance with SFAS
No. 109 on the Consolidated Balance Sheets (see Note 3 to Consolidated
Financial Statements relating to the adoption of SFAS No. 109 "Accounting for
Income Taxes").
The adoption of SFAS No. 106 also results in additional ongoing expenses for
service and interest costs related to postretirement benefits, which were
$10.8 million and $32.2 million, respectively, for the 1994 third quarter and
year-to-date. The 1994 full year expense for these ongoing costs is
estimated to be $43.0 million.
The Company is evaluating the weighted average discount rate used to
determine the actuarial present value of postretirement benefits for year-end
1994 due to the recent rise in market rates of interest. It is expected that
the assumed discount rate will increase, which will result in a decrease in
the obligation for the present value of postretirement benefits.
Note 3
INCOME TAXES
SFAS No. 109 "Accounting for Income Taxes" requires an asset and liability
approach for financial accounting and reporting of income taxes. Under
SFAS No. 109, deferred tax assets and liabilities are established at the
balance sheet date in amounts that are expected to be recoverable or payable
when the difference in the tax bases and financial statement carrying amounts
of assets and liabilities ("temporary differences") reverse. The Company
complied with the provisions of SFAS No. 109 as of November 29, 1993. The
adoption resulted in an $11.9 million credit to income, which was recorded as
a cumulative effect of changes in accounting principles on the Consolidated
Statements of Income. Upon adoption, deferred tax assets and deferred tax
liabilities were adjusted accordingly.
Temporary differences which gave rise to deferred tax assets and liabilities
at August 28, 1994 were as follows:
<TABLE>
<CAPTION>
Deferred Tax Deferred Tax
Assets Liabilities
-------------- ------------
(000's)
<S> <C> <C>
Employee compensation and benefit plans $ 156,493 $ --
Postretirement benefits 153,885 --
Inventory 27,799 --
Restructuring charges 20,611 --
Depreciation and amortization 23,836 33,946
State income tax 20,949 --
Foreign exchange gains/losses 14,106 48,761
Tax on unremitted non-U.S. earnings -- 88,939
Other 54,919 27,467
----------- ----------
$ 472,598 $ 199,113
=========== ==========
</TABLE>
The net deferred tax assets at August 28, 1994 were $273.5 million.
The consolidated U.S. income tax returns of the Company for 1983 through 1985
are under examination by the Internal Revenue Service (IRS). The examination
includes the review of certain transactions relating to the 1985 leveraged
buyout by the Company of Levi Strauss & Co. The IRS has not yet concluded
its examination and a settlement has not been negotiated. The Company
believes it has made adequate provision for income taxes and interest, which
may become payable upon settlement.
Note 4
COMMITMENTS AND CONTINGENCIES
The Company has forward currency contracts to buy the aggregate equivalent of
$188.2 million of the following foreign currencies: Netherlands Guilders,
British Pounds, Finnish Markkaa, French Francs, German Marks, Swiss Francs
and Belgian Francs, principally as a result of intercompany financing
transactions. In addition, the Company has Belgian Franc forward currency
contracts to buy the aggregate equivalent of $14.7 million of the following
currencies: Swedish Kroner, Spanish Pesetas, Netherlands Guilders, Italian
Lire, British Pounds, French Francs and German Marks. These contracts hedge
currency exposures resulting from intercompany receivables and payables.
The Company has forward currency contracts to sell the aggregate equivalent
of $846.9 million of the following foreign currencies: Japanese Yen, Swedish
Kroner, Spanish Pesetas, Norwegian Kroner, Netherlands Guilders, Italian
Lire, British Pounds, Finnish Markkaa, French Francs, Danish Kroner, German
Marks, Swiss Francs and Belgian Francs. These contracts hedge currency
exposures resulting from sourcing operations as well as net investment
positions, intercompany royalties and dividend payments. In addition, the
Company has Belgian Franc forward currency contracts to sell the aggregate
equivalent of $223.2 million of the following foreign currencies: Swedish
Kroner, Spanish Pesetas, Netherlands Guilders, Italian Lire, Greek Drachma,
British Pounds, French Francs and German Marks. These contracts hedge
currency exposures resulting from intercompany receivables and payables.
All of these contracts are at various exchange rates. The majority of these
contracts expire at various dates during the fourth quarter of 1994. The
remaining contracts expire at various dates through 1996.
In addition, the Company has the right to sell Japanese Yen for
$10.0 million. This contract expires March 1995 and hedges the Company's net
investment in its Japanese affiliate.
Realized and unrealized transaction losses on these contracts for the third
quarter of 1994 were $12.7 million and $23.3 million, respectively.
Year-to-date realized and unrealized losses on these contracts were
$14.2 million and $30.4 million, respectively.
The Company's market risk is directly related to fluctuations in the currency
exchange rates. The Company's credit risk is limited to the currency rate
differential for each agreement, if a counterparty failed to meet the terms
of the contract. These instruments are executed with credit worthy financial
institutions and the Company does not anticipate nonperformance by the
counterparties.<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Summary
Record third quarter 1994 net income of $140.9 million increased 10 percent
from the comparable quarter of 1993. The increase in net income was
primarily due to record third quarter dollar sales, higher other operating
income, net, a lower effective tax rate and lower interest expense. This
increase was partially offset by higher other expense, net.
Year-to-date net income was $126.6 million, a decrease of 64 percent from the
prior year period. The decrease was mostly due to the effects of adopting
Statement of Financial Accounting Standards (SFAS) No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" in 1994 (see Note
2 to Consolidated Financial Statements) and higher other expense, net.
Despite the effects of adopting SFAS No. 106, contributing to 1994 year-
to-date net income were a lower effective tax rate, lower interest expense
and the positive effect of adopting SFAS No. 109 "Accounting for Income
Taxes" (see Note 3 to Consolidated Financial Statements). Without the
effects of adopting both SFAS Nos. 106 and 109, year-to-date net income would
have been 3 percent higher than the prior year period.
Full year 1994 net income is expected to be significantly lower than 1993
mostly due to the net impact of adopting SFAS Nos. 106 and 109.
Additionally, the Company expects net income to be negatively impacted by
non-cash expenses associated with the Company's stock liquidity program for
management holders of Class L common stock (see Management Compensation
Charge caption).
Net Sales
Record dollar sales for the 1994 third quarter increased 1 percent over the
comparable quarter of 1993, despite a 3 percent decrease in unit sales. The
dollar sales increase was mostly due to a 5 percent increase in average unit
selling prices. The 1994 third quarter results were attributable to record
dollar and unit sales performances by the Europe division and the U.S.
Levi's(R) brand product line. Dollar sales, on a year-to-date basis,
increased less than 1 percent from the prior year period and was also a
record.
U.S. dollar sales for the 1994 third quarter of $1.0 billion were flat
compared to the prior year period, mostly due to an increase in average unit
selling prices that was offset by a decrease in unit sales. On a year-
to-date basis, U.S. dollar sales were $2.6 billion, a decrease of 3 percent
from the prior year period, primarily due to lower unit sales. Contributing
to these results were record overall dollar sales in the Levi's(R) product
line that were more than offset by lower dollar and unit sales in the
Dockers(R) product line.
The U.S. women and youth Levi's(R) product lines each posted record 1994
third quarter and year-to-date dollar sales, with Levi's(R) jeans for women
also achieving record unit sales. However, current quarter and year-to-date
dollar and unit sales for U.S. men's Levi's(R) product line decreased from
the 1993 periods primarily due to a discontinuance of certain higher-margin
silverTab(TM) products. During 1994, the men's Dockers(R) product line
focused its efforts on producing and selling wrinkle-resistant products.
Finishing capacity limitations for wrinkle-resistant bottoms and the
inability to meet full demand contributed to a third quarter and year-to-date
dollar and unit sales decrease of men's Dockers(R) products from the prior
year periods. The women's Dockers(R) brand has decreased production while in
the process of repositioning its line. This was reflected in the 1994 third
quarter Dockers(R) for women brand dollar and unit sales decreases of
45 percent and 50 percent, respectively, as compared to the third quarter of
1993. (See Inventories caption for additional information.)
Outside the U.S., record 1994 third quarter and year-to-date dollar sales of
$557.3 million and $1.7 billion, respectively, both increased 5 percent over
the comparable periods of 1993 mostly on the strength of the Europe division,
principally in Germany and Italy. Additionally, on a quarter-to-date basis,
the Europe division experienced increased sales growth due to favorable
translation of certain European currencies to U.S. dollars. During 1994, the
Europe division generated new business related to the 1994 introduction of
the Dockers(R) brand of products in Europe.
The record results in Europe were partially offset by declines of 5 percent
and 10 percent in third quarter dollar and unit sales, respectively, for the
Asia Pacific division, compared to the third quarter of 1993. Contributing
to these declines was the slow economic recovery, increased product
competition (particularly private label products), lower average unit selling
prices and a market shift to lower margin products, all occurring in Japan.
On a year-to-date basis, dollar sales decreased 1 percent due to lower sales
in Japan that were mostly offset by increased sales for the Company's
affiliates in Korea and the Philippines. (See Gross Profit and Inventories
captions for additional information.)
Total Company dollar sales for full year 1994 are expected to be slightly
higher than the dollar sales records of 1993 mostly due to the Europe
division and the U.S. Levi's(R) brand. However, overall unit sales are
expected to decrease mostly due to lower sales for the U.S. Dockers(R) brand
products.
Gross Profit
As a percent of sales, 1994 third quarter and year-to-date gross profit
increased slightly compared to the prior year periods. In dollars, current
quarter and year-to-date gross profit increased 5 percent and 2 percent,
respectively, over the comparable 1993 periods mostly due to lower U.S.
production costs and higher overall average unit selling prices.
Included in cost of goods sold were lower U.S. production costs that
primarily reflected prior year workers' health and safety costs accrual
reversals of $25.2 million and $33.7 million, respectively, for the current
quarter and year-to-date compared to the prior year periods. New state
workers' compensation legislation in Texas and the Company's safety programs
and alternative manufacturing systems implementation all had a positive
effect on lowering workers' health and safety costs. These adjustments were
partially offset by third quarter 1994 and year-to-date charges of
$8.4 million and $25.2 million, respectively, for ongoing benefit expenses
related to SFAS 106 (see Postretirement Benefits caption). (See Inventories
caption for additional information.)
The businesses outside the U.S. continue to record higher gross profit as a
percent of sales than businesses in the U.S., mostly due to higher overall
average unit selling prices. Additionally, compared to the U.S., the
non-U.S. businesses sell a greater proportion of higher margin denim bottoms
(predominately 501(R) and Red Tab(TM) products). The current quarter gross
margin percentage for the businesses outside the U.S. was slightly lower
compared to the prior year period primarily due to inventory markdowns for
basic denim products in Japan, which resulted from a change in consumers'
preferences from higher margin basic denim products to more lower margin
light-weight denim/rayon blend products. (See Net Sales and Inventories
captions for additional information.)
The businesses outside the U.S. represented 41 percent of the Company's 1994
third quarter profit contribution before corporate expenses and taxes,
compared to 45 percent in 1993. The lower third quarter 1994 percentage was
primarily due to favorable revised estimates for U.S. workers' health and
safety costs in the third quarter of 1994 compared to the 1993 third quarter.
On a year-to-date basis, both 1994 and 1993 non-U.S. percentages were
54 percent. The 1994 non-U.S. year-to-date percentage is higher than the
third quarter 1994 percentage due to lower U.S. sales volume in the first
quarter of 1994.
Marketing, General and Administrative Expenses
As a percentage of sales, marketing, general and administrative expenses for
the current quarter and year-to-date of 23 percent and 24 percent,
respectively, were unchanged from the prior year periods. In dollars,
marketing, general and administrative expenses for the current quarter and
year-to-date increased 3 percent and 1 percent, respectively, over the
comparable 1993 periods. The current quarter increase was mostly due to
higher selling and administrative expenses. On a year-to-date basis,
marketing, general and administrative expenses increased for the same
reasons, but were partially offset by lower advertising expense.
Selling expense for the current quarter and year-to-date increased 16 percent
and 17 percent, respectively, primarily due to increased sales volume outside
the U.S. Third quarter and year-to-date administrative expense increased
5 percent and 2 percent, respectively, from the comparable 1993 periods
primarily due to expenses in connection with customer service initiatives in
the U.S., Europe and Asia Pacific.
Year-to-date advertising expense decreased 5 percent from the prior year
mostly due to planned reductions in media production expenditures and local
cooperative advertising in the U.S. This decrease was partially offset by
increased advertising expense for the Company's affiliates in Germany and
Korea.
Information resource expense for the current periods increased slightly
compared to the prior year periods. The majority of systems and software
costs related to the Company's initiative to improve customer service are not
expected to occur until 1995.
Management Compensation Charge
During the 1994 first quarter, the Company purchased 83,949 shares of Class L
common stock, for a total of $9.6 million, held by certain management
stockholders that have left the employment of the Company. The purchase
price of $114 per share was the appraised value as determined by a valuation
obtained in November 1993 from an independent investment banking firm for the
Company's employee stock plans.
The selling stockholders acquired the shares through exercises of stock
options. As a result of the purchase transaction, compensation expense of
$3.8 million was recorded to recognize the difference between the original
compensation amount recorded for the related stock options and the current
appraised value of the stock. Additionally, stockholders' equity decreased
by a total of $5.8 million due to the purchase and retirement of these shares
of stock.
Separately, during the first quarter of 1994, the Board of Directors approved
a stock liquidity program (the "Liquidity Program") for management holders of
Class L common stock. This program received stockholder approval at the
April 1994 annual meeting of stockholders. The Liquidity Program allows the
Company to enter into contracts with management holders of Class L common
stock relating to in-service, employment separation-related and post-
separation stock purchases. Currently, holders of 1,297,526 shares of
Class L common stock (including outstanding options) are eligible to
participate in this program. This program would allow participating
management stockholders to annually sell a specified amount of their stock to
the Company, subject to certain limitations and conditions. The program also
entitles the Company to purchase all of the shares held by a management
holder at the time of separation from employment.
The Liquidity Program offering is expected to be completed during the fourth
quarter of 1994. Once individual contracts for the Liquidity Program are
completed, shares held by participants must under accounting rules be
reflected on the balance sheet "outside" of stockholders' equity due to the
liquidity feature. If all eligible management stockholders participated in
the Liquidity Program, the Company would incur an initial pre-tax
compensation expense increase of approximately $57.0 million (based on the
current appraised stock value of $129 per share), the addition of common
stock outside of stockholders' equity of approximately $167.0 million and a
reduction in stockholders' equity of approximately $121.0 million. Future
changes in the stock valuation would result in periodic adjustments to
compensation expense. Stock related compensation expense would generally
result in a permanent tax difference and will not be deductible for tax
purposes. Actual purchases of stock by the Company under the Liquidity
Program would result in cash outflows.
Other Operating (Income) Expense, Net
Third quarter 1994 other operating income, net increased $8.1 million from
the prior year period primarily due to reserves recognized in 1993 for
potential losses on existing capital assets as a result of the Company's
initiative to improve customer service and 1993 expenses for new business
development in Europe and Asia Pacific. This increase was partially offset
by 1994 costs associated with the Company's data center relocation. The data
center was relocated outside of California during and subsequent to the third
quarter of 1994 in accordance with the Company's disaster recovery plan.
On a year-to-date basis, other operating income, net increased $1.5 million
from the comparable period of 1993 for the same reasons noted above, as well
as for additional reserves recognized in 1993 for costs associated with
pre-LBO idle facilities. This increase was partially offset by the
recognition in 1994 of current and future costs associated with
environmental-related soil remediation of a facility previously owned by the
Company and income recognized in 1993 from joint ventures. (See Note 1 to
Consolidated Financial Statements regarding the reclassification of certain
1993 quarterly amounts to Other Operating (Income), Net.)
Interest Expense
Interest expense for the current quarter and year-to-date decreased
52 percent and 46 percent, respectively, from the comparable periods of 1993
primarily due to lower average debt balances. Debt reductions after the
third quarter of 1993 included net repayments of debt on the Company's
working capital facility and repayment and cancellation of the second and
third series of dividend notes payable to Class L stockholders. The debt was
repaid using cash flows from operations.
During the second quarter of 1994, the Company renegotiated and amended its
primary credit agreement which, among other items, provides for lower
commitment fees and interest rate basis points (see Liquidity and Capital
Resources caption).
Full year 1994 interest expense related to borrowings is expected to be lower
than 1993 due to anticipated lower 1994 average debt levels. The Company
anticipates that it will not need to borrow funds during the remainder of
1994 for costs relating to its global initiatives to improve customer
service. These costs are expected to be funded by cash flows from operations
during 1994.
Other (Income) Expense, Net
Other expense, net for the current quarter and year-to-date increased
$22.3 million and $39.4 million, respectively, from the prior year periods
mostly due to greater 1994 net foreign currency transaction losses. These
net foreign currency transaction losses were mostly due to the weakening of
the U.S. dollar compared to European currencies during the nine months of
1994 coupled with a higher volume of hedging transactions compared to 1993.
The majority of contracts generating the foreign currency transaction losses
mature by the end of fiscal 1994. Additionally, contributing to the other
expense, net increase were translation losses recorded by a Company affiliate
located in a high inflationary environment, higher net costs for foreign
currency exchange contracts and interest rate swap termination costs. (See
Note 1 to Consolidated Financial Statements regarding the reclassification of
certain Other (Income) Expense, Net amounts and Note 4 to Consolidated
Financial Statements regarding foreign currency exchange contracts.)
Provision for Taxes
The decrease in the 1994 third quarter and year-to-date provision for taxes
compared to the prior year periods was primarily due to a 3 percentage point
decrease in the Company's effective tax rate. The effective tax rate for
both the current quarter and year-to-date was 40 percent compared to the rate
for both 1993 periods of 43 percent.
The lower 1994 rates were primarily due to a change in the mix of U.S. and
non-U.S. earnings, lower state taxes and a reassessment of the Company's tax
settlement strategies. (See Note 3 to Consolidated Financial Statements for
information relating to the adoption of SFAS No. 109 "Accounting for Income
Taxes".)
Postretirement Benefits
The Company recorded a one-time, non-cash charge against earnings of
$402.3 million before taxes and $248.4 million after taxes due to the
adoption of SFAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions" effective November 29, 1993. This charge was recorded
as a cumulative effect of a change in accounting principles, net of income
tax effects, on the Consolidated Statements of Income. The adoption of SFAS
No. 106 also results in additional ongoing expenses for service and interest
costs related to postretirement benefits, which were $10.8 million and
$32.2 million, respectively, for the current quarter and year-to-date. The
1994 full year expense for these ongoing costs is estimated to be
$43.0 million (see Note 2 to Consolidated Financial Statements).
FINANCIAL CONDITION AND LIQUIDITY
Trade Receivables
Trade receivables of $816.5 million decreased 5 percent from year-end 1993.
This decrease was primarily due to improved U.S. collection efforts coupled
with a reduction (by collection) in U.S. past-due receivables. Partially
offsetting this decrease were higher non-U.S. trade receivables as a result
of increased sales in the Company's affiliates in Germany and Italy. As a
percent of sales, trade receivables for the 1994 third quarter decreased
5 percent from year-end for the same reasons. The allowance for doubtful
accounts, as a percentage of accounts receivable, increased to 4.01 percent
from the 1993 year-end percentage of 3.33 percent mostly due to concerns
related to retail industry bankruptcies in the current U.S. economic
environment. The current percentage is expected to be lower by year-end
1994.
Inventories
Inventories at third quarter 1994 were $855.0 million, 8 percent higher than
the year-end 1993 level. The inventories increase reflected a 26 percent
increase in non-U.S. inventories that was partially offset by a 2 percent
decrease in U.S. inventories.
U.S. inventories decreased 41 percent and 4 percent, respectively, in the
Brittania(R) and Levi's(R) product lines. The lower Brittania(R) brand
inventories at third quarter 1994 reflect a reduction from high year-end 1993
levels and are currently in line with projected sales. The decrease in the
Levi's(R) brand inventories was a result of strong Back-to-School sales for
Levi's(R) jeans for women and Levi's(R) youth products during the third
quarter of 1994. In response to consumer demand for lower priced products,
during 1994 the U.S. men's Levi's(R) brand marketing division is carrying a
higher percentage of lower margin Orange Tab(TM) products and a lower
percentage of certain higher margin silverTab(TM) and Red Tab(TM) products,
including 501(R) products.
In addition, inventory levels for the women's Dockers(R) product line
decreased 30 percent from year-end 1993 as the line is being repositioned in
the market primarily due to a shift in consumer preferences away from certain
casual sportswear products (i.e., skirts, dresses and coordinated products)
and consumer price sensitivity. The new line is expected to be fully
repositioned by the Spring of 1995 and will focus on the Dockers(R) brand
image of casual core bottoms supported by casual tops as opposed to carrying
predominately seasonal products.
The U.S. inventories decrease was partially offset by a 38 percent increase
in the men's Dockers(R) product line. The effects of the finishing capacity
limitations for wrinkle-resistant products caused the men's Dockers(R) brand
work-in-process inventories to increase from year-end 1993. Due to recent
increases in finishing capacity and efficiency, units of wrinkle-resistant
bottoms are expected to move from the work-in-process inventories to the
finished goods inventories at an improved rate.
The increase in inventories outside the U.S. was mostly due to higher
inventories (consisting primarily of denim bottoms) in the Company's Italian
and German affiliates to meet projected sales demand. In addition,
inventories in the Europe division grew in 1994 due to the consolidation of
entities that were previously accounted for by the equity method of
accounting. The Asia Pacific division is shifting some of its product mix to
lower margin products in response to a change in consumers' preferences from
higher margin basic denim products to lower margin light-weight products.
The Company anticipates that current inventory levels will be lower at
year-end due to shipments in the fourth quarter of 1994 to meet the remainder
of the 1994 Back-to-School demand and Holiday demand.
Property, Plant and Equipment
Property, plant and equipment, net of $639.0 million increased 7 percent from
year-end 1993. The increase in property, plant and equipment was primarily
due to capital expenditures and the consolidation of entities in Europe that
were previously accounted for by the equity method of accounting. These
increases were partially offset by depreciation expense during the period.
Capital expenditures in the U.S. were primarily for purchase of land and
customer service center design and engineering costs, related to the
Company's initiative on customer service, and equipment and leasehold
improvements in connection with the Company's data center relocation. The
data center was relocated outside of California during and subsequent to the
third quarter of 1994 in accordance with the Company's disaster recovery
plan. Outside the U.S., the Company continued to build a distribution and
administrative office facility in Germany.
Actual spending on projects during 1994 is expected to be $120.0 million, not
including spending related to the Company's U.S. initiative on customer
service. The Company expects to spend over $400.0 million during the next
several years in connection with this initiative including $85 million
previously recognized or currently committed in 1994. During the third
quarter of 1994, the Company negotiated and signed a design, engineering,
procurement and construction services agreement with Fluor Daniel, Inc.
relating to the design and construction of the Company's customer service
centers. (See Subsequent Events - Strategic Initiative on Customer Service
caption.)
Working Capital
Working capital at the end of the 1994 third quarter increased $373.1 million
from year-end 1993 to $1.4 billion. In addition, the current ratio increased
to 2.2 from 1.9. The increase in working capital was mostly due to higher
cash and cash equivalents from operations and higher inventories. This was
partially offset by higher accrued liabilities, which included increased
professional fee accruals relating to advertising expense and the Company's
initiative on customer service, and lower accounts receivable.
Liquidity and Capital Resources
The increase of $408.9 million in cash and cash equivalents from year-end
1993 was mostly due to cash provided by operations. Cash provided by
operations was partially used for the net repayment of debt and purchases of
property, plant and equipment. Most of the remaining cash was invested in
short-term investments. The Company is continuing to explore short-term
fixed-income portfolio investment possibilities for its cash and cash
equivalents balance. Additionally, the Company anticipates utilizing a
portion of this cash in 1995 to fund costs relating to its global initiatives
on customer service.
During the second quarter of 1994, the Company renegotiated and amended its
primary credit agreement to reduce its $500.0 million unsecured working
capital facility to a $200.0 million 364 day revolving line of credit, which
is convertible at the option of the Company into a three-year term loan.
This amendment reflects the current financing needs and cash position of the
Company. Under the new revolving line of credit, commitment fees and
interest rate basis points are lower than under the working capital facility.
During 1994, the Company repaid $50.0 million on its working capital loan and
repaid its second and third series of dividend notes payable to Class L
stockholders totaling $38.6 million, plus accrued interest of $2.0 million.
At August 28, 1994, the Company's total outstanding debt balance was
$82.2 million, 44 percent lower than year-end 1993.
The Company expects total debt at year-end 1994 to be lower than the level at
year-end 1993 due to the continued repayment of debt using cash generated
from operations. The Company does not anticipate that it will need to borrow
funds during the remainder of 1994 for costs related to the Company's global
initiatives on customer service.
In 1994, due to lower debt levels, the Company terminated its remaining
$200.0 million of interest rate swap agreements that hedged floating-rate
liabilities for fixed rates. The termination will become effective during
the fourth quarter of 1994 and resulted in a loss of $2.6 million that was
included in other (income) expense, net.
Sale of Class E Common Stock to Employee Investment Plans
In July 1994, the employee investment plans, collectively, purchased 54,695
shares of Class E common stock from the Company at $129 per share as
determined by the valuation of an independent investment banking firm. In
addition, the Company contributed 52,863 matching shares to these plans.
SUBSEQUENT EVENTS
Payment of Dividends on Class E Common Stock
In June 1994, the Board of Directors declared a dividend of $.65 per share
(totaling $.9 million), which was paid on August 31, 1994 to Class E
stockholders of record on July 29, 1994. There were no dividends declared on
Class L common stock.
Employee Investment Plan Trustee
Effective September 1994, certain assets of the Employee Investment Plan of
Levi Strauss Associates Inc. (the "Plan") will be held by and under the
control of a new trustee, Fidelity Management Trust Company. Plan
participants may direct investments among a series of mutual funds offered
under the Plan and managed by the new trustee. These mutual funds will
provide participants investment alternatives similar to those previously
available under the Plan as well as certain additional options. Investments
in the Company's Class E common stock will continue to be held by Boston Safe
Deposit and Trust Company.
Strategic Initiative on Customer Service
During September 1994, the Board of Directors endorsed the Company's U.S.
customer service initiative. The Company will focus its efforts on certain
parts of the initiative to be completed within the original time frame of
November 1996. The Company will focus on other areas of the initiative after
these initial areas are completed to mitigate disruption to the Company's
ongoing business and strain on the Company and its employees.
The Company expects to make capital expenditures of over $400.0 million
during the next few years to support the new U.S. distribution network,
expanded systems plans, organization and manufacturing changes.
Additionally, the Company expects to spend approximately $450.0 million for
transitional expenses, including software costs, costs for redesign of
existing facilities, training and education costs and other related expenses.
These costs include previously recognized or currently committed capital
expenditures and expenses of $85.0 million and $55.0 million, respectively.
All these costs may be recognized ratably throughout the implementation
period and/or as expenditures occur, depending on the nature of the cost and
the decisions made related to this initiative.
The Company is assuming substantial risks in undertaking this initiative.
This initiative involves fundamental changes in the way the Company operates
its U.S. business. There are numerous commercial, operating, financial,
legal and other risks and uncertainties presented by the design and
implementation of such a program. Although there can be no assurance that
the Company will successfully design and implement these new business
processes, or that the costs of this initiative will not exceed estimates,
the Company believes that the re-engineering initiative is essential to
maintain its competitive position. Additionally, the Company believes it is
important to implement this initiative at a time when the Company's market
and financial performance is strong.
Company-owned Retail and Outlet Stores
Consistent with the Company's business vision of enhancing brand image
through dedicated retail distribution, the Board of Directors, in September
1994, endorsed the ownership and operation by the Company of retail and
outlet stores in the U.S. These stores would include Original Levi's(R)
Stores, Dockers(R) Shops and separate outlet stores in all cases selling only
Levi's(R) or Dockers(R) products. The Company expects to open approximately
190 of these stores. Implementation of this dedicated distribution program
is dependent upon approval from the Federal Trade Commission (FTC). This
program is in addition to the plans the Company has with Designs, Inc. to
establish a joint venture that will own and operate, in the northeastern
U.S., Original Levi's(R) Stores selling only Levi's(R) jeans and
jeans-related products. Venture establishment is subject to FTC approval.<PAGE>
PART II. OTHER INFORMATION
LEVI STRAUSS ASSOCIATES INC. AND SUBSIDIARIES
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
10a Master Trust Agreement between Levi Strauss Associates Inc. and
Fidelity Management Trust Company.
10b Levi Strauss Associates Inc. Deferred Compensation Plan for
Executives (as amended and restated through August 22, 1994)
(b) There were no reports on Form 8-K filed with the Commission during the
third quarter of 1994.<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEVI STRAUSS ASSOCIATES INC.
----------------------------
(Registrant)
Date: October 11, 1994
By /s/Richard D. Murphy
---------------------------------------
(Richard D. Murphy)
Vice President and Corporate Controller<PAGE>
<PAGE>
EXHIBIT INDEX
10a Master Trust Agreement between Levi Strauss Associates Inc. and
Fidelity Management Trust Company. 22
10b Levi Strauss Associates Inc. Deferred Compensation Plan for
Executives (as amended and restated through August 22, 1994) 56<PAGE>
<PAGE>
Exhibit 10a
-----------
Master Trust Agreement
Between
Levi Strauss Associates Inc.
And
Fidelity Management Trust Company
LEVI STRAUSS ASSOCIATES INC.
MASTER INVESTMENT PLAN
TRUST
Dated as of September 1, 1994<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Exclusive Benefit and Reversion of Sponsor
Contributions . . . . . . . . . . . . . . . . . . . . . . 7
Section 4. Disbursements . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Directions from Applicable Fiduciary. . . . . . . . . . . . 7
(b) Limitations . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 5. Investment of Trust . . . . . . . . . . . . . . . . . . . . 8
(a) Selection of Investment Options . . . . . . . . . . . . . . 8
(b) Available Investment Options. . . . . . . . . . . . . . . . 8
(c) Participant Direction . . . . . . . . . . . . . . . . . . . 9
(d) Mutual Funds. . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Reliance of Trustee on Directions . . . . . . . . . . . . . 12
(g) Trustee Powers. . . . . . . . . . . . . . . . . . . . . . . 13
Section 6. Recordkeeping and Administrative Services to Be Performed . 15
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) Inspection and Audit. . . . . . . . . . . . . . . . . . . . 16
(d) Effect of Plan Amendment. . . . . . . . . . . . . . . . . . 17
(e) Returns, Reports and Information. . . . . . . . . . . . . . 17
(f) Allocation of Plan Interests. . . . . . . . . . . . . . . . 18
(g) Provision of Information Relating to Mutual Funds . . . . . 19
Section 7. Compensation and Expenses . . . . . . . . . . . . . . . . . 19
Section 8. Directions and Indemnification. . . . . . . . . . . . . . . 20
(a) Identity of Administrator and Named Fiduciary . . . . . . . 20
(b) Directions from Sponsor or Administrator. . . . . . . . . . 20
(c) Directions from Applicable Fiduciaries. . . . . . . . . . . 21
(d) Co-Fiduciary Liability. . . . . . . . . . . . . . . . . . . 21
(e) Indemnification . . . . . . . . . . . . . . . . . . . . . . 22
(f) Survival. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9. Resignation or Removal of Trustee . . . . . . . . . . . . . 23
(a) Resignation . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Removal . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Transition. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 10. Successor Trustee . . . . . . . . . . . . . . . . . . . . . 24
(a) Appointment . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Acceptance. . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Corporate Action. . . . . . . . . . . . . . . . . . . . . . 24
Section 11. Termination . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 12. Resignation, Removal, and Termination Notices . . . . . . . 25
Section 13. Duration. . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 14. Amendment or Modification . . . . . . . . . . . . . . . . . 26
Section 15. General . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Performance by Trustee, its Agents or Affiliates. . . . . . 26
(b) Delegation by Employer. . . . . . . . . . . . . . . . . . . 27
(c) Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 28
(d) Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(e) Successors and Assigns. . . . . . . . . . . . . . . . . . . 28
(f) Partial Invalidity. . . . . . . . . . . . . . . . . . . . . 28
(g) Section Headings. . . . . . . . . . . . . . . . . . . . . . 28
Section 16. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Massachusetts Law Controls. . . . . . . . . . . . . . . . . 29
(b) Trust Agreement Controls. . . . . . . . . . . . . . . . . . 29
Section 17. Plan Qualification. . . . . . . . . . . . . . . . . . . . . 29<PAGE>
Schedules
- ---------
A - Recordkeeping & Administrative Services
B - Fee Schedule
C - Investment Options
D - Sponsor's Authorization Letter
E - Named Fiduciaries' Authorization Letters
F - Opinion of Counsel
G - Telephone Exchange Procedures
H - Plan Designation Form
I - Sponsor Stock Operating Procedures<PAGE>
TRUST AGREEMENT, dated as of the first day of September, 1994,
between LEVI STRAUSS ASSOCIATES INC., a Delaware corporation, having an
office at 1155 Battery Street, San Francisco, CA 94111 (the "Sponsor"), and
FIDELITY MANAGEMENT TRUST COMPANY, a Massachusetts trust company, having an
office at 82 Devonshire Street, Boston, Massachusetts 02109 (the "Trustee").
WITNESSETH:
WHEREAS, the Sponsor is the sponsor of the Employee Investment Plan of
Levi Strauss Associates Inc. and the Levi Strauss Associates Inc. Employee
Long Term Investment and Savings Plan (collectively and individually, the
"Plan"); and
WHEREAS, certain affiliates and subsidiaries of the Sponsor maintain, or
may in the future maintain, qualified defined contribution plans for the
benefit of their eligible employees; and
WHEREAS, the Sponsor has appointed Boston Safe Deposit and Trust Company
to serve as trustee of the Plan assets attributable to Sponsor Stock (as such
term is defined below); and
WHEREAS, the Sponsor desires to establish a trust to hold other assets
of the Plan and of such other tax-qualified defined contribution plans
maintained by the Sponsor, or any of its subsidiaries or affiliates, as are
designated by the Sponsor as being eligible to participate therein; and
WHEREAS, the Trustee is willing to hold and invest the aforesaid plan
assets in trust pursuant to the provisions of this Trust Agreement, which
trust shall constitute a continuation, by means of an amendment and
restatement, of each of the prior trusts from which plan assets are
transferred to the Trustee; and
WHEREAS, the Trustee is willing to hold and invest the aforesaid plan
assets in trust among several investment options selected by the Applicable
Fiduciary (as such term is defined below); and
WHEREAS, the Trustee is willing to perform recordkeeping and
administrative services for the Plan pursuant to the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth below, the Sponsor and the Trustee
agree as follows:
Section 1. Definitions. The following terms as used in this Trust
Agreement have the meaning indicated unless the context clearly requires
otherwise:
(a) "Administrator" shall mean, with respect to each Plan, the
person or entity which is the "administrator" or such Plan within the meaning
of Section 3(16)(A) of ERISA.
(b) "Agreement" shall mean this Trust Agreement, as the same may
be amended and in effect from time to time.
(c) "Applicable Fiduciary" shall mean, with respect to the
application of any provision of this Agreement to any Plan, the person or
entity which is the relevant fiduciary under such Plan with respect to such
matter.
(d) "Code" shall mean the Internal Revenue Code of 1986, as it has
been or may be amended from time to time.
(e) "Employer" shall mean the Sponsor and each subsidiary or
affiliate of the Sponsor having employees who are Participants in a Plan.
(f) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as it has been or may be amended from time to time.
(g) "Mutual Fund" shall mean any investment company advised by
Fidelity Management & Research Company or any of its affiliates.
(h) "Participant" shall mean, with respect to a Plan, any employee
(or former employee or alternate payee under a qualified domestic relations
order) with an account under such Plan, which has not yet been fully
distributed and/or forfeited, and shall include the designated
beneficiary(ies) with respect to the account of any deceased employee (or
deceased former employee) until such account has been fully distributed
and/or forfeited.
(i) "Participant Recordkeeping Reconciliation Period" shall mean,
with respect to any Plan, the "Blackout Period" as such term is defined in
such Plan. In the event that a Plan does not provide for a Blackout Period,
"Participant Recordkeeping Reconciliation Period" shall mean a period of
reasonable duration during which the Trustee installs on its system the Plan
and participant information.
(j) "PIN" shall mean, with respect to any participant in the Plan,
a personal identification number.
(k) "Plan" shall mean the Employee Investment Plan of Levi Strauss
Associates Inc., the Levi Strauss Associates Inc. Employee Long Term
Investment and Savings Plan and such other tax-qualified, defined
contribution plans which are maintained by the Sponsor or any of its
subsidiaries or affiliates for the benefit of their eligible employees as may
be designated by the Sponsor in writing to the Trustee as a Plan hereunder,
such writing to be in the form of the Plan Designation Form attached hereto
as Schedule "H". Each reference to "a Plan" or "the Plan" in this Agreement
shall mean and include the Plan or Plans to which the particular provision of
this Agreement is being applied or all Plans, as the context may require.
(l) "Reporting Date" shall mean the last day of each calendar
quarter, the last day of the Plan's plan year, the date as of which the
Trustee resigns or is removed pursuant to Section 9 hereof and the date as of
which this Agreement terminates pursuant to Section 11 hereof.
(m) "Sponsor" shall mean Levi Strauss Associates Inc., a Delaware
corporation, or any successor to all or substantially all of its businesses
which, by agreement, operation of law or otherwise, assumes the
responsibility of the Sponsor under this Agreement.
(n) "Sponsor Stock" shall mean the Class E Common Stock, par value
$.10 per share, of the Sponsor.
(o) "Trust" shall mean the Levi Strauss Associates Inc. Master
Investment Plan Trust, being the trust established by the Sponsor and the
Trustee pursuant to the provisions of this Agreement.
(p) "Trustee" shall mean Fidelity Management Trust Company, a
Massachusetts trust company and any successor to all or substantially all of
its trust business, as described in Section 10(c). The term Trustee shall
also include any successor trustee appointed pursuant to Section 10 to the
extent such successor agrees to serve as Trustee under this Agreement.
Section 2. Trust. The Sponsor hereby establishes the Trust with the
Trustee. The Trust shall consist of an initial contribution of money or
other property (as agreed to by the Sponsor and the Trustee) made by the
Sponsor or transferred from a previous trustee under the Plan, such
additional sums of money as shall from time to time be delivered to the
Trustee under a Plan, all investments made therewith and proceeds thereof,
and all earnings and profits thereon, less the payments that are made by the
Trustee as provided herein, without distinction between principal and income.
The Trustee hereby accepts the Trust on the terms and conditions set forth in
this Agreement. In accepting this Trust, the Trustee shall be accountable
for the assets received by it, subject to the terms and conditions of this
Agreement.
Section 3. Exclusive Benefit and Reversion of Sponsor Contributions.
--------------------------------------------------------
Except as provided under applicable law, no part of the Trust allocable to a
Plan may be used for, or diverted to, purposes other than the exclusive
benefit of the participants in the Plan or their beneficiaries prior to the
satisfaction of all liabilities with respect to the participants and their
beneficiaries.
Section 4. Disbursements.
-------------
(a) Directions from Applicable Fiduciary. The Trustee shall make
disbursements in the amounts and in the manner that the Applicable Fiduciary
directs from time to time in writing. The Sponsor hereby directs that,
pursuant to the Plan, a participant withdrawal request may be made by
telephone and the Trustee shall process such request only after the identity
of the participant is verified by use of a PIN and social security number.
The Trustee shall have no responsibility to see to the application of any
disbursement.
(b) Limitations. The Trustee shall not be required to make any
disbursement under a Plan in excess of the net realizable value of the assets
of the Trust allocable to such Plan at the time of the disbursement. Any
disbursement in cash shall be pursuant to a written direction from the
Applicable Fiduciary identifying the source of such cash including, to the
extent provided in such direction, the non-cash assets to be converted to
cash for the purpose of making the disbursement.
Section 5. Investment of Trust.
-------------------
(a) Selection of Investment Options. The Trustee shall have no
responsibility for the selection of investment options under the Trust and
shall not render investment advice to any person in connection with the
selection of such options.
(b) Available Investment Options.
(i) The Applicable Fiduciary with respect to a Plan shall direct
the Trustee as to what investment options: (A) the Trust shall be
invested in during the Participant Recordkeeping Reconciliation Period,
and (B) the investment options in which Plan Participants may invest,
subject to the limitations set forth in subparagraphs (ii) and (iii)
below.
(ii) The Applicable Fiduciary may determine to offer as investment
options only (A) Mutual Funds, (B) a fund which invests in Sponsor Stock
(which is held pursuant to a trust agreement other than this Trust
Agreement), (C) notes evidencing loans to Participants in accordance
with the terms of the Plan, (D) other investments designated by the
Applicable Fiduciary but held pursuant to one or more trust agreements
other than this Trust Agreement, and (E) collective investment funds
maintained by the Trustee for qualified plans; provided, however, that
the Trustee shall be considered a fiduciary with investment discretion
only with respect to Plan assets that are invested in collective
investment funds maintained by the Trustee for qualified plans.
(iii) The investment options initially selected by the Applicable
Fiduciary are identified on Schedules "A" and "C" attached hereto. The
Applicable Fiduciary may add additional investment options consistent
with this Trust Agreement upon mutual amendment of this Trust Agreement
and the Schedules thereto as necessary to reflect such additions.
(c) Participant Direction. Each Participant shall direct the
Trustee in which investment option(s) to invest the assets in the
Participant's individual accounts under the Plan. Such directions shall be
made in accordance with the procedures set forth therefor in the Plan and
communicated to and accepted by the Trustee, including by use of the
telephone exchange system maintained for such purposes by the Trustee or its
agent in accordance with written Telephone Exchange Guidelines attached
hereto as Schedule "G". Any directions made by a Participant using the
telephone exchange system shall be treated as a direction made in writing by
the Applicable Fiduciary for purposes of Section 8 hereof. The Trustee shall
invest the Plan assets pursuant to proper directions received from
Participants. In the event that the Trustee fails to receive a proper
direction, the assets shall be invested in the securities of the Mutual Fund
set forth for such purpose on Schedule "C", until the Trustee receives a
proper direction.
(d) Mutual Funds. Trust investments in Mutual Funds shall be
subject to the following limitations:
(i) Execution of Purchases and Sales. Purchases and sales of
Mutual Funds (other than transfers from one Mutual Fund to another
Mutual Fund ("Exchanges")) shall be made on the date on which the
Trustee receives from the Sponsor in good order all information and
documentation necessary to accurately effect such purchases and sales
(or in the case of a purchase, the subsequent date on which the Trustee
has received a wire transfer of funds necessary to make such purchase).
Exchanges of Mutual Funds shall be made in accordance with the Telephone
Exchange Guidelines attached hereto as Schedule "G".
(ii) Voting. At the time of mailing of notice of each annual or
special stockholders' meeting of any Mutual Fund, the Trustee shall send
a copy of the notice and all proxy solicitation materials to each
Participant who has shares of the Mutual Fund credited to the
Participant's accounts, together with a voting direction form for return
to the Trustee or its designee. The Participant shall have the right to
direct the Trustee as to the manner in which the Trustee is to vote the
shares' credited to the Participant's accounts (both vested and
unvested). The Trustee shall vote the shares as directed by the
Participant. The Trustee shall not vote shares for which it has
received no directions from the Participant. During the Participant
Recordkeeping Reconciliation Period, the Sponsor shall have the right to
direct the Trustee as to the manner in which the Trustee is to vote the
shares of the Mutual Funds in the Trust. The Sponsor shall have the
right to direct the Trustee as to the manner in which the Trustee is to
vote the Mutual Fund shares held in any short-term investment fund or
liquidity reserve. With respect to all rights other than the right to
vote, the Trustee shall follow the directions of the Participant and if
no such directions are received, the directions of the Applicable
Fiduciary. Other than as stated in the first sentence of this Section
5(d)(ii), the Trustee shall have no duty to solicit directions from
Participants or the Sponsor.
With regard to voting rights with respect to the assets of the Plan
held in the Sponsor Stock fund, the Trustee shall comply with the
relevant terms of Schedule "I" and the instructions of the Applicable
Fiduciary. However, it is understood that the Trustee is not
responsible for exercising any voting rights with respect to the assets
of the Plan held in the Sponsor Stock fund.
(e) Notes. The Administrator shall act as the Trustee's agent for
the purpose of holding all trust investments in Participant loan notes and
related documentation and as such shall (i) hold physical custody of and keep
safe the notes and other loan documents, (ii) collect and remit all principal
and interest payments to the Trustee, and (iii) cancel and surrender the
notes and other loan documentation when a loan has been paid in full. To
originate a Participant loan, the Participant shall direct the Trustee as to
the type of loan to be made from the Participant's individual account. Such
directions shall be made by Participants by use of the telephone exchange
system maintained for such purpose by the Trustee or its agent. The Trustee
shall determine, based on the current value of the Participant's account, the
amount available for the loan. Based on the monthly interest rate supplied
by the Sponsor in accordance with the terms of the Plan, the Trustee shall
advise the Participant of such interest rate, as well as the installment
payment amounts. The Trustee shall forward the loan documents to the
Participant for execution and submission for approval to the Administrator.
The Administrator shall have the responsibility for approving the loan and
instructing the Trustee to send the loan proceeds to the Participant unless
otherwise directed by the Administrator. In all cases, such instruction by
the Administrator shall be made within thirty (30) days of the Participant's
initial request (the origination date).
(f) Reliance of Trustee on Directions.
(i) The Trustee shall not be liable for any loss, or by reason of
any breach, which arises from any Participant's exercise or non-exercise
of rights under this Agreement over the assets in the Participant's
accounts to the extent that the Trustee acts in conformity with such
exercise or non-exercise of rights and the applicable provisions of this
Trust Agreement.
(ii) The Trustee shall not be liable for any loss, or by reason of
any breach, which arises from the Applicable Fiduciary's exercise or
non-exercise of rights under this Section 5, unless the Trustee knew or
should have known that the actions to be taken under the Applicable
Fiduciary's directions were prohibited by the fiduciary duty rules of
Section 404(a) of ERISA or were contrary to the terms of the Plan, as
communicated to the Trustee, or this Agreement.
(g) Trustee Powers. The Trustee shall have the following powers
and authority:
(i) Subject to paragraphs (b), (c), (d) and (e) of this Section 5,
to sell, exchange, convey, transfer, or otherwise dispose of any
property held in the Trust, by private contract or at public auction.
No person dealing with the Trustee shall be bound to see to the
application of the purchase money or other property delivered to the
Trustee or to inquire into the validity, expediency, or propriety of any
such sale or other disposition.
(ii) Subject to paragraphs (b) and (c) of this Section 5, to invest
in investment contracts and short term investments (including interest
bearing accounts with the Trustee or money market mutual funds advised
by affiliates of the Trustee) and in collective investment funds
maintained by the Trustee for qualified plans, in which case the
provisions of each collective investment fund in which the Trust is
invested shall be deemed adopted by the Sponsor and the provisions
thereof incorporated as a part of this Trust as long as the fund remains
exempt from taxation under Sections 401(a) and 501(a) of the Internal
Revenue Code of 1986, as amended.
(iii) To cause any securities or other property held as part of the
Trust to be registered in the Trustee's own name, in the name of one or
more of its nominees, or in the Trustee's account with the Depository
Trust Company of New York and to hold any investments in bearer form,
but the books and records of the Trustee shall at all times show that
all such investments are part of the Trust.
(iv) To keep that portion of the Trust in cash or cash balances as
the Applicable Fiduciary or Sponsor may, from time to time, deem to be
in the best interest of the Trust.
(v) To make, execute, acknowledge, and deliver any and all
documents of transfer or conveyance and to carry out the powers herein
granted.
(vi) Subject to the second and third sentences of this subparagraph
(vi), to settle, compromise, or submit to arbitration any claims, debts,
or damages due to or arising from the Trust; to commence or defend suits
or legal or administrative proceedings to which the Trust is a party or
the Trustee is a party by reason of serving as Trustee of the Trust; to
represent the Trust in all suits and legal and administrative hearings;
and to pay all reasonable expenses arising from any such action, from
the Trust if not paid by the Sponsor. The Trustee agrees to notify the
Administrator promptly of any matter referenced in the preceding
sentence and to consult with the Administrator (or the Administrator's
designee) as appropriate during the pendency of such matter, including,
but not limited to, prior to the settlement, compromise or other
termination of such a matter. Further, the Administrator, in its sole
discretion, may assume responsibility for the defense, prosecution or
other participation in such matter.
(vii) To do all other acts although not specifically mentioned
herein, as the Trustee may deem necessary to carry out any of the
foregoing powers and the purposes of the Trust.
Section 6. Recordkeeping and Administrative Services to Be Performed.
---------------------------------------------------------
(a) General. The Trustee shall perform those recordkeeping and
administrative functions described in this Section 6 and in Schedule "A"
attached hereto. These recordkeeping and administrative functions shall be
performed in conformity with the Applicable Fiduciary's written directions
regarding the Plan's provisions, guidelines and interpretations. Investments
in Sponsor Stock shall be recordkept in accordance with operating procedures
attached hereto as Schedule "I".
(b) Accounts. The Trustee shall keep accurate accounts of all
investments, receipts, disbursements, and other transactions hereunder, and
shall report the value of the assets held in the Trust as of each Reporting
Date. Within thirty (30) days following each Reporting Date or within sixty
(60) days in the case of a Reporting Date caused by the resignation or
removal of the Trustee, or the termination of this Agreement, the Trustee
shall file with the Sponsor a written account setting forth all investments,
receipts, disbursements, and other transactions effected by the Trustee
between the Reporting Date and the prior Reporting Date, and setting forth
the value of the Trust as of the Reporting Date. Except as otherwise required
under ERISA, upon the expiration of six (6) months from the date of filing
such account with the Sponsor, the Trustee shall have no liability or further
accountability to anyone with respect to the propriety of its acts or
transactions shown in such account, except with respect to such acts or
transactions as to which the Sponsor shall within such six (6) month period
file with the Trustee written objections.
(c) Inspection and Audit. All records generated by the Trustee in
accordance with paragraphs (a) and (b) shall be open to inspection and audit,
during the Trustee's regular business hours prior to the termination of this
Agreement and for 90 days after such termination, by the Sponsor or any
person designated by the Sponsor. Upon the resignation or removal of the
Trustee or the termination of this Agreement, the Trustee shall provide to
the Sponsor, at no expense to the Sponsor, in the format regularly provided
to the Sponsor, a statement of each Participant's accounts as of the date of
such resignation, removal, or termination, and the Trustee shall provide to
the Sponsor or the Plan's new recordkeeper such further records as are
reasonable, at the Sponsor's expense.
(d) Effect of Plan Amendment. Material regarding the current
qualified status of each Plan is attached hereto as Schedule "F". The
Trustee's provision of the recordkeeping and administrative services set
forth in this Section 6 shall be conditioned on the Sponsor delivering to the
Trustee a copy of any amendment to the Plan as soon as administratively
feasible following the amendment's adoption, with, if reasonably requested,
an IRS determination letter or an opinion of counsel substantially in the
form of Schedule "F" covering such amendment, and on the Sponsor providing
the Trustee with such other information as the Trustee may reasonably request
in connection with the performance of the recordkeeping and administrative
services.
(e) Returns, Reports and Information. The Sponsor shall be
responsible for the preparation and filing of all returns, reports, and
information required of the Trust or Plan by law. The Trustee shall provide
the Sponsor with such information as the Sponsor may reasonably request to
make these filings, including completed Schedule P to Form 5500. The Trustee
shall timely make all filings with respect to any mutual fund or collective
investment fund which may be required by regulations promulgated under ERISA
for the Plan or Trust to avail itself of simplified or alternative methods of
annual reporting under ERISA. Subject to Section 6(g) below, the Sponsor
also shall be responsible for making any disclosures to Participants required
by law including, without limitation, such disclosures as may be required
under federal or state truth-in-lending laws with regard to Participant
loans.
(f) Allocation of Plan Interests. All transfers to, withdrawals
from, or other transactions regarding the Trust shall be conducted in such a
way that the proportionate interest in the Trust of each Plan and the fair
market value of that interest may be determined at any time. Whenever the
assets of more than one Plan are commingled in the Trust or in any investment
option, the undivided interest therein of each such Plan shall be debited or
credited (as the case may be) (i) for the entire amount of every contribution
received on behalf of such Plan, every benefit payment, or other expense
attributable solely to such Plan, and every other transaction relating only
to such Plan; and (ii) for its proportionate share of every item of collected
or accrued income, gain or loss, and general expense, and of any other
transactions attributable to the Trust or that investment option as a whole.
(g) Provision of Information Relating to Mutual Funds. The
Sponsor hereby acknowledges that it has received from the Trustee a copy of
the prospectus for each Mutual Fund selected by the Applicable Fiduciary as
a Plan investment option. The Trustee shall provide to each Participant who
requests such information regarding a Mutual Fund, a prospectus for the
Mutual Fund and such other information as the Sponsor reasonably determines
(and communicates to the Trustee) must be made available to the Participant
in order to satisfy the conditions for relief from fiduciary liability
provided in the regulations published under Section 404(c) of ERISA.
Section 7. Compensation and Expenses. Within thirty (30) days of receipt
of the Trustee's bill, which shall be computed and billed in accordance with
Schedule "B" attached hereto and made a part hereof, as amended from time to
time, the Sponsor shall either (a) send to the Trustee a payment in such
amount or (b) direct the Trustee to charge all or specified portions of such
bills to the Trust. All expenses of the Trustee relating directly to the
acquisition and disposition of investments constituting part of the Trust,
and all taxes of any kind whatsoever that may be levied or assessed under
existing or future laws upon or in respect of the Trust or the income
thereof, shall be a charge against and paid from the appropriate
Participants' accounts.
Section 8. Directions and Indemnification.
------------------------------
(a) Identity of Administrator and Named Fiduciary. The Trustee
shall be fully protected in relying on the fact that the Sponsor and the
Applicable Fiduciaries under a Plan are the individuals or persons named as
such on the Authorization Letters in the form of Schedules "D" and "E"
attached hereto or on a Plan Designation Form in accordance with Schedule "H"
attached hereto or such other individuals or persons as the Sponsor may
notify the Trustee in writing.
(b) Directions from Sponsor or Administrator. Whenever the
Sponsor or Administrator provides a direction to the Trustee, the Trustee
shall not be liable for any loss, or by reason of any breach, arising from
actions of the Trustee which are consistent with the direction if the
direction is contained in a writing (or is oral and immediately confirmed in
a writing) signed by any individual whose name and signature have been
submitted (and not withdrawn) in writing to the Trustee by the Sponsor in the
form attached hereto as Schedule "D", provided the Trustee reasonably
believes the signature of the individual to be genuine. Such direction may
also be made via electronic data transmission ("EDT") in accordance with
procedures agreed to by the Sponsor and the Trustee; provided, however, that
the Trustee shall be fully protected in relying on such direction as if it
were a direction made in writing by the Sponsor. The Trustee shall have no
responsibility to ascertain any direction's (i) accuracy (providing the
direction is comprehensible on its face), (ii) compliance with the terms of
any applicable law, or (iii) effect for tax purposes or otherwise.
(c) Directions from Applicable Fiduciaries. Whenever an
Applicable Fiduciary provides a direction to the Trustee, the Trustee shall
not be liable for any loss, or by reason of any breach, arising from actions
of the Trustee which are consistent with the direction (i) if the direction
is contained in a writing (or is oral and immediately confirmed in a writing)
signed by any individual whose name and signature have been submitted (and
not withdrawn) in writing to the Trustee by the Applicable Fiduciary in the
form attached hereto as Schedule "E" and (ii) if the Trustee reasonably
believes the signature of the individual to be genuine, unless it is clear on
the direction's face that the actions to be taken under the direction would
be prohibited by the fiduciary duty rules of Section 404(a) of ERISA or would
be contrary to the terms of the Plan or this Agreement.
(d) Co-Fiduciary Liability. In any other case, the Trustee shall
not be liable for any loss, or by reason of any breach, arising from any act
or omission of another fiduciary under the Plan except as provided in Section
405(a) of ERISA. Without limiting the foregoing, the Trustee shall have no
liability for the acts or omissions of any predecessor or successor trustee.
(e) Indemnification. The Sponsor shall indemnify the Trustee
against, and hold the Trustee harmless from, any and all loss, damage,
penalty, liability, cost, and expense, including without limitation,
reasonable attorneys' fees and disbursements ("Loss"), that may be incurred
by, imposed upon, or asserted against the Trustee by reason of any claim,
regulatory proceeding, or litigation arising from any act done or omitted to
be done by any individual or person with respect to the Plan or Trust,
excepting only any and all Loss arising from the Trustee's breach of contract
or agreement, negligence or bad faith. The Trustee agrees to notify the
Sponsor promptly of any matter referenced in the preceding sentence and to
consult with the Sponsor (or the Sponsor's designee) as appropriate during
the pendency of such matter, including, but not limited to, prior to the
settlement, compromise or other termination of such matter. Further, the
Trustee shall permit the Sponsor to participate in the defense, prosecution
or other involvement in such matter. The Trustee shall indemnify Sponsor
against, and hold the Sponsor harmless from, any Loss that may be incurred
by, imposed upon, or asserted against the Sponsor by reason of any claim,
regulatory proceeding, or litigation arising from the Trustee's breach of
contract or agreement, negligence or bad faith. The Sponsor agrees to notify
the Trustee promptly of any matter referenced in the preceding sentence and
to consult with the Trustee (or the Trustee's designee) as appropriate during
the pendency of such matter, including, but not limited to, prior to the
settlement, compromise or other termination of such matter. Further, the
Sponsor shall permit the Trustee to participate in the defense, prosecution
or other involvement in any matter referenced in the preceding two sentences.
(f) Survival. The provisions of this Section 8 shall survive the
termination of this Agreement.
Section 9. Resignation or Removal of Trustee.
---------------------------------
(a) Resignation. The Trustee may resign at any time upon sixty
(60) days' notice in writing to the Sponsor, unless a shorter period of
notice is agreed upon by the Sponsor.
(b) Removal. The Sponsor may remove the Trustee at any time upon
sixty (60) days' notice in writing to the Trustee, unless a shorter period of
notice is agreed upon by the Trustee.
(c) Transition. Trustee shall provide assistance in transferring
Plan data and Plan assets to the successor trustee, and the Sponsor shall
reasonably reimburse the Trustee for reasonable fees and expenses incurred in
connection with such transaction.
Section 10. Successor Trustee.
-----------------
(a) Appointment. If the office of Trustee becomes vacant for any
reason, the Sponsor may in writing appoint a successor trustee under this
Agreement. The successor trustee shall have all of the rights, powers,
privileges, obligations, duties, liabilities, and immunities granted to the
Trustee under this Agreement. The successor trustee and predecessor trustee
shall not be liable for the acts or omissions of the other with respect to
the Trust.
(b) Acceptance. When the successor trustee accepts its
appointment under this Agreement, title to and possession of the Trust assets
shall immediately vest in the successor trustee without any further action on
the part of the predecessor trustee. The predecessor trustee shall execute
all instruments and do all acts that reasonably may be necessary or
reasonably may be requested in writing by the Sponsor or the successor
trustee to vest title to all Trust assets in the successor trustee or to
deliver all Trust assets to the successor trustee.
(c) Corporate Action. Any successor of the Trustee or successor
trustee, through sale or transfer of the business or trust department of the
Trustee or successor trustee, or through reorganization, consolidation, or
merger, or any similar transaction, shall, upon consummation of the
transaction and provisions of sixty (60) days written notice to the Sponsor,
become the successor trustee under this Agreement.
Section 11. Termination. This Agreement may be terminated at any time by
the Sponsor, with or without cause, upon sixty (60) days' notice in writing
to the Trustee. On the date of the termination of this Agreement, the Trustee
shall forthwith transfer and deliver to such individual(s) or entity(ies) as
the Sponsor shall designate, all cash and assets then constituting the Trust
and all Plan data. If, by the termination date, the Sponsor has not notified
the Trustee in writing as to whom the assets and cash are to be transferred
and delivered, the Trustee may bring an appropriate action or proceeding for
leave to deposit the assets and cash in a court of competent jurisdiction.
The Trustee shall be reimbursed by the Sponsor for all costs and expenses of
the action or proceeding including, without limitation, reasonable attorneys'
fees and disbursements.
Section 12. Resignation, Removal, and Termination Notices. All notices of
resignation, removal, or termination under this Agreement must be in writing
and mailed to the party to which the notice is being given by certified or
registered mail, return receipt requested, to the Sponsor, c/o the Corporate
Treasurer (or equivalent successor position), Levi Strauss Associates, Inc.,
1155 Battery Street, San Francisco, CA 94111, and to the Trustee c/o John M.
Kimpel, Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts
02109, or to such other addresses as the parties have notified each other of
in the foregoing manner.
Section 13. Duration. This Trust shall continue in effect without limit
as to time, subject, however, to the provisions of this Agreement relating to
amendment, modification, and termination thereof.
Section 14. Amendment or Modification. This Agreement may be amended or
modified at any time and from time to time only by an instrument which is (a)
executed by both the Sponsor and the Trustee, (b) refers to this Trust
Agreement, and (c) affirmatively states that it is an amendment to this Trust
Agreement. Notwithstanding the foregoing, (i) to reflect increased operating
costs the Trustee may once each calendar year prospectively amend Schedule
"B" without the Sponsor's consent upon seventy-five (75) days written notice
to the Sponsor; however, no such fee increase shall be made prior to
September 1, 1997; and (ii) Schedule C may be amended by the Sponsor, in its
sole discretion, by delivery of a revised, executed Schedule C to the
Trustee.
Section 15. General.
(a) Performance by Trustee, its Agents or Affiliates. The Sponsor
acknowledges and authorizes that the services to be provided under this
Agreement shall be provided by the Trustee, its agents or affiliates,
including Fidelity Investments Institutional Operations Company or its
successor, and that certain of such services may be provided pursuant to one
or more other contractual agreements or relationships; provided, however,
that services to be provided hereunder may be provided by an entity which is
not an affiliate of the Trustee only upon consent of the Sponsor. Trustee
acknowledges that it is fully responsible for the services performed by its
agents or affiliates under this Agreement, as if such services were performed
by the Trustee.
(b) Delegation by Employer. By authorizing the assets of any Plan
as to which it is an Employer to be deposited in the Trust, each Employer,
other than the Sponsor, hereby irrevocably delegates and grants to the
Sponsor full and exclusive power and authority to exercise all of the powers
conferred upon the Sponsor and each Employer by the terms of this Agreement,
and to take or refrain from taking any and all action which such Employer
might otherwise take or refrain from taking with respect to this Agreement,
including the sole and exclusive power to exercise, enforce or waive any
rights whatsoever which such Employer might otherwise have with respect to
the Trust, and irrevocably appoints the Sponsor as its agent for all purposes
under this Agreement. The Trustee shall have no obligation to account to any
such Employer or to follow the instructions of or otherwise deal with any
such Employer, the intention being that the Trustee shall deal solely with
the Sponsor.
(c) Entire Agreement. This Agreement, including exhibits hereto,
contains all of the terms agreed upon between the parties with respect to the
subject matter hereof.
(d) Waiver. No waiver by either party of any failure or refusal
to comply with an obligation hereunder shall be deemed a waiver of any other
or subsequent failure or refusal to so comply.
(e) Successors and Assigns. The stipulations in this Agreement
shall inure to the benefit of, and shall bind, the successors and assigns of
the respective parties.
(f) Partial Invalidity. If any term or provision of this
Agreement or the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be
valid and enforceable to the fullest extent permitted by law.
(g) Section Headings. The headings of the various sections and
subsections of this Agreement have been inserted only for the purposes of
convenience and are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement.
Section 16. Governing Law.
-------------
(a) Massachusetts Law Controls. This Agreement is being made in
the Commonwealth of Massachusetts, and the Trust shall be administered as a
Massachusetts trust. The validity, construction, effect, and administration
of this Agreement shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Massachusetts, except to the extent those laws
are superseded under Section 514 of ERISA.
(b) Trust Agreement Controls. The Trustee is not a party to the
Plan, and in the event of any conflict between the provisions of the Plan and
the provisions of this Agreement, the provisions of this Agreement shall
control.
Section 17. Plan Qualification. The Sponsor shall be responsible for
verifying that while any assets of a particular Plan are held in the Trust,
the Plan (i) is qualified within the meaning of section 401(a) of the Code;
(ii) is permitted by existing or future rulings of the United States Treasury
Department to pool its funds in a group trust; and (iii) permits its assets
to be commingled for investment purposes with the assets of other such plans
by investing such assets in this Trust. If any Plan ceases to be qualified
within the meaning of section 401(a) of such notice, the Trustee shall
promptly segregate and withdraw from the Trust, the assets which are
allocable to such disqualified Plan, and shall dispose of such assets in the
manner directed by the Sponsor. The Trustee shall be responsible for
maintaining any group trust or commingled fund which is represented as an
investment suitable for tax-qualified plans in a manner which is consistent
with maintaining such suitability.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
LEVI STRAUSS ASSOCIATES INC.
Attest: /s/Jay A. Mitchell By /s/George B. James
------------------------------- ------------------------------
Assistant Secretary George B. James,
Senior Vice President
FIDELITY MANAGEMENT TRUST
COMPANY
Attest: By
------------------------------- ------------------------------
Assistant Clerk Senior Vice President<PAGE>
<PAGE>
Exhibit 10b
-----------
LEVI STRAUSS ASSOCIATES INC.
DEFERRED COMPENSATION PLAN FOR EXECUTIVES
(As amended and restated through April 1, 1994)
ARTICLE 1 - EFFECTIVE DATE
- --------------------------
The Levi Strauss Associates Inc. Deferred Compensation Plan for
Executives (hereinafter the "Plan") is maintained by Levi Strauss Associates
Inc. (the "Company") for the benefit of employees who are eligible pursuant
to the terms of the Plan. The Plan became effective upon approval by the
Executive Committee of the Board of Directors of Levi Strauss & Co. in 1971.
The Plan has been amended or restated from time to time thereafter.
ARTICLE 2 - ELIGIBILITY
- -----------------------
(1) General Rule. Any employee of the Company or a participating
domestic subsidiary (including a wholly-owned subsidiary of a wholly-owned
subsidiary of the Company and Battery Street Enterprises, Inc. or any
subsidiary thereof) (a "Participating Subsidiary"), who (i) is customarily
employed 30 or more hours per week by the Company or such subsidiary, (ii) is
employed within the United States or is a designated participant in the
Revised Home Office Pension Plan of Levi Strauss Associates Inc., and (iii)
is compensated on a salary basis (hereinafter, the "Eligible Employee") shall
be eligible to participate in the Plan during a calendar year; provided that,
either (i) the grade for the employee is equivalent to Home Office grade 9 or
above, or (ii) (except for purposes of current deferrals) the employee has an
undistributed balance of Deferred Compensation (within the meaning of
Articles 4 and 5). Notwithstanding the aforesaid, no employee shall be
eligible to participate in the Plan if said employee has entered into an
employment agreement with the Company or a subsidiary thereof which precludes
the employee from participating in a deferred compensation plan offered by
the Company.
(2) Exclusions. Notwithstanding the foregoing, an individual employed
on a commission basis shall not be eligible to participate in the Plan.
ARTICLE 3 - DEFINITION OF COMPENSATION
- --------------------------------------
For all purposes under the Plan: (a) "total compensation" shall mean
base salary, but shall not include any payments under or contributions to the
Company's Long Term Disability Plan or other group insurance or any employee
benefit plan maintained by the Company; (b) "total bonuses" shall mean
payments made under the Company's Management Incentive Plan (hereinafter
"MIP") or under any regularly paid bonus program other than the Long Term
Performance Plan, and any non-recurring special bonus which is designated as
being part of "total bonuses" in writing by the Administrator (identified as
set forth in Article 9 below); and (c) for individuals on expatriate
assignment, "total compensation" shall be defined as base salary adjusted by
appropriate expatriate-related deductions and allowances as determined by the
Administrator.
ARTICLE 4 - DEFERRED COMPENSATION
- ---------------------------------
(a) Total Compensation Eligible for Deferral.
----------------------------------------
Election to Defer Compensation. (i) Any Eligible Employee may elect
that a portion not to exceed one-third (1/3) of his or her total compensation
shall be payable only as Deferred Compensation under this Plan. Amounts of
total compensation deferred by an Eligible Employee shall not be less than
five percent (5%) of his or her total base salary.
(ii) Total Bonuses Eligible for Deferral. Any Eligible Employee
may elect that a portion or all of his or her total bonuses shall be payable
only as Deferred Compensation under this Plan. Amounts of total bonuses
deferred by an Eligible Employee shall not be less than the greater of (i)
$5,000 or (ii) five percent (5%) of his or her total bonuses.
(iii) Time for Filing Elections. Except as provided in paragraph
(iv) below, a deferral election shall be made in writing to the Administrator
(A) in the case of base salary or non-recurring special bonuses or a
regularly paid bonus program other than MIP at least two weeks prior to the
commencement of the first payroll period ending in the calendar year in which
payment otherwise would have been made; or (B) in the case of amounts payable
under MIP prior to May 15. All elections are irrevocable once the final date
for elections has passed.
(iv) First Year of Employment. (A) An Eligible Employee may also
make an election during the first year of employment with respect to his base
salary for services performed after the effective day of the election. Such
election shall be made in writing to the Administrator within 30 days after
commencement of employment with the Company or a Participating Subsidiary and
at least two weeks prior to commencement of the first payroll period with
respect to which the election is to be effective, but no such election shall
be permitted after November 15 of any calendar year.
(B) Newly Eligible Employee. An employee of the Company or
subsidiary thereof who becomes an Eligible Employee during any calendar year
may make an election with respect to his or her base salary for services
performed after the effective day of the election. Such election shall be
made in writing to the Administrator within 30 days after the date as of
which such employee becomes an Eligible Employee (or if the employee becomes
an Eligible Employee in 1991 but before the effective date of this Section
5(d)(ii), within 30 days after such effective date) and at least two weeks
prior to commencement of the first payroll period with respect to which the
election is to be effective, but no such election shall be permitted after
November 15 of any calendar year.
(b) Additional Deferred Compensation. When an Eligible Employee elects
that a portion of his or her total compensation or total bonus for a calendar
year shall be payable as Deferred Compensation under the Plan, there shall
also be credited as Additional Deferred Compensation for such calendar year
an amount equal to the difference between (a) the aggregate amount of
contributions by the Company which would have been allocated in respect of
such Eligible Employee under the Employee Investment Plan ("EIP") if such
Eligible Employee has not made such election under this Plan, and (b) the
actual aggregate amount of contributions by the Company so allocated in
respect of such Eligible Employees for the EIP for such calendar year. The
Additional Deferred Compensation determined pursuant to the preceding
sentence shall be credited during the next following calendar year and shall
coincide with the time that profit sharing allocations are made to
participants in the EIP.
(c) Pension Make-Up Deferred Compensation. Further, there shall be
payable to or in respect of an Eligible Employee the difference between (i)
the amount of benefits which would have been payable to or in respect of the
Eligible Employee under the Revised Home Office Pension Plan of Levi Strauss
Associates Inc., or any successor defined benefit plan (the "HOPP"), the Levi
Strauss Associates Inc. Excess Benefit Restoration Plan (the "Excess BRP")
and the Levi Strauss Associates Inc. Supplemental Benefits Restoration Plan
(the "Supplemental BRP") if not for the deferral of compensation under this
Plan, and (ii) the amount actually payable to or in respect of the Eligible
Employee under the HOPP, the Excess BRP and the Supplemental BRP, such
difference being referred to herein as "Pension Make-Up Deferred
Compensation"; provided; however, that the Pension Make-Up Deferred
Compensation shall be vested only to the extent that such amounts would be
vested under the HOPP, the Excess BRP and the Supplemental BRP, as
applicable.
(d) The Deferred Compensation of an Eligible Employee at any time shall
include Deferred Compensation arising under prior provisions of the Plan.
(e) Effect on Other Plans. Compensation deferred under this Plan shall
not be included in "covered compensation" for crediting benefits or
contributions to any qualified retirement, profit-sharing, stock purchase
plan, employee saving plan or employee stock ownership plan. Other benefit
plans shall not be affected by deferral of compensation under this Plan.
ARTICLE 5 - CREDITING DEFERRED COMPENSATION
- -------------------------------------------
(a) In General. The Deferred Compensation of an Eligible Employee will
be credited with increases and, as appropriate, decreases to reflect the
performance of the measurement standard offered by the Administrator pursuant
to this Article 5 and selected by the Eligible Employee. If, with respect to
all or a portion of his or her Deferred Compensation, an Eligible Employee
fails to elect a measurement standard or if a measurement standard becomes
unavailable under the Plan without an effective successor election by the
eligible employee, such Deferred Compensation thereof shall be credited
pursuant to Article 5(b)(1).
(b) (1) Interest Measurement Standard. Interest shall be computed
monthly as of the last day of each calendar month on the undistributed
balance of each Eligible Employee's Deferred Compensation at the end of such
calendar month. For amounts deferred pursuant to an election prior to
January 1, 1983, interest shall be computed at a monthly interest rate equal
to the sum of (i) one-twelfth (1/12) of the annual reference rate charged for
commercial loans, as most recently announced by Bank of America in San
Francisco, California, effective as of the last day of the calendar month on
which such interest is computed, plus (ii) one-twelfth (1/12) of two percent
(2%) per annum; except that for any calendar year beginning prior to January
1, 1980, interest shall be credited in accordance with the procedures
specified in the Plan as then in effect.
Except as provided below, for amounts deferred pursuant to an election
after January 1, 1983, interest shall be computed at a monthly interest rate
equal to one-twelfth (1/12) of the annual reference rate charged for
commercial loans, as most recently announced by Bank of America in San
Francisco, California, effective as of the last day of the calendar month on
which such interest is computed.
For amounts deferred by an Eligible Employee whose grade is equivalent
to Home Office grade 9 or above representing a 1985 bonus payable under the
MIP or his or her total base salary for calendar year 1986, interest shall be
computed at a monthly interest rate equal to one-twelfth (1/12) of (i) the
annual rate charged for commercial loans to most credit-worthy customers, as
most recently announced by Bank of America in San Francisco, California,
effective as of the last day of the calendar month in which such interest is
computed, plus (ii) two percent (2%) for the period through December 31,
1990, and thereafter such amount, if any, as the Board of Directors of the
Company or its delegatee shall determine in its sole discretion.
Such interest shall be credited to the account of each participating
Eligible Employee on the books of the Company or Participating Subsidiary as
of December 31 of such calendar year.
(2) Alternative Measurement Standards. The Administrator may from
time to time offer one or more measurement standards in addition to the
standard prescribed in Article 5(b)(1) above. Such alternative measurement
standards offered by the Administrator may include standards which have
different potential for risk and return, and could result in reductions in
value of the Deferred Compensation of an Eligible Employee who elects such
standards. The availability of any such alternative measurement standard and
the terms applicable to such standard (including, but not limited to, the
method and frequency with which increases or decreases are reflected in the
amount of Deferred Compensation are solely in the discretion of the
Administrator.
(3) Election of Standard. The Administrator, in its discretion,
shall prescribe procedures participating Eligible Employees to elect and
change measurement standards applicable to Deferred Compensation Accounts.
(c) An Eligible Employee's Pension Make-Up Deferred Compensation shall
not be credited with interest or otherwise available for additions or
deletions pursuant to any measurement standard offered pursuant to Article
5(b).
ARTICLE 6 - PAYMENT OF DEFERRED COMPENSATION
- --------------------------------------------
All Deferred Compensation under the Plan shall be payable as follows:
(a) Termination for Any Reason Other Than Death or Involuntary
Discharge. In the event that the Eligible Employee's employment shall be
terminated by reason of disability, retirement, voluntary termination, layoff
due to job elimination or job relocation or for any other reason other than
his death or other involuntary discharge, the amount of his Deferred
Compensation Plan shall be paid to him over a ten (10) year period in one
hundred twenty (120) ratable monthly installments commencing on the first day
of the calendar month following the later of the Eligible Employee's
attainment of age seventy and one-half (70-1/2) or the date of the Eligible
Employee's termination of employment. An Eligible Employee may, however, at
the time he notifies the Administrator of his election to have a portion of
his total compensation for a given calendar year payable as Deferred
Compensation under the Plan:
(i) Specify a date for either a lump sum payment of his or her
Deferred Compensation or commencement of payment of his or her Deferred
Compensation in ratable annual installments over a period longer than five
(5) years, but not to exceed ten (10) years; and/or
(ii) Specify that such monthly installments commence on other than
the date of retirement but not later than his or her attainment of age
seventy and one-half (70-1/2).
(b) Termination of Employment by Death. In the event that the Eligible
Employee's employment is terminated by death, or in the event of an Eligible
Employee's death after termination of employment, and payments have not
commenced, the unpaid balance of his or her Deferred Compensation shall be
paid to his or her Beneficiary over a ten (10) year period in one hundred and
twenty (120) ratable month installments commencing on the first day of the
calendar month following the later of (i) the month in which the Eligible
Employee died, or (ii) the month in which the Eligible Employee would have
attained age seventy and one-half (70-1/2); except that at the time an
Eligible Employee notifies the Administrator of his or her election to have
a portion of his total compensation for a given calendar year payable as
Deferred Compensation under the Plan, such Eligible Employee may elect that
such unpaid balance be paid in a lump sum at a designated time within the
five (5) year period following his or her death or in ratable monthly
installments over a five (5) year period or a specified longer period not to
exceed ten (10) years.
(c) Termination of Employment by Involuntary Discharge. In the event
that an Eligible Employee's employment is terminated by involuntary
termination other than death, disability or layoff due to job elimination or
job relocation, the amount of his or her Deferred Compensation shall be paid
in a lump sum within thirty (30) days after his or her termination of
employment.
(d) Change in Timing or Manner of Payment. With respect to Deferred
Compensation for which no effective election as to time and method of payment
has been filed,
(i) the Eligible Employee or, in the case of the death of the
Eligible Employee prior to the commencement of payment of Deferred
Compensation for any year, the Eligible Employee's Beneficiary, may file a
request to accelerate payment of such Deferred Compensation. Such petition
shall specify a date for lump sum payment or a period for payment which
commences not later than the Eligible Employee's attainment of age seventy
and one-half (70-1/2) or actual retirement, whichever is later, and ends no
later than one hundred and twenty (120) months after the Eligible Employee
would attain age seventy and one-half (70-l/2).
(ii) The Eligible Employee or, in the case of the death of the
Eligible Employee prior to the commencement of payment of Deferred
Compensation for any year, the Eligible Employee's surviving spouse if such
spouse is the Eligible Employee's Beneficiary, may file a request to have the
Deferred Compensation applied towards the purchase of an annuity contract
which satisfies the criteria set forth herein; provided that the amount of
Deferred Compensation available for such purchase equals or exceeds $50,000.
Such annuity contract shall be purchased with a single premium, owned by the
Company, have an annuity starting date within one (1) year from the date of
purchase and provide for substantially equal periodic payments during the
annuity period. The petition for purchase of an annuity shall specify
whether the annuity period is to be over the life of the Eligible Employee,
the joint lives of the Eligible Employee and the Eligible Employee's spouse,
or over the life of the Eligible Employee's spouse. The petition also shall
specify an annuity starting date, which shall not be later than the later of
the Eligible Employee's retirement date or the Eligible Employee's attainment
of age seventy and one-half (70-1/2).
(e) In-Service Payments. In the case of an Eligible Employee whose
grade is equivalent to Home Office grade 9 or above, at the time he or she
notifies the Administrator of his or her election to have amounts deferred
representing a bonus payable under MIP for calendar year 1987 or later, in
lieu of the provisions for payment of deferred compensation set forth
Subsections (a), (b), (c) and (d) above, he or she may elect payment to be
made as follows: Twenty percent (20%) of the MIP bonus to be paid as soon as
practical after the amounts have been determined by the awarding company;
thereafter in ratable annual installments in January of each of the following
four years.
(f) Hardship. Upon a showing of financial hardship, the Administrative
Committee for the Retirement Plans of Levi Strauss Associates Inc., in its
sole discretion, may direct the Company or Participating Subsidiary to pay to
an Eligible Employee (or, in the event of death, to an Eligible Employee's
Beneficiary) in one lump sum a portion or all of the unpaid balance of such
Eligible Employee's Deferred Compensation to the extent necessary to
alleviate the hardship. For purposes of the Plan, a hardship shall include
any need, circumstance or event which is considered a hardship under the then
current provisions of the Employee Investment Plan of Levi Strauss Associates
Inc. (whether or not the Eligible Employee participates in such plan) and
such other needs, circumstances or events which the Administration, in its
sole discretion, determines are consistent with the goals of the Company for
the Plan and the requirements of administration of the Plan.
(g) Minimum Balance. Notwithstanding the foregoing, in the event that
an Eligible Employee's employment is terminated for any reason and his or her
aggregate undistributed balance of all Deferred Compensation Accounts under
the Plan is $50,000 or less, without regard to any balance to which
in-service payment has been elected, on the last day of the full payroll
period immediately prior to such termination of employment, the amount of his
or her Deferred Compensation Accounts, without regard to any balance to which
in-service payment has been elected, shall be paid in a lump sum within
thirty (30) days after his or her termination of employment. Nothing herein
shall require the payment of Deferred Compensation for which an election was
made prior to January 1, 1983, and reaffirmed prior to June 15, 1985.
(h) Elections. An Eligible Employee who was employed by the Company or
a Participating Subsidiary on October 1, 1985, and who prior to October 1,
1985, filed with the Administrator a confirmation of each prior election,
shall have his or her Deferred Compensation paid pursuant to such elections.
Any Deferred Compensation with respect to any other participant in the Plan
will be paid according to the participant's election or, if no election was
made, according to the provisions of the Plan in effect at the time of
deferral.
(i) Notwithstanding any other provision of this Plan to the
contrary and subject to the following sentence, the vested Pension Make-Up
Deferred Compensation shall be paid to the Eligible Employee, his or her
surviving spouse or his beneficiary at the same time or times, in the same
form and subject to the same form and subject to the same adjustments as his
or her benefit under the HOPP, the Excess BRP and the Supplemental BRP, as
applicable; provided, that if the Pension Make-Up Deferred Compensation is
attributable to two or more of such plans, then the time and form shall be
determined separately for each of such components. The foregoing
notwithstanding, if the Eligible Employee is not a participant in the Excess
BRP or the Supplemental BRP and the present value of his or her vested
Pension Make-Up Deferred Compensation is $50,000 or less, such present value
shall be paid to the Eligible Employee or the Eligible Employee's Beneficiary
in a lump sum, and such payment shall extinguish such Eligible Employee's or
Beneficiary's right to Pension Make-Up Deferred Compensation with respect to
employment prior to the date of such payment. For the purposes of the
preceding sentence, the present value of the Pension Make-Up Deferred
Compensation shall be determined by the Administrator in a uniform and
nondiscriminatory manner.
(i) For purposes of this Plan:
(i) the term "disability"shall have the same meaning as the term
"Total and Permanent Disability" (or any successor term) under the Revised
Home Office Pension Plan of the Company,or any successor thereto (the
"HOPP");
(ii) the term "retirement" shall mean the termination of employment
with the Company or any subsidiary thereof with the right to an immediate
benefit under (the "HOPP"), providing that an Eligible Employee who is not a
participant in the HOPP at the time of his or her termination of employment
shall be deemed to have incurred a retirement if the Eligible Employee would
have been eligible for an immediate benefit under the HOPP if he or she had
been participating in the HOPP at such time.
ARTICLE 7 - SOURCE OF PAYMENT
- -----------------------------
All payments of Deferred Compensation hereunder shall be paid in cash
from the general funds of the Company or the Participating Subsidiary,
whichever was the employer at the time of the deferral, and no special or
separate fund shall, trust or account be established in the name of any
Eligible Employee or beneficiary or other segregation of assets made to
assure such payments; provided, however, that the Company or the
Participating Subsidiary, as the case may be, may establish a bookkeeping
reserve to meet its obligation hereunder. No sponsor of any financial entity
which is utilized as a measurement standard, such as a designated mutual fund
sponsor or bank, shall have any responsibility for payment of Deferred
Compensation hereunder, and no Eligible Employee shall have an account with
such a sponsor in connection with the Eligible Employee's participation in
the Plan. Any account which the Company may, from time to time, establish
with any financial entity which is utilized as a measurement standard under
the Plan, and any increases to or distributions from such account, shall
remain the property of the Company. Nothing contained in the Plan and no
action taken pursuant to the provisions of the Plan shall create or be
construed to create a trust of any kind or a fiduciary relationship between
the Company or the Participating Subsidiary or the Administrator and any
employee or other person. To the extent that any person acquires a right to
receive payments from the Company or the Participating Subsidiary under the
Plan, such right shall be no greater than the right of any unsecured general
creditor of the Company or the Participating Subsidiary.
ARTICLE 8 - DESIGNATION OF BENEFICIARIES
- ----------------------------------------
(a) Designation by Eligible Employee. Each Eligible Employee shall file
with the Administrator a written designation of one or more persons as the
"Beneficiary" who shall be entitled to receive the amount, if any, payable
under the Plan upon his or her death. An Eligible Employee may from time to
time revoke or change his or her beneficiary designation without the consent
of any prior Beneficiary by filing a new designation with the Administrator.
The last such designation received by the Administrator shall be controlling;
provided, however, that no designation, or change or revocation thereof,
shall be effective unless received by the Administrator prior to the Eligible
Employee's death, and in no event shall it be effective as of a date prior to
such receipt.
(b) Lack of Designation. If no beneficiary designation is in effect at
the time of an Eligible Employee's death, if no designated Beneficiary
survives the Eligible Employee or if such designation conflicts with law,
then the Eligible Employee's estate shall be the Beneficiary entitled to
receive the amount. The Administrator may direct the Company or
Participating Subsidiary to retain such amount, without liability for any
interest thereon, until the rights thereto are determined, or the
Administrator may direct the Company or Participating Subsidiary to pay such
amount into any court of appropriate jurisdiction, and such payment shall
completely discharge the liability of the Plan, the Company and Participating
Subsidiary therefor.
ARTICLE 9 - ADMINISTRATION OF PLAN
- ----------------------------------
For the purposes of this Plan, the "Administrator" shall be the Director
of Employee Benefits or such other person as the Chief Executive Officer of
the Company may designate from time to time. The Plan, except for Sections
6(d) and 6(f), shall be administrated by the Administrator, who shall have
full power, discretion and authority to interpret, construe and administer
the Plan and any part thereof. The Administrator's interpretations and
constructions of the Plan and actions thereunder shall, except as otherwise
determined by the Board of Directors of the Company or the Personnel
Committee thereof, be binding and conclusive on all persons for all purposes.
ARTICLE 10 - AMENDMENT
- ----------------------
The Plan may be amended, suspended or terminated, in whole or in part,
by the Board of Directors of the Company or the Personnel Committee thereof,
or the delegate of either, but no such action shall retroactively impair or
otherwise adversely affect the rights of any person to payment of Deferred
Compensation under the Plan which has accrued prior to the date of such
action, as determined by the Administrator.
ARTICLE 11 - GENERAL PROVISIONS
- -------------------------------
(a) No Assignment. The right of any Eligible Employee or other person
to the payment of Deferred Compensation under the Plan shall not be assigned,
transferred, pledged or encumbered, either voluntarily or by operation of
law, except as provided in Section 8 with respect to designations of
Beneficiaries hereunder or as may otherwise be required by law. If any
person shall attempt to, or shall assign, transfer, pledge or encumber any
amount payable hereunder, or if by reason of his or her bankruptcy or other
event happening at any time any such payment would be made subject to his or
her debts or liabilities or would otherwise devolve upon anyone else and not
be enjoyed by him or her or his or her Beneficiary, the Administrator may, in
its sole discretion, terminate such person's interest in any such payment and
direct that the same be held and applied to or for the benefit of such
Person, his or her spouse, children or other dependents, or any other Persons
deemed to be the natural objects of his or her bounty, or any of them, in
such manner as the Administrator may deem proper.
(b) Incapacity. If the Administrator shall find that any person to whom
any payment is payable under the Plan is unable to care for his or her
affairs because of illness or accident or is a minor, then any payment due
(unless a prior claim therefor shall have been made by a duly appointed
guardian, committee or other legal representative), in the sole discretion of
the Administrator, may be paid to his or her spouse, a child, a parent, or a
brother or sister, or any other person deemed by the Administrator to have
incurred expenses for such person otherwise entitled to payment, in such
manner and proportions as the Administrator may determine. Any such payment
shall constitute a complete discharge of the liability of the Company or
Participating Subsidiary under the Plan.
(c) Information Required. Each Eligible Employee shall provide the
Administrator with such pertinent information concerning himself or herself
and his or her Beneficiary relating to Plan administration or participation
by the Eligible Employee as the Administrator may specify, and no Eligible
Employee or Beneficiary or other person shall have any rights or be entitled
to any benefits under the Plan unless such information is provided by or with
respect to him or her.
(d) Election by Employee. All elections, designations, requests,
notices, instructions and other communications from an Eligible Employee,
Beneficiary or other person to the Administrator required or permitted under
the Plan shall be in such form as is prescribed from time to time by the
Administrator, shall be mailed by first-class mail, transmitted by facsimile
or delivered to such location as shall be specified by the Administrator and
shall be deemed to have been given and delivered only upon actual receipt
thereof by the Administrator at such location.
(e) Notices by Company. All notices, statements, reports and other
communications from the Administrator to any employee, Eligible Employee,
Beneficiary or other person required or permitted under the Plan shall be
deemed to have been duly given when delivered to, or when mailed first-class
mail, postage prepaid and addressed to, such employee, Eligible Employee,
Beneficiary or other person at his or her address last appearing on the
records of the Company.
(f) No Employment Rights. Neither the Plan nor any action taken
hereunder shall be construed as giving to any employee the right to be
retained in the employ of the Company or Participating Subsidiary or as
affecting the right of the Company or Participating Subsidiary to dismiss any
employee at any time, with or without cause.
(g) Captions. The captions preceding the sections and subsections
hereof have been inserted solely as a matter of convenience and in no way
define or limit the scope or intent of any provisions thereof.
(h) Choice of Law. The Plan and all rights thereunder shall be governed
by and construed in accordance with the laws of the State of California.<PAGE>
LEVI STRAUSS ASSOCIATES INC.
---------
AMENDMENT
OF
LEVI STRAUSS ASSOCIATES INC.
DEFERRED COMPENSATION PLAN
FOR EXECUTIVES
WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") maintains the Levi
Strauss Associates Inc. Deferred Compensation Plan for Executives (as amended
and restated through April 1, 1994) (the "Plan");
WHEREAS, pursuant to Article 10 of the Plan, the Board of Directors of
the Company or its delegatee is authorized to amend the Plan at any time and
for any reason;
WHEREAS, the Company desires to amend the Plan;
WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of
Directors of the Company authorized Robert D. Haas, Chairman of the Board and
Chief Executive Officer, to adopt certain amendments to the Plan and to
delegate to any other officer of the Company the authority to adopt certain
amendments to the Plan;
WHEREAS, on June 1, 1993, Robert D. Haas delegated to Donna J. Goya,
Senior Vice President, the authority to amend the Plan subject to specified
limits, and such delegation has not been amended, rescinded or superseded as
of the date hereof,
WHEREAS, the amendments herein are within such limits to the delegated
authority of Donna J. Goya;
NOW, THEREFORE, effective April 1, 1994, Section 6(f) shall be amended
by the addition of a new paragraph at the end of existing Section 6(f), to
read as set forth below:
In the event the Administrative Committee approves a hardship
distribution to an Eligible Employee under this Section 6(f),
deferrals of such Eligible Employee's total compensation
automatically shall be cancelled for the remaining portion of the
calendar year in which the Eligible Employee's request is filed
with the Administrative Committee.
IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on August
22, 1994.
/s/Donna J. Goya
------------------------------
Donna J. Goya
Senior Vice President<PAGE>
LEVI STRAUSS ASSOCIATES INC.
---------
AMENDMENT AND RESTATEMENT
OF
LEVI STRAUSS ASSOCIATES INC.
DEFERRED COMPENSATION PLAN
FOR EXECUTIVES
WHEREAS, LEVI STRAUSS ASSOCIATES INC. (the "Company") maintains the Levi
Strauss Associates Inc. Deferred Compensation Plan for Executives (the
"Plan");
WHEREAS, pursuant to Article 10 of the Plan, the Board of Directors of
the Company or its delegatee is authorized to amend the Plan at any time and
for any reason;
WHEREAS, the Company desires to amend the Plan and restate the Plan to
provide alternative measurement methods with respect to deferred compensation
accounts and effect certain other changes;
WHEREAS, by resolutions duly adopted on June 18, 1992, the Board of
Directors of the Company authorized Robert D. Haas, Chairman of the Board and
Chief Executive Officer, to adopt certain amendments to the Plan and to
delegate to any other officer of the Company the authority to adopt certain
amendments to the Plan;
WHEREAS, on June 1, 1993, Robert D. Haas delegated to Donna J. Goya,
Senior Vice President, the authority to amend the Plan subject to specified
limits, and such delegation has not been amended, rescinded or superseded as
of the date hereof,
WHEREAS, the amendment and restatement effected hereby are within such
limits to the delegated authority of Donna J. Goya;
NOW, THEREFORE, effective April 1, 1994, the Plan is hereby amended and
restated to read as set forth in the exhibit hereto.
IN WITNESS WHEREOF, the undersigned has set her hand hereunto, on August
22, 1994.
/s/Donna J. Goya
------------------------------
Donna J. Goya
Senior Vice President<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF LEVI STRAUSS ASSOCIATES INC. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-27-1994
<PERIOD-START> NOV-29-1993
<PERIOD-END> AUG-28-1994
<CASH> 661,558
<SECURITIES> 0
<RECEIVABLES> 849,246
<ALLOWANCES> 32,742
<INVENTORY> 854,979
<CURRENT-ASSETS> 2,563,192
<PP&E> 1,080,585
<DEPRECIATION> 441,538
<TOTAL-ASSETS> 3,753,918
<CURRENT-LIABILITIES> 1,172,948
<BONDS> 17,410
<COMMON> 256,872
49,655
0
<OTHER-SE> 1,147,157
<TOTAL-LIABILITY-AND-EQUITY> 3,753,918
<SALES> 4,308,080
<TOTAL-REVENUES> 4,314,536
<CGS> 2,615,218
<TOTAL-COSTS> 3,658,410
<OTHER-EXPENSES> 35,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,472
<INCOME-PRETAX> 605,145
<INCOME-TAX> 242,058
<INCOME-CONTINUING> 363,087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (236,517)
<NET-INCOME> 126,570
<EPS-PRIMARY> 2.41
<EPS-DILUTED> 0
</TABLE>
